H.R. 1180 (106th): Ticket to Work and Work Incentives Improvement Act of 1999

106th Congress, 1999–2000. Text as of Dec 09, 1999 (Passed Congress/Enrolled Bill).

Status & Summary | PDF | Source: GPO

H.R.1180

One Hundred Sixth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Wednesday,

the sixth day of January, one thousand nine hundred and ninety-nine

An Act

To amend the Social Security Act to expand the availability of health care coverage for working individuals with disabilities, to establish a Ticket to Work and Self-Sufficiency Program in the Social Security Administration to provide such individuals with meaningful opportunities to work, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Ticket to Work and Work Incentives Improvement Act of 1999’.

    (b) TABLE OF CONTENTS- The table of contents is as follows:

      Sec. 1. Short title; table of contents.

      Sec. 2. Findings and purposes.

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

Subtitle A--Ticket to Work and Self-Sufficiency

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

Subtitle B--Elimination of Work Disincentives

      Sec. 111. Work activity standard as a basis for review of an individual’s disabled status.

      Sec. 112. Expedited reinstatement of disability benefits.

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

      Sec. 121. Work incentives outreach program.

      Sec. 122. State grants for work incentives assistance to disabled beneficiaries.

TITLE II--EXPANDED AVAILABILITY OF HEALTH CARE SERVICES

      Sec. 201. Expanding State options under the medicaid program for workers with disabilities.

      Sec. 202. Extending medicare coverage for OASDI disability benefit recipients.

      Sec. 203. Grants to develop and establish State infrastructures to support working individuals with disabilities.

      Sec. 204. Demonstration of coverage under the medicaid program of workers with potentially severe disabilities.

      Sec. 205. Election by disabled beneficiaries to suspend medigap insurance when covered under a group health plan.

TITLE III--DEMONSTRATION PROJECTS AND STUDIES

      Sec. 301. Extension of disability insurance program demonstration project authority.

      Sec. 302. Demonstration projects providing for reductions in disability insurance benefits based on earnings.

      Sec. 303. Studies and reports.

TITLE IV--MISCELLANEOUS AND TECHNICAL AMENDMENTS

      Sec. 401. Technical amendments relating to drug addicts and alcoholics.

      Sec. 402. Treatment of prisoners.

      Sec. 403. Revocation by members of the clergy of exemption from social security coverage.

      Sec. 404. Additional technical amendment relating to cooperative research or demonstration projects under titles II and XVI.

      Sec. 405. Authorization for State to permit annual wage reports.

      Sec. 406. Assessment on attorneys who receive their fees via the Social Security Administration.

      Sec. 407. Extension of authority of State medicaid fraud control units.

      Sec. 408. Climate database modernization.

      Sec. 409. Special allowance adjustment for student loans.

      Sec. 410. Schedule for payments under SSI state supplementation agreements.

      Sec. 411. Bonus commodities.

      Sec. 412. Simplification of definition of foster child under EIC.

      Sec. 413. Delay of effective date of organ procurement and transplantation network final rule.

TITLE V--TAX RELIEF EXTENSION ACT OF 1999

      Sec. 500. Short title of title.

Subtitle A--Extensions

      Sec. 501. Allowance of nonrefundable personal credits against regular and minimum tax liability.

      Sec. 502. Research credit.

      Sec. 503. Subpart F exemption for active financing income.

      Sec. 504. Taxable income limit on percentage depletion for marginal production.

      Sec. 505. Work opportunity credit and welfare-to-work credit.

      Sec. 506. Employer-provided educational assistance.

      Sec. 507. Extension and modification of credit for producing electricity from certain renewable resources.

      Sec. 508. Extension of duty-free treatment under Generalized System of Preferences.

      Sec. 509. Extension of credit for holders of qualified zone academy bonds.

      Sec. 510. Extension of first-time homebuyer credit for District of Columbia.

      Sec. 511. Extension of expensing of environmental remediation costs.

      Sec. 512. Temporary increase in amount of rum excise tax covered over to Puerto Rico and Virgin Islands.

Subtitle B--Other Time-Sensitive Provisions

      Sec. 521. Advance pricing agreements treated as confidential taxpayer information.

      Sec. 522. Authority to postpone certain tax-related deadlines by reason of Y2K failures.

      Sec. 523. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines.

      Sec. 524. Delay in effective date of requirement for approved diesel or kerosene terminals.

      Sec. 525. Production flexibility contract payments.

Subtitle C--Revenue Offsets

Part I--General Provisions

      Sec. 531. Modification of estimated tax safe harbor.

      Sec. 532. Clarification of tax treatment of income and loss on derivatives.

      Sec. 533. Expansion of reporting of cancellation of indebtedness income.

      Sec. 534. Limitation on conversion of character of income from constructive ownership transactions.

      Sec. 535. Treatment of excess pension assets used for retiree health benefits.

      Sec. 536. Modification of installment method and repeal of installment method for accrual method taxpayers.

      Sec. 537. Denial of charitable contribution deduction for transfers associated with split-dollar insurance arrangements.

      Sec. 538. Distributions by a partnership to a corporate partner of stock in another corporation.

Part II--Provisions Relating to Real Estate Investment Trusts

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

      Sec. 541. Modifications to asset diversification test.

      Sec. 542. Treatment of income and services provided by taxable REIT subsidiaries.

      Sec. 543. Taxable REIT subsidiary.

      Sec. 544. Limitation on earnings stripping.

      Sec. 545. 100 percent tax on improperly allocated amounts.

      Sec. 546. Effective date.

      Sec. 547. Study relating to taxable REIT subsidiaries.

SUBPART B--HEALTH CARE REITS

      Sec. 551. Health care REITs.

SUBPART C--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

      Sec. 556. Conformity with regulated investment company rules.

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

      Sec. 561. Clarification of exception for independent operators.

SUBPART E--MODIFICATION OF EARNINGS AND PROFITS RULES

      Sec. 566. Modification of earnings and profits rules.

SUBPART F--MODIFICATION OF ESTIMATED TAX RULES

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

SEC. 2. FINDINGS AND PURPOSES.

    (a) FINDINGS- The Congress makes the following findings:

      (1) It is the policy of the United States to provide assistance to individuals with disabilities to lead productive work lives.

      (2) Health care is important to all Americans.

      (3) Health care is particularly important to individuals with disabilities and special health care needs who often cannot afford the insurance available to them through the private market, are uninsurable by the plans available in the private sector, and are at great risk of incurring very high and economically devastating health care costs.

      (4) Americans with significant disabilities often are unable to obtain health care insurance that provides coverage of the services and supports that enable them to live independently and enter or rejoin the workforce. Personal assistance services (such as attendant services, personal assistance with transportation to and from work, reader services, job coaches, and related assistance) remove many of the barriers between significant disability and work. Coverage for such services, as well as for prescription drugs, durable medical equipment, and basic health care are powerful and proven tools for individuals with significant disabilities to obtain and retain employment.

      (5) For individuals with disabilities, the fear of losing health care and related services is one of the greatest barriers keeping the individuals from maximizing their employment, earning potential, and independence.

      (6) Social Security Disability Insurance and Supplemental Security Income beneficiaries risk losing medicare or medicaid coverage that is linked to their cash benefits, a risk that is an equal, or greater, work disincentive than the loss of cash benefits associated with working.

      (7) Individuals with disabilities have greater opportunities for employment than ever before, aided by important public policy initiatives such as the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et seq.), advancements in public understanding of disability, and innovations in assistive technology, medical treatment, and rehabilitation.

      (8) Despite such historic opportunities and the desire of millions of disability recipients to work and support themselves, fewer than one-half of one percent of Social Security Disability Insurance and Supplemental Security Income beneficiaries leave the disability rolls and return to work.

      (9) In addition to the fear of loss of health care coverage, beneficiaries cite financial disincentives to work and earn income and lack of adequate employment training and placement services as barriers to employment.

      (10) Eliminating such barriers to work by creating financial incentives to work and by providing individuals with disabilities real choice in obtaining the services and technology they need to find, enter, and maintain employment can greatly improve their short and long-term financial independence and personal well-being.

      (11) In addition to the enormous advantages such changes promise for individuals with disabilities, redesigning government programs to help individuals with disabilities return to work may result in significant savings and extend the life of the Social Security Disability Insurance Trust Fund.

      (12) If only an additional one-half of one percent of the current Social Security Disability Insurance and Supplemental Security Income recipients were to cease receiving benefits as a result of employment, the savings to the Social Security Trust Funds and to the Treasury in cash assistance would total $3,500,000,000 over the worklife of such individuals, far exceeding the cost of providing incentives and services needed to assist them in entering work and achieving financial independence to the best of their abilities.

    (b) PURPOSES- The purposes of this Act are as follows:

      (1) To provide health care and employment preparation and placement services to individuals with disabilities that will enable those individuals to reduce their dependency on cash benefit programs.

      (2) To encourage States to adopt the option of allowing individuals with disabilities to purchase medicaid coverage that is necessary to enable such individuals to maintain employment.

      (3) To provide individuals with disabilities the option of maintaining medicare coverage while working.

      (4) To establish a return to work ticket program that will allow individuals with disabilities to seek the services necessary to obtain and retain employment and reduce their dependency on cash benefit programs.

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

Subtitle A--Ticket to Work and Self-Sufficiency

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

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

‘THE TICKET TO WORK AND SELF-SUFFICIENCY PROGRAM

    ‘SEC. 1148. (a) IN GENERAL- The Commissioner shall establish a Ticket to Work and Self-Sufficiency Program, under which a disabled beneficiary may use a ticket to work and self-sufficiency issued by the Commissioner in accordance with this section to obtain employment services, vocational rehabilitation services, or other support services from an employment network which is of the beneficiary’s choice and which is willing to provide such services to such beneficiary.

    ‘(b) TICKET SYSTEM-

      ‘(1) DISTRIBUTION OF TICKETS- The Commissioner may issue a ticket to work and self-sufficiency to disabled beneficiaries for participation in the Program.

      ‘(2) ASSIGNMENT OF TICKETS- A disabled beneficiary holding a ticket to work and self-sufficiency may assign the ticket to any employment network of the beneficiary’s choice which is serving under the Program and is willing to accept the assignment.

      ‘(3) TICKET TERMS- A ticket issued under paragraph (1) shall consist of a document which evidences the Commissioner’s agreement to pay (as provided in paragraph (4)) an employment network, which is serving under the Program and to which such ticket is assigned by the beneficiary, for such employment services, vocational rehabilitation services, and other support services as the employment network may provide to the beneficiary.

      ‘(4) PAYMENTS TO EMPLOYMENT NETWORKS- The Commissioner shall pay an employment network under the Program in accordance with the outcome payment system under subsection (h)(2) or under the outcome-milestone payment system under subsection (h)(3) (whichever is elected pursuant to subsection (h)(1)). An employment network may not request or receive compensation for such services from the beneficiary.

    ‘(c) STATE PARTICIPATION-

      ‘(1) IN GENERAL- Each State agency administering or supervising the administration of the State plan approved under title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et seq.) may elect to participate in the Program as an employment network with respect to a disabled beneficiary. If the State agency does elect to participate in the Program, the State agency also shall elect to be paid under the outcome payment system or the outcome-milestone payment system in accordance with subsection (h)(1). With respect to a disabled beneficiary that the State agency does not elect to have participate in the Program, the State agency shall be paid for services provided to that beneficiary under the system for payment applicable under section 222(d) and subsections (d) and (e) of section 1615. The Commissioner shall provide for periodic opportunities for exercising such elections.

      ‘(2) EFFECT OF PARTICIPATION BY STATE AGENCY-

        ‘(A) STATE AGENCIES PARTICIPATING- In any case in which a State agency described in paragraph (1) elects under that paragraph to participate in the Program, the employment services, vocational rehabilitation services, and other support services which, upon assignment of tickets to work and self-sufficiency, are provided to disabled beneficiaries by the State agency acting as an employment network shall be governed by plans for vocational rehabilitation services approved under title I of the Rehabilitation Act of 1973 (29 U.S.C. 720 et seq.).

        ‘(B) STATE AGENCIES ADMINISTERING MATERNAL AND CHILD HEALTH SERVICES PROGRAMS- Subparagraph (A) shall not apply with respect to any State agency administering a program under title V of this Act.

      ‘(3) AGREEMENTS BETWEEN STATE AGENCIES AND EMPLOYMENT NETWORKS- State agencies and employment networks shall enter into agreements regarding the conditions under which services will be provided when an individual is referred by an employment network to a State agency for services. The Commissioner shall establish by regulations the timeframe within which such agreements must be entered into and the mechanisms for dispute resolution between State agencies and employment networks with respect to such agreements.

    ‘(d) RESPONSIBILITIES OF THE COMMISSIONER-

      ‘(1) SELECTION AND QUALIFICATIONS OF PROGRAM MANAGERS- The Commissioner shall enter into agreements with 1 or more organizations in the private or public sector for service as a program manager to assist the Commissioner in administering the Program. Any such program manager shall be selected by means of a competitive bidding process, from among organizations in the private or public sector with available expertise and experience in the field of vocational rehabilitation or employment services.

      ‘(2) TENURE, RENEWAL, AND EARLY TERMINATION- Each agreement entered into under paragraph (1) shall provide for early termination upon failure to meet performance standards which shall be specified in the agreement and which shall be weighted to take into account any performance in prior terms. Such performance standards shall include--

        ‘(A) measures for ease of access by beneficiaries to services; and

        ‘(B) measures for determining the extent to which failures in obtaining services for beneficiaries fall within acceptable parameters, as determined by the Commissioner.

      ‘(3) PRECLUSION FROM DIRECT PARTICIPATION IN DELIVERY OF SERVICES IN OWN SERVICE AREA- Agreements under paragraph (1) shall preclude--

        ‘(A) direct participation by a program manager in the delivery of employment services, vocational rehabilitation services, or other support services to beneficiaries in the service area covered by the program manager’s agreement; and

        ‘(B) the holding by a program manager of a financial interest in an employment network or service provider which provides services in a geographic area covered under the program manager’s agreement.

      ‘(4) SELECTION OF EMPLOYMENT NETWORKS-

        ‘(A) IN GENERAL- The Commissioner shall select and enter into agreements with employment networks for service under the Program. Such employment networks shall be in addition to State agencies serving as employment networks pursuant to elections under subsection (c).

        ‘(B) ALTERNATE PARTICIPANTS- In any State where the Program is being implemented, the Commissioner shall enter into an agreement with any alternate participant that is operating under the authority of section 222(d)(2) in the State as of the date of the enactment of this section and chooses to serve as an employment network under the Program.

      ‘(5) TERMINATION OF AGREEMENTS WITH EMPLOYMENT NETWORKS- The Commissioner shall terminate agreements with employment networks for inadequate performance, as determined by the Commissioner.

      ‘(6) QUALITY ASSURANCE- The Commissioner shall provide for such periodic reviews as are necessary to provide for effective quality assurance in the provision of services by employment networks. The Commissioner shall solicit and consider the views of consumers and the program manager under which the employment networks serve and shall consult with providers of services to develop performance measurements. The Commissioner shall ensure that the results of the periodic reviews are made available to beneficiaries who are prospective service recipients as they select employment networks. The Commissioner shall ensure that the periodic surveys of beneficiaries receiving services under the Program are designed to measure customer service satisfaction.

      ‘(7) DISPUTE RESOLUTION- The Commissioner shall provide for a mechanism for resolving disputes between beneficiaries and employment networks, between program managers and employment networks, and between program managers and providers of services. The Commissioner shall afford a party to such a dispute a reasonable opportunity for a full and fair review of the matter in dispute.

    ‘(e) PROGRAM MANAGERS-

      ‘(1) IN GENERAL- A program manager shall conduct tasks appropriate to assist the Commissioner in carrying out the Commissioner’s duties in administering the Program.

      ‘(2) RECRUITMENT OF EMPLOYMENT NETWORKS- A program manager shall recruit, and recommend for selection by the Commissioner, employment networks for service under the Program. The program manager shall carry out such recruitment and provide such recommendations, and shall monitor all employment networks serving in the Program in the geographic area covered under the program manager’s agreement, to the extent necessary and appropriate to ensure that adequate choices of services are made available to beneficiaries. Employment networks may serve under the Program only pursuant to an agreement entered into with the Commissioner under the Program incorporating the applicable provisions of this section and regulations thereunder, and the program manager shall provide and maintain assurances to the Commissioner that payment by the Commissioner to employment networks pursuant to this section is warranted based on compliance by such employment networks with the terms of such agreement and this section. The program manager shall not impose numerical limits on the number of employment networks to be recommended pursuant to this paragraph.

      ‘(3) FACILITATION OF ACCESS BY BENEFICIARIES TO EMPLOYMENT NETWORKS- A program manager shall facilitate access by beneficiaries to employment networks. The program manager shall ensure that each beneficiary is allowed changes in employment networks without being deemed to have rejected services under the Program. When such a change occurs, the program manager shall reassign the ticket based on the choice of the beneficiary. Upon the request of the employment network, the program manager shall make a determination of the allocation of the outcome or milestone-outcome payments based on the services provided by each employment network. The program manager shall establish and maintain lists of employment networks available to beneficiaries and shall make such lists generally available to the public. The program manager shall ensure that all information provided to disabled beneficiaries pursuant to this paragraph is provided in accessible formats.

      ‘(4) ENSURING AVAILABILITY OF ADEQUATE SERVICES- The program manager shall ensure that employment services, vocational rehabilitation services, and other support services are provided to beneficiaries throughout the geographic area covered under the program manager’s agreement, including rural areas.

      ‘(5) REASONABLE ACCESS TO SERVICES- The program manager shall take such measures as are necessary to ensure that sufficient employment networks are available and that each beneficiary receiving services under the Program has reasonable access to employment services, vocational rehabilitation services, and other support services. Services provided under the Program may include case management, work incentives planning, supported employment, career planning, career plan development, vocational assessment, job training, placement, follow-up services, and such other services as may be specified by the Commissioner under the Program. The program manager shall ensure that such services are available in each service area.

    ‘(f) EMPLOYMENT NETWORKS-

      ‘(1) QUALIFICATIONS FOR EMPLOYMENT NETWORKS-

        ‘(A) IN GENERAL- Each employment network serving under the Program shall consist of an agency or instrumentality of a State (or a political subdivision thereof) or a private entity, that assumes responsibility for the coordination and delivery of services under the Program to individuals assigning to the employment network tickets to work and self-sufficiency issued under subsection (b).

        ‘(B) ONE-STOP DELIVERY SYSTEMS- An employment network serving under the Program may consist of a one-stop delivery system established under subtitle B of title I of the Workforce Investment Act of 1998 (29 U.S.C. 2811 et seq.).

        ‘(C) COMPLIANCE WITH SELECTION CRITERIA- No employment network may serve under the Program unless it meets and maintains compliance with both general selection criteria (such as professional and educational qualifications, where applicable) and specific selection criteria (such as substantial expertise and experience in providing relevant employment services and supports).

        ‘(D) SINGLE OR ASSOCIATED PROVIDERS ALLOWED- An employment network shall consist of either a single provider of such services or of an association of such providers organized so as to combine their resources into a single entity. An employment network may meet the requirements of subsection (e)(4) by providing services directly, or by entering into agreements with other individuals or entities providing appropriate employment services, vocational rehabilitation services, or other support services.

      ‘(2) REQUIREMENTS RELATING TO PROVISION OF SERVICES- Each employment network serving under the Program shall be required under the terms of its agreement with the Commissioner to--

        ‘(A) serve prescribed service areas; and

        ‘(B) take such measures as are necessary to ensure that employment services, vocational rehabilitation services, and other support services provided under the Program by, or under agreements entered into with, the employment network are provided under appropriate individual work plans that meet the requirements of subsection (g).

      ‘(3) ANNUAL FINANCIAL REPORTING- Each employment network shall meet financial reporting requirements as prescribed by the Commissioner.

      ‘(4) PERIODIC OUTCOMES REPORTING- Each employment network shall prepare periodic reports, on at least an annual basis, itemizing for the covered period specific outcomes achieved with respect to specific services provided by the employment network. Such reports shall conform to a national model prescribed under this section. Each employment network shall provide a copy of the latest report issued by the employment network pursuant to this paragraph to each beneficiary upon enrollment under the Program for services to be received through such employment network. Upon issuance of each report to each beneficiary, a copy of the report shall be maintained in the files of the employment network. The program manager shall ensure that copies of all such reports issued under this paragraph are made available to the public under reasonable terms.

    ‘(g) INDIVIDUAL WORK PLANS-

      ‘(1) REQUIREMENTS- Each employment network shall--

        ‘(A) take such measures as are necessary to ensure that employment services, vocational rehabilitation services, and other support services provided under the Program by, or under agreements entered into with, the employment network are provided under appropriate individual work plans that meet the requirements of subparagraph (C);

        ‘(B) develop and implement each such individual work plan, in partnership with each beneficiary receiving such services, in a manner that affords such beneficiary the opportunity to exercise informed choice in selecting an employment goal and specific services needed to achieve that employment goal;

        ‘(C) ensure that each individual work plan includes at least--

          ‘(i) a statement of the vocational goal developed with the beneficiary, including, as appropriate, goals for earnings and job advancement;

          ‘(ii) a statement of the services and supports that have been deemed necessary for the beneficiary to accomplish that goal;

          ‘(iii) a statement of any terms and conditions related to the provision of such services and supports; and

          ‘(iv) a statement of understanding regarding the beneficiary’s rights under the Program (such as the right to retrieve the ticket to work and self-sufficiency if the beneficiary is dissatisfied with the services being provided by the employment network) and remedies available to the individual, including information on the availability of advocacy services and assistance in resolving disputes through the State grant program authorized under section 1150;

        ‘(D) provide a beneficiary the opportunity to amend the individual work plan if a change in circumstances necessitates a change in the plan; and

        ‘(E) make each beneficiary’s individual work plan available to the beneficiary in, as appropriate, an accessible format chosen by the beneficiary.

      ‘(2) EFFECTIVE UPON WRITTEN APPROVAL- A beneficiary’s individual work plan shall take effect upon written approval by the beneficiary or a representative of the beneficiary and a representative of the employment network that, in providing such written approval, acknowledges assignment of the beneficiary’s ticket to work and self-sufficiency.

    ‘(h) EMPLOYMENT NETWORK PAYMENT SYSTEMS-

      ‘(1) ELECTION OF PAYMENT SYSTEM BY EMPLOYMENT NETWORKS-

        ‘(A) IN GENERAL- The Program shall provide for payment authorized by the Commissioner to employment networks under either an outcome payment system or an outcome-milestone payment system. Each employment network shall elect which payment system will be utilized by the employment network, and, for such period of time as such election remains in effect, the payment system so elected shall be utilized exclusively in connection with such employment network (except as provided in subparagraph (B)).

        ‘(B) NO CHANGE IN METHOD OF PAYMENT FOR BENEFICIARIES WITH TICKETS ALREADY ASSIGNED TO THE EMPLOYMENT NETWORKS- Any election of a payment system by an employment network that would result in a change in the method of payment to the employment network for services provided to a beneficiary who is receiving services from the employment network at the time of the election shall not be effective with respect to payment for services provided to that beneficiary and the method of payment previously selected shall continue to apply with respect to such services.

      ‘(2) OUTCOME PAYMENT SYSTEM-

        ‘(A) IN GENERAL- The outcome payment system shall consist of a payment structure governing employment networks electing such system under paragraph (1)(A) which meets the requirements of this paragraph.

        ‘(B) PAYMENTS MADE DURING OUTCOME PAYMENT PERIOD- The outcome payment system shall provide for a schedule of payments to an employment network, in connection with each individual who is a beneficiary, for each month, during the individual’s outcome payment period, for which benefits (described in paragraphs (3) and (4) of subsection (k)) are not payable to such individual because of work or earnings.

        ‘(C) COMPUTATION OF PAYMENTS TO EMPLOYMENT NETWORK- The payment schedule of the outcome payment system shall be designed so that--

          ‘(i) the payment for each month during the outcome payment period for which benefits (described in paragraphs (3) and (4) of subsection (k)) are not payable is equal to a fixed percentage of the payment calculation base for the calendar year in which such month occurs; and

          ‘(ii) such fixed percentage is set at a percentage which does not exceed 40 percent.

      ‘(3) OUTCOME-MILESTONE PAYMENT SYSTEM-

        ‘(A) IN GENERAL- The outcome-milestone payment system shall consist of a payment structure governing employment networks electing such system under paragraph (1)(A) which meets the requirements of this paragraph.

        ‘(B) EARLY PAYMENTS UPON ATTAINMENT OF MILESTONES IN ADVANCE OF OUTCOME PAYMENT PERIODS- The outcome-milestone payment system shall provide for 1 or more milestones, with respect to beneficiaries receiving services from an employment network under the Program, that are directed toward the goal of permanent employment. Such milestones shall form a part of a payment structure that provides, in addition to payments made during outcome payment periods, payments made prior to outcome payment periods in amounts based on the attainment of such milestones.

