,,ii #aadth ,,congress #b;d ,session ,s4 #beci ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #aj1 #bjaf ,mr4 ,casey 7for himself1 ,mrs4 ,gillibrand1 ,mr4 ,franken1 ,ms4 ,baldwin1 ,mr4 ,reed1 ,ms4 ,warren1 ,mr4 ,durbin1 ,ms4 ,hirono1 and ,mr4 ,merkley7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,social ,security ,act to provide for mandatory funding1 to ensure that the families that have infants and toddlers1 have a family income of not more than #bjj percent of the applicable ,federal poverty guideline1 and need child care have access to high-quality infant and toddler child care by the end of fiscal year #bjbf1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,child ,care ,access to ,resources for ,early-learning ,act or the ,child ,,care ,act4 #b4 ,purposes ,the purposes of this ,act are-- 7#a7 to provide funding to ensure that the families that have infants and toddlers1 that have a family income of not more than #bjj percent of the applicable ,federal poverty guideline1 and that need child care have access to high-quality infant and toddler child care by the end of fiscal year #bjbf1 in order to promote family economic security and parental employment1 to support parents in balancing work and family obligations1 and to promote children's health1 early care1 and learning2 7#b7 to provide sufficient funding to ensure that both families and child care providers have the resources they need to support high-quality early care and learning for infants and toddlers2 7#c7 to ensure that provider payment rates1 for infant and toddler child care providers1 are set at a level high enough to support high-quality child care for infants and toddlers1 including infants and toddlers with disabilities2 7#d7 to assist eligible infant and toddler child care providers in improving the quality of their programs-- 7,a7 by strengthening the skills1 competencies1 and compensation of the workforce of those providers1 in a manner aligned with the report entitled ,transforming the ,workforce for ,children ,birth ,through ,age #h3 ,a ,unifying ,foundation1 issued by the ,national ,academy of ,sciences in ,april #bjae2 and 7,b7 by helping those providers ensure that children receive the comprehensive services they need1 by coordinating activities with other community service providers2 and 7#e7 to ensure that high-quality infant and toddler child care is a strong component of a continuum of quality early care and learning activities within ,states and ,indian and ,native ,hawaiian communities1 starting with prenatal care and continuing through activities in the early school years1 with seamless transitions between programs4 ,i ,child care access to resources for early learning #aja4 ,appropriation ,title ,,iv of the ,social ,security ,act is amended by inserting after section #dah 7#db ,u4,s4,c4 #fah7 the following3 #dah;,a4 ,appropriation ,for grants under the ,child ,,care ,act1 there is appropriated-- 7#a7 #c1ffd1hfb1fjd for fiscal year #bjag2 7#b7 #d1aba1gca1hfa for fiscal year #bjah2 7#c7 #d1hai1edf1cah for fiscal year #bjai2 7#d7 #e1hdc1ghd1cga for fiscal year #bjbj2 and 7#e7 #f1hhg1bcf1jef for fiscal year #bjba4 4 #ajb4 ,definitions ,in this ,act3 7#a7 ,child ,care and ,development ,fund ,the term ,child ,care and ,development ,fund means the funds appropriated under the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh et seq47 and the funds appropriated under section #dah of the ,social ,security ,act 7#db ,u4,s4,c4 #fah74 7#b7 ,eligible family ,the term eligible family means a family that has1 and needs child care for1 an infant or toddler1 and is a low-income family4 7#c7 ,eligible infant or toddler ,the term eligible infant or toddler means an infant or toddler from a low-income family4 7#d7 ,indian2 indian tribe ,the terms ,indian and ,indian tribe have the meanings given the terms in section #d of the ,indian ,self-,determination and ,education ,assistance ,act 7#be ,u4,s4,c4 #dej;b74 7#e7 ,high-quality ,the term high-quality1 used with respect to child care 7including early care and learning71 means child care provided in a manner consistent with the quality standards described in section #aje7;a77#c74 7#f7 ,infant or toddler ,the term infant or toddler means a child under age #d4 7#g7 ,infant or toddler with a disability ,the term infant or toddler with a disability has the meaning given the term in section #fcb of the ,individuals with ,disabilities ,education ,act 7#bj ,u4,s4,c4 #adcb74 7#h7 ,low-income family ,the term