The text of the bill below is as of Dec 22, 1987 (Passed Congress).
You are reading a bill enacted 12,460 days ago. In the intervening time subsequent legislation may have amended or repealed the provisions below.
Summary of this bill
Source: Wikipedia
The Omnibus Budget Reconciliation Act of 1987 (or OBRA-87) was federal law that was enacted by the 100th United States Congress and signed into law by President Ronald Reagan.
This summary is from Wikipedia.
101 STAT. 1330 PUBLIC LAW 100-203—DEC. 22, 1987
•Public Law 100- -203
100th Congress
An Act
Dec. 22, 1987 To provide for reconciliation pursuant to section 4 of the concurrent resolution on the
[H.R. 3545] budget for the fiscal year 1988.
Be it enacted by the Senate and House of Representatives of the
Omnibus Budget United States of America in Congress assembled, , .
Reconciliation
Act of 1987. SECTION 1. SHORT TITLE. " "^
This Act may be cited as the "Omnibus Budget ReconciUation Act
of 1987". -,^ ,.,,. , . ,.,.,.,,
SEC. 2. TABLE OF CONTENTS. <i
Title I—Agriculture and related programs.
Title II—National Ek:onomic Commission. "'
Title III—Education programs.
Title IV—Medicare, medicaid, and other health-related programs. ^,
Title V—Energy and environmental programs.
Title VI—Civil service and postal service programs. ' '
Title VII—Veterans' programs. •-
Title VIII—Budget policy and fiscal procedures. < -^
Title IX—Income security and related programs. ^, . , , . . ,, ^
Title X—Revenues.
Agricultural
Reconciliation
TITLE I—AGRICULTURE AND RELATED
Act of 1987. PROGRAMS ix:
SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.
7 use 1421 note. (a) SHORT TITLE.—This title may be cited as the "Agricultural
Reconciliation Act of 1987".
(b) TABLE OF CONTENTS.—The table of contents is as follows:
TABLE OF CONTENTS ,.
Sec. 1001. Short title; table of contents.
Subtitle A—Adjustments to Agricultural Commodity Programs
Sec. 1101.Target price reductions.
Sec. 1102.Loan rates.
Sec. 1103.Feed grain diversion program.
Sec. 1104.Price support reduction tor nontarget price commodities.
Sec. 1105.Loan rate differentials.
Sec. 1106.Storage cost adjustment.
Sec. 1107.Acreage limitation program for oats. ,^ y
Sec. 1108.Producer reserve program. • - r '
Sec. 1109.Yield adjustments.
Sec. 1110.Advance pa}rments.
Sec. n i l . Advanced emergency compensation pajrments for wheat.
Sec. 1112. Tobacco provisions.
Sec. 1113. Haying and grazing.
ENROLLMENT ERRATA
Pursuant to the provisions of section 8004 of this Act (appearing on 101 Stat.
1330-282), changes made are indicated by footnote.
'Note: For information on the printing of this law and a related Presidential memorandum, see the editorial note
at the end.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-1
Subtitle B—Optional Acreage Diversion
Sec. 1201. Wheat optional acreage diversion program.
Sec. 1202. Feed grains optional acreage diversion program.
Sec. 1203. Regulations.
Subtitle C—Farm Program Payments
Sec. 1301. Prevention of the creation of entities to qualify as separate persons.
Sec. 1302. Payments limited to active farmers.
Sec. 1303. Definition of person: eligible individuals and entities; restrictions applic-
able to cash-rent tenants.
Sec. 1304. More effective and uniform application of payment limitations.
Sec. 1305. Regulations; transition rules; equitable adjustments.
Sec. 1306. Foreign persons made ineligible for program benefits.
Sec. 1307. Honey loan limitation.
Subtitle D—Prepayment of Rural Electrification Loans '
Chapter 1—Prepayment of Rural Electrification Loans
Sec. 1401. Prepayment of loans.
Sec. 1402. Use of funds.
Sec. 1403. Cushion of credit payments program. -
Chapter 2—Rural Telephone Bank Borrowers
Sec. 1411. Rural Telephone Bank interest rates and loan prepayments.
Sec. 1412. Interest rate to be considered for purposes of assessing eligibility for
loans.
Sec. 1413. Establishment of reserve for losses due to interest rate fluctuations.
Sec. 1414. Publication of Rural Telephone Bank policies and regulations.
Subtitle E—Miscellaneous
Sec. 1501.
Marketing order penalties.
Sec. 1502.
Study of use of agricultural commodity futures and options markets.
Sec. 1503.
Authorization of appropriations for Philippine food aid initiative.
Sec. 1504.
Rural industrialization assistance.
Sec. 1505.
Plant variety protection fees.
Sec. 1506.
Annual appropriations to reimburse the Commodity Credit Corporation
for net realized losses.
Sec. 1507. Federal crop insurance. ,;
Sec. 1508. Ethanol usage.
Sec. 1509. Demonstration of family independence program. ,
Subtitle A—Adjustments to Agricultural
Commodity Programs
SEC. 1101. TARGET PRICE REDUCTIONS.
(a) WHEAT.—Effective only for the 1988 and 1989 crops of wheat,
section 107D(c)(l)(G) of the Agricultural Act of 1949 (7 U.S.C. 1445b-
3(c)(1)(G)) is amended by striking out "$4.29 per bushel for the 1988
crop, $4.16 per bushel for the 1989 crop" and inserting in lieu
thereof "$4.23 per bushel for the 1988 crop, $4.10 per bushel for the
1989 crop".
(b) FEED GRAINS.—Effective only for the 1988 and 1989 crops of
feed grains, section 105C(c)(l)(E) of such Act (7 U.S.C. 1444e(c)(l)(E))
is amended by striking out "$2.97 per bushel for the 1988 crop, $2.88
per bushel for the 1989 crop" and inserting in lieu thereof "$2.93 per
bushel for the 1988 crop, $2.84 per bushel for the 1989 crop".
(c) COTTON.—Effective only for the 1988 and 1989 crops of upland
cotton, section 103A(c)(l)(D) of such Act (7 U.S.C. 1444-l(c)(l)(D)) is
amended by striking out "$0.77 per pound for the 1988 crop, $0,745
' Copy read "loans".
101 STAT. 1330-2 PUBLIC LAW 100-203—DEC. 22, 1987
per pound for the 1989 crop" and inserting in lieu thereof "$0,759
per pound for the 1988 crop, $0,734 per pound for the 1989 crop".
(d) EXTRA LONG STAPLE COTTON.—Effective only for the 1988 and
1989 crops of extra long staple cotton, section 103(h)(8)(B) of such Act
(7 U.S.C. 1444(h)(3)(B)) is amended—
(1) by striking out "The" and inserting in lieu thereof "Except
as provided in clause (ii), the"; and
(2) by adding at the end thereof the following new clause:
"(ii) In the case of each of the 1988 and 1989 crops of extra long
staple cotton, the established price for each such crop shall be 118.3
percent of the loan level determined for such crop under paragraph
(2).".
(e) RICE.—Effective only for the 1988 and 1989 crops of rice,
section 101 A(c)(l)(D) of such Act (7 U.S.C. 1441-l(c)(l)(D)) is amended
by striking out "$11.30 per hundredweight for the 1988 crop, $10.95
per hundredweight for the 1989 crop" and inserting in lieu thereof
"$11.15 per hundredweight for the 1988 crop, $10.80 per hundred-
weight for the 1989 crop".
SEC. 1102. LOAN RATES. '
(a) WHEAT.—Effective only for the 1988 through 1990 crops of
wheat, section 107D(a)(3XB) of the Agricultural Act of 1949 (7 U.S.C.
1445b-3(a)(3)(B)) is amended by striking out "not be reduced by more
than 5 percent from the level determined for the preceding crop."
and inserting in lieu thereof the following: "not be reduced by more
than—
"(i) in the case of the 1987 crop, 5 percent from the level
determined for the preceding crop;
"(ii) in the case of the 1988 crop, 3 percent from the level
, ^. determined for the preceding crop;
"(iii) in the case of the 1989 crop, 5 percent from the level
determined for the preceding crop, plus an additional 2
percent from the level determined for the preceding crop if
the Secretary, after taking into account any reduction that
is provided for under paragraph (4XAXii), determines that
5 such additional percentage reduction is necessary to main-
tain a competitive market position for wheat; and
"(iv) in the case of the 1990 crop, 5 percent from the level
determined for the preceding crop.".
(b) FEED GRAINS.—Effective only for the 1988 through 1990 crops
of feed grains, section 105C(aX2XB) of such Act (7 U.S.C.
1444e(aX2XB)) is amended by striking out "not be reduced by more
than 5 percent from the level determined for the preceding crop."
and inserting in lieu thereof the following: "not be reduced by more
than—
"(i) in the case of the 1987 crop, 5 percent from the level
determined for the preceding crop;
"(ii) in the case of the 1988 crop, 3 percent from the level
determined for the preceding crop;
"(iii) in the case of the 1989 crop, 5 percent from the level
determined for the preceding crop, plus an additional 2
percent from the level determined for the preceding crop if
the Secretary, after taking into account any reduction that
^ is provided for under paragraph (3XAXii), determines that
such additional percentage reduction is necessary to msdn-
tain a competitive market position for feed grains; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-3
"(iv) in the case of the 1990 crop, 5 percent from the level
determined for the preceding crop.".
(c) COTTON.—Effective only for the 1988 through 1990 crops of
upland cotton, subparagraph (A) of section 103A(aX2) of such Act (7
U.S.C. 1444-l(a)(2)(A)) is amended to read as follows:
"(A) The loan level for any crop determined under paragraph
(1)(B) may not be reduced below 50 cents per pound nor more than—
"(i) in the case of the 1987 crop, 5 percent from the level
determined for the preceding crop;
"(ii) in the case of the 1988 crop, 3 percent from the level
determined for the preceding crop;
"(iii) in the case of the 1989 crop, 5 percent from the level
determined for the preceding crop, plus an additional 2 percent
from the level determined for the preceding crop if the Sec-
retary determines that such additional percentage reduction is
necessary to maintain a competitive market position for upland
cotton; and
"(iv) in the case of the 1990 crop, 5 percent from the level
determined for the preceding crop.".
(d) RICE.—Effective only for the 1988 through 1990 crops of rice,
paragraph (2) of section lOlA(a) of such Act (7 U.S.C. 1441-l(aX2)) is
amended to read as follows:
"(2) The loan level for any crop determined under paragraph (IXB)
may not be reduced by more than—
"(A) in the case of the 1987 crop, 5 percent from the level
determined for the preceding crop;
"(B) in the case of the 1988 crop, 3 percent from the level
determined for the preceding crop;
"(C) in the case of the 1989 crop, 5 percent from the level
determined for the preceding crop, plus an additional 2 percent
from the level determined for the preceding crop if the Sec-
retary determines that such additional percentage reduction is
necessary to maintain a competitive market position for rice;
and
"(D) in the case of the 1990 crop, 5 percent from the level
determined for the preceding crop,".
SEC. 1103. FEED GRAIN DIVERSION PROGRAM.
Effective only for the 1988 and 1989 crops of feed grains, section
105C(fK5) of the Agricultural Act of 1949 (7 U.S.C. 1444e(fX5)) is
amended by adding at the end thereof the following new
subparagraph:
"(DXi) In the case of the 1988 and 1989 crops of corn, grain
sorghums, and barley, except as provided in clause (ii), the Secretary
sh£ill make land diversion payments to producers of corn, grain
sorghums, and barley, in accordance with this paragraph, under
which the required reduction in the crop acreage base shall be 10
percent and the diversion payment rate shall be $1.75 per bushel for
corn. The Secretary shall establish the diversion payment rate for
grain sorghums and barley at such level as the Secretary determines
is fair and reasonable in relation to the rate established for corn.
"(ii) In the case of the 1989 crop of corn, grain sorghums, or
barley, the Secretary may waive the application of clause (i) if the
Secretary determines that it is necessary to maintain an adequate
supply of corn, gredn sorghums, or barley.".
101 STAT. 1330-4 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 1104. PRICE SUPPORT REDUCTION FOR NONTARGET PRICE
COMMODITIES.
(a) TOBACCO.—Effective only for the 1988 and 1989 crops of to-
bacco, section 106(f) of the Agricultural Act of 1949 (7 U.S.C. 1445(f))
is amended by adding at the end thereof the following new
paragraph:
"(8)(A) Notwithstanding any other provision of this subsec-
l&-^ tion, in the case of each of the 1988 and 1989 crops of any kind
of tobacco, the Secretary shall reduce the support level for such
i fv crop by an amount equal to 1.4 percent of the level otherwise
established under this subsection. Any such reduction shall not
':. be taken into consideration in determining the support level for
a subsequent crop of tobacco.
"(B) In lieu of making any such reduction, the Secretary may
impose assessments on the producers and purchasers in an
i amount sufficient to realize a reduction in outlays equal to the
amount that would have been achieved as a result of the
] ^ reduction required under subparagraph (A). Such assessments
shall not apply to purchasers if it is judicially determined that
the imposition of the purchaser assessment will adversely affect
the contracts entered into under section 1109 of the Consoli-
dated Omnibus Budget Reconciliation Act of 1986 (7 U.S.C.
— 1445-3).".
(b) PEANUTS.—Effective only for the 1988 and 1989 crops of pea-
nuts, section 108B of such Act (7 U.S.C. 1445c-2) is amended by
adding at the end thereof the following new paragraph:
"(6) Notwithstanding any other provision of this section, in
the case of each of the 1988 and 1989 crops of peanuts, the
Secretary shall reduce outlays under the program provided for
under this subsection by an amount equal to 1.4 percent of the
amount of outlays that would otherwise be incurred in the
absence of the reduction required by this paragraph.".
(c) HONEY.—Effective only for the 1987 through 1990 crops of
honey, section 201(bXl) of such Act (7 U.S.C. 14460^X1)) is amended
by adding at the end thereof the following new subparagraph:
"(D) Notwithstanding the foregoing provisions of this para-
graph, effective for each of the 1987 through 1990 crops, the
loan and purchase level for honey that would otherwise apply
under subparagraphs (B) and (C), without regard to this
*^f subparagraph, shall be reduced for loans and purchases made
after the date of the enactment of this subparagraph by 2 cents
'^'' per pound for the 1987 crop, % cents per pound for the 1988
crop, Vz cent per pound for the 1989 crop, and V4 cent per pound
^'' for the 1990 crop.^'.
(d) MILK.—Section 201(dX2) of such Act (7 U.S.C. 1446(d)) is
amended—
(1) in subparagraph (C), by striking out "subparagraph (A)"
and inserting in lieu thereof this paragraph"; and
(2) by adding at the end thereof the following new
subparagraph:
"(F) During calendar year 1988, the Secretary shall provide for a
reduction of 2y2 cents per hundredweight to be made in the price
received by producers for all milk produced in the United States and
marketed by producers for commercial use.".
(e) SUGAR.—Section 201(j) of such Act (7 U.S.C. 14460')) is amended
by adding at the end thereof the following new paragraph: . .
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-5
"(1) Notwithstanding any other provision of this section, in
the case of each of the 1988 and 1989 crops of sugar beets and
sugarcane, the Secretary shall reduce outlays under the pro- , , ,>H
gram provided for under this subsection by an amount equal to
1.4 percent of the amount of outlays that would otherwise be
incurred in the absence of the reduction required by this
> paragraph.".
(f) WOOL AND MOHAIR.—Section 703(b) of the National Wool Act of
1954 (7 U.S.C. 1782) is amended—
(1) by striking out "The" and inserting in lieu thereof "(1)
Except as provided in paragraphs (2) and (3), the";
(2) by striking out ": Provided," and all that follows through
the period and inserting in lieu thereof a period; and
(3) by adding at the end thereof the following new paragraphs:
"(2) Except as provided in paragraph (3), for the marketing years
beginning January 1, 1982, and ending December 31, 1990, the
support price for shorn wool shall be 77.5 percent (rounded to the
nearest full cent) of the amount calculated according to para-
graph (1).
"(3) For the marketing years beginning January 1, 1988, and
ending December 31, 1989, the support price for shorn wool shall be
76.4 percent (rounded to the nearest full cent) of the amount cal-
culated according to paragraph (1).".
SEC. 1105. LOAN RATE DIFFERENTIALS.
Section 403 of the Agricultural Act of 1949 (7 U.S.C. 1423) is
amended by adding at the end thereof the following new sentence:
"Notwithstanding the preceding provisions of this section, for each
of the 1988 through 1990 crops of wheat and feed grains, no adjust-
ment in the loan rate applicable to a particular region. State, or
county for the purpose of reflecting transportation differentials may
increase or decrease such regional. State, or county loan rate from
the level established for the previous year by more than the percent-
age change in the national average loan rate plus or minus 2
percent.".
SEC. 1106. STORAGE COST ADJUSTMENT, 15 USC 714b
For the fiscal years 1988 and 1989, the Secretary of Agriculture
shall ensure that expenditures of the Commodity Credit Corporation
for commercial storage, transportation, and handling of commod-
ities owned by the Corporation (excluding storage payments made in
accordance with section 110 of the Agricultural Act of 1949 (7 U.S.C.
1445e)) are reduced by $230,000,000 in such fiscal years from the
amount of funds otherwise projected to be expended in fiscal years
1988 and 1989 under the budget base determined under section 251
of the Balanced Budget and Emergency Deficit Control Act of 1985
(2 U.S.C. 901) for commercial storage, transportation, and handling
of such commodities. In order to achieve the savings required by this
section, the Secretary shall adjust storage, handling, or transpor-
tation expenditures paid by the Corporation or take other appro-
priate actions.
SEC. 1107. ACREAGE LIMITATION PROGRAM FOR OATS.
Effective only for the 1988 through 1990 crops of feed grains,
section 105C(fK2) of the Agricultural Act of 1949 (7 U.S.C. 1444e(fK2))
is amended by adding at the end thereof the following new subpara-
graph:
101 STAT. 1330-6 PUBLIC LAW 100-203—DEC. 22, 1987
"(G) In the case of the 1988 through 1990 crops of oats, the
Secretary shall not establish a percentage reduction in accordance
Regulations. with paragraph (1) in excess of 5 percent. In implementing this
subparagraph, the Secretary shall issue regulations that provide for
the fair and equitable treatment of producers on a farm for which
an oat and barley crop acreage base has been established. To ensure
the efficient and fair implementation of this subparagraph, the
Secretary shall announce revisions of the acreage limitation pro-
gram for the 1988 crop of feed grains that implement this subpara-
graph £is soon as practicable after the date of enactment of the
Agricultural Reconciliation Act of 1987. In the case of the 1990 crop
of oats, the Secretary may waive the application of this subpara-
graph if the Secretary determines that the supply of oats will be
excessive.".
SEC. 1108. PRODUCER RESERVE PROGRAM.
Subparagraph (A) of the fourth sentence of section llOOt)) of the
Agricultural Act of 1949 (7 U.S.C. 1445eOb)) is amended—
(1) in clause (i), by striking out "17 percent of the estimated
total domestic and export usage of wheat during the then
current marketing year for wheat, as determined by the Sec-
retary" and inserting in lieu thereof "300 million bushels"; and
(2) in clause (ii), by striking out "7 percent of the estimated
total domestic and export usage of feed grains during the then
current marketing year for feed grains, as determined by the
Secretary" and inserting in lieu thereof "450 million bushels".
SEC. 1109. YIELD ADJUSTMENTS.
Effective only for the 1988 through 1990 crops of wheat, feed
grains, upland cotton, and rice, section 50603X2) of the Agricultural
Act of 1949 (7 U.S.C. 146603X2)) is amended by adding at the end
thereof the following new subparagraph:
"(C) In the C£ise of each of the 1988 through 1990 crop years for a
commodity, if the farm program payment yield for a farm is reduced
more than 10 percent below the farm program payment yield for the
> 1985 crop year, the Secretary shall make available to producers
established price payments for the commodity in such amount as the
Secretary determines is necessary to provide the same total return
to producers as if the farm program payment yield had not been
reduced more than 10 percent below the farm program payment
yield for the 1985 crop year. Such pajmients shall be made available
to producers at the time final deficiency payments are made
available.".
SEC. 1110. ADVANCE PAYMENTS.
Effective only for the 1988 through 1990 crops of wheat, feed
grains, upland cotton, and rice, section 107C(a) of the Agricultural
Act of 1949 (7 U.S.C. 1445b-2(a)) is amended—
(1) by striking out paragraph (1) and inserting in lieu thereof
the following new paragraph:
"(1) If the Secretary establishes an acreage limitation or set-aside
program for any of the 1988 through 1990 crops of wheat, feed
grains, upland cotton, or rice under this Act and determines that
deficiency payments will likely be made for such commodity for
such crop, the Secretary shall make advance deficiency payments
available to producers for each of such crops."; and ^ ^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-7
(2) in paragraph (2XF), by striking out clause (iii) and insert-
ing in lieu thereof the following new clause:
"(iiiXD in the case of wheat and feed grains, not less than
40 percent, nor more than 50 percent, of the projected
payment rate; and
"(11) in the case of rice and upland cotton, not less than 30
percent, nor more than 50 percent, of the projected pay-
ment rate,".
SEC. n i l . ADVANCED EMERGENCY COMPENSATION PAYMENTS FOR
WHEAT.
Effective only for the 1987 through 1990 crops of wheat, section
107D(cXlXE) of the Agricultural Act of 1949 (7 U.S.C. 1445b-
3(cXlXE)) is amended by adding at the end thereof the following new
clauses:
"(iii) Notwithstanding any other provision of this Act, in the case
of each of the 1987 through 1990 crops of wheat, the Secretary
shall—
"(I) by December 1 of each of the marketing years for such
crops (or, in the case of the 1987 crop, £is soon as practicable
after the date of enactment of the Agricultural Reconciliation
Act of 1987), estimate the national weighted average market
price, per bushel of wheat, received by producers during such
marketing year;
"(II) by Etecember 15 of such marketing year (or, in the case of
the 1987 crop, as soon as practicable, but not later than 75 days,
after the date of enactment of such Act), use the estimate to
make available to producers who have elected the pajonent
option authorized by this clause not less than 75 percent of the
increase in established price pajmtients estimated to be payable
with respect to such crop under this subparagraph; and
"(III) adjust the amount of each final established price pay-
ment for wheat to reflect any difference between the amount of
any estimated payment made under this clause and the amount
of actual payment due under this subparagraph,
"(iv) Producers shall elect the payment option authorized by
clause (iii)—
"(I) in the case of the 1987 crop of wheat, not later than 45
days after the date of the enactment of this clause; and
(II) in the case of each of the 1988 through 1990 crops of Contracts.
wheat, at the time of entering into a contract to participate in
the progreim established by this section for the crop.".
SEC. 1112. TOBACCO PROVISIONS.
(a) TRANSFER AUTHORITY.—Section 316 of the Agricultural Adjust-
ment Act of 1938 (7 U.S.C. 316(h)) is amended by adding at the end 7 u s e 1314b.
thereof the following new subsection:
"(hXD Notwithstanding any other provision of this section, the
Secretary may permit, after June 30 of any crop year, the lease and
transfer of flue-cured tobacco quota assigned to a farm if—
"(A) the planted acreage of flue-cured tobacco on the farm to
which the quota is assigned is determined by the Secretary to be
equal to or greater than 90 percent of the farm's acreage
allotment, or the planted acreage is determined to be sufflcient
to produce the farm marketing quota under average conditions;
and
91-194 O - 90 - 26 : QL.3 Part 2
101 STAT. 1330-8 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) the farm's expected production of flue-cured tobacco is
less than 80 percent of the farm's effective marketing quota as a
result of a natural disaster condition.
"(2) Any lease and transfer of quota under this paragraph may be
made to any other farm within the same State in accordance with
regulations issued by the Secretary.".
(b) PERIODIC ADJUSTMENT OF YIELD FACTOR FOR ^ FLUE-CURED
TOBACCO ACREAGE-POUNDAGE QUOTAS.—Section 317(a) of such
Act (7 U.S.C. 1314c(a)) is amended by striking out "and at five year
intervals thereafter" each place it appears in paragraphs (2), (4), and
(6)(A).
(c) IMPROVED TOBACCO FIELD MEASUREMENT.—It is the sense of
Congress that the Secretary of Agriculture should review current
compliance procedures for acreage or poundage quotas with respect
to cigar and dark-air and fire-cured tobaccos under the Agricultural
Act of 1949 (7 U.S.C. 1421 et seq.) to determine means of improving
such procedures. The Secretary shall recommend to Congress
changes in existing law that would be necessary to implement any
such improvements.
SEC. 1113. HAYING AND GRAZING.
(a) WHEAT.—Effective only for the 1988 through 1990 crops of
wheat, section 107D of the Agricultural Act of 1949 (7 U.S.C.
1445b-3) is amended—
(1) in subsection (cXlXK)—
(A) in clause (i)—
(i) by striking out "(i)"; and
(ii) by redesignating subclauses (I) and (II) as clauses
(i) and (ii), respectively; and
(B) by striking out clause (ii);
(2) in subsection (^4)—
(A) in subparagraph (B)—
(i) by striking out "Subject to subparagraph (C), the"
and inserting in lieu thereof "The"; and
(ii) by striking out "hay and grazing,"; and
(B) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraph:
"(CXi) Except as provided in clauses (ii) and (iii), haying and
grazing of acreage designated as conservation use acreage for the
purpose of meeting any requirements established under an acreage
limitation program (including a program conducted under subsec-
tion (cXlXC)), set-£iside program, or land diversion program estab-
lished under this section shall be permitted, except during any
consecutive 5-month period that is established by the State commit-
tee established under section 8(b) of the Soil Ck)nservation and
Domestic Allotment Act (16 U.S.C. 590h(b)) for a State. Such 5-
month period shall be established during the period beginning April
1, and ending October 31, of a year.
"(ii) In the case of a natural disaster, the Secretary may permit
unlimited haying and grazing on such acreage.
"(iii) Haying and grazing shall not be permitted for any crop
under clause (i) if the Secretary determines that haying and grazing
would have an adverse economic effect.".
» Copy read "FOR". iSfljg
A j-:rt s,i?;-: '•^: svj} - o m i ' i n
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-9
(b) FEED GRAINS.—Effective only for the 1988 through 1990 crops
of feed grains, section 105C of such Act (7 U.S.C. 1445b-3) is 7 USC I444e.
amended—
(1) in subsection (cXlXD—
(A) in clause (i)—
(i) by striking out "(i)"; and
(ii) by redesignating subclauses (I) and (II) as clauses
^.. (i) and (ii), respectively; and
' (B) by striking out clause (ii);
(2) in subsection (f)(4)—
(A) in subparagraph (B)—
(i) by striking out "Subject to subparagraph (C), the"
to^if^^ and inserting in lieu thereof "The"; and
(ii) by striking out hay and grazing, ; and
(B) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraph:
"(C)(i) Except as provided in clauses (ii) and (iii), haying and
grazing of acreage designated as conservation use acreage for the
purpose of meeting any requirements established under an acreage
limitation program (including a program conducted under subsec-
tion (c)(lXB)), set-aside program, or land diversion program estab-
lished under this section shall be permitted, except during any
consecutive 5-month period that is established by the State commit-
tee established under section 8(b) of the Soil Conservation and
Domestic Allotment Act (16 U.S.C. 590h(b)) for a State. Such 5-
month period shall be established during the period beginning April
1, and ending October 31, of a year.
"(ii) In the case of a natural disaster, the Secretary may permit
unlimited haying and grazing on such acreage.
"(iii) Haying and grazing shall not be permitted for any crop
under clause (i) if the Secretary determines that haying and grazing
would have an adverse economic effect.".
(c) COTTON.—Effective only for the 1988 through 1990 crops of
upland cotton, section 103A of such Act (7 U.S.C. 1444-1) is
amended—
(1) in subsection (cXlXG)—
(A) in clause (i)—
(i) by striking out "(i)"; and
(ii) by redesignating subclauses (I) and (II) sis clauses
(i) and (ii), respectively; and
(B) by striking out clause (ii);
(2) in subsection (fX3)—
(A) in subparagraph (B)—
(i) by striking out "Subject to s u b p a r ^ r a p h (C), the"
and inserting in lieu thereof "The"; and
(ii) by striking out "hay and grazing,"; and
(B) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraph:
"(CXi) Except as provided in clauses (ii) and (iii), haying and
grazing of acreage designated as conservation use acreage for the
purpose of meeting any requirements established under an acreage
limitation progrsim (including a program conducted under
subsection (cXlXC)), set-aside program, or land diversion program
established under this section shall be permitted, except during any
consecutive 5-month period that is established by the State commit-
tee established under section 8(b) of the Soil Conservation and
Domestic Allotment Act (16 U.S.C. 590h(b)) for a State. Such 5-
101 STAT. 1330-10 PUBLIC LAW 100-203—DEC. 22, 1987
month period shall be established during the period beginning
April 1, and ending October 31, of a year.
"(ii) In the case of a natural disaster, the Secretary may permit
unlimited haying and grazing on such acreage.
"(iii) Haying and grazing shall not be permitted for any crop
under clause (i) if the Secretary determines that haying and grazing
would have an adverse economic effect.".
(d) RICE.—Effective only for the 1988 through 1990 crops of rice,
section 101A of such Act (7 U.S.C. 1441-1) is amended—
(1) in subsection (c)(1)(G)—
(A) in clause (i)—
(i) by striking out "(i)"; and
(ii) by redesignating subclauses (I) and (II) as clauses
(i) and (ii), respectively; and
(B) by striking out clause (ii);
(2) in subsection (f)(3)—
(A) in subparagraph (B)—
(i) by striking out "Subject to subparagraph (C), the"
and inserting in lieu thereof "The"; and
(ii) by striking out "hay and grazing,"; and
(B) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraph:
"(CXi) Except as provided in clauses (ii) and (iii), haying and
grazing of acreage designated as conservation use acreage for the
purpose of meeting any requirements established under an acreage
limitation program (including a program conducted under subsec-
tion (c)(lXB)), set-aside program, or land diversion program estab-
lished under this section shall be permitted, except during any
consecutive 5-month period that is established by the State commit-
tee established under section 8(b) of the Soil Conservation and
Domestic Allotment Act (16 U.S.C. 590h(b)) for a State. Such 5-
month period shall be established during the period beginning
April 1, and ending October 31, of a year.
"(ii) In the case of a natural disaster, the Secretary may permit
unlimited haying and grazing on such acreage.
"(iii) Haying and grazing shall not be permitted for any crop
under clause (i) if the Secretary determines that haying and grazing
would have an adverse economic effect.".
Subtitle B—Optional Acreage Diversion
SEC. 1201. WHEAT OPTIONAL ACREAGE DIVERSION PROGRAM.
Effective only for the 1988 through 1990 crops of wheat,
section 107D(cXlXC) of the Agricultural Act of 1949 (7 U.S.C.
1445b-3(cXlXC)) is amended—
(1) in clause (iXII), by striking out ", subject to the compliance
of the producers with clause (ii)";
(2) by striking out clauses (ii) and (iii) and inserting in lieu
thereof the following new clauses:
"(ii) Notwithstanding any other provision of this section, any
producer who elects to devote all or a portion of the permitted wheat
acreage of the farm to conservation uses (or other uses as provided
in subparagraph (K)) under this subparagraph shall receive defi-
ciency payments on the acreage that is considered to be planted to
wheat and eligible for payments under this subparagraph for such
crop at a per-bushel rate established by the Secretary, except that
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-11
such rate may not be established at less than the projected defi-
ciency payment rate for the crop, as determined by the Secretary.
Such projected payment rate for the crop shall be announced by the
Secretary prior to the period during which wheat producers may
agree to participate in the program for such crop.
"(iii) The Secretary shall implement this subparagraph in such a
manner as to minimize the adverse effect on agribusiness and other
agriculturally related economic interests within any county, State,
or region. In carrying out this subparagraph, the Secretary is au-
thorized to restrict the total amount of wheat acreage that may be
taken out of production under this subparagraph, taking into consid-
eration the total amount of wheat acreage that has or will be
removed from production under other price support, production
adjustment, or conservation program activities. No restrictions on
the amount of acreage that may be taken out of production in
accordance with this subparagraph in a crop year shall be imposed
in the case of a county in which producers were eligible to receive
disaster emergency loans under section 321 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1961) as a result of a
disaster that occurred during such crop year."; and
(3) in clause (iv)—
(A) by inserting "(or all)" after "such portion"; and
(B) by inserting "under this subparagraph" after
"subparagraph (K))^.
SEC. 1202. FEED GRAINS OPTIONAL ACREAGE DIVERSION PROGRAM.
Effective only for the 1988 through 1990 crops of feed grains,
section 105C(cXlXB) of the Agricultural Act of 1949 (7 U.S.C.
1444e(cXlXB)) is amended—
(1) in clause (iXH), by striking out ", subject to the compliance
of the producers with clause (ii)";
(2) by striking out clauses (ii) and (iii) and inserting in lieu
thereof the following new clauses:
"(ii) Notwithstanding any other provision of this section, any
producer who elects to devote all or a portion of the permitted feed
grsdn acreage of the farm to conservation uses (or other uses as
provided in subparagraph (I)) under this subparagraph shall receive
deficiency pajrments on the acreage that is considered to be planted
to feed grains and eligible for pa3anents under this subparagraph for
such crop at a per-bushel rate established by the Secretary, except
that such rate may not be established at less than the projected
deficiency payment rate for the crop, as determined by the Sec-
retary. Such projected pajonent rate for the crop shall be announced
by the Secretary prior to the period during which feed grain pro-
ducers may agree to participate in the program for such crop.
"(iii) The Secretary shall implement this subparagraph in such a
manner as to minimize the adverse effect on agribusiness and other
agriculturally related economic interests within £uiy county. State,
or region. In carrsdng out this subparagraph, the Secretary is au-
thorized to restrict the total amount of feed grain acreage that may
be taken out of production under this subparagraph, taking into
consideration the total amount of feed grain acreage that has or will
be removed from production under other price support, production
adjustment, or conservation program activities. No restrictions on
the amount of acreage that may be taken out of production in
accordance with this subparagraph in a crop year shall be imposed
in the case of a county in which producers were eligible to receive
101 STAT. 1330-12 PUBLIC LAW 100-203—DEC. 22, 1987
disaster emergency loans under section 321 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1961) as a result of a
disaster that occurred during such crop year."; and
(3) in clause (iv)—
(A) by inserting "(or all)" after "such portion"; and
(B) by inserting "under this subparagraph" after
"subparagraph (I))".
7 u s e 1444e SEC. 1203. REGULATIONS.
(a) IN GENERAL.—Not later than 30 days after the date of enact-
ment of this Act, the Secretary of Agriculture shall issue regulations
implementing the amendments made to sections 107D(c)(l)(C) and
105C(c)(l)(B) of the Agricultural Act of 1949 (7 U.S.C. 1445b-3(c)(l)(C)
and 1444e(c)(l)(B)) by sections 1201 and 1202, respectively.
(b) NoNREDUCTiON OF BASES AND YiELDS.—Such regulations shall
include provisions that ensure that the wheat or feed grain crop
acreage base and farm program payment yield for any farm will not
be reduced if the producers on the farm set aside from production
all, or a portion, of the producer's permitted acreage under the
acreage diversion program under section 107D(c)(l)(C) or
105C(c)(l)(B) as amended by section 1201 or 1202, respectively.
(c) EFFECT ON LANDLORD-TENANT RELATIONS.—Such regulations
shall ensure, to the maximum extent practicable, that the programs
authorized under this subtitle will not adversely affect the relation-
ships between landlords and tenants, regarding any crop acreage
base entered into such programs, in existence on the date of enact-
ment of this Act.
Subtitle C—Farm Program Payments
SEC. 1301. PREVENTION OF THE CREATION OF ENTITIES TO QUALIFY AS
SEPARATE PERSONS.
(a) IN GENERAL.—Effective beginning with the 1989 crops, the
Food Security Act of 1985 is amended—
(1) in section 1001(1) (7 U.S.C. 1308), by striking out "For
each" and inserting in lieu thereof "Subject to sections lOOlA
through lOOlC, for each";
(2) in section 1001(2)—
(A) in subparagraph (A), by striking out "For each" and
inserting in lieu thereof "Subject to sections lOOlA through
lOOlC, for each"; and
(B) in subparagraph (C), by striking out "The total" and
inserting in lieu thereof "Subject to sections lOOlA through
lOOlC, the total"; and
(3) by inserting after section 1001 the following new section:
7 u s e 1308-1. "SEC. lOOlA. PREVENTION OF CREATION OF ENTITIES TO QUALIFY AS
SEPARATE PERSONS; PAYMENTS LIMITED TO ACTIVE
FARMERS.
"(a) PREVENTION OF CREATION OF ENTITIES TO QUAUFY AS SEPA-
RATE PERSONS.—For the purposes of preventing the use of multiple
legal entities to avoid the effective application of the pajrment
limitations under section 1001:
"(1) IN GENERAL.—A person (as defined in section 1001(5XBXi))
that receives farm program payments (as described in para-
graphs (1) and (2) of this section as being subject to limitation)
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-13
for a crop year under the Agricultural Act of 1949 (7 U.S.C. 1421
et seq.) may not also hold, directly or indirectly, substantial
beneficial interests in more than two entities (as defined in
section 1001(5)(BXi)(II)) engaged in farm operations that also
receive such payments as separate persons, for the purposes of
the application of the limitations under section 1001. A person
that does not receive such payments for a crop year may not
hold, directly or indirectly, substantial beneficial interests in
more than three entities that receive such payments as separate
persons, for the purposes of the application of the limitations
under section 1001.
"(2) MINIMAL BENEFICIAL INTERESTS.—For the purpose of this
subsection, a beneficial interest in any entity that is less than 10
percent of all beneficial interests in such entity combined shall
not be considered a substantial beneficial interest, unless the
Secretary determines, on a case-by-case basis, that a smaller
percentage should apply to one or more beneficial interests to
ensure that the purpose of this subsection is achieved.
"(3) NOTIFICATION BY ENTITIES.—To facilitate administration
of this subsection, each entity receiving such pa3mients as a
separate person shall notify each individual or other entity that
acquires or holds a substantial beneficial interest in it of the
requirements and limitations under this subsection. Each such
entity receiving pa3mients shall provide to the Secretary of
Agriculture, at such times and in such manner as prescribed by
the Secretary, the name and social security number of each
individual, or the name and taxpayer identification number of
each entity, that holds or acquires a substantial beneficial
interest.
"(4) NOTIFICATION OF INTEREST.—
"(A) IN GENERAL.—If a person is notified that the person
holds substantisd beneficial interests in more than the
number of entities receiving pajmients that is permitted
under this subsection for the purposes of the application of
the limitations under section 1001, the person immediately
shall notify the Secretary, designating those entities that
should be considered as permitted entities for the person for
purposes of applying the limitations. Each remaining entity
in which the person holds a substantial beneficial interest
shall be subject to reductions in the pa)mients to the entity
subject to limitation under section 1001 in accordance with
this subparagraph. Each such pa)anent applicable to the
entity shall be reduced by an smiount that bears the same
relation to the full payment that the person's beneficial
interest in the entity bears to all beneficial interests in the
entity combined. Before making such reductions, the Sec-
retary shall notify all individuals or entities affected
thereby and permit them to adjust among themselves their
interests in the designated entity or entities.
"(B) NOTICE NOT PROVIDED.—If the person does not so
notify the Secretary, all entities in which the person holds
substantisd beneficial interests shall be subject to reduc-
tions in the per person limitations under section 1001 in the
manner described in subparagraph (A). Before making such
reductions, the Secretary shall notify all individueds or
entities affected thereby and permit them to adjust among
101 STAT. 1330-14 PUBLIC LAW 100-203—DEC. 22, 1987
themselves their interests in the designated entity or
entities.".
SEC. 1302. PAYMENTS LIMITED TO ACTIVE FARMERS.
Effective beginning with the 1989 crops, section 1001A of the Food
Security Act of 1985, as added by section 1301, is amended by adding
at the end the following:
"0)) PAYMENTS LIMITED TO ACTIVE FARMERS.—
"(1) IN GENERAL.—To be separately eligible for farm program
payments (as described in paragraphs (1) and (2) of section 1001
as being subject to limitation) under the Agricultural Act of
1949 with respect to a particular farming operation (whether in
the person's own right or as a partn3r in a general partnership,
a grantor of a revocable trust, a participant in a joint venture,
or a participant in a similar entity (as determined by the
Secretary) that is the producer of the crops involved), a person
must be an individual or entity described in section 1001(5)(B)(i)
and actively engaged in farming with respect to such operation,
as provided under paragraphs (2), (3), and (4).
(2) GENERAL CLASSES ACTIVELY ENGAGED IN FARMING.^—For
the purposes of paragraph (1), except £is otherwise provided in
paragraph (3):
"(A) INDIVIDUALS.—An individual shall be considered to
be actively engaged in farming with respect to a farm
operation if—
"(i) the individual makes a significant contribution
(based on the total value of the farming operation) of^
"(I) capital, equipment, or land; and
"(II) personal labor or active personal manage-
ment;
to the farming operation; and
"(ii) the individual's share of the profits or losses
from the farming operation is commensurate with the
individual's contributions to the operation; and
"(iii) the individual's contributions are at risk.
"(B) CORPORATIONS OR OTHER ENTITIES.—A corporation or
other entity described in section 1001(5)(B)(iXII) shall be
considered as actively engaged in farming with respect to a
farming operation if—
(i) the entity separately makes a significant con-
tribution (based on the total value of the farming oper-
ation) of capital, equipment, or land;
"(ii) the stockholders or members collectively make a
significant contribution of personal labor or active per-
sonal management to the operation; and
"(iii) the standards provided in clauses (ii) and (iii) of
paragraph (A), as applied to the entity, are met by the
entity.
"(C) ENTITIES MAKING SIGNIFICANT CONTRIBUTIONS.—If a
general partnership, joint venture, or similar entity (as
determined by the Secretary) separately makes a signifi-
cant contribution (based on the total value of the farming
operation involved) of capital, equipment, or land, and the
standards provided in clauses (ii) and (iii) of paragraph (A),
as applied to the entity, are met by the entity, the partners
' Copy read "CLASSES ACTIVELY ENGAGED IN FARMING".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-15
or members making a significant contribution of personal
labor or active personal management shall be considered to
be actively engaged in farming with respect to the farming
operation involved.
"(D) EQUIPMENT AND PERSONAL LABOR.—In making deter-
minations under this subsection regarding equipment and
personal labor, the Secretary shall take into consideration
the equipment and personal labor normally and customar-
ily provided by farm operators in the area involved to
produce program crops.
"(3) SPECIAL CLASSES ACTIVELY ENGAGED IN FARMING.—Not-
withstanding paragraph (2), the following persons shall be
considered to be actively engaged in farming with respect to a
farm operation:
"(A) LANDOWNERS.—A person that is a landowner
contributing the owned land to the farming operation if the
landowner receives rent or income for such use of the land
based on the land's production or the operation's operating
results, and the person meets the standard provided in
clauses (ii) and (iii) of paragraph (2XA).
"(B) FAMILY MEMBERS.—With respect to a farming oper-
ation conducted by persons, a majority of whom are individ-
uals who are family members, an adult family member who
makes a significant contribution (based on the total value of
the farming operation) of active personal management or
personal labor and, with respect to such contribution, who
meets the standards provided in clauses (ii) and (iii) of
paragraph (2XA). For the purposes of the preceding sen-
tence, the term 'family member' means an individual to
whom another family member in the farming operation is
related as lineal ancestor, lineal descendant, or sibling
(including the spouses of those family members who do not
make a significant contribution themselves).
"(C) SHARECROPPERS.—A sharecropper who makes a
significant contribution of personal labor to the farming
operation and, with respect to such contribution, who meets
the standards provided in clauses (ii) and (iii) of paragraph
(2XA).
"(4) PERSONS NOT ACTIVELY ENGAGED IN FARMING.—For the
purposes of paragraph (1), except as provided in paragraph (3),
the following persons shall not be considered to be actively
engaged in farming with respect to a farm operation:
"(A) LANDLORDS.—A landlord contributing land to the
farming operation if the landlord receives cash rent, or a
crop share guaranteed as to the amount of the commodity
to be paid in rent, for such use of the land.
"(B) OTHER PERSONS.—Any other person, or class of per-
sons, determined by the Secretary as failing to meet the
standards set out in paragraphs (2) and (3).
"(5) CUSTOM FARMING SERVICES.—A person receiving custom
farming services will be considered separately eligible for pay-
ment limitation purposes if such person is actively engaged in
farming based on paragraphs (1) through (3). No other rules
with respect to custom farming shall apply.".
101 STAT. 1330-16 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 1303. DEFINITION OF PERSON: ELIGIBLE INDIVIDUALS AND ENTI-
TIES; RESTRICTIONS APPLICABLE TO CASH-RENT TENANTS.
7 use 1308 note. Effective beginning with the 1989 crops:
(a) IN GENERAL.—Section 1001(5) of the Food Security Act of 1985
(7 U.S.C. 1308(5)) is amended—
(1) by inserting after the first sentence of subparagraph (A)
Regulations. the following new sentence: "Such regulations shall incorporate
the provisions in subparagraphs (B) through (E) of this para-
graph, paragraphs (6) and (7), and sections lOOlA through
lOOlC";
(2) by striking out the second sentence of subparagraph (A)
and inserting in lieu thereof the following new subparagraph:
"(B)(i) For the purposes of the regulations issued under subpara-
graph (A), subject to clause (ii), the term 'person' means—
"(I) an individual, including any individual participating in a
farming operation as a partner in a general partnership, a
participant in a joint venture, a grantor of a revocable trust, or
a participant in a similar entity (as determined by the
Secretary);
"(II) a corporation, joint stock company, association, limited
partnership, charitable organization, or other similar entity (as
determined by the Secretary), including any such entity or
organization participating in the farming operation as a partner
in a general partnership, a participant in a joint venture, a
grantor of a revocable trust, or as a participant in a similar
entity (as determined by the Secretary); and
"(III) a State, political subdivision, or agency thereof.
"(ii)(I) Such regulations shall provide that the term 'person' does
not include any cooperative association of producers that markets
commodities for producers with respect to the commodities so mar-
keted for producers.
"(II) In defining the term 'person' as it will apply to irrevocable
trusts and estates, the Secretary shall ensure that fair and equitable
treatment is given to trusts and estates and the beneficiaries
thereof.
"(iii) Such regulations shall provide that, with respect to any
married couple, the husband and wife shall be considered to be one
person, except that any married couple consisting of spouses who,
prior to their marriage, were separately engaged in unrelated farm-
ing operations, each spouse shall be treated as a separate person
with respect to the farming operation brought into the marriage by
such spouse so long as such operation remains as a separate farming
operation, for the purposes of the application of the limitations
under this section.";
(3) by redesignating subparagraph (B) as subparagraph (C);
and
(4) by adding at the end thereof the following new subpara-
graphs:
"(D) Any person that conducts a farming operation to produce a
crop subject to limitations under this section as a tenant that rents
the land for cash (or a crop share guaranteed £is to the amount of the
commodity to be paid in rent) and that makes a significant contribu-
tion of active personal management but not of personal labor shall
be considered the same person as the landlord unless the tenant
makes a significant contribution of equipment used in the farming
operation.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-17
"(E) The Secretary may not approve (for purposes of the applica-
tion of the limitations under this section) any change in a farming
operation that otherwise will increase the number of persons to
which the limitations under this section are applied unless the
Secretary determines that the change is bona fide and substantive.
In the implementation of the preceding sentence, the addition of a
family member to a farming operation under the criteria set out in
section 1001A(b)(lXB) shall be considered a bona fide and sub-
stantive change in the farming operation.".
(b) LANDS OWNED BY STATES, POUTICAL SUBDIVISIONS, AND PUBUC
SCHOOLS.—Paragraph (6) of section 1001 of the Food Security Act of
1985 (7 U.S.C. 1308(6)) is amended to read as follows:
"(6) The provisions of this section that limit payments to any
person shall not be applicable to land owned by a public school
district or land owned by a State that is used to maintain a public
school.".
SEC. 1304. MORE EFFECTIVE AND UNIFORM APPLICATION OF PAYMENT
LIMITATIONS.
(a) EDUCATION PROGRAM. 7 use 1308 note.
(1) IN GENERAL.—The Secretary of Agriculture shall imple-
ment a payment provisions education program for appropriate
personnel of the Department of Agriculture and members and
other personnel of local, county, and State committees estab-
lished under section 8(b) of the Soil Conservation and Domestic
Allotment Act (16 U.S.C. 590h(b)), for the purpose of fostering
more effective and uniform application of the payment limita-
tions and restrictions under sections 1001 through lOOlC of the
Food Security Act of 1985.
(2) TRAINING.—The education program shall provide training
to such personnel in the fair, accurate, and uniform application
to individual farming operations of the provisions of law and
regulation relating to the payment provisions of sections 1001
through lOOlC of the Food Security Act of 1985. Particular
emphasis shall be given to the changes in the law made by
sections 1301,1302, and 1303 of this Act.
(3) IMPLEMENTATION.—The education program shall be fully
implemented, and the training completed, not later than 30
days after the date final regulations are issued to carry out the
amendments made by this subtitle.
(4) COMMODITY CREDIT CORPORATION.—The Secretary shall
carry out the program provided under this subsection through
the Commodity Credit (Corporation.
(b) SCHEMES OR DEVICES.—Effective beginning with the 1989 crops,
the Food Security Act of 1985 is amended by inserting after section
lOOlA, as added by sections 1301 and 1302 of this Act, the following
new section:
"SEC. lOOlB. SCHEMES OR DEVICES. 7 USC 1308-2.
"If the Secretary of Agriculture determines that any person has
adopted a scheme or device to evade, or that has the purpose of
evading, section 1001, lOOlA, or lOOlC, such person shall be ineli-
gible to receive farm program pa3mients (as described in paragraphs
(1) and (2) of section 1001 as being subject to limitation) applicable to
the crop year for which such scheme or device was adopted and the
succeeding crop year.".
101 STAT. 1330-18 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 1305. REGULATIONS: TRANSITION RULES; EQUITABLE ADJUST-
MENTS.
7 u s e 1308 note. (a) REGULATIONS.—
(1) ISSUANCE.—The Secretary of Agriculture shall issue—
(A) proposed regulations to carry out the amendments
made by this subtitle not later than April 1, 1988; and
(B) final regulations to carry out such amendments not
later than August 1,1988.
(2) FIELD INSTRUCTIONS.—Any field instructions relating to, or
other supplemental clarifications of, the regulations issued
under sections 1001 through lOOlC of the Food Security Act of
1985 shall not be used in resolving issues involved in the
application of the payment limitations or restrictions under
such sections or regulations to individuals, other entities, or
farming operations until copies of the publication are made
available to the public.
(b) ALLOWANCE FOR EQUITABLE REORGANIZATIONS.—To allow for
the equitable reorganization of farming operations to conform to the
limitations and restrictions contained in the amendments made to
the Food Security Act of 1985 by this subtitle in cases in which the
application of such limitations and restrictions will reduce pay-
ments to the farming operation (as determined by the Secretary),
the Secretary may waive the application of the substantive change
rule under section 1001(5XE), as added by section 1303 of this Act, or
any regulation of the Secretary containing a comparable rule, to any
reorganization applied for prior to the final date when producers are
eligible to enter into contracts to participate in the commodity
programs established for the 1989 crop year, to the extent the
Secretary determines appropriate to facilitate any such equitable
reorganizations that does not increase such payments.
(c) GOOD FAITH REUANCE ON OFFICIAL ADVICE.—Section 1001 of
the Food Security Act of 1985 (7 U.S.C. 1308) is amended by adding
at the end thereof the following new paragraph:
"(7) Regulations of the Secretary shall establish time limits for the
various steps involved with notice, hearing, decision, and the ap-
peals procedure in order to ensure expeditious handling and settle-
ment of payment limitation disputes. Notwithstanding any other
provision of law, actions taken by an individual or other entity in
good faith on action or advice of an authorized representative of the
Secretary may be accepted as meeting the requirement under this
section or section lOOlA, to the extent the Secretary deems it
desirable in order to provide fair and equitable treatment.".
Contracts. (d) CONSERVATION RESERVE AppucATiON.—Notwithstanding sec-
7 use 1308 note, tion 1234(fK2) of the Food Security Act of 1985 (16 U.S.C. 3834(f)),
paragraphs (5) through (7) of section 1001, as amended by this
subtitle, and sections 1001A through lOOlC, of the Food Security Act
of 1985 shall apply to the conservation reserve program under
subtitle D of title XII of such Act (16 U.S.C. 3831 et seq.) with respect
to rental payments to persons under contracts entered into after the
date of the enactment of this Act, except with respect to landlords
that receive C£ish rent, or a crop share guaranteed as to the amount
of the commodity to be paid in rent, for the use of the land.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-19
SEC 1306. FOREIGN PERSONS MADE INELIGIBLE FOR PROGRAM BENE-
FITS.
Effective beginning with the 1989 crops, the Food Security Act of
1985 is amended by inserting after section lOOlB, as added by
section 1304 of this Act, the following new section:
"SEC. lOOlC. FOREIGN PERSONS MADE INELIGIBLE FOR PROGRAM 7 USC 1308-3.
BENEFITS.
"Notwithstanding any other provision of law:
"(a) IN GENERAL.—For each of the 1989 and 1990 crops, any person
who is not a citizen of the United States or an alien lawfully
admitted into the United States for permanent residence under the
Immigration and Nationality Act (8 U.S.C. 1101 et seq.) shall be
ineligible to receive any type of production adjustment payments,
price support program loans, payments, or benefits made available
under the Agricultural Act of 1949 (7 U.S.C. 1421 et seq.), the
Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq.), or
subtitle D of title XII of the Food Security Act of 1985 (16 U.S.C.
3831 et seq.) with respect to any commodity produced, or land set
aside from production, on a farm that is owned or operated by such
person, unless such person is an individual who is providing land,
capital, and a substantial amount of personal labor in the produc-
tion of crops on such farm.
"(b) CORPORATIONS OR OTHER ENTITIES.—For purposes of subsec-
tion (a), a corporation or other entity shall be considered a person
that is ineligible for production adjustment payments, price support
program loans, payments, or benefits if more than 10 percent of the
beneficial ownership of the entity is held by persons who are not
citizens of the United States or aliens lawfully admitted into the uasH
United States for permanent residence under the Immigration and
Nationality Act, unless such persons provide a substantial amount
of personal labor in the production of crops on such farm. Notwith-
standing the foregoing provisions of this subsection, with respect to
an entity that is determined to be ineligible to receive such pay-
ments, loans, or other benefits, the Secretary may make payments,
loans, and other benefits in an amount determined by the Secretary
to be representative of the percentage interests of the entity that is
owned by citizens of the United States and aliens lawfully admitted
into the United States for permanent residence under the Immigra-
tion and Nationality Act.
"(c) PROSPECTIVE APPUCATION.—No person shall become ineligible Contracts.
under this section for production adjustment pa3anents, price sup-
port program loans, payments or benefits as the result of the
production of a crop of an agricultural commodity planted, or
commodity program or conservation reserve contract entered into,
before the date of the enactment of this section.".
SEC. 1307. HONEY LOAN LIMITATION.
Section 1001(2XC) of the Food Security Act of 1985 (7 U.S.C.
1308(2XC)) is amended—
(1) by striking out clause (i); and
(2) in clause (ii), by striking out "(ii)".
101 STAT. 1330-20 PUBLIC LAW 100-203—DEC. 22, 1987
Subtitle D—Rural Electrification ^^^ -^^
Administration Programs
CHAPTER 1—PREPAYMENT OF RURAL ELECTRIFICATION
LOANS
1 u s e 936a note. SEC. 1401. PREPAYMENT OF LOANS.
(a) ELIGIBILITY TO PREPAY.—Notwithstanding subsections (c), (d),
and (e) of section 306A of the Rural Electrification Act of 1936 (7
U.S.C. 936a (c), (d), and (e)), during fiscal year 1988, a borrower of a
loan made by the Federal Financing Bank and guaranteed under
section 306 of such Act (7 U.S.C. 936) may, at the option of the
borrower, prepay such loan (or any loan advance thereunder) in
accordance with subsections (a) and (b) of section 306A of such Act,
except that any prepayment that would cause the total amount of
such prepayments during fiscal year 1988 to exceed $2,000,000,000
shall be subject solely to the approval of the Secretary of the
Treasury.
Oa) PRIORITY FOR APPROVAL.—In determining which borrowers
shall be permitted to prepay loans under subsection (a):
(1) The Administrator of the Rural Electrification Adminis-
tration shall give priority to those 8 borrowers that were deter-
mined by the Administrator, prior to the date of the enactment
of this Act, to be eligible to prepay, or that prepaid, an advance
under section 306A of such Act (as in effect prior to the date of
the enactment of this Act), except that to retain such priority a
borrower shall—
Regulations. (A) notify the Administrator in writing, within 30 days
after the issuance of regulations to carry out this section, of
the intent of the borrower to prepay; and
(B) complete such prepayment by disbursing funds to the
Federal Financing Bank to prepay loan advances within
120 days after the issuance of such regulations.
(2) In considering requests for prepayment under subsection
(a) by borrowers not described in paragraph (1), the Adminis-
trator shall permit prepayment based on the order in which
borrowers are prepared to disburse funds to the Federal Financ-
ing Bank to complete such prepayments. If more than 1 bor-
rower is so prepared at the same time, and if the combined
amount of such prepayments would cause the total amount of
prepayments during fiscal year 1988, under this section, to
exceed $2,000,000,000, the Administrator shall—
(A) base the determination on the date on which prepay-
ment applications have been submitted; or
(B) permit partial prepayment by two or more borrowers.
(c) REGULATIONS.—Not later than 30 days after the date of enact-
ment of this Act, the Administrator of the Rural Electrification
Administration shall issue such regulations as are necessary to
carry at this section.
(d) STUDY.—Not later than January 1, 1989, the Comptroller
General of the United States shall—
(1) study—
(A) all benefits provided by Federal Financing Bank lend-
ing and the procedures and conditions for the prepayment
of current Federal Financing Bank loans;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-21
(B) the benefits and costs to Federal Financing Bank
borrowers of making prepayments; and
(C) alternative conditions and procedures for prepayment
of all Federal Financing Bank loans to balance Federal
benefits with Federal costs; and
(2) submit to Congress a report describing the results of such Reports,
study, together with any appropriate recommendations.
SEC. 1402. USE OF FUNDS.
The Rural Electrification Act of 1936 is amended by inserting
after section 311 (7 U.S.C. 940a) the following new section:
"SEC. 312. USE OF FUNDS. 7 USC 940b.
"A borrower of an insured or guaranteed electric loan under this
Act may, without restriction or prior approval of the Administrator,
invest its own funds or make loans or guarantees, not in excess of 15
percent of its total utility plant.".
SEC. 1403. CUSHION OF CREDIT PAYMENTS PROGRAM.
Title III of the Rural Electrification Act of 1936 (as amended by
section 1402 of this Act) is amended by adding at the end thereof the
following new section:
"SEC. 313. CUSHION OF CREDIT PAYMENTS PROGRAM. 7 USC 940c.
"(a) ESTABUSHMENT.—
"(1) IN GENERAL.—The Administrator shall develop and pro-
mote a program to encourage borrowers to voluntarily make
deposits into cushion of credit accounts established within the
Rural Electrification and Telephone Revolving Fund.
"(2) INTEREST.—Amounts in each cushion of credit account jHli
shall accrue interest to the borrower at a rate of 5 percent per
annum.
"(3) BALANCE.—A borrower may reduce the balance of its
cushion of credit account only if the amount obtained from the
reduction is used to make scheduled payments on loans made or
guaranteed under this Act.
"(h) USES OF CUSHION OF CREDIT PAYMENTS.—
"(1) IN GENERAL.—
"(A) CASH BALANCE.—Cushion of credit payments shall be
held in the Rural Electrification and Telephone Revolving
Fund as a cash balance in the cushion of credit accounts of
borrowers.
"(B) INTEREST.—All cash balance amounts (obtained from
cushion of credit payments, loan pajrments, and other
sources) held by the Fund shall bear interest to the Fund at
a rate equal to the weighted average rate on outstanding
certificates of beneficial ownership issued by the Fund.
"(C) CREDITS.—The amount of interest accrued on the
cash balances shall be credited to the Fund as an offsetting
reduction to the amount of interest paid by the Fund on its
certificates of beneficial ownership.
"(2) RURAL ECONOMIC DEVELOPMENT SUBACCOUNT.—
"(A) MAINTENANCE OF ACCOUNT.—The Administrator
shall maintain a subaccount within the Rural Electrifica-
tion and Telephone Revolving Fund to which shall be cred-
ited, on a monthly basis, a sum determined by multiplying
the outstanding cushion of credit payments made after
101 STAT. 1330-22 PUBLIC LAW 100-203—DEC. 22, 1987
October 1, 1987, by the difference (converted to a monthly
basis) between the average weighted interest rate paid on
outstanding certificates of beneficial ownership issued by
the Fund and the 5 percent rate of interest provided to
borrowers on cushion of credit payments.
"(B) GRANTS.—The Administrator is authorized, from the
interest differential sums credited this subaccount and from
any other funds made available thereto, to provide grants
or zero interest loans to borrowers under this Act for the
purpose of promoting rural economic development and job
creation projects, including funding for project feasibility
studies, start-up costs, incubator projects, and other
reasonable expenses for the purpose of fostering rural
development.
"(C) REPAYMENTS.—In the case of zero interest loans, the
Administrator shall establish such reasonable repayment
terms as will ensure borrower participation.
"(D) PROCEEDS.—All proceeds from the repayment of such
loans shall be returned to the subaccount.
"(E) NUMBER OF GRANTS.—Such loans and grants shall be
made during each fiscal year to the full extent of the
amounts held by the rural economic development
subaccount, subject only to limitations as may be from time-
to-time imposed by law.".
CHAPTER 2—RURAL TELEPHONE BANK BORROWERS
SEC. 1411. RURAL TELEPHONE BANK INTEREST RATES AND LOAN
PREPAYMENTS.
7 use 948 note. (a) FINDINGS.—Congress finds that—
(1) overcharging of Rural Telephone Bank borrowers has
resulted in $179,000,000 in excess profits and has imperiled
borrowers by raising costs to ratepayers;
(2) borrowers will be able to seek redress under section
408(bX3XG) of the Rural Electrification Act of 1936, as added by
subsection (c), or may leave the Rural Telephone Bank, but in
no case may the Governor of the Bank issue regulations requir-
ing any penalty from borrowers seeking to retire debt prior to
maturity; and
(3) any reduction in Federal Government * expenditures in
the operation of the Rural Telephone Bank, from borrowers'
conduct resulting from the implementation of the amendments
made by subsections 0>) and (c), should be included in all
calculations of the budget of the United States Government,
authorized under the *^ Balanced Budget and Emergency Deficit
Control Reaffirmation Act of 1987.
(b) RURAL TELEPHONE BANK LOAN PREPAYMENTS.— ®
(1) PREPAYMENTS AUTHORIZED.—Section 408(b) of the Rural
Electrification Act of 1936 (7 U.S.C. 9480))) is amended by
adding at the end the following new paragraph:
"(8) A borrower with a loan from the Rural Telephone Bank
may prepay such loan (or any part thereof) by paying the face
amount thereof without being required to pay the prepayment
* Copy read "government".
**Copy read "under of the".
' Copy read "PREPAYMENTS.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-23
penalty set forth in the note covering such loan, if such prepay-
ment is not made later than September 30,1988.".
(2) PREPAYMENT REGULATIONS.—The Governor of the Rural 7 USC 948 note.
Telephone Bank shall issue regulations to carry out the amend-
ment made by paragraph (1) within 30 days after the date of
enactment of this Act. Such regulations shall implement the
amendment made by paragraph (1) without the addition of any
restrictions not set forth in such amendment.
(c) DETERMINATION OF INTEREST RATES ON RURAL TELEPHONE BANK
LOANS.—Paragraph (3) of section 4080t)) of the Rural Electrification
Act of 1936 (7 U.S.C. 948(bX3)) is amended—
(1) by inserting "(A)" after the paragraph designation;
and
(2) by adding at the end thereof the following new
subparagraphs:
"(B) On and after the date of the enactment of this paragraph,
advances made on or after such date of enactment under loan
commitments made on or after October 1, 1987, shall bear
interest at the rate determined under subparagraph (C), but in
no event at a rate that is less than 5 percent per annum.
"(C) The rate determined under this subparagraph shall be—
"(i) for the period beginning on the date the advance is
made and ending at the close of the fiscal year in which
the advance is made, the average yield (on the date of the
advance) on outstanding marketable obligations of the
United States having a final maturity comparable to the
final maturity of the advance; and
"(ii) after the fiscal year in which the advance is made,
the cost of money rate for such fiscal year, as determined
under subparagraph (D).
"(D) Within 30 days after the end of each fiscal year, the
Governor shall determine to the nearest 0.01 percent the cost of
money rate for the fiscal year, by calculating the sum of the
resultis of the following calculations:
"(i) The aggregate of all amounts received by the tele-
phone bank during the fiscal year from the issuance of class
A stock, multiplied by the rate of return payable by the
telephone bank during the fiscal year, as specified in sec-
tion 406(c), to holders of class A stock, which product is
divided by the aggregate of the amounts advanced by the
telephone bank during the fiscal year.
"(ii) The aggregate of all amounts received by the tele-
phone bank during the fiscal year from the issuance of class
B stock, multiplied by the rate at which dividends are
payable by the telephone bank during the fiscal year, as
specified in section 406(d), to holders of class B stock, which
product is divided by the aggregate of the amounts ad-
vanced by the telephone bank during the fiscal year.
"(iii) The aggregate of all amounts received by the tele-
phone bank during the fiscal year from the issuance of class
C stock, multiplied by the rate at which dividends are
payable by the telephone bank during the flsc£d year, under
section 406(e), to holders of class C stock, which product is
divided by the aggregate of the amounts advanced by the
telephone bank during the fiscal year.
"(ivXD The sum of the results of the calculations de-
scribed in subclause (II).
101 STAT. 1330-24 PUBLIC LAW 100-203—DEC. 22, 1987
"(II) The amounts received by the telephone bank during
the fiscal year from each issue of telephone debentures and
other obligations of the telephone bank, multiplied, respec-
tively, by the rates at which interest is payable during the
fiscal year by the telephone bank to holders of each issue,
each of which products is divided, respectively, by the
aggregate of the amounts advanced by the telephone bank
during the fiscal year.
"(vXD The amount by which the aggregate of the amounts
advanced by the telephone bank during the fiscal year
exceeds the aggregate of the amounts received by the tele-
phone bank from the issuance of class A stock, class B
stock, class C stock, and telephone debentures and other
obligations of the telephone bank during the fiscal year,
multiplied by the historic cost of money rate as of the close
of the fiscal year immediately preceding the fiscal year,
which product is divided by the aggregate of the amounts
advanced by the telephone bank during the fiscal year.
"(II) For purposes of this clause, the term 'historic cost of
money rate', with respect to the close of a preceding fiscal
year, means the sum of the results of the following calcula-
tions: The amounts advanced by the telephone bank in each
fiscal year during the period beginning with fiscal year 1974
and ending with the preceding fiscal year, multiplied,
respectively, by the cost of money rate for the fiscal year (as
set forth in the table in subparagraph (E)) for fiscal years
1974 through 1987, and as determined by the Governor
under this subparagraph for fiscal years after fiscal year
1987), each of which products is divided, respectively, by the
aggregate of the amounts advanced by the telephone bank
during the period.
"(E) For purposes of subparagraph (DXII), the cost of
money rate for the fiscal years in which each advance was
made shall be as set forth in the following table:
The cost of money
"For advances made in— rate shall be—
Fiscal year 1974 5.01 percent
Fiscal year 1975 5.85 percent
Fiscal year 1976 5.33 percent
Fiscal year 1977 5.00 percent
Fiscal year 1978 5.87 percent
Fiscal year 1979 5.93 percent
Fiscal year 1980 8.10 percent
Fiscal year 1981 9.46 percent
Fiscal year 1982 8.39 percent
Fiscal year 1983 6.99 percent
Fiscal year 1984 6.55 percent
Fiscal year 1985 5.00 percent
Fiscal year 1986 5.00 percent
Fiscal year 1987 5.00 percent.
For purposes of this subparagraph, the term 'fiscal year' means
the 12-month period ending on September 30 of the designated
year.
"(FXi) Notwithstanding subparagraph (B), if a borrower holds
a commitment for a loan under this section made on or after
October 1, 1987, and before the date of the enactment of this
paragraph, part or all of the proceeds of which have not been
advanced as of such date of enactment, the borrower may, until
the later of the date the next advance under the loan commit-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-25
ment is made or 90 days after such date of enactment, elect to
have the interest rate specified in the loan commitment apply to
the unadvanced portion of the loan in lieu of the rate which (but
for this clause) would apply to the unadvanced portion under
this paragraph. If any borrower makes an election under this
clause with respect to a loan, the Governor shall adjust the
interest rate which applies to the unadvanced portion of the
loan accordingly.
"(iiXD If the telephone bank, pursuant to section 407(b), issues
telephone debentures on any date to refinance telephone deben-
tures or other obligations of the telephone bank, the telephone
bank shall, in addition to any interest rate reduction required
by any other provision of this paragraph, for the period ap-
plicable to the advance, reduce the interest rate charged on
each advance made under this section during the fiscal year in
which the refinanced debentures or other obligations were origi-
nally issued by the amount applicable to the advance.
"(II) For purposes of subclause (I), the term 'the period ap-
plicable to the advance' means the period beginning on the issue
date described in subclause (I) and ending on the earlier of the
date the advance matures or is completely prepaid.
"(Ill) For purposes of subclause (I), the term 'the amount
applicable to the advance' means an amount which fully reflects
that percentage of the funds saved by the telephone bank £is a
result of the refinancing which is equal to the percentage
representation of the advance in all advances described in
subclause (I).
"(IV) Within 60 days after any issue date described in
subclause (I), the Governor shall amend the loan documentation
for each advance described in subclause (I), as necessary, to
reflect any interest rate reduction applicable to the advance by
reason of this clause, and shall notify each affected borrower of
the reduction.
"(G) Within 30 days after the publication of any determina-
tion made under subparagraph (D), any affected borrower may
obtain review of the determination, or any other equitable relief
as may be determined appropriate, by the United States court of
appeals for the judicial circuit in which the borrower does
business by filing a written petition requesting the court to set
aside or modify such determination. On receipt of such a peti-
tion, the clerk of the court shall transmit a copy of the petition
to the Governor. On receipt of a copy of such a petition from the
clerk of the court, the Governor shall file with the court
the record on which the determination is based. The court
shall have jurisdiction to affirm, set aside, or modify the
determination.
"(H) Within 5 days after determining the cost of money rate
for a fiscal year, the Governor shall—
"(i) cause the determination to be published in the Fed- Federal
eral Register in accordance with section 552 of title 5, Register,
publication.
United States Code; and
"(ii) furnish a copy of the determination to the Comptrol-
ler General of the United States.
"(I) The Comptroller General shall review, on an expedited Reports.
basis, each determination a copy of which is received from the
Governor and, within 15 days after the date of such receipt,
furnish Congress a report on the accuracy of the determination.
101 STAT. 1330-26 PUBLIC LAW 100-203—DEC. 22, 1987
"(J) The telephone bank shall not sell or otherwise dispose of
any loan made under this section, except as provided in this
paragraph.".
SEC. 1412. INTEREST RATE TO BE CONSIDERED FOR PURPOSES OF
ASSESSING ELIGIBILITY FOR LOANS.
Paragraph (4) of section 408(b) of the Rural Electrification Act of
1936 (7 U.S.C. 948(bX4)) is amended by inserting at the end the
following: "For purposes of determining the creditworthiness of a
borrower for a loan under this paragraph, the Governor shall
assume that the loan, if made, would bear interest at a rate equal to
the average yield (on the date of the determination) on outstanding
marketable obligations of the United States having a final maturity
comparable to the final maturity of the loan.".
SEC. 1413. ESTABLISHMENT OF RESERVE FOR LOSSES DUE TO INTEREST
RATE FLUCTUATIONS.
(a) EsTABUSHMENT OF RESERVE; FUNDING.—Section 406 of the
7 use 946. Rural Electrification Act of 1936 (7 U.S.C. 947) is amended by adding
at the end the following:
"(h) There is hereby established in the telephone bank a reserve
for losses due to interest rate fluctuations. Within 30 days after the
date of the enactment of this subsection, the Governor of the
telephone bank shall transfer to the reserve for losses due to in-
terest rate fluctuations all amounts in the reserve for contingencies
as of the date of the enactment of this subsection. Amounts in the
reserve for interest rate fluctuations may be expended only to cover
operating losses of the telephone bank (other than losses attrib-
utable to loan defaults) and only after taking into consideration any
recommendations made by the General Accounting Office under
section 1413(b) of the Rural Telephone Bank Borrowers Fairness Act
of 1987.".
Reports. (b) STUDY BY GENERAL ACCOUNTING OFFICE.—Within 180 days
after the date of the enactment of this Act, the General Accounting
Office shall complete a study of operations of the telephone bank
and report its recommendations to the Committees on Agriculture
and Government Operations of the House of Representatives and
the Committee on Agriculture, Nutrition, and Forestry of the
Senate with respect to—
(1) the appropriate level of funding for the reserve for losses
due to interest rate fluctuations established in section 406(h) of
the Rural Electrification Act of 1936 (7 U.S.C. 947(h)) (as added
by subsection (a));
(2) the circumstances under which amounts in the reserve for
losses due to interest rate fluctuations should be expended;
(3) the circumstances under which amounts should be added
to the reserve for losses due to interest rate fluctuations; and
(4) the disposition of excess reserves.
In such study, the General Accounting Office shall consider the
effects of such recommendations on telephone bank borrowers, the
subscribers of such borrowers, and the United States Government,
(c) LIMITATION ON ESTABUSHMENT OF N E W RESERVES.—Subsection
7 use 946. (g) of section 406 of the Rural Electrification Act of 1936 (7 U.S.C.
947(g)) is amended—
(1) by striking out "reserves for losses," and inserting in lieu
thereof "the reserve for loan losses,"; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-27
(2) by adding at the end the following: "The telephone bank
may not establish any reserve other than the reserves referred
to in this subsection and in subsection (h).".
SEC. 1414. PUBLICATION OF RURAL TELEPHONE BANK POLICIES AND Federal
REGULATIONS. Register,
publication.
Notwithstanding the exemption contained in section 553(a)(2) of Grants.
title 5, United States Code, the Governor of the telephone bank shall Contracts.
7 u s e 944a.
cause to be published in the Federal Register, in accordance with
section 553 of title 5, United States Code, all rules, regulations,
bulletins, and other written policy standards governing the oper-
ation of the telephone bank's programs relating to public property,
loans, grants, benefits, or contracts. After September 30, 1988, the
telephone bank may not deny a loan or advance to, or take any
other adverse action against, any applicant or borrower for any
reason which is based upon a rule, regulation, bulletin, or other
written policy standard which has not been published pursuant to
such section.
Subtitle E—Miscellaneous
SEC. 1501. MARKETING ORDER PENALTIES.
Section 8c(14) of the Agricultural Adjustment Act of 1933 (7 U.S.C.
608c(14)), reenacted with amendments by the Agricultural Market-
ing Agreement Act of 1937, is amended—
(1) by inserting "(A)" before "Any"; and
(2) by adding at the end thereof the following new
subparagraph:
"(B) Any handler subject to an order issued under this section, or
any officer, director, agent, or employee of such handler, who vio-
lates any provision of such order (other than a provision calling for
payment of a pro rata share of expenses) may be assessed a civil
penalty by the Secretary not exceeding $1,000 for each such viola-
tion. Each day during which such violation continues shall be
deemed a separate violation, except that if the Secretary finds that a
petition pursuant to paragraph (15) was filed and prosecuted by the
handler in good faith and not for delay, no civil penalty may be
assessed under this paragraph for such violations as occurred be-
tween the date on which the handler's petition was filed with the
Secretary, and the date on which notice of the Secretary's ruling
thereon was given to the handler in accordeuice with regulations
prescribed pursuant to paragraph (15). The Secretary may issue an
order assessing a civil penalty under this paragraph only after
notice and an opportunity for an agency hearing on the record. Such
order shall be treated as a final order reviewable in the district
courts of the United States in any district in which the handler
subject to the order is an inhabitant, or has the handler's principal
place of business. The validity of such order may not be reviewed in
an action to collect such civil penalty.".
SEC. 1502. STUDY OF USE OF AGRICULTURAL COMMODITY FUTURES AND
OPTIONS MARKETS.
The last sentence of section 1742 of the Food Security Act of 1985
(7 U.S.C. 1421 note) is amended by striking out "1988" and inserting
in lieu thereof "1989".
101 STAT. 1330-28 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 1503. AUTHORIZATION OF APPROPRIATIONS FOR PHILIPPINE FOOD
AID INITIATIVE.
Section 416(b) of the Agricultural Act of 1949 (7 U.S.C. 1431(b)) is
amended by adding at the end thereof the following new paragraph:
"(12) There is authorized to be appropriated for fiscal year 1988, in
addition to any other funds authorized to be appropriated,
$1,000,000 for technical assistance for the sale or barter of commod-
ities under paragraph (7) to strengthen nonprofit private organiza-
tions and cooperatives in the Philippines.".
SEC. 1504. RURAL INDUSTRIALIZATION ASSISTANCE.
Section 310B(c) of the Consolidated Farm and Rural Development
Act (7 U.S.C. 1932(c)) is amended—
(1) by inserting "and private nonprofit corporations" after
"public bodies"; and
(2) by striking out "to facilitate development o f and inserting
in lieu thereof "to finance and facilitate development of small
and emerging". - „--..„
SEC. 1505. PLANT VARIETY PROTECTION FEES.
Section 31 of the Plant Variety Protection Act (7 U.S.C. 2371) is
amended to read as follows:
"SEC. 31. PLANT VARIETY PROTECTION FEES.
"(a) IN GENERAL.—The Secretary shall, under such regulations as
the Secretary may prescribe, charge and collect reasonable fees for
services performed under this Act.
"Ot)) LATE PAYMENT PENALTY.—On failure to pay such fees, the
Secretary shall assess a late payment penalty. Such overdue fees
shall accrue interest as required by section 3717 of title 31, United
States Code,
"(c) DISPOSITION OF FUNDS.—Such fees, late payment penalties,
and accrued interest collected shall be credited to the account that
incurs the cost and shall remain available without fiscal year
limitation to pay the expenses incurred by the Secretary in carrying
out this Act. Such funds collected (including late payment penalties
and any interest earned) may be invested by the Secretary in
insured or fully collateralized, interest-bearing accounts or, at the
discretion of the Secretary, by the Secretary of the Treasury in
United States Government debt instruments.
"(d) ACTIONS FOR NONPAYMENT.—The Attorney General may
bring an action for the recovery of charges that have not been paid
in accordance with this Act against any person obligated for pay-
ment of such charges under this Act in any United States district
court or other United States court for any territory or possession in
any jurisdiction in which the person is found, resides, or transacts
business. The court shall have jurisdiction to hear and decide the
action.
"(e) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to
be appropriated such sums as are necessary to carry out this Act.".
SEC. 1506. ANNUAL APPROPRIATIONS TO REIMBURSE THE COMMODITY
CREDIT CORPORATION FOR NET REALIZED LOSSES.
(a) IN GENERAL.—The first sentence of section 2 of Public Law
87-155 (15 U.S.C. 713a-ll) is amended by striking out ", commenc-
ing with the fiscal year ending June 30, 1961" and inserting in lieu
thereof "by means of a current, indefinite appropriation".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-29
(b) OPERATING EXPENSES.—No funds may be appropriated for 15 USC 7i3a-li
operating expenses of the Commodity Credit Corporation except as ^°^-
authorized under section 2 of Public Law 87-155 to reimburse the
Corporation for net realized losses.
(c) EFFECTIVE D A T E . — T h i s section a n d t h e a m e n d m e n t m a d e by 15 USC 7i3a-il
this section shall apply beginning with fiscal y e a r 1988. ^°*^®
SEC. 1507. FEDERAL CROP INSURANCE. 7 USC 1508 note.
It is the sense of Congress that, in carrying out the Federal Crop
Insurance Act (7 U.S.C. 1501 et seq.), the Federal Crop Insurance
Corporation-
CD should not be required to assume 100 percent of all loss
adjustments in the Federal crop insurance program; and
(2) should assume and perform the loss adjustment obligations
of a reinsured company if the Corporation determines that such
company's loss adjustment performance and practices are not
carried out in accordance with the applicable reinsurance
agreement.
SEC. 1508. ETHANOL USAGE. 42 USC 7545
(a) FINDINGS.—Congress finds t h a t — '^°*^®'
(1) the United States is dependent for a large and growing
share of its energy needs on the Middle East at a time when
world petroleum reserves are declining;
(2) the burning of gEisoline causes pollution;
(3) ethanol can be blended with gasoline to produce a cleaner
source of fuel;
(4) ethanol can be produced from grain, a renewable resource
that is in considerable surplus in the United States;
(5) the conversion of grain into ethanol would reduce farm
program costs and grain surpluses; and
(6) increasing the quantity of motor fuels that contain at least
10 percent ethanol from current levels to 50 percent by 1992
would create thousands of new jobs in ethanol production
facilities.
(b) SENSE OF CONGRESS.—It is the sense of Congress that the
Administrator of the Environmental Protection Agency should use
authority provided under the Clean Air Act (42 U.S.C. 7401 et seq.)
to require greater use of ethanol as motor fuel.
SEC. 1509. DEMONSTRATION OF FAMILY INDEPENDENCE PROGRAM.
The Food Stamp Act of 1977 is amended by adding after section 20
(7 U.S.C. 2029) the following new section:
"SEC. 21. DEMONSTRATION OF FAMILY INDEPENDENCE PROGRAM. 7 USC 2030.
"(a) I N GENERAL.—Upon written application of the State of
Washington (in this section referred to as the 'State') and after the
approval of such application by the Secretary, the State may con-
duct a Family Independence Demonstration Project (in this section
referred to as the 'Project') in all or in part of the State in accord-
ance with this section to determine whether the Project, as an
alternative to providing benefits under the food stamp program,
would more effectively break the cycle of poverty and would provide
families with opportunities for economic independence and strength-
ened family functioning.
"(b) NATURE OF PROJECT.—In an application submitted under
subsection (a), the State shall provide the following:
101 STAT. 1330-30 PUBLIC LAW 100-203—DEC. 22, 1987
"(1) Except as provided in this section, the provisions of
chapter 434 of the 1987 Washington Laws, as enacted in May
1987, shall apply to the operation of the Project.
"(2) All of the following terms and conditions shall be in effect
under the Project:
"(AXi) Except as provided in clause (ii), individuals with
respect to whom benefits may be paid under part A of title
IV of the Social Security Act, and such other individuals as
are included in the Project pursuant to chapter 434 of the
1987 Washington Laws, as enacted in May 1987, shall be
eligible to participate in the Project in lieu of receiving
benefits under the food stamp program and cash assistance
under any other Federal program covered by the Project.
"(ii) Individuals who receive only child care or medical
benefits under the Project shall not be eligible to receive
food assistance under the Project. Such individuals may
receive coupons under the food stamp program if eligible.
"(B) Individuals who participate in the Project shall re-
ceive for each month an amount of cash assistance that is
not less than the total value of the assistance such individ-
uals would otherwise receive, in the aggregate, under the
food stamp program and any cash-assistance Federal pro-
gram covered by the Project for such month, including
income and resource exclusions and deductions, and benefit
levels.
"(CXi) The State may provide a standard benefit for food
assistance under the Project, except that individuals who
participate in the Project shall receive as food assistance for
a month an amount of cash that is not less than the value
of the assistance such individuals would otherwise receive
under the food stamp program.
"(ii) The State may provide a cash benefit for food assist-
ance equal to the value of the thrifty food plan.
"(D) Each month participants in the Project shall be
notified by the State of the amount of Project assistance
that is provided as food assistance for such month.
"(E) The State shall have a program to require partici-
pants to engage in employment and training activities car-
ried out under chapter 434 of the 1987 Washington Laws, as
enacted in May 1987.^
"(F) Food assistance shall be provided under the Project—
"(i) to any individual who is accepted for participa-
tion in the Project, not later than 30 days after such
individued applies to participate in the Project;
"(ii) to any participant for the period that begins on
the date such participant applies to participate in the
Project, except that the amount of such assistance shall
be reduced to reflect the pro rata value of any coupons
received under the food stamp program for such period
for the benefit of such participant; and
"(iii) until—
"(I) the participant's cash assistance under the
Project is terminated;
• Copy read "May, 1987.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-31
"(II) such participant is informed of such termi-
nation and is advised of the eligibility require-
ments for participation in the food stamp program;
"(III) the State determines whether such partici-
pant will be eligible to receive coupons as a
member of a household under the food stamp pro-
gram; and
"(IV) coupons under the food stamp program are
received by such participant if such participant
will be eligible to receive coupons as a member of a
household under the food stamp program.
"(G)(i)' Paragraphs (IXB), (8), (10), and (19) of section
11(e) shall apply with respect to the participants in the
Project in the same manner as such paragraphs apply with
respect to participants in the food stamp program.
"(ii) Each individual who contacts the State in person
during office hours to make what may reasonably be inter-
preted as an oral or written request to participate in the
Project shall receive and shall be permitted to file on the
same day that such contact is first made, an application
form to participate in the Project.
"(iii) The Project shall provide for telephone contact by,
mail delivery of forms to and mail return of forms by, and
subsequent home or telephone interview with, the elderly
persons, physically or mentally handicapped, and persons
otherwise unable, solely because of transportation difficul-
ties and similar hardships, to appear in person.
"(iv) An individual who applies to participate in the
Project may be represented by another person in the review
process if the other person has been clearly designated as
the representative of such individual for that purpose, by
such individual or the spouse of such individual, and, in the
case of the review process, the representative is an adult
who is sufficiently aware of relevant circumstances, except
that the State may—
"(I) restrict the number of individuals who may be
represented by such person; and -
"(II) otherwise establish criteria and verification
standards for representation under this clause.
"(v) The State shall provide a method for reviewing ap-
plications to participate in the Project submitted by, and
distributing food assistance under the Project to, individ-
uals who do not reside in permanent dwellings or who have
no fixed mailing address. In carrying out the preceding
sentence, the State shall take such steps as are necessary to
ensure that participation in the Project is limited to eligible
individuals.
"(3) An assurance that the State will allow any individual to
apply to participate in the food stamp program without apply-
ing to participate in the Project.
"(4) An assurance that the cost of food assistance provided
under the Project will not be such that the aggregate amount of
payments made under this section by the Secretary to the State
over the period of the Project will exceed the sum of—
' Copy read " '(HXi)".
101 STAT. 1330-32 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) the anticipated aggregate value of the coupons that
would have been distributed under the food stamp program
if the individuals who participate in the Project had partici-
pated instead in the food stamp program; and
"(B) the portion of the administrative costs for which the
State would have received reimbursement under—
"(i) subsections (a) and (g) of section 16 (without
regard to the first proviso to such subsection (g)) if the
individuals who participated in the Project had partici-
pated instead in the food stamp program; and
"(ii) section 16(h) if the individuals who participated
in the Project had participated in an employment and
training program under section 6(d)(4);
except that this paragraph shall not be construed to pre-
vent the State from claiming payments for additional
households that would qualify for benefits under the food
stamp program in the absence of a cash out of such benefits
as a result of changes in economic, demographic, and other
conditions in the State or a subsequent change in the
benefit levels approved by the State legislature.
"(5) An assurance that the State will continue to carry out the
food stamp program while the State carries out the Project.
"(6) If there is a change in existing State law that would
eliminate guaranteed benefits or reduce the rights of applicants
or participants under this section during, or as a result of
participation in, the Project, the Project shall be terminated.
"(7) An assurance that the Project shall include procedures
and due process guarantees no less beneficial than those which
are available under Federal law and under State law to partici-
pants in the food stamp program.
"(8)(A) An assurance that, except as provided in subparagraph
(B), the State will carry out the Project during a 5-year period
beginning on the date the first individual is approved for
participation in the Project.
Termination "(B) The Project may be terminated 180 days after—
date. "(i) the State gives notice to the Secretary that it intends
to terminate the Project; or
"(ii) the Secretary, after notice and an opportunity for a
hearing, determines that the State materially failed to
comply with this section.
"(c) FUNDING.—If an application submitted under subsection (a) by
the State complies with the requirements specified in subsection (b),
then the Secretary shall—
"(1) approve such application; and
"(2) from funds appropriated under this Act, pay the State
for—
"(A) the actual cost of the food assistance provided under
the Project; and
"(B) the percentage of the administrative costs incurred
by the State to provide food assistance under the Project
that is equal to the percentage of the State's aggregate
administrative costs incurred in operating the food stamp
program in the most recent fiscal year for which data are
available, that was paid under subsections (a), (g), and (h) of
section 16 of this Act.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-33
"(d)(1) PROJECT APPLICATION.—Unless and until an application to
participate in the Project is approved, and food assistance under the
Project is made available to the applicant—
"(A) such application shall also be treated as an application to
participate in the food stamp program; and
"(B) section 11(e)(9) shall apply with respect to such
application, , ^,- ,^, .^
"(2) Coupons provided under the food stamp program with respect
to an individual who—
"(A) is participating in such program; and
"(B) applies to participate in the Project;
may not be reduced or terminated because such individual applies to
participate in the Project.
"(3) For purposes of the food stamp program, individuals who
participate in the Project shall not be considered to be members of a
household during the period of such participation.
"(e) WAIVER.—The Secretary shall (with respect to the Project)
waive compliance with any requirement contained in this Act (other
than this section) that (if applied) would prevent the State from
carrying out the Project or effectively achieving its purpose. ;ybi*»i'i
"(f) CONSTRUCTION.—For purposes of any other Federal, State or
local law—
"(1) cash assistance provided under the Project that rep-
resents food assistance shall be treated in the same manner as
coupons provided under the food stamp program are treated;
and
® "(2) participants in the program who receive food assistance
under the Project shall be treated in the same manner as
recipients of coupons under the food stamp program are treated.
"(g) PROJECT AUDITS.—The Comptroller General of the United
States shall—
"(1) conduct periodic audits of the operation of the Project to
verify the amounts payable to the State from time to time under
subsection (bX4); and
"(2) submit to the Secretary of Agriculture, the Secretary of
Health and Human Services, the Committee on Agriculture of
the House of Representatives, and the Committee on Agri-
culture, Nutrition, and Forestry of the Senate a report describ-
ing the results of each such audit.
"(h) EVALUATION.—With funds appropriated under section
18(aXl), the Secretary shall conduct, in consultation with the Sec-
retary of Health and Human Services, an evaluation of the
Project.".
TITLE II—NATIONAL ECONOMIC
COMMISSION
SEC. 2101. ESTABLISHMENT OF COMMISSION. 2 USC 901 note.
There is established a commission to be known as the National
Economic Commission (in this subtitle referred to as the
"Commission").
' Copy had wrong indention for paragraph " '(2)".
101 STAT. 1330-34 PUBLIC LAW 100-203—DEC. 22, 1987
2 u s e 901 note. SEC. 2102. MEMBERSHIP OF COMMISSION.
(a) APPOINTMENT.—The Commission shall be initially composed of
12 members, appointed not later than March 1, 1988. After the
meeting of the Presidential Electors in December 1988, the Commis-
sion shall be expanded to 14 members. The members shall be as
follows:
President of U.S. (1) 2 citizens of the United States, appointed by the President.
(2) 1 Senator and 2 citizens of the United States, appointed by
the President pro tempore of the Senate upon the recommenda-
tions of the Majority Leader of the Senate.
(3) 1 Senator and 1 citizen of the United States, appointed by
the President pro tempore of the Senate upon the recommenda-
tion of the Minority Leader of the Senate.
(4) 1 Member of the House of Representatives and 2 citizens of
the United States, appointed by the Speaker of the House of
Representatives.
(5) 1 Member of the House of Representatives and 1 citizen of
the United States, appointed by the Minority Leader of the
House of Representatives.
President of U.S. (6) 2 citizens of the United States, 1 of whom is a Democrat
and 1 of whom is a Republican, appointed by the President-elect
as established by the allocation of electoral college votes in the
Presidential election of November 8,1988.
(b) ADDITIONAL QUAUFICATIONS.—
(1) Individuals appointed under subsection (aXD may be offi-
cers or employees of the Executive Branch or may be private
citizens.
(2) Individuals who are not Members of the Congress, and are
appointed under paragraphs (2) through (6) of subsection (a)
shall be individuals who—
(A) are leaders of business or labor, distinguished aca-
demics. State or local government officials, or other individ-
uals with distinctive qualifications or experience; and
(B) are not officers or employees of the United States.
(c) CHAIRPERSON.—The Commission shall elect a Chairperson from
among the members of the Commission.
(d) QUORUM.—A majority of the members of the Commission shall
constitute a quorum for the transaction of business.
(e) VOTING.—Each member of the Commission shall be entitled to
1 vote, which shall be equal to the vote of every other member of the
Commission.
(f) VACANCIES.—Any vacancy on the Commission shall not affect
its powers, but shall be filled in the manner in which the original
appointment was made.
(g) PROHIBITION OF ADDITIONAL PAY.—Members of the Commission
shedl receive no additional pay, allowances, or benefits by reason of
their service on the Commission. Members appointed from among
private citizens of the United States may be allowed travel expenses,
including per diem, in lieu of subsistence, as authorized by law for
persons serving intermittently in the government service to the
extent funds are av£dlable for such expenses.
2 u s e 901 note. SEC. 2103. FUNCTIONS OF COMMISSION.
(a) SPECIFIC RECOMMENDATIONS.—The Commission shall make spe-
cific recommendations regarding the following:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-35
(1) Methods to reduce the Federal budget deficit while promot-
ing economic growth and encouraging saving and capital
formation.
(2) A means of ensuring that the burden of achieving the
Federal budget deficit reduction goals of the United States does
not undermine economic growth and is equitably distributed
and not borne disproportionately by any one economic group,
social group, region or State.
(b) FINAL REPORT.—
(1) Subject to section 2108(bX3), the Commission shall submit
to the President and to the Congress on March 1, 1989, a final
report which shall contain a detailed statement of the findings
and conclusions of the Commission, including its recommenda-
tions for administrative and legislative action that the Commis-
sion considers advisable.
(2) Any recommendation may be made by the Commission to
the President and to the Congress only if adopted by a majority
vote of the members of the Commission who are present and
voting.
(3) On February 1, 1989, the President may issue an order
extending the date for submission of the final report to Septem-
ber 1,1989.
SEC. 2104. POWERS OF COMMISSION. 2 USC 901 note.
(a) HEARINGS.—The Commission may, for the purpose of carrying
out this, subtitle, hold such hearings and sit and act at such times
and places, as the Commission mayfind advisable.
(b) RULES AND REGULATIONS.—The Commission may adopt such
rules and regulations as may be necessary to establish its procedures
and to govern the manner of its operations, organization, and
personnel.
(c) ASSISTANCE FROM FEDERAL AGENCIES.—
(1) The Commission may request from the head of any Federal
agency or instrumentality such information as the Commission
may require for the purpose of this subtitle. Each such agency
or instrumentality shall, to the extent permitted by law and
subject to the exceptions set forth in section 552 of title 5,
United States Code (commonly referred to as the Freedom of
Information Act), furnish such information to the Commission,
upon request made by the Chairperson of the Commission.
(2) Upon request of the Chairperson of the Commission, the
head of any Federal agency or instrumentality shall, to the
extent possible and subject to the discretion of such head—
(A) make any of the facilities and services of such agency
or instrumentality available to the Commission; and
(B) detail any of the personnel of such agency or
instrumentality to the Commission, on a non-reimburseable
bsisis, to assist the Commission in carrying out its duties
under this subtitle, except that any expenses of the
Commission incurred under this subparagraph shall be
subject to the limitation on total expenses set forth in
section 2105(b).
(c) MAILS.—The Commission may use the United States mails in
the same manner and under the same conditions sis other Federal
agencies.
(d) CONTRACTING.—The Commission may, to such extent and in
such amounts as are provided in appropriation Acts, enter into
101 STAT. 1330-36 PUBLIC LAW 100-203—DEC. 22, 1987
contracts with State agencies, private firms, institutions, and
individuals for the purpose of conducting research or surveys nec-
essary to enable the Commission to discharge its duties under this
subtitle, subject to the limitation on total expenses set forth in
section 2105(b).
(e) STAFF.—Subject to such rules and regulations as may be
adopted by the Commission, the Chairperson of the Commission
(subject to the limitation on total expenses set forth in section
2105(b)) shall have the power to appoint, terminate, and fix the
compensation (without regard to the provisions of title 5, United
States Code, governing appointments in the competitive service, and
without regard to the provisions of chapter 51 and subchapter III of
chapter 53 of such title, or of any other provision, or of any other
provision of law, relating to the number, classification, and General
Schedule rates) of an Executive Director, and of such additional staff
as the Chairperson deems advisable to assist the Commission, at
rates not to exceed a rate equal to the maximum rate for GS-18 of
the General Schedule under section 5332 of such title.
if) ADVISORY COMMITTEE.—The Commission shall be considered an
advisory committee within the meaning of the Federal Advisory
Committee Act (5 U.S.C. App.).
2 u s e 901 note. SEC. 2105. EXPENSES OF COMMISSION.
(a) IN GENERAL.—Any expenses of the Commission shall be paid
from such funds as may be available to the Secretary of the
Treasury.
(b) LIMITATION.—The total expenses of the Commission shall not
exceed $1,000,000.
(c) GAO AUDIT.—Prior to the termination of the Commission,
pursuant to section 2106, the Comptroller General of the United
States shall conduct an audit of the financial books and records of
the Commission to determine that the limitation on expenses has
been met, and shall include its determination in an opinion to be
included in the report of the Commission.
2 u s e 901 note. SEC. 2106. TERMINATION OF COMMISSION.
The Commission shall cease to exist on the date that is 30 days
after the date on which the Commission submits its report.
TITLE III—EDUCATION PROGRAMS
Subtitle A—Guaranteed Student Loan
Program Savings
SEC. 3001. RECOVERY OF EXCESS CASH RESERVES ACCUMULATED
UNDER THE GUARANTEED STUDENT LOAN PROGRAM.
(a) IN GENERAL.—Section 422 of the Higher Education Act of 1965
(2() U.S.C. 1072) is amended by adding at the end thereof the
following new subsection:
"(e) REDUCTION OF EXCESS CASH RESERVES.—
"(1) LIMITATION ON MAXIMUM CASH RESERVES.—A guaranty
agency shall not accumulate cash reserves in excess of the
greater of—
"(A) 40 percent of the total amount paid by that agency
on insurance claims during the preceding fiscal year;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-37
"(B) 0.3 percent of original principal amount of loans that
are insured by that agency and that are outstanding at the
end of such preceding fiscal y6ar;
"(C) an amount which, when combined with all other
parts of total agency reserves, equals 0.4 percent of such
original principal amount;
"(D) $500,000; or
"(E) the amount required to comply with the reserve
requirements of a State law as in effect on October 17, 1986.
"(2) RECOVERY OF EXCESS CASH RESERVES.—The Secretary
shall, not later than March 31, 1988, determine for each guar-
anty agency the maximum cash reserve permitted under para-
graph (1) for fiscal year 1986. Subject to paragraphs (3) and (4), if
the Secretary determines that any guaranty agency had, at the
end of fiscal year 1986, a cash reserve that exceeded such
maximum, the Secretary shall direct the agency to eliminate
such excess by any one or more of the following methods, as
selected by the guaranty agency:
"(A) by repaying any advances to such agency made by
the Secretary under this section that are not required to be
repaid under subsection (d);
'(B) by withholding and canceling claims for reimburse-
ment otherwise payable under section 428(c)(1);
"(C) by reducing the amount of payments for which ap-
plication will be made by such agency under section 428(f);
or
"(D) by any other method of reducing payments from or
increasing payments to the Federal Government, including
payment of additional reinsurance fees in addition to the
fees required by section 428(cX9), as proposed by the agency
and agreed to by the Secretary.
"(3) APPEALS BASED ON SPECIAL CIRCUMSTANCES.—(A) If the
Secretary determines, on the basis of an application from a
guaranty agency, that—
"(i) the agency's financial position has deteriorated
significantly since the end of the preceding fiscal year;
"(ii) significant changes in the economic circumstances
(such as a change in agency current cash reserves) or the
loan insurance program render the limitations of para-
graph (1) inadequate for the continued functioning of the
agency; or
"(iii) in recovering funds as required by this subsection, a
guaranty agency would be compelled to violate contractual
obligations existing on the date of enactment of this subsec-
tion that require a specified level of reserve funds to be
maintained by such agency;
the Secretary may waive, in whole or in part, the imposition of
the remedies required by paragraph (2) for such agency.
"(B) The Secretary shall respond to request for waivers from
guaranty agencies in an expedited manner and, except for
unusual circumstances or with the consent of the guaranty
agency, shall resolve such request within 6 weeks of submission.
"(4) RECOVERY UMITS.—The Secretary shall not require a total
reduction of cash reserves for all guaranty agencies in excess of
$250,000,000 during fiscal year 1988. If the total of cash reserves
of all guaranty agencies exceeds the maximum amounts per-
mitted under paragraph (1) by more than $250,000,000, the
101 STAT. 1330-38 PUBLIC LAW 100-203—DEC. 22, 1987
Secretary shall ratably reduce the amounts that guaranty agen-
cies are directed to eliminate under paragraph (2), so that the
total excess cash reserves to be eliminated equals $250,000,000.
"(5) DEFINITIONS.—As used in this subsection—
"(A) the 'cash reserves' for any guaranty agency for any
fiscal year are equal to the agency's cumulative cash re-
ceipts less the agency's cumulative cash disbursements at
the end of such fiscal year;
"(B) the 'total reserves' for any guaranty agency for any
fiscal year are equal to the agency's cash reserves plus the
agency's cumulative accounts receivable less the agency's
accounts payable, as of the end of such fiscal year;
"(C) the term 'cumulative cash receipts' includes such
receipts as insurance premiums. Federal reinsurance pay-
ments, and collections on defaulted loans;
"(D) the term 'cumulative cash disbursements' includes
such disbursements as payments for default claims, repay-
ment of Federal advances, transfers to other State activi-
ties, and payment of collection costs and other operating
costs;
"(E) the term 'accounts receivable' includes Federal re-
insurance pa3rments and administrative cost allowances
owed but not yet paid to the guaranty agency, as of the end
of a fiscal year; and
"(F) the term 'accounts payable' includes collections and
reinsurance fees due (hut not paid) to the Department of
Education, as of the end of a fiscal year.".
Ob) CONFORMING AMENDMENTS.—
(1) The second sentence of section 428(cXlXA) of such Act (20
U.S.C. 1078(cXlXA)) is amended by striking out "shall be
deemed" and inserting "shall, subject to section 422(e), be
deemed".
(2) Section 428(cX9XA) of such Act is amended by striking out
"an amount equal to" and inserting "an amount, subject to
section 422(e), equal to".
(3) The second sentence of section 428(fKlXB) of such Act is
amended by striking out "shall be deemed" and inserting
"shall, subject to section 422(e), be deemed".
SEC. 3002. REPEAL.
(a) I N GENERAL.—Subsection (e) of section 422 of the Higher
Education Act of 1965 (20 U.S.C. 1072) is repealed on September 30,
1989.
0)) CONFORMING AMENDMENTS.—
(1) Effective September 30, 1989, the second sentence of sec-
tion 428(cXlXA) of such Act (20 U.S.C. 1078(cXlXA)) is amended
by striking out "shall, subject to section 422(e), be deemed" and
inserting "shall be deemed".
(2) Effective September 30, 1989, section 428(cX9XA) of such
Act is amended by striking out "an amount, subject to section
422(e), equal to" and inserting "an amount equal to".
(3) Effective September 30, 1989, the second sentence of sec-
tion 428(fXlXB) of such Act is amended by striking out "shall,
subject to section 422(e), be deemed" and inserting "shall be
deemed".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-39
SEC. 3003. INFORMATION ON DEFAULTS REQUIRED.
(a) GENERAL RULE.—The first sentence of section 428(kXl) of the
Higher Education Act of 1965 (20 U.S.C. 1078(kKl)) is amended—
(1) by striking out "In" and inserting in lieu thereof "Not-
withstanding any other provision of law, in"; and
(2) by striking out "may" and inserting in lieu thereof "shall".
Qo) CONFORMING AMENDMENT.—The second sentence of section
428(k)(l) of such Act is amended by striking out "may" and inserting
in lieu thereof "shall".
Subtitle B—Sale of College Facilities and
Housing Loans
SEC. 3101. SALE OF COLLEGE FACILITIES AND HOUSING LOANS.
Section 783 of the Higher Education Act of 1965 (20 U.S.C. 11321-
2) is amended by adding at the end thereof the following: "Notwith-
standing any other provision of this title, after September 30, 1988,
the Secretary shall not sell any of such obligations. Any agreement
providing for delaying payment (with respect to obligations sold)
until after September 30, 1988, or for delaying delivery of such
obligations or delaying taking other actions in furtherance of such a
sale until after such date, shall be considered to be a violation of the
preceding sentence.".
TITLE IV—MEDICARE, MEDICAID, AND
OTHER HEALTH-RELATED PROGRAMS
TABLE OF CONTENTS OF TITLE
TITLE IV—MEDICARE, MEDICAID, AND OTHER HEALTH-RELATED
PROGRAMS
Subtitle A—Medicare ' " *
PART 1—RELATING ONLY TO PART A
Sec. 4001. Extension of reductions under sequester order.
Sec. 4002. Basic hospital prospective payment rates.
Sec. 4003. Increase in disproportionate share adjustment and reduction in indirect
medical education payments.
Sec. 4004. Provisions relating to wage index.
Sec. 4005. Rural hospitals.
Sec. 4006. Payments for hospital capital.
Sec. 4007. Reporting hospital information.
Sec. 4008. Other provisions relating to payment for inpatient hospital services.
Sec. 4009. Miscellaneous provisions. *
PART 2—PROVISIONS RELATING TO PARTS A AND B
SUBPART A—HEALTH MAINTENANCE ORGANIZATION REFORMS , ,, ;
Sec. 4011. Beneficiary protection.
Sec. 4012. Payments for hospital services.
Sec. 4013. Two-year extension on period for benefit stabilization.
Sec. 4014. Civil money penalties and intermediate sanctions against HMOs/CMPs.
Sec. 4015. Medicare payment demonstration projects.
Sec. 4016. Delay in effective date in physician incentive rules for health mainte-
nance organizations.
Sec. 4017. GAO study and reports on medicare capitation.
Sec. 4018. Special rules.
91-194O-90-27:QL.3Part2
101 STAT. 1330-40 PUBLIC LAW 100-203—DEC. 22, 1987
SUBPART B—HOME HEALTH QUALITY
Sec. 4021. Conditions of participation for home health agencies.
Sec. 4022. Standard and extended survey. ' ^^
Sec. 4023. Enforcement. •* • /--r • '
Sec. 4024. Requirement that individual be confined to home.
Sec. 4025. Home health toll-free hotline and investigative unit. ,
Sec. 4026. Home health agency cost limits.
Sec. 4027. Home health prospective payment demonstration project.
SUBPART C—OTHER PROVISIONS
Sec. 4031. Payment cycle standards.
Sec. 4032. Denials and reconsiderations of claims for home health services,
extended care services, and post-hospital extended care services.
Sec. 4033. Permitting disabled individuals to renew entitlement to medicare after
gainful employment without a 2-year waiting period.
Sec. 4034. Application of secondary payer provisions to governmental entities.
Sec. 4035. Publication and notification of policies.
Sec. 4036. End-stage renal disease amendments.
Sec. 4037. Medicare hearings and appeals. * . ' ,
Sec. 4038. Rural health medical education demonstration project.
Sec. 4039. Miscellaneous and technical provisions. •, * -S.
,; PART 3—RELATING TO PART B
SUBPART A—PROVISIONS RELATING TO PAYMENTS FOR PHYSICIANS* SERVICES
Sec. 4041. Freeze in payments for physicians' services; extension of sequester order.
Sec. 4042. General update in payments for physicians' services.
Sec. 4043. Incentive payments for physicians' services furnished in underserved
areas.
Sec. 4044. Adjustment in prevailing charge level for primary care services.
Sec. 4045. Reduction in prevailing charge level for overpriced procedures.
Sec. 4046. Limits on payment for ophthalmic ultrasound.
Sec. 4047. Customary charges for primary care services of new physicians. ..,y.^..
Sec. 4048. Payment for physician anesthesia services. i tk
Sec. 4049. Fee schedules for radiologist services. f x
Sec. 4050. Fee schedules for physician pathology services.
Sec. 4051. Elimination of markup for certain purchased services.
Sec. 4052. Collection of past-due amounts owed by physicians who breached con-
tracts under the National Health Service Corps Scholarship Program.
' Sec. 4053. Elimination of 1975 floor for prevailing physician charges.
• ° Sec. 4054. Application of maximum allowable actual charge (MAAC).
*' Sec. 4055. Applying copayment and deductible to certain outpatient physicians'
services.
• * Sec. 4056. Physician payment studies.
SUBPART B—PROVISIONS RELATING TO PAYMENTS FOR OTHER SERVICES
Sec. 4061. Extension of reduction for other part B items and services payments
under sequester order.
Sec. 4062. Payments for durable medical equipment, prosthetic devices, orthotics,
and prosthetics.
Sec. 4063. Payment for intraocular lenses.
Sec. 4064. Clinical diagnostic laboratory tests. " *S .I'M-- •• S
Sec. 4065. Return on equity payments to outpatient departments.
Sec. 4066. Payments to hospital outpatient departments for radiology.
Sec. 4067. Updating maximum rate of payment per visit for independent rural
health clinics.
Sec. 4068. Payment for ambulatory surgery at eye, and eye and ear, specialty
hospitals.
SUBPART C—EUGIBIUTY AND BENEFITS CHANGES
Sec. 4070. Coverage of mental health services. .p vt; j ' :
Sec. 4071. Coverage of influenza vaccine and its administration.
Sec. 4072. Payment for therapeutic shoes for individuals with severe diabetic foot
disease.
Sec. 4073. Coverage of certified nurse-midwife services. , ^^
» Copy read "Sec. 4052.".
'"Copy read "Sec. 4053.".
' ' Copy read "Sec. 4054.".
»» Copy read "Sec. 4055.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-41
Sec. 4074. Coverage of social worker services furnished by a health maintenance or-
ganization to its members.
Sec. 4075. Clarification of coverage of drugs used in immunosuppressive therapy.
Sec. 4076. Services of a physician assistant.
Sec. 4077. Psychologist services in clinics.
Sec. 4078. Provision of offsite comprehensive outpatient rehabilitation services.
Sec. 4079. Demonstration projects to provide payment on a prepaid, capitated basis
for community nursing and ambulatory care furnished to medicare
beneficiaries.
Sec. 4080. Part B premium. , v ; ^<
SUBPART D—OTHER PROVISIONS
Sec. 4081. Submission of claims to supplemental insurance carriers.
Sec. 4082. Revision of part B hearings.
Sec. 4083. Provisions relating to Physician Payment Review Commission.
Sec. 4084. Technical amendments related to certified registered nurse anesthetists.
Sec. 4085. Miscellaneous and technical provisions.
PART 4—PEER REVIEW ORGANIZATIONS V^,
Sec. 4091. Contract provisions. * '--^-^
Sec. 4092. Preference in contracting with in-State organizations.
Sec. 4093. Requiring reasonable notice and opportunity for discussion prior to
denial of claim.
Sec. 4094. Peer '^ review norms and education.
Sec. 4095. Preexclusion hearings.
Sec. 4096. Limitation of beneficiary liability for services disallowed by peer review
organizations.
Sec. 4097. Separate funding levels.
Subtitle B—Medicaid ;
PART 1—EUGIBIUTY AND BENEFITS . .• ,
Sec. 4101.
Medicaid benefits for poor children and pregnant women.
Sec. 4102.
Home and community-based services for the elderly. '
Sec. 4103.
Physicians' services furnished by dentists.
Sec. 4104.
Optional medicaid coverage of individuals in certain States '* receiving
only optional State '* supplementary payments.
Sec. 4105. Miscellaneous SSI-related amendments.
Sec. 4106. Clarification of coverage of clinic services furnished to homeless outside
facility.
Sec. 4107. Medically needy income levels for certain 2-member couples in
California.' *
PART 2—OTHER PROVISIONS
Sec. 4111. Increasing the maximum annual medicaid payments that may be made
to the commonwealths and territories.
Sec. 4112. Adjustment in medicaid payment for inpatient hospital services fur-
nished by disproportionate share hospitals.
Sec. 4113. HMO-related provisions.
Sec. 4114. Medicaid waiver for hospice care for AIDS patients.
Sec. 4115. State demonstration projects.
Sec. 4116. Waiver authority under the medicaid program for the Northern Mariana
Islands.' *
Sec. 4117. Delay quality control sanctions for medicaid.
Sec. 4118. Technical and miscellaneous amendments.
Subtitle C—Nursing Home Reform
PART 1—MEDICARE PROGRAM
Sec. 4201. Requirements for skilled nursing facilities. '^
Sec. 4202. Survey and certification process. £j
Sec. 4203. Enforcement process. ,H
Sec. 4204. Effective dates.
Sec. 4205. Annual report.
Sec. 4206. Construction. '^
'^Copy read "reer".
'* Copy read "states", and "state", respectively.
'*Copy read "California.".
' * Copy read "northern mariana islands.".
101 STAT. 1330-42 PUBLIC LAW 100-203—DEC. 22, 1987
PART 2—MEDICAID PROGRAM
Sec. 4211. Requirements for nursing facilities.
Sec. 4212. Survey and certification process.
Sec. 4213. Enforcement process.
Sec. 4214. Effective dates. '
Sec. 4215. Annual report.
Sec. 4216. Construction.
Sec. 4217. Final regulations with respect to plans of correction or reduction.
Sec. 4218. Medicaid certifications and recertifications for certain services. " " '^^
Subtitle D—Vaccine Compensation
Sec. 4301. Short title, reference.
Sec. 4302. Effective date.
Sec. 4303. Compensation. '•'•:
Sec. 4304. Petitions.
Sec. 4305. Citizen's actions.
Sec. 4306. Vaccine'** administrators.
Sec. 4307. Court jurisdiction.
Subtitle E—Rural Health . . .
Sec. 4401. Office of Rural Health Policy.
Sec. 4402. Impact analyses of medicare rules and regulations on small rural
hospitals.
S^c. 4403. Set aside for experiments and demonstration projects relating to rural
health care issues.
PART l—RELATING ONLY TO PART A
2 u s e 902 note. SEC. 4001. EXTENSION OF REDUCTIONS UNDER SEQUESTER ORDER.
President of U.S. Notwithstanding any other provision of law (including any other
provision of this Act), the reductions in the amount of pajmients
required under title XVIII of the Social Security Act made by the
final sequester order issued by the President on November 20, 1987,
pursuant to section 2520b) of the Balanced Budget Emergency Deficit
Control Act of 1985 shall continue to be effective (as provided by
sections 252(aX4XB) and 256(dX2) of such Act) through—
(1) March 31, 1988, with respect to payments for inpatient
hospital services under such title (including payments under
section 1886 of such title attributable or allocated to part A of
such title); £md
(2) December 31, 1987, with respect to payments for other
items and services under part A of such title.
SEC. 4002. BASIC HOSPITAL PROSPECTIVE PAYMENT RATES.
(a) BASIC UPDATE FACTOR FOR P P S HOSPITALS.—Clause (i) of sec-
tion 1886(bX3XB) of the Social Security Act (42 U.S.C.
1395ww(bX3XB)) is amended by striking "and for fiscal year 1988" in
subclause (II) and all that follows through the end of such clause and
inserting after such subclause the following:
"(III) for fiscal year 1988, 3.0 percent for hospitals located in a
rural area, 1.5 percent for hospitals located in a large urban
area (as defined in subsection (dX2XD)), and 1.0 percent for other
hospitals,
"(IV) for fiscal year 1989, the market basket percentage in-
crease minus 1.5 percent for hospitals located in a rural area,
the market basket percentage increase minus 2.0 percent for
hospitals located in a large urban area, and the market basket
percentage increase minus 2.5 percent for other hospitals, and
"(V) for fiscal year 1990 and each subsequent fiscal year, the
market basket percentage for hospitals in ail areas.".
'*• Copy read "Vacine".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-43
0>) LARGE URBAN AREA DEFINED.—The second sentence of section
1886(dX2XD) of such Act (42 U.S.C. 1395ww(d)(2XD)) ** is amended
by inserting after "under subsection (a) by regulation;" the follow-
ing: "the term 'large urban area' means, with respect to a fiscal
year, such an urban area which the Secretary determines (in the
publication described in subsection (eX5XB) before the fiscal year)
has a population of more than 1,000,000 (as determined by the
Secretary based on the most recent available population data pub-
lished by the Bureau of the Census);".
(c) ADJUSTMENT FOR HOSPITALS IN LARGE URBAN AREAS OR IN
RURAL AREAS.—
(1) IN GENERAL.—Section 1886(dX3) of such Act (42 U.S.C.
1395ww(dX3)) is amended—
(A) in the matter before subparagraph (A), by striking
"urban or rural areas" and inserting "large urban, other
urban, or rural areas";
(B) in first sentence of subparagraph (A)—
(i) by striking "The Secretary" and inserting "(i) For
discharges occuring in a Hscal year beginning before
October 1,1987, the Secretary",
(ii) by striking "each of fiscal years 1985, 1986, 1987,
and 1988" and inserting "the fiscal year involved", and
(iii) by striking ", and adjusted for subsequent fiscal
years in accordance with the final determination of the
Secretary under subsection (eX4), and adjusted to re-
flect the most recent case-mix data available,";
;; .5 (C) by adding at the end of subparagraph (A) the follow-
ing new clauses:
"(ii) For discharges occurring in a fiscal year beginning on or
after October 1, 1987, the Secretary shall compute an average
standardized amount for hospitals located in a large urban area,
for hospitals located in a rural area, and for hospitals located in
urban areas, within the United States and within each region,
equal to the respective average standardized amount computed
for the previous fiscal year under this subparagraph increased
by the applicable percentage increase under subsection
(bX3XBXi) with respect to hospitals located in the respective
areas for the fiscal year involved.
"(iii) Average standardized amounts computed under this
paragraph shall be adjusted to reflect the most recent case-mix
data available."; and
(D) in subparagraph (D)—
(i) by striking "URBAN AND RURAL HOSPITALS" in the
heading and inserting "HOSPITALS IN DIFFERENT AREAS",
(ii) in clause (i), by inserting "(or, for discharges
occurring on or aifter April 1, 1988, in a large urban
area or other urban area)" after "urbsm area" the first
place it appears, and
(iii) in clause (i), by inserting "such" before "an
urban area" the second place it appears.
(2) CONFORMING AMENDMENTS.—Section 1886(dX9XA) of such
Act (42 U.S.C. 1395ww(dX9XA)) is amended—
(A) in clause (ii)(I), by striking "an urban area, and" and
inserting "a large urban area,";
'""Copy read "(42 U.S.C. 1395www(dX2XD))".
101 STAT. 1330-44 PUBLIC LAW 100-203—DEC. 22, 1987
(B) by redesignating subclause (II) of clause (ii) as
subclause (III); and
(C) by inserting after subclause (I) of clause (ii) the follow-
ing new subclause:
"(II) such rate for hospitals located in other urban areas,
and".
(d) ESTABLISHMENT OF REGIONAL FLOOR.—Section 1886(d)(lXAXiii)
of such Act (42 U.S.C. 1395ww(d)(lXA)(iii)) is amended by inserting
before the period at the end the following: ", or, if greater for
discharges occurring during the period beginning on April 1, 1988,
and ending on September 30, 1990, the sum of (I) 85 percent of the
national adjusted DRG prospective payment rate determined under
paragraph (3) for such discharges, and (II) 15 percent of the regional
adjusted DRG prospective payment rate determined under such
paragraph".
(e) UPDATE FOR PPS-EXEMPT HOSPITALS.—Section 1886(bX3XB) of
such Act (42 U.S.C. 1395ww(bX3XB)) is amended—
(1) in clause (i), by striking "subparagraph (A) for 12-month
cost reporting periods beginning during a fiscal year and for
purposes of,
r (2) in clause (ii), by striking "(ii) For purposes of clause (i)"
and inserting "(iii) For purposes of this subparagraph", and
(3) by inserting after clause (i) the following new clause:
"(ii) For purposes of subparagraph (A), the 'applicable percentage
increase' for 12-month cost reporting periods beginning during—
"(I) fiscal year 1986, is 0.5 percent,
"(II) fiscal year 1987, is 1.15 percent,
-Wij "(III) fiscal year 1988, is the market basket percentage in-
crease minus 2.0 percentage points, and
"(IV) subsequent fiscal years is the market basket percentage
increase.".
(f) RELATED CONFORMING AND TECHNICAL AMENDMENTS.—
(1) Section 1886 of such Act (42 U.S.C. 1395ww) is further
amended—
(A) by adding at the end of subsection (dX2XD) the follow-
ing new sentence: "For purposes of payment under this
subsection, a hospital is considered to be located in an
^v,.,;. i^j urban area or large urban area, respectively, if the hospital
is paid under this subsection at the rate for hospitals
located in such an area.";
(B) in subsection (e)(3XB), by striking "or determine";
(C) in subsection (eX4)—
(i) by striking "for fiscal year 1988" and inserting
*3'^' " "for each fiscal year Ot>eginning with fiscal year 1988)',
(ii) by striking "and shall determine for each subse-
quent fiscal year" and all that follows through "fiscal
year, and", and
(iii) by amending the last sentence to read as follows:
"The appropriate change factor may be different for all
CB'* S oir^d large urban subsection (d) hospitals, other urban
subsection (d) hospitals, urban subsection (d) Puerto
is:>ijR lo t- ' Rico hospitals, rural subsection (d) hospitals, and rural
subsection (d) Puerto Rico hospitals, and all other hos-
of s "br» ^ pitals and units not paid under subsection (d), and may
vary among such other hospitals and units."; and
(D) in p a r a g r a p h (5), by striking "or d e t e r m i n a t i o n " each
place it appears. , • t,••:-::••>.-w<<;:-^ .-A^^ /'-^/.^-v, /.^.o-^'
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-45
(2) Subsection (a)(l)(B)(ii) of section 107 of the Balanced
Budget and Emergency Deficit Control Reaffirmation Act of
1987 (Public Law 100-119) is amended, effective as of the date of 42 u s e 1395WW
the enactment of such Act, by inserting ", the target percentage note.
and DRG percentage shall be those specified in subsection
(dXl)(C)(iv) of such section, and the applicable percentage in-
crease in a hospital's target amount shall be deemed to be 0
percent" before the period at the end.
(g) EFFECTIVE DATES.— 42 u s e 1395WW
(1) PPS HOSPITALS, DRG PORTION OF PAYMENT.—In the case of a note.
subsection (d) hospital (as defined in paragraph (6))—
(A) the amendments made by subsections (a) and (c) shall
apply to payments made under section 1886(a)(l)(A)(iii) of
the Social Security Act on the basis of discharges occurring
on or after April 1,1988, and
(B) for discharges occurring on or after October 1, 1988,
the applicable percentage increase (described in section
1886(d)(3XB) of such Act) *' for discharges occurring during
fiscal year 1987 is deemed to have been such percentage
increase £is amended by subsection (a).
(2) PPS SOLE COMMUNITY HOSPITALS, HOSPITAL SPECIFIC PORTION
OF PAYMENT.—In the case of a subsection (d) hospital which
receives payments made under section 1886(dXl)(A) of the Social
Security Act because it is a sole community hospital—
(A) the amendment made by subsections (a) and (c) shall
apply to payments under section 1886(dXlXAXii)(I) of the
Social Security Act made on the basis of discharges occur-
ring during a cost reporting period of a hospital, for the
hospital's cost reporting period beginning on or after Octo-
ber 1, 1987;
,.. (B) notwithstanding subparagraph (A), for cost reporting
period beginning during fiscal year 1988, the applicable
percentage increase (as defined in section 1886(dX3XB) of
such Act) for the—
(i) first 51 days of the cost reporting period shall be 0
percent,
(ii) next 132 days of such period shall be 2.7 percent,
and
gfst; (iii) remainder of such period of the cost reporting
period shall be the applicable percentage increase (as so
defined, as amended by subsection (a)); and
(C) for cost reporting periods beginning on or after Octo-
ber 1, 1988, the applicable percentage increase (as so de-
fined) with respect to the previous cost reporting period
shall be deemed to have been the applicable percentage
increase (as so defined, as amended by subsection (a)).
(3) PPS-EXEMPT HOSPITALS.—In the case of a hospital that is
not a subsection (d) hospital—
(A) the amendments made by subsection (e) shall apply to
cost reporting periods beginning on or after October 1,1987;
(B) notwithstanding subparagraph (A), for the hospital's
cost reporting period beginning during fiscal year 1988,
payment under title XVIII of the Social Security Act shall
be made as though the applicable percentage increase de-
«' Copy read "Act))".
101 STAT. 1330-46 PUBLIC LAW 100-203—DEC. 22, 1987
scribed in section 1886(b)(3XB) of such Act were equal to the
product of 2.7 percent and the ratio of 315 to 366; and
-: « (C) for cost reporting periods beginning on or after Octo-
•^ = ber 1, 1988, the applicable percentage increase (as so de-
fined) with respect to the cost reporting period beginning
during fiscal year 1988 shall be deemed to have been 2.7
percent.
Effective date. (4) DEFINITION, REGIONAL FLOOR, AND TECHNICAL AND
CONFORMING AMENDMENTS.—The a m e n d m e n t s m a d e by subsec-
V >. tions (b) and (d) and p a r a g r a p h s (1) a n d (2) of subsection (0 shall
take effect on the date of the enactment of this Act.
(5) TRANSITION FOR LARGE URBAN AREA RATES.—In computing
the average standardized amount for hospitals located in a large
, urban area or other urban area under section 1886(dX3)(A)(ii) of
the Social Security Act (as amended by subsection (c)) for fiscal
year 1988, the reference to "the respective average standardized
amount computed for the previous fiscal year under this
subparagraph" is deemed a reference to the average standard-
ized amount computed for hospitals located in an urban area for
the 51-day period beginning on October 1, 1987.
. (6) DEFINITION.—In this subsection, the term "subsection (d)
hospital" has the meaning given such term in section
1886(dX10XB) of the Social Security Act.
SEC. 4003. INCREASE IN DISPROPORTIONATE SHARE ADJUSTMENT AND
REDUCTION IN INDIRECT MEDICAL EDUCATION PAYMENTS.
(a) REDUCTION I N INDIRECT M E D I C A L EDUCATION P A Y M E N T S . —
(1) Section 1886(dX5XBXii) of t h e Social Security Act (42 U.S.C.
1395ww(dX5XBXii)) is amended—
(A) in subclause (I), by striking "2" and inserting in lieu
thereof "1.89"; and
(B) in subclause (II), by striking "1.5" and inserting in
lieu thereof "1.43".
(2) Section 1886(dX3XCXii) of such Act (42 U.S.C.
; , 1395ww(dX3)(CXii)) is amended by inserting "and by section
* "'' 4003(aXl) of the Omnibus Budget Reconciliation Act of 1987"
after "1985" each place it appears in subclauses (I) and (II).
(b) INCREASE I N DISPROPORTIONATE S H A R E A D J U S T M E N T . — S e c t i o n
1886(d)(5XF) of such Act (42 U.S.C. 1395ww(dX5)(B))—
(1) in clause (iii), by striking "15 percent" and inserting "25
percent", and
(2) in clause (ivXD, by s t r i k i n g " t h e lesser of 15 percent, or".
(c) EXTENSION OF DISPROPORTIONATE SHARE ADJUSTMENT.—Sec-
tions 1886(dX2)(CXiv) (42 U.S.C. 1395ww(dX2XCXiv)), 1886(dX3XCXiiXI)
(42 U.S.C. 1395ww(dX3XCXiiXI)), 1886(dX3XCXiiXII) (42 U.S.C.
1395ww(dX3XCXiiXII)), 1886(dX5XBXiiXI) (42 U.S.C.
1395ww(dX5XBXiiXI)), 1886(dX5XBXiiXII) (42 U.S.C.
1395ww(dX5XBXiiXII)), and 1886(dX5XFXi) (42 U.S.C.
1395ww(dX5XFXi)) of the Social Security Act are each amended by
striking "1989" and inserting in lieu thereof "1990".
(d) SPECIAL RULE.—In the case of a hospital which—
(1) consists of 2 inpatient hospital facilities which are more
than 4 miles apart and each of which is in a separate political
jurisdiction within the same State and one of which meets the
criteria under section 1886(dX5XF) of the Social Security Act for
serving a significantly disproportionate number of low-income
patients as if that facility were a separate hospital; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-47
(2) receives payments for inpatient hospital services under
title XVIII of the Social Security Act which are less than the
hospital's reasonable costs,
the Secretary of Health and Human Services, upon application by
the hospital, may treat each of the facilities of hospital as separate
hospitals for purposes of applying section 1886(d)(5)(F) of the Social
Security Act, for discharges occurring on or after October 1, 1988.
(e) EFFECTIVE DATE.—The amendments made by this section shall 42 u s e 1395WW
apply to payments for discharges occurring on or after October 1, note.
1988.
SEC. 4004. PROVISIONS RELATING TO WAGE INDEX.
(a) SURVEY.—Section 1886(d)(3)(E) of the Social Security Act (42
U.S.C. 1395ww(d)(3)(E)) is amended by adding at the end the follow-
ing: "Not later than October 1, 1990 (and at least every 36 months
thereafter), the Secretary shall update the factor under the preced-
ing sentence on the basis of a survey conducted by the Secretary
(and updated as appropriate) of the wages and wage-related costs of
subsection (d) hospitals in the United States. To the extent deter-
mined feasible by the Secretary, such survey shall measure the
earnings and paid hours of employment by occupational category
and shall exclude data with respect to the wages and wage-related
costs incurred in furnishing skilled nursing facility services.".
(b) CLINIC HOSPITAL WAGE INDICES.—In calculating the wage index 42 u s e 1395WW
under section 1886(d) of the Social Security Act for purposes of note.
making payment adjustments after September 30, 1988, as required
under paragraphs (2)(H) and (3)(E) of such section, in the case of any
institution which received the waiver specified in section 602(k) of
the Social Security Amendments of 1983, the Secretary of Health
and Human Services shall include wage costs paid to related
organization employees directly involved in the delivery and
administration of care provided by the related organization to hos-
pital inpatients. For purposes of the preceding sentence, the term
"wage costs" does not include costs of overhead or home office
administrative salaries or any costs that are not incurred in the
hospital's Metropolitan Statistical Area.
SEC. 4005. RURAL HOSPITALS.
(a) REVISION OF STANDARDS FOR INCLUDING A RURAL COUNTY IN AN
URBAN AREA.—
(1) TREATING CERTAIN RURAL HOSPITALS ADJACENT TO URBAN
AREAS AS URBAN HOSPITALS.—Section 1886(d)(8) of the Social
Security Act (42 U.S.C. 1395ww(d)(8))—
(A) by redesignating clauses (i) and (ii) of subparagraphs
(A) and (B) as subclauses (I) and (II), respectively,
(B) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively,
(C) by inserting "(A)" after "(8)", and
(D) by adding at the end the following new subparagraph:
"(B) The Secretary shall treat a hospital located in a rural county
adjacent to one or more urban areas as being located in the urban
metropolitan statistical area to which the greatest number of
workers in the county commute, if—
"(i) the rural county would otherwise be considered part of an
urban area but for the fact that the rural county does not meet
the standard relating to the rate of commutation between the
101 STAT. 1330-48 PUBLIC LAW 100-203—DEC. 22, 1987
-r; rural county and the central county or counties of any adjacent
i>f urban area; and
"(ii) either (I) the number of residents of the rural county who
/f commute for employment to the central county or counties of
any adjacent urban area is equal to at least 15 percent of the
number of residents of the rural county who are employed, or
(II) the sum of the number of residents of the rural county who
commute for employment to the central county or counties of
,1 any adjacent urban area and the number of residents of any
adjacent urban area who commute for employment to the rural
county is at least equal to 20 percent of the number of residents
of the rural county who are employed.
"(C) The Secretary shall make a proportional adjustment in the
standardized amount determined under paragraph (3) for hospitals
located in an urban area to assure that the provisions of subpara-
graph (B) do not result in aggregate payments under this section
that are greater or less than those that would otherwise be made.
The Secretary shall make such adjustment in payments under this
section to hospitals located in rural areas as are necessary to assure
that the aggregate of payments to rural hospitals not affected by
subparagraph (B) are not changed as a result of the application of
subparagraph (B).".
(2) LOCATION OF HOSPITAL.—For purposes of section 1886 of the
Social Security Act, Watertown Memorial Hospital in Water-
town, Wisconsin is deemed to be located in Jefferson County,
Wisconsin.
42 u s e 1395WW (3) EFFECTIVE DATE.—This section, and the amendments made
note. by paragraph (1), shall apply to discharges occurring on or after
October 1,1988.
(b) EXPANSION OF SWING-BED PROGRAM.—
(1) EXPANSION TO HOSPITALS WITH FEWER THAN lOO BEDS.—
Section 1883(b)(1) of the Social Security Act (42 U.S.C.
1395tt(b)(l)) is amended by striking "50 beds" and inserting "100
beds".
(2) REQUIREMENTS FOR HOSPITALS WITH MORE THAN 49 BEDS.—
42 u s e 1395tt. Section 1883(d) of such Act (42 U.S.C. 1395dd(d)) is amended—
(A) by inserting "(1)" after "(d)", and
(B) by adding at the end the following new paragraphs:
"(2)(A) Any agreement under this section with a hospital with
more than 49 beds shall provide that no payment may be made for
extended care services which are furnished to an extended care
patient after the end of the 5-day period (excluding weekends and
holidays) beginning on an availability date for a skilled nursing
facility, unless the patient's physician certifies, within such 5-day
period, that the transfer of that patient to that facility is not
Regulations. medically appropriate on the availability date. The Secretary shall
prescribe regulations to provide for notice by skilled nursing facili-
ties of availability dates to hospitals which have agreements under
this section and which are located within the same geographic
region (as defined by the Secretary).
"(B) In this paragraph:
"(i) The term 'availability date' means, with respect to an
extended care patient at a hospital, any date on which a bed is
available for the patient in a skilled nursing facility located
,.!; within the geographic region in which the hospital is located.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-49
"(ii) The term 'extended care patient' means an individual
being furnished extended care services at a hospital pursuant to
an agreement with the Secretary under this section.
"(3) In the case of an agreement for a cost reporting period under
this section with a hospital that has more than 49 beds, payment
may not be made in the period for patient-days of extended care
services that exceed 15 percent of the product of the number of days
in the period and the average number of licensed beds in the
hospital in the period.".
(3) REPORT.—The Secretary of Health and Human Services 42 u s e 1395tt
shall report to Congress, not later than February 1, 1989, note.
concerning—
(A) the proportion of admissions to hospitals for extended
care services under section 1883 of the Social Security Act
which are denied or approved by a peer review organization
under section 1154(aXl) of such Act, and
(B) on recommendations for methods of encouraging hos-
pitals that—
(i) have a low occupancy rate,
,;_ (ii) are eligible to enter (but have not entered) into an
agreement under section 1883 of such Act, and
(iii) are located in areas with a need for additional
providers of extended care services,
to enter into such agreements.
(4) EFFECTIVE DATE.—The amendments made by paragraphs 42 u s e 1395tt
(1) and (2) shall apply to agreements under section 1883 of the note.
Social Security Act entered into after March 31,1988.
(c) PAYMENTS TO SOLE COMMUNITY HOSPITALS.—
(1) Section 1886(d)(5)(C)(ii) of the Social Security Act (42 U.S.C.
1395ww(dX5)(CXii)) is amended—
(A) by striking "1988" in the second sentence and insert-
-^* ' ing "1990", and
(B) by inserting after the second sentence the following:
>>• "A subsection (d) hospital that meets the criteria for clas-
sification as a sole community hospital and otherwise
te -^ qualifies for the adjustment authorized by the preceding
sentence may qualify for such an adjustment without
regard to the formula by which payments are determined
for the hospital under paragraph (IXA).".
(2XA) The amendments made by paragraph (1) shall apply to 42 u s e 1395WW
cost reporting periods beginning on or after October 1, 1987 note.
(B) The Secretary of Health and Human Services shall take
appropriate steps to ensure that the total amount paid in a
fiscal year under title XVIII of the Social Security Act by reason
of the amendment made by paragraph (IXB) does not exceed
$5,000,000 in the case of fiscal year 1988 and $10,000,000 for
fiscal year 1989.
(d) MEDICARE CLASSIFICATION OF RURAL REFERRAL CENTERS.—
(1) EXTENSION OF CLASSIFICATION.—
(A) I N GENERAL.—The first sentence of section
1886(dX5XCXiXI) of the Social Security Act (42 U.S.C.
1395ww(dX5XCXiXI)) is amended by striking "500" and
-- inserting "275".
mil. (B) EFFECTIVE DATE.—The amendment made by subpara- 42 u s e 1395WW
graph (A) shall apply to discharges occurring on or after note.
April 1,1988.
(2) STUDY.— 42 u s e 1395WW
note.
101 STAT. 1330-50 PUBLIC LAW 100-203—DEC. 22, 1987
(A) I N GENERAL.—The Secretary of Health and Human
' . Services shall provide for a study of the criteria used for the
classification of hospitals as rural referral centers under
/.. . section 1886(dX5XCXi) of the Social Security Act. The study
shall include an examination of—
(i) the extent that hospitals classified as rural refer-
ral centers receive more or less than their actual costs
of providing inpatient hospital services, and
(ii) the appropriateness of providing for payment for
- "^ such centers at a rate other than the rate for a hospital
. '' located in an other urban area.
(B) REPORT.—The Secretary shall report to Congress, by
not later than March 1, 1989, on the study conducted under
subparagraph (A) and on recommendations for the criteria
that should be applied under section 1886(dX5XCXi) of the
Social Security Act for the classification of hospitals as
rural referral centers for cost reporting periods beginning
on or after October 1,1989.
42 u s e 1395WW (e) G R A N T PROGRAM FOR RURAL HEALTH C A R E TRANSITION.—
note. (1) The Administrator of the Health Care Financing Adminis-
f tration, in consultation with the Assistant Secretary for Health
(or a designee), shall establish a program of grants to assist
eligible small rural hospitals and their communities in the
planning and implementation of projects to modify the type and
extent of services such hospitals provide in order to adjust for
one or more of the following factors:
(A) Changes in clinical practice patterns.
;. n ^ (B) Changes in service populations.
(C) Declining demand for acute-care inpatient hospital
,,^. ., capacity.
(D) Declining ability to provide appropriate staffing for
inpatient hospitals.
(E) Increasing demand for ambulatory and emergency
services.
(F) Increasing demand for appropriate integration of
community health services.
(G) The need for adequate access (including appropriate
transportation) to emergency care and inpatient care in
areas in which a significant number of underutilized hos-
pital beds are being eliminated.
(H) The Administrator shall submit a final report on the
program to the Congress not later than 180 days after all
projects receiving a grant under the program are
completed.
,^ Each demonstration project under this subsection shall dem-
onstrate methods of strengthening the financial and managerial
capability of the hospital involved to provide necessary services.
Such methods may include programs of cooperation with other
health care providers, of diversification in services furnished
(including the provision of home health services), of physician
recruitment, and of improved management systems.
(2) For purposes of this subsection, the term "eligible small
J, rural hospital" *® means any non-Federal, short-term general
acute care hospital that—
• • Copy read " 'eligible small rural hospital' ".
PUBLIC LAW 100-208—DEC. 22, 1987 101 STAT. 1330-51
(A) is located in a rural area (as determined in accordance
with subsection (d)),
(B) has less than 100 beds, and
(C) is not for profit.
(3)(A) Any eligible small rural hospital that desires to modify
the type or extent of health care services that it provides in
order to adjust for one or more of the factors specified in
paragraph (1) may submit an application to the Governor of the
State in which it is located. The application shall specify the
nature of the project proposed by the hospital, the data and
information on which the project is based, and a timetable (of
not more than 24 months) for completion of the project. The
application shall be submitted on or before a date specified by
the Administrator and shall be in such form as the Adminis-
trator may require.
(B) The Governor shall transmit any application submitted
pursuant to subparagraph (A) to the Secretary not later than 30
days after it is received by the Governor, accompanied by any
comments with respect to the application that the Governor
deems appropriate.
(C) The Governor of a State may designate an appropriate
State agency to receive and comment on applications submitted
under subparagraph (A).
(4) A hospital shall be considered to be located in a rural area
for purposes of this subsection if it is treated as being located in
a rural area for purposes of section 1886(d)(3)(D) of the Social
Security Act.
(5) In determining which hospitals making application under
paragraph (3) will receive grants under this subsection, the
Administrator shall take into account—
(A) any comments received under paragraph (3)(B) with
respect to a proposed project;
(B) the effect that the project will have on—
(i) reducing expenditures from the Federal Hospital
Insurance Trust Fund,
(ii) improving the access of medicare beneficiaries to
health care of a reasonable quality;
(C) the extent to which the proposal of the hospital, using
appropriate data, demonstrates an understanding of—
(i) the primary market or service area of the hospital,
and
(ii) the health care needs of the elderly and disabled
' that are not currently being met by providers in such
market or area, and
(D) the degree of coordination that may be expected
between the proposed project and—
(i) other local or regional health care providers, and
(ii) community and government leaders,
as evidenced by the availability of support for the project (in
cash or in kind) and other relevant factors.
(6) A grant to a hospital under this subsection may not exceed
$50,000 a year and may not exceed a term of 2 years.
(7XA) Except as provided in subparagraphs (D) and (C), a
hospital receiving a grant under this subsection may use the
grant for any of expenses incurred in planning and implement-
ing the project with respect to which the grant is made.
101 STAT. 1330-52 PUBLIC LAW 100-203—DEC. 22, 1987
: (B) A hospital receiving a grant under this subsection for a
project may not use the grant to retire debt incurred with
respect to any capital expenditure made prior to the date on
which the project is initiated.
(C) Not more than one-third of any grant made under this
subsection may be expended for capital-related costs (as defined
by the Secretary for purposes of section 1886(aX4) of the Social
Security Act) of the project.
. •. (8XA) A hospital receiving a grant under this section shall
K furnish the Administrator with such information as the
Administrator may require to evaluate the project with respect
to which the grant is made and to ensure that the grant is
expended for the purposes for which it was made.
Reports. (B) The Administrator shall report to the Congress at least
once every 6 months on the program of grants established under
this subsection. The report shall assess the functioning and
status of the program, shall evaluate the progress made toward
achieving the purposes of the program, and shall include any
recommendations the Secretary may deem appropriate with
respect to the program. In preparing the report, the Secretary
shall solicit and include the comments and recommendations of
utJ J private and public entities with an interest in rural health care.
Reports. (C) The Administrator shall submit a final report on the
program to the Congress not later than 180 days after all
projects receiving a grant under the program are completed.
(9) For purposes of carrying out the program of grants under
this subsection, there are authorized to be appropriated from
the Federal Hospital Insurance Trust Fund $15,000,000 for each
of the fiscal years 1989 and 1990. ,, .
SEC. 4006. PAYMENTS FOR HOSPITAL CAPITAL.
(a) REDUCTIONS IN PAYMENTS FOR CAPITAL.—Section 1886(gX3XA)
of the Social Security Act (42 U.S.C. 1395ww(gX3XA)) is amended—
(A) in clause (ii), by striking ", and" and inserting "on or
after October 1, 1987, and before January 1,1988,",
c' (B) by striking clause (iii) and inserting the following:
"(iii) 12 percent for payments attributable to portions of cost
reporting periods or discharges (as the case may be) in fiscal
year 1988, occurring on or after January 1,1988, and
"(iv) 15 percent to portions of cost reporting periods or dis-
charges (as the case may) be occurring during fiscal year 1989.".
(b) PROSPECTIVE PAYMENT FOR CAPITAL-RELATED COSTS.—
(1) IN GENERAL.—Paragraph (1) of section 1886(g) of such Act
(42 U.S.C. 1395ww(g)) is amended to read as follows:
"(gXlXA) Notwithstanding section 1861(v), instead of any amounts
that are otherwise payable under this title with respect to the
reasonable costs of subsection (d) hospitals and subsection (d) Puerto
Rico hospitals for capital-related costs of inpatient hospital services,
the Secretary shall, for hospital cost reporting periods beginning on
or after October 1, 1991, provide for payments for such costs in
accordance with a prospective pa3mient system established by the
Secretary. •.-. .-s-vv • ••.'•:• v, ••• u-. ^j--
"(B) Such system—
"(i) shall provide for (I) a payment on a per discharge basis,
and (II) an appropriate weighting of such payment amount as
relates to the classification of the discharge;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-53
"(ii) may provide for an adjustment to take into account
variations in the relative costs of capital and construction for
the different types of facilities or areas in which they are
located;
"(iii) may provide for such exceptions (including appropriate
exceptions to reflect capital obligations) as the Secretary deter-
i mines to be appropriate, and
r "(iv) may provide for suitable adjustment to reflect hospital
occupancy rate.
"(C) In this paragraph, the term 'capital-related costs' has the
meaning given such term by the Secretary under subsection (a)(4) as
of September 30, 1987, and does not include a return on equity
capital.".
(2) CONFORMING AMENDMENT.—Section 1886 of such Act is 42 u s e 1395WW.
amended—
(A) in subsection (a)(4), by striking "with respect to costs
^ incurred in cost reporting periods beginning prior to Octo-
ber 1 of 1987 (or of such later year £is the Secretary may, in
.J i& his discretion, select), other capital-related costs, as defined
by the Secretary" and inserting "other capital-related costs
:'* (as defined by the Secretary for periods before October 1,
1987)", and
(B) by striking subparagraph (C) of subsection (gX3).
to ^•^ (3) EFFECTIVE DATES.—The amendment made by paragraph (1) 42 u s e 1395WW
shall take effect on October 1, 1987. The amendments made by note.
paragraph (2) shall apply to cost reporting periods beginning on
or after October 1,1987.
(c) P R O P A C REPORT ON ADJUSTMENT FOR HOSPITAL OCCUPANCY.—
The Prospective Payment Assessment Commission shall study and
report to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate, by not
later than May 1, 1988, on the suitability and feasibility of linking
gayment for capital-related costs under part A of title XVIII of the
ocial Security Act to hospital occupancy rates.
SEC. 4007. REPORTING HOSPITAL INFORMATION. ' ' 42 u s e 1395WW
note.
(a) DEVELOPMENT OF DATA BASE.—The Secretary of Health and
Human Services (in ^^ this section referred to as the "Secretary")
shall develop and place into effect not later than June 1, 1989, a
data base of the operating costs of inpatient hospital services with
respect to all hospitals under title XVIII of the Social Security Act,
which data base shall be updated at least once every quarter (and
maintained for the 12-month period preceding any such update). The
data base under this subsection may include data from preliminary
cost reports (but the Secretary shall make available an updata
analysis of the differences between preliminary and settled cost
reports).
Ot)) REPORTING OF INFORMATION ELECTRONICALLY.—
2° (1) Subject to paragraph (2), with respect to hospital cost
reporting periods beginning on or after October 1, 1989, the
Secretary shall place into effect a standardized electronic cost
reporting format for hospitals under the medicare program.
(2) The Secretary may delay or waive the implementation of
such format in particular instances where such implementation
'* Copy read "Services, (in".
*° Copy read "ELECTRONICALLY.—Subject"
101 STAT. 1330-54 PUBLIC LAW 100-203—DEC. 22, 1987
would result in financial hardship (in particular with respect to
a small percentage of medicare volume),
(c) DEMONSTRATION PROJECT.—
(1) The Secretary of Health and Human Services shall provide
for a 3-year demonstration project to develop, and determine
the costs and benefits of establishing a uniform system for the
reporting by medicare participating hospitals of balance sheet
Contracts. *" and information described in paragraph (2), In contracting the
^ project, the Secretary shall require hospitals in at least 2 States,
one of which maintains a uniform hospital reporting system, to
report such information based on standard information estab-
lished by the Secretary.
(2) The information described in this paragraph is as follows:
(A) Hospital discharges (classified by category of service
and by class of primary payer).
(B) Patient days (classified by category of service and by
class of primary payer).
(C) Licensed beds, staffed beds, and occupancy (by cat-
egory of service).
f (D) Outpatient visits (classified by class of primary payer).
(E) Inpatient charges and revenues (classified by clsiss of
primary payer).
., • ., „. (F) Outpatient charges and revenues (classified by class of
primary payer).
a. (G) Inpatient and outpatient hospital expenses (by cost-
center cl£issifled for operating and capital).
(H) Reasonable costs.
(I) Other income.
(J) Uncompensated care (classified by bad debt and char-
ity care).
(K) Capital acquisitions.
(L) Capital assets.
(3) The Secretary shall develop the system under subsection
(c) in a manner so as—
(A) to facilitate the submittal of the information in the
report in an electronic form, and
(B) to be compatible with the needs of the medicare
prospective payment system.
(4) The Secretary shall prepare and submit, to the Prospective
Payment Assessment Commission, the Comptroller General, the
Committee on Ways and Means of the House of Representa-
tives, and the Committee on Finance of the Senate, by not later
than 45 days after the end of each calendar quarter, data
collected under the system.
(5) In paragraph (3):
(A) The terms "bad debt" and "charity care" have such
meanings as the Secretary establishes.
(B) The term "class" means, with respect to payers, the
programs under this title VIII of the Social Security Act, a
State plan approved under title XIX of such Act, other
third party-payers, and self-paying individuals.
(6) 21 The Secretary shall set aside at least $1,000,000 for each
of fiscal years 1988, 1989, and 1990 from existing research funds
»'Copy read "(7)" •*;•
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-55
to develop the format, according to paragraph (1), and at least
$2,000,000 from program operations funds for data collection
and analysis, but total funds shall not exceed $15,000,000 over 3
years.
(7) 2 2 Tj^g Comptroller General shall analyze the adequacy of
the existing system for reporting of hospital information and
the costs and benefits of data reporting under the demonstra-
tion system and will recommend improvements in hospital data
collection and in analysis and display of data in support of
policy making.
^^ (d) CONSULTATION.—The Secretary shall consult representatives
of the hospital industry in carrying out the provisions of this section.
SEC. 4008. OTHER PROVISIONS RELATING TO PAYMENT FOR INPATIENT
HOSPITAL SERVICES.
(a) MASSACHUSETTS MEDICARE REPAYMENT.—The Secretary of
Health and Human Services shall not, on or after the date of the
enactment of this Act, and before January 1, 1989, recoup from, or
otherwise reduce payments to, hospitals in the State of Massachu-
setts because of alleged overpayments to such hospitals under part
A of title XVIII of the Social Security Act which occurred during the
period of the statewide hospital reimbursement demonstration
project conducted in that State, between October 1, 1982, and June
30, 1986, under section 402 of the Social Security Amendments of
1967 and section 222 of the Social Security Amendments of 1972.
Oo) CLARIFICATION OF SECTION 18140)) STATE WAIVER AUTHORITY.—
(1) APPUCATION OF AGGREGATE TEST.—Section 181403)(3)(B) of
the Social Security Act (42 U.S.C. 1395f(b)(3)(B)) is amended bv
striking "rate of increase for the previous three-year period'
and inserting "aggregate rate of increeise from October 1, 1983,
to the most recent date for which annual data are available".
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 42 u s e 1395f
shall take effect on the date of the enactment of this Act. note.
(c) CONTINUATION OF BAD DEBT RECOGNITION FOR HOSPITAL SERV- 42 u s e 1395f
ICES.—In making payments to hospitals under title XVIII of the note.
Social Security Act, the Secretary of Health and Human Services
shall not make any change in the policy in effect on August 1, 1987,
with respect to payment under title XVIII of the Social Security Act
to providers of service for reasonable costs relating to unrecovered
costs associated with unpaid deductible and coinsurance amounts
incurred under such title (including criteria for what constitutes a
reasonable collection effort).
(d) HOSPITAL OUTUER PAYMENTS AND POUCY.— 42 u s e 1395WW
(1) INCREASE IN OUTUER PAYMENTS FOR BURN CENTER DRGS.— note.
(A) I N GENERAL.—For discharges classified in diagnosis-
related groups relating to burn cases and occurring on or
after April 1,1988, and before October 1, 1989, the marginal
cost of care permitted by the Secretary of Health and
Human Services under section 1886(dX5XAXiii) of the Social
Security Act shall be 90 percent of the appropriate per diem
cost of care or 90 percent of the cost for cost outliers.
(B) BUDGET NEUTRAUTY.—Subparagraph (A) shall be im-
plemented in a manner that ensures that total payments
under section 1886 of the Social Security Act are not in-
2" Copy read "(8)".
23 "(J)' Paragraph had wrong indention.
101 STAT. 1330-56 PUBLIC LAW 100-203—DEC. 22, 1987
creased or decreased by reason of the adjustments required
by such subparagraph.
' ' (2) LIMITATION ON CHANGES IN OUTLIER REGULATIONS.—
(A) IN GENERAL.—Notwithstanding any other provision of
law, except as required to implement specific provisions
required under statute, the Secretary of Health and Human
Services is not authorized to issue in final form, after the
date of the enactment of this Act and before September 1,
1988, any final regulation which changes the method of
g
ayment for outlier cases under section 1886(d)(5)(A) of the
ocial Security Act.
^ ^ (B) PROPAC 24 REPORT.—The chairman of the Prospective
i^ J Payment Assessment Commission shall report to the Con-
gress and the Secretary of Health and Human Services, by
not later than June 1, 1988, on the method of payment for
^'',^ outlier cases under such section and providing more ade-
^' quate and appropriate payments with respect to burn
outlier cases.
(3) REPORT ON OUTLIER PAYMENTS.—The Secretary of Health
and Human Services shall include in the annual report sub-
mitted to the Congress pursuant to section 1875(b) of the Social
Security Act a comparison with respect to hospitals located in
an urban area and hospitals located in a rural area in the
amount of reductions under section 1886(d)(3)(B) of the Social
Security Act and additional payments under section
1886(d)(5)(A) of such Act.
(e) MISCELLANEOUS ACCOUNTING PROVISION.—Effective as if in-
cluded in the enactment of the Omnibus Budget Reconciliation Act
42 use I395ww of 1986, subsection (d) of section 9307 of such Act is amended to read
^°^- as follows:
"(d) MISCELLANEOUS ACCOUNTING PROVISION.—Notwithstanding
any other provision of law, for purposes of section 1886(d)(1)(A) of
,, the Social Security Act, in the case of a hospital that—
, *' "(1) had a cost reporting period beginning on September 28,
29, or 30 of 1985,
"(2) is located in a State in which inpatient hospital services
were paid in fiscal year 1985 pursuant to a Statewide dem-
onstration project under section 402 of the Social Security
Amendments of 1967 and section 222 of the Social Security
Amendments of 1972, and
"(3) elects, by notice to the Secretary of Health and Human
,,,, , Services by not later than April 1, 1988, to have this subsection
apply,
during the first 7 months of such cost reporting period the target
percentage' shall be 75 percent and the 'DRG percentage' shall be 25
percent, and during the remaining 5 months of such period the
'target percentage' and the 'DRG percentage' shall each be 50
percent.'.
SEC. 4009. MISCELLANEOUS PROVISIONS. ''"''-
(a) RESPONSIBILITIES OF MEDICARE HOSPITALS IN EMERGENCY
CASES.—
(1) INCREASE IN CIVIL MONETARY PENALTY.—Section 1867(d)(2)
of the Social Security Act (42 U.S.C. 1395dd(d)(2)) is amended by
striking "$25,000" and inserting "$50,000".
24 "Copy read " P R O P A C " .
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-57
(2) EXCLUSION FROM MEDICARE PROGRAM FOR VIOLATIONS —
Section 1867(dKl) of such Act is amended by adding at the end
the following new sentence:
"If a civil money penalty is imposed on a responsible physician
under paragraph (2), the Secretary may impose the sanction de-
scribed in section 1842(jX2)(A) (relating to barring from participation
in the medicare program) in the same manner as it is imposed under
section 1842(j).".
(3) EFFECTIVE DATE.—The amendments made by this subsec- 42 u s e 1395dd
tion shall apply to actions occurring on or after the date of the note.
enactment of this Act.
(b) DESIGNATION OF PEDIATRIC HOSPITALS AS MEETING CERTIFI- 42 u s e 1395y
CATION AS HEART TRANSPLANT FACILITY.—For purposes of determin- note.
ing whether a pediatric hospital that performs pediatric heart
transplants meets the criteria established by the Secretary of
Health and Human Services for facilities in which the heart trans-
plants performed will be considered to meet the requirement of
section 1862(aXlXA) of the Social Security Act, the Secretary shall
treat such a hospital as meeting such criteria if—
(1) the hospital's pediatric heart transplant program is oper-
ated jointly by the hospital and another facility that meets such
criteria,
,, (2) the unified program shares the same transplant surgeons
and quality assurance program (including oversight committee,
patient protocol, and patient selection criteria), and
(3) the hospital demonstrates to the satisfaction of the
Secretary that it is able to provide the sp)ecialized facilities,
services, and personnel that are required by pediatric heart
transplant patients.
(c) WAIVER OF INPATIENT LIMITATIONS FOR THE CONNECTICUT HOS-
PICE. ^^—Subsection (a) of section 9307 of the Omnibus Budget Rec-
onciliation Act of 1986 is amended— 100 Stat. 1995.
(1) by striking "TEMPORARY" in the heading, and
(2) by striking "for hospice care provided before October 1,
r 1988,".
" (d) REVISION OF APPOINTMENT PROCESS FOR PROSPECTIVE PAYMENT
ASSESSMENT COMMISSION.—
(1) I N GENERAL.—Section 1886(eX6XB) of the Social Security
Act (42 U.S.C. 1395ww(eX6XB)) is amended—
* (A) in the first sentence, by striking "provide expertise
and experience in the provision and financing of health
; care" and inserting "include individuals with national rec-
ognition for their expertise in health economics, hospital
reimbursement, hospital financial management, and other
related fields, who provide a mix of different professionals,
broad geographic representation, and a balance between
urban and rural representatives,"; and
(B) by striking the last sentence.
(2) EFFECTIVE DATE.—The amendments made by paragraph (1) 42 u s e 1395WW
. shall apply to appointments made after the date of the enact- note.
ment of this Act.
(e) PSYCHOLOGISTS' SERVICES FURNISHED TO HOSPITAL
INPATIENTS.—
** Copy read "UMITATIONS FOR THE CONNECTICUT HOSPICE.".
101 STAT. 1330-58 PUBLIC LAW 100-203—DEC. 22, 1987
(1) IN GENERAL.—Section 1861(bX3) of such Act (42 U.S.C.
1395x(bX3)) is amended by inserting "(including clinical
psychologist (£is defined by the Secretary))" after "others" the
first place it appears.
42 u s e 1395x (2) EFFECTIVE DATE.—The amendment made by paragraph (1)
note. shall apply with respect to services furnished on or after
April 1,1988.
(f) HOSPITAL CONDITION OF PARTICIPATION RELATED TO INDIVIDUAL
RESPONSIBLE FOR CARE OF PATIENT.—Section 1861(eX4) of such Act
(42 U.S.C. 1395x(eX4)) is amended by inserting "with respect to
whom payment may be made under this title" after "patient",
42 u s e 1320b- (g) DELAY IN REQUIREMENTS RELATING TO HOSPITAL STANDARDS
note. FOR ORGAN TRANSPLANTS AND STANDARDS FOR ORGAN PROCUREMENT
AGENCIES.—
(1) Section 9318(bX2) of the Omnibus Budget Reconciliation
Act of 1986, as amended by section 107(c) of the Balanced
Budget and Emergency Deficit (Dontrol Reaffirmation Act of
1987, is amended by striking "November 21,1987" and inserting
"March 31,1988".
Effective date. (2) The amendment made by paragraph (1) shall be effective
42 u s e 1320b-8 as if included in the enactment of the Omnibus Budget Rec-
note.
onciliation Act of 1986.
42 u s e 1395WW (h) PROPAC STUDIES AND REPORTS.—
note. (1) PROPAC REPORTS ON STUDY OF DRG RATES FOR HOSPITALS IN
RURAL AND URBAN AREAS.—The Prospective Pa3nment Assess-
ment Commission shall evaluate the study conducted by the
Secretary of Health and Human Services pursuant to section
603(aX2XCXi) of the Social Security Amendments of 1983 (relat-
ing to the feasibility, impact, and desirability of eliminating or
phasing out separate urban and rural DRG prospective pay-
ment rates) and report its conclusions and recommendations to
the Congress not later than March 1,1988.
(2) PROPAC REPORT ON SEPARATE URBAN PAYMENT RATES.—The
Prospective Payment Assessment Commission shall evaluate
' the desirability of maintaining separate DRG prospective pay-
ment rates for hospitals located in large urban areas (as defined
Y ? in section 1886(dX2XD)) of the Social Security Act) and in other
urban areas, and shall report to Congress on such evaluation
' • not later than January 1,1989.
(3) REPORT ON ADJUSTMENT FOR NON-LABOR COSTS.—The
Prospective Payment Assessment Commission shall perform an
analysis to determine the feasibility and appropriateness of
acljusting the non-wage-related portion of the adjusted average
standardized amounts under section 1886(dX3) of the Social
Security Act based on area differences in hospitals' costs (other
than wage-related costs) and input prices. The Commission shall
report to the Congress on such analysis by not later than
October 1,1989.
