Text: H.R.4150 — 102nd Congress (1991-1992)All Information (Except Text)

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HR 4150 IH
102d CONGRESS
2d Session
 H. R. 4150
To create jobs, promote economic growth, assist families, and promote health,
education, savings, and home ownership.
IN THE HOUSE OF REPRESENTATIVES
February 4, 1992
Mr. MICHEL (for himself, Mr. ARCHER, Mr. GINGRICH, Mr. LEWIS of California,
Mr. EDWARDS of Oklahoma, Mr. HUNTER, Mr. MCCOLLUM, and Mr. WEBER) (by request)
introduced the following bill; which was referred jointly to the Committees
on Ways and Means, Agriculture, Armed Services, Banking, Finance and Urban
Affairs, Education and Labor, Energy and Commerce, Foreign Affairs, Government
Operations, House Administration, Interior and Insular Affairs, the Judiciary,
Merchant Marine and Fisheries, Post Office and Civil Service, Public Works and
Transportation, Rules, Science, Space, and Technology, and Veterans' Affairs.
A BILL
To create jobs, promote economic growth, assist families, and promote health,
education, savings, and home ownership.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. SHORT TITLE.
  This Act may be cited as the `Economic Growth Act of 1992'.
SEC. 2. TABLE OF TITLES.
TITLE I--ENHANCED ECONOMIC RECOVERY ACT OF 1992
TITLE II--TAX RELIEF FOR FAMILIES ACT OF 1992
TITLE III--LONG TERM GROWTH ACT OF 1992
TITLE IV--FINANCIAL INSTITUTIONS SAFETY AND CONSUMER CHOICE ACT OF 1992
TITLE V--PENSION SECURITY ACT
TITLE VI--FEDERAL INSURANCE ACCOUNTING ACT OF 1992
TITLE VII--MEDICARE PREMIUM EQUITY AMENDMENTS OF 1992
TITLE VIII--MEDICARE BUDGET AMENDMENTS OF 1992
TITLE IX--AID TO FAMILIES WITH DEPENDENT CHILDREN SAVINGS SET-ASIDE AMENDMENTS
OF 1992
TITLE X--FOOD STAMP AMENDMENTS OF 1992
TITLE XI--CHILD SUPPORT ENFORCEMENT AMENDMENTS OF 1992
TITLE XII--INCENTIVES FOR FAMILIES WITH ABSENT PARENTS TO COOPERATE WITH STATE
AGENCIES UNDER THE SOCIAL SECURITY ACT IN SECURING CHILD SUPPORT FOR DEPENDENTS
TITLE XIII--PURPOSES AND DURATION OF EMERGENCY ASSISTANCE UNDER THE AID TO
FAMILIES WITH DEPENDENT CHILDREN PROGRAM
TITLE XIV--ENHANCE HEALTH INSURANCE COVERAGE FOR CHILDREN UNDER THE AID TO
FAMILIES WITH DEPENDENT CHILDREN PROGRAM
TITLE XV--CHILD NUTRITION AMENDMENTS OF 1992
TITLE XVI--SOCIAL SECURITY CROSS PROGRAM RECOVERY AMENDMENTS OF 1992
TITLE XVII--AMERICA 2000 EXCELLENCE IN EDUCATION ACT
TITLE XVIII--STUDENT FINANCIAL ASSISTANCE IMPROVEMENTS ACT OF 1992
TITLE XIX--NATIONAL ENERGY STRATEGY ACT
TITLE XX--ARCTIC COASTAL PLAIN COMPETITIVE OIL AND GAS LEASING ACT
TITLE XXI--COASTAL COMMUNITIES IMPACT ASSISTANCE ACT OF 1992
TITLE XXII--ALASKA POWER ADMINISTRATION SALE AUTHORIZATION ACT
TITLE XXIII--THE ACCESS TO JUSTICE ACT OF 1992
TITLE XXIV--HEALTH CARE LIABILITY REFORM AND QUALITY OF CARE IMPROVEMENT ACT
TITLE XXV--PRODUCT LIABILITY FAIRNESS ACT
TITLE XXVI--CIVIL LIBERTIES ACT AMENDMENTS OF 1992
TITLE XXVII--FEDERAL CREDIT AND DEBT MANAGEMENT ACT OF 1992
TITLE XXVIII--REDUCE CERTAIN COMMODITY CREDIT CORPORATION SUBSIDIES OF THOSE
WITH OFF-FARM INCOME OF $100,000 OR MORE
TITLE XXIX--FARM CREDIT SYSTEM FINANCIAL ASSISTANCE CORPORATION REPAYMENT
ACT OF 1992
TITLE XXX--RECOVER COSTS OF CARRYING OUT FEDERAL MARKETING AGREEMENTS
AND ORDERS
TITLE XXXI--ELIMINATE PROVISIONS FOR PERMANENT ANNUAL APPROPRIATIONS TO
SUPPORT LAND GRANT UNIVERSITIES
TITLE XXXII--POWER MARKETING ADMINISTRATION TIMELY PAYMENT ACT
TITLE XXXIII--EMERGING TELECOMMUNICATIONS TECHNOLOGIES ACT OF 1992
TITLE XXXIV--ENTERPRISE FOR THE AMERICAS ACT OF 1992
TITLE XXXV--REPEAL THE TRADE ADJUSTMENT ASSISTANCE PROGRAM
TITLE XXXVI--VA MEDICAL CARE COST RECOVERY AMENDMENT OF 1992
TITLE XXXVII--VETERANS' HOME LOAN IMPROVEMENT ACT OF 1992
TITLE XXXVIII--PERMANENT EXTENSION OF CERTAIN VETERANS-RELATED INCOME
VERIFICATION AND PENSION PROVISIONS IN THE OMNIBUS BUDGET RECONCILIATION
ACT OF 1990
TITLE XXXIX--TARGET ENTITLEMENT FOR VOCATIONAL REHABILITATION BENEFITS
TO VETERANS WITH SERVICE-CONNECTED DISABILITIES RATED 30 PERCENT OR MORE;
AND ADJUST MILITARY PAY REDUCTION FOR MONTGOMERY GI BILL PARTICIPANTS
TITLE XL--RETIREMENT MODIFICATION ACT OF 1992
TITLE XLI--CONFORM THE DEFINITION OF COMPENSATION UNDER THE RAILROAD RETIREMENT
TAX ACT TO THAT UNDER THE FEDERAL INSURANCE CONTRIBUTIONS ACT
TITLE XLII--EXTEND THE DURATION OF THE PATENT AND TRADEMARK OFFICE USER FEE
SURCHARGE THROUGH 1997
TITLE XLIII--EXPAND EXISTING ARMY CORPS OF ENGINEERS USER FEES FOR USE OF
DEVELOPED RECREATIONAL SITES
TITLE XLIV--EXTEND AUTHORITY TO COLLECT ABANDONED MINE RECLAMATION FEES
TITLE XLV--FCC USER FEES
TITLE XLVI--LIMITATION ON MANDATORY SPENDING
TITLE XLVII--EXTENSION OF BUDGET ENFORCEMENT ACT AND APPLICATION TO CREDIT
PROGRAMS
TITLE XLVIII--CONGRESSIONAL BUDGET REFORM ACT OF 1992
TITLE XLIX--LEGISLATIVE LINE ITEM VETO ACT OF 1992
TITLE I--ENHANCED ECONOMIC RECOVERY ACT OF 1992
SEC. 101. SHORT TITLE, ETC.
  (a) SHORT TITLE- This title may be cited as the `Enhanced Economic Recovery
  Act of 1992'.
  (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided,
  whenever in this title an amendment or repeal is expressed in terms of an
  amendment to, or repeal of, a section or other provision, the reference
  shall be considered to be made to a section or other provision of the
  Internal Revenue Code of 1986.
  (c) SECTION 15 SHALL NOT APPLY- Except as otherwise expressly provided,
  no amendment made by this title shall be treated as a change in rate of
  tax for purposes of section 15 of the Internal Revenue Code of 1986.
  (d) TABLE OF CONTENTS-
TABLE OF CONTENTS
TITLE I--ENHANCED ECONOMIC RECOVERY
Sec. 101. Short title, etc.
Subtitle A--Provisions Relating to Capital Gains
Sec. 111. Reduction in capital gains tax for noncorporate taxpayers.
Sec. 112. Recapture under section 1250 of total amount of depreciation.
Subtitle B--Provisions Relating to Passive Losses and Depreciation
Sec. 121. Passive loss relief for real estate developers.
Sec. 122. Special allowance for equipment acquired in 1992.
Sec. 123. Elimination of ACE depreciation adjustment.
Subtitle C--Provisions Relating to Real Estate Investments by Pension Funds
Sec. 131. Real property acquired by a qualified organization.
Sec. 132. Special rules for investments in partnerships.
Subtitle D--Provisions Affecting Homebuyers
Sec. 141. Credit for first-time homebuyers.
Sec. 142. Penalty-free withdrawals for first home purchase.
Subtitle A--Provisions Relating to Capital Gains
SEC. 111. REDUCTION IN CAPITAL GAINS TAX FOR NONCORPORATE TAXPAYERS.
  (a) GENERAL RULE- Part I of subchapter P of chapter 1 (relating to treatment
  of capital gains) is amended by adding at the end thereof the following
  new section:
`SEC. 1202. REDUCTION IN CAPITAL GAINS TAX FOR NONCORPORATE TAXPAYERS.
  `(a) DEDUCTION ALLOWED FOR CAPITAL GAINS-
  `(1) IN GENERAL- If, for any taxable year, a taxpayer other than a
  corporation has a net capital gain, an amount equal to the sum of the
  applicable percentages of the applicable capital gain shall be allowed as
  a deduction.
  `(2) ESTATES AND TRUSTS- In the case of an estate or trust, the deduction
  under paragraph (1) shall be computed by excluding the portion (if any)
  of the gains for the taxable year from sales or exchanges of capital assets
  which, under section 652 and 662 (relating to inclusions of amounts in gross
  income of beneficiaries of trusts), is includible by income beneficiaries
  (other than corporations) as gain derived from the sale or exchange of
  capital assets.
  `(b) APPLICABLE PERCENTAGES- For purposes of this subsection, the applicable
  percentages shall be the percentages determined in accordance with the
  following table:
--The applicable
`In the case of:
--percentage is:
 1-year gain
--15
 2-year gain
--30
 3-year gain
--45
  `(c) GAIN TO WHICH DEDUCTION APPLIES- For purposes of this section--
  `(1) APPLICABLE CAPITAL GAIN- The term `applicable capital gain' means
  1-year gain, 2-year gain, or 3-year gain determined by taking into account
  only gain which is properly taken into account on or after February 1, 1992.
  `(2) 3-YEAR GAIN- The term `3-year gain' means the lesser of--
  `(A) the net capital gain for the taxable year, or
  `(B) the long-term capital gain determined by taking into account only
  gain from the sale or exchange of qualified assets held more than 3 years.
  `(3) 2-YEAR GAIN- The term `2-year gain' means the lesser of--
  `(A) the net capital gain for the taxable year, reduced by 3-year gain, or
  `(B) the long-term capital gain determined by taking into account only
  gain from the sale or exchange of qualified assets held more than 2 years
  but not more than 3 years.
  `(4) 1-YEAR GAIN- The term `1-year gain' means the net capital gain for
  the taxable year determined by taking into account only--
  `(A) gain from the sale or exchange of assets held more than 1 year but
  not more than 2 years, and
  `(B) losses from the sale or exchange of assets held more than 1 year.
  `(5) Special rules for gain allocable to periods before 1994- For purposes
  of this section--
  `(A) GAIN ALLOCABLE TO PERIODS BEGINNING ON OR AFTER FEBRUARY 1, 1992 AND
  BEFORE 1993- In the case of any gain from any sale or exchange which is
  properly taken into account for the period beginning on February 1, 1992
  and ending on December 31, 1992, gain which is 1-year gain or 2-year gain
  (without regard to this subparagraph) shall be treated as 3-year gain.
  `(B) GAIN ALLOCABLE TO 1993- In the case of any gain from any sale or
  exchange which is properly taken into account for periods during 1993, gain
  which is 1-year gain or 2-year gain (without regard to this subparagraph)
  shall be treated as 2-year gain and 3-year gain, respectively.
  `(6) Special rules for pass-through entities-
  `(A) IN GENERAL- In applying this subsection with respect to any pass-through
  entity, the determination of when a sale or exchange has occurred shall
  be made at the entity level.
  `(B) PASS-THROUGH ENTITY DEFINED- For purposes of subparagraph (A), the term
  `pass-through entity' means--
  `(i) a regulated investment company,
  `(ii) a real estate investment trust,
  `(iii) an S corporation,
  `(iv) a partnership,
  `(v) an estate or trust, and
  `(vi) a common trust fund.
  `(7) RECAPTURE OF NET ORDINARY LOSS UNDER SECTION 1231- For purposes of
  this subsection, if any amount is treated as ordinary income under section
  1231(c) for any taxable year--
  `(A) the amount so treated shall be allocated proportionately among the
  section 1231 gains (as defined in section 1231(a)) for such taxable year, and
  `(B) the amount so allocated to any such gain shall reduce the amount of
  such gain.'
  (b) TREATMENT OF COLLECTIBLES-
  (1) IN GENERAL- Section 1222 is amended by inserting after paragraph (11)
  the following new paragraph:
  `(12) Special rule for collectibles-
  `(A) IN GENERAL- Any gain or loss from the sale or exchange of a collectible
  shall be treated as a short-term capital gain or loss (as the case may be),
  without regard to the period such asset was held. The preceding sentence
  shall apply only to the extent the gain or loss is taken into account in
  computing taxable income.
  `(B) TREATMENT OF CERTAIN SALES OF INTEREST IN PARTNERSHIP, ETC- For
  purposes of subparagraph (A), any gain from the sale or exchange of an
  interest in a partnership, S corporation, or trust which is attributable
  to unrealized appreciation in the value of collectibles held by such entity
  shall be treated as gain from the sale or exchange of a collectible. Rules
  similar to the rules of section 751(f) shall apply for purposes of the
  preceding sentence.
  `(C) COLLECTIBLE- For purposes of this paragraph, the term `collectible'
  means any capital asset which is a collectible (as defined in section 408(m)
  without regard to paragraph (3) thereof).'
  (2) Charitable deduction not affected-
  (A) Paragraph (1) of section 170(e) is amended by adding at the end
  thereof the following new sentence: `For purposes of this paragraph,
  section 1222 shall be applied without regard to paragraph (12) thereof
  (relating to special rule for collectibles).'
  (B) Clause (iv) of section 170(b)(1)(C) is amended by inserting before
  the  period at the end thereof the  following: `and section 1222 shall be
  applied without regard to paragraph (12) thereof (relating to special rule
  for collectibles)'.
  (c) MINIMUM TAX- Section 56(b)(1) is amended by adding at the  end thereof
  the following new subparagraph:
  `(G) CAPITAL GAINS DEDUCTION DISALLOWANCE- Except with respect to gains
  realized on the sale, exchange, or other disposition of a direct or indirect
  interest in real estate or in closely held business, the deduction under
  section 1202 shall not be allowed.'
  (d) Conforming Amendments-
  (1) Section 62(a) is amended by inserting after paragraph (13) the following
  new paragraph:
  `(14) CAPITAL GAINS DEDUCTION- The deduction allowed by section 1202.'
  (2) Clause (ii) of section 163(d)(4)(B) is amended by inserting `, reduced
  by the amount of any deduction allowable under section 1202 attributable
  to gain from such property' after `investment'.
  (3)(A) Subparagraph (B) of section 170(e)(1) is amended by inserting
  `the nondeductible percentage' before `the amount of gain'.
  (B) Paragraph (1) of section 170(e) is amended by adding at the end
  thereof the following new sentence: `For purposes of subparagraph (B),
  the term `nondeductible percentage' means 100 percent minus the applicable
  percentage with respect to such property under section 1202(b), or, in
  the case of a corporation, 100 percent.'
  (4)(A) Paragraph (2) of section 172(d) (relating to modifications with
  respect to net operating loss deduction) is amended to read as follows:
  `(2) CAPITAL GAINS AND LOSSES OF TAXPAYERS OTHER THAN CORPORATIONS- In
  the case of a taxpayer other than a corporation--
  `(A) the amount deductible on account of losses from sales or exchanges
  of capital assets shall not exceed the amount includible on account of
  gains from sales or exchanges of capital assets; and
  `(B) the deduction provided by section 1202 shall not be allowed.'
  (B) Subparagraph (B) of section 172(d)(4) is amended by inserting',
  (2)(B),' after `paragraph (1)'.
  (5)(A) Section 221 (as redesignated by section 224(a) of this Act) is
  amended to read as follows:
`SEC. 221. CROSS REFERENCES.
  `(1) For deductions for new capital gains in the case of a taxpayer other
  than a corporation, see section 1202.
  `(2) For deductions in respect of a decedent, see section 691.'
  (B) The table of sections for part VII of subchapter B of chapter 1 (as
  amended by section 224(c) of this Act) is amended by striking `reference'
  in the item relating to section 221 and inserting `references'.
  (6) Paragraph (4) of section 642(c) is amended to read as follows:
  `(4) ADJUSTMENTS- To the extent that the amount otherwise allowable as a
  deduction under this subsection consists of gain from the sale or exchange
  of capital assets held for more than 1 year, proper adjustment shall be
  made for any deduction allowable to the estate or trust under section 1202
  (relating to deduction for net capital gain). In the case of a trust,
  the deduction allowed by this subsection shall be subject to section 681
  (relating to unrelated business income.'
  (7) Paragraph (3) of section 643(a) is amended by adding at the end thereof
  the following new sentence: `The deduction under section 1202 (relating
  to deduction for net capital gain) shall not be taken into account.'
  (8) Subparagraph (C) of section 643(a)(6) is amended--
  (A) by inserting `(i)' before `there', and
  (B) by inserting `, and (ii) the deduction under section 1202 (relating
  to deduction for excess of capital gains over capital losses) shall not
  be taken into account' before the period at the end thereof.
  (9) Paragraph (4) of section 691(c) is amended by striking `1202, and 1211'
  and inserting `1201, 1202, and 1211'.
  (10) The second sentence of paragraph (2) of section 871(a) is amended
  by inserting `such gains and losses shall be determined without regard
  to section 1202 (relating to deduction for net capital gain) and' after
  `except that'.
  (11) Paragraph (1) of section 1402(i) is amended to read as follows:
  `(1) IN GENERAL- In determining the net earnings from self-employment of
  any options dealer or commodities dealer--
  `(A) notwithstanding subsection (a)(3)(A), there shall not be excluded any
  gain or loss (in the normal course of the taxpayer's activity of dealing in
  or trading section 1256 contracts) from section 1256 contracts or property
  related to such contracts, and
  `(B) the deduction provided by section 1202 shall not apply.'
  (12)(A) Subparagraph (A) of section 7518(g)(6) is amended by striking the
  last sentence.
  (B) Subparagraph (A) of section 607(h)(6) of the Merchant Marine Act of
  1936, is amended by striking the last sentence.
  (e) CLERICAL AMENDMENT- The table of sections for part I of subchapter P
  of chapter 1 is amended by adding at the end thereof the following new item:
`Sec. 1202. Reduction in capital gains tax for noncorporate taxpayers.'
  (f) EFFECTIVE DATES-
  (1) IN GENERAL--Except as provided in paragraph (2), the amendments made
  by this section shall apply to taxable years ending on or after February
  1, 1992.
  (2) TREATMENT OF COLLECTIBLES-
  (A) IN GENERAL- The amendment made by subsection (b) shall apply to taxable
  years beginning on or after February 1, 1993.
  (B) SPECIAL RULE FOR 1992 TAXABLE YEAR- In the case of any taxable year
  which includes February 1, 1992, for purposes of section 1202 of the
  Internal Revenue Code of 1986 and section 1(g) of such Code, any gain or
  loss from  the sale or exchange of a collectible (within the meaning of
  section 1222(12) of such Code) shall be treated as gain or loss from a
  sale or exchange occurring before such date.
SEC. 112. RECAPTURE UNDER SECTION 1250 OF TOTAL AMOUNT OF DEPRECIATION.
  (a) GENERAL RULE- Subsections (a) and (b) of section 1250 (relating to
  gain from disposition of certain depreciable realty) are amended to read
  as follows:
  `(a) GENERAL RULE- Except as otherwise provided in this section, if section
  1250 property is disposed of, the lesser of--
  `(1) the depreciation adjustments in respect to such property, or
  `(2) the excess of--
  `(A) the amount realized (or, in the case of a disposition other than a
  sale, exchange, or involuntary conversion, the fair market value of such
  property), over
  `(B) the adjusted basis of such property,
shall be treated as gain which is ordinary income. Such gain shall be
recognized notwithstanding any other provision of this subtitle.
  `(b) DEPRECIATION ADJUSTMENTS- For purposes of this section, the term
  `depreciation adjustments' means, in respect of any property, all adjustments
  attributable to periods after December 31, 1963, reflected in the adjusted
  basis of such property on account of deductions (whether in respect of
  the same or other property) allowed or allowable to the taxpayer or to any
  other person for exhaustion, wear and tear, obsolescence, or amortization
  (other than amortization under section 168 (as in effect before its repeal
  by the Tax Reform Act of 1976), 169, 185 (as in effect before its repeal
  by the Tax Reform Act of 1986), 188, 190, or 193). For purposes of the
  preceding sentence, if the taxpayer can establish by adequate records or
  other sufficient evidence that the amount allowed as a deduction for any
  period was less than the amount allowable, the amount taken into account
  for such period shall be the amount allowed.'
  (b) LIMITATION IN CASE OF INSTALLMENT SALES- Subsection (i) of section
  453 is amended--
  (1) by striking `1250' the first place it appears and inserting `1250
  (as in effect on the day before the date of enactment of the Enhanced
  Economic Recovery Act of 1992)', and
  (2) by striking `1250' the second place it appears and inserting `1250
  (as so in effect)'.
  (c) Conforming Amendments-
  (1) Subparagraph (E) of section 1250(d)(4) is amended--
  (A) by striking `additional depreciation' and inserting `amount of the
  depreciation adjustments', and
  (B) by striking `additional depreciation' in the subparagraph heading and
  inserting `depreciation adjustments'.
  (2) Subparagraph (B) of section 1250(d)(6) is amended to read as follows:
  `(B) DEPRECIATION ADJUSTMENTS- In respect of any property described in
  subparagraph (A), the amount of the depreciation adjustments attributable
  to periods before the distribution by the partnership shall be--
  `(i) the amount of gain to which subsection (a) would have applied if
  such property had been sold by the partnership immediately before the
  distribution at its fair market value at such time, reduced by
  `(ii) the amount of such gain to which section 751(b) applied.'
  (3) Subsection (d) of section 1250 is amended by striking paragraph (10).
  (4) Section 1250 is amended by striking subsections (e) and (f) and
  by redesignating subsections (g) and (h) as subsections (e) and (f),
  respectively.
  (5) Paragraph (5) of section 48(q) is amended to read as follows:
  `(5) RECAPTURE OF REDUCTION- For purposes of sections 1245 and 1250, any
  reduction under this subsection shall be treated as a deduction allowed
  for depreciation.'
  (6) Clause (i) of section 267(e)(5)(D) is amended by striking `section
  1250(a)(1)(B)' and inserting `section 1250(a)(1)(B) (as in effect on the day
  before the date of enactment of the Enhanced Economic Recovery Act of 1992)'.
  (7)(A) Subsection (a) of section 291 is amended by striking paragraph (1)
  and by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (1),
  (2), (3), and (4), respectively.
  (B) Subsection (c) of section 291 is amended to read as follows:
  `(c) SPECIAL RULE FOR POLLUTION CONTROL FACILITIES- Section 168 shall apply
  with respect to that portion of the basis of any property not taken into
  account under section 169 by reason of subsection (a)(4).'
  (C) Section 291 is amended by striking subsection (d) and redesignating
  subsection (e) as subsection (d).
  (D) Paragraph (2) of section 291(d) (as redesignated by subparagraph (C))
  is hereby repealed.
  (E) Subparagraph (A) of section 265(b)(3) is amended by striking
  `291(e)(1)(B)' and inserting `291(d)(1)(B)'.
  (F) Subsection (c) of section 1277 is amended by striking `291(e)(1)(B)(ii)'
  and inserting `291(d)(1)(B)(ii)'.
  (10) Subsection (d) of section 1017 is amended to read as follows:
  `(d) RECAPTURE OF DEDUCTIONS- For purposes of sections 1245 and 1250--
  `(1) any property the basis of which is reduced under this section and
  which is neither section 1245 property nor section 1250 property shall be
  treated as section 1245 property, and
  `(2) any reduction under this section shall be treated as a deduction
  allowed for depreciation.'
  (11) Paragraph (5) of section 7701(e) is amended by striking `(relating
  to low-income housing)' and inserting `(as in effect on the day before
  the date of enactment of the Enhanced Economic Recovery Act of 1992)'.
  (d) EFFECTIVE DATE- The amendments made by this section shall apply to
  dispositions made on or after February 1, 1992, in taxable years ending
  on or after such date.
Subtitle B--Provisions Relating to Passive Losses and Depreciation
SEC. 121. PASSIVE LOSS RELIEF FOR REAL ESTATE DEVELOPERS.
  (a) TREATMENT OF REAL ESTATE DEVELOPMENT ACTIVITIES- Subsection (c) of
  section 469 (relating to the limitation on passive activity losses and
  credits) is amended by adding at the end the following new paragraph:
  `(7) REAL ESTATE DEVELOPMENT ACTIVITY- The real estate development activity
  of a taxpayer shall be treated as a single trade or business activity that
  is not a rental activity.'
  (b) DEFINITION- Subsection (j) of section 469 is amended by adding at the
  end thereof the following new paragraph:
  `(13) Real estate development activity-
  `(A) IN GENERAL- The real estate development activity of a taxpayer
  shall include all activities of the taxpayer (determined without regard
  to subsection (c)(7) and this paragraph) in which the taxpayer actively
  participates and that consist of the performance of real estate development
  services and the rental of any qualified real property.
  `(B) REAL ESTATE DEVELOPMENT SERVICES- For purposes of this paragraph,
  real estate development services include only the construction, substantial
  renovation, and management of real property and the lease-up and sale of real
  property in which the taxpayer holds an interest of not less than 10 percent.
  `(C) QUALIFIED REAL PROPERTY- For purposes of this paragraph, the term
  `qualified real property' means any real property that was constructed or
  substantially renovated in an activity of the taxpayer at a time when the
  taxpayer materially participated in such activity.'
  (c) EFFECTIVE DATE- The amendments made by this section are effective for
  taxable years ending on or after December 31, 1992.
SEC. 122. SPECIAL ALLOWANCE FOR EQUIPMENT ACQUIRED IN 1992.
  (a) IN GENERAL- Section 168 is amended by adding at the end thereof the
  following new subsection:
  `(j) SPECIAL RULE FOR EQUIPMENT ACQUIRED IN 1992-
  `(1) ADDITIONAL ALLOWANCE- There shall be allowed, in addition to the
  reasonable allowance provided for by section 167(a), a depreciation
  deduction determined under paragraph (2) with respect to qualified equipment.
  `(2) Determination of additional allowance-
  `(A) IN GENERAL- The additional allowance shall equal 15 percent of the
  purchase price of the qualified equipment.
  `(B) PURCHASE PRICE- For purposes of paragraph (A), the purchase price
  of qualified equipment shall equal its cost to the taxpayer. In the case
  of self-constructed property that is qualified equipment under paragraph
  (4)(D), cost is determined on the date the property is placed in service.
  `(3) WHEN ADDITIONAL ALLOWANCE MAY BE CLAIMED- The additional allowance
  may be claimed in the tax year in which the qualified equipment is placed
  in service.
  `(4) Definitions and special rules-
  `(A) QUALIFIED EQUIPMENT- For purposes of this subsection, the term
  `qualified equipment' means property that--
  `(i) is new property,
  `(ii) is section 1245 property (within the meaning of section 1245(a)(3)),
  `(iii) is--
  `(I) acquired on or after February 1, 1992, but only if no binding contract
  for the acquisition was in effect before that date, or
  `(II) acquired pursuant to a binding contract entered into on or after
  February 1, 1992, and before January 1, 1993.
  `(iv) is placed in service before July 1, 1993, and
  `(v) is not defined as disqualified property in regulations prescribed by
  the Secretary.
  `(B) NEW PROPERTY- For purposes of this paragraph, property is new property
  if the original use of the property commences with the taxpayer and commences
  on or after February 1, 1992. Except as otherwise provided in regulations,
  repaired or reconstructed property is not new property, regardless of the
  extent of the repairs or reconstruction.
  `(C) ACQUIRE- For purposes of this paragraph, a taxpayer is considered to
  `acquire' property on the date the taxpayer obtains physical control or
  possession of the property, or on such other date as the Secretary may
  prescribe by regulations.
  `(D) SPECIAL RULE FOR SELF-CONSTRUCTED PROPERTY- If a taxpayer manufactures,
  constructs, or produces property for the taxpayer's own use, the property
  shall be treated as `qualified equipment' only if--
  `(i) the property meets the requirements of clauses (i), (ii), (iv), and
  (v) of paragraph (4)(A), and
  `(ii) the taxpayer begins manufacturing, constructing, or producing the
  property on or after February 1, 1992, and before January 1, 1993.
  `(E) COORDINATION WITH SECTION 280F- In the case of a passenger automobile
  (within the meaning of section 280F(d)(5)) that is qualified equipment
  under this subsection, the Commissioner shall adjust the limitations of
  section 280F(a)(1) to take into account the additional allowance under
  this subsection. Consistent with the overall purpose of section 280F, such
  adjustments shall be based on the threshhold cost at which the section
  280F(a)(1) limitations begin to apply.
  `(5) REGULATIONS- The Secretary shall prescribe such regulations as may
  be necessary to carry out the purposes of this subsection.'
  (b) BASIS ADJUSTMENTS- Subsection (c) of section 167 is amended by adding
  at the end thereof the following new sentence: `If a taxpayer claims the
  additional allowance provided by section 168(j) with respect to qualified
  equipment in a taxable year, the basis of the qualified equipment is
  reduced under section 1016 by the amount of the additional allowance
  before the depreciation deduction under paragraph (a) is determined for
  that taxable year.'
  (c) ALTERNATIVE MINIMUM TAX- Paragraph (1) of section 56(a) is amended--
  (1) by inserting `or (iii)' after `(ii)' in subparagraph (A)(i), and
  (2) by adding at the end thereof the following new clause:
  `(iii) The additional allowance provided by section 168(j) for certain
  equipment shall apply in determining the amount of alternative minimum
  taxable income. The basis adjustment required for the additional allowance
  provided by section 168(j) shall be made before the depreciation deduction
  allowable in determining alternative minimum taxable income under this
  paragraph is determined.'
  (d) CROSS REFERENCE- Subsection (e) of section 1016 is amended by adding
  at the end thereof the following new paragraph:
  `(3) For the order in which basis adjustments should be made for depreciation
  in the case of property with respect to which the special additional
  allowance is claimed under section 168(j), see section 167(c).'
  (e) EFFECTIVE DATE- The amendments made by this section are effective
  February 1, 1992.
SEC. 123. ELIMINATION OF ACE DEPRECIATION ADJUSTMENT.
  (a) GENERAL RULE- Clause (i) of section 56(g)(4)(A) is amended to read
  as follows:
  `(i) PROPERTY PLACED IN SERVICE AFTER 1989 AND PRIOR TO FEBRUARY 1, 1992-
  The depreciation deduction with respect to any property placed in service--
  `(I) in a taxable year beginning after 1989, and
  `(II) prior to February 1, 1992,
shall be determined under the alternative system of section 168(g).'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply for
  property placed in service on or after February 1, 1992.
Subtitle C--Provisions Relating to Real Estate Investments by Pension Funds
SEC. 131. REAL PROPERTY ACQUIRED BY A QUALIFIED ORGANIZATION.
  (a) INTERESTS IN MORTGAGES- The last sentence of subparagraph (B) of section
  514(c)(9) is hereby transferred to subparagraph (A) of section 514(c)(9)
  and added at the end thereof.
  (b) MODIFICATIONS OF EXCEPTIONS- Paragraph (9) of section 514(c) is amended
  by adding at the end thereof the following new subparagraph:
  `(G) SPECIAL RULES FOR PURPOSES OF THE EXCEPTIONS- For purposes of section
  514(c)(9)(B), except as otherwise provided by regulations, the following
  additional rules apply--
  `(i) IN GENERAL-
  `(I) For purposes of clauses (iii) and (iv) of subparagraph (B), a lease
  to a person described in clause (iii) or (iv) shall be disregarded if no
  more than 10 percent of the leasable floor space in a building is covered
  by the lease and if the lease is on commercially reasonable terms.
  `(II) Clause (v) of subparagraph (B) shall not apply to the extent the
  financing is commercially reasonable and is on substantially the same
  terms as loans involving unrelated persons; for this purpose, standards
  for determining a commercially reasonable interest rate shall be provided
  by the Secretary.
  `(ii) QUALIFYING SALES OUT OF FORECLOSURE BY FINANCIAL INSTITUTIONS- In the
  case of a qualifying sale out of foreclosure by a financial institution,
  clauses (i) and (ii) of subparagraph (B) shall not apply. For this purpose,
  a `qualifying sale out of foreclosure by a financial institution' exists
  where--
  `(I) a qualified organization acquires real property from a person (a
  `financial institution') described in sections 581 or 591(a) (including a
  person in receivership) and the financial institution acquired the property
  pursuant to a bid at foreclosure or by operation of an agreement or of
  process of law after a default on indebtedness which the property secured
  (`foreclosure'), and the financial institution treats any income realized
  from the sale or exchange of the property as ordinary income,
  `(II) the amount of the financing provided by the financial institution
  does not exceed the amount of the financial institution's outstanding
  indebtedness (determined without regard to accrued but unpaid interest)
  with respect to the property at the time of foreclosure,
  `(III) the financing provided by the financial institution is commercially
  reasonable and is on substantially the same terms as loans between unrelated
  persons for sales of foreclosed property (for this purpose, standards for
  determining a commercially reasonable interest rate shall be provided by
  the Secretary), and
  `(IV) the amount payable pursuant to the financing that is determined by
  reference to the revenue, income, or profits derived from the property
  (`participation feature') does not exceed 25 percent of the principal
  amount of the financing provided by the financial institution, and the
  participation feature is payable no later than the earlier of satisfaction
  of the financing or disposition of the property.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  debt-financed acquisitions of real estate made on or after February 1, 1992.
SEC. 132. SPECIAL RULES FOR INVESTMENTS IN PARTNERSHIPS.
  (a) MODIFICATION TO ANTI-ABUSE RULES- Paragraph (9) of section 514(c)
  (as amended by section 131 of this Act) is amended by adding at the end
  thereof the following new subparagraph:
  `(H) Partnerships not involving tax avoidance-
  `(i) DE MINIMIS RULE FOR CERTAIN LARGER PARTNERSHIPS- The provisions of
  subparagraph (B) shall not apply to an investment in a partnership having
  at least 250 partners if--
  `(I) investments in the partnership are organized into units that are
  marketed primarily to individuals expected to be taxed at the maximum rate
  prescribed for individuals under section 1,
  `(II) at least 50 percent of each class of interests is owned by such
  individuals,
  `(III) the partners that are qualified organizations owning interests in a
  class participate on substantially the same terms as other partners owning
  interests in that class, and
  `(IV) the principal purpose of partnership allocations is not tax avoidance.
  `(ii) EXCEPTION WHERE TAXABLE PERSONS OWN A SIGNIFICANT PERCENTAGE- In
  the case of any partnership, other than  a partnership to which clause
  (i) applies, in which persons who are expected (under the regulations to
  be prescribed by the Secretary), at the time the partnership is formed,
  to pay tax at the maximum rate prescribed in section 1 or 11 (whichever
  is applicable) throughout the term of the partnership own at least a 25
  percent interest, the provisions of subparagraph (B) shall not apply if
  the partnership satisfies the requirements of subparagraph (E).'
  (b) PUBLICLY TRADED PARTNERSHIPS; UNRELATED BUSINESS INCOME FROM
  PARTNERSHIPS- Subsection (c) of section 512 is amended by striking paragraph
  (2) (relating to publicly traded partnerships), by redesignating paragraph
  (3) as paragraph (2), and by striking `paragraph (1) or (2)' in paragraph
  (2) (as so redesignated) and inserting `paragraph (1)'.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  partnership interests acquired on or after February 1, 1992.
Subtitle D--Provisions Affecting Homebuyers
SEC. 141. CREDIT FOR FIRST-TIME HOMEBUYERS.
  (a) IN GENERAL- Subpart A of part IV of chapter 1 is amended by inserting
  after section 22 the following new section:
`SEC. 23. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST-TIME HOMEBUYER.
  `(a) ALLOWANCE OF CREDIT- If an individual who is a first-time homebuyer
  purchases a principal residence (within the meaning of section 1034),
  there shall be allowed to such individual as a credit against the tax
  imposed by this subtitle an amount equal to 10 percent of the purchase
  price of the principal residence.
  `(b) LIMITATIONS-
  `(1) MAXIMUM CREDIT- The credit allowed under subsection (a) shall not
  exceed $5,000.
  `(2) LIMITATION TO ONE RESIDENCE- The credit under this section shall be
  allowed with respect to only one residence of the taxpayer.
  `(3) MARRIED INDIVIDUALS FILING JOINTLY- In the case of a husband and wife
  who file a joint return under section 6013, the credit under this section
  is allowable only if both the husband and wife are first-time homebuyers,
  and the amount specified under paragraph (1) shall apply to the joint return.
  `(4) OTHER TAXPAYERS- In the case of individuals to whom paragraph (3) does
  not apply who together purchase the same new principal residence for use as
  their principal residence, the credit under this section is allowable only
  if each of the individuals is a first-time homebuyer, and the sum of the
  amount of credit allowed to such individuals shall not exceed the lesser
  of $5,000 or 10 percent of the total purchase price of the residence. The
  amount of any credit allowable under this section shall be apportioned
  among such individuals under regulations to be prescribed by the Secretary.
  `(5) APPLICATION WITH OTHER CREDITS-
  `(A) GENERAL RULE- The credit allowed by subsection (a) for any taxable
  year shall not exceed the amount of the tax imposed by this chapter for
  the taxable year, reduced by the sum of any other credits allowable under
  this chapter.
  `(B) CARRYFORWARD OF UNUSED CREDITS- Any credit that is not allowed for
  the taxable year solely by reason of subparagraph (A) shall be carried
  forward to the succeeding taxable year and allowed as a credit for that
  taxable year. However, the credit shall not be carried forward more than
  5 taxable years after the taxable year in which the residence is purchased.
  `(6) YEAR FOR WHICH CREDIT ALLOWED- Fifty percent of the credit allowed by
  subsection (a) shall be allowed in the taxable year in which the residence
  is purchased and the remaining fifty percent of the credit shall be allowed
  in the succeeding taxable year.
  `(c) DEFINITIONS AND SPECIAL RULES- For purposes of this section--
  `(1) PURCHASE PRICE- The term `purchase price' means the adjusted basis
  of the principal residence on the date of the acquisition thereof.
  `(2) FIRST-TIME HOMEBUYER-
  `(A) IN GENERAL- The term `first-time homebuyer' means any individual if
  such individual has not had a present ownership interest in any residence
  (including an interest in a housing cooperative) at any time within the
  36-month period ending on the date of acquisition of the residence on which
  the credit allowed under subsection (a) is to be claimed. An interest in a
  partnership, S corporation, or trust that owns an interest in a residence
  is not considered an interest in a residence  for purposes of this paragraph
  except as may be provided in regulations.
  `(B) CERTAIN INDIVIDUALS- Notwithstanding subparagraph (A), an individual
  is not a first-time homebuyer on the date of purchase of a residence if
  on that date the running of any period of time specified in section 1034
  is suspended under subsection (h) or (k) of section 1034 with respect to
  that individual.
  `(3) SPECIAL RULES FOR CERTAIN ACQUISITIONS- No credit is allowable under
  this section if--
  `(A) the residence is acquired from a person whose relationship to the
  person acquiring it would result in the disallowance of losses under
  section 267 or 707(b), or
  `(B) the basis of the residence in the hands of the person acquiring it
  is determined--
  `(i) in whole or in part by reference to the adjusted basis of such
  residence in the hands of the person from whom it is acquired, or
  `(ii) under section 1014(a) (relating to property acquired from a decedent).
  `(d) RECAPTURE FOR CERTAIN DISPOSITIONS-
  `(1) IN GENERAL- Except as provided in paragraphs (2) and (3), if the
  taxpayer disposes of property with respect to the purchase of which a
  credit was allowed under subsection (a) at any time within 36 months after
  the date the taxpayer acquired the property as his principal residence,
  then the tax imposed under this chapter for the taxable year in which the
  disposition occurs is increased by any amount equal to the amount allowed
  as a credit for the purchase of such property.
  `(2) ACQUISITION OF NEW RESIDENCE- If, in connection with a disposition
  described in paragraph (1) and within the applicable period prescribed
  in section 1034, the taxpayer purchases a new principal residence, then
  the provisions of paragraph (1) shall not apply and the tax imposed by
  this chapter for the taxable year in which the new principal residence
  is purchased is increased to the extent the amount of the credit that
  could be claimed under this section on the purchase of the new residence
  (determined without regard to subsection (e)) is less than the amount of
  credit claimed by the taxpayer under this section.
  `(3) DEATH OF OWNER; CASUALTY LOSS; INVOLUNTARY CONVERSION; ETC- The
  provisions of paragraph (1) do not apply to--
  `(A) a disposition of a residence made on account of the death of any
  individual having a legal or equitable interest therein occurring during
  the 36-month period to which reference is made under paragraph (1),
  `(B) a disposition of the old residence if it is substantially or completely
  destroyed by a casualty described in section 165(c)(3) or compulsorily or
  involuntarily converted (within the meaning of section 1033(a)), or
  `(C) a disposition pursuant to a settlement in a divorce or legal separation
  proceeding where the residence is sold or the other spouse retains the
  residence as a principal residence.
  `(e) PROPERTY TO WHICH SECTION APPLIES-
  `(1) IN GENERAL- The provisions of this section apply to a principal
  residence if--
  `(A) the taxpayer acquires the residence on or after February 1, 1992,
  and before January 1, 1993, or
  `(B) the taxpayer enters into, on or after February 1, 1992, and before
  January 1, 1993, a binding contract to acquire the residence, and acquires
  and occupies the residence before July 1, 1993.'
  (b) CLERICAL AMENDMENT- The table of sections for subpart A of part IV of
  chapter 1 is amended by inserting after section 22 the following new item:
`Sec. 23. Purchase of principal residence by first-time homebuyer.'
  (c) EFFECTIVE DATE- The amendments made by this section are effective on
  February 1, 1992.
SEC. 142. PENALTY-FREE WITHDRAWALS FOR FIRST HOME PURCHASE.
  (a) IN GENERAL- Paragraph (2) of section 72(t) (relating to exceptions to
  10-percent additional tax on early distributions from qualified retirement
  plans), as amended by section 213 of this Act, is further amended by adding
  at the end thereof the following new subparagraph:
  `(E) DISTRIBUTION FROM INDIVIDUAL RETIREMENT PLAN FOR FIRST HOME PURCHASE-
  A distribution to an individual from an individual retirement plan with
  respect to which the requirements of paragraph (7) are met.'
  (b) DEFINITIONS- Subsection (t) of section 72 is amended by adding at the
  end thereof the following new paragraph:
  `(6) REQUIREMENTS APPLICABLE TO FIRST HOME PURCHASE DISTRIBUTION- For
  purposes of paragraph (2)(E)--
  `(A) IN GENERAL- The requirements of this paragraph are met with respect
  to a distribution if--
  `(i) DOLLAR LIMIT- The amount of the distribution does not exceed the excess
  (if any) of--
  `(I) $10,000, over
  `(II) the sum of the distributions to which paragraph (2)(E) previously
  applied with respect to the individual who is the owner of the individual
  retirement plan.
  `(ii) USE OF DISTRIBUTION- The distribution--
  `(I) is made to or on behalf of a qualified first home purchaser, and
  `(II) is applied within 60 days of the date of distribution to the purchase
  or construction of a principal residence of such purchaser.
  `(iii) ELIGIBLE PLANS- The distribution is not made from an individual
  retirement plan which--
  `(I) is an inherited individual retirement plan (within the meaning of
  section 408(d)(3)(C)(ii)), or
  `(II) any part of the contributions to which were excludable from income
  under section 402(c), 402(a)(7), 403(a)(4), or 403(b)(8).
  `(B) QUALIFIED FIRST HOME PURCHASER- For purposes of this paragraph,
  the term `qualified first home purchaser' means the individual who is the
  owner of the individual retirement plan, but only if--
  `(i) such individual (and, if married, such individual's spouse) had no
  present ownership interest in a residence at any time within the 36-month
  period ending on the date for which the distribution is applied pursuant
  to subparagraph (A)(ii), and
  `(ii) subsection (h) or (k) of section 1034 did not suspend the running
  of any period of time specified in section 1034 with respect to such
  individual on the day before the date the distribution is applied pursuant
  to subparagraph (A)(ii).
  `(C) SPECIAL RULE WHERE DELAY IN ACQUISITION- If any distribution from an
  individual retirement plan fails to meet the requirements of subparagraph (A)
  solely by reason of a delay or cancellation of the purchase or construction
  of the residence, the amount of the distribution may be contributed to
  an individual retirement plan as provided in section 408(d)(3)(A)(i),
  except that--
  `(i) section 408(d)(3)(B) shall not be applied to such contribution, and
  `(ii) such amount shall not be taken into account--
  `(I) in determining whether section 408(d)(3)(A)(i) applies to any other
  amount, or
  `(II) for purposes of subclause (II) of subparagraph (A)(i).
  `(D) PRINCIPAL RESIDENCE- For purposes of this paragraph, the term
  `principal residence' has the meaning given such term by section 1034.
  `(E) OWNER- For purposes of this paragraph, the term `owner' means, with
  respect to any individual retirement plan, the individual with respect to
  whom such plan was established.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  distributions on or after February 1, 1992.
TITLE II--TAX RELIEF FOR FAMILIES ACT OF 1992
SEC. 201. SHORT TITLE, ETC.
  (a) SHORT TITLE- This title may be cited as the `Tax Relief for Families
  Act of 1992'.
  (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided,
  whenever in this title an amendment or repeal is expressed in terms of an
  amendment to, or repeal of, a section or other provision, the reference
  shall be considered to be made to a section or other provision of the
  Internal Revenue Code of 1986.
  (c) SECTION 15 SHALL NOT APPLY- Except as otherwise expressly provided,
  no amendment made by this title shall be treated as a change in rate of
  tax for purposes of section 15 of the Internal Revenue Code of 1986.
  (d) TABLE OF CONTENTS-
TABLE OF CONTENTS
TITLE II--TAX RELIEF FOR FAMILIES
Sec. 201. Short title, etc.
Subtitle A--Provisions Relating to Education and Savings
Sec. 211. Deduction for interest on certain educational loans.
Sec. 212. Flexible individual retirement accounts.
Sec. 213. Penalty-free withdrawals for certain educational and medical
expenses.
Subtitle B--Other Provisions
Sec. 221. Casualty loss on sale of home; basis adjustment.
Sec. 222. Family tax allowance.
Sec. 223. Extend health insurance deduction for self-employed.
Sec. 224. Adoption expenses.
Sec. 225. Public transit fringe benefit exclusion.
Subtitle A--Provisions Relating to Education and Savings
SEC. 211. DEDUCTION FOR INTEREST ON CERTAIN EDUCATIONAL LOANS.
  (a) IN GENERAL- Paragraph (2) of section 163(h) is amended by striking
  `and' at the end of subparagraph (D), by redesignating subparagraph (E)
  as subparagraph (F), and by inserting after subparagraph (D) the following
  new subparagraph:
  `(E) any qualified educational interest (within the meaning of paragraph
  (5)), and'.
  (b) QUALIFIED EDUCATIONAL INTEREST DEFINED- Subsection (h) of section
  163 is amended by redesignating paragraph (5) as paragraph (6), and by
  inserting after paragraph (4) the following new paragraph:
  `(5) For purposes of this subsection--
  `(A) QUALIFIED EDUCATIONAL INTEREST- The term `qualified educational
  interest' means interest which is paid during the taxable year on qualified
  educational indebtedness.
  `(B) QUALIFIED EDUCATIONAL INDEBTEDNESS- The term `qualified educational
  indebtedness' means any loan--
  `(i) which is provided--
  `(I) pursuant to a Federal, State, or State-based guarantee program or
  insurance program,
  `(II) by an organization described in section 501(c)(3) and exempt from
  tax under section 501(a),
  `(III) by a financial institution under a supplemental education program
  which requires that payments be made to the educational institution referred
  to in subparagraph (C)(i), or
  `(IV) by an institution that is an eligible educational institution
  (defined in subparagraph (E)) on the date the loan is provided, and
  `(ii) which is incurred to pay qualified educational expenses which are
  paid or incurred at a time that is reasonably contemporaneous (as defined
  in regulations prescribed by the Secretary) with the time the loan proceeds
  are received.
  `(C) Qualified educational expenses-
  `(i) IN GENERAL- The term `qualified educational expenses' means qualified
  tuition and related expenses of the taxpayer, the taxpayer's spouse or
  child (as defined in section 151(c)(3)) for attendance at an institution
  that is an eligible educational institution (as defined in subparagraph
  (E)) at the time of attendance, provided that the person in attendance at
  such institution is a qualified individual.
  `(ii) QUALIFIED TUITION AND RELATED EXPENSES- The term `qualified tuition
  and related expenses' has the meaning given such term by section 117(b),
  except that such term shall include any reasonable living expenses of
  the qualified individual while living away from home and attending the
  educational institution referred to in clause (i).
  `(iii) EXCLUSION OF REIMBURSED EXPENSES- If the taxpayer, or the taxpayer's
  spouse or child, is reimbursed for tuition or a related expense by someone
  other than the taxpayer or the taxpayer's spouse or child, the tuition
  or related expense shall not be `qualified tuition and related expenses'
  to the extent of the reimbursement.
  `(iv) COORDINATION WITH SAVINGS BOND PROVISIONS- The amount of qualified
  tuition and related expenses for any taxable year shall be reduced by any
  amount excludable from gross income for that year under section 135.
  `(D) QUALIFIED INDIVIDUAL- An individual is a `qualified individual'
  if the individual--
  `(i) is either--
  `(I) a high school graduate, or
  `(II) over 18 years of age, and
  `(ii) is enrolled in a course of study--
  `(I) leading to a degree or certificate, or
  `(II) related to existing or future full-time employment.
  `(E) ELIGIBLE EDUCATIONAL INSTITUTION- An institution is an `eligible
  educational institution' if it is described in section 481(a) of the
  Higher Education Act of 1965 and is eligible to participate in programs
  under title IV of such Act.
  `(F) REGULATIONS- The Secretary shall prescribe such regulations as
  may be necessary to carry out the purposes of this paragraph, including
  regulations--
  `(i) precluding treatment of artificial loan arrangements as qualified
  educational indebtedness,
  `(ii) specifying reasonable repayment terms for qualified educational
  indebtedness, and
  `(iii) providing rules for the application of this paragraph to loans
  incurred before February 1, 1992.'
  (c) COORDINATION WITH QUALIFIED  RESIDENCE INTEREST PROVISION-
  (1) LIMITATION- Clause (ii) of section 163(h)(3)(C) is amended--
  (i) by striking `(ii) LIMITATION- The' and inserting the following:
  `(ii) LIMITATIONS- '
  `(I) The',
  (ii) by moving the text of such clause 2 ems to the right, and
  (iii) by adding at the end thereof the following new subclause:
  `(II) Except as provided in clause (iii), the aggregate amount treated as
  home equity indebtedness for any period (after the application of subclause
  (I)) shall be reduced by any amount treated by the taxpayer as qualified
  educational indebtedness under subsection (h)(5).'
  (2) ELECTION- Subparagraph (C) of section 163(h)(3) is amended by adding
  at the end thereof the following new clause:
  `(iii) If the taxpayer elects not to treat otherwise qualified educational
  indebtedness as qualified educational indebtedness, the reduction required
  by subparagraph (C)(ii)(II) shall not apply for that taxable year.'
  (d) EXCLUSION FROM DEFINITION OF INVESTMENT INTEREST- Subparagraph (B) of
  section 163(d)(3) (defining investment interest) is amended by striking `or'
  at the end of clause (i), striking the period at the end of clause (ii) and
  inserting ', or', and inserting after clause (ii) the following new clause:
  `(iii) any qualified educational interest (as defined in subsection (h)(5).'
  (e) INFORMATION REPORTING-
  (1) REPORTING REQUIREMENT- Subpart B of part III of subchapter A of chapter
  61 is amended by adding at the end thereof the following new section:
`SEC. 60500. RETURNS RELATING TO EDUCATIONAL INTEREST.
  `(a) EDUCATIONAL INTEREST OF $10 OR MORE- Any person who receives from
  any individual interest aggregating $10 or more for any calendar year
  on an educational loan described in section 163(h)(5)(B) shall make the
  return described in subsection (b) with respect to each individual from
  whom such interest was received at such time as the Secretary may by
  regulations prescribe.
  `(b) FORM AND MANNER OF RETURNS- A return is described in this subsection
  if such return--
  `(1) is in such form as the Secretary may prescribe,
  `(2) contains--
  `(A) the name and address of the individual from whom the interest described
  in subsection (a) was received,
  `(B) the amount of such interest received for the calendar year, and
  `(C) such other information as the Secretary may prescribe.
  `(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RESPECT TO WHOM
  INFORMATION IS REQUIRED- Every person required to make a return under
  subsection (a) shall furnish to each individual whose name is required to
  be set forth in such return a written statement showing--
  `(1) the name and address of the person required to make such return, and
  `(2) the aggregate amount of interest described in subsection (a) received
  by the person required to make such return from the individual to whom
  the statement is required to be furnished.
The written statement required under the preceding sentence shall be furnished
on or before January 31 of the year following the calendar year for which
the return under subsection (a) was required to be made.'
  (2) CLERICAL AMENDMENT- The table of sections for such subpart B is amended
  by adding at the end thereof the following:
Sec. 60500. Returns regarding educational interest.'
  (f) EFFECTIVE DATE- The amendments made by this section shall apply to
  interest paid on or after July 1, 1992.
SEC. 212. FLEXIBLE INDIVIDUAL RETIREMENT ACCOUNTS.
  (a) IN GENERAL- Subchapter B of chapter 1 (relating to computation of taxable
  income) is amended by adding at the end thereof the following new part:
`PART XII--FLEXIBLE INDIVIDUAL RETIREMENT ACCOUNTS
`Sec. 292. Special rules for flexible individual retirement accounts.
`SEC. 292. SPECIAL RULES FOR FLEXIBLE INDIVIDUAL RETIREMENT ACCOUNTS.
  `(a) GENERAL RULE- For purposes of this title, in the case of a flexible
  individual retirement account--
  `(1) the taxation of such account shall be determined under subsection
  (d), and
  `(2) the taxation of any distributions from such account shall be determined
  under subsection (e).
  `(b) FLEXIBLE INDIVIDUAL RETIREMENT ACCOUNT DEFINED- For purposes of this
  section, the term `flexible individual retirement account' means a trust
  created or organized in the United States for the exclusive benefit of
  an individual and the individual's beneficiaries, but only if the written
  governing instrument creating the trust meets the following requirements:
  `(1) No contribution will be accepted unless it is in cash, and contributions
  will not be accepted for the taxable year on behalf of any individual in
  excess of $2,500.
  `(2) The trustee is a bank (as defined in section 408(n)) or such other
  person who demonstrates to the satisfaction of the Secretary that the manner
  in which such other person will administer the trust will be consistent
  with the requirements of this section.
  `(3) No part of the trust assets will be invested in insurance contracts
  or collectibles (within the meaning of section 408(m)).
  `(4) The interest of the individual in the balance in such individual's
  account is nonforfeitable.
  `(5) The assets of the trust will not be commingled with other property
  except in a common trust fund or common investment fund.
  `(c) Contributions to Flexible Individual Retirement Accounts-
  `(1) FORM OF CONTRIBUTION- No amount may be contributed to a flexible
  individual retirement account unless such amount is paid in cash by or on
  behalf of the individual for whom such account is maintained.
  `(2) Contribution limits-
  `(A) IN GENERAL- Except as provided in this subsection, the aggregate
  amount of contributions for any taxable year to all flexible individual
  retirement accounts maintained for the benefit of an individual shall not
  exceed the lesser of--
  `(i) $2,500, or
  `(ii) an amount equal to the compensation includible in the individual's
  gross income for such taxable year.
  `(B) MARRIED INDIVIDUALS FILING JOINT RETURNS- For purposes of subparagraph
  (A)(ii), in the case of married individuals filing a joint return under
  section 6013 for the taxable year, the compensation of each of such
  individuals for such taxable year shall be treated as equal to one-half
  of the aggregate compensation of both individuals.
  `(C) COMPENSATION- For purposes of this paragraph, the term `compensation'
  has the meaning given such term by section 219(f)(1).
  `(3) Limitation based on adjusted gross income-
  `(A) IN GENERAL- No contribution may be made during a taxable year to a
  flexible individual retirement account maintained for the benefit of the
  taxpayer if the taxpayer's adjusted gross income exceeds the applicable
  dollar amount.
  `(B) APPLICABLE DOLLAR AMOUNT- For purposes of this paragraph, the term
  `applicable dollar amount' means--
  `(i) in the case of a taxpayer filing a joint return, $120,000,
  `(ii) in the case of a taxpayer who is a surviving spouse (as defined in
  section 2(a)) or who is a head of a household (as defined in section 2(b)),
  $100,000, or
  `(iii) in the case of any other taxpayer, $60,000.
  `(C) SPECIAL RULE FOR MARRIED INDIVIDUALS FILING SEPARATE RETURNS- In the
  case of a married individual filing a separate return whose adjusted gross
  income does not exceed the applicable dollar limit, such individual's
  adjusted gross income shall be treated as exceeding such limit if the
  aggregate adjusted gross income of such individual and the individual's
  spouse exceeds $120,000.
  `(D) MARITAL STATUS- Subparagraph (C) shall not apply to any individual
  who is not treated as married under the rules of section 219(g)(4).
  `(E) ADJUSTED GROSS INCOME- For purposes of this paragraph, the term
  `adjusted gross income' has the meaning given such term by section
  219(g)(3)(A).
  `(4) NO CONTRIBUTION IN CASE OF DEPENDENTS- No contribution may be made
  during a taxable year to a flexible individual retirement account maintained
  for the benefit of an individual with respect to whom a deduction under
  section 151(c) is allowable to another taxpayer for a taxable year beginning
  in the calendar year in which the individual's taxable year begins.
  `(5) Transfers permitted-
  `(A) IN GENERAL- In the case of a transfer by a trustee of a flexible
  individual retirement account maintained for the benefit of an individual
  to a trustee of another flexible individual retirement account maintained
  for the benefit of such individual, such transfer shall not be treated as
  a contribution for purposes of this section.
  `(B) INFORMATION PROVIDED- A trustee making a transfer described in
  subparagraph (A) shall provide to the other trustee such information as
  the Secretary requires to carry out the purposes of this section.
  `(d) Tax Treatment of Accounts-
  `(1) IN GENERAL- Except as provided in paragraph (2), a flexible individual
  retirement account is exempt from taxation under this subtitle.
  `(2) UNRELATED BUSINESS INCOME- A flexible individual retirement account
  shall be subject to the tax imposed by section 511 (relating to imposition
  of tax on unrelated business income of charitable, etc. organizations).
  `(3) POOLING ARRANGEMENTS PERMITTED- A common trust fund or common investment
  fund consisting of flexible individual retirement accounts assets which is
  exempt from taxation under this subtitle shall not be treated as failing
  to be exempt from taxation under this subtitle solely by reason of the
  participation or inclusion in such fund of assets of--
  `(A) a trust exempt from taxation under section 501(a) which is part of
  a plan described in section 401(a), or
  `(B) an individual retirement plan exempt from taxation under section
  408(e)(1).
  `(4) Cessation of treatment as account-
  `(A) IN GENERAL- If during any taxable year of an individual for whom a
  flexible individual retirement account is maintained the requirements of
  subsection (b) are not met with respect to such account, the account shall
  cease to be a flexible individual retirement account as of the first day
  of such taxable year.
  `(B) ACCOUNT TREATED AS DISTRIBUTING ALL ITS ASSETS- In any case in which
  any account ceases to be a flexible individual retirement account by reason
  of subparagraph (A) on the first day of any taxable year, subsection (e)
  shall apply as if there were a distribution immediately before the account
  ceased to be a flexible individual retirement account in an amount equal
  to the fair market value (on such first day) of all assets in the account
  (on such first day).
  `(e) Tax Treatment of Distributions-
  `(1) IN GENERAL- Except as provided in this subsection, any amount paid
  or distributed out of a flexible individual retirement account shall not
  be included in the gross income of the distributee.
  `(2) Exception for earnings on contributions held less than 7 years-
  `(A) IN GENERAL- Any amount distributed out of a flexible individual
  retirement account which consists of earnings allocable to contributions
  made to the account during the 7-year period ending on the day before such
  distribution shall be included in the gross income of the distributee for
  the taxable year in which the distribution occurs.
  `(B) 10-percent additional tax on earnings on contributions held less than
  3 years-
  `(i) IN GENERAL- If any amount described in subparagraph (A) consists of
  earnings allocable to contributions made during the 3-year period ending
  on the day before the distribution, the tax imposed by this chapter on the
  distributee for the taxable year in which such distribution occurs shall
  be increased by an amount equal to 10 percent of such earnings.
  `(ii) EXCEPTION FOR DISTRIBUTIONS ON DEATH- Clause (i) shall not apply
  to distributions made to a beneficiary (or the estate of the individual)
  on the death of the individual.
  `(C) Ordering rule-
  `(i) FIRST-IN, FIRST-OUT RULE- Distributions from a flexible individual
  retirement account shall be treated as having been made--
  `(I) first from the earliest contribution (and earnings allocable thereto)
  remaining in the account at the time of the distribution, and
  `(II) then from other contributions (and earnings allocable thereto)
  in the order in which made.
  `(ii) ALLOCATIONS BETWEEN CONTRIBUTIONS AND EARNINGS- Any portion of a
  distribution allocated to a contribution (and earnings allocable thereto)
  shall be treated as allocated first to the earnings and then to the
  contribution.
  `(iii) ALLOCATION OF EARNINGS- Earnings shall be allocated to a contribution
  in such manner as the Secretary may by regulations prescribe.
  `(iv) CONTRIBUTIONS IN THE SAME YEAR- Under regulations, all contributions
  made during the same taxable year may be treated as 1 contribution for
  purposes of this subparagraph.
  `(3) OTHER AMOUNTS TREATED AS DISTRIBUTIONS- For purposes of this
  subsection--
  `(A) IN GENERAL- In the case of any distributable event--
  `(i) there shall be treated as distributed during the taxable year in
  which the event occurs to the individual for whom the flexible individual
  retirement account is maintained an amount equal to the distributable
  amount, and
  `(ii) any earnings after the date of the distributable event which (as
  determined under regulations) are allocable to the distributable amount
  shall be treated as distributed to such individual in the taxable year in
  which earned.
  `(B) Tax treatment of amounts-
  `(i) IN GENERAL- Except as provided in this subparagraph, paragraph (2)
  shall apply to any amount treated as distributed under subparagraph (A).
  `(ii) SUBSEQUENT EARNINGS- Notwithstanding paragraph (2), any earnings
  treated as distributed under subparagraph (A)(ii)--
  `(I) shall be included in gross income in the taxable year in which treated
  as distributed, and
  `(II) shall be subject to the additional tax under paragraph (2)(B) for such
  taxable year, except that paragraph (2)(B) shall be applied by substituting
  `20 percent' for `10 percent'.
  `(iii) EXCEPTION FOR EXCESS CONTRIBUTIONS- In the case of a distributable
  event described in subparagraph (C)(ii) (relating to excess contributions)
  which occurs by reason of a contribution not permitted under subsection
  (c)(4), any amount required to be included in gross income (or any additional
  tax imposed) by reason of this paragraph shall be included in the gross
  income of (or imposed on) the taxpayer entitled  to the deduction under
  section 151(c) for the individual for whom the account is maintained.
  `(iv) ACTUAL DISTRIBUTIONS- If any portion of any distributable amount
  and any earnings allocable to such amount are actually distributed from
  the account during any taxable year, this paragraph shall cease to apply
  to any earnings attributable to such portion for periods following such
  distribution.
  `(C) DISTRIBUTABLE EVENT- For purposes of this paragraph, the following
  are distributable events:
  `(i) The use of a flexible individual retirement account (or any portion
  thereof) as security for a loan.
  `(ii) Except as provided in paragraph (4), a contribution to a flexible
  individual retirement account in excess of the amount allowed under
  subsection (c).
  `(iii) Any other event to the extent, and subject to such terms and
  conditions, as the Secretary may prescribe by regulations in order to
  accomplish the purposes of, or to prevent abuse of, this section.
  `(D) DISTRIBUTABLE AMOUNT- For purposes of this paragraph, the term
  `distributable amount' means the following:
  `(i) In the case of a distributable event described in subparagraph (C)(i),
  the amount in the account used as security for a loan.
  `(ii) In the case of a distributable event described in subparagraph
  (C)(ii), the amount of the excess contribution.
  `(iii) In any other case, the amount determined under regulations.
  (4) Excess contributions returned before due date of return-
  `(A) IN GENERAL- Paragraph (2) shall not apply to the distribution of any
  contribution paid during a taxable year to a flexible individual retirement
  account to the extent that such contribution exceeds the amount allowable
  under subsection (c) by reason of paragraph (3) or (4) thereof if--
  `(i)  at the time of making such contribution, the taxpayer in good faith
  believed that--
  `(I) in any case to which subsection (c)(3) applies, the taxpayer's adjusted
  gross income would not exceed the applicable dollar limit under subsection
  (c)(3), or
  `(II) in any case to which subsection (c)(4) applies, the individual for
  whom the account is maintained would not be the dependent of any individual
  for purposes of section 151(c),
  `(ii) such distribution is received on or before the last day of the
  taxable year following such taxable year, and
  `(iii) such distribution is accompanied by the amount of earnings actually
  attributable to such excess contribution.
  `(B) LIMITATION ON AMOUNT- Subparagraph (A) shall apply only to that portion
  of the amount of the distributions which does not exceed the limitation
  under subsection (c)(2) (and earnings actually attributable to such portion).
  `(C) EARNINGS- Any earnings described in subparagraph (A)(iii) shall be
  included in the gross income of the individual for whom the account is
  established (or in the case described in subclause (II) of subparagraph
  (A)(i), the taxpayer entitled to the deduction under section 151(c))
  for the taxable year in which it is received.
  `(5) Transfers-
  `(A) IN GENERAL- Paragraph (2) shall not apply to any distribution which
  is a transfer to which subsection (c)(5) applies.
  `(B) CONTRIBUTION PERIOD FOR AMOUNTS TRANSFERRED- For purposes of paragraph
  (2), the flexible individual retirement account to which any amounts are
  transferred in a transfer to which subsection (c)(5) applies shall be
  treated as having held such amounts during any period such amounts were
  held (or treated as held under this subparagraph) by the account from
  which transferred.
`(6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE- Rules similar to the rules of
section 408(d)(6) shall apply to a flexible individual retirement account.
  `(f) Other Rules-
  `(1) DISALLOWANCE OF LOSSES- No loss shall be allowed in connection with
  a contribution to, or distribution from, a flexible individual retirement
  account.
  `(2) DISTRIBUTION INCLUDES PAYMENT- For purposes of this section, the term
  `distribution' includes any payment, and the term `distributee' includes
  any payee.
  `(3) COMMUNITY PROPERTY LAWS- This section shall be applied without regard
  to any community property laws.
  `(4) CUSTODIAL ACCOUNTS- For purposes of this section, a custodial account
  shall be treated as a trust if--
  `(A) The assets of such account are held by a bank (as defined in section
  408(n)) or such other person who demonstrates, to the satisfaction of the
  Secretary, that the manner in which such other person will administer the
  account will be consistent with the requirements of this section, and
  `(B) the custodial account would, except for the fact that it is not a trust,
  constitute a flexible individual retirement account described in subsection
  (b).
For purposes of this title, in the case of a custodial account treated as
a trust by reason of the preceding sentence, the custodian of such account
shall be treated as the trustee thereof.
  `(g) REPORTS- The trustee of a flexible individual retirement account
  shall make such reports regarding such account to the Secretary and to
  the individual for whose benefit the account is maintained with respect
  to contributions (and the years to which such contributions relate),
  distributions and such other matters as the Secretary may require under
  regulations. Such reports shall be filed with the Secretary and furnish
  to such individuals at such time and in such manner as the Secretary
  may prescribe.
  `(h) Certain Transfers From Individual Retirement Plans-
  `(1) QUALIFIED TRANSFERS NOT TREATED AS CONTRIBUTIONS- A qualified transfer
  from an individual retirement plan to a flexible individual retirement
  account shall not be treated as a contribution for purposes of this section.
  `(2) Tax treatment of amounts transferred-
  `(A) IN GENERAL- Notwithstanding any other provision of law, in the case
  of a qualified transfer--
  `(i) there shall be included in gross income any amount which, but for
  the qualified transfer, would be includible in gross income, but
  `(ii) section 72(t) shall not apply to such amount.
  `(B) TIME FOR INCLUSION- Any amount includible in gross income under
  subparagraph (A) with respect to the amount transferred shall be includible
  ratably over the 4-taxable year period beginning in the taxable year in which
  the amount was paid or distributed out of the individual retirement plan.
  `(3) QUALIFIED TRANSFER- For purposes of this section, the term `qualified
  transfer' means a transfer to a flexible individual retirement account that--
  `(A) is made from an individual retirement plan out of amounts that are
  not attributable to contributions that were excludable from income under
  section 402(a)(5), 402(a)(7), 403(a)(4), or 403(b)(8),
  `(B) is made to a flexible individual retirement account contributions to
  which are not prohibited under paragraph (3) or (4) of subsection (c),
  `(C) meets the requirements of section 408(d)(3), and
  `(D) is made between February 1, 1992 and December 31, 1992.
  `(i) Cross Reference-
`For taxes on prohibited transactions involving a flexible individual
retirement account, see section 4975.'
  (b) TAX ON PROHIBITED TRANSACTIONS- Section 4975 (relating to prohibited
  transactions) is amended--
  (1) by inserting `, or a flexible individual retirement account described in
  section 292(b)' after `described in section 408(b)' in subsection (e)(1), and
  (2) by adding at the end of subsection (h) the following new sentence:
  `This subsection shall not apply to any tax imposed with respect to a
  flexible individual retirement account (as defined in section 292(b)).'
  (c) FAILURE TO PROVIDE REPORTS ON FLEXIBLE INDIVIDUAL RETIREMENT ACCOUNTS-
  Section 6693 (relating to a failure to provide reports on individual
  retirement accounts or annuities) is amended--
  (1) by inserting `or on flexible individual retirement accounts' after
  `annuities' in the heading of such section, and
  (2) by adding at the end of subsection (a) the following new sentence: `The
  person required by section 292(g) to file a report regarding a flexible
  individual retirement account at the time and in the manner required by
  such section shall pay a penalty of $50 for each failure unless it is
  shown that such failure is due to reasonable cause.'
  (d) COMMON FUNDS- Section 408(e)(6) is amended to read as follows:
  `(6) COMMINGLING INDIVIDUAL RETIREMENT ACCOUNT AMOUNTS IN CERTAIN COMMON
  TRUST FUNDS AND COMMON INVESTMENT FUNDS- Any common trust fund or common
  investment fund consisting of individual retirement account assets which
  is exempt from taxation under this subtitle does not cease to be exempt
  on account of the participation or inclusion of assets of--
  `(A) a trust exempt from taxation under section 501(a) which is part of
  a plan described in section 401(a), or
  `(B) a flexible individual retirement account exempt from taxation under
  section 292.'
  (e) Clerical Amendments-
  (1) The table of parts for subchapter B of chapter 1 is amended by adding
  at the end thereof the following new item:
`Part XII. Flexible individual retirement accounts.'
  (2) The table of sections for subchapter B of chapter 68 is amended by
  inserting `or on flexible individual retirement accounts' after `annuities'
  in the item relating to section 6693.
  (f) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1991.
SEC. 213. PENALTY-FREE WITHDRAWALS FOR CERTAIN EDUCATIONAL AND MEDICAL
EXPENSES.
  (a) IN GENERAL- Paragraph (2) of section 72(t) (relating to exceptions
  to 10-percent additional tax on early distributions from qualified
  retirement plans) is amended by adding at the end thereof the following
  new subparagraph:
  `(D) DISTRIBUTIONS FROM CERTAIN PLANS FOR EDUCATIONAL EXPENSES- Distributions
  to an individual from an individual retirement plan to the extent such
  distributions do not exceed the qualified higher education expenses (as
  defined in paragraph (6)) of the taxpayer for the taxable year.'
  (b) FINANCIALLY DEVASTATING MEDICAL EXPENSES-
  (1) IN GENERAL- Section 72(t)(3)(A) is amended by striking `(B),'.
  (2) APPLICATION OF MEDICAL RULES TO CERTAIN RELATIVES- Section 72(t)(2)(B)
  is amended by adding at the end thereof the following new sentence: `For
  purposes of this subparagraph, a child, grandchild, or lineal ascendant of
  the taxpayer shall be treated as a dependent of the taxpayer in applying
  section 213.'
  (c) DEFINITIONS- Section 72(t) is amended by adding at the end thereof
  the following new paragraph:
  `(6) QUALIFIED HIGHER EDUCATION EXPENSES- For purposes of paragraph (2)(D)--
  `(A) IN GENERAL- The term `qualified higher education expenses' means
  tuition, fees, books, supplies, and equipment required for the enrollment
  or attendance of--
  `(i) the taxpayer,
  `(ii) the taxpayer's spouse, or
  `(iii) the taxpayer's child (as defined in section 151(c)(3)),
at an eligible educational institution (as defined in section 163(h)(5)(E)).
  `(B) COORDINATION WITH SAVINGS BOND PROVISIONS- The amount of qualified
  higher education expenses for any taxable year shall be reduced by any
  amount excludable from gross income under section 135.'
  (d) EFFECTIVE DATE- The amendments made by this section shall apply to
  payments and distributions on or after February 1, 1992.
Subtitle B--Other Provisions
SEC. 221. CASUALTY LOSS ON SALE OF HOME; BASIS ADJUSTMENT.
  (a) CASUALTY LOSS- Paragraph (3) of section 165(c) is amended by striking
  the period and inserting `, or from the sale of a principal residence
  (within the meaning of section 1034).'
  (b) $100 LIMITATION TO APPLY- Paragraph (1) of section 165(h) is amended
  by inserting `, or from each sale of a principal residence,' after `theft,'.
  (c) BASIS ADJUSTMENT- Section 1016 is amended by redesignating subsection
  (e) as subsection (f) and by inserting after subsection (d) the following
  new subsection:
  `(e) INCREASE IN BASIS OF NEW PRINCIPAL RESIDENCE-
  `(1) IN GENERAL- If--
  `(A) the taxpayer sells property used by the taxpayer as his principal
  residence (within the meaning of section 1034) (`the old principal
  residence') and realizes a loss on the sale, and
  `(B) the taxpayer purchases a new principal residence (within the meaning
  of section 1034) within the time period described in section 1034(a) (and
  taking into account any suspension of such period under section 1034(h)
  or (k)),
the basis of the new principal residence shall be increased by the amount
of the loss realized on the sale of the old principal residence, less the
amount treated under regulations prescribed by the Secretary as a casualty
loss arising from the sale of the old principal residence.
  `(2) REGULATIONS- The Secretary shall prescribe regulations for determining
  the amount that shall be treated as a casualty loss arising from the sale
  of the old principal residence.'
  (d) CROSS REFERENCES-
  (1) Subsection (m) of section 165 is amended by adding at the end thereof
  the following new paragraph:
  `(6) For adjustments to basis of a new principal residence where a loss is
  claimed under this section on sale of a principal residence, see section
  1016(e) and section 1034.'
  (2) Subsection (l) of section 1034 is amended by adding at the end thereof
  the following new sentence: `For adjustments to basis of the new principal
  residence on sale of the old principal residence at a loss, see section
  1016(e).'
  (3) The heading of paragraph (1) of section 1034 is amended by striking
  `REFERENCE' and inserting `REFERENCES'.
  (e) EFFECTIVE DATE-
  (1) CASUALTY LOSS- The amendments made by subsections (a) and (b) apply
  to sales of principal residences on or after February 1, 1992.
  (2) BASIS ADJUSTMENT- The amendments made by subsections (c) and (d)
  apply to sales of principal residences on or after January 1, 1991.
SEC. 222. FAMILY TAX ALLOWANCE.
  (a) GENERAL RULE- Paragraph (1) of section 151(d) (defining exemption
  amount) is amended to read as follows:
  `(1) IN GENERAL- Except as otherwise provided in this subsection, the term
  `exemption amount' means--
  `(A) $2,000, or
  `(B) in the case of an exemption under subsection (c) for a child who has
  not attained age 19 before the close of the calendar year in which the
  taxable year begins--
  `(i) $2,425 for taxable years beginning in 1992, and
  `(ii) $2,800 for taxable years beginning in 1993 and subsequent years.'
  (b) CONFORMING AMENDMENTS-
  (1) Subparagraph (A) of section 151(d)(3) of such Code is amended by striking
  `the exemption amount' and inserting `each dollar amount in effect under
  paragraph (1) (after any adjustment under paragraph (4))'.
  (2) Subparagraph (A) of section 151(d)(4) of such Code is amended--
  (A) by striking `the dollar amount contained in' and inserting `the dollar
  amounts contained in subparagraph (A) and subparagraph (B)(ii) of', and
  (B) by adding at the end thereof the following new sentence: `In the case
  of the $2,800 amount contained in subparagraph (B)(ii), the preceding
  sentence shall be applied by substituting `1992' for `1989' the first
  place it appears, and by substituting `1991' for `1988'.'
  (c) EFFECTIVE DATE- The amendments made by this section shall be effective
  October 1, 1992.
SEC. 223. EXTEND HEALTH INSURANCE DEDUCTION FOR SELF-EMPLOYED.
  (a) EXTENSION- Paragraph (6) of section 162(l) (relating to special rules
  for health insurance costs of self-employed individuals) is amended by
  striking `June 30, 1992' and inserting `December 31, 1993'.
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  taxable years beginning after December 31, 1991.
SEC. 224. ADOPTION EXPENSES.
  (a) IN GENERAL- Part VII of subchapter B of chapter 1 is amended by
  redesignating section 220 as section 221 and by inserting after section
  219 the following new section:
`SEC. 220. SPECIAL NEEDS ADOPTION EXPENSES DEDUCTION.
  `(a) ALLOWANCE OF DEDUCTION- In the case of an individual, there shall be
  allowed as a deduction for the taxable year the amount of the qualified
  adoption expenses paid or incurred by the individual for such taxable year.
  `(b) LIMITATIONS-
  `(1) MAXIMUM DOLLAR AMOUNT- The aggregate amount of adoption expenses
  which may be taken into account under subsection (a) with respect to the
  adoption of a child shall not exceed $3,000.
  `(2) DENIAL OF DOUBLE BENEFIT-
  `(A) IN GENERAL- No deduction shall be allowable under subsection (a)
  for any expense for which a deduction or credit is allowable under any
  other provision of this chapter.
  `(B) REIMBURSEMENTS- No deduction shall be allowable under subsection (a)
  for any qualified adoption expenses for which a taxpayer is reimbursed. If
  a taxpayer is reimbursed for qualified adoption expenses for which a
  deduction was allowed under subsection (a) in a prior taxable year, the
  amount of such reimbursement shall be includible in the gross income of
  the taxpayer in the taxable year in which such reimbursement is received.
  `(c) DEFINITIONS- For purposes of this section--
  `(1) QUALIFIED ADOPTION EXPENSES- The term `qualified adoption expenses'
  means reasonable and necessary adoption fees, court costs, attorneys fees,
  and other expenses which--
  `(A) are directly related to the legal adoption of a child with special
  needs by the taxpayer,
  `(B) are not incurred in violation of State or Federal law, and
  `(C) are of a type eligible for reimbursement under the adoption assistance
  program under part E of title IV of the Social Security Act.
  `(2) CHILD WITH SPECIAL NEEDS- The term `child with special needs' means
  any child determined by the State to be a child described in paragraphs
  (1) and (2) of section 473(c) of the Social Security Act.'
  (b) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES DEDUCTIONS- Subsection
  (a) of section 62 is amended by inserting after paragraph (13) the following
  new paragraph:
  `(14) ADOPTION EXPENSES- The deduction allowed by section 220 (relating
  to deduction for expenses of adopting a child with special needs).'
  (c) CLERICAL AMENDMENT- The table of sections for part VII of subchapter
  B of chapter 1 is amended by striking the item relating to section 220
  and by inserting the following new items:
`Sec. 220. Special needs adoption expenses deduction.
`Sec. 221. Cross reference.'
  (d) EFFECTIVE DATE- The amendments made by this section shall apply to
  adoptions on or after February 1, 1992.
SEC. 225. PUBLIC TRANSIT FRINGE BENEFIT EXCLUSION.
  (a) Paragraph (4) of section 132(h) (providing special rules for determining
  the fringe benefits excluded from income under section 132) is amended to
  read as follows:
  `(4) CERTAIN EMPLOYER-PROVIDED TRANSPORTATION EXPENSES- The term `working
  condition fringe' includes--
  `(A) parking provided to an employee on or near the business premises of
  the employer, and
  `(B) passes, tokens, fare cards, tickets or similar instruments for commuting
  by public transit provided to an employee at a discount by the employer,
  or reimbursements by the employer to cover all or part of the costs of
  such instruments, to the extent that the total amount of such discounts
  or reimbursements does not exceed $60 per month.'
  (b) EFFECTIVE DATE- The amendments made by this section shall be effective
  for discounts and reimbursements provided on or after February 1, 1992.
TITLE III--LONG TERM GROWTH ACT OF 1992
SEC. 301. SHORT TITLE, ETC.
  (a) SHORT TITLE- This title may be cited as the `Long Term Growth Act
  of 1992'.
  (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided,
  whenever in this title an amendment or repeal is expressed in terms of an
  amendment to, or repeal of, a section or other provision, the reference
  shall be considered to be made to a section or other provision of the
  Internal Revenue Code of 1986.
  (c) SECTION 15 SHALL NOT APPLY- Except as otherwise expressly provided,
  no amendment made by this title shall be treated as a change in rate of
  tax for purposes of section 15 of the Internal Revenue Code of 1986.
  (d) Table of Contents-
TABLE OF CONTENTS
TITLE III--LONG TERM GROWTH
Sec. 301. Short title, etc.
Subtitle A--Extension of Expiring Provisions
Sec. 311. Credit for research and experimentation.
Sec. 312. Allocation of research and experimental expenditures.
Sec. 313. Extension of low-income housing credit.
Sec. 314. Extension of targeted jobs tax credit.
Sec. 315. Extension of solar and geothermal investment credit.
Sec. 316. Qualified small issue bonds.
Sec. 317. Qualified mortgage bonds.
Sec. 318. Expenses for drugs for rare conditions.
Subtitle B--Provisions Relating to Enterprise Zones
Part I--General Provisions
Sec. 321. Short title.
Sec. 322. Purpose.
Sec. 323. Effective date.
Part II--Designation of Enterprise Zones
Sec. 324. Designation of zones.
Sec. 325. Reporting requirements.
Sec. 326. Interaction with other federal programs.
Part III--Federal Income Tax Incentives
Sec. 327. Defintions and regulations; employee credit; capital gain exclusion;
stock expensing.
Sec. 328. Alternative minimum tax.
Sec. 329. Adjusted gross income defined.
Part IV--Regulatory Flexibility
Sec. 330. Definition of small entities in enterprise zone for purposes of
analysis of regulatory functions.
Sec. 331. Waiver or modification of agency rules in enterprise zones.
Sec. 332. Federal agency support of enterprise zones.
Part V--Establishment of Foreign-Trade Zones in Enterprise Zones
Sec. 333. Foreign-trade zone preferences.
Part VI--Repeal of Title VII of the Housing and Community Development Act
of 1987
Sec. 334. Repeal.
Subtitle C--Excise Tax Provisions
Sec. 341. Repeal of luxury excise tax on boats and aircraft.
Sec. 342. Repeal of exemption for the use of diesel fuel in pleasure boats.
Sec. 343. Additional services subject to communications excise tax.
Sec. 344. Repeal of exemption for certain coin-operated telephone service.
Subtitle D--Provisions Related to Retirement Savings and Pension Distributions
Sec. 351. Taxability of beneficiary of qualified plan.
Sec. 352. Simplified method for taxing annuity distributions under certain
employer plans.
Sec. 353. Requirement that qualified plans include optional trustee-to-trustee
transfers of eligible rollover distributions.
Sec. 354. Salary reduction arrangements of simplified employee pensions.
Sec. 355. Tax exempt organizations eligible under section 401(k).
Sec. 356. Duties of sponsors of certain prototype plans.
Sec. 357. Simplification of nondiscrimination tests applicable under sections
401(k) and 401(m).
Sec. 358. Definition of highly compensated employee.
Sec. 359. Elimination of special vesting rule for multiemployer plans.
Subtitle E--Other Provisions
Part I--Provisions Relating to Charitable Contributions
Sec. 361. The alternative minimum tax.
Sec. 362. Allocation and apportionment.
Sec. 363. Information reporting of large donations.
Part II--Other Provisions
Sec. 371. Extend Medicare hospital insurance (HI) coverage to all state and
local employees.
Sec. 372. Conform tax accounting to financial accounting for securities
dealers.
Sec. 373. Disallowance of interest deductions on corporate owned life
insurance.
Sec. 374. Clarification of treatment of certain FSLIC assistance.
Sec. 375. Equalizing tax treatment of large credit unions and thrifts.
Sec. 376. Treatment of annuities without life contingencies.
Sec. 377. Expansion of 45-day interest-free period.
Subtitle A--Extension of Expiring Provisions
SEC. 311. CREDIT FOR RESEARCH AND EXPERIMENTATION.
  (a) PERMANENT CREDIT- Section 41 (relating to the credit for increasing
  research activities) is amended by striking subsection (h).
  (b) CONFORMING AMENDMENT- Paragraph (1) of section 28(b) is amended by
  striking subparagraph (D).
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  amounts paid or incurred after June 30, 1992.
SEC. 312. ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
  (a) EXTENSION- Paragraph (5) of section 864(f) (relating to allocation of
  research and experimental expenditures) is amended to read as follows:
  `(5) YEARS TO WHICH RULE APPLIES- This subsection shall apply to the
  taxpayer's first 4 taxable years beginning after August 1, 1989, and on
  or before August 1, 1993.'
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after August 1, 1991.
SEC. 313. EXTENSION OF LOW-INCOME HOUSING CREDIT.
  (a) Extension-
  (1) Paragraph (1) of section 42(o) is amended--
  (A) by striking `to any amount allocated after June 30, 1992' and inserting
  `for any calendar year after 1993', and
  (B) by striking `June 30, 1992' in subparagraph (B) and inserting `1993'.
  (2) Paragraph (2) of section 42(o) is amended--
  (A) by striking `July 1, 1992' each place it appears and inserting `1994',
  (B) by striking `June 30, 1992' in subparagraph (B) and inserting `December
  31, 1993',
  (C) by striking `June 30, 1994' in subparagraph (B) and inserting `December
  31, 1995', and
  (D) by striking `July 1, 1994' in subparagraph (C) and inserting `January
  1, 1996'.
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  calendar years after 1991.
SEC. 314. EXTENSION OF TARGETED JOBS TAX CREDIT.
  (a) EXTENSION- Section 51(c)(4) is amended by striking `June 30, 1992'
  and inserting `December 31, 1993'.
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  individuals who begin work after June 30, 1992.
SEC. 315. EXTENSION OF SOLAR AND GEOTHERMAL INVESTMENT CREDIT.
  (a) EXTENSION- Section 48(a)(2)(B) is amended by striking `June 30, 1992'
  and inserting `December 31, 1993'.
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  periods after June 30, 1992.
SEC. 316. QUALIFIED SMALL ISSUE BONDS.
  (a) IN GENERAL- Subparagraph (B) of section 144(a)(12) (relating to
  manufacturing facilities and farm property) is amended to read as follows:
  `(B) BONDS ISSUED TO FINANCE FARM PROPERTY- In the case of any bond issued as
  part of an issue, 95 percent or more of the net proceeds of which are to be
  used to provide any land or property in accordance with section 147(c)(2),
  subparagraph (A) shall be applied by substituting `December 31, 1993' for
  `December 31, 1986'.
  (b) CONFORMING AMENDMENT- Section 144(a)(12) (defining manufacturing
  facility) is amended by striking subparagraph (c).
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  bonds issued after June 30, 1992.
SEC. 317. QUALIFIED MORTGAGE BONDS.
  (a) IN GENERAL- Subparagraph (B) of section 143(a)(1) (defining qualified
  mortgage bond) is amended by striking `June 30, 1992' and inserting
  `December 31, 1993'.
  (b) MORTGAGE CREDIT CERTIFICATES- Subsection (h) of section 25 (relating
  to interest on certain home mortgages) is amended by striking `June 30,
  1992' and inserting `December 31, 1993'.
  (c) EFFECTIVE DATES-
  (1) The amendment made by subsection (a) shall apply to bonds issued after
  June 30, 1992.
  (2) The amendment made by subsection (b) shall apply to elections for
  periods after June 30, 1992.
SEC. 318. EXPENSES FOR DRUGS FOR RARE CONDITIONS.
  (a) IN GENERAL- Section 28 (relating to clinical testing expenses for certain
  drugs for rare diseases or conditions) is amended by striking subsection (e).
  (b) EFFECTIVE DATE- The amendment made by this section shall be effective
  on the date of enactment of this Act.
Subtitle B--Provisions Relating to Enterprise Zones
PART I--GENERAL PROVISIONS
SEC. 321. SHORT TITLE.
  This subtitle may be cited as the `Enterprise Zone--Jobs Creation Act
  of 1992'.
SEC. 322. PURPOSE.
  It is the purpose of this subtitle to provide for the establishment of
  enterprise zones in order to stimulate entrepreneurship, particularly by
  zone residents, the creation of new jobs, particularly for disadvantaged
  workers and long-term unemployed individuals, and to promote revitalization
  of economically distressed areas primarily by providing or encouraging--
  (1) tax relief at the Federal, State, and local levels,
  (2) regulatory relief at the Federal, State, and local levels, and
  (3) improved local services and an increase in the economic stake of
  enterprise zone residents in their own community and its development,
  particularly through the increased involvement of private, local, and
  neighborhood organizations.
SEC. 323. EFFECTIVE DATE.
  The amendments made by this subtitle shall take effect on January 1, 1992.
PART II--DESIGNATION OF ENTERPRISE ZONES
SEC. 324. DESIGNATION OF ZONES.
  (a) GENERAL RULE- Chapter 80 of subtitle F (relating to general rules)
  is amended by adding at the end thereof the following new subchapter:
`Subchapter D- Designation of Enterprise Zones
`Sec. 7880. Designation
`SEC. 7880. DESIGNATION.
  `(a) Designation of Zones-
  `(1) DEFINITION- For purposes of this title, the term `enterprise zone'
  means any area--
  `(A) which is nominated by one or more local governments and the State
  or States in which it is located for designation as an enterprise zone
  (hereinafter in this section referred to as a `nominated area'), and
  `(B) which the Secretary of Housing and Urban Development, after consultation
  with--
  `(i) the Secretaries of Agriculture, Commerce, Labor, and the Treasury;
  the Director of the Office of Management and Budget; and the Administrator
  of the Small Business Administration, and
  `(ii) in the case of an area on an Indian reservation, the Secretary of
  the Interior, designates as an enterprise zone.
  `(2) AUTHORITY TO DESIGNATE- The Secretary of Housing and Urban Development
  is authorized to designate enterprise zones in accordance with the provisions
  of this section.
  `(3) Limitations on designations-
  `(A) PUBLICATION OF REGULATIONS- Before designating any area as an enterprise
  zone and not later than 4 months following the date of the enactment of this
  section, the Secretary of Housing and Urban Development shall prescribe by
  regulation, after consultation with the officials described in paragraph
  (1)(B)--
  `(i) the procedures for nominating an area, and
  `(ii) the procedures for designation as an enterprise zone, including a
  method for comparing courses of action under subsection (d) proposed for
  nominated areas, and the other factors specified in subsection (e).