low-income family means a family with a family income of not more than #bjj percent of the applicable ,federal poverty guideline4 7#i7 ,native hawaiian ,the term ,native ,hawaiian has the meaning given the term in section #fbjg of the ,elementary and ,secondary ,education ,act of #aife 7#bj ,u4,s4,c4 #geag74 7#aj7 ,secretary ,the term ,secretary means the ,secretary of ,health and ,human ,services4 7#aa7 ,state ,the term ,state means any of the several ,states1 the ,district of ,columbia1 the ,virgin ,islands of the ,united ,states1 the ,commonwealth of ,puerto ,rico1 ,guam1 ,american ,samoa1 and the ,commonwealth of the ,northern ,mariana ,islands4 7#ab7 ,tribal organization ,the term tribal organization has the meaning given the term in section #feh,p of the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #ihehn74 #ajc4 ,funding allotments 7a7 ,distribution by activity ,from the amounts appropriated under this ,act for each fiscal year1 the ,secretary shall-- 7#a7 reserve a portion for providing the allotments described in subsection 7b7 7relating to expanding access to high-quality child care72 7#b7 reserve a portion of not less than #b percent of the appropriated amounts for providing the allotments described in subsection 7d7 7relating to ,indian and ,native ,hawaiian child care72 7#c7 reserve a portion1 of not more than #j4e percent of the appropriated amounts1 for carrying out research and evaluation activities under this ,act2 7#d7 reserve a portion1 of not more than #j4e percent of the appropriated amounts1 for carrying out technical assistance activities under this ,act2 7#e7 reserve #f percent of the appropriated amounts for making grants under subsection 7e7 7relating to child care provided during nontraditional and unpredictable hours72 and 7#f7 use the remainder for providing the allotments described in subsection 7c7 7relating to maintaining access to child care74 7b7 ,allotments for expanding access to high-,quality child care 7#a7 ,allotments ,using funds reserved under subsection 7a77#a7 for a fiscal year1 the ,secretary shall allot to each eligible ,state an amount that bears the same relationship to the reserved funds as the number of infants and toddlers from low-income families in the ,state bears to the total number of such infants and toddlers in all eligible ,states4 7#b7 ,use of funds ,a ,state that receives an allotment under this subsection shall use the allotment funds-- 7,a7 to expand access to high-quality child care for infants and toddlers who do not receive child care funded through the ,child ,care and ,development ,fund2 7,b7 to increase1 as described in this ,act1 the quality of child care for infants and toddlers who receive child care funded through the ,child ,care and ,development ,fund2 7,c7 7i7 to support payment rates1 for child care providers that serve infants and toddlers1 that reflect the cost of high-quality child care and are sufficient to attract1 support1 and retain providers who meet quality standards that relate to the unique needs of infants and toddlers1 including infants and toddlers with disabilities2 and 7ii7 to increase the compensation of1 and provide other financial incentives for1 the highly qualified infant and toddler child care workforce2 and 7,d7 as otherwise described in section #aje4 7c7 ,allotments for maintaining access to child care 7#a7 ,allotments ,using the remainder described in subsection 7a77#f7 for a fiscal year1 the ,secretary shall allot to each eligible ,state an amount that bears the same relationship to the reserved funds as the amount the ,state receives for the fiscal year under section #dah7;a77#b77;,b7 of the ,social ,security ,act 7#db ,u4,s4,c4 #fah7;a77#b77;,b77 bears to the total amount received by all eligible ,states under that section4 7#b7 ,use of funds ,a ,state that receives an allotment under this subsection shall use the allotment funds in accordance with the ,child ,care and ,development ,block ,grant ,act of #aiij4 7d7 ,allotments for ,indian and native hawaiian child care 7#a7 ,formula 7,a7 ,in general ,in order to ensure that ,indian and ,native ,hawaiian children have equal access to high-quality infant and toddler child care1 the ,secretary shall develop a formula for allotting the funds reserved under subsection 7a77#b7 to ,indian tribes and tribal organizations4 7,b7 ,formula factors ,in developing the formula1 the ,secretary shall-- 7i7 provide for a level of funding that will ensure that1 by the end of fiscal year #bjbf1 