42 u s e 1395WW (i) SPECIAL RULE.—In the case of New England county metropoli-
note. tan areas, the Secretarv of Health and Human Services shall apply
the second sentence of section 1886(dX2XD) of the Social Security
Act, as amended by section 4001(b) of this subtitle, as though 970,000
were substituted for 1,000,000.
(j) TECHNICAL CORRECTIONS.—
(1) Section 1886(aX4) of the Social Security Act (42 U.S.C.
1395ww(aX4)) is amended by inserting a comma after "edu-
cational activities".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-59
(2) Section 1886(d)(5)(CXiXII) of such Act (42 U.S.C.
1395ww(d)(5)(C)(i)(II)) is amended by inserting "index" after
"case mix" both places it appears.
(3) Section 1886(dX5XF) of such Act (42 U.S.C. 1395ww(dX5XF))
is amended—
(A) in clause (iXH), by striking "such revenues" the
second place it appears and inserting "such net inpatient
care revenues", and
(B) in clause (ivXI), by striking "subclause (III)" and
inserting "clause (v)".
(4) Section 1886(dX9) of such Act (42 U.S.C. 1395ww(dX9)) is
amended by moving the matter in subparagraph (B) before
clause (i) 2 ems to the left so the left margin of such matter is
aligned with the left margin of the matter in subparagraph (A)
(5) Section 1886(hX4XC) of such Act (42 U.S.C. 1395ww(hX4XC))
is amended by striking "subparagraph (E)" and inserting
"subparagraph (D)".
(6) Effective as if included in the enactment of the Omnibus
Budget Reconciliation Act of 1986—
(A) subparagraph (B) of section 9307(cXl) of such Act is 42 u s e 1395WW.
amended to read as follows:
"(B) in paragraph (2)—
"(i) by striking subparagraphs (A) and (B),
"(ii) in subparagraph (C), by striking 'such subsection'
and inserting 'of section 1886(d) of the Social Security Act
(42 U.S.C. 1395ww(d)' and by redesignating such subpara-
graph as subparagraph (A), and
"(iii) by amending subparagraph (D) to read as follows:
" '(B) The amendments made by subparagraph (A) apply to 42 u s e 1395WW
discharges occurring on or after May 1,1986.' "; note.
(B) section 9302(aX2XC) of such Act is amended by strik- 42 u s e 1395WW.
ing "1866(eX5)" and inserting "1886(eX5)";
(C) section 9320(hXl) of such Act is amended by striking 42 u s e 1395y.
"before the period" and inserting "before the semicolon";
(D) section 9321(cX4) of such Act is amended by striking 42 u s e 1395WW
"second sentence" and all that follows through "operating note.
costs" and inserting "second sentence of section 1886(aX4) of
the Social Security Act, from the term 'operating costs";
(E) the second sentence of section 9335(dX2) of such Act is 42 u s e 1395rr
amended by striking "establish" and inserting "designate"; note.
and
(F) section 9321(cX3) of such Act is amended by inserting 42 u s e 1395WW
"section 1861(vXlXO) and 1886(gX2) of the Social Security note.
Act and" after "implementing".
(7) Section 218(v) of the Social Security Act (42 U.S.C. 418(v)) is
amended by striking paragraph (3).
(8) Effective as if included in the Tax Reform Act of 1986,
section 1895(dX6XC) of such Act is amended by striking "603" 42 u s e 300bb-6.
and inserting "2203".
101 STAT. 1330-60 PUBLIC LAW 100-203—DEC. 22, 1987
P A R T 2 — P R O V I S I O N S R E L A T I N G TO P A R T S A
ANDB
•^'l!
Subpart A—Health Maintenance Organization
Reforms
SEC. 4011. BENEFICIARY PROTECTION.
(a) POST-CONTRACT PROTECTION FOR ENROLLEES WITH ELIGIBLE
ORGANIZATIONS UNDER ^e THE MEDICARE PROGRAM.—
(1) Section 1876(cX3) of such Act (42 U.S.C. 1395mm(b)(2)) is
amended by adding at the end the following new subparagraph:
"(F) Each eligible organization that provides items and
services pursuant to a contract under this section shall
provide assurances to the Secretary that in the event the
organization ceases to provide such items and services, the
organization shall provide or arrange for supplemental cov-
erage of benefits under this title related to a pre-existing
Bi'f'i condition with respect to any exclusion period, to all
individuals enrolled with the entity who receive benefits
under this title, for the lesser of six months or the duration
of such period.".
42 u s e 1395mm (2) The amendment made by paragraph (1) shall apply with
note. respect to contracts entered into or renewed on or after the date
of enactment of this Act.
(b) NOTIFICATION OF TERMINATION OF RISK-SHARING CONTRACT.—
(1) Section 1876(c)(3) of such Act, as amended by subsection
(a)(1), is further amended by adding at the end the following
new subparagraph:
"(G)(i) Each eligible organization having a risk-sharing contract
under this section shall notify individuals eligible to enroll with the
organization under this section and individuals enrolled with the
organization under this section that—
"(I) the organization is authorized by law to terminate or
refuse to renew the contract, and
•'•Pufi'^H:
"(II) termination or nonrenewal of the contract may result in
termination of the enrollments of individuals enrolled with the
organization under this section.
"(ii) The notice required by clause (i) shall be included in—
"(I) any marketing materials described in subparagraph (C)
that are distributed by an eligible organization to individuals
eligible to enroll under this section with the organization, and
"(II) any explanation provided to enrollees by the organiza-
tion pursuant to subparagraph (E).".
42 u s e 1395mm (2) The amendment made by paragraph (1) shall apply to
note. contracts entered into or renewed on or after the date of the
enactment of this Act.
SEC. 4012. PAYMENTS FOR HOSPITAL SERVICES.
.ji-ddtHm naiJ (a) IN GENERAL.—Section 1866(aXl) of such Act (42 U.S.C.
1395cc(aXl)) is amended by inserting immediately after subpara-
graph (N) the following new subparagraph:
eontracts. "(O) in the cgise of hospitals and skilled nursing facilities, to
accept as pajonent in full for inpatient hospital and extended
** Copy read "UNDER".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-61
care services that are covered under this title and are furnished
• to any individual enrolled with an eligible organization with a
risk-sharing contract under section 1876 the amounts (in the
case of hospitals) or limits (in the case of skilled nursing facili-
ties) that would be made as a payment in full under this title if
the individuals were not so enrolled.".
(b) REPEAL.—Section 1876(g)(4) of the Social Security Act (42
U.S.C. 1395mm(g)(4)) is repealed.
(c) IMPLEMENTATION.—The Secretary of Health and Human Serv- 42 u s e 1395mm
ices shall provide (in machine readable form) to eligible organiza- note.
tions under section 1876 of the Social Security Act medicare DRG
rates for payments required by the amendment made by paragraph
(2) and data on cost pass-through items for all inpatient services
provided to medicare beneficiaries enrolled with such organizations.
(d) EFFECTIVE DATE.—The amendments made by subsections (a) 42 u s e 1395mm
and (b) shall apply to admissions occurring on or after April 1, 1988, note.
or, if later, the earliest date the Secretary can provide the informa-
tion required under subsection (c) in machine readable form.
SEC. 40L3. TWO-YEAR EXTENSION ON PERIOD FOR BENEFIT STABILIZA-
TION.
(a) IN GENERAL.—Section 1876(g)(5) of the Social Security Act
(42 U.S.C. 1395mm(g)(5)), as added by the amendment made by
section 2350(a)(2) of the Deficit Reduction Act of 1984, is amended by
striking "four" and inserting "six".
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 u s e 1395mm
shall be effective as if included in the enactment of the amendment note.
made by section 2350(a)(2) of the Deficit Reduction Act of 1984.
SEC. 4014. CIVIL MONEY PENALTIES AND INTERMEDIATE SANCTIONS
AGAINST HMOS/CMPS.
Section 1876(i)(6) of the Social Security Act (42 U.S.C. 1395mm) is
amended to read as follows:
"(6)(A) If the Secretary determines that an eligible organization Contracts.
with a contract under this section—
"(i) fails substantially to provide medically necessary items
and services that are required (under law or under the contract)
to be provided to an individual covered under the contract, if
the failure has adversely affected (or has substantial likelihood
of adversely affecting) the individual;
"(ii) imposes premiums on individuals enrolled under this
section in excess of the premiums permitted;
"(iii) acts to expel or to refuse to re-enroll an individual in
violation of the provisions of this section;
Ii "(iv) engages in any practice that would reasonably be ex-
pected to have the effect of denying or discouraging enrollment
(except as permitted by this section) by eligible individuals with
. , the organization whose medical condition or history indicates a
need for substantial future medical services;
"(v) misrepresents or falsifies information that is furnished—
"(I) to the Secretary under this section, or
"(II) to an individual or to any other entity under this
section; or
"(vi) fails to comply with the requirements of subsection
(gXeXA);
the Secretary may provide for any of the remedies described in
subparagraph (B).
101 STAT. 1330-62 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) The remedies described in this subparagraph are—
"(i) civil money penalties of not more than $25,000 for each
"' determination under subparagraph (A) or, with respect to a
determination under clause (iv) or (v)(I), of not more than
$100,000 for each such determination,
"(ii) suspension of enrollment of individuals under this section
' after the date the Secretary notifies the organization of a
determination under subparagraph (A) and until the Secretary
' is satisfied that the basis for such determination has been
corrected and is not likely to recur, or
"(iii) suspension of payment to the organization under this
section for individuals enrolled after the date the Secretary
notifies the organization of a determination under subpara-
graph (A) and until the Secretary is satisfied that the basis for
such determination has been corrected and is not likely to
recur.
The provisions of section 1128A (other than subsections (a) and (b))
shall apply to a civil money penalty under clause (i) in the same
manner as they apply to a civil money penalty under that section.",
42 u s e 1395mm SEC. 4015. MEDICARE PAYMENT DEMONSTRATION PROJECTS.
(a) MEDICARE INSURED GROUP DEMONSTRATION PROJECTS.—
Contracts. (1) The Secretary of Health and Human Services (in this
subsection referred to as the "Secretary") may provide for
capitation demonstration projects (in this subsection referred to
as "projects") with an entity which is an eligible organization
with a contract with the Secretary under section 1876 of the
Social Security Act or which meets the restrictions and require-
ments of this subsection. The Secretary may not approve a
project unless it meets the requirements of this subsection.
(2) The Secretary may not conduct more than 3 projects and
may not expend, from funds under title XVIII of the Social
Security Act, more than $600,000,000 in any fiscal year for all
such projects.
(3) The per capita rate of payment under a project—
(A) may be based on the adjusted average per capita cost
(as defined in section 1876(a)(4) of the Social Security Act)
determined only with respect to the group of individuals
involved (rather than with respect to medicare beneficiaries
generally), but
(B) t h e r a t e of p a y m e n t m a y not exceed t h e lesser of—
\ *' ""' (i) 95 percent of t h e adjusted average per capita cost
described in s u b p a r a g r a p h (A), or
(iiXD in t h e 4th y e a r or 5th y e a r of a project, 115
percent of t h e adjusted average per capita cost (as
defined in section 1876(aX4) of such Act) for classes of
individuals described in section 1876(aXlXB) of t h a t
. , .^f • . Act, or
(II) in a n y subsequent y e a r of a project, 95 percent of
.i.» t h e adjusted average per capita cost (as defined in
section 1876(aX4)) for such cleisses.
(4) If the payment amounts made to a project are greater than
the costs of the project (as determined by the Secretary or, if
applicable, on the basis of adjusted community rates described
in section 1876(eX3) of the Social Security Act), the project—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-63
(A) may retain the surplus, but not to exceed 5 percent of
the average adjusted per capita cost determined in accord-
ance with paragraph (3XA), and
(B) with respect to any additional surplus not retained by
the project, shall apply such surplus to additional benefite
for individuals served by the project or return such surplus
to the Secretary.
(5) Enrollment under the project shall be voluntary. Individ-
uals enrolled with the project may terminate such enrollment
as of the beginning of the first calendar month following the
date on which the request is made for such termination. Upon
such termination, such individuals shall retain the same rights
to other health benefits that such individuals would have had if
they had never enrolled with the project without any exclusion
or waiting period for pre-existing conditions.
(6) The requirements of—
(A) subsection (cX3XC) (relating to dissemination of
information),
(B) subsection (cX3XE) (annual statement of rights),
(C) subsection (cX5) (grievance procedures),
(D) subsection (c)(6) (on-going quality),
(E) subsection (gX6) (relating to prompt payment of
claims),
(F) subsection (iX3XA) and (B) (relating to access to
information and termination notices),
(G) subsection (iX6) (relating to providing necessary serv-
ices), and
(H) subsection (iX7) (relating to agreements with peer Contracts.
review organizations),
of section 1876 of the Social Security Act shall apply to a project
in the same manner as they apply to eligible organizations with
risk-sharing contracts under such section,
(7) The benefits provided under a project must be at least
actuarially equivalent to the combination of the benefits avail-
able under title XVIII of the Social Security Act and the
benefits available through any alternative plans in which the
individual can enroll through the the employer. The project
shall guarantee the actuarial value of benefits available under
the employer plan for the duration of the project.
(8) A project shall comply with all applicable State laws.
(9) The Secretary may not authorize a project unless the
entity offering the project demonstrates to the satisfaction of
the Secretaiy that it has the necessary financial reserves to pay
for any liability for benefits under the project (including those
liabilities for health benefits under medicare and any supple-
mental benefits).
(10) The Comptroller General shall monitor projects under Reports.
this subsection and shall report periodically (not less often than
once every year) to the (Dommittee on Finance of the Senate and
the CJommittee on Energy and Commerce and Committee on
Ways and Means of the House of Representatives on the status
of such projects and the affect on such projects of the require-
ments of this section and shall submit a final report to each
such committee on the results of such projects.
(b) PAYMENT METHODOLOGY REFORM DEMONSTRATIONS PROJECTS.—
(1) The Secretary of Health and Human Services (in this
subsection referred to as the "Secretary") is specifically au-
101 STAT. 1330-64 PUBLIC LAW 100-203—DEC. 22, 1987
thorized to conduct demonstration projects under this subsec-
tion for the purpose of testing alternative payment methodolo-
gies pertaining to capitation payments under title XVIII of the
Social Security Act, including—
(A) computing adjustments to the average per capita cost
under section 1876 of such Act on the basis of health status
or prior utilization of services, and
.t\p /•^r (B) accounting for geographic variations in cost in the
adjusted average per capita costs applicable to an eligible
organization under such section which differs from pay-
ments currently provided on a county-by-county basis.
(2) No project may be conducted under this subsection—
(A) with an entity which is not an eligible organization
(as defined in section 1876(b) of the Social Security Act), and
(B) unless the project meets all the requirements of
subsections (c) and (iX3) of section 1876 of such Act.
Appropriation (3) There are authorized to be appropriated to carry out
authorization. projects Under this subsection $5,000,000 in each of fiscal years
1989 and 1990.
(c) APPLICATION OF PROVISIONS.—The provisions of subsection (a)(2)
and the first sentence of subsection (b) of section 402 of the Social
Security Amendments of 1967 shall apply to the demonstration
projects under this section in the same manner as they apply to
experiments under subsection (a)(1) of that section.
42 u s e 1320a-7a SEC. 4016. DELAY IN EFFECTIVE DATE IN PHYSICIAN INCENTIVE RULES
note. FOR HEALTH MAINTENANCE ORGANIZATIONS.
Section 9313(c)(2)(B) of the Omnibus Budget Reconciliation Act of
100 Stat. 2002. 1986 is amended by striking "April 1, 1989" and inserting "April 1,
1990".
42 u s e 1395mm SEC. 4017. GAO STUDY AND REPORTS ON MEDICARE CAPITATION.
(a) STUDY.—The Comptroller General shall conduct a study on
medicare capitation rates that shall include an analysis and assess-
ment of—
(1) the current method for computing per capita rates of
payment under section 1876 of the Social Security Act (includ-
ing the method for determining the United States per capita
cost);
(2) the method for establishing relative costs for geographic
areas and the data used to establish age, sex, and other
weighting factors;
(3) ways to refine the calculation of adjusted average per
capita costs under section 1876 of such Act (including making
adjustments for health status or prior utilization of services and
improvements in the definition of geographic areas);
Contracts. (4) the extent to which individuals enrolled with organizations
with a risk-sharing contract with the Secretary under section
1876 of such Act differ in utilization and cost from fee-for-
service beneficiaries and ways for modifying enrollment pat-
terns through program changes or for reflecting the differences
in rates through group experience rating or other means;
(5) approaches for limiting the liability of the contracting
organization under section 1876 of such Act in catastrophic
cases:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-65
s (6) ways of establishing capitation rates on a basis other than
fee-for-service experience in areas with high prepaid market
penetration; and .j«i»«
(7) methods for providing the rate levels necessary to main-
tain access to quality prepaid services in rural or medically
underserved areas (while maintaining cost savings),
(b) REPORTS.
V (1) Not later than January 1 of 1989 and 1990, the Comptrol-
ler General shall submit to the Committee on Finance of the
0 Senate and the Committee on Energy and Commerce and
Committee on Ways and Means of the House of Representatives
interim reports on the progress of the study conducted under
subsection (a).
^ (2) Not later than January 1, 1991, the Comptroller General
shall submit to each such committee a final report on the
g results of such study.
SEC. 4018. SPECIAL RULES.
(a) ASSIGNMENT OF MEMBERS FOR HIP HEALTH MAINTENANCE
ORGANIZATION.—Section 1876(f) of such Act (42 U.S.C. 1395mm(f)) is
amended by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
"(3)(A) An eligible organization described in subparagraph (B)
may elect, for purposes of determining the compliance of a subdivi- ., ,r ..
sion, subsidiary, or affiliate described in subparagraph (BXiii) with .jr.
the requirement of paragraph (1) for the period before October 1, .-a%
1992, to have members of the subdivision, subsidiary, or affiliate
considered to be members of the parent organization.
"(B) An eligible organization described in this subparagraph is an
eligible organization which—
"(i) is described in section 1903(mX2XBXiii);
"(ii) has members who have a collectively bargained contrac-
tual right to obtain health benefits from the organization;
"(iii) elects to provide benefits under a risk-sharing contract Contracts.
to individuals residing in a service area, who have a collectively
bargained contractual right to obtain benefits from the
organization, through a subdivision, subsidiary, or affiliate
which itself is an eligible organization serving the area and
which is owned or controlled by the parent eligible organization;
and
T "(iv) has assumed any risk of insolvency and quality assur-
ance with respect to individuals receiving benefits through such
a subdivision, subsidiary, or affiliate.".
(b) EXTENSION OF WAIVERS FOR SOCIAL HEALTH MAINTENANCE
ORGANIZATIONS.—
(1) The Secretary of Health and Human Services shall extend
without interruption, through September 30,1992, the approval
of waivers granted under subsection (a) of section 2355 of the
Deficit Reduction Act of 1984 for the demonstration project
described in subsection (b) of that section, subject to the terms
and conditions (other than duration of the project) established
under that section (as amended by paragraph (2) of this subsec-
tion).
(2) Section 2355(bX5) of the Deficit Reduction Act of 1984 is 98 Stat. 1103.
amended by inserting "and in succeeding years" after "third
year".
101 STAT. 1330-66 PUBLIC LAW 100-203—DEC. 22, 1987
98 Stat. 1103. (3) Section 2355(dX2) of the Deficit Reduction Act of 1984 is
amended by striking "final" and inserting "interim".
Reports. (4) The Secretary of Health and Human Services shall submit
•'* a final report to the Congress on the project referred to in
paragraph (1) not later than March 31,1993.
(c) TREATMENT OF MICHIGAN BLUE CARE HMO NETWORK UNDER ^^
50 PERCENT RULE.—Blue Care, Inc., a nonprofit corporation which is
indirectly owned and operated by Blue Cross and Blue Shield of
Michigan, Inc. and which enrolls individuals for the purpose of
providing them with health care services through assignment to
health maintenance organizations which are indirectly or wholly
owned and operated by Blue Cross and Blue Shield of Michigan, Inc.,
is deemed to meet the requirement of section 1876(fKl) of the Social
Security Act (relating to limitation on enrollment of medicare and
medicaid beneficiaries with an eligible organization) if—
(1) such requirement would be met if applied to all individuals
enrolled with (or otherwise assigned to) each of such health
maintenance organizations, and
(2) not more than 20 percent of the number of individuals who
are members of (or otherwise assigned to) each such organiza-
tion consists of individuals who are entitled to benefits under
title XVIII of the Social Security Act.
(d) TEMPORARY WAIVER FOR WATTS HEALTH FOUNDATION.—Section
42 use 1395mm 9312(c)(3) of the Omnibus Budget Reconciliation Act of 1986 is
note. amended by adding at the end the following new subparagraph:
Grants. "(D) TREATMENT OF CERTAIN WAIVERS.—In t h e CaSC of a n
eligible organization (or successor organization) that is de-
scribed in clauses (i) and (ii) of subparagraph (C) and that
•e • N received a grant or grante totaling at least $3,000,000 in
fiscal year 1987 under section 329(dXlXA) or 330(dXl) of the
Public Health Service Act—
"(i) before January 1, 1990, section 1876(f) of the
Social Security Act shall not apply to the organization;
"(ii) beginning on January 1, 1990, the Secretary of
Health and Human Services shall waive the require-
ment of such section with respect to the organization
if—
"(I) before such date, the organization has
submitted to the Secretary a schedule for the
organization to comply with the requirement of
section 1876(fKl) of such Act, and the Secretary has
found such schedule to be reasonable and has ap-
proved such schedule; and
V •• •' ^ "(II) periodically after such date, the Secretary
reviews the organization's compliance with such
schedule and determines that the organization has
complied, or made significant progress towards
compliance, with such schedule; and
"(iii) after January 1, 1990, if the Secretary has
approved a schedule under clause (iiXD and has deter-
mined, in a periodic review under clause (iiXII), that
> . the organization has not complied, or made significant
progress towards compliance, with such schedule, the
•> Secretary may provide for a sanction described in sec-
*' Copy read "UNDER".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-67
tion 1876(fX3) of the Social Security Act effective with
respect to individuals enrolling with the organization
after the date the Secretary notifies the organization of
such noncompliance.".
Subpart B—Home Health Quality
SEC. 4021. CONDITIONS OF PARTICIPATION FOR HOME HEALTH
AGENCIES.
(a) DEFINITION OF HOME HEALTH AGENCY.—Section 1861(o)(6) of
the Social Security Act (42 U.S.C. 1395x(o)(6)) is amended by insert-
ing "the conditions of participation specified in section 1891(a) and"
after "meets".
(b) CONDITIONS OF PARTICIPATION.—Title XVIII of such Act is
amended by adding at the end the following new section:
"CONDITIONS OF PARTICIPATION FOR HOME HEALTH AGENCIES; HOME
HEALTH QUAUTY
"SEC. 1891. (a) The conditions of participation that a home health 42 USC I395bbb.
agency is required to meet under this subsection are as follows:
"(1) The agency protects and promotes the rights of each
individual under its care, including each of the following rights:
"(A) The right to be fully informed in advance about the
care and treatment to be provided by the sigency, to be fully
informed in advance of any changes in the care or treat-
ment to be provided by the agency that may affect the
individual's well-being, and (except with respect to an
individual adjudged incompetent) to participate in planning
care and treatment or changes in care or treatment.
"(B) The right to voice grievances with respect to treat-
ment or care that is (or fails to be) furnished without
'-•"' discrimination or reprisal for voicing grievances.
"(C) The right to confidentiality of the clinical records
described in section 1861(oX3).
"(D) The right to have one's property treated with
respect.
"(E) The right to be fully informed orally and in writing
(in advance of coming under the care of the agency) of—
"(i) all items and services furnished by (or under
arrangements with) the agency for which payment may
be made under this title,
"(ii) the coverage available for such items and serv-
ices under this title, title XIX, and any other Federal
program of which the agency is reasonably aware,
"(iii) any charges for items and services not covered
under this title and any charges the individual may
have to pay with respect to items and services fur-
; nished by (or under arrangements with) the agency,
and
"(iv) any changes in the charges or items and services
described in clause (i), (ii), or (iii).
"(F) The right to be fully informed in writing (in advance
of coming under the care of the agency) of the individual's
rights and obligations under this title.
101 STAT. 1330-68 PUBLIC LAW 100-203—DEC. 22, 1987
"(G) The right to be informed of the availability of the
State home health agency hot-line established under sec-
lu . tion 1864(a).
"(2) The agency notifies the State entity responsible for the
licensing or certification of the agency of a change in—
"(A) the persons with an ownership or control interest (as
defined in section 1124(a)(3)) in the agency,
m.iP'-M "(B) the persons who are officers, directors, agents, or
managing employees (as defined in section 1126(b)) of the
agency, and
"(C) the corporation, association, or other company
, J* ' responsible for the management of the agency.
•'* Such notice shall be given at the time of the change and shall
include the identity of each new person or company described in
'SJ the previous sentence.
"(3XA) The agency must not use as a home health aide (on a
full-time, temporary, per diem, or other basis), any individual
who is not a licensed health care professional (as defined in
subparagraph (F)) to provide items or services described in
section 1861(m) on or after January 1, 1990, unless the individ-
.M?(-0;= ;/3US^ ual—
"(i) has completed a training and competency evaluation
program, or a competency evaluation program, that meets
the minimum standards established by the Secretary under
subparagraph (D), and
"(ii) is competent to provide such items and services.
For purposes of clause (i), an individual is not considered to
have completed a training and competency evaluation program,
or a competency evaluation program if, since the individual's
most recent completion of such a program, there has been a
continuous period of 24 consecutive months during none of
which the individual provided items and services described in
section 1861(m) for compensation.
"(B)(i) The agency must provide, with respect to individuals
used as a home health aide by the agency as of July 1, 1989, for
a competency evaluation program (as described in subpara-
graph (A)(i)) and such preparation as may be necessary for the
individual to complete such a program by January 1, 1990.
"(ii) The agency must provide such regular performance
review and regular in-service education as assures that individ-
uals used to provide items and services described in section
1861(m) are competent to provide those items and services.
"(C) The agency must not permit an individual, other than in
a training and competency evaluation program that meets the
minimum standards established by the Secretary under
subparagraph (D), to provide items or services of a type for
which the individual has not demonstrated competency.
"(DXi) The Secretary shall establish minimum standards for
the programs described in subparagraph (A) by not later than
October 1,1988.
"(ii) Such standards shall include the content of the curricu-
lum, minimum hours of training, qualification of instructors,
and procedures for determination of competency.
"(iii) Such standards may permit approval of programs of-
fered by or in home health agencies, as well as outside agencies
(including employee organizations), and of programs in effect on
the date of the enactment of this section; except that they may
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-69
not provide for the approval of a program offered by or in a
home health agency which has been determined to be out of
compliance with the requirements specified in or pursuant to
section 1861(o) or subsection (a) within the previous 2 years,
"(iv) Such standards shall permit a determination that an
individual who has completed (before July 1, 1989) a training
and competency evaluation program or a competency evalua-
tion program shall be deemed for purposes of subparagraph (A)
to have completed a program that is approved by the Secretary
under the standards established under this subparagraph if the
Secretary determines that, at the time the program was offered,
the program met such standards.
"(E) In this paragraph, the term 'home health aide' means
any individual who provides the items and services described in
section 1861(m), but does not include an individual—
"(i) who is a licensed health professional (as defined in
subparagraph (F)), or
"(ii) who volunteers to provide such services without
monetary compensation.
"(F) In this paragraph, the term 'licensed health professional'
means a physician, physician assistant, nurse practitioner,
physical, speech, or occupational therapist, registered profes-
sional nurse, licensed practical nurse, or licensed or certified
social worker.
"(4) With respect to durable medical equipment furnished to
rt individuals for whom the agency provides items and services,
suppliers of such equipment do not use (on a full-time, tem-
porary, per diem, or other basis) any individual who does not
meet minimum training standards (established by the Secretary
by October 1, 1988) for the demonstration and use of any such
equipment furnished to individuals with respect to whom pay-
ments may be made under this title.
"(5) The agency includes an individual's plan of care required
under section 186l(m) as part of the clinical records described in
- section 1861(o)(3).
"(6) The agency operates and provides services in compliance
with all applicable Federal, State, and local laws and regula-
tions (including the requirements of section 1124) and with
accepted professional standards and principles which apply to
professionals providing items and services in such an agency.
"(b) It is the duty and responsibility of the Secretary to assure
that the conditions of participation and requirements specified in or
pursuant to section 1861(o) and subsection (a) of this section and the
enforcement of such conditions and requirements are adequate to
protect the health and safety of individuals under the care of a home
health agency and to promote the effective and efficient use of
public moneys.".
(c) EFFECTIVE DATE.—Except as otherwise provided, the amend- 42 use I395x
ments made by subsections (a) and (b) shall apply to home health ^°^-
agencies as of the first day of the 18th calendar month that begins
after the date of the enactment of this Act.
SEC. 4022. STANDARD AND EXTENDED SURVEY.
(a) IN GENERAL.—Section 1891 of the Social Security Act (as added
by section 4021) is amended by adding at the end the following new
subsections:
101 STAT. 1330-70 PUBLIC LAW 100-203—DEC. 22, 1987
"(c)(1) Any agreement entered into or renewed by the Secretary
pursuant to section 1864 relating to home health agencies shall
provide that the appropriate State or local agency shall conduct,
without any prior notice, a standard survey of each home health
agency. Any individual who notifies (or causes to be notified) a home
health agency of the time or date on which such a survey is
scheduled to be conducted is subject to a civil money penalty of not
to exceed $2,000. The Secretary shall provide for imposition of civil
money penalties under this clause in a manner similar to that for
the imposition of civil money penalties under section 1128A. The
Secretary shall review each State's or local agency's procedures for
scheduling and conduct of standard surveys to assure that the State
or agency has taken all reasonable steps to avoid giving notice of
such a survey through the scheduling procedures and the conduct of
the surveys themselves.
"(2)(A) Except as provided in subparagraph (B), each home health
agency shall be subject to a standard survey not later than 15
months after the date of the previous standard survey conducted
under this paragraph. The statewide-'^ average interval between
standard surveys of any home health agency shall not exceed 12
months.
"(B) If not otherwise conducted under subparagraph (A), a stand-
ard survey (or an abbreviated standard survey) of an agency—
"(i) may be conducted within 2 months of any change of
a ownership, administration, or management of the agency to
determine whether the change has resulted in any decline in
the quality of care furnished by the agency, and
"(ii) shall be conducted within 2 months of when a significant
number of complaints have been reported with respect to the
agency to the Secretary, the State, the entity responsible for the
;. licensing of the agency, the State or local agency responsible for
maintaining a toll-free hotline and investigative unit (under
section 1864(a)), or any other appropriate Federal, State, or local
agency.
"(C) A standard survey conducted under this paragraph with
respect to a home health agency—
"(i) shall include (to the extent practicable), for a case-mix
stratified sample of individuals furnished items or services by
5; the agency—
"(I) visits to the homes of such individuals, but only with
the consent of such individuals, for the purpose of evaluat-
''.- ing (in accordance with a standardized reproducible assess-
ment instrument (or instruments) approved by the Sec-
retary under subsection (d)) the extent to which the quality
and scope of items and services furnished by the agency
'> attained and maintained the highest practicable functional
capacity of each such individual as reflected in such individ-
y...' ual's written plan of care required under section 1861(m)
and clinical records required under section 1861(o)(3); and
"(II) a survey of the quality of care and services furnished
by the agency as measured by indicators of medical, nurs-
ing, and rehabilitative care;
"(ii) shall be based upon a protocol that is developed, tested,
and validated by the Secretary not later than January 1, 1989;
and
"(iii) shall be conducted by an individual—
"• Copy read "Statewide".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-71
"(I) who meets minimum qualifications established by the
Secretary not later than July 1, 1989,
"(II) who is not serving (or has not served within the
previous 2 years) as a member of the staff of, or as a
consultant to, the home health agency surveyed respecting
compliance with the conditions of participation specified in
or pursuant to section 1861(o) or subsection (a) of this
section, and
"(III) who has no personal or familial financial interest in
the home health agency surveyed.
"(D) Each home health agency that is found, under a standard
survey, to have provided substandard care shall be subject to an
extended survey to review and identify the policies and procedures
which produced such substandard care and to determine whether
the agency has complied with the conditions of participation speci-
fied in or pursuant to section 1861(o) or subsection (a) of this section.
Any other agency may, at the Secretary's or State's discretion, be
subject to such an extended survey (or a partial extended survey).
The extended survey shall be conducted immediately after the
standard survey (or, if not practical, not later than 2 weeks after the
date of completion of the standard survey).
"(E) Nothing in this paragraph shall be construed as requiring an
extended (or partial extended) survey as a prerequisite to imposing a
sanction against an agency under subsection (e) on the basis of the
findings of a standard survey.
"(d)(1) Not later than January 1, 1989, the Secretary shall des-
ignate an assessment instrument (or instruments) for use by an
agency in complying with subsection (cX2XCXI).
"(2XA) Not later than January 1, 1991, the Secretary shall—
"(i) evaluate the assessment process,
"(ii) report to Congress on the results of such evaluation, and Reports.
"(iii) based on such evaluation, make such modifications in
the assessment process as the Secretary determines are appro-
priate.
"(B) The Secretary shall periodically update the evaluation con- Reports.
ducted under subparagraph (A), report the results of such update to
Congress, and, based on such update, make such modifications in the
assessment process as the Secretary determines are appropriate.
"(3) The Secretary shall provide for the comprehensive training of
State and Federal surveyors in matters relating to the performance
of standard and extended surveys under this section, including the
use of any assessment instrument (or instruments) designated under
paragraph (1).".
(b) EFFECTIVE DATE.—Except as otherwise specifically provided in 42 u s e 1395bbb
section 1891(d) of the Social Security Act (as added by subsection (a)), note.
the amendment made by subsection (a) shall become effective on the
first day of the 18th calendar month to begin after the date of the
enactment of this Act.
SEC. 4023. ENFORCEMENT.
Section 1891 of the Social Security Act (as added by section 4021
and amended by section 4022) is further amended by adding at the
end the following new subsections:
"(eXD If the Secretary determines on the basis of a standard,
extended, or partial extended survey or otherwise, that a home
health agency that is certified for participation under this title is no
longer in compliance with the requirements specified in or pursuant
91-194 O - 90 - 28 : QL.3 Part 2
101 STAT. 1330-72 PUBLIC LAW 100-203—DEC. 22, 1987
to section 1861(o) or subsection (a) and determines that the defi-
ciencies involved immediately jeopardize the health and safety of
the individuals to whom the agency furnishes items and services,
the Secretary shall take immediate action to remove the jeopardy
and correct the deficiencies through the remedy specified in subsec-
tion (fK2XA)(iii) or terminate the certification of the agency, and
may provide, in addition, for 1 or more of the other remedies
described in subsection (f)(2)(A).
"(2) If the Secretary determines on the basis of a standard,
extended, or partial extended survey or otherwise, that a home
health agency that is certified for participation under this title is no
longer in compliance with the requirements specified in or pursuant
to section 1861(o) or subsection (a) and determines that the defi-
ciencies involved do not immediately jeopardize the health and
safety of the individuals to whom the agency furnishes items and
services, the Secretary may (for a period not to exceed 6 months)
impose intermediate sanctions developed pursuant to subsection (f),
in lieu of terminating the certification of the agency. If, after such a
period of intermediate sanctions, the agency is still no longer in
compliance with the requirements specified in or pursuant to sec-
tion 1861(o) or subsection (a), the Secretary shall terminate the
certification of the agency.
"(3) If the Secretary determines that a home health agency that is
certified for participation under this title is in compliance with the
requirements specified in or pursuant to section 1861(o) or subsec-
tion (a) but, as of a previous period, did not meet such requirements,
the Secretary may provide for a civil money penalty under subsec-
tion (f)(2)(A)(i) for the days in which it finds that the agency was not
in compliance with such requirements.
"(4) The Secretary may continue payments under this title with
respect to a home health agency not in compliance with the require-
ments specified in or pursuant to section 1861(o) or subsection (a)
over a period of not longer than 6 months, if—
,. "(A) the State or local survey agency finds that it is more
appropriate to take alternative action to assure compliance of
the agency with the requirements than to terminate the certifi-
cation of the agency,
"(B) the agency has submitted a plan and timetable for
corrective action to the Secretary for approval and the Sec-
retary approves the plan of corrective action, and
"(C) the agency agrees to repay to the Federal Government
payments received under this subparagraph if the corrective
: i irf ''tp^'i '? action is not taken in accordance with the approved plan and
.,;. . timetable.
The Secretary shall establish guidelines for approval of corrective
actions requested by home health agencies under this subparagraph.
"(fKD The Secretary shall develop and implement, by not later
than April 1, 1989—
"(A) a range of intermediate sanctions to apply to home
health agencies under the conditions described in subsection (e),
and
"(B) appropriate procedures for appealing determinations
relating to the imposition of such sanctions.
"(2XA) The intermediate sanctions developed under paragraph (1)
shall include—
"(i) civil money penalties for each day of noncompliance,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-73
-= "(ii) suspension of all or part of the payments to which a
• home health agency would otherwise be entitled under this
title with respect to items and services furnished by a home
health agency on or after the date on which the Secretary
determines that intermediate sanctions should be imposed
«i '• pursuant to subsection (e)(2), and
h "(iii) the appointment of temporary management to over-
1 see the operation of the home health agency and to protect
and Eissure the health and safety of the individuals under
the care of the agency while improvements are made in
order to bring the agency into compliance with all the
requirements specified in or pursuant to section 1861(o) or
subsection (a).
,y- The temporary management under clause (iii) shall not be
terminated until the Secretary has determined that the agency
, has the management capability to ensure continued compliance ,., -,
with all the requirements referred to in that clause. ' "" T
"(B) The sanctions specified in subparagraph (A) are in addition to
sanctions otherwise available under State or Federal law and shall
not be construed as limiting other remedies, including any remedy
available to an individual at common law.
"(C) A finding to suspend payment under subparagraph (A)(ii)
shall terminate when the Secretary finds that the home health
agency is in substantial compliance with all the requirements speci-
fied in or pursuant to section 1861(o) and subsection (a).
"(3) The Secretary shall develop and implement, by not later than
April 1, 1989, specific procedures with respect to the conditions
under which each of the intermediate sanctions developed under
paragraph (1) is to be applied, including the amount of any fines and
the severity of each of these sanctions. Such procedures shall be
designed so as to minimize the time between identification of defi-
ciencies and imposition of these sanctions and shall provide for the
imposition of incrementally more severe fines for repeated or uncor-
rected deficiencies.".
(b) EFFECTIVE DATE.—Except as otherwise specifically provided in 42 use I395bbb
sulasections (e) and (f) of section 1891 of the Social Security Act (as "ot^.
added by subsection (a)), the amendment made by subsection (a)
shall become effective on the first day of the 18th calendar month to
begin after the date of the enactment of this Act.
SEC. 4024. REQUIREMENT THAT INDIVIDUAL BE CONFINED TO HOME.
(a) PART A.—Section 1814(a) of the Social Security Act (42 U.S.C.
1395f(a)) is amended by adding at the end the following: "For
purposes of paragraph (2XC), an individual shall be considered to be
confined to his home' if the individual has a condition, due to an ^ \,
illness or injury, that restricts the ability of the individual to leave
his or her home except with the assistance of another individual or
the aid of a supportive device (such as crutches, a cane, a wheel-
chair, or a walker), or if the individual has a condition such that
leaving his or her home is medically contraindicated. While an
individual does not have to be bedridden to be considered 'confined
to his home', the condition of the individual should be such that
there exists a normal inability to leave home, that leaving home
requires a considerable and taxing effort by the individual, and that
absences of the individual from home are infrequent or of relatively
short duration, or are attributable to the need to receive medical
treatment.".
101 STAT. 1330-74 PUBLIC LAW 100-203—DEC. 22, 1987
(b) PART B.—Section 1835(a) of such Act (42 U.S.C. 1395n(a)) is
amended by adding at the end the following: "For purposes of
paragraph (2)(A), an individual shall be considered to be 'confined to
his home' if the individual has a condition, due to an illness or
injury, that restricts the ability of the individual to leave his or her
home except with the assistance of another individual or the aid of a
supportive device (such as crutches, a cane, a wheelchair, or a
walker), or if the individual has a condition such that leaving his or
her home is medically contraindicated. While an individual does not
have to be bedridden to be considered 'confined to his home', the
condition of the individual should be such that there exists a normal
inability to leave home, that leaving home requires a considerable
and taxing effort by the individual, and that absences of the individ-
ual from home are infrequent or of relatively short duration, or are
attributable to the need to receive medical treatment.".
42 u s e 1395f (c) EFFECTIVE DATE.—The amendments made by subsections (a)
note. and (b) shall apply to items and services provided on or after
January 1,1988.
SEC. 4025. HOME HEALTH TOLL-FREE HOTLINE AND INVESTIGATIVE
UNIT.
(a) IN GENERAL.—Section 1864(a) of the Social Security Act (42
U.S.C. 1395aa(a)) is amended by adding at the end the following:
"Any agreement under this subsection shall provide for the appro-
priate State or local agency to maintain a toll-free hotline (1) to
collect, maintain, and continually update information on home
health agencies located in the State or locality that are certified to
participate in the program established under this title (which
information shall include any significant deficiencies found with
respect to patient care in the most recent certification survey
conducted with respect to the agency, when that survey was com-
pleted, whether corrective actions have been taken or are planned,
and the sanctions, if any, imposed under this title with respect to
the agency) and (2) to receive complaints (and answer questions)
with respect to home health agencies in the State or locality. Any
such agreement shall provide for such agency to maintain a unit for
investigating such complaints that possesses enforcement authority
and has access to survey and certification reports, information
gathered by any private accreditation agency pursuant to an agree-
ment with the Secretary under section 1864, and consumer medical
records (but only with the consent of the consumer or his or her
legal representative).".
42 u s e 1395aa (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall apply with respect to agreements entered into or renewed on
or after the date of enactment of this Act.
SEC. 4026. HOME HEALTH AGENCY COST LIMITS.
(a) DATA USED TO DETERMINE LIMITS.—
(1) Section 1861(vXlXL) of the Social Security Act (42 U.S.C.
1395x(vXlXL)) is amended by adding at the end the following
new clause:
"(iii) In establishing limits under this subparagraph, the Secretary
shall—
"(I) utilize a wage index that is based on audited wage data
obtained from home health sigencies, and s
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-75
.'. "(ID base such limits on the most recent audited wage data
available, which data may be for cost reporting periods begin-
ning no earlier than July 1,1985.".
(2) The amendment made by paragraph (1) shall apply to cost 42 u s e 1395x
reporting periods beginning on or after July 1,1988. note.
(b) STUDY OF LIMITS.—The Secretary of Health and Human Serv- Reports.
ices shall study and report to the Congress, not later than June 1,
1988, on—
(1) whether the separate schedules of cost limits currently
applied to home health agencies under title XVIII of the Social
Security Act located in urban and rural areas accurately reflect
differences in the costs of urban and rural home health agen-
jfc cies, and
(2) the appropriateness of modifying such limits to take into
account the proportion of agency patients who are from urban
and rural areas.
SEC. 4027. HOME HEALTH PROSPECTIVE PAYMENT DEMONSTRATION 42 u s e 1395n
PROJECT. note.
(a) IN GENERAL.—The Secretary of Health and Human Services (in
this section referred to as the "Secretary") shall provide for a
demonstration project to develop and test alternative methods of
paying home health agencies on a prospective basis for services
furnished under the medicare and medicaid programs. The project
shall be designed in a manner to enable the Secretary to evaluate
the effects of various methods of prospective payment (including
payments on a per-visit, per-case, and per-episode basis) on program
expenditures, access to, and quality of, home health care, and home
health agency operations. The Secretary shall assure that services Contracts.
are first furnished under the project not later than July 1,1988, and,
for this purpose, the Secretary may reinstate a previously awarded
contract, or award a sole source contract, to carry out the project.
(b) FUNDING.—The provisions of subsection (a)(2) and the first
sentence of subsection (b) of section 402 of the Social Security
Amendments of 1967 shall apply to the demonstration project under
subsection (a) of this section as they apply to experiments under <
subsection (a)(1) of that section.
(c) REPORT.—The Secretary shall submit to Congress, not later
than one year after the date of the enactment of this Act, an interim
report on the demonstration project and, not later than four years
after the date of the enactment of this Act, a final report on the
results of the project.
Subpart C—Other Provisions
SEC. 4031. PAYMENT CYCLE STANDARDS.
(a) PAYMENT FLOOR STANDARDS.—
(1) Section 1816(c) of the Social Security Act (42 U.S.C.
1395h(c)) is amended by adding at the end the following new
•- pars^aph:
"(3XA) Each agreement under this section shall provide that no
payment shall be issued, mailed, or otherwise transmitted with
respect to any claim submitted under this title within the applicable
number of calendar days after the date on which the claim is
received.
"(B) In this paragraph, the term 'applicable number of calendar
days' means—
101 STAT. 1330-76 PUBLIC LAW 100-203—DEC. 22, 1987
"(i) with respect to claims received in the 3-month period
•f. beginning July 1,1988,10 days, and
"(ii) with respect to claims received in the 12-month period
K< !>ii :>ai, ^; » e beginning October 1,1988,14 days.".27»>
'^-; (2) Section 1842(c) of such Act (42 U.S.C. 1395u(c)) is amended
.; ,-v;5 by adding at the end the following new paragraph:
eontracts. "(3)(A) Each contract under this section which provides for the
disbursement of funds, as described in subsection (a)(1)(B), shall
provide that no payment shall be issued, mailed, or otherwise
transmitted with respect to any claim submitted under this title
within the applicable number of calendar days after the date on
which the claim is received.
"(B) In this paragraph, the term 'applicable number of calendar
days' means—
"(i) with respect to claims received in the 3-month period
beginning July 1,1988,10 days, and
ai;f;' )/;.;-f. m "(u) with respect to claims received in the 12-month period
beginning October 1, 1988, 14 days.''.^"*
42 use 1395h (3XA) The amendments made by paragraphs (1) and (2) shall
note. apply to claims received on or after July 1,1988.
C!ontracts. (B) The Secretary of Health and Human Services shall pro-
Regulations. vide for such timely amendments to agreements under section
1816 of the Social Security Act and contracts under section 1842
of such Act, and regulations, to such extent as may be necessary
to implement the provisions of this subsection on a timely basis,
42 u s e 1395h (b) PROHIBITION OF OTHER POUCIES INTENDED TO SLOW DOWN
note. MEDICARE PAYMENTS.—Notwithstanding any other provision of law,
«{ir'j except as specifically provided in this section, the Secretary of
Health and Human Services is not authorized to issue, after the date
of the enactment of this Act, and before October 1, 1990, any final
regulation, instruction, or other policy change which is primarily
intended to have the effect of slowing down claims processing, or
dela3dng payment of claims, under title XVIII of the Social Security
Act.
42 use I395h (c) BUDGET CONSIDERATIONS.—For purposes of section 202 of the
note. Balanced Budget and Emergency Deficit Control Reaffirmation Act
of 1987, this section is a necessary (but secondary) result of a
significant policy change.
SEC. 4032. DENIALS AND RECONSIDERATIONS OF CLAIMS FOR HOME
HEALTH SERVICES, EXTENDED CARE SERVICES, AND POST-
HOSPITAL EXTENDED CARE SERVICES.
(a) NOTIFICATION AND PHYSICIAN REVIEW.—Section 1816 of the
Social Security Act (42 U.S.C. 1395h) is amended by adding at the
end the following new subsection:
"(j) An agreement with an agency or organization under this
section shall require that, with respect to a claim for home health
services, extended care services, or post-hospital extended care serv-
ices submitted by a provider to such agency or organization that is
denied, such agency or organization—
"(1) furnish the provider and the individual with respect to
whom the claim is made with a written explanation of the
denial and of the statutory or regulatory basis for the denial;
and
jdt- "(2) promptly notify such individual and the provider of
disposition of such reconsideration.". - • < . j^ *
' Copy read "days.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-77
(b) PERFORMANCE STANDARDS FOR FISCAL INTERMEDIARIES AND
CARRIERS.—Section 1816(f) of such Act (42 U.S.C. 1395h(f)) is
amended by adding at the end the following: "Such standards and
criteria shall include with respect to claims for services furnished
under this part by any provider of services other than a hospital
whether such agency or organization is able to process 75 percent of
reconsiderations within 60 days (except in the case of the fiscal year
1989, 66 percent of reconsiderations) and 90 percent of reconsider-
ations within 90 days and the extent to which its determinations are
reversed on appeal.".
(c) EFFECTIVE DATE.— 42 u s e 1395h
(IXA) The amendment made by subsection (a) shall apply with note.
respect to claims received on or after January 1,1988.
(B) The amendment made by subsection (b) shall apply with
t respect to claims filed on or after October 1,1988.
(2) The Secretary of Health and Human Services shall provide Contracts.
for such timely amendments to agreements under section 1816 Regulations.
and contracts under section 1842 of the Social Security Act, and
regulations, to such extent as may be necessary to implement
the amendments made by subsections (a) and (b) on a timely
basis.
SEC. 4033. PERMITTING DISABLED INDIVIDUALS TO RENEW ENTITLE-
•'••3^---
MENT TO MEDICARE AFTER GAINFUL EMPLOYMENT WITH.
OUT A 2.YEAR WAITING PERIOD.
(a) IN GENERAL.—
(1) Section 226(0 of the Social Security Act (42 U.S.C. 426(f)) is
amended by inserting before the period at the end the following:
", unless the physical or mental impairment which is the basis
for disability is the same as (or directly related to) the physical
or mental impairment which served as the bsisis for disability in
such previous period".
(2XA) The amendment made by subsection (a) shall apply to 42 USC 426 note.
months beginning after the end of the 60-day period beginning
on the date of enactment of this Act.
(B) The amendment made by subsection (a) shall not apply so
as to include (for the purposes described in section 226(f) of the
Social Security Act) monthly benefits paid for any month in a
previous period (described in that section) that terminated
before the end of the 60-day period described in paragraph (1).
SEC. 4034. APPLICATION OF SECONDARY PAYER PROVISIONS TO
GOVERNMENTAL ENTITIES.
(a) IN GENERAL.—Section 1862(bX4XBXi) of the Social Security Act
(42 U.S.C. 1395y(bX4XBXi)), as added by the amendment made by , ,...
section 9319(a) of the Omnibus Budget Reconciliation Act of 1986, is
amended by striking "section 5000(b) of the Internal Revenue (Dode
of 1986" and inserting "subsection (b) of section 5000 of the Internal
Revenue Code of 1986 without regard to subsection (d) of such
section".
Oa) EFFECTIVE DATE.—The amendment made by subsection (a) 42 use I395y
shall be effective as if included in the enactment of section 9319(a) of note.
the Omnibus Budget Reconciliation Act of 1986.
SEC. 4035. PUBLICATION AND NOTIFICATION OF POLICIES. Federal
Register,
(a) REQUIRING PUBUCATION OF INTERMEDIARY AND CARRIER publication.
BUDGET METHODOLOGY.—
101 STAT. 1330-78 PUBLIC LAW 100-203—DEC. 22, 1987
-^' (1) Section 1816(cXl) of the Social Security Act (42 U.S.C.
1395h(cXl)) is amended by adding at the end the following
sentence: "The Secretary shall cause to have published in the
Federal Register, by not later than September 1 before each
fiscal year, data, standards, and methodology to be used to
establish budgets for fiscal intermediaries under this section for
that fiscal year, and shall cause to be published in the Federal
Register for public comment, at least 90 days before such data,
standards, and methodology are published, the data, standards,
and methodology proposed to be used.".
(2) Section 1842(cXl) of such Act (42 U.S.C. 1395u(cXl)) is
amended by adding at the end the following sentence: "The
Secretary shall cause to have published in the Federal Register,
•i by not later than September 1 before each fiscal year, data,
standards, and methodology to be used to establish budgets for
carriers under this section for that fiscal year, and shall cause
to be published in the Federal Register for public comment, at
least 90 days before such data, standards, and methodology are
published, the data, standards, and methodology proposed to be
used.".
Effective date. (3) The amendments made by this section shall take effect on
42 u s e 1395h the date of the enactment of this Act and shall apply to budgets
note. for fiscal years beginning with fiscalyear 1989.
(b) PuBUCATiON AS REGULATIONS OF SIGNIFICANT PouciES.—Sec-
tion 1871(a) of such Act (42 U.S.C. 1395hh(a)) is amended—
(1) by inserting "(1)" after "(a)"; and
(2) by adding at the end the following new paragraph:
"(2) No rule, requirement, or other statement of policy (other than
a national coverage determination) that establishes or changes a
substantive legal standard governing the scope of benefits, the
pajrment for services, or the eligibility of individuals, entities, or
organizations to furnish or receive services or benefits under this
- - i- title shall take effect unless it is promulgated by the Secretary by
regulation under paragraph (1).".
(c) MISCELLANEOUS PUBUCATION AND INFORMATION ACCESS PROVI-
SIONS.—Section 1871 of such Act (42 U.S.C. 1395hh) is amended by
adding at the end the following new subsection:
"(cXD The Secretary shall publish in the Federal Register, not less
frequently than every 3 months, a list of all manual instructions,
interpretative rules, statements of policy, and guidelines of general
applicability which—
"(A) are promulgated to carry out this title, but
"(B) are not published pursuant to subsection (aXD and have
not been previously published in a list under this subsection.
Effective date. "(2) Effective June 1, 1988, each fiscal intermediary and carrier
administering claims for extended care, post-hospital extended care,
home health care, and durable medical equipment benefits under
this title shall make available to the public all interpretative mate-
rials, guidelines, and clarifications of policies which relate to pay-
ments for such benefits.
^- "(3) The Secretary shall to the extent feasible make such changes
• in automated data collection and retrieval by the Secretary and
fiscal intermediaries with agreements under section 1816 as are
necessary to make easily accessible for the Secretary and other
appropriate parties a data base which fairly and accurately reflects
the provision of extended care, post-hospital extended care and
home health care benefits pursuant to this title, including such
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-79
categories as benefit denials, results of appeals, and other relevant
factors, and selectable by such categories and by fiscal intermediary,
service provider, and region.".
SEC. 4036. END-STAGE RENAL DISEASE AMENDMENTS.
(a) IMPLEMENTATION OF PRIMARY PAYER REQUIREMENTS FOR END-
STAGE RENAL DISEASE PROGRAM.—
(1) Section 1862(b)(2XA) of the Social Security Act (42 U.S.C.
J, 1395y(bX2XA)) is amended by striking "(ii)" and all that follows
through "under this title" and inserting "(ii) can reasonably be
expected to be made under such a plan".
(2) The amendment made by paragraph (1) shall apply with Effective date.
respect to items and services furnished on or after 30 days after 42 u s e 1395y
note.
the date of the enactment of this Act.
(b) LIMITATION OF MINIMUM UTIUZATION RATE REQUIREMENT FOR
END-STAGE RENAL DISEASE TRANSPLANTATIONS.—The last sentence
of section 1881(bXl) of such Act (42 U.S.C. 1395rr(bXl)) is amended
by striking "covered procedures and for self-dialysis training pro-
grams" and inserting "transplantations".
(c) EXTENSION OF DEADUNE FOR ESTABUSHING PROTOCOLS ON
REUSE OF DIALYSIS FILTERS AND OTHER DIALYSIS SUPPLIES AS IT
RELATES TO THE REUSE OF BLOODUNES.—
(IXA) Section 9335(kX2) of the Omnibus Budget Reconciliation
Act of 1986 is amended by inserting "(or July 1, 1988, with 42 u s e 1395rr
respect to protocols that relate to the reuse of bloodlines)" after note.
"October 1,1987".
(B) The amendment made by subparagraph (A) shall be effec- 42 u s e 1395rr
tive as if included in the enactment of section 9335(k)(2) of the note.
Omnibus Budget Reconciliation Act of 1986.
(2) Section 1881(fK7XB) of the Social Security Act (42 U.S.C.
1395rr(f)(7XB)) is amended by inserting "(or July 1, 1988, with
respect to protocols that relate to the reuse of bloodlines)" after
"January 1,1988".
(d) STUDIES OF END-STAGE RENAL DISEASE PROGRAM.— 42 u s e 1395rr
(1) The Secretary of Health and Human Services (in this note.
sult)section referred to as the "Secretary") shall arrange for a
study of the end-stage renal disease program within the medi-
care program.
(2) Among other items, the study shall address—
(A) access to treatment by both individuals eligible for
medicare benefits and those not eligible for such benefits;
(B) the quality of care provided to end-stage renal disease
beneficiaries, as measured by clinical indicators, functional
* status of patients, and patient satisfaction;
(C) the effect of reimbursement on quality of treatment;
(D) major epidemiological and demographic changes in
the end-stage renal disease population that may affect
access to treatment, the quality of care, or the resource
requirements of the program; and
(E) the adequacy of existing data systems to monitor
these matters on a continuing basis.
(3) The Secretary shall submit to Congress, not later than 3 Reports.
years after the date of the enactment of this Act, a report on the
study.
(4) The Secretary shall request the National Academy of
Sciences, acting through the Institute of Medicine, to submit an
application to conduct the study described in this section. If the
101 STAT. 1330-80 PUBLIC LAW 100-203—DEC. 22, 1987
Ifi Academy submits an acceptable application, the Secretary shall
,' enter into an appropriate arrangement with the Academy for
the conduct of the study. If the Academy does not submit an
acceptable application to conduct the study, the Secretary may
request one or more appropriate nonprofit private entities to
'-<i submit an application to conduct the study and may enter into
an appropriate arrangement for the conduct of the study by the
.'-) entity which submits the best acceptable application.
: '^' (5) Section 1881 of the Social Security Act (42 U.S.C. 1395rr) is
' amended—
(A) in subsection (c)(2)(F), by striking "and subsection (g)",
/' 'iv • (B) by striking the last sentence of subsection (c)(6),
>'.;j -?r' (C) by striking subsection (g), and
(D) by redesignating subsection (h), as added by section 20
of the Medicare and Medicaid Patient and Program Protec-
tion Act of 1987 (Public Law 100-93), as subsection (g).
42 u s e 1395ff SEC. 4037. MEDICARE HEARINGS AND APPEALS.
note.
(a) MAINTAINING CURRENT SYSTEM FOR HEARINGS AND APPEALS.—
Any hearing conducted under section 1869(b)(1) of the Social Secu-
rity Act prior to the earliest of the date on which the Secretary of
Health and Human Services submits the report required to be
submitted by the Secretary under subsection (l))(l) or September 1
•5 ' • ;) shall be conducted by Administrative Law Judges of the Office of
Hearings and Appeals of the Social Security Administration in the
same manner as are hearings conducted under section 205(b)(1) of
' ' ' ' ' such Act.
'^**'^ (b) STUDY AND REPORT ON USE OF TELEPHONE HEARINGS.—
(1) The Secretary of Health and Human Services and the
Comptroller General of the United States shall each conduct a
• study on holding hearings under section 1869(b)(1) of the Social
'9 Security Act by telephone and shall each report the results of
the study not later than 6 months after the date of enactment of
; {•%.. >::;r! ,; this Act.
" *'• (2) The studies under paragraph (1) shall focus on whether
telephone hearings allow for a full and fair evidentiary hearing,
in general, or with respect to any particular category of claims
and shall examine the possible improvements to the hearing
process (such as cost-effectiveness, convenience to the claimant,
and reduction in time under the process) resulting from the use
of such hearings as compared to the adoption of other changes
to the process (such as expansions in staff and resources).
42 u s e 1395WW SEC. 4038. RURAL HEALTH MEDICAL EDUCATION DEMONSTRATION
note. PROJECT.
(a) IN GENERAL.—The Secretary of Health and Human Services (in
this section referred to as the ' Secretary") shall enter into agree-
ments with four sponsoring hospitals submitting applications under
this subsection to conduct demonstration projects to assist resident
physicians in developing field clinical experience in rural areas.
(b) NATURE OF PROJECT.—Under a demonstration project con-
.iff:i^sSi ducted under subsection (a), a sponsoring hospital entering into an
agreement with the Secretary under such subsection shall enter into
arrangements with a small rural hospital to provide to such rural
hospital, for a period of one to three months of training, physicians
(in such number as the agreement under subsection (a) may provide)
who have completed one year of residency training. - . ,, .
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-81
(c) SELECTION.—In selecting from among applications submitted
under subsection (a), the Secretary shall ensure that four small
rural hospitals located in different counties participate in the dem-
onstration project and that—
(1) two of such hospitals are located in rural counties of more
than 2,700 square miles (one of which is east of the Mississippi
River and one of which is west of such river); and
(2) two of such hospitals are located in rural counties with (as
o determined by the Secretary) a severe shortage of physicians
-* (one of which is east of the Mississippi River and one of which is
west of such river).
(d) CLARIFICATION OF PAYMENT.—For purposes of section 1886 of
the Social Security Act—
(1) with respect to subsection (d)(5)(B) of such section, any
resident physician participating in the project under subsection
A (a) for any part of a year shall be treated as if he or she were
it working at the appropriate sponsoring hospital with an agree-
ment under subsection (a) on September 1 of such year (and
shall not be treated as if working at the small rural hospital);
and
(2) with respect to subsection (h) of such section, the payment
amount permitted under such subsection for a sponsoring hos-
pital with an agreement under subsection (a) shall be increased
(for the duration of the project only) by an amount equal to the
amount of any direct graduate medical education costs (as
defined in paragraph (5) of such subsection (h)) incurred by such
hospital in supervising the education and training activities
'"••- under a project under subsection (a).
(e) DURATION OF PROJECT.—Each demonstration project under
subsection (a) shall be commenced not later than six months after
the date of enactment of this Act and shall be conducted for a period
of three years. . „^
(D DEFINITION.—In this section, the term "sponsoring hospital"
means a hospital that receives payments under sections 1886(d)(5)(B)
and 1886(h) of the Social Security Act. '" ',; ;_
SEC. 4039. MISCELLANEOUS AND TECHNICAL PROVISIONS.
(a) CLARIFICATION OF CRIMINAL PENALTIES FOR WILLFUL MISREPRE-
SENTATIONS.—Subsection (c) of section 1128B of the Social Security
Act (42 U.S.C. 1320a-7(b)), ^s as redesignated by section 4(d) of the
Medicare and Medicaid Patient and Program Protection Act of 1987
(Public Law 100-93), is amended— 42 USC
(1) by striking "institution or facility" each place it appears 1320a-7b.
and inserting "institution, facility, or entity", and ,
(2) by inserting "(including an eligible organization under
section 1876(b))" after "other entity".
-, (b) PODIATRISTS.—
(1) Section 1861(rX3) of the Social Security Act (42 U.S.C.
1395x(rX3)) is amended—
;,^ _ (A) by striking "subsection (s) of this section" and insert-
ing "subsections (k), (m), (pXD, and (s) of this section and
t sections 1814(a), 1832(aX2XFXii), and 1835", and
(B) by striking "; and for the purposes" and all that
follows through "which he is legally authorized to per-
form".
" Copy read "1320a-7b)),".
101 STAT. 1330-82 PUBLIC LAW 100-203—DEC. 22, 1987
(2) Section 1861(b)(6) of such Act (42 U.S.C. 1395x(b)(6)) is
amended by striking "Council on Podiatry Education of the
American Podiatry Association" and inserting "Council on
Podiatric Medical Education of the American Podiatric Medical
Association".
(c) RECOVERY OF PAYMENTS FOR CERTAIN PACEMAKER DEVICES.—
(1) Section 1862(h) of such Act (42 U.S.C. 1395y(h)) is
^ amended—
(A) in paragraph dXB), by striking "law," and inserting
"law (and any amount paid to a provider under any such
warranty),";
d ^k:ii (B) in paragraph (1)(D), by striking "(3)," and inserting
"(3), in determining the amount subject to repayment under
paragraph (2XC),";
(C) in paragraph (2)—
(i) by striking "and" at the end of subparagraph (A),
> (ii) by striking the period at the end of subparagraph
> (B) and inserting ", and", and
(iii) by adding at the end the following new subpara-
graph:
•'v--- "(C) to make repayment to the Secretary of amounts paid
under this title to the provider with respect to any cardiac
pacemaker device or lead which has been replaced by the
manufacturer, or for which the manufacturer has made pay-
ment to the provider, under an express or implied warranty.';
and
(D) in paragraph (4XB)—
(i) by striking "or has" and inserting ", has", and
» ' --: (ii) by striking "(2XB)," and inserting "(2XB), or has
failed to make repayment to the Secretary as required
under paragraph (2XC),".
Effective date. (2) The amendments made by paragraph (1) shall become
42 u s e 1395y effective on January 1, 1988.
note. (d) EXTEND AND CLARIFY PROHIBITION ON COST SAVINGS POUCIES
42 u s e 1395WW
note. BEFORE BEGINNING OF FISCAL YEAR.—Notwithstanding any other
provision of law, except as required to implement specific provisions
required under statute, the Secretary of Health and Human Serv-
ices is not authorized to issue in final form, after the date of the
enactment of this Act and before October 15, 1988, any regulation,
instruction, or other policy which is estimated by the Secretary to
result in a net reduction in expenditures under title XVIII of the
Social Security Act in fiscal year 1989 of more than $50,000,000.
42 u s e 1395x (e) MORATORIUM ON PRIOR AUTHORIZATION FOR HOME HEALTH AND
note. POST-HOSPITAL EXTENDED CARE SERVICES.—The Secretary of Health
and Human Services shall not implement any voluntary or manda-
tory program of prior authorization for home health services, ex-
tended care services, or post-hospital extended care services under
part A or B of title XVIII of the Social Security Act at any time
prior to six months after the date on which the Congress receives
the report required under section 9305(kX4) of the Omnibus Budget
Reconciliation Act of 1986.
Federal (f) DELAY IN PUBUSHING REGULATIONS WITH RESPECT TO DEEMING
Register, THE STATUS OF ENTITIES.—The Secretary of Health and Human
publication.
42 u s e 1395x Services (in this subsection referred to as the "Secretary") shall not
note. deem any entity to be a provider of services (as defined in section
1861(u) of the Social Security Act) for purposes of title XVIII of such
Act—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-83
(1) on any date prior to 6 months after the date on which the
Secretary has published a proposed rule with respect to the
deeming of the entity, and
(2) until the Secretary publishes a final rule with respect to
the deeming of the entity.
(g) USE OF INTERIM FINAL REGULATIONS.—The Secretary of Health 42 u s e 1395hh
and Human Services shall issue such regulations (on an interim or note.
other beisis) as may be necessary to implement this subtitle and the
amendments made by this subtitle.
PART 3—RELATING TO PART B
$ Subpart A—Provisions Relating to Payments for
Physicians' Services
SEC. 4041. FREEZE IN PAYMENTS FOR PHYSICIANS' SERVICES; EXTEN-
SION OF SEQUESTER ORDER.
(a) THREE-MONTH FREEZE ON INCREASES IN PHYSICIAN PAY-
MENTS.—
(1) I N GENERAL.—Section 1842 of the Social Security Act (42
U.S.C. 1395u) is amended—
(A) in subsection (b)(4)—
(i) in subparagraph (A), by redesignating clause (v) as
clause (vi) and by inserting after clause (iv) the follow-
ing new clause:
"(v) In determining the prevailing charge levels under the third
and fourth sentences of paragraph (3) for physicians' services fur-
nished during the 3-month period beginning January 1, 1988, the
Secretary shall not set any level higher than the same level as was
set for the 12-month period beginning January 1,1987.", and
(ii) in subparagraph (B), by adding at the end the
following new clause:
"(iii) In determining the reasonable charge under paragraph (3)
for physicians' services furnished during the 3-month period begin-
ning January 1, 1988, the customary charges shall be the same
customary charges as were recognized under this section for the 12-
month period beginning January 1,1987."; and
(B) in subsection (jXlKC), by adding at the end thereof the
following new clause:
"(vii) Notwithstanding any other provision of this subparagraph,
the maximum allowable actual charge for a particular physician's
service furnished by a nonparticipating physician to individuals
enrolled under this part during the 3-month period beginning on
January 1, 1988, shall be the amount determined under this
subparagraph for 1987. The maximum allowable actual charge for Effective date.
any such service otherwise determined under this subparagraph for
1988 shall take effect on April 1,1988.".
(2) EXTENSION OF PHYSICIAN PARTICIPATION AGREEMENTS AND 42 u s e 1395u
RELATED PROVISIONS.—Notwithstanding any other provision of note.
law—
(A) subject to the last sentence of this paragraph, each
agreement with a participating physician in effect on
December 31, 1987, under section 1842(hXl) of the Social
Security Act shall remain in effect for the 3-month period
beginning on January 1,1988;
101 STAT. 1330-84 PUBLIC LAW 100-203—DEC. 22, 1987
(B) the effective period for agreements under such section
'> . K entered into for 1988 shall be the nine-month period begin-
ning on April 1, 1988, and the Secretary shall provide an
iij 'ji,' opportunity for physicians to enroll as participating physi-
cians prior to April 1, 1988;
'i'") _i. ii - (C) instead of publishing, under section 1842(hX4) of the
"'• Social Security Act at the beginning of 1988, directories of
participating physicians for 1988, the Secretary shall pro-
vide for such publication, at the beginning of the 9-month
period beginning on April 1, 1988, of such directories of
participating physicians for such period; and
(D) instead of providing to nonparticipating physicians,
under section 1842(b)(3)(G) of the Social Security Act at the
beginning of 1988, a list of maximum allowable actual
charges for 1988, the Secretary shall provide, at the begin-
ning of the 9-month period beginning on April 1, 1988, to
-»it such physicians such a list for such 9-month period.
An agreement with a participating physician in effect on
,Y^ December 31, 1987, under section 1842(h)(1) of the Social Secu-
rity Act shall not remain in effect for the period described in
,i|, subparagraph (A) if the participating physician requests on or
before December 31, 1987, that the agreement be terminated.
(3)(A) Section 1842 of the Social Security Act (42 U.S.C. 1395u)
is amended—
,^„ (i) in subsection (b)(2), by adding at the end the following:
' "In establishing such standards and criteria, the Secretary
shall provide a system to measure a carrier's performance
of responsibilities described in paragraph (3)(H) and subsec-
tion (h)."; and
(ii) in subsection (c)(1), by inserting "(A)" after "(c)(1)" and
by adding at the end the following new subparagraph:
"(B) Of the amounts appropriated for administrative activities to
carry out this part, the Secretary shall provide payments, totaling 1
percent of the total payments to carriers for claims processing in
any fiscal year, to carriers under this section, to reward carriers for
their success in increasing the proportion of physicians in the
carrier's service area who are participating physicians or in increas-
ing the proportion of total payments for physicians' services which
are payments for such services rendered by participating physi-
cians.".
(B) Section 9332(a) of the Omnibus Budget Reconciliation Act
of 1986 is amended—
42 use I395u (i) by striking paragraphs (2) and (3),
notes. (ii) in paragraph (4XB), by striking "under paragraph (2)'^'^
iote ^^^^" ^^^ inserting "under the last sentence of section 1842(b)(2)
of the Social Security Act", and
42 use 1395U (iii) in paragraph (4)(C)—
note. (I) by striking "under paragraph (3)" and inserting
"under section 1842(c)(lXB) of the Social Security Act",
y.-: jviA r^ - .;^. (II) by striking "April" and inserting "July", and
^ (III) by striking "at the end of 1987" and inserting
"before April 1,1988".
President of U.S. (b) EXTENSION OF REDUCTION U N D E R S E Q U E S T E R O R D E R . — N o t w i t h -
2 use 902 note, standing any other provision of law (including any other provision of
this Act), the reductions in the amount of payments required under
title XVIII of the Social Security Act made by the final sequester
order issued by the President on November 20, 1987, pursuant to
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-85
section 252Cb) of the Balanced Budget Emergency Deficit Control Act
of 1985 shall continue to be effective (as provided by sections
252(a)(4XB) and 256(d)(2) of such Act) through March 31, 1988, with • '' '•
respect to payments for physicians' services under part B of such
title.
SEC. 4042. GENERAL UPDATE IN PAYMENTS FOR PHYSICIANS* SERVICES. , . ,.
(a) INCREASE IN M E I FOR 1988 AND 1989.—Section 1842(b)(4) of the '«
Social Security Act (42 U.S.C. 1395u(b)(4)) is amended by adding at
the end the following new subparagraph:
"(F)(i) For purposes of this part for physicians' services furnished
in 1987, the percentage increase in the MEI is 3.2 percent.
"(ii) For purposes of this part for physicians' services furnished in
1988, on or after April 1, the percentage increase in the MEI is—
"(I) 3.6 percent for primary care services (as defined in
subparagraph (E)(iii)), and
"(II) 1 percent for other physicians' services,
"(iii) For purposes of this part for physicians' services furnished in
1989, the percentage increase in the MEI is—
"(I) 3.0 percent for primary care services; and
"(II) 1 percent for other physician's services.".
(b) PRIMARY CARE SERVICES DEFINED.—Section 1842(b)(4)(E) of such
Act (42 U.S.C. 1395u(b)(4)(E)) is amended by adding at the end
thereof the following new clause:
"(iii) The term 'primary care services' means physicians'
services which constitute office medical services, emergency
. department services, home medical services, skilled nursing,
intermediate care, and long-term care medical services, or nurs-
ing home, boarding home, domiciliary, or custodial care medical -i ;8U a
services.". ' '"
(c) PARTICIPATING PHYSICIAN DIFFERENTIAL.—Section
1842(b)(4)(A)(iv) of such Act (42 U.S.C. 1395u(b)(4)(A)(iv)) is
amended—
(1) by striking "96 percent" and inserting "applicable per-
cent", and
(2) by adding at the end the following: "In the previous
sentence, the term 'applicable percent' means for services fur-
nished (I) on or after January 1, 1987, and before April 1, 1988,
96 percent, (II) on or after April 1, 1988, and before January 1,
1988, 95.5 percent, and (III) on or after January 1, 1989, 95
percent.".
SEC. 4043. INCENTIVE PAYMENTS FOR PHYSICIANS' SERVICES FUR-
NISHED IN UNDERSERVED AREAS.
(a) IN GENERAL.—Section 1833 of the Social Security Act (42 U.S.C.
13951) is amended by adding at the end the following new subsection:
"(m) In the case of physicians' services furnished to an individual,
who is covered under the insurance program established by this part
and who incurs expenses for such services, in an area that is
designated (under section 332(a)(lXA) of the Public Health Service
Act) as a class 1 or class 2 health manpower shortage area, in
addition to the amount otherwise paid under this part, there also
shall be paid to the physician (or to an employer or facility in the
cases described in clause (A) of section 1842(b)(6)) (on a monthly or
quarterly basis) from the Federal Supplementary Medical Insurance
'Trust Fund an amount equal to 5 percent of the payment amount
for the service under this part.".
101 STAT. 1330-86 PUBLIC LAW 100-203—DEC. 22, 1987
Reports. (b) STUDY.—The Secretary of Health and Human Services shall
42 u s e 1395/ study and report to Congress, by not later than January 1, 1990, on
note. the feasibility of making additional payments described in section
1833(m) of the Social Security Act with respect to physician services
which are performed in health manpower shortage areas located in
urban areas.
42 u s e 1395/ (c) EFFECTIVE DATE.—The amendments made by this subsection (a)
note. shall apply with respect to services furnished in a rural area (as
defined in section 1886(d)(2XD) of the Social Security Act) ^ 9 on or
after January 1, 1989, and to other services furnished on or after
January 1,1991.
SEC. 4044. ADJUSTMENT IN PREVAILING CHARGE LEVEL FOR PRIMARY
CARE SERVICES.
(a) INCREASE IN PREVAIUNG CHARGES FOR PRIMARY CARE SERV-
ICES.—Section 1842(b)(4XA) of the Social Security Act (42 U.S.C.
1395u(b)(4XA)), as amended by section 4041(aXl) of this subtitle, is
further amended by redesignating clause (vi) as clause (vii) and by
inserting after clause (v) the following new clause:
"(vi) Before each year (beginning with 1989), the Secretary shall
establish a prevailing charge floor for primary care services (as
defined in subparagraph (E)(iii)) equal to 50 percent of the average of
the prevailing charge levels (determined, for participating physi-
cians under the third and fourth sentences of paragraph (3) and
under paragraph (4), without regard to this clause and without
regard to physician specialty) for such service for all localities in the
United States (weighted by the relative frequency of the service in
each locality) for the year. .
42 u s e 1395u (b) EFFECTIVE DATE.—The amendments made by subsection (a)
note. shall apply to payment for physicians' services furnished on or after
January 1,1989.
SEC. 4045. REDUCTION IN PREVAILING CHARGE LEVEL FOR OVERPRICED
PROCEDURES.
(a) I N GENERAL.—Paragraph (10) of section 1842(b) of the Social
Security Act (42 U.S.C. 1395u(b)) is amended to read as follows:
"(lOXAXi) In determining the reasonable charge under paragraph
(3) for procedures described in subparagraph (C) and performed
during the 9-month period beginning on April 1,1988, the prevailing
charge for such procedure for participating and nonparticipating
physicians shall be the prevailing charge otherwise recognized for
such procedure for 1987—
"(I) subject to clause (iii), reduced by 2.0 percent, and
"(II) further reduced by the applicable percentage specified in
clause (ii).
"(ii) For purposes of clause (i), the applicable percentage specified
in this clause is—
"(I) 15 percent, in the case of a prevailing charge otherwise
recognized (without regard to this paragraph and determined
without regard to physician specialty) that is at least 150 per-
cent of the weighted national average (as determined by the
Secretary) of such prevailing charges for such procedure for all
localities in the United States for 1987;
"(II) 0 percent, in the case of a prevailing charge that does not
exceed 85 percent of such weighted national average; and
*" Copy read "Act))".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-87
"(III) in the case of any other prevailing charge, a percent
determined on the basis of a straight-line sliding scale, equal to
% 3 of a percentage point for each percent by which the prevail-
ing charge exceeds 85 percent of such weighted national
average.
"(iii) In no case shall the reduction under clause (i) for a procedure
result in a prevailing charge in a locality for 1988 which is less than
85 percent of the Secretary's estimate of the weighted national
average of such prevailing charges for such procedure for all local-
ities in the United States for 1987 0)ased upon the best available
data and determined without regard to physician specialty) after
making the reduction described in clause (iXII).
"(B) The procedures described in this subparagraph are as follows:
bronchoscopy,^^ carpal tunnel repair, cataract surgery, coronary
artery bypass surgery, diagnostic and/or therapeutic dilation and
curettage, knee arthroscopy, knee arthroplasty, pacemaker
implantation surgery, total hip replacement, suprapubic prostatec-
tomy, transurethral resection of the prostate, and upper gastro-
intestinal endoscopy.
"(C) In the case of a reduction in the reasonable charge ifor a
physicians' service under subparagraph (A), if a nonparticipating
physician furnishes the service to an individual entitled to benefits
under this part, after the effective date of such reduction, the
physician's actual charge is subject to a limit under subsection
OXIXD).
"(D) There shall be no administrative or judicial review section
1869 or otherwise of any determination under subpareigraph (A) or
under "»> paragraph (llXBXii).".
(h) MODIFICATION OF GEOGRAPHIC INDEX.—Section 1845(eX4XAXi)
of such Act (42 U.S.C. 1395w-l(eX4XAXi)) is amended by inserting
"and costs of living" after "costs of practice".
(C) CONSOUDATED CHARGE LIMITATION PROVISIONS.—
(1) PENALTIES FOR EXCESS CHARGES.—Section 1842 of such Act
is further amended—
(A) in subsection (bXllXC)—
,; (i) in clause (i), by striking "(subject to clause (iv))"
and all that follows through the end and inserting the
following: ", the physician's actual charge is subject to •'•
a limit under subsection (jXlXD)."; . t^
(ii) in clause (i), by striking "(i)" after "(C)"; and
(iii) by striking clauses (ii) through (iv); and
(B) in subsection (jXD, by adding at the end the following
new subparagraph:
"(DXi) If an action described in clause (ii) results in a reduction in
a reasonable charge for a physicians' service or item and a
nonparticipating physician furnishes the service or item to an
individual entitled to benefits under this part after the effective date
of such action, the physician may not charge the individual more
than 125 percent of the reduced pajrment allowance (as defined in
clause (iii)) plus (for services or items furnished during the 12-month
period (or 9-month period in the case of an action described in clause
(iiXID) beginning on the effective date of the action) Vz of the amount
by which the physician's maximum allowable actual charge for the
service or item for the previous 12-month period exceeds such 125
percent level.
"(ii) The first sentence of clause (i) shall apply to—
' Copy read "bronschoscopy,".
' Copy read "under under'.
101 STAT. 1330-88 PUBLIC LAW 100-203—DEC. 22, 1987
"(I) an adjustment under subsection (b)(8)(B) (relating to
inherent reasonableness),
"(II) a reduction under subsection (b)(10)(A) (relating to cer-
tain overpriced procedures),
"(III) a reduction under subsection (b)(ll)(B) (relating to cer-
tain cataract procedures), and
"(IV) an adjustment under section 1833(1)(3)(B) (relating to
physician supervision of certified registered nurse anesthetists),
"(iii) In clause (i), the term 'reduced payment allowance' means,
with respect to an action—
"(I) under subsection (b)(8)(B), the inherently reasonable
charge established under subsection (b)(8); or
"(II) under subsection (b)(10)(A) or (b)(ll)(B) or under section
1833(1)(3)(B), the prevailing charge for the service after the
action,
"(iv) If a physician knowingly and willfully imposes a charge in
violation of clause (i) (whether or not such charge violates subpara-
graph (B)), the Secretary may apply sanctions against such physi-
cian in accordance with paragraph (2).
"(v) Clause (i) shall not apply to items and services furnished after
the earlier of (I) December 31, 1990, or (II) one-year after the date
the Secretary reports to Congress, under section 1845(e)(3), on the
development of the relative value scale under section 1845.".
(2) CONFORMING AMENDMENTS.—(A) Section 1833(1)(6) of such
Act (42 U.S.C. 13951(1)(6)) is amended—
(i) in subparagraph (A), by striking "(subject to subpara-
V' VI graph (D))" and all that follows through the end and insert-
ing the following: "after the effective date of the reduction,
the physician's actual charge is subject to a limit under
, -- section 1842(j)(l)(D).";
(ii) in subparagraph (A), by striking "(A)" after "(6)"; and
(iii) by striking subparagraphs (B) through (D).
(B) Section 1842(b)(ll)(B)(i) of such Act (42 U.S.C.
1395u(b)(ll)(B)(i)) is amended by striking "and shall be further
reduced" and all that follows through "1988".
(C) Section 9334(b)(2) of the Omnibus Budget Reconciliation
42 u s e 1395u Act of 1986 is amended by striking "1842(bX10)" and inserting
note. "18420X1)(D)".
42 u s e 1395u (d) EFFECTIVE DATE.—The amendments made by this section shall
note. apply to items and services furnished on or after April 1, 1988,
except the amendment made by subsection (c)(2)(B) shall apply to
services furnished on or after January 1,1988.
SEC. 4046. LIMITS ON PAYMENT FOR OPHTHALMIC ULTRASOUND.
(a) IN GENERAL.—Section 1842 of the Social Security Act (42 U.S.C.
1395u), as previously amended by this subpart is amended—
(1) in subsection (b)(ll)—
(A) in subparagraph (C), as redesignated under section
4045(cXl)(AXii) of this title, by inserting "or (C)" after
"subparagraph (B)";
(B) by redesignating subparagraph (C) as subparagraph
(D); and
(C) by inserting after subparagraph (B) the following new
subparagraph:
"(C) The prevailing charge level determined with respect to A-
mode ophthalmic ultrsisound procedures may not exceed 5 percent
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-89
of the prevailing charge level established with respect to extra-
capsular cataract removal with lens implantation."; and
(2) in subparagraph (D) of subsection (jXD, as added by section
4045(cXl)(B) of this subtitle—
(A) in clause (ii), by striking "and" at the end of subclause
(III), by redesignating subclause (IV) as subclause (V) and
by inserting before such subclause the following new
,r'- subclause:
"(IV) a prevailing charge limit is established under subsection
(b)(llXC)(i), and"; and
(B) in clause (iii)(II), by striking "or (bXllXB)" and insert-
ing ", (bXllXB), or (bXll)(C)(i)".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1395u
shall apply to services furnished on or after April 1,1988. note.
SEC. 4047. CUSTOMARY CHARGES FOR PRIMARY CARE SERVICES OF NEW
PHYSICIANS.
(a) IN GENERAL.—Section 1842(bX4) of the Social Security Act, as
amended by section 4042(a), is further amended by adding at the end
thereof the following new subparagraph:
"(G) In determining the customary charges for physicians' serv-
ices (other primary care services and other than services furnished
in a rural area (as defined in section 1886(dX2XD)) that is designated,
under section 332(a)(1)(A) of the Public Health Service Act, as a
health manpower shortage area) for which adequate actual charge
data are not available because a physician has not yet been in
practice for a sufficient period of time, the Secretary shall set a
customary charge at a level no higher than 80 percent of the
prevailing charge (as determined under the third and fourth sen-
tences of paragraph (3) and under paragraph (4)) for a service.".
0)) EFFECTIVE DATE.—The amendment made by subsection (a) 42 u s e 1395U
shall apply to physicians who first furnish services to medicare note.
beneficiaries after April 1,1988.
SEC. 4048. PAYMENT FOR PHYSICIAN ANESTHESIA SERVICES.
(a) IN GENERAL.—Section 1842(b) of the Social Security Act (42
U.S.C. 1395u(b)) is further amended by adding at the end the
following new paragraph:
"(14)(A) In determining the reasonable charge under paragraph (3)
of a physician for medical direction of two or more nurse anes-
thetists performing, on or after April 1, 1988, and before January 1,
1991, anesthesia services in whole or in part concurrently, the nvQun.
number of base units which may be recognized with respect to such
medical direction for each concurrent procedure (other than cata-
ract surgery or an iridectomy) shall be reduced by—
"(i) 10 percent, in the case of medical direction of 2 nurse
anesthetists concurrently,
"(ii) 25 percent, in the case of medical direction of 3 nurse
anesthetists concurrently, and
"(iii) 40 percent, in the case of medical direction of 4 nurse
anesthetists concurrently.
"(B) In determining the reasonable charge under paragraph (3) of
a physician for medical direction of two or more nurse anesthetists
performing, on or after January 1, 1989, and before January 1, 1991,
anesthesia services in whole or in part concurrently, the number of
base units which may be recognized with respect to such medical
101 STAT. 1330-90 PUBLIC LAW 100-203—DEC. 22, 1987
direction for each concurrent cataract surgery or iridectomy proce-
dure shall be reduced by 10 percent.
"(C) The Secretary shall require claims for physicians' services for
medical direction of nurse anesthetists during the periods in which
the provisions of subparagraph (A) or (B) apply to indicate the
number of such anesthetists being medically directed concurrently
at any time during the procedure, the name of each nurse anes-
thetist being directed, and the type of procedure for which the
services are provided.".
Regulations. (b) DEVELOPMENT OF UNIFORM RELATIVE VALUE GUIDE.—The Sec-
42 u s e 1395u retary of Health and Human Services, in consultation with groups
note.
representing physicians who furnish anesthesia services, shall estab-
lish by regulation a relative value guide for use in all carrier
localities in making payment for physician anesthesia services fur-
nished under part B of title XVIII of the Social Security Act on and
after January 1, 1989. Such guide shall be designed so as to result in
expenditures under such title for such services in an amount that
would not exceed the amount of such expenditures which would
otherwise occur.
Reports. (c) STUDY OF PREVAIUNG CHARGES FOR ANESTHESIA SERVICES.—
42 u s e 1395u The Secretary of Health and Human Services shall conduct a study
note.
of the variations in conversion factors used by carriers under section
184203) of the Social Security Act to determine the prevailing charge
for anesthesia services and shall report the results of the study and
make recommendations for appropriate adjustments in such factors
not later than January 1,1989.
42 u s e 1395u (d) GAG STUDIES.—(1) The Comptroller General shall conduct a
note. study—
(A) to determine the average anesthesia times reported for
medicare reimbursement purposes,
(B) to verify those times from patient medical records,
(C) to compare anesthesia times to average surgical times, and
(D) to determine whether the current payments for physician
supervision of nurse anesthetists are excessive.
Reports. The Comptroller General shall report to Congress, by not later than
January 1, 1989, on such study and in the report include rec-
ommendations regarding the appropriateness of the anesthesia
times recognized by medicare for reimbursement purposes and rec-
ommendations regarding adjustments of payments for physician
supervision of nurse anesthetists.
Reports. (2) The Comptroller General shall conduct a study on the impact
of the amendment made by subsection (a), and shall report to
Congress on the results of such study by April 1,1990.
SEC. 4049. FEE SCHEDULES FOR RADIOLOGIST SERVICES.
(a) IN GENERAL.—Part B of title XVIII of the Social Security Act is
(1) in section 1833(aXl) (42 U.S.C. 13951(aXl)), as amended by
section 4062(cX3) of this subtitle by striking "and" before "(I)",
and by adding at the end the following new clause: "and (J) with
respect to expenses incurred for radiologist services (as defined
in section 18340)X5)), the amounts paid shall be 80 percent of the
lesser of the actual charge for the services or the amount
provided under the fee schedule established under section
1834(b),"; and
PUBLIC LAW 100-203—DEC. 22, 1987 iCl STAT. 1330-91
(2) by adding at the end of section 1834, as subsequently
inserted by section 4062(a) of this subtitle, the following new
subsection:
"(b) F E E SCHEDULES FOR RADIOLOGIST SERVICES.— 42 USC I395m.
"(1) DEVELOPMENT.—The Secretary shall develop—
"(A) a relative value scale to serve as the basis for the
payment for radiologist services under this part, and
"(B) using such scale and appropriate conversion factors,
fee schedules (on a regional, statewide, or carrier service
area basis) for payment for radiologist services under this
part, to be implemented for such services furnished during
1989.
"(2) CONSULTATION.—In carrying out paragraph (1), the Sec-
retary shall regularly consult closely with the Physician Pay-
ment Review Commission, the American College of Radiology,
and other organizations representing physicians or suppliers
who furnish radiologist services and shall share with them the
data and data analysis being used to make the determinations
under paragraph (1), including data on variations in current
medicare payments by geographic area, and by service and
physician specialty.
"(3) CONSIDERATIONS.—In developing the relative value scale
and fee schedules under paragraph (1), the Secretary—
"(A) shall take into consideration variations in the cost of
furnishing such services among geographic areas and
among different sites where services are furnished, and
"(B) may also take into consideration such other factors
respecting the manner in which physicians in different
specialties furnish such services as may be appropriate to
assure that payment amounts are equitable and designed to
promote effective and efficient provision of radiologist serv-
ices by physicians in the different specialties.
"(4) SAVINGS.—
"(A) BUDGET NEUTRAL FEE SCHEDULES.—The Secretary
shall develop preliminary fee schedules for 1989, which are
designed to result in the same amount of aggregate pay-
ments (net of any insurance and deductibles under section
1835(aXlXI) and 1833(b)) for radiologist services furnished in
1989 as would have been made if this subsection had not
been enacted.
"(B) INITIAL SAVINGS.—The fee schedules established for
payment purposes under this subsection for services fur-
nished in 1989 shall be 97 percent of the amounts permitted
under these ^° preliminary fee schedules developed under
subparagraph (A).
"(C) SUBSEQUENT UPDATING.—Radiologist services fur-
nished in subsequent years, the fee schedules shall be the
schedules for the previous year updated by the percentage
increase in the MET (as defined in section 1842(bX4XEXii))
for the year.
"(D) ^* NONPARTICIPATING PHYSICIANS.—Each fee sched-
ule so established shall provide that the payment rate
'° Copy read "this".
=" Copy read " '(C)".
101 STAT. 1330-92 PUBLIC LAW 100-203—DEC. 22, 1987
recognized for nonparticipating physicians and suppliers is
' '' equal to the appropriate percent (as defined in section
^,,,, -,,,, 1842(b)(4)(AXiv)) of the payment rate recognized for partici-
m .<.. ... .^ pating physicians and suppliers.
, "(5) LIMITING CHARGES OF NONPARTICIPATING PHYSICIANS.—
**'*" "(A) IN GENERAL.—In the case of radiologist services fur-
nished after January 1, 1989, for which payment is made
under a fee schedule under this subsection, if a
nonparticipating physician or supplier furnishes the service
to an individual entitled to benefits under this part, the
physician or supplier may not charge the individual more
,_. than the limiting charge (as defined in subparagraph (B)).
.-, - w^g^ LIMITING CHARGE DEFINED.—In subparagraph (A), the
term 'limiting charge' means, with respect to a service
furnished—
"(i) in 1989, 125 percent of the amount specified for
the service in the appropriate fee schedule established
under paragraph (1),
^ "(ii) in 1990, 120 percent of the amount specified for
''*' the service in the appropriate fee schedule established
J under paragraph (1), and
^'' •" " "(iii) after 1990, 115 percent of the amount specified
for the service in the appropriate fee schedule estab-
I ' ""'•'' lished under paragraph (1).
"-"'' "(C) ENFORCEMENT.—If a physician or supplier knowingly
and willfully imposes a charge in violation of subparagraph
(A), the Secretary may apply sanctions against such physi-
cian or supplier in accordance with section 1842(j)(2).
"(6) ^2 RADIOLOGIST SERVICES DEFINED.—For the purposes of
this subsection, section 1833(aXlXI), and section 1842(hXlXB),
the term 'radiologist services' only includes radiologic services
performed by, or under the direction or supervision of, a
physician—
"(A) who is certified, or eligible to be certified, by the
American Board of Radiology, or
"(B) for whom radiologic services account for at least 50
percent of billings made under this part.".
Reports. (b) DEADLINES AND EFFECTIVE D A T E . —
note^^ ^^^^^ ^^^ '^^® Secretary of Health and Human Services shall estab-
lish the relative value scale and fee schedules for radiologist
services (under section 1834(b) of the Social Security Act) by not
later than August 1, 1988, and shall report to Congress on the
development of such fee schedules not later than August 1,
1988.
(2) The amendments made by this section shall apply to
services performed on or after January 1, 1989, and until such
time as the Secretary of Health and Human Services imple-
ments physician fee schedules based on the relative value scale
developed under section 1845(e) of the Social Security Act.
42 u s e 1395/ SEC. 4050. FEE SCHEDULES FOR PHYSICIAN PATHOLOGY SERVICES.
(a) IN GENERAL.—The Secretary of Health and Human Servipes
shall develop—
'* Copy read " ' ( 5 ) " . i " " •. <
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-93
(1) a relative value scale to serve as the basis for the payment
for physician pathology services under part B of title XVIII of
the Social Security Act,
(2) using such scale and appropriate conversion factors, pro-
posed fee schedules (on a regional, statewide, or carrier service
area basis) for payment for physician pathology services under
such part, that could be implemented for such services fur-
ytf nished during 1990, and
(3) an appropriate index to be applied to updating such fee
schedules annually for physician pathology services furnished
in years after 1990.
(b) CONSULTATION.—In carrying out subsection (a), the Secretary
shall regularly consult closely with the Physician Payment Review
Commission, the College of American Pathologists, and other c ; ; ysii S[
organizations representing physicians who furnish physician pathol-
ogy services and shall share with them the data and data analysis
being used to make the determinations under subsection (a), includ-
ing data on variations in current medicare payments by geographic
area, and by service and physician specialty.
(c) CONSIDERATION.—In developing the fee schedules under subsec-
tion (a), the Secretary shall take into consideration variations in the
cost of furnishing physician pathology services among geographic
areas.
(d) REPORT.—The Secretary shall report, not later than April 1,
1989, to the Committees on Energy and Commerce and Ways and
Means of the House of Representatives and the Committee on
Finance of the Senate on the relative value scale, fee schedules, and
the index developed under this section. Such report shall include
recommendations on how to protect medicare beneficiaries against
excessive charges for physician pathology services above the pay-
ment amounts established by the fee schedules.
SEC. 4051. ELIMINATION OF MARKUP FOR CERTAIN PURCHASED SERV-
ICES.
(a) IN GENERAL.—Section 1842 of the Social Security Act (42 U.S.C. 42 use I395u.
1935u) is amended by adding at the end the following new subsec-
tion:
"(n)(l) If a physician's bill or a request for payment for services
billed by a physician includes a charge to a patient for a diagnostic
test described in section 1861(sX3) (other than a clinical diagnostic » J ic )
laboratory test) for which payment does not indicate that the billing
physician personally performed or supervised the performance of
the test or that another physician with whom the physician who
shares his practice personally performed or supervised the test, the
amount payable with respect to the test shall be determined as
follows:
"(A) If the bill or request for payment indicates that the test
was performed by a supplier, identifies the supplier, and in-
dicates the amount the supplier charged the billing physician, ' i ^•"'." "^
t J payment for the test (less the applicable deductible and coinsur-
ance amounts) shall be the actual acquisition costs (net of any
r discounts) or, if lower, the [ ] [ ] [ ] [ ]
; [ ]32a enrolled under [ ] [ ] [ ] [ ]
- [ ].^*
"(B) If the bill or request for payment (i) does not indicate who
performed the test, or (ii) indicates that the test was performed
by a supplier but does not identify the supplier or include the
'" Copy not legible.
101 STAT. 1330-94 PUBLIC LAW 100-203—DEC. 22, 1987
amount charged by the supplier, no payment shall be made
tf under this part.
"(2) A physician may not bill an individual enrolled under this
part—
"(A) any amount other than any applicable deductible and
coinsurance for a diagnostic test for which payment is made
pursuant to paragraph (IXA), or
"(B) any amount for a diagnostic test for which payment may
not be made pursuant to paragraph (1)(B).
"(3) If a physician knowingly and willfully in repeated cases bills
one or more individuals in violation of paragraph (2), the Secretary
may apply sanctions against such physician or supplier in accord-
ance with section 1842(jX2).".
42 u s e 1395u. (b) ADJUSTMENT IN MEDICARE PREVAILING CHARGES.—
(1) REVIEW.—The Secretary of Health and Human Services
shall review payment levels under part B of title XVIII of the
Social Security Act for diagnostic tests (described in section
1861(sX3) of such Act, but excluding clinical diagnostic labora-
tory tests) which are commonly performed by independent
suppliers, sold as a service to physicians, and billed by such
physicians, in order to determine the reasonableness of pay-
ment amounts for such tests (and for associated professional
services component of such tests). The Secretary may require
physicians and suppliers to provide such information on the
purchase or sale price (net of any discounts) for such tests as is
necessary to complete the review and make the adjustments
under this subsection. The Secretary shall also review the
reasonableness of payment levels for comparable in-office diag-
nostic tests.
(2) ESTABLISHMENT OF REVISED PAYMENT SCREENS.—If, as a
result of such review, the Secretary determines, after notice and
opportunity of at least 60 days for public comment, that the
current prevailing charge levels (under the third and fourth
.liti'-jfi
sentences of section 1842(b) of the Social Security Act) for any
such tests or associated professional services are excessive, the
Secretary shall establish such charge levels at levels which,
consistent with assuring that the test is widely and consistently
available to medicare beneficiaries, reflect a reasonable price
eontracts. for the test without any markup. Alternatively, the Secretary,
pursuant to guidelines published after notice and opportunity of
at least 60 days for public comment, may delegate to carriers
with contracts under section 1842 of the Social Security Act the
establishment of new prevailing charge levels under this para-
graph. When such charge levels are established, the provisions
of section 1842(jXlXD) of such Act shall apply in the same
manner as they apply to a reduction under section 1842(bX8XA)
of such Act.
42 u s e 1395u (c) EFFECTIVE D A T E S . —
note. (1) The amendment made by subsection (a) shall apply to
diagnostic tests performed on or sifter April 1,1988.
(2) The Secretary of Health and Human Services shall com-
plete the review and make an appropriate adjustment of
prevailing charge levels under subsection (b) for items and
services furnisheid no later than January 1,1989.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-95
SEC. 4052. COLLECTION OF PAST-DUE AMOUNTS OWED BY PHYSICIANS
WHO BREACHED CONTRACTS UNDER THE NATIONAL HEALTH
SERVICE CORPS SCHOLARSHIP PROGRAM.
(a) I N GENERAL.—Title XVIII of the Social Security Act, as pre-
viously amended by this subtitle, is amended by adding at the end
thereof the following new section:
"OFFSET OF P A Y M E N T S TO PHYSICIANS TO COLLECT PAST-DUE OBUGATIONS 42 USC 1395ccc.
ARISING FROM BREACH OF SCHOLARSHIP CONTRACT
"SEC. 1892. (a) IN GENERAL.—
"(IXA) Subject to subparagraph (B), the Secretary shall enter
into an agreement under this section with any physician who,
by reason of a breach of a contract entered into by such
physician pursuant to the National Health Service Corps Schol-
arship Program, owes a past-due obligation to the United States
(as defined in subsection (b)).
"(B) The Secretary shall not enter into an agreement with a
physician under this section to the extent—
"(iXD the physician has entered into a contract with the
Secretary pursuant to section 204(aXl) of the Public Health
Service Amendments of 1987, and
"(II) the physician has fulfilled or (as determined by the
Secretary) is fulfilling the terms of such contract; or
Ti • "(ii) the liability of the physician under such section
204(aXl) has otherwise been relieved under such section; or
"(iii) the physician is performing such physician's service
obligation under a forbearance agreement entered into with
the Secretary under subpart II of part D of title III of the
Public Health Service Act.
"(2) The agreement under this section shall provide that—
"(A) deductions shall be made from the amounts other-
wise payable to the physician under this title, in accordance
with a formula and schedule agreed to by the Secretary and
the physician, until such past-due obligation (and accrued
interest) have been repaid;
"(B) payment under this title for services provided by
such physician shall be made only on an assignment-related
basis;
"(C) if the physician does not provide services, for which
payment would otherwise be made under this title, of a
sufficient quantity to maintain the offset collection accord-
ing to the agreed upon formula and schedule—
"(i) the Secretary shall immediately inform the
Attorney General, and the Attorney General shall
immediately commence an action to recover the full
amount of the past-due obligation, and
"(ii) subject to paragraph (3), the Secretary shedl
immediately exclude the physician from the program
under this title, until such time as the entire past-due
obligation has been repaid.
"(3) If the physician refuses to enter into an agreement or
breaches any provision of the s^eement—
"(A) the Secretary shall immediately inform the Attorney
General, and the Attorney General shall immediately com-
mence an action to recover the full amount of the past-due
obligation, and
101 STAT. 1330-96 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) subject to paragraph (3), the Secretary shall imme-
diately exclude the physician from the program under this
title, until such time as the entire past-due obligation has
.^.j,. been repaid.
Sv„c "(4) The Secretary shall not bar a physician pursuant to
paragraph (2)(CXii) or paragraph (3)(B) if such physician is a sole
community physician or sole source of essential specialized
.r)s?«'£r 0^1 i i ~ services in a community.
"(b) PAST-DUE OBUGATION.—For purposes of this section, a past-
due obligation is any amount—
"(1) owed by a physician to the United States by reason of a
V breach of a scholarship contract under section 338E of the
Public Health Service Act, and
"(2) which has not been paid by the deadline established by
the Secretary pursuant to section 338E of the Public Health
Service Act, and has not been canceled, waived, or suspended by
the Secretary pursuant to such section.
"(c) COLLECTION UNDER THIS SECTION SHALL NOT B E EXCLUSIVE.—
This section shall not preclude the United States from applying
other provisions of law otherwise applicable to the collection of
obligations owed to the United States, including (but not limited to)
the use of tsix refund offsets pursuant to section 3720A of title 31,
United States Code, and the application of other procedures pro-
vided under chapter 37 of title 31, United States Code.
"(d) COLLECTION FROM PROVIDERS AND HEALTH MAINTENANCE
ORGANIZATIONS.—
"(1) In the case of a physician who owes a psist-due obligation,
and who is an employee of, or affiliated by a medical services
agreement with, a provider having an agreement under section
1866 or a health maintenance organization or competitive medi-
cal plan having a contract under section 1833 or section 1876,
the Secretary shall deduct the amounts of such past-due obliga-
tion from amounts otherwise payable under this title to such
provider, organization, or plan.
"(2) Deductions shall be in accordance with a formula and
schedule agreed to by the Secretary, the physician and the
provider, organization, or plan. The deductions shall be made
from the amounts otherwise payable to the physician under this
title as long as the physician continued to be employed or
affiliated by a medical services agreement.
"(3) Such deduction shall not be made until 6 months after
the Secretary notifies the provider, organization, or pl£m of the
amount to be deducted and the particular physicians to whom
C's the deductions are attributable.
• "(4) A deduction made under this subsection shall relieve the
physician of the obligation (to the extent of the amount col-
lected) to the United States, but the provider, organization, or
plan shall have a right of action to collect from such physician
the amount deducted pursuant to this subsection (including
accumulated interest).
"(5) No deduction shall be made under this subsection if,
70 :.' within the 6-month period after notice is given to the provider,
organization, or plan, the physician pays the past-due obliga-
~ tion, or ceases to be employed by the provider, organization, or
plan.
"(6) The Secretary shall also apply the provisions of this
subsection in the case of a physician who is a member of a group
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-97
T JO practice, if such group practice submits bills under this program
as a group, rather than by individual physicians.
"(e) TRANSFER FROM TRUST FUNDS.—Amounts equal to the
amounts deducted pursuant to this section shall be transferred from
the Trust Fund from which the payment to the physician, provider,
or other entity would otherwise have been made, to the general fund
in the Treasury, and shall be credited as payment of the past-due
obligation of the physician from whom (or with respect to whom) the
deduction was made.".
(b) CONFORMING REFERENCE.—Section 338E(b)(l) of the Public
Health Service Act (42 U.S.C. 254o(b)(l)) is amended by adding at the
end thereof the following new sentence: "Amounts not paid within
such period shall be subject to collection through deductions in
Medicare payments pursuant to section 1892 of the Social Security
Act.".
(c) EFFECTIVE DATE.—The amendments made by this section shall 42 u s e 1395CCC
be effective on the date of the enactment of this Act. note.
SEC. 40.52. ELIMINATION OF 197.5 FLOOR FOR PREVAILING PHYSICIAN
CHARGES.
(a) IN GENERAL.—Section 1842(b)(3) of the Social Security Act (42
U.S.C. 1395u(b)(3)) is amended by striking the next-to-last sentence
(which begins "Notwithstanding the provisions of).
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 u s e 1395u
shall apply to payment for services furnished on or after January 1, note.
1988.
SEC. 4053. APPLICATION OF MAXIMUM ALLOWABLE ACTUAL CHARGE
(MAAC).
(a) APPLICATION ON INDIVIDUAL CHARGE BASIS.—Section 1842(j)(l)
of the Social Security Act (42 U.S.C. 1395u(jXl)) is amended—
', -, (1) in the first sentence of subparagraph (BXi), by striking
"each such physician's actual charges" and inserting "the
5itt actual charges of each such physician";
(2) in the second sentence of subparagraph (B)(i)^ by striking
"for such a service a physician's actual charge {as defined in
' subparagraph (CXvi)" and inserting "on a repeated basis for
such a service an actual charge"; and
(3) in subparagraph (CXvi), by striking "and subparagraph
(B)".
(b) ADJUSTMENT.—In the case of a physician who did not have 42 u s e 1395u
actual charges under title XVIII of the Social Security Act for a note.
procedure in the calendar quarter beginning on April 1, 1984, but
who establishes to the satisfaction of a carrier that he or she had
actual charges (whether under such title or otherwise) for the
procedure performed prior to June 30, 1984, the carrier shall com-
pute the maximum allowable actual charge under section 1842(j) of
the Social Security Act for such procedure performed by such
physician in 1988 based on such physician's actual charges for the
procedure.
(c) EFFECTIVE DATE.—The amendment made by subsection (a) shall 42 u s e 1395u
apply to charges imposed for services furnished on or after April 1, note.
1988.
101 STAT. 1330-98 PUBLIC LAW 100-203—DEC. 22, 1987
42 u s e 1395/ SEC. 4054. APPLYING COPAYMENT AND DEDUCTIBLE TO CERTAIN OUT-
note. PATIENT PHYSICIANS' SERVICES.
Notwithstanding any other provision of law, payment under part
B of title XVIII of the Social Security Act for physicians' services
specified in section 1833(i)(l) of such Act and furnished on or after
April 1, 1988, in an ambulatory surgical center or hospital out-
patient department on an assignment-related basis shall be subject
to the deductible under section 1833(b) of such Act and 20 percent
coinsurance.
SEC. 4055. PHYSICIAN PAYMENT STUDIES.
42 u s e 1395u (a) DEFINITIONS OF M E D I C A L AND SURGICAL PROCEDURES.—
note. (1) REPORT ON VARIATIONS IN CARRIER PAYMENT PRACTICE.—
The Secretary of Health and Human Services (in this section
referred to as the "Secretary") shall conduct a study of vari-
.4j ations in payment practices for physicians' services among the
different carriers under section 1842 of the Social Security Act.
Such study shall examine carrier variations in the services
included in global fees and pre- and post-operative services
included in payment for the operation. The Secretary shall
report to Congress on such study by not later than May 1, 1988.
(2) UNIFORM DEFINITIONS OF PROCEDURES FOR PAYMENT PUR-
POSES.—The Secretary shall develop, in consultation with appro-
priate national medical specialty societies and by not later than
July 1, 1989, uniform definitions of physicians' services (includ-
ing appropriate classification scheme for procedures) which
could serve as the basis for making payments for such services
under part B of title XVIII of the Social Security Act. In
developing such list, to the extent practicable—
(A) ancillary services commonly performed in conjunction
with a major procedure would be included with the major
procedure;
(B) pre- and post-procedure services would be included in
the procedure; and
(C) similar procedures would be listed together if the
procedures are similar in resource requirements.
42 u s e 1395W-1 (b) EXPANSION OF RELATIVE VALUE SCALE (RVS) STUDY.—
note. (1) ADDITIONAL SERVICES.—The Secretary shall expand the
study being conducted, under section 1845(e) of the Social Secu-
rity Act, to develop a relative value scale for physicians' services
to include physicians' services in the fields of cardiology, der-
i#x matology, emergency medicine, gastroenterology, hematology,
infectious disease, nephrology, neurology, neurosurgery, nuclear
medicine, oncology, physical medicine and rehabilitation, plas-
tic surgery, pulmonary medicine, and radiation therapy, and for
physicians who specialize in osteopathic procedures.
(2) No DELAY IN CURRENT STUDY.—The expansion under para-
graph (1) shall not be conducted in a manner that delays the
completion of the current study or the report to Congress
Reports. required under section 1845(e)(3) of the Social Security Act. The
Secretary shall report to Congress on the services described in
paragraph (1) by not later than October 1,1989.
Reports. (3) PROMPT SUBMITTAL OF STUDY RESULTS TO PHYSICIAN PAY-
MENT REVIEW COMMISSION.—The Secretary shall submit to the
Physician Payment Review Commission a copy of any report
submitted to the Secretary pursuant to a cooperative agreement
in the fulfillment of the requirement of section 1845(e) of such
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-99
Act, with all relevant supporting data (including survey data,
analj^ic data files, and file documentation), by no later than 30
days after the date the final report is received by the Secretary.
^c) OTHER PHYSICIAN PAYMENT STUDIES.— 42 u s e 1395/
(1) FEE SCHEDULE IMPLEMENTATION.—The Secretary shall con- note.
duct a study of changes in the payment system for physicians'
services, under part B of title XVIII of the Social Security Act,
that would be required for the implementation of a national fee
schedule for such services furnished on or after January 1, 1990.
Such study shall identify any major technical problems related
to such implementation and recommendations on ways in which
to address such problems. The Secretary shall report to the Reports.
Congress on such study by not later than July 1,1989.
(2) VOLUME AND INTENSITY OF PHYSICIAN SERVICES.—The Sec-
retary shall conduct a study of issues relating to the volume and
intensity of physicians' services under part B of title XVIII of
the Social Security Act, including—
(A) historical trends with regard to increeises in the
volume and intensity of physicians' services furnished on a
per enrollee basis (with appropriate adjustments to account
for changes in the demographic composition of the medi-
care population);
; ;, (B) geographic variations in volume and intensity in
physicians' services;
(C) an analysis of the effectiveness of methods currently
used under such part to ensure that payments under such
part are made only for services which are medically
necessary;
(D) the development and analysis of alternative methods
to control the volume of services; and
(E) the impact of the implementation of the relative value
scale developed under section 1845(e) of such Act on the
volume and intensity of physicians' services.
The Secretary shall submit to Congress an interim report on Reports.
such study not later than May 1, 1988, and a final report on
such study not later than May 1,1989.
(3) SURVEY OF OUT-OF-POCKET COSTS OF MEDICARE BENEFICIARIES
FOR HEALTH CARE SERVICES.—The Secretary shall conduct a
survey to determine the distribution of—
(A) the liabilities and expenditures for health care serv-
ices of individuals entitled to benefits under title XVIII of
the Social Security Act, including liabilities for charges (not
paid on an assignment-related basis) in excess of the reason-
able charge recognized, and
(B) the collection rates among different classes of physi-
cians for such liabilities, including collection rates for re-
}j, t quired coinsurance and for charges (not paid on an assign-
ment-related basis) in excess of the reasonable charge recog-
nized.
The Secretary shall report to Congress on such study by not Reports.
later than July 1,1990.
(d) STUDY OF PAYMENT FOR CHEMOTHERAPY IN PHYSICIANS' 42 u s e 1395/
OFFICES.— note.
(1) IN GENERAL.—The Secretary shall study ways of modifying
part B of title XVIII of the Social Security Act to permit
adequate payment under such part for the costs associated with
providing chemotherapy to cancer patients in physicians' of-
101 STAT. 1330-100 PUBLIC LAW 100-203—DEC. 22, 1987
flees. The study shall be performed in consultation with physi-
cians and other health care providers who are experts in cancer
therapy and with representation of health insurers who have
experience in these payment issues.
(2) REPORT.—The Secretary shall report to Congress on the
results of the study by not later than April 1, 1989.
Subpart B—Provisions Relating to Payments for Other
Services
2 u s e 902 note. SEC. 4061. EXTENSION OF REDUCTION FOR OTHER PART B ITEMS AND
SERVICES PAYMENTS UNDER SEQUESTER ORDER.
Notwithstanding any other provision of law (including any other
provision of this Act), the reductions in the amount of payments
required under title XVIII of the Social Security Act made by the
final sequester order issued by the President on November 20, 1987,
pursuant to section 252(b) of the Balanced Budget Emergency Deficit
Control Act of 1985 shall continue to be effective (as provided by
sections 252(aX4XB) and 256(dK2) of such Act) through March 31,
1988, with respect to payments for all items and services (other than
physicians' services) under part B of such title.
SEC. 4062. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT, PROSTHETIC
DEVICES, ORTHOTICS. AND PROSTHETICS.
42 u s e 1395u (a) 1-YEAR FREEZE ON CHARGE LIMITATIONS.—
note. (1) IN GENERAL.—In imposing limitations on allowable charges
for items and services (other than physicians' services) fur-
nished in 1988 under part B of title XVIII of such Act and for
which payment is made on the basis of the reasonable charge
for the item or service, the Secretary of Health and Human
Services shall not impose any limitation at a level higher than
the same level as was in effect in December 1987.
(2) TRANSITION.—The provisions of section 4041(aX2) (other
than subparagraph (D) thereof) of this subtitle shall apply to
suppliers of items and services described in paragraph (1), and
directories of participating suppliers of such items and services,
in the same manner as such section applies to physicians fur-
nishing physicians' services, and directories of participating
physicians.
(b) AMOUNT AND FREQUENCY OF PAYMENT FOR DURABLE MEDICAL
EQUIPMENT, PROSTHETIC DEVICES, ORTHOTICS, AND PROSTHETICS.—
Part B of title XVIII of the Social Security Act is amended by
inserting after section 1833 the following new section:
"SPECIAL PAYMENT RULES FOR PARTICULAR SERVICES
42 u s e 1395m. "SEC. 1834. (a) PAYMENT FOR DURABLE MEDICAL EQUIPMENT, PROS-
THETIC DEVICES, ORTHOTICS, AND PROSTHETICS.—
"(1) GENERAL RULE FOR PAYMENT.—
"(A) I N GENERAL.—With respect to a covered item (as
defined in paragraph (13)) for which payment is determined
* "'^ under this subsection, payment shall be made in the fre-
•••Jo«
quency specified in paragraphs (2) through (7) and in an
-^ amount equal to 80 percent of the payment basis described
in subparagraph (B).
"(B) PAYMENT BASIS.—The payment basis described in
'^ this subparagraph is the lesser of—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-101
"(i) the actual charge for the item, or
"(ii) the payment amount recognized under para-
graphs (2) through (7) of this subsection for the item;
except that clause (i) shall not apply if the covered item is
'* furnished by a public home health agency (or by another
home health agency which demonstrates to the satisfaction
of the Secretary that a significant portion of its patients are
low income) free of charge or at nominal charges to the
public.
"(C) EXCLUSIVE PAYMENT RULE.—This subsection shall
constitute the exclusive provision of this title for payment
for covered items under this part.
"(2) PAYMENT FOR INEXPENSIVE AND OTHER ROUTINELY PUR-
CHASED DURABLE MEDICAL EQUIPMENT.—
"(A) IN GENERAL.—Payment for an item of durable medi-
cal equipment (as defined in paragraph (13XA))—
"(i) the purchase price of which does not exceed $150,
or
"(ii) which the Secretary determines is acquired at
least 75 percent of the time by purchase,
shall be made on a rental basis or in a lump-sum amount
for the purchase of the item. The payment amount recog-
nized for purchase or rental of such equipment is the
amount specified in subparagraph (B) for purchase or
rental, except that the total amount of rental payments
with respect to an item may not exceed the payment
amount specified in subparagraph (B) with respect to the
purchase of the item.
"(B) PAYMENT AMOUNT.—For purposes of subparagraph
(A), the amount specified in this subparagraph, with respect
to the purchase or rental of an item furnished in a carrier
service area—
"(i) in 1989 is the average allowed charge in the area
'!ii'. for the purchase or rental, respectively, of the item for
the 12-month period ending on June 30, 1987, increased
by the percentage increase in the consumer price index
for all urban consumers (U.S. city average) for the 6-
month period ending with December 1987; or
"(ii) in a subsequent year, is the amount specified in
i' '• this subparagraph for the preceding year increased by
the percentage increase in the consumer price index for
all urban consumers (U.S. city average) for the 12-
month period ending with June of that preceding year.
"(3) PAYMENT FOR ITEMS REQUIRING FREQUENT AND SUBSTAN-
TIAL SERVICING.—
"(A) IN GENERAL.—Pajrment for a covered item (such as
ventilators , aspirators, IPPB machines, and nebulizers) for
which there must be frequent smd substantial servicing in
order to avoid risk to the patient's health shall be made on
a monthly basis for the rental of the item and the amount
recognized is the amount specified in subparagraph (B).
"(B) PAYMENT AMOUNT.—For purposes of subparagraph
(A), the amount specified in this subparagraph, with respect
to an item or device furnished in a carrier service area—
"(i) in 1989 is the average allowable charge in the
area for the rental of the item or device for the 12-
101 STAT. 1330-102 PUBLIC LAW 100-203—DEC. 22, 1987
month period ending with June 1987,^^ increased by
fx t the percentage increase in the consumer price index for
all urban consumers (U.S. city average) for the 6-month
period ending with December 1987; or
"(ii) in a subsequent year, is the amount specified in
this subparagraph for the preceding year increased by
the percentage increase in the consumer price index for
all urban consumers (U.S. city average) for the 12-
month period ending with June of that preceding year.
"(4) PAYMENT FOR CERTAIN CUSTOMIZED ITEMS.—Payment with
respect to a covered item that is uniquely constructed or
substantially modified to meet the specific needs of an individ-
ual patient shall be made in a lump-sum ^* amount for the
purchase of the item in a payment amount based upon the
carrier's individual consideration for that item, and for the
reasonable and necessary maintenance and service for parts
and labor not covered by the supplier's or manufacturer's war-
ranty, when necessary during the period of medical need, and
the amount recognized for such maintenance and service shall
be paid on a lump-sum, as needed basis b£ised upon the carrier's
individual consideration for that item.
"(5) PAYMENT FOR OXYGEN AND OXYGEN EQUIPMENT.—
"(A) IN GENERAL.—Payment for oxygen and oxygen
equipment shall be made on a monthly basis in the monthly
payment amount recognized under paragraph (9) for oxygen
and oxygen equipment (other than portable oxygen equip-
ment), subject to subpargigraphs (B) and (C).
"(B) ADD-ON FOR PORTABLE OXYGEN EQUIPMENT.—When
portable oxygen equipment is used, but subject to subpara-
graph (D), the payment amount recognized under subpara-
graph (A) shall be increased by the monthly payment
amount recognized under paragraph (9) for portable oxygen
equipment.
"(C) VOLUME ADJUSTMENT.—When the attending physi-
cian prescribes an oxygen flow rate—
"(i) exceeding 4 liters per minute, the payment
;< amount recognized under subparagraph (A), subject to
subparagraph (D), shall be increased by 50 percent, or
"(ii) of less than 1 liter per minute, the payment
amount recognized under subparagraph (A) shall be
decreased by 50 percent.
"(D) LIMIT ON ADJUSTMENT.—When portable oxygen
equipment is used and the attending physician prescribes
an oxygen flow rate exceeding 4 liters per minute, there
shall only be an increase under either subparagraph (B) or
(C), whichever increase is larger, and not under both such
subparagraphs.
"(6) PAYMENT FOR OTHER COVERED ITEMS (OTHER THAN DUR-
ABLE MEDICAL EQUIPMENT).—Pa3rment for other covered items
(other than durable medical equipment and other covered items
described in paragraph (3), (4), or (5)) shall be made in a lump-
sum amount for the purchase of the item in the amount of the
purchase price recognized under paragraph (8).
" Copy read "June, 1987,",
** Copy read "lump sum".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-103
"(7) PAYMENT FOR OTHER ITEMS OF DURABLE MEDICAL EQUIP-
MENT.—
"(A) I N GENERAL.—In the case of an item of durable
medical equipment not described in paragraphs (2) through
(6)-
"(i) payment shall be made on a monthly basis for the
rental of such item during the period of medical need
O^ut pajrments under this subparagraph may not
extend over a period of continuous use of longer than
15 months), and, subject to subparagraph (B), the
amount recognized for each such month is 10 percent of
the purchase price recognized under paragraph (8) with
respect to the item;
(ii) during the succeeding 6-month period of medical
need, no pajnnent shall be made for rental or servicing
of the item; and
"(iii) during the first month of each succeeding 6-
month period of medical need, a service and mainte-
nance pa3rment may be made (for parts and labor not
covered by the supplier's or manufacturer's warranty,
as determined by the Secretary to be appropriate for
the particular type of durable medical equipment) and
the amount recognized for each such 6-month period is
the lower of (I) a reasonable and necessary mainte-
nance and servicing fee established by the carrier, or
(II) 10 percent of the total of the purchase price recog-
nized under paragraph (8) with respect to the item.
The Secretary shall determine the meaning of the term
'continuous' in subparagraph (A).
"(B) RANGE FOR RENTAL AMOUNTS.—
"(i) FOR 1989.—For items furnished during 1989, the
payment amount recognized under subparagraph (AXi)
shall not be more than 115 percent, and shall not be
less than 85 percent, of the prevailing charge estab-
lished for rental of the item January 1987, increased by
the percentage increase in the consumer price index for
all urbgm consumers (U.S. city average) for the 6-month
period ending with December [ ].^*^
"(ii) FOR 1990.—For items furnished during 1990, the
payment amount recognized under subparagraph (AXi)
shall not be more than the maximum amount estab-
' lished under clause (i), and shall not be less than the
minimum amount established under such clause, for
1989, each such amount increased by the percents^e
increase in the consumer price index for all urban
consumers (U.S. city average) for the 12-month period
ending with June 1989.
"(8) PURCHASE PRICE RECOGNIZED FOR MISCELLANEOUS DEVICES
AND ITEMS.—For purposes of paragraphs (6) and (7), the amount
that is recognized under this paragraph as the purchase price
for a covered item is the amount described in subparagraph (C)
of this paragraph, determined as follows:
(A) COMPUTATION OF LOCAL PURCHASE PRICE.—Each car-
rier under section 1842 shall compute a base local purchase
price for the item as follows:
"(i) The carrier shall compute a base local purchase
price, for each item described—
'** Copy not legible.
91-194 O - 90 - 29 : QL.3 Part 2
101 STAT. 1330-104 PUBLIC LAW 100-203—DEC. 22, 1987
-<irj|!S .; oir • "(I) in paragraph (6) equal to the average allow-
able charge in the locality for the purchase of the
'.'--• item for the 12-month period ending with June
1987, or
"(11) in paragraph (7) equal to the average of the
QH purchase prices on the claims submitted on an
assignment-related basis for the unused item sup-
plied during the 6-month period ending with
December 1986.
"(ii) The carrier shall compute a local purchase price,
with respect to the furnishing of each particular item—
"(I) in 1989, equal to the base local purchase
price computed under clause (i) increased by the
'souV^iii 1' percentage increase in the consumer price index
, •^il'>i\^--b'- X. for all urban consumers (U.S. city average) for the
6-month period ending with December 1987, or
"(II) in 1990, 1991, or 1992, equal to the local
purchase price computed under this clause for the
previous year increased by the percentage increase
in the consumer price index for all urban con-
sumers (U.S. city average) for the 12-month period
ending with June of the previous year.
"(B) COMPUTATION OF REGIONAL PURCHASE PRICE.—With
respect to the furnishing of a particular item in each region
(as defined in section 1886(dX2XD)), the Secretary shall
compute a regional purchase price—
"(i) for 1991, and for 1992, equal to the average
(weighted by relative volume of all claims among car-
riers) of the local purchase prices for the carriers in the
region computed under subparagraph (AXiiXII) for the
>Hj i>n year, and
"(ii) for each subsequent year, equal to the regional
purchase price computed under this subparagraph for
the previous year increased by the percentage increase
in the consumer price index for all urban consumers
(U.S. city average) for the 12-month period ending with
June of the previous year.
"(C) PURCHASE PRICE RECOGNIZED.—For purposes of para-
graphs (6) and (7) and subject to subparagraph (D), the
amount that is recognized under this paragraph as the
purchase price for each item furnished—
"(i) in 1989 or 1990, is 100 percent of the local pur-
chase price computed under subparagraph (A)(iiXI);
"(ii) in 1991, is the sum of (I) 75 percent of the local
purchase price computed under subparagraph (AXiiXII)
for 1991, and (II) 25 percent of the regional purchase
price computed under subparagraph (B) for 1991;
"(iii) in 1992, is the sum of (I) 50 percent of the local
purchase price computed under subparagraph (AXiiXII)
for 1992, and (II) 50 percent of the regional purchase
^ price computed under subparagraph (B) for 1992; and
"(iv) in 1993 or a subsequent year, is the regional
purchase price computed under subparagraph (B) for
that year.
"(D) RANGE ON AMOUNT RECOGNIZED.—The amount that is
e2J? recognized under subparagraph (C) as the purchase price
for an item furnished— .„ .; „ ... „.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-105
"(i) in 1991, may not exceed 130 percent, and may not
be lower than 80 percent, of the average of the pur-
chase prices recognized under such subparagraph for
all the carrier service areas in the United States in that
year; and
Is . J "(ii) in a subsequent year, may not exceed 125 per-
cent, and may not be lower than 85 percent, of the
l^-)Ki[ '*:. average of the purchase prices recognized under such
•! vb subparagraph for all the carrier service areas in the
United States in that year.
I "(9) MONTHLY PAYMENT AMOUNT RECOGNIZED WITH RESPECT TO
OXYGEN AND OXYGEN EQUIPMENT.—For purposcs of paragraph
(5), the amount that is recognized under this paragraph for
payment for oxygen and oxygen equipment is the monthly
payment amount described in subparagraph (C) of this para-
graph. Such amount shall be computed separately (i) for all
items of oxygen and oxygen equipment (other than portable
oxygen equipment) and (ii) for portable oxygen equipment (each
such group referred to in this paragraph as an 'item ).
"(A) COMPUTATION OF LOCAL MONTHLY PAYMENT RATE.—
Each carrier under this section shall compute a base local
payment rate for each item as follows:
,^.;^, ^ "(i) The carrier shall compute a base local average
monthly payment rate per beneficiary as an amount
equal to (I) the total reasonable charges for the item
during the 12-month period ending with December
1986, divided by (II) the total number of months for all
A , . beneficiaries receiving the item in the area during the
12-month period for which the carrier made payment
for the item under this title.
"(ii) The carrier shall compute a local average
monthlv payment rate for the item applicable—
(I) to 1989, equal to 95 percent of the base local
average monthly payment rate computed under
clause (i) for the item increased by the percentage
increase in the consumer price index for all urban
consumers (U.S. city average) for the 12-month
period ending with December 1987, or
"(II) to 1990 and to 1991, equal to the local
'^'''^' average monthly payment rate computed under
this clause for the item for the previous year in-
creased by the percentage increase in the
^'"^ consumer price index for all urban consumers (U.S.
city average) for the 12-month period ending with
June of the previous year.
"(B) COMPUTATION OF REGIONAL MONTHLY PAYMENT
RATE.—With respect to the furnishing of an item in each
region (as defined in section 1886(dX2XD)), the Secretary
shall compute a regional monthly payment rate—
"(i) for 1991, and 1992, equal to the average (weighted
by relative volume of all claims among carriers) of the
local monthly pajmnient rates for the carriers in the
region computed under subparagraph (AXiiXID for the
year, and
"(ii) for each subsequent year, equal to the regional
monthly pajmtient rates computed under this subpara-
graph for the previous year increased by the percent-
101 STAT. 1330-106 PUBLIC LAW 100-203—DEC. 22, 1987
age increase in the consumer price index for all urban
consumers (U.S. city average) for the 12-month period
"^1 ending with June of the previous year.
' "(C) MONTHLY PAYMENT AMOUNT RECOGNIZED.—For pur-
poses of paragraph (5), the amount that is recognized under
this paragraph as the base monthly payment amount for
each item furnished—
"(i) in 1989 and in 1990, is 100 percent of the local
'^<^ '^ average monthly payment rate computed under
subparagraph (A)(iiXI) for the item;
"(ii) in 1991, is the sum of (I) 75 percent of the local
average monthly payment rate computed under
subparagraph (AXii)(II) for the item for 1991, and (II) 25
percent of the regional monthly payment rate com-
^. puted under subparagraph (BXi) for the item for 1991;
' "(iii) in 1992, is the sum of (I) 50 percent of the local
'' average monthly payment rate computed under
subparagraph (AXiiXII) for the item for 1992, and (II) 50
percent of the regional monthly payment rate com-
^" ^ ' puted under subparagraph (BXi) for the item for 1992;
" and
"(iv) in a subsequent year, is the regional monthly
? ' payment rate computed under subparagraph (B) for the
item for that year.
"(D) RANGE ON AMOUNT RECOGNIZED.—The amount that is
recognized under subparagraph (C) as the base monthly
payment amount for an item furnished—
"(i) in 1991, may not exceed 130 percent, and may not
be lower than 80 percent, of the average of the base
,^ _ . monthly pa)rment amounts recognized under such
subparagraph for all the carrier service areas in the
^> ' United States in that year; and
"(ii) in a subsequent year, may not exceed 125 per-
cent, and may not be lower than 85 percent, of the
average of the base monthly payment amounts recog-
nized under such subparagraph for all the carrier serv-
ice areas in the United States in that year.
IJ. ^ "(10) EXCEPTIONS AND ADJUSTMENTS.—
"(A) AREAS OUTSIDE CONTINENTAL UNITED STATES.—Excep-
tions to the amounts recognized under the previous provi-
sions of this subsection shall be made to take into account
the unique circumstances of covered items furnished in
ri Alaska, Hawaii, or Puerto Rico,
"(B) ADJUSTMENT FOR INHERENT REASONABLENESS.—For
fv covered items furnished on or after January 1, 1991, the
•f Secretary is authorized to apply the provisions of para-
?; graphs (8) and (9) (other than subparagraph (D)) of section
1842(b) to covered items and suppliers of such items.
b "(C) TRANSCUTANEOUS ELECTRICAL NERVE STIMULATOR
(TENS).—In order to permit an attending physician time to
determine whether the purchase of a transcutaneous elec-
trical nerve stimulator is medically appropriate for a
particular patient, the Secretary may determine an appro-
priate payment amount for the initial rental of such item
i for a period of not more than 2 months. If such item is
subsequently purchased, the pajonent amount with respect
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-107
to such purchase is the payment amount determined under
paragraph (2).
"(11) IMPROPER BILLING AND REQUIREMENT OF PHYSICIAN
ORDER.—
"(A) IMPROPER BILLING FOR CERTAIN RENTAL ITEMS.—Not-
withstanding any other provision of this title, a supplier of
a covered item for which payment is made under this
subsection and which is furnished on a rental basis shall
continue to supply the item without charge (other than a
charge provided under this subsection for the servicing of
the item) after rental payments may no longer be made
under this subsection. If a supplier knowingly and willfully
violates the previous sentence, the Secretary may apply
sanctions against the supplier under subsection (j)(2) in the
same manner such sanctions may apply with respect to a
physician.
"(B) REQUIREMENT OF PHYSICIAN ORDER.—The Secretary is
authorized to require, for specified covered items, that pay-
ment may be made under this subsection with respect to
the item only if a physician has communicated to the
supplier, before delivery of the item, a written order for the
item.
"(12) REGIONAL CARRIERS.—The Secretary may designate, by
regulation under section 1842, one carrier for each region (as
defined in section 1886(dX2)(D)) to process all claims within the
region for covered items under this section.
"(13) COVERED ITEM.—In this subsection, the term 'covered
item' means—
"(A) durable medical equipment (as defined in section
1861(n)), including such equipment described in section
1861(m)(5);
BtK;.: "(B) prosthetic devices (described in section 1861(sX8)), but
not including parenteral and enteral nutrition nutrients,
supplies, and equipment; and
"(C) orthotics and prosthetics (described in section
1861(sX9));
but does not include intraocular lenses.
"(14) CARRIER.—In this subsection, any reference to the term
'carrier' includes a reference, with respect to durable medical
equipment furnished by a home health agency as part of home
health services, to a fiscal intermediary.",
(c) STUDY AND EVALUATION.—(1) The Secretary of Health and 42 u s e 1395m
Human Services shall monitor the impact of the amendments made note.
by this section on the availability of covered items and shall evalu-
ate the appropriateness of the volume adjustment for oxygen and
oxygen equipment under section 1834(aX5XC) of the Social Security
Act (as amended by subsection (b) of this section). The Secretary Reports.
shall report to Congress, by not later than January 1, 1991, on such
impact and on the evaluation and shall include in such report
recommendations for changes in payment methodology for covered
items under section 1834(a) of such Act.
(2) Before January 1, 1991, the Secretary may not conduct any
demonstration project respecting alternative methods of payment
for covered items under title XVIII of the Social Security Act.
(3) In this subsection, the term "covered item" has the meaning
given such term in section 1834(aX13) of the Social Security Act (as
amended by subsection (b) of this section).
101 STAT. 1330-108 PUBLIC LAW 100-203—DEC. 22, 1987
(4) The Secretary shall, upon written request, provide the data
and information used in determining the payment amounts for
covered items under section 1834(a) of the Social Security Act.
Reports. (5) The Comptroller General shall conduct a study on the appro-
priateness of the level of payments allowed for covered items under
the medicare program, and shall report to Congress on the results of
such study (including recommendations on the transition to regional
or national rates) by not later than January 1, 1991. Entities fur-
nishing such items which fail to provide the Comptroller General
with reasonable access to necessary records to carry out the study
under this paragraph are subject to exclusion from the medicare
program under section 1128(a) of the Social Security Act.
(d) CONFORMING AMENDMENTS.—
^. ^_ , (1) Section 1814 of such Act (42 U.S.C. 1395f) is amended—
(A) in subsection (jX2XB), by amending subparagraph (B)
,; to read as follows:
X- "(B) Section 1834(aXlXB).", and
(B) in subsection (k), by striking all that follows "shall be"
«, and insert "the amount described in section 1834(a)(1).".
li' (2) Section 1832(a) of such Act (42 U.S.C. 1395k(a)) is
amended—
/ (A) in paragraph (2XA), by inserting "(other than items
ki described in subparagraph (G))" after "services";
(B) in paragraph (2XB), by inserting "(other than items
described in subparagraph (G))" after "medical and other
biv ^' health services"; and
(C) in paragraph (2)—
"*"• (i) by striking "and" at the end of subparagraph (E),
AO: Ttt. (ii) by striking the period at the end of subparagraph
(F) and inserting "; and", and
*' (iii) by adding at the end the following new subpara-
graph:
"(G) covered items (described in section 1834(aX13)) fur-
nished by a provider of services or by others under arrange-
ments with them made by a provider of services.".
42 use 1395/. (3) Section 1833(a) of such Act (42 U.S.C. 13951(a)) is
amended—
_ .., , (A) in paragraph (1)—
"" (i) by striking "; and" at the end of clause (G) and
•.y&C.
tj„^. . inserting a comma, and
?;^ n 313^^ ^ (ii) by adding at the end the following: "and (I) with
respect to covered items (described in section
i.^. 1834(aX13)), the amounts paid shall be the amounts
'•-. described in section 1834(aXl),";
>q&y /l (B) in paragraph (2)—
,{ (i) by striking "and (F)" and inserting "(F), and (G)",
f, and
i>f (ii) in subparagraph (A), by striking "(other than
durable medical equipment)";
^os i '**>(C) by striking "and" at the end of paragraph (3);
tc '^(D) by striking the period at the end of pareigraph (4)
and inserting "; and"; and
'*^ Copy read "(B)".
'*= Copy read "(C)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-109
3«(E) by adding at the end the following new paragraph:
"(5) in the case of covered items (described in section
1834(aX13)) the amounts described in section 1834(aKl).".
(4) Section 1866(aX2XA) of such Act (42 U.S.C. 1395cc(a)(2XA))
is amended by adding at the end the following new sentence:
"Notwithstanding the first sentence of this subparagraph, a >• •
home health agency m a y charge such a n individual or person, ""'"
with respect t o covered items subject t o payment under section
1834(a), t h e a m o u n t of a n y deduction imposed under section
1833(b) a n d 20 percent of t h e payment basis described in section
1834(aX2).".
(5) Section 1889 of such Act (42 U.S.C. 1395zz) is repealed. 42 u s e I395zz.
(e) EFFECTIVE DATE.—The a m e n d m e n t s made by this section shall 42 u s e I395f
apply t o covered items furnished on or after J a n u a r y 1, 1989. "ote.
SEC. 4063. PAYMENT FOR INTRAOCULAR LENSES.
(a) PROVIDED I N PHYSICIAN'S OFFICE.—Section 1842 of t h e Social
Security Act (42 U.S.C. 1395u), a s previously amended is amended—
(1) in subsection (bXll)(C), as inserted by section 4046(aXlXC)
of this subtitle—
(A) by inserting "(i)" after "(C)" and by adding at the end
the following new clause:
"(ii) The reasonable charge for an intraocular lens implanted
during cataract surgery in a physician's office may not exceed the
actual acquisition cost for the lens (taking into account any dis-
count) plus a handling fee (not to exceed 5 percent of such actual
acquisition cost).", and
(B)^^ in subparagraph (D), as so redesignated and as :. >cii3 s*
amended by section 4046(aXl) of this subtitle, by inserting
"or item" after "service" or "services" each place either
appears; and
(2) in subsection (jXlXD), a s added b y section 4045(cXlXB) of
this subtitle a n d a s amended by 4046(aX2) of this subtitle—
(A) in clause (ii), by striking " a n d " a t t h e end of subclause
(IV), by redesignating subclause (V) a s subclause (VI) a n d
by inserting before such subclause t h e following n e w
^1- subclause:
"(FV) a reasonable charge limit is established under subsec-
W tion (bXllXCXii), and"; and
(B) in clause (iii)—
(i) by striking "or" at the end of subclause (I),
-ri ir (ii) in subclause (II), by striking "(bXllXO" and
inserting "(bXllXCXi)",
(iii) by striking the period at the end of subclause (II)
and inserting "; or", and
£-'.«' -^ (iv) by adding at the end the following new subclause: * ' ''^: ,"t
"(III) under subsection (bXUXCXii), the payment allowance *''^
established under such subsection.".
(b) PROVIDED IN AMBULATORY SURGICAL CENTERS.—Section
1833(iX2XA) of such Act (42 U.S.C. 13951(iX2XA)) is amended— 42 u s e 1395Z.
(1) by striking "and" at the end of clause (i),
(2) by striking the period at the end of clause (ii) and inserting
",and^and
•xmH
(3) by inserting after clause (ii) t h e following n e w clause:
3*"'Copy read "(D)".
"» Copy read "(C)".
101 STAT. 1330-110 PUBLIC LAW 100-203—DEC. 22, 1987
"(iii) in the case of implantation of an intraocular lens during
cataract surgery includes payment which is reasonable and
related to the cost of acquiring the class of lens involved.".
42 u s e 1395/ (c) EFFECTIVE DATE.—The amendments made by this section shall
note. apply to items furnished on or after July 1,1988.
42 u s e 1395u (d) SPECIAL RULE.—With respect to the^^ establishment of a
note. reasonable charge limit under section 1842(b)(ll)(C)(ii) of the Social
Security Act, in applying section 1842(jXlXDXi) of such Act, the
matter beginning with "plus" shall be considered to have been
deleted.
SEC. 4064. CLINICAL DIAGNOSTIC LABORATORY TESTS.
42 u s e 1395/ (a) LIMITATION ON CHANGES IN FEE SCHEDULES.—
note. (1) 3-MONTH FREEZE IN FEE SCHEDULES.—Notwithstanding any
other provision of law, any change in the fee schedules for
clinical laboratory diagnostic laboratory tests under part B of
title XVIII of such Act which would have become effective for
tests furnished on or after January 1,1988, shall not be effective
for tests furnished during the 3-month period beginning on
January 1,1988.
(2) ^fo CPi INCREASE IN 1988.—Notwithstanding any other
provision of law, the Secretary of Health and Human Services
shall not adjust the fee schedules established under section
1833(h) of the Social Security Act for 1988 to take into account
any increase in the consumer price index.
Oa) FEE SCHEDULES AND PAYMENT LIMITS.—
(1) REBASING OF FEE SCHEDULES FOR CERTAIN AUTOMATED AND
42 u s e 1395/. SIMILAR TESTS.—Section 1833(hX2) of the Social Security Act (42
U.S.C. 13951(hX2)) is amended by adding at the end the follow-
ing: "In establishing fee schedules under the first sentence of
this par£igraph with respect to automated tests and tests (other
than cytopathology tests) which before July 1, 1984, the Sec-
retary made subject to a limit based on lowest charge levels
under the sixth sentence of section 1842(bX3) performed after
March 31,1988, the Secretary shall reduce by 8.3 percent the fee
,/j schedules otherwise established for 1988.".
(2) NATIONWIDE PAYMENT UMITS.—Section 1833(hX4XB) of
^2^. such Act is amended—
(A) in clause (i), by striking "January" and inserting
"April", and
(B) by amending clause (ii) to read £is follows:
I "(ii) March 31, 1988, and so long as a fee schedule for the test
has not been established on a nationwide basis, is equal to the
median of all the fee schedules established for that test for that
laboratory setting under paragraph (1).".
42 u s e 1395/ (3) EFFECTIVE DATES.—The amendments made by paragraphs
note. (1) and (2) shall apply with respect to services furnished on or
after April 1,1988.
42 u s e 1395/ (4) GAO STUDY OF FEE SCHEDULES.—The Comptroller General
note. shall conduct a study of the level of the fee schedules estab-
lished for clinical diagnostic laboratory services under section
^r- 1833(hX2) of the Social Security Act to determine, bsised on the
costs of, and revenues received for, such tests the appropriate-
Reports. ;*^ ness of such schedules. The Comptroller General shall report to
the Congress on the results of such study by not later than
January 1,1990. Suppliers of such tests which fail to provide the
Comptroller General with reasonable access to necessary
records to carry out the study under this paragraph are subject
' Copy read "the the".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-111
to exclusion from the medicare program under section 1128(a) of
the Social Security Act.
(c) LIMITATION ON APPLICATION OF 2 PERCENT HOSPITAL LAB DIF-
FERENTIAL.—Section 1833(hX2) of such Act is amended by striking 42 USC 1395Z.
"hospital laboratory" and inserting "laboratory in a sole community
hospital".
(d) INTERMEDIATE SANCTIONS.—
(1) Part B of title XVIII of such Act is amended by adding at
the end thereof the following new section:
"INTERMEDIATE SANCTIONS FOR PROVIDERS OF CLINICAL DIAGNOSTIC
LABORATORY TESTS 35b
"SEC. 1846. (a) If the Secretary determines that any provider or 42 USC 1395w-2.
clinical laboratory certified for participation under this title no
longer substantially meets the conditions of participation specified
under this title with respect to the provision of clinical diagnostic
laboratory tests under this part, the Secretary may (for a period not
to exceed one year) impose intermediate sanctions developed pursu- t
ant to subsection (b), in lieu of canceling immediately the certifi-
cation of the provider or clinical laboratory.
"(b)(1) The Secretary shall develop and implement—
"(A) a range of intermediate sanctions to apply to providers or
certified clinical laboratories under the conditions described in
subsection (a), and
"(B) appropriate procedures for appealing determinations
relating to the imposition of such sanctions.
"(2)(A) The intermediate sanctions developed under paragraph (1)
shall include—
"(i) directed plans of correction,
"(ii) civil fines and penalties,
"(iii) payment for the costs of onsite monitoring by an agency
responsible for conducting certification surveys, and
"(iv) suspension of all or part of the payments to which a
provider or certified clinical laboratory would otherwise be
entitled under this title with respect to clinical diagnostic lab-
oratory tests provided on or after the date in which the Sec-
retary determines that intermediate sanctions should be im-
posed pursuant to subsection (a).^*
"(B) The sanctions specified in subparagraph (A) are in addition to
sanctions otherwise available under State or Federal law.
"(3) The Secretary shall develop and implement specific proce-
dures with respect to when and how each of the intermediate
sanctions developed under paragraph (1) is to be applied, the
amounts of any fines, and the severity of each of these penalties.
Such procedures shall be designed so as to minimize the time
between identification of violations and imposition of these sanc-
tions and shall provide for the imposition of incrementally more
severe fines for repeated or uncorrected deficiencies.".
(2) The amendment made by paragraph (1) shall become Effective date.
effective on January 1,1990. 42 USC l395w-2
(e) STATE CERTIFICATION OF HIGH-VOLUME PHYSICIAN OFFICE "°*®
LABS.—
(1) Section 1861(s) of such Act (42 U.S.C. 1395x(s)) is amended,
in the sentence following paragraph (11), by inserting "a labora-
^""Copy read "TESTS" ".
' • Subparagraphs " '(i)", " '(ii)", " '(iii)", and " '(iv)" indented incorrectly.
101 STAT. 1330-112 PUBLIC LAW 100-203—DEC. 22, 1987
tory not independent of a physician's office that has a volume of
clinical diagnostic laboratory tests exceeding 5,000 per year"
after "physician's office,".
42 u s e 1395x (2) The amendment made by paragraph (1) shall apply to
note. diagnostic tests performed on or after January 1,1990.
SEC. 4065. RETURN ON EQUITY PAYMENTS TO OUTPATIENT DEPART-
MENTS.
(a) IN GENERAL.—Section 1861(vXl) of the Social Security Act (42
U.S.C. 1395x(vXl)) is amended by adding at the end thereof the
following new subparagraph:
"(S) Such regulations shall not include provision for specific rec-
ognition of any return on equity capital with respect to hospital
outpatient departments.".
Ot>) CONFORMING AMENDMENT.—Section 18810t)X2)(C) of such Act
(42 U.S.C. 1395rra)X2XC)) is amended by striking "facilities" and
inserting "facilities (other than hospital outpatient departments)".
42 u s e 1395x (c) EFFECTIVE DATE.—The amendments made by this section shall
note. become effective on January 1,1988.
SEC. 4066. PAYMENTS TO HOSPITAL OUTPATIENT DEPARTMENTS FOR
RADIOLOGY.
(a) AMOUNTS PAYABLE.—Section 1833 of the Social Security Act (42
U.S.C. 13951) is amended—
(1) in subsection (aX2)— iU ' '^ .-..,•,:,'> '^,^.:.
(A) by striking "and" in subparagraph (C),
ii) ii- (B) by adding "and" at the end of subparagraph (D), and
(C) by adding at the end thereof the following new
subparagraph:
"(E) with respect to—
•jn-jL "(i) outpatient hospital radiology services (including
diagnostic and therapeutic radiology, nuclear medicine
and CAT scan procedures, magnetic resonance imag-
ing, and ultrasound and other imaging services), and
*(ii) effective for procedures performed on or after
October 1, 1989, diagnostic procedures (as defined by
the Secretary) described in section 1861(sX3) (other
than diagnostic x-ray tests and diagnostic laboratory
, , ,j tests),
the amount determined under subsection (n);"; and
(2) by adding at the end, as previously amended, the following
new subsection:
"(nXlXA) The aggregate amount of the payments to be made for
all or part of a cost reporting period beginning on or after October 1,
1988 under this part for services described in subsection (aX2XE)
shall be equal to the lesser of—
"(i) the amount determined with respect to such services
under subsection (aX2XB), or
"(ii) the blend amount for radiology services and diagnostic
procedures determined in accordance with subparagraph (B).
"(BXi) The blend amount for radiology services and diagnostic
procedures for a cost reporting period is the sum of—
"(I) the cost proportion (as defined in clause (ii)) of the amount
described in subparagraph (AXi); and
"(II) the charge proportion (as defined in clause (iiXID) of 62
percent (for services described in subsection (aX2XEXi)), or (for
procedures described in subsection (aX2XEXii)), 42 percent or
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-113
such other percent established by the Secretary (or carriers
acting pursuant to guidelines issued by the Secretary) based on
prevailing charges established with actual charge data, of 80
percent of the prevailing charge for participating physicians for
the same services as if they were furnished in a physician's
office in the same locality £is determined under section 1842(b).
"(ii) In this subparagraph:
"(I) The term 'cost proportion' means 65 percent for all or any
part of cost reporting periods which occur in fiscal year 1989
and 50 percent for other cost reporting periods.
"(II) The term 'charge proportion' means 35 percent for all or
any parts of cost reporting periods which occur in fiscal year
1989 and 50 percent for other cost reporting periods.".
(b) CONFORMING AMENDMENT.—Section 1833(a)(2)(B) of such Act
(42 U.S.C. 13951(aX2XB)) is amended in the matter preceding clause
(i) by striking "(C) or (D)" and inserting "(C), (D), or (E)".
(c) EFFECTIVE DATE.—The amendments made by subsection (a) 42 USC 1395/
shall apply with respect to outpatient hospital radiology services note.
furnished on or after October 1, 1988, and other diagnostic proce-
dures performed on or after October 1,1989.
SEC. 4067. UPDATING MAXIMUM RATE OF PAYMENT PER VISIT FOR
INDEPENDENT RURAL HEALTH CLINICS.
(a) IN GENERAL.—Section 1833 of the Social Security Act (42 U.S.C.
13951) is further amended by inserting after subsection (e) the
following new subsection: c-. - >>' S*
"(f) In establishing limits under subsection (a) on payment for -'-^
rural health clinic services provided by independent rural health
clinics, the Secretary shall establish such limit, for services pro-
vided—
. ,J "(1) in 1988, after March 31, at $46, and
"(2) in a subsequent year, at the limit established under this
subsection for the previous year increased by the percentage
increase in the medicare economic index (referred to in the
fourth sentence of section 1842(bX3)) applicable to physicians'
services furnished as of the first day of that year.".
0)) REPORT ON RATES.—The Secretary of Health and Human Serv- 42 USC 1395/
ices shall report to Congress, by not later than March 1,1989, on the note,
adequacy of the amounts paid under title XVIII of the Social
Security Act for rural health clinic services provided by independent
rural health clinics.
(c) EFFECTIVE DATE.—The amendment made by subsection (a) shall 42 USC 1395/
apply to services furnished on or after April 1,1988. note.
SEC. 4068. PAYMENT FOR AMBULATORY SURGERY AT EYE, AND EYE AND
EAR, SPECIALTY HOSPITALS.
(a) IN GENERAL.—Section 1833(iX3XBXii) of the Social Security Act
(42 U.S.C. 13951(iX3XBXii)) is amended—
(1) by striking "In" and inserting "Subject to the last sentence
of this clause, in"; and
(2) by adding at the end thereof the following:
"In the case of a hospital that makes application to the Secretary
and demonstrates that it specializes in eye services or eye and ear
services (as determined by the Secretary), receives more than 30
percent of its total revenues from outpatient services and was an eye
specialty hospital or an eye and ear specialty hospital on October 1,
1987, the cost proportion and ASC proportion in effect under
101 STAT. 1330-114 PUBLIC LAW 100-203—DEC. 22, 1987
subclauses (I) and (II) for cost reporting periods beginning in fiscal
year 1988 shall remain in effect for cost reporting periods beginning
in fiscal year 1989 or fiscal year 1990.".
(b) DEVELOPMENT OF PROSPECTIVE PAYMENT METHODOLOGY FOR
OUTPATIENT HOSPITAL SERVICES.—Section 1135(d) of the Social Secu-
rity Act (42 U.S.C. 1320b-5(d)) is amended—
(1) by adding at the end of paragraph (3) the following: "In
{ establishing such rates, the Secretary shall consider whether a
r differential payment rate is appropriate for speciality hos-
pitals."; and
^ (2) by adding at the end the following new paragraph:
"(7) The Secretary shall solicit the views of the Prospective Pay-
ment Assessment Commission in developing the systems under
paragraphs (1) and (6), and shall include in the Secretary's reports
under this subsection any views the Commission may submit with
respect to such systems.".
42 use 1395Z. (c) EFFECTIVE DATE.—The amendments made by subsection (a)
shall be effective as if included in the amendment made by section
9343(aXlXB) of the Omnibus Budget Reconciliation Act of 1986.
Subpart C—Eligibility and Benefits Changes
SEC. 4070. COVERAGE OF MENTAL HEALTH SERVICES.
(a) OUTPATIENT SERVICES UNDER PART B.—Section 1833(c) of the
42 use 1395/ Social Security Act (42 U.S.C. 13951(c)) is amended—
"ote. (1) by striking "$312.50" and inserting "$1375.00"; and
(2) by adding at the end thereof the following:
"For purposes of this subsection, the term 'treatment' does not
include brief office visits (as defined by the Secretary) for the sole
purpose of prescribing or monitoring prescription drugs used in the
treatment of such disorders.".
(b) PARTIAL HOSPITAUZATION COVERAGE.—
(1) Section 1861(sX2XB) of such Act (42 U.S.C. 1395x(sX2XB)) is
amended by inserting "and partial hospitalization services in-
cident to such services" before the semicolon.
"^ ^^ ^ (2) Section 1861 of such Act (42 U.S.C. 1395x) is amended by
adding at the end thereof the following new subsection:
"(ffKl) The term 'partial hospitalization services' means the items
and services described in paragraph (2) prescribed by a physician
and provided under a program described in paragraph (3) under the
supervision of a physician pursuant to an individualized, written
plan of treatment established and periodically reviewed by a physi-
cian (in consultation with appropriate staff participating in such
program), which plan sets forth the physician's diagnosis, the type,
amount, frequency, and duration of the items and services provided
under the plan, and the goals for treatment under the plan.
"(2) The items and services described in this paragraph are—
"(A) individual and group therapy with physicians or
psychologists (or other mental health professionals to the extent
authorized under State law),
"(B) occupational therapy requiring the skills of a qualified
occupational therapist,
•y "(C) services of social workers, trained psychiatric nurses, and
other staff trained to work with psychiatric patients,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-115
"(D) drugs and biologicals furnished for therapeutic purposes
(which cannot, as determined in accordance with regulations, be
self-administered),
"(E) individualized activity therapies that are not primarily
recreational or diversionary,
"(F) family counseling (the primary purpose of which is treat-
ment of the individual's condition),
"(G) patient training and education (to the extent that train-
,y, ing and educational activities are closely and clearly related to
'IT individual's care and treatment),
"(H) diagnostic services, and
"(I) such other items and services as the Secretary may
provide (but in no event to include meals and transportation);
that are reasonable and necessary for the diagnosis or active treat-
ment of the individual's condition, reasonably expected to improve
or maintain the individual's condition and functional level and to
prevent relapse or hospitalization, and furnished pursuant to such
guidelines relating to frequency and duration of services as the
Secretary shall by regulation establish (taking into account accepted
norms of medical practice and the reasonable expectation of patient
improvement).
(3) A program described in this paragraph is a program which is
hospital-based or hospital-affiliated (as defined by the Secretary) and
which is a distinct and organized intensive ambulatory treatment
service offering less than 24-hour-daily care.".
(3) Section 1835(aX2) of such Act (42 U.S.C. 1395n(aX2)) is
amended—
(A) by striking "and" at the end of subparagraph (D);
(B) by striking the period at the end of subparagraph (E)
and inserting "; £md"; and
*' (C) by inserting sifter subparagraph (E) the following new
subparagraph:
"(F) in the case of partial hospitalization services, (i) the
individual would require inpatient psychiatric care in the
ef absence of such services, (ii) an individualized, written plan
for furnishing such services has been established by a
phjrsician and is reviewed periodically by a physician, and
tifi (iii) such services are or were furnished while the individual
is or was under the care of a physician.".
&1 (4) Section 1833(c) of such Act, as amended by subsection (a), is
further amended at the end thereof by inserting "or partial
hospitalization services that are not directly provided by a
ph3rsician" before the period.
(c) EFFECTIVE DATE; IMPLEMENTATION.—
(1) The amendment made b^ subsection (aXD shall apply with 42 u s e 1395/
respect to calendar years beginning with 1988; except that with note.
respect to 1988, any reference in section 1833(c) of the Social
Security Act, as amended by subsection (a), to "$1375.00" is
deemed a reference to "$562.50". The amendment made by
subsection (aX2) shall apply to services furnished on or after
January 1,1989.
(2XA) The amendments made by subsection (b) shall become 42 u s e 1395x
effective on the date of enactment of this Act. note.
(B) The Secretary of Health and Human Services shall imple-
ment the amendments made by subsection (b) so as to ensure
that there is no additional cost to the medicare program by
reason of such amendments.
101 STAT. 1330-116 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 4071. COVERAGE OF INFLUENZA VACCINE AND ITS ADMINISTRATION.
(a) IN GENERAL.—Section 1861(s)(10)(A) of the Social Security Act
(42 U.S.C. 1395x(a)(10)(A)) is amended by inserting before the semi-
colon the following: "and influenza vaccine and its administration".
42 u s e 1395x (b) CONTINGENT EFFECTIVE D A T E ; DEMONSTRATION PROJECT.—
note. (1) The provisions of subsection (e) of section 4072 of this
subpart shall apply to this section in the same manner as it
"^ applies to section 4072.
t'^ (2) In conducting the demonstration project pursuant to para-
graph (1), in order to determine the cost effectiveness of includ-
ing influenza vaccine in the medicare program, the Secretary of
Health and Human Services is required to conduct a demonstra-
tion of the provision of influenza vaccine as a service for medi-
care beneficiaries and to expend $25,000,000 each year of the
demonstration project for this purpose. In conducting this dem-
onstration, the Secretary is authorized to purchase in bulk
influenza vaccine and to distribute it in a manner to make it
widely available to medicare beneficiaries, to develop projects to
provide vaccine in the same manner as other covered medicare
services in large scale demonstration projects, including state-
wide projects, and to engage in other appropriate use of moneys
to provide influenza vaccine to medicare beneficiaries and
evaluate the cost effectiveness of its use. In determining cost
effectiveness, the Secretary shall consider the direct cost of the
vaccine, the utilization of vaccine which might otherwise not
^- have occurred, the costs of illnesses and nursing home days
avoided, and other relevant factors, except that extended life for
beneficiaries shall not be considered to reduce the cost effective-
ness of the vaccine.
SEC. 4072. PAYMENT FOR THERAPEUTIC SHOES FOR INDIVIDUALS WITH
SEVERE DIABETIC FOOT DISEASE.
(a) COVERAGE UNDER PART B.—Section 1861(s) of the Social Secu-
rity Act (42 U.S.C. 1395x(s)) is amended—
(1) by redesignating paragraphs (12) through (15) as para-
graphs (13) through (16), respectively,
bi (2) by striking out "and" at the end of paragraph (10),
k (3) by striking out the period at the end of paragraph (11) and
inserting "; and", and
ai (4) by inserting after paragraph (11) the following new para-
ift graph:
& "(12) extra-depth shoes with inserts or custom molded shoes
for an individual with diabetes, if—
"(A) the physician who is managing the individual's dia-
XMIJ. ?<>•''• .. betic condition (i) documents that the individual has periph-
eral neuropathy with evidence of callus formation, a history
; of pre-ulcerative calluses, a history of previous ulceration,
foot deformity, or previous amputation, or poor circulation,
and (ii) certifies that the individual needs such shoes under
I' a comprehensive plan of care related to the individual's
diabetic condition;
.«''41 03 ; yi o^c^o* "(B) the particular t3T)e of shoes are prescribed by a
'' •' podiatrist or other qualified physician (as established by the
'Sl:7~T Secretary); and
@' "(C) the shoes are fitted and furnished by a podiatrist or
t other qualified individual (such as a pedorthist or orthotist,
as established by the Secretary) who is not the physician
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-117
described in subparagraph (A) (unless the Secretary finds ,, f
that the physician is the only such qualified individual in
the area).'.
