COMPARISON OF CERTAIN PROVISIONS OF H.R. 4520 AS PASSED BY THE

HOUSE OF REPRESENTATIVES AND AS AMENDED BY THE SENATE:

EXPIRING PROVISIONS

Prepared by the Staff of the

JOINT COMMITTEE ON TAXATION

September 29, 2004

JCX-66-04
ii

Contents

Page

INTRODUCTION ...................................................................................................................................................................................... 1

A. Nonrefundable Personal Credits Allowed Against the Alternative Minimum Tax (“AMT”) (sec. 401 of the House bill

and sec. 713 of the Senate amendment).......................................................................................................................................... 3

B. Extension and Modification of the Research Credit (sec. 402 of the House bill and secs. 311 and 312 of the Senate

amendment)..................................................................................................................................................................................... 3

C. Extension of Credit for Electricity Produced from Certain Renewable Resources (sec. 403 of the House bill and secs. 714

and 801 of the Senate amendment) ................................................................................................................................................. 5

D. Indian Employment Tax Credit (sec. 404 of the House bill and sec. 716 of the Senate amendment)............................................ 5

E. Extension of the Work Opportunity Tax Credit (sec. 405 of the House bill and sec. 702 of the Senate amendment)................... 6

F. Extension of the Welfare-to-Work Tax Credit (sec. 406 of the House bill and sec. 702 of the Senate amendment) .................... 7

G. Combination and Modification of the Work Opportunity Tax Credit and the Welfare-to-Work Tax Credit (sec. 703 of the

Senate amendment)......................................................................................................................................................................... 8

H. Certain Expenses of Elementary and Secondary School Teachers (sec. 407 of the House bill and sec. 707 of the Senate

amendment)..................................................................................................................................................................................... 9

I. Accelerated Depreciation for Business Property on Indian Reservations (sec. 408 of the House bill and sec. 717 of the

Senate amendment)......................................................................................................................................................................... 9

J. Charitable Contributions of Computer Technology and Equipment Used for Educational Purposes and of Scientific

Property Used for Research (sec. 409 of the House bill and sec. 706 of the Senate amendment) ................................................. 9

K. Expensing of Environmental Remediation Costs (sec. 410 of the House bill and sec. 708 of the Senate amendment) .............. 10

L. Availability of Archer Medical Savings Accounts (sec. 411 of the House bill)........................................................................... 10

M. Suspension of 100-Percent-of-Net-Income Limitation on Percentage Depletion for Oil and Gas from Marginal Wells

(sec. 412 of the House bill and secs. 715 and 846 of the Senate amendment) ............................................................................. 11

N. Qualified Zone Academy Bonds (sec, 413 of the House bill, and secs. 612 and 704 of the Senate amendment)........................ 11

O. Tax Incentives for Investment in the District of Columbia (sec. 414 of the House bill and sec. 711 of the Senate amendment) 12

P. New York Liberty Zone Provisions.............................................................................................................................................. 13

1. Modifications to New York Liberty Zone bond provisions (sec. 415 of the House bill and secs. 611 and 709 of the

 Senate amendment)................................................................................................................................................................... 13

2. Qualified New York Liberty Zone leasehold improvement election out (sec. 709(c) of the Senate amendment)................... 14

Q. Disclosures Relating to Terrorist Activities (sec. 416 of the House bill)..................................................................................... 15
Page

iii

R. Disclosure of Return Information Relating to Student Loans (sec. 417 of the House bill and sec. 718 of the Senate

amendment)................................................................................................................................................................................... 15

S. Extension of Cover Over of Excise Tax on Distilled Spirits to Puerto Rico and Virgin Islands (sec. 418 of the House bill

and sec. 705 of the Senate amendment)........................................................................................................................................ 16

T. Joint Review of Strategic Plans and Budget for the IRS (sec. 419 of the House bill).................................................................. 17

U. Extension of Parity in the Application of Certain Limits to Mental Health Benefits (sec. 420 of the House bill and sec. 701

of the Senate amendment)............................................................................................................................................................. 17

V. Combined Employment Tax Reporting (sec. 421 of the House bill and sec. 712 of the Senate amendment) ............................. 18

W. Clean Fuel Vehicles ...................................................................................................................................................................... 19

1. Credit for qualified electric vehicles (sec. 422 of the House bill and sec. 720 of the Senate amendment).............................. 19

2. Deduction for qualified clean-fuel vehicle property (sec. 422 of the House bill and sec. 721 of the Senate amendment) ...... 20

X. Repeal of Reduction of Deductions for Mutual Life Insurance Companies (sec. 710 of the Senate amendment)....................... 21
1

INTRODUCTION

On June 17, 2004, the House of Representatives passed H.R. 4520, the “American Jobs Creations Act of 2004.” On July 15, 

2004, the Senate amended H.R. 4520 by substituting the text and title of S. 1637, the “Jumpstart Our Business Strength (JOBS) Act,” 1

and an additional non-tax amendment.