        ‘(C) LIMITATION ON TOTAL PAYMENTS TO EMPLOYMENT NETWORK- The payment schedule of the outcome milestone payment system shall be designed so that the total of the payments to the employment network with respect to each beneficiary is less than, on a net present value basis (using an interest rate determined by the Commissioner that appropriately reflects the cost of funds faced by providers), the total amount to which payments to the employment network with respect to the beneficiary would be limited if the employment network were paid under the outcome payment system.

      ‘(4) DEFINITIONS- In this subsection:

        ‘(A) PAYMENT CALCULATION BASE- The term ‘payment calculation base’ means, for any calendar year--

          ‘(i) in connection with a title II disability beneficiary, the average disability insurance benefit payable under section 223 for all beneficiaries for months during the preceding calendar year; and

          ‘(ii) in connection with a title XVI disability beneficiary (who is not concurrently a title II disability beneficiary), the average payment of supplemental security income benefits based on disability payable under title XVI (excluding State supplementation) for months during the preceding calendar year to all beneficiaries who have attained 18 years of age but have not attained 65 years of age.

        ‘(B) OUTCOME PAYMENT PERIOD- The term ‘outcome payment period’ means, in connection with any individual who had assigned a ticket to work and self-sufficiency to an employment network under the Program, a period--

          ‘(i) beginning with the first month, ending after the date on which such ticket was assigned to the employment network, for which benefits (described in paragraphs (3) and (4) of subsection (k)) are not payable to such individual by reason of engagement in substantial gainful activity or by reason of earnings from work activity; and

          ‘(ii) ending with the 60th month (consecutive or otherwise), ending after such date, for which such benefits are not payable to such individual by reason of engagement in substantial gainful activity or by reason of earnings from work activity.

      ‘(5) PERIODIC REVIEW AND ALTERATIONS OF PRESCRIBED SCHEDULES-

        ‘(A) PERCENTAGES AND PERIODS- The Commissioner shall periodically review the percentage specified in paragraph (2)(C), the total payments permissible under paragraph (3)(C), and the period of time specified in paragraph (4)(B) to determine whether such percentages, such permissible payments, and such period provide an adequate incentive for employment networks to assist beneficiaries to enter the workforce, while providing for appropriate economies. The Commissioner may alter such percentage, such total permissible payments, or such period of time to the extent that the Commissioner determines, on the basis of the Commissioner’s review under this paragraph, that such an alteration would better provide the incentive and economies described in the preceding sentence.

        ‘(B) NUMBER AND AMOUNTS OF MILESTONE PAYMENTS- The Commissioner shall periodically review the number and amounts of milestone payments established by the Commissioner pursuant to this section to determine whether they provide an adequate incentive for employment networks to assist beneficiaries to enter the workforce, taking into account information provided to the Commissioner by program managers, the Ticket to Work and Work Incentives Advisory Panel established by section 101(f) of the Ticket to Work and Work Incentives Improvement Act of 1999, and other reliable sources. The Commissioner may from time to time alter the number and amounts of milestone payments initially established by the Commissioner pursuant to this section to the extent that the Commissioner determines that such an alteration would allow an adequate incentive for employment networks to assist beneficiaries to enter the workforce. Such alteration shall be based on information provided to the Commissioner by program managers, the Ticket to Work and Work Incentives Advisory Panel established by section 101(f) of the Ticket to Work and Work Incentives Improvement Act of 1999, or other reliable sources.

        ‘(C) REPORT ON THE ADEQUACY OF INCENTIVES- The Commissioner shall submit to the Congress not later than 36 months after the date of the enactment of the Ticket to Work and Work Incentives Improvement Act of 1999 a report with recommendations for a method or methods to adjust payment rates under subparagraphs (A) and (B), that would ensure adequate incentives for the provision of services by employment networks of--

          ‘(i) individuals with a need for ongoing support and services;

          ‘(ii) individuals with a need for high-cost accommodations;

          ‘(iii) individuals who earn a subminimum wage; and

          ‘(iv) individuals who work and receive partial cash benefits.

        The Commissioner shall consult with the Ticket to Work and Work Incentives Advisory Panel established under section 101(f) of the Ticket to Work and Work Incentives Improvement Act of 1999 during the development and evaluation of the study. The Commissioner shall implement the necessary adjusted payment rates prior to full implementation of the Ticket to Work and Self-Sufficiency Program.

    ‘(i) SUSPENSION OF DISABILITY REVIEWS- During any period for which an individual is using, as defined by the Commissioner, a ticket to work and self-sufficiency issued under this section, the Commissioner (and any applicable State agency) may not initiate a continuing disability review or other review under section 221 of whether the individual is or is not under a disability or a review under title XVI similar to any such review under section 221.

    ‘(j) AUTHORIZATIONS-

      ‘(1) PAYMENTS TO EMPLOYMENT NETWORKS-

        ‘(A) TITLE II DISABILITY BENEFICIARIES- There are authorized to be transferred from the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund each fiscal year such sums as may be necessary to make payments to employment networks under this section. Money paid from the Trust Funds under this section with respect to title II disability beneficiaries who are entitled to benefits under section 223 or who are entitled to benefits under section 202(d) on the basis of the wages and self-employment income of such beneficiaries, shall be charged to the Federal Disability Insurance Trust Fund, and all other money paid from the Trust Funds under this section shall be charged to the Federal Old-Age and Survivors Insurance Trust Fund.

        ‘(B) TITLE XVI DISABILITY BENEFICIARIES- Amounts authorized to be appropriated to the Social Security Administration under section 1601 (as in effect pursuant to the amendments made by section 301 of the Social Security Amendments of 1972) shall include amounts necessary to carry out the provisions of this section with respect to title XVI disability beneficiaries.

      ‘(2) ADMINISTRATIVE EXPENSES- The costs of administering this section (other than payments to employment networks) shall be paid from amounts made available for the administration of title II and amounts made available for the administration of title XVI, and shall be allocated among such amounts as appropriate.

    ‘(k) DEFINITIONS- In this section:

      ‘(1) COMMISSIONER- The term ‘Commissioner’ means the Commissioner of Social Security.

      ‘(2) DISABLED BENEFICIARY- The term ‘disabled beneficiary’ means a title II disability beneficiary or a title XVI disability beneficiary.

      ‘(3) TITLE II DISABILITY BENEFICIARY- The term ‘title II disability beneficiary’ means an individual entitled to disability insurance benefits under section 223 or to monthly insurance benefits under section 202 based on such individual’s disability (as defined in section 223(d)). An individual is a title II disability beneficiary for each month for which such individual is entitled to such benefits.

      ‘(4) TITLE XVI DISABILITY BENEFICIARY- The term ‘title XVI disability beneficiary’ means an individual eligible for supplemental security income benefits under title XVI on the basis of blindness (within the meaning of section 1614(a)(2)) or disability (within the meaning of section 1614(a)(3)). An individual is a title XVI disability beneficiary for each month for which such individual is eligible for such benefits.

      ‘(5) SUPPLEMENTAL SECURITY INCOME BENEFIT- The term ‘supplemental security income benefit under title XVI’ means a cash benefit under section 1611 or 1619(a), and does not include a State supplementary payment, administered federally or otherwise.

    ‘(l) REGULATIONS- Not later than 1 year after the date of the enactment of the Ticket to Work and Work Incentives Improvement Act of 1999, the Commissioner shall prescribe such regulations as are necessary to carry out the provisions of this section.’.

    (b) CONFORMING AMENDMENTS-

      (1) AMENDMENTS TO TITLE II-

        (A) Section 221(i) of the Social Security Act (42 U.S.C. 421(i)) is amended by adding at the end the following new paragraph:

    ‘(5) For suspension of reviews under this subsection in the case of an individual using a ticket to work and self-sufficiency, see section 1148(i).’.

        (B) Section 222(a) of such Act (42 U.S.C. 422(a)) is repealed.

        (C) Section 222(b) of such Act (42 U.S.C. 422(b)) is repealed.

        (D) Section 225(b)(1) of such Act (42 U.S.C. 425(b)(1)) is amended by striking ‘a program of vocational rehabilitation services’ and inserting ‘a program consisting of the Ticket to Work and Self-Sufficiency Program under section 1148 or another program of vocational rehabilitation services, employment services, or other support services’.

      (2) AMENDMENTS TO TITLE XVI-

        (A) Section 1615(a) of such Act (42 U.S.C. 1382d(a)) is amended to read as follows:

    ‘SEC. 1615. (a) In the case of any blind or disabled individual who--

      ‘(1) has not attained age 16; and

      ‘(2) with respect to whom benefits are paid under this title,

    the Commissioner of Social Security shall make provision for referral of such individual to the appropriate State agency administering the State program under title V.’.

        (B) Section 1615(c) of such Act (42 U.S.C. 1382d(c)) is repealed.

        (C) Section 1631(a)(6)(A) of such Act (42 U.S.C. 1383(a)(6)(A)) is amended by striking ‘a program of vocational rehabilitation services’ and inserting ‘a program consisting of the Ticket to Work and Self-Sufficiency Program under section 1148 or another program of vocational rehabilitation services, employment services, or other support services’.

        (D) Section 1633(c) of such Act (42 U.S.C. 1383b(c)) is amended--

          (i) by inserting ‘(1)’ after ‘(c)’; and

          (ii) by adding at the end the following new paragraph:

    ‘(2) For suspension of continuing disability reviews and other reviews under this title similar to reviews under section 221 in the case of an individual using a ticket to work and self-sufficiency, see section 1148(i).’.

    (c) EFFECTIVE DATE- Subject to subsection (d), the amendments made by subsections (a) and (b) shall take effect with the first month following 1 year after the date of the enactment of this Act.

    (d) GRADUATED IMPLEMENTATION OF PROGRAM-

      (1) IN GENERAL- Not later than 1 year after the date of the enactment of this Act, the Commissioner of Social Security shall commence implementation of the amendments made by this section (other than paragraphs (1)(C) and (2)(B) of subsection (b)) in graduated phases at phase-in sites selected by the Commissioner. Such phase-in sites shall be selected so as to ensure, prior to full implementation of the Ticket to Work and Self-Sufficiency Program, the development and refinement of referral processes, payment systems, computer linkages, management information systems, and administrative processes necessary to provide for full implementation of such amendments. Subsection (c) shall apply with respect to paragraphs (1)(C) and (2)(B) of subsection (b) without regard to this subsection.

      (2) REQUIREMENTS- Implementation of the Program at each phase-in site shall be carried out on a wide enough scale to permit a thorough evaluation of the alternative methods under consideration, so as to ensure that the most efficacious methods are determined and in place for full implementation of the Program on a timely basis.

      (3) FULL IMPLEMENTATION- The Commissioner shall ensure that ability to provide tickets and services to individuals under the Program exists in every State as soon as practicable on or after the effective date specified in subsection (c) but not later than 3 years after such date.

      (4) ONGOING EVALUATION OF PROGRAM-

        (A) IN GENERAL- The Commissioner shall provide for independent evaluations to assess the effectiveness of the activities carried out under this section and the amendments made thereby. Such evaluations shall address the cost-effectiveness of such activities, as well as the effects of this section and the amendments made thereby on work outcomes for beneficiaries receiving tickets to work and self-sufficiency under the Program.

        (B) CONSULTATION- Evaluations shall be conducted under this paragraph after receiving relevant advice from experts in the fields of disability, vocational rehabilitation, and program evaluation and individuals using tickets to work and self-sufficiency under the Program and in consultation with the Ticket to Work and Work Incentives Advisory Panel established under section 101(f) of this Act, the Comptroller General of the United States, other agencies of the Federal Government, and private organizations with appropriate expertise.

        (C) METHODOLOGY-

          (i) IMPLEMENTATION- The Commissioner, in consultation with the Ticket to Work and Work Incentives Advisory Panel established under section 101(f) of this Act, shall ensure that plans for evaluations and data collection methods under the Program are appropriately designed to obtain detailed employment information.

          (ii) SPECIFIC MATTERS TO BE ADDRESSED- Each such evaluation shall address (but is not limited to)--

            (I) the annual cost (including net cost) of the Program and the annual cost (including net cost) that would have been incurred in the absence of the Program;

            (II) the determinants of return to work, including the characteristics of beneficiaries in receipt of tickets under the Program;

            (III) the types of employment services, vocational rehabilitation services, and other support services furnished to beneficiaries in receipt of tickets under the Program who return to work and to those who do not return to work;

            (IV) the duration of employment services, vocational rehabilitation services, and other support services furnished to beneficiaries in receipt of tickets under the Program who return to work and the duration of such services furnished to those who do not return to work and the cost to employment networks of furnishing such services;

            (V) the employment outcomes, including wages, occupations, benefits, and hours worked, of beneficiaries who return to work after receiving tickets under the Program and those who return to work without receiving such tickets;

            (VI) the characteristics of individuals in possession of tickets under the Program who are not accepted for services and, to the extent reasonably determinable, the reasons for which such beneficiaries were not accepted for services;

            (VII) the characteristics of providers whose services are provided within an employment network under the Program;

            (VIII) the extent (if any) to which employment networks display a greater willingness to provide services to beneficiaries with a range of disabilities;

            (IX) the characteristics (including employment outcomes) of those beneficiaries who receive services under the outcome payment system and of those beneficiaries who receive services under the outcome-milestone payment system;

            (X) measures of satisfaction among beneficiaries in receipt of tickets under the Program; and

            (XI) reasons for (including comments solicited from beneficiaries regarding) their choice not to use their tickets or their inability to return to work despite the use of their tickets.

        (D) PERIODIC EVALUATION REPORTS- Following the close of the third and fifth fiscal years ending after the effective date under subsection (c), and prior to the close of the seventh fiscal year ending after such date, the Commissioner shall transmit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report containing the Commissioner’s evaluation of the progress of activities conducted under the provisions of this section and the amendments made thereby. Each such report shall set forth the Commissioner’s evaluation of the extent to which the Program has been successful and the Commissioner’s conclusions on whether or how the Program should be modified. Each such report shall include such data, findings, materials, and recommendations as the Commissioner may consider appropriate.

      (5) EXTENT OF STATE’S RIGHT OF FIRST REFUSAL IN ADVANCE OF FULL IMPLEMENTATION OF AMENDMENTS IN SUCH STATE-

        (A) IN GENERAL- In the case of any State in which the amendments made by subsection (a) have not been fully implemented pursuant to this subsection, the Commissioner shall determine by regulation the extent to which--

          (i) the requirement under section 222(a) of the Social Security Act (42 U.S.C. 422(a)) for prompt referrals to a State agency; and

          (ii) the authority of the Commissioner under section 222(d)(2) of such Act (42 U.S.C. 422(d)(2)) to provide vocational rehabilitation services in such State by agreement or contract with other public or private agencies, organizations, institutions, or individuals,

        shall apply in such State.

        (B) EXISTING AGREEMENTS- Nothing in subparagraph (A) or the amendments made by subsection (a) shall be construed to limit, impede, or otherwise affect any agreement entered into pursuant to section 222(d)(2) of the Social Security Act (42 U.S.C. 422(d)(2)) before the date of the enactment of this Act with respect to services provided pursuant to such agreement to beneficiaries receiving services under such agreement as of such date, except with respect to services (if any) to be provided after 3 years after the effective date provided in subsection (c).

    (e) SPECIFIC REGULATIONS REQUIRED-

      (1) IN GENERAL- The Commissioner of Social Security shall prescribe such regulations as are necessary to implement the amendments made by this section.

      (2) SPECIFIC MATTERS TO BE INCLUDED IN REGULATIONS- The matters which shall be addressed in such regulations shall include--

        (A) the form and manner in which tickets to work and self-sufficiency may be distributed to beneficiaries pursuant to section 1148(b)(1) of the Social Security Act;

        (B) the format and wording of such tickets, which shall incorporate by reference any contractual terms governing service by employment networks under the Program;

        (C) the form and manner in which State agencies may elect participation in the Ticket to Work and Self-Sufficiency Program pursuant to section 1148(c)(1) of such Act and provision for periodic opportunities for exercising such elections;

        (D) the status of State agencies under section 1148(c)(1) of such Act at the time that State agencies exercise elections under that section;

        (E) the terms of agreements to be entered into with program managers pursuant to section 1148(d) of such Act, including--

          (i) the terms by which program managers are precluded from direct participation in the delivery of services pursuant to section 1148(d)(3) of such Act;

          (ii) standards which must be met by quality assurance measures referred to in paragraph (6) of section 1148(d) of such Act and methods of recruitment of employment networks utilized pursuant to paragraph (2) of section 1148(e) of such Act; and

          (iii) the format under which dispute resolution will operate under section 1148(d)(7) of such Act;

        (F) the terms of agreements to be entered into with employment networks pursuant to section 1148(d)(4) of such Act, including--

          (i) the manner in which service areas are specified pursuant to section 1148(f)(2)(A) of such Act;

          (ii) the general selection criteria and the specific selection criteria which are applicable to employment networks under section 1148(f)(1)(C) of such Act in selecting service providers;

          (iii) specific requirements relating to annual financial reporting by employment networks pursuant to section 1148(f)(3) of such Act; and

          (iv) the national model to which periodic outcomes reporting by employment networks must conform under section 1148(f)(4) of such Act;

        (G) standards which must be met by individual work plans pursuant to section 1148(g) of such Act;

        (H) standards which must be met by payment systems required under section 1148(h) of such Act, including--

          (i) the form and manner in which elections by employment networks of payment systems are to be exercised pursuant to section 1148(h)(1)(A) of such Act;

          (ii) the terms which must be met by an outcome payment system under section 1148(h)(2) of such Act;

          (iii) the terms which must be met by an outcome-milestone payment system under section 1148(h)(3) of such Act;

          (iv) any revision of the percentage specified in paragraph (2)(C) of section 1148(h) of such Act or the period of time specified in paragraph (4)(B) of such section 1148(h) of such Act; and

          (v) annual oversight procedures for such systems; and

        (I) procedures for effective oversight of the Program by the Commissioner of Social Security, including periodic reviews and reporting requirements.

    (f) THE TICKET TO WORK AND WORK INCENTIVES ADVISORY PANEL-

      (1) ESTABLISHMENT- There is established within the Social Security Administration a panel to be known as the ‘Ticket to Work and Work Incentives Advisory Panel’ (in this subsection referred to as the ‘Panel’).

      (2) DUTIES OF PANEL- It shall be the duty of the Panel to--

        (A) advise the President, the Congress, and the Commissioner of Social Security on issues related to work incentives programs, planning, and assistance for individuals with disabilities, including work incentive provisions under titles II, XI, XVI, XVIII, and XIX of the Social Security Act (42 U.S.C. 401 et seq., 1301 et seq., 1381 et seq., 1395 et seq., 1396 et seq.); and

        (B) with respect to the Ticket to Work and Self-Sufficiency Program established under section 1148 of such Act--

          (i) advise the Commissioner of Social Security with respect to establishing phase-in sites for such Program and fully implementing the Program thereafter, the refinement of access of disabled beneficiaries to employment networks, payment systems, and management information systems, and advise the Commissioner whether such measures are being taken to the extent necessary to ensure the success of the Program;

          (ii) advise the Commissioner regarding the most effective designs for research and demonstration projects associated with the Program or conducted pursuant to section 302 of this Act;

          (iii) advise the Commissioner on the development of performance measurements relating to quality assurance under section 1148(d)(6) of the Social Security Act; and

          (iv) furnish progress reports on the Program to the Commissioner and each House of Congress.

      (3) MEMBERSHIP-

        (A) NUMBER AND APPOINTMENT- The Panel shall be composed of 12 members as follows:

          (i) four members appointed by the President, not more than two of whom may be of the same political party;

          (ii) two members appointed by the Speaker of the House of Representatives, in consultation with the Chairman of the Committee on Ways and Means of the House of Representatives;

          (iii) two members appointed by the minority leader of the House of Representatives, in consultation with the ranking member of the Committee on Ways and Means of the House of Representatives;

          (iv) two members appointed by the majority leader of the Senate, in consultation with the Chairman of the Committee on Finance of the Senate; and

          (v) two members appointed by the minority leader of the Senate, in consultation with the ranking member of the Committee on Finance of the Senate.

        (B) REPRESENTATION-

          (i) IN GENERAL- The members appointed under subparagraph (A) shall have experience or expert knowledge as a recipient, provider, employer, or employee in the fields of, or related to, employment services, vocational rehabilitation services, and other support services.

          (ii) REQUIREMENT- At least one-half of the members appointed under subparagraph (A) shall be individuals with disabilities, or representatives of individuals with disabilities, with consideration given to current or former title II disability beneficiaries or title XVI disability beneficiaries (as such terms are defined in section 1148(k) of the Social Security Act (as added by subsection (a)).

        (C) TERMS-

          (i) IN GENERAL- Each member shall be appointed for a term of 4 years (or, if less, for the remaining life of the Panel), except as provided in clauses (ii) and (iii). The initial members shall be appointed not later than 90 days after the date of the enactment of this Act.

          (ii) TERMS OF INITIAL APPOINTEES- Of the members first appointed under each clause of subparagraph (A), as designated by the appointing authority for each such clause--

            (I) one-half of such members shall be appointed for a term of 2 years; and

            (II) the remaining members shall be appointed for a term of 4 years.

          (iii) VACANCIES- Any member appointed to fill a vacancy occurring before the expiration of the term for which the member’s predecessor was appointed shall be appointed only for the remainder of that term. A member may serve after the expiration of that member’s term until a successor has taken office. A vacancy in the Panel shall be filled in the manner in which the original appointment was made.

        (D) BASIC PAY- Members shall each be paid at a rate, and in a manner, that is consistent with guidelines established under section 7 of the Federal Advisory Committee Act (5 U.S.C. App.).

        (E) TRAVEL EXPENSES- Each member shall receive travel expenses, including per diem in lieu of subsistence, in accordance with sections 5702 and 5703 of title 5, United States Code.

        (F) QUORUM- Eight members of the Panel shall constitute a quorum but a lesser number may hold hearings.

        (G) CHAIRPERSON- The Chairperson of the Panel shall be designated by the President. The term of office of the Chairperson shall be 4 years.

        (H) MEETINGS- The Panel shall meet at least quarterly and at other times at the call of the Chairperson or a majority of its members.

      (4) DIRECTOR AND STAFF OF PANEL; EXPERTS AND CONSULTANTS-

        (A) DIRECTOR- The Panel shall have a Director who shall be appointed by the Chairperson, and paid at a rate, and in a manner, that is consistent with guidelines established under section 7 of the Federal Advisory Committee Act (5 U.S.C. App.).

        (B) STAFF- Subject to rules prescribed by the Commissioner of Social Security, the Director may appoint and fix the pay of additional personnel as the Director considers appropriate.

        (C) EXPERTS AND CONSULTANTS- Subject to rules prescribed by the Commissioner of Social Security, the Director may procure temporary and intermittent services under section 3109(b) of title 5, United States Code.

        (D) STAFF OF FEDERAL AGENCIES- Upon request of the Panel, the head of any Federal department or agency may detail, on a reimbursable basis, any of the personnel of that department or agency to the Panel to assist it in carrying out its duties under this Act.

      (5) POWERS OF PANEL-

        (A) HEARINGS AND SESSIONS- The Panel may, for the purpose of carrying out its duties under this subsection, hold such hearings, sit and act at such times and places, and take such testimony and evidence as the Panel considers appropriate.

        (B) POWERS OF MEMBERS AND AGENTS- Any member or agent of the Panel may, if authorized by the Panel, take any action which the Panel is authorized to take by this section.

        (C) MAILS- The Panel may use the United States mails in the same manner and under the same conditions as other departments and agencies of the United States.

      (6) REPORTS-

        (A) INTERIM REPORTS- The Panel shall submit to the President and the Congress interim reports at least annually.

        (B) FINAL REPORT- The Panel shall transmit a final report to the President and the Congress not later than eight years after the date of the enactment of this Act. The final report shall contain a detailed statement of the findings and conclusions of the Panel, together with its recommendations for legislation and administrative actions which the Panel considers appropriate.

      (7) TERMINATION- The Panel shall terminate 30 days after the date of the submission of its final report under paragraph (6)(B).

      (8) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated from the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the general fund of the Treasury, as appropriate, such sums as are necessary to carry out this subsection.

Subtitle B--Elimination of Work Disincentives

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

    (a) IN GENERAL- Section 221 of the Social Security Act (42 U.S.C. 421) is amended by adding at the end the following new subsection:

    ‘(m)(1) In any case where an individual entitled to disability insurance benefits under section 223 or to monthly insurance benefits under section 202 based on such individual’s disability (as defined in section 223(d)) has received such benefits for at least 24 months--

      ‘(A) no continuing disability review conducted by the Commissioner may be scheduled for the individual solely as a result of the individual’s work activity;

      ‘(B) no work activity engaged in by the individual may be used as evidence that the individual is no longer disabled; and

      ‘(C) no cessation of work activity by the individual may give rise to a presumption that the individual is unable to engage in work.

    ‘(2) An individual to which paragraph (1) applies shall continue to be subject to--

      ‘(A) continuing disability reviews on a regularly scheduled basis that is not triggered by work; and

      ‘(B) termination of benefits under this title in the event that the individual has earnings that exceed the level of earnings established by the Commissioner to represent substantial gainful activity.’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on January 1, 2002.

