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100 STAT. 315

"(B) would not be employment (as so defined) without the application of such paragraphs." (2) CONFORMING AMENDMENTS.—

(A)(i) Section 3125 (relating to returns in the case of governmental employees in Guam, American Samoa, and the District of Columbia) is amended by redesignated subsections (a), (b), and (c) as subsections (b), (c), and (d), respectively, and by inserting before subsection (b) (as so redesignated) the following new subsection: "(a) STATES.—Except as otherwise provided in this section, in the case of the taxes imposed by sections 3101(b) and 3111(b) with respect to service performed in the employ of a State or any political subdivision thereof (or any instrumentality of any one or more of the foregoing which is wholly owned thereby), the return and payment of such taxes may be made by the head of the agency or instrumentality having the control of such service, or by such agents as such head may designate. The person making such return may, for convenience of administration, make payments of the tax imposed under section 3111 with respect to the service of such individuals without regard to the contribution and benefit base limitation in section 3121(a)(1)." (ii) The section heading for such section 3125 is amended by inserting "STATES," before "GUAM". (iii) The item relating to section 3125 in the table of sections for subchapter C of chaper 21 is amended by inserting "States," before "Guam". (B) Subsection (b) of section 1402 is amended by striking out "medicare qualified Federal employment (as defined in section 3121(u)(2))" and inserting in lieu thereof "medicare qualified government employment (as defined in section 3121(u)(3))". (C) Section 3122 (relating to Federal service) is amended by striking out "including service which is medicare qualified Federal employment (as defined in section 3121(u)(2))" and inserting in lieu thereof "including such service which is medicare qualified government employment (as defined in section 3121(u)(3))". (D) Subsection (a) of section 6205 (relating to special rules applicable to certain employment tsixes) is amended by adding at the end thereof the following new paragraph:

26 USC 3125. Guam, American Samoa. District of Columbia. 26 USC 3101, 3111.

26 USC 1402. 26 USC 3121. 26 USC 3122.

26 USC 6205.

"(5) STATES AND POLITICAL SUBDIVISIONS AS EMPLOYER.—For

purposes of this subsection, in the case of remuneration received from a State or any political subdivision thereof (or any instrumentality of any one or more of the foregoing which is wholly owned thereby) during any calendar year, each head of an agency or instrumentality, and each agent designated by either, who makes a return pursuant to section 3125 shall be 26 USC 3125. deemed a separate employer.' (E)(i) Section 6413(a) (relating to adjustment of certain 26 USC 6413. employment taxes) is amended by adding at the end thereof the following new paragraph: "(5) STATES AND POLITICAL SUBDIVISIONS AS EMPLOYER.—For

purposes of this subsection, in the case of remuneration received from a State or any political subdivision thereof (or any instrumentality of any one or more of the foregoing which is wholly owned thereby) during any calendar year, each head of an agency or instrumentality, and each agent designated by

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Page:United States Statutes at Large Volume 100 Part 1.djvu/352

 100 STAT. 316 26 USC 3125. 26 USC 6413.

PUBLIC LAW 99-272—APR. 7, 1986 either, who makes a return pursuant to section 3125 shall be deemed a separate employer." (ii) Section 6413(c)(2) (relating to special refunds of certain employment taxes) is amended— (I) by striking out "3125(a)", "3125(b)", and "3125(c)" in subparagraphs (D), (E), and (F), respectively, and inserting in lieu thereof "3125(b)", "3125(c)", and "3125(d)^', respectively, and (II) by adding at the end thereof the following new subparagraph: "(G) EMPLOYEES OF STATES AND POLITICAL SUBDIVISIONS.—

In the case of remuneration received from a State or any political subdivision thereof (or any instrumentality of any one or more of the foregoing which is wholly owned thereby) during any calendar year, each head of an agency or instrumentality, and each agent designated by either, who makes a return pursuant to section 3125(a) shall, for purposes of this subsection, be deemed a separate employer." (b) ENTITLEMENT TO HOSPITAL INSURANCE BENEFITS.— (1) REVISION OF DEFINITION OF MEDICARE QUALIFIED GOVERN-

MENT EMPLOYMENT.—Section 210(p)) of the Social Security Act (42 U.S.C. 410(p)) is amended to read as follows: "MEDICARE QUALIFIED GOVERNMENT EMPLOYMENT

State and local governments. 426^1 ^^^'

42 USC 418.

"(p)(l) For purposes of sections 226 and 226A, the term 'medicare qualified government employment' means any service which would constitute 'employment' as defined in subsection (a) of this section but for the application of the provisions of— "(A) subsection (a)(5), or "(B) subsection (a)(7), except as provided in paragraphs (2) and (3). "(2) Service shall not be treated as employment by reason of paragraph (1)(B) if the service is performed— "(A) by an individual who is employed by a State or political subdivision thereof to relieve him from unemployment, "(B) in a hospital, home, or other institution by a patient or inmate thereof as an employee of a State or political subdivision thereof or of the District of Columbia, "(C) by an individual, as an employee of a State or political subdivision thereof or of the District of Columbia, serving on a temporary basis in case of fire, storm, snow, earthquake, flood or other similar emergency, or "(D) by any individual as an employee included under section 5351(2) of title 5, United States Code (relating to certain interns, student nurses, and other student employees of hospitals of the District of Columbia Government), other than as a medical or dental intern or a medical or dental resident in training. As used in this paragraph, the terms 'State' and 'political subdivision' have the meanings given those terms in section 218(b). "(3) Service performed for an employer shall not be treated as employment by reason of paragraph (1)(B) if— "(A) such service would be excluded from the term 'employment' for purposes of this section if paragraph (1)(B) did not apply; "(B) such service is performed by an individual—

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100 STAT. 317

"(i) who was performing substantial and regular service for remuneration for that employer before April 1, 1986, "(ii) who is a bona fide employee of that employer on March 31, 1986, and "(iii) whose employment relationship with that employer was not entered into for purposes of meeting the requirements of this subparagraph; and "(C) the employment relationship with that employer has not been terminated after March 31, 1986. "(4) For purposes of paragraph (3), under regulations (consistent with regulations established under section 3121(u)(2)(D) of the Internal Revenue Code of 1954)— 26 USC 3121. "(A) all agencies and instrumentalities of a State (as defined in section 218(b)) or of the District of Columbia shall be treated 42 USC 418. as a single employer, and "(B) all agencies and instrumentalities of a political subdivision of a State (as so defined) shall be treated as a single employer and shall not be treated as described in subparagraph "(A)." (2) ENTITLEMENT TO HOSPITAL INSURANCE BENEFITS.— (A) FOR INDIVIDUALS AGE 65 OR OLDER AND FOR DISABLED

-

INDIVIDUALS.—Section 226 of such Act (42 U.S.C. 426) is amended by striking out "medicare qualified Federal employment" in subsections (a)(2)(C)(i) and (b)(2)(C)(ii)(I) and inserting in lieu thereof "medicare qualified government employment". (B) FOR INDIVIDUALS WITH END-STAGE RENAL DISEASE.—

Section 226A(a) of such Act (42 U.S.C. 426-l(a)) is amended by striking out "medicare qualified Federal employment" in paragraphs (l)(A)(ii) and (l)(B)(iii) and inserting in lieu thereof "medicare qualified government employment". (C) CONFORMING AMENDMENTS.—

(i) Section 1811 of such Act (42 U.S.C. 1395c) is amended by striking out "Federal employment" in clauses (1) and (2) and inserting in lieu thereof "government employment". (ii) Section 226(g) of such Act (42 U.S.C. 426(g)) is amended by striking out "medicare qualified Federal employment" and inserting in lieu thereof "medicare qualified government employment by virtue of service described in section 210(a)(5)". 42 USC 410. (c) OPTIONAL MEDICARE COVERAGE OF CURRENT EMPLOYEES.—Sec-

tion 218 of the Social Security Act (42 U.S.C. 418) is amended by adding at the end the following new subsection: "(v)(l) The Secretary shall, at the request of any State, enter into or modify an agreement with such State under this section for the purpose of extending the provisions of title XVIII, and sections 226 and 226A, to services performed by employees of such State or any political subdivision thereof who are described in paragraph (2). "(2) This subsection shall apply only with respect to employees— "(A) whose services are not treated as employment as that term applies under section 210(p) by reason of paragraph (3) of such section; and "(B) who are not otherwise covered under the State's agreement under this section. "(3) Payments by the State required under subsection (e) with respect to employees covered under this subsection shall be limited

State and local governments. 425^ ^^^^' 42 USC 426-1.

Ante, p. 316.

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 100 STAT. 318 26 USC 3101, 311126 USC 3121. 42 USC 426, 426-1.

26 USC 3125, 6205,6413.

26 USC 3121

note.

PUBLIC LAW 99-272—APR. 7, 1986

to amounts equivalent to the sum of the taxes which would be imposed by sections 3101(b) and 3111(b) of the Internal Revenue Code of 1954 if such services for which wages were paid to such employees constituted 'employment' as defined in section 3121 of such Code. "(4) For purposes of sections 226 and 226A of this Act, services covered under an agreement pursuant to this subsection shall be treated as 'medicare qualified government employment'. "(5) Except as otherwise provided in this subsection, the provisions of this section shall apply with respect to services covered under the agreement pursuant to this subsection. "(w) Notwithstanding sections 3125(a), 6205(a)(5), 6413(a)(5), and 6413(c)(2)(G) of the Internal Revenue Code of 1954, any State shall make payments of the taxes imposed with respect to services of employees of such State and of a political subdivision thereof under sections 3101(b) and 3111(b) of such Code, and reports of such services, under the same procedures as apply to payments and reports under subsection (e) of this section, but only if any employees of such State or of such political subdivision thereof respectively are covered under an agreement pursuant to this section.". (d) EFFECTIVE DATES.— (1) HOSPITAL INSURANCE TAXES.—The amendments made by

sulDsection (a) shall apply to services performed after March 31, 1986. 42 USC 410 n^te.