The House bill and the Senate amendment each repeal the extraterritorial income exclusion provisions of present law, provide 

provisions to reduce the effective income tax imposed on income earned from certain domestic production activities, and make 

numerous other changes to the Internal Revenue Code. This document, 2 prepared by the staff of the Joint Committee on Taxation, 

compares provisions that extend certain expired or expiring provisions of present law. 

In this publication set,3 (JCX-61-04 to JCX-66-04), the staff of the Joint Committee on Taxation compares provisions of H.R. 

4520 as passed by the House of Representatives and as amended by the Senate relating to the repeal of the extraterritorial income 

exclusions, domestic production, corporate income tax rates applicable to small corporations, tax incentives for manufacturers, small 

 

1

 The Senate originally passed S. 1637 on May 11, 2004.

2

 This document may be cited as follows: Joint Committee on Taxation, Comparison of Certain Provisions of H.R. 4520 as 

Passed by the House of Representatives and as Amended by the Senate: Expiring Provisions (JCX-66-04), September 29, 2004.

3

 Joint Committee on Taxation, Comparison of Certain Provisions of H.R. 4520 as Passed by the House of Representatives 

and as Amended by the Senate: Provisions Relating to the Repeal of the Exclusion for Extraterritorial Income, Domestic Production, 

and the Corporate Income Tax Rates Applicable to Small Corporations (JCX-61-04), September 29, 2004; Joint Committee on 

Taxation, Comparison of Certain Provisions of H.R. 4520 as Passed by the House of Representatives and as Amended by the Senate: 

Job Creation Tax Incentives for Manufacturing, Small Business, and Farming (JCX-62-04), September 29, 2004; Joint Committee on 

Taxation, Comparison of Certain Provisions of H.R. 4520 as Passed by the House of Representatives and as Amended by the Senate: 

Provisions Relating to International Tax Reform and Simplification for United States Businesses (JCX-63-04), September 29, 2004; 

Joint Committee on Taxation, Comparison of Certain Provisions of H.R. 4520 as Passed by the House of Representatives and as 

Amended by the Senate: Revenue Provisions (JCX-64-04), September 29, 2004; Joint Committee on Taxation, Comparison of Certain 

Provisions of H.R. 4520 as Passed by the House of Representatives and as Amended by the Senate: Alcohol Fuels and Fuel Fraud 

Provisions (JCX-65-04), September 29, 2004; and Joint Committee on Taxation, Comparison of Certain Provisions of H.R. 4520 as 

Passed by the House of Representatives and as Amended by the Senate: Expiring Provisions (JCX-66-04), September 29, 2004.
2

businesses and farming, international tax reform and simplification for United States businesses, alcohol fuels and fuel fraud, expiring 

provisions, and certain revenue raising provisions.

On September 23, 2004, the House of Representatives and the Senate both passed H.R. 1308, the conference report for the 

“Working Families Tax Relief Act of 2004”, which included extensions of many of the expiring provisions described in this 

document. H.R. 1308 has not been signed into law as of the time of publication of this document, so this document does not reflect 

H.R. 1308.
3

Provision Present Law House Bill Senate Amendment

A. Nonrefundable Personal 

Credits Allowed Against the 

Alternative Minimum Tax 

(“AMT”) (sec. 401 of the House 

bill and sec. 713 of the Senate 

amendment)

Nonrefundable personal credits 

(other than child credit, adoption 

credit, and saver’s credit) are not 

allowed to offset the AMT in 

taxable years beginning after 2003.

Allows all nonrefundable personal 

credits against the AMT.

Effective date.–Taxable years 

beginning in 2004 and 2005.

Same as the House bill.

Effective date.–Taxable years 

beginning in 2004.

B. Extension and Modification 

of the Research Credit (sec. 402 

of the House bill and secs. 311 

and 312 of the Senate 

amendment)

Section 41 provides for a research 

tax credit equal to 20 percent of the 

amount by which a taxpayer’s 

qualified research expenses for a 

taxable year exceed its base 

amount for that year. Taxpayers 

may elect an alternative 

incremental research credit regime 

in which the taxpayer is assigned a 

three-tiered fixed-base percentage 

and the credit rate likewise is 

reduced. Under the alternative 

credit regime, a credit rate of 2.65 

percent applies to the extent that a 

taxpayer’s current-year research 

expenses exceed a base amount 

computed by using a fixed-base 

percentage of one percent but do 

not exceed a base amount 

computed by using a fixed-base 

percentage of 1.5 percent. A credit 

rate of 3.2 percent applies to the 

extent that a taxpayer’s currentyear research expenses exceed a 

base amount computed by using a 

Extends the present-law research 

credit to qualified amounts paid or 

incurred before January 1, 2006.

Same as House bill with respect to 

extension of the present-law 

research credit. In addition, makes 

the following modifications:

(1) Increases the credit rates of the 

alternative incremental credit to 3.0 

percent, 4.0 percent, and 5.0 

percent.