SEC. 112. EXPEDITED REINSTATEMENT OF DISABILITY BENEFITS.

    (a) OASDI BENEFITS- Section 223 of the Social Security Act (42 U.S.C. 423) is amended--

      (1) by redesignating subsection (i) as subsection (j); and

      (2) by inserting after subsection (h) the following new subsection:

‘Reinstatement of Entitlement

    ‘(i)(1)(A) Entitlement to benefits described in subparagraph (B)(i)(I) shall be reinstated in any case where the Commissioner determines that an individual described in subparagraph (B) has filed a request for reinstatement meeting the requirements of paragraph (2)(A) during the period prescribed in subparagraph (C). Reinstatement of such entitlement shall be in accordance with the terms of this subsection.

    ‘(B) An individual is described in this subparagraph if--

      ‘(i) prior to the month in which the individual files a request for reinstatement--

        ‘(I) the individual was entitled to benefits under this section or section 202 on the basis of disability pursuant to an application filed therefor; and

        ‘(II) such entitlement terminated due to the performance of substantial gainful activity;

      ‘(ii) the individual is under a disability and the physical or mental impairment that is the basis for the finding of disability is the same as (or related to) the physical or mental impairment that was the basis for the finding of disability that gave rise to the entitlement described in clause (i); and

      ‘(iii) the individual’s disability renders the individual unable to perform substantial gainful activity.

    ‘(C)(i) Except as provided in clause (ii), the period prescribed in this subparagraph with respect to an individual is 60 consecutive months beginning with the month following the most recent month for which the individual was entitled to a benefit described in subparagraph (B)(i)(I) prior to the entitlement termination described in subparagraph (B)(i)(II).

    ‘(ii) In the case of an individual who fails to file a reinstatement request within the period prescribed in clause (i), the Commissioner may extend the period if the Commissioner determines that the individual had good cause for the failure to so file.

    ‘(2)(A)(i) A request for reinstatement shall be filed in such form, and containing such information, as the Commissioner may prescribe.

    ‘(ii) A request for reinstatement shall include express declarations by the individual that the individual meets the requirements specified in clauses (ii) and (iii) of paragraph (1)(B).

    ‘(B) A request for reinstatement filed in accordance with subparagraph (A) may constitute an application for benefits in the case of any individual who the Commissioner determines is not entitled to reinstated benefits under this subsection.

    ‘(3) In determining whether an individual meets the requirements of paragraph (1)(B)(ii), the provisions of subsection (f) shall apply.

    ‘(4)(A)(i) Subject to clause (ii), entitlement to benefits reinstated under this subsection shall commence with the benefit payable for the month in which a request for reinstatement is filed.

    ‘(ii) An individual whose entitlement to a benefit for any month would have been reinstated under this subsection had the individual filed a request for reinstatement before the end of such month shall be entitled to such benefit for such month if such request for reinstatement is filed before the end of the twelfth month immediately succeeding such month.

    ‘(B)(i) Subject to clauses (ii) and (iii), the amount of the benefit payable for any month pursuant to the reinstatement of entitlement under this subsection shall be determined in accordance with the provisions of this title.

    ‘(ii) For purposes of computing the primary insurance amount of an individual whose entitlement to benefits under this section is reinstated under this subsection, the date of onset of the individual’s disability shall be the date of onset used in determining the individual’s most recent period of disability arising in connection with such benefits payable on the basis of an application.

    ‘(iii) Benefits under this section or section 202 payable for any month pursuant to a request for reinstatement filed in accordance with paragraph (2) shall be reduced by the amount of any provisional benefit paid to such individual for such month under paragraph (7).

    ‘(C) No benefit shall be payable pursuant to an entitlement reinstated under this subsection to an individual for any month in which the individual engages in substantial gainful activity.

    ‘(D) The entitlement of any individual that is reinstated under this subsection shall end with the benefits payable for the month preceding whichever of the following months is the earliest:

      ‘(i) The month in which the individual dies.

      ‘(ii) The month in which the individual attains retirement age.

      ‘(iii) The third month following the month in which the individual’s disability ceases.

    ‘(5) Whenever an individual’s entitlement to benefits under this section is reinstated under this subsection, entitlement to benefits payable on the basis of such individual’s wages and self-employment income may be reinstated with respect to any person previously entitled to such benefits on the basis of an application if the Commissioner determines that such person satisfies all the requirements for entitlement to such benefits except requirements related to the filing of an application. The provisions of paragraph (4) shall apply to the reinstated entitlement of any such person to the same extent that they apply to the reinstated entitlement of such individual.

    ‘(6) An individual to whom benefits are payable under this section or section 202 pursuant to a reinstatement of entitlement under this subsection for 24 months (whether or not consecutive) shall, with respect to benefits so payable after such twenty-fourth month, be deemed for purposes of paragraph (1)(B)(i)(I) and the determination, if appropriate, of the termination month in accordance with subsection (a)(1) of this section, or subsection (d)(1), (e)(1), or (f)(1) of section 202, to be entitled to such benefits on the basis of an application filed therefor.

    ‘(7)(A) An individual described in paragraph (1)(B) who files a request for reinstatement in accordance with the provisions of paragraph (2)(A) shall be entitled to provisional benefits payable in accordance with this paragraph, unless the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration under paragraph (2)(A)(ii) is false. Any such determination by the Commissioner shall be final and not subject to review under subsection (b) or (g) of section 205.

    ‘(B) The amount of a provisional benefit for a month shall equal the amount of the last monthly benefit payable to the individual under this title on the basis of an application increased by an amount equal to the amount, if any, by which such last monthly benefit would have been increased as a result of the operation of section 215(i).

    ‘(C)(i) Provisional benefits shall begin with the month in which a request for reinstatement is filed in accordance with paragraph (2)(A).

    ‘(ii) Provisional benefits shall end with the earliest of--

      ‘(I) the month in which the Commissioner makes a determination regarding the individual’s entitlement to reinstated benefits;

      ‘(II) the fifth month following the month described in clause (i);

      ‘(III) the month in which the individual performs substantial gainful activity; or

      ‘(IV) the month in which the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration made in accordance with paragraph (2)(A)(ii) is false.

    ‘(D) In any case in which the Commissioner determines that an individual is not entitled to reinstated benefits, any provisional benefits paid to the individual under this paragraph shall not be subject to recovery as an overpayment unless the Commissioner determines that the individual knew or should have known that the individual did not meet the requirements of paragraph (1)(B).’.

    (b) SSI BENEFITS-

      (1) IN GENERAL- Section 1631 of the Social Security Act (42 U.S.C. 1383) is amended by adding at the end the following new subsection:

‘Reinstatement of Eligibility on the Basis of Blindness or Disability

    ‘(p)(1)(A) Eligibility for benefits under this title shall be reinstated in any case where the Commissioner determines that an individual described in subparagraph (B) has filed a request for reinstatement meeting the requirements of paragraph (2)(A) during the period prescribed in subparagraph (C). Reinstatement of eligibility shall be in accordance with the terms of this subsection.

    ‘(B) An individual is described in this subparagraph if--

      ‘(i) prior to the month in which the individual files a request for reinstatement--

        ‘(I) the individual was eligible for benefits under this title on the basis of blindness or disability pursuant to an application filed therefor; and

        ‘(II) the individual thereafter was ineligible for such benefits due to earned income (or earned and unearned income) for a period of 12 or more consecutive months;

      ‘(ii) the individual is blind or disabled and the physical or mental impairment that is the basis for the finding of blindness or disability is the same as (or related to) the physical or mental impairment that was the basis for the finding of blindness or disability that gave rise to the eligibility described in clause (i);

      ‘(iii) the individual’s blindness or disability renders the individual unable to perform substantial gainful activity; and

      ‘(iv) the individual satisfies the nonmedical requirements for eligibility for benefits under this title.

    ‘(C)(i) Except as provided in clause (ii), the period prescribed in this subparagraph with respect to an individual is 60 consecutive months beginning with the month following the most recent month for which the individual was eligible for a benefit under this title (including section 1619) prior to the period of ineligibility described in subparagraph (B)(i)(II).

    ‘(ii) In the case of an individual who fails to file a reinstatement request within the period prescribed in clause (i), the Commissioner may extend the period if the Commissioner determines that the individual had good cause for the failure to so file.

    ‘(2)(A)(i) A request for reinstatement shall be filed in such form, and containing such information, as the Commissioner may prescribe.

    ‘(ii) A request for reinstatement shall include express declarations by the individual that the individual meets the requirements specified in clauses (ii) through (iv) of paragraph (1)(B).

    ‘(B) A request for reinstatement filed in accordance with subparagraph (A) may constitute an application for benefits in the case of any individual who the Commissioner determines is not eligible for reinstated benefits under this subsection.

    ‘(3) In determining whether an individual meets the requirements of paragraph (1)(B)(ii), the provisions of section 1614(a)(4) shall apply.

    ‘(4)(A) Eligibility for benefits reinstated under this subsection shall commence with the benefit payable for the month following the month in which a request for reinstatement is filed.

    ‘(B)(i) Subject to clause (ii), the amount of the benefit payable for any month pursuant to the reinstatement of eligibility under this subsection shall be determined in accordance with the provisions of this title.

    ‘(ii) The benefit under this title payable for any month pursuant to a request for reinstatement filed in accordance with paragraph (2) shall be reduced by the amount of any provisional benefit paid to such individual for such month under paragraph (7).

    ‘(C) Except as otherwise provided in this subsection, eligibility for benefits under this title reinstated pursuant to a request filed under paragraph (2) shall be subject to the same terms and conditions as eligibility established pursuant to an application filed therefor.

    ‘(5) Whenever an individual’s eligibility for benefits under this title is reinstated under this subsection, eligibility for such benefits shall be reinstated with respect to the individual’s spouse if such spouse was previously an eligible spouse of the individual under this title and the Commissioner determines that such spouse satisfies all the requirements for eligibility for such benefits except requirements related to the filing of an application. The provisions of paragraph (4) shall apply to the reinstated eligibility of the spouse to the same extent that they apply to the reinstated eligibility of such individual.

    ‘(6) An individual to whom benefits are payable under this title pursuant to a reinstatement of eligibility under this subsection for twenty-four months (whether or not consecutive) shall, with respect to benefits so payable after such twenty-fourth month, be deemed for purposes of paragraph (1)(B)(i)(I) to be eligible for such benefits on the basis of an application filed therefor.

    ‘(7)(A) An individual described in paragraph (1)(B) who files a request for reinstatement in accordance with the provisions of paragraph (2)(A) shall be eligible for provisional benefits payable in accordance with this paragraph, unless the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration under paragraph (2)(A)(ii) is false. Any such determination by the Commissioner shall be final and not subject to review under paragraph (1) or (3) of subsection (c).

    ‘(B)(i) Except as otherwise provided in clause (ii), the amount of a provisional benefit for a month shall equal the amount of the monthly benefit that would be payable to an eligible individual under this title with the same kind and amount of income.

    ‘(ii) If the individual has a spouse who was previously an eligible spouse of the individual under this title and the Commissioner determines that such spouse satisfies all the requirements of section 1614(b) except requirements related to the filing of an application, the amount of a provisional benefit for a month shall equal the amount of the monthly benefit that would be payable to an eligible individual and eligible spouse under this title with the same kind and amount of income.

    ‘(C)(i) Provisional benefits shall begin with the month following the month in which a request for reinstatement is filed in accordance with paragraph (2)(A).

    ‘(ii) Provisional benefits shall end with the earliest of--

      ‘(I) the month in which the Commissioner makes a determination regarding the individual’s eligibility for reinstated benefits;

      ‘(II) the fifth month following the month for which provisional benefits are first payable under clause (i); or

      ‘(III) the month in which the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration made in accordance with paragraph (2)(A)(ii) is false.

    ‘(D) In any case in which the Commissioner determines that an individual is not eligible for reinstated benefits, any provisional benefits paid to the individual under this paragraph shall not be subject to recovery as an overpayment unless the Commissioner determines that the individual knew or should have known that the individual did not meet the requirements of paragraph (1)(B).

    ‘(8) For purposes of this subsection other than paragraph (7), the term ‘benefits under this title’ includes State supplementary payments made pursuant to an agreement under section 1616(a) of this Act or section 212(b) of Public Law 93-66.’.

      (2) CONFORMING AMENDMENTS-

        (A) Section 1631(j)(1) of such Act (42 U.S.C. 1383(j)(1)) is amended by striking the period and inserting ‘, or has filed a request for reinstatement of eligibility under subsection (p)(2) and been determined to be eligible for reinstatement.’.

        (B) Section 1631(j)(2)(A)(i)(I) of such Act (42 U.S.C. 1383(j)(2)(A)(i)(I)) is amended by inserting ‘(other than pursuant to a request for reinstatement under subsection (p))’ after ‘eligible’.

    (c) EFFECTIVE DATE-

      (1) IN GENERAL- The amendments made by this section shall take effect on the first day of the thirteenth month beginning after the date of the enactment of this Act.

      (2) LIMITATION- No benefit shall be payable under title II or XVI on the basis of a request for reinstatement filed under section 223(i) or 1631(p) of the Social Security Act (42 U.S.C. 423(i), 1383(p)) before the effective date described in paragraph (1).

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

SEC. 121. WORK INCENTIVES OUTREACH PROGRAM.

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

‘WORK INCENTIVES OUTREACH PROGRAM

    ‘SEC. 1149. (a) ESTABLISHMENT-

      ‘(1) IN GENERAL- The Commissioner, in consultation with the Ticket to Work and Work Incentives Advisory Panel established under section 101(f) of the Ticket to Work and Work Incentives Improvement Act of 1999, shall establish a community-based work incentives planning and assistance program for the purpose of disseminating accurate information to disabled beneficiaries on work incentives programs and issues related to such programs.

      ‘(2) GRANTS, COOPERATIVE AGREEMENTS, CONTRACTS, AND OUTREACH- Under the program established under this section, the Commissioner shall--

        ‘(A) establish a competitive program of grants, cooperative agreements, or contracts to provide benefits planning and assistance, including information on the availability of protection and advocacy services, to disabled beneficiaries, including individuals participating in the Ticket to Work and Self-Sufficiency Program established under section 1148, the program established under section 1619, and other programs that are designed to encourage disabled beneficiaries to work;

        ‘(B) conduct directly, or through grants, cooperative agreements, or contracts, ongoing outreach efforts to disabled beneficiaries (and to the families of such beneficiaries) who are potentially eligible to participate in Federal or State work incentive programs that are designed to assist disabled beneficiaries to work, including--

          ‘(i) preparing and disseminating information explaining such programs; and

          ‘(ii) working in cooperation with other Federal, State, and private agencies and nonprofit organizations that serve disabled beneficiaries, and with agencies and organizations that focus on vocational rehabilitation and work-related training and counseling;

        ‘(C) establish a corps of trained, accessible, and responsive work incentives specialists within the Social Security Administration who will specialize in disability work incentives under titles II and XVI for the purpose of disseminating accurate information with respect to inquiries and issues relating to work incentives to--

          ‘(i) disabled beneficiaries;

          ‘(ii) benefit applicants under titles II and XVI; and

          ‘(iii) individuals or entities awarded grants under subparagraphs (A) or (B); and

        ‘(D) provide--

          ‘(i) training for work incentives specialists and individuals providing planning assistance described in subparagraph (C); and

          ‘(ii) technical assistance to organizations and entities that are designed to encourage disabled beneficiaries to return to work.

      ‘(3) COORDINATION WITH OTHER PROGRAMS- The responsibilities of the Commissioner established under this section shall be coordinated with other public and private programs that provide information and assistance regarding rehabilitation services and independent living supports and benefits planning for disabled beneficiaries including the program under section 1619, the plans for achieving self-support program (PASS), and any other Federal or State work incentives programs that are designed to assist disabled beneficiaries, including educational agencies that provide information and assistance regarding rehabilitation, school-to-work programs, transition services (as defined in, and provided in accordance with, the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.)), a one-stop delivery system established under subtitle B of title I of the Workforce Investment Act of 1998 (29 U.S.C. 2811 et seq.), and other services.

    ‘(b) CONDITIONS-

      ‘(1) SELECTION OF ENTITIES-

        ‘(A) APPLICATION- An entity shall submit an application for a grant, cooperative agreement, or contract to provide benefits planning and assistance to the Commissioner at such time, in such manner, and containing such information as the Commissioner may determine is necessary to meet the requirements of this section.

        ‘(B) STATEWIDENESS- The Commissioner shall ensure that the planning, assistance, and information described in paragraph (2) shall be available on a statewide basis.

        ‘(C) ELIGIBILITY OF STATES AND PRIVATE ORGANIZATIONS-

          ‘(i) IN GENERAL- The Commissioner may award a grant, cooperative agreement, or contract under this section to a State or a private agency or organization (other than Social Security Administration Field Offices and the State agency administering the State medicaid program under title XIX, including any agency or entity described in clause (ii), that the Commissioner determines is qualified to provide the planning, assistance, and information described in paragraph (2)).

          ‘(ii) AGENCIES AND ENTITIES DESCRIBED- The agencies and entities described in this clause are the following:

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

            ‘(II) The State agency administering the State program funded under part A of title IV.

        ‘(D) EXCLUSION FOR CONFLICT OF INTEREST- The Commissioner may not award a grant, cooperative agreement, or contract under this section to any entity that the Commissioner determines would have a conflict of interest if the entity were to receive a grant, cooperative agreement, or contract under this section.

      ‘(2) SERVICES PROVIDED- A recipient of a grant, cooperative agreement, or contract to provide benefits planning and assistance shall select individuals who will act as planners and provide information, guidance, and planning to disabled beneficiaries on the--

        ‘(A) availability and interrelation of any Federal or State work incentives programs designed to assist disabled beneficiaries that the individual may be eligible to participate in;

        ‘(B) adequacy of any health benefits coverage that may be offered by an employer of the individual and the extent to which other health benefits coverage may be available to the individual; and

        ‘(C) availability of protection and advocacy services for disabled beneficiaries and how to access such services.

      ‘(3) AMOUNT OF GRANTS, COOPERATIVE AGREEMENTS, OR CONTRACTS-

        ‘(A) BASED ON POPULATION OF DISABLED BENEFICIARIES- Subject to subparagraph (B), the Commissioner shall award a grant, cooperative agreement, or contract under this section to an entity based on the percentage of the population of the State where the entity is located who are disabled beneficiaries.

        ‘(B) LIMITATIONS-

          ‘(i) PER GRANT- No entity shall receive a grant, cooperative agreement, or contract under this section for a fiscal year that is less than $50,000 or more than $300,000.

          ‘(ii) TOTAL AMOUNT FOR ALL GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS- The total amount of all grants, cooperative agreements, and contracts awarded under this section for a fiscal year may not exceed $23,000,000.

      ‘(4) ALLOCATION OF COSTS- The costs of carrying out this section shall be paid from amounts made available for the administration of title II and amounts made available for the administration of title XVI, and shall be allocated among those amounts as appropriate.

    ‘(c) DEFINITIONS- In this section:

      ‘(1) COMMISSIONER- The term ‘Commissioner’ means the Commissioner of Social Security.

      ‘(2) DISABLED BENEFICIARY- The term ‘disabled beneficiary’ has the meaning given that term in section 1148(k)(2).

    ‘(d) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to carry out this section $23,000,000 for each of the fiscal years 2000 through 2004.’.

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

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

‘STATE GRANTS FOR WORK INCENTIVES ASSISTANCE TO DISABLED BENEFICIARIES

    ‘SEC. 1150. (a) IN GENERAL- Subject to subsection (c), the Commissioner may make payments in each State to the protection and advocacy system established pursuant to part C of title I of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6041 et seq.) for the purpose of providing services to disabled beneficiaries.

    ‘(b) SERVICES PROVIDED- Services provided to disabled beneficiaries pursuant to a payment made under this section may include--

      ‘(1) information and advice about obtaining vocational rehabilitation and employment services; and

      ‘(2) advocacy or other services that a disabled beneficiary may need to secure or regain gainful employment.

    ‘(c) APPLICATION- In order to receive payments under this section, a protection and advocacy system shall submit an application to the Commissioner, at such time, in such form and manner, and accompanied by such information and assurances as the Commissioner may require.

    ‘(d) AMOUNT OF PAYMENTS-

      ‘(1) IN GENERAL- Subject to the amount appropriated for a fiscal year for making payments under this section, a protection and advocacy system shall not be paid an amount that is less than--

        ‘(A) in the case of a protection and advocacy system located in a State (including the District of Columbia and Puerto Rico) other than Guam, American Samoa, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands, the greater of--

          ‘(i) $100,000; or

          ‘(ii) 1/3 of 1 percent of the amount available for payments under this section; and

        ‘(B) in the case of a protection and advocacy system located in Guam, American Samoa, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands, $50,000.

      ‘(2) INFLATION ADJUSTMENT- For each fiscal year in which the total amount appropriated to carry out this section exceeds the total amount appropriated to carry out this section in the preceding fiscal year, the Commissioner shall increase each minimum payment under subparagraphs (A) and (B) of paragraph (1) by a percentage equal to the percentage increase in the total amount so appropriated to carry out this section.

    ‘(e) ANNUAL REPORT- Each protection and advocacy system that receives a payment under this section shall submit an annual report to the Commissioner and the Ticket to Work and Work Incentives Advisory Panel established under section 101(f) of the Ticket to Work and Work Incentives Improvement Act of 1999 on the services provided to individuals by the system.

    ‘(f) FUNDING-

      ‘(1) ALLOCATION OF PAYMENTS- Payments under this section shall be made from amounts made available for the administration of title II and amounts made available for the administration of title XVI, and shall be allocated among those amounts as appropriate.

      ‘(2) CARRYOVER- Any amounts allotted for payment to a protection and advocacy system under this section for a fiscal year shall remain available for payment to or on behalf of the protection and advocacy system until the end of the succeeding fiscal year.

    ‘(g) DEFINITIONS- In this section:

      ‘(1) COMMISSIONER- The term ‘Commissioner’ means the Commissioner of Social Security.

      ‘(2) DISABLED BENEFICIARY- The term ‘disabled beneficiary’ has the meaning given that term in section 1148(k)(2).

      ‘(3) PROTECTION AND ADVOCACY SYSTEM- The term ‘protection and advocacy system’ means a protection and advocacy system established pursuant to part C of title I of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6041 et seq.).

    ‘(h) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to carry out this section $7,000,000 for each of the fiscal years 2000 through 2004.’.

TITLE II--EXPANDED AVAILABILITY OF HEALTH CARE SERVICES

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

    (a) IN GENERAL-

      (1) STATE OPTION TO ELIMINATE INCOME, ASSETS, AND RESOURCE LIMITATIONS FOR WORKERS WITH DISABILITIES BUYING INTO MEDICAID- Section 1902(a)(10)(A)(ii) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is amended--

        (A) in subclause (XIII), by striking ‘or’ at the end;

        (B) in subclause (XIV), by adding ‘or’ at the end; and

        (C) by adding at the end the following new subclause:

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

      (2) STATE OPTION TO PROVIDE OPPORTUNITY FOR EMPLOYED INDIVIDUALS WITH A MEDICALLY IMPROVED DISABILITY TO BUY INTO MEDICAID-

        (A) ELIGIBILITY- Section 1902(a)(10) (A)(ii) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by paragraph (1), is amended--

          (i) in subclause (XIV), by striking ‘or’ at the end;

          (ii) in subclause (XV), by adding ‘or’ at the end; and

          (iii) by adding at the end the following new subclause:

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

        (B) DEFINITION OF EMPLOYED INDIVIDUALS WITH A MEDICALLY IMPROVED DISABILITY- Section 1905 of the Social Security Act (42 U.S.C. 1396d) is amended by adding at the end the following new subsection:

    ‘(v)(1) The term ‘employed individual with a medically improved disability’ means an individual who--

      ‘(A) is at least 16, but less than 65, years of age;

      ‘(B) is employed (as defined in paragraph (2));

      ‘(C) ceases to be eligible for medical assistance under section 1902(a)(10)(A)(ii)(XV) because the individual, by reason of medical improvement, is determined at the time of a regularly scheduled continuing disability review to no longer be eligible for benefits under section 223(d) or 1614(a)(3); and

      ‘(D) continues to have a severe medically determinable impairment, as determined under regulations of the Secretary.

    ‘(2) For purposes of paragraph (1), an individual is considered to be ‘employed’ if the individual--

      ‘(A) is earning at least the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act (29 U.S.C. 206) and working at least 40 hours per month; or

      ‘(B) is engaged in a work effort that meets substantial and reasonable threshold criteria for hours of work, wages, or other measures, as defined by the State and approved by the Secretary.’.

        (C) CONFORMING AMENDMENT- Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is amended in the matter preceding paragraph (1)--

          (i) in clause (x), by striking ‘or’ at the end;

          (ii) in clause (xi), by adding ‘or’ at the end; and

          (iii) by inserting after clause (xi), the following new clause:

      ‘(xii) employed individuals with a medically improved disability (as defined in subsection (v)),’.