(2) MEDICARE COVERAGE.—

(A) IN GENERAL.—The amendments made by subsection (b) shall be effective after March 31, 1986, and the amendments made by paragraph (3) of that subsection shall apply to services performed (for medicare qualified government employment) after that date. (B) 'TREATMENT OF CERTAIN DISABILITIES.—For purposes of

42 USC 1395c.

42 USC 418 note.

26 USC 1303.

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), no individual may be considered to be under a disability for any period beginning before April 1, 1986. (3) OPTIONAL COVERAGE OF CURRENT EMPLOYEES.—The amendment made by subsection (c) shall apply to services performed after March 31, 1986. SEC. 13206. FULL-TIME STUDENTS NOT ELIGIBLE FOR INCOME AVERAGING. (a) IN GENERAL.—Subsection (d) of section 1303 (defining eligible individuals for income averaging) is amended to read as follows: "(d) ELIGIBLE INDIVIDUALS NOT TO INCLUDE FULL-TIME DENTS.—

STU-

"(1) IN GENERAL.—For purposes of this part, an individual shall not be an eligible individual for the computation year if, at any time during any base period year, such individual was a student. "(2) EXCEPTION FOR MARRIED STUDENTS PROVIDING 25 PERCENT

OR LESS OF JOINT INCOME.—Paragraph (1) shall not apply to any

individual for any computation year if— "(A) the individual makes a joint return for the computation year, and "(B) not more than 25 percent of the aggregate adjusted gross income of such individual and the spouse of such

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100 STAT. 319

individual for such computation year is attributable to such individual. In applying subparagraph (B), amounts which constitute earned income (within the meaning of section 911(d)(2)) and are community income under commuity prop- 26 USC 911. erty laws applicable to such income shall be taken into account as if such amounts did not constitute community income. "(3) STUDENT DEFINED.—For purposes of this subsection, the term 'student' means, with respect to a taxable year, an individual who during each of 5 calendar months during such taxable year— "(A) was a full-time student at an educational organization described in section 170(b)(l)(A)(ii); or 26 USC 170. "(B) was pursuing a full-time course of institutional onfarm training under the supervision of an accredited agent of an educational organization described in section 170(b)(l)(A)(ii) or of a State or political subdivision of a State.". (b) REPEAL OF NON-FULL-TIME STUDENT SUPPORT EXCEPTION.—

Paragraph (2) of section 1303(c) (relating to individuals receiving 26 USC 1303. support from others) is amended— (1) by striking out subparagraph (A), (2) by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), and (3) by striking out "subparagraph (C)" in the second sentence and inserting in lieu thereof "subparagraph (B)". (c) EFFECTIVE DATE.—The amendments made by this section shall 26 USC 1303 apply with respect to taxable years beginning after December 31, ^°^1985. SEC. 13207. APPLICATION OF FRINGE BENEFIT RULES TO AIRLINES AND THEIR AFFILIATES. (a) PARENTS OF A I R U N E EMPLOYEES TREATED AS EMPLOYEES IN APPLYING FRINGE BENEFIT RULES.—

(1) IN GENERAL.—Section 132(f) (relating to certain individuals 26 USC 132. treated as employees with respect to certain fringe benefits) is amended by adding at the end thereof the following new paragraph: "(3) SPECIAL RULE FOR PARENTS IN THE CASE OF AIR TRANSPOR-

TATION.—Any use of air transportation by a parent of an employee (determined without regard to paragraph (1)(B)) shall be treated as use by the employee.". (2) EFFECTIVE DATE.—The amendment made by this subsection 26 USC 132 note, shall take effect on January 1, 1985. (b) LINE OF BUSINESS TEST FOR AFFIUATES PROVIDING AIRLINERELATED SERVICES.—

(1) IN GENERAL.—Section 132(h) (relating to special rules) is amended by adding at the end thereof the following new paragraph: "(6) SPECIAL RULE FOR AFFIUATES OF AIRLINES.— "(A) IN GENERAL.—If—

"(i) a qualified affiliate is a member of an affiliated group another member of which operates an airline, and "(ii) employees of the qualified affiliate who are directly engaged in providing airline-related services are

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 100 STAT. 320

26 USC 1504. 26 USC 132 note. 26 USC 132 note.

26 USC 132. 26 USC 1504.

26 USC 132.

26 USC 132 note.

PUBLIC LAW 99-272—APR. 7, 1986 entitled to no-additional-cost service with respect to air transportation provided by such other member, then, for purposes of applying paragraph (1) of subsection (a) to such no-additional-cost service provided to such employees, such qualified affiliate shall be treated as engaged in the same line of business as such other member. "(B) QUALIFIED AFFILIATE.—For purposes of this paragraph, the term 'qualified affiliate' means any corporation which is predominantly engaged in airline-related services. "(C) AIRLINE-RELATED SERVICES.—For purposes of this paragraph, the term 'airline-related services' means any of the following services provided in connection with air transportation: "(i) Catering. "(ii) Baggage handling, "(iii) Ticketing and reservations. "(iv) Flight planning and weather analysis. "(v) Restaurants and gift shops located at an airport. "(vi) Such other similar services provided to the airline as the Secretary may prescribe. "(D) AFFILIATED GROUP.—For purposes of this paragraph, the term 'affiliated group' has the meaning given such term by section 1504(a).". (2) EFFECTIVE DATE.—The amendment made by this subsection shall take effect on January 1, 1985.

(c) TRANSITIONAL R u L E FOR DETERMINATION OF LiNE OF BUSINESS IN CASE OF AFFILIATED GROUP OPERATING AIRUNE.—If, as of Septem-

ber 12, 1984— (1) an individual— (A) was an employee (within the meaning of section 132 of the Internal Revenue Code of 1954, including subsection (f) thereof) of one member of an affiliated group (as defined in section 1504 of such Code), hereinafter referred to as the "first corporation", and (B) was eligible for no-additional-cost service in the form of air transportation provided by another member of such affiliated group, hereinafter referred to as the "second corporation", (2) at least 50 percent of the individuals performing service for the first corporation were or had been employees of, or had previously performed services for, the second corporation, and (3) the primary business of the affiliated group was air transportation of passengers, then, for purposes of applying paragraphs (1) and (2) of section 132(a) of the Internal Revenue Code of 1954, with respect to no-additionalcost services and qualified employee discounts provided after December 31, 1984, for such individual by the second corporation, the first corporation shall be treated as engaged in the same air transportation line of business as the second corporation. For purposes of the preceding sentence, an employee of the second corporation who is performing services for the first corporation shall also be treated as an employee of the first corporation. (d) SPECIAL RULE FOR SERVICES RELATED TO PROVIDING AlR TRANSPORTATION.—Section 531 of the Tax Reform Act of 1984 is

amended by redesignating subsections (g) and (h) as subsections (h) and (i), respectively, and by inserting after subsection (f) the following new subsection:

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100 STAT. 321

"(g) SPECIAL RULE FOR CERTAIN SERVICES RELATED TO A I R 26 USC 132 note. TRANSPORTATION.— "(1) IN GENERAL.—If^

"(A) an individual performs services for a qualified air transportation organization, and "(B) such services are performed primarily for persons engaged in providing air transportation and are of the kind which (if performed on September 12, 1984) would qualify such individual for no-additional-cost services in the form of air transportation, then, with respect to such individual, such qualified air transportation organization shall be treated as engaged in the line of business of providing air transportation. "(2) QUALIFIED AIR TRANSPORTATION ORGANIZATION.—For purposes of paragraph (1), the term 'qualified air transportation organization' means any organization— "(A) if such organization (or a predecessor) was in existence on September 12, 1984, "(B) if— "(i) such organization is described in section 501(c)(6) of the Internal Revenue Code of 1954 and the member- 26 USC 501. ship of such organization is limited to entities engaged in the transportation by air of individuals or property for compensation or hire, or "(ii) such organization is a corporation all the stock of which is owned entirely by entities referred to in clause (i), and "(C) if such organization is operated in furtherance of the activities of its members or owners.". SEC. 13208. CERTAIN INSOLVENT TAXPAYERS ALLOWED TO REDUCE CAPITAL GAINS PREFERENCE ITEM FOR PURPOSES OF THE INDIVIDUAL MINIMUM TAX. (a) IN GENERAL.—Paragraph (9) of section 57(a) (relating to capital 26 USC 57. gains as items of tax preference) is amended by adding at the end thereof the following new subparagraph: "(E) SPECIAL RULE FOR CERTAIN INSOLVENT TAXPAYERS.—

"(i) IN GENERAL.—The amount of the tax preference under subparagraph (A) shall be reduced (but not below zero) by the excess (if any) of— "(I) the applicable percentage of gain from any farm insolvency transaction, over "(II) the applicable percentage of any loss from any farm insolvency transaction which offsets such gain. "(ii) REDUCTION LIMITED TO AMOUNT OF INSOLVENCY.—

The amount of the reduction determined under clause (i) shall not exceed the amount by which the taxpayer is insolvent immediately before the transaction (reduced by any portion of such amount previously taken into account under this clause). "(iii) FARM INSOLVENCY TRANSACTION.—For purposes

of this subparagraph, the term 'farm insolvency transaction' means— "(I) the transfer by a farmer of farmland to a creditor in cancellation of indebtedness or

71-194 0 - 89 - 13: Q 3 Parti L

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 100 STAT. 322

26 USC 1202.

26 USC 2032A.

26 USC 57 note.

26 USC 103.

PUBLIC LAW 99-272—APR. 7, 1986

"(ID the sale or exchange by the farmer of property described in subclause (I) under the threat of foreclosure, but only if the farmer is insolvent immediately before such transaction. "(iv) INSOLVENT.—For purposes of this subparagraph, the term 'insolvent' means the excess of liabilities over the fair market value of assets. "(v) APPLICABLE PERCENTAGE.—For purposes of this subparagraph, the term 'applicable percentage' means that percentage of net capital gain with respect to which a deduction is allowed under section 1202(a). "(vi) FARMLAND.—For purposes of this subparagraph, the term 'farmland' means any land used or held for use in the trade or business of farming (within the meaning of section 2032A(e)(5)). "(vii) FARMER.—For purposes of this subparagraph, the term 'farmer' means any taxpayer if 50 percent or more of the average annual gross income of the taxpayer for the 3 preceding taxable years is attributable to the trade or business of farming (within the meaning of section 2032A(e)(5))." (b) EFFECTIVE DATE.—The amendment made by this section shall apply to transfers or sales or exchanges made after December 31, 1981, in taxable years ending after such date. SEC. 13209. TREATMENT OF CERTAIN POLLUTION CONTROL BONDS. (a) GENERAL RULE.—For purposes of subparagraph (F) of section 103(b)(4) of the Internal Revenue Code of 1954 (relating to pollution control facilities), any obligation issued after December 31, 1985, shall be treated as described in such subparagraph if it is part of an issue substantially all of the proceeds of which are used by a qualified regional pollution control authority to acquire existing air or water pollution control facilities which the authority itself will operate in order to maintain or improve control of pollutants. The provisions of section 103(b)(17) of such Code (relating to prohibition on acquisition of existing property not permitted) shall not apply to any obligation described in the preceding sentence. (b) $200,000,000 LIMITATION.—The aggregate amount of obligations to which subsection (a) applies shall not exceed $200,000,000, except that the amount of such obligations issued during calendar year 1986 to which subsection (a) applies shall not exceed $100,000,000. (c) RESTRICTIONS.—Subsection (a) shall apply only if— (1) the amount paid (directly or indirectly) for the facilities does not exceed their fair market value, (2) the fees or charges imposed (directly or indirectly) on any seller for the use of any facilities after the sale are not less than the amounts charged for the use of such facilities to persons other than the seller, (3) the original use of the facilities acquired with the proceeds of such obligations commenced before September 3, 1982, and (4) no person other than the qualified regional pollution control authority is considered after the sale as the owner of the facilities for purposes of Federal income taxes.