  `(B) TIME LIMITATIONS- The Secretary of Housing and Urban Development shall
  designate nominated areas as enterprise zones only during the 48-month
  period beginning on the later of--
  `(i) the first day of the first month following the month in which the
  effective date of the regulations described in subparagraph (A) occurs, or
  `(ii) January 1, 1992.
  `(C) Number of designations-
  `(i) IN GENERAL- The Secretary of Housing and Urban Development may
  designate--
  `(I) not more than 50 nominated areas as enterprise zones under this
  section, and
  `(II) not more than 15 nominated areas as enterprise zones during the
  12-month period beginning on the date determined under subparagraph (B), not
  more than 30 by the end of the 24-month period beginning on that date, not
  more than 45 by the end of the 36-month period beginning on that date, and
  not more than 50 by the end of the 48-month period beginning on that date.
  `(ii) MINIMUM DESIGNATION IN RURAL AREAS- Of the areas designated as
  enterprise zones, at least one-third must be areas that are--
  `(I) within a local government jurisdiction or jurisdictions with a
  population of less than 50,000 (as determined using the most recent census
  data available),
  `(II) outside of a metropolitan statistical area (within the meaning of
  section 143(k)(2)(B), or
  `(III) determined by the Secretary of Housing and Urban Development,
  after consultation with the Secretary of Commerce, to be rural areas.
  `(D) PROCEDURAL RULES- The Secretary of Housing and Urban Development
  shall not make any designations under this section unless--
  `(i) the State and local governments in which the nominated area is located
  have the authority to--
  `(I) nominate such area for designation as an enterprise zone,
  `(II) make the State and local commitments under subsection (d), and
  `(III) provide assurances satisfactory to the Secretary of Housing and
  Urban Development that such commitments will be fulfilled, and
  `(ii) a nomination therefor is submitted by such State and local governments
  in such a manner in such form, and containing such information, as the
  Secretary of Housing and Urban Development shall prescribe by regulation.
  `(4) NOMINATION PROCESS FOR INDIAN RESERVATIONS- In the case of a nominated
  area on an Indian reservation, the reservation governing body (as determined
  by the Secretary of the Interior) shall be deemed to be both the State
  and local governments with respect to such area.
  `(b) Time Period for Which Designation is in Effect--
  `(1) IN GENERAL- Any designation of an area as an enterprise zone shall
  remain in effect during the period beginning on the date of the designation
  and ending on the earliest of--
  `(A) December 31 of the 24th calendar year following the calendar year in
  which such date occurs,
  `(B) the termination date specified by the State and local governments
  as provided in the nomination submitted in accordance with subsection
  (a)(3)(D)(ii),
  `(C) such other date as the Secretary of Housing and Urban Development
  shall specify as a condition of designation, or
  `(D) the date upon which the Secretary of Housing and Urban Development
  revokes such designation.
  `(2) REVOCATION OF DESIGNATION- The Secretary of Housing and Urban
  Development, after consultation with the officials described in subsection
  (a)(1)(B), may revoke the designation of an area if the Secretary of Housing
  and Urban Development determines that a State or local government in which
  the area is located is not complying substantially with the agreed course
  of action for the area.
  `(c) Area and Eligibility Requirements-
  `(1) IN GENERAL- The Secretary of Housing and Urban Development may
  designate a nominated area as an enterprise zone only if it meets the
  requirements of paragraphs (2) and (3).
  `(2) AREA REQUIREMENTS- A nominated area meets the requirements of this
  paragraph if--
  `(A) the area is within the jurisdiction of the local government,
  `(B) the boundary of the area is continuous, and
  `(C) the area--
  `(i) has a population, as determined by the most recent census data
  available, of not less than--
  `(I) 4,000 if any portion of such area (other than a rural area described
  in subsection (a)(3)(C)(ii)) is located within a metropolitan statistical
  area (as designated by the Director of the Office of Management and Budget)
  with a population of 50,000 or more, or
  `(II) 1,000 in any other case, or
  `(ii) is entirely within an Indian reservation (as determined by the
  Secretary of the Interior).
  `(3) ELIGIBILITY REQUIREMENTS- A nominated area meets the requirements of
  this paragraph if the State and local governments in which the nominated
  area is located certify, and the Secretary of Housing and Urban Development
  accepts such certification, that--
  `(A) the area is one of pervasive poverty, unemployment and general distress,
  `(B) the area is located wholly within the jurisdiction of a local government
  that is eligible for Federal assistance under section 119 of the Housing
  and Community Development Act of 1974, as in effect on the date of the
  enactment of the Enterprise Zone--Jobs Creation Act of 1992,
  `(C) the unemployment rate for the area, as determined by the appropriate
  available data, was not less than 1.5 times the national unemployment rate
  for the period to which such data relate,
  `(D) the poverty rate  (as determined by the most recent census data
  available) for each populous census tract (or where not tracted, the
  equivalent county division as defined by the Bureau of the Census for the
  purpose of defining poverty areas) within the area was not less than 20
  percent for the period to which such data relate, and
  `(E) the area meets at least one of the following criteria:
  `(i) Not less than 70 percent of the households living in the area have
  incomes below 80 percent of the median income of households of the area
  within the jurisdiction of the local government (determined in the same
  manner as under section 119(b)(2) of the Housing and Community Development
  Act of 1974).
  `(ii) The population of the area decreased by 20 percent or more between 1980
  and 1990 (or the most recent decade for which census data are available).
  `(4) ELIGIBILITY REQUIREMENTS FOR RURAL AREAS- For purposes of paragraph (1),
  a nominated area that is a rural area described in subsection (a)(3)(C)(ii)
  meets the requirements of paragraph (3) if the State and local governments
  in which it is located certify and the Secretary, after such review of
  supporting data as he deems appropriate, accepts such certification,
  that the area meets--
  `(A) the criteria set forth in subparagraphs (A) and (B) of paragraph
  (3), and
  `(B) not less than one of the criteria set forth in the other subparagraphs
  of paragraph (3).
  `(d) Required State and Local Commitments-
  `(1) IN GENERAL- No nominated area shall be designated as an enterprise
  zone unless the State and local governments of the jurisdictions in which
  the nominated area is located agree in writing that, during any period
  during which the nominated area is an enterprise zone, such governments
  will follow a specified course of action designed to reduce the various
  burdens  borne by employers or employees in such area.
  `(2) COURSE OF ACTION- The course of action under paragraph (1) may include,
  but is not limited to--
  `(A) the reduction or elimination of tax rates or fees applying within
  the enterprise zone,
  `(B) actions to reduce, remove, simplify, or streamline governmental
  requirements applying within the enterprise zone,
  `(C) an increase in the level of efficiency of local services within the
  enterprise zone, for example, crime prevention, and drug use prevention
  and treatment,
  `(D) involvement in the program by private entities, organizations,
  neighborhood associations, and community groups, particularly those within
  the enterprise zone, including a commitment from such private entities
  to provide jobs and job training for, and technical, financial or other
  assistance to, employers, employees, and residents of the enterprise zone,
  `(E) mechanisms to increase equity ownership by residents and employees
  within the enterprise zone,
  `(F) donation (or sale below market value) of land and buildings to benefit
  low and moderate income people,
  `(G) linkages to--
  `(i) job training,
  `(ii) transportation,
  `(iii) education,
  `(iv) day care,
  `(v) health care, and
  `(vi) other social service support,
  `(H) provision of supporting public facilities, and infrastructure
  improvements,
  `(I) encouragement of local entrepreneurship, and
  `(J) other factors determined essential to support enterprise zone activities
  and encourage livability or quality of life.
  `(3) LATER MODIFICATION OF A COURSE OF ACTION- The Secretary of Housing
  and Urban Development may by regulation prescribe procedures to permit or
  require a course of action to be updated or modified during the time that
  a designation is in effect.
  `(e) PRIORITY OF DESIGNATION- In choosing nominated areas for designation,
  the Secretary of Housing and Urban Development shall give preference to
  the nominated areas--
  `(1) with respect to which the strongest and highest quality contributions
  have been promised as part of the course of action, taking into consideration
  the fiscal ability of the nominating State and local governments to provide
  tax relief,
  `(2) with respect to which the nominating State and local governments have
  provided the most effective and enforceable guarantees that the proposed
  course of action will actually be carried out during the period of the
  enterprise zone designation,
  `(3) with respect to which private entities have made the most substantial
  commitments in additional resources and contributions, including the
  creation of new or expanded business activities, and
  `(4) which best exhibit such other factors determined by the Secretary
  of Housing and Urban Development, including relative distress, which are
  consistent with the intent of the enterprise zone program and which have
  the greatest likelihood of success.
  `(f) GEOGRAPHIC DISTRIBUTION- In making designations, the Secretary of
  Housing and Urban Development will take into consideration a reasonable
  geographic distribution of enterprise zones.
  `(g) DEFINITIONS- For the purposes of this title--
  `(1) GOVERNMENTS- If more than one government seeks to nominate an area
  as an enterprise zone, any reference to, or requirement of, this section
  shall apply to all such governments.
  `(2) STATE- The term `State' shall also include Puerto Rico, the Virgin
  Islands, Guam, American Samoa, the Northern Mariana Islands, and any other
  territory of the United States.
  `(3) LOCAL GOVERNMENTS- The term `local government' means--
  `(A) any county, city, town, township, parish, village, or other general
  purpose political subdivision of a State,
  `(B) any combination of political subdivisions described in subparagraph
  (A) recognized by the Secretary of Housing and Urban Development, and
  `(C) the District of Columbia.
  `(h) Cross References for--
  `(1) definitions, see section 1391,
  `(2) treatment of employees in enterprise zones, see section 1392, and
  `(3) treatment of investments in enterprise zones, see sections 1393
  and 1394.'
  (b) CLERICAL AMENDMENT- The table of subchapters for chapter 80 of subtitle
  F is amended by adding at the end thereof the following new item:
`SUBCHAPTER D. Designation of Enterprise Zones'.
SEC. 325. REPORTING REQUIREMENTS.
  Not later than the close of the second calendar year after the calendar year
  in which the Secretary of Housing and Urban Development first designates
  areas as enterprise zones, and at the close of each second calendar year
  thereafter, the Secretary of Housing and Urban Development shall submit to
  the Congress a report on the effects of such designation in accomplishing
  the purposes of this subtitle.
SEC. 326. INTERACTION WITH OTHER FEDERAL PROGRAMS.
  (a) COORDINATION WITH RELOCATION ASSISTANCE- The designation of an enterprise
  zone under section 7880 shall not--
  (1) constitute approval of a Federal or federally assisted program or project
  (within the meaning of the Uniform Relocation Assistance and Real Property
  Acquisition Policies Act of 1970 (42 U.S.C. 4601)), or
  (2) entitle any person displaced from real property located in such zone
  to any rights or any benefits under such Act.
  (b) COORDINATION WITH ENVIRONMENTAL POLICY- Designation of an enterprise
  zone under section 7880 shall not constitute a Federal action for purposes
  of applying the procedural requirements of the National Environmental
  Policy Act of 1969 (42 U.S.C. 4341) or other provisions of Federal law
  relating to the protection of the environment.
PART III--FEDERAL INCOME TAX INCENTIVES
SEC. 327. DEFINITIONS AND REGULATIONS; EMPLOYEE CREDIT; CAPITAL GAIN EXCLUSION;
STOCK EXPENSING.
  (a) GENERAL RULE- Chapter 1 of subtitle A (relating to normal tax and
  surtax rules) is amended by inserting after subchapter T the following
  new subchapter:
`SUBCHAPTER U. Enterprise Zones
`Sec. 1391. Definitions and Regulatory Authority.
`Sec. 1392. Credit for enterprise zone employees.
`Sec. 1393. Enterprise zone capital gain.
`Sec. 1394. Enterprise zone stock.
`SEC. 1391. DEFINITIONS AND REGULATORY AUTHORITY.
  `(a) Enterprise Zone-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise
  zone' means any area which the Secretary of Housing and Urban Development
  designates pursuant to section 7880(a) as a Federal enterprise zone for
  purposes of this title.
  `(2) TERMINATION OF ENTERPRISE ZONE- An area will cease to constitute
  an enterprise zone once its designation as such terminates or is revoked
  under section 7880(b).
  `(b) Enterprise Zone Business-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise zone
  business' means an activity constituting the active conduct of a trade or
  business within an enterprise zone, and with respect to which--
  `(A) at least 80 percent of the gross income in each calendar year is
  attributable to the active conduct of a trade or business within an
  enterprise zone,
  `(B) less than 10 percent of the property (as measured by unadjusted basis)
  constitutes stocks, securities, or property held for use by customers,
  `(C) no more than an insubstantial portion of the property constitutes
  collectibles (as defined in section 408(m)(2)), unless such collectibles
  constitute property held primarily for sale to customers in the ordinary
  course of the active trade or business,
  `(D) substantially all of the property (whether owned or leased) is located
  within an enterprise zone, and
  `(E) substantially all of the employees work within an enterprise zone.
  `(2) RELATED ACTIVITIES TAKEN INTO ACCOUNT- Except as otherwise provided in
  regulations, all activities conducted by a taxpayer and persons related to
  the taxpayer shall be treated as one activity for purposes of paragraph (1).
  `(3) SPECIAL RULES-
  `(A) RENTAL REAL PROPERTY- For purposes of paragraph (1), holding real
  property located within an enterprise zone for use by customers other than
  related persons shall be treated as the active conduct of a trade or business
  for purposes of paragraph (1)(A) and as not subject to paragraph (1)(B).
  `(B) TERMINATION OF ENTERPRISE ZONE BUSINESS- An activity shall cease to
  be an enterprise zone business if--
  `(i) the designation of the enterprise zone in which the activity is
  conducted terminates or is revoked pursuant to section 7880(b),
  `(ii) more than 50 percent (by value) of the activity's property or services
  are obtained from related persons other than enterprise zone businesses, or
  `(iii) more than 50 percent of the activity's gross income is attributable
  to property or services provided to related persons other than enterprise
  zone businesses.
  `(c) Enterprise Zone Property-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise
  zone property' means--
  `(A) any tangible personal property located in an enterprise zone and used
  by the taxpayer in an enterprise zone business, and
  `(B) any real property located in an enterprise zone and used by the
  taxpayer in an enterprise zone business.
In no event shall any financial property or intangible interest in property
be treated as constituting enterprise zone property, whether or not such
property is used in the active conduct of an enterprise zone business.
  `(2) TERMINATION OF ENTERPRISE ZONE- The treatment of property as
  enterprise zone property under subparagraph (A) shall  not terminate upon
  the termination or revocation of the designation of the enterprise zone in
  which the property is located, but instead shall terminate immediately after
  the first sale or exchange of such propety occurring after the expiration
  or revocation.
  `(d) RELATED PERSONS- For purposes of this subchapter, a person  shall be
  treated as related to another person if--
  `(1) the relationship of such persons is described in section 267(b)
  or 707(b)(1), or
  `(2) such persons are engaged  in trades or businesses under common control
  (within the meaning of subsections (a) and (b) of section 52).
For purposes of paragraph (1), in applying section 267(b) or 707(b)(1),
`33 percent' shall be substituted for `50 percent'.
  `(e) REGULATORY AUTHORITY- The Secretary shall prescribe such regulations as
  may be necessary or appropriate to carry out the purposes of the Enterprise
  Zone--Jobs Creation Act of 1992, including--
  `(1) providing that Federal tax relief is unavailable to an activity that
  does not stimulate employment in, or revitalization of, enterprise zones,
  `(2) providing for appropriate coordination with other Federal programs
  that, in combination, might enable activity within enterprise zones to be
  more than 100 percent subsidized by the Federal government, and
  `(3) preventing the avoidance of the rules in this subchapter.
`SEC. 1392. CREDIT FOR ENTERPRISE ZONE EMPLOYEES.
  `(a) GENERAL RULE- In the case of a taxpayer who is an enterprise zone
  employee, there shall be allowed as a credit against the tax imposed by
  this subtitle for the taxable year an amount equal to 5 percent of so much
  of the qualified wages of the taxpayer for the taxable year as does not
  exceed $10,500.
  `(b) DEFINITIONS- For purposes of this section--
  `(1) ENTERPRISE ZONE EMPLOYEE- The term `enterprise zone employee' means
  an individual if--
  `(A) the individual performs services during the taxable year that are
  directly related to the conduct of an enterprise zone business,
  `(B) substantially all of the services described in paragraph (1)(A)
  are performed within an enterprise zone, and
  `(C) the employer for whom the services described in paragraph (1)(A)
  are performed is not the Federal Government, any State government or
  subdivision thereof, or any local government.
  `(2) WAGES- The term `wages' has the meaning given by subsection (b) of
  section 3306 (determined without regard to any dollar limitation contained
  in such subsection).
  `(3) QUALIFIED WAGES- The term `qualified wages' means all wages of the
  taxpayer, to the extent attributable to services described in paragraph (1).
  `(c) LIMITATIONS-
  `(1) PHASE-OUT OF CREDIT- The amount of the credit allowable to a taxpayer
  under subsection (a) for any taxable year shall not exceed the excess
  (if any) of--
  `(A) $525, over
  `(B) 10.5 percent of so much of the taxpayer's total wages (whether or
  not constituting qualified wages) as exceeds $20,000.
  `(2) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone
  occurs, expires, or is revoked pursuant to section 7880 on a date other
  than the first or last day of the taxable year of the taxpayer, or in the
  case of a short taxable year, the limitations specified in paragraph (1)
  shall be adjusted on a pro rata basis (based upon the number of days).
  `(d) APPLICATION WITH OTHER CREDITS- The credit allowed under this section
  for the taxable year shall be reduced by the amount (if any) of tax imposed
  by section 55 (relating to the alternative minimum tax) with respect to
  such taxpayer for such year.
  `(e) CREDIT TREATED AS SUBPART C CREDIT- For purposes of this title, the
  credit allowed under subsection (a) shall be treated as a credit allowed
  under subpart C of part IV of subchapter A of chapter 1.
`SEC. 1393. ENTERPRISE ZONE CAPITAL GAIN.
  `(a) GENERAL RULE- Gross income does not include the amount of any gain
  constituting enterprise zone capital gain.
  `(b) DEFINITION- For purposes of this section--
  `(1) IN GENERAL- The term `enterprise zone capital gain' means gain--
  `(A) treated as long-term capital gain,
  `(B) allocable in accordance with the rules under subsection (b)(5) of
  section 338 to the sale or exchange of enterprise zone property, and
  `(C) properly attributable to period(s) of use in an enterprise zone
  business.
  `(2) LIMITATIONS- Enterprise zone capital gain does not include any gain
  attributable to--
  `(A) the sale or exchange of property not constituting enterprise zone
  property with respect to the taxpayer throughout the period of twenty-four
  full calendar months immediately preceding the sale or exchange,
  `(B) any collectibles (as defined in section 408(m)), or
  `(C) sales or exchanges to persons controlled by the same interests.
  `(c) BASIS- Amounts excluded from gross income pursuant to subsection (a)
  shall not be applied in reduction to the basis of any property held by
  the taxpayer.
`SEC. 1394. ENTERPRISE ZONE STOCK.
  `(a) GENERAL RULE- At the election of any individual, the aggregate
  amount paid by such individual during the individual's taxable year for
  the purchase of enterprise zone stock on the original issue of such stock
  by a qualified issuer shall be allowed as a deduction.
  `(b) LIMITATIONS-
  `(1) CEILING- The maximum amount allowed as a deduction under subsection (a)
  to a taxpayer shall not exceed $50,000 for any taxable year, nor $250,000
  during the taxpayer's lifetime.
  `(A) EXCESS AMOUNTS- If the amount otherwise deductible by any person
  under subsection (a) exceeds the limitation under this paragraph (1)--
  `(i) the amount of such excess shall be treated as an amount paid in the
  next taxable year, and
  `(ii) the deduction allowed for any taxable year shall be allocated among
  the enterprise zone stock purchased by such person in accordance with the
  purchase price per share.
  `(2) RELATED PERSONS- The taxpayer and all individuals related to the
  taxpayer shall be treated as one person for purposes of the limitations
  described in paragraph (1).
  `(3) ALLOCATION OF EXCESS AMOUNTS- The limitations described in paragraph
  (1) shall be allocated among the taxpayer and related persons in accordance
  with their respective purchases of enterprise zone stock.
  `(4) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone
  occurs, expires, or is revoked pursuant to section 7880 on a date other
  than the first or last day of the taxable year of the taxpayer, or in the
  case of a short taxable year, the limitations specified in paragraph (1)
  shall be adjusted on a pro rata basis (based upon the number of days).
  `(c) Disposition of Stock-
  `(1) GAIN TREATED AS ORDINARY INCOME- Except as otherwise provided in
  regulations, if a taxpayer disposes of any enterprise zone stock with
  respect to which a deduction was allowed under subsection (a), the amount
  realized upon such disposition shall be treated as ordinary income and
  recognized notwithstanding any other provision of this subtitle.
  `(2) Interest charged if disposition within 5 years of purchase-
  `(A) IN GENERAL- If a taxpayer disposes of any enterprise zone stock before
  the end of the 5-year period beginning on the date such stock was purchased
  by the taxpayer, the tax imposed by this chapter for the taxable year in
  which such disposition occurs shall be increased by the amount determined
  in subparagraph (B).
  `(B) ADDITIONAL AMOUNT- For purposes of subparagraph (A), the additional
  amount shall be equal to the amount of interest (determined at the rate
  applicable under section 6621(a)(2)) that would accrue--
  `(i) during the period beginning on the date the stock was purchased by the
  taxpayer and ending on the date such stock was disposed of by the taxpayer,
  `(ii) on an amount equal to the aggregate decrease in tax of the taxpayer
  resulting from the deduction allowed under subsection (a) with respect to
  the stock so disposed of.
  `(d) Disqualification-
  `(1) ISSUER OR STOCK CEASES TO QUALIFY- If a taxpayer elects the deduction
  under subsection (a) with respect to enterprise zone stock, and either--
  `(A) the issuer with respect to which the election was made ceases to be
  a qualified issuer, or
  `(B) the proceeds from the issuance of the taxpayer's enterprise zone
  stock fail or otherwise cease to be invested by the issuer in enterprise
  zone property, then, notwithstanding any provision of this subtitle
  (other than paragraph (2)) to the contrary, the taxpayer shall recognize
  as ordinary income the amount of the deduction allowed under subsection
  (a) with respect to the issuer's enterprise zone stock.
  `(2) Special rules-
  `(A) LIQUIDATION- Where enterprise zone property acquired with proceeds
  from the issuance of enterprise zone stock is sold or exchanged pursuant
  to a plan of complete liquidation, the treatment described in paragraph
  (1) shall be inapplicable.
  `(B) TERMINATION OF ENTERPRISE ZONE- The treatment of an activity as an
  enterprise zone business shall not cease for purposes of paragraph (1)
  solely by reason of the termination or revocation of the designation of
  the enterprise zone with respect to the activity.
  `(C) PARTIAL DISQUALIFICATION- Where some, but not all, of the property
  acquired by the issuer with the proceeds of issuance of enterprise zone
  stock ceases to constitute enterprise zone property, the treatment described
  in paragraph (1) shall be modified as follows--
  `(i) the total amount recognized as ordinary income by all shareholders
  of the issuer shall be limited to an amount of deduction allowed up to the
  unadjusted basis of property ceasing to constitute enterprise zone property,
  `(ii) the amount recognized shall be allocated among enterprise zone
  stock with respect to which the election in subsection (a) was made in
  the reverse order in which such stock was issued, and
  `(iii) the amount recognized shall be apportioned among taxpayers having
  made the election in subsection (a) in the ratios in which the stock
  described in paragraph (2)(C)(ii) was purchased.
  `(3) ADDITIONAL AMOUNT- If income is recognized pursuant to paragraph
  (1) at any time before the close of the 5th calendar year ending after
  the date the enterprise zone stock was purchased, the tax imposed by this
  chapter with respect to such income shall be increased by an amount equal
  to the amount of interest (determined at the rate applicable under section
  6621(a)(2)) that would accrue--
  `(A) during the period beginning on the date the stock was purchased by
  the taxpayer and ending on the date of the disqualification event described
  in paragraph (1),
  `(B) on an amount equal to the aggregate decrease in tax of the taxpayer
  resulting from the deduction allowed under subsection (a) with respect to
  the stock so disqualified.
  `(e) DEFINITIONS- For purposes of this section--
  `(1) ENTERPRISE ZONE STOCK- The term `enterprise zone stock' means common
  stock issued by a qualified issuer, but only to the extent that the amount
  of proceeds of such issuance are used by such issuer no later than twelve
  months following issuance to acquire and maintain an equal amount of newly
  acquired enterprise zone property.
  `(2) Qualified issuer-
  `(A) IN GENERAL- The term `qualified issuer' means any subchapter C
  corporation--
  `(i) which does not have more than one class of stock,
  `(ii) which is engaged solely in the conduct of one or more enterprise
  zone businesses,
  `(iii) which does not own or lease more than $5 million of total property
  (including money), as measured by the unadjusted basis of the property, and
  `(iv) more than 20 percent of the total voting power and 20 percent of the
  total value of the stock of which is owned by individuals, partnerships,
  estates or trusts.
  `(B) LIMITATION ON TOTAL ISSUANCES- A qualified issuer may issue no more
  than an aggregate of $5 million of enterprise zone stock.
  `(C) AGGREGATION- For purposes of applying the limitations under this
  paragraph, the issuer and all related persons shall be treated as one person.
  `(3) AMOUNT PAID- For purposes of subsection (a), the amount `paid' by a
  taxpayer for any taxable year shall not include the issuance of evidences
  of indebtedness of the taxpayer (whether or not such indebtedness is
  guaranteed by another person), nor amounts paid by the taxpayer after the
  close of the taxable year.
  `(f) ISSUANCES IN EXCHANGE FOR PROPERTY- If enterprise zone stock is issued
  in exchange for property, then notwithstanding any provision of subchapter
  C of chapter 1 of subtitle A to the contrary--
  `(1) the issuance shall be treated for purposes of this subtitle as the
  sale of the property at its then fair market value to the corporation, and
  a contribution to the corporation of the proceeds immediately thereafter
  in exchange for the enterprise zone stock, and
  `(2) the issuer's basis for the property shall be equal to the fair market
  value of such property at the time of issuance.
  `(g) BASIS ADJUSTMENT- For purposes of this subtitle, if a taxpayer elects
  the deduction under subsection (a), the taxpayer's basis (without regard
  to this subsection) for the enterprise zone stock with respect to such
  election shall be reduced by the deduction allowed or allowable.
  `(h) LIMITATIONS ON ASSESSMENT AND COLLECTION- If a taxpayer elects the
  deduction under subsection (a) for any taxable year--
  `(1) the period for assessment and collection of any deficiency attributable
  to any part of the deduction shall not expire before one year following
  expiration of such period of the qualified issuer that includes the
  circumstances giving rise to the deficiency, and
  `(2) such deficiency may be assessed before expiration of the period
  described in paragraph (1) notwithstanding any provisions of this subtitle
  to the contrary.
  `(i) CROSS REFERENCE- For treatment of the deduction under subsection (a)
  for purposes of the alternative minimum tax, see section 56.'
  (b) TECHNICAL AMENDMENT- Subsection (a) of section 1016 (relating to
  adjustments to basis) is amended by striking `and' at the end of paragraph
  (23), by striking the period at the end of paragraph (24) and inserting
  `; and', and by adding at the end thereof the following new paragraph:
  `(25) to the extent provided in section 1394(g), in the case of stock with
  respect to which a deduction was allowed or allowable under section 1394(a).'
  (c) CLERICAL AMENDMENT- The table of subchapters for chapter 1 is amended
  by inserting after the item relating to subchapter T the following new item:
`SUBCHAPTER U. Enterprise zones.'
SEC. 328. ALTERNATIVE MINIMUM TAX.
  (a) CORPORATIONS- Subparagraph (B) of section 56(g)(4) (relating to
  adjustments based on adjusted current earnings of corporations) is amended
  by adding the following new clause at the end thereof:
  `(iii) EXCLUSION OF ENTERPRISE ZONE CAPITAL GAIN- Clause (i) shall not apply
  in the case of any enterprise zone capital gain (as defined in section
  1393(b)), and such gain shall not be included in income for purposes of
  computing alternative minimum taxable income.'
  (b) INDIVIDUALS- Subsection (b) of section 56 (relating to adjustments
  to the alternative minimum taxable income of individuals) is amended by
  adding the following new paragraph at the end thereof:
  `(4) ENTERPRISE ZONE STOCK- No deduction shall be allowed for the purchase
  of enterprise zone stock (as defined in section 1394(e)).'
SEC. 329. ADJUSTED GROSS INCOME DEFINED.
  Subsection (a) of section 62 (relating to the definition of adjusted gross
  income) is amended by adding at the end thereof the following new paragraph:
  `(14) ENTERPRISE ZONE STOCK- The deduction allowed by section 1394.'
PART IV--REGULATORY FLEXIBILITY
SEC. 330. DEFINITION OF SMALL ENTITIES IN ENTERPRISE ZONE FOR PURPOSES OF
ANALYSIS OF REGULATORY FUNCTIONS.
  Section 601 of title 5, United States Code, is amended by--(1) striking
  `and' at the end of paragraph (5), and (2) striking paragraph (6) and
  inserting the following:
  `(6) the term `small entity' means--
  `(A) a small business, small organization, or small governmental jurisdiction
  defined in paragraphs (3), (4), and (5) of this section, respectively, and
  `(B) any qualified enterprise zone business; any unit of government that
  nominated an area which the Secretary of Housing and Urban Development
  designates as an enterprise zone (within the meaning of section 7880
  of the Internal Revenue Code of 1986) that has a rule pertaining to the
  carrying out of any project, activity, or undertaking within such zone;
  and any not-for-profit enterprise carrying out a significant portion of
  its activities within such a zone; and
  `(7) the term `qualified enterprise zone business' means any person,
  corporation, or other entity--
  `(A) which is engaged in the active conduct of a trade or business within
  an enterprise zone (within the meaning of section 7880 of the Internal
  Revenue Code of 1986); and
  `(B) at least 50 percent of the employees of which are qualified employees
  (within the meaning of section 1392(b)(1) of such Code).'
SEC. 331. WAIVER OR MODIFICATION OF AGENCY RULES IN ENTERPRISE ZONES.
  (a) Chapter 6 of title 5, United States Code, is amended by redesignating
  sections 611 and 612 as section 612 and 613, respectively, and inserting
  the following new section after section 610:
`SEC. 611. WAIVER OR MODIFICATION OF AGENCY RULES IN ENTERPRISE ZONES.
  `(a) Upon the written request of any government which nominated an area
  that the Secretary of Housing and Urban Development has designated as an
  enterprise zone under section 7880 of the Internal Revenue Code of 1986,
  an agency is authorized, in order to further the job creation, community
  development, or economic revitalization objectives with respect to such
  zone, to waive or modify all or part of any rule which it has authority
  to promulgate, as such rule pertains to the carrying out of projects,
  activities, or undertakings within such zone.
  `(b) Nothing in this section shall authorize an agency to waive or modify
  any rule adopted to carry out a statute or Executive order which prohibits,
  or the purpose of which is to protect persons against, discrimination on
  the basis of race, color, religion, sex, familial status, national origin,
  age, or handicap.
  `(c) A request under subsection (a) shall specify the rule or rules to be
  waived or modified and the change proposed, and shall briefly describe why
  the change would promote the achievement of the job creation, community
  development, or economic revitalization objectives of the enterprise
  zone. If such a request is made to any agency other than the Department
  of Housing and Urban Development, the requesting government shall send a
  copy of the request to the Secretary of Housing and Urban Development at
  the time the request is made.
  `(d) In considering a request, the agency shall weigh the extent to which
  the proposed change is likely to further job creation, community development,
  or economic revitalization within the enterprise zone against the effect the
  change is likely to have on the underlying purposes of applicable statutes
  in the geographic area which would be affected by the change. The agency
  shall approve the request whenever it finds, in its discretion, that the
  public interest which the proposed change would serve in furthering such job
  creation, community development, or economic revitalization outweighs the
  public interest which continuation of the rule unchanged would serve. The
  agency shall not approve any request to waive or modify a rule if that
  waiver or modification would--
  `(1) violate a statutory requirement (including any requirement of the
  Fair Labor Standards Act of 1938 (52 Stat. 1060; 29 U.S.C. 201 et seq.)), or
  `(2) be likely to present a significant risk to the public health, including
  environmental or occupational health or safety, or of environmental
  pollution.
  `(e) If a request is disapproved, the agency shall inform all the requesting
  governments, and the Department of Housing and Urban Development, in
  writing of the reasons therefor and shall, to the maximum extent possible,
  work with such governments to develop an alternative, consistent with the
  standards contained in subsection (d).
  `(f) Agencies shall discharge their responsibilities under this section
  in an expeditious manner, and shall make a determination on requests not
  later than 90 days after their receipt.
  `(g) A waiver or modification of a rule under subsection (a) shall not
  be considered to be a rule, rulemaking, or regulation under chapter 5 of
  this title. To facilitate reaching its decision on any requested waiver
  or modification, the agency may seek the views of interested parties and,
  if the views are to be sought, determine how they should be obtained and
  to what extent, if any, they should be taken into account in considering
  the request. The agency shall publish a notice in the Federal Register
  stating any waiver or modification of a rule under this section, the time
  such waiver or modification takes effect and its duration, and the scope
  of applicability of such waiver or modification.
  `(h) In the event that an agency proposes to amend a rule for which a
  waiver or modification under this section is in effect, the agency shall
  not change the waiver or modification to impose additional requirements
  unless it determines, consistent with standards contained in subsection
  (d), that such action is necessary. Such determinations shall be published
  with the proposal to amend such rule.
  `(i) No waiver or modification of a rule under this section shall remain
  in effect with respect to an enterprise zone after the enterprise zone
  designation has expired or has been revoked.
  `(j) For purposes of this section, the term `rule' means (1) any rule as
  defined in section 551(4) of this title or (2) any rulemaking conducted
  on the record after opportunity for an agency hearing pursuant to sections
  556 and 557 of this title.'
  (b) The table of sections for such chapter is amended by redesignating
  sections 611 and 612 as sections 612 and 613, respectively, and inserting
  after the item relating to section 610 the following new item:
`Sec. 611. Waiver or modification of agency rules in enterprise zones.'
  (c) Section 601(2) of such title is amended by inserting `(except for
  purposes of section 611)' immediately before `means'.
  (d) Section 613 of such title, as redesignated by subsection (a),
  is amended--
  (1) in subsection (a) by inserting `(except section 611)' immediately after
  `chapter', and
  (2) in subsection (b) by inserting `as defined in section 601(2)' immediately
  before the period at the end of the first sentence.
SEC. 332. FEDERAL AGENCY SUPPORT OF ENTERPRISE ZONES.
  In order to maximize all agencies' support of enterprise zones, the Secretary
  of Housing and Urban Development is authorized to convene regional and
  local coordinating councils of any appropriate agencies to assist State
  and local governments to achieve the objectives agreed to in the course
  of action under section 7880 of the Internal Revenue code of 1986.
PART V--ESTABLISHMENT OF FOREIGN TRADE ZONES IN ENTERPRISE ZONES
SEC. 333. FOREIGN-TRADE ZONE PREFERENCES.
  (a) PREFERENCE IN ESTABLISHMENT OF FOREIGN-TRADE ZONES IN REVITALIZATION
  AREAS- In processing applications for the establishment of foreign-trade
  zones pursuant to the Act `To provide for the establishment, operation,
  and maintenance of foreign-trade zones in ports of entry of the United
  States, to expedite and encourage foreign commerce, and for other purposes',
  approved June 18, 1934 (48 Stat. 998), the Foreign-Trade Zone Board shall
  consider on a priority basis and expedite, to the maximum extent possible,
  the processing of any application involving the establishment of a foreign
  trade zone within an enterprise zone designated pursuant to section 7880
  of the Internal Revenue Code of 1986.
  (b) APPLICATION PROCEDURE- In processing applications for the establishment
  of ports of entry pursuant to `An Act making appropriations for sundry
  civil expenses of the Government for the fiscal year ending June thirtieth,
  nineteen hundred and fifteen, and for other purposes', approved August 1,
  1914 (38 Stat. 609), the Secretary of the Treasury shall consider on a
  priority basis and expedite, to the maximum extent possible, the processing
  of any application involving the establishment of a port of entry which
  is necessary to permit the establishment of a foreign-trade zone within
  an enterprise zone so designated.
  (c) APPLICATION EVALUATION- In evaluating applications for the establishment
  of foreign-trade zones and ports of entry in connection with enterprise
  zones so designated, the Foreign-Trade Zone Board and the Secretary of the
  Treasury shall approve the applications, to the maximum extent practicable,
  consistent with their respective statutory responsibilities.
PART VI--REPEAL OF TITLE VII OF THE HOUSING
AND COMMUNITY DEVELOPMENT ACT OF 1987
SEC. 334. REPEAL.
  Title VII of the Housing and Community Development Act of 1987 is hereby
  repealed.
Subtitle C--Excise Tax Provisions
SEC. 341. REPEAL OF LUXURY EXCISE TAX ON BOATS AND AIRCRAFT.
  (a) GENERAL RULE- Subpart A of part I of subchapter A of chapter 31
  (relating to luxury taxes) is amended by striking sections 4002 and 4003
  and by redesignating section 4004 as section 4002.
  (b) CONFORMING AMENDMENTS-
  (1) Clause (iii) of section 4002(b)(2)(A) (as redesignated by subsection
  (a)) is amended by striking `, boat, or aircraft'.
  (2) Subparagraph (B) of section 4002(b)(2) (as redesignated by subsection
  (a)) is amended by striking `in the case of a passenger vehicle, $100,000
  in the case of a boat, and $250,000 in the case of an aircraft'.
  (3) Paragraph (2) of section 4011(c) is amended--
  (A) by striking `, boats, and aircraft' in the paragraph heading,
  (B) by striking `, boat, or aircraft' in subparagraph A,
  (C) by amending subparagraph (B) to read as follows:
  `(B) QUALIFIED LEASE- For purposes of subparagraph (A), the term `qualified
  lease' means any long-term lease (as defined in section 4052) of any
  passenger vehicle.', and
  (D) by striking `section 4004(c)' in subparagraph (C) and inserting
  `section 4002(c)'.
  (4) Subsection (c) of section 4221 is amended by striking `4002(b), 4003(c),
  4004(a)' and inserting `4002(a)'.
  (5) Subsection (d) of section 4222 is amended by striking `4002(b), 4003(c),
  4004(a)' and inserting `4002(a)'.
  (c) CLERICAL AMENDMENTS-
  (1) The table of subparts for part I is amended by striking `, boats,
  and aircraft' in the item relating to subpart A.
  (2) The table of sections for subpart A is amended by striking the items
  relating to sections 4002, 4003 and 4004 and inserting the following:
`Sec. 4002. Rules applicable to subpart A.'
  (d) EFFECTIVE DATE- The amendments made by this section shall apply to
  boats and aircraft sold or used on or after February 1, 1992.
SEC. 342. REPEAL OF EXEMPTION FOR THE USE OF DIESEL FUEL IN PLEASURE BOATS.
  (a) IN GENERAL- Paragraph (1) of section 4041(a) (relating to imposition
  of tax on diesel fuel and special motor fuels) is amended to read as follows:
  `(1) TAX ON DIESEL FUEL WHERE NO TAX IMPOSED UNDER SECTION 4091-
  `(A) HIGHWAY VEHICLES- There is hereby imposed a tax on any liquid (other
  than any product taxable under section 4081)--
  `(i) sold by any person to an owner, lessee, or other operator of a
  diesel-powered highway vehicle for use as a fuel in such vehicle, or
  `(ii) used by any person as a fuel in a diesel-powered highway vehicle
  unless there was a taxable sale of such fuel under clause (i).
  `(B) BOATS- There is hereby imposed a tax on any diesel fuel (within the
  meaning of section 4092(a)(2)) that is not taxable under subparagraph (A)
  and is--
  `(i) sold by any person to an owner, lessee, or other operator of a
  diesel-powered boat for use as a fuel in such boat, or
  `(ii) used by any person as a fuel in a diesel-powered boat unless there
  was a taxable sale of such fuel under clause (i).
  `(C) RATE OF TAX; PREVIOUSLY TAXED FUEL- The rate of tax imposed by this
  paragraph shall be the sum of the Highway Trust Fund financing rate and
  the diesel fuel deficit reduction rate in effect under section 4091 at
  the time of such sale or use. No tax shall be imposed by this paragraph
  on the sale or use of any diesel fuel if there was a taxable sale of such
  fuel under section 4091.'
  (b) EXEMPTION FOR BUSINESS USE-
  (1) IN GENERAL- Subsection (b) of section 4041 is amended by adding at
  the end thereof the following new paragraph:
  `(3) EXEMPTION FOR BOAT BUSINESS USE-
  `(A) IN GENERAL- No tax shall be imposed by subsection (a)(1)(B) or (d)(1)
  on diesel fuel sold for use or used in a boat business use.
  `(B) TAX WHERE OTHER USE- If diesel fuel on which no tax was imposed by
  reason of subparagraph (A) is used otherwise than in a boat business use,
  a tax shall be imposed by subsection (a)(1)(B)(ii) and by the corresponding
  provision of subsection (d)(1).
  `(C) BOAT BUSINESS USE DEFINED- For purposes of this paragraph, the term
  `boat business use' means any use of a boat in the active conduct of--
  `(i) a trade or business of commercial fishing or transporting persons or
  property for compensation or hire, or
  `(ii) any other trade or business unless the boat is used predominantly
  in any activity which is of a type generally considered to constitute
  entertainment, amusement or recreation.'
  (c) CONFORMING AMENDMENTS-
  (1) the heading of subsection (b) of section 4041 is amended by inserting
  `; EXEMPTION FOR BOAT BUSINESS USE' after `FUEL'.
  (2) Subparagraph (A) of section 4041(b)(1) is amended by striking `subsection
  (a) or (d)(1)' and inserting `paragraph (1)(A) or (2) of subsection (a)
  or subsection (d)(1)'.
  (3) Subparagraph (B) of section 4041(b)(1) is amended by striking `paragraph
  (1)(B) or (2)(B)' and inserting `paragraph (1)(A)(ii) or (2)(B)'.
  (4) Paragraph  (2) of section 4092(a) is amended by striking `or a' and
  inserting ', diesel-powered boat, or'.
  (5) Subparagraph (B) of section 4092(b)(1) is amended by striking
  `commercial and noncommercial vessels' each place it appears and inserting
  `boat business use as defined in section 4042(b)(3)(C)'.
  (d) Retention of Taxes in General Fund-
  (1) TAXES IMPOSED AT HIGHWAY TRUST FUND FINANCING RATE- Paragraph (4)
  of section 9503(b) (relating to transfers to Highway Trust Fund) is amended--
  (A) by striking `and' at the end of subparagraph (A),
  (B) by striking the period at the end of subparagraph (B) and inserting
  `, and', and
  (C) by adding at the end thereof the following new subparagraph:
  `(C) there shall not be taken into account the taxes imposed by sections
  4041 and 4091 on diesel fuel sold for use or used as fuel in a diesel-powered
  boat.'
  (2) TAXES IMPOSED AT LEAKING UNDERGROUND STORAGE TANK TRUST FUND FINANCING
  RATE- Subsection (b) of section 9508 (relating to transfers to Leaking
  Underground Storage Tank Trust Fund) is amended by adding at the end thereof
  the following new sentence: `For purposes of this subsection, there shall
  not be taken into account the taxes imposed by sections 4041 and 4091 on
  diesel fuel sold for use or used as fuel in a diesel-powered boat.'
  (e) EFFECTIVE DATE- The amendments made by this section shall take effect
  on July 1, 1992.
SEC. 343. ADDITIONAL SERVICES SUBJECT TO COMMUNICATIONS EXCISE TAX.
  (a) DIGITAL DATA TRANSMISSIONS- Paragraph (2) of section 4252(b) is amended
  by inserting before the period `or an unlimited number of digital data
  transmissions to the subscriber's telephone or radio telephone stations
  in such specified area if primarily used for such transmissions'.
  (b) EFFECTIVE DATE- The amendment made by this section shall take effect
  on July 1, 1992.
SEC. 344. REPEAL OF EXEMPTION FOR CERTAIN COIN-OPERATED TELEPHONE SERVICE.
  (a) REPEAL OF EXEMPTION- Section 4253 is amended--
  (1) by striking subsection (a) and redesignating subsections (b), (c),
  (d), (e), (f), (g), (h), (i), (j), and (k) as subsections (a), (b), (c),
  (d), (e), (f), (g), (h), (i), and (j), respectively, and
  (2) by striking `subsection (c), (h), (i), or (j)' in subsection (j)(1)
  (as so redesignated) and inserting `subsection (b), (g), (h), or (i)'.
  (b) EFFECTIVE DATE- The amendments made by this section shall take effect
  on July 1, 1992.
Subtitle D--Provisions Related to Retirement Savings and Pension Distributions
SEC. 351. TAXABILITY OF BENEFICIARY OF QUALIFIED PLAN.
  (a) IN GENERAL- So much of section 402 (relating to taxability of beneficiary
  of employees' trust) as precedes subsection (g) thereof is amended to read
  as follows:
`SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES' TRUST.
  `(a) TAXABILITY OF BENEFICIARY OF EXEMPT TRUST- Except as otherwise provided
  in this section, any amount actually distributed to any distributee by
  any employees' trust described in section 401(a) which is exempt from tax
  under section 501(a) shall be taxable to the distributee, in the taxable
  year of the distributee in which distributed, under section 72 (relating
  to annuities).
  `(b) Taxability of Beneficiary of Nonexempt Trust-
  `(1) CONTRIBUTIONS- Contributions to an employees' trust made by an
  employer during a taxable year of the employer which ends within or with a
  taxable year of the trust for which the trust is not exempt from tax under
  section 501(a) shall be included in the gross income of the employee in
  accordance with section 83 (relating to property transferred in connection
  with performance of services), except that the value of the employee's
  interest in the trust shall be substituted for the fair market value of
  the property for purposes of applying such section.
  `(2) DISTRIBUTIONS- The amount actually distributed or made available to any
  distributee by any trust described in paragraph (1) shall be taxable to the
  distributee, in the taxable year in which so distributed or made available,
  under section 72 (relating to annuities), except that distributions of
  income of such trust before the annuity starting date (as defined in section
  72(c)(4)) shall be included in the gross income of the employee without
  regard to section 72(e)(5) (relating to amount not received as annuities).
  `(3) GRANTOR TRUSTS- A beneficiary of any trust described in paragraph
  (1) shall not be considered the owner of any portion of such trust under
  subpart E of part I of subchapter J (relating to grantors and others
  treated as substantial owners).
  `(4) Failure to meet requirements of section 410(b)-
  `(A) HIGHLY COMPENSATED EMPLOYEES- If one of the reasons a trust is not
  exempt from tax under section 501(a) is the failure of the plan of which
  it is a part to meet the requirements of section 401(a)(26) or 410(b),
  then a highly compensated employee shall, in lieu of the amount determined
  under this subsection, include in gross income for the taxable year with
  or within which the taxable year of the trust ends an amount equal to the
  vested accrued benefit of such employee (other than the employee's investment
  in the contract) as of the close of such taxable year of the trust.
  `(B) FAILURE TO MEET COVERAGE TESTS- If a trust is not exempt from tax
  under section 501(a) for any taxable year solely because such trust is
  part of a plan which fails to meet the requirements of section 401(a)(26)
  or 410(b), this subsection shall not apply by reason of such failure to
  any employee who was not a highly compensated employee during--
  `(i) such taxable year, or
  `(ii) any preceding period for which service was creditable to such employee
  under the plan.
  `(C) HIGHLY COMPENSATED EMPLOYEE- For purposes of this paragraph, the term
  `highly compensated employee' has the meaning given such term by section
  414(q).
  `(c) Rules Applicable to Rollovers From Exempt Trusts-
  `(1) EXCLUSION FROM INCOME- If--
  `(A) any portion of the balance to the credit of an employee in a qualified
  trust is paid to the employee in an eligible rollover distribution,
  `(B) the distributee transfers any portion of the property received in
  such distribution to an eligible retirement plan, and
  `(C) in the case of a distribution of property other than money, the amount
  so transferred consists of the property distributed,
then such distribution (to the extent so transferred) shall not be includible
in gross income for the taxable year in which paid.
  `(2) MAXIMUM AMOUNT WHICH MAY BE ROLLED OVER- In the case of any eligible
  rollover distribution, the maximum amount transferred to which paragraph
  (1) applies shall not exceed the portion of such distribution which is
  includible in gross income (determined without regard to paragraph (1)).
  `(3) TRANSFER MUST BE MADE WITHIN 60 DAYS OF RECEIPT- Paragraph (1)
  shall not apply to any transfer of a distribution made after the 60th day
  following the day on which the distributee received the property distributed.
  `(4) ELIGIBLE ROLLOVER DISTRIBUTION- For purposes of this subsection,
  the term `eligible rollover distribution' means any distribution to an
  employee of all or any portion of the balance to the credit of the employee
  in a qualified trust; except that such term shall not include--
  `(A) any distribution which is part of a series of substantially equal
  periodic payments (not less frequently than annually) made--
  `(i) for the life (or life expectancy) of the employee or the joint lives (or
  joint life expectancies) of the employee and his designated beneficiary, or
  `(ii) for a specified period of 10 years or more, and
  `(B) any distribution to the extent such distribution is required under
  section 401(a)(9).
  `(5) TRANSFER TREATED AS ROLLOVER CONTRIBUTION UNDER SECTION 408-
  For purposes of this title, a transfer resulting in any portion of a
  distribution being excluded from gross income under paragraph (1) to an
  eligible retirement plan described in clause (i) or (ii) of paragraph (8)(B)
  shall be treated as a rollover contribution described in section 408(d)(3).
  `(6) SALES OF DISTRIBUTED PROPERTY- For purposes of this subsection--
  `(A) TRANSFER OF PROCEEDS FROM SALE OF DISTRIBUTED PROPERTY TREATED AS
  TRANSFER OF DISTRIBUTED PROPERTY- The transfer of an amount equal to
  any portion of the proceeds from the sale of property received in the
  distribution shall be treated as the transfer of property received in
  the distribution.
  `(B) PROCEEDS ATTRIBUTABLE TO INCREASE IN VALUE- The excess of fair market
  value of property on sale over its fair market value on distribution shall
  be treated as property received in the distribution.
  `(C) DESIGNATION WHERE AMOUNT OF DISTRIBUTION EXCEEDS ROLLOVER CONTRIBUTION-
  In any case where part or all of the distribution consists of property
  other than money, the taxpayer may designate--
  `(i) the portion of the money or other property which is to be treated as
  attributable to the amount not included in gross income, and
  `(ii) the portion of the money or other property which is to be treated
  as included in the rollover contribution. Any designation under this
  subparagraph for a taxable year shall be made not later than the time
  prescribed by law for filing the return for such taxable year (including
  extensions thereof). Any such designation, once made, shall be irrevocable.
  `(D) TREATMENT WHERE NO DESIGNATION- In any case where part or all of the
  distribution consists of property other than money and the taxpayer fails
  to make a designation under subparagraph (C) within the time provided
  therein, then--
  `(i) the portion of the money or other property which is to be treated as
  attributable to the amount not included in gross income, and
  `(ii) the portion of the money or other property which is to be treated
  as included in the rollover contribution,
shall be determined on a ratable basis.
  `(E) NONRECOGNITION OF GAIN OR LOSS- In the case of any sale described
  in subparagraph (A), to the extent that an amount equal to the proceeds
  is transferred pursuant to paragraph (1), neither gain nor loss on such
  sale shall be recognized.
  `(7) SPECIAL RULE FOR FROZEN DEPOSITS-
  `(A) IN GENERAL- The 60-day period described in paragraph (3) shall not--
  `(i) include any period during which the amount transferred to the employee
  is a frozen deposit, or
  `(ii) end earlier than 10 days after such amount ceases to be a frozen
  deposit.
  `(B) FROZEN DEPOSITS- For purposes of this paragraph, the term `frozen
  deposit' means any deposit which may not be withdrawn because of--
  `(i) the bankruptcy or insolvency of any financial institution, or
  `(ii) any requirement imposed by the State in which such institution is
  located by reason of the bankruptcy or insolvency (or threat thereof)
  of 1 or more financial institutions in such State.
A deposit shall not be treated as a frozen deposit unless on at least 1 day
during the 60-day period described in paragraph (3) (without regard to this
paragraph) such deposit is described in the preceding sentence.
  `(8) DEFINITIONS- For purposes of this subsection--
  `(A) QUALIFIED TRUST- The term `qualified trust' means an employees' trust
  described in section 401(a) which is exempt from tax under section 501(a).
  `(B) ELIGIBLE RETIREMENT PLAN- The term `eligible retirement plan' means--
  `(i) an individual retirement account described in section 408(a),
  `(ii) an individual retirement annuity described in section 408(b) (other
  than an endowment contract),
  `(iii) a qualified trust, and
  `(iv) an annuity plan described in section 403(a).
  `(9) ROLLOVER WHERE SPOUSE RECEIVES DISTRIBUTION AFTER DEATH OF EMPLOYEE-
  If any distribution attributable to an employee is paid to the spouse of
  the employee after the employee's death, the preceding provisions of this
  subsection shall apply to such distribution in the same manner as if the
  spouse were the employee; except that a trust or plan described in clause
  (iii) or (iv) of paragraph (8)(B) shall not be treated as an eligible
  retirement plan with respect to such distribution.
  `(d) TAXABILITY OF BENEFICIARY OF CERTAIN FOREIGN SITUS TRUSTS- For purposes
  of subsections (a), (b), and (c), a stock bonus, pension, or profit-sharing
  trust which would qualify for exemption from tax under section 501(a)
  except for the fact that it is a trust created or organized outside the
  United States shall be treated as if it were a trust exempt from tax under
  section 501(a).
  `(e) OTHER RULES APPLICABLE TO EXEMPT TRUSTS-
  `(1) ALTERNATE PAYEES-
  `(A) ALTERNATE PAYEE TREATED AS DISTRIBUTEE- For purposes of subsection
  (a) and section 72, an alternate payee who is the spouse or former spouse
  of the participant shall be treated as the distributee of any distribution
  or payment made to the alternate payee under a qualified domestic relations
  order (as defined in section 414(p)).
  `(B) ROLLOVERS- If any amount is paid or distributed to an alternate payee
  who is the spouse or former spouse of the participant by reason of any
  qualified domestic relations order (within the meaning of section 414(p)),
  subsection (c) shall apply to such distribution in the same manner as if
  such alternate payee were the employee.
  `(2) DISTRIBUTIONS BY UNITED STATES TO NONRESIDENT ALIENS- The amount
  includible under subsection (a) in the gross income of a nonresident alien
  with respect to a distribution made by the United States in respect of
  services performed by an employee of the United States shall not exceed
  an amount which bears the same ratio to the amount includible in gross
  income without regard to this paragraph as--
  `(A) the aggregate basic pay paid by the United States to such employee
  for such services, reduced by the amount of such basic pay which was not
  includible in gross income by reason of being from sources without the
  United States, bears to
  `(B) the aggregate basic pay paid by the United States to such employee
  for such services.
In the case of distributions under the civil service retirement laws, the term
`basic pay' shall have the meaning provided in section 8331(3) of title 5,
United States Code.
  `(3) CASH OR DEFERRED ARRANGEMENTS- For purposes of this title, contributions
  made by an employer on behalf of an employee to a trust which is a part of
  a qualified cash or deferred arrangement (as defined in section 401(k)(2))
  shall not be treated as distributed or made available to the employee
  nor as contributions made to the trust by the employee merely because the
  arrangement includes provisions under which the employee has an election
  whether the contribution will be made to the trust or received by the
  employee in cash.
  `(f) WRITTEN EXPLANATION TO RECIPIENTS OF DISTRIBUTIONS ELIGIBLE FOR
  ROLLOVER TREATMENT-
  `(1) IN GENERAL- The plan administrator of any plan shall, when making
  an eligible rollover distribution, provide a written explanation to the
  recipient of the provisions under which such distribution will not be
  subject to tax if transferred to an eligible retirement plan within 60
  days after the date on which the recipient received the distribution.
  `(2) DEFINITIONS- For purposes of this subsection--
  `(A) ELIGIBLE ROLLOVER DISTRIBUTION- The term `eligible rollover
  distribution' has the same meaning as when used in subsection (c) of this
  section or paragraph (4) of section 403(a).
  `(B) ELIGIBLE RETIREMENT PLAN- The term `eligible retirement plan' has
  the meaning given such term by subsection (c)(8)(B).'
  (b) REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS- Subsection
  (b) of section 101 is hereby repealed.
  (c) CONFORMING AMENDMENTS-
  (1) Paragraph (1) of section 55(c) is amended by striking `shall not
  include any tax imposed by section 402(e) and'.
  (2) Paragraph (8) of section 62(a) (relating to certain portion of
  lump-sum distributions from pension plans taxed under section 402(e))
  is hereby repealed.
  (3) Paragraph (4) of section 72(o) (relating to special rule for treatment
  of rollover amount) is amended by striking `sections 402(a)(5), 402(a)(7)'
  and inserting `sections 402(c)'.
  (4) Paragraph (2) of section 219(d) (relating to recontributed amount)
  is amended by striking `section 402(a)(5), 402(a)(7)' and inserting
  `section 402(c)'.
  (5) Subparagraph (A) of section 292(h)(2) (relating to flexible individual
  retirement accounts), as added by section 212 of this Act, is amended by
  striking `section 402(a)(5), 402(a)(7)' and inserting `section 402(c)'.
  (6) Paragraph (20) of section 401(a) is amended by striking `qualified
  total distribution described in section 402(a)(5)(E)(i)(I)' and inserting
  `distribution to a distributee on account of a termination of the plan
  of which the trust is a part, or in the case of a profit-sharing or stock
  bonus plan, a complete discontinuance of contributions under such plan'.
  (7) Subparagraph (B) of section 401(a)(28) (relating to coordination with
  distribution rules) is amended by striking clause (v).
  (8) Subclause (IV) of section 401(k)(2)(B)(i) is amended by striking
  `section 402(a)(8)' and inserting `section 402(e)(3)'.
  (9) Clause (ii) of section 401(k)(10)(B) (relating to distributions that
  must be lump-sum distributions is amended to read as follows:
  `(ii) LUMP SUM DISTRIBUTION- For purposes of this subparagraph, the term
  `lump sum distribution' means any distribution of the balance to the credit
  of an employee immediately before the distribution.'
  (10) Paragraph (1) of section 402(g) is amended by striking `subsections
  (a)(8)' and inserting `subsections (e)(3)'.
  (11) Subsection (i) of section 402 is amended by striking `, except as
  otherwise provided in subparagraph (A) of subsection (e)(4)'.
  (12) Subsection (j) of section 402 is hereby repealed.
  (13)(A) Clause (i) of section 403(a)(4)(A) is amended by inserting `in an
  eligible rollover distribution' before the comma at the end thereof.
  (B) Subparagraph (B) of section 403(a)(4) is amended to read as follows:
  `(B) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of section
  402(c) shall apply for purposes of subparagraph (A).'
  (14)(A) Clause (i) of section 403(b)(8)(A) is amended by inserting `in an
  eligible rollover distribution' before the comma at the end thereof.
  (B) Paragraph (8) of section 403(b) is amended by striking subparagraphs
  (B), (C), and (D) and inserting the following:
  `(B) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of paragraphs
  (2), (3), (4), (5), (6), and (7) of section 402(c) shall apply for purposes
  of subparagraph (A).'
  (15) Subsection (c) of section 406 (relating to termination of status as
  deemed employee not to be treated as separation from service for purposes
  of limitation of tax) is hereby repealed.
  (16) Subsection (c) of section 407 (relating to termination of status as
  deemed employee not to be treated as separation from service for purposes
  of limitation of tax) is hereby repealed.
  (17) Paragraph (1) of section 408(a) is amended by striking `section
  402(a)(5), 402(a)(7)' and inserting `section 402(c)'.
  (18) Clause (ii) of section 408(d)(3)(A) is amended by striking `of qualified
  total distribution (as defined in section 402(a)(5)(E)(i))' and inserting
  `(as defined in section 402(c)(1))'.
  (19) Clause (ii) of section 408(d)(3)(A) is amended--
  (A) by striking `the entire amount received (including money and any other
  property) represents the entire amount in the account or the entire value
  of the annuity and', and
  (B) by striking `the entire amount thereof' and inserting `the entire
  amount received (including money and any other property)'.
  (20) Subparagraph (B) of section 408(d)(3) (relating to limitations)
  is amended by striking the second sentence thereof.
  (21) Subparagraph (F) of section 408(d)(3) (relating to frozen deposits) is
  amended by striking `section 402(a)(6)(H)' and inserting `section 402(c)(7)'.
  (22) Subclause (I) of section 414(n)(5)(C)(iii) is amended by striking
  `section 402(a)(8)' and inserting `section 402(e)(3)'.
  (23) Paragraph (2) of section 414(s) (relating to employer may elect to
  treat certain deferrals as compensation) is amended by striking `402(a)(8)'
  and inserting `402(e)(3)'.
  (24) Subparagraph (A) of section 415(b)(2) (relating to annual benefit
  in general) is amended by striking `sections 402(a)(5)' and inserting
  `sections 402(c)'.
  (25) Subparagraph (B) of section 415(b)(2) (relating to adjustment for
  certain other forms of benefit) is amended by striking `sections 402(a)(5)'
  and inserting `sections 402(c)'.
  (26) Paragraph (2) of section 415(c) (relating to annual addition) is
  amended by striking `sections 402(a)(5)' and inserting `sections 402(c)'.
  (27) Clause (i) of section 457(c)(2)(B) is amended by striking `section
  402(a)(8)' and inserting `section 402(e)(3)'.
  (28) Subsection (c) of section 691 (relating to coordination with section
  402(e)) is amended by striking paragraph (5).
  (29) Subparagraph (B) of section 871(a)(1) (relating to income other than
  capital gains) is amended by striking `402(a)(2), 403(a)(2), or'.
  (30) Paragraph (1) of section 871(b) (relating to imposition of tax) is
  amended by striking `section 1, 55, or 402(e)(1)' and inserting `section
  1 or 55'.
  (31) Paragraph (1) of section 871(k) is amended by striking `section
  402(a)(4)' and inserting `section 402(e)(2)'.
  (32) Subsection (b) of section 877 (relating to alternative tax) is amended
  by striking `section 1, 55, or 402(e)(1)' and inserting `section 1 or 55'.
  (33) Subsection (b) of section 1441 (relating to income items) is amended
  by striking `section 402(a)(2), 403(a)(2), or'.
  (34) Paragraph (5) of section 1441(c) (relating to special items) is
  amended by striking `section 402(a)(2), 403(a)(2), or'.
  (35) Subparagraph (A) of section 3121(v)(1) is amended by striking `section
  402(a)(8)' and inserting `section 402(e)(3)'.
  (36) Subparagraph (A) of section 3306(r)(1) is amended by striking `section
  402(a)(8)' and inserting  `section 402(e)(3)'.
  (37) Subsection (a) of section 3405 is amended by striking `PENSIONS,
  ANNUITIES, ETC- ' from the heading thereof and inserting `PERIODIC PAYMENTS-
  '.
  (38) Subsection (b) of section 3405 (relating to nonperiodic distribution)
  is amended--
  (A) by striking `the amount determined under paragraph (2)' from paragraph
  (1) thereof and inserting `an amount equal to 10 percent of such
  distribution' and
  (B) by striking paragraph (2) (relating to amount of withholding) and
  redesignating paragraph (3) as paragraph (2).
  (39) Paragraph (4) of section 3405(d) (relating to qualified total
  distributions) is hereby repealed.
  (40) Paragraph (8) of section 3405(d) (relating to maximum amounts withheld)
  is amended to read as follows:
  `(8) MAXIMUM AMOUNT WITHHELD- The maximum amount to be withheld under
  this section on any designated distribution shall not exceed the sum of
  the amount of money and the fair market value of other property received
  in the distribution.'
  (41) Subparagraph (A) of section 4973(b)(1) is amended by striking `sections
  402(a)(5), 402(a)(7)' and inserting `sections 402(c)'.
  (42) Paragraph (4) of section 4980A(c) is amended to read as follows:
  `(4) ONE-TIME ELECTION FOR CERTAIN DISTRIBUTIONS- A taxpayer may elect
  to determine the excess distributions as defined in paragraph (1) for a
  calendar year by multiplying the limitation in paragraph (1) by 5 times the
  amount of such limitation without regard to this subparagraph. Not more than
  one election may be made under this paragraph with respect to any taxpayer.'
  (43) Subparagraph (C) of section 7701(j)(1) is amended by striking `section
  402(a)(8)' and inserting `section 402(e)(3)'.
  (d) EFFECTIVE DATES-
  (1) IN GENERAL- Except as otherwise provided in this subsection, the
  amendments made by this section shall apply to taxable years beginning
  after December 31, 1991.
  (2) SPECIAL RULE FOR CERTAIN DISTRIBUTIONS- Distributions made before
  February 1, 1992, shall be taxed in accordance with the provisions of
  sections 101(b) and 402 of the Internal Revenue Code of 1986 as in effect
  prior to the amendments made by this section.
  (3) TERMINATION OF PRIOR TRANSITIONAL RULES- Paragraph (5) of section 1122(h)
  of the Tax Reform Act of 1986 shall not apply to any amount distributed
  after December 31, 1996.
  (4) 5-YEAR PHASE-OUT OF PRIOR TRANSITIONAL RULES-
  (A) In the case of any lump distribution in any taxable year beginning
  after December 31, 1991 and before January 1, 1997, paragraph (5) of
  section 1122(h) of the Tax Reform Act of 1986 shall apply to the phase-out
  percentage of any lump sum distribution which would have been eligible
  for the election of those provisions.
  (B) For purposes of this paragraph-
     In the case of distributions
--The phase-out
      during calendar year:
--percentage is:
    1992
--100
    1993
--70
    1994
--35
    1995
--20
    1996
--10
SEC. 352. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER CERTAIN
EMPLOYER PLANS.
  (a) GENERAL RULE- Subsection (d) of section 72 (relating to annuities;
  certain proceeds of endowment and life insurance contracts) is amended to
  read as follows:
  `(d) SPECIAL RULES FOR QUALIFIED EMPLOYER RETIREMENT PLANS-
  `(1) Simplified method of taxing annuity payments-
  `(A) IN GENERAL- In the case of any amount received as an annuity under
  a qualified employer retirement plan--
  `(i) subsection (b) shall not apply, and
  `(ii) the investment in the contract shall be recovered as provided in
  this paragraph.
  `(B) METHOD OF RECOVERING INVESTMENT IN CONTRACT-
  `(i) IN GENERAL- Gross income shall not include so much of any monthly
  annuity payment under a qualified employer retirement plan as does not
  exceed the amount obtained by dividing--
  `(I) the investment in the contract (as of the annuity starting date), by
  `(II) the number of anticipated payments determined under the table contained
  in clause (iii) (or, in the case of a contract to which subsection (c)(3)(B)
  applies, the number of monthly annuity payments under such contract).
  `(ii) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of paragraphs
  (2) and (3) of subsection (b) shall apply for purposes of this paragraph.
  `(iii) Number of anticipated payments-
     If the age of the
--The number of
     primary annuitant on
--anticipated
     the annuity starting:
--payments is:
    Not more than 55
--300
    More than 55 but not more than 60
--260
    More than 60 but not more than 65
--240
    More than 65 but not more than 70
--170
    More than 70
--120
  `(C) ADJUSTMENT FOR REFUND FEATURE NOT APPLICABLE- For purposes of this
  paragraph, investment in the contract shall be determined under subsection
  (c)(1) without regard to subsection (c)(2).
  `(D) SPECIAL RULE WHERE LUMP SUM PAID IN CONNECTION WITH COMMENCEMENT OF
  ANNUITY PAYMENTS- If in connection with the commencement of annuity payments
  under any qualified employer plan the taxpayer receives a lump sum payment--
  `(i) such payment shall be taxable under subsection (e) as if received
  before the annuity starting date, and
  `(ii) the investment in the contract for purposes of this paragraph shall
  be determined as if such payment had been so received.
  `(E) EXCEPTION- This paragraph shall not apply in any case where the
  primary annuitant has attained age 75 on the annuity starting date unless
  there are fewer than 5 years of guaranteed payments under the annuity.
  `(F) ADJUSTMENT WHERE ANNUITY PAYMENTS NOT ON MONTHLY BASIS- In any case
  where the annuity payments are not made on a monthly basis, appropriate
  adjustments in the application of this paragraph shall be made to take
  into account  the period on the basis of which such payments are made.
  `(G) QUALIFIED EMPLOYER RETIREMENT PLAN- For purposes of this paragraph,
  the term `qualified employer retirement plan' means any plan or contract
  described in paragraph (1), (2), or (3) of section 4974(c).
  `(2) TREATMENT OF EMPLOYEE CONTRIBUTIONS UNDER DEFINED CONTRIBUTION PLANS-
  For purposes of this section, employee contributions (and any income
  allocable thereto) under a defined contribution plan may be treated as a
  separate contract.'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply in
  cases where the annuity starting date is on or after February 1, 1992.
SEC. 353. REQUIREMENT THAT QUALIFIED PLANS INCLUDE OPTIONAL TRUSTEE-TO-TRUSTEE
TRANSFERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS.
  `(a) GENERAL RULE- Subsection (a) of section 401 (relating to requirements
  for qualification) is amended by inserting after paragraph (30) the
  following new paragraph:
  `(31) Optional direct transfer or eligible rollover distributions-
  `(A) IN GENERAL- A trust shall not constitute a qualified trust under
  this section unless the plan of which such trust is a part provides that
  if the distributee of any eligible rollover distribution--
  `(i) elects to have such distribution paid directly to an eligible retirement
  plan, and
  `(ii) specifies the eligible retirement plan to which such distribution
  is to be paid (in such form and at such time as the plan administrator
  may prescribe),
such distribution shall be made in the form of a direct trustee-to-trustee
transfer to the eligible retirement plan so specified.
  `(B) LIMITATION- Subparagraph (A) shall apply only to the extent that the
  eligible rollover distribution would be includible in gross income if not
  transferred as provided in subparagraph (A) (determined without regard to
  sections 402(c) and 403(a)(4)).
  `(C) ELIGIBLE ROLLOVER DISTRIBUTION- For purposes of this paragraph, the
  term `eligible rollover distribution' has the meaning given such term by
  section 402(f)(2)(A).
  `(D) ELIGIBLE RETIREMENT PLAN- For purposes of this paragraph, the term
  `eligible retirement plan' has the meaning given such term by section
  402(c)(8)(B), except that a qualified trust shall be considered an eligible
  retirement plan only if it is a defined contribution plan, the terms of
  which permit the acceptance of rollover distributions.'
  (b) EMPLOYEE'S ANNUITIES- Paragraph (2) of section 404(a) (relating to
  employee's annuities) is amended by striking `and (27)' and inserting
  `(27), and (31)'.
  (c) Exclusion From Income-
  (1) QUALIFIED TRUSTS- Subsection (e) of section 402 (relating to taxability
  of beneficiary of employees' trust), as amended by section 351 of this Act,
  is amended by adding at the end the following new paragraph:
  `(4) DIRECT TRUSTEE-TO-TRUSTEE TRANSFERS- Any amount transferred in a direct
  trustee-to-trustee transfer in accordance with section 401(a)(31) shall
  not be includible in gross income for the taxable year of such transfer.'
  `(2) EMPLOYEE ANNUITIES- Subsection (a) of section 403 is amended by adding
  at the end thereof the following new paragraph:
  `(5) DIRECT TRUSTEE-TO-TRUSTEE TRANSFER- Any amount transferred in a direct
  trustee-to-trustee transfer in accordance with section 401(a)(31) shall
  not be includible in gross income for the taxable year of such transfer.'
  (d) WRITTEN EXPLANATION- Paragraph (1) of section 402(f) (as amended by
  section 351 of this Act) is amended to read as follows:
  `(1) IN GENERAL- The plan administrator of any plan shall, before making
  an eligible rollover distribution, provide a written explanation to the
  recipient of--
  `(A) the optional direct transfer provisions provided pursuant to section
  401(a)(31), and
  `(B) the provisions under which such distribution will not be subject to
  tax if transferred to an eligible retirement plan within 60 days after
  the date on which the recipient received the distribution.'
  (e) EFFECTIVE DATE- The amendments made by this section shall apply to
  distributions in plan years beginning on or after February 1, 1992.
SEC. 354. SALARY REDUCTION ARRANGEMENTS OF SIMPLIFIED EMPLOYEE PENSIONS.
  (a) Salary Reduction Arrangements-
  (1) IN GENERAL- Paragraph (6) of section 408(k) (relating to salary
  reduction arrangements) is amended to read as follows:
  `(6) Employee may elect salary reduction arrangement-
  `(A) QUALIFIED ARRANGEMENTS- A simplified employee pension shall not fail
  to meet the requirements of this subsection for a year merely because,
  under the terms of the pension, the employee may participate in a qualified
  salary reduction arrangement.
  `(B) CERTAIN EMPLOYERS NOT ELIGIBLE- This paragraph shall not apply with
  respect to any year in the case of a simplified employee pension maintained
  by an employer with more than 100 employees who were eligible to participate
  (or would have been required to be eligible to participate if a pension
  was maintained) at any time during the preceding year.
  `(C) QUALIFIED SALARY REDUCTION ARRANGEMENT- For purposes of this paragraph,
  the term `qualified salary reduction arrangement' means a written arrangement
  of an eligible employer which meets the requirements of subparagraphs (D),
  (E), and (F) and under which--
  `(i) an employee may elect to have the employer make payments--
  `(I) as elective employer contributions to the simplified employee pension
  on behalf of the employee, or
  (II) to the employee directly in cash,
  `(ii) the amount which an employee may elect under clause (i) for any year
  may not exceed a total of $3,000 for any year.
An arrangement meets the requirements of clause (ii) only if, under the
arrangement, the employer may not place a limit on the percentage of
compensation an employee may elect to contribute.
  `(D) NONELECTIVE CONTRIBUTIONS- An arrangement meets the requirements of
  this subparagraph only if, under the arrangement, the employer is required
  (without regard to whether the employee makes an elective contribution)
  to make a contribution to the simplified employee pension on behalf of each
  employee eligible to participate for the year in an amount equal to 1 percent
  of the employee's compensation (not in excess of $100,000) for the year.
  `(E) Arrangement may be only plan of employer-
  `(i) IN GENERAL- An arrangement shall not be treated as a qualified salary
  reduction arrangement for any year if the employer (or any predecessor
  employer) maintained a qualified plan with respect to which contributions
  were made, or amounts were accrued, for any year in the period beginning
  with the year such arrangement became effective and ending with the year
  for which the determination is being made.
  `(ii) SERVICE CREDIT- A qualified plan maintained by an employer shall
  provide that, in computing the accrued benefit of any employee, no credit
  shall be given with respect to any year for which such employee was eligible
  to participate in a qualified salary reduction arrangement of such employer.
  `(F) Rules relating to matching contributions-
  `(i) IN GENERAL- An arrangement meets the requirements of this subparagraph
  only if, under the arrangement, the employer is required to make a matching
  contribution described in subparagraph (F)(ii) to the simplified employee
  pension on behalf of each employee that makes elective contributions under
  subparagraph (C)(i)(I).
  `(ii) RATES OF MATCHING CONTRIBUTIONS- The level of an employer's matching
  contribution--
  `(I) shall equal as much of the employee's elective contribution as does
  not exceed 3 percent of the employee's compensation, plus
  `(II) an amount equal to 50 percent of the employee's elective contribution
  that exceeds 3 percent of the employee's compensation and is not greater
  than 5 percent of the employee's compensation.
  `(G) QUALIFIED PLAN- For purposes of this paragraph, the term `qualified
  plan' means a plan, contract, pension, or trust described in subparagraph
  (A) or (B) of section 219(g)(5).
  `(H) COMPENSATION- For purposes of this paragraph, the term compensation
  has the same meaning as in section 414(q)(5).'
  (2) CONFORMING CHANGES- Subparagraph (B) of section 408(k)(7) is amended
  by striking `paragraph (2)(C)' and inserting `paragraphs (2)(C) and (6)(H)'.
  (b) COST-OF-LIVING ADJUSTMENTS- Paragraph (8) of section 408(k) is amended
  to read as follows:
  `(8) Cost-of-living adjustments-
  `(A) IN GENERAL- The Secretary shall adjust each of the following amounts
  at the same time and in the same manner as under section 415(d):
  `(i) The $300 amount in paragraph (2)(C).
  `(ii) The $200,000 amount in paragraph (3)(C).
  `(iii) The $3,000 amount in paragraph (6)(C)(ii).
  `(iv) The $100,000 amount in paragraph (6)(D)(i).
  `(B) Exceptions-
  `(i) COORDINATION WITH SECTION 401(A)(17)- The amount described in clause
  (ii) of subparagraph (A) (as adjusted under such subparagraph) shall not
  exceed 100 percent of the amount in effect under section 401(a)(17).
  `(ii) BASE PERIOD- The base period taken into account under section 415(d)
  for the amounts described in clauses (iii) and (iv) of subparagraph (A)
  shall be the calendar quarter beginning October 1, 1991.'
  (c) REPORTING REQUIREMENTS- Subsection (1) of section 408 is amended--
  (1) by striking `(1) SIMPLIFIED EMPLOYER REPORTS- An' and inserting the
  following:
  `(1) Simplified Employer Reports-
  `(1) IN GENERAL- An',
  (2) by moving the text of such subsection 2 ems to the right, and
  (3) adding at the end thereof the following new paragraph:
  `(2) Qualified salary reduction arrangements under simplified employee
  pensions-
  `(A) IN GENERAL- The employer maintaining any simplified employee pension
  established pursuant to a qualified salary reduction arrangement under
  subsection (k)(6) shall each year prepare, and provide to each employee
  eligible to participate in the arrangement, a description containing the
  following information:
  `(i) The name and address of the employer and the trustee.
  `(ii) The requirements for eligibility for participation.
  `(iii) The benefits provided with respect to the arrangement.
  `(iv) The time and method of making elections with respect to the
  arrangement.
  `(v) The procedures for, and effects of, withdrawals from the arrangement.
  `(B) TIME REPORT PROVIDED- The description under subparagraph (A) for any
  year shall be provided to each employee during the 30-day period preceding
  the first date during such year on which the employee may make an election
  with respect to the arrangement.'
  (d) Effective Date-
  (1) IN GENERAL- The amendments made by this section shall apply to years
  beginning after December 31, 1991.
  (2) TRANSITION RULE- The amendments made by this section shall not apply
  to a simplified employee pension which was in effect on the date of the
  enactment of this Act and which maintained a salary reduction arrangement
  on such date, unless the employer elects to have such amendments apply
  for any year and all subsequent years.
SEC. 355. TAX EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).
  (a) GENERAL RULE- Subparagraph (B) of section 401(k)(4) is amended to read
  as follows:
  `(B) STATE AND LOCAL GOVERNMENTS NOT ELIGIBLE- A cash and deferred
  arrangement shall not be treated as a qualified cash and deferred arrangement
  if it is part of a plan maintained by a State or local government or
  political subdivision thereof, or any agency or instrumentality thereof. This
  subparagraph shall not apply to a rural cooperative plan.'
  (b) EFFECTIVE DATES- The amendment made by this section shall apply to
  plan years beginning on or after February 1, 1992.
SEC. 356. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE PLANS.
  (a) IN GENERAL- The Secretary of the Treasury may, as a condition of
  sponsorship, prescribe rules defining the duties and responsibilities
  of sponsors of master and prototype plans, regional prototype plans,
  and other Internal Revenue Service preapproved plans.
  (b) DUTIES RELATING TO PLAN AMENDMENT, NOTIFICATION OF ADOPTERS, AND PLAN
  ADMINISTRATION- The duties and responsibilities referred to in subsection
  (a) may include--
  (1) the maintenance of lists of persons adopting the sponsor's plans,
  including the updating of such lists not less frequently than annually,
  (2) the furnishing of notices at least annually to such persons and to the
  Secretary or his delegate, in such form and at such time as the Secretary
  shall prescribe,
  (3) duties relating to administrative services to such persons in the
  operation of their plans,
  (4) other duties that the Secretary considers necessary to ensure that--
  (A) the master and prototype, regional prototype, and other preapproved
  plans of adopting employers are timely amended to meet the requirements
  of the Internal Revenue Code of 1986 or of any rule or regulation of the
  Secretary, and
  (B) adopting employers receive timely notification of amendments and other
  actions taken by sponsors with respect to their plans.
SEC. 357. SIMPLIFICATION OF NONDISCRIMINATION TESTS APPLICABLE UNDER SECTIONS
401(k) AND 401(m).
  (a) CASH OR DEFERRED ARRANGEMENTS-
  (1) IN GENERAL- Paragraph (3) of section 401(k) (relating to application
  of participation and discrimination standards) is amended by redesignating
  subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively,
  and by striking subparagraphs (A) and (B) and inserting the following:
  `(A) IN GENERAL- A cash or deferred arrangement shall not be treated as
  a qualified cash or deferred arrangement unless--
  `(i) those employees eligible to benefit under the arrangement satisfy
  the provisions of section 410(b)(1),
  `(ii) the actual deferral percentage of each eligible highly compensated
  employee for the plan year does not exceed 200 percent of the average
  deferral percentage of nonhighly compensated employees for the preceding
  plan year, and
  `(iii) the actual deferral percentage of each eligible highly compensated
  employee for the plan year does not exceed the average deferral percentage
  of nonhighly compensated employees for the preceding plan year by more
  than 3 percentage points.
  `(B) DEFERRAL PERCENTAGES- For purposes of this paragraph--
  `(i) ACTUAL DEFERRAL PERCENTAGE- The actual deferral percentage of any
  employee for a plan year is the percentage which--
  `(I) the amount of employer contributions actually paid over to the trust
  on behalf of such employee for such plan year, is of
  `(II) the employee's compensation for such plan year.
  `(ii) AVERAGE DEFERRAL PERCENTAGE OF NONHIGHLY COMPENSATED EMPLOYEES-
  The average deferral percentage of nonhighly compensated employees for any
  plan year is the average of the actual deferral percentages for such plan
  year all of eligible employees other than highly compensated employees.
  `(C) SPECIAL RULES-
  `(i) ELECTION TO USE AVERAGE DEFERRAL PERCENTAGE FOR HIGHLY COMPENSATED
  EMPLOYEE- A plan may provide that in lieu of satisfying the requirements
  of clauses (ii) and (iii) of subparagraph (3)(A), a cash or deferred
  arrangement may be a qualified cash or deferred arrangement if the average
  deferral percentage for eligible highly compensated employees for such
  year bears a relationship to the average deferral percentage of nonhighly
  compensated employees for the preceding plan year which meets either of
  the following tests:
  `(I) The average deferral percentage for the group of eligible highly
  compensated employees is not more than the average deferral percentage
  for nonhighly compensated employees for the preceding plan year multiplied
  by 1.25.
  `(II) The excess of the average deferral percentage for the group of
  eligible highly compensated employees over the average deferral percentage
  for nonhighly compensated employees for the preceding plan year is not
  more than 2 percentage points, and the average deferral percentage for
  the group of eligible highly compensated employees is not more than the
  average deferral percentage for nonhighly compensated employees for the
  preceding plan year multiplied by 2.
The average deferral percentage for the group of eligible highly compensated
employees is the average of the actual deferral percentages for such plan
year of all eligible highly compensated employees.
  `(ii) SPECIAL RULE FOR FIRST PLAN YEAR- In the case of the first plan year
  of any plan, the amount taken into account as the average deferral percentage
  of nonhighly compensated employees for the preceding plan year shall be--
  `(I) 3 percent, or
  `(II) if the employer makes an election under this subclause, the average
  deferral percentage of nonhighly compensated employees determined for such
  first plan year.
  `(iii) AGGREGATION OF PLANS- If 2 or more plans which include cash or
  deferred arrangements are considered as 1 plan for purposes of section
  401(a)(4) or 410(b), the cash or deferred arrangements included in such
  plans shall be treated as 1 arrangement for purposes of this paragraph. If
  any highly compensated employee is a participant under 2 or more cash or
  deferred arrangements of the employer, for purposes of determining the
  actual deferral percentage with respect to such employee, all such cash
  or deferred arrangements shall be treated as 1 cash or deferred arrangement.
  `(iv) Rules relating to election-
  `(I) IN GENERAL- The election to use the average deferral percentage
  pursuant to subparagraph (C) shall be made, if at all, with respect to the
  first plan year of the plan (or, if later, the first plan year beginning
  after February 1, 1992) and, once made, shall be irrevocable.
  `(II) CONSISTENCY REQUIREMENT- The election to use the average contribution
  percentage pursuant to section 401(m)(3)(C)(i) will be treated as an election
  to use the average deferral percentage pursuant to subparagraph (C)(i).'
  (2) DISTRIBUTION OF EXCESS CONTRIBUTIONS- Paragraph (8) of section 401(k)
  is amended by striking subparagraphs (A), (B), and (C), and inserting
  the following:
  `(A) IN GENERAL- A cash or deferred arrangement shall not be treated as
  failing to meet the requirements of clauses (ii) and (iii) of paragraph
  (3)(A) (or clause (i) of paragraph (3)(C)) for any plan year if, with
  respect to each highly compensated employee having excess contributions
  for such plan year, the amount of such excess contributions (and any income
  allocable to such contributions) is distributed to such employee before the
  close of the following plan year. Any distribution of excess contributions
  (and income) may be made without regard to any other provision of law.
  `(B) EXCESS CONTRIBUTIONS- For purposes of subparagraph (A), the term
  `excess contributions' means, with respect to any highly compensated
  employee for any plan year, the excess of--
  `(i) the aggregate amount of employer contributions actually paid over to
  the trust on behalf of such employee for such plan year, over
  `(ii) the maximum amount of such contributions permitted under the
  limitations of paragraph (3).
  `(C) PLANS THAT UTILIZE AVERAGING OPTION- A plan that elects to use
  the average deferral percentage for highly compensated employees as
  provided in paragraph (3)(C)(i) must determine the maximum amount
  of contributions permitted under the limits of paragraph (3)(C)(i) by
  reducing the contributions made on behalf of highly compensated employees
  in order of the actual deferral percentages beginning with the highest of
  such percentages and distribute the excess contributions to the highly
  compensated employees on the basis of the respective portions of the
  excess contributions attributable to each such employee. To the extent
  permitted by regulations, an employee may elect to treat the amount of
  excess contributions as an amount distributed to the employee and then
  contributed by the employee to the plan.'
  (b) Nondiscrimination Test for Matching Contributions and Employee
  Contributions-
  (1) IN GENERAL- Subparagraph (A) of section 401(m)(2) (relating to
  contribution percentage requirement) is amended to read as follows:
  `(A) CONTRIBUTION PERCENTAGE REQUIREMENT- A plan meets the contribution
  percentage requirement of this paragraph for any plan year only if--
  `(i) the actual contribution percentage of each eligible highly compensated
  employee for such plan year does not exceed 200 percent of the average
  contribution percentage of nonhighly compensated employees for the preceding
  plan year, and
  `(ii) the actual contribution percentage of each eligible highly compensated
  employee for the plan year does not exceed the average contribution
  percentage of nonhighly compensated employees for the preceding plan year
  by more than 3 percentage points.'
  (2) CONTRIBUTION PERCENTAGES- Paragraph (3) of section 401(m) is amended
  to read as follows:
  `(3) CONTRIBUTION PERCENTAGES- For purposes of this subsection--
  `(A) ACTUAL CONTRIBUTION PERCENTAGE- The actual contribution percentage
  of any employee for any plan year is the percentage which--
  `(i) the sum of the matching contributions and employee contributions paid
  under the plan on behalf of such employee for such plan year, is of
  `(ii) such employee's compensation (within the meaning of section 414(s))
  for such plan year.
  `(B) AVERAGE CONTRIBUTION PERCENTAGE OF NONHIGHLY COMPENSATED EMPLOYEES-
  The average contribution percentage of nonhighly compensated employees for
  any plan year is the average of the actual contribution percentages for such
  plan year of all eligible employees other than highly compensated employees.
  `(C) Special rules-
  `(i) ELECTION TO USE AVERAGE CONTRIBUTION PERCENTAGE FOR HIGHLY COMPENSATED
  EMPLOYEE- A plan may provide that in lieu of satisfying the requirements of
  paragraph (2)(A), a plan meets the contribution requirement of this section
  if the average contribution percentage for eligible highly compensated
  employees for such year bears a relationship to the average contribution
  percentage of nonhighly compensated employees for the preceding plan year
  which meets either of the following tests:
  `(I) The average contribution percentage for the group of eligible highly
  compensated employees is not more than the average contribution percentage
  for nonhighly compensated employees for the preceding plan year multiplied
  by 1.25.
  `(II) The excess of the average contribution percentage  for the group
  of eligible highly compensated employees over the average contribution
  percentage for nonhighly compensated employees for the preceding plan
  year is not more than 2 percentage points, and the average contribution
  percentage  for the group of eligible highly compensated employees is not
  more than the average contribution percentage  for nonhighly compensated
  employees for the preceding plan year multiplied by 2.
The average contribution percentage for the group of eligible highly
compensated employees is the average of the actual contribution percentages
for such plan year of all eligible highly compensated employees.
  `(ii) CERTAIN CONTRIBUTIONS MAY BE TAKEN INTO ACCOUNT- Under regulations, an
  employer may elect to take into account under subparagraph (A)(i) elective
  deferrals and qualified nonelective contributions under the plan or any
  other plan of employer. If matching contributions are taken into account
  for purposes of subsection (k)(3)(A) for any plan year, such contributions
  shall not be taken into account under paragraph (2) for such plan year.
  `(iii) SPECIAL RULE FOR FIRST PLAN YEAR- Rules similar to the rules of
  subsection (k)(3)(C)(ii) shall apply for purposes of this subsection.
  `(iv) RULES RELATING TO ELECTIONS-
  `(I) IN GENERAL- The election to use the average contribution percentage
  pursuant to subparagraph (C) shall be made, if at all, with respect to the
  first plan year of the plan (or, if later, the first plan year beginning
  after February 1, 1992) and, once made, shall be revocable only with the
  consent of the Commissioner.
  `(II) CONSISTENCY REQUIREMENT- The election to use the average deferral
  percentage pursuant to section 401(k)(3)(C)(i) will be treated as an election
  to use the average contribution percentage pursuant to subparagraph (C)(i).'
  (3) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS- Paragraph (6) of
  section 401(m) is amended--
  (A) by striking subparagraphs (A) and (B) and inserting the following:
  `(A) IN GENERAL- A plan shall not be treated as failing to meet the
  requirements of paragraph (1) for any plan year if, with respect to
  each highly compensated employee having excess aggregate contributions
  for such plan year, the amount of such excess aggregate contributions
  (and any income allocable to such contributions) is distributed to such
  employee before the close of the following plan year (or, if forfeitable,
  is forfeited). Any distribution of excess aggregate contributions (and
  income) may be made without regard to any other provision of law.
  `(B) EXCESS AGGREGATE CONTRIBUTIONS- For purposes of subparagraph (A),
  the term `excess aggregate contributions' means, with respect to any highly
  compensated employee for any plan year, the excess of--
  `(i) the aggregate amount of the matching contributions and employee
  contributions (and any qualified nonelective contribution or elective
  contribution taken into account under paragraph (3)(A)(i)) actually made
  on behalf of such employee for such plan year, over
  `(ii) the maximum amount of such contributions permitted under the
  limitations of paragraph (2)(A).'
  `(C) PLANS THAT UTILIZE AVERAGING OPTION- A plan that elects to use
  the average contribution percentage for highly compensated employees
  as provided in paragraph (3)(C)(i) must determine the maximum amount of
  contributions permitted under the limits of paragraph (3)(C)(i) by reducing
  the contributions made on behalf of highly compensated employees in order
  of the actual contribution percentages beginning with the highest of such
  percentages and distribute the excess aggregate contributions to the highly
  compensated employees on the basis of the respective portions of the excess
  aggregate contributions attributable to each such employee. Forfeitures
  of excess aggregate contributions may not be allocated to participants
  whose contributions are reduced under this paragraph.'