the ,indian and ,native ,hawaiian infants and toddlers in eligible families will receive a level of services that is equivalent to the high-quality child care received by infants and toddlers in the general population under this ,act2 7ii7 take into consideration the unique needs and circumstances of individuals in ,indian and ,native ,hawaiian communities1 such as unemployment rates2 and 7iii7 the cost of providing high-quality child care that addresses ,indian and ,native ,hawaiian culture and language4 7#b7 ,use of funds ,an ,indian tribe or tribal organization that receives an allotment under this subsection shall use the allotment funds as described in section #ajg4 7e7 ,grants for child care during unconventional hours 7#a7 ,in general ,using funds reserved under subsection 7a77#e7 for a fiscal year1 the ,secretary may make grants to ,states for child care provided during nontraditional and unpredictable hours4 7#b7 ,adjustments ,the ,secretary may adjust the requirement that providers serving children that require child care during those hours meet quality standards as described in section #aje7;a77#c71 as necessary to address the need for nontraditional and unpredictable hours care4 7#c7 ,applicable requirements ,except as provided in paragraph 7#b71 a ,state that receives a grant under this subsection shall use the grant funds in accordance with the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #ihei et seq47 and this ,act4 #ajd4 ,state application 7a7 ,in general ,to be eligible to receive a grant under this ,act through allotments made under subsection 7b71 7c71 or 7e7 of section #ajc1 a ,state shall submit to the ,secretary an application1 as a supplement to the ,state plan described in section #feh;,e of the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh;c74 7b7 ,information ,each such application shall include a description of each of the following3 7#a7 7,a7 ,how the ,state will increase the number of high-quality child care slots for eligible families1 to ensure1 by the end of fiscal year #bjbf1 access to high-quality infant and toddler child care for the eligible families in the ,state 7referred to in this section as universal high-quality child care74 7,b7 ,the ambitious goals and measurable benchmarks that the ,state will use to demonstrate progress toward achieving universal high-quality child care1 including-- 7i7 substantially increasing the percentage of eligible families served2 and 7ii7 addressing the needs identified in the needs assessment under section #aje7;a77#d74 7#b7 ,how the ,state will measurably improve1 by the end of fiscal year #bjbf1 the quality of child care available to children who are infants and toddlers1 including such children who are dual language learners or are children with disabilities1 and the ambitious goals and measurable benchmarks that the ,state will use to demonstrate progress toward achieving this improvement4 7#c7 ,how the ,state will maintain1 using the ,child ,care and ,development ,fund and the funds made available under section #ajc7;c71 the caseload of children that were served using the ,child ,care and ,development ,fund on the date of enactment of this ,act4 7#d7 7,a7 ,how the ,state will conduct a study on the cost of high-quality child care for infants and toddlers1 at least once every #c years1 consistent with this supplement-- 7i7 to determine provider payment rates that are sufficient-- 7,i7 to ensure fair and competitive compensation for high-quality infant and toddler child care providers2 7,,ii7 to recognize child care providers who have the specialized knowledge and competencies of early childhood educators2 and 7,,iii7 to recognize child care providers who offer a rich learning environment1 use evidence-based classroom practices1 and have provider competencies in engaging in stimulating1 warm1 and responsive adult-child interactions1 consistent with the program performance standards referred to in section #fda;,a7a77#a7 of the ,head ,start ,act 7#db ,u4,s4,c4 #ihcf;a71 appropriate to the age of the child2 and 7ii7 to assess the compensation levels necessary to attract1 support1 and retain a workforce of child care providers described in clause 7i74 7,b7 ,whether the ,state proposes to conduct the study required under subparagraph 7,a7 by carrying out a cost of quality study or survey that the ,state is currently conducting1 as a requirement of its ,state plan under section #feh;,e of the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh;c74 