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 PUBLIC LAW 99-272—APR. 7, 1986 (d)

100 STAT. 323

QUALIFIED REGIONAL POLLUTION CONTROL AUTHORITY DE-

FINED.—For purposes of this section, the term "qualified regional pollution control authority" means an authority which— (1) is a political subdivision created by State law to control air or water pollution, (2) has within its jurisdictional boundaries all or part of at least 2 counties (or equivalent political subdivision), (3) operates air or water pollution control facilities, and (4) was created on September 1, 1969. (e) REPEAL OF SECTION 103(b)(ll).—Paragraph (11) of section 103(b) 26 USC 103. is hereby repealed. SEC. 13210. TREATMENT OF THE NETTING OF GAINS AND LOSSES BY COOPERATIVES. (a) IN GENERAL.—Section 1388 (relating to definitions and special 26 USC 1388. rules applicable to cooperatives) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: "(j) SPECIAL RULES FOR THE NETTING OF GAINS AND LOSSES BY

COOPERATIVES.—For purposes of this subchapter, in the case of any organization to which part I of this subchapter applies— 26 USC 1381. "(1) OPTIONAL NETTING OF PATRONAGE GAINS AND LOSSES PER-

MITTED.—The net earnings of such organization may, at its option, be determined by offsetting patronage losses (including any patronage loss carried to such year) which are attributable to 1 or more allocation units (whether such units are functional, divisional, departmental, geographic, or otherwise) against patronage earnings of 1 or more other such allocation units. "(2) CERTAIN NETTING PERMITTED AFTER SECTION 381 TRANS-

ACTIONS.—If such an organization acquires the assets of another such organization in a transaction described in section 381(a), 26 USC 381. the acquiring organization may, in computing its net earnings for taxable years ending after the date of acquisition, offset losses of 1 or more allocation units of the acquiring or acquired organization against earnings of the acquired or acquiring organization, respectively, but only to the extent— "(A) such earnings are properly allocable to periods after the date of acquisition, and "(B) such earnings could have been offset by such losses if such earnings and losses had been derived from allocation units of the same organization. "(3) NOTICE REQUIREMENTS.—

"(A) IN GENERAL.—In the case of any organization which exercises its option under paragraph (1) for any taxable year, such organization shall, on or before the 15th day of the 9th month following the close of such taxable year, provide to its patrons a written notice which— "(i) states that the organization has offset earnings and losses from 1 or more of its allocation units and that such offset may have affected the amount which is being distributed to its patrons, "(ii) states generally the identity of the offsetting allocation units, and "(iii) states briefly what rights, if any, its patrons may have to additional financial information of such organization under terms of its charter, articles of incorporation, or bylaws, or under any provision of law.

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 100 STAT. 324

PUBLIC LAW 99-272—APR. 7, 1986 "(B) CERTAIN INFORMATION NEED NOT BE PROVIDED.—An

organization may exclude from the information required to be provided under clause (ii) of subparagraph (A) any detailed or specific data regarding earnings or losses of such units which such organization determines would disclose commercially sensitive information which— "(i) could result in di.~competitive disadvantage to such organization, or "(ii) could create a competitive advantage to the benefit of a competitor of such organization. "(C) FAILURE TO PROVIDE SUFFICIENT NOTICE.—If the Secretary determines that an organization failed to provide sufficient notice under this paragraph— "(i) the Secretary shall notify such organization, and "(ii) such organization shall, upon receipt of such notification, provide to its patrons a revised notice meeting the requirements of this paragraph. Any such failure shall not affect the treatment of the organization under any provision of this subchapter or section 521. "(4) PATRONAGE EARNINGS OR LOSSES DEFINED.—For purposes of this subsection, the terms 'patronage earnings' and 'patronage losses' means earnings and losses, respectively, which are derived from business done with or for patrons of the organization."

26 USC 521.

26 USC 521.

Ante, p. 323. 26 USC 1388

^°^'

(b)

TAX-EXEMPT STATUS NOT AFFECTED BY NETTING.—Section

521(b) (relating to applicable rules) is amended by adding at the end thereof the following new paragraph: "(6) NETTING OF LOSSES.—Exemption shall not be denied any such association because such association computes its net earnings for purposes of determining any amount available for distribution to patrons in the manner described in paragraph (1) of section 1388(j)." (c) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1962. (2) NOTIFICATION REQUIREMENT.—The provisions of section 1388(j)(3) of the Internal Revenue Code of 1954 (as added by subsection (a)) shall apply to taxable years beginning on or after the date of the enactment of this Act. (3) No INFERENCE.—Nothing in the amendments made by this section shall be construed to infer that a change in law is intended as to whether any patronage earnings may or not be offset by nonpatronage losses, and any determination of such issue shall be made as if such amendments had not been enacted. SEC. 13211. ALLOCATION UNDER SECTION 861 OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

26 USC 861 note.

Subsection (c) of section 126 of the Deficit Reduction Act of 1984 is amended— (1) by striking out "1985" and inserting in lieu thereof "1986"; and (2) by striking out "3rd" each place it appears and inserting in lieu thereof "4th".

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100 STAT. 325

SEC. 13212. LIMITATION ON ISSUANCE OF UNITED STATES BONDS. Subsection (a) of section 3102 of title 31, United States Code, is amended by striking o u t "$200,000,000,000" and inserting in lieu thereof "$250,000,000,000". SEC. 13213. AUTHORIZATION OF ADDITIONAL FUNDS TO INTERNAL REVENUE SERVICE FOR REVENUE ENFORCEMENT AND RELATED PURPOSES, ETC. (a) AUTHORIZATION.—There is authorized to be a p p r o p r i a t e d $46,500,000 for each of the fiscal year s 1986, 1987, and 1988 for the use of the I n t e r n a l Revenue Service to employ 1,550 additional a g e n t s and examination employees. (b) RESTORATION O F PROPOSED C U T S. — I t is the sense of the Con-

gress that — (1) the r e s to r a t i o n of the cuts in the budget for the I n t e r n a l Revenue Service for fiscal year 1986, and (2) the f u r the r increase in such budget total, recommended by the Committee on Appropriations of the House of Representatives a r e necessary for the efficient operation of the Government and to c a r r y o u t the purposes of t h i s Act.

Subtitle C—Provisions Relating to Unemployment Taxes SEC. 13301. RAILROAD UNEMPLOYMENT REPAYMENT TAX. (a) R A T E O F TAX.—Subsection (c) of section 3321 of the I n t e r n a l Revenue Code of 1954 (relating to r a t e of railroad unemployment r e payment tax) is amended to read a s follows: "(c) R A T E OF T A X. — For purposes of this section— "(1) IN GENERAL.—The applicable p e r c e n t a g e for any tax a b l e period shall be the s u m of— "(A) the basic r a t e for such period, and "(B) the s u r tax r a t e (if any) for such period. "(2) BASIC RATE.—For purposes of paragraph (1)— "(A) FOR PERIODS BEFORE 1989.—The basic r a t e shall be— "(i) 4.3 percent for the tax a b l e period beginning on July 1, 1986, and ending on December 31, 1986, "(ii) 4.7 percent for the 1987 tax a b l e period, and "(iii) 6 p e r c e n t for the 1988 tax a b l e period.

26 USC 3321.

"(B) FOR PERIODS AFTER 1988. — For any tax a b l e period

beginning after December 31, 1988, the basic r a t e shall be the s u m of— "(i) 2.9 percent, plus "(ii) 0.3 percent for each preceding taxable period after 1988. In no event shall the basic r a t e under this subparagraph exceed 5 percent. "(3) SURTAX RATE.—For purposes of paragraph (1), the s u r tax r a t e shall be— "(A) 3.5 percent for any tax a b l e period if, a s of September 30 of the preceding c a l e n d a r year, the r e w a s a b a l a n c e of transfers (or u n p a i d i n t e r e s t thereon) m a d e after September 30, 1985, to the railroad unemployment insurance account under section 10(d) of the Railroad Unemployment Insurance Act, and

45 USC 360.

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 100 STAT. 326

PUBLIC LAW 99-272—APR. 7, 1986 "(B) zero for any other taxable period. "(4) BASIC RATE NOT TO APPLY TO RAIL WAGES PAID AFTER

SEPTEMBER 30, 1990.—The basic rate under paragraph (1>(A, shall not apply to rail wages paid after September 30, 1990 " OJ) BASE OF TAX TO B E COMPENSATION USED FOR RAILROAD RETIRE-

26 USC 3323.

MENT TAX PURPOSES.—Subsection (b) of section 3323 of such Code (defining rail wages) is amended to read as follows: "(b) RAIL WAGES.—

26 USC 3231. 26 USC 3201.

"(1) IN GENERAL.—For purposes of this chapter, the term 'rail wages' means compensation (as defined in section 3231(e) for purposes of the tax imposed by section 3201(a)) with the modifications specified in paragraph (2). "(2) MODIFICATIONS.—In applying subsection (e) of section 3231 for purposes of paragraph (1)— "(A) ONLY EMPLOYMENT COVERED BY RAILROAD UNEMPLOYMENT INSURANCE ACT TAKEN INTO ACCOUNT.—Such subsec-

26 USC 3321.

tion (e) shall be applied— "(i) by substituting 'rail employment' for 'services' each place it appears, "(ii) by substituting 'rail employer' for 'employer' each place it appears, and "(iii) by substituting 'rail employee' for 'employee' each place it appears. "(B) $7,000 WAGE BASE.—Such subsection (e) shall be applied by substituting for 'the applicable base' in paragraph (2)(A)(i) thereof— "(i) except as provided in clauses (ii) and (iii),'$7,000', "(ii) '$3,500' for the taxable period beginning on July 1, 1986, and ending on December 31, 1986, and "(iii) for purposes of applying the basic rate under section 3321(c)(1)(A), '$5,250' for the taxable period beginning on January 1, 1990. "(C) SUCCESSOR EMPLOYERS.—For purposes of this subsection, rules similar to the rules applicable under section 3231(e)(2)(C) shall apply." (c) USE OF TAXES.—

45 USC 231n ^°^-

(1) IN GENERAL.—Paragraph (2) of section 232(a) of the Railroad Retirement Revenue Act of 1983 (relating to tax used to repay loans made to railroad unemployment insurance account) is amended to read as follows: "(2) TAXES CREDITED AGAINST LOANS TO RAILROAD UNEMPLOYMENT INSURANCE ACCOUNT.— "(A) TAXES ATTRIBUTABLE TO BASIC RATE TO REDUCE RAILROAD UNEMPLOYMENT LOANS MADE BEFORE OCTOBER 1,

1985.—So much of the amount transferred under paragraph (1) as is attributable to the basic rate under section 3321(c)(1)(A) of the Internal Revenue Code of 1954 shall be credited against, and operate to reduce, the outstanding balance of railroad unemployment loans made before October 1, 1985. "(B) T A X E S ATTRIBUTABLE TO SURTAX RATE TO REDUCE RAILROAD UNEMPLOYMENT LOANS MADE AFTER SEPTEMBER 30,

1985.—So much of the amount transferred under paragraph (1) as is attributable to the surtax rate under section 3321(c)(l)(B) of such Code shall be credited against, and operate to reduce, the outstanding balance of railroad unemployment loans made after September 30, 1985."