  (4) CONFORMING AMENDMENT- Paragraph (9) of section 401(m) is amended to
  read as follows:
  `(9) REGULATIONS- The Secretary shall prescribe such regulations as may
  be necessary to carry out the purposes of this subsection and subsection
  (k), including regulations permitting appropriate aggregation of plans
  and contributions.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  plan years beginning on or after February 1, 1992.
SEC. 358. DEFINITION OF HIGHLY COMPENSATED EMPLOYEE.
  (a) GENERAL RULE- Subsection (q) of section 414 (defining highly compensated
  employee) is amended to read as follows:
  `(q) HIGHLY COMPENSATED EMPLOYEE-
  `(1) IN GENERAL- The term `highly compensated employee' means any employee
  who, during the year or the preceding year--
  `(A) was a 5-percent owner, or
  `(B) received compensation from the employer in excess of $50,000.
The Secretary shall adjust the $50,000 amount specified in subparagraph (B)
at the same time and in the same manner as under section 415(d).
  `(2) SPECIAL RULE FOR CURRENT YEAR- In the case of the year for which
  the relevant determination is being made, an employee not described in
  subparagraph (B) of paragraph (1) for the preceding year (without regard
  to this paragraph) shall not be treated as described in such subparagraph
  for the year for which the determination is being made unless such employee
  is a member of the group consisting of the 100 employees paid the highest
  compensation during the year for which such determination is being made.
  `(3) 5-PERCENT OWNER- An employee shall be treated as a 5-percent owner
  for any year if at any time during such year such employee was a 5-percent
  owner (as defined in section 416(i)(1)) of the employer.
  `(4) SPECIAL RULE IF NO EMPLOYEE DESCRIBED IN PARAGRAPH (1)- If no employee
  is treated as a highly compensated employee under paragraph (1), the
  employee who has the highest compensation for the year shall be treated
  as a highly compensated employee.
  `(5) COMPENSATION- For purposes of this subsection--
  `(A) IN GENERAL- The term `compensation' means compensation within the
  meaning of section 415(c)(3).
  `(B) CERTAIN PROVISIONS NOT TAKEN INTO ACCOUNT- The determination under
  subparagraph (A) shall be made--
  `(i) without regard to sections 125, 402(e)(3), 402(h)(1)(B), and 414(h)(2),
  and
  `(ii) in the case of employer contributions made pursuant to a salary
  reduction agreement, without regard to sections 403(b) and 457.
  `(6) FORMER EMPLOYEES- A former employee shall be treated as a highly
  compensated employee if--
  `(A) such employee was a highly compensated employee when such employee
  separated from service, or
  `(B) such employee was a highly compensated employee at any time after
  attaining age 55.
  `(7) COORDINATION WITH OTHER PROVISIONS- Subsections (b), (c), (m), (n),
  and (o) shall be applied before the application of this section.
  `(8) SPECIAL RULE FOR NONRESIDENT ALIENS- For purposes of this subsection,
  any employee described in subsection (r)(9)(F) shall not be treated as
  an employee.'
  (b) CONFORMING AMENDMENTS-
  (1)(A) Section 414(r) is amended by adding at the end thereof the following
  new paragraph:
  `(9) EXCLUDED EMPLOYEES- For purposes of this subsection, the following
  employees shall be excluded:
  `(A) Employees who have not completed 6 months of service.
  `(B) Employees who normally work less than 17 1/2  hours per week.
  `(C) Employees who normally work not more than 6 months during any year.
  `(D) Employees who have not attained the age of 21.
  `(E) Except to the extent provided in regulations, employees who are
  included in a unit of employees covered by an agreement which the Secretary
  of Labor finds to be a collective bargaining agreement between employee
  representatives and the employer.
  `(F) Employees who are nonresident aliens and who receive no earned
  income (within the meaning of section 911(d)(2)) from the employer which
  constitutes income from sources within the United States (within the
  meaning of section 861(a)(3)).
Except as provided by the Secretary, the employer may elect to apply
subparagraph (A), (B), (C), or (D) by substituting a shorter period of
service, smaller number of hours or months, or lower age for the period of
service, number of hours or months, or age (as the case may be) specified
in such subparagraph.'
  (B) Subparagraph (A) of section 414(r)(2) is amended by striking `subsection
  (q)(8)' and inserting `paragraph (9)'.
  (2) Paragraph (2) of section 414(s) is amended to read as follows:
  `(2) EMPLOYER MAY ELECT TO TREAT CERTAIN DEFERRALS AS COMPENSATION- An
  employer may elect to include all of the following amounts as compensation:
  `(A) Amounts not includible in the gross income of the employee under
  section 125, 402(e)(3), 402(h)(1)(B), or 414(h)(2).
  `(B) Amounts contributed by the employer under a salary reduction agreement
  and not includible in gross income under section 403(b) or 457.'
  (3) Paragraph (17) of section 401(a) is amended by striking the last
  sentence.
  (4) Subsection (1) of section 404 is amended by striking the last sentence.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  years beginning on or after February 1, 1992.
SEC. 359. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.
  (a) INTERNAL REVENUE CODE AMENDMENT- Paragraph (2) of section 411(a)
  (relating to minimum vesting standards) is amended--
  (1) by striking `subparagraph (A), (B), or (C)' and inserting `subparagraph
  (A) or (B)'; and
  (2) by striking subparagraph (C).
  (b) ERISA AMENDMENT- Paragraph (2) of section 203(a)(2) of the Employee
  Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)(2)) is amended--
  (1) by striking `subparagraph (A), (B), or (C)' and inserting `subparagraph
  (A) or (B)'; and
  (2) by striking subparagraph (C).
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  plan years beginning on or after the earlier of--
  (1) the later of--
  (A) January 1, 1993, or
  (B) the date on which the last of the collective bargaining agreements
  pursuant to which the plan is maintained terminates (determined without
  regard to any extension thereof after the date of the enactment of this
  Act), or
  (2) January 1, 1995.
Such amendments shall not apply to any individual who does not have more
than 1 hour of service under the plan on or after the 1st day of the 1st
plan year to which such amendments apply.
Subtitle E--Other Provisions
PART I--PROVISIONS RELATING TO CHARITABLE CONTRIBUTIONS
SEC. 361. THE ALTERNATIVE MINIMUM TAX.
  (a) REPEAL OF TAX PREFERENCE- Subsection (a) of section 57 is amended by
  striking paragraph (6) (relating to the appreciated property charitable
  deduction under the alternative minimum tax) and by redesignating paragraph
  (7) as paragraph (6).
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  contributions made in calendar years ending on or after December 31, 1992.
SEC. 362. ALLOCATION AND APPORTIONMENT.
  (a) APPLICATION OF SECTION 864(E)(6)- Paragraph (6) of section 864(e) is
  amended by designating the existing text as subparagraph (A), by inserting
  the heading `AFFILIATED GROUP RULE' before the text of subparagraph (A),
  and by adding at the end thereof the following new subparagraph:
  `(B) ALLOCATION AND APPORTIONMENT OF CHARITABLE DEDUCTIONS- A charitable
  contribution allowable as a deduction in computing taxable income for a
  taxable year shall be allocated and apportioned solely to gross income from
  sources within the United States. For purposes of the preceding sentence,
  all members of an affiliated group shall be treated as a single corporation.'
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  contributions made in calendar years ending on or after December 31, 1992.
SEC. 363. INFORMATION REPORTING OF LARGE DONATIONS.
  (a) Reporting by Donees-
  (1) REPORTING REQUIREMENTS- Subpart B of part III of subchapter A of
  chapter 61 is amended by adding at the end thereof the following new section:
`SEC. 6050P. RETURNS RELATING TO CERTAIN CHARITABLE CONTRIBUTIONS.
  `(a) GENERAL RULE- The donee of any large charitable donation shall make
  a return (in accordance with forms and regulations prescribed by the
  Secretary) showing--
  `(1) the name, address, and TIN of the donor,
  `(2) the amount of the contribution (or the value, if the contribution is
  made other than in money), and
  `(3) the circumstances under which the contribution was made.
  `(b) LARGE CHARITABLE DONATION- For purposes of this section, the term
  `large charitable donation' means any combination of money or value
  of property contributed by an individual during the calendar year in
  contributions for which a deduction could potentially be claimed under
  section 170, based on the donee's determination that it did not provide
  substantial goods or services in exchange for the contribution, if the
  amount of such contributions exceeds $500.
  `(c) STATEMENT TO BE FURNISHED TO DONORS- Every person making a return
  under subsection (a) shall furnish a copy of such return to the donor at
  such time and in such manner as the Secretary may by regulations prescribe.
  `(d) EXCEPTIONS FROM FILING- Subsection (a) shall not apply to any
  organization exempt from the filing requirements of section 6033 by reason
  of the organization's normal level of gross receipts, whether exempted
  by section 6033(a)(2)(A)(ii) or by the Secretary pursuant to section
  6033(a)(2)(B).'
  (2) CLERICAL AMENDMENT- The table of sections for subpart B of part III
  of subchapter A of chapter 61 (as amended by section 363 of this Act)
  is amended by adding at the end thereof the following new items:
`Sec. 6050P. Returns relating to certain charitable contributions.'
  (b) DENIAL OF DEDUCTION- Except as otherwise provided by regulations,
  no deduction for a large charitable donation (as defined in section 6050P
  of the Internal Revenue Code) shall be allowed unless the donor includes
  on the return on which such deduction is first claimed such additional
  information as the Secretary may prescribe (by form or regulation).
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  contributions made on or after July 1, 1992.
PART II--OTHER PROVISIONS
SEC. 371. EXTEND MEDICARE HOSPITAL INSURANCE (HI) COVERAGE TO ALL STATE AND
LOCAL EMPLOYEES.
  (a) APPLICATION OF HOSPITAL INSURANCE TAX- Paragraph (2) of section 3121(u)
  (relating to the application of the hospital insurance tax to State and
  local employment) is amended:
  (1) by striking `subparagraphs (B) and (C)' and inserting `subparagraph
  (B)' in subparagraph (A), and
  (2) by deleting subparagraphs (C) and (D).
  (b) Entitlement to Hospital Insurance Benefits-
  (1) Section 210(p) of the Social Security Act (42 U.S.C. 410(p)) is amended:
  (A) by striking `paragraphs (2) and (3)' and inserting `paragraph (2)'
  in paragraph (1)(B), and
  (B) by deleting paragraphs (3) and (4).
  (2) Section 218(n) of the Social Security Act (42 U.S.C. 418(n)) is repealed.
  (c) EFFECTIVE DATE-
  (1) IN GENERAL- The amendments made by this section shall apply to services
  performed after June 30, 1992.
  (2) SERVICES PERFORMED BEFORE JULY 1, 1992- If any service performed by an
  individual during July 1992 is medicare qualified government employment (as
  defined in section 210(p) of the Social Security Act (42 U.S.C. 410(p)), as
  amended by subsection (b) of this section), the amendments made by subsection
  (b) of this section shall apply to all periods (if any) of service performed
  by that individual before July 1, 1992, that would be medicare qualified
  government employment (as so defined) if performed after June 30, 1992.
  (3) DISABILITY BEFORE JULY 1, 1992- For purposes of establishing entitlement
  to hospital insurance benefits under part A of title XVIII of the Social
  Security Act pursuant to the amendments made by subsection (b) of this
  section, no individual may be considered to be under a disability for any
  period before July 1, 1992.
  (4) CONFORMING AMENDMENT- Section 278(d)(2)(A) of the Tax Equity and Fiscal
  Responsibility Act of 1982, Pub. L. No. 97-248, as amended by section
  309(a)(11) of the Technical Corrections Act of 1982, Pub. L. No. 97-448,
  is amended by inserting `or of section 371(c)(2) of the Long Term Growth
  Act of 1992' after `subsection'.
SEC. 372. CONFORM TAX ACCOUNTING TO FINANCIAL ACCOUNTING FOR SECURITIES
DEALERS.
  (a) GENERAL RULE- Subpart D of part II of subchapter E of chapter 1 of
  the Internal Revenue Code of 1986 (relating to inventories) is amended by
  inserting at the end thereof the following new section:
`SEC. 475. MARK TO MARKET INVENTORY METHOD FOR DEALERS IN STOCK OR SECURITIES.
  `(a) GENERAL RULE- Each stock or security held for resale to customers
  in the ordinary course of the taxpayer's trade or business at the close
  of the taxable year shall be treated as sold for its fair market value on
  the last business day of such taxable year and any gain or loss shall be
  taken into account for that taxable year.
  `(b) BASIS ADJUSTMENT REQUIRED- Proper adjustment shall be made to the
  taxpayer's basis in each stock or security so that any gain or loss
  subsequently realized is not recognized to the extent such gain or loss
  was previously taken into account by reason of subsection (a).
  `(c) DERIVATIVE FINANCIAL INSTRUMENTS HELD BY DEALERS- A taxpayer that is
  required by subsection (a) to treat stocks or securities held for resale
  to customers in the ordinary course of the taxpayer's trade or business as
  sold for their fair market value on the last business day of the taxable
  year shall--
  `(1) treat all derivative financial instruments held at the close of the
  taxable year as sold for their fair market value on the last business day
  of the taxable year, and
  `(2) properly adjust the amount of gain or loss subsequently realized for
  gain or loss taken into account by reason of paragraph (1).
  `(d) DEFINITIONS AND SPECIAL RULES- For purposes of this section--
  `(1) STOCK OR SECURITIES DEFINED- The term `stock or securities' shall
  include stock or securities as defined in section 851(b)(2), 1091(a),
  or 1236(c), and notional principal contracts.
  `(2) DEALERS OR TRADERS IN NOTIONAL PRINCIPAL CONTRACTS- A dealer or trader
  in notional principal contracts shall be treated as holding such contracts
  for resale to customers in the ordinary course of its trade or business.
  `(3) DERIVATIVE FINANCIAL INSTRUMENTS DEFINED- The term `derivative financial
  instruments' includes commodities, options, forward contracts, futures
  contracts, notional principal contracts, short positions in securities,
  and any similar financial instrument.
  `(4) SECTION 263A SHALL NOT APPLY- The cost capitalization rules of
  section 263A shall not apply to stock, securities, or derivative financial
  instruments accounted for under this section.
  `(e) REGULATORY AUTHORITY- The Secretary shall prescribe such regulations as
  may be necessary or appropriate to carry out the purposes of this section,
  including rules to prevent the use of year-end transfers, related parties,
  or other arrangements to avoid the effect of this section.'
  (b) CONFORMING AMENDMENT- Subsection (b) of section 471 is amended to read
  as follows:
  `(b) CROSS REFERENCES-
  `(1) For rules relating to the inventory method that conforms to the best
  accounting practice for dealers in stock or securities, see section 475.
  `(2) For rules relating to capitalization of direct and indirect costs of
  property, see section 263A.'
  (c) CLERICAL AMENDMENT- The table of sections for subpart D of part II
  of Subchapter E of chapter 1 is amended by adding at the end thereof the
  following new item:
`SEC. 475. Conform tax accounting to financial accounting for securities
dealers.'
  (1) EFFECTIVE DATE-
  (1) IN GENERAL- The amendments made by this section shall apply to all
  taxable years ending on or after December 31, 1992.
  (2) CHANGE IN METHOD OF ACCOUNTING- In the case of any taxpayer required
  by this section to change its method of accounting for any taxable year--
  (A) such change shall be treated as initiated by the taxpayer,
  (B) such change shall be treated as made with the consent of the Secretary,
  (C) the change in method of accounting shall be implemented by valuing
  each stock or security to which the amendments of this section apply at
  its fair market value on the last day of the first taxable year ending on
  or after December 31, 1992, and
  (D) 10 percent of any increase or decrease in value by reason of subparagraph
  (C) shall be taken into account in each of the 10 taxable years beginning
  with the first taxable year ending on or after December 31, 1992.
SEC. 373. DISALLOWANCE OF INTEREST DEDUCTIONS ON CORPORATE OWNED LIFE INSURANCE
  (a) DISALLOWANCE OF DEDUCTION- Subsection (a) of section 264 is amended--
  (1) by striking `to the extent that the aggregate amount of such indebtedness
  with respect to policies covering such individuals exceeds $50,000' in
  paragraph (4), and
  (2) by striking the last sentence thereof.
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  interest incurred on or after February 1, 1992.
SEC. 374. CLARIFICATION OF TREATMENT OF CERTAIN FSLIC ASSISTANCE.
  (a) GENERAL RULE- For purposes of chapter 1 of the Internal Revenue Code
  of 1986--
  (1) no deduction is allowed under section 165 of such Code for a loss of
  the disposition of property to the extent that the taxpayer has a right
  to be reimbursed for the loss with FSLIC Assistance, and
  (2) no deduction is allowed under section 166, 585, or 593 of such Code
  with respect to any debt to the extent that the taxpayer has a right to
  be reimbursed for the debt with FSLIC Assistance.
  (b) FSLIC ASSISTANCE- For purposes of this section, the term `FLSIC
  Assistance' means any money or other property provided with respect to a
  domestic building and loan association (as defined in section 7701(a)(19)
  of such Code without regard to subparagraph (C) thereof) pursuant to section
  406(f) of the National Housing Act or section 21A of the Federal Home Loan
  Bank Act (or  any similar provision of law). The term `FSLIC Assistance'
  does not include money or other property to which the amendments made
  by section 1401(a)(3) of the Financial Institutions Reform, Recovery,
  and Enforcement Act of 1989 apply.
  (c) EFFECTIVE DATE-
  (1) IN GENERAL- The provisions of this section apply to FSLIC Assistance
  credited on or after March 4, 1991, with respect to property disposed of
  and charge-offs made in taxable years ending on or after March 4, 1991.
  (2) SPECIAL RULE FOR NET OPERATING LOSS CARRYOVERS- The amount  of any net
  operating loss carryover to a taxable year ending on or after March 4,
  1991, must be reduced by the amount of FSLIC Assistance credited on or
  after March 4, 1991, with respect to property disposed of or charge-offs
  made in taxable years ending before March 4, 1991.
SEC. 375. EQUALIZING TAX TREATMENT OF LARGE CREDIT UNIONS AND THRIFTS.
  (a) REPEAL OF EXEMPTION- Subparagraph (A) of section 501(c)(14) is amended
  to read as follows:
  `(A) Small credit unions without capital stock organized and operated for
  mutual purposes and without profit. For purposes of this subparagraph,
  a credit union is a small credit union unless, for any taxable year,
  the average adjusted basis of all of its assets exceeds $50,000,000.'
  (b) REPEAL OF DEDUCTION FOR DIVIDENDS PAID- Subsection (a) of section 591
  is amended by inserting `credit unions that are not small credit unions
  as defined in section 501(c)(14)(A),' after `domestic building and loan
  associations,'.
  (c) RESERVES FOR BAD DEBTS-
  (1) IN GENERAL- Paragraph (1) of section 593(a) is amended by striking `or'
  at the end of subparagraph (B), by inserting `or' at the end of subparagraph
  (C), and by inserting after subparagraph (C) the following new subparagraph:
  `(D) any credit union that is not a small credit union as defined in
  section 501(c)(14)(A),'.
  (2) CONFORMING AMENDMENT- Paragaph (2) of section 593(a) is amended by
  striking `association or bank' and inserting `entity'.
  (d) EFFECTIVE DATE- The provisions of this section apply for taxable years
  ending on or after December 31, 1992.
SEC. 376. TREATMENT OF ANNUITIES WITHOUT LIFE CONTINGENCIES.
  (a) LIFE CONTINGENCY REQUIRED FOR ANNUITY TREATMENT- Paragraph (5) of
  section 72(c) is amended to read as follows:
  (5) ANNUITY CONTRACT-
  `(A) IN GENERAL- For purposes of this subtitle (other than subchapter
  L), a contract is treated as an annuity contract only if the purchaser
  irrevocably chooses as a settlement option a series of substantially equal
  periodic payments (not less frequently than annually) made for the life of
  the annuitant or the joint lives of the annuitants. The settlement option
  must be irrevocable as of the date the contract is entered into.
  `(B) CERTAIN FEATURES-
  `(i) TERM CERTAIN FEATURE- If the settlement option described in subparagraph
  (A) contains a term certain feature, that feature may not guarantee that
  periodic payments will be made for a period of time that exceeds one-third
  of the life expectancy of the annuitant determined as of the annuity
  starting date.
  `(ii) AMOUNT CERTAIN FEATURE- If the settlement option described in
  subparagraph (A) contains an amount certain feature, that feature may not
  guarantee that an amount will be paid that exceeds one-third of the cash
  value of the contract (determined without regard to any surrender charge)
  determined as of the annuity starting date (or date of annuitant's death,
  if earlier).
  `(C) SPECIAL RULES- This paragraph shall not apply to--
  `(i) annuities purchased by a trust described in section 401(a) which is
  exempt from tax under section 501(a),
  `(ii) annuities purchased as part of a plan described in section 403(a),
  `(iii) annuities described in section 403(b),
  `(iv) annuities provided for employees of a life insurance company under
  a plan described in section 818(a)(3),
  `(v) amounts received from an individual retirement account or an individual
  retirement annuity,
  `(vi) individual retirement annuities,
  `(vii) amounts received from a trust described in section 401(a) which is
  exempt from tax under section 501(a), and
  `(viii) annuities which qualify as a `qualified funding asset' in accordance
  with section 130(d).'
  (b) EFFECTIVE DATE- The provisions of this section apply to all contracts
  entered into on or after the date of enactment of this Act.
SEC. 377. EXPANSION OF 45-DAY INTEREST-FREE PERIOD.
  (a) IN GENERAL- Subsection (e) of section 6611 (relating to interest on
  overpayments) is amended to read as follows:
  `(e) TAX REFUND WITHIN 45 DAYS- No interest shall be allowed under subsection
  (a) on any overpayment of tax imposed by this title if such overpayment--
  `(1) is refunded within 45 days after the last date prescribed for filing
  the return of such tax (determined without regard to any extension of time
  for filing the return),
  `(2) is refunded within 45 days after the date the return is filed, in
  case the return is filed after such last date, or
  `(3) is refunded within 45 days of the date the right to the refund arises,
  in case the right to the refund arises other than pursuant to the original
  filing of a tax return.'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  returns due on or after July 1, 1992, and to all other refunds made on or
  after such date.
TITLE IV--FINANCIAL INSTITUTIONS SAFETY AND CONSUMER CHOICE ACT OF 1992
SEC. 401. SHORT TITLE; TABLE OF CONTENTS.
  (a) SHORT TITLE- This title may be cited as the `Financial Institutions
  Safety and Consumer Choice Act of 1992'.
  (b) Table of Contents-
Sec. 402. Purposes.
Subtitle A--Financial Services Modernization
Chapter 1--Financial Services Holding Companies
Sec. 411. Financial services holding companies.
Sec. 412. Acquisition of banks.
Sec. 413. Interests in nonbanking organizations.
Sec. 414. Diversified holding companies.
Sec. 415. Administration.
Sec. 416. Reservation of rights to States; pre-emption of anti-affiliation
provisions.
Sec. 417. Penalties.
Sec. 418. Antitrust review.
Sec. 419. Technical amendment.
Sec. 420. Effective date.
Sec. 421. Application of the limitations on tying arrangements and insider
lending to financial services holding and diversified holding companies.
Sec. 422. Provisions exempting financial services holding companies from
the Savings and Loan Holding Company Act.
Chapter 2--Financial Activities of National Banks
Sec. 426. Amendments to the Banking Act of 1933.
Sec. 427. Insurance activities of national banks.
Sec. 428. Amendments to sections 23A and 23B of the Federal Reserve Act.
Sec. 429. Customer disclosure.
Sec. 430. Bankers' banks.
Chapter 3--Non-banking Activities of Foreign Banks in the United States
Sec. 431. Amendments to the International Banking Act of 1987.
Chapter 4--Amendments to the Securities Acts
Sec. 436. Amendments to the Securities Act of 1933.
Sec. 437. Amendments to the Securities Exchange Act of 1934.
Sec. 438. Amendments to the Investment Company Act of 1940.
Sec. 439. Removal of the exclusion from the definition of investment adviser
for banks that advise investment companies.
Sec. 440. Treatment of bank common trust funds.
Sec. 441. Securities and Exchange Commission study of bank insurance pooled
investment vehicles.
Sec. 442. Effective date.
Chapter 5--Amendments to Prompt Corrective Action
Sec. 446. Amendments to prompt corrective action.
Chapter 6--Nationwide Banking and Branching
Sec. 451. Nationwide banking.
Sec. 452. Interstate branching by national banks.
Sec. 453. Interstate consolidation or merger of national banks or State
banks with national banks.
Sec. 454. Interstate branching by State banks.
Sec. 455. Interstate branching and banking by foreign banks.
Sec. 456. Interstate acquisitions by savings and loan holding companies.
Sec. 457. Effective dates.
Subtitle B--Miscellaneous Provisions
Chapter 1--Reduction in Regulatory Burden
Sec. 461. Fair housing reporting.
Chapter 2--Expedited Funds Availability
Sec. 466. Amendment to the Expedited Funds Availability Act.
Subtitle C--Technical and Conforming Amendments
Chapter 1--Severability; Transition References
Sec. 471 Severability.
Sec. 472 Transition references.
Chapter 2--Technical and Conforming Amendments
Sec. 476 Amendment to Acts codified in title 2, United States Code.
Sec. 477 Amendments to title 5, United States Code.
Sec. 478 Amendment to Act codified in title 7, United States Code.
Sec. 479 Amendments to Acts codified in title 12, United States Code.
Sec. 480 Amendments to Acts codified in title 15, United States Code.
Sec. 481 Amendments to Act codified in title 16, United States Code.
Sec. 482 Amendments to title 18, United States Code.
Sec. 483 Amendments to the Internal Revenue Code of 1986.
Sec. 484 Amendments to thtle 31, United States Code.
Sec. 485 Amendments to Acts codified in title 42, United States Code.
Sec. 486 Amendment to title 46, United States Code.
Chapter 3--Repeal of Obsolete Provisions of Law
Sec. 491 Repeal of Obsolete Provisions of Law.
Chapter 4--Effective Date
Sec. 496 Effective date.
SEC. 402. PURPOSES.
  The purposes of this title are--
  (1) To strengthen the role of capital in insured depository institutions.
  (2) To permit nationwide banking and branching.
  (3) To authorize the establishment of financial services holding companies
  to permit companies owning depository institutions to engage in other
  financial activities with appropriate safeguards.
  (4) To promote consumer convenience by permitting banking organizations
  a broader range of financial products.
Subtitle A--Financial Services Modernization
CHAPTER 1--FINANCIAL SERVICES HOLDING COMPANIES
SEC. 411. FINANCIAL SERVICES HOLDING COMPANIES.
  (a) DEFINITIONS MODIFIED- Section 2 of the Bank Holding Company Act of 1956
  (12 U.S.C. 1841) is amended--
  (1) by amending subsection (a)(1) to read as follows:
  `(a)(1)(A) The term `financial services holding company' means any company
  (other than a diversified holding company) which has control over any bank.
  `(B) The term `diversified holding company' means any company (other than
  a bank or a foreign bank) which has control over a bank only through a
  financial services holding company and which engages in activities or
  controls any company engaged in activities that are not permissible for
  a financial services holding company or any subsidiary thereof under
  this Act. For purposes of this subparagraph the term `foreign bank'
  does not include (and the term `diversified holding company' may include)
  any company organized under the laws of a foreign country (as defined in
  section 1(b)(8) of the International Banking Act of 1978), a territory
  of the United States, Puerto Rico, Guam, American Samoa, or the Virgin
  Islands which does not engage in the business of banking.';
  (2) in the second sentence of subsection (a)(5)(A), by inserting a period
  after `thereto' and striking the balance of the sentence;
  (3) by amending subsection (f) to read as follows:
  `(f)(1) The term `appropriate Federal banking agency' shall have the same
  meaning as set forth in section 3(q) of the Federal Deposit Insurance Act
  (12 U.S.C. 1813(q)).
  `(2) The term `Board' means the Board of Governors of the Federal Reserve
  System.'; and
  (4) by adding after subsection (m) the following new subsections:
  `(n) SECURITIES AFFILIATE- The term `securities affiliate' means any company
  that is controlled by a financial services holding company and that is
  engaged in the United States in activities pursuant to section 4(c)(15).
  `(o) INSURANCE AFFILIATE- The term `insurance affiliate' means any company
  that is controlled by a financial services holding company and that is
  engaged in the United States in activities pursuant to section 4(c)(16).
  `(p) FOREIGN BANK- The term `foreign bank' has the same meaning as in
  section 1(b)(7) of the International Banking Act of 1978 (12 U.S.C. 3101(7)).
  `(q) INSURED DEPOSITORY INSTITUTION- The term `insured depository
  institution' means any insured bank as defined in section 3(h) of the Federal
  Deposit Insurance Act (12 U.S.C. 1813(h)) and any insured institution.
  `(r) WELL CAPITALIZED AND ADEQUATELY CAPITALIZED- The terms `well
  capitalized' and `adequately capitalized' have the same meaning as in
  section 38 of the Federal Deposit Insurance Act.
  `(s) WELL CAPITALIZED FINANCIAL SERVICES HOLDING COMPANY- The term `well
  capitalized financial services holding company' means any financial
  services holding company that qualifies as a well capitalized financial
  services holding company pursuant to section 38(e)(2) of the Federal
  Deposit Insurance Act.
  `(t) FUNCTIONAL REGULATOR- The term `functional regulator' means a Federal
  or State agency that has supervisory authority concerning the activities
  of a company (other than an insured depository institution) that are of
  concern to the Board for purposes of section 6(c).
  `(u) NEW FINANCIAL ACTIVITY- The term `new financial activity' means any
  activity authorized pursuant to section 4(c)(8), 4(c)(15), or 4(c)(16)
  other than any activity that, prior to the date of enactment of the
  Financial Institutions Safety and Consumer Choice Act of 1992, the Board
  has determined, by any other or regulation that continued to be in effect
  on December 31, 1993, to be closely related to banking and a proper
  incident thereto.
  `(v) QUALIFIED FINANCIAL ACTIVITY- The term `qualified financial activity'
  means any activity authorized pursuant to section 4(c)(8), 4(c)(15),
  or 4(c)(16).
  `(w) FINANCIAL AFFILIATE- The term `financial affiliate' means any
  company that is controlled by a financial services holding company that
  is engaged in the United States in qualified financial activities and any
  other company that is controlled by a diversified holding company that
  is engaged in activities authorized to be engaged in by a subsidiary of a
  financial services holding company pursuant to section 4(c)(8), 4(c)(15),
  or 4(c)(16).'.
  (b) CONFORMING AMENDMENTS- Section 2 of the Bank Holding Act of 1956
  (12 U.S.C. 1841) is further amended--
  (1) in subsection (c)(2)(J), by striking `Federal Savings and Loan Insurance
  Corporation insurance to Federal Deposit Insurance Corporation insurance'
  and inserting `Savings Association Insurance Fund to Bank Insurance Fund';
  (2) in subsection (h)(5), by striking `bank' the first time it appears
  and inserting `insured depository institution'; and
  (3) by striking `bank holding company' wherever it appears except in
  subsection (b) and inserting--
  (A) in subsections (a)(5)(A), (a)(5)(B), (a)(5)(C), (a)(5)(D), (d),
  and (g)(1), `financial services holding company and diversified holding
  company'; and
  (B) in all other instances, `financial services holding company'.
SEC. 412. ACQUISITION OF BANKS.
  (a) AMENDMENTS TO APPLICATION PROCESS- Section 3 of the Bank Holding
  Company Act of 1956 (12 U.S.C. 1842) is amended--
  (1) in subsection (a)--
  (A) by amending paragraph (3) to read as follows:
  `(3) for any financial services holding company to acquire ownership or
  control of any voting shares of any insured depository institution or
  financial services holding company, for any diversified holding company
  to acquire ownership or control of any voting shares of any financial
  services holding company, or for a company to acquire ownership or control
  of a diversified holding company if, after such acquisition, such company
  will own or control more than 5 per centum of the voting shares of such
  institution or company;';
  (B) by striking `Notwithstanding the foregoing' and inserting `It  shall be
  unlawful for any insured depository institution (other than a foreign bank
  operating an insured branch as defined in section 3(s) of the Federal Deposit
  Insurance Act (12 U.S.C. 1813(s)) to become a financial services holding
  company or a diversified holding company. Notwithstanding the foregoing';
  (C) by adding at the end thereof the following new sentence: `Notwithstanding
  paragraph (1), any company that was a bank holding company under the Bank
  Holding Company Act of 1956 on December 31, 1993, shall be a financial
  services holding company as of January 1, 1994 without further approval
  by the Board.';
  (D) in subparagraph (A)(ii), by striking `or' at the end thereof; and
  (E) in subparagraph (B), by inserting after `prior to such acquisition'
  the following: `; or (C) the acquisition by a company of control of a
  bank in a reorganization in which a person or group of persons exchange
  their shares of the bank for shares of a newly formed financial services
  holding company and receive after the reorganization substantially the
  same proportional share interest in the holding company as they held in
  the bank except for changes in shareholders' interests resulting from the
  exercise of dissenting shareholders' rights under State or Federal law if (i)
  immediately following the acquisition, the bank meets the requirements for
  well capitalized or adequately capitalized, (ii) the holding company does
  not engage in any activities other than those of managing and controlling
  banks as a result of the reorganization, and (iii) the company provides
  30 days prior notification to the Board.';
  (2) in subsection (b)--
  (A) by amending the first sentence to read `Upon receiving from a company
  any application for approval under this section to acquire any interest in
  an insured depository institution, the Board shall give notice (A) to the
  Comptroller of the Currency, if the insured depository institution to be
  acquired is a national banking association or a District bank, (B) to the
  Director of the Office of Thrift Supervision, if the insured depository
  institution to be acquired is a Federally-chartered insured institution,
  or (C) to the appropriate supervisory authority of the interested State,
  if the insured depository institution to be acquired is a State-chartered
  bank or State-chartered insured institution, in order to provide for the
  submission of the views and recommendations of the Comptroller of the
  Currency, the Director of the Office of Thrift Supervision, or the State
  supervisory authority, as appropriate.';
  (B) in the second sentence, by inserting `, the Director of the Office of
  Thrift Supervision,' after `Comptroller of the Currency';
  (C) in the third sentence--
  (i) by inserting `, the Director of the Office of Thrift Supervision,'
  after `Comptroller of the Currency'; and
  (ii) by striking `disapproves' and inserting `recommends disapproval of'; and
  (D) in the ninth sentence, by inserting `, the Director of the Office of
  Thrift Supervision,' after `Comptroller of the Currency';
  (3) in subsection (C)--
  (A) in paragraph (1), by striking `, or' at the end thereof and inserting
  a semicolon;
  (B) in paragraph (2), by striking the period at the end thereof and inserting
  `; or'; and
  (C) by adding after paragraph (2) the following new paragraph:
  `(3) any acquisition or merger or consolidation if the Comptroller of the
  Currency or the Director of the Office of Thrift Supervision determines
  that the insured depository institution to be acquired or any other insured
  depository institution controlled by the company involved in the proposal is
  engaging in any unsafe and unsound practice or, following the transaction,
  will be in an unsafe and unsound condition.';
  (4) by redesignating subsections (d) through (g) as subsections (f) through
  (i), respectively; and
  (5) by inserting after subsection (c) the following new subsections:
  `(d) Expedited Procedures for Acquisition of Additional Banks by Well
  Capitalized Financial Services Holding Companies-
  `(1) Procedures-
  `(A) Upon receiving from a well capitalized financial services holding
  company a complete application for approval under this section to acquire
  an insured depository institution, the Board shall notify the Comptroller
  of the Currency, the Director of the Office of Thrift Supervision, or
  the appropriate supervisory authority of an interested State, if any,
  as provided for in subsection (b). Notwithstanding subsection (b)(1), the
  views and recommendations of the Comptroller of the Currency, the Director of
  the Office of Thrift Supervision, or the appropriate supervisory authority
  of an interested State, as appropriate, shall be submitted within 21 days
  of the date on which notice is given to them by the Board.
  `(B) The Board must approve or disapprove the application within 45 days
  after the date of receipt of such application.
  `(C) In the event of the failure of the Board to act on any such application
  within 45 days after it has been received, the application shall be deemed
  to have been approved.
  `(D) If the Board has found that an emergency exists requiring expeditious
  action, or that it must act immediately to prevent probable failure, or if
  the Board receives a certification described in section 13(f)(8)(D) of the
  Federal Deposit Insurance Act (12 U.S.C. 1823(f)(8)(D)) from the Comptroller
  of the Currency, the Director of the Office of Thrift Supervision, the
  Federal Deposit Insurance Corporation or the State supervisory authority that
  an insured depository institution is in danger of closing, the Board may
  waive or shorten the 45-day notice period with respect to any application
  for an acquisition received pursuant to this subsection.
  `(2) EXTENSION OF TIME FOR NOTICE AND HEARING- The 45-day period may be
  extended if the Comptroller of the Currency, the Director of the Office
  of Thrift Supervision, or the State supervisory authority recommends
  disapproval of an application subject to subparagraph (1) in writing based
  on its consideration of the factors listed in paragraphs (1), (2), or
  (3) of subsection (c). In the event that the Comptroller of the Currency,
  the Director of the Office of Thrift Supervision or the State Supervisory
  authority recommends disapproval, the Board shall follow the review period
  and procedures for notice and hearing contained in subsection (b)(1).
  `(3) GROUNDS FOR DISAPPROVAL- An application under this subsection shall
  be disapproved only--
  `(A) pursuant to subsection (c)(1), (c)(2) or (c)(3);
  `(B) if the financial services holding company does not qualify as, or
  would not continue to qualify as, a well capitalized financial services
  holding company after consummation of the transaction; or
  `(C) if the Board determines that the transaction would not be consistent
  with the convenience and needs of the community to be served.
  `(e) ACQUISITION INVOLVING DIVERSIFIED HOLDING COMPANIES- The Board shall not
  permit any acquisition or merger or consolidation of a financial services
  holding company involving a diversified holding company or a company
  that seeks to become a diversified holding company unless all financial
  services holding companies controlled by the diversified holding company
  are and remain well capitalized financial services holding companies,
  and any financial services holding company to be acquired, will be, upon
  consummation of the transaction, a well capitalized financial services
  holding company. An application involving a proposal that meets the
  requirement of this subsection shall be reviewed in accordance with the
  procedures and standards under subsection (d).'.
  (b) CONFORMING AMENDMENTS- Section 3 of the Bank Holding Company Act of 1956
  (12 U.S.C. 1842) is further amended--
  (1) by striking `bank holding company' wherever it appears (except in the
  last sentence of subsection (a) as added by this section or as it appears
  in the reference to the `Bank Holding Company Act Amendments of 1970')
  and inserting--
  (A) in subsections (a)(1), (a)(2), (a)(4), (a)(5), (a)(A), and (d),
  `financial services holding company or diversified holding company'; and
  (B) in all other instances, `financial services holding company';
  (2) in subsection (a)(2), by striking `causes a bank' and inserting
  `causes an insured depository institution';
  (3) in subsection (a)(4)--
  (A) by striking `other than a bank' and inserting `other than an insured
  depository institution'; and
  (B) by striking `assets of a bank' and inserting `assets of an insured
  depository institution';
  (4) in subsection (a)(A), by striking `acquired by a bank' and inserting
  `acquired by an insured depository institution'; and
  (5) in subsection (a)(B), by striking `in a bank' and inserting `in an
  insured depository institution'.
SEC. 413. INTERESTS IN NONBANKING ORGANIZATIONS.
  (a) INTERESTS IN NONBANKING ORGANIZATIONS- Section 4 of the Bank Holding
  Company Act of 1956 (12 U.S.C. 1843) is amended--
  (1) in subsection (a)--
  (A) by striking the two flush sentences following paragraph (2);
  (B) in paragraph (2)--
  (i) by striking `, or in the case of a company which has been' and all
  that follows through `December 31, 1980' and inserting `or in the case of
  a company that becomes a financial services holding company as a result
  of enactment of the Financial Institutions Safety and Consumer Choice Act
  of 1992, on January 1, 1993';
  (ii) in subparagraph (A)--
  (I) by striking `of banking or'; and
  (II) by adding at the end thereof `, in the case of a foreign bank, the
  business of banking, where otherwise permitted through a branch or agency,
  as those terms are defined in section 1(b) of the International Banking
  Act of 1978 (12 U.S.C. 3101)';
  (iii) in subparagraph (B), by striking `those permitted under' and all
  that follows through `under such paragraph' and inserting `those permitted
  under subsection (c)(8)(A)(i) subject to all the conditions specified
  in such subsection or in any order or regulation issued by the Board
  under such subsection, and (C) those permitted under subsection (c)(16)
  provided that the financial services holding company is a company exclusive
  owned in a mutual form by holders of contracts of insurance issued by
  such financial services holding company, or is a company organized as a
  reciprocal inter-insurance exchange';
  (iv) in the second sentence, by inserting a period after `practices'
  and striking the remainder of the sentence; and
  (v) by striking the last sentence.
  (2) in subsection (c)--
  (A) by striking the two flush sentences following paragraph (14)(H)(ii);
  (B) in paragraph (8)--
  (i) in subparagraphs (C), (D), and (E), by redesignating clauses (i) and
  (ii) as subclauses (i) and (ii), respectively;
  (ii) by redesignating subparagraphs (B) through (G) as clauses (ii) through
  (vii), respectively;
  (iii) by redesignating subparagraph (A) as subparagraph (B)(i);
  (iv) in subparagraph (B)(vii) (as redesignated), by striking `subparagraph
  (A), (B), or (C)' and inserting `clause (i), (ii), or (iii)';
  (v) by striking `shares of any company' and all that follows through
  `provide' and inserting:
  `(A) shares of any company the activities of which the Board, after due
  notice and opportunity for comment, has determined (by order or regulation)
  to be of a financial nature.
  `(i) Any activity that the Board has determined (by order or regulation
  that is effective on December 31, 1993) to be closely related to banking
  and a proper incident thereto shall be deemed to be of a financial nature
  for purposes of this paragraph.
  `(ii) Any company that was a bank holding company on December 31, 1993 and
  that, on January 1, 1994, becomes a financial services holding company
  as a result of the enactment of the Financial Institutions Safety and
  Consumer Choice Act of 1992, may without further approval under this
  paragraph retain shares of any company engaged in any activity described
  in clause (i) and continue to engage in any activity described in clause
  (i), provided that such company lawfully acquired the company or commenced
  the activity pursuant to approval that was granted by the Board prior to
  January 1, 1994, and was still in effect on December 31, 1993.
  `(iii) Notwithstanding clause (ii), no financial services holding company
  may pursuant to this paragraph engage in, or acquire or retain the shares
  of any company engaged in, underwriting and dealing in securities that
  a national bank may not underwrite or deal in under section 5136 of the
  Revised Statutes (12 U.S.C. 24 (Seventh)), except that a financial services
  holding company that received approval of the Board to underwrite and deal
  in such securities may continue to do so pursuant to this section subject
  to all the same conditions and limitations as required by the Board on
  the date of enactment of the Financial Institutions Safety and Consumer
  Choice Act of 1992 of a period of time not to exceed three years from the
  date of enactment of that Act.
  `(iv) Real estate investment, management, or development and the purchase
  and sale of real estate as principal or broker shall not be deemed to be
  of a financial nature except to the extent authorized pursuant to clause (i).
  `(v) Activities described in paragraph (16) shall not be deemed to be of
  a financial nature, except providing.';
  (vi) by striking `except' before subparagraph (B) (as redesignated); and
  (vii) by striking the last five sentences;
  (C) in paragraph (13), by striking `or' at the end thereof;
  (D) in paragraph (14), by striking the period at the end thereof and
  inserting a semicolon; and
  (D) by inserting after paragraph (14) the following new paragraphs:
  `(15)(A) shares of any company engaged in any of the following activities
  subject to the provisions of subsection (l);
  `(i) underwriting, distributing, or dealing in securities;
  `(ii) organizing, sponsoring, controlling, or distributing the shares of
  any registered investment company pursuant to the Investment Company Act
  of 1940 (15 U.S.C. 80a-1 et seq.);
  `(iii) securities brokerage, private placement, or investment advisory
  activities; or
  `(iv) other securities activities permitted for broker or dealers registered
  under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or for
  investment advisers registered under the Investment Advisers Act of 1940
  (15 U.S.C. 80b-1 et seq.;
  `(B) a financial services holding company that acquires control of
  a securities affiliate under this paragraph shall not, after one year
  from the date of that acquisition, permit a bank or an insured depository
  institution that it controls to engage, directly or indirectly, in the
  United States in activities described in subparagraph (A) except to the
  extent that these activities are specifically authorized by statute for a
  national bank (other than underwriting and dealing in obligations issued by
  a State or political subdivision as permitted by law) or by a regulation or
  order promulgated by the Office of the Comptroller of the Currency pursuant
  to that statute before the date of enactment of the Financial Institutions
  Safety and Consumer Choice Act of 1992: Provided, however, That a financial
  services holding company acquiring control of a securities affiliate under
  this paragraph shall not permit, after one year from the date of that
  acquisition, an insured depository institution it controls to underwrite
  or deal in obligations issued by a State or political subdivision thereof
  and shall permit these activities to be conducted only by a securities
  affiliate and not by an affiliate pursuant to subsection (c)(8);
  `(C) for purposes of this paragraph, a branch or agency of a foreign
  bank or a commercial lending company controlled by a foreign bank (as
  the terms `agency', `branch', `commercial lending company', and `foreign
  bank' are defined in section 1 of the International Banking Act of 1978
  (12 US.C. 3101)), shall be considered a bank; or
  `(16)(A) shares of any company that provides insurance as principal, agent,
  or broker subject to the provisions of subsection (1);
  `(B) A financial services holding company that acquires control of an
  insurance affiliate may not permit an insured depository institution it
  controls or a subsidiary thereof to provide insurance--
  `(i) as principal; or
  `(ii) as agent or broker, including insurance in which an affiliate acts
  as principal, agent or broker,  unless the laws of the State in which the
  bank is located permit banks chartered by the state to provide insurance
  as agent or broker in that State.
  `(C) Nothing in subparagraph (B) shall be construed to limit the ability
  of a financial services holding company to sell insurance pursuant to
  subsection (8);
  `(D) for purposes of this paragraph, a branch or agency of a foreign bank
  (as the terms `branch' and `agency' are defined in section 1(b) of the
  International Banking Act of 1978 (12 U.S.C. 3101)) shall be considered
  an insured depository institution.';
  (3) by amending subsection (i) to read as follows:
  `(i) NOTICE PROCEDURES FOR NONBANKING ACTIVITIES-
  `(1) General notice procedure-
  `(A) NOTICE REQUIREMENT- No financial services holding company may engage
  in activities or acquire or retain ownership or control of the shares of
  a company engaged in qualified financial activities without providing the
  Board with at least 45 days prior written notice of the proposed transaction
  or expansion.
  `(B) CONTENTS OF NOTICE- The notice submitted to the Board shall contain
  such information as the Board shall prescribe by regulation or by specific
  request in connection with a particular notice. The Board may only require
  such information as may be relevant to the nature and scope of the proposed
  transaction and to the Board's evaluation of the criteria provided for in
  paragraph (2) and subsection (j), as appropriate.
  `(C) PROCEDURE FOR AGENCY ACTION- A notice filed under this subsection shall
  be deemed to be approved by the Board unless, prior to the expiration of
  45 days from the receipt of a complete notice, the Board issues an order
  setting forth the reasons for disapproval. The Board may extend the 45-day
  period for an additional 30 days.
  `(D) Expedited procedures for well capitalized financial services holding
  companies-
  `(i) COMMENCEMENT OF PERMISSIBLE NONBANKING ACTIVITIES- Notwithstanding
  subparagraph (A), any well capitalized financial services holding company
  may commence through a subsidiary (other than a depository institution),
  any activity authorized by subsections (c)(15) and (c)(16) of section 4
  of the Financial Services Holding Company Act of 1992 (12 U.S.C. 1843) or
  that has been determined by regulation by the Board under section 4(c)(8)
  of such Act to be permissible for such a financial services holding company
  or subsidiary. The financial services holding company shall provide the
  Board with written notice of the commencement of such activity not later
  than 30 days following such action.
  `(ii) Acquisitions- Notwithstanding subparagraphs (B) and (C), a notice
  filed under this subsection by a financial services holding company that
  will qualify as a well capitalized financial services holding company both
  before and after the proposed transaction shall be deemed to be approved
  unless prior to the expiration of 30 days after the receipt of a complete
  notice, the Board issues an order setting forth the reasons for disapproval.
  `(E) NOTICE OF APPROVAL- Any proposal may proceed prior to the expiration of
  the disapproval period if the Board issues a written notice of approval. The
  Board may provide for no notice under this paragraph or notice for a
  shorter period of time with respect to particular activities or transactions.
  `(F) EXTENSION OF NOTICE PERIOD- In the case of any proposal to engage in,
  or acquire or retain ownership or control of shares of any company engaged
  in, any activity pursuant to subsection (c)(8) that has not been previously
  approved by order or regulation, the Board may extend the notice period
  under this subsection for an additional 90 days.
  `(2)(A) GENERAL STANDARDS FOR REVIEW- In connection with a notice under
  this subsection, the Board may consider the following criteria--
  `(i) the managerial resources of the companies involved;
  `(ii) the adequacy of their financial resources, including their capital,
  giving consideration to the financial resources and capital of others
  engaged in similar activities;
  `(iii) any material adverse effect on the safety and soundness or financial
  condition of an affiliated depository institution; and
  `(iv) whether, in the case of notice for approval involving activities
  under subsection (c)(8), performance of the activity by a financial services
  holding company or a subsidiary of such company can reasonably be expected
  to produce benefits to the public, such as greater convenience, increased
  competition, or gains in efficiency, that outweigh possible adverse effects,
  such as undue concentration of resources, decreased or unfair competition,
  conflicts of interests, or unsound banking practices.
  `(B) REQUIREMENTS FOR DISAPPROVAL- The Board shall not approve any proposed
  transaction under this subsection if the Board determines that any insured
  depository institution controlled by the financial services holding company
  is engaging in any unsafe and unsound practice or is in an unsafe and
  unsound condition.
  `(C) STANDARDS FOR WELL CAPITALIZED FINANCIAL SERVICES HOLDING COMPANY- A
  notice filed under this section by a well capitalized financial services
  holding company or any subsidiary (other than an insured depository
  institution of such company) may be disapproved only pursuant to subparagraph
  (B) or if the Board determines that the financial services holding company
  is not a well capitalized financial services holding company.'; and
  (4) by adding after subjection (i) the following new subsections:
  `(j) ADDITIONAL CAPITAL REQUIREMENTS FOR NEW FINANCIAL ACTIVITIES- The
  Board shall disapprove a notice to engage in, or acquire or retain the
  shares of a company engaged in, a new financial activity unless the company
  filing the notice is a well capitalized financial services holding company,
  or the Board finds that--
  `(1) the capital of each insured bank controlled by the company is above
  the mean capital level of the range for insured banks are adequately
  capitalized; and
  `(2) the financial services holding company is making substantial progress
  toward qualifying as a well capitalized financial services holding company.
  `(k) MAINTENANCE OF HIGHER CAPITAL- Any financial services holding company
  that--
  `(1) engages, directly or indirectly, in any new financial activity,
  or controls any company engaged in any such activity, and
  `(2) fails to qualify as a well capitalized financial services holding
  company within the time period specified by the Board,
shall be subject to the provisions of section 38(e)(5) of the Federal Deposit
Insurance Act.
  `(l) LIMITATIONS ON ACTIVITIES OF FINANCIAL SERVICES HOLDING COMPANIES-
  `(1) DISCLOSURE- A securities affiliate, an insurance affiliate, or an
  affiliate engaged in securities or insurance activities authorized pursuant
  to subsection (c)(8) shall each--
  `(A) prominently disclose in writing to its customers that such affiliates
  are not insured depository institutions and are separate from any affiliated
  depository insured institution;
  `(B) prominently disclose in writing to its customers that securities or
  insurance products sold, offered, or recommended by such affiliates are not
  deposits, are not insured by the Federal Deposit Insurance Corporation,
  are not guaranteed by any affiliated insured depository institutions,
  and are not otherwise obligations of such insured depository institutions
  unless such is the case; and
  `(C) obtain an acknowledgement of receipt of the disclosures including
  the date of receipt and the customer's name, address, and account number.
  `(2) Regulations-
  `(A) The Securities and Exchange Commission is authorized to adopt
  regulations in consultation with the Board pursuant to this subsection
  regarding disclosures by securities affiliates and affiliates engaged in
  securities activities pursuant to subsection (c)(8).
  `(B) The Board is authorized to adopt regulations pursuant to this subsection
  regarding disclosures by insurance affiliates or by any affiliates engaged in
  activities pursuant to subsection (c)(8) (other than securities activities).
  `(3) DISCLOSURE OF CUSTOMER INFORMATION- The Board is authorized to issue
  regulations limiting disclosures of nonpublic customer information between
  an insured depository institution and affiliates thereof, including an
  evaluation of the creditworthiness of an issuer or other customer of
  that insured depository institution or subsidiary thereof or financial,
  securities, or insurance affiliate.
  `(4) AUTHORITY TO IMPOSE ADDITIONAL SAFEGUARDS- The Board may by regulation
  or order adopt limitations or restrictions on the extension of credit or
  other similar financial support, the purchase or sale of assets, or the
  issuance of guarantees, letters of credit, or other credit facilities to or
  for the benefit of an affiliate engaged in any new financial activity or to
  customers of such affiliate by an affiliate that is an insured depository
  institution controlled by the financial services holding company. Such
  restrictions and limitations shall be adopted as the Board deems appropriate
  to address potential adverse effects, including unfair competition,
  conflicts of interest, and unsafe banking practices. Transactions or similar
  arrangements between an insured depository institution and the customers
  of an affiliate engaged in such activities that are both controlled by
  the same financial services holding company shall not be used to evade
  any restrictions or limitations imposed under this paragraph.
  `(m) Exception for Certain Nonbanking Investments-
  `(1) IN GENERAL- Notwithstanding subsection (a), a financial services
  holding company may own or control shares of any company engaged in
  activities not authorized pursuant to this section if--
  `(A) the shares were acquired before January 1, 1994, and the aggregate
  investment in all such shares does not exceed 5 per centum of the financial
  services holding company's capital and surplus on a consolidated basis; or
  `(B) the shares are acquired and held by a securities affiliate as part of a
  bona fide underwriting or investment banking activity if such shares are held
  only for such period of time as will permit the sale thereof on a reasonable
  basis consistent with the nature of such investment banking activity.
  `(2) LIMITATIONS- The limitations in section 5(c) shall apply to the
  companies described in paragraphs (1)(A) and (1)(B).
  `(3) Divestiture in case of loss of exemption-
  `(A) If any financial services holding company loses the exemption provided
  in paragraph (1)(A), such company shall divest ownership and control of
  all of the shares of such company within 180 days after the loss of such
  exemption.
  `(B) If any financial services holding company loses the exemption provided
  in paragraph (1)(B) the financial services holding company shall divest
  ownership and control of such shares within 15 days of the loss of the
  exemption.'.
  (b) CONFORMING AMENDMENTS- Section 4 of the Bank Holding Company Act
  (12 U.S.C. 1843) is further amended--
  (1) by striking `bank holding company' wherever it appears (except in
  subsections (c)(1), (c)(8)(A)(ii), and (c)(8)(B)(vii)) and inserting
  `financial services holding company'; and
  (2) in subsection (c)--
  (A) in paragraph (1)(A), by striking `banking subsidiary' and inserting
  `insured depository institution';
  (B) in paragraphs (1)(C) and (1)(D), by striking `banking subsidiaries'
  wherever it appears and inserting `insured depository institutions';
  (C) in paragraph (1)(D), by striking `banking subsidiaries' wherever it
  appears and inserting `insured depository institutions'; and
  (4) in paragraph (4), by striking `acquired by a bank' and inserting
  `acquired by an insured depository institution'.
SEC. 414. DIVERSIFIED HOLDING COMPANIES.
  Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) is
  amended to read as follows:
`SEC. 5. DIVERSIFIED HOLDING COMPANIES.
  `(a) CAPITAL REQUIREMENTS FOR ACQUISITION OF FINANCIAL SERVICES HOLDING
  COMPANIES- No diversified holding company may acquire control of a financial
  services holding company unless, after the acquisition, such company is
  a well capitalized financial services holding company.
  `(b) NOTICE PROVISION FOR DIVERSIFIED HOLDING COMPANIES- A diversified
  holding company that acquires the shares of a financial  affiliate, shall
  file notice with the Board 30 days after the commencement of such activity
  or the acquisition of such shares.
  `(c) Limitations on Diversified Holding Companies and Their Affiliates-
  `(1) Except in the case of a foreign bank, no financial services holding
  company or any of its subsidiaries shall--
  `(A) extend credit in any manner to an affiliated diversified holding
  company or any of its affiliates not otherwise under the control of a
  financial services holding company;
  `(B) purchase for its own account financial assets or any securities of
  an affiliated diversified holding company or any of its affiliates not
  otherwise under the control of a financial services holding company;
  `(C) issue a guarantee, acceptance or letter of credit, including an
  endorsement or standby letter of credit, to an affiliated diversified
  holding company or any of its affiliates not otherwise under the control
  of a financial services holding company; or
  `(D) extend credit to any customer of the diversified holding company or
  any of its affiliates except on an arms-length basis in compliance with
  section 23B of the Federal Reserve Act (12 U.S.C. 371c-1).
  `(2) To the extent that activities are not prohibited under paragraph (1),
  the restrictions and limitations issued by the Board pursuant to section
  4(l) shall apply to diversified holding companies and their financial
  affiliates that are not otherwise controlled by an affiliated financial
  services holding company in the same manner and to the same  extent as if
  the diversified holding company were a financial services holding company.
  `(3) A diversified holding company and any of its affiliates that are engaged
  in the purchase and sale of real property, as principal, agent or broker,
  may not market such service jointly with any affiliated insured depository
  institution unless such insured depository institution is permitted under
  State law to engage in such purchase or sale of property.
  `(4) A diversified holding company that either directly or through an
  affiliate (not otherwise under the control of an affiliated financial
  services holding company) provides insurance as principal, agent or broker,
  may not permit an affiliated insured depository institution or a subsidiary
  thereof to provide insurance as agent or broker, including insurance in which
  the diversified holding company or such affiliate acts as principal, agent
  or broker, unless the laws of the State in which the insured depository
  institution is located permit depository institutions chartered by such
  State to provide insurance as agent or broker in that State.
  `(5) In the case of a foreign bank that is a financial services holding
  company, the Board shall apply the restrictions in paragraph (1) to the
  United States affiliates of such foreign bank and the foreign bank in the
  same manner and to the same extent as they apply to domestic financial
  services holding companies and their affiliates.'.
SEC. 415. ADMINISTRATION.
  The Bank Holding Company Act of 1956, is amended by inserting after section
  5 the following new section:
`SEC. 6. ADMINISTRATION.
  `(a) REGISTRATION OF FINANCIAL SERVICES HOLDING COMPANY- Within 180 days
  after becoming a financial services holding company, each financial services
  holding company shall register with the Board on forms prescribed by the
  Board, which shall include such information with respect to the financial
  condition and operations, management, and inter-company relationships of
  the financial services holding company and its subsidiaries, and related
  matters, as the Board may deem necessary or appropriate to carry out the
  purposes of this Act. The Board may, in its discretion, extend the time
  within which a financial services holding company shall register and file
  the requisite information.
  `(b) Regulations and Orders-
  `(1) The Board is authorized to issue such regulations and orders as may
  be necessary to enable it to administer and carry out the purposes of this
  Act and prevent evasions thereof: Provided, however, That any capital
  requirements for diversified holding companies or financial services
  holding companies shall only be imposed pursuant to subsection (f)(2)(B)
  of this section.
  `(2) The Board shall propose and issue regulations for the purpose of
  implementing this Act. Such regulations shall be adopted and published as
  final before January 1, 1994.
  `(c) Records, Reports and Examinations-
  `(1) Records and reports-
  `(A) RECORDS RELATING TO DIVERSIFIED HOLDING COMPANIES- A financial
  services holding company shall obtain such information and make and keep
  such records as the Board may prescribe concerning the financial services
  holding company's policies and procedures for monitoring and controlling
  financial and operational risks to its insured depository institution
  subsidiaries from the activities of the diversified holding company or
  its financial affiliates that are not controlled by the financial services
  holding company. Such records shall describe the activities conducted by the
  diversified holding company and such financial affiliates that are likely
  to have a material impact on the financial or operational condition of the
  insured depository institution  subsidiaries of the financial services
  holding company, and the customary sources of capital and funding of
  such activities.
  `(B) REPORTS OF FINANCIAL SERVICES HOLDING COMPANY AND DEPOSITORY
  INSTITUTIONS- The Board from time to time may require the financial services
  holding company and its insured depository institution subsidiaries to
  file reports under oath to keep it informed as to whether the provisions
  of this Act and such regulations and orders issued thereunder have been
  complied with. With regard to insured depository institutions controlled
  by a financial services holding company, the Board shall consult with and,
  to the extent possible, use reports obtained by, the appropriate Federal
  banking agency for such institutions.
  `(C) REPORTS OF FINANCIAL SERVICES HOLDING COMPANIES AND AFFILIATES- The
  Board may require a financial services holding company, and any affiliate
  it controls, to file reports if the Board reasonably believes that the
  activities or financial condition of such holding company or affiliate is
  likely to have a material impact on the financial or operational condition
  of any insured depository institution subsidiary (and a subsidiary thereof)
  of the financial services holding company. The Board shall consult with and,
  to the extent possible, use reports obtained by, the functional regulator
  of the financial services holding company or affiliate to obtain the
  necessary information.
  `(D) REPORTS OF DIVERSIFIED HOLDING COMPANIES AND FINANCIAL AFFILIATES- The
  Board may require a diversified holding company and any financial affiliate
  not controlled by a financial services holding company to file reports if
  the Board reasonably believes that the activities or financial condition
  of such diversified holding company or financial affiliate is likely to
  have a material impact on the financial or operational condition of the
  insured depository institution subsidiaries (and subsidiaries thereof) of
  the financial services holding company. The Board shall consult with and,
  to the extent possible, use reports obtained by, the functional regulator
  of the diversified holding company or financial affiliate to obtain the
  necessary information.
  `(E) RECIPROCAL ACCESS- The functional regulator of a diversified holding
  company or a financial affiliate may have access on a reciprocal basis to
  reports, other than examination reports, obtained by the Board under this
  subsection with respect to an affiliated insured depository institution or
  financial services holding company, if the functional regulator reasonably
  believes that the activities or financial condition of such institution or
  financial services holding company is likely to have a material impact on
  the financial or operational condition of the diversified holding company or
  a financial affiliate. The Comptroller of the Currency, the Director of the
  Office of Thrift Supervision, and the Federal Deposit Insurance Corporation
  may have access on a reciprocal basis to reports, other than examination
  reports, obtained by the Board under this subsection with respect to any
  affiliate of the insured depository institution, if the Comptroller of the
  Currency, the Director of the Office of Thrift Supervision, or the Federal
  Deposit Insurance Corporation reasonably believes that the activities
  or financial condition of such affiliate or company is likely to have a
  material impact on the insured depository institution.
  `(F) RESTRICTION ON DISCLOSURE- Any reports obtained from another agency
  or regulator under this subsection shall not be disclosed to the public by
  the recipient agency or regulator and shall not be disclosed to any other
  governmental agency or to the Congress except as otherwise permitted
  by law. Reports obtained from another agency or regulator under this
  subsection may be used only to carry out the purposes of this subsection
  or as otherwise permitted by law.
  `(2) Examinations-
  `(A) FINANCIAL SERVICES HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS-
  The Board may make on-site examinations of each financial services holding
  company, its insured depository institution subsidiaries (and subsidiaries
  thereof) and, subject to subparagraphs (B) through (E), any of its other
  affiliates. Where appropriate, the Board shall consult with, and to the
  extent possible, use the report of examination made by the Comptroller of
  the Currency, the Director of the Office of Thrift Supervision, the Federal
  Deposit Insurance Corporation or the appropriate State bank supervisory
  authority.
  `(B) FINANCIAL SERVICES HOLDING COMPANIES AND AFFILIATES- The Board
  may examine the financial services holding company and any affiliate
  it controls--
  `(i) to determine whether such holding company or affiliate is engaged
  in a particular transaction that would violate, directly or indirectly,
  the restrictions prescribed in sections 4(l) and 5(c);
  `(ii) to determine compliance with sections of the Federal Deposit Insurance
  Act, as applicable; or
  `(iii) if the agency reasonably believes that such holding company or
  affiliate is engaged in a particular transaction or course of conduct
  that directly or indirectly may constitute a material risk to any insured
  depository institution subsidiary (or a subsidiary thereof).
The Board shall consult with and, to the extent possible, use the report
of examinations made by the functional regulator, if any, of an affiliate
to obtain the necessary information. If such reports do not contain the
necessary information, the Board shall request the functional regulator
to conduct an examination to obtain such information. In the event the
functional regulator does not conduct an examination within a reasonable
period of time, the Board may conduct the examination, but shall notify the
functional regulator before doing so.
  `(C) DIVERSIFIED HOLDING COMPANIES AND FINANCIAL AFFILIATES- The Board
  may examine the diversified holding company and any financial affiliate
  not controlled by a financial services holding company--
  `(i) to determine whether such holding company or affiliate is engaged
  in a particular transaction that would violate, directly or indirectly,
  the restrictions prescribed in sections 4(1) and 5(c);
  `(ii) to determine compliance with sections of the Federal Deposit Insurance
  Act, as applicable; or
  `(iii) if the agency reasonably believes that such holding company or
  affiliate is engaged in a particular transaction or course of conduct
  that directly or indirectly may constitute a material risk to any insured
  depository institution subsidiary (or a subsidiary thereof).
The Board shall consult with and, to the extent possible, use the report of
examinations made by the functional regulator, if any, of the  diversified
holding company or financial affiliate to obtain the necessary information. If
such reports do not contain the necessary information, the Board shall
request the functional regulator to conduct an examination to obtain such
information. In the event the functional regulator does not conduct an
examination within a reasonable period of time, the Board may conduct the
examination, but shall notify the functional regulator before doing so.
  `(D) RECIPROCAL EXAMINATION OF INSURED DEPOSITORY INSTITUTION AFFILIATES
  CONTROLLED BY FINANCIAL SERVICES HOLDING COMPANIES- The functional
  regulator for a financial affiliate may examine an insured depository
  institution affiliate if the regulator reasonably believes that such
  institution is engaged in a particular transaction or course of conduct
  that directly or indirectly may constitute a material risk to the financial
  affiliate. The functional regulator shall consult with, and, to the extent
  possible, use the report of examinations made by, the appropriate Federal
  banking agency to obtain the necessary information. If such report does
  not contain the necessary information, the functional regulator shall
  request the appropriate Federal banking agency to conduct an examination
  to obtain such information. In the event the appropriate Federal banking
  agency does not conduct an examination within a reasonable period of time,
  the functional regulator may conduct the examination and shall notify the
  appropriate Federal banking agency before doing so.
  `(E) NONFINANCIAL AFFILIATES OF A DIVERSIFIED HOLDING COMPANY- The Board
  may examine any of the non-financial affiliates of a diversified holding
  company in order to determine whether such affiliate is engaged in a
  particular transaction that would violate, directly or indirectly, the
  restrictions prescribed in section 5(c).
  `(F) COST OF EXAMINATIONS- The cost of examinations of a diversified holding
  company and any affiliate of a diversified holding company not controlled
  by a financial services holding company shall be assessed against, and
  paid by, the diversified holding company or the affiliate, whichever is
  the subject of the examination. The cost of examinations of a financial
  services holding company and its subsidiaries shall be assessed against,
  and paid by, the financial services holding company.
  `(d) TRANSFER OF RECORDS- No agency or department transferring records
  as provided by this section shall be deemed to have waived any privilege
  applicable to those records under law.
  `(e) REPORT TO THE CONGRESS; RECOMMENDATIONS- The Board shall include in
  its annual report to the Congress the results of the administration of this
  Act, stating what, if any, substantial difficulties have been encountered
  in carrying out the purposes of this Act, and any recommendations as to
  changes in the law which in the opinion of the Board would be desirable.
  `(f) Cease and Desist Authority; Termination of Activities or Ownership
  or Control of Nonbank Subsidiaries Constituting Serious Risk-
  `(1) In addition to any other authority of the Board, the Board may
  take any action described in paragraph (2) if it has reasonable cause to
  believe that--
  `(A) any financial affiliate of an insured depository institution, or
  any other affiliate controlled by a financial services holding company,
  is engaged in activities in such a manner as to constitute a serious risk
  to the financial safety, soundness, or stability of such insured depository
  institution; or
  `(B) the diversified holding company, the financial services holding
  company controlled by the diversified holding company, or any affiliate
  is in significant danger of default and either poses a significant risk to
  the liquidity or solvency of an affiliated insured depository institution
  or is likely to cause a significant dissipation of its assets or earnings.
  `(2) Subject to paragraph (1), the Board--
  `(A) may institute cease and desist proceedings or issue a temporary order
  requiring the diversified holding company or financial services holding
  company controlled by the diversified holding company or affiliate thereof
  engaged in qualified financial activities to cease and desist from such
  activity and take affirmative action to prevent significant    dissipation
  of assets or earnings, of an insured depository institution as prescribed
  in section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818);
  `(B) may institute cease and desist proceedings or issue a temporary order
  requiring a financial services holding company described in paragraph
  (1)(B) to increase its capital; and
  `(C) in the event the diversified holding company or the financial
  services holding company controlled by the diversified holding company
  or the affiliate thereof does not comply with the order issued pursuant
  to subparagraph (A) or (B), may order the diversified holding company or
  such financial services holding company or any such affiliate, after due
  notice and opportunity for hearing and after considering the views of the
  insured depository institution's appropriate Federal banking agency and
  the appropriate State authority in the case of a State-insured depository
  institution, to terminate (within 120 days, or such longer period as the
  Board may direct in unusual circumstances) its ownership or control of any
  such affiliate either by sale to any third party or by distribution of the
  shares of the affiliate to the shareholders of the diversified holding
  company or financial services holding company. Such distribution shall
  be pro rata with respect to all of the shareholders of the distributing
  diversified holding company or financial services holding company, and such
  holding company shall not make any charge to its shareholders arising out
  of such a distribution.
  `(3) The Board may in its discretion apply to the United States district
  court within the jurisdiction of which the principal office of the holding
  company is located, for the enforcement of any effective and outstanding
  order issued under this section, and such court shall have jurisdiction and
  power to order and require compliance therewith, but except as provided
  in section 9 of this Act, no court shall have jurisdiction to affect by
  injunction or otherwise the issuance or enforcement of any notice or order
  under this section, or to review, modify, suspend, terminate, or set aside
  any such notice or order.
  `(g) Oaths and Affirmations; Depositions; Subpoenas-
  `(1) In the course of or in connection with an application, examination,
  investigation or other proceeding under this Act, the Board or any member
  or designated representative thereof, including any person designated to
  conduct any hearing under this Act, shall have the power to administer
  oaths and affirmations, to take or cause to be taken depositions, and
  to issue, revoke, quash, or modify subpoenas including witness subpoenas
  and subpoenas duces tecum; and the Board is empowered to make rules and
  regulations to effectuate the purposes of this subsection.
  `(2) The attendance of witnesses and the production of documents provided
  for in this subsection may be required from any place in any State or in any
  territory or other place subject to the jurisdiction of the United States at
  any designated place where such proceeding is being conducted. A subpoena
  issued under this section may be served upon any person who is not found
  within the territorial jurisdiction of any court in the United States in
  such manner as the Federal Rules of Civil Procedure prescribe for service
  of process in a foreign country, except that a subpoena to be served on a
  person who is not to be found in the United States may be issued only on
  the prior approval of the Board. Any party to the proceedings under this
  Act may apply to the United States District Court for the District of
  Columbia, or the United States district court for the judicial district
  or the United States court in any territory in which such proceeding is
  being conducted or where the witness resides or carries on business, for
  the enforcement of any subpoena or subpoena duces tecum issued pursuant
  to this subsection, and such court shall have jurisdiction and power to
  order and require compliance therewith. Witnesses subpoenaed under this
  subsection shall be paid the same fees and mileage that are paid witnesses
  in the district courts of the United States.
  `(3) Any service required under this subsection in any State or in any
  territory or other place subject to the jurisdiction of the United States may
  be made by registered mail, or in such other manner reasonably calculated
  to give actual notice as the Board may by regulation or otherwise provide,
  and all process in any such case may be served in the judicial district
  wherein such person is an inhabitant or transacts business or wherever
  such person may be found. Any court having jurisdiction of any proceeding
  instituted under this subsection may allow to any such party such reasonable
  expenses and attorneys' fees as it deems just and proper.
  `(4) Any person who willfully fails or refuses to attend and testify or
  to answer any lawful inquiry or to produce books, papers, correspondence,
  memoranda, contracts, agreements, or other records in obedience to the
  subpoena of the Board shall be guilty of a misdemeanor and, upon conviction,
  shall be subject to a fine of not more than $1,000 or to imprisonment for
  a term of not more than one year or both.'.
SEC. 416. RESERVATION OF RIGHTS TO STATES; PREEMPTION OF ANTI-AFFILIATION
PROVISIONS.
  Section 7 of the Bank Holding Company Act of 1956 (12 U.S.C. 1846) is
  amended to read as follows:
`SEC. 7. RESERVATION OF RIGHTS TO STATES; ANTI-AFFILIATION PROVISIONS.
  `(a) No provision of this Act shall be construed as preventing any State from
  exercising such powers and jurisdiction which it now has or may hereafter
  have with respect to companies, banks, diversified holding companies,
  financial services holding companies, and subsidiaries thereof.
  `(b)(1) Notwithstanding subsection (a), no provision of law of any State,
  including, without limitation, any provision relating to the business of
  insurance, banking (including any law relating to savings associations as
  that term is defined in section 3 of the Federal Deposit Insurance Act
  (12 U.S.C. 1813), real estate, securities, finance, retail or other law
  regulating the provisions of financial or other services, shall prevent or
  impede or shall be interpreted or applied by any administrative, executive,
  or judicial authority with the purpose or effect of preventing or impeding--
  `(A) any insured depository institution, any affiliate thereof or any
  representative of any such institution or affiliate thereof from being
  acquired, owned or controlled by, or from being affiliated in any manner
  with, any company which is or becomes a financial services holding company
  or with any affiliate of such company because of the types of activities
  engaged in directly or indirectly by such insured depository institution
  or any affiliate thereof, or by any representative of any such institution
  or affiliate thereof or because of the types of activities engaged in
  directly or indirectly by any such company or affiliate thereof, or by
  any representative of any such company or affiliate thereof;
  `(B) any company which is or becomes a financial services holding company
  or affiliate thereof, any representative of any such company or affiliate
  thereof, from acquiring, owning, or controlling or being affiliated in any
  way with any insured depository institution or affiliate thereof because of
  the types of activities engaged in directly or indirectly by any such company
  or affiliate thereof, or any representative of any such company or affiliate
  thereof, or because of the types of activities engaged in directly or
  indirectly by any such insured depository institution or affiliate thereof,
  or by any representative of such institution or affiliate thereof; or
  `(C) any insured depository institution or any affiliate thereof, or any
  representative of any such institution or affiliate thereof, from offering
  or marketing products or services of any affiliated financial services
  holding company or affiliate thereof or from having its products or services
  offered or marketed by any affiliate thereof, or by any representative of
  such company or affiliate--
  `(i) except as provided in sections 4(c)(16)(B) and 5(c)(3) and 5(c)(4); and
  `(ii) except with regard to offering and marketing insurance pursuant to
  section 4(c)(8).
Nothing in this subparagraph shall exempt any company which is or becomes
a financial services holding company or an affiliate thereof, or any
representative of any such company or affiliate, from complying with, or shall
annul, alter, or affect the application of, the laws of any State relating
to the examination, supervision, or regulation of providers of financial
services or the protection of consumers, except to the extent that the intent,
purpose or effect of those laws is inconsistent with this subsection or with
the purposes of this Act and then only to the extent of the inconsistency.
  `(2) For purposes of this subsection, an insured depository institution
  includes a branch, agency, or commercial lending company subsidiary of a
  foreign bank, as those terms are defined in section 1(b) of the International
  Banking Act of 1978 (12 U.S.C. 3101).'.
SEC. 417. PENALTIES.
  Section 8 of the Banking Holding Company Act of 1956 (12 U.S.C. 1847)
  is amended--
  (1) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company';
  (2) in subsection (a)--
  (A) in paragraph (2), by striking `profit significantly' and inserting
  `obtain anything of value'; and
  (B) by striking the flush text following paragraph (2);
  (3) in subsection (b)(1), by striking `forfeit and'; and
  (4) in subsection (d)--
  (A) in the heading, by striking `Penalty' and inserting `Civil penalty'; and
  (B) in paragraphs (1) through (4), by inserting `civil' before `penalty'
  each place it appears.
SEC. 418 ANTITRUST REVIEW.
  (a) ANTITRUST REVIEW- Section 11(b)(1) of the Bank Holding Company Act
  (12 U.S.C. 1849(b)(1)) is amended by inserting `, except that such period
  may be eliminated or reduced with the concurrence of the Attorney General'
  before the period at the end of the third sentence.
  (b) CONFORMING AMENDMENTS- Section 11 of the Bank Holding Company Act of
  1956 (12 U.S.C. 1849) is further amended--
  (1) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'; and
  (2) in subsection (b)(1), by striking `failure of a bank' and inserting
  `failure of an insured depository institution'.
  (c) AMENDMENT TO THE FEDERAL DEPOSIT INSURANCE ACT- Section 18(c)(6) of the
  Federal Deposit Insurance Act (12 U.S.C. 1828(c)(6)) is amended by inserting
  `, except that such period may be eliminated or reduced with the concurrence
  of the Attorney General' before the period at the end of the third sentence.
SEC. 419. TECHNICAL AMENDMENT.
  Section 1 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841 note)
  is amended by striking `Bank Holding Company Act of 1956' and inserting
  `Financial Services Holding Company Act of 1992'.
SEC. 420. EFFECTIVE DATE.
  Sections 411 through 419 shall become effective on January 1, 1994, except
  that section 4(c)(8)(A)(ii) of the Bank Holding Company Act of 1956 (as
  added by section 413(a)(2)), shall be effective on the date of enactment
  of this title.
SEC. 421. APPLICATION OF THE LIMITATIONS ON TYING ARRANGEMENTS AND INSIDER
LENDING TO FINANCIAL SERVICES HOLDING AND DIVERSIFIED HOLDING COMPANIES.
  (a) DEFINITIONS- Section 106(a) of the Bank Holding Company Act Amendments
  of 1970 (12 U.S.C. 1971) is amended by striking `bank holding company'
  and inserting `financial services holding company and diversified holding
  company'.
  (b) CERTAIN TYING ARRANGEMENTS PROHIBITED- Section 106(b) of the Bank
  Holding Company Act Amendments of 1970 (12 U.S.C. 1972(b)) is amended--
  (1) by redesignating paragraph (2) as paragraph (3); and
  (2) by inserting after paragraph (1) the following new paragraph:
  `(2)(A) A financial services holding company and any subsidiary (other than
  a bank) of such holding company and a diversified holding company and any
  subsidiary (other than a bank) of such holding company shall not in any
  manner extend credit, lease, or sell property of any kind, or furnish any
  service or fix or vary the consideration for any of the foregoing, on the
  condition or requirement that the customer shall obtain credit, property
  or service from an affiliated bank except as provided in subparagraph (B).
  `(B) A financial services holding company and any subsidiary (other than
  a bank) of such holding company and a diversified holding company and
  any subsidiary (other than a bank) of such holding company may vary the
  consideration--
  `(i) for any extension of credit, lease or sale of property of any kind,
  or the furnishing of any service on the condition or requirement that the
  customer shall obtain some credit, property, or service from an affiliated
  bank provided that the products or services offered to and obtained by the
  customer are also separately available to such customer on substantially
  the same terms, including interest rate, collateral, and cost, as those
  prevailing at the time for comparable transactions that are not subject
  to such conditions or requirements; or
  `(ii) for any loan, discount, deposit, or trust service on the condition
  or requirement that the customer shall obtain a loan, discount, deposit
  or trust service from an affiliated bank provided that such products or
  services described in this subparagraph are also separately available to
  such customer.
  `(C) The Board may adopt such regulations to carry out the purposes
  of this paragraph which may include such restrictions or limitations
  regarding subparagraph (B) as it deems necessary or appropriate in the
  public interest.'.
  (c) CONFORMING AMENDMENTS- Sections 22(h)(6) (C) and (D) of the Federal
  Reserve Act (12 U.S.C. 375b(6) (C) and (D)) are each amended--
  (1) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company and diversified holding company'; and
  (2) by striking `Bank Holding Company Act of 1956' wherever it appears
  and inserting `Financial Services Holding Company Act of 1992'.
SEC. 422. PROVISIONS EXEMPTING FINANCIAL SERVICES HOLDING COMPANIES FROM
THE SAVINGS AND LOAN HOLDING COMPANY ACT.
  Section 10(a) of the Home Owners' Loan Act (12 U.S.C. 1467a(a)) is amended--
  (1) in paragraph (1), by amending subparagraph (D) to read as follows:
  `(D) Savings and Loan Holding Company-
  `(i) Except as provided in clause (ii), the term `savings and loan holding
  company' means any company which directly or indirectly controls a savings
  association or controls any other company which is a savings and loan
  holding company.
  `(ii) No company which is a financial services holding company or a
  diversified holding company registered under and subject to the provisions
  of the Financial Services Holding Company Act of 1992, other than a company
  described in section 4(f) of such Act (12 U.S.C. 1843(f)), and no company
  controlled by such company, shall be deemed to be a savings and loan
  holding company.'; and
  (2) by adding after paragraph (4) the following new paragraph:
  `(5) EXEMPTION FOR FINANCIAL SERVICES HOLDING COMPANIES AND DIVERSIFIED
  HOLDING COMPANIES- The provisions of this section shall not apply to any
  company that is a financial services holding company or a diversified holding
  company registered under, and subject to, the provisions of the Financial
  Services Holding Company Act of 1992, other than companies described in
  section 4(f) of such Act (12 U.S.C. 1843(f)), or to any company directly
  or indirectly controlled by such company (other than a savings association).'
CHAPTER 2--FINANCIAL ACTIVITIES OF NATIONAL BANKS
SEC. 426. AMENDMENTS TO THE BANKING ACT OF 1933.
  (a) DEALING, UNDERWRITING AND PURCHASING SECURITIES- Paragraph Seventh
  of section 5136 of the Revised Statutes (12 U.S.C. 24 (Seventh)) is
  amended by adding at the end thereof the following: `If an association
  is not an affiliate of a securities affiliate (as the terms `affiliate'
  and `securities affiliate' are defined in section 2 of the Financial
  Services Holding Company Act of 1992 (12 U.S.C. 1841)), the limitations and
  restrictions contained in this paragraph as to dealing in, underwriting,
  and purchasing securities for its own account shall not apply to the
  distribution of securities issued by investment companies (as defined in
  section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3)): Provided,
  That notwithstanding any other provision of law (including this section),
  an association shall not in the United States, pursuant to any express or
  incidental power, underwrite, distribute, or sell interests in a pool of
  assets originated or purchased by the association or its affiliate, and an
  association shall not continue to engage in such activity pursuant to any
  order issued by the Comptroller of the Currency: Provided further, That
  no association shall sponsor, organize or control an investment company
  registered under the Investment Company Act of 1940: Provided further,
  That no association shall engage in the United States in any securities
  activity except to the extent that such activity is specifically authorized
  by statute, or authorized by regulation, order, or interpretation issued
  by the Office of the Comptroller of the Currency pursuant to that statute,
  on the date of enactment of the Financial Institutions Safety and Consumer
  Choice Act of 1992, provided that this shall not authorize the underwriting
  or distributing by an association of securities backed by or representing
  an interest in mortgages or other assets originated or purchased by the
  association or its affiliate.'.
  (b) Conforming Amendments-
  (A) Section 20 of the Banking Act of 1933 (12 U.S.C. 377) is repealed.
  (B) Section 32 of the Banking Act of 1933 (12 U.S.C. 78) is repealed.
SEC. 427. INSURANCE ACTIVITIES OF NATIONAL BANKS.
  (a) SALE OF INSURANCE AUTHORIZED- In addition to the powers vested by
  law in national banking associations, any such association located in a
  place that has a population not exceeding 5,000 (as shown by the preceding
  decennial census) may sell insurance so long as such insurance activities
  are confined to that place, and the insurance is sold only to residents
  of the State in which the association is located or to natural persons
  employed in that State: Provided, That no such association shall in any
  case assume or guarantee the payment of any premium on insurance policies
  issued through its agency by its principal: Provided further, That the
  association shall not guarantee the truth of any statement made in any
  application made for such insurance.
  (b) DEFINITION- For purposes of subsection (a), the term `residents of
  that State' includes--
  (1) companies incorporated in, or organized under the laws of, the State;
  (2) companies licensed to do business in the State; and
  (3) companies having an office in the State.
  (c) ADDITIONAL AUTHORITY UNDER STATE LAW- Notwithstanding the limitations
  in subsection (a), a national banking association organized under the laws
  of the United States may act as agent in soliciting and selling insurance
  and collecting premiums in one or more States in which such association
  or any of its branches is located to the extent to which such activities
  are permitted by such States for banks located in those States.
  (d) CONFORMING AMENDMENT- Chapter 461 of the Act of September 7, 1916
  (39 Stat. 753; 12 U.S.C. 92 note) is further amended by striking `That in
  addition to the powers now vested by law in national banking associations'
  and all that follows through `filing his application for insurance.'.
SEC. 428. AMENDMENTS TO SECTIONS 23A AND 23B OF THE FEDERAL RESERVE ACT.
  (a) Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended--
  (1) in subsection (a)--
  (i) in paragraph (2), by striking the period at the end thereof and
  inserting `: Provided, however, That notwithstanding the foregoing, a loan
  or extension of credit shall not be deemed to be made to any affiliate if--
  `(A) the member bank approves such loan or extension of credit in accordance
  with substantially the same standards, procedures, and terms that it has
  applied to similar loans or extensions of credit the proceeds of which
  are not transferred to or for the benefit of an affiliate; and
  `(B) such loan or extension of credit is not made for purposes of evading
  any of the requirements of this section.'; and
  (ii) by adding after paragraph (4) the following new paragraph:
  `(5) No financial services holding company shall permit an insured depository
  institution that it controls to engage in any covered transaction if such
  covered transaction exceeds 5 percent of the capital stock and surplus of
  the insured depository institution unless 5 days prior notice is provided
  to the Board and the appropriate Federal banking agency for the insured
  depository institution, if different;'
  (2) in subsection (b)--
  (A) in paragraph (1)(D), by amending clause (ii) to read as follows:
  `(ii) any investment company, commodity pool, or other company engaged in
  substantially the same activities as an investment company or commodity
  pool with respect to which a member bank or any affiliate is an investment
  advisor as defined in section 2(a)(20) of the Investment Company Act of 1940
  (15 U.S.C. 80a-2(a)(20)), commodity trading advisor as defined in section
  2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)), or performs
  substantially equivalent activities which are substantially equivalent to
  those of an investment advisor or commodity trading advisor; and';
  (B) in paragraph (2)(A), by inserting `and of which the member bank owns
  at least 80 per centum of the voting stock' after `member bank';
  (C) in paragraph (5), by inserting `principally engaged in deposit taking
  or lending activities' after `trust company';
  (D) in paragraph (7)--
  (i) in subparagraph (D), by striking `or' at the end thereof;
  (ii) in subparagraph (E)--
  (I) by inserting `to, or' after `standby letter of credit,'; and
  (II) by striking `or' at the end thereof; and
  (iii) by adding after subparagraph (E) the following new subparagraphs:
  `(F) the assumption by a member bank of a liability of any affiliate whether
  directly or through the transfer of such affiliate to the member bank;
  `(G) a loan or extension of credit to any company, or the issuance of or
  participation in a standby letter of credit, asset purchase agreement,
  indemnification, guarantee, insurance or other facility with any company,
  the purpose of which is to enhance the marketability of securities or
  other obligations or assets, other than those securities that a member
  bank may underwrite pursuant to section 5136 of the Revised Statutes (12
  U.S.C. 24 (Seventh)), that are underwritten or distributed by the affiliate,
  unless there is substantial participation by other lenders in such loan,
  extension of credit, letter of credit, agreement, indemnification, guarantee,
  insurance or other facility; or
  `(H) any other financial arrangement that is determined by the Board by
  regulation to be substantially equivalent to a transaction described in
  this paragraph;';
  (3) in subsection (c)--
  (A) in paragraph (1)--
  (i) by inserting `to, or' after `letter of credit issued'; and
  (ii) by striking `at the time of the transaction'; and
  (B) in paragraph (4)--
  (i) by inserting `the member bank or' after `issued by'; and
  (ii) by inserting `to, or' after `letter of credit'; and
  (4) in subsection (d)(5), by inserting `provided that the company provides
  services solely to affiliated member banks' before the semicolon.
  (b) Section 23B of the Federal Reserve Act (12 U.S.C. 371c-1) is amended--
  (1) in subsection (a)(2)(E)--
  (A) in clause (i), by striking `, or' and inserting a semicolon;
  (B) in clause (ii), by striking the period and inserting `; or'; and
  (C) by adding at the end thereof the following new clause:
  `(iii) if the third party is a customer of an affiliate (as defined
  in section 2 of the Financial Services Holding Company Act of 1992 (12
  U.S.C. 1841) unless--
  `(I) the member bank approves such transaction in accordance with
  substantially the same standards, procedures, and terms that it has
  applied to similar transactions with persons who are not customers of an
  affiliate; and
  `(II) such transaction or series of transactions is not made for the
  purpose of evading any of the requirements of this section.'; and
  (2) in subsection (b)(2), by inserting `officers, directors, or employees
  of' after `of the bank or'.
SEC. 429. CUSTOMER DISCLOSURE.
  Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended
  by adding after subsection (n) the following new subsection:
  `(o) CUSTOMER DISCLOSURE REGARDING SECURITIES, INSURANCE AND OTHER
  NONBANKING PRODUCTS-
  `(1) PRODUCTS OFFERED, RECOMMENDED OR SOLD BY DEPOSITORY INSTITUTIONS-
  An insured depository institution shall prominently disclose in writing to
  its customers pursuant to regulations adopted by its appropriate Federal
  banking agency, that securities or insurance products offered, recommended,
  or sold by the insured depository institution are not deposits, are not
  insured by the Federal Deposit Insurance Corporation, are not guaranteed
  by the insured depository institution or an affiliated insured depository
  institution, and are not otherwise an obligation of an insured depository
  institution unless such is the case.
  `(2) PRODUCTS OFFERED, RECOMMENDED OR SOLD ON BANK PREMISES OR THROUGH JOINT
  MARKETING ACTIVITIES- An insured depository institution shall not permit
  securities or insurance products to be offered, recommended, or sold on bank
  premises, or to bank customers as part of joint marketing activities with
  another entity, unless the entity prominently discloses in writing that it
  is not an insured institution and is separate from the insured depository
  institution in addition to the disclosures required in paragraph (1).
  `(3) CUSTOMER ACKNOWLEDGEMENT OF DISCLOSURES- No insured depository
  institution shall permit the sale of securities or insurance products to
  be consummated unless an acknowledgement of receipt of the disclosures
  described in paragraphs (1) and (2) including the date of receipt and the
  customer's name, address and account number is obtained from the customer.
  `(4) REGULATIONS- The appropriate Federal banking agencies may adopt
  regulations implementing this subsection and applying these provisions to
  nonbank products sold in a similar manner.'.
SEC. 430. BANKERS' BANKS.
  (a) Section 5136 (Seventh) of the Revised Statutes (12 U.S.C. 24 (Seventh))
  is further amended by inserting `or their holding companies' after
  `providing services for other depository institutions'.
  (b) Section 5169(b)(1) of the Revised Statutes (12 U.S.C. 27(b)(1)) is
  amended by inserting `or their holding companies' after `other depository
  institutions' the second time it appears.
CHAPTER 3--NON-BANKING ACTIVITIES OF FOREIGN BANKS IN THE UNITED STATES
SEC. 431. AMENDMENTS TO THE INTERNATIONAL BANKING ACT OF 1978.
