PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 21

Public Law 107–147

107th Congress

An Act

To provide tax incentives for economic recovery.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Job Creation

and Worker Assistance Act of 2002’’.

(b) REFERENCES TO INTERNAL REVENUE CODE OF 1986.—Except

as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or

repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal

Revenue Code of 1986.

(c) TABLE OF CONTENTS.—

Sec. 1. Short title; etc.

TITLE I—BUSINESS PROVISIONS

Sec. 101. Special depreciation allowance for certain property acquired after

September 10, 2001, and before September 11, 2004.

Sec. 102. Carryback of certain net operating losses allowed for 5 years; temporary

suspension of 90 percent AMT limit.

TITLE II—UNEMPLOYMENT ASSISTANCE

Sec. 201. Short title.

Sec. 202. Federal-State agreements.

Sec. 203. Temporary extended unemployment compensation account.

Sec. 204. Payments to States having agreements for the payment of temporary

extended unemployment compensation.

Sec. 205. Financing provisions.

Sec. 206. Fraud and overpayments.

Sec. 207. Definitions.

Sec. 208. Applicability.

Sec. 209. Special Reed Act transfer in fiscal year 2002.

TITLE III—TAX INCENTIVES FOR NEW YORK CITY AND DISTRESSED AREAS

Sec. 301. Tax benefits for area of New York City damaged in terrorist attacks on

September 11, 2001.

TITLE IV—MISCELLANEOUS AND TECHNICAL PROVISIONS

Subtitle A—General Miscellaneous Provisions

Sec. 401. Allowance of electronic 1099’s.

Sec. 402. Excluded cancellation of indebtedness income of S corporation not to

result in adjustment to basis of stock of shareholders.

Sec. 403. Limitation on use of nonaccrual experience method of accounting.

Sec. 404. Exclusion for foster care payments to apply to payments by qualified

placement agencies.

Sec. 405. Interest rate range for additional funding requirements.

Sec. 406. Adjusted gross income determined by taking into account certain

expenses of elementary and secondary school teachers.

26 USC 1 note.

Job Creation and

Worker

Assistance Act of

2002.

Intergovernmental

relations.

Mar. 9, 2002

[H.R. 3090]

116 STAT. 22 PUBLIC LAW 107–147—MAR. 9, 2002

Subtitle B—Technical Corrections

Sec. 411. Amendments related to Economic Growth and Tax Relief Reconciliation

Act of 2001.

Sec. 412. Amendments related to Community Renewal Tax Relief Act of 2000.

Sec. 413. Amendments related to the Tax Relief Extension Act of 1999.

Sec. 414. Amendments related to the Taxpayer Relief Act of 1997.

Sec. 415. Amendment related to the Balanced Budget Act of 1997.

Sec. 416. Other technical corrections.

Sec. 417. Clerical amendments.

Sec. 418. Additional corrections.

TITLE V—SOCIAL SECURITY HELD HARMLESS; BUDGETARY TREATMENT

OF ACT

Sec. 501. No impact on social security trust funds.

Sec. 502. Emergency designation.

TITLE VI—EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

Sec. 601. Allowance of nonrefundable personal credits against regular and minimum tax liability.

Sec. 602. Credit for qualified electric vehicles.

Sec. 603. Credit for electricity produced from certain renewable resources.

Sec. 604. Work opportunity credit.

Sec. 605. Welfare-to-work credit.

Sec. 606. Deduction for clean-fuel vehicles and certain refueling property.

Sec. 607. Taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.

Sec. 608. Qualified zone academy bonds.

Sec. 609. Cover over of tax on distilled spirits.

Sec. 610. Parity in the application of certain limits to mental health benefits.

Sec. 611. Temporary special rules for taxation of life insurance companies.

Sec. 612. Availability of medical savings accounts.

Sec. 613. Incentives for Indian employment and property on Indian reservations.

Sec. 614. Subpart F exemption for active financing.

Sec. 615. Repeal of requirement for approved diesel or kerosene terminals.

Sec. 616. Reauthorization of TANF supplemental grants for population increases

for fiscal year 2002.

Sec. 617. 1-year extension of contingency fund under the TANF program.

TITLE I—BUSINESS PROVISIONS

SEC. 101. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED AFTER SEPTEMBER 10, 2001, AND

BEFORE SEPTEMBER 11, 2004.

(a) IN GENERAL.—Section 168 (relating to accelerated cost

recovery system) is amended by adding at the end the following

new subsection:

‘‘(k) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED

AFTER SEPTEMBER 10, 2001, AND BEFORE SEPTEMBER 11, 2004.—

‘‘(1) ADDITIONAL ALLOWANCE.—In the case of any qualified

property—

‘‘(A) the depreciation deduction provided by section

167(a) for the taxable year in which such property is placed

in service shall include an allowance equal to 30 percent

of the adjusted basis of the qualified property, and

‘‘(B) the adjusted basis of the qualified property shall

be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation

deduction under this chapter for such taxable year and

any subsequent taxable year.