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30

Attempts by evil-disposed persons to invade the Indian Territory and to take possession of certain unoccupied lands there have so far been successfully frustrated by the prompt action of the government, but they have been as persistently repeated. It is reported that another attempt is in preparation now. The military forces of the United States in the Territory are instructed to arrest the intruders and to take proper measures to bring them to justice as they have done heretofore. But it is evident that the penalty imposed upon repeated intrusion into the Indian Territory, which penalty consists in a mere fine and is difficult of enforcement, is not sufficient to deter lawless characters from such undertakings. I concur with the Commissioner in recommending that a law be passed adding the penalty of imprisonment to that of a fine. If this is done invaders will know that such attempts are not without serious risks to them.

In conclusion I desire to express to the War Department my grateful acknowledgments for cordial and prompt co-operation whenever the exigencies of the service called for it.

During the last fiscal year public lands were disposed of as follows:


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100 STAT. 327

(2) TRANSFERS TO RAILROAD UNEMPLOYMENT FUND AFTER LOAN

REPAID.—Subsection (c) of section 232 of such Act is amended— (A) by striking out "the amount" in paragraph (1) and inserting in lieu thereof "the amount described in subparagraph (A) or (B) of subsection (a)(2)", and (B) by inserting before the comma at the end of paragraph (2) "against which the amount described in such subparagraph may be credited under such subparagraph".

45 USC 23ln note,

(d) TECHNICAL AMENDMENTS.—

(1) Subsection (a) of section 3322 of such Code (relating to 26 USC 3322. taxable period) is amended— (A) by adding "and" at the end of paragraph (1), and (B) by striking out paragraphs (2) and (3) and inserting in lieu thereof the following: "(2) each calendar year after 1986." (2) Subsection (b) of section 3322 of such Code (relating to earlier termination if loans to rail unemployment fund repaid) is amended— (A) by striking out "The tax imposed by this chapter shall not apply" and inserting in lieu thereof "The basic rate under section 3321(c)(1)(A) of the tax imposed by section 3321 shall not apply", and (B) by inserting 'made before October 1, 1985," after "no balance of transfers" in paragraph (1) thereof SEC. 13302. EXTENSION OF BORROWING AUTHORITY UNDER THE RAILROAD UNEMPLOYMENT INSURANCE ACT. Section 10(d) of the Railroad Unemployment Insurance Act is 45 USC 360. amended by striking out the last sentence thereof SEC. 13303. CERTAIN EXEMPTIONS FROM THE FEDERAL UNEMPLOYMENT TAX ACT. (a) CERTAIN AGRICULTURAL LABOR.—Paragraph (1)(B) of section 26 USC 3306. 3306(c) of the Internal Revenue Code of 1954 (defining employment) is amended by striking out "January 1, 1986," and inserting in lieu thereof "January 1, 1988". (b) FULL-TIME STUDENTS EMPLOYED BY SUMMER CAMPS.—Notwith-

standing paragraph (3) of section 276(b) of the Tax Equity and Fiscal Responsibility Act of 1982, the amendments made by paragraphs (1) and (2) of such section 276(b) shall also apply to remuneration paid after September 19, 1985. (c) SERVICES PERFORMED ON CERTAIN FISHING BOATS.— (1) IN GENERAL.—Section 822(b) of the Economic Recovery Tax Act of 1981 is amended to read as follows: "(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to remuneration paid after December 31, 1980.". (2) TECHNICAL AMENDMENT.—Paragraph (20) of section 312(b) of such Code (defining employment for purposes of Federal Insurance Contributions Act) is amended by inserting "(other than service described in paragraph (3)(A))" after "service".

26 USC 3306 note. 26 USC 3306 note.

26 USC 3121. 26 USC 3101.

TITLE XIV—REVENUE SHARING SEC. 14001. TERMINATION OF GENERAL REVENUE SHARING.

(a) IN GENERAL.—(1) Except as otherwise provided in this section, chapter 67 of title 31, United States Code, is hereby repealed.

3i USC 6701 e^ seq.

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 100 STAT. 328 31 USC 6701 note. Post, p. 329. Ante, p. 327.

31 USC 6701 note.

State and local governments. 31 USC 6701 note.

State and local governments. 31 USC 6701 note. 31 USC 6701 note.

state and local governments, eourts, U.S. 31 USC 6701 note. 31 USC 6701 note. Reports.

31 USC 6701 et seq.

PUBLIC LAW 99-272—APR. 7, 1986

(2) The Secretary of the Treasury shall continue to be the trustee of the Trust Fund, which shall remain in existence until all entitlement payments which are required to be made under the Revenue Sharing Act are made in accordance with the terms of such Act. Any funds remaining in the Trust Fund after all of such entitlement payments are completely made shall revert to the General Fund of the Treasury of the United States. (3) The Secretary is authorized to take such necessary or appropriate actions, to carry out the requirements of this Act with respect to funds appropriated to the Trust Fund, as were authorized under the terms of the Revenue Sharing Act, including but not limited to enforcement of the regulatory provisions concerning nondiscrimination, audits, accounting procedures, public hearings, expenditures in accordance with State and local law, and cooperation with reasonable requests for information. (4) The Secretary may increase or decrease a payment to a unit of general local government under the Revenue Sharing Act for the entitlement period ending September 30, 1986, to account for a prior underpayment or overpayment only if the increase or decrease is demanded by the Secretary or such unit of general local government before June 2, 1986. (5) Amounts paid to units of general local government from the Trust Fund shall be used, obligated, or appropriated by the units of general local government before October 1, 1987, and shall continue to be subject to the terms of the Revenue Sharing Act. (6) Subsection (a)(1) of this section shall not have the effect of releasing or extinguishing any fiscal sanction, finding, determination, compliance agreement, or other duly authorized action for the purpose of sustaining any proper action or prosecution for enforcement authorized under the terms of the Revenue Sharing Act. (7) The Attorney General, and persons adversely affected by a practice of a local government, may bring a civil action in an appropriate district court of the United States against the applicable unit of general local government as authorized under the Revenue Sharing Act. The court is authorized to grant such relief as was authorized under the terms of the Revenue Sharing Act. (8) The Secretary shall report to Congress on the operation and status of the Trust Fund and the implementation of this section not later than December 1 of each year the Trust Fund remains on the books of the Department of the Treasury. (b) CONFORMING AMENDMENTS.—(1) The table of chapters for subtitle V of title 31, United States Code, is amended by striking out the item relating to chapter 67. (2) Paragraph (2) of section 1115(b) of the Social Security Act (42 U.S.C. 1315(b)(2)) is amended— (A) by adding "and" at the end of subparagraph (A), (B) by striking out "; and" at the end of subparagraph (B) and inserting in lieu thereof a period, and (C) by striking out subparagraph (C). (3) Section 501(b)(6) of the Housing Act of 1949 (42 U.S.C. 1471(b)(6)) and section 102(a)(17) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(17)) are each amended by striking out "or under chapter 67 of title 31, United States Code" and inserting in lieu thereof "or was considered an eligible recipient under chapter 67 of title 31, United States Code, prior to the repeal of such chapter".

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(4) Section 302 of the Age Discrimination Act of 1975 (42 U.S.C. 6101) is amended by striking out ", including programs or activities receiving funds under the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221 et seq.)". (5) Paragraph (3) of section 3 of the Coastal Barrier Resources Act (16 U.S.C. 3502(3)) is amended by striking out subparagraph (A) and redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs (A), (B), (C), and (D), respectively. (6) Subparagraph (B) of section 119(n)(2) of the Housing and Community Development Act of 1974 (42 U.S.C. 5318(n)(2)(B)) is amended by striking out "is an eligible recipient under chapter 67 of title 31, United States Code" and inserting in lieu thereof "was an eligible recipient under chapter 67 of title 31, United States Code, prior to the repeal of such chapter". (7) Paragraph (1) of section 248(h) of the National Housing Act (12 U.S.C. 1715z-13(h)(l)) is amended by striking out "is an eligible recipient under chapter 67 of title 31, United States Code" and inserting in lieu thereof "was an eligible recipient under chapter 67 of title 31, United States Code, prior to the repeal of such chapter". (c) DEFINITIONS.—For purposes of this section— (1) The term "Trust Fund" means the State and Local Government Fiscal Assistance Trust Fund established under the Revenue Sharing Act. (2) The term "Revenue Sharing Act" means the provisions of chapter 67 of title 31, United States Code, as in effect on the day before the date of enactment of this Act and subject to the terms of any appropriation Act of fiscal year 1986. (3) The term "Secretary" means the Secretary of the Treasury. (d) AUTHORIZATION OF APPROPRIATIONS.—There are hereby authorized to be appropriated for fiscal year 1987 such sums as may be necessary to administer the provisions of this section. (e) EFFECTIVE DATES.—(1) Except as otherwise provided in this subsection, the repeal and amendments made by this section, and the provisions of this section, shall take effect on the earlier of— (A) the date of the adjournment sine die of the 99th Congress, or (B) December 31, 1986, unless the provisions of chapter 67 of title 31, United States Code, are amended before the earlier of such dates to apply to any entitlement period beginning after September 30, 1986. (2) The provisions of subsections (a)(4), (c), and (d) shall take effect on the date of enactment of this Act. (3) Nothing in this section shall be construed to prevent the payment of any allocation for the entitlement period ending September 30, 1986.

31 USC 6701 ^^ «^9-

3i USC 6701 note. Infra. ^"^e, p. 327.

31 USC 6701 "o*^^ 31 USC 6701 note.

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PUBLIC LAW 99-272—APR. 7, 1986

TITLE XV—CIVIL SERVICE, POSTAL SERVICE, AND GOVERNMENTAL AFFAIRS GENERALLY Subtitle A—Postal Service Programs SEC. 15101. REVENUE FORGONE.