  (a) IN GENERAL- Section 8 of the International Banking Act of 1978 (12
  U.S.C. 3106) is amended--
  (1) by amending subsection (a) to read  as follows:
  `(a)(1)(A) Except as otherwise provided in this section, any foreign bank--
  `(i) that maintains a branch or agency in the United States, or
  `(ii) that directly or indirectly owns or controls a commercial lending
  company organized under State law,
shall be subject to the provisions of the Financial Services Holding Company
Act of 1992 (12 U.S.C. 1841 to et seq.) and to sections 105 and 106 of the
Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1850, 1971 et seq.) in
the same manner and to the same extent as a financial services holding company.
  `(B) Any company that directly or indirectly owns or controls a foreign
  bank described in subparagraph (A) shall be subject to the provisions of the
  Financial Services Holding Company Act of 1992 (12 U.S.C. 1841 et seq.) and
  to sections 105 and 106 of the Bank Holding Company Act Amendments of 1970
  (12 U.S.C. 1850, 1971 et seq.) in the same manner and to the same extent
  as a company that owns or controls a financial services holding company.
  `(C)(i) Notwithstanding subparagraphs (A) and (B), no foreign bank or
  company described in this subsection shall, by reason of this subsection
  alone, be deemed to be a financial services holding company or a company
  that controls a financial services holding company for purposes of section
  3 of the Financial Services Holding Company Act of 1992 (12 U.S.C. 1842).
  `(ii) Notwithstanding clause (i), a foreign bank or company described in
  this subsection that seeks to acquire, directly or indirectly, more than 5
  percent of the shares of an insured depository institution (as defined in
  section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), other
  than a foreign bank that is an insured depository institution solely by
  virtue of operating an insured branch, must obtain the prior approval of
  such acquisition by the Board under section 3 of the Financial Services
  Holding Company Act of 1992 (12 U.S.C. 1842) as if the foreign bank or
  company were a financial services holding company or company that owns or
  controls a financial services holding company.
  `(2) The Board shall disapprove any notice or application under section 4(c)
  of the Financial Services Holding Company Act of 1992 by a foreign bank
  or foreign company controlling a foreign bank unless the Board determines
  that the foreign bank or foreign company has capital equivalent to that of
  a domestic financial services holding company engaged in similar activities.'
  (2) in subsection (c)(1)--
  (A) by amending the second sentence to read as follows: `Notwithstanding
  the preceding sentence, no foreign bank or other company referred to in
  this subsection may retain, pursuant to this subsection, the ownership or
  control of any company engaged in the business of underwriting, distributing
  or otherwise buying or selling stocks, bonds, and other securities in the
  United States after three years from the date of enactment of the Financial
  Institutions Safety and Consumer Choice Act of 1992.';
  (B) in the third sentence, by striking `Except in the case of affiliates
  described in the preceding sentence, nothing' and inserting `Nothing';
  (C) in the fifth sentence, by striking `the term `domestically-controlled
  affiliate covered in 1978' and all that follows in such sentence and
  inserting a period; and
  (D) by striking the sixth sentence.
  (b) EFFECTIVE DATE- The amendments made by subsection (a) shall become
  effective on January 1, 1994.
CHAPTER 4--AMENDMENTS TO THE SECURITIES ACTS
SEC. 436. AMENDMENTS TO THE SECURITIES ACT OF 1933.
  (a) BANK-ISSUED SECURITIES- Section 3(a)(2) of the Securities Act of 1933
  (15 U.S.C. 77c(a)(2)), is amended--
  (1) by striking `or any security issued or guaranteed by any bank;' and
  (2) by striking `a security issued or guaranteed by a bank shall not include
  any interest or participation in any collective trust fund maintained by
  a bank'.
  (b) SAVINGS ASSOCIATION-ISSUED SECURITIES- Section 3(a)(5) of the Securities
  Act of 1933 (15 U.S.C. 77c(a)(5)) is amended to read as follows:
  `(5) Any security issued by--
  `(A) a farmer's cooperative organization exempt from tax under section
  521 of the Internal Revenue Code of 1986 (26 U.S.C. 521);
  `(B) a corporation described in section 501(c)(16) of such Code and exempt
  from tax under section 501(a) of such Code;
  `(C) a corporation described in section 501(c)(2) of such Code and organized
  for the exclusive purpose of holding title to property, collecting income
  therefrom, and turning over the entire amount thereof, less expenses,
  to an organization or corporation described in subparagraph (A) or (B); or
  `(D) a savings and loan association of Federal savings bank issued or
  exchanged in connection with a transaction pursuant to which a savings and
  loan association or Federal savings bank converts from the mutual stock form
  of ownership under section 5 of the Home Owners' Loan Act (12 U.S.C. 1464)
  or section 402 of the National Housing Act (12 U.S.C. 1725(j)).'.
  (c) TREATMENT OF CERTAIN BANK AND SAVINGS ASSOCIATION INSTRUMENTS- Section
  3 of the Securities Act of 1933 (15 U.S.C. 77c) is amended by adding after
  subsection (c) the following new subsection:
  `(d)(1) Except as hereinafter expressly provided, in those circumstances
  in which an interest in any of the following is otherwise deemed to be a
  `security' within the meaning of section 2, the provisions of this Act
  shall not apply to--
  `(A) a deposit account, savings account, certificate of deposit, or other
  deposit instrument issued by a bank or savings association,
  `(B) a share account issued by a savings association if such account is
  insured by the Federal Deposit Insurance Corporation,
  `(C) a banker's acceptance,
  `(D) a letter of credit issued by a bank or savings association, or
  `(E) a debit account at a bank or savings association arising from a credit
  card or other similar arrangement,
except that this paragraph shall not exempt from the provisions of this Act
any participation in such an interest, account, certificate, instrument,
acceptance, or letter of credit, other than a participation that is a direct
obligation of a bank or savings association.
  `(2) For purposes of this subsection, the term `deposit' means the unpaid
  balance of money or its equivalent received or held by a bank or savings
  association in the usual course of business--
  `(A) for which it has given or is obligated to give credit, either
  conditionally or unconditionally, to a commercial, checking, savings,
  time, or thrift account;
  `(B) which is evidenced by its certificate of deposit, a check or draft drawn
  against a deposit account and certified by a bank or savings association,
  a letter of credit or a traveler's check, or by any other similar instrument
  on which the bank is liable;
  `(C) which consists of nonpooled assets of individual trust funds received or
  held by such bank or savings association whether held in the trust department
  or deposited in any other department of such bank or savings association;
  `(D) which is received or held by a bank or savings association for a special
  or specific non-investment purpose, including, without being limited to,
  escrow funds, funds held in security for any obligation due to the bank or
  savings association or others (including funds held as dealers' reserves)
  or for securities loaned by the bank or savings association, funds deposited
  by a debtor to meet maturing subscriptions to United States Government
  securities, funds held to meet its acceptances or letters of credit,
  and withheld taxes; or
  `(E) which is insured by the Federal Deposit Insurance Corporation, is
  subject to deposit reserve requirements adopted by the Board of Governors
  of the Federal Reserve System, or is regulated by the Comptroller of
  the Currency or the Board of Governors of the Federal Reserve System as
  a deposit.
  `(3) For purposes of this subsection, the term `savings association' shall
  have the meaning given in section 3 of the Federal Deposit Insurance Act
  (12 U.S.C. 1813).'.
  (d) EXEMPTION OF CERTAIN HOLDING COMPANY FORMATIONS FROM REGISTRATION
  UNDER THE SECURITIES ACT OF 1933- Section 4 of the Securities Act of 1933
  (15 U.S.C. 77d) is amended by adding after paragraph (6) the following
  new paragraph:
  `(7) transactions involving offers or sales of equity securities, in
  connection with the acquisition, under section 3(a) of the Financial
  Services Holding Company Act of 1992 (12 U.S.C. 1842(a)), of a bank by
  a financial services holding company, or a financial services holding
  company by a diversified holding company if--
  `(A) the acquisition occurs solely as part of a reorganization in which
  a person or group of persons--
  `(i) exchanges shares of a bank for shares of a newly formed financial
  services holding company, or shares of a financial services holding company
  for shares of a newly formed diversified holding company; and
  `(ii) receives, after such reorganization, substantially the same
  proportional share interests in the newly formed financial services holding
  company as they held in the bank or financial services holding company,
  as the case may be, except for changes in shareholders' interests resulting
  from the exercise of dissenting shareholders' rights under State or Federal
  law; and
  `(B) the newly formed company has substantially the same assets as it
  predecessor.'.
  (e) Technical Amendments-
  (1) Section 12(2) of the Securities Act of 1933 (15 U.S.C. 77l(2)) is
  amended by inserting `or (d)' after `subsection (a)'.
  (2) Section 304(a)(4) of the Trust Indenture Act of 1939 (15
  U.S.C. 77ddd(a)(4)) is amended by inserting `or 3(d)' after `section 3(a)'.
SEC. 437. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.
  (a) REGULATION OF BANK BROKER ACTIVITIES- Section 3(a)(4) of the Securities
  Exchange Act of 1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
  `(4) BROKER-
  `(A) IN GENERAL- The term `broker' means any person engaged in the business
  of affecting transactions in securities for the account of others.
  `(B) EXCLUSION OF BANKS- Such term does not include a bank unless the
  bank publicly solicits such business or is compensated for such business
  by the payment of commissions or similar remuneration based on effecting
  transactions in securities, excluding fees calculated as a percentage
  of assets under management (hereinafter referred to as `incentive
  compensation').
  `(C) BANK ACTIVITIES- A bank shall not be deemed to be a broker because
  it engages in one or more of the following activities:
  `(i) Enters into contractual or other arrangements with a broker or dealer
  registered under this Act pursuant to which the broker or dealer will
  offer brokerage services on or off the premises of the bank if--
  `(I) such broker or dealer is clearly identified as the person performing
  the brokerage services;
  `(II) bank employees perform only clerical or ministerial functions
  in connection with brokerage transactions unless such employees are
  qualified as registered representatives pursuant to the requirements of
  a self-regulatory organization;
  `(III) bank employees do not receive incentive compensation for any brokerage
  activities unless such employees are qualified as registered representatives
  pursuant to the requirements of a self-regulatory organization; and
  `(IV) such services are provided by the broker or dealer on a basis in
  which all customers are fully disclosed.
  `(ii) Engages in trust activities (including effecting transactions in
  the course of such trust activities) permissible for national banks under
  section 1 of Public Law 87-722 (12 U.S.C. 92a) or for State banks under
  relevant State trust statutes or law (excluding securities safekeeping,
  self-directed individual retirement accounts, or managed agency or other
  functionally equivalent accounts of a bank) unless the bank--
  `(I) publicly solicits brokerage business other than by advertising, in
  conjunction with advertising its other trust activities, that it effects
  transactions in securities; and
  `(II) receives incentive compensation.
  `(iii) Effects transactions in exempted securities, other than municipal
  securities, or in commercial paper, bankers' acceptances, or commercial
  bills.
  `(iv) Effects transactions in municipal securities and does not have a
  securities affiliate as provided in section 4(c)(15) of the Financial
  Services Holding Company Act of 1992 (12 U.S.C. 1843(c)(15)).
  `(v) Effects transactions as part of any bonus, profit-sharing, pension,
  retirement, thrift, savings, incentive, stock purchase, stock ownership,
  stock appreciation, stock option, dividend reinvestment, or similar plan
  for employees or shareholders of an issuer or its subsidiaries.
  `(vi) Effects transactions as part of a program for the investment or
  reinvestment of bank deposit funds into any no-load open-end investment
  company registered pursuant to the Investment Company Act of 1940 (15
  U.S.C. 80a-1 et seq.) that attempts to maintain a constant net asset value
  per share and has an investment policy calling for investment of at least
  80 percent of its assets in debt securities maturing in 13 months or less.
  `(vii) Effects transactions for the account of any affiliate of the bank,
  as the term `affiliate' is defined in section 2 of the Banking Act of
  1933 (12 U.S.C. 221a), treating all banks as member banks for purposes of
  such definition.
  `(viii) Effects sales--
  `(I) as part of a primary offering of securities by an issuer, not involving
  a public offering, pursuant to section 3(b), 4(2), or 4(6) of the Securities
  Act of 1933 and the rules and regulations thereunder; and
  `(II) exclusively to: a bank as defined in section 3(a)(2) of the Securities
  Act of 1933 whether acting in its individual or fiduciary capacity; an
  insurance company as defined in section 2(13) of the Securities Act of 1933;
  an investment company registered under the Investment Company Act of 1940
  or a business development company as defined in section 2(a)(48) of that
  Act; a Small Business Investment Company licensed by the Small Business
  Administration; an insured institution, as defined in section 401 of the
  National Housing Act; an employee benefit plan within the meaning of title 1
  of the Employee Retirement Security Act of 1974, if the investment decision
  is made by a plan fiduciary, as defined in Section 3(21) of such Act, that
  is a bank as defined in section 3(a)(2) of the Securities Act of 1933, or an
  insurance company as defined in section 2(17) of the Investment Company Act
  of 1940, or an investment adviser registered under the Investment Advisers
  Act of 1940, or if the employee benefit plan has total assets in excess
  of $5,000,000; an employee benefit plan as defined in section 3 of the
  Employee Retirement Income Security Act of 1974, established and maintained
  by a State, its political subdivisions, or any agency or instrumentality of
  a State or its political subdivisions exclusively for the benefit of its
  employees or their beneficiaries that is governed by fiduciary principles
  comparable to those contained in such Act, if (aa) the plan has total assets
  in excess of $25,000,000, and (bb) investment decisions for the plan are
  made by a plan fiduciary, as defined in section 3(21) of such Act, that
  is a bank as defined in section 3(a)(2) of the Securities Act of 1933, an
  insurance company as defined in section 2(17) of the Investment Company Act
  of 1940, or an investment adviser registered under the Investment Advisers
  Act of 1940; a corporation with total assets in excess of $50,000,000 and
  net worth in excess of $5,000,000, as reflected on financial statements
  prepared in accordance with general accepted accounting principles; an
  organization described in section 501(c)(3) of the Internal Revenue Code
  of 1986 with total assets in excess of $5,000,000; a foreign bank, broker,
  dealer, insurance company, or government or government agency; or a natural
  person with a net worth exceeding $5,000,000. The dollar limitations in this
  clause shall be adjusted annually after December 31, 1992, by the annual
  percentage increase in the Consumer Price Index for Urban Wage Earners
  and Clerical Workers published monthly by the Bureau of Labor Statistics.
  `(ix) Effects fewer than 1,000 transactions per year in securities other
  than transactions described in clauses (i) through (viii), if the bank
  does not have a subsidiary or affiliate registered as a broker or dealer
  under this Act.'.
  (b) REGULATION OF BANK DEALER ACTIVITIES- Section 3(a)(5) of the Securities
  Exchange Act of 1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:
  `(5)(A) The term `dealer' means any person engaged in the business of buying
  and selling securities for his own account through a broker or otherwise.
  `(B) Such term does not include--
  `(i) any person insofar as that person buys or sells securities for his
  own account, either individually or in some fiduciary capacity, but not
  as a part of a regular business; or
  `(ii) any bank insofar as the bank--
  `(I) buys and sells commercial paper, bankers' acceptances, or commercial
  bills, or exempted securities other than municipal securities;
  `(II) buys and sells municipal securities and does not have a securities
  affiliate as provided in section 4(c)(15) of the Financial Services Holding
  Company Act of 1992; or
  `(III) buys and sells securities for investment purposes for the bank
  or for accounts for which the bank, acting as a trustee or fiduciary,
  is authorized to determine the securities to be purchased or sold.'.
  (c) POWER TO EXEMPT FROM THE DEFINITIONS OF BROKER OR DEALER- Section 3 of
  the Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended by adding
  after subsection (d) the following new subsection:
  `(e) The Commission, by rule, regulation, or order, upon its own motion or
  upon application, may conditionally or unconditionally exempt any person
  or class of persons from the definitions of `broker' or `dealer', if the
  Commission finds that such exemption is consistent with the public interest,
  the protection of investors, and the purposes of this Act.'.
  (d) REQUIREMENT THAT BANKS FALLING WITHIN THE DEFINITIONS OF BROKER OR
  DEALER PLACE THEIR SECURITIES ACTIVITIES IN A SEPARATE CORPORATE ENTITY-
  Section 15(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(a))
  is amended to read as follows:
  `(a)(1) It shall be unlawful for any broker or dealer that is either a
  person other than a natural person or a natural person not associated with
  a broker or dealer that is a person other than a natural person (other
  than such a broker or dealer whose business is exclusively intrastate and
  who does not make use of any facility of a national securities exchange)
  to make use of the mails or any means or instrumentality of interstate
  commerce to effect any transactions in, or to induce or attempt to induce
  the purchase or sale of, any security (other than an exempted security or
  commercial paper, bankers' acceptances, or commercial bills) unless such
  broker or dealer is registered in accordance with subsection (b).
  `(2) It shall be unlawful for any bank to act as a broker or dealer,
  except in the course of an exclusively intrastate business. This section
  shall not preclude a subsidiary of a bank or an affiliate of a financial
  services holding company other than a bank, as those terms are defined
  in the Financial Services Holding Company Act of 1992 (12 U.S.C. 1841 et
  seq.), that is registered in accordance with subsection (b) from acting
  as a broker or dealer to any extent otherwise permissible by law.
  `(3) The Commission, by rule or order, as it deems consistent with the
  public interest and the protection of investors, may conditionally or
  unconditionally exempt from paragraphs (1) and (2) any broker or dealer
  or class of brokers or dealers specified in such rule or order.'.
  (e) REGULATION OF TRANSACTIONS IN CERTAIN SECURITIES ON BANK PREMISES-
  Section 15 of the Securities and Exchange Act of 1934 (15 U.S.C. 78o)
  is amended by adding after subsection (e) the following new subsection:
  `(f)(1) No bank may permit any evidence of indebtedness of, or ownership
  interest in, any affiliate of such bank to be sold or offered for sale to
  the general public in any part of any office (other than an office which
  is not located within any State) of such bank which is commonly accessible
  to the general public for the purpose of accepting deposits.
  `(2) No bank may permit any evidence of indebtedness of, or ownership
  interest in, such bank to be sold or offered for sale to the general public
  in any part of any office (other than an office which is not located within
  any State) of such bank which is commonly accessible to the general public
  for the purpose of accepting deposits.
  `(3)(A) This subsection shall not apply to transactions in shares of
  investment companies registered under the Investment Company Act of 1940
  (15 U.S.C. 80a-1 et seq.) that are affiliated with the bank by or through
  a broker or dealer registered under this Act, if sales by or through such
  broker or dealer are subject to sales practice standards of a self-regulatory
  organization, provided the transactions--
  `(i) are consistent with the purposes of this subsection; and
  `(ii) are in the public interest.
  `(B) This subsection shall not apply to any evidence of indebtedness or
  ownership interest which--
  `(i) is a deposit in an insured depository institution; or
  `(ii) constitutes a means of payment to a third party, such as a traveler's
  check, cashier's check, teller's check or money order.'.
  (f) SECURITIES EXCHANGE ACT ADMINISTRATION TRANSFER- Section 12(i) of the
  Securities Exchange Act of 1934 (15 U.S.C. 78l(i)) is repealed.
SEC. 438. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.
  (a) Custody of Investment Company Assets by Affiliate Banks-
  (1) MANAGEMENT COMPANIES- Section 17(f) of the Investment Company Act of
  1940 (15 U.S.C. 80a-17(f)) is amended by striking `trusts' the first place
  it appears and inserting `trusts, but where any such bank or an affiliated
  person thereof is an affiliated person, promoter, sponsor, or organizer of,
  or principal underwriter for, such registered company, only in accordance
  with such rules and regulations or orders as the Commission may from time
  to time prescribe for the protection of investors, after consulting in
  writing with the appropriate Federal banking agency as defined in section
  3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)),'.
  (2) UNIT INVESTMENT TRUSTS- Section 26(a)(1) of the Investment Company Act of
  1940 (15 U.S.C. 80a-26(a)(1)) is amended by inserting `not affiliated with
  such underwriter or depositor, or where such bank is so affiliated, only in
  accordance with such rules and regulations or orders as the Commission may
  from time to time prescribe for the protection of investors after consulting
  in writing with the appropriate Federal banking agency as defined in section
  3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)),' after `bank'.
  (b) Independent Directors-
  (1) INTERESTED PERSONS- Section 2(a)(19)(A)(v) of the Investment Company
  Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)(v)) is amended by striking `1934 or
  any affiliated person of such a broker or dealer' and inserting `1934 or
  any person that, at any time during the preceding 6 months, has acted as
  custodian or transfer agent or has executed any portfolio transactions
  for, engaged in any principal transactions with, or loaned money to,
  the investment company, or any other investment company having the same
  investment adviser, principal underwriter, sponsor, or promoter, or any
  affiliated person of such a broker, dealer, or person'.
  (2) AFFILIATION OF DIRECTORS- Section 10(c) of the Investment Company
  Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking `bank, except'
  and inserting `bank and its subsidiaries or any financial services holding
  company and its affiliates and subsidiaries, as those terms are defined
  in the Financial Services Holding Company Act of 1992 (12 U.S.C. 1842
  et seq.),'.
  (c) ADDITIONAL SEC RULEMAKING AUTHORITY REGARDING BANK AFFILIATED MUTUAL
  FUNDS- Section 38 of the Investment Company Act of 1940 (15 U.S.C. 80a-37)
  is amended by adding after subsection (c) the following new subsection:
  `(d) The Commission shall have the authority to promulgate such rules
  regarding loans, purchases or sales of assets, and other transactions
  involving a bank, an affiliated person, and an affiliated registered
  investment company.'.
  (d)  ADDITIONAL DISCLOSURE AUTHORITY- Section 35(a) of the Investment
  Company Act of 1940 (15 U.S.C. 80a-34(a)) is amended to read as follows:
  `(a) UNLAWFUL REPRESENTATION OF GUARANTEE BY UNITED STATES OR AGENCY THEREOF-
  It shall be unlawful for any person, in issuing or selling any security
  of which a registered investment company is the issuer, to represent or
  imply in any manner whatsoever that such security or company has been
  guaranteed, sponsored, recommended, or approved by the United States or
  any agency or officer thereof or has been insured by the Federal Deposit
  Insurance Corporation or is guaranteed by or is otherwise an obligation of
  any bank or insured institution. If a financial services holding company,
  bank, or separately identifiable division or department of a bank, or any
  affiliate or subsidiary thereof, is an investment adviser, organizer,
  sponsor, promoter, principal underwriter, or an affiliated person of
  a registered investment company, or a bank or an affiliated person of a
  bank is offering or selling securities of a registered investment company,
  or the name of an investment company is that of, or similar to that of, a
  bank, pursuant to regulations adopted by the Commission, after consultation
  in writing with the appropriate federal banking agencies as defined in
  section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), any
  person in issuing or selling securities of such investment company may be
  required to disclose prominently that the investment company and any security
  issued by it are not insured by the Federal Deposit Insurance Corporation,
  are not guaranteed by an affiliated bank or insured institution, and are
  not otherwise an obligation of such a bank or insured institution. The
  Commission may determine by order as provided for in subsection (d), after
  consultation with the appropriate Federal banking agencies (as defined in
  section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))) that
  use of a name similar to that of a bank is deceptive and misleading. In
  that event, use of such name shall be unlawful as provided in subsection
  (d) and the Commission shall have the authority to take such actions as
  provided in that subsection.'.
  (e) DEFINITION OF BROKER- Section 2(a)(6) of the Investment Company Act
  of 1940 (15 U.S.C. 80a-2(a)(6)) is amended to read as follows:
  `(6) `Broker' has the same meaning as in the Securities Exchange Act of
  1934, but does not include any person solely by reason of the fact that
  such person is an underwriter for one or more investment companies.'.
  (f) DEFINITION OF DEALER- Section 2(a)(11) of the Investment Company Act
  of 1940 (15 U.S.C. 80a-2(a)(11) is amended to read as follows:
  `(11) `Dealer' has the same meaning as in the Securities Exchange Act of
  1934, but does not include an insurance company or investment company.'.
SEC. 439. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT ADVISER
FOR BANKS THAT ADVISE INVESTMENT COMPANIES.
  (a) Section 202(a)(11) of the Investment Advisers Act of 1940 (15
  U.S.C. 80b-2(a)(11)) is amended--
  (1) in subparagraph (A), by striking `investment company' and inserting
  `investment company, except that the term `investment adviser' includes any
  bank or financial services holding company to the extent such bank acts
  as an investment adviser to a registered investment company unless the
  bank performs such services through a separately identifiable department
  or division of the bank, in which case the department or division and not
  the bank shall be deemed to be the investment adviser'; and
  (2) by adding at the end thereof the following: `For purposes of this
  paragraph, a separately identifiable department or division of a bank
  shall mean a unit that--
  `(A) is under the direct supervision of an officer or officers designated
  by the appropriate Federal banking agency or directors of the bank as
  responsible for the day-to-day conduct of the bank's investment adviser
  activities for one or more investment companies, including the supervision
  of all bank employees engaged in the performance of such activities; and
  `(B) there are separately maintained in or extractable from such unit's
  own facilities or the facilities of the bank, all of the records relating
  to such investment adviser activities and such records are so maintained
  or otherwise accessible as to permit independent examination thereof and
  enforcement of the Act and rules and regulations thereunder.'.
  (b) DEFINITION OF BROKER- Section 202(a)(3) of the Investment Advisers
  Act of 1940 (15 U.S.C. 80b-2(a)(3)) is amended to read as follows:
  `(3) `Broker' has the same meaning as in the Securities Exchange Act
  of 1934.'.
  (c) DEFINITION OF DEALER- Section 202(a)(7) of the Investment Advisers
  Act of 1940 (15 U.S.C. 80b-2(a)(7)) is amended to read as follows:
  `(7) `Dealer' has the same meaning as in the Securities Exchange Act of
  1934, but does not include an insurance company or investment company.'.
  (d) NOTIFICATION AND CONSULTATION- The Investment Advisers Act of 1940
  (15 U.S.C. 80b-1 et seq.) is amended by inserting after section 210 the
  following new section:
`SEC. 210A. NOTIFICATION AND CONSULTATION.
  `(a) IN GENERAL- The Commission, prior to the examination of, the entry
  of an order of investigation of, or the commencement of any disciplinary
  or law enforcement proceedings against, any financial services holding
  company, bank, or department or division of a bank that is a registered
  investment adviser shall give notice to the appropriate Federal banking
  agency as defined in section 3(q) of the Federal Deposit Insurance Act (12
  U.S.C. 1813(q)), of the identity of such financial service holding company,
  bank, department or division and the nature of the proposed actions and
  shall consult in writing with such appropriate Federal banking agency
  concerning any such proposed action, unless the protection of investors
  requires immediate action by the Commission and prior notice or consultation
  is not practical under the circumstances, in which case notice shall be
  given and the appropriate Federal banking agency shall be notified and
  consulted as promptly as possible thereafter.
  `(b) EXAMINATION RESULTS- The Commission and the appropriate Federal banking
  agency shall exchange the results of any examination of any financial
  services holding company, bank, department or division of a bank that is
  a registered investment adviser concerning activities subject to this Act.
  `(c) EFFECT ON OTHER AUTHORITY- Nothing herein shall limit in any respect
  the authority of the appropriate Federal banking agency with respect to
  such financial services holding company, bank, or department or division
  under any provision of law.'.
SEC. 440. TREATMENT OF BANK COMMON TRUST FUNDS.
  (a) SECURITIES ACT OF 1933- Section 3(a)(2) of the Securities Act of 1933 (15
  U.S.C. 77c(a)(2)) is amended by striking `or any interest or participation
  in any common trust fund or similar fund maintained by a bank exclusively
  for the collective investment and reinvestment of assets contributed thereto
  by a bank in its capacity as trustee, executor, administrator, or guardian'
  and inserting `or any interest or participation in any common trust fund or
  similar fund excepted from the definition of the term `investment company'
  by section 3(c)(3) of the Investment Company Act (15 U.S.C. 80a-3(c)(3))'.
  (b) SECURITIES EXCHANGE ACT OF 1934- Section 3(a)(12)(A)(iii) of the
  Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is amended
  to read as follows:
  `(iii) any interest or participation in any common trust fund or similar
  fund excepted from the definition of the term `investment company' by
  section 3(c)(3) of the Investment Company Act.'.
  (c) INVESTMENT COMPANY ACT OF 1940- Section 3(c)(3) of the Investment
  Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by deleting the
  period at the end thereof and inserting: `so long as--
  `(A) such fund is employed by the bank solely as an aid to the administration
  of trust, estates, and other accounts created and maintained for a
  fiduciary purpose;
  `(B) except in connection with generic advertising of the bank's fiduciary
  services, interests in such fund are not--
  `(i) advertised; or
  `(ii) offered for sale to the general public; and
  `(C) a fund is not charged any fees or expenses which, when added to any
  other compensation charged by the bank to a participant account, exceeds
  the total amount of compensation which would have been charged to such
  participant account if no assets of such participant account had been
  invested in interests in the fund, except that any reasonable and necessary
  expenses related to the prudent operation of the fund, as determined by
  the Comptroller of the Currency shall be permitted to be charged directly
  to the fund.'.
  (d) TAX EFFECT- Section 584 of the Internal Revenue Code of 1986 (26
  U.S.C. 584) is amended by adding after subsection (g) the following new
  subsection:
  `(h) CONVERSION, MERGERS, OR REORGANIZATION OF COMMON TRUST FUNDS-
  Notwithstanding any other provision of the Internal Revenue Code, any
  transfer of all or substantially all of the assets of a common trust fund
  taxable under this section to a registered investment company taxable
  under subchapter M shall not result in a gain or loss to the participants
  in such common trust fund where the transfer is a result of a merger,
  conversion, reorganization, transfer, or other similar transaction or
  series of transactions.'.
SEC. 441. SECURITIES AND EXCHANGE COMMISSION STUDY OF BANK AND INSURANCE
POOLED INVESTMENT VEHICLES.
  (a) IN GENERAL- The Securities and Exchange Commission, in consultation
  with the Secretary of Labor, shall examine--
  (1) the appropriate treatment of bank collective investment funds and
  separate accounts under the securities laws and the Employee Retirement
  Income Security Act (29 U.S.C. 1001 et seq.); and
  (2) the appropriate treatment of common trust funds under the securities
  laws.
  (b) REPORT- Not later than six months after the date of enactment of
  this title, the Securities and Exchange Commission shall transmit to
  the Congress a final report which shall contain a detailed statement of
  findings and conclusions, including recommendations for such administrative
  and legislative action as the Commission deems advisable.
SEC. 442. EFFECTIVE DATE.
  This chapter shall become effective on January 1, 1994, except that section
  441 shall become effective on the date of enactment of this title.
CHAPTER 5--AMENDMENTS TO PROMPT CORRECTIVE ACTION
SEC. 446. AMENDMENTS TO PROMPT CORRECTIVE ACTION.
  (a) PROVISIONS APPLICABLE TO WELL CAPITALIZED BANKS AND COMPANIES- Section
  38 of the Federal Deposit Insurance Act is amended--
  (1) in subsection (b)(2), by inserting at the end the following new
  subparagraphs:
  `(J) BANKING LAWS DEFINED- For the purposes of this section, the term
  `banking laws' means this Act, the National Bank Act, the Federal Reserve
  Act, the Financial Services Holding Company Act of 1992, the Change in
  Bank Control Act, the Bank Merger Act, the International Banking Act of
  1978, any other law codified in title 12 of the United States Code that
  is applicable to or affects insured banks or persons that own or control
  insured banks, and any regulations promulgated thereunder.
  `(K) DIVERSIFIED HOLDING COMPANY DEFINED- The term `diversified holding
  company' shall have the same meaning as provided in section 2(a)(2) of
  the Financial Services Holding Company Act of 1992 (12 U.S.C. 1841(a)(2)).
  `(L) FINANCIAL SERVICES HOLDING COMPANY AND FINANCIAL AFFILIATE DEFINED-
  The terms `financial services holding company' and `financial affiliate'
  shall have the same meaning as provided in section 2 of the Financial
  Services Holding Company Act of 1992 (12 U.S.C. 1841).
  `(M) NEW FINANCIAL ACTIVITY DEFINED- The term `new financial activity'
  means any activity authorized pursuant to subsections (c)(8), (c)(15),
  or (c)(16) of section 4 of the Financial Services Holding Company Act of
  1992 (12 U.S.C. 1843) other than any activity that, prior to the date of
  enactment of the Financial Institutions Safety and Consumer Choice Act of
  1992, the Board of Governors of the Federal Reserve System had determined,
  by any order or regulation that continued to be in effect on December 31,
  1993, to be closely related to banking and a proper incident thereto.
  `(N) BOARD OF GOVERNORS DEFINED- The term `Board of Governors' means the
  Board Governors of the Federal Reserve System.';
  (2) by redesignating subsections (e) through (o) as subsections (f) through
  (p), respectively; and
  (3) by inserting after subsection (d) the following new subsection:
  `(e) PROVISIONS APPLICABLE TO WELL CAPITALIZED BANKS AND COMPANIES-
  `(1) EXPANSION BY WELL CAPITALIZED BANKS-
  `(A) IN GENERAL- Notwithstanding any other provision of the banking laws,
  any insured bank that qualifies under subparagraph (B) may--
  `(i) DE NOVO BRANCHES- Subject to the notice requirement of paragraph (3)(A),
  establish and maintain a new branch office at any location permitted under
  the banking laws, so long as the branch office is not the first branch
  office of the bank in a given State and the bank has an outstanding or
  satisfactory record of meeting community credit needs as determined pursuant
  to section 807 of the Community Reinvestment Act of 1977 (12 U.S.C. 2906);
  `(ii) COMMENCEMENT OF PERMISSIBLE ACTIVITIES DE NOVO- Subject to the notice
  requirement of paragraph (3)(A), commence, either directly or through
  a subsidiary, any activity that has been determined by the appropriate
  Federal banking agency under the banking laws to be permissible for such
  insured bank or such subsidiary; and
  `(iii) MERGERS AND ACQUISITIONS BY BANKS- Subject to any applicable notice,
  application, and approval requirement of the banking laws as modified by
  paragraph (3)(B)--
  `(I) merge or consolidate with any other insured bank, acquire directly
  or indirectly the assets of any other insured bank, or assume liability
  directly or indirectly to pay any deposits made in any other insured bank; or
  `(II) acquire, directly or indirectly, the assets (other than assets acquired
  in the ordinary course of business), or all of the voting shares or control,
  of any company (other than an insured bank) that is engaged solely in
  activities that have been determined by regulation by the appropriate Federal
  banking agency under the banking laws to be permissible for an insured bank.
  `(B) QUALIFYING BANKS- An insured bank qualifies under this subparagraph
  if, both prior to and following consummation of the transaction or other
  expansion--
  `(i) the insured bank is well capitalized; and
  `(ii) in the event the insured bank is controlled by a financial services
  holding company, the company qualifies as a well capitalized financial
  services holding company as described in paragraph (2).
  `(2) WELL CAPITALIZED FINANCIAL SERVICES HOLDING COMPANIES- A financial
  services holding company is well capitalized if insured depository
  institutions representing at least 80 percent of the assets of all insured
  depository institutions controlled by the company are well capitalized,
  and the balance of the insured depository institutions controlled by the
  company are adequately capitalized.
  `(3) Procedures and standards for review-
  `(A) SUBSEQUENT NOTICE FOR CERTAIN ACTIONS- For actions described in
  clauses (i) and (ii) of paragraphs (1)(A), the insured bank shall provide
  the appropriate Federal banking agency with written notice no later than
  30 days following such action.
  `(B) LIMITATION ON REVIEW PERIOD FOR PROPOSED TRANSACTIONS- Notwithstanding
  any other provision of the banking laws, the appropriate Federal banking
  agency shall make a decision to approve or disapprove any proposed
  transaction described in paragraph (1)(A)(iii) no later than 45 days after
  the date of receipt of the completed notice or application.
  `(C) REVIEW STANDARDS- The appropriate Federal banking agency may disapprove
  any proposed transaction described in paragraph (1)(A)(iii) involving a
  well capitalized insured bank only--
  `(i) pursuant to section 18(c)(5) (A) or (B); or
  `(ii) if the appropriate Federal banking agency determines--
  `(I) that the insured bank or any other insured bank controlled by the
  same financial services holding company is engaging in an unsafe and
  unsound practice or will be in an unsafe and unsound condition following
  the transaction; or
  `(II) that the proposed transaction is inconsistent with the convenience
  and needs of the community to be served.
  `(D) FORM OF NOTICES- Each appropriate Federal banking agency shall by
  regulation establish the form and content of the notice required under
  subparagraph (A).
  `(4) Effect of notice under this subsection-
  `(A) SUBSEQUENT NOTICE- Any notice required under paragraph (3)(A) shall
  supersede any other notice or application requirement under the banking
  laws imposed on the insured bank in connection with the proposed transaction
  or other expansion.
  `(B) OTHER REQUIREMENTS CONTINUE TO APPLY TO ACTIVITY- Except as provided
  in this subsection, nothing in this subsection shall relieve any insured
  bank or any subsidiary thereof from the provisions of any law or regulation
  applicable to that institution or subsidiary.
  `(5) Holding company failure to maintain well capitalized status after
  expansion-
  `(A) CAPITAL MUST BE PROMPTLY RESTORED- Any financial services holding
  company that--
  `(i) engages, directly or indirectly, in any new financial activity,
  directly or indirectly controls any company engaged in any new financial
  activity, or is controlled by a diversified holding company, and
  `(ii) does not continue to qualify under subsection (e)(2), or does not
  qualify under such subsection within such time period as is specified by
  the Board of Governors pursuant to section 4(k) of the Financial Services
  Holding Company Act of 1992 (12 U.S.C. 1843(k)),
must either restore the capital of insured banks controlled by such financial
services holding company to at least the levels required for the company to
requalify under subsection (e)(2) or take the actions required in subparagraph
(B). A financial services holding company shall be given a period of at
least 45 days within which to restore such capital.
  `(B) REQUIRED ACTIONS- Any financial services holding company that does
  not requalify under subsection (e)(2) within the applicable period under
  subparagraph (A) must--
  `(i) immediately post a bond in an amount equal to the amount necessary
  to restore the capital of the insured depository institutions controlled
  by such company to at least the level required to permit the company
  to requalify under subsection (e)(2) as of the date the bond is posted,
  which bond shall be subject to forfeiture as necessary to reimburse the
  Corporation for any funds expended for resolution of the insured depository
  institutions controlled by such company; and
 `(ii)(I) within the time period provided in subsection (b)(2), submit
 to the Board of Governors and, after its acceptance, implement a capital
 plan that meets the requirements of such subsection (other than subsection
 (b)(2)(C)(ii)) and will restore the relevant capital measures to the level
 necessary to requalify under subsection (e)(2); or
  `(II) within one year from the date the company originally failed to meet
  the requirements of subsection (e)(2)--
  `(aa) divest any interest in any insured depository institution; or
  `(bb) terminate all direct or indirect new financial activities and divest
  any interest in any company engaged in any such activity.
  `(C) APPOINTMENT OF CONSERVATOR- If the financial services holding company
  does not complete the actions required by either clause (i) or (ii)
  of subparagraph (B), the Board of Governors may appoint a conservator
  for any insured depository institution controlled by such company that
  maintains capital below the level necessary for the company to requalify
  under subsection (e)(2).
  `(D) Alteration of compliance period-
  `(i) EXTENSION OF COMPLIANCE PERIOD- The Board of Governors may extend the
  period provided in subparagraph (B)(ii)(II) for up to one year if the Board
  of Governors finds that the financial services holding company has taken
  significant steps toward restoring the capital of the insured depository
  institutions controlled by that company to at least the levels required
  for the company to requalify under subsection (e)(2).
  `(ii) SHORTENING OF COMPLIANCE PERIOD FOR FAILURE TO MAINTAIN WELL
  CAPITALIZED STATUS- The Board of Governors may, by regulation, establish
  shorter divestiture and termination periods under subparagraph (B)(ii)(II)
  applicable to any financial services holding company that fails to
  continue to qualify under subsection (e)(2) after having once fallen out
  of qualification from subsection (e)(2).
  `(E) APPLICABILITY TO DIVERSIFIED HOLDING COMPANIES- If a financial
  services holding company to which this paragraph applies is controlled
  by a diversified holding company, and the financial services holding
  company does not complete the actions under either subparagraph (A) or (B)
  (other than clause (ii)(II)(bb) of subparagraph (B)), then the diversified
  holding company must, within the same time period specified in subparagraph
  (B)(ii)(II), divest any interest in the financial services holding company
  or terminate all direct or indirect activities not permitted for a financial
  services holding company.'.
  (b) CONFORMING AMENDMENTS- Section 38 of the Federal Deposit Insurance
  Act is amended--
  (1) in subsection (b)(2)(D), by striking `Bank Holding Company Act of 1956'
  and inserting `Financial Services Holding Company Act of 1992';
  (2) in subsection (f)(2) (as redesignated by this section), by striking
  `(f)(2)' and inserting `(g)(2)';
  (3) in subsection (g)(1)(B)(i) (as redesignated by this section), by deleting
  `(e)(2)(D)' and inserting `(f)(2)(D)';
  (4) in subsection (g)(2)(D) (as redesignated by this section), by deleting
  `(e)(3)' and inserting `(f)(3)';
  (5) in subsection (h)(1) (as redesignated by this section)--
  (A) by deleting `(e)' and inserting `(f)'; and
  (B) by deleting `(f)(2)' and inserting `(g)(2)';
  (6) in subsection (i)(1) (as redesignated by this section), by deleting
  `(i)' and inserting `(j)';
  (7) in subsection (k) (as redesignated by this section), by deleting `(e)
  through (i)' and inserting `(f) through (j)';
  (8) in subsection (n) (as redesignated by this section), by deleting
  `(f)(2)(F)(ii)' and inserting `(g)(2)(F)(ii)';
  (9) in subsection (p)(1)(B) (as redesignated by this section) by, deleting
  `(k)' and inserting `(l); and
  (10) in subsection (p)(2) (as redesignated by this section), by deleting
  `(e)(2), (f), and (h)' and inserting `(f)(2), (g), and (i)'.
  (c) EFFECTIVE DATE- The amendments made by this section shall become
  effective three years after the date of enactment of this title, except
  that such amendments shall become effective January 1, 1994, with respect
  to financial services holding companies with bank subsidiaries that are
  well capitalized or adequately capitalized that wish to engage in any new
  financial activity.
CHAPTER 6--NATIONWIDE BANKING AND BRANCHING
SEC. 451. NATIONWIDE BANKING.
  (a) INTERSTATE ACQUISITIONS- Section 3(f) of the Financial Services Holding
  Company Act (12 U.S.C. 1842(f)), as redesignated by this title, is amended
  to read as follows:
  `(f) Interstate Acquisitions-
  `(1) IN GENERAL- The Board may approve an application under this section
  for a diversified holding company, financial services holding company,
  or foreign bank to acquire, directly or indirectly, any voting shares of,
  interest in, or all or substantially all of the assets of, any additional
  insured depository institution or financial services holding company
  located in any State.
  `(2) STATE LAWS- Any acquisition described in paragraph (1) that has been
  approved under this section may be consummated notwithstanding any State
  law that would prohibit or otherwise limit such acquisition on the basis of--
  `(A) the location or size of the acquiring diversified holding company or
  financial services holding company or foreign bank or any subsidiary of
  such company or foreign bank;
  `(B) the number of insured depository institution subsidiaries of such
  diversified holding company or financial services holding company or
  foreign bank; or
  `(C) any factor that has the effect, directly or indirectly, of prohibiting
  or limiting the acquisition of shares or control of an insured depository
  institution or financial services holding company located in that State by
  an out-of-State diversified holding company or financial services holding
  company or foreign bank without such factor having a similar effect on such
  acquisitions by financial services holding companies located in that State.'.
  (b) EFFECTIVE DATE- The amendment made by this section shall become
  effective three years after the date of enactment of this title.
SEC. 452. INTERSTATE BRANCHING BY NATIONAL BANKS.
  (a) LOCATION OF BRANCHES- Section 5155(c) of the Revised Statutes (12
  U.S.C. 36(c)) is amended--
  (1) by striking `and' at the end of paragraph (1);
  (2) in paragraph (2), by striking the first period and inserting `; and';
  (3) by adding after paragraph (2) the following new paragraph:
  `(3) at an initial location within any State in which a financial services
  holding company having the same home State as such association could acquire
  a bank pursuant to section 3 of the Financial Services Holding Company
  Act of 1992 (12 U.S.C. 1842) or at an initial location within any State in
  which a State bank chartered in the home State of such association could
  establish a branch, and, thereafter, at any point within those States to
  the extent permitted in paragraph (1) and paragraph (2) for associations
  situated in those States.'; and
  (4) by adding at the end thereof the following: `A State, other than the
  State in which the principal office of a national banking association
  is located, may require any national banking association establishing a
  branch within the host State to comply with such filing requirements as
  are otherwise imposed on a corporation that is incorporated in another
  State and seeks to engage in business in the host State.'.
  (b) DEFINITIONS- Section 5155 of the Revised Statutes (12 U.S.C. 36)
  is further amended--
  (1) by amending subsection (f) to read as follows:
  `(f) The term `branch' as used in this section shall mean any office,
  agency, or other place of business located in any State or Territory of
  the United States or in the District of Columbia at which deposits are
  received, checks paid, or money lent.'; and
  (2) by adding after subsection (h) the following new subsections:
  `(i) For purposes of this section, the term `home State' shall mean--
  `(1) in the case of a national banking association, the State in which
  the principal place of business of such association is located;
  `(2) in the case of a State bank, the State in which such bank is chartered
  and engaged in a banking business; and
  `(3) in the case of a financial services holding company, the State in which
  the total deposits of all bank subsidiaries of such company are largest.
  `(j) For purposes of this section, the term `State' shall include the
  District of Columbia.
  `(k) For purposes of this section, the term `host State' is the State in
  which a bank establishes or maintains a branch other than the State in
  which the principal place of business of such bank is located.'.
SEC. 453. INTERSTATE CONSOLIDATION OR MERGER OF NATIONAL BANKS OR STATE
BANKS WITH NATIONAL BANKS.
  (a) CONSOLIDATION OF NATIONAL BANKS OR STATE BANKS WITH NATIONAL BANKS-
  Section 1 of the Act of November 7, 1918 (12 U.S.C. 215) is amended by
  inserting `or in any other State' after `located in the same State'.
  (b) MERGER OF NATIONAL BANKS OR STATE BANKS WITH NATIONAL BANKS- Section 2(a)
  of the Act of November 7, 1918 (12 U.S.C. 215a(a)) is amended by inserting
  `or in any other State' after `located within the same State'.
  (c) DEFINITION AMENDMENT- Section 3(4) of the Act of November 7, 1918 (12
  U.S.C. 215b(4)) is amended by striking `, located within the same State,'.
  (d) RETENTION OF BRANCHES FOLLOWING MERGER OR CONSOLIDATION WITH NATIONAL
  BANKS- Section 5155(b)(2) of the Revised Statutes (12 U.S.C. 36(b)(2))
  is amended to read as follows:
  `(2)(A) A national bank resulting from the merger or consolidation of
  a national bank (under whose charter the consolidation is effected)
  with any other bank may retain and operate as a branch any office which,
  immediately prior to such merger or consolidation, was in operation as an
  office or branch of any bank participating in the merger or consolidation
  if the Comptroller of the Currency approves the continued operation of
  such office or branch as a branch after the merger or consolidation.
  `(B)(i) The Comptroller of the Currency may not grant approval under
  subparagraph (A) for the retention of any office or branch of any
  bank participating in the merger or consolidation referred to in such
  subparagraph if, in a situation identical to that of the resulting national
  bank, any State bank which were to result from the merger or consolidation
  of a State bank with any other bank would be prohibited by the law of the
  State where the office or branch is located from retaining and operating
  as a branch after such merger or consolidation, any office or branch which
  is identically situated and was operated as an office or branch of the
  State bank immediately prior to the merger or consolidation.
  `(ii) For purposes of this subparagraph, the term `host State' is the State
  in which a bank establishes or maintains a branch other than the State in
  which the principal place of business of such bank is located.'.
SEC. 454. INTERSTATE BRANCHING BY STATE BANKS.
  Section 18(d) of the Federal Deposit Insurance Act (12 U.S.C. 1828(d))
  is amended by adding after paragraph (2) the following new paragraphs:
  `(3) STATE LAW- Except as otherwise provided in this subsection, no State
  may prohibit any insured bank chartered by another State, and engaged in
  a banking business in another State from establishing and maintaining one
  or more branches within the State. A host State may require any insured
  bank chartered by another State that wishes to establish a branch within
  the host State to comply with such filing requirements as are otherwise
  imposed on a corporation that is incorporated in another State and seeks
  to engage in business in the host State.
  `(4) LOCATION OF BRANCHES-
  `(A) Any insured State bank may, if authorized by the law of the State in
  which the bank is chartered, establish and maintain:
  `(i) a branch at an initial location within any State in which a financial
  services holding company, whose principal place of operations is the same
  State in which the insured bank is chartered, could acquire an additional
  bank pursuant to section 3 of the Financial Services Holding Company Act
  of 1992 (12 U.S.C. 1842); and
  `(ii) additional branches at locations within any State in which the bank
  has established an initial branch pursuant to clause (i) to the extent
  permitted for insured State banks located in such State as if the initial
  branch of the out-of-State insured bank were a State bank chartered in
  such State with its head office at the location of the initial branch.
  `(B) For purposes of this paragraph, `principal place of operations'
  means the State in which the total deposits of all bank subsidiaries of
  such company are largest.
  `(5) RESERVATION OF CERTAIN RIGHTS TO STATES- Nothing in this subsection
  shall limit in any way the right of a State to determine the authority of
  State banks chartered in that State to establish and maintain branches,
  or to supervise, regulate, and examine State banks chartered by that State.
  `(6) ACTIVITIES OF BRANCHES- An insured State bank that establishes a branch
  or branches pursuant to paragraph (4) may not conduct any activity at such
  branch that is not permissible for a bank chartered by the host State.
  `(7) Coordination of Examination Authority-
  `(A) A host State bank supervisory or regulatory authority may examine
  branches established in the host State by banks chartered by another State
  for the purpose of determining compliance with the host State law regarding
  permissible activities and to ensure that the activities of the branch
  are conducted in a manner not inconsistent with sound banking principles
  and do not constitute a serious risk to the safety and sound operation of
  the branch.
  `(B) In the event that a host State bank authority as described above
  determines that there is a violation of host State law concerning the
  activities being conducted by the branch or that the branch is being operated
  in a manner not consistent with sound banking principles or in an unsafe
  and unsound manner, such host State bank authority may undertake such
  enforcement actions or proceedings as would be permitted under host State
  law as if the branch were deemed to be a bank chartered by that host State.
  `(C) The State bank authorities from one or more States are authorized to
  enter into cooperative agreements to facilitate State regulatory supervision
  of State-chartered banks including cooperative agreements relating to the
  coordination of examinations and joint participation in examinations as long
  as the participation in the examination of the branch of an out-of-State bank
  by a host State bank authority is limited as described in subparagraph (B).
  `(8) DEFINITION- For purposes of this subsection a `host State' is the
  State in which a bank establishes or maintains a branch other than the
  State in which the bank is chartered and engaging in banking business.'
SEC. 455. INTERSTATE BRANCHING AND BANKING BY FOREIGN BANKS.
  (a) Section 4(a) of the International Banking Act of 1978 (12 U.S.C. 3102(a))
  is amended to read as follows:
  `(a) Establishment and Operation of Federal Branches and Agencies-
  `(1) INITIAL FEDERAL BRANCH OR AGENCY- Subject to paragraph (2), a
  foreign bank which engages directly in a banking business outside the
  United States may, with the approval of the Comptroller and the Board,
  establish and operate a Federal branch or Federal agency at an initial
  location in the United States in any State in which it is not operating a
  branch or agency pursuant to State law; provided that during the three-year
  period beginning on the date of the enactment of the Financial Institutions
  Safety and Consumer Choice Act of 1992, the Comptroller and the Board may
  only authorize such establishment of a branch or agency by a foreign bank,
  as the case may be, if such establishment is not prohibited by the law of
  the relevant State.
  `(2) FEDERAL BRANCH AND AGENCY OUTSIDE A HOME STATE- No foreign bank
  which engages directly in a banking business outside the United States
  may establish and operate an initial Federal branch or Federal agency in a
  State other than the foreign bank's home State, except with the approval
  of the Comptroller and the Board, in the same location and subject to
  the same requirements as a national bank having the same home State (as
  the term `home State' as defined for national banks under section 5155(c)
  of the Revised Statutes) as the foreign bank.
  `(3) BOARD CONDITIONS REQUIRED TO BE INCLUDED- In considering any application
  for approval under this subsection, the Comptroller shall include any
  condition imposed by the Board under section 7(d)(5) as a condition for
  the approval of such application.'.
  (b) Section 4(h) of the International Banking Act of 1978 (12 U.S.C. 3102(h))
  is amended by adding after paragraph (2) the following new paragraph:
  `(3) DETERMINATION OF HOME STATE- For purposes of section 36(c) of the
  National Bank Act (12 U.S.C. 36(c)), the home State of a foreign bank
  shall be its home State as determined under section 5.'.
  (c) Section 5(a) of the International Banking Act of 1978 (12 U.S.C. 3103(a))
  is amended to read as follows:
  `(a) Limitations-
  `(1) No foreign bank may establish and operate a State branch in any State
  outside its home State unless a financial services holding company whose
  principal place of operation under section 3 of the Financial Services
  Holding Company Act of 1992 (12 U.S.C. 1842) is the same as the home State
  of the foreign bank would be permitted to acquire a bank in such other State.
  `(2) No foreign bank may directly or indirectly establish and operate
  a State branch, State agency, or commercial lending company subsidiary
  outside of the foreign bank's home State unless its establishment and
  operation is approved by the Board and the bank regulatory authority of
  the State in which the new branch is to be located.
  `(3) Notwithstanding paragraph (2), effective three years after the date
  of enactment of the Financial Institutions Safety and Consumer Choice Act
  of 1992, no State shall prohibit a foreign bank having a State branch or
  State agency licensed by another State and engaged in a banking business in
  that other State, from establishing and maintaining one or more branches
  or agencies of that foreign bank within the State after approval from the
  bank regulatory authority of such other State and the Board. Establishment,
  operation and supervision of any such branches or agencies shall be in
  accordance with the provisions applicable to an interstate branch of
  a State bank under section 18(d) of the Federal Deposit Insurance Act
  (12 U.S.C. 1828(d)) as if the branch in such other State were an insured
  State bank located in such other State.
  `(4) Notwithstanding paragraph (1) and section 4(h), a foreign bank may,
  with the approval of the Comptroller and the Board, establish and operate
  a Federal branch or Federal agency, or with the approval of the Board and
  the bank regulatory authority of the State, a State branch or State agency,
  in any State outside of its home State if--
  `(A) establishment and operation of a branch or agency is expressly
  permitted by the State in which it is to be established; and
  `(B) in the case of a Federal or State branch, the branch receives only
  such deposits as would be permissible for a corporation organized under
  section 25(a) of the Federal Reserve Act (12 U.S.C. 611 et seq.).'.
SEC. 456. INTERSTATE ACQUISITIONS BY SAVINGS AND LOAN HOLDING COMPANIES.
  Section 10(e)(3) of the Home Owners' Loan Act (12 U.S.C. 1467a(e)(3))
  is amended to read as follows:
  `(3) Interstate Acquisitions-
  `(A) IN GENERAL- The Director may approve an application under this
  subsection for a savings and loan holding company or a foreign bank to
  acquire, directly or indirectly, any voting shares of, interest in, or
  all or substantially all the assets of, any additional savings association
  located in any State.
  `(B) STATE LAWS- Any acquisition described in subparagraph (A) that has
  been approved under this section may be consummated notwithstanding any
  State law that would prohibit or otherwise limit such acquisition on the
  basis of the location or size of the acquiring company or foreign bank
  or any subsidiary of such company or foreign bank, the number of insured
  depository institution subsidiaries of such company or foreign bank, or any
  other factor that has the effect directly or indirectly of prohibiting or
  limiting the acquisition of shares or control of a savings association or
  savings and loan holding company located in that State by an out-of-State
  savings and loan holding company or foreign bank without having a similar
  effect on such acquisitions by savings and loan holding companies located
  in that State.
  `(C) DEFINITIONS- For purposes of this paragraph--
  `(i) the term `State' includes the District of Columbia; and
  `(ii) the term `foreign bank' has the same meaning as in section 1(b)(7)
  of the International Banking Act (12 U.S.C. 3101(7)).'.
SEC. 457. EFFECTIVE DATE.
  Except as provided in section 451(b), the provisions of this chapter shall
  become effective on the date of enactment of this title.
Subtitle B--Miscellaneous Provisions
CHAPTER 1--REDUCTION IN REGULATORY BURDEN
SEC. 461. FAIR HOUSING REPORTING.
  Effective one year after the date of enactment of this title, no appropriate
  Federal banking agency shall require any institution for which it is the
  appropriate Federal banking agency (as defined in section 3(q) of the
  Federal Deposit Insurance Act (12 U.S.C. 1813(q)) to prepare, file, or
  maintain any form for the purpose of collection, analysis, or maintenance of
  appropriate data to further the purposes of, or to fulfill the requirements
  of, the Fair Housing Act (42 U.S.C. 3601 et seq.), other than a form for
  data collection, analysis, or maintenance prescribed pursuant to the Home
  Mortgage Disclosure Act (12 U.S.C. 2801 et seq.).
CHAPTER 2--EXPEDITED FUNDS AVAILABILITY
SEC. 466. AMENDMENT OF THE EXPEDITED FUNDS AVAILABILITY ACT.
  Section 604(f)(2) of the Expedited Funds Availability Act (12
  U.S.C. 4003(f)(2)) is amended by inserting after subparagraph (C) the
  following new subparagraph:
  `(D) After a depository institution has provided notice as required under
  subparagraphs (A), (B), and (C), no further notice shall be required until
  the earlier of one year after notice  has been provided or such other time
  as the exception for which the notice was provided ceases to apply.'.
Subtitle C--Technical and Conforming Amendments
CHAPTER 1--SEVERABILITY; TRANSITION REFERENCES
SEC. 471. SEVERABILITY.
  If any provision of this title, or application thereof to any person
  or circumstances, is held invalid, the remainder of the title, and the
  application of any remaining provision to  other persons or circumstances,
  shall not be affected thereby.
SEC. 472. TRANSITION REFERENCES.
  Effective on the date of enactment of this title, and until January 1,
  1994, any reference to a financial services holding company or to this
  the Financial Services Holding Company Act of 1992 in any amendment made
  by, or provision of, this title that becomes effective prior to such date
  shall be deemed to include a reference to a bank holding company and the
  Bank Holding Company Act of 1956, respectively.
CHAPTER 2--TECHNICAL AND CONFORMING AMENDMENTS
SEC. 476. AMENDMENT TO ACTS CODIFIED IN TITLE 2, UNITED STATES CODE.
  THE FEDERAL ELECTION CAMPAIGN ACT OF 1971- The Federal Election Campaign
  Act of 1971 is amended effective on the date of enactment of this title--
  (1) in section 301(8)(B)(vii) (2 U.S.C. 431(8)(B)(vii), by striking `,
  Federal Savings and Loan Insurance  Corporation,'; and
  (2) in section 302(h)(1) (2 U.S.C. 432(h)(1)), by striking `, the Federal
  Savings and Loan Insurance Corporation,'.
SEC. 477. AMENDMENTS TO TITLE 5, UNITED STATES CODE.
  Title 5, United States Code, is amended--
  (1) in section 8438(a)(7)(B), effective on the date of enactment of this
  title, by striking `Federal Savings and Loan Insurance Corporation' and
  inserting `Federal Deposit Insurance Corporation'; and
  (2) in section 8478(a)(2)(B)(iii), by striking `or the Federal Savings
  and Loan Insurance Corporation'.
SEC. 478. AMENDMENT TO ACT CODIFIED IN TITLE 7, UNITED STATES CODE.
  THE FOOD STAMP ACT OF 1977- Section 10 of the Food Stamp Act of 1977
  (7 U.S.C. 2019) is amended effective on the date of enactment of this title--
  (1) by striking `the Federal Savings and Loan Insurance Corporation, or'; and
  (2) by striking `the Federal Savings and Loan Insurance Corporation or'.
SEC. 479. AMENDMENTS TO ACTS CODIFIED IN TITLE 12, UNITED STATES CODE.
  (a) THE FEDERAL RESERVE ACT- The Federal Reserve Act is amended--
  (1) in section 11(d) (12 U.S.C. 248)--
  (A) by striking `the bureau under the charge of the Comptroller of the
  Currency' and inserting `the Secretary of the Treasury'; and
  (B) by striking `such notes may be delivered by the Comptroller' and
  inserting `such notes may be delivered by the Secretary of the Treasury';
  (2) in section 23A(d)(5) (12 U.S.C. 371c(d)(5)), by striking `Bank Holding
  Company Act of 1956' and inserting `Financial Services Holding Company
  Act of 1992';
  (3) in section 16--
  (A) in the eighth paragraph (12 U.S.C. 418), by striking `the Comptroller of
  the Currency shall, under the direction of the Secretary of the Treasury,'
  and inserting `the Secretary of the Treasury shall';
  (B) in the ninth paragraph (12 U.S.C. 419), by striking `shall be deposited
  in the Treasury, or in the subtreasury or mint of the United States nearest
  the place of business of each Federal reserve bank and shall be held for the
  use of such bank subject to the order of the Comptroller of the Currency'
  and inserting `shall be delivered to the Board of Governors of the Federal
  Reserve System subject to the order of the Secretary of the Treasury'; and
  (C) in the tenth paragraph (12 U.S.C. 420)--
  (i) by striking `Comptroller of the Currency' and inserting `Secretary of
  the Treasury'; and
  (ii) by striking `Federal Reserve Board' ; and inserting `Board of Governors
  of the Federal Reserve System'; and
  (4) in the tenth undesignated paragraph of section 25(a) (12 U.S.C. 619)--
  (A) by striking `Bank Holding Company Act of 1956' wherever it appears
  and inserting `Financial Services Holding Company Act of 1992';
  (B) by striking `bank holding companies' and inserting `financial services
  holding companies'; and
  (C) by striking `bank holding company' and inserting `financial services
  holding company'.
  (b) The Home Owners' Loan Act- The Home Owners' Loan Act (12 U.S.C. 1461
  et seq.) is further amended--
  (1) in section 10 (12 U.S.C. 1467a)--
  (A) in subsection (a)(1)(I)--
  (i) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'; and
  (ii) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992';
  (B) in subsection (C)--
  (i) in paragraph (2)(F)(i)--
  (I) by striking `bank holding companies' and inserting `financial services
  holding companies'; and
  (II) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992'; and
  (ii) in paragraph (8)--
  (I) by striking `bank holding company' and inserting `financial services
  holding company'; and
  (II) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992';
  (C) in subsection (m)(3)(C)--
  (i) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company';
  (ii) by striking `bank holding companies' and inserting `financial services
  holding companies'; and
  (iii) by striking `Bank Holding Company Act of 1956' wherever it appears
  and inserting `Financial Services Holding Company Act of 1992'; and
  (D) in subsection (q)(1)(A)(ii), by striking `bank holding company' and
  inserting `financial services holding company'; and
  (2) in section 11(c) (12 U.S.C. 1468(c))--
  (A) by striking `or 18(j)'; and
  (B) by striking `, as appropriate'.
  (c) THE NATIONAL HOUSING ACT- The National Housing Act is amended--
  (1) in section 203(s)(6) (12 U.S.C. 1709(s)(6)), by striking `bank holding
  company' and inserting `financial services holding company'.
  (2) in section 255(k)(3) (12 U.S.C. 1715z-20(k)(3)), effective on the date
  of enactment of this title, by striking `Federal Home Loan Bank Board'
  and inserting `Director of the Office of Thrift Supervision'; and
  (3) in section 502 (12 U.S.C. 1701c), effective on the date of enactment
  of this title, by striking `Federal Home Loan Bank Board' wherever it
  appears and inserting `Director of the Office of Thrift Supervision'.
  (d) THE ACT OF OCTOBER 15, 1982- Section 341(e)(1) of the Act of October 15,
  1982 (12 U.S.C. 1701j-3) is amended, effective on the date of enactment of
  this title, by striking `Federal Home Loan Bank Board' wherever it appears
  and inserting `Director of the Office of Thrift Supervision'.
  (e) THE DOMESTIC HOUSING AND INTERNATIONAL RECOVERY AND FINANCIAL STABILITY
  ACT- Section 469 of the Domestic Housing and International Recovery and
  Financial Stability Act (12 U.S.C. 1701p-1) is amended, effective on the
  date of enactment of this title, by striking `Federal Home Loan Bank Board'
  and inserting `Director of the Office of Thrift Supervision'.
  (f) THE FEDERAL DEPOSIT INSURANCE ACT- The Federal Deposit Insurance Act
  (12 U.S.C. 1811 et seq.) is amended--
  (1) in section 3 (12 U.S.C. 1813)--
  (A) in subsection (u), by striking `bank holding company' wherever it
  appears and inserting `financial services holding company'; and
  (B) in subsection (w) by striking `bank holding company' wherever it
  appears and inserting `financial services holding company';
  (2) in section 5(d)(3) (12 U.S.C. 1815(d)(3))--
  (A) in subparagraph (A), by striking `bank holding company' and inserting
  `financial services holding company'; and
  (B) in subparagraph (E), by striking `bank holding company' wherever its
  appears and inserting `financial services holding company';
  (3) in section 7 (12 U.S.C. 1817)--
  (A) in subsection (a)(3), by striking `Chairman of the Director' and by
  inserting `Director'; and
  (B) in subsection (n), by striking `under section 1467 of this Act'; and
  (4) in section 8(b)(4) (12 U.S.C. 1818(b)(4)), by striking `bank holding
  company' and inserting `financial services holding company'.
  (g) THE BANK PROTECTION ACT OF 1968- Section 2(4) of the Bank Protection
  Act of 1968 (12 U.S.C. 1881) is amended by inserting `associations' after
  `savings'.
  (h) THE REAL ESTATE SETTLEMENT PROCEDURES ACT- The Real Estate Settlement
  Procedures Act is amended, effective on the date of enactment of this title--
  (1) in section 4(a) (12 U.S.C. 2603(a)), by striking `Federal Home Loan
  Bank Board' and inserting `Director of the Office of Thrift Supervision'; and
  (2) in section 8 (12 U.S.C. 2607), by striking `Federal Home Loan Bank
  Board' wherever it appears and inserting `Director of the Office of Thrift
  Supervison'.
  (i) THE COMMUNITY REINVESTMENT ACT OF 1977- Section 803(1) of the Community
  Reinvestment Act of 1977 (12 U.S.C. 2902(1)) is amended--
  (1) in subparagraph (B), by striking `bank holding companies' and inserting
  `financial services holding companies'; and
  (2) in subparagraph (C), by striking `section 8 of this Act, by'.
  (j) THE INTERNATIONAL BANKING ACT OF 1978- The International Banking Act
  of 1978 is amended--
  (1) in section 1(b) (12 U.S.C. 3101)--
  (A) by amending paragraph (13) to read as follows:
  `(13) the terms `affiliate', `bank', `financial services holding company',
  `company', `control', and `subsidiary' have the same meanings assigned to
  those terms in the Financial Services Holding Company Act of 1992, and the
  terms `controlled' and `controlling' shall be construed consistently with
  the term `control' as defined in section 2 the Financial Services Holding
  Company Act of 1992;'; and
  (2) in section 8(c) (12 U.S.C. 3106)--
  (A) by striking `Bank Holding Company Act of 1956' wherever it appears
  and inserting `Financial Services Holding Company Act of 1992'; and
  (B) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'.
  (k) THE DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT OF 1978- The
  Depository Institution Management Interlocks Act of 1978 is amended--
  (1) in section 202 (12 U.S.C. 3201)--
  (A) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'; and
  (B) by striking `Bank Holding Company Act of 1956' wherever it appears
  and inserting `Financial Services Holding Company Act of 1992';
  (2) in section 207(2) (12 U.S.C. 3206(2)) by striking `bank holding
  companies' and inserting `financial services holding companies'; and
  (3) in section 208 (12 U.S.C. 3207)--
  (A) in paragraph (2), by striking `bank holding companies' and inserting
  `financial services holding companies'; and
  (B) in paragraph (4), effective on the date of enactment of this title,
  by striking `Federal Home Loan Bank Board with respect to institutions the
  accounts of which are insured by the Federal Savings and Loan Insurance
  Corporation' and inserting `Director of the Office of Thrift Supervision
  with respect to institutions which are members of the Savings Association
  Insurance Fund'.
  (l) THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ACT OF 1978-
  Section 1002 of the Federal Financial Institutions Examination Council Act
  of 1978 (12 U.S.C. 3301) is amended, effective on the date of enactment
  of this title, by striking `Federal Home Loan Bank Board' and inserting
  `Office of Thrift Supervision'.
  (m) THE RIGHT TO FINANCIAL PRIVACY ACT OF 1978- Section 1101 of the right
  to Financial Privacy Act of 1978 (12 U.S.C. 3401) is amended--
  (1) in paragraph (6)--
  (A) in subparagraph (A), by striking `bank holding company' and inserting
  `financial services holding company'; and
  (B) in subparagraph (B), by striking `Bank Holding Company Act of 1956'
  and inserting `Financial Services Holding Company Act of 1992'; and
  (2) in paragraph (7)(G), by inserting `, insurance' after `banking'.
  (n) THE EXPEDITED FUNDS AVAILABILITY ACT OF 1987- Section 609(e) of the
  Expedited Funds Availability Act of 1987 (12 U.S.C. 4008(e)) is amended,
  effective on the date of enactment of this title, by striking `Federal
  Home Loan Bank Board' and inserting `Office of Thrift Supervision'.
SEC. 480. AMENDMENTS TO ACTS CODIFIED IN TITLE 15, UNITED STATES CODE
  (a) THE ACT OF SEPTEMBER 26, 1914- Effective on the date of enactment
  of this title, section 18(f)(1) of the Act of September 26, 1914 (15
  U.S.C. 57a(f)(1)) is amended--
  (1) by striking `Federal Home Loan Bank Board' and inserting `Director of
  the Office of Thrift Supervision';
  (2) by striking `each such Board' and inserting `the appropriate Board or
  the Director';
  (3) by striking `any such Board' and inserting `the appropriate Board or
  the Director'; and
  (4) by striking `such Board' and inserting `the appropriate Board or
  the Director'.
  (b) THE SECURITIES EXCHANGE ACT OF 1934- The Securities Exchange Act of
  1934 is amended--
  (1) in section 3(a)(34) (14 U.S.C. 78c(a)(34))--
  (A) in subparagraph (A)(ii), by striking `a bank holding company, a
  subsidiary of a bank holding company' and inserting `a financial services
  holding company, a subsidiary of a financial services holding company';
  (B) in subparagraph (B)(ii), by striking `a bank holding company, or a
  subsidiary of a bank holding company' and inserting `a financial services
  holding company, or a subsidiary of a financial services holding company';
  (C) in subparagraph (C)(ii), by striking `a bank holding company,
  or a subsidiary of a bank holding company, or a subsidiary of a bank
  holding company' and inserting `a financial services holding company,
  or a subsidiary of a financial services holding company, or a subsidiary
  of a financial services holding company'; and
  (D) in the last sentence--
  (i) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'; and
  (ii) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992';
  (2) in section 15C--
  (A) in subsection (b)(2)(C)(ii) (15 U.S.C. 58o-5(b)(2)(C)(ii)), by striking
  `section 8 of the Bank Holding Company Act of 1956' and inserting `section
  8 of the Financial Services Holding Company Act of 1992'; and
  (B) in subsection (f)(1) (15 U.S.C. 78o-5(f)(1)), effective on the date
  of enactment of this title, by striking `the Federal Savings and Loan
  Insurance Corporation.'; and
  (3) in section 17(h)(3)(B) (15 U.S.C. 78q(h)(3)(B)), by striking `section
  8 of the Bank Holding Company Act of 1956' and inserting `section 8 of
  the Financial Services Holding Company Act of 1992'.
  (c) THE INVESTMENT COMPANY ACT OF 1940- Section 6(a)(3) of the Investment
  Company Act of 1940 (15 U.S.C. 80a-6(a)(3)) is amended, effective on the
  date of enactment of this title, by inserting `(or successor thereto)'
  after `Federal Savings and Loan Insurance Corporation'.
  (d) THE INVESTMENT ADVISORS ACT OF 1940- Section 202(a)(11) of the Investment
  Advisors Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended--
  (1) by striking `bank holding company' and inserting `financial services
  holding company'; and
  (2) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992'.
  (e) THE SMALL BUSINESS INVESTMENT ACT OF 1958- The Small Business Investment
  Act of 1958 (15 U.S.C. 661) is amended--
  (1) in section 302(b) (15 U.S.C. 682(b)), effective on the date of enactment
  of this title, by striking `Notwithstanding the provisions of section
  6(a)(1) of the Bank Holding Act of 1956, shares' and inserting `Shares'; and
  (2) in section 308(b) (15 U.S.C. 687(b)), by striking `or the Federal
  Savings and Loan Insurance Corporation'.
  (f) THE EXPORT TRADING COMPANY ACT OF 1982- Section 102(b) of the Export
  Trading Company Act of 1982 (15 U.S.C. 4001(b)) is amended by striking
  `bank holding companies' wherever it appears and inserting `financial
  services holding companies'.
SEC. 481. AMENDMENT TO ACT CODIFIED IN TITLE 16, UNITED STATES CODE.
  THE FEDERAL POWER ACT- Section 305(c)(2)(A) of the Federal Power Act
  (16 U.S.C. 825d(c)(2)(A)) is amended by striking `bank holding company'
  and inserting `financial services holding company'.
SEC. 482. AMENDMENTS TO TITLE 18, UNITED STATES CODE.
  Section 1005 of title 18, United States Code, is amended in the last sentence
  of the sixth paragraph by inserting `, as amended by the Financial Services
  Holding Company Act of 1992' before the period.
SEC. 483. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.
  The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) is amended--
  (1) in section 149(b)(4)(B), effective on the date of enactment of this
  title, by striking `the Federal Savings and Loan Insurance Corporation,';
  (2) in section 246A(c)(3)--
  (A) by amending subparagraph (B)(ii) to read as follows:
  `(ii) FINANCIAL SERVICES HOLDING COMPANY- The term `Financial Services
  Holding Company' means a financial services holding company (within the
  meaning of section 2 of the Financial Services Holding Company Act of 1992
  (12 U.S.C. 1841)).'; and
  (B) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company';
  (3) in section 304(b)(3)--
  (A) by amending subparagraph (D)(ii) to read as follows:
  `(ii) FSHC- The term `FSHC' means a financial services holding company
  (within the meaning of section 2 of the Financial Services Holding Company
  Act of 1992).';
  (B) by striking `bank holding companies' and inserting `financial services
  holding companies';
  (C) by striking `BHC' wherever it appears and inserting `FSHC'; and
  (D) by striking `BHC's' wherever it appears and inserting `FSHC's';
  (4) in section 597(c)(1), effective on the date of enactment of this title,
  by inserting `(or any successor thereof)' after `the Federal Savings and
  Loan Insurance Corporation'; and
  (5) in section 864(e)(5)(D)--
  (A) by striking `bank holding companies' and inserting `financial services
  holding companies';
  (B) by striking `bank holding company' wherever it appears and inserting
  `financial services holding company'; and
  (C) by striking `Bank Holding Company Act of 1956' and inserting `Financial
  Services Holding Company Act of 1992'.
SEC. 484. AMENDMENTS TO TITLE 31, UNITED STATES CODE.
  Section 5115 of title 31, United States Code, is amended--
  (1) by amending subsection (b) to read as follows:
  `(b) The amount of United States currency notes outstanding and in
  circulation may not be more than $300,000,000.'; and
  (2) by adding after subsection (b) the following new subsection:
  `(c) The Secretary shall not be required to reissue United States currency
  notes upon redemption.'.
SEC. 485. AMENDMENTS TO ACTS CODIFIED IN TITLE 42, UNITED STATES CODE.
  (a) THE ENERGY CONSERVATION AND PRODUCTION ACT- Section 303(7) of the
  Energy Conservation and Production Act (42 U.S.C. 6832(7)) is amended,
  effective on the date of enactment of this title, by striking `the Federal
  Home Loan Bank Board, the Federal Savings and Loan Insurance Corporation'
  and inserting `the Director of the Office of Thrift Supervision'.
  (b) THE NEIGHBORHOOD REINVESTMENT CORPORATION ACT- Section 606(c)(3)
  of the Neighborhood Reinvestment Corporation Act (42 U.S.C. 8105(c)(3))
  is amended, effective on the date of enactment of this title, by striking
  `Federal Home Loan Bank Board' and inserting `Director of the Office of
  Thrift Supervision'.
SEC. 486. AMENDMENT TO TITLE 46, UNITED STATES CODE.
  Section 10315(a)(3) of title 46, United States Code, is amended, effective
  on the date of enactment of this title, by striking `or the Federal Savings
  and Loan Insurance Corporation'.
CHAPTER 3--REPEAL OF OBSOLETE PROVISIONS OF LAW
SEC. 491. REPEAL OF OBSOLETE PROVISIONS OF LAW.
  The following provisions of law (as they may have been amended) are repealed:
  (1) section 331 (12 U.S.C. 13) of the Revised Statutes;
  (2) title II of the Act of October 28, 1974 (Public Law 93-495; 12
  U.S.C. 2401 et seq.); and
  (3) section 14 of the Act of December 22, 1974 (Public Law 93-533; 12
  U.S.C. 2612).
CHAPTER 4--EFFECTIVE DATE
SEC. 496. EFFECTIVE DATE.
  Unless otherwise expressly provided, the amendments made by this subtitle
  shall become effective January 1, 1994.
TITLE V--PENSION SECURITY ACT
SECTION 501. SHORT TITLE AND TABLE OF CONTENTS.
  (a) SHORT TITLE- This Act may be cited as the `Pension Security Act of 1992'.
  (b) TABLE OF CONTENTS-
Subtitle A--Amendments to Pension Plan Funding Requirements
Part 1--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
Sec. 511. Revision of additional funding requirements for plans that are
not multiemployer plans.
Sec. 512. Correction to ERISA citation.
Sec. 513. Effective dates.
Part 2--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
Sec. 521. Revision of additional funding requirements for plans that are
not multiemployer plans.
Sec. 522. Effective dates.
Subtitle B--Amendments to Title IV of ERISA
Sec. 531. Limitation on benefits guaranteed.
Sec. 532. Enforcement of minimum funding requirements.
Sec. 533. Definition of contributing sponsor.
Sec. 534. Recovery ratio payable under Corporation's guaranty.
Sec. 535. Elimination of the seventh revolving fund.
Sec. 536. Distress termination criteria for banking institutions.
Sec. 537. Variable rate premium exemption.
Subtitle C--Employer Liability, Lien, and Priority
Part 1--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
Sec. 541. Employer liability lien and priority amount.
Sec. 542. Liability upon liquidation of contributing sponsor where plan
remains ongoing.
Part 2--AMENDMENTS TO TITLE 11, United States Code
Sec. 551. Pension Benefit Guaranty Corporation permitted to be a member of
an unsecured creditors' committee.
Sec. 552. Clarification of priorities in conformity with the Employee
Retirement Income Security Act of 1974.
Sec. 553. Notice required where federally-insured pension plan is administered
by the debtor or its affiliate.
Subtitle A--Amendments to Pension Plan Funding Requirements
PART 1--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
SEC. 511. REVISION OF ADDITIONAL FUNDING REQUIREMENTS FOR PLANS THAT ARE
NOT MULTIEMPLOYER PLANS.
  (a) Section 412(a) of the Internal Revenue Code of 1986 (26 U.S.C. 412(a)) is
  amended by striking `the excess of the total charges to the funding standard
  account' through the end of that sentence, and inserting `the largest of--
  `(1) the lesser of--
  `(A) the excess of the total charges to the funding standard account for
  all plan years (beginning with the first plan year to which this section
  applies) over the total credits to such account for such years; or,
  `(B) the excess of the total charges to the alternative minimum funding
  standard account for such plan years over the total credits to such account
  for such years; or,
  `(2) if applicable, the underfunding reduction requirement under subsection
  (1); or
  `(3) if applicable, the solvency maintenance requirement under subsection
  (o).'.
  (b) Section 412(l) is revised to read as follows:
  `(l) UNDERFUNDING REDUCTION REQUIREMENT FOR PLANS THAT ARE NOT MULTIEMPLOYER
  PLANS-
  `(1) UNDERFUNDING REDUCTION REQUIREMENT- In the case of a defined benefit
  plan (other than a multiemployer plan) that has an initial funding ratio
  of less than 100 percent for any plan year, the underfunding reduction
  requirement for such plan year is the sum of--
  `(A) an amount equal to the product of the initial unfunded liability
  of the plan multiplied by the excess (if any) of (i) 30 percent, over
  (ii) the product of one quarter of one percent multiplied by the number
  of percentage points (if any) that the initial funding ratio of the plan
  exceeds 35 percent;
  `(B) the charges to the funding standard account for normal cost under
  subparagraph (b)(2)(A) and for the amounts necessary to amortize any waived
  funding deficiencies under subparagraph (b)(2)(C);
  `(C) the excess (if any) of--
  `(i) the sum of charges to the funding standard account for plans years
  beginning after December 31, 1993, for net experience losses under clause
  (b)(2)(B)(iv) and net losses resulting from changes in actuarial assumptions
  under clause (b)(2)(B)(v) over--
  `(ii) the sum of credits to the funding standard account for plan years
  beginning after December 31, 1993--
  `(I) for net experience gains under clause (b)(3)(B)(ii) and net gains
  resulting from changes in actuarial assumptions under clause (b)(3)(B)(iii);
  and
  `(II) for amounts considered contributed by the employer under subparagraph
  (b)(3)(A) (to the extent they are necessary to avoid an accumulated funding
  deficiency under section 412(b)); and
  `(D) the net of--
  `(i) charges to the funding standard account for plan years beginning
  on or before December 31, 1993, for net experience losses under clause
  (b)(2)(B)(iv) and net losses resulting from changes in actuarial assumptions
  under clause (b)(2)(B)(v); and
  `(ii) the sum of credits to the funding standard account for plan years
  beginning on or before December 31, 1993--
  `(I) for net experience gains under clause (b)(3)(B)(ii) and net gains
  resulting from changes in actuarial assumptions under clause (b)(3)(B)(iii);
  and
  `(II) for amounts considered contributed by the employer under subparagraph
  (b)(3)(A) (to the extent they are necessary to avoid an accumulated funding
  deficiency under section 412(b)).
  `(2) DEFINITIONS- For definitions pertaining to this subsection, see
  subsection (o)(3).
  `(3) APPLICATION TO SMALL PLANS- For the application of this subsection
  to small plans, see subsection (o)(4).'.
  (c) Section 412 is further amended by adding at the end thereof the
  following new subsection (o):
  `(o) SOLVENCY MAINTENANCE REQUIREMENT FOR PLANS THAT ARE NOT MULTIEMPLOYER
  PLANS-
  `(1) SOLVENCY MAINTENANCE REQUIREMENT- In the case of a defined benefit plan
  (other than a multiemployer plan) that has an initial funding ratio of less
  than 100 percent for any plan year, the solvency maintenance requirement
  for such plan year is the sum of--
  `(A) the sum of:
  `(i) all disbursements from the plan for the plan year, and
  `(ii) an amount equal to the initial unfunded liability of the plan
  multiplied by the interest rate used by such plan (determined under
  subparagraph (b)(5)(A));
  `(B) the charges described in section 412(l)(1)(B);
  `(C) the amount described in section 412(l)(1)(C); and
  `(D) the amount described in section 412(l)(1)(D).
  `(2) LIMITATION ON SOLVENCY MAINTENANCE REQUIREMENT- For plan years
  commencing after December 31, 1993, the amount required under paragraph
  (1) shall not exceed the sum of--
  `(A) the amount required under 412(l); and
  `(B) the product of--
  `(i) the excess (if any) of--
  `(I) the amount required under paragraph 1 over
  `(II) the amount required under subsection (l); multiplied by--
  `(ii) the applicable percentage.
  `(iii) For purposes of subparagraph (ii), the applicable percentage is:
     `For plan years
--The applicable
      commencing after:
--percentage is:
     December 31, 1993
-- 20 percent
     December 31, 1994
-- 40 percent
     December 31, 1995
-- 60 percent
     December 31, 1996
-- 80 percent
     December 31, 1997
-- 100 percent
  `(3) DEFINITIONS- For purposes of this subsection and subsection (l)--
  `(A) INITIAL UNFUNDED LIABILITY- The term `initial unfunded liability'
  means the excess (if any) of the amount necessary to satisfy the initial
  termination liability of the plan over the initial value of assets of
  the plan.
  `(B) INITIAL FUNDING RATIO- The term `initial funding ratio' means the
  ratio of (i) the initial value of assets of the plan to (ii) the amount
  necessary to satisfy the initial termination liability of the plan.
  `(C) INITIAL TERMINATION LIABILITY- The term `initial termination liability'
  means all liabilities with respect to employees and their beneficiaries
  under the plan in the meaning of section 401(a)(2) as of the first day of
  the plan year.
  `(D) INITIAL VALUE OF ASSETS- The term `initial value of assets' means
  the value of the assets of the plan determined under section 412(c)(2)
  as of the first day of the plan year.
  `(E) Disbursements from the plan-
  `(i) IN GENERAL- The term `disbursements from the plan' means benefit
  payments, including purchases of annuities or payment of lump sums in
  satisfaction of liabilities, administrative expenditures or any other
  disbursements from the plan or its trust.
  `(ii) SPECIAL RULE FOR PURCHASES OF ANNUITIES AND PAYMENT OF LUMP SUMS- In
  determining the applicable amounts attributable to purchases of annuities
  or the payment of lump sums under clause (i), the actual purchase or lump
  sum amounts paid by the plan or trust shall be multiplied by the excess
  (if any) of one over the initial funding ratio of the plan.
  `(4) SPECIAL RULES FOR SMALL PLANS-
  `(A) PLANS WITH 100 OR FEWER PARTICIPANTS- This subsection and subsection
  412(l) shall not apply to any plan for any plan year if on each day during
  the  preceding plan year such plan had no more than 100 participants.
  `(B) PLANS WITH MORE THAN 100 BUT NOT MORE THAN 150 PARTICIPANTS- In
  the case of a plan to which subparagraph (A) does not apply and which
  on each day during the preceding year had no more than 150 participants,
  the additional amounts required by the underfunding reduction requirement
  under subsection (l) or the solvency maintenance requirement under this
  subsection shall be equal to the product of--
  `(i) the excess of such requirements (determined without regard to this
  subparagraph) over the funding deficiency (if any) under subsection 412(b),
  multiplied by--
  `(ii) 2 percent for the highest number of participants in excess of 100
  on any such day.
  `(C) AGGREGATION OF PLANS- For purposes of this paragraph, all defined
  benefit plans maintained by the same employer (or any member of such
  employer's controlled group) shall be treated as 1 plan, but only employees
  of such employer or member shall be taken into account.'.
  (d) Conforming Amendments-
  (1) Section 412(b) is amended--
  (A) by striking the last sentence of paragraph (2); and
  (B) by striking `and for purposes of determining a plan's required
  contribution under section 412(l)' in subparagraph (5)(B) and inserting
  `under section 412(c)(7)(B)'.
  (2) Section 412(c) is amended by striking `has the meaning given such
  term by section 412(l)(7) and inserting `means all liabilities with
  respect to employees and their beneficiaries under the plan within the
  meaning of section 401(a)(2) (within such limitations as the Secretary
  may prescribe by regulation) determined by using the interest rate under
  section 412(b)(5)(B)'.
  (3) Section 412(m)(4)(B) is amended by striking `section 412' in subparagraph
  (i) and inserting `section 412(b) or (l), whichever is greater'.
  (4) Section 401(a)(29) is amended--
  (A) by striking `current liability' and `funded current liability percentage'
  and `unfunded current liability' and `412(l)' each time they appear and
  inserting instead, respectively, the terms `initial termination liability'
  and `initial funding ratio' and `initial unfunded liability' and `412(o)'.
  (B) By striking everything after the word `except' in subparagraph (E) and
  inserting `that in computing initial unfunded liability there shall not be
  taken into account an amount equal to the initial unfunded liability of the
  plan as of the beginning of the first plan year beginning after December
  31, 1987 (determined  without regard to any plan amendment increasing
  liabilities adopted after October  16, 1987), reduced by an amount equal
  to the product of the amount necessary to amortize such pre-1988 initial
  unfunded liability in equal annual installments over a period of 18 plan
  years (beginning with the first plan year beginning after  December 31,
  1988) multiplied by the number of years (but not more than 18) beginning
  since December 31, 1988.'.
  (5) Section 404(a)(1)(D) is amended by striking `the unfunded liability
  determined under section 412(l).' at the end of the first sentence and
  inserting instead `the amount necessary to assure that the plan can satisfy
  all liabilities with respect to employees and their beneficiaries within
  the meaning of section 412(c)(7)(B) determined by using the interest rate
  under section 412(b)(5)(B).'
SEC. 512. CORRECTION TO ERISA CITATION.
  (a) Section 404(g)(4) is amended by striking `enactment' and all that follows
  through the end of the paragraph and inserting `the transaction involved.'.
SEC. 513. EFFECTIVE DATES.
  The amendments made by section 511 shall be effective for plan years
  beginning after December 31, 1993. The amendment made by section 512 shall
  be effective upon enactment.
PART 2--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
SEC. 521. REVISION OF ADDITIONAL FUNDING REQUIREMENTS FOR PLANS THAT ARE
NOT MULTIEMPLOYER PLANS.
  (a) Section 302(a)(2) of the Employee Retirement Income Security Act of
  1974 (29 U.S.C. 1082(a)(2)) is amended by striking `the excess of the total
  charges to the funding standard account' through the end of that sentence,
  and inserting `the largest of--
  `(A) the lesser of--
  `(i) the excess of the total charges to the funding standard account for
  all plan years (beginning with the first plan year to which this section
  applies) over the total credits to such account for such years; or,
  `(ii) the excess of the total charges to the alternative minimum funding
  standard account for such plan years over the total credits to such account
  for such years; or,
  `(B) if applicable, the underfunding reduction requirement under subsection
  (d); or,
  `(C) if applicable, the solvency maintenance requirement under subsection
  (g).'.
  (b) Section 302(d) is revised to read as follows:
  `(d) Underfunding Reduction Requirement for Plans That Are Not Multiemployer
  Plans-
  `(1) UNDERFUNDING REDUCTION REQUIREMENT- In the case of a defined benefit
  plan (other than a multiemployer plan) that has an initial funding ratio
  of less than 100 percent for any plan year, the underfunding reduction
  requirement for such plan year is the sum of--
  `(A) An amount equal to the product of the initial unfunded liability
  of the plan multiplied by the excess (if any) of (i) 30 percent, over
  (ii) the product of one-quarter of one percent multiplied by the number
  of percentage points (if any) that the initial funding ratio of the plan
  exceeds 35 percent;
  `(B) the charges to the funding standard account for normal cost under
  subparagraph (b)(2)(A) and for the amounts necessary to amortize any waived
  funding deficiencies under subparagraph (b)(2)(C);
  `(C) the excess (if any) of--
  `(i) the sum of charges to the funding standard account for plans years
  beginning after December 31, 1993 for net experience losses under clause
  (b)(2)(B)(iv) and net losses resulting from changes in actuarial assumptions
  under clause (b)(2)(B)(v) over--
  `(ii) the sum of credits to the funding standard account for plan years
  beginning after December 31, 1993--
  `(I) for net experience gains under clause (b)(3)(B)(ii) and net gains
  resulting from changes in actuarial assumptions under clause (b)(3)(B)(iii);
  and
  `(II) for amounts considered contributed by the employer under subparagraph
  (b)(3)(A) (to the extent they are necessary to avoid an accumulated funding
  deficiency under section 302(b)); and
  `(D) the net of--
  `(i) charges to the funding standard account for plan years beginning on or
  before December 31, 1993 for net experience losses under clause (b)(2)(B)(iv)
  and net losses resulting from changes in actuarial assumptions under clause
  (b)(2)(B)(v); and
  `(ii) the sum of credits to the funding standard account for plan years
  beginning on or before December 31, 1993--
  `(I) for net experience gains under clause (b)(3)(B)(ii) and net gains
  resulting from changes in actuarial assumptions under clause (b)(3)(B)(iii);
  and
  `(II) amounts considered contributed by the employer under subparagraph
  (b)(3)(A) (to the extent they are necessary to avoid an accumulated funding
  deficiency under section 302(b)).