7,c7 ,how the ,state will incorporate into the study information gathered through a public hearing to solicit input from relevant stakeholders including the infant and toddler child care workforce4 7,d7 ,how the ,state will use the results of the study to establish and annually update reimbursement rates for high-quality infant and toddler child care providers in the ,state4 7#e7 ,how the ,state will ensure and demonstrate that-- 7,a7 the higher provider payment rates that the ,state proposes to pay under this ,act are sufficient to achieve the compensation levels described in paragraph 7#d77;,a77ii71 and attract1 support1 and retain child care providers described in paragraph 7#d77;,a77i72 and 7,b7 the rates described in subparagraph 7,a7 will keep pace with inflation4 7#f7 ,the need in the ,state for high-quality child care for infants and toddlers1 based on a needs assessment-- 7,a7 that is conducted prior to the receipt of the corresponding allotment and at least once every #c years consistent with the ,state plan2 7,b7 that is conducted by the ,state ,advisory ,council on ,early ,childhood ,education and ,care 7designated or established pursuant to section #fdb;,b7b77#a77;,a77i7 of the ,head ,start ,act 7#db ,u4,s4,c4 #ihcg;b7b77#a77;,a77i777 or another entity as determined by the ,state2 and 7,c7 that identifies such need for geographic areas and special populations of infants and toddlers1 including children with disabilities1 children experiencing cognitive issues as a result of exposure to lead or another toxic substance 7as the terms cognitive issues1 exposure1 and toxic substance are defined by the ,secretary71 homeless children1 children in foster care1 children who are dual language learners1 children living in rural areas1 and children whose families work nontraditional hours4 7#g7 ,a unified approach to early care and learning that begins prenatally and supports children and their families at least until the children enter kindergarten1 which includes a description of how the ,state will align infant and toddler child care with-- 7,a7 other early care and learning programs1 including ,state-supported programs of quality preschool if applicable2 and 7,b7 programs carried out under section #fai and part ,c of the ,individuals with ,disabilities ,education ,act 7#bj ,u4,s4,c4 #adai1 #adca et seq474 7#h7 ,how the ,state will support early childhood educators and ,k-#c teachers1 including the best practices that the ,state will use to support transitions into kindergarten and alignment of curricula1 professional development1 and early learning standards1 to reflect an integrated approach to enabling children to achieve substantial gains in key skill areas across their development4 7#i7 ,how the ,state will coordinate activities with other public or private agencies to ensure that1 to the extent that services are available in the community1 infants and toddlers are referred to local agencies or other appropriate providers1 including community-based organizations1 for comprehensive health1 mental health1 family1 and nutrition services similar to those provided through ,early ,head ,start programs4 7#aj7 ,how the ,state will address infant and toddler child care needs for populations that have acute barriers to accessing high-quality child care and the ,state's plan to increase the supply of high-quality child care slots for populations for which the unmet need is greatest1 including populations listed in section #feh;,e7c77#b77,m7 of the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh;c7c77#b77,m771 with methods such as grants and contracts4 7#aa7 ,how the ,state will1 at the option of an ,indian tribe or tribal organization in the ,state1 collaborate and coordinate activities with the ,indian tribe or tribal organization in the development of the ,state plan4 7#ab7 ,a plan that describes how the ,state will ensure successful engagement by parents and families in their child's early care and learning and how this plan will promote engagement that continues from infant and toddler programs into preschool programs and beyond4 7#ac7 ,how the ,state will collaborate and coordinate activities with early childhood educators and organizations that foster the professional development and collective engagement of the child care workforce4 7c7 ,assurances ,each such application shall include each of the following3 7#a7 ,an assurance that the ,state will maintain1 using the ,child ,care and ,development ,fund and the funds made