39 USC 2401 note.

Notwithstanding subsection (c) of section 2401 of title 39, United States Code, the amount authorized to be appropriated pursuant to such subsection for fiscal year 1986 shall be $749,000,000. SEC. 15102. DELAY OF STEP 16 RATES: ELIMINATION OF PHASING SCHEDULE; TERMINATION OF REDUCTION IN RATES OF POSTAGE FOR CERTAIN MAILERS. (a) DELAY OF STEP 16 RATES.—The increase in rates of postage for

39 USC 4358, 4452,4554.

Effective date. 39 USC 3626 "

non-profit and certain other mailers announced by the Board of Governors of the United States Postal Service in Resolution No. 85-7 (adopted September 6, 1985) shall not take effect before January 1, 1986. (b) ELIMINATION OF PHASING SCHEDULE.—(1) Section 3626(a) of title 39, United States Code, is amended to read as follows: "(a)(1) Except as provided in paragraph (2) of this subsection, rates of postage for a class of mail or kind of mailer under former section 4358, 4452(b), 4452(c), 4554(b), or 4554(c) of this title shall be established in accordance with applicable provisions of this chapter. "(2) Rates of postage for a class of mail or kind of mailer referred to in paragraph (1) of this subsection shall be established in accordance with the requirement that the direct and indirect postal costs attributable to such class of mail or kind of mailer (excluding any other costs of the Postal Service) shall be borne by such class of mail or kind of mailer, as the case may be.". (2) The amendment made by this subsection shall apply with respect to rates of postage taking effect after December 31, 1985. (c) TERMINATION OF REDUCTION IN RATES OF POSTAGE FOR CERTAIN

MAILERS.—Section 3626 of title 39, United States Code, is amended by adding at the end thereof the following: "(f) In the administration of this chapter, the rates for mail under former section 4358(g) of this title shall be established without regard to either the provisions of such former section 4358(g) or the provisions of this section.". SEC. 15103. STUDY AND REPORT.

(a) PERIOD OF STUDY.—The Postal Rate Commission shall study and, within 6 months after the date of the enactment of this Act, transmit to the Committee on Post Office and Civil Service of the House of Representatives and the Committee on Governmental Affairs of the Senate a written report on the matters described in subsection (b). (b) PURPOSE OF STUDY.—The purpose of the study under this section is— (1) to develop recommendations for legislation which would reduce the amount of revenue forgone with respect to former sections 4355(a), 4355(b), 4358(d), 44520t)), 4452(c), 4554(b) and 4554(c) of title 39, United States Code, by changing the eligi-

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bility requirements under which the reduced rates of postage under those sections would apply to mail which advertises or promotes the sale of, recommends the purchase of, or announces the availability of any article, product, service, insurance, or travel arrangements; (2)(A) to identify the kinds of mailers which are the most frequent users of, or which otherwise significantly benefit from, rates for mail under subsections (a), (b), and (c) of former section 4358 of title 39, United States Code; and (B) to examine the arguments for and against making the eligibility requirements for the rates referred to in subparagraph (A) more stringent, taking into consideration— (i) the findings under subparagraph (A); (ii) costs and benefits to the public; and (iii) any other factor which may be appropriate; and (3) to develop one or more alternatives for the method currently used by the United States Postal Service in computing revenue forgone (as determined with respect to the provisions of law referred to in section 2401(c) of title 39, United States Code) and to determine the advantages and disadvantages of each such alternative. (c) In preparing its report under this section, the Postal Rate Commission shall invite and consider the views of interested parties. (d) The United States Postal Service shall, upon request of the Postal Rate Commission, cooperate in the conduct of the study and the preparation of the report under this section. SEC. 15104. RESTRICTION RELATING TO ELIGIBILITY FOR IN-COUNTY SECOND-CLASS RATES OF POSTAGE.

Section 3626 of title 39, United States Code, as amended by section 15102(c) of this Act, is further amended by adding at the end thereof the following: "(g)(1) In the administration of this section, the rates for mail under subsections (a), (b), and (c) of former section 4358 of this title shall not apply to an issue of a publication if the number of copies of such issue distributed within the county of publication is less than the number equal to the sum of 50 percent of the total paid circulation of such issue plus one. "(2) Paragraph (1) of this subsection shall not apply to an issue of a publication if the total paid circulation of such issue is less than 10,000 copies.". SEC. 15105. CURBING OF SUBSIDIES FOR ADVERTISING-ORIENTED "PLUS ISSUES" MAILED TO SUBSCRIBERS AT IN-COUNTY RATES.

Section 3626 of title 39, United States Code, as amended by sections 15102(c) and 15104 of this Act, is further amended by adding at the end thereof the following: "(h) In the administration of this section, the number of copies of a subscription publication mailed to nonsubscribers during a calendar year at rates under subsections (a), (b), and (c) of former section 4358 of this title may not exceed 10 percent of the number of copies of such publication mailed at such rates to subscribers.".

39 USC 4358.

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Subtitle B—Civil Service Programs 5 USC 5305 note.

SEC. 15201. PAY ADJUSTMENTS. (a) LIMITATION ON PAY ADJUSTMENTS FOR STATUTORY PAY SYS-

President of U.S.

5 USC 5343 note.

TEMS.—(1) The rates of pay under the General Schedule and the rates of pay under the other statutory pay systems referred to in section 5301(c) of title 5, United States Code, shall not be adjusted under section 5305 of such title during fiscal year 1986. (2)(A)(i) For fiscal years 1987 and 1988, the President shall provide for the adjustment of rates of pay under section 5305 of title 5, United States Code, as appropriate to reduce outlays, relating to pay of officers and employees of the Federal Government, by at least $746,000,000 in fiscal year 1987 and $1,264,000,000 in fiscal year 1988 (without regard to reductions in outlays which result by reason of subparagraph (B)(ii) of this paragraph, paragraph (1) of this subsection, subsection (b) of this section, and the application of section 1009 of title 37, United States Code), computed using the baseline used for the First Concurrent Resolution on the Budget for Fiscal Year 1986 (S. Con. Res. 32, 99th Congress), agreed to on August 1, 1985. (ii) Clause (i) of this subparagraph shall not be construed to suspend the requirements of section 5305 of title 5, United States Code, with respect to fiscal years 1987 and 1988. (B) Each adjustment in a pay rate or schedule which takes effect pursuant to subparagraph (A) of this paragraph— (i) shall, to the maximum extent practicable, be of the same percentage; and (ii) shall be effective with respect to pay periods beginning on or after January 1 of the fiscal year involved. (b)

LIMITATION ON P A Y ADJUSTMENTS FOR PREVAILING

RATE

EMPLOYEES.—(1) Notwithstanding any other provision of law, and except as otherwise provided in this subsection, in the case of a prevailing rate employee described in section 5342(a)(2) of title 5, United States Code, or an employee covered by section 5348 of such title, the total adjustment to any wage schedule or rate applicable to such employee which is to become effective (determined without regard to paragraph (2)) during— (A) fiscal year 1986, shall (except to the extent permitted by section 616(a)(2) of H.R. 5798, incorporated by reference in section 101(j) of Public Law 98-473 (98 Stat. 1963)) be equal to zero; (B) fiscal year 1987, shall not exceed an increase equal to the overall percentage of the adjustment (under section 5305 of title 5, United States Code) in the rates of pay under the General 5 USC 5332. Schedule for such fiscal year; and (C) fiscal year 1988, shall not exceed an increase equal to the overall percentage of the adjustment (under section 5305 of title 5, United States Code) in the rates of pay under the General Schedule for such fiscal year. Effective date. (2) Notwithstanding any other provision of law, any increase permitted by paragraph (1) which is scheduled to take effect during fiscal year 1987 or 1988 (determined without regard to this paragraph) shall take effect as of the beginning of the first applicable pay period beginning at least 90 days after the date on which such increase is so scheduled to take effect. (3) Notwithstanding the provisions of section 9(b) of Public Law 5 USC 5343 note. 92-392 or section 704(b) of Public Law 95-454, the provisions of

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paragraphs (1) and (2) shall apply (in such manner as the Office of Personnel Management shall prescribe) to prevailing rate employees to whom such section 9(b) applies, except that the provisions of 5 USC 5343 note, paragraph (1) shall not apply to any increase in a wage schedule or rate which is required by the terms of a contract entered into before October 1, 1985. (4) Nothing in this subsection or any provision of law governing the use of appropriated funds for the payment of employees covered by this subsection during the period covered by paragraph (1) (or any part of such period) shall be construed to permit or require the payment to any such employee at a rate in excess of the rate that would be payable were this subsection, or such provision of law governing the use of appropriated funds, not in effect. (5) The Office may make exceptions from the limitations imposed by paragraph (1) if the Office determines that such exceptions are necessary to ensure the recruitment or retention of well-qualified employees. SEC. 15202. PROVISIONS RELATING TO FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM.

(a) AMOUNTS TO B E REFUNDED FROM CARRIERS' SPECIAL RE- 5 USC 8909 note. SERVES.—(1) The Office of Personnel Management— (A) shall determine the minimum level of financial reserves necessary to be held by a carrier for each health benefits plan under chapter 89 of such title for the purpose of ensuring the stable and efficient operation of such plan; and (B) shall require the carrier to refund to the Employees Health Benefits Fund (described in section 8909(a) of title 5, United States Code) any such reserves in excess of such minimum level in such amounts and at such times during fiscal years 1986 and 1987 as the Office determines appropriate. (2) In carrying out its responsibilities under this subsection, the Office shall ensure that the aggregate amount to be refunded to the Employees Health Benefits Fund under this subsection— (A) during fiscal year 1986 shall be not less than $800,000,000; and (B) during fiscal year 1987 shall be not less than $300,000,000. (3) No amount in the Employees Health Benefits Fund may be transferred to the general fund of the Treasury of the United States as a result of a refund made under this subsection. (4)(A) Subject to subparagraphs (B) and (C), any amounts refunded to the Employees Health Benefits Fund under this subsection may be used solely for the purpose of paying the Government contribution under chapter 89 of title 5, United States Code, for health 5 USC 8901 et benefits for annuitants, as defined by section 8901(3) of title 5, seq. United States Code, (including the Government contribution for former employees of the United States Postal Service) enrolled in health benefits plans under such chapter. (B) This paragraph applies to a refund to the extent that such refund represents amounts attributable to Government contributions which were made under section 8906(b) of title 5, United States Code, (including contributions made by the United States Postal Service) as determined under regulations which the Office of Personnel Management shall prescribe. (C) Any part of the amount in the Employees Health Benefits District of Fund as a result of a refund made under this subsection may be Columbia, transferred—