      (3) STATE AUTHORITY TO IMPOSE INCOME-RELATED PREMIUMS AND COST-SHARING- Section 1916 of such Act (42 U.S.C. 1396o) is amended--

        (A) in subsection (a), by striking ‘The State plan’ and inserting ‘Subject to subsection (g), the State plan’; and

        (B) by adding at the end the following new subsection:

    ‘(g) With respect to individuals provided medical assistance only under subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii)--

      ‘(1) a State may (in a uniform manner for individuals described in either such subclause)--

        ‘(A) require such individuals to pay premiums or other cost-sharing charges set on a sliding scale based on income that the State may determine; and

        ‘(B) require payment of 100 percent of such premiums for such year in the case of such an individual who has income for a year that exceeds 250 percent of the income official poverty line (referred to in subsection (c)(1)) applicable to a family of the size involved, except that in the case of such an individual who has income for a year that does not exceed 450 percent of such poverty line, such requirement may only apply to the extent such premiums do not exceed 7.5 percent of such income; and

      ‘(2) such State shall require payment of 100 percent of such premiums for a year by such an individual whose adjusted gross income (as defined in section 62 of the Internal Revenue Code of 1986) for such year exceeds $75,000, except that a State may choose to subsidize such premiums by using State funds which may not be federally matched under this title.

    In the case of any calendar year beginning after 2000, the dollar amount specified in paragraph (2) shall be increased in accordance with the provisions of section 215(i)(2)(A)(ii).’.

      (4) PROHIBITION AGAINST SUPPLANTATION OF STATE FUNDS AND STATE FAILURE TO MAINTAIN EFFORT- Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended--

        (A) by striking the period at the end of paragraph (19) and inserting ‘; or’; and

        (B) by inserting after such paragraph the following new paragraph:

      ‘(20) with respect to amounts expended for medical assistance provided to an individual described in subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii) for a fiscal year unless the State demonstrates to the satisfaction of the Secretary that the level of State funds expended for such fiscal year for programs to enable working individuals with disabilities to work (other than for such medical assistance) is not less than the level expended for such programs during the most recent State fiscal year ending before the date of the enactment of this paragraph.’.

    (b) CONFORMING AMENDMENTS- Section 1903(f)(4) of the Social Security Act (42 U.S.C. 1396b(f)(4) is amended in the matter preceding subparagraph (A) by inserting ‘1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI),’ before ‘1905(p)(1)’.

    (c) GAO REPORT- Not later than 3 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Congress regarding the amendments made by this section that examines--

      (1) the extent to which higher health care costs for individuals with disabilities at higher income levels deter employment or progress in employment;

      (2) whether such individuals have health insurance coverage or could benefit from the State option established under such amendments to provide a medicaid buy-in; and

      (3) how the States are exercising such option, including--

        (A) how such States are exercising the flexibility afforded them with regard to income disregards;

        (B) what income and premium levels have been set;

        (C) the degree to which States are subsidizing premiums above the dollar amount specified in section 1916(g)(2) of the Social Security Act (42 U.S.C. 1396o(g)(2)); and

        (D) the extent to which there exists any crowd-out effect.

    (d) EFFECTIVE DATE- The amendments made by this section apply to medical assistance for items and services furnished on or after October 1, 2000.

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

    (a) IN GENERAL- The next to last sentence of section 226(b) of the Social Security Act (42 U.S.C. 426) is amended by striking ‘24’ and inserting ‘78’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall be effective on and after October 1, 2000.

    (c) GAO REPORT- Not later than 5 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Congress that--

      (1) examines the effectiveness and cost of the amendment made by subsection (a);

      (2) examines the necessity and effectiveness of providing continuation of medicare coverage under section 226(b) of the Social Security Act (42 U.S.C. 426(b)) to individuals whose annual income exceeds the contribution and benefit base (as determined under section 230 of such Act (42 U.S.C. 430));

      (3) examines the viability of providing the continuation of medicare coverage under such section 226(b) based on a sliding scale premium for individuals whose annual income exceeds such contribution and benefit base;

      (4) examines the viability of providing the continuation of medicare coverage under such section 226(b) based on a premium buy-in by the beneficiary’s employer in lieu of coverage under private health insurance;

      (5) examines the interrelation between the use of the continuation of medicare coverage under such section 226(b) and the use of private health insurance coverage by individuals during the extended period; and

      (6) recommends such legislative or administrative changes relating to the continuation of medicare coverage for recipients of social security disability benefits as the Comptroller General determines are appropriate.

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

    (a) ESTABLISHMENT-

      (1) IN GENERAL- The Secretary of Health and Human Services (in this section referred to as the ‘Secretary’) shall award grants described in subsection (b) to States to support the design, establishment, and operation of State infrastructures that provide items and services to support working individuals with disabilities.

      (2) APPLICATION- In order to be eligible for an award of a grant under this section, a State shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary shall require.

      (3) DEFINITION OF STATE- In this section, the term ‘State’ means each of the 50 States, the District of Columbia, Puerto Rico, Guam, the United States Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands.

    (b) GRANTS FOR INFRASTRUCTURE AND OUTREACH-

      (1) IN GENERAL- Out of the funds appropriated under subsection (e), the Secretary shall award grants to States to--

        (A) support the establishment, implementation, and operation of the State infrastructures described in subsection (a); and

        (B) conduct outreach campaigns regarding the existence of such infrastructures.

      (2) ELIGIBILITY FOR GRANTS-

        (A) IN GENERAL- No State may receive a grant under this subsection unless the State demonstrates to the satisfaction of the Secretary that the State makes personal assistance services available under the State plan under title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) to the extent necessary to enable individuals with disabilities to remain employed, including individuals described in section 1902(a)(10)(A)(ii)(XIII) of such Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)) if the State has elected to provide medical assistance under such plan to such individuals.

        (B) DEFINITIONS- In this section:

          (i) EMPLOYED- The term ‘employed’ means--

            (I) earning at least the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act (29 U.S.C. 206) and working at least 40 hours per month; or

            (II) being engaged in a work effort that meets substantial and reasonable threshold criteria for hours of work, wages, or other measures, as defined and approved by the Secretary.

          (ii) PERSONAL ASSISTANCE SERVICES- The term ‘personal assistance services’ means a range of services, provided by 1 or more persons, designed to assist an individual with a disability to perform daily activities on and off the job that the individual would typically perform if the individual did not have a disability. Such services shall be designed to increase the individual’s control in life and ability to perform everyday activities on or off the job.

      (3) DETERMINATION OF AWARDS-

        (A) IN GENERAL- Subject to subparagraph (B), the Secretary shall develop a methodology for awarding grants to States under this section for a fiscal year in a manner that--

          (i) rewards States for their efforts in encouraging individuals described in paragraph (2)(A) to be employed; and

          (ii) does not provide a State that has not elected to provide medical assistance under title XIX of the Social Security Act to individuals described in section 1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)) with proportionally more funds for a fiscal year than a State that has exercised such election.

        (B) AWARD LIMITS-

          (i) MINIMUM AWARDS-

            (I) IN GENERAL- Subject to subclause (II), no State with an approved application under this section shall receive a grant for a fiscal year that is less than $500,000.

            (II) PRO RATA REDUCTIONS- If the funds appropriated under subsection (e) for a fiscal year are not sufficient to pay each State with an application approved under this section the minimum amount described in subclause (I), the Secretary shall pay each such State an amount equal to the pro rata share of the amount made available.

          (ii) MAXIMUM AWARDS-

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

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

    (c) AVAILABILITY OF FUNDS-

      (1) FUNDS AWARDED TO STATES- Funds awarded to a State under a grant made under this section for a fiscal year shall remain available until expended.

      (2) FUNDS NOT AWARDED TO STATES- Funds not awarded to States in the fiscal year for which they are appropriated shall remain available in succeeding fiscal years for awarding by the Secretary.

    (d) ANNUAL REPORT- A State that is awarded a grant under this section shall submit an annual report to the Secretary on the use of funds provided under the grant. Each report shall include the percentage increase in the number of title II disability beneficiaries, as defined in section 1148(k)(3) of the Social Security Act (as added by section 101(a) of this Act) in the State, and title XVI disability beneficiaries, as defined in section 1148(k)(4) of the Social Security Act (as so added) in the State who return to work.

    (e) APPROPRIATION-

      (1) IN GENERAL- Out of any funds in the Treasury not otherwise appropriated, there is appropriated to make grants under this section--

        (A) for fiscal year 2001, $20,000,000;

        (B) for fiscal year 2002, $25,000,000;

        (C) for fiscal year 2003, $30,000,000;

        (D) for fiscal year 2004, $35,000,000;

        (E) for fiscal year 2005, $40,000,000; and

        (F) for each of fiscal years 2006 through 2011, the amount appropriated for the preceding fiscal year increased by the percentage increase (if any) in the Consumer Price Index for All Urban Consumers (United States city average) for the preceding fiscal year.

      (2) BUDGET AUTHORITY- This subsection constitutes budget authority in advance of appropriations Acts and represents the obligation of the Federal Government to provide for the payment of the amounts appropriated under paragraph (1).

    (f) RECOMMENDATION- Not later than October 1, 2010, the Secretary, in consultation with the Ticket to Work and Work Incentives Advisory Panel established by section 101(f) of this Act, shall submit a recommendation to the Committee on Commerce of the House of Representatives and the Committee on Finance of the Senate regarding whether the grant program established under this section should be continued after fiscal year 2011.

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

    (a) STATE APPLICATION- A State may apply to the Secretary of Health and Human Services (in this section referred to as the ‘Secretary’) for approval of a demonstration project (in this section referred to as a ‘demonstration project’) under which up to a specified maximum number of individuals who are workers with a potentially severe disability (as defined in subsection (b)(1)) are provided medical assistance equal to--

      (1) that provided under section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) to individuals described in section 1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)); or

      (2) in the case of a State that has not elected to provide medical assistance under that section to such individuals, such medical assistance as the Secretary determines is an appropriate equivalent to the medical assistance described in paragraph (1).

    (b) WORKER WITH A POTENTIALLY SEVERE DISABILITY DEFINED- For purposes of this section--

      (1) IN GENERAL- The term ‘worker with a potentially severe disability’ means, with respect to a demonstration project, an individual who--

        (A) is at least 16, but less than 65, years of age;

        (B) has a specific physical or mental impairment that, as defined by the State under the demonstration project, is reasonably expected, but for the receipt of items and services described in section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)), to become blind or disabled (as defined under section 1614(a) of the Social Security Act (42 U.S.C. 1382c(a))); and

        (C) is employed (as defined in paragraph (2)).

      (2) DEFINITION OF EMPLOYED- An individual is considered to be ‘employed’ if the individual--

        (A) is earning at least the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act (29 U.S.C. 206) and working at least 40 hours per month; or

        (B) is engaged in a work effort that meets substantial and reasonable threshold criteria for hours of work, wages, or other measures, as defined under the demonstration project and approved by the Secretary.

    (c) APPROVAL OF DEMONSTRATION PROJECTS-

      (1) IN GENERAL- Subject to paragraph (3), the Secretary shall approve applications under subsection (a) that meet the requirements of paragraph (2) and such additional terms and conditions as the Secretary may require. The Secretary may waive the requirement of section 1902(a)(1) of the Social Security Act (42 U.S.C. 1396a(a)(1)) to allow for sub-State demonstrations.

      (2) TERMS AND CONDITIONS OF DEMONSTRATION PROJECTS- The Secretary may not approve a demonstration project under this section unless the State provides assurances satisfactory to the Secretary that the following conditions are or will be met:

        (A) MAINTENANCE OF STATE EFFORT- Federal funds paid to a State pursuant to this section must be used to supplement, but not supplant, the level of State funds expended for workers with potentially severe disabilities under programs in effect for such individuals at the time the demonstration project is approved under this section.

        (B) INDEPENDENT EVALUATION- The State provides for an independent evaluation of the project.

      (3) LIMITATIONS ON FEDERAL FUNDING-

        (A) APPROPRIATION-

          (i) IN GENERAL- Out of any funds in the Treasury not otherwise appropriated, there is appropriated to carry out this section--

            (I) $42,000,000 for each of fiscal years 2001 through 2004; and

            (II) $41,000,000 for each of fiscal years 2005 and 2006.

          (ii) BUDGET AUTHORITY- Clause (i) constitutes budget authority in advance of appropriations Acts and represents the obligation of the Federal Government to provide for the payment of the amounts appropriated under clause (i).

        (B) LIMITATION ON PAYMENTS- In no case may--

          (i) the aggregate amount of payments made by the Secretary to States under this section exceed $250,000,000;

          (ii) the aggregate amount of payments made by the Secretary to States for administrative expenses relating to annual reports required under subsection (d) exceed $2,000,000 of such $250,000,000; or

          (iii) payments be provided by the Secretary for a fiscal year after fiscal year 2009.

        (C) FUNDS ALLOCATED TO STATES- The Secretary shall allocate funds to States based on their applications and the availability of funds. Funds allocated to a State under a grant made under this section for a fiscal year shall remain available until expended.

        (D) FUNDS NOT ALLOCATED TO STATES- Funds not allocated to States in the fiscal year for which they are appropriated shall remain available in succeeding fiscal years for allocation by the Secretary using the allocation formula established under this section.

        (E) PAYMENTS TO STATES- The Secretary shall pay to each State with a demonstration project approved under this section, from its allocation under subparagraph (C), an amount for each quarter equal to the Federal medical assistance percentage (as defined in section 1905(b) of the Social Security Act (42 U.S.C. 1395d(b)) of expenditures in the quarter for medical assistance provided to workers with a potentially severe disability.

    (d) ANNUAL REPORT- A State with a demonstration project approved under this section shall submit an annual report to the Secretary on the use of funds provided under the grant. Each report shall include enrollment and financial statistics on--

      (1) the total population of workers with potentially severe disabilities served by the demonstration project; and

      (2) each population of such workers with a specific physical or mental impairment described in subsection (b)(1)(B) served by such project.

    (e) RECOMMENDATION- Not later than October 1, 2004, the Secretary shall submit a recommendation to the Committee on Commerce of the House of Representatives and the Committee on Finance of the Senate regarding whether the demonstration project established under this section should be continued after fiscal year 2006.

    (f) STATE DEFINED- In this section, the term ‘State’ has the meaning given such term for purposes of title XIX of the Social Security Act (42 U.S.C. 1396 et seq.).

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

    (a) IN GENERAL- Section 1882(q) of the Social Security Act (42 U.S.C. 1395ss(q)) is amended--

      (1) in paragraph (5)(C), by inserting ‘or paragraph (6)’ after ‘this paragraph’; and

      (2) by adding at the end the following new paragraph:

      ‘(6) Each medicare supplemental policy shall provide that benefits and premiums under the policy shall be suspended at the request of the policyholder if the policyholder is entitled to benefits under section 226(b) and is covered under a group health plan (as defined in section 1862(b)(1)(A)(v)). If such suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, such policy shall be automatically reinstituted (effective as of the date of such loss of coverage) under terms described in subsection (n)(6)(A)(ii) as of the loss of such coverage if the policyholder provides notice of loss of such coverage within 90 days after the date of such loss.’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) apply with respect to requests made after the date of the enactment of this Act.

TITLE III--DEMONSTRATION PROJECTS AND STUDIES

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

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

‘DEMONSTRATION PROJECT AUTHORITY

    ‘SEC. 234. (a) AUTHORITY-

      ‘(1) IN GENERAL- The Commissioner of Social Security (in this section referred to as the ‘Commissioner’) shall develop and carry out experiments and demonstration projects designed to determine the relative advantages and disadvantages of--

        ‘(A) various alternative methods of treating the work activity of individuals entitled to disability insurance benefits under section 223 or to monthly insurance benefits under section 202 based on such individual’s disability (as defined in section 223(d)), including such methods as a reduction in benefits based on earnings, designed to encourage the return to work of such individuals;

        ‘(B) altering other limitations and conditions applicable to such individuals (including lengthening the trial work period (as defined in section 222(c)), altering the 24-month waiting period for hospital insurance benefits under section 226, altering the manner in which the program under this title is administered, earlier referral of such individuals for rehabilitation, and greater use of employers and others to develop, perform, and otherwise stimulate new forms of rehabilitation); and

        ‘(C) implementing sliding scale benefit offsets using variations in--

          ‘(i) the amount of the offset as a proportion of earned income;

          ‘(ii) the duration of the offset period; and

          ‘(iii) the method of determining the amount of income earned by such individuals,

      to the end that savings will accrue to the Trust Funds, or to otherwise promote the objectives or facilitate the administration of this title.

      ‘(2) AUTHORITY FOR EXPANSION OF SCOPE- The Commissioner may expand the scope of any such experiment or demonstration project to include any group of applicants for benefits under the program established under this title with impairments that reasonably may be presumed to be disabling for purposes of such demonstration project, and may limit any such demonstration project to any such group of applicants, subject to the terms of such demonstration project which shall define the extent of any such presumption.

    ‘(b) REQUIREMENTS- The experiments and demonstration projects developed under subsection (a) shall be of sufficient scope and shall be carried out on a wide enough scale to permit a thorough evaluation of the alternative methods under consideration while giving assurance that the results derived from the experiments and projects will obtain generally in the operation of the disability insurance program under this title without committing such program to the adoption of any particular system either locally or nationally.

    ‘(c) AUTHORITY TO WAIVE COMPLIANCE WITH BENEFITS REQUIREMENTS- In the case of any experiment or demonstration project conducted under subsection (a), the Commissioner may waive compliance with the benefit requirements of this title and the requirements of section 1148 as they relate to the program established under this title, and the Secretary may (upon the request of the Commissioner) waive compliance with the benefits requirements of title XVIII, insofar as is necessary for a thorough evaluation of the alternative methods under consideration. No such experiment or project shall be actually placed in operation unless at least 90 days prior thereto a written report, prepared for purposes of notification and information only and containing a full and complete description thereof, has been transmitted by the Commissioner to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate. Periodic reports on the progress of such experiments and demonstration projects shall be submitted by the Commissioner to such committees. When appropriate, such reports shall include detailed recommendations for changes in administration or law, or both, to carry out the objectives stated in subsection (a).

    ‘(d) REPORTS-

      ‘(1) INTERIM REPORTS- On or before June 9 of each year, the Commissioner shall submit to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate an annual interim report on the progress of the experiments and demonstration projects carried out under this subsection together with any related data and materials that the Commissioner may consider appropriate.

      ‘(2) TERMINATION AND FINAL REPORT- The authority under the preceding provisions of this section (including any waiver granted pursuant to subsection (c)) shall terminate 5 years after the date of the enactment of this Act. Not later than 90 days after the termination of any experiment or demonstration project carried out under this section, the Commissioner shall submit to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate a final report with respect to that experiment or demonstration project.’.

    (b) CONFORMING AMENDMENTS; TRANSFER OF PRIOR AUTHORITY-

      (1) CONFORMING AMENDMENTS-

        (A) REPEAL OF PRIOR AUTHORITY- Paragraphs (1) through (4) of subsection (a) and subsection (c) of section 505 of the Social Security Disability Amendments of 1980 (42 U.S.C. 1310 note) are repealed.

        (B) CONFORMING AMENDMENT REGARDING FUNDING- Section 201(k) of the Social Security Act (42 U.S.C. 401(k)) is amended by striking ‘section 505(a) of the Social Security Disability Amendments of 1980’ and inserting ‘section 234’.

      (2) TRANSFER OF PRIOR AUTHORITY- With respect to any experiment or demonstration project being conducted under section 505(a) of the Social Security Disability Amendments of 1980 (42 U.S.C. 1310 note) as of the date of the enactment of this Act, the authority to conduct such experiment or demonstration project (including the terms and conditions applicable to the experiment or demonstration project) shall be treated as if that authority (and such terms and conditions) had been established under section 234 of the Social Security Act, as added by subsection (a).

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

    (a) AUTHORITY- The Commissioner of Social Security shall conduct demonstration projects for the purpose of evaluating, through the collection of data, a program for title II disability beneficiaries (as defined in section 1148(k)(3) of the Social Security Act) under which benefits payable under section 223 of such Act, or under section 202 of such Act based on the beneficiary’s disability, are reduced by $1 for each $2 of the beneficiary’s earnings that is above a level to be determined by the Commissioner. Such projects shall be conducted at a number of localities which the Commissioner shall determine is sufficient to adequately evaluate the appropriateness of national implementation of such a program. Such projects shall identify reductions in Federal expenditures that may result from the permanent implementation of such a program.

    (b) SCOPE AND SCALE AND MATTERS TO BE DETERMINED-

      (1) IN GENERAL- The demonstration projects developed under subsection (a) shall be of sufficient duration, shall be of sufficient scope, and shall be carried out on a wide enough scale to permit a thorough evaluation of the project to determine--

        (A) the effects, if any, of induced entry into the project and reduced exit from the project;

        (B) the extent, if any, to which the project being tested is affected by whether it is in operation in a locality within an area under the administration of the Ticket to Work and Self-Sufficiency Program established under section 1148 of the Social Security Act; and

        (C) the savings that accrue to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and other Federal programs under the project being tested.

      The Commissioner shall take into account advice provided by the Ticket to Work and Work Incentives Advisory Panel pursuant to section 101(f)(2)(B)(ii) of this Act.

      (2) ADDITIONAL MATTERS- The Commissioner shall also determine with respect to each project--

        (A) the annual cost (including net cost) of the project and the annual cost (including net cost) that would have been incurred in the absence of the project;

        (B) the determinants of return to work, including the characteristics of the beneficiaries who participate in the project; and

        (C) the employment outcomes, including wages, occupations, benefits, and hours worked, of beneficiaries who return to work as a result of participation in the project.

      The Commissioner may include within the matters evaluated under the project the merits of trial work periods and periods of extended eligibility.

    (c) WAIVERS- The Commissioner may waive compliance with the benefit provisions of title II of the Social Security Act (42 U.S.C. 401 et seq.), and the Secretary of Health and Human Services may waive compliance with the benefit requirements of title XVIII of such Act (42 U.S.C. 1395 et seq.), insofar as is necessary for a thorough evaluation of the alternative methods under consideration. No such project shall be actually placed in operation unless at least 90 days prior thereto a written report, prepared for purposes of notification and information only and containing a full and complete description thereof, has been transmitted by the Commissioner to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate. Periodic reports on the progress of such projects shall be submitted by the Commissioner to such committees. When appropriate, such reports shall include detailed recommendations for changes in administration or law, or both, to carry out the objectives stated in subsection (a).

    (d) INTERIM REPORTS- Not later than 2 years after the date of the enactment of this Act, and annually thereafter, the Commissioner of Social Security shall submit to the Congress an interim report on the progress of the demonstration projects carried out under this subsection together with any related data and materials that the Commissioner of Social Security may consider appropriate.

    (e) FINAL REPORT- The Commissioner of Social Security shall submit to the Congress a final report with respect to all demonstration projects carried out under this section not later than 1 year after their completion.

    (f) EXPENDITURES- Expenditures made for demonstration projects under this section shall be made from the Federal Disability Insurance Trust Fund and the Federal Old-Age and Survivors Insurance Trust Fund, as determined appropriate by the Commissioner of Social Security, and from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, as determined appropriate by the Secretary of Health and Human Services, to the extent provided in advance in appropriation Acts.

SEC. 303. STUDIES AND REPORTS.

    (a) STUDY BY GENERAL ACCOUNTING OFFICE OF EXISTING DISABILITY-RELATED EMPLOYMENT INCENTIVES-

      (1) STUDY- As soon as practicable after the date of the enactment of this Act, the Comptroller General of the United States shall undertake a study to assess existing tax credits and other disability-related employment incentives under the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et seq.) and other Federal laws. In such study, the Comptroller General shall specifically address the extent to which such credits and other incentives would encourage employers to hire and retain individuals with disabilities.

      (2) REPORT- Not later than 3 years after the date of the enactment of this Act, the Comptroller General shall transmit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together with such recommendations for legislative or administrative changes as the Comptroller General determines are appropriate.

    (b) STUDY BY GENERAL ACCOUNTING OFFICE OF EXISTING COORDINATION OF THE DI AND SSI PROGRAMS AS THEY RELATE TO INDIVIDUALS ENTERING OR LEAVING CONCURRENT ENTITLEMENT-

      (1) STUDY- As soon as practicable after the date of the enactment of this Act, the Comptroller General of the United States shall undertake a study to evaluate the coordination under current law of the disability insurance program under title II of the Social Security Act (42 U.S.C. 401 et seq.) and the supplemental security income program under title XVI of such Act (42 U.S.C. 1381 et seq.), as such programs relate to individuals entering or leaving concurrent entitlement under such programs. In such study, the Comptroller General shall specifically address the effectiveness of work incentives under such programs with respect to such individuals and the effectiveness of coverage of such individuals under titles XVIII and XIX of such Act (42 U.S.C. 1395 et seq., 1396 et seq.).

      (2) REPORT- Not later than 3 years after the date of the enactment of this Act, the Comptroller General shall transmit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together with such recommendations for legislative or administrative changes as the Comptroller General determines are appropriate.