‘‘(2) QUALIFIED PROPERTY.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘qualified property’ means

property—

26 USC 168.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 23

‘‘(i)(I) to which this section applies which has a

recovery period of 20 years or less, ‘‘(II) which is computer software (as defined in

section 167(f)(1)(B)) for which a deduction is allowable

under section 167(a) without regard to this subsection,

‘‘(III) which is water utility property, or

‘‘(IV) which is qualified leasehold improvement

property,

‘‘(ii) the original use of which commences with

the taxpayer after September 10, 2001,

‘‘(iii) which is—

‘‘(I) acquired by the taxpayer after September

10, 2001, and before September 11, 2004, but only

if no written binding contract for the acquisition

was in effect before September 11, 2001, or

‘‘(II) acquired by the taxpayer pursuant to a

written binding contract which was entered into

after September 10, 2001, and before September

11, 2004, and

‘‘(iv) which is placed in service by the taxpayer

before January 1, 2005, or, in the case of property

described in subparagraph (B), before January 1, 2006.

‘‘(B) CERTAIN PROPERTY HAVING LONGER PRODUCTION

PERIODS TREATED AS QUALIFIED PROPERTY.—

‘‘(i) IN GENERAL.—The term ‘qualified property’

includes property—

‘‘(I) which meets the requirements of clauses

(i), (ii), and (iii) of subparagraph (A),

‘‘(II) which has a recovery period of at least

10 years or is transportation property, and

‘‘(III) which is subject to section 263A by reason of clause (ii) or (iii) of subsection (f)(1)(B)

thereof.

‘‘(ii) ONLY PRE-SEPTEMBER 11, 2004, BASIS ELIGIBLE

FOR ADDITIONAL ALLOWANCE.—In the case of property

which is qualified property solely by reason of clause

(i), paragraph (1) shall apply only to the extent of

the adjusted basis thereof attributable to manufacture,

construction, or production before September 11, 2004.

‘‘(iii) TRANSPORTATION PROPERTY.—For purposes of

this subparagraph, the term ‘transportation property’

means tangible personal property used in the trade

or business of transporting persons or property.

‘‘(C) EXCEPTIONS.—

‘‘(i) ALTERNATIVE DEPRECIATION PROPERTY.—The

term ‘qualified property’ shall not include any property

to which the alternative depreciation system under

subsection (g) applies, determined—

‘‘(I) without regard to paragraph (7) of subsection (g) (relating to election to have system

apply), and ‘‘(II) after application of section 280F(b)

(relating to listed property with limited business

use).

‘‘(ii) QUALIFIED NEW YORK LIBERTY ZONE LEASE- HOLD IMPROVEMENT PROPERTY.—The term ‘qualified

property’ shall not include any qualified New York

Applicability.

116 STAT. 24 PUBLIC LAW 107–147—MAR. 9, 2002

Liberty Zone leasehold improvement property (as

defined in section 1400L(c)(2)).

‘‘(iii) ELECTION OUT.—If a taxpayer makes an election under this clause with respect to any class of

property for any taxable year, this subsection shall

not apply to all property in such class placed in service

during such taxable year.

‘‘(D) SPECIAL RULES.—

‘‘(i) SELF-CONSTRUCTED PROPERTY.—In the case of

a taxpayer manufacturing, constructing, or producing

property for the taxpayer’s own use, the requirements

of clause (iii) of subparagraph (A) shall be treated

as met if the taxpayer begins manufacturing, constructing, or producing the property after September

10, 2001, and before September 11, 2004.

‘‘(ii) SALE-LEASEBACKS.—For purposes of subparagraph (A)(ii), if property—

‘‘(I) is originally placed in service after September 10, 2001, by a person, and

‘‘(II) sold and leased back by such person

within 3 months after the date such property was

originally placed in service,

such property shall be treated as originally placed

in service not earlier than the date on which such

property is used under the leaseback referred to in

subclause (II).

‘‘(E) COORDINATION WITH SECTION 280F.—For purposes

of section 280F—

‘‘(i) AUTOMOBILES.—In the case of a passenger

automobile (as defined in section 280F(d)(5)) which

is qualified property, the Secretary shall increase the

limitation under section 280F(a)(1)(A)(i) by $4,600.

‘‘(ii) LISTED PROPERTY.—The deduction allowable

under paragraph (1) shall be taken into account in

computing any recapture amount under section

280F(b)(2).

‘‘(F) DEDUCTION ALLOWED IN COMPUTING MINIUMUM

TAX.—For purposes of determining alternative minimum

taxable income under section 55, the deduction under subsection (a) for qualified property shall be determined under

this section without regard to any adjustment under section

56.

‘‘(3) QUALIFIED LEASEHOLD IMPROVEMENT PROPERTY.—For

purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified leasehold

improvement property’ means any improvement to an

interior portion of a building which is nonresidential real

property if—

‘‘(i) such improvement is made under or pursuant

to a lease (as defined in subsection (h)(7))—

‘‘(I) by the lessee (or any sublessee) of such

portion, or

‘‘(II) by the lessor of such portion,

‘‘(ii) such portion is to be occupied exclusively by

the lessee (or any sublessee) of such portion, and

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 25

‘‘(iii) such improvement is placed in service more

than 3 years after the date the building was first

placed in service.

‘‘(B) CERTAIN IMPROVEMENTS NOT INCLUDED.—Such

term shall not include any improvement for which the

expenditure is attributable to—

‘‘(i) the enlargement of the building,

‘‘(ii) any elevator or escalator,

‘‘(iii) any structural component benefiting a

common area, and

‘‘(iv) the internal structural framework of the

building.

‘‘(C) DEFINITIONS AND SPECIAL RULES.—For purposes

of this