UBI Proposal

The Universal Dividend Act: Policy Rationale

Summary

The Universal Dividend Act establishes a monthly per capita payment to every citizen and national of the United States, funded as a fixed and escalating percentage of federal outlays. The payment begins at 10% of the five-year moving average of federal spending, rises by 4 percentage points annually, and caps at 50%. At current spending levels, this produces roughly $190/month per person in year one, growing to approximately $1,700/month at maturity as federal outlays grow over the ten-year ramp. Payments are non-taxable, immune from garnishment, and do not affect eligibility for existing benefit programs.

This document elaborates on the findings and design rationale of the bill.

Broad Sharing of Productive Capacity

Finding (1): The productive capacity of the United States economy generates benefits that should be broadly shared among all citizens and nationals.

The economic output of the United States is the product of collective infrastructure (legal systems, public investment, educated workforces, shared institutions) and not solely of individual effort. A universal dividend recognizes this by returning a share of the government's fiscal activity directly to the people. The payment is unconditional because the claim it represents is unconditional: every citizen has a stake in the productive capacity of the country.

The dividend is the reciprocal of the tax obligation. Citizens owe a share of their income to the government that maintains the conditions under which that income is earned. The dividend recognizes that this obligation runs in both directions: the government, in turn, owes a share of its fiscal activity to the citizens whose participation and compliance sustain it. Taxation and dividend are two sides of the same relationship between the individual and the state.

This principle also explains why the payment is universal rather than means-tested. Means-testing is expensive to administer, creates benefit cliffs that trap people in poverty, requires invasive verification of personal financial circumstances, and inevitably excludes eligible people through administrative burden. The populations most in need of assistance are also the populations least equipped to navigate complex eligibility requirements. Universality eliminates these problems and creates a political constituency for the program that includes everyone.

Consumer Spending and Economic Growth

Finding (2): Consumer spending constitutes the largest component of the gross domestic product of the United States, and broadly distributed purchasing power supports sustained economic activity and growth.

Consumer spending accounts for roughly two-thirds of GDP. The marginal propensity to consume is highest among lower-income households: a dollar transferred to someone with unmet needs is more likely to be spent than a dollar added to existing wealth. A universal dividend directed at every citizen therefore channels purchasing power where it is most likely to circulate through the economy, supporting demand for goods and services, sustaining employment, and generating tax revenue.

Consumer spending also performs a critical allocative function. Individual purchasing decisions are the primary mechanism by which the economy generates quality signals: information about which goods and services are valued, which producers are meeting needs, and where resources should flow. An economy in which purchasing power is concentrated among a narrow population receives quality signals that reflect only that population's preferences. Broadly distributed purchasing power produces more complete and representative market information, improving the efficiency of resource allocation across the entire economy.

Direct Cash Transfers

Finding (3): Direct, unconditional cash transfers are an efficient means of distributing benefit and promoting growth.

Cash is the most efficient form of transfer. It requires no administrative apparatus to determine what recipients need, imposes no compliance burden on recipients, and allows individuals to allocate resources according to their own circumstances. The existing landscape of federal transfer programs is fragmented across dozens of agencies, each with its own eligibility rules, application processes, and verification requirements. A single universal payment does not replace these programs, but it provides a baseline of economic security that reaches populations the existing system systematically misses, including the homeless, those not in federal databases, and those whose circumstances change faster than administrative processes can track.

The payment is excluded from gross income and cannot be counted as income or resources for purposes of any federal or state benefit program. This ensures the dividend supplements existing benefits rather than displacing them. Without this protection, the dividend would effectively convert into a funding cut for the most vulnerable recipients by pushing them over eligibility thresholds for programs like Medicaid, SNAP, and SSI, which cover unpredictable, catastrophic expenses that a monthly cash payment cannot substitute for.

Federal Outlays as the Base

Finding (4): A payment linked to the scale of federal expenditure provides a transparent and self-adjusting mechanism that connects the activities of government to the welfare of the people.

Federal outlays reflect the full fiscal activity of the government. They are downstream of economic productivity, tax policy, and spending decisions. When the economy grows, revenue rises, spending capacity expands, and the dividend grows with it. This creates a transparent connection between the scale of government activity and the benefit each citizen receives.

Federal spending is also naturally countercyclical. Automatic stabilizers (unemployment insurance, Medicaid, and other safety-net programs) expand during economic downturns, which means the dividend base holds relatively steady precisely when stability matters most. The five-year moving average adds further smoothing, dampening both crisis-year spending spikes and temporary contractions so that only sustained, multi-year shifts in fiscal capacity affect the payment amount.