    (c) STUDY BY GENERAL ACCOUNTING OFFICE OF THE IMPACT OF THE SUBSTANTIAL GAINFUL ACTIVITY LIMIT ON RETURN TO WORK-

      (1) STUDY- As soon as practicable after the date of the enactment of this Act, the Comptroller General of the United States shall undertake a study of the substantial gainful activity level applicable as of that date to recipients of benefits under section 223 of the Social Security Act (42 U.S.C. 423) and under section 202 of such Act (42 U.S.C. 402) on the basis of a recipient having a disability, and the effect of such level as a disincentive for those recipients to return to work. In the study, the Comptroller General also shall address the merits of increasing the substantial gainful activity level applicable to such recipients of benefits and the rationale for not yearly indexing that level to inflation.

      (2) REPORT- Not later than 2 years after the date of the enactment of this Act, the Comptroller General shall transmit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together with such recommendations for legislative or administrative changes as the Comptroller General determines are appropriate.

    (d) REPORT ON DISREGARDS UNDER THE DI AND SSI PROGRAMS- Not later than 90 days after the date of the enactment of this Act, the Commissioner of Social Security shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report that--

      (1) identifies all income, assets, and resource disregards (imposed under statutory or regulatory authority) that are applicable to individuals receiving benefits under title II or XVI of the Social Security Act (42 U.S.C. 401 et seq., 1381 et seq.);

      (2) with respect to each such disregard--

        (A) specifies the most recent statutory or regulatory modification of the disregard; and

        (B) recommends whether further statutory or regulatory modification of the disregard would be appropriate; and

      (3) with respect to the disregard described in section 1612(b)(7) of such Act (42 U.S.C. 1382a(b)(7)) (relating to grants, scholarships, or fellowships received for use in paying the cost of tuition and fees at any educational (including technical or vocational education) institution)--

        (A) identifies the number of individuals receiving benefits under title XVI of such Act (42 U.S.C. 1381 et seq.) who have attained age 22 and have not had any portion of any grant, scholarship, or fellowship received for use in paying the cost of tuition and fees at any educational (including technical or vocational education) institution excluded from their income in accordance with that section;

        (B) recommends whether the age at which such grants, scholarships, or fellowships are excluded from income for purposes of determining eligibility under title XVI of such Act (42 U.S.C. 1381 et seq.) should be increased to age 25; and

        (C) recommends whether such disregard should be expanded to include any such grant, scholarship, or fellowship received for use in paying the cost of room and board at any such institution.

    (e) STUDY BY THE GENERAL ACCOUNTING OFFICE OF SOCIAL SECURITY ADMINISTRATION’S DISABILITY INSURANCE PROGRAM DEMONSTRATION AUTHORITY-

      (1) STUDY- As soon as practicable after the date of the enactment of this Act, the Comptroller General of the United States shall undertake a study to assess the results of the Social Security Administration’s efforts to conduct disability demonstrations authorized under prior law as well as under section 234 of the Social Security Act (as added by section 301 of this Act).

      (2) REPORT- Not later than 5 years after the date of the enactment of this Act, the Comptroller General shall transmit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a written report presenting the results of the Comptroller General’s study conducted pursuant to this section, together with a recommendation as to whether the demonstration authority authorized under section 234 of the Social Security Act (as added by section 301 of this Act) should be made permanent.

TITLE IV--MISCELLANEOUS AND TECHNICAL AMENDMENTS

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

    (a) CLARIFICATION RELATING TO THE EFFECTIVE DATE OF THE DENIAL OF SOCIAL SECURITY DISABILITY BENEFITS TO DRUG ADDICTS AND ALCOHOLICS- Section 105(a)(5) of the Contract with America Advancement Act of 1996 (42 U.S.C. 405 note) is amended--

      (1) in subparagraph (A), by striking ‘by the Commissioner of Social Security’ and ‘by the Commissioner’; and

      (2) by adding at the end the following new subparagraph:

        ‘(D) For purposes of this paragraph, an individual’s claim, with respect to benefits under title II based on disability, which has been denied in whole before the date of the enactment of this Act, may not be considered to be finally adjudicated before such date if, on or after such date--

          ‘(i) there is pending a request for either administrative or judicial review with respect to such claim; or

          ‘(ii) there is pending, with respect to such claim, a readjudication by the Commissioner of Social Security pursuant to relief in a class action or implementation by the Commissioner of a court remand order.

        ‘(E) Notwithstanding the provisions of this paragraph, with respect to any individual for whom the Commissioner of Social Security does not perform the entitlement redetermination before the date prescribed in subparagraph (C), the Commissioner shall perform such entitlement redetermination in lieu of a continuing disability review whenever the Commissioner determines that the individual’s entitlement is subject to redetermination based on the preceding provisions of this paragraph, and the provisions of section 223(f) shall not apply to such redetermination.’.

    (b) CORRECTION TO EFFECTIVE DATE OF PROVISIONS CONCERNING REPRESENTATIVE PAYEES AND TREATMENT REFERRALS OF SOCIAL SECURITY BENEFICIARIES WHO ARE DRUG ADDICTS AND ALCOHOLICS- Section 105(a)(5)(B) of the Contract with America Advancement Act of 1996 (42 U.S.C. 405 note) is amended to read as follows:

        ‘(B) The amendments made by paragraphs (2) and (3) shall take effect on July 1, 1996, with respect to any individual--

          ‘(i) whose claim for benefits is finally adjudicated on or after the date of the enactment of this Act; or

          ‘(ii) whose entitlement to benefits is based upon an entitlement redetermination made pursuant to subparagraph (C).’.

    (c) EFFECTIVE DATES- The amendments made by this section shall take effect as if included in the enactment of section 105 of the Contract with America Advancement Act of 1996 (Public Law 104-121; 110 Stat. 852 et seq.).

SEC. 402. TREATMENT OF PRISONERS.

    (a) IMPLEMENTATION OF PROHIBITION AGAINST PAYMENT OF TITLE II BENEFITS TO PRISONERS-

      (1) IN GENERAL- Section 202(x)(3) of the Social Security Act (42 U.S.C. 402(x)(3)) is amended--

        (A) by inserting ‘(A)’ after ‘(3)’; and

        (B) by adding at the end the following new subparagraph:

    ‘(B)(i) The Commissioner shall enter into an agreement under this subparagraph with any interested State or local institution comprising a jail, prison, penal institution, or correctional facility, or comprising any other institution a purpose of which is to confine individuals as described in paragraph (1)(A)(ii). Under such agreement--

      ‘(I) the institution shall provide to the Commissioner, on a monthly basis and in a manner specified by the Commissioner, the names, Social Security account numbers, dates of birth, confinement commencement dates, and, to the extent available to the institution, such other identifying information concerning the individuals confined in the institution as the Commissioner may require for the purpose of carrying out paragraph (1) and other provisions of this title; and

      ‘(II) the Commissioner shall pay to the institution, with respect to information described in subclause (I) concerning each individual who is confined therein as described in paragraph (1)(A), who receives a benefit under this title for the month preceding the first month of such confinement, and whose benefit under this title is determined by the Commissioner to be not payable by reason of confinement based on the information provided by the institution, $400 (subject to reduction under clause (ii)) if the institution furnishes the information to the Commissioner within 30 days after the date such individual’s confinement in such institution begins, or $200 (subject to reduction under clause (ii)) if the institution furnishes the information after 30 days after such date but within 90 days after such date.

    ‘(ii) The dollar amounts specified in clause (i)(II) shall be reduced by 50 percent if the Commissioner is also required to make a payment to the institution with respect to the same individual under an agreement entered into under section 1611(e)(1)(I).

    ‘(iii) There are authorized to be transferred from the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, as appropriate, such sums as may be necessary to enable the Commissioner to make payments to institutions required by clause (i)(II).

    ‘(iv) The Commissioner shall maintain, and shall provide on a reimbursable basis, information obtained pursuant to agreements entered into under this paragraph to any agency administering a Federal or federally-assisted cash, food, or medical assistance program for eligibility and other administrative purposes under such program.’.

      (2) CONFORMING AMENDMENTS TO THE PRIVACY ACT- Section 552a(a)(8)(B) of title 5, United States Code, is amended--

        (A) in clause (vi), by striking ‘or’ at the end;

        (B) in clause (vii), by adding ‘or’ at the end; and

        (C) by adding at the end the following new clause:

          ‘(viii) matches performed pursuant to section 202(x)(3) or 1611(e)(1) of the Social Security Act (42 U.S.C. 402(x)(3), 1382(e)(1));’.

      (3) CONFORMING AMENDMENTS TO TITLE XVI-

        (A) Section 1611(e)(1)(I)(i)(I) of the Social Security Act (42 U.S.C. 1382(e)(1)(I)(i)(I)) is amended by striking ‘; and’ and inserting ‘and the other provisions of this title; and’.

        (B) Section 1611(e)(1)(I)(ii)(II) of such Act (42 U.S.C. 1382(e)(1)(I)(ii)(II)) is amended by striking ‘is authorized to provide, on a reimbursable basis,’ and inserting ‘shall maintain, and shall provide on a reimbursable basis,’.

      (4) EFFECTIVE DATE- The amendments made by this subsection shall apply to individuals whose period of confinement in an institution commences on or after the first day of the fourth month beginning after the month in which this Act is enacted.

    (b) ELIMINATION OF TITLE II REQUIREMENT THAT CONFINEMENT STEM FROM CRIME PUNISHABLE BY IMPRISONMENT FOR MORE THAN 1 YEAR-

      (1) IN GENERAL- Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. 402(x)(1)(A)) is amended--

        (A) in the matter preceding clause (i), by striking ‘during which’ and inserting ‘ending with or during or beginning with or during a period of more than 30 days throughout all of which’;

        (B) in clause (i), by striking ‘an offense punishable by imprisonment for more than 1 year (regardless of the actual sentence imposed)’ and inserting ‘a criminal offense’; and

        (C) in clause (ii)(I), by striking ‘an offense punishable by imprisonment for more than 1 year’ and inserting ‘a criminal offense’.

      (2) EFFECTIVE DATE- The amendments made by this subsection shall apply to individuals whose period of confinement in an institution commences on or after the first day of the fourth month beginning after the month in which this Act is enacted.

    (c) CONFORMING TITLE XVI AMENDMENTS-

      (1) FIFTY PERCENT REDUCTION IN TITLE XVI PAYMENT IN CASE INVOLVING COMPARABLE TITLE II PAYMENT- Section 1611(e)(1)(I) of the Social Security Act (42 U.S.C. 1382(e)(1)(I)) is amended--

        (A) in clause (i)(II), by inserting ‘(subject to reduction under clause (ii))’ after ‘$400’ and after ‘$200’;

        (B) by redesignating clauses (ii) and (iii) as clauses (iii) and (iv) respectively; and

        (C) by inserting after clause (i) the following new clause:

    ‘(ii) The dollar amounts specified in clause (i)(II) shall be reduced by 50 percent if the Commissioner is also required to make a payment to the institution with respect to the same individual under an agreement entered into under section 202(x)(3)(B).’.

      (2) EXPANSION OF CATEGORIES OF INSTITUTIONS ELIGIBLE TO ENTER INTO AGREEMENTS WITH THE COMMISSIONER- Section 1611(e)(1)(I)(i) of such Act (42 U.S.C. 1382(e)(1)(I)(i)) is amended in the matter preceding subclause (I) by striking ‘institution’ and all that follows through ‘section 202(x)(1)(A),’ and inserting ‘institution comprising a jail, prison, penal institution, or correctional facility, or with any other interested State or local institution a purpose of which is to confine individuals as described in section 202(x)(1)(A)(ii),’.

      (3) ELIMINATION OF OVERLY BROAD EXEMPTION- Section 1611(e)(1)(I)(iii) of such Act (42 U.S.C. 1382(e)(1)(I)(iii)) (as redesignated by paragraph (1)(B)) is amended further--

        (A) by striking ‘(I) The provisions’ and all that follows through ‘(II)’; and

        (B) by striking ‘eligibility purposes’ and inserting ‘eligibility and other administrative purposes under such program’.

      (4) EFFECTIVE DATE- The amendments made by this subsection shall take effect as if included in the enactment of section 203(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 2186). The reference to section 202(x)(1)(A)(ii) of the Social Security Act in section 1611(e)(1)(I)(i) of the Social Security Act, as amended by paragraph (2) of this subsection, shall be deemed a reference to such section 202(x)(1)(A)(ii) of such Act as amended by subsection (b)(1)(C) of this section.

    (d) CONTINUED DENIAL OF BENEFITS TO SEX OFFENDERS REMAINING CONFINED TO PUBLIC INSTITUTIONS UPON COMPLETION OF PRISON TERM-

      (1) IN GENERAL- Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. 402(x)(1)(A)) is amended--

        (A) in clause (i), by striking ‘or’ at the end;

        (B) in clause (ii)(IV), by striking the period and inserting ‘, or’; and

        (C) by adding at the end the following new clause:

      ‘(iii) immediately upon completion of confinement as described in clause (i) pursuant to conviction of a criminal offense an element of which is sexual activity, is confined by court order in an institution at public expense pursuant to a finding that the individual is a sexually dangerous person or a sexual predator or a similar finding.’.

      (2) CONFORMING AMENDMENT- Section 202(x)(1)(B)(ii) of such Act (42 U.S.C. 402(x)(1)(B)(ii)) is amended by striking ‘clause (ii)’ and inserting ‘clauses (ii) and (iii)’.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply with respect to benefits for months ending after the date of the enactment of this Act.

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

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

    (b) EFFECTIVE DATE- Subsection (a) shall apply with respect to service performed (to the extent specified in such subsection) in taxable years beginning after December 31, 1999, and with respect to monthly insurance benefits payable under title II on the basis of the wages and self-employment income of any individual for months in or after the calendar year in which such individual’s application for revocation (as described in such subsection) is effective (and lump-sum death payments payable under such title on the basis of such wages and self-employment income in the case of deaths occurring in or after such calendar year).

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

    (a) IN GENERAL- Section 1110(a)(3) of the Social Security Act (42 U.S.C. 1310(a)(3)) is amended by striking ‘title XVI’ and inserting ‘title II or XVI’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect as if included in the enactment of the Social Security Independence and Program Improvements Act of 1994 (Public Law 103-296; 108 Stat. 1464).

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

    (a) IN GENERAL- Section 1137(a)(3) of the Social Security Act (42 U.S.C. 1320b-7(a)(3)) is amended by inserting before the semicolon the following: ‘, and except that in the case of wage reports with respect to domestic service employment, a State may permit employers (as so defined) that make returns with respect to such employment on a calendar year basis pursuant to section 3510 of the Internal Revenue Code of 1986 to make such reports on an annual basis’.

    (b) TECHNICAL AMENDMENTS- Section 1137(a)(3) of the Social Security Act (42 U.S.C. 1320b-7(a)(3)) is amended--

      (1) by striking ‘(as defined in section 453A(a)(2)(B)(iii))’; and

      (2) by inserting ‘(as defined in section 453A(a)(2)(B))’ after ‘employers’ .

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to wage reports required to be submitted on and after the date of the enactment of this Act.

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

    (a) ASSESSMENT ON ATTORNEYS-

      (1) IN GENERAL- Section 206 of the Social Security Act (42 U.S.C. 406) is amended by adding at the end the following new subsection:

    ‘(d) ASSESSMENT ON ATTORNEYS-

      ‘(1) IN GENERAL- Whenever a fee for services is required to be certified for payment to an attorney from a claimant’s past-due benefits pursuant to subsection (a)(4) or (b)(1), the Commissioner shall impose on the attorney an assessment calculated in accordance with paragraph (2).

      ‘(2) AMOUNT-

        ‘(A) The amount of an assessment under paragraph (1) shall be equal to the product obtained by multiplying the amount of the representative’s fee that would be required to be so certified by subsection (a)(4) or (b)(1) before the application of this subsection, by the percentage specified in subparagraph (B).

        ‘(B) The percentage specified in this subparagraph is--

          ‘(i) for calendar years before 2001, 6.3 percent, and

          ‘(ii) for calendar years after 2000, such percentage rate as the Commissioner determines is necessary in order to achieve full recovery of the costs of determining and certifying fees to attorneys from the past-due benefits of claimants, but not in excess of 6.3 percent.

      ‘(3) COLLECTION- The Commissioner may collect the assessment imposed on an attorney under paragraph (1) by offset from the amount of the fee otherwise required by subsection (a)(4) or (b)(1) to be certified for payment to the attorney from a claimant’s past-due benefits.

      ‘(4) PROHIBITION ON CLAIMANT REIMBURSEMENT- An attorney subject to an assessment under paragraph (1) may not, directly or indirectly, request or otherwise obtain reimbursement for such assessment from the claimant whose claim gave rise to the assessment.

      ‘(5) DISPOSITION OF ASSESSMENTS- Assessments on attorneys collected under this subsection shall be credited to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, as appropriate.

      ‘(6) AUTHORIZATION OF APPROPRIATIONS- The assessments authorized under this section shall be collected and available for obligation only to the extent and in the amount provided in advance in appropriations Acts. Amounts so appropriated are authorized to remain available until expended, for administrative expenses in carrying out this title and related laws.’.

      (2) CONFORMING AMENDMENTS-

        (A) Section 206(a)(4)(A) of such Act (42 U.S.C. 406(a)(4)(A)) is amended by inserting ‘and subsection (d)’ after ‘subparagraph (B)’.

        (B) Section 206(b)(1)(A) of such Act (42 U.S.C. 406(b)(1)(A)) is amended by inserting ‘, but subject to subsection (d) of this section’ after ‘section 205(i)’.

    (b) ELIMINATION OF 15-DAY WAITING PERIOD FOR PAYMENT OF FEES- Section 206(a)(4) of such Act (42 U.S.C. 406(a)(4)), as amended by subsection (a)(2)(A) of this section, is amended--

      (1) by striking ‘(4)(A)’ and inserting ‘(4)’;

      (2) by striking ‘subparagraph (B) and’; and

      (3) by striking subparagraph (B).

    (c) GAO STUDY AND REPORT-

      (1) STUDY- The Comptroller General of the United States shall conduct a study that--

        (A) examines the costs incurred by the Social Security Administration in administering the provisions of subsection (a)(4) and (b)(1) of section 206 of the Social Security Act (42 U.S.C. 406) and itemizes the components of such costs, including the costs of determining fees to attorneys from the past-due benefits of claimants before the Commissioner of Social Security and of certifying such fees;

        (B) identifies efficiencies that the Social Security Administration could implement to reduce such costs;

        (C) examines the feasibility and advisability of linking the payment of, or the amount of, the assessment under section 206(d) of the Social Security Act (42 U.S.C. 406(d)) to the timeliness of the payment of the fee to the attorney as certified by the Commissioner of Social Security pursuant to subsection (a)(4) or (b)(1) of section 206 of such Act (42 U.S.C. 406);

        (D) determines whether the provisions of subsection (a)(4) and (b)(1) of section 206 of such Act (42 U.S.C. 406) should be applied to claimants under title XVI of such Act (42 U.S.C 1381 et seq.);

        (E) determines the feasibility and advisability of stating fees under section 206(d) of such Act (42 U.S.C. 406(d)) in terms of a fixed dollar amount as opposed to a percentage;

        (F) determines whether the dollar limit specified in section 206(a)(2)(A)(ii)(II) of such Act (42 U.S.C. 406(a)(2)(A)(ii)(II)) should be raised; and

        (G) determines whether the assessment on attorneys required under section 206(d) of such Act (42 U.S.C. 406(d)) (as added by subsection (a)(1) of this section) impairs access to legal representation for claimants.

      (2) REPORT- Not later than 1 year after the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the study conducted under paragraph (1), together with any recommendations for legislation that the Comptroller General determines to be appropriate as a result of such study.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply in the case of any attorney with respect to whom a fee for services is required to be certified for payment from a claimant’s past-due benefits pursuant to subsection (a)(4) or (b)(1) of section 206 of the Social Security Act after the later of--

      (1) December 31, 1999, or

      (2) the last day of the first month beginning after the month in which this Act is enacted.

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

    (a) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE FRAUD IN OTHER FEDERAL HEALTH CARE PROGRAMS- Section 1903(q)(3) of the Social Security Act (42 U.S.C. 1396b(q)(3)) is amended--

      (1) by inserting ‘(A)’ after ‘in connection with’; and

      (2) by striking ‘title.’ and inserting ‘title; and (B) upon the approval of the Inspector General of the relevant Federal agency, any aspect of the provision of health care services and activities of providers of such services under any Federal health care program (as defined in section 1128B(f)(1)), if the suspected fraud or violation of law in such case or investigation is primarily related to the State plan under this title.’.

    (b) RECOUPMENT OF FUNDS- Section 1903(q)(5) of such Act (42 U.S.C. 1396b(q)(5)) is amended--

      (1) by inserting ‘or under any Federal health care program (as so defined)’ after ‘plan’; and

      (2) by adding at the end the following: ‘All funds collected in accordance with this paragraph shall be credited exclusively to, and available for expenditure under, the Federal health care program (including the State plan under this title) that was subject to the activity that was the basis for the collection.’.

    (c) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE RESIDENT ABUSE IN NON-MEDICAID BOARD AND CARE FACILITIES- Section 1903(q)(4) of such Act (42 U.S.C. 1396b(q)(4)) is amended to read as follows:

      ‘(4)(A) The entity has--

        ‘(i) procedures for reviewing complaints of abuse or neglect of patients in health care facilities which receive payments under the State plan under this title;

        ‘(ii) at the option of the entity, procedures for reviewing complaints of abuse or neglect of patients residing in board and care facilities; and

        ‘(iii) procedures for acting upon such complaints under the criminal laws of the State or for referring such complaints to other State agencies for action.

      ‘(B) For purposes of this paragraph, the term ‘board and care facility’ means a residential setting which receives payment (regardless of whether such payment is made under the State plan under this title) from or on behalf of two or more unrelated adults who reside in such facility, and for whom one or both of the following is provided:

        ‘(i) Nursing care services provided by, or under the supervision of, a registered nurse, licensed practical nurse, or licensed nursing assistant.

        ‘(ii) A substantial amount of personal care services that assist residents with the activities of daily living, including personal hygiene, dressing, bathing, eating, toileting, ambulation, transfer, positioning, self-medication, body care, travel to medical services, essential shopping, meal preparation, laundry, and housework.’.

    (d) EFFECTIVE DATE- The amendments made by this section take effect on the date of the enactment of this Act.

SEC. 408. CLIMATE DATABASE MODERNIZATION.

    Notwithstanding any other provision of law, the National Oceanic and Atmospheric Administration shall initiate a new competitive contract procurement for its multi-year program for key entry of valuable climate records, archive services, and database development in accordance with existing Federal procurement laws and regulations.

SEC. 409. SPECIAL ALLOWANCE ADJUSTMENT FOR STUDENT LOANS.

    (a) AMENDMENT- Section 438(b)(2) of the Higher Education Act of 1965 (20 U.S.C. 1087-1(b)(2)) is amended--

      (1) in subparagraph (A), by striking ‘(G), and (H)’ and inserting ‘(G), (H), and (I)’;

      (2) in subparagraph (B)(iv), by striking ‘(G), or (H)’ and inserting ‘(G), (H), or (I)’;

      (3) in subparagraph (C)(ii), by striking ‘(G) and (H)’ and inserting ‘(G), (H), and (I)’;

      (4) in the heading of subparagraph (H), by striking ‘JULY 1, 2003’ and inserting ‘JANUARY 1, 2000’;

      (5) in subparagraph (H), by striking ‘July 1, 2003,’ each place it appears and inserting ‘January 1, 2000,’; and

      (6) by inserting after subparagraph (H) the following new subparagraph:

        ‘(I) LOANS DISBURSED ON OR AFTER JANUARY 1, 2000, AND BEFORE JULY 1, 2003-

          ‘(i) IN GENERAL- Notwithstanding subparagraphs (G) and (H), but subject to paragraph (4) and clauses (ii), (iii), and (iv) of this subparagraph, and except as provided in subparagraph (B), the special allowance paid pursuant to this subsection on loans for which the first disbursement is made on or after January 1, 2000, and before July 1, 2003, shall be computed--

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

            ‘(II) by subtracting the applicable interest rates on such loans from such average bond equivalent rate;

            ‘(III) by adding 2.34 percent to the resultant percent; and

            ‘(IV) by dividing the resultant percent by 4.

          ‘(ii) IN SCHOOL AND GRACE PERIOD- In the case of any loan for which the first disbursement is made on or after January 1, 2000, and before July 1, 2003, and for which the applicable rate of interest is described in section 427A(k)(2), clause (i)(III) of this subparagraph shall be applied by substituting ‘1.74 percent’ for ‘2.34 percent’.

          ‘(iii) PLUS LOANS- In the case of any loan for which the first disbursement is made on or after January 1, 2000, and before July 1, 2003, and for which the applicable rate of interest is described in section 427A(k)(3), clause (i)(III) of this subparagraph shall be applied by substituting ‘2.64 percent’ for ‘2.34 percent’, subject to clause (v) of this subparagraph.