  `(2) DEFINITIONS- For definitions pertaining to this subsection, see
  subsection (g)(3).
  `(3) APPLICATION TO SMALL PLANS- For the application of this subsection
  to small plans, see subsection (g)(4).'.
  (c) Section 302 is further amended by--
  (1) redesignating subsection (g) as (h); and
  (2) inserting after subsection (f) the following:
  `(g) Solvency Maintenance Requirement for Plans That Are Not Multiemployer
  Plans-
  `(1) SOLVENCY MAINTENANCE REQUIREMENT- In the case of a defined benefit plan
  (other than a multiemployer plan) that has an initial funding ratio of less
  than 100 percent for any plan year, the solvency maintenance requirement
  for such plan year is the sum of--
  `(A) the sum of:
  `(i) all disbursements from the plan for the plan year, and
  `(ii) an amount equal to the initial unfunded liability of the plan
  multiplied by the interest rate used by such plan (determined under
  subparagraph (b)(5)(A));
  `(B) the charges described in section 302(d)(1)(B);
  `(C) the amount described in section 302(d)(1)(C); and
  `(D) the amount described in section 302(d)(1)(D).
  `(2) LIMITATION ON SOLVENCY MAINTENANCE REQUIREMENT- For plan years
  commencing after December 31, 1993, the amount required under paragraph
  (1) shall not exceed the sum of--
  `(A) the amount required under section 302(d); and
  `(B) the product of--
  `(i) the excess (if any) of--
  `(I) the amount required under paragraph 1 over
  `(II) the amount required under section 302(d); multiplied by--
  `(ii) the applicable percentage.
  `(iii) For purposes of subparagraph (ii), the applicable percentage is:
     `For plan years
--The applicable
      commencing after:
--percentage is:
     December 31, 1993
--20 percent
     December 31, 1994
--40 percent
     December 31, 1995
--60 percent
     December 31, 1996
--80 percent
     December 31, 1997
--100 percent
  `(3) DEFINITIONS- For purposes of this subsection and subsection (d)--
  `(A) INITIAL UNFUNDED LIABILITY- The term `initial unfunded liability'
  means the excess (if any) of the amount necessary to satisfy the initial
  termination liability of the plan over the initial value of assets of
  the plan.
  `(B) INITIAL FUNDING RATIO- The term `initial funding ratio' means the
  ratio of (i) the initial value of assets of the plan to (ii) the amount
  necessary to satisfy the initial termination liability of the plan.
  `(C) INITIAL TERMINATION LIABILITY- The term `initial termination liability'
  means all liabilities with respect to employees and their beneficiaries
  under the plan in the meaning of section 401(a)(2) of the Internal Revenue
  Code of 1986 as of the first day of the plan year.
  `(D) INITIAL VALUE OF ASSETS- The term `initial value of assets' means
  the value of the assets of the plan determined under section 302(c)(2)
  as of the first day of the plan year.
  `(E) DISBURSEMENTS FROM THE PLAN-
  `(i) IN GENERAL- The term `disbursements from the plan' means benefit
  payments, including purchases of annuities or payment of lump sums in
  satisfaction of liabilities, administrative expenditures or any other
  disbursements from the plan or its trust.
  `(ii) SPECIAL RULE FOR PURCHASES OF ANNUITIES AND PAYMENT OF LUMP SUMS- In
  determining the applicable amounts attributable to purchases of annuities
  or the payment of lump sums under clause (i), the actual purchase or lump
  sum amounts paid by the plan or trust shall be multiplied by the excess
  (if any) of one over the initial funding ratio of the plan.
  `(4) Special rules for small plans-
  `(A) PLANS WITH 100 OR FEWER PARTICIPANTS- This subsection and subsection
  (d) shall not apply to any plan for any plan year if on each day during
  the preceding plan year such plan had no more than 100 participants.
  `(B) PLANS WITH MORE THAN 100 BUT NOT MORE THAN 150 PARTICIPANTS- In
  the case of a plan to which subparagraph (A) does not apply and which
  on each day during the preceding year had no more than 150 participants,
  the additional amounts required by the underfunding reduction requirement
  under subsection (d) or the solvency maintenance requirement under this
  subsection shall be equal to the product of--
  `(i) the excess of such requirements (determined without regard to this
  subparagraph) over the funding deficiency (if any) under subsection 302(b),
  multiplied by--
  `(ii) 2 percent for the highest number of participants in excess of 100
  on any such day.'.
  (C) AGGREGATION OF PLANS- For purposes of this paragraph, all defined benefit
  plans maintained by the same employer (or any member of such employer's
  controlled group) shall be treated as 1 plan, but only employees of such
  employer or member shall be taken into account.
  (d) Conforming Amendments-
  (1) Section 302(b) is amended--
  (A) by striking `and for purposes of determining a plan's required
  contribution under section 302(d)' in subparagraph (5)(B) in inserting
  `under section 302(c)(7)(B)'.
  (2) Section 302(c) is amended by striking `has the meaning given such
  term by subsection 302(d)(7) (without regard to subparagraph (D) thereof)'
  in subparagraph (7)(B) and inserting `means all liabilities with respect
  to employees and their beneficiaries under the plan within the meaning
  of section 401(a)(2) of the Internal Revenue Code of 1986 (within such
  limitations as the Secretary of the Treasury may prescribe by regulation)
  determined by using the interest rate under section 302(b)(5)(B)'.
  (3) Section 302(e)(4)(B) is amended by striking `section 412 of the Internal
  Revenue Code of 1986' in subparagraph (i) and inserting `section 412 (b)
  or (i) of the Internal Revenue Code of 1986, whichever is greater'.
SEC. 522. EFFECTIVE DATES.
  The amendments made by this part shall be effective for plan years beginning
  after December 31, 1993.
Subtitle B--Amendments to Title IV of ERISA
SEC. 531. LIMITATION ON BENEFITS GUARANTEED.
  (a) Subsection (b)(1) of section 4022 of ERISA is amended by adding after
  `(7)' `, (8) and (9)'.
  (b) Subsection (b)(7) of section 4022 of ERISA is amended by--
  (1) striking the period at the end and inserting in its place a semicolon;
  and
  (2) by adding after paragraph (7) a new paragraph (8):
  `(8)(A) Benefits under a new plan or any increase in benefits under a plan
  resulting from a plan amendment, which new plan or amendment was adopted
  or became effective after December 31, 1991, shall be disregarded unless:
  `(i) The plan was fully funded for vested benefits for the plan year that the
  new plan or amendment was adopted or became effective, whichever is later,
  or became fully funded for vested benefits in a subsequent plan year; and
  `(ii) The new plan or amendment was adopted or effective, whichever is
  later, at least one year prior to the date of plan termination.
  `(B) For purposes of this section, a plan is `fully funded for vested
  benefits' for any plan year if such plan has no unfunded vested benefits
  within the meaning of section 4006(a)(3)(E)(iii) as of the last day of
  such plan year.
  `(C)(i) Except as provided in clause (ii), paragraph (7) and paragraphs
  (5)(B) and (5)(C) shall not apply to benefits described in subparagraph
  (A) of this paragraph.
  `(ii) This paragraph shall not apply, and paragraph (7) and paragraphs
  (5)(B) and (5)(C) shall apply, to any new plan or plan amendment resulting
  from a collective bargaining agreement or amendment thereto entered and
  ratified on or prior to December 31, 1991.'
  (c) Subsection (b) of section 4022 of ERISA (as amended by subsection (b)
  of this section) is further amended by adding a new paragraph (9):
  `(9)(A) Notwithstanding paragraph (8), any plan provision or amendment
  adopted or effective after December 31, 1991, that creates or increases
  unpredictable contingent event benefits shall not be guaranteed.
  `(B) For purposes of this section, an `unpredictable contingent event
  benefit' means any benefit contingent on an event other than--
  `(i) age, service compensation, death or disability, or
  `(ii) an event which is reasonably and reliably predictable (as determined
  under regulations prescribed by the corporation).'.
  (d) EFFECTIVE DATE- The amendments made by this section shall be effective
  on December 31, 1991.
SEC. 532. ENFORCEMENT OF MINIMUM FUNDING REQUIREMENTS.
  (a) IN GENERAL- Paragraph (1) of section 4003(c) of Employee Retirement
  Income Security Act of 1974 (29 U.S.C. 1303 (e)(1)) is amended by inserting
  after `title' the following: `and, in the case of a plan to which this
  title applies under section 4021, section 302 of this Act or section 412
  of the Internal Revenue Code of 1986'.
  (b) EFFECTIVE DATE- The amendments made by this section shall be effective
  for installments and other payments required under section 302 of the
  Employee Retirement Income Security Act of 1974 or section 412 of the
  Internal Revenue Code of 1986 due on or after the date of the enactment
  of this Act.
SEC. 553. DEFINITION OF CONTRIBUTING SPONSOR.
  (a) IN GENERAL- Paragraph (13) of section 4001(a) of the Employee Retirement
  Income Security Act of 1974 (29 U.S.C. 1301(a)(13)) is amended to read
  as follows:
  `(13) `contributing sponsor' means, with respect to a single-employer plan,
  a person entitled to receive a deduction under section 404(a)(1) of the
  Internal Revenue Code of 1986 for contributions required to be made to
  the plan under section 302 of this Act or section 412 of such Code.'.
  (b) EFFECTIVE DATE- The amendment made by subsection (a) shall be effective
  as if included in section 9305 of the Pension Protection Act (Public Law
  100-203; 101 Stat. 1330-351).
SEC. 534. RECOVERY RATIO PAYABLE UNDER CORPORATION'S GUARANTY.
  (a) IN GENERAL- Section 4022(c)(3)(B) of the Employee Retirement Income
  Security Act of 1974 (29 U.S.C. 1322(c)(3)(B)) is amended--
  (1) by redesignating clauses (i) and (ii) as clauses (ii) and (iii)
  respectively; and
  (2) by inserting before clause (ii) (as so redesignated) the following
  new clause:
  `(i) the outstanding amount of benefit liabilities does not exceed
  $20,000,000,'.
  (b) TERMINATIONS- Clause (iii) of section 4022(c)(3)(B) of such Act (29
  U.S.C. 1322(c)(3)(B)), as redesignated by subsection (a), is amended--
  (1) by inserting `, or proceedings were instituted under section 4042,'
  after `provided'; and
  (2) by striking `in which occurs the date of the notice of intent to
  terminate with respect to the plan termination'.
  (c) CONFORMING AMENDMENTS- Clause (i) of section 9312(b)(3)(B) of the
  Pension Protection Act is amended by--
  (1) inserting `, or proceedings were instituted under section 4042,' after
  `provided'; and
  (2) striking `1990' and inserting `1994'.
  (d) EFFECTIVE DATE- The amendments made by this section shall take effect
  as if included in section 9312(b)(3) of the Pension Protection Act (Public
  Law 100-203; 101 Stat. 1330-362).
SEC. 535. ELIMINATION OF THE SEVENTH REVOLVING FUND.
  (a) TRANSFER- Effective September 30, 1992, all assets and liabilities
  of the fund described in section 4005(f)(1) of the Employee Retirement
  Income Security Act of 1974 (as in effect before the amendments made by
  this section) shall be transferred to the fund established pursuant to
  section 4005(a) of such Act with respect to basic benefits guaranteed
  under section 4022 of such Act.
  (b) REPEAL- Section 4005 of the Employee Retirement Income Security Act
  of 1974 (29 U.S.C. 1305) is amended--
  (1) by striking subsection (f); and
  (2) by redesignating subsections (g) and (h) as subsections (f) and (g),
  respectively.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply with
  respect to fiscal years beginning after September 30, 1992.
SEC. 536. DISTRESS TERMINATION CRITERIA FOR BANKING INSTITUTIONS.
  (a) IN GENERAL- Subclause (I) of section 4041(c)(2)(B)(i) of the Employee
  Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)(B)(i)(I))
  is amended by inserting `Federal law or' before `law of a State'.
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  plan terminations under section 4041 of the Employee Retirement Income
  Security Act of 1974 with respect to which notices of intent to terminate
  under section 4041(a)(2) of such Act are provided on or after the date of
  the enactment of this Act.
SEC. 537. VARIABLE RATE PREMIUM EXEMPTION.
  (a) IN GENERAL- Clause (v) of section 4006(a)(3)(E) of the Employee
  Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is
  amended by striking all that follows `not less than' and inserting `the
  maximum amount that may be contributed without incurring an excise tax
  under section 4972 of the Internal Revenue Code of 1986'.
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  plan years beginning after December 31, 1992.
Subtitle C--Employer Liability, Lien and Priority
PART 1--AMENDMENTS TO TITLE IV OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974
SEC. 541. EMPLOYER LIABILITY LIEN AND PRIORITY AMOUNT.
  (a) REVISED LIMITATIONS ON LIEN AND TAX PRIORITY AMOUNT- Section 4068(a)
  of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1368(a))
  is amended--
  (1) by striking `If any person liable to the corporation' and inserting `(1)
  Subject to paragraphs (2) and (3), if any person liable to the corporation';
  (2) by striking `section 4062' and inserting `section 4062(a)(1)';
  (3) by striking the comma after `belonging to such person' and inserting
  a period;
  (4) by striking `except that such lien' and inserting the following:
  `(2) In the case of plan terminations under section 4041 with respect
  to which notices of intent to terminate under section 4041(a)(2) are
  provided before January 1, 1992, and plan terminations with respect to
  which proceedings are instituted by the corporation before January 1,
  1992, the lien established under paragraph (1)'; and
  (5) by adding at the end the following paragraph:
  `(3)(A) In the case of plan terminations under section 4041 with respect to
  which notices of intent to terminate under section 4041(a)(2) are provided
  on or after January 1, 1992, and plan terminations with respect to which
  proceedings are instituted by the corporation on or after January 1, 1992,
  the lien established under paragraph (1) may not be in an amount in excess
  of the sum of--
  `(i) the amount of benefits attributable to the occurrence of unpredictable
  contingent events valued as of the date of plan termination arising at
  any time during the 3 years preceding the date of plan termination (to
  the extent not funded prior to plan termination), plus
  `(ii) the greater of--
  `(I) 30 percent of the collective net worth of all persons described in
  section 4062(a), or
  `(II) the currently applicable percentage of the excess of the amount
  of unfunded benefit liabilities under the plan as of the date of plan
  termination over the amount described in clause (i).
  `(B) For purposes of this paragraph--
  `(i) the term `currently applicable percentage' means--
  `(I) with respect to plan terminations initiated in calendar year 1992,
  10 percent,
  `(II) with respect to plan terminations initiated in any calendar year
  after 1992 and before 2012, the percentage determined under this clause
  with respect to plan terminations initiated in the preceding calendar year,
  plus 2 percent, and
  `(III) with respect to plan terminations initiated in calendar years after
  2011, 50 percent.
  `(ii) The term `amount of benefits attributable to the occurrence
  of unpredictable contingent events' means, with respect to any plan,
  the present value of unpredictable contingent event benefits (within the
  meaning of section 302(d)(7)(B)(ii)), determined as of the termination date
  on the basis of assumptions prescribed by the corporation for purposes of
  section 4044.
  `(C) In applying subparagraph (A), the corporation may disregard subclause
  (I) of clause (ii) thereof if the corporation determines, in its sole
  discretion, that disregarding such subclause (I) is cost-effective.'.
  (b) CONFORMING AND CLARIFYING AMENDMENTS RELATING TO AMOUNT ENTITLED TO
  PRIORITY TREATMENT IN INSOLVENCY AND BANKRUPTCY CASES- Section 4068(c)(2)
  of such Act (29 U.S.C. 1368(c)(2)) is amended by inserting `(A)' after
  `(2)' and by adding at the end the following new subparagraph:
  `(B) Subparagraph (A) shall apply--
  `(i) in the case of terminations described in paragraph (2) of subsection
  (a), only with respect to so much of the liability as does not exceed the
  amount determined under such paragraph (2), and
  `(ii) in the case of terminations described in paragraph (3) of subsection
  (a), only with respect to so much of the liability as does not exceed the
  amount determined under such paragraph (3).'.
  (c) CLARIFICATION OF BANKRUPTCY AND INSOLVENCY CLAIM- Section 9312(b)(2)(B)
  of the Pension Protection Act (Public Law 100-203, 101 Stat. 1330-361)
  is amended by adding at the end thereof the following new clause:
  `(iii) Section 4068(c)(2) of ERISA (29 U.S.C. 1368(c)(2)) is amended--
  `(I) by striking `the lien imposed under subsection (a)' and inserting
  `the liability to the corporation under section 4062(a)(1), 4063, or
  4064'; and `(II) by inserting `which is' after `tax', and by inserting
  `and assigned priority' after `United States'.'.
  (d) Effective Dates-
  (1) Section 4068(a)(2) of the Employee Retirement Income Security Act of
  1974 (as amended by subsection (a)) and section 4068(c)(2)(B)(i) of such
  Act (as amended by subsection (b)) shall be effective with respect to plan
  terminations under section 4041 of such Act with respect to which notices of
  intent to terminate under section 4041(a)(2) of such Act are provided before
  January 1, 1992, and plan terminations with respect to which proceedings
  are instituted by the Pension Benefit Guaranty Corporation under section
  4042 of such Act before January 1, 1992.
  (2) Section 4068(a)(3) of the Employee Retirement Income Security Act of
  1974 (as amended by subsection (a)) and section 4068(c)(2)(B)(ii) of such
  Act (as amended by subsection (b)) shall be effective with respect to plan
  terminations under section 4041 of such Act with respect to which notices
  of intent to terminate under section 4041(a)(2) of such Act are provided
  on or after January 1, 1992, and plan terminations with respect to which
  proceedings are instituted by the Pension Benefit Guaranty Corporation
  under section 4042 of such Act on or after January 1, 1992.
  (3) The amendment made by subsection (a)(2) shall be effective as if
  included in the enactment of section 11011(a) of the Single-Employer
  Pension Plan Amendments Act of 1986 (Public Law 99-272; 100 Stat. 253).
  (4) The amendment made by subsection (c) shall be effective as if included
  in the enactment of section 9312(b)(2)(B) of the Pension Protection Act
  (Public Law 100-203, 101 Stat. 1330-361).
SEC. 542. LIABILITY UPON LIQUIDATION OF CONTRIBUTING SPONSOR WHERE PLAN
REMAINS ONGOING
  (a) IN GENERAL- Section 4062 of the Employee Retirement Income Security
  Act of 1974 (29 U.S.C. 1362) is amended by adding at the end the following
  new subsection:
  `(f) Liability on Liquidation of Contributing Sponsor-
  `(1) IN GENERAL- In any case in which all or substantially all of the
  assets of a person who is a contributing sponsor of a single-employer plan
  are liquidated in a case under title 11, United States Code, or under any
  similar Federal law or law of a State or political subdivision of a State,
  and in the course of such liquidation another member of  such person's
  controlled group remains a contributing sponsor of the plan or is liable
  for payment of contributions or installments under section 302(c)(11)
  of this Act or section 412(c)(11) of the Internal Revenue Code of 1986,
  such person shall be deemed liable under subsection (b) as if such plan
  had terminated under section 4041(c) in the course of such liquidation and
  as if the termination date were the date determined by the corporation as
  the date on which the liquidation was initiated.
  `(2) APPLICABILITY OF OTHER PROVISIONS- Any provision of this Act or any
  other provision of law that applies to liability under this section upon
  termination of a plan shall apply in the same manner and to the same extent
  to the liability established under this subsection. For purposes of this
  paragraph, the date referred to in paragraph (1) shall be deemed the date
  of plan termination.
  `(3) TRANSFER OF LIABILITY PAYMENTS TO THE ONGOING PLAN- The corporation
  shall pay to the plan amounts collected by the corporation in satisfaction of
  any liability established under this subsection in connection with such plan.
  `(4) REGULATIONS- The corporation may prescribe regulations under this
  subsection. Such regulations may--
  `(A) prescribe rules governing--
  `(i) the basis upon which the plan will continue as an ongoing plan
  maintained by other members of the controlled group,
  `(ii) the determination of whether a liquidation referred to in this
  subsection has occurred, and
  `(iii) the assignment of the corporation's claim to liability payments
  under this subsection to other members of the controlled group as a means
  of collecting such payments, subject to the transfer of such payments to
  the plan, and
  `(B) provide alternative arrangements for making liability payments under
  this subsection.'.
  (b) CONFORMING AMENDMENT- Section 4062(a)(1) of such Act (29
  U.S.C. 1362(a)(1)) is amended by striking `subsection (b) and inserting
  `subsections (b) and (f)'.
  (c) EFFECTIVE DATE- The amendments made by this section shall be effective
  for liquidations initiated on or after the date of the enactment of this Act.
PART 2--AMENDMENTS TO TITLE 11, UNITED STATES CODE
SEC. 551. PENSION BENEFIT GUARANTY CORPORATION PERMITTED TO BE A MEMBER OF
AN UNSECURED CREDITORS' COMMITTEE.
  (a) DEFINITION- Section 101(41) of title 11 of the United States Code is
  amended by inserting `that guarantees pension benefits of the debtor or
  an affiliate of the debtor, or' after `governmental unit' the second time
  it appears.
  (b) EFFECTIVE DATE- The amendment made by subsection (a) shall not apply
  with respect to cases commenced under title 11 of the United States Code
  before the date of the enactment of this Act.
SEC. 552. CLARIFICATION OF PRIORITIES IN CONFORMITY WITH THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974.
  (a) Priority as Expenses Arising Before Commencement of Case-
  (1) in subparagraph (F), by striking `or' at the end;
  (2) in subparagraph (G), by striking the period at the end and inserting
  a semicolon; and
  (3) by adding after subparagraph (G) the following:
  `(H) unpaid contributions (including interest) to pension plans for
  plan years beginning after December 31, 1987, which are attributable to
  the period prior to the date of the filing of the petition and treated as
  taxes owing to the United States under section 412(n)(4)(C) of the Internal
  Revenue Code of 1986; or
  `(I) liability (including interest) arising under section 4062(a)(1),
  4063, or 4064 of the Employee Retirement Income Security Act of 1974 to
  the extent it is treated as a tax under section 4068(c)(2) of such Act,
  if the date of pension plan termination is on or prior to the date of the
  filing of the petition.
`For purposes of subparagraph (I), the date of plan termination, the amount of
the liability, and the extent to which the liability is treated as a tax shall
be determined in accordance with the provisions of the Employee Retirement
Income Security Act of 1974 and the regulations promulgated thereunder.'.
  (b) PRIORITY AS ADMINISTRATIVE EXPENSES ARISING AFTER COMMENCEMENT OF CASE-
  Section 503(b) of such title 11 is amended--
  (1) in paragraph (5), by striking `and' at the end;
  (2) in paragraph (6), by striking the period and inserting `; and'; and
  (3) by adding at the end the following;
  `(7)(A) unpaid contributions (including interest) to pension plans for
  plan years beginning after December 31, 1987, which are attributable
  to the period beginning on the date of the filing of the petition and
  treated as taxes owing to the United States under section 412(n)(4)(C)
  of the Internal Revenue Code of 1986; and
  `(B) liability (including interest) arising under section 4062(a)(1), 4063,
  or 4064 of the Employee Retirement Income Security Act of 1974 to the extent
  it is treated as a tax under section 4068(c)(2) of such Act, if the date
  of pension plan termination is after the date of the filing of the petition.
`For purposes of paragraph (7)(B), the date of plan termination, the amount of
the liability, and the extent to which the liability is treated as a tax shall
be determined in accordance with the provisions of the Employee Retirement
Income Security Act of 1974 and the regulations promulgated thereunder.'.
  (c) EFFECTIVE DATE- Sections 507(a)(7)(H) and 503(b)(1)(7)(A) of title 11
  of the United States Code (as amended by this section) shall be effective
  as if included in section 9304(e) of the Pension Protection Act (Public
  Law 100-203; 101 Stat. 1330-348). Sections 507(a)(7)(I) and 503(b)(1)(7)(B)
  of such title (as amended by this section) shall be effective with respect
  to cases under such title which commence on or after the date of the
  enactment of this Act or cases under such title which are pending on the
  date of the enactment of this Act and in which claims for liability have
  not been resolved as of such date.
SEC. 553. NOTICE REQUIRED WHERE FEDERALLY INSURED PENSION PLAN IS ADMINISTERED
BY THE DEBTOR OR ITS AFFILIATE.
  (a) IN GENERAL- Rule 2002(j) of the Bankruptcy Rules (11 U.S.C. Appendix)
  is amended by inserting before the period at the end the following: `;
  (5) to the Pension Benefit Guaranty Corporation in any case in which the
  debtor or an affiliate of the debtor maintains a pension plan to which
  title IV of the Employee Retirement Income Security Act of 1974 applies.'.
  (b) EFFECTIVE DATE- The amendment made by this section shall take effect
  one day after the date of enactment of title VI.
TITLE VI--FEDERAL INSURANCE ACCOUNTING ACT OF 1992
SECTION 601. SHORT TITLE.
  This Act may be cited as the `Federal Insurance Accounting Act of 1992'.
SEC. 602. INSURANCE ACCRUAL ACCOUNTING.
  Title V of the Congressional Budget Act of 1974 is amended as follows:
  (a) The title of title V is amended to read `TITLE V--CREDIT AND INSURANCE
  ACCOUNTING REFORM'.
  (b) Following the title, insert `Subtitle A--Credit Accounting'.
  (c) Substitute the word `subtitle' for `title' wherever it appears.
  (d) Following section 507, insert the following:
`Subtitle B--Insurance Accounting
`SEC. 550. PURPOSES.
  `The purposes of this subtitle are to--
  `(1) measure more accurately the cost of Federal insurance programs;
  `(2) place the cost of insurance programs on a budgetary basis equivalent
  to other Federal spending;
  `(3) improve the allocation of resources among insurance programs and
  between insurance and other spending programs; and
  `(4) encourage the provision of Federal insurance in a manner that adequately
  protects the insured at the least cost to the Federal Government.
`SEC. 551. EFFECTIVE DATES.
  `The definitions and changes in budget treatment and accounting shall be
  effective as of the following dates:
  `(a) October 1, 1991, for: the deposit insurance activities of the Federal
  Deposit Insurance Corporation, the Resolution Trust Corporation, and the
  National Credit Union Administration; and the pension guarantee program
  of the Pension Benefit Guaranty Corporation;
  `(b) October 1, 1992, for all other insurance programs.
`SEC. 552. DEFINITIONS.
  `For purposes of this subtitle, with respect to any Federal insurance
  program--
  `(1) the term `obligation' means a binding agreement by a Federal agency
  to indemnify a nonfederal entity against specified losses in return for
  premiums paid. This term does not include loan guarantees as defined in
  Subtitle A or obligations of social security, Medicare, and other social
  and medical insurance programs;
  `(2) the term `accrued cost' means the net present value of the insurance
  liabilities outstanding on the effective date and at the end of each
  successive reporting period;
  `(3) the term `accrual cost' means the increase or decrease in accrued cost
  during a fiscal year or from the beginning of a fiscal year to the time of
  the insured event, if one occurs during the fiscal year. Alternatively,
  for programs for which it is possible to make actuarial estimates, the
  accrual cost may be the estimated long-term average loss per fiscal year
  for periods of comparable exposure to risk of loss;
  `(4) the term `liquidating account' means the budget account for the
  accrued cost, as estimated on the effective date specified in section 551;
  `(5) the term `program account' means the budget account for the accrual
  costs, for all costs of administering the insurance program, and balances;
  `(6) the term `financing account' means the non-budget account that receives
  cost payments from the program account and the liquidating account, makes
  payments to the program account, includes all cash flows to and from the
  Federal Government, and holds balances;
  `(7) the term `insured event' means an event that results in an obligation
  of the Federal Government; and
  `(8) the term `Director' means the Director of the Office of Management
  and Budget.
`SEC. 553. OMB, CBO, AND AGENCY ANALYSIS, COORDINATION, AND REVIEW.
  `(a) DIRECTOR'S RESPONSIBILITIES- For the Executive branch, the Director
  shall be responsible for the estimates required by this subtitle, in
  consultation with the agencies that administer insurance programs.
  `(b) DELEGATION- The Director may delegate to agencies authority to
  make estimates. The delegation of authority shall be based upon written
  guidelines, regulations, or criteria consistent with the definitions in
  this subtitle.
  `(c) COORDINATION WITH THE CONGRESSIONAL BUDGET OFFICE- In developing
  estimation guidelines, regulations, or criteria to be used by Federal
  agencies, the Director shall consult with the Director of the Congressional
  Budget Office.
  `(d) IMPROVING COST ESTIMATES- The Director and the Director of the
  Congressional Budget Office shall coordinate the development of methods
  of estimating the costs of insurance programs. The Office of Management
  and Budget and the Congressional Budget Office shall have access to the
  agency data necessary to develop estimates of costs.
  `(e) ACCOUNTING SUPPORT- The Director shall coordinate the development by
  the Federal agencies that conduct insurance programs of such accounting
  methods and systems as are necessary to support accounting and budgeting
  for insurance programs on an accrual basis.
`SEC. 554. BUDGETARY TREATMENT.
  `(a) BUDGET ACCOUNTING- For any insurance program-
  `(1) Premiums and other income shall be credited to a finance account and
  available to finance program costs in the following priority:
  `(A) administrative expenses, by reimbursement to the program account;
  `(B) accrued costs, estimated as of the effective date specified in section
  551, for insured events that occur during a fiscal year, before drawing
  on the resources of the liquidating account; and
  `(C) accrual costs, before drawing on the resources of the program account.
  `(2) Any balance of premiums and other income remaining after financing
  the program costs shall be paid to the program accounts.
  `(3) All collections and payments by the financing accounts shall be a
  means of financing.
  `(4) To the extent the accrued costs, estimated as of the effective date
  specified in section 551, for insured events that occur during a fiscal year,
  exceed the premiums and other income available in accordance with paragraph
  (1), an obligation equal to the amount of such excess shall be recorded in
  the insurance liquidating account. Such obligation shall be a charge, first,
  against any unobligated balances of the liquidating account and, second,
  against appropriations to the liquidating account for that year. Outlays
  from the liquidating account shall be made to the financing account at
  the time the insured event occurs. Any balances remaining in excess of
  accrued costs shall be transferred to the program account.
  `(5) For any year in which there is an accrual cost that exceeds the
  premiums and other income available in accordance with paragraph (1),
  an obligation equal to such excess shall be recorded in the program
  account. Such obligation will be a charge, first, against any unobligated
  balances of the program account and, second, against appropriations to the
  program account for that year. An outlay in the amount of the obligation
  shall be made in the same fiscal year to the finance account for the program.
  `(6) For the Bank Insurance Fund, any appropriations necessary under
  paragraphs (4) and (5) shall be repaid to the general fund from premiums
  and other income on a 15 year schedule as authorized under section 14 of
  the Federal Deposit Insurance Corporation Improvement Act of 1991. Premiums
  and other income available to the Bank Insurance Fund shall be available,
  first, to finance costs in the priority shown in paragraph (1) and, second,
  to finance these repayments.
  `(b) MODIFICATIONS- No action shall be taken to modify an insurance program
  in a manner that increases its accrual cost unless budget authority for
  the additional accrual cost is appropriated in advance, or is available
  out of existing appropriations or from other budgetary resources.
  `(c) ADMINISTRATIVE EXPENSES- All obligations for an agency's administration
  of an insurance program shall be displayed as distinct and separately
  identified subaccounts within the program account. To the extent that
  the administrative expenses of an insurance programs are authorized to be
  financed by premiums and other income, the financing account shall reimburse
  the program account for administrative expenses. The administrative expenses
  of the Resolution Trust Corporation shall be financed as authorized by
  section 501 of Public Law 101-73, in a program account established for
  the purpose, separate from the RTC Revolving Fund.
`SEC. 555. AUTHORIZATIONS.
  `(a) AUTHORIZATION OF APPROPRIATIONS FOR COSTS- There are authorized to
  be appropriated to each Federal agency authorized to conduct insurance
  programs, such sums as may be necessary to pay the accrued and accrual
  costs associated with   such insurance programs. For the purposes of the
  Balanced Budget and Emergency Deficit Control Act of 1985, as amended,
  such appropriations shall be considered discretionary spending if the
  spending for a program was classified as discretionary spending by that
  Act. If such spending was not classified as discretionary spending, it
  shall be considered direct spending (entitlement authority).
  `(b) AUTHORIZATION TO ESTABLISH FINANCING ACCOUNTS- In order to implement
  the accounting required by this subtitle, the President is authorized to
  establish such non-budgetary accounts as may be appropriate.
  `(c) TREASURY TRANSACTIONS WITH THE FINANCING ACCOUNTS- The Secretary of the
  Treasury shall borrow from, receive from, lend to, or pay to the insurance
  financing accounts such amounts as may be appropriate. The Secretary of the
  Treasury may prescribe forms and denominations, maturities, and terms and
  conditions for the transactions described above. The authorities described
  above shall not be construed to supersede or override the authority
  of the head of a Federal agency to administer and  operate an insurance
  program. All of the transactions provided in this subsection shall be subject
  to the provisions of subchapter II of chapter 15 of title 31, United States
  Code. Cash balances of the program, financing, and liquidating accounts in
  excess of current requirements shall be maintained in a form of uninvested
  funds, and the Secretary of the Treasury shall pay interest on these funds.
  `(d) ELIGIBILITY AND ASSISTANCE- Nothing in this subtitle shall be construed
  to change the authority or the responsibility of a Federal agency to
  determine the terms and conditions of eligibility for, or the amount of
  assistance provided by, an insurance program.
`SEC. 556. EFFECT ON OTHER LAWS.
  `(a) This subtitle shall supersede, modify, or repeal any provision of law
  enacted prior to the date of enactment of this subtitle to the extent such
  provision is inconsistent with this subtitle. Nothing in this subtitle shall
  be construed to establish a limitation on any Federal insurance program.
  `(b) The changes made by this subtitle shall be considered changes in
  budget concepts and definitions for the purposes of the Balanced Budget
  and Emergency Deficit Control Act of 1985, as amended.'.
SEC. 603. CONFORMING AMENDMENTS.
  `(a) CONFORMING AMENDMENTS-
  (1) The last sentence of section 3(2) of the Congressional Budget Act of
  1974 is amended by adding `and accrual costs of insurance programs,' after
  `programs,'.
  (2) Section 1105(a) of title 31, United States Code, is amended by inserting
  at the end thereof the following:
  `(29) the accrued and accrual costs of insurance programs.'.
  (b) EFFECTIVE DATE- These changes are effective upon enactment.
TITLE VII--MEDICARE PREMIUM EQUITY AMENDMENTS OF 1992
SEC. 701. SHORT TITLE.
  This title may be cited as the `Medicare Premium Equity Amendments of 1992'.
SEC. 702. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH HIGH INCOME.
  Section 1839 of the Social Security Act is amended by adding at the end
  the following:
  `(g)(1)(A) Notwithstanding the previous subsections, in the case of an
  individual who in a taxable year ending with or within a calendar year has
  an adjusted gross income (as defined in section 62 of the Internal Revenue
  Code of 1986) exceeding the applicable amount (specified under subparagraph
  (B)), the amount of the monthly premium for the calendar year shall be
  increased by an amount such that the total monthly premium shall be equal
  to 150 percent of the monthly actuarial rate for enrollees age 65 and over
  determined for that calendar year.
  `(B) For purposes of subparagraph (A), the applicable amount is--
  `(i) $125,000, in the case of an individual who is a married individual
  (as defined in section 7703 of the Internal Revenue Code of 1986) who
  makes a single return jointly with his spouse under section 6013 of that
  Code, who is a surviving spouse (as defined in section 2(a) of that Code),
  or who is a head of a household (as defined in section 2(b) of that Code),
  `(ii) $62,500, in the case of an individual who is a married individual
  (as so defined) who does not make a single return jointly with his spouse
  under section 6013 of that Code, and
  `(iii) $100,000, in the case of any other individual.
  `(2) Subsection (f) does not apply to the additional amount specified
  under paragraph (1).'.
SEC. 703. COLLECTION OF ADDITIONAL PREMIUM.
  Section 1840 of the Social Security Act is amended by adding at the end
  the following:
  `(i)(1) Notwithstanding the previous subsections, the additional premium
  amounts specified in section 1839(g)(1) shall be paid in such manner and
  at such times as the Secretary may specify.
  `(2) The Secretary may impose such interest and penalties for failure to
  comply with requirements developed under paragraph (1) as the Secretary
  may specify.
  `(3) The Secretary of the Treasury shall provide to the Secretary
  information concerning taxpayers and tax returns as is needed to carry
  out this subsection and section 1839(g).'.
SEC. 704. TERMINATION OF PART B ENROLLMENT.
  Section 1838 of the Social Security Act is amended by adding at the end
  the following:
  `(f) Notwithstanding the previous subsections, the Secretary may provide
  for termination of enrollment and coverage under this part at such times
  and in such manner as the Secretary may specify for failure to comply with
  requirements developed under section 1840(i).'.
SEC. 705. INITIAL FUNDING OF PROGRAM MANAGEMENT.
  Amounts appropriated for fiscal year 1992 or 1993 for the Health Care
  Financing Administration under the heading `Program Management' or
  for the Social Security Administration under the heading `Limitation on
  Administrative Expenses', and that are reserved to meet unanticipated costs
  or to process unanticipated workloads, may be expended and apportioned
  for use to meet the costs of administering the amendments made by this title.
SEC. 706. EFFECTIVE DATE.
  The amendments made by this title apply to premiums for months after
  March 1992.
TITLE VIII--MEDICARE BUDGET AMENDMENTS OF 1992
SEC. 801. SHORT TITLE, REFERENCES IN TITLE, AND TABLE OF CONTENTS.
  (a) SHORT TITLE- This title may be cited as the `Medicare Budget Amendments
  of 1992'.
  (b) REFERENCES IN TITLE- The amendments in this title apply to the Social
  Security Act unless otherwise specifically stated.
SEC. 802. ELIMINATION OF CERTAIN ANOMALIES IN PAYMENTS FOR ANESTHESIA.
  (a) GENERAL RULE-
  (1) Part B of title XVIII is amended by inserting after section 1846
  the following:
`ELIMINATION OF CERTAIN ANOMALIES IN PAYMENTS FOR ANESTHESIA
  `SEC. 1847. (a) Payment under this part for anesthesia physicians' services,
  when a separate charge (on a fee schedule basis) is also made for the
  services of a certified registered nurse anesthetist, may not, when added
  to the payment made for the services of the nurse anesthetist, exceed the
  amount that would be paid for the anesthesia physicians' services if a
  separate payment were not made for the services of the nurse anesthetist.
  (2) Section 1848(g)(2)(D) is amended by inserting `(or the lower amount
  under section 1847)' after `subsection (a)'.
  (b) EFFECTIVE DATE- The amendments made by subsection (a) apply to services
  furnished after September 1992.
SEC. 803. RATES FOR CERTIFIED REGISTERED NURSE ANESTHETISTS.
  (a) NON-MEDICALLY DIRECTED CRNA'S-
  (1) Section 1833(1)(4)(A) is amended--
  (A) in the matter preceding clause (i), by striking `subparagraphs (C)
  and (D)' and inserting `subparagraph (C)', and
  (B) in clause (i)--
  (i) in subclause (III), by striking `$16.00,' and inserting `$18.00, and',
  (ii) by striking subclauses (IV) through (VI),
  (iii) in subclause (VII), by striking `1996' and inserting `1993', and
  (iv) by renumbering subclause (VII) as (IV).
  (2) Section 1833(1)(4) is further amended--
  (A) by striking subparagraph (C), and
  (B) by redesignating subparagraph (D) as (C).
  (b) MEDICALLY DIRECTED CRNA'S- Section 1833(1)(4)(B) is amended--
  (1) in clause (i), by striking `subparagraph (D)' and inserting `subparagraph
  (C)', and
  (2) in clause (ii)--
  (A) in subclause (III), by striking `$11.00,' and inserting `$8.60, and',
  (B) by striking subclauses (IV) through (VI),
  (C) in subclause (VII), by striking `1997' and inserting `1993', and
  (D) by  renumbering subclause (VII) and (IV).
SEC. 804. SECRETARIAL DISCRETION IN DETERMINING ANNUAL UPDATE IN PAYMENTS
FOR DURABLE MEDICAL EQUIPMENT, PROSTHETIC DEVICES, ORTHOTICS, AND PROSTHETICS.
  (A) DURABLE MEDICAL EQUIPMENT- Section 1834(a)(14)(B) is amended by striking
  out `the percentage increase' and all that follows through `year' and
  inserting `a percentage change (or no change), which may be different for
  different kinds of equipment, as determined by the Secretary and published
  in the Federal Register by the end of the September preceding the year,
  after taking into consideration market factors and technological change'.
  (b) PROSTHETIC DEVICES, ORTHOTICS, AND PROSTHETICS- Section 1834(h)(4)(A)
  is amended--
  (1) by striking `and' at the end of clause (i),
  (2) in clause (ii)--
  (A) by striking `a subsequent year' and inserting `1992', and
  (B) by striking the semicolon and adding a comma and `and', and
  (3) by adding at the end the following:
  `(iii) for a subsequent fiscal year, a percentage change (or no change),
  which may be different for different kinds of items, as determined by the
  Secretary and published in the Federal Register by the end of the September
  preceding the year, after taking into consideration market factors and
  technological change.'.
SEC. 805. PAYMENTS CLINICAL DIAGNOSTIC LABORATORY TESTS.
  (a) LOWER CAP- Section 1833(h)(4)(B) is amended--
  (1) by striking `and' at the end of clause (iii),
  (2) in clause (iv), by inserting `and before October 1, 1992,' after `1990,',
  (3) by striking the period at the end of clause (iv) and adding a comma and
  `and', and
  (4) by adding at the end the following:
  `(v) after September 30, 1992, is equal to 76 percent of the median of all
  the fee schedules established for that test for that laboratory setting
  under paragraph (1).'.
  (b) SECRETARIAL DISCRETION IN DETERMINING ANNUAL UPDATE IN PAYMENTS FOR
  CLINICAL DIAGNOSTIC LABORATORY TESTS- Section 1833(h)(2)(A)(ii) is amended--
  (1) by striking `and' at the end of subclause (II),
  (2) in subclause (III), by striking `, 1992, and 1993 shall be 2
  percent.' and adding `and 1992 shall be 2 percent, and', and
  (3) by adding at the end the following:
  `(IV) the annual adjustment in the fee schedules determined under clause
  (i) for each subsequent year shall be a percentage change (or no change),
  which may be different for different kinds of tests, as determined by the
  Secretary and published in the Federal Register by the end of the September
  preceding the year, after taking into consideration market factors and
  technological change.'.
SEC. 806. UPDATES FOR INPATIENT HOSPITAL SERVICES ON A CALENDAR YEAR BASIS.
  (a) PPS HOSPITALS- Section 1886(b)(3)(B)(i) is amended--
  (1) in the matter preceding subclause (I), by striking `fiscal year'
  and inserting `particular time period',
  (2) in subparagraph (VII), by inserting `and the three succeeding months'
  after `fiscal year 1992',
  (3) in subparagraphs (VIII) through (X), by striking `fiscal year', and
  (4) in subparagraph (XI), by striking `for fiscal year 1996 and each
  subsequent fiscal year' and inserting `for 1996 and each subsequent year'.
  (b) OTHER HOSPITALS- Section 1886(b)(3)(B)(ii) is amended--
  (1) by renumbering subclause (IV) as (VI), and
  (2) by inserting after subclause (III) the following:
  `(IV) fiscal years 1989, 1990, 1991, and 1992, the market basket percentage
  increase,
  `(V) fiscal year 1993, 75 percent of the market basket percentage increase,
  and'
  `(c) CONFORMING AMENDMENT- Section 1886(b)(3)(B)(iii) is amended--
  (1) by striking `fiscal year' the first place it occurs and inserting
  `particular time period',
  (2) by striking `period or fiscal year' the first place it occurs and
  inserting `cost reporting period or particular time period', and
  (3) by striking `for the period or fiscal year' and inserting `for the
  cost reporting period or fiscal year ending in the particular time period'.
TITLE IX--AID TO FAMILIES WITH DEPENDENT CHILDREN SAVINGS SET-ASIDE AMENDMENTS
OF 1992
SHORT TITLE
  SEC. 901. This title may be cited as the `AFDC Savings Set-Aside Amendments
  of 1992'.
INCREASE IN RESOURCE LIMIT
  SEC. 902. Section 402(a)(7)(B) of the Social Security Act is amended by
  striking out the semicolon at the end and inserting lieu thereof: `and at
  the option of the State disregard, in determining such combined value with
  respect to a family already receiving aid, resources the value of which
  do not exceed $10,000, but only if the State plan provides that (I) the
  State agency will determine that any such disregarded resources are being
  retained for later expenditure for a purpose directly related to improving
  the education, training, or employability (including self-employment) of a
  family member or for the purchase of a home for the family, (II) the value
  of any resources so disregarded will not be taken into consideration for
  purposes of determining eligibility for benefits under the Food Stamp Act
  of 1977, and (III) the State agency will not disregard under this paragraph
  any resource (or interest therein) owned by a family member within the
  preceding 12 months, if such resource (or interest) was disposed of at
  less than fair market value for the purpose of establishing eligibility
  for aid under the State plan (and any such transaction shall be presumed
  to have been for such purpose unless convincing evidence is furnished to
  establish that the transaction was for another purpose exclusively);'.
DISREGARDS TO CARRY OUT A SELF-EMPLOYMENT PLAN
  SEC. 903. (a) Section 402(a)(7) of the Social Security Act is amended by
  striking out `and section 415' in the matter preceding subparagraph (A)
  and inserting in lieu thereof `section 415, and section 482(b)'.
  (b) Section 482(b)(1) of the Act is amended by adding at the end thereof
  the following new subparagraphs:
  `(C) The employability plan may, at the option of the State agency, provide
  for the retention and set-aside of such amounts of income and resources
  as the State agency determines necessary for carrying out an approved
  employability plan which includes self-employment as its employment goal,
  and the State agency must find that the specific form of self-employment
  for which the set-aside is intended is practical and attainable by the
  participant in light of all the surrounding circumstances. Income and
  resources set-aside in order to carry out a self-employment plan shall not
  be considered to be income or resources for purposes of the participant's
  continued receipt of aid to families with dependent children, or for purposes
  of determining eligibility for or the amount of benefits payable under
  any other Federal or Federally assisted program providing benefits based
  on need, but only for months in which the State agency determines that the
  participant is making progress towards achieving the self-employment goal
  and otherwise satisfactorily participating in the program under this part.
  `(D) The State agency may, at its option, develop an employability plan
  at the request of individual who is exempt from participation in the
  program under this part which has such individual's self-employment as
  its employability goal. The State agency may then approve the set-aside of
  income and resources, subject to the same terms and conditions as provided
  in subparagraph (C), to fulfill such plan.
  `(E) Income may be disregarded under subparagraph (C) or (D) for no more than
  a 24-month period beginning with the first month in which self-employment
  income is produced under the plan, and such subparagraphs shall cease to
  apply to an employability plan 36 months after the State agency approves
  such plan.'.
EFFECTIVE DATE
  SEC. 904. The amendments made by this title shall become effective October
  1, 1992.
TITLE X--FOOD STAMP AMENDMENTS OF 1992
SHORT TITLE
  SEC. 1001. That this title may be cited as the `Food Stamp Amendments
  of 1992'.
COOPERATION WITH CHILD SUPPORT ENFORCEMENT AGENCIES
  SEC. 1002. (a) Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015)
  is amended by adding a new subsection (i) at the end thereof as follows--
  `(i) No natural or adoptive parent or other individual who is living with
  and exercising parental control over a child under the age of eighteen
  who has an absent parent shall be eligible to participate in the food
  stamp program unless such individual cooperates with the State agency
  administering the program under part D of title IV of the Social Security
  Act in (1) establishing the paternity of such child (if born out of wedlock)
  and (2) in obtaining support for such child or for herself/himself and for
  such child, unless good cause is found by the State agency for refusing to
  cooperate. The State agency responsible for administering the program under
  this title shall make determinations of good cause. For a determination of
  refusal to cooperate to be made, an individual must be able to cooperate,
  but clearly demonstrate that she or he will not take actions that she or
  he is able to take that are required to establish paternity and/or obtain
  support for such child or for herself/himself and for such child. Good cause
  for an individual's failure to appear for an interview at the State agency
  administering the program under part D of title IV of the Social Security
  Act to meet the requirements of this subsection shall include, but not
  be limited to, circumstances beyond the individual's control, including
  illness, illness of another household member requiring the presence of the
  individual scheduled for the interview, or a household emergency such as
  the death of a relative or fire. Good cause for refusal to cooperate with
  the agency administering the program under part D of title IV of the Social
  Security Act in meeting the requirements of this subsection shall include,
  but not be limited to, situations in which cooperation would be against
  the best interests of the child because such cooperation is reasonably
  anticipated to result in physical or emotional harm of a serious nature to
  the child or the parent or caretaker relative, the child for whom support
  is sought was conceived as a result of incest or forcible rape, or legal
  proceedings for the adoption of the child are pending before a court of
  competent jurisdiction or the applicant or recipient is currently being
  assisted by a public or licensed private social agency to resolve the
  issue of whether to keep the child or relinquish the child for adoption
  and discussions have not gone on for more than three months, or the
  applicant or recipient is pregnant or has given birth with the previous
  60 days. Notwithstanding any other provision of law, in no event shall
  individuals subject to the requirements in this subsection be made to pay
  a fee for services provided under part D of title IV of the Social Security
  Act or be subject to cost recovery for services provided under such part D.'.
  (b) Section 11(e) of the Food Stamp Act of 1977 (7 U.S.C. 2020(e) is
  amended by--
  (1) striking `and' at the end of paragraph (24);
  (2) striking the period at the end of paragraph (25) and inserting in lieu
  thereof '; and' and
  (3) adding a new paragraph (26) at the end of the subsection as follows--
  `(26) that the State agency shall (A) furnish to the State agency
  administering the program under part D of title IV of the Social Security
  Act, the information required by that agency to establish and enforce
  support obligations pursuant to such part D with respect to households
  from which a parent is absent that include a child or children under the
  age of eighteen who are applying for or receiving food stamps under this
  act and are not applying for or receiving cash assistance under the State
  plan under part A of title IV, or foster care maintenance payments under
  part E of title IV of the Social Security Act; (B) establish, in accordance
  with regulations issued by the Secretary, a conciliation procedure for the
  resolution of disputes involving determinations of refusal to cooperate with
  the State agency administering the program under Part D of title IV of the
  Social Security Act; and (C) inform individuals subject to section 6(i) of
  this Act of the benefits of cooperating with the State agency administering
  the program under part D of title IV of the Social Security Act.'.
  (c) The provisions of this section shall become effective with respect
  to a State agency at such time as it is implemented by the State agency
  after promulgation of implementing regulations by the Secretary, but in
  no event later than October 1, 1994. The Secretary shall consult with
  the Secretary of Health and Human Services prior to promulgation of such
  implementing regulations.
RETENTION OF FUNDS OR ALLOTMENTS RECOVERED OR COLLECTED BY STATES
  SEC. 1003. Effective upon enactment, section 16(a) of the Food Stamp Act
  of 1977 (7 U.S.C. 2025(a)) is amended by--
  (1) striking in the provision of the first sentence the following:
  `during the period beginning October 1, 1990, and ending September 30,
  1995, and 50 percent thereafter'; and
  (2) striking in the provision of the first sentence the following:
  `during the period beginning October 1, 1990, and ending September 30,
  1995, and 25 percent thereafter'.
TITLE XI--CHILD SUPPORT ENFORCEMENT  AMENDMENTS OF 1992
SHORT TITLE
  SEC. 1101. This title may be cited as the `Child Support Enforcement
  Amendments of 1992'.
APPLICATION FEES
  SEC. 1102. Section 454(6)(B) is amended by striking out `an application fee
  for furnishing such services shall be imposed' and inserting in lieu thereof:
  `a $25 application fee (or, at the option of the State, a $50 application
  fee) for furnishing such services shall be imposed with respect to each
  individual applying for such services, but if the State elects to impose
  the $50 fee, no application fee may be charged to individuals whose income,
  as determined in such manner as the State may prescribe, does not exceed
  185 percent of the poverty line as most recently revised by the Secretary
  pursuant to section 673(2) of the Omnibus Budget Reconciliation Act of
  1981 (42 U.S.C. 9902(2))' and by striking out everything after `income to
  the program),'.
SERVICES FEES
  SEC. 1103. Section 454(6) of the Act is amended by--
  (1) by redesignating clause (E) as clause (F), and
  (2) by striking out `and' after clause (D) and inserting in lieu thereof
  the following: `(E)(i) a $25 services fee (or, at the option of the State,
  a $50 services fee) shall be imposed with respect to each family for which
  a collection is made, but if the State elects to impose the $50 fee, no
  services fee may be charged with respect to families whose income does
  not exceed 185 percent of the poverty line as referenced in clause (B),
  (ii) such fee will be collected annually for each year in which support
  is collected at such time or times in accordance with such schedule as
  the State finds appropriate, and (iii) such fee shall be paid in any of
  the ways allowed under clause (B) (and shall be treated, when paid from
  State funds, in the same way as fees under clause (B) when so paid), and'.
PERFORMANCE BASED INCENTIVES
  SEC. 1104. (a) Section 458 of the Social Security Act is amended--
  (1) by redesignating subsection (a) as subsection (a)(1),
  (2) by redesignating subsection (b)(1) as paragraph (2)(A) (and subparagraphs
  (A) and (B) thereof as clauses (i) and (ii), respectively),
  (3) by redesignating paragraphs (2), (3), and (4) of subsection (b)
  (prior to any redesignating by this section) as subparagraphs (B), (C),
  and (D), respectively,
  (4) by redesignating subsection (c) as paragraph (3) and paragraphs (1)
  and (2) of such subsection as subparagraphs (A) and (B), respectively, and
  (5) by redesignating subsections (d) and (e) as subsections (c) and (d),
  respectively.
  (b) Section 458 is further amended by adding between subsection (a)
  and subsection (c) (as redesignated by the previous provisions of this
  subsection) the following new subsection:
  `(b)(1) In order to encourage and reward States for activities that can
  be expected to increase paternity establishment and lead to increased
  support collections, the Secretary shall by regulation establish a schedule
  of incentive payments to be made with respect to each of the following
  measures of performance:
  `(A) with respect to cases described in section 454 (4) or (6)--
  `(i) the number of children in a fiscal year for whom the State has
  established paternity;
  `(ii) the number of cases in which support orders were established or
  modified in a fiscal year;
  `(B) the number of cases in a fiscal year in which payments of aid under
  part A were terminated by the State in a month in which child support was
  collected for each such case; and
  `(C) such other performance standards as the Secretary may find appropriate.
  `(2)(A) The Secretary shall, in accordance with the succeeding provisions of
  this subsection, determine the amount of the incentive payment or payments
  with respect to each category of performance enumerated in this subsection in
  a manner designed to best achieve the objectives of this section and, more
  generally, of this part, and shall from time to time review and revise the
  schedule of incentive payments as he finds appropriate to better achieve
  such objectives.
  `(B) Notwithstanding any other provision of this subsection, the Secretary
  shall not provide any amount to a State for a fiscal year under this
  subsection in excess of 10 per centum of the State's total child support
  collections for such year with respect to children receiving aid under
  part A.'.
  (c)(1) Section 458(a)(2)(A) of the Act (as redesignated by subsection
  (a)) is amended by striking out `6 percent' in clauses (i) and (ii) and
  by inserting in lieu thereof `3 percent'.
  (2) Section 458(a)(3) of the Act (as so redesignated) is amended--
  (A) in subparagraph (A), by striking out `6.5 percent' and inserting in
  lieu thereof `3.25 percent',
  (B) in subparagraph (B), by striking out `one-half of 1 percent' and
  inserting in lieu thereof `one-quarter of 1 percent', and
  (C) by striking out `10 percent' and inserting in lieu thereof `5 percent'.
  (d) Section 458(a) of the Act (as amended by the preceding provisions of
  this section) is further amended--
  (1) in paragraph (1)(A) by striking out `subsection (b)' and inserting in
  lieu thereof `paragraph (2)',
  (2) in paragraph (2)(A), by striking out `paragraphs (2), (3), and (4)'
  and inserting in lieu thereof `subparagraphs (B), (C), and (D)',
  (3) in paragraph (2)(B), by striking out `subsection (c)' and inserting in
  lieu thereof `paragraph (3)', by striking out `paragraph (1) (A) or (B)'
  and inserting in lieu thereof `subparagraph (A) (i) or (ii)', by striking
  out `such subsection' and inserting in lieu thereof `such subparagraph'
  and by striking out `this subsection' and inserting in lieu thereof
  `this paragraph',
  (4) in paragraph (2)(C), by striking out `paragraph (1)(B)' and inserting in
  lieu thereof `subparagraph (A)(ii)' by striking out `subsection (c)' (in two
  places) and inserting in lieu thereof `paragraph (3)', and by striking out
  `paragraph (1)(A)' and inserting in lieu thereof `subparagraph (A)(i)', and
  (5) in paragraph (3), by striking out `subparagraph (A) or (B) of subsection
  (b)(1)' and inserting in lieu thereof `clause (i) or (ii) of paragraph
  (2)(A)'.
USE OF INCENTIVES
  SEC. 1105. Section 454 of the Social Security Act is amended--
  (1) by striking out `and' after paragraph (23);
  (2) by striking out the period after paragraph (24) and inserting in lieu
  thereof `; and'; and
  (3) by adding after paragraph (24) (and before the last sentence of such
  section) the following new paragraph:
  `(25) provide that incentive payments made to such State under section
  458 shall be used to improve or protect the welfare of children within
  the State.'.
MANDATORY SERVICES FOR RECIPIENTS OF CERTAIN NEED-BASED FEDERAL OR FEDERALLY
ASSISTED PROGRAMS
  SEC. 1106. (a) Section 454(4) of the Social Security Act is amended to
  read as follows:
  `(4) provide that such State will undertake--
  `(A) to establish the paternity of each child born out of wedlock with
  respect to whom an assignment under section 402(a)(26), 471(a)(17), or 1912
  is in effect or with respect to whom a referral for services has been made
  to the State agency administering the program under this part because the
  child, or the family with whom he lives, is applying for or receiving or
  has been found eligible to receive need-based assistance pursuant to a
  Federal or Federally-assisted program under which continued cooperation
  with such State agency is required, and
  `(B) to secure support for such child from his parent (or from any
  other person legally liable for such support), and from such parent for
  his spouse or former spouse (but only if a support obligation has been
  established with respect to such spouse, and only if the support obligation
  established with respect to the child is being enforced under the plan),
  utilizing any reciprocal arrangements adopted with other States, except
  that when such arrangements and other means have proven ineffective, the
  States may utilize the Federal courts to obtain or enforce court orders for
  support, unless (i) the agency administering the State plan approved under
  part A or part E of this title, or under title XIX, determines that it is
  against the best interests of the child to do so, in the case of a child
  with respect to whom an assignment under section 402(a)(26) or 471(a)(17),
  or under section 1912, respectively, is in effect, or (ii) the agency that
  has made such referral so determines pursuant to standards applicable to
  the Federal or Federally-assisted program involved;'.
  (b)(1) Section 464(a)(2)(A) of that Act is amended by striking out `which
  such State has agreed to collect under section 454(6)' and inserting instead
  `, other than support described in paragraph (1), which such State has
  undertaken to collect under section 454(4) or 454(6)'.
  (2) Section 466(a)(3)(B) of that Act is amended by striking out `overdue
  support which a State has agreed to collect under section 454(6)' and
  inserting instead `any other overdue support which a State has undertaken
  to collect under section 454(4) or 454(6)'.
EFFECTIVE DATE
  SEC. 1107. The amendments made by this title shall be effective with
  respect to fiscal years beginning after September 30, 1992.
TITLE XII--INCENTIVES FOR FAMILIES WITH ABSENT PARENTS TO COOPERATE WITH STATE
AGENCIES UNDER THE SOCIAL SECURITY ACT IN SECURING CHILD SUPPORT FOR DEPENDENTS
  SEC. 1201. Section 3(b)(4) of the United States Housing Act of 1937 is
  amended by read as follows:
  `(4) The term `income' means income from all sources of each member of the
  household, as determined in accordance with criteria prescribed by the
  Secretary, in consultation with the Secretary of Agriculture, including
  spousal support imputed to the family in the following situation. In
  accordance with regulations issued by the Secretary, a family that has
  a member residing in the household (other than the head of the household
  or his or her spouse) who is under 18 years of age or who is 18 years of
  age or older and is disabled or handicapped or a full-time student and
  whose parent is absent may have spousal support imputed to it. The amount
  imputed would be the amount of the established spousal support obligation,
  but no more than $550 a year. Spousal support may be imputed only where
  there is an established support obligation for child support and spousal
  support payable to the parent residing in the household and the family has
  failed, without good cause, to cooperate in securing spousal support with
  the State agency administering the program under part D of title IV of the
  Social Security Act for the collection of child and spousal support. With
  the exception of the imputation of spousal support described above, any
  amounts not actually received by the family may not be considered as income
  under this paragraph.'.
  SEC. 1202. Section 3(b)(5)(A) of the United States Housing Act of 1937 is
  amended by--
  (1) inserting immediately after `student' the following: `, except that,
  in accordance with regulations issued by the Secretary, a family with an
  absent parent may be ineligible for this exclusion if the family has failed,
  without good cause, to cooperate in securing support for the dependent
  member of the family with the State agency administering the program under
  part D of title IV of the Social Security Act for the collection of child
  and spousal support'; and
  (2) inserting immediately after `his' the following: `or her'.
  SEC. 1203. In accordance with section 201(b)(2) of the United States
  Housing Act of 1937, the amendments made by sections 1201 and 1202 shall
  also apply to public housing developed or operated pursuant to a contract
  between the Secretary and an Indian Housing Authority.
TITLE XIII--PURPOSES AND DURATION OF EMERGENCY ASSISTANCE UNDER THE AID TO
FAMILIES WITH DEPENDENT CHILDREN PROGRAM
PURPOSE AND DURATION OF EMERGENCY ASSISTANCE
  SEC. 1301. (a) Section 406(e) of the Social Security Act is amended--
  (1) by striking out in paragraph (1) `furnished for a period not in
  excess of 30 days in any 12-month period' and inserting in lieu thereof
  `furnished with respect to needs of one period that does not exceed 30
  consecutive days in any 12-month period', and
  (2) by redesignating paragraph (2) as paragraph (3), and
  (3) by adding after paragraph (1) the following new paragraph:
  `(2) Emergency assistance under paragraph (1) may include amounts necessary
  to satisfy shelter and utility arrearages for no more than 3 months in
  order to prevent evictions and utility shut-offs. Emergency assistance may
  also include amounts necessary to pay an initial month's shelter charges
  and security deposit necessary to secure permanent housing for homeless
  families. Any such amounts must be authorized by the State agency during
  the single 30-day period referred to in paragraph (1).'.
  (b) The amendments made by subsection (a) shall become effective October
  1, 1992.
TITLE XIV--ENHANCE HEALTH INSURANCE COVERAGE FOR CHILDREN UNDER THE AID TO
FAMILIES WITH DEPENDENT CHILDREN PROGRAM
SEC. 1401. REQUIREMENTS FOR HEALTH INSURANCE COVERAGE OF CHILDREN.
  (a) STATE PLAN REQUIREMENTS- Section 1902(a) of the Social Security Act
  (42 U.S.C. 1396a(a)) is amended--
  (1) by redesignating the second paragraph (58) as paragraph (59);
  (2) by striking out the period at the end of paragraph (59), as redesignated,
  and inserting instead `; and'; and
  (3) by adding below paragraph (59) the following new paragraphs:
  `(60) provide assurances satisfactory to the Secretary that the State has
  in effect laws applicable to health insurers and insurance policies or
  programs subject to the laws of the State that--
  `(A) require insurers to permit enrollment at any time under the health
  insurance of a non-custodial parent, upon application either by such parent
  or (where such parent fails to make application) by the custodial parent or
  the State agency administering the program under this part, of any child
  for whom such non-custodial parent is required by court or administrative
  order to provide support; and
  `(B) in any case where a child is covered under the health insurance of
  a non-custodial parent, require insurers, at the option of the custodial
  parent--
  `(i) to permit the custodial parent (or service provider, with the custodial
  parent's approval) to submit claims for covered services without the
  approval of the non-custodial parent, and
  `(ii) to make payment on claims submitted in accordance with clause (i)
  directly to the custodial parent or the service provider.
  `(61) provide assurances satisfactory to the Secretary that the State has
  in effect laws authorizing the State agency to garnish the wages, salary,
  or other employment income of, and to withhold amounts from State tax
  refunds to, any person who--
  `(A) is required by court or administrative order to provide coverage
  of the costs of medical services to an individual eligible for medical
  assistance under this title,
  `(B) has received payment from a third party for the costs of medical
  services to such individual, and
  `(C) has not used such payments to reimburse, as appropriate, either such
  individual or the provider of such services,
to the extent necessary to reimburse the State agency for expenditures for
such costs under its plan under this title, but any claims for current  or
past-due child support shall take priority over any such claims for the
costs of medical services.'.
  (b) EFFECTIVE DATE- (1) IN GENERAL- The amendments made by subsection (a)
  apply to calendar quarters beginning on or after October 1, 1992, except
  as provided in paragraph (2).
  (2) EXTENSION FOR STATE LAW AMENDMENT- In the case of a State plan under
  title XIX of the Social Security Act which the Secretary of Health and
  Human Services determines requires State legislation in order for the
  plan to meet the additional requirements imposed by the amendments made by
  subsection (a), the State plan shall not be regarded as failing to comply
  with the requirements of such title solely on the basis of its failure
  to meet these additional requirements before the first day of the first
  calendar quarter beginning after the close of the first regular session
  of the State legislature that begins after the date of enactment of this
  Act. For purposes of the previous sentence, in the case of a State that
  has a 2-year legislative session, each year of such session shall be deemed
  to be a separate regular session of the State legislature.
TITLE XV--CHILD NUTRITION AMENDMENTS OF 1992
  SEC. 1500. This title may be cited as the `Child Nutrition Amendments
  of 1992'.
Subtitle A--Budget-Related Provisions
INCREASED CASH SUBSIDY FOR REDUCED PRICE MEALS IN THE NATIONAL SCHOOL
LUNCH PROGRAM
  SEC. 1501. (a) Section 9(b)(3) of the National School Lunch Act (42
  U.S.C. 1758(b)(3)) is amended by deleting `40' and inserting in lieu thereof
  `15'.
  (b) Section 11(a) of the National School Lunch Act (42 U.S.C. 1759a(a))
  is amended--
  (1) in paragraph (2)--
  (A) by deleting `98.75' and inserting in lieu thereof `162.25'; and
  (B) by deleting `40' and inserting in lieu thereof `15'; and
  (2) in paragraph (3)--
  (A) in subparagraph (A)--
  (i) by deleting `1982' and inserting in lieu thereof `1993'; and
  (ii) by deleting clause (iv);
  (B) by redesignating subparagraph (B) as subparagraph (C); and
  (C) by adding a new subparagraph (B) to read as follows:
  `(B) The Secretary shall prescribe on July 1, 1982, and on each subsequent
  July 1, an annual adjustment in the national average payment rates for
  supplements (as established under section 17(c) of this Act).'.
INCREASED CASH SUBSIDIES FOR REDUCED PRICE MEALS IN THE SCHOOL BREAKFAST
PROGRAM
  SEC. 1502. (a) Section 4(b)(1)(B) of the Child Nutrition Act of 1966
  (42 U.S.C. 1773(b)(1)(B)) is amended--
  (1) by deleting `57' and inserting in lieu thereof `96.25';
  (2) by deleting `one-half of the national average payment for each free
  breakfast,' and all that follows up to the period at the end of that
  sentence and inserting in lieu thereof `10 cents less than the national
  average payment for each free breakfast'; and
  (3) by deleting `8.25' and inserting in lieu thereof `13.00'.
  (b) Section 4(b)(1)(C) of the Child Nutrition Act of 1966 (42
  U.S.C. 1773(b)(1)(C)) is amended by deleting `30' and inserting in lieu
  thereof `10'.
  (c) Section 4(b)(2)(B) of the Child Nutrition Act of 1966 (42
  U.S.C. 1773(b)(2)(B)) is amended--
  (1) by deleting `the higher of--(i) the national average payment established
  by the Secretary for free breakfasts plus 10 cents, or (ii) 45 cents'
  and inserting in lieu thereof `114.25 cents'; and
  (2) by deleting `January 1, 1978' and all that follows up to the period
  and inserting in lieu thereof `July 1, 1993'.
  (d) Section 4(b)(2)(C) of the Child Nutrition Act of 1966 (42
  U.S.C. 1773(b)(2)(C)) is amended by deleting `thirty' and inserting in
  lieu thereof `ten'.
INCREASED WIC RESEARCH FUNDS TO STUDY THE EFFECTS ON CHILDREN
  SEC. 1503. Section 17(g)(5) of the Child Nutrition Act of 1966 (42
  U.S.C. 1786(g)(5)) is amended by deleting `$5,000,000' and inserting in
  lieu thereof `$7,000,000'.
Subtitle B--Effective Date
  SEC. 1521. Except as otherwise provided in this section, the provisions
  of this title shall become effective on July 1, 1992. The amendments made
  by section 1503 of this title shall become effective on October 1, 1992.
TITLE XVI--SOCIAL SECURITY CROSS PROGRAM RECOVERY AMENDMENTS OF 1992
SEC. 1601. SHORT TITLE.
  This title may be cited as the `Social Security Act Cross Program Recovery
  Amendments of 1992'.
SEC. 1602. RECOVERY OF SUPPLEMENTAL SECURITY INCOME OVERPAYMENTS FROM SOCIAL
SECURITY BENEFITS.
  (a) IN GENERAL- Title XI of the Social Security Act is amended by adding
  at the end of part A a new section as follows:
`RECOVERY OF SSI OVERPAYMENTS FROM SOCIAL SECURITY BENEFITS
  `SEC. 1144. (a) Whenever the Secretary determines that more than the correct
  amount of any payment has been made to any person under the supplemental
  security income program authorized by title XVI of this Act (which includes,
  for purposes of this section, State supplementary payments which are made
  by the Secretary under an agreement pursuant to section 1616(a) of this Act
  or section 212(b) of Public Law 93-66), and the Secretary is unable to make
  proper adjustment or recovery of the amount so incorrectly paid as provided
  in section 1631(b) of this Act, the Secretary (notwithstanding section
  207 of this Act) may recover the amount incorrectly paid by decreasing any
  amount which is payable under the Federal Old-Age and Survivors Insurance
  program or the Federal Disability Insurance program authorized by title
  II of this Act to that person or his estate.
  `(b) Notwithstanding sections 1611 (a) and (b) of this Act, in any case
  in which the Secretary takes action in accordance with subsection (a)
  to recover an overpayment from any person, neither that person, nor any
  individual whose eligibility or benefit amount is determined by considering
  any part of that person's income, shall, as result of such action--
  `(1) become eligible under the program of supplemental security income
  benefits under title XVI of this Act, or
  `(2) if such person or individual is already so eligible, become eligible
  for increased benefits thereunder.'.
  (b) CONFORMING CHANGES-
  (1) Section 204 of such Act is amended by adding at the end a new subsection
  as follows:
  `(f) For payments which are adjusted or withheld to recover an overpayment
  of supplemental security income benefits paid under title XVI of this Act
  (including State supplementary payments which were paid under an agreement
  pursuant to section 1616(a) of this Act or section 212(b) of Public Law
  93-66), see section 1144.'.
  (2) Section 1631(b) of such Act is amended by adding at the end a new
  paragraph as follows:
  `(6) For the recovery of overpayments of benefits under this title from
  benefits payable under title II, see section 1144.'.
  (c) EFFECTIVE DATE- The amendments made by this section shall take effect
  upon the date of the enactment of this Act and shall apply to overpayments
  outstanding on or after such date.
TITLE XVII--AMERICA 2000 EXCELLENCE IN EDUCATION ACT
SHORT TITLE
  SEC. 1701. This title may be cited as the `AMERICA 2000 Excellence in
  Education Act'.
TABLE OF CONTENTS
  SEC. 1702. This title is organized as follows:
Part A--New American Schools
Part B--Merit Schools
Part C--Teachers and School Leaders
Subpart 1--Governors' Academies for Teachers
Subpart 2--Governors' Academies for School Leaders
Subpart 3--Alternative Certification of Teachers and Principals
Part D--Educational Reform and Flexibility
 Subpart 1--Educational Reform Through Flexibility and Accountability
Subpart 2--Amendments to Chapter 2
Part  E--Parental Choice of Schools
Subpart 1--Findings
Subpart  2--Parental Choice and Chapter 1
Subpart 3--Assistance for Parental Choice Programs
Subpart 4--Parental Choice Programs of National Significance
Part F--National Assessment of Educational Progress
Part G--National Commission on Time, Study, Learning, and Teaching
Part H--Regional Literacy Resource Centers
Part  I--General Provisions
FINDINGS
  SEC. 1703. The Congress finds that--
  (1) nine years after the report of the National Commission on Excellence
  in Education, the Nation's schools have yet to show significant improvement;
  (2) the educational reforms of the 1980's were too slow and too timid;
  a bolder and more comprehensive effort that involves the citizens of every
  American community is needed;
  (3) the Federal Government should provide start-up funding to communities
  across the country to create their own high-performance New American
  Schools--schools where all students meet new World Class Standards;
  (4) rewards for schools in which students make significant gains in learning
  can spur improvements in all schools;
  (5) teachers and school leaders in every State should receive the additional
  training they need to deliver capable instruction in the core academic
  disciplines and to provide strong instructional leadership to their schools;
  (6) new approaches to training and certifying teachers and principals would
  expand the pool of talent from which schools draw professional staff and
  would enable talented, qualified individuals who do not possess traditional
  credentials to enter teaching and the principalship;
  (7) greater flexibility and accountability at the school site can enable
  educators to improve learning for all students;
  (8) expanding parental choice among schools can help all schools to improve;
  (9) an expanded National Assessment of Educational Progress can be used to
  provide clear and comparable information on the progress of States, school
  districts, and schools toward attainment of the National Education Goals;
  (10) Americans need to know how much time their children should spend
  learning, and how that time should be used, in order for those children to
  develop the intellectual competencies necessary for a productive workforce
  and an enlightened citizenry;
  (11) better coordination of adult literacy services, and access by service
  providers to information about the best practices in the field of literacy,
  will assist the Nation in meeting the goal that every adult American be
  literate by the year 2000; and
  (12) therefore, national progress toward attainment of the National
  Education Goals by the year 2000 can be assisted by the Federal Government
  through initiatives that provide funds for the creation of the first of a
  new generation of American schools; reward schools that make demonstrated
  progress toward attainment of the National Education Goals; create academies
  for the training of teachers and school leaders; provide support for
  development of alternative teacher and school administrator certification
  programs in the States; provide schools with greater flexibility in exchange
  for accountability for results; encourage, test, and evaluate educational
  choice programs; expand the National Assessment of Educational Progress;
  create a National Commission on Time, Study, Learning, and Teaching;
  and establish Regional Literacy Resource Centers.
PART A--NEW AMERICAN SCHOOLS
STATEMENT OF FINDINGS
  SEC. 1711. The Congress finds that--
  (1) many American elementary and secondary schools--
  (A) are structured according to models that are outmoded and ineffective;
  (B) rely on notions about pedagogy, management, technology, staffing, and
  other resources that may be outdated or insufficient for the challenges
  of the next century; and
  (C) are unsuccessful at equipping the majority of students with the
  knowledge and skills needed to succeed as citizens and in the workplace;
  (2) new approaches to elementary and secondary education are needed. Without
  major reforms in elementary and secondary schools, the United States will
  lose its ability to compete fully and successfully in the world economy;
  (3) although educational change must take place school by school, experience
  shows that the schools, on their own, will not alter themselves radically;
  (4) there is an appropriate Federal role in providing seed money for the
  establishment of new types of schools in communities across the country; and
  (5) the Nation is embarking on a major effort to support the invention of
  radically better forms of schooling, and to establish a network of American
  communities whose citizens are dedicated to the improvement of education.
PURPOSE
  SEC. 1712. (a) The purpose of this part is to support the creation of new
  schools across the country--schools that reflect the best thinking about
  teaching and learning, employ the highest-quality instructional materials
  and technologies, and are designed to meet the National Education Goals,
  as well as the particular needs of their students and communities.
  (b) In order to carry out this purpose, this part authorizes financial
  assistance for New American Schools in communities that have been designated
  `AMERICA 2000 Communities'.
ALLOCATION OF FUNDS
  SEC. 1713. (a) From the amount of funds appropriated to carry out this
  part for fiscal years 1992, 1993, and 1994, the Secretary shall reserve
  a total of up to $3 million for a national program evaluation.
  (b)(1) The Secretary shall allocate the remaining funds among the several
  States in proportion to their respective numbers of members of Congress,
  including Senators, Representatives, and Delegates. For the purpose of this
  subsection, the Commonwealth of the Northern Mariana Islands and Palau (until
  the effective date of the Compact of Free Association with the Government
  of Palau) shall be treated as if they each had one member of Congress.
  (2) If, within any State, a congressional district has no community that
  has been designated an AMERICA 2000 Community, or there are fewer such
  communities than members of Congress from such State, the Secretary shall
  proportionately reduce such State's allocation under paragraph (1), and
  shall proportionately increase the allocation of all other States.
STATE APPLICATIONS
  SEC. 1714. In order for a State to qualify for its allocation under section
  1713(b), the Governor shall submit an application at such time as the
  Secretary may determine, including--
  (1) a description of the process the Governor has used, in accordance with
  section 1715, to nominate communities to create New American Schools;
  (2) a list of the communities nominated by the Governor, and the name of
  the agency, institution, or organization designated by the Governor to
  receive a New American School grant on behalf of each such community;
  (3) copies of the plans, prepared by each community nominated by the
  Governor for funding under this part, for establishing and operating a
  New American School, including, as necessary, a description of the steps
  to be taken to obtain recognition or accreditation from the State;
  (4) an identification of non-Federal resources that will be available to
  establish and operate each New American School in the State; and
  (5) such other information as the Secretary may require.
SELECTION OF COMMUNITIES TO CREATE NEW AMERICAN SCHOOLS
  SEC. 1715. (a)(1) The Governor of each State shall nominate communities
  within the State to create New American Schools.
  (2) The Governor may nominate only communities that have been previously
  designated by the Governor as AMERICA 2000 Communities, in accordance with
  the President's AMERICA 2000 initiative.
  (b) In carrying out subsection (a), each Governor shall nominate--
  (1) at least as many communities as there are members in the State's
  congressional delegation; and
  (2) at least one community in each congressional district in the State.
  (c)(1) Each Governor shall nominate communities on the basis of criteria
  established by the Secretary, based on the advice of the panel of experts
  established under section 1717, including, at a minimum--
  (A) the level of commitment and activity displayed by the community through
  its participation in the AMERICA 2000 Communities initiative;
  (B) the need for new and innovative educational programs in the schools
  of the community; and
  (C) the quality of the application submitted by the applicant to the
  Governor.
  (d)(1) The Secretary, with the advice of the panel of experts established
  under section 1717, shall approve some or all of the communities nominated by
  each Governor, and the agencies, institutions, and organizations designated
  by the Governor to receive New American School grants on behalf of those
  communities, based on the Secretary's determination that such approval
  would be fully consistent with the purpose and requirements of this part.
  (2) The Secretary shall ensure that--
  (A) to the extent consistent with paragraph (1), a New American School is
  created in each congressional district and that the number of such schools
  created in each State is at least equal to the number of members in the
  State's congressional delegation; and
  (B) communities with high concentrations of children from low-income
  families in each State receive an equitable share of awards under this part.
  (e) The Governor may nominate other communities or recipients if--
  (1) the Secretary does not approve one or more of the Governor's nominees;
  (2) an approved community or recipient withdraws from the program; or
  (3) the Secretary determines that the community or recipient is unable
  successfully to carry out its project or is not making adequate progress
  in carrying out such project.
AMOUNT OF AWARDS, OPERATION OF SCHOOLS, AND USES OF FUNDS
  SEC. 1716. (a)(1) The Secretary shall make grants for New American Schools
  to agencies, organizations, and institutions selected by the Secretary
  under section 1715(d).
  (2) The Secretary, after consultation with the Governor, shall determine
  the total amount of each award under this part, except that--
  (A) no such award shall exceed $1,000,000; and
  (B) the Secretary shall consider the expected student enrollment in the
  New American School in setting such amount.
  (b) In establishing a New American School, the grantee is encouraged to
  adapt and implement one or more New American School designs developed
  by research and development teams funded by the New American Schools
  Development Corporation.
  (c)(1) Funds made available under this part may be used only to meet the
  special start-up costs associated with the creation and establishment of
  a New American School, including--
  (A) planning, curriculum development, and curriculum adaptation;
  (B) training of teachers, administrators, and other staff, as well as
  parents and members of the community who are involved with the school;
  (C) purchase of equipment and materials;
  (D) minor renovation and remodeling of facilities; and
  (E) obtaining the assistance of outside experts, including one or more
  of the teams described in subsection (b), to assist it in adapting and
  implementing one or more of the designs developed by such teams to the
  needs of the individual community and school.
  (2) Such funds may not be used for construction or for the grantee's
  general administrative expenses.
  (d) Each New American School shall have obtained State recognition or
  accreditation, as necessary, and be fully operating by the start of the
  1996-1997 school year.
SECRETARY'S PANEL OF EXPERTS
  SEC. 1717. Within 90 days of enactment of this Act, the Secretary shall
  convene an expert panel of educators, representatives of private business,
  and public representatives to advise on the administration of the program
  authorized by this part, including--
  (1) the criteria to be used to nominate communities for New American
  Schools; and
  (2) the approval of communities nominated by Governors to establish and
  operate New American Schools, and of the agencies, institutions, and
  organizations to receive grants for those schools.
NATIONAL EVALUATION
  SEC. 1718. (a) The Secretary shall use the funds reserved under section
  1713(a) to conduct a national evaluation of the impact of the New American
  Schools program on schools and communities, and on education generally.
  (b) The Secretary shall submit such interim evaluation reports to the
  President and the Congress as may be appropriate, and shall submit a final
  report by September 30, 1998.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1719. For the purpose of carrying out this part, there are authorized
  to be appropriated $180 million for fiscal year 1992, $180 million for
  fiscal year 1993, and $185 million for fiscal year 1994. Such sums shall
  remain available for obligation by the Secretary for two fiscal years
  beyond the fiscal year for which they are appropriated.
DEFINITION
  SEC. 1720. For the purpose of this part, the term `community' means--
  (1) a unit of general purpose local government, such as a city, township,
  or village;
  (2) a geographically distinct area, such as a school district, school
  attendance area, ward, precinct, or neighborhood; or
  (3) an identifiable group of individuals, such as the members of a service
  organization, who generally reside in a particular geographic area.
PART B--MERIT SCHOOLS
FINDINGS AND PURPOSE
  SEC. 1721. (a) FINDINGS- The Congress finds that--
  (1) all elementary and secondary schools in the United States should seek
  to attain the National Education Goals by the year 2000;
  (2) achievable standards of excellence can and should be set for all
  students and for all schools;
  (3) schools' progress in meeting those standards should be measured and
  made public;
  (4) financial incentives can spur schools to rise to the challenge of
  meeting those standards; and
  (5) demonstrated school-wide progress in achieving excellence, particularly
  in mathematics and science, deserves reward and recognition.
  (b) PURPOSE- The purpose of this part is to recognize and reward public and
  private elementary and secondary schools (including their faculty) that make
  documented progress in attaining the National Education Goals, particularly
  the goal of increasing students' mastery of the core academic subjects.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1722. For the purpose of carrying out this part, there are authorized
  to be appropriated $100,000,000 for fiscal year 1992 and such sums as may
  be needed for each of the four succeeding fiscal years. Such sums shall
  remain available for obligation by the Secretary for two fiscal years
  beyond the fiscal year for which they are appropriated.
ALLOCATION OF APPROPRIATIONS
  SEC. 1723. (a) RESERVATIONS- From the amount appropriated under section
  1722 for any fiscal year, the Secretary may reserve--
  (1) up to one quarter of 1 percent for grants to Guam, American Samoa,
  the Virgin Islands, the Commonwealth of the Northern Mariana Islands,
  and Palau (until the effective date of the Compact of Free Association
  with the Government of Palau) for activities under this part; and
  (2) up to two percent for evaluations and dissemination.
  (b) ALLOCATION AMONG STATES- (1) The amount remaining after any reservation
  of funds under subsection (a) shall be allocated among the States on the
  same basis as funds were allocated among such States under sections 1005
  and 1006 of the Elementary and Secondary Education Act of 1965 for the
  preceding fiscal year.
  (2) For purposes of this subsection, the term `State' means each of the
  50 States, the District of Columbia, and the Commonwealth of Puerto Rico.
STATE APPLICATIONS
  SEC. 1724. (a) APPLICATIONS- The Governor of each State that wishes to
  receive a grant under this part shall submit to the Secretary an application
  for a three-year period, which may be followed by an application for the
  succeeding two years, at such time and in such manner as the Secretary
  may prescribe.
  (b) APPLICATION CONTENTS- Each State application shall contain--
  (1) the criteria the Governor will use to select Merit Schools under
  section 1727;
  (2) the criteria the Governor will use to determine the amount of awards;
  (3) an assurance that the State will carry out this part in accordance with
  the requirements of this title and other applicable legal requirements; and
  (4) other information the Secretary may require.
  (c) GEPA PROVISIONS INAPPLICABLE- Sections 435 and 436 of the General
  Education Provisions Act, except to the extent that such sections relate to
  fiscal control and fund accounting procedures, shall not apply to this part.
STATE USE OF FUNDS
  SEC. 1725. (a) ADMINISTRATION- Each State may use up to five percent of
  its annual allocation for the administrative costs of carrying out this part.
  (b) MERIT SCHOOL AWARDS- (1) Each State shall use at least 95 percent
  of its annual allocation for Merit School awards made in accordance with
  section 1727, except that the Governor may, by so notifying the Secretary,
  designate part or all of such amount to remain available to make such
  awards for two additional years.
  (2) Of the amount used for Merit School awards, the Governor shall use at
  least 20 percent for awards to schools that demonstrate exceptional progress
  in improving students' performance in mathematics and science, in addition
  to meeting the national and State criteria under sections 1727 (b) and (c).
STATE ACTIVITIES AND RESPONSIBILITIES
  SEC. 1726. (a) STATE REVIEW PANEL- (1) Each Governor shall establish a
  State review panel to assist in the selection of Merit Schools.
  (2) The State review panel shall be broadly representative of the following
  interests in the State--
  (A) public and private elementary and secondary school teachers and
  administrators;
  (B) college and university faculty and administrators;
  (C) parents;
  (D) students;
  (E) State and local boards of education;
  (F) State and local governments;
  (G) labor;
  (H) business; and
  (I) the general public.
  (b) ANNUAL REPORTS TO THE SECRETARY- (1) Within 60 days of the end of each
  fiscal year, each Governor shall submit a report to the Secretary that--
  (A) identifies the schools chosen as Merit Schools;
  (B) states the reasons for their selection; and
  (C) states the amount of the award to each school.
  (2) Beginning with the second year for which any State makes awards
  under this part, the Governor's annual report shall also include a brief
  description of how schools selected in the previous year used their awards.
SELECTION OF MERIT SCHOOLS
  SEC. 1727. (a) ELIGIBLE SCHOOLS- (1) A Governor may designate as Merit
  Schools public or private elementary or secondary schools in the State
  that have been nominated through procedures established by the Governor.
  (2) In selecting Merit Schools, the Governor shall apply the selection
  criteria described in subsections (b) and (c) uniformly to public and
  private schools.
  (b) NATIONAL CRITERIA- Each school selected through the nomination procedure
  established by the Governor under subsection (a) shall have--
  (1) demonstrated progress over a period of at least three years in
  significantly increasing the number or percentage of students who meet
  the National Education Goal of leaving grades four, eight, and twelve, as
  applicable, having demonstrated competency in challenging subject matter,
  including English, mathematics, science, history, and geography;
  (2) utilized objective measures of progress over the period that are
  established by the State in its plan and approved by the Secretary; and
  (3) made public an annual `report card', which includes information about
  the progress the school is making toward achievement of relevant aspects
  of the National Education Goals.
  (c) STATE CRITERIA- (1) In selecting Merit Schools, each Governor may use
  selection criteria in addition to those set out in subsection (b).
  (2) In setting these additional criteria, the Governor--
  (A) may include other aspects of educational performance, including the
  school's progress in attaining the other National Education Goals;
  (B) shall take into account differences in the composition of the student
  body of different schools;
  (C) shall give special consideration to schools with substantial numbers
  or proportions of children from low-income families; and
  (D) may set different criteria for awards for achievement in different
  grade levels.
  (3) Each Governor shall develop State criteria for selecting schools to
  receive awards under section 1725(b)(2) for outstanding progress in student
  achievement in mathematics and science.
  (4) In applying the criteria to a school in which a program is conducted
  under part A of chapter 1 of title I of the Elementary and Secondary
  Education Act of 1965, the Governor shall consider the desired outcomes
  identified for children in the application submitted under section 1012(b)
  of such Act by the local educational agency operating the school. No school
  that has received assistance under section 1021(b) of such Act for all of
  the years covered by a Merit Schools Award competition shall be eligible
  for a Merit School Award.
  (5) In selecting Merit Schools and in setting the amount of their awards,
  the Governor may not consider a school's planned use of a Merit School
  award, if it is otherwise permitted by law.
  (d) AMOUNT OF AWARD- Each Governor shall establish criteria, subject to
  subsection (c)(5), for determining the amount of Merit School awards. Such
  criteria shall include criteria relating to the school size and the economic
  circumstances of the student body.
  (e) BYPASS- If a State is either prohibited by State law from providing
  funds made available under this part to private schools, or is unwilling
  to do so, the Governor shall notify the Secretary of such prohibition or
  unwillingness, as well as the private schools the Governor has designated
  as Merit Schools and the amount of their awards. The Secretary shall then
  provide those funds, from the State's allocation under this part, to the
  designated private schools, through such arrangements as the Secretary finds
  suitable. The Secretary shall also withhold from the State's allocation
  under this part the administrative costs of making such arrangements.
USE OF FUNDS BY MERIT SCHOOLS
  SEC. 1728. A Merit School shall use its Merit School award for activities,
  otherwise permitted by law, that further the educational program of the
  school. Such activities may include, but are not limited to--
  (1) development, implementation, or expansion of special programs, such
  as those focused on: dropout prevention or reentry, student transition to
  college or employment, preschool children, remedial services, or gifted
  and talented students;
  (2) the purchase or lease of computers, telecommunications equipment,
  scientific instruments, instructional materials, library books, and other
  equipment and materials, except that a public agency shall have title to,
  and exercise administrative control of, all such equipment and materials;
  (3) bonus payments for faculty and administrators;
  (4) college scholarships for secondary school students;
  (5) parental involvement activities;
  (6) community outreach activities; and
  (7) helping other schools replicate its success.
PROHIBITION ON STATE OR LOCAL REDUCTION OF OTHER ASSISTANCE
  SEC. 1729. No Federal, State, or local agency may, in any year, take a
  Merit School award into account in determining whether to award any other
  assistance from Federal, State, or local resources, or in determining the
  amount of such assistance, to either the Merit School itself or the local
  educational agency, if any, that operates the school.
PART C--TEACHERS AND SCHOOL LEADERS
Subpart 1--Governors' Academies for Teachers
STATEMENT OF FINDINGS
  SEC. 1731. The Congress finds as follows:
  (1) Reform and restructuring of American education, and the Nation's
  ability to attain the National Education Goals, depend heavily on the
  quality of teaching in elementary and secondary schools, particularly in
  the core academic disciplines of English, mathematics, science, history,
  and geography.
  (2) Experienced teachers need access to training of exceptional quality
  to keep current in the core academic disciplines, participate successfully
  in curriculum development, and act as master teachers.
  (3) Governors' efforts to reform elementary and secondary education in
  the States should include a focus on ensuring that teachers have a firm
  grasp of, and keep current in, the core academic disciplines.
  (4) Governors' Academies for Teachers can be a principal vehicle for
  providing the kind of high-level, intensive training essential to education
  reform and accomplishment of the National Education Goals.
  (5) Excellent teachers in the academic subjects deserve public recognition
  and appropriate financial rewards in return for their efforts.