The bill designates payments as direct spending, exempt from annual appropriations and from sequestration. A payment that can be zeroed out in a continuing resolution or across-the-board spending cut is not a reliable income floor. The political durability of Social Security rests in part on its mandatory spending classification; the check arrives every month regardless of the status of annual appropriations legislation. The Universal Dividend is designed to have the same character.

Fiscal Impact

At 10% in year one, total program cost is approximately $700 billion, rising over 10 years to approximately $7 trillion annually at the 50% cap as the underlying spending base grows. The bill does not specify a funding offset. The funding mechanism is the existing and future tax code. The gradual ramp provides a decade during which Congress can adjust revenue, restructure spending, or both. Whether existing transfer programs are consolidated as the dividend grows is left to future Congresses. The bill neither requires nor prohibits such consolidation.

H.R. ___

To provide for the issuance of monthly per capita payments to all citizens and nationals of the United States, to be administered by the Department of the Treasury.

IN THE HOUSE OF REPRESENTATIVES

M___ . __________ introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To provide for the issuance of monthly per capita payments to all citizens and nationals of the United States, to be administered by the Department of the Treasury.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the "Universal Dividend Act."

SECTION 2. FINDINGS.

The Congress finds the following:

(1) The productive capacity of the United States economy generates benefits that should be broadly shared among all citizens and nationals.

(2) Consumer spending constitutes the largest component of the gross domestic product of the United States, and broadly distributed purchasing power supports sustained economic activity and growth.

(3) Direct, unconditional cash transfers are an efficient means of distributing benefit and promoting growth.

(4) A payment linked to the scale of federal expenditure provides a transparent and self-adjusting mechanism that connects the activities of government to the welfare of the people.

SECTION 3. DEFINITIONS.

In this Act:

(a) SECRETARY. — The term "Secretary" means the Secretary of the Treasury.

(b) ELIGIBLE INDIVIDUAL. — The term "eligible individual" means any individual who is—

(1) a citizen of the United States; or

(2) a national of the United States (as defined in section 101(a)(22) of the Immigration and Nationality Act),

regardless of age, subject to Section 10.

(c) CUSTODIAL PARENT OR GUARDIAN. — The term "custodial parent or guardian" means, with respect to any minor individual—

(1) the parent or legal guardian with whom the minor primarily resides, as determined under applicable State law; or

(2) in the case of joint custody, the parent or guardian designated for purposes of this section in accordance with regulations prescribed by the Secretary.

(d) EMANCIPATED MINOR. — The term "emancipated minor" means an individual under the age of 18 who has been declared emancipated under applicable State law, or who is otherwise legally recognized as an adult under applicable State law.

(e) FEDERAL OUTLAYS. — The term "federal outlays" means total outlays of the Federal Government for a fiscal year as set forth in the final audited budget results published by the Office of Management and Budget for such fiscal year.

(f) FIVE-YEAR MOVING AVERAGE. — The term "five-year moving average" means, with respect to any payment period, the arithmetic mean of federal outlays for the five most recently completed fiscal years for which final audited budget results have been published by the Office of Management and Budget as of June 1 preceding the beginning of such payment period.

(g) APPLICABLE PERCENTAGE. — The term "applicable percentage" means—

(1) for the first payment period and the first full payment period following such period, 10 percent;

(2) for each subsequent payment period, the applicable percentage for the preceding payment period plus 4 percentage points; except that

(3) in no case shall the applicable percentage exceed 50 percent.

(h) ANNUAL DIVIDEND AMOUNT. — The term "annual dividend amount" means, with respect to any payment period, the product of the applicable percentage and the five-year moving average for such payment period.

(i) PAYMENT PERIOD. — The term "payment period" means, with respect to any fiscal year, the twelve-month period beginning on October 1 of such fiscal year.

(j) REPRESENTATIVE PAYEE. — The term "representative payee" means, with respect to an eligible individual, a person or organization appointed to receive payments under this Act on behalf of such individual who, by reason of mental or physical incapacity, is unable to manage or direct the management of such payments. Such term shall have the same meaning, and shall be subject to the same standards, qualifications, and disqualifications, as the term "representative payee" as used in section 205(j) of the Social Security Act (42 U.S.C. 405(j)).

