SECTION 1. FINDINGS.

    Congress finds that--
            (1) the United States exercises sovereignty over Puerto 
        Rico pursuant to the Treaty of Paris proclaimed by President 
        McKinley on April 11, 1899 (30 Stat. 1754), article IX of which 
        established that residents of the territory not owing 
        allegiance to another nation would have United States 
        nationality and provided that the ``civil rights and political 
        status of the native inhabitants'' of Puerto Rico ``shall be 
        determined by the Congress'';
            (2) Congress carries out all Federal responsibilities with 
        respect to Puerto Rico, including those set forth in article IX 
        of the Treaty of Paris, pursuant to clause 2 of section 3 of 
        article IV of the Constitution (commonly known as the 
        ``territorial clause''), which provides that ``Congress shall 
        have Power to dispose of and make all needful Rules and 
        Regulations respecting the Territory or other Property 
        belonging to the United States'';
            (3) in the Act of March 2, 1917 (39 Stat. 951, chapter 
        145), Congress carried out its responsibility under article IX 
        of the Treaty of Paris by providing for civil administration of 
        Puerto Rico and declared that, by virtue of that Act, the 
        inhabitants of Puerto Rico shall be citizens of the United 
        States, with such civil rights and political status as Congress 
        determined to be consistent with birth or residence in an 
        unincorporated territory rather than a State of the Union;
            (4) in the Act of July 3, 1950 (64 Stat. 319, chapter 446), 
        Congress further implemented article IX of the Treaty of Paris 
        by authorizing the residents of Puerto Rico to adopt a 
        constitution, which was implemented in 1952 after acceptance by 
        Puerto Rico of certain amendments made by Congress in approving 
        the territorial constitution, thereby establishing the current 
        commonwealth structure for local self-government in respect of 
        internal affairs and local government administration, subject 
        to the Constitution of the United States and other Federal law 
        applicable to Puerto Rico; and
            (5) the United States, consistent with its constitutional 
        process, is committed to respecting the principle of self-
        determination in implementing any Federal measures that would 
        provide for or make possible a transition of government from 
        the current territorial status of commonwealth to a permanent 
        and fully self-governing political status for Puerto Rico.

SEC. 2. REFERENDA.