(b) LIMITATION ON BENEFIT.—Section 1833 of such Act (42 U.S.C. 42 USC 1395/.
1395) is amended by inserting after subsection (e) the following new
subsection:
"(fKl) In the case of shoes described in section 1861(s)(12)—
"(A) no payment may be made under this part for the furnish-
ing of more than one pair of shoes for any individual for any
calendar year, and .-.a<|9S
"(B) with respect to expenses incurred in any calendar year,
no more than the limit established under paragraph (2) shall be ni:>Hi¥H
considered as incurred expenses for purposes of subsections (a)
and (b).
Payment for shoes under this part shall be considered to include
payment for any expenses for the fitting of such shoes.
'(2)(A) Except as provided by the Secretary under subparagraphs
(B) and (C), the limit established under this paragraph—
"(i) for the furnishing of one pair of custom molded shoes is
$300;
"(ii) for the furnishing of extra-depth shoes and inserts is—
"(I) $100 for the pair of shoes itself, and
i,« -v „Qj^ ^gQ ^^j. ijjggj.^ fQj. a pg^jj. Qf shoes.
"(B) The Secretary or a carrier may establish limits for shoes that
are lower than the limits established under subparagraph (A) if the
Secretary finds that shoes and inserts of an appropriate quality are
readily available at or below such lower limits.
"(C) For each year after 1988, each dollar amount under subpara-
graph (A) or (B) (as previously adjusted under this subparagraph)
shall be increased by the same percentage increase as the Secretary
provides with respect to durable medical equipment for that year,
except that if such increase is not a multiple of $1, it shall be
rounded to the nearest multiple of $1.
"(3) In this title, the term 'shoes' includes, except for purposes of
subparagraphs (AXii) and (B) of paragraph (2), inserts for extra-
depth shoes.".
(c) MODIFICATION OF EXCLUSION.—Section 1862(aX8) of such Act (42
U.S.C. 1395y(aX8)) is amended by inserting ", other than shoes ../BU ilP
furnished pursuant to section 1861(sX12)" before the semicolon.
(d) CONFORMING AMENDMENTS.—Sections 1864(a), 1865(a),
1902(aX9XC), and 1915(aXlXBXiiXI) of such Act (42 U.S.C. 1395aa(a),
1395bb(a), 1396a(aX9XC), 1396n(aXlXBXiiXI)) are each amended by
striking out "paragraphs (12) and (13)" and inserting "paragraphs
(13) and (14)".
(e) CONTINGENT EFFECTIVE DATE; DEMONSTRATION PROJECT.— 42 use I395x
(1) The amendments made by this section shall become effec- ^°^-
tive (if at all) in accordance with paragraph (2).
(2XA) The Secretary of Health and Human Services (in this
paragraph referred to as the "Secretary"), shall establish a
demonstration project to begin on October 1, 1988, to test the
cost-effectiveness of furnishing therapeutic shoes under the
medicare program to the extent provided under the amend-
ments made by this section to a sample group of medicare
beneficiaries.
(BXi) The demonstration project under subparagraph (A) shall
be conducted for an initial period of 24 months. Not later than Reports.
October 1, 1990, the Secretary shall report to the Congress on
101 STAT. 1330-118 PUBLIC LAW 100-203—DEC. 22, 1987
Effective date. the results of such project. If the Secretary finds, on the basis of
existing data, that furnishing therapeutic shoes under the medi-
care program to the extent provided under the amendments
irii^< :;«0 ij^ made by this section is cost-effective, the Secretary shall include
such finding in such report, such project shall be discontinued,
and the amendments made by this section shall become effec-
tive on November 1,1990.
(ii) If the Secretary determines that such finding cannot be
made on the basis of existing data, such project shall continue
Reports. for an additional 24 months. Not later than April 1, 1993, the
Secretary shall submit a final report to the Congress on the
Effective date. results of such project. The amendments made by this section
shall become effective on the first day of the first month to
begin after such report is submitted to the Congress unless the
report contains a finding by the Secretary that furnishing
therapeutic shoes under the medicare program to the extent
provided under the amendments made by this section is not
cost-effective (in which case the amendments made by this
section shall not become effective).
SEC. 4073. COVERAGE OF CERTIFIED NURSE-MIDWIFE SERVICES.
(a) COVERAGE OF SERVICES.—Section 1861(s)(2) of the Social Secu-
rity Act (42 U.S.C. 1395x(s)(2)) is amended—
(1) by striking "and" at the end of subparagraph (J);
(2) by adding "and" at the end of subparagraph (K); and
(3) by adding at the end thereof the following new subpara-
graph:
"(L) certified nurse-midwife services;".
(b) PAYMENT OF BENEFITS.—
(1) Section 1832(a)(2XB) of such Act (42 U.S.C. 1395k(a)(2)(B)) is
amended—
(A) by striking "and" at the end of clause (ii);
(B) by striking the semicolon at the end of clause (iii) and
inserting a comma; and
(C) by adding at the end thereof the following new clause:
'i^ "(iv) certified nurse-midwife services; and".
42 use 1395Z. (2) Section 1833(a)(1) of such Act (42 U.S.C. 1395k(a)(l)) is
amended—
(A) by striking "and" at the end of clause (F);
(B) by striking "services; and" in clause (G) and inserting
"services,"; and
(C) ^' by adding at the end thereof the following: "and (I)
with respect to certified nurse-midwife services under sec-
.x.v 5^ '^F't tion 1861(s)(2)(L), the amounts paid shall be the amount
"" determined by a fee schedule established by the Secretary
for the purposes of this subparagraph (but in no event more
c than 65 percent of the prevailing charge that would be
allowed for the same service performed by a physician);".
(3) Section 1833 of such Act (42 U.S.C. 13951) is amended by
adding at the end the following new subsection:
"(m) In the case of certified nurse-midwife services for which
pajmient may be made under this part only pursuant to section
1861(s)(2)(L), payment may only be made under this part for such
services on an assignment-related basis.".
»' Ck)py read "(D)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-119
(c) DEFINITION.—Section 1861 of such Act (42 U.S.C. 1395x) is
amended by adding at the end thereof the following new subsection:
"Certified Nurse-Midwife Services
"(ffKD The term 'certified nurse-midwife services' means such -'
services furnished by a certified nurse-midwife (as defined in para-
graph (2)) and such services and supplies furnished as an incident to
his service which the certified nurse-midwife is legally authorized to
perform under State law (or the State regulatory mechanism pro-
vided by State law) as would otherwise be covered if furnished by a
physician or as an incident to a physician's service.
"(2) The term 'certified nurse-midwife' means a registered nurse
who has successfully completed a program of study and clinical
experience meeting guidelines prescribed by the Secretary, or has ..^
been certified by an organization recognized by the Secretary, and
performs services in the area of management of the care of mothers
and babies throughout the maternity cycle.".
(d) 3* CONFORMING CHANGES.—
(1) Section 1905(aX17) of such Act (42 U.S.C. 1396d(aX17)) is
amended by striking "as defined in subsection (m)" and insert-
ing "as defined in section 1861(ff)".
(2) Section 1905 of such Act (42 U.S.C. 1396d) is amended by
striking subsection (m).
(e) ^^ EFFECTIVE DATE.—The amendments made by this section 42 USC 1395k ^
shall be effective with respect to services performed on or after July note. "'
1,1988.
SEC. 4074. COVERAGE OF SOCIAL WORKER SERVICES FURNISHED BY A
HEALTH MAINTENANCE ORGANIZATION TO ITS MEMBERS.
(a) IN GENERAL.—Section 1861(sX2XHXii) of the Social Security Act
(42 U.S.C. 1395x(sX2XHXii)) is amended—
(1) by inserting "or by a clinical social worker (as defined in
subsection (ff))" after '^clinical psychologist (as defined by the
Secretary)"; and
(2) by striking "incident to his services" and inserting "in- • •- f -•
cident to such clinical psychologist's services or clinical social ^'
worker's services".
(b) CuNiCAL SOCIAL WORKER DEFINED.—Section 1861 of such Act
(42 U.S.C. 1395x) is amended by adding at the end the following new
subsection:
"Clinical Social Worker
"(ff) The term 'clinical social worker' means an individual who—
"(1) possesses a master's or doctor's degree in social work;
"(2) after obtaining such degree has performed at least 2 years
of supervised clinical social work; and
"(3XA) is licensed or certified as a clinical social worker by the
State in which the services are performed, or
"(B) in the case of an individual in a State which does not
provide for licensure or certification—
"(i) has completed at least 2 years or 3,000 hours of post-
•»v master's degree supervised clinical social work practice
under the supervision of a master's level social worker in
" Copy read "(c)".
»8 Copy read "(d)".
101 STAT. 1330-120 PUBLIC LAW 100-203—DEC. 22, 1987
an appropriate setting (as determined by the Secretary),
and
"(ii) meets such other criteria as the Secretary estab-
lishes.",
42 u s e 1395x (c) EFFECTIVE DATE.—The amendments made by this section shall
note. be effective with respect to services performed on or after January 1,
1988.
SEC. 4075. CLARIFICATION OF COVERAGE OF DRUGS USED IN IMMUNO-
SUPPRESSIVE THERAPY.
(a) IN GENERAL.—Section 1861(sX2)(J) of the Social Security Act
(42 U.S.C. 1395x(sX2XJ)) is amended by striking "immunosuppressive
drugs" and inserting "prescription drugs used in immuno-
suppressive therapy".
42 u s e 1395x (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall apply to drugs dispensed on or after the date of the enactment
of this Act.
SEC. 4076. SERVICES OF A PHYSICIAN ASSISTANT.
(a) SERVICES COVERED.—Section 1861(sX2XK) of the Social Security
Act (42 U.S.C. 1395x(sX2XK)) is amended by inserting ", in a rural
area (as defined in section 1886(dX2XD)) that is designated, under
section 332(aXlXA) of the Public Health Service Act, as a health
manpower shortage area," after "1905(c))".
42 u s e 1395x (b) EFFECTIVE DATE.—The amendments made by this section shall
note. apply with respect to services furnished on or after January 1, 1989.
SEC. 4077. PSYCHOLOGIST SERVICES IN CLINICS.
(a) COVERAGE OF PSYCHOLOGISTS' SERVICES FURNISHED AT RURAL
HEALTH CUNICS.—
(1) Section 1861(aaXlXB) of the Social Security Act (42 U.S.C.
1395x(aaXlXB)) is amended by striking "physician assistant or
by a nurse practitioner" and inserting "physician assistant or a
nurse practitioner (as defined in paragraph (3)), or by a clinical
psychologist (as defined by the Secretary),'.
42 u s e 1395x (2) The amendment made by paragraph (1) shall be effective
note. with respect to services furnished on or after the date of enact-
ment of this Act.
(b) DIRECT PAYMENT FOR PSYCHOLOGISTS' SERVICES FURNISHED AT A
COMMUNITY MENTAL HEALTH CENTER.—
(1) Section 1861(sX2) of the Social Security Act (42 U.S.C.
1395x(sX2)), as amended, is amended—
(A) by striking "and" at the end of subparagraph (K);
--.; (B) by adding 'and" at the end of subparagraph (L); and
(C) by adding at the end thereof the following new
subparagraph:
"(M) qualified psychologist services;".
(2) Section 1832(aX2XB) of such Act (42 U.S.C. 1395k(aX2XB)) is
amended—
(A) by striking "and" at the end of clause (ii);
(B) by striking the semicolon in clause (iii) and inserting a
comma; and
(C) bv adding at the end thereof the following new clause:
(iv) qualified psychologist services; a n d ' .
42 u s e 1395Z. (3) Section 1833(aXl) of such Act (42 U.S.C. 1395k(aXl)) is
amended—
(A) by striking "and" at the end of subparagraph (G);
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-121
, (B) by striking "services; and" in subparagraph (H) and
inserting "services,";
(C) by adding "and" at the end of subparagraph (I); and
(D) by adding at the end thereof the following new
3 subparagraph: "(J) with respect to qualified psychologist
services under section 1861(sX2XM), the amounts paid shall
be the amount determined by a fee schedule established by
the Secretary for the purposes of this subparagraph;".
(4) The subsection added by section 4073(bX3) of this subpart is 42 u s e 1395/.
amended by inserting "and in the case of qualified psychologists
services for which payment may be made under this part only
pursuant to section 1861(sX2XM)" after "1861(sX2XL)".
(5) Section 1861 of such Act (42 U.S.C. 1395x) is amended by
adding at the end thereof the following new subsection:
"Qualified Psychologist Services
"(gg) The term 'qualified psychologist services' means such serv-
ices and such services and supplies furnished as an incident to his
service furnished by a clinical psychologist (as defined by the Sec-
retary) at a community mental health center (as such term is used
in the Public Health Service Act) which the psychologist is legally
authorized to perform under State law (or the State regulatory
mechanism provided by State law) as would otherwise be covered if
furnished by a physician or as an incident to a physician's
service.".*"
(6) * ^ The amendments made by this subsection shall be Effective date.
pf effective with respect to services performed on or after July 1, 42 u s e 1395k
note.
, 1988.
SEC. 4078. PROVISION OF OFFSITE COMPREHENSIVE OUTPATIENT RE-
HABILITATION SERVICES.
Section 1861(ccXl) of the Social Security Act (42 U.S.C.
1395x(ccXl)) is amended by adding at the end thereof the following:
"In the case of physical therapy, occupational therapy, and speech
pathology services, there shall be no requirement that the item or
service be furnished at any single fixed location if the item or
service is furnished pursuant to such plan and payments are not
otherwise made for the item or service under this title.".
SEC. 4079. DEMONSTRATION PROJECTS TO PROVIDE PAYMENT ON A PRE- 42 u s e 1395mm
« rw ' PAW, CAPITATED BASIS FOR COMMUNITY NURSING AND note.
*' AMBULATORY CARE FURNISHED TO MEDICARE BENE-
FICIARIES.
(a) IN GENERAL.—The Secretary of Health and Human Services (in
this section referred to as the "Secretary") shall enter into an
agreement with not less than four eligible organizations submitting
applications under this section to conduct demonstration projects to
provide payment on a prepaid, capitated basis for community nurs-
ing and ambulatory care furnished to any individual entitled to
benefits under part A and enrolled under part B of title XVIII of the
Social Security Act (other than an individual medically determined
to have end-stage renal disease) who resides in the geographic area
*o Copy read "service.".
*• Ck)py read "(5)".
101 STAT. 1330-122 PUBLIC LAW 100-203—DEC. 22, 1987
served by the organization and enrolls with such organization (in
accordance with subsection (cX2)).
(b) DEFINITIONS OF COMMUNITY NURSING AND AMBULATORY CARE
AND EuGiBLE ORGANIZATION.—As used in this section:
(1) The term "community nursing and ambulatory care"
means the following services:
(A) Part-time or intermittent nursing care furnished by
or under the supervision of registered professional nurses.
'^^ '^' (B) Physical, occupational, or speech therapy.
(C) Social and related services supportive of a plan of
ambulatory care.
(D) Part-time or intermittent services of a home health
¥ci fe^; aide.
(E) Medical supplies (other than drugs and biologicals)
and durable medical equipment while under a plan of care.
(F) Medical and other health services described in para-
graphs (2XHXii) and (5) through (9) of section 1861(s) of the
Social Security Act.
(G) Rural health clinic services described in section
1861(aaXlXC) of such Act.
(H) Certain other related services listed in section
1915(cX4XB) of such Act to the extent the Secretary finds
such services are appropriate to prevent the need for
institutionalization of a patient.
(2) The term "eligible organization" means a public or private
entity, organized under the laws of any State, which meets the
''' following requirements:
. , • (A) The entity (or a division or part of such entity) is
primarily engaged in the direct provision of community
nursing and ambulatory care.
(B) The entity provides directly, or through arrangements
with other qualified personnel, the services described in
paragraph (1).
(C) The entity provides that all nursing care (including
services of home health aids) is furnished by or under the
supervision of a registered nurse.
(D) The entity provides that all services are furnished by
qualified staff and are coordinated by a registered profes-
sional nurse.
(E) The entity has policies governing the furnishing of
"^ .^ community nursing and ambulatory care that are devel-
oped by registered professional nurses in cooperation with
(as appropriate) other professionals.
(F) The entity maintains clinical records on all patients.
(G) The entity has protocols and procedures to assure,
when appropriate, timely referral to or consultation with
other health care providers or professionals.
(H) The entity complies with applicable State and local
laws governing the provision of community nursing and
ambulatory care to patients.
(I) The requirements of subparagraphs (B), (D), and (E) of
section 1876(bX2) of the Social Security Act.
(c) AGREEMENTS WITH EUGIBLE ORGANIZATIONS T O * ^ CONDUCT
DEMONSTRATION PROJECTS.—
*' Copy read "WITH EUGIBLE ORGANIZATIONS TO".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-123
(1) The Secretary may not enter into an agreement with an
eligible oi^anization to conduct a demonstration project under
t h ^ section unless the organization meets the requirements of
this subsection and subsection (d) with respect to members
enrolled with the organization under this section.
(2) The organization shall have an open enrollment period for
the enrollment of individuals under this section. The duration
of such period of enrollment and any other requirement
pertaining to enrollment or termination of enrollment shall be
specified in the agreement with the organization.
(3) The organization must provide to members enrolled with
the organization under this section, through providers and
other persons that meet the applicable requirements of titles
XVIII and XIX of the Social Security Act, community nursing
and ambulatory care (as defined in subsection O^XD) which is
generally available to individuals residing in the geographic
area served by the organization, except that the organization
may provide such members with such additional health care
services as the members may elect, at their option, to have
covered.
(4) The organization must make community nursing and
ambulatory care (and such other health care services as such
individuals have contracted for) available and accessible to each
individual enrolled with the organization under this section,
within the area served by the organization, with reasonable
promptness £md in a manner which assures continuity.
(5) Section 1876(cX5) of the Social Security Act shall apply to
organizations under this section in the same manner as it
applies to organizations under section 1876 of such Act.
(6) The organization must have arrangements, established in
accordance with regulations of the Secretary, for an ongoing
quality assurance program for health care services it provides to
such individuals under the demonstration project conducted
under this section, which program (A) stresses health outcomes
and (B) provides review by health care professionals of the
process followed in the provision of such health care services.
(7) Under a demonstration project under this section—
(A) the Secretary could require the organization to pro-
vide financial or other assurances (includmg financial risk-
sharing) that minimize the inappropriate substitution of
other services under title XVIII of such Act for community
nursing services; and
(B) if the Secretary determines that the organization has
failed to perform in accordance with the requirements of
the project (including meeting fincmcial responsibility
requirements under the project, any pattern of dispropor-
tionate or inappropriate institutionalization) the Secretory
shall, after notice, terminate the project.
(d) DETERMINATION OF PER CAPITA PAYMENT RATES.—
(1) The Secretary shall determine for each 12-month period in
which a demonstration project is conducted under this section,
and shall announce (in a mcmner intended to provide notice to
interested parties) not later than three months before the begin-
ning of such period, with respect to each eligible organization
conducting a demonstration project under this section, a per
capita rate of pajonent for each class of individuals who are
enrolled with such organization who are entitled to benefits
101 STAT. 1330-124 PUBLIC LAW 100-203—DEC. 22, 1987
under part A and enrolled under part B of title XVIII of the
Social Security Act.
(2XA) Except as provided in paragraph (3), the per capita rate
a of payment under paragraph (1) shall be determined in accord-
ance with this paragraph.
' < (B) The Secretary shall define appropriate classes of members,
based on age, disability status, and such other factors as the
Secretary determines to be appropriate, so as to ensure actuar-
;; ial equivalence. The Secretary may add to, modify, or substitute
for such classes, if such changes will improve the determination
of actuarial equivalence.
(C) The per capita rate of pa5mient under paragraph (1) for
each such class shall be equal to 95 percent of the adjusted
average per capita cost (as defined in subparagraph (D)) for that
class.
(D) For purposes of subparagraph (C), the term 'adjusted
average per capita cost' means the average per capita amount
that the Secretary estimates in advance (on the basis of actual
s experience, or retrospective actuarial equivalent based upon an
adequate sample and other information and data, in a geo-
ct graphic area served by an eligible organization or in a similar
area, with appropriate adjustments to assure actuarial equiva-
lence) would be payable in any contract year for those services
covered under parts A and B of title XVIII of the Social Security
Act and types of expenses otherwise reimbursable under such
parts A and B which are described in subparagraphs (A)
o: through (G) of subsection (bXl) (including administrative costs
ii incurred by organizations described in sections 1816 and 1842 of
such Act), if the services were to be furnished by other than an
eligible organization.
(3) The Secretary shall, in consultation with providers, health
policy experts, and consumer groups develop capitation-based
reimbursement rates for such classes of individuals entitled to
benefits under part A and enrolled under part B of the Social
Security Act as the Secretary shall determine. Such rates shall
.*-. be applied in determining per capita rates of payment under
paragraph (1) with respect to at least one eligible organization
conducting a demonstration project under this section.
(4XA) In the case of an eligible organization conducting a
demonstration project under this section, the Secretary shall
make monthly pa)anents in advance and in accordance with the
rate determined under paragraph (2) or (3), except as provided
in subsection (eX3XB), to the organization for each individual
enrolled with the organization.
(B) The amount of payment under paragraph (2) or (3) may be
retroactively adjusted to take into account any difference be-
tween the actual number of individuals enrolled in the plan
under this section and the number of such individuals estimated
to be so enrolled in determining the amount of the advance
m payment.
(5) The payment to an eligible orgsmization under this section
for individuals enrolled under this section with the organization
and entitled to benefits under part A and enrolled under part B
of the Social Security Act shall be made from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund established under such Act in
m, such proportions from each such trust fund as the Secretary
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-125
deems to be fair and equitable taking into consideration benefits
attributable to such parts A and B, respectively.
(6) During any period in which an individual is enrolled with
an eligible organization conducting a demonstration project
under this section, only the eligible organization (and no other
individual or person) shall be entitled to receive payments from
the Secretary under this title for community nursing and
ambulatory care (as defined in subsection (b)(1)) furnished to the
individual.
(e) RESTRICTION ON PREMIUMS, DEDUCTIBLES, COPAYMENTS, AND
COINSURANCE.—
(1) In no case may the portion of an eligible organization's
premium rate and the actuarial value of its deductibles, coinsur-
ance, and copayments charged (with respect to community nurs-
ing and ambulatory care) to individuals who are enrolled under
this section with the organization, exceed the actuarial value of ^^ ,^ ^ ^
the coinsurance and deductibles that would be applicable on the
average to individuals enrolled under this section with the
organization (or, if the Secretary finds that adequate data are
not available to determine that actuarial value, the actuarial
value of the coinsurance and deductibles applicable on the
average to individuals in the area, in the State, or in the United
States, eligible to enroll under this section with the organiza-
tion, or other appropriate data) and entitled to benefits under
part A and enrolled under part B of the Social Security Act, if
they were not members of an eligible organization.
(2) If the eligible organization provides to its members en-
rolled under this section services in addition to community
nursing and ambulatory care, election of coverage for such
additional services shall be optional for such members and such
organization shall furnish such members with information on
the portion of its premium rate or other charges applicable to
such additional services. In no case may the sum of^
(A) the pwrtion of such organization's premium rate
charged, with respect to such additional services, to mem-
#iJis» bers enrolled under this section, and
(B) the actuarial value of its deductibles, coinsurance, and
'^^ S- copayments charged, with respect to such services to such
members
exceed the adjusted community rate for such services (as de-
fined in section 1876(eX3) of the Social Security Act).
(3XA) Subject to subparagraphs (B) and (C), each agreement to
conduct a demonstration project under this section shall provide
that if—
(i) the adjusted community rate, referred to in paragraph
(2), for community nursing and ambulatory care covered
- '^ under parts A and B of title XVIII of the Social Security
Act (as reduced for the actuarial value of the coinsurance
and deductibles under those parts) for members enrolled
under this section with the organization,
is less than
(ii) the average of the per capita rates of payment to be
made under subsection (dXD at the beginning of the 12-
month period (as determined on such basis as the Secretary
determines appropriate) described in such subsection for
members enrolled under this section with the organization.
101 STAT. 1330-126 PUBLIC LAW 100-203—DEC. 22, 1987
the eligible organization shall provide to such members the
additional benefits described in section 1876(g)(3) of the Social
Security Act which are selected by the eligible organization and
which the Secretary finds are at least equal in value to the
difference between that average per capita payment and the
adjusted community rate (as so reduced).
(B) Subparagraph (A) shall not apply with respect to any
organization which elects to receive a lesser payment to the
extent that there is no longer a difference between the average
per capita payment and adjusted community rate (as so
reduced).
(C) An organization conducting a demonstration project under
this section may provide (with the approval of the Secretary)
that a part of the value of such additional benefits under
subparagraph (A) be withheld and reserved by the Secretary as
provided in section 1876(g)(5) of the Social Security Act.
Contracts. (4) The provisions of paragraphs (3), (5), and (6) of section
1876(g) of the Social Security Act shall apply in the same
manner to agreements under this section as they apply to risk-
sharing contracts under section 1876 of such Act, and, for this
purpose, any reference in such paragraphs to paragraph (2) is
deemed a reference to paragraph (3) of this subsection.
(5) Section 1876(e)(4) of the Social Security Act shall apply to
eligible organizations under this section in the same manner as
it applies to eligible organizations under section 1876 of such
Act.
(f) COMMENCEMENT AND DURATION OF PROJECTS.—Each dem-
onstration project under this section shall begin not later than July
1, 1989, and shall be conducted for a period of three years.
(g) REPORT.—Not later than January 1, 1992, the Secretary shall
submit to the Congress a report on the results of the demonstration
projects conducted under this section.
SEC. 4080. PART B PREMIUM.
Section 1839 of the Social Security Act (42 U.S.C. 1395r) is
amended—
(1) in subsection (e), by striking "1989" each place it appears
and inserting in lieu thereof "1990";
(2) in subsection (0(1), by striking "or 1987" and inserting in
lieu thereof "1987, or 1988"; and
(3) in subsection (fK2), by striking "or 1988" and inserting in
lieu thereof "1988, or 1989".
Subpart D—Other Provisions
SEC. 4081. SUBMISSION OF CLAIMS TO SUPPLEMENTAL INSURANCE
CARRIERS.
(a) IN GENERAL.—Section 1842(h)(3) of the Social Security Act (42
U.S.C. 1395u(hX3)) is amended by inserting "(A)" after "(3)" and by
adding at the end the following new subparagraph:
"(B) The Secretary shall establish a procedure whereby an individ-
ual enrolled under this part may assign, in an appropriate manner
on the form claiming a benefit under this part for an item or service
furnished by a participating physician or supplier, the individual's
rights of payment under a medicare supplemental policy (described
in section 1882(gXl)) in which the individual is enrolled. In the case
such an assignment is properly executed and a claims determination
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-127
is made by a carrier with a contract under this section, the carrier
shall transmit to the private entity issuing the medicare supple-
mental policy notice of such fact and including such information as
the Secretary determines is generally provided to enable the entity
to decide whether (and the amount of) any payment is due under the
policy. The Secretary may enter into arrangements for the transmit-
tal of such information to entities electronically. The Secretary shall
impose user fees for the transmittal of information under this
subparagraph, whether electronically or otherwise.".
(b) MEDIGAP POUCY STANDARDS.—Section 1882 of such Act (42
U.S.C. 1395ss) is amended—
(1) in subsection (bXD—
(A) by amending subparagraph (B) to read as follows:
"(B) includes requirements equal to or more stringent than
' the requirements described in paragraphs (2) and (3) of subsec-
tion (c);",
*3 (B) by adding "and" at the end of subparagraph (C),
~c and
*^ (C) by inserting after subparagraph (C) the following
new subparagraph:
"(D) provides the Secretary periodically (but at least an-
nually) with a list containing the name and address of the issuer
of each such policy and the name and number of each such
policy (including an indication of policies that have been pre-
viously approved, newly approved, or withdrawn from approval
since the previous list was provided),";
(2) in subsection (c)—
' (A) by striking "and" at the end of paragraph (1),
(B) by striking the period at the end of paragraph (2) and
inserting "; and ', and
(C) by inserting after paragraph (2) the following new
paragraph:
"(3XA) accepts a notice under section 1842(hX3XB) £is a claims
form for benefits under such policy in lieu of any claims form
otherwise required and agrees to make a payment determina-
tion on the basis of the information contained in such claims
form;
"(B) where such a notice is received—
"(i) provides notice to such physician or supplier and the
beneficiary of the pajrment determination, and
"(ii) provides any appropriate pa3mient directly to the
{ participating physician or supplier involved;
"(C) provides each enroUee at the time of enrollment a card
listing the policy name and number and a single mailing ad-
dress to which notices under section 1842(hX3XB) respecting the
policy are to be sent;
"(D) agrees to pay any user fees established under section
1842(hX3XB) with respect to information transmitted to the
issuer of the policy; and
"(E) provides to the Secretary at least annually, for transmit-
tal to carriers, a single mailing address to which notices under
section 1842(hX3XB) respecting the policy are to be sent.".
(c) EFFECTIVE DATES.—(1) The amendment made by subsection (a) Contracts.
shall apply to contracts with carriers for clsiims for items and 42 USC I395u
*' Paragraphs (B) and (C) were indented wrong.
101 STAT. 1330-128 PUBLIC LAW 100-203—DEC. 22, 1987
services furnished by participating physicians and suppliers on or
after January 1,1989.
42 u s e 1395SS (2)(A) The amendments made by subsection (b) shall apply to
note. medicare supplemental policies as of January 1, 1989 (or, if ap-
plicable, the date established under subparagraph (B)).
(B) In the case of a State which the Secretary of Health and
Human Services identifies as—
(i) requiring State legislation (other than legislation appro-
priating funds) in order for medical supplemental policies to be
i changed to meet the requirements of section 1882(cX3) of the
Social Security Act, and
(ii) having a legislature which is not scheduled to meet in
1988 in a legislative session in which such legislation may be
considered,
the date specified in this subparagraph is the first day of the first
calendar quarter beginning after the close of the first legislative
session of the State legislature that begins on or after January 1,
1989, and in which legislation described in clause (i) may be
considered.
SEC. 4082. REVISION OF PART B HEARINGS.
(a) CLARIFICATION OF O B R A AMENDMENT.—Section 1869(b)(3XB) of
the Social Security Act (42 U.S.C. 1395ff(b)(3)(B)) is amended *^ by
striking "chapter 5" and inserting "section 553".
(b) EXPEDITED ADMINISTRATIVE HEARING WHERE ONLY ISSUES OF
LAW.—Section 1869(b) of such Act (42 U.S.C. 1395ffrb)) is amended by
adding at the end the following new paragraph:
"(5) In an administrative hearing pursuant to paragraph (1),
where the moving party alleges that there are no material issues of
fact in dispute, the administrative law judge shall make an expe-
dited determination as to whether any such facts are in dispute and,
if not, shall determine the case expeditiously.".
(c) TIMELY CARRIER HEARINGS ON PART B APPEALS.—Section
1842(bX5) of such Act (42 U.S.C. 1395u(bX5)) is amended—
(1) by inserting "(A)" after "(5)", and
(2) by adding at the end the following new subparagraph:
"(B) The Secretary shall establish standards for evaluating car-
riers' performance of reviews of initial carrier determinations and of
fair hearings under paragraph (3XC), under which a carrier is
expected—
- "(i) to complete such reviews, within 45 days after the date of
a request by an individual enrolled under this part for such a
'' review, in 95 percent of such requests, and
"(ii) to make a final determination, within 120 days after the
date of receipt of a request by an individual enrolled under this
part for a fair hearing under paragraph (3XC), in 90 percent of
such cases.".
42 u s e 1395u (d) GAO STUDY.—The Comptroller General shall conduct a study
note. concerning the cost effectiveness of requiring hearings with a car-
rier under part B of title XVIII of the Social Security Act before
having a hearing before an administrative law judge respecting
Reports. carrier determinations under that part. The Comptroller General
shall report to the (Dongress on the results of such study by not later
than June 30,1989.
42 u s e 1395ff (e) EFFECTIVE DATES.—(1) The amendment made by subsection (a)
note. shall take effect on the date of the enactment of this Act.
'Copy read "is amended is amended".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-129
(2) The amendment made by subsection (b) shall apply to requests
for hearings filed after the end of the 60-day period beginning on the
date of the enactment of this Act.
(3) The amendments made by subsection (c) shall apply to evalua- 42 u s e 1395u
tion of performance of carriers under contracts entered into or note.
renewed on or after October 1,1988.
SEC. 4083. PROVISIONS RELATING TO PHYSICIAN PAYMENT REVIEW
COMMISSION.
(a) REVISION OF APPOINTMENT PROCESS FOR THE PHYSICIAN PAY-
MENT REVIEW COMMISSION.—
(1) IN GENERAL.—Section 1845(a) of the Social *^^ Security Act
(42 U.S.C. 1395w-l(a)(3)) is amended—
.J, (A) in paragraph (1), by striking "with expertise in the
provision and financing of physicians' services" and insert-
>0: ing "with national recognition for their expertise in health
economics, physician reimbursement, medical practice, and
other related fields"; and
(B) in paragraph (3), by striking the Isist sentence.
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 42 u s e 1395W-1
shall apply to appointments made after the date of the enact- note.
ment of this Act.
Ot)) TREATMENT OF EMPLOYEES FOR CERTAIN PURPOSES.—
(1) IN ** GENERAL.—Section 1886(eX6)(D) of the Social Security
Act (42 U.S.C. 1395ww(e)(6)(D)) is amended by adding at the end
the following: "For purposes of pay (other than pay of members
of the Commission) and employment benefits, rights, and privi-
leges, all personnel of the Commission shall be treated as if they
were employees of the United States Senate.".
(2) EFFECTIVE DATE.—The amendments made by paragraph (1) 42 u s e 1395WW
shall take effect on the date of the enactment of this Act. note.
(c) CHANGE IN DATE FOR ANNUAL REPORT OF PHYSICIAN PAYMENT
REVIEW COMMISSION.—
(1) Section 1845(bXl) of such Act (42 U.S.C. 1395w-l(bXl)) is
-i amended by striking "March 1" and inserting "March 31".
^d:^ (2) The amendment made by paragraph (1) shall apply with 42 u s e 1395W-1
respect to reports for years after 1987. note.
SEC. 4084. TECHNICAL AMENDMENTS RELATED TO CERTIFIED REG-
ISTERED NURSE ANESTHETISTS.
(a) I N GENERAL.—Section 1833(1) of the Social Security Act (42
U.S.C. 13951(1)), as added by section 9320(e) of the Omnibus Budget
Reconciliation Act of 1986, is amended—
(1) in paragraph (2), by striking "1985" and inserting "1985
and such other data as the Secretary determines necessary";
and
(2) in paragraph (5XA), by striking "or group practice" each
place it appears and inserting "group practice, or ambulatory
surgical center".
0)) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1395/
shall apply as if included in the amendment made by section note.
9320(eX2) of the Omnibus Budget Reconciliation Act of 1986.
'•^''Copy read "of Social".
** Copyread"General.".
101 STAT. 1330-130 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 4085. MISCELLANEOUS AND TECHNICAL PROVISIONS.
(a) PROMPT SUBMITTAL OF DATA BY SECRETARY.—Section 1845 of
the Social Security Act (42 U.S.C. 1395w-l) is amended by adding at
the end the following new subsection:
"(f)(1) Not later than October 1st of each year (beginning with
1988), the Secretary shall transmit to the Physician Payment
Review Commission, to the Congressional Budget Office, and to the
Congressional Research Service of the Library of Congress national
data (known as the Part B Medicare Annual Data System) for the
previous year respecting part B of this title.
"(2) In order to ensure that the data are available for transmittal
under paragraph (1) on a timely basis, the Secretary shall require, in
the standards and criteria established under section 1842(b)(2), that
carriers submit data for a year under the system referred to in
paragraph (1) not later than July 1st of the following year.
"(3) The Secretary, in consultation with the Physician Payment
Review Commission, the Congressional Budget Office, and the
Congressional Research Service of the Library of Congress, shall
establish and annually revise standards for the data reporting
system described in paragraph (1).
"(4) The Secretary shall also provide to the entities described in
paragraph (1) additional data respecting the program under this
part as may be reasonably requested by them on an agreed-upon
schedule.
"(5) The Secretary shall develop, in consultation with the Physi-
cian Payment Review Commission, the Congressional Budget Office,
and the Congressional Research Service of the Library of Congress,
a system for providing to each of such entities on a quarterly basis
summary data on aggregate expenditures under this part by type of
service and by type of provider. Such data shall be provided not later
than 90 days after the end of each quarter (for quarters beginning
with the calendar quarter ending on March 31, 1989).".
(b) CLARIFICATION OF PENALTIES FOR UNASSIGNED LABORATORY
SERVICES.—
(1) IN GENERAL.—Section 1833(h)(5) of the Social Security Act
(42 U.S.C. 13951(h)(5)) is amended by adding at the end the
following new subparagraph:
"(D) If a person knowingly and willfully and on a repeated basis
bills an individual enrolled under this part for charges for a clinical
diagnostic laboratory test for which payment may only be made on
an assignment-related basis under subparagraph (C), the Secretary
may apply sanctions against the person in the same manner as the
Secretary may apply sanctions against a physician in accordance
with section 1842(j)(2).".
42 u s e 1395/ (2) EFFECTIVE DATE.—The amendment made by paragraph (1)
note. shall apply to procedures performed on or after January 1,1988.
(c) EXTENSION OF MORATORIUM ON LABORATORY PAYMENT DEM-
ONSTRATION.—Section 9204(a) of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended by section 9339(e) of the
42 u s e 1395WW Omnibus Budget Reconciliation Act of 1986, is amended by striking
note. "January 1,1988" and inserting "January 1,1989".
(d) PROMPT PAYMENT FOR COMPREHENSIVE OUTPATIENT RE-
HABIUTATION FACIUTIES.—
(1) Section 1816(cX2)(C) of the Social Security Act (42 U.S.C.
1395h(cX2XC)) is amended by striking "or hospice program" and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-131
inserting "hospice program, comprehensive outpatient re-
habilitation facility, or rehabilitation agency".
(2)(A) The amendment made by paragraph (1) shall apply to 42 u s e 1395h
claims received on or after the date of enactment of this Act. note.
(B) The Secretary of Health and Human Services shall pro-
vide for such timely amendments to agreements under section
1816, and regulations, to such extent as may be necessary to
implement the amendment made by paragraph (1).
(e) CAPACITY TO ** SET GEOGRAPHIC PAYMENT LIMITS.—The Sec- 42 u s e 1395u
retary of Health and Human Services shall develop the capability to note.
implement (for services furnished on or after January 1, 1989)
geographic limits on charges and payments under part B of title
XVIII of the Social Security Act for physicians* services based on
statewide, regional, or national average (or percentile in a distribu-
tion) of prevailing charges or payment amounts (weighted by fre-
quency of services). Any such limits shall take into account adjust-
ments for geographic differences in cost of practice and cost of
living.
(f) DELAY IN EFFECTIVE DATE FOR ESTABUSHING PHYSICIAN IDENTI-
FIER SYSTEM.—Section 9202(g) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 is amended by striking "July 1,1987" and 42 u s e 1395WW
inserting "October 1,1988". note.
(g) DATE FOR APPLYING CIVIL PENAUTIES FOR IMPROPER USE OF
ASSISTANTS IN PERFORMING CATARACT SURGERY.—
(1) Section 1842(k) of the Social Security Act (42 U.S.C.
, 1395u(k)) is amended in paragraphs (1) and (2) by striking
"(j)(2)" each place it appears and inserting "(jX2) in the case of
^i. surgery performed on or after March 1,1987".
(2) The amendment made by paragraph (1) shall be effective 42 u s e 1395u
as if included in section 9307(c) of the Consolidated Omnibus note.
Budget Reconciliation Act of 1985.
(h) UTIUZATION SCREENS FOR PHYSICIAN SERVICES PROVIDED TO 42 u s e 1395u
PATIENTS IN REHABIUTATION HOSPITALS.— note.
(1) The Secretary of Health and Human Services shall estab-
lish (in consultation with appropriate physician groups, includ-
ing those representing rehabilitative medicine) a separate utili-
zation screen for physician visits to patients in rehabilitation
hospitals and rehabilitative units (and patients in long-term
care hospitals receiving rehabilitation services) to be used by
carriers under section 1842 of the Social Security Act in
performing functions under subsection (a) of such section re-
lated to the utilization practices of physicians in such hospitals
and units.
(2) Not later than 12 months after the date of enactment of
this Act, the Secretary of Health and Human Services shsdl
take appropriate steps to implement the utilization screen
established under paragraph (1).
(i) TECHNICAL AMENDMENTS.—
(1) Section 1833(a) of the Social Security Act (42 U.S.C.
13951(a)) is amended—
(A) in paragraphs dXDXi) and (2XDXi), by striking, "on
the basis of an assignment described in section
1842(bX3XBXii), under the procedure described in section
1870(f)(1)," and inserting "on an assignment-related basis";
*' Copy read "TO".
101 STAT. 1330-132 PUBLIC LAW 100-203—DEC. 22, 1987
i, .; (B) in paragraph (1), by striking "and" before "(G)"; and
(C) in subsection (b)(3)(A), by striking "on the basis of an
ddt?. oai? ti= assignment described in section 1842(b)(3)(B)(ii), under the
procedure described in section 1870(f)(1)" and inserting "on
an assignment-related basis".
(2) Section 1833(h)(1)(C) of such Act (42 U.S.C. 13951(h)(1)(C)) is
Ci amended by inserting before the period the following: ", and
ending on December 31, 1989. For such tests furnished on or
iic^ir .fj > .., after January 1, 1990, the fee schedule shall be established on a
-'" nationwide basis".
(3) Section 1833(h)(5XA) of such Act (42 U.S.C. 13951(hX5)(A)) is
amended by striking "and" at the end of clause (i), by striking
the period at the end of clause (ii) and inserting ", and", and by
adding at the end the following new clause:
"(iii) in the case of a clinical diagnostic laboratory test pro-
vided under an arrangement (as defined in section 1861(w)(l))
made by a hospital, payment shall be made to the hospital.".
(4) Section 1835(a)(2)(C) of such Act (42 U.S.C. 1395n(aX2)(C)) is
. amended by striking the second comma at the end of clause (i).
(5) Section 1842(bX3)(C) of such Act (42 U.S.C. 1395u(bX3)(C)) is
„ .rv , .p^ ' amended by striking "not more than" and inserting "less than".
" "^Q (6) Section 1842(hX5) of such Act (42 U.S.C. 1395u(hX5)) is
,^ amended by striking "the" before "participation".
(7) Effective as if included in the enactment of the Omnibus
Budget Reconciliation Act of 1986, section 1842(jXl) of the Social
Security Act (42 U.S.C. 1395u(jXl)) is amended—
(A) in subparagraph (C)(i), by inserting "maximum allow-
able" after "If the physician's ,
. ,, , ,^. (B) in subparagraph (CXv), by striking "1987" and insert-
••' •" ''^ ; ' ing *« "1986^', and
(C) by adding at the end of subparagraph (C) the following
bCfi^.
new clause:
'•• "(vii) In the case of a nonparticipating physician who was a
participating physician during a previous period, for the purpose of
computing the physician's maximum allowable actual charge during
the physician's period of nonparticipation, the physician shall be
deemed to have had a maximum allowable actual charge during the
period of participation, and such deemed maximum allowable actual
charge shall be determined accordingly to clauses (i) through (vi).".
(8) Paragraph (4) of section 1845(e) of the Social Security Act
(42 U.S.C. 1395w-l(e)) is amended by moving the alignment of
each of its provisions (including any clauses therein) 2 ems to
8 the left.
(9) Section 1861(bX4) of such Act (42 U.S.C. 1395x(bX4)) is
amended by striking the comma before "anesthesia" and insert-
ing "and" and by striking "certified" the second place it
appears.
(10) The heading of subsection (g) of section 1861 of such Act
(42 U.S.C. 1395x) is amended to read as follows:
"Outpatient Occupational Therapy Services".
ff (11) Section 1861(s) of such Act (42 U.S.C. 1395x(s)), as
amended by section 9367(a) of this Act, is amended by striking
"which—" before paragraph (15) and all that follows through
*' Copy read "insert".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-133
the end of paragraph (16) and inserting the following: "which
would not be included under subsection (b) if it were furnished
to an inpatient of a hospital.".
(12) Section 1861(vX5)(A) of such Act (42 U.S.C. 1395x(v)(5)(A))
is amended by striking "section 1861(p)" and "section 1861(g)"
and inserting "subsection (p)" and "subsection (g)", respectively.
(13) The heading of subsection (bb) of section 1861 of such Act
(42 U.S.C. 1395x) is amended to read £is follows:
., "Services of a Certified Registered Nurse Anesthetist". X^Miii C>&Jti
(14) The heading of subsection (ee) of section 1861 of such Act
(42 U.S.C. 1395x) is amended to read as follows:
"Discharge Planning Process".
(15) Section 1862(aXl)(A) of such Act (42 U.S.C. 1395y(aXlXA))
is amended by striking "or (D)" and inserting "(D), or (E)".
(16) Section 1862(aX14) of such Act (42 U.S.C. 1395y(aX14)) is
amended by striking "an patient" and inserting "a patient".
(17) Effective as if included in the enactment of the Omnibus
Budget Reconciliation Act of 1986, section 1866(g) of the Social
Security Act (42 U.S.C. 1395cc(g)) is amended by striking "for a
hospital outpatient service" and all that follows through
"subsection (aXlXH)" and inserting "inconsistent with an
arrangement under subsection (aXlXH) or in violation of the
requirement for such an arrangement".
(18) Section 1869(a) of the Social Security Act (42 U.S.C.
1395ffl[a)) is amended by inserting "or a claim for benefits with
respect to home health services under part B" before "shall".
(19) Section 1869(bX2) of such Act (42 U.S.C. 1395ffGt)X2)) is
amended by inserting "and (IXD)" after "paragraph (IXC)" each
place it appears.
(20) Section 1875(cX3XB) of such Act (42 U.S.C. 139511(cX3XB))
is amended by striking "years 1987" and inserting "year 1987".
(21) Effective as if included in the enactment of the Omnibus
Budget Reconciliation Act of 1986—
(A) section 9313(dX3) of such Act is amended by striking 42 u s e 1395//
"2 years after the date of the enactment of this Act" and note.
inserting "January 1,1990";
(B) section 9332(aX3) of such Act is amended by inserting 42 u s e 1395u
before the period at the end the following: "or in increasing note.
the proportion of total payments for physicians' services
which are payments for such services rendered by partici-
pating physicians";
(C) section 9335(jX2) of such Act is amended by inserting 42 u s e 1395rr
before the period at the end the following: "except that, note.
until network administrative organizations are established
under section 1881(cXlXA) of the Social Security Act (as
amended by subsection (dXD of this section), the distribu-
tion of payments described in the leist sentence of section
1881(bX7) of such Act shall be made based on the distribu-
tion of payments under section 1881 of such Act to network
administrative organizations for fiscal year 1986"; and
(D) section 9343 of such Act is amended— 42 u s e 1395/.
(i) amending subparagraph (A) of subsection (eX2) to
read as follows:
101 STAT. 1330-134 PUBLIC LAW 100-203—DEC. 22, 1987
"(2XA) Section 1833 (42 U.S.C. 13951) is amended—
"(i) in subsection (aXlXF), by striking '(iX3)' and inserting
'(iX4y,and
"(ii) in subsection (bX3), by striking 'or under subsection
(iX2)or(iX4)'.";
42 u s e 1395/ (ii) in subsection (hX2), by striking "(d)" and inserting
note. "(c)" and by adding at the end the following: "The
amendments made by subsection (c) shall apply to serv-
ices furnished after June 30,1987."; and
42 u s e 1395/ (iii) in subsection (hX4), by striking "(c)" and insert-
note. ing "(d)".
PART 4—PEER REVIEW ORGANIZATIONS
SEC. 4091. CONTRACT PROVISIONS.
(a) EXTENSIONS OF PEER REVIEW CONTRACT PERIOD.—
42 u s e 1320C-2 (1) ONE-TIME EXTENSIONS TO PERMIT STAGGERING OF EXPIRA-
note.
TION DATES.—
(A) IN GENERAL.—In order to permit the Secretary of
Health and Human Services an adequate time to complete
contract renewal negotiations with utilization and quality
control peer review organizations under part B of title XI of
the Social Security Act and to provide for a staggered
period of contract expiration dates, notwithstanding section
1153(c) of such Act, the Secretary may provide for exten-
sions of existing contracts, but the total of such extensions
may not exceed 24 months for any contract.
(B) EFFECTIVE DATE,—The amendment made by subpara-
graph (A) shall apply to renewals occurring on or after the
date of the enactment of this Act.
(2) 3"YEAR CONTRACT PERIOD.—"
(A) Section 1153(cX3) of such Act (42 U.S.C. 1320c-2(cX3))
is amended by striking "two" and "biennial" and inserting
"three" and "triennial", respectively.
42 u s e 1320C-2 (B) The amendment made by subparagraph (A) shall
note. apply with respect to contracts entered into or renewed on
or after the date of the enactment of this Act.
(b) CONTRACT REQUIREMENTS.—
(1) Section 1153 of the Social Security Act (42 U.S.C. 1320c-2)
is amended by adding at the end the following new subsection:
Federal Register, "(hXD The Secretary shall publish in the Federal Register any
publication. new policy or procedure adopted by the Secretary that affects
substantially the performance of contract obligations under this
section not less than 30 days before the date on which such policy or
procedure is to take effect. This paragraph shall not apply to the
extent it is inconsistent with a statutory deadline.
Federal Register, "(2) The Secretary shall publish in the Federal Register the
publication. general criteria and standards used for evaluating the efficient and
effective performance of contract obligations under this section and
shall provide opportunity for public comment with respect to such
criteria and standards.
Reports. "(3) The Secretary shall regularly furnish each peer review
organization with a contract under this section with a report that
documents the performance of the organization in relation to the
performance of other such organizations.". - .. ..~
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-135
(2) Section 1153(e) of such Act (42 U.S.C. 1320c-2(e)) is
amended—
(A) by inserting "(1)" after "(e)";
"? (B) by striking "Contracting" and inserting "Except as
provided in paragraph (2), contracting"; and
(C) by adding at the end the following new paragraph:
"(2) If a peer review organization with a contract under this
section is required to carry out a review function in addition to any
function required to be carried out at the time the Secretary entered
into or renewed the contract with the organization, the Secretary
shall, before requiring such organization to carry out such addi-
tional function, negotiate the necessary contractual modifications,
including modifications that provide for an appropriate adjustment
(in light of the cost of such additional function) to the amount of
reimbursement made to the organization.".
(3) The amendments made by paragraphs (1) and (2) shall 42 u s e 1320C-2
become effective on the date of enactment of this Act. note.
SEC. 4092. PREFERENCE IN CONTRACTING WITH IN-STATE ORGANIZA-
TIONS.
(a) IN GENERAL.—Section 1153 of the Social Security Act (42 U.S.C.
1320C-2), as amended by section 4091(bKl) of this part, is further
amended by adding at the end the following new subsection:
"(iXD Notwithstanding any other provision of this section, the
Secretary shall not renew a contract with any organization that is
not an in-State organization (as defined in paragraph (3)) unless the
Secretary has first complied with the requirements of paragraph (2).
"(2XA) Not later than six months before the date on which a Federal Register,
contract period ends with respect to an organization that is not an publication.
in-State organization, the Secretary shall publish in the Federal
Register—
"(i) the date on which such period ends; and
"(ii) the period of time in which an in-State organization may
submit a proposal for the contract ending on such date.
"(B) If one or more qualified in-State organizations submits a
proposal within the period of time specified under subparagraph
(AXii), the Secretary shall not automatically renew the current
contract on a noncompetitive basis, but shall provide for competition
for the contract in the same manner as a new contract under
subsection (b).
"(3) For purposes of this subsection, an in-State organization is an
organization that has its primary place of business in the State in
which review will be conducted (or, which is owned by a parent
corporation the headquarters of which is located in such State).".
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 u s e 1320C-2
shall apply with respect to contracts scheduled to be renewed on or note.
after the first day of the eighth month to begin after the date of
enactment of this Act.
SEC. 4093. REQUIRING REASONABLE NOTICE AND OPPORTUNITY FOR
DISCUSSION PRIOR TO DENIAL OF CLAIM.
(a) I N GENERAL.—Section 1154(aX3) of the Social Security Act (42
U.S.C. 1320c-3(aX3)) is amended to read as follows:
"(3XA) Subject to subparagraph (B), whenever the organiza-
tion makes a determination that any health care services or
items furnished or to be furnished to a patient by any practi-
tioner or provider are disapproved, the organization shall
91-194 O - 90 - 30 : QL.3 Part 2
101 STAT. 1330-136 PUBLIC LAW 100-203—DEC. 22, 1987
gi promptly notify such patient and the agency or oi^anization
responsible for the payment of claims under title XVIII of this
Act of such determination.
.^^ "(B) The notification under subparagraph (A) shall not occur
until 20 days after the date that the organization has—
,^. "(i) made a preliminary notification to such practitioner
, or provider of such proposed determination, and
V . "(ii) provided such practitioner or provider an oppor-
Kc tunity for discussion and review of the proposed determina-
tion.
The discussion and review conducted under subparagraph (BXii)
shall not affect the rights of a practitioner or provider to a formal
reconsideration of a determination under this part (as provided
under section 1155).".
42 u s e 1320C-3 (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall apply with respect to determinations made on or after April 1,
>-r, 1988.
SEC. 4094. PEER REVIEW NORMS AND EDUCATION.
(a) STANDARDS APPUED BY PROS.—Section 1154(aX6) of the Social
Security Act (42 U.S.C. 1320c-3(aX6)) is amended by adding after and
below subparagraph (B) thereof the following:
"As a component of the norms described in clause (i) or (ii), the
organization shall take into account the special problems associ-
ated with delivering care in remote rural areas, the availability
of service alternatives to inpatient hospitalization, and other
appropriate factors (such as the distance from a patient's resi-
dence to the site of care, family support, availability of proxi-
mate alternative sites of care, and the patient's ability to carry
jj, out necessary or prescribed self-care regimens) that could ad-
versely affect the safety or effectiveness of treatment provided
on an outpatient basis. .
(b) ON-SITE REVIEW.—Section 1154(a) of such Act (42 U.S.C.
1320c-3(a)) is amended by adding at the end the following new
paragraph:
Contracts. "(15) During each year of the contract entered into under
section 1153(b), the organization shall perform significant on-
site review activities, including on-site review at at least 20
percent of the rural hospitals in the organization's area.".
(c) REPORTS TO PROVIDERS AND EDUCATIONAL ACTIVITIES.—
(IXA) Section 1154(aX6) of such A c t " (42 U.S.C. 132Gc-3(aX6))
n is amended—
tf (i) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively,
^)au SI {,: (ii) by inserting "(A)" after "(6)", and
^, (iii) by adding at the end the following:
ic "(B) The organization shall—
"(i) offer to provide, several times each year, for a physi-
cian representing the organization to meet (at a hospital or
^1^* at a regional meeting) with medical and administrative
staff of each hospital (the services of which are reviewed by
g the organization) respecting the organization's review of
the hospital's services for which payment may be made
under title XVIII, and
*"* Copy read "1154(aK6) such Act".
' s i i V v iv|
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-137
"(ii) publish (not less often than annually) and distribute
to providers and practitioners whose services are subject to
review a report that describes the organization's findings
with respect to the types of cases in which the organization
has frequently determined that (I) inappropriate or un-
necessary care has been provided, (II) services were ren-
dered in an inappropriate setting, or (III) services did not
meet professionally recognized standards of health care.".
(B) The amendments made by subparagraph (A) shall apply to Contracts.
contracts under part B of title XI of the Social Security Act 42 u s e 1320C-3
note.
entered into or renewed more than 6 months after the date of
the enactment of this Act.
(2)(A) Section 1154(aX4XB) of the Social Security Act (42 U.S.C.
1320c-3(aX4XB)) is amended—
(i) by inserting before the period at the end of the first
sentence the following: "and whether individuals enrolled
with an eligible organization have adequate access to
health care services provided by or through such organiza-
tion (as determined, in part, by a survey of individuals
enrolled with the organization who have not yet used the
organization to receive such services). The contract of each
organization shall also provide that with respect to health
care provided by a health maintenance organization or
competitive medical plan under section 1876, the organiza-
tion shall maintain a beneficiary outreach program de-
signed to apprise individuals receiving care under such
section of the role of the peer review system, of the rights of
the individual under such system, and of the method and
purposes for contacting the organization"; and
(ii) by striking "previous sentence" and inserting "pre-
vious two sentences".
(B) Section 1154(aX7)(A) of such Act (42 U.S.C. 1320c-
3(aX7XA)) is amended—
(i) by inserting "(i)" after "(A)", m.
(ii) by striking the semicolon and inserting "; and", and
(iii) by adding at the end thereof the following new clause:
'VRx'<}ti
"(ii) in the case of psychiatric and physical rehabilitation
services, make arrangements to ensure that (to the extent
:> possible) initial review of such services be made by a physi-
cian who is trained in psychiatry or physical rehabilitation
(as appropriate).''.
(C) The amendments made by this paragraph shall apply with Contracts.
respect to contracts entered into or renewed on or after the date 42 u s e 1320C-3
note.
of enactment of this Act.
(d) PEER REVIEW EMPHASIS ON EDUCATIONAL ACTIVITIES.—
(1) Section 1153(c) of such Act (42 U.S.C. 1320c-2(c)) is
amended by adding after and below paragraph (8) the following:
"In evaluating the performance of utilization and quality con-
trol peer review organizations under contracts under this part,
the Secretary shall place emphasis on the performance of such
organizations in educating providers and practitioners (particu-
larly those in rural areas) concerning the review process and
criteria being applied by the organization.".
(2) The amendment made by paragraph (1) shall apply to Contracts.
contracts under part B of title XI of the Social Security Act as of 42 u s e 1320C-2
note.
January 1,1988.
101 STAT. 1330-138 PUBLIC LAW 100-203—DEC. 22, 1987
Contracts. (e) TELECOMMUNICATIONS DEMONSTRATION PROJECTS.—The Sec-
42 u s e 1320C-5 retary of Health and Human Services shall enter into agreements
note.
with entities submitting applications under this subsection (in such
form as the Secretary may provide) to establish demonstration
projects to examine the feasability of requiring instruction and
oversight of rural physicians, in lieu of imposing sanctions, through
use of video communication between rural hospitals and teaching
hospitals under this title. Under such demonstration projects, the
Secretary may provide for payments to physicians consulted via
video communication systems. No funds may be expended under the
demonstration projects for the acquisition of capital items including
computer hardware.
SEC. 4095. PREEXCLUSION HEARINGS.
(a) IN GENERAL.—Section 11560t>) of the Social Security Act (42
U.S.C. 1320c-5(b)) is amended by adding at the end the following
new paragraph:
"(5) Before the Secretary may effect an exclusion under paragraph
(2) in the case of a provider or practitioner located in a rural health
manpower shortage area (HMSA) or in a county with a population
of less than 70,000, the provider or practitioner adversely affected by
the determination is entitled to a hearing before an administrative
law judge (described in section 205(b)) respecting whether the pro-
vider or practitioner should be able to continue furnishing services
to individuals entitled to benefits under this Act, pending comple-
tion of the administrative review procedure under paragraph (4). If
the judge does not determine, by a preponderance of the evidence,
that the provider or practitioner will pose a serious risk to such
individuals if permitted to continue furnishing such services, the
Secretary shall not effect the exclusion under paragraph (2) until
the provider or practitioner has been provided reasonable notice and
opportunity for an administrative hearing thereon under paragraph
(4).".
42 u s e 1320C-5 (b) EFFECTIVE DATE.—^The amendment made by subsection (a)
note. shall apply to determinations made by the Secretary of Health and
Human Services under section 1156(b) of the Social Security Act on
or after the date of the enactment of this Act.
42 u s e 1320C-5 (c) TRANSITION FOR CURRENT CASES.—In the case of a practitioner
note. or person—
(1) for whom a notice of determination under section 1156(b)
of the Social Security Act has been provided within 365 days
before the date of the enactment of this Act,
(2) who has not exhausted the administrative remedies avail-
able under section 11560)X4) of such Act for review of the
determination, and
(3) who requests, within 90 days after the date of the enact-
ment of this Act, a hearing established under this subsection,
the Secretary of Health and Human Services shall provide for a
hearing described in section 1156ft)K5) of the Social Security Act (as
amended by subsection (a) of this section).
42 u s e 1320C-5 (d) REDETERMINATIONS IN CERTAIN CASES.—If, in hearing under
note. subsection (c), the judge does not determine, by a preponderance of
the evidence, that the provider or practitioner will pose a serious
risk to individuals entitled to benefits under title XVIII of the Social
Security Act if permitted to continue or resume furnishing such
services, the Secretary shall not effect the exclusion (or shall sus-
pend the exclusion, if previously effected) under paragraph (2) of
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-139
section 1156(b) of such Act until the provider or practitioner has
been provided an administrative hearing thereon under paragraph
(4) of such section, notwithstanding any failure by the provider or
practitioner to request the hearing on a timely basis.
(e) REPORT ON IMPROVEMENTS IN PROCEDURES FOR IMPOSING SANC-
TIONS.—Not later than one year after the date of enactment of this
Act, the Secretary of Health and Human Services shall report to
Congress on the improved procedures for imposing sanctions against
a practitioner or person under section 1156 of the Social Security
Act established through agreement by the Health Care Financing
Administration, the American Association of Retired Persons, the
American Medical Association, and the Office of the Inspector
General in the Department of Health and Human Services. The
report shall set forth such improved procedures, describe the re-
sponse of physicians and providers to the procedures, assess whether
the procedures effect an appropriate balance between procedural
fairness and the need for ensuring quality medical care, comment on
the alternative provider-patient notification procedure contained in
the agreement, and recommend whether such procedures should
apply to institutional providers of health care services.
SEC. 4096. LIMITATION OF BENEFICIARY LIABILITY FOR SERVICES DIS-
ALLOWED BY PEER REVIEW ORGANIZATIONS.
(a\ p^jii' B SERVICES.
(1) Section 1842 of the Social Security Act (42 U.S.C 1395u) is—
amended—
(A) in subsection (bX3Xii), by inserting "(and to refund
amounts already collected)" after "agrees not to charge",
and by striking 'and (II)" and inserting ", (II) the physician
or other person furnishing such service agrees not to charge
(and to refund amounts already collected) for services for
which payment under this title is denied under section
1154(aX2) by reason of a determination under section
1154(aXlXB), and (III)";
(B) in subsection (IXlXAXiii), by inserting "(I)" after "(iii)"
and by inserting before the comma the following: "or (II)
payment under this title for such services is denied under
i-A^-><'<'} section 1154(aX2) by reason of a determination under sec-
tion 1154(aXlXB)"; and
(C) in subsection (IXIXC), by inserting "in the case de-
scribed in subparagraph (AXiiiXD" after to an individual".
(2) Section 1870(f) of such Act (42 U.S.C. 1395gg(f)) is amended
by striking "that the reasonable charge is the full charge for the
services" each place it appears and inserting "to the terms
specified in subclauses (I) and (II) of section 1842(bX3XBXii) with
respect to the services".
(b) INDEMNIFICATION.—Section 1879(b) of such Act (42 U.S.C.
1395pp(b)) is amended—
(1) in the first sentence, by striking ", subject to the deductible
and coinsurance provisions of this title,", and
(2) by adding at the end the following: "No item or service for
which an individual is indemnified under this subsection shall
be taken into account in applying any limitation on the amount
of items and services for which pajonent may be made to or on
behalf of the individual under this title.".
(c) PATIENT LIABILITY FOR HOSPITAL CHARGES DURING APPEAL OF
DISCHARGE NOTICE.—
101 STAT. 1330-140 PUBLIC LAW 100-203—DEC. 22, 1987
(1) Section 1154(e)(2) of such Act (42 U.S.C. 1320c-3(eX2)) is
'-; amended by adding at the end thereof the following: "If the
^ hospital requests such a review, it shall also notify the patient
that the review has been requested.".
(2) Sections 1154(e)(3XA)(i) (42 U.S.C. 1320c-3(e)(3)(A)(i)) and
1154(e)(3XB) (42 U.S.C. 1320c-3(eX3XB)) of such Act are each
amended by inserting "or (2)" after "paragraph (1)".
42 use 1320C-3 (d) EFFECTIVE DATE.—The amendments made by this section shall
"°*®- apply to services furnished on or after January 1, 1988.
SEC. 4097. SEPARATE FUNDING LEVELS.
(a) AGGREGATE FUNDING.—Section 1866(aXlXFXiXIII) of the Social
Security Act (42 U.S.C. 1395cc(aXlXFXiXIII)) is amended—
(1) by striking "1986" and inserting "1988"; and
t, (2) inserting "and for any direct or administrative costs in-
curred as a result of review functions added with respect to a
subsequent fiscal year" after "inflation".
(b) PAYMENT.—Section 1866(aX4XCXii) of such Act (42 U.S.C.
1395cc(aX4XCXii)) is amended to read as follows:
"(ii) shall not be less in the aggregate for a fiscal year—
"(I) in the case of hospitals, than the amount specified in
paragraph (IXFXiXIII), and
"(II) in the case of facilities and agencies, than the
£i (i;,- amounts the Secretary determines to be sufficient to cover
the costs of such organizations' conducting the activities
^^»;, described in subparagraph (A) with respect to such facilities
or agencies under part B of title XL".
42 use 1395CC (c) EFFECTIVE DATE.—The amendments made by this section
"°'^- shall apply with respect to fiscal years beginning on or after
October 1, 1988.
Subtitle B—Medicaid
• PART 1—ELIGIBILITY AND BENEFITS
SEC. 4101. MEDICAID BENEFITS FOR POOR CHILDREN AND PREGNANT
WOMEN.
"' (a) MEDICAID OPTIONAL COVERAGE FOR ADDITIONAL LOW-INCOME
PREGNANT WOMEN AND CHILDREN.—
(1) Section 1902(1) of the Social Security Act (42 U.S.C.
1396a(l)) is amended— ...
(A) in paragraph (2)—
£ij'.« ... (J) ijy striking "(2) For purposes of paragraph (1)" and
r^.-,y., , . inserting "(2XA) For purposes of paragraph (1) with
"* • ' " respect to individuals described in subparagraph (A) or
,,..^ , ^ (B) of that paragraph",
*"''**'' (ii) by striking "100 percent" and inserting "185 per-
cent", and
',' (iii) by adding at the end the following new subpara-
graph:
"(B) If a State elects, under subsection (aXlOXAXiiXIX), to cover
individuals not described in subparagraph (A) or (B) of paragraph
(1), for purposes of that paragraph and with respect to individuals
not described in such subparagraphs the State shall establish an
income level which is a percentage (not more than 100 percent, or, if
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-141
less, the percentage established under subparagraph (A)) of the
income official poverty line described in subparagraph (A)."; and
(B) in paragraph (3XD), by inserting "appropriate" after
flUoliGci is tiiG
(2) Section 1902(eX4) of such Act (42 U.S.C. 1396a(e)(4)) is
amended by adding at the end the following new sentence:
w "During the period in which a child is deemed under the
preceding sentence to be eligible for medical assistance, the
^^ medical assistance eligibility identification number of the
mother shall also serve as the identification number of the
child, and all claims shall be submitted and paid under such
number (unless the State issues a separate identification
number for the child before such period expires).".
(3) The amendments made by this subsection shall apply to Effective date.
medical assistance furnished on or after July 1,1988. 42 u s e 1396a
note.
(b) ALLOWING ACCELERATED COVERAGE OF CHILDREN U P ' ' * TO
(1) Section 1902(1X1) of such Act (42 U.S.C. 1396a(lXl)) is
-. amended—
(A) by inserting "and" at the end of subparagraph (B),
and
(B) by striking subparagraphs (C) through (F) and insert-
ing the following:
"(C) children born after September 30, 1983, and who have
attained one year of age but have not attained 2, 3, 4, or 5 years
of age (as selected by the State),".
(2XA) Section 1902(1) of such Act is further amended—
i: (i) in paragraph (3XC), by striking ", (C), (D), (E), or (F)"
f and inserting "or (C)", and
(ii) in paragraph (4XBXii), by striking ", (D), (E), or (F)".
(B) Section 1902(eX7) of such Act (42 U.S.C. 1396a(eX7)) is
amended by striking ", (C), (D), (E), or (F)" and inserting
"or (C)".
(C) Section 9401(fK2) of the Omnibus Budget Reconciliation
Act of 1986 is amended by striking "(A)" after "(2)" and by 42 u s e 1396a
note.
striking subparagraphs (B) through (D).
(3) The amendments made by this subsection shall apply with Effective date.
respect to medical assistance furnished on or after July 1, 1988. 42 u s e 1396a
note.
< (c) COVERAGE OF CHILDREN U P *^ TO AGE 8.—
(1) Section 1905(nX2) of such Act (42 U.S.C. 1396d(nX2)) is
Ki amended by striking "is under 5 years of age" and inserting
"has not attained the age of 7 (or any age designated by the
:^ State that exceeds 7 but does not exceed 8)".
(2) Section 1902(1X1XC) of such Act, as amended by subsection
Ot)XlXB), is further amended by striking "or 5 years" and insert-
ing "5, 6, 7, or 8 years".
(3XA) The amendments made by this subsection shall apply to Effective date.
medical assistance furnished on or after October 1,1988. 42 u s e 1396d
note.
(B) For purposes of section 1905(nX2) of the Social Security
8 Act (as amended by subsection (a)) for medical assistance fur-
nished during fiscal year 1989, any reference to "age of 7" is
deemed to be a reference to "age of 6".
(d) PREMIUM.—
**Copy read "UP".
*'Copy read "UP".
101 STAT. 1330-142 PUBLIC LAW 100-203—DEC. 22, 1987
(1) Section 1916 of the Social Security Act (42 U.S.C. 1396o) is
amended—
(A) in subsection (a)(1), by inserting "(except for a pre-
mium imposed under subsection (c))" before the semicolon;
(B) by redesignating subsections (c) and (d) £is subsections
(d) and (e), respectively; and
(C) by inserting after subsection (b) the following new
subsection:
"(cXD The State plan of a State may at the option of the State
provide for imposing a monthly premium (in an amount that does
not exceed the limit established under paragraph (2)) with respect to
an individual described in subparagraph (A) or (B) of section
1902(1)(1) who is receiving medical assistance on the basis of section
; • 1902(a)(10XAXiiXIX) and whose family income (as determined in
accordance with the methodology specified in section 1902(1X3))
equals or exceeds 150 percent of the nonfarm income official poverty
line (as defined by the Office of Management and Budget, and
revised annually in accordance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1981) applicable to a family of the size
involved.
"(2) In no case may the amount of any premium imposed under
paragraph (1) exceed 10 percent of the amount by which the family
income (less expenses for the care of a dependent child) of an
individual exceeds 150 percent of the line described in paragraph (1).
"(3) A State shall not require prepayment of a premium imposed
pursuant to paragraph (1) and shall not terminate eligibility of an
individual for medical assistance under this title on the basis of
failure to pay any such premium until such failure continues for a
period of not less than 60 days. The State may waive payment of any
such premium in any case where the State determines that requir-
ing such payment would create an undue hardship.
"(4) A State may permit State or local funds available under other
programs to be used for payment of a premium imposed under
paragraph (1). Payment of a premium with such funds shall not be
'" counted as income to the individual with respect to whom such
payment is made.".
Effective date. (2) The amendments made by paragraph (1) shall become
42 use 13960 effective on July 1,1988.
note. (e) MiSCELXANEOUS PROVISIONS RELATING TO SERVICES FOR PREG-
NANT W O M E N A N D CHILDREN.—
(1) Section 1902(aX10) of such Act (42 U.S.C. 1396a(aX10)) is
. amended, in subdivision (VII) of the matter following subpara-
graph (E), by striking "and postpartum" and inserting
"postpartum, and family planning".
(2) Section 1902(eX5) of such Act (42 U.S.C. 1396a(eX5)) is
amended by striking "until the end of the 60-day period begin-
^ ning on the last day of her pregnancy" and inserting "through
the end of the month in which the 60-day period (beginning on
the last day of her pregnancy) ends".
(3) Section 1902(1X3XE) of such Act (42 U.S.C. 1396a(l)(3XE)) is
amended by inserting after "title IV" the following: "(except to
the extent such methodology is inconsistent with clause (D) of
subsection (aX17))".
(4) Section 1902(1X4XA) of such Act (42 U.S.C. 1396a(lX4)(A)) is
amended by striking "April 17, 1986" and inserting "July 1,
1987".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-143
(5) Section 1902(1X4) of such Act (42 U.S.C. 1396a(lX4)) is
amended by adding at the end the following new subparagraph:
"(C) A State plan may not provide, in its election of the option of
furnishing medical eissistance to individuals described in paragraph
(1), that such individuals must apply for benefits under part A of
title IV as a condition of applying for, or receiving, medical assist-
ance under this title.".
(6XA) The amendment made by paragraph ^o (i) shall become Effective dates.
effective on the date of enactment of this Act. ^2JJSC I396a
(B) The amendments made by paragraphs (2) and (3) shall be note.
effective as if they had been included in the enactment of the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(C) The amendment made by paragraph (4) shall apply to
elections made on or after the enactment of this Act.
(D) The amendment made by paragraph (5) shall apply £is if
included in the enactment of section 9401 of the Omnibus
Budget Reconciliation Act of 1986.
SEC. 4102. HOME AND COMMUNITY-BASED SERVICES FOR THE ELDERLY.
(a) IN GENERAL.—
(1) Section 1915 of the Social Security Act (42 U.S.C. 1396n) is
amended—
(A) by transferring subsection (d) to the end of such
section and redesignating it as subsection (h), and
(B) by inserting after subsection (c) the following new
subsection:
"(dXD Subject to paragraph (2), the Secretary shall grant a waiver
to provide that a State plan approved under this title shall include
as 'medical assistance' under such plan pajnnent for part or all of
the cost of home or community-based services (other than room and
board) which are provided pursuant to a written plan of care to
individuals 65 years of age or older with respect to whom there has
been a determination that but for the provision of such services the
individuals would be likely to require the level of care provided in a
skilled nursing facility or intermediate care facility the cost of
which could be reimbursed under the State plan.
"(2) A wgdver shall not be granted under this subsection unless the
State provides assurances satisfactory to the Secretary that—
"(A) necessary safeguards (including adequate standards for
provider participation) have been taken to protect the health
and welfare of individuals provided services under the waiver
and to assure financial accountability for funds expended with
respect to such services;
(B) with respect to individuals 65 years of age or older who—
"(i) are entitled to medical assistance for skilled nursing
or intermediate care facility services under the State plan,
',. "(ii) may require such services, and
"(iii) may be eligible for such home or community-based
services under such waiver,
the State will provide for an evaluation of the need for such
skilled nursing facility or intermediate care facility services;
and
"(C) such individuals who are determined to be likely to
require the level of care provided in a skilled nursing facility or
intermediate care facility are informed of the feasible alter-
*° Ckjpy read "paragraphs".
101 STAT. 1330-144 PUBLIC LAW 100-203—DEC. 22, 1987
natives to the provision of skilled nursing facility or intermedi-
ate care facility services, which such individuals may choose if
available under the waiver.
Each State with a waiver under this subsection shall provide to the
Secretary annually, consistent with a reasonable data collection
plan designed by the Secretary, information on the impact of the
waiver granted under this subsection on the type and amount of
/ , ' ; medical assistance provided under the State plan and on the health
',. , and welfare of recipients.
"(3) A waiver granted under this subsection may include a waiver
of the requirements of section 1902(aXl) (relating to statewideness),
section 1902(aX10XB) (relating to comparability), and section
1902(aX10XCXiXni) (relating to income and resource rules applicable
in the community). Subject to a termination by the State (with
notice to the Secretary) at any time, a waiver under this subsection
shall be for an initial term of 3 years and, upon the request of a
State, shall be extended for additional 5-year periods unless the
Secretary determines that for the previous waiver period the assur-
ances provided under paragraph (2) have not been met. A waiver
may provide, with respect to post-eligibility treatment of income of
all individuals receiving services under the waiver, that the maxi-
mum amount of the individual's income which may be disregarded
for any month is equal to the amount that may be allowed for that
purpose under a waiver under subsection (c).
"(4) A waiver under this subsection may, consistent with para-
graph (2), provide medical Eissistance to individuals for case manage-
ment services, homemaker/home health aide services and personal
care services, adult day health services, respite care, and other
medical and social services that can contribute to the health and
well-being of individuals and their ability to reside in a community-
based care setting.
"(5XA) In the case of a State having a waiver approved under this
subsection, notwithstanding any other provision of section 1903 to
the contrary, the total amount expended by the State for medical
assistance with respect to skilled nursing facility services, inter-
mediate care facility services, and home and community-based serv-
ices under the State plan for individuals 65 years of age or older
during a waiver year under this subsection may not exceed the
projected amount determined under subparagraph (B).
"(B) For purposes of subparagraph (A), the projected amount
under this subparagraph is the sum of the following:
"(i) The aggregate amount of the State's medical assistance
under this title for skilled nursing facility services and inter-
mediate care facility services furnished to individuals who have
attained the age of 65 for the base year increased by a percent-
age which is equal to the lesser of 7 percent times the number of
years beginning after the base year and ending before the
waiver vear involved or the sum of—
(I) the percentage increase (based on an appropriate
;/* market-basket index representing the costs of elements of
^"* such services) between the base year and the waiver year
involved, plus
"(II) the percentage increase between the base year and
the W£dver year involved in the number of residents in the
' ^ ^^ State who have attained the age of 65, plus
"(III) 2 percent for each year beginning after the base
year and ending before the waiver year.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-145
"(ii) The aggregate amount of the State's medical assistance
under this title for home and community-based services for
individuals who have attained the age of 65 for the base year
increased by a percentage which is equal to the lesser of 7
percent times the number of years beginning after the base year
and ending before the waiver year involved or the sum of—
"(I) the percentage increase (based on an appropriate
market-basket index representing the costs of elements of
9ff' such services) between the base year and the waiver year ;*
involved, plus ' '"' j , " ^ ,
"(ID the percentage increase between the base year and
the waiver year involved in the number of residents in the
State who have attained the age of 65, plus
"(III) 2 percent for each year beginning after the base
year and ending before the waiver year,
"(iii) The Secretary shall develop and promulgate by regulation Regulations,
(by not later than October 1,1989)—
"(I) a method, based on an index of appropriately weighted
indicators of changes in the wages and prices of the mix of goods J«' t >8U :,|\
and services which comprise both skilled nursing facility serv- 9-ifia
ices and intermediate care facility services (regardless of the
source of payment for such services), for projecting the percent-
age increase for purposes of clause (iXI);
"(II) a method, based on an index of appropriately weighted
indicators of changes in the wages and prices of the mix of goods
and services which comprise home and community-based serv-
ices (regardless of the source of payment for such services), for
projecting the percentage increase for purposes of clause (iiXD;
and
"(III) a method for projecting, on a State specific basis, the
percentage increase in the number of residents in each State
who are over 75 years of age for any period.
Effective on and after the date the Secretary promulgates the
regulation under clause (iii), any reference in this subparagraph to
the 'lesser of 7 percent' shall be deemed to be a reference to the
'greater of 7 percent'.
"(C) In this paragraph:
"(i) The term 'home and community-based services' includes
services described in sections 1905(aX7) and 1905(aX8), services
described in subsection (cX4XB), services described in paragraph
(4XB), personal care services, and services furnished pursuant to
a waiver under subsection (c).
"(iiXD Subject to subclause (II), the term 'base year' means the
most recent year (ending before the date of the enactment of
this subsection) for which actual final expenditures under this
title have been reported to, and accepted by, the Secretary.
"(II) For purposes of subparagraph (C), in the case of a State
that does not report expenditures on the basis of the age
categories described in such subparagraph for a year ending
before the date of the enactment of this subsection, the term
'base year' means fiscal year 1989.
"(iii) The term 'intermediate care facility services' does not
include services furnished in an institution certified in accord-
ance with section 1905(d).
"(6XA) A determination by the Secretary to deny a request for a
waiver (or extension of waiver) under this subsection shall be subject
to review to the extent provided under section 1116(b).
101 STAT. 1330-146 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) Notwithstanding any other provision of this Act, if the Sec-
retary denies a request of the State for an extension of a waiver
under this subsection, any waiver under this subsection in effect on
the date such request is made shall remain in effect for a period of
not less than 90 days after the date on which the Secretary denies
such request (or, if the State seeks review of such determination in
accordance with subparagraph (A), the date on which a final deter-
mination is made with respect to such review).".
Effective date. (2) The amendments made by paragraph (1) shall become
42 u s e 1396n effective on January 1,1988.
uote.
(h) CONFORMING AMENDMENTS.—
(1) Section 1902(a)(10)(A)(ii)(VI) of such Act (42 U.S.C.
1396a(a)(10)(AXiiXVI)) is amended by striking "section 1915(c)"
each place it appears and inserting "subsection (c) or (d) of
section 1915".
(2) Section 1915(h) of such Act, as redesignated by subsection
(a), is amended by striking "(c)" and inserting in lieu thereof "(c)
or(d)".
42 u s e 1396n (c) EXTENSION OF WAIVER.—In the case of a State which, as of
note.
December 1, 1987, has a waiver approved with respect to elderly
individuals under section 1915(c) of the Social Security Act, which
waiver is scheduled to expire before July 1,1988, if the State notifies
the Secretary of Health and Human Services of the State's intention
to file an application for a waiver under section 1915(d) of such Act
(£is amended by subsection (a) of this section), the Secretary shall
extend approval of the State's waiver, under section 1915(c) of such
Act, on the same terms and conditions through September 30, 1988.
SEC. 4103. PHYSICIANS* SERVICES FURNISHED BY DENTISTS.
(a) CLARIFYING COVERAGE.—Section 1905(a)(5) of the Social Secu-
rity Act (42 U.S.C. 1396d(a)(5)) is amended by inserting "(A)" after
"(5)" and by inserting before the semicolon at the end the following:
", and (B) medical and surgical services furnished by a dentist
(described in section 1861(rX2)) to the extent such services may be
performed under State law either by a doctor of medicine or by a
doctor of dental surgery or dental medicine and would be described
in subparagraph (A) if furnished by a physician (as defined in
section 1861(rXl))".
42 u s e 1396d (b) EFFECTIVE DATE.—
note. (1) The amendment made by subsection (a) applies (except as
provided under paragraph (2)) to payments under title XIX of
the Social Security Act for calendar quarters beginning on or
after January 1, 1988, without regard to whether or not final
regulations to carry out such amendment have been promul-
gated by such date.
(2) In the case of a State plan for medical assistance under
title XIX of the Social Security Act which the Secretary of
Health and Human Services determines requires State legisla-
tion (other than legislation appropriating funds) in order for the
plan to meet the additional requirement imposed by the amend-
ment made by subsection (a), the State plan shall not be re-
garded as failing to comply with the requirements of such title
solely on the basis of its failure to meet this additional require-
ment before the first day of the first calendar quarter beginning
after the close of the first regular session of the State legislature
that begins after the date of enactment of this Act.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-147
SEC. 4104. OPTIONAL MEDICAID COVERAGE OF INDIVIDUALS IN CERTAIN
STATES RECEIVING ONLY OPTIONAL STATE SUPPLE-
MENTARY PAYMENTS.
Section 1902(a)(10)(A){ii) of the Social Security Act (42 U.S.C.
1396a(aK10)(AXii)) is amended—
(1) by striking "or" at the end of subclause (IX) and inserting
"or" at the end of subclause (X); and
(2) by adding at the end the following new subclause:
i^5^> "(XI) who receive only an optional State supple-
mentary payment based on need and paid on a
'^ J'" regular basis, equal to the difference between the
individual's countable income and the income
standard used to determine eligibility for such
supplementary payment (with countable income
being the income remaining after deductions as
established by the State pursuant to standards that
are more restrictive than the standards for supple-
mentary security income benefits under title XVI),
which are available to all individuals in the State
(but which may be based on different income stand-
ards by political subdivision according to cost of
living differences), and which are paid by a State
that does not have an agreement with the Sec-
retary under section 1616 or 1634.".
SEC. 4105. CLARIFICATION OF COVERAGE OF CLINIC SERVICES FUR-
NISHED TO HOMELESS OUTSIDE FACILITY.
(a) IN GENERAL.—Section 1905(a)(9) of the Social Security Act (42
U.S.C. 1396d(a)(9)) is amended by inserting before the semicolon at • ^' '
the end the following: ", including such services furnished outside
the clinic by clinic personnel to an eligible individual who does not
reside in a permanent dwelling or does not have a fixed home or
mailing address".
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 use I396d
shall apply to services furnished on or after January 1, 1988, ^°^-
without regard to whether regulations to implement such amend-
ment are promulgated by such date.
SEC. 4106. MEDICALLY NEEDY INCOME LEVELS FOR CERTAIN 2-MEMBER
COUPLES IN CALIFORNIA.
For purposes of section 1903(0(1)(B) of the Social Security Act, for
payments made to California on or after July 1,1983, in the C£ise of a
family consisting only of two individuals both of whom are adults
and at least one of whom is aged, blind, or disabled, the "highest
amount which would ordinarily be paid to a family of the same size"
under the State's plan approved under part A of title IV of such Act
shall, at California's option, be the amount determined by the State
agency to be the amount of the aid which would ordinarily be
payable under such plan to a family which consists of one adult and
two children and which is without any income or resources. Section
1902(aX10)(C)(iXIII) of the Social Security Act shall not prevent
California from establishing (under the previous sentence) an ap-
plicable income limitation for families described in that sentence
which is greater than the income limitation applicable to other
families, if California has an applicable income limitation under
section 1903(f) of such Act which is equal to the maximum ap-
plicable income limitation permitted consistent with paragraph
101 STAT. 1330-148 PUBLIC LAW 100-203—DEC. 22, 1987
(IXB) of such section for families other than those described in the
previous sentence.
PART 2—OTHER PROVISIONS
SEC. 4111. INCREASING THE MAXIMUM ANNUAL MEDICAID PAYMENTS
' '' THAT MAY BE MADE TO THE COMMONWEALTHS AND TERRI-
TORIES.
(a) IN GENERAL.—Subsection (c) of section 1108 of the Social
Security Act (42 U.S.C. 1308) is amended to read as follows:
"(c) The total amount certified by the Secretary under title XIX
with respect to a fiscal year for payment to—
"(1) Puerto Rico shall not exceed (A) $73,400,000 for fiscal year
1988, (B) $76,200,000 for fiscal year 1989, and (C) $79,000,000 for
fiscal year 1990 (and each succeeding fiscal year);
"(2) the Virgin Islands shall not exceed (A) $2,430,000 for
fiscal year 1988, (B) $2,515,000 for fiscal year 1989, and (C)
$2,600,000 for fiscal year 1990 (and each succeeding fiscal year);
"(3) Guam shall not exceed (A) $2,320,000 for fiscal year 1988,
(B) $2,410,000 for fiscal year 1989, and (C) $2,500,000 for fiscal
year 1990 (and each succeeding fiscal year);
"(4) the Northern Mariana Islands shall not exceed (A)
$636,700 for fiscal year 1988, (B) $693,350 for fiscal year 1989,
and (C) $750,000 for fiscal year 1990 (and each succeeding fiscal
year); and
"(5) American Samoa shall not exceed (A) $1,330,000 for fiscal
year 1988, (B) $1,390,000 for fiscal year 1989, and (C) $1,450,000
for fiscal year 1990 (and each succeeding fiscal year).".
42 use 1308 (b) EFFECTIVE DATE.—The amendment made by subsection (a)
"°*® shall apply to payments for fiscal years beginning with fiscal year
1988.
42 u s e 1396a SEC. 4112. ADJUSTMENT IN MEDICAID PAYMENT FOR INPATIENT HOS-
note. PITAL SERVICES FURNISHED BY DISPROPORTIONATE SHARE
HOSPITALS.
(a) IMPLEMENTATION OF REQUIREMENT.—
(1) A State's plan under title XIX of the Social Security Act
shall not be considered to meet the requirement of section
• 1902(aX13XA) of such Act (insofar as it requires payments to
hospitals to take into account the situation of hospitals which
serve a disproportionate number of low income patients with
special needs), as of July 1, 1988, unless the State has submitted
to the Secretary of Health and Human Services, by not later
than such date, an amendment to such plan that—
(A) specifically defines the hospitals so described (and
J includes in such definition any disproportionate share hos-
pital described in subsection (bXD which meets the require-
ment of subsection (d)), and
(B) provides, effective for inpatient hospital services pro-
vided not later than July 1, 1988, for an appropriate in-
t crease in the rate or amount of payment for such services
provided by such hospitals, consistent with subsection (c).
f (2)(A) In order to be considered to have met such requirement
of section 1902(aX13XA) as of July 1,1989, the State must submit
-' to the Secretary of Health and Human Services by not later
than such date, the State plan amendment described in para-
graph (1), consistent with subsection (c).
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-149
t (B) In order to be considered to have met such requirement of
section 1902(a)(13)(A) as of July 1, 1990, the State must submit
to the Secretary of Health and Human Services by not later
than such date, the State plan amendment described in para-
graph (1), consistent with subsection (c).
The Secretary shall, not later than June 30 of each year in which
the State is required to submit an amendment under this subsection,
review each such amendment for compliance with such requirement
and by such date shall approve or disapprove each such amendment.
If the Secretary disapproves such an amendment, the State shall
immediately submit a revised amendment which meets such
requirement. The requirement of this subsection may not be waived
under section 1915(b)(4) of the Social Security Act.
(b) HOSPITALS DEEMED DISPROPORTIONATE SHARE.—
(1) For purposes of subsection (a)(1), a hospital which meets
the requirement of subsection (d) is deemed to be a dispropor-
t tionate share hospital if—
(A) the hospital's medicaid inpatient utilization rate (as
defined in paragraph (2)) is at lesist one standard deviation
above the mean medicaid inpatient utilization rate for
hospitals receiving medicaid payments in the State; or
(B) the hospital's low-income utilization rate (as defined
1 in paragraph (3)) exceeds 25 percent.
(2) For purposes of paragraph (1)(A), the term "medicaid
inpatient utilization rate" means, for a hospital, a fraction
(expressed as a percentage), the numerator of which is the
hospital's number of inpatient days attributable to patients who
(for such days) were eligible for medical assistance under the
State plan approved under title XIX of the Social Security Act
i in a period, and the denominator of which is the total number of
the hospital's inpatient days in that period.
(3) For purposes of paragraph (1)(B), the term "low-income
utilization rate" means, for a hospital, the sum of—
(A) the fraction (expressed as a percentage)—
1 (i) the numerator of which is the sum (for a period) of
(I) the total revenues paid the hospital for patient
services under a State plan under title XIX of the
. _; Social Security Act and (II) the amount of the cash
subsidies for patient services received directly from
t; ' State and local governments, and
(ii) the denominator of which is the total amount of
revenues of the hospital for patient services (including
c the amount of such cash subsidies) in the period; and
(B) a fraction (expressed as a percentage)—
(i) the numerator of which is the total amount of the
"^ hospital's charges for inpatient hospital services which
are attributable to charity care in a period, and
s^c;,v (ii) the denominator of which is the total amount of
the hospital's charges for inpatient hospital services in
the hospital in the period.
The numerator under subparagraph (BXi) shall not include
contractual allowances and discounts (other than for indigent
patients not eligible for medical assistance under a State plan daee 7
approved under title XIX of the Social Security Act).
(c) PAYMENT ADJUSTMENT.—In order to be consistent with this
subsection, a payment adjustment for a disproportionate share hos-
pital must either—
101 STAT. 1330-150 PUBLIC LAW 100-203—DEC. 22, 1987
(1) be in an amount equal to the product of (A) the amount
paid under the State plan to the hospital for operating costs for
inpatient hospital services (of the kind described in section
1886(a)(4)), and (B) the hospital's disproportionate share adjust-
ment percentage (established under section 1886(d)(5)(F)(iv)); or
(2) provide for a minimum specified additional payment
amount (or increased percentage payment) and for an increase
in such a payment amount (or percentage payment) in propor-
tion to the percentage by which the hospital's medicaid utiliza-
tion rate (as defined in subsection (bX2)) exceeds one standard
deviation above the mean medicaid inpatient utilization rate for
hospitals receiving medicaid payments in the State;
except that, for purposes of paragraphs (2XA) and (2)(B), the pay-
ment adjustment for a disproportionate share hospital is consistent
with this subsection if the appropriate increase in the rate or
amount of payment is equal to one-third of the increase otherwise
applicable under subsection (c) (in the case of paragraph (2XA)) and
two-thirds of such increase (in the case of paragraph (2)(B)).
(d) REQUIREMENT TO ^^ QUAUFY AS DISPROPORTIONATE SHARE HOS-
PITAL.—
(1) Except as provided in paragraph (2), no hospital may be
defined or deemed as a disproportionate share hospital under a
State plan under title XIX of the Social Security Act or under
subsection (b) of this section unless the hospital has at least 2
obstetricians who have staff privileges at the hospital and who
have agreed to provide obstetric services to individuals who are
entitled to medical assistance for such services under such State
plan.
(2XA) Paragraph (1) shall not apply to a hospital—
(i) the inpatients of which are predominantly individuals
under 18 years of age; or
(ii) which does not offer nonemergency obstetric services
to the general population as of the date of the enactment of
this Act.
(B) In the case of a hospital located in a rural area (as defined
for purposes of section 1886 of the Social Security Act), in
paragraph (1) the term "obstetrician" includes any physician
with staff privileges at the hospital to perform nonemergency
obstetric procedures.
(e) SPECIAL RULE.—A State plan shall be considered to meet the
requirement of section 1902(aX13XA) (insofar as it requires pay-
ments to hospitals to take into account the situation of hospitals
which serve a disproportionate number of low income patients with
special needs) without regard to the requirement of subsection (a) if
the plan provided for payment adjustments for disproportionate
share hospitals as of January 1,1984, and if the aggregate amount of
the payment adjustments under the plan for such hospitals is not
less than the aggregate amount of such adjustments otherwise
required to be made under such subsection.
SEC. 4113. HMO-RELATED PROVISIONS.
(a) TREATMENT OF GARDEN STATE HEALTH PLAN.—
42 use 1396b. (1) Section 1903(m) of the Social Security Act (42 U.S.C.
1396(m)) is amended—
(A) by adding at the end the following new paragraph:
" Copy read "TO". - ' -^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-151
"(6XA) For purposes of this subsection and section 1902(eX2KA), in Contracts.
the C£ise of the State of New Jersey, the term 'contract' shall be
deemed to include an undertaking by the State agency, in the State
plan under this title, to operate a program meeting all requirements
of this subsection.
"(B) The undertaking described in subparagraph (A) must
provide—
"(i) for the establishment of a separate entity responsible for
the operation of a program meeting the requirements of this
subsection, which entity may be a subdivision of the State
agency administering the State plan under this title;
"(ii) for separate accounting for the funds used to operate
such program;
"(iii) for setting the capitation rates and any other payment
rates for services provided in accordance with this subsection
using a methodology satisfactory to the Secretary designed to
ensure that total Federal matching payments under this title
for such services will be lower than the matching payments that
would be made for the same services, if provided under the
State plan on a fee for service basis to an actuarially equivalent
population; and
"(iv) that the State agency will contract, for purposes of Contracts.
meeting the requirement under section 1902(aX30)(C), with an
organization or entity that under section 1154 reviews services
provided by an eligible organization pursuant to a contract
under section 1876 for the purpose of determining whether the
quality of services meets professionally recognized standards of
health care.
"(C) The undertaking described in subparagraph (A) shall be Contracts.
subject to approval (and annual re-approval) by the Secretary in the
same manner as a contract under this subsection.
"(D) The undertaking described in subparagraph (A) shall not be
eligible for a waiver under section 1915(b)."; and
(B) in paragraph (2XF), by striking all that precedes "a ^
State plan may restrict" and inserting the following:
" "(E) In the case of—
^^ "(i) a contract with an entity described in subparagraph (G) Contracts.
or with a qualified health maintenance organization (as defined
in section 1310(d) of the Public Health Service Act) which meets
the requirement of subparagraph (AXii), or
"(ii) a program pursuant to an undertaking described in
paragraph (6) in which at least 25 percent of the membership
enrolled on a prepaid basis are individuals who (I) are not
insured for benefits under part B of title XVIII or eligible for
benefits under this title, and (II) (in the case of such individuals
whose prepayments are made in whole or in part by any
government entity) had the opportunity at the time of enroll-
ment in the program to elect other coverage of health care costs
that would have been paid in whole or in part by any govern-
meffital entity,".
(2) Section 1902(eX2XA) of such Act (42 U.S.C. 1396a(eX2XA)) is
amended by striking "section 1903(mX2XG)" and inserting
"paragraph (2XG) or (6) of section 1903(m)".
»=• Copy read " '(F)".
*' Copy read "(i)".
101 STAT. 1330-152 PUBLIC LAW 100-203—DEC. 22, 1987
(b) MEDICAID MATCHING RATE FOR QUALITY REVIEW OF HMO
SERVICES.—
(1) Section 1902(a)(30)(C) of such Act (42 U.S.C. 1396a(aX30)(C))
is amended by inserting ", an entity which meets the require-
ments of section 1152, as determined by the Secretary," after
"title XI)".
(2) Section 1902(d) of such Act (42 U.S.C. 1396a(d)) is
amended—
Contracts. (i) by inserting after "contracts with" the following: "an
entity which meets the requirements of section 1152, as
determined by the Secretary, for the performance of the
^ g^ quality review functions described in subsection (aX30)(C),
or", and
(ii) by striking "organization (or organizations)" each
place it appears and inserting "such an entity or organiza-
tion".
(3) Section 1903(a)(3XC) of such Act (42 U.S.C. 1396b(aX3)(C)) is
amended by inserting "or by an entity which meets the require-
ments "of section 1152, as determined by the Secretary," after
"utilization and quality control peer review organization".
(c) FREEDOM OF CHOICE.—
(1) Section 1902(aX23) of such Act (42 U.S.C. 1396a(aX23)) is
.aJos-f^ri':
amended—
(A) by inserting "(A)" after "Guam, provide that", and
(B) by inserting before the semicolon at the end the
following: ", and (B) an enrollment of an individual eligible
for medical assistance in a primary care case-management
l'v>
system (described in section 1915(bXl)), a health mainte-
nance organization, or a similar entity shall not restrict the
choice of the qualified person from whom the individual
may receive services under section 1905(aX4XC)".
(2) Section 1902(eX2XA) of such Act (42 U.S.C. 1396a(eX2XA)) is
amended by striking "but only" and inserting "but, except for
benefits furnished under section 1905(aX4XC), only".
Effective date. (3) The amendments made by this subsection shall apply to
42 u s e 1396a services furnished on and after July 1,1988.
note.
(d) TECHNICAL AMENDMENTS.—
(1) Section 1903(mX2XF) of such Act (42 U.S.C. 1396b(mX2XF))
' is amended by striking "subparagraph (G)" and inserting "sub-
paragraphs (E) or (G)".
(2) Section 1902(eX2XA) of such Act (42 U.S.C. 1396a(eX2XA)) is
amended by striking "section 1903(mX2XG)" and inserting
"subparagraph (BXiii), (E), or (G) of section 1903(mX2)".
(e) CONTINUED EUGIBIUTY AND RESTRICTION ON DISENROLLMENT
WITHOUT CAUSE FOR METROPOUTAN HEALTH PLAN HMO.—For pur-
poses of sections 1902(eX2XA) and 1903(mX2XF) of the Social Security
Act, the Metropolitan Health Plan HMO operated by the New York
City public hospitals shall be treated in the same manner as a
qualiHed health maintenance organization (as defined in section
1310(d) of the Public Health Service Act).
SEC. 4114. MEDICAID WAIVER FOR HOSPICE CARE FOR AIDS PATIENTS.
Section 1905(oXl) of the Social Security Act (42 U.S.C. 1396d(oXl))
is amended—
(1) by inserting "(A)" after "(1)";
(2) by striking "The" and inserting "Subject to subparagraph
(B), the"; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-153
(3) by adding at the end the following new subparagraph:
"(B) For purposes of this title only, with respect to the definition
of hospice program under section 1861(ddX2), the Secretary may
allow an agency or organization to make the assurance under
subparagraph (AXiii) of such section without taking into account
any individual who is afflicted with acquired immunodeficiency
syndrome.".
SEC. 4115. STATE DEMONSTRATION PROJECTS.
(a) EXTENSION OF ARIZONA HEALTH CARE DEMONSTRATION
PROJECT.—
(1) Notwithstanding any limitations contained in section 1115
of the Social Security Act, but subject to paragraphs (2) and (3)
of this subsection, the Secretary of Health and Human Services
(in this subsection referred to as the "Secretary") upon applica-
tion shall renew until September 30, 1989, approval of dem-
onstration project number ll-P-98239/9-05 ("Arizona Health
Care Cost Containment System—AHCCCS—A statewide ap-
proach to cost effective health care financing"), including all
waivers granted by the Secretary under such section 1115 as of
September 30,1987.
(2) The Secretary's renewed approval of the project under
paragraph (1) shall— ca-fo^s?!
(A) subject to paragraph (3) be on the same terms and
conditions that existed between the applicant and the Sec-
retary as of September 30,1987; and
(B) remain in effect through September 30, 1989, unless
the Secretary finds that the applicant no longer complies
with such terms and conditions.
(3) Nothing in this subsection shall be construed to prohibit or
require the Secretary from granting additional waivers to the
applicant—
(A) for coverage of additional optional groups, and
(B) for coverage of long-term care and other services
which were not covered as of September 30,1987.
Ot>) NEW YORK STATE PILOT PROGRAM FOR PRENATAL, MATERNITY,
AND NEWBORN CARE.—
(1) Upon application by the State of New York and approval
by the Secretary of Health and Human Services (in this subsec-
tion referred to as the "Secretary"), the State of New York (in
this subsection referred to as the "State") may conduct a dem-
onstration project in accordance with this subsection for the
purpose of testing its Prenatal/Maternity/Newborn Care Pilot
Program (in this subsection referred to as the "Program"), as ' ' > -^-
the Program is set forth in the Prenatal Care Act of 1987 *-'^^
(enacted by the State in February 1987), as an alternative to
existing Federal programs.
(2) Under the demonstration project conducted under this
subsection—
(A) any individual who receives benefits under the Pro-
gram shall not receive any of such benefits under the plan
of the State under title XIX of the Social Security Act; and
.0 (B) the Secretary shall make payments to the State with
respect to individuals receiving benefits under the Program
in the same amounts as would be payable for such benefits
liv „. under title XIX of the Social Security Act if such individ-
101 STAT. 1330-154 PUBLIC LAW 100-203—DEC. 22, 1987
uals were receiving such benefits under such title (as deter-
mined by the Secretary).
(3) The Secretary may (with respect to the demonstration
project under this subsection) waive compliance with any
requirement contained in section 1902(a)(1), 1902(a)(10XB),
, 1902(aX17XD), 1902(aX23), 1902(aX30), or 1903(0 of the Social
Security Act which (if applied) would prevent the State from
carrying out the project, effectively achieving its purpose, or
receiving payments in accordance with paragraph (2XB).
(4) As a condition of approval of the demonstration project
under this subsection, the State shall provide assurances satis-
factory to the Secretary that—
(A) the State will continue to make benefits available
under title XIX of the Social Security Act to all pregnant
women entitled to receive benefits under such title to the
extent such benefits are not provided under the Program;
and
J (B) the State has in effect a quality assurance mechanism
; to ensure the quality and accessibility of the services fur-
nished under the program.
(5XA) The demonstration project under this subsection shall
w be conducted for a period not to exceed three years.
Reports. (B) The Secretary shall conduct an evaluation of the dem-
,, onstration project under this subsection and shall report the
. results of such evaluation to the Congress not later than one
year after completion of the project,
(c) WAIVERS FOR FAMILY INDEPENDENCE PROGRAM.—Upon ap-
proval of the demonstration project relating to the Family Independ-
ence Program in the State of Washington and with respect to such
project, the Secretary of Health and Human Services shall waive
compliance with any requirements of sections 1902(aXl), 1916, and
1924 of the Social Security Act, but only to the extent necessary to
enable the State to carry out the project as enacted by the State of
Washington in May 198f.
SEC. 4116. WAIVER AUTHORITY UNDER THE MEDICAID PROGRAM FOR
THE NORTHERN MARIANA ISLANDS.
Section 1902(j) of the Social Security Act (42 U.S.C. 1396a(j)) is
amended—
(1) by inserting "and the Northern Mariana Islands" after
"American Samoa" the first place it appears; and
(2) by inserting "or the Northern Mariana Islands" after
"American Samoa" the second place it appears.
42 u s e 1396b SEC. 4117. DELAY QUALITY CONTROL SANCTIONS FOR MEDICAID.
note.
The Secretary of Health and Human Services shall not, prior to
July 1, 1988, implement any reductions in payments to States
pursuant to section 1903(u) of the Social Security Act (or any
provision of law described in subsection (c) of section 133 of the Tax
Equity and Fiscal Responsibility Act of 1982).
SEC. 4118. TECHNICAL AND MISCELLANEOUS AMENDMENTS.
(a) SECTION 2176 WAIVER TECHNICALS.—
(1) Section 1915(cX3) of the Social Security Act (42 U.S.C.
1396n(cX3)) is amended by striking "and section 1902(aX10XB)
(relating to comparability)" and inserting ", section
1902(aX10XB) (relating to comparability), and section
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-155
1902(aK10)(C)(i)(III) (relating to income and resource rules ap-
plicable in the community)".
(2) The amendment made by paragraph (1) shall be effective 42 u s e 1396n
as if included in the enactment of the Omnibus Budget Rec- note.
onciliation Act of 1986.
flj) INCREASE IN NUMBER OF INDIVIDUALS WHO MAY ** BE SERVED
UNDER MODEL HOME AND COMMUNITY-BASED SERVICES WAIVERS.—
Section 1915(c) of the Social Security Act (42 U.S.C. 1396n(c)) is
amended by adding at the end the following new paragraph:
"(10) No waiver under this subsection shall limit by an amount
less than 200 the number of individuals in the State who may
receive home and community-based services under such waiver.'.
(c) KATIE BECKETT TECHNICAL.—
(1) Section 1902(eX3XC) of such Act (42 U.S.C. 1396a(e)(3)(C)) is
amended by striking "to have a supplemental security income
(or State supplemental) payment made with respect to him
under title XVI" and inserting "for medical assistance under
the State plan under this title".
(2) The amendment made by paragraph (1) shall be effective 42 u s e 1396a
as if it were included in section 134 of the Tax Equity and Fiscal note.
Responsibility Act of 1982.
(d) ORGAN TRANSPLANT TECHNICAL.—
(1) Section 1903(i) of the Social Security Act (42 U.S.C.
1396b(i)) is amended—
(A) in paragraph (1), by striking the period at the end and
inserting "; or", and
(B) by adding at the end the following new sentence:
"Nothing in paragraph (1) shall be construed as permitting
a State to provide services under its plan under this title
that are not reasonable in amount, duration, and scope to
achieve their purpose.".
(2) The amendments made by paragraph (1) shall be effective Effective date.
as if included in the enactment of section 9507 of the Consoli- 42 u s e 1396b
dated Omnibus Budget Reconciliation Act of 1985. note.
(e) CIVIL MONEY PENALTY AND EXCLUSION CLARIFICATIONS.—
(1) Section 1128A(aXl) of the Social Security Act (42 U.S.C.
1320a-7(aXl)), as amended by section 3(aXl) of the Medicare and
Medicaid Patient and Program Protection Act of 1987 (Public
i Law 100-93), is amended by striking "or has reason to know" 42 u s e 1320a-7a.
each place it appears and inserting "or should know".
(2) Section 1128(dX3XB) of the such Act (42 U.S.C. 1320a-
6(dX3XB)), as amended by section 2 of the Medicare and Medic-
aid Patient and Program Protection Act of 1987 (Public Law
100-93), is amended— 42 u s e 1320a-7.
(A) by inserting "(i)" after "(B)", and
(B) by adding at the end the following new clause:
"(ii) A State health care program may provide for a period of
exclusion which is longer than the period of exclusion under a
program under title XVIII.".
(3) The amendment made by paragraph (1) shall apply to Effective date.
activities occurring before, on, or after the date of the enact- 42 u s e 1320a-7a
note.
ment of this Act.
(f) INCORPORATION OF CERTAIN PROVISIONS RELATING TO INDIAN
HEALTH SERVICE FACILITIES.—
•* Copy read "WHO MAY".
101 STAT. 1330-156 PUBLIC LAW 100-203—DEC. 22, 1987
(1) Section 1911 of the Social Security Act (42 U.S.C. 1396j), as
amended by section 4111(g)(8) of this title, is amended—
(A) by striking "or nursing facility" each place it appears
and inserting ", nursing facility, or any other type of
. facility which provides services of a type otherwise covered
under the State plan"; and
(B) by adding at the end the following new subsection:
"(c) The Secretary is authorized to enter into agreements with the
State agency for the purpose of reimbursing such agency for health
care and services provided in Indian Health Service facilities to
Indians who are eligible for medical assistance under the State
plan.".55
Effective date. (2) The amendments made by paragraph (1) shall apply to
42 u s e 1396J health care services performed on or after the date of the
note.
enactment of this Act.
(g) FRAIL ELDERLY DEMONSTRATION PROJECT WAIVERS.—
(1) Section 9412(b)(2) of the Omnibus Budget Reconciliation
100 Stat. 2063. Act of 1986 is amended—
(A) in subparagraph (A), by inserting before the period at
"*"^ the end the following: ", including permitting the organiza-
tion to assume progressively (over the initial 3-year period
of the waiver) the full financial risk", and
r).8.i (B) in subparagraph (B), by striking "be awarded a grant
from the Robert Wood Johnson Foundation" and insert
k "participate in an organized initiative to replicate the find-
ings of the On Lok long-term care demonstration project
(described in section 603(c)(1) of the Social Security Amend-
ments of 1983)".
Effective date. (2) The amendments made by paragraph (1) shall take effect
as though it were included in the Omnibus Budget Reconcili-
ation Act of 1986.
(h) MEDICALLY NEEDY INCURRED EXPENSES.
(1) Section 1902(a)(17) of the Social Security Act (42 U.S.C.
1396a(a)(17)) is amended by striking "(whether in the form of
insurance premiums or otherwise)" and inserting "(whether in
the form of insurance premiums or otherwise and regardless of
whether such costs are reimbursed under another public pro-
gram of the State or political subdivision thereof)".
Effective date. (2) The amendment made by paragraph (1) shall apply to costs
42 u s e 1396a incurred after the date of the enactment of this Act.
note.
(i) QUAUFICATIONS FOR CASE MANAGERS FOR INDIVIDUALS WITH
DEVELOPMENT DISABIUTIES AND CHRONIC MENTAL ILLNESS.—
(1) Section 1915(g)(1) of such Act (42 U.S.C. 1396n(g)(l)) is
amended by adding at the end the following new sentence: "The
State may limit the case managers available with respect to
case management services for eligible individuals with devel-
'•'•' opmental disabilities or with chronic mental illness in order to
*^ ensure that the case managers for such individuals are capable
of ensuring that such individuals receive needed services.".
Effective date. (2) The amendment made by paragraph (1) shall take effect as
42 u s e 1396n though it were included in the enactment of the Consolidated
note.
Omnibus Budget Reconciliation Act of 1985.
42 u s e 1396n (j) HABIUTATION SERVICES EFFECTIVE DATE.—Effective £is if in-
note. cluded in the enactment of section 9502 of the Consolidated Omni-
** Subparagraph " "(c)"' indented incorrectly. <:-. -eqc:^^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-157
bus Budget Reconciliation Act of 1985, subsection (jXl) of such
section is amended by inserting before the period at the end the
following: "to individuals eligible for services under a waiver
granted under section 1915(c) of the Social Security Act, without
regard to whether such individuals were receiving institutional
services before their participation in the waiver".
(k) SECTION 2176 WAIVER FOR INSTITUTIONALIZED DEVELOPMEN-
TALLY DISABLED.—Section 1915(c)(7) of the Social Security Act (42
U.S.C. 1396n(c)(7)) is amended by inserting "(A)" after "(7)" and
adding at the end the following new subparagraph:
"(B) In making estimates under paragraph (2)(D) in the case of a
waiver that applies only to individuals with developmental disabil-
ities who are inpatients in a skilled nursing facility or intermediate
care facility and whom the State has determined, on the basis of an
evaluation under paragraph (2)(B), to need the level of services
provided by an intermediate care facility for the mentally retarded,
the State may determine the average per capita expenditures that
would have been made in a fiscal year for those individuals under
the State plan on the bsisis of the average per capita expenditures
under the State plan for services to individuals who are inpatients
in an intermediate care facility for the mentally retarded.".
(1) RENEWAL OF FREEDOM-OF-CHOICE WAIVERS.—
(1) Section 1915(h) of such Act (42 U.S.C. 1396n(h)) is amended
by striking "denies such request in writing within 90 days after
the date of its submission to the Secretary." and inserting ",
within 90 days after the date of its submission to the Secretary,
either denies such request in writing or informs the State
agency in writing with respect to any additional information
which is needed in order to make a final determination with
6 respect to the request. After the date the Secretary receives
such additional information, the request shall be deemed
granted unless the Secretary, within 90 day of such date, denies
; - > such request.".
(2) The amendment made by paragraph (1) shall apply to Effective date.
requests for continuation of waivers received after the date of 42 u s e 1396n
note.
the enactment of this Act.
(m) REPEAL OF COORDINATED AUDIT REQUIREMENT.—
(IXA) Section 1129 of such Act (42 U.S.C. 1320a-8) is repealed.
(B) Section 1902(aX42) of such Act (42 U.S.C. 1396a(aX42)) is
*^i amended—
(i) by striking "(A)", and
:-5 (ii) by striking ", (B)" and all that follows up to the
^^- semicolon at the end.
(2) The amendments made by paragraph (1) shall apply to Effective date.
audits conducted after the date of the enactment of this Act. 42 u s e 1396a
note.
(n) TEMPORARY TECHNICAL ERROR DEFINITION.—For purposes of 42 u s e 1396b
section 1903(uXlXEXii) of the Social Security Act, effective for the note.
period beginning on the date of enactment of this Act and ending
December 31, 1988, a "technical error" ^^ is gm error in eligibility
condition (such as assignment of social security numbers and assign-
ment of rights to third-party benefits as a condition of eligibility)
that, if corrected, would not result in a difference in the amount of
medical assistance paid.
" Copy read " 'technical error' ".
101 STAT. 1330-158 PUBLIC LAW 100-203—DEC. 22, 1987
(o) TECHNICAL AMENDMENTS RELATING TO NEW JERSEY RESPITE
CARE PILOT PROJECT.—
(1) Section 9414(b) of the Omnibus Budget Reconciliation Act
100 Stat. 2064. of 1986 is amended—
(A) by redesignating paragraphs (2), (3), and (4), as para-
graphs (3), (4), and (5), respectively,
(B) by inserting after paragraph (1) the following new
paragraph:
"(2) provide that the State may submit a detailed proposal
describing the project (in lieu of a formal request for the waiver
of applicable provisions of title XIX of the Social Security Act)
and that submission of such a description by the State will be
treated as such a request for purposes of subsection (g),", and
(C) in paragraph (3), as redesignated by *^» paragraph (1) of
this subsection, by striking "if the project" and all that
follows through "Act" the second place it appears and
inserting "the State shall utilize a post-eligibility cost-shar-
ing formula based on the available income of participants
with income in excess of the nonfarm income ofRcial pov-
erty line (as defined by the Office of Management and
^ Budget, and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of 1981)".
(2XA) Section 9414(a) of the Omnibus Budget Reconciliation
Act of 1986 is amended by striking "elderly and disabled
individuals" and inserting "eligible individuals".
(B) Section 941(c) of the Omnibus Budget Reconciliation Act
of 1986 is amended to read as follows:
"(C) DEFINITIONS.—For purposes of this section—
"(1) the term 'eligible individual' means an individual—
"(A) who is elderly or disabled,
"(BXi) whose income (not including the income of the
spouse or family of the individual) does not exceed 300
percent of the amount in effect under section 1611(aXlXA)
of the Social Security Act (as increased pursuant to section
1617ofsuchAct),or
"(ii) in the case of an individual and spouse who are both
dependent on a caregiver, whose combined incomes do not
exceed such amount,
"(C) whose liquid resources (as declared by the individual)
do not exceed $40,000,
"(D) who is at risk of institutionalization unless the
individual's caregiver is provided with respite care, and
"(E) who has been determined to meet the requirements
of subparagraphs (A) through (D) in accordance with an
application process designed by the State; and
"(2) the term 'respite care services' shall include—
"(A) short-term and intermittent—
"(i) companion or sitter services (paid as well as
volunteer),
V; .1 a?; "(ii) homemaker and personal care-services, vt
"(iii) adult day care, and
"(iv) inpatient care in a hospital, a skilled nursing
facility, or an intermediate care facility (not to exceed a
total of 14 da}^ for any individual), and
"(B) peer support and training for family caregivers
(using informal support groups and organized counseling).".
**• Copy read "by by".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-159
(3) Section 9414(g) of the Omnibus Budget Reconciliation Act
of 1986 is amended by inserting "section 1902(a)(10)(C)(i)(III)," 100 Stat. 2064.
after "section 1902(aX10XB),".
(4) The amendments made by this subsection shall be effective Effective date.
as if included in the enactment of the Omnibus Budget
Reconciliation Act of 1986.
(p) MISCELLANEOUS TECHNICAL CORRECTIONS.—
(1) Subclause (IX) of section 1902(a)(10)(AXii) of the Social
Security Act (42 U.S.C. 1396a(aX10XAXii)) is amended by moving
it 4 ems to the right so as to align its left margin with that of
subclause (VIII) of that section.
(2) Subclause (X) of section 1902(aX10XAXii) of such Act (42
U.S.C. 1396a(aX10XAXii)) is amended by moving it 2 ems to the
right so as to align its left margin with that of subclause (VIII)
of that section.
(3) Section 1902(aX17) of such Act (42 U.S.C. 1396a(aX17)) is
amended by striking "subsection (1X3)" and inserting "subsec-
tions (1X3), (mX4), and (mX5)".
(4) Section 1902(aX30XC) of such Act (42 U.S.C. 1396(aX30XC)) 42 use I396a.
is amended by striking "provide" and inserting "use".
(5) Section 1903(fX4) of such Act (42 U.S.C. 1396b(f)(4)) is
amended by inserting ", 1902(aX10XAXiiXX), or 1905(pXl)" after
* * 1902(aX 1 OXAXiiXIX)
(6) Paragraph (9) of section 1902(e) of such Act (42 U.S.C.
1396a(e)) is amended by moving the paragraph 2 ems to the left
so as to align the left margin of subparagraph (A) (before clause
(i)) and subparagraphs (B) and (C) with the left margin of
paragraph (8). : JJU
(7) Section 1902(1X1) of such Act (42 U.S.C. 1396a(lXl)) is
amended—
(A) by striking "(IXD Individuals" and inserting "(IXD
Individuals",
(B) by moving the matter before subparagraph (A) 2 ems
* to the left so it is indented only once, and
(C) by striking ", whose" and inserting "and whose".
(8) Sections 1902(1X2), 1902(mX2XA), 1905(pX2XA), and 501(bX2)
of such Act (42 U.S.C. 1396a(lX2), 1396a(mX2XA), 1396d(pX2XA), "' '
701(bX2)) are each amended by striking "nonfarm".
(9) Paragraphs (1) and (2) of section 1925(a), as redesignated by
section (4111(a)) of this title, are amended to read as follows: 42 USC 1396s.
"(1) AFDC.—(A) Section 402(aX32) of this Act (relating to
individuals who are deemed recipients of aid but for whom a
payment is not made).
'^(B) Section 402(aX37) of this Act (relating to individuals who
lose AFDC eligibility due to increased earnings).
"(C) Section 406(h) of this Act (relating to individuals who lose
AFDC eligibility due to increased collection of child or spousal
support).
(D) Section 414(g) of this Act (relating to certain individuals
participating in work supplementation programs).
"(2) SSL—(A) Section 1611(e) of this Act (relating to treatment
of couples sharing an accommodation in a facility).
"(B) Section 1619 of this Act (relating to benefits for individ-
uals who perform substantial gainful activity despite severe
medical impairment).
"(C) Section 1634(b) of this Act (relating to preservation of
benefit status for disabled widows and widowers who lost SSI
101 STAT. 1330-160 PUBLIC LAW 100-203—DEC. 22, 1987
benefits because of 1983 changes in actuarial reduction
l-S!;? te a ;?0l formula).
"(D) Section 1634(c) of this Act (relating to individuals who
Qi«i . rs^spf'? loge eligibility for SSI benefits due to entitlement to child's
insurance benefits under section 202(d) of this Act).".
Effective date. (10) Effective as if included in the enactment of the Omnibus
42 use 1396n. Budget Reconciliation Act of 1986, section 9411(a)(2)(B) of such
Act is amended by inserting "such" after "need for".
Subtitle C—Nursing Home Reform ;:
i PART 1—MEDICARE PROGRAM i
SEC. 4201. REQUIREMENTS FOR SKILLED NURSING FACILITIES. >
(a) SPECIFICATION OF FACILITY REQUIREMENTS.—Title XVIII of the
Social Security Act is amended—
.tsd'i&i ^)£l
I (1) by amending subsection (j) of section 1861 (42 U.S.C. 1395x)
to read as follows:
"Skilled Nursing Facility
"(j) The term 'skilled nursing facility' has the meaning given such
term in section 1819(a).";
(2) by adding at the end of section 1864 (42 U.S.C. 1395aa) the
following new subsection:
Contracts. "(d) The Secretary may not enter an agreement under this section
with a State with respect to determining whether an institution
therein is a skilled nursing facility unless the State meets the
requirements specified in section 1819(e)."; and
(3) by adding at the end of part A the following new section:
"REQUIREMENTS FOR, AND ASSURING QUAUTY OF CARE IN, SKILLED
NURSING FACILITIES
42 use 1395i-3. "SEC. 1819. (a) SKILLED NURSING FACIUTY DEFINED.—In this title,
the term 'skilled nursing facility' means an institution (or a distinct
part of an institution) which—
.^<^^i ,, , V "(1) is primarily engaged in providing to residents—
"(A) skilled nursing care and related services for resi-
£ dents who require medical or nursing care, or
"(B) rehabilitation services for the rehabilitation of in-
jured, disabled, or sick persons,
and is not primarily for the care and treatment of mental
.; diseases;
f "(2) has in effect a transfer agreement (meeting the require-
ments of section 1861(1)) with one or more hospitals having
agreements in effect under section 1866; and
"(3) meets the requirements for a skilled nursing facility
described in subsections (b), (c), and (d) of this section.
"Ot)) REQUIREMENTS RELATING TO PROVISION OF SERVICES.—
"(1) QUAUTY OF UFE.—
t "(A) IN GENERAL.—A skilled nursing facility must care
for its residents in such a manner and in such an environ-
i (.: ment as will promote maintenance or enhancement of the
'}'•'"'' :t quality of life of each resident, ng •> JM stih ; .a;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-161
i, i h: "(B) QUALITY ASSESSMENT AND ASSURANCE.—A skilled
nursing facility must maintain a quality assessment and
assurance committee, consisting of the director of nursing
services, a physician designated by the facility, and at least
Su 3 other members of the facility's staff, which (i) meets at
least quarterly to identify issues with respect to which
.>tf i quality assessment and assurance activities are necessary
:o and (ii) develops and implements appropriate plans of
!;/ action to correct identified quality deficiencies.
i "(2) SCOPE OF SERVICES AND ACTIVITIES UNDER PLAN OF CARE.—
A skilled nursing facility must provide services to attain or
maintain the highest practicable physical, mental, and
, psychosocial well-being of each resident, in accordance with a
,.; written plan of care which—
"(A) describes the medical, nursing, and psychosocial
needs of the resident and how such needs will be met;
3Q im. "(B) is initially prepared, with the participation to the
extent practicable of the resident or the resident's family or
legal representative, by a team which includes the resi-
dent's attending physician and a registered professional
io- nurse with responsibility for the resident; and
*i- "(C) is periodically reviewed and revised by such team
after each assessment under paragraph (3).
£>£• "(3) RESIDENTS' ASSESSMENT.—
"(A) REQUIREMENT.—A skilled nursing facility must con-
s'i duct a comprehensive, accurate, standardized, reproducible
assessment of each resident's functional capacity, which
vt' assessment—
"(i) describes the resident's capability to perform
ai' daily life functions and significant impairments in
r: functional capacity;
"(ii) is based on a uniform minimum data set speci-
^H5 fied by the Secretary under subsection (fK6)(A);
: ..,;, "(iii) in the case of a resident eligible for benefits
under title XIX, uses an instrument which is specified
by the State under subsection (eX5); and
"(iv) in the case of a resident eligible for benefits
'.. .vjj under part A of this title, includes the identification of
medical problems.
"(B) CERTIFICATION.—
;'){ "(i) IN GENERAL.—Each such assessment must be con-
v.r ducted or coordinated (with the appropriate participa-
,^i tion of health professionals) by a registered profes-
;ij J sional nurse who signs and certifies the completion of
the assessment. Each individual who completes a por-
y tion of such an assessment shall sign and certify as to
the accuracy of that portion of the assessment.
i "(ii) PENALTY FOR FALSIFICATION.—
"(I) An individual who willfully and knowingly
ytx /jv certifies under clause (i) a material and false state-
tja . ment in a resident assessment is subject to a civil
money penalty of not more than $1,000 with re-
spect to each assessment.
"(II) An individual who willfully and knowingly
,> causes another individual to certify under clause (i)
a material and false statement in a resident assess-
101 STAT. 1330-162 PUBLIC LAW 100-203—DEC. 22, 1987
' ment is subject to a civil money penalty of not
'•' more than $5,000 with respect to each assessment.
"(Ill) The Secretary shall provide for imposition
of civil money penalties under this clause in a
manner similar to that for the imposition of civil
money penalties under section 1128A.
'• "(iii) USE OF INDEPENDENT ASSESSORS.—If a State
determines, under a survey under subsection (g) or
otherwise, that there has been a knowing and willful
certification of false assessments under this paragraph,
the State may require (for a period specified by the
State) that resident assessments under this paragraph
-''''• be conducted and certified by individuals who are
independent of the facility and who are approved by
^ the State.
"(C) FREQUENCY.—
"(i) IN GENERAL.—Such an £issessment must be
conducted—
"(I) promptly upon (but no later than 4 days
' ' after the date of) admission for each individual
admitted on or after October 1, 1990, and by not
"•-•••''• later than October 1, 1990, for each resident of the
facility on that date;
"(II) promptly after a significant change in the
resident's physical or mental condition; and
"(III) in no case less often than once every 12
months.
"(ii) RESIDENT REVIEW.—The skilled nursing facility
must examine each resident no less frequently than
' once every 3 months and, as appropriate, revise the
resident's assessment to assure the continuing accuracy
yr-/: •'- of the assessment.
"(D) USE.—The results of such an assessment shall be
used in developing, reviewing, and revising the resident's
- plan of care under paragraph (2).
"(E) COORDINATION.—Such assessments shall be coordi-
nated with any State-required preadmission screening pro-
gram to the maximum extent practicable in order to avoid
duplicative testing and effort.
"(4) PROVISION OF SERVICES AND ACTIVITIES.—
"(A) IN GENERAL.—To the extent needed to fulfill all
plans of care described in paragraph (2), a skilled nursing
facility must provide, directly or under arrangements (or,
with respect to dental services, under agreements) with
others for the provision of—
'^ "(i) nursing services and specialized rehabilitative
services to attain or maintain the highest practicable
physical, mental, and psychosocial well-being of each
'• ' ' resident;
"(ii) medically-related social services to attain or
maintain the highest practicable physical, mental, and
psychosocial well-being of each resident;
"(iii) pharmaceutical services (including procedures
that assure the accurate acquiring, receiving, dispens-
ing, and administering of all drugs and biologicals) to
v , - , . - meet the needs of each resident;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-163
"(iv) dietary services that assure that the meals meet
the daily nutritional and special dietary needs of each
resident;
"(v) an on-going program, directed by a qualified
professional, of activities designed to meet the interests
and the physical, mental, and psychosocial well-being
of each resident; and
"(vi) routine and emergency dental services to meet
the needs of each resident.
The services provided or arranged by the facility must meet
professional standards of quality. Nothing in clause (vi)
shall be construed as requiring a facility to provide or
arrange for dental services described in that clause without
additional charge.
"(B) QuAUFiED PERSONS PROVIDING SERVICES.—Services
described in clauses (i), (ii), (iii), (iv), and (vi) of subpara-
graph (A) must be provided by qualified persons in accord-
ance with each resident's written plan of care.
"(C) REQUIRED NURSING CARE.—
"(i) IN GENERAL.—Except as provided in clause (ii), a
skilled nursing facility must provide 24-hour nursing
service which is sufficient to meet nursing needs of its
residents and must employ the services of a registered
professional nurse at least during the day tour of duty
(of at legist 8 hours a day) 7 days a week.
"(ii) EXCEPTION.—To the extent that clause (i) may be
deemed to require that a skilled nursing facility engage
the services of a registered professional nurse for more
than 40 hours a week, the Secretary is authorized to
waive such requirement if the Secretary finds that—
"(I) the facility is located in a rural area and the
supply of skilled nursing facility services in such
area is not sufficient to meet the needs of individ-
uals residing therein,
"(II) the facility has one full-time registered
professional nurse who is regularly on duty at such
facility 40 hours a week, and
"(III) the facility either has only patients whose
physicians have indicated (through physicians'
orders or admission notes) that each such patient
does not require the services of a registered nurse
or a physician for a 48-hour period, or has made
arrangements for a registered professional nurse
or a physician to spend such time at such facility
as may be indicated as necessary by the physician
to provide necessary skilled nursing services on
days when the regular full-time registered profes-
sional nurse is not on duty.
A waiver under this subparagraph shall be subject to
annual renewal.
*(5) REQUIRED TRAINING OF NURSE AIDES.—
"(A) IN GENERAL.—A skilled nursing facility must not use
(on a full-time, temporary, per diem, or other basis) any
individual, who is not a licensed health professional (as
defined in subparagraph (E)), as a nurse aide in the facility
on or after October 1, 1989, (or January 1, 1990, in the CEise
of an individual used by the facility as a nurse aide before
101 STAT. 1330-164 PUBLIC LAW 100-203—DEC. 22, 1987
i J u l y 1, 1989) for more t h a n 4 m o n t h s unless t h e
* individual—
"(i) h a s completed a t r a i n i n g a n d competency evalua-
fc"?^l?' i r tion program, or a competency evaluation program,
approved by t h e S t a t e u n d e r subsection (e)(1)(A), a n d
J, "(ii) is competent to provide such services.
"(B) O F F E R I N G COMPETENCY EVALUATION PROGRAMS FOR
i&*jffi CURRENT EMPLOYEES.—A skilled n u r s i n g facility m u s t pro-
vide, for individuals used a s a n u r s e aide by t h e facility as
N" ' of J u l y 1, 1989, for a competency evaluation p r o g r a m ap-
i; proved by t h e S t a t e u n d e r subsection (e)(1) a n d such
j! p r e p a r a t i o n a s m a y b e necessary for t h e individual to com-
I plete such a program by January 1,1990.
"(C) COMPETENCY.—The skilled nursing facility must not
• - permit an individual, other than in a training and com-
petency evaluation program approved by the State, to serve
as a nurse aide or provide services of a type for which the
individual has not demonstrated competency and must not
use such an individual as a nurse aide unless the facility
•> has inquired of the State registry established under subsec-
» tion (e)(2)(A) as to information in the registry concerning
the individual.
b; "(D) RE-TRAINING REQUIRED.—For purposes of subpara-
mni? graph (A), if, since an individual's most recent completion
of a training and competency evaluation program, there
tw h a s been a continuous period of 24 consecutive months
^ during none of which t h e individual performed nursing or
3. nursing-related services for monetary compensation, such
•: individual shall complete a new training a n d competency
evaluation program.
»r "(E) REGULAR IN-SERVICE EDUCATION.—The skilled nurs-
» ing facility m u s t provide such regular performance review
b. a n d regular in-service education as assures t h a t individuals
used as nurse aides a r e competent to perform services as
b • nurse aides, including training for individuals providing
1 nursing a n d nursing-related services to residents with cog-
nitive impairments.
SSNJP s "(F) N U R S E AIDE DEFINED.—In this paragraph, t h e t e r m
'nurse aide' means a n y individual providing nursing or
nursing-related services to residents in a skilled nursing
facility, b u t does not include a n individual—
"(i) who is a licensed health professional (as defined
in subparagraph (G)), or
"(ii) who volunteers to provide such services without
monetary compensation.
Ti "(G) LICENSED HEALTH PROFESSIONAL DEFINED.—In this
asii.: paragraph, the term 'licensed health professional' means a
physician, physician assistant, nurse practitioner, physical,
oi lo') speech, or occupational therapist, registered professional
nurse, licensed practical nurse, or licensed or certified
social worker.
"(6) PHYSICIAN SUPERVISION AND CUNICAL RECORDS.—A skilled
nursing facility must—
"(A) require that the medical care of every resident be
provided under the supervision of a physician;
"(B) provide for having a physician available to furnish
'-n necessary medical care in case of emergency; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-165
ynp* s "(C) maintain clinical records on all residents, which
records include the plans of care (described in paragraph
(2)) and the residents' assessments (described in para-
graph (3)).
"(7) REQUIRED SOCIAL SERVICES.—In the case of a skilled nurs-
ing facility with more than 120 beds, the facility must have at
least one social worker (with at least a bachelor's degree in
social work or similar professional qualifications) employed full-
time to provide or assure the provision of social services.
"(c) REQUIREMENTS RELATING TO RESIDENTS' RIGHTS.—
"(1) GENERAL RIGHTS.—
V
. "(A) SPECIFIED RIGHTS.—A skilled nursing facility must
. protect and promote the rights of each resident, including
each of the following rights:
istfiie. "(i) FREE CHOICE.—The right to choose a personal
attending physician, to be fully informed in advance
(lolfe'yoK about care and treatment, to be fully informed in
advance of any changes in care or treatment that may
8fiCH">;ri affect the resident's well-being, and (except with re-
spect to a resident adjudged incompetent) to participate
in planning care and treatment or changes in care and
treatment.
"(ii) FREE FROM RESTRAINTS.—The right to be free
.£. ." from physical or mental abuse, corporal punishment,
involuntary seclusion, and any physical or chemical
restraints imposed for purposes of discipline or conven-
ience and not required to treat the resident's medical
, . symptoms. Restraints may only be imposed—
^.^ "(I) to ensure the physical safety of the resident
r^'^^ or other residents, and
,..". "(II) only upon the written order of a physician
that specifies the duration and circumstances
^. ^. .f . under which the restraints are to be used (except
,.,cy^^ in emergency circumstances specified by the Sec-
r ;j,, retary) until such an order could reasonably be
obtained.
"(iii) PRIVACY.—The right to privacy with regard to
accommodations, medical treatment, written and tele-
P phonic communications, visits, and meetings of family
and of resident groups.
"(iv) CONFIDENTIAUTY.—The right to confidentiality
of personal and clinical records.
^^ "(v) ACCOMMODATION OF NEEDS.—The right—
;il\;,j^lj^^ "(I) to reside and receive services with reason-
able accommodations of individual needs and pref-
erences, except where the health or safety of the
individual or other residents would be endangered,
and
"(II) to receive notice before the room or room-
. . ]-^f mate of the resident in the facility is changed,
"(vi) GRIEVANCES.—The right to voice grievances
..^,. with respect to treatment or care that is (or fails to be)
^''.' .^ furnished, without discrimination or reprisal for voic-
ing the grievances and the right to prompt efforts by
the facility to resolve grievances the resident may
have, including those with respect to the behavior of
other residents.
101 STAT. 1330-166 PUBLIC LAW 100-203—DEC. 22, 1987
"(vii) PARTICIPATION IN RESIDENT AND FAMILY
GROUPS.—The right of the resident to organize and
•'i participate in resident groups in the facility and the
right of the resident's family to meet in the facility
with the families of other residents in the facility.
^'' "(viii) PARTICIPATION IN OTHER ACTIVITIES.—The
right of the resident to participate in social, religious,
and community activities that do not interfere with the
rights of other residents in the facility.
®® "(ix) EXAMINATION OF SURVEY RESULTS.—The right
to examine, upon reasonable request, the results of the
^••'f* most recent survey of the facility conducted by the
•' " ' Secretary or a State with respect to the facility and any
plan of correction in effect with respect to the facility.
5^ "(x) OTHER RIGHTS.—Any other right established
by the Secretary.
Clause (iii) shall not be construed as requiring the provision
of a private room.
"(B) NOTICE OF RIGHTS AND SERVICES.—A skilled nursing
facility must—
"(i) inform each resident, orally and in writing at the
time of admission to the facility, of the resident's legal
rights during the stay at the facility;
, "(ii) make available to each resident, upon reason-
able request, a written statement of such rights (which
statement is updated upon changes in such rights); and
"(iii) inform each other resident, in writing before or
at the time of admission and periodically during the
^ resident's stay, of services available in the facility and
of related charges for such services, including any
charges for services not covered under this title or by
the facility's basic per diem charge.
The written description of legal rights under this subpara-
graph shall include a description of the protection of per-
sonal funds under paragraph (6) and a statement that a
resident may file a complaint with a State survey and
certification agency respecting resident abuse and neglect
and misappropriation of resident property in the facility.
"(C) RIGHTS OF INCOMPETENT RESIDENTS.—In the case of a
y,; resident adjudged incompetent under the laws of a State,
' the rights of the resident under this title shall devolve
upon, and, to the extent judged necessary by a court of
competent jurisdiction, be exercised by, the person ap-
pointed under State law to act on the resident's behalf.
"(2) TRANSFER AND DISCHARGE RIGHTS.—
"(A) IN GENERAL.—A skilled nursing facility must permit
each resident to remain in the facility and must not trans-
fer or discharge the resident from the facility unless—
• "(i) the transfer or discharge is necessary to meet the
resident's welfare and the resident's welfare cannot be
met in the facility;
"(ii) the transfer or discharge is appropriate because
the resident's health has improved sufficiently so the
"'Copy read " "(ix)".
*'Copy read " "(%)".
**Copy read " "(xi)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-167
resident no longer needs the services provided by the
facihty;
"(iii) the safety of individuals in the facility is
endangered;
"(iv) the health of individuals in the facility would
otherwise be endangered;
"(v) the resident has failed, after reasonable and
appropriate notice, to pay (or to have paid under this
title or title XIX on the resident's behalf) an allowable
charge imposed by the facility for an item or service
requested by the resident and for which a charge may
be imposed consistent with this title and title XIX; or
"(vi) the facility ceases to operate.
In each of the cases described in clauses (i) through (v), the
basis for the transfer or discharge must be documented in
the resident's clinical record. In the cases described in
clauses (i) and (ii), the documentation must be made by the
resident's physician, and in the cases described in clauses
(iii) and (iv) the documentation must be made by a
physician.
"(B) PRE-TRANSFER AND PRE-DISCHARGE NOTICE.—
"(i) IN GENERAL.—Before effecting a transfer or dis-
charge of a resident, a skilled nursing facility must—
"(I) notify the resident (and, if known, a family
member of the resident or legal representative) of
the transfer or discharge and the reasons therefor,
"(II) record the reasons in the resident's clinical
record (including any documentation required
under subparagraph (A)), and
"(III) include in the notice the items described in
clause (iii).
"(ii) TIMING OF NOTICE.—The notice under clause (i)(I)
must be made at least 30 days in advance of the
resident's transfer or discharge except—
"(I) in a case described in clause (iii) or (iv) of
subparagraph (A);
"(II) in a case described in clause (ii) of subpara-
graph (A), where the resident's health improves
sufficiently to allow a more immediate transfer or
discharge;
"(III) in a case described in clause (i) of subpara-
graph (A), where a more immediate transfer or
discharge is necessitated by the resident's urgent
medical needs; or
"(IV) in a case where a resident has not resided
in the facility for 30 days.
In the case of such exceptions, notice must be given as
many days before the date of the transfer or discharge
as is practicable.
"(iii) ITEMS INCLUDED IN NOTICE.—Each notice under
clause (i) must include—
"(I) for transfers or discharges effected on or
after October 1, 1990, notice of the resident's right
to appeal the transfer or discharge under the State
process established under subsection (eX3); and
"(II) the name, mailing address, and telephone
number of the State long-term care ombudsman
91-194 O - 90 - 31 : QL.3 Part 2
101 STAT. 1330-168 PUBLIC LAW 100-203—DEC. 22, 1987
(established under section 307(a)(12) of the Older
Americans Act of 1965).
"(C) ORIENTATION.—A skilled nursing facility must pro-
vide sufficient preparation and orientation to residents to
ensure safe and orderly transfer or discharge from the
facility.
"(3) ACCESS AND VISITATION RIGHTS.—A skilled nursing facility
must—
"(A) permit immediate access to any resident by any
representative of the Secretary, by any representative of
the State, by an ombudsman described in paragraph
(2)(B)(iii)(II), or by the resident's individual physician;
"(B) permit immediate access to a resident, subject to the
resident's right to deny or withdraw consent at any time, by
immediate family or other relatives of the resident;
"(C) permit immediate access to a resident, subject to
reasonable restrictions and the resident's right to deny or
withdraw consent at any time, by others who are visiting
with the consent of the resident;
"(D) permit reasonable access to a resident by any entity
or individual that provides health, social, legal, or other
services to the resident, subject to the resident's right to
deny or withdraw consent at any time; and
"(E) permit representatives of the State ombudsman (de-
scribed in paragraph (2)(B)(iiiXII)), with the permission of
the resident (or the resident's legal representative) and
consistent with State law, to examine a resident's clinical
records.
"(4) EQUAL ACCESS TO QUALITY CARE.—A skilled nursing facil-
ity must establish and maintain identical policies and practices
regarding transfer, discharge, and covered services under this
title for all individuals regardless of source of payment.
"(5) ADMISSIONS POUCY.—
"(A) ADMISSIONS.—With respect to admissions practices, a
skilled nursing facility must—
"(i)(I) not require individuals applying to reside or
residing in the facility to waive their rights to benefits
under this title or under a State plan under title XIX,
(II) not require oral or written assurance that such
individuals are not eligible for, or will not apply for,
benefits under this title or such a State plan, and (III)
prominently display in the facility and provide to such
individuals written information about how to apply for
and use such benefits and how to receive refunds for
previous payments covered by such benefits; and
"(ii) not require a third party guarantee of payment
to the facility as a condition of admission (or expedited
admission) to, or continued stay in, the facility.
"(B) CONSTRUCTION.—
"(i) No PREEMPTION OF STRICTER STANDARDS.—
Subparagraph (A) shall not be construed as preventing
States or political subdivisions therein from prohibit-
ing, under State or local law, the discrimination
against individuals who are entitled to medical assist-
ance under this title with respect to admissions prac-
tices of skilled nursing facilities.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-169
"(ii) CONTRACTS WITH LEGAL REPRESENTATIVES.—
Subparagraph (AXii) shall not be construed as prevent-
ing a facility from requiring an individual, who has
legal access to a resident's income or resources avail-
able to pay for care in the facility, to sign a contract
(without incurring personal financial liability) to pro-
vide payment from the resident's income or resources
for such care.
"(6) PROTECTION OP RESIDENT FUNDS.—
"(A) IN GENERAL.—The skilled nursing facility—
"(i) may not require residents to deposit their per-
sonal funds with the facility, and
"(ii) once the facility accepts the written authoriza-
tion of the resident, must hold, safeguard, and account
for such personal funds under a system established and
maintained by the facility in accordance with this para-
graph.
"(B) MANAGEMENT OP PERSONAL FUNDS.—Upon a facility's
acceptance of written authorization of a resident under
subparagraph (AXii), the facility must manage and account
for the personal funds of the resident deposited with the
facility as follows:
"(i) DEPOSIT.—The facility must deposit any amount
of personal funds in excess of $50 with respect to a
resident in an interest bearing account (or accounts)
that is separate from any of the facility's operating
accounts and credits all interest earned on such sepa-
rate account to such account. With respect to any other
personal funds, the facility must maintain such funds
in a non-interest bearing account or petty cash fund,
"(ii) ACCOUNTING AND RECORDS.—The facility must
assure a full and complete separate accounting of each
such resident's personal funds, maintain a written
record of all financial transactions involving the per-
sonal funds of a resident deposited with the facility,
and afford the resident (or a legal representative of the
resident) reasonable access to such record.
"(iii) CONVEYANCE UPON DEATH.—Upon the death
of a resident with such an account, the facility must
convey promptly the resident's personal funds (and a
final accounting of such funds) to the individual admin-
istering the resident's estate.
"(C) ASSURANCE OP FINANCIAL SECURITY.—The facility
must purchase a surety bond, or otherwise provide assur-
ance satisfactory to the Secretary, to assure the security of
all personal funds of residents deposited with the facility.
"(D) LIMITATION ON CHARGES TO PERSONAL FUNDS.—The
facility may not impose a charge against the personal funds
of a resident for any item or service for which payment is
made under this title or title XIX.
"(d) REQUIREMENTS RELATING TO ADMINISTRATION AND OTHER
MATTERS.—
"(1) ADMINISTRATION.—
"(A) IN GENERAL.—A skilled nursing facility must be
administered in a manner that enables it to use its re-
sources effectively and efficiently to attain or maintain the
highest practicable physical mental, and psychosocial well-
101 STAT. 1330-170 PUBLIC LAW 100-203—DEC. 22, 1987
being of each resident (consistent with requirements estab-
hshed under subsection (f)(5)).
"(B) REQUIRED NOTICES.—If a change occurs in—
"(i) the persons with an ownership or control interest
(as defined in section 1124(a)(3)) in the facility,
"(ii) the persons who are officers, directors, agents, or
managing employees (as defined in section 1126(b)) of
the facility,
"(iii) the corporation, association, or other company
responsible for the management of the facility, or
"(iv) the individual who is the administrator or direc-
tor of nursing of the facility,
the skilled nursing facility must provide notice to the State
agency responsible for the licensing of the facility, at the
time of the change, of the change and of the identity of each
new person, company, or individual described in the respec-
tive clause.
"(C) SKILLED NURSING FACILITY ADMINISTRATOR.—The
administrator of a skilled nursing facility must meet stand-
ards established by the Secretary under subsection (f)(4).
"(2) LICENSING AND LIFE SAFETY CODE.—
"(A) LICENSING.—A skilled nursing facility must be li-
censed under applicable State and local law.
"(B) LIFE SAFETY CODE.—A skilled nursing facility must
meet such provisions of such edition (as specified by the
Secretary in regulation) of the Life Safety Code of the
National Fire Protection Association as are applicable to
nursing homes; except that—
"(i) the Secretary may waive, for such periods as he
deems appropriate, specific provisions of such Code
which if rigidly applied would result in unreasonable
hardship upon a facility, but only if such waiver would
not adversely affect the health and safety of residents
or personnel, and
' (ii) the provisions of such Code shall not apply in
any State if the Secretary finds that in such State there
is in effect a fire and safety code, imposed by State law,
which adequately protects residents of and personnel in
skilled nursing facilities.
"(3) SANITARY AND INFECTION CONTROL AND PHYSICAL ENVIRON-
MENT.—A skilled nursing facility must—
"(A) establish and maintain an infection control program
designed to provide a safe, sanitary, and comfortable
environment in which residents reside and to help prevent
the development and transmission of disease and infection,
and
"(B) be designed, constructed, equipped, and maintained
in a manner to protect the health and safety of residents,
personnel, and the general public.
"(4) MISCELLANEOUS.—
"(A) COMPUANCE WITH FEDERAL, STATE, AND LOCAL LAWS
AND PROFESSIONAL STANDARDS.—A skilled nursing facility
must operate and provide services in compliance with all
applicable Federal, State, and local laws and regulations
(including the requirements of section ^^^ 1124) and with
accepted professional standards and principles which apply
to professionals providing services in such a facility.
'Copy read "sections".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-171
"(B) OTHER.—A skilled nursing facility must meet such
other requirements relating to the health, safety, and well-
being of residents or relating to the physical facilities
thereof as the Secretary may find necessary.
"(e) STATE REQUIREMENTS RELATING TO SKILLED NURSING FACILITY
REQUIREMENTS.—The requirements, referred to in section 1864(d),
with respect to a State are as follows:
"(1) SPECIFICATION AND REVIEW OF NURSE AIDE TRAINING AND
COMPETENCY EVALUATION PROGRAMS AND OF NURSE AIDE COM-
PETENCY EVALUATION PROGRAMS.—The State must—
"(A) by not later than March 1, 1989, specify those train-
ing and competency evaluation programs, and those com-
petency evaluation programs, that the State approves for
purposes of subsection (b)(5) and that meet the require-
ments established under clause (i) or (ii) of subsection
(f)(2)(A), and
"(B) by not later than March 1, 1990, provide for the
review and reapproval of such programs, at a frequency and
using a methodology consistent with the requirements
established under subsection (f)(2)(A)(iii).
The failure of the Secretary to establish requirements under
subsection (f)(2) shall not relieve any State of its responsibility
under this paragraph.
"(2) NURSE AIDE REGISTRY.—
"(A) IN GENERAL.—By not later than March 1, 1989, the
State shall establish and maintain a registry of all individ-
uals who have satisfactorily completed a nurse aide train-
ing and competency evaluation program, or a nurse aide
competency evaluation program, approved under para-
graph (1) in the State.
"(B) INFORMATION IN REGISTRY.—The registry under
subparagraph (A) shall provide (in accordance with regula-
tions of the Secretary) for the inclusion of specific docu-
mented findings by a State under subsection (gXlXC) of
resident neglect or abuse or misappropriation of resident
property involving an individual listed in the registry, as
well as any brief statement of the individual disputing the
findings. In the case of inquiries to the registry concerning
an individual listed in the registry, any information dis-
closed concerning such a finding shall also include disclo-
sure of any such statement in the registry relating to the
finding or a clear and accurate summary of such a
statement.
"(3) STATE APPEALS PROCESS FOR TRANSFERS.—The State, for
transfers from skilled nursing facilities effected on or after
October 1, 1990, must provide for a fair mechanism for hearing
appeals on transfers of residents of such facilities. Such mecha-
nism must meet the guidelines established by the Secretary
under subsection (fX3); but the failure of the Secretary to estab-
lish such guidelines shall not relieve any State of its responsibil-
ity to provide for such a fair mechanism.
"(4) SKILLED NURSING FACILITY ADMINISTRATOR STANDARDS.—
By not later than January 1, 1990, the State must have imple-
mented and enforced the skilled nursing facility administrator
standards developed under subsection (fX4) respecting the quali-
fication of administrators of skilled nursing facilities.
101 STAT. 1330-172 PUBLIC LAW 100-203—DEC. 22, 1987
"(5) SPECIFICATION OF RESIDENT ASSESSMENT INSTRUMENT.—
Effective July 1, 1989, the State shall specify the instrument to
be used by nursing facilities in the State in complying with the
requirement of subsection (b)(3)(A)(iii). Such instrument shall
be—
"(A) one of the instruments designated under subsection
(f)(6)(B), or
"(B) an instrument which the Secretary has approved as
being consistent with the minimum data set of core ele-
ments, common definitions, and utilization guidelines speci-
fied by the Secretary under subsection (fK6)(A).
"(f) RESPONSIBIUTIES OF SECRETARY RELATING TO SKILLED NURSING
FACILITY REQUIREMENTS.—
"(1) GENERAL RESPONSIBILITY.—It is the duty and responsibil-
ity of the Secretary to assure that requirements which govern
the provision of care in skilled nursing facilities under this title,
and the enforcement of such requirements, are adequate to
protect the health, safety, welfare, and rights of residents and to
promote the effective and efficient use of public moneys.
"(2) REQUIREMENTS FOR NURSE AIDE TRAINING A N D COM-
PETENCY EVALUATION PROGRAMS A N D FOR NURSE AIDE COM-
PETENCY EVALUATION PROGRAMS.—
"(A) IN GENERAL.—For purposes of subsections (b)(5) and
(e)(1)(A), the Secretary shall establish, by not later than
September 1, 1988—
"(i) requirements for the approval of nurse aide
training and competency evaluation programs, includ-
ing requirements relating to (I) the areas to be covered
in such a program (including at least basic nursing
skills, personal care skills, cognitive, behavioral and
social care, beisic restorative services, and residents'
rights), content of the curriculum, (II) minimum hours
of initial and ongoing training and retraining (includ-
ing not less than 75 hours in the C£ise of initial train-
ing), (III) qualifications of instructors, and (IV) proce-
dures for determination of competency;
"(ii) requirements for the approval of nurse aide
competency evaluation programs, including require-
ment relating to the areas to be covered in such a
program, including at least basic nursing skills, per-
sonal care skills, cognitive, behavioral and social care,
basic restorative services, residents' rights, and proce-
dures for determination of competency; and
"(iii) requirements respecting the minimum fre-
quency and methodology to be used by a State in
reviewing such programs compliance with the require-
ments for such programs.
"(B) APPROVAL OF CERTAIN PROGRAMS.—Such require-
ments—
"(i) may permit approval of programs offered by or in
facilities, as well as outside facilities (including em-
ployee organizations), and of programs in effect on the
date of the enactment of this section;
"(ii) shall permit a State to find that an individual
who has completed (before July 1, 1989) a nurse aide
training and competency evaluation program shall be
deemed to have completed such a program approved
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-173
under subsection (bX5) if the State determines that, at
the time the program was offered, the program met the
requirements for approval under such paragraph; and
"(iii) shall prohibit approval of such a program—
"(I) offered by or in a skilled nursing facility
which has been determined to be out of compliance
with the requirements of subsection (b), (c), or (d),
within the previous 2 years, or
"(II) offered by or in a skilled nursing facility
unless the State makes the determination, upon an
individual's completion of the program, that the
individual is competent to provide nursing and
nursing-related services in skilled nursing
facilities.
A State may not delegate its responsibility under
clause (iiiXII) to the skilled nursing facility.
"(3) FEDERAL GUIDELINES FOR STATE APPEALS PROCESS FOR
TRANSFERS.—For purposcs of subsections (cX2)(BXiii)(I) and (eX3),
by not later than October 1, 1989, the Secretary shall establish
guidelines for minimum standards which State appeals proc-
esses under subsection (eX3) must meet to provide a fair mecha-
nism for hearing appeals on transfers of residents from skilled
nursing facilities.
"(4) SECRETARIAL STANDARDS FOR QUAUFICATION OF ADMINIS- *
TRATORS.—For purposes of subsections (dXlXC) and (eX4), the
Secretary shall develop, by not later than March 1, 1989, stand-
ards to be applied in sissuring the qualifications of administra-
tors of skilled nursing facilities.
"(5) CRITERIA FOR ADMINISTRATION.—The Secretary shall
establish criteria for assessing a skilled nursing facility's
compliance with the requirement of subsection (dXD with
respect to—
"(A) its governing body and management,
"(B) agreements with hospitals regarding transfers of
residents to and from the hospitals and to and from other
skilled nursing facilities,
"(C) disaster preparedness,
"(D) direction of medical care by a physician,
"(E) laboratory and radiological services,
"(F) clinical records, and
"(G) resident and advocate participation.
"(6) SPECIFICATION OF RESIDENT ASSESSMENT DATA SET AND
INSTRUMENTS.—The Secretary shall—
"(A) not later than July 1, 1989, specify a minimum data
set of core elements and common definitions for use by
nursing facilities in conducting the assessments required
under subsection (bX3), and establish guidelines for utiliza-
tion of the data set; and
"(B) by not later than October 1, 1990, designate one or
more instruments which are consistent with the specifica-
tion made under subparagraph (A) and which a State may
specify under subsection (eX5XA) for use by nursing facili-
ties in complying with the requirements of subsection
a)X3XAXiii).
"(7) LIST OF ITEMS AND SERVICES FURNISHED IN SKILLED NURS-
ING FACILITIES NOT CHARGEABLE TO THE PERSONAL FUNDS OF A
RESIDENT.—
101 STAT. 1330-174 PUBLIC L A W 100-203—DEC. 22, 1987
"(A) REGULATIONS REQUIRED.—Pursuant to the require-
ment of section 21(b) of the Medicare-Medicaid Anti-Fraud
and Abuse Amendments of 1977, the Secretary shall issue
regulations, on or before the first day of the seventh month
to begin after the date of enactment of this section, that
define those costs which may be charged to the personal
funds of patients in skilled nursing facilities who are
individuals receiving benefits under this part and those
costs which are to be included in the reasonable cost (or
other payment amount) under this title for extended care
services.
"(B) RULE IF FAILURE TO PUBLISH REGULATIONS.—-If the
Secretary does not issue the regulations under subpara-
graph (A) on or before the date required in such subpara-
graph, in the case of a resident of a skilled nursing facility
who is eligible to receive benefits under this part, the costs
which may not be charged to the personal funds of such
resident (and for which payment is considered to be made
under this title) shall not include, at a minimum, the costs
for routine personal hygiene items and services furnished
by the facility.".
(b) COSTS OF MEETING REQUIREMENTS.—
42 u s e 1395x. (1) UNDER REASONABLE COST.—Section 1861(vXlXE) of such Act
(42 U.S.C. 1395s(vXl)(E)) is amended by adding at the end the
following new sentence: "Notwithstanding the previous sen-
tence, such regulations with respect to skilled nursing facilities
shall take into account (in a manner consistent with subpara-
graph (A) and based on patient-days of services furnished) the
costs of such facilities complying with the requirements of
subsections (b), (c), and (d) of section 1819 (including the costs of
conducting nurse aide training and competency evaluation pro-
grams and competency evaluation programs).".
(2) ADJUSTMENT IN PROSPECTIVE PAYMENTS.—Section 1888(d) of
such Act (42 U.S.C. 1395yy(d)) is amended by adding at the end
the following new paragraph:
"(7) In computing the rates of payment to be made under this
subsection, there shall be taken into account the costs described in
the last sentence of section 1861(vXlXE) (relating to compliance with
nursing facility requirements and of conducting nurse aide training
and competency evaluation programs and competency evaluation
programs).".
Reports. (c) EVALUATION.—The Secretary of Health and Human Services
42 u s e 1395i-3 shall evaluate, and report to Congress by not later than January 1,
note. 1992, on the implementation of the resident assessment process for
residents of skilled nursing facilities under the amendments made
by this section.
(d) CONFORMING AMENDMENT.—Section 1861(aX2) of the Social
Security Act (42 U.S.C. 1395x(aX2)) is amended by striking "skilled
nursing facility" and inserting "facility described in section
1919(aX2) or subsection (yXD".
SEC. 4202. SURVEY AND CERTIFICATION PROCESS.
(a) STATE REQUIREMENT FOR PROCESS.—Title XVIII of the Social
Security Act is amended—
(1) in section 1864(d) (42 U.S.C. 1395aa(d)), as added by section
4201(aX2) of this Act, by inserting before the period "and section
1819(g)", and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-175
(2) in section 1819, as added by section 4201(a)(3) of this Act,
by adding at the end the following new subsection:
'(g) SURVEY AND CERTIFICATION PROCESS.—
"(1) STATE AND FEDERAL RESPONSIBILITY.—
"(A) I N GENERAL.—Pursuant to an agreement under sec-
tion 1864, each State shall be responsible for certifying, in
accordance with surveys conducted under paragraph (2),
the compliance of skilled nursing facilities (other than
facilities of the State) with the requirements of subsections
(b), (c), and (d). The Secretary shall be responsible for
certifying, in accordance with surveys conducted under
paragraph (2), the compliance of State skilled nursing facili-
ties with the requirements of such subsections.
"(B) EDUCATIONAL PROGRAM.—Each State shall conduct
periodic educational programs for the staff and residents
(and their representatives) of skilled nursing facilities in
order to present current regulations, procedures, and poli-
cies under this section.
"(C) INVESTIGATION OF ALLEGATIONS OF RESIDENT NEGLECT
AND ABUSE AND MISAPPROPRIATION OF RESIDENT PROPERTY.—
The State shall provide, through the agency responsible for
surveys and certification of nursing facilities under this
subsection, for a process for the receipt, review, and inves-
tigation of allegations of neglect and abuse and misappro-
priation of resident property by a nurse aide of a resident in
a nursing facility. If the State finds, after notice to the
nurse aide involved and a reasonable opportunity for a
hearing for the nurse aide to rebut allegations, that a nurse
aide whose name is contained in a nurse aide registry has
neglected or abused a resident or misappropriated resident
property in a facility, the State shall notify the nurse aide
and the registry of such finding.
"(D) CONSTRUCTION.—The failure of the Secretary to
establish standards under subsection (f) shall not relieve a
State of its responsibility under this subsection.
"(2) SURVEYS.—
"(A) STANDARD SURVEY.—
"(i) I N GENERAL.—Each skilled nursing facility shall
be subject to a standard survey, to be conducted with-
out any prior notice to the facility. Any individual who
notifies (or causes to be notified) a skilled nursing
facility of the time or date on which such a survey is
scheduled to be conducted is subject to a civil money r^
penalty of not to exceed $2,000. The Secretary shall
provide for imposition of civil money penalties under
this clause in a manner similar to that for the imposi-
tion of civil money penalties under section 1128A. The
Secretary shall review each State's procedures for the
scheduling and conduct of standard surveys to assure
that the State has taken all reasonable steps to avoid
giving notice of such a survey through the scheduling
procedures and the conduct of the surveys themselves,
"(ii) CONTENTS.—Each standard survey shall include,
for a case-mix stratified sample of residents—
"(I) a survey of the quality of care furnished, as
measured by indicators of medical, nursing, and
rehabilitative care, dietary and nutrition services,
101 STAT. 1330-176 PUBLIC LAW 100-203—DEC. 22, 1987
activities and social participation, and sanitation,
infection control, and the physical environment,
"(II) written plans of care provided under subsec-
tion (bX2) and an audit of the residents' assess-
ments under subsection (b)(3) to determine the ac-
curacy of such assessments and the adequacy of
such plans of care, and
"(III) a review of compliance with residents'
rights under subsection (c).