          ‘(iv) CONSOLIDATION LOANS- In the case of any consolidation loan for which the application is received by an eligible lender on or after January 1, 2000, and before July 1, 2003, and for which the applicable interest rate is determined under section 427A(k)(4), clause (i)(III) of this subparagraph shall be applied by substituting ‘2.64 percent’ for ‘2.34 percent’, subject to clause (vi) of this subparagraph.

          ‘(v) LIMITATION ON SPECIAL ALLOWANCES FOR PLUS LOANS- In the case of PLUS loans made under section 428B and first disbursed on or after January 1, 2000, and before July 1, 2003, for which the interest rate is determined under section 427A(k)(3), a special allowance shall not be paid for such loan during any 12-month period beginning on July 1 and ending on June 30 unless, on the June 1 preceding such July 1--

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

            ‘(II) 3.1 percent,

          exceeds 9.0 percent.

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

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

            ‘(II) 2.64 percent,

          exceeds the rate determined under section 427A(k)(4).’.

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

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

    (a) SCHEDULE FOR SSI SUPPLEMENTATION PAYMENTS-

      (1) IN GENERAL- Section 1616(d) of the Social Security Act (42 U.S.C. 1382e(d)) is amended--

        (A) in paragraph (1), by striking ‘at such times and in such installments as may be agreed upon between the Commissioner of Social Security and such State’ and inserting ‘in accordance with paragraph (5)’; and

        (B) by adding at the end the following new paragraph:

    ‘(5)(A)(i) Any State which has entered into an agreement with the Commissioner of Social Security under this section shall remit the payments and fees required under this subsection with respect to monthly benefits paid to individuals under this title no later than--

      ‘(I) the business day preceding the date that the Commissioner pays such monthly benefits; or

      ‘(II) with respect to such monthly benefits paid for the month that is the last month of the State’s fiscal year, the fifth business day following such date.

    ‘(ii) The Commissioner may charge States a penalty in an amount equal to 5 percent of the payment and the fees due if the remittance is received after the date required by clause (i).

    ‘(B) The Cash Management Improvement Act of 1990 shall not apply to any payments or fees required under this subsection that are paid by a State before the date required by subparagraph (A)(i).

    ‘(C) Notwithstanding subparagraph (A)(i), the Commissioner may make supplementary payments on behalf of a State with funds appropriated for payment of benefits under this title, and subsequently to be reimbursed for such payments by the State at such times as the Commissioner and State may agree. Such authority may be exercised only if extraordinary circumstances affecting a State’s ability to make payment when required by subparagraph (A)(i) are determined by the Commissioner to exist.’.

      (2) AMENDMENT TO SECTION 212- Section 212 of Public Law 93-66 (42 U.S.C. 1382 note) is amended--

        (A) in subsection (b)(3)(A), by striking ‘at such times and in such installments as may be agreed upon between the Secretary and the State’ and inserting ‘in accordance with subparagraph (E)’;

        (B) by adding at the end of subsection (b)(3) the following new subparagraph:

    ‘(E)(i) Any State which has entered into an agreement with the Commissioner of Social Security under this section shall remit the payments and fees required under this paragraph with respect to monthly benefits paid to individuals under title XVI of the Social Security Act no later than--

      ‘(I) the business day preceding the date that the Commissioner pays such monthly benefits; or

      ‘(II) with respect to such monthly benefits paid for the month that is the last month of the State’s fiscal year, the fifth business day following such date.

    ‘(ii) The Cash Management Improvement Act of 1990 shall not apply to any payments or fees required under this paragraph that are paid by a State before the date required by clause (i).

    ‘(iii) Notwithstanding clause (i), the Commissioner may make supplementary payments on behalf of a State with funds appropriated for payment of supplemental security income benefits under title XVI of the Social Security Act, and subsequently to be reimbursed for such payments by the State at such times as the Commissioner and State may agree. Such authority may be exercised only if extraordinary circumstances affecting a State’s ability to make payment when required by clause (i) are determined by the Commissioner to exist.’; and

        (C) by striking ‘Secretary of Health, Education, and Welfare’ and ‘Secretary’ each place such term appear and inserting ‘Commissioner of Social Security’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to payments and fees arising under an agreement between a State and the Commissioner of Social Security under section 1616 of the Social Security Act (42 U.S.C. 1382e) or under section 212 of Public Law 93-66 (42 U.S.C. 1382 note) with respect to monthly benefits paid to individuals under title XVI of the Social Security Act for months after September 2009 (October 2009 in the case of a State with a fiscal year that coincides with the Federal fiscal year), without regard to whether the agreement has been modified to reflect such amendments or the Commissioner has promulgated regulations implementing such amendments.

SEC. 411. BONUS COMMODITIES.

    Section 6(e)(1) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(e)(1)) is amended--

      (1) by striking ‘in the form of commodity assistance’ and inserting ‘in the form of--

      ‘(A) commodity assistance’;

      (2) by striking the period at the end and inserting ‘; or’; and

      (3) by adding at the end the following:

      ‘(B) during the period beginning October 1, 2000, and ending September 30, 2009, commodities provided by the Secretary under any provision of law.’.

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

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

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

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

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

    (a) IN GENERAL- The final rule entitled ‘Organ Procurement and Transplantation Network’, promulgated by the Secretary of Health and Human Services on April 2, 1998 (63 Fed. Reg. 16295 et seq.) (relating to part 121 of title 42, Code of Federal Regulations), together with the amendments to such rules promulgated on October 20, 1999 (64 Fed. Reg. 56649 et seq.) shall not become effective before the expiration of the 90-day period beginning on the date of the enactment of this Act.

    (b) NOTICE AND REVIEW- For purposes of subsection (a):

      (1) Not later than 3 days after the date of the enactment of this Act, the Secretary of Health and Human Services (referred to in this subsection as the ‘Secretary’) shall publish in the Federal Register a notice providing that the period within which comments on the final rule may be submitted to the Secretary is 60 days after the date of such publication of the notice.

      (2) Not later than 21 days after the expiration of such 60-day period, the Secretary shall complete the review of the comments submitted pursuant to paragraph (1) and shall amend the final rule with any revisions appropriate according to the review by the Secretary of such comments. The final rule may be in the form of amendments to the rule referred to in subsection (a) that was promulgated on April 2, 1998, and in the form of amendments to the rule referred to in such subsection that was promulgated on October 20, 1999.

TITLE V--TAX RELIEF EXTENSION ACT OF 1999

SEC. 500. SHORT TITLE OF TITLE.

    This title may be cited as the ‘Tax Relief Extension Act of 1999’.

Subtitle A--Extensions

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

    (a) IN GENERAL- Subsection (a) of section 26 of the Internal Revenue Code of 1986 (relating to limitation based on amount of tax) is amended to read as follows:

    ‘(a) LIMITATION BASED ON AMOUNT OF TAX-

      ‘(1) IN GENERAL- The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the excess (if any) of--

        ‘(A) the taxpayer’s regular tax liability for the taxable year, over

        ‘(B) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).

      For purposes of subparagraph (B), the taxpayer’s tentative minimum tax for any taxable year beginning during 1999 shall be treated as being zero.’.

      ‘(2) SPECIAL RULE FOR 2000 AND 2001- For purposes of any taxable year beginning during 2000 or 2001, the aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of--

        ‘(A) the taxpayer’s regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27(a), and

        ‘(B) the tax imposed by section 55(a) for the taxable year.’.

    (b) CONFORMING AMENDMENTS-

      (1) Section 24(d)(2) of such Code is amended by striking ‘1998’ and inserting ‘2001’.

      (2) Section 904(h) of such Code is amended by adding at the end the following: ‘This subsection shall not apply to taxable years beginning during 2000 or 2001.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

SEC. 502. RESEARCH CREDIT.

    (a) EXTENSION-

      (1) IN GENERAL- Paragraph (1) of section 41(h) of the Internal Revenue Code of 1986 (relating to termination) is amended--

        (A) by striking ‘June 30, 1999’ and inserting ‘June 30, 2004’; and

        (B) by striking the material following subparagraph (B).

      (2) TECHNICAL AMENDMENT- Subparagraph (D) of section 45C(b)(1) of such Code is amended by striking ‘June 30, 1999’ and inserting ‘June 30, 2004’.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to amounts paid or incurred after June 30, 1999.

    (b) INCREASE IN PERCENTAGES UNDER ALTERNATIVE INCREMENTAL CREDIT-

      (1) IN GENERAL- Subparagraph (A) of section 41(c)(4) of such Code is amended--

        (A) by striking ‘1.65 percent’ and inserting ‘2.65 percent’;

        (B) by striking ‘2.2 percent’ and inserting ‘3.2 percent’; and

        (C) by striking ‘2.75 percent’ and inserting ‘3.75 percent’.

      (2) EFFECTIVE DATE- The amendments made by this subsection shall apply to taxable years beginning after June 30, 1999.

    (c) EXTENSION OF RESEARCH CREDIT TO RESEARCH IN PUERTO RICO AND THE POSSESSIONS OF THE UNITED STATES-

      (1) IN GENERAL- Subsections (c)(6) and (d)(4)(F) of section 41 of such Code (relating to foreign research) are each amended by inserting ‘, the Commonwealth of Puerto Rico, or any possession of the United States’ after ‘United States’.

      (2) DENIAL OF DOUBLE BENEFIT- Section 280C(c)(1) of such Code is amended by inserting ‘or credit’ after ‘deduction’ each place it appears.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to amounts paid or incurred after June 30, 1999.

    (d) SPECIAL RULE-

      (1) IN GENERAL- For purposes of the Internal Revenue Code of 1986, the credit determined under section 41 of such Code which is otherwise allowable under such Code--

        (A) shall not be taken into account prior to October 1, 2000, to the extent such credit is attributable to the first suspension period; and

        (B) shall not be taken into account prior to October 1, 2001, to the extent such credit is attributable to the second suspension period.

      On or after the earliest date that an amount of credit may be taken into account, such amount may be taken into account through the filing of an amended return, an application for expedited refund, an adjustment of estimated taxes, or other means allowed by such Code.

      (2) SUSPENSION PERIODS- For purposes of this subsection--

        (A) the first suspension period is the period beginning on July 1, 1999, and ending on September 30, 2000; and

        (B) the second suspension period is the period beginning on October 1, 2000, and ending on September 30, 2001.

      (3) EXPEDITED REFUNDS-

        (A) IN GENERAL- If there is an overpayment of tax with respect to a taxable year by reason of paragraph (1), the taxpayer may file an application for a tentative refund of such overpayment. Such application shall be in such manner and form, and contain such information, as the Secretary may prescribe.

        (B) DEADLINE FOR APPLICATIONS- Subparagraph (A) shall apply only to an application filed before the date which is 1 year after the close of the suspension period to which the application relates.

        (C) ALLOWANCE OF ADJUSTMENTS- Not later than 90 days after the date on which an application is filed under this paragraph, the Secretary shall--

          (i) review the application;

          (ii) determine the amount of the overpayment; and

          (iii) apply, credit, or refund such overpayment,

        in a manner similar to the manner provided in section 6411(b) of such Code.

        (D) CONSOLIDATED RETURNS- The provisions of section 6411(c) of such Code shall apply to an adjustment under this paragraph in such manner as the Secretary may provide.

      (4) CREDIT ATTRIBUTABLE TO SUSPENSION PERIOD-

        (A) IN GENERAL- For purposes of this subsection, in the case of a taxable year which includes a portion of the suspension period, the amount of credit determined under section 41 of such Code for such taxable year which is attributable to such period is the amount which bears the same ratio to the amount of credit determined under such section 41 for such taxable year as the number of months in the suspension period which are during such taxable year bears to the number of months in such taxable year.

        (B) WAIVER OF ESTIMATED TAX PENALTIES- No addition to tax shall be made under section 6654 or 6655 of such Code for any period before July 1, 1999, with respect to any underpayment of tax imposed by such Code to the extent such underpayment was created or increased by reason of subparagraph (A).

      (5) SECRETARY- For purposes of this subsection, the term ‘Secretary’ means the Secretary of the Treasury (or such Secretary’s delegate).

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

    (a) IN GENERAL- Sections 953(e)(10) and 954(h)(9) of the Internal Revenue Code of 1986 (relating to application) are each amended--

      (1) by striking ‘the first taxable year’ and inserting ‘taxable years’;

      (2) by striking ‘January 1, 2000’ and inserting ‘January 1, 2002’; and

      (3) by striking ‘within which such’ and inserting ‘within which any such’.

    (b) TECHNICAL AMENDMENT- Paragraph (10) of section 953(e) of such Code is amended by adding at the end the following new sentence: ‘If this subsection does not apply to a taxable year of a foreign corporation beginning after December 31, 2001 (and taxable years of United States shareholders ending with or within such taxable year), then, notwithstanding the preceding sentence, subsection (a) shall be applied to such taxable years in the same manner as it would if the taxable year of the foreign corporation began in 1998.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

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

    (a) IN GENERAL- Subparagraph (H) of section 613A(c)(6) of the Internal Revenue Code of 1986 (relating to temporary suspension of taxable limit with respect to marginal production) is amended by striking ‘January 1, 2000’ and inserting ‘January 1, 2002’.

    (b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 1999.

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

    (a) TEMPORARY EXTENSION- Sections 51(c)(4)(B) and 51A(f) of the Internal Revenue Code of 1986 (relating to termination) are each amended by striking ‘June 30, 1999’ and inserting ‘December 31, 2001’.

    (b) CLARIFICATION OF FIRST YEAR OF EMPLOYMENT- Paragraph (2) of section 51(i) of such Code is amended by striking ‘during which he was not a member of a targeted group’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to individuals who begin work for the employer after June 30, 1999.

SEC. 506. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

    (a) IN GENERAL- Subsection (d) of section 127 of the Internal Revenue Code of 1986 (relating to termination) is amended by striking ‘May 31, 2000’ and inserting ‘December 31, 2001’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to courses beginning after May 31, 2000.

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

    (a) EXTENSION AND MODIFICATION OF PLACED-IN-SERVICE RULES- Paragraph (3) of section 45(c) of the Internal Revenue Code of 1986 is amended to read as follows:

      ‘(3) QUALIFIED FACILITY-

        ‘(A) WIND FACILITY- In the case of a facility using wind to produce electricity, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and before January 1, 2002.

        ‘(B) CLOSED-LOOP BIOMASS FACILITY- In the case of a facility using closed-loop biomass to produce electricity, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service after December 31, 1992, and before January 1, 2002.

        ‘(C) POULTRY WASTE FACILITY- In the case of a facility using poultry waste to produce electricity, the term ‘qualified facility’ means any facility of the taxpayer which is originally placed in service after December 31, 1999, and before January 1, 2002.’.

    (b) EXPANSION OF QUALIFIED ENERGY RESOURCES-

      (1) IN GENERAL- Section 45(c)(1) of such Code (defining qualified energy resources) is amended by striking ‘and’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘, and’, and by adding at the end the following new subparagraph:

        ‘(C) poultry waste.’.

      (2) DEFINITION- Section 45(c) of such Code is amended by adding at the end the following new paragraph:

      ‘(4) POULTRY WASTE- The term ‘poultry waste’ means poultry manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.’.

    (c) SPECIAL RULES- Section 45(d) of such Code (relating to definitions and special rules) is amended by adding at the end the following new paragraphs:

      ‘(6) CREDIT ELIGIBILITY IN THE CASE OF GOVERNMENT-OWNED FACILITIES USING POULTRY WASTE- In the case of a facility using poultry waste to produce electricity and owned by a governmental unit, the person eligible for the credit under subsection (a) is the lessee or the operator of such facility.

      ‘(7) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES UNDER CERTAIN CONTRACTS-

        ‘(A) IN GENERAL- The credit determined under subsection (a) shall not apply to electricity--

          ‘(i) produced at a qualified facility described in paragraph (3)(A) which is placed in service by the taxpayer after June 30, 1999, and

          ‘(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether or not amended or restated after that date).

        ‘(B) EXCEPTION- Subparagraph (A) shall not apply if--

          ‘(i) the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),

          ‘(ii) such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of--

            ‘(I) the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or

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

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

            ‘(I) sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or

            ‘(II) sold to a third party subject to a mutually agreed upon advance notice to the utility.

        For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall take effect on the date of the enactment of this Act.

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

    (a) IN GENERAL- Section 505 of the Trade Act of 1974 (19 U.S.C. 2465) is amended by striking ‘June 30, 1999’ and inserting ‘September 30, 2001’.

    (b) EFFECTIVE DATE-

      (1) IN GENERAL- The amendment made by this section applies to articles entered on or after the date of the enactment of this Act.

      (2) RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS AND RELIQUIDATIONS-

        (A) GENERAL RULE- Notwithstanding section 514 of the Tariff Act of 1930 or any other provision of law, and subject to paragraph (3), any entry--

          (i) of an article to which duty-free treatment under title V of the Trade Act of 1974 would have applied if such entry had been made on July 1, 1999, and such title had been in effect on July 1, 1999; and

          (ii) that was made--

            (I) after June 30, 1999; and

            (II) before the date of the enactment of this Act,

        shall be liquidated or reliquidated as free of duty, and the Secretary of the Treasury shall refund any duty paid with respect to such entry.

        (B) ENTRY- As used in this paragraph, the term ‘entry’ includes a withdrawal from warehouse for consumption.

      (3) REQUESTS- Liquidation or reliquidation may be made under paragraph (2) with respect to an entry only if a request therefore is filed with the Customs Service, within 180 days after the date of the enactment of this Act, that contains sufficient information to enable the Customs Service--

        (A) to locate the entry; or

        (B) to reconstruct the entry if it cannot be located.

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

    (a) IN GENERAL- Section 1397E(e)(1) of the Internal Revenue Code of 1986 (relating to national limitation) is amended by striking ‘and 1999’ and inserting ‘, 1999, 2000, and 2001’.

    (b) LIMITATION ON CARRYOVER PERIODS- Paragraph (4) of section 1397E(e) of such Code is amended by adding at the end the following flush sentences:

      ‘Any carryforward of a limitation amount may be carried only to the first 2 years (3 years for carryforwards from 1998 or 1999) following the unused limitation year. For purposes of the preceding sentence, a limitation amount shall be treated as used on a first-in first-out basis.’.

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

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

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

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

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

    (a) IN GENERAL- Section 7652(f)(1) of the Internal Revenue Code of 1986 (relating to limitation on cover over of tax on distilled spirits) is amended to read as follows:

      ‘(1) $10.50 ($13.25 in the case of distilled spirits brought into the United States after June 30, 1999, and before January 1, 2002), or’.

    (b) SPECIAL COVER OVER TRANSFER RULES- Notwithstanding section 7652 of the Internal Revenue Code of 1986, the following rules shall apply with respect to any transfer before October 1, 2000, of amounts relating to the increase in the cover over of taxes by reason of the amendment made by subsection (a):

      (1) INITIAL TRANSFER OF INCREMENTAL INCREASE IN COVER OVER- The Secretary of the Treasury shall, within 15 days after the date of the enactment of this Act, transfer an amount equal to the lesser of--

        (A) the amount of such increase otherwise required to be covered over after June 30, 1999, and before the date of the enactment of this Act; or

        (B) $20,000,000.

      (2) TRANSFER OF INCREMENTAL INCREASE FOR FISCAL YEAR 2001- The Secretary of the Treasury shall on October 1, 2000, transfer an amount equal to the excess of--

        (A) the amount of such increase otherwise required to be covered over after June 30, 1999, and before October 1, 2000, over

        (B) the amount of the transfer described in paragraph (1).

    (c) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on July 1, 1999.

Subtitle B--Other Time-Sensitive Provisions

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

    (a) IN GENERAL-

      (1) TREATMENT AS RETURN INFORMATION- Paragraph (2) of section 6103(b) of the Internal Revenue Code of 1986 (defining return information) is amended by striking ‘and’ at the end of subparagraph (A), by inserting ‘and’ at the end of subparagraph (B), and by inserting after subparagraph (B) the following new subparagraph:

        ‘(C) any advance pricing agreement entered into by a taxpayer and the Secretary and any background information related to such agreement or any application for an advance pricing agreement,’.

      (2) EXCEPTION FROM PUBLIC INSPECTION AS WRITTEN DETERMINATION- Paragraph (1) of section 6110(b) of such Code (defining written determination) is amended by adding at the end the following new sentence: ‘Such term shall not include any advance pricing agreement entered into by a taxpayer and the Secretary and any background information related to such agreement or any application for an advance pricing agreement.’.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall take effect on the date of the enactment of this Act.

    (b) ANNUAL REPORT REGARDING ADVANCE PRICING AGREEMENTS-

      (1) IN GENERAL- Not later than 90 days after the end of each calendar year, the Secretary of the Treasury shall prepare and publish a report regarding advance pricing agreements.

      (2) CONTENTS OF REPORT- The report shall include the following for the calendar year to which such report relates:

        (A) Information about the structure, composition, and operation of the advance pricing agreement program office.

        (B) A copy of each model advance pricing agreement.

        (C) The number of--

          (i) applications filed during such calendar year for advance pricing agreements;

          (ii) advance pricing agreements executed cumulatively to date and during such calendar year;

          (iii) renewals of advance pricing agreements issued;

          (iv) pending requests for advance pricing agreements;

          (v) pending renewals of advance pricing agreements;

          (vi) for each of the items in clauses (ii) through (v), the number that are unilateral, bilateral, and multilateral, respectively;

          (vii) advance pricing agreements revoked or canceled, and the number of withdrawals from the advance pricing agreement program; and

          (viii) advance pricing agreements finalized or renewed by industry.

        (D) General descriptions of--

          (i) the nature of the relationships between the related organizations, trades, or businesses covered by advance pricing agreements;

          (ii) the covered transactions and the business functions performed and risks assumed by such organizations, trades, or businesses;

          (iii) the related organizations, trades, or businesses whose prices or results are tested to determine compliance with transfer pricing methodologies prescribed in advance pricing agreements;

          (iv) methodologies used to evaluate tested parties and transactions and the circumstances leading to the use of those methodologies;

          (v) critical assumptions made and sources of comparables used;

          (vi) comparable selection criteria and the rationale used in determining such criteria;

          (vii) the nature of adjustments to comparables or tested parties;

          (viii) the nature of any ranges agreed to, including information regarding when no range was used and why, when interquartile ranges were used, and when there was a statistical narrowing of the comparables;

          (ix) adjustment mechanisms provided to rectify results that fall outside of the agreed upon advance pricing agreement range;

          (x) the various term lengths for advance pricing agreements, including rollback years, and the number of advance pricing agreements with each such term length;

          (xi) the nature of documentation required; and

          (xii) approaches for sharing of currency or other risks.

        (E) Statistics regarding the amount of time taken to complete new and renewal advance pricing agreements.

        (F) A detailed description of the Secretary of the Treasury’s efforts to ensure compliance with existing advance pricing agreements.

      (3) CONFIDENTIALITY- The reports required by this subsection shall be treated as authorized by the Internal Revenue Code of 1986 for purposes of section 6103 of such Code, but the reports shall not include information--

        (A) which would not be permitted to be disclosed under section 6110(c) of such Code if such report were a written determination as defined in section 6110 of such Code; or

        (B) which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.

      (4) FIRST REPORT- The report for calendar year 1999 shall include prior calendar years after 1990.

    (c) REGULATIONS- The Secretary of the Treasury or the Secretary’s delegate shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 6103(b)(2)(C), and the last sentence of section 6110(b)(1), of the Internal Revenue Code of 1986, as added by this section.

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

    (a) IN GENERAL- In the case of a taxpayer determined by the Secretary of the Treasury (or the Secretary’s delegate) to be affected by a Y2K failure, the Secretary may disregard a period of up to 90 days in determining, under the internal revenue laws, in respect of any tax liability (including any interest, penalty, additional amount, or addition to the tax) of such taxpayer--

      (1) whether any of the acts described in paragraph (1) of section 7508(a) of the Internal Revenue Code of 1986 (without regard to the exceptions in parentheses in subparagraphs (A) and (B)) were performed within the time prescribed therefor; and

      (2) the amount of any credit or refund.

    (b) APPLICABILITY OF CERTAIN RULES- For purposes of this section, rules similar to the rules of subsections (b) and (e) of section 7508 of the Internal Revenue Code of 1986 shall apply.

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

    (a) INCLUSION OF VACCINES-

      (1) IN GENERAL- Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph:

        ‘(L) Any conjugate vaccine against streptococcus pneumoniae.’.

      (2) EFFECTIVE DATE-

        (A) SALES- The amendment made by this subsection shall apply to vaccine sales after the date of the enactment of this Act, but shall not take effect if subsection (b) does not take effect.

        (B) DELIVERIES- For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date.

    (b) VACCINE TAX AND TRUST FUND AMENDMENTS-

      (1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed.

      (2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking ‘August 5, 1997’ and inserting ‘December 31, 1999’.

      (3) The amendments made by this subsection shall take effect as if included in the provisions of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 to which they relate.

    (c) REPORT- Not later than January 31, 2000, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program.