    (a) Policy of the United States.--
            (1) In general.--It is the policy of the United States 
        that, as long as Puerto Rico remains subject to the plenary 
power of Congress under the territorial clause, the residents of Puerto 
Rico periodically should be afforded an opportunity freely to express 
their wishes regarding the future political status of Puerto Rico.
            (2) Options.--The self-determination process for Puerto 
        Rico should enable the residents of Puerto Rico to express a 
        preference to--
                    (A) preserve the current political status of Puerto 
                Rico; or
                    (B) choose to seek, in accordance with a process 
                approved by Congress and the residents of Puerto Rico--
                            (i) admission as a State of the Union on 
                        the basis of full equality; or
                            (ii) withdrawal of United States 
                        sovereignty and nationality in favor of 
                        separate sovereignty and nationality for Puerto 
                        Rico and a relationship with the United States 
                        consistent with independence or free 
                        association.
    (b) Requirements.--A referendum under this Act--
            (1) shall be conducted among persons in Puerto Rico who 
        have the nationality and citizenship of the United States and 
        meet other applicable residency and voter eligibility 
        requirements under Federal or territorial law; and
            (2) shall be conducted by the duly constituted authorities 
        of the Commonwealth of Puerto Rico in accordance with 
        applicable provisions of the elections law of Puerto Rico and 
        other applicable Federal and territorial law, consistent with 
        this Act.
    (c) Referendum by the End of 1998.--A referendum under this Act 
shall be conducted not later than December 31, 1998.
    (d) Format of Referendum Ballot.--A referendum ballot shall 
instruct a voter to approve 1 of 3 options presented in a side-by-side 
format on the ballot, as follows:
    ``Instructions: Mark 1 of the following status options for Puerto 
Rico. A ballot with more than 1 option marked will not be counted.
    ``Option A.--COMMONWEALTH.--If you agree, mark here: ____.
    ``Puerto Rico should continue its current status, in which--
            ``(1) Puerto Rico continues the current commonwealth 
        structure for self-government with respect to internal affairs 
        and administration;
            ``(2) provisions of the Constitution and other laws of the 
        United States apply to Puerto Rico as determined by Congress;
            ``(3) Puerto Rico remains a locally self-governing 
        unincorporated territory of the United States;
            ``(4) continuation or modification of current Federal law 
        and policy applicable to Puerto Rico remains within the 
        discretion of Congress under the territorial clause of the 
        Constitution of the United States; and
            ``(5) the ultimate status of Puerto Rico will be determined 
        through a process authorized by Congress that includes self-
        determination by the people of Puerto Rico in periodic 
        referenda.
    ``Option B.--SEPARATE SOVEREIGNTY.--If you agree, mark here: ____.
    ``Puerto Rico should become fully self-governing through separate 
sovereignty leading to independence or free association, in which--
            ``(1) Puerto Rico is a sovereign nation with full authority 
        and responsibility for its internal affairs and has the 
        capacity to exercise in its own name and right the powers of 
        government with respect to its territory and population;
            ``(2) relations between the United States and Puerto Rico 
        are maintained under a negotiated government-to-government 
        treaty of friendship, or bilateral pact of free association 
        terminable at will by either government, providing for 
        cooperation and assistance in matters of shared interest as 
        agreed on by Puerto Rico and the United States in accordance 
        with their respective constitutional processes;
            ``(3) a constitution democratically instituted by the 
        people of Puerto Rico, establishing a republican form of 
        government and securing the rights of citizens of the Puerto 
        Rican nation, is the supreme law, and the Constitution and 
        other laws of the United States no longer apply in Puerto Rico;
            ``(4)(A) the people of Puerto Rico owe allegiance to the 
        sovereign nation of Puerto Rico and have the nationality and 
        citizenship of Puerto Rico;
            ``(B) United States sovereignty, nationality, and 
        citizenship in Puerto Rico are ended; and
            ``(C) birth in Puerto Rico or relationship to a person with 
        statutory United States citizenship by virtue of birth in 
        Puerto Rico is not a basis for United States nationality or 
        citizenship;
            ``(5) a person who acquired United States citizenship by 
        virtue of birth in Puerto Rico at a time when Puerto Rico was a 
        territory of the United States has a statutory right to retain 
        that status for life, by entitlement or election as provided by 
        Congress, based on allegiance to the United States, except that 
        no person who has or maintains allegiance, nationality, or 
        citizenship rights with respect to any sovereign nation other 
        than the United States shall have that statutory right; and
            ``(6) diplomatic relations, trade relations, and 
        government-to-government assistance shall be based on treaty, 
        and property rights and acquired rights vested by employment 
        under the laws of Puerto Rico or the United States shall be 
        honored, adjusted, and settled in accordance with agreements 
        implementing the separation of sovereignty.
    ``Option C.--STATEHOOD.--If you agree, mark here: ____.
    ``Puerto Rico should become fully self-governing through United 
States sovereignty leading to statehood, in which--
            ``(1) the people of Puerto Rico are fully self-governing 
        with their rights secured under the Constitution of the United 
        States, which is the supreme law and has the same force and 
        effect as in the other States of the United States;
            ``(2) the sovereign State of Puerto Rico is in permanent 
        union with the United States, and powers not delegated to the 
        Federal Government or prohibited to the States by the 
        Constitution of the United States are reserved to the people of 
        Puerto Rico or the State government;
            ``(3) United States nationality and citizenship of a person 
        born in Puerto Rico is guaranteed, protected, and secured in 
        the same way as for all United States citizens born in the 
        other States;
            ``(4) residents of Puerto Rico have equal rights, benefits, 
        duties, and responsibilities of citizenship as residents of the 
        other States;
            ``(5) Puerto Rico is represented by 2 members in the United 
        States Senate and in the United States House of Representatives 
        proportionately to the population; and
            ``(6) United States citizens in Puerto Rico are 
        enfranchised to vote in elections for the President and Vice 
        President of the United States.''.

SEC. 3. IMPLEMENTATION.