"(iii) FREQUENCY.—
"(I) IN GENERAL.—Each skilled nursing facility
shall be subject to a standard survey not later than
15 months after the date of the previous standard
survey conducted under this subparagraph. The
Statewide average interval between standard sur-
veys of skilled nursing facilities under this subsec-
tion shall not exceed 12 months.
"(II) SPECIAL SURVEYS.—If not otherwise con-
ducted under subclause (I), a standard survey (or
an abbreviated standard survey) may be conducted
within 2 months of any change of ownership,
administration, management of a skilled nursing
facility, or the director of nursing in order to deter-
mine whether the change has resulted in any de-
cline in the quality of care furnished in the facility.
"(B) EXTENDED SURVEYS.—
"(i) IN GENERAL.—Each skilled nursing facility which
is found, under a standard survey, to have provided
substandard quality of care shall be subject to an ex-
tended survey. Any other facility may, at the Sec-
retary's or State's discretion, be subject to such an
extended survey (or a partial extended survey).
"(ii) TIMING.—The extended survey shall be con-
ducted immediately after the standard survey (or, if not
practical, not later than 2 weeks after the date of
completion of the standard survey).
"(iii) CONTENTS.—In such an extended survey, the
survey team shall review and identify the policies and
procedures which produced such substandard quality of
care and shall determine whether the facility has com-
plied with all the requirements described in subsections
Contracts. (b), (c), and (d). Such review shall include an expansion
of the size of the sample of residents' assessments
reviewed and a review of the staffing, of in-service
training, and, if appropriate, of contracts with consult-
ants.
"(iv) CONSTRUCTION.—Nothing in this paragraph
shall be construed as requiring an extended or partial
extended survey as a prerequisit-e to imposing a sanc-
tion against a facility under subsection (h) on the basis
of findings in a standard survey.
"(C) SURVEY PROTOCOL.—Standard and extended surveys
shall be conducted—
"(i) based upon a protocol which the Secretary has
developed, tested, and validated by not later than Octo-
ber 1,1990, and , . „ _ . . . . , ,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-177
"(ii) by individuals, of a survey team, who meet such
minimum qualifications £is the Secretary establishes by
not later than such date.
The failure of the Secretary to develop, test, or validate
such protocols or to establish such minimum qualifications
shall not relieve any State of its responsibility (or the
Secretary of the Secretary's responsibility) to conduct sur-
veys under this subsection.
(D) CONSISTENCY OF SURVEYS.—Each State and the Sec-
retary shall implement programs to measure and reduce
inconsistency in the application of survey results among
surveyors.
"(E) SURVEY TEAMS.—
"(i) IN GENERAL.—Surveys under this subsection shall
be conducted by a multidisciplinary team of profes-
sionals (including a registered professional nurse).
"(ii) PROHIBITION OF CONFLICTS OF INTEREST.—A State
may not use as a member of a survey team under this
subsection an individual who is serving (or has served
within the previous 2 years) as a member of the staff of,
or as a consultant to, the facility surveyed respecting
compliance with the requirements of subsections (b), (c),
and (d), or who has a personal or familial financial
interest in the facility being surveyed.
"(iii) TRAINING.—The Secretary shall provide for the
comprehensive training of State and Federal surveyors
in the conduct of standard and extended surveys under
this subsection, including the auditing of resident
assessments and plans of care. No individual shall
serve as a member of a survey team unless the individ-
ual has successfully completed a training and testing
program in survey and certification techniques that
has been approved by the Secretary.
'(3) VAUDATION SURVEYS.—
"(A) IN GENERAL.—The Secretary shall conduct onsite
surveys of a representative sample of skilled nursing facili-
ties in each State, within 2 months of the date of surveys
conducted under paragraph (2) by the State, in a sufficient
number to allow inferences about the adequacies of each
State's surveys conducted under paragraph (2). In conduct-
ing such surveys, the Secretary shall use the same survey
protocols as the State is required to use under paragraph
(2). If the State has determined that an individual skilled
nursing facility meets the requirements of subsections (b),
(c), and (d), but the Secretary determines that the facility
does not meet such requirements, the Secretary's deter-
mination as to the facility's noncompliance with such
requirements is binding and supersedes that of the State
survey.
"(B) SCOPE.—With respect to each State, the Secretary
shall conduct surveys under subparagraph (A) each year
with respect to at least 5 percent of the number of skilled
nursing facilities surveyed by the State in the year, but in
no case less than 5 skilled nursing facilities in the State.
"(C) REMEDIES FOR SUBSTANDARD PERFORMANCE.—If the
Secretary finds, on the basis of such surveys, that a State
has failed to perform surveys as required under paragraph
101 STAT. 1330-178 PUBLIC LAW 100-203—DEC. 22, 1987
(2) or that a State's survey and certification performance
otherwise is not adequate, the Secretary shall provide for
an appropriate remedy, which may include the training of
survey teams in the State.
^° "(D) SPECIAL SURVEYS OF COMPLIANCE.—Where the Sec-
retary has reason to question the compliance of a skilled
nursing facility with any of the requirements of subsections
03), (c), and (d), the Secretary may conduct a survey of the
facility and, on that basis, make independent and binding
determinations concerning the extent to which the skilled
nursing facility meets such requirements.
"(4) INVESTIGATION OF COMPLAINTS AND MONITORING COMPLI-
ANCE.—Each State shall maintain procedures and adequate
staff to—
"(A) investigate complaints of violations of requirements
by skilled nursing facilities, and
"(B) monitor, on-site, on a regular, GS needed basis, a
skilled nursing facility's compliance with the requirements
of subsections (b), (c), and (d), if—
"(i) the facility has been found not to be in compli-
ance with such requirements and is in the process of
correcting deficiencies to achieve such compliance;
"(ii) the facility was previously found not to be in
compliance with such requirements, has corrected defi-
ciencies to achieve such compliance, and verification of
continued compliance is indicated; or
"(iii) the State has reason to question the compliance
of the facility with such requirements.
A State may maintain and utilize a specialized team (including
an attorney, an auditor, and appropriate health care profes-
sionals) for the purpose of identifying, surveying, gathering and
preserving evidence, and carrying out appropriate enforcement
actions against chronically substandard skilled nursing
facilities.
"(5) DISCLOSURE OF RESULTS OF INSPECTIONS AND ACTIVITIES.—
"(A) PuBuc INFORMATION.—Each State, and the Sec-
retary, shall make available to the public—
"(i) information respecting all surveys and certifi-
cations made respecting skilled nursing facilities,
including statements of deficiencies and plans of
correction.
Reports. "(ii) copies of cost reports of such facilities filed under
this title or title XIX,
"(iii) copies of statements of ownership under section
1124, and
"(iv) information disclosed under section 1126.
"(B) NOTICE TO OMBUDSMAN.—Each State shall notify the
State long-term care ombudsman (established under section
307(a)(12) of the Older Americans Act of 1965) of the State's
findings of noncompliance with any of the requirements of
subsections (b), (c), and (d), with respect to a skilled nursing
facility in the State.
"(C) NOTICE TO PHYSICIANS AND SKILLED NURSING FACIUTY
ADMINISTRATOR UCENSING BOARD.—If a State finds that a
'Copy read ""(C)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-179
skilled nursing facility has provided substandard quality of
care, the State shall notify—
"(i) the attending physician of each resident with
respect to which such finding is made, and
"(ii) the State board responsible for the licensing of
the skilled nursing facility administrator at the facility.
"(D) ^°° ACCESS TO FRAUD CONTROL UNITS.—Each State shall
provide its State medicaid fraud and abuse control unit
(established under section 1903(q)) with access to all
information of the State agency responsible for surveys and
certifications under this subsection.".
(c) POSTING SURVEY RESULTS.—Section 1864(a) of such Act (42
U.S.C. 1395aa(a)) is amended by inserting, after "readily available
form and place" in the fifth sentence, the following: ", and require
(in the case of skilled nursing facilities) the posting in a place readily
accessible to patients (and patients' representatives),".
SEC. 4203. ENFORCEMENT PROCESS.
(a) STATE REQUIREMENT.—Title XVIII of the Social Security Act is
amended—
(1) in section 1864(d) (42 U.S.C. 1395aa(d)), as added by section
4201(aX2) and as amended by section 4202(a)(1) of this Act, by
inserting before the period at the end the following: "and the
establishment of remedies under sections 1819(h)(2)(B) and
1819(h)(2)(C) (relating to establishment and application of rem-
edies)"; and
(2) by adding at the end of section 1819 of such Act, as added
by section 4201(a)(3) and as amended by section 4202(aX2), the
end the following new subsection:
"(h) ENFORCEMENT PROCESS.—
"(1) IN GENERAL.—If a State finds, on the basis of a standard,
extended, or partial extended survey under subsection (gX2) or
otherwise, that a skilled nursing facility no longer meets a
requirement of subsection (b), (c), or (d), and further finds that
the facility's deficiencies—
"(A) immediately jeopardize the health or safety of its
residents, the State shall recommend to the Secretary that
the Secretary take such action as described in para-
graph (2XAXi); or
"(B) do not immediately jeopardize the health or safety of
its residents, the State may recommend to the Secretary
that the Secretary take such action as described in para-
graph (2XAXii).
If a State finds that a skilled nursing facility meets the require-
ments of subsections (b), (c), and (d), but, as of a previous period,
did not meet such requirements, the State may recommend a
civil money penalty under paragraph (2XBXii) for the days in
which it finds that the facility was not in compliance with such
requirements.
"(2) SECRETARIAL AUTHORITY.—
"(A) IN GENERAL.—With respect to any skilled nursing
facility in a State, if the Secretary finds, or pursuant to a
recommendation of the State under paragraph (1) finds,
that a skilled nursing facility no longer meets a require-
ment of subsection (b), (c), (d), or (e), and further finds that
the facility's deficiencies—
**• Copy read ""(C)".
101 STAT. 1330-180 PUBLIC LAW 100-203—DEC. 22, 1987
"(i) immediately jeopardize the health or safety of its
residents, the Secretary shall take immediate action to
remove the jeopardy and correct the deficiencies
through the remedy specified in subparagraph (BXiii),
or terminate the facility's participation under this title
and may provide, in addition, for one or more of the
other remedies described in subparagraph (B); or
"(ii) do not immediately jeopardize the health or
safety of its residents, the Secretary may impose any of
the remedies described in subparagraph (B).
Nothing in this subparagraph shall be construed as restrict-
ing the remedies available to the Secretary to remedy a
skilled nursing facility's deficiencies. If the Secretary finds,
or pursuant to the recommendation of the State under
paragraph (1) finds, that a skilled nursing facility meets
such requirements but, as of a previous period, did not meet
such requirements, the Secretary may provide for a civil
money penalty under subparagraph (BXii) for the days on
which he finds that the facility was not in compliance with
such requirements.
"(B) SPECIFIED REMEDIES.—The Secretary may take the
following actions with respect to a finding that a facility
has not met an applicable requirement:
"(i) DENIAL OF PAYMENT.—The Secretary may deny
any further payments under this title with respect to
all individuals entitled to benefits under this title in
the facility or with respect to such individuals admitted
to the facility after the effective date of the finding.
"(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PEN-
ALTIES.—The Secretary may impose a civil money pen-
alty in an amount not to exceed $10,000 for each day of
noncompliance and the Secretary shall impose and
collect such a penalty in the same manner as civil
money penalties are imposed and collected under sec-
tion 1128 A.
"(iii) APPOINTMENT OF TEMPORARY MANAGEMENT.—In
consultation with the State, the Secretary may appoint
temporary management to oversee the operation of the
facility and to assure the health and safety of the
facility's residents, where there is a need for temporary
management while—
"(I) there is an orderly closure of the facility, or
"(II) improvements are made in order to bring
the facility into compliance with all the require-
ments of subsections (b), (c), and (d).
The temporary management under this clause shall
not be terminated under subclause (II) until the Sec-
retary has determined that the facility has the manage-
ment capability to ensure continued compliance with
all the requirements of subsections (b), (c), and (d).
The Secretary shall specify criteria, as to when and how
each of such remedies is to be applied, the amounts of any
fines, and the severity of each of these remedies, to be used
in the imposition of such remedies. Such criteria shall be
designed so as to minimize the time between the identifica-
tion of violations and final imposition of the remedies and
shall provide for the imposition of incrementally more
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-181
severe fines for repeated or uncorrected deficiencies. In
addition, the Secretary may provide for other specified
remedies, such as directed plans of correction.
"(C) CONTINUATION OF PAYMENTS PENDING REMEDI-
ATION.—The Secretary may continue payments, over a
period of not longer than 6 months, under this title with
respect to a skilled nursing facility not in compliance with a
requirement of subsection (b), (c), or (d), if—
"(i) the State survey agency finds that it is more
appropriate to take alternative action to assure compli-
ance of the facility with the requirements than to
terminate the certification of the facility,
"(ii) the State has submitted a plan and timetable for
corrective action to the Secretary for approval and the
Secretary approves the plan of corrective action, and
"(iii) the facility agrees to repay to the Federal
Government payments received under this subpara-
graph if the corrective action is not taken in accord-
ance with the approved plan and timetable.
The Secretary shall establish guidelines for approval of
corrective actions requested by States under this subpara-
graph.
"(D) ASSURING PROMPT COMPLIANCE.—If a skilled nursing
facility has not complied with any of the requirements of
subsections (b), (c), and (d), within 3 months after the date
the facility is found to h»e out of compliance with such
requirements, the Secretary shall impose the remedy de-
scribed in subparagraph (BXi) for all individuals who are
admitted to the facility after such date.
"(E) REPEATED NONCOMPLIANCE.—In the case of a skilled
nursing facility which, on 3 consecutive standard surveys
conducted under subsection (gX2), has been found to have
provided substandard quality of care, the Secretary shall
(regardless of what other remedies are provided)—
"(i) impose the remedy described in subparagraph
(BXi), and
"(ii) monitor the facility under subsection (gX4XB),
until the facility has demonstrated, to the satisfaction of
the Secretary, that it is in compliance with the require-
ments of subsections (b), (c), and (d), and that it will remain
in compliance with such requirements.
"(3) EFFECTIVE PERIOD OF DENIAL OF PAYMENT.—A finding to
deny payment under this subsection shall terminate when the
Secretary finds that the facility is in substantial compliance
with all the requirements of subsections (b), (c), and (d).
"(4) IMMEDIATE TERMINATION OF PARTICIPATION FOR FACIUTY
WHERE SECRETARY FINDS NONCOMPUANCE AND IMMEDIATE JEOP-
ARDY.—If the Secretary finds that a skilled nursing facility has
not met a requirement of subsection (b), (c), or (d), and finds that
the failure immediately jeopardizes the health or safety of its
residents, the Secretary shall take immediate action to remove
the jeopardy and correct the deficiencies through the remedy
specified in paragraph (2XBXiii), or the Secretary shall termi-
nate the facility's participation under this title. If the facility's
participation under this title is terminated, the State shall
provide for the safe and orderly transfer of the residents eligible
101 STAT. 1330-182 PUBLIC LAW 100-203—DEC. 22, 1987
under this title consistent with the requirements of subsection
(0(2).
"(5) CONSTRUCTION.—The remedies provided under this
subsection are in addition to those otherwise available under
State or Federal law and shall not be construed as limiting such
other remedies, including any remedy available to an individual
at common law. The remedies described in clauses (i), (iii), and
(iv) of paragraph (2)(A) may be imposed during the pendency of
any hearing.
"(6) SHARING OF INFORMATION.—Notwithstanding any other
provision of law, all information concerning skilled nursing
facilities required by this section to be filed with the Secretary
or a State agency shall be made available to Federal or State
employees for purposes consistent with the effective administra-
tion of programs established under this title and title XIX,
including investigations by State medicaid fraud control units.".
42 u s e 1395i-3 SEC. 4204. EFFECTIVE DATES.
(a) NEW REQUIREMENTS AND SURVEY AND CERTIFICATION PROC-
ESS.—Except as otherwise specifically provided in section 1819 of the
Social Security Act, the amendments made by this part shall apply
to extended care services furnished on or after October 1, 1990,
without regard to whether regulations to implement such amend-
ments are promulgated by such date.
(b) WAIVER OF PAPERWORK REDUCTION.—Chapter 35 of title 44,
United States Code, shall not apply to information required for
purposes of carrying out this part and implementing the amend-
ments made by this part.
42 u s e 1395i-3 SEC. 420.5. ANNUAL REPORT.
The Secretary of Health and Human Services shall report to the
Congress annually on the extent to which skilled nursing facilities
are complying with the requirements of subsections (b), (c), and (d) of
section 1819 of the Social Security Act (as added by the amendments
made by this part) and the number and type of enforcement actions
taken by States and the Secretary under section 1819(h) of such Act
(as added by section 4203 of this Act).
SEC. 4206. CONSTRUCTION.
42 use l395i-3. Section 1819 of the Social Security Act is amended by adding at
the end the following new subsection:
"(i) CONSTRUCTION.—Where requirements or obligations under
this section are identical to those provided under section 1919 of this
Act, the fulfillment of those requirements or obligations under
section 1919 shall be considered to be the fulfillment of the cor-
responding requirements or obligations under this section.".
PART 2—MEDICAID PROGRAM
#
SEC. 4211. REQUIREMENTS FOR NURSING FACILITIES.
(a) SPECIFICATION OF FACILITY REQUIREMENTS.—Title XIX of the
Social Security Act is amended—
42 use 1396s. (1) by redesignating section 1922 as section 1923,
42 use I396r, (2) by redesignating section 1919 as section 1922 and by
i396r-3. transferring and inserting such section after section 1921, and
(3) by inserting after section 1918 the following new section:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-183
"REQUIREMENTS FOR NURSING FACIUTIES
"SEC. 1919. (a) NURSING FACIUTY DEFINED.—In this title, the term 42 use I396r.
'nursing facility' means an institution (or a distinct part of an
institution) which—
"(1) is primarily engaged in providing to residents—
"(A) skilled nursing care and related services for resi-
dents who require medical or nursing care,
"(B) rehabilitation services for the rehabilitation of in-
jured, disabled, or sick persons, or
"(C) on a regular basis, health-related care and services to
individuals who because of their mental or physical condi-
tion require care and services (above the level of room and
board) which can be made available to them only through
institutional facilities,
and is not primarily for the care and treatment of mental
diseases;
"(2) has in effect a transfer agreement (meeting the require-
ments of section 1861(1)) with one or more hospitals having
agreements in effect under section 1866; and
"(3) meets the requirements for a nursing facility described in
subsections (b), (c), and (d) of this section.
Such term also includes any facility which is located in a State on
an Indian reservation and is certified by the Secretary as meeting
the requirements of paragraph (1) and subsections (b), (c), and (d).
"(b) REQUIREMENTS RELATING TO PROVISION OF SERVICES.—
"(1) QUAUTY OF UFE.—
"(A) IN GENERAL.—A nursing facility must care for its
residents in such a manner and in such an environment as
will promote maintenance or enhancement of the quality of
life of each resident.
"(B) QuAUTY ASSESSMENT AND ASSURANCE.—A n u r s i n g
facility must maintain a quality assessment and assurance
committee, consisting of the director of nursing services, a
physician designated by the facility, and at least 3 other
members of the facility's staff, which (i) meets at least
quarterly to identify issues with respect to which quality
assessment and assurance activities are necessary and (ii)
develops and implements appropriate plans of action to
correct identified quality deficiencies.
"(2) SCOPE OF SERVICES AND ACTIVITIES UNDER PLAN OF CARE.—
A nursing facility must provide services and activities to attain
or maintain the highest practicable physical, mental, and
psychosocial well-being of each resident in accordance with a
written plan of care which—
"(A) describes the medical, nursing, and psychosocial
needs of the resident and how such needs will be met;
"(B) is initially prepared, with the participation to the
extent practicable of the resident or the resident's family or
legal representative, by a team which includes the resi-
dent's attending physician and a registered professional
nurse with responsibility for the resident; and
"(C) is periodically reviewed and revised by such team
after each assessment under paragraph (3).
"(3) RESIDENTS' ASSESSMENT.—
"(A) REQUIREMENT.—A nursing facility must conduct a
comprehensive, accurate, standardized, reproducible assess-
101 STAT. 1330-184 PUBLIC LAW 100-203—DEC. 22, 1987
ment of each resident's functional capacity, which assess-
ment—
"(i) describes the resident's capability to perform
daily life functions and significant impairments in
functional capacity;
"(ii) is based on a uniform minimum data set speci-
fied by the Secretary under subsection (f)(6)(A);
"(iii) in the case of a resident eligible for benefits
under this title, uses an instrument which is specified
by the State under subsection (eX5); and
"(iv) in the case of a resident eligible for benefits
under part A of title XVIII, includes the identification
of medical problems.
"(B) CERTIFICATION.—
"(i) IN GENERAL.—Each such assessment must be con-
ducted or coordinated (with the appropriate participa-
tion of health professionals) by a registered profes-
sional nurse who signs and certifies the completion of
the assessment. Each individual who completes a por-
tion of such an assessment shall sign and certify as to
the accuracy of that portion of the eissessment.
"(ii) PENALTY FOR FALSIFICATION.—
"(I) An individual who willfully and knowingly
certifies under clause (i) a material and false state-
ment in a resident assessment is subject to a civil
money penalty of not more than $1,000 with re-
spect to each assessment.
"(II) An individual who willfully and knowingly
causes another individual to certify under clause (i)
a material and false statement in a resident assess-
ment is subject to a civil money penalty of not
more than $5,000 with respect to each assessment.
"(Ill) The Secretary shall provide for imposition
of civil money penalties under this clause in a
manner similar to that for the imposition of civil
money penalties under section 1128A.
"(iii) USE OF INDEPENDENT ASSESSORS.—If a State
determines, under a survey under subsection (g) or
otherwise, that there has been a knowing and willful
certification of false assessments under this paragraph,
the State may require (for a period specified by the
State) that resident assessments under this paragraph
be conducted and certified by individuals who are
independent of the facility and who are approved by
the State.
"(C) FREQUENCY.—
"(i) IN GENERAL.—Such an assessment must be con-
ducted—
"(I) promptly upon (but no later than 4 days
after the date of) admission for each individual
admitted on or after October 1, 1990, and by not
later than October 1, 1991, for each resident of the
facility on that date;
"(II) promptly after a significant change in the
resident's physical or mental condition; and
"(III) in no case less often than once every 12
months. •
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-185
"(ii) RESIDENT REVIEW.—The nursing facility must
examine each resident no less frequently than once
every 3 months and, as appropriate, revise the resi-
dent s assessment to assure the continuing accuracy of
the assessment.
"(D) USE.—The results of such an assessment shall be
used in developing, reviewing, and revising the resident's
plan of care under paragraph (2).
"(E) COORDINATION.—Such assessments shall be coordi-
nated with any State-required preadmission screening pro-
gram to the maximum extent practicable in order to avoid
duplicative testing and effort.
"(F) REQUIREMENTS RELATING TO PREADMISSION SCREENING
FOR M E N T A L L Y ILL AND MENTALLY RETARDED INDIVIDUALS.—
A nursing facility must not admit, on or after January 1,
1989, any new resident who—
"(i) is mentally ill (as defined in subsection (eXTXGXi))
unless the State mental health authority has deter-
mined (based on an independent physical and mental
evaluation performed by a person or entity other than
the State mental health authority) prior to admission
that, because of the physical and mental condition of
the individual, the individual requires the level of serv-
ices provided by a nursing facility, and, if the individ-
ual requires such level of services, whether the individ-
ual requires active treatment for mental illness, or
"(ii) is mentally retarded (as defined in subsection
(eXTXGXii)) unless the State mental retardation or
developmental disability authority has determined
prior to admission that, because of the physical and
mental condition of the individual, the individual re-
quires the level of services provided by a nursing facil-
ity, and, if the individual requires such level of services,
whether the individual requires active treatment for
mental retardation.
"(4) PROVISION OF SERVICES AND ACTIVITIES.—
"(A) IN GENERAL.—To the extent needed to fulfill all
plans of care described in paragraph (2), a nursing facility
must provide (or arrange for the provision of)—
"(i) nursing and related services and specialized re-
habilitative services to attain or maintain the highest
practicable physical, mental, and psychosocial well-
being of each resident;
"(ii) medically-related social services to attain or
maintain the highest practicable physical, mental, and
psychosocial well-being of each resident;
"(iii) pharmaceutical services (including procedures
that assure the accurate acquiring, receiving, dispens-
ing, and administering of all drugs and biologicals) to
meet the needs of each resident;
"(iv) dietary services that assure that the meals meet
the daily nutritional and special dietary needs of each
resident;
"(v) an on-going program, directed by a qualified
professional, of activities designed to meet the interests
and the physical, mental, and psychosocial well-being
of each resident; and
101 STAT. 1330-186 PUBLIC LAW 100-203—DEC. 22, 1987
"(vi) routine dental services (to the extent covered
under the State plan) and emergency dental services to
meet the needs of each resident.
The services provided or arranged by the facility must meet
professional standards of quality.
"(B) QUALIFIED PERSONS PROVIDING SERVICES.—Services
described in clauses (i), (ii), (iii), (iv), and (vi) of subpara-
graph (A) must be provided by qualified persons in accord-
ance with each resident's written plan of care.
"(C) REQUIRED NURSING CARE; FACIUTY WAIVERS.—
"(i) GENERAL REQUIREMENTS.—With respect to nurs-
ing facility services provided on or after October 1,
1990, a nursing facility—
"(I) except as provided in clause (ii), must provide
24-hour licensed nursing services which are suffi-
cient to meet the nursing needs of its residents,
and
"(II) except as provided in clause (ii), must use
the services of a registered nurse for at least 8
consecutive hours a day, 7 days a week,
"(ii) FACIUTY WAIVERS.—
"(i) WAIVER BY STATE.—A State may waive the
requirement of subclause (I) or (II) of clause (i) with
respect to a facility if—
"(I) the facility demonstrates to the satisfaction
of the State that the facility has been unable,
despite diligent efforts (including offering wages at
the community prevailing rate for nursing facili-
ties), to recruit appropriate personnel,
"(II) the State determines that a waiver of the
requirement will not endanger the health or safety
of individuals staying in the facility, and
"(III) the State finds that, for any such periods in
which licensed nursing services are not available, a
registered nurse or a physician is obligated to re-
spond immediately to telephone calls from the
facility.
A waiver under this clause shall be subject to annual
review and to the review of the Secretary and subject to
clause (ii) shall be accepted by the Secretary for pur-
poses of this title to the same extent as is the State's
certification of the facility. In granting or renewing a
waiver, a State may require the facility to employ other
qualified, licensed personnel.
"(ii) ASSUMPTION OF WAIVER AUTHORITY BY SEC-
RETARY.—If the Secretary determines that a State has
shown a clear pattern and practice of allowing waivers
in the absence of diligent efforts by facilities to meet
the staffing requirements, the Secretan^ shall assume
and excercise the authority of the State to grant
waivers.
"(5) REQUIRED TRAINING OF NURSE AIDES.—
"(A) IN GENERAL.—A nursing facility must not use (on a
full-time, temporary, per diem, or other basis) any individ-
ual, who is not a licensed health professional (as defined in
subparagraph (E)), as a nurse aide in the facility on or after
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-187
January 1, 1990, for more than 4 months unless the individ-
ual—
"(i) has completed a training and competency evalua-
tion program, or a competency evaluation program,
approved by the State under subsection (eXlXA), and
'(ii) is competent to provide such services.
"(B) OFFERING COMPETENCY EVALUATION PROGRAMS FOR
CURRENT EMPLOYEES.—A nursing facility must provide, for
individuals used as a nurse aide by the facility as of July 1,
1989, for a competency evaluation program approved by the
State under subsection (eXD and such preparation as may
be necessary for the individual to complete such a program
by January 1,1990.
"(C) COMPETENCY.—The nursing facility must not permit
an individual, other than in a training and competency
evaluation program approved by the State, to serve as a
nurse aide or provide services of a type for which the
individual has not demonstrated competency and must not
use such an individual as a nurse aide unless the facility
has inquired of the State registry established under subsec-
tion (e)(2XA) as to information in the registry concerning
the individual.
"(D) RE-TRAINING REQUIRED.—For purposes of subpara-
graph (A), if, since an individual's most recent completion
of a training and competency evaluation program, there
has been a continuous period of 24 consecutive months
during none of which the individual performed nursing or
nursing-related services for monetary compensation, such
individual shall complete a new training and competency
evaluation program.
"(E) REGULAR IN-SERVICE EDUCATION.—The nursing facil-
ity must provide such regular performance review and
regular in-service education as assures that individuals
used as nurse aides are competent to perform services as
nurse aides, including training for individuals providing
nursing and nursing-related services to residents with cog-
nitive impairments.
"(F) NURSE AIDE DEFINED.—In this paragraph, the term
'nurse aide' means any individual providing nursing or
nursing-related services to residents in a nursing facility,
but does not include an individual—
"(i) who is a licensed health professional (as defined
in subparagraph (G)), or
"(ii) who volunteers to provide such services without
monetary compensation.
"(G) LICENSED HEALTH PROFESSIONAL DEFINED.—In this
paragraph, the term 'licensed health professional' means a
physician, physician assistant, nurse practitioner, physical,
speech, or occupational therapist, registered professional
nurse, licensed practical nurse, or licensed or certified
social worker.
"(6) PHYSICIAN SUPERVISION AND CUNICAL RECORDS.—A nurs-
ing facility must—
"(A) require that the health care of every resident be
provided under the supervision of a physician;
"(B) provide for having a physician available to furnish
necessary medical care in case of emergency; and
101 STAT. 1330-188 PUBLIC LAW 100-203—DEC. 22, 1987
"(C) maintain clinical records on all residents, which
records include the plans of care (described in paragraph
(2)) and the residents' assessments (described in paragraph
(3)), as well as the results of any pre-admission screening
conducted under subsection (eX7).
"(7) REQUIRED SOCIAL SERVICES.—In the case of a nursing
facility with more than 120 beds, the facility must have at least
one social worker (with at least a bachelor's degree in social
work or similar professional qualifications) employed full-time
to provide or eissure the provision of social services.
"(c) REQUIREMENTS RELATING TO RESIDENTS' RIGHTS.—
"(1) GENERAL RIGHTS.—
"(A) SPECIFIED RIGHTS.—A nursing facility must protect
and promote the rights of each resident, including each of
the following rights:
"(i) FREE CHOICE.—The right to choose a personal
attending physician, to be fully informed in advance
about care and treatment, to be fully informed in
advance of any changes in care or treatment that may
affect the resident's well-being, and (except with re-
spect to a resident adjudged incompetent) to participate
in planning care and treatment or changes in care and
treatment.
"(ii) FREE FROM RESTRAINTS.—The right to be free
from physical or mental abuse, corporal punishment,
involuntary seclusion, and any physical or chemical
restraints imposed for purposes of discipline or conven-
ience and not required to treat the resident's medical
symptoms. Restraints may only be imposed—
"(I) to ensure the physical safety of the resident
or other residents, and
"(II) only upon the written order of a physician
that specifies the duration and circumstances
under which the restraints are to be used (except
in emergency circumstances specified by the Sec-
retary) until such an order could reasonably be
obtained,
"(iii) PRIVACY.—The right to privacy with regard to
accommodations, medical treatment, written and tele-
phonic communications, visits, and meetings of family
and of resident groups.
"(iv) CONFIDENTIAUTY.—The right to confidentiality
of personal and clinical records.
"(v) ACCOMMODATION OF NEEDS.—The right—
"(I) to reside and receive services with reason-
able accommodations of individual needs and pref-
erences, except where the health or safety of the
individual or other residents would be endangered,
and
"(II) to receive notice before the room or room-
mate of the resident in the facility is changed,
"(vi) GRIEVANCES.—The right to voice grievances
with respect to treatment or care that is (or fails to be)
furnished, without discrimination or reprisal for voic-
ing the grievances and the right to prompt efforts by
the facility to resolve grievances the resident may
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-189
have, including those with respect to the behavior of
other residents.
"(vii) PARTICIPATION IN RESIDENT AND FAMILY
GROUPS.—The right of the resident to organize and
participate in resident groups in the facility and the
right of the resident's family to meet in the facility
with the families of other residents in the facility.
^^ "(viii) PARTICIPATION IN OTHER ACTIVITIES.—The
right of the resident to participate in social, religious,
and community activities that do not interfere with the
rights of other residents in the facility.
^2 "(ix) EXAMINATION OF SURVEY RESULTS.—The right
to examine, upon reasonable request, the results of the
most recent survey of the facility conducted by the
Secretary or a State with respect to the facility and any
plan of correction in effect with respect to the facility.
^3 "(x) OTHER RIGHTS.—Any other right established
by the Secretary.
Clause (iii) shall not be construed as requiring the provision
of a private room.
"(B) NOTICE OP RIGHTS.—A nursing facility must—
"(i) inform each resident, orally and in writing at the
time of admission to the facility, of the resident's legal
rights during the stay at the facility;
"(ii) make available to each resident, upon reason-
able request, a written statement of such rights (which
statement is updated upon changes in such rights);
"(iii) inform each resident who is entitled to medical
assistance under this title—
"(I) at the time of admission to the facility or, if
later, at the time the resident becomes eligible for
such assistance, of the items and services (includ-
ing those specified under section 1902(aX28XB))
that are included in nursing facility services under
the State plan and for which the resident may not
be charged (except as permitted in section 1916),
and of those other items and services that the
facility offers and for which the resident may be
charged and the amount of the charges for such
items and services, and
"(II) of changes in the items and services de-
scribed in subclause (I) and of changes in the
charges imposed for items and services described in
that subclause; and
"(iv) inform each other resident, in writing before or
at the time of admission and periodically during the
resident's stay, of services available in the facility and
of related charges for such services, including any
charges for services not covered under title XVIII or by
the facility's basic per diem charge.
The written description of legal rights under this subpara-
graph shall include a description of the protection of per-
sonal funds under paragraph (6) and a statement that a
"Copy read " "(ix)".
"Copy read " "(x)".
"Copy read " "(xi)".
101 STAT. 1330-190 PUBLIC LAW 100-203—DEC. 22, 1987
resident may file a complaint with a State survey and
certification agency respecting resident abuse and neglect
and misappropriation of resident property in the facility.
"(C) RIGHTS OF INCOMPETENT RESIDENTS.—In the case of a
resident adjudged incompetent under the laws of a State,
the rights of the resident under this title shall devolve
upon, and, to the extent judged necessary by a court of
competent jurisdiction, be exercised by, the person ap-
pointed under State law to act on the resident's behalf.
"(D) USE OF PSYCHOPHARMACOLOGIC DRUGS.—Psycho-
pharmacologic drugs may be administered only on the
orders of a physician and only as part of a plan (included in
the written plan of care described in paragraph (2)) de-
signed to eliminate or modify the symptoms for which the
drugs are prescribed and only if, at least annually an
independent, external consultant reviews the appropriate-
ness of the drug plan of each resident receiving such drugs.
"(2) TRANSFER AND DISCHARGE RIGHTS.—
"(A) IN GENERAL.—A nursing facility must permit each
resident to remain in the facility and must not transfer or
discharge the resident from the facility unless—
"(i) the transfer or discharge is necessary to meet the
resident's welfare and the resident's welfare cannot be
met in the facility;
"(ii) the transfer or discharge is appropriate because
the resident's health has improved sufficiently so the
resident no longer needs the services provided by the
facility;
"(iii) the safety of individuals in the facility is
endangered;
"(iv) the health of individuals in the facility would
otherwise be endangered;
"(v) the resident has failed, after reasonable and
appropriate notice, to pay (or to have paid under this
title or title XVIII on the resident's behalf) an allow-
able charge imposed by the facility for an item or
service requested by the resident and for which a
charge may be imposed consistent with this title and
title XVIII; or
"(vi) the facility ceases to operate.
In each ^* of the cases described in clauses (i) through (iv),
the basis for the transfer or discharge must be documented
in the resident's clinical record. In the cases described in
clauses (i) and (ii), the documentation must be made by the
resident's physician, and in the case described in clause (iv)
the documentation must be made by a physician. For pur-
poses of clause (v), in the case of a resident who becomes
eligible for assistance under this title after admission to the
facility, only charges which may be imposed under this title
shall be considered to be allowable.
"(B) PRE-TRANSFER AND PRE-DISCHARGE NOTICE.—
"(i) IN GENERAL.—Before effecting a transfer or dis-
charge of a resident, a nursing facility must—
•* Copy read "In the each".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-191
"(I) notify the resident (and, if known, an imme-
diate family member of the resident or legal rep-
resentative) of the transfer or discharge and the
reasons therefor,
"(II) record the reasons in the resident's clinical
record (including any documentation required
under subparagraph (A)), and
"(III) include in the notice the items described in
clause (iii).
"(ii) TIMING OF NOTICE.—The notice under clause (iXI)
must be made at least 30 days in advance of the
resident's transfer or discharge except—
"(I) in a case described in clause (iii) or (iv) of
subparagraph (A);
"(II) in a case described in clause (ii) of subpara-
graph (A), where the resident's health improves
sufficiently to allow a more immediate transfer or
discharge;
"(III) in a case described in clause (i) of subpara-
graph (A), where a more immediate transfer or
discharge is necessitated by the resident's urgent
medical needs; or
"(IV) in a case where a resident has not resided
in the facility for 30 days.
In the case of such exceptions, notice must be given as
many days before the date of the transfer or discharge
as is practicable.
"(iii) ITEMS INCLUDED IN NOTICE.—Each notice under
clause (i) must include—
"(I) for transfers or discharges effected on or
after October 1, 1989, notice of the resident's right
to appeal the transfer or discharge under the Stete
process established under subsection (eX3);
"(II) the name, mailing address, and telephone
number of the State long-term care ombudsman
(established under section 307(aX12) of the Older
Americans Act of 1965);
"(III) in the case of residents with developmental
disabilities, the mailing address and telephone
number of the agency responsibile for the protec-
tion and advocacy system for developmentally dis-
abled individuals established under part C of the
Developmental Disabilities Assistance and Bill of
Rights Act; and
*(IV) in the case of mentally ill residents (as
defined in subsection (eX^XGXi)), the mailing ad-
dress and telephone number of the agency respon-
sible for the protection and advocacy system for
mentally ill individuals established under the
Protection and Advocacy for Mentally 111 Individ-
uals Act.
"(C) ORIENTATION.—A nursing facility must provide suffi-
cient preparation and orientation to residents to ensure
safe and orderly transfer or discharge from the facility.
"(D) NOTICE ON BED-HOLD POUCY AND READMISSION.—
"(i) NOTICE BEFORE TRANSFER.—Before a resident of a
nursing facility is transferred for hospitalization or
101 STAT. 1330-192 PUBLIC LAW 100-203—DEC. 22, 1987
therapeutic leave, a nursing facility must provide writ-
ten information to the resident and an immediate
family member or legal representative concerning—
"(I) the provisions of the State plan under this
title regarding the period (if any) during which the
resident will be permitted under the State plan to
return and resume residence in the facility, and
"(II) the policies of the facility regarding such a
period, which policies must be consistent with
clause (iii).
"(ii) NOTICE UPON TRANSFER.—At the time of transfer
of a resident to a hospital or for therapeutic leave, a
nursing facility must provide written notice to the
resident and an immediate family member or legal
representative of the duration of any period described
in clause (i).
"(iii) PERMITTING RESIDENT TO RETURN.—A nursing
facility must establish and follow a written policy
under which a resident—
"(I) who is eligible for medical sissistance for
nursing facility services under a State plan,
"(II) who is transferred from the facility for hos-
pitalization or therapeutic leave, and
"(III) whose hospitalization or therapeutic leave
exceeds a period paid for under the State plan for
the holding of a bed in the facility for the resident,
will be permitted to be readmitted to the facility imme-
diately upon the first availability of a bed in a
semiprivate room in the facility if, at the time of
readmission, the resident requires the services provided
by the facility.
"(3) ACCESS AND VISITATION RIGHTS.—A nursing facility
must—
"(A) permit immediate access to any resident by any
representative of the Secretary, by any representative of
the State, by an ombudsman or agency described in
subclause (II), (III), or (IV) of paragraph (2XBXiii), or by the
resident's individual physician;
"(B) permit immediate access to a resident, subject to the
resident's right to deny or withdraw consent at any time, by
immediate family or other relatives of the resident;
"(C) permit immediate access to a resident, subject to
reasonable restrictions and the resident's right to deny or
withdraw consent at any time, by others who are visiting
with the consent of the resident;
"(D) permit reasonable access to a resident by any entity
or individual that provides health, social, legal, or other
services to the resident, subject to the resident's right to
deny or withdraw consent at any time; and
"(E) permit representatives of the State ombudsman (de-
scribed in paragraph (2XBXiiiXII)), with the permission of
the resident (or the resident's legal representative) and
consistent with State law, to examine a resident's clinical
records.
"(4) EQUAL ACCESS TO QUAUTY CARE.—
"(A) IN GENERAL.—A nursing facility must establish and
maintain identical policies and practices regarding trans-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-193
fer, discharge, and the provision of services required under
the State plan for all individuals regardless of source of
pavment.
(B) CONSTRUCTION.—
"(i) NOTHING PROHIBITING ANY CHARGES FOR NON-
MEDiCAiD PATIENTS.—Subparagraph (A) shall not be
construed as prohibiting a nursing facility from charg-
ing any amount for services furnished, consistent with
the notice in paragraph (IXB) describing such charges,
"(ii) No ADDITIONAL SERVICES REQUIRED.—Subpara-
graph (A) shall not be construed as requiring a State to
offer additional services on behalf of a resident than
are otherwise provided under the State plan.
'(5) ADMISSIONS POUCY.—
"(A) ADMISSIONS.—With respect to admissions practices, a
nursing facility must—
"(iXD not require individuals applying to reside or
residing in the facility to waive their rights to benefits
under this title or title XVIII, (II) not require oral or
written assurance that such individuals are not eligible
for, or will not apply for, benefits under this title or
title XVIII, and (III) prominently display in the facility
written information, and provide to such individuals
oral and written information, about how to apply for
and use such benefits and how to receive refunds for
previous payments covered by such benefits;
"(ii) not require a third party guarantee of payment
to the facility as a condition of admission (or expedited
admission) to, or continued stay in, the facility; and
"(iii) in the case of an individual who is entitled to
medical Eissistance for nursing facility services, not
charge, solicit, accept, or receive, in addition to any
amount otherwise required to be paid under the State
plan under this title, any gift, money, donation, or
other consideration as a precondition of admitting (or
expediting the admission of) the individual to the facil-
ity or as a requirement for the individual's continued
stay in the facility.
"(B) CONSTRUCTION.—
"(i) N o PREEMPTION OF STRICTER STANDARDS.—
Subparagraph (A) shall not be construed as preventing
States or political subdivisions therein from prohibit-
ing, under State or local law, the discrimination
against individuals who are entitled to medical assist-
ance under the State plan with respect to admissions
practices of nursing facilities.
"(ii) CONTRACTS WITH LEGAL REPRESENTATIVES.—
Subparagraph (AXii) shall not be construed as prevent-
ing a facility from requiring an individual, who has
legal access to a resident's income or resources avail-
able to pay for care in the facility, to sign a contract
(without incurring personal financial liability) to pro-
vide payment from the resident's income or resources
for such care.
"(iii) CHARGES FOR ADDITIONAL SERVICES REQUESTED.—
Subparagraph (AXiii) shall not be construed as prevent-
ing a facility from charging a resident, eligible for
101 STAT. 1330-194 PUBLIC LAW 100-203—DEC. 22, 1987
medical assistance under the State plan, for items or
services the resident has requested and received and
that are not specified in the State plan as included in
the term 'nursing facility services'.
"(iv) BONA FIDE CONTRIBUTIONS.—Subparagraph
(AXiii) shall not be construed as prohibiting a nursing
facility from soliciting, accepting, or receiving a chari-
table, religious, or philanthropic contribution from an
organization or from a person unrelated to the resident
(or potential resident), but only to the extent that such
contribution is not a condition of admission, expediting
admission, or continued stay in the facility.
"(6) PROTECTION OF RESIDENT FUNDS.—
"(A) IN GENERAL.—The nursing facility—
"(i) may not require residents to deposit their per-
sonal funds with the facility, and
"(ii) once the facility accepts the written authoriza-
tion of the resident, must hold, safeguard, and account
for such personal funds under a system established and
maintained by the facility in accordance with this para-
graph.
"(B) MANAGEMENT OF PERSONAL FUNDS.—Upon a facility's
acceptance of written authorization of a resident under
subparagraph (AXii), the facility must manage and account
for the personal funds of the resident deposited with the
facility as follows:
"(i) DEPOSIT.—The facility must deposit any amount
of personal funds in excess of $50 with respect to a
resident in an interest bearing account (or accounts)
that is separate from any of the facility's operating
accounts and credits all interest earned on such sepa-
rate account to such account. With respect to any other
personal funds, the facility must maintain such funds
in a non-interest bearing account or petty cash fund.
"(ii) ACCOUNTING AND RECORDS.—The facility must
assure a full and complete separate accounting of each
such resident's personal funds, maintain a written
record of all financial transactions involving the per-
sonal funds of a resident deposited with the facility,
and afford the resident (or a legal representative of the
resident) reasonable access to such record.
"(iii) NOTICE OF CERTAIN BALANCES.—The facility
must notify each resident receiving medical assistance
under the State plan under title XIX when the amount
in the resident's account reaches $200 less than the
dollar amount determined under section 1611(aX3XB)
and the fact that if the amount in the account (in
addition to the value of the resident's other nonexempt
resources) reaches the amount determined under such
section the resident may lose eligibility for such medi-
cal assistance or for benefits under title XVI.
"(iv) CONVEYANCE UPON DEATH.—Upon the death of a
resident with such an account, the facility must convey
promptly the resident's personal funds (and a final
accounting of such funds) to the individual administer-
ing the resident's estate. ' ' ^"
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-195
"(C) ASSURANCE OF FINANCIAL SECURITY.—The facility
must purchase a surety bond, or otherwise provide assur-
ance satisfactory to the Secretary, to assure the security of
all personal funds of residents deposited with the facility.
"(D) LIMITATION ON CHARGES TO PERSONAL FUNDS.—The
facility may not impose a charge against the personal funds
of a resident for any item or service for which payment is
made under this title or title XVIIL
"(d) REQUIREMENTS RELATING TO ADMINISTRATION AND OTHER
MATTERS.—
"(1) ADMINISTRATION.—
"(A) I N GENERAL.—A nursing facility must be adminis-
tered in a manner that enables it to use its resources
effectively and efficiently to attain or maintain the highest
practicable physical, mental, and psychosocial well-being of
each resident (consistent with requirements established
under subsection (fK5)).
"(B) REQUIRED NOTICES.—If a change occurs in—
"(i) the persons with an ownership or control interest
(as defined in section 1124(aX3)) in the facility,
"(ii) the persons who are officers, directors, agents, or
managing employees (as defined in section 1126(b)) of
the facility,
"(iii) the corporation, association, or other company
responsible for the management of the facility, or
"(iv) the individual who is the administrator or direc-
tor of nursing of the facility,
the nursing facility must provide notice to the State agency
responsible for the licensing of the facility, at the time of
the change, of the change and of the identity of each new
person, company, or individual described in the respective
clause.
"(C) NURSING FACIUTY ADMINISTRATOR.—The adminis-
trator of a nursing facility must meet standards established
by the Secretary under subsection (fK4).
"(2) LICENSING AND U F E SAFETY CODE.—
"(A) LICENSING.—A nursing facility must be licensed
under applicable State and local law.
"(B) LIFE SAFETY CODE.—A nursing facility must meet
such provisions of such edition (as specified by the Sec-
retary in regulation) of the Life Safety Code of the National
Fire Protection Association as are applicable to nursing
homes; except that—
"(i) the Secretary may waive, for such periods £is he
deems appropriate, specific provisions of such Code
which if rigidly applied would result in unreasonable
hardship upon a facility, but only if such waiver would
not adversely affect the health and safety of residents
or personnel, and
"(ii) the provisions of such Code shall not apply in
any State if the Secretary finds that in such State there
is in effect a fire and safety code, imposed by State law,
which adequately protects residents of and personnel in
nursing facilities.
"(3) SANITARY AND INFECTION CONTROL AND PHYSICAL ENVIRON-
MENT.—A nursing facility must—
101 STAT. 1330-196 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) establish and maintain an infection control program
designed to provide a safe, sanitary, and comfortable
environment in which residents reside and to help prevent
the development and transmission of disease and infection,
and
"(B) be designed, constructed, equipped, and maintained
in a manner to protect the health and safety of residents,
personnel, and the general public.
"(4) MISCELLANEOUS.—
"(A) COMPUANCE WITH FEDERAL, STATE, AND LOCAL LAWS
AND PROFESSIONAL STANDARDS.—A nursing facility must
operate and provide services in compliance with all ap-
plicable Federal, State, and local laws and regulations
(including the requirements of section 1124 and with
accepted professional standards and principles which apply
to professionals providing services in such a facility.
"(B) OTHER.—A nursing facility must meet such other
requirements relating to the health and safety of residents
or relating to the physical facilities thereof as the Secretary
may find necessary.' .
(c) STATE REQUIREMENTS RELATING TO NURSING FACIUTY REQUIRE-
42 use I396r. MENTS.—Section 1919 of such Act is further amended by adding at
the end the following new subsection:
"(e) STATE REQUIREMENTS RELATING TO NURSING FACILITY
REQUIREMENTS.—As a condition of approval of ** its plan under this
title, a State must provide for the following:
"(1) SPECIFICATION AND REVIEW OF NURSE AIDE TRAINING AND
COMPETENCY EVALUATION PROGRAMS AND OF NURSE AIDE COM-
PETENCY EVALUATION PROGRAMS.—The State must—
"(A) by not later than September 1, 1988, specify those
training and competency evaluation programs, and those
competency evaluation programs, that the State approves
for purposes of subsection (bX5) and that meet the require-
ments established under clause (i) or (ii) of subsection
(fK2XA), and
"(B) by not later than September 1, 1990, provide for the
review and reapproval of such programs, at a frequency and
using a methodology consistent with the requirements
established under subsection (fK2XAXiii).
The failure of the Secretary to establish requirements under
subsection (fX2) shall not relieve any State of its responsibility
under this paragraph.
"(2) NURSE AIDE REGISTRY.—
"(A) IN GENERAL.—By not later than January 1, 1989, the
State shall establish and maintain a registry of all individ-
uals who have satisfactorily completed a nurse aide train-
ing and competency evaluation program, or a nurse aide
competency evaluation program, approved under para-
graph (1) in the State.
"(B) INFORMATION IN REGISTRY.—The registry under
subparagraph (A) shall provide (in accordance with regula-
tions of the Secretary) for the inclusion of specific docu-
mented findings by a State under subsection (gXlXC) of
resident neglect or abuse or misappropriation of resident
•* Copy read "approval its".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-197
property involving an individual listed in the registry, as
well as any brief statement of the individual disputing the
findings. In the case of inquiries to the registry concerning
an individual listed in the registry, any information dis-
closed concerning such a finding shall also include disclo-
sure of any such statement in the registry relating to the
finding or a clear and accurate summary of such a
statement.
"(3) STATE APPEALS PROCESS FOR TRANSFERS.—The State, for
transfers from nursing facilities effected on or after October 1,
1989, must provide for a fair mechanism, meeting the guidelines
established under subsection (fK3), for hearing appeals on trans-
fers of residents of such facilities; but the failure of the Sec-
retary to establish such guidelines under such subsection shall
not relieve any State of its responsibility under this paragraph.
"(4) NURSING FACILITY ADMINISTRATOR STANDARDS.—By not
later than July 1, 1989, the State must have implemented and
enforced the nursing facility administrator standards developed
under subsection (f)(4) respecting the qualification of adminis-
trators of nursing facilities.
"(5) SPECIFICATION OF RESIDENT ASSESSMENT INSTRUMENT.—
Effective July 1, 1990, the State shall specify the instrument to
be used by nursing facilities in the State in complying with the
requirement of subsection (bXSXAXiii). Such instrument shall
be-
"(A) one of the instruments designated under subsection
(fK6XB), or
"(B) an instrument which the Secretary has approved as
being consistent with the minimum data set of core ele-
ments, common definitions, and utilization guidelines speci-
fied by the Secretary under subsection (fK6XA).
"(6) NOTICE OF MEDICAID RIGHTS.—Each State, as a condition of
approval of its plan under this title, effective April 1, 1988, must
develop (and periodically update) a written notice of the rights
and obligations of residents of nursing facilities (and spouses of
such residents) under this title.
"(7) STATE REQUIREMENTS FOR PREADMISSION SCREENING AND
RESIDENT REVIEW.—
"(A) PREADMISSION SCREENING.—Effective January 1,
1989, the State must have in effect a preadmission screen-
ing program, for making determinations (using any criteria
developed under subsection (fX8)) described in subsection
(bX3XF) for mentally ill and mentally retarded individuals
(as defined in subparagraph (G)) who are admitted to nurs-
ing facilities on or after January 1, 1989. The failure of the
Secretary to develop minimum criteria under subsection
(fX8) shall not relieve any State of its responsibility to have
a preadmission screening program under this subparagraph
or to perform resident reviews under subparagraph (B).
"(B) STATE REQUIREMENT FOR ANNUAL RESIDENT REVIEW.—
"(i) FOR MENTALLY ILL RESIDENTS.—As of April 1,
1990, in the case of each resident of a nursing facility
who is mentally ill, the State mental health authority
must review and determine (using any criteria devel-
oped under subsection (fX8) and based on an independ-
ent physical and mental evaluation performed bv a
101 STAT. 1330-198 PUBLIC LAW 100-203—DEC. 22, 1987
person or entity other than the State mental health
authority)—
"(I) whether or not the resident, because of the
resident's physical and mental condition, requires
the level of services provided by a nursing facility
or requires the level of services of an inpatient
psychiatric hospital for individuals under age 21
(as described in section 1905(h)) or of an institution
for mental diseases providing medical assistance to
individuals 65 years of age or older; and
"(II) whether or not the resident requires active
treatment for mental illness,
"(ii) FOR MENTALLY RETARDED RESIDENTS.—As of April
1,1990, in the case of each resident of a nursing facility
who is mentally retarded, the State mental retardation
or developmental disability authority must review and
determine (using any criteria developed under sub-
section (0(8))—
"(I) whether or not the resident, because of the
resident's physical and mental condition, requires
the level of services provided by a nursing facility
or requires the level of services of an intermediate
care facility described under section 1905(d); and
"(II) whether or not the resident requires active
treatment for mental retardation,
"(iii) FREQUENCY OF REVIEWS.—
"(I) ANNUAL.—Except as provided in subclauses
(II) and (III), the reviews and determinations under
clauses (i) and (ii) must be conducted with respect
to each mentally ill or mentally retarded resident
not less often than annually.
"(II) PREADMISSION REVIEW CASES.—In the case of
a resident subject to a preadmission review under
subsection (bX3XF), the review and determination
under clause (i) or (ii) need not be done until the
resident has resided in the nursing facility for 1
year.
"(Ill) INITIAL REVIEW.—The reviews and deter-
minations under clauses (i) and (ii) must first be
conducted (for each resident not subject to
preadmission review under subsection (bX3XF)) by
not later than April 1,1990.
"(C) RESPONSE TO PREADMISSION SCREENING AND RESIDENT
REVIEW.—AS of April 1, 1990, the State must meet the
following requirements:
"(i) LONG-TERM RESIDENTS NOT REQUIRING NURSING
FACIUTY SERVICES, BUT REQUIRING ACTIVE TREATMENT.—
In the case of a resident who is determined, under
subparagraph (B), not to require the level of services
provided by a nursing facility, but to require active
treatment for rciental illness or mental retardation, and
who has continuously resided in a nursing facility for
at least 30 months before the date of the determination,
the State must, in consultation with the resident's
family or legal representative and care-givers—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-199
"(I) inform the resident of the institutional and
noninstitutional alternatives covered under the
State plan for the resident,
"(11) offer the resident the choice of remaining in
the facility or of receiving covered services in an
alternative appropriate institutional or noninstitu-
tional setting,
"(III) clarify the effect on eligibility for services
under the State plan if the resident chooses to
leave the facility (including its effect on readmis-
sion to the facility), and
"(IV) regardless of the resident's choice, provide
for (or arrange for the provision of) such active
treatment for the mental illness or mental retarda-
tion.
A State shall not be denied payment under this title for
nursing facility services for a resident described in this
clause because the resident does not require the level of
services provided by such a facility, if the resident
chooses to remain in such a facility.
"(ii) O T H E R RESIDENTS N O T R E Q U I R I N G N U R S I N G FACIL-
ITY SERVICES, BUT REQUIRING ACTIVE TREATMENT.—In
the case of a resident who is determined, under
subparagraph (B), not to require the level of services
provided by a nursing facility, but to require active
treatment for mental illness or mental retardation, and
who has not continuously resided in a nursing facility
for at least 30 months before the date of the determina-
tion, the State must, in consultation with the resident's
family or legal representative and care-givers—
"(I) arrange for the safe and orderly discharge of
the resident from the facility, consistent with the
requirements of subsection (cX2),
"(II) prepare and orient the resident for such
discharge, and
"(III) provide for (or arrange for the provision of)
such active treatment for the mental illness or
mental retardation,
"(iii) RESIDENTS NOT REQUIRING NURSING FACILITY
SERVICES AND NOT REQUIRING ACTIVE TREATMENT.—In
the case of a resident who is determined, under
subparagraph (B), not to require the level of services
provided by a nursing facility and not to require active
treatment for mental illness or mental retardation, the
State must—
"(I) arrange for the safe and orderly discharge of
the resident from the facility, consistent with the
requirements of subsection (cX2), and
"(II) prepare and orient the resident for such
discharge.
"(D) DENIAL OF PAYMENT WHERE FAILURE TO CONDUCT
PREADMISSION SCREENING.—No payment may be made
under section 1903(a) with respect to nursing facility serv-
ices furnished to an individual for whom a determination is
required under subsection 0)X3XF) or subparagraph (B) but
for whom the determination is not made.
91-194 O - 90 - 32 : QL.3 Part 2
101 STAT. 1330-200 PUBLIC LAW 100-203—DEC. 22, 1987
Contracts. "(E) PERMITTING ALTERNATIVE DISPOSITION PLANS.—With
respect to residents of a nursing facility who are mentally
retarded or mentally ill and who are determined under
subparagraph (B) not to require the level of services of such
a facility, but who require active treatment for mental
illness or mental retardation, a State and the nursing
facility shall be considered to be in compliance with the
requirement of this paragraph if, before October 1, 1988,
the State and the Secretary have entered into an agree-
ment relating to the disposition of such residents of the
facility and the State is in compliance with such agreement.
Such an agreement may provide for the disposition of the
residents after the date specified in subparagraph (C).
"(F) APPEALS PROCEDURES.—Each State, as a condition of
approval of its plan under this title, effective January 1,
^ 1989, must have in effect an appeals process for individuals
adversely affected by determinations under subparagraph
(A) or (B).
"(G) DEFINITIONS.—In this paragraph and in subsection
(bX3XF):
^ "(i) An individual is considered toT)e 'mentally ill' if
the individual has a primary or secondary diagnosis of
mental disorder (as defined in the Diagnostic and
Statistical Manual of Mental Disorders, 3rd edition)
and does not have a primary diagnosis of dementia
(including Alzheimer's disease or a related disorder),
"(ii) An individual is considered to be 'mentally re-
tarded' if the individual is mentally retarded or a
person with a related condition (as described in section
1905(d)).
^ / "(iii) The term 'active treatment' has the meaning
' . given such term by the Secretary in regulations, but
does not include, in the case of a resident of a nursing
"' » facility, services within the scope of services which the
facility must provide or arrange for its residents under
subsection (b)(4).
(f) RESPONSIBIUTIES OF SECRETARY RELATING TO NURSING FACIL-
ITY REQUIREMENTS.—
"(1) GENERAL RESPONSIBIUTY.—It is the duty and responsibil-
ity of the Secretary to assure that requirements which govern
the provision of care in nursing facilities under State plans
approved under this title, and the enforcement of such require-
ments, are adequate to protect the health, safety, welfare, and
rights of residents and to promote the effective and efficient use
of public moneys.
(2) REQUIREMENTS FOR NURSE AIDE TRAINING AND COM-
PETENCY EVALUATION PROGRAMS AND FOR NURSE AIDE COM-
PETENCY EVALUATION PROGRAMS.—
"(A) IN GENERAL.—For purposes of subsections (bX5) and
(eXlXA), the Secretary shall establish, by not later than
July 1,1988—
"(i) requirements for the approval of nurse aide
training and competency evaluation programs, includ-
ing requirements relating to (I) the areas to be covered
in such a program (including at least b£isic nursing
skills, personal care skills, cognitive, behavioral and
social care, basic restorative services, and residents'
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-201
rights), content of the curriculum, (II) minimum hours
of initial and ongoing training and retraining (includ-
ing not less than 75 hours in the case of initial train-
ing), (III) qualifications of instructors, and (IV)
procedures for determination of competency;
"(ii) requirements for the approval of nurse aide
competency evaluation programs, including require-
ment relating to the areas to be covered in such a
program, including at least basic nursing skills, per-
sonal care skills, cognitive, behavioral and social care,
basic restorative services, and residents' rights, and
procedures for determination of competency;
"(iii) requirements respecting the minimum fre-
- quency and methodology to be used by a State in
reviewing such programs' compliance with the require-
ments for such programs.
"(B) APPROVAL OF CERTAIN PROGRAMS.—Such require-
ments—
"(i) may permit approval of programs offered by or in
- facilities, as well as outside facilities (including em-
ployee organizations), and of programs in effect on the
date of the enactment of this section;
"(ii) shall permit a State to find that an individual
who has completed (before January 1, 1989) a nurse
aide training and competency evaluation program shall
be deemed to have completed such a program approved
under subsection (b)(5) if the State determines that, at
the time the program was offered, the program met the
requirements for approval under such paragraph; and
"(iii) shall prohibit approval of such a program—
"(I) offered by or in a nursing facility which has
been determined to be out of compliance with the
requirements of subsection (b), (c), or (d), within the
previous 2 years, or
"(II) offered by or in a nursing facility
unless the State makes the determination, upon an
individual's completion of the program, that the
individual is competent to provide nursing and
nursing-related services in nursing facilities.
A State may not delegate its responsibility under
clause (iiiXII) to the nursing facility.
"(3) FEDERAL GUIDELINES FOR STATE APPEALS PROCESS FOR
TRANSFERS.—For purposes of subsections (cX2XBXiii) and (eX3),
by not later than October 1, 1988, the Secretary shall establish
guidelines for minimum standards which State appeals proc-
esses under subsection (eX3) must meet to provide a fair mecha-
nism for hearing appeals on transfers of residents from nursing
facilities.
"(4) SECRETARIAL STANDARDS QUALIFICATION OF ADMINISTRA-
TORS.—For purposes of subsections (dXlXC) and (eX4), the Sec-
retary shall develop, by not later than March 1, 1988, standards
to be applied in assuring the qualifications of administrators of
nursing facilities.
"(5) CRITERIA FOR ADMINISTRATION.—The Secretary shall
establish criteria for assessing a nursing facility's compliance
with the requirement of subsection (dXD with respect to—
"(A) its governing body and management,
101 STAT. 1330-202 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) agreements with hospitals regarding transfers of
residents to and from the hospitals and to and from other
nursing facilities,
"(C) disaster preparedness,
"(D) direction of medical care by a physician,
"(E) laboratory and radiological services,
"(F) clinical records, and
"(G) resident and advocate participation.
"(6) SPECIFICATION OF RESIDENT ASSESSMENT DATA SET AND
INSTRUMENTS.—The Secretary shall—
"(A) not later than January 1, 1989, specify a minimum
data set of core elements and common dehnitions for use by
nursing facilities in conducting the assessments required
under subsection (bX3), and establish guidelines for utiliza-
• tion of the data set; and
"(B) by not later than April 1, 1990, designate one or
more instruments which are consistent with the specifica-
tion made under subparagraph (A) and which a State may
specify under subsection (eX5XA) for use by nursing facili-
ties in complying with the requirements of subsection
s; (bX3XAXiii).
"(7) LIST OF ITEMS AND SERVICES FURNISHED IN NURSING FACIU-
TIES N O T C H A R G E A B L E TO THE PERSONAL FUNDS OF A RESIDENT.—
"(A) REGULATIONS REQUIRED.—Pursuant to the require-
ment of section 21(b) of the Medicare-Medicaid Anti-Fraud
and Abuse Amendments of 1977, the Secretary shall issue
regulations, on or before the first day of the seventh month
to begin after the date of enactment of this section, that
define those costs which may be charged to the personal
funds of patients in nursing facilities who are individuals
receiving medical assistance with respect to nursing facility
services under this title and those costs which are to be
included in the payment amount under this title for nurs-
ing facility services.
(B) RULE IF FAILURE TO PUBUSH REGULATIONS.—If the
Secretary does not issue the regulations under subpara-
graph (A) on or before the date required in that subpara-
^' graph, in the case of a resident of a nursing facility who is
eligible to receive benefits for nursing facility services
' under this title, for purposes of section 1902(aX28XB), the
Secretary shall be deemed to have promulgated regulations
under this paragraph which provide that the costs which
may not be charged to the personal funds of such resident
(and for which payment is considered to be made under this
title) do not include, at a minimum, the costs for routine
personal hygiene items and services furnished by the
fsicility.
"(8) FEDERAL MINIMUM CRITERIA AND MONITORING FOR
•^ PREADMISSION SCREENING AND RESIDENT REVIEW.—
"(A) MINIMUM CRITERIA.—The Secretary shall develop, by
not later than October 1, 1988, minimum criteria for States
to use in making determinations under subsections (bX3XF)
and (eX7XB) and in permitting individuals adversely af-
fected to appeal such determinations, and shall notify the
States of such criteria.
"(B) MONITORING COMPLIANCE.—The Secretary shall
review, in a sufficient number of cases to allow reasonable
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-203
inferences, each State's compliance with the requirements
of subsection (e)(7)(C)(ii) (relating to discharge and place-
ment for active treatment of certain residents).
"(9) ®^ CRITERIA FOR MONITORING STATE WAIVERS.—The Sec-
retary shall develop, by not later than October 1, 1988, criteria
and procedures for monitoring State performances in granting
waivers pursuant to subsection (b)(4)(C)(ii).".
(b) INCORPORATING REQUIREMENTS INTO STATE PLAN.—
(1) IN GENERAL.—Section 1902(a) of such Act (42 U.S.C. .-
1396a(a)) is amended—
(A) in paragraph (13)(A), by inserting "which, in the case
of nursing facilities, take into account the costs of comply-
ing with subsections (b) (other than paragraph (3)(F)
thereof), (c), and (d) of section 1919 and provide (in the case
- of a nursing facility with a waiver under section
1919(b)(4)(C)(ii)) for an appropriate reduction to take into
account the lower costs (if any) of the facility for nursing
care," after "State" the second place it appears; and
(B) by amending paragraph (28) to read as follows:
"(28) provide—
"(A) that any nursing facility receiving payments under
such plan must satisfy all the requirements of subsections
(b) through (d) of section 1919 as they apply to such
facilities;
"(B) for including in 'nursing facility services' at least the
items and services specified (or deemed to be specified) by
the Secretary under section 1919(f)(7) and making available
upon request a description of the items and services so
included;
"(C) for procedures to make available to the public the
data and methodology used in establishing payment rates
for nursing facilities under this title; and
"(D) for compliance (by the date specified in the respec-
tive sections) with the requirements of—
"(i) section 1919(0 (relating to implementation of ,
nursing facility requirements, including paragraph ,:
(6)(B), relating to specification of resident assessment
instrument);
"(ii) section 1919(g) (relating to responsibility for
survey and certification of nursing facilities); and
"(iii) sections 1919(hX2)(B) and 1919(h)(2)(D) (relating
to establishment and application of remedies);".
(2) STATE PLAN AMENDMENT REQUIRED.—A plan of a State 42 use I396a
under title XIX of the Social Security Act shall not be consid- note.
ered to have met the requirement of section 1902(a)(13)(A) of the
Social Security Act (as amended by paragraph (1)(A) of this
subsection), as of the first day of a Federal fiscal year (beginning
on or after October 1, 1990), unless the State has submitted to
the Secretary of Health and Human Services, as of April 1
before the fiscal year, an amendment to such State plan to
provide for an appropriate adjustment in payment amounts for
nursing facility services furnished during the Federal fiscal
year. The Secretary shall, not later than September 80 before
the fiscal year concerned, review each such plan amendment for
•e Copy read " "(8)".
101 STAT. 1330-204 PUBLIC LAW 100-203—DEC. 22, 1987
- compliance with such requirement and by such date shall ap-
prove or disapprove each such amendment. If the Secretary
disapproves such an amendment, the State shall immediately
submit a revised amendment which meets such requirement.
The absence of approval of such a plan amendment does not
relieve the State or any nursing facility of any obligation or
requirement under title XIX of the Social Security Act (as
amended by this Act).
Reports. (c) EVALUATION.—The Secretary of Health and Human Services
42 use 1396r shall evaluate, and report to Congress by not later than January 1,
"°^®- 1993, on the implementation of the resident assessment process for
residents of nursing facilities under the amendments made by this
section.
(d) FUNDING.—
(1) IN GENERAL.—Section 1903(a)(2) of such Act (42 U.S.C.
1396b(a)(2)) is amended—
(A) by inserting "(A)" after "(2)", and
(B) by adding at the end the following new subpara-
graphs:
"(B) notwithstanding paragraph (1) or subparagraph (A), with
.V respect to amounts expended for nursing aide training and
competency evaluation programs, and competency evaluation
programs, described in section 1919(e)(1), regardless of whether
the programs are provided in or outside nursing facilities or of
the skill of the personnel involved in such programs, an amount
equal to 50 percent of so much of the sums expended during
such quarter (as found necessary by the Secretary for the proper
and efficient administration of the State plan) as are attrib-
utable to such programs; plus
J "(C) an amount equal to 75 percent of so much of the sums
^ expended during such quarter (as found necessary by the Sec-
retary for the proper and efficient administration of the State
plan) as are attributable to preadmission screening and resident
review activities conducted by the State under section 1919(e)(7);
plus".
42 u s e 1396b (2) ENHANCED FUNDING FOR NURSE AIDE TRAINING.—For Cal-
iiote. endar quarters during fiscal years 1988 and 1989, with respect
^' to payment under section 1903(a)(2)(B) of the Social Security Act
to a State for additional amounts expended by the State under
' ' its plan approved under title XIX of such Act for nursing aide
training and competency evaluation programs, and competency
'*' evaluation programs, described in section 1919(e)(1) of such title,
\^ , any reference to "50 percent" is deemed a reference to the sum
^''' ^' ' : ; of the Federal medical assistance percentage (determined under
section 1905(b) of such Act) plus 25 percentage points, but not to
exceed 90 percent.
(e) REVISION OF PREVIOUS DEFINITIONS.—Section 1905 of such Act
(42 U.S.C. 1396d) is amended—
(1) by amending subsection (c) to read as follows:
"(c) For definition of the term 'nursing facility', see section
1919(a).";
(2) in subsection (d)—
(A) by striking "intermediate care facility services" and
inserting "intermediate care facility for the mentally re-
>^^ - i tarded",
(B) by striking "may include services in a public" and
inserting "means an",
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-205
ft' (C) in paragraph (3), by inserting "in the case of a public
institution," after "(3)";
(3) in subsection (f), by striking "skilled" each place it
appears; and
(4) by striking subsection (i).
(f) MAKING COVERAGE OF NURSING FACILITY SERVICES MANDATORY
FOR ADULTS.—Section 1905(a)(4XA) of such Act (42 U.S.C.
1396d(aX4XA)) is amended by striking "skilled".
(g) ELIMINATION OF PAYMENT DIFFERENTIAL.—Section 1903 of such
Act (42 U.S.C. 1396b) is amended—
(1) by striking subsection (h), and
(2) in subsection (aXD, by striking ", (h), and" and inserting
"and".
(h) CLARIFYING TERMINOLOGY.—(1) Section 1902(aX10) of such Act
(42 U.S.C. 1396a(aX10)) is amended—
(A) in subparagraph (AXiiXVI), by striking "skilled" and by
inserting "for the mentally retarded" after "intermediate care
facility";
(B) in subparagraph (CXiv), by striking "intermediate care
facility services" and inserting "in an intermediate care facil-
ity"; and
(C) in subparagraph (D), by striking "skilled".
(2) Section 1902(aX13) of such Act (42 U.S.C. 1396a(aX13)) is
amended—
(A) in subparagraph (A), by striking ", skilled nursing facility,
and intermediate care facility services" and inserting "services,
nursing facility services, and services in an intermediate care
facility for the mentally retarded"; *'^
(B) in subparagraph (A), by striking ", skilled nursing facility,
and intermediate care facility and" and inserting "nursing
facility, and intermediate care facility for the mentally retarded
and";
(C) in subparagraph (C), by striking "skilled nursing facilities
and intermediate care facilities" and inserting "nursing facili-
ties"; and
(D) in subparagraph (D)—
(i) by striking "skilled nursing facility or intermediate
care facility" and inserting "nursing facility", and
(ii) by striking "skilled nursing facility services or inter-
mediate care facility services" and inserting "nursing facil-
itv services"
(3) Section 1902(aX30XB) of such Act (42 U.S.C. 1396a(aX30XB)) is
amended by striking "skilled nursing facility, intermediate care
facility," each place it appears and inserting "intermediate care
facility for the mentally retarded,".
(4) Section 1902(eX3XBXi) of such Act (42 U.S.C. 1396a(eX3XBXi)) is
amended by striking "skilled nursing facility, or intermediate care
facility" and inserting "nursing facility, or intermediate care facil-
ity for the mentally retarded".
(5) Section 1902(eX9) of such Act (42 U.S.C. 1396a(eX9)) is
amended—
(A) in subparagraph (AXiii), by striking "skilled nursing facil-
ity, or intermediate care facility," and inserting "nursing facil-
ity, or intermediate care facility for the mentally retarded" and
*' Copy read "retarded",".
101 STAT. 1330-206 PUBLIC LAW 100-203—DEC. 22, 1987
(B) in subparagraph (B), by striking "skilled nursing facilities,
or intermediate care facilities" and inserting "nursing facilities,
*i or intermediate care facilities for the mentally retarded".
(6) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is amended—
(A) in paragraph (5), by striking "skilled",
y (B) in paragraph (14), by striking ", skilled nursing facility
services, and intermediate care facility services" and inserting
"and nursing facility services", and
4; (C) in paragraph (15), by striking "intermediate care facility
services (other than such services" and inserting "services in an
intermediate care facility for the mentally retarded (other
than".
(7) Section 1128B of such Act (42 U.S.C. 1320a-7b) is amended—
(A) in subsection (c), by striking "intermediate care facility"
and inserting "nursing facility, intermediate care facility for
the mentally retarded", and
(B) in subsection (d)(2)(A), by striking "skilled nursing facility,
or intermediate care facility" and inserting "nursing facility, or
t intermediate care facility for the mentally retarded".
(8) Section 1911 of such Act (42 U.S.C. 1396j) is amended by
striking ", intermediate care facility, or skilled nursing facility '
each place it appears and inserting "or nursing facility".
(9) Section 1913 of such Act (42 U.S.C. 13961) is amended—
(A) in the heading, by striking "SKILLED NURSING AND INTER-
MEDIATE CARE SERVICES" and inserting "NURSING FACILITY SERV-
ICES";
(B) in subsection (a)—
(i) by striking "skilled nursing facility services and inter-
mediate care facility services" and inserting "nursing facil-
ity services", and
V (ii) by inserting before the period at the end the following:
"and which, with respect to the provision of such services,
meets the requirements of subsections (b) through (d) of
section 1919";
(C) in subsection (b)(1)—
(i) by striking "skilled nursing or intermediate care facil-
^jj. . ity services" and inserting "nursing facility services", and
(ii) by striking "skilled nursing and intermediate care
facilities" and inserting "nursing facilities"; and
(D) in subsection (b)(3), by striking "skilled nursing or inter-
mediate care facility services" and inserting "nursing facility
services'
(10) Section 1915(c) of such Act (42 U.S.C. 1396n(c)) is amended—
(A) in paragraph (1), by striking "skilled nursing facility or
intermediate care facility" and inserting "nursing facility or
intermediate care facility for the mentally retarded";
(B) in paragraph (2)(B)(i), by striking ", skilled nursing facil-
ity, or intermediate care facility services" and inserting "serv-
ices, nursing facility services, or services in an intermediate
care facility for the mentally retarded";
(C) in paragraph (2)(B), by striking "need" and all that follows
up to the semicolon and inserting "need for inpatient hospital
services, nursing facility services, or services in an intermediate
care facility for the mentally retarded";
(D) in paragraph (2)(C), by striking "or skilled nursing facility
or intermediate care facility" and inserting ", nursing facility,
or intermediate care facility for the mentally retarded';
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-207
(E) in paragraph (2)(C), by striking "or skilled nursing facility
or intermediate care facility services" and inserting ", nursing
facility services, or services in an intermediate care facility for
the mentally retarded";
(F) in paragraph (5), by striking "skilled nursing facility or
intermediate care facility" and inserting "nursing facility or
intermediate care facility for the mentally retarded"; and
(G) in paragraph (7), by striking "or in skilled nursing or
intermediate care facilities" and inserting ", nursing facilities,
or intermediate care facilities for the mentally retarded".
(11) Section 1916 of such Act (42 U.S.C. 1396m) is amended, in 42 USC 139Go.
subsections (aX2XC) and (b)(2XC), by striking "skilled nursing facil-
ity, intermediate care facility" and inserting "nursing facility, inter-
mediate care facility for the mentally retarded".
(12) Section 1917 of such Act (42 U.S.C. 1396p), as amended by this
title, is further amended—
(A) in subsections (aXlXBXi) and (cX2)(BXi), by striking
"skilled nursing facility, intermediate care facility" and insert-
ing "nursing facility, intermediate care facility for the mentally
retarded", and
(B) in subsection (cX3XA), by striking "skilled".
(i) UTILIZATION REVIEW.—Section 1903(iX4) of such Act (42 U.S.C.
1396b(iX4)) is amended by striking "or skilled nursing facility" each
place it appears.
(j) TECHNICAL ASSISTANCE.—The Secretary of Health and Human 42 USC 1396a
Services shall, upon request by a State, furnish technical assistance note.
with respect to the development and implementation of reimburse-
ment methods for nursing facilities that take into account the case
mix of residents in the different facilities.
(k) REPORT ON STAFFING REQUIREMENTS.—The Secretary of Health 42 USC 1396r
and Human Services shall report to Congress, by not later than note.
January 1, 1993, on the progress made in implementing the nursing
facility staffing requirements of subparagraph (C) of section
1919(bX4) of the Social Security Act (as amended by subsection (a) of
this section), including the number and types of waivers approved
under subparagraph (CXii) of such section and the number of facili-
ties which have received waivers.
(1) CONFORMING AMENDMENT.—Section 9516(c) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 is amended by striking 42 USC 1396r-3
"section 1919" and inserting "section 1922". note.
SEC. 4212. SURVEY AND CERTIFICATION PROCESS.
(a) I N GENERAL.—Section 1919 of the Social Security Act, as
inserted by section 4211, is amended by adding at the end the
following new subsection:
"(g) SURVEY AND CERTIFICATION PROCESS.—
"(1) STATE AND FEDERAL RESPONSIBIUTY.—
"(A) IN GENERAL.—Under each State plan under this title,
^ the State shall be responsible for certifying, in accordance
with surveys conducted under paragraph (2), the compli-
ance of nursing facilities (other than facilities of the State)
with the requirements of subsections (b), (c), and (d). The
Secretary shall be responsible for certifying, in accordance
with surveys conducted under paragraph (2), the compli-
ance of State nursing facilities with the requirements of
such subsections.
101 STAT. 1330-208 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) EDUCATIONAL PROGRAM.—Each State shall conduct
periodic educational programs for the staff and residents
: 'i (and their representatives) of nursing facilities in order to
present current regulations, procedures, and policies under
this section.
"(C) INVESTIGATION OF ALLEGATIONS OF RESIDENT NEGLECT
A N D ABUSE A N D MISAPPROPRIATION OF RESIDENT PROPERTY.—
The State shall provide, through the agency responsible for
surveys and certification of nursing facilities under this
subsection, for a process for the receipt, review, and inves-
t. ( \: tigation of allegations of neglect and abuse and misappro-
priation of resident property by a nurse aide of a resident in
a nursing facility. If the State finds, after notice to the
nurse aide involved and a reasonable opportunity for a
iMs hearing for the nurse aide to rebut allegations, that a nurse
aide whose name is contained in a nurse aide registry has
- s u t neglected or abused a resident or misappropriated resident
property in a facility, the State shall notify the nurse aide
and the registry of such finding.
"(D) CONSTRUCTION.—The failure of the Secretary to
establish standards under subsection (f) shall not relieve a
State of its responsibility under this subsection.
"(2) SURVEYS.—
"(A) ANNUAL STANDARD SURVEY.—
"(i) IN GENERAL.—Each nursing facility shall be sub-
ject to a ^^ standard survey, to be conducted without
any prior notice to the facility. Any individual who
. .^, notifies (or causes to be notified) a nursing facility of
the time or date on which such a survey is scheduled to
be conducted is subject to a civil money penalty of not
to exceed $2,000. The Secretary shall provide for im-
position of civil money penalties under this clause in a
manner similar to that for the imposition of civil
money penalties under section 1128A. The Secretary
shall review each State's procedures for scheduling and
conduct of standard surveys to assure that the State
has taken all reasonable steps to avoid giving notice of
such a survey through the scheduling procedures and
. theconductof the surveys themselves.
"(ii) CONTENTS.—Each standard survey shall include,
for a case-mix stratified sample of residents—
"(I) a survey of the quality of care furnished, as
measured by indicators of medical, nursing, and
m ji rehabilitative care, dietary and nutrition services,
activities and social participation, and sanitation,
infection control, and the physical environment,
"(II) written plans of care provided under subsec-
tion (bX2) and an audit of the residents' assess-
ments under subsection (bX3) to determine the ac-
curacy of such assessments and the adequacy of
such plans of care, and
"(III) a review of compliance with residents'
rights under subsection (c).
"(iii) FREQUENCY.—
•8 Copy read "to an standard".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-209
"(I) IN GENERAL.—Each nursing facility shall be
subject to a standard survey not later than 15
months after the date of the previous standard
survey conducted under this subparagraph. The
statewide ®^ average interval between standard
surveys of a nursing facility shall not exceed 12
months.
"(II) SPECIAL SURVEYS.—If not otherwise con-
ducted under subclause (I), a standard survey (or
an abbreviated standard survey) may be conducted
within 2 months of any change of ownership,
administration, management of a nursing facility,
or director of nursing in order to determine
whether the change has resulted in any decline in
the quality of care furnished in the facility.
"(B) EXTENDED SURVEYS.—
"(i) I N GENERAL.—Each nursing facility which is
found, under a standard survey, to have provided sub-
standard quality of care shall be subject to an extended
survey. Any other facility may, at the Secretary's or
State's discretion, be subject to such an extended
survey (or a partial extended survey).
"(ii) TIMING.—The extended survey shall be con-
ducted immediately after the standard survey (or, if not
practical, not later than 2 weeks after the date of
completion of the standard survey).
"(iii) CONTENTS.—In such an extended survey, the
survey team shall review and identify the policies and
procedures which produced such substandard quality of
care and shall determine whether the facility has com-
plied with all the requirements described in subsections
(b), (c), and (d). Such review shall include an expansion
of the size of the sample of residents' assessments
reviewed and a review of the staffing, of in-service
training, and, if appropriate, of contracts with consult-
ants.
"(iv) CONSTRUCTION.—Nothing in this paragraph
shall be construed as requiring an extended or partial
extended survey as a prerequisite to imposing a sanc-
tion against a facility under subsection (h) on the basis
of findings in a standard survey.
"(C) SURVEY PROTOCOL.—Standard and extended surveys
shall be conducted—
"(i) based upon a protocol which the Secretary has
developed, tested, and validated by not later than Janu-
ary 1,1990, and
"(ii) by individuals, of a survey team, who meet such
minimum qualifications as the Secretary establishes by
not later than such date.
The failure of the Secretary to develop, test, or validate
such protocols or to establish such minimum qualifications
shall not relieve any State of its responsibility (or the
Secretary of the Secretary's responsibility) to conduct sur-
veys under this subsection.
*" Copy read "Statewide".
101 STAT. 1330-210 PUBLIC LAW 100-203—DEC. 22, 1987
"(D) CONSISTENCY OF SURVEYS.—Each State shall imple-
ment programs to measure and reduce inconsistency in the
application of survey results among surveyors.
"(E) SURVEY TEAMS.—
"(i) IN GENERAL.—Surveys under this subsection shall
be conducted by a multidisciplinary team of profes-
sionals (including a registered professional nurse).
"(ii) PROHIBITION OF CONFLICTS OF INTEREST.—A State
may not use as a member of a survey team under this
subsection an individual who is serving (or has served
within the previous 2 years) as a member of the staff of,
or as a consultant to, the facility surveyed respecting
compliance with the requirements of subsections (b), (c),
and (d), or who has a personal or familial financial
interest in the facility being surveyed.
"(iii) TRAINING.—The Secretary shall provide for the
comprehensive training of State and Federal surveyors
in the conduct of standard and extended surveys under
this subsection, including the auditing of resident
assessments and plans of care. No individual shall
serve as a member of a survey team unless the individ-
ual has successfully completed a training and testing
program in survey and certification techniques that
has been approved by the Secretary.
"(3) VALIDATION SURVEYS.—
"(A) IN GENERAL.—The Secretary shall conduct onsite
surveys of a representative sample of nursing facilities in
each State, within 2 months of the date of surveys con-
ducted under paragraph (2) by the State, in a sufficient
number to allow inferences about the adequacies of each
State's surveys conducted under paragraph (2). In conduct-
ing such surveys, the Secretary shall use the same survey
protocols as the State is required to use under paragraph
(2). If the State has determined that an individual nursing
_, facility meets the requirements of subsections (b), (c), and
(d), but the Secretary determines that the facility does not
meet such requirements, the Secretary's determination as
to the facility s noncompliance with such requirements is
binding and supersedes that of the State survey.
"(B) SCOPE.—With respect to each State, the Secretary
shall conduct surveys under subparagraph (A) each year
with respect to at least 5 percent of the number of nursing
facilities surveyed by the State in the year, but in no case
less than 5 nursing facilities in the State.
"(C) REDUCTION IN ADMINISTRATIVE COSTS FOR SUB-
STANDARD PERFORMANCE.—If the Secretary finds, on the
basis of such surveys, that a State has failed to perform
surveys as required under paragraph (2) or that a State's
survey and certification performance otherwise is not ade-
quate, the Secretary may provide for the training of survey
teams in the State and shall provide for a reduction of the
payment otherwise made to the State under section
1903(aX2XD) with respect to a quarter equal to 33 percent
multiplied by a fraction, the denominator of which is equal
to the total number of residents in nursing facilities sur-
veyed by the Secretary that quarter and the numerator of
which is equal to the total number of residents in nursing
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-211
facilities which were found pursuant to such surveys to be
not in compliance with any of the requirements of subsec-
tions (b), (c), and (d). A State that is dissatisfied with the
Secretary's findings under this subparagraph may obtain
reconsideration and review of the findings under section
1116 in the same manner as a State may seek reconsider-
ation and review under that section of the Secretary's
determination under section 1116(aXl).
"(C) SPECIAL SURVEYS OF COMPUANCE.—Where the Sec-
retary has reason to question the compliance of a nursing
facility with any of the requirements of subsections (b), (c),
and (d), the Secretary may conduct a survey of the facility
and, on that basis, make independent and binding deter-
minations concerning the extent to which the nursing facil-
ity meets such requirements.
"(4) INVESTIGATION OF COMPLAINTS AND MONITORING NURSING
FACiuTY COMPUANCE.—Each State shall maintain procedures
and adequate staff to—
"(A) investigate complaints of violations of requirements
by nursing facilities, and
"(B) monitor, on-site, on a regular, as needed basis, a
nursing facility's compliance with the requirements of
subsections (b), (c), and (d), if^
"(i) the facility has been found not to be in compli-
ance with such requirements and is in the process of
correcting deficiencies to achieve such compliance;
"(ii) the facility WEIS previously found not to be in
compliance with such requirements, has corrected defi-
ciencies to achieve such compliance, and verification of
continued compliance is indicated; or
"(iii) the State has reason to question the compliance
of the facility with such requirements.
A State may maintain and utilize a specialized team (including
an attorney, an auditor, and appropriate health care profes- »„
sionals) for the purpose of identifying, surveying, gathering and
preserving evidence, and carrying out appropriate enforcement
actions against chronically substandard nursing facilities.
"(5) DISCLOSURE OF RESULTS OF INSPECTIONS AND ACTIVITIES.—
"(A) PuBuc INFORMATION.—Each State, and the Sec-
retary, shall make available to the public—
"(i) information respecting all surveys and certifi-
cations made respecting nursing facilities, including
statements of deficiencies and plans of correction,
"(ii) copies of cost reports of such facilities filed under
this title or under title XVIII,
"(iii) copies of statements of ownership under section
1124, and
"(iv) information disclosed under section 1126.
"(B) NOTICE TO OMBUDSMAN.— Each State shall notify the
State long-term care ombudsman (established under section
307(aX12) of the Older Americans Act of 1965) of the State's
findings of noncompliance with any of the requirements of
subsections (b), (c), and (d), with respect to a nursing facility
in the State.
"(C) NOTICE TO PHYSICIANS AND NURSING FACILITY
ADMINISTRATOR UCENSING BOARD.—If a State finds that a
101 STAT. 1330-212 PUBLIC LAW 100-203—DEC. 22, 1987
nursing facility hsis provided substandard quality of care,
the State shall notify—
• "(i) the attending physician of each resident with
p respect to which such finding is made, and
"(ii) any State board responsible for the licensing of
the nursing facility administrator of the facility.
fc "(D) ACCESS TO FRAUD CONTROL UNITS.—Each State shall
provide its State medicaid fraud and abuse control unit
(established under section 1903(q)) with access to all
information of the State agency responsible for surveys and
certifications under this subsection. '.
(b) POSTING SURVEY RESULTS.—Section 1864(a) of such Act (42
U.S.C. 1395aa(a)) is amended by inserting, after "readily available
form and place" in the fifth sentence, the following: ", and require
(in the case of skilled nursing facilities) the posting in a place readily
accessible to patients (and patients' representatives),".
(c) INCREASING MATCHING PERCENTAGE FOR NURSING HOME
SURVEY AND CERTIFICATION ACTIVITIES.—(1) Section 1903(aX2) of
such Act (42 U.S.C. 1396b(a)(2)), as amended by this title, is further
amended by adding at the end the following new subparagraph:
"(D) for each calendar quarter during—
"(i) fiscal year 1991, an amount equal to 90 percent,
"(ii) fiscal year 1992, an amount equal to 85 percent,
;, "(iii) fiscal year 1993, an amount equal to 80 percent, and
"(iv) fiscal year 1994 and thereafter, an amount equal to
75 percent,
of so much of the sums expended during such quarter (as found
necessary by the Secretary for the proper and efficient adminis-
tration of the State plan) as are attributable to State activities
under section 1919(g); plus".
(2) Section 1903(r) of such Act (42 U.S.C. 1396b(r)) is amended by
striking "paragraphs (2)" each place it appears and inserting "para-
graphs (2KA)".
42 use 1396b (3) For purposes of section 1903(a) of the Social Security Act,
note. proper expenses incurred by a State for medical review by independ-
ent professionals of the care provided to residents of nursing facili-
ties who are entitled to medical assistance under title XIX of such
Act shall be reimbursable as expenses necessary for the proper and
efficient administration of the State plan under that title.
(d) REVISION OF PENALTY PROVISIONS.—(1) Section 1903(g) of such
Act (42 U.S.C. 1396b(g)) is amended—
(A) in paragraph (1)—
(i) by striking "or intermediate care facility services" the
first place it appears and inserting "or services in an
• •^.'•: intermediate care facility for the mentally retarded",
(ii) by striking ", skilled nursing facility services for 30
i ' •' d a y s , " ,
(iii) by striking ", skilled nursing facility services, or
intermediate care facility services" and inserting "or serv-
ices in an intermediate care facility for the mentally
retarded",
(iv) by striking ", skilled nursing facilities, and intermedi-
ate care facilities" and inserting "and intermediate care
facilities for the mentally retarded";
(B) in paragraph (4XB), by striking ", skilled nursing facilities,
* and intermediate care facilities" and inserting "and intermedi-
fi ate care facilities for the mentally retarded"; x v
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-213
(C) in paragraph (6)—
(i) by striking subparagraph (B),
(ii) in subparagraph (C), by striking "intermediate care
facility services" and inserting "services in an intermediate
care facility for the mentally retarded", and \
(iii) by redesignating subparagraphs (C) and (D) as sub-
paragraphs (B) and (C), respectively; and
(D) by striking paragraph (7).
(2) Section 1902(aX31) of such Act (42 U.S.C. 1396a(a)(31)) is
amended—
(A) in the matter before subparagraph (A), by striking "skilled
nursing facility services" and all that follows through "where"
and inserting "services in an intermediate care facility for the
mentally retarded (where", and
(B) in subparagraph (B), by striking "skilled nursing or inter-
mediate care facility" and inserting "intermediate care facility
for the mentally retarded".
(3) Section 1902(aX33)(B) of such Act (42 U.S.C. 1396a(a)(33)(B)) is
amended by inserting ", except as provided in section 1919(d)," after
"(B) that".
(4) The amendments made by this subsection shall not apply to a Effective date.
State until such date (not earlier than October 1, 1990) as of which 42 use I396a
the Secretary determines that— "°*®
(A) the State has specified the resident assessment in-
strument under section 1919(e)(5) of the Social Security Act, and
(B) the State has begun conducting surveys under section
1919(gX2)ofsuchAct.
(e) MISCELLANEOUS CONFORMING AMENDMENTS.—(1) Section
1902(aX44) of such Act (42 U.S.C. 1396a(aX44)) is amended—
(A) in the matter before subparagraph (A), by striking "skilled
nursing facility services, intermediate care facility services"
and inserting "services in an intermediate care facility for the
mentally retarded", and
(B) in subparagraph (A), by striking "that are intermediate
care facility services in an institution for the mentally re-
tarded" and inserting "that are services in an intermediate care
facility for the mentally retarded".
(2) Section 1903(aX7) of such Act (42 U.S.C. 1396b(aX7)) is amended
by inserting "subject to section 1919(gX3XB)," after "(7)".
(3) Section 1910 of such Act (42 U.S.C. 13961) is amended—
(A) by striking "SKILLED NURSING FACILITIES AND" in the
heading,
(B) by striking subsection (a), and
(C) by redesignating subsections (b) and (c) as subsections (a)
and (b) resoectivelv.
(4) Section 1866(c) of such Act (42 U.S.C. 1395cc(c)) is amended by
striking paragraph (2) and by redesignating paragraph (3) as para-
graph (2).
SEC. 4213. ENFORCEMENT PROCESS.
(a) I N GENERAL.—Section 1919 of the Social Security Act, as
inserted by section 4201 and amended by section 4202, is further
amended by adding at the end the following new subsection:
"(h) ENFORCEMENT PROCESS.—
"(1) IN GENERAL.—If a State finds, on the basis of a standard,
extended, or partial extended survey under subsection (gX2) or
otherwise, that a nursing facility no longer meets a requirement
101 STAT. 1330-214 PUBLIC LAW 100-203—DEC. 22, 1987
of subsection 0)), (c), or (d), and further finds that the facility's
deficiencies—
"(A) immediately jeopardize the health or safety of its
residents, the State shall take immediate action to remove
the jeopardy and correct the deficiencies through the
remedy specified in paragraph (2XAXiii), or terminate the
facility's participation under the State plan and may pro-
vide, in addition, for one or more of the other remedies
; described in paragraph (2); or
"(B) do not immediately jeopardize the health or safety of
its residents, the State may—
"(i) terminate the facility's participation under the
State plan,
"(ii) provide for one or more of the remedies de-
scribed in paragraph (2), or
"(iii) do both.
Nothing in this paragraph shall be construed as restricting the
remedies available to a State to remedy a nursing facility's
deficiencies. If a State finds that a nursing facility meets the
requirements of subsections (b), (c), and (d), but, as of a previous
period, did not meet such requirements, the State may provide
for a civil money penalty under paragraph (2XAXi) for the days
in which it finds that the facility was not in compliance with
such requirements.
Regulations. "(2) SPECIFIED REMEDIES.—
"(A) LISTING.—Except as provided in subparagraph (BXii),
each State shall establish by law (whether statute or regula-
f, tion) at least the following remedies:
"(i) Denial of payment under the State plan with
respect to any individual admitted to the nursing facil-
ity involved after such notice to the public and to the
facility as may be provided for by the State.
"(ii) A civil money penalty assessed and collected,
with interest, for each day in which the facility is or
was out of compliance with a requirement of subsection
(b), (c), or (d). Funds collected by a State as a result of
imposition of such a penalty (or as a result of the
|. i. imposition by the State of a civil money penalty for
activities described in subsections (bXSXBXiiXD,
(bX3XBXiiXII), or (gX2XAXi)) shall be applied to the
i^ , protection of the health or property of residents of
nursing facilities that the State or the Secretary finds
deficient, including payment for the costs of relocation
J . of residents to other facilities, maintenance of oper-
ation of a facility pending correction of deficiencies or
closure, and reimbursement of residents for personal
, funds lost.
" "(iii) The appointment of temporary management to
oversee the operation of the facility and to assure the
health and safety of the facility s residents, where
there is a need for temporary management while—
"(I) there is an orderly closure of the facility, or
"(II) improvements are made in order to bring
the facility into compliance with all the require-
ments of subsections (b), (c), and (d).
The temporary management under this clause shall
, . not be terminated under subclause (II) until the State
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-215
h£is determined that the facility has the management
capability to ensure continued compliance with all the
requirements of subsections (b), (c), and (d).
"(iv) The authority, in the case of an emergency, to
close the facility, to transfer residents in that facility to
other facilities, or both.
The State also shall specify criteria, as to when and how
each of such remedies is to be applied, the amounts of any
fines, and the severity of each of these remedies, to be used
in the imposition of such remedies. Such criteria shall be
designed so as to minimize the time between the identifica-
tion of violations and final imposition of the remedies and
shall provide for the imposition of incrementally more
severe fines for repeated or uncorrected deficiencies. In
addition, the State may provide for other specified rem-
edies, such as directed plans of correction.
"(B) DEADLINE AND GUIDANCE,—(i) Except as provided in
clause (ii), as a condition for approval of a State plan for
calendar quarters beginning on or after October 1, 1989,
each State shall establish the remedies described in clauses
(i) through (iv) of subparagraph (A) by not later than Octo-
ber 1, 1989. The Secretary shall provide, through regula- Regulations.
tions or otherwise by not later than October 1, 1988, guid-
ance to States in establishing such remedies; but the failure
of the Secretary to provide such guidance shall not relieve a
State of the responsibility for establishing such remedies.
"(ii) A State may establish alternative remedies (other
than termination of participation) other than those de-
scribed in clauses (i) through (iv) of subparagraph (A), if the
State demonstrates to the Secretary's satisfaction that the
alternative remedies are as effective in deterring non-
compliance and correcting deficiencies as those described in
subparagraph (A).
"(C) ASSURING PROMPT COMPUANCE.—If a nursing facility
has not complied with any of the requirements of subsec-
tions (b), (c), and (d), within 3 months after the date the
facility is found to be out of compliance with such require-
ments, the State shall impose the remedy described in
subparagraph (AXi) for all individuals who are admitted to
the facility after such date.
"(D) REPEATED NONCOMPUANCE.—In the case of a nursing
facility which, on 3 consecutive standard surveys conducted
under subsection (gX2), has been found to have provided
substandard quality of care, the State shall (regardless of
what other remedies are provided)—
"(i) impose the remedy described in subparagraph
(AXi), and
"(ii) monitor the facility under subsection (gX4XB),
until the facility has demonstrated, to the satisfaction of
the State, that it is in compliance with the requirements of
subsections (b), (c), and (d), and that it will remain in
compliance with such requirements.
"(E) FUNDING.—The reasonable expenditures of a State to
provide for temporary management and other expenses
associated with implementing the remedies described in
clauses (iii) and (iv) of subparagraph (A) shall be considered,
101 STAT. 1330-216 PUBLIC LAW 100-203—DEC. 22, 1987
t*f for purposes of section 1903(aX7), t o be necessary for t h e
*? proper and efficient administration of the State plan.
"(F) INCENTIVES FOR HIGH QUAUTY CARE.—In addition to
the remedies specified in this paragraph, a State may estab-
lish a program to reward, through public recognition, incen-
tive payments, or both, nursing facilities that provide the
highest quality care to residents who are entitled to medical
assistance under this title. For purposes of section
1903(aX7), proper expenses incurred by a State in carrying
out such a program shall be considered to be expenses
necessary for the proper and efficient administration of the
State plan under this title.
"(3) SECRETARIAL AUTHORITY.—
"(A) FOR STATE NURSING FACILITIES.—With respect to a
-»« State nursing facility, the Secretary shall have the author-
ity and duties of a State under this subsection, including
the authority to impose remedies described in clauses (i),
(ii), and (iii) of paragraph (2X A).
"(B) OTHER NURSING FACILITIES.—With respect to any
other nursing facility in a State, if the Secretary finds that
a nursing facility no longer meets a requirement of subsec-
i tion (b), (c), (d), or (e), and further finds that the facility's
deficiencies—
"(i) immediately jeopardize the health or safety of its
residents, the Secretary shall take immediate action to
remove the jeopardy and correct the deficiencies
through the remedy specified in subparagraph (CXiii),
or terminate the facility's participation under the State
plan and may provide, in addition, for one or more of
the other remedies described in subparagraph (C); or
"(ii) do not immediately jeopardize the health or
J safety of its residents, the Secretary may impose any of
the remedies described in subparagraph (C).
Nothing in this subparagraph shall be construed as restrict-
ing the remedies available to the Secretary to remedy a
nursing facility's deficiencies. If the Secretary finds that a
nursing facility meets such requirements but, as of a pre-
vious period, did not meet such requirements, the Secretary
5 may provide for a civil money penalty under subparagraph
(CXii) for the days on which he finds that the facility was
not in compliance with such requirements.
"(C) SPECIFIED REMEDIES.—The Secretary may take the
following actions with respect to a finding that a facility
h£is not met an applicable requirement:
"(i) DENIAL OF PAYMENT.—The Secretary may deny
' '"•;,,':•• any further payments to the State for medical assist-
ance furnished by the facility to all individuals in the
facility or to individuals admitted to the facility after
the effective date of the finding.
"(ii) AUTHORITY WITH RESPECT TO CIVIL MONEY PEN-
¥ ALTiES.—The Secretary may impose a civil money pen-
alty in an amount not to exceed $10,000 for each day of
noncompliance and the Secretary shall impose and
collect such a penalty in the same manner as civil
money penalties are imposed and collected under
section 1128A. „ , , „. ... ,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-217
"(iii) APPOINTMENT OF TEMPORARY MANAGEMENT.—In
consultation with the State, the Secretary may appoint
temporary management to oversee the operation of the
facility and to assure the health and safety of the
facility's residents, where there is a need for temporary
management while—
"(I) there is an orderly closure of the facility, or
,0, , "(II) improvements are made in order to bring
the facility into compliance with all the require-
ments of subsections (b), (c), and (d).
The temporary management under this clause shall
not be terminated under subclause (II) until the Sec-
retary has determined that the facility has the manage-
ment capability to ensure continued compliance with
all the requirements of subsections (b), (c), and (d).
The Secretary shall specify criteria, as to when and how
each of such remedies is to be applied, the amounts of any
fines, and the severity of each of these remedies, to be used
in the imposition of such remedies. Such criteria shall be
designed so as to minimize the time between the identifica-
tion of violations and final imposition of the remedies and
shall provide for the imposition of incrementally more
severe fines for repeated or uncorrected deficiencies. In
addition, the Secretary may provide for other specified
remedies, such as directed plans of correction.
"(D) CONTINUATION OF PAYMENTS PENDING REMEDI-
ATION.—The Secretary may continue payments, over a
period of not longer than 6 months, under this title with
respect to a nursing facility not in compliance with a
requirement of subsection (b), (c), or (d), if—
"(i) the State survey agency finds that it is more
appropriate to take alternative action to assure compli-
ance of the facility with the requirements than to
terminate the certification of the facility,
"(ii) the State has submitted a plan and timetable for
corrective action to the Secretary for approval and the
Secretary approves the plan of corrective action, and
"(iii) the State agrees to repay to the Federal Govern-
ment payments received under this subparagraph if
the corrective action is not taken in accordance with
the approved plan and timetable.
The Secretary shall establish guidelines for approval of
corrective actions requested by States under this subpara-
graph.
"(4) EFFECTIVE PERIOD OF DENIAL OF PAYMENT.—A finding to
deny payment under this subsection shall terminate when the
State or Secretary (or both, as the case may be) finds that the
facility is in substantial compliance with all the requirements of
subsections (b), (c), and (d).
"(5) IMMEDIATE TERMINATION OF PARTICIPATION FOR FACIUTY
WHERE STATE OR SECRETARY FINDS NONCOMPUANCE AND IMME-
DIATE JEOPARDY.—If either the State or the Secretary finds that
a nursing facility has not met a requirement of subsection (b),
(c), or (d), and finds that the failure immediately jeopardizes the
health or safety of its residents, the State and the Secretary
shall notify the other of such finding, and the State or the
Secretary, respectively, shall take immediate action to remove
101 STAT. 1330-218 PUBLIC LAW 100-203—DEC. 22, 1987
the jeopardy and correct the deficiencies through the remedy
specified in paragraph (2XAXiii) or (SXCXiii), or terminate the
facility's participation under the State plan. If the facility's
participation in the State plan is terminated by either the State
or the Secretary, the State shall provide for the safe and orderly
transfer of the residents eligible under the State plan consistent
with the requirements of subsection (cX2).
"(6) SPECIAL RULES WHERE STATE AND SECRETARY DO NOT AGREE
ON FINDING OF NONCOMPLIANCE.—
"(A) STATE FINDING OF NONCOMPUANCE AND NO SECRETAR-
IAL FINDING OF NONCOMPLIANCE.—If the Secretary finds
that a nursing facility has met all the requirements of
subsections (b), (c), and (d), but a State finds that the facility
has not met such requirements and the failure does not
immediately jeopardize the health or safety of its residents,
the State's findings shall control and the remedies imposed
by the State shall be applied.
"(B) SECRETARIAL FINDING OF NONCOMPLIANCE AND NO
STATE FINDING OF NONCOMPUANCE.—If the Secretary finds
that a nursing facility has not met all the requirements of
subsections (b), (c), and (d), and that the failure does not
immediately jeopardize the health or safety of its residents,
but the State has not made such a finding, the Secretary—
"(i) may impose any remedies specified in paragraph
(3XC) with respect to the facility, and
"(ii) shall (pending any termination by the Secretary)
permit continuation of payments in accordance with
paragraph (3XD).
"(7) SPECIAL RULES FOR TIMING OF TERMINATION OF PARTICIPA-
TION WHERE REMEDIES OVERLAP.—If both the Secretary and the
State find that a nursing facility has not met all the require-
ments of subsections (b), (c), and (d), and neither finds
that the failure immediately jeopardizes the health or safety of
its residents—
"(AXi) if both find that the facility's participation under
the State plan should be terminated, the State's timing of
any termination shall control so long £is the termination
date does not occur later than 6 months after the date of
the finding to terminate;
"(ii) if the Secretary, but not the State, finds that the
facility's participation under the State plan should be
terminated, the Secretary shall (pending any termination
by the Secretary) permit continuation of payments in
accordance with paragraph (3XD); or
"(iii) if the State, but not the Secretary, finds that the
facility's participation under the State plan should be
terminated, the State's decision to terminate, and timing of
such termination, shall control; and
"(BXi) if the Secretary or the State, but not both, estab-
lishes one or more remedies which are additional or alter-
native to the remedy of terminating the facility's participa-
tion under the State plan, such additional or alternative
remedies shall also be applied, or
"(ii) if both the Secretary and the State establish one or
more remedies which are additional or alternative to the
remedy of terminating the facility's participation under the
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-219
State plan, only the additional or alternative remedies of
the Secretary shall apply.
"(8) CONSTRUCTION.—The remedies provided under this
subsection are in addition to those otherwise available under
State or Federal law and shall not be construed as limiting such
other remedies, including any remedy available to an individual
at common law. The remedies described in clauses (i), (iii), and
(iv) of paragraph (2)(A) may be imposed during the pendency of
any hearing.
"(9) SHARING OF INFORMATION.—Notwithstanding any other
provision of law, all information concerning nursing facilities
required by this section to be filed with the Secretary or a State
agency shall be made available to Federal or State employees
for purposes consistent with the effective administration of
programs established under this title and title XVIII, including
investigations by State medicaid fraud control units.",
(b) CONFORMING AMENDMENTS.—(1) Section 1902 of such Act (42
U.S.C. 1396a) is amended by striking subsection (i).
(2) Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended by
striking the period at the end of paragraph (7) and inserting "; or"
and by adding at the end the following new paragraph:
"(8) with respect to any amount expended for medical assist-
ance for nursing facility services to reimburse (or otherwise
compensate) a nursing facility for payment of a civil money
penalty imposed under section 1919(h).'.
SEC. 4214. EFFECTIVE DATES. 42 USC 1396r
(a) NEW REQUIREMENTS AND SURVEY AND CERTIFICATION
PROCESS.—Except as otherwise specifically provided in section 1919
of the Social Security Act, the amendments made by sections 4211
and 4212 (relating to nursing facility requirements and survey and
certification requirements) shall apply to nursing facility services
furnished on or after October 1, 1990, without regard to whether
regulations to implement such amendments are promulgated by
such date; except that section 1902(a)(28XB) of the Social Security
Act (as amended by section 4211(b) of this Act), relating to requiring
State medical assistance plans to specify the services included in
nursing facility services, shall apply to calendar quarters beginning
more than 6 months after the date of the enactment of this Act,
without regard to whether regulations to implement such section
are promulgated by such date.
(b) ENFORCEMENT.—(1) Except as otherwise specifically provided in
section 1919 of the Social Security Act, the amendments made by
section 4213 of this Act apply to payments under title XIX of the
Social Security Act for calendar quarters beginning on or after the
date of the enactment of this Act, without regard to whether
regulations to implement such amendments are promulgated by
such date.
(c) TRANSITIONAL RULE.—In applying the amendments made by
this part for services furnished before October 1,1990—
(A) any reference to a nursing facility is deemed a reference
to a skilled nursing facility or intermediate care facility (other
than an intermediate care facility for the mentally retarded),
and
(B) with respect to such a skilled nursing facility or intermedi-
ate care facility, any reference to a requirement of subsection
101 STAT. 1330-220 PUBLIC LAW 100-203—DEC. 22, 1987
(b), (c), or (d), is deemed a reference to the provisions of section
186l(j) or section 1905(c), respectively, of the Social Security Act.
(d) WAIVER OF PAPERWORK REDUCTION.—Chapter 35 of title 44,
United States Code, shall not apply to information required for
purposes of carrying out this part and implementing the amend-
ments made by this part.
42 u s e 1396r SEC. 4215. ANNUAL REPORT.
note.
The Secretary of Health and Human Services shall report to the
Congress annually on the extent to which nursing facilities are
complying with the requirements of subsections (b), (c), and (d) of
section 1919 of the Social Security Act (as added by the amendments
made by this part) and the number and type of enforcement actions
taken by States and the Secretary under section 1919(h) of such Act
(as added by section 4213 of this Act).
42 u s e 1396r. SEC. 4216. CONSTRUCTION.
Section 1919 of the Social Security Act is amended by adding at
the end the following new subsection:
"(i) CONSTRUCTION.—Where requirements or obligations under
this section are identical to those provided under section 1819 of this
Act, the fulfillment of those requirements or obligations under
section 1819 shall be considered to be the fulfillment of the cor-
responding requirements or obligations under this section.".
Effective date. SEC. 4217. FINAL REGULATIONS WITH RESPECT TO PLANS OF CORREC-
42 u s e 1396r-3 TION OR REDUCTION.
note.
(a) IN GENERAL.—Not later than 30 days after the date of enact-
ment of this Act, the Secretary of Health and Human Services shall
promulgate final regulations to implement the amendments made
by section 9516 of the Consolidated Omnibus Budget Reconciliation
100 Stat. 82. Act of 1985.
(b) The regulations promulgated under paragraph (1) shall be
effective as if promulgated on the date of enactment of the Consoli-
dated Omnibus Budget Reconciliation Act of 1985.
SEC. 4218. MEDICAID CERTIFICATIONS AND RECERTIFICATIONS FOR CER-
TAIN SERVICES.
(a) IN GENERAL.—Section 1902(aX44) of the Social Security Act (42
U.S.C. 1396a(aX44)) is amended—
(1) in subparagraph (A)—
(A) by striking "physician certifies" and inserting "physi-
cian (or, in the case of skilled nursing facility services or
intermediate care facility services, a physician, or a nurse
practitioner or clinical nurse specialist who is not an em-
ployee of the facilitv but is working in collaboration with a
physician) certifies', and
(B) by striking "the physician, or a physician assistant or
nurse practitioner under the supervision of a physician,"
~M and inserting "a physician, a physician assistant under the
supervision of a physician, or, in the case of skilled nursing
facility services or intermediate care facility services, a
physician, or a nurse practitioner or clinical nurse special-
ist who is not an employee of the facility but is working in
collaboration with a physician,"; and
" (2) in subparagraph (B), by striking "a physician;" and insert-
ing "a physician, or, in the case of skilled nursing facility
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-221
services or intermediate care facility services, a physician, or a
nurse practitioner or clinical nurse specialist who is not an
employee of the facility but is working in collaboration with a
physician;".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1396a
shall apply with respect to certifications or recertifications during note.
the period beginning on July 1, 1988, and ending on October 1, 1990.
Subtitle D—Vaccine Compensation Vaccine
Compensation
Amendments of
SEC. 4301. SHORT TITLE, REFERENCE. 1987.
(a) SHORT TITLE.—This subtitle may be cited as the "Vaccine 42 USC 201 note.
Compensation Amendments of 1987".
(b) REFERENCE.—Whenever in this subtitle (other than in section
4302(a)) an amendment or repeal is expressed in terms of an amend-
ment to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the Public
Health Service Act.
SEC. 4302. EFFECTIVE DATE.
(a) IN GENERAL.—Section 323(a) of the National Childhood Vac-
cine Injury Act of 1986 (42 U.S.C. 300aa-l note) is amended by
striking out "Subtitle 2 of such title and this title shall take effect
on the effective date of a tax" and all that follows in that section
and inserting in lieu thereof "parts A and B of subtitle 2 of such title
shall take effect on October 1, 1988 and parts C and D of such title
and this title shall take effect on the date of the enactment of the
Vaccine Compensation Amendments of 1987.".
(b) REFERENCES."—
(1) Sections 2111, 2115, 2119(a), 2122, 2123, 2125, 2126, 2127, 42 USC
and 2128 (42 U.S.C. 300aa-ll, 300aa-15, 300aa-199a), 300aa-22, 300aa-i9.
300aa-23, 300aa-25, 300aa-26, 300aa-27, 300aa-28) are each
amended by striking out "effective date of this subtitle" each
place it appears and inserting in lieu thereof "effective date of
this part".
(2) Sections 2111(aX5)(A), 2115(eX2) and 2116 (42 U.S.C. 300aa- 42 USC
ll(a)(5XA), 300aa-15(eX2), 300a-16) are each amended by strik- 300aa-16.
ing out "effective date of this title" each place it appears and
inserting in lieu thereof "effective date of this part".
SEC. 4303. COMPENSATION.
(a) SOURCE.—Section 2115 (42 U.S.C. 300aa-15) is amended by
adding at the end the following:
"(i) SOURCE OF COMPENSATION.—
"(1) Payment of compensation under the Program to a peti-
tioner for a vaccine-related injury or death associated with the
administration of a vaccine before the effective date of this part
shall be made from appropriations under subsection (i).
"(2) Payment of compensation under the Program to a peti-
tioner for a vaccine-related injury or death associated with the
administration of a vaccine on or after the effective date of this
part shall be made from the Vaccine Injury Compensation Trust
Fund established under section 9510 of the Internal Revenue
Code of 1986.".
101 STAT. 1330-222 PUBLIC LAW 100-203—DEC. 22, 1987
(b) AUTHORIZATION.—Section 2115 (42 U.S.C. 300aa-15) (as
amended by subsection (a)) is amended by adding at the end
the following:
"0") AUTHORIZATION.—For the payment of compensation under the
Program to a petitioner for a vaccine-related injury or death associ-
ated with the administration of a vaccine before the effective date of
this part there are authorized to be appropriated $80,000,000 for
fiscal year 1989, $80,000,000 for fiscal year 1990, $80,000,000 for
fiscal year 1991, and $80,000,000 for fiscal year 1992. Amounts
appropriated under this subsection shall remain available until
expended.".
42 use (c) MINIMUM.—Section 2115(a)(1) (42 U.S.C. 300a-15(aXl)) is
300aa-15. amended by striking out the last sentence of subparagraphs
(A)and(B).
(d) LUMP SUM.— ^.^' ^?
(1) Section 2115 (42 U.S.C. 300aa-15) is amended—
(A) by striking out the last two sentences after paragraph
. : (4) in subsection (a), and
(B) by adding at the end of the first subsection (f) the
following:
"(4XA) Except as provided in subparagraph (B), payment of
compensation under the Program shall be made in a lump sum
determined on the basis of the net present value of the elements
of the compensation.
"(B) In the case of a payment of compensation under the
Program to a petitioner for a vaccine-related injury or death
associated with the administration of a vaccine before the effec-
tive date of this part the compensation shall be paid in 4 equal
annual installments. If the appropriations under subsection (i)
are insufficient to make a payment of an annual installment,
section 2111(a) shall not apply to a civil action for damages
brought by the petitioner entitled to the payment.".
42 use (2XA) Subsections (e) and (f) of section 2112 (42 U.S.C. 300a-12)
300aa-12. are repealed and subsection (g) of such section is redesignated as
(B) Section 2118 (42 U.S.C. 300aa-18) is repealed.
(e) LIMIT.—Section 2115(b) (42 U.S.C. 300aa-15(b)) is amended by
striking out "shall only include the compensation described in
paragraphs (IXA) and (2) of subsection (a)" and inserting in lieu
thereof the following: "may not include the compensation described
in paragraph (IXB) of subsection (a) and may include attorneys' fees
and other costs included in a judgment under subsection (e), except
that the total amount that may be paid as compensation under
paragraphs (3) and (4) of subsection (a) and included as attorneys'
fees and other costs under subsection (e) may not exceed $30,000".
(f) TERMINATION OF PROGRAM.—Part D of title XXI is amended by
adding at the end the following:
TERMINATION OF PROGRAM
42 use "SEC. 2134. (a) REVIEWS.—The Secretary shall review the number
300aa-34. of awards of compensation made under the program to petitioners
under section 2111 for vaccine-related injuries and deaths associated
with the administration of vaccines on or after the effective date of
this part as follows: ?-s^ • j ..i
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-223
"(1) The Secretary shall review the number of such awards
made in the 12-month period beginning on the effective date of
this part.
"(2) At the end of each 3-month period beginning after the
expiration of the 12-month period referred to in paragraph (1)
the Secretary shall review the number of such awards made in
the 3-month period.
"(b) REPORT.—
"(1) If in conducting a review under subsection (a) the Sec-
retary determines that at the end of the period reviewed the
total number of awards made by the end of that period and
accepted under section 2121(a) exceeds the number of awards
listed next to the period reviewed in the table in paragraph (2)—
"(A) the Secretary shall notify the Congress of such deter-
mination, and
"(B) beginning 180 days after the receipt by Congress of a
notification under paragraph (1), no petition for a vaccine-
related injury or death associated with the administration
of a vaccine on or after the effective date of this part may
be filed under section 2111.
Section 2111(a) and part B shall not apply to civil actions for
damages for a vaccine-related injury or death for which a
petition may not be filed because of subparagraph (B).
"(2) The table referred to in paragraph (1) is as follows:
Total number of awards
by the end of the period
•"* "Period reviewed: reviewed
12 months after the effective date of part 150
13th through the 15th month after such date 188
16th through the 18th month after such date 225
19th through the 21st month after such date 263
22nd through the 24th month after such date 300
25th through the 27th month after such date 338
28th through the 30th month after such date 375
31st through the 33rd month after such date 413
34th through the 36th month after such date 450
37th through the 39th month after such date 488
40th through the 42nd month after such date 525
43rd through the 45th month after such date 563
46th through the 48th month after such date 600.".
(g) TECHNICAL.—Section 2115 (42 U.S.C. 300a-15) is amended by 42 use
redesignating the second subsection (f) and subsection (g) as subsec- 300aa-15.
tions (g) and (h), respectively.
SEC. 4304. PETITIONS.
(a) APPUCATION OF LIMITS.—Section 2111(a) (42 U.S.C. 300aa-ll) is
amended by adding at the end the following:
"(8) This subsection applies only to a person who has sustained a
vaccine-related injury or death and who is qualified to file a petition
for compensation under the Program.".
Ot)) QUAUFICATION.—
(1) Section 2111(bXl) (42 U.S.C. 300a-l 1(b)(1)(A)) is amended by 42 use
striking out "may file" and inserting in lieu thereof "may, if the 300aa-ll.
person meets the requirements of subsection (c)(1), file".
(2) Section 2111(cXlXD) (42 U.S.C. 300a-ll(cXl)(D)) is amended
(A) by striking out "for more than 1 year" and inserting in lieu
thereof "for more than 6 months", (B) by striking out ",Tii)" and
'"Copy read "Period reviewed:".
101 STAT. 1330-224 PUBLIC LAW 100-203—DEC. 22, 1987
inserting in lieu thereof "and", and (C) by striking out "(iii)"
and inserting in lieu thereof "(ii)".
42 use (c) WITHDRAWAL.—Section 2121 (42 U.S.C. 300a-21) is amended by
300aa-21. redesignating subsection (b) as subsection (c) and by inserting after
subsection (a) the following:
"(b) WITHDRAWAL OF PETITION.—If the United States Claims Court
fails to enter a judgment under section 2112 on a petition filed under
section 2111 within 365 days after the date on which the petition
was filed, the petitioner may submit to the court a notice in writing
withdrawing the petition. Such a notice shall be filed not later than
90 days after the expiration of such 365-day period. A person who
has submitted a notice under this subsection may, notwithstanding
section 2111(a)(2), thereafter maintain a civil action for damages in a
State or Federal court without regard to part B and consistent with
otherwise applicable law.".
SEC. 4305. CITIZEN'S ACTIONS.
42 use Section 2131(c) (42 U.S.C. 300a-31(c)) '^ is amended by striking out
300aa-31. "to any party, whenever the court determines that such award is
appropriate" and inserting in lieu thereof "to any plaintiff who
substantially prevails on one or more significant issues in the
action".
42 use SEC. 4306. VACCINE ADMINISTRATORS. ^ ^
300aa-ll. Section 2111(a) (42 U.S.C. 300a-ll) is amended by striking out
"vaccine manufacturer" each place it appears and inserting in lieu
thereof "vaccine administrator or manufacturer".
SEC. 4307. COURT JURISDICTION.
Subtitle 2 of title XXI is amended as follows:
(1) Section 2111(aXl) (42 U.S.C. 300aa-ll(aXl)) is amended by
striking out "with the United States district court for the
district in which the petitioner resides or the injury or death
occurred" and inserting in lieu thereof "with the United States
Claims Court".
(2) Section 2111(aX2)(AXii) (42 U.S.C. 300aa-ll(aX2XAXii)) is
amended by striking out "a district court of the United States"
and inserting in lieu thereof "the United States Claims Court".
t (3) Section 2112 (42 U.S.C. 300aa-12) is amended—
<Tk. .. (A) in subsection (a), by striking out "district courts of the
United States" and inserting in lieu thereof "United States
Claims Court" and by striking out "the courts" and insert-
ing in lieu thereof "the court",
f (i ' (B) in subsection (cXD, by striking out "the district court
of the United States in which the petition is filed" and
>• inserting in lieu thereof "the United States Claims Court",
' and
(C) in subsection (g), by striking out "a district court of
the United States" and inserting in lieu thereof "the
United States Claims Court" and by striking out "for the
V" circuit in which the court is located" and inserting in lieu
thereof "for the Federal Circuit".
(4) Section 2113(c) (42 U.S.C. 300aa-13(c)) is amended by strik-
ing out "a district court of the United States" and inserting in
lieu thereof "the United States Claims Court".
" Copy read "300a-31(c)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-225
(5) Section 2115{eXl) (42 U.S.C. 300aa-15(eKl)) is amended by
striking out "of a court" and inserting in lieu thereof "of the
United States Claims Court".
(6) Paragraph (2) of subsection (f) of section 2115 (42 U.S.C.
300aa-15) is amended by striking out "district court of the
United States" and inserting in lieu thereof "United States
Claims Court".
(7) Section 2117(a) (42 U.S.C. 300aa-17(a)) is amended by
striking out "(1)", by running in the text of paragraph (1) into
the subsection heading, and by striking out paragraph (2).
(8) Section 2121(a) (42 U.S.C. 300aa-21(a)) is amended by
striking out "a district court of the United States" and inserting
in lieu thereof "the United States Claims Court" and by striking
out "a court" each place it occurs and inserting in lieu thereof
"the court".
(9) Section 2123(e) (42 U.S.C. 300aa-23(e)) is amended by strik-
ing out "a district court of the United States" and inserting in
lieu thereof "the United States Claims Court".
Subtitle E^Rural Health
SEC. 4401. OFFICE OF RURAL HEALTH POLICY.
Title VII of the Social Security Act is amended by adding at the
end thereof the following new section:
"OFFICE OF RURAL HEALTH POUCY
"SEC. 711. (a) There shall be established in the Department of Establishment.
Health and Human Services (in this section referred to as the ^^ use 912.
'Department') "^^ an Office of Rural Health Policy (in this section
referred to as the 'Office'). The Office shall be headed by a Director,
who shall advise the Secretary on the effects of current policies and
proposed statutory, regulatory, administrative, and budgetary
changes in the programs established under titles XVIII and XIX on
the financial viability of small rural hospitals, the ability of rural
areas (and rural hospitals in particular) to attract and retain physi-
cians and other health professionals, and access to (and the quality
of) health care in rural areas.
"(b) In addition to advising the Secretary with respect to the *
matters specified in subsection (a), the Director, through the Office,
shall-
"(1) oversee compliance with the requirements of section ' ^ ^-^
1102(b) of this Act and section 4083 of the Omnibus Budget
Reconciliation Act of 1987,
"(2) establish and maintain a clearinghouse for collecting and
disseminating information on—
"(A) rural health care issues,
"(B) research findings relating to rural health care, and
"(C) innovative approaches to the delivery of health care
in rural areas,
"(3) coordinate the activities within the Department that
relate to rural health care, and
"" Copy read " "Department")".
101 STAT. 1330-226 PUBLIC LAW 100-203—DEC. 22, 1987
"(4) provide information to the Secretary and others in the
Department with respect to the activities, of other Federal
departments and agencies, that relate to rural health care.".
SEC. 4402. IMPACT ANALYSES OF MEDICARE AND MEDICAID RULES AND
REGULATIONS ON SMALL RURAL HOSPITALS.
(a) IN GENERAL.—Section 1102 of the Social Security Act (42 U.S.C.
1302) is amended—
• (1) by inserting "(a)" after "SEC. 1102.", and
(2) by adding at the end thereof the following new subsection:
"O^XD Whenever the Secretary publishes a general notice of
proposed rulemaking for any rule or regulation proposed under title
XVIII, title XIX, or part B of this title that may have a significant
impact on the operations of a substantial number of small rural
hospitals, the Secretary shall prepare and make available for public
comment an initial regulatory impact analysis. Such analysis shall
describe the impact of the proposed rule or regulation on such
hospitals and shall set forth, with respect to small rural hospitals,
the matters required under section 603 of title 5, United States Code,
Federal Register, to be set forth with respect to small entities. The initial regulatory
publication. impact analysis (or a summary) shall be published in the Federal
Register at the time of the publication of general notice of proposed
rulemaking for the rule or regulation.
"(2) Whenever the Secretary promulgates a final version of a rule
or regulation with respect to which an initial regulatory impact
analysis is required by paragraph (1), the Secretary shall prepare a
final regulatory impact analysis with respect to the final version of
such rule or regulation. Such analysis shall set forth, with respect to
small rural hospitals, the matters required under section 604 of title
5, United States Code, to be set forth with respect to small entities.
Federal Register, The Secretary shall make copies of the final regulatory impact
publication. analysis available to the public and shall publish, in the Federal
Register at the time of publication of the final version of the rule or
regulation, a statement describing how a member of the public may
obtain a copy of such analysis.
"(3) If a regulatory flexibility analysis is required by chapter 6 of
title 5, United States Code, for a rule or regulation to which this
subsection applies, such analysis shall specifically address the
impact of the rule or regulation on small rural hospitals.".
42 u s e 1302 (b) EFFECTIVE DATE.—The amendments made by paragraph (1)
note. shall apply to regulations proposed more than 30 days after the date
of the enactment of this Act.
42 u s e 1395b-l SEC. 4403. SET ASIDE FOR EXPERIMENTS AND DEMONSTRATION
note. PROJECTS RELATING TO RURAL HEALTH CARE ISSUES.
(a) SET ASIDE.—Not less than ten percent of the total amounts
expended in each fiscal year by the Secretary of Health and Human
Services (in this section referred to as the "Secretary") after
October 1, 1988, with respect to experiments and demonstration
projects authorized by section 402 of the Social Security Amend-
ments of 1967 and the experiments and demonstration projects
authorized by the Social Security Amendments of 1972 shall be
expended for experiments and demonstration projects relating
exclusively or substantially to rural health issues, including (but not
limited to) the impact of the payment methodology under section
1886(d) of the Social Security Act on the financial viability of small
rural hospitals, the effect of medicare payment policies on the
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-227
ability of rural areas (and rural hospitals in particular) to attract
and retain physicians and other health professionals, the appro-
priateness of medicare conditions of participation and staffing
requirements for small rural hospitals, and the impact of medicare
policies on access to (and the quality oD health care in rural areas,
(b) AGENDA.—The Secretary of Health and Human Services shall
establish an agenda of experiments and demonstration projects,
relating exclusively or substantially to rural health issues, that are
in progress or have been proposed, and shall include such agenda in
the annual report submitted pursuant to section 1875(b) of the Social
Security Act. The agenda shall be accompanied by a statement
setting forth the amounts that have been obligated and expended
with respect to such experiments and projects in the current and
most recently completed fiscal years.
TITLE V—ENERGY AND ENVIRONMENT
PROGRAMS
Subtitle A—Nuclear Waste Amendments Nuclear Waste
Policy
Amendments
SEC. 5001. SHORT TITLE. Act of 1987.
42 u s e 10101
This subtitle may be cited as the "Nuclear Waste Policy Amend- note.
ments Act of 1987".
SEC. .5002. DEFINITIONS.
Section 2 of the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10101)
is amended by adding at the end the following new paragraphs:
"(30) The term 'Yucca Mountain site' means the candidate
site in the State of Nevada recommended by the Secretary to
the President under section 112a))(l)(B) on May 27,1986.
"(31) The term 'affected unit of local government' means the
unit of local government with jurisdiction over the site of a
repository or a monitored retrievable storage facility. Such term
may, at the discretion of the Secretary, include units of local
government that are contiguous with such unit.
"(32) The term 'Negotiator' means the Nuclear Waste Nego-
tiator.
"(33) As used in title IV, the term 'Office' means the Office of
the Nuclear Waste Negotiator established under title IV of this
Act.
"(34) The term 'monitored retrievable storage facility' means
the storage facility described in section 141(b)(1).".
> PART A—REDIRECTION OF THE NUCLEAR
WASTE PROGRAM
SEC. 5011. FIRST REPOSITORY.
(a) SITE SPECIFIC ACTIVITIES.—Title I of the Nuclear Waste Policy
Act of 1982 (42 U.S.C. 10121-10171) is amended by adding at the end
the following new subtitle:
101 STAT. 1330-228 PUBLIC LAW 100-203—DEC. 22, 1987
"SUBTITLE E—REDIRECTION OF THE NUCLEAR WASTE PROGRAM
"SELECTION OF YUCCA MOUNTAIN SITE
42 use 10172. "SEC. 160. (a) IN GENERAL.—(1) The Secretary shall provide for an
orderly phase-out of site specific activities at all candidate sites
other than the Yucca Mountain site.
"(2) The Secretary shall terminate all site specific activities (other
than reclamation activities) at all candidate sites, other than the
Yucca Mountain site, within 90 days after the date of enactment of
the Nuclear Waste Policy Amendments Act of 1987.
"(h) Effective on the date of the enactment of the Nuclear Waste
Policy Amendments Act of 1987, the State of Nevada shall be
eligible to enter into a benefits agreement with the Secretary under
section 170.".
Ot>) SITE RECOMMENDATION TO THE PRESIDENT.—Section 112(b) of
the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10132(b)) is amended
by-
(1) striking out paragraph (1)(C) and redesignating the subse-
quent subparagraphs accordingly; and
(2) in subparagraph (C) '^ (as redesignated) by striking "sub-
paragraphs (B) and (C)" and inserting "subparagraph (B)'.
(c) TERMINATION OF CANDIDATE SITE SCREENING.—Section 112 of
the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10132) is amended
by striking all of subsection (d) and redesignating subsequent subsec-
tions accordingly.
(d) TIMELY SITE CHARACTERIZATION.—Section 112 of the Nuclear
Waste Policy Act of 1982 (42 U.S.C. 10132) is amended by striking all
of subsection (f) and redesignating subsequent subsections
accordingly.
(e) SITE CHARACTERIZATION.—Section 113(a) of the Nuclear Weiste
Policy Act of 1982 (42 U.S.C. 10133(a)) is amended—
(1) by striking "State involved" and all that follows through
"tribe involved' and inserting "State of Nevada"; and
(2) by striking "beginning" and all that follows through "geo-
logical media" and inserting "at the Yucca Mountain site".
(f) COMMISSION AND STATES.—Section 113(b) of the Nuclear Waste
Policy Act of 1982 (42 U.S.C. 101330))) is amended—
(1) in paragraph (1)—
(A) by striking "any candidate site" and inserting "the
Yucca Mountain site";
(B) by striking "either" and all that follows through "may
be" and insert "the Governor or legislature of the State of
Nevada";
(2) in paragraph (2), by striking "at any candidate site" and
inserting "at the Yucca Mountain site"; and
(3) in paragraph (3)—
(A) by striking "a candidate site" and inserting "the
Yucca Mountain site";
(B) by striking "either"; and
(C) by striking "the State" and all that follows through
"may be" and inserting "the State of Nevada".
(g) RESTRICTIONS.—Section 113(c) of the Nuclear Waste Policy Act
of 1982 (42 U.S.C. 10133(c)) is amended—
(1) in paragraph (1)—
'^ Copy read "(C), (as"
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-229
(A) by striking "any candidate site" and inserting "the
Yucca Mountain site"; and
(B) by striking "such candidate site" each place it appears
and inserting "such site";
(2) in paragraph (2), by striking "candidate" each place it
appears; and
(3) by striking paragraphs (3) and (4) and inserting the
following:
"(3) If the Secretary at any time determines the Yucca Mountain
site to be unsuitable for development as a repository, the Secretary
shall—
"(A) terminate all site characterization activities at such site;
"(B) notify the Congress, the Governor and legislature of
Nevada of such termination and the reasons for such termi-
nation;
"(C) remove any high-level radioactive waste, spent nuclear
fuel, or other radioactive materials at or in such site as
promptly as practicable;
"(D) take reasonable and necessary steps to reclaim the site
and to mitigate any significant adverse environmental impacts
caused by site characterization activities at such site;
"(E) suspend all future benefits payments under subtitle F
with respect to such site; and
"(F) report to Congress not later than 6 months after such Reports.
determination the Secretary's recommendations for further
action to assure the safe, permanent disposal of spent nuclear
fuel and high-level radioactive waste, including the need for
new legislative authority.",
(h) HEARINGS AND PRESIDENTIAL RECOMMENDATION.—Section
114(a) of the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10134(a)) is
amended—
(1) in paragraph (1)—
(A) by striking "each site" through "development of a
repository" and inserting "the Yucca Mountain site";
(B) by striking "in which such site is located";
(C) by striking "not less than 3" and all that follows
through "subsequent repositories" and inserting "the
Yucca Mountain site";
(D) by striking "in which such site" and all that follows
through "case may be" and insert "of Nevada";
(E) by striking the sentence beginning with "In making
site recommendations";
(F) by amending subparagraph (D) to read as follows:
"(D) a final environmental impact statement prepared for
the Yucca Mountain site pursuant to subsection (f) and the
National Environmental Policy Act of 1969 (42 U.S.C. 4321
et seq.), together with comments made concerning such
environmental impact statement by the Secretary of the
Interior, the Council on Environmental Quality, the
Administrator, and the Commission, except that the Sec-
retary shall not be required in any such environmental
impact statement to consider the need for a repository, the
alternatives to geological disposal, or alternative sites to
the Yucca Mountain site;"; and
(G) in subparagraph (H), by striking "the State" and all
that follows through the end of the sentence and inserting
"the State of Nevada";
101 STAT. 1330-230 PUBLIC LAW 100-203—DEC. 22, 1987
(2) by striking paragraphs (2) and (3) and inserting the
following:
President of U.S. "(2)(A) If, after recommendation by the Secretary, the President
considers the Yucca Mountain site qualified for application for a
construction authorization for a repository, the President shall
submit a recommendation of such site to Congress.
"(B) The President shall submit with such recommendation a copy
of the statement for such site prepared by the Secretary under
paragraph (1)."; and
(3) in paragraph (4) by—
(A) striking "(4)(A)" and inserting "(3KA)";
(B) striking "any site under this subsection" and insert-
ing "the Yucca Mountain site"; and
(C) by striking "report" and inserting "statement".
(i) SUBMISSION OF APPLICATION.—Section 114(b) of the Nuclear
Waste Policy Act of 1982 (42 U.S.C. 10134(b)) is amended—
(1) by striking "a site for a repository" and inserting "the
Yucca Mountain site"; and
(2) by striking "in which" and all that follows through "may
be," and inserting "of Nevada".
(j) COMMISSION ACTION.—Section 114(d) of the Nuclear Waste
Policy Act of 1982 (42 U.S.C. 10134(d)) is amended in the first
sentence—
,,,. (1) by striking "than—" and all that follows through "(2) the
expiration" and inserting "than the expiration"; and
(2) by striking "(e)(2); whichever occurs later" and inserting
"(e)(2)<
(k) PROJECT DECISION SCHEDULE.—Section 114(e) of the Nuclear
Waste Policy Act of 1982 (42 U.S.C. 10134(e)) is amended by striking
"repository involved" and inserting "repository".
(1) ENVIRONMENTAL IMPACT STATEMENT.—Section 114(0 of the Nu-
clear Waste Policy Act of 1982 (42 U.S.C. 10134(f)) is amended to
read as follows:
"(f) ENVIRONMENTAL IMPACT STATEMENT.—(1) Any recommenda-
tion made by the Secretary under this section shall be considered a
major Federal action significantly affecting the quality of the
human environment for purposes of the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.). A final environmental
impact statement prepared by the Secretary under such Act shall
accompany any recommendation to the President to approve a site
for a repository.
"(2) With respect to the requirements imposed by the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), compli-
ance with the procedures and requirements of this Act shall be
deemed adequate consideration of the need for a repository, the time
of the initial availability of a repository, and all alternatives to the
isolation of high-level radioactive waste and spent nuclear fuel in a
repository.
(3) For purposes of complying with the requirements of the
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.)
and this section, the Secretary need not consider alternate sites to
the Yucca Mountain site for the repository to be developed under
this subtitle.
"(4) Any environmental impact statement prepared in connection
with a repository proposed to be constructed by the Secretary under
this subtitle shall, to the extent practicable, be adopted by the
Commission in connection with the issuance by the Commission of a
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-231
construction authorization and license for such repository. To the
extent such statement is adopted by the Commission, such adoption
shall be deemed to also satisfy the responsibilities of the Commission
under the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.) and no further consideration shall be required, except
that nothing in this subsection shall affect any independent respon-
sibilities of the Commission to protect the public health and safety
under the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.).
"(5) Nothing in this Act shall be construed to amend or otherwise
detract from the licensing requirements of the Nuclear Regulatory
Commission established in title II of the Energy Reorganization Act
of 1974 (42 U.S.C. 5841 et seq.).
"(6) In any such statement prepared with respect to the repository
to be constructed under this subtitle, the Nuclear Regulatory
Commission need not consider the need for a repository, the time of
initial availability of a repository, alternate sites to the Yucca
Mountain site, or nongeologic alternatives to such site.".
(m) ON-SITE REPRESENTATIVE.—Section 117 of the Nuclear Waste
Policy Act of 1982 (42 U.S.C. 10137) is amended by adding at the end
the following new subsection:
"(d) ON-SITE REPRESENTATIVE.—The Secretary shall offer to any
State, Indian tribe or unit of local government within whose juris-
diction a site for a repository or monitored retrievable storage
facility is located under this title an opportunity to designate a
representative to conduct on-site oversight activities at such site.
Reasonable expenses of such representatives shall be paid out of the
Waste Fund.".
SEC. 5012. SECOND REPOSITORY.
Subtitle E of title I of the Nuclear Waste Policy Act of 1982 (as
created by section 5011 of this Act) is amended by adding at the end
the following new section:
"SITING A SECOND REPOSITORY
"SEC. 161. (a) CONGRESSIONAL ACTION REQUIRED.—The Secretary 42 u s e ioi72a.
may not conduct site-specific activities with respect to a second
repository unless Congress has specifically authorized and appro-
priated funds for such activities.
"Go) REPORT.—The Secretary shall report to the President and to
Congress on or after January 1, 2007, but not later than January 1, : : ,
2010, on the need for a second repository.
"(c) TERMINATION OF GRANITE RESEARCH.—Not later than 6
months after the date of the enactment of the Nuclear Waste Policy
Amendments Act of 1987, the Secretary shall phase out in an
orderly manner funding for all research programs in existence on
such date of enactment designed to evaluate the suitability of
crystalline rock as a potential repository host medium.
"(d) ADDITIONAL SITING CRITERIA.—In the event that the Secretary
at any time after such date of enactment considers any sites in
crystalline rock for characterization or selection as a repository, the
Secretary shall consider (as a supplement to the siting guidelines
under section 112) such potentially disqualifying factors as—
"(1) seasonal increases in population;
"(2) proximity to public drinking water supplies, including
those of metropolitan areas; and
91-194 O - 90 - 33 : QL.3 Part 2
101 STAT. 1330-232 PUBLIC LAW 100-203—DEC. 22, 1987 .
"(3) the impact that characterization or siting decisions would
have on lands owned or placed in trust by the United States for
Indian tribes.".
PART B—MONITORED RETRIEVABLE STORAGE
SEC. .5021. AUTHORIZATION O F MONITORED RETRIEVABLE STORAGE.
Subtitle C of the Nuclear '* Waste Policy Act of 1982 is amended
by adding at the end the following new sections:
"AUTHORIZATION OF MONITORED RETRIEVABLE STORAGE
42 use 10162. "SEC. 142. (a) NULLIFICATION OF OAK RIDGE SITING PROPOSAL.—
The proposal of the Secretary (EC-1022, 100th Congress) to locate a
monitored retrievable storage facility at a site on the Clinch River
in the Roane County portion of Oak Ridge, Tennessee, with alter-
native sites on the Oak Ridge Reservation of the Department of
Energy and on the former site of a proposed nuclear powerplant in
Hartsville, Tennessee, is annulled and revoked. In carrying out the
provisions of sections 144 and 145, the Secretary shall make no
presumption or preference to such sites by reason of their previous
selection.
"(b) AUTHORIZATION.—The Secretary is authorized to site, con-
struct, and operate one monitored retrievable storage facility subject
to the conditions described in sections 143 through 149.
'>n ; h MONITORED RETRIEVABLE STORAGE COMMISSION
42 u s e 10163. "SEC. 143. (a) ESTABLISHMENT.—(1)(A) There is established a Mon-
itored Retrievable Storage Review Commission (hereinafter in this
section referred to as the 'MRS Commission'), that shall consist of 3
members who shall be appointed by and serve at the pleasure of the
President pro tempore of the Senate and the Speaker of the House of
Representatives.
"(B) ^^ Members of the MRS Commission shall be appointed not
later than 30 days after the date of the enactment of the Nuclear
Waste Policy Amendments Act of 1987 from among persons who as a
result of training, experience and attainments are exceptionally
well qualified to evaluate the need for a monitored retrievable
storage facility as a part of the Nation's nuclear waste management
system.
Reports. "(C) The MRS Commission shall prepare a report on the need for a
monitored retrievable storage facility as a part of a national nuclear
waste management system that achieves the purposes of this Act. In
preparing the report under this subparagraph, the MRS Commis-
sion s h a l l ^
"(i) review the status and adequacy of the Secretary's evalua-
j{ tion of the systems advantages and disadvantages of bringing
such a facility into the national nuclear waste disposal system;
,j "(ii) obtain comment and available data on monitored retriev-
j able storage from affected parties, including States containing
" potentially acceptable sites;
.^ "(iii) evaluate the utility of a monitored retrievable storage
facility from a technical perspective; and
'•* Copy read "C of Nuclear".
"Copy read " "(BXi)".
'OlU
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-233
"(iv) make a recommendation to Congress as to whether such
a facility should be included in the national nuclear waste
management system in order to achieve the purposes of this
Act, including meeting needs for packaging and handling of
spent nuclear fuel, improving the flexibility of the repository
development schedule, and providing temporary storage of
spent nuclear fuel accepted for disposal.
"(2) In preparing the report and making its recommendation , •, << i?;;:
under paragraph (1) the MRS Commission shall compare such a
facility to the alternative of at-reactor storage of spent nuclear fuel
prior to disposal of such fuel in a repository under this Act. Such
comparison shall take into consideration the impact on—
"(A) repository design and construction;
"(B) waste package design, fabrication and standardization;
"(C) waste preparation;
"(D) w£iste transportation systems;
i "(E) the reliability of the national system for the disposal of
radioactive waste;
"(F) the ability of the Secretary to fulfill contractual commit-
ments of the Department under this Act to accept spent nuclear
fuel for disposal; and
"(G) economic factors, including the impact on the costs likely
to be imposed on ratepayers of the Nation's electric utilities for
temporary at-reactor storage of spent nuclear fuel prior to final
disposal in a repository, as well as the costs likely to be imposed
on ratepayers of the Nation's electric utilities in building and
operating such a facility.
"(3) The report under this subsection, together with the rec- Reports.
ommendation of the MRS Commission, shall be transmitted to
Congress on June 1,1989.
"(4XA)(i) Each member of the MRS Commission shall be paid at
the rate provided for level III of the Executive Schedule for each day
(including travel time) such member is engaged in the work of the
MRS Commission, and shall receive travel expenses, including per
diem in lieu of subsistence in the same manner as is permitted ,,, y; -j^.- <
under sections 5702 and 5703 of title 5, United States Code.
"(ii) The MRS Commission may appoint and fix compensation, not
to exceed the rate of basic pay payable for GS-18 of the General
Schedule, for such staff as may be necessary to carry out its
functions.
"(BXi) The MRS Commission may hold hearings, sit and act at
such times and places, take such testimony and receive such evi-
dence as the MRS Commission considers appropriate. Any member
of the MRS Commission may administer oaths or affirmations to
witnesses appearing before the MRS Commission.
"(ii) The MRS Commission may request any Executive agency,
including the Department, to furnish such assistance or informa-
tion, including records, data, files, or documents, as the Commission
considers necessary to carry out its functions. Unless prohibited by
law, such agency shall promptly furnish such £issistance or
information.
"(iii) To the extent permitted by law, the Administrator of the
General Services Administration shall, upon request of the MRS
Commission, provide the MRS Commission with necessary adminis-
trative services, facilities, and support on a reimbursable basis,
"(iv) The MRS Commission may procure temporary and intermit-
tent services from experts and consultants to the same extent as is
101 STAT. 1330-234 PUBLIC LAW 100-203—DEC. 22, 1987
authorized by section 3109(b) of title 5, United States Code, at rates
and under such rules as the MRS Commission considers reasonable.
"(C) The MRS Commission shall cease to exist 60 days after the
submission to Congress of the report required under this subsection.
"SURVEY
42 use 10164. "SEC. 144. After the MRS Commission submits its report to the
Congress under section 143, the Secretary may conduct a survey and
evaluation of potentially suitable sites for a monitored retrievable
storage facility. In conducting such survey and evaluation, the
Secretary shall consider the extent to which siting a monitored
retrievable storage facility at each site surveyed would—
"(1) enhance the reliability and flexibility of the system for
the disposal of spent nuclear fuel and high-level radioactive
. waste established under this Act;
"(2) minimize the impacts of transportation and handling of
such fuel and waste;
"(3) provide for public confidence in the ability of such system
to safely dispose of the fuel and waste;
"(4) impose minimal adverse effects on the local community
and the local environment;
"(5) provide a high probability that the facility will meet
applicable environmental, health, and safety requirements in a
, timely fashion;
"(6) provide such other benefits to the system for the disposal
of spent nuclear fuel and high-level radioactive waste as the
n;;,» . Secretary deems appropriate; and
"(7) unduly burden a State in which significant volumes of
high-level radioactive waste resulting from atomic energy
' defense activities are stored.
SITE SELECTION
42 use 10165. "SEC. 145. (a) I N GENERAL.—The Secretary may select the site
evaluated under section 144 that the Secretary determines on the
basis of available information to be the most suitable for a mon-
itored retrievable storage facility that is an integral part of the
system for the disposal of spent nuclear fuel and high-level radio-
active waste established under this Act.
"(b) LIMITATION.—The Secretary may not select a site under
subsection (a) until the Secretary recommends to the President the
approval of a site for development as a repository under section
114(a).
"(c) SITE SPECIFIC ACTIVITIES.—The Secretary may conduct such
site specific activities at each site surveyed under section 144 as he
determines may be necessary to support an application to the
Commission for a license to construct a monitored retrievable stor-
age facility at such site.
"(d) ENVIRONMENTAL ASSESSMENT.—Site specific activities and
selection of a site under this section shall not require the prepara-
tion of an environmental impact statement under section 102(2)(C)
of the National Environmental Policy Act of 1969 (42 U.S.C.
4332(2)(C)). The Secretary shall prepare an environmental assess-
ment with respect to such selection in accordance with regulations
issued by the Secretary implementing such Act. Such environmental
assessment shall be based upon available information regarding ^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-235
alternative technologies for the storage of spent nuclear fuel and
high-level radioactive waste. The Secretary shall submit such
environmental assessment to the Congress at the time such site is
selected.
"(e) NOTIFICATION BEFORE SELECTION.—(1) At least 6 months
before selecting a site under subsection (a), the Secretary shall
notify the Governor and legislature of the State in which such site is
located, or the governing body of the affected Indian tribe where
such site is located, as the case may be, of such potential selection
and the basis for such selection.
"(2) Before selecting any site under subsection (a), the Secretary
shall hold at least one public hearing in the vicinity of such site to
solicit any recommendations of interested parties with respect to
issues raised by the selection of such site.
"(f) NOTIFICATION OF SELECTION.—The Secretary shall promptly
notify Congress and the appropriate State or Indian tribe of the
selection under subsection (a).
"(g) LIMITATION.—No monitored retrievable storage facility au-
thorized pursuant to section 142(b) may be constructed in the State
of Nevada.
"NOTICE OF DISAPPROVAL
"SEC. 146. (a) IN GENERAL.—The selection of a site under section 42 use 10166.
145 shall be effective at the end of the period of 60 calendar days
beginning on the date of notification under such subsection, unless
the governing body of the Indian tribe on whose reservation such
site is located, or, if the site is not on a reservation, the Governor
and the legislature of the State in which the site is located, has
submitted to Congress a notice of disapproval with respect to such
site. If any such notice of disapproval has been submitted under this
subsection, the selection of the site under section 145 shall not be
effective except as provided under section 115(c).
"(b) REFERENCES.—For purposes of carrying out the provisions of
this subsection, references in section 115(c) to a repository shall be
considered to refer to a monitored retrievable storage facility and
references to a notice of disapproval of a repository site designation
under section 116(b) or 118(a) shall be considered to refer to a notice
of disapproval under this section.
BENEFITS AGREEMENT
"SEC. 147. Once selection of a site for a monitored retrievable 42 u s e 10167.
storage facility is made by the Secretary under section 145, the
Indian tribe on whose reservation the site is located, or, in the case
that the site is not located on a reservation, the State in which the
site is located, shall be eligible to enter into a benefits agreement
with the Secretary under section 170.
CONSTRUCTION AUTHORIZATION
"SEC. 148. (a) ENVIRONMENTAL IMPACT STATEMENT.—(1) Once the 42 u s e 10168.
selection of a site is effective under section 146, the requirements of
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et
seq.) shall apply with respect to construction of a monitored retriev-
able storage facility, except that any environmental impact state-
ment prepared with respect to such facility shall not be required to
101 STAT. 1330-236 PUBLIC LAW 100-203—DEC. 22, 1987
consider the need for such faciHty or any alternative to the design
criteria for such facility set forth in section 141(b)(1).
"(2) Nothing in this section shall be construed to limit the consid-
eration of alternative facility designs consistent with the criteria
described in section 141(b)(1) in any environmental impact state-
ment, or in any licensing procedure of the Commission, with respect
to any monitored retrievable storage facility authorized under
section 142(b).
"(b) APPLICATION FOR CONSTRUCTION LICENSE.—Once the selection
of a site for a monitored retrievable storage facility is effective
under section 146, the Secretary may submit an application to the
Commission for a license to construct such a facility as part of an
integrated nuclear waste management system and in accordance
with the provisions of this section and applicable agreements under
this Act affecting such facility.
"(c) LICENSING.—Any monitored retrievable storage facility au-
thorized pursuant to section 142(b) shall be subject to licensing
under section 202(3) of the Energy Reorganization Act of 1974 (42
U.S.C. 5842(3)). In reviewing the application filed by the Secretary
for licensing of such facility, the Commission may not consider the
need for such facility or any alternative to the design criteria for
H,r,r ,ji; X such facility set forth in section 141(b)(1).
"(d) LICENSING CONDITIONS.—Any license issued by the Commis-
sion for a monitored retrievable storage facility under this section
shall provide that—
"(1) construction of such facility may not begin until the
,^^ Commission has issued a license for the construction of a reposi-
,4 tory under section 115(d);
"(2) construction of such facility or acceptance of spent nu-
y, clear fuel or high-level radioactive waste shall be prohibited
during such time as the repository license is revoked by the
t^ Commission or construction of the repository ceases;
,1 "(3) the quantity of spent nuclear fuel or high-level radio-
s' active waste at the site of such facility at any one time may not
,. exceed 10,000 metric tons of heavy metal until a repository
3* under this Act first accepts spent nuclear fuel or solidified high-
level radioactive waste; and
"(4) the quantity of spent nuclear fuel or high-level radio-
active waste at the site of such facility at any one time may not
exceed 15,000 metric tons of heavy metal.
HC ; "FINANCIAL ASSISTANCE . ^' '\
42 use 10169. "SEC. 149. The provisions of section 116(c) or 118(b) with respect to
grants, technical assistance, and other financial assistance shall
apply to the State, to affected Indian tribes and to affected units of
local government in the case of a monitored retrievable storage
facility in the same manner as for a repository.".
'3fo: ::>?•• h .vf: . < : . : ; : . • - . ; PART C—BENEFITS ^ '"
SEC. 5031. BENEFITS. ^ ^ '
Title I of the Nuclear Waste Policy Act of 1982 is further amended
by adding at the end the following new subtitles:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-237
"SUBTITLE F—BENEFITS
"BENEFITS AGREEMENTS
"SEC. 170. (a) IN GENERAL.—(1) The Secretary may enter into a 42 USC 10173.
benefits agreement with the State of Nevada concerning a reposi-
tory or with a State or an Indian tribe concerning a monitored
retrievable storage facility for the acceptance of high-level radio-
active waste or spent nuclear fuel in that State or on the reservation
of that tribe, as appropriate.
"(2) The State or Indian tribe may enter into such an agreement
only if the State Attorney General or the appropriate governing
authority of the Indian tribe or the Secretary of the Interior, in the
absence of an appropriate governing authority, as appropriate, cer-
tifies to the satisfaction of the Secretary that the laws of the State or
Indian tribe provide adequate authority for that entity to enter into
the benefits agreement.
"(3) Any benefits agreement with a State under this section shall
be negotiated in consultation with affected units of local govern-
ment in such State.
"(4) Benefits and payments under this subtitle may be made
available only in accordance with a benefits agreement under this
section.
"(b) AMENDMENT.—A benefits agreement entered into under
subsection (a) may be amended only by the mutual consent of the
parties to the agreement and terminated only in accordance with
section 173.
"(c) AGREEMENT WITH NEVADA.—The Secretary shall offer to
enter into a benefits agreement with the Governor of Nevada. Any
benefits agreement with a State under this subsection shall be
negotiated in consultation with any affected units of local govern-
ment in such State.
"(d) MONITORED RETRIEVABLE STORAGE.—The Secretary shall offer
to enter into a benefits agreement relating to a monitored retriev-
able storage facility with the governing body of the Indian tribe on
whose reservation the site for such facility is located, or, if the site is
not located on a reservation, with the Governor of the State in
which the site is located and in consultation with affected units of
local government in such State.
"(e) LIMITATION.—Only one benefits agreement for a repository
and only one benefits agreement for a monitored retrievable storage
facility may be in effect at any one time.
"(f) JUDICIAL REVIEW.—Decisions of the Secretary under this sec-
tion are not subject to judicial review.
CONTENT OF AGREEMENTS
"SEC. 171. (a) IN GENERAL.—(1) In addition to the benefits to which 42 USC 10173a.
a State, an affected unit of local government or Indian tribe is
entitled under title I, the Secretary shall make payments to a State
or Indian tribe that is a party to a benefits agreement under section
170 in accordance with the following schedule:
101 STAT. 1330-238 PUBLIC LAW 100-203—DEC. 22, 1987
, "BENEFITS SCHEDULE
(amounts in $ millions)
Event MRS Repository
(A) Annual payments prior to first spent fuel receipt 5 10
(B) Upon first spent fuel receipt 10 20
(C) Annual payments after first spent fuel receipt until closure
of the facility 10 20
"(2) For purposes of this section, the term—
"(A) 'MRS' means a monitored retrievable storage facility,
"(B) 'spent fuel' means high-level radioactive waste or spent
nuclear fuel, and
"(C) 'first spent fuel receipt' does not include receipt of spent
fuel or high-level radioactive waste for purposes of testing or
operational demonstration.
"(3) Annual payments prior to first spent fuel receipt under
paragraph (1)(A) shall be made on the date of execution of the
benefits agreement and thereafter on the anniversary date of such
execution. Annual payments after the first spent fuel receipt until
closure of the facility under paragraph (1)(C) shall be made on the
anniversary date of such first spent fuel receipt.
"(4) If the first spent fuel payment under paragraph (1)(B) is made
within six months after the last annual payment prior to the receipt
of spent fuel under paragraph (1)(A), such first spent fuel payment
under paragraph (1)(B) shall be reduced by an amount equal to one-
twelfth of such annual payment under paragraph (IXA) for each full
month less than six that has not elapsed since the last annual
payment under paragraph (1)(A).
"(5) Notwithstanding paragraph (1), (2), or (3), no payment under
this section may be made before January 1, 1989, and any payment
due under this title before January 1, 1989, shall be made on or after
such date.
"(6) Except as provided in paragraph (7), the Secretary may not
restrict the purposes for which the payments under this section may
be used.
"(7)(A) Any State receiving a payment under this section shall
transfer an amount equal to not less than one-third of the amount of
such payment to affected units of local government of such State.
"(B) A plan for this transfer and appropriate allocation of such
portion among such governments shall be included in the benefits
agreement under section 170 covering such payments.
"(C) In the event of a dispute concerning such plan, the Secretary
shall resolve such dispute, consistent with this Act and applicable
State law.
"(b) CONTENTS.—A benefits agreement under section 170 shall
provide that—
"(1) a Review Panel be established in accordance with section
172;
"(2) the State or Indian tribe that is party to such agreement
waive its rights under title I to disapprove the recommendation
of a site for a repository;
"(3) the parties to the agreement shall share with one another
information relevant to the licensing process for the repository
or monitored retrievable storage facility, as it becomes avail-
able;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-239
"(4) the State or Indian tribe that is party to such agreement
participate in the design of the repository or monitored retriev-
able storage facility and in the preparation of documents re-
quired under law or regulation governing the effects of the
facility on the public health and safety; and
"(5) the State or Indian tribe waive its rights, if any, to impact
assistance under sections 116(cXlXBXii), 116(cX2), 118(bX2XAXii),
and 118(bX3).