(k) UNITED STATES. — The term "United States," when used in a geographical sense, includes the several States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

SECTION 4. MONTHLY PAYMENTS.

(a) IN GENERAL. — The Secretary shall make a payment in each month of the payment period to each eligible individual. The amount of each monthly payment shall be equal to the annual dividend amount for the applicable payment period, divided by the total number of eligible individuals as of the first day of such payment period, divided by twelve.

(b) TIMING. — Payments under this section shall be made not later than the 15th day of each calendar month, beginning with the first calendar month of the first payment period.

(c) DETERMINATION OF ELIGIBLE POPULATION. — The Secretary, in consultation with the Commissioner of Social Security and the Director of the Bureau of the Census, shall determine the total number of eligible individuals as of the first day of each payment period. Such determination shall be made not later than September 1 preceding the beginning of such payment period.

(d) FIXED PAYMENT AMOUNT. — The monthly per capita payment amount determined under subsection (a) for a given payment period shall remain fixed for the duration of that payment period, notwithstanding any change in the number of eligible individuals receiving payments during such period.

(e) MID-YEAR ENROLLMENT. — An individual who becomes an eligible individual after the first day of a payment period, whether by birth, naturalization, or any other means, shall be entitled to payments under this section beginning with the first full calendar month following the date on which such individual becomes an eligible individual. Such payments shall be in the same monthly amount as determined under subsection (a) for the applicable payment period.

(f) ANNUAL PUBLICATION. — Not later than September 15 preceding the beginning of each payment period, the Secretary shall publish in the Federal Register and on a publicly accessible website—

(1) the five-year moving average for such payment period;

(2) the applicable percentage for such payment period;

(3) the total number of eligible individuals; and

(4) the monthly per capita payment amount.

SECTION 5. PAYMENTS ON BEHALF OF OTHER INDIVIDUALS.

(a) MINOR INDIVIDUALS — GENERAL RULE. — In the case of an eligible individual who has not attained the age of 18 and who is not an emancipated minor, the payment under Section 4 shall be made to the custodial parent or guardian of such individual.

(b) EMANCIPATED MINORS. — In the case of an eligible individual who is an emancipated minor, payments under Section 4 shall be made directly to such individual.

(c) DISPUTES REGARDING MINORS. — The Secretary shall prescribe regulations establishing a process for resolving disputes regarding the designation of a custodial parent or guardian for purposes of this section, including in cases of—

(1) joint custody arrangements;

(2) changes in custody during a payment period; and

(3) the absence of a legal custodial parent or guardian, including individuals in the foster care system or in the care of a State.

(d) FOSTER CARE AND WARDS OF THE STATE. —

(1) IN GENERAL. — In the case of a minor individual who is in foster care or is otherwise a ward of a State, the payment under Section 4 shall be made to the foster parent, relative caregiver, or institutional caregiver of record for such individual, as reported by the applicable State child welfare agency.

(2) DATA SHARING. — Each State child welfare agency shall, pursuant to an agreement with the Secretary, provide to the Secretary on a monthly basis current placement data for all minor individuals in foster care or otherwise in the custody of the State, including the identity and payment information of the foster parent, relative caregiver, or institutional caregiver of record. The Secretary shall redirect payments not later than 30 days following receipt of updated placement data.

(3) INSTITUTIONAL CARE. — In the case of a minor individual residing in a group home, residential treatment facility, or other institutional setting, the payment shall be made to the entity responsible for the care of such individual and shall be used exclusively for the direct benefit of such individual. The Secretary, in consultation with the Secretary of Health and Human Services, shall prescribe regulations establishing reporting and accountability requirements for such entities.

(4) NO OFFSET AGAINST STATE OBLIGATIONS. — Payments received under this section on behalf of a minor individual in foster care shall not be used by any State to offset or reduce foster care maintenance payments or any other payments or services to which such individual is entitled under title IV-E of the Social Security Act or any other Federal or State program.

(e) REPRESENTATIVE PAYEES FOR INCAPACITATED ADULTS. —

(1) IN GENERAL. — In the case of an eligible individual who has attained the age of 18 and who, by reason of mental or physical incapacity, is unable to manage or direct the management of payments under this Act, the Secretary may appoint a representative payee to receive such payments on behalf of such individual.