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 100 STAT. 334

PUBLIC LAW 99-272—APR. 7, 1986

(i) to the government of the District of Columbia, except that the amount of any such part so transferred shall not exceed the amount attributable to the contributions made by the government of the District of Columbia to subscription charges under this chapter (as determined by the Office of Personnel Management); and (ii) to the United States Postal Service, except that the amount of any such part so transferred shall not exceed the amount attributable to the contributions made by the United States Postal Service to subscription charges under this chapter (as determined by the Office). (5) The provisions of this subsection shall apply notwithstanding any provision of the Federal Employees Benefits Improvement Act of 1985. (b) GOVERNMENT CONTRIBUTIONS FOR RETIRED FORMER EMPLOYEES OF THE UNITED STATES POSTAL SERVICE.—Section 8906(g) of title 5,

United States Code, is amended— (1) by striking out "(g) The" and inserting in lieu thereof "(g)(1) Except as provided in paragraph (2), the"; and (2) isy adding at the end thereof the following: "(2) The Government contributions authorized by this section for health benefits for an individual who first becomes an annuitant by reason of retirement from employment with the United States Postal Service on or after October 1, 1986, shall be paid by the United States Postal Service.". SEC. 15203. COMPUTATION OF HOURLY RATES OF PAY. (a) METHOD OF COMPUTATION.—Section 5504(b) of title 5, United States Code, is amended— (1) by striking out the first sentence; (2) in the second sentence, by striking out "When" and inserting in lieu thereof "When, in the case of an employee,"; (3) in paragraph (1), by striking out "2,080" and inserting in lieu thereof "2,087"; and (4) in the last sentence, by striking out "title." and inserting in lieu thereof "title other than an employee or individual 5 USC 5541. excluded by section 5541(2)(xvi) of this title.. 5 USC 5504 note. (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall be effective with respect to pay periods commencing on or after March 1, 1986. SEC. 15204. COMPUTATION OF RETIREMENT ANNUITY FOR PART-TIME EMPLOYMENT.

(a) IN GENERAL.—(1) Section 8339 of title 5, United States Code, is amended by adding at the end thereof the following new subsection: "(o)(1) In computing an annuity under this subchapter for an employee whose service includes service that was performed on a part-time basis— "(A) the average pay of the employee, to the extent that it includes pay for service performed in any position on a parttime basis, shall be determined by using the annual rate of basic pay that would be payable for full-time service in the position; and "(B) the benefit so computed shall then be multiplied by a fraction equal to the ratio which the employee's actual service, as determined by prorating an employee's total service to reflect the service that was performed on a part-time basis, bears to the

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100 STAT. 335

total service that would be creditable for the employee if all of the service had been performed on a full-time basis. "(2) For the purpose of this subsection, employment on a part-time basis shall not be considered to include employment on a temporary or intermittent basis.". (2) Section 8341 of such title is amended— 5 USC 8341. (A) by striking out "and (n)" in subsection (b)(1) and inserting in lieu thereof ", (n), and (o)"; and (B) by striking out "and (n)" in subsection (d) and inserting in lieu thereof "(n), and (o)". (b) Section 4109(b) of title 38, United States Code, is repealed. (c) The amendments made by this section shall be effective with 5 USC 8339 note. respect to service performed on or after the date of the enactment of this Act. SEC. 15205. EFFECT OF WAGE AREA SURVEY REGARDING CERTAIN FEDERAL EMPLOYEES IN TUCSON, ARIZONA.

(a) IN GENERAL.—Notwithstanding any other provision of law limiting the amounts payable to prevailing wage rate employees during the fiscal year 1986, wage schedules or rates applicable to the Tucson, Arizona, wage area shall not be reduced as a result of a wage survey conducted during fiscal year 1985. (b) EFFECTIVE DATE.—This section shall be effective as of October 1, 1985.

Subtitle C—Federal Motor Vehicle Expenditure Control SEC. 15301. MONITORING SYSTEM.

40 USC 901.

The head of each executive agency, including the Department of Defense, shall designate one office, officer, or employee of the agency to establish and operate a central monitoring system for, and provide oversight of, the motor vehicle operations of the agency, related activities, and related reporting requirements. SEC. 15302. DATA COLLECTION.

(a) COST IDENTIFICATION AND ANALYSIS.—The head of each executive agency, including the Department of Defense, shall develop a system to identify, collect, and analyze data with respect to all costs, including obligations and outlays, incurred by the agency in the operation, maintenance, acquisition, and disposition of motor vehicles, including Government-owned vehicles, leased vehicles, and privately owned vehicles used for official purposes. (b) REQUIREMENTS FOR DATA SYSTEMS.—The Administrator, in

cooperation with the Comptroller General and the Director, shall promulgate requirements governing the establishment and operation by executive agencies of the systems required by subsection (a), including requirements with respect to data concerning the costs and uses of motor vehicles and with respect to the uniform collection and submission of such data. Requirements promulgated under this section shall be in conformance with accounting principles and standards issued by the Comptroller General. Each executive agency, including the Department of Defense, shall comply with such requirements.

40 USC 902.

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SEC. 15303. AGENCY STATEMENTS WITH RESPECT TO MOTOR VEHICLE USE.

(a) CONTENTS OF STATEMENT.—The head of each executive agency, including the Department of Defense, shall include with the appropriation request of such agency submitted under section 1108 of title 31, United States Code, for fiscal year 1988 and each succeeding fiscal year, a statement— (1) specifying— (A) the total motor vehicle acquisition, maintenance, leasing, operation, and disposal costs, including obligations and outlays, incurred by such agency in the most recently completed fiscal year; and (B) an estimate of such costs for the fiscal year in which such request is submitted and for the succeeding fiscal year; and (2) justifying why the existing and any new motor vehicle acquisition, maintenance, leasing, operation, and disposal requirements of the agency cannot be met through the Interagency Fleet Management System operated by the Administrator, a qualified private fleet management firm, or any other method which is less costly to the Government. (b) COMPLIANCE WITH REQUIREMENTS.—The head of each executive agency shall comply with the requirements promulgated under section 15302(b) in preparing each statement required under subsection (a). SEC. 15304. PRESIDENTIAL REPORT. President of U.S.

(a) SUMMARY AND ANALYSIS OF A G E N C Y STATEMENTS.—The P r e s i -

40 USC 904.

dent shall include with the budget transmitted pursuant to section 1105 of title 31, United States Code, for fiscal year 1988 and each succeeding fiscal year, or in a separate written report to the Congress for each such fiscal year, a summary and analysis of the statements most recently submitted by the heads of executive agencies pursuant to section 15303(a). Each such summary and analysis shall include a review, for the fiscal year preceding the fiscal year in which the budget is submitted, the current fiscal year, and the fiscal year for which the budget is submitted, of the cost savings that have been achieved, that are estimated will be achieved, and that could be achieved, in the acquisition, maintenance, leasing, operation, and disposal of motor vehicles by executive agencies through— (1) the use of a qualified private fleet management firm or another private contractor; (2) increased reliance by executive agencies on the Interagency Fleet Management System operated by the Administrator; or (3) other existing motor vehicle management systems. (b) APPLICABILITY TO FISCAL YEAR 1986.—The summary and analysis submitted under subsection (a) during fiscal year 1987 is not required to include a review, under the second sentence of such subsection, of the cost savings achieved for fiscal year 1986.

40 USC 905.

SEC. 15305. STUDY REQUIRED.

(a) STUDY OF COSTS, BENEFITS, AND FEASIBILITY.—(1) The head of each executive agency, including the Department of Defense, shall conduct a comprehensive and detailed study of the costs, benefits, and feasibility of—

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text:
Page:U.S. Department of the Interior Annual Report 1880.djvu/33

Rh

The cash receipts were $2,290,161.60, an increase of $407,048.04. During the fiscal year 15,699,253 acres of public lands were surveyed, and 652,151.37 acres of private land claims, an increase of 7,253,471 acres. The total area of public lands surveyed up to 30th June last is 752,557,195 acres, leaving still unsurveyed an estimated area of 1,062,231,729 acres.

The Public Lands Commission, appointed in conformity with the act of March 3, 1879, and consisting of the Commissioner of the General Land Office, the Director of the Geological Survey, and Messrs. John A. Powell, A. T. Britton, and Thomas Donaldson, was duly organized on July 8, 1879, and submitted to me on the 24th of February, 1880, its preliminary report, which I had the honor to transmit to you on the 24th of February, 1880, for submission to Congress.

In compliance with the provisions of the law, the work was subdivided into two principal parts—first, the codification of the present laws relating to the survey and disposition of the public domain; and, second, investigation of the whole subject, with a view to recommend new legislation.

The preliminary report above referred to contains a carefully-prepared bill providing for the survey and disposal of the public lands of the United States.

Before preparing the bill the commission distributed a circular letter making inquiries of various intelligent persons throughout the States and Territories as to what legislation might be required regarding the disposal of the public domain.

This circular letter contained, among many others, inquiries in regard to rainfall, irrigation, water rights, the area of pasturage, timber, and mineral lands; also as to the climatic conditions in various localities, and so on. The commission visited all the Western States and Territories, and as much as possible personally informed themselves upon these various topics on the ground.

The proposed legislation as embodied in the bill accompanying the report is predicated upon the information elicited by the circular, as well as personal inspection and investigation.

The importance of the passage of this or some similar bill by Congress cannot be overestimated. Existing laws for the survey and disposal of the public domain, were enacted mainly while the government was disposing of public lands east of the Missouri River. The climate, soil,


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(A) relying on the Interagency Management Fleet System operated by the Administrator; (B) entering into a contract with a qualified fleet management firm or another private contractor; or (C) using any other means less costly to the Government, to meet its motor vehicle operation, maintenance, leasing, acquisition, and disposal requirements. (2) Each study conducted under paragraph (1) shall compare the costs, benefits, and feasibility of the alternatives described in subparagraphs (A), (B), and (C) of such paragraph to the costs and benefits of the agency's current motor vehicle operations and, in the case of the alternatives described in subparagraphs (B) and (C) of such paragraph, to the costs, benefits, and feasibility of the use of the Interagency Fleet Management System operated by the Administrator. (b) SUBMISSION TO DIRECTOR AND COMPTROLLER GENERAL.—Within

Reports.

6 months after the date of enactment of this Act, the head of each executive agency shall submit a report concerning the study required under subsection (a) to the Administrator. SEC. 15306. INTERAGENCY CONSOLIDATION.

40 USC 906.

(a) IDENTIFICATION OF OPPORTUNITIES FOR CONSOLIDATION.—The Administrator shall review and identify interagency opportunities for the consolidation of motor vehicles, related equipment, and facilities, and of functions relating to the administration and management of such vehicles, equipment, and facilities, in order to reduce the size and cost of the Federal Government's motor vehicle fleet. (b) REPORT AND ACTION ON FINDINGS.—Within one year after the date of enactment of this Act, the Administrator shall— (1) submit a report to the Congress specifying the findings and recommendations of the Administrator from the review conducted under subsection (a); and (2) take such action as the Administrator considers appropriate based on such findings and recommendations and in accordance with section 211 of the Federal Property and Administrative Services Act.