PURPOSE
  SEC. 1731A. The purposes of this subpart are--
  (1) to build the highest quality teaching force for the Nation's schools,
  by providing start-up funds for Governors' Academies that teachers from
  public and private elementary and secondary schools may attend to obtain
  advanced instruction focusing on the core academic disciplines; and
  (2) to establish awards for outstanding teachers in the academic subjects
  covered by those Academies.
PROGRAM AUTHORIZED; ALLOCATION OF APPROPRIATIONS
  SEC. 1731B. (a)(1) From funds appropriated under section 1731G (a) and
  (b), the Secretary shall make a one-time, five-year grant to each State,
  in accordance with this subpart, to establish and operate Governors'
  Academies for Teachers and to recognize outstanding teachers.
  (2) The Governor of each State shall use the State's grant to make
  competitive awards to the State educational agency, local educational
  agencies, institutions of higher education, other public and private
  agencies and organizations, or consortia of such agencies, institutions, and
  organizations, to establish and operate Governors' Academies for Teachers.
  (3) Such Academies may be operated in cooperation or consortium with those
  of other States.
  (b)(1) From the funds appropriated for this subpart for any fiscal year,
  the Secretary--
  (A) may reserve up to $500,000 for evaluations of, and dissemination of
  information about, activities conducted under this subpart; and
  (B) shall reserve up to $175,000 for Guam, American Samoa, the Virgin
  Islands, the Commonwealth of the Northern Mariana Islands, and Palau (until
  the effective date of the Compact of Free Association with the Government
  of Palau), to be expended in such manner as the Secretary determines will
  best meet the purpose of this subpart.
  (2) The Secretary shall proportionately allocate the remainder of such
  funds to each of the 50 States, the District of Columbia, and Puerto Rico,
  on the basis of the full-time equivalent number of public elementary and
  secondary school teachers in the most recent year for which satisfactory
  data are available.
  (3) If the Secretary determines that any amount of a State's allotment
  for any fiscal year under paragraph (2) will not be needed for such fiscal
  year by the State, the Secretary shall reallot such amount to other States
  that need additional funds, in such manner as the Secretary determines
  is appropriate.
STATE APPLICATION
  SEC. 1731C. (a) The Governor of each State wishing to receive a grant under
  this subpart shall submit an application to the Secretary, for a five-year
  period, at such time and in such manner, as the Secretary may prescribe.
  (b) Each such application shall include--
  (1) a description of how the Governors' Academies planned for the State
  will relate to the Governor's overall plan for the reform of elementary and
  secondary education and the attainment of the National Education Goals in
  the State, including, in particular, improvement of education in the core
  academic subjects;
  (2) a description of the competitive process the Governor will use to select
  applicants to operate the Governors' Academies for Teachers in the State;
  (3) an assurance that a separate Academy will be established in each
  of the five core academic subjects (English, mathematics, science,
  history, and geography), unless the Governor determines that it would be
  inefficient to use funds in this manner and the application describes the
  Governor's reasons for establishing Academies that focus on more than one
  subject. Nothing in this paragraph prohibits the same agency, institution,
  or organization from operating more than one Academy;
  (4) a description of how Academy participants will be selected;
  (5) a description of how the State will monitor the implementation of
  Governors' Academies for Teachers, including the awards to teachers under
  section 1731D(d), and the performance of teachers who have been trained
  in those Academies, and an assurance that it will comply with reasonable
  requests of the Secretary for information on these matters;
  (6) a description of how the State will meet the cost-sharing requirements
  of section 1731F, and how the State will continue to operate the Academies
  when Federal assistance is no longer available; and
  (7) such other assurances and information as the Secretary may require.
AUTHORIZED ACTIVITIES
  SEC. 1731D. (a) Each Governor's Academy for Teachers assisted under this
  subpart shall conduct a program of intensive instruction, during the summer
  or the school year, focusing on the core academic disciplines of English,
  mathematics, science, history, and geography. Such instruction shall be
  provided to current elementary and secondary school teachers.
  (b) The instruction provided by each such Academy shall include--
  (1) renewal and enhancement of participant's knowledge of one of the five
  core academic disciplines described in subsection (a), except as provided
  in section 1731(b)(3);
  (2) teaching skills and strategies needed to impart academic subject
  matter to students, including students who are economically disadvantaged,
  limited English proficient, or have disabilities, and other students from
  diverse backgrounds;
  (3) at the Academy's discretion, the use of educational technologies in
  teaching the core academic disciplines;
  (4) training needed to become a lead teacher or a master teacher in a core
  subject, consistent with State policies on teacher career ladders;
  (5) training needed to participate in curriculum development in a core
  subject; and
  (6) training in the development and use of assessment tools.
  (c) Each Academy assisted under this subpart shall carry out activities
  consistent with the purpose of this subpart, which may include--
  (1) review of existing teacher enhancement programs to identify the most
  promising approaches;
  (2) development of a curriculum for use by the Academy;
  (3) recruitment of teachers within the State to participate in the Academy's
  program, including, on a nondiscriminatory basis, recruitment of--
  (A) minority group members;
  (B) individuals with disabilities;
  (C) individuals from areas with high numbers or concentrations of
  disadvantaged students; and
  (D) other teachers who have a potential for leadership;
  (4) follow-up activities for previous participants;
  (5) dissemination of information about the Academy, including the training
  curricula developed; and
  (6) evaluation of the impact of the Academy on the teaching practices of
  participants, and other evaluation activities designed to strengthen the
  Academy's program.
  (d)(1) The Governor shall allocate to the Academies, in the same proportion
  as funds appropriated under section 1731G(a) are distributed to those
  Academies, the State's allocation under section 1731G(b). Each Academy
  shall use such allocation for a program of cash awards and recognition to
  outstanding teachers in the core academic subject or subjects covered by
  the program of the Academy.
  (2) Academies shall select teachers to receive awards from nominations
  received from local educational agencies, public and private schools,
  teachers, associations of teachers, parents, associations of parents and
  teachers, businesses, business groups, and student groups.
  (3) Any full-time public or private elementary or secondary school teachers
  of a core academic subject, including an elementary school teacher of the
  general curriculum, shall be eligible to receive an award under this subpart.
  (4) The Academy shall select award recipients in accordance with criteria
  developed by the Academy and approved by the Governor. The selection criteria
  may take into account, but are not limited to, teacher's success in--
  (A) educating disadvantaged children, children with disabilities, children of
  limited English proficiency, or homeless children, as well as the children
  of migrant agricultural workers, in a core academic subject;
  (B) educating gifted and talented students in a core academic subject;
  (C) encouraging students to enroll, and succeed, in advanced classes in
  a core academic subject;
  (D) teaching a core academic subject successfully in schools educating
  large numbers of disadvantaged students, including schools in low-income
  inner-city or rural areas;
  (E) introducing a new curriculum in a core academic subject into a school
  or strengthening an established curriculum; or
  (F) acting as a `master teacher' in a core academic subject.
  (5) The amount of a teacher's award under this subsection shall not exceed
  $5,000 and shall be available for any purpose the recipient chooses.
USE OF FUNDS
  SEC. 1731E. Each recipient of funds appropriated under section 1731G(a)
  shall use those funds to meet the reasonable start-up and initial operating
  costs of carrying out the activities described in section 1731D (a) through
  (c), which may include stipends and travel and living expenses for teachers
  who participate in the Academy's program if no other funds are available
  to pay those costs.
COST-SHARING
  SEC. 1731F. Funds received under section 1731G(a) may be used to pay up to
  75 percent of the cost of a Governor's Academy for Teachers in the first
  year, 65 percent of such cost in the second year, 55 percent in the third
  year, 45 percent in the fourth year, and 35 percent in the fifth year. The
  remaining share shall be provided from non-Federal sources, and may include
  in-kind contributions, fairly valued.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1731G. (a) For the purpose of carrying out this subpart, except for
  section 1731D(d), there are authorized to be appropriated $62,400,000 for
  fiscal year 1992, $54,170,000 for fiscal year 1993, $45,940,000 for fiscal
  year 1994, $37,710,000 for fiscal year 1995, and $29,480,000 for fiscal
  year 1996.
  (b) For the purpose of carrying out section 1731D(d), there are authorized
  to be appropriated $7,600,000 for each of the fiscal years 1992 through 1996.
Subpart 2--Governors' Academies for School Leaders
STATEMENT OF FINDINGS
  SEC. 1732. The Congress finds as follows:
  (1) The role of the school principal and other school leaders is central
  to school performance, school reform, and achievement of the National
  Education Goals.
  (2) School restructuring intensifies the need for effective school leadership
  as it locates greater authority and responsibility at the school building
  level. In this context, principals and other administrators need to
  cultivate strong collegial relationships among teachers and staff and
  effectively involve parents.
  (3) School leaders must be well versed in the core academic disciplines,
  must provide instructional leadership to the teachers in their schools,
  and must be able to coordinate school services with those of social service
  agencies and other organizations, including businesses, in the community
  affecting students and their families.
  (4) Over the next ten years, at least half of those individuals now serving
  as school principals will be eligible for retirement.
  (5) Governors' efforts to reform elementary and secondary education in
  the States must include a focus on preparing a new generation of highly
  effective school leaders.
  (6) The pool of talent from which to draw school leaders can be expanded
  substantially with well-designed training programs.
PURPOSE
  SEC. 1732A. The purpose of this subpart is to improve the training and
  performance of public and private school principals and other school leaders,
  and increase the number of persons who are well trained and well qualified
  to be school leaders, by supporting the development and implementation of
  programs that offer--
  (1) for prospective school leaders, recruitment, training, and, as
  appropriate, internships under experienced school leaders;
  (2) for experienced school leaders, opportunities for professional renewal
  and enhancement of skills; and
  (3) for all participants, a focus on instructional leadership, school-based
  management, school reform strategies, and implementation of school-level
  accountability mechanisms.
PROGRAM AUTHORIZED; ALLOCATION OF APPROPRIATIONS
  SEC. 1732B. (a)(1) The Secretary shall make a one-time, five-year grant
  to each State, in accordance with this subpart, to establish and operate
  a Governor's Academy for School Leaders.
  (2) The Governor of each State shall use the State's grant to make
  competitive awards to the State educational agency, local educational
  agencies, institutions of higher education, other public and private
  agencies and organizations, or consortia of such agencies, institutions,
  and organizations, to establish and operate a Governor's Academy for
  School Leaders.
  (3) Such Academies may be operated in cooperation or consortium with those
  of other States.
  (b)(1) From the funds appropriated for this subpart for any fiscal year,
  the Secretary--
  (A) may reserve up to $500,000 for evaluations of, and dissemination of
  information about, activities conducted under this subpart; and
  (B) shall reserve up to $55,000 for Guam, American Samoa, the Virgin Islands,
  the Commonwealth of the Northern Mariana Islands, and Palau (until the
  effective date of the Compact of Free Association with the Government of
  Palau), to be expended in such manner as the Secretary determines will
  best meet the purpose of this subpart.
  (2)(A) Except as provided in paragraph (3), the Secretary shall
  proportionately allocate the remainder of such funds to each of the 50
  States, the District of Columbia, and Puerto Rico, on the basis of the
  number of public elementary and secondary schools in each such jurisdiction
  in the most recent year for which satisfactory data are available.
  (B) If the Secretary determines that any amount of a State's allotment for
  any fiscal year under subparagraph (A) will not be needed for such fiscal
  year by the State, the Secretary shall reallot such amount to other States
  that need additional funds, in such manner as the Secretary determines
  is appropriate.
STATE APPLICATION
  SEC. 1732C. (a) The Governor of each State wishing to receive a grant under
  this subpart shall submit an application to the Secretary for a five-year
  period, at such time and in such manner as the Secretary may prescribe.
  (b) Each such application shall include--
  (1) a description of how the Governor's Academy for School Leaders planned
  for the State will relate to the Governor's overall plan for the attainment
  of the National Education Goals and the reform of elementary and secondary
  education in the State, including, in particular, improvement of school
  leadership in the State;
  (2) a description of the competitive process the Governor will use to
  select the applicant to operate the Governor's Academy;
  (3) a description of how Academy participants will be selected;
  (4) a description of how the State will monitor the implementation of the
  Governor's Academy and the subsequent progress of individuals trained by
  the Academy, and an assurance that it will comply with reasonable requests
  of the Secretary for information on these matters;
  (5) a description of how the State will meet the cost-sharing requirements
  of section 1732F and how the State will continue to operate the Academy
  when Federal assistance is no longer available; and
  (6) such other assurances and information as the Secretary may require.
AUTHORIZED ACTIVITIES
  SEC. 1732D. Each Academy assisted under this subpart shall--
  (1) identify models and methods of leadership training and development
  that are promising or have proven to be successful;
  (2) develop curricula, which focus on instructional leadership, school-based
  management, and the design and execution of school improvement strategies
  and accountability mechanisms, for the development of school leaders;
  (3) identify, in a nondiscriminatory manner, candidates, including members
  of minority groups, individuals with disabilities, and individuals from
  schools with high numbers of concentrations of disadvantaged students,
  to be trained as new school leaders;
  (4) provide intensive training and development programs both for persons
  desiring and demonstrating outstanding promise to become school leaders,
  and for current school leaders seeking enhanced and up-to-date knowledge
  needed to perform their jobs effectively;
  (5) identify districts and schools with principal and other school
  leader vacancies and work with them to match Academy participants with
  such vacancies;
  (6) as appropriate, facilitate internships for graduates of the program
  for new school leaders, under the guidance and supervision of experienced
  administrators;
  (7) provide periodic follow-up development activities for school leaders
  trained through the Academy's programs;
  (8) disseminate information about the Academy, including the training
  curricula developed; and
  (9) evaluation of the impact of the Academy on the leadership practices
  of participants, and other evaluation activities designed to strengthen
  the Academy's program.
USE OF FUNDS
  SEC. 1732E. Each recipient of funds under this subpart shall use those funds
  to meet the reasonable start-up and initial operating costs of carrying
  out the activities described in section 1732D, which may include stipends,
  travel, and living expenses for participants in the Academy if no other
  funds are available to pay those costs.
COST-SHARING
  SEC. 1732F. Funds received under this subpart may be used to pay up to
  75 percent of the cost of a Governor's Academy for School Leaders in the
  first year, 65 percent of such cost in the second year, 55 percent in the
  third year, 45 percent in the fourth year, and 35 percent in the fifth
  year. The remaining share shall be provided from non-Federal sources,
  and may include in-kind contributions, fairly valued.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1732G. For the purpose of carrying out this subpart, there are
  authorized to be appropriated $22,500,000 for fiscal year 1992, $19,500,000
  for fiscal year 1993, $16,500,000 for fiscal year 1994, $13,500,000 for
  fiscal year 1995, and $10,500,000 for fiscal year 1996.
Subpart 3--Alternative Certification of Teachers and Principals
FINDINGS
  SEC. 1733. The Congress finds that--
  (1) effective elementary and secondary schools require competent teachers
  and strong leadership;
  (2) school systems would benefit greatly by recruitment pools of
  well-qualified individuals, such as scientists and engineers, from which
  to select teachers and principals;
  (3) talented professionals who have demonstrated a high level of subject
  area competence or management and leadership qualities outside the education
  profession and who wish to pursue second careers in education often do
  not meet traditional certification requirements; and
  (4) alternative certification requirements that do not exclude such
  individuals from teaching or school administration solely because they do not
  meet current certification requirements would allow school systems to take
  advantage of these professionals and improve the supply of well-qualified
  teachers and principals.
PURPOSE
  SEC. 1734. (a) It is the purpose of this subpart to improve the supply
  of well-qualified elementary and secondary school teachers and principals
  by encouraging and assisting States to develop and implement alternative
  teacher and principal certification requirements.
  (b) As used in this subpart, the term--
  (1) `alternative teacher and principal certification requirements' means
  State or local requirements that permit entry into elementary and secondary
  teacher and principal positions for individuals who have demonstrated
  a high level of appropriate subject area competence, or management or
  leadership qualities, in careers in or out of the education field, but who
  would not otherwise meet existing requirements for teaching or supervisory
  positions. Alternative teacher and principal certification requirements
  may recognize that--
  (A) for teachers, a high level of demonstrated competence in an appropriate
  subject area may be substituted for traditional teacher certification
  requirements (such as teacher training course work); and
  (B) for principals, a high level of demonstrated competence in administration
  and management may be substituted for traditional principal certification
  requirements (such as teaching experience or supervisory experience in
  the field of education); and
  (2) `State' means each of the 50 States, the District of Columbia, and
  the Commonwealth of Puerto Rico.
AUTHORIZATION OF APPROPRIATIONS
  Sec. 1735. For the purpose of carrying out this subpart, there are authorized
  to be appropriated $25 million for fiscal year 1992.
ALLOTMENTS
  SEC. 1736. (a)(1) From the amount appropriated to carry out this subpart,
  the Secretary shall allot to each State the lesser of either the amount
  the State applies for under section 325 or an amount that is proportional
  to the State's share of the total population of children ages five through
  seventeen in all the States (based on the most recent data available that
  is satisfactory to the Secretary).
  (2) If a State does not apply for its allotment, or the full amount of its
  allotment, under the preceding paragraph, the Secretary may reallocate
  the excess funds to one or more other States that demonstrate, to the
  satisfaction of the Secretary, a current need for the funds.
  (b) Notwithstanding section 412(b) of the General Education Provisions Act,
  funds awarded under this subpart shall remain available for obligation by
  a recipient for a period of two calendar years from the date of the grant.
STATE APPLICATIONS
  SEC. 1737. (a)  Any State desiring to receive a grant under this subpart
  shall submit an application, through its Governor, at such time, in such
  manner, and containing such information, as the Secretary may reasonably
  require.
  (b) Each State application shall--
  (1) describe the programs, projects, and activities to be undertaken; and
  (2) contain such assurances as the Secretary deems necessary, including
  assurances that--
  (A) funds awarded to the State will be used to supplement, and not
  to supplant, any State or local funds available for the development
  and implementation of alternative teacher and principal certification
  requirements;
  (B) the State has, in developing its application, consulted with the
  State or local agency that certifies teachers and principals, as well as
  representatives of elementary and secondary school teachers and principals,
  local school systems, parents, and other interested organizations and
  individuals; and
  (C) the State will submit to the Secretary, through the Governor, at such
  time as the Secretary may specify, a final report describing the activities
  carried out with funds awarded under this subpart and the results achieved.
  (c) Sections 435 and 436 of the General Education Provisions Act, except to
  the extent that such sections relate to fiscal control and fund accounting
  procedures, shall not apply to this subpart.
USE OF FUNDS
  SEC. 1738. (a)(1) A State shall use funds awarded under this subpart
  to support programs, projects, or activities that develop and implement
  new, or expand and improve existing, alternative teacher and principal
  certification requirements.
  (2) A State may carry out such programs, projects, or activities directly,
  through contracts, or through subgrants to local educational agencies,
  intermediate educational agencies, institutions of higher education,
  or consortia of such agencies.
  (b) Programs, projects, and activities supported under this subpart may
  include, but are not limited to, the--
  (1) design, development, implementation, testing, and evaluation of
  alternative teacher and principal certification requirements;
  (2) establishment of administrative structures necessary to the development
  and implementation of alternative teacher and principal certification
  requirements;
  (3) training of staff, including the development of appropriate support
  programs, such as mentor programs, for teachers and principals entering the
  school system through the alternative teacher and principal certification
  program;
  (4) development of recruitment strategies; and
  (5) development of reciprocity agreements between or among States for the
  certification of teachers and principals.
PART D--EDUCATIONAL REFORM AND FLEXIBILITY
Subpart 1--Educational Reform Through Flexibility and Accountability
STATEMENT OF FINDINGS AND PURPOSE
  SEC. 1741. (a) FINDINGS- Historically, Federal education programs have
  addressed the Nation's most pressing educational problems by providing
  categorical assistance with detailed requirements relating to the use of
  funds. While this approach has proven generally successful, some program
  requirements may inadvertently impede educational achievement. The Nation's
  schools are being asked to deal effectively with increasingly diverse
  educational needs that current program structures may not be flexible
  enough to address. In an era when educational change and reform must
  prevail, it is more important than ever to provide programs that result in
  improved educational outcomes for all students; promote the coordination of
  education and related services that benefit children and their families;
  respond flexibly to the needs of a diverse student population; stop the
  proliferation of unnecessary Federal, State, and local regulation; and
  place less emphasis on measuring resources and reviewing procedures and
  more emphasis on achieving program results.
  (b) PURPOSE- The purpose of this subpart is to promote educational
  reform that leads to improved educational outcomes for participants in
  affected programs. Under this approach, the schools and other recipients of
  Federal funds would be held accountable for achieving specific educational
  improvement goals in exchange for increased flexibility in the use of their
  resources. This more flexible approach is intended to enable school and
  program administrators, teachers, parents, local agencies, and community
  groups to work together to develop effective education programs that
  lead to improved achievement and meet the needs of all participants,
  particularly those who are disadvantaged.
FLEXIBILITY AND ACCOUNTABILITY IN EDUCATION AND RELATED SERVICES
  SEC. 1742. Subpart I of Part C of the General Education Provisions Act
  (20 U.S.C. 1221 et seq.) is amended by adding after section 421A a new
  section 421B to read as follows:
`FLEXIBILITY AND ACCOUNTABILITY IN EDUCATION AND RELATED SERVICES
  `SEC. 421B. (a) PROGRAM AUTHORIZED- (1)(A) The Secretary shall, in accordance
  with this section, assist elementary and secondary schools and other
  service providers to improve the achievement of all students and other
  participants, but particularly disadvantaged individuals, by authorizing
  waivers by which the Governors, State and local educational agencies,
  and other service providers can improve the performance of schools and
  programs by increasing their flexibility in the use of their resources
  while holding them accountable for achieving educational gains.
  `(B) In support of these projects, the Secretary is authorized to waiver any
  statutory or regulatory requirement (except as provided in subsection (e))
  applicable to a program administered by the Department of Education that the
  Secretary determines may impede the ability of a school or other service
  provider to meet the special needs of such students and other individuals
  in the most effective manner possible. The head of any other Federal agency
  is similarly authorized to waive such requirements applicable to a program
  administered by such agency if the agency head and the Secretary agree
  that such a waiver would promote the purpose of this section.
  `(2) Projects conducted under this section, and any waivers associated
  with such projects, shall last no longer than three years, except that the
  Secretary may extend a project and any associated waivers for an additional
  two years if the Secretary determines that the project is making substantial
  progress in meeting its goals.
  `(3) The Secretary shall terminate a project and its associated waivers if
  the Secretary, at any time, determines it is not making acceptable progress
  toward meeting its goals. The head of any other Federal agency who has
  granted waivers under this section shall determine whether to extend or
  terminate those waivers, but the Secretary shall have exclusive authority
  to extend or terminate the project.
  `(b) ELIGIBILITY- (1) Each project that involves elementary or secondary
  schools shall include the participation of a State educational agency and
  at least--
  `(A) one local educational agency; and
  `(B) two schools.
  `(2) To the extent possible, each grade and academic program, including
  programs under part A of chapter 1 of title I of the Elementary and Secondary
  Education Act of 1965, in a participating school shall participate in
  the project.
  `(3) If fewer than all the schools of a local educational agency participate
  in a project, available resources, including available Federal assistance,
  shall not be concentrated unreasonably in those schools that do participate.
  `(4) Each project that does not involve elementary and secondary schools
  shall involve at least two programs, including at least one program
  administered by the Secretary.
  `(c) APPLICATIONS- The Governor of any State wishing to conduct a project
  under this section shall, after consultation with, as the Governor finds
  appropriate, the State educational agency, one or more local educational
  agencies, and other State and local agencies and service providers, submit
  an application to the Secretary for each such project. Each application
  shall include a plan that--
  `(1) describes the purposes and overall expected outcomes of the project;
  `(2) identifies, for each school or site participating in the project,
  those impediments to improved educational outcomes that would be removed
  by the proposed waivers;
  `(3) identifies the Federal programs to be included in the project, the
  Federal statutory or regulatory requirements to be waived, and the purpose
  and duration of the requested waivers;
  `(4) describes the State and local requirements that will be waived,
  the purpose of such waivers, and, if such requirements will not have been
  waived before the project begins, when those waivers will be obtained and
  take effect;
  `(5) describes specific, measurable, educational improvement goals for
  each school or other site in the project and for each school year of the
  project, including--
  `(A) goals for improving the achievement of all participants, including
  disadvantaged individuals, with respect to achievement in basic and
  advanced skills;
  `(B) goals that reflect the broad purposes of each program for which a
  waiver is sought; and
  `(C) an explanation of how the applicant will measure progress in meeting
  the goals set for each school or site in the project and for disadvantaged
  individuals participating in the project; and
  `(6) for projects involving elementary or secondary schools--
  `(A) identifies the schools to be included in the project and describes
  the student population at each school including--
  `(i) current data regarding the achievement of the disadvantaged students
  as well as other students; and
  `(ii) in the number of students who--
  `(I) are of limited English proficiency, as defined in section 7003(a)(1)
  of the Bilingual Education Act;
  `(II) are children with disabilities, as defined in section 602(a)(1)
  of the Individual with Disabilities Education Act;
  `(III) are currently or formerly migratory;
  `(IV) are educationally deprived, for the purposes of chapter 1 of title
  I of the Elementary and Secondary Education Act of 1965; and
  `(V) are eligible for a free or reduced price school lunch;
  `(B) describes specific goals for enhancing coordination between the
  regular education program available to all students and programs serving
  disadvantaged students;
  `(C) if fewer than all the schools in a local educational agency will
  participate in a project, describes the expected educational outcomes for
  disadvantaged students in schools that do not participate, and how those
  outcomes will be assessed; and
  `(D) describes how school administrators, teachers, staff, and parents
  (including parents of educationally disadvantaged children) have been,
  or will be, involved in the planning, development, and implementation of
  the goals and program for each participating school.
  `(d) APPROVAL OF PROJECTS- (1) The Secretary shall approve an application
  for a project under this section if he determines that the project
  shows substantial promise of achieving the purposes of this section,
  after considering--
  `(A) the comprehensiveness of the project, including the types of students,
  schools, programs, and activities to be included;
  `(B) the extent to which the provisions for which waivers are sought impede
  educational improvement;
  `(C) the State and local requirements that will be waived for the project;
  `(D) the significance and feasibility of the proposed project's goals for
  each participating school or site; and
  `(E) the quality of the plan for ensuring accountability for the proposed
  plan's activities and goals.
  `(2) The Secretary shall consult with the heads of other appropriate Federal
  agencies, if any, in determining whether to approve a project. Each such
  agency head shall notify the Secretary of any waivers granted by such
  agency head as part of such project.
  `(e) ALLOCATION OF FEDERAL FUNDS; RESTRICTION ON WAIVERS- (1) Federal funds
  under any program that are used to support a project under this section
  shall be allocated to States and other recipients in accordance with the
  statutory and regulatory requirements that govern the operation of that
  program, except that, for the purpose of such a project, the Secretary
  (or the head of any other Federal agency) may extend the duration of,
  and provide continuation funding to, a project chosen on a competitive
  basis that a participating agency is conducting before the project under
  this section commences.
  `(2) Neither the Secretary nor the head of any other Federal agency shall
  waive under this section any statutory or regulatory requirement in awarding
  a new competitive grant to a State educational agency, local educational
  agency, or other applicant participating in a project under this section.
  `(3) Neither the Secretary nor, when applicable, the head of any other
  Federal agency shall waive under this section any statutory or regulatory
  requirement--
  `(A) relating to--
  `(i) maintenance of effort;
  `(ii) comparability; or
  `(iii) the equitable participation of students attending private schools;
  `(B) under section 438 or 439 of the General Education Provisions Act;
  `(C) under title VI of the Civil Rights Act of 1964, section 504 of the
  Rehabilitation Act of 1973, title IX of the Education Amendments of 1972,
  or the Age Discrimination Act of 1975; or
  `(D) under the Individuals with Disabilities Education Act--
  `(i) relating to the availability of a free appropriate public education
  to children with disabilities (including the evaluation and placement of
  such children), or the procedural safeguards afforded such children and
  their parents, under part B thereof; or
  `(ii) relating to the provision of early intervention services to infants
  and toddlers with disabilities, or the procedural safeguards afforded such
  infants and toddlers and their parents, under part H thereof.
  `(f) REPORTS AND EVALUATIONS- (1) Each project shall submit, no later
  than 90 days after the end of each year of the project, an annual report
  to the Secretary that--
  `(A) summarizes the principal activities of the project;
  `(B) contains school-by-school and other data, as described in the project
  plan, that show the extent to which the project is meeting its overall
  goals, including its goals for improving the achievement of all participants,
  particularly disadvantaged individuals, with respect to achievement in basic
  and advanced skills, and is meeting the goals for each school or other site;
  `(C) describes the impact of the project on disadvantaged children in
  schools, if any, that are not participating in the demonstration; and
  `(D) describes the effectiveness of efforts to coordinate programs and
  services for children and their families as appropriate.
  `(2) The Secretary shall submit a report to the Congress every two years
  that summarizes and analyzes the project reports required by paragraph (1).
  `(3) At the end of the 5-year period described in this section, and at
  such interim points as the Secretary deems appropriate, the Secretary shall
  report to the Congress on the evaluation of this section by the Department
  of Education and other affected Federal agencies. Such reports may include
  recommendations for amendments to program statutes that are based on the
  experience of projects that successfully raise educational achievement by
  eliminating or modifying statutory or regulatory provisions that impede
  educational improvement.
  `(g) DEFINITION- For the purpose of this section, the term `disadvantaged
  students' includes students of limited English proficiency, children
  with disabilities, students who are currently or formerly migratory,
  and students who are educationally deprived.
  `(h) BUDGET NEUTRALITY- The authority provided by this section shall not be
  exercised in a manner that, for any fiscal year, increases total obligations
  or outlays of discretionary appropriations for programs subject to such
  authority, or that increases total obligations or outlays of funding for
  all direct-spending programs subject to such authority over those that
  would have occurred absent such authority.'.
Subpart 2--Amendments to Chapter 2
ALLOCATION TO LOCAL EDUCATIONAL AGENCIES
  SEC. 1745. Section 1512(a) of the Elementary and Secondary Education Act
  of 1965 is amended by striking out `not less than 80 percent' and inserting
  in lieu thereof `50 percent'.
STATE USES OF FUNDS
  SEC. 1746. Section 1521(b) of the Elementary and Secondary Education Act
  of 1965 is amended--
  (1) in paragraph (1), by striking out `25 percent' and inserting in lieu
  thereof `10 percent'; and
  (2) in paragraph (2)(A), by striking out `20 percent' and inserting in
  lieu thereof `8 percent'.
STATE APPLICATIONS
  SEC. 1747. Section 1522(a) of the Elementary and Secondary Education Act
  of 1965 is amended--
  (1) by submitting a comma and `approved by the Governor,' after `an
  application'; and
  (2) in paragraph (2), in the text following subparagraph (I), by striking
  out `(not to exceed 20 percent of the amount of the State's allotment)'.
LOCAL USES OF FUNDS
  SEC. 1748. Section 1531(b) of the Elementary and Secondary Education Act
  of 1965 is amended--
  (1) by redesignating paragraphs (1) through (6) as paragraphs (2) through
  (7), respectively; and
  (2) by inserting before paragraph (2), as so redesignated, a new paragraph
  (1) to read as follows:
  `(1) educational choice programs;'.
AUTHORIZED ACTIVITIES
  SEC. 1749. Section 1532(a) of the Elementary and Secondary Education Act
  of 1965 is amended--
  (1) by redesignating paragraphs (1), (2), and (3) as paragraphs (2),
  (3), and (4), respectively; and
  (2) by inserting before paragraph (2), as so redesignated, a new paragraph
  (1) to read as follows:
  `(1) any activities or expenses directly related to planning, implementing,
  operating, evaluating, and disseminating information about, the local
  educational agency's educational choice program, if any, including expenses
  of parents and children resulting from their participation in such program,
  to the extent otherwise permitted by law;'.
PART E--PARENTAL CHOICE OF SCHOOLS
Subpart 1--Findings
  SEC. 1751. The Congress finds that--
  (1) parental choice in education creates market-based accountability,
  encourages school diversity and competition, and provides parents and
  their children with a sense of investment in their schools;
  (2) economically disadvantaged children deserve the same educational choices,
  both public and private, as their more advantaged peers;
  (3) educational choice programs and programs of compensatory education
  assisted under part A of chapter 1 of title I of the Elementary and Secondary
  Education Act of 1965 should be coordinated with, and be carried out so
  as to enhance, each other;
  (4) local implementation of programs that enhance student and parental
  choice deserves national support and encouragement; and
  (5) different methods for expanding educational choice should be tested
  and evaluated.
Subpart 2--Parental Choice and Chapter 1
CHAPTER 1 SERVICES FOR CHILDREN PARTICIPATING IN EDUCATIONAL CHOICE PROGRAMS
  SEC. 1752. (a) Subpart 2 of part A of chapter 1 of title I of the Elementary
  and Secondary Education Act of 1965 is amended  by adding at the end
  thereof a new section 1022 to read as follows:
`CHILDREN PARTICIPATING IN EDUCATIONAL CHOICE PROGRAMS
  `SEC. 1022. (a) SERVICES TO FOLLOW THE CHILD- Notwithstanding any other
  provision of this chapter, a local educational agency that is carrying
  out an educational choice program shall, in accordance with this section,
  make available supplementary compensatory education services, paid for
  under this part, to each child residing in such agency who is afforded the
  opportunity to participate in that program and who, in the absence of the
  choice program, would receive services from that agency under this part.
  `(b) FUNDS TO PARENTS- (1) If the local educational agency determines that
  it is not feasible or efficient to make such services available to such
  a child directly or through arrangements with other service providers,
  it shall provide to the parents of such child a per-child share of funds
  received by such agency under subpart 1 of this part for the applicable
  fiscal year.
  `(2) As used in paragraph (1), a `per-child share' means--
  `(A) the total amount of funds received by the local educational agency
  under subpart 1 of this part for the applicable fiscal year, minus amounts
  spent on administrative expenses including transportation provided under
  section 1011(a)(4); divided by
  `(B) the number of children selected by such agency to receive services
  under this part.
  `(3) Parents may use funds received from a local educational agency under
  paragraph (1) only for either or both of the following--
  `(A) to purchase supplementary compensatory education services that meet
  the special educational needs of the parents' eligible child, as identified
  by the local educational agency, from any elementary or secondary school,
  or any other public or private agency, organization, or institution that
  the local educational agency determines is able to provide appropriate and
  effective supplementary compensatory educational services to the child; and
  `(B) for the costs of transportation related to the child's participation
  in the educational choice program.
  `(4) Payments received by parents under paragraph (1) are not income for
  Federal income tax purposes.
  `(c) APPLICATION BY LOCAL EDUCATIONAL AGENCY- Each local educational agency
  subject to this section shall include in its application under section 1012--
  `(1) a description of its policies and procedures for carrying out this
  section;
  `(2) an assurance that it will keep such records and provide such
  information to the State educational agency relating to the provision of
  funds to parents under subsection (b) as may be required for fiscal audit
  and program compliance; and
  `(3) an assurance that it will exercise due diligence to--
  `(A) ensure that payments made to parents under subsection (b)(1) will be
  used only for the purposes authorized by subsection (b)(3); and
  `(B) recover such payments that are not so used.'.
  (b) Section 1011(a) of the ESEA is amended by adding at the end thereof
  a new paragraph (4) to read as follows:
  `(4) A local educational agency may use funds received under this chapter
  for the additional transportation costs of children receiving services
  under this part who are participating in an educational choice program.'.
PARENTAL INVOLVEMENT
  SEC. 1752A. Section 1016(c) of the Elementary and Secondary Education Act
  of 1965 is amended--
  (1) in paragraph (2), by adding the following sentence at the end thereof:
  `If the local educational agency is carrying out an educational choice
  program, representatives of such agency shall explain the availability of
  compensatory education services under the various available options.'; and
  (2) by adding at the end thereof a new paragraph (7) to read as follows:
  `(7) Each local educational agency that is implementing an educational choice
  program shall provide an explanation in writing, and in such other manner
  as may be appropriate, to the parents of each eligible child selected
  to participate in the agency's program under this part of the options
  available to them under the educational choice program and this part.'.
DEFINITION
  SEC. 1752B. Section 1471 of the Elementary and Secondary Education Act of
  1965 is amended by adding at the end thereof a new paragraph (24) to read
  as follows:
  `(24) The term `educational choice program' means a program, including
  a desegregation plan, adopted by a State educational agency or a local
  educational agency under which parents select the school in which their
  children will be enrolled.'.
Subpart 3--Assistance for Parental Choice Programs
PROGRAM AUTHORIZED
  SEC. 1753. The Secretary shall make grants, in accordance with this subpart,
  to local educational agencies that carry out educational choice programs.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1753A. For the purpose of carrying out this subpart, there are
  authorized to be appropriated $200 million for fiscal year 1992, and such
  sums as may be needed for each of the four succeeding fiscal years.
ELIGIBILITY
  SEC. 1753B. (a) A local educational agency is eligible for a grant under
  this subpart if it will carry out an educational choice  program during
  the year for which  assistance is sought and carried out such a program
  during the preceding year.
  (b) For the purpose of this subpart, an `educational choice program' is
  a program adopted by a State or by a local educational agency under which--
  (1) parents select the school, including private schools, in which their
  children will be enrolled; and
  (2) sufficient financial support is provided to enable a significant number
  or percentage of parents to enroll their children in a variety of schools
  and educational programs, including private schools.
ALLOCATION OF APPROPRIATIONS
  SEC. 1753C. (a) From the amount appropriated under section 1753A for any
  fiscal year, the Secretary shall allot, to each eligible local educational
  agency whose application for a grant under this part has been approved, an
  amount that bears the same ratio to such amount as the amount allocated to
  such agency under sections 1005 and 1006 of the Elementary and Secondary
  Education Act of 1965 for the previous fiscal year bears to the amounts
  so allocated to all such eligible agencies whose applications have been
  approved.
  (b) No local educational agency's allotment shall exceed--
  (1) the average per pupil expenditure of all local educational agencies
  in the State for the most recent fiscal year for which satisfactory data
  are available to the Secretary; multiplied by
  (2) the number of children afforded the opportunity to participate in
  the educational choice program in the year preceding the year for which
  assistance is sought.
  (c) Any funds appropriated under this subpart for any fiscal year that
  exceed the amounts that can be awarded under this section shall be returned
  to the Treasury.
AUTHORIZED ACTIVITIES
  SEC. 1753D. (a) Each local educational agency that receives  funds under
  this subpart may use those funds only for educational services provided
  to the students of such agency and for parental involvement activities,
  except that such services and activities must be in addition to services
  and activities that would otherwise be provided from State or local funds.
  (b) A local educational agency may not use funds received under this
  subpart for general administrative expenses.
APPLICATIONS
  SEC. 1753E. (a) Each local educational agency that wishes to receive a
  grant under this subpart shall submit an application to the Secretary,
  covering a period of one year, at such time and in such manner as the
  Secretary may prescribe.
  (b) Each such application shall contain--
  (1) a description of the educational choice program carried out in the year
  preceding the year for which assistance is sought, in sufficient detail
  for the Secretary to determine whether the agency is eligible under this
  subpart; and
  (2) such other assurances and information as the Secretary may require.
  (c) Before finally deciding not to approve a local educational agency's
  application under this subpart, the Secretary shall--
  (1) provide a written explanation to such agency; and
  (2) afford such agency a reasonable opportunity to respond.
Subpart 4--Parental Choice Programs of National Significance
PROGRAM AUTHORIZED
  SEC. 1754. The Secretary shall make grants, in accordance with this
  subpart, to State educational agencies, local educational agencies, and
  other agencies, institutions, and organizations to conduct and demonstrate
  nationally significant model programs of educational choice.
AUTHORIZATION OF APPROPRIATIONS
  SEC. 1754A. (a) For the purpose of carrying out this subpart, there are
  authorized to be appropriated $30 million for fiscal year 1992 and such
  sums as may be needed for each of the four succeeding fiscal years.
  (b) From the amount appropriated under subsection (a) for any fiscal year,
  the Secretary may set aside up to five percent for evaluation of, and
  dissemination of information about, educational choice programs assisted
  under this subpart.
ANNUAL COMPETITION
  SEC. 1754B. In any fiscal year for which funds are available to make new
  awards, the Secretary shall announce the approaches to educational choice
  that will be considered for funding under this subpart. An application
  for assistance may be considered only if it complies with such announcement.
APPLICATIONS
  SEC. 1754C. (a) Each agency, institution, or organization that wishes
  to receive a grant under this subpart shall submit an application to the
  Secretary, at such time, in such manner, and containing such assurances
  and information as the Secretary may prescribe.
  (b) Each application under this subpart shall be for a period of up to
  five years.
AUTHORIZED ACTIVITIES
  SEC. 1754D. (a) Each recipient of a grant under this subpart shall use the
  grant funds only for activities directly related to planning, implementing,
  operating, and evaluating, and disseminating information about, the
  educational choice demonstration program funded under this subpart.
  (b) Such funds may be used, to the extent otherwise permitted by law, to
  meet expenses of parents and children resulting from their participation
  in such program.
EXPERT ADVICE
  SEC. 1754E. The Secretary shall consult with educational practitioners
  with experience with educational choice programs, individuals with expert
  knowledge and experience in the area of educational choice, and other
  interested individuals, including parents, in determining which approaches
  to educational choice to support under, and in otherwise carrying out,
  this subpart.
DEFINITION
  SEC. 1754F. For the purpose of this subpart, an `educational choice program'
  is a program adopted by a State or by a local educational agency under
  which parents select the school in which their children will be enrolled
  and that complies with the annual announcement under section 1754B.
PART F--NATIONAL ASSESSMENT OF EDUCATIONAL PROGRESS
NATIONAL ASSESSMENT OF EDUCATIONAL PROGRESS
  SEC. 1761. Section 406 of the General Education Provisions Act is amended--
  (1) by amending subsection (f)(1) to read as follows:
  `(1) There are authorized to be appropriated for the purposes of this
  section $86,160,000 for fiscal year 1992, and such sums as may be necessary
  for each of the four succeeding fiscal years.';
  (2) in subsection (i)--
  (A) in paragraph (2)(A)--
  (i) by amending the first sentence to read as follows: `The National
  Assessment shall provide a fair and accurate presentation of educational
  achievement in skills, abilities, and knowledge in reading, writing,
  mathematics, science, history, and geography, and in other areas specified
  by the Board, and shall use sampling techniques that produce data that
  are representative on a national and on a State basis for those States
  that choose to participate.';
  (ii) by amending clause (i) to read as follows:
  `(i) collect and report data on a periodic basis, but at least once
  every four years in reading, writing, mathematics, science, history,
  and geography;'; and
  (iii) in clause (ii), by striking out `every 2 years' and inserting in
  lieu thereof `annually';
  (B) by striking out paragraph (2)(B);
  (C) in paragraph (4)(B)(i), by striking out `and that information with
  respect to individual schools';
  (D) by striking out paragraph (4)(C); and
  (E) by amending paragraphs (8) (B) and (C) to read as follows:
  `(B) Participation in assessments made on a State basis shall be
  voluntary. The Secretary shall enter into an agreement with any State that
  desires to carry out an assessment for the State under this subsection. Each
  such agreement shall contain assurances that the State will--
  `(i) participate in the Assessment;
  `(ii) perform the functions of conducting the Assessment at the school
  level for all schools in the State sample and coordinating within the State,
  subject to subparagraph (C);
  `(iii) pay from non-Federal sources the minimum State contribution required
  in subparagraph (C)(i); and
  `(iv) comply with the terms and conditions specified in subsection
  (i)(2)(C)(iv).
  `(C)(i) The minimum State contribution for participation in the State
  assessments for each fiscal year shall be $100,000, which the State may
  meet by in-kind contributions, fairly valued.
  `(ii) The Secretary shall pay the State for the cost, in excess of the
  minimum State contribution, of conducting the Assessment at the school level
  for all schools in the State sample and for the cost of coordination within
  the State an amount that shall be identified in the agreement reached under
  subparagraph (B), that shall be the product of the total number of hours of
  work and training of school staff the Secretary estimates is required to
  conduct the Assessment at the school level and the total number of hours
  of work of State staff the Secretary estimates is required to coordinate
  the Assessment within the State multiplied by a daily rate of pay, as
  determined by the Secretary.'.
PART G--NATIONAL COMMISSION ON TIME, STUDY, LEARNING, AND TEACHING
  SEC. 1771. (a) ESTABLISHMENT- There is hereby established a National
  Commission on Time, Study, Learning, and Teaching (hereafter in this title
  referred to as the `Commission').
  (b) MEMBERSHIP OF THE COMMISSION-
  (1) IN GENERAL- The Commission shall consist of twelve members, of whom--
  (A) six members shall be appointed by the President;
  (B) three members shall be appointed by the Speaker of the House of
  Representatives in consultation with the Minority Leader of the House of
  Representatives; and
  (C) three members shall be appointed by the President pro tempore of the
  Senate upon the recommendations of the Majority Leader and the Minority
  Leader of the Senate.
  (2) REQUIREMENTS-
  (A) Members of the Commission shall be appointed on the basis of exceptional
  education, training, or experience from among--
  (i) the Nation's Governors;
  (ii) individuals from the business community;
  (iii) representatives of nonprofit organizations or foundations committed
  to the improvement of American education;
  (iv) individuals who are engaged in the profession of teaching;
  (v) individuals engaged in school administration, members of school boards,
  and parents or representatives of parents or parent organizations;
  (vi) State officials directly responsible for education;
  (vii) Federal officials responsible for education policy; and
  (viii) educational researchers with experience relevant to the Commission's
  work.
  (B) The members of the Commission shall be appointed no later than 60 days
  after the date of enactment of this Act.
  (3) VACANCIES- A vacancy in the Commission shall not affect its powers,
  but shall be filled in the same manner as the original appointment was made.
  (4) TERMS- Members of the Commission shall be appointed to serve for the
  life of the Commission.
  (5) COMPENSATION- Each member of the Commission shall serve without
  compensation, but shall be allowed travel expenses, including per diem
  in lieu of subsistence, as authorized by section 5703 of title 5, United
  States Code, when engaged in the performance of Commission duties.
  (6) ACTIVITY OF COMMISSION- The Commission may begin to carry out its duties
  under this subsection when at least seven members of the Commission have
  been appointed.
  (c) FUNCTIONS OF THE COMMISSION-
  (1) STUDY- The Commission shall examine the quality and adequacy of the
  study and learning time of elementary and secondary students in the United
  States in an era when World Class Standards of achievement need to be
  met, including issues regarding the length of the school day and year,
  the extent and role of homework, how time is currently being used for
  academic subjects, year-round professional opportunities for teachers,
  and the use of school facilities for extended learning programs.
  (2) REPORT- The Commission shall submit a final report under subsection
  (d). The report shall include an analysis and recommendations concerning--
  (A) the length of the academic day and the academic year in elementary
  and secondary schools throughout the United States and in schools of
  other nations;
  (B) the time children spend in school learning the five core subjects of
  English, mathematics, science, history, and geography;
  (C) the use of incentives for students to increase their educational
  achievement in available instructional time;
  (D) how children spend the 91 percent of their time that is outside school,
  with particular attention to how much of that time can be considered
  `learning time' and how out-of-school activities affect intellectual
  development;
  (E) the time children spend on homework, how much of that time is spent on
  the core curriculum subjects, the importance that parents and teachers
  attach to homework, and the extent to which homework contributes to
  student learning;
  (F) year-round professional opportunities for teachers and how teachers
  can use their time to acquire knowledge and skills that will permit them
  to improve their performance and help raise the status of the profession;
  (G) how school facilities are used for extended learning programs;
  (H) the appropriate number of hours per day and days per year of instruction
  for United States elementary and secondary schools; and
  (I) if appropriate, a model plan for adopting a longer academic day and
  academic year for use by United States elementary and secondary schools
  by the end of this decade, including recommendations regarding mechanisms
  to assist States, school districts, schools, and parents in making the
  transition from the current academic day and year to an academic day and
  year of a longer duration.
  (d) COMMISSION REPORT- Not later than one year after the Commission
  concludes its first meeting, the Commission shall submit a report to the
  President and the Congress on the study and any recommendations required
  pursuant to this section.
  (e) POWERS OF THE COMMISSION-
  (1) HEARINGS- The Commission may, for the purpose of carrying out this
  section, conduct such hearings, sit and act at such times and places, take
  such testimony, and receive such evidence, as the Commission considers
  appropriate.
  (2) TESTIMONY; PUBLIC HEARINGS- In carrying out this section, the Commission
  may receive testimony and conduct public hearings in different geographic
  areas of the country, both urban and rural, to receive the reports, views,
  and analyses of a broad spectrum of experts and the public regarding the
  quality and adequacy of American students' study and learning time in an
  era when World Class Standards of achievement need to be met.
  (3) INFORMATION- The Commission may secure directly from any Federal agency
  such information, relevant to its functions, as may be necessary to enable
  the Commission to carry out this section. Upon request of the Chairman of
  the Commission, the head of the agency shall, to the extent permitted by
  law, furnish such information to the Commission.
  (4) GIFTS- The Commission may accept, use, and dispose of gifts or donations
  of money, services, or property, both real and personal, for the purpose
  of aiding the work of the Commission.
  (5) USE OF MAILS- The Commission may use the United States mails in the
  same manner and under the same conditions as the departments and agencies
  of the United States.
  (6) SUPPORT SERVICES- The Secretary shall provide to the Commission on a
  reimbursable basis such reasonable administrative and support services as
  the Commission may request.
  (f) ADMINISTRATIVE PROVISIONS-
  (1) MEETINGS- The Commission shall meet on a regular basis, as necessary,
  at the call of the Chairman or a majority of its members.
  (2) QUORUM- A majority of the members of the Commission shall constitute
  a quorum for the transaction of business.
  (3) CHAIRMAN AND VICE CHAIRMAN- (A) The Chairman and Vice Chairman of the
  Commission shall be elected by and from the members of the Commission for
  the life of the Commission.
  (B) The Commission shall appoint a staff director, who shall be paid at
  a rate not to exceed the maximum rate of basic pay under section 5376 of
  title 5, United States Code, and such professional and clerical personnel as
  may be reasonable and necessary to enable the Commission to carry out its
  functions without regard to the provisions of title 5, United States Code,
  governing appointments in the competitive service, and without regard to the
  provisions of chapter 51 and subchapter III of chapter 53 of such title,
  or of any other provision of law, relating to classification and General
  Schedule pay rates.
  (4) OTHER FEDERAL PERSONNEL- Upon request of the Chairman of the Commission,
  the head of any Federal agency is authorized to detail, with or without
  reimbursement, any personnel of such agency to the Commission to assist
  the Commission in carrying out its duties under this section. Such detail
  shall be without interruption or loss of civil service status or privilege.
  (g) TERMINATION OF THE COMMISSION- The Commission shall terminate 90 days
  after submitting the final report required by subsection (d).
  (h) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated
  a total of $1,000,000 for fiscal years 1991 and 1992 to carry out this part.
PART H--REGIONAL LITERACY RESOURCE CENTERS
REGIONAL LITERACY RESOURCE CENTERS
  SEC. 1781. Part B of the Adult Education Act (20 U.S.C. 1203 et seq.) is
  amended--
  (1) by redesignating subpart 7 as subpart 8; and
  (2) by inserting after subpart 6 the following:
`Subpart 7--Regional Literacy Resource Centers
`REGIONAL LITERACY RESOURCE CENTERS
  `SEC. 356. (a) PURPOSE- It is the purpose of this section to assist State
  and local public and private nonprofit efforts to improve literacy through
  a program of regional literacy resource center grants to--
  `(1) stimulate the coordination of literacy services;
  `(2) enhance the capacity of State and local organizations to provide
  literacy services.
  `(b) REGIONAL RESOURCE CENTERS- The Secretary, from funds available
  for this subpart, shall make grants to or enter into contracts with,
  State educational agencies, local educational agencies, State offices
  on literacy, volunteer organizations, community-based organizations,
  institutions of higher education, or other nonprofit entities to operate
  regional literacy resource centers in such regions of the United States
  as the Secretary determines are appropriate.
  `(c) USE OF FUNDS- Funds awarded under subsection (b) to carry out this
  section shall be used to conduct such activities as--
  `(1) improving and promoting the dissemination and adoption of teaching
  methods, technologies, and program evaluations;
  `(2) developing innovative approaches to the coordination of literacy
  services within and among States and with the Federal Government;
  `(3) assisting public and private agencies in coordinating the delivery
  of literacy services;
  `(4) encouraging government and industry partnerships, including partnerships
  with small businesses, private nonprofit organizations, and community-based
  organizations for the delivery of literacy services;
  `(5) encouraging innovation and experimentation in literacy activities that
  will enhance the delivery of literacy services and address emerging problems;
  `(6) providing technical assistance to State and local governments
  and service providers to improve literacy programs and access to such
  programs; and
  `(7) providing training and technical assistance to literacy instructors
  in reading instruction and in--
  `(A) selecting and making the most effective use of methodologies,
  instructional materials, and technologies such as--
  `(i) computer-assisted instruction;
  `(ii) video tapes;
  `(iii) interactive systems; and
  `(iv) data link systems; or
  `(B) assessing learning styles, screening for learning disabilities,
  and providing individualized remedial reading instruction.
  `(d) APPLICATIONS- Each entity that desires to receive an award under this
  section for a regional adult literacy resource center shall submit to the
  Secretary an application that describes how the applicant will--
  `(1) develop a literacy resource center or expand an existing literacy
  resource center;
  `(2) provide services and activities with the assistance provided under
  this section;
  `(3) ensure access to services of the center for the maximum participation
  of all public and private programs and organizations providing or seeking
  to provide basic skills instruction, including local educational agencies,
  agencies responsible for corrections education, service delivery areas under
  the Job Training Partnership Act, welfare agencies, labor organizations,
  businesses, volunteer groups, and community-based organizations;
  `(4) develop procedures for the coordination of literacy activities conducted
  within the States of the region by public and private organizations,
  and for enhancing the systems of service delivery;
  `(5) secure approval of the Governors of each State in the region, to ensure
  that the regional literacy resource center serves the needs of the State,
  as identified in the four-year plan developed under section 342 of this Act;
  `(6) evaluate the effectiveness of the services and activities supported
  by the center, including the provision of such information as the Secretary
  may require; and
  `(7) meet the cost-sharing requirements of subsection (e).
  `(e) PAYMENTS; FEDERAL SHARE- (1) The Secretary shall pay to each entity
  having an application approved pursuant to subsection (d) the Federal
  share of the cost of the activities described in the application.
  `(2) The Federal share--
  `(A) for each of the first two fiscal years in which the applicant receives
  funds under this section shall not exceed 80 percent;
  `(B) for each of the third and fourth fiscal years in which the applicant
  receives funds under this section shall not exceed 70 percent; and
  `(C) for the fifth fiscal year in which the applicant receives funds under
  this section shall not exceed 60 percent.
  `(3) The non-Federal share of payments under this section may be in cash
  or in kind, fairly evaluated, including plant, equipment, or services.
  `(h) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated
  to carry out the provisions of this section $5,000,000 for fiscal year
  1992, and such sums as may be necessary for each of the four succeeding
  fiscal years.'.
PART I--GENERAL PROVISIONS
DEFINITIONS
  SEC. 1791. Except as otherwise provided, as used in this title--
  (1) the terms `elementary school', `local educational agency', `secondary
  school', and `State educational agency' have the meanings given them in
  section 1471 of the Elementary and Secondary Education Act of 1965;
  (2) the term `Governor' means the chief executive of each State;
  (3) the term `Secretary' means the Secretary of Education; and
  (4) the term `State' means each of the 50 States, the District of Columbia,
  the Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin Islands,
  the Commonwealth of the Northern Islands, and Palau (until the effective
  date of the Compact of Free Association with the Government of Palau).
INSULAR AREAS
  SEC. 1792. The provisions of Public Law 95-134, permitting the consolidation
  of grants to the Insular Areas, shall not apply to funds received by such
  area under this title.
EFFECTIVE DATE
  SEC. 1793. This title shall take effect on enactment.
TITLE XVIII--STUDENT FINANCIAL ASSISTANCE IMPROVEMENTS ACT OF 1992
SHORT TITLE
  SEC. 1801. This title may be cited as the `Student Financial Assistance
  Improvements Act of 1992'.
EXTENSION OF PELL GRANT PROGRAM AUTHORITY
  SEC. 1802. Section 411(a)(1) of the Higher Education Act of 1965 (20
  U.S.C. 1001 et seq.; hereinafter in this title referred to as the Act)
  is amended by striking out `September 30, 1992,' and inserting in lieu
  thereof `September 30, 1993,'.
AMOUNT OF PELL GRANTS
  SEC. 1803. Section 411(b) of the Act is amended to read as follows:
  `(b) AMOUNT OF GRANTS- (1)(A) The amount of a basic grant for a student
  eligible under this subpart shall be the lesser of--
  `(i) the maximum award specified in paragraph (2), less an amount equal
  to the amount determined in accordance with Part F of this title to be the
  expected family contribution with respect to that student for that year; or
  `(ii) the percentage, specified in paragraph (3), of the amount of the
  student's need for financial assistance (as defined in section 471).
  `(B) In any case in which a student attends an institution of higher
  education on less than a full-time basis (including a student who attends
  an institution of higher education on less than a half-time basis) during
  any award year, the amount of the basic grant for which that student
  is eligible shall be reduced in proportion to the extent to which that
  student is not so attending on a full-time basis, in accordance with a
  schedule of reductions established by the Secretary for this purpose and
  published in the Federal Register.
  `(2) The maximum amount of an award under this subpart shall be $3,700
  for award year 1993-1994 and the four succeeding award years.
  `(3) The percentage of the amount of a student's need for financial
  assistance to be used in paragraph (1)(A)(ii) shall be--
  `(A) 80 percent, if the family of the student has a total income (excluding
  the income of the dependent student) of $10,000 or less;
  `(B) 75 percent, if the family of the student has a total income (excluding
  the income of the dependent student) of between $10,001 and $15,000,
  inclusive;
  `(C) 69 percent, if the family of the student has a total income (excluding
  the income of the dependent student) of between $15,001 and $20,000,
  inclusive; and
  `(D) 55 percent, if the family of the student has a total income (excluding
  the income of the dependent student) of $20,001 or more.
  `(4) Except as provided in subsection (g)(2), no basic grant shall be
  awarded to a student under this subpart if the amount of that grant for
  that student as determined under this subsection for any award year would
  be less than $200.'.
PERIOD OF ELIGIBILITY FOR PELL GRANTS
  SEC. 1804. Section 411(c) of the Act is amended--
  (1) in paragraph (1)--
  (A) in the matter preceding subparagraph (A), by striking out `period
  required' through `attendance' and inserting in lieu thereof the following:
  `period normally required for the completion of the first undergraduate
  baccalaureate course of study,'; and
  (B) by amending subparagraph (A) to read as follows:
  `(A) such period may not exceed the full-time equivalent of--
  `(i) three academic years in the aggregate in the case of all undergraduate
  degree or certificate programs normally requiring two years or less;
  `(ii) five academic years in the aggregate in the case of all undergraduate
  degree or certificate programs normally requiring more than two years
  but not more than four years, including any period for which the student
  received a Pell Grant in accordance with clause (i); or
  `(ii) six academic years in the aggregate in the case of all undergraduate
  degree or certificate programs normally requiring more than four years,
  including any period for which the student received a Pell Grant in
  accordance with clause (i) or (ii);'; and
  (2) in paragraph (3), by striking out `is entitled to' and inserting in
  lieu thereof `shall'.
PELL GRANT NEED ANALYSIS REPEALS
  SEC. 1805. Sections 411A, 411B, 411C, 411D, 411E, and 411F of the Act
  are repealed.
LIMITATIONS ON AMOUNTS OF LOANS COVERED BY FEDERAL INSURANCE
  SEC. 1806. Section 424(a) of the Act is amended by striking out `1992.' and
  inserting in lieu thereof `1993.'.
LOAN LIMITS; LESS THAN HALF-TIME ATTENDANCE
  SEC. 1807. (a) Section 425(a) of the Act is amended--
  (1) in paragraph (1)--
  (A) in subparagraph (A)--
  (i) in clause (i), by striking out `$2,625,' and inserting in lieu thereof
  `$3,500,';
  (ii) in clause (ii), by striking out `$4,000,' and inserting in lieu thereof
  `$5,000,'; and
  (iii) in clause (iii), by striking out `(as defined in regulations of
  the Secretary)';
  (B) in subparagraph (B), by striking out the first sentence therein; and
  (2) in paragraph (2)(A)--
  (A) in clause (i), by striking out `$17,500,' and inserting in lieu thereof
  `$22,000,'; and
  (B) in clause (ii)--
  (I) by striking out `$54,750,' and inserting in lieu thereof `$59,500,'; and
  (II) by striking out `as defined by regulations of the Secretary and'.
  (b) Section 427 of the Act is amended--
  (1) in subsection (a)--
  (A) by amending paragraph (1) to read as follows:
  `(1) made to a student who (A) is an eligible student under section 484,
  and (B) has agreed to notify promptly the holder of the loan concerning
  any change of address; and'; and
  (B) in paragraph (2)(B)(i), by striking out the semicolon at the end
  thereof and inserting in lieu thereof `and subsection (d)'; and
  (2) by adding at the end thereof the following new subsection:
  `(d) SPECIAL RULE FOR LESS THAN HALF-TIME STUDENTS- A borrower who is
  attending an eligible institution on a less than half-time basis (as
  determined by the institution)--
  `(1) shall be required to--
  `(A) repay any loans received while attending an eligible institution
  on at least a half-time basis without regard to the borrower's less than
  half-time attendance; and
  `(B) commence repayment of any loans received under this part while attending
  on a less than half-time basis immediately upon ceasing such attendance; and
  `(2) may receive deferments under subsection (a)(2)(C)(ii) for loans
  received while attending on a less than half-time basis.'.
  (c) Section 428(b) of the Act is amended--
  (1) in paragraph (1)--
  (A) in subparagraph (A)--
  (i) in the matter preceding clause (i), by striking out `who is carrying
  at an eligible institution at least one-half the normal full-time academic
  workload (as determined by the institution)' and inserting in lieu thereof
  `who is enrolled at an eligible institution,';
  (ii) in clause (i), by striking out `$2,625,' and inserting in lieu thereof
  `$3,500,';
  (iii) in clause (ii), by striking out `$4,000,' and inserting in lieu
  thereof `$5,000,'; and
  (iv) in the matter immediately following clause (iii), by striking out
  `in cases' through `but'and inserting in lieu thereof `that';
  (B) in subparagraph (B)--
  (i) in clause (i), by striking out `$17,250,' and inserting in lieu thereof
  `$22,000,'; and
  (ii) in clause (ii), by striking out `$54,750,' and inserting in lieu
  thereof `$59,500,'; and
  (2) by adding at the end thereof the following new paragraph:
  `(7) SPECIAL RULE FOR LESS THAN HALF-TIME STUDENTS- A borrower who is
  attending an eligible institution on at less than half-time basis (as
  determined by the institution)--
  `(A) shall be required to--
  `(i) repay any loans received while attending an eligible institution
  on a least a half-time basis without regard to the borrower's less than
  half-time attendance; and
  `(ii) commence repayment of any loans received under this part while
  attending on a less than half-time basis immediately upon ceasing such
  attendance; and
  `(B) may receive deferments under paragraph (1)(M)(ii) for loans received
  while attending on a less than half-time basis.'.
  (c) Section 428A(b) of the Act is amended by amending paragraphs (1) and
  (2) to read as follows:
  `(1) ANNUAL LIMITS- Subject to paragraphs (2) and (3), the amount a student
  may borrow in any academic year or its equivalent (as determined by the
  Secretary) may not exceed--
  `(A) $2,500, in the case of a student who has not successfully completed
  the first year of a program of undergraduate education and who is enrolled
  in a program of less than one academic year (defined for this purpose as
  24 semester or trimester hours, 36 quarter hours, or 900 clock hours);
  `(B) $4,000, in the case of a student who has not successfully completed
  the first year of a program  of undergraduate education and who is enrolled
  in a program of at least one academic year in length;
  `(C) $6,000, in the case of a student who has successfully completed such
  first year, but who has not successfully completed the remainder of a
  program of undergraduate education; or
  `(D) $10,000, in the case of a graduate or professional student.
  `(2) AGGREGATE LIMITS- The aggregate insured principal amount for insured
  loans made to any student under this section, exclusive of interest
  capitalized under subsection (c), shall not exceed--
  `(A) $28,000, in the case of a student who has not successfully completed
  a program of undergraduate education; and
  `(B) $50,000, in the case of a graduate or professional student, including
  any loans made to such student under this section before he or she became
  a graduate or professional student.'.
GRADUATED REPAYMENT
  SEC. 1808. (a) Section 427 of the Act is amended--
  (1) in subsection (a)(2)--
  (A) in subparagraph (G), by striking out the `and' at the end thereof;
  (B) by redesignating subparagraph (H) as subparagraph (J); and
  (C) by inserting immediately following subparagraph (G) the following
  new subparagraph:
  `(H) provides that, not more than 6 months prior to the date on which
  the borrower's first payment on a loan is due, the lender shall offer the
  borrower the option of repaying the loan in accordance with a graduated
  repayment schedule, provided that such schedule does not result in negative
  amortization of the loan, provides for the repayment of only accrued
  interest during the first 12 months of repayment, and, after the fourth
  year of repayment, requires the borrower to resume repayment on an equal
  installment basis in an amount sufficient to satisfy the requirements of
  subparagraph (B);'.
  (b) Section 428 of the Act is further amended--
  (1) in subsection (a)(2)(A)(III), by striking out `and' at the end
  thereof; and
  (2) in subsection (b)(1)--
  (A) by amending subparagraph (E) to read as follows:
  `(E) subject to subparagraphs (D) and (L), and except as provided by
  subparagraph (M), provides that (i) not more than 6 months prior to the
  date on which the borrower's first payment is due, the lender shall offer
  the borrower of a loan made, insured, or guaranteed under this section
  or section 428A the option of repaying the loan in accordance with a
  graduated repayment schedule, provided that such schedule does not result
  in negative amortization of the loan, provides for the repayment of only
  accrued interest during the first 12 months of repayment, and, after the
  fourth year of repayment, requires the borrower to resume repayment on an
  equal installment basis in an amount sufficient to satisfy the requirements
  of clause (ii), and (ii) repayment of loans shall be in installments over
  a period of not less than 5 years (unless the student, during the 6 months
  immediately preceding the start of the repayment period, specifically
  requests that repayment be made over a shorter period) nor more than 10
  years, beginning 6 months after the month in which the student ceases to
  carry at least one-half the normal full-time academic workload as determined
  by the institution;'.
LOAN CERTIFICATION BY ELIGIBLE INSTITUTIONS
  SEC. 1809. Section 428(a)(2)(F) of the Act is amended by striking out
  `under this part,' through the end thereof and inserting in lieu thereof
  `under this part.'
DEFERMENTS
  SEC. 1810. (a) Section 427(a)(2)(C) of the Act is amended--
  (1) in clause (i), by striking out the subclause designations `(I)',
  `(II)', and `(III)';
  (2) by redesignating clauses (i) through (xi) as subclauses (I) through
  (XI), respectively;
  (3) by inserting immediately preceding subclause (I) (as redesignated in
  paragraph (2)) the following new  clause:
  `(i) for a loan made to cover a period of instruction beginning before
  October 1, 1992--';
  (4) in subclause (XI) (as redesignated by paragraph (2)), by striking out
  the comma at the end thereof and inserting in lieu thereof a semicolon and
  `or'; and
  (5) by inserting immediately after clause (i) the following new clause:
  `(ii) except as provided in subsection (d), for a loan made to cover a
  period of instruction beginning on or after October 1, 1992--
  `(I) during which the borrower is pursuing a full-time course of study
  leading to a degree or certificate at an eligible institution, is pursing
  at least a half-time course of study (as determined by the institution)
  leading to a degree or certificate during an enrollment period for which
  the student has obtained a loan under this part, or is pursuing a course of
  study pursuant to a graduate fellowship program approved by the Secretary
  or pursuant to a rehabilitation training program for disabled individuals
  approved by the Secretary; or
  `(II) not in excess of three years in the aggregate, during which the
  borrower demonstrates a financial inability to make the required repayments
  of principal and interest because of exceptional circumstances that meet
  criteria established by the Secretary pursuant to regulations.'.
  (b) Section 428(b) of the Act is further amended--
  (1) in paragraph (1)--
  (A) in subparagraph (M)--
  (i) in clause (i), by striking out the subclause designations `(I)',
  `(II)', and `(III)';
  (ii) by redesignating clauses (i) through (xi) as subclauses (I) through
  (XI), respectively;
  (iii) by inserting immediately preceding subclause (I) (as redesignated
  in paragraph (2)) the following new clause:
  `(i) for a loan made to cover a period of instruction beginning before
  October 1, 1992--';
  (iv) in subclause (XI) (as redesignated by paragraph (2)), by adding at
  the end thereof `or'; and
  (v) by inserting immediately after clause (i) the following new clause:
  `(ii) except as provided in paragraph (7), for a loan made to cover a
  period of instruction beginning on or after October 1, 1992--
  `(I) during which the borrower is pursuing a full-time course of study
  leading to a degree or certificate at an eligible institution, is pursuing
  at least a half-time course of study (as determined by the institution)
  leading to a degree or certificate during an enrollment period for which
  the student has obtained a loan under this part, or is pursuing a course of
  study pursuant to a graduate fellowship program approved by the Secretary
  or pursuant to a rehabilitation training program for disabled individuals
  approved by the Secretary; or
  `(II) not in excess of three years in the aggregate, during which the
  borrower demonstrates a financial inability to make the required repayments
  of principal and interest because of exceptional circumstances that meet
  criteria established by the Secretary pursuant to regulations.'; and
  (B) in subparagraph (V)--
  (i) in clause (i), by striking out `and' at the end thereof;
  (ii) in clause (ii), by striking out `clause (i),' and clause (i).' and
  inserting in lieu thereof `clause (i) or (ii),' and `clause (i) or (ii).',
  respectively;
  (iii) by redesignating clause (ii) as clause (iii); and
  (iv) by inserting immediately following clause (i) the following new clause:
  `(ii) provides that, upon written request, a lender shall grant a borrower
  forbearance, renewable at 12-month intervals for up to three years,
  under which no payments of interest or principal may be required, but the
  interest that accrues shall be added to the principal amount of the loan,
  if the borrower--
  `(I) is serving under the Peace Corps Act or the Domestic Volunteer Service
  Act of 1973; and
  `(II) does not qualify for the deferment described in subparagraph
  (M)(ii)(II); and'.
  (c) Section 428A(c)(2) of the Act is amended by striking out `sections
  427(a)(2)(C)(i) and 428(b)(1)(M)(i)' and inserting in lieu thereof `sections
  427(a)(2)(C) and 428(b)(1)(M)'.
  (d) Section 428B(c)(1) of the Act is amended--
  (1) by striking out `clause (i), (viii) or (ix)' and inserting in lieu
  thereof `subclause (I), (VIII), or (IX) of clause (i), or clause (ii)'; and
  (2) by striking out `clause (i) of either such section.' and inserting in
  lieu thereof `clause (i)(I) of either such section.'.
CHANGES IN FEDERAL REINSURANCE COVERAGE
  SEC. 1811. Section 428(c) of the Act is amended--
  (1) in paragraph (1)--
  (A) in subparagraph (A), by striking out the period at the end thereof and
  inserting in lieu thereof a comma and `or 45 days after the guaranty agency
  discharges its insurance obligation on the loan, whichever is later.'; and
  (B) by amending subparagraph (B) to read as follows:--
  `(B) Notwithstanding subparagraph (A)--
  `(i) if, for any fiscal year, the amount of such reimbursement payments
  by the Secretary under this subsection exceeds 5 percent of the amount
  of the loans which are insured by such guaranty agency under such program
  and which were in repayment at the end of the preceding fiscal year, the
  amount to be paid as reimbursement under this subsection for such excess
  shall be equal to 90 percent of the amount of such excess;
  `(ii) if, for any fiscal year, the amount of such reimbursement payments
  exceeds 9 percent of such loans, the amount to be paid as reimbursement
  under this subsection for such excess shall be equal to 80 percent of such
  excess; and
  `(iii) if, with respect to the end of any fiscal year, a guaranty agency is
  being reimbursed at the level described in clause (i) or (ii), the initial
  reimbursement payments by the Secretary with respect to the beginning of
  the next succeeding fiscal year shall be calculated at such level until
  the Secretary determines, based on data submitted by the guaranty agency,
  that it meets the requirements of this subsection for reimbursement at a
  different level. Upon the Secretary's determination, the reimbursement
  payments by the Secretary shall be adjusted accordingly, including any
  underpayment or overpayment of the initial reimbursement payments.'; and
  (2) in paragraph (7)--
  (A) in subparagraph (A)(i), by inserting immediately following `1977'
  a comma and `but before October 1, 1992';
  (B) in subparagraph (B), by inserting `or (B)' immediately following `(A)';
  (C) by redesignating subparagraph (B) as subparagraph (C); and
  (D) by inserting immediately following subparagraph (A) the following
  new subparagraph:
  `(B) Notwithstanding paragraph (1)(B), the Secretary may pay a guaranty
  agency 100 percent of the amount expended by it in discharge of its
  insurance obligation for any fiscal year--
  `(i) which begins on or after October 1, 1992; and
  `(ii) which is either the fiscal year in which such guaranty agency begins
  to actively carry on a student loan insurance program which is subject to
  a guaranty agreement under subsection (b), or is one of the four succeeding
  fiscal years.'.
DELAYED LOAN DISBURSEMENT
  SEC. 1812. Section 428G(b) of the Act is amended--
  (1) by amending the subsection heading to read as follows: `TIMING OF
  FIRST DISBURSEMENT- '; and
  (2) by amending paragraph (1) to read as follows:
  `(1) LOANS TO FIRST-YEAR STUDENTS- In the case of a borrower who is entering
  the first year of a program of undergraduate education--
  `(A) at an institution with a cohort default rate equal to or greater than
  30 percent, the institution shall not disburse the first installment of
  the proceeds of any loan made, insured, or guaranteed in accordance with
  section 427, 428, or 428A prior to 60 days after classes have begun for
  the period of enrollment for which the loan is obtained; or
  `(B) at an institution with a cohort default rate less than 30 percent,
  the institution shall not disburse the first installment of the proceeds
  of any loan made, insured, or guaranteed in accordance with sections 427,
  428, or 428A prior to 30 days after classes have begun for the period of
  enrollment for which the loan is obtained.'.
LIMITATIONS, SUSPENSIONS, TERMINATIONS, OTHER HEARING PROCEDURES, AND FINES
  SEC. 1813. Section 432 of the Act is amended--
  (1) in subsection (a)(3), by striking out `on the record,' and inserting
  in lieu thereof a comma;
  (2) in subsection (g)--
  (A) in paragraph (1), by striking out `on the record,' and inserting in
  lieu thereof a comma;
  (B) by striking out paragraphs (2), (3), and (4); and
  (C) by redesignating paragraphs (5) and (6) as paragraphs (2) and (3),
  respectively;
  (3) in subsection (h)--
  (A) in paragraph (2)--
  (i) in subparagraph (A)--
  (I) in the first sentence therein, by striking out `shall, in accordance
  with sections 556 and 557 of title 5, United States Code,' and inserting
  in lieu thereof `shall'; and
  (II) in the second sentence therein, by striking out `The Secretary'
  through `disqualification--' and inserting in lieu thereof the following:
  `The Secretary shall impose any or all sanctions, imposed by the guaranty
  agency, on the participation of the lender in the student loan insurance
  program of each of the guaranty agencies under this part, and notify such
  guaranty agencies of the imposition of such sanctions--';
  (ii) in subparagraph (B), by striking out `disqualification' each place
  it appears and inserting in lieu thereof `sanctions'; and
  (iii) by redesignating subparagraph (B) as subparagraph (C); and
  (iv) by inserting immediately following subparagraph (A) the following
  new paragraph:
  `(B) The Secretary's review under this paragraph of the limitation,
  suspension, or termination imposed by a guaranty agency pursuant to section
  428(b)(1)(U) shall be limited to--
  `(i) a review of the written record of the proceedings in which the guaranty
  agency imposed such sanctions; and
  `(ii) a determination as to whether the guaranty agency complied with
  section 428(b)(1)(U) and any notice and hearing requirements specified in
  regulations prescribed under this part.'; and
  (B) in paragraph (3)--
  (i) in subparagraph (A)--
  (I) in the first sentence therein, by striking out `shall, in accordance
  with sections 556 and 557 of title 5, United States Code,' and inserting
  in lieu thereof `shall'; and
  (II) in the second sentence therein, by striking out `The Secretary'
  through `disqualification--' and inserting in lieu thereof the following:
  `The Secretary shall impose any or all sanctions, imposed by the guaranty
  agency, on the participation of the institution in the student loan
  insurance program of each of the guaranty agencies under this part, and
  notify such guaranty agencies of the imposition of such sanctions--';
  (ii) in subparagraph (B), by striking out `disqualification' each place
  it appears and inserting in lieu thereof `sanctions';
  (iii) by redesignating subparagraph (B) as subparagraph (C); and
  (iv) by inserting immediately following subparagraph (A) the following
  new subparagraph:
  `(B) The Secretary's review under this paragraph of the limitation,
  suspension, or termination imposed by a guaranty agency pursuant to section
  428(b)(1)(T) shall be limited to--
  `(i) a review of the written record of the proceedings in which the guaranty
  agency imposed such sanctions; and
  `(ii) a determination as to whether the guaranty agency complied with
  section 428(b)(1)(T) and any notice and hearing requirements specified in
  regulations prescribed under this part.'.
  (b) Section 428(b)(1)(T) of the Act is amended by striking out `as in
  effect on January 1, 1985'.
RESTRICTIONS ON GUARANTY AGENCY OFFICERS AND EMPLOYEES
  SEC. 1814. Section 428(b) of the Act is further amended by adding at the
  end thereof the following new paragraph:
  `(7) RESTRICTIONS ON GUARANTY AGENCY OFFICERS AND EMPLOYEES- No guaranty
  agency shall permit any of its officers or employees, or any member of
  their immediate families, to have a direct financial interest in, or serve
  as an officer or employee of, any lender, secondary market, contractor,
  or servicer with which the guaranty agency does business.'.
GUARANTY AGENCY INFORMATION
  SEC. 1815. (a) Section 428 of the Act is further amended--
  (1) in subsection (c)(2)(B) by striking out `as the Secretary may reasonably
  require to carry out the Secretary's functions under this subsection,' and
  inserting in lieu thereof `including financial information, as the Secretary
  may reasonably require to carry out the Secretary's functions under this
  part and protect the financial interest of the United States,'; and
  (2) in subsection (f)--
  (A) in paragraph (1)(B)--
  (i) by inserting `subject to paragraph (3),'; and
  (ii) by striking out `according to the provisions of this subparagraph.' and
  inserting in lieu thereof `according to the provisions of this subsection.',
  respectively; and
  (B) by adding at the end thereof the following new paragraph:
  `(3) PROVISIONS OF FINANCIAL INFORMATION- The Secretary is authorized
  to reduce or withhold payments under this subsection until the guaranty
  agency provides the information required under subsection (c)(2)(B).'.
ADMINISTRATIVE COST ALLOWANCE
  SEC. 1816. Section 428(f)(1)(B) of the Act is further amended, in the first
  sentence therein, by striking out `equal to' through the end thereof and
  inserting in lieu thereof `equal to the lesser of one percent of loan
  volume or actual administrative costs, as estimated in accordance with
  criteria prescribed by the Secretary.'.
COLLECTION RETENTION ALLOWANCE
  SEC. 1817. Section 428(c)(6)(A)(ii) of the Act is amended by striking out
  `30 percent of such payments (subject to subparagraph (D) of this paragraph)'
  and inserting in lieu thereof `the lesser of 30 percent of such payments,
  or the cost of collection on that loan, as estimated in accordance with
  criteria prescribed by the Secretary in regulations,'.
GUARANTY AGENCY OVERSIGHT
  SEC. 1818. Section 432 of the Act is amended by adding at the end thereof
  the following new subsections:
  `(k) GUARANTY AGENCY MANAGEMENT PLANS- (1) If the ratio of a guaranty
  agency's reserve funds to its outstanding guarantees is less than a level
  set by the Secretary, or the Secretary otherwise determines that the
  administrative or financial condition of the guaranty agency jeopardizes
  its continued ability to perform its responsibilities under its guaranty
  agreement, the Secretary may, in order to protect the financial interest
  of the United States, require the guaranty agency to submit and implement
  a management plan acceptable to the Secretary.
  `(2) A management plan under this subsection shall include the means by
  which the guaranty agency will improve its financial and administrative
  condition. The management plan may include, but is not limited to, the
  limitation of administrative expenditures, the increase of the insurance
  premium charged to borrowers, up to the maximum prescribed in section
  428(b)(1)(H), and the increase of the ratio of guaranty agency's reserve
  funds to outstanding guarantees.
  `(3) If the guaranty agency fails to submit a management plan acceptable
  to the Secretary, or the Secretary determines that the guaranty agency has
  failed to improve substantially its administrative and financial condition in
  accordance with its management plan under this subsection, the Secretary may
  terminate the guaranty agency's agreement in accordance with subsection (l).
  `(l) TERMINATION OF GUARANTY AGENCY'S AGREEMENT- If the guaranty agency does
  not satisfy the requirements of subsection (k), or the Secretary otherwise
  determines that the guaranty agency is no longer able to perform its
  responsibilities under its guaranty agreement, the Secretary is authorized,
  in order to protect the financial interest of the United States, after
  notice and opportunity for a hearing, to terminate the guaranty agency's
  agreement under this part.
  `(m) AUTHORITY OF THE SECRETARY TO ASSUME GUARANTY AGENCY FUNCTIONS-
  (1) If a guaranty agency terminates its agreement under this part, or
  its guaranty agreement is terminated by the Secretary under subsection
  (1), the Secretary is authorized, to the extent the Secretary determines
  is necessary to protect the financial interest of the United States and
  carry out the purposes of this part, to--
  `(A) assume responsibility for the functions of the guaranty agency under
  its loan insurance program, including, but not limited to--
  `(i) ensuring the exercise of due diligence by lenders in making, servicing,
  and collecting loans;
  `(ii) requiring lenders to submit the information necessary to determine
  the amount of interest benefits and special allowance payments payable on
  loans guaranteed under the guaranty agency's loan insurance program;
  `(iii) requiring the timely filing by lenders of default, death, disability,
  and bankruptcy claims;
  `(iv) paying default claims made by lenders;
  `(v) monitoring the participation of institutions and lenders in the loan
  insurance program, including requiring the submission of any necessary
  information;
  `(vi) the limitation, suspension, or termination of the participation of
  an institution or lender;
  `(vii) monitoring the enrollment status of student borrowers; and
  `(viii) reporting to national credit bureaus in accordance with section 430A;
  `(B) require the guaranty agency to assign or otherwise provide, without
  compensation, to the Secretary any of the guaranty agency's assets, books,
  records, computer software, and equipment that the Secretary determines
  are necessary to carry out the functions assumed by the Secretary under
  subparagraph (A); and
  `(C) take such other action as the Secretary determines is appropriate to
  ensure the continued availability of loans made under this part to residents
  of the State or States in which the guaranty agency did business, and the
  proper servicing of loans guaranteed by the guaranty agency prior to the
  Secretary's assumption of its responsibilities, including the transfer of
  such guaranty agency's functions and assets to another entity.
  `(2) Nothing in this subsection shall require the Secretary to guarantee new
  loans as part of the guaranty agency functions assumed under paragraph (1),
  or to serve as a lender of last resort in accordance with section 428(j).
  `(3) The Secretary's liability for any outstanding liabilities of a guaranty
  agency, the functions of which the Secretary has assumed, shall not exceed
  the fair market value of the assets assigned by the guaranty agency to
  the Secretary in accordance with paragraph (1)(B), minus any necessary
  liquidation or other administrative costs.'.
COST SHARING BY STATES
  SEC. 1819. Section 428 of the Act is amended by adding at the end thereof
  the following new subsections:
  `(m) STATE BACKING OF GUARANTY AGENCIES- (1) Notwithstanding any other
  provision of law, a State shall guarantee, with the full faith and credit of
  the State, or its equivalent, all loans guaranteed under this part by the
  guaranty agency designated for the State for borrowers who are attending
  eligible institutions in that State.
  `(2) In addition to the designated guaranty agency specified in paragraph
  (1), a State may elect to guarantee, with the full faith and credit of
  the State, loans guaranteed under this part by any other guaranty agency
  for borrowers who are attending eligible institutions in that State.
  `(3) In the event that a guaranty agency whose loan guarantees are guaranteed
  by a State under paragraph (1) or (2) is unable to discharge its insurance
  obligation incurred on loans under its loan insurance program, the State
  shall be responsible for discharging such obligations, as well as the
  administrative costs associated with transferring the operations of that
  guaranty agency to another entity.
  `(4) If a State discharges the insurance obligations of a guaranty agency
  under paragraph (3), the Secretary shall pay the State the amount such
  guaranty agency would have otherwise received as reimbursement under
  subsection (c).
  `(5) Unless a State demonstrates to the satisfaction of the Secretary that it
  has taken any steps necessary to satisfy the requirements of paragraph (1) by
  January 1, 1994, the Secretary shall assess institutions of higher education
  participating in the program under this part that are located in that State
  a fee based on the risk of financial loss to the Federal Government that
  the State would otherwise assume under this subsection. Such fees shall
  be deposited in student loan insurance fund described in section 431.
  `(n) STATE SHARE OF DEFAULT COSTS- (1) For any institution of higher
  education that has a cohort default rate, determined on the basis of the
  most recent fiscal years for which data are available, that exceeds the
  percentage specified in paragraph (3), the State in which such institution
  is located shall pay to the Secretary an amount equal to one half of the
  percentage of new loan volume attributable to such institution that is
  equal to the percentage by which such institution's cohort default rate
  exceeds the percentage specified in paragraph (3).
  `(2) A State may charge a fee to an institution of higher education that
  participates in the program under this part and is located in that State
  according to a fee structure, approved by the Secretary, that is based on
  the institution's cohort default rate and the State's risk of loss under
  this subsection.
  `(3) For purposes of paragraph (1), the cohort default rate percentage
  shall be--
  `(A) 25 percent for fiscal year 1993; and
  `(B) 20 percent for fiscal year 1994 and succeeding fiscal years.'.
GUARANTEED STUDENT LOAN PROGRAM DEFINITIONS
  `SEC. 1820. Section 435 of the Act is amended--
  (1) by amending subsection (a) to read as follows:
  `(a) ELIGIBLE INSTITUTION- The term `eligible institution' means an
  institution of higher education, as defined in section 481.';
  (2) by striking out subsections (b), (c), and (n);
  (3) in subsection (m)--
  (A) by inserting the paragraph designation `(1)' immediately following
  the subsection heading;
  (B) in the first sentence, by striking out `The term' and inserting in
  lieu thereof `In general, the term'; and
  (C) by adding at the end thereof the following new paragraphs:
  `(2) For purposes of the definition in paragraph (1) only, a loan made in
  accordance with section 428A shall not be considered to enter repayment
  until after the borrower has ceased to be enrolled in a course of study
  leading to a degree or certificate at an eligible institution on at least
  a half-time basis (as determined by the institution) and ceased to be in
  a period of deferment based on such enrollment. Each eligible lender of a
  loan made under section 428A shall provide the guaranty agency with the
  information necessary to determine when the loan entered repayment for
  purposes of this subsection, and the guaranty agency shall provide such
  information to the Secretary.
  `(3) For purposes of calculating the cohort default rates for lenders
  or other holders of loans made under this part, references to lenders or
  other holders, as the case may be, shall be substituted for references to
  institutions in paragraph (1).'; and
  (4) by redesignating subsections (d) through (m) as subsections (b) through
  (k), respectively.
SPECIAL ALLOWANCE
  SEC. 1821. Section 438(b)(2) of the Act is amended--
  (1) in subparagraph (A), by striking out `subparagraphs (B), (C), and (D)'
  and inserting in lieu thereof `subparagraphs (B), (C), (D), (E) and (F)'; and
  (2) by adding at the end thereof the following new subparagraphs:
  `(E) In the case of a holder of loans for which the cohort default rate
  exceeds 20 percent, subparagraph (A)(iii) shall be applied by substituting
  `3 percent' for `3.25 percent'.
  `(F) In the case of a lender who does not provide to the guaranty agency
  the information required under section 435(k)(2), subparagraph (A)(iii)
  shall be applied by substituting `3 percent' for `3.25 percent'.'.
AMOUNT OF NEED
  SEC. 1821. Section 471 of the Act is amended by striking out the
  parenthetical therein.
COST OF ATTENDANCE
  SEC. 1822. Section 472 of the Act is amended--
  (1) by amending the matter immediately preceding paragraph (1) to read
  as follows: `Except as provided in subsections (b) and (c) and subject
  to section 478, for purposes of this title, the term `cost of attendance'
  means--'
  (2) by amending paragraph (1) to read as follows:
  `(1) tuition and uniform compulsory fees normally assessed a student carrying
  the same academic workload, as determined by the institution at which the
  student is in attendance for any award year, without regard to whether
  the student receives grant, loan, or work assistance under this title;'
  (3) in paragraph (3)--
  (A) in the matter immediately preceding subparagraph (A), by inserting
  immediately following `institution' the following: `without regard to whether
  the student receives grant, loan, or work assistance under this title';
  (B) in subparagraph (A), by striking out `$1,500' and inserting in lieu
  thereof `$1,700'; and
  (C) in subparagraph (C), by striking out `$2,500' and inserting in lieu
  thereof `$2,300';
  (4) by inserting the subsection designation `(a)' immediately following
  `SEC. 472.'; and
  (5) by adding at the end thereof the following new subsection:
  `(b) For the purpose of subpart 1 of part A of this title--
  `(1) tuition and fees to be used in determining the student's cost of
  attendance in accordance with subsection (a)(1) shall be first calculated on
  the basis of a full-time academic workload, and then adjusted in accordance
  with section 411(b)(1)(B);
  `(2) the allowance for room and board costs, books, equipment, supplies,
  transportation, and miscellaneous personal expenses incurred by the student
  to be used in determining the student's cost of attendance in accordance
  with subsection (a) shall not exceed--
  `(A) $1,700 for a student without dependents residing at home with his or
  her parents; and
  `(B) $2,300 for all other students;
`except that if, for an award year after award year 1992-1993, the standard
maintenance allowances specified in sections 475(c)(4) and 477(b)(4) are
increased or decreased by the Secretary in accordance with section 478, then
the dollar amounts specified in paragraphs (1) and (2) shall be increased
or decreased by a percentage equal to such percentage increase or decrease
in such standard maintenance allowances; and
  `(3) the allowance for dependent care to be used in determining the
  student's cost of attendance in accordance with subsection (a)(7) shall
  not exceed $1,000.'.
FAMILY CONTRIBUTION DEFINED
  SEC. 1823. Section 473 of the Act is amended by striking out `subparts 1
  and 3' and inserting in lieu thereof `subpart 3'.
DATA ELEMENTS
  SEC. 1824. Section 474 of the Act is amended--
  (1) by amending paragraphs (1), (2), and (3) to read as follows:
  `(1) the available income of (A) the student and his or her parents,
  in the case of a dependent student, or (B) the student (and spouse),
  in the case of an independent student;
  `(2) the number of (A) dependents of the parents of the student, in the
  case of a dependent student, or (B) dependents of the student (and spouse),
  in the case of an independent student;
  `(3) the number of (A) dependents of the parents of the student, in the
  case of a dependent student, who are enrolled in, on at least a half-time
  basis, a program of postsecondary education and for whom the family may
  reasonably be expected to contribute to their postsecondary education, or
  (B) dependents of the student (and spouse), in the case of an independent
  student, who are so enrolled and for whom such contribution may reasonably
  be expected;';
  (2) in paragraph (4)(B), by striking out `(and spouse)'; and
  (3) in paragraph (6)--
  (i) in subparagraph (A), by striking out `the student and the student's
  parents,' and inserting in lieu thereof `the student's parents and the
  dependents of the parents, including the student,'; and
  (ii) in subparagraph (B), by inserting `spouse and' immediately following
  `his or her'.