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

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

SEC. 525. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

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

Subtitle C--Revenue Offsets

PART I--GENERAL PROVISIONS

SEC. 531. MODIFICATION OF ESTIMATED TAX SAFE HARBOR.

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

‘1999

108.6

2000

110’.

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

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

    (a) IN GENERAL- Section 1221 of the Internal Revenue Code of 1986 (defining capital assets) is amended--

      (1) by striking ‘For purposes’ and inserting the following:

    ‘(a) IN GENERAL- For purposes’;

      (2) by striking the period at the end of paragraph (5) and inserting a semicolon; and

      (3) by adding at the end the following:

      ‘(6) any commodities derivative financial instrument held by a commodities derivatives dealer, unless--

        ‘(A) it is established to the satisfaction of the Secretary that such instrument has no connection to the activities of such dealer as a dealer, and

        ‘(B) such instrument is clearly identified in such dealer’s records as being described in subparagraph (A) before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe);

      ‘(7) any hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe); or

      ‘(8) supplies of a type regularly used or consumed by the taxpayer in the ordinary course of a trade or business of the taxpayer.

    ‘(b) DEFINITIONS AND SPECIAL RULES-

      ‘(1) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENTS- For purposes of subsection (a)(6)--

        ‘(A) COMMODITIES DERIVATIVES DEALER- The term ‘commodities derivatives dealer’ means a person which regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business.

        ‘(B) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENT-

          ‘(i) IN GENERAL- The term ‘commodities derivative financial instrument’ means any contract or financial instrument with respect to commodities (other than a share of stock in a corporation, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract (as defined in section 1256(b)), the value or settlement price of which is calculated by or determined by reference to a specified index.

          ‘(ii) SPECIFIED INDEX- The term ‘specified index’ means any one or more or any combination of--

            ‘(I) a fixed rate, price, or amount, or

            ‘(II) a variable rate, price, or amount,

          which is based on any current, objectively determinable financial or economic information with respect to commodities which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.

      ‘(2) HEDGING TRANSACTION-

        ‘(A) IN GENERAL- For purposes of this section, the term ‘hedging transaction’ means any transaction entered into by the taxpayer in the normal course of the taxpayer’s trade or business primarily--

          ‘(i) to manage risk of price changes or currency fluctuations with respect to ordinary property which is held or to be held by the taxpayer,

          ‘(ii) to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by the taxpayer, or

          ‘(iii) to manage such other risks as the Secretary may prescribe in regulations.

        ‘(B) TREATMENT OF NONIDENTIFICATION OR IMPROPER IDENTIFICATION OF HEDGING TRANSACTIONS- Notwithstanding subsection (a)(7), the Secretary shall prescribe regulations to properly characterize any income, gain, expense, or loss arising from a transaction--

          ‘(i) which is a hedging transaction but which was not identified as such in accordance with subsection (a)(7), or

          ‘(ii) which was so identified but is not a hedging transaction.

      ‘(3) REGULATIONS- The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of paragraph (6) and (7) of subsection (a) in the case of transactions involving related parties.’.

    (b) MANAGEMENT OF RISK-

      (1) Section 475(c)(3) of such Code is amended by striking ‘reduces’ and inserting ‘manages’.

      (2) Section 871(h)(4)(C)(iv) of such Code is amended by striking ‘to reduce’ and inserting ‘to manage’.

      (3) Clauses (i) and (ii) of section 988(d)(2)(A) of such Code are each amended by striking ‘to reduce’ and inserting ‘to manage’.

      (4) Paragraph (2) of section 1256(e) of such Code is amended to read as follows:

      ‘(2) DEFINITION OF HEDGING TRANSACTION- For purposes of this subsection, the term ‘hedging transaction’ means any hedging transaction (as defined in section 1221(b)(2)(A)) if, before the close of the day on which such transaction was entered into (or such earlier time as the Secretary may prescribe by regulations), the taxpayer clearly identifies such transaction as being a hedging transaction.’.

    (c) CONFORMING AMENDMENTS-

      (1) Each of the following sections of such Code are amended by striking ‘section 1221’ and inserting ‘section 1221(a)’:

        (A) Section 170(e)(3)(A).

        (B) Section 170(e)(4)(B).

        (C) Section 367(a)(3)(B)(i).

        (D) Section 818(c)(3).

        (E) Section 865(i)(1).

        (F) Section 1092(a)(3)(B)(ii)(II).

        (G) Subparagraphs (C) and (D) of section 1231(b)(1).

        (H) Section 1234(a)(3)(A).

      (2) Each of the following sections of such Code are amended by striking ‘section 1221(1)’ and inserting ‘section 1221(a)(1)’:

        (A) Section 198(c)(1)(A)(i).

        (B) Section 263A(b)(2)(A).

        (C) Clauses (i) and (iii) of section 267(f)(3)(B).

        (D) Section 341(d)(3).

        (E) Section 543(a)(1)(D)(i).

        (F) Section 751(d)(1).

        (G) Section 775(c).

        (H) Section 856(c)(2)(D).

        (I) Section 856(c)(3)(C).

        (J) Section 856(e)(1).

        (K) Section 856(j)(2)(B).

        (L) Section 857(b)(4)(B)(i).

        (M) Section 857(b)(6)(B)(iii).

        (N) Section 864(c)(4)(B)(iii).

        (O) Section 864(d)(3)(A).

        (P) Section 864(d)(6)(A).

        (Q) Section 954(c)(1)(B)(iii).

        (R) Section 995(b)(1)(C).

        (S) Section 1017(b)(3)(E)(i).

        (T) Section 1362(d)(3)(C)(ii).

        (U) Section 4662(c)(2)(C).

        (V) Section 7704(c)(3).

        (W) Section 7704(d)(1)(D).

        (X) Section 7704(d)(1)(G).

        (Y) Section 7704(d)(5).

      (3) Section 818(b)(2) of such Code is amended by striking ‘section 1221(2)’ and inserting ‘section 1221(a)(2)’.

      (4) Section 1397B(e)(2) of such Code is amended by striking ‘section 1221(4)’ and inserting ‘section 1221(a)(4)’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after the date of the enactment of this Act.

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

    (a) IN GENERAL- Paragraph (2) of section 6050P(c) of the Internal Revenue Code of 1986 (relating to definitions and special rules) is amended by striking ‘and’ at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting ‘, and’, and by inserting after subparagraph (C) the following new subparagraph:

        ‘(D) any organization a significant trade or business of which is the lending of money.’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to discharges of indebtedness after December 31, 1999.

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

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

‘SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

    ‘(a) IN GENERAL- If the taxpayer has gain from a constructive ownership transaction with respect to any financial asset and such gain would (without regard to this section) be treated as a long-term capital gain--

      ‘(1) such gain shall be treated as ordinary income to the extent that such gain exceeds the net underlying long-term capital gain, and

      ‘(2) to the extent such gain is treated as a long-term capital gain after the application of paragraph (1), the determination of the capital gain rate (or rates) applicable to such gain under section 1(h) shall be determined on the basis of the respective rate (or rates) that would have been applicable to the net underlying long-term capital gain.

    ‘(b) INTEREST CHARGE ON DEFERRAL OF GAIN RECOGNITION-

      ‘(1) IN GENERAL- If any gain is treated as ordinary income for any taxable year by reason of subsection (a)(1), the tax imposed by this chapter for such taxable year shall be increased by the amount of interest determined under paragraph (2) with respect to each prior taxable year during any portion of which the constructive ownership transaction was open. Any amount payable under this paragraph shall be taken into account in computing the amount of any deduction allowable to the taxpayer for interest paid or accrued during such taxable year.

      ‘(2) AMOUNT OF INTEREST- The amount of interest determined under this paragraph with respect to a prior taxable year is the amount of interest which would have been imposed under section 6601 on the underpayment of tax for such year which would have resulted if the gain (which is treated as ordinary income by reason of subsection (a)(1)) had been included in gross income in the taxable years in which it accrued (determined by treating the income as accruing at a constant rate equal to the applicable Federal rate as in effect on the day the transaction closed). The period during which such interest shall accrue shall end on the due date (without extensions) for the return of tax imposed by this chapter for the taxable year in which such transaction closed.

      ‘(3) APPLICABLE FEDERAL RATE- For purposes of paragraph (2), the applicable Federal rate is the applicable Federal rate determined under section 1274(d) (compounded semiannually) which would apply to a debt instrument with a term equal to the period the transaction was open.

      ‘(4) NO CREDITS AGAINST INCREASE IN TAX- Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining--

        ‘(A) the amount of any credit allowable under this chapter, or

        ‘(B) the amount of the tax imposed by section 55.

    ‘(c) FINANCIAL ASSET- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘financial asset’ means--

        ‘(A) any equity interest in any pass-thru entity, and

        ‘(B) to the extent provided in regulations--

          ‘(i) any debt instrument, and

          ‘(ii) any stock in a corporation which is not a pass-thru entity.

      ‘(2) PASS-THRU ENTITY- For purposes of paragraph (1), the term ‘pass-thru entity’ means--

        ‘(A) a regulated investment company,

        ‘(B) a real estate investment trust,

        ‘(C) an S corporation,

        ‘(D) a partnership,

        ‘(E) a trust,

        ‘(F) a common trust fund,

        ‘(G) a passive foreign investment company (as defined in section 1297 without regard to subsection (e) thereof),

        ‘(H) a foreign personal holding company,

        ‘(I) a foreign investment company (as defined in section 1246(b)), and

        ‘(J) a REMIC.

    ‘(d) CONSTRUCTIVE OWNERSHIP TRANSACTION- For purposes of this section--

      ‘(1) IN GENERAL- The taxpayer shall be treated as having entered into a constructive ownership transaction with respect to any financial asset if the taxpayer--

        ‘(A) holds a long position under a notional principal contract with respect to the financial asset,

        ‘(B) enters into a forward or futures contract to acquire the financial asset,

        ‘(C) is the holder of a call option, and is the grantor of a put option, with respect to the financial asset and such options have substantially equal strike prices and substantially contemporaneous maturity dates, or

        ‘(D) to the extent provided in regulations prescribed by the Secretary, enters into one or more other transactions (or acquires one or more positions) that have substantially the same effect as a transaction described in any of the preceding subparagraphs.

      ‘(2) EXCEPTION FOR POSITIONS WHICH ARE MARKED TO MARKET- This section shall not apply to any constructive ownership transaction if all of the positions which are part of such transaction are marked to market under any provision of this title or the regulations thereunder.

      ‘(3) LONG POSITION UNDER NOTIONAL PRINCIPAL CONTRACT- A person shall be treated as holding a long position under a notional principal contract with respect to any financial asset if such person--

        ‘(A) has the right to be paid (or receive credit for) all or substantially all of the investment yield (including appreciation) on such financial asset for a specified period, and

        ‘(B) is obligated to reimburse (or provide credit for) all or substantially all of any decline in the value of such financial asset.

      ‘(4) FORWARD CONTRACT- The term ‘forward contract’ means any contract to acquire in the future (or provide or receive credit for the future value of) any financial asset.

    ‘(e) NET UNDERLYING LONG-TERM CAPITAL GAIN- For purposes of this section, in the case of any constructive ownership transaction with respect to any financial asset, the term ‘net underlying long-term capital gain’ means the aggregate net capital gain that the taxpayer would have had if--

      ‘(1) the financial asset had been acquired for fair market value on the date such transaction was opened and sold for fair market value on the date such transaction was closed, and

      ‘(2) only gains and losses that would have resulted from the deemed ownership under paragraph (1) were taken into account.

    The amount of the net underlying long-term capital gain with respect to any financial asset shall be treated as zero unless the amount thereof is established by clear and convincing evidence.

    ‘(f) SPECIAL RULE WHERE TAXPAYER TAKES DELIVERY- Except as provided in regulations prescribed by the Secretary, if a constructive ownership transaction is closed by reason of taking delivery, this section shall be applied as if the taxpayer had sold all the contracts, options, or other positions which are part of such transaction for fair market value on the closing date. The amount of gain recognized under the preceding sentence shall not exceed the amount of gain treated as ordinary income under subsection (a). Proper adjustments shall be made in the amount of any gain or loss subsequently realized for gain recognized and treated as ordinary income under this subsection.

    ‘(g) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations--

      ‘(1) to permit taxpayers to mark to market constructive ownership transactions in lieu of applying this section, and

      ‘(2) to exclude certain forward contracts which do not convey substantially all of the economic return with respect to a financial asset.’.

    (b) CLERICAL AMENDMENT- The table of sections for part IV of subchapter P of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 1260. Gains from constructive ownership transactions.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to transactions entered into after July 11, 1999.

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

    (a) EXTENSION-

      (1) IN GENERAL- Paragraph (5) of section 420(b) of the Internal Revenue Code of 1986 (relating to expiration) is amended by striking ‘in any taxable year beginning after December 31, 2000’ and inserting ‘made after December 31, 2005’.

      (2) CONFORMING AMENDMENTS-

        (A) Section 101(e)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by striking ‘January 1, 1995’ and inserting ‘the date of the enactment of the Tax Relief Extension Act of 1999’.

        (B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is amended by striking ‘January 1, 1995’ and inserting ‘the date of the enactment of the Tax Relief Extension Act of 1999’.

        (C) Paragraph (13) of section 408(b) of such Act (29 U.S.C. 1108(b)(13)) is amended--

          (i) by striking ‘in a taxable year beginning before January 1, 2001’ and inserting ‘made before January 1, 2006’; and

          (ii) by striking ‘January 1, 1995’ and inserting ‘the date of the enactment of the Tax Relief Extension Act of 1999’.

    (b) APPLICATION OF MINIMUM COST REQUIREMENTS-

      (1) IN GENERAL- Paragraph (3) of section 420(c) of the Internal Revenue Code of 1986 is amended to read as follows:

      ‘(3) MINIMUM COST REQUIREMENTS-

        ‘(A) IN GENERAL- The requirements of this paragraph are met if each group health plan or arrangement under which applicable health benefits are provided provides that the applicable employer cost for each taxable year during the cost maintenance period shall not be less than the higher of the applicable employer costs for each of the 2 taxable years immediately preceding the taxable year of the qualified transfer.

        ‘(B) APPLICABLE EMPLOYER COST- For purposes of this paragraph, the term ‘applicable employer cost’ means, with respect to any taxable year, the amount determined by dividing--

          ‘(i) the qualified current retiree health liabilities of the employer for such taxable year determined--

            ‘(I) without regard to any reduction under subsection (e)(1)(B), and

            ‘(II) in the case of a taxable year in which there was no qualified transfer, in the same manner as if there had been such a transfer at the end of the taxable year, by

          ‘(ii) the number of individuals to whom coverage for applicable health benefits was provided during such taxable year.

        ‘(C) ELECTION TO COMPUTE COST SEPARATELY- An employer may elect to have this paragraph applied separately with respect to individuals eligible for benefits under title XVIII of the Social Security Act at any time during the taxable year and with respect to individuals not so eligible.

        ‘(D) COST MAINTENANCE PERIOD- For purposes of this paragraph, the term ‘cost maintenance period’ means the period of 5 taxable years beginning with the taxable year in which the qualified transfer occurs. If a taxable year is in two or more overlapping cost maintenance periods, this paragraph shall be applied by taking into account the highest applicable employer cost required to be provided under subparagraph (A) for such taxable year.

        ‘(E) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to prevent an employer who significantly reduces retiree health coverage during the cost maintenance period from being treated as satisfying the minimum cost requirement of this subsection.’.

      (2) CONFORMING AMENDMENTS-

        (A) Clause (iii) of section 420(b)(1)(C) of such Code is amended by striking ‘benefits’ and inserting ‘cost’.

        (B) Subparagraph (D) of section 420(e)(1) of such Code is amended by striking ‘and shall not be subject to the minimum benefit requirements of subsection (c)(3)’ and inserting ‘or in calculating applicable employer cost under subsection (c)(3)(B)’.

    (c) EFFECTIVE DATES-

      (1) IN GENERAL- The amendments made by this section shall apply to qualified transfers occurring after the date of the enactment of this Act.

      (2) TRANSITION RULE- If the cost maintenance period for any qualified transfer after the date of the enactment of this Act includes any portion of a benefit maintenance period for any qualified transfer on or before such date, the amendments made by subsection (b) shall not apply to such portion of the cost maintenance period (and such portion shall be treated as a benefit maintenance period).

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

    (a) REPEAL OF INSTALLMENT METHOD FOR ACCRUAL BASIS TAXPAYERS-

      (1) IN GENERAL- Subsection (a) of section 453 of the Internal Revenue Code of 1986 (relating to installment method) is amended to read as follows:

    ‘(a) USE OF INSTALLMENT METHOD-

      ‘(1) IN GENERAL- Except as otherwise provided in this section, income from an installment sale shall be taken into account for purposes of this title under the installment method.

      ‘(2) ACCRUAL METHOD TAXPAYER- The installment method shall not apply to income from an installment sale if such income would be reported under an accrual method of accounting without regard to this section. The preceding sentence shall not apply to a disposition described in subparagraph (A) or (B) of subsection (l)(2).’.

      (2) CONFORMING AMENDMENTS- Sections 453(d)(1), 453(i)(1), and 453(k) of such Code are each amended by striking ‘(a)’ each place it appears and inserting ‘(a)(1)’.

    (b) MODIFICATION OF PLEDGE RULES- Paragraph (4) of section 453A(d) of such Code (relating to pledges, etc., of installment obligations) is amended by adding at the end the following: ‘A payment shall be treated as directly secured by an interest in an installment obligation to the extent an arrangement allows the taxpayer to satisfy all or a portion of the indebtedness with the installment obligation.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to sales or other dispositions occurring on or after the date of the enactment of this Act.

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

    (a) IN GENERAL- Subsection (f) of section 170 of the Internal Revenue Code of 1986 (relating to disallowance of deduction in certain cases and special rules) is amended by adding at the end the following new paragraph:

      ‘(10) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOWMENT CONTRACTS-

        ‘(A) IN GENERAL- Nothing in this section or in section 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall be construed to allow a deduction, and no deduction shall be allowed, for any transfer to or for the use of an organization described in subsection (c) if in connection with such transfer--

          ‘(i) the organization directly or indirectly pays, or has previously paid, any premium on any personal benefit contract with respect to the transferor, or

          ‘(ii) there is an understanding or expectation that any person will directly or indirectly pay any premium on any personal benefit contract with respect to the transferor.

        ‘(B) PERSONAL BENEFIT CONTRACT- For purposes of subparagraph (A), the term ‘personal benefit contract’ means, with respect to the transferor, any life insurance, annuity, or endowment contract if any direct or indirect beneficiary under such contract is the transferor, any member of the transferor’s family, or any other person (other than an organization described in subsection (c)) designated by the transferor.

        ‘(C) APPLICATION TO CHARITABLE REMAINDER TRUSTS- In the case of a transfer to a trust referred to in subparagraph (E), references in subparagraphs (A) and (F) to an organization described in subsection (c) shall be treated as a reference to such trust.

        ‘(D) EXCEPTION FOR CERTAIN ANNUITY CONTRACTS- If, in connection with a transfer to or for the use of an organization described in subsection (c), such organization incurs an obligation to pay a charitable gift annuity (as defined in section 501(m)) and such organization purchases any annuity contract to fund such obligation, persons receiving payments under the charitable gift annuity shall not be treated for purposes of subparagraph (B) as indirect beneficiaries under such contract if--

          ‘(i) such organization possesses all of the incidents of ownership under such contract,

          ‘(ii) such organization is entitled to all the payments under such contract, and

          ‘(iii) the timing and amount of payments under such contract are substantially the same as the timing and amount of payments to each such person under such obligation (as such obligation is in effect at the time of such transfer).

        ‘(E) EXCEPTION FOR CERTAIN CONTRACTS HELD BY CHARITABLE REMAINDER TRUSTS- A person shall not be treated for purposes of subparagraph (B) as an indirect beneficiary under any life insurance, annuity, or endowment contract held by a charitable remainder annuity trust or a charitable remainder unitrust (as defined in section 664(d)) solely by reason of being entitled to any payment referred to in paragraph (1)(A) or (2)(A) of section 664(d) if--

          ‘(i) such trust possesses all of the incidents of ownership under such contract, and

          ‘(ii) such trust is entitled to all the payments under such contract.

        ‘(F) EXCISE TAX ON PREMIUMS PAID-

          ‘(i) IN GENERAL- There is hereby imposed on any organization described in subsection (c) an excise tax equal to the premiums paid by such organization on any life insurance, annuity, or endowment contract if the payment of premiums on such contract is in connection with a transfer for which a deduction is not allowable under subparagraph (A), determined without regard to when such transfer is made.

          ‘(ii) PAYMENTS BY OTHER PERSONS- For purposes of clause (i), payments made by any other person pursuant to an understanding or expectation referred to in subparagraph (A) shall be treated as made by the organization.

          ‘(iii) REPORTING- Any organization on which tax is imposed by clause (i) with respect to any premium shall file an annual return which includes--

            ‘(I) the amount of such premiums paid during the year and the name and TIN of each beneficiary under the contract to which the premium relates, and

            ‘(II) such other information as the Secretary may require.

          The penalties applicable to returns required under section 6033 shall apply to returns required under this clause. Returns required under this clause shall be furnished at such time and in such manner as the Secretary shall by forms or regulations require.

          ‘(iv) CERTAIN RULES TO APPLY- The tax imposed by this subparagraph shall be treated as imposed by chapter 42 for purposes of this title other than subchapter B of chapter 42.

        ‘(G) SPECIAL RULE WHERE STATE REQUIRES SPECIFICATION OF CHARITABLE GIFT ANNUITANT IN CONTRACT- In the case of an obligation to pay a charitable gift annuity referred to in subparagraph (D) which is entered into under the laws of a State which requires, in order for the charitable gift annuity to be exempt from insurance regulation by such State, that each beneficiary under the charitable gift annuity be named as a beneficiary under an annuity contract issued by an insurance company authorized to transact business in such State, the requirements of clauses (i) and (ii) of subparagraph (D) shall be treated as met if--

          ‘(i) such State law requirement was in effect on February 8, 1999,

          ‘(ii) each such beneficiary under the charitable gift annuity is a bona fide resident of such State at the time the obligation to pay a charitable gift annuity is entered into, and

          ‘(iii) the only persons entitled to payments under such contract are persons entitled to payments as beneficiaries under such obligation on the date such obligation is entered into.

        ‘(H) MEMBER OF FAMILY- For purposes of this paragraph, an individual’s family consists of the individual’s grandparents, the grandparents of such individual’s spouse, the lineal descendants of such grandparents, and any spouse of such a lineal descendant.

        ‘(I) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations to prevent the avoidance of such purposes.’.

    (b) EFFECTIVE DATES-

      (1) IN GENERAL- Except as otherwise provided in this section, the amendment made by this section shall apply to transfers made after February 8, 1999.

      (2) EXCISE TAX- Except as provided in paragraph (3) of this subsection, section 170(f)(10)(F) of the Internal Revenue Code of 1986 (as added by this section) shall apply to premiums paid after the date of the enactment of this Act.

      (3) REPORTING- Clause (iii) of such section 170(f)(10)(F) shall apply to premiums paid after February 8, 1999 (determined as if the tax imposed by such section applies to premiums paid after such date).

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

    (a) IN GENERAL- Section 732 of the Internal Revenue Code of 1986 (relating to basis of distributed property other than money) is amended by adding at the end the following new subsection:

    ‘(f) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A DISTRIBUTED CORPORATION CONTROLLED BY A CORPORATE PARTNER-

      ‘(1) IN GENERAL- If--

        ‘(A) a corporation (hereafter in this subsection referred to as the ‘corporate partner’) receives a distribution from a partnership of stock in another corporation (hereafter in this subsection referred to as the ‘distributed corporation’),

        ‘(B) the corporate partner has control of the distributed corporation immediately after the distribution or at any time thereafter, and

        ‘(C) the partnership’s adjusted basis in such stock immediately before the distribution exceeded the corporate partner’s adjusted basis in such stock immediately after the distribution,

      then an amount equal to such excess shall be applied to reduce (in accordance with subsection (c)) the basis of property held by the distributed corporation at such time (or, if the corporate partner does not control the distributed corporation at such time, at the time the corporate partner first has such control).

      ‘(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CONTROL ACQUIRED- Paragraph (1) shall not apply to any distribution of stock in the distributed corporation if--

        ‘(A) the corporate partner does not have control of such corporation immediately after such distribution, and

        ‘(B) the corporate partner establishes to the satisfaction of the Secretary that such distribution was not part of a plan or arrangement to acquire control of the distributed corporation.

      ‘(3) LIMITATIONS ON BASIS REDUCTION-

        ‘(A) IN GENERAL- The amount of the reduction under paragraph (1) shall not exceed the amount by which the sum of the aggregate adjusted bases of the property and the amount of money of the distributed corporation exceeds the corporate partner’s adjusted basis in the stock of the distributed corporation.

        ‘(B) REDUCTION NOT TO EXCEED ADJUSTED BASIS OF PROPERTY- No reduction under paragraph (1) in the basis of any property shall exceed the adjusted basis of such property (determined without regard to such reduction).