(2) INCORPORATION OF SSA FRAMEWORK. — The appointment, duties, oversight, accounting, and removal of representative payees under this subsection shall be governed by the same standards, procedures, and protections applicable to representative payees under section 205(j) of the Social Security Act (42 U.S.C. 405(j)), to the extent consistent with this Act. The Secretary may, by agreement with the Commissioner of Social Security, designate the same representative payee already serving an individual under such section to serve as representative payee for purposes of this Act.

(3) USE OF PAYMENTS. — A representative payee appointed under this subsection shall use payments received on behalf of an eligible individual exclusively for the needs and direct benefit of such individual, and shall maintain such records and submit such reports as the Secretary may require.

(4) NO OFFSET AGAINST INSTITUTIONAL COSTS. — Payments received by a representative payee on behalf of an eligible individual residing in an institution shall not be used to offset or reduce any payment or service to which such individual is otherwise entitled under any Federal or State program.

SECTION 6. METHOD OF PAYMENT.

(a) IN GENERAL. — The Secretary shall make payments under this Act by electronic funds transfer to an account designated by the eligible individual (or the custodial parent, guardian, or representative payee receiving payments on behalf of such individual under Section 5).

(b) ALTERNATIVE METHODS. — In the case of any eligible individual who does not designate an account under subsection (a), or for whom electronic funds transfer is impracticable, the Secretary shall make payment by—

(1) check mailed to the last known address of the individual;

(2) prepaid debit card; or

(3) such other means as the Secretary determines appropriate, which may include mobile payment platforms.

(c) REGISTRATION. — The Secretary shall establish, not later than 60 days after the date of enactment of this Act, a process by which any eligible individual may register to receive payments under this Act, including individuals who have not filed a Federal income tax return and individuals who are not known to the Social Security Administration.

SECTION 7. TAX TREATMENT AND BENEFIT INTERACTION.

(a) AMENDMENT TO INTERNAL REVENUE CODE. — Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. 101 et seq.) is amended by inserting before section 140 the following new section:

"SEC. 139__. UNIVERSAL DIVIDEND PAYMENTS.

"(a) IN GENERAL. — Gross income does not include any payment received by an individual under the Universal Dividend Act.

"(b) DENIAL OF DOUBLE BENEFIT. — No deduction or credit shall be allowed under this chapter with respect to any amount excluded from gross income under subsection (a).

"(c) NOT TREATED AS EARNED INCOME. — Payments excluded under subsection (a) shall not be treated as earned income for purposes of this title.".

(b) CONFORMING AMENDMENT. — The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting before the item relating to section 140 the following new item:

"Sec. 139__. Universal dividend payments.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

(d) NOT TAKEN INTO ACCOUNT FOR FEDERAL BENEFIT PROGRAMS. — Notwithstanding any other provision of law, any payment made to any individual under this Act shall not be taken into account as income, earned or unearned, and shall not be taken into account as resources, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds. Amounts saved or accumulated from payments under this Act shall retain this exclusion regardless of the period for which they are held.

SECTION 8. PROTECTION OF PAYMENTS; UNIVERSALITY.

(a) NO EXCLUSION OF ELIGIBLE INDIVIDUALS. — No eligible individual shall be denied, suspended from, or excluded from receiving payments under this Act by reason of any status, condition, or circumstance not expressly provided for in this Act.

(b) PROTECTION FROM GARNISHMENT, LEVY, AND ASSIGNMENT. — Notwithstanding any other provision of law, no payment made under this Act shall be subject to execution, levy, attachment, garnishment, assignment, or any other legal process, or to the operation of any bankruptcy or insolvency law. No person, entity, financial institution, or governmental body may seize, offset, confiscate, or redirect any payment made under this Act, except—

(1) as provided in Section 12 (overpayments and underpayments);

(2) as provided in Section 10 (suspension of payments); or

(3) as provided in Section 15 (fraud and penalties).

(c) NO OFFSET UNDER TREASURY OFFSET PROGRAM. — Payments made under this Act shall not be subject to offset under subchapter II of chapter 37 of title 31, United States Code (the Treasury Offset Program).

(d) WAIVER VOID. — Any agreement by an individual to waive protections under this section shall be void and unenforceable.

SECTION 9. TERMINATION OF ELIGIBILITY UPON DEATH.

(a) IN GENERAL. — The eligibility of an individual to receive payments under this Act shall terminate as of the date of death of such individual.

(b) PAYMENT FOR MONTH OF DEATH. — The full monthly payment for the calendar month in which an eligible individual dies shall be made and shall not be subject to recapture.