    (a) Certification of Results of Referendum.--The Government of 
Puerto Rico shall certify to the President and Congress the results of 
a referendum under this Act. On certification of the results, 
subsection (b) or (c), as appropriate, shall apply.
    (b) Approval of Current Status or Rejection of Terms for 
Implementation of a New Status.--If a majority of the voters in a 
referendum under this Act approves continuation of the unincorporated 
status and commonwealth structure for local self-government, or on 
rejection of a transition plan or implementation of a new status in 
accordance with this Act, unless otherwise provided by Congress--
            (1) the unincorporated status and commonwealth structure 
        for local self-government shall continue; and
            (2) to ensure that the principle of self-determination is 
        respected and that the residents of Puerto Rico are afforded 
        the opportunity freely to express their wishes with respect to 
        resolution of the status of Puerto Rico based on the options 
        for permanent self-government described in section 2, a 
        referendum on the future political status of Puerto Rico shall 
        be held in accordance with this Act every 4 years thereafter, 
        but not on or within 180 calendar days before or after the date 
        of a general election.
    (c) Approval of Separate Sovereignty or Incorporation Leading to 
Statehood.--
            (1) Transition plan.--
                    (A) Proposal.--If a majority of the voters in a 
                referendum under this Act approve full self-government 
                through separate sovereignty or incorporation leading 
                to statehood, not later than 180 days after the date of 
                the referendum, the President shall transmit to 
                Congress a proposal for legislation to enact a 
                transition plan.
                    (B) Transition period.--Unless Congress provides a 
                longer period, a transition plan shall provide for a 
                transition period of not to exceed 10 years.
                    (C) Contents.--A transition plan shall prescribe 
                the terms and criteria the fulfillment of which will 
                provide the basis for instituting full self-government 
                for Puerto Rico consistent with separate sovereignty or 
                incorporation leading to statehood, as the case may be.
            (2) Referendum on transition plan.--
                    (A) Initial approval.--Not later than 180 days 
                after the date of enactment of an Act establishing a 
                transition plan under paragraph (1), a referendum shall 
                be conducted in which the qualified residents of Puerto 
                Rico vote to approve or disapprove the transition plan.
                    (B) Approval of final implementation.--Before the 
                expiration of the transition period set forth in the 
                transition plan, a referendum shall be conducted in 
                which the qualified residents of Puerto Rico vote to 
                approve or disapprove final implementation of the new 
                status of Puerto Rico, as established in accordance 
                with this Act.

SEC. 4. AVAILABILITY OF FUNDS FOR THE REFERENDA.

    (a) In General.--
            (1) Availability of amounts derived from tax on foreign 
        rum.--During the period beginning on October 1, 1997, and 
        ending on the date on which the President determines that all 
        referenda required by this Act have been held, from the amounts 
        covered into the treasury of Puerto Rico under section 
        7652(e)(1) of the Internal Revenue Code of 1986, the Secretary 
        of the Treasury--
                    (A) upon request and in the amounts identified from 
                time to time by the President, shall make the amounts 
                so identified available to the treasury of Puerto Rico 
                for the purposes specified in subsection (b); and
                    (B) shall transfer all remaining amounts to the 
                treasury of Puerto Rico in accordance with law in 
                effect on the date of enactment of this Act.
            (2) Report of referenda expenditures.--Not later than 180 
        days after each referendum under this Act, and after the end of 
        the period specified in paragraph (1), the President, in 
        consultation with the government of Puerto Rico, shall submit a 
        report to Congress on the amounts made available under 
        paragraph (1)(A) and all other amounts expended by the State 
        Elections Commission of Puerto Rico for referenda under this 
        Act.
    (b) Grants for Conducting Referenda and Voter Education.--
            (1) In general.--From amounts made available under 
        subsection (a)(1), the Government of Puerto Rico shall make 
        grants to the State Elections Commission of Puerto Rico for 
        referenda under this Act, as follows:
                    (A) 50 percent shall be available only for the 
                costs of conducting the referenda.
                    (B) 50 percent shall be available only for voter 
                education funds for the central ruling body of the 
                political party, parties, or other qualifying entities 
                advocating a particular ballot choice.
            (2) Allocation among advocates.--The amount allocated for 
        advocating ballot choices under this paragraph (1)(B) shall be 
        apportioned equally among the parties advocating the respective 
        ballot choices.
    (c) Additional Resources.--In addition to amounts made available 
under this Act, the legislature of Puerto Rico may allocate additional 
resources for administrative and voter education costs to each party so 
long as the distribution of funds is consistent with the apportionment 
requirements of subsection (b)(2).
Declares that it is U.S. policy that the residents of Puerto Rico should be afforded periodically the opportunity freely to express a preference for preserving its current political status or choosing to seek U.S. statehood or separate sovereignty (independence or free association).  Requires a referendum on these questions to be held by December 31, 1998.  Sets forth specified requirements with respect to the referendum and implementation of its results. 
Makes funds derived from excise taxes collected on rum imported into the United States and deposited into the treasury of Puerto Rico available for grants to the State Elections Commission of Puerto Rico for:  (1) costs of conducting the referendum; and (2) voter education.
A bill to provide for referenda in which the residents of Puerto Rico may express democratically their preferences regarding the political status of the territory, and for other purposes.