available under section #ajc7;c71 the caseload of children that were served using the ,child ,care and ,development ,fund on the date of enactment of this ,act4 7#b7 ,an assurance that the ,state will establish and support standards for high-quality child care for infants and toddlers in the ,state as described in section #aje7;a77#c74 7#c7 ,an assurance that the ,state will contribute a percentage toward the cost of activities authorized under section #ajc7;b71 toward the cost of activities authorized under section #ajc7;c71 and toward the cost of activities authorized under section #ajc7;e71 that is equal to the percentage that the ,state contributes under section #dah7;a77#b77;,c7 of the ,social ,security ,act 7#db ,u4,s4,c4 #fah7;a77#b77;,c77 toward the cost of the child care authorized under section #dah of that ,act 7#db ,u4,s4,c4 #fah74 #aje4 ,state expansion and quality enhancement activities 7a7 ,expanding access to high-,quality child care 7#a7 ,in general ,using funds made available through an allotment under section #ajc7;b71 the ,state shall reserve at least #hj percent for direct services provided through grants1 contracts1 or certificates1 to expand access to high-quality child care for infants and toddlers and to increase parental options for and access to such care4 7#b7 ,promotion of quality ,during the period beginning not later than the date on which the allotment is made and ending not later than #f months after that date1 and every third year thereafter1 the ,state shall use the cost of high-quality child care study1 described in section #ajd7;b77#d71 to ensure that1 for all infant and toddler child care slots-- 7,a7 the child care is of sufficient quality2 7,b7 the providers of the care are supported along a career pathway to achieve higher levels of training and education2 and 7,c7 provider payment rates are sufficient as described in section #ajd7;b77#d77;,a77i74 7#c7 ,quality standards ,the ,state shall ensure that all infant and toddler child care providers1 who participate in activities funded through the ,child ,care and ,development ,fund1 meet quality standards by the end of fiscal year #bjbf1 including-- 7,a7 ensuring that the providers enable lead teachers and educators1 regardless of setting1 to receive program quality funds reserved under subsection 7b71 through grants1 contracts1 or certificates1 to prepare for meeting higher standards of quality and to progress through professional development goals2 and 7,b7 7i7 offering full-day1 full-year care or otherwise meeting the needs of working families2 7ii7 meeting the requirements described in section #ajd7;b77#d77;,a77i77,,iii72 7iii7 ensuring individuals working directly with infants and toddlers have the qualifications1 knowledge1 and skills to promote the healthy social1 emotional1 cognitive1 and physical development of children as appropriate to the children's age1 and attain the compensation levels necessary to attract1 support1 and retain a well-qualified workforce1 in a manner aligned with the findings in the study entitled ,transforming the ,workforce for ,children ,birth ,through ,age #h3 ,a ,unifying ,foundation1 issued by the ,national ,academy of ,sciences in ,april #bjae2 7iv7 aligning its activities with the ,state's ,early ,learning and ,development ,guidelines that apply to infants and toddlers and the ,head ,start ,early ,learning ,outcomes ,framework2 7v7 coordinating activities with other public or private agencies to ensure that1 to the extent that services are available in the community1 infants and toddlers are referred to local agencies or other appropriate providers1 including community-based organizations1 for comprehensive health1 mental health1 family1 and nutrition services1 similar to those provided through ,early ,head ,start programs2 and 7vi7 engaging with parents in their roles as first teachers and partnering with parents in their child's early care and learning and transition to pre-kindergarten or a ,head ,start program4 7#d7 ,addressing underserved geographic areas and special populations 7,a7 ,identification ,based on a valid needs assessment referred to in section #ajd7;b77#f71 the ,state shall identify geographic areas and special populations described in that section4 7,b7 ,increasing availability of child care ,the ,state shall develop and implement a plan to increase the availability of high-quality child care 7including by stabilizing the income of providers of such care7-- 7i7 in geographic areas and for populations