(c) IDENTIFICATION OF DECEASED INDIVIDUALS. — The Secretary shall, on a monthly basis, cross-reference payment records with the Death Master File maintained by the Social Security Administration, and shall terminate payments with respect to deceased individuals not later than 60 days following the date of death as recorded in such file.

(d) RECAPTURE OF ERRONEOUS PAYMENTS. — Any payment made under this Act with respect to any month following the month of death of an eligible individual shall be subject to recapture. The Secretary may recover such amounts—

(1) from the estate of the deceased individual, in full; or

(2) from the person who received such payment, subject to the limitation under Section 12(b).

SECTION 10. SUSPENSION OF PAYMENTS.

(a) IN GENERAL. — Payments under this Act shall be suspended with respect to any eligible individual as provided in this section.

(b) PHYSICAL PRESENCE REQUIREMENT. — An eligible individual satisfies the physical presence requirement for a payment period if such individual—

(1) maintains a mailing address or designated financial account within the United States; and

(2) meets the substantial presence test, as described in subsection (c).

(c) SUBSTANTIAL PRESENCE TEST. — For purposes of subsection (b)(2), an eligible individual meets the substantial presence test for a calendar year if the sum of the following equals or exceeds 183 days:

(1) the number of days the individual was physically present in the United States during the current calendar year;

(2) one-third of the number of days the individual was physically present in the United States during the first preceding calendar year; and

(3) one-sixth of the number of days the individual was physically present in the United States during the second preceding calendar year.

This test shall be applied in the same manner, and days of presence shall be determined under the same rules, as the substantial presence test under section 7701(b)(3) of the Internal Revenue Code of 1986, except that such test shall be applied to citizens and nationals of the United States for purposes of this Act notwithstanding section 7701(b)(1)(A) of such Code.

(d) GOVERNMENT SERVICE ABROAD. — An eligible individual shall be treated as physically present in the United States for purposes of subsection (c) for any day during which such individual is absent from the United States by reason of—

(1) service as a member of the Armed Forces of the United States;

(2) service as a member of the Foreign Service of the United States;

(3) employment by the Federal Government at an official duty station outside the United States; or

(4) status as the spouse of an individual described in paragraph (1), (2), or (3) who is so serving or employed, if such spouse is accompanying such individual at a duty station outside the United States; or

(5) status as a dependent (as defined in section 152 of the Internal Revenue Code of 1986) of an individual described in paragraph (1), (2), or (3) who is so serving or employed, if such dependent is accompanying such individual at a duty station outside the United States.

(e) CESSATION AND RESUMPTION. —

(1) CESSATION. — If an eligible individual fails to satisfy the physical presence requirement under subsection (b), payments to such individual shall cease beginning with the first full calendar month following the month in which the Secretary determines that the requirement is no longer satisfied.

(2) RESUMPTION. — Payments shall resume beginning with the first full calendar month following the month in which the Secretary determines that the individual has reestablished physical presence in the United States and satisfies the requirements of subsection (b). No back payments shall be made for any period during which the individual did not satisfy the physical presence requirement.

(f) ANNUAL CERTIFICATION. — Each eligible individual receiving payments under this Act shall certify annually, at such time and in such form as the Secretary shall prescribe, that such individual satisfies the physical presence requirement under subsection (b). Such certification shall be made under penalty of perjury.

(g) AUDIT AND EXAMINATION. — Certifications made under subsection (f) shall be subject to audit and examination by the Internal Revenue Service under the same authority, infrastructure, procedures, and standards of selection, review, and due process applicable to the examination of claims under section 911 of the Internal Revenue Code of 1986. For purposes of such audit and examination, the Secretary shall have the same authority to request and obtain records — including passport records, travel records, and such other records as may be relevant to the determination of physical presence — as is available to the Secretary in connection with examinations under such section 911.

(h) REGULATIONS. — The Secretary shall prescribe such additional regulations as may be necessary to carry out this section.

SECTION 11. IDENTIFICATION OF ELIGIBLE INDIVIDUALS.

(a) USE OF EXISTING DATA. — For purposes of identifying eligible individuals under this Act, the Secretary shall use—

(1) information available from Federal income tax returns;

(2) records of the Social Security Administration;

(3) records of the Department of State relating to citizenship and nationality; and

(4) such other information as the Secretary determines necessary and appropriate.