(2) Creates a third alternative for 

taxpayers, the alternative 

simplified credit. The taxpayer 

may elect to claim a credit equal to 

12 percent of qualified research 

expenses in excess of 50 percent of 

the average qualified research 

expenses for the preceding three 

taxable years.

(3) Permits taxpayers to claim a 

credit equal to 20 percent of 

amounts paid to certain research 

consortia.
4

Provision Present Law House Bill Senate Amendment

fixed-base percentage of 1.5 

percent but do not exceed a base 

amount computed by using a fixedbase percentage of two percent. A 

credit rate of 3.75 percent applies 

to the extent that a taxpayer’s 

current-year research expenses 

exceed a base amount computed by 

using a fixed-base percentage of 

two percent. 

The research tax credit expired and 

generally will not apply to amounts 

paid or incurred after June 30, 

2004.

Effective date.–Effective for 

amounts paid or incurred after June 

30, 2004. 

(4) Permits taxpayers to include 

100 percent of contract research 

expenses (rather than 65 percent) if 

the contractor is an eligible small 

business, a college or university, or 

a Federal laboratory.

Effective date.–With respect to 

extension of the present-law 

research credit the provision is 

effective for amounts paid or 

incurred after the date of 

enactment.

With respect to the increase in the 

alternative incremental credit and 

the alternative simplified credit the 

provisions are effective for taxable 

years beginning after December 31, 

2004.

With respect to payments to 

research consortia and certain 

contract research the provisions are 

effective for amounts paid or 

incurred after December 31, 2004. 
5

Provision Present Law House Bill Senate Amendment

C. Extension of Credit for 

Electricity Produced from 

Certain Renewable Resources 

(sec. 403 of the House bill and

secs. 714 and 801 of the Senate 

amendment)

An income tax credit is allowed for 

the production of electricity from 

either qualified wind energy, 

qualified “closed-loop” biomass, or 

qualified poultry waste facilities. 

The amount of the credit is 1.8 

cents per kilowatt hour for 2004. 

The credit amount is indexed for 

inflation. 

The credit applies to electricity 

produced by a wind energy facility 

placed in service after December 

31, 1993, and before January 1, 

2004, to electricity produced by a 

closed-loop biomass facility placed 

in service after December 31, 1992, 

and before January 1, 2004, and to 

a poultry waste facility placed in 

service after December 31, 1999, 

and before January 1, 2004. The 

credit is allowable for production 

during the 10-year period after a 

facility is originally placed in 

service. 

Extends the placed-in-service date 

for wind facilities and closed-loop 

biomass facilities to facilities 

placed in service after 

December 31, 1993 (December 31, 

1992 in the case of closed-loop 

biomass facilities) and before 

January 1, 2006. Does not extend 

the placed-in-service date for 

poultry waste facilities.

Effective date.–Effective for 

facilities placed in service after 

December 31, 2003.

With respect to extension of the 

present-law credit, extends the 

placed-in-service date for wind, 

closed-loop biomass, and poultry 

waste facilities to facilities placed 

in service prior to January 1, 2007.

(Sec. 714 of the Senate amendment 

extends the present-law credit 

placed-in-service date through 

December 31, 2004. Sec. 801 of 

the Senate amendment further 

extends the placed-in-service date 

through December 31, 2006 and 

would also expand the definition of 

qualified facilities and make 

certain other modifications to the 

operation of credit. These 

expansions and modifications are 

not described in this document.)

Effective date.–With respect to the 

extension of the placed-in-service 

dates, generally effective for 

facilities placed in service after 

December 31, 2003. 

D. Indian Employment Tax 

Credit (sec. 404 of the House bill 

and sec. 716 of the Senate 

amendment)

Employers are allowed to claim a 

credit with respect to the 

employment of certain Native 

Americans. The credit does not

Extends the wage credit through 

December 31, 2005.

Effective date.−Date of enactment.

Same as the House bill. 
6

Provision Present Law House Bill Senate Amendment

apply to taxable years beginning 

after December 31, 2004. 

E. Extension of the Work 

Opportunity Tax Credit (sec. 405 

of the House bill and sec. 702 of

the Senate amendment)

The work opportunity tax credit 

(“WOTC”) is available on an 

elective basis for employers hiring 

individuals from one or more of 

eight targeted groups. The credit 

equals 40 percent (25 percent for 

employment of 400 hours or less) 

of qualified wages. Generally, 

qualified wages are wages 

attributable to service rendered by 

a member of a targeted group 

during the one-year period 

beginning with the day the 

individual began work for the 

employer.

The maximum credit per employee 

is $2,400 (40 percent of the first 

$6,000 of qualified first-year 

wages). With respect to qualified 

summer youth employees, the 

maximum credit is $1,200 (40 

percent of the first $3,000 of 

qualified first-year wages).

The credit is effective for wages 

paid or incurred to a qualified 

individual who begins work for an 

employer before January 1, 2004.

The House bill extends the WOTC 

for two years (through December 

31, 2005).