identified under subparagraph 7,a72 and 7ii7 to the extent practicable1 in hard-to-serve areas or populations4 7b7 ,enhancing the quality of infant and toddler child care 7#a7 ,findings ,congress finds that the activities described in paragraph 7#c7 are interconnected and that each of the activities is critical to enhancing the quality of infant and toddler child care4 7#b7 ,general authority ,the ,state shall reserve at least #ab percent of funds made available through each allotment made under subsection 7b71 7c71 or 7e7 of section #ajc to carry out activities described in paragraph 7#c71 to increase the quality of child care programs for infants and toddlers in eligible families4 7#c7 ,activities ,the activities referred to in paragraph 7#b7 shall consist of-- 7,a7 activities that improve the skills and competencies of the infant and toddler child care workforce1 including competencies specific to working with children who are culturally and linguistically diverse and children with disabilities1 by providing a pathway to higher levels of training and education consistent with the findings in the ,national ,academy of ,sciences study described in subsection 7a77#c77;,b77iii72 7,b7 activities that support training and technical assistance through a statewide network of infant and toddler specialists1 infant and early childhood mental health consultants1 or coach mentors1 that provide onsite assistance directly to providers who receive funds under this ,act2 7,c7 activities that provide startup grants1 to purchase equipment and materials needed to provide high-quality early care and learning experiences to infants and toddlers1 such as cribs1 changing tables1 safety equipment1 infant and toddler curricula1 and age- and developmentally appropriate toys2 or 7,d7 activities that establish networks of family child care providers to share workforce training and technical assistance4 7#d7 ,standards ,the ,state shall use the funds described in paragraph 7#b7 to ensure that infant and toddler child care providers meet relevant standards and shall develop statewide plans to improve the knowledge and competencies of the infant and toddler child care workforce1 by implementing #a or more of the activities described in paragraph 7#c74 7#e7 ,coordination ,the ,state shall coordinate the activities carried out under this subsection with other quality enhancement efforts funded through the ,child ,care and ,development ,fund4 7c7 ,applicable requirements ,in carrying out activities under this section1 a ,state shall comply with the requirements of this ,act and the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh et seq474 7d7 ,supplement not supplant ,amounts made available under this ,act shall be used to supplement and not supplant other ,federal1 ,state1 and local public funds expended to provide child care for children under age #ac4 #ajf4 ,tribal application ,to be eligible to receive a grant under this ,act through an allotment made under section #ajc7;d71 an ,indian tribe or tribal organization shall submit to the ,secretary an application1 as a supplement to the application the tribe or tribal organization submits under section #feh,o7c7 of the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #ihehm7c774 ,each such application shall contain such information as the ,secretary may require1 including3 7#a7 ,information demonstrating that the ,indian tribe or tribal organization meets the requirements for a grant or contract on section #feh,o7c7 of such ,act4 7#b7 ,at the election of the ,indian tribe or tribal organization1 a plan-- 7,a7 to align programs for child care funded through the ,child ,care and ,development ,fund1 ,head ,start 7including ,early ,head ,start7 programs1 early childhood home visitation programs under section #eaa of the ,social ,security ,act 7#db ,u4,s4,c4 #gaa71 preschool programs1 and early childhood programs relating to ,indian and ,native ,hawaiian culture and language1 to create more aligned and seamless early care and learning in tribal communities2 and 7,b7 to combine funding for the programs described in subparagraph 7,a74 7#c7 7,a7 ,information describing how the ,indian tribe or tribal organization will increase the number of high-quality child care slots for eligible families with ,indian or ,native ,hawaiian children1 to ensure1 by the end of fiscal year #bjbf1 access to high-quality1 culturally and linguistically appropriate infant and toddler child care for such eligible families in the tribal