(b) INTERAGENCY COOPERATION. — The head of any Federal agency that possesses information relevant to identifying eligible individuals or making payments under this Act shall, upon request of the Secretary, make such information available to the Secretary for such purposes, subject to applicable privacy protections.

(c) OUTREACH. — The Secretary shall conduct outreach to ensure that eligible individuals, including those without fixed addresses, those not in existing Federal databases, and those in institutional settings, are aware of and able to receive payments under this Act.

SECTION 12. OVERPAYMENTS AND UNDERPAYMENTS.

(a) IN GENERAL. — The Secretary shall issue such regulations or other guidance as may be necessary to provide for proper adjustments in payments, and recapture of payments, to correct underpayments and overpayments, including—

(1) payments made on behalf of individuals subsequently determined not to be eligible individuals;

(2) payments made to a custodial parent or guardian following a change in custody; and

(3) payments not made to an eligible individual due to administrative error.

(b) LIMITATION ON RECAPTURE. — No recapture of payments under this section shall reduce the monthly payment to any eligible individual below one-half of the monthly payment amount otherwise payable under Section 4 in any given month. Any overpayment amount not recovered due to this limitation shall be carried forward and recovered from subsequent monthly payments, subject to the same limitation, until fully recovered.

SECTION 13. ADMINISTRATIVE REVIEW.

(a) RIGHT TO REVIEW. — Any individual who is adversely affected by a determination of the Secretary under this Act — including a determination regarding eligibility, suspension of payments, or the amount of any overpayment — may request administrative review of such determination.

(b) ADMINISTRATIVE REVIEW. — Upon receipt of a request under subsection (a), the Secretary shall conduct a review of the determination by an officer or employee who was not involved in making the initial determination. Such review shall be completed, and the individual notified of the result, not later than 60 days after the date on which the request is received.

(c) JUDICIAL REVIEW. — Any individual who is dissatisfied with the result of a review under subsection (b) may, within 90 days after being notified of such result, file a civil action for review in the United States district court for the judicial district in which the individual resides.

(d) CONTINUATION OF PAYMENTS PENDING REVIEW. — Payments to an individual who has requested review under subsection (a) shall not be suspended or reduced by reason of the determination under review until such review is completed, except where the Secretary determines that there is probable cause to believe that the payments were obtained by fraud.

SECTION 14. PAYMENTS IN TERRITORIES.

(a) IN GENERAL. — The Secretary shall ensure that payments under this Act are made to all eligible individuals residing in the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

(b) ADMINISTRATION. — The Secretary shall enter into agreements with the government of each territory described in subsection (a) under which—

(1) the territorial government shall assist in identifying eligible individuals residing in the territory and in disbursing payments under this Act, using such data systems and administrative infrastructure as may be available;

(2) the Secretary shall provide all funds necessary for payments to eligible individuals in the territory, as well as reasonable administrative costs incurred by the territorial government in carrying out its responsibilities under the agreement; and

(3) the territorial government shall comply with such reporting, auditing, and accountability requirements as the Secretary may prescribe.

(c) DIRECT ADMINISTRATION. — If the Secretary determines that a territorial government is unable or unwilling to enter into an agreement under subsection (b), or that a territorial government has failed to comply with the terms of such agreement, the Secretary may administer payments directly to eligible individuals in such territory using Federal resources.

(d) EQUAL TREATMENT. — The amount of any payment made to an eligible individual residing in a territory shall be the same as the amount payable to any other eligible individual under Section 4.

SECTION 15. FRAUD AND PENALTIES.

(a) CRIMINAL PENALTIES. — Any individual who knowingly makes a false statement or representation of a material fact in connection with obtaining or attempting to obtain a payment under this Act shall be subject to prosecution under section 1001 of title 18, United States Code, and such other provisions of Federal criminal law as may apply.

(b) CIVIL PENALTY. — Any individual who receives payments under this Act for a period of 12 or more months to which such individual is not entitled, by reason of a knowing failure to disclose a material change in eligibility, shall be liable to the United States for the amount of such payments, plus a civil penalty equal to twice the amount of such payments. Recovery of amounts owed under this subsection may be made by offset against future payments under this Act, subject to the limitation under Section 12(b).

(c) RECOVERY OF OTHER OVERPAYMENTS. — Any individual who receives payments under this Act to which such individual is not entitled, and who is not subject to subsection (a) or (b), shall be subject to recovery of such payments under Section 12.

(d) REFERRAL. — The Secretary may refer any matter arising under this section to the Attorney General for investigation and prosecution.