Permanently extends the WOTC.

Also makes the following 

modifications to the WOTC:

(1) Repeals the requirement that a 

qualified ex-felon be a member of 

an economically disadvantaged 

family for purposes of eligibility 

for the tax credit.

(2) Expands the category of 

vocational rehabilitation referrals 

to include certain individuals who 

have a physical or mental 

disability that constitutes a 

substantial handicap to 

employment and who are receiving 

vocational services or have 

completed an individual work plan 

developed by a private 

employment network as defined 

under section 1148(f) of the Social 

Security Act qualify as members 

of the vocational rehabilitation 

referral targeted group.

(3) Increases the age limit for 

qualified food stamp recipients. 

Therefore a food stamp recipient is 
7

Provision Present Law House Bill Senate Amendment

Effective date.–Wages paid or 

incurred for individuals beginning 

work after December 31, 2003.

an individual aged 18 but not aged 

40 certified as being a member of a 

family either currently or recently 

receiving assistance under an 

eligible food stamp program and

(4) Increases the age limit for highrisk youths. Therefore a high-risk 

youth is an individual aged 18 but 

not aged 40 having a principal 

place of abode within an 

empowerment zone, enterprise 

community, or renewal 

community.

Effective date.–The extension is 

effective for wages paid or 

incurred for individuals beginning 

work after December 31, 2003. 

The modifications are effective for 

wages paid or incurred for 

individuals beginning work after 

December 31, 2004.

F. Extension of the Welfare-toWork Tax Credit (sec. 406 of the 

House bill and sec. 702 of the 

Senate amendment)

The welfare-to-work tax credit 

(“WWTC”) is available on an 

elective basis for employers for the 

first $20,000 of eligible wages paid 

to qualified long-term family 

assistance recipients during the 

first two years of employment. 

The credit is 35 percent of the first 

$10,000 of eligible wages in the 

Extends the WWTC for two years 

(through December 31, 2005).

Effective date.–Wages paid or 

incurred for individuals beginning 

work after December 31, 2003.

Permanently extends the WWTC.

Effective date.–Wages paid or 

incurred for individuals beginning 

work after December 31, 2003.
8

Provision Present Law House Bill Senate Amendment

first year of employment and 50 

percent of the first $10,000 of 

eligible wages in the second year 

of employment. The maximum 

credit is $8,500 per qualified 

employee.

The welfare-to-work credit is 

effective for wages paid or incurred 

to a qualified individual who 

begins work for an employer 

before January 1, 2004.

G. Combination and 

Modification of the Work 

Opportunity Tax Credit and the 

Welfare-to-Work Tax Credit

(sec. 703 of the Senate 

amendment)

Same as items E and F, above. No provision. Combines and modifies the work 

opportunity and welfare-to-work 

tax credits with the following 

modifications:

The combined credit uses the 

WOTC definition of wages.

In the case of first-year wages for 

long-term family assistance 

recipients the maximum credit is 

increased to $4,000 (40 percent of 

the first $10,000 of qualified firstyear wages).

The combined credit uses the 

WOTC definition for the minimum 

employment period (i.e., the 

combined credit is not allowed for 

qualified wages paid to employees 

who work less than 120 hours in 

the first year of employment).
9

Provision Present Law House Bill Senate Amendment

Effective date.–Wages paid or 

incurred for individuals beginning 

work after December 31, 2004.

H. Certain Expenses of 

Elementary and Secondary 

School Teachers (sec. 407 of the 

House bill and sec. 707 of the 

Senate amendment)

An above-the-line deduction is 

allowed for certain expenses of 

eligible educators for taxable years 

beginning prior to January 1, 2004.

Extends the above-the-line 

deduction for two years.

Effective date.–Taxable years 

beginning in 2004 and 2005.

Same as the House bill.

Effective date.–Taxable years 

beginning in 2004 and 2005.

I. Accelerated Depreciation for 

Business Property on Indian 

Reservations (sec. 408 of the 

House bill and sec. 717 of the 

Senate amendment)

The Code provides special 

depreciation periods for qualified 

Indian reservation property. These 

periods apply to property placed in 

service before January 1, 2005.

Extends eligibility for the special 

depreciation periods to property 

placed in service before January 1, 

2006. 

Effective date.−Date of enactment.

Same as the House bill.

J. Charitable Contributions of 

Computer Technology and 

Equipment Used for Educational 

Purposes and of Scientific 

Property Used for Research

(sec. 409 of the House bill and

sec. 706 of the Senate 

amendment)

A deduction for charitable 

contributions of computer 

technology and equipment and of 

scientific property used for 

research generally is limited to the 

taxpayer’s basis in the property. 

However, certain corporations may 

claim a deduction in excess of 

basis for a qualified computer 

contribution or a qualified research 

contribution. To be eligible for the 

enhanced deduction, the 

contributed property must be 

constructed by the taxpayer, among 

Extends the enhanced deduction 

for qualified computer 

contributions to contributions made 

during any taxable year beginning 

before January 1, 2006.