FAMILY CONTRIBUTION FOR DEPENDENT STUDENTS
  SEC. 1825. Section 475 of the Act is amended--
  (1) in subsection (a), by striking out `(and spouse)' each place it appears;
  (2) in subsection (b)--
  (A) in paragraph (1)--
  (i) in subparagraph (B), by adding `and' at the end thereof;
  (ii) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii),
  respectively;
  (iii) by inserting the subparagraph designation `(A)' immediately following
  the paragraph designation; and
  (iv) by adding at the end thereof the following new subparagraph:
  `(B) if the amount determined under subparagraph (A) is a negative amount,
  setting the parents' adjusted available income at zero, and converting such
  negative amount to a positive number and using it to increase the adjustment
  to student income (determined in accordance with subsection (g)(2));'
  (B) in paragraph (3), by striking out the semicolon at the end thereof
  and inserting in lieu thereof a period; and
  (C) by striking out the matter immediately following paragraph (3);
  (3) in subsection (c)--
  (A) in paragraph (2), in the table therein, by striking out `$15,000 more'
  and inserting in lieu thereof `$15,000 or more';
  (B) in paragraph (4), by amending the table therein to read as follows:
`Standard Maintenance Allowance
----------------------------------------------------------------------------------------------------------------
  Family size (including student) Number in College
                                                  1      2      3       4
                                                  5 For each additional
                                                  subtract:
----------------------------------------------------------------------------------------------------------------
                                2           $10,520 $8,720
                                3            13,100 11,310 $9,510
                                4            16,180 14,380 12,590 $10,790
                                5            19,090 17,290 15,500  13,700
                                $10,650
                                6            22,330 20,530 18,740  16,940
                                15,150                        $1,790
         For each additional add:             2,520  2,520  2,520   2,520
         2,520                            ';
----------------------------------------------------------------------------------------------------------------
  (C) in paragraph (5)--
  (i) by striking out `$2,100' each place it appears and inserting in lieu
  thereof `$2,500'; and
  (ii) by striking out `1987-1988,' and inserting in lieu thereof `1992-1993,';
  and
  (D) in paragraph (7), by striking out `instructional';
  (4) in subsection (d)--
  (A) in paragraph (1), by striking out the period at the end thereof and
  inserting in lieu thereof a semicolon and the following:
`except that the amount determined under this paragraph shall not be less
than zero.';
  (B) in paragraph (2)--
  (i) by amending subparagraph (B) to read as follows:
  `(B) the net value of investments and real estate, including the net value
  of the principal place of residence, as defined in section 480(i); and `; and
  (ii) in subparagraph (C)--
  (I) by striking out `a business or farm' and `such business or farm' and
  inserting in lieu thereof `business or farm assets' and `such business or
  farm assets', respectively; and
  (II) by amending the table therein to read as follows:
`Adjusted Net Worth of Business or Farm Assets
------------------------------------------------------------------------------------------------
  If the net worth of business or farm assets is-- Then the adjusted net
worth is:
------------------------------------------------------------------------------------------------
  Less than $1                                     $0
  $1-$75,000                                       $0 + 40 percent of NW
  $75,001-$225,000                                 $30,000 + 50 percent of
  NW over $75,000
  $225,001-$375,000                                $105,000 + 60 percent of
  NW over $225,000
  $375,001 or more                                 $195,000 + 100 percent
  of NW over $375,000';
------------------------------------------------------------------------------------------------
and
  (B) in paragraph (3), by amending the table therein to read as follows:
`Asset Protection Allowance for Families and Students
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     If there is one parent,
and the age of that parent is, or if there are two parents, and the average
age of both parents is-- And there are
                                                                                                                                                                                  one
                                                                                                                                                                                  parent
                                                                                                                                                                                  two
                                                                                                                                                                                  parents
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
            then the asset protection allowance is-- 25 or less
            $0                    $0
                                                     26
                                                     400                1,600
                                                     27
                                                     700                3,200
                                                     28
                                                     1,100              4,800
                                                     29
                                                     1,500              6,400
                                                     30
                                                     1,900              8,000
                                                     31
                                                     2,200              9,600
                                                     32
                                                     2,600             11,200
                                                     33
                                                     3,000             12,800
                                                     34
                                                     3,400             14,400
                                                     35
                                                     3,700             16,000
                                                     36
                                                     4,100             17,600
                                                     37
                                                     4,500             19,200
                                                     38
                                                     4,900             20,800
                                                     39
                                                     5,200             22,400
                                                     40
                                                     5,600             24,000
                                                     41
                                                     5,800             24,600
                                                     42
                                                     5,900             25,100
                                                     43
                                                     6,000             25,700
                                                     44
                                                     6,200             26,100
                                                     45
                                                     6,300             26,800
                                                     46
                                                     6,500             27,400
                                                     47
                                                     6,700             28,000
                                                     48
                                                     6,900             28,600
                                                     49
                                                     7,100             29,300
                                                     50
                                                     7,200             30,000
                                                     51
                                                     7,500             30,800
                                                     52
                                                     7,700             31,500
                                                     53
                                                     7,900             32,300
                                                     54
                                                     8,200             33,200
                                                     55
                                                     8,400             34,000
                                                     56
                                                     8,600             34,800
                                                     57
                                                     8,900             35,800
                                                     58
                                                     9,200             36,700
                                                     59
                                                     9,500             37,800
                                                     60
                                                     9,800             38,800
                                                     61
                                                     10,100            40,000
                                                     62
                                                     10,500            41,100
                                                     63
                                                     10,800            42,300
                                                     64
                                                     11,200            43,400
                                                     65 or more
                                                     11,600           44,900';
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  (5) in subsection (e)--
  (A) by striking out `under section 479):' and inserting in lieu thereof
  `under section 478):'; and
  (B) by amending the table therein to read as follows:
`Parents' Assessment From Adjusted Available Income (AAI)
--------------------------------------------------------
  If AAI is--        Then the assessment is--
--------------------------------------------------------
  Less than zero     zero
  $0 to $9,400       22% of AAI
  $9,401 to $11,800  $2,068 + 25% of AAI over $9,400
  $11,801 to $14,200 $2,668 + 29% of AAI over $11,800
  $14,201 to $16,600 $3,364 + 34% of AAI over $14,200
  $16,601 to $19,000 $4,180 + 40% of AAI over $16,600
  $19,001 or more    $5,059 + 47% of AAI over $19,000';
--------------------------------------------------------
  (6) in subsection (g)--
  (A) by amending paragraph (1) to read as follows:
  `(1) IN GENERAL- The minimum student contribution from available income
  is equal to the greater of--
  `(A)(i) in the case of a student who has not completed the first year of
  undergraduate studies--
  `(I) zero, if the parents' total income is $12,000 or less;
  `(II) $500, if the parents' total income is between $12,001 and $15,000,
  inclusive; and
  `(III) $700, if the parents' total income is $15,001 or more; and
  `(ii) in the case of any other student--
  `(I) zero, if the parents' total income is $12,000 or less;
  `(II) $600, if the parents' total income is between $12,001 and $15,000,
  inclusive; and
  `(III) $900, if the parents' total income is $15,001 or more; or
  `(B) an amount equal to 70 percent of the student's total income (determined
  in accordance with section 480) minus the adjustment to student income
  (determined in accordance with paragraph (2));
`except that, if the amount determined in accordance with subsection (b)(1)(B)
results in a negative amount, then such negative amount shall be converted to
a positive number and  increase the adjustment to student income (determined
in accordance with paragraph (2)), except that the dependent student's
contribution from income shall not be reduced to less than zero.';
  (B) in paragraph (2)--
  (i) in the paragraph heading, by striking out `(AND SPOUSE)';
  (ii) by striking out `(and spouse)' each place it appears; and
  (iii) in subparagraph (A), by striking out `estimated'; and
  (C) in paragraph (4), by striking out `(and spouse)';
  (7) in subsection (h)--
  (A) in subsection heading, by striking out `(AND SPOUSE)';
  (B) by striking out `(and spouse)' each place it appears; and
  (C) by striking out `35 percent,' through the end thereof and inserting
  in lieu thereof `35 percent.'; and
  (8) in subsection (i), in the matter immediately preceding paragraph (1),
  by striking out `For' and inserting `Except for purposes of subpart 1 of
  part A, for'.
FAMILY CONTRIBUTION FOR MARRIED OR SINGLE INDEPENDENT STUDENTS WITHOUT
DEPENDENTS
  SEC. 1826. Section 476 of the Act is amended--
  (1) by amending the section heading to read as follows: `FAMILY CONTRIBUTION
  FOR MARRIED OR SINGLE INDEPENDENT STUDENTS WITHOUT DEPENDENTS';
  (2) in subsection (a)--
  (A) in the matter immediately preceding paragraph (1)--
  (i) by inserting `married or single' immediately following `For each'; and
  (ii) by striking out `(including a spouse),' and inserting in lieu thereof
  a comma;
  (B) in paragraph (1), by inserting `(and spouse's)' immediately following
  `student's'; and
  (C) in paragraph (2), by inserting `(and spouse's)' immediately following
  `student's';
  (3) in subsection (b)--
  (A) by amending the section heading to read as follows: `STUDENT'S (AND
  SPOUSE'S) CONTRIBUTION FROM INCOME- '
  (B) by amending paragraph (1) to read as follows:
  `(1)(A) IN GENERAL- Subject to subparagraph (B), the student's (and spouse's)
  contribution from income is determined by--
  `(i) adding student's (and spouse's) adjusted gross income and any income
  earned from work but not reported on a Federal income tax return, and
  subtracting excludable income (as defined in section 480);
  `(ii) computing the student's (and spouse's) available taxable income by
  deducting, from the amount determined under clause (i)--
  `(I) Federal income taxes;
  `(II) an allowance for State and local income taxes, determined in accordance
  with paragraph (2);
  `(III) the allowance for social security taxes, determined in accordance
  with paragraph (3);
  `(IV) an employment expense allowance, determined in accordance with
  paragraph (4); and
  `(V) a maintenance allowance of up to $610 per month, during periods of
  non-enrollment, for the independent student without dependents, and $5,310
  per year, for the spouse of the independent student without dependents,
  or amounts established by the Secretary in accordance with section 478;
  `(iii) assessing such available taxable income in accordance with paragraph
  (5); and
  `(iv) adding to the assessment resulting under clause (iii) the amount of
  the untaxed income and benefits of the student (and the student's spouse),
  determined in accordance with section 480(c).
  `(B) The student's (and spouses') minimum contribution from income shall
  be the greater of--
  `(i)(I) zero, if the student's (and spouse's) total income is $6,000 or less;
  `(II) $780, if the student' (and spouse's) total income is between $6,001
  and $12,000, inclusive; and
  `(III) $1,200, if the student's (and spouse's) total income is $12,001 or
  more; or
  `(ii) the amount calculated under subparagraph (A).';
  (C) in paragraph (3), by inserting `(and the student's spouse)' immediately
  following `student';
  (D) by redesignating paragraph (4) as paragraph (5);
  (E) by inserting immediately following paragraph (3) the following new
  paragraph:
  `(4) EMPLOYMENT EXPENSE ALLOWANCE- The employment expense allowance is
  determined as follows: If both the student and a spouse were employed in
  the year for which their income is reported and both have their incomes
  reported in determining the expected family contribution, such allowance
  is equal to the lesser of $2,500 or 35 percent of the earned income of the
  student or spouse with the lesser earned income. For any award year after
  award year 1992-1993, this paragraph shall be applied by increasing the
  dollar amount specified to reflect increases in the amount and percent of
  the Bureau of Labor Standards' budget of the marginal costs for meals away
  from home, apparel and upkeep, transportation, and housekeeping services
  for a two-earner versus a one-worker family.'; and
  (F) in paragraph (5) (as redesignated by subparagraph (D))--
  (i) in the matter preceding subparagraph (A)--
  (I) by inserting `(and spouse's)' immediately following `student's'; and
  (II) by striking out `paragraph (1)(A)' and inserting in lieu thereof
  `paragraph (1)(A)(i)';
  (ii) in subparagraph (A), by striking out `$8,600,' and inserting in lieu
  thereof `$10,800,'; and
  (iii) in subparagraph (B), by striking out `$8,600,', $6,020', and
  `$8,600.' and inserting in lieu thereof `$10,800,', `$7,560', and `$10,800.',
  respectively; and
  (4) in subsection (c)--
  (A) in the subsection heading, by inserting `(AND SPOUSE'S)' immediately
  following `STUDENT'S';
  (B) in paragraph (1), by inserting `(and spouse's)' after `student's'
  each place it appears;
  (C) in paragraph (2)--
  (i) in the paragraph heading, by inserting `(AND SPOUSE'S)' immediately
  following `STUDENT'S';
  (ii) in the matter immediately preceding subparagraph (A) by inserting
  `(and spouse's)' immediately following `student's';
  (iii) by amending subparagraph (B) to read as follows:
  `(B) the net value of investments and real estate, including the net value
  of the principal place of residence, as defined in section 480(i); and
  (iv) in subparagraph (C)--
  (I) by striking out `a business or farm' and `such business or farm' and
  inserting in lieu thereof `business or farm assets' and `such business or
  farm assets', respectively; and
  (II) by amending the table therein to read as follows:
`Adjusted Net Worth of Business or Farm Assets
-----------------------------------------------------------------------------------------------
 If the net worth of business or farm assets is-- Then the adjusted net
 worth is:
-----------------------------------------------------------------------------------------------
 Less than $1                                     $0
 $1-$75,000                                       $0 + 40 percent of NW
 $75,001-$225,000                                 $30,000 + 50 percent of
 NW over $75,000
 $225,001-$375,000                                $105,000 + 60 percent of
 NW over $225,000
 $375,001 or more                                 $195,000 + 100 percent of
 NW over $375,000';
-----------------------------------------------------------------------------------------------
and
  (D) by amending the table in paragraph (3) to read as follows:
`Asset Protection Allowance for Independent Students
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     If the age of the single
                                                     student, or the average
                                                     age of the student and
                                                     spouse, is-- And the
                                                     student is
                                                                                                                                          single
                                                                                                                                          married
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
            then the asset protection allowance is-- 25 or less
            $0                 $0
                                                     26
                                                     400                1,600
                                                     27
                                                     700                3,200
                                                     28
                                                     1,100              4,800
                                                     29
                                                     1,500              6,400
                                                     30
                                                     1,900              8,000
                                                     31
                                                     2,200              9,600
                                                     32
                                                     2,600              11,200
                                                     33
                                                     3,000              12,800
                                                     34
                                                     3,400              14,400
                                                     35
                                                     3,700              16,000
                                                     36
                                                     4,100              17,600
                                                     37
                                                     4,500              19,200
                                                     38
                                                     4,900              20,800
                                                     39
                                                     5,200              22,400
                                                     40
                                                     5,600              24,000
                                                     41
                                                     5,800              24,600
                                                     42
                                                     5,900              25,100
                                                     43
                                                     6,000              25,700
                                                     44
                                                     6,200              26,100
                                                     45
                                                     6,300              26,800
                                                     46
                                                     6,500              27,400
                                                     47
                                                     6,700              28,000
                                                     48
                                                     6,900              28,600
                                                     49
                                                     7,100              29,300
                                                     50
                                                     7,200              30,000
                                                     51
                                                     7,500              30,800
                                                     52
                                                     7,700              31,500
                                                     53
                                                     7,900              32,300
                                                     54
                                                     8,200              33,200
                                                     55
                                                     8,400              34,000
                                                     56
                                                     8,600              34,800
                                                     57
                                                     8,900              35,800
                                                     58
                                                     9,200              36,700
                                                     59
                                                     9,500              37,800
                                                     60
                                                     9,800              38,800
                                                     61
                                                     10,100             40,000
                                                     62
                                                     10,500             41,100
                                                     63
                                                     10,800             42,300
                                                     64
                                                     11,200             43,400
                                                     65 or more
                                                     11,600
                                                     44,900';
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
FAMILY CONTRIBUTION FOR MARRIED OR SINGLE INDEPENDENT STUDENTS WITH DEPENDENTS
  SEC. 1827. Section 477 of the Act is amended--
  (1) by amending the section heading to read as follows: `FAMILY CONTRIBUTION
  FOR MARRIED OR SINGLE INDEPENDENT STUDENTS WITH DEPENDENTS';
  (2) by amending subsection (a) to read as follows:
  `(a) COMPUTATION OF EXPECTED FAMILY CONTRIBUTION- For each married or single
  independent student with dependents, the expected family contribution is
  equal to--
  `(1) the sum of--
  `(A) the family's contribution from income (determined in accordance with
  subsection (b)); and
  `(B) the family's income supplemental amount from assets (determined in
  accordance with subsection (c)); divided by
  `(2) the number of family members who will be attending, on at least a
  half-time basis, a program of postsecondary education during the award
  period for which assistance under this title is requested;
`except that the amount determined under this subsection shall not be less
than zero.';
  (3) in subsection (b)--
  (A) by amending the subsection heading to read as follows: `FAMILY'S
  CONTRIBUTION FROM INCOME- '
  (B) by amending paragraph (1) to read as follows:
  `(1)(A) IN GENERAL- Subject to subparagraph (B), the family's contribution
  from income is determined by--
  `(i) calculating the family's available income by deducting from total
  income (as defined in section 480)--
  `(I) Federal income taxes;
  `(II) an allowance for State and other taxes, determined in accordance
  with paragraph (2);
  `(III) an allowance for social security taxes, determined in accordance
  with paragraph (3);
  `(IV) a standard maintenance allowance, determined in accordance with
  paragraph (4);
  `(V) an employment expense allowance, determined in accordance with paragraph
  (5);
  `(VI) a medical-dental expense allowance, determined in accordance with
  paragraph (6); and
  `(VII) an educational expense allowance, determined in accordance with
  paragraph (7); and
  `(ii) assessing the family's available income in accordance with subsection
  (d).
  `(B) The family's minimum contribution from income shall be the greater of--
  `(i)(I) zero, if the family's total income is $6,000 or less;
  `(II) $780, if the family's total income is between $6,001 and $12,000,
  inclusive; and
  `(III) $1,200, if the family's total income is $12,001 or more; or
  `(ii) the amount calculated under subparagraph (A).';
  (B) in paragraph (4)--
  (i) by striking out `section 479):' and inserting in lieu thereof `section
  478):'; and
  (ii) by amending the table therein to read as follows:
`Standard Maintenance Allowance
---------------------------------------------------------------------------------------------------------------
 Family size (including student) Number in College
                                                 1      2      3       4
                                                 5 For each additional
                                                 subtract:
---------------------------------------------------------------------------------------------------------------
                               2           $10,520 $8,720
                               3            13,100 11,310 $9,510
                               4            16,180 14,380 12,590 $10,790
                               5            19,090 17,290 15,500  13,700
                               $10,650
                               6            22,330 20,530 18,740  16,940
                               15,150                        $1,790
        For each additional add:             2,520  2,520  2,520   2,520
        2,520                            ';
---------------------------------------------------------------------------------------------------------------
  (C) in paragraph (5)--
  (i) by striking out `$2,100' each place it appears and inserting in lieu
  thereof `$2,500'; and
  (ii) by striking out `1987-1988,' and inserting in lieu thereof `1992-1993,';
  and
  (D) in paragraph (7), by striking out `instructional';
  (4) in subsection (c)--
  (A) in paragraph (1)--
  (i) in subparagraph (C), by striking out the period at the end thereof
  and inserting in lieu thereof a semicolon; and
  (ii) by adding at the end thereof the following:
`except that the family's income supplemental amount from assets shall not
be less than zero.';
  (B) in paragraph (2)--
  (i) by amending subparagraph (B) to read as follows:
  `(B) the net value of investments and real estate, including the net value
  of the principal place of residence, as defined in section 480(i); and'; and
  (ii) in subparagraph (C)--
  (I) by striking out `a business or farm' and `such business or farm' and
  inserting in lieu thereof `business or farm assets' and `such business or
  farm assets', respectively; and
  (II) by amending the table therein to read as follows:
`Adjusted Net Worth of Business or Farm
------------------------------------------------------------------------------------------
 If the net worth of a business or farm is-- Then the adjusted net worth is:
------------------------------------------------------------------------------------------
 Less than $1                                $0
 $1-$75,000                                  $0 + 40 percent of NW
 $75,001-$225,000                            $30,000 + 50 percent of NW
 over $75,000
 $225,001-$375,000                           $105,000 + 60 percent of NW
 over $225,000
 $375,001 or more                            $195,000 + 100 percent of NW
 over $375,000';
------------------------------------------------------------------------------------------
and
  (C) by amending the table in paragraph (3) to read as follows:
`Asset Protection Allowance for Independent Students
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     If the age of the single
                                                     student, or the average
                                                     age of the student and
                                                     spouse, is-- And the
                                                     student is
                                                                                                                                          single
                                                                                                                                          married
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
            then the asset protection allowance is-- 25 or less
            $0                       $0
                                                     26
                                                     400
                                                     1,600
                                                     27
                                                     700
                                                     3,200
                                                     28
                                                     1,100
                                                     4,800
                                                     29
                                                     1,500
                                                     6,400
                                                     30
                                                     1,900
                                                     8,000
                                                     31
                                                     2,200
                                                     9,600
                                                     32
                                                     2,600
                                                     11,200
                                                     33
                                                     3,000
                                                     12,800
                                                     34
                                                     3,400
                                                     14,400
                                                     35
                                                     3,700
                                                     16,000
                                                     36
                                                     4,100
                                                     17,600
                                                     37
                                                     4,500
                                                     19,200
                                                     38
                                                     4,900
                                                     20,800
                                                     39
                                                     5,200
                                                     22,400
                                                     40
                                                     5,600
                                                     24,000
                                                     41
                                                     5,800
                                                     24,600
                                                     42
                                                     5,900
                                                     25,100
                                                     43
                                                     6,000
                                                     25,700
                                                     44
                                                     6,200
                                                     26,100
                                                     45
                                                     6,300
                                                     26,800
                                                     46
                                                     6,500
                                                     27,400
                                                     47
                                                     6,700
                                                     28,000
                                                     48
                                                     6,900
                                                     28,600
                                                     49
                                                     7,100
                                                     29,300
                                                     50
                                                     7,200
                                                     30,000
                                                     51
                                                     7,500
                                                     30,800
                                                     52
                                                     7,700
                                                     31,500
                                                     53
                                                     7,900
                                                     32,300
                                                     54
                                                     8,200
                                                     33,200
                                                     55
                                                     8,400
                                                     34,000
                                                     56
                                                     8,600
                                                     34,800
                                                     57
                                                     8,900
                                                     35,800
                                                     58
                                                     9,200
                                                     36,700
                                                     59
                                                     9,500
                                                     37,800
                                                     60
                                                     9,800
                                                     38,800
                                                     61
                                                     10,100
                                                     40,000
                                                     62
                                                     10,500
                                                     41,100
                                                     63
                                                     10,800
                                                     42,300
                                                     64
                                                     11,200
                                                     43,400
                                                     65 or more
                                                     11,600
                                                     44,900';
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
and
  (5) in subsection (d)--
  (A) by striking out `adjusted';
  (B) by striking out in the first parenthetical `subsection (a)(1) and
  hereafter referred to as `AAI' and inserting in lieu thereof `subsection
  (b)(1)(A)(i)'; and
  (C) by amending the table therein to read as follows:
`Assessment From Available Income
-------------------------------------------------------------
 If available income is--           Then the assessment is--
-------------------------------------------------------------
 Less than zero                                         zero
 $0 to $9,400                                     22% of AAI
 $9,401 to $11,800           $2,068 + 25% of AAI over $9,400
 $11,801 to $14,200         $2,668 + 29% of AAI over $11,800
 $14,201 to $16,600         $3,364 + 34% of AAI over $14,200
 $16,601 to $19,000         $4,180 + 40% of AAI over $16,600
 $19,001 or more          $5,059 + 47% of AAI over $19,000';
-------------------------------------------------------------
UPDATED TABLES
  SEC. 1828. Section 478 of the Act is amended--
  (1) in the section heading, by striking out `REGULATIONS;';
  (2) by striking out subsection (a);
  (3) by striking out `academic year 1987-1988,' and `1986' each place
  each appears and inserting in lieu thereof `academic year 1992-1993,' and
  `1991', respectively;
  (4) in subsection (b), by striking out `and 477(b)(4). Such revised table'
  and inserting in lieu thereof `and 477(b)(4), and revised maintenance
  allowances for purposes of section 476(b)(1)(B)(ii)(V). Such revisions';
  (5) in subsection (c)(2), by striking out `$24,000', `$84,000', and
  `$156,000' and inserting in lieu thereof  `$30,000', `$105,000', and
  `$195,000';
  (6) by amending subsection (e) to read as follows:
  `(e) ASSESSMENT SCHEDULES AND RATES- For each academic year after academic
  year 1992-1993, the Secretary shall publish in the Federal Register revised
  tables of assessments for the purpose of sections 475(e), 476(b)(5),
  and 477(d). Such revised tables shall be developed--
  `(1) by increasing each dollar amount that refers to adjusted available
  income, available taxable income, and available income in sections
  475(e), 476(b)(5), and 477(d), respectively, by a percentage equal to the
  estimated percentage increase in the Consumer Price Index (as determined
  by the Secretary after consultation with the Advisory Committee on Student
  Financial Assistance) between December 1991 and the December next preceding
  the beginning of such academic year, rounded to the nearest $100; and
  `(2) adjusting the other dollar amounts to reflect the changes made pursuant
  to paragraph (1).'; and
  (7) by redesignating subsections (b), (c), (d), (e), and (f) as subsections
  (a), (b), (c), (d), and (e), respectively.
AID ADMINISTRATOR DISCRETION
  SEC. 1829. Section 479A of the Act is amended--
  (1) in subsection (a)--
  (A) by striking out the subsection designation and `IN GENERAL- '; and
  (B) by striking out `subparts 1 and 2' each place it appears and inserting
  in lieu thereof `subpart 2'; and
  (2) by striking out subsections (b) and (c).
INDEPENDENT STUDENT AND OTHER NEED ANALYSIS DEFINITIONS
  SEC. 1830. Section 480 of the Act is amended--
  (1) in subsection (a)--
  (A) in paragraph (1), by striking out `paragraphs (2) through (4),' and
  inserting in lieu thereof `paragraphs (2) and (3), and subsection (e),';
  (B) in paragraph (2), by striking out `subpart 2 of part A and parts B,
  C, and E of';
  (C) by striking out paragraph (3); and
  (D) by redesignating paragraph (4) as paragraph (3);
  (2) in subsection (b), by amending the matter preceding paragraph (1)
  to read as follows:
  `(b) UNTAXED INCOME AND BENEFITS- The term `untaxed income and benefits'
  when applied to parent contributions and the contributions of dependent
  students or independent students (with or without dependents) means--';
  (3) by striking out subsection (c), and inserting in lieu thereof the
  following new subsection:
  `(c) SECRETARIAL ADJUSTMENTS OF DATA ELEMENTS FOR SPECIAL CIRCUMSTANCES- The
  Secretary may prescribe regulations specifying situations in which the data
  elements considered in determining a student's expected family contribution
  may be modified to accommodate the special circumstances of the student.';
  (4) in subsection (d)--
  (A) in paragraph (1)(A), by striking out `24' and inserting in lieu thereof
  `26';
  (B) in paragraph (2)--
  (i) in subparagraph (C), by striking out `who declares' through the end
  thereof and inserting in lieu thereof a semicolon;
  (ii) in subparagraph (D), by striking out `who declares' through the end
  thereof and inserting in lieu thereof a semicolon; and
  (iii) by amending subparagraph (F) to read as follows:
  `(F) is a single undergraduate student with no dependents who--
  `(i) did not live with his or her parents for more than six weeks in the
  aggregate during the calendar year preceding the award year;
  `(ii) will not live with his or her parents for more than six weeks in
  the aggregate during the first calendar year of the award year; and
  `(iii) prior to the disbursal of assistance under this title, demonstrates
  to the student financial aid administrator self-sufficiency during each of
  the two calendar years preceding the award year by demonstrating annual
  total income (excluding resources from parents and student financial
  assistance and living allowances from programs established under the
  National and Community Service Act of 1990) that is equal to or exceeds
  the amount specified in the Department of Labor's Lower Living Standard
  Income Level, adjusted for a family size of one; or';
  (C) by striking out paragraphs (3) and (4); and
  (D) by adding at the end thereof the following new paragraph:
  `(3) An individual who meets the requirements of paragraphs (1) and (2)
  may, in unusual circumstances, be determined to be a dependent student by
  a student financial aid administrator, provided that such determination
  is documented.';
  (5) by striking out subsection (e);
  (6) by redesignating subsections (f), (g), (h), and (i) as subsections (e),
  (f), (i), and (j), respectively;
  (7) by inserting immediately following subsection (f) (as redesignated by
  paragraph (6)) the following new subsections:
  `(g) FARM ASSETS- The term `farm assets' means any property owned
  and used in the operation of a farm for profit, including real estate,
  livestock, livestock products, crops, farm machinery, and other equipment
  inventories. A farm is not considered to be operated for profit if crops
  or livestock are raised mainly for the consumption of the family, even if
  some income is derived from incidental sales.
  `(h) BUSINESS ASSETS- The term `business assets' means property that
  is used in the operation of a trade or business, including real estate,
  inventories, buildings, machinery, and other equipment, patents, franchise
  rights, and copyrights.';
  (8) by amending subsection (i) as redesignated in paragraph (6) to read
  as follows:
  `(i) NET VALUE- The `net value' of assets means the current market value
  at the time of application of the assets described in subsection (f), minus
  the outstanding liabilities or indebtedness against the assets, except that
  in the case of the principal place of residence, the net value of such
  residence shall be calculated by subtracting the outstanding liabilities
  or indebtedness from the lesser of--
  `(1) the value of such residence; or
  `(2) the total income of the parents (or the student and the student's
  spouse, as the case may be), multiplied by three.'; and
  (9) by adding at the end thereof the following new subsections:
  `(k) DEPENDENT OF THE STUDENT- Except as otherwise provided, the term
  `dependent of the student' means the student's dependent children and other
  persons (except the student's spouse) who live with and receive more than
  one-half of their support from the student and will continue to receive
  more than half of their support from the student during the award year.
  `(l) DEPENDENT OF THE PARENT- Except as otherwise provided, the term
  `dependent of the parent' means the student, any of the student's dependent
  children, dependent children of the student's parents, including those
  children who are deemed to be dependent students when applying for aid
  under this title, and other persons who live with and receive more than
  one-half of their support from the parent and will continue to receive
  more than half of their support from the parent during the award year.
  `(m) FAMILY SIZE- (1) In determining family size in the case of a dependent
  student--
  `(A) if the parents are not divorced or separated, family members include
  the student's parents, and the dependents of the student's parents including
  the student;
  `(B) if the parents are divorced or separated, family members include the
  parent whose income is included in computing available income and that
  parent's dependents, including the student; and
  `(C) if the parents are divorced and the parent whose income is so included
  is remarried, or if the parent was a widow or widower who has remarried,
  family members also include, in addition to those individuals referred to
  in subparagraph (B), the new spouse and any dependents of the new spouse
  if that spouse's income is included in determining available income or
  the student's contribution from income.
  `(2) In determining family size in the case of an independent student
  with dependents--
  `(A) family members include the student, the student's spouse, and the
  dependents of the student; and
  `(B) if the student is divorced or separated, family members do not include
  the spouse (or ex-spouse), but do include the student and the student's
  dependents.
  `(3) In determining family size in the case of an independent student
  without dependents--
  `(A) family members include the student and the student's spouse; and
  `(B) if the student is divorced or separated, family members do not include
  the spouse (or ex-spouse), but do include the student.'.
STUDENT FINANCIAL ASSISTANCE DEFINITIONS
  SEC. 1831. Section 481 of the Act is amended--
  (1) in subsection (a)--
  (A) in paragraph (1)--
  (i) in the matter preceding subparagraph (A)--
  (I) by striking out `Subject to subsection (e), for' and inserting in lieu
  thereof `For'; and
  (II) by striking out `and part B,' and inserting in lieu thereof a comma;
  (ii) by striking out subparagraph (B); and
  (iii) by redesignating subparagraphs (C) and (D) as subparagraphs (B) and
  (C), respectively; and
  (B) by adding at the end thereof the following new paragraph:
  `(4)(A) An institution whose cohort default rate, as defined in section
  435(k)(1), is equal to or greater than the threshold percentage specified in
  subparagraph (B) for each of the three most recent fiscal years for which
  data are available shall not be eligible to participate in a program under
  this title for the fiscal year for which the determination is made and
  for the two succeeding fiscal years, unless, within 30 days of receiving
  notification from the Secretary of the loss of eligibility under this
  paragraph, the institution appeals the loss of its eligibility to the
  Secretary. The Secretary shall issue a decision on any such appeal within
  45 days after its submission. Such decision may permit the institution to
  continue its participation in a program under this part if--
  `(i) the institution demonstrates to the satisfaction of the Secretary that
  the Secretary's calculation of its cohort default rate is not accurate, and
  that recalculation would reduce its cohort default rate for any of the three
  fiscal years below the threshold percentage specified in subparagraph (B); or
  `(ii) there are, in the judgment of the Secretary, exceptional mitigating
  circumstances that would make the application of this paragraph inequitable.
`During such appeal, the Secretary may permit the institution to continue
to participate in a program under this title.
  `(B) For purposes of determinations under subparagraph (A), the threshold
  percentage is--
  `(i) 35 percent for fiscal years 1991 and 1992;
  `(ii) 30 percent for fiscal year 1993; and
  `(iii) 25 percent for any succeeding fiscal year.
  `(C) Until July 1, 1994, this paragraph shall not apply to any institution
  that is--
  `(i) a part B institution within the meaning of section 322(2) of the Act;
  `(ii) a tribally controlled community college within the meaning of section
  2(a)(4) of the Tribally Controlled Community College Assistance Act of
  1978; or
  `(iii) a Navajo Community College under the Navajo Community College Act.'.
  (2) in subsection (b), by adding at the end thereof the following: `If the
  Secretary determines that a particular category of proprietary institution of
  higher education does not meet the requirements of paragraph (4) because
  there is no nationally recognized accrediting agency or association
  qualified to accredit institutions in such category, the Secretary may,
  pending the establishment of such an accrediting agency or association,
  appoint an advisory committee, composed of persons specially qualified to
  evaluate training provided by institutions in such category, which shall
  make recommendations to the Secretary concerning the standards of content,
  scope, and quality that must be met in order to qualify institutions in
  such category to participate in programs under this title, and whether
  particular schools not meeting the requirements of paragraph (4) meet
  the standards established by the Secretary after review of the standards
  recommended by the advisory committee.';
  (3) by striking out subsections (c) and (e); and
  (4) by redesignating subsection (d) as subsection (c).
AWARD MAXIMUMS FOR SHORT TERM PROGRAMS
  SEC. 1832. Part G of Title IV of the Act is further amended by inserting
  immediately after section 481 the following new section:
`AWARD MAXIMUMS FOR SHORT TERM PROGRAMS
  `SEC. 481A. The maximum grant or loan amount that may be awarded under
  any grant or loan program under this title to a student enrolled in any
  course of study of less than one academic year (defined for this purpose
  as 24 semester or trimester hours, 36 quarter hours, or 900 clock hours)
  shall not exceed the amount that bears the same relation to the annual
  statutory maximum for such grant or loan as the course of study measured
  in semester, trimester, quarter or clock hours bears to one academic year.'.
STUDENT ELIGIBILITY
  SEC. 1833. Section 484 of the Act is amended--
  (1) in subsection (a), by amending paragraph (2) to read as follows:
  `(2) satisfy the minimum academic achievement standards specified in
  subsection (c);';
  (2) in subsection (b)--
  (A) by amending paragraph (4) to read as follows:
  `(4) Notwithstanding subsection (a)(1), a student who is enrolled or accepted
  for enrollment in a program at an eligible institution that is necessary
  for a professional credential or certification in a State that is required
  for employment as a teacher in an elementary or secondary school in that
  State shall be eligible to apply for loans under part B of this title.'; and
  (B) by adding at the end thereof the following new paragraph:
  `(5) In order to be eligible to receive a loan under part B of this title
  (other than a loan under section 428C) a student who is enrolled at an
  institution on a less than half-time basis (as determined by the institution)
  shall be--
  `(A) enrolled in a program of study leading to a degree or certificate; or
  `(B) enrolled in training to prepare students for gainful employment in
  a recognized occupation.';
  (3) by amending subsection (c) to read as follows:
  `(c) MINIMUM ACADEMIC ACHIEVEMENT STANDARDS- For the purposes of subsection
  (a)(2), a student shall meet minimum academic achievement standards
  established by the institution. Such standards shall be established in
  accordance with the regulations of the Secretary and shall be at least
  as rigorous as the equivalent of a cumulative `C' average, unless the
  institution demonstrates to the satisfaction of the Secretary that a
  different standard is more appropriate for its students.';
  (4) in subsection (d), by striking out `approved by the Secretary.' and
  inserting in lieu thereof `that meets such standards for development,
  administration, and scoring as the Secretary may prescribe in regulations.';
  (5) by striking out subsections (f), (h), (i), and (j); and
  (6) by inserting immediately preceding subsection (g) the following new
  subsection:
  `(f) VERIFICATION OF IMMIGRATION STATUS- (1) The Secretary shall implement a
  system under which the statements and supporting documentation, if required,
  of an individual declaring that he or she satisfies the requirements of
  subsection (a)(5) shall be verified prior to the individual's receipt of
  grant, loan, or work assistance under this title.
  `(2) The Secretary is authorized to verify such statements and supporting
  documentation through a data match, using an automated or other system,
  with other Federal agencies that may be in possession of information
  relevant to such statements and supporting documentation.'.
REPEAL; INSTITUTIONAL REFUNDS
  SEC. 1834. (a) Section 486 of the Act is repealed.
  (b) Part G of the Title IV of the Act is amended by inserting immediately
  following section 485B the following new section:
`INSTITUTIONAL REFUNDS
  `SEC. 486. (a) Each institution of higher education participating in
  a program under this title shall have in effect a fair and equitable
  refund policy under which the institution refunds unearned tuition, fees,
  room and board, and other charges to a student who received grant, loan,
  or work assistance under this title, or whose parent received a loan made
  under section 428B on behalf of the student, if the student--
  `(1) does not register for the period of attendance for which the assistance
  was intended; or
  `(2) withdraws or otherwise fails to complete the period of enrollment
  for which the assistance was provided.
  `(b) The institution shall provide a written statement containing its
  refund policy, together with examples of the application of this policy,
  to a prospective student prior to the student's enrollment, and make its
  refund policy known to currently enrolled students. The institution shall
  include in its statement the procedures that a student must follow to
  obtain a refund, but whether or not the student follows those procedures,
  the institution shall, in accordance with subsection (e), pay to the lender
  the portion of a refund allocable to the student's loans made, insured,
  or guaranteed under section 427, 428, 428A, or 428B, and return the portion
  of the refund allocable to another program under title IV of the Act to the
  appropriate account for that program. If the institution changes its refund
  policy, it shall ensure that all students are made aware of the new policy.
  `(c) The institution's refund policy shall be considered to be fair and
  equitable for purposes of this section if that policy provides for a refund
  in an amount of at least the largest of the amounts provided under--
  `(1) the requirements of applicable State law;
  `(2) the specific refund requirements established by the institution's
  nationally recognized accrediting agency and approved by the Secretary;
  `(3) if no such standards exist, the specific refund policy standards
  set by another association of institutions of postsecondary education and
  approved by the Secretary; or
  `(4) the pro rata refund calculation described in subsection (d), except
  that this paragraph will not apply to the institution's refund policy for
  any student whose date of withdrawal from the institution is after the
  halfway point (in time) in the period of enrollment for which the student
  has been charged.
  `(d)(1) As used in this section, the term `pro rata refund' means a refund
  by the institution of not less than that portion of the tuition, fees,
  room and board, and other charges assessed the student by the institution
  equal to the portion of the period of enrollment for which the student has
  been charged that remains on the last recorded day of attendance by the
  student, rounded downward to the nearest 10 percent of that period, less
  any unpaid charges owed by the student for the period of enrollment for
  which the student has been charged, and less a reasonable administrative
  fee not to exceed the lesser of 5 percent of the tuition, fees, room and
  board, and other charges assessed the student, or $100.
  `(2) For purposes of paragraph (1), `the portion of the period of enrollment
  for which the student has been charged that remains' shall be determined--
  `(A) in the case of a program that is measured in credit hours, by dividing
  the total number of weeks comprising the period of enrollment for which
  the student has been charged into the number of weeks remaining in that
  period as of the last recorded day of attendance by the student;
  `(B) in the case of a program that is measured in clock hours, by dividing
  the total number of clock hours comprising the period of enrollment for
  which the student has been charged into the number of clock hours remaining
  to be completed by the student in that period as of the last recorded day
  of attendance by the student; and
  `(C) in the case of a correspondence program, by dividing the total number
  of lessons comprising the period of enrollment for which the student has been
  charged into the total number of such lessons not submitted by the student.
  `(e) For purposes of this section, a refund shall be credited against grant,
  loan, or work assistance awarded under this title on a pro rata basis.'.
  (c) Section 485(a)(1)(F) of the Act is amended by inserting a comma and
  `in accordance with section 486,' immediately following `institution'.
PROGRAM PARTICIPATION AGREEMENTS
  SEC. 1835. Section 487 of the Act is amended--
  (1) in subsection (a), by adding at the end thereof the following new
  paragraph:
  `(13) The institution acknowledges the authority of the Secretary,
  guaranty agencies, accrediting agencies, and State licensing bodies under
  section 1214 to share with each other any information pertaining to the
  institution's eligibility to participate in programs under this title.'.
  (2) in subsection (b)(2), by striking out `on the record';
  (3) in subsection (c)--
  (A) in paragraph (1)(D), by striking out `on the record,' and inserting
  in lieu thereof a comma; and
  (B) in paragraph (2)--
  (i) in subparagraph (A), by striking out `on the record,' and inserting
  in lieu thereof a comma; and
  (ii) in subparagraph (B)(i), by striking out `on the record,' and inserting
  in lieu thereof a comma.
DATA MATCHING
  SEC. 1836. Section 489A of the Act is amended--
  (1) in subsection (a)(1), by inserting a comma and `or of any State,'
  immediately following `the United States';
  (2) in subsection (b)--
  (A) in paragraph (1), by inserting `or of a State' immediately following
  `the United States'; and
  (B) in paragraph (3)(A), by inserting `or of a State' immediately following
  `the United States'; and
  (3) by adding at the end thereof the following new subsection:
  `(c) The Secretary of Labor  shall enter into an agreement with the
  Secretary to provide prompt access for the Secretary, in accordance with
  this section, to the wage and unemployment compensation claims information
  and data maintained by or for the Department of Labor or State employment
  security agencies.'.
AMENDMENTS TO OTHER LAWS
  SEC. 1837. Section 3(c) of the Higher Education Technical  Amendments of
  1991 (P.L. 102-26) is amended by striking out `that are brought before
  November 15, 1992'.
HIGHER EDUCATION ACT DEFINITIONS
  SEC. 1838. Section 1201(a) of the Act is amended--
  (1) in paragraph (2), by adding at the end thereof the following:
  `subject to such minimum State licensing standards as the Secretary may
  prescribe in regulations, which the relevant State licensing body shall
  impose upon institutions that it licenses, and with which an institution
  of postsecondary education would be required to comply in order to be
  eligible to participate in programs under this Act,';
  (2) by amending paragraph (5)(B) to read as follows:
  `(B) if the Secretary determines that a particular category of institutions
  is not so accredited because there is no nationally recognized accrediting
  agency or association qualified to accredit institutions in such category,
  the Secretary may, pending the establishment of such an accrediting agency
  or association, appoint an advisory committee, composed of persons specially
  qualified to evaluate training provided by institutions  in such category,
  which shall make recommendations to the Secretary concerning the standards
  of content, scope, and quality that must be met in order to qualify
  institutions in such category to participate in programs under this Act,
  and whether particular institutions not so accredited meet the standards
  established by the Secretary after review of the standards recommended by
  the advisory committee.';
  (3) by inserting immediately following the second sentence the following:
  `For purposes of title IV, such term also includes any school which provides
  not less than a six month  (or 600 clock hour) program of training to
  prepare students for gainful employment in a recognized  occupation,
  which has been in existence for at least two years, and which meets the
  requirements of clauses  (1), (2), (4), and (5).'; and
  (4) by adding at the end thereof the following: `If an institution is
  accredited by more than one accrediting body, the institution shall, for
  purposes of eligibility under this Act, designate one such accrediting
  body as its  primary  accreditor, either on an institutionwide basis or by
  program, and if the institution's accreditation is withdrawn, revoked, or
  otherwise terminated for cause by the primary accreditor, or the institution
  withdraws from accreditation by the primary accreditor voluntarily under
  a show cause or suspension order, the institution (or a program thereof)
  shall no longer be deemed to meet the requirements of clause (5) for 24
  months from the date of such withdrawal, revocation or termination, unless
  during such period of time the institution's accreditation is restored by
  the same accrediting agency which had accredited it prior to such withdrawal,
  revocation or termination.'.
SHARING OF INSTITUTIONAL ELIGIBILITY INFORMATION
  SEC. 1839. (a) Title XII of the Act is further amended by adding at the
  end thereof the following new section:
`SHARING OF INSTITUTIONAL ELIGIBILITY INFORMATION
  `SEC. 1214. SHARING OF INSTITUTIONAL ELIGIBILITY INFORMATION- Notwithstanding
  any other provision of Federal or State law, the Secretary, a guaranty
  agency, an accrediting agency, or a State licensing body--
  `(1) may provide any information in the Secretary's or its possession, as
  the case may be, if that information is relevant to an institution of higher
  education's eligibility to participate in programs under this title, to the
  Secretary, or any other entity specified in this section that accredits,
  licenses, or serves as the primary guaranty agency for that institution; and
  `(2) shall provide any such information to the Secretary, or any other
  entity specified in this section that accredits, licenses, or serves as
  the primary guaranty agency for that institution, as the case may be--
  `(A) if the Secretary or other entity in possession of such information
  is considering, or preparing for, an action that would adversely affect
  an institution's eligibility to participate in programs under this title; or
  `(B) upon the request of the Secretary or such other entity, if the Secretary
  or such other entity is considering, or preparing for, an action that would
  adversely affect an institution's eligibility to participate in programs
  under this title.'.
INELIGIBILITY FOR DEFAULT ON FEDERAL OBLIGATION
  SEC. 1840. (a) Title XII of the Act is further amended by adding at the
  end thereof the following new section:
`INELIGIBILITY FOR DEFAULT ON FEDERAL OBLIGATION
  `SEC. 1215. INELIGIBILITY FOR DEFAULT ON FEDERAL OBLIGATION- Notwithstanding
  any other provision of law, an individual who is in default on any loan made,
  insured, or guaranteed by the Federal Government shall not be eligible
  to receive any assistance under this Act unless satisfactory repayment
  arrangements are made with regard to such default.'.
EFFECTIVE DATES
  SEC. 1841. (a) Except as otherwise provided in this section, the amendments
  made by this title shall be effective on October 1, 1993.
  (b) The amendments made by sections 1807 and 1810 shall be effective for
  loans made in accordance with section 427 or 428 on or after the date of
  enactment to cover periods of instruction beginning on or after October 1,
  1992, or made on or after October 1, 1992 in the case of loans made in
  accordance with section 428A, 428B, or 428C of the Act.
  (c) The amendments made by sections 1803, 1804, 1820 (1), (2), and (4),
  1833, and 1838 shall be effective for periods of enrollment beginning on
  or after July 1, 1993.
  (d) The amendments made by sections 1805 and 1821 through 1830, inclusive,
  shall be effective for determinations of need for periods of enrollment
  beginning on or after July 1, 1993.
  (e) The amendments made by sections 1813, 1814, 1815, 1818, 1834, 1835,
  1839, and 1840 shall be effective 90 days after enactment.
  (f) The amendments made by sections 1809, 1836, and 1837 shall be effective
  on enactment.
  (g) The amendments made by section 1808 shall be effective for a loan made,
  insured, or guaranteed under part B of title IV of the Act, whenever made,
  for which the student borrower's first payment is due on or after 90 days
  after enactment.
TITLE XIX--NATIONAL ENERGY STRATEGY ACT
TABLE OF CONTENTS
Subtitle A--Residential, Commercial, and Federal Energy Use
Part 1--Consumer and Commercial Products
Sec. 1901. Definitions.
Sec. 1902. Coverage.
Sec. 1903. Test procedures.
Sec. 1904. Labeling.
Sec. 1905. Energy conservation standards.
Sec. 1906. Conforming amendment.
Part 2--Federal Energy Management
Sec. 1907. Utility incentive programs.
Subtitle B--Natural Gas
Part 1--Natural Gas Pipeline Regulatory Reform
Sec. 1908. Gas delivery interconnection.
Sec. 1909. NEPA compliance.
Sec. 1910. Amendment to section 311 of the Natural Gas Policy Act of 1978.
Sec. 1911. Optional certificate procedures.
Sec. 1912. Non-jurisdictional option.
Part 2--Natural Gas Import/Export Deregulation
Sec. 1913. Coverage of Natural Gas Act.
Sec. 1914. Definitions.
Sec. 1915. Natural gas imports and exports.
Part 3--Structural Reform of the Federal Energy Regulatory Commission
Sec. 1916. Natural Gas and Electricity Administration.
Subtitle C--Oil
Part 1--Naval Petroleum Reserve Leasing
Sec. 1917. Short title.
Sec. 1918. Leasing authorization.
Sec. 1919. Procedures to arrange and conduct a leasing action.
Sec. 1920. Privately owned lands and physical improvements.
Sec. 1921. Strategic Petroleum Reserve tie-in; Defense Petroleum Inventory.
Sec. 1922. Naval Petroleum Reserves Lease Proceeds Special Account and
revenue sharing with the State of California.
Sec. 1923. Congressional consultation.
Sec. 1924. Effect on school lands grant.
Sec. 1925. Conforming amendments.
Part 2--Oil Pipeline Deregulation
Sec. 1926. Short title.
Sec. 1927. Findings and purposes.
Sec. 1928. Regulatory reform and deregulation.
Sec. 1929. Conforming amendments.
Sec. 1930. Applicability of antitrust laws.
Sec. 1931. Severability.
Subtitle D--Electricity Generation and Use
Part 1--Public Utility Holding Company Act Reform
Sec. 1932. Definitions.
Sec. 1933. Exempt wholesale generators.
Sec. 1934. Ownership of exempt wholesale generators and qualifying facilities.
Sec. 1935. Federal and State authorities.
Subtitle E--Nuclear Power
Part 1--Licensing Reform
Sec. 1936. Combined licenses.
Sec. 1937. Rulemaking.
Sec. 1938. Conforming and technical amendments.
Sec. 1939. Effect on pending proceedings.
Part 2--Nuclear Waste Management
Sec. 1940. Repository site characterization.
Sec. 1941. Monitored retrievable storage facility.
Subtitle F--Renewable Energy
Part 1--PURPA Size Cap and Co-firing Reform
Sec. 1942. Federal Power Act definitions.
Sec. 1943. Utility purchasing and exemptions.
Part 2--Hydroelectric Power Regulatory Reform
Sec. 1944. Regulatory reform.
Sec. 1945. Removal of Commission authority over five megawatt projects.
Subtitle G--Alternative Fuel
Part 1--Alternative and Dual Fuel Vehicle Credits
Sec. 1946. Alternative and dual fuel cap removal.
Part 2--Alternative Transportation Fuels
Sec. 1947. Definitions.
Sec. 1948. Acquisition of alternative fuel vehicles.
Sec. 1949. Exception.
Sec. 1950. Credits.
Sec. 1951. Reports.
Sec. 1952. Enforcement.
Sec. 1953. Implementation.
Subtitle H--Innovation and Technology Transfer
Sec. 1954. Stevenson-Wydler amendments.
Sec. 1955. Royalty payments to authors.
Sec. 1956. Technical and conforming amendments.
Subtitle I--Tax Incentives
Sec. 1957. Energy investment tax credit.
Sec. 1958. Permanence of the research credit.
Subtitle A--Residential, Commercial and Federal Energy Use
PART 1--CONSUMER AND COMMERCIAL PRODUCTS
DEFINITIONS
  SEC. 1901. Section 321(a) of the Energy Policy and Conservation Act (42
  U.S.C. 6291(a)) is amended--
  (1) in paragraph (1) by inserting `electric lights and' after `includes';
  (2) in paragraph (2) by inserting `commercial or' before `consumer';
  (3) in paragraphs (4), (5), (7), (12), (13), (14), and (15) by striking
  `consumer' wherever it appears and inserting `covered' in its place;
  (4) in paragraph (6)(A) by striking `covered' and inserting `consumer'
  in its place;
  (5) in paragraph (27) by inserting `, other than a commercial water heater,'
  after `product'; and
  (6) by adding `(30) The term `commercial product' means an article which,
  to any significant extent, is distributed in commerce for commercial
  use.' after paragraph (29).
COVERAGE
  SEC. 1902. Section 322 of the Energy Policy and Conservation Act (42
  U.S.C. 6292) is amended--
  (1) in subsection (a)--
  (A) by striking `IN GENERAL' and inserting `CONSUMER PRODUCTS' in its place;
  (B) by redesignating paragraph `(14)' as paragraph `(15)'; and
  (C) by inserting `(14) Electric lights.' after paragraph (13); and
  (2) by adding the following subsection:
  `(c) COMMERCIAL PRODUCTS- The following commercial products are covered
  products:
  `(1) Commercial space heating equipment.
  `(2) Commercial space cooling equipment.
  `(3) Commercial ventilation equipment.
  `(4) Commercial water heaters.
  `(5) Commercial refrigeration equipment.
  `(6) Electric motors less than 25 horsepower.
  `(7) Office equipment.'.
TEST PROCEDURES
  SEC. 1903. Section 323(b)(1)(B) of the Energy Policy and Conservation Act
  (42 U.S.C. 6293(b)(1)(B)) is amended--
  (1) by inserting `commercial or' before `consumer'; and
  (2) by striking `322(b)' and inserting `322(a)(14), (b), or (c)'.
LABELING
  SEC. 1904. Section 324 of the Energy Policy and Conservation Act (42
  U.S.C. 6294) is amended--
  (1) in subsection (a)(2) by adding the following subparagraph after
  subparagraph (B):
  `(C) The Commission shall prescribe labeling rules under this section
  applicable to covered products specified in section 322(a)(14) or (c),
  except for a class of covered products for which the Commission determines--
  `(i) under the second sentence of section 324(b)(5), labeling in accordance
  with this section is not technologically or economically feasible, or
  `(ii) labeling in accordance with this section is not preferable to
  alternative approaches, including voluntary labeling programs, considering
  the benefits, burdens, and reliability of information of both approaches.';
  and
  (2) in sections 324(a)(3), (b)(1)(B), (b)(3), and (b)(5) by striking `(14)'
  whenever it appears and inserting `(15)' in its place.
ENERGY CONSERVATION STANDARDS
  SEC. 1905. Section 325 of the Energy Policy and Conservation Act (42
  U.S.C. 6295) is amended--
  (1) in subsection (a)(2) by striking `covered' and inserting `consumer'
  in its place;
  (2) in subsection (i) by striking `(14)' whenever it appears and inserting
  `(15)' in its place; and
  (3) by adding the following subsection:
  `(r) ELECTRIC LIGHTS AND COMMERCIAL PRODUCTS- The Secretary shall not
  prescribe energy conservation standards for electric lights or a commercial
  product specified in section 322(c).'.
CONFORMING AMENDMENT
  SEC. 1906. The catchline for part B, title III of the Energy Policy and
  Conservation Act is amended by inserting `Commercial and' before `Consumer'.
PART 2--FEDERAL ENERGY MANAGEMENT
UTILITY INCENTIVE PROGRAMS
  SEC. 1907. Part 3 of Title V of the National Energy Conservation Policy Act
  (42 U.S.C. 8251-8259) is amended by adding the following after section 549--
  `SEC. 550. UTILITY INCENTIVE PROGRAMS- Notwithstanding any other law,
  an agency may participate in any program conducted by a gas or electric
  utility for the management of energy demand or for the application of
  energy conservation measures to Federal buildings and may accept, retain,
  and use, without further appropriations, any financial incentive available
  from a gas or electric utility for the management of energy demand or
  for the application of energy conservation measures. Any cash incentive
  received from a gas or electric utility shall be credited to the same
  appropriations account from which an agency has paid, or is authorized to
  pay, funds needed to participate in the utility program.'.
Subtitle B--Natural Gas
PART 1--NATURAL GAS PIPELINE REGULATORY REFORM
GAS DELIVERY INTERCONNECTION
  SEC. 1908. Section 7(a) of the Natural Gas Act (15 U.S.C. 717f(a)) is
  amended to read as follows:
  `(a)(1) Whenever the Commission, after notice and opportunity for hearing,
  finds such action necessary or desirable in the public interest, it may
  by order direct a natural-gas company or a person who has constructed,
  extended, or acquired, or is operating a facility under section 7(k) of this
  Act to extend or improve its transportation facilities; to establish physical
  connection of its transportation facilities with the facilities of, and sell
  natural gas to, any person or municipality engaged or legally authorized
  to engage in the local distribution of natural or artificial gas to the
  public; and for such purpose to extend its transportation facilities to
  communities immediately adjacent to such facilities or to territory served
  by such natural-gas company or person, if the Commission finds that no
  undue burden will be placed upon the natural-gas company or person thereby.
  `(2) Upon the petition of any person, the Commission, by order, may direct a
  natural-gas company or a person who has constructed, extended, or acquired,
  or is operating a facility under section 7(k) of this Act to establish, at
  petitioner's expense, physical connection of its transportation facilities
  with the petitioner's facilities in order to receive natural gas from the
  petitioner's facilities.
  `(3) The Commission shall have no authority to--
  `(A) compel the enlargement of transportation facilities for purposes
  described in paragraphs (1) and (2) of this subsection, or
  `(B) compel a natural-gas company or a person who has constructed, extended,
  acquired, or who is operating a facility under section 7(k) of this Act
  to establish a physical connection or sell natural gas,
when to do so would impair its ability to render adequate service to its
customers.'.
NEPA COMPLIANCE
  SEC. 1909. (a) Section 7(c) of the Natural Gas Act (15 U.S.C. 717f(c))
  is amended by adding the following after paragraph (2):
  `(3) For purposes of the National Environmental Policy Act of 1969 (42
  U.S.C. 4321 et seq.), the authorization of construction or extension of
  facilities by issuance of a certificate of public convenience and necessity
  by the Commission is the only Federal action that is considered a major
  Federal action requiring a detailed statement on the environmental impact
  of the proposed action in connection with the construction or extension
  of facilities.'.
  (b) Notwithstanding any other law, the Commission may charge an applicant
  directly for environmental documentation costs the Commission incurs in
  processing applications filed for permission to construct and operate
  natural gas pipeline facilities under the Natural Gas Act (15 U.S.C. 717
  et seq.) and applications filed for hydroelectric licenses and relicenses
  under the Federal Power Act (15 U.S.C. 791 et seq.). Such a charge shall
  not be applied against the Commission's annual appropriations.
AMENDMENT TO SECTION 311 OF THE NATURAL GAS POLICY ACT OF 1978
  SEC. 1910. Section 311 of the Natural Gas Policy Act of 1978 (15 U.S.C. 3371)
  is amended by--
  (1) amending the catchline to read as follows:
`SEC. 311. AUTHORIZATION OF CERTAIN SALES, TRANSPORTATION, AND CONSTRUCTION.'
and
  (2) in subsection (a)--
  (A) amending paragraph (1)(A) to read as follows:
  `(A) IN GENERAL- The Commission shall authorize, by rule or order, any
  interstate pipeline to transport natural gas on behalf of--
  `(i) any intrastate pipeline,
  `(ii) any local distribution company, or
  `(iii) any other person.';
  (B) amending paragraph (2)(A) to read as follows:
  `(A) IN GENERAL- The Commission shall authorize, by rule or order, any
  intrastate pipeline to transport natural gas on behalf of--
  `(i) any interstate pipeline,
  `(ii) any local distribution company served by any interstate pipeline, or
  `(iii) any other person.'; and
  (C) adding the following after paragraph (2):
  `(3) CONSTRUCTION- Upon 30 days notification to the affected State
  commission, an interstate pipeline may construct facilities for
  transportation service provided under this subsection. Rates, terms,
  and conditions for services provided through facilities constructed for
  transportation service authorized under this subsection are not subject
  to State regulation.'.
OPTIONAL CERTIFICATE PROCEDURES
  SEC. 1911. (a) Section 4 of the Natural Gas Act, (15 U.S.C. 717c)
  is amended--
  (1) in subsection (a), by adding the following after `unlawful.'--
`A rate or charge made, demanded or received by any natural gas company in
connection with the transportation or sale of natural gas through facilities
authorized under section 7(i) of this Act is just and reasonable and complies
with subsection (b) of this section if the natural gas company and the person
paying the rate or charge mutually agree to that rate or charge.'; and
  (2) by adding the following subsection after subsection (e)--
  `(f) Subsections (c), (d), and (e) of this section do not apply to the
  transportation or sale of natural gas through facilities authorized by a
  certificate issued under section 7(i) of this Act.'.
  (b) Section 5(a) of the Natural Gas Act, (15 U.S.C. 717d) is amended by
  adding the following after the period--
`This subsection does not apply to any rate, charge, or classification by
a natural gas company in connection with transportation or sale of natural
gas through facilities authorized by a certificate issued under section 7(i)
of this Act.'.
  (c) Section 7 of the Natural Gas Act, (15 U.S.C. 717f) is amended--
  (1) in subsection (c)(1)(B), by striking the period after `interest'
  and inserting--
`: Provided further, That the Commission shall issue a certificate for the
construction, extension, or acquisition of facilities for the transportation
or sale of natural gas and for the operation of those facilities for that
purpose to a natural gas company that fulfills the terms and conditions
contained in section 7(i) without requiring a hearing or further proof that
the public convenience and necessity would be served by those facilities. Such
a certificate shall be nonexclusive and nonprejudicial to an application for
any other authorization under the Natural Gas Act or the Natural Gas Policy
Act.'; and
  (2) by adding the following two subsections after subsection (h)--
  `(i)(1) The Commission shall issue to an applicant a certificate of public
  convenience and necessity to undertake the construction or extension of any
  facilities if the following terms and conditions are attached to the issuance
  of the certificate and to the exercise of the rights granted under it--
  `(A) The applicant shall not include any costs or expenses it incurs in
  relation to the operation, sale, service, construction, extension, or
  acquisition of facilities covered by the certificate issued under this
  subsection in the rates and charges of any schedule required to be filed
  with the Commission under section 4(c);
  `(B) Notwithstanding section 15(a) of this Act, the holder of a certificate
  issued under this subsection shall not participate in any proceedings under
  this Act to consider the application for a certificate for the construction
  or extension of facilities that, upon completion, would serve the service
  area served by the facilities authorized by the holder's certificate issued
  under this subsection.
  `(2) The Commission shall issue to any applicant a certificate of public
  convenience and necessity authorizing the acquisition or operation of any
  facilities for which a certificate for the construction or extension has
  been issued under this subsection or for which abandonment of facilities
  or services subject to the jurisdiction of the Commission, including any
  sales or service rendered by means of such facilities, has been approved
  by the Commission under subsection (b) of this section if the terms and
  conditions in paragraph (1) (A) and (B) are attached to the issuance of
  the certificate and to the exercise of the rights granted under it.
  `(j)(1) If the Commission, after a hearing held upon the petition of a
  person who has made a bona-fide offer to enter into a contract, finds
  that the failure to provide a requested rate, charge, classification,
  or practice in connection with the transportation of natural gas through
  facilities constructed, extended, acquired, or operated under a certificate
  issued under either section 7(i) or section 7(k) of this Act is unduly
  discriminatory, the Commission, considering market conditions and, to the
  extent relevant, the entire range of rates and services provided to others
  for transportation through those facilities, shall determine the rates,
  charges, classifications, or practices which are not unduly discriminatory
  to be observed and in force with respect to transportation to be provided
  to the petitioner, and shall fix the same by order.
  `(2) A petition filed with the Commission under subsection (j)(1) shall
  contain a description of the transportation service sought, including the
  rates, charges, classifications, or practices requested by the petitioner,
  and the basis for asserting that the failure to provide the requested rates,
  charges, classifications, or practices is unduly discriminatory. Unless
  the Commission determines that capacity, in whole or in part, is not
  available to provide the transportation service sought by the petitioner,
  it shall issue an order within sixty days after the filing of the petition
  directing the requested transportation service to commence on the terms
  sought. However, if within sixty days of the filing of the petition,
  the person against whom the petition is filed responds by filing with the
  Commission the rates, charges, classifications, or practices which that
  person considers to be not unduly discriminatory for the service sought by
  the petitioner, the requested service shall commence sixty days after the
  filing of the petition, based upon the rates, charges, classifications,
  or practices filed in response, except to the extent the Commission finds
  capacity is not available. Any rate or charge collected on the basis of
  the response is subject to refund, with interest, by the person providing
  the transportation service for that portion which is collected in excess of
  rates or charges requested in the petition and which the Commission finds,
  after hearing, to be unduly discriminatory. The burden of proof to show that
  any rate or charge in excess of those filed in the petition is not unduly
  discriminatory is upon the person filing in response to the petition.'.
NONJURISDICTIONAL OPTION
  SEC. 1912. (a) Section 7 of the Natural Gas Act, (15 U.S.C. 717f) is
  amended as follows--
  (1) in subsection (c)(1)(A) by striking `No' and inserting in its place
  `Except as provided in section 311 of the Natural Gas Policy Act of 1978
  (15 U.S.C. 3371) or subsection (j) of this section, no', and
  (2) adding the following after subsection (j), as added by this subtitle--
  `(k)(1) A person may elect to construct, extend, acquire, or operate a
  facility for the transportation or sale of natural gas and engage in the
  transportation or sale of natural gas through that facility without a
  certificate of public convenience and necessity issued by the Commission
  under this section.
  `(2) If a person elects under this subsection not to obtain a certificate
  of public convenience and necessity--
  `(A) the person is not a natural-gas company for the purposes of this
  Act in relation to the construction, extension, acquisition, or operation
  of facilities under this subsection or any sales or services rendered by
  means of such facilities;
  `(B) notwithstanding section 15(a) of this Act, the person shall not
  participate in any proceeding under this Act to consider an application
  for a certificate for the construction or extension of facilities that,
  upon completion, would serve the service area served by the facility or
  extension constructed under this subsection;
  `(C) the construction or extension of a facility authorized under this
  subsection may be subject to regulation by a State; however, rates
  or charges for the transportation or sale of natural gas by means of a
  facility or extension authorized under this subsection are not subject to
  regulation by a State, except that they may be regulated if that facility
  or extension is engaged solely in activities described in section 1(c)
  of this Act (15 U.S.C. 717(c)).'.
  (b) Section 4 of the Natural Gas Act (15 U.S.C. 717c) is amended by
  adding after subsection (f) as added by this subtitle, the following
  new subsection--
  `(g) After a hearing held upon the application of a natural-gas company,
  if the Commission finds that the natural-gas company has demonstrated
  that a market that the natural-gas company is authorized to serve is
  competitive and that the natural-gas company's transportation or sales
  services are offered in that market on a not unduly discriminatory basis,
  the Commission may issue an order finding that the rates and charges made,
  demanded, or received by the natural-gas company for or in connection with
  the transportation or sale of natural gas in that market are not subject
  to the jurisdiction of the Commission under this Act. A hearing held under
  this section is subject to section 15 of this Act.'.
PART 2--NATURAL GAS IMPORT/EXPORT DEREGULATION
COVERAGE OF NATURAL GAS ACT
  SEC. 1913. Section 1(c) of the Natural Gas Act (15 U.S.C. 717(c)) is amended
  by inserting `or exported from such State' after `State' the second time
  it appears.
DEFINITIONS
  SEC. 1914. Section 2 of the Natural Gas Act (15 U.S.C. 717a) is amended--
  (1) in paragraph (7) by inserting `including a foreign country,' after
  `thereof,' both places it appears, and
  (2) by adding the following after paragraph (9):
  `(10) `Importation' means the actions involved in bringing natural gas
  into the United States.
  `(11) `Exportation' means the actions involved in taking natural gas out
  of the United States.'.
NATURAL GAS IMPORTS AND EXPORTS
  SEC. 1915. Section 3 of the Natural Gas Act (15 U.S.C. 717b) is amended
  to read as follows:
`EXPORTATION OR IMPORTATION OF NATURAL GAS
  `SEC. 3. (a) Importation of natural gas is considered a first sale
  for purposes of this Act and the Natural Gas Policy Act of 1978 (15
  U.S.C. 3301-3432).
  `(b) Neither the Commission nor a State may prohibit on condition the
  exportation or importation of natural gas or treat exported or imported
  natural gas while it is within the United States differently than any
  other natural gas.
  `(c) The President may prohibit or condition the exportation or importation
  of natural gas upon finding that it is in the national interest.
  `(d) Upon finding that the exportation or importation of natural gas is
  in the national interest, the President may waive any law relating to the
  exportation or importation of natural gas or may specify, by schedule or
  otherwise, when a particular law relating to the exportation or importation
  of natural gas is considered satisfied if the appropriate Federal or State
  agency has not taken final action.'.
PART 3--STRUCTURAL REFORM OF THE FEDERAL ENERGY REGULATORY COMMISSION
NATURAL GAS AND ELECTRICITY ADMINISTRATION
  SEC. 1916. (a) Section 2(a) of the Department of Energy Organization Act
  (42 U.S.C. 7101(a)) is amended by striking `, including the Federal Energy
  Regulatory Commission'.
  (b) Section 204 of the Department of Energy Organization Act (42 U.S.C. 7134)
  is amended to read as follows:
`NATURAL GAS AND ELECTRICITY ADMINISTRATION
  `SEC. 204. There shall be within the Department a Natural Gas and Electricity
  Administration established by title IV of this Act to be headed by an
  Administrator who shall be appointed by the President, by and with the
  advice and consent of the Senate, and who shall be compensated at the rate
  provided for in level III of the Executive Schedule under section 5314 of
  title 5, United States Code.'.
  (c) Section 301(b) of the Department of Energy Organization Act (42
  U.S.C. 7151(b)) is amended to read as follows:
  `(b) There are transferred to, and vested in, the Secretary the functions
  of the Federal Power Commission, the Federal Energy Regulatory Commission,
  and the members, officers, or components thereof.'.
  (d) Section 306 of the Department of Energy Organization Act (42 U.S.C. 7155)
  is amended by striking `Except as provided in title IV, there' and inserting
  in its place `There'.
  (e) Title IV of the Department of Energy Organization Act is amended to
  read as follows:
`TITLE IV--NATURAL GAS AND ELECTRICITY ADMINISTRATION APPOINTMENT AND
ADMINISTRATION
  `SEC. 401. (a) There is established with the Department an Administration
  to be known as the Natural Gas and Electricity Administration.
  `(b) The Secretary is responsible for the executive and administrative
  operation of the Natural Gas and Electricity Administration, including
  functions of the Natural Gas and Electricity Administration with respect
  to the appointment and employment of hearing examiners in accordance with
  title 5, United States Code.
  `(c) The Secretary may require that hearing examiners appointed under this
  section conduct hearings on any matter within the Secretary's jurisdiction.
RULEMAKING PROCEEDINGS FOR RATES AND CHARGES
  `SEC. 402. (a) Any function transferred to the Secretary under section
  301(b) or section 306 of this Act which relates to the establishment of
  rates and charges under the Federal Power Act or the Natural Gas Act may
  be conducted by rulemaking procedures. Except as provided in subsection
  (b), the procedures in such a rulemaking proceeding shall assure full
  consideration of the issues and an opportunity for interested persons to
  present their views.
  `(b) with respect to any rule or regulation promulgated by the Secretary
  to establish rates and charges for the first sale of natural gas by a
  producer or gatherer to a natural gas pipeline under the Natural Gas Act,
  the Secretary may afford any interested person a reasonable opportunity
  to submit written questions with respect to disputed issues of fact to
  other interested persons participating in the rulemaking proceedings. The
  Secretary may establish a reasonable time for both the submission of
  questions and responses.'.
  (f) Section 501(a) of the Department of Energy Organization Act (42
  U.S.C. 7191(a)) is amended--
  (1) by striking `(1)';
  (2) by striking `other than the Commission,'; and
  (3) by striking paragraph (2).
  (g) Section 502 of the Department of Energy Organization Act (42 U.S.C. 7192)
  is amended--
  (1) in subsection (a) by striking `, the Commission'; and
  (2) in subsection (c) by striking `Subject to the provisions of section
  401 of this Act, and notwithstanding' and inserting in its place
  `Notwithstanding'.
  (h) Section 503 of the Department of Energy Organization Act (42 U.S.C. 7193)
  is amended--
  (1) by amending subsection (c) to read as follows:
  `(c) If within thirty days after the receipt of the remedial order issued by
  the Secretary, the person notifies the Secretary that he intends to contest
  a remedial order issued under subsection (a) of this section, the Secretary
  shall stay the effect of the remedial order, unless the Secretary finds the
  public interest requires immediate compliance with the order. The Secretary,
  upon request, shall afford an opportunity for a hearing, including, at a
  minimum, the submission of briefs, oral or documentary evidence, and oral
  arguments. To the extent that the Secretary determines that the right of
  cross examination is required for a full and true disclosure of the facts,
  the Secretary shall afford it. The Secretary shall thereafter issue an
  order, based on findings of fact, affirming, modifying, or vacating the
  remedial order, or directing other appropriate relief, and such order shall,
  for the purpose of judicial review, constitute a final agency action.'; and
  (2) by striking subsection (d).
  (i) Section 504 of the Department of Energy Organization Act (42 U.S.C. 7194)
  is amended--
  (1) in subsection (b)(1) by striking `Commission' and inserting in its place
  `Secretary'; and
  (2) in subsection (b)(2) to read as follows:
  `(b)(2) The Secretary shall, by rule, establish appropriate procedures,
  including a hearing when requested, for review of a denial. Action by the
  Secretary under this section shall be considered final agency action within
  the meaning of section 704 of title 5, United States Code.'.
  (j) Section 605(a)(3) of the Department of Energy Organization Act (42
  U.S.C. 7215(a)(3)) by striking `or the Commission, as the case may be,'.
  (k) Section 649(a) of the Department of Energy Organization Act (42
  U.S.C. 7259(a)) is amended by striking `and the Federal Energy Regulatory
  Commission' and `or the Commission'.
  (l)(1) Section 705 of the Department of Energy Organization Act (42
  U.S.C. 7295) is amended--
  (A) in subsection (a)(1) by striking `or the Commission'; and
  (B) in subsection (a)(2) by striking `the Federal Energy Regulatory
  Commission,'; and
  (C) in subsection (b)(2) by striking `and the Commission' and `or the
  Commission'.
  (2) For purposes of the transfer of functions from the Federal Energy
  Regulatory Commission to the Secretary of Energy by this Act, the phrases
  `the time this Act takes effect', `the date this Act takes effect', and
  `the date on which this Act takes effect' in section 705 of the Department
  of Energy Organization Act (42 U.S.C. 7295) are considered to refer to
  the date of enactment of this Act.
  (m) Section 707 of the Department of Energy Organization Act (42 U.S.C. 7297)
  is amended by striking `the Federal Energy Regulatory Commission,'.
  (n) Section 708 of the Department of Energy Organization Act (42 U.S.C. 7298)
  is amended by striking `Except as provided in title IV, nothing' and
  inserting in its place `Nothing'.
  (o) Title 5, United States Code, is amended--
  (1) in section 5314 by striking the following item: `Chairman, Federal
  Energy Regulatory Commission.' and inserting in its place `Administrator,
  Natural Gas and Electricity Administration.'; and
  (2) in section 5315 by striking the following item: `Members, Federal
  Energy Regulatory Commission.'.
  (p) Section 901 of the Department of Energy Organization Act (42 U.S.C. 7341)
  is amended by striking `and the Commission' and `or the Commission'.
  (q) The Table of Contents of the Department of Energy Organization Act
  is amended--
  (1) by striking the item for section 204 and inserting in its place
  `Natural Gas and Electricity Administration.'; and
  (2) by amending the items relating to title IV to read as follows:
`TITLE IV--NATURAL GAS AND ELECTRICITY ADMINISTRATION
`Sec. 401. Appointment and administration.
`Sec. 402. Rulemaking proceedings for rates and charges.'.
Subtitle C--OIL
PART 1--NAVAL PETROLEUM RESERVE LEASING
SHORT TITLE
  SEC. 1917. This part may be cited as the `Naval Petroleum Reserve Leasing
  Act'.
LEASING AUTHORIZATION
  SEC. 1918. (a) Notwithstanding any other law, if the President finds
  that control and use of Naval Petroleum Reserve Numbered 1 by the United
  States is not necessary for national defense purposes or to assure its
  exploration, development, and operation, the Secretary of Energy (the
  `Secretary') may lease any or all of that reserve. As determined by the
  Secretary, portions of chapter 641 of title 10, United States Code, shall
  cease to apply with respect to the reserve from the effective date to be
  specified in a lease, and to the extent and under conditions that may be
  provided for elsewhere in this part.
  (b) The President shall submit a finding under this section to the Congress,
  together with a report on the basis for the finding, at least 60 days
  before the effective date of a lease of the reserve.
  (c)(1) The Secretary may use the United States' share of lease proceeds
  received to satisfy contractual obligations directly related to the
  accomplishment of a lease and to pay any liabilities of the Department
  of Energy arising with respect to the interests leased at Naval Petroleum
  Reserve Numbered 1 and with respect to the settlement of issues under the
  Unit Plan Contract at Naval Petroleum Reserve Numbered 1, including any
  liabilities relating to payment of just compensation and under any Federal
  statute concerning the environment. The balance of funds received shall
  be utilized as provided in section 1922 of this part.
  (2) Before entering into a lease under this part, the Secretary shall
  determine that the rental price represents fair market value.
  (d)(1) The Secretary shall notify the Attorney General of each proposed
  lease under this part. The notification shall contain information that
  the Attorney General may require in order to advise the Secretary as to
  whether the lease may substantially lessen competition. Within thirty days
  after the notification, the Attorney General shall advise the Secretary
  whether the lease may substantially lessen competition.
  (2) Nothing in this part confers on any person immunity from civil or
  criminal liability, or creates defenses to actions, under the antitrust laws.
  (3) As used in this section, the term `antitrust laws' means--
  (A) the Sherman Act (15 U.S.C. 1 et seq.):
  (B) the Clayton Act (15 U.S.C. 12 et seq.);
  (C) the Federal Trade Commission Act (15 U.S.C. 41 et seq.);
  (D) sections 73 and 74 of the Wilson Tariff Act (15 U.S.C. 8 and 9); and
  (E) the Act of June 19, 1936, chapter 592 (15 U.S.C. 13, 13a, 13b, and 21a,
  commonly referred to as the `Robinson-Patman Act').
  (e) The Secretary shall conduct a leasing action under this part using
  competitive procedures and may reject any and all offers or bids for leases
  even if the offers or bids meet or exceed minimum acceptable levels.
  (f) Any lease under this part shall require that a royalty payment equal
  to not less than 12.5 percent of the value, as determined by the Secretary,
  of the oil, natural gas, and other hydrocarbon resources of the production
  removed or sold from the lease be paid to the `Naval Petroleum Reserve
  Lease Proceeds Special Account,' provided for in section 1922 of this part.
  (g) Any lease contract authorized under this part shall be so structured
  as to require parties leasing the reserve or any interest in the reserve to--
  (1) retain all records pertaining to the production, transportation and
  sale of production for a period of not less than 6 years, or such longer
  period as the Secretary by notice may require;
  (2) make all such records available to the Secretary for audit; and
  (3) provide that, in the event of late payment of royalties, partial
  payment of royalties, or failure to pay any royalties due, the Secretary
  shall require the payment of interest and penalties and may cancel the lease.
  (h) Any lease authorized under this part shall be so structured as to
  require parties leasing the reserve to set aside a portion of the crude oil
  produced to sell to small refiners for processing or use in such refineries
  except that--
  (1) none of the production sold to small refiners may be resold in kind;
  (2) production must be sold at a cost of not less than the prevailing
  local market price of comparable petroleum; and
  (3) the set-aside portion shall not exceed 25 percent of the estimated
  annual production at the reserve.
PROCEDURES TO ARRANGE AND CONDUCT A LEASING ACTION
  SEC. 1919. (a) Before and after the President's finding under section 1918(a)
  of this Act, the Secretary may take the steps the Secretary considers
  necessary to arrange the lease of Naval Petroleum Reserve Numbered 1.
  (b) In order to arrange and conduct a leasing action, the Secretary may:
  (1) create new corporations, partnerships, or other business entities,
  and transfer the United States' interest to the new entities;
  (2) enter into contracts with State or private entities, including contracts
  for technical, financial, auditing or other professional services; and
  (3) use funds appropriated to the Department of Energy under the Department
  of the Interior and Related Agencies Appropriations Acts, but not to exceed
  five percent from the Naval Petroleum Reserves account.
Resources and expertise of other Federal agencies shall be used to lease
the Reserve when doing so will reduce the cost to the Federal government
of leasing.
  (c) Unless otherwise determined in accordance with section 1918(e), all
  lands to be leased shall be leased to the highest responsible qualified
  bidder or bidders by competitive bidding under general regulations issued
  by the Secretary. The Secretary may establish bidding and lease terms and
  conditions the Secretary considers necessary or appropriate, including,
  but not limited to, the establishment of the acreage and units of lands
  to be leased and the minimum rental or royalty rates.
  (d) A lessee of any of the United States' interest in Naval Petroleum Reserve
  Numbered 1 is not liable for any claim of liability arising exclusively
  from or during the ownership and operation of the interest by the United
  States. Such a claim may be asserted only against the United States to
  the extent and in the manner provided by law.
PRIVATELY OWNED LANDS AND PHYSICAL IMPROVEMENTS
  SEC. 1920. (a) Whenever the Secretary is otherwise unable to make
  arrangements the Secretary considers satisfactory for a lease of Naval
  Petroleum Reserve Numbered 1, the Secretary may acquire, by purchase,
  condemnation, or otherwise, privately owned lands or physical improvements
  within Naval Petroleum Reserve Numbered 1, as the Secretary considers
  necessary to facilitate the leasing action.
  (b) Before condemnation proceedings are instituted, an effort shall be
  made to acquire the property by negotiation, unless, in the judgment of
  the Secretary, the effort to acquire the property by negotiation would be
  futile, unduly time consuming, or otherwise not in the public interest.
STRATEGIC PETROLEUM RESERVE TIE-IN; DEFENSE PETROLEUM INVENTORY
  SEC. 1921. (a) In the event of a lease of any part of Naval Petroleum
  Reserve Numbered 1 under this subtitle, sections 160 (a), (b), and (d)
  of the Energy Policy and Conservation Act (42 U.S.C. 6240 (a), (b) and
  (d)) shall cease to apply to the reserve.
  (b)(1) Title I, part B, of the Energy Policy and Conservation Act (42
  U.S.C. 6215 et seq.) is amended by adding after section 167 a new section
  168 as follows:
`DEFENSE PETROLEUM INVENTORY
  `SEC. 168. (a) Notwithstanding any other provision of this part, the
  Secretary may acquire or construct, operate, and maintain storage and
  related facilities to meet petroleum product requirements of the Department
  of Defense, and may acquire and store therein a Defense Petroleum Inventory
  of crude oil. This acquisition and storage shall be in addition to any
  acquisition or storage of crude oil for the Strategic Petroleum Reserve
  required by any other law, and crude oil acquired and stored under this
  section shall not be counted as part of the Strategic Petroleum Reserve. In
  carrying out the functions authorized by this section, the Secretary may
  exercise any authority available under this part.
  `(b) The Secretary shall obligate the U.S. share of funds available in the
  Naval Petroleum Reserve Lease Proceeds Special Account created by section
  1922 of the Naval Petroleum Reserve Leasing Act for the acquisition of 10
  million barrels of crude oil for the Defense Petroleum Inventory. Until the
  acquisition of 10 million barrels of crude oil for the Defense Petroleum
  Inventory has been completed, the Secretary shall dedicate to the Defense
  Petroleum Inventory, crude oil contained in the Strategic Petroleum Reserve
  in sufficient quantities to maintain the Defense Petroleum Inventory at a
  level determined by multiplying 10 million barrels times the percentage
  of the United States' interest in Naval Petroleum Reserve Numbered 1
  leased under the Naval Petroleum Reserve Leasing Act. Any crude oil so
  dedicated shall be considered to remain in storage for the purposes of
  any law relating to the rate of fill of the Strategic Petroleum Reserve.
  `(c) Notwithstanding any other provision of this part, upon the request
  of the Secretary of Defense, crude oil acquired for or dedicated to the
  Defense Petroleum Inventory shall be drawn down and distributed by the
  Secretary to, or on behalf of, the Department of Defense for use, sale,
  or exchange. Crude oil in the Defense Petroleum Inventory may be drawn
  down and distributed, used, sold, or exchanged, without regard to--
  `(1) whether the crude oil has been commingled with petroleum products of
  the Strategic Petroleum Reserve;
  `(2) the requirements of this part concerning drawdown of the Strategic
  Petroleum Reserve; or
  `(3) otherwise applicable Federal contracting statutes and regulations.
The Secretary of Energy shall exercise the authority provided by this
subsection in a manner which does not adversely affect drawdown of the
Strategic Petroleum Reserve.
  `(d) Upon the request of the Secretary of Defense, and subject to the
  availability of funds from the Department of Defense, the Secretary shall
  acquire and store in the Defense Petroleum Inventory crude oil to replace
  crude oil drawn down under subsection (c).
  `(e) An amendment to the Strategic Petroleum Reserve Plan relating to the
  exercise of this authority shall not be required.
  `(f) The Department of Defense shall reimburse the Department of Energy for--
  `(1) drawdown and distribution services provided under this section,
  in amounts that the Secretary determines to be reasonable;
  `(2) all costs of acquiring crude oil for the Strategic Petroleum Reserve
  to replace crude oil drawn down and distributed under subsection (c); and
  `(3) all costs of acquiring and storing in the Defense Petroleum Inventory
  any crude oil in excess of the initial 10 million barrels acquired for it
  or dedicated to it.
  `(g) Crude oil acquired for the Defense Petroleum Inventory under subsection
  (a) shall be transferred to the Strategic Petroleum Reserve, pursuant
  to subsection (f)(2), in reimbursement on a barrel-for-barrel basis for
  the cost of replacement petroleum products acquired for the Strategic
  Petroleum Reserve.'.
  (2) The Table of Contents of the Energy Policy and Conservation Act is
  amended by inserting after the entry for section 167 the following:
`Sec. 168. Defense Petroleum Inventory.'.
NAVAL PETROLEUM RESERVE LEASE PROCEEDS SPECIAL ACCOUNT AND REVENUE SHARING
WITH THE STATE OF CALIFORNIA
  SEC. 1922. (a) There is established in the Treasury of the United States
  a fund called the `Naval Petroleum Reserve Lease Proceeds Special Account'
  (referred to as the `Special Account' in this part) which shall be available
  to the Department of Energy without fiscal year limitation to carry out
  the purposes, functions, and powers authorized by this part.
  (b) There shall be deposited in the Special Account all proceeds realized
  under this part from the lease of all or any part of the United States'
  interest in Naval Petroleum Reserve Numbered 1, including bonus and
  royalty payments.
  (c) Fifty percent of the proceeds received from royalty payments and
  seven percent of the bonus payments from Naval Petroleum Reserve Numbered
  1 under this part shall, notwithstanding any other provision of law, be
  paid to the State of California (to be credited by the State in accordance
  with California Public Resources Code, section 8711 and allocated  in the
  manner provided in California Statutes 1988 ch. 985, section 3, as amended
  from time to time). The portion of the proceeds accruing to the State of
  California from the bonus payment shall be paid to the State of California
  in seven annual payments, beginning one year from the date that the Federal
  Government receives the first installment of the bonus payment. No interest
  shall be due on these amounts to the State. Each of the seven annual payments
  shall be equal to one-seventh of the lease bonus payment due to the State.
  (d) The Secretary may make expenditures from the Special Account without
  further appropriation and without fiscal year limitation, but within specific
  directives or limitations that may be included in appropriation Acts, for any
  purposes necessary or appropriate to carry out section 168(b) of the Energy
  Policy and Conservation Act or to satisfy obligations related to the lease
  of Naval Petroleum Reserve Numbered 1 as specified in section 1918(c)(1).
  (e)(1) Upon a written notification from the Secretary to the Secretary of the
  Treasury that the Special Account contains funds in excess of the amounts
  considered necessary to fulfill the purposes specified in subsections (c)
  and (d), excess funds specified by the Secretary may be transferred from
  the Special Account to the miscellaneous receipts account of the Treasury
  of the United States. In the event funds are no longer required to fulfill
  the purposes specified in subsections (c) and (d), the Special Account
  shall be abolished and all remaining funds credited to the miscellaneous
  receipts account of the Treasury of the United States.
  (2) Following abolition of the Special Account under subsection (e)(1),
  proceeds realized under this part from the lease of all or any part of
  the United States' interest in Naval Petroleum Reserve Numbered 1 shall
  be deposited in the miscellaneous receipts account of the Treasury of
  the United States; except for the portion of royalty, interest and bonus
  payments specified in section 1922(c) to be paid to the State of California,
  which shall continue to be paid to that State regardless of the status of
  the Special Account.
  (f) The Secretary may collect lease proceeds on behalf of any private owner
  of Naval Petroleum Reserve Numbered 1 and may pay the owner its share of
  lease proceeds.
CONGRESSIONAL CONSULTATION
  SEC. 1923. Compliance with the procedures specified in sections 1918 (b)
  and (d) of this part is considered to satisfy the requirements of sections
  7431(a) and 7431(b) of title 10, United States Code.
EFFECT ON SCHOOL LANDS GRANT
  SEC. 1924. (a) The authority to lease under this part extends to sections
  16 and 36 within Naval Petroleum Reserve Numbered 1.
  (b) A payment may be made under section 1922(c) of this part only after--
  (1) the State of California files, on behalf of all party plaintiffs, a
  motion to dismiss, with prejudice, the lawsuit it filed against the United
  States and certain agency officials in November 1987 in the United States
  District Court, Eastern District of California (No. CV-F-87-665-EDP), and
  (2) the State of California, by written agreement, forfeits any rights
  under section 6 of the Act of March 3, 1853 (Chapter CXLV; 10 Stat. 246)
  to sections 16 and 36, Township 30 South, Range 23 East Mount Diablo Base
  and Meridian, located within Elk Hills, including all rights to indemnity
  lands under Revised Statutes 2275 and 2276 (43 U.S.C. 851 and 852).
The agreement referred to in paragraph (2) of this subsection is subject to
the concurrence of the Attorney General of the United States.
CONFORMING AMENDMENTS
  SEC. 1925. (a) Section 501 of Public Law 101-45 (103 Stat. 103) is repealed.
  (b) Sections 7422 (a) and (b) of title 10, United States Code, are amended
  to read as follows:
  `(a) The Secretary, directly or by contract, lease, or otherwise, shall
  explore, prospect, conserve, develop, use, and operate the naval petroleum
  reserves in his discretion, subject to the provisions of this chapter, except
  the authority to lease is not extended to Naval Petroleum Reserve Numbered 3.
  `(b) Except as otherwise provided in this chapter, particularly subsection
  (c) of this section, and in the Naval Petroleum Reserve Leasing Act,
  the naval petroleum reserves shall be used and operated for--
  `(1) the protection, conservation, maintenance, and testing of those
  reserves; or
  `(2) the production of petroleum whenever and to the extent that the
  Secretary, with the approval of the President, finds that such production
  is needed for national defense purposes and the production is authorized
  by a joint resolution of Congress.'.
  (c) Section 7422(c)(1)(B) of title 10, United States Code, is amended to
  read as follows:
  `(B) to produce such reserves at the maximum efficient rate consistent
  with sound engineering practices.'.
  (d) Sections 7422(c)(1)(C), 7422(c)(2), and 7426 (b), (c), (d), and (e)
  of title 10, United States Code, are repealed.
  (e) Section 7430(a) of title 10, United States Code, is amended to read
  as follows:
  `(a) In administering the naval petroleum reserves under this chapter,
  except for those reserves covered by leases executed pursuant to the Naval
  Petroleum Reserve Leasing Act, the Secretary shall use, store, or sell the
  petroleum produced from the naval petroleum reserves and lands covered by
  joint, unit, or other cooperative plans as provided in this section.'.
  (f) Section 7430(b)(1) of title 10, United States Code, is amended by
  striking `paragraph (2) and notwithstanding any other provision of law'
  and inserting `subsection (a) and paragraph (2)'.