SECTION 16. APPROPRIATIONS; MANDATORY SPENDING.

(a) APPROPRIATIONS FOR PAYMENTS. — There are hereby appropriated, out of any money in the Treasury not otherwise appropriated, such sums as may be necessary to make payments under this Act for each fiscal year, or for any portion of a fiscal year during which payments are made under this Act. Such sums shall include an amount equal to 5 percent of the total projected payments under Section 4 for the applicable period, to accommodate mid-year enrollment under Section 4(e). Any amounts appropriated under this subsection that are not expended during the fiscal year for which they are appropriated shall be available for payments under this Act in succeeding fiscal years.

(b) APPROPRIATIONS FOR ADMINISTRATIVE COSTS. — There are hereby appropriated, out of any money in the Treasury not otherwise appropriated, such sums as are necessary for the proper and efficient administration of this Act for each fiscal year, or for any portion of a fiscal year during which the Secretary carries out responsibilities under this Act. Such sums shall be available for personnel, systems, outreach, interagency agreements, fraud prevention and detection, administrative review under Section 13, and such other administrative functions as the Secretary determines necessary to carry out this Act.

(c) DESIGNATION AS DIRECT SPENDING. — All amounts appropriated under this section — including amounts for payments under subsection (a) and amounts for administrative costs under subsection (b) — shall be classified as direct spending (as defined in section 250(c)(8) of the Balanced Budget and Emergency Deficit Control Act of 1985) and shall not be subject to annual appropriations Acts or to sequestration under such Act.

SECTION 17. REPORTING AND OVERSIGHT.

(a) ANNUAL REPORT. — Not later than March 1 of each year, the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on the implementation of this Act during the preceding fiscal year, including—

(1) the total number of eligible individuals who received payments;

(2) the total amount of payments made;

(3) the number of individuals enrolled through mid-year enrollment under Section 4(e);

(4) the number and amount of overpayments identified and recovered;

(5) the number of fraud cases referred under Section 15;

(6) the number of eligible individuals residing in each territory who received payments under Section 14;

(7) the number of eligible individuals for whom payments were suspended or resumed under Section 10;

(8) the total amount of mid-year enrollment buffer funds appropriated under Section 16(a), the amount expended, and the amount carried forward;

(9) the total administrative costs incurred under Section 16(b), including a breakdown by major category of expenditure; and

(10) such other information as the Secretary determines appropriate or as may be requested by such committees.

(b) GAO AUDIT. — The Comptroller General of the United States shall conduct an audit of the implementation of this Act not later than 2 years after the first payments are made under this Act, and every 3 years thereafter. Such audit shall include an assessment of payment accuracy, program integrity, administrative costs, and the effectiveness of outreach efforts under Section 11(c). The Comptroller General shall submit the results of each audit to the committees described in subsection (a).

SECTION 18. REGULATIONS.

(a) INTERIM GUIDANCE. — Not later than 90 days after the date of enactment of this Act, the Secretary shall issue such interim guidance as may be necessary to carry out this Act upon its effective date.

(b) FINAL REGULATIONS. — Not later than 180 days after the date of enactment of this Act, the Secretary shall issue such final regulations as may be necessary or appropriate to carry out this Act. Until such final regulations take effect, the interim guidance issued under subsection (a) shall govern.

SECTION 19. SEVERABILITY.

If any provision of this Act, or the application of such provision to any person or circumstance, is held to be unconstitutional or otherwise invalid, the remainder of this Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.

SECTION 20. EFFECTIVE DATE; TRANSITIONAL PROVISIONS.

(a) EFFECTIVE DATE. — This Act shall take effect on the date that is 90 days after the date of enactment of this Act.

(b) FIRST PAYMENT PERIOD. — Notwithstanding Section 3(i), the first payment period under this Act shall begin on the first day of the first full calendar month beginning on or after the effective date of this Act and shall end on the following September 30. Each subsequent payment period shall be as defined in Section 3(i).

(c) TRANSITIONAL DETERMINATIONS. — For the first payment period under this Act, the Secretary shall—

(1) determine the five-year moving average using the five most recently completed fiscal years for which final audited budget results have been published by the Office of Management and Budget as of the effective date of this Act;

(2) determine the total number of eligible individuals as soon as practicable before the beginning of the first payment period; and

(3) publish the information described in Section 4(f) as soon as practicable before the beginning of the first payment period.