Expands the enhanced deduction 

for qualified computer 

contributions and qualified 

research contributions to apply to 

property assembled by the taxpayer 

as well as property constructed by 

the taxpayer.

The extension of the enhanced 

deduction for qualified computer 

contributions is the same as the 

House bill.
10

Provision Present Law House Bill Senate Amendment

other requirements. The enhanced 

deduction for qualified computer 

contributions expired for 

contributions made during any 

taxable year beginning after 

December 31, 2003.

Effective date.−Taxable years 

beginning after December 31, 

2003.

Effective date.−Taxable years 

beginning after December 31, 

2003.

K. Expensing of Environmental 

Remediation Costs (sec. 410 of 

the House bill and sec. 708 of the 

Senate amendment)

Taxpayers can elect to treat certain 

environmental remediation 

expenditures that would otherwise 

be chargeable to capital account as 

deductible in the year paid or 

incurred. The deduction applies for 

both regular and alternative 

minimum tax purposes. The 

expenditure must be incurred in 

connection with the abatement or 

control of hazardous substances at 

a qualified contaminated site (so 

called “brownfields”).

Eligible expenditures are those 

paid or incurred before January 1, 

2004.

Extends the present law expensing 

provision for two years (through 

December 31, 2005).

Effective date.–Effective for 

expenses paid or incurred after 

December 31, 2003.

Same as the House bill.

L. Availability of Archer 

Medical Savings Accounts

(sec. 411 of the House bill)

After 2003, no new contributions 

may be made to Archer MSAs 

except by or on behalf of 

individuals who previously made 

(or had made on their behalf) 

Archer MSA contributions and 

Extends Archer MSAs through 

December 31, 2005.

Effective date.–January 1, 2004.

No provision.
11

Provision Present Law House Bill Senate Amendment

employees who are employed by a 

participating employer. 

M. Suspension of 100-Percent-ofNet-Income Limitation on 

Percentage Depletion for Oil and 

Gas from Marginal Wells

(sec. 412 of the House bill and

secs. 715 and 846 of the Senate 

amendment) 

Percentage depletion method for 

oil and gas properties applies to 

independent producers and royalty 

owners. Generally, under the 

percentage depletion method, 15 

percent of the taxpayer’s gross 

income from an oil- or gasproducing property is allowed as a 

deduction in each taxable year. 

The amount deducted generally 

may not exceed 100 percent of the 

net income from the property in 

any year (the “net-income 

limitation”). The 100-percent netincome limitation for marginal 

wells is suspended for taxable

years beginning after December 31, 

1997, and before January 1, 2004.

Extends the suspension of the netincome limitation for marginal 

wells for taxable years beginning 

before January 1, 2006.

Effective date.–Taxable years 

beginning after December 31, 

2003.

Extends the suspension of the netincome limitation for marginal 

wells for taxable years beginning 

before January 1, 2007.

(Sec. 715 of the Senate 

amendments extends the 

suspension of the net-income 

limitation for taxable years 

beginning before January 1, 2005. 

Sec. 846 of the Senate amendment 

further extends the suspension of 

the net-income limitation for 

taxable years beginning before 

January 1, 2007.)

Effective date.−Same as the House 

bill.

N. Qualified Zone Academy 

Bonds (sec, 413 of the House bill, 

and secs. 612 and 704 of the 

Senate amendment)

Generally, “qualified zone 

academy bonds” are bonds issued 

by a State or local government, 

provided that at least 95 percent of 

the proceeds are used for one or 

more qualified purposes with 

respect to a “qualified zone 

academy” and private entities have 

promised to contribute to the 

qualified zone academy certain 

Authorizes $400 million of 

qualified zone academy bonds to 

be issued in 2004 and 2005.

Authorizes $400 million of 

qualified zone academy bonds to 

be issued in 2004 and 2005.

Expands qualified purposes for 

qualified zone academy bonds to 

include construction of the public 

school facility in which the 

qualified zone academy is 

established, and the acquisition of 
12

Provision Present Law House Bill Senate Amendment

equipment, technical assistance or 

training, employee services, or 

other property or services with a 

value equal to at least 10 percent of 

the bond proceeds. Qualified 

purposes with respect to any 

qualified zone academy are: (1) 

rehabilitating or repairing the 

public school facility in which the 

academy is established; (2) 

providing equipment for use at 

such academy; (3) developing 

course materials for education at 

such academy; and (4) training 

teachers and other school 

personnel. A total of $400 million 

of qualified zone academy bonds 

was authorized to be issued 

annually in calendar years 1998 

through 2003.

Effective date.−Obligations issued 

after the date of enactment.

land on which the facility is to be 

constructed. 

Effective date.−Obligations issued 

after December 31, 2003.

O. Tax Incentives for Investment 

in the District of Columbia

(sec. 414 of the House bill and

sec. 711 of the Senate 

amendment)

Certain economically depressed 

census tracts within the District of 

Columbia are designated as the 

District of Columbia Enterprise 

Zone (the “D.C. Zone”) within 

which businesses and individual 

residents are eligible for special tax 

incentives. The designation 

expired on December 31, 2003.