Motor vehicles.

40 USC 491.

SEC. 15307. REDUCTION OF STORAGE AND DISPOSAL COSTS.

40 USC 907.

The Administrator shall take such actions as may be necessary to reduce motor vehicle storage and disposal costs and to improve the rate of return on motor vehicle sales through a program of vehicle reconditioning prior to sale. SEC. 15308. SAVINGS.

(a) ACTIONS BY PRESIDENT REQUIRED.—The President shall establish, for each executive agency, including the Department of Defense, goals to reduce outlays for the operation, maintenance, leasing, acquisition, and disposal of motor vehicles in order to reduce, by fiscal year 1988, the total amount of outlays by all executive agencies for such operation, maintenance, leasing, acquisition, and disposal to an amount which is $150,000,000 less than the amount for such operation, maintenance, leasing, acquisition, and disposal requested by the President in the budget submitted under section 1105 of title 31, United States Code, for fiscal year 1986. (b) MONITORING OF COMPLIANCE AND COMPLIANCE REPORT.—The

Director shall monitor compliance by executive agencies with the

40 USC 908.

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text: Ancient Ballads and Legends of Hindustan/Our Casuarina Tree


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goals established by the President under subsection (a) and shall include, in each summary and analysis required under section 15304, a statement specifying the reductions in expenditures by executive agencies, including the Department of Defense, achieved under such goals. Motor vehicles. 40 USC 909.

40 USC 910.

SEC. 15309. COMPLIANCE.

(a) ADMINISTRATOR OF GENERAL SERVICES.—The Administrator shall comply with and be subject to the provisions of this part with regard to all motor vehicles that are used within the General Services Administration for official purposes. (b) MANAGERS OF OTHER MOTOR POOLS.—The provisions of this part with respect to motor vehicles from the Interagency Fleet Management System shall be complied with by the executive agencies to which such motor vehicles are assigned. SEC. 15310. A P P L I C A B I L I T Y.

(a) PRIORITY IN REDUCING HEADQUARTERS USE.—The heads of executive agencies shall give first priority to meeting the goals established by the President under section 15308(a) by reducing the costs of administrative motor vehicles used at the headquarters and regional headquarters of executive agencies, rather than by reducing the costs of motor vehicles used by line agency personnel working in agency field operations or activities. President of U.S.

(b) REGULATIONS, STANDARDS, AND DEFINITIONS.—The P r e s i d e n t

shall require the Administrator, in cooperation with the Director, to promulgate appropriate regulations, standards, and definitions to assure that executive agencies meet the goals established under section 15308(a) in the manner prescribed by subsection (a). 40 USC 911.

SEC. 15311. COOPERATION.

The Director and the Administrator shall closely cooperate in the implementation of the provisions of this part. 40 USC 912.

SEC. 15312. REPORTS.

The Comptroller General shall evaluate the extent to which the Director, the Administrator, and executive agencies have complied with this part. By January 31, 1988, the Comptroller General shall submit a report to the Congress describing the results of such evaluation. 40 USC 913.

SEC. 15313. DEFINITIONS.

For purposes of this title— (1) the term "executive agency" means an Executive agency (as such term is defined in section 105 of title 5, United States Code), which operates at least three hundred motor vehicles, except that such term does not include the Tennessee Valley Authority; (2) the term "Director" means the Director of the Office of Management and Budget; (3) the term "Administrator" means the Administrator of General Services; (4) the term "Comptroller General" means the Comptroller General of the United States; and (5) the term "motor vehicle" means any vehicle self-propelled or drawn by mechanical power, except that such term does not include any vehicle designed or used for military field training, combat, or tactical purposes, or any other special purpose ve-

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hide exempted from the requirements of this part by the Administrator.

TITLE XVI—HIGHER EDUCATION PROGRAMS SEC. 16001. SHORT TITLE; REFERENCE.

(a) SHORT TITLE.—This title may be cited as the "Student Financial Assistance Amendments of 1985". (b) REFERENCE.—References in this title to "the Act" are to the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).

Student Financial Assistance Amendments of 1985. 20 USC 1001 note.

Subtitle A—Savings in Student Loan Program Operations SEC. 16011. RECOVERY OF OUTSTANDING ADVANCES TO GUARANTY AGENCIES. Section 422 of the Act is amended by adding at the end thereof the following new subsection: "(d)(1) Notwithstanding any other provision of this section, advances made by the Secretary under this section shall be repaid in accordance with this paragraph and shall be deposited in the fund established by section 431. The Secretary shall, in accordance with the requirements of paragraph (2), recover (and so deposit) an amount equal to $75,000,000 during fiscal year 1988. "(2) In determining the amount of advances which shall be repaid by a State or nonprofit private institution or organization under paragraph (1), the Secretary— "(A) shall consider the solvency and maturity, as determined by the Comptroller General, of the reserve and insurance funds of the State or nonprofit private institution or organization assisted by such advances; "(B) shall not seek repayment of such advances from any State described in subsection (c)(5)(B) during any year of its eligibility under such subsection; and "(C) shall not seek repayment of such advances from any State if such repayment encumbers the reserve fund requirement mandated by the statutes of such State.". SEC. 16012. DISBURSEMENT OF STUDENT LOANS TO INSTITUTIONS REQUIRED. (a) FISL LOANS REQUIREMENT.—Section 427(a)(2) of the Act is

amended— (1) by striking out clause (ii) of subparagraph (B) and by redesignating clauses (iii) and (iv) of subparagraph (B) as clauses (ii) and (iii), respectively; (2) by striking out "or the fifteen-year period" in the matter following clause (viii) of subparagraph (C); and (3) by amending subparagraph (I) to read as follows: "(I) the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except nothing in this subparagraph shall be interpreted to allow the Secretary to require checks to be made

20 USC 1072. State and local governments. 20 USC 1081.

20 USC 1077.

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PUBLIC LAW 99-272—APR. 7, 1986 co-payable to the institution and the borrower or to prohibit the disbursement of loan proceeds by means other than by

20 USC 1078.

20 USC 1083a.

(b) GSL LOANS REQUIREMENT.—Section 428(b)(l)(0) of the Act is

amended to read as follows: "(O) provides that funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except nothing in this subparagraph shall be interpreted to allow the Secretary to require checks to be made co-payable to the institution and the borrower or to prohibit the disbursement of loan proceeds by means other than by check;". (c) CONFORMING AMENDMENT.—Section 433A(a) of the Act is amended by striking out "to a borrower" in the first sentence. SEC. 16013. MULTIPLE DISBURSEMENTS OF STUDENT LOANS REQUIRED. (a) REPEAL OF INCENTIVES TO LENDERS TO MAKE MULTIPLE

20 USC 1078.

DISBURSEMENTS.—Section 428(a) of the Act is amended by striking out paragraph (8). (b) MULTIPLE DISBURSEMENT REQUIRED IN F I S L PROGRAM.—Sec-

20 USC 1077.

tion 427(a) of the Act is amended— (1) by striking out "and" at the end of paragraph (1); (2) by striking out the period at the end of paragraph (2) and inserting in lieu thereof "; and"; and (3) by adding at the end thereof the following: "(3) in the case of a loan made for any period of enrollment of more than six months, one semester, two quarters, or 600 clock hours and for an amount of $1,000 or more, the proceeds of the loan will be disbursed directly by the lender in two or more installments, none of which exceeds one-half of the loan, with the interval between the first and second installment being not less than one-third of such period. For purposes of paragraph (3), all loans issued for the same period of enrollment shall be considered as a single loan.". (c) MULTIPLE DISBURSEMENTS REQUIRED IN GSL PROGRAM.—Sec-

tion 42803)(1) of such Act is amended— (1) by redesignating subparagraph (P) as subparagraph (Q); and (2) by inserting after subparagraph (O) the following new subparagraph: "(P) provides that the proceeds of any loan made for any period of enrollment of more than six months, one semester, two quarters, or 600 clock hours and for an amount of $1,000 or more— "(i) will be disbursed directly by the lender in two or more installments, none of which exceeds one-half of the loan, with the interval between the first and second installment being not less than one-third of such period, or "(ii) will be disbursed in such installments pursuant to the escrow provisions of subsection (i) of this section, but all loans issued for the same period of enrollment shall be considered as a single loan for purposes of this subparagraph; and". 20 USC 1087-1.

(d) ORIGINATION FEE TO B E DEDUCTED PROPORTIONATELY FROM EACH INSTALLMENT.—Section 438(c)(2) of the Act is amended by

striking out "which may be deducted from the proceeds of the loan

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prior to payment to the borrower" and inserting in lieu thereof "which shall be deducted proportionately from each installment payment of the proceeds of the loan to the borrower". (e) CONFORMING AMENDMENTS.—(1) Section 425(a)(1) of the Act is

20 USC 1075.

amended— (A) by inserting "and" at the end of subparagraph (A), by striking out subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B); and (B) by striking out the last sentence. (2) Section 428(a)(3)(A) of the Act is amended— 20 USC 1078. (A) by striking out "Except as provided in paragraph (8) and subject" and inserting in lieu thereof "Subject"; and (B) by striking out "but, except as provided in paragraph (8) of this subsection, such portion" and inserting in lieu thereof "but such portion". (3) Section 428(b)(l)(A) of such Act is amended— (A) by inserting "and" at the end of division (i); (B) by striking out division (ii) and by redesignating division (iii) as division (ii); and (C) in the matter following such division, by striking out "annual limit," and all that follows and inserting in lieu thereof "annual limit;". SEC. 16014. PRECLAIM COLLECTION ACTIVITIES. (a) DELAY REQUIRED BEFORE SUBMISSION OF CLAIMS BY GUARANTY

AGENCIES.—(1) Section 428(c)(l)(A) of the Act is amended by adding 20 USC 1078. at the end thereof the following new sentence: "In no case shall a State or nonprofit private institution or organization with which the Secretary has an agreement pursuant to subsection (b) file a claim for such reimbursement with respect to such losses prior to 270 days after the loan becomes delinquent with respect to any loan installment.". (2) Section 430(e)(2) of the Act is amended— 20 USC 1080. (A) by striking out "one hundred and twenty days" and inserting in lieu thereof "180 days"; and (B) by striking out "one hundred and eighty days" and inserting in lieu thereof "240 days". QD) SUPPLEMENTAL PRECLAIMS ASSISTANCE.—(1) Section 428(c)(6)(A) of the Act is amended— (A) by inserting after "assistance for default prevention," the following: "the administrative costs of supplemental preclaim assistance for default prevention,"; and (B) by striking out "as such terms are defined in subparagraph (B)" and inserting in lieu thereof "as such terms are defined in subparagraph (B) or (C)". (2) Section 428(c)(6) of the Act is amended by adding at the end thereof the following new subparagraph: "(C)(i) For purposes of this paragraph, 'administrative costs of supplemental preclaim assistance for default prevention' means (subject to divisions (ii) through (iv)) any administrative costs— "(I) incurred by a guaranty agency in connection with a loan on which the guarantor has exercised preclaims assistance required or permitted under sections 428(c)(2)(A) and 428(0(2), and which has been in delinquent status for at least 120 days; and

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20 USC 1078.