  (g) Section 7430(f) of title 10, United States Code, is amended to read
  as follows:
  `(f) The consultation and approval requirements of section 7431(a)(3)
  are waived for contracts to sell petroleum produced from Naval Petroleum
  Reserves Numbered 1, 2, and 3, and for contracts to sell petroleum from
  the Naval Oil Shale Reserves which is produced for their exploration,
  protection, conservation, maintenance, and testing.'.
  (h) Section 7430(l)(1) of title 10, United States Code is amended to read
  as follows:
  `(l)(1) The Secretary, at the request of the Secretary of Defense,
  may provide any portion of the United States share of petroleum to the
  Department of Defense for its use, exchange, or sale in order to meet
  petroleum product requirements of the Department of Defense.'.
  (i) Section 7431(a) of title 10, United States Code, is amended by adding
  `Except for actions taken pursuant to the Naval Petroleum Reserve Leasing
  Act,' at the beginning of the subsection.
  (j) Sections 7431 (b) and (c) of title 10, United States Code, are amended
  by striking `During the period of production authorized by section 7422(c)
  of this title, the' and inserting `The'.
  (k) Section 7433(b) of title 10, United States Code, is amended to read
  as follows:
  `(b) Except as provided in the Naval Petroleum Reserve Leasing Act, all
  money accruing to the United States from lands in the naval petroleum
  reserves shall be covered into the Treasury.'.
PART 2--OIL PIPELINE DEREGULATION
SHORT TITLE
  SEC. 1926. This subtitle may be cited as the `Oil Pipeline Regulatory
  Reform Act'.
FINDINGS AND PURPOSES
  SEC. 1927. (a) The Congress finds that--
  (1) oil pipelines are of critical strategic and economic importance to
  the Nation;
  (2) the Nation's interests are best served by encouraging the competitive
  and efficient operation of oil pipelines;
  (3) economic regulation can impose unproductive costs, discourage and
  distort investment decisions, cause regulatory uncertainty, and often be
  only partially effective in achieving its goals;
  (4) most markets served by oil pipelines are sufficiently competitive that,
  given application of the antitrust laws, economic regulation of pipelines in
  these markets is unnecessary to ensure reasonable rates and adequate service;
  (5) for those oil pipeline markets for which competition and antitrust
  enforcement are not sufficient to ensure their efficient operation,
  continued economic regulation may be necessary to prevent abuse of
  significant market power;
  (6) where continued economic regulation of oil pipelines remains necessary,
  that regulation must be reformed to maximize reliance on competition to
  benefit consumers, reduce regulatory costs, and encourage the efficient
  use and development of existing and new pipelines;
  (7) for those oil pipeline markets for which continued economic regulation
  is necessary, consumers can best be protected, costs of regulation can
  best be reduced, and efficiency can best be enhanced by regulating the
  maximum rates that pipelines may charge and adjusting the maximum rates
  to reflect price changes in competitive markets while allowing pipelines
  freely to discount below those maximum rates; and
  (8) this reformed rate regulation in markets in which there is significant
  market power will provide just compensation to a pipeline if the allowable
  rate is comparable to what that rate would be if the market were competitive
  and not subject to market power, as calculated by a method that establishes
  maximum rates, permits them to be revised if they had been enhanced by
  market power, and adjusts them over time by an index reflecting pipeline
  prices in competitive markets.
  (b) It therefore is the policy of the Federal Government--
  (1) to remove the burden of economic regulation from those oil pipeline
  markets that operate under competitive circumstances or for which that
  regulation would not be an effective or efficient remedy to constrain the
  exercise of market power; and
  (2) to provide for continued economic regulation of only those oil pipeline
  markets for which regulation will increase economic efficiency and for
  which the benefits of regulation outweigh its costs.
REGULATORY REFORM AND DEREGULATION
  SEC. 1928. The Department of Energy Organization Act (42 U.S.C. 7101-7352)
  is amended by adding after section 407 the following new sections:
`REGULATION OF PIPELINES
  `SEC. 408. (a) As used in this section and sections 409 and 410--
  `(1) `adjudication' means an agency hearing, which, in the discretion of
  the Secretary, may be a hearing on the record governed by section 554 of
  title 5, United States Code;
  `(2) `Attorney General' means the Attorney General of the United States
  or the Attorney General's designee;
  `(3) `Commission rate regulation' means those functions and authorities
  set forth in section 410 of this Act;
  `(4) `existing Commission regulatory jurisdiction' means those functions
  and authorities transferred by sections 306 and 402(b) of the Department
  of Energy Organization Act (42 U.S.C. 7155, 7172(b));
  `(5) `existing pipeline' means a pipeline that was brought into service
  or was under construction before January 1, 1991;
  `(6) `interested person' means a person whose economic or business interests
  would be substantially affected by a finding that Commission rate regulation
  is in the public interest or that a base rate should be revised;
  `(7) `new pipeline' means a pipeline that was brought into service after
  January 1, 1991, and was not under construction before January 1, 1991;
  `(8) `pipeline' means a pipeline subject to existing Commission regulatory
  jurisdiction or which would be subject to existing Commission regulatory
  jurisdiction except for this section, but it does not include the
  Trans-Alaska Pipeline authorized by the Trans-Alaska Pipeline Authorization
  Act (43 U.S.C. 1651 et seq.) or a pipeline directly or indirectly delivering
  oil to the Trans-Alaska Pipeline; and
  `(9) `rate' means the price for transportation by pipeline, including
  all charges that the pipeline requires its customers to pay for the
  transportation and for any ancillary services set forth as part of that
  pipeline's tariff on file with the Commission on January 1, 1991, or
  approved by the Commission after January 1, 1991.
  `(b)(1) Existing Commission regulatory jurisdiction over pipelines terminates
  sixty days after the effective date of the Oil Pipeline Regulatory Reform
  Act. On that date, pipelines become subject to sections 408, 409, 410,
  and 411 of this Act.
  `(2)(A) Within 120 days after the effective date of the Oil Pipeline
  Regulatory Reform Act, the Attorney General may petition the Secretary for an
  adjudication of whether Commission rate regulation of an existing pipeline
  in any market is in the public interest. Upon receipt of such a petition,
  the Secretary shall conduct an adjudication in accordance with subsection
  (b)(3). In deciding whether to bring a petition, the Attorney General shall
  be guided by the methods, assumptions, standards, and definitions underlying
  and set forth in the report of the United States Department of Justice
  dated May 1986 entitled `Oil Pipeline Deregulation.' None of the findings
  and conclusions of the report, and none of the methods, assumptions,
  standards, and definitions underlying and set forth in the report are
  binding on the Secretary in an adjudication conducted under this section.
  `(B) Within 180 days after the effective date of the Oil Pipeline
  Regulatory Reform Act, an interested person may petition the Secretary
  for an adjudication of whether Commission rate regulation of an existing
  pipeline in any market is in the public interest. A person filing such a
  petition shall provide a reasonable basis for the conclusion that Commission
  rate regulation is in the public interest, and shall serve a copy of the
  petition on the Attorney General and on the pipeline for which Commission
  rate regulation is sought. Upon receipt of the petition, the Secretary, for
  good cause shown, may conduct an adjudication in accordance with subsection
  (b)(3). The Secretary may consult with the Attorney General in deciding
  whether to conduct an adjudication, and shall conduct an adjudication in
  accordance with subsection (b)(3) if the Attorney General so recommends.
  `(C) Not later than 270 days after the effective date of the Oil
  Pipeline Regulatory Reform Act, the Secretary shall publish a list of all
  adjudications that the Secretary has determined will be held pursuant to
  this subsection, identifying in each case the pipeline and the market for
  which Commission rate regulation is sought. Pipeline rates for service
  to markets that are not identified in the list published by the Secretary
  shall no longer be subject to section 410 of this Act.
  `(3)(A) The Secretary shall find that Commission rate regulation of an
  existing pipeline in a market is in the public interest only if it is
  demonstrated that regulation is necessary to constrain the exercise of
  substantial market power in the supply or demand of products transported by
  the pipeline in that market. If the Secretary finds that Commission rate
  regulation of an existing pipeline in a market is in the public interest,
  Commission rate regulation shall continue. If the Secretary finds that
  Commission rate regulation of an existing pipeline in a market is not in
  the public interest, regulation shall terminate at a time the Secretary
  designates, but in no event shall that regulation continue beyond sixty
  days after the Secretary issues the finding.
  `(B) A finding under subsection (b)(3)(A) shall be issued within one
  year after the Secretary decides to conduct the adjudication, unless the
  Secretary, in the event of unusual circumstances, determines that the
  finding cannot be issued within one year. In such a case, the Secretary
  shall make specific findings as to the unusual circumstances necessitating
  the delay, and shall specify a date certain by which the Secretary will
  issue the finding, but in no event shall the Secretary's finding be issued
  more than two years after the Secretary decides to conduct the adjudication.
  `(C) If parties to an adjudication conducted by the Secretary reach a
  settlement of the issues prior to the Secretary's finding that Commission
  rate regulation of a pipeline in a market is in the public interest, the
  settlement shall bind those parties. If all parties reach such a settlement,
  the Secretary shall terminate the proceeding by accepting the settlement.
  `(c)(1) Upon petition of any interested person, the Secretary may conduct an
  adjudication of whether Commission rate regulation of an existing pipeline in
  any market subject to that regulation is in the public interest in accordance
  with subsection (b)(3). The Secretary shall notify the Attorney General
  of any petition for adjudication or decision to conduct an adjudication
  under this paragraph and may consult with the Attorney General in deciding
  whether to conduct an adjudication.
  `(2) If the Secretary finds that Commission rate regulation of an existing
  pipeline in a market subject to that regulation is not in the public
  interest, Commission rate regulation over that pipeline in that market
  terminates when the Secretary designates, but in no event shall Commission
  rate regulation continue beyond sixty days after the Secretary issues
  the finding.
  `(d) The Attorney General may participate in any adjudication initiated
  by petition from any interested person under this section, or upon the
  request of the Secretary. In participating, the Attorney General shall be
  guided by the methods, assumptions, standards, and definitions set forth
  in the report cited in section 408(b)(2)(A).
  `(e) Except as provided under subsection (i), new pipelines are not
  subject to existing Commission regulatory jurisdiction or to Commission
  rate regulation, but are subject to section 409 of this Act.
  `(f)(1) The termination pursuant to this section of existing Commission
  regulatory jurisdiction or Commission rate regulation does not apply to
  products transported before the termination.
  `(2) Commission rate regulation of a pipeline in a market made subject
  to that regulation under this section shall be prospective only. Products
  transported by the pipeline before regulation becomes effective under this
  section shall not be subject to Commission rate regulation.
  `(3) Existing Commission regulatory jurisdiction terminated under this
  section, including existing Commission regulatory jurisdiction over new
  pipelines, shall not revert back to, be delegated to, or otherwise transfer
  to, the Department of Energy, the Interstate Commerce Commission, or any
  other agency of the Federal Government except as provided under subsection
  (i).
  `(4) Notwithstanding any other law, and except as otherwise provided
  in section 409 and 410 of this Act, no State, political subdivision of
  a State, or agency of the Federal Government may regulate a pipeline
  with respect to which existing Commission regulatory jurisdiction or
  Commission rate regulation has been terminated pursuant to this section,
  including existing Commission regulatory jurisdiction and Commission
  rate regulation over new pipelines, to the extent that the regulation is
  similar in nature to those functions and authorities constituting existing
  Commission regulatory jurisdiction or Commission rate regulation that are
  terminated under this section. This authority includes, but is not limited
  to, subsections 5(e) and 5(f) of the Outer Continental Shelf Lands Act (43
  U.S.C. 1334(e) and (f)) and section 28(r) of the Mineral Leasing Act of 1920
  (30 U.S.C. 185(r)). Nothing in this Act limits any authority vested in a
  State or political subdivision of a State to regulate pipelines engaged
  in intrastate commerce.
  `(g) Notwithstanding section 501 of this Act (42 U.S.C. 7191), the Secretary
  and the Attorney General each may promulgate, in accordance with section
  553 of title 5, United States Code, rules and regulations necessary or
  appropriate to carry out their respective responsibilities under this
  section. Rules and regulations proposed by the Secretary implementing this
  section or any other actions taken by the Secretary under this section
  are not subject to section 404 of this Act (42 U.S.C. 7174).
  `(h)(1) Notwithstanding section 502 of this Act (42 U.S.C. 7192), the
  United States Court of Appeals for the District of Columbia Circuit has
  exclusive original jurisdiction over any petition for judicial review
  under this section.
  `(2) Any action of the Attorney General under this section, including without
  limitation any participation of the Attorney General in any adjudication
  under this section, is an agency action committed to agency discretion by
  law, and is not subject to judicial review in any manner.
  `(i)(1) The Secretary of Defense may petition the Secretary for an
  adjudication or whether Commission rate regulation of an unregulated pipeline
  would be in the national defense interest, except that the Secretary of
  Defense may not petition the Secretary earlier than two years after--
  `(A) the termination of Commission rate regulation of a pipeline that is
  the subject of the petition, or
  `(B) a prior adjudication under this section regarding a pipeline that is
  the subject of the petition.
  `(2) In response to a petition under this subsection, the Secretary may
  hold an adjudication of whether Commission rate regulation of an unregulated
  pipeline would be in the national defense interest. If the Secretary finds
  that Commission rate regulation of the pipeline is in the national defense
  interest, the pipeline shall be subject to section 410 of this Act.
`COMMON CARRIER STATUS CONTINUED; CONTRACTS
  `SEC. 409. (a) Notwithstanding any other provision of this Act, pipelines
  shall operate as common carriers, as follows:
  `(1) provide transportation service to all persons upon reasonable demand
  and upon fair, equitable, and nondiscriminatory terms and conditions
  and establish through routes with other common carrier pipelines, except
  that a pipeline's charging different rates to different shippers does not
  constitute a violation of this paragraph;
  `(2) establish and observe just and reasonable classifications of
  property for transportation and just and reasonable regulations and
  practices affecting that transportation, except that a pipeline's charging
  different rates to different shippers does not constitute a violation of
  this paragraph;
  `(3) refrain from disclosing to any person, other than the shipper or
  consignee, without consent of the shipper or consignee, any information
  concerning the nature, kind, quantity, destination, consignee, or routing
  of any property tendered or delivered.
  `(b) Pipelines shall publish and file with the Commission schedules setting
  forth applicable terms and conditions of carriage, but excluding the rates
  to be charged for carriage.
  `(c) Contracts between pipelines and other persons on terms and conditions
  other than those filed pursuant to subsection (b) as applicable to basic
  common carriage shall be presumed conclusively to be in the public interest
  as long as, in regulated markets, the regulated service is available at
  no more than the maximum rate.
  `(d) The Commission shall enforce compliance with the obligations set
  forth in this section, and may adopt rules and regulations necessary or
  appropriate for that purpose.
`COMMISSION RATE REGULATION
  `SEC. 410. (a) Notwithstanding any other law, the rates of any pipeline
  in any market subject to this section shall be regulated as follows:
  `(1) The base rates of the pipeline in any market subject to this section
  are;
  `(A) those rates that were in effect and not subject to investigation by
  the Commission on January 1, 1991, increased or reduced by the percentage
  change in the Producer Price Index for total finished goods calculated by
  the Bureau of Labor Statistics in the United States Department of Labor
  from that date to the date that Commission rate regulation commenced
  pursuant to section 408(b)(1);
  `(B) with respect to rates that were subject to investigation by the
  Commission on January 1, 1991, which investigation was not terminated by
  final adjudication or settlement approved by the Commission as of the
  termination of existing Commission regulatory jurisdiction pursuant to
  section 408(b)(1), those rates that were in effect upon the last rate change
  prior to January 1, 1991, that was not made subject to an investigation
  by the Commission, increased or reduced by the percentage change in the
  Producer Price Index from the effective date of that change to the date
  that Commission rate regulation commenced prior to section 408(b)(1);
  `(C) with respect to rates that were subject to investigation by the
  Commission on or before January 1, 1991, which investigation was terminated
  by a final adjudication or a settlement approved by the Commission prior to
  the termination of existing Commission regulatory jurisdiction pursuant to
  section 408(b)(1), those finally adjudicated or settled rates, increased
  or reduced by the percentage change in the Producer Price Index from the
  effective date of the final adjudication or settlement to the date that
  Commission rate regulation commenced pursuant to section 408(b)(1);
  `(D) with respect to pipelines not in service on January 1, 1991, those
  rates initially established by those pipelines.
  `(2) The base rate for a pipeline subject to this section may be modified
  as follows--
  `(A) Within 120 days after a finding by the Secretary pursuant to section
  408(b) that Commission rate regulation of any pipeline in any market is in
  the public interest, the Attorney General may petition the Secretary for an
  adjudication of whether any base rate of that pipeline in that market should
  be reduced. Upon receipt of such a petition, the Secretary shall conduct
  an adjudication in accordance with subsection (a)(2)(D) of this section.
  `(B) Within 180 days after a public interest finding, an interested person
  may petition the Secretary for an adjudication of whether any base rate
  of that pipeline in that market should be reduced. A person filing such
  a petition shall provide a reasonable basis for the conclusion that the
  base rate should be reduced, and shall serve a copy of the petition
  on the Attorney General and on the pipeline that is the subject of
  the petition. Upon receipt of such a petition, the Secretary, for good
  cause shown, may conduct an adjudication in accordance with subsection
  (a)(2)(D). The Secretary may consult with the Attorney General in deciding
  whether to conduct an adjudication, and shall conduct an adjudication if
  the Attorney General so recommends.
  `(C) Not later than 270 days after a public interest finding, the Secretary
  shall publish a list of all adjudications that the Secretary has determined
  will be held pursuant to this paragraph, identifying  in each case the
  pipeline, the market, and the base rate for which a reduction is sought.
  `(D)(i) The Secretary shall order a reduction if the petitioner demonstrates
  that the pipeline's market power has resulted in a base rate that is
  significantly higher than the rate likely would be if the relevant market
  were not subject to market power. In making this finding, the Secretary
  shall consider only statistical evidence of rates charged by that pipeline in
  competitive markets, with appropriate recognition of the effects of factors
  such as the distance of a movement. For purposes of this subparagraph,
  a base rate is considered significantly higher than the rate likely would
  be if the relevant market were not subject to market power only if the
  difference is statistically significant under commonly accepted standards.
  `(ii) A finding under clause (i) of this subparagraph shall be issued
  within one year after the Secretary decides to conduct an adjudication,
  unless the Secretary, in the event of unusual circumstances, determines that
  the finding cannot be issued within one year. In such a case, the Secretary
  shall make specific findings as to the unusual circumstances necessitating
  the delay, and shall specify a date certain by which the Secretary will
  issue the finding, but in no event shall the Secretary's finding be issued
  more than two years after the Secretary decides to conduct the adjudication.
  `(iii) If parties to an adjudication conducted by the Secretary reach a
  settlement of the issues prior to the Secretary's finding, it shall bind
  those parties. If all parties reach such a settlement, the Secretary shall
  terminate the proceeding by accepting the settlement.
  `(E) Any adjustment of a base rate ordered under this subsection shall be
  effective as of the date of the Secretary's finding pursuant to subsection
  (a)(2)(D)(ii).
  `(F) The Attorney General may participate in any adjudication initiated
  by petition from any interested person under this section, and shall
  participate upon the request of the Secretary. In participating, the
  Attorney General shall be guided by the methods, assumptions, standards,
  and definitions set forth in the report cited in section 408(b)(2)(A).
  `(3) The Commission shall calculate as follows a maximum rate for each
  rate subject to Commission rate regulation:
  `(A) Following the commencement of Commission rate regulation pursuant to
  subsection 408(b)(1)--
  `(i) For the first period, which shall be from the commencement of
  Commission rate regulation pursuant to subsection 408(b)(1) until the date
  of publication by the Secretary of the list of adjudications required by
  subsection 408(b)(2)(C), the maximum rate shall be the base rate established
  under section 410(a) (1) and (2).
  `(ii) For each of the next two periods, each of which shall be six months,
  the maximum rate for pipeline rates serving markets which are subject to an
  adjudication shall be the base rate increased or reduced by the percentage
  change in the Producer Price Index from the date upon  which the base rate
  became effective.
  `(iii) For all subsequent six month periods, the maximum rate shall be the
  prior maximum rate increased or reduced by the percentage change in the
  Competitive Pipeline Price Index during the previous period, except that,
  with respect to a settlement approved by the Commission after January 1,
  1991, which expressly governs maximum rates for any future period, the
  settlement rate shall be the maximum rate until the conclusion of that
  period. At the conclusion of that period, the rate in effect shall be
  the maximum rate increased or reduced by the percentage change in the
  Competitive Pipeline Price Index.
  `(B)(i) The Secretary shall calculate a Competitive Pipeline Price Index
  to reflect relative changes in prices charged by pipelines in competitive
  markets not subject to Commission rate regulation. The Competitive Pipeline
  Price Index shall be derived from the average revenue per barrel-mile of
  a sample of pipelines in those markets. The Secretary shall select the
  sample of pipelines, markets, and revenues to be used in calculating the
  Competitive Pipeline Price Index, and the Secretary may exclude data from
  pipelines not subject to Commission rate regulation but whose rates for any
  reason may not reflect effective competition. The Secretary may require
  reports from pipelines for the purpose of calculating the Competitive
  Pipeline Price Index.
  `(ii) The Secretary shall initially publish the Competitive Pipeline Price
  Index one year after the termination of existing Commission regulatory
  jurisdiction, and shall publish changes in it at intervals of not more
  than six months.
  `(iii) The Secretary may substitute an appropriate existing index for
  the Competitive Pipeline Price Index if that substitute index accurately
  reflects increases in prices in competitive pipeline markets and if the
  Secretary determines that calculation of the Competitive Pipeline Price
  Index would be unduly burdensome.
  `(4)(A) Any rate subject to Commission rate regulation under this section
  which does not exceed the maximum rate determined in accordance with
  subsection (a)(3) of this section is presumed conclusively to be lawful
  and is not subject to protest, complaint, suspension, investigation,
  or any other challenge or inquiry under Commission rate regulation.
  `(B) Nothing in this Act makes it unlawful for a pipeline to charge a rate
  that is lower than the maximum rate determined in accordance with subsection
  (a)(3). A pipeline charging lower than the maximum rate to a shipper with
  which it is affiliated by means of common ownership or otherwise shall make
  the lower rate available to any shipper upon the same terms and conditions
  of service.
  `(5) The Commission shall publish base rates, rate adjustments, and maximum
  rates determined in accordance with this section and make them available
  for public inspection.
  `(b) A pipeline subject to Commission rate regulation in a market shall
  not condition pipeline services in that market on entering into any other
  transaction, or on taking or refraining from any action.
  `(c)(i) In any market subject to Commission rate regulation, if a pipeline
  expands its available capacity, it may petition the Commission for a
  determination of the pre-existing capacity that will remain subject to
  Commission rate regulation. If such a determination is made, the additional
  capacity shall not be subject to Commission rate regulation. Interested
  persons may participate in the proceeding.
  `(2) The Commission may promulgate any regulations necessary or appropriate
  to ensure that rights to use pre-existing capacity at rates governed by
  Commission rate regulation are allocated to shippers in a manner that
  both preserves the efficacy of Commission rate regulation of pre-existing
  capacity and is consistent with the requirements of section 409 of this Act.
  `(d) The Commission shall enforce compliance with the obligations set
  forth in this section, and may adopt rules and regulations necessary or
  appropriate for that purpose.
  `(e) Notwithstanding section 501 of this Act (42 U.S.C. 7191), the Secretary
  and the Attorney General each may promulgate in accordance with section
  553 of title 5, United States Code, rules and regulations necessary or
  appropriate to carry out their respective responsibilities under this
  section. Rules and regulations proposed by the Secretary implementing this
  section or any other actions taken by the Secretary under this section
  are not subject to section 404 of this Act (42 U.S.C. 7174).
  `(f)(1) Notwithstanding section 502 of this Act (42 U.S.C. 7192), the
  United States Court of Appeals for the District of Columbia Circuit has
  exclusive original jurisdiction over any petition for judicial review
  under this section.
  `(2) Any action of the Attorney General under this section, including
  without limitation any decision to petition or not to petition for an
  adjudication under this section, is an agency action committed to agency
  discretion by law, and is not subject to judicial review in any manner.
`REPORT TO CONGRESS
  `SEC. 411. At the conclusion of the fifth year after the completion of all
  adjudications conducted under section 410 of this Act, the Secretary shall
  provide to the appropriate committee of Congress a report setting forth
  the findings and conclusions of the Secretary on the results of the Oil
  Pipeline Regulatory Reform Act and its impact on the public interest. In
  this report, the Secretary shall make any recommendations that the Secretary
  considers appropriate.'.
CONFORMING AMENDMENTS
  SEC. 1929. (a) Section 402(b) of the Department of Energy Organization Act
  (42 U.S.C. 7172(b)), is amended by striking `There' and inserting in its
  place `Subject to sections 408, 409, 410, and 411 of this Act, there'.
  (b) Section 404(a) of the Department of Energy Organization Act (42
  U.S.C. 7174(a)) is amended by striking `section 403' and by inserting in
  its place `sections 408 and 410'.
  (c) The Table of Contents of the Department of Energy Organization Act is
  amended by adding after the item for section 407 four new items as follows:
  `Sec. 408. Regulation of pipelines.', `Sec. 409. Common carrier status
  continued; contracts.', `Sec. 410. Commission rate regulation.', and
  `Sec. 411. Report to Congress.'.
APPLICABILITY OF ANTITRUST LAWS
  SEC. 1930. Nothing in this part affects the applicability to the
  transportation by pipeline of crude oil, refined oil, or other petroleum
  products of the laws of the United States relating to unlawful restraints
  and monopolies and to combinations, contracts, or  agreements in restraint
  of trade.
SEVERABILITY
  SEC. 1931. If any provision of this part or its application to any person
  or circumstances is held invalid, neither the remainder of this part nor
  the application of the provision to other persons or circumstances shall
  be affected.
Subtitle D--Electricity Generation and Use
PART 1--PUBLIC UTILITY HOLDING COMPANY ACT REFORM DEFINITIONS
  SEC. 1932. For the purposes of this part:
  (1) `Exempt wholesale generator' means any person who is engaged directly,
  or indirectly, through one or more of that person's affiliates as defined
  under section 2(a)(11)(B) of the Act, exclusively in the business of owning
  or operating all or part of one or more eligible facilities and selling
  electric energy at wholesale. The term excludes a registered holding
  company affiliate in existence on the date of enactment of the National
  Energy Strategy Act, unless the Commission has consented to its inclusion.
  (2) `Eligible facility' means a facility, wherever located, that is used
  for the generation of electric energy exclusively for sale at wholesale
  (including interconnecting transmission facilities necessary to effect
  sale at wholesale). For purposes of sections 1932 and 1933, `facility'
  includes a portion of a facility. This term does not include a facility
  if a rate or a charge for, or in connection with, its construction or
  for electricity it produces (other than any portion of a rate or charge
  that represents recovery of the cost of a wholesale rate or charge) is in
  effect under the laws of any State.
  (3) `Electric consumer' means any person, State or local authority or agency,
  or Federal agency to which electric energy is sold other than for purposes
  of resale.
  (4) As used in sections 1932 and 1933, `the Act' means the Public Utility
  Holding Company Act. All of the terms used in sections 1932 and 1933 and
  defined in the Act have the meaning given in the Act.
EXEMPT WHOLESALE GENERATORS
  SEC. 1933. (a) An exempt wholesale generator is not considered an `electric
  utility company' under section 2(a)(3) of the Act and, whether or not a
  subsidiary company, an affiliate, or an associate company of a holding
  company, is exempt from the Act.
  (b) Notwithstanding any provision of the Act, the eligibility of a holding
  company for exemption under section 3(a) of the Act is not affected by
  whether an associate company, affiliate, or subsidiary company is an exempt
  wholesale generator, unless the Commission, by order upon application of
  an affected State commission or other interested party, and considering
  among other relevant factors any views submitted by each affected State
  commission, terminates the exemption upon determining that--
  (1) the holding company has not established appropriate means to determine
  the allocation of costs between the exempt wholesale generator and any
  associate company, affiliate, or subsidiary company that provides electric
  service to electric consumers; or
  (2) the exempt wholesale generator is a party to a contract, either directly
  or through an associate company, for the sale of electric energy to an
  associate company, affiliate, or subsidiary company that provides electric
  service to electric consumers without each affected State commission having
  given its prior approval of the contract under State law.
  (c) For the purposes of this section, an `affected State commission' is
  any State commission that has jurisdiction to regulate a holding company's
  associate company, affiliate, or subsidiary company that provides electric
  service to electric consumers.
  (d) Notwithstanding any provision of the Act and the Commission's
  jurisdiction under subsection (e) of this section, a registered holding
  company may acquire and hold, directly or indirectly, the securities,
  or interest in the business, of one or more exempt wholesale generators
  without applying for or receiving approval from the Commission and without
  being subject to any other conditions under the Act, so long as the
  exempt wholesale generator is not a party to a contract, either directly
  or through an associate company, for the sale of electric energy to an
  associate company, affiliate, or subsidiary company that provides electric
  service to electric consumers, unless each affected State commission has
  given its prior approval of the contract under State law.
  (e) The direct or indirect issuance of securities by a registered holding
  company for purposes of financing the acquisition of an exempt wholesale
  generator; the direct or indirect guarantee of securities of an exempt
  wholesale generator by a registered holding company; the direct or indirect
  entering into service, sales, or construction contracts; and the direct or
  indirect creation or maintenance of any other relationship in addition to
  that described in subsection (d) between an exempt wholesale generator and a
  registered holding company, its affiliates, and associate companies, remain
  subject to the jurisdiction of the Commission under the Act, except that--
  (1) section 11 of the Act does not prohibit the ownership of an interest
  in the business of one or more exempt wholesale generators by a registered
  holding company (regardless of the location of facilities owned or operated
  by the exempt wholesale generator), and that ownership is considered to
  be consistent with the operation of an integrated public utility system; and
  (2) the ownership of an interest in the business of one or more exempt
  wholesale generators by a registered holding company (regardless of the
  location of facilities owned or operated by the exempt wholesale generator)
  is considered to be reasonably incidental, or economically necessary or
  appropriate to the operations of an integrated public utility system.
OWNERSHIP OF EXEMPT WHOLESALE GENERATORS AND QUALIFYING FACILITIES
  SEC. 1934. The ownership by a person of one or more exempt wholesale
  generators does not result in that person being considered as being
  primarily engaged in the generation or sale of electric power within the
  meaning of sections 3(17)(C)(ii) and 3(18)(B)(ii) of the Federal Power Act
  (16 U.S.C. 796(17)(C)(ii) and (18)(B)(ii)).
FEDERAL AND STATE AUTHORITIES
  SEC. 1935. (a) A rate or charge for the sale of electric energy at
  wholesale in interstate commerce by an exempt wholesale generator is not
  considered just and reasonable within the meaning of sections 205 and 206
  of the Federal Power Act (16 U.S.C. 824d and 824e) if the rate or charge
  allows the exempt wholesale generator to receive undue advantage from
  the existence of an affiliate relationship between the exempt wholesale
  generator and the purchaser of that electric energy.
  (b) A State commission may determine the prudence of a wholesale power
  purchase by an electric utility company that provides electric service to
  electric consumers and may disallow recovery of costs determined to be
  imprudently incurred, unless the wholesale purchaser has no alternative
  to accepting the amount of power or costs allocated to it by the Federal
  Energy Regulatory Commission in setting a wholesale rate or charge that
  is based on an allocation of power or costs among--
  (1) companies of a registered holding company; or
  (2) companies that operate on an integrated basis under an agreement
  approved by the Federal Energy Regulatory Commission.
Subtitle E--Nuclear Power
PART 1--LICENSING REFORM
COMBINED LICENSES
  SEC. 1936. (a) Section 185 of the Atomic Energy Act of 1954 (42 U.S.C. 2235)
  is amended by--
  (1) adding `and Operating Licenses' after `Permits' in the catchline;
  (2) adding a subsection designator `(a)' before `All'; and
  (3) adding the following new subsections:
  `(b)(1) After holding a public hearing under section 189 of this Act,
  the Commission shall issue to the applicant a combined construction and
  operating license if the application contains sufficient information to
  support the issuance of a combined license and the Commission determines
  that there is reasonable assurance that the facility will be constructed and
  will operate in conformity with the license, the provisions of this Act,
  and the Commission's rules and regulations. The Commission shall identify
  within the combined license the inspections, tests, and analyses that the
  licensee shall perform, and the acceptance criteria that the Commission
  shall use to determine their satisfactory completion.
  `(2)(A) An application for a combined license shall include a State,
  local, or utility emergency plan. The combined license shall identify the
  inspections, tests, exercises, and analyses required for the emergency
  plan and the acceptance criteria for their satisfactory completion.
  `(B) In finding reasonable assurance that adequate protective measures
  can and will be taken in a radiological emergency, the Commission may
  presume that States and localities in the emergency planning zones will
  use best efforts to protect their citizens by following an emergency plan
  determined by the Commission to be adequate.
  `(C) Notwithstanding paragraph (4) of this subsection, questions which arise
  after combined license issuance, concerning offsite emergency planning
  issues relating to whether there is reasonable assurance of adequate
  protective measures including those from a decision by a State or locality
  not to participate in a previously approved State, local or utility plan,
  may be resolved only in a proceeding, either in response to a petition or
  at the initiative of the Commission, to modify or suspend operation under
  the combined license.
  `(3) At appropriate intervals during construction or preoperational
  testing, the Commission shall publish in the Federal Register notices of
  the successful completion of inspections, tests, and analyses.
  `(4)(A) Not less than 120 days before the date scheduled for initial loading
  of fuel into a plant by a licensee that has been issued a combined license,
  the Commission shall publish in the Federal Register notice of intended
  operation. That notice shall provide that any person whose interest may be
  affected by operation of the plant, may within 30 days request the Commission
  to hold a hearing on whether the facility as constructed complied, or on
  completion will comply, with the acceptance criteria of the license.
  `(B) A request for a hearing under this paragraph shall show, prima facie,
  that one or more of the acceptance criteria in the combined license have
  not been, or will not be, met, and the specific operational consequences
  of nonconformance that would be contrary to adequate protection of the
  public health and safety.
  `(C) After receiving a request for a hearing under this paragraph, the
  Commission expeditiously shall either deny or grant the request. If a
  hearing is held, commencement of plant operation shall not be delayed
  pending decision after hearing unless the Commission determines, after
  considering petitioners' prima facie showing and any answers thereto,
  that petitioners are likely to succeed on the merits and, as a result,
  there will not be adequate protection of the public health and safety in
  the interval prior to the decision.
  `(D) A hearing under this paragraph shall be informal, but parties shall
  be allowed to offer evidence, under oath or affirmation. Discovery and
  cross-examination of witnesses are not permitted, but the presiding official
  may direct questions to any party.
  `(E) The Commission shall, to the maximum possible extent, render a decision
  on issues raised by the hearing request within 120 days of the publication
  of the notice provided by subparagraph (A) or the anticipated date for
  initial loading of fuel into the reactor, whichever is later. Commencement
  of operation under a combined license is not subject to section 189(a)(1),
  but any final order of the Commission under this paragraph is subject to
  judicial review as provided in section 189(b).
  `(5) The Commission also shall notify the Attorney General if significant
  changes in the licensee's activities or proposed activities have
  occurred subsequent to the previous review by the Attorney General and
  the Commission under section 105 c. in  connection with issuance of the
  combined construction and operating licenses for the facility so as to
  warrant further review under that section under such procedures as may be
  established by the Commission.
  `(c) In acting on a request by the holder of a combined license for an
  amendment to the combined license, the Commission shall apply the same
  procedures and criteria as it would under section 189(a) of this Act to a
  licensee request for an amendment to an operating license for a utilization
  facility. The Commission shall not delay preoperational activities or
  operation of a facility pending completion of a proceeding under this
  paragraph if the Commission determines that the amendment involves no
  significant hazards considerations.'.
RULEMAKING
  SEC. 1937. The Nuclear Regulatory Commission shall propose regulations
  implementing this part of the National Energy Strategy Act within 1 year
  of the date of its enactment.
CONFORMING AND TECHNICAL AMENDMENTS
  SEC. 1938. (a) Section 105(c)(2) of the Atomic Energy Act of 1954 is
  amended by inserting `or both construct and operate' after `operate'
  the first time it appears.
  (b) Subsection 182(b) of the Atomic Energy Act of 1954 is amended to read
  as follows:
  `(b) The Advisory Committee on Reactor Safeguards shall review:
  `(1) an application under section 103 or section 104 b. for a construction
  permit, an operating license, or a combined construction and operating
  license for a facility;
  `(2) an application under section 104 c. for a construction permit or an
  operating license for a testing facility;
  `(3) an application under section 104 a. or c. specifically referred to
  it by the Commission; or
  `(4) an application for an amendment to a construction permit, to an
  operating license, or to a combined construction and operating license
  under section 103 or 104 a., b., or c. specifically referred to it by
  the Commission;
The Advisory Committee on Reactor Safeguards shall submit a report on the
application which shall be made a part of the record of the application
and be made available to the public except to the extent that security
classification prevents disclosure.'.
  (c) Section 186(a) of the Atomic Energy Act of 1954 is amended by inserting
  `and 185,' after `sections 182,'.
  (d) The table of contents of the Atomic Energy Act of 1954 (42 U.S.C. 2011
  prec.) is amended by amending the item relating to section 185 to read
  as follows:
`Sec. 185. Construction Permits and Operating Licenses.'.
EFFECT ON PENDING PROCEEDINGS
  SEC. 1939. Sections 1936 through 1938 of this part apply to all proceedings
  pending before the Nuclear Regulatory  Commission on the date of enactment
  of this part.
PART 2--NUCLEAR WASTE MANAGEMENT
REPOSITORY SITE CHARACTERIZATION
  SEC. 1940. Section 113(a) of the Nuclear Waste Policy Act of 1982 (42
  U.S.C. 10133(a)) is amended to read as follows:
  `(a) IN GENERAL- (1) The Secretary shall carry out, in accordance with
  this section, appropriate site characterization activities at the Yucca
  Mountain site. The Secretary shall consider fully the comments received
  under subsection (b)(2) of this section and section 112(b)(2) of this Act
  and shall, to the maximum extent practicable and in consultation with the
  Governor of the State of Nevada, conduct site characterization activities
  in a manner that minimizes any significant adverse environmental impacts
  identified in those comments or in the environmental assessment submitted
  under subsection (b)(1) of this section.
  `(2) Notwithstanding any other law, for the purpose of site characterization
  activities, a Federal agency administering a law, ordinance, or
  regulation that imposes a requirement for a permit, license, right of way,
  certification, approval, or other authorization, shall administer the
  application of that law, ordinance, or regulation to site characterization
  activities conducted by the Secretary under this Act without regard to
  whether its administration has been, or could be, delegated to a State or
  superseded by a comparable State law.
  `(3)(A) A requirement for a permit, license, right of way, certification,
  approval, or other authorization imposed by a State, local, or tribal law,
  ordinance, or regulation does not apply to site characterization activities
  under this Act.
  `(B) The Secretary shall carry out site characterization activities under
  this Act notwithstanding a denial of, or refusal to act on, an application
  for a permit, license, right of way, certification, approval, or other
  authorization required by a State, local, or tribal law, ordinance,
  or regulation.
  `(4) Notwithstanding paragraph (3), in carrying out site characterization
  activities under this Act, the Secretary shall consider the views of State,
  local, and tribal officials regarding the substantive provisions of State
  and local laws, ordinances, and regulations.
  `(5) An action to contest the constitutionality of a provision of this
  subsection must be brought within 60 days of the date of the enactment of the
  National Energy Strategy Act. A court may not enjoin site characterization
  activities carried out by the Secretary under this Act in an action brought
  to contest the constitutionality of a provision of this subsection except
  as part of a final judgment.
  `(6) Paragraphs (2), (3), (4), and (5) of this subsection apply only to site
  characterization activities conducted or begun before the Secretary submits
  to the Commission under section 114(b) of this Act (42 U.S.C. 10134(b))
  an application for a construction authorization for a repository.
  `(7) The exclusion or inclusion of any provisions contained in paragraphs
  (2), (3), (4), or (5) of this subsection in a negotiated proposed
  agreement developed under title IV of this Act shall not affect any
  determinations regarding either the reasonableness or appropriateness of
  such an agreement.'.
MONITORED RETRIEVABLE STORAGE FACILITY
  SEC. 1941. Sections 145(b) and 148(d) (1) and (2) of the Nuclear Waste
  Policy Act of 1982 (42 U.S.C. 1065(b) and 1068(d) (1) and (2)) are repealed.
Subtitle F--Renewable Energy
PART 1--PURPA SIZE CAP AND CO-FIRING REFORM
FEDERAL POWER ACT DEFINITIONS
  SEC. 1942. Section 3(17) of the Federal Power Act (16 U.S.C. 796(17))
  is amended--
  (1) by amending paragraph (A) to read as follows:
  `(17)(A) `small power production facility' means a facility which--
  `(i) is an `eligible solar, wind, waste, biomass, hydroelectric, or
  geothermal facility';
  `(ii) is an `alternative power production facility'; or
  `(iii)(I) produces electric energy solely by the use, as a primary energy
  source, of biomass, waste, renewable resources, geothermal resources,
  or any combination of those energy sources; and
  `(II) has a power production capacity which, together with any other
  facilities located at the same site (as determined by the Commission),
  is not greater than 80 megawatts;';
  (2) in paragraph (E)--
  (A) by inserting `, biomass, hydroelectric,' after `waste' the first time
  it appears; and
  (B) by striking `or geothermal resources, and which would otherwise not
  qualify as a small power production facility because of the power production
  capacity limitation contained in subparagraph (A)(ii)' and inserting `,
  biomass energy, hydroelectric power, or geothermal resources, regardless
  of power production capacity' in its place; and
  (3) by adding the following paragraph:
  `(F) `alternative power production facility' means a facility, regardless
  of power production capacity, which produces electric energy by using solar
  energy, wind energy, waste resources, biomass energy, hydroelectric power,
  or geothermal resources, but only if--
  `(i) either an application for certification of the facility as a qualifying
  small power production facility or a notice that the facility meets the
  requirements for qualification is submitted to the Commission;
  `(ii) the electric capacity of the facility is acquired through competitive
  acquisition; and
  `(iii) at least fifty percent of the energy source used to produce electric
  energy is obtained through the use of solar, wind, waste, biomass,
  hydroelectric power, geothermal resources, or any combination of those
  energy sources.'.
UTILITY PURCHASING AND EXEMPTIONS
  SEC. 1943. Section 210 of the Public Utility Regulatory Policies Act of 1978
  (16 U.S.C.  824a-3) is amended--
  (1) in subsection (a),
  (A) by striking `and to encourage geothermal small power production
  facilities of not more than 80 megawatts capacity,'; and
  (B) by inserting `In the case of an alternative power production facility,
  these rules shall require electric utilities  to offer to purchase electric
  capacity from such a facility only through competitive acquisition.' after
  `resale.';
  (2) in subsection (e)(2) by striking `other than a qualifying small power
  production facility which is an eligible solar, wind, waste, or geothermal
  facility as defined in section 3(17)(E) of the Federal Power Act' and
  inserting `other than a qualifying small power production facility which
  is an alternative  power production facility or an eligible solar, wind,
  waste, biomass, hydroelectric or geothermal facility' in its place; and
  (3) in subsection (1) by inserting `alternative power production facility',
  `eligible solar, wind, waste, biomass, hydroelectric, or geothermal
  facility', `competitive acquisition', after `qualifying small power
  producer','.
PART 2--HYDROELECTRIC POWER REGULATORY REFORM
REGULATORY REFORM
  SEC. 1944. Section 4 of the Federal Power Act (16 U.S.C. 797) is amended by--
  (1) inserting `, and for the purposes of subsections (h), (i), and (j),
  the Commission shall' after `empowered'; and
  (2) adding the following after subsection (g):
  `(h) Require each applicant who files an application for a license under this
  part after December 31, 1992, before filing the application to consult,
  concerning studies to be undertaken  in connection with the licensing
  process, with those Federal and State agencies and Indian tribes the
  Commission requires to be consulted and then to have the applicant submit to
  the Commission a plan and schedule for conducting the studies and a summary
  of  its consultation activities. The Commission shall approve or modify
  the plan and schedule  taking into consideration the cost of the studies,
  the potential value to the licensing determination of the information the
  studies are likely to produce, and any other factors the Commission considers
  relevant and shall ensure that the plan includes all studies necessary to
  evaluate the proposed projects. Once a plan is approved by the Commission,
  the Commission may modify it only after determining that the public interest
  would be affected if it were not modified. This determination may include
  a finding that additional information is needed in order to address the
  provisions of this Act or other applicable law. Approval of the study plan
  and schedule does not constitute a formal Commission decision and is not
  subject to appeal.
  `(i) Coordinate a single, consolidated review, including  review under the
  National Environmental Policy Act of 1969, of a hydropower project which
  is the subject of an application for a license under this part, by all
  Federal agencies, State agencies and  affected Indian tribes interested in
  the project that is the subject of the application. The Commission shall
  give reasonable notice of the application and the consolidated  review to
  all Federal agencies, State agencies, and affected Indian tribes that may
  be interested in the project that is the subject of the application. The
  Commission shall be the lead agency for purposes of compliance with the
  National Environmental Policy Act of 1969. A review under the National
  Environmental Policy Act of 1969 completed by the Commission as part of
  this consolidated review is the only documentation needed by an agency to
  satisfy the requirements of the National Environmental Policy Act  of 1969
  for the project subject to the review. The Commission's decision concerning
  issuance  of a license and the terms, conditions, and prescriptions of
  the license shall take into account the results of the consolidated
  review. An agency's decision concerning its recommendations, terms,
  conditions, and prescriptions for the license and any approvals within
  its authority related to the project shall take into account the results
  of the consolidated review. The Commission may establish reasonable time
  limits for submission of recommendations, terms, conditions, prescriptions,
  and reports by a Federal agency, State agency, or Indian tribe as part
  of the consolidated review. If an agency does not meet the Commission's
  time limitations, the Commission may continue to process and to take any
  appropriate action on the application.
  `(j)(1) Notwithstanding any other provision of this Act or other law, have
  exclusive authority to determine which recommendations, terms, conditions,
  prescriptions, permits, and certifications are included  in a license issued
  under this part for a hydropower project at an existing dam or conduit. If
  the Commission does not adopt in whole or part a recommendation, term,
  condition, prescription, permit, or certification promulgated by a Federal
  or State agency or an Indian tribe, the Commission  shall state fully its
  reasons for its action.
  `(2) If there is a conflict between the terms of a license issued under
  this part for a hydropower project at an  existing dam or conduit and the
  terms of a permit, license, certificate, or other authorization required by
  another Federal agency or a State agency for the same project, the terms of
  the license issued under this part prevail. If the hydropower project  at
  an existing dam or conduit  has been issued a license under this part and
  has been denied a permit, license, certificate, or other authorization by
  another Federal agency or State agency, the licensee of the project may
  proceed under the license issued under this part.'.
REMOVAL OF COMMISSION AUTHORITY OVER FIVE MEGAWATT PROJECTS
  SEC. 1945. Section 10(i) of the Federal Power Act (16 U.S.C. 803(i))
  is amended to read as follows:
  `(i)(1) A constructed or proposed hydropower project with an installed
  capacity of five megawatts or less that has not received a license under
  this part by the effective date of the National Energy Strategy Act is
  not subject to this part.
  `(2) The licensee of a project with an installed capacity of five megawatts
  or less licensed under this part as of the effective date of the National
  Energy Strategy Act may elect not to be regulated under this part by
  applying to the Commission for permission to surrender the license. The
  Commission shall permit surrender of the license unless the Commission
  determines it is not in  the public interest to do so.
  `(3) Notwithstanding this subsection, section 401 of the Federal Water
  Pollution Control Act of 1972 (33 U.S.C. 1341) applies to a project with
  an installed capacity of five megawatts or less as it did before the date
  of enactment of the National Energy Strategy Act.'.
Subtitle G--Alternative Fuel
PART 1--DUAL AND FLEXIBLE FUEL VEHICLE CREDITS
DUAL AND FLEXIBLE FUEL CAP REMOVAL
  SEC. 1946. Section 513(g) of the Motor Vehicle Information and Cost Savings
  Act (15 U.S.C. 2013(g)) is amended to read as follows:
  `(g) AMENDMENT TO STANDARDS- In carrying out section 502(a)(4) and (f)
  of this title, the Secretary shall not consider the fuel economy of
  alcohol powered automobiles or natural gas powered automobiles, and the
  Secretary shall consider dual energy automobiles and natural gas dual
  energy automobiles to be operated exclusively on gasoline or diesel fuel.'.
PART 2--ALTERNATIVE TRANSPORTATION FUELS
DEFINITIONS
  SEC. 1947. for the purposes of this part--
  (1) `alternative fuel' means methanol, ethanol, and other alcohols; mixtures
  containing 85 percent or more by volume of methanol, ethanol, or other
  alcohol with gasoline or other fuels; natural gas; liquid petroleum gas;
  hydrogen; and electricity;
  (2) `alternative fuel vehicle' means a motor vehicle that--
  (A) operates solely on alternative fuel, or
  (B) is a flexi-fueled vehicle;
  (3) `covered person' means a person to whom section 1948 of this part
  applies;
  (4) `fleet' means a number of motor vehicles, all or a part of which are
  centrally fueled or capable of being centrally fueled, that are owned,
  operated, leased, or otherwise controlled by a person. This term does
  not include--
  (A) motor vehicles held for daily lease or rental to the general public;
  (B) motor vehicles held for sale by motor vehicle dealers, including
  demonstration vehicles;
  (C) motor vehicles used for motor vehicle manufacturer product evaluations
  or tests;
  (D) law enforcement vehicles;
  (E) emergency vehicles;
  (F) military tactical vehicles; or
  (G) non-road vehicles, including farm and construction vehicles;
  (5) `flexi-fueled vehicle' means a motor vehicle that can operate on
  alternative or non-alternative fuel;
  (6) `person' has the meaning given that term in section 1 of title 1, United
  States Code, but also includes a State government and a local government;
  (7) `Secretary' means the Secretary of Energy; and
  (8) `urban bus' has the meaning given that term in section 219 of the
  Clean Air Act (42 U.S.C. 7554).
ACQUISITION OF ALTERNATIVE FUEL VEHICLES
  SEC. 1948. (a)(1) This subsection applies to a person who owns, operates,
  leases, or otherwise controls a fleet that--
  (A)(i) contains at least--
  (I) 10 automobiles;
  (II) 10 trucks, except multi-unit trucks over 26,000 pounds gross vehicle
  weight; or
  (III) 10 buses, except intercity passenger buses and urban buses; or
  (IV) a combination of at least 10 motor vehicles of these types; and
  (ii) is located in a metropolitan statistical area or consolidated
  metropolitan statistical area, as established by the Bureau of the Census,
  with a 1980 population of more than 250,000, which has been classified by
  the Environmental Protection Agency under part D of title I of the Clean
  Air Act as a serious, severe or extreme nonattainment area for ozone based
  on 1987, 1988, and 1989 data; or
  (B)(i) contains at least--
  (I) 20 automobiles;
  (II) 20 trucks, except multi-unit trucks over 26,000 pounds gross vehicle
  weight;
  (III) 20 buses, except intercity passenger buses and urban buses; or
  (IV) a combination of 20 motor vehicles of these types; and
  (ii) is located in any metropolitan statistical area or consolidated
  metropolitan statistical area, as established by the Bureau of the Census,
  with a 1980 population of more than 250,000.
  (2) When a person to whom this subsection applies under paragraph (1)
  purchases, leases, or otherwise acquires vehicles for the fleet described
  in paragraph (1), in the years specified in this paragraph, the following
  percentage of the vehicles purchased, leased, or otherwise acquired shall
  be alternative fuel vehicles in the respective years--
  (A) in 1995, 10 percent;
  (B) in 1996, 15 percent;
  (C) in 1997, 25 percent;
  (D) in 1998, 50 percent;
  (E) in 1999, 75 percent; and
  (F) in 2000 and afterwards, 90 percent.
  (b)(1) This subsection applies to a person who owns, operates, leases,
  or otherwise controls a fleet that--
  (A)(i) contains at least 10 urban buses, except intercity passenger
  buses, and
  (ii) is located in an area described in subsection (a)(1)(A)(ii) of this
  section, or
  (B)(i) contains at least 20 urban buses, except intercity passenger
  buses, and
  (ii) is located in an area described in subsection (a)(1)(B)(ii) of this
  section.
  (2) When a person to whom this subsection applies under paragraph (1)
  purchases, leases, or otherwise acquires vehicles for the fleet described
  in paragraph (1), in the years specified in this paragraph, the following
  percentage of the vehicles purchases, leased, or otherwise acquired shall
  be alternative fuel vehicles in the respective years--
  (A) in 2000, 50 percent;
  (B) in 2001, 75 percent;
  (C) in 2002, 80 percent; and
  (D) in 2003 and thereafter, 90 percent.
EXCEPTION
  SEC. 1949. This part does not apply to a covered person if the Secretary
  determines that no alternative fuel vehicles meeting the fleet requirements
  for that person are available for purchase, lease, or acquisition by
  other means when the part becomes applicable to the covered person. This
  part applies to that covered person when alternative fuel vehicles become
  available. This part does not apply to a person subject to section 1948(b)
  if the Secretary determines that no alternative fuel vehicle that is an
  urban bus complies with the warranty standards for urban buses.
CREDITS
  SEC. 1950. (a) The Secretary shall allocate a credit to a covered person
  if that person purchases an alternative fuel vehicle in excess of the
  number that person is required to purchase under this part or purchases
  an alternative fuel vehicle before the date that person is required to
  purchase an alternative fuel vehicle under this part.
  (b) In allocating credits under subsection (a), the Secretary shall allocate
  one credit for each alternative fuel vehicle the covered person purchases
  that exceeds the number of alternative fuel vehicles that person is required
  to purchase under this part or that is purchased before the date that person
  is required to purchase an alternative fuel vehicle under this part. The
  credit shall be allocated for the same type of vehicle, including an urban
  bus, automobile, or other vehicle subject to the requirements of this part,
  as the excess vehicle or earlier purchased vehicle.
  (c) At the request of a covered person allocated a credit under this section,
  the Secretary shall treat the credit as the purchase of one alternative fuel
  vehicle of the type for which the credit is allocated in the year designated
  by that person when determining whether that person has complied with this
  part in the year designated. A credit may be counted toward compliance
  for only one year.
  (d) A covered person allocated a credit under this section or to whom a
  credit is transferred under this section, may transfer freely the credit
  to another person who is required to comply with this part. At the request
  of the person to whom a credit is transferred, the Secretary shall treat
  the transferred credit as the purchase of one alternative fuel vehicle of
  the type for which the credit is allocated in the year designated by the
  person to whom the credit is transferred when determining whether that
  person has complied with this part in the year designated. A transferred
  credit may be counted toward compliance for only one year.
REPORTS
  SEC. 1951. The Secretary may require a person to file with the Secretary
  the reports the Secretary determines necessary to implement this part.
ENFORCEMENT
  SEC. 1952. (a) A person who violates a requirement or prohibition of
  this part is subject to a civil penalty of not more than $100,000 per
  violation. Each month in which a violation occurs constitutes a separate
  violation, unless the violator establishes that the vehicle necessary to
  comply with this part could not be purchased, leased, or otherwise acquired
  in that month. The first month of a violation of the yearly acquisition
  requirement of section 1948 is the month in which a person purchases,
  leases, or otherwise acquires vehicles that result in noncompliance
  with the yearly alternative fuel vehicle purchase requirement under that
  section. Each month in which compliance has not been achieved after the
  first month is a separate violation.
  (b) The Secretary may request the Attorney General to commence a civil
  action for a permanent or temporary injunction or to assess and recover
  any civil penalty under subsection (a) of this section. An action under
  this subsection may be brought in the district court of the United States
  for the district in which the violation is alleged to have occurred or in
  which the defendant resides or has his principal place of business. The
  court in which the action has been brought may restrain a violation, require
  compliance, assess a civil penalty, collect any noncompliance assessment and
  nonpayment penalty owed the United States, and award any other appropriate
  relief. In such an action, subpoenas for witnesses who are required to
  attend a district court in any district may run into any other district.
  (c)(1) Instead of commencing a civil action under subsection (b), the
  Secretary may assess an administrative penalty in the amount prescribed
  in subsection (a) of this section. The maximum amount of penalty sought
  against each violator in a proceeding under this subsection may not exceed
  $200,000, unless the Secretary and the Attorney General jointly determine
  that a larger amount is appropriate. A determination by the Secretary
  and the Attorney General on the appropriateness of a larger amount is not
  subject to judicial review.
  (2) The Secretary shall assess an administrative penalty under this
  subsection by an order made on the record after opportunity for a hearing
  in accordance with sections 554 and 556 of title 5 of the United States
  Code. Before issuing such an order, the Secretary shall give to the person
  to be assessed an administrative penalty written notice of the Secretary's
  proposal to issue an order. That person has 30 days from the date the
  notice is received to request a hearing on the order. The Secretary
  shall issue rules for procedures for hearings under this subsection. The
  Secretary may compromise, modify, or remit, with or without conditions,
  an administrative penalty that the Secretary imposes under this subsection.
  (3) An order issued under this subsection becomes final 30 days after its
  issuance unless a petition for judicial review is filed under paragraph (4).
  (4) Within 30 days following the date an administrative penalty is issued
  under this subsection, a person against whom the administrative penalty is
  assessed may seek review of the assessment in the United States District
  Court for the District of Columbia or for the district in which the violation
  is alleged to have occurred, the person resides, or the person's principal
  place of business is located. That person shall send a copy of the filing
  seeking review by certified mail to the Secretary and the Attorney General on
  the day of the filing. Within 30 days of the date the Secretary receives a
  copy of the filing, the Secretary shall file in the court a certified copy,
  or certified index, as appropriate, of the record on which the order was
  issued. The court shall not set aside or remand the order unless there is
  not substantial evidence in the record, taken as a whole, to support the
  finding of a violation or unless the Secretary's assessment of the penalty
  constitutes an abuse of discretion. In a proceeding under this subsection,
  the United States may seek to recover administrative penalties assessed
  under this subsection.
  (5) If a person fails to pay an assessment of an administrative penalty
  imposed by the Secretary under this subsection--
  (A) after the order making the assessment has become final, or
  (B) after a court in an action brought under paragraph (4) has entered a
  final judgment in favor of the Secretary.
the Secretary shall request the Attorney General to bring a civil action in
an appropriate district court to recover the amount assessed, plus interest
at rates established under section 6621(a)(2) of the Internal Revenue Code
of 1986 from the date of the final order or the date of the final judgment,
as the case may be. In this action, the validity, amount, and appropriateness
of the penalty is not subject to review. A person who fails to pay on a timely
basis the amount of an assessment of an administrative penalty under this
section shall be required to pay, in addition to the amount and interest, the
United States' enforcement expenses, including but not limited to, attorneys
fees and costs for collection proceedings, and a quarterly nonpayment penalty
for each quarter during which the failure to pay persists. This nonpayment
penalty shall be in an amount equal to 10 percent of the aggregate amount
of that person's penalties and nonpayment penalties which are unpaid as of
the beginning of the quarter.
  (d) In determining the amount of a penalty to be assessed under this section,
  the Secretary or the court, as appropriate, shall take into consideration,
  in addition to other factors justice may require, the size of the business,
  the economic impact of the penalty on the business, the violator's full
  compliance history and good faith efforts to comply, the duration of the
  violation as established by any credible evidence, payment by the violator
  of penalties previously assessed for the same violation, the economic
  benefit of noncompliance, and the seriousness of the violation.
IMPLEMENTATION
  SEC. 1953. The Secretary of Energy shall issue regulations to implement
  this part.
Subtitle H--Innovation and Technology Transfer
STEVENSON-WYDLER ACT AMENDMENTS
  SEC. 1954. (a) Section 12 of the Stevenson-Wydler Technology Innovation Act
  of 1980 (15 U.S.C. 3710a) is amended by adding the following new subsection
  after subsection (g):
  `(h) COPYRIGHT OF COMPUTER SOFTWARE- Each Federal agency may secure
  copyright on behalf of the United States as author or proprietor in any
  computer software prepared in whole or in part by employees of the United
  States Government in the course of work under a cooperative research and
  development agreement entered into under the authority of subsection (a)(1)
  of this section, or under any other equivalent authority, notwithstanding
  the limitations contained in section 105 of title 17, United States Code;
  and may grant or agree to grant in advance to a collaborating party,
  licenses or assignments for such copyrights, or options thereto, retaining
  a nonexclusive, nontransferable, irrevocable, paid-up license to reproduce,
  adapt, translate, distribute, and publicly perform or display the computer
  software throughout the world by or on behalf of the Government and such
  other rights as the Federal agency deems appropriate.'.
  (b) Section 4 of the Stevenson-Wydler Technology Innovation Act of 1980
  (15 U.S.C. 3703) is amended by adding at the end the following new paragraph:
  `(14) `Computer software' means a computer program, as defined in section
  101 of title 17, United States Code, and any associated documentation,
  supporting materials, or user instructions.'.
ROYALTY PAYMENTS TO AUTHORS
  SEC. 1955. (a) Sections 14(a)(1)(A), 14(a)(2), and 14(a)(3) of the
  Stevenson-Wydler Technology Innovation Act of 1980 (15 U.S.C. 3710c(a)(1)(A),
  (a)(2) and (a)(3) are amended--
  (1) by inserting `or computer software' after `inventions' each place
  it appears;
  (2) by inserting `or computer software' after `invention' each place
  it appears;
  (3) by inserting `or author' after `inventor' each place it appears;
  (4) by inserting `or co-author' after `co-inventor' each place it appears;
  (5) by inserting `or authors' after `inventors' each place it appears;
  (6) by inserting `or co-authors' after `co-inventors' each place it
  appears; and
  (7) by inserting `or author's' after `inventor's' each place it appears.
  (b) Section 14(a)(1)(B) of the Stevenson-Wydler Technology Innovation Act
  of 1980 (15 U.S.C. 3710c(a)(1)(B)) is amended--
  (1) by inserting `or computer software' after `income from any invention';
  (2) by inserting `or computer software was developed' after `the invention
  occurred';
  (3) by inserting `or computer software' after `licensing of inventions'
  in clause (i);
  (4) by inserting `or computer software which was developed' after `with
  respect to inventions' in clause (i); and
  (5) by inserting `or computer software' after `organizations for invention'
  in clause (i).
  (c) Section 14(c) of the Stevenson-Wydler Technology Innovation Act of
  1980 (15 U.S.C. 3710a(c)), is amended by inserting `or author' after
  `including inventor'.
TECHNICAL AND CONFORMING AMENDMENTS
  SEC. 1956. Section 12(c) of the Stevenson-Wydler Technology Innovation Act
  of 1980 (15 U.S.C. 3710a(c)), is amended by inserting `or computer software'
  after `inventions' each place it appears.
Subtitle I--Tax Incentives
ENERGY INVESTMENT TAX CREDIT
  SEC. 1957. (a) The Internal Revenue Code of 1986 is amended in section
  48(a)(2)(B) by striking `June 30, 1992' and inserting `December 31, 1993'.
  (b) The amendment made by subsection (a) applies after June 30, 1992.
PERMANENCE OF THE RESEARCH CREDIT
  SEC. 1958. (a) The Internal Revenue Code of 1986 is amended--
  (1) by striking section 41(h); and
  (2) by striking subparagraph (D) of section 28(b)(1).
  (b) The amendments made by subsection (a) apply to taxable years beginning
  after June 30, 1992.
TITLE XX--ARCTIC COASTAL PLAIN COMPETITIVE OIL AND GAS LEASING ACT
TABLE OF CONTENTS
Subtitle A--Short Title and Statement of Purpose
Sec. 2001. Short title.
Sec. 2002. Statement of purpose.
Subtitle B--Definitions
Sec. 2003. Definitions.
Subtitle C--Coastal Plain Competitive Leasing Program
Sec. 2004. Leasing program for lands within the coastal plain.
Sec. 2005. Rules and regulations.
Sec. 2006. Adequacy of the Department of the Interior's Legislative
Environmental Impact Statement.
Sec. 2007. Lease sales.
Sec. 2008. Grant of leases by the Secretary of the Interior.
Sec. 2009. Lease terms and conditions.
Sec. 2010. Exploration and development and production plans.
Sec. 2011. Bonding requirements.
Sec. 2012. Lease suspension.
Sec. 2013. Lease cancellation.
Sec. 2014. Assignment or subletting of leases.
Sec. 2015. Relinquishment.
Sec. 2016. Unitization.
Sec. 2017. Oil and gas geological and geophysical information.
Sec. 2018. Remedies and penalties.
Sec. 2019. Judicial review.
Sec. 2020. Annual report to Congress.
Sec. 2021. Interests of Arctic Slope Regional Corporation and Kaktovik
Corporation.
Subtitle D--Coastal Plain Environmental Protection
Sec. 2022. No significant adverse effect standard to govern authorized
Coastal Plain activities.
Sec. 2023. Regulations to protect the Coastal Plain's fish and wildlife
resources, subsistence users and the environment.
Sec. 2024. Sadlerochit Spring Special Area.
Sec. 2025. Facility consolidation planning.
Sec. 2026. Rights-of-way across the Coastal Plain.
Sec. 2027. Environmental studies.
Sec. 2028. Enforcement of safety and environmental regulations.
Subtitle E--Land Reclamation and Reclamation Liability Fund
Sec. 2029. Land reclamation.
Sec. 2030. Standard to govern land reclamation.
Sec. 2031. Coastal Plain Liability and Reclamation Fund.
Subtitle F--Disposition of Oil and Gas Revenues
Sec. 2032. Distribution of revenues.
Sec. 2033. Judicial review.
Subtitle A--Short Title and Statement of Purpose
SHORT TITLE
  SEC. 2001. This title may be cited as the `Arctic Coastal Plain Competitive
  Oil and Gas Leasing Act'.
STATEMENT OF PURPOSE
  SEC. 2002. It is the purpose of this title to authorize competitive oil and
  gas leasing and development to proceed on the Coastal Plain in a manner
  consistent with protection of the environment, maintenance of fish and
  wildlife and their habitat, and the interests of the area's subsistence
  users.
Subtitle B--Definitions
DEFINITIONS
  SEC. 2003. When used in this title--
  (1) `Coastal Plain' means that area identified as such in the map entitled
  `Arctic National Wildlife Refuge', dated February, 1991, on file in the
  office of the Director of the United States Fish and Wildlife Service;
  (2) `Secretary' means the Secretary of the Interior or the Secretary's
  designee; and
  (3) `significant adverse effects' means those effects which, despite the
  reasonable application of mitigation measures, if any, involving appropriate
  technology, engineering, and environmental control measures, including siting
  and timing restrictions, would result in widespread long-term reductions
  in habitat quality or availability that cause, or are likely to cause,
  a widespread long-term reduction in the natural abundance of any species
  of fish, wildlife, or plant.
Subtitle C--Coastal Plain Competitive Leasing Program
LEASING PROGRAM FOR LANDS WITHIN THE COASTAL PLAIN
  SEC. 2004. (a) The Secretary and other appropriate Federal officers and
  agencies shall take the actions necessary to establish and implement
  a competitive oil and gas leasing program that will provide for an
  environmentally sound program for the exploration, development, and
  production of the oil and gas resources of the Coastal Plain. Activities
  pursuant to such program shall be undertaken--
  (1) in accordance with the standards for protection of the environment
  required by subtitle D of this title; and
  (2) in a manner to ensure that the public receives fair market value for
  the lands to be leased.
  (b) This title shall be the Secretary's sole legislative authority for
  authorizing and conducting an oil and gas leasing program on the Coastal
  Plain and related activities.
  (c) The Coastal Plain shall be considered `Federal land' for purposes of
  the Federal Oil and Gas Royalty Management Act of 1982.
RULES AND REGULATIONS
  SEC. 2005. (a) The Secretary shall prescribe such rules and regulations as
  may be necessary to carry out the purposes and provisions of this title,
  including, but not limited to, rules and regulations relating to protection
  of the environment of the Coastal Plan, as required by subtitle D of
  this title. Such rules and regulations shall be promulgated within nine
  months after the date of enactment of this title and shall, as of their
  effective date, apply to all operations conducted under a lease issued
  under the provisions of this subtitle and all operations on the Coastal
  Plain related to the exploration, development and production of oil and
  gas and related activities.
  (b) In the formulation and promulgation of rules and regulations under this
  title, the Secretary shall consult with appropriate officials of the State
  of Alaska and the Government of Canada. The Secretary shall also consult
  with the Environmental Protection Agency and the Army Corps of Engineers
  in developing rules and regulations relating to the environment.
  (c) The Secretary shall periodically review and, if in the Secretary's
  judgment it is appropriate, revise the rules and regulations issued under
  subsection (a) of this section to reflect any significant biological,
  environmental, or engineering data which come to the Secretary's attention.
ADEQUACY OF THE DEPARTMENT OF THE INTERIOR'S LEGISLATIVE ENVIRONMENTAL
IMPACT STATEMENT
  SEC. 2006. (a) The `Final Legislative Environmental Impact Statement'
  (April 1987) on the Coastal Plain prepared pursuant to section 1002 of the
  Alaska National Interest Lands Conservation Act of 1980 (16 U.S.C. 3142),
  and section 102(2)(C) of the National Environmental Policy Act of 1969 (42
  U.S.C. 4332(2)(C)), is hereby found by the Congress to be compatible and
  consistent with the major purposes and policies of the National Environmental
  Policy Act of 1969 with respect to actions authorized to be taken by the
  Secretary to develop and promulgate the regulations for the establishment
  of a leasing program authorized by this title prior to conducting the
  first lease sale, and therefore, nothing in the National Environmental
  Policy Act of 1969 shall require any further environmental analysis or
  documentation in the development and promulgation of such regulations.
  (b) Except as provided in subsection (a) of this section, nothing in this
  title shall be considered or construed as otherwise limiting, amending, or
  affecting in any way the applicability of section 102(2)(C) of the National
  Environmental Policy Act of 1969 or its implementing regulations to all
  phases of oil and gas leasing, exploration, development and production and
  related activities conducted under or associated with the leasing program
  authorized by this title, nor shall anything in this title, except as
  provided in section 2022 of this title, be considered or construed as in
  any way limiting, amending, or affecting the applicability of any other
  Federal law or State law not in conflict with Federal law relating to the
  protection of the environment.
LEASE SALES
  SEC. 2007. (a) Lands may be leased pursuant to this title to any person
  qualified to obtain a lease for deposits of oil and gas under the Mineral
  Leasing Act, as amended (30 U.S.C. 181).
  (b) The Secretary shall, by regulation, establish procedures for--
  (1) receipt and consideration of sealed nominations for any area in the
  Coastal Plain for inclusion in, or exclusion from, a lease sale;
  (2) public notice of and comment on designation of areas to be included in,
  or excluded from, a lease sale;
  (3) review and comment by the State of Alaska and local governments in
  Alaska which may be affected by oil and gas exploration, development or
  production activities on the Coastal Plain on the schedule, configuration,
  and terms and conditions of each proposed lease sale; and
  (4) periodic consultation with the State of Alaska and local governments
  in Alaska, oil and gas lessees, and representatives of other individuals
  or organizations engaged in activity in or on the Coastal Plain including
  those involved in subsistence uses and recreational activities.
  (c) The Secretary shall, by regulation, provide for lease sales of lands
  on the Coastal Plain. When lease sales are to be held, they shall occur
  after the nomination process provided for in subsection (b) of this
  section. For the first least sale, the Secretary shall, consistent with
  the requirements set forth in subtitle D of this title, offer for lease
  those acres nominated pursuant to subsection (b), giving preference to
  those acres receiving the greater number of nominations, but not to exceed
  a total of three hundred thousand acres. If the total acreage nominated
  is less than three hundred thousand acres, the Secretary shall include in
  such sale any other acreage which the Secretary believes has the highest
  resource potential, but in no event shall more than three hundred thousand
  acres of the Coastal Plain be offered in such sale. Thereafter, no more
  than three hundred thousand acres of the Coastal Plain may be leased in
  any one lease sale. The initial lease sale shall be held within eighteen
  months of the issuance of final regulations by the Secretary. The second
  lease sale shall be held twenty-four months after the initial sale, with
  additional sales every twenty-four months thereafter so long as sufficient
  interest in development exists to warrant, in the Secretary's judgment,
  the conduct of such sales.
  (d) Areas of the Coastal Plain deemed by the Secretary to be of particular
  environmental sensitivity may be excluded from leasing by the Secretary. The
  Secretary shall notify the Committee on Energy and Natural Resources of
  the United States Senate and the Committee on Interior and Insular Affairs
  of the United States House of Representatives ninety days in advance of
  excluding any such areas from leasing. If the Secretary later determines
  that exploration, development, or production will result in no significant
  adverse effect on fish and wildlife, their habitat, and the environment,
  the Secretary shall, consistent with the provisions of subsection (c)
  of this section, offer such lands for leasing.
GRANT OF LEASES BY THE SECRETARY OF THE INTERIOR
  SEC. 2008. (a) Consistent with the provisions of section 2004(a)(2) of this
  title, the Secretary is authorized to grant to the highest responsible
  qualified bidder by sealed competitive cash bonus bid any lands to be
  leased on the Coastal Plain upon payment by the lessee of such bonus as
  may be accepted by the Secretary. The royalty shall be fixed in the lease
  and shall be not less than 12 1/2  per cent in amount or value of the
  production removed or sold from the lease.
  (b) The Secretary shall not issue a lease or leases or approve the
  assignment of any lease or leases under the terms of this title to any
  person, association, corporation, or any subsidiary, affiliate, or person
  controlled by or under common control with such person, association, or
  corporation, during any period in which, as determined by the Secretary,
  such entity has failed or refused to comply in any material respect with
  the reclamation requirements and other standards established for any prior
  lease to which such requirements and standard applied. Prior to making
  such determination with respect to any such entity the Secretary shall
  provide such entity with adequate notification and an opportunity to comply
  with such reclamation requirements and other standards and shall consider
  whether any administrative or judicial appeal is pending. Once the entity
  has complied with the reclamation requirement or other standard concerned,
  the Secretary may issue an oil and gas lease to the entity under this title.
  (c)(1) Following each notice of a proposed lease sale and before the
  acceptance of bids and the issuance of leases based on such bids, the
  Secretary shall allow the Attorney General, in consultation with the Federal
  Trade Commission, thirty days to review the results of such lease sale,
  except that the Attorney General, after consultation with the Federal
  Trade Commission, may agree to a shorter review period.
  (2) The Attorney General may, in consultation with the Federal Trade
  Commission, conduct such antitrust review on the likely effects the
  issuance of such leases would have on competition as the Attorney General,
  after consultation with the Federal Trade Commission, deems appropriate
  and shall advise the Secretary with respect to such review. The Secretary
  shall provide such information as the Attorney General, after consultation
  with the Federal Trade Commission, may require in order to conduct any
  antitrust review pursuant to this paragraph and to make recommendations
  pursuant to paragraph (3) of this subsection.
  (3) The Attorney General, after consultation with the Federal Trade
  Commission, may make such recommendations to the Secretary, including
  the nonacceptance of any bid or the imposition of terms or conditions
  on any lease, as may be appropriate to prevent any situation which may
  substantially lessen competition. If the Secretary determines, or if
  the Attorney General advises the Secretary, after consultation with the
  Federal Trade Commission and prior to the issuance of any lease, that such
  lease would create or maintain a situation which may substantially lessen
  competition, the Secretary may--
  (A) refuse to accept an otherwise qualified bid for such lease, or refuse
  to issue such lease, notwithstanding subsection (a) of this section; or
  (B) modify or impose terms or conditions on the lease, consistent with
  advice provided by the Attorney General.
  (4) The Secretary may issue a lease notwithstanding adverse advice from the
  Attorney General, or refuse to impose recommended terms or conditions, if the
  Secretary makes specific findings that approval of the lease is necessary to
  carry out the purposes of this title, that approval is consistent with the
  public interest, and that there are no reasonably available alternatives that
  would have significantly less anticompetitive effects. In such event, the
  Secretary must notify the lessee and the Attorney General of his findings.
  (5) Nothing in this subsection shall restrict the authority of the Attorney
  General, the Federal Trade Commission, or any other Federal department
  or agency to secure information, conduct reviews, make recommendations,
  or seek appropriate relief.
  (d) Nothing in this title shall be deemed to convey to any person,
  association, corporation, or other business organization immunity from
  civil or criminal liability, or to create defenses to actions, under any
  antitrust law.
  (e) As used in this section, `antitrust review' means an `antitrust
  investigation' for the purpose of the Antitrust  Civil Process Act (15
  U.S.C. 1311).
LEASE TERMS AND CONDITIONS
  SEC. 2009. An oil and gas lease issued pursuant to  this section shall--
  (1) be for a tract consisting of a compact area not to exceed two thousand
  five hundred and sixty acres, or four surveyed or protracted sections,
  whichever is larger, which shall be as compact in form as possible: Provided,
  That the Secretary is authorized to lease on a case-by-case basis units of
  up to 3,840 acres when necessary to consolidate  partial tracts adjacent
  to the external boundaries of the Coastal Plain;
  (2) be for an initial period of ten years and shall be extended for so long
  thereafter as oil or gas is produced in paying quantities from the lease
  or unit area to which the lease is committed or for so long as drilling
  or reworking operations, as approved by the Secretary, are conducted  on
  the lease or unit area;
  (3) require the payment of royalty as provided for in section 2008 of
  this title;
  (4) require approval of an exploration plan, as provided for in section
  2010 of this title;
  (5) require approval of a development and production plan, as required in
  section 2010 of this title;
  (6) require posting of bond required by section 2011 of this title;
  (7) provide for the suspension of the lease during the initial lease term
  or thereafter pursuant to section 2012 of this title;
  (8) provide for the cancellation of the lease during the initial lease
  term or thereafter pursuant to section 2013 of this title;
  (9) contain the terms and conditions relating to protection of fish and
  wildlife, their habitat, and the environment, as required by subtitle D
  of this title;
  (10) forbid the flaring of natural gas from any well unless the Secretary
  finds that such flaring is necessary to alleviate a temporary emergency
  situation or to conduct testing or work-over operations;
  (11) contain such rental and other provisions as the Secretary may prescribe
  at the time of offering the area for lease; and
  (12) contain such other provisions as the Secretary determines necessary
  to ensure compliance with this title and the regulations issued under it.
EXPLORATION AND DEVELOPMENT AND PRODUCTION PLANS
  SEC. 2010. (a) All exploration activities pursuant to any lease issued
  or maintained  under this title shall be conducted in accordance with an
  approved exploration plan or an approved revision of such plan. Prior
  to commencing  exploration pursuant to any oil and gas lease issued or
  maintained under this title, the holder thereof shall submit an exploration
  plan to the Secretary for approval.  Such plan may apply to more than one
  lease held by a lessee in any region of the Coastal Plain, or by a group
  of lessees acting  under a  unitization, pooling, or drilling agreement,
  and shall be approved by the Secretary if the Secretary finds that such
  plan is consistent with this title and other applicable law.
  (b) All development and production pursuant to a lease issued or maintained
  pursuant to this title shall be conducted in accordance with an approved
  development and production plan. Prior to commencing development or
  production pursuant to any oil  and gas lease issued or maintained under
  this title, the holder thereof shall submit a development and production
  plan to the Secretary for approval. Such plan may apply to more than one
  lease held by a lessee in any region of the Coastal Plain, or by a group
  of lessees acting under a unitization, pooling, or drilling  agreement,
  and shall be approved by the Secretary if the Secretary finds that such
  plan is consistent with this title and other applicable law.
  (c) Exploration plans and development and production plans shall include
  where applicable--
  (1) the names and legal addresses of the following persons: the operator,
  contractors, subcontractors and the owners  or lessees other than the
  operator;
  (2) a map or maps showing--
  (A) the location of a point of reference selected  by the operator within
  the area covered by the plan of operations showing, in relation to that
  point, existing  and proposed access routes or roads within the area, the
  boundaries of proposed surface disturbance and location of all survey lines;
  (B) the location of proposed drilling sites, wellsite layout, and all
  surface facilities;
  (C) sources of construction materials within the area including but not
  limited to water and gravel; and
  (D) the location of ancillary facilities including but not limited to
  camps, sanitary facilities, water supply, disposal facilities, pipelines,
  fuel storage  facilities, storage facilities, base of operations, and
  airstrips. A point of reference selected by the operator within the area
  of operations shall be marked with a ground monument;
  (3) a description of--
  (A) all surface and ancillary facilities, including but not limited to camps,
  sanitary facilities, water supply, disposal facilities, pipelines, fuel
  storage facilities, storage facilities, base of operations, and airstrips;
  (B) the major equipment  to be used in the operations, including but
  not limited to equipment and methods of transporting all waters used in
  or produced by operations, and the proposed method of transporting such
  equipment within the area covered by the plan of operations including to
  and from the site; and
  (C) construction materials within the area including but not limited to
  water and gravel;
  (4) an estimated schedule for any phase of operations of which review by
  the Secretary is sought and the anticipated date of operation completion;
  (5) the nature and extent of proposed operations;
  (6) a description of all licenses and permits necessary to carry out
  the plan;
  (7) plans for reclamation, including:
  (A) the anticipated reclamation work to be performed;
  (B) a proposed schedule of reclamation activities to be performed; and
  (C) a detailed estimate of reclamation costs;
  (8) methods for the storage and disposal of all wastes and hazardous and
  toxic substances;
  (9) an affidavit stating that the operations planned will be in compliance
  with all applicable Federal, State, and local laws and regulations;
  (10) contingency plans in case of spills, leaks, or other accidents;
  (11) certification that the plan complies with the State of Alaska's
  approved coastal zone management program, if required by the Coastal Zone
  Management Act of 1972, as amended, and the date such certification was
  submitted to the appropriate State agency for review pursuant to section
  307(c)(3) of that Act; and
  (12) such additional information as may be required by the Secretary to
  ensure that the proposed activities are consistent with this title, as
  well as other applicable Federal and State environmental laws.
  (d)(1) After an exploration or development and production plan is submitted
  for approval, the Secretary shall promptly publish notice of the submission
  and availability of the text of the proposed plan in the Federal Register
  and a newspaper of general circulation in the State of Alaska and provide
  an opportunity for written public comment.
  (2) Within one hundred and twenty days after receiving an exploration or
  development and production plan; or when consistency certification is
  required under the Coastal Zone Management Act of 1972, within thirty
  days after the State of Alaska concurs, or is conclusively presumed to
  concur, with the consistency certification accompanying the plan pursuant
  to section 307(c)(B) (i) or (ii) of the Coastal Zone Management Act of
  1972 or the Secretary of Commerce makes the finding authorized by section
  307(c)(3)(B)(iii) of such Act, whichever period is later, the Secretary shall
  determine, after taking into account any comment received under paragraph
  (1) of this subsection, whether the activities proposed in the plan are
  consistent with this title and other applicable provisions of Federal
  law and State law not in conflict with Federal law. If that determination
  is in the affirmative, the Secretary shall return the plan along with a
  statement of any modification necessary for its approval. The Secretary,
  as a condition of approving any plan under this section--
  (A) may require modifications to the plan that the Secretary considers
  necessary or appropriate to make it consistent with this title and other
  applicable law. The Secretary shall assess reasonable fees or charges for
  the reimbursement of all necessary and reasonable research, administrative,
  monitoring, enforcement, and reporting costs associated with reviewing
  the plan and monitoring its implementation; and
  (B) shall require such periodic reports regarding the carrying out of the
  drilling and related activities as may be necessary or appropriate for
  purposes of determining the extent to which the plan is being complied
  with and the effectiveness of the plan in ensuring that the drilling and
  related activities are consistent with this title and other applicable
  provisions of Federal law and State law not in conflict with Federal law.
  (e) If at any time while activities are being carried out under a plan
  approved under this section, the Secretary, on the basis of available
  information, determines that the continuation of any particular activity
  under the plan is likely to result in a significant adverse effect on fish
  or wildlife, or on their habitat, or on the environment, the Secretary,
  after consultation with the lessee, shall--
  (1) make modifications to part or all of the plan as necessary or appropriate
  to avoid the significant adverse effect;
  (2) temporarily suspend part or all of the drilling or related activity
  under the plan for such time as the Secretary considers necessary or
  appropriate to avoid significant adverse effect; or
  (3) terminate and cancel the plan when actions under paragraphs (1) or
  (2) will not avoid the significant adverse effect.
BONDING REQUIREMENTS
  SEC. 2011. (a) As a condition of approval of an exploration or development
  and production plan, the lessee shall be required to file with the
  Secretary a suitable performance bond. The bond shall be conditioned upon
  compliance with all the terms and conditions of the lease and all applicable
  laws. Such performance bond is in addition to and not in lieu of any bond
  or security deposit required by other regulatory authorities or required
  by any other provision of law. The lessee may file either a surety bond,
  or a personal bond consisting of cash or negotiable Treasury bonds of the
  United States. When negotiable Treasury bonds serve as the personal bond,
  they shall be accompanied by a proper conveyance to the Secretary of full
  authority to sell such securities in case of a default in the performance
  of the terms and conditions of the lease.
  (b)(1) The performance bond shall be in an amount--
  (A) to be determined by the Secretary to provide for the estimated full
  cost of reclamation of the lease site in accordance with an approved or
  revised exploration or development and production plan; plus
  (B) an amount set by the Secretary, consistent with the type of operations
  proposed, to cover the estimated costs to provide the means for rapid and
  effective cleanup, and to minimize damages resulting from an oil spill;
  the escape of gas, refuse, domestic wastewater, or hazardous or toxic
  substances; or fire caused by oil and gas activities.
  (2) The Secretary shall review, and adjust if he determines necessary,
  the amount of the performance bond at least every three years to ensure
  its adequacy in accordance with paragraph (1) of this subsection.
  (c) In the event that an approved exploration or development and production
  plan is revised, the Secretary may adjust the amount of the bond to conform
  to such modified plan.
  (d) The responsibility and liability of the lessee and its surety under the
  bond or security deposit shall continue until such time as the Secretary,
  after consultation with affected Federal and State agencies, determines
  that there has been compliance with the terms and conditions of the lease
  and all applicable law.
  (e) Within sixty days after determining that there has been compliance
  with the terms and conditions of the lease and all applicable laws, the
  Secretary shall notify the lessee that the period of liability under the
  bond or security deposit has been terminated.
LEASE SUSPENSION
  SEC. 2012. The Secretary may direct or assent to the suspension of operations
  and production under any lease granted under the terms of this title--
  (1) in the interest of conservation of the resource;
  (2) where there is no available system to transport the resource; or
  (3) where there is a threat of significant adverse effect upon fish or
  wildlife, their habitat or the environment.
If such a suspension is directed or assented to by the Secretary, any payment
of rental prescribed by such lease shall be suspended during such period of
suspension of operations and production, and the term of the lease shall be
extended by adding any such suspension period thereto.
LEASE CANCELLATION
  SEC. 2013. (a) Whenever the owner of a nonproducing lease fails to comply
  with any of the provisions of this title, or of any applicable provision of
  Federal or State environmental law, or of the lease, or of any regulation
  issued under this title, such lease may be canceled by the Secretary
  if such default continues for the period of thirty days after mailing of
  notice by registered letter to the lease owner at the lease owner's record
  post office address.
  (b) Whenever the owner of any producing lease fails to comply with any of
  the provisions of this title, or of any applicable provision of Federal or
  State environmental law, or of the lease, or of any regulation issued under
  this title, such lease may be forfeited and canceled by any appropriate
  proceeding brought by the Secretary in any United States district court
  having jurisdiction under this title.
  (c)(1) In addition to the authority for lease cancellation provided for
  by subsections (a) and (b) of this section, any lease may be canceled at
  any time, if the Secretary determines, after a hearing, that--
  (A) continued activity pursuant to such lease is likely to result in
  a significant adverse effect to fish or wildlife, their habitat, or the
  environment, or is likely to result in serious harm or damage to human life,
  to property, or to the national security or defense;
  (B) the likelihood of a significant adverse effect will not disappear
  within a reasonable period of time or the threat of harm or damage will
  not disappear or decrease to any acceptable extent within a reasonable
  period of time; and
  (C) the advantages of cancellation outweigh the advantages of continuing
  such lease.
  (2) Such cancellation shall not occur unless and until operations under
  such lease shall have been under suspension, or temporary prohibition,
  by the Secretary, with due extension of any lease term continuously for
  a period of five years, or for a lesser period upon request of the lessee.
  (3) Cancellation under this subsection shall entitle the lessee to receive
  such compensation as the lessee demonstrates to the Secretary to be equal
  to the lesser of--
  (A) the fair market value of the canceled rights as of the date of
  cancellation, taking account of both anticipated revenues from the lease and
  anticipated costs, including the costs of compliance with all applicable
  regulations and operating orders; liability for cleanup costs or damages,
  or both, in the case of an oil spill or spill of other hazardous or toxic
  materials; fines, damages, penalties, or removal costs assessed pursuant
  to section 2018 of this title or other State or Federal environmental law;
  any fees paid pursuant to section 2031 of this title; and all other costs
  reasonably anticipated on the lease; or
  (B) the excess, if any, over the lessee's revenues from the lease (plus
  interest thereon from the date of receipt to the date of reimbursement)
  of all consideration paid for the lease and all direct expenditures made
  by the lessee (exclusive of any fines, damages, penalties, or removal
  costs assessed pursuant to section 2018 of this title or other State or
  Federal environmental law, and any fees paid pursuant to section 2031 of
  this title) after the date of issuance of such lease and in connection with
  exploration or development, or both, pursuant to the lease (plus interest
  on such consideration and such expenditures from date of payment to date
  of reimbursement).
  (d) Cancellation of a lease under this section shall in no way release
  the owner of the lease from the obligation to provide for reclamation of
  the lease site.
ASSIGNMENT OR SUBLETTING OF LEASES
  SEC. 2014. No lease issued under this title shall be assigned or sublet,
  except with the consent of the Secretary.
RELINQUISHMENT
  SEC. 2015. The lessee may, at the discretion of the Secretary, be permitted
  at any time to make written relinquishment of all rights under any lease
  issued pursuant to this title. The Secretary shall accept the relinquishment
  by the lessee of any lease issued under this title where there has not
  been surface disturbance on the lands covered by the lease.
UNITIZATION
  SEC. 2016. For the purpose of conserving the natural resources of any oil or
  gas pool, field, or like area, or any part thereof and in order to avoid
  the unnecessary duplication of facilities, to protect the environment
  of the Coastal Plain, and to protect correlative rights, the Secretary
  shall require to the greatest extent practicable, that lessees unite with
  each other in collectively adopting and operating under a cooperative or
  unit plan of development for operation of such pool, field, or like area,
  or any part thereof including the construction of a common carrier pipeline
  to transport oil and gas to the exterior boundary of the Coastal Plain. The
  Secretary is also authorized and directed to enter into such agreements
  as are necessary and appropriate for the protection of the United States
  against drainage.
OIL AND GAS GEOLOGICAL AND GEOPHYSICAL INFORMATION
  SEC. 2017. (a)(1) Any lessee or permittee conducting any exploration for,
  or development or production of, oil or gas pursuant to this title shall
  provide the Secretary access to all geological and geophysical data and
  information (including processed, analyzed, and interpreted information)
  obtained from such activity and shall provide copies of such data and
  information as the Secretary may request. Such data and information shall be
  provided in accordance with regulations which the Secretary shall prescribe.
  (2) If interpreted information provided pursuant to paragraph (1) of
  this subsection is provided in good faith by the lessee or permittee,
  such lessee or permittee shall not be responsible for any consequence of
  the use or of reliance upon such interpreted information.
  (3) Whenever any geological or geophysical data or information is provided
  to the Secretary, pursuant to paragraph (1) of this subsection--
  (A) by a lessee or permittee, in the form and manner of processing which is
  utilized by such lessee or permittee in the normal conduct of business,
  the Secretary shall pay the reasonable cost of reproducing such data
  and information;
  (B) by a lessee or permittee, in such other form and manner of processing
  as the Secretary may request, the Secretary shall pay the reasonable cost
  of processing and reproducing such data and information.
  (b) The Secretary shall maintain the confidentiality of all geological
  and geophysical information obtained pursuant to subsection (a) of this
  section until such time as the Secretary determines that making such data
  available to the public would not be likely to damage the competitive
  position of the lessee or permittee.
REMEDIES AND PENALTIES
  SEC. 2018. (a) Except as provided in section 2019 of this title, the
  district courts of the United States shall have jurisdiction of cases
  and con