First-time homebuyers of a 

principal residence in the District 

Extends the D.C. Zone designation 

and related tax incentives for two 

years. Extends the first-time 

homebuyer credit for two years.

Effective date.−Date of enactment, 

except that the provision relating to 

tax-exempt financing incentives 

applies to obligations issued after 

December 31, 2003.

Same as the House bill.

Effective date.−January 1, 2004, 

except that the provision relating to 

tax-exempt financing incentives 

applies to obligations issued after 

the date of enactment.
13

Provision Present Law House Bill Senate Amendment

of Columbia are eligible for a 

nonrefundable tax credit of up to 

$5,000 of the amount of the 

purchase price. The credit expired 

for property purchased after 

December 31, 2003.

P. New York Liberty Zone 

Provisions

1. Modifications to New York 

Liberty Zone bond provisions 

(sec. 415 of the House bill and 

secs. 611 and 709 of the Senate 

amendment)

An aggregate of $8 billion in taxexempt private activity bonds is 

authorized for the purpose of 

financing the construction and 

repair of infrastructure in New 

York City (“Liberty Zone bonds”). 

The bonds must be issued before 

January 1, 2005. 

Certain bonds used to fund 

facilities located in New York City 

are permitted one additional 

advance refunding before January 

1, 2005 (“advance refunding 

bonds”). In addition to satisfying 

other requirements, the bond 

refunded must be: (1) a State or 

local bond that is a general 

obligation of New York City; (2) a 

State or local bond issued by the 

New York Municipal Water 

Finance Authority or Metropolitan 

Transportation Authority of the 

Extends authority to issue Liberty 

Zone bonds through December 31, 

2009.

Effective date.−Date of enactment.

Same as the House bill.

Extends the additional advance 

refunding authority through 

December 31, 2005. 

Effective date.−Date of enactment.

Provides that bonds of the 

Municipal Assistance Corporation 

are eligible for advance refunding.

Effective date.−Effective as if 

included in the amendments made 

by section 301 of the Job Creation 

and Worker Assistance Act of 

2002.
14

Provision Present Law House Bill Senate Amendment

City of New York; or (3) a 

qualified 501(c)(3) bond which is a 

qualified hospital bond issued by or 

on behalf of the State of New York 

or the City of New York. The 

maximum amount of advance 

refunding bonds is $9 billion.

2. Qualified New York Liberty 

Zone leasehold improvement 

election out (sec. 709(c) of the 

Senate amendment)

Qualified New York Liberty Zone 

leasehold improvements placed in 

service after September 10, 2001 

and before January 1, 2007, are 

depreciable over five years (rather 

than 39 years) using the straight 

line method of depreciation. There 

is no election out of this provision.

Liberty Zone leasehold 

improvements that are eligible for a 

five-year recovery period are not 

also eligible for the 30-percent 

first-year bonus depreciation under 

section 168(k) or 1400L(b). A 

taxpayer may elect out of bonus 

depreciation. The election out is 

made on a year-by-year basis at the 

property class level. Thus, all 

property placed in service in the 

tax year of the election, in a class 

for which the election is made, is 

excluded from bonus depreciation 

(sec.168(k)(2)(C)(iii)). 

No provision. Permits a taxpayer to elect-out of 

the five-year recovery period for 

qualified New York Liberty Zone 

leasehold improvement property 

under rules similar to section 

168(k)(2)(C)(iii).

Effective date.−Effective as if 

included in the amendments made 

by section 301 of the Job Creation 

and Worker Assistance Act of 

2002.
15

Provision Present Law House Bill Senate Amendment

Q. Disclosures Relating to 

Terrorist Activities (sec. 416 of 

the House bill)

If the IRS wishes to apprise a 

Federal law enforcement agency of 

terrorist activities, the IRS may 

disclose a taxpayer’s identity and 

return information to the head of 

such agency. Upon receiving a 

written request meeting certain 

requirements, the IRS may disclose 

return information relating to 

terrorist activities to officers or 

employees of Federal law 

enforcement or a Federal 

intelligence agency. A court order 

is necessary for law enforcement 

and intelligence agency personnel 

to obtain the disclosure of returns 

and return information filed by the 

taxpayer himself. Disclosure 

authority relating to terrorist 

activities expired December 31, 

2003.

Extends all disclosure authority 

relating to terrorist activities 

through December 31, 2005.

Effective date.−Disclosures made 

on or after the date of enactment.

Makes a technical correction to 

permit the disclosure of taxpayer 

identity upon receiving a proper 

written request from the head of a 

Federal law enforcement agency.

Effective date.−As if included in 

section 201 of the Victims of 

Terrorism Tax Relief Act of 2001.

No provision.