community 7referred to in this section as universal high-quality child care74 7,b7 ,the ambitious goals and measurable benchmarks that the ,indian tribe or tribal organization will use to demonstrate progress toward achieving universal high-quality child care4 #ajg4 ,tribal early care and learning expansion activities 7a7 ,in general ,an ,indian tribe or tribal organization that receives a grant through an allotment made under section #ajc7;d7 shall use the grant funds to provide1 by the end of fiscal year #bjbf1 access to high-quality1 culturally and linguistically appropriate child care 7or1 in the case of an entity that submits a plan described in section #ajf7b71 high-quality1 culturally and linguistically appropriate early care and learning7 7including related supports7 for infants and toddlers for such eligible families in the tribal community4 7b7 ,applicable requirements ,in carrying out activities under this section1 an ,indian tribe or tribal organization shall comply with the requirements of this ,act and the ,child ,care and ,development ,block ,grant ,act of #aiij 7#db ,u4,s4,c4 #iheh et seq474 ,,ii ,inverted corporations #bja4 ,modifications to rules relating to inverted corporations 7a7 ,in general ,subsection 7b7 of section #ghgd of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7b7 ,inverted corporations treated as domestic corporations 7#a7 ,in general ,notwithstanding section #ggja7;a77#d71 a foreign corporation shall be treated for purposes of this title as a domestic corporation if-- 7,a7 such corporation would be a surrogate foreign corporation if subsection 7a77#b7 were applied by substituting #hj percent for #fj percent1 or 7,b7 such corporation is an inverted domestic corporation4 7#b7 ,inverted domestic corporation ,for purposes of this subsection1 a foreign corporation shall be treated as an inverted domestic corporation if1 pursuant to a plan 7or a series of related transactions7-- 7,a7 the entity completes after ,february #aj1 #bjaf1 the direct or indirect acquisition of-- 7i7 substantially all of the properties held directly or indirectly by a domestic corporation1 or 7ii7 substantially all of the assets of1 or substantially all of the properties constituting a trade or business of1 a domestic partnership1 and 7,b7 after the acquisition1 more than #ej percent of the stock 7by vote or value7 of the entity is held-- 7i7 in the case of an acquisition with respect to a domestic corporation1 by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation1 or 7ii7 in the case of an acquisition with respect to a domestic partnership1 by former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership4 7#c7 ,exception for corporations with substantial business activities in foreign country of organization ,a foreign corporation described in paragraph 7#b7 shall not be treated as an inverted domestic corporation if after the acquisition the expanded affiliated group which includes the entity has substantial business activities in the foreign country in which or under the law of which the entity is created or organized when compared to the total business activities of such expanded affiliated group4 ,for purposes of subsection 7a77#b77;,b77iii7 and the preceding sentence1 the term substantial business activities shall have the meaning given such term under regulations in effect on ,february #aj1 #bjaf1 except that the ,secretary may issue regulations increasing the threshold percent in any of the tests under such regulations for determining if business activities constitute substantial business activities for purposes of this paragraph4 4 7b7 ,conforming amendments 7#a7 ,clause 7i7 of section #ghgd7;a77#b77;,b7 of such ,code is amended by striking after ,march #d1 #bjjc1 and inserting after ,march #d1 #bjjc1 and before ,february #aa1 #bjaf14 7#b7 ,subsection 7c7 of section #ghgd of such ,code is amended-- 7,a7 in paragraph 7#b7-- 7i7 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b71 and 7ii7 by inserting or 7b77#b77;,a7 after 7a77#b77;,b77i7 in subparagraph 7,b71 7,b7 in paragraph 7#c71 by inserting or 7b77#b77;,b71 as the case may be1 after 7a77#b77;,b77ii71 7,c7 in paragraph 7#e71 by striking subsection 7a77#b77;,b77ii7 and inserting subsections 7a77#b77;,b77ii7 and 7b77#b77;,b71 and 7,d7 in paragraph 7#f71 by inserting or inverted domestic corporation1 as the case may be1 after surrogate foreign corporation4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years ending after ,february #aj1 #bjaf4