      ‘(4) GAIN RECOGNITION WHERE REDUCTION LIMITED- If the amount of any reduction under paragraph (1) (determined after the application of paragraph (3)(A)) exceeds the aggregate adjusted bases of the property of the distributed corporation--

        ‘(A) such excess shall be recognized by the corporate partner as long-term capital gain, and

        ‘(B) the corporate partner’s adjusted basis in the stock of the distributed corporation shall be increased by such excess.

      ‘(5) CONTROL- For purposes of this subsection, the term ‘control’ means ownership of stock meeting the requirements of section 1504(a)(2).

      ‘(6) INDIRECT DISTRIBUTIONS- For purposes of paragraph (1), if a corporation acquires (other than in a distribution from a partnership) stock the basis of which is determined (by reason of being distributed from a partnership) in whole or in part by reference to subsection (a)(2) or (b), the corporation shall be treated as receiving a distribution of such stock from a partnership.

      ‘(7) SPECIAL RULE FOR STOCK IN CONTROLLED CORPORATION- If the property held by a distributed corporation is stock in a corporation which the distributed corporation controls, this subsection shall be applied to reduce the basis of the property of such controlled corporation. This subsection shall be reapplied to any property of any controlled corporation which is stock in a corporation which it controls.

      ‘(8) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations to avoid double counting and to prevent the abuse of such purposes.’.

    (b) EFFECTIVE DATES-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendment made by this section shall apply to distributions made after July 14, 1999.

      (2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999- In the case of a corporation which is a partner in a partnership as of July 14, 1999, the amendment made by this section shall apply to any distribution made (or treated as made) to such partner from such partnership after June 30, 2001, except that this paragraph shall not apply to any distribution after the date of the enactment of this Act unless the partner makes an election to have this paragraph apply to such distribution on the partner’s return of Federal income tax for the taxable year in which such distribution occurs.

PART II--PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS

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

SEC. 541. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

    (a) IN GENERAL- Subparagraph (B) of section 856(c)(4) of the Internal Revenue Code of 1986 is amended to read as follows:

        ‘(B)(i) not more than 25 percent of the value of its total assets is represented by securities (other than those includible under subparagraph (A)),

        ‘(ii) not more than 20 percent of the value of its total assets is represented by securities of one or more taxable REIT subsidiaries, and

        ‘(iii) except with respect to a taxable REIT subsidiary and securities includible under subparagraph (A)--

          ‘(I) not more than 5 percent of the value of its total assets is represented by securities of any one issuer,

          ‘(II) the trust does not hold securities possessing more than 10 percent of the total voting power of the outstanding securities of any one issuer, and

          ‘(III) the trust does not hold securities having a value of more than 10 percent of the total value of the outstanding securities of any one issuer.’.

    (b) EXCEPTION FOR STRAIGHT DEBT SECURITIES- Subsection (c) of section 856 of such Code is amended by adding at the end the following new paragraph:

      ‘(7) STRAIGHT DEBT SAFE HARBOR IN APPLYING PARAGRAPH (4)- Securities of an issuer which are straight debt (as defined in section 1361(c)(5) without regard to subparagraph (B)(iii) thereof) shall not be taken into account in applying paragraph (4)(B)(ii)(III) if--

        ‘(A) the issuer is an individual, or

        ‘(B) the only securities of such issuer which are held by the trust or a taxable REIT subsidiary of the trust are straight debt (as so defined), or

        ‘(C) the issuer is a partnership and the trust holds at least a 20 percent profits interest in the partnership.’.

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

    (a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT TREATED AS IMPERMISSIBLE TENANT SERVICE INCOME- Clause (i) of section 856(d)(7)(C) of the Internal Revenue Code of 1986 (relating to exceptions to impermissible tenant service income) is amended by inserting ‘or through a taxable REIT subsidiary of such trust’ after ‘income’.

    (b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDIARIES NOT EXCLUDED FROM RENTS FROM REAL PROPERTY-

      (1) IN GENERAL- Subsection (d) of section 856 of such Code (relating to rents from real property defined) is amended by adding at the end the following new paragraphs:

      ‘(8) SPECIAL RULE FOR TAXABLE REIT SUBSIDIARIES- For purposes of this subsection, amounts paid to a real estate investment trust by a taxable REIT subsidiary of such trust shall not be excluded from rents from real property by reason of paragraph (2)(B) if the requirements of either of the following subparagraphs are met:

        ‘(A) LIMITED RENTAL EXCEPTION- The requirements of this subparagraph are met with respect to any property if at least 90 percent of the leased space of the property is rented to persons other than taxable REIT subsidiaries of such trust and other than persons described in section 856(d)(2)(B). The preceding sentence shall apply only to the extent that the amounts paid to the trust as rents from real property (as defined in paragraph (1) without regard to paragraph (2)(B)) from such property are substantially comparable to such rents made by the other tenants of the trust’s property for comparable space.

        ‘(B) EXCEPTION FOR CERTAIN LODGING FACILITIES- The requirements of this subparagraph are met with respect to an interest in real property which is a qualified lodging facility leased by the trust to a taxable REIT subsidiary of the trust if the property is operated on behalf of such subsidiary by a person who is an eligible independent contractor.

      ‘(9) ELIGIBLE INDEPENDENT CONTRACTOR- For purposes of paragraph (8)(B)--

        ‘(A) IN GENERAL- The term ‘eligible independent contractor’ means, with respect to any qualified lodging facility, any independent contractor if, at the time such contractor enters into a management agreement or other similar service contract with the taxable REIT subsidiary to operate the facility, such contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities for any person who is not a related person with respect to the real estate investment trust or the taxable REIT subsidiary.

        ‘(B) SPECIAL RULES- Solely for purposes of this paragraph and paragraph (8)(B), a person shall not fail to be treated as an independent contractor with respect to any qualified lodging facility by reason of any of the following:

          ‘(i) The taxable REIT subsidiary bears the expenses for the operation of the facility pursuant to the management agreement or other similar service contract.

          ‘(ii) The taxable REIT subsidiary receives the revenues from the operation of such facility, net of expenses for such operation and fees payable to the operator pursuant to such agreement or contract.

          ‘(iii) The real estate investment trust receives income from such person with respect to another property that is attributable to a lease of such other property to such person that was in effect as of the later of--

            ‘(I) January 1, 1999, or

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

        ‘(C) RENEWALS, ETC., OF EXISTING LEASES- For purposes of subparagraph (B)(iii)--

          ‘(i) a lease shall be treated as in effect on January 1, 1999, without regard to its renewal after such date, so long as such renewal is pursuant to the terms of such lease as in effect on whichever of the dates under subparagraph (B)(iii) is the latest, and

          ‘(ii) a lease of a property entered into after whichever of the dates under subparagraph (B)(iii) is the latest shall be treated as in effect on such date if--

            ‘(I) on such date, a lease of such property from the trust was in effect, and

            ‘(II) under the terms of the new lease, such trust receives a substantially similar or lesser benefit in comparison to the lease referred to in subclause (I).

        ‘(D) QUALIFIED LODGING FACILITY- For purposes of this paragraph--

          ‘(i) IN GENERAL- The term ‘qualified lodging facility’ means any lodging facility unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility.

          ‘(ii) LODGING FACILITY- The term ‘lodging facility’ means a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis.

          ‘(iii) CUSTOMARY AMENITIES AND FACILITIES- The term ‘lodging facility’ includes customary amenities and facilities operated as part of, or associated with, the lodging facility so long as such amenities and facilities are customary for other properties of a comparable size and class owned by other owners unrelated to such real estate investment trust.

        ‘(E) OPERATE INCLUDES MANAGE- References in this paragraph to operating a property shall be treated as including a reference to managing the property.

        ‘(F) RELATED PERSON- Persons shall be treated as related to each other if such persons are treated as a single employer under subsection (a) or (b) of section 52.’.

      (2) CONFORMING AMENDMENT- Subparagraph (B) of section 856(d)(2) of such Code is amended by inserting ‘except as provided in paragraph (8),’ after ‘(B)’.

      (3) DETERMINING RENTS FROM REAL PROPERTY-

        (A)(i) Paragraph (1) of section 856(d) of such Code is amended by striking ‘adjusted bases’ each place it occurs and inserting ‘fair market values’.

        (ii) The amendment made by this subparagraph shall apply to taxable years beginning after December 31, 2000.

        (B)(i) Clause (i) of section 856(d)(2)(B) of such Code is amended by striking ‘number’ and inserting ‘value’.

        (ii) The amendment made by this subparagraph shall apply to amounts received or accrued in taxable years beginning after December 31, 2000, except for amounts paid pursuant to leases in effect on July 12, 1999, or pursuant to a binding contract in effect on such date and at all times thereafter.

SEC. 543. TAXABLE REIT SUBSIDIARY.

    (a) IN GENERAL- Section 856 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

    ‘(l) TAXABLE REIT SUBSIDIARY- For purposes of this part--

      ‘(1) IN GENERAL- The term ‘taxable REIT subsidiary’ means, with respect to a real estate investment trust, a corporation (other than a real estate investment trust) if--

        ‘(A) such trust directly or indirectly owns stock in such corporation, and

        ‘(B) such trust and such corporation jointly elect that such corporation shall be treated as a taxable REIT subsidiary of such trust for purposes of this part.

      Such an election, once made, shall be irrevocable unless both such trust and corporation consent to its revocation. Such election, and any revocation thereof, may be made without the consent of the Secretary.

      ‘(2) THIRTY-FIVE PERCENT OWNERSHIP IN ANOTHER TAXABLE REIT SUBSIDIARY- The term ‘taxable REIT subsidiary’ includes, with respect to any real estate investment trust, any corporation (other than a real estate investment trust) with respect to which a taxable REIT subsidiary of such trust owns directly or indirectly--

        ‘(A) securities possessing more than 35 percent of the total voting power of the outstanding securities of such corporation, or

        ‘(B) securities having a value of more than 35 percent of the total value of the outstanding securities of such corporation.

      The preceding sentence shall not apply to a qualified REIT subsidiary (as defined in subsection (i)(2)). The rule of section 856(c)(7) shall apply for purposes of subparagraph (B).

      ‘(3) EXCEPTIONS- The term ‘taxable REIT subsidiary’ shall not include--

        ‘(A) any corporation which directly or indirectly operates or manages a lodging facility or a health care facility, and

        ‘(B) any corporation which directly or indirectly provides to any other person (under a franchise, license, or otherwise) rights to any brand name under which any lodging facility or health care facility is operated.

      Subparagraph (B) shall not apply to rights provided to an eligible independent contractor to operate or manage a lodging facility if such rights are held by such corporation as a franchisee, licensee, or in a similar capacity and such lodging facility is either owned by such corporation or is leased to such corporation from the real estate investment trust.

      ‘(4) DEFINITIONS- For purposes of paragraph (3)--

        ‘(A) LODGING FACILITY- The term ‘lodging facility’ has the meaning given to such term by paragraph (9)(D)(ii).

        ‘(B) HEALTH CARE FACILITY- The term ‘health care facility’ has the meaning given to such term by subsection (e)(6)(D)(ii).’.

    (b) CONFORMING AMENDMENT- Paragraph (2) of section 856(i) of such Code is amended by adding at the end the following new sentence: ‘Such term shall not include a taxable REIT subsidiary.’.

SEC. 544. LIMITATION ON EARNINGS STRIPPING.

    Paragraph (3) of section 163(j) of the Internal Revenue Code of 1986 (relating to limitation on deduction for interest on certain indebtedness) is amended by striking ‘and’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘, and’, and by adding at the end the following new subparagraph:

        ‘(C) any interest paid or accrued (directly or indirectly) by a taxable REIT subsidiary (as defined in section 856(l)) of a real estate investment trust to such trust.’.

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

    (a) IN GENERAL- Subsection (b) of section 857 of the Internal Revenue Code of 1986 (relating to method of taxation of real estate investment trusts and holders of shares or certificates of beneficial interest) is amended by redesignating paragraphs (7) and (8) as paragraphs (8) and (9), respectively, and by inserting after paragraph (6) the following new paragraph:

      ‘(7) INCOME FROM REDETERMINED RENTS, REDETERMINED DEDUCTIONS, AND EXCESS INTEREST-

        ‘(A) IMPOSITION OF TAX- There is hereby imposed for each taxable year of the real estate investment trust a tax equal to 100 percent of redetermined rents, redetermined deductions, and excess interest.

        ‘(B) REDETERMINED RENTS-

          ‘(i) IN GENERAL- The term ‘redetermined rents’ means rents from real property (as defined in subsection 856(d)) the amount of which would (but for subparagraph (E)) be reduced on distribution, apportionment, or allocation under section 482 to clearly reflect income as a result of services furnished or rendered by a taxable REIT subsidiary of the real estate investment trust to a tenant of such trust.

          ‘(ii) EXCEPTION FOR CERTAIN SERVICES- Clause (i) shall not apply to amounts received directly or indirectly by a real estate investment trust for services described in paragraph (1)(B) or (7)(C)(i) of section 856(d).

          ‘(iii) EXCEPTION FOR DE MINIMIS AMOUNTS- Clause (i) shall not apply to amounts described in section 856(d)(7)(A) with respect to a property to the extent such amounts do not exceed the one percent threshold described in section 856(d)(7)(B) with respect to such property.

          ‘(iv) EXCEPTION FOR COMPARABLY PRICED SERVICES- Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if--

            ‘(I) such subsidiary renders a significant amount of similar services to persons other than such trust and tenants of such trust who are unrelated (within the meaning of section 856(d)(8)(F)) to such subsidiary, trust, and tenants, but

            ‘(II) only to the extent the charge for such service so rendered is substantially comparable to the charge for the similar services rendered to persons referred to in subclause (I).

          ‘(v) EXCEPTION FOR CERTAIN SEPARATELY CHARGED SERVICES- Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if--

            ‘(I) the rents paid to the trust by tenants (leasing at least 25 percent of the net leasable space in the trust’s property) who are not receiving such service from such subsidiary are substantially comparable to the rents paid by tenants leasing comparable space who are receiving such service from such subsidiary, and

            ‘(II) the charge for such service from such subsidiary is separately stated.

          ‘(vi) EXCEPTION FOR CERTAIN SERVICES BASED ON SUBSIDIARY’S INCOME FROM THE SERVICES- Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if the gross income of such subsidiary from such service is not less than 150 percent of such subsidiary’s direct cost in furnishing or rendering the service.

          ‘(vii) EXCEPTIONS GRANTED BY SECRETARY- The Secretary may waive the tax otherwise imposed by subparagraph (A) if the trust establishes to the satisfaction of the Secretary that rents charged to tenants were established on an arms’ length basis even though a taxable REIT subsidiary of the trust provided services to such tenants.

        ‘(C) REDETERMINED DEDUCTIONS- The term ‘redetermined deductions’ means deductions (other than redetermined rents) of a taxable REIT subsidiary of a real estate investment trust if the amount of such deductions would (but for subparagraph (E)) be decreased on distribution, apportionment, or allocation under section 482 to clearly reflect income as between such subsidiary and such trust.

        ‘(D) EXCESS INTEREST- The term ‘excess interest’ means any deductions for interest payments by a taxable REIT subsidiary of a real estate investment trust to such trust to the extent that the interest payments are in excess of a rate that is commercially reasonable.

        ‘(E) COORDINATION WITH SECTION 482- The imposition of tax under subparagraph (A) shall be in lieu of any distribution, apportionment, or allocation under section 482.

        ‘(F) REGULATORY AUTHORITY- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph. Until the Secretary prescribes such regulations, real estate investment trusts and their taxable REIT subsidiaries may base their allocations on any reasonable method.’.

    (b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE DISTRIBUTED- Subparagraph (E) of section 857(b)(2) of such Code (relating to real estate investment trust taxable income) is amended by striking ‘paragraph (5)’ and inserting ‘paragraphs (5) and (7)’.

SEC. 546. EFFECTIVE DATE.

    (a) IN GENERAL- The amendments made by this subpart shall apply to taxable years beginning after December 31, 2000.

    (b) TRANSITIONAL RULES RELATED TO SECTION 541-

      (1) EXISTING ARRANGEMENTS-

        (A) IN GENERAL- Except as otherwise provided in this paragraph, the amendment made by section 541 shall not apply to a real estate investment trust with respect to--

          (i) securities of a corporation held directly or indirectly by such trust on July 12, 1999;

          (ii) securities of a corporation held by an entity on July 12, 1999, if such trust acquires control of such entity pursuant to a written binding contract in effect on such date and at all times thereafter before such acquisition;

          (iii) securities received by such trust (or a successor) in exchange for, or with respect to, securities described in clause (i) or (ii) in a transaction in which gain or loss is not recognized; and

          (iv) securities acquired directly or indirectly by such trust as part of a reorganization (as defined in section 368(a)(1) of the Internal Revenue Code of 1986) with respect to such trust if such securities are described in clause (i), (ii), or (iii) with respect to any other real estate investment trust.

        (B) NEW TRADE OR BUSINESS OR SUBSTANTIAL NEW ASSETS- Subparagraph (A) shall cease to apply to securities of a corporation as of the first day after July 12, 1999, on which such corporation engages in a substantial new line of business, or acquires any substantial asset, other than--

          (i) pursuant to a binding contract in effect on such date and at all times thereafter before the acquisition of such asset;

          (ii) in a transaction in which gain or loss is not recognized by reason of section 1031 or 1033 of the Internal Revenue Code of 1986; or

          (iii) in a reorganization (as so defined) with another corporation the securities of which are described in paragraph (1)(A) of this subsection.

        (C) LIMITATION ON TRANSITION RULES- Subparagraph (A) shall cease to apply to securities of a corporation held, acquired, or received, directly or indirectly, by a real estate investment trust as of the first day after July 12, 1999, on which such trust acquires any additional securities of such corporation other than--

          (i) pursuant to a binding contract in effect on July 12, 1999, and at all times thereafter; or

          (ii) in a reorganization (as so defined) with another corporation the securities of which are described in paragraph (1)(A) of this subsection.

      (2) TAX-FREE CONVERSION- If--

        (A) at the time of an election for a corporation to become a taxable REIT subsidiary, the amendment made by section 541 does not apply to such corporation by reason of paragraph (1); and

        (B) such election first takes effect before January 1, 2004,

      such election shall be treated as a reorganization qualifying under section 368(a)(1)(A) of such Code.

SEC. 547. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

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

Subpart B--Health Care REITs

SEC. 551. HEALTH CARE REITS.

    (a) SPECIAL FORECLOSURE RULE FOR HEALTH CARE PROPERTIES- Subsection (e) of section 856 of the Internal Revenue Code of 1986 (relating to special rules for foreclosure property) is amended by adding at the end the following new paragraph:

      ‘(6) SPECIAL RULE FOR QUALIFIED HEALTH CARE PROPERTIES- For purposes of this subsection--

        ‘(A) ACQUISITION AT EXPIRATION OF LEASE- The term ‘foreclosure property’ shall include any qualified health care property acquired by a real estate investment trust as the result of the termination of a lease of such property (other than a termination by reason of a default, or the imminence of a default, on the lease).

        ‘(B) GRACE PERIOD- In the case of a qualified health care property which is foreclosure property solely by reason of subparagraph (A), in lieu of applying paragraphs (2) and (3)--

          ‘(i) the qualified health care property shall cease to be foreclosure property as of the close of the second taxable year after the taxable year in which such trust acquired such property, and

          ‘(ii) if the real estate investment trust establishes to the satisfaction of the Secretary that an extension of the grace period in clause (i) is necessary to the orderly leasing or liquidation of the trust’s interest in such qualified health care property, the Secretary may grant one or more extensions of the grace period for such qualified health care property.

        Any such extension shall not extend the grace period beyond the close of the 6th year after the taxable year in which such trust acquired such qualified health care property.

        ‘(C) INCOME FROM INDEPENDENT CONTRACTORS- For purposes of applying paragraph (4)(C) with respect to qualified health care property which is foreclosure property by reason of subparagraph (A) or paragraph (1), income derived or received by the trust from an independent contractor shall be disregarded to the extent such income is attributable to--

          ‘(i) any lease of property in effect on the date the real estate investment trust acquired the qualified health care property (without regard to its renewal after such date so long as such renewal is pursuant to the terms of such lease as in effect on such date), or

          ‘(ii) any lease of property entered into after such date if--

            ‘(I) on such date, a lease of such property from the trust was in effect, and

            ‘(II) under the terms of the new lease, such trust receives a substantially similar or lesser benefit in comparison to the lease referred to in subclause (I).

        ‘(D) QUALIFIED HEALTH CARE PROPERTY-

          ‘(i) IN GENERAL- The term ‘qualified health care property’ means any real property (including interests therein), and any personal property incident to such real property, which--

            ‘(I) is a health care facility, or

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

          ‘(ii) HEALTH CARE FACILITY- For purposes of clause (i), the term ‘health care facility’ means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility (as defined in section 7872(g)(4)), or other licensed facility which extends medical or nursing or ancillary services to patients and which, immediately before the termination, expiration, default, or breach of the lease of or mortgage secured by such facility, was operated by a provider of such services which was eligible for participation in the medicare program under title XVIII of the Social Security Act with respect to such facility.’.

    (b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 2000.

Subpart C--Conformity With Regulated Investment Company Rules

SEC. 556. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

    (a) DISTRIBUTION REQUIREMENT- Clauses (i) and (ii) of section 857(a)(1)(A) of the Internal Revenue Code of 1986 (relating to requirements applicable to real estate investment trusts) are each amended by striking ‘95 percent (90 percent for taxable years beginning before January 1, 1980)’ and inserting ‘90 percent’.

    (b) IMPOSITION OF TAX- Clause (i) of section 857(b)(5)(A) of such Code (relating to imposition of tax in case of failure to meet certain requirements) is amended by striking ‘95 percent (90 percent in the case of taxable years beginning before January 1, 1980)’ and inserting ‘90 percent’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

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

SEC. 561. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERATORS.

    (a) IN GENERAL- Paragraph (3) of section 856(d) of the Internal Revenue Code of 1986 (relating to independent contractor defined) is amended by adding at the end the following flush sentence:

      ‘In the event that any class of stock of either the real estate investment trust or such person is regularly traded on an established securities market, only persons who own, directly or indirectly, more than 5 percent of such class of stock shall be taken into account as owning any of the stock of such class for purposes of applying the 35 percent limitation set forth in subparagraph (B) (but all of the outstanding stock of such class shall be considered outstanding in order to compute the denominator for purpose of determining the applicable percentage of ownership).’.

    (b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 2000.

Subpart E--Modification of Earnings and Profits Rules

SEC. 566. MODIFICATION OF EARNINGS AND PROFITS RULES.

    (a) RULES FOR DETERMINING WHETHER REGULATED INVESTMENT COMPANY HAS EARNINGS AND PROFITS FROM NON-RIC YEAR-

      (1) IN GENERAL- Subsection (c) of section 852 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

      ‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS OF SUBSECTION (a)(2)(B)- Any distribution which is made in order to comply with the requirements of subsection (a)(2)(B)--

        ‘(A) shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and

        ‘(B) to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(D) and section 855.’.

      (2) CONFORMING AMENDMENT- Subparagraph (A) of section 857(d)(3) of such Code is amended to read as follows:

        ‘(A) shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and’.

    (b) CLARIFICATION OF APPLICATION OF REIT SPILLOVER DIVIDEND RULES TO DISTRIBUTIONS TO MEET QUALIFICATION REQUIREMENT- Subparagraph (B) of section 857(d)(3) of such Code is amended by inserting before the period ‘and section 858’.

    (c) APPLICATION OF DEFICIENCY DIVIDEND PROCEDURES- Paragraph (1) of section 852(e) of such Code is amended by adding at the end the following new sentence: ‘If the determination under subparagraph (A) is solely as a result of the failure to meet the requirements of subsection (a)(2), the preceding sentence shall also apply for purposes of applying subsection (a)(2) to the non-RIC year and the amount referred to in paragraph (2)(A)(i) shall be the portion of the accumulated earnings and profits which resulted in such failure.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 2000.

Subpart F--Modification of Estimated Tax Rules

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

    (a) IN GENERAL- Subsection (e) of section 6655 of the Internal Revenue Code of 1986 (relating to estimated tax by corporations) is amended by adding at the end the following new paragraph:

      ‘(5) TREATMENT OF CERTAIN REIT DIVIDENDS-

        ‘(A) IN GENERAL- Any dividend received from a closely held real estate investment trust by any person which owns (after application of subsections (d)(5) and (l)(3)(B) of section 856) 10 percent or more (by vote or value) of the stock or beneficial interests in the trust shall be taken into account in computing annualized income installments under paragraph (2) in a manner similar to the manner under which partnership income inclusions are taken into account.

        ‘(B) CLOSELY HELD REIT- For purposes of subparagraph (A), the term ‘closely held real estate investment trust’ means a real estate investment trust with respect to which 5 or fewer persons own (after application of subsections (d)(5) and (l)(3)(B) of section 856) 50 percent or more (by vote or value) of the stock or beneficial interests in the trust.’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to estimated tax payments due on or after December 15, 1999.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.