R. Disclosure of Return 

Information Relating to Student 

Loans (sec. 417 of the House bill 

and sec. 718 of the Senate 

amendment)

An exception to the general rule 

prohibiting disclosure is provided 

for disclosure to the Department of 

Education (but not to contractors 

thereof) to establish an appropriate 

repayment amount for an 

applicable student loan. The 

Department of Education

Extends the disclosure authority 

relating to the disclosure of return 

information to carry out incomecontingent repayment of student 

loans. No disclosures can be made 

after December 31, 2005.

Same as the House bill.
16

Provision Present Law House Bill Senate Amendment

disclosure authority is scheduled to 

expire after December 31, 2004.

Effective date.–Date of enactment.

S. Extension of Cover Over of 

Excise Tax on Distilled Spirits

to Puerto Rico and Virgin 

Islands (sec. 418 of the House bill 

and sec. 705 of the Senate 

amendment)

A $13.50 per proof gallon (a proof 

gallon is a liquid gallon consisting 

of 50 percent alcohol) excise tax is 

imposed on distilled spirits 

produced in or imported into the 

United States.

The Code provides for cover over 

(payment) to Puerto Rico and the 

Virgin Islands of the excise tax 

imposed on rum imported into the 

United States, without regard to the 

country of origin. The amount of 

the cover over is limited under 

section 7652(f) to $10.50 per proof 

gallon ($13.25 per proof gallon 

during the period July 1, 1999 

through December 31, 2003).

Thus, tax amounts attributable to 

rum produced in Puerto Rico are 

covered over to Puerto Rico. Tax 

amounts attributable to rum 

produced in the Virgin Islands are 

covered over to the Virgin Islands. 

Tax amounts attributable to rum 

produced in neither Puerto Rico 

nor the Virgin Islands are divided 

and covered over to the two 

possessions under a formula. All 

Temporarily suspends the $10.50 

per proof gallon limitation on the 

amount of excise taxes on rum 

covered over to Puerto Rico and 

the Virgin Islands. Under the 

proposal, the cover over amount of 

$13.25 per proof gallon is extended 

for rum brought into the United 

States after December 31, 2003 and 

before January 1, 2006. After 

December 31, 2005, the cover over 

amount reverts to $10.50 per proof 

gallon. 

Effective date.–Articles brought 

into the United States after 

December 31, 2003.

Same as the House bill.
17

Provision Present Law House Bill Senate Amendment

of the amounts covered over are 

subject to the limitation.

T. Joint Review of Strategic 

Plans and Budget for the IRS 

(sec. 419 of the House bill)

The Joint Committee on Taxation 

was required to conduct a joint 

review of the strategic plans and 

budget of the IRS from 1999 

through 2003. The Joint 

Committee also was required to 

provide an annual report from 1999 

through 2003 with respect to 

certain items.

The Joint Committee on Taxation 

is required to conduct a joint 

review before June 1, 2005 and to 

provide an annual report before 

June 1, 2005. The content of the 

annual report is the matters 

addressed in the joint review.

Effective date.−Date of enactment.

No provision.

U. Extension of Parity in the 

Application of Certain Limits to 

Mental Health Benefits (sec. 420 

of the House bill and sec. 701 of

the Senate amendment)

ERISA, the Public Health Service 

Act (“PHSA”), and the Code 

impose the requirement that group 

health plans which provide both 

medical and surgical benefits and 

mental health benefits cannot 

impose aggregate lifetime or 

annual dollar limits on mental 

health benefits that are not imposed 

on substantially all medical and 

surgical benefits.

The Code imposes an excise tax on 

group health plans that fail to meet 

the requirements. The excise tax is 

$100 day during the period of 

noncompliance and is generally 

imposed on the employer 

sponsoring the plan. The 

Extends the Code provisions to 

benefits for services furnished after 

the date of enactment and before 

January 1, 2006. 

Effective date.–Benefits for 

services furnished on or after 

December 31, 2003.

Same as the House bill with respect 

to the extension of the Code 

provisions.

Extends the ERISA and PHSA 

provisions to benefits for services 

furnished before January 1, 2006.

Effective date.–The provision 

extending the Code provision 

applies to benefits for services 

furnished on or after December 31, 

2003. The ERISA and PHSA 

provisions apply to benefits for 

services furnished on or after 

December 31, 2004.
18

Provision Present Law House Bill Senate Amendment

maximum tax that can be imposed 

during a year cannot exceed the 

lesser of 10 percent of the 

employer’s group health plan 

expenses for the prior year or 

$500,000. 

The Code provisions expired with 

respect to benefits for services 

furnished after December 31, 2003. 

The ERISA and PHSA provisions 

expire with respect to benefits for 

services furnished on or after 

December 31, 2004. 

V. Combined Employment Tax 

Reporting (sec. 421 of the House 

bill and sec. 712 of the Senate 

amendment)

Traditionally, Federal tax forms are 

filed with the Federal government 

and State tax forms are filed with 

individual States. This necessitates 

duplication of items common to 

both returns.