20 USC 1078

Loans. 20 USC 1078 ^° ®' 20 USC 1078.

PUBLIC LAW 99-272—APR. 7, 1986

"(II) which are directly related to providing collection assistance to the lender on a delinquent loan, prior to a claim being filed by the guaranty agency, including the attributable compensation of appropriate personnel (and in the case of personnel who perform several functions, only the portion of compensation attributable to the collection assistance), fees paid to locate a missing borrower, postage, equipment, supplies, telephone, and similar charges, but does not include overhead costs. "(ii) The administrative costs for which reimbursement is authorized under this subparagraph must be clearly supplemental to the preclaim assistance for default prevention which the guaranty agency is required to provide pursuant to section 428(c)(2)(A) and section 428(f)(2) of this Act. "(iii) The services associated with carrying out this subparagraph may be provided by the guaranty agency directly or under contract, except that such services may not be carried out by an organization or entity (other than the guaranty agency)— "(I) that is the holder or servicer of the loan or an organization or entity that owns or controls the holder or servicer of the loan; or "(II) that is owned or controlled by the same corporation, partnership, association, or individual that owns or controls the holder or servicer of the loan. "(iv) The costs associated with carrying out this subparagraph may not exceed 2 percent of the outstanding principal balance of each delinquent loan subject to the supplemental preclaim assistance authorized by this subparagraph or $100, whichever is less.". (3) The amendments made by this subsection shall be effective in accordance with section 16041(a) of this title without regard to whether such amendments are reflected in the regulations prescribed by the Secretary of Education. SEC. 16015. PROMPT PAYMENT OF SUPPLEMENTAL GUARANTY ADMINISTRATIVE COST AGREEMENT. (a) PURPOSE.—It is the purpose of the amendments made by this section to assure the prompt payment of the amount due under the supplemental guaranty administrative cost agreement made under section 428(f)(2) in order to encourage improved collection of student loans and preclaims assistance to prevent default on student loans. (b) PROMPT PAYMENT REQUIRED.—(1) Section 428(f)(1) of the Act is

amended— (A) by striking out "is authorized to" and inserting in lieu thereof "shall"; (B) by striking out "shall not exceed" and inserting in lieu thereof "shall be equal to"; and (C) by striking out the third and fourth sentences of such section. (2) Section 428(f)(2) of the Act is amended— (A) by striking out "is authorized to" and inserting in lieu thereof "shall"; (B) by striking out "shall not exceed" and inserting in lieu thereof "shall be equal to"; and (C) by striking out the third and fourth sentences of such section.

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SEC. 16016. GUARANTY AGENCY; LENDER OF LAST RESORT. Section 428 of the Act is amended by adding at the end thereof the 20 USC 1078. following new subsection: "(j) In each State, the guaranty agency or an eligible lender in the State and local State described in section 435(d)(1)(D) of this Act shall make loans foYjcpTo^oldirectly, or through an agreement with an eligible lender or lenders, ^• to students who are eligible to have interest benefits paid on their behalf (under subsection (a) of this section) but who are otherwise unable to obtain loans under this part. Loans made under this subsection shall neither exceed the amount of the need of the borrower, as determined under subsection (a)(2)(B), nor be less than $200.". SEC. 16017. STUDENT LOAN CONSOLIDATION. (a) LOAN CONSOLIDATION AUTHORIZED.—Part B of title IV of the Act is amended by inserting after section 428B the following new section: "CONSOLIDATION LOANS

"SEC. 428C. (a)(1) For the purpose of providing loans to eligible borrowers for consolidation of their obligations with respect to student loans made, insured, or guaranteed under this part or made under part E of this title, the Secretary or a guaranty agency shall enter into agreements in accordance with subsection (b) with the following eligible lenders: "(A) the Student Loan Marketing Association; "(B) agencies described in subparagraphs (D) and (F) of section 435(g)(1); and "(C) eligible lenders described in subparagraphs (A), (B), (C), and (E) of such section. "(2) Except as provided in section 429(e), no contract of insurance under this part shall apply to a consolidation loan unless such loan is made under an agreement pursuant to this section and is covered by a certificate issued in accordance with subsection (b)(2). Loans covered by such a certificate that is issued by a guaranty agency shall be considered to be insured loans for the purposes of reimbursements under section 428(c), but no payment shall be made with respect to such loans under section 428(f) to any such guaranty agency. "(3) For the purpose of this section, the term 'eligible borrower' means a borrower who— "(A) has an outstanding indebtedness, at the time of application for a consolidation loan, to one or more lenders or programs under this title of not less than $5,000; "(B) has not during the previous 4 months carried at an eligible institution at least one-half the normal full-time academic workload; "(C) if in repayment status, is not delinquent with respect to any required payment on such indebtedness by more than 90 days; and '(D) is not a parent borrower under section 428B(a)(l). "(4) An individual's status as an eligible borrower under this section terminates upon receipt of a consolidation loan under this section except with respect to loans received under this title after the date of receipt of the consolidation loan. For the purpose of computing the outstanding indebtedness of such an individual, only loans received after such date shall be taken into account.

20 USC 1078-3. 20 USC 1088.

20 USC 1085. 20 USC 1079.

20 USC 1078.

20 USC 1078-2.

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"(b)(1) Any lender described in clause (A), (B), or (C) of subsection (a)(1) who wishes to make consolidation loans under this section shall enter into an agreement with the Secretary or a guaranty agency which provides— "(A)(i) that, in the case of lenders described in subsection (a)(1)(C), the lender will make a consolidation loan to any eligible borrower on request of that borrower, if the lender holds an outstanding loan of that borrower which is selected by the borrower for consolidation under this section, and will make such loans to other eligible borrowers only to the extent permitted by the Secretary in an agreement under subsection (d); "(ii) that, in the case of lenders described in subsection (a)(1)(B), the lender will make, subject to the availability of funds allocated for such purpose, a consolidation loan to any eligible borrower— "(I) who is, or was at the time of receiving a loan which is selected for consolidation, a resident of the State of such lender; or "(II) who received loans under this title while attending an institution of higher education in the State of such lender, except that the lender may elect to limit further the availability of its loans under this section to those borrowers for whom the lender is the holder of a loan selected for consolidation; or "(iii) that, in the case of the Student Loan Marketing Association, the lender will make a consolidation loan to any eligible borrower on request of that borrower; "(B) that each consolidation loan made by the lender will bear interest, and be subject to repayment, in accordance with subsection (c); "(C) that each consolidation loan will be made, notwithstanding any other provision of this part limiting the maximum principal amount for all insured loans made to a borrower, in an amount (i) which is not less than the minimum amount required for eligibility of the borrower under subsection (a)(3)(A)(i), and (ii) which is equal to the sum of the unpaid principal, accrued unpaid interest and late charges of all loans received by the eligible borrower under this title which are selected by the borrower for consolidation; "(D) that the proceeds of each consolidation loan will be paid by the lender to the holder or holders of the loans so selected to discharge the liability on such loans; "(E) that, in the case of any lender, such lender will not make consolidation loans under this part from the proceeds of bonds or other obligations, the income from which is exempt from 26 USC 1 et seq. taxation under the Internal Revenue Code of 1954, issued subsequent to the enactment date of the Student Financial AssistAnte, p. 339. ance Amendments of 1985; and "(F) such other terms and conditions as the Secretary or guaranty agency (whichever is party to the agreement) may specifically require of the lender to carry out this section. "(2) The Secretary shall issue a certificate of comprehensive insur20 USC 1079. ance coverage under section 429(b) to a lender which has entered into an agreement with the Secretary under paragraph (1) of this subsection. A guaranty agency may issue a certificate of comprehensive insurance coverage to a lender if the lender has entered into an agreement under paragraph (1) of this subsection. The Secretary

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 PUBLIC LAW 99-272—APR. 7, 1986

100 STAT. 345

shall not issue such a certificate under this paragraph to a lender described in clause (B) or (C) of subsection (a)(1) if the Secretary determines that such lender has reasonable access in its State, for the purpose of obtaining such a certificate, to a guaranty agency. In either case, such certificate shall, at a minimum, provide— "(A) that all consolidation loans made by such lender in conformity with the requirements of this section will be insured against loss of principal and interest by the issuer of such certificate; "(B) that a consolidation loan will not be insured unless the lender has determined to its satisfaction, in accordance with reasonable and prudent business practices, for each loan being consolidated (i) that the loan is a legal, valid, and binding obligation of the borrower; (ii) that each such loan was made and serviced in compliance with applicable laws and regulations; and (iii) in the case of loans under this part, that the insurance on such loan is in full force and effect; "(C) the effective date and expiration date of the certificate; "(D) the aggregate amount to which the certificate applies; "(E) that, if the lender prior to the expiration of the certificate no longer proposes to make consolidation loans, the lender will so notify the issuer of such certificate in order that the certificate may be terminated (without affecting the insurance on any consolidation loan made prior to such termination); and "(F) the terms upon which the issuer of the certificate may limit, suspend, or terminate the lender's authority to make consolidation loans under the certificate (without affecting the insurance on any consolidation loan made prior to such limitation, suspension, or termination). "(3) A consolidation loan made pursuant to this section shall be insurable under a certificate issued pursuant to paragraph (2) only if the loan is made to an eligible borrower who has agreed to notify the holder of the loan promptly concerning any change of address and the loan is evidenced by a note or other written agreement which— "(A) is made without security and without endorsement, except that if the borrower is a minor and such note or other written agreement executed by him would not, under applicable law, create a binding obligation, endorsement may be required; "(B) provides for the payment of interest and the repayment of principal in accordance with subsection (c) of this section and contains notice of the possibility of a revised repayment schedule under paragraph (2) of such subsection; "(C) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid, during any period— "(i) during which the borrower is pursuing a full-time course of study at an eligible institution, 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; "(ii) not in excess of 2 years during which the borrower is serving an internship, the successful completion of which is required in order to receive professional recognition; "(iii) not in excess of 3 years during which the borrower is temporarily totally disabled, as established by sworn affidavit of a qualified physician, or during which the borrower is

Fellowships and scholarships. Handicapped persons.

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