"(c) The Secretary shall make payments to the States or affected
Indian tribes under a benefits agreement under this section from
the Waste Fund. The signature of the Secretary on a valid benefits
agreement under section 170 shall constitute a commitment by
the United States to make payments in accordance with such
agreement.
"REVIEW PANEL
"SEC. 172. (a) IN GENERAL.—The Review Panel required to be 42 use 10173b.
established by section 171(bXl) of this Act shall consist of a Chair-
man selected by the Secretary in consultation with the Governor of
the State or governing body of the Indian tribe, as appropriate, that
is party to such agreement and 6 other members as follows:
"(1) 2 members selected by the Governor of such State or
governing body of such Indian tribe;
"(2) 2 members selected by units of local government affected
by the repository or monitored retrievable storage facility;
"(3) 1 member to represent persons making payments into the
Waste Fund, to be selected by the Secretary; and
"(4) 1 member to represent other public interests, to be
selected by the Secretary. »
"(b) TERMS.—(1) The members of the Review Panel shall serve for
terms of 4 years each.
"(2) Members of the Review Panel who are not full-time em-
ployees of the Federal Government, shall receive a per diem com-
pensation for each day spent conducting work of the Review Panel,
including their necessary travel or other expenses while engaged in
the work of the Review Panel.
"(3) Expenses of the Panel shall be paid by the Secretary from the
Waste Fund.
"(c) DUTIES.—The Review Panel shall—
"(1) advise the Secretary on matters relating to the proposed
repository or monitored retrievable storage facility, including
issues relating to design, construction, operation, and decommis-
sioning of the facility;
"(2) evaluate performance of the repository or monitored
retrievable storage facility, as it considers appropriate;
"(3) recommend corrective actions to the Secretary;
"(4) assist in the presentation of State or affected Indian tribe
and local perspectives to the Secretary; and
"(5) participate in the planning for and the review of
preoperational data on environmental, demographic, and socio-
economic conditions of the site and the local community.
"(d) INFORMATION.—The Secretary shall promptly make available
promptly any information in the Secretary's possession reouested by
the Panel or its Chairman.
"(e) FEDERAL ADVISORY COMMITTEE ACT.—The requirements of the
Federal Advisory Committee Act shall not apply to a Review Panel
established under this title.
101 STAT. 1330-240 PUBLIC LAW 100-203—DEC. 22, 1987
TERMINATION
42 u s e 10173c. " S E C . 173. (a) I N GENERAL.—The Secretary may t e r m i n a t e a bene-
fits a g r e e m e n t u n d e r this title if—
"(1) t h e site u n d e r consideration is disqualified for its failure
t to comply with guidelines a n d technical r e q u i r e m e n t s estab-
(*; lished by t h e Secretary in accordance with this Act; or
"(2) t h e Secretary d e t e r m i n e s t h a t t h e Commission cannot
license t h e facility within a reasonable time.
"(b) T E R M I N A T I O N BY STATE OR INDIAN T R I B E . — A S t a t e or I n d i a n
tribe m a y t e r m i n a t e a benefits a g r e e m e n t u n d e r this title only if the
Secretary disqualifies t h e site u n d e r consideration for its failure to
comply with technical r e q u i r e m e n t s established by t h e Secretary in
accordance with this Act or t h e Secretary determines t h a t t h e
Commission cannot license t h e facility within a reasonable time.
"(c) DECISIONS O F T H E SECRETARY.—Decisions of t h e Secretary
ifiVfCi A- J uf u n d e r this section shall b e in writing, shall be available to Congress
and t h e public, a n d a r e not subject to judicial review.
"SUBTITLE G — O T H E R BENEFITS
CONSIDERATION I N SITING FACILITIES
42 u s e 10174. " S E C . 174. T h e Secretary, in siting Federal research projects, shall
give special consideration to proposals from States where a reposi-
tory is located.
"REPORT
42 u s e 10174a. " S E C . 175. (a) I N GENERAL.—Within o n e y e a r of t h e date of t h e
e n a c t m e n t of t h e Nuclear W a s t e Policy A m e n d m e n t s Act of 1987,
t h e Secretary shall report to Congress on t h e potential impacts of
locating a repository a t t h e Yucca Mountain site, including t h e
recommendations of t h e Secretary for mitigation of such impacts
and a s t a t e m e n t of which impacts should be dealt with by t h e
Federal Government, which should be dealt with by t h e State with
S t a t e resources, including t h e benefits p a y m e n t s u n d e r section 171,
and which should be a joint Federal-State responsibility. T h e report
under this subsection shall include t h e analysis of t h e Secretary of
t h e authorities available to mitigate these impacts a n d t h e appro-
priate sources of funds for such mitigation.
"(b) IMPACTS T O B E ' ^ C O N S I D E R E D . — P o t e n t i a l i m p a c t s to be ad-
dressed in t h e report u n d e r this subsection (a) shall include impacts
on—
"(1) education, including facilities a n d personnel for ele-
m e n t a r y a n d secondary schools, community colleges, vocational
a n d technical schools a n d universities;
sd' "(2) public health, including t h e facilities a n d personnel for
t r e a t m e n t a n d distribution of water, t h e t r e a t m e n t of sewage,
Ic t h e control of pests a n d t h e disposal of solid waste;
"(3) l a w enforcement, including facilities a n d personnel for
t h e courts, police a n d sheriffs d e p a r t m e n t s , district attorneys
;v a n d public defenders a n d prisons;
vd "(4) fire protection, including personnel, t h e construction of
fire stations, a n d t h e acquisition of equipment;
"(5) medical care, including emergency services a n d hospitals;
' Copy read "TO BE"
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-241
"(6) cultural and recreational needs, including facilities and
personnel for libraries and museums and the acquisition and
expansion of parks;
"(7) distribution of public lands to allow for the timely expan-
sion of existing, or creation of new, communities and the
construction of necessary residential and commercial facilities;
"(8) vocational training and employment services;
"(9) social services, including public assistance programs,
vocational and physical rehabilitation programs, mental health
services, and programs relating to the abuse of alcohol and
controlled substances;
* "(10) transportation, including any roads, terminals, airports,
bridges, or railways associated with the facility and the repair
and maintenance of roads, terminals, airports, bridges, or rail- "''' -
ways damaged as a result of the construction, operation, and
closure of the facility;
^ "(11) equipment and training for State and local personnel in
the management of accidents involving high-level radioactive
waste;
ji.r , "(12) availability of energy;
"(13) tourism and economic development, including the poten-
tial loss of revenue and future economic growth; and
"(14) other needs of the State and local governments that
would not have arisen but for the characterization of the site
and the construction, operation, and eventual closure of the
repository facility.".
SEC. 5032. PARTICIPATION OF STATES.
(a) FINANCIAL ASSISTANCE.—Section 116(c) of the Nuclear Waste < .•
Policy Act of 1982 (42 U.S.C. 10136(c)) is amended to read as follows:
"(c) FINANCIAL ASSISTANCE.—(IXA) The Secretary shall make
grants to the State of Nevada and any affected unit of local govern-
ment for the purpose of participating in activities required by this
section and section 117 or authorized by written agreement entered
into pursuant to section 117(c). Any salary or travel expense that
would ordinarily be incurred by such State or affected unit of local
government, may not be considered eligible for funding under this
paragraph.
"(B) The Secretary shall make grants to the State of Nevada and Grants.
any affected unit of local government for purposes of enabling such
State or affected unit of local government— - ; :
"(i) to review activities taken under this subtitle with respect
to the Yucca Mountain site for purposes of determining any
' potential economic, social, public health and safety, and
environmental impacts of a repository on such State, or affected
unit of local government and its residents;
"(ii) to develop a request for impact assistance under para-
graph (2);
"(iii) to engage in any monitoring, testing, or evaluation
' activities with respect to site characterization programs with
regard to such site;
(iv) to provide information to Nevada residents regarding
any activities of such State, the Secretary, or the Commission
with respect to such site; and
^ "(v) to request information from, and make comments and
' recommendations to, the Secretary regarding any activities
^ taken under this subtitle with respect to such site.
101 STAT. 1330-242 PUBLIC LAW 100-203—DEC. 22, 1987
"(C) Any salary or travel expense that would ordinarily be in-
curred by the State of Nevada or any affected unit of local govern-
ment may not be considered eligible for funding under this para-
graph.
"(2)(A)(i) The Secretary shall provide financial and technical
assistance to the State of Nevada, and any affected unit of local
government requesting such assistance.
"(ii) Such assistance shall be designed to mitigate the impact on
such State or affected unit of local government of the development
of such repository and the characterization of such site.
"(iii) Such assistance to such State or affected unit of local govern-
ment of such State shall commence upon the initiation of site
characterization activities.
Reports. "(B) The State of Nevada and any affected unit of local govern-
ment may request assistance under this subsection by preparing and
submitting to the Secretary a report on the economic, social, public
health and safety, and environmental impacts that are likely to
result from site characterization activities at the Yucca Mountain
site. Such report shall be submitted to the Secretary after the
Secretary has submitted to the State a general plan for site
characterization activities under section 113(b).
"(C) As soon as practicable after the Secretary has submitted such
site characterization plan, the Secretary shall seek to enter into a
binding agreement with the State of Nevada setting forth—
"(i) the amount of assistance to be provided under this subsec-
tion to such State or affected unit of local government; and
"(ii) the procedures to be followed in providing such
assistance.
Grants. "(3)(A) In addition to financial assistance provided under para-
graphs (1) and (2), the Secretary shall grant to the State of Nevada
and any affected unit of local government an amount each fiscal
year equal to the amount such State or affected unit of local
government, respectively, would receive if authorized to tax site
characterization activities at such site, and the development and
operation of such repository, as such State or affected unit of local
government taxes the non-Federal real property and industrial
activities occurring within such State or affected unit of local
government.
"(B) Such grants shall continue until such time as all such activi-
ties, development, and operation are terminated at such site.
Grants. "(4XA) The State of Nevada or any affected unit of local govern-
ment may not receive any grant under paragraph (1) after the
expiration of the 1-year period following—
"(i) the date on which the Secretary notifies the Governor and
legislature of the State of Nevada of the termination of site
characterization activities at the site in such State;
;. "(ii) the date on which the Yucca Mountain site is dis-
approved under section 115; or
(iii) the date on which the Commission disapproves an ap-
plication for a construction authorization for a repository at
such site;
whichever occurs first.
"(B) The State of Nevada or any affected unit of local government
may not receive any further assistance under paragraph (2) with
respect to a site if repository construction activities or site
characterization activities at such site are terminated by the Sec-
retary or if such activities are permanently enjoined by any court.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-243
"(C) At the end of the 2-year period beginning on the effective date
of any license to receive and possess for a repository in a State, no
Federal funds, shall be made available to such State or affected unit
of local government under paragraph (1) or (2), except for—
"(i) such funds as may be necessary to support activities
related to any other repository located in, or proposed to be
located in, such State, and for which a license to receive and
possess has not been in effect for more than 1 year;
"(ii) such funds as may be necessary to support State activi-
ties pursuant to agreements or contracts for impact assistance
entered into, under paragraph (2), by such State with the Sec-
retary during such 2-year period; and
"(iii) such funds as may be provided under an agreement
entered into under title IV.
"(5) Financial assistance authorized in this subsection shall be
made out of amounts held in the Waste Fund.
"(6) No State, other than the State of Nevada, may receive
financial assistance under this subsection after the date of the
enactment of the Nuclear Waste Policy Amendments Act of 1987.".
SEC. 5033. PARTICIPATION OF INDIAN TRIBES.
Section 118(b)(5) of the Nuclear Waste Policy Act of 1982 (42
U.S.C. 10138(b)(5)) is amended by—
(1) striking "or" at the end of clause (ii); and
(2) adding at the end the following new clause:
"(iv) the date of the enactment of the Nuclear Waste Policy
Amendments Act of 1987;".
PART D—NUCLEAR WASTE NEGOTIATOR
SEC. 5041. NUCLEAR WASTE NEGOTIATOR.
The Nuclear Waste Policy Act of 1982 is amended by adding at the
end the following new title:
"TITLE IV—NUCLEAR WASTE NEGOTIATOR
"DEFINITION
"SEC. 401. For purposes of this title, the term 'State' means each 42 u s e 10241.
of the several States, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, American Samoa, the North-
ern Mariana Islands, the Trust Territory of the Pacific Islands, any
other territory or possession of the United States, and the Republic
of the Marshall Islands.
THE OFFICE OF THE NUCLEAR WASTE NEGOTIATOR
"SEC. 402. (a) ESTABUSHMENT.—There is established within the 42 u s e 10242.
Executive Office of the President the Office of the Nuclear Waste
Negotiator.
"(b) THE NUCLEAR WASTE NEGOTIATOR.—(1) The Office shall be President of U.S.
headed by a Nuclear Waste Negotiator who shall be appointed by
the President, by and with the advice and consent of the Senate. The
Negotiator shall hold office at the pleasure of the President, and
shall be compensated at the rate provided for level III of the
Executive Schedule in section 5314 of title 5, United States Code.
101 STAT. 1330-244 PUBLIC LAW 100-203—DEC. 22, 1987
"(2) The Negotiator shall attempt to find a State or Indian tribe
willing to host a repository or monitored retrievable storage facility
at a technically qualified site on reasonable terms and shall nego-
tiate with any State or Indian tribe which expresses an interest in
hosting a repository or monitored retrievable storage facility.
"DUTIES OF THE NEGOTIATOR
42 use 10243. "SEC. 403. (a) NEGOTIATIONS WITH POTENTIAL HOSTS.—(1) The
Negotiator shall—
"(A) seek to enter into negotiations on behalf of the United
States, with—
, ^_. "(i) the Governor of any State in which a potential site is
"' ~ located; and
^ "(ii) the governing body of any Indian tribe on whose
reservation a potential site is located; and
"(B) attempt to reach a proposed agreement between the
United States and any such State or Indian tribe specifying the
terms and conditions under which such State or tribe would
agree to host a repository or monitored retrievable storage
facility within such State or reservation.
"(2) In any case in which State law authorizes any person or entity
other than the Governor to negotiate a proposed agreement under
this section on behalf of the State, any reference in this title to the
Governor shall be considered to refer instead to such other person or
entity.
"(b) CONSULTATION WITH AFFECTED STATES, SUBDIVISIONS OF
STATES, AND TRIBES.—In addition to entering into negotiations under
subsection (a), the Negotiator shall consult with any State, affected
unit of local government, or any Indian tribe that the Negotiator
determines may be affected by the siting of a repository or mon-
itored retrievable storage facility and may include in any proposed
agreement such terms and conditions relating to the interest of such
States, affected units of local government, or Indian tribes as the
Negotiator determines to be reasonable and appropriate.
"(c) CONSULTATION WITH OTHER FEDERAL AGENCIES.—The Nego-
tiator may solicit and consider the comments of the Secretary, the
Nuclear Regulatory Commission, or any other Federal agency on
the suitability of any potential site for site characterization. Nothing
-> " in this subsection shall be construed to require the Secretary, the
Nuclear Regulatory Commission, or any other Federal agency to
make a finding that any such site is suitable for site characteriza-
tion.
"(d) PROPOSED AGREEMENT.—(1) The Negotiator shall submit to
the Congress any proposed agreement between the United States
and a State or Indian tribe negotiated under subsection (a) and an
environmental assessment prepared under section 404(a) for the site
concerned.
-- "(2) Any such proposed agreement shall contain such terms and
conditions (including such financial and institutional arrangements)
as the Negotiator and the host State or Indian tribe determine to be
'i-'- reasonable and appropriate and shall contain such provisions as are
necessary to preserve any right to participation or compensation of
such State, affected unit of local government, or Indian tribe under
sections 116(c), 117, and 118(b).
"(3XA) No proposed agreement entered into under this section
shall have legal effect unless enacted into Federal law.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-245
"(B) A State or Indian tribe shall enter into an agreement under
this section in accordance with the laws of such State or tribe
Nothing in this section may be construed to prohibit the disapproval
of a proposed agreement between a State and the United States
under this section by a referendum or an act of the legislature of
such State.
"(4) Notwithstanding any proposed agreement under this section,
the Secretary may construct a repository or monitored retrievable
storage facility at a site agreed to under this title only if authorized
by the Nuclear Regulatory Commission in accordance with the
Atomic Energy Act of 1954 (42 U.S.C. 2012 et seq.), title II of the
Energy Reorganization Act of 1982 (42 U.S.C. 5841 et seq.) and any
other law applicable to authorization of such construction.
"ENVIRONMENTAL ASSESSMENT OF SITES
"SEC. 404. (a) IN GENERAL.—Upon the request of the Negotiator, 42 use 10244.
the Secretary shall prepare an environmental assessment of any site
that is the subject of negotiations under section 403(a).
"(b) CONTENTS.—(1) Each environmental assessment prepared for
a repository site shall include a detailed statement of the probable
impacts of characterizing such site and the construction and oper-
ation of a repository at such site.
"(2) Each environmental assessment prepared for a monitored
retrievable storage facility site shall include a detailed statement of
the probable impacts of construction and operation of such a facility -i Q,
at such site.
"(c) JUDICIAL REVIEW.—The issuance of an environmental assess-
ment under subsection (a) shall be considered to be a final agency
action subject to judicial review in accordance with the provisions of
chapter 7 of title 5, United States Code, and section 119.
"(d) PuBuc HEARINGS.—(1) In preparing an environmental assess- r f.i)
ment for any repository or monitored retrievable storage facility
site, the Secretary shall hold public hearings in the vicinity of such
site to inform the residents of the area in which such site is located
that such site is being considered and to receive their comments.
"(2) At such hearings, the Secretary shall solicit and receive any
recommendations of such residents with respect to issues that
should be addressed in the environmental sissessment required
under subsection (a) and the site characterization plan described in - ' ' -
section 113(bXl).
"(e) PuBuc AvAiLABiUTY.—Each environmental assessment pre-
pared under subsection (a) shall be made available to the public.
"(f) EVALUATION OF SITES.—(1) In preparing an environmental
assessment under subsection (a), the Secretary shall use available
geophysical, geologic, geochemical and hydrologic, and other
information and shall not conduct any preliminary borings or exca-
vations at any site that is the subject of such assessment unless—
"(A) such preliminary boring or excavation activities were in
progress on or before the date of the enactment of the Nuclear
Waste Policy Amendments Act of 1987; or
"(B) the Secretary certifies that, in the absence of preliminary
borings or excavations, adequate information will not be avail-
able to satisfy the requirements of this Act or any other law.
"(2) No preliminary boring or excavation conducted under this
section shall exceed a diameter of 40 inches.
101 STAT. 1330-246 PUBLIC LAW 100-203—DEC. 22, 1987
SITE C H A R A C T E R I Z A T I O N ; L I C E N S I N G
42 use 10245. "SEC. 405. (a) SiTE CHARACTERIZATION.—Upon enactment of legis-
lation to implement an agreement to site a repository negotiated
under section 403(a), the Secretary shall conduct appropriate site
characterization activities for the site that is the subject of such
agreement subject to the conditions and terms of such agreement.
Any such site characterization activities shall be conducted in
accordance with section 113, except that references in such section
to the Yucca Mountain site and the State of Nevada shall be deemed
to refer to the site that is the subject of the agreement and the State
or Indian tribe entering into the agreement.
"(b) LICENSING.—(1) Upon the completion of site characterization
activities carried out under subsection (a), the Secretary shall
submit to the Nuclear Regulatory Commission an application for
construction authorization for a repository at such site.
'^ - "(2) The Nuclear Regulatory Commission shall consider an ap-
plication for a construction authorization for a repository or mon-
itored retrievable storage facility in accordance with the laws
applicable to such applications, except that the Nuclear Regulatory
Commission shall issue a final decision approving or disapproving
the issuance of a construction authorization not later than 3 years
after the date of the submission of such application.
MONITORED RETRIEVABLE STORAGE
42 u s e 10246. "SEC. 406. (a) CONSTRUCTION AND OPERATION.—Upon enactment of
legislation to implement an agreement negotiated under section
403(a) to site a monitored retrievable storage facility, the Secretary
shall construct and operate such facility as part of an integrated
nuclear waste management system in accordance with the terms
and conditions of such agreement.
Grants. "(b) FINANCIAL ASSISTANCE.—The Secretary may make grants to
any State, Indian tribe, or affected unit of local government to
assess the feasibility of siting a monitored retrievable storage facil-
ity under this section at a site under the jurisdiction of such State,
tribe, or affected unit of local government.
ENVIRONMENTAL IMPACT STATEMENT
42 use 10247. "SEC. 407. (a) IN GENERAL.—Issuance of a construction authoriza-
tion for a repository or monitored retrievable storage facility under
section 405(b) shall be considered a major Federal action signifi-
cantly affecting the quality of the human environment for purposes
of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et
seq.).
"Go) PREPARATION.—A final environmental impact statement shall
be prepared by the Secretary under such Act and shall accompany
any application to the Nuclear Regulatory Commission for a
construction authorization.
"(c) ADOPTION.—(1) Any such environmental impact statement
shall, to the extent practicable, be adopted by the Nuclear Regu-
latory Commission, in accordance with section 1506.3 of title 40,
Code of Federal Regulations, in connection with the issuance by the
Nuclear Regulatory Commission of a construction authorization and
license for such repository or monitored retrievable storage facility.
"(2XA) In any such statement prepared with respect to a reposi-
tory to be constructed under this title at the Yucca Mountain site,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-247
t h e Nuclear Regulatory Commission need not consider t h e need for
a repository, t h e time of initial availability of a repository, a l t e r n a t e
sites to t h e Yucca Mountain site, or nongeologic alternatives to such
site.
"(B) In any such s t a t e m e n t prepared with respect to a repository
to be constructed under this title at a site other t h a n t h e Yucca
Mountain site, t h e Nuclear Regulatory Commission need not con-
sider t h e need for a repository, t h e t i m e of initial availability of a
repository, or nongeologic alternatives to such site but shall consider
t h e Yucca M o u n t a i n site as an a l t e r n a t e to such site in t h e prepara-
tion of such s t a t e m e n t .
"ADMINISTRATIVE POWERS OF THE NEGOTIATOR
" S E C . 408. In carrying out his functions under this title, t h e 42 USC10248.
Negotiator may—
"(1) appoint such officers and employees as he determines to
be necessary and prescribe their duties;
"(2) obtain services as authorized by section 3109 of title 5,
United States Code, at r a t e s not to exceed t h e r a t e prescribed . , ^
for grade GS-18 of t h e General Schedule by section 5332 of title
5, United States Code;
"(3) promulgate such rules and regulations as m a y be nec-
essary to carry out such functions;
"(4) utilize t h e services, personnel, and facilities of other
Federal agencies (subject to t h e consent of t h e head of a n y such
agency);
"(5) for purposes of performing administrative functions Contracts. : ; .
u n d e r this title, and to t h e e x t e n t funds a r e appropriated, e n t e r
into a n d perform such contracts, leases, cooperative agree-
ments, or other transactions as may be necessary and on such .i:.L.ir.;,
t e r m s as t h e Negotiator determines to be appropriate, with a n y
agency or i n s t r u m e n t a l i t y of the United States, or with any
public or private person or entity;
"(6) accept voluntary and uncompensated services, notwith-
s t a n d i n g t h e provisions of section 1342 of title 31, United States ..^ ,, ;•
Code;
"(7) adopt a n official seal, which shall be judicially noticed;
"(8) use t h e United States mails in t h e s a m e m a n n e r and
u n d e r t h e s a m e conditions as o t h e r d e p a r t m e n t s and agencies of
t h e United States;
"(9) hold such hearings as a r e necessary to d e t e r m i n e t h e
views of interested parties and t h e general public; and
"(10) appoint advisory committees under t h e Federal Advisory
Committee Act (5 U.S.C. App.).
"COOPERATION OF OTHER DEPARTMENTS AND AGENCIES
" S E C . 409. Each d e p a r t m e n t , agency, and i n s t r u m e n t a l i t y of t h e 42 USC 10249.
United States, including any independent agency, m a y furnish t h e
Negotiator such information as h e determines to be necessary to
c a r r y out his functions u n d e r this title.
"TERMINATION OF THE OFFICE
" S E C . 410. The Office shall cease to exist not later t h a n 30 days 42 USC 10250.
after t h e d a t e 5 years after t h e date of t h e e n a c t m e n t of t h e Nuclear
W a s t e Policy A m e n d m e n t s Act of 1987.
101 STAT. 1330-248 PUBLIC LAW 100-203—DEC. 22, 1987
AUTHORIZATION OF APPROPRIATIONS • -
42 u s e 10251. "SEC. 411. Notwithstanding subsection (d) of section 302, and
subject to subsection (e) of such section, there are authorized to be
appropriated for expenditures from amounts in the Waste Fund
established in subsection (c) of such section, such sums as may be
necessary to carry out the provisions of this title.".
PART E—NUCLEAR WASTE TECHNICAL REVIEW
BOARD
SEC. 5051. NUCLEAR WASTE TECHNICAL REVIEW BOARD.
The Nuclear Waste Policy Act of 1982 (42 U.S.C. 10101 et seq.) is
further amended by adding at the end the following new title:
"TITLE V—NUCLEAR WASTE TECHNICAL REVIEW BOARD
"DEFINITIONS
42 u s e 10261. "SEC. 501. As used in this title:
"(1) The term 'Chairman' means the Chairman of the Nuclear
Waste Technical Review Board.
"(2) The term 'Board' means the Nuclear Waste Technical
Review Board established under section 502.
" N U C L E A R W A S T E TECHNICAL REVIEW BOARD
42 u s e 10262. "SEC. 502. (a) ESTABLISHMENT.—There is established a Nuclear
Waste Technical Review Board that shall be an independent
establishment within the executive branch.
President of U.S. "Oa) MEMBERS.—(1) The Board shall consist of 11 members who
shall be appointed by the President not later than 90 days after the
date of the enactment of the Nuclear Waste Policy Amendments Act
of 1987 from among persons nominated by the National Academy of
Sciences in accordance with paragraph (3).
President of U.S. "(2) The President shall designate a member of the Board to serve
as chairman.
"(3)(A) The National Academy of Sciences shall, not later than 90
days after the date of the enactment of the Nuclear Waste Policy
Amendments Act of 1987, nominate not less than 22 persons for
appointment to the Board from among persons who meet the quali-
fications described in subparagraph (C).
"(B) The National Academy of Sciences shall nominate not less
than 2 persons to fill any vacancy on the Board from among persons
who meet the qualifications described in subparagraph (C).
"(C)(i) Each person nominated for appointment to the Board shall
be-
"(I) eminent in a field of science or engineering, including
environmental sciences; and
"(II) selected solely on the basis of established records of
distinguished service.
"(ii) The membership of the Board shall be representative of the
broad range of scientific and engineering disciplines related to
activities under this title.
OdSD? "(iii) No person shall be nominated for appointment to the Board
who is an employee of—
"(I) the Department of Energy;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-249
"(11) a national laboratory under contract with the Depart-
ment of Energy; or
"(III) an entity performing high-level radioactive waste or
spent nuclear fuel activities under contract with the Depart-
ment of Energy.
"(4) Any vacancy on the Board shall be filled by the nomination
and appointment process described in paragraphs (1) and (3).
"(5) Members of the Board shall be appointed for terms of 4 years,
each such term to commence 120 days after the date of enactment of
the Nuclear Waste Policy Amendments Act of 1987, except that of
the 11 members first appointed to the Board, 5 shall serve for 2
years and 6 shall serve for 4 years, to be designated by the President
at the time of appointment.
FUNCTIONS
"SEC. 503. The Board shall evaluate the technical and scientific 42 u s e 10263.
validity of activities undertaken by the Secretary after the date of
the enactment of the Nuclear Waste Policy Amendments Act of
1987, including—
"(1) site characterization activities; and
"(2) activities relating to the packaging or transportation of
high-level radioactive waste or spent nuclear fuel.
i INVESTIGATORY POWERS
"SEC. 504. (a) HEARINGS.—Upon request of the Chairman or a 42 USC 10264.
majority of the members of the Board, the Board may hold such
hearings, sit and act at such times and places, take such testimony,
and receive such evidence, as the Board considers appropriate. Any
member of the Board may administer oaths or affirmations to
witnesses appearing before the Board,
"(b) PRODUCTION OF DOCUMENTS.—(1) Upon the request of the
Chairman or a majority of the members of the Board, and subject to
existing law, the Secretary (or any contractor of the Secretary) shall
provide the Board with such records, files, papers, data, or informa-
tion as may be necessary to respond to any inquiry of the Board
under this title.
"(2) Subject to existing law, information obtainable under para-
graph (1) shall not be limited to final work products of the Secretary,
but shall include drafts of such products and documentation of work
in progress.
"COMPENSATION OF MEMBERS
"SEC. 505. (a) IN GENERAL.—Each member of the Board shall be 42 USC 10265.
paid at the rate of pay payable for level III of the Executive
Schedule for each day (including travel time) such member is en-
gaged in the work of the Board.
"Ot)) TRAVEL EXPENSES.—Each member of the Board may receive
travel expenses, including per diem in lieu of subsistence, in the
same manner as is permitted under sections 5702 and 5703 of title 5,
,>ai< St
United States Code.
"STAFF
"SEC. 506. (a) CLERICAL STAFF.—(1) Subject to paragraph (2), the 42 usc 10266.
Chairman may appoint and fix the compensation of such clerical
101 STAT. 1330-250 PUBLIC LAW 100-203—DEC. 22, 1987
staff as may be necessary to discharge the responsibihties of the
Board.
"(2) Clerical staff shall be appointed subject to the provisions of
title 5, United States Code, governing appointments in the competi-
tive service, and shall be paid in accordance with the provisions of
chapter 51 and subchapter III of chapter 53 of such title relating to
classification and General Schedule pay rates.
"(b) PROFESSIONAL STAFF.—(1) Subject to paragraphs (2) and (3),
the Chairman may appoint and fix the compensation of such profes-
sional staff as may be necessary to discharge the responsibilities of
the Board.
"(2) Not more than 10 professional staff members may be ap-
pointed under this subsection.
"(3) Professional staff members may be appointed without regard
to the provisions of title 5, United States Code, governing appoint-
ments in the competitive service, and may be paid without regard to
the provisions of chapter 51 and subchapter III of chapter 53 of such
title relating to classification and General Schedule pay rates,
except that no individual so appointed may receive pay in excess of
the annual rate of basic pay payable for GS-18 of the General
Schedule.
"SUPPORT SERVICES J
42 use 10267. "SEC. 507. (a) GENERAL SERVICES.—To the extent permitted by law
and requested by the Chairman, the Administrator of General
Services shall provide the Board with necessary administrative
services, facilities, and support on a reimbursable basis.
"Oa) ACCOUNTING, RESEARCH, AND TECHNOLOGY ASSESSMENT SERV-
ICES.—The Comptroller General, the Librarian of Congress, and the
Director of the Office of Technology Assessment shall, to the extent
permitted by law and subject to the availability of funds, provide the
Board with such facilities, support, funds and services, including
staff, as may be necessary for the effective performance of the
functions of the Board.
"(c) ADDITIONAL SUPPORT.—Upon the request of the Chairman, the
Board may secure directly from the head of any department or
agency of the United States information necessary to enable it to
carry out this title,
"(d) MAILS.—The Board may use the United States mails in the
same manner and under the same conditions as other departments
and agencies of the United States.
"(e) EXPERTS AND CONSULTANTS.—Subject to such rules as may be
prescribed by the Board, the Chairman may procure temporary and
intermittent services under section 310900) of title 5 of the United
States Code, but at rates for individuals not to exceed the daily
equivalent of the maximum annual rate of basic pay payable for
GS-18 of the General Schedule.
"REPORT i
42 use 10268. "SEC. 508. The Board shall report not less than 2 times per year to
Congress and the Secretary its findings, conclusions, and rec-
ommendations. The first such report shall be submitted not later
than 12 months after the date of the enactment of the Nuclear
Waste Policy Amendments Act of 1987.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-251
AUTHORIZATION OF APPROPRIATIONS
"SEC. 509. Notwithstanding subsection (d) of section 302, and 42 USC 10269.
subject to subsection (e) of such section, there are authorized to be
appropriated for expenditures from amounts in the Waste Fund
established in subsection (c) of such section such sums as may be
necessary to carry out the provisions of this title.
" T E R M I N A T I O N OF THE BOARD
"SEC. 510. The Board shall cease to exist not later than 1 year 42 USC 10270.
after the date on which the Secretary begins disposal of high-level
radioactive waste or spent nuclear fuel in a repository.".
PART F—MISCELLANEOUS
SEC. 5061. TRANSPORTATION.
Title I of the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10121-
10171) is further amended by adding at the end the following new
subtitle:
"SUBTITLE H—TRANSPORTATION
' 'TRANSPORTATION
"SEC. 180. (a) No spent nuclear fuel or high-level radioactive waste 42 USC 10175.
may be transported by or for the Secretary under subtitle A or
under subtitle C except in packages that have been certified for such
purpose by the Commission.
"(b) The Secretary shall abide by regulations of the Commission
regarding advance notification of State and local governments prior
to transportation of spent nuclear fuel or high-level radioactive
waste under subtitle A or under subtitle C.
"(c) The Secretary shall provide technical assistance and funds to
States for training for public safety officials of appropriate units of
local government and Indian tribes through whose jurisdiction the
Secretary plans to transport spent nuclear fuel or high-level radio-
active waste under subtitle A or under subtitle C. Training shall
cover procedures required for safe routine transportation of these
materials, as well as procedures for dealing with emergency re-
sponse situations. The Waste Fund shall be the source of funds for
work carried out under this subsection.".
SEC. 5062. TRANSPORTATION OF PLUTONIUM BY AIRCRAFT THROUGH 42 USC 5841
UNITED STATES AIR SPACE. note.
(a) IN GENERAL.—Notwithstanding any other provision of law, no
form of plutonium may be transported by aircraft through the air
space of the United States from a foreign nation to a foreign nation
unless the Nuclear Regulatory Commission has certified to Congress
that the container in which such plutonium is transported is safe, as
determined in accordance with subsection (b), the second undesig-
nated paragraph under section 201 of Public Law 94-79 (89 Stat. 413;
42 U.S.C. 5841 note), and all other applicable laws.
Ot)) RESPONSIBIUTIES OF THE NUCLEAR REGULATORY COMMISSION.—
(1) DETERMINATION OF SAFETY.—The Nuclear Regulatory
Commission shall determine whether the container referred to
in subsection (a) is safe for use in the transportation of pluto-
nium by aircraft and transmit to Congress a certification for the
101 STAT. 1330-252 PUBLIC LAW 100-203—DEC. 22, 1987
purposes of such subsection in the case of each container deter-
mined to be safe.
Hr. ', k t. ^2) TESTING.—In order to make a determination with respect
to a container under paragraph (1), the Nuclear Regulatory
Commission shall—
(A) require an actual drop test from maximum cruising
altitude of a full-scale sample of such container loaded with
test materials; and
(B) require an actual crash test of a cargo aircraft fully ''^
. jr . Tij * loaded with full-scale samples of such container loaded with
, > >. test material unless the Commission determines, after con-
sultation with an independent scientific review panel, that
the stresses on the container produced by other tests used
in developing the container exceed the stresses which would
occur during a worst case plutonium air shipment accident.
(3) LIMITATION.—The Nuclear Regulatory Commission may
I y not certify under this section that a container is safe for use in
,;, the transportation of plutonium by aircraft if the container
ruptured or released its contents during testing conducted in
accordance with paragraph (2).
(4) EVALUATION.—The Nuclear Regulatory Commission shall
evaluate the container certification required by title II of the
Energy Reorganization Act of 1974 (42 U.S.C. 5841 et seq.) and
fT I 7. V? subsection (a) in accordance with the National Environmental
Policy Act of 1969 (83 Stat. 852; 42 U.S.C. 4321 et seq.) and all
other applicable law.
(c) CONTENT OF CERTIFICATION.—A certification referred to in
subsection (a) with respect to a container shall include—
(1) the determination of the Nuclear Regulatory Commission
as to the safety of such container;
(2) a statement that the requirements of subsection (b)(2) were
satisfied in the testing of such container; and
(3) a statement that the container did not rupture or release
its contents into the environment during testing.
(d) DESIGN OF TESTING PROCEDURES.—The tests required by subsec-
tion (b) shall be designed by the Nuclear Regulatory Commission to
replicate actual worst case transportation conditions to the maxi-
mum extent practicable. In designing such tests, the Commission
shall provide for public notice of the proposed test procedures,
provide a reasonable opportunity for public comment on such proce-
i > IB' Si dures, and consider such comments, if any.
a o: (e) TESTING RESULTS: REPORTS AND PUBLIC DISCLOSURE.—The Nu-
clear Regulatory Commission shall transmit to Congress a report on
the results of each test conducted under this section and shall make
such results available to the public.
President of U.S. (f) ALTERNATIVE ROUTES AND M E A N S OF TRANSPORTATION.—With
respect to any shipments of plutonium from a foreign nation to a
foreign nation which are subject to United States consent rights
contained in an Agreement for Peaceful Nuclear Cooperation, the
President is authorized to make every effort to pursue and conclude
arrangements for alternative routes and means of transportation,
including sea shipment. All such arrangements shall be subject to
stringent physical security conditions, and other conditions designed
" Copy read "full".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-253
to protect the public health and safety, and provisions of this
section, and all other applicable laws.
(g) INAPPLICABILITY TO MEDICAL DEVICES.—Subsections (a) through
(e) shall not apply with respect to plutonium in any form contained
in a medical device designed for individual human application.
(h) INAPPLICABILITY TO MIUTARY USES.—Subsections (a) through
(e) shall not apply to plutonium in the form of nuclear weapons nor
to other shipments of plutonium determined by the Department of
Energy to be directly connected with the United States national
security or defense programs. '.', .
(i) INAPPLICABILITY TO PREVIOUSLY CERTIFIED CONTAINERS.—This
section shall not apply to any containers for the shipment of pluto-
nium previously certified as safe by the Nuclear Regulatory
Commission under Public Law 94-79 (89 Stat. 413; 42 U.S.C. 5841
note).
(j) PAYMENT OF COSTS.—All costs incurred by the Nuclear Regu-
latory Commission associated with the testing program required by
this section, and administrative costs related thereto, shall be re-
imbursed to the Nuclear Regulatory Commission by any foreign
country receiving plutonium shipped through United States air-
space in containers specified by the Commission.
SEC. 5063. SUBSEABED DISPOSAL.
Title II of the Nuclear Waste Policy Act of 1982 (42 U.S.C. 10191-
10203) is amended by adding at the end the following new section:
"SUBSEABED DISPOSAL
"SEC. 224. (a) STUDY.—Within 270 days after the date of the Reports.
enactment of the Nuclear Waste Policy Amendments Act of 1987, 42 USC 10204.
the Secretary shall report to Congress on subseabed disposal of spent ^ ^, ,,,
nuclear fuel and high-level radioactive waste. The report under this
subsection shall include—
"(1) an assessment of the current state of knowledge of
subseabed disposal as an alternative technology for disposal of
spent nuclear fuel and high-level radioactive waste;
"(2) an estimate of the costs of subseabed disposal;
"(3) an analysis of institutional factors associated with
subseabed disposal, including international aspects of a decision
of the United States to proceed with subseabed disposal as an
option for nuclear waste management;
"(4) a full discussion of the environmental and public health
and safety aspects of subseabed disposal;
"(5) recommendations on alternative ways to structure an
effort in research, development, and demonstration with respect ii.jac '
to subseabed disposal; and
"(6) the recommendations of the Secretary with respect to
research, development and demonstration in subseabed disposal
of spent nuclear fuel and hiffh-level radioactive waste.
"Ob) OFFICE OF SUBSEABED DISPOSAL RESEARCH.—(1) There is Establishment.
hereby established an Office of Subseabed Disposal Research within
the Office of Enersy Research of the Department of Energy. The
Office shall be headed by the Director, who shall be a member of the
Senior Executive Service appointed by the Director of the Office of
Energy Research, and compensatea at a rate determined by
applicable law.
101 STAT. 1330-254 PUBLIC LAW 100-203—DEC. 22, 1987
"(2) The Director of the Office of Subseabed Disposal Research
shall be responsible for carrying out research, development, and
demonstration activities on all aspects of subseabed disposal of high-
level radioactive waste and spent nuclear fuel, subject to the general
supervision of the Secretary. The Director of the Office shall be
directly responsible to the Director of the Office of Energy Research,
and the first such Director shall be appointed within 30 days of the
date of enactment of the Nuclear Waste Policy Amendments Act of
1987.
Grants. "(3) In carrying out his responsibilities under this Act, the Sec-
Contracts. retary may make grants to, or enter into contracts with, the
Subseabed Consortium described in subsection (d) of this section,
and other persons.
"(4)(A) Within 60 days of the date of enactment of the Nuclear
Waste Policy Amendments Act of 1987, the Secretary shall establish
a university-based Subseabed Consortium involving leading oceano-
graphic universities and institutions, national laboratories, and
other organizations to investigate the technical and institutional
feasibility of subseabed disposal.
"(B) The Subseabed Consortium shall develop a research plan and
budget to achieve the following objectives by 1995:
"(i) demonstrate the capacity to identify and characterize
potential subseabed disposal sites;
"(ii) develop conceptual designs for a subseabed disposal
system, including estimated costs and institutional require-
ments; and
"(iii) identify and assess the potential impacts of subseabed
disposal on the human and marine environment.
Reports. "(C) In 1990, and again in 1995, the Subseabed Consortium shall
report to Congress on the progress being made in achieving the
objectives of paragraph (2).
Reports. "(5) The Director of the Office of Subseabed Disposal Research
shall annually prepare and submit a report to the Congress on the
activities and expenditures of the Office.'.
SEC. 5604. DRY CASK STORAGE.
(a) STUDY.—During the period between the date of the enactment
of the Nuclear Waste Policy Amendments Act of 1987 and October 1,
1988, the Secretary of Energy (hereinafter in this section referred to
as the "Secretary") shall conduct a study and evaluation of the use
of dry cask storage technology at the sites of civilian nuclear power
reactors for the temporary storage of spent nuclear fuel until such
time as a permanent geologic repository has been constructed and
licensed by the Nuclear Regulatory Commission (hereinafter in this
section referred to as the "Commission") and is capable of receiving
Reports. spent nuclear fuel. The Secretary shall report to Congress on the
study under this paragraph by October 1,1988.
(b) CONTENTS OF STUDY.—In conducting the study under para-
graph (1) the Secretary shall—
(1) consider the costs of dry csisk storage technology, the
extent to which dry cask storage on the site of civilian nuclear
power reactors will affect human health and the environment,
the extent to which the storage on the sites of civilian nuclear
power reactors affects the costs and risk of transporting spent
nuclear fuel to a central facility such as a monitored retrievable
storage facility, and any other factors the Secretary considers
appropriate; 7 > < ii»
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-255
(2) consider the extent to which amounts in the Nuclear
Waste Fund established in section 302(c) of the Nuclear Waste
Policy Act of 1982 (42 U.S.C. 10222(c)) can be used, and should be
used, to provide funds to construct, operate, maintain, and
safeguard spent nuclear fuel in dry cask storage at the sites for
civilian nuclear power reactors;
(3) consult with the Commission and include the views of the
Commission in the report under paragraph (1); and
(4) solicit the views of State and local governments and the
public.
SEC. 506.5. AMENDMENTS TO THE TABLE OF CONTENTS.
The table of contents of the Nuclear Waste Policy Act of 1982 is
amended by—
(1) adding at the end of subtitle C the following new sections:
"Sec. 142. Authorization of monitored retrievable storage.
"Sec. i43. Monitored Retrievable Storage Commission.
"Sec. 144. Survey.
"Sec. 145. Site selection.
"Sec. 146. Notice of disapproval.
"Sec. 147. Benefits agreement.
"Sec. 148. Construction authorization.
"Sec. 149. Financial assistance.";
(2) adding at the end of title I the following new subtitles:
"SUBTITLE E—REDIRECTION OF THE NUCLEAR WASTE PROGRAM
"Sec. 160. Selection of Yucca Mountain site.
"Sec. 161. Siting a second repository.
"SUBTITLE F—BENEFITS
"Sec. 170. Benefits agreements.
"Sec. 171. Content of agreements.
"Sec. 172. Review panel.
"Sec. 173. Termination.
"SUBTITLE G—OTHER BENEFITS
"Sec. 174. Consideration in siting facilities.
"Sec. 175. Report.
"SUBTITLE H—TRANSPORTATION
"Sec. 180. Transportation.";
(3) adding at the end of title II the following new section.
"Sec. 224. Subseabed disposal."; and iP iUi >;
(4) adding at the end the following new titles:
"TITLE IV—NUCLEAR WASTE NEGOTIATOR
"Sec. 401. Definition.
"Sec. 402. The Office of Nuclear Waste Negotiator.
"Sec. 403. Duties of the Negotiator.
"Sec. 404. Environmental assessment of sites.
"Sec. 405. Site characterization; licensing.
"Sec. 406. Monitored retrievable storage
"Sec. 407. Environmental impact statement.
"Sec. 408. Administrative powers of the Negotiator
"Sec. 409. Cooperation of other departments and agencies.
"Sec. 410. Termination of the office.".
101 STAT. 1330-256 PUBLIC LAW 100-203—DEC. 22, 1987
Federal Onshore Subtitle B—Federal Onshore Oil and Gas
Oil and Gas
Leasing Reform Leasing Reform Act of 1987
Act of 1987.
Contracts.
SEC. 5101. SHORT TITLE; REP^ERENCES.
30 u s e 181 note. (a) SHORT TITLE.—This subtitle may be cited as the "Federal
Onshore Oil and Gas Leasing Reform Act of 1987".
(b) REFERENCES.—Any reference in this subtitle to the "Act of
February 25, 1920", is a reference to the Act of February 25, 1920,
entitled "An Act to promote the mining of coal, phosphate, oil, oil
shale, gas, and sodium on the public domain" (30 U.S.C. 181 and
following). ,
SEC. 5102. OIL AND GAS LEASING SYSTEM. " r
(a) COMPETITIVE BIDDING.—Section 17(b)(1) of the Act of Febru-
ary 25, 1920 (30 U.S.C. 226(b)(1)), is amended to read as follows:
"(b)(1)(A) All lands to be leased which are not subject to leasing
under paragraph (2) of this subsection shall be leased as provided in
this paragraph to the highest responsible qualified bidder by
competitive bidding under general regulations in units of not more
than 2,560 acres, except in Alaska, where units shall be not more
than 5,760 acres. Such units shall be as nearly compact as possible.
Lease sales shall be conducted by oral bidding. Lease sales shall be
held for each State where eligible lands are available at least
quarterly and more frequently if the Secretary of the Interior
determines such sales are necessary. A lease shall be conditioned
upon the payment of a royalty at a rate of not less than 12.5 percent
in amount or value of the production removed or sold from the lease.
The Secretary shall accept the highest bid from a responsible quali-
fied bidder which is equal to or greater than the national minimum
acceptable bid, without evaluation of the value of the lands proposed
for lease. Leases shall be issued within 60 days following payment by
the successful bidder of the remainder of the bonus bid, if any, and
the annual rental for the first lease year. All bids for less than the
national minimum acceptable bid shall be rejected. Lands for which
no bids are received or for which the highest bid is less than the
national minimum acceptable bid shall be offered promptly within
30 days for leasing under subsection (c) of this section and shall
remain available for leasing for a period of 2 years after the
competitive lease sale.
"(B) The national minimum acceptable bid shall be $2 per acre for
a period of 2 years from the date of enactment of the Federal
Regulations. Onshore Oil and Gas Leasing Reform Act of 1987. Thereafter, the
Secretary may establish by regulation a higher national minimum
acceptable bid for all leases based upon a finding that such action is
necessary: (i) to enhance financial returns to the United States; and
(ii) to promote more efficient management of oil and gas resources
on Federal lands. Ninety days before the Secretary makes any
change in the national minimum acceptable bid, the Secretary shall
notify the Committee on Interior and Insular Affairs of the United
States House of Representatives and the Committee on Energy and
Natural Resources of the United States Senate. The proposal or
promulgation of any regulation to establish a national minimum
acceptable bid shall not be considered a major Federal action subject
to the requirements of section 102(2)(C) of the National Environ-
mental Policy Act of 1969.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-257
(b) NONCOMPETITIVE LEASING.—Section 17(c) of the Act of Feb-
ruary 25, 1920 (30 U.S.C. 226(c)), is amended to read as follows:
"(cXD If the lands to be leased are not leased under subsection
(b)(1) of this section or are not subject to competitive leasing under
subsection (b)(2) of this section, the person first making application
for the lease who is qualified to hold a lease under this Act shall be
entitled to a lease of such lands without competitive bidding, upon
payment of a non-refundable application fee of at least $75. A lease
under this subsection shall be conditioned upon the payment of a
royalty at a rate of 12.5 percent in amount or value of the produc-
tion removed or sold from the lease. Leases shall be issued within 60
days of the date on which the Secretary identifies the first respon-
sible qualified applicant.
"(2)(A) Lands (i) which were posted for sale under subsection (b)(1)
of this section but for which no bids were received or for which the
highest bid was less than the national minimum acceptable bid and
(ii) for which, at the end of the period referred to in subsection (bXl)
of this section no lease has been issued and no lease application is
pending under paragraph (1) of this subsection, shall again be
available for leasing only in accordance with subsection (b)(1) of this
section.
"(B) The land in any lease which is issued under paragraph (1) of
this subsection or under subsection (bXD of this section which lease
terminates, expires, is cancelled or is relinquished shall again be
available for leasing only in accordance with subsection (bXD of this
section.".
(c) RENTAUS.—Section 17(d) of the Act of February 25, 1920 (30
U.S.C. 226(d)), is amended to read as follows:
"(d) All leases issued under this section, as amended by the
Federal Onshore Oil and Gas Leasing Reform Act of 1987, shall be
conditioned upon payment by the lessee of a rental of not less than
$1.50 per acre per year for the first through fifth years of the lease
and not less than $2 per acre per year for each year thereafter. A
minimum royalty in lieu of rental of not less than the rental which
otherwise would be required for that lease year shall be payable at
the expiration of each lease year beginning on or after a discovery of
oil or gas in paying quantities on the lands leased.".
(d) NOTICE AND RECLAMATION.—(1) Section 17 of the Act of Feb-
ruary 25, 1920 (30 U.S.C. 226), is amended by redesignating subsec-
tions (f) through (k) as subsections (i) through (n) and by adding the
following new subsections (f) through (h):
"(f) At least 45 days before offering lands for lease under this Public
section, and at least 30 days before approving applications for information.
permits to drill under the provisions of a lease or substantially
modifying the terms of any lease issued under this section, the
Secretary shall provide notice of the proposed action. Such notice
shall be posted in the appropriate local office of the leasing and land
management agencies. Such notice shall include the terms or modi-
fied lease terms and maps or a narrative description of the affected
lands. Where the inclusion of maps in such notice is not practicable,
maps of the affected lands shall be made available to the public for
review. Such maps shall show the location of all tracts to be leased,
and of all leases already issued in the general area. The require-
ments of this subsection are in addition to any public notice required
by other law.
"(g) The Secretary of the Interior, or for National Forest lands. Regulations
the Secretary of Agriculture, shall regulate all surface-disturbing
101 STAT. 1330-258 PUBLIC LAW 100-203—DEC. 22, 1987
activities conducted pursuant to any lease issued under this Act, and
shall determine reclamation and other actions as required in the
interest of conservation of surface resources. No permit to drill on
an oil and gas lease issued under this Act may be granted without
the analysis and approval by the Secretary concerned of a plan of
operations covering proposed surface-disturbing activities within the
lease area. The Secretary concerned shall, by rule or regulation,
establish such standards as may be necessary to ensure that an
adequate bond, surety, or other financial arrangement will be estab-
lished prior to the commencement of surface-disturbing activities on
any lease, to ensure the complete and timely reclamation of the
leeise tract, and the restoration of any lands or surface waters
adversely affected by lease operations after the abandonment or
cessation of oil and gas operations on the lease. The Secretary shall
not issue a lease or leases or approve the assignment of any lease or
leases under the terms of this section to any person, association,
corporation, or any subsidiary, affiliate, or person controlled by or
under common control with such person, gissociation, or corporation,
during any period in which, as determined by the Secretary of the
Interior or Secretary of Agriculture, such entity has failed or re-
fused to comply in any material respect with the reclamation
requirements and other standards established under this section for
any prior lease to which such requirements and standards applied.
Prior to making such determination with respect to any such entity
the concerned Secretary shall provide such entity with adequate
notification and an opportunity to comply with such reclamation
requirements and other standards and shall consider whether any
administrative or judicial appeal is pending. Once the entity has
complied with the reclamation requirement or other standard con-
cerned an oil or gas lease may be issued to such entity under this
Act.
"(h) The Secretary of the Interior may not issue any lease on
National Forest System Lands reserved from the public domain over
the objection of the Secretary of Agriculture.".
(2) Section 31(h) of the Act of February 25, 1920 (30 U.S.C. 188(h)),
is amended by striking out "section 17(j)" and substituting "section
17(m)".
SEC. 5103. ASSIGNMENTS.
Sections 30(a) and 30(b) of the Act of February 25, 1920 (30 U.S.C.
187a, 187b), are redesignated as sections 30A and 30B, respec-
tively, and the third sentence of section 30A, as so redesignated, is
amended to read as follows: "The Secretary shall disapprove the
assignment or sublease only for lack of qualification of the assignee
or sublessee or for lack of sufficient bond: Provided, however, That
the Secretary may, in his discretion, disapprove an assignment of
any of the following, unless the assignment constitutes the entire
lease or is demonstrated to further the development of oil and gas:
"(1) A separate zone or deposit under any lease.
"(2) A part of a legal subdivision.
"(3) Less than 640 acres outside Aleiska or of less than 2,560
acres within Alaska.
Requests for approval of assignment or sublease shall be processed
promptly by the Secretary. Except where the assignment or sublease
is not in accordance with applicable law, the approval shall be given
7 within 60 days of the date of receipt by the Secretary of a request for
such approval.". ^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-259
SEC. 5104. LEASE CANCELLATION.
The first sentence of section Slflj) of the Act of February 25, 1920
(30 U.S.C. 1880t))) is amended to read as follows: "Any lease issued
after August 21, 1935, under the provisions of section 17 of this Act
shall be subject to cancellation by the Secretary of the Interior after
30 days notice upon the failure of the lessee to comply with any of
the provisions of the lease, unless or until the leasehold contains a
well capable of production of oil or gas in paying quantities, or the
lease is committed to an approved cooperative or unit plan or
communitization agreement under section 17(m) of this Act which
contains a well capable of production of unitized substances in ,v ,,.
paying quantities.".
SEC. 5105. ALASKA NATIONAL INTEREST LANDS CONSERVATION ACT.
Section 1008 of the Alaska National Interest Lands Conservation
Act (16 U.S.C. 3148) is amended as follows:
(1) Subsections (c) and (e) are deleted in their entirety.
(2) The second sentence of subsection 1008(d) is deleted.
SEC. 5106. PENDING APPLICATIONS, OFFERS, AND BIDS. 30 USC 226 note.
(a) Notwithstanding any other provision of this subtitle and except
as provided in subsection (b) of this section, all noncompetitive oil
and gas lease applications and offers and competitive oil and gas
bids pending on the date of enactment of this subtitle shall be
processed, and leases shall be issued under the provisions of the Act
of February 25, 1920, as in effect before its amendment by this
subtitle, except where the issuance of any such lease would not be
lawful under such provisions or other applicable law,
(b) No noncompetitive lease applications or offers pending on the
date of enactment of this subtitle for lands within the Shawnee
National Forest, Illinois; the Ouachita National Forest, Arkansas;
Fort Chafee, Arkansas; or Eglin '* Air Force Base, Florida; shall be
processed until these lands are posted for competitive bidding in
accordance with section 5102 of this subtitle. If any such tract does
not receive a bid equal to or greater than the national minimum
acceptable bid from a responsible qualified bidder then the non-
competitive applications or offers pending for such a tract shall be
reinstated and noncompetitive leases issued under the Act of Feb-
ruary 25, 1920, as in effect before its amendment by this subtitle,
except where the issuance of any such lease would not be lawful
under such provisions or other applicable law. If competitive leases
are issued for any such tract, then the pending noncompetitive
application or offer shall be rejected.
(c) Except as provided in subsections (a) and (b) of this section, all
oil and gas leasing pursuant to the Act of February 25, 1920, after
the date of enactment of this subtitle shall be conducted in accord-
ance with the provisions of this subtitle.
SEC. 5107. REGULATIONS; TEST SALE. 30 USC 226 note.
(a) REGULATIONS.—The Secretary shall issue final regulations to
implement this subtitle within 180 days after the enactment of this
subtitle. The regulations shall be effective when published in the Effective date.
Federal Register. Federal Register,
(b) TREATMENT UNDER OTHER LAW.—The proposal or promulga- publication.
tion of such regulations shall not be considered a major Federal
"Copy read "Elgin".
101 STAT. 1330-260 PUBLIC LAW 100-203—DEC. 22, 1987
action subject to the requirements of section 102(2)(C) of the
National Environmental Policy Act of 1969.
(c) TEST SALE.—The Secretary may hold one or more lease sales
conducted in accordance with the amendments made by this subtitle
before promulgation of regulations referred to in subsection (a). Sale
procedures for such sale shall be established in the notice of sale.
SEC. .5108. ENFORCEMENT.
The Act of February 25, 1920, is amended by inserting after
section 40 the following new section:
30USC195. "SEC. 41. E N F O R C E M E N T . •'- •'<'• ^"•.-•'-" ; -'-^ -^n.*•>•.;.;^ .:-: . -,
"(a) VIOLATIONS.—It shall be unlawful for any person:
"(1) to organize or participate in any scheme, arrangement,
plan, or agreement to circumvent or defeat the provisions of
this Act or its implementing regulations, or
"(2) to seek to obtain or to obtain any money or property by
means of false statements of material facts or by failing to state
material facts concerning:
" •' ' ' ' " "(A) the value of any lease or portion thereof issued or to
be issued under this Act;
"(B) the availability of any land for leasing under this
Act;
"(C) the ability of any person to obtain leases under this
Act; or
"(D) the provisions of this Act and its implementing
regulations.
"(h) PENALTY.—Any person who knowingly violates the provisions
of subsection (a) of this section shall be punished by a fine of not
more than $500,000, imprisonment for not more than five years, or
both.
"(c) CIVIL ACTIONS.—Whenever it shall appear that any person is
engaged, or is about to engage, in any act which constitutes or will
constitute a violation of subsection (a) of this section, the Attorney
General may institute a civil action in the district court of the
United States for the judicial district in which the defendant resides
or in which the violation occurred or in which the lease or land
involved is located, for a temporary restraining order, injunction,
civil penalty of not more than $100,000 for each violation, or other
appropriate remedy, including but not limited to, a prohibition from
participation in exploration, leasing, or development of any Federal
mineral, or any combination of the foregoing.
"(d) CORPORATIONS.—(1) Whenever a corporation or other entity is
subject to civil or criminal action under this section, any officer,
employee, or agent of such corporation or entity who knowingly
authorized, ordered, or carried out the proscribed activity shall be
subject to the same action.
,, J ^; ,, "(2) Whenever any officer, employee, or agent of a corporation or
other entity is subject to civil or criminal action under this section
for activity conducted on behalf of the corporation or other entity,
the corporation or other entity shall be subject to the same action,
unless it is shown that the officer, employee, or agent was acting
without the knowledge or consent of the corporation or other entity^
"(e) REMEDIES, FINES, AND IMPRISONMENT.—The remedies, pen-
alties, fines, and imprisonment p|rescribed in this section shall be
concurrent and cumulative and the exercise of one shall not pre-
clude the exercise of the others. Further, the remedies, penalties.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-261
fines, and imprisonment prescribed in this section shall be in addi-
tion to any other remedies, penalties, fines, and imprisonment
afforded by any other law or regulation.
"(f) STATE CIVIL ACTIONS.—(1) A State may commence a civil
action under subsection (c) of this section against any person
conducting activity within the State in violation of this section. Civil
actions brought by a State shall only be brought in the United
States district court for the judicial district in which the defendant ' " <^^- '-'5 J C
resides or in which the violation occurred or in which the lease or
land involved is located. The district court shall have jurisdiction,
without regard to the amount in controversy or the citizenship of
the parties, to order appropriate remedies and penalties as described
in subsection (c) of this section.
"(2) A State shall notify the Attorney General of the United States
of any civil action filed by the State under this subsection within 30
days of filing of the action. The Attorney General of the United
States shall notify a State of any civil action arising from activity
conducted within that State filed by the Attorney General under
this subsection within 30 days of filing of the action.
"(3) Any civil penalties recovered by a State under this subsection
shall be retained by the State and may be expended in such manner
and for such purposes as the State deems appropriate. If a civil
action is jointly brought by the Attorney General and a State, by
more than one State or by the Attorney General and more than one
State, any civil penalties recovered as a result of the joint action
shall be shared by the parties bringing the action in the manner
determined by the court rendering judgment in such action.
"(4) If a State has commenced a civil action against a person
conducting activity within the State in violation of this section, the
Attorney General may join in such action but may not institute a
separate action arising from the same activity under this section. If ., ^ ^
the Attorney General has commenced a civil action against a person ' '*^"
conducting activity within a State in violation of this section, that
State may join in such action but may not institute a separate action
arising from the same activity under this section.
"(5) Nothing in this section shall deprive a State of jurisdiction to
enforce its own civil and criminal laws against any person who may
also be subject to civil and criminal action under this section.'.
SEC. 5109. PAYMENTS TO STATES.
Section 35 of the Act of February 25, 1920 (30 U.S.C. 191) is
amended by adding the following at the end thereof: "In determin-
ing the amount of payments to States under this section, the amount
of such payments shall not be reduced by any administrative or
other costs incurred by the United States.".
SEC. 5110. REPORT. 30 USC 226 note.
The Secretary shall submit annually for 5 years after enactment
of this subtitle to the Congress a report containing appropriate
information to facilitate congressional monitoring of this subtitle.
Such report shall include, but not be limited to—
(1) the number of acres leased, and the number of leases
issued, competitively and noncompetitively;
(2) the amount of revenue received from bonus bids, filing^
fees, rentals, and royalties;
(3) the amount of production from competitive and non-
competitive leases; and
101 STAT. 1330-262 PUBLIC LAW 100-203—DEC. 22, 1987
(4) such other data and information as will facilitate—
- (A) an assessment of the onshore oil and gas leasing
system, and
•* (B) a comparison of the system as revised by this subtitle
with the system in operation prior to the enactment of this
subtitle.
30 u s e 226 note. SEC. ."il 11. LAND USE STUDY.
The National Academy of Sciences and the Comptroller General
of the United States shall conduct a study of the manner in which
oil and gas resources are considered in the land use plans developed
by the Secretary of the Interior in accordance with provisions of the
Federal Land Policy and Management Act of 1976 (90 Stat. 2743)
and the Secretary of Agriculture in accordance with the Forest and
Rangeland Renewable Resources Planning Act of 1974 (88 Stat. 476),
as amended by the National Forest Management Act of 1976 (90
Stat. 2949), and recommend any improvements that may be nec-
essary to ensure that—
(1) potential oil and gas resources are adequately addressed in
planning documents;
(2) the social, economic, and environmental consequences of
exploration and development of oil and gas resources are deter-
mined; and
(3) any stipulations to be applied to oil and gas leases are
clearly identified.
SEC. 5112. LANDS NOT SUBJECT TO OIL AND GAS LEASING.
The Act of February 25, 1920, is amended by adding the following
at the end thereof:
30 u s e 226-3. "SEC. 43. LANDS NOT SUBJECT TO OIL AND GAS LEASING.
"(a) PROHIBITION.—The Secretary shall not issue any oil and gas
lease under this Act on any of the following Federal lands:
"(1) Lands recommended for wilderness allocation by the
surface managing agency.
"(2) Lands within Bureau of Land Management wilderness
study areas.
"(3) Lands designated by Congress as wilderness study areas,
except where oil and gas leasing is specifically allowed to
continue by the statute designating the study area.
"(4) Lands within areas allocated for wilderness or further
planning in Executive Communication 1504, Ninety-Sixth Con-
gress (House Document numbered 96-119), unless such lands
are allocated to uses other than wilderness by a land and
resource management plan or have been released to uses other
than wilderness by an act of Congress.
"(b) EXPLORATION.—In the case of any area of National Forest or
public lands subject to this section, nothing in this section shall
affect any authority of the Secretary of the Interior (or for National
Forest Lands reserved from the public domain, the Secretary of
Agriculture) to issue permits for exploration for oil and gas by
means not requiring construction of roads or improvement of exist-
ing roads if such activity is conducted in a manner compatible with
the preservation of the wilderness environment.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-263
SEC. 5113. SHORT TITLE.
The Act of February 25, 1920, is amended by inserting after
section 43 the following new section:
"SEC. 44. SHORT TITLE. Mineral Leasing
Act.
"This Act may be cited as the 'Mineral Leasing Act'.".
30 u s e 181 note.
Subtitle C—Land and Water Conservation
Fund and Tongass Timber Supply Fund
SEC. 5201. LAND AND WATER CONSERVATION FUND ACT AMENDMENTS.
(a) ADMISSION FEES.—Section 4(a) of the Land and Water Con-
servation Fund Act of 1965 (16 U.S.C. 4601-6a(a)) is amended as
follows:
(1) Paragraph (1) is amended by striking out "$10" and insert-
ing in lieu thereof "$25" in the first sentence.
(2) Paragraph (1) is further amended by striking out "(1)" and
inserting in lieu thereof "(IXA)" and adding the following new
subparagraph at the end thereof:
"(B) For admission into a specific designated unit of the
National Park System, or into several specific units located in a
particular geographic area, the Secretary is authorized to make
available an annual admission permit for a reasonable fee. The
fee shall not exceed $15 regardless of how many units of the
park system are covered. The permit shall convey the privileges
of, and shall be subject to the same terms and conditions as, the
Golden Eagle Passport, except that it shall be valid only for
admission into the specific unit or units of the National Park
System indicated at the time of purchase.".
(3) Paragraph (2) is amended by adding the following sen-
tences at the end thereof: "The fee for a single-visit permit at
any designated area applicable to those persons entering by
private, noncommercial vehicle shall be no more than $5 per
vehicle. The single-visit permit shall admit the permittee and
all persons accompanying him in a single vehicle. The fee for a
single-visit permit at any designated area applicable to those
persons entering by any means other than a private non-
commercial vehicle shall be no more than $3 per person. Except
as otherwise provided in this subsection, the maximum fee
amounts set forth in this paragraph shall apply to all des-
ignated areas.".
(4) Paragraph (3) is amended by adding the following new
sentence at the end thereof: "Notwithstanding any other provi-
sion of this Act, no admission fee may be charged at any unit of
the National Park System which provides significant outdoor
recreation opportunities in an urban environment and to which
access is publicly available at multiple locations.".
(5) Add the following new paragraphs:
"(6XA) No later than 60 days after the date of enactment of Reports.
this paragraph, the Secretary of the Interior shall submit to the
Committee on Interior and Insular Affairs of the United States
House of Representatives and the Committee on Energy and
Natural Resources of the United States Senate a report on the
entrance fees proposed to be charged at units of the National
Park System. The report shall include a list of units of the
91-194 O - 90 - 34 : QL.3 Part 2
101 STAT. 1330-264 PUBLIC LAW 100-203—DEC. 22, 1987
National Park System and the entrance fee proposed to be
charged at each unit. The Secretary of the Interior shall include
in the report an explanation of the guidelines used in applying
the criteria in subsection (d).
"(B) Following submittal of the report to the respective
^ committees, any proposed changes to matters covered in the
"''>'' '"" •- report, including the addition or deletion of park units or the
increase or decrease of fee levels at park units shall not take
effect until 60 days after notice of the proposed change has been
submitted to the committees.
"(7) No admission fee may be charged at any unit of the
National Park System for admission of any person 16 years of
age or less.
"(8) No admission fee may be charged at any unit of the
j. National Park System for admission of organized school groups
or outings conducted for educational purposes by schools or
other bona fide educational institutions.
"(9) No admission fee may be charged at the following units of
f the National Park System; U.S.S. Arizona Memorial, Independ-
\ ence National Historical Park, any unit of the National Park
System within the District of Columbia, Arlington House—
?- Robert E. Lee National Memorial, San Juan National Historic
{ Site, and Canaveral National Seashore.
t "(10) For each unit of the National Park System where an
c- admission fee is collected, the Director shall annually designate
s at least one day during periods of high visitation as a 'Fee-Free
£ Day' when no admission fee shall be charged.
f> "(11) In the case of the following parks, the fee for a single-
^ visit permit applicable to those persons entering by private,
> noncommercial vehicle (the permittee and all persons accom-
panying him in a single vehicle) shall be no more than $10 per
vehicle and the fee for a single-visit permit applicable to persons
^ entering by any means other than a private noncommercial
'•" vehicle shall be no more than $5 per person: Yellowstone Na-
tional Park and Grand Teton National Park and after the end
of fiscal year 1990, Grand Canyon National Park. In the case of
^ Yellowstone and Grand Teton, a single-visit fee collected at one
^ unit shall also admit the vehicle or person who paid such fee for
' a single-visit to the other unit.
' "(12) Notwithstanding section 203 of the Alaska National
^ Interest Lands Conservation Act, the Secretary may charge an
admission fee under this section at Denali National Park and
Preserve in Alaska.".
(b) VISITOR RESERVATION SERVICES.—Section 4(f) of the Land and
Water Conservation Fund Act of 1965 (16 U.S.C. 4601-6a(f)) is
amended to read as follows:
Contracts. "(f) The head of any Federal agency, under such terms and
conditions as he deems appropriate, may contract with any public or
private entity to provide visitor reservation services. Any such
contract may provide that the contractor shall be permitted to
.^i-ic deduct a commission to be fixed by the agency head from the
amount charged the public for providing such services and to remit
the net proceeds therefrom to the contracting agency.".
(c) SPECIAL PROVISIONS.—Section 4 of the Land and Water Con-
servation Fund Act of 1965 (16 U.S.C. 4601-6a) is amended by adding
the following new subsections at the end thereof:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-265
"(iXD Except in the case of fees collected by the United States Contracts.
Fish and Wildlife Service or the Tennessee Valley Authority, all
receipts from fees collected pursuant to this section by any Federal
agency (or by any public or private entity under contract with a
Federal agency) shall be covered into a special account for that
agency established in the Treasury of the United States. Fees
collected by the Secretary of Agriculture pursuant to this subsection
shall continue to be available for the purposes of distribution to
States and counties in accordance with applicable law.
"(2) Amounts covered into the special account for each agency
during each fiscal year shall, after the end of such fiscal year, be
available for appropriation solely for the purposes and in the
manner provided in this subsection. No funds shall be transferred
from fee receipts made available under this Act to each unit of the
national park system: Provided, however, That in making appropria-
tions, funds derived from such fees may be used for any purpose
authorized therein. Funds credited to the special account shall
remain available until expended.
"(3) For agencies other than the National Park Service, such
funds shall be made available for resource protection, research,
interpretation, and maintenance activities related to resource
protection in areas managed by that agency at which outdoor
recreation is available. To the extent feasible, such funds should be
used for purposes (as provided for in this paragraph) which are
directly related to the activities which generated the funds, includ-
ing but not limited to water-based recreational activities and
camping.
"(4) Amounts covered into the special account for the National
Park Service shall be allocated among park system units in accord-
ance with subsection (j) for obligation or expenditure by the Director
of the National Park Service for the following purposes:
"(A) In the case of receipts from the collection of admission
fees: for resource protection, research, and interpretation at
units of the National Park System.
"(B) In the case of receipts from the collection of user fees: for
resource protection, research, interpretation, and maintenance
activities related to resource protection at units of the National
Park System.
"(j)(l) 10 percent of the funds made available to the Director of the
National Park Service under subsection (i) in each fiscal year shall
be allocated among units of the National Park System on the basis
of need in a manner to be determined by the Director.
"(2) 40 percent of the funds made available to the Director of the
National Park Service under subsection (i) in each fiscal year shall
be allocated among units of the National Park System in accordance
with paragraph (3) of this subsection and 50 percent shall be allo-
cated in accordance with paragraph (4) of this subsection.
"(3) The amount allocated to each unit under this paragraph for
each fiscal year shall be a fraction of the total allocation to all units
under this paragraph. The fraction for each unit shall be deter-
mined by dividing the operating expenses at that unit during the 'b
prior fiscal year by the total operating expenses at all units during
the prior fiscal year.
"(4) The amount allocated to each unit under this paragraph for
each fiscal year shall be a fraction of the total allocation to all units
under this paragraph. The fraction for each unit shall be deter-
mined by dividing the user fees and admission fees collected under
101 STAT. 1330-266 PUBLIC LAW 100-203—DEC. 22, 1987
this section at that unit during the prior fiscal year by the total of
user fees and admission fees collected under this section at all units
during the prior fiscal year.
"(5) Amounts allocated under this subsection to any unit for any
fiscal year and not expended in that fiscal year shall remain avail-
able for expenditure at that unit until expended.
"(k) When authorized by the head of the collecting agency, volun-
teers at designated areas may sell permits and collect fees au-
thorized or established pursuant to this section. The head of such
agency shall ensure that such volunteers have adequate training
regarding—
"(1) the sale of permits and the collection of fees,
"(2) the purposes and resources of the areas in which they are
assigned, and
"(3) the provision of assistance and information to visitors to
the designated area.
The Secretary shall require a surety bond for any such volunteer
performing services under this subsection. Funds available to the
collecting agency may be used to cover the cost of any such surety
bond. The head of the collecting agency may enter into arrange-
ments with qualified public or private entities pursuant to which
such entities may sell (without cost to the United States) annual
admission permits (including Golden Eagle Peissports) at any appro-
priate location. Such arrangements shall require each such entity to
reimburse the United States for the full amount to be received from
the sale of such permits at or before the agency delivers the permits
to such entity for sale.
"(1X1) Where the National Park Service provides transportation to
view all or a portion of any unit of the National Park System, the
Director may impose a charge for such service in lieu of an admis-
sion fee under this section. The charge imposed under this para-
graph shall not exceed the maximum admission fee under sub-
section (a).
"(2) Notwithstanding any other provision of law, half of the
charges imposed under paragraph (1) shall be retained by the unit of
the National Park System at which the service was provided. The
remainder shall be covered into the special account referred to in
subsection (i) in the same manner as receipts from fees collected
pursuant to this section. Fifty percent of the amount retained shall
be expended only for maintenance of transportation systems at the
unit where the charge was imposed. The remaining 50 percent of the
retained amount shall be expended only for activities related to
resource protection at such units.
"(m) Where the primary public access to a unit of the National
Park System is provided by a concessioner, the Secretary may
charge an admission fee at such units only to the extent that the
total of the fee charged by the concessioner for access to the unit
and the admission fee does not exceed the maximum amount of
the admission fee which could otherwise be imposed under sub-
section (a).".
16 use 460/-5a. (d) REPEALS.—(1) Title I of Public Law 96-514 is amended by
striking out the following provisions which appear under the head-
ing "Land and Water Conservation Fund": "Notwithstanding the
provisions of Public Law 90-401, revenues from recreation fee collec-
tions by Federal agencies shall hereafter be paid into the Land and
Water Conservation Fund, to be available for appropriation for any
or all purposes authorized by the Land and Water Conservation
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-267
Fund Act of 1965, as amended, without regard to the source of such
(2) Section 402 of the Act of October 12, 1979 (93 Stat. 664), is 16 u s e 460/-6b.
hereby repealed.
(3) The seventh paragraph of title I of the Energy and Water
Development Appropriation Act, 1982, entitled "Special Recreation
Use Fees" is hereby repealed. 16 u s e 460Z-5a
(e) STUDY.—(1) The Secretary of the Interior shall assess the note.
16 u s e 460/-6a
extent to which traffic congestion and overcrowding occurs at cer- note.
tain park system units during times of sesisonally high usage and
shall conduct a study of the following—
(A) the feasibility of reducing vehicular traffic within national
park system units through fee reductions for visitors traveling
by bus and through other means which could shift visitation
from automobiles to buses; and
(B) the feasibility of encouraging more even seasonal distribu-
tion of visitation.
(2) The study shall include a pilot project to be carried out in
Yosemite National Park. For purposes of such pilot project, the
Secretary may reduce the fees for admission of various classes or
categories of visitors to Yosemite National Park and may reduce the
admission fees imposed at the park during seasons with low visita-
tion. A report containing the results of the study shall be transmit- Reports.
ted to the Committee on Interior and Insular Affairs of the United
States House of Representatives and to the Committee on Energy
and Natural Resources of the United States Senate within 3 years
after the enactment of this Act.
(f) EXTENSION OF LAND AND WATER CONSERVATION FUND.—(1)
Section 2 of the Land and Water Conservation Fund Act of 1965 (16 16 u s e 460Z-5.
U.S.C. 4601 and following) is amended as follows:
(A) In the matter preceding subsection (a) strike "1989" and
substitute "2015".
(B) In subsection (cXD strike "1989" and substitute "2015".
(2) The last sentence of section 3 of the Land and Water Conserva-
tion Fund Act of 1965 (16 U.S.C. 4601 and following) is amended to 16 u s e 460/-6.
read as follows: "Moneys made available for obligation or expendi-
ture from the fund or from the special account established under
section 4(i)(l) may be obligated or expended only as provided in this
Act.".
(g) RELATIONSHIP TO FISCAL YEAR 1988 APPROPRIATIONS.—For pur-
poses of legislation providing appropriations for the fiscal year 1988
to the Department of the Interior, the provisions of this section shall
be treated as "permanent statutory language" establishing entrance
fees for the National Park Service.
SEC. 5202. TONGASS TIMBER SUPPLY FUND. 16 u s e 539d
note.
From the period beginning on October 1,1987, and extending until
September 30, 1989, the provisions of section 705(a) of the Alaska
National Interest Lands Conservation Act of 1980 (16 U.S.C. 539(d))
shall not be effective. In lieu thereof, the following provision shall
apply:
"There is hereby authorized to be appropriated the sum of at least Appropriation
$40,000,000 annually (or such sums as the Secretary of Agriculture authorization.
determines necessary) to maintain the timber supply from the
Tongass National Forest to dependent industry at a rate of
4,500,000,000 foot board measure per decade."
101 STAT. 1330-268 PUBLIC LAW 100-203—DEC. 22, 1987
Subtitle D—Reclamation
43 u s e 421b SEC. 5301. SALE OF BUREAU OF RECLAMATION LOANS.
note.
(a) SALE.—The Secretary of the Interior (hereinafter in this sec-
tion referred to as the "Secretary"), under such terms as the Sec-
retary shall prescribe, shall sell or otherwise dispose of loan» made
pursuant to the Distribution System Loans Act (43 U.S.C. 421a-
421d), the Small Reclamation Projects Act (43 U.S.C. 422a-4221), and
the Rehabilitation and Betterment Act (43 U.S.C. 504-505) in such
amounts as to realize net proceeds to the Federal Government of not
less than $130,000,000 in the fiscal year ending September 30, 1988.
Contracts. In the conduct of such sales, the Secretary shall take such actions as
he deems appropriate to accommodate, effectuate, and otherwise
protect the rights and obligations of the United States and the
borrowers under the contracts executed to provide for repayment of
such loans.
(b) SAVINGS PROVISIONS.—Nothing in this section, including the
prepayment or other disposition of any loan or loans, shall—
^. (1) except to the extent that prepayment may have been
, ^ authorized heretofore, relieve the borrower from the application
^^ of the provisions of Federal Reclamation law (Act of June 17,
J 1902, and Acts amendatory thereof or supplementary thereto,
K' including the Reclamation Reform Act of 1982), including acre-
'.. age limitations, to the extent such provisions would apply
r^ absent such prepayment, or
(2) authorize the transfer of title to any federally owned
f; facilities funded by the loans specified in subsection (a) of this
section without a specific Act of Congress.
(c) FEES AND EXPENSES OF PROGRAM.—Proceeds from the conduct
of the program authorized by this section shall be first used to pay
the fees and expenses of such program and the net proceeds shall be
deposited in the Treasury of the United States as miscellaneous
receipts.
(d) TERMINATION.—The authority granted by this section to sell or
otherwise dispose of loans shall terminate on December 31, 1988.
SEC. 5302. RECLAMATION REFORM ACT AMENDMENTS.
43 u s e 390ww. (a) AUDIT.—Section 224 of the Reclamation Reform Act of 1982
(Public Law 97-293) is amended by adding the following new subsec-
tions after subsection (f):
"(g) In addition to any other audit or compliance activities which
may otherwise be undertaken, the Secretary of the Interior, or his
designee, shall conduct a thorough audit of the compliance with the
reclamation law of the United States, specifically including this Act,
by legal entities and individuals subject to such law. At a minimum,
•mj the Secretary shall complete audits of those legal entities and
individuals whose landholdings or operations exceed 960 acres
Reports. within 3 years. The Secretary shall submit an annual written report
to the Senate Committee on Energy and Natural Resources and the
House Committee on Interior and Insular Affairs. Such report shall
summarize the legal entities and individuals audited, the results of
such audits, and the actions taken by the Secretary to correct any
instances of noncompliance with the reclamation law.
Contracts. "(h) The provisions of section 205(c) are and have been applicable
to all recordable contracts executed prior to October 12, 1982, and
any decision, rule, or regulation promulgated by the Department of
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-269
the Interior to the contrary is hereby revoked: Provided, That
notwithstanding the provisions of subsection (i), the Secretary shall
not seek reimbursement for any amounts due under this subsection
or section 205(c) which was due prior to the date of enactment of this
subsection.
"(i) When the Secretary finds that any individual or legal entity
subject to reclamation law, including this Act, has not paid the
required amount for irrigation water delivered to a landholding
pursuant to reclamation law, including this Act, he shall collect the
amount of any underpayment with interest accruing from the date
the required payment was due until paid. The interest rate shall be
determined by the Secretary of the Treasury on the basis of the
weighted average yield of all interest bearing marketable issues sold
by the Treasury during the period of underpayment.".
(b) REVOCABLE TRUSTS.—Section 214 of the Reclamation Reform
Act of 1982 (Public Law 97-293) is amended by inserting "(a)" after 43 use 390nn.
"214" and by adding the following new subsection at the end
thereof:
"(b) Lands placed in a revocable trust shall be attributable to the
grantor if—
"(1) the trust is revocable at the discretion of the grantor and
revocation results in the title to such lands reverting either
directly or indirectly to the grantor; or
"(2) the trust is revoked or terminated by its terms upon the
expiration of a specified period of time and the revocation or
termination results in the title to such lands reverting either
directly or indirectly to the grantor.".
^ Subtitle E—Panama Canal
SEC. 5401. REFERENCE TO THE PANAMA CANAL ACT OF 1979.
Except as otherwise expressly provided, whenever in this subtitle
an amendment or repeal is expressed in terms of an amendment to,
or repeal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the Panama
Canal Act of 1979 (22 U.S.C. 3601 and following).
PART 1—PANAMA CANAL REAUTHORIZATION
SEC. 5411. OPERATING EXPENSES.
There is authorized to be appropriated from the Panama Canal
Commission Fund to the Panama Canal Commission (hereafter in
this part referred to as the "Commission") for the fiscal year
beginning October 1, 1987, not to exceed $467,050,000, for necessary
expenses of the Commission incurred under the Panama Canal Act
of 1979 (22 U.S.C. 3601 and following), including expenses for—
(1) the hire of passenger motor vehicles and aircraft;
(2) the purchase of passenger motor vehicles as may be nec-
essary for fiscal year 1988, the number and price of which shall
not exceed the amount provided in appropriation Acts; except
that large heavy-duty passenger sedans used to transport
Commission employees across the Isthmus of Panama may be
purchased for fiscal year 1988 without regard to price limita-
tions set forth in applicable regulations of any department or
agency of the United States;
101 STAT. 1330-270 PUBLIC LAW 100-203—DEC. 22, 1987
J (3) official receptions and representation expenses, except
1 that not more than $43,000 may be made available for such
. expenses, of which (A) not more than $10,000 may be made
available for such expenses of the Supervisory Board of the
Commission, (B) not more than $5,000 may be made available
for such expenses of the Secretary of the Commission, and (C)
not more than $28,000 may be made available for such expenses
of the Administrator of the Commission;
(4) the procurement of expert and consultant services as
provided in section 3109 of title 5, United States Code;
(5) a residence for the Administrator of the Commission;
4 (6) uniforms, or allowances therefor, as authorized by section
>• 5901 and 5902 of title 5, United States Code;
(7) disbursements by the Administrator of the Commission for
J employee recreation and community projects; and
'/: ;,. ; (8) the operation of guide services.
SEC. 5412. CAPITAL OUTLAY.
Of any funds appropriated pursuant to section 5411, not more
than $37,000,000 (which is authorized to remain available until
expended) may be made available for the acquisition, construction,
replacement and improvements of facilities, structures, and equip-
ment required by the Commission.
SEC. 5413. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS.
In addition to the amount authorized to be appropriated by sec-
tion 5411, there are authorized to be appropriated to the Commis-
sion for the fiscal year 1988 such amounts as may be necessary for—
(1) increases in salary, pay, retirement, and other employee
benefits provided by law;
(2) covering payments to Panama under paragraph 4(a) of
Article XIII of the Panama Canal Treaty of 1977, as provided by
section 1341(a) of the Panama Canal Act of 1979 (22 U.S.C.
3751(a)); and
(3) increased costs for fuel. . :
SEC. 5414. INSURANCE.
Section 1419 (22 U.S.C. 3779) is amended bv inserting "or other
unpredictable events" after "marine accidents'.
Contracts. SEC. 5415. AUTHORITY TO LEASE OFFICE SPACE.
22 u s e 3712a
Notwithstanding section 210 of the Federal Property and
Administrative Services Act of 1949 (40 U.S.C. 490), the Commission
is authorized to negotiate directly and enter into contracts for the
lease of, and for improvements to, real property in the United States
for use by the Commission as office space, on such terms as the
Commission considers to be in the interest of the United States, and
to make direct payments therefor.
SEC. 5416. COMPENSATION OF BOARD MEMBERS.
Section 11020)) (22 U.S.C. 3612(b)) is amended by inserting before
the period at the end thereof the following: "or, as authorized by the
Chairman of the Board, while on '^ official Panama Canal Commis-
sion business".
"Copy read "an". t. • .,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-271
SEC. 5117. SKTTLEMKNT OF CLAIMS.
(a) SETTLEMENT OF CLAIMS.—Section 1401(b) (22 U.S.C. 3761(b)) is
amended to read as follows:
"(b) The Commission may pay not more than $50,000 on any claim
described in subsection (a).".
(b) INJURIES TO VESSELS WITHOUT PILOTS.—Section 1411(b)(1) (22
U.S.C. 3771(b)(1)) is amended by striking out "adjust and pay" and
all that follows through "$50,000" and inserting in lieu thereof "pay
not more than $50,000 on the claim".
SEC. 5118. REPORT TO CONGRESS. 22 USC 3871
Out of the funds authorized to be appropriated by this part, the
Commission shall prepare and submit to the Congress a report on—
(1) the condition of the Panama Canal and potential adverse
effects on United States shipping and commerce;
(2) tho effect on canal operations of the military forces under Manuel Noriega.
General Noriega; and
(8) the Commission's evaluation of the effect on canal oper-
ations if the Panamanian Government continues to withhold its
consent to major factors in the United States Senate's ratifica-
tion of the Panama Canal Treaties.
PART 2—PANAMA CANAL REVOLVING FUND Panama Canal
Revolving Fund
SEC. .5421. SHORT TITLE. ^2 USC 3601
This part may be referred to as the "Panama Canal Revolving note.
Fund Act".
SEC. 5422. ESTABLISHMENT OF REVOLVING FUND.
(a) ESTABLISHMENT.—Section 1302 (22 U.S.C. 3712) is amended by
striking out subsections (a) through (d) and inserting in lieu thereof
the following:
"SEC. 1302. (a)(1) There is established in the Treasury of the
United States a revolving fund to be known as the 'Panama Canal
Revolving Fund'. The Panama Canal Revolving Fund shall, subject
to subsection (c), be available to the Commission to carry out the
purposes, functions, and powers authorized by this Act, including
for—
"(A) the hire of passenger motor vehicles and aircraft;
"(B) uniforms or allowances therefor, as authorized by sec-
tions 5901 and 5902 of title 5, United States Code;
"(C) official receptions and representation expenses of the
Board, the Secretary of the Commission, and the Administrator;
"(D) the operation of guide services;
"(E) a residence for the Administrator;
"(F) disbursements by the Administrator for employee and
community projects; and
"(G) the procurement of expert and consultant services £is
provided in section 3109 of title 5, United States Code.
"(2) On the effective date of the Panama Canal Revolving Fund
Act—
"(A) the Panama Canal Commission Fund shall be terminated
and the unappropriated balance, including undeposited receipts
as of the close of business on the day before the effective date of
the Panama Canal Revolving Fund Act, shall be transferred to
the Panama Canal Revolving Fund;
101 STAT. 1330-272 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) the unexpended balance of appropriations to the Commis-
c^i sion, as of the close of business on the day before the effective
date of the Panama Canal Revolving Fund Act, shall be trans-
*n ferred to the Panama Canal Revolving Fund, and such amounts,
including amounts appropriated for capital expenditures, shall
remain available until expended;
"(C) the assets and liabilities recorded before such effective
date under the 'Panama Canal Commission Fund' shall be
recorded under the Panama Canal Revolving Fund; and
r.jji J "(D) the Panama Canal Emergency Fund shall be terminated
jj ; and the remaining balance shall be transferred to the Panama
Canal Revolving Fund.
"(b) Upon completion of the transfers of funds under subsection
(a)-
"(1) amounts attributable to interest on the investment of the
' "" ' ' '' United States in the Panama Canal which accrued before Janu-
ary 1, 1986, shall be transferred from the Panama Canal Revolv-
ing Fund to the general fund of the Treasury; and
"(2) such amounts as were appropriated to the Commission in
the fiscal year which ended September 30, 1980, and for which
the Commission has not reimbursed the general fund of the
, ,,„.,, Treasury, shall be transferred to the general fund of the
b <. - " . Treasury.
"(c)(1) There shall be deposited in the Panama Canal Revolving
Fund, on a continuing basis, toll receipts and all other receipts of
the Commission. Except as provided in section 1303 and subject to
paragraph (2), no funds may be obligated or expended by the
Commission in any fiscal year unless such obligation or expenditure
has been specifically authorized by law.
"(2) No funds may be obligated or expended by the Commission in
any fiscal year for administrative expenses except to the extent or in
such amounts as are provided in appropriations Acts.
"(3) No funds may be authorized for the use of the Commission, or
obligated or expended by the Commission in any fiscal year in excess
of—
"(A) the amount of revenues deposited in the Panama Canal
' Revolving Fund during such fiscal year, plus
"(B) the amount of revenues deposited in the Panama Canal
Revolving Fund before such fiscal year and remaining unex-
pended at the beginning of such fiscal year.
Reports. Not later than 30 days after the end of each fiscal year, the
Secretary of the Treasury shall report to the Congress the amount of
revenues deposited in the Panama Canal Revolving Fund during
such fiscal year.
"(d) With the approval of the Secretary of the Treasury, the
Commission may deposit amounts in the Panama Canal Revolving
Fund in any Federal Reserve bank, any depository for public funds,
or in such other places and in such manner as the Commission and
the Secretary may agree.
"(e) The Committee on Appropriations of each House of Congress
shall review the annual budget of the Commission, including oper-
ations and capital expenditures.".
Ot)) CONFORMING AMENDMENTS.—(1) The section heading for sec-
22 use 3712. tion 1302 is amended to read as follows:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-273
"PANAMA CANAL REVOLVING F U N D " .
(2) The item relating to section 1302 in the table of contents of the
Panama Canal Act of 1979 is amended to read as follows:
"1302. Panama Canal Revolving Fund.".
SEC. 5423. EMERGENCY AUTHORITY.
(a) GRANT OF AUTHORITY.—Section 1303 (22 U.S.C. 3713) is
amended to read as follows:
"SEC. 1303. If authorizing legislation described in section 1302(cXl)
has not been enacted for a fiscal year, then the Commission may
withdraw funds from the Panama Canal Revolving Fund in order to
defray emergency expenses and to ensure the continuous, efficient,
and safe operation of the Panama Canal, including expenses for
capital projects. The authority of this section may not be used for
administrative expenses. The authority of this section may be exer-
cised only until authorizing legislation described in section 1302(c)(1)
is enacted, or for a period of 24 months after the end of the fiscal
year for which such authorizing legislation was last enacted, which-
ever occurs first. Within 60 days after the end of any calendar Reports.
quarter in which expenditures are made under this section, the
Commission shall report such expenditures to the appropriate
committees of the Congress.".
(b) CONFORMING AMENDMENTS.—(1) The section heading for sec-
tion 1303 is amended by striking out " F U N D " and inserting in lieu 22 USC 3713.
thereof "AUTHORITY".
(2) The item relating to section 1303 in the table of contents of the
Panama Canal Act of 1979 is amended by striking out "fund" and
inserting in lieu thereof "authority".
SEC. 5424. BORROWING AUTHORITY.
(a) GRANT OF AUTHORITY.—Subchapter I of chapter 3 of title I (22
U.S.C. 3711 and following) is amended by adding at the end thereof
the following new section:
"BORROWING AUTHORITY
"SEC. 1304. (a) The Panama Canal Commission may borrow from 22 USC 3714.
the Treasury, for any of the purposes of the Commission, not more
than $100,000,000 outstanding at any time. For this purpose, the
Commission may issue to the Secretary of the Treasury its notes or
other obligations—
"(1) which shall have maturities (of not later than December
31, 1999) agreed upon by the Commission and the Secretary of
the Treasury, and
"(2) which may be redeemable at the option of the Commis-
sion before maturity.
"(h) Amounts borrowed under this section shall not be available
for payments to Panama under Article XIII of the Panama Canal
Treaty of 1977.
"(c) Amounts borrowed under this section shall increase the
investment of the United States in the Panama Canal, and repay-
ment of such amounts shall decrease such investment.
"(d) The Commission shall report to the Congress and to the Office Reports.
of Management and Budget on each exercise of borrowing authority
under this section.".
101 STAT. 1330-274 PUBLIC LAW 100-203—DEC. 22, 1987
(b) CONFORMING AMENDMENT.—The table of contents of the
Panama Canal Act of 1979 is amended by inserting after the item
relating to section 1303 the following:
"1304. Borrowing authority.".
SEC. 5425. CALCULATION OF INTEREST.
(a) CALCULATION OF INTEREST.—Section 1603 (22 U.S.C. 3793) is
amended—
(1) in subsection OJXIXA), by striking out "appropriations to
the Commission made on or after the effective date of this Act"
and inserting in lieu thereof "the Panama Canal Revolving
Fund,";
(2) in subsection fl3)(2XA), by striking out "covered into the
Panama Canal Commission Fund pursuant to section 1302 of
this Act" and inserting in lieu thereof "deposited in the Panama
Canal Revolving Fund"; and
(3) by adding at the end thereof the following new subsection:
"(d) The Panama Canal Commission shall pay to the Treasury of
the United States interest on the investment of the United States, as
determined under this section. Such interest shall be deposited in
the general fund of the Treasury.".
SEC. 5426. PAYMENTS TO THE REPUBLIC OF PANAMA.
The second sentence of section 1341(e) (22 U.S.C. 3751(e)) is
amended—
(1) by striking out "and" before "(6)"; and
(2) by inserting before the period ", and (7) amounts pro-
grammed to meet working capital requirements".
SEC. 5427. BASES OF TOLLS.
Section 16020b) (22 U.S.C 3792(b)) is amended by inserting "work-
ing capital," after "depreciation,".
SEC. 5428. TECHNICAL AND CONFORMING AMENDMENTS.
(a) APPUANCES FOR EMPLOYEES INJURED BEFORE SEPTEMBER 7,
1916.—Section 1246 (22 U.S.C. 3683) is amended by striking out
"appropriated" and inserting in lieu thereof "available".
(b) DISASTER REUEF.—Section 1343 (22 U.S.C. 3753) is amended by
striking out "available funds appropriated" and inserting in lieu
thereof "funds available".
(c) CONGRESSIONAL RESTRAINTS ON PROPERTY TRANSFERS AND
TAX EXPENDITURES.—Section 1344(bX4) (22 U.S.C. 375403X4)) is
amended—
(1) by striking out "appropriated to or" and inserting in lieu
thereof "available"; and
(2) by striking out "Panama Canal Commission Fund" and
inserting in lieu thereof "Panama Canal Revolving Fund".
(d) CIVIL SERVICE RETIREMENT AND DISABIUTY FUND.—Section
8348(iX2) of title 5, United States Code, is amended by striking out
"The Secretary of the Treasury shall pay to the Fund from appro-
priations" and inserting in lieu thereof "The Panama Canal
Commission shall pay to the Fund from funds available to it".
(e) CANAL ZONE GOVERNMENT FUNDS.—Section 1301 (22 U.S.C.
3711) is amended—
(1) by amending the second sentence to read as follows: "The
Commission may, to the extent of funds available to it, pay
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-275
claims or make payments chargeable to such accounts, upon
proper audit of such claims or payments."; and
(2) by striking out the third sentence.
SEC. 5429. EFFECTIVE DATE. 22 USC 3683
This part and the amendments made by this part take effect on
January 1, 1988.
Subtitle F—Abandoned Mine Funds in
Wyoming
SEC. 5501. ALLOCATION OF ABANDONED MINE RECLAMATION FUNDS IN
WYOMING.
Notwithstanding any other provision of law, the State of Wyo-
ming may, subject to a plan approved by the Governor, expend not
more than $2,000,000 from its allocation of fiscal year 1987 appro-
priated funds under section 402(g) of Public Law 95-87 for direct
assistance to citizens evacuated from their homes in the Rawhide
and Horizon Subdivisions in Campbell County, Wyoming, due to
hazards from methane and hydrogen sulfide gases.
Subtitle G—Nuclear Regulatory Commission
User Fees
SEC. 5601. USER FEES.
Section 760103)(1)(A) of the Consolidated Omnibus Budget Rec-
onciliation Act of 1985 (Public Law 99-272; 100 Stat. 147) is amended 42 USC 2213.
by inserting "; except that for fiscal years 1988 and 1989, such
percentage shall be increased an additional 6 percent of such costs
plus all other assessments made by the Nuclear Regulatory Commis-
sion pursuant to House Joint Resolution 395, 100th Congress, 1st
Session, as enacted; but in no event shall such percentage be less
than a total of 45 percent of such costs in each such fiscal year"
after "with respect to such fiscal year".
TITLE VI—CIVIL SERVICE AND POSTAL
SERVICE PROGRAMS
SEC. 6001. PARTIAL DEFERRED PAYMENT OF LUMP-SUM CREDIT FOR 5 USC 8343a
CERTAIN INDIVIDUALS ELECTING ALTERNATIVE FORMS OF note.
ANNUITIES.
(a) IN GENERAL.—Notwithstanding any other provision of law, and
except as provided in subsection (c), any lump-sum credit payable to
an employee or Member pursuant to the election of an alternative
form of annuity by such employee or Member under section 8343a or
section 8420a of title 5, United States Code, shall be paid in accord-
ance with the schedule under subsection (b) (instead of the schedule
which would otherwise apply), if the commencement date of the
annuity payable to such employee or Member occurs after Janu-
ary 3,1988, and before October 1,1989.
0>) SCHEDULE OF PAYMENTS.—The schedule of payment of any
lump-sum credit subject to this section is as follows:
101 STAT. 1330-276 PUBLIC LAW 100-203—DEC. 22, 1987
n:. (1) 60 percent of the lump-sum credit shall be payable on the
date on which, but for the enactment of this section, the full
amount of the lump-sum credit would otherwise be payable.
(2) The remainder of the lump-sum credit shall be payable on
,i f the date which occurs 12 months after the date described in
paragraph (1).
An amount payable in accordance with paragraph (2) shall be
payable with interest, computed using the rate under section
8334(e)(3) of title 5, United States Code.
Regulations. (c) EXCEPTIONS.—The Office of Personnel Management shall pre-
scribe regulations under which this section shall not apply—
(1) in the case of any individual who is separated from
f' Government service involuntarily, other than for cause on
charges of misconduct or delinquency; and
(2) in the case of any individual as to whom the application of
this section would be against equity and good conscience, due to
a life-threatening affliction or other critical medical condition
affecting such individual.
(d) ANNUITY BENEFITS NOT AFFECTED.—Nothing in this section
shall affect the commencement date, the amount, or any other
aspect of any annuity benefits payable under section 8343a or
section 8420a of title 5, United States Code.
(e) DEFINITIONS.—For purposes of this section, the terms "lump-
sum credit", "employee , and "Member" each has the meaning
given such term by section 8331 or section 8401 of title 5, United
States Code, as appropriate.
39 u s e 2003 SEC. 6002. CONTRIBUTIONS BY THE UNITED STATES POSTAL SERVICE TO
no<^e. THE CIVIL SERVICE RETIREMENT AND DISABILITY FUND.
(a) ESTABUSHMENT OF POSTAL SERVICE ESCROW FUND.—There is
established as a separate account in the United States Treasury, the
"Postal Service Escrow Fund".'^ Such Fund shall—
(1) have such amounts described under subsection (bX2) depos-
ited no later than October 31,1988;
(2) not be available for expenditures of any amounts therein
during the existence of such Fund; and
(3) cease to exist on October 1, 1989, and on such date all
amounts deposited in such Fund under subsection (bX2) shall be
deposited in the Postal Service Fund established under section
2003 of title 39, United States Code.
(b) DEPOSIT OF CERTAIN SAVINGS IN CERTAIN FUNDS.—
(1) FISCAL YEAR 1988.—From all funds available to the United
States Postal Service in fiscal year 1988, the Postal Service shall
^ '; deposit into the Civil Service Retirement and Disability Fund
established under section 8348 of title 5, United States Code, an
amount of $350,000,000 in fiscsd year 1988, in addition to any
amount deposited pursuant to subsection (h) of such section.
(2) FISCAL YEAR 1989.—From all funds available to the United
States Postal Service in fiscal year 1989, the Postal Service shall
deposit into the Postal Service Escrow Fund an amount of
$465,000,000 no later than October 31,1988.
(c) CAPITAL LIMITATIONS FOR FISCAL YEARS 1988 AND 1989.—
(1) The United States Postal Service may not make any
commitment or obligation to expend any monies deposited in
the Postal Service Fund established under section 2003 of title
39, United States Code, for the capital investment program—
(A) in excess of $625,000,000 in fiscal year 1988; and
"• Copy read "Fund." ".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-277
(B) in excess of $1,995,000,000 in fiscal year 1989.
(2) CAPITAL INVESTMENT PROGRAMS.—For the purposes of para-
graph (1) the term "capital investment program" shall include
all investments in long-term assets and capital investment
expenditures (including direct and indirect costs associated with
such investments and expenditures, such as obligations through
contracts).
SEC. 6003. CONTRIBUTIONS BY THE UNITED STATES POSTAL SERVICE TO 5 USC 8906 note.
THE EMPLOYEES HEALTH BENEFITS FUND.
(a) CONTRIBUTIONS FOR CERTAIN ANNUITANTS OF THE UNITED
STATES POSTAL SERVICE.—As partial payment to the Employees
Health Benefits Fund established under section 8909 of title 5,
United States Code, for benefits of certain annuitants and survivor
annuitants (no portion of the cost of which was paid by the Postal
Service before the date of enactment of this section) the Postal
Service shall pay into the Employee Health Benefits Fund
$160,000,000 in fiscal year 1988, and $270,000,000 in fiscal year 1989
in addition to any amount deposited into such Fund pursuant to
section 8906 of such title 5 in each such fiscal year.
(b) PAYMENT LIMITATIONS IN FISCAL YEARS 1988 AND 1989.—The
partial payment required by subsection (a) of this section shall—
(1) be from all funds available to the United States Postal
Service in each such fiscal year;
(2) be from funds representing savings to the United States
Postal Service resulting from savings from the operating budget
of the United States Postal Service in each such fiscal year; and
(3) be paid into such Fund in each such fiscal year, without—
(A) increasing borrowing under section 2005 of title 39,
United States Code;
(B) using any budgetary resources other than budgetary
resources derived from the operating budget of the United
States Postal Service; or
(C) increasing postal rates under chapter 36 of title 39,
United States Code,
for the purposes of financing such payment.
(c) IMPLEMENTATION PLANS, PROGRESS REPORTS, AND COMPUANCE
FOR FISCAL YEARS 1988 AND 1989.—
(1) IMPLEMENTATION.—No later than March 1, 1988 for fiscal
year 1988, and October 1, 1988 for fiscal year 1989, the United
States Postal Service shall—
(A) formulate an implementation plan specifically
enumerating the methods by which the Postal Service shall
make the payments required under subsection (b) and fulfill
the conditions required under paragraphs (1), (2), and (3) of
such subsection; and
(B) submit such plan to the Committee on Governmental
•—h Affairs of the Senate and the Committee on Post Office and
Civil Service of the House of Representatives.
(2) INTERIM REPORT.—NO later than July 15, 1988 for fiscal
" * year 1988, and March 1, 1989 for fiscal year 1989, the United
States Postal Service shall submit an interim report to the
Committee on Governmental Affairs of the Senate and the
Committee on Post Office and Civil Service of the House of
Representatives on the status of meeting the guidelines and
goals of the plans submitted under pargigraph (IXB), and any
adjustments necessary to meet the requirements under the
101 STAT. 1330-278 PUBLIC LAW 100-203—DEC. 22, 1987
provisions of subsection (b) of this section for each such fiscal
year.
(3) PRELIMINARY AUDIT AND REPORT BY THE GENERAL ACCOUNT-
ING OFFICE.—No later than September 1, 1988 for fiscal year
1988, and September 1, 1989 for fiscal year 1989, the General
Accounting Office shall—
(A) conduct an audit of the plans and adjustments to the
plans submitted by the United States Postal Service under
paragraphs (1) and (2) of this subsection and determine the
extent of compliance of the Postal Service with such plans
and the requirements of subsection (b) of this section; and
(B) submit a report of such audit and determinations to
the Committee on Governmental Affairs of the Senate and
the Committee on Post Office and Civil Service of the House
of Representatives.
^° (4) DETERMINATION OF COMPLIANCE.—On October 31, 1988
for fiscal year 1988, and on October 31, 1989 for fiscal year 1989,
the General Accounting Office shall—
(A) make a final audit and determination of whether the
United States Postal Service is in compliance with the
requirements of subsection (b) of this section;
(B) submit a final report for each such fiscal year on such
compliance to the Committee on Governmental Affairs of
the Senate and the Committee on Post Office and Civil
Service of the House of Representatives; and
(C) include in each final report submitted under subpara-
graph (B), such recommendations (if applicable) for any
actions to enforce compliance with the provisions of subsec-
tion (b) of this section.
(5) COMPLIANCE IN FISCAL YEARS 1988 AND 1989.—Based on the
determination of compliance required by subsection (c)(4) of this
section for fiscal years 1988 and 1989, the Congress shall (after
receiving the recommendation of the General Accounting Office
under paragraph (4)(C)) determine appropriate action, if nec-
essary, to enforce compliance with any payment limitation
under subsection (b) of this section.
SEC. 6004. TECHNICAL CLARIFICATION.
For purposes of section 202 of the Balanced Budget and Emer-
gency Deficit Reaffirmation Act of 1987, the amendments made by
this title shall be considered an exception under subsection (b) of
such section.
TITLE VII—VETERANS' PROGRAMS
SEC. 7001. SALES OF VENDEE LOANS WITH OR WITHOUT RECOURSE.
Section 1816(d) of title 38, United States Code, is amended—
(1) by redesignating paragraph (3) as subparagraph (C);
(2) by inserting after paragraph (2) the following:
"(3)(A) Before October 1, 1989, notes evidencing such loans may be
sold with or without recourse as determined by the Administrator,
with respect to specific proposed sales of such notes, to be in the best
interest of the effective functioning of the loan guaranty program
under this chapter, taking into consideration the comparative cost-
'° Paragraphs "(4)", "(A)", "(B)", and "(C)", indented wrong.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-279
effectiveness of each type of sale. In comparing the cost-effectiveness
of conducting a proposed sale of such notes with recourse or without
recourse, the Administrator shall, based on available estimates
regarding likely market conditions and other pertinent factors as of
the time of the sale, determine and consider—
"(i) the average amount by which the selling price for such
notes sold with recourse would exceed the selling price for such
notes if sold without recourse; and
"(ii) the total cost of selling such notes with recourse, •
including—
"(I) any estimated discount or premium;
1(« "(II) the projected cost, based on Veterans' Administra-
tion experience with the sale of notes evidencing vendee
loans with recourse and the quality of the loans evidenced
by the notes to be sold, of repurchasing defaulted notes;
"(III) the total servicing cost with respect to repurchased
notes, including the costs of taxes and insurance, collecting
monthly payments, servicing delinquent accounts, and
terminating insoluble loans;
"(IV) the costs of managing and disposing of properties
acquired as the result of defaults on such notes;
"(V) the loss or gain on resale of such properties; and
"(VI) any other cost determined appropriate by the
Administrator.
"(B) Not later than 60 days after making any sale described in Reports.
subparagraph (A) of this paragraph occurring before October 1,
1989, the Administrator shall submit to the Committees on Veter-
ans' Affairs of the Senate and the House of Representatives a report
describing—
"(i) the application of the provisions of such subparagraph,
and each of the determinations required thereunder, in the case
of such sale;
"(ii) the results of the sale in comparison to the anticipated
results; and
"(iii) actions taken by the Administrator to facilitate the
marketing of the notes involved."; and
(3) in subparagraph (C), as redesignated by clause (1) of this
section—
(A) by striking out "The Administrator may sell any note
securing" and inserting in lieu thereof "Beginning on Octo-
ber 1, 1989, the Administrator may sell any note evidenc-
ing"; and
(B) by redesignating clauses (A) and (B) as clauses (i) and
(ii), respectively.
SEC. 7002. LOAN FEE EXTENSION.
Section 1829(c) of title 38, United States Code, is amended by
striking out "1987" and inserting in lieu thereof "1989".
SEC. 7003. CASH SALES OF PROPERTIES ACQUIRED THROUGH FORE-
CLOSURES.
(a) IN GENERAL.—Section 1816(dXl) of title 38, United States Code,
is amended by striking out "not more than 75 percent, nor less than
60 percent," in the first sentence and inserting in lieu thereof "not
more than 65 percent, nor less than 50 percent,'.
Ot>) EFFECTIVE DATE.—The amendment made by subsection (a) 38 USC 1816
shall take effect as of October 1,1987. "ot^
101 STAT. 1330-280 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 7004. STATUTORY CONSTRUCTION.
(a) STATUTORY CONSTRUCTION FOR PURPOSES OF THE BALANCED
BUDGET AND EMERGENCY DEFICIT CONTROL REAFFIRMATION ACT OF
1987.—For the purposes of subsections (a) and (b) of section 202 of
the Balanced Budget and Emergency Deficit Control Reaffirmation
Act of 1987 (Public Law 100-119), the amendments made by section
7003 achieve savings made possible by changes in program require-
ments.
wY^^ ^^^^ ^^ RULE FOR CONSTRUCTION OF DUPUCATE PROVISIONS.—In apply-
note. ing the provisions of this title and the provisions of the Veterans'
Home Loan Program Improvements and Property Rehabilitation
Act of 1987 which make the same amendments as the provisions of
this title—
(1) the identical provisions of title 38, United States Code,
amended by the provisions of this title and the provisions of
such Act shall be treated £is having been amended only once;
and
(2) in executing to title 38, United States Code, the amend-
ments made by this title and by such Act, such amendments
shall be executed so as to appear only once in the law.
TITLE VIII—BUDGET POLICY AND FISCAL
PROCEDURES
SEC. 8001. DEFENSE AND DOMESTIC DISCRETIONARY SPENDING LIMITS.
(a) AGGREGATE ALLOCATIONS FOR DEFENSE.—The levels of budget
authority and budget outlays for fiscal years 1988 and 1989 for
major functional category 050 (National Defense) shall be:
(1) Fiscal year 1988:
(A) New budget authority, $292,000,000,000.
(B) Outlays, $285,400,000,000.
(2) Fiscal year 1989:
(A) New budget authority, $299,500,000,000.
(B) Outlays, $294,000,000,000.
Ot>) AGGREGATE ALLOCATIONS FOR DOMESTIC DISCRETIONARY SPEND-
ING.—The levels of total budget authority and total budget outlays
for fiscal years 1988 and 1989 for all discretionary spending in
categories other than major functional category 050 (National De-
fense) shall be:
(1) Fiscal year 1988:
c, (A) New budget authority, $162,900,000,000.
(B) Outlays, $176,800,000,000.
(2) Fiscal year 1989:
(A) New budget authority, $166,200,000,000.
(B) Outlays, $185,300,000,000.
(c) FISCAL YEAR 1989 BUDGET RESOLUTION.—
(1) HOUSE OF REPRESENTATIVES.—The Committee on the
Budget of the House of Representatives ®^ shall report a concur-
rent resolution on the budget for fiscal year 1989, pursuant to
section 301 of the Congressional Budget Act of 1974, in accord-
ance with the appropriate levels of budget authority and budget
outlays for major functional category 050 (National Defense)
and for all discretionary spending in categories other than
•• Copy read "Representative".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-281
major functional category 050 as set forth in subsections (a)(2)
and (b)(2).
( 2 ) P O I N T OF ORDER IN THE SENATE ON AGGREGATE ALLOCATIONS
FOR DEFENSE A N D DOMESTIC DISCRETIONARY SPENDING FOR FISCAL
YEAR 1 9 8 9 . —
(A) Except as provided in subparagraph (E), it shall not be
in order in the Senate to consider any concurrent resolution
on the budget for fiscal year 1989 (including a conference
report thereon), or any amendment to such a resolution,
'••^ that would fail to be consistent with the allocations in
subsections (a) and (b) for such fiscal year.
(B) Subparagraph (A) may be waived or suspended by a ^' '" -
vote of three-fifths of the Members of the Senate, duly
chosen and sworn.
-^ ' (C) If the ruling of the presiding officer of the Senate
--^ - sustains a point of order raised pursuant to subparagraph
(A), a vote of three-fifths of the Members of the Senate, duly * ' '
chosen and sworn, shall be required to sustain an appeal of
such ruling. Debate on any such appeal shall be limited to
two hours, to be equally divided between, and controlled by,
the Majority and Minority Leaders, or their designees.
(D) For purposes of this paragraph, the levels of new
budget authority, spending authority as described in section
401(c)(2), outlays, and new credit authority for a fiscal year
shall be determined on the basis of estimates made by the
; Committee on the Budget of the Senate. . ^ ,. ,, ^
(E) This paragraph shall not apply if a declaration of war
by the Congress is in effect or if a resolution pursuant to
section 254(a) of the Balanced Budget and Emergency Defi-
cit Control Act of 1985 has been enacted.
(d) ALLOCATIONS PURSUANT TO FISCAL YEAR 1989 BUDGET RESOLU-
TION.—(1) The allocations required to be included in the joint ^,
explanatory statement accompanying the conference report on the
concurrent resolution on the budget for fiscal year 1989, pursuant to
section 302(a) of the Congressional Budget Act of 1974, shall be
based upon the levels set forth in subsections (a)(2) and (b)(2) of this
section. JV :ti%M
(2) The Committee on Appropriations of each House shall, after
consulting with the Committee on Appropriations of the other
House, make the subdivisions required under section 302(b)(1) of the
Congressional Budget Act of 1974 consistent with the allocations in
subsections (aX2) and Ot)X2) for fiscal year 1989.
SEC. 8002. RESTORATION OF FUNDS SEQUESTERED. 2 USC 902 note.
(a) ORDER RESCINDED.—Upon the enactment of this Act and House
Joint Resolution 395,100th Congress,* ^ IQI session, the orders issued
by the President on October 20, 1987, and November 20, 1987,
pursuant to section 252 of the Balanced Budget and Emergency
Deficit Control Act of 1985 are hereby rescinded. 3 CFR, 1987
Ot)) AMOUNTS RESTORED.—Except as otherwise provided in sections Comp., pp. 3ii,
4001, 4041(b), and 4061, any action taken to implement the orders
referred to in subsection (a) shall be reversed, and any sequesterable
resource that has been reduced or sequestered by such orders is
hereby restored, revived, or released and shall be available to the
** Copy read "Congres".
101 STAT. 1330-282 PUBLIC LAW 100-203—DEC. 22, 1987
same extent and for the same purpose as if the orders had not been
issued.
SEC. 8003. TECHNICAL AMENDMENTS TO THE CONGRESSIONAL BUDGET
ACT OF 1974.
(a) REFERENCES IN SECTION.—Except as otherwise specifically pro-
vided, whenever in this section an amendment is expressed in terms
of an amendment to or repeal of a section or other provision, the
reference shall be considered to be made to that section or other
provision of the Congressional Budget and Impoundment Control
Act of 1974.
88 Stat. 297. (b) REVISION OF TABLE OF CONTENTS.—Section 1(b) is amended by
striking "Disapproval of proposed deferrals" and inserting "Pro-
posed deferrals'.
(c) REDESIGNATiON OF SUBPARAGRAPH HEADINGS.—Section 3(7) (as
amended by section 106(a) of the Balanced Budget and Emergency
2 use 622. Deficit Control Reaffirmation Act of 1987) is amended by—
(1) striking section 3(7)(C);
(2) redesignating section 3(7XD) as 3(7)(C);
(3) redesignating section 3(7XE) as 3(7)(D);
(4) redesignating section 3(7)(F) as 3(7XE);
(5) redesignating section 3(7XG) as 3(7XF);
(6) redesignating section 3(7XH) as 3(7XG); and
(7) redesignating section 3(7X1) as 3(7XH).
(d) GRAMMATICAL CLARIFICATION OF SECTION 305(c).—Section 305(c)
(as amended by section 209 of the Balanced Budget and Emergency
2 use 636. Deficit Control Reaffirmation Act of 1987) is amended by inserting a
comma after "therewith".
(e) SUBSTITUTION OF "PROPOSED" FOR "MADE" WITH REGARD TO
AMENDMENTS IN COMMITTEE.—Section 252(cX2XFXii) of the Balanced
Budget and Emergency Deficit Control Act of 1985 (as amended by
section 102(a) of the Balanced Budget and Emergency Deficit Con-
2 use 902. trol Reaffirmation Act of 1987) is amended by striking "made" and
inserting "proposed".
(f) CLARIFICATION OF BUDGET BASEUNE.—Section 251(aX6XB) of the
Balanced Budget and Emergency Deficit Control Act of 1985 (as
amended by section 102(a) of the Balanced Budget and Emergency
2 use 901. Deficit Control Reaffirmation Act of 1987) is amended by striking
out "and" before "contract authority" and by inserting before the
semicolon at the end thereof the following: ", and that authority to
provide insurance through the Federal Housing Administration
Fund is continued".
1 u s e 106 note. SEC. 8004. PREPARATION OF PRINTED ENROLLED BILL.
(a) PREPARATION OF PRINTED ENROLLMENT.—(1) Upon the enact-
ment of this Act enrolled as a hand enrollment, the Clerk of the
House of Representatives shall prepare a printed enrollment of this
Act as in the case of a bill or joint resolution to which sections 106
and 107 of title 1, United States Code, apply. Such enrollment
shall be a correct enrollment of this Act as enrolled in the hand
enrollment.
(2) A printed enrollment prepared pursuant to paragraph (1) may,
in order to conform to customary style for printed laws, include
corrections in spelling, punctuation, indentation, type face, and type
size and other necessary stylistic corrections to the hand enrollment.
Such a printed enrollment shall include notations (in the margins or
as otherwise appropriate) of all such corrections. o^a
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-283
(b) TRANSMITTAL TO PRESIDENT.—A printed enrollment prepared
pursuant to subsection (a) shall be signed by the presiding officers of
both Houses of Congress as a correct printing of the hand enroll-
ment of this Act and shall be transmitted to the President.
(c) CERTIFICATION BY PRESIDENT; LEGAL EFFECT.—Upon certifi-
cation by the President that a printed enrollment transmitted
pursuant to subsection (b) is a correct printing of the hand enroll-
ment of this Act, such printed enrollment shall be considered for all
purposes as the original enrollment of this Act and as valid evidence
of the enactment of this Act.
(d) ARCHIVES.—A printed enrollment certified by the President
under subsection (c) shall be transmitted to the Archivist of the
United States, who shall preserve it with the hand enrollment. In
preparing this Act for publication in slip form and in the United
States Statutes at Large pursuant to section 112 of title 1, United
States Code, the Archivist of the United States shall use the printed
enrollment certified by the President under subsection (c) in lieu of
the hand enrollment.
(e) HAND ENROLLMENT DEFINED.—As used in this section, the term
"hand enrollment" means enrollment in a form other than the
printed form required by sections 106 and 107 of title 1, United
States Code, as authorized by the joint resolution entitled "Joint
resolution authorizing the hand enrollment of the budget reconcili-
ation bill and of the full-year continuing resolution for fiscal year
1988", approved December 1987 (H.J. Res. 426 of the 100th
Congress).
SEC. 8005. ASSET SALES.
In the fiscal year 1989 budget process. Congress commits to pass
legislation sufficient to achieve the budget summit agreement of
$3,500,000,000 of asset sales in fiscal year 1989.
TITLE IX—INCOME SECURITY AND
RELATED PROGRAMS
-. ^ TABLE OF CONTENTS
Subtitle A — O A S D I Provisions
PART 1—COVERAGE AND BENEFITS
Sec. 9001. Coverage of inactive duty military training.
Sec. 9002. Coverage of all cash pay of agricultural employees whose employers
spend $2,500 or more a year for agricultural labor.
Sec. 9003. Coverage of the employer cost of group-term life insurance.
Sec. 9004, Coverage of services performed by one spouse in the employ of the other.
Sec. 9005. Treatment of service performed by an individual in the employ of a
parent.
Sec. 9006. Application of employer taxes to employees' cash tips.
Sec. 9007. Applicability of Government pension offset to certain Federal employees.
Sec. 9008. Modification of agreement with Iowa to provide coverage for certain po-
licemen and firemen.
Sec. 9009. Continuation of disability benefits during appeal.
Sec. 9010. Extension of disability re-entitlement period from 15 months to 36
months.
PART 2—OTHER SOCIAL SECURITY PROVISIONS
Sec. 9021. Moratorium on reductions in attorneys' fees; studies of attorneys' fee
payment system.
Sec. 9022. Corporate directors.
Sec. 9023. Technical corrections.
101 STAT. 1330-284 PUBLIC LAW 100-203—DEC. 22, 1987
PART 3—RAILROAD RETIREMENT PROGRAM
Sec. 9031. Increase in rates of tier 2 Railroad Retirement Tax on employees for
1988 and thereafter.
Sec. 9032. Increase in rates of tier 2 Railroad Retirement Tax on employers for 1988
and thereafter.
Sec. 9033. Commission on Railroad Retirement Reform. -7"
Sec. 9034. Transfer to railroad retirement account. " ' '^ '.
Subtitle B—Provisions Relating to Public Assistance and Unemployment
Compensation
PART 1—AFDC AND SSI AMENDMENTS
Sec. 9101. Permanent extension of disregard of nonprofit organizations' in-kind
assistance to SSI and AFDC recipients.
Sec. 9102. Fraud control under AFDC program.
Sec. 9103. Exclusion of real property when it cannot be sold.
Sec. 9104. Adjustment of penalty where asset is transferred for less than fair
market value.
Sec. 9105. Exclusion of interest on burial accounts.
Sec. 9106. Exception from SSI retrospective accounting for AFDC and certain other
assistance payments.
Sec. 9107. Technical amendment relating to 1986 amendment concerning the treat-
ment of certain couples in medical institutions.
Sec. 9108. Extension of deadline for disabled widows to apply for Medicaid protec-
tion under 1984 amendments.
Sec. 9109. Increase in SSI emergency advance payments.
Sec. 9110. Modification of interim assistance reimbursement program.
Sec. 9111. Special notice to blind recipients.
Sec. 9112. Rehabilitation services for blind SSI recipients.
Sec. 9113. Extending the number of months that an individual in a public emer-
gency shelter can be eligible for SSI.
Sec. 9114. Exclusion of underpayments from resources.
Sec. 9115. Continuation of full benefit standard for individuals temporarily institu-
tionalized.
Sec. 9116. Retention of Medicaid when SSI benefits are lost upon entitlement to
early widow's or widower's insurance benefits.
Sec. 9117. Demonstration program to assist homeless individuals.
Sec. 9118. Assistance to homeless AFDC families.
Sec. 9119. Increase in personal needs allowance for SSI recipients.
Sec. 9120. Exclusion of death benefits to the extent spent on last illness and burial.
Sec, 9121. Demonstration of Family Independence Program.*'
Sec. 9122. Child support demonstration program in New York State.**
Sec. 9123. Technical correction.
PART 2—SOCIAL SERVICES, CHILD WELFARE SERVICES, AND OTHER PROVISIONS
RELATING TO CHILDREN
Sec. 9131. Permanent extension of authority for voluntary foster care placements.
Sec. 9132. 2-year extension of foster care ceiling and of authority to transfer foster
care funds to child welfare services.
Sec. 9133. Mother/infant foster care.
Sec. 9134. Increased funding for social services block grants.
Sec. 9135. Extension of social services block grant and child welfare services pro-
grams to American Samoa.
Sec. 9136. National Commission on Children.*^
Sec. 9137. Boarder babies demonstration project.
Sec. 9138. Study of infants and children with AIDS in foster care.
Sec. 9139. Technical corrections. |^ ,
PART 3—CHILD SUPPORT ENFORCEMENT AMENDMENTS
Sec. 9141. Continuation of child support enforcement services to families no longer
receiving AFDC.
Sec. 9142. Child support enforcement services required for certain families receiv-
ing Medicaid.
Sec. 9143. Repeal of unnecessary child support revolving fund.
*' Copy read "family independence program.".
*•• Copy read "state.'.
*•'' Copy read "commission on children.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-285
PART 4—UNEMPLOYMENT COMPENSATION
Sec. 9151. Determination of amount of Federal share with respect to certain ex-
tended benefits payments.
Sec. 9152. Demonstration program to provide self-employment allowances for eligi-
ble individuals.
Sec. 9153. Extension of FUTA tax.
Sec. 9154. Transfer of funds into the Federal Unemployment Account and the Ex-
tended Unemployment Compensation Account.
Sec. 9155. Interest on advances to the Federal Unemployment Account and the Ex- '•
tended Unemployment Compensation Account.
Sec. 9156. Crediting to the Federal Unemployment Account of interest earned on
advances by the States.
Subtitle C—Manufacturers Excise Tax on Certain Vaccines
Sec. 9201. Manufacturers excise tax on certain vaccines.
Sec. 9202. Vaccine Injury Compensation Trust Fund.
Subtitle D—Pension Provisions
PART I—FULL-FUNDING LIMITATIONS
Sec. 9301. Full-funding limitation for deductions to qualified plans.
PART II—PENSION FUNDING AND TERMINATION REQUIREMENTS ; : ) ; ; t.
Sec. 9302. Short title; definitions.
SUBPART A—ADDITIONAL FUNDING REQUIREMENTS
Sec. 9303. Additional funding requirements.
Sec. 9304. Time for making contributions.
Sec. 9305. Liability of members of controlled group for taxes on failure to meet min-
imum funding standards and to make minimum funding contributions.
Sec. 9307. Other funding changes.
SUBPART B—PLANT TERMINATIONS
Sec. 9311. Limitations on employer reversions upon plan termination.
Sec. 9312. Elimination of section 4049 trust: increase in liability to pension benefit 1'
guaranty corporation and in payments by corporation to participants
and beneficiaries.
Sec. 9313. Standards for termination.
Sec. 9314. Additional amendments relating to plan termination.
SUBPART C—INCREASE IN PREMIUM RATES
Sec. 9331. Increase in premium rates.
SUBPART D—MISCELLANEOUS PROVISIONS
Sec. 9341. Security required upon adoption of plan amendment resulting in signifi-
cant underfunding.
Sec. 9342. Reporting requirements.
Sec. 9343. Coordination of provisions of the Internal Revenue Code of 1986 with pro-
visions of the Employee Retirement Income Security Act of 1974.
Sec. 9344. Clarification regarding the imposition of an annual sanction for pro-
hibited transactions which are continuing in nature.
Sec. 9345. Additional limitations on investment by an individual account plan form-
ing part of a floor-offset arrangement and on investment by an individ-
ual account plan in employer stock.
Sec. 9346. Interest rate on accumulated contributions.
Subtitle E—Miscellaneous Provisions
Sec. 9401. Restoration of trust funds for 1987.
Sec. 9402. 6-month extension of provisions relating to collection of non-tax debts
owed to Federal agencies.
Sec. 9403. Increase in limit on long-term bonds.
Subtitle F—Customs User Fees; Trade and Customs Authorizations
Sec. 9501. Customs user fees.
Sec. 9502. United States International Trade Commission authorizations. '
Sec. 9503. United States Customs Service ** authorizations. *'
Sec. 9504. Office of the United States Trade Representative authorizations.
"• Copy read "service".
101 STAT. 1330-286 PUBLIC LAW 100-203—DEC. 22, 1987
Subtitle A—OASDI Provisions
PART 1—COVERAGE AND BENEFITS ^
SEC. 9001. COVERAGE OF INACTIVE DUTY MILITARY TRAINING.
(a) SOCIAL SECURITY ACT AMENDMENTS.—(1) Paragraph (1) of sec-
42 use 410. tion 210(1) of the Social Security Act is amended to read as follows:
"(1)(1) Except as provided in paragraph (4), the term 'employment'
shall, notwithstanding the provisions of subsection (a) of this section,
include—
"(A) service performed after December 1956 by an individual
as a member of a uniformed service on active duty, but such
term shall not include any such service which is performed
while on leave without pay, and
"(B) service performed after December 1987 by an individual
as a member of a uniformed service on inactive duty training.".
(2) The second indented paragraph following subsection (s) in
42 use 409. section 209 of such Act (relating to service in the uniformed services)
is amended by striking "only his basic pay" and all that follows and
inserting "only (1) his basic pay as described in chapter 3 and section
1009 of title 37, United States Code, in the case of an individual
performing service to which subparagraph (A) of such section
210(1)(1) applies, or (2) his compensation for such service as deter-
mined under section 206(a) of title 37, United States Code, in the
case of an individual performing service to which subparagraph (B)
of such section 210(1)(1) applies.".
(b) FICA AMENDMENTS.—(1) Paragraph (1) of section 3121(m) of
26 use 3121. the Internal Revenue Code of 1986 (relating to inclusion of service in
the uniformed services) is amended to read as follows:
"(1) INCLUSION OF SERVICE.—The term 'employment' shall,
notwithstanding the provisions of subsection (b) of this section,
include—
"(A) service performed by an individual as a member of a
uniformed service on active duty, but such term shall not
include any such service which is performed while on leave
r<I without pay, and
"(B) service performed by an individual as a member of a
uniformed service on inactive duty training.".
(2) Paragraph (2) of section 3121(i) of such Code (relating to
computation of wages for individuals performing service in the
uniformed services) is amended by striking "only his basic pay" and
all that follows and inserting "only (A) his basic pay as described in
chapter 3 and section 1009 of title 37, United States Code, in the case
of an individual performing service to which subparagraph (A) of
such subsection (m)(l) applies, or (B) his compensation for such
service as determined under section 206(a) of title 37, United States
Code, in the case of an individual performing service to which
subparagraph (B) of such subsection (m)(l) applies.".
(c) C O N F O R M I N G A M E N D M E N T . — S e c t i o n 229(a) of t h e Social Secu-
42 u s e 429. rity A c t is a m e n d e d by s t r i k i n g "section 210(1)" a n d i n s e r t i n g
"210(1X1)(A)".
26 u s e 3121 (d) E F F E C T I V E D A T E . — T h e a m e n d m e n t s m a d e by this section shall
"°*®- apply with respect to remuneration paid after December 31, 1987.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-287
SEC. 9002. COVERAGE OF ALL CASH PAY OF AGRICULTURAL EMPLOYEES
WHOSE EMPLOYERS SPEND $2,500 OR MORE A YEAR FOR
AGRICULTURAL LABOR.
(a) SOCIAL SECURITY A C T A M E N D M E N T . — P a r a g r a p h (2) of section
209(h) of t h e Social Security Act is a m e n d e d by striking clause (B) 42 USC 409.
a n d inserting "(B) t h e employer's expenditures for agricultural
labor in such y e a r equal or exceed $2,500;".
(b) PICA A M E N D M E N T . — S u b p a r a g r a p h (B) of section 3121(a)(8) of
t h e I n t e r n a l Revenue Code of 1986 (relating to wages) is amended by 26 USC 3121.
striking clause (ii) a n d inserting "(ii) t h e employer's expenditures for
a g r i c u l t u r a l labor in such y e a r equal or exceed $2,500;".
(c) EFFECTIVE D A T E . — T h e a m e n d m e n t s m a d e by this section shall 26 USC 3121
apply with respect to r e m u n e r a t i o n for agricultural labor paid after note.
December 31, 1987.
SEC. 9003. COVERAGE OF THE EMPLOYER COST OF GROUP-TERM LIFE
INSURANCE.
(a) COVERAGE U N D E R O L D - A G E , SURVIVORS, AND DISABILITY INSUR-
ANCE P R O G R A M . —
(1) SOCIAL SECURITY ACT A M E N D M E N T . — C l a u s e (3) of section
209(b) of t h e Social Security Act is a m e n d e d by striking " d e a t h " 42 USC 409.
and inserting " d e a t h , except t h a t this subsection does not apply
to a p a y m e n t for group-term life i n s u r a n c e to t h e e x t e n t t h a t
such p a y m e n t is includible in t h e gross income of t h e employee
u n d e r t h e I n t e r n a l Revenue Code of 1986".
(2) PICA A M E N D M E N T . — S u b p a r a g r a p h (C) of section 3121(a)(2)
of t h e I n t e r n a l Revenue Code of 1986 (relating to wages) is 26 USC 3121.
a m e n d e d by striking " d e a t h " a n d inserting "death, except t h a t
this p a r a g r a p h does n o t apply to a p a y m e n t for group-term life
i n s u r a n c e to t h e e x t e n t t h a t such p a y m e n t is includible in t h e
gross income of t h e employee".
(b) EFFECTIVE D A T E . — T h e a m e n d m e n t s m a d e by subsection (a) 26 USC 3121
shall apply with respect to group-term life insurance coverage in "ote.
effect after December 31,1987.
SEC. 9004. COVERAGE OF SERVICES PERFORMED BY ONE SPOUSE IN THE
EMPLOY OF THE OTHER.
(a) SOCIAL SECURITY A C T A M E N D M E N T S . —
(1) I N GENERAL.—Subparagraph (A) of section 210(a)(3) of t h e
Social Security Act is a m e n d e d by striking "performed by a n 42 USC 410.
individual in t h e employ of his spouse, a n d service".
(2) EXCEPTION FOR CERTAIN DOMESTIC SERVICE I N THE PRIVATE
HOME OF A SPOUSE.—Paragraph (3) of section 210(a) of such Act
is a m e n d e d by striking so m u c h of s u b p a r a g r a p h (B) a s precedes
clause (i) a n d inserting t h e following:
"(B) Service n o t in t h e course of t h e employer's t r a d e or
business, or domestic service in a private home of t h e employer,
performed by a n individual in t h e employ of his spouse or son or
d a u g h t e r ; except t h a t t h e provisions of this s u b p a r a g r a p h shall
not be applicable to such domestic service performed by a n
individual in t h e employ of his son or d a u g h t e r if—".
Ob) PICA A M E N D M E N T S . —
(1) I N GENERAL.—Subparagraph (A) of section 31210t))(3) of t h e
I n t e r n a l Revenue Code of 1986 (relating to employment) is 26 USC 3121.
a m e n d e d by striking "performed by a n individual in t h e employ
of his spouse, a n d service".
101 STAT. 1330-288 PUBLIC LAW 100-203—DEC. 22, 1987
26 u s e 3121. (2) EXCEPTION FOR CERTAIN DOMESTIC SERVICE I N THE PRIVATE
HOME OF A SPOUSE.—Paragraph (3) of section 3121(b) of such
Code (relating t o employment) is amended by striking so m u c h
of s u b p a r a g r a p h (B) a s precedes clause (i) a n d inserting t h e
.'^^i in . f following:
> "(B) service n o t in t h e course of t h e employer's t r a d e or
business, or domestic service in a private h o m e of t h e employer,
1 performed by a n individual in t h e employ of his spouse or son or
c&i ''?' daughter; except t h a t t h e provisions of this s u b p a r a g r a p h shall
not be applicable to such domestic service performed by a n
individual in t h e employ of his son or d a u g h t e r if—".
26 u s e 3121 (c) EFFECTIVE D A T E . — T h e a m e n d m e n t s m a d e by t h i s section shall
^°^^- apply with respect to r e m u n e r a t i o n paid after December 31, 1987.
SEC. 9005. TREATMENT OF SERVICE PERFORMED BY AN INDIVIDUAL IN
THE EMPLOY OF A PARENT.
42 u s e 410. (a) SOCIAL SECURITY A C T A M E N D M E N T S . — '
(1) A G E BELOW W H I C H SERVICE FOR PARENT IS EXCLUDED FROM
COVERED EMPLOYMENT REDUCED TO AGE 1 8 . — S u b p a r a g r a p h (A) of
section 210(aX3) of t h e Social Security Act (as a m e n d e d by
5t't a < section 9004(a)(1) of this Act) is further amended by striking
"twenty-one" a n d i n s e r t i n g " 1 8 " .
(2) EXCEPTION FOR CERTAIN DOMESTIC SERVICE I N THE PRIVATE
i HOME OF PARENT.—Subparagraph (B) of section 210(a)(3) of such
Act (as a m e n d e d by section 9004(aX2) of this Act) is further
a m e n d e d by inserting " u n d e r t h e age of 21 in t h e employ of his
111? au father or mother, or performed by a n individual" after "individ-
ual" t h e first place it appears,
r Ot)) FICA AMENDMENTS.—
(1) AGE BELOW WHICH SERVICE FOR PARENT IS EXCLUDED FROM
COVERED EMPLOYMENT REDUCED TO AGE 18.—Subparagraph (A) of
I5{: w . { section 31210t)X3) of the Internal Revenue Code of 1986 (as
.•j:6a i amended by section 9004(b)(1) of this Act) is further amended by
striking " 2 1 " and inserting "18".
(2) EXCEPTION FOR CERTAIN DOMESTIC SERVICE IN THE PRIVATE
HOME OF PARENT.—Subparagraph (B) of section 3121(bX3) of such
Code (as amended by section 9004(b)(2) of this Act) is further
amended by inserting "under the age of 21 in the employ of his
' father or mother, or performed by an individual" after "individ-
ual" the first place it appears.
26 use 3121 (c) EFFECTIVE DATE.—The amendments made by this section shall
"°^ apply with respect to remuneration paid after December 31, 1987.
SEC. 9006. APPLICATION OF EMPLOYER TAXES TO EMPLOYEES' CASH
TIPS.
(a) APPUCATION OF TAX TO TIPS.—Section 3121(q) of the Internal
26 use 3121. Revenue Code of 1986 (relating to inclusion of tips for employee
taxes) is amended—
(1) by striking "EMPLOYEE TAXES" in the heading and insert-
ing "BOTH EMPLOYEE AND EMPLOYER TAXES";
(2) by striking "other than for purposes of the taxes imposed
by section 3111";
(3) by striking "remuneration for employment" and inserting
' - • ' ' • '• "remuneration for such employment (and deemed to have been
paid by the employer for purposes of subsections (a) and (b) of
section 3111)"; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-289
(4) by inserting after "at the time received" the following:
"; except that, in determining the employer's liability in
connection with the taxes imposed by section 3111 with respect
to such tips in any case where no statement including such tips ''
was so furnished (or to the extent that the statement so fur-
nished was inaccurate or incomplete), such remuneration shall
be deemed for purposes of subtitle F to be paid on the date on
which notice and demand for such taxes is made to the em-
ployer by the Secretary".
(b) CONFORMING AMENDMENTS.—(1) Subsections (a) and (b) of sec-
tion 3111(a) of such Code (relating to rate of tax on employers) are 26 USC 3iii.
each amended by striking "and (t)".
(2) Section 3121(t) of such Code (relating to special rule) is
repealed.
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 3iii
apply with respect to tips received (and wages paid) on and after "°^®
January 1,1988.
SEC. 9007. APPLICABILITY OF GOVERNMENT PENSION OFFSET TO CER-
TAIN FEDERAL EMPLOYEES.
(a) WIFE'S INSURANCE BENEFITS.—Paragraph (4) of section 202(b) of
the Social Security Act is amended— 42 USC 402.
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by striking subparagraph (A) and inserting the following:
"(A) The amount of a wife's insurance benefit for each month (as
determined after application of the provisions of subsections (q) and
(k)) shall be reduced (but not below zero) by an amount equal to two-
thirds of the amount of any monthly periodic benefit payable to the
wife (or divorced wife) for such month which is based upon her
earnings while in the service of the Federal Government or any
State (or political subdivision thereof, as defined in section 218(bX2))
if, on the last day she was employed by such entity—
"(i) such service did not constitute 'employment' as defined in
section 210, or
"(ii) such service was being performed while in the service of
the Federal Government, and constituted 'employment' as so
defined solely by reason of—
"(I) clause (ii) or (iii) of subparagraph (G) of section
210(aX5), where the lump-sum pa3mient described in such
• ;^)v clause (ii) or the cessation of coverage described in such
clause (iii) (whichever is applicable) was received or oc-
')) curred on or after January 1,1988, or
"(II) an election to become subject to chapter 84 of title 5,
United States Code, made pursuant to law after Decem-
ber 31,1987,
unless subparagraph (B) applies.
The amount of the reduction in any benefit under this subpara-
graph, if not a multiple of $0.10, shall be rounded to the next higher
multiple of $0.10.
"(B) Subparagraph (AXii) shall not apply with respect to monthly
periodic benefits based in whole or in part on service which con-
stituted 'employment' as defined in section 210 if such service was
performed for at least 60 months in the aggregate during the period
beginning January 1, 1988, and ending with the close of the first
calendar month as of the end of which the wife (or divorced wife) is
101 STAT. 1330-290 PUBLIC LAW 100-203—DEC. 22, 1987
eligible for benefits under this subsection and has made a valid
application for such benefits.".
(b) HUSBAND'S INSURANCE BENEFITS.—Paragraph (2) of section
42 use 402. 202(c) of such Act is amended—
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by striking subparagraph (A) and inserting the following:
"(A) The amount of a husband's insurance benefit for each month
(as determined after application of the provisions of subsections (q)
and (k)) shall be reduced (but not below zero) by an amount equal to
ii two-thirds of the amount of any monthly periodic benefit payable to
the husband (or divorced husband) for such month which is based
upon his earnings while in the service of the Federal Government or
any State (or political subdivision thereof, as defined in section
'' 218(b)(2)) if, on the last day he was employed by such entity—
"(i) such service did not constitute 'employment' as defined in
section 210, or
"(ii) such service was being performed while in the service of
the Federal Government, and constituted 'employment' as so
defined solely by reason of—
"(I) clause (ii) or (iii) of subparagraph (G) of section
^^^ ? ' "* 210(a)(5), where the lump-sum payment described in such
• >>) clause (ii) or the cessation of coverage described in such
clause (iii) (whichever is applicable) was received or
v occurred on or after January 1, 1988, or
"(II) an election to become subject to chapter 84 of title 5,
United States Code, made pursuant to law after Decem-
ber 31, 1987,
unless subparagraph (B) applies.
The amount of the reduction in any benefit under this subpara-
graph, if not a multiple of $0.10, shall be rounded to the next higher
multiple of $0.10.
"(B) Subparagraph (A)(ii) shall not apply with respect to monthly
periodic benefits based in whole or in part on service which con-
stituted 'employment' as defined in section 210 if such service was
performed for at least 60 months in the aggregate during the period
beginning January 1, 1988, and ending with the close of the first
calendar month as of the end of which the husband (or divorced
husband) is eligible for benefits under this subsection and has made
a valid application for such benefits.".
(c) WIDOW'S INSURANCE BENEFITS.—Paragraph (7) of section 202(e)
of such Act is amended—
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by striking subparagraph (A) and inserting the following:
"(A) The amount of a widow's insurance benefit for each month
(as determined after application of the provisions of subsections (q)
and (k), paragraph (2)(D), and paragraph (3)) shall be reduced (but
not below zero) by an amount equal to two-thirds of the amount of
any monthly periodic benefit payable to the widow (or surviving
divorced wife) for such month which is based upon her earnings
while in the service of the Federal Government or any State (or
political subdivision thereof, as defined in section 218(bX2)) if, on the
last day she was employed by such entity—
"(i) such service did not constitute 'employment' as defined in
section 210, or
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-291
"(ii) such service was being performed while in the service of
the Federal Government, and constituted 'employment' as so
defined solely by reason of—
"(I) clause (ii) or (iii) of subparagraph (G) of section
210(a)(5), where the lump-sum payment described in such
clause (ii) or the cessation of coverage described in such
clause (iii) (whichever is applicable) was received or : * ;
•V /: occurred on or after January 1, 1988, or
"(II) an election to become subject to chapter 84 of title 5,
United States Code, made pursuant to law after Decem-
ber 31, 1987,
unless subparagraph (B) applies.
The amount of the reduction in any benefit under this subpara-
graph, if not a multiple of $0.10, shall be rounded to the next higher
multiple of $0.10.
"(B) Subparagraph (A)(ii) shall not apply with respect to monthly
periodic benefits based in whole or in part on service which con-
stituted 'employment' as defined in section 210 if such service was
performed for at least 60 months in the aggregate during the period
beginning January 1, 1988, and ending with the close of the first
calendar month as of the end of which the widow (or surviving
divorced wife) is eligible for benefits under this subsection and has
made a valid application for such benefits.".
(d) WIDOWER'S INSURANCE BENEFITS.—Paragraph (2) of section
202(0 of such Act is amended— 42 USC 402.
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by striking subparagraph (A) and inserting the following:
"(A) The amount of a widower's insurance benefit for each month
(as determined after application of the provisions of subsections (q)
and (k), paragraph (3)(D), and paragraph (4)) shall be reduced (but
not below zero) by an amount equal to two-thirds of the amount of
any monthly periodic benefit payable to the widower (or surviving
divorced husband) for such month which is based upon his earnings
while in the service of the Federal Government or any State (or
political subdivision thereof, as defined in section 218(b)(2)) if, on the
last dav he was employed by such entity—
'(i) such service did not constitute 'employment' as defined in
section 210, or
"(ii) such service was being performed while in the service of
the Federal Government, and constituted 'employment' as so
defined solely by reason of—
"(I) clause (ii) or (iii) of subparagraph (G) of section
210(a)(5), where the lump-sum payment described in such
clause (ii) or the cessation of coverage described in such '
clause (iii) (whichever is applicable) was received or oc-
curred on or after January 1, 1988, or
"(II) an election to become subject to chapter 84 of title 5,
United States Code, made pursuant to law after Decem-
ber 31, 1987,
unless subparagraph (B) applies.
The amount of the reduction in any benefit under this subpara-
graph, if not a multiple of $0.10, shall be rounded to the next higher
multiple of $0.10. ' ' ''' ' "
"(B) Subparagraph (A)(ii) shall not apply with respect to monthly
periodic benefits based in whole or in part on service which con-
stituted 'employment' as defined in section 210 if such service was
101 STAT. 1330-292 PUBLIC LAW 100-203—DEC. 22, 1987
performed for at least 60 months in the aggregate during the period
beginning January 1, 1988, and ending with the close of the first
calendar month as of the end of which the widower (or surviving
divorced husband) is eligible for benefits under this subsection and
has made a valid application for such benefits.",
(e) MOTHER'S AND FATHER'S INSURANCE BENEFITS.—Paragraph (4)
42 use 202. of section 202(g) of such Act is amended—
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by striking subparagraph (A) and inserting the following:
"(A) The amount of a mother s or father's insurance benefit for
each month (as determined after application of the provisions of
subsection (k)) shall be reduced (but not below zero) by an amount
equal to two-thirds of the amount of any monthly periodic benefit
payable to the individual for such month which is based upon the
individual's earnings while in the service of the Federal Govern-
ment or any State (or political subdivision thereof, as defined in
section 218(b)(2)) if, on the last day the individual was employed by
such entity—
"(i) such service did not constitute 'employment' as defined in
section 210, or
"(ii) such service was being performed while in the service of
the Federal Government, and constituted 'employment' as so
defined solely by reason of—
* I }«] ii "(I) clause (ii) or (iii) of subparagraph (G) of section
210(a)(5), where the lump-sum payment described in such
clause (ii) or the cessation of coverage described in such
clause (iii) (whichever is applicable) was received or oc-
curred on or after January 1, 1988, or
"(II) an election to become subject to chapter 84 of title 5,
United States Code, made pursuant to law after Decem-
ber 31, 1987,
unless subparagraph (B) applies.
The amount of the reduction in any benefit under this subpara-
graph, if not a multiple of $0.10, shall be rounded to the next higher
multiple of $0.10.
"(B) Subparagraph (AXii) shall not apply with respect to monthly
periodic benefits based in whole or in part on service which con-
stituted 'employment' as defined in section 210 if such service was
performed for at least 60 months in the aggregate during the period
beginning January 1, 1988, and ending with the close of the first
calendar month as of the end of which the individual is eligible for
benefits under this subsection and has made a valid application for
such benefits.".
42 use 402 note. (f) EFFECTIVE DATE.—The amendments made by this section shall
apply only with respect to benefits for months after December 1987;
except that nothing in such amendments shall affect any exemption
(from the application of the pension offset provisions contained in
subsection (b)(4), (cX2), (eX7), (fX2), or (gX4) of section 202 of the Social
Security Act) which any individual may have by reason of subsec-
tion (g) or (h) of section 334 of the Social Security Amendments of
1977.
42 u s e 418 note. SEC. 9008. MODIFICATION OF AGREEMENT WITH IOWA TO PROVIDE COV-
ERAGE FOR CERTAIN POLICEMEN AND FIREMEN.
(a) IN GENERAL.—Notwithstanding subsection (dX5XA) of section
218 of the Social Security Act £ind the references thereto in subsec-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-293
tions (d)(1) and (d)(3) of such section 218, the agreement with the
State of Iowa heretofore entered into pursuant to such section 218
may, at any time prior to January 1, 1989, be modified pursuant to
subsection (c)(4) of such section 218 so as to apply to services
performed in policemen's or firemen's positions required to be cov- ' , . .=
ered by a retirement system pursuant to section 410.1 of the Iowa
Code as in effect on July 1, 1953, if the State of Iowa has at any time
prior to the date of the enactment of this Act paid to the Secretary
of the Treasury, with respect to any of the services performed in
such positions, the sums prescribed pursuant to subsection (e)(1) of
such section 218 (as in effect on December 31, 1986, with respect to
payments due with respect to wages paid on or before such date). dSi € U i '
(b) SERVICE TO B E COVERED.—Notwithstanding the provisions of
subsection (e) of section 218 of the Social Security Act (as so redesig-
nated by section 9002(c)(1) of the Omnibus Budget Reconciliation Act
of 1986)), any modification in the agreement with the State of Iowa
under subsection (a) shall be made effective with respect to—
(1) all services performed in any policemen's or firemen's ,
position to which the modification relates on or after January 1,
1987, and
(2) all services performed in such a position before January 1,
1987, with respect to which the State of Iowa has paid to the
Secretary of the Treasury the sums prescribed pursuant to
subsection (e)(1) of such section 218 (as in effect on December 31,
1986, with respect to payments due with respect to wages paid
on or before such date) at the time or times established pursu-
ant to such subsection (e)(1), if and to the extent that—
(A) no refund of the sums so paid has been obtained, or
(B) a refund of part or all of the sums so paid has been
obtained but the State of Iowa repays to the Secretary of
the Treasury the amount of such refund within 90 days
after the date on which the modification is agreed to by the
.. State and the Secretary of Health and Human Services.
SEC. 9009. CONTINUATION OF DISABILITY BENEFITS DURING APPEAL.
Subsection (g) of section 223 of the Social Security Act is 42USC423.
amended—
(1) in paragraph (l)(iii), by striking "June 1988" and inserting
"June 1989"; and
(2) in paragraph (3)(B), by striking "January 1, 1988" and
inserting "January 1, 1989".
SEC. 9010. EXTENSION OF DISABILITY RE-ENTITLEMENT PERIOD FROM 15
MONTHS TO 36 MONTHS.
(a) DiSABiUTY INSURANCE BENEFITS.—Paragraph (1) of section
223(a) of the Social Security Act is amended by striking "15 months"
and inserting "36 months".
Ob) CHILD'S INSURANCE BENEFITS BASED ON DISABILITY.—Clause (i)
of section 202(dXl)(G) of such Act is amended by striking "15 42USC402.
months" and inserting "36 months".
(c) WIDOW'S INSURANCE BENEFITS BASED ON DISABIUTY.—Para-
graph (1) of section 202(e) of such Act is amended, in subclause (II) of
the last sentence, by striking "15 months" and inserting "36
months".
(d) WIDOWER'S INSURANCE BENEFITS BASED ON DISABILITY.—Para-
graph (1) of section 202(f) of such Act is amended, in subclause (II) of
101 STAT. 1330-294 PUBLIC LAW 100-203—DEC. 22, 1987
the last sentence, by striking "15 months" and inserting "36
months",
(e) CONFORMING AMENDMENTS.—
(1) TERMINATION OF PERIOD OF DISABILITY.—Subparagraph (D)
42 use 416. of section 216(i)(2) of such Act is amended by striking "15-
month" and inserting "36-month".
(2) TERMINATION OF BENEFITS DURING RE-ENTITLEMENT
42 use 423. PERIOD.—Subsection (e) of section 223 of such Act is amended by
striking "15-month" and inserting "36-month".
(3) SPECIAL RULE FOR * ' DETERMINATION OF CONTINUED MEDI-
CARE ELIGIBILITY BASED ON ENTITLEMENT TO DISABILITY BENE-
42 use 426. FITS.—Section 226(b) of such Act is amended by adding at the
end the following new sentence: "In determining when an
individual's entitlement or status terminates for purposes of the
preceding sentence, the second sentence of section 223(a) shall
be applied as though the term '36 months' (in such second
sentence) read '15 months'.".
42 use 402 note. (f) EFFECTIVE DATE.—The amendments made by this section shall
take effect January 1, 1988, and shall apply with respect to—
(1) individuals who are entitled to benefits which are payable
under subsection (d)(l)(B)(ii), (d)(6)(A)(ii), (d)(6)(B), (e)(l)(B)(ii), or
(f)(l)(B)(ii) of section 202 of the Social Security Act or subsection
(a)(1) of section 223 of such Act for any month after December
1987, and
(2) individuals who are entitled to benefits which are payable
under any provision referred to in paragraph (1) for any month
before January 1988 and with respect to whom the 15-month
period described in the applicable provision amended by this
section has not elapsed as of January 1, 1988.
PART 2—OTHER SOCIAL SECURITY PROVISIONS
SEC. 9021. MORATORIUM ON REDUCTIONS IN ATTORNEYS' FEES; STUDIES
OF ATTORNEYS' FEE PAYMENT SYSTEM.
(a) MORATORIUM.—(1) The provisions of the memorandum of the
Associate Commissioner of Social Security dated March 31, 1987
(relating to revised delegations of authority for administrative law
judges to determine fees of representatives) which amend sections
1-220 through 1-226 of the Office of Hearings and Appeals Staff
Guides and Programs Digest (commonly referred to as the OHA
Handbook), and Interim Circular No. 122 (relating to the determina-
tion authority regarding fees for representation of claimants), are
hereby declared to be null and void. The preceding sentence shall
apply with respect to all attorneys' fees finally authorized in connec-
tion with claims for benefits under title II of the Social Security Act
on and after the date of the enactment of this Act, regardless of
when the legal services involved were performed; and no reconsider-
ation of any such fee finally authorized prior to that date shall be
required.
(2) Until July 1, 1989, neither the Secretary nor the Social Secu-
rity Administration may modify any of the rules and regulations
relating to attorneys' fees in connection with claims for benefits
under title II of the Social Security Act.
*' Copy read "FOR".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-295
(b) STUDIES.—(1) The Secretary of Health and Human Services
shall conduct a study of the attorneys' fee payment process under
title II of the Social Security Act. Such study shall—
(A) assess the levels of reimbursement to attorneys, giving
consideration to the contingent nature of most arrangements
between claimants and their legal representatives, and propose
alternative methods for establishing fees which take the nature
of these arrangements into account, and
(B) suggest changes aimed at eliminating unnecessary delays
in the approval and payment of attorneys' fees and thereby
streamlining the payment process. '' "'
In conducting this study, the Secretary shall consult with individ-
uals who represent the views of attorneys and with others who
represent the views of claimants.
(2) At the same time, the Comptroller General shall conduct a
study of the fee approval system, including at a minimum—
(A) a study of the impact of the current system on claimants
and attorneys,
(B) an identification of obstacles to the timely payment of
attorneys' fees under present law, and
(C) an assessment of the effect, if any, which the reduced limit
on attorneys' fees in effect immediately prior to the enactment
of this Act has had on access to legal representation by
applicants for disability insurance benefits.
(3) 'The studies required by paragraphs (1) and (2), along with any
recommendations resulting therefrom, shall be submitted to the
Congress no later than July 1, 1988.
SEC. 9022. CORPORATE DIRECTORS.
(a) SOCIAL SECURITY ACT AMENDMENT.—Section 211(a) of the
Social Security Act is amended by adding at the end thereof the 42 use 4ii.
following new paragraph:
"Any income of an individual which results from or is attributable
to the performance of services by such individual as a director of a j ;:.• >
corporation during any taxable year shall be deemed to have been
derived (and received) by such individual in that year, at the time
the services were performed, regardless of when the income is
actually paid to or received by such individual (unless it was actu-
ally paid and received prior to that year).".
(b) SECA AMENDMENT.—Section 1402(a) of the Internal Revenue
Code of 1986 (relating to definition of net earnings from self-employ- 26 USC 1402.
ment) is amended by adding at the end thereof the following new
paragraph:
"Any income of an individual which results from or is attributable
to the performance of services by such individual gis a director of a
corporation during any taxable year shall be deemed to have been
derived (and received) by such individual in that year, at the time
the services were performed, regardless of when the income is
actually paid to or received by such individual (unless it was actu-
ally paid and received prior to that year).".
(c) EFFECTIVE DATE.—The amendments made by this section shall
apply with respect to services performed in taxable years beginning
on or after January 1, 1988.
SEC. 9023. TECHNICAL CORRECTIONS.
(a) The heading of section 210(p) of the Social Security Act is 42 USC 410.
amended to read as follows:
91-194 O - 90 - 35 : QL.3 Part 2
101 STAT. 1330-296 PUBLIC LAW 100-203—DEC. 22, 1987
"Medicare Qualified Government Employment".
42 use 411. (b)(1) Section 211(a)(7) of such Act is amended—
(A) by inserting "and" before "section 911"; and
(B) by striking "and section 931 (relating to income from
sources within possessions of the United States) of the Internal
Revenue Code of 1954".
(2) Section 211(a)(8) of such Act is amended to read as follows:
"(8) The exclusion from gross income provided by section 931
of the Internal Revenue Code of 1986 shall not apply;".
42 use 418. (c) Section 218(v) of such Act is amended— ., , , ,, . ...
(1) by striking "(v)" and inserting "(n)";
(• (2) by striking paragraph (3); and
(3) by redesignating paragraphs (4) and (5) as paragraphs (3)
and (4) respectively.
26 use 3121. (d) Section 3121(aX5) of the Internal Revenue Code of 1986 is
amended—
(1) by striking "; or" at the end of subparagraph (F) and
f. inserting ", or"; and
(2) by striking the comma at the end of subparagraph (G) and
j inserting a semicolon.
PART 3—RAILROAD RETIREMENT PROGRAM
SEC. 9031. INCREASE IN RATES OF TIER 2 RAILROAD RETIREMENT TAX
ON EMPLOYEES FOR 1988 AND THEREAFTER.
(a) I N GENERAL.—Subsection (b) of section 3201 of t h e I n t e r n a l
Revenue Code of 1986 (relating to tier 2 employee tax) is a m e n d e d to
read as follows:
"OJ) TIER 2 T A X . — I n addition to o t h e r taxes, t h e r e is hereby
.ItivDfclf imposed on t h e income of each employee a t a x equal to 4.90 percent
of t h e compensation received d u r i n g a n y calendar y e a r by such
employee for services rendered by such employee.".
26 u s e 3201 (b) EFFECTIVE D A T E , — T h e a m e n d m e n t m a d e by t h i s section shall
"°*®' apply with respect to compensation received after December 31,
1987.
SEC. 9032. INCREASE IN RATES OF TIER 2 RAILROAD RETIREMENT TAX
ON EMPLOYERS FOR 1988 AND THEREAFTER.
(a) IN GENERAL.—Subsection (b) of section 3221 of the Internal
• ' * '^''- Revenue Code of 1986 (relating to tier 2 employer tax) is amended to
read as follows:
"Ot)) TIER 2 TAX.—In addition to other taxes, there is hereby
imposed on every employer an excise tax, with respect to having
individuals in his employ, equal to 16.10 percent of the compensa-
tion paid during any calendar year by such employer for services
rendered to such employer.".
26 use 3221 (b) EFFECTIVE DATE.—The amendments made by this section shall
^°^- apply with respect to compensation paid after December 31, 1987.
45 u s e 231n SEC. 9033. COMMISSION ON RAILROAD RETIREMENT REFORM.
note.
(a) COMMISSION ON RAILROAD RETIREMENT REFORM.—There is
established a commission to be known as the Commission on
Railroad Retirement Reform (in this section referred to as the
"Commission").
- ' (b) STUDY.—The Commission shall conduct a comprehensive study
of the issues pertaining to the long-term financing of the railroad
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-297
retirement system (in this section referred to as the "system") and ^ '
the system's short-term and long-term solvency. The Commission Reports,
shall submit a report containing a detailed statement of its findings
and conclusions together with recommendations to the Congress for
revisions in, or alternatives to, the current system to assure the
provision of retirement benefits to former, present, and future
railroad employees on an actuarially sound basis. The study will
take into account—
(1) the possibility of restructuring the financing of railroad
retirement benefits through increases in the tier 2 tax rate,
increases in the tier 2 tax wage base, the imposition of a tax on
operating revenues, revisions in the investment policy of the
railroad retirement pension fund, and establishing a privately
funded and administered railroad industry pension plan;
(2) the economic outlook for the railroad industry, and the
nature of the relationships between the railroad retirement
system, levels of railroad employment and compensation, and
the performance of the rail sector;
(3) the ability of the system under current law to pay benefits
to current and future retirees and other beneficiaries;
(4) the financial relationship of the system to the railroad
unemployment insurance system, the social security system,
and the General Fund; and
(5) any other matters which the Commission considers would
be necessary, appropriate, or useful to the Congress in develop-
ing legislation to reform the system.
(c) MEMBERSHIP OF THE COMMISSION.—
(1) NUMBER AND APPOINTMENT.—The Commission shall be
composed of seven members, as follows:
(A) four individuals appointed by the President— President of U.S.
(i) one of whom shall be appointed on the basis of
recommendations made by representatives of em-
ployers (as defined in section 1(a) of the Railroad
Retirement Act of 1974) so as to provide representation
on the Commission satisfactory to the largest number
of employers concerned,
(ii) one of whom shall be appointed on the basis of
recommendations made by representatives of em-
ployees (as defined in section 1(b) of the Railroad
Retirement Act of 1974) so as to provide representation
on the Commission satisfactory to the largest number
of employees concerned,
5 (iii) one of whom shall be appointed on the basis of
recommendations made by representatives of com-
muter railroads, and
(iv) one of whom shall be appointed from members of
the public;
(B) one individual appointed by the Speaker of the House
't of Representatives from among members of the public;
ZYd (C) one individual appointed by the President pro tem-
pore of the Senate from among members of the public; and
'' (D) one individual appointed by the Comptroller General
from among members of the public with expertise in the
fields of retirement systems and pension plans.
All public members of the Commission shall be appointed from
among individuals who are not in the employment of and are
not j)ecuniarily or otherwise interested in any employer (as so
101 STAT. 1330-298 PUBLIC LAW 100-203—DEC. 22, 1987
President of U.S. defined) or organization of employees (as so defined). In making
appointments under this section, the President, the Speaker of
the House of Representatives, and the President pro tempore of
the Senate shall ensure that the members of the Commission,
collectively, possess special knowledge of retirement income
policy, social insurance, private pensions, taxation, and the
structure of the transportation industry. A vacancy in the
Commission shall be filled in the manner in which the original
appointment was made.
(2) PAY.—Members of the Commission shall serve without
y compensation, but shall be reimbursed for travel, subsistence,
and other necessary expenses incurred in the performance of
their duties as members of the Commission.
(3) QUORUM.—Five members of the Commission shall con-
stitute a quorum but a lesser number may hold hearings.
(4) CHAIRMAN.—The members of the Commission shall elect a
Chairman ^'° from among the membership.
(d) STAFF OF COMMISSION; EXPERTS AND CONSULTANTS.—
(1) STAFF.—Subject to such rules as may be prescribed by the
Commission, the Chairman may appoint and fix the pay of such
I personnel as the Chairman considers appropriate.
(2) APPLICABILITY OF CERTAIN CIVIL SERVICE LAWS.—The staff
of the Commission may be appointed without regard to the
} provisions of title 5, United States Code, governing appoint-
ments in the competitive service, and may be paid without
regard to the provisions of chapter 51 and subchapter III of
chapter 53 of such title relating to classification and General
•i Schedule pay rates, except that no individual so appointed may
receive pay in excess of the annual rate of basic pay payable for
; ' *; '.IPS. • GS-18 of the General Schedule.
(3) EXPERTS AND CONSULTANTS.—Subject to such rules as may
be prescribed by the Commission, the Chairman may procure
I temporary and intermittent services under section 31090?) of
(• title 5 of the United States Code, but at rates for individuals not
to exceed the daily equivalent of the maximum annual rate of
basic pay payable for GS-18 of the General Schedule.
; (4) STAFF OF FEDERAL AGENCIES.—Upon request of the
; Commission, the Railroad Retirement Board and any other
J Federal agency may detail, on a reimbursable basis, any of the
r personnel thereof to the Commission to assist the Commission
in carrying out its duties under this section.
(e) ACCESS TO OFFICIAL DATA AND SERVICES.—
(1) OFFICIAL DATA.—The Commission may, as appropriate,
.; secure directly from any department or agency of the United
States information necessary to enable it to carry out this
I section. Upon request of the Chairman of the Commission, the
head of such department or agency shall, as appropriate, fur-
t nish such information to the Commission.
(2) MAILS.—The Commission may use the United States mails
in the same manner and under the same conditions as other
; departments and agencies of the United States.
(3) ADMINISTRATIVE SUPPORT SERVICES.—The Administrator of
General Services shall provide to the Commission on a re-
imbursable basis such administrative support services as the
Commission may request.
(f) REPORT.—The Commission shall transmit a report to the Presi-
dent and to each House of the Congress not later than October 1,
"'"Copy read "chairman".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-299
1989. The report shall contain a detailed statement of the findings
and conclusions of the Commission, together with its legislative
recommendations.
(g) TERMINATION.—The Commission shall cease to exist 60 days
after submitting its report pursuant to subsection (f).
(h) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be
appropriated the sum of $1,000,000 for purposes of this section, to
remain available until expended but in no event beyond the date of
termination provided in subsection (g).
SEC. 9034. TRANSFER TO RAILROAD RETIREMENT ACCOUNT.
Subsection (c)(1)(A) of section 224 of the Railroad Retirement
Solvency Act of 1983 (relating to section 72(r) revenue increase 45 USC 23ln
transferred to certain railroad accounts) is amended— "°*®
(1) by inserting "(other than amounts described in subpara-
graph (B))" after "amounts";
(2) by striking "1988" and inserting "1989"; and
(3) by striking the last sentence.
Subtitle B—Provisions Relating to Public
Assistance and Unemployment Compensation
PART 1—AFDC AND SSI AMENDMENTS
SEC. 9101. PERMANENT EXTENSION OF DISREGARD OF NONPROFIT
ORGANIZATIONS' IN-KIND ASSISTANCE TO SSI AND AFDC
RECIPIENTS.
Effective as of October 1, 1987, section 2639(d) of the Deficit Effective date.
Reduction Act of 1984 is amended by striking "; but" and all that 42 USC 602 note,
follows and inserting a period.
SEC. 9102. FRAUD CONTROL UNDER AFDC PROGRAM.
(a) IN GENERAL.—Part A of title IV of the Social Security Act is
amended by adding at the end the folloviring new section:
"FRAUD CONTROL
"SEC. 416. (a) Any State, in the administration of its State plan 42 USC 616.
approved under section 402, may elect to establish and operate a
fraud control program in accordance with this section.
"(b) Under any such program, if an individual who is a member of
a family applying for or receiving aid under the State plan approved ' '•
under section 402 is found by a Federal or State court or pursuant to
an administrative hearing meeting requirements determined in
regulations of the Secretary, on the basis of a plea of guilty or nolo
contendere or otherwise, to have intentionally—
"(1) made a false or misleading statement or misrepresented,
concealed, or withheld facts, or
"(2) committed any act intended to mislead, misrepresent,
conceal, or withhold facts or propound a falsity,
for the purpose of establishing or maintaining the family's eligibility
for aid under such State plan or of increasing (or preventing a
reduction in) the amount of such aid, then the needs of such
individual shall not be taken into account in making the determina-
tion under section 402(3X7) with respect to his or her family (A) for a
period of 6 months upon the first occasion of any such offense, (B) for
101 STAT. 1330-300 PUBLIC LAW 100-203—DEC. 22, 1987
a period of 12 months upon the second occasion of any such offense,
and (C) permanently upon the third or a subsequent occasion of any
such offense.
"(c) The State agency involved shall proceed against any individ-
ual alleged to have committed an offense described in subsection (b)
either by way of administrative hearing or by referring the matter
to the appropriate authorities for civil or criminal action in a court
of law. The State agency shall coordinate its actions under this
section with any corresponding actions being taken under the food
stamp program in any case where the factual issues involved arise
from the same or related circumstances.
"(d) Any period for which sanctions are imposed under subsection
(b) shall remain in effect, without possibility of administrative stay,
unless and until the finding upon which the sanctions were imposed
is subsequently reversed by a court of appropriate jurisdiction; but
in no event shall the duration of the period for which such sanctions
are imposed be subject to review.
"(e) The sanctions provided under subsection (b) shall be in addi-
tion to, and not in substitution for, any other sanctions which may
be provided for by law with respect to the offenses involved.
"(f) Each State which has elected to establish and operate a fraud
control program under this section must provide all applicants for
aid to families with dependent children under its approved State
plan, at the time of their application for such aid, with a written
notice of the penalties for fraud which are provided for under this
section.".
42 use 602. (b) STATE PLAN REQUIREMENT.—Section 402(a) of such Act is
amended—
r,ru ,j > , *, (1) by striking "and" after the semicolon at the end of para-
graph (38);
(2) by striking the period at the end of paragraph (39) and
inserting "; and"; and
^^ (3) by inserting immediately after paragraph (39) the follow-
ing new paragraph:
"(40) provide, if the State has elected to establish and operate
a fraud control program under section 416, that the State will
r. ,rn k .. submit to the Secretary (with such revisions as may from time
y to time be necessary) a description of and budget for such
program, and will operate such program in full compliance with
that section.".
42 use 603. (c) FEDERAL MATCHING.—Section 403(aX3) of such Act is
amended—
(1) by striking "and" after the final comma in subpara-
0 graph (B);
(2) by redesignating subparagraph (C) as subparagraph (D);
vj (3) by inserting after subparagraph (B) the following new
subparagraph:
,: "(C) 75 percent of so much of such expenditures as are for
the costs of carrying out a fraud control program under
vih't section 416, including costs related to the investigation,
u prosecution, and administrative hearing of fraudulent cases
and the making of any resultant collections, and"; and
(4) by striking "(C)" in the matter following subparagraph (D)
*. (as redesignated by paragraph (2) of this subsection) and
?" inserting "(D)". :iv,, ,^ u.* • .. - < - ..•.-^^..--j-i-. •-.-•: ^ .y.:ri*ta
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-301
®* (d) EFFECTIVE DATE.—The amendments made by this section 42 u s e 602 note.
shall become effective April 1, 1988.
SEC. 9103. EXCLUSION OF REAL PROPERTY WHEN IT CANNOT BE SOLD.
(a) IN GENERAL.—Section 1613(b) of the Social Security Act is 42 u s e 1382b.
amended—
(1) by inserting "(1)" after "(b)"; and
(2) by adding at the end the following new paragraph:
"(2) Notwithstanding the provisions of paragraph (1), the Sec-
retary shall not require the disposition of any real property for so
long as it cannot be sold because (A) it is jointly owned (and its sale
would cause undue hardship, due to loss of housing, for the other
owner or owners), (B) its sale is barred by a legal impediment, or (C)
as determined under regulations issued by the Secretary, the
owner's reasonable efforts to sell it have been unsuccessful.".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1382b
shall become effective April 1, 1988. note.
SEC. 9104. A D J U S T M E N T OF PENALTY WHERE ASSET IS TRANSFERRED
FOR LESS THAN FAIR MARKET VALUE.
*^ (a) IN GENERAL.—Section 1613(c) of the Social Security Act is
amended—
(1) by inserting immediately after "the exclusions under
subsection (a)" in paragraph (1) the following: ", and subject to
paragraph (4) of this subsection"; and
(2) by adding at the end the following new paragraph:
"(4) The Secretary shall by regulation provide for suspending the Regulations.
application of paragraph (1) to the extent (in any instance) that the
Secretary determines that such suspension is necessary to avoid
undue hardship.".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1382b
note.
shall become effective April 1, 1988.
SEC. 9105. EXCLUSION OF INTEREST ON BURIAL ACCOUNTS.
(a) IN GENERAL.—Section 1613(d) of the Social Security Act is
amended—
(1) in paragraph (1), by striking "if the inclusion" and all that
follows and inserting a period; and
(2) in paragraph (3), by striking "aside" and inserting "aside
in cases where the inclusion of any portion of the amount would
cause the resources of such individual, or of such individual and
spouse, to exceed the limits specified in paragraph (1) or (2)
(whichever may be applicable) of section 1611(a)'.
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 u s e 1382b
shall become effective April 1, 1988. note.
SEC. 9106. EXCEPTION FROM SSI RETROSPECTIVE ACCOUNTING FOR
AFDC AND CERTAIN OTHER ASSISTANCE PAYMENTS.
(a) IN GENERAL.—Section 1611(c) of the Social Security Act is 42 u s e 1382.
amended—
(1) by striking "paragraphs (2), (3), and (4)" in paragraph (1)
and inserting "paragraphs (2), (3), (4), and (5)";
(2) by redesignating paragraphs (5) and (6) as paragraphs (6)
and (7), respectively; and
** Copy read "EFFECTIVE DATE.—".
*' Copy read "IN GENERAL.—".
101 STAT. 1330-302 PUBLIC LAW 100-203—DEC. 22, 1987
(3) by inserting after paragraph (4) the following new para-
graph:
"(5) Notwithstanding paragraphs (1) and (2), any income which is
paid to or on behalf of an individual in any month pursuant to (A) a
State plan approved under part A of title IV of this Act (relating to
aid to families with dependent children), (B) section 472 of this Act
(relating to foster care assistance), (C) section 412(e) of the Immigra-
tion and Nationality Act (relating to assistance for refugees), (D)
section 501(a) of Public Law 96-422 (relating to assistance for Cuban
and Haitian entrants), or (E) the Act of November 2, 1921 (42 Stat.
208), as amended (relating to assistance furnished by the Bureau of
Indian Affairs), shall be taken into account in determining the
amount of the benefit under this title of such individual (and his
eligible spouse, if any) only for that month, and shall not be taken
into account in determining the amount of the benefit for any other
month.".
42 u s e 1382 (b) EFFECTIVE DATE.—The amendments made by subsection (a)
note. shall become effective April 1, 1988.
SEC. 9107. TECHNICAL AMENDMENT RELATING TO 1986 AMENDMENT
s r; CONCERNING THE TREATMENT OF CERTAIN COUPLES IN
MEDICAL INSTITUTIONS.
Effective date. Effective November 10, 1986, section 1611(eX5) of the Social Secu-
42 u s e 1382. rity Act is amended—
(1) by striking "sharing a room or comparable accommodation
in a hospital, home, or facilitv" and inserting "living in the
same hospital, home, or facility '; and
(2) by striking "shared such a room or accommodation" and
inserting "lived in the same such hospital, home, or facility".
SEC. 9108. EXTENSION OF DEADLINE FOR DISABLED WIDOWS TO APPLY
FOR MEDICAID PROTECTION UNDER 1984 AMENDMENTS.
Effective date. Effective July 1, 1987, section 1634(b)(3) of the Social Security Act
42 u s e 1383c. is amended by striking "d'.iring the 15-month period beginning with
the month in which this subsection is enacted" and inserting "no
later than July 1,1988".
SEC. 9109. INCREASE IN SSI EMERGENCY ADVANCE PAYMENTS.
42 u s e 1383. (a) IN GENERAL.—Section 1631(aX4XA) of the Social Security Act is
amended by striking "a cash advance against such benefits in an
amount not exceeding $100" and inserting "a cash advance against
such benefits, including any federally-administered State supple-
mentary payments, in an amount not exceeding the monthly
amount that would be payable to an eligible individual with no
other income for the first month of such presumptive eligibility".
42 u s e 1383 (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall become effective on the date of the enactment of this Act.
SEC. 9110. MODIFICATION OF INTERIM ASSISTANCE REIMBURSEMENT
PROGRAM.
(a) I N GENERAL.—The first sentence of section 1631(gX2) of the
Social Security Act is amended by striking "at the time the Sec-
retary makes the first payment of benefits' and inserting "at the
time the Secretary makes the first payment of benefits with respect
to the period described in clause (A) or (B) of paragraph (3)".
Ob) DEFINITION OF INTERIM ASSISTANCE.—Section 1631(gX3) of such
Act is amended—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-303
(1) by inserting "(A)" after "basic needs"; and
(2) by inserting before the period at the end the following:
", or (B) during the period beginning with the tirst month for
which the individual's benefits (as defined in paragraph (2))
have been terminated or suspended if the individual was subse- <
quently found to have been eligible for such benefits",
(c) EFFECTIVE DATE.—The amendments made by this section shall 42 use 1383
become effective with the 13th month following the month in which "°*®
this Act is enacted, or, if sooner, with the first month for which the
Secretary of Health and Human Services determines that it is
administratively feasible.
SEC. 9111. SPECIAL NOTICE TO BLIND RECIPIENTS.
(a) IN GENERAL.—(1) Section 1631 of the Social Security Act is 42 use 1383.
amended by adding at the end the following new subsection:
"Special Notice to Blind Individuals with Respect to Hearings and
Other Official Actions
"(1)(1) In any case where an individual who is applying for or •
receiving benefits under this title on the basis of blindness is
entitled (under subsection (c) or otherwise) to receive notice from the
Secretary of any decision or determination made or other action : i: i
taken or proposed to be taken with respect to his or her rights under rcrt
this title, such individual shall at his or her election be entitled
either (A) to receive a supplementary notice of such decision, deter-
mination, or action, by telephone, within 5 working days after the
initial notice is mailed, (B) to receive the initial notice in the form of
a certified letter, or (C) to receive notification by some alternative
procedure established by the Secretary and agreed to by the individ-
ual.
"(2) The election under paragraph (1) may be made at any time;
but an opportunity to make such an election shall in any event be '
given (A) to every individual who is an applicant for benefits under
this title on the basis of blindness, at the time of his or her
application, and (B) to every individual who is a recipient of such
benefits on the beisis of blindness, at the time of each redetermina-
tion of his or her eligibility. Such an election, once made by an
individual, shall apply with respect to all notices of decisions, deter-
minations, and actions which such individual may thereafter be
entitled to receive under this title until such time as it is revoked or
changed.".
(2) Not later than one year after the date on which the amend- 42 use 1383
ment made by paragraph (1) becomes effective, the Secretary of "°*®
Health and Human Services shall provide every individual receiving
benefits under title XVI of the Social Security Act on the basis of
blindness an opportunity to make an election under section
1631(1X1) of such Act (as added by such amendment).
(b) STUDY.—The Secretary of Health and Human Services shall Reports.
study the desirability and feasibility of extending special or supple- f^^Y^^ ^^^^
mentary notices of the type provided to blind individuals by section note.
1631(1) of the Social Security Act (as added by subsection (a) of this
section) to other individuals who may lack the ability to read and
comprehend regular written notices, and shall report the results of
such study to the Congress, along with such recommendations as
may be appropriate, within 12 months after the date of the enact-
ment of this Act.
101 STAT. 1330-304 PUBLIC LAW 100-203—DEC. 22, 1987
42 use 1383. (c) EFFECTIVE DATE.—The amendment made by subsection (a) shall
"°*^ become effective July 1,1988.
SEC. 9112. REHABILITATION SERVICES FOR BLIND SSI RECIPIENTS.
42 use 1383. (a) IN GENERAL.—Section 1631(a)(6) of the Social Security Act is
amended—
(1) by inserting "blindness (as determined under section
^^' 1614(a)(2)) or" before "disability (as determined under section
f 1614(a)(3))";
(2) by inserting "blindness or other" before "physical or
mental impairment"; and
(3) by inserting "blindness and" before "disability benefit
rolls" in subparagraph (B).
42 use 1383 (b) EFFECTIVE DATE.—The amendments made by subsection (a)
note. shall become effective April 1,1988.
SEC. 9113. EXTENDING THE NUMBER OF MONTHS THAT AN INDIVIDUAL
IN A PUBLIC EMERGENCY SHELTER CAN BE ELIGIBLE FOR
SSI.
42 use 1382. (a) IN GENERAL.—Section 1611(e)(1)(D) of the Social Security Act is
amended by striking "three months in any 12-month period" and
inserting "6 months in any 9-month period".
42 use 1382 (t)) EFFECTIVE DATE.—(1) The amendment made by subsection (a)
"°*^ shall become effective January 1,1988.
(2) In the application of section 1611(e)(1)(D) of the Social Security
Act on and after the effective date of such amendment, months
before January 1988 in which a person was an eligible individual or
eligible spouse by reason of such section shall not be taken into
account.
SEC. 9114. EXCLUSION OF UNDERPAYMENTS FROM RESOURCES.
42 use 1382b. (a) I N GENERAL.—Section 1613(a)(7) of the Social Security Act is
amended by inserting after "shall be limited to the first 6 months
following the month in which such amount is received" the follow-
ing: "(or to the first 9 months following such month with respect to
any amount so received during the period beginning October 1,1987,
and ending September 30,1989)".
42 use 1382b (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall become effective January 1,1988.
SEC. 9115. CONTINUATION OF FULL BENEFIT STANDARD FOR INDIVID-
UALS TEMPORARILY INSTITUTIONALIZED.
• (a) IN GENERAL.—Section 1611(e)(1) of the Social Security Act is
amended—
(1) in subparagraph (A), by striking "and (E)" and inserting
"(E), and (G)";
(2) in subparagraph (B), by inserting "(subject to subpara-
graph (G))" after "throughout any month"; and
(3) by adding at the end the following new subpareigraphs:
"(G) A person may be an eligible individual or eligible spouse for
purposes of this title, and subparagraphs (A) and (B) shall not apply,
with respect to any particular month throughout which he or sne is
an inmate of a public institution the primary purpose of which is the
provision of medical or psychiatric care, or which is a hospital,
extended care facility, nursing home, or intermediate care facility
receiving payments (with respect to such individual or spouse) under
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-305
a State plan approved under title XIX, if it is determined in
accordance with subparagraph (H) that—
"(i) such person's stay in that institution or facility (or in that
institution or facility and one or more other such institutions or
facilities during a continuous period of institutionalization) is
likely (as certified by a physician) not to exceed 3 months, and
the particular month involved is one of the first 3 months
throughout which such person is in such an institution or
facility during a continuous period of institutionalization; and
"(ii) such person needs to continue to maintain and provide
for the expenses of the home or living arrangement to which he
or she may return upon leaving the institution or facility.
The benefit of any person under this title (including State
supplementation if any) for each month to which this subparagraph
applies shall be payable, without interruption of benefit payments
and on the date the benefit involved is regularly due, at the rate
that was applicable to such person in the month prior to the first
month throughout which he or she is in the institution or facility.
"(H) The Secretary shall establish procedures for the determina- Contracts.
tions required by clauses (i) and (ii) of subparagraph (G), and may
enter into agreements for making such determinations (or for
providing information or assistance in connection with the making
of such determinations) with appropriate State and local public and
private agencies and organizations. Such procedures and agree-
ments shall include the provision of appropriate assistance to
individuals who, because of their physical or mental condition, are
limited in their ability to furnish the information needed in connec-
tion with the making of such determinations.".
(b) CONFORMING AMENDMENT.—Section 1902(1) of such Act is 42 u s e 1396a.
amended by striking "section 1611(e)(1)(E)" and inserting "subpara-
graph (E) or (G) of section 1611(e)(1)".
(c) EFFECTIVE DATE.—The amendments made by this section shall 42 u s e 1382
become effective July 1,1988. note.
SEC. 9116. RETENTION OF MEDICAID WHEN SSI BENEFITS ARE LOST
UPON ENTITLEMENT TO EARLY WIDOW'S OR WIDOWERS
INSURANCE BENEFITS.
(a) IN GENERAL.—Section 1634 of the Social Security Act is 42 u s e 1383c.
amended by adding at the end the following new subsection:
"(d) If any person—
"(1) applies for and obtains benefits under subsection (e) or (f)
of section 202 (or under any other subsection of section 202 if
such person is also eligible for benefits under such subsection (e)
or (f)) as required by section 1611(e)(2), being then at least 60
years of age but not entitled to hospital insurance benefits
under part A of title XVIII, and
"(2) is determined to be ineligible (by reason of the receipt of
such benefits under section 202) for supplemental security
income benefits under this title or for State supplementary
payments of the type described in section 1616(a),
such person shall nevertheless be deemed to be a recipient of
supplemental security income benefits under this title for purposes
of title XIX, so long as he or she (A) would be eligible for such
supplemental security income benefits, or such State supplementary
payments, in the absence of such benefits under section 202, and (B)
is not entitled to hospital insurance benefits under part A of title
XVIII.".
101 STAT. 1330-306 PUBLIC LAW 100-203—DEC. 22, 1987
42 u s e 1383c (b) NOTICE.—The Secretary of Health and Human Services, acting
note.
through the Social Security Administration, shall (within 3 months
after the date of the enactment of this Act) issue a notice to all
individuals who will have attained age 60 but not age 65 as of April
1, 1988, and who received supplemental security income benefits
under title XVI of the Social Security Act prior to attaining age 60
but lost those benefits by reason of the receipt of widow's or
widower's insurance benefits (or other benefits as described in sec-
tion 1634(d)(1) of that Act as added by subsection (a) of this section)
under title II of that Act. Each such notice shall set forth and
explain the provisions of section 1634(d) of the Social Security Act
(as so added), and shall inform the individual that he or she should
contact the Secretary or the appropriate State agency concerning
his or her possible eligibility for medical assistance benefits under
such title XIX.
42 u s e 1383c (c) STATE DETERMINATIONS.—Any determination required under
note. section 1634(d) of the Social Security Act with respect to whether an
individual would be eligible for benefits under title XVI of such Act
(or State supplementary payments) in the absence of benefits under
section 202 shall be made by the appropriate State agency.
(d) CONFORMING AMENDMENTS.—Section 1922(a)(2) of the Social
42 u s e 1396s. Security Act is amended—
(1) by striking "1634 (b)" in subparagraph (B) and inserting
"1634 (b) and (c)"; and
(2) by adding at the end the following new subparagraph:
"(C) Section 1634(d) of this Act (relating to individuals who lose
eligibility for SSI benefits due to entitlement to early widow's or
widower's insurance benefits under section 202 (e) or (f) of this
Act).".
42 u s e 1383c (e) EFFECTIVE DATE.—The amendments made by subsection (a)
note. shall apply with respect to any individual without regard to whether
the determination of his or her ineligibility for supplemental secu-
rity income benefits by reason of the receipt of benefits under
section 202 of the Social Security Act ^^ (EIS described in section
1634(d)(2) of such Act) occurred before, on, or after the date of the
enactment of this Act; but no individual shall be eligible for assist-
ance under title XIX of such Act by reason of such amendments for
any period before July 1, 1988.
42 u s e 1383 SEC. 9117. DEMONSTRATION PROGRAM TO ASSIST HOMELESS INDIVID-
note. UALS.
Grants. (a) IN GENERAL.—The Secretary of Health and Human Services (in
this section referred to as the "Secretary") is authorized to make
grants to States for projects designed to demonstrate and test the
feasibility of special procedures and services to ensure that homeless
individuals are provided SSI and other benefits under the Social
Security Act to which they are entitled and receive assistance in
using such benefits to obtain permanent housing, food, and health
care. Each project approved under this section shall meet such
conditions and requirements, consistent with this section, as the
Secretary shall prescribe.
Grants. (b) SCOPE OF PROJECTS.—Projects for which grants are made under
this section shall include, more specifically, procedures and services
to overcome barriers which prevent homeless individuals (particu-
•° Copy read "Social Security (as".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-307
larly the chronically mentally ill) from receiving and appropriately
using benefits, including—
(1) the creation of cooperative approaches between the Social
Security Administration, State and local governments, shelters
for the homeless, and other providers of services to the
homeless;
(2) the establishment, where appropriate, of multi-agency SSI
Outreach Teams (as described in subsection (c)), to facilitate
communication between the agencies and staff involved in
taking and processing claims for SSI and other benefits by the
homeless who use shelters;
(3) special efforts to identify homeless individuals who are
potentially eligible for SSI or other benefits under the Social
Security Act;
(4) the provision of special assistance to the homeless in
applying for benefits, including assistance in obtaining and
developing evidence of disability and supporting documentation
for nondisability-related eligibility requirements;
(5) the provision of special training and assistance to public
and private agency staff, including shelter employees, on
disability eligibility procedures and evidentiary requirements;
(6) the provision of ongoing assistance to formerly homeless
individuals to ensure their responding to information requests
related to periodic redeterminations of eligibility for SSI and
other benefits;
(7) the provision of assistance in ensuring appropriate use of
benefit funds for the purpose of enabling homeless individuals
to obtain permanent housing, nutrition, and physical and
mental health care, including the use, where appropriate, of the
disabled individual's representative payee for case management
services; and
(8) such other procedures and services as the Secretary may
approve.
(c) SSI OUTREACH TEAM PROJECTS.—(1) If a State applies for funds
under this section for the purpose of establishing a multi-agency SSI
Outreach Team, the membership and functions of such Team ^ ^
shall be as follows (except as provided in paragraph (2)):
(A) The membership of the Team shall include a social serv-
ices case worker (or case workers, if necessary); a consultative
medical examiner who is qualified to provide consultative
examinations for the Disability Determination Service of the
State; a disability examiner, from the State Disability Deter-
mination Service; and a claims representative from an office of
the Social Security Administration.
(B) The Team shall have designated members responsible
for—
(i) identification of homeless individuals who are poten-
tially eligible for SSI or other benefits under the Social
Security Act;
(ii) ensuring that such individuals understand their rights
under the programs;
(iii) gissisting such individuals in applying for benefits,
including assistance in obtaining and developing evidence
"' Copy read "team".
101 STAT. 1330-308 PUBLIC LAW 100-203—DEC. 22, 1987
and supporting documentation relating to disability- and
nondisability-related eligibility requirements;
! (iv) arranging transportation and accompanying ap-
plicants to necessary examinations, if needed; and
3f . . (v) providing for the tracking and monitoring of all claims
for benefits by individuals under the project.
(2) If the Secretary determines that an application by a State for
an SSI Outreach Team Project under this section which proposes a
membership and functions for such Team different from those
prescribed in paragraph (1) but which is expected to be as effective,
the Secretary may waive the requirements of such paragraph.
(d) INFORMATION AND REPORTS; EVALUATION.—(1) Each State
having an approved SSI Outreach Team Project shall periodically
submit to the Secretary such information (with respect to the
project) as may be necessary to enable the Secretary to evaluate
such project in particular and the demonstration program under
this section in general.
(2)(A) The Secretary shall from time to time (but not less often
than annually) submit to the Congress a full and complete report on
the program under this section, together with a detailed evaluation
of such program and of the projects thereunder along with such
recommendations as may be deemed appropriate. Such evaluation
and such recommendations shall be designed to serve as a basis for
determining whether (and to what extent) the activities and proce-
dures included in the demonstration program under this section
should be continued, expanded, or modified, or converted (with or
without changes) into a regular feature of permanent law.
(B) The criteria used by the Secretary in evaluating the program
and the projects thereunder shall not be limited to those which
would normally be used in evaluating programs and activities of the
kind involved, but shall fully take into account the special cir-
cumstances of the homeless and their need for personalized atten-
tion and follow-through assistance, and shall emphasize the extent
to which the procedures and assistance made available to applicants
under such projects are recognizing those circumstances and meet-
ing that need.
(e) AUTHORIZATION OF APPROPRIATIONS.—To carry out this section,
there are authorized to be appropriated to the Secretary—
(A) the sum of $1,250,000 for the fiscal year 1988;
(B) the sum of $2,500,000 for the fiscal year 1989; and
(C) such sums as may be necessary for each fiscal year
thereafter.
SEC. 9118. ASSISTANCE TO HOMELESS AFDC FAMILIES.
Federal Register, The Secretary of Health and Human Services may not take any
publication. action, prior to October 1, 1988, that would have the effect of
implementing in whole or in part the proposed regulation published
in the Federal Register on December 14, 1987, with respect to
emergency assistance and the need for and amount of assistance
under the program of aid to families with dependent children, or
that would change current policy with respect to any of the matters
addressed in such proposed regulation.
SEC. 9119. INCREASE IN PERSONAL NEEDS ALLOWANCE FOR SSI RECIPI-
ENTS.
(a) INCREASE IN STANDARD.—Section 1611(e)(1)(B) of the Social
42 use 1382. Security Act is amended—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-309
(1) by striking "$300 per year" in clauses (i) and (iiXI) and
inserting "$360 per year"; and
(2) by striking "$600 per year" in clause (iii) and inserting
"$720 per year".
(b) MANDATORY PASS-THROUGH OF INCREASED PERSONAL NEEDS
ALLOWANCE.—Section 1618 of such Act is amended by adding at the 42 USC I382g.
end the following new subsection:
"(g) In order for any State which makes supplementary payments
of the type described in section 1616(a) (including payments pursu-
ant to an agreement entered into under section 212(a) of Public Law
93-66) to recipients of benefits determined under section
1611(e)(1)(B), on or after October 1, 1987, to be eligible for payments
pursuant to title XIX with respect to any calendar quarter which
begins—
"(1) after October 1,1987, or, if later
"(2) after the calendar quarter in which it first makes such
supplementary payments to recipients of benefits so deter-
mined,
such State must have in effect an agreement with the Secretary
whereby the State will—
"(3) continue to make such supplementary payments to recipi-
ents of benefits so determined, and
"(4) maintain such supplementary payments to recipients of
benefits so determined at levels which assure (with respect to
any particular month beginning with the month in which this
subsection is first effective) that—
"(A) the combined level of such supplementary payments
and the amounts payable to or on behalf of such recipients
under section 1611(e)(1)(B) for that particular month,
is not less than—
"(B) the combined level of such supplementary payments
and the amounts payable to or on behalf of such recipients
under section 1611(e)(1)(B) for October 1987 (or, if no such
supplementary payments were made for that month, the
combined level for the first subsequent month for which
.:^^() such payments were made), increased—
"(i) in a case to which clause (i) of such section
1611(e)(lXB) applies or (with respect to the individual or
spouse who is in the hospital, home, or facility in-
volved) to which clause (ii) of such section applies, by
|;,g 5T^y $5, a n d
"(ii) in a case to which clause (iii) of such section
1611(eXl)(B) applies, by $10.".
(c) EFFECTIVE DATE.—The amendments made by subsections (a) 42 USC 1382
and Ot)) shall become effective July 1,1988. note.
SEC. 9120. EXCLUSION OF DEATH BENEFITS TO THE EXTENT SPENT ON
LAST ILLNESS AND BURIAL.
(a) IN GENERAL.—Subparagraphs (D) and (E) of section 1612(aX2) of
the Social Security Act are amended to read as follows: 42 USC 1382a.
"(D) payments to the individual occasioned by the death
of another person, to the extent that the total of such
payments exceeds the amount expended by such individual
for purposes of the decesised person's last illness and burial;
"(E) support and alimony payments, and (subject to the
provisions of subparagraph (D) excluding certain amounts
101 STAT. 1330-310 PUBLIC LAW 100-203—DEC. 22, 1987
expended for purposes of a last illness and burial) gifts (cash
or otherwise) and inheritances; and".
42 use 1382a (b) EFFECTIVE DATE.—The amendments made by subsection (a)
note shall become effective April 1, 1988.
42 u s e 602 note. SEC. 9121. DEMONSTRATION OF FAMILY INDEPENDENCE PROGRAM.
(a) IN GENERAL.—Upon application of the State of Washington
and approval by the Secretary of Health and Human Services, the
State of Washington (in this section referred to as the "State") may
conduct a demonstration project in accordance with this section for
the purpose of testing whether the operation of its Family Independ-
ence Program enacted in May 1987 (in this section referred to as the
"Program"), as an alternative to the AFDC program under title IV
of the Social Security Act, would more effectively break the cycle of
poverty and provide families with opportunities for economic
independence and strengthened family functioning.
(b) NATURE OF PROJECT.—Under the demonstration project con-
ducted under this section—
(1) every individual eligible for aid under the State plan
approved under section 402(a) of the Social Security Act shall be
eligible to enroll in the Program, which shall operate simulta-
neously with the AFDC program so long as there are individuals
who qualify for the latter;
(2) cash assistance shall be furnished in a timely manner to
all eligible individuals under the Program (and the State may
not make expenditures for services under the Program until it
has paid all necessary cash assistance), with no family receiving
less in cash benefits than it would have received under the
AFDC program;
(3) individuals may be required to register, undergo assess-
ment, and participate in work, education, or training under the
Program, except that—
(A) work or training may not be required in the case of—
(i) a single parent of a child under six months of age,
,^ or more than one parent of such a child in a two-parent
"' " ' family,
(ii) a single parent with a child of any age who has
received assistance for less than six months,
(iii) a single parent with a child under three years of
^': age who has received assistance for less than three
years,
(iv) an individual under 16 years of age or over 64
' *' years of age,
(v) an individual who is incapacitated, temporarily
..' '•"' ill, or needed at home to care for an impaired person, or
(vi) an individual who has not yet been individually
«, ~. Y 'A' notified in writing of such requirement or of the expira-
tion of his or her exempt status under this subpara-
^, graph;
(B) participation in work or training shall in any case be
voluntary during the first two years of the Program, and
may thereafter be made mandatory only in counties where
more than 50 percent of the enrollees can be placed in
employment within three months after they are job ready;
(C) in no case shall the work and training aspect of the
Program be mandated in any county where the unemploy-
ment level is at least twice the State average; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-311
(D) mandated work shall not include work in any position
created by a reduction in the work force, a bona fide labor
dispute, the decertification of a bargaining unit, or a new
job classification which subverts the intention of the
Program;
(4) there shall be no change in existing State law which would
eliminate guaranteed benefits or reduce the rights of applicants
or enrollees; and
(5) the Program shall include due process guarantees and
procedures no less than those which are available to partici-
pants in the AFDC program under Federal law and regulation
and under State law.
(c) WAIVERS.—The Secretary shall (with respect to the project
under this section) waive compliance with any requirements con-
tained in title IV of the Social Security Act which (if applied) would
prevent the State from carrying out the project or effectively achiev-
ing its purpose, or with the requirements of sections 1902(a)(1),
1902(e)(1), and 1916 of that Act Gout only to the extent necessary to
enable the State to carry out the Program ^^ as enacted by the State
in April 1987).
(d) FUNDING.—
(1) The Secretary, under section 403(b) or 1903(d) of the Social
Security Act, shall reimburse the State for its expenditures
under the Program—
(A) at a rate equal to the Federal matching rate ap-
plicable to the State under section 403(aXl) (or 1118) of the
Social Security Act, for cash assistance, medical assistance,
and child care provided to enrollees;
(B) at a rate equal to the applicable Federal matching
- rate under section 403(a)(3) of such Act, for administrative
expenses; and
(C) at the rate of 75 percent for an evaluation plan
approved by the Secretary.
(2) As a condition of approval of the project under this section,
the State must provide assurances satisfactory to the Secretary
that the total amount of Federal reimbursement over the period
of the project will not exceed the anticipated Federal reimburse-
ments (over that period) under the AFDC and Medicaid pro-
grams; but this paragraph shall not prevent the State from
claiming reimbursement for additional persons who would qual-
ify for assistance under the AFDC program, for costs attrib-
utable to increases in the State's payment standard, or for any
other federally-matched benefits or services.
(e) EVALUATION.—The State must satisfy the Secretary that the
Program ^^ will be evaluated using a reasonable methodology.
(f) DURATION OF PROJECT.—
(1) The project under this section shall begin on the date on
which the first individual is enrolled in the Program and (sub-
ject to paragraph (2)) shall end five years after that date.
(2) The project may be terminated at any time, on six months
written notice, by the State or (upon a finding that the State has
materially failed to comply with this section) by the Secretary.
'" Copy read "program".
»3 Copy read "program".
101 STAT. 1330-312 PUBLIC LAW 100-203—DEC. 22, 1987
42 u s e 602 note. SEC. 9122. CHILD SUPPORT DEMONSTRATION PROGRAM IN NEW YORK
STATE.
(a) IN GENERAL.—Upon application by the State of New York and
approval by the Secretary of Health and Human Services (in this
section referred to as the "Secretary"), the State of New York (in
this section referred to as the "State") may conduct a demonstration
program in accordance with this section for the purpose of testing a
State program as an alternative to the program of Aid to Families
with Dependent Children under title IV of the Social Security Act.
(b) NATURE OF PROGRAM.—Under the demonstration program con-
ducted under this section—
(1) all custodial parents of dependent children who are eligible
for supplements under the State plan approved under section
402(a) of the Social Security Act (and such other types or classes
of such parents as the State may specify) may elect to receive
benefits under the State's Child Support Supplement Program
in lieu of supplements under such plan; and
(2) the Federal Government will pay to the State with respect
to families receiving benefits under the State's Child Support
Supplement Program the same amounts as would have been
payable with respect to such families under sections 403 and
1903 of the Social Security Act as if the families were receiving
aid and medical assistance under the State plans in effect with
respect to such sections.
(c) WAIVERS.—The Secretary shall (with respect to the program
under this section) waive compliance with any requirements con-
tained in title IV of the Social Security Act which (if applied) would
prevent the State from carrying out the program or effectively
achieving its purpose.
(d) CONDITIONS OF APPROVAL.—As a condition of approval of the
program under this section, the State shall—
(1) provide assurances satisfactory to the Secretary that the
State—
(A) will continue to make assistance available to all
eligible children in the State who are in need of financial
support, and
(B) will continue to operate an effective child support
enforcement program;
(2) agree—
.,^^_,,,,: (A) to have the program evaluated, and
Reports. u {. (B) to report interim findings to the Secretary at such
y], r times £is the Secretary shall provide; and
(3) satisfy the Secretary that the program will be evaluated
using a reasonable methodology that can determine whether
changes in work behavior and changes in earnings are attrib-
utable to participation in the program.
(e) APPLICATION PROCESS.—In order to participate in the program
under this section, the State must submit an application under this
section not later than two years after the date of enactment of this
Act. The Secretary shall approve or disapprove the application of
the State not later than 90 days after the date of its submission. If
the application is disapproved, the Secretary shall provide to the
State a statement of the reasons for such disapproval, of the changes
needed to obtain approval, and of the date by which the State may
resubmit the application. . -?
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-313
(f) EFFECTIVE DATE.—The program under this section shall com-
mence not later than the first day of the third calendar quarter
beginning on or after the date on which the application of the State
is approved in accordance with subsection (e).
(g) DURATION OF PROGRAM.—
(1) Except as provided in paragraph (2), if the Secretary
approves the application of the State, the demonstration pro-
gram under this section shall be conducted for a period not to ?a jf/ '
exceed five years.
(2)(A) The Governor of the State may before the end of the
period described in paragraph (1) terminate the demonstration
program under this section if the Governor finds that the v..: 'i2i
program is not successful in testing the State's Child Support
Supplement Program as an alternative to the program under
title IV of the Social Security Act. The Governor shall notify the
Secretary of the decision to terminate the program not less than
three months prior to the date of such termination.
(B) The Secretary may terminate the program before the end
of such period if the Secretary finds that the program is not in
compliance with the terms of the application. The Secretary
shall notify the Governor of the decision to terminate the
program not less than three months prior to the date of such
termination.
SEC. 9123. TECHNICAL CORRECTION.
The subsection of section 1631 of the Social Security Act which
was added as subsection (j) by section 11006 of the Anti-Drug Abuse
Act of 1986 is redesignated as subsection (m) and is moved to the end 42 USC 1383.
of such section 1631 so that it appears immediately after subsection
(1) thereof (as added by section 9111(a) of this Act); and the heading
of such subsection is amended to read as follows:
"Pre-Release Procedures for Institutionalized Persons".
PART 2—SOCIAL SERVICES, CHILD WELFARE SERVICES,
AND OTHER PROVISIONS RELATING TO CHILDREN
SEC. 9131. PERMANENT EXTENSION OF AUTHORITY FOR VOLUNTARY
FOSTER CARE PLACEMENTS.
(a) IN GENERAL.—Section 102 of the Adoption Assistance and
Child Welfare Act of 1980 is amended— 42 USC 672 note.
(1) in subsection (a)(1) (in the matter preceding subparagraph
(A)), by striking "and before October 1,1987,";
(2) in subsection (c), by striking all that follows "Septem-
ber 30, 1979" and inserting a period; and
(3) in subsection (e), by striking "with respect to which the
amendments made by this section are in effect".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 use 672 note.
shall become effective October 1,1987.
SEC. 9132. 2-YEAR EXTENSION OF FOSTER CARE CEILING AND OF
AUTHORITY TO TRANSFER FOSTER CARE FUNDS TO CHILD
WELFARE SERVICES.
(a) I N GENERAL.—Section 474 of the Social Security Act is 42 use 674.
amended—
101 STAT. 1330-314 PUBLIC LAW 100-203—DEC. 22, 1987
(1) in paragraphs (1), (2)(A)(iii), (2)(B), (4)(B), and (5)(A)(ii) of
subsection (b), by striking "through 1987" and inserting
"through 1989";
(2) in paragraph (5)(A) of subsection (b) (in the matter preced-
ing clause (i)), by striking "October 1, 1987" and inserting
"October 1,1989"; and
(3) in paragraphs (1) and (2) of subsection (c), by striking
"through 1987" and inserting "through 1989".
42 use 674 note. (b) EFFECTIVE DATE.—The amendments made by subsection (a)
shall become effective October 1, 1987.
SEC. 9133. MOTHER/INFANT FOSTER CARE.
42 use 675. (a) IN GENERAL.—Section 475(4) of the Social Security Act is
amended—
(1) by inserting "(A)" after "(4)"; and
(2) by adding at the end the following new subparagraph:
"(B) In cases where—
"(i) a child placed in a foster family home or child-care
institution is the parent of a son or daughter who is in the
same home or institution, and
"(ii) payments described in subparagraph (A) are being
made under this part with respect to such child,
the foster care maintenance payments made with respect to
such child as otherwise determined under subparagraph (A)
shall also include such amounts as may be necessary to cover
the cost of the items described in that subparagraph with
respect to such son or daughter.",
(b) CONFORMING AMENDMENTS RELATING TO ELIGIBIUTY UNDER
42 use 602. OTHER PROGRAMS.—(1) Section 402(a)(24) of such Act is amended by
striking "if an individual is receiving benefits under title XVI, then,
for the period for which such benefits are received," and inserting
the following: "if an individual is receiving benefits under title XVI
or his costs in a foster family home or child-care institution are
covered by the foster care maintenance payments being made to his
or her minor parent as provided in section 475(4)(B), then, for the
period for which such benefits are received or such costs are so
covered ".
42 use 672. (2) Section 472(h) of such Act is amended by adding at the end the
following new sentence: "For purposes of the preceding sentence, a
child whose costs in a foster family home or child-care institution
are covered by the foster care maintenance payments being made
with respect to his or her minor parent, as provided in section
475(4)(B), shall be considered a child with respect to whom foster
care maintenance payments are made under this section.".
42 use 673. (3)(A) Section 473(a)(2XA) of such Act is amended—
(i) by striking "or" at the end of clause (i);
(ii) by adding "or" at the end of clause (ii); and
4 (iii) by adding after clause (ii) the following new clause:
"(iii) is a child whose costs in a foster family home or child-
; % J : care institution are covered by the foster care maintenance
payments being made with respect to his or her minor parent as
provided in section 475(4)(B),".
(B) Section 473(aX2)(B)(iii) of such Act is amended by inserting "or
(A)(iii)" after "(A)(ii)".
(4) Section 473(b) of such Act is amended by adding at the end the
following new sentence: "For purposes of the preceding sentence, a
child whose costs in a foster family home or child-care institution
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-315
are covered by the foster care maintenance payments being made
with respect to his or her minor parent, as provided in section
475(4)(B), shall be considered a child with respect to whom foster
care maintenance payments are being made under section 472.".
(c) EFFECTIVE DATE.—The amendments made by this section shall 42 USC 602 note.
become effective April 1,1988.
SEC. 9134. INCREASED FUNDING FOR SOCIAL SERVICES BLOCK GRANTS.
(a) INCREASE IN FUNDING.—Section 2003(c) of the Social Security
Act is amended— 42 USC 1397b.
(A) by striking "and" at the end of paragraph (2);
(B) in paragraph (3), by striking "year" the first place it
appears and all that follows through the period and inserting
"years 1984, 1985, 1986, and 1987, and for each succeeding fiscal
year other than the fiscal year 1988; and"; and
(C) by adding at the end the following new paragraph:
"(4) $2,750,000,000 for the fiscal year 1988.".
OJ) REQUIREMENT THAT ADDITIONAL FUNDS SUPPLEMENT AND NOT 42 u s e 1397b
SUPPLANT FUNDS AVAILABLE FROM OTHER SOURCES.—The additional note.
$50,000,000 made available to the States for the fiscal year 1988
pursuant to the amendments made by subsection (a) shall—
(A) be used only for the purpose of providing additional
services under title XX of the Social Security Act; and
(B) be expended only to supplement the level of any funds
that would, in the absence of the additional funds appropriated
pursuant to such amendments, be available from other sources
(including any amounts available under title XX of the Social
Security Act without regard to such amendments) for services
in accordance with such title, and shall in no case supplant such
funds from other sources or reduce the level thereof
SEC. 9135. EXTENSION OF SOCIAL SERVICES BLOCK GRANT AND CHILD
WELFARE SERVICES PROGRAMS TO AMERICAN SAMOA.
(a) SOCIAL SERVICES BLOCK GRANT PROGRAM.—(1) Section
1101(a)(1) of the Social Security Act is amended by inserting "Amer- 42 USC 1301.
ican Samoa," after "Guam," in the last sentence.
(2)(A) Section 2003(a) of such Act is amended by adding at the end
the following new sentence: "The allotment for fiscal year 1989 and
each succeeding fiscal year to American Samoa shall be an amount
which bears the same ratio to the amount allotted to the Northern
Mariana Islands for that fiscal year as the population of American
Samoa bears to the population of the Northern Mariana Islands
determined on the basis of the most recent data available at the
time such allotment is determined.".
(B) Section 20030t>) of such Act is amended by inserting "American
Samoa," after "the Virgin Islands," each place it appears.
(b) CHILD WELFARE SERVICES PROGRAM.—(1) Section 1101(a)(1) of
such Act is amended by adding at the end thereof the following new
sentence: "Such term when used in part B of title IV also includes
American Samoa.".
(2) Section 4210t)) of such Act is amended by striking "and Guam" 42 USC 621. ^
and inserting "Guam, and American Samoa".
(c) EFFECTIVE DATE.—The amendments made by this section shall 42 use 62i note.
apply with respect to fiscal years beginning on or after October 1,
1988.
101 STAT. 1330-316 PUBLIC LAW 100-203—DEC. 22, 1987
Establishment. SEC. 9136. NATIONAL COMMISSION ON CHILDREN.
Part A of title XI of the Social Security Act is amended by adding
at the end the following new section: ^
NATIONAL COMMISSION ON CHILDREN
42 use 1320b-9. "SEC. 1139. (aXD There is hereby established a commission to be
known as the National Commission on Children (in this section
referred to as the'Commission'). .tv,
"(b)(1) The Commission shall consist of—
President of U.S. "(A) 12 members to be appointed by the President,
"(B) 12 members to be appointed by the Speaker of the House
of Representatives, and
"(C) 12 members to be appointed by the President pro tempore
of the Senate.
President of U.S. "(2) The President, the Speaker, and the President pro tempore
shall each appoint as members of the Commission—
"(A) 4 individuals who—
" j, "(i) are representatives of organizations providing serv-
ices to children,
"(ii) are involved in activities on behalf of children, or
"(iii) have engaged in academic research with respect to
the problems and needs of children,
"(B) 4 individuals who are elected or appointed public officials
(at the Federal, State, or local level) involved in issues and
programs relating to children, and
"(C) 4 individuals who are parents or representatives of par-
ents or parents' organizations.
"(3) The appointments made pursuant to subparagraphs (B) and
(C) of paragraph (1) shall be made in consultation with the chairmen
of committees of the House of Representatives and the Senate,
respectively, having jurisdiction over relevant Federal programs.
Reports. "(c)(1) It shall be the duty and function of the Commission to serve
as a forum on behalf of the children of the Nation and to conduct
the studies and issue the report required by subsection (d).
^ '^ ' "(2) The Commission (and any committees that it may form) shall
conduct public hearings in different geographic areas of the country,
both urban and rural, in order to receive the views of a broad
spectrum of the public on the status of the Nation's children and on
ways to safeguard and enhance the physical, mental, and emotional
well-being of all of the children of the Nation, including those with
physical or mental disabilities, and others whose circumstances
deny them a full share of the opportunities that parents of the
Nation may rightfully expect for their children.
"(3) The Commission shall receive testimony from individuals, and
from representatives of public and private organizations and institu-
tions with an interest in the welfare of children, including edu-
cators, health care professionals, religious leaders, providers of
social services, representatives of organizations with children as
members, elected and appointed public officials, and from parents
and children speaking in their own behalf.
Reports. "(d) The Commission shall submit to the President, and to the
Committees on Finance and Labor and Human Resources of the
yon i J Senate and the Committees on Ways and Means, Education and
Labor, and Energy and Commerce of the House of Representatives,
an interim report no later than September 30, 1988, and a final
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-317
report no later than March 31, 1989, setting forth recommendations
with respect to the following subjects:
"(1) Questions relating to the health of children that the
Commission shall address include—
f "(A) how to reduce infant mortality,
"(B) how to reduce the number of low-birth-weight babies,
5.1^'!; "(C) how to reduce the number of children with chronic
illnesses and disabilities,
irfi "(D) how to improve the nutrition of children,
:-. "(E) how to promote the physical fitness of children,
"(F) how to ensure that pregnant women receive ade-
quate prenatal care,
%:i y "(G) how to ensure that all children have access to both
preventive and acute care health services, and
?' h. "(H) how to improve the quality and availability of health
' care for children.
* "(2) Questions relating to social and support services for
children and their parents that the Commission shall address
include—
"(A) how to prevent and treat child neglect and abuse,
"(B) how to provide help to parents who seek assistance
in meeting the problems of their children,
"(C) how to provide counseling services for children,
"(D) how to strengthen the family unit,
"(E) how children can be assured of adequate care while
their parents are working or participating in education or
training programs,
"(F) how to improve foster care and adoption services,
"(G) how to reduce drug and alcohol abuse by children
and youths, and
"(H) how to reduce the incidence of teenage pregnancy.
"(3) Questions relating to education that the Commission
shall address include—
"(A) how to encourage academic excellence for all chil-
dren at all levels of education,
"(B) how to use preschool experiences to enhance edu-
cational achievement,
"(C) how to improve the qualifications of teachers,
"(D) how schools can better prepare the Nation's youth to
; compete in the labor market,
"(E) how parents and schools can work together to help
children achieve success at each step of the academic
ladder,
"(F) how to encourage teenagers to complete high school
c . and remain in school to fulfill their academic potential,
"(G) how to address the problems of drug and alcohol
tQ abuse by young people,
"(H) how schools might lend support to efforts aimed at
reducing the incidence of teenage pregnancy, and
"(I) how schools might better meet the special needs of
children who have physical or mental handicaps.
"(4) Questions relating to income security that the Commis-
sion shall address include—
"(A) how to reduce poverty among children,
"(B) how to ensure that parents support their cnildren to
the fullest extent possible through improved child support
101 STAT. 1330-318 PUBLIC LAW 100-203—DEC. 22, 1987
- . ' . .r collection services, including services on behalf of children
whose parents are unmarried, and
^ "(C) how to ensure that cash assistance to needy children
is adequate.
"(5) Questions relating to tax policy that the Commission
shall address include—
"(A) how to assure the equitable tax treatment of families
with children,
"(B) the effect of existing tax provisions, including the
r, ,%• dependent care tax credit, the earned income tax credit,
,. and the targeted jobs tax credit, on children living in
poverty,
,s,M. "(C) whether the dependent care tax credit should be
refundable and the effect of such a policy,
•i]: . "(D) whether the earned income tax credit should be
adjusted for family size and the effect of such a policy, and
"(E) whether there are other tax-related policies which
would reduce poverty among children.
"(6) In addition to addressing the questions specified in para-
graphs (1) through (5), the Commission shall—
"(A) seek to identify ways in which public and private
organizations and institutions can work together at the
community level to identify deficiencies in existing services
for families and children and to develop recommendations
:. to ensure that the needs of families and children are met,
, using all available resources, in a coordinated and com-
prehensive manner, and
"(B) assess the existing capacities of agencies to collect
and analyze data on the status of children and on relevant
programs, identify gaps in the data collection system, and
recommend ways to improve the collection of data and the
coordination among agencies in the collection and utiliza-
tion of data.
The reports required by this subsection shall be based upon the
testimony received in the hearings conducted pursuant to subsection
(c), and upon other data and findings developed by the Commission.
"(e)(1)(A) Members of the Commission shall first be appointed not
later than 60 days after the date of the enactment of this section, for
terms ending on March 31, 1989.
"(B) A vacancy in the Commission shall not affect its powers, but
shall be filled in the same manner as the vacant position was first
filled.
"(2) The Commission shall elect one of its members to serve as
Chairman of the Commission. The Chairman shall be a nonvoting
member of the Commission.
"(3) A majority of the members of the Commission shall constitute
a quorum for the transaction of business.
(4)(A) The Commission shall meet at the call of the Chairman, or
at the call of a majority of the members of the Commission.
"(B) The Commission shall meet not less than 4 times during the
period beginning with the date of the enactment of this section and
ending with March 31, 1989.
"(5) Decisions of the Commission shall be according to the vote of a
simple majority of those present and voting at a properly called
meeting,
"(6) Members of the Commission shall serve without compensa-
tion, but shall be reimbursed for travel, subsistence, and other
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-319
necessary expenses incurred in the performance of their duties as
members of the Commission.
"(f)(1) The Commission shall appoint an Executive Director of the
Commission who shall be compensated at a rate fixed by the
Commission, but which shall not exceed the rate established for
level V of the Executive Schedule under title 5, United States Code.
"(2) In addition to the Executive Director, the Commission may
appoint and fix the compensation of such personnel as it deems
advisable, in accordance with the provisions of title 5, United States
Code, governing appointments to the competitive service, and the
provisions of chapter 51 and subchapter III of chapter 53 of such
title, relating to classification and General Schedule pay rates.
"(g) In carrying out its duties, the Commission, or any duly
organized committee thereof, is authorized to hold such hearings, sit
and act at such times and places, and take such testimony, with
respect to matters for which it has a responsibility under this
section, as the Commission or committee may deem advisable.
"(h)(1) The Commission may secure directly from any department
or agency of the United States such data and information as may be
necessary to carry out its responsibilities.
"(2) Upon request of the Commission, any such department or
agency shall furnish any such data or information.
"(i) The General Services Administration shall provide to the
Commission, on a reimbursable basis, such administrative support
services as the Commission may request.
"(j) There are authorized to be appropriated such sums as may be
necessary to carry out this section.",
SEC. 9137. BOARDER BABIES DEMONSTRATION PROJECT,
Section 426 of the Social Security Act is amended— 42 USC 626.
(1) by redesignating subsection (b) as subsection (c); and
(2) by inserting immediately after subsection (a) the following
new subsection:
"(b)(1) There are authorized to be appropriated $4,000,000 for each
of the fiscal years 1988, 1989, and 1990 for grants by the Secretary to
public or private nonprofit entities submitting applications under
this subsection for the purpose of conducting demonstration projects
under this subsection to develop alternative care arrangements for
infants who do not have health conditions that require hospitaliza-
tion and who would otherwise remain in inappropriate hospital
settings.
"(2) The demonstration projects conducted under this section may
include—
"(A) multidisciplinary projects designed to prevent the
inappropriate hospitalization of infants and to allow infants
described in paragraph (1) to remain with or return to a parent
in a residential setting, where appropriate care for the infant
and suitable treatment for the parent (including treatment for
drug or alcohol addiction) may be assured, with the goal (where
possible) of rehabilitating the parent and eliminating the need
for such care for the infant;
"(B) multidisciplinary projects that assure appropriate,
individualized care for such infants in a foster home or other
non-medical residential setting in cases where such infant does
not require hospitalization and would otherwise remain in
inappropriate hospital settings, including projects to dem-
101 STAT. 1330-320 PUBLIC LAW 100-203—DEC. 22, 1987
onstrate methods to recruit, train, and retain foster care
families; and
"(C) such other projects as the Secretary determines will best
serve the interests of such infants and will serve as models for
projects that agencies or organizations in other communities
may wish to develop.
"(3) In the case of any project which includes the use of funds
authorized under this subsection for the care of infants in foster
homes or other non-medical residential settings away from their
parents, there shall be developed for each such infant a case plan of
the type described in section 475(1) (to the extent that such infant is
not otherwise covered by such a plan), and each such project shall
include a case review system of the type described in section 475(5)
(covering each such infant who is not otherwise subject to such a
system).
"(4) In evaluating applications from entities proposing to conduct
demonstration projects under this subsection, the Secretary shall
give priority to those projects that serve areas most in need of
alternative care arrangements for infants described in paragraph
(1).
"(5) No project may be funded unless the application therefor
contains assurances that it will—
"(A) provide for adequate evaluation;
"(B) provide for coordination with local governments;
"(C) provide for community education regarding the inappro-
priate hospitalization of infants;
"(D) use, to the extent practical, other available private, local.
State, and Federal sources for the provision of direct services;
and
"(E) meet such other criteria as the Secretary may prescribe.
Grants. "(6) Grants may be used to pay the costs of maintenance and of
necessary medical and social services (to the extent that these costs
are not otherwise paid for under other titles of this Act), and for
such other purposes as the Secretary may allow.
"(7) The Secretary shall provide training and technical assistance
to grantees, as requested.".
SEC. 9138. STUDY OF INFANTS AND CHILDREN WITH AIDS IN FOSTER
CARE.
(a) IN GENERAL.—The Secretary of Health and Human Services (in
this section referred to as the "Secretary") shall conduct (or arrange
for) a survey to determine—
(1) the total number of infants and children in the United
States who have been diagnosed as having acquired immune
deficiency syndrome and who have been placed in foster care;
(2) the problems encountered by social service agencies in
placing infants and children with such syndrome in foster care;
and
(3) the potential increase (over the five-year period beginning
on the date of the enactment of this Act) in the number of
infants and children with such syndrome who will require foster
care.
For purposes of this section, an infant or child with acquired
immune deficiency syndrome includes an infant or child who is
infected with the virus associated with such syndrome.
(b) RESTRICTION ON SCOPE OF SURVEY.—In conducting (or arrang-
ing for) the survey under subsection (a), the Secretary shall assure
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-321
that survey activities do not duplicate research activities conducted
by the Centers for Disease Control.
(c) REPORT.—Not later than 12 months after the date of enactment
of this Act, the Secretary shall report to the Congress on the results
of the survey conducted under subsection (a) and shall make rec-
ommendations to the Congress with respect to improving the care of
infants and children with acquired immune deficiency syndrome
who lack ongoing parental involvement and support.
SEC. 9139. TECHNICAL CORRECTIONS. •
(a) The last sentence of section 472(a) of the Social Security Act is 42 USC 672.
amended by striking out "473(a)(1)(B)" and inserting in lieu thereof
"473(a)(2)(B)".
(b) Section 201(b)(2)(B) of the Immigration Reform and Control Act
of 1986 is amended by striking out "Section 473(a)(1) of such Act" 42 USC 673.
and inserting in lieu thereof "Section 473(a)(2) of such Act (as
amended by section 1711(a) of the Tax Reform Act of 1986)".
PART 3—CHILD SUPPORT ENFORCEMENT AMENDMENTS
•if \i
SEC. 9141. CONTINUATION iW CHILD SUPPORT ENFORCEMENT SERVICES
TO FAMILIES NO LONGER RECEIVING AFDC.
(a) IN GENERAL.—(1) Section 457(c) of the Social Security Act is 42 USC 657.
amended to read as follows:
"(c) Whenever a family with respect to which child support
enforcement services have been provided pursuant to section 454(4) '•'* " _^
ceases to receive assistance under part A of this title, the State shall
provide appropriate notice to the family and continue to provide
such services, and pay any amount of support collected, subject to
the same conditions and on the same basis as in the case of the
individuals to whom services are furnished pursuant to section
454(6), except that no application or other request to continue
services shall be required of a family to which this subsection
applies, and the provisions of section 454(6)(B) may not be applied.".
(2) Section 454(5) of such Act is amended by striking "(except as 42 USC 654.
provided in section 457(c))".
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 42 USC 654 note.
shall become effective upon enactment.
SEC. 9142. CHILD SUPPORT ENFORCEMENT SERVICES REQUIRED FOR
CERTAIN FAMILIES RECEIVING MEDICAID.
(a) IN GENERAL.—Section 454 of the Social Security Act is
amended—
(1)(A) by striking "an assignment under section 402(a)(26) of
this title" in paragraph (4)(A) and inserting "an assignment
under section 402(a)(26) or section 1912";
(B) by striking ", and" at the end of paragraph (4)(A) and
inserting ", or, in the case of such a child with respect to whom
an assignment under section 1912 is in effect, the State agency
administering the plan approved under title XIX determines
pursuant to section 1912(aXlXB) that it is against the best
interests of the child to do so, and"; and
(C) by inserting "or medical assistance under a State plan
approved under title XIX" immediately after "aid to families
with dependent children" in paragraph (4)(B); and
(2)(A) by striking "provide that," and inserting "provide that
(A)" in paragraph (5); and
101 STAT. 1330-322 PUBLIC LAW 100-203—DEC. 22, 1987
(B) by striking the semicolon at the end of paragraph (5) and
inserting "; and (B) in any case in which support payments are
collected for an individual pursuant to the assignment made
under section 1912, such payments shall be made to the State
for distribution pursuant to section 1912, except that this clause
shall not apply to such payments for any month after the month
in which the individual ceases to be eligible for medical assist-
ance;".
42 use 654 note. (b) EFFECTIVE DATE.—The amendments made by subsection (a)
shall become effective on July 1, 1988.
SEC. 9143. REPEAL OF UNNECESSARY CHILD SUPPORT REVOLVING FUND.
42 use 652. (a) IN GENERAL.—Section 452(c) of the Social Security Act is
amended to read as follows:
"(c) The Secretary of the Treasury shall from time to time pay to
each State for distribution in accordance with the provisions of
section 457 the amount of each collection made on behalf of such
State pursuant to subsection (b).".
42 use 652 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply with respect to amounts collected after the date of the
enactment of this Act.
PART 4—UNEMPLOYMENT COMPENSATION
26 u s e 3304 SEC. 9151. DETERMINATION OF AMOUNT OF FEDERAL SHARE WITH RE-
note. SPECT TO CERTAIN EXTENDED BENEFITS PAYMENTS.
For the purpose of determining the amount of the Federal pay-
ment to any State under section 204(aXl) of the Federal-State
Extended Unemployment Compensation Act of 1970 with respect to
the implementation of paragraph (3) of section 202 (a) of such Act (as
added by section 1024(a) of the Omnibus Reconciliation Act of 1980),
such paragraph shall be considered to apply only with respect to
weeks of unemployment beginning after October 31, 1981, except
that for any State in which the State legislature did not meet in
1981, it shall be considered to apply for such purpose only with
respect to weeks of unemployment beginning after October 31, 1982.
Contracts. SEC. 9152. DEMONSTRATION PROGRAM TO PROVIDE SELF-EMPLOYMENT
26 u s e 3304 ALLOWANCES FOR ELIGIBLE INDIVIDUALS.
note.
(a) IN GENERAL.—The Secretary of Labor (hereinafter in this
section referred to as the "Secretary") shall carry out a demonstra-
tion program under this section for the purpose of making available
self-employment allowances to eligible individuals. To carry out
such program, the Secretary shall enter into agreements with three
States that—
(1) apply to participate in such program, and
(2) demonstrate to the Secretary that they are capable of
implementing the provisions of the agreement.
(b) SELECTION OF STATES.—(1) In determining whether to enter into
an agreement with a State under this section, the Secretary shall
take into consideration at least—
(A) the availability and quality of technical assistance cur-
rently provided by agencies of the State to the self-employed;
(B) existing local market conditions and the business climate
for new, small business enterprises in the State;
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-323
(C) the adequacy of State resources to carry out a regular
unemployment compensation program and a program under
this section;
(D) the range and extent of specialized services to be provided
by the State to individuals covered by such an agreement;
(E) the design of the evaluation to be applied by the State to
the program; and
(F) the standards which are to be utilized by the State for the
purpose of assuring that individuals who will receive self-
employment assistance under this section will have sufficient
experience (or training) and ability to be self employed.
(2) The Secretary may not enter into an agreement with any State
under this section unless the Secretary makes a determination that
the State's unemployment compensation program has adequate
reserves.
(c) PROVISIONS OF AGREEMENTS.—Any agreement entered into
with a State under this section shall provide that—
(1) each individual who is an eligible individual with respect
to any benefit year beginning during the three-year period
commencing on the date on which such agreement is entered
into shall receive a self-employment allowance;
(2) self-employment allowances made to any individual under
this section shall be made in the same amount, on the same
terms, and subject to the same conditions as regular or extended ---'C'^-- ^
unemployment compensation, as the case may be, paid by such
State; except that—
(A) State and Federal requirements relating to availabil-
ity for work, active search for work, or refusal to accept
suitable work shall not apply to such individual; and
(B) such individual shall be considered to be unemployed
for purposes of the State and Federal laws applicable to
unemployment compensation, as long as the individual
meets the requirements applicable under this section to
such individual;
(3) to the extent that such allowances are made to an individ-
ual under this section, an amount equal to the amount of such
allowances shall be charged against the amount that may be
paid to such individual under State law for regular or extended
unemployment compensation, as the case may be;
(4) the total amount paid to an individual with respect to any
benefit year under this section may not exceed the total amount
that could be paid to such individual for regular or extended
unemployment compensation, as the case may be, with respect
to such benefit year under State law;
(5) the State shall implement a program that—
(A) is approved by the Secretary;
(B) will not result in any cost to the Unemployment Trust
Fund established by section 904(a) of the Social Security Act
in excess of the cost which would have been incurred by
such State and charged to such Fund if the State had not
participated in the demonstration program under this
'd- section;
(C) is designed to select and assist individuals for self-
employment allowances, monitor the individual's self-
employment, and provide, as described in subsection (d), to
the Secretary a complete evaluation of the use of such
allowances; and
101 STAT. 1330-324 PUBLIC LAW 100-203—DEC. 22, 1987
(D) otherwise meets the requirements of this section; and
(6) the State, from its general revenue funds, shall—
(A) repay to the Unemployment Trust Fund any cost
•""*> incurred by the State and charged to the Fund which
exceeds the cost which would have been incurred by such
State and charged to such Fund if the State had not partici-
pated in the demonstration program under this section; and
^'^ ' (B) in any case in which any excess cost described in
subparagraph (A) is not repaid in the fiscal year in which it
was charged to the Fund, pay to the Fund an amount of
interest, on the outstanding balance of such excess cost,
which is sufficient (when combined with any repayment by
the State described in subparagraph (A)) to reimburse the
Fund for any loss which would not have been incurred if
such excess cost had not been incurred.
(d) EVALUATION.—(1) Each State that enters into an agreement
under this section shall carry out an evaluation of its activities
under this section. Such evaluation shall be based on an experi-
mental design with random assignment between a treatment group
and a control group with not more than one-half of the individuals
receiving assistance at any one time being assigned to the treatment
group.
Reports. (2) The Secretary shall use the data provided from such evaluation
to analyze the benefits and the costs of the program carried out
under this section, to formulate the reports under subsection (g), and
to estimate any excess costs described in subsection (c)(6)(A).
(e) FINANCING.—(1) Notwithstanding section 303(a)(5) of the Social
Security Act and section 3304(a)(4) of the Internal Revenue Code of
1986, amounts in the unemployment fund of a State may be used by
a State to make payments (exclusive of expenses of administration)
for self-employment allowances made under this section to an
individual who is receiving them in lieu of regular unemployment
compensation.
(2) In any case in which a self-employment allowance is made
under this section to an individual in lieu of extended unemploy-
ment compensation under the Federal-State Extended Unemploy-
ment Compensation Act of 1970, payments made under this section
for self-employment allowances shall be considered to be compensa-
tion described in section 204(a)(1) of such Act and paid under State
law.
(f) LIMITATION.—No funds made available to a State under title III
of the Social Security Act or any other Federal law may be used for
the purpose of administering the program carried out by such State
under this section.
(g) REPORT TO CONGRESS.—(1) Not later than two years after the
date of the enactment of this Act, the Secretary shall submit an
interim report to the Congress on the effectiveness of the demonstra-
tion program carried out under this section. Such report shall
include—
(A) information on the extent to which this section has been
utilized;
(B) an analysis of any barriers to such utilization; and
(C) an analysis of the feasibility of extending the provisions of
this section to individuals not covered by State unemployment
compensation laws.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-325
(2) Not later than four years after the date of the enactment of
this Act, the Secretary shall submit a final report to the Congress on
such program.
(h) FRAUD AND OVERPAYMENTS.—(1) If an individual knowingly
has made, or caused to be made by another, a false statement or
representation of a material fact, or knowingly has failed, or caused
another to fail, to disclose a material fact, and as a result of such
false statement or representation or of such nondisclosure such
individual has received payment under this section to which he was • K. :\J
not entitled, such individual shall be— %'
(A) ineligible for further assistance under this section; and
(B) subject to prosecution under section 1001 of title 18,
United States Code.
(2)(A) If any person received any payment under this section to
which such person was not entitled, the State is authorized to
require such person to repay such assistance; except that the State
agency may waive such repayment if it determines that—
(i) the providing of such assistance or making of such payment
was without fault on the part of such person; and
(ii) such repayment would be contrary to equity and good
conscience.
(B) No repayment shall be required under subparagraph (A) until
a determination has been made, notice thereof and an opportunity
for a fair hearing has been given to the person, and the determina-
tion has become final. Any determination under such subparagraph
shall be subject to review in the same manner and to the same
extent as determinations under the State unemployment compensa-
tion law, and only in that manner and to that extent.
(i) DEFINITIONS.—For purposes of this section—
(1) the term "eligible individual" means, with respect to any
benefit year, an individual who—
(A) is eligible to receive regular or extended compensa-
tion under the State law during such benefit year;
I (B) is likely to receive unemployment compensation for
( the maximum number of weeks that such compensation is
made available under the State law during such benefit
year;
:' ' (C) submits an application to the State agency for a self-
^' ' employment allowance under this section; and
(D) meets applicable State requirements,
except that not more than (i) 3 percent of the number of
individuals eligible to receive regular compensation in a State
at the beginning of a fiscal year, or (ii) the number of persons
who exhausted their unemployment compensation benefits in
the fiscal year ending before such fiscal year, whichever is
lesser, may be considered as eligible individuals for such State
for purposes of this section during such fiscal year;
(2) the term "self-employment allowance" means compensa-
tion paid under this section for the purpose of assisting an
eligible individual with such individual's self-employment; and
(3) the terms "compensation", "extended compensation",
"regular compensation", "benefit year", "State", and "State
law", have the respective meanings given to such terms by
section 205 of the Federal-State Extended Unemployment Com-
pensation Act of 1970.
101 STAT. 1330-326 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 9153. EXTENSION OF FUTA TAX.
(a) IN GENERAL.—Paragraphs (1) and (2) of section 8301 of the
Federal Unemployment Tax Act (26 U.S.C. 3301) are amended to
read as follows:
"(1) 6.2 percent in the case of calendar years 1988, 1989, and
1990; or
"(2) 6.0 percent in the case of calendar year 1991 and each
calendar year thereafter;".
26 use 3301 (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall apply to wages paid on or after January 1, 1988.
SEC. 9154. TRANSFER OF FUNDS INTO THE FEDERAL UNEMPLOYMENT
ACCOUNT AND THE EXTENDED UNEMPLOYMENT COMPENSA-
TION ACCOUNT.
(a) IN GENERAL.—Section 901 of the Social Security Act (42 U.S.C.
1101) is amended by adding at the end the following new subsection:
"Transfers For Calendar Years 1988, 1989, and 1990
"(g)(1) With respect to calendar years 1988, 1989, and 1990, the
Secretary of the Treasury shall transfer from the employment
security administration account—
"(A) to the Federal unemployment account an amount equal
to 50 percent of the amount of tax received under section 3301(1)
of the Federal Unemployment Tax Act which is attributable to
the difference in the tax rates between paragraphs (1) and (2) of
such section; and
"(B) to the extended unemployment compensation account an
amount equal to 50 percent of such amount of tax received.
"(2) Transfers under this subsection shall be as of the beginning of
the month succeeding the month in which the moneys were credited
to the employment security administration account pursuant to
subsection (b)(2) with respect to wages paid during such calendar
years.".
Ot)) INCREASE IN THE LIMITATION ON THE AMOUNTS IN SUCH AC-
COUNTS.—(1) Section 902(a)(2) of such Act (42 U.S.C. 1102(a)(2)) is
amended by striking out "one-eighth" and inserting in lieu thereof
"five-eighths".
(2) Section 905(b)(2)(B) of such Act (42 U.S.C. 1105a))(2XB)) is
amended by striking out "one-eighth" and inserting in lieu thereof
"three-eighths".
(c) CONFORMING AMENDMENTS.—(1) Section 9050bXl) of such Act
(42 U.S.C. 1105(bXl)) is amended by striking out the last sentence
thereof
(2) Section 901(cX3XC) of such Act (42 U.S.C. 1101(cX3XC)) is
amended by striking out "(i)" and all that follows through the period
and inserting in lieu thereof "a tax rate of 0.6 percent.".
42 use 1101 (d) EFFECTIVE DATE.—The amendments made by this section shall
note. become effective on the date of the enactment of this Act.
SEC. 9155. INTEREST ON ADVANCES TO THE FEDERAL UNEMPLOYMENT
ACCOUNT AND THE EXTENDED UNEMPLOYMENT COMPENSA-
TION ACCOUNT.
(a) EXTENDED UNEMPLOYMENT COMPENSATION ACCOUNT.—Section
905(d) of the Social Securitv Act (42 U.S.C. 1105(d)) is amended—
(1) by striking out 'Without interest)" and ", without in-
terest,' ; and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-327
(2) by adding the following new sentence at the end:
"Amounts appropriated as repayable advances for purposes of
this subsection shall bear interest at a rate equal to the average
rate of interest, computed as of the end of the calendar month
next preceding the date of such advance, borne by all interest
bearing obligations of the United States then forming part of
the public debt; except that in cases in which such average rate
is not a multiple of one-eighth of 1 percent, the rate of interest
shall be the multiple of one-eighth of 1 percent next lower than
such average rate.".
(b) FEDERAL UNEMPLOYMENT ACCOUNT.—Section 1203 of such Act
(42 U.S.C. 1323) is amended—
(1) by striking out "(without interest)" and ", without in-
terest,"; and
(2) by adding the following new sentence at the end:
"Amounts appropriated as repayable advances for purposes of
this subsection shall bear interest at a rate equal to the average
rate of interest, computed as of the end of the calendar month
next preceding the date of such advance, borne by all interest
bearing obligations of the United States then forming part of
the public debt; except that in cases in which such average rate
is not a multiple of one-eighth of 1 percent, the rate of interest
shall be the multiple of one-eighth of 1 percent next lower than
such average rate.".
(c) CONFORMING AMENDMENT.—Section 903(a)(1) of such Act (42
U.S.C. 1103(a)(1)) is amended by inserting "and interest" after "all
advances".
(d) EFFECTIVE DATE.—The amendments made by this section shall 42 use 1103
apply to advances made on or after the date of the enactment of this "ot^.
Act.
SEC. 9156. CREDITING TO THE FEDERAL UNEMPLOYMENT ACCOUNT OF
INTEREST EARNED ON ADVANCES TO THE STATES.
(a) IN GENERAL.—Section 1202 of the Social Security Act is 42 use 1322.
amended by adding at the end the following new subsection:
"(c) Interest paid by States in accordance with this section shall be
credited to the Federal unemployment account established by sec-
tion 904(g) in the Unemployment Trust Fund.".
Ob) EFFECTIVE DATE.—The amendment made by subsection (a) 42 USC 1322
shall apply to interest paid on advances made on or after the date of ^°^^-
the enactment of this Act.
Subtitle C—Manufacturers Excise Tax on
Certain Vaccines
SEC. 9201. MANUFACTURERS EXCISE TAX ON CERTAIN VACCINES.
(a) IN GENERAL.—Chapter 32 of the Internal Revenue Code of 1986
(relating to manufacturers excise taxes) is amended by inserting
after subchapter B the following new subchapter:
"Subchapter C—Certain Vaccines
"Sec. 4131. Imposition of tax.
"Sec. 4132. Definitions and special rules.
91-194 O - 90 - 36 : QL.3 Part 2
101 STAT. 1330-328 PUBLIC LAW 100-203—DEC. 22, 1987
26 u s e 4131. "SEC. 4131. IMPOSITION OF TAX.
"(a) GENERAL RULE,—There is hereby imposed a tax on any
taxable vaccine sold by the manufacturer, producer, or importer
thereof.
"(b) AMOUNT OF TAX.—
"(1) IN GENERAL.—The amount of the tax imposed by subsec-
r tion (a) shall be determined in accordance with the following
table:
'••" ^''' "•'••• '\*''' " ' " The tax per
"If the taxable vaccine is: dose is:
t DPT vaccine $4.56
DT vaccine 0.06
,, MMR vaccine 4.44
• I .« Polio vaccine 0.29.
"(2) COMBINATIONS OF VACCINES.—If any taxable vaccine is
r^j. included in more than 1 category of vaccines in the table
y contained in paragraph (1), the amount of the tax imposed by
.<• subsection (a) on such vaccine shall be the sum of the amounts
.' determined under such table for each category in which such
vaccine is so included.
"(c) TERMINATION OF TAX IF AMOUNTS COLLECTED EXCEED PRO-
JECTED FUND LIABILITY.—
"(1) IN GENERAL.—If the Secretary estimates under paragraph
(3) that the Vaccine Injury Compensation Trust Fund would not
have a negative projected balance were the tax imposed by this
7j section to terminate as of the close of any applicable date, no
tax shall be imposed by this section after such date.
,,.. ^ , "(2) APPLICABLE DATE.—For purposes of paragraph (1), the
^ term 'applicable date' means—
"(A) the close of any calendar quarter ending on or after
December 31,1992, and
'•I© i^- "(B) the 1st date on which petitions may not be filed
under section 2111 and 2111(a) of the Public Health Service
, V ;•> ;; - ^^^ ^y reason of section 2134 of such Act and each date
,r,., ,- J ,j thereafter.
, -- "(3) E S T I M A T E S BY SECRETARY.—
*; ." • "(A) IN GENERAL.—The Secretary shall estimate the pro-
""'''' '' jected balance of the Vaccine Injury Compensation Trust
. , Fund as of—
"(i) the close of each calendar quarter ending on or
after December 31,1992, and
"(ii) such other times as are appropriate in the case
of applicable dates described in paragraph (2)(B).
•I* "(B) DETERMINATION OF PROJECTED BALANCE.—In deter-
mining the projected balance of the Fund as of any date, the
Secretary shall assume that—
"(i) the tax imposed by this section will not apply
a after such date, and
;^ r t i . "(ii) there shall be paid from such Trust Fund all
^I^ ^.r'Sf T^ claims made or to be made against such Trust Fund—
,..-.. 1 { ttQ^ ^j^j^ respect to vaccines administered before
October 1, 1992, in the case of an applicable date
described in paragraph (2XA), or
"(II) with respect to petitions filed under section
2111 or section 2111(a) of the Public Health Service
Act, in the case of an applicable date described in
paragraph (2)(B).
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-329
"SEC. 4132. DEFINITIONS AND SPECIAL RULES. 26 USC 4132.
"(a) DEFINITIONS RELATING TO TAXABLE VACCINES.—For purposes
of this subchapter—
"(1) TAXABLE VACCINE.—The term 'taxable vaccine' means
any vaccine—
"(A) which is listed in the table contained in section
4131(b)(1), and
"(B) which is manufactured or produced in the United
States or entered into the United States for consumption,
^ use, or warehousing.
-''' "(2) DPT VACCINE.—The term 'DPT vaccine' means any vac-
cine containing pertussis bacteria, extracted or partial cell bac- .^^
teria, or specific pertussis antigens. ' •' '
"(3) DT VACCINE.—The term 'DT vaccine' means any vaccine
(other than a DPT vaccine) containing diphtheria toxoid or
tetanus toxoid.
"(4) MMR VACCINE,—The term "MMR vaccine' means any
vaccine against measles, mumps, or rubella. Not more than 1
tax shall be imposed by section 4131 on any MMR vaccine by
reason of being a vaccine against more than 1 of measles,
mumps, or rubella.
"(5) POLIO VACCINE.—The term 'polio vaccine' means any
vaccine containing polio virus.
"(6) VACCINE.—The term 'vaccine' means any substance de-
signed to be administered to a human being for the prevention
of 1 or more diseases.
"(7) UNITED STATES.—The term 'United States' has the mean-
ing given such term by section 4612(a)(4).
"(8) IMPORTER.—The term 'importer* means the person enter-
ing the vaccine for consumption, use, or warehousing.
"(b) CREDIT OR REFUND WHERE VACCINE RETURNED TO MANUFAC- '.',
TURER, ETC., OR DESTROYED.—
"(1) I N GENERAL.—Under regulations prescribed by the Sec-
1 retary, whenever any vaccine on which tax was imposed by
section 4131 is—
"(A) returned (other than for resale) to the person who
paid such tax, or
"(B) destroyed, ^ ^^
the Secretary shall abate such tax or allow a credit, or pay a
refund (without interest), to such person equal to the tax paid
under section 4131 with respect to such vaccine.
"(2) CLAIM MUST BE FILED WITHIN 6 MONTHS.—Paragraph (1)
shall apply to any returned or destroyed vaccine only with
respect to claims filed within 6 months after the date the
vaccine is returned or destroyed.
^ "(3) CONDITION OF ALLOWANCE OF CREDIT OR REFUND.—No
credit or refund shall be allowed or made under paragraph (1)
with respect to any vaccine unless the person who paid the tax
establishes that he—
"(A) has repaid or agreed to repay the amount of the tax
fi >'! •> ^Q |.jjg ultimate purchaser of the vaccine, or
"(B) has obtained the written consent of such purchaser
'^ ' to the allowance of the credit or the making of the refund.
"(4) TAX IMPOSED ONLY ONCE.—No tax shall be imposed by
section 4131 on the sale of any vaccine if tax was imposed by
101 STAT. 1330-330 PUBLIC LAW 100-203—DEC. 22, 1987
section 4131 on any prior sale of such vaccine and such tax is
not abated, credited, or refunded.
"(c) OTHER SPECIAL RULES.—
"(1) FRACTIONAL PART OF A DOSE.—In the case of a fraction of a
dose, the tax imposed by section 4131 shall be the same fraction
of the amount of such tax imposed by a whole dose.
"(2) DISPOSITION OF REVENUES FROM PUERTO RICO AND THE
i VIRGIN ISLANDS.—The provisions of subsections (a)(3) and (b)(3)
of section 7652 shall not apply to any tax imposed by section
4131."
(b) CERTAIN PROVISIONS RELATING TO TAX-FREE SALES, ETC. NOT TO
APPLY.—
26 use 4221. (1) Subsection (a) of section 4221 of such Code (relating to
certain tax-free sales) is amended by adding at the end thereof
the following new sentence: "In the case of the tax imposed by
section 4131, paragraphs (3), (4), and (5) shall not apply and
paragraph (2) shall apply only if the use of the exported vaccine
f: meets such requirements as the Secretary may by regulations
I prescribe."
' (2) Paragraph (2) of section 6416(b) of such Code (relating to
^ specified uses or resales) is amended by adding at the end
thereof the following new sentence: "In the case of the tax
imposed by section 4131, subparagraphs (B), (C), and (D) shall
not apply and subparagraph (A) shall apply only if the use of
the exported vaccine meets such requirements as the Secretary
may by regulations prescribe."
(c) CLERICAL AMENDMENT.—The table of subchapters for chapter
32 of such Code is amended by inserting after the item relating to
subchapter B the following new item:
"SUBCHAPTER C. Certain vaccines."
26 use 4131 (d) EFFECTIVE DATE.—The amendments made by this section shall
note. take effect on January 1, 1988.
SEC. 9202. VACCINE INJURY COMPENSATION TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the Internal
Revenue Code of 1986 (relating to trust fund code) is amended by
adding at the end thereof the following new section:
26 u s e 9510. "SEC. 9510. VACCINE INJURY COMPENSATION TRUST FUND.
"(a) CREATION OF TRUST FUND.—There is established in the Treas-
ury of the United States a trust fund to be known as the 'Vaccine
Injury Compensation Trust Fund', consisting of such amounts as
may be credited to such Trust Fund as provided in section 9602(b).
"Ot)) TRANSFERS TO TRUST FUND.—
"(1) IN GENERAL.—There are hereby appropriated to the Vac-
cine Injury Compensation Trust Fund amounts equivalent to
the net revenues received in the Treasury from the tax imposed
by section 4131 (relating to tax on certain vaccines).
"(2) NET REVENUES.—For purposes of paragraph (1), the term
'net revenues' means the amount estimated by the Secretary
based on the excess of—
"(A) the taxes received in the Treasury under section
4131 (relating to tax on certain vaccines), over
"(B) the decrease in the tax imposed by chapter 1 result-
ing from the tax imposed by section 4131.
"(c) EXPENDITURES FROM TRUST FUND.—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-331
"(1) IN GENERAL.—Amounts in the Vaccine Injury Compensa-
tion Trust Fund shall be available, as provided in appropriation
Acts, only for the payment of compensation under subtitle 2 of
title XXI of the Public Health Service Act (as in effect on the
date of the enactment of this section) for vaccine-related injury
or death with respect to vaccines administered after Septem-
ber 30, 1988, and before October 1, 1992.
"(2) TRANSFERS FOR CERTAIN REPAYMENTS.—
"(A) IN GENERAL.—The Secretary shall pay from time to
time from the Vaccine Injury Compensation Trust Fund
into the general fund of the Treasury amounts equivalent
to amounts paid under section 4132(b) and section 6416 with
respect to the taxes imposed by section 4131.
"(B) TRANSFERS BASED ON ESTIMATES.—Transfers under
subparagraph (A) shall be made on the basis of estimates by
the Secretary, and proper adjustments shall be made in the
amounts subsequently transferred to the extent prior esti-
,,. mates were in excess of or less than the amounts required
to be transferred.
"(d) LIABILITY OF UNITED STATES LIMITED TO AMOUNT IN TRUST
FUND.—
"(1) GENERAL RULE.—Any claim filed against the Vaccine
Injury Compensation Trust Fund may be paid only out of such
Trust Fund.
"(2) COORDINATION WITH OTHER PROVISIONS.—Nothing in the
National Childhood Vaccine Injury Act of 1986 (or in any
amendment made by such Act) shall authorize the payment by
the United States Government of any amount with respect to
any such claim out of any source other than the Vaccine Injury
Compensation Trust Fund.
"(3) ORDER IN WHICH UNPAID CLAIMS TO BE PAID.—If at any
time the Vaccine Injury Compensation Trust Fund has insuffi-
cient funds to pay all of the claims out of such Trust Fund at
such time, such claims shall, to the extent permitted under
paragraph (1) be paid in full in the order in which they are
finally determined."
(b) CLERICAL AMENDMENT.—The table of sections for such sub-
chapter A is amended by adding at the end thereof the following
new item:
"Sec. 9510. Vaccine Injury Compensation Trust Fund."
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 9510
take effect on January 1, 1988. note.
Subtitle D—Pension Provisions
PART I—FULL-FUNDING LIMITATIONS
SEC. 9301. FULL-FUNDING LIMITATION FOR DEDUCTIONS TO QUALIFIED
PLANS.
(a) GENERAL RULE.—Paragraph (7) of section 412(c) of the Internal
Revenue Code of 1986 (defining full-funding limitation) is amended 26 USC 412.
to read as follows:
"(7) FULL-FUNDING UMITATION.—
"(A) IN GENERAL.—For purposes of paragraph (6), the
term 'full-funding limitation' means the excess (if any) of—
101 STAT. 1330-332 PUBLIC LAW 100-203—DEC. 22, 1987
"(i) t h e lesser of (I) 150 percent of c u r r e n t liability, or
* (II) t h e accrued liability (including n o r m a l cost) under
t h e plan (determined u n d e r t h e e n t r y age n o r m a l fund-
•'"- • ing method if such accrued liability cannot be directly
<^-'. calculated u n d e r t h e funding method used for t h e
plan), over
"(ii) t h e lesser of—
"(I) t h e fair m a r k e t value of t h e plan's assets, or
'^' "(II) t h e value of such assets determined u n d e r
p a r a g r a p h (2).
"(B) C U R R E N T LIABILITY.—For purposes of s u b p a r a g r a p h s
(A) a n d (D), t h e t e r m ' c u r r e n t liability' h a s t h e m e a n i n g
given such t e r m by subsection (1)(7) (without regard to
" *>' s u b p a r a g r a p h (D) thereof).
"(C) SPECIAL RULE FOR PARAGRAPH (GKB).—For purposes
of p a r a g r a p h (6)(B), s u b p a r a g r a p h (A)(i) shall be applied
without regard to subclause (I) thereof.
"(D) REGULATORY AUTHORITY.—The Secretary may by
regulations provide—
''-" ' ' "(i) for adjustments to t h e percentage contained in
s u b p a r a g r a p h (A)(i) to t a k e into account t h e respective
'^ ' ages or lengths of service of t h e participants,
' "^' "(ii) a l t e r n a t i v e methods based on factors other t h a n
c u r r e n t liability for t h e determination of t h e a m o u n t
', t a k e n into account u n d e r s u b p a r a g r a p h (A)(i), and
'* ' "(iii) for t h e t r e a t m e n t u n d e r this section of contribu-
^ tions which would be required to be m a d e u n d e r t h e
plan b u t for t h e provisions of s u b p a r a g r a p h (A)(i)(I)."
(b) AMENDMENT TO E R I S A . — P a r a g r a p h (7) of section 302(c) of t h e
Employee R e t i r e m e n t Income Security Act of 1974 (29 U.S.C.
1082(c)(7)) is amended to read as follows:
"(7) F U L L - F U N D I N G LIMITATION.—
"(A) I N GENERAL.—For purposes of p a r a g r a p h (6), t h e
t e r m 'full-funding limitation' m e a n s t h e excess (if any) of—
"(i) t h e lesser of (I) 150 percent of c u r r e n t liability, or
^^ J (II) t h e accrued liability (including n o r m a l cost) u n d e r
^ J !^^ ' t h e plan (determined u n d e r t h e e n t r y age n o r m a l fund-
ing method if such accrued liability cannot be directly
calculated u n d e r t h e funding method used for t h e
plan), over
' - '^ ' •.''•' ' "(ii) t h e lesser of—
'• "(I) t h e fair m a r k e t value of t h e plan's assets, or
"(II) t h e value of such assets determined u n d e r
p a r a g r a p h (2).
"(B) C U R R E N T L I A B I U T Y . — F o r purposes of s u b p a r a g r a p h s
(A) a n d (D), t h e t e r m ' c u r r e n t liability' h a s t h e m e a n i n g
given such t e r m by subsection (d)(7) (without regard to
s u b p a r a g r a p h (D) thereof).
fiai'f. <<(Q SPECIAL RULE FOR PARAGRAPH (GMB).—For p u r p o s e s
of p a r a g r a p h (6)(B), s u b p a r a g r a p h (A)(i) shall b e applied
>•;. without regard to subclause (I) thereof.
. . . . , fi'.,i "(D) REGULATORY AUTHORITY.—The Secretary of the
T r e a s u r y m a y by regulations provide—
"(i) for adjustments to t h e percentage contained in
'^i .V' ». s u b p a r a g r a p h (A)(i) t o t a k e into account t h e respective
It* ( « ' ages or lengths of service of t h e participants,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-333
^ "(ii) alternative methods based on factors other than
current liability for the determination of the amount
; y taken into account under subparagraph (A)(i), and
"(iii) for the treatment under this section of contribu-
,, tions which would be required to be made under the
plan but for the provisions of subparagraph (A)(i)(I)."
(c) EFFECTIVE DATE.— 26 USC 412 note.
(1) IN GENERAL.—The amendments made by this section shall
apply to years beginning after December 31, 1987.
(2) REGULATIONS.—The Secretary of the Treasury or his dele-
gate shall prescribe such regulations as are necessary to carry
out the amendments made by this section no later than
August 15,1988.
(3) STUDY.—The Secretary of the Treasury or his delegate
shall study the effect of the amendments made by this section
on benefit security under defined benefit pension plans and
shall report the results of such study to the Committee on Ways
and Means of the House of Representatives and to the Com-
mittee on Finance of the Senate no later than August 15, 1988.
PART II—PENSION FUNDING AND TERMINATION Pension
Protection Act.
REQUIREMENTS
SEC. 9302. SHORT TITLE; DEFINITIONS.
(a) SHORT TITLE.—This part may be cited as the "Pension Protec- 26 USC l note.
tion Act".
(b) DEFINITIONS.—For purposes of this part—
(1) 1986 CODE.—The term "1986 Code" means the Internal
Revenue Code of 1986.
(2) ERISA.—The term "ERISA" means the Employee Retire-
ment Income Security Act of 1974.
Subpart A—Modifications of Minimum Funding
* • Standard
SEC. 9303. ADDITIONAL FUNDING REQUIREMENTS.
(a) AMENDMENTS TO 1986 CODE.—
(1) IN GENERAL.—Section 412 of the 1986 Code (relating to 26 USC 412.
minimum funding standard) is amended by adding at the end
thereof the following new subsection:
"(1) ADDITIONAL FUNDING REQUIREMENTS FOR PLANS WHICH ARE
NOT MULTIEMPLOYER PLANS.—
"(1) IN GENERAL.—In the case of a defined benefit plan (other
than a multiemployer plan) which has an unfunded current
liability for any plan year, the amount charged to the funding
standard account for such plan year shall be increased by the
sum of—
"(A) the excess (if any) of^
"(i) the deficit reduction contribution determined
under paragraph (2) for such plan year, over
"(ii) the sum of the charges for such plan year under
subparagraphs (B) (other than clauses (iv) and (v)
thereof), (C), and (D) of subsection (b)(2), reduced by the
-ii sum of the credits for such plan year under subpara-
graph (B)(i) of subsection (bX3), plus
101 STAT. 1330-334 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) the unpredictable contingent event amount (if any)
for such plan year.
Such increase shall not exceed the amount necessary to increase
the funded current liability percentage to 100 percent.
"(2) DEFICIT REDUCTION CONTRIBUTION.—For purposes of para-
graph (1), the deficit reduction contribution determined under
' - f' - " -' this paragraph for any plan year is the sum of—
"(A) the unfunded old liability amount, plus
"(B) the unfunded new liability amount.
"(3) UNFUNDED OLD LIABILITY AMOUNT.—For purposes of this
subsection—
"(A) IN GENERAL.—The unfunded old liability amount
with respect to any plan for any plan year is the amount
necessary to amortize the unfunded old liability under the
plan in equal annual installments over a period of 18 plan
years (beginning with the 1st plan year beginning after
December 31, 1988).
"(B) UNFUNDED OLD LIABIUTY.—The term 'unfunded old
liability' means the unfunded current liability of the plan
as of the beginning of the 1st plan year beginning after
December 31, 1987 (determined without regard to any plan
•' ./ "' -: -' amendment increasing liabilities adopted after October 16,
1987).
"(C) SPECIAL RULES FOR BENEFIT INCREASES UNDER EXIST-
ING COLLECTIVE BARGAINING AGREEMENTS.—
' r-, '^ -^sK i "(i) IN GENERAL.—In the case of a plan maintained
pursuant to 1 or more collective bargaining agreements
between employee representatives and the employer
i -^ - ratified before October 17, 1987, the unfunded old li-
ability amount with respect to such plan for any plan
' year shall be increased by the amount necessary to
amortize the unfunded existing benefit increase liabil-
ity in equal annual installments over a period of 18
plan years beginning with—
"(I) the plan year in which the benefit increase
with respect to such liability occurs, or
"(II) if the taxpayer elects, the 1st plan year
beginning after December 31,1988.
"(ii) U N F U N D E D EXISTING BENEFIT INCREASE LikBiL-
•" ITIES.—For purposes of clause (i), the unfunded existing
• benefit increase liability means, with respect to any
benefit increase under the agreements described in
/ clause (i) which takes effect during or after the 1st plan
year beginning after December 31, 1987, the unfunded
"" current liability determined—
"(I) by taking into account only liabilities attrib-
:< utable to such benefit increase, and
"(II) by reducing the amount determined under
paragraph (8XA)(ii) by the current liability deter-
mined without regard to such benefit increase,
"(iii) EXTENSIONS, MODIFICATIONS, ETC. NOT TAKEN
INTO ACCOUNT.—For purposes of this subparagraph,
any extension, amendment, or other modification of an
agreement after October 16, 1987, shall not be taken
into account.
"(4) UNFUNDED NEW UABILITY AMOUNT.—For purposes of this
subsection— -• -• — ••• «^-.'..-. >•.<: -•„,>-; ••• -.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-335
"(A) IN GENERAL.—The unfunded new liability amount
with respect to any plan for any plan year is the applicable
percentage of the unfunded new liability.
"(B) UNFUNDED NEW LIABILITY.—The term 'unfunded new
liability' means the unfunded current liability of the plan
for the plan year determined without regard to—
"(i) the unamortized portion of the unfunded old
liability, and
"(ii) the liability with respect to any unpredictable
contingent event benefits (without regard to whether
the event has occurred).
"(C) APPLICABLE PERCENTAGE.—The term 'applicable
percentage' means, with respect to any plan year, 30 per-
cent, reduced by the product of—
"(i) .25 multiplied by
"(ii) the number of percentage points (if any) by
which the funded current liability percentage exceeds
35 percent.
"(5) UNPREDICTABLE CONTINGENT EVENT AMOUNT.—
"(A) IN GENERAL.—The unpredictable contingent event
amount with respect to a plan for any plan year is an
amount equal to the greater of—
"(i) the applicable percentage of the product of—
"(I) 100 percent, reduced (but not below zero) by
the funded current liability percentage for the plan
year, multiplied by
"(II) the amount of unpredictable contingent
event benefits paid during the plan year, including
(except as provided by the Secretary) any payment
for the purchase of an annuity contract for a
participant or beneficiary with respect to such
' ; benefits, or
"(ii) the amount which would be determined for the
plan year if the unpredictable contingent event benefit
liabilities were amortized in equal annual installments
over 7 plan years (beginning with the plan year in
which such event occurs).
"(B) APPUCABLE PERCENTAGE.—
"In the case of plan The applicable
years beginning in: percentage is:
1989 and 1990 5
1991 10
1992 15
1993 ; 20
1994 30
1995 40
1996 50
1997 60
1998 70
1999 80
2000 90
2001 and thereafter 100.
"(C) PARAGRAPH NOT TO APPLY TO EXISTING BENEFITS.—
This paragraph shall not apply to unpredictable contingent
event benefits (and liabilities attributable thereto) for
which the event occurred before October 17,1987.
"(D) SPECIAL RULE FOR FIRST YEAR OF AMORTIZATION.—
Unless the employer elects otherwise, the amount deter-
101 STAT. 1330-336 PUBLIC LAW 100-203—DEC. 22, 1987
;.;;,-fmined under s u b p a r a g r a p h (A) for t h e plan year in which
,1..: •
t h e event occurs shall be equal to 150 percent of t h e a m o u n t
determined under s u b p a r a g r a p h (AXi). T h e a m o u n t u n d e r
./;; . s u b p a r a g r a p h (A)(ii) for subsequent plan years in t h e
ir/v amortization period shall be adjusted in t h e m a n n e r pro-
vided by t h e Secretary to reflect t h e application of this
subparagraph.
"(6) S P E C I A L RULES FOR SMALL PLANS.—
, "(A) P L A N S WITH lOO OR FEWER PARTICIPANTS.—This
- subsection shall not apply to any plan for any plan year if on
each day during t h e preceding plan year such plan had no
... more t h a n 100 participants.
>, "(B) P L A N S WITH MORE THAN lOO BUT NOT MORE THAN 1 5 0
PARTICIPANTS.—In t h e case of a plan to which s u b p a r a g r a p h
(A) does not apply a n d which on each d a y d u r i n g t h e
preceding plan y e a r h a d no more t h a n 150 participants, t h e
^ a m o u n t of t h e increase under p a r a g r a p h (1) for such plan
y e a r shall be equal to t h e product of—
"(i) such increase determined without regard to this
,/:vv.i s u b p a r a g r a p h , multiplied by
n- "(ii) 2 percent for t h e highest n u m b e r of participants
in excess of 100 on a n y such day.
"(C) AGGREGATION OF PLANS.—For purposes of t h i s para-
graph, all defined benefit plans m a i n t a i n e d by t h e same
employer (or a n y m e m b e r of such employer's controlled
group) shall be treated as 1 plan, b u t only employees of
' such employer or m e m b e r shall be t a k e n into account.
"(7) C U R R E N T LIABILITY.—For purposes of t h i s subsection—
"(A) I N GENERAL.—The t e r m 'current liability' means all
^ liabilities to employees a n d their beneficiaries under t h e
>,.j, plan.
"(B) T R E A T M E N T O F UNPREDICTABLE CONTINGENT EVENT
BENEFITS.—
"(i) I N GENERAL.—For purposes of s u b p a r a g r a p h (A),
a n y unpredictable contingent event benefit shall not be
.' ''' t a k e n into account until t h e event on which t h e benefit
is contingent occurs.
"(ii) UNPREDICTABLE CONTINGENT EVENT BENEFIT.—
^ T h e t e r m 'unpredictable contingent event benefit'
m e a n s any benefit contingent on a n event other than—
.; "(I) age, service, compensation, death, or disabil-
/ ity, or
^., "(II) a n event which is reasonably a n d reliably
predictable (as determined by t h e Secretary).
"(C) INTEREST RATES USED.—The r a t e of i n t e r e s t used to
d e t e r m i n e c u r r e n t liability shall be t h e r a t e of interest used
u n d e r subsection (b)(5).
"(D) CERTAIN SERVICE DISREGARDED.—
"(i) I N GENERAL.—In t h e case of a participant to
whom this s u b p a r a g r a p h applies, only t h e applicable
. . . », percentage of t h e years of service before such individ-
1' V ual became a participant shall be t a k e n into account in
-J computing t h e c u r r e n t liability of t h e plan.
"(ii) APPLICABLE PERCENTAGE.—For p u r p o s e s of this
Xh s u b p a r a g r a p h , t h e applicable percentage shall be deter-
... ' mined as follows: ^ >„^ , .
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-337
"If the years of The applicable
participation are: percentage is:
1 20
2 40
3 60
4 80
5 or more 100.
"(iii) PARTICIPANTS TO WHOM SUBPARAGRAPH AP-
,,^s ., PLIES.—This subparagraph shall apply to any partici-
pant who, at the time of becoming a participant—
,- "(I) has not accrued any other benefit under any
,., defined benefit plan (whether or not terminated)
maintained by the employer or a member of the
... •^ same controlled group of which the employer is a
member, and
., J "(II) who first becomes a participant under the
plan in a plan year beginning after December 31,
1987.
"(8) OTHER DEFINITIONS.—For purposes of this subsection—
"(A) UNFUNDED CURRENT LIABILITY.—The term 'unfunded
current liability' means, with respect to any plan year, the
excess (if any) of—
R. "(i) the current liability under the plan, over
"(ii) value of the plan's assets determined under
subsection (c)(2) reduced by any credit balance in the
funding standard account.
"(B) FUNDED CURRENT LIABILITY PERCENTAGE.—The term
'funded current liability percentage' means, with respect to
; , any plan year, the percentage which—
"(i) the amount determined under subparagraph
(A)(ii), is of
"(ii) the current liability under the plan.
"(C) CONTROLLED GROUP.—The term 'controlled group'
means any group treated as a single employer under
• subsections (b), (c), (m), and (o) of section 414.
"(D) ADJUSTMENTS TO PREVENT OMISSIONS AND DUPLICA-
TIONS.—The Secretary shall provide such adjustments in
the unfunded old liability amount, the unfunded new liabil-
i- ity amount, the unpredictable contingent event amount,
the current payment amount, and any other charges or
credits under this section as are necessary to avoid duplica-
tion or omission of any factors in the determination of such
amounts, charges, or credits."
(2) CONFORMING AMENDMENT.—Paragraph (2) of section 412(b)
of the 1986 Code is amended by adding at the end thereof the 26 USC 412.
following new sentence: ^^ "For additional requirements in the
case of plans other than multiemployer plans, see subsection
(1)."
(b) AMENDMENTS TO ERISA.—
(1) IN GENERAL.—Section 302 of ERISA (29 U.S.C. 1082) is
amended by redesignating subsection (d) as subsection (e) and by
inserting after subsection (c) the following new subsection:
"(d) ADDITIONAL FUNDING REQUIREMENTS FOR PLANS WHICH ARE
NOT MULTIEMPLOYER PLANS.—
'•• Incorrect indention in copy.
101 STAT. 1330-338 PUBLIC LAW 100-203—DEC. 22, 1987
I "(1) IN GENERAL.—In the case of a defined benefit plan (other
" than a multiemployer plan) which has an unfunded current
liability for any plan year, the amount charged to the funding
standard account for such plan year shall be increased by the
sum of—
"(A) the excess (if any) of—
"(i) the deficit reduction contribution determined
under paragraph (2) for such plan year, over
"(ii) the sum of the charges for such plan year under
subparagraphs (B) (other than clauses (iv) and (v)
thereof), (C), and (D) of subsection (b)(2), reduced by the
sum of the credits for such plan year under subpara-
graph (B)(i) of subsection (b)(8), plus
"(B) the unpredictable contingent event amount (if any)
for such plan year.
.; Such increase shall not exceed the amount necessary to increase
the funded current liability percentage to 100 percent.
"(2) DEFICIT REDUCTION CONTRIBUTION.—For purposes of para-
graph (1), the deficit reduction contribution determined under
this paragraph for any plan year is the sum of—
"(A) the unfunded old liability amount, plus
"(B) the unfunded new liability amount.
"(3) UNFUNDED OLD LiABiUTY AMOUNT.—For purposes of this
"]. subsection—
"(A) IN GENERAL.—The unfunded old liability amount
with respect to any plan for any plan year is the amount
necessary to amortize the unfunded old liability under the
plan in equal annual installments over a period of 18 plan
years (beginning with the 1st plan year beginning after
^ " December 31,1988).
"(B) UNFUNDED OLD LIABIUTY.—The term 'unfunded old
liability' means the unfunded current liability of the plan
5 ^ ^s of the beginning of the 1st plan year beginning after
'^ December 31, 1987 (determined without regard to any plan
amendment increasing liabilities adopted after October 16,
-• 1987).
"(C) SPECIAL RULES FOR BENEFIT INCREASES UNDER EXIST-
ING COLLECTIVE BARGAINING AGREEMENTS.—
"(i) IN GENERAL.—In the case of a plan maintained
pursuant to 1 or more collective bargaining agreements
between employee representatives and the employer
ratified before October 17, 1987, the unfunded old li-
ability amount with respect to such plan for any plan
year shall be increased by the amount necessary to
' '^ amortize the unfunded existing benefit increase liabil-
ity in equal annual installments over a period of 18
plan years beginning with—
"(I) the plan year in which the benefit increase
with respect to such liability occurs, or
"(II) if the taxpayer elects, the 1st plan year
• "\ beginning after December 31,1988.
"(ii) UNFUNDED EXISTING BENEFIT INCREASE LIABIL-
»• •'. ITIES.—For purposes of clause (i), the unfunded existing
benefit increase liability means, with respect to any
benefit increase under the agreements described in
clause (i) which takes effect during or after the 1st plan
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-339
year beginning after December 31, 1987, the unfunded
current liability determined—
"(I) by taking into account only liabilities attrib-
utable to such benefit increase, and
"(II) by reducing the amount determined under
paragraph (8)(AXii) by the current liability deter-
mined without regard to such benefit increase,
"(iii) EXTENSIONS, MODIFICATIONS, ETC. NOT TAKEN
INTO ACCOUNT.—For purposes of this subparagraph,
any extension, amendment, or other modification of an
agreement after October 16, 1987, shall not be taken
into account.
"(4) UNFUNDED NEW LIABILITY AMOUNT.—For purposes of this
subsection—
"(A) IN GENERAL.—The unfunded new liability amount
with respect to any plan for any plan year is the applicable
percentage of the unfunded new liability.
"(B) UNFUNDED NEW LIABILITY.—The term 'unfunded new
liability' means the unfunded current liability of the plan
for the plan year determined without regard to—
"(i) the unamortized portion of the unfunded old
liability, and
"(ii) the liability with respect to any unpredictable
contingent event benefits (without regard to whether
the event has occurred).
"(C) APPLICABLE PERCENTAGE.—The term 'applicable
percentage' means, with respect to any plan year, 30 per-
cent, reduced by the product of—
"(i) .25 multiplied by
"(ii) the number of percentage points (if any) by
which the funded current liability percentage exceeds
35 percent.
"(5) UNPREDICTABLE CONTINGENT EVENT AMOUNT.—
"(A) I N GENERAL.—The unpredictable contingent event
amount with respect to a plan for any plan year is an
amount equal to the greater of—
"(i) the applicable percentage of the product of—
"(I) 100 percent, reduced (but not below zero) by
> the funded current liability percentage for the plan
year, multiplied by
"(II) the amount of unpredictable contingent Contracts.
event benefits paid during the plan year, including
(except as provided by the Secretary of the Treas-
ury) any payment for the purchase of an annuity
contract for a participant or beneficiary with re-
spect to such benefits, or
"(ii) the amount which would be determined for the
plan year if the unpredictable contingent event benefit
liabilities were amortized in equal annual installments
, over 7 plan years (beginning with the plan year in
which such event occurs).
"(B) A P P U C A B L E PERCENTAGE.—
101 STAT. 1330-340 PUBLIC LAW 100-203—DEC. 22, 1987
"In the case of plan years The applicable
beginning in: - .. * percentage is:
,,..f, ., 1989 and 1990 .' 5
'^ ' ' 1991 10
1992 15
' ' 1993 20
1994 30
1995 40
1996 50
' * • 1997 : 60
1998 70
1999 80
,.; . ,; 2000 90
2001 and thereafter 100.
• .!'.>. "(C) P A R A G R A P H N O T TO APPLY TO EXISTING BENEFITS.—
This p a r a g r a p h shall n o t apply to unpredictable contingent
event benefits (and liabilities a t t r i b u t a b l e thereto) for
' ; > ; . : ^ which t h e event occurred before October 17,1987.
"(D) SPECIAL RULE FOR FIRST YEAR OF AMORTIZATION.—
Unless t h e employer elects otherwise, t h e a m o u n t deter-
mined u n d e r s u b p a r a g r a p h (A) for t h e plan y e a r i n which
t h e event occurs shall be equal to 150 percent of t h e a m o u n t
'. determined u n d e r s u b p a r a g r a p h (A)(i). T h e a m o u n t u n d e r
s u b p a r a g r a p h (A)(ii) for subsequent plan years in t h e
; '' amortization period shall be adjusted in t h e m a n n e r pro-
'•'->•'' vided by t h e Secretary of t h e T r e a s u r y to reflect t h e ap-
plication of t h i s s u b p a r a g r a p h .
"(6) SPECIAL RULES FOR SMALL P L A N S . —
"(A) P L A N S W I T H lOO OR FEWER PARTICIPANTS.—This
subsection shall n o t apply t o a n y plan for a n y plan year if
on each day d u r i n g t h e preceding plan y e a r such plan h a d
no more t h a n 100 participants.
•:.•>: >;-., "(B) P L A N S W I T H MORE THAN lOO BUT NOT MORE T H A N 1 5 0
PARTICIPANTS.—In t h e case of a plan to which s u b p a r a g r a p h
(A) does n o t apply a n d which on each d a y d u r i n g t h e
preceding plan y e a r h a d no more t h a n 150 participants, t h e
mi a m o u n t of t h e increase u n d e r p a r a g r a p h (1) for such plan
y e a r shall be equal to t h e product of—
"(i) such increase determined without regard to this
s u b p a r a g r a p h , multiplied by
• "(ii) 2 percent for t h e highest n u m b e r of participants
in excess of 100 on a n y such day.
f:!^^'^
"(C) A G G R E G A T I O N OF P L A N S . — F o r p u r p o s e s of t h i s p a r a -
g r a p h , all defined benefit plans m a i n t a i n e d by t h e s a m e
employer (or a n y m e m b e r of such employer's controlled
group) shall be t r e a t e d as 1 plan, b u t only employees of
such employer or m e m b e r shall be t a k e n into account.
'(7) C U R R E N T LIABILITY.—For p u r p o s e s of t h i s subsection—
"(A) I N GENERAL.—The t e r m ' c u r r e n t liability' m e a n s all
liabilities to participants a n d t h e i r beneficiaries u n d e r t h e
plan.
"(B) T R E A T M E N T O F UNPREDICTABLE CONTINGENT EVENT
BENEFITS.—
"(i) I N GENERAL.—For purposes of s u b p a r a g r a p h (A),
a n y unpredictable contingent event benefit shall not be
t a k e n into account until t h e event on which t h e benefit
is contingent occurs.
"(ii) UNPREDICTABLE CONTINGENT EVENT BENEFIT.—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-341
The term 'unpredictable contingent event benefit*
means any benefit contingent on an event other than—
"(I) age, service, compensation, death, or disabil-
ity, or
"(II) an event which is reasonably and reliably
predictable (as determined by the Secretary of the t^ -
Treasury).
"(C) INTEREST RATES USED.—The rate of interest used to
determine current liability shall be the rate of interest used
under subsection (b)(5).
"(D) CERTAIN SERVICE DISREGARDED.—
"(i) IN GENERAL.—In the case of a participant to
whom this subparagraph applies, only the applicable
percentage of the years of service before such individ-
ual became a participant shall be taken into account in
computing the current liability of the plan. • ;,\ '
"(ii) APPLICABLE PERCENTAGE.—For purposes of this
subparagraph, the applicable percentage shall be deter-
mined as follows:
"If the years of The applicable
participation are: percentage is:
1 20
2 40 )i i(<5^:
8 60 ^ ;^' ';,
4 80
5 or more 100.
"(iii) PARTICIPANTS TO WHOM SUBPARAGRAPH AP-
PLIES.—This subparagraph shall apply to any partici-
pant who, at the time of becoming a participant—
"(I) has not accrued any other benefit under any . , .
defined benefit plan (whether or not terminated) ' •'
maintained by the employer or a member of the
same controlled group of which the employer is a
member, and
"(II) who first becomes a participant under the
plan in a plan year beginning after December 31,
1987.
"(8) OTHER DEFINITIONS.—For purposes of this subsection—
"(A) UNFUNDED CURRENT LIABILITY.—The term 'unfunded
current liability' means, with respect to any plan year, the
excess (if any) of—
"(i) the current liability under the plan, over
"(ii) value of the plan's assets determined under
subsection (c)(2) reduced by any credit balance in the
funding standard account.
"(B) FUNDED CURRENT LIABILITY PERCENTAGE.—The term
'funded current liability percentage' means, with respect to
any plan year, the percentage which—
"(i) the amount determined under subparagraph
(A)(ii), is of
"(ii) the current liability under the plan.
"(C) CONTROLLED GROUP.—The term 'controlled group'
means any group treated as a single employer under
subsections^"^ (b), (c), (m), and (o) of section 414 of the
Internal Revenue Code of 1986.
"(D) ADJUSTMENTS TO PREVENT OMISSIONS AND DUPLICA-
TIONS.—The Secretary of the Treasury shall provide such
adjustments in the unfunded old liability amount, the un-
'Copy read "subsection".
101 STAT. 1330-342 PUBLIC LAW 100-203—DEC. 22, 1987
funded new liability amount, the unpredictable contingent
event amount, the current payment amount, and any other
~"-'S , . charges or credits under this section as are necessary to
avoid duplication or omission of any factors in the deter-
mination of such amounts, charges, or credits."
26 use 412 note. (c) REVISION OF VALUATION REGULATIONS.—Effective with respect
to plan years beginning after December 31, 1987, the provisions of
the regulations prescribed under section 412(c)(2) of the 1986 Code
which permit asset valuations to be based on a range between 85
percent and 115 percent of average value shall have no force and
effect with respect to plans other than multiemployer plans (as
defined in section 414(f) of the 1986 Code). The Secretary of the
Treasury or his delegate shall amend such regulations to carry out
the purposes of the preceding sentence.
(d) VALUATION OF BONDS.—
Regulations. (1) AMENDMENT TO 1986 CODE.—Subparagraph (B) of section
26 u s e 412. 412(c)(2) of the 1986 Code is amended by adding at the end
thereof the following new sentence: "In the case of a plan other
than a multiemployer plan, this subparagraph shall not apply,
but the Secretary may by regulations provide that the value of
any dedicated bond portfolio of such plan shall be determined
by using the interest rate under subsection (b)(5)."
Regulations. (2) AMENDMENT TO ERISA.—Subparagraph (B) of section
29 u s e 1082 302(c)(2) of ERISA is amended by adding at the end thereof the
following new sentence: "In the case of a plan other than a
multiemployer plan, this subparagraph shall not apply, but the
Secretary of the Treasury may by regulations provide that the
value of any dedicated bond portfolio of such plan shall be
determined by using the interest rate under subsection (bX5)."
26 u s e 412 note. (e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this subsection, the
amendments made by this section shall apply with respect to
plan years beginning after December 31,1988.
(2) SUBSECTIONS (C) AND (D).—The amendments made by
subsections (c) and (d) shall apply with respect to years begin-
ning after December 31, 1987.
(3) SPECIAL RULE FOR STEEL COMPANIES.—
(A) I N GENERAL.—For any plan year beginning before
January 1, 1994, any increase in the funding standard
account under section 412(1) of the 1986 Code or section
302(d) of ERISA (as added by this section) with respect to
any steel employee plan shall not exceed the sum of—
(i) the required percentage of the current liability
under such plan, plus
(ii) the amount determined under subparagraph (CXi)
for such plan year.
(B) REQUIRED PERCENTAGE.—For purposes of subpara-
graph (A), the term "required percentage" means, with
respect to any plan year, the excess (if any) of—
(i) the sum of—
^ (I) the funded current liability percentage as of
I the beginning of the 1st plan year beginning after
December 31, 1988 (determined without regard to
any plan amendment adopted after June 30, 1987),
plus
(II) 1 percentage point for the plan year for
which the determination under this paragraph is
being made and for each prior plan year beginning
after December 31,1988, over
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-343
,- ^ (ii) the funded current liability percentage as of the
beginning of the plan year for which such determina-
tion is being made.
(C) SPECIAL RULES FOR CONTINGENT EVENTS.—In the case
of any unpredictable contingent event benefit with respect
I to which the event on which such benefits are contingent
occurs after December 17,1987—
(i) AMORTIZATION AMOUNT.—For purposes of subpara-
graph (AXii), the amount determined under this clause
for any plan year is the amount which would be deter-
mined if the unpredictable contingent event benefit
liability were amortized in equal annual installments
over 10 plan years 0)eginning with the plan year in
which such event occurs).
(ii) BENEFIT AND CONTRIBUTIONS NOT TAKEN INTO AC-
COUNT.—For purposes of subparagraph (B), in deter-
mining the funded current liability percentage for any
plan year, there shall not be taken into account—
' (I) the unpredictable contingent event benefit
liability, or
(II) any amount contributed to the plan which is
^' attributable to clause (i).
(D) STEEL EMPLOYEE PLAN.—For purposes of this para-
graph, the term "steel employee plan" means any plan if—
(i) such plan is maintained by a steel company, and
(ii) substantially all of the employees covered by such
plan are employees of such company.
(E) OTHER DEFINITIONS.—For purposes of this para-
graph—
(i) STEEL COMPANY.—The term "steel company"
means any corporation described in section 80603) of
the Steel Import Stabilization Act.
(ii) OTHER DEFINITIONS.—The terms "current liabil-
ity", "funded current liability percentage", and \
"unpredictable contingent event benefit" have the
meanings given such terms by section 412(1) of the 1986
Code (as added by this section).
(F)95 SPECIAL RULE.—The provisions of this paragraph
shall apply in the case of a company which was originally •i
incorporated on April 25, 1927, in Michigan and reincorpo-
rated on June 3,1968, in Delaware in the same manner sis if
such company were a steel company.
SEC. 9304. TIME FOR MAKING CONTRIBUTIONS.
(a) PERIOD DURING WHICH CONTRIBUTIONS MAY B E MADE AFTER
CLOSE OF YEAR.—
(1) AMENDMENT TO 1986 CODE.—Paragraph (10) of section
412(c) of the 1986 Code (relating to time when certain contribu- 26 USC 412.
tions deemed made) is amended to read as follows:
"(10) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.—For
purposes of this section—
"(A) PLANS OTHER THAN MULTIEMPLOYER PLANS.—In the
J case of a plan other than a multiemployer plan, any con-
tributions for a plan year made by gm employer during the
period—
»» Copy read "(E)"
101 STAT. 1330-344 PUBLIC LAW 100-203—DEC. 22, 1987
,....., , ; "(i) beginning on the day after the last day of such
plan year, and
"(ii) ending on the day which is SVz months after the
close of the plan year,
shall be deemed to have been made on such last day.
"(B) MULTIEMPLOYER PLANS.—In the case of a multiem-
ployer plan, any contributions for a plan year made by an
employer after the Isist day of such plan year, but not later
than two and one-half months after such day, shall be
deemed to have been made on such leist day. For purposes of
this subparagraph, such two and one-half month period
may be extended for not more than six months under
regulations prescribed by the Secretary."
(2) AMENDMENT TO ERISA.—Paragraph (10) of section 302(c) of
ERISA (relating to time when certain contributions deemed
made) (29 U.S.C. 1082(cX10))»» is amended to read as follows:
"(10) For purposes of this section—
:, "(A) In the case of a plan other than a multiemployer plan,
any contributions for a plan year made by an employer during
sf ri the period—
"(i) beginning on the day after the last day of such plan
year, and
"(ii) ending on the date which is 8V2 months after the
close of the plan year,
i shall be deemed to have been made on such last day.
"(B) In the case of a multiemployer plan, any contributions
for a plan year made by an employer after the last day of such
plan year, but not later than two and one-half months after
such day, shall be deemed to have been made on such last day.
Regulations. For purposes of this subparagraph, such two and one-half
month period may be extended for not more than six months
under regulations prescribed by the Secretary of the Treasury."
26 use 412 note. (3) EFFECTIVE DATE.—The amendments made by this subsec-
tion shall apply to plan years beginning after December 31,
1987.
(b) QUARTERLY ESTIMATED PAYMENTS REQUIRED.—
(1) AMENDMENT TO 1986 CODE.—Section 412 of the 1986 Code
26 use 412. (relating to minimum funding standard) is amended by adding
at the end thereof the following new subsection:
"(m) QUARTERLY CONTRIBUTIONS REQUIRED.—
"(1) I N GENERAL.—If a plan (other than a multiemployer plan)
fails to pay the full amount of a required installment for any
plan year, then the rate of interest charged to the funding
' standard account under subsection Ot)X5) with respect to the
amount of the underpayment for the period of the
, . .^J , underpayment shall be equal to the greater of—
y i ji; i. «^^j -j^Yg percent of the Federal mid-term rate (as in effect
under section 1274 for the 1st month of such plan year), or
lij I u(g) ^j^g j . ^ ^ ^jjjgj. subsection (bX5).
"(2) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDERPAYMENT.—
For purposes of paragraph (1)—
^;^; "(A) AMOUNT.—The amount of the underpayment shall
" " * be the excess of—
"(i) the required installment, over
»• Copy read "1082(cX10)".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-345
.^.j. / . "(ii) the amount (if any) of the installment contrib-
uted to or under the plan on or before the due date for
-• the installment.
"(B) PERIOD OF UNDERPAYMENT.—The period for which
interest is charged under this subsection with regard to any
portion of the underpayment shall run from the due date
for the installment to the date on which such portion is
contributed to or under the plan (determined without
regard to subsection (cXlO)).
"(C) ORDER OF CREDITING CONTRIBUTIONS.—For purposes
of subparagraph (AXii), contributions shall be credited
against unpaid required installments in the order in which
such installments are required to be paid.
"(8) NUMBER OF REQUIRED INSTALLMENTS; DUE DATES.—For
purposes of this subsection—
"(A) PAYABLE IN 4 INSTALLMENTS.—There shall be 4 re-
quired installments for each plan year.
"(B) TIME FOR PAYMENT OF INSTALLMENTS.— ''=
"In the case of the following
required installments: The due date is:
1st April 15
2nd July 15
3rd October 15
4th January 15 of the
following year.
"(4) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this
subsection—
"(A) IN GENERAL.—The amount of any required install-
ment shall be the applicable percentage of the required
annual payment.
"(B) REQUIRED ANNUAL PAYMENT.—For purposes of
subparagraph (A), the term 'required annual payment'
means the lesser of—
"(i) 90 percent of the amount required to be contrib-
uted to or under the plan by the employer for the plan
year under section 412 (without regard to any waiver
'l^'; under subsection (c) thereof), or
"(ii) 100 percent of the amount so required for the
preceding plan year.
Clause (ii) shall not apply if the preceding plan year was not
a year of 12 months.
"(C) APPLICABLE PERCENTAGE.—For purposes of subpara-
graph (A), the applicable percentage shall be determined in
accordance with the following table:
"For plan years The applicable
beginning in: percentage is:
1989 6.25
1990 12.5
1991 18.75
1992 and thereafter 25.
"(D) SPECIAL RULES FOR UNPREDICTABLE CONTINGENT
EVENT BENEFITS.—In the case of a plan with any unpredict-
able contingent event benefit liabilities—
"(i) such liabilities shall not be taken into account in
computing the required annual payment under
subparagraph (B), and
101 STAT. 1330-346 PUBLIC LAW 100-203—DEC. 22, 1987
"(ii) each required installment shall be increased by
the greater of—
"(I) the amount of benefits described in subsec-
• ' tion (lX5)(AXi) paid during the 3-month period
preceding the month in which the due date for
such installment occurs, or
"(ID 25 percent of the amount determined under
subsection (lX5)(AXii) for the plan year.
"(5) FISCAL YEARS AND SHORT YEARS.—
"(A) FISCAL YEARS.—In applying this subsection to a plan
year beginning on any date other than January 1, there
shall be substituted for the months specified in this subsec-
tion, the months which correspond thereto.
-^ vi "(B) SHORT PLAN YEAR.—This subsection shall be applied
to plan years of less than 12 months in accordance with
regulations prescribed by the Secretary."
(2) AMENDMENT TO ERISA.—Section 302 of ERISA (29 U.S.C.
1082) is amended by redesignating subsection (e) as subsection
(f) and by inserting after subsection (d) the following new
subsection:
"(e) QUARTERLY CONTRIBUTIONS REQUIRED.—
"(1) IN GENERAL.—If a plan (other than a multiemployer plan)
fails to pay the full amount of a required installment for any
plan year, then the rate of interest charged to the funding
standard account under subsection (bX5) with respect to the
amount of the underpa3mient for the period of the
underpayment shall be equal to the greater of—
"(A) 175 percent of the Federal mid-term rate (as in effect
under section 1274 of the Internal Revenue Code of 1986 for
the 1st month of such plan year), or
"(B) the rate under subsection (b)(5).
"(2) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDERPAYMENT.—
For purposes of paragraph (1)—
"(A) AMOUNT.—The amount of the underpa3rment shall
be the excess of—
"(i) the required installment, over
"(ii) the amount (if any) of the installment contrib-
, ,. uted to or under the plan on or before the due date for
the installment.
"(B) PERIOD OF UNDERPAYMENT.—The period for which
any interest is charged under this subsection with respect
to any portion of the underpayment shall run from the due
date for the installment to the date on which such portion
is contributed to or under the plan (determined without
regard to subsection (c)(10)).
" (C) ORDER OF CREDITING CONTRIBUTIONS.—For purposes
of subparagraph (AXii), contributions shall be credited
against unpaid required installments in the order in which
such installments are required to be paid.
"(3) NUMBER OF REQUIRED INSTALLMENTS; DUE DATES.—For
purposes of this subsection—
"(A) PAYABLE IN 4 INSTALLMENTS.—There shall be 4 re-
quired installments for each plan year.
"(B) TIME FOR PAYMENT OF INSTALLMENTS.—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-347
"In the case of the followin|r
required installments: The due date is:
1st April 15
2nd July 15
V 3rd October 15
4th January 15 of the
following year. ,,
"(4) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this
subsection—
"(A) IN GENERAL.—The amount of any required install-
ment shall be the applicable percentage of the required
annual payment.
"(B) REQUIRED ANNUAL PAYMENT.—For purposes of
subparagraph (A), the term 'required annual payment'
means the lesser of—
"(i) 90 percent of the amount required to be contrib-
uted to or under the plan by the employer for the plan
year under section 412 of the Internal Revenue Code of
1986 (without regard to any waiver under subsection (c)
thereof), or
"(ii) 100 percent of the amount so required for the
preceding plan year.
Clause (ii) shall not apply if the preceding plan year was not
a year of 12 months.
"(C) APPLICABLE PERCENTAGE.—For purposes of subpara-
graph (A), the applicable percentage shall be determined in
accordance with the following table:
"For plan years The applicable
beginning in: percentage is:
' - 1989 6.25
f'S ' 1990 12.5
1991 18.75
. -:> -^ 1992 and thereaRer 25.
"(D) SPECIAL RULES FOR UNPREDICTABLE CONTINGENT
t EVENT BENEFITS.—In the case of a plan with any unpredict-
' able contingent event benefit liabilities—
"(i) such liabilities shall not be taken into account in
< computing the required annual payment under
subparagraph (B), and
"(ii) each required installment shall be increased by
the greater of—
"(I) the amount of benefits described in subsec-
tion (d)(5)(A)(i) paid during the 3-month period
preceding the month in which the due date for
such installment occurs, or
"(II) 25 percent of the amount determined under
subsection (d)(5)(A)(ii) for the plan year.
"(5) FISCAL YEARS AND SHORT YEARS.—
"(A) FISCAL YEARS.—In applying this subsection to a plan
year beginning on any date other than January 1, there
shall be substituted for the months specified in this subsec-
tion, the months which correspond thereto.
"(B) SHORT PLAN YEAR.—This section shall be applied to Regulations.
plan years of less than 12 months in accordance with
regulations prescribed by the Secretary of the Treasury."
(3) EFFECTIVE DATE.—The amendments made by this subsec- 26 USC 412 note.
tion shall apply with respect to plan years beginning after 1988.
(c) INCREASE IN EXCISE TAX FROM 5 PERCENT TO 10 PERCENT.—
101 STAT. 1330-348 PUBLIC LAW 100-203—DEC. 22, 1987
26 use 4971. (1) I N GENERAL.—Section 4971(a) of the 1986 Code (relating to
initial tax on failure to meet minimum funding standards) is
amended by striking out "5 percent" and inserting in lieu
thereof "10 percent (5 percent in the case of a multiemployer
plan)".
26 use 4971 (2) EFFECTIVE DATE.—The amendments made by this subsec-
"0*^- tion shall apply to plan years beginning after 1988.
(d) REQUIREMENT OF NOTICE.—Section 101 of ERISA (relating to
duty of disclosure and reporting) (29 U.S.C. 1021) is amended by
redesignating subsection (d) as subsection (e) and by inserting after
subsection (c) the following new subsection:
"(d) NOTICE OF FAILURE TO MEET MINIMUM FUNDING STAND-
ARDS.—
"(1) IN GENERAL.—If an employer of a plan other than a
multiemployer plan fails to make a required installment or
other payment required to meet the minimum funding standard
under section 302 to a plan before the 60th day following the
due date for such installment or other payment, the employer
shall notify each participant and beneficiary (including an alter-
nate payee as defined in section 206(d)(3)(K)) of such plan of
such failure. Such notice shall be made at such time and in such
manner as the Secretary may prescribe.
"(2) SUBSECTION NOT TO APPLY IF WAIVER PENDING.—This
subsection shall not apply to any failure if the employer has
filed a waiver request under section 303 with respect to the plan
year to which the required installment relates, except that if
the waiver request is denied, notice under paragraph (1) shall be
provided within 60 days after the date of such denial.
"(3) DEFINITIONS.—For purposes of this subsection, the terms
'required installment' and 'due date' have the same meanings
given such terms by section 302(e)."
(e) IMPOSITION O F L I E N W H E R E F A I L U R E TO M A K E R E Q U I R E D C O N -
TRIBUTIONS.—
(1) A M E N D M E N T TO 1986 CODE.—Section 412 of t h e 1986 Code
(as amended by this subtitle) is a m e n d e d by adding a t t h e e n d
thereof t h e following new subsection:
"(n) IMPOSITION OF L I E N W H E R E F A I L U R E TO M A K E R E Q U I R E D
CONTRIBUTIONS.—
"(1) I N GENERAL.—In t h e case of a plan to which this section
applies, if—
"(A) a n y person fails to m a k e a required i n s t a l l m e n t
u n d e r subsection (m) or a n y other p a y m e n t required u n d e r
this section before t h e d u e d a t e for such i n s t a l l m e n t or
other p a y m e n t , a n d
;sj£ "(B) t h e unpaid balance of such i n s t a l l m e n t or other
p a y m e n t (including interest), w h e n added to t h e aggregate
u n p a i d balance of all preceding such i n s t a l l m e n t s o r other
p a y m e n t s for which p a y m e n t w a s n o t m a d e before t h e d u e
d a t e (including interest), exceeds $1,000,000,
t h e n t h e r e shall be a lien in favor of t h e plan in t h e a m o u n t
d e t e r m i n e d u n d e r p a r a g r a p h (3) upon all property a n d rights t o
. , ,,, property, w h e t h e r real or personal, belonging to such person
a n d a n y other person w h o is a m e m b e r of t h e s a m e controlled
group of which such person is a member.
- , , . ; ; , . "(2) P L A N S TO W H I C H SUBSECTION APPLIES.—This subsection
shall apply to a defined benefit p l a n (other t h a n a multiem-
ployer plan) for a n y p l a n y e a r for which t h e funded c u r r e n t
liability percentage (within t h e m e a n i n g of subsection (1)(8)(B))
of such p l a n is less t h a n 100 percent.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-349
, "(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the
amount of the lien shall be equal to the lesser of—
"(A) the amount by which the unpaid balances described
in paragraph (1)(B) (including interest) exceed $1,000,000, or
, - "(B) the aggregate unpaid balance of required install-
, ments and other payments required under this section
(including interest)—
, _, : , "(i) for plan years beginning after 1987, and
"(ii) for which payment has not been made before the
due date.
"(4) NOTICE OF FAILURE; LIEN.—
"(A) NOTICE OF FAILURE.—A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required installment or other payment.
"(B) PERIOD OF LIEN.—The lien imposed by paragraph (1)
shall arise on the 60th day following the due date for the
•'- - required installment or other payment and shall continue
until the last day of the first plan year in which the plan
ceases to be described in paragraph (1)(B). Such lien shall
continue to run without regard to whether such plan
continues to be described in paragraph (2) during the period
referred to in the preceding sentence.
"(C) CERTAIN RULES TO APPLY.—Any amount with respect
to which a lien is imposed under paragraph (1) shall be
treated as taxes due and owing the United States and rules
,^i similar to the rules of subsections (c), (d), and (e) of section
4068 of the Employee Retirement Income Security Act of
1974 shall apply with respect to a lien imposed by subsec-
tion (a) and the amount with respect to such lien.
"(5) ENFORCEMENT.—Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension Benefit
Guaranty Corporation, by the contributing sponsor (or any
member of the controlled group of the contributing sponsor).
"(6) DEFINITIONS.—For purposes of this subsection—
"(A) DUE DATE; REQUIRED INSTALLMENT.—The terms 'due
i date' and 'required installment' have the meanings given
such terms by subsection (m), except that in the case of a
payment other than a required installment, the due date
shall be the date such payment is required to be made
under this section. ^''
"(B) CONTROLLED GROUP.—The term 'controlled group'
means any group treated as a single employer under
subsections Ot)), (c), (m), and (o) of section 414."
(2) AMENDMENT TO ERISA.—Section 302 of ERISA (as amended
by this subtitle) (29 U.S.C. 1082) is amended by redesignating
subsection (f) as subsection (g) and by adding after subsection (e)
the following new subsection:
"(f) IMPOSITION OF LIEN WHERE FAILURE TO MAKE REQUIRED CON-
TRIBUTIONS.—
"(1) IN GENERAL.—In the case of a plan to which this section
applies, if—
" Copy read "section." ".
101 STAT. 1330-350 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) any person fails to make a required installment
J., under subsection (e) or any other payment required under
this section before the due date for such installment or
other payment, and
"(B) the unpaid balance of such installment or other
payment (including interest), when added to the aggregate
unpaid balance of all preceding such installments or other
payments for which payment was not made before the due
date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights to
property, whether real or personal, belonging to such person
and any other person who is a member of the same controlled
group of which such person is a member.
"(2) PLANS TO WHICH SUBSECTION APPLIES.—This subsection
shall apply to a defined benefit plan (other than a multiem-
ployer plan) for any plan year for which the funded current
liability percentage (within the meaning of subsection (d)(8)(B))
of such plan is less than 100 percent.
"(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the
amount of the lien shall be equal to the lesser of—
"(A) the amount by which the unpaid balances described
in paragraph (1)(B) (including interest) exceed $1,000,000, or
"(B) the aggregate unpaid balance of required install-
ments and other payments required under this section
(including interest)—
"(i) for plan years beginning after 1987, and
"(ii) for which payment has not been made before the
due date.
"(4) NOTICE OF FAILURE; LIEN.—
"(A) NOTICE OF FAILURE.—A person committing a failure
described in paragraph (1) shall notify the Pension Benefit
Guaranty Corporation of such failure within 10 days of the
due date for the required installment or other payment.
"(B) PERIOD OF LIEN.—The lien imposed by paragraph (1)
shall arise on the 60th day following the due date for the
required installment or other payment and shall continue
until the last day of the first plan year in which the plan
ceases to be described in paragraph (1)(B). Such lien shall
continue to run without regard to whether such plan
continues to be described in paragraph (2) during the period
-"' referred to in the preceding sentence.
"(C) CERTAIN RULES TO APPLY.—Any amount with respect
to which a lien is imposed under paragraph (1) shall be
treated as taxes due and owing the United States and rules
similar to the rules of subsections vc), (d), and (e) of section
4068 shall apply with respect to a lien imposed by subsec-
tion (a) and the amount with respect to such lien.
"(5) ENFORCEMENT.—Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension Benefit
Guaranty Corporation, by the contributing sponsor (or any
member of the controlled group of the contributing sponsor).
"(6) DEFINITIONS.—For purposes of this subsection—
"(A) DUE DATE; REQUIRED INSTALLMENT.—The terms 'due
date' and 'required installment' have the meanings given
such terms by subsection (e), except that in the case of a
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-351
p a y m e n t o t h e r t h a n a required installment, t h e d u e d a t e
shall be t h e d a t e such p a y m e n t is required to be m a d e
u n d e r this section."
"(B) CONTROLLED G R O U P . — T h e t e r m 'controlled group'
m e a n s a n y group t r e a t e d as a single employer u n d e r
subsections (b), (c), (m), a n d (o) of section 414 of t h e I n t e r n a l
Revenue Code of 1986."
(3) EFFECTIVE DATE.—The a m e n d m e n t s m a d e by this subsec- 26 USC 412 note.
tion shall apply to plan years beginning after December 3 1 ,
1987.
SEC. 9305. LIABILITY OF MEMBERS OF CONTROLLED GROUP FOR TAXES
ON FAILURE TO MEET MINIMUM FUNDING STANDARDS AND
TO MAKE MINIMUM FUNDING CONTRIBUTIONS.
(a) EXCISE T A X . —
(1) I N GENERAL.—Section 4971 of t h e 1986 Code (relating to 26 USC 4971.
taxes on failure to meet m i n i m u m funding standards) is
a m e n d e d by redesignating subsection (e) a s subsection (f) a n d by
inserting after subsection (d) t h e following new subsection:
"(e) LIABILITY FOR T A X . —
"(1) I N GENERAL.—Except a s provided in p a r a g r a p h (2), t h e
tax imposed by subsection (a) or (b) shall be paid by t h e
employer responsible for contributing to or u n d e r t h e plan t h e
a m o u n t described in section 412(b)(3)(A).
"(2) J O I N T AND SEVERAL LIABILITY WHERE EMPLOYER MEMBER
OF CONTROLLED G R O U P . —
"(A) I N GENERAL.—In t h e case of a plan o t h e r t h a n a
multiemployer plan, if t h e employer referred to in para- " "
i 1 g r a p h (1) is a m e m b e r of a controlled group, each m e m b e r of
such group shall be jointly a n d severally liable for t h e t a x ,^ - ,
imposed by subsection (a) or (b).
"(B) CONTROLLED G R O U P . — F o r p u r p o s e s of s u b p a r a g r a p h
(A), t h e t e r m 'controlled group' m e a n s a n y group treated a s
a single employer u n d e r subsection (b), (c), (m), or (o) of
section 414."
(2) T E C H N I C A L A M E N D M E N T S . —
(A) Subsection (a) of section 4971 of t h e 1986 Coae is
a m e n d e d by striking o u t t h e last sentence.
(B) Subsection (b) of section 4971 of t h e 1986 Code is
a m e n d e d by striking out t h e last sentence.
(b) M I N I M U M F U N D I N G CONTRIBUTIONS.—
(1) A M E N D M E N T TO 1986 CODE.—Section 412(c) of t h e 1986 Code
is amended by adding a t t h e end thereof t h e following new
paragraph:
"(11) LlABIUTY FOR CONTRIBUTIONS.—
. "(A) I N GENERAL.—Except as provided in s u b p a r a g r a p h
(B), t h e a m o u n t of a n y contribution required by this section
and a n y required i n s t a l l m e n t s u n d e r subsection (m) shall be
4 paid by t h e employer responsible for contributing t o or
u n d e r t h e plan t h e a m o u n t described in subsection (b)(3)(A).
"(B) J O I N T A N D SEVERAL UABILITY WHERE EMPLOYER
MEMBER OF CONTROLLED GROUP.—
"(i) I N GENERAL.—In t h e case of a plan o t h e r t h a n a
multiemployer plan, if t h e employer referred to in
s u b p a r a g r a p h (A) is a m e m b e r of a controlled group,
each m e m b e r of such group shall be jointly a n d sever-
101 STAT. 1330-352 PUBLIC LAW 100-203—DEC. 22, 1987
ally liable for payment of such contribution or required
' installment.
"(ii) CONTROLLED GROUP.—For purposes of clause (i),
. v^L • the term'controlled group'means any group treated as
a single employer under subsection (b), (c), (m), or (o) of
section 414.'
(2) AMENDMENT TO ERISA.—Section 302(c) of ERISA (29 U.S.C.
! -^ ' 1082(c)) is amended by adding at the end thereof the following
new paragraph: ,./;iv ,5^o >! .
"(11) LIABILITY FOR CONTRIBUTIONS.— •'-
"(A) IN GENERAL.—Except as provided in subparagraph
(B), the amount of any contribution required by this section
*' and any required installments under subsection (e) shall be
paid by the employer responsible for contributing to or
under the plan the amount described in subsection (b)(3XA).
v.; '>8U f' ' "(B) JOINT AND SEVERAL UABIUTY WHERE EMPLOYER
M E M B E R OF CONTROLLED GROUP.—
V "(i) IN GENERAL.—In the case of a plan other than a
multiemployer plan, if the employer referred to in
subparagraph (A) is a member of a controlled group,
^n- each member of such group shall be jointly and sever-
ally liable for payment of such contribution or required
installment,
"(ii) CONTROLLED GROUP.—For purposes of clause (i),
ir^HMar ^^® term 'controlled group' means any group treated as
a single employer under subsection (b), (c), (m), or (o) of
section 414 of the Internal Revenue Code of 1986." ^*
26 use 414. (c) CONFORMING AMENDMENT.—Section 4140)) of the 1986 Code is
amended by striking out "the minimum funding standard of section
412, the tax imposed by section 4971, and".
26 use 412 note. (d) EFFECTIVE DATE.—The amendments made by this section shall
apply with respect to plan years beginning after December 31, 1987.
SEC. 9306. FUNDING WAIVERS.
(a) REQUIREMENTS FOR WAIVERS.— *
(1) AMENDMENTS TO 1986 CODE.—
(A) APPUCATION MUST BE SUBMITTED BEFORE DATE 2V2
^•' -^ MONTHS AFTER CLOSE OF YEAR.—Subsection (d) of section 412
of the 1986 Code (relating to variance from minimum fund-
^' - ing standard) is amended by adding at the end thereof the
following new paragraph:
"(4) APPUCATION MUST BE SUBMITTED BEFORE DATE 2y2 MONTHS
AFTER CLOSE OF YEAR.—In the case of a plan other than a
multiemployer plan, no waiver may be granted under this
subsection with respect to any plan for any plan year unless an
application therefor is submitted to the Secretary not later than
the 15th day of the 3rd month beginning after the close of such
plan year."
(B) WAIVER ALLOWED ONLY FOR TEMPORARY HARDSHIP.—
Subsection (d) of section 412 of the 1986 Code is amended—
(i) by striking out "substantial business hardship" in
paragraphs (1) and (2) and inserting in lieu thereof
temporary substantial business hardship (substantial
.-^i : ,;1; business hardship in the case of a multiemployer
plan)", and
•• Indention on paragraphs " '(11)", " '(A)", " '(B)", " '(i)", and " '(ii)", incorrect.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-353
li -r b :, (ii) by striking o u t "SUBSTANTIAL" in t h e headings of
p a r a g r a p h s (1) a n d (2).
(C) H A R D S H I P MUST ALSO EXIST AT CONTROLLED GROUP
LEVEL.—Subsection (d) of section 412 of t h e 1986 Code is 26 USC 412.
a m e n d e d by adding a t t h e e n d thereof t h e following new
paragraph:
"(5) SPECIAL RULE I F EMPLOYER IS MEMBER O F CONTROLLED
GROUP.—
"(A) I N GENERAL.—In t h e case of a plan other t h a n a
multiemployer plan, if a n employer is a m e m b e r of a
controlled group, t h e t e m p o r a r y substantial business hard-
ship r e q u i r e m e n t s of p a r a g r a p h (1) shall be treated as m e t
' only if such r e q u i r e m e n t s a r e met—
"(i) with respect to such employer, a n d
"(ii) w i t h respect t o t h e controlled group of which
such employer is a m e m b e r (determined by t r e a t i n g all
m e m b e r s of such group as a single employer).
T h e Secretary m a y provide t h a t a n analysis of a t r a d e o r
business or i n d u s t r y of a m e m b e r need not be conducted if •'"
t h e Secretary d e t e r m i n e s such analysis is not necessary
because t h e t a k i n g into account of such m e m b e r would not
significantly affect t h e d e t e r m i n a t i o n u n d e r this subsection.
"(B) CONTROLLED G R O U P . — F o r p u r p o s e s of s u b p a r a g r a p h
(A), t h e t e r m 'controlled group' m e a n s a n y group t r e a t e d a s
a single employer u n d e r subsection (b), (c), (m), or (o) of
section 414."
(2) A M E N D M E N T S TO ERISA.—
(A) A P P U C A T I O N MUST BE SUBMITTED BEFORE DATE 2 ¥2
MONTHS AFTER CLOSE OF YEAR.—SectioD 303 of ERISA (relat-
ing to v a r i a n c e from m i n i m u m funding standard) (29 U.S.C.
1083) is a m e n d e d by redesignating subsection (d) as subsec-
tion (f) a n d by inserting after subsection (c) t h e following
new subsection:
'(d) SPECIAL R U L E S . —
"(1) A P P U C A T I O N MUST BE SUBMITTED BEFORE DATE 2 ¥2 MONTHS
AFTER CLOSE O F YEAR.—In t h e case of a p l a n o t h e r t h a n a
multiemployer plan, no waiver m a y be g r a n t e d u n d e r this
section w i t h respect to a n y plan for a n y plan year unless a n
application therefor is submitted t o t h e Secretary of t h e Treas-
u r y n o t l a t e r t h a n t h e 15th d a y of t h e 3rd m o n t h beginning
after t h e close of such plan year."
(B) W A I V E R ALLOWED ONLY FOR TEMPORARY HARDSHIP.—
Section 303 of ERISA (29 U.S.C. 1083) is amended by strik-
ing o u t "substantial business h a r d s h i p " in subsections (a)
a n d (b) a n d inserting in lieu thereof " t e m p o r a r y s u b s t a n t i a l
business h a r d s h i p (substantial business h a r d s h i p in t h e
case of a multiemployer plan)".
(C) H A R D S H I P MUST ALSO EXIST AT CONTROLLED GROUP
LEVEL.—Subsection (d) of section 303 of ERISA (as amended
by s u b p a r a g r a p h (A)) (29 U.S.C. 1083) is a m e n d e d by adding
a t t h e end thereof t h e following new p a r a g r a p h :
"(2) SPECIAL RULE I F EMPLOYER IS MEMBER O F CONTROLLED
GROUP.—
"(A) I N GENERAL.—In t h e case of a plan other t h a n a
multiemployer plan, if a n employer is a m e m b e r of a
controlled group, t h e t e m p o r a r y substantial business hard-
101 STAT. 1330-354 PUBLIC LAW 100-203—DEC. 22, 1987
ship requirements of subsection (a) shall be treated as met
only if such requirements are met—
"(i) with respect to such employer, and
"(ii) with respect to the controlled group of which
such employer is a member (determined by treating all
members of such group as a single employer).
u^: The Secretary of the Treasury may provide that an analysis
of a trade or business or industry of a member need not be
g , conducted if the Secretary of the Treasury determines such
I analysis is not necessary because the taking into account of
such member would not significantly affect the determina-
tion under this subsection.
"(B) CONTROLLED GROUP.—For purposes of subparagraph
(A), the term 'controlled group' means any group treated as
ft ;; a single employer under subsection (b), (c), (m), or (o) of
section 414 of the Internal Revenue Code of 1986."
(b) FREQUENCY OF WAIVERS.—
(1) AMENDMENTS TO 1986 CODE.—The second sentence of sec-
26 use 412. tion 412(d)(1) of the 1986 Code is amended by striking out "more
than 5 of any 15" and inserting in lieu thereof "more than 3 of
any 15 (5 of any 15 in the case of a multiemployer plan)".
(2) AMENDMENTS TO ERISA.—The second sentence of section
303(a) of ERISA (29 U.S.C. 1083(a)) is amended by striking out
"more than 5 of any 15" and inserting in lieu thereof "more
than 3 of any 15 (5 of any 15 in the case of a multiemployer
plan)".
(c) INTEREST ON REPAYMENT OF WAIVED CONTRIBUTIONS.—
^•i (1) A M E N D M E N T S TO 1986 CODE.—
(A) Paragraph (1) of section 412(d) of the 1986 Code is
amended by striking out the last sentence and inserting in
lieu thereof the following new sentence: "The interest rate
used for purposes of computing the amortization charge
described in subsection (b)(2)(C) for any plan year shall be—
"(A) in the case of a plan other than a multiemployer
plan, the greater of (i) 150 percent of the Federal mid-
term rate (as in effect under section 1274 for the 1st
month of such plan year), or (ii) the rate of interest
used under the plan in determining costs, and
"(B) in the case of a multiemployer plan, the rate
determined under section 6621(b). '
(B) Subsection (e) of section 412 of the 1986 Code is
amended by striking out the last sentence and inserting in
lieu thereof the following new sentence: "In the case of a
plan other than a multiemployer plan, the interest rate
applicable for any plan year under any arrangement en-
tered into by the Secretary in connection with an extension
granted under this subsection shall be the greater of (A) 150
percent of the Federal mid-term rate (as in effect under
section 1274 for the 1st month of such plan year), or (B) the
^ rate of interest used under the plan in determining costs. In
)l - the case of a multiemployer plan, such rate shall be the
rate determined under section 6621(b)."
* •' * (2) A M E N D M E N T S TO ERISA.—
(A) Subsection (a) of section 303 of ERISA (29 U.S.C.
1083(a)) is amended by striking out the last sentence and
• inserting in lieu thereof the following new sentence: "The
"•^' interest rate used for purposes of computing the amortiza-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-355
tion charge described in subsection 03X2)(C) for any plan
year shall be—
"(A) in the case of a plan other than a multiemployer
plan, the greater of (i) 150 percent of the Federal mid-
term rate (as in effect under section 1274 of the In-
ternal Revenue Code of 1986 for the 1st month of such
plan year), or (ii) the rate of interest used under the
plan in determining costs, and
"(B) in the case of a multiemployer plan, the rate
determined under section 6621(b)."
(B) Subsection (a) of section 304 of ERISA (29 U.S.C.
1084(a)) is amended by striking out the last sentence and
inserting in lieu thereof the following new sentence:
"In the case of a plan other than a multiemployer plan, the interest
rate applicable for any plan year under any arrangement entered
into by the Secretary in connection with an extension granted under
this subsection shall be the greater of (A) 150 percent of the Federal
mid-term rate (as in effect under section 1274 of the Internal
Revenue Code of 1986 for the 1st month of such plan year), or (B) the
rate of interest used under the plan in determining costs. In the case
of a multiemployer plan, such rate shall be the rate determined
under section 6621(b) of such Code."
(d) NOTICE TO PARTICIPANTS OF APPUCATION FOR FUNDING
WAIVERS.—
(1) AMENDMENT TO 1986 CODE.—Section 412 (fK4)(A) of the 1986
Code (relating to advance notice) is amended by striking out 26 USC 412.
"plan." and inserting in lieu thereof "plan, and each partici-
pant, beneficiary, and alternate payee (within the meaning of
section 414(p)(8)). Such notice shall include a description of the
extent to which the plan is funded for benefits which are
guaranteed under title IV of such Act and the benefit
liabilities.".
(2) AMENDMENT TO ERISA.—Section 303(eXl) of ERISA (relat-
ing to advance notice) (29 U.S.C. 1083(eXl)) is amended by
striking out "plan." and inserting in lieu thereof "plan, and
each affected party (as defined in section 4001(aX21)) other than
the Pension Benefit Guaranty Corporation. Such notice shall
include a description of the extent to which the plan is funded
for benefits which are guaranteed under title IV and the benefit
liabilities.".
(e) DECREASE IN AMOUNT OF DEFICIENCIES REQUIRED BEFORE SECU-
RITY REQUIRED.—
(1) AMENDMENT TO 1986 CODE.—Subparagraph (C) of section
412 (0(3) is amended by striking out "$2,000,000" and inserting
in lieu thereof "$1,000,000".
(2) AMENDMENT TO ERISA.—Section 306(cXl) of ERISA (29
U.S.C. 1085a(cXl)) is amended by striking out "$2,000,000" and
inserting in lieu thereof "$1,000,000".
(f) EFFECTIVE DATES.— 26 use 412 note.
(1) IN GENERAL.—Except as provided in this subsection, the
amendments made by this section shall apply in the case of—
(A) any application submitted after December 17, 1987,
and
(B) any waiver granted pursuant to such an application.
(2) SPECIAL RULE FOR APPUCATION REQUIREMENT.—
101 STAT. 1330-356 PUBLIC LAW 100-203—DEC. 22, 1987
. J (A) I N GENERAL.—The amendments made by subsections
(a)(1)(A) and (a)(2)(A) shall apply to plan years beginning
after December 31,1987.
(B) TRANSITIONAL RULE FOR YEARS BEGINNING IN I988.—In
the case of any plan year beginning during calendar 1988,
,. section 412(d)(4) of the 1986 Code and section 303(d)(1) of
ERISA (as added by subsection (a)(1)) shall be applied by
substituting "6th month" for "3rd month".
(3) FREQUENCY OF WAIVERS.—In applying the second sentence
of section 412(d) of the 1986 Code and section 303(a) of ERISA to
plans other than multiemployer plans, the number of waivers
which may be granted pursuant to applications submitted after
December 17, 1987, shall be determined without regard to
waivers granted with respect to plan years beginning before
January 1, 1988.
(4) SUBSECTION (d).—The amendments made by subsection (d)
shall apply to applications submitted more than 90 days after
the date of the enactment of this Act.
SEC. 9307. OTHER FUNDING CHANGES. , . •« ';
(a) A M O R T I Z A T I O N P E R I O D S . — *•• ' ' -*•
(1) A M E N D M E N T S TO 1986 CODE.—
(A) Paragraphs (2)(B)(iv), (2)(C), and (3XB)(ii) of section
26 use 412. o ? 4120t>) of the 1986 Code are each amended by striking out
"15 plan years" and inserting in lieu thereof "5 plan years
i •<: (15 plan years in the case of a multiemployer plan)".
.ftu>n: ti (B) Paragraphs (2)(B)(v) and (3)(B)(iii) of section 412(b) of
;„ the 1986 Code are each amended by striking out "30 plan
years" and inserting in lieu thereof "10 plan years (30 plan
years in the case of a multiemployer plan)".
(2) AMENDMENTS TO ERISA.—
(A) Paragraphs (2)(B)(iv), (2)(C), and (3)(B)(ii) of section
302(b) of ERISA (29 U.S.C. 1082(b)) are each amended by
|. striking out "15 plan years" and inserting in lieu thereof "5
plan years (15 plan years in the case of a multiemployer
plan)".
(B) Paragraphs (2)(B)(v) and (3)(B)(iii) of section 3020)) of
ERISA (29 U.S.C. 1082(b)) are each amended by striking out
"30 plan years" and inserting in lieu thereof' 10 plan years
(30 plan years in the case of a multiemployer plan)".
Ob) ACTUARIAL ASSUMPTIONS MUST B E REASONABLE.—
(1) AMENDMENT TO 1986 CODE.—Paragraph (3) of section 412(c)
of the 1986 Code is amended to read £is follows:
"(3) ACTUARIAL ASSUMPTIONS MUST BE REASONABLE.—For pur-
poses of this section, all costs, liabilities, rates of interest, and
other factors under the plan shall be determined on the basis of
actuarial assumptions and methods— --
"(A) in the case of—
^'' "(i) a plan other than a multiemployer plan, each of
which is reasonable (taking into account the experience
. • ! ,r 5 i of the plan and reasonable expectations) or which, in
. •• the aggregate, result in a total contribution equivalent
to that which would be determined if each such
, ' assumption and method were reasonable, or
"(ii) a multiemployer plan, which, in the aggregate,
*ii •;-•';:.' are reasonable (taking into account the experiences of
the plan and reasonable expectations), and
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-357
'(B) which, in combination, offer the actuary's best esti-
mate of anticipated experience under the plan."
(2) AMENDMENT TO ERISA.—Paragraph (3) of section 302(c) of
ERISA (29 U.S.C. 1082(c)(3)) is amended to read as follows:
"(3) For purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be determined on
the basis of actuarial assumptions and methods—
"(A) in the case of—
"(i) a plan other than a multiemployer plan, each of
which is reasonable (taking into account the experience
of the plan and reasonable expectations) or which, in
the aggregate, result in a total contribution equivalent
to that which would be determined if each such
assumption and method were reasonable, or
" "(ii) a multiemployer plan, which, in the aggregate,
are reasonable (taking into account the experiences of
the plan and reasonable expectations), and
"(B) which, in combination, offer the actuary's best esti-
mate of anticipated experience under the plan.'
(c) LIMITATION ON DEDUCTION FOR CONTRIBUTIONS TO CERTAIN
PLANS NOT LESS THAN UNFUNDED CURRENT LIABIUTY.—Paragraph
(1) of section 404(a) of the 1986 Code is amended by redesignating 26 USC 404.
subparagraph (D) as subparagraph (E) and by inserting after
subparagraph (C) the following new subparagraph:
"(D) SPECIAL RULE IN CASE OF CERTAIN PLANS.—In the case
of any defined benefit plan (other than a multiemployer
^^'^ plan) which has more than 100 participants for the plan
year, except as provided in regulations, the maximum
[ amount deductible under the limitations of this paragraph
shall not be less than the unfunded current liability deter-
mined under section 412(1) (without regard to any reduction
by the credit balance in the funding standard account). For
purposes of this subparagraph, all defined benefit plans
maintained by the same employer (or any member of such
,f . employer's controlled group (within the meaning of section
' 412(l)(8Xc))) shall be treated as 1 plan, but only employees of
such member or employer shall be taken into account."
(d) LIMITATION ON AMORTIZATION OF PAST SERVICE CREDITS.— ;.:; ,
Clause (iii) of section 404(aXlXA) of the 1986 Code (relating to
pension trusts) is amended by striking out "to amortize such cred-
its" and inserting in lieu thereof "to amortize the unfunded costs
attributable to such credits".
(e) LIMITATION ON INTEREST RATE.—
(1) AMENDMENT TO 1986 CODE.—Paragraph (5) of section 4120t>)
of the 1986 Code (relating to interest) is amended to read as
follows:
"(5) INTEREST.—
"(A) IN GENERAL.—The funding standard account (and Regulations.
items therein) shall be charged or credited (as determined
.Si' under regulations prescribed by the Secretary) with in-
•: terest at the appropriate rate consistent with the rate or
rates of interest used under the plan to determine costs.
"(B) REQUIRED CHANGE OF INTEREST RATE.—For purposes
of determining a plan's current liability and for purposes of
'in ^ determining a plan's required contribution under section
412(1) for any plan year—
101 STAT. 1330-358 PUBLIC LAW 100-203—DEC. 22, 1987
"(i) I N GENERAL.—If any rate of interest used under
the plan to determine cost is not within the permissible
range, the plan shall establish a new rate of interest
within the permissible range.
o "(ii) PERMISSIBLE RANGE.—For purposes of this
subparagraph—
"(I) I N GENERAL.—Except as provided in
subclause (II), the term 'permissible range' means
a rate of interest which is not more than 10 per-
cent above, and not more than 10 percent below,
the weighted average of the rates of interest on 30-
year Treasury securities during the 4-year period
ending on the last day before the beginning of the
plan year.
, "(II) SECRETARIAL AUTHORITY.—If the Secretary
finds that the lowest rate of interest permissible
under subclause (I) is unreasonably high, the Sec-
j;. ^ ... retary may prescribe a lower rate of interest,
except that such rate may not be less than 80
percent of the average rate determined under
subclause (I).
icn "(iii) ASSUMPTIONS.—Notwithstanding subsection
(c)(3)(A)(i), for purposes of this section and for purposes
of determining current liability, the interest rate used
, under the plan shall be—
1/ "(I) determined without taking into account the
experience of the plan and reasonable expecta-
tions, but
"(II) consistent with the assumptions which re-
flect the purchase rates which would be used by
insurance companies to satisfy the liabilities under
the plan.".
(2) AMENDMENT TO ERISA.—Paragraph (5) of section 3O20t>) of
ERISA (relating to interest) (29 U.S.C. 1082(bX5)) is amended to
read as follows:
"(5) INTEREST.—For purposes of determining a plan's current li-
ability and for purposes of determining a plan's required contribu-
tion under section 412(1) for any plan year—
Regulations. "(A) IN GENERAL.—The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary of the Treasury) with
interest at the appropriate rate consistent with the rate or rates
of interest used under the plan to determine costs.
"(B) R E Q U I R E D CHANGE OF INTEREST RATE.—
"(i) I N GENERAL.—If any rate of interest used under the
plan to determine cost is not within the permissible range,
the plan shall establish a new rate of interest within the
permissible range.
"(ii) PERMISSIBLE RANGE.—For purposes of this subpara-
graph—
"(I) I N GENERAL.—Except as provided in subclause
(II), the term 'permissible range' means a rate of in-
terest which is not more than 10 percent above, and not
more than 10 percent below, the average rate of in-
terest on 30-year Treasury securities during the 4-year
.1 period ending on the last day before the beginning of
the plan year.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-359
"(II) SECRETARIAL AUTHORITY.—If the Secretary finds
that the lowest rate of interest permissible under
subclause (I) is unreasonably high, the Secretary may
prescribe a lower rate of interest, except that such rate
may not be less than 80 percent of the average rate
determined under subclause (I).
"(iii) ASSUMPTIONS.—Notwithstanding subsection
(cX3)(A)(i), for purposes of this section and for purposes of
determining current liability, the interest rate used under
the plan shall be—
"(I) determined without taking into account the
experience of the plan and reasonable expectations, but
"(11) consistent with the assumptions which reflect
the purchase rates which would be used by insurance
companies to satisfy the liabilities under the plan.".'**
(f) EFFECTIVE DATE.—The amendments made by this section shall 26 use 404 note,
apply to years beginning after December 31,1987.
Subpart B—Plan Terminations
SEC. 9311. LIMITATIONS ON EMPLOYER REVERSIONS UPON PLAN
TERMINATION.
(a) RESTRICTIONS ON REVERSIONS PURSUANT TO RECENTLY AMENDED
PLANS.—
(1) IN GENERAL.—Section 4044(d) of ERISA (29 U.S.C. 1344(d))
is amended—
(A) by redesignating paragraph (2) as paragraph (3); and
(B) by inserting after paragraph (1) the following new
paragraph:
"(2)(A) In determining the extent to which a plan provides for the
distribution of plan assets to the employer for purposes of paragraph
(1)(C), any such provision, and any amendment increasing the
amount which may be distributed to the employer, shall not be
treated as effective before the end of the fifth calendar year follow-
ing the date of the adoption of such provision or amendment.
"(B) A distribution to the employer from a plan shall not be
treated as failing to satisfy the requirements of this paragraph if the
plan has been in effect for fewer than 5 years and the plan has
provided for such a distribution since the effective date of the plan.
"(C) Except as otherwise provided in regulations of the Secretary Regulations.
of the Treasury, in any case in which a transaction described in
section 208 occurs, subparagraph (A) shall continue to apply sepa-
rately with respect to the amount of any assets transferred in such
transaction.
"(D) For purposes of this subsection, the term 'employer' includes
any member of the controlled group of which the employer is a
member. For purposes of the preceding sentence, the term 'con-
trolled group' means any group treated as a single employer under
subsection (b), (c), (m) or (o) of section 414 of the Internal Revenue
Code of 1986."
(2) TRANSITIONAL RULE.—The amendments made by para- 29 use 1344
graph (1) shall apply, in the case of plans which, as of note.
December 17, 1987, have no provision relating to the distribu-
tion of plan assets to the employer for purposes of section
4044(dXlXC) of the Employee Retirement Income Security Act of
1974, only with respect to plan amendments providing for the
"•Copy read "plan."
91-194 O - 90 - 37 : QL.3 Part 2
101 STAT. 1330-360 PUBLIC LAW 100-203—DEC. 22, 1987
distribution of plan assets to the employer which are adopted
after 1 year after the effective date of such amendments made
by paragraph (1). Such amendment shall not apply to any
provision of the plan adopted on or before December 17, 1987,
which provides for the distribution of plan assets to the em-
ployer.
(b) DISTRIBUTION OF ASSETS ATTRIBUTABLE TO EMPLOYEE CONTRIBU-
TIONS.—Section 4044(d) of ERISA (29 U.S.C. 1344(d)) is amended—
(1) in paragraph (1), by striking "Any" and inserting "Subject
to paragraph (3), any"; and
(2) by striking paragraph (3) (as redesignated by subsection
(c)(1)) and inserting the following new paragraph:
"(3)(A) Before any distribution from a plan pursuant to paragraph
(1), if any assets of the plan attributable to employee contributions
0;fcii f ;i 0'; 5 remain after satisfaction of all liabilities described in subsection (a),
such remaining assets shall be equitably distributed to the partici-
pants who made such contributions or their beneficiaries (including
alternate payees, within the meaning of section 206(d)(3)(K)).
"(B) For purposes of subparagraph (A), the portion of the remain-
ing assets which are attributable to employee contributions shall be
an amount equal to the product derived by multiplying—
"(i) the market value of the total remaining assets, by
"(ii) a fraction—
«lijV^ "(I) the numerator of which is the present value of all
portions of the accrued benefits with respect to participants
|,^^ which are derived from participants' mandatory contribu-
,^. "j tions (referred to in subsection (aX2)), and
"(II) the denominator of which is the present value of all
^,:; benefits with respect to which assets are allocated under
paragraphs (2) through (6) of subsection (a).
"(C) For purposes of this paragraph, each person who is, as of the
termination date—
"(i) a participant under the plan, or
"(ii) an individual who has received, during the 3-year period
ending with the termination date, a distribution from the plan
of such individual's entire nonforfeitable benefit in the form of
a single sum distribution in accordance with section 203(e) or in
the form of irrevocable commitments purchased by the plan
oiJElyati^; from an insurer to provide such nonforfeitable benefit,
shall be treated as a participant with respect to the termination, if
all or part of the nonforfeitable benefit with respect to such person
is or was attributable to participants' mandatory contributions (re-
ferred to in subsection (a)(2))."
(c) TECHNICAL AMENDMENT.—Section 404405X4) of ERISA (29
U.S.C. 1344(bX4)) is amended by striking "section 401(a), 403(a), or
405(a)" and inserting "section 401(a) or 403(a)".
29 use 1344 (d) EFFECTIVE DATE.—The amendments made by this section shall
note. apply with respect to—
; 5 g ; 7 |>C-
(1) plan terminations under section 4041(c) of ERISA with
respect to which notices of intent to terminate are provided
under section 4041(aX2) of ERISA after December 17, 1987, and
(2) plan terminations with respect to which proceedings are
instituted by the Pension Benefit Guaranty Corporation under
section 4042 of ERISA after December 17,1987.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-361
SEC. 9312. ELIMINATION OF SECTION 4049 TRUST: INCREASE IN LIABILITY
TO PENSION BENEFIT GUARANTY CORPORATION AND IN
;c PAYMENTS BY CORPORATION TO PARTICIPANTS AND
BENEFICIARIES.
(a) REPEAL.—Section 4049 of ERISA (29 U.S.C. 1349) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) ELIMINATION OF EMPLOYER LIABILITY TO SECTION 4049
* TRUST.—
(A) REPEAL.—Subsection (c) of section 4062 of ERISA (29
f U.S.C. 1362(c)) is repealed.
'•*• (B) CONFORMING AMENDMENTS.—Section 4062 of ERISA is
further amended by redesignating subsections (d), (e), and
"* * (f) as subsections (c), (d), and (e), respectively.
(2) INCREASE IN EMPLOYER LIABILITY TO THE CORPORATION.—
-j^* (A) IN GENERAL.—Subparagraph (A) of section 4062(b)(1)
of ERISA (29 U.S.C. 1362(bXlXA)) is amended to read as
w»i; •' follows:
"(A) IN GENERAL.—Exccpt as provided in subparagraph Regulations.
'' (B), the liability to the corporation of a person described in
subsection (a) shall be the total amount of the unfunded
benefit liabilities (as of the termination date) to all partici-
pants and beneficiaries under the plan, together with in-
terest (at a reasonable rate) calculated from the termi-
nation date in accordance with regulations prescribed by
the corporation."
JUMC » (B) L I E N LIMITED TO 30 PERCENT OF NET WORTH.—
(i) Subsection (a) of section 4068 of ERISA (29 U.S.C.
"^^ 1368(a)) is amended by striking out "to the extent of an
'^ amount equal to the unpaid amount described in sec-
tion 4062(b)(l)(A)(i)" each place it appears and inserting
in lieu thereof "to the extent such amount does not
^^ exceed 30 percent of the collective net worth of all
persons described in section 4062(a)".
m'm- (ii) Title IV of ERISA (29 U.S.C. 4001 et seq.) is
amended by transferring subsection (e) of section 4062
^^' of ERISA (29 U.S.C. 1362(e)) to the end of section 4068
«' of ERISA (29 U.S.C. 1368) and by redesignating such
subsection as subsection (f).
fl; (C) TREATMENT OF MULTIPLE CONTROLLED GROUPS.—
^* (i) IN GENERAL.—So much of section 4064(b) of ERISA
(29 U.S.C. 13640t))) as precedes the second sentence is
"" ""' amended to read as follows:
"(b) The corporation shall determine the liability with respect to
each contributing sponsor and each member of its controlled group
in a manner consistent with section 4062, except that the amount of
liability determined under section 4062(bKl) with respect to the
entire plan shall be allocated to each controlled group by multiply-
ing such amount by a fraction—
"(1) the numerator of which is the amount required to be
contributed to the plan for the last 5 plan years ending prior to
the termination date by persons in such controlled group as
"'' contributing sponsors, and
"(2) the denominator of which is the total amount required to
^ be contributed to the plan for such last 5 plan years by all
persons as contributing sponsors,
101 STAT. 1330-362 PUBLIC LAW 100-203—DEC. 22, 1987
and clauses (iXII) and (ii) of section 4062(bXlXA) shall be applied
separately with respect to each controlled group."
(ii) CONFORMING AMENDMENTS.—Section 4068(a) of
ERISA (29 U.S.C. 1368(a)) is amended by adding at the
: ,,^, . end thereof the following new sentence: "The preceding
pj.QyjgjQjjg Qf ^jjjg subsection shall be applied in a
.,^..j ,. manner consistent with the provisions of section
4064(d) relating to treatment of multiple controlled
^> groups."
(3) PAYMENT BY CORPORATION TO PARTICIPANTS AND BENE-
, FICIARIES OF RECOVERY PERCENTAGE OF OUTSTANDING AMOUNT OF
•• BENKFIT LIABILITIES ~~'
^ (A) IN GENERAL.—Section 4022 of ERISA (29 U.S.C. 1322)
is amended—
(i) by redesignating subsections (c) and (d) as subsec-
tions (d) and (e); and
(ii) by inserting after subsection 0)) the following new
_^ subsection:
"(cXD In addition to benefits paid under the preceding provisions
of this section with respect to a terminated plan, the corporation
shall pay the portion of the amount determined under paragraph (2)
which is allocated with respect to each participant under section
4044(a), to such participant or (in the case of a deceased participant)
to such participant's beneficiaries (including alternate payees,
within the meaning of section 206(dX3XK)).
"(2) The amount determined under this paragraph is an amount
equal to the product derived by multiplying—
"(A) the outstanding amount of benefit liabilities under
the plan (including interest calculated from the termination
date), by
"(B) the applicable recovery ratio.
"(3XA) Except as provided in subparagraph (C), for purposes of
this subsection, the term 'recovery ratio' means the average ratio,
with respect to prior plan terminations described in subparagraph
(B),of-
"(i) the value of the recovery of the corporation under section
4062, 4063, or 4064 in connection with such prior terminations,
to
"(ii) the amount of unfunded benefit liabilities under such
plans as of the termination date in connection with such prior
terminations.
"(B) A plan termination described in this subparagraph is a
termination with respect to which—
"(i) the corporation has determined the value of recoveries
under section 4062, 4063, or 4064, and
"(ii) notices of intent to terminate were provided after Decem-
ber 17,1987.
"(C) In the case of a terminated plan with respect to which the
outstanding amount of benefit liabilities exceeds $20,000,000, for
purposes of this section, the term 'recovery ratio' means, with
respect to the termination of such plan, the ratio of—
"(i) the value of the recoveries of the corporation under
y section 4062, 4063, or 4064 in connection with such plan, to
I "(ii) the amount of unfunded benefit liabilities under such
plan as of the termination date. ^ , v . .. , , ,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-363
"(4) Determinations under this subsection shall be made by the
corporation. Such determinations shall be binding unless shown by
clear and convincing evidence to be unreasonable.'
(B) TRANSITIONAL RULE.— 29 use 1322
(i) IN GENERAL.—In the case of any plan termination "ote.
to which the amendments made by this section apply
and with respect to which notices of intent to terminate
were provided on or before December 17,1990—
^;»ftfi (I) subparagraph (A) of section 4022(c)(1) of
ERISA (as amended by this paragraph) shall not
^u :'*'•• apply, and
(II) subparagraph (B) of section 4022(c)(1) of
ERISA (as so amended) shall apply irrespective of
the outstanding amount of benefit liabilities under
the plan,
(ii) LIMITATION.—Clause (i) shall not apply in the case
of any plan termination referred to in clause (i) with
respect to which the recovery ratio is not finally deter-
mined under section 4022(c)(1)(B) of ERISA (as so
amended) as of December 17,1990.
(4) BENEFIT LIABIUTIES.—Paragraph (16) of section 4001(a) of
ERISA (29 U.S.C. 1301(aX16)) is amended to read as follows:
"(16) 'benefit liabilities' means the benefits of employees and
their beneficiaries under the plan (within the meaning of sec-
tion 401(aX2) of the Internal Revenue Code of 1986);".
(5) OUTSTANDING AMOUNT OF BENEFIT UABILITIES.—Paragraph
(19) of section 4001(a) of ERISA (29 U.S.C. 1301(a)(19)) is
amended to read as follows:
"(19) 'outstanding amount of benefit liabilities' means, with
respect to any plan, the excess (if any) of—
"(A) the value of the benefit liabilities under the plan
(determined as of the termination date on the basis of
assumptions prescribed by the corporation for purposes of
section 4044), over
"(B) the value of the benefit liabilities which would be so
determined by only taking into account benefits which are
guaranteed under section 4022 or to which assets of the
plan are allocated under section 4044;".
(c) ADDITIONAL CONFORMING AMENDMENTS.—
(1) Section 4041(c)(3XB)(ii) of ERISA (29 U.S.C. 1341(cX3XBXii))
is amended—
(A) by striking subclause (II);
(B) by striking "plan, and" at the end of subclause (I) and
inserting "plan.'; and
^ (C) by striking "available to it—" and all that follows
« • through "the plan administrator" and inserting "available
to it, the plan administrator".
- (2) Section 4041(cX3XBXiii) of ERISA (29 U.S.C.
1341(cX3XBXiii)) is amended—
(A) by striking subclause (II);
(B) by striking "section 4042, and" at the end of subclause
(I) and inserting "section 4042."; and
(C) by striking "available to it—" and all that follows
through "the corporation" in subclause (I) and inserting
"available to it, the corporation".
(3) Subsection (i) of section 4042 of ERISA (29 U.S.C. 1342(i)) is
repealed.
101 STAT. 1330-364 PUBLIC LAW 100-203—DEC. 22, 1987
.^^: (4) Section 4005(g) of ERISA (29 U.S.C. 1305(g)) is amended by
t?f striking out "or fiduciaries with respect to trusts to which the
requirements of section 4049 apply",
(d) EFFECTIVE DATE.—
29 use 1301 ,. (1) I N GENERAL.—The amendments made by this section shall
"o**- apply with respect to—
->j, . (A) plan terminations under section 4041(c) of ERISA
with respect to which notices of intent to terminate are
). ' provided under section 4041(a)(2) of ERISA after
; . . . December 17, 1987, and
(B) plan terminations with respect to which proceedings
v^ are instituted by the Pension Benefit Guaranty Corporation
;; under section 4042 of ERISA after December 17, 1987.
Regulations. ^ (2) SECTION 4049 ADMINISTRATIVE EXPENSES UNDER PRIOR
29 use 1349. TERMINATIONS.—Section 4049(a) of ERISA (as effective under
^; paragraph (1)), is amended by adding at the end thereof the
^ following new sentence: "Reasonable administrative expenses
.., incurred in carrying out the responsibilities under this section
->,, prior to the receipt of any liability payments under section
4062(c) shall be paid by the persons described in section 4062(a)
li in accordance with procedures which shall be prescribed by the
. corporation by regulation, and the amount of the liability deter-
f, mined under section 4062(c) shall be reduced by the amount of
such expenses so paid."
SEC. 9313. STANDARDS FOR TERMINATION. ' ' -* ~ ' ' ^'
(a) STANDARD TERMINATION PROCEDURES AVAILABLE ONLY WHEN
ASSETS SUFFICIENT TO MEET BENEFIT LIABILITIES.—
(1) I N GENERAL.—Subparagraph (D) of section 4041(b)(1) of
ERISA (29 U.S.C. 1341(b)(1)(D)) is amended to read as follows:
"(D) when the final distribution of assets occurs, the plan
% is sufficient for benefit liabilities (determined as of the
. termination date)."
(2) TECHNICAL AMENDMENTS.—
(A) Paragraphs (2)(A), (2)(C), (2)(D), and (3) of section
ij, 4041(b) of ERISA (29 U.S.C. 1341(b)(2XA), (2)(C), (2XD), (3))
,^j are each amended by striking out "benefit commitments"
each place it appears and inserting in lieu thereof "benefit
liabilities".
,,^Vi. (B) Subparagraph (B) of section 4041(b)(2) of ERISA (29
• ' U.S.C. 134ia))(2)(B)) is amended—
(i) by striking out "the amount of such person's
. f . benefit commitments (if any)" and inserting in lieu
thereof "the amount of the benefit liabilities (if any)
,^, ^ - attributable to such person"; and
f ' (ii) by striking out "such benefit commitments" and
inserting in lieu thereof "such benefit liabilities".
-^ - (CXi) Subparagraph (A) of section 4041(bX3) of ERISA (29
U.S.C. 1341(bX3XA)) is amended by striking out clauses (i)
and (ii) and inserting in lieu thereof the following:
vo^' "(i) purchase irrevocable commitments from an in-
surer to provide all benefit liabilities under the plan, or
"(ii) in accordance with the provisions of the plan and
any applicable regulations, otherwise fully provide all
benefit liabilities under the plan."
,j-. ;iv (ii) Subparagraph (B) of section 4041(b)(3) of ERISA (29
U.S.C. 1341(bX3)) is amended by striking out "so as to pay"
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-365
and all that follows and inserting in lieu thereof "so as to
pay all benefit liabilities under the plan".
(D) Paragraphs (2) and (3) of section 4041(c) of ERISA (29
U.S.C. 1341(c) (2), (3)) are each amended by striking out
"benefit commitments" each place it appears (including in
any heading) and inserting in lieu thereof "benefit
liabilities".
(E) Paragraph (1) of section 4041(d) of ERISA (29 U.S.C.
1341(d)) is amended—
• (i) by striking out "no amount of unfunded benefit
, ; commitments" and inserting in lieu thereof "no
amount of unfunded benefit liabilities", and
r, •, (ii) by striking out "BENEFIT COMMITMENTS" in the
paragraph heading and inserting in lieu thereof "BENE-
FIT u ABILITIES".
(F) Paragraph (18) of section 4001(a) of ERISA (29 U.S.C.
1301(a)(18)) is amended to read as follows: j, . t
"(18) 'amount of unfunded benefit liabilities' means, as of any t^ ,:
date, the excess (if any) of^
"(A) the value of the benefit liabilities under the plan
(determined as of such date on the basis of assumptions
prescribed by the corporation for purposes of section 4044),
over
"(B) the current value (as of such date) of the assets of the
plan;".
Ot)) CRITERIA FOR DISTRESS TERMINATION.—
(1) APPUCABIUTY TO ALL MEMBERS OF CONTROLLED GROUP.—
Section 4041(cX2) of ERISA (29 U.S.C. 1341(c)(2)) is amended—
(A) in subparagraph (B), by striking "a substantial
tJ member" in the matter preceding clause (i) and inserting "a
member"; and
(B) by striking subparagraph (C) and by redesignating
subparagraph (D) as subparagraph (C).
(2) R E Q U I R E M E N T OF ADDITIONAL FINDINGS TO QUALIFY FOR
DISTRESS TERMINATION BASED ON REORGANIZATION I N BANK-
RUPTCY.—Scction 4041(cX2XBXiiXIII) of ERISA (29 U.S.C.
1341(cX2XBXiiXIII)) is amended by striking "approves the termi-
nation" and inserting "determines that, unless the plan is
terminated, such person will be unable to pay all its debts
pursuant to a plan of reorganization and will be unable to
continue in business outside the chapter 11 reorganization
process and approves the termination".
(3) CLARIFICATION OF DATE AS OF WHICH EMPLOYER MUST BE IN
A BANKRUPTCY PROCEEDING TO QUAUFY FOR DISTRESS TERMI-
NATION.—ClaUSeS (i) and (ii) of section 4041(cX2XB) of ERISA (29
U.S.C. 1341(cX2XB) (i) and (ii)) are each amended by inserting
"proposed" before "termination date".
(4) TREATMENT UNDER DISTRESS TESTS OF CASES CONVERTED TO
UQuiDATiON.—Section 4041(cX2XBXiXI) of ERISA (29 U.S.C.
1341(cX2XBXiXI)) is amended by inserting before the comma at
the end the following: "(or a case described in clause (ii) filed by
or against such person has been converted, as of such date, to a
case in which liquidation is sought)".
(5) NOTICE TO CORPORATION UNDER REORGANIZATION DISTRESS
TEST.—Section 4041(cX2XBXii) of ERISA (29 U.S.C
1341(cX2XBXii)) is amended—
(A) in subclause (II), by striking "and" at the end;
101 STAT. 1330-366 PUBLIC LAW 100-203—DEC. 22, 1987
(B) by redesignating subclause (III) as subclause (IV);
(C) by inserting after subclause (II) the following new
" subclause:
"(III) such person timely submits to the corpora-
* tion any request for the approval of the bank-
r 'f ruptcy court (or other appropriate court in a case
under such similar law of a State or political sul>-
division) of the plan termination, and";
and
(D) in subclause (IV) (as redesignated), by striking "(or
<>•" other" and all that follows through "subdivision) and
inserting "(or such other appropriate court)".
(6) ARRANGEMENTS FOR PAYMENT OF LIABILITY BY CONTROLLED
GROUPS.—Section 4067 of ERISA (29 U.S.C. 1367) is amended by
striking "controlled groups who are" and inserting "controlled
groups who are or may become".
29 use 1301 (c) EFFECTIVE DATE.—The amendments made by this section shall
note. apply with respect to plan terminations under section 4041 of
ERISA with respect to which notices of intent to terminate are
provided under section 4041(a)(2) of ERISA after December 17, 1987.
SEC. 9314. ADDITIONAL AMENDMENTS RELATING TO PLAN TERMINATION.
(a) CERTAIN INFORMATION NOT REQUIRED FROM CERTAIN INSUR-
ANCE CONTRACT PLANS.—
(1) STANDARD TERMINATION.—Section 4041(b)(2)(A) of ERISA
(29 U.S.C. 1341(b)(2)(A)) is amended—
(A) by striking clause (iii) and inserting the following:
"(iii) certification by the plan administrator that—
a "(I) the information on which the enrolled actu-
ary based the certification under clause (i) is ac-
curate and complete, and
jii'^ "(II) the information provided to the corporation
under clause (ii) is accurate and complete."; and
(B) by adding at the end thereof the following:
"Clause (i) and clause (iii)(I) shall not apply to a plan described
in section 412(i) of the Internal Revenue Code of 1986.".
(2) DISTRESS TERMINATION.—Section 4041(c)(2)(A) of ERISA (29
U.S.C. 1341(c)(2)(A)) is amended—
(A) by striking clause (iv) and inserting the following:
"(iv) certification by the plan administrator that—
"(I) the information on which the enrolled actu-
ary based the certifications under clause (ii) is
t: - accurate and complete, and
"(II) the information provided to the corporation
under clauses (i) and (iii) is accurate and com-
vtf plete."; and
(B) by adding at the end the following:
"Clause (ii) and clause (iv)(I) shall not apply to a plan described
in section 412(i) of the Internal Revenue Code of 1986.".
(b) CLARIFICATION OF EXISTING AUTHORITY TO POOL ASSETS OF TERMI-
NATED PLANS.—Section 4042 of ERISA (29 U.S.C. 1342(a)) is amended
by striking the third sentence and inserting the following: "Notwith-
standing any other provision of this title, the corporation is au-
thorized to pool assets of terminated plans for purposes of adminis-
tration, investment, payment of liabilities of all such terminated
plans, and such other purposes as it determines to be appropriate in
the administration of this title.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-367
(b) SUBMISSION OF PLAN DATA IN INVOLUNTARY TERMINATION.—
Section 4042(c) of ERISA (29 U.S.C. 1342(c)) is amended by adding at
the end the following new paragraph:
"(3) In the case of a proceeding initiated under this section, the
plan administrator shall provide the corporation, upon the request
of the corporation, the information described in clauses (ii), (iii), and
(iv) of section 4041(cX2XA).".
(c) CIVIL PENALTIES FOR FAILURE TO TIMELY PROVIDE REQUIRED
INFORMATION RELATING TO SINGLE-EMPLOYER PLANS.—
(1) IN GENERAL.—Subtitle D of ERISA (29 U.S.C. 1361 et seq.)
is amended by adding at the end the following new section:
"PENALTY FOR FAILURE TO TIMELY PROVIDE REQUIRED INFORMATION
"SEC. 4071. The corporation may assess a penalty, payable to the 29 USC 1371.
corporation, against any person who fails to provide any notice or
other material information required under this subtitle or subtitle
A, B, or C, or any regulations prescribed under any such subtitle,
within the applicable time limit specified therein. Such penalty
shall not exceed $1,000 for each day for which such failure
continues.".
(2) CLERICAL AMENDMENTS.—The table of contents in section 1
of ERISA (29 U.S.C. 1001 note) is amended by adding after the
item relating to section 4070 the following new item:
"Sec. 4071. Penalty for failure to timely provide required information.".
Subpart C—Increase in Premium Rates
SEC. 9331. INCREASE IN PREMIUM RATES.
(a) GENERAL RULE.—Clause (i) of section 4006(aX3XA) of ERISA (29
U.S.C. 1306(a)(3)(A)) is amended by striking out "for plan years
beginning after December 31, 1985, an amount equal to $8.50" and
inserting in lieu thereof "for plan years beginning after
December 31, 1987, an amount equal to the sum of $16 plus the
additional premium (if any) determined under subparagraph (E)".
(b) DETERMINATION OF ADDITIONAL PREMIUM.—Paragraph (3) of
section 4006(a) of ERISA (29 U.S.C. 1306(aX3)) is amended by adding
at the end thereof the following new subparagraph:
"(EXi) The additional premium determined under this subpara-
graph with respect to any plan for any plan year shall be an amount
equal to the amount determined under clause (ii) divided by the
number of participants in such plan £is of the close of the preceding
plan year.
"(ii) The amount determined under this clause for any plan year
shall be an amount equal to $6.00 for each $1,000 (or fraction
thereof) of unfunded vested benefits under the plan as of the close of
the preceding plan year.
"(iii) For purposes of clause (ii)—
"(I) Except as provided in subclause (II), the term 'unfunded
vested benefits' means the amount which would be the un-
funded current liability (within the meaning of section
302(dX8XA)) if only vested benefits were taken into account.
"(II) The interest rate used in valuing vested benefits for
purposes of subclause (I) shall be equal to 80 percent of the
annual yield on 30-year Treasury securities for the month
preceding the month in which the plan year begins.
101 STAT. 1330-368 PUBLIC LAW 100-203—DEC. 22, 1987
"(iv)(I) Except as provided in this clause, the aggregate increase in
the premium payable with respect to any participant by reason of
this subparagraph shall not exceed $34.
"(II) If an employer made contributions to a plan during 1 or more
of the 5 plan years preceding the 1st plan year to which this
subparagraph applies in an amount not less than the maximum
amount allowable as a deduction with respect to such contributions
under section 404 of such Code, the dollar amount in effect under
subclause (I) for the 1st 5 plan years to which this subparagraph
applies shall be reduced by $3 for each plan year for which such
contributions were made in such amount.
(c) LIABILITY FOR PREMIUM.—
(1) IN GENERAL.—Section 4007 of ERISA (29 U.S.C. 1307) is
amended by striking out "plan administrator" each place it
cv,! J •*; > appears and inserting in lieu thereof "designated payor".
'^\ (2) DESIGNATED PAYOR.—Section 4007 of ERISA (29 U.S.C.
^ 1307) is amended by adding at the end thereof the following new
subsection:
"(e)(1) For purposes of this section, the term 'designated payor'
means—
"(A) the contributing sponsor or plan administrator in the
'• case of a single-employer plan, and
'> "(B) the plan administrator in the case of a multiemployer
plan.
"(2) If the contributing sponsor of any single-employer plan is a
member of a controlled group, each member of such group shall be
jointly and severally liable for any premiums required to be paid by
such contributing sponsor. For purposes of the preceding sentence,
the term 'controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section 414 of the
Internal Revenue Code of 1986."
(d) DEPOSIT OF PREMIUMS INTO SEPARATE REVOLVING FUND.—
Section 4005 of ERISA (relating to establishment of Pension Benefit
Guaranty funds) (29 U.S.C. 1305) is amended by redesignating
subsections (f) and (g) as subsections (g) and (h) and by inserting
after subsection (e) the following new subsection:
''(f)(1) A seventh fund shall be established and credited with—
"(A) premiums, penalties, and interest charges collected
under section 4006(a)(3)(AXi) (not described in subparagraph (B))
' to the extent attributable to the amount of the premium in
excess of $8.50,
» "(B) premiums, penalties, and interest charges collected
under section 4006(a)(3)(E), and
"(C) earnings on investments of the fund or on assets credited
to the fund.
"(2) Amounts in the fund shall be available for transfer to other
funds established under this section with respect to a single-
employer plan but shall not be available to pay— >
"(A) administrative costs of the corporation, or
& "(B) benefits under any plan which was terminated before
October 1,1988,
unless no other amounts are available for such payment.
"(3) The corporation may invest amounts of the fund in such
obligations as the corporation considers appropriate."
(e) CONFORMING AMENDMENTS.—Section 4006(cXlXA) of ERISA (29
U.S.C. 1306(cXlXA)) is amended by striking out "and" at the end of
clause (i), by inserting "and before January 1, 1986," after "after
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-369
December 31, 1977,", and by adding at the end thereof the following
new clause:
"(iii) with respect to each plan year beginning after
December 31, 1985, and before January 1, 1988, an
amount equal to $8.50 for each individual who was a
participant in such plan during the plan year, and".
(f) EFFECTIVE DATE.— 29 use 1305
(1) IN GENERAL.—The amendments made by this section shall ^°^-
K.^t apply to plan years beginning after December 31,1987.
(2) SEPARATE ACCOUNTING.—The amendments made by
subsection (d) shall apply to fiscal years beginning after Septem-
ber 30,1988.
Subpart D—Miscellaneous Provisions a M^iws^M
SEC. 9341. SECURITY REQUIRED UPON ADOPTION OF PLAN AMENDMENT
RESULTING IN SIGNIFICANT UNDERFUNDING.
(a) AMENDMENTS TO 1986 CODE,—^® Subsection (a) of section 401 of
the 1986 Code (relating to requirements for qualification) is 26 USC 401.
amended by inserting after paragraph (28) the following new para-
graph: 100
"(29) SECURITY REQUIRED UPON ADOPTION OF PLAN AMENDMENT
RESULTING IN SIGNIFICANT UNDERFUNDING.—
"(A) IN GENERAL.—If—
"(i) a defined benefit plan (other than a multiem-
ployer plan) adopts an amendment an effect of which is ., ,,,.
,^ to increase current liability under the plan for a plan
-.i'.GLiW-'-' year, and
"(ii) the funded current liability percentage of the
"'' plan for the plan year in which the amendment takes
effect is less than 60 percent, including the amount of
the unfunded current liability under the plan attrib- :M[I-^1; i-t
, ^•„ „ utable to the plan amendment,
V the trust of which such plan is a part shall not constitute a
qualified trust under this subsection unless such amend-
ment does not take effect until the contributing sponsor (or
any member of the controlled group of the contributing
sponsor) provides security to the plan.
"(B) FORM OF SECURITY.—The security required under
.^, subparagraph (A) shall consist of—
"(i) a bond issued by a corporate surety company that
is an acceptable surety for purposes of section 412 of
the Employee Retirement Income Security Act of 1974,
,.^ gj * "(ii) cash, or United States obligations which mature
in 3 years or less, held in escrow by a bank or similar
;-. ... financial institution, or
- gt , . :, "(iii) such other form of security as is satisfactory to
the Secretary and the parties involved.
^^ "(C) AMOUNT OF SECURITY.—The security shall be in an
amount equal to the excess of—
h . J. •., .- "(i) the lesser of—
"(I) the amount of additional plan assets which
would be necessary to increase the funded current
•• Copy read "CODE—".
»oo Copy read "paragraph:—".
101 STAT. 1330-370 PUBLIC LAW 100-203—DEC. 22, 1987
liability percentage under the plan to 60 percent,
including the amount of the unfunded current li-
' ability under the plan attributable to the plan
amendment, or
"(II) the amount of the increase in current liabil-
ity under the plan attributable to the plan amend-
cQ' ment, over
i-' •" "(ii) $10,000,000. -'^ " 1
"(D) RELEASE OF SECURITY.—Thesecurity shall be released
(and any amounts thereunder shall be refunded together
' •; with any interest accrued thereon) at the end of the first
plan year which ends after the provision of the security and
for which the funded current liability percentage under the
Regulations. plan is not less than 60 percent. The Secretary may pre-
scribe regulations for partial releases of the security by
^'' ; reason of increases in the funded current liability
percentage.
n "(E) DEFINITIONS.—For purposes of this paragraph, the
terms 'current liability', 'funded current liability percent-
age', and 'unfunded current liability' shall have the mean-
ings given such terms by section 412(1), except that in
computing unfunded current liability there shall not be
taken into account any unamortized portion of the un-
funded old liability amount as of the close of the plan year."
(b) AMENDMENTS TO ERISA.—Part 3 of subtitle B of title I of
ERISA (29 U.S.C. 1081 et seq.) is amended—
29 use 1086. (1) by redesignating section 307 as section 308; and
(2) by inserting after section 306 the following new section:
"SECURITY REQUIRED UPON ADOPTION OF PLAN AMENDMENT
RESULTING IN SIGNIFICANT UNDERFUNDING
29 u s e 1085b. "SEC. 307. (a) IN GENERAL.—If—
"(1) a defined benefit plan (other than a multiemployer plan)
adopts an amendment an effect of which is to increase current
liability under the plan for a plan year, and
"(2) the funded current liability percentage of the plan for the
plan year in which the amendment takes effect is less than 60
percent, including the amount of the unfunded current liability
under the plan attributable to the plan amendment,
the contributing sponsor (or any member of the controlled group of
the contributing sponsor) shall provide security to the plan.
"(b) FORM OF SECURITY.—The security required under subsection
(a) shall consist of—
"(1) a bond issued by a corporate surety company that is an
acceptable surety for purposes of section 412,
"(2) cash, or United States obligations which mature in 3
years or less, held in escrow by a bank or similar financial
institution, or
"(3) such other form of security as is satisfactory to the
Secretary of the Treasury and the parties involved.
"(c) AMOUNT OF SECURITY.—The security shall be in an amount
equal to the excess of—
"(1) the lesser of—
"(A) the amount of additional plan assets which would be
necessary to increase the funded current liability percent-
age under the plan to 60 percent, including the amount of
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-371
/ the unfunded current liability under the plan attributable
to the plan amendment, or
"(B) the amount of the increase in current liability under
the plan attributable to the plan amendment, over
"(2) $10,000,000.
"(d) RELEASE OF SECURITY.—The security shall be released (and
any amounts thereunder shall be refunded together with any in-
terest accrued thereon) at the end of the first plan year which ends
after the provision of the security and for which the funded current
liability percentage under the plan is not less than 60 percent. The Regulations.
Secretary may prescribe regulations for partial releases of the
security by re£ison of increases in the funded current liability
percentage.
"(e) DEFINITIONS.—For purposes of this section, the terms 'current
liability', 'funded current liability percentage', and 'unfunded cur-
rent liability' shall have the meanings given such terms by section
302(d), except that in computing unfunded current liability there
shall not be taken into account any unamortized portion of the
unfunded old liability amount as of the close of the plan year."
Ot)) CLERICAL AMENDMENT.—The table of contents in section 1 of
ERISA (29 U.S.C. 1001 note) is amended by striking out the item
relating to section 307 and inserting in lieu thereof the following
new items:
"Sec. 307. Security required upon adoption of plan amendment resulting in signifi-
cant underfunding.
"Sec. 308. Effective dates." ' " "'
(c) EFFECTIVE DATE.— 26 use 40i note.
(1) I N GENERAL.—Except sis provided in this subsection, the
amendments made by this section shall apply to plan amend-
ments adopted after the date of the enactment of this Act.
(2) COLLECTIVE BARGAINING AGREEMENTS.—In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before the date of the enactment of this Act,
the amendments made by this section shall not apply to plan
amendments adopted pursuant to collective bargaining agree-
ments ratified before the date of enactment.
SEC. 9342. REPORTING REQUIREMENTS.
(a) FUNDED PERCENTAGE REQUIRED TO B E SHOWN IN ANNUAL
REPORT " ^
(i) Subsection (d) of section 103 of ERISA (29 U.S.C. 1023(d)) is
amended by redesignating paragraphs (11) and (12) as para-
graphs (12) and (13), respectively, and by inserting after para-
graph (10) the following new paragraph:
"(11) If the current value of the assets of the plan is less than
60 percent of the current liability under the plan (within the
meaning of section 302(dX7)), such percentage."
(2) Paragraph (3) of section 1040t)) of ERISA (29 U.S.C.
1024(bX3)) is amended by striking out "such other material" and
inserting in lieu thereof "such other material (including the
percentage determined under section 103(dXll))".
(b) AMENDMENT OF STATUTE OF LIMITATIONS WITH RESPECT TO
CERTAIN REPORTS.—Section 413(aX2) of ERISA (29 U.S.C. 1113(aX2))
is amended by striking "(A)" and by striking "or (B)" and all that
follows through "title".
101 STAT. 1330-372 PUBLIC LAW 100-203—DEC. 22, 1987
(c) PENALTY FOR FAILURE TO PROVIDE ANNUAL REPORT IN COM-
PLETE FORM.—Section 502(c) of ERISA (29 U.S.C. 1132(c)) is
amended—
(1) by inserting "(1)" after "(c)", and by striking "(1) who" and
"(2) who" and inserting "(A) who" and "(B) who", respectively;
and
(2) by adding at the end the following new paragraph:
"(2) The Secretary may assess a civil penalty of up to $1,000 a day
from the date of a plan administrator's failure or refusal to file the
f6*Me^.r;as- annual report required to be filed with the Secretary under section
101(b)(4). For purposes of this paragraph, an annual report that has
been rejected under section 104(a)(4) for failure to provide material
information shall not be treated as having been filed with the
Secretary.".
29 u s e 1132 (d) EFFECTIVE DATE.—
note. (1) IN GENERAL.—The amendments made by this section shall
Reports. ? apply with respect to reports required to be filed after
f December 31, 1987.
(2) REGULATIONS.—The Secretary of Labor shall issue the
i regulations required to carry out the amendments made by
" subsection (c) not later than January 1, 1989.
SEC. 9343. COORDINATION OF PROVISIONS OF THE INTERNAL REVENUE
CODE OF 1986 WITH PROVISIONS OF THE EMPLOYEE RETIRE-
'fl^my MENT INCOME SECURITY ACT OF 1974.""
26 u s e 401 note. (a) INTERPRETATION OF INTERNAL REVENUE CODE.—Except to the
extent specifically provided in the Internal Revenue Code of 1986 or
as determined by the Secretary of the Treasury, titles I and IV of
the Employee Retirement Income Security Act of 1974 are not
applicable in interpreting such Code.
(b) CLARIFICATION REGARDING EFFECT OF DETERMINATION LETTER
BY THE INTERNAL REVENUE SERVICE ON ENFORCEMENT BY THE
DEPARTMENT OF LABOR OF FIDUCIARY STANDARDS UNDER ^°^
ERISA.—Section 3001(d) of ERISA (29 U.S.C. 1201(d)) is amended by
adding after the second sentence the following: "The determination
of the Secretary of the Treasury shall not be prima facie evidence on
issues relating solely to part 4 of subtitle B of title I.".
(c) CLARIFICATION REGARDING RETURNS OF CONTRIBUTIONS UPON
RECEIPT OF ADVERSE DETERMINATION LETTERS.—
(1) IN GENERAL.—Subparagraph (B) of section 403(c)(2) of
ERISA (29 U.S.C. 1103(c)(2)(B)) is amended to read as follows:
"(B) If a contribution is conditioned on initial qualification of the
plan under section 401 or 403(a) of the Internal Revenue Code of
1986, and if the plan receives an adverse determination with respect
to its initial qualification, then paragraph (1) shall not prohibit the
return of such contribution to the employer within one year after
such determination, but only if the application for the determina-
tion is made by the time prescribed by law for filing the employer's
return for the taxable year in which such plan was adopted, or such
later date as the Secretary of the Treasury may prescribe.".
(2) CONFORMING AMENDMENT.—Paragraph (3) of section 403(c)
of ERISA (29 U.S.C. 1103(cX3)) is amended by striking out
"49720^) of the Internal Revenue Code of 1954" and inserting in
lieu thereof "4979(c) of the Internal Revenue Code of 1986"
" " Copy read "1974".
'"^ Copy read "UNDER".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-373
SEC. 9344. CLARIFICATION REGARDING THE IMPOSITION OF AN ANNUAL
SANCTION FOR PROHIBITED TRANSACTIONS WHICH ARE
CONTINUING IN NATURE.
Section 502(i) of ERISA (29 U.S.C. 1132(i)) is amended by striking
the second sentence and inserting the following: "The amount of Regulations.
such penalty may not exceed 5 percent of the amount involved in
each such transaction (as defined in section 4975(f)(4) of the Internal
Revenue Code of 1986) for each year or part thereof during which ; in ,<;
the prohibited transaction continues, except that, if the transaction
is not corrected (in such manner as the Secretary shall prescribe ^°^
in regulations which shall be consistent with section 4975(f)(5) of
such Code) within 90 days after notice from the Secretary (or such
longer period as the Secretary may permit), such penalty may be in
an amount not more than 100 percent of the amount involved.".
SEC. 9345. ADDITIONAL LIMITATIONS ON INVESTMENT BY AN INDIVID-
UAL ACCOUNT PLAN FORMING PART OF A FLOOR-OFFSET
ARRANGEMENT AND ON INVESTMENT BY AN INDIVIDUAL
ACCOUNT PLAN IN EMPLOYER STOCK.
(a) TREATMENT OF INDIVIDUAL ACCOUNT PORTIONS OF FLOOR-
OFFSET ARRANGEMENTS.—
(1) IN GENERAL.—Section 407(d)(3) of ERISA (29 U.S.C.
1107(d)(3)) is amended by adding at the end the following new
subparagraph: ai^nil* 2
"(C) The term 'eligible individual account plan' does not
include any individual account plan the benefits of which
" are taken into account in determining the benefits payable
to a participant under any defined benefit plan."
! (2) TREATMENT OF FLOOR-OFFSET ARRANGEMENT AS SINGLE
PLAN.—Section 407(d) of ERISA (29 U.S.C. 1107(d)) is amended
by adding at the end the following new paragraph:
"(9) For purposes of this section, an arrangement which consists of
a defined benefit plan and an individual account plan shall be
treated as 1 plan if the benefits of such arrangement are taken into ^^^ „,
account in determining the benefits payable under such defined es
benefit plan."
(3) EFFECTIVE DATE.—The amendments made by this subsec- 29 USC 1107
tion shall apply with respect to arrangements established after "o*®-
December 17,1987.
Ob) RESTRICTIONS ON TREATMENT OF STOCK AS QUALIFYING
EMPLOYER SECURITY.—Section 407 of ERISA (29 U.S.C. 1107) is
amended—
(1) in subsection (d)(5), by adding at the end the following new
sentence: "After December 17, 1987, in the case of a plan other
than an eligible individual account plan, stock shall be consid-
ered a qualifying employer security only if such stock satisfies
the requirements of subsection (f)(1)."; and
(2) by adding at the end the following new subsection:
"(f)(1) Stock satisfies the requirements of this subsection if—
"(A) no more than 25 percent of the aggregate amount of
stock of the same class issued and outstanding at the time of
acquisition is held by the plan, and
"(B) at least 50 percent of the aggregate amount referred to in
subparagraph (A) is held by persons independent of the issuer.
•03 Copy read "presribe".
101 STAT. 1330-374 PUBLIC LAW 100-203—DEC. 22, 1987
"(2) Until January 1, 1993, a plan shall not be treated as violating
subsection (a) solely by holding stock which fails to satisfy the
requirements of paragraph (1) if such stock—
"(A) has been so held since December 17,1987, or
Contracts. "(B) was acquired after December 17, 1987, pursuant to a
legally binding contract in effect on December 17, 1987, and has
been so held at all times after the acquisition.
Contracts. "(3) After December 17, 1987, no plan may acquire stock which
does not satisfy the requirements of paragraph (1) unless the acquisi-
tion is made pursuant to a legally binding contract in effect on such
date.".
SEC. 9346. INTEREST RATE ON ACCUMULATED CONTRIBUTIONS.
(a) AMENDMENTS TO ERISA.—Section 204(c)(2) of ERISA (29 U.S.C.
1054(c)(2)) is amended—
(1) in subparagraph (CXiii), by striking "5 percent per annum"
and inserting "120 percent of the Federal mid-term rate (as in
effect under section 1274 of the Internal Revenue Code of 1986
for the 1st month of a plan year)"; and
>!;; (2) in subparagraph (D)—
(A) in the first sentence, by striking ", the rate of interest
described in clause (iii) of subparagraph (C), or both,"; and
(B) by striking the second sentence.
26 u s e 411. (b) AMENDMENTS TO 1986 CODE.—Section 411(c)(2) of the 1986 Code
(relating to accrued benefit derived from employee contributions) is
amended—
(1) in subparagraph (C)(iii), by striking "5 percent per annum"
and inserting "120 percent of the Federal mid-term rate (as in
effect under section 1274 for the 1st month of a plan year)"; and
(2) in subparagraph (D)—
(A) in the first sentence, by striking ", the rate of interest
described in clause (iii) of subparagraph (C), or both,"; and
(B) by striking the second sentence.
29 u s e 1054 (c) EFFECTIVE D A T E . —
note. (1) IN GENERAL.—The amendments made by this section shall
apply to plan years beginning after December 31,1987.
(2) PLAN AMENDMENTS NOT REQUIRED UNTIL J A N U A R Y i,
1989.—If a n y a m e n d m e n t m a d e by t h i s section requires a n
a m e n d m e n t to a n y plan, such plan a m e n d m e n t shall not be
required to be m a d e before t h e first plan y e a r beginning on or
after J a n u a r y 1,1989, if—
(A) d u r i n g t h e period after such a m e n d m e n t s m a d e by
this section t a k e effect a n d before such first plan year, t h e
plan is operated in accordance with t h e r e q u i r e m e n t s of
,, such a m e n d m e n t s or in accordance w i t h a n a m e n d m e n t
prescribed by t h e Secretary of t h e T r e a s u r y a n d adopted by
t h e plan, a n d
rv (B) such plan a m e n d m e n t applies retroactively to t h e
period after such a m e n d m e n t s t a k e effect a n d such first
plan year.
A plan shall not be t r e a t e d as failing to provide definitely
d e t e r m i n a b l e benefits or contributions, or to be operated in
accordance with t h e provisions of t h e plan, merely because it
operates in accordance with this subsection.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-375
Subtitle E—Miscellaneous Provisions
SEC. 9401. RESTORATION OF TRUST FUNDS FOR 1987.
(a) IN GENERAL.—
(1) OBLIGATIONS ISSUED.—Except as provided in subsection (b),
within 30 days after the expiration of any debt issuance suspen-
sion period to which this section applies, the Secretary of the
Treasury shall issue to each Federal fund obligations under
chapter 31 of title 31, United States Code, which bear such issue
dates, interest rates, and maturity dates as are necessary to
ensure that, after such obligations are issued, the holdings of
such Federal fund will replicate to the maximum extent prac-
ticable the obligations that would have been held by such
Federal fund if any—
(A) failure to invest amounts in such Federal fund (or any
disinvestment) resulting from the limitation of section
3101(b) of title 31, United States Code, had not occurred,
and
(B) issuance of such obligations had occurred immediately
on the expiration of the debt issuance suspension period.
(2) INTEREST CREDITED.—On the first normal interest payment
date or within 30 days after the expiration of any debt issuance
suspension period (whichever is later) to which this section
applies, the Secretary of the Treasury shall credit to each
Federal fund an amount determined by the Secretary, after
taking into account the actions taken pursuant to paragraph (1),
to be equal to the income lost by such Federal fund by reason of
any failure to invest amounts in such Federal fund (or any
disinvestment) resulting from the limitation of such section
3101(b), including any income lost between the expiration of the
debt issuance suspension period and the date of the credit.
(b) INTEREST ON MARKET-BASED OBUGATIONS.—With respect to any
Federal fund which invests in market-based special obligations, on
the expiration of a debt issuance suspension period to which this
section applies, the Secretary of the Treasury shall immediately ^ r ,^
credit to such fund an amount equal to the interest that would have
been earned by such fund during the debt issuance suspension
period if the daily balance in such fund that the Secretary was
unable to invest by reason of the limitation of such section 3101(b)
had been invested each day during such period, overnight, in obliga-
tions under chapter 31 of title 31, United States Code, earning
interest at a rate determined by the Secretary in accordance with
the standard practice of the Department of the Treasury.
(c) INTEREST ON STATE AND LOCAL GOVERNMENT SERIES.—On the
expiration of any debt issuance suspension period to which this
section applies, the Secretary of the Treasury shall (as of the close of
such period) credit to each holder of any obligation which is part of ,,,, ^
the State and Local Government Series and which is in the nature of
a demand deposit an amount equal to the income lost by such holder ^. ,;
by reason of not being able to reinvest the principal of, and interest ' *..
on, such obligation during such period.
(d) DEBT ISSUANCE SUSPENSION PERIODS TO WHICH SECTION
APPUES.—This section shall apply to debt issuance suspension
periods beginning on or after July 18, 1987, and ending before
January 1,1988.
101 STAT. 1330-376 PUBLIC LAW 100-203—DEC. 22, 1987
(e) CREDITED AMOUNTS TREATED AS INTEREST.—'°'' All amounts
credited under this section shall be treated as interest on obligations
issued under chapter 31 of title 31, United States Code, for all
purposes of Federal law.
(f) DEFINITIONS.—For purposes of this section—
(1) DEBT ISSUANCE SUSPENSION PERIOD.—The term "debt issu-
ance suspension period" means any period for which the Sec-
retary of the Treasury determines that the issuance of obliga-
tions of the United States sufficient to conduct the orderly
financial operations of the United States may not be made
without exceeding the limitation imposed by section 3101(b) of
title 31, United States Code.
(2) FEDERAL FUND.—The term "Federal fund" means any
' Federal trust fund or Government account established pursuant
to Federal law to which the Secretary of the Treasury has
issued or is expressly authorized by law directly to issue obliga-
tions under chapter 31 of title 31, United States Code, in respect
of public money, money otherwise required to be deposited in
the Treasury, or amounts appropriated; except that such term
shall not include the Civil Service Retirement and Disability
Fund or the Thrift Savings Fund of the Federal Employees'
Retirement System.
(g) SPECIAL RULES.—In the case of any debt suspension period
beginning on or after July 18, 1987, and ending before the date of
the enactment of this Act—
(1) for purposes of determining the date on which the Sec-
retary of the Treasury is required to take the actions described
in subsections (a), (b), and (c), such period shall be treated as
having ended on such date of enactment, and
(2) the amount required to be credited under subsection (c)
shall include any income lost because the credit was not made
upon the expiration of such period.
SEC. 9402. 6-MONTH EXTENSION OF PROVISIONS RELATING TO COLLEC-
TION OF NON-TAX DEBTS OWED TO FEDERAL AGENCIES.
(a) GENERAL RULE.—Subsection (c) of section 2653 of the Deficit
26 u s e 6402 Reduction Act of 1984 is amended by striking out "January 1, 1988"
note. and inserting in lieu thereof "July 1, 1988".
26 u s e 6402 OJ) CLARIFICATION OF CONGRESSIONAL INTENT AS TO SCOPE OF
note. PROVISION.—
(1) Nothing in the amendments made by section 2653 of the
Deficit Reduction Act of 1984 shall be construed as exempting,
debts of corporations or any other category of persons from the
application of such amendments.
(2) It is the intent of the Congress that, to the extent prac-
ticable, the amendments made by section 2653 of the Deficit
Reduction Act of 1984 shall extend to all Federal agencies (as '
defined in the amendments made by such section).
Regulations. (3) The Secretary of the Treasury shall issue regulations to
carry out the purposes of this subsection.
26 u s e 6402 (c) STUDY BY THE GENERAL ACCOUNTING OFFICE.—The Comptroller
note. General of the United States, in consultation with the Secretary of
the Treasury or his delegate, shall conduct a study of the operation
and effectiveness of the amendments made by section 2653 of the
Deficit Reduction Act of 1984. The study shall compile and evaluate
^'^•^I
' °* Copy read "AMOUNTS TREATED AS INTEREST.-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-377
information on the effect of those amendments on voluntary compli-
ance with the income tax laws. Not later than April 1, 1989, the Reports.
Comptroller General shall submit to the Committee on Ways and
Means of the House of Representatives and the Committee on
Finance of the Senate a report of the study conducted under this
subsection, together with such recommendations as he may deem
advisable.
SEC. 9403. INCREASE IN LIMIT ON LONG-TERM BONDS.
The last sentence of section 3102(a) of title 31, United States Code,
is amended by striking out "$250,000,000,000" and inserting in lieu
thereof "$270,000,000,000".
Subtitle F—Customs User Fees; Trade and
Customs Agency Authorizations
SEC. 9501. CUSTOMS USER FEES.
(a) AMENDMENTS TO CUSTOMS USER FEES PROGRAM.—Section 13031
of the Consolidated Budget Reconciliation Act of 1985 (19 U.S.C. 58c)
is amended as follows:
(1) M E R C H A N D I S E PROCESSING FEE IMPOSED ON FOREIGN CON-
TENT OF CERTAIN SCHEDULE 8 ARTICLES.—
(A) Subsection (aX9XA) is amended to read as follows:
-ii':; "(A) provided for under any item in schedule 8 of the
Tariff Schedules of the United States except item 806.30 or
licfi 807.00,".
JB? (B) Subsection (b)(8XA) is amended—
(i) by striking out "and" at the end of clause (i);
(ii) by striking out the period at the end of clause (ii)
^ and inserting a semicolon; and
(iii) by adding at the end thereof the following:
"(iii) in the case of merchandise classified under item
806.30 of the Tariff Schedules of the United States, be
applied to the value of the foreign repairs or alterations to
the merchandise; and
"(iv) in the case of merchandise classified under item
807.00 of such Schedules, be applied to the full value of the
merchandise, less the cost or value of the component
United States products.
With respect to merchandise that is classified under item 806.30
or 807.00 of such Schedules and is duty-free, the Secretary may
collect the fee charged on the processing of the merchandise
under subsection (a) (9) or (10) on the basis of aggregate data
derived from financial and manufacturing reports used by the
importer in the normal course of business, rather than on the
basis of entry-by-entry accounting.".
(2) PROVISION OF CUSTOMS SERVICES.—Subsection (e) is
amended—
(A) by redesignating paragraph (4) as paragraph (6);
(B) by inserting after paragraph (3) the following new
•u « paragraphs:
"(4) Notwithstanding any other provision of law, all customs
services (including, but not limited to, normal and overtime clear-
ance and preclearance services) shall be adequately provided, when
requested, for—
101 STAT. 1330-378 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) the clearance of any commercial vessel, vehicle, or air-
aj jof'. craft or its passengers, crew, stores, material, or cargo arriving,
departing, or transiting the United States;
'(B) the preclearance at any customs facility outside the
United States of any commercial vessel, vehicle or aircraft or its
peissengers, crew, stores, material, or cargo; and
"(C) the inspection or release of commercial cargo or other
commercial shipments being entered into, or withdrawn from,
the customs territory of the United States.
"(5) For purposes of this subsection, customs services shall be
treated as being 'adequately provided' if such of those services that
are necessary to meet the needs of parties subject to customs
inspection are provided in a timely manner taking into account
factors such as—
"(A) the unavoidability of weather, mechanical, and other
delays;
"(B) the necessity for prompt and efficient passenger and
baggage clearance;
(C) the perishability of cargo;
"(D) the desirability or unavoidability of late night and early
morning arrivals from various time zones;
"(E) the availability (in accordance with regulations
prescribed under subsection (gX2)) of customs personnel and
resources; and
"(F) the need for specific enforcement checks."; and
(C) by amending paragraph (6) (as redesignated by subpara-
graph (A)) to read as follows:
"(6) Notwithstanding any other provision of law except paragraph
(2), during any period when fees are authorized under subsection (a),
no charges, other than such fees, may be collected—
"(A) for any—
"(i) cargo inspection, clearance, or other customs activity,
expense, or service performed (regardless whether per-
iiitw formed outside of normal business hours on an overtime
basis), or
"(ii) customs personnel provided,
in connection with the arrival or departure of any commercial
vessel, vehicle, or aircraft, or its passengers, crew, stores, mate-
rial, or cargo, in the United States;
"(B) for any preclearance or other customs activity, expense,
or service performed, and any customs personnel provided,
outside the United States in connection with the departure of
any commercial vessel, vehicle, or aircraft, or its passengers,
crew, stores, material, or cargo, for the United States; or
"(C) in connection with—
"(i) the activation or operation (including Customs Serv-
«f»j ice supervision) of any foreign trade zone or subzone estab-
lished under the Act of June 18, 1934 (commonly know as
.8'. the Foreign Trade Zones Act, 19 U.S.C. 81a et seq.), or
"(ii) the designation or operation (including Customs
Service supervision) of any bonded warehouse under section
555 of the Tariff Act of 1930 (19 U.S.C. 1555).".
(3) DISPOSITION OF FEES.—Subsection (f) is amended by striking
out paragraphs (1), (2), and (3) and inserting the following:
"(f) DISPOSITION OF F E E S . - - ( 1 ) There is established in the general
fund of the Treasury a separate account which shall be known as
the 'Customs User Fee Account'. Notwithstanding section 524 of the
Tariff Act of 1930 (19 U.S.C. 1524), there shall be deposited as
offsetting receipts into the Customs User Fee Account all fees
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-379
collected under subsection (a) except that portion of such fees that is
required under paragraph (3) for the direct reimbursement of appro-
priations.
"(2) All funds in the Customs User Fee Account shall be available,
to the extent provided for in appropriations Acts, to pay the costs
(other than costs for which direct reimbursement under paragraph
(3) is required) incurred by the United States Customs Service in
conducting commercial operations, including, but not limited to, all
costs associated with commercial passenger, vessel, vehicle, aircraft,
and cargo processing. So long as there is a surplus of funds in the
Customs User Fee Account, the Secretary of the Treasury may not
reduce personnel staffing levels for providing commercial clearance
and preclearance services.
"(3) The Secretary of the Treasury, in accordance with such
section 524 and without regard to apportionment or any other
administrative practice or limitation, shall directly reimburse, from
the fees collected under subsection (a), each appropriation for the
amount paid out of that appropriation for the costs incurred by the
Secretary in providing—
"(A) inspectional overtime services; and
"(B) all preclearance services;
for which the recipients of such services are not required to re-
imburse the Secretary of the Treasury. Reimbursement under this
paragraph shall apply with respect to each fiscal year occurring
after September 30, 1987, and shall be made at least quarterly. To
the extent necessary, reimbursement of appropriations under this
paragraph may be made on the basis of estimates made by the
Secretary of the Treeisury of the costs for inspectional overtime and
preclearance services, and adjustments shall oe made in subsequent
reimbursements to the extent that the estimates were in excess of,
or less than, the amounts required to be reimbursed.".
(4) REGULATIONS.—Subsection (g) is amended—
(A) by striking out "(g) REGULATIONS.—The" and insert-
ing "(g) REGULATIONS.—(1) In addition to the regulations
required under paragraph (2), the "; and
(B) by inserting at the end thereof the following new
paragraph: : - -'' '
"(2) The Secretary of the Treasury shall prescribe regulations
governing the work shifts of customs personnel at airports. Such
regulations shall provide, among such other factors considered
appropriate by the Secretary, that—
"(A) the work shifts will be adjusted, as necessary, to meet
cyclical and seasonal demands and to minimize the use of
overtime;
"(B) the work shifts will not be arbitrarily reduced or com-
pressed; and
"(C) consultation with the Advisory Committee on Com-
mercial Operations of the United States Customs Service
(established under section 9501(c) of the Omnibus Budget Rec-
onciliation Act of 1987) will be carried out before adjustments
are made in the work shifts.".
(5) EXTENSION OF CUSTOMS USER FEES PROGRAM.—Subsection
(jX3) is amended by striking out "1989" and inserting "1990".
(b) ADDITIONAL PERIOD To CLAIM CERTAIN REFUNDS.—Section
1893(gX2) of the Tax Reform Act of 1986 is amended by striking out 19 USC 58c note.
"90 days after the date of enactment of this Act" and inserting "90
dayff after the date of the enactment of the Omnibus Budget Rec-
onciliation Act of 1987".
101 STAT. 1330-380 PUBLIC LAW 100-203—DEC. 22, 1987
19 u s e 3 note. (c) ANALYSIS REGARDING THE CES PROGRAM; EFFECT ON
IMPLEMENTATION OF PROGRAM.—
(1) The Comptroller General of the United States shall con-
duct a comprehensive analysis, including a cost-benefit study, of
the centralized cargo examination station (CES) concept from
the perspective of both the United States Customs Service and
business community users. The analysis shall be submitted on
the same day to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the
Senate (hereinafter in this subsection referred to as the
"Committees") not later than March 30, 1988, and shall include
recommendations as to how best to implement cargo inspection
procedures.
(2) The United States Customs Service—
(A) may not, after the date of the enactment of this Act,
ixf. establish any new centralized cargo examination station at
> ,i any ocean port, airport, or land border location unless the
Customs Service provides to the Committees advance
notice, in writing, of not less than 90 days regarding the
proposed establishment; and
(B) shall, on such date of enactment, suspend operations
at each centralized cargo examination station that was
operating at an airport on the day before such date until
the 90th day after a date—
(i) that is not earlier than the date on which the
analysis required under paragraph (1) is submitted to
'- ' the Committees, and
I. (ii) on which the Customs Service provides to the
Committees notice, in writing, that it intends to resume
such operations at the station.
During the period of suspension of operations under subpara-
graph (B) at any centralized cargo examination station at an
airport, the Secretary of the Treasury shall maintain customs
^ operations and staffing at that airport at a level not less than
that which was in effect immediately before the suspension took
effect.
19 u s e 58c note. (d) EFFECTIVE D A T E S . —
(1) Except as otherwise provided in this subsection, the provi-
sions of this section take effect on the date of the enactment of
i this Act.
(2) The amendments made by subsection (aXD apply with
respect to articles entered, or withdrawn from warehouse for
'? consumption, on or after the 15th day after the date of enact-
ment of this Act.
(3) The amendment made by subsection (aX3) shall take effect
on October 1,1987.
SEC. 9502. UNITED STATES INTERNATIONAL TRADE COMMISSION
AUTHORIZATIONS.
Section 330(eX2) of the Tariff Act of 1930 (19 U.S.C. 1330(eX2)) is
amended—
(1) by striking out "1986" and inserting "1988"; and
(2) by striking out "$28,901,000;" and inserting "$35,386,000;".
SEC. 9503. UNITED STATES CUSTOMS SERVICE AUTHORIZATIONS.
*-.»« o8a osi.
(a) AUTHORIZATION OF APPROPRIATIONS.—Section 301(b) of the Cus-
toms Procedural Reform and Simplification Act of 1978 (19 U.S.C.
20750t))) is amended to read as follows:
"(b) AUTHORIZATION OF APPROPRIATIONS.—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-381
"(1) FOR NONCOMMERCIAL OPERATIONS.—There are authorized
to be appropriated for fiscal year 1988 not to exceed
$348,192,000 for the salaries and expenses of the United States
Customs Service that are incurred in noncommercial oper-
ations, of which $171,857.06 shall be available only for conclud-
ing Contract TC-82-54 that was awarded for the development
and testing of an automatic license plate reader. fh r "
"(2) FOR COMMERCIAL OPERATIONS.—There are authorized to
be appropriated for fiscal year 1988 not to exceed $615,000,000
from the Customs User Fee Account for the salaries and ex-
penses of the United States Customs Service that are incurred
in commercial operations.
"(3) FOR AIR INTERDICTION.—There are authorized to be appro-
priated for fiscal year 1988 not to exceed $118,309,000 for the
operation (including salaries and expenses) and maintenance of
the air interdiction program of the United States Customs
Service.".
Ot)) CONGRESSIONAL NOTICE OF CERTAIN ACTIONS.—Section 301 of
3ii-!:-
the Customs Procedural Reform and Simplification Act of 1978
(19 U.S.C. 2075) is amended—
(1) by striking out " U S E OF SAVINGS RESULTING FROM ADMINIS-
TRATIVE CoNSOUDATiONS.—" in subsection (f);
(2) by striking out "ALLOCATION OF RESOURCES.—" in subsec-
tion (g) and inserting "(1)"; and
(3) by adding at the end of subsection (g) the following new
paragraph:
"(2) The Commissioner of Customs shall notify the Committee on
Finance of the Senate and the (Dommittee on Ways and Means of the
House of Representatives at least 180 days prior to taking any action
which would—
"(A) result in any significant reduction in force of employees
other than by means of attrition;
"(B) result in any significant reduction in hours of operation
or services rendered at any office of the United States Customs i^^-
Service or any port of entry; ''
"(C) eliminate or relocate any office of the United States
Customs Service; , ^
"(D) eliminate any port of entry; or " ' '
"(E) significantly reduce the number of employees assigned to
any office of the United States Customs Service or any port of
entry.",
(c) ADVISORY COMMITTEE ON COMMERCIAL OPERATIONS OF THE Establishment
UNITED STATES CUSTOMS SERVICE.— 19 use 2071
(1) The Secretary of the Treasury shall establish an advisory note.
committee which shall be known as the "Advisory Committee
on Commercial Operations of the United States Customs Serv-
ice" (hereafter in this subsection referred to as the "Advisory
Committee").
(2XA) The Advisory Committee shall consist of 20 members
appointed by the Secretary of the Treasury.
(B) In making appointments under subparagraph (A), the
Secretary of the Tresisury shall ensure that—
(i) the membership of the Advisory Committee is rep-
resentative of the individuals and firms affected by the
commercial operations of the United States Customs
Service; and
101 STAT. 1330-382 PUBLIC LAW 100-203—DEC. 22, 1987
(ii) a majority of the members of the Advisory Committee
do not belong to the same political party.
* (3) The Advisory Committee shall—
(A) provide advice to the Secretary of the Treasury on all
matters involving the commercial operations of the United
States Customs Service; and
Reports. (B) submit an annual report to the Committee on Finance
i of the Senate and the Committee on Ways and Means of the
W. House of Representatives that shall—
(i) describe the operations of the Advisory Committee
;< I t , during the preceding year, and
(ii) set forth any recommendations of the Advisory
s^- Committee regarding the commercial operations of the
United States Customs Service.
(4) The Assistant Secretary of the Treasury for Enforcement
shall preside over meetings of the Advisory Committee.
(d) DISSOLUTION OF EXISTING ADVISORY COMMITTEE.—Section 13033
19 u s e 2071 of the Consolidated Budget Reconciliation Act of 1985 is repealed.
note.
SEC. 9504. OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
AUTHORIZATIONS.
Section 141(0(1) of the Trade Act of 1974 (19 U.S.C. 2171(f)(1)) is
amended to read as follows:
"(f)(lXA) There are authorized to be appropriated for fiscal year
1988 to the Office for the purposes of carrying out its functions not
to exceed $15,172,000.
"(B) Of the amounts authorized to be appropriated under subpara-
graph (A) for fiscal year 1988—
"(i) not to exceed $69,000 may be used for entertainment and
representation expenses of the Office; and
'(ii) not to exceed $1,000,000 shall remain available until
expended.".
Revenue Act of
1987.
TITLE X—REVENUE PROVISIONS
SEC. 10000. SHORT TITLE: AMENDMENT OF THE 1986 CODE.
26 u s e 1 note. (a) SHORT TITLE.—This title may be cited as the "Revenue Act of
1987".
Ot)) AMENDMENT OF 1986 CODE.—Except as otherwise expressly
provided, whenever in this title an amendment or repeal is ex-
pressed in terms of an amendment to, or repeal of, a section or other
provision, the reference shall be considered to be made to a section
26 u s e 1 et seq. or other provision of the Internal Revenue Code of 1986.
26 u s e 15 note. (c) COORDINATION WITH SECTION 15.—No amendment made by this
title shall be treated as a change in a rate of tax for purposes
section 15 of the Internal Revenue Code of 1986.
(d) TABLE OF CONTENTS.—
'-'- • ' TITLE X—REVENUE PROVISIONS
Sec. 10000. Short title; amendment of the 1986 Code.
Subtitle A—Individual Income Tax Provisions
Sec. 10101. Expenses of overnight camps not allowable for dependent care credit
Sec. 10102. Changes to deduction for qualified residence interest.
Sec. 10103. Clarification of treatment of Federal judges.
Sec. 10104. Treatment of regulated investment companies under 2-percent floor.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-383
Subtitle B—Business Provisions
PART I—ACCOUNTING PROVISIONS
Sec. 10201. Repeal of reserve for accrual of vacation pay.
Sec. 10202. Provisions relating to installment sales.
Sec. 10203. Reduction in percentage of items taken into account under completed
contract method.
Sec. 10204. Amortization of past service pension costs.
Sec. 10205. Certain farm corporations required to use accrual method of accounting.
Sec. 10206. Entities may elect taxable years other than required taxable year.
PART II—PARTNERSHIP PROVISIONS
Sec. 10211. Certain publicly traded partnerships treated as corporations.
Sec. 10212. Treatment of publicly traded partnerships under section 469.
Sec. 10213. Treatment of publicly traded partnerships for unrelated business tax.
Sec. 10214. Treatment of certain partnership allocations.
Sec. 10215. Study.
PART III—CORPORATE PROVISIONS
Sec. 10221. Reduction in dividends received deduction for dividends from corpora-
tions not 20-percent owned.
Sec. 10222. Certain earnings and profits adjustments not to apply for certain pur-
poses.
Sec. 10223. Treatment of mirror subsidiary transactions.
Sec. 10224. Benefits of graduated corporate rates not allowed to personal service
corporations.
Sec. 10225. Amendments to section 382.
Sec. 10226. Limitation on use of preacquisition losses to offset built-in gains.
Sec. 10227. Recapture of LIFO amount in the case of elections by S corporations.
Sec. 10228. Excise tax on receipt of greenmail.
PART IV—FOREIGN TAX PROVISIONS
Sec. 10231. Denial of foreign tax credit for taxes paid or accrued to South Africa.
PART V—INSURANCE PROVISIONS
Sec. 10241. Interest rate used in computing tax reserves for life insurance compa-
nies may not be less than applicable Federal rate.
Sec. 10242. Treatment of foreign insurance.
Sec. 10243. Treatment of mutual life insurance company policy holder dividends for
purposes of book preference.
Sec. 10244. Certain insurance sjmdicates.
Subtitle C—Estimated Tax Provisions
Sec. 10301. Revision of corporate estimated tax provisions.
Sec. 10302. Revised withholding certificates required to be put into effect more
promptly.
Sec. 10303. Estimated tax penalties for 1987.
Subtitle D—Estate and Gift Tax Provisions
' PART I—GENERAL PROVISIONS
Sec. 10401. 5-year extension of existing rates; phaseout of benefits of existing rates,
and unified credit.
Sec. 10402. Inclusion related to valuation freezes.
PART II—ESTATE TAX PROVISIONS RELATING TO EMPLOYEE STOCK OWNERSHIP PLANS
Sec. 10411. Congressional clarification of estate tax deduction for sales of employer
securities. ' * "*' v
Sec. 10412. Modifications of estate tax deduction for sale of employer securities.
Sec. 10413. Excise tax on plans or cooperatives disposing of employer securities for
which estate tax deduction was allowed.
Subtitle E—Provisions Relating to Excise Taxes and User Fees
PART I—EXCISE TAXES
Sec. 10501. Extension of telephone excise tax.
Sec. 10502. Diesel fuel and aviation fuel taxes imposed at wholesale level.
Sec. 10503. Extension of temporary increase in amount of tax imposed on coal
producers.
101 STAT. 1330-384 PUBLIC LAW 100-203—DEC. 22, 1987
PART II—TAX-RELATED USER FEES
Sec. 10511. Fees for request for ruling, determination, and similar letters.
Sec. 10512. Occupational taxes relating to alcohol, tobacco, and firearms. ,
Subtitle F—Other Revenue Provisions
PART I—TARGETED JOBS CREDIT
Sec. 10601. Denial of targeted jobs credit for wages paid during period of labor
dispute.
PART II—TREATMENT OF CERTAIN ILLEGAL IRRIGATION SUBSIDIES
Sec. 10611. Treatment of certain illegal irrigation subsidies. ; ,r
PART III—COMPLIANCE
Sec. 10621. State escheat laws not to apply to refunds of Federal tax.
Sec. 10622. Sense of Congress as to increased Internal Revenue Service funding for
taxpayer assistance and enforcement.
PART IV—TAX EXEMPT BOND PROVISIONS
Sec. 10631. Issues used to acquire nongovernmental output property. _ .»
Sec. 10632. Bonds issued by Indian tribal governments. •"'^
Subtitle G—Lobbying and Political Activities of Tax-Exempt Organizations ^ •;
PART I—DISCLOSURE REQUIREMENTS
Sec. 10701. Required disclosure of nondeductibility of contributions.
Sec. 10702. Public inspection of annual returns and applications for tax-exempt
status.
Sec. 10703. Additional information required on annual returns of section 501(cX3)
organizations.
Sec. 10704. Penalties. ;
Sec. 10705. Required disclosure that certain information or service available from
Federal Government.
PART II—PoLrricAL AcTivrriES
Sec. 10711. Clariflcation of prohibited political activities.
Sec. 10712. Excise taxes on political expenditures by section 501(cX3) organizations.
Sec. 10713. Additional enforcement authority in the case of flagrant political
expenditures. v », >. j . *.;<
Sec. 10714. Tax on disqualifying lobbying expenditures.
Subtitle A—Individual Income Tax Provisions
SEC. 10101. EXPENSES OF OVERNIGHT CAMPS NOT ALLOWABLE FOR
DEPENDENT CARE CREDIT.
(a) GENERAL RULE.—Subparagraph (A) of section 21(bX2) (defining
employment-related expenses) is amended by adding at the end
thereof the following new sentence:
"Such term shall not include any amount paid for services
,4^ outside the taxpayer's household at a camp where the
qualif3dng individual sta3rs overnight."
26 use 21 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to expenses paid in taxable years beginning after Decem-
ber 31,1987.
SEC. 10102. CHANGES TO DEDUCTION FOR QUALIFIED RESIDENCE
INTEREST.
(a) GENERAL RULE.—Paragraph (3) of section 163(h) (defining
qualified residence interest) is amended to read as follows:
los Ck)py read "Indian Tribal Governments.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-385
"(3) QuAUFiED RESIDENCE INTEREST.—For purposes of this
subsection—
"(A) IN GENERAL.—The term 'qualified residence interest'
means any interest which is paid or accrued during the
taxable year on—
"(i) acquisition indebtedness with respect to any
qualified residence of the taxpayer, or
"(ii) home equity indebtedness with respect to any
qualified residence of the taxpayer.
For purposes of the preceding sentence, the determination
of whether any property is a qualified residence of the
taxpayer shall be made as of the time the interest is
accrued.
"(B) ACQUISITION INDEBTEDNESS.—
"(i) IN GENERAL.—The term 'acquisition indebted-
ness' means any indebtedness which—
'^^^ "(I) is incurred in acquiring, constructing, or
substantially improving any qualified residence of
the taxpayer, and
• •o ^ "(II) is secured by such residence.
Such term also includes any indebtedness secured by
- -*' ^' such residence resulting from the refinancing of indebt-
edness meeting the requirements of the preceding sen-
tence (or this sentence); but only to the extent the
amount of the indebtedness resulting from such re-
financing does not exceed the amount of the refinanced
indebtedness.
^t ;-. "(ii) $1,000,000 LIMITATION.—The aggregate amount
treated as acquisition indebtedness for any period shall
not exceed $1,000,000 ($500,000 in the case of a married
r^*? .. individual filing a separate return).
"(C) HOME EQUITY INDEBTEDNESS.—
i.x^U "(i) IN GENERAL.—The term 'home equity indebted- ( t i S ) ; .;:
ness' means any indebtedness (other than acquisition
indebtedness) secured by a qualified residence to the
extent the aggregate amount of such indebtedness does
not exceed—
l o z:ss' "(I) t h e fair m a r k e t value of such qualified resi-
dence, reduced by
;c ; f? "(II) t h e a m o u n t of acquisition indebtedness with
respect to such residence.
vksi|6 "(ii) LIMITATION.—The aggregate a m o u n t t r e a t e d as
h o m e equity indebtedness for a n y period shall not
exceed $100,000 ($50,000 in t h e case of a s e p a r a t e
Tf.11 r f\ return by a married individual).
"(D) TREATMENT OF INDEBTEDNESS INCURRED ON OR BEFORE
CK K OCTOBER 13, 1987.— , '
"(i) I N GENERAL.—In the case of any pre-October 13,
1987, indebtedness—
"(I) such indebtedness shall be treated as acquisi-
j tion indebtedness, and
"(II) the limitation of subparagraph (BXii) shall
/ not apply.
"(ii) REDUCTION IN $1,000,000 UMITATION.—The
limitation of subparagraph (BXii) shall be reduced Oaut
, ^^ not below zero) by the aggregate amount of outstanding
pre-October 13,1987, indebtedness.
101 STAT. 1330-386 PUBLIC LAW 100-203—DEC. 22, 1987
'• '^ ^ • "(iii) PRE-OCTOBER I 3 , I 9 8 7 , INDEBTEDNESS.—The term
'pre-October 13,1987, indebtedness' means—
jp^..-,. "(I) any indebtedness which was incurred on or
- » t,:i J before October 13, 1987, and which was secured by
, a qualified residence on October 13, 1987, and at all
* ' "* '^ times thereafter before the interest is paid or
,. . . ,, accrued, or
' ' "(ID any indebtedness which is secured by the
qualified residence and was incurred after Octo-
;" .^ .r ber 13,1987, to refinance indebtedness described in
" subclause (I) (or refinanced indebtedness meeting
the requirements of this subclause) to the extent
(immediately after the refinancing) the principal
..-.<(..».., - amount of the indebtedness resulting from the
refinancing does not exceed the principal amount
^^ of the refinanced indebtedness (immediately before
the refinancing).
"(iv) LIMITATION ON PERIOD OF REFINANCING.—
Subclause (II) of clause (iii) shall not apply to any
, indebtedness after—
^j, "(I) the expiration of the term of the indebted-
ness described in clause (iiiXD, or
.,- "(II) if the principal of the indebtedness de-
scribed in clause (iiiXD is not amortized over its
iy- ,^,, term, the expiration of the term of the 1st refinanc-
ing of such indebtedness (or if earlier, the date
which is 30 years after the date of such 1st re-
financing)."
(b) CONFORMING AMENDMENTS.—Subsection (h) of section 163 is
amended by striking out paragraph (4) and by redesignating para-
graph (5) as paragraph (4).
26 use 163 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply to taxable years beginning after December 31,1987.
26 u s e 219 note. SEC. 10103. CLARIFICATION OF TREATMENT OF FEDERAL JUDGES.
(a) GENERAL RULE.—A Federal judge—
* (1) shall be treated as an active participant for purposes of
section 219(g) of the Internal Revenue Code of 1986, and
:^ (2) shall be treated as an employee for purposes of chapter 1 of
such Code.
(b) EFFECTIVE DATE.—The provisions of subsection (a) shall apply
to taxable years beginning after December 31,1987.
SEC. 10104. TREATMENT OF REGULATED INVESTMENT COMPANIES
UNDER 2.PERCENT FLOOR.
26 u s e 67 note. (a) 1 - Y E A R D E L A Y IN TREATMENT OF PUBUCLY OFFERED REGULATED
INVESTMENT COMPANIES UNDER 2-PERCENT FLOOR.—
(1) GENERAL RULE.—Section 67(c) of the Internal Revenue
' Code of 1986 to the extent it relates to indirect deductions
through a publicly offered regulated investment company shall
'' apply only to taxable years beginning after December 31, 1987.
(2) PUBUCLY OFFERED REGULATED INVESTMENT COMPANY
-'^DEFINED.—For purposes of this subsection—
(A) IN GENERAL.—The term "publicly offered regulated
investment company" means a regulated investment com-
pany the shares of which are—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-387
(i) continuously offered pursuant to a public offering
(within the meaning of section 4 of the Securities Act of
'• •' 1933, as amended (15 U.S.C. 77a to 77aa)),
(ii) regularly traded on an established securities
market, or > .
(iii) held by or for no fewer than 500 persons at all
times during the taxable year.
(B) SECRETARY MAY REDUCE 500 PERSON REQUIREMENT.—
The Secretary of the Treasury or his delegate may by Regulations.
regulation decrease the minimum shareholder requirement
•J of subparagraph (AXiii) in the case of regulated investment
companies which experience a loss of shareholders through
net redemptions of their shares,
(b) CHANGES IN DISTRIBUTION REQUIREMENTS.—
(1) INCREASE IN REQUIRED DISTRIBUTION OF INCOME.—Para-
graph (1) of section 4982(b) (defining required distribution) is
amended by striking out "90 percent in subparagraph (B) and
inserting in lieu thereof "98 percent".
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 26 use 4982
shall take effect as if included in the amendments made by ^°^-
section 651 of the Tax Reform Act of 1986.
Subtitle B—Business Provisions
PART I—ACCOUNTING PROVISIONS
SEC. 10201. REPEAL OF RESERVE FOR ACCRUAL OF VACATION PAY.
(a) GENERAL RULE.—Section 463 (relating to accrual of vacation
pay) is hereby repealed.
(b) TECHNICAL AMENDMENTS.—
(1) Section 81 is hereby repealed.
(2) Subparagraph (B) of section 404(bX2) is amended to read as
follows:
"(B) EXCEPTION.—Subparagraph (A) shall not apply to
* any benefit provided through a welfare benefit fund (as
denned in section 419(e))."
(3) Section 404(aX5) is amended by adding at the end thereof
the following new sentence: "For purposes of this section, any
vacation pay which is treated as deferred compensation shall be
deductible for the taxable year of the employer in which paid to
the employee."
(4) Paragraph (2) of section 419(e) is amended bv inserting
"or" at the end of subparagraph (B), by striking out , or" at the
end of subparagraph (C), and inserting in lieu thereof a period,
and by striking out subparagraph (D).
(5) Paragraph (5) of section 461(h) is amended to read as
follows:
"(5) SUBSECTION NOT TO APPLY TO CERTAIN ITEMS.—This subsec-
tion sh£dl not apply to any item for which a deduction is
allowable under a provision of this title which specifically pro-
vides for a deduction for a reserve for estimated expenses."
(6) The table of sections for part II of subchapter B of chapter
1 is amended by striking out the item relating to section 81.
(7) The table of sections for subpart C of part II of subchapter
E of chapter 1 is amended by striking out the item relating to
section 463.
101 STAT. 1330-388 PUBLIC LAW 100-203—DEC. 22, 1987
(c) EFFECTIVE DATE.—
26 use 404 note. (1) IN GENERAL.—The amendments made by this section shall
apply to taxable years beginning after December 31,1987.
26 use 463 note. (2) CHANGE IN METHOD OF ACCOUNTING.—In the case of any
taxpayer who elected to have section 463 of the Internal Reve-
nue Code of 1986 apply for such taxpayer's last taxable year
„. beginning before January 1, 1988, and who is required to change
>!r 'jjibiir>i; V ^is method of accounting by reason of the amendments made by
ir. this section—
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as having been made
with the consent of the Secretary, and
-m (C) the net amount of adjustments required by section 481
ai of such Code to be taken into account by the taxpayer—
buB ;o. 11 (i) shall be reduced by the balance in the suspense
account under section 463(c) of such Code as of the close
'i; of such last taxable year, and
1^ (ii) shall be taken into account over the 4-taxable
year period beginning with the taxable year following
such last taxable year as follows:
The percentage taken
In the case of the: into account is:
1st year 25
2nd year 5
-. 3rd year ..^^...y^^ 3&.., «?rj,
4th year 35.
^ Notwithstanding subparagraph (C)(ii), if the period the adjust- „
ments are required to be taken into account under section 481 of
such Code is less than 4 years, such adjustments shall be taken
g. into account ratably over such shorter period.
SEC. 10202. PROVISIONS RELATING TO INSTALLMENT SALES.
(a) REPEAL OF PROPORTIONATE DISALLOWANCE OF INSTALLMENT
METHOD.—
,,, (1) IN GENERAL.—Section 453C (relating to certain indebted-
7 ness treated as payment on installment obligations) is hereby
"repealed.
J (2) CONFORMING AMENDMENT.—The table of sections for sub-
part B of part II of subchapter E of chapter 1 is amended by
striking out the item relating to section 453C.
(b) REPEAL OF INSTALLMENT METHOD FOR DEALERS IN PROPERTY.—
(1) IN GENERAL.—Subparagraph (A) of section 453(bX2) (defin-
ing installment sale) is amended to read as follows:
& "(A) DEALER DISPOSITIONS.—Any dealer disposition (as
defined in subsection (1))."
-. (2) DEALER DISPOSITION DEFINED.—Section 453 (relating to
6ti installment method) is amended by adding at the end thereof
the following new subsection:
"(1) DEALER DISPOSITIONS.—For purposes of subsection (b)(2)(A)—
"(1) IN GENERAL.—The term 'dealer disposition' means any of
the following dispositions:
"(A) PERSONAL PROPERTY.—Any disposition of personal
' property by a person who regularly sells or otherwise dis-
poses of personal property on the installment plan.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-389
"(B) REAL PROPERTY.—Any disposition of real property
which is held by the taxpayer for sale to customers in the
ordinary course of the taxpayer's trade or business.
"(2) EXCEPTIONS.—The term 'dealer disposition' does not
include—
•Hm'^ "^^^ FARM PROPERTY.—The disposition on the installment
plan of any property used or produced in the trade or
business of farming (within the meaning of section 2032A(e)
* (4) or (5)).
"(B) TiMESHARES AND RESIDENTIAL LOTS.—
"(i) I N GENERAL.—Any dispositions described in
clause (ii) on the installment plan if the taxpayer elects
to have paragraph (3) apply to any installment obliga-
tions which arise from such dispositions. An election
under this paragraph shall not apply with respect to an
installment obligation which is guaranteed by any
person other than an individual.
"(ii) DISPOSITIONS TO WHICH SUBPARAGRAPH APPLIES.—
A disposition is described in this clause if it is a disposi-
tion in the ordinary course of the taxpayer's trade or
business to an individual of—
"(I) a timeshare right to use or a timeshare
-- Rj'-u\- ownership interest in residential real property for
'^'^'••'•" not more than 6 weeks per year, or a right to use
specified campgrounds for recreational purposes,
.¥'• •: or
"(II) any residential lot, but only if the taxpayer
0J itos.ifc.,- (QJ. g^jjy related person) is not to make any improve-
ments with respect to such lot.
For purposes of subclause (I), a timeshare right to use
*v V .; (or timeshare ownership interest in) property held by
the spouse, children, grandchildren, or parents of an
individual shall be treated as held by such individual.
"(C) CARRYING CHARGES OR INTEREST.—Any carrying
charges or interest with respect to a disposition described in
subparagraph (A) or (B) which are added on the books of
account of the seller to the established cash selling price of
the property shall be included in the total contract price of
the property and, if such charges or interest are not so
included, any payments received shall be treated as apply-
ing first against such carrying charges or interest.
"(3) PAYMENT OF INTEREST ON TIMESHARES AND RESIDENTIAL
LOTS.—
"(A) IN GENERAL.—In the case of any installment obliga-
tion to which paragraph (2)(B) applies, the tax imposed by
this chapter for any taxable year for which payment is
received on such obligation shall be increased by the
r amount of interest determined in the manner provided
under subparagraph (B).
"(B) COMPUTATION OF INTEREST.—
"(i) IN GENERAL.—The amount of interest referred to
in subparagraph (A) for any taxable year shall be
j \™ i', determined—
ztae^ - "(I) on the amount of the tax for such taxable
year which is attributable to the payments re-
Qf^ ceived during such teixable year on installment
obligations to which this subsection applies.
101 STAT. 1330-390 PUBLIC LAW 100-203—DEC. 22, 1987
"(II) for the period beginning on the date of sale,
^ and ending on the date such payment is received,
and
'* -'' "(III) by using the applicable Federal rate under
section 1274 (without regard to subsection (dX2)
? mii " thereoO in effect at the time of the sale
compounded semiannually,
"(ii) INTEREST NOT TAKEN INTO ACCOUNT.—For pur-
poses of clause (i), the portion of any tax attributable to
the receipt of any payment shall be determined
^ without regard to any interest imposed under subpara-
graph (A).
"(iii) TAXABLE YEAR OF SALE.—No interest shall be
determined for any payment received in the taxable
year of the disposition from which the installment
obligation arises.
"(C) TREATMENT AS INTEREST.—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.'
(c) TREATMENT OF INSTALLMENT OBUGATIONS OF NONDEALERS.—
Section 453A (relating to installment method for dealers in personal
property) is amended to read as follows:
"SEC. 453A. SPECIAL RULES FOR NONDEALERS OF REAL PROPERTY.
"(a) GENERAL RULE.—In the case of an installment obligation to
which this section applies—
"(1) interest shall be paid on the deferred tax liability with
respect to such obligation in the manner provided under subsec-
tion (c), and
"(2) the pledging rules under subsection (d) shall apply.
"(b) INSTALLMENT OBUGATIONS TO WHICH SECTION APPUES.—
"(1) IN GENERAL.—This section shall apply to any obligation
which arises from the disposition of real property under the
installment method which is property used in the taxpayer's
trade or business or property held for the production of rental
income, but only if the sales price of such property exceeds
$150,000.
"(2) SPECIAL RULE FOR INTEREST PAYMENTS.—For purposes of
subsection (aXD, this section shall apply to an obligation de-
scribed in paragraph (1) arising during a taxable year only if—
"(A) such obligation is outstanding as of the close of such
taxable year, and
"(B) the face amount of all obligations of the taxpayer
described in paragraph (1) which arose during, and are
outstanding as of the close of, such taxable year exceeds
$5,000,000.
Except as provided in regulations, all persons treated as a single
employer under subsection (a) or (b) of section 52 shall be
treated as one person for purposes of this paragraph.
"(3) EXCEPTION FOR PERSONAL USE AND FARM PROPERTY.—An
installment obligation shall not be treated as described in para-
graph (1) if it arises from the disposition—
"(A) by an individual of personal use property (within the
meaning of section 1275fll)X3)), or
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-391
; H .; "(B) of any property used or produced in the trade or
business of farming (within the meaning of section 2032A(e)
(4) or (5)).
"(4) SPECIAL RULE FOR TIMESHARES AND RESIDENTIAL LOTS.—An
^' installment obligation shall not be treated as described in para-
graph (1) if it arises from a disposition described in section
' 453(1)(2)(B), but the provisions of section 453(1)(3) (relating to
interest payments on timeshares and residential lots) shall
apply to such obligation.
"(5) SALES PRICE.—For purposes of paragraph (1), all sales or
exchanges which are part of the same transaction (or a series of
related transactions) shall be treated as 1 sale or exchange.
"(c) INTEREST ON DEFERRED TAX LIABILITY.—
"(1) IN GENERAL.—If an obligation to which this section ap-
plies is outstanding as of the close of any taxable year, the tax
imposed by this chapter for such taxable year shall be increased
by the amount of interest determined in the manner provided
under paragraph (2).
"(2) COMPUTATION OF INTEREST.—For purposes of paragraph
(1), the interest for any taxable year shall be an amount equal to
the product of—
"(A) the applicable percentage of the deferred tax liabil-
ity with respect to such obligation, multiplied by
"(B) the underpayment rate in effect under section
6621(a)(2) for the month with or within which the taxable
year ends.
"(3) DEFERRED TAX LIABIUTY.—For purposes of this section,
the term 'deferred tax liability' means, with respect to any
taxable year, the product of—
"(A) the amount of gain with respect to an obligation
which has not been recognized as of the close of such
taxable year, multiplied by
"(B) the maximum rate of tax in effect under section 1 or
^j^ 11, whichever is appropriate, for such taxable year.
y|^; "(4) APPUCABLE PERCENTAGE.—For purposes of this subsec-
tion, the term 'applicable percentage' means, with respect to
obligations arising in any taxable year, the percentage deter-
mined by dividing—
"(A) the portion of the aggregate face amount of such
obligations outstanding as of the close of such taxable year
in excess of $5,000,000, by
"(B) the aggregate face amount of such obligations
outstanding as of the close of such taxable year.
"(5) REGULATIONS.*"^—The Secretary shall prescribe such
regulations as may be necessary to carry out the provisions of
this subsection including regulations providing for the applica- a ;c)
tion of this subsection in the case of contingent payments, short
taxable years, and pass-thru entities.
"(d) PLEDGES, ETC., OF INSTALLMENT OBLIGATIONS.—
"(1) IN GENERAL.—For purposes of section 453, if any indebted-
y ness (hereinafter in this subsection referred to as 'secured
indebtedness') is secured by an installment obligation to which
this section applies, the net proceeds of the secured indebted-
">• Copy read "REGULATIONS—".
91-194 O - 90 - 38 : QL.3 Part 2
101 STAT. 1330-392 PUBLIC LAW 100-203—DEC. 22, 1987
ness shall be treated as a payment received on such installment
{.^ obligation as of the later of—
"(A) the time the indebtedness becomes secured indebted-
ness, or
"(B) the proceeds of such indebtedness are received by the
taxpayer.
"(2) LIMITATION BASED ON TOTAL CONTRACT PRICE.—The
amount treated as received under paragraph (1) by reason of
any secured indebtedness shall not exceed the excess (if any)
, of—
"(A) the total contract price, over
"(B) any portion of the total contract price received under
the contract before such secured indebtedness was incurred
(including amounts previously treated as received under
paragraph (1) but not including amounts not taken into
!' account by reason of paragraph (3)).
"(3) LATER PAYMENTS TREATED AS RECEIPT OF TAX PAID
AMOUNTS.—If any amount is treated as received under para-
graph (1) with respect to any installment obligation, subsequent
payments received on such obligation shall not be taken into
a' account for purposes of section 453 to the extent that the
aggregate of such subsequent payments does not exceed the
' aggregate amount treated as received under paragraph (1).
"(4) SECURED INDEBTEDNESS.—For purposes of this subsection
n^ indebtedness is secured by an installment obligation to the
*>' extent that payment of principal or interest on such indebted-
ness is directly secured (under the terms of the indebtedness or
i any underlying arrangements) by any interest in such install-
ment obligation."
(2) CLERICAL AMENDMENT.—The table of sections for subpart B
n of part II of subchapter E of chapter 1 is amended by striking
i' out the item relating to section 453A and inserting in lieu
thereof the following new item:
"'• "Sec. 453A. Special rules for nondealers of real property." '
(3) CONFORMING AMENDMENTS.—Sections 381(c)(8) and 691(a)
; (4) and (5) are each amended by striking out "or 453A" each
''^_ place it appears.
(d) MINIMUM TAX.—Paragraph (6) of section 56(a) (relating to
installment sales of certain property) is amended to read as follows:
"(6) INSTALLMENT SALES OF CERTAIN PROPERTY.—In the
' ' case of any disposition after March 1, 1986, of any property
described in section 1221(1), income from such disposition
.i )K f shall be determined without regard to the installment
method under section 453. This paragraph shall not apply
d :.K to any disposition with respect to which an election is in
effect under section 453(1X2XB)."
26 u s e 453 note. (e) EFFECTIVE D A T E S . —
(1) IN GENERAL.—Except as provided in this subsection, the
amendments made by this section shall apply to dispositions in
taxable years beginning after December 31,1987. ^/
(2) SPECIAL RULES FOR DEALERS.—
(A) I N GENERAL.—In the case of dealer dispositions
':' > (within the meaning of section 453A of the Internal Reve-
./;«.! 5 nue Code of 1986), the amendments made by subsections (a)
and (b) shall apply to installment obligations arising from
dispositions after December 31,1987. ,; .,,,,,.,,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-393
^ . . . , . j . . ,. (B) S P E C I A L RULES FOR OBLIGATIONS ARISING FROM DEALER
DISPOSITIONS AFTER FEBRUARY 28, 1986, AND BEFORE
JANUARY 1, 1988.—
''*''•^^• (i) IN GENERAL.—In the case of an applicable install-
ment obligation arising from a disposition described in
'>f' ';• subclause (I) or (II) of section 453C(e)(l)(A)(i) of the
Internal Revenue Code of 1986 (as in effect before the
amendments made by this section) before January 1,
•OA. J 1988, the amendments made by subsections (a) and (b)
shall apply to taxable years beginning after Decem-
ber 31, 1987. ^'' ' "
(ii) CHANGE IN METHOD OF ACCOUNTING.—In the case
of any taxpayer who is required by clause (i) to change
its method of accounting for any taxable year with
respect to obligations described in clause (i)—
" (I) such change shall be treated as initiated by
'/ the taxpayer,
. (II) such change shall be treated as made with
J; "^ l7 the consent of the Secretary of the Treasury or his
delegate, and
-. y|j ^-t (III) the net amount of adjustments required by
' section 481 of the Internal Revenue Code of 1986
jl^^yg t ,^ shall be taken into account over a period not
, longer than 4 taxable years.
(3) SPECIAL RULE FOR NONDEALERS.—
(A) ELECTION.—A taxpayer may elect, at such time and in
such manner as the Secretary of the Treasury or his dele-
gate may prescribe, to have the amendments made by 00; ' <
'3r''- ^ subsections (a) and (c) apply to taxable years ending after *'
s December 31, 1986, with respect to dispositions and pledges
occurring after August 16,1986.
(B) PLEDGING RULES.—Except as provided in subpara-
j graph (A)—
(i) I N GENERAL.—Section 453A(d) of the Internal
Revenue Code of 1986 shall apply to any installment
obligation which is pledged to secure any secured
f- ''••• indebtedness (within the meaning of section 453A(d)(4)
of such Code) after December 17, 1987, in taxable years
ending after such date.
(ii) COORDINATION WITH SECTION 453C.—For purposes
-* '
of section 453C of such Code (as in effect before its
repeal), the face amount of any obligation to which
section 453A(d) of such Code applies shall be reduced by
the amount treated as payments on such obligation
j^ under section 453A(d) of such Code and the amount of
9X. • Y" " any indebtedness secured by it shall not be taken into
^ account.
" (4) MINIMUM TAX.—The amendment made by subsection (d)
shall apply to dispositions in taxable years beginning after
December 31,1986.
(5) COORDINATION WITH TAX REFORM ACT OF 1986.—The amend-
ments made by this section shall not apply to any installment
obligation or to any taxpayer during any period to the extent
the amendments made by section 811 of the Tax Reform Act of
1986 do not apply to such obligation or during such period.
101 STAT. 1330-394 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 10203. REDUCTION IN PERCENTAGE OF ITEMS TAKEN INTO ACCOUNT
UNDER COMPLETED CONTRACT METHOD.
(a) I N GENERAL.—Section 460(a) (relating to percentage of comple-
tion—capitalized cost method) is amended—
(1) by striking out "40 percent" each place it appears in the
,„,, text and heading thereof and inserting in lieu thereof "70
£ „ percent", and
."^ I (2) by striking out "60 percent" and inserting in lieu thereof
"30 percent".
26 u s e 460 note. (b) EFFECTIVE D A T E S . —
(1) I N GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to contracts
entered into after October 13,1987.
*" (2) SPECIAL RULE FOR CERTAIN SHIP CONTRACTS.—
(A) I N GENERAL.—The amendments made by this section
' ''• shall not apply in the case of a qualified ship contract.
(B) QUALIFIED SHIP CONTRACT.—For purposes of subpara-
, graph (A), the term "qualified ship contract" ^ ° ' means any
"^ contract for the construction in the United States of not
more than 5 ships if^
'' "T' (i) such ships will not be constructed (directly or
indirectly) for the Federal Government, and
^ ^ >" ' < (ii) the taxpayer reasonably expects to complete such
contract within 5 years of the contract commencement
date (as defined in section 460(g) of the Internal Reve-
r-r. k. . . . : nueCodeof 1986).
26 u s e 263A SEC. 10204. AMORTIZATION OF PAST SERVICE PENSION COSTS.
"°*® (a) I N G E N E R A L . — F o r purposes of sections 263A a n d 460 of t h e
Internal Revenue Code of 1986, the allocable costs (within the
meaning of section 263A(a)(2) or section 460(c) of such Code, which-
ever is applicable) with respect to any property shall include con-
tributions paid to or under a pension or annuity plan whether or not
such contributions represent past service costs.
(b) EFFECTIVE DATE.—
(1) I N GENERAL.—Except as provided in paragraph (2), subsec-
tion (a) shall apply to costs incurred after December 31, 1987, in
, ,ii taxable years ending after such date.
(2) SPECIAL RULE FOR INVENTORY PROPERTY.—In the case of any
... property which is inventory in the hands of the taxpayer—
(A) I N GENERAL.—Subsection (a) shall apply to taxable
years beginning after December 31,1987.
(B) CHANGE IN METHOD OF ACCOUNTING.—If the taxpayer
is required by this section to change its method of account-
ing for any taxable year—
,, ,. (i) such change shall be treated as initiated by the
taxpayer,
, ,. ,, (ii) such change shall be treated as made with the
J,. ., . ., consent of the Secretary of the Treasury or his dele-
gate, and
(iii) the net amount of adjustments required by sec-
tion 481 of the Internal Revenue Code of 1986 shall be
taken into account over a period not longer than 4
taxable years.
"" Copy read " 'qualined ship contract' ".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-395
SEC. 10205. CERTAIN FAKM CORPORATIONS REQUIRED TO USE ACCRUAL
METHOD OF ACCOUNTING.
(a) GENERAL RULE.—Section 447 (relating to method of accounting
for corporations engaged in farming) is amended by striking out
subsections (c) and (e), by redesignating subsection (d) as subsection
(e), and by inserting after subsection (b) the following new sub-
sections:
"(c) EXCEPTION FOR CERTAIN CORPORATIONS.—For purposes of
subsection (a), a corporation shall be treated as not being a corpora-
tion if it is—
"(1) an S corporation, or
"(2) a corporation the gross receipts of which meet the
requirements of subsection (d). „,
"(d) GROSS RECEIPTS REQUIREMENTS.—
"(1) IN GENERAL.—A corporation meets the requirements of
this subsection if, for each prior taxable year beginning after
December 31, 1975, such corporation (and any predecessor cor-
poration) did not have gross receipts exceeding $1,000,000. For
purposes of the preceding sentence, all corporations which are
members of the same controlled group of corporations (within
the meaning of section 1563(a)) shall be treated as 1 corporation.
"(2) SPECIAL RULES FOR FAMILY CORPORATIONS.—
"(A) IN GENERAL.—In the case of a family corporation,
paragraph (1) shall be applied—
"(i) by substituting 'December 31, 1985,' for 'Decem-
ber 31,1975,'; and
:^ "(ii) by substituting '$25,000,000' for '$1,000,000'.
^' "(B) GROSS RECEIPTS TEST.—
"(i) CONTROLLED GROUPS.—Notwithstanding the last
sentence of paragraph (1), in the case of a family
corporation—
"(I) except as provided by the Secretary, only the
applicable percentage of gross receipts of any other
member of any controlled group of corporations of
which such corporation is a member shall be taken
'•'"/"' into account, and
'•'''* "(II) under regulations, gross receipts of such
corporation or of another member of such group
' ; ' " •' -^ shall not be taken into account by such corporation
^ ' more than once.
"(ii) PASS-THRU ENTITIES.—For purposes of paragraph
(1), if a family corporation holds directly or indirectly
any interest in a partnership, estate, trust or other
pass-thru entity, such corporation shall take into
" account its proportionate share of the gross receipts of
such entity.
^ "(iii) APPUCABLE PERCENTAGE.—For purposes of
' ^ clause (i), the term 'applicable percentage' means the
percentage equal to a fraction—
^ "(I) the numerator of which is the fair market
value of the stock of another corporation held di-
rectly or indirectly £is of the close of the taxable
"'" year by the family corporation, and
" "(II) the denominator of which is the fair market
value of all stock of such corporation as of such
time.
101 STAT. 1330-396 PUBLIC LAW 100-203—DEC. 22, 1987
,..^ , For purposes of this clause, the term 'stock' does not
include stock described in section 1563(c)(1). *°*
^^, "(C) FAMILY CORPORATION.—For purposes of this
/* ^' section,'"*" the term 'family corporation' means—
"(i) any corporation if at least 50 percent of the total
combined voting power of all classes of stock entitled to
vote, and at least 50 percent of all other classes of stock
-s J ^ ,,^ of the corporation, are owned by members of the same
L,^^ r family, and
"(ii) any corporation described in subsection (h)."
(b) SUSPENSE ACCOUNT IN LIEU OF 481 ADJUSTMENTS.—Section 447
is amended by adding at the end thereof the following new subsec-
tion:
"(i) SUSPENSE ACCOUNT FOR FAMILY CORPORATIONS.—
"(1) IN GENERAL.—If any family corporation is required by
this section to change its method of accounting for any taxable
year (hereinafter in this subsection referred to as the 'year of
the change'), notwithstanding subsection (f), such corporation
shall establish a suspense account under this subsection in lieu
of taking into account adjustments under section 481(a) with
respect to amounts included in the suspense account.
"(2) INITIAL OPENING BALANCE.—The initial opening balance
of the account described in paragraph (1) shall be the lesser of—
"(A) the net adjustments which would have been required
to be taken into account under section 481 but for this
subsection, or
., "(B) the amount of such net adjustments determined as of
the beginning of the taxable year preceding the year of
change.
1^ If the amount referred to in subparagraph (A) exceeds the
amount referred to in subparagraph (B), notwithstanding para-
graph (1), such excess shall be included in gross income in the
^; year of the change.
ijj "(3) REDUCTION IN ACCOUNT IF FARMING BUSINESS CON-
'*'[ TRACTS.—If—
"•^ "(A) the gross receipts of the corporation from the trade
^. ^ or business of farming for the year of the change or any
.«3. subsequent taxable year, is less than
"(B) such gross receipts for the taxpayer's last taxable
year beginning before the year of the change (or for the
,^ most recent taxable year for which a reduction in the
* ' suspense account was made under this paragraph),
the amount in the suspense account (after taking into account
prior reductions) shall be reduced by the percentage by which
the amount described in subparagraph (A) is less than the
amount described in subparagraph (B).
^ "(4) INCOME INCLUSION.—Any reduction in the suspense
if account under paragraph (3) shall be included in gross income
^ for the taxable year of the reduction.
"(5) INCLUSION WHERE CORPORATION CEASES TO BE A FAMILY
"' CORPORATION.—
:;j , "(A) IN GENERAL.—If the corporation ceases to be a family
''"^^~ corporation during any taxable year, the amount in the
suspense account (after taking into account prior reduc-
'"•Copy read "1563(cKl)."
"""Copy read "section.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-397
Hi ^ad tions) shall be included in gross income for such taxable
year.
2 _ "(B) SPECIAL RULE FOR CERTAIN TRANSFERS.—For purposes
", of subparagraph (A), any transfer in a corporation after
;, December 15,1987, shall be treated as a transfer to a person
.g, whose ownership could not qualify such corporation as a
family corporation unless it is a transfer—
,,,r. , "(i) to a member of the family of the transferor, or
Y ,o~ "(ii) in the case of a corporation described in subsec-
tion (h), to a member of a family which on December
15, 1987, held stock in such corporation which qualified
the corporation under subsection (h).
^' "(6) SUBCHAPTER C TRANSACTIONS.—The application of this
subsection with respect to a taxpayer which is a party to any
transaction with respect to which there is nonrecognition of
gain or loss to any party by reason of subchapter C shall be
determined under regulations prescribed by the Secretary."
(c) TECHNICAL AMENDMENTS.—
(1) Subsection (e) of section 447 (as redesignated by subsection
(a)) is amended by striking out "subsection (c)(2)" and inserting
in lieu thereof "subsection (d)".
(2) Paragraph (1) of section 447(h) is amended—
^i (A) by striking out "This section shall not apply to any
?£ I corporation" and inserting in lieu thereof "A corporation is
described in this subsection",
(B) by striking out "subsection (d)" each place it appears
llBtia ( and inserting in lieu thereof "subsection (e)', and
iO ,««; (C) by striking out "subsection (d)(1)" each place it ap-
pears and inserting in lieu thereof "subsection (e)(1)".
(d) EFFECTIVE DATE.—The amendments made by this section shall 26 use 447 note.
apply to taxable years beginning after December 31,1987.
SEC. 10206. ENTITIES MAY ELECT TAXABLE YEARS OTHER THAN RE-
QUIRED TAXABLE YEAR.
(a) ELECTION OF DIFFERENT Y E A R . —
(1) IN GENERAL.—Part I of subchapter E of chapter 1 (relating
, to accounting periods) is amended by adding at the end thereof
J,, the following new section: * °^
•SEC. 444. ELECTION OF TAXABLE YEAR OTHER THAN REQUIRED TAX- 26 USC 444.
ABLE YEAR.
"(a) GENERAL RULE.—Except as provided in subsections (b) and (c),
a partnership, S corporation, or personal service corporation may
elect to have a taxable year other than the required taxable year.
"(b) LIMITATIONS ON TAXABLE YEARS WHICH MAY B E ELECTED.—
"(1) IN GENERAL.—Except as provided in paragraphs (2) and
' (3), an election may be made under subsection (a) only if the
deferral period of the taxable year elected is not longer than 3
'^i months.
"(2) CHANGES IN TAXABLE YEAR.—Except as provided in para-
<• graph (3), in the case of an entity changing a taxable year, an
election may be made under subsection (a) only if the deferral
A period of the taxable year elected is not longer than the shorter
iii- of—
"(A) 3 months, or
"" Copy read "section.".
101 STAT. 1330-398 PUBLIC LAW 100-203—DEC. 22, 1987
"(B) the deferral period of the taxable year which is being
changed.
»'' "(3) SPECIAL RULE FOR ENTITIES RETAINING 1986 TAXABLE
"*['- YEARS.—In the case of an entity's 1st taxable year beginning
• after December 31, 1986, an entity may elect a taxable year
* under subsection (a) which is the same as the entity's last
taxable year beginning in 1986.
'J "(4) DEFERRAL PERIOD.—For purposes of this subsection, the
;^ term 'deferral period' means, with respect to any taxable year of
/^ the entity, the months between—
"(A) the beginning of such year, and
"(B) the close of the 1st required taxable year ending
within such year.
"(c) EFFECT OF ELECTION.—If an entity makes an election under
subsection (a), then—
"(1) in the case of a partnership or S corporation, such entity
shall make the payments required by section 7519, and
"(2) in the case of a personal service corporation, such cor-
« poration shall be subject to the deduction limitations of section
280H.
"(d) ELECTIONS.— —••-- /^ • ,.,
vj "(1) PERSON MAKING ELECTION.—An election under subsection
•;. (a) shall be made by the partnership, S corporation, or personal
service corporation. ;
tj-i "(2) PERIOD OF ELECTION.—
"(A) IN GENERAL.—Any election under subsection (a) shall
.i remain in effect until the partnership, S corporation, or
personal service corporation changes its taxable year. Any
jif r^ au '* I V change to a required taxable year may be made without the
consent of the Secretary.
3>l V "(^^ No FURTHER ELECTION.—If an election is terminated
under subparagraph (A), the partnership, S corporation, or
personal service corporation may not make another elec-
tion under subsection (a).
•y. "(3) TIERED STRUCTURES, ETC.—No election may be made under
subsection (a) with respect to an entity which is part of a tiered
structure other than a tiered structure comprised of 1 or more
4^^! ;*?.! )' partnerships or S corporations all of which have the same
taxable year.
"(e) REQUIRED TAXABLE YEAR.—For purposes of this section, the
term 'required taxable year' means the taxable year determined
under section 706(b), 1378, or 441(i) without taking into account any
taxable year which is allowable by reason of business purposes.
Solely for purposes of the preceding sentence, sections 706(b), 1378,
and 441(i) shall be treated as in effect for taxable years beginning
before January 1, 1987.
"(f) REGULATIONS.—The Secretary shall prescribe such regulations
as may be necessary to carry out the provisions of this section,
including regulations to prevent the avoidance of subsection (bX2XB)
or (d)(2XB) through the change in form of an entity."
(2) CONFORMING AMENDMENT.—The table of sections for part I
of subchapter E of chapter 1 is amended by adding at the end
thereof the following new item:
"Sec. 444. Election of taxable year other than required taxable year."
(b) REQUIRED PAYMENTS.— -»
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-399
(1) IN GENERAL.—Chapter 77 is amended by adding at the end
thereof the following new section:
"SEC. 7519. REQUIRED PAYMENTS FOR ENTITIES ELECTING NOT TO HAVE 26 USC 7519.
REQUIRED TAXABLE YEAR.
"(a) GENERAL RULE.—This section applies to a partnership or S
corporation for any taxable year, if^
"(1) an election under section 444 is in effect for the taxable
r year, and
"(2) the required payment determined under subsection (b) for
such taxable year (or any preceding taxable year) exceeds $500.
"(b) REQUIRED PAYMENT.—For purposes of this section, the term
'required payment' means, with respect to any applicable election
year of a partnership or S corporation, an amount equal to—
"(1) the excess of the product of—
"(A) the applicable percentage of the adjusted highest
section 1 rate, multiplied by
"(B) the net base year income of the entity, over
.1, „-,« "(2) the amount of the required payment for the preceding
applicable election year.
For purposes of paragraph (IXA), the term 'adjusted highest section
1 rate' means the highest rate of tax in effect under section 1 as of
the end of the base year plus 1 percentage point (or, in the case of
applicable election years beginning in 1987, 36 percent).
"(c) REFUND OF PAYMENTS.—If the amount determined under
subsection (b)(2) exceeds the amount determined under subsection
(b)(1), then the entity shall be entitled to a refund of such excess.
"(d) NET BASE YEAR INCOME.—For purposes of this section—
"(1) IN GENERAL.—An entity's net base year income shall be
equal to the sum of^
"(A) the deferral ratio multiplied by the entity's net
income for the base year, plus
"(B) the excess (if any) of—
"(i) the deferral ratio multiplied by the aggregate
amount of applicable payments made by the entity
Vf *• during the base year, over
"(ii) the aggregate amount of such applicable pay-
ments made during the deferral period of the base year.
• For purposes of this paragraph, the term 'deferral ratio' means
« the ratio which the number of months in the deferral period of
•=>. the base year bears to the number of months in the partner-
ship's or S corporation's taxable year.
"(2) NET INCOME,—Net income is determined by taking into
< account the aggregate amount of the following items— ;
"(A) PARTNERSHIPS.—In the case of a partnership, net
income shall be the amount (not below zero) determined by
X taking into account the aggregate amount of the partner-
> ship's items described in section 702(a) (other than credits).
t ' (B) S CORPORATIONS.—In the case of an S corporation,
f net income shall be the amount (not below zero) determined
H. by taking into account the aggregate amount of the S
corporation's items described in section 1366(a) (other than
credits). If the S corporation was a C corporation for the
base year, its taxable income for such year shall be treated
V . as its net income for such year.
"(C) CERTAIN UMITATIONS DISREGARDED.—For purposes of
subparagraph (A) or (B), any limitation on the amount of
101 STAT. 1330-400 PUBLIC LAW 100-203—DEC. 22, 1987
i •,* «jr any item described in either such paragraph which may be
taken into account for purposes of computing the taxable
,^ , income of a partner or shareholder shall be disregarded.
» . i M i.:: J« "(3) A P P L I C A B L E PAYMENTS.—
"(A) IN GENERAL.—The term 'applicable payment' means
8 fo Cf amounts paid or incurred by a partnership or S corporation
which are includible in gross income of a partner or share-
&( :<; a holder.
"(B) EXCEPTIONS.—The term 'applicable payment' shall
Gl '.# not include any—
M'':'"' "(i) gain from the sale or exchange of property be-
ixf tween the partner or shareholder and the partnership
r>Q- or S corporation, and
"(ii) dividend paid by the S corporation.
"(4) APPLICABLE PERCENTAGE.—The applicable percentage is
-' the percentage determined in accordance with the following
table: • >
"If the applicable election year /''
»f- of the partnership or S •i .,' ' ^ The applicable
corporation begins during: percentage is:
m 1987 25
%r, 1988 50
•' 1989 75
^"^ 1990 or thereafter"!!!"!'"!!!!!!"!!!!!!!!!!!!!!!!!!!!!!!!!!"!!!"!"!^ loo.
"(e) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
,;,: "(1) DEFERRAL PERIOD.—The term 'deferral period' has the
meaning given to such term by section 444(b)(4).
ac "(2) YEARS.—
"(A) BASE YEAR.—The term 'base year' means, with re-
iso a spect to any applicable election year, the taxable year of the
partnership or S corporation preceding such applicable
election year.
If "(B) APPLICABLE ELECTION YEAR.—The term 'applicable
/t. election year' means any taxable year of a partnership or S
corporation with respect to which an election is in effect
•V; under section 444.
3 "(3) REQUIREMENT OF REPORTING.—Each partnership or S cor-
: poration which makes an election under section 444 shall in-
ia elude on any required return or statement such information as
•' the Secretary shall prescribe as is necessary to carry out the
provisions of this section. :,
"(f) ADMINISTRATIVE PROVISIONS.—
Regulations. "(1) IN GENERAL.—Except as Otherwise provided in this
fe subsection or in regulations prescribed by the Secretary, any
v; payment required by this section shall be assessed and collected
1 in the same manner as if it were a tax imposed by subtitle C,
M "(2) DUE DATE.—The amount of any payment required by this
») section shall be paid on or before April 15 of the calendar year
b' following the calendar year in which the applicable election
'C year begins (or such later date as may be prescribed by the
;!/ Secretary).
in "(3) INTEREST.—For purposes of determining interest, any
h- payment required by this section shall be treated as a tax;
except that no interest shall be allowed with respect to any
refund of a payment made under this section.
c "(4) PENALTIES.—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-401
' d> A; "(A) IN GENERAL.—In the case of any failure by any
person to pay on the date prescribed therefor any amount
required by this section, there shall be imposed on such
"''^"' person a penalty of 10 percent of the underpayment. For
' purposes of the preceding sentence, the term
'underpayment' means the excess of the amount of the
"> •>' i payment required under this section over the amount (if
any) of such payment paid on or before the date prescribed
*->• ' "N therefor.
"(B) NEGUGENCE AND FRAUD PENALTIES MADE AP-
pla.r, PUCABLE.—For purposes of section 6653, any payment re-
• ypivo-i quired by this section shall be treated as a tax.
"(C) WILLFUL **° FAILURE.—If any partnership or S cor-
^ poration willfully fails to comply with the requirements of
this section, section 444 shall cease to apply with respect to
such partnership or S corporation.
"(g) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the provisions
of this section and section 280H, including regulations for
annualizing the income and applicable payments of an entity if the
base year is a taxable year of less than 12 months."
(2) CONFORMING AMENDMENT.—The table of sections for chap-
I ter 77 is amended by adding at the end thereof the following
new item:
.|j "Sec. 7519. Required payments for entities electing not to have required
taxable year."
(c) DEDUCTION LIMITATIONS.—
(1) IN GENERAL.—Part IX of subchapter B of chapter 1 (relat-
ing to items not deductible) is amended by adding at the end
thereof the following new section:
"SEC. 280H. LIMITATION ON CERTAIN AMOUNTS PAID TO EMPLOYEE- 26 USC 280H.
OWNERS BY PERSONAL SERVICE CORPORATIONS ELECTING
ALTERNATIVE TAXABLE YEARS. ,^ ^
"(a) GENERAL RULE.—If^
"(1) an election by a personal service corporation under sec-
, tion 444 is in effect for a taxable year, and
^' "(2) such corporation does not meet the minimum distribution
requirements of subsection (c) for such taxable year,
then the deduction otherwise allowed under this chapter for ap-
plicable amounts paid or incurred by such corporation to employee-
owners shall not exceed the maximum deductible amount. The
preceding sentence shall not apply for purposes of subchapter G
(relating to personal holding companies).
"(b) CARRYOVER OF NONDEDUCTIBLE AMOUNTS.—If any amount is
not allowed as a deduction for a taxable year under subsection (a),
such amount shall be treated as paid or incurred in the succeeding
taxable year.
"(c) MINIMUM DISTRIBUTION REQUIREMENT.—For purposes of this
section—
"(1) IN GENERAL.—A personal service corporation meets the
minimum distribution requirements of this subsection if the
applicable amounts paid or incurred during the deferral period
' Copy read "WILLFULL"
101 STAT. 1330-402 PUBLIC LAW 100-203—DEC. 22, 1987
, of the taxable year (determined without regard to subsection (b))
^ equal or exceed the lesser of—
' . "(A) the product of—
"(i) the applicable amounts paid or incurred during
'} the preceding taxable year, divided by the number of
r* " months in such taxable year, multiplied by
"(ii) the number of months in the deferral period of
\9n.- the preceding taxable year, or
"(B) the applicable percentage of the adjusted taxable
income for the deferral period of the taxable year.
"(2) APPLICABLE PERCENTAGE.—**°*The term 'applicable
percentage' means the percentage (not in excess of 95 percent)
-^ determined by dividing—
ir, "(A) the applicable amounts paid or incurred during the 3
6t }•:-,- taxable years immediately preceding the taxable year, by
"(B) the adjusted taxable income of such corporation for
such 3 taxable years.
"(d) MAXIMUM DEDUCTIBLE AMOUNT.—For purposes of this sec-
tion, the term 'maximum deductible amount' means the sum of—
"(1) the applicable amounts paid or incurred during the defer-
ral period, plus
, , . "(2) an amount equal to the product of^
.-. "(A) the amount determined under paragraph (1), divided
by the number of months in the deferral period, multiplied
by
"(B) the number of months in the nondeferral period.
"(e) DISALLOWANCE OF N E T OPERATING LOSS CARRYBACKS.—No net
operating loss carryback shall be allowed to (or from) any taxable
year of a personal service corporation to which an election under
section 444 applies.
"(f) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
' "(1) APPUCABLE AMOUNT.—The term 'applicable amount'
" means any amount paid to an employee-owner which is includ-
ible in the gross income of such employee, other than—
"(A) any gain from the sale or exchange of property
<. between the owner-employee and the corporation, or
"(B) any dividend paid by the corporation.
is "(2) EMPLOYEE-OWNER.—The term 'employee-owner' has the
meaning given such term by section 296A(bX2).
"(3) NONDEFERRAL AND DEFERRAL PERIODS.—
^- "(A) DEFERRAL PERIOD.—The term 'deferral period' has
, the meaning given to such term by section 444(b)(4).
^"'I "(B) NONDEFERRAL PERIOD.—The term 'nondeferral
period' means the portion of the taxable year of the per-
„; ;..-. sonal service corporation which occurs after the portion of
/ such year constituting the deferral period. * ^ *
; "(4) ADJUSTED TAXABLE INCOME.—The term 'adjusted taxable
* income' means taxable income increased by any amount paid or
^^ incurred to an employee-owner which was includible in the
' gross income of such employee-owner."
(2) CLERICAL AMENDMENT.—The table of sections for part IX of
^ subchapter B of chapter 1 is cunended by adding at the end
^ thereof the following item:
'""•Copy read "PERCENTAGE.—".
' ' ' Copy read "period." ".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-403
. r , "Sec. 280H. Limitation on certain amounts paid to owner-employees by per-
sonal service corporations electing alternative taxable years."
(d) EFFECTIVE DATES.— 26 use 444 note.
(1) I N GENERAL.—Except as provided in this subsection, the
amendments made by this section shall apply to taxable years
beginning after December 31,1986.
(2) REQUIRED PAYMENTS.—The amendments made by subsec-
tion (b) shall apply to applicable election years beginning after
December 31,1986.
p;- (3) ELECTIONS.—Any election under section 444 of the Internal
Revenue Code of 1986 (as added by subsection (a)) for an entity's
1st taxable year beginning after December 31,1986, shall not be
3j required to be made before the 90th day after the date of the
enactment of this Act.
(4) SPECIAL RULE FOR EXISTING ENTITIES ELECTING S CORPORA-
TION STATUS.—If a C corporation (within the meaning of section
1361(a)(2) "2 of the Internal Revenue Code of 1986) with a
;. taxable year other than the calendar year—
(A) made an election after September 18, 1986, and before
.J,. »,, January 1, 1988, under section 1362 of such Code to be
^, treated as an S corporation, and
(B) elected to have the calendar year as the taxable year
of the S corporation,
then section 444(bX2XB) of such Code shall be applied by taking
into account the deferral period of the last taxable year of the C
f^, corporation rather than the deferral period of the taxable year
being changed.
PART II—PARTNERSHIP PROVISIONS
SEC. 10211. CERTAIN PUBLICLY TRADED PARTNERSHIPS TREATED AS
CORPORATIONS.
(a) GENERAL RULE.—Chapter 79 (relating to definitions) is
amended by adding at the end thereoif the following new section:
"SEC. 7704. CERTAIN PUBLICLY TRADED PARTNERSHIPS TREATED AS 26 USC 7704.
CORPORATIONS.
"(a) GENERAL RULE.—For purposes of this title, except as provided
in subsection (c), a publicly traded partnership shall be treated as a
corporation.
"(b) PuBUCLY TRADED PARTNERSHIP.—For purposes of this section,
the term 'publicly traded partnership' means any partnership if—
"(1) interests in such partnership are traded on an established
securities market, or
"(2) interests in such partnership are readily tradable on a
secondary market (or the substantial equivalent thereof).
"(c) EXCEPTION FOR PARTNERSHIPS WITH PASSIVE-TYPE INCOME.—
"(1) IN GENERAL.—Subsection (a) shall not apply to any pub-
.VI licly traded partnership for any taxable year if such partnership
f met the gross income requirements of paragraph (2) for such
taxable year and each preceding taxable year beginning after
December 31, 1987, during which the partnership (or any prede-
cessor) was in existence.
,.. "(2) GROSS INCOME REQUIREMENTS.—A partnership meets the
gross income requirements of this paragraph for any taxable
" * Copy read "1361(aX2))".
101 STAT. 1330-404 PUBLIC LAW 100-203—DEC. 22, 1987
year if 90 percent or more of the gross income of such partner-
ship for such taxable year consists of quahfying income.
.^ ' :t ' i dS; "(3) EXCEPTION NOT TO APPLY TO CERTAIN PARTNERSHIPS WHICH
• :! COULD QUALIFY AS REGULATED INVESTMENT COMPANIES.—This
PJ subsection shall not apply to any partnership which would be
described in section 851(a) if such partnership were a domestic
-^ corporation. To the extent provided in regulations, the preced-
i^ ing sentence shall not apply to any partnership a principal
activity of which is the buying and selling of commodities (not
described in section 1221(1)), or options, futures, or forwards
with respect to commodities.
"(d) QUALIFYING INCOME.—For purposes of this section—
"Ai "(1) IN GENERAL.—Except as otherwise provided in this
subsection, the term 'qualifying income' means—
"(A) interest, - ^^
K "(B) dividends,
1, r'.- "(C) real property rents,
"(D) gain from the sale or other disposition of real prop-
>io*%u ertv (including property described in section 1221(1)),
xl *^j ' (E) income and gains derived from the exploration,
development, mining or production, processing, refining,
" ^V -' transportation (including pipelines transporting gas, oil, or
products thereof), or the marketing of any mineral or natu-
i- ^' ral resource (including fertilizer, geothermal energy, and
'-'-"•" timber),
s* - tt^Y) any gain from the sale or disposition of a capital
asset (or property described in section 1231(b)) held for the
production of income described in any of the foregoing
subparagraphs of this paragraph, and
"(G) in the case of a partnership described in the second
^* sentence of subsection (cX3), income and gains from
commodities (not described in section 1221(1)) or futures,
ir forwards, and options with respect to commodities.
J "(2) CERTAIN INTEREST NOT QUAUFIED.—Interest shall not be
.,. ,.>T • (i '.f treated as qualifying income if—
"(A) such interest is derived in the conduct of a financial
or insurance business, or
'. L .1. "(B) such interest would be excluded from the term
« 'interest* under section 856(f).
"(3) REAL PROPERTY RENT.—The term 'real property rent'
' means amounts which would qualify as rent from real property
- under section 856(d) if such section were applied without regard
•' to paragraph (2)(C) thereof (relating to independent contractor
requirements).
B "(4) CERTAIN INCOME QUAUFYING UNDER REGULATED INVEST-
MENT COMPANY OR REAL ESTATE TRUST PROVISIONS.—The term
~ 'qualifying income' also includes any income which would qual-
« ify under section 851(bX2) or 856(cX2).
•|i "(5) SPECIAL RULE FOR DETERMINING GROSS INCOME FROM CER-
^•' TAIN REAL PROPERTY SALES.—In the case of the sale or other
"' disposition of real property described in section 1221(1), gross
income shall not be reduced by inventory costs.
"(e) INADVERTENT TERMINATIONS.—If^
"(1) a partnership fails to meet the gross income requirements
»i of subsection (cX2),
"(2) the Secretary determines that such failure was
inadvertent,
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-405
^ "(3) no later than a reasonable time after the discovery of
such failure, steps are taken so that such partnership once more
' meets such gross income requirements, and
"(4) such partnership agrees to make such adjustments
(including adjustments with respect to the partners) as may be
required by the Secretary with respect to such period,
then, notwithstanding such failure, such entity shall be treated as
continuing to meet such gross income requirements for such period.
"(f) EFFECT OF BECOMING CORPORATION.—As of the 1st day that a
partnership is treated as a corporation under this section, for pur-
poses of this title, such partnership shall be treated as—
"(1) transferring all of its assets (subject to its liabilities) to a
newly formed corporation in exchange for the stock of the
corporation, and
"(2) distributing such stock to its partners in liquidation of
their interests in the partnership."
i (b) CLERICAL AMENDMENT.—The table of sections for chapter 79 is
amended by adding at the end thereof the following new item:
"Sec. 7704. Certain publicly traded partnerships treated as corporations."
(c) EFFECTIVE DATE.— 26 use 7704
f (1) IN GENERAL.—The amendments made by this section shall note,
apply—
(A) except as provided in subparagraph (B), to taxable
,- ^, years beginning after December 31, 1987, or
(B) in the case of an existing partnership, to taxable years
beginning after December 31, 1997.
- - . • (2) EXISTING PARTNERSHIP.—For purposes of this subsection—
(A) IN GENERAL.—The term "existing partnership" means
any partnership if—
" • '• • (i) such partnership was a publicly traded partner-
^'' ship on December 17,1987,
(ii) a registration statement indicating that such
partnership was to be a publicly traded partnership
was filed with the Securities and Exchange Commis-
sion with respect to such partnership on or before such
date, or
(iii) with respect to such partnership, an application
''• was filed with a State regulatory commission on or
before such date seeking permission to restructure a
portion of a corporation as a publicly traded partner-
(B) SPECIAL RULE WHERE SUBSTANTIAL NEW U N E OF BUSI-
NESS ADDED AFTER DECEMBER 17, 1987.—A partnership
which, but for this subparagraph, would be treated as an
•^ '^•; existing partnership shall cease to be treated as an existing
-'^ •' partnership as of the 1st day after December 17, 1987, on
which there has been an addition of a substantial new line
of business with respect to such partnership.
SEC. 10212. TREATMENT OF PUBLICLY TRADED PARTNERSHIPS UNDER
SECTION 469.
' (a) GENERAL RULE.—Section 469 (relating to passive activity losses
and credits limited) is amended by redesignating subsections (k) and
(1) as subsections (1) and (m), respectively, and by inserting after
subsection (j) the following new subsection:
101 STAT. 1330-406 PUBLIC LAW 100-203—DEC. 22, 1987
"(k) SEPARATE APPLICATION OF SECTION IN CASE OF PUBLICLY
TRADED PARTNERSHIPS.—
"(1) IN GENERAL.—This section shall be applied separately
with respect to items attributable to each publicly traded part-
'^"\ nership (and subsection (i) shall not apply with respect to items
attributable to any such partnership). The preceding sentence
shall not apply to any credit determined under section 42, or
any rehabilitation investment credit (within the meaning of
section 48(o)), attributable to a publicly traded partnership to
" the extent the amount of any such credits exceeds the regular
'" tax liability attributable to income from such partnership.
^ "(2) PUBLICLY TRADED PARTNERSHIP.—For purposes of this sec-
'^ tion, the term 'publicly traded partnership' means any partner-
"•* ship if—
"(A) interests in such partnership are traded on an estab-
* lished securities market, or
"(B) interests in such partnership are readily tradable on
a secondary market (or the substantial equivalent thereof)."
(b) CONFORMING AMENDMENTS.—Paragraph (3) of section 58(b) and
subparagraph (E) of section 163(d)(4) are each amended by striking
out "469(1)" and inserting in lieu thereof "469(m)".
26 use 58 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
take effect as if included in the amendments made by section 501 of
the Tax Reform Act of 1986.
SEC. 10213. TREATMENT OF PUBLICLY TRADED PARTNERSHIPS FOR
UNRELATED BUSINESS TAX.
(a) GENERAL RULE.—Subsection (c) of section 512 (relating to
special rules for partnerships) is amended to read as follows:
"(c) SPECIAL RULES FOR PARTNERSHIPS.—
"(1) IN GENERAL.—If a trade or business regularly carried on
by a partnership of which an organization is a member is an
jA^,. unrelated trade or business with respect to such organization,
such organization in computing its unrelated business taxable
income shall, subject to the exceptions, additions, and limita-
tions contained in subsection (b), include its share (whether or
not distributed) of the gross income of the partnership from
such unrelated trade or business and its share of the partner-
ship deductions directly connected with such gross income.
'^ ,^ "(2) SPECIAL RULE FOR PUBLICLY TRADED PARTNERSHIPS.—Not-
, withstanding any other provision of this section—
"(A) any organization's share (whether or not distributed)
of the gross income of a publicly traded partnership (as
defined in section 469(k)(2)) shall be treated as gross income
derived from an unrelated trade or business, and
"(B) such organization's share of the partnership deduc-
tions shall be allowed in computing unrelated business
taxable income.
"(3) SPECIAL RULE WHERE PARTNERSHIP YEAR IS DIFFERENT
FROM ORGANIZATION'S YEAR.—If the taxable year of the organiza-
• '. tion is different from that of the partnership, the amounts to be
included or deducted in computing the unrelated business tax-
able income under paragraph (1) or (2) shall be based upon the
income and deductions of the partnership for any taxable year
\ of the partnership ending within or with the taxable year of the
organization."
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-407
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 512 note,
shall apply to partnership interests acquired after December 17,
1987.
SEC. 10214. TREATMENT OF CERTAIN PARTNERSHIP ALLOCATIONS. "
(a) GENERAL RULE.—Clause (vi) of section 514(c)(9)(B) is amended
to read as follows:
"(vi) the real property is held by a partnership unless
the partnership meets the requirements of clauses (i)
.* .: through (v) and unless—
"(I) all of the partners of the partnership are
qualified organizations,
"(II) each allocation to a partner of the partner-
s fc j;i)no ik ship which is a qualified organization is a qualified
allocation (within the meaning of section 168(h)(6)),
*•.', -^fcrLVi o r
"(III) such partnership meets the requirements
of subparagraph (E)."
(b) CERTAIN ALLOCATIONS PERMITTED.—Paragraph (9) of section
514(c) is amended by adding at the end thereof the following new
subparagraph:
(E) CERTAIN ALLOCATIONS PERMITTED.—
"(i) IN GENERAL.—A partnership meets the require-
' -' ^; ments of this subparagraph if—
"(I) the allocation of items to any partner other
than a qualified organization cannot result in such
partner having a share of the overall partnership
loss for any taxable year greater than such part-
f*. ;i .• ner's share of the overall partnership income for
the taxable year for which such partner's income
share will be the smallest,
"(II) the allocation of items to any partner which
IS a qualified organization cannot result in such
* *^ ** • partner having a share of the overall partnership
*' income for any taxable year greater than such
H^..i partner's share of the overall partnership loss for
the taxable year for which such partner's loss
share will be the smallest, and
'- \ "(III) each allocation with respect to the partner-
ship has substantial economic effect within the
. ,) meaning of section 704(bX2).
For purposes of this clause, items allocated under sec-
1 t A-tt tion 704(c) shall not be taken into account,
"(ii) SPECIAL RULES.—
;, "(I) CHARGEBACKS.—Except as provided in regu-
.5,. . ., lations, a partnership may without violating the
requirements of this subparagraph provide for
y: FT:J :'-:>. chargebacks with respect to disproportionate losses
previously allocated to qualified organizations and
_ A : rs disproportionate income previously allocated to
other partners. Any chargeback rererred to in the
preceding sentence shall not be at a ratio in excess
of the ratio under which the loss or income (as the
/. . case may be) was allocated.
"(II) PREFERRED RATES OF RETURN, ETC.—To the
extent provided in regulations, a partnership may
without violating the requirements of this subpara-
101 STAT. 1330-408 PUBLIC LAW 100-203—DEC. 22, 1987
>>m::;ir : r ' {B]^ i graph provide for reasonable preferred returns or
reasonable guaranteed payments."
26 use 514 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply to—
(1) property acquired by the partnership after October 13,
1987, and
(2) partnership interests acquired after October 13,1987,
except that such amendments shall not apply in the C£ise of any
property (or partnership interest) acquired pursuant to a written
binding contract in effect on October 13, 1987, and at all times
thereafter before such property (or interest) is acquired.
SEC. 10215. STUDY.
The Secretary of the Treasury or his delegate shall conduct a
study of—
(1) the issue of treating publicly traded limited partnerships
(and other partnerships which significantly resemble corpora-
tions) as corporations for Federal income tax purposes, includ-
ing the issues of disincorporation and opportunities for avoid-
vvt^; ance of the corporate tax, and
(2) the administrative and compliance issues related to
the tax treatment of publicly traded partnerships and other
large partnerships.
Reports. Not later than January 1, 1989, the Secretary of the Treasury or his
delegate shall submit a report on such study to the Committee on
Ways and Means of the House of Representatives and the Commit-
tee on Finance of the Senate, together with such recommendations
as he may deem appropriate. Not later than May 1,1988, an interim
report with respect to the issues referred to in paragraph (2) shall be
submitted to such Committees.
) PART III—CORPORATE PROVISIONS
SEC. 10221. REDUCTION IN DIVIDENDS RECEIVED DEDUCTION FOR DIVI-
DENDS FROM CORPORATIONS NOT 20-PERCENT OWNED.
(a) GENERAL RULE.—The following provisions are each amended
by striking out "80 percent" and inserting in lieu thereof "70
percent":
(1) Section 243(aXl) (relating to dividends received by corpora-
tions).
(2) Subsections (aX3) and 0)X2) of section 244 (relating to
^^ dividends received on certain preferred stock).
(b) RETENTION OF 80-PERCENT DIVIDENDS RECEIVED DEDUCTION FOR
DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.—Section 243 is
amended by redesignating subsections (c) and (d) as subsections (d)
and (e), respectively, and by inserting after subsection 0)) the follow-
ing new subsection:
(c) RETENTION OF 80-PERCENT DIVIDENDS RECEIVED DEDUCTION
FOR DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.—
"(1) IN GENERAL.—In the c€ise of any dividend received from a
20-percent owned corporation—
"(A) subsection (aXD of this section, and
^^-- "(B) subsections (aX3) and m2) of section 244,
shall be applied by substituting '80 percent' for '70 percent'.
•i "(2) 20-PERCENT OWNED CORPORATION.—For purposes of this
"' section, the term '20-percent owned corporation means any
• corporation if 20 percent or more of the stock of such corpora-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-409
tion (by vote and value) is owned by the taxpayer. For purposes
of the preceding sentence, stock described in section 1504(aX4)
shall not be taken into account."
(c) MODIFICATIONS TO TAXABLE YEAR LIMITATIONS.—
(1) Subsection (b) of section 246 (relating to limitation on
aggregate amount of deductions) is amended—
^ (A) by striking out "80 percent" in paragraph (1) and
inserting in lieu thereof "the percentage determined under
paragraph (3)", and
(B) by adding at the end thereof the following new para-
graph:
"(3) SPECIAL RULES.—The provisions of paragraph (1) shall be
applied—
"(A) first separately with respect to dividends from 20-
percent owned corporations (as defined in section 243(cX2))
and the percentage determined under this paragraph shall
be 80 percent, and
"(B) then separately with respect to dividends not from
20-percent owned corporations and the percentage deter-
mined under this paragraph shall be 70 percent and the
taxable income shall be reduced by the aggregate
amount of dividends from 20-percent owned corporations
(as so defined)."
(2) Subparagraph (B) of section 805(aX4) is amended by strik-
ing out "shall be 80 percent of the life insurance company
taxable income" and inserting in lieu thereof "shall be the
percentage determined under section 246(bX3) of the life insur-
ance company taxable income (and such limitation shall be
" applied as provided in section 2460)X3))".
(d) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 245(cXl) is amended by strik-
ing out "85 percent" and inserting in lieu thereof "70 percent
(80 percent in the case of dividends from a 20-percent owned
corporation as defined in section 243(cX2))".
(2) Paragraph (1) of section 246A(a) is amended by striking out
"80 percent" and inserting in lieu thereof "70 percent (80
percent in the case of any dividend from a 20-percent owned , ,^ ,
corporation as defined in section 243(cX2))". ' '' V,,:
(3) Subparagraph (A) of section 8540t)Xl) is amended by insert-
ing before the period at the end thereof the following: "and such
dividend shall be treated as received from a corporation which
is not a 20-percent owned corporation".
(4) Paragraph (2) of section 861(a) is amended—
(A) by striking out "100/85th" and inserting in lieu
;i,, , thereof "100/70th", and
r; (B) by adding at the end thereof the following new
sentence:
"In the case of any dividend from a 20-p)ercent owned corpora-
tion (£is defined in section 243(cX2)), subparagraph (B) shall be
applied by substituting '100/80th' for *100/70th'."
(e) EFFECTIVE DATES.— 26 use 243 note.
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to dividends
received or accrued after December 31, 1987, in taxable years
ending after such date.
101 STAT. 1330-410 PUBLIC LAW 100-203—DEC. 22, 1987
(2) AMENDMENTS RELATING TO LIMITATIONS.—The amendments
' made by subsection (b) shall apply to taxable years beginning
after December 31,1987.
SEC. 10222. CERTAIN EARNINGS AND PROFITS ADJUSTMENTS NOT TO
APPLY FOR CERTAIN PURPOSES.
(a) SPECIAL RULE FOR DETERMINING ADJUSTED BASIS OF STOCK OF
, MEMBERS OF AFFILIATED GROUP.—
(1) IN GENERAL.—Section 1503 (relating to computation and
payment of tax by affiliated group) is amended by adding at the
end thereof the following new subsection:
"(e) SPECIAL RULE FOR DETERMINING ADJUSTMENTS TO BASIS.—
"(1) IN GENERAL.—Solely for purposes of determining gain or
loss on the disposition of intragroup stock, in determining the
aciyustments to the basis of such intragroup stock on account of
Ij; the earnings and profits of any member of an affiliated group
icBui; fQj. g^jjy consolidated year—
"(A) such earnings and profits shall be determined as if
ermn : >; section 312 were applied for such taxable year (and all
"^ preceding consolidated years of the member with respect to
- such group) without regard to subsections (k) and (n)
thereof, and
e "(B) earnings and profits shall not include any amount
excluded from gross income under section 108 to the extent
-''"'S "•' the amount so excluded was not applied to reduce tax
attributes (other than basis in property). »
t "(2) DEFINITIONS.—For purposes of this subsection—
"(A) INTRAGROUP STOCK.—The term 'intragroup stock'
-f^. means any stock which—
"(i) is in a corporation which is or was a member of
an affiliated group of corporations, and
,... > ^_-i "(ii) is held by another member of such group.
^f«, /-,> '^ ' Such term includes any other property the basis of which is
.,. /. determined (in whole or in part) by reference to the basis of
stock described in the preceding sentence.
J, , ,,,-j "(B) CONSOUDATED YEAR.—The term 'consolidated year'
means any taxable year for which the affiliated group
makes a consolidated return."
26 use 1503 (2) EFFECTIVE DATE.—
"°te- ^. (A) IN GENERAL.—Except as provided in Subparagraph (B),
the amendment made by paragraph (1) shall apply to any
* intragroup stock disposed of after December 15, 1987. For
purposes of determining the adjustments to the basis of
such stock, such amendment shall be deemed to have been
in effect ^ ^ ^ for all periods whether before, on, or after
-^-" - December 15,1987.
(B) EXCEPTION.—The amendment made by paragraph (1)
Y'aii r^^' shall not apply to any intragroup stock disposed of after
December 15, 1987, and before January 1, 1989, if such
-;^io0^:': disposition is pursuant to a written binding contract,
id lift'.a governmental order, letter of intent or preliminary agree-
ment, or stock acquisition agreement, in effect on or before
5*>oi. m. OKU K December 15,1987.
(b) DISTRIBUTIONS RECEIVED BY 20-PERCENT CORPORATE SHARE-
'• HOLDERS.—
" Copy read "been effect". Ji;K<.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-411
(1) IN GENERAL.—Paragraph (1) of section 301(f) (relating to
special rule for certain distributions received by 20-percent
corporate shareholders) is amended by striking out "subsection
(n) thereof and inserting in lieu thereof "subsections (k) and (n)
* ' thereof.
(2) EFFECTIVE DATES.— 26 use 30i note.
(A) IN GENERAL.—The amendment made by paragraph (1)
^ shall apply to distributions after December 15, 1987. For
purposes of applying such amendment to any such
distribution—
. ^ (i) for purposes of determining earnings and profits,
' '' - such amendment shall be deemed to be in effect for all
periods whether before, on, or after December 15, 1987,
Q''' ^ but •J as.
(ii) such amendment shall not affect the determina-
tion of whether any distribution on or before December
15, 1987, is a dividend and the amount of any reduction
in accumulated earnings and profits on account of any
>-^b .H.t such distribution.
^"- (B) EXCEPTION.—The amendment made by paragraph (1)
shall not apply for purposes of determining gain or loss on
any disposition described in subsection (aX2XB) of this
section.
SEC. 10223. TREATMENT OF MIRROR SUBSIDIARY TRANSACTIONS.
(a) CONSOUDATED RETURN REGULATIONS NOT T o APPLY FOR*^*
PURPOSES OF NONRECOGNITION UNDER SECTION 337.—Subsection (c)
of section 337 (defining 80-percent distributee) is amended by adding
at the end thereof the following new sentence: "For purposes of this
section, the determination of whether any corporation is an 80-
percent distributee shall be made without regard to any consoli-
dated return regulation."
(b) AMENDMENT TO SECTION 355.—Subparagraph (D) of section
3550t)X2) (relating to requirements as to active business) is
amended—
(1) by amending clause (i) to read as follows:
"(i) was not acquired by any distributee corporation
*« . » directly (or through 1 or more corporations, whether
through the distributing corporation or otherwise)
within the period described in subparagraph (B), or",
(2) by striking out "by another corporation" in clause (ii) and
, inserting in lieu thereof "such distributee corporation", and
(3) by adding at the end thereof the following new sentence:
"For purposes of subparagraph (D), all distributee corporations
which are members of the same affiliated group (as defined in
section 1504(a) without regard to section 15040t))) shall be
treated as 1 distributee corporation."
(c) AMENDMENT TO SECTION 304.—Subsection (b) of section 304
(relating to redemption through use of related corporations) is
amended by adding at the end thereof the following new paragraph:
"(4) TREATMENT OF CERTAIN INTRAGROUP TRANSACTIONS.—
"(A) IN GENERAL.—In the case of any transfer described
in subsection (a) of stock of 1 member of an affiliated group
^ .^^ to another member of such group, proper adjustments shall
be made to—
'• Copy read "TO APPLY FOR PURPOSBB".
101 STAT. 1330-412 PUBLIC LAW 100-203—DEC. 22, 1987
^ "(i) the adjusted basis of any intragroup stock, and
"(ii) the earnings and profits of any member of such
I''" I' group,
'"' ' to the extent necessary to carry out the purposes of this
At-.n ;;">ni?,5 ^4v section.
'"^ " ' ' "(B) DEFINITIONS.—For purposes of this paragraph—
I' "(i) AFFILIATED GROUP.—The term 'affiliated group'
^;^ has the meaning given such term by section 1504(a).
"^' * "(ii) INTRAGROUP STOCK.—The term 'intragroup stock'
means any stock which—
t "(I) is in a corporation which is a member of an
affiliated group, and
"(II) is held by another member of such group."
26 u s e 304 note. (d) EFFECTIVE D A T E S . —
(1) I N GENERAL.—The amendments made by this section shall
apply to distributions or transfers after December 15, 1987.
(2) EXCEPTIONS.—
*' (A) DISTRIBUTIONS.—The amendments made by this sec-
, (, ' tion shall not apply to any distribution after December 15,
1987, and before January 1,1993, if—
/ (i) 80 percent or more of the stock of the distributing
corporation was acquired by the distributee before
December 15, 1987, or
Contracts. "^ (ii) 80 percent or more of the stock of the distributing
'^^ corporation was acquired by the distributee before
• January 1,1989, pursuant to a binding written contract
or tender offer in effect on December 15,1987.
For purposes of the preceding sentence, stock described in
-h section 1504(aX4) of the Internal Revenue Code of 1986 shall
\ ^'-i" not be taken into account.
(B) SECTION 304 TRANSFERS.—The amendment made by
. oi" • subsection (c) shall not apply to any transfer after Decem-
' i ber 15, 1987, and before January 1, 1993, if such transfer
is—
(i) between corporations which are members of the
:ir:/sf-JO , game affiliated group on December 15,1987, or
Contracts. "^ (ii) between corporations which become members of
^ the same affiliated group before January 1, 1989,
pursuant to a binding written contract or tender offer
~ in effect on December 15,1987.
•iJt. (C) DISTRIBUTIONS COVERED BY PRIOR TRANSITION RULE.—
'^ " The amendments made by this section shall not apply to
any distribution to which the amendments made by subtitle
D of title VI of the Tax Reform Act of 1986 do not apply.
SEC. 10224. BENEFITS OF GRADUATED CORPORATE RATES NOT ALLOWED
r TO PERSONAL SERVICE CORPORATIONS.
(a) GENERAL RULE.—Subsection (b) of section 11 (relating to cor-
porate tax rates) is amended to read as follows:
"(b) AMOUNT OF TAX.—
^ "(1) I N GENERAL.—The amount of the tax imposed by subsec-
;' tion (a) shall be the sum of—
"(A) 15 percent of so much of the taxable income as does
not exceed $50,000,
"(B) 25 percent of so much of the taxable income as
exceeds $50,000 but does not exceed $75,000, and ^
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-413
"(C) 34 percent of so much of the taxable income as
exceeds $75,000.
In the case of a corporation which h£is taxable income in excess
of $100,000 for any taxable year, the amount of tax determined
under the preceding sentence for such taxable year shall be
increased by the lesser of (i) 5 percent of such excess, or (ii)
$11,750. . - ,-•;•,
"(2) CERTAIN PERSONAL SERVICE CORPORATIONS NOT EUGIBLE
FOR GRADUATED RATES.—Notwithstanding paragraph (1), the
amount of the tax imposed by subsection (a) on the taxable
income of a qualified personal service corporation (as defined in
section 448(d)(2)) shall be equal to 34 percent of the taxable
income."
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 use ii note,
shall apply to taxable years beginning after December 31, 1987.
SEC. 10225. AMENDMENTS TO SECTION 382.
(a) TREATMENT OF WORTHLESS STOCK.—Paragraph (4) of section
382(g) (defining ownership change) is amended by adding at the end
thereof the following new subparagraph:
"(D) TREATMENT OF WORTHLESS STOCK.—If any stock held
by a 50-percent shareholder is treated by such shareholder
jQ r as becoming worthless during any taxable year of such
^^ . shareholder and such stock is held by such shareholder as
of the close of such taxable year, for purposes of determin-
^^ ,^; ing whether an ownership change occurs after the close of
such taxable year, such shareholder—
"(i) shall be treated as having acquired such stock on
the 1st day of his 1st succeeding taxable year, and
"(ii) shall not be treated as having owned such stock
during any prior period.
For purposes of the preceding sentence, the term '50-per-
cent shareholder' means any person owning 50 percent or
more of the stock of the corporation at any time during the
3-year period ending on the last day of the taxable year
with respect to which the stock was so treated."
Ob) TREATMENT OF DEPRECIATION UNDER BUILT-IN Loss RULES.—
Subparagraph (B) of section 382(h)(2) (defining recognized built-in
loss) is amended by adding at the end thereof the following new
sentence:
"Such term includes any amount allowable as depreciation,
, ji. amortization, or depletion for any period within the rec-
ognition period except to the extent the new loss corpora-
tion establishes that the amount so allowable is not attrib-
utable to the excess described in clause (ii)."
(c) EFFECTIVE DATES.— 26 use 382 note.
(1) SUBSECTION (a).—The amendment made by subsection (a)
shall apply in the case of stock treated as becoming worthless in
taxable years beginning after December 31,1987.
(2) SUBSECTION (b).—The amendment made by subsection (b) Contracts.
shall apply in the case of ownership changes (as defined in
section 382 of the Internal Revenue Code of 1986 as amended by
subsection (a)) after December 15,1987; except that such amend-
ment shall not apply in the case of any ownership change
pursuant to a binding written contract which was in effect on
December 15, 1987, and at all times thereafter before such
ownership change.
101 STAT. 1330-414 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 10226. LIMITATION ON USE OF PREACQUISITION LOSSES TO OFFSET
BUILT-IN GAINS.
(a) GENERAL RULE.—Part V of subchapter C of chapter 1 (relating
to carryovers) is amended by adding at tne end thereof the following
new section:
26 u s e 384. "SEC. 384. LIMITATION ON USE OF PREACQUISITION LOSSES TO OFFSET
BUILT-IN GAINS.
"(a) GENERAL RULE.—
"(1) STOCK ACQUISITIONS, ETC.—If—
"(A) a corporation (hereinafter in this section referred to
* as the 'gain corporation') becomes a member of an affiliated
*~ ''^ "(B) such corporation has a net unrealized built-in gain,
the income of such corporation for any recognition period tax-
able year (to the extent attributable to recognized built-in gains)
shall not be offset by any preacquisition loss of any other
member of such group.
"(2) ASSET ACQUISITIONS.—If—
"(A) the £issets of a corporation (hereinafter in this sec-
tion referred to as the 'gain corporation') are acquired by
another corporation—
"(i) in a liquidation to which section 332 applies, or
"(ii) in a reorganization described in subparagraph
(A), (C), or (D) of section 368(aXl), and
"(B) the gain corporation has a net unrealized built-in
gain,
the income of the acquiring corporation for any recognition
period taxable year (to the extent attributable to recognized
built-in gains of the gain corporation) shall not be offset by any
preacquisition loss of any corporation (other than the gain
corporation).
"(b) EXCEPTION WHERE 50 PERCENT OF GAIN CORPORATION HELD.—
Subsection (a) shall not apply if more than 50 percent of the stock
(by vote and value) of the gain corporation was held throughout the
5-year period ending on the acquisition date—
(1) in any case described in subsection (aXD, by members of
the affiliated group referred to in subsection (a)(1), or
"(2) in any case described in subsection (aX2), by the acquiring
corporation or members of such acquiring corporation's affili-
ated group.
For purposes of the preceding sentence, stock described in section
1504(aX4) shall not be taken into account.
"(c) DEFINITIONS.—For purposes of this section—
,, , "(1)RECOGNIZED BUILT-IN GAIN.—
.ftjoiT ' ' u^^^ jj^ GENERAL.—The term 'recognized built-in gain'
*: means any gain recognized during the recognition period on
the disposition of any asset except to the extent the gain
corporation (or, in an^ case described in subsection (aX2),
the acquiring corporation) establishes that—
(i) such asset was not held by the gain corporation
on the acquisition date, or
"(ii) sucn gain exceeds the excess (if any) of—
"(I) the fair market value of such asset on the
acquisition date, over
'(II) the adjusted basis of such asset on such
date.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-415
"(B) TREATMENT OF CERTAIN INCOME ITEMS.—Any item of
income which is properly taken into account for any rec- ... .«,•
ognition period taxable year but which is attributable to
periods before the acquisition date shall be treated as a
recognized built-in gain for the taxable year in which it is
properly taken into account and shall be taken into account
I'mir: in determining the amount of the net unrealized built-in
gain.
ii « "(C) LIMITATION.—The amount of the recognized built-in
gains for any recognition period taxable year shall not
.^.„ „ _ exceed—
*' "(i) the net unrealized built-in gain, reduced by
"(ii) the recognized built-in gains for prior years
ending in the recognition period which (but for this
section) would have been offset by preacquisition losses.
"(2) ACQUISITION DATE.—The term 'acquisition date' means
the date on which the gain corporation becomes a member of
the affiliated group or, in any case described in subsection (a)(2),
the date of the distribution or transfer in the liquidation or
reorganization.
"(3) PREACQUISITION LOSS.—
Cfli "(A) I N GENERAL.—The term 'preacquisition loss'
means—
8«- "(i) any net operating loss carryforward to the tax-
able year in which the acquisition date occurs, and
"(ii) any net operating loss for the taxable year in
.• which the acquisition date occurs to the extent such
loss is allocable to the period in such year on or before
the acquisition date.
t*-' \ Except as provided in regulations, the net operating loss
Hi *! shall, for purposes of clause (ii), be allocated ratably to each
day in the year.
* ! "(B) TREATMENT OF RECOGNIZED BUILT-IN LOSS.—In the
C£ise of a corporation with a net unrealized built-in loss, the
term 'preacquisition loss' includes any recognized built-in
"(4) OTHER DEFINITIONS.—Except as provided in regulations,
the terms 'net unrealized built-in gain', 'net unrealized built-in
loss', 'recognized built-in loss', 'recognition period', and 'recogni-
tion period taxable year', have the same respective meanings as
when used in section 382(h), except that the acquisition date
shall be taken into account in lieu of the change date.
"(d) LIMITATION ALSO TO APPLY TO EXCESS CREDITS OR NET CAPITAL
LOSSES.—Rules similar to the rules of subsection (a) shall also apply
in the csise of any excess credit (as defined in section 383(aX2)) or net
capital loss.
(e) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary to carry out the purposes of this section,
including regulations to ensure that the purposes of this section may
not be circumvented through—
"(1) the use of any provision of law or regulations (including
subchapter K of this chapter), or
"(2) contributions of property to the gain corporation."
(b) CLERICAL AMENDMENT.—The table of sections for part V of
subchapter C of chapter 1 is amended by adding at the end thereof
the following new item:
101 STAT. 1330-416 PUBLIC LAW 100-203—DEC. 22, 1987
"Sec. 384. Limitation on use of preacquisition losses to offset built-in gains."
26 use 384 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply in cases where the acquisition date (as defined in section
384(cX2) of the Internal Revenue Code of 1986 as added by this
section) is after December 15, 1987; except that such amendments
shall not apply in the case of any transaction pursuant to—
( D a binding written contract in effect on or before December
15,1987, or
(2) a letter of intent or agreement of merger signed on or
before December 15, 1987.
SEC. 10227. RECAPTURE OF LIFO AMOUNT IN THE CASE OF ELECTIONS BY
S CORPORATIONS.
(a) GENERAL RULE.—Section 1363 (relating to effect of election on
corporations) is amended by adding at the end thereof the following
new subsection:
"(d) RECAPTURE OF LIFO BENEFITS.— % - ; dofi^ n.> ^-^mb 5*i'
"(1) IN GENERAL.—If^
'to "(A) an S corporation was a C corporation for the last
taxable year before the first taxable year for which the
election under section 1362(a) was effective, and
«' "(B) the corporation inventoried goods under the LIFO
method for such last taxable year,
the LIFO recapture amount shall be included in the gross
income of the corporation for such last taxable year (and appro-
priate adjustments to the basis of inventory shall be made to
take into account the amount included in gross income under
this paragraph).
"(2) ADDITIONAL TAX PAYABLE IN INSTALLMENTS.—
"(A) IN GENERAL.—Any increase in the tax imposed by
this chapter by reason of this subsection shall be payable in
4 equal installments.
* "(B) DATE FOR PAYMENT OF INSTALLMENTS.—The first
installment under subparagraph (A) shall be paid on or
before the due date (determined without regard to exten-
sions) for the return of the tax imposed by this chapter for
'"' the last taxable year for which the corporation was a C
corporation and the 3 succeeding installments shall be paid
on or before the due date (as so determined) for the corpora-
tion's return for the 3 succeeding taxable years.
S' "(C) No INTEREST FOR PERIOD OF EXTENSION.—Notwith-
standing section 6601(b), for purposes of section 6601, the
date prescribed for the payment of each installment under
this paragraph shall be determined under this paragraph.
"(3) LIFO RECAPTURE AMOUNT.—For purposes of this subsec-
tion, the term 'LIFO recapture amount' means the amount (if
any) by which—
"(A) the inventory amount of the inventory asset under
tap the first-in, first-out method authorized by section 471,
exceeds
gfi i "(B) the inventory amount of such assets under the LIFO
method.
For purp>oses of the preceding sentence, inventory amounts
shall be determined as of the close of the last taxable year
referred to in paragraph (1).
"(4) OTHER DEFINITIONS.—For purposes of this subsection—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-417
*k i" "(A) LIFO METHOD.—The term'LIFO method'means the
method authorized by section 472.
ion -; «(g) INVENTORY ASSETS.—The term 'inventory assets'
means stock in trade of the corporation, or other property
of a kind which would properly be included in the inventory
* of the corporation if on hand at the close of the taxable
year.
.,, "(C) METHOD OF DETERMINING INVENTORY AMOUNT.—The
;" * inventory amount of assets under a method authorized by
section 471 shall be determined—
"(i) if the corporation uses the retail method of valu-
*' • ing inventories under section 472, by using such
method, or
^ "(ii) if clause (i) does not apply, by using cost or
market, whichever is lower."
(h) EFFECTIVE DATES.— 26 u s e 1363
(1) IN GENERAL.—Except as provided in paragraph (2) the ^°^-
amendment made by subsection (a) shall apply in the case of
elections made after December 17,1987.
* (2) EXCEPTION.—The amendment made by subsection (a) shall
not apply in the case of any election made by a corporation after
g December 17, 1987, and before January 1, 1989, if, on or before
;. December 17,1987—
(A) there was a resolution adopted by the board of direc-
tors of such corporation to make an election under sub-
JuTie: chapter S of chapter 1 of the Internal Revenue Code of 1986,
J' or
f' (B) there W£is a ruling request with respect to the business
j^ filed with the Internal Revenue Service expressing an
intent to make such an election.
SEC. 10228. EXCISE TAX ON RECEIPT OF GREENMAIL.
(a) I N GENERAL.—Subtitle E is amended by adding at the end
thereof the following new chapter:
"CHAPTER 54—GREENMAIL
"Sec. 5881. Greenmail.
"SEC. 5881. GREENMAIL.
"(a) IMPOSITION OF TAX.—There is hereby imposed on any person
who receives greenmail a tax equal to 50 percent of gain realized by
such person on such receipt.
"(b) GREENMAIL.—For purposes of this section, the term
'greenmail' means any consideration transferred by a corporation to
directly or indirectly acquire its stock from any shareholder if—
"(1) such shareholder held such stock (as determined under
i section 1223) for less than 2 years before entering into the ^t
agreement to make the transfer,
"(2) at some time during the 2-year period ending on the date
of such acquisition—
"(A) such shareholder,
"(B) any person acting in concert with such shareholder,
• or
"(C) any person who is related to such shareholder or
person described in subparagraph (B),
101 STAT. 1330-418 PUBLIC LAW 100-203—DEC. 22, 1987
0i> made or threatened to make a public tender offer for stock of
such corporation, and
"(3) such acquisition is pursuant to an offer which was not
made on the same terms to all shareholders.
For purposes of the preceding sentence, payments made in connec-
tion with, or in transactions related to, an acquisition shall be
treated as paid in such acquisition.
"(c) OTHER DEFINITIONS.—For purposes of this section—
"(1) PuBUC TENDER OFFER.—The term 'public tender offer'
means any offer to purchase or otherwise acquire stock or assets
If in a corporation if such offer waa or would be required to be
-5; filed or registered with any Federal or State agency regulating
securities.
.fg "(2) RELATED PERSON.—A person is related to another person
if the relationship between such persons would result in the
v.1^ disallowance of losses under section 267 or 707(b).
•v "(d) TAX APPUES WHETHER OR NOT GAIN RECOGNIZED.—The tax
imposed by this section shall apply whether or not the gain referred
to in subsection (a) is recognized."
(b) DENIAL OF INCOME TAX DEDUCTION FOR GREENMAIL TAX.—
Paragraph (6) of section 275(a) is amended by striking out "and 46"
and inserting in lieu thereof "46, and 54".
(c) CLERICAL AMENDMENT.—The table of chapters for subtitle E is
amended by adding at the end thereof the following new item:
"CHAPTER 54. GREENMAIL."
26 use 5881 (d) EFFECTIVE DATE.—The amendments made by this section shall
"°^- apply to consideration received after the date of the enactment of
this Act in taxable years ending after such date; except that such
amendments shall not apply in the case of any acquisition pursuant
to a written binding contract in effect on December 15, 1987, and at
all times thereafter before the acquisition.
PART IV—FOREIGN TAX PROVISIONS
SEC. 10231. DENIAL OF FOREIGN TAX CREDIT FOR TAXES PAID OR
ACCRUED TO SOUTH AFRICA.
(a) GENERAL RULE.—Paragraph (2) of section 901(j) (relating to
denial of foreign tax credit, etc., with respect to certain foreign
countries) is amended by adding at the end thereof the following
new subparagraph:
"(C) SPECIAL RULE FOR SOUTH AFRICA.—
"(i) IN GENERAL.—In addition to any period during
which this subsection would otherwise apply to South
Africa, this subsection shall apply to South Africa
'\' during the period—
Effective date. "(I) beginning on January 1,1988, and
Termination "(H) ending on the date the Secretary of State
^^' •'• •' •' - certifies to the Secretary of the Treasury that
South Africa meets the requirements of section
'• ' i\.- ^ r : 311(a) of the Comprehensive Anti-Apartheid Act of
1986 (as in effect on the date of the enactment of
this subparagraph).
^i>:^^-'^i''---~ •• ,^ "(ii) SOUTH AFRICA DEFINED.—For purposes of clause
(i), the term 'South Africa' has the meaning given to
ii •«•?' • such term by paragraph (6) of section 3 of tihe C!om-
prehensive Anti-Apartheid Act of 1986 (as so in effect)."
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-419
(b) TECHNICAL AMENDMENTS.—Paragraph (1) of section 901(j) is
amended—
(1) by striking out "to which" in subparagraph (A) and insert-
ing in lieu thereof "during which", and
(2) by striking out "any country so identified" and inserting in
lieu thereof "such country".
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 901 note,
apply to taxable years beginning after December 31,1987.
PART V—INSURANCE PROVISIONS
SEC. 10241. INTEREST RATE USED IN COMPUTING TAX RESERVES FOR
LIFE INSURANCE COMPANIES MAY NOT BE LESS THAN AP-
'^^- PLICABLE FEDERAL RATE. i / f oc
(a) I N GENERAL.—Subparagraph (B) of section 807(dX2) (relating to
method of computing reserves for purposes of determining income)
is amended to read as follows:
"(B) the greater of—
^, "(i) the applicable Federal interest rate, or
"(ii) the prevailing State assumed interest rate, and".
(b) APPLICABLE FEDERAL INTEREST RATE.—
(1) I N GENERAL.—Paragraph (4) of section 807(d) (defining
State assumed interest rate) is amended to read as follows:
"(4) APPLICABLE FEDERAL INTEREST RATE; PREVAILING STATE
ASSUMED INTEREST RATE.—For purposes of this subsection—
"(A) APPUCABLE FEDERAL INTEREST RATE.—
"(i) I N GENERAL.—Except as provided in clause (ii),
I, the term 'applicable Federal interest rate' means the
annual rate determined by the Secretary under section
846(cX2) for the calendar year in which the contract
was issued.
"(ii) ELECTION TO RECOMPUTE FEDERAL INTEREST RATE
^n 'Y-'y^ EVERY 5 YEARS.—
"(I) I N GENERAL.—In computing the amount of
the reserve with respect to any contract to which
an election under this clause applies for periods
during any recomputation period, the applicable
\ Federal interest rate shall be the annual rate y s r / . , ';
je,,.j..- determined by the Secretary under section 846(cX2)
for the 1st year of such period. N o change in the
applicable Federal interest rate shall be made
under the preceding sentence unless such change
B- would equal or exceed V2 of 1 percentage point.
' "(II) RECOMPUTATION PERIOD.—For purposes of
subclause (I), the term 'recomputation period' r, , ,
'>?v: means, with respect to any contract, the 5 calendar
year period beginning with the 5th calendar year
' beginning after the calendar year in which the
contract was issued (and each subsequent 5 cal-
; endar year period).
"(Ill) ELECTION.—An election under this clause Contracts.
shall apply to all contracts issued during the cal-
i endar year for which the election was made or
# during any subsequent calendar year unless such
a election is revoked with the consent of the Sec-
retary.
101 STAT. 1330-420 PUBLIC LAW 100-203—DEC. 22, 1987
,.,, "(IV) SPREAD NOT AVAILABLE.—Subsection (f)
shall not apply to any adjustment required under
this clause.
(B) PREVAILING STATE ASSUMED INTEREST RATE.—
"(i) IN GENERAL.—The term 'prevailing State as-
sumed interest rate' means, with respect to any con-
iBiin CiOLi tract, the highest assumed interest rate permitted to be
used in computing life insurance reserves for insurance
contracts or annuity contracts (as the case may be)
under the insurance laws of at least 26 States. For
purposes of the preceding sentence, the effect of
nonforfeiture laws of a State on interest rates for
reserves shall not be taken into account.
Contracts. '" "(ii) WHEN RATE DETERMINED.—The prevailing State
assumed interest rate with respect to any contract
shall be determined as of the beginning of the calendar
year in which the contract was issued.'
(2) TECHNICAL AMENDMENTS.—
(A) The third to the last sentence of section 807(c) is
amended by striking out "the higher o f and all that fol-
btiB lows and inserting in lieu thereof "whichever of the follow-
ing rates is the highest as of the time such obligation first
s .J did not involve life, accident, or health contingencies: the
>// MU applicable Federal interest rate under subsection (d)(2)(B)(i),
T^. the prevailing State assumed interest rate under subsection
(dX2)(BXii), or the rate of interest assumed by the company
in determining the guaranteed benefit."
, i '', (B) Paragraph (2) of section 812(b) is amended—
T (i) by striking out "at the prevailing State assumed
" ..^.'^ rate or, where such rate is not used, another appro-
'-• priate rate" and inserting in lieu thereof "at the
greater of the prevailing State assumed rate or the
• - 1' '•" applicable Federal interest rate", and
(ii) by adding at the end thereof the following new
"t'f sentence:
f! "In any case where the prevailing State assumed rate is not
used, another appropriate rate shall be treated £is the prevailing
State assumed rate for purposes of subparagraph (A)."
26 use 807 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply to contracts issued in taxable years beginning after December
31,1987.
SEC. 10242. TREATMENT OF FOREIGN INSURANCE COMPANIES.
(a) IN GENERAL.—Section 842 (relating to foreign corporations
carrying on insurance business) is amended to read as follows:
26 use 842. "SEC. 842. FOREIGN COMPANIES CARRYING ON INSURANCE BUSINESS.
"(a) TAXATION UNDER THIS SUBCHAPTER.—If a foreign company
carrying on an insurance business within the United States would
qualify under part I or II of this subchapter for the taxable year if
(without regard to income not effectively connected with the conduct
.• •. r, of any trade or business within the United States) it were a domestic
corporation, such company shall be taxable under such part on its
income effectively connected with its conduct of any trade or busi-
ness within the United States. With respect to the remainder of its
income which is from sources within the United States, such a
foreign company shall be taxable as provided in section 881.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-421
"(b) MINIMUM EFFECTIVELY CONNECTED NET INVESTMENT
INCOME.—
"(1) IN GENERAL.—In the case of a foreign company taxable
under part I or II of this subchapter for the taxable year, its net
investment income for such year which is effectively connected
with the conduct of an insurance business within the United
States shall be not less than the product of—
"(A) the required United States *** assets of such com-
pany, and
"(B) the domestic investment yield applicable to such
company for such year.
. . "(2) REQUIRED U.S. ASSETS.—
M Lc- "(A) IN GENERAL.—For purposes of paragraph (1), the
required United States"^ assets of any foreign company
for any taxable year is an amount equal to the product of—
"(i) the mean of such foreign company's total insur-
ance liabilities on United States business, and
"(ii) the domestic asset/liability percentage ap-
> :i --i & plicable to such foreign company for such year.
"(B) TOTAL INSURANCE UABIUTIES.—For purposes of this
^) i' paragraph—
"(i) COMPANIES TAXABLE UNDER PART I •'*.—In the
case of a company taxable under part I, the term 'total
insurance liabilities' means the sum of the total re-
serves (as defined in section 816(c)) plus (to the extent
• * •' *- not included in total reserves) the items referred to in
^•'ii paragraphs (3), (4), (5), and (6) of section 807(c).
"(ii) COMPANIES TAXABLE UNDER PART **' ii.—In the
case of a company taxable under part II, the term 'total
^' insurance liabilities' means the sum of unearned pre-
miums and unpaid losses.
'^ -^ "(C) DOMESTIC ASSET/LIABILITY PERCENTAGE.—The domes-
tic asset/liability percentage applicable for purposes of
v^xj'j subparagraph (AXii) to any foreign company for any taxable
'""^^ year is a percentage determined by the Secretary on the
basis of a ratio—
'^'^ "(i) the numerator of which is the mean of the assets
of domestic insurance companies taxable under the
same part of this subchapter as such foreign company,
and
"(ii) the denominator of which is the mean of the
total insurance liabilities of the same companies.
"(3) DOMESTIC INVESTMENT YIELD.—The domestic investment
yield applicable for purposes of paragraph (IXB) to any foreign
company for any taxable year is the percentage determined by
the Secretary on the basis of a ratio—
"(A) the numerator of which is the net investment
income of domestic insurance companies taxable under the
' same part of this subchapter as such foreign company, and
, , "(B) the denominator of which is the mean of the assets of
the same companies held for the production of such income.
"(4) ELECTION TO USE WORLDWIDE YIELD.—
"*Copy read "U.S.".
' '• Copy read "PART I.—". .-.-^„
" ' Copy read "PART II.—". ',B r ^nj,, vtaO
101 STAT. 1330-422 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) IN GENERAL.—If the foreign company makes an elec-
tion under this paragraph, such company's worldwide cur-
rent investment yield shall be taken into account in lieu of
the domestic investment yield for purposes of paragraph
- - N - (IXB).
>-; "(B) WORLDWIDE CURRENT INVESTMENT YIELD.—For pur-
poses of subparagraph (A), the term 'worldwide current
,;-.* .: investment yield' means the percentage obtained by
dividing—
"(i) the net investment income of the company from
all sources, by
"(ii) the mean of all assets of the company (whether
••.•> ,\, • or not held in the United States) held for the produc-
. . tion of investment income.
}' "(C) ELECTION.—An election under this paragraph shall
- i; '. apply to the taxable year for which made and all subse-
quent taxable years unless revoked with the consent of the
Secretary.
"(5) NET INVESTMENT INCOME.—For purposes of this subsec-
i, tion, the term 'net investment income' means—
"(A) gross investment income (within the meaning of
:r„i J section 834(b)), reduced by
"(B) expenses allocable to such income.
"(c) SPECIAL RULES FOR PURPOSES OF SUBSECTION (b).—
"(1) COORDINATION WITH SMALL LIFE INSURANCE COMPANY
DEDUCTION.—In the case of a foreign company taxable under
part I, subsection (b) shall be applied before computing the
small life insurance company deduction.
^^ , "(2) REDUCTION IN SECTION 8 8 1 TAXES.—
.J,, "(A) IN GENERAL.—The tax under section 881 (determined
without regard to this paragraph) shall be reduced (but not
...,, below zero) by an amount which bears the same ratio to
-' such tax as—
. J "(i) the amount of the increase in effectively con-
.,.^V ,, nected income of the company resulting from subsec-
tion (b), bears to
y^^ , "(ii) the amount which would be subject to tax under
Jfi
I ' section 881 if the amount taxable under such section
. ' were determined without regard to sections 103 and
894.
"(B) LIMITATION ON REDUCTION.—The reduction under
subparagraph (A) shall not exceed the increase in taxes
under part I or II (as the case may be) by reason of the
increase in effectively connected income of the company
resulting from subsection (b).
"(3) ADJUSTMENT TO UMITATION ON DEDUCTION FOR POUCY-
HOLDER DIVIDENDS IN THE CASE OF FOREIGN MUTUAL LIFE INSUR-
ANCE COMPANIES.—For purposes of section 809, the equity base
of any foreign mutual life insurance company as of the close of
any taxable year shall be increased by the excess of—
"(A) the required United States ^ ** assets of the company
(determined under subsection (b)(2)), over
"(B) the mean of the sissets held in the United States
during the taxable year.
"•Copy read "U.S.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-423
"(4) DATA USED IN DETERMINING DOMESTIC ASSET/UABILITY
PERCENTAGES AND DOMESTIC INVESTMENT YEILDS.—Each domCStic
asset/liability percentage, and each domestic investment yield, *?'
for any taxable year shall be based on such representative data
with respect to domestic insurance companies for the second
preceding taxable year as the Secretary considers appropriate.
"(d) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the purposes
of this section, including regulations—
"(1) providing for the proper treatment of segregated asset ? ; '
accounts,
"(2) providing for proper adjustments in succeeding taxable
years where the company's actual net investment income for
any taxable year which is effectively connected with the con-
duct of an insurance business within the United States exceeds
the amount required under subsection (bXD, and
"(3) providing for the proper treatment of investments in
domestic subsidiaries."
(b) PART II COMPANIES SUBJECT TO SAME EFFECTIVELY CONNECTED
INCOME RULE AS PART I COMPANIES.—Subparagraph (C) of section
864(c)(4) (relating to income from sources without the United States)
is amended by inserting "or part 11" after "part I".
(c) REPEAL OF SECTION * *^ 813.—
(1) Section 813 (relating to foreign life insurance companies) is
hereby repealed.
f (2) Subsection (h) of section 816 is amended by striking out
¥ "section 813(aX4)(B)" and inserting in lieu thereof "section
842(c)(lXA)".
(3) Paragraph (2) of section 4371 is amended by striking out
"section 813" and inserting in lieu thereof "section 842(b)".
(4) The table of sections for part I of subchapter L of chapter 1
is amended by striking out the item relating to section 813.
(d) EFFECTIVE DATE,—The amendments made by this section shall 26 use 816 note.
apply to taxable years beginning after December 31,1987.
SEC. 10243. TREATMENT OF MUTUAL LIFE INSURANCE COMPANY POLICY-
HOLDER DIVIDENDS FOR PURPOSES OF BOOK PREF-
ERENCE.
(a) GENERAL RULE.—Paragraph (2) of section 56(f) (defining ad-
justed net book income) is amended by redesignating subparagraph
(H) as subparagraph (I) and by inserting after subparagraph (G) the
following new subparagraph:
"(H) SPECIAL RULES FOR U F E INSURANCE COMPANIES.—
"(i) POUCYHOLDER DIVIDENDS OF MUTUAL COMPA-
L c. *, NIES.—In determining the adjusted net book income of
any mutual life insurance company, a reduction shall
y\ % il-j be allowed for policyholder dividends with respect to
any taxable year only to the extent such dividends
^ }:i:- exceed the differential earnings amount determined for
such taxable year under section 809.
"(ii) OTHER ADJUSTMENTS.—To the extent provided by
the Secretary, such additional adjustments shall be
; , made as may be necessary to make the calculation of
adjusted net book income in the case of any life insur-
'"• Copy read "SECTION 813—".
91-194 O - 90 - 39 : QL.3 Part 2
101 STAT. 1330-424 PUBLIC LAW 100-203—DEC. 22, 1987
I ance company consistent with the calculation of ad-
'•' justed net book income generally."
26 use 56 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1987.
SEC. 10244. CERTAIN INSURANCE SYNDICATES. '!
(a) STUDY.—The Secretary of the Treasury (or his delegate) shall
conduct a study of the proper Federal income tax treatment of
income earned by members of insurance or reinsurance syndicates.
Reports. Not later than April 1, 1988, the Secretary 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 results of the
study conducted under this subsection, together with such rec-
ommendations as he may deem advisable.
(b) RENEGOTIATION OF CLOSING AGREEMENT.—Not later than Janu-
ary 1, 1990, the Secretary of the Treasury (or his delegate) shall
renegotiate the closing agreement with the underwriters participat-
ing in certain insurance or reinsurance syndicates which was signed
by the Internal Revenue Service on April 1, 1980, to implement the
conclusions reached in the study conducted under subsection (a).
Subtitle C—Estimated Tax Provisions ^
SEC. 10301. REVISION OF CORPORATE ESTIMATED TAX PROVISIONS.
(a) GENERAL RULE.—Section 6655 (relating to failure by corpora-
tion to pay estimated income tax) is amended to read as follows:
26 use 6655. "SEC. 6655. FAILURE BY CORPORATION TO PAY ESTIMATED INCOME TAX.
"(a) ADDITION TO TAX.—Except as otherwise provided in this
section, in the case of any underpayment of estimated tsix by a
corporation, there shall be added to the tax under chapter 1 for the
-•:K'" alii "ibU r taxable year an amount determined by applying—
"(1) the underpayment rate established under section 6621,
V .? I "(2) to the amount of the underpayment, ,, . . ,,^g
' ' "(3) for the period of the underpayment. ' ' " '
"(b) AMOUNT OF UNDERPAYMENT; PERIOD OF UNDERPAYMENT.—For
purposes of subsection (a)—
"(1) AMOUNT.—The amount of the underpayment shall be the
excess of—
* ' '(A) the required installment, over
"(B) the amount (if any) of the installment paid on or
- .a:s before the due date for the installment.
"(2) PERIOD OF UNDERPAYMENT.—The period of the
"i underpayment shall run from the due date for the installment
I to whichever of the following dates is the earlier—
{ "(A) the 15th day of the 3rd month following the close of
K the taxable year, or
t'- "(B) with respect to any portion of the underpayment, the
date on which such portion is paid.
v^ i- "(3) ORDER OP CREDITING PAYMENTS.—For purposes of para-
f graph (2XB), a payment of estimated tax shall be credited
'i against unpaid required installments in the order in which such
installments are required to be paid.
"(c) NUMBER OF REQUIRED INSTALLMENTS; DUE DATES.—For pur-
poses of this section— -Fs. ,:, Mv i*?i ? •
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-425
« "(1) PAYABLE IN 4 INSTALLMENTS.—There shall be 4 required
installments for each taxable year.
"(2) T I M E FOR PAYMENT OF INSTALLMENTS.—
"In the case of the following
required installments: The due date is:
1st April 15
if> 2nd June 15
3rd September 15
4th December 15.
"(d) AMOUNT OF REQUIRED INSTALLMENTS.—For purposes of this
section—
.: "(1) AMOUNT.—
"(A) IN GENERAL.—Except as otherwise provided in this
r.i ,;^t section, the amount of any required installment shall be 25
percent of the required annual payment.
;. jg, "(B) REQUIRED ANNUAL PAYMENT.—Except as otherwise
o ' provided in this subsection, the term 'required annual pay-
oo ment' means the lesser of—
g "(i) 90 percent of the tax shown on the return for the
^ taxable year (or, if no return is filed, 90 percent of the
tax for such year), or
•r -. "(ii) 100 percent of the tax shown on the return of the
^ corporation for the preceding taxable year.
Clause (ii) shall not apply if the preceding taxable year was not
. a taxable year of 12 months, or the corporation did not file a
* return for such preceding taxable year showing a liability for
tax.
"(2) LARGE CORPORATIONS REQUIRED TO PAY 90 PERCENT OF
CURRENT YEAR TAX.—
"(A) IN GENERAL.—Except as provided in subparagraph
* (B), clause (ii) of paragraph (IXB) shall not apply in the case
of a large corporation.
"(B) MAY USE LAST YEAR'S TAX FOR 1ST INSTALLMENT.—
Subparagraph (A) shall not apply for purposes of determin-
s- ing the amount of the 1st required installment for any
taxable year. Any reduction in such 1st installment by
reason of the preceding sentence shall be recaptured by
increasing the amount of the next required installment
determined under paragraph (1) by the amount of such
reduction.
"(e) LOWER REQUIRED INSTALLMENT WHERE ANNUAUZED INCOME
INSTALLMENT OR ADJUSTED SEASONAL INSTALLMENT Is LESS THAN
AMOUNT DETERMINED UNDER SUBSECTION (d).—
"(1) IN GENERAL.—In the case of any required installment, if
the corporation establishes that the annualized income install-
ment or the adjusted seasonal installment is less than the
amount determined under section (dXD (as modified by sub-
section (dX2))—
"(A) the amount of such required installment shall be the
annualized income installment (or, if lesser, the adjusted
<>j v* seasonal installment), and
"(B) any reduction in a required installment resulting
from the application of this paragraph shall be recaptured
by increasing the amount of the next required installment
It. - determined under subsection (dXD (as so modified) by the
amount of such reduction (and by increasing subsequent
101 STAT. 1330-426 PUBLIC LAW 100-203—DEC. 22, 1987
, ^,, ^ required installments to the extent that the reduction has
not previously been recaptured under this subparagraph).
A reduction shall be treated as recaptured for purposes of
subparagraph (B) if 90 percent of the reduction is recaptured.
"(2) DETERMINATION OF ANNUAUZED INCOME INSTALLMENT.—
"(A) IN GENERAL.—In the case of any required install-
ment, the annualized income installment is the excess (if
any) of—
"(i) an amount equal to the applicable percentage of
the tax for the taxable year computed by placing on an
annualized basis the taxable income, alternative mini-
mum taxable income, and modified alternative mini-
r' mum taxable income—
^' ' "(I) for the first 3 months of the taxable year, in
the case of the 1st required installment,
"(II) for the first 3 months or for the first 5
months of the taxable year, in the case of the 2nd
required installment,
=^^{ ' "(III) for the first 6 months or for the first 8
-. ;< .' r:-. '-• • ^ months of the taxable year in the case of the 3rd
required installment, and
' ' "•'••' "(IV) for the first 9 months or for the first 11
months of the taxable year, in the case of the 4th
required installment, over
"(ii) the aggregate amount of any prior required
installments for the taxable year.
"(B) SPECIAL RULES.—For purposes of this paragraph—
"^ " "(i) ANNUAUZATION.—The taxable income, alter-
native minimum taxable income, and modified alter-
l "^" ^ native minimum taxable income shall be placed on an
•i^Ko -'•• annualized basis under regulations prescribed by the
Secretary,
"(ii) APPUCABLE PERCENTAGE.—
"In the case of the following The applicable
required installments: percentage is:
1st 22.5
2nd 45
3rd 67.5
ily i- 4th 90
"(iii) MODIFIED ALTERNATIVE MINIMUM TAXABLE
/ ' ' INCOME.—The term 'modified alternative minimum
taxable income' has the meaning given to such term by
section 59A(b).
"(3) DETERMINATION OF ADJUSTED SEASONAL INSTALLMENT.—
"(A) IN GENERAL.—In the case of any required install-
ment, the amount of the adjusted seasonal installment is
the excess (if any) of—
.i "(i) 90 percent of the amount determined under
C7..;>, subparagraph (C), over
*' "(ii) the aggregate amount of all prior required
installments for the taxable year.
"(B) LIMITATION ON APPUCATION OF PARAGRAPH.—This
paragraph shall apply only if the base period percentage for
any 6 consecutive months of the taxable year equals or
^.-r exceeds70percent. , r,.^. -^i,' i «: 's- isn; •:%..
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-427
"(C) DETERMINATION OF AMOUNT.—The amount deter-
mined under this subparagraph for any installment shall be
determined in the following manner—
"(i) take the taxable income for all months during
the taxable year preceding the filing month,
"(ii) divide *^° such amount by the base period
percentage for all months during the taxable year
preceding the filing month,
"(iii) determine the tax on the amount determined
under clause (ii), and
"(iv) multiply the tax computed under clause (iii) by
the base period percentage for the filing month and all
months during the taxable year preceding the filing
month.
"(D) DEFINITIONS AND SPECIAL RULES.—For purposes of
this paragraph—
"(i) BASE PERIOD PERCENTAGE.—The base period
percentage for any period of months shall be the aver-
age percent which the taxable income for the cor-
responding months in each of the 3 preceding taxable
years bears to the taxable income for the 3 preceding
taxable years.
: "(ii) FILING MONTH.—The term 'filing month' means
the month in which the installment is required to be
paid.
"(iii) REORGANIZATION, ETC.—The Secretary may by Regulations.
regulations provide for the determination of the base
t' period percentage in the case of reorganizations, new
corporations, and other similar circumstances.
"(f) EXCEPTION WHERE TAX IS ^^i SMALL AMOUNT.—No addition to
tax shall be imposed under subsection (a) for any taxable year if the
tax shown on the return for such taxable year (or, if no return is
filed, the t£ix) is less than $500.
"(g) DEFINITIONS AND SPECIAL RULES.—
"(1) TAX.—For purposes of this section, the term 'tax' means
the excess of—
"(A) the sum of^
"(i) the tax imposed by section 11 or 1201(a), or
subchapter L of chapter 1, whichever applies,
"(ii) the tax imposed by section 55,
"(iii) the tax imposed by section 59A, plus
"(iv) the tax imposed by section 887, over
"(B) the sum of—
"(i) the credits against tax provided by part IV of
subchapter A of chapter 1, plus
"(ii) to the extent allowed under regulations pre-
scribed by the Secretary, any overpayment of the tax
imposed by section 4986 (determined without regard to
section 4995(a)(4)(B)).
For purposes of the preceding sentence, in the case of a foreign
corporation subject to taxation under section 11 or 1201(a), or
under subchapter L of chapter 1, the tax imposed by section 881
shall be treated as a tax imposed by section 11.
"(2) LARGE CORPORATION.—
'2° Copy read "divided".
' * • Copy read "is".
101 STAT. 1330-428 PUBLIC LAW 100-203—DEC. 22, 1987
"(A) I N GENERAL.—For purposes of this section, the term
,•,[. 'large corporation' means any corporation if such corpora-
tion (or any predecessor corporation) had taxable income of
^^,j, $1,000,000 or more for any taxable year during the testing
period.
i,Qi "(B) RULES FOR APPLYING SUBPARAGRAPH (A) .—
,^».j . "(i) TESTING PERIOD.—For purposes of subparagraph
(A), the term 'testing period' means the 3 taxable years
htif/iiz t immediately preceding the taxable year involved.
"(ii) MEMBERS OF CONTROLLED GROUP.—For purposes
^/, of applying subparagraph (A) to any taxable year in the
.ij ;:.} i- testing period with respect to corporations which are
^Hfj'" ' component members of a controlled group of corpora-
tions for such taxable year, the $1,000,000 amount
^o ,i3r; specified in subparagraph (A) shall be divided among
such members under rules similar to the rules of sec-
borvm tion 1561.
"(iii) CERTAIN CARRYBACKS AND CARRYOVERS NOT
TAKEN INTO ACCOUNT.—For purposes of subparagraph
s , (A), taxable income shall be determined without regard
g*if.b to any amount carried to the taxable year under
section 172 or 1212(a).
i"-f* "(3) CERTAIN TAX-EXEMPT ORGANIZATIONS.—For purposes of
this section—
"(A) Any organization subject to the tax imposed by
. L'ftl-!s>Ji section 511, and any private foundation, shall be treated as
a corporation subject to tax under section 11.
¥J. "(B) Any tax imposed by section 511, and any tax imposed
by section 1 or 4940 on a private foundation, shall be
treated as a tax imposed by section 11.
"(C) Any reference to taxable income shall be treated as
^i ' including a reference to unrelated business taxable income
or net investment income (as the case may be).
In the case of any organization described in subparagraph (A),
subsection (bX2)(A) shall be applied by substituting '5th month'
for '3rd month'.
"(h) EXCESSIVE ADJUSTMENT UNDER SECTION 6425.—
"(1) ADDITION TO TAX.—If the amount of an adjustment under
section 6425 made before the 15th day of the 3rd month follow-
ing the close of the taxable year is excessive, there shall be
added to the tax under chapter 1 for the taxable year an
amount determined at the underpayment rate established
under section 6621 upon the excessive amount from the date on
which the credit is allowed or the refund is paid to such 15th
day.
"(2) EXCESSIVE AMOUNT.—For purposes of paragraph (1), the
excessive amount is equal to the amount of the adjustment or (if
smaller) the amount by which—
^ "(A) the income tax liability (as defined in section 6425(c))
for the taxable year as shown on the return for the taxable
year, exceeds
"(B) the estimated income tax paid during the taxable
year, reduced by the amount of the adjustment,
"(i) FISCAL YEARS AND SHORT YEARS.—
"(1) FISCAL YEARS.—In applying thissection to a taxable year
beginning on any date other than January 1, there shall be
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-429
substituted, for the months specified in this section, the months
which correspond thereto. , „,,; .
"(2) SHORT TAXABLE YEAR.—This section shall be applied to
taxable years of less than 12 months in accordance with regula-
tions prescribed by the Secretary,
"(j) REGULATIONS.—The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section."
(b) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Section 6154 of such Code is hereby repealed.
(2) Subparagraph (C) of section 585(cX3) of such Code is . ij^,; ,
amended by striking out "section 6655(d)(3)" and inserting in ->? >
lieu thereof "section 6655(e)(2XAXi)".
ry (3) Paragraph (1) of section 6201(b) of such Code is amended by
Z striking out section 6154 or 6654" and inserting in lieu thereof
: "section 6654 or 6655".
(4) Subsection (c) of section 6425 of such Code is amended by
striking out "section 6655(g)" and inserting in lieu thereof
"section 6655(h)".
(5) Subsection (h) of section 6601 of such Code is amended by
striking out "section 6154 or 6654" and inserting in lieu thereof
"section 6654 or 6655".
I- (6) Subsection (e) of section 6651 of such Code is amended by
striking out "section 6154 or 6654" and inserting in lieu thereof
"section 6654 or 6655".
(7) The table of sections for subchapter A of chapter 62 of such
Code is amended by striking out the item relating to section
6154.
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 use 585 note.
apply to taxable years beginning after December 31, 1987.
SEC. 10302. REVISED WITHHOLDING CERTIFICATES REQUIRED TO BE PUT
INTO EFFECT MORE PROMPTLY.
(a) GENERAL RULE.—Subparagraph (B) of section 3402(fK3) (relat-
ing to when certificate takes effect) is amended to read as follows:
"(B) FURNISHED TO TAKE PLACE OF EXISTING CERTIFICATE.—
"(i) I N GENERAL.—Except as provided in clauses (ii)
and (iii), a withholding exemption certificate furnished
'"" '• ' to the employer in cases in which a previous such
certificate is in effect shall take effect as of the begin-
>,- 5; ning of the 1st payroll period ending (or the 1st pay-
.j ment of wages made without regard to a payroll period)
on or after the 30th day after the day on which such
rjr-..V?^ certificate is so furnished.
"(ii) EMPLOYER MAY ELECT EARUER EFFECTIVE DATE.—
M^ At the election of the employer, a certificate described
;, in clause (i) may be made effective beginning with any
payment of wages made on or after the day on which
'ji as; the certificate is so furnished and before the 30th day
referred to in clause (i).
"(iii) CHANGE OF STATUS WHICH AFFECTS NEXT YEAR.—
T:K.-S?;'IJ Any certificate furnished pursuant to paragraph (2XC)
shall not take effect, and may not be made effective.
Yd t'Sf with respect to any payment of wages made in the
calendar year in which the certificate is furnished."
01)) EFFECTIVE DATE.—The amendment made by subsection (a) 26 use 3402
shall apply to certificates furnished after the day 30 days after the note.
date of the enactment of this Act.
101 STAT. 1330-430 PUBLIC LAW 100-203—DEC. 22, 1987
SEC. 10303. ESTIMATED TAX PENALTIES FOR 1987.
26 u s e 6654 (a) D E L A Y OF INCREASE IN CURRENT Y E A R LIABIUTY T E S T FOR
"o*^e. INDIVIDUALS.—Notwithstanding section 1541(c) of the Tax Reform
Act of 1986, the amendments made by section 1541 of such Act shall
apply only to taxable years beginning after December 31, 1987.
(b) CORPORATE PROVISIONS.—
(1) RATIFICATION OF SECRETARIAL WAIVER.—The Congress
hereby ratifies the safe harbor provided by paragraph (b) of the
Treasury Temporary Regulation 1.6655-2T.
26 u s e 6655 (2) CORPORATIONS ALSO MAY USE 1986 TAX TO DETERMINE
note. -^ AMOUNT OF CERTAIN ESTIMATED TAX INSTALLMENTS DUE ON OR
BEFORE JUNE 15, 1987.—
(A) I N GENERAL.—In the case of a large corporation, no
addition to tax shall be imposed by section 6655 of the
Internal Revenue Code of 1986 with respect to any
underpayment of an estimated tax installment to which
this subsection applies if no addition would be imposed with
respect to such underpayment by reason of section
6655(d)(1) of such Code if such corporation were not a large
corporation. The preceding sentence shall apply only to the
extent the underpayment is paid on or before the last date
^.'\^ prescribed for payment of the most recent installment of
^''''^- estimated tax due on or before September 15,1987.
(B) INSTALLMENT TO WHICH SUBSECTION APPLIES.—This
subsection applies to any installment of estimated tax for a
taxable year beginning after December 31, 1986, which is
due on or before June 15,1987.
' ' ''>-•••'' (C) LARGE CORPORATION.—For purposes of this subsection,
the term "large corporation" has the meaning given such
•.r ^ term by section 6655(i)(2) of such Code (as in effect on the
day before the date of the enactment of this Act).
Subtitle D—Estate and Gift Tax Provisions
PART I—GENERAL PROVISIONS
SEC. 10401. 5-YEAR EXTENSION OF EXISTING RATES; PHASEOUT OF BENE-
FITS OF EXISTING R A T E S AND UNIFIED CREDIT.
(a) 5-YEAR EXTENSION OF GRADUATED RATES.—Paragraph (2) of
section 2001(c) (relating to phasein of 50 percent maximum rate) is
amended—
(1) by striking out "1988" in subparagraph (A) and inserting
in lieu thereof '1993",
(2) by striking out "in 1984, 1985, 1986, or 1987" in the text of
subparagraph (D) and inserting in lieu thereof "after 1983 and
before 1993^', and
(3) by amending the heading of subparagraph (D) to read as
follows:
"(D) AFTER 1983 AND BEFORE 1993.—".
(b) PHASEOUT OF BENEFITS OF GRADUATED RATES AND UNIFIED
CREDIT.—
(1) IN GENERAL.—Subsection (c) of section 2001 is amended by
adding at the end thereof the following new paragraph:
5 ^- "(3) PHASEOUT OF GRADUATED RATES AND UNIFIED CREDIT.—The
'-^^ tentative tax determined under paragraph (1) shall be increased
by an amount equal to 5 percent of so much of the amount (with
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-431
respect to which the tentative tax is to be computed) as exceeds
$10,000,000 but does not exceed $21,040,000 ($18,340,000 in the
case of decedents dying, and gifts made, after 1992)."
(2) TECHNICAL AMENDMENTS.—
(A) Subsection (b) of section 2001 is amended—
(i) by striking out "in accordance with the rate sched-
ule set forth in subsection (c)" in paragraph (1) and
inserting in lieu thereof "under subsection (c)", and
(ii) by striking out "the rate schedule set forth in
subsection (c) (as in effect at the decedent's death)" in
paragraph (2) and inserting in lieu thereof "the provi-
sions of subsection (c) (as in effect at the decedent's
,.. ,, death)".
(B) Subsection (a) of section 2502 is amended—
(i) by striking out "in accordance with the rate sched-
ule set forth in section 2001(c)" in paragraph (1) and
inserting in lieu thereof "under section 2001(c)", and
. (ii) by striking out "in accordance with such rate
schedule" in paragraph (2) and inserting in lieu thereof
"under such section".
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 2001
apply in the C£ise of decedents dying, and gifts made, after note.
December 31,1987.
SEC. 10402. INCLUSION RELATED TO VALUATION FREEZES.
(a) IN GENERAL.—Section 2036 (relating to transfers with retained
life estate) is amended by redesignating subsection (c) as subsection
(d) and by inserting after subsection (b) the following new sub-
section:
"(c) INCLUSION RELATED TO VALUATION FREEZES.—
"(1) IN GENERAL.—For purposes of subsection (a), if—
"(A) any person holds a substantial interest in an enter-
prise, and
"(B) such person in effect transfers after December 17,
1987, property having a disproportionately large share of
the potential appreciation in such person's interest in the
s enterprise while retaining a disproportionately large share
in the income of, or rights in, the enterprise,
then the retention of the retained interest shall be considered to
be a retention of the enjoyment of the transferred property.
"(2) SPECIAL RULE FOR SALES TO FAMILY MEMBERS.—The excep-
tion contained in subsection (a) for a bona fide sale shall not
', apply to a transfer described in paragraph (1) if such transfer is
to a member of the transferor's family.
;^. "(3) DEFINITIONS.—For purposes of this subsection—
"(A) SUBSTANTIAL INTEREST.—A person holds a substan-
tial interest in an enterprise if such person owns (directly
or indirectly) 10 percent or more of the voting power or
income stream, or both, in such enterprise. For purposes of
the preceding sentence, an individual shall be treated as
owning any interest in an enterprise which is owned (di-
rectly or indirectly) by any member of such individual's
family.
"(B) FAMILY.—The term 'family' means, with respect to
any individual, such individual's spouse, any lineal descend-
ant of such individual or of such individual's spouse, any
parent or grandparent of such individual, and any spouse of
101 STAT. 1330-432 PUBLIC LAW 100-203—DEC. 22, 1987
• •>•' : any of the foregoing. For purposes of the preceding sen-
•"'^'-^ • tence, a relationship by legal adoption shall be treated £is a
relationship by blood.
"(C) TREATMENT OF SPOUSE.—An individual and such
individual's spouse shall be treated £is 1 person.
-fe "(4) COORDINATION WITH SECTION 2035.—For purposes of apply-
^ ing section 2035, any transfer of the retained interest referred
* to in paragraph (1) shall be treated as a transfer of an interest
^ in the transferred property referred to in paragraph (1).
' ' "(5) COORDINATION WITH SECTION 2043.—In lieu of applying
V section 2043, appropriate adjustments shall be made for the
value of the retained interest." ^^^
26 use 2036 flj) EFFECTIVE DATE.—The amendment made by subsection (a)
"°*® shall apply with respect to estates of decedents dying after Decem-
ber 31, 1987, but only in the case of property transferred after
December 17,1987.
PART II—ESTATE TAX PROVISIONS RELATING
TO EMPLOYEE STOCK OWNERSHIP PLANS
«>i gg(, JP4J, CONGRESSIONAL CLARIFICATION OF ESTATE TAX DEDUC-
TION FOR SALES OF EMPLOYER SECURITIES.
(a) INTENT OF CONGRESS IN ENACTING SECTION 2057 OF THE IN-
TERNAL REVENUE CODE OF 1986.—Section 2057 (relating to sales of
employer securities to employee stock ownership plans or worker-
owned cooperatives) is amended by redesignating subsections (d), (e),
and (f) as subsections (e), (f), and (g), respectively, and by inserting
after subsection (c) the following new subsection:
"(d) QUALIFIED PROCEEDS FROM QUAUFIED SALES.—
"(1) IN GENERAL.—For purposes of this section, the proceeds of
a sale of employer securities by an executor to an employee
»' stock ownership plan or an eligible worker-owned cooperative
shall not be treated as qualified proceeds from a qualified sale
unless—
"(A) the decedent directly owned the securities imme-
diately before death, and
"(B) after the sale, the employer securities— "
"(i) are allocated to participants, or
'^ "(ii) are held for future allocation in connection
with—
^- - "(I) an exempt loan under the rules of section
4975, or
"(II) a transfer of assets under the rules of
'*'•'' section 4980(cX3).
;, "(2) No SUBSTITUTION PERMITTED.—For purposes of paragraph
i. (IXB), except in the case of a bona fide business transaction (e.g.,
a substitution of employer securities in connection with a
merger of employers), employer securities shall not be treated
as allocated or held for future allocation to the extent that such
securities are allocated or held for future allocation in substi-
tution of other employer securities that had been allocated or
held for future allocation."
> ' ' • ' • ; . - f i
'** Copy read "interest." ,.^ .. . , . ''>'''• , ^«i
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-433
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 26 USC 2057
shall take effect as if included in the amendments made by section ^°^^-
1172 of the Tax Reform Act of 1986.
SEC. 10412. MODIFICATIONS OF ESTATE TAX DEDUCTION FOR SALE OF
EMPLOYER SECURITIES.
(a) IN GENERAL.—Section 2057 (relating to estate tax deduction for
sales of employer securities to employee stock ownership plans or
worker-owned cooperatives) is amended to read as follows:
"SEC. 2057. SALES OF EMPLOYER SECURITIES TO EMPLOYEE STOCK
OWNERSHIP PLANS OR WORKER-OWNED COOPERATIVES.
"(a) GENERAL RULE.—For purposes of the tax imposed by section
2001, the value of the taxable estate shall be determined by deduct-
ing from the value of the gross estate an amount equal to 50 percent
of the proceeds of any sale of any qualified employer securities to—
'(1) an employee stock ownership plan, or
"(2) an eligible worker-owned cooperative.
"(b) LIMITATIONS.—
"(1) MAXIMUM REDUCTION IN TAX LIABILITY.—The amount
allowable £is a deduction under subsection (a) shall not exceed
the amount which would result in an aggregate reduction in the
tax imposed by section 2001 (determined without regard to any
u • credit allowable against such tax) equal to $750,000.
"(2) DEDUCTION SHALL NOT EXCEED 50 PERCENT OF TAXABLE
ESTATE.—The amount of the deduction allowable under subsec-
tion (a) shall not exceed 50 percent of the taxable estate (deter-
mined without regard to this section).
"(c) LIMITATIONS ON PROCEEDS WHICH MAY B E TAKEN INTO AC-
COUNT.—
"(1) DISPOSITIONS BY PLAN OR COOPERATIVE WITHIN i YEAR OF
SALE.—
"(A) IN GENERAL.—Proceeds from a sale which are taken
,,^. into account under subsection (a) shall be reduced (but not
-••r i^. below zero) by the net sale amount.
"(B) NET SALE AMOUNT.—For purposes of subparagraph
s (A), the term 'net sale amount' means the excess (if any)
of—
"(i) the proceeds of the plan or cooperative from the
fr: ' . •• disposition of employer securities during the 1-year
period immediately preceding such sale, over
"(ii) the cost of employer securities purchased by
such plan or cooperative during such 1-year period.
"(C) EXCEPTIONS.—For purposes of subparagraph (BXi),
J., there shall not be taken into account any proceeds of a plan
or cooperative from a disposition described in section
,bf£i 4978A(e).
,y "(D) AGGREGATION RULES.—For purposes of this para-
graph, all employee stock ownership plans maintained by
,i; an employer shall be treated as 1 plan.
"(2) SECURITIES MUST BE ACQUIRED BY PLAN FROM ASSETS WHICH
ARE NOT TRANSFERRED ASSETS.—
"(A) I N GENERAL.—Proceeds from a sale shall not be
taken into account under subsection (a) to the extent that
j such proceeds (as reduced under paragraph (1)) are attrib-
If utable to transferred sissets. For purposes of the preceding
sentence, all assets of a plan or cooperative (other than
101 STAT. 1330-434 PUBLIC LAW 100-203—DEC. 22, 1987
qualified employer securities) shall be treated as first ac-
quired out of transferred assets.
"(B) TRANSFERRED ASSETS.—For purposes of subparagraph
; (A)-
"(i) I N GENERAL.—The term 'transferred assets'
^ means assets of an employee stock ownership plan
which—
"(I) are attributable to assets held by a plan
exempt from tax under section 501(a) and meeting
,. V the requirements of section 401(a) (other than an
•4 employee stock ownership plan of the employer), or
' (II) were held by the plan when it was not an
* employee stock ownership plan.
"(ii) EXCEPTION FOR ASSETS HELD ON FEBRUARY 26,
1987.—The term 'transferred assets' shall not include
any asset held by the employee stock ownership plan
on February 26,1987.
"(iii) SECRETARIAL AUTHORITY TO WAIVE TREATMENT AS
TRANSFERRED ASSET.—The Secretary may provide that
;"• assets or a class of assets shall not be treated as trans-
* ferred assets if the Secretary finds such treatment is
not necessary to carry out the purposes of this para-
graph.
"(3) OTHER PROCEEDS.—The following proceeds shall not be
taken into account under subsection (a):
"(A) PROCEEDS FROM SALE AFTER DUE DATE FOR RETURN.—
Any proceeds from a sale which occurs after the date on
which the return of the tax imposed by section 2001 is
-*^ required to be filed (determined by taking into account any
extension of time for filing).
« ; ji, u^gj PROCEEDS FROM SALE OF CERTAIN SECURITIES.—Any
proceeds from a sale of employer securities which were
': ' received by the decedent—
'^* "(i) in a distribution from a plan exempt from tax
under section 501(a) and meeting the requirements of
section 401(a), or
"(ii) as a transfer pursuant to an option or other right
to acquire stock to which section 83, 422, 422A, 423, or
424 applies.
•'*'' Any employer security the basis of which is determined by
reference to any employer security described in the preced-
ing sentence shall be treated as an employer security to
which this subparagraph applies.
"(d) QUAUFIED EMPLOYER SECURITIES.—
"(1) IN GENERAL.—The term 'qualified employer securities'
means employer securities—
"(A) which are issued by a domestic corporation which
has no stock outstanding which is readily tradable on an
established securities market,
"(B) which are includible in the gross estate of the
decedent,
"(C) which would have been includible in the gross estate
of the decedent if the decedent had died at any time during
the shorter of—
"(i) the 5-year period ending on the date of death, or
"(ii) the period beginning on October 22, 1986, and
ending on the date of death, and ' *-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-435
"(D) with respect to which the executor elects the applica-
tion of this section.
Subparagraph (C) shall not apply if the decedent died on or
before October 22,1986.
"(2) CERTAIN ASSETS HELD BY SPOUSE.—For purposes of para-
graph (1)(C), any employer security which would have been
includible in the gross estate of the spouse of a decedent during
any period if the spouse had died during such period shall be
treated as includible in the gross estate of the decedent during
such period.
"(3) PERIODS DURING WHICH DECEDENT NOT AT RISK.—For pur-
poses of paragraph (IXC), employer securities shall not be
treated as includible in the gross estate of the decedent during
any period described in section 246(c)(4).
"(e) WRITTEN STATEMENT REQUIRED.—
"(1) IN GENERAL.—No deduction shall be allowed under
subsection (a) unless the executor of the estate of the decedent
files with the Secretary the statement described in paragraph
(2).
"(2) STATEMENT.—A statement is described in this paragraph
if it is a verified written statement—
"(A) which is made by—
"(i) the employer whose employees are covered by the
*'' employee stock ownership plan, or
"(ii) any authorized officer of the eligible worker-
owned cooperative, and
\.j^^.i "(B) which—
,,. "(i) acknowledges that the sale of employer securities
to the plan or cooperative is a sale to which sections
4978A and 4979A apply, and
?::'r.^ "(ii) certifies—
"(I) the net sale amount for purposes of subsec-
tion (cXD, and
"(II) the amount of assets which are not trans-
ferred assets for purposes of subsection (cX2).
"(f) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
"(1) EMPLOYER SECURITIES.—The term 'employer securities'
has the meaning given such term by section 409(1).
"(2) EMPLOYEE STOCK OWNERSHIP PLAN.—The term 'employee
stock ownership plan' means—
"(A) a tax credit employee stock ownership plan (within
the meaning of section 409(a)), or
"(B) a plan described in section 4975(eX7).
"(3) EuGiBLE WORKER-OWNED COOPERATIVE.—The term 'eli-
gible worker-owned cooperative' has the meaning given such
term by section 1042(c).
"(4) EMPLOYER.—Except to the extent provided in regulations,
the term 'employer' includes any person treated as an employer
under subsections (b), (c), (m), and (o) of section 414.
"(g) TERMINATION.—This section shall not apply to any sale after
December 31,1991."
(b) EFFECTIVE DATES.— 26 use 2057
(1) IN GENERAL.—Except as provided in this subsection, the note.
amendments made by this section shall apply to sales after
February 26,1987.
101 STAT. 1330-436 PUBLIC LAW 100-203—DEC. 22, 1987
(2) PROVISIONS TAKING EFFECT AS IF INCLUDED IN THE TAX
REFORM ACT OF 1986.—The following provisions shall take effect
as if included in the amendments made by section 1172 of the
Tax Reform Act of 1986:
(A) Section 2057(f)(2) of the Internal Revenue Code of
1986, as added by this section.
(B) The repeal of the requirement that a sale be made by
the executor of an estate to qualify for purposes of section
2057 of such Code.
(3) DIRECT OWNERSHIP REQUIREMENT.—If the requirements of
section 2057(d)(1)(B) of such Code (as modified by section
2057(d)(2) of such Code), as in effect after the amendments made
by this section, are met with respect to any employer securities
sold after October 22, 1986, and before February 27, 1987, such
securities shall be treated as having been directly owned by the
decedent for purposes of section 2057 of such Code, as in effect
before such amendments.
(4) REDUCTION FOR SALES ON OR BEFORE FEBRUARY 26, 1987.—In
applying the limitations of subsection (b) of section 2057 of such
Code to sales after February 26, 1987, there shall be taken into
account sales on or before February 26, 1987, to which section
2057 of such Code applied.
SEC. 10413. EXCISE TAX ON PLANS OR COOPERATIVES DISPOSING OF
.iOi.. r EMPLOYER SECURITIES FOR WHICH ESTATE TAX DEDUC-
TION WAS ALLOWED.
(a) IN GENERAL.—Chapter 43 (relating to excise taxes on qualified
pension, etc., plans) is amended by inserting after section 4978 the
following new section:
"SEC. 4978A. TAX ON CERTAIN DISPOSITIONS OF EMPLOYER SECURITIES
TO WHICH SECTION 2057 APPLIED.
"(a) IMPOSITION OF TAX.—In the case of a taxable event involving
qualified employer securities held by an employee stock ownership
plan or eligible worker-owned cooperative, there is hereby imposed a
tax equal to the amount determined under subsection (b).
"(b) AMOUNT OF TAX.—
"(1) IN GENERAL.—The amount of the tax imposed by subsec-
tion (a) shall be equal to 30 percent of—
"(A) the amount realized on the disposition in the case of
a taxable event described in paragraph (1) or (2) of sub-
"^'^" section (c), or
Loans. "(B) the amount repaid on the loan in the case of a
• taxable event described in paragraph (3) of subsection (c).
"(2) DISPOSITIONS OTHER THAN SALES OR EXCHANGES.—For pur-
poses of paragraph (1), in the case of a disposition of employer
securities which is not a sale or exchange, the amount realized
on such disposition shall be the fair market value of such
employer securities at the time of disposition.
"(c) TAXABLE EVENT.—For purposes of this section, the term'tax-
able event' means the following: /I
?r«s Dsrj "^^^ DISPOSITION WITHIN 3 YEARS OF ACQUISITION.—Any disposi-
^0. tion of employer securities by an employee stock ownership plan
or eligible worker-owned cooperative within 3 years after such
plan or cooperative acquired qualified employer securities.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-437
"(2) STOCKS DISPOSED OF BEFORE ALLOCATION.—Any disposition
of qualified employer securities to which paragraph (1) does not
apply if—
V a. "(A) such disposition occurs before such securities are
allocated to accounts of participants or their beneficiaries,
vd »•• and
"(B) the proceeds from such disposition are not so
allocated.
"(3) USE OF ASSETS TO REPAY ACQUISITION LOANS.—The pay-
ment by an employee stock ownership plan of any portion of
any loan used to acquire employer securities from transferred
assets (within the meaning of section 2057(cX2XB)).
"(d) ORDERING RULES.—For purposes of this section and section
4978, any disposition of employer securities shall be treated as
having been made in the following order:
"(1) First, from qualified employer securities acquired during
the 3-year period ending on the date of such disposition, begin-
ning with the securities first so acquired.
"(2) Second, from qualified employer securities acquired
before such 3-year period unless such securities (or the proceeds
from such disposition) have been allocated to accounts of partici-
pants or their beneficiaries.
"(3) Third, from qualified securities (within the meaning of
section 4978(eX2)) to which section 1042 applied acquired during
the 3-year period ending on the date of such disposition, begin-
ning with the securities first so acquired.
"(4) Finally, from any other employer securities. In the case of
a disposition to which section 4978(d) or subsection (e) applies,
the disposition of employer securities shall be treated as having
been made in the opposite order of the preceding sentence.
"(e) SECTION NOT TO APPLY TO CERTAIN DISPOSITIONS.—
"(1) IN GENERAL.—This section shall not apply to any disposi-
, tion described in paragraph (Dor (3) of section 4978(d).
"(2) CERTAIN REORGANIZATIONS.—For purposes of this section,
any exchange of qualified employer securities for employer
securities of another corporation in any reorganization de-
scribed in section 368(aXl) shall not be treated as a disposition,
but the employer securities which were received shall be
treated—
"(A) as qualified employer securities of the plan or co-
operative, and
?.; "(B) as having been held by the plan or cooperative
during the period the qualified employer securities were
held.
"(3) DISPOSITION TO MEET DIVERSIFICATION REQUIREMENTS.—
Any disposition which is made to meet the requirements of
section 401(aX28) shall not be treated as a disposition.
"(f) DEFINITIONS AND SPECIAL RULES.—For purposes of this
section— . ,^ .
"(1) TERMS USED IN SECTION 2057.—Any term used in this ' '^' ^ "
section which is used in section 2057 shall have the meaning
, given such term by section 2057.
"(2) QuAUFiED EMPLOYER SECURITIES.—The term 'qualified em-
ployer securities' has the meaning given such term by section
101 STAT. 1330-438 PUBLIC LAW 100-203—DEC. 22, 1987
2057, except that such term shall include employer securities
sold before February 27, 1987, for which a deduction was
allowed under section 2057.
"(8) DISPOSITION.—The term 'disposition' includes any
distribution.
"(4) LIABILITY FOR PAYMENT OF TAXES.—The tax imposed by
this section shall be paid by—
"(A) the employer, or
"(B) the eligible worker-owned cooperative,
which made the written statement described in section 2057(e)."
(b) CONFORMING AMENDMENTS.—
(1) Section 4978(b)(2) is amended by striking out the par-
enthetical and inserting in lieu thereof "(determined as if such
securities were disposed of in the order described in section
4978A(e))".
(2) The table of sections for chapter 43 is amended by insert-
ing after the item relating to section 4978 the following new
item:
"Sec. 4978A. Tax on certain dispositions of employer securities to which sec-
tion 2057 applied."
26 use 4978 (c) EFFECTIVE DATE.—The amendments made by this section shall
note. apply to taxable events (within the meaning of section 4978A(c) of
the Internal Revenue Code of 1986) occurring after February 26,
1987.
Subtitle E—Provisions Relating to Excise
Taxes and User Fees
PART I—EXCISE TAXES
SEC. 10501. EXTENSION OF TELEPHONE EXCISE TAX.
Paragraph (2) of section 4251(b) (relating to applicable percentage)
is amended to read as follows:
"(2) APPLICABLE PERCENTAGE.—The term 'applicable percent-
age' means 3 percent; except that, with respect to amounts paid
pursuant to bills first rendered after 1990, the applicable
percentage shall be zero."
SEC. 10502. DIESEL FUEL AND AVIATION FUEL TAXES IMPOSED AT
WHOLESALE LEVEL.
(a) IN GENERAL.—Part III of subchapter A of chapter 32 is
amended by inserting after subpart A the following new subpart:
"Subpart B—Diesel Fuel and Aviation Fuel
"Sec. 4091. Imposition of tax.
"Sec. 4092. Definitions. . , . r
*- "Sec. 4093. Exemptions; special rule. ''"' . - . "^
26 u s e 4091. "SEC. 4091. IMPOSITION OF TAX.
"(a) IN GENERAL.—There is hereby imposed a tax on the sale of
any taxable fuel by the producer or the importer thereof or by any
producer of a taxable fuel.
"(b) RATE OF TAX.—
"(1) IN GENERAL.—The rate of the tax imposed by subsection
(a) shall be the sum of—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-439
"(AKi) the Highway Trust Fund financing rate in the C£ise
of dieselfuel, and
"(ii) the Airport and Airway Trust Fund financing rate in
the case of aviation fuel, and
"(B) the Leaking Underground Storage Tank Trust Fund
financing rate in the case of any taxable fuel.
"(2) HIGHWAY TRUST FUND FINANCING RATE.—For purposes of
paragraph (1), except as provided in subsection (c), the Highway
Trust Fund financing rate is 15 cents per gallon.
"(3) AIRPORT AND AIRWAY TRUST FUND FINANCING RATE.—For
purposes of paragraph (1), the Airport and Airway Trust Fund . -.
financing rate is 14 cents per gallon.
"(4) LEAKING UNDERGROUND STORAGE TANK TRUST FUND
FINANCING RATE.—For purposes of paragraph (1), the Leaking
Underground Storage Tank Trust Fund financing rate is 0.1
cent per gallon.
"(5) TERMINATION OF RATES.—
"(A) The Highway Trust Fund financing rate shall not
apply on and after October 1,1993.
(B) The Airport and Airway Trust Fund financing rate
shall not apply on and after January 1,1988.
"(C) The Leaking Underground Storage Tank Trust Fund
financing rate shall not apply during any period during
which the Leaking Underground Storage Tank Trust Fund
financing rate under section 4081 does not apply.
"(c) REDUCED RATE OF TAX FOR DIESEL FUEL IN ALCOHOL MIXTURE,
ETC.—Under regulations prescribed by the Secretary—
"(1) I N GENERAL.—The Highway Trust Fund financing rate
shall be—
"(A) 9 cents per gallon in the case of the sale of any
mixture of diesel fuel if—
,.^ "(i) at least 10 percent of such mixture consists of
alcohol (as defined in section 4081(cX3)), and
, "(ii) the diesel fuel in such mixture was not taxed
under subparagraph (B), and
"(B) 10 cents per gallon in the case of the sale of diesel
fuel for use (at the time of such sale) in producing a mixture
described in subparagraph (A).
"(2) LATER SEPARATION.—If any person separates the diesel
fuel from a mixture of the diesel fuel and alcohol on which tax
was imposed under subsection (a) at a Highway Trust Fund
financing rate equivalent to 9 cents a gallon by reason of this
subsection (or with respect to which a credit or payment was
allowed or made by reason of section 6427(fKl)), such person
shall be treated as the producer of such diesel fuel. The amount
of tax imposed on any sale of such diesel fuel by such person ^ j . , , 3,,
shall be 5 cents per gallon.
"(3) TERMINATION.—Paragraph (1) shall not apply to any sale
after September 30,1993.
"(d) EXEMPTION FROM TAX FOR AVIATION FUEL IN ALCOHOL MIX-
TURE, ETC.— - J ,,:
"(1) I N GENERAL.—The Airport and Airway Trust Fund
financing rate shall not apply to the sale of—
"(A) any mixture of aviation fuel at least 10 percent of , , >{
which consists of alcohol (as defined in section 4081(c)(3)), or
"(B) any aviation fuel for use (at the time of such sale) in
producing a mixture described in subparagraph (A).
101 STAT. 1330-440 PUBLIC LAW 100-203—DEC. 22, 1987
"(2) LATER SEPARATION.—If any person separates the aviation
fuel from a mixture of the aviation fuel and alcohol on which
the Airport and Airway Trust Fund financing rate did not apply
by reeison of this subsection (or with respect to which a credit or
payment was allowed or made by reason of section 6427(f)(2)),
such person shall be treated as the producer of such aviation
fuel.
"(3) TERMINATION.—Paragraph (1) shall not apply to any sale
after September 30,1993.
26 u s e 4092. "SEC. 4092. DEFINITIONS. ?')
"(a) TAXABLE FUEL.—For purposes of this s u b p a r t ^
"(1) IN GENERAL.—The term'taxable fuel'means— .
( "(A) diesel fuel, and \J
"(B) aviation fuel.
"(2) DIESEL FUEL.—The term 'diesel fuel' means any liquid
(other than any product taxable under section 4081) which is
suitable for use as a fuel in a diesel-powered highway vehicle or
a diesel-powered train.
"(3) AVIATION FUEL.—The term 'aviation fuel' means any
liquid (other than any product taxable under section 4081)
which is suitable for use sis a fuel in an aircraft.
"(b) PRODUCER.—For purposes of this subpart—
"(1) C E R T A I N PERSONS TREATED AS PRODUCERS.—
,%y::j "(A) I N GENERAL.—The term 'producer' includes any
person described in subparagraph (B) who elects to register
ff.m under section 4101 with respect to the tax imposed by
section 4091.
"(B) PERSONS DESCRIBED.—A person is described in this
subparagraph if such person is—
ic "(i) a refiner, compounder, blender, or wholesale
distributor of a taxable fuel, or
"(ii) a dealer selling any taxable fuel exclusively to
producers of such taxable fuel.
.:*^;;" "(C) TAX-FREE PURCHASERS TREATED AS PRODUCERS.—Any
person to whom any taxable fuel is sold tax-free under this
subpart shall be treated as the producer of such fuel.
"(2) WHOLESALE DISTRIBUTOR.—For purposes of parsigraph (1),
the term 'wholesale distributor' includes any person who sells a
taxable fuel to producers, retailers, or to users who purchase in
bulk quantities and deliver into bulk storage tanks. Such term
does not include any person who (excluding the term 'wholesale
distributor' from paragraph (1)) is a producer or importer.
26 use 4093. "SEC. 4093. EXEMPTIONS; SPECIAL RULE.
"(a) HEATING OIL.—The tax imposed by section 4091 shall not
apply in the case of sales of any taxable fuel which the Secretary
determines is destined for use as heating oil.
Regulations. "0)) SALES TO PRODUCER.—Under regulations prescribed by the
Secretary, the tax imposed by section 4091 shall not apply in the
case of sales of a taxable fuel to a producer of such fuel.
Regulations. "(c) AUTHORITY TO EXEMPT CERTAIN O T H E R U S E S . — S u b j e c t t o SUCh
terms and conditions as the Secretary may provide (including the
application of section 4101), the Secretary may by regulation provide
that-
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-441
"(1) the Highway Trust Fund financing rate under section
4091 shall not apply to diesel fuel sold for use by any purchaser
as a fuel in a diesel-powered train,
"(2) the Airport and Airway Trust Fund financing rate under
section 4091 shall not apply to aviation fuel sold for use by any
purchaser as a fuel in an aircraft not in noncommercial aviation
: (as defined in section 4041(c)(4)),
•:'r "(3) the tax imposed by section 4091 shall not apply to taxable
fuel sold for use by any purchaser other than as a motor fuel,
and
"(4) the tax imposed by section 4091 shall not apply to taxable
fuel sold for the exclusive use of any State, any political subdivi-
sion of a State, or the District of Columbia.
"(d) SPECIAL ADMINISTRATIVE RULES.—The Secretary may Reports,
require—
"(1) information reporting by each remitter of the tax im-
^ posed by section 4091, and
"(2) information reporting by, and registration of, such other
persons as the Secretary deems necessary to carry out this
subpart.
"(e) CROSS REFERENCES.—
"(1) For imposition of tax where certain uses of diesel fuel or
aviation fuel occur before imposition of tax by section 4091, see
. r subsections (a)(1) and (c)(1) of section 4041.
"(2) For provisions allowing a credit or refund for fuel not
used for certain taxable purposes, see section 6427."
Ot)) RETAIL DIESEL FUEL AND AVIATION FUEL TAXES TO BE RESIDUAL
TAXES.—
(1) Paragraph (1) of section 4041(a) is amended—
(A) by striking out "DIESEL FUEL" in the heading and
inserting in lieu thereof "TAX ON DIESEL FUEL WHERE NO
TAX IMPOSED ON FUEL UNDER SECTION 4091", and
(B) by adding at the end thereof the following new
sentence:
"No tax shall be imposed by this paragraph on the sale or use of
any liquid if there was a taxable sale of such liquid under
section 4091."
(2) Paragraph (1) of section 4041(c) is amended—
no (^) ]r,y striking out " I N GENERAL" in the heading and
inserting in lieu thereof "TAX ON NONGASOLINE FUELS
WHERE NO TAX IMPOSED ON FUEL UNDER SECTION 4091", and
(B) by adding at the end thereof the following new
sentence:
'• "No tax shall be imposed by this paragraph on the sale or use of
any liquid if there was a taxable sale of such liquid under
section 4091."
(3) Subsection (d) of section 4041 is amended by redesignating
paragraph (3) as paragraph (4) and by striking out paragraphs
(1) and (2) and inserting in lieu thereof the following:
"(1) TAX ON SALES AND USES SUBJECT TO TAX UNDER SUBSECTION
(a).—In addition to the taxes imposed by subsection (a), there is
hereby imposed a tax of 0.1 cent a gallon on the sale or use of
any liquid (other than liquefied petroleum gas) if tax is imposed
by subsection (a) on such sale or use.
i- "(2) TAX ON DIESEL FUEL USED IN TRAINS.—There is hereby
imposed a tax of 0.1 cent a gallon on any liquid (other than a
.riV product taxable under section 4081)—
101 STAT. 1330-442 PUBLIC LAW 100-203—DEC. 22, 1987
, "(A) sold by any person to an owner, lessee, or other
operator of a diesel-powered train for use as a fuel in such
train, or
"(B) used by any person as a fuel in a diesel-powered train
unless there was a taxable sale of such liquid under
f subparagraph (A).
No tax shall be imposed by this paragraph on the sale or use of
e any liquid if there was a taxable sale of such liquid under
section 4091.
"(3) LIQUIDS USED IN AVIATION.—In addition to the taxes
imposed by subsection (c), there is hereby imposed a tax of 0.1
cent a gallon on any liquid (other than any product taxable
under section 4081)—
ai5..xi3>l '< "(A) sold by any person to an owner, lessee, or other
operator of an aircraft for use as a fuel in such aircraft, or
0ti i "(B) used by any person as a fuel in an aircraft unless
there was a taxable sale of such liquid under subpara-
graph (A).
« No tax shall be imposed by this paragraph on the sale or use of
any liquid if there was a taxable sale of such liquid under
section 4091."
(4) Subsection (n) of section 4041 is hereby repealed,
(c) AMENDMENTS RELATING TO CREDITS AND REFUNDS.—
(1) Section 6427 is amended by redesignating subsections (1)
' through (p) as subsections (m) through (q), respectively, and by
inserting after subsection (k) the following new subsection:
"(1) NONTAXABLE USES OF DIESEL FUEL AND AVIATION FUEL TAXED
UNDER SECTION 4091.—
"(1) IN GENERAL.—Except £is provided in subsection (k) and in
paragraph (3) of this subsection, if any fuel on which tax has
been imposed by section 4091 is used by any person in a
nontaxable use, the Secretary shall pay (without interest) to the
'*' ultimate purchaser of such fuel an amount equal to the aggre-
gate amount of tax imposed on such fuel under section 4091.
"(2) NONTAXABLE USE.—For purposes of this subsection, the
term 'nontaxable use' means, with respect to any fuel, any use
of such fuel if such use is exempt from the taxes imposed by
subsections (aXD and (cXD of section 4041 (other than by reason
of the imposition of tax on any sale thereof).
"(3) No REFUND OF LEAKING UNDERGROUND STORAGE TANK
TRUST FUND FINANCING TAX.—Paragraph (1) shall not apply to so
much of the tax imposed by section 4091 as is attributable to the
Leaking Underground Storage Tank Trust Fund financing rate
imposed by such section in the case of—
"(A) fuel used in a diesel-powered train, and
"(B) fuel used in any aircraft."
(2) Paragraph (1) of section 6427(b) is amended—
(A) by striking out "subsection (a) of section 4041" the
first place it appears and inserting in lieu thereof "section
4041(a) or 409r, and
(B) by striking out "subsection (a) of section 4041" the
I second place it appears and inserting in lieu thereof "sec-
tion 4041(a) or 4091, as the case may be".
(3) Subparagraph (B) of section 6427(eXl) is amended by
; inserting ^'or 409r'after "section 4041".
(4) Subsection (f) of section 6427 is amended to read as follows:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-443
"(f) GASOUNE, DIESEL FUEL, AND AVIATION FUEL USED TO''^'
PRODUCE CERTAIN ALCOHOL FUELS.—Except as provided in subsection
(k)-
"(1) G A S O U N E AND DIESEL FUELS.—
"(A) IN GENERAL.—If any gasoline or diesel fuel on which
tax was imposed by section 4081 or 4091 at the regular
Highway Trust Fund financing rate is used by any person
in producing a mixture described in section 4081(c) or in
section 4091(cXlKA) (as the case may be) which is sold or
•' used in such person's trade or business, the Secretary shall
pay (without interest) to such person an amount equal to
the excess of the regular Highway Trust Fund financing
rate over the incentive Highway Trust Fund Financing rate
with respect to such fuel.
*i "(B) DEFINITIONS.—For purposes of subparagraph (A)—
"(i) REGULAR HIGHWAY TRUST FUND FINANCING
RATE.—The term 'regular Highway Trust Fund financ-
ing rate' means—
"(I) 9 cents per gallon in the case of gasoline, and
"(II) 15 cents per gallon in the case of diesel fuel.
"(ii) INCENTIVE HIGHWAY TRUST FUND FINANCING
-a*-. RATE.—The term 'incentive Highway Trust Fund
Financing rate' means—
"(I) SVs cents per gallon in the case of gasoline,
r. and
"(II) 10 cents per gallon in the case of diesel fuel.
"(C) COORDINATION WITH OTHER REPAYMENT PROVISIONS.—
No amount shall be payable under subparagraph (A) with
respect to any gasoline or diesel fuel with respect to which
I an amount is payable under subsection (d), (e), or (1) of this
section or under section 6420 or 6421.
"(2) AVIATION FUEL.—If any aviation fuel on which tax was
imposed by section 4091 is used by any person in producing a
mixture at least 10 percent of which is alcohol (as defined in
section 4081(c)(3)) which is sold or used in such person's trade or
business, the Secretary shall pay (without interest) to such
person an amount equal to the aggregate amount of tax (attrib-
utable to the Airport and Airway Trust Fund financing rate)
imposed on such fuel under section 4091.
"(3) TERMINATION.—Paragraphs (1) and (2) shall not apply
with respect to any mixture sold or used after September 30,
1993."
(5XA) Paragraph (1) of section 6427(i) is amended by striking
out "or (h)" and inserting in lieu thereof "(h), or (1)".
(B) Clause (i) of section 6427(iX2KA) is amended by striking out
"and (h)" and inserting in lieu thereof "(h), and (1)".
(6) Subsection (o) of section 6427 (as redesignated by para-
graph (D) is amended to read as follows:
"(o) TERMINATION OF CERTAIN PROVISIONS.—Except with respect to
taxes imposed by section 4041(d) and sections 4081 and 4091 at the
Leaking Underground Storage Tank Trust Fund financing rate,
subsections (a), 0)), (c), (d), (g), (h), and (1) shall only apply with
respect to fuels purchased before October 1,1993."
(d) OTHER CONFORMING AMENDMENTS.—
'"Copy read "TO".
101 STAT. 1330-444 PUBLIC LAW 100-203—DEC. 22, 1987
(1) Subsection (c) of section 40 is amended by striking out "or
' section 4081(c)" and inserting in lieu thereof ", section 4081(c),
or section 4091(c)".
(2) Subparagraph (B) of section 4081(eX2), as amended by
section 1703 of the Tax Reform Act of 1986, is amended by
striking out "net revenues" and all that follows and inserting in
1 lieu thereof the following: "net revenues are at least
, $500,000,000 from taxes imposed by section 4041(d) and taxes
attributable to Leaking Underground Storage Tank Trust Fund
financing rate imposed under this section and sections 4042 and
J 4091."
(3) Subsection (a) of section 4101, as amended by section 1703
of the Tax Reform Act of 1986, is amended by inserting "or
4091" after "section 4081".
(4) Subsection (a) of section 4221 is amended by striking out
"(other than" and all that follows through "sale by the manu-
- facturer" and inserting in lieu thereof "(other than under sec-
tion 4121, 4081, or 4091) on the sale by the manufacturer".
(5) Section 6206 is amended by striking out "or 4041" and
inserting in lieu thereof "or 4041 or 4091".
(6) Paragraph (2) of section 6416(b) is amended—
IK (A) by striking out "(other than coal teixable under sec-
tion 4121)", and
jfiilr (B) by adding at the end thereof the following new sen-
tence: "This paragraph shall not apply in the case of any
tax paid under section 4091 or 4121."
(7) Subparagraph (A) of section 64160t)X3) is amended by
1 inserting "and other than any fuel taxable under section 4091"
r after "section 4081".
(8) Subparagraph (B) of section 64160t>X3) is amended by strik-
ing out ", such gasoline" and inserting in lieu thereof "or any
fuel taxable under section 4091, such gasoline or fuel".
J (9) Subparagraph (C) of section 6421(eX2) is hereby repealed.
(10) The subsection (j) of section 6421 relating to cross ref-
erences is amended by striking out paragraph (1) and by re-
i designating paragraphs (2), (3), and (4), as paragraphs (1), (2),
- and (3), respectively.
( (11) Section 6652 is amended by striking out the subsection (j)
added by section 17020)) of the Tax Reform Act of 1986 and by
redesignating subsections (1) and (m) as subsections (k) and (1),
, respectively.
(12) Subsection (b) of section 9502 is amended by striking out
I "and" at the end of paragraph (2), by redesignating paragraph
(3) as paragraph (4), and by inserting after paragraph (2) the
following new paragraph:
"(3) amounts determined by the Secretary to be equivalent to
the taxes received in the Treasury before January 1, 1988,
under section 4091 (to the extent attributable to the Airport and
• Airway Trust Fund financing rate), and".
(13) Paragraph (1) of section 9503(b) is amended by striking
out subparagraph (F) and inserting in lieu thereof the following:
"(F) section 4091 (relating to tax on diesel fuel), and".
(14) Paragraph (4) of section 9503(b) is amended to read as
follows:
"(4) CERTAIN ADDITIONAL TAXES NOT TRANSFERRED TO HIGHWAY
TRUST FUND.—For purposes of paragraphs (1) and (2)—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-445
,„, "(A) there shall not be taken into account the taxes
imposed by sections 4041(d), and
"(B) there shall be taken into account the taxes imposed
by sections 4081 and 4091 only to the extent attributable to
the Highway Trust Fund financing rates under such
i^ sections."
(15) Paragraph (2) of section 9503(e) is amended—
(A) by striking out "sections 4041 and 4081" and inserting
:" in lieu thereof "sections 4041, 4081, and 4091", and
(B) by striking out "section 4041 or 4081" and inserting in
^;^ lieu thereof "section 4041, 4081, or 4091".
(16) Subsection (b) of section 9508 is amended by redesignating
paragraphs (3) and (4) as paragraphs (4) and (5), respectively,
and by inserting after paragraph (2) the following new para-
graph:
"(3) taxes received in the Treasury under section 4091 (relat-
ing to tax on diesel fuel and aviation fuel) to the extent attrib-
utable to the Leaking Underground Storage Trust Fund financ-
ing rate under such section,".
(17) Subparagraph (A) of section 9508(c)(2) is amended by
striking out clause (ii) and all that follows and inserting in lieu
thereof the following:
"(ii) credits allowed under section 34,
with respect to the taxes imposed by section 4041(d) or by
c sections 4081 and 4091 (to the extent attributable to the
j.:j Leaking Underground Storage Trust Fund financing rate
under such sections)."
(18) The table of subparts for part III of subchapter A of
chapter 32 is amended by inserting after the item relating to • f':^,
subpart A the following new item: \^''l
"Subpart B. Diesel fuel and aviation fuel."
(e) EFFECTIVE DATE.—The amendments made by this section shall 26 use 40 note.
apply to sales after March 31,1988.
(f) FLOOR STOCKS TAX.— 26 use 4091
(1) IMPOSITION OF TAX.—On any taxable fuel which on April 1, note.
1988, is held by a taxable person, there is hereby imposed a floor
stocks tax at the rate of tax which would be imposed if such fuel
were sold on such date in a sale subject to tax under section
4091 of the Internal Revenue Code of 1986 (as added by this
section).
(2) OVERPAYMENT OF FLOOR STOCKS TAXES, ETC.—Sections 6416
and 6427 of such Code shall apply in respect of the floor stocks
taxes imposed by this subsection so as to entitle, subject to all s
provisions of such sections, any person paying such floor stocks '
taxes to a credit or refund thereof for any reason specified in
such sections. All provisions of law, including penalties, ap-
plicable with respect to the taxes imposed by section 4091 of
such Code (as so added) shall apply to the floor stocks taxes
imposed by this subsection.
(3) DUE DATE OF TAX.—The taxes imposed by this subsection
shall be paid before June 16,1988.
(4) DEFINITIONS.—For purposes of this subsection—
(A) TAXABLE FUEL.—
(i) I N GENERAL.—The term "taxable fuel" means any
tsixable fuel (as defined in section 4092 of such Code, as
101 STAT. 1330-446 PUBLIC LAW 100-203—DEC. 22, 1987
added by this section) on which no tax bas been im-
posed under section 4041 of such Code.
(ii) EXCEPTION FOR FUEL HELD FOR NONTAXABLE
USES.—The term "taxable fuel""'' shall not include
fuel held exclusively for any use which is a nontaxable
use (as defined in section 6427(1) of such Code, as added
by this section).
(B) TAXABLE PERSON.—The term "taxable person" means
any person other than a producer (as defined in section
4092 of such Code, as so added) or importer of taxable fuel.
(C) HELD BY A TAXABLE PERSON.—An article shall be
treated as held by a person if title thereto has passed to
such person (whether or not delivery to such person has
been made).
(5) SPECIAL RULE FOR FUEL HELD FOR USE IN TRAINS AND
COMMERCIAL AIRCRAFT.—Only the Leaking Underground Stor-
age Tank Trust Fund financing rate under section 4091 of such
Code shall apply for purposes of this subsection with respect
to—
(A) diesel fuel held exclusively for use as a fuel in a
X1 diesel-powered train, and
(B) aviation fuel held exclusively for use as a fuel in an
aircraft not in noncommercial aviation (as defined in sec-
tion 4041(cX4) of such Code).
(6) TRANSFER OF FLOOR STOCK REVENUES TO TRUST FUNDS.—For
purposes of determining the amount transferred to any trust
fund, the tax imposed by this subsection shall be treated as
imposed by section 4091 of such Code (as so added).
Effective date. (g) COORDINATION WiTH AlRPORT AND AlRWAY SAFETY AND C A P A C -
26 use 4091 i-pY EXPANSION ACT OF 1987.—If the Airport and Airway Safety and
"'^ ®" Capacity Expansion Act of 1987 is enacted, effective on December
31, 1987, sections 4091(bX5XB) and 9502(bX3) of such Code (as added
by this section) are each amended by striking out "January 1, 1988"
and inserting in lieu thereof "January 1, 1991".'^^
SEC. 10503. EXTENSION OF TEMPORARY INCREASE IN AMOUNT OF TAX
IMPOSED ON COAL PRODUCERS.
Subparagraph (A) of section 4121(eX2) (relating to temporary in-
crease termination date) is amended by striking out "January 1,
1996" and inserting in lieu thereof "January 1, 2014".
I PART II—TAX-RELATED USER FEES
26 u s e 7801 SEC. 10511. FEES FOR REQUESTS FOR RULING, DETERMINATION, AND
note. SIMILAR LETTERS.
(a) GENERAL RULE.—The Secretary of the Treasury or his delegate
(hereinafter in this section referred to as the "Secretary") shall
establish a program requiring the payment of user fees for requests
to the Internal Revenue Service for ruling letters, opinion letters,
and determination letters and for similar requests.
(b) PROGRAM CRITERIA.—
(1) IN GENERAL.—The fees charged under the program re-
quired by subsection (a)—
"*Copy read " 'taxable fuel' ".
'"Copy read "1991", and.".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-447
(A) shall vary according to categories (or subcategories)
established by the Secretary,
(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
(C) shall be payable in advance.
(2) EXEMPTIONS, ETC.—The Secretary shall provide for such
exemptions (and reduced fees) under such program as he deter-
mines to be appropriate.
(3) AVERAGE FEE REQUIREMENT.—The average fee charged
under the program required by subsection (a) shall not be less
than the amount determined under the following table:
Category Average Fee
Employee plan ruling and opinion $250
Exempt organization ruling $350
Employee plan determination $300
Exempt organization determination $275
Chief counsel ruling $200.
(c) APPLICATION OF SECTION.—Subsection (a) shall apply with re- Effective date.
spect to requests made on or after the 1st day of the second calendar
month beginning after the date of the enactment of this Act and
before September 30,1990. ;,
SEC. 10512. OCCUPATIONAL TAXES RELATING TO ALCOHOL, TOBACCO,
AND FIREARMS.
(a) OCCUPATIONAL TAXES ON DISTILLED SPIRITS PLANTS, BONDED
WINE CELLARS, BREWERIES, ETC.—
(1) DISTILLED SPIRITS PLANTS, BONDED WINE CELLARS, ETC.—
(A) IN GENERAL.—Part II of subchapter A of chapter 51
Y~ ' (relating to distilled spirits, wines, and beer) is amended by
inserting before subpart B the following new subpart:
"Subpart A—Proprietors of Distilled Spirits Plants,
Bonded Wine Cellars, Etc.
"Sec. 5081. Imposition and rate of tax.
"SEC. 5081. IMPOSITION AND RATE OF TAX. 26 USC 5081.
"(a) GENERAL RULE.—Every proprietor of—
"(1) a distilled spirits plant,
"(2) a bonded wine cellar,
"(3) a bonded wine warehouse, or
"(4) a taxpaid wine bottling house,
shall pay a tax of $1,000 per year in respect of each such premises.
"(b) REDUCED RATES FOR SMALL PROPRIETORS.—
"(1) IN GENERAL.—Subsection (a) shall be applied by substitut-
ing '$500' for '$1,000' with respect to any taxpayer the gross
receipts of which (for the most recent taxable year ending
before the 1st day of the taxable period to which the tax
imposed by subsection (a) relates) are less than $500,000.
(2) (DoNTROLLED GROUP RULES.—All persons treated as 1 tax-
payer under section 5061(eX3) shall be treated as 1 taxpayer for
purposes of paragraph (1).
"(3) CERTAIN RULES TO APPLY.—For purposes of paragraph (1),
rules similar to the rules of subparagraphs (B) and (C) of section
448(cX3) shall apply."
(B) T E C H N I C A L AMENDMENTS.—
101 STAT. 1330-448 PUBLIC LAW 100-203—DEC. 22, 1987
^•:.i.K~ # (^^ Subsection (a) of section 5691 is amended by strik-
ing out "the business of a brewer, wholesale dealer in
«5,fN /^ liquors, retail dealer in liquors, wholesale dealer in
' ;=i;p-s beer, retail dealer in beer, or limited retail dealer," and
inserting in lieu thereof "a business subject to a special
tax imposed by part II of subchapter A or section 5276
<lr..u 'c* (relating to occupational taxes)"
-"'.:. '.J (ii) The section heading of section 5691 is amended by
striking out "RELATING TO LIQUORS".
LM7; :f r. (iii) The table of sections for part V of subchapter J of
.'»&' :o chapter 51 is amended by striking out "relating to
liquors" in the item relating to section 5691.
•/' < (C) CLERICAL AMENDMENT.—The table of subparts for part
II of subchapter A of chapter 51 is amended by inserting
before the item relating to subpart B the following new
item:
"Subpart A. Proprietors of distilled spirits plants, bonded wine cellars, etc."
'^* "' ' (2) BREWERIES.—Section 5091 (relating to imposition and rate
of tax on brewers) is amended to read as follows:
26 u s e 5091. "SEC. 5091. IMPOSITION AND RATE OF TAX.
"(a) GENERAL RULE.—Every brewer shall pay a tax of $1,000 per
year in respect of each brewery.
"Ot)) REDUCED RATES FOR SMALL BREWERS.—Rules similar to the
rules of section 5O810t)) shall apply for purposes of subsection (a)."
(b) WHOLESALE DEALERS IN LIQUORS AND B E E R . —
(1) LIQUORS.—Subsection (a) of section 5111 (relating to im-
position and rate of tax on wholesale dealers) is amended by
striking out "$255" and inserting in lieu thereof "$500".
(2) BEER.—Subsection (b) of section 5111 is amended by strik-
ing out "$123" and inserting in lieu thereof "$500".
(c) RETAIL DEALERS IN LIQUORS AND BEER.—
(1) LIQUORS.—Subsection (a) of section 5121 (relating to im-
position and rate of tax on retail dealers) is amended by striking
out "$54" and inserting in lieu thereof "$250".
•> ;.?.: (2) BEER.—Subsection (b) of section 5121 is amended by strik-
ing out "$24" and inserting in lieu thereof "$250".
(3) REPEAL OF TAX ON LIMITED RETAIL DEALERS.—Subsection (c)
of section 5121 is hereby repealed.
(d) TAX ON NONBEVERAGE DOMESTIC DRAWBACK.—Subsection (b) of
section 5131 (relating to eligibility and rate of tax) is amended to
read as follows:
"0)) RATE OF TAX.—The special tax imposed by subsection (a) shall
be $500 per year."
(e) TAX ON INDUSTRIAL USE OF DISTILLED SPIRITS.—
(1) I N GENERAL.—Subchapter D of chapter 51 (relating to
industrial use of distilled spirits) is amended by adding at the
end thereof the following new section:
26 u s e 5276. "SEC. 5276. OCCUPATIONAL TAX. .
"(a) GENERAL RULE.—A permit issued under section 5271 shall not
be valid with respect to acts conducted at any place unless the
person holding such permit pays a special tax of $250 with respect to
such place.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-449
"(b) CERTAIN OCCUPATIONAL TAX RULES TO APPLY.—Rules similar . „
to the rules of subpart G of part II of subchapter A shall apply for
purposes of this section."
(2) CLERICAL AMENDMENT.—The table of sections for such
subchapter is amended by adding at the end thereof the follow-
ing new item:
"Sec. 5276. Occupational tax." - l'
(f) TOBACCO.—
(1) I N GENERAL.—Chapter 52 (relating to cigars, cigarettes,
smokeless tobacco and cigarette papers and tubes) is amended
by redesignating subchapters D, E, and F as subchapters E, F,
^ and G, respectively, and by inserting after subchapter C the
* following new subchapter:
"Subchapter D—Occupational Tax
"Sec. 5731. Imposition and rate of tax.
"SEC. 5731. IMPOSITION AND RATE OF TAX. 26 USC 5731.
"(a) GENERAL RULE.—Every person engaged in business as—
"(1) a manufacturer of tobacco products, *
"(2) a manufacturer of cigarette papers and tubes, or
"(3) an export warehouse proprietor,
shall pay a tax of $1,000 per year in respect of each premises at
which such business is carried on.
"(b) REDUCED RATES FOR SMALL PROPRIETORS.—
"(1) IN GENERAL.—Subsection (a) shall be applied by substitut- ,<..,- y^r, ;
f ing '$500' for '$1,000' with respect to any taxpayer the gross ^
receipts of which (for the most recent taxable year ending
before the 1st day of the taxable period to which the tax
imposed by subsection (a) relates) are less than $500,000.
"(2) CONTROLLED GROUP RULES.—All persons treated as 1 tax-
payer under section 5061(eX3) shall be treated as 1 taxpayer for
purposes of paragraph (1).
"(3) CERTAIN RULES TO APPLY.—For purposes of paragraph (1),
I rules similar to the rules of subparagraphs (B) and (C) of section
:; 448(cX3) shall apply.
"(c) CERTAIN OCCUPATIONAL TAX RULES TO APPLY.—Rules similar
to the rules of subpart G of part II of subchapter A of chapter 51
shall apply for purposes of this section.
"(d) PENALTY FOR FAILURE TO REGISTER.—Any person engaged in a
business referred to in subsection (a) who willfully fails to pay the
tax imposed by subsection (a) shall be fined not more than $5,000, or
imprisoned not more than 2 years, or both, for each such offense."
(2) CLERICAL AMENDMENT.—"The table of subchapters for chap-
ter 52 is amended by redesignating the items relating to sub-
chapters D, E, and F as items relating to subchapters E, F, and
G, respectively, and by inserting after the item relating to
subchapter C the following new item:
"SUBCHAPTER D . Occupational tax."
(g) FIREARMS.—
I (1) IN GENERAL.—Section 5801 (relating to occupational taxes)
is amended to read as follows:
101 STAT. 1330-450 PUBLIC LAW 100-203—DEC. 22, 1987
26 u s e 5801. "SEC. 5801. IMPOSITION OF TAX.
"(a) GENERAL RULE.—On 1st engaging in business and thereafter
on or before July 1 of each year, every importer, manufacturer, and
dealer in firearms shall pay a special (occupational) tax for each
place of business at the following rates:
"(1) Importers and manufacturers: $1,000 a year or fraction
thereof.
"(2) Dealers: $500 a year or fraction thereof.
"(b) REDUCED RATES OF TAX FOR SMALL IMPORTERS AND MANUFAC-
TURERS.—
"(1) IN GENERAL.—Paragraph (1) of subsection (a) shall be
applied by substituting '$500' for '$1,000' with respect to any
taxpayer the gross receipts of which (for the most recent taxable
year ending before the 1st day of the taxable period to which the
tax imposed by subsection (a) relates) are less than $500,000.
"(2) CONTROLLED GROUP RULES.—All persons treated as 1 tax-
payer under section 5061(eX3) shall be treated as 1 taxpayer for
purposes of paragraph (1).
' "(3) CERTAIN RULES TO APPLY.—For purposes of paragraph (1),
rules similar to the rules of subparagraphs (B) and (C) of section
448(cX3) shall apply."
(2) CLERICAL AMENDMENT.—The table of sections for part I of
subchapter A of chapter 53 is amended by striking out the item
relating to section 5801 and inserting in lieu thereof the follow-
ing new item:
"Sec. 5801. Imposition of tax."
26 u s e 5081 (li) EFFECTIVE D A T E . —
note. (1) Iff GENERAL.—The amendments made by this section shall
take effect on January 1,1988.
(2) ALL TAXPAYERS TREATED AS COMMENCING IN BUSINESS ON
JANUARY 1, 1988.—
(A) I N GENERAL.—Any person engaged on January 1,
1988, in any trade or business which is subject to an occupa-
tional tax shall be treated for purposes of such tax as
having 1st engaged in such trade or business on such date.
(B) LIMITATION ON AMOUNT OF TAX.—In the case of a
taxpayer who paid an occupational tax in respect of any
premises for any taxable period which began before Janu-
ary 1, 1988, and includes such date, the amount of the
occupational tax imposed by reason of subparagraph (A) in
respect of such premises shall not exceed an amount equal
to V2 the excess (if any) of—
(i) the rate of such tax as in effect on January 1,1988,
over
(ii) the rate of such tax as in effect on December 31,
1987.
(C) OCCUPATIONAL TAX.—For purposes of this paragraph,
the term "occupational tax" means any tax imposed under
part II of subchapter A of chapter 51, section 5276, section
5731, or section 5801 of the Internal Revenue (Dode of 1986
(as amended by this section).
(D) DUE DATE OF TAX.—The amount of any tax required to
be paid by reason of this paragraph shall be due on April 1,
1988.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-451
Subtitle F—Other Revenue Provisions
PART I—TARGETED JOBS CREDIT
SEC. 10601. DENIAL OF TARGETED JOBS CREDIT FOR WAGES PAID ^o.0s; Kl^
DURING PERIOD OF LABOR DISPUTE.
(a) GENERAL RULE.—Subsection (c) of section 51 (defining wages) is
amended by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
"(3) PAYMENTS FOR SERVICES DURING LABOR DISPUTES.—If—
"(A) the principal place of employment of an individual
with the employer is at a plant or facility, and
,^ "(B) there is a strike or lockout involving employees at
such plant or facility,
the term 'wages' shall not include any amount paid or incurred
by the employer to such individual for services which are the .-;,=
same as, or substantially similar to, those services performed by
employees participating in, or affected by, the strike or lockout
during the period of such strike or lockout."
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 use 51 note.
shall apply to amounts paid or incurred on or after January 1,1987,
for services rendered on or after such date.
- PART II—TREATMENT OF CERTAIN ILLEGAL
. IRRIGATION SUBSIDIES
SEC. 10611. TREATMENT OF CERTAIN ILLEGAL IRRIGATION SUBSIDIES.
(a) GENERAL RULE.—Part II of subchapter B of chapter 1 (relating
to items specifically included in gross income) is amended by adding
at the end thereof the following new section:
"SEC. 90. ILLEGAL FEDERAL IRRIGATION SUBSIDIES. 26 USC 90.
"(a) GENERAL RULE.—Gross income shall include an amount equal
to any illegal Federal irrigation subsidy received by the taxpayer
during the taxable year.
"(b) ILLEGAL FEDERAL IRRIGATION SUBSIDY.—For purposes of this
section—
"(1) IN GENERAL.—The term 'illegal Federal "* irrigation
subsidy' means the excess (if any) of—
"(A) the amount required to be paid for any Federal
gjii / irrigation water delivered to the taxpayer during the tax-
payer year, over
"(B) the amount paid for such water.
"(2) FEDERAL IRRIGATION WATER.—The term 'Federal irriga-
tion water' means any water made available for agricultural
purposes from the operation of any reclamation or irrigation
project referred to in paragraph (8) of section 202 of the Rec-
lamation Reform Act of 1982.
"(c) DENIAL OF DEDUCTION.—No deduction shall be allowed under
this subtitle by reason of any inclusion in gross income under
subsection (a)."
'Copy read "federal".
101 STAT. 1330-452 PUBLIC LAW 100-203—DEC. 22, 1987
(b) CLERICAL AMENDMENT.—The table of sections for part II of
subchapter B of chapter 1 is amended by adding at the end thereof
the following new item: ^, , ., ^,
"Sec. 90. Federal irrigation subsidies."
26 use 90 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply to water delivered to the taxpayer in months beginning after
the date of the enactment of this Act.
\%i Utiii
PART III—COMPLIANCE
SEC. 10621. STATE ESCHEAT L A W S N O T T O APPLY T O REFUNDS O F
FEDERAL TAX.
(a) GENERAL RULE.—Subchapter A of chapter 65 (relating to proce-
dure in general for abatements, credits, and refunds) is amended by
adding at the end thereof the following new section:
26 use 6408. "SEC. 6408. STATE ESCHEAT LAWS NOT TO APPLY. 7.1
"No overpayment of any tax imposed by this title shall be re-
funded (and no interest with respect to any such overpayment shall
be paid) if the amount of such refund (or interest) would escheat to a
Men K; 081) gg State or would otherwise become the property of a State under any
law relating to the disposition of unclaimed or abandoned property.
No refund (or payment of interest) shall be made to the estate of any
decedent unless it is affirmatively shown that such amount will not
escheat to a State or otherwise become the property of a State under
such a law,"
(b) CLERICAL AMENDMENT.—The table of sections for subchapter A
of chapter 65 is amended by adding at the end thereof the following
new item:
"Sec. 6408. State escheat laws not to apply." **'* • '- " " ••'*'
26 use 6408 (c) EFFECTIVE DATE.—The amendments made by this section shall
note. take effect on the date of the enactment of this Act.
26 use 7803 SEC. 10622. SENSE OF CONGRESS AS TO INCREASED INTERNAL REVENUE
note. SERVICE FUNDING FOR TAXPAYER ASSISTANCE AND
ENFORCEMENT.
(a) FINDINGS.—The (Dongress hereby finds that—
(1) the Internal Revenue Service estimates that the amount of
taxes owed for 1986 will exceed the amount of taxes collected for
ao* such year by $100 billion;
/ (2) the current taxpayer compliance rate stands at 81.5 per-
5.«tr cent;
'<a (3) the tax gap can be significantly reduced by enhancing
taxpayer assistance services and enforcement; and
(4) the Appropriations Committee of the House of Representa-
tives, in its fiscal year 1988 Internal Revenue Service appropria-
tion, took a step in the direction of providing additional funding
for taxpayer assistance and enforcement efforts.
(b) It is the sense of the (Dongress that:
(1) The Congress increase outlays for the Internal Revenue
•50li Service in fiscal year 1989 and fiscal year 1990 in the areas of
fAfc taxpayer assistance and enforcement by $.7 billion in fiscal year
1989 for a revenue total of $3.2 billion and by $.8 billion in fiscal
year 1990 for a revenue total of $4.4 billion. The net revenue
increase would be $2.5 billion in fiscal year 1989 and $3.6 billion
in fiscal year 1990, or a net revenue increase over the House
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-453
Appropriations Committee recommendations of $.4 billion in
fiscal year 1989 and $1.3 billion in fiscal year 1990.
(2) The Internal Revenue Service offer improved taxpayer
assistance and enforcement efforts by using the aforementioned
outlays in areas recommended by, or consistent with the rec-
ommendations of, the "Dorgan Task Force Report". Taxpayer
assistance efforts would include providing expanded taxpayer
education programs, instituting pilot programs of taxmobiles in
rural areas, and upgrading the quality of telephone assistance.
Taxpayer enforcement efforts would include raising the audit
rate from 1.1 percent toward 2.5 percent, restoring resources to
criminal investigations, and the collection of delinquent
accounts.
(3) The Congress should undertake an experimental multiyear
authorization and 2-year appropriation for the Internal Reve-
nue Service consistent with the recommendations in Public Law
100-119, section*^' 201 (Increasing the Statutory Limit on the
Public Debt).
(4) Increased funding should be provided for compilation and
analysis of statistics of income and research.
The Internal Revenue Service must issue a report on the extent of Reports.
the tax gap and che measures that could be undertaken to decrease
the tax gap. The report must utilize more current data than has
been utilized recently. The report must be issued by April 15, 1989.
The Internal Revenue Service must also report annually on the
improvements being made in the audit rate, taxpayer assistance,
and enforcement efforts.
PART IV—TAX-EXEMPT BOND PROVISIONS
SEC. 10631. ISSUES USED TO ACQUIRE NONGOVERNMENTAL OUTPUT
PROPERTY.
(a) IN GENERAL.—Section 141 is amended by redesignating subsec-
tion (d) as subsection (e) and by inserting after subsection (c) the
following new subsection:
"(d) CERTAIN ISSUES USED TO ACQUIRE NONGOVERNMENTAL
OUTPUT PROPERTY TREATED AS PRIVATE ACTIVITY BONDS.—
"(1) IN GENERAL.—For purposes of this title, the term 'private
activity bond' includes any bond issued as part of an issue if the
amount of the proceeds of the issue which are to be used
(directly or indirectly) for the acquisition by a governmental
unit of nongovernmental output property exceeds the lesser
of—
"(A) 5 percent of such proceeds, or
"(B) $5,000,000.
"(2) NONGOVERNMENTAL OUTPUT PROPERTY.—Except as other-
wise provided in this subsection, for purposes of paragraph (1),
the term 'nongovernmental output property' means any prop-
erty (or interest therein) which before such acquisition was used
(or held for use) by a person other than a governmental unit in
connection with an output facility (within the meaning of
subsection (bX4)) (other than a facility for the furnishing of
water). For purposes of the preceding sentence, use (or the
holding for use) before October 14, 1987, shall not be taken into
account.
101 STAT. 1330-454 PUBLIC LAW 100-203—DEC. 22, 1987
"(3) EXCEPTION FOR PROPERTY ACQUIRED TO PROVIDE OUTPUT TO
CERTAIN AREAS.—For purposes of paragraph (1)—
"(A) IN GENERAL.—The term 'nongovernmental output
property' shall not include any property which is to be used
in connection with an output facility 95 percent or more of
the output of which will be consumed in—
"(i) a qualified service area of the governmental unit
acquiring the property, or
"(ii) a qualiHed annexed area of such unit.
"(B) DEFINITIONS.—For purposes of subparagraph (A)—
"(i) QuAUFiED SERVICE AREA.—The term 'qualified
service area' means, with respect to the governmental
unit acquiring the property, any area throughout
which such unit provided (at all times during the 10-
year period ending on the date such property is ac-
quired by such unit) output of the same type as the
output to be provided by such property. For purposes of
the preceding sentence, the period before October 14,
.FT^i n . 1987, shall not be taken into account.
"(ii) QuAUFiED ANNEXED AREA.—The term 'qualified
r. , •: annexed area' means, with respect to the governmental
unit acquiring the property, any area if—
(I) such area is contiguous to, and annexed for
general governmental purposes into, a qualified
service area of such unit,
"(II) output from such property is made available
to all members of the general public in the an-
nexed area, and
* "(III) the annexed area is not greater than 10
percent of such qualified service area.
iv; j "(C) LIMITATION ON SIZE OF ANNEXED AREA NOT TO APPLY
WHERE O U T P U T CAPACITY DOES NOT INCREASE BY MORE THAN
10 PERCENT.—Subclause (III) of subparagraph (BXii) shall
'^ not apply to an annexation of an area by a governmental
•• unit if the output capacity of the property acquired in
connection with the annexation, when added to the output
^ "^ capacity of all other property which is not treated as non-
governmental output property by reason of subparagraph
(AXii) with respect to such annexed area, does not exceed 10
percent of the output capacity of the property providing
output of the same type to the qualified service area into
which it is annexed.
.,.> u^jy^ RULES FOR DETERMINING RELATIVE SIZE, ETC.—For
purposes of subparagraphs (BXii) and (C)—
"(i) The size of any qualified service area and the
output capacity of property serving such area shall be
">i determined as the close of the calendar year preceding
the calendar year in which the acquisition of non-
governmental output property or the annexation
occurs.
"(ii) A qualified annexed area shall be treated as part
of the qualified service area into which it is annexed for
purposes of determining whether any other area an
nexed in a later year is a qualified annexed area.
"(4) EXCEPTION FOR PROPERTY CONVERTED TO NONOUTPUT
USE.—For purposes of paragraph (1)—
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-455
"(A) IN GENERAL.—The term 'nongovernmental output
> property' shall not include any property which is to be
converted to a use not in connection with an output facility.
"(B) EXCEPTION.—Subparagraph (A) shall not apply to
i any property which is part of the output function of a
'( nuclear power facility.
"(5) SPECIAL RULES.—In the case of a bond which is a private
< activity bond solely by reason of this subsection—
"(A) subsections (c) and (d) of section 147 (relating to
limitations on acquisition of land and existing property)
( shall not apply, and
si "(B) paragraph (8) of section 142(a) shall be applied as if it
did not contain 'local'.
'•c "(6) TREATMENT OF JOINT ACTION AGENCIES.—With respect to
nongovernmental output property acquired by a joint action
f agency the members of which are governmental units, this
subsection shall be applied at the member level by treating each
member as acquiring its proportionate share of such property."
(b) TECHNICAL AMENDMENT.—Subparagraph (A) of section 146(fX5)
is amended to read as follows:
"(A) the purpose of issuing exempt facility bonds de-
scribed in 1 of the paragraphs of section 142(a),'.
(c) EFFECTIVE DATE.— 26 use 141 note.
(1) I N GENERAL.—Except as otherwise provided in this subsec-
tion, the amendments made by this section shall apply to bonds
issued after October 13, 1987 (other than bonds issued to refund
bonds issued on or before such date).
(2) BINDING AGREEMENTS.—The amendments made by this
section shall not apply to bonds (other than advance refunding
bonds) with respect to a facility acquired after October 13, 1987,
pursuant to a binding contract entered into on or before such
date.
(3) TRANSITIONAL RULE.—The amendments made by this sec-
tion shall not apply to bonds issued—
^: (A) after October 13, 1987, by an authority created by a
statute—
(i) approved by the State Governor on July 24, 1986
and
(ii) sections 1 through 10 of which became effective on
January 15,1987, and
(B) to provide facilities serving the area specified in such
statute on the date of its enactment,
SEC. 10632. BONDS ISSUED BY INDIAN TRIBAL GOVERNMENTS.
(a) IN GENERAL.—Section 7871 is amended by adding at the end
thereof the following new subsection:
"(e) ESSENTIAL GOVERNMENTAL FUNCTION.—For purposes of this
section, the term 'essential governmental function' shall not include
any function which is not customarily performed by State and local
governments with general taxing powers."
(b) EXCEPTION FOR CERTAIN PRIVATE ACTIVITY BONDS.—
(1) IN GENERAL.—Subsection (c) of section 7871 (relating to
additional requirements for tax-exempt bonds) is amended by
adding at the end thereof the following new paragraph:
"(3) EXCEPTION FOR CERTAIN PRIVATE ACTIVITY BONDS.—
"(A) I N GENERAL.—In the case of an obligation to which
this paragraph applies—
91-194 O - 90 - 40 : QL.3 Part 2
101 STAT. 1330-456 PUBLIC LAW 100-203—DEC. 22, 1987
Ji;qi> o Icf' "(i) paragraph (2) shall not apply,
9(i "•' "(ii) such obligation shall be treated for purposes of
'<i < this title as a qualified small issue bond, and
oi "(iii) section 146 shall not apply.
fc "(B) OBUGATIONS TO WHICH PARAGRAPH APPUES.—This
paragraph shall apply to any obligation issued as part of an
o: . i issue if—
"(i) 95 percent or more of the net proceeds of the
Oi )5r .^ issue are to be used for the acquisition, construction,
> V !%'fiq, -{; reconstruction, or improvement of property which is of
a character subject to the allowance for depreciation
n'H rx ': ;: and which is part of a manufacturing facility (as de-
fined in section 144(aX12XC)),
oi "(ii) such issue is issued by an Indian tribal govern-
iioi. ment or a subdivision thereof,
aidj o it "(iii) 95 percent or more of the net proceeds of the
001- issue are to be used to finance property which—
"\ "(I) is to be located on land which, throughout
the 5-year period ending on the date of issuance of
such issue, is part of the qualified Indian lands of
•^jh zi>ii(m the issuer, and
"(II) is to be owned and operated by such issuer,
ctr; ; ^: OBU ff2 "(iv) such obligation would not be a private activity
-sasHi.:;i bond without regard to subparagraph (C),
^br "(v) it is reasonably expected (at the time of issuance
bf* of t h e issue) t h a t t h e employment r e q u i r e m e n t of
s u b p a r a g r a p h (DXi) will be m e t with respect to t h e
»;/? f /cf >L facility to be financed by t h e n e t proceeds of t h e issue,
and
"(vi) no principal user of such facility will be a person
.ti, ^ (or group of persons) described in section 144(a)(6XB).
For purposes of clause (iii), section 150(aX5) shall apply.
19?- »i "(C) PRIVATE ACTIVITY BOND RULES TO APPLY.—An obliga-
tion to which this paragraph applies (other than an obliga-
B '{d i: tion described in paragraph (D) shall be treated for pur-
poses of this title as a private activity bond.
dWJ "(D) EMPLOYMENT REQUIREMENTS.—
"(i) IN GENERAL.—The employment requirements of
no BVQ'-•:.,'• this subparagraph are met with respect to a facility
financed by the net proceeds of an issue if, as of the
rfiog "• 5s close of each calendar year in the testing period, the
aggregate face amount of all outstanding tax-exempt
private activity bonds issued to provide financing for
the establishment which includes such facility is not
j..»T'# ' j ; ; >;. more than 20 times greater than the aggregate wages
(as defined by section 3121(a)) paid during the preced-
i'ls : ing calendar year to individuals (who are enrolled
M-. members of the Indian tribe of the issuer or the spouse
of any such member) for services rendered at such
establishment,
"(ii) FAILURE TO MEET REQUIREMENTS.—
o* "(I) I N GENERAL.—If, as of the close of any cal-
vj endar year in the testing period, the requirements
of this subparagraph are not met with respect to
an establishment, section 103 shall cease to apply
>> -civ oJ ivi,., to interest received or accrued (on all private activ-
ity bonds issued to provide financing for the
. : Ct - (:<:'
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-457
?f^'- ^ ' ' ' establishment) after the close of such calendar
a- J. .f1--^ 'ic: year.
"(II) EXCEPTION.—Subclause (I) shall not apply if
the requirements of this subparagraph would be
met if the aggregate face amount of all tax-exempt
. private activity bonds issued to provide financing
'^"^ '' ^ for the establishment and outstanding at the close
,, of the 90th day after the close of the calender year
^,' ' were substituted in clause (i) for such bonds
outstanding at the close of such calendar year.
" ^^ "(iii) TESTING PERIOD.—For purposes of this subpara-
" *^ graph, the term 'testing period' means, with respect to
an issue, each calendar year which begins more than 2
years after the date of issuance of the issue (or, in the
case of a refunding obligation, the date of issuance of
!, , the original issue).
"(E) DEFINITIONS.—For purposes of this paragraph—
"(i) QUALIFIED INDIAN LANDS.—The term 'qualified
Indian lands' means land which is held in trust by the
United States for the benefit of an Indian tribe.
J "(ii) INDIAN TRIBE.—The term 'Indian tribe' means
any Indian tribe, band, nation, or other organized
J• group or community which is recognized as eligible for
the special programs and services provided by the
f United States to Indians because of their status as
Indians.
x; "(iii) NET PROCEEDS.—The term 'net proceeds' has the
meaning given such term by section 150(a)(3)."
-<- (2) TECHNICAL AMENDMENT.—Paragraph (2) of section 7871(c)
is amended by striking out "Subsection (a)" and inserting in lieu
thereof "Except as provided in paragraph (3), subsection (a)",
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 use 7871
apply to obligations issued after October 13,1987, ^°^-
Subtitle G—Lobbying and Political Activities
;
i' •
of Tax-Exempt Organizations
" PART I—DISCLOSURE REQUIREMENTS
SEC. 10701. REQUIRED DISCLOSURE OF NONDEDUCTIBILITY OF CON-
TRIBUTIONS.
(a) GENERAL RULE.—Subchapter B of chapter 61 (relating to mis-
cellaneous provisions) is amended by redesignating section 6113 as .Gim
section 6114 and by inserting after section 6112 the following new
section:
"SEC. 6113. DISCLOSURE OF NONDEDUCTIBILITY OF CONTRIBUTIONS. 26 USC 6113.
"(a) GENERAL RULE.—Each fundraising solicitation by (or on
behalf of) an organization to which this section applies shall contain
an express statement (in a conspicuous and easily recognizable
format) that contributions or gifts to such organization are not
deductible as charitable contributions for Federal income tax
purposes.
"(b) ORGANIZATIONS TO WHICH SECTION APPLIES.—
101 STAT. 1330-458 PUBLIC LAW 100-203—DEC. 22, 1987
"(1) IN GENERAL.—Except £is otherwise provided in this
subsection, this section shall apply to any organization which is
not described in section 170(c) and which—
"(A) is described in subsection (c) (other than paragraph
(1) thereof) or (d) of section 501 and exempt from taxation
,'. under section 501(a),
"(B) is a political organization (as defined in section
527(e)), or
"(C) was an organization described in subparagraph (A) or
(B) at any time during the 5-year period ending on the date
of the fundraising solicitation or is a successor to an
organization so described at any time during such 5-year
period.
"(2) EXCEPTION FOR SMALL ORGANIZATIONS.—
"(A) ANNUAL GROSS RECEIPTS DO NOT EXCEED $100,000.—
This section shall not apply to any organization the gross
receipts of which in each taxable year are normally not
more than $100,000.
- " "(B) MULTIPLE ORGANIZATION RULE.—The Secretary may
•5 treat any group of 2 or more organizations as 1 organization
for purposes of subparagraph (A) where necessary or appro-
priate to prevent the avoidance of this section through the
use of multiple organizations.
"(3) SPECIAL RULE FOR CERTAIN FRATERNAL ORGANIZATIONS.—
For purposes of paragraph (1), an organization described in
section 170(c)(4) shall be treated as described in section 170(c)
only with respect to solicitations for contributions or gifts which
" are to be used exclusively for purposes referred to in section
170(c)(4).
"(c) FUNDRAISING SOLICITATION.—For purposes of this section—
"(1) IN GENERAL.—Except as provided in paragraph (2), the
term 'fundraising solicitation' means any solicitation of con-
. u tributions or gifts which is made—
•>'w "(A) in written or printed form, :^ r ;• ;
"(B) by television or radio, or
"(C) by telephone.
- ' "(2) EXCEPTION FOR CERTAIN LETTERS OR CALLS.—The term
'fundraising solicitation' shall not include any letter or tele-
phone call if such letter or call is not part of a coordinated
fundraising campaign soliciting more than 10 persons during
the calendar year."
(b) PENALTY.—Part I of subchapter B of chapter 68 (relating to
assessable penalties) is amended by adding at the end thereof the
following new section:
26 u s e 6710. "SEC. 6710. FAILURE TO DISCLOSE THAT CONTRIBUTIONS ARE NON-
DEDUCTIBLE.
"(a) IMPOSITION OF PENALTY.—If there is a failure to meet the
requirement of section 6113 with respect to a fundraising solicita-
^' -^ tion by (or on behalf of) an organization to which section 6113
applies, such organization shall pay a penalty of $1,000 for each day
on which such a failure occurred. The maximum penalty imposed
under this subsection on failures by any organization during any
calendar year shall not exceed $10,000.
"(b) REASONABLE CAUSE EXCEPTION.—No penalty shall be imposed
under this section with respect to any failure if it is shown that such
failure is due to reasonable cause.
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-459
"(c) $10,000 LIMITATION NOT TO APPLY WHERE INTENTIONAL DIS-
REGARD.—If any failure to which subsection (a) applies is due to
intentional disregard of the requirement of section 6113—
"(1) the penalty under subsection (a) for the day on which
such failure occurred shall be the greater of—
"(A) $1,000, or
"(B) 50 percent of the aggregate cost of the solicitations
which occurred on such day and with respect to which there
' was such a failure,
"(2) the $10,000 limitation of subsection (a) shall not apply to
any penalty under subsection (a) for the day on which such
failure occurred, and
"(3) such penalty shall not be taken into account in applying
such limitation to other penalties under subsection (a).
"(d) DAY ON WHICH FAILURE OCCURS.—For purposes of this sec-
tion, any failure to meet the requirement of section 6113 with
respect to a solicitation—
"(1) by television or radio, shall be treated as occurring when
the solicitation was telecast or broadcast,
"(2) by mail, shall be treated as occurring when the solicita-
tion was mailed,
"(3) not by mail but in written or printed form, shall be t • .
treated as occurring when the solicitation was distributed, or
"(4) by telephone, shall be treated as occurring when the
solicitation was made."
(c) CLERICAL AMENDMENTS.—
(1) The table of sections for subchapter B of chapter 61 is
amended by striking out the item relating to section 6113 and
inserting in lieu thereof the following:
"Sec. 6113. Disclosure of nondeductibility of contributions.
"Sec. 6114. Cross reference."
(2) The table of sections for part I of subchapter B of chapter
68 is amended by adding at the end thereof the following new
item:
"Sec. 6710. Failure to disclose that contributions are nondeductible." •
(d) EFFECTIVE DATE.—The amendments made by this section shall 26 use 6113
apply to solicitations after January 31,1988. note.
SEC. 10702. PUBLIC INSPECTION OF ANNUAL RETURNS AND APPLICA-
TIONS FOR TAX-EXEMPT STATUS.
(a) GENERAL RULE.—Section 6104 (relating to publicity of informa-
tion required from certain tax-exempt organizations and certain
trusts) is amended by adding at the end thereof the following new
subsection:
"(e) PuBUC INSPECTION OF CERTAIN ANNUAL RETURNS AND AP-
PUCATIONS FOR EXEMPTION.—
"(1) A N N U A L RETURNS.—
"(A) IN GENERAL.—During the 3-year period beginning on Public
the filing date, a copy of the annual return filed under information.
section 6033 (relating to returns by exempt organizations)
by any organization to which this paragraph applies shall
be made available by such organization for inspection
during regular business hours by any individual at the
principal office of the organization and, if such organization
regularly maintains 1 or more regional or district offices
101 STAT. 1330-460 PUBLIC LAW 100-203—DEC. 22, 1987
having 3 or more employees, at each such regional or
-i>S district office.
"(B) ORGANIZATIONS TO WHICH PARAGRAPH APPLIES.—This
paragraph shall apply to any organization which—
"(i) is described in subsection (c) or (d) of section 501
and exempt from taxation under section 501(a), and
"(ii) is not a private foundation (within the meaning
of section 509(a)).
"(C) NONDISCLOSURE OF CONTRIBUTORS.—Subparagraph
(A) shall not require the disclosure of the name or address
of any contributor to the organization.
"(D) FiUNG DATE.—For purposes of subparagraph (A), the
term 'filing date' means the last day prescribed for filing
the return under section 6033 (determined with regard to
any extension of time for filing).
'(2) APPUCATION FOR EXEMPTION.—
"(A) IN GENERAL.—If^
"(i) an organization described in subsection (c) or (d)
of section 501 is exempt from taxation under section
iJb.5i->a 501(a), and
Public "(ii) such organization filed an application for rec-
information. ognition of exemption under section 501,
a copy of such application (together with a copy of any
•SfJJ papers submitted in support of such application and any
letter or other document issued by the Internal Revenue
Service with respect to such application) shall be made
available by the organization for inspection during regular
business hours by any individual at the principal office of
the organization and, if the organization regularly main-
tains 1 or more regional or district offices having 3 or more
employees, at each such regional or district office.
"(B) NONDISCLOSURE OF CERTAIN INFORMATION.—Subpara-
'>.9it:
graph (A) shall not require the disclosure of any informa-
'^ ' tion if the Secretary withheld such information from public
inspection under subsection (aXlXD)."
26 u s e 6104 (b) EFFECTIVE DATE.—The amendment made by subsection (a)
note. shall apply—
(1) to returns for years beginning after December 31, 1986,
and
(2) on and after the 30th day after the date of the enactment
of this Act in the case of applications submitted to the Internal
Revenue Service—
(A) after July 15,1987, or
(B) on or before July 15, 1987, if the organization has a
copy of the application on July 15,1987.
SEC. 10703. ADDITIONAL INFORMATION REQUIRED ON ANNUAL RETURNS
OF SECTION 501(c)(3) ORGANIZATIONS.
(a) GENERAL RULE.—Subsection (b) of section 6033 (relating to
certain organizations described in section 501(cX3)) *^^ is amended
by striking out "and" at the end of paragraph (7), by striking out the
period at the end of paragraph (8) and inserting in lieu thereof a
comma, and by inserting after paragraph (8) the following new
paragraphs:
>»« Copy read "503(cX3))".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-461
"(9) such other information with respect to direct or indirect
f. transfers to, and other direct or indirect transactions and rela-
, tionships with, other organizations described in section 501(c)
(other than paragraph (3) thereof) or section 527 as the Sec-
retary may require to prevent—
^ "(A) diversion of funds from the organization's exempt
purpose, or
1 "(B) misallocation of revenues or expenses, and
* "(10) such other information for purposes of carrying out the
internal revenue laws as the Secretary may require."
(b) EFFECTIVE DATE.—The amendments made by subsection (a) 26 USC 6033
shall apply to returns for years beginning after December 31, 1987. note.
SEC. 10704. PENALTIES.
(a) GENERAL RULE.—Subsection (c) of section 6652 (relating to
returns by exempt organizations and by certain trusts) is amended
to read as follows:
"(c) RETURNS BY EXEMPT ORGANIZATIONS AND BY CERTAIN
TRUSTS.—
"(1) ANNUAL RETURNS UNDER SECTION 6033.—
' "(A) PENALTY ON ORGANIZATION.—In the case of—
<. "(i) a failure to file a return required under section
Its , 6033 (relating to returns by exempt organizations) on
the date and in the manner prescribed therefor (deter-
fif}'"- mined with regard to any extension of time for filing),
t' or
5- "(ii) a failure to include any of the information re-
,,;i quired to be shown on a return filed under section 6033
-5 or to show the correct information,
there shall be paid by the exempt organization $10 for each
« day during which such failure continues. The maximum
penalty under this subparagraph on failures with respect to
? any 1 return shall not exceed the lesser of $5,000 or 5
J percent of the gross receipts of the organization for the
year.
^, : .^ "(B) MANAGERS.—
^ ' *i "(i) IN GENERAL.—The Secretary may make a written
''-'' ' demand on any organization subject to penalty under
subparagraph (A) specifying therein a reasonable
future date by which the return shall be filed (or the
information furnished) for purposes of this subpara-
' "'^ ' graph.
"(ii) FAILURE TO COMPLY WITH DEMAND.—If any
•*>. • a. person fails to comply with any demand under clause (i)
on or before the date specified in such demand, there
shall be paid by the person failing to so comply $10 for
each day after the expiration of the time specified in
flns^ ~ such demand during which such failure continues. The
' n .: maximum penalty imposed under this subparagraph on
' ? ••n; all persons for failures with respect to any 1 return
shall not exceed $5,000.
"(C) PuBUC INSPECTION OF ANNUAL RETURNS.—In the case
V of a failure to comply with the requirements of subsection
£A:.> (d) or (eXD of section 6104 (relating to public inspection of
annual returns) on the date and in the manner prescribed
therefor (determined with regard to any extension of time
for filing), there shall be paid by the person failing to meet
101 STAT. 1330-462 PUBLIC LAW 100-203—DEC. 22, 1987
such requirements $10 for each day during which such
failure continues. The maximum penalty imposed under
this subparagraph on all persons for failures with respect to
>" any 1 return shall not exceed $5,000.
"(D) PUBLIC INSPECTION OF APPLICATIONS FOR EXEMP-
' TiON.—In the case of a failure to comply with the require-
ments of section 6104(e)(2) (relating to public inspection of
applications for exemption) on the date and in the manner
. I.? prescribed therefor, there shall be paid by the person fail-
ing to meet such requirements $10 for each day during
' ;,^ which such failure continues.
"(2) RETURNS UNDER SECTION 6034 OR 6043 (b) .—
"(A) PENALTY ON ORGANIZATION OR TRUST.—In the case of
a failure to file a return required under section 6034 (relat-
ing to returns by certain trusts) or section 6043(b) (relating
to terminations, etc., of exempt organizations), on the date
r>s;'5 ^^^ ^^ ^^® manner prescribed therefor (determined with
regard to any extension of time for filing), there shall be
paid by the exempt organization or trust failing so to file
$10 for each day during which such failure continues, but
the total amount imposed under this subparagraph on any
organization or trust for failure to file any 1 return shall
not exceed $5,000.
"(B) MANAGERS.—The Secretary may make written
demand on an organization or trust failing to file under
subparagraph (A) specifying therein a reasonable future
hK- . date by which such filing shall be made for purposes of this
subparagraph. If such filing is not made on or before such
date, there shall be paid by the person failing so to file $10
for each day after the expiration of the time specified in the
written demand during which such failure continues, but
the total amount imposed under this subparagraph on all
persons for failure to file any 1 return shall not exceed
$5,000.
"(3) REASONABLE CAUSE EXCEPTION.—No penalty shall be im-
posed under this subsection with respect to any failure if it is
shown that such failure is due to reasonable cause.
"(4) OTHER SPECIAL RULES.—
"(A) TREATMENT AS TAX.—Any penalty imposed under
this subsection shall be paid on notice and demand of the
f. Secretary and in the same manner as tax.
"(B) JOINT AND SEVERAL UABILITY.—If more than 1 person
is liable under this subsection for any penalty with respect
to any failure, all such persons shall be jointly and sever-
ally liable with respect to such failure.
"(C) PERSON.—For purposes of this subsection, the term
'person' means any officer, director, trustee, employee, or
other individual who is under a duty to perform the act in
respect of which the violation occurs."
(b) WILLFUL FAILURE TO PERMIT PUBLIC INSPECTION.—
(1) IN GENERAL.—Section 6685 (relating to assessable penalty
with respect to private foundation annual returns) is amended
to read as follows:
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-463
"SEC. 6685. ASSESSABLE PENALTY WITH RESPECT TO PUBLIC INSPEC- 26 USC 6685.
TION REQUIREMENTS FOR CERTAIN TAX-EXEMPT
ORGANIZATIONS.
"In addition to the penalty imposed by section 7207 (relating to
fraudulent returns, statements, or other documents), any person
who is required to comply with the requirements of subsection (d) or
(e) of section 6104 and who fails to so comply with respect to any
return or application, if such failure is willful, shall pay a penalty of
$1,000 with respect to each such return or application.'
(2) CLERICAL AMENDMENT.—The table of sections for part I of
subchapter B of chapter 68 is amended by striking out the
f item relating to section 6685 and inserting in lieu thereof the
following:
"Sec. 6685. Assessable penalty with respect to public inspection require-
ments for certain tax-exempt organizations."
(c) FURNISHING FRAUDULENT INFORMATION.—Section 7207 (relat-
ing to fraudulent returns, statements, or other documents) is
amended by striking out "subsection (d) of section 6104" and insert-
ing in lieu thereof "subsection (d) or (e) of section 6104".
(d) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 6652
apply— note.
(1) to returns for years beginning after December 31, 1986,
and
(2) on and after the date of the enactment of this Act in
the case of applications submitted to the Internal Revenue
Service—
(A) after July 15,1987, or
(B) on or before July 15, 1987, if the organization has a
copy of the application on July 15,1987.
SEC. 10705. REQUIRED DISCLOSURE THAT CERTAIN INFORMATION OR
SERVICE AVAILABLE FROM FEDERAL GOVERNMENT.
(a) GENERAL RULE.—Part I of subchapter B of chapter 68 (relating
to assessable penalties) is amended by adding at the end thereof the
following new section:
"SEC. 6711. FAILURE BY TAX-EXEMPT ORGANIZATION TO DISCLOSE THAT 26 USC 6711.
CERTAIN INFORMATION OR SERVICE AVAILABLE FROM
FEDERAL GOVERNMENT.
"(a) IMPOSITION OF PENALTY.—If—
"(1) a tax-exempt organization offers to sell (or solicits money
for) specific information or a routine service for any individual
which could be readily obtained by such individual free of
charge (or for a nominal charge) from an agency of the Federal
Government,
"(2) the tax-exempt organization, when making such offer or
solicitation, fails to make an express statement (in a conspicu-
ous and easily recognizable format) that the information or
service can be so obtained, and
"(3) such failure is due to intentional disregard of the require-
ments of this subsection,
such organization shall pay a penalty determined under subsection
(b) for each day on which such a failure occurred.
"(h) AMOUNT OF PENALTY.—The penalty under subsection (a) for
any day on which a failure referred to in such subsection occurred
shall be the greater of—
"(1) $1,000, or
101 STAT. 1330-464 PUBLIC LAW 100-203—DEC. 22, 1987
. ; :« JS . >i i:* "(2) 50 percent of the aggregate cost of the offers and solicita-
T*l tions referred to in subsection (aXD which occurred on such day
and with respect to which there was such a failure.
"(c) DEFINITIONS.—For purposes of this section—
"(1) TAX-EXEMPT ORGANIZATION.—The term 'tax-exempt
organization' means any organization which—
"(A) is described in subsection (c) or (d) of section 501 and
exempt from taxation under section 501(a), or
"(B) is a political organization (as defined in section
*- 5 -^ 527(e)).
"(2) DAY ON WHICH FAILURE OCCURS.—The day on which any
failure referred to in subsection (a) occurs shall be determined
under rules similar to the rules of section 6710(d)."
(b) CLERICAL AMENDMENT.—The table of sections for part I of
subchapter B of chapter 68 is amended by adding at the end thereof
the following new item:
"Sec. 6711. Failure by tax-exempt organization to disclose that certain in-
formation or service available from Federal Grovernment."
26 u s e 6711 (c) EFFECTIVE D A T E . — T h e a m e n d m e n t s m a d e by this section shall
^°^- apply to offers a n d solicitations after J a n u a r y 31,1988. vkiCT£
PART II—POLITICAL ACTIVITIES 1^
SEC. 10711. CLARIFICATION OF PROHIBITED POLITICAL ACTIVITIES.
(a) GENERAL R U L E . — T h e following provisions a r e each a m e n d e d
by striking o u t "on behalf of a n y c a n d i d a t e " a n d inserting in lieu
thereof "on behalf of (or in opposition to) a n y candidate":
(1) Section 170(cX2XD).
(2) Section 501(cX3). .« .
(3) P a r a g r a p h s (2) a n d (3) of section 2055(a).
(4) Clauses (ii) a n d (iii) of section 2106(aX2XA).
•" (5) Section 2522(aX2). ' -
(6) P a r a g r a p h s (2) a n d (3) of section 25220)).
(b) STATUS AFTER DISQUAUFICATION BECAUSE O F POLITICAL
f jra Oc ACTIVITIES.—
(1) I N G E N E R A L . — P a r a g r a p h (2) of section 504(a) (relating t o
s t a t u s after organization ceases to qualify for exemption u n d e r
section 501(cX3) because of s u b s t a n t i a l lobbying) is a m e n d e d to
read a s follows:
,„ "(2) is n o t a n organization described in section 501(cX3)—
•i^ "(A) by reason of c a r r y i n g on propaganda, or otherwise
1^. a t t e m p t i n g , to influence legislation, or
"(B) by reason of participating in, or i n t e r v e n i n g in, a n y
.,,, political campaign on behalf of (or in opposition to) a n y
^y, candidate for public office,".
jf^ (2) CLERICAL AMENDMENTS.—
(A) T h e section h e a d i n g for section 504 is a m e n d e d by
..^ s t r i k i n g o u t "SUBSTANTIAL L O B B Y I N G " a n d inserting
in lieu thereof "SUBSTANTIAL L O B B Y I N G O R B E -
CAUSE O F P O L I T I C A L A C T I V I T I E S " .
(B) T h e table of sections for p a r t I of s u b c h a p t e r F of
to c h a p t e r 1 is a m e n d e d by striking out " s u b s t a n t i a l lobbjdng"
be i n t h e item r e l a t i n g to section 504 £md inserting in lieu
thereof " s u b s t a n t i a l lobbying or because of political
activities".
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-465
(c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 170 note.
apply with respect to activities after the date of the enactment of
this Act.
SEC. 10712. EXCISE TAXES ON POLITICAL EXPENDITURES BY SECTION
501(c)(3) ORGANIZATIONS.
(a) GENERAL RULE.—Chapter 42 (relating to excise taxes on pri-
vate foundations and black lung benefit trusts) is amended by
redesignating subchapter C as subchapter D and by inserting after
subchapter B the following new subchapter:
... "Subchapter C—Political Expenditures of Section 501(c)(3)
Organizations
"Sec. 4955. Taxes on political expenditures of section 501(cX3) organizations.
"SEC. 4955. TAXES ON POLITICAL EXPENDITURES OF SECTION 501(c)(3) 26 USC 4955.
ORGANIZATIONS.
"(a) INITIAL TAXES.—
a "(1) O N THE ORGANIZATION.—There is hereby imposed on each
political expenditure by a section 501(cX3) organization a tax
i equal to 10 percent of the amount thereof. The tax imposed by
• this paragraph shall be paid by the organization.
"(2) O N THE MANAGEMENT.—There is hereby imposed on the
agreement of any organization manager to the making of any
expenditure, knowing that it is a political expenditure, a tax
equal to 2y2 percent of the amount thereof, unless such agree-
ment is not willful and is due to reasonable cause. The tax
imposed by this paragraph shall be paid by any organization
manager who agreed to the making of the expenditure.
"(b) ADDITIONAL TAXES.—
"(1) O N THE ORGANIZATION.—In any case in which an initial
tax is imposed by subsection (aXD on a political expenditure and
such expenditure is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the
^^ amount of the expenditure. The tax imposed by this paragraph
' shall be paid by the organization.
"(2) O N THE MANAGEMENT.—In any case in which an addi-
tional tax is imposed by paragraph (1), if an organization man-
^' ager refused to agree to part or all of the correction, there is
hereby imposed a tax equal to 50 percent of the amount of the
political expenditure. The tax imposed by this paragraph shall
be paid by any organization manager who refused to agree to
part or all of the correction.
"(c) SPECIAL RULES.—For purposes of subsections (a) and 0))—
"(1) JOINT AND SEVERAL UABIUTY.—If more than 1 person is
liable under subsection (aX2) or (bX2) with respect to the making
of a political expenditure, all such persons shall be jointly and
severally liable under such subsection with respect to such
. expenditure.
"(2) LIMIT FOR MANAGEMENT.—With respect to any 1 political
5 expenditure, the maximum amount of the tax imposed by
;: subsection (aX2) shall not exceed $5,000, and the maximum
amount of the tax imposed by subsection (bX2) shall not exceed
$10,000.
"(d) POUTICAL EXPENDITURE.—For purposes of this section—
101 STAT. 1330-466 PUBLIC LAW 100-203—DEC. 22, 1987
"(1) IN GENERAL.—The term 'political expenditure' means any
^* amount paid or incurred by a section 501(c)(3) organization in
any participation in, or intervention in (including the publica-
^4, tion or distribution of statements), any political campaign on
behalf of (or in opposition to) any candidate for public office.
"(2) CERTAIN OTHER EXPENDITURES INCLUDED.—In the case of
'••• • an organization which is formed primarily for purposes of
• promoting the candidacy (or prospective candidacy) of an
' individual for public office (or which is effectively controlled by
a candidate or prospective candidate and which is availed of
primarily for such purposes), the term 'political expenditure'
includes any of the following amounts paid or incurred by the
organization:
"(A) Amounts paid or incurred to such individual for
s •'-: speeches or other services. i ^^TK,
^ , "(B) Travel expenses of such individual.
« f^ /J > .» * ; ii^Q^ Expenses of conducting polls, surveys, or other
studies, or p r e p a r i n g papers or other materials, for use by
such individual.
"(D) Expenses of advertising, publicity, and fundraising
for such individual.
,--: "^ "(E) A n y other expense which h a s t h e p r i m a r y effect of
promoting public recognition, or otherwise primarily accru-
ing to t h e benefit, of such individual.
"(e) COORDINATION W I T H SECTION 4945.—If t a x is imposed under
this section with respect to a n y political expenditure, such expendi-
t u r e shall not be treated as a taxable expenditure for purposes of
section 4945.
"(f) O T H E R D E F I N I T I O N S . — F o r purposes of this section—
"(1) SECTION 501(CH3) ORGANIZATION.—The term 'section
501(cX3) organization' m e a n s a n y organization which (without
regard to a n y political expenditure) would be described in sec-
tion 501(cX3) a n d exempt from taxation under section 501(a).
"(2) ORGANIZATION M A N A G E R . — T h e t e r m 'organization man-
ager' means—
.-: "(A) a n y officer, director, or trustee of t h e organization
(or individual having powers or responsibilities similar to
those of officers, directors, or trustees of t h e organization),
"(B) with respect to a n y expenditure, a n y employee of t h e
organization having authority or responsibility with respect
to such expenditure.
"(3) CORRECTION.—The t e r m s 'correction' and 'correct' mean,
with respect to a n y political expenditure, recovering p a r t or all
of t h e expenditure to t h e extent recovery is possible, establish-
m e n t of safeguards to prevent future political expenditures, and
w h e r e full recovery is not possible, such additional corrective
action as is prescribed by t h e Secretary by regulations.
"(4) TAXABLE PERIOD.—The t e r m 'taxable period' means, with
respect to a n y political expenditure, t h e period beginning with
the date on which t h e political expenditure occurs a n d ending
on t h e earlier of—
"(A) t h e date of mailing a notice of deficiency under
section 6212 with respect to t h e tax imposed by subsection
' (aXl), or
"(B) t h e date on which t a x imposed by subsection (aXD is
assessed."
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-467
(b) ABATEMENT OF FIRST TIER TAX IN CERTAIN CASES.—
(1) Section 4962 (relating to abatement of private foundation
first tier taxes in certain cases) is amended by striking out ., . ...
subsection (b) and inserting in lieu thereof the following new .;. T
subsections:
"(b) QUALIFIED FIRST TIER TAX.—For purposes of this section, the
term 'qualified first tier tax' means any first tier tax imposed by
subchapter A or C of this chapter, except that such term shall not
include the tax imposed by section 4941(a) (relating to initial tax on
self-dealing).
"(c) SPECIAL RULE FOR TAX ON POLITICAL EXPENDITURES OF SEC-
TION 501(c)(3) ORGANIZATIONS.—In the case of the tax imposed by
section 4955(a), subsection (aXD shall be applied by substituting 'not
willful and flagrant' for 'due to reasonable cause and not to willful
neglect'." > '.-. ?ji.
(2) Subsection (a) of section 4962 is amended by striking out
"any private foundation first tier tax" and inserting in lieu
thereof "any qualified first tier tax".
' (3) Subsections (a), (b), and (c) of section 4963 are each
amended by striking out "4952," and inserting in lieu thereof
"4952, 4955,".
(4) The section heading for section 4962 is amended by strik-
ing out "PRIVATE FOUNDATION".
(5) The table of sections for subchapter D of chapter 42 (as
redesignated by this section) is amended by striking out "pri-
vate foundation" in the item relating to section 4962,
(c) TECHNICAL AMENDMENTS.—
(1) Subsection (e) of section 6213 is amended by striking out
"4971" and inserting in lieu thereof "4955 (relating to taxes on
political expenditures), 4971".
(2) Paragraph (1) of section 6501(1) is amended by striking out
"plan, or trust" and inserting in lieu thereof "plan, trust, or
-V other organization".
(3) Subsection (g) of section 6503 is amended by striking out
"4951, 4952,".
(4) Section 6684 is amended by striking out "private founda-
tions" and inserting in lieu thereof "private foundations and
certain other tax-exempt organizations'.
ft (5) Paragraphs (2) and (3) of section 7422(g) are each amended
by striking out "4952," and inserting in lieu thereof "4952,
, 4955,".
(6) Subsection (b) of section 7454 is amended by striking out
"the burden of proof and inserting in lieu thereof "or whether
an organization manager (as defined in section 4955(e)(2)) has
'knowingly' agreed to the making of a political expenditure
(within the meaning of section 4955), the burden of proof.
(7) The chapter heading for chapter 42 is amended by
striking out "BLACK LUNG BENEFIT TRUSTS" and
inserting in lieu thereof "AND CERTAIN OTHER TAX-
EXEMPT ORGANIZATIONS".
(8) The table of chapters for subtitle D of such Code is
amended by striking out "black lung benefit trusts" in the item
relating to chapter 42 and inserting in lieu thereof "and certain
: other tax-exempt organizations".
(9) The table of subchapters for chapter 42 is amended by
striking out the item relating to subchapter C and inserting in
lieu thereof the following:
101 STAT. 1330-468 PUBLIC L A W 100-203—DEC. 22, 1987
"SUBCHAPTER C. Political expenditures of section 501(cX3) organizations.
"SUBCHAPTER D. Abatement of first and second-tier taxes in certain cases."
26 use 4955 (d) EFFECTIVE DATES.—The amendments made by this section shall
note. apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 10713. ADDITIONAL ENFORCEMENT AUTHORITY IN THE CASE OF
FLAGRANT POLITICAL EXPENDITURES.
(a) AUTHORITY TO ENJOIN FLAGRANT POLITICAL EXPENDITURES.—
(1) I N GENERAL.—Subchapter A of chapter 76 (relating to civil
-'' actions by the United States) is amended by redesignating
section 7409 as section 7410 and by inserting after section 7408
the following new section:
26 u s e 7409. "SEC. 7409. ACTION TO ENJOIN FLAGRANT POLITICAL EXPENDITURES OF
SECTION 501(c)(3) ORGANIZATIONS.
"(a) AUTHORITY To SEEK INJUNCTION.—
^j^ "(1) I N GENERAL.—If the requirements of paragraph (2) are
^^ met, a civil action in the name of the United States may be
commenced at the request of the Secretary to enjoin any section
.{ 501(c)(3) organization from further making political expendi-
tures and for such other relief as may be appropriate to ensure
>5> that the assets of such organization are preserved for charitable
.J or other purposes specified in section 501(cX3). Any action under
this section shall be brought in the district court of the United
States for the district in which such organization has its prin-
•£5, cipal place of business or for any district in which it has made
'(jfT^ political expenditures. The court may exercise its jurisdiction
over such action (as provided in section 7402(a)) separate and
ty. apart from any other action brought by the United States
tc against such organization.
"(2) REQUIREMENTS.—An action may be brought under subsec-
j0 tion (a) only if—
"(A) the Internal Revenue Service has notified the
i;f«ivC organization of its intention to seek an injunction under
bfis f this section if the making of political expenditures does not
immediately cease, and
"(B) the C!ommissioner of Internal Revenue has person-
ally determined that—
"(i) such organization has flagrantly participated in,
liif •;' or intervened in (including the publication or distribu-
tion of statements), any political campaign on behalf of
aB (or in opposition to) a n y candidate for public office, a n d
31 "(ii) injunctive relief is appropriate to prevent future
political expenditures.
"(b) ADJUDICATION AND DECREE.—In any action under subsection
(a), if the court finds on the basis of clear and convincing evidence
that—
"(1) such organization has flagrantly participated in, or inter-
K vened in (including the publication or distribution of state-
' • ments), any political campaign on behalf of (or in opposition to)
^ any candidate for public office, and
"(2) injunctive relief is appropriate to prevent future political
^ - expenditures,
the court may enjoin such organization from making political
expenditures and may grant such other relief as may be appropriate
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-469
to ensure that the assets of such organization are preserved for
charitable or other purposes specified in section 501(cX3).
"(c) DEFINITIONS.—For purposes of this section, the terms 'section
501(cX3) organization' and 'political expenditures' have the respec-
tive meanings given to such terms by section 4955."
(2) CLERICAL AMENDMENT.—The table of sections for sub-
" chapter A of chapter 76 is amended by striking the item
relating to section 7409 and inserting in lieu thereof the
1^. following:
"Sec. 7409. Action to enjoin flagrant political expenditures of section
501(cX3) organizations.
"Sec. 7410. Cross references."
., (h) AUTHORITY TO MAKE IMMEDIATE ASSESSMENTS.—
['^ (1) IN GENERAL.—Part I of subchapter A of chapter 70 (relat-
ing to termination of taxable year) is amended by adding at the
end thereof the following new section:
"SEC. 6852. TERMINATION ASSESSMENTS IN CASE OF FLAGRANT POLITI- 26 USC 6852.
CAL EXPENDITURES OF SECTION 501(c)(3) ORGANIZATIONS.
^ "(a) AUTHORITY TO MAKE.—
" "(1) IN GENERAL.—If the Secretary finds that—
„• "(A) a section 501(cX3) organization has made political
^,' [;: expenditures, and
(B) such expenditures constitute a flagrant violation of
the prohibition against making political expenditures,
the Secretary shall immediately make a determination of any
income tax payable by such organization for the current or
immediately preceding teixable year, or both, and shall imme-
diately make a determination of any tax payable under section
4955 by such organization or any maneiger thereof with respect
,. to political expenditures during the current or preceding tax-
able year, or both. Notwithstanding any other provision of law,
any such tax shall become immediately due and payable. The
Secretary shall immediately assess the amount of tax so deter-
I mined (together with all interest, additional amounts, and addi-
' tions to the tax provided by law) for the current year or the
preceding taxable year, or both, and shall cause notice of such
^ determination and assessment to be given to the organization or
*: any manager thereof, as the case may be, together with a
. demand for immediate payment of such tax.
^ "(2) COMPUTATION OF TAX.—In the case of a current taxable
. year, the Secretary shall determine the taxes for the period
' beginning on the 1st day of such current taxable year and
ending on the date of the determination under paragraph (1) as
though such period were a taxable year of the organization, and
shall take into account any prior determination made under
this subsection with respect to such current taxable year. *>0J> .i^TT d l
• "(3) TREATMENT OF AMOUNTS COLLECTED.—Any amounts col-
lected as a result of any £issessments under this subsection shall,
to the extent thereof, be treated as a pajrment of income tax for
such taxable year, or tax under section 4955 with respect to the
expenditure, as the case may be.
(4) SECTION INAPPUCABLE TO ASSESSMENTS AFTER DUE DATE.—
This section shall not authorize any assessment of tax for the
preceding taxable year which is made after the due date of the
organization's return for such taxable year (determined with
'^. regard to any extensions).
101 STAT. 1330-470 PUBLIC LAW 100-203—DEC. 22, 1987
"(b) DEFINITIONS AND SPECIAL RULES.—
"(1) DEFINITIONS.—For purposes of this section, the terms
'section 501(cX3) organization', 'political expenditure', and
'organization manager' have the respective meanings given to
such terms by section 4955.
"(2) CERTAIN RULES MADE APPUCABLE.—The provisions of sec-
tions 6851(b), 6861(f), and 6861(g) shall apply with respect to any
assessment made under subsection (a), except that determina-
tions under section 6861(g) shall be made on the basis of
'Wiik- whether the requirements of subsection (aXlXB) of this section
are met in lieu of whether jeopardy exists."
(2) TECHNICAL AND CONFORMING AMENDMENTS.—
(A) Clause (v) of section 6091(bXlXB) is amended by strik-
ing out "section 6851(a)" and inserting in lieu thereof "sec-
tion 6851(a) or 6852(a)".
(B) Paragraph (1) of section 6211(b) is amended bv strik-
;i j^y ,'i ,, ing out "section 6851" and inserting in lieu thereof 'section
6851 or 6852".
(C) Paragraph (1) of section 6212(c) is amended by striking
out "section 6851" and inserting in lieu thereof "section
6851 or 6852".
13; f • (D) Subsection (a) of section 6213 is amended by striking
out "section 6851 or section 6861" and inserting in lieu
••?
thereof "section 6851, 6852, or 6861".
(E) Section 6863 is amended—
(i) by striking out "6851" in subsection (a) and insert-
ing in lieu thereof "6851, 6852,",
(ii) by striking out "6851 or 6861" in subsection
(bX3XA) and inserting in lieu thereof "6851, 6852, or
6861", and
(iii) by striking out "6851(a) or 6861(a)" and inserting
in lieu thereof "6851(a), 6852(a), or 6861(a)".
(F) Section 7429 is amended—
(i) by striking out "6851(a)," each place it appears
and inserting in lieu thereof "6851(a), 6852(a),', and
(ii) by striking out "6851," each place it appears and
inserting in lieu thereof "6851, 6852,".
(G) Paragraph (3) of section 761 l(i) is amended by striking
•- out "or section 6861" and inserting in lieu thereof "section
6852 relating to termination assessments in case of political
expenditures of section 501(cX3), or 6861".
(H) The table of sections for part I of subchapter 70 is
amended by adding at the end thereof the following new
item:
"Sec. 6852. Termination assessments in case of flagrant political expendi-
tures of section 501(cX3) organizations."
26 use 6091 (c) EFFECTIVE DATE.—The amendments made by this section shall
note. take effect on the date of the enactment of this Act.
SEC. 10714. TAX ON DISQUALIFYING LOBBYING EXPENDITURES.
(a) GENERAL RULE.—Chapter 41 (relating to public charities) is
amended by adding at the end thereof the following new section:
26 use 4912. "SEC. 4912. TAX ON DISQUALIFYING LOBBYING EXPENDITURES OF CER-
TAIN ORGANIZATIONS.
"(a) TAX ON ORGANIZATION.—If an organization to which this
section applies is not described in section 501(cX3) for any taxable
PUBLIC LAW 100-203—DEC. 22, 1987 101 STAT. 1330-471
year by reason of making lobbying expenditures, there is hereby
imposed a tax on the lobbying expenditures of such organization for
such taxable year equal to 5 percent of the amount of such expendi-
tures. The tax imposed by this subsection shall be paid by the
organization.
"(b) O N MANAGEMENT.—If tax is imposed under subsection (a) on
the lobbying expenditures of any organization, there is hereby
imposed on the agreement of any organization manager to the
making of any such expenditures, knowing that such expenditures
are likely to result in the organization not being described in section
501(c)(3), a tax equal to 5 percent of the amount of such expendi-
tures, unless such agreement is not willful and is due to reasonable
cause. The tax imposed by this subsection shall be paid by any
manager who agreed to the making of the expenditures.
"(c) ORGANIZATIONS TO WHICH SECTION APPLIES.—
"(1) IN GENERAL.—Except as provided in paragraph (2), this
section shall apply to any organization which was exempt (or
was determined by the Secretary to be exempt) from taxation
under section 501(a) by reason of being an organization de-
scribed in section 501(c)(3).
"(2) EXCEPTIONS.—This section shall not apply to any
organization—
"(A) to which an election under section 501(h) applies,
"(B) which is a disqualified organization (within the
meaning of section 501(hX5)), or
"(C) which is a private foundation.
"(d) DEFINITIONS.—
"(1) LOBBYING EXPENDITURES.—The term 'lobbying expendi-
ture' means any amount paid or incurred by the organization in
carrying on propaganda, or otherwise attempting to influence
legislation.
"(2) ORGANIZATION MANAGER.—The term 'organization man-
ager' has the meaning given to such term by section 4955(fK2).
"(3) JOINT AND SEVERAL UABILITY.—If more than 1 person is
liable under subsection (b), all such persons shall be jointly and
severally liable under such subsection."
(b) BURDEN OF PROOF.—Subsection (b) of section 7454 (as amended
by this Act) is amended by striking out "the burden of proof and
inserting in lieu thereof ", or whether an organization manager (as
defined in section 4912(d)(2)) has 'knowingly' agreed to the making
of disqualifying lobbying expenditures within the meaning of section
49120)), the burden of proof'.
(c) TECHNICAL AMENDMENT.—Paragraph (1) of section 6501(1) is
amended by striking out "by chapter 42 (other than section 4940)"
and inserting in lieu thereof "by section 4912, by chapter 42 (other
than section 4940),".
(d) CLERICAL AMENDMENT.—The table of sections for chapter 41 is
amended by adding at the end thereof the following new item:
"Sec. 4912. Tax on disqualifying lobbying expenditures of certain organiza-
tions."
101 STAT. 1330-472 PUBLIC LAW 100-203—DEC. 22, 1987
26 u s e 4912 (e) EFFECTIVE DATE.—The amendments made by this section shall
^°^- apply to taxable years beginning after the date of the enactment of
this Act. '^
Approved December 22, 1987. '•(j^l^-* «"*
• Certified April 20, 1988. ,T - -
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Editorial note: This printed version of the original hand enrollment is published
pursuant to section 8004(c) of this law. The following memorandum for the Archivist
of the United States was signed by the President on January 28,1988, and w£is printed
in the Federal Register on February 1, 1988:
By the authority vested in me as President by the Constitution and laws of the
United States, including Section 301 of Title 3 of the United States Code, I hereby
authorize you to ascertain whether the printed enrollments of H.J. Res. 395, Joint
, Resolution making further continuing appropriations for the fiscal year 1988 (Public
Law 100-202), and H.R. 3545, the Omnibus Budget Reconciliation Act of 1987 (Public
Law 100-203), are correct printings of the hand enrollments, which were approved on
December 22, 1987, and if so to make on my behalf the certifications required by
Section 101(nX4) of H.J. Res. 395 and Section 8004(c) of H.R. 3545.
Attached are the printed enrollments of H.J. Res. 395 and H.R. 3545, which were
; received at the White House on January 27, 1988.
This memorandum shall be published in the Federal Register.
The Archivist on April 20, 1988, certified this to be a correct printing of the hand
enrollment of Public Law 100-203.
'i'ij.'.ij'.!' ^,i- «;vj i:.-!' .;>>;,^;/
LEGISLATIVE HISTORY—H.R. 3545 (S. 1920):
HOUSE REPORTS: No. 100-391 (Comm. on the Budget) and No. 100-495 (Comm. of
Conference).
CONGRESSIONAL RECORD, Vol. 133 (1987):
Oct. 29, considered and passed House.
Dec. 9, S. 1920 considered in Senate.
Dec. 10, H.R. 3545 considered and passed Senate, amended, in lieu of S. 1920.
Dec. 21, House and Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 23 (1987):
Dec. 22, Presidential remarks.