The Taxpayer Relief Act of 1997 

permitted implementation of a 

limited demonstration project to 

assess the feasibility and 

desirability of expanding combined 

Federal and State reporting. First, 

it was limited to the sharing of 

information between the State of 

Montana and the IRS. Second, it 

was limited to employment tax 

reporting. Third, it was limited to 

disclosure of the name, address, 

Extends the demonstration project 

through December 31, 2005. 

Effective date.−Disclosures made 

on or after the date of enactment.

Provides permanent authority for 

any State to participate in a 

combined Federal and State 

employment tax reporting program, 

provided that the program has been 

approved by the Secretary.

Effective date.–Date of enactment.
19

Provision Present Law House Bill Senate Amendment

TIN, and signature of the taxpayer, 

which is information common to 

both the Montana and Federal 

portions of the combined form. 

Fourth, it was limited to a period of 

five years (expiring August 5, 

2002).

W. Clean Fuel Vehicles

1. Credit for qualified electric 

vehicles (sec. 422 of the House 

bill and sec. 720 of the Senate 

amendment)

A 10-percent tax credit is provided 

for the cost of a qualified electric 

vehicle, up to a maximum credit of

$4,000. A qualified electric 

vehicle generally is a motor vehicle 

that is powered primarily by an 

electric motor drawing current 

from rechargeable batteries, fuel 

cells, or other portable sources of 

electrical current. The full amount 

of the credit is available for 

purchases prior to 2002. The credit 

phases down in the years 2004 

through 2006, and is unavailable 

for purchases after December 31, 

2006. Under the phase down, the 

credit for 2004 is 75 percent of the 

otherwise allowable credit.

Repeals the phase down of 

allowable tax credit for electric 

vehicles in 2004 and 2005. Thus, a 

taxpayer who purchases a 

qualifying vehicle may claim 100 

percent of the otherwise allowable 

credit for vehicles purchased in 

2004 and 2005. For vehicles 

purchased in 2006 the credit 

remains at 25 percent of the 

otherwise allowable amount as 

under present law.

Effective date.–Effective for 

vehicles placed in service after 

December 31, 2003.

Repeals the phase down for each of 

2004, 2005, and 2006.

(Other sections of the Senate 

amendment modify the credit. 

These modifications are not 

described in this document.)

Effective date.–Effective for 

vehicles placed in service after 

December 31, 2003.
20

Provision Present Law House Bill Senate Amendment

2. Deduction for qualified cleanfuel vehicle property (sec. 422 of 

the House bill and sec. 721 of the 

Senate amendment)

Certain costs of qualified cleanfuel vehicle may be expensed and 

deducted when such property is 

placed in service. Qualified cleanfuel vehicle property includes 

motor vehicles that use certain 

clean-burning fuels (natural gas, 

liquefied natural gas, liquefied 

petroleum gas, hydrogen, 

electricity and any other fuel at 

least 85 percent of which is 

methanol, ethanol, any other 

alcohol or ether). The maximum 

amount of the deduction is $50,000 

for a truck or van with a gross 

vehicle weight over 26,000 pounds 

or a bus with seating capacities of 

at least 20 adults; $5,000 in the 

case of a truck or van with a gross 

vehicle weight between 10,000 and 

26,000 pounds; and $2,000 in the 

case of any other motor vehicle. 

The deduction phases down in the 

years 2004 through 2006, and is 

unavailable for purchases after 

December 31, 2006. Under the 

phase down, the deduction 

permitted for 2004 is 75 percent of 

the otherwise allowable amount.

Repeals the phase down of the 

allowable deduction for clean-fuel 

vehicles in 2004 and 2005. Thus, a 

taxpayer who purchases a 

qualifying vehicle may claim 100 

percent of the otherwise allowable 

deduction for vehicles purchased in 

2004 and 2005. For vehicles 

purchased in 2006 the deduction 

remains at 25 percent of the 

otherwise allowable amount as 

under present law.

Effective date.–Effective for 

vehicles placed in service after 

December 31, 2003.

Repeals the phase down for each of 

2004, 2005, and 2006.

(Other sections of the Senate 

amendment create new credits for 

the purchase of certain vehicles 

that would be qualified clean-fuel 

vehicles under present law. These 

modifications are not described in 

this document.)

Effective date.–Effective for 

vehicles placed in service after 

December 31, 2003.
21

Provision Present Law House Bill Senate Amendment

X. Repeal of Reduction of 

Deductions for Mutual Life 

Insurance Companies (sec. 710 of 

the Senate amendment)

The Pension Funding Equity Act of 

2004 (Pub. L. No. 108-218) 

repealed the rule requiring 

reduction in certain deductions of a 

mutual life insurance company 

(Code section 809), for taxable 

years beginning after 2004. Code 

section 809 was suspended for 

taxable years beginning in 2001, 

2002, or 2003, and remains in 

effect for taxable years beginning 

in 2004.

No provision. Repeals section 809 for taxable 

years beginning in 2004.

Effective date.–Taxable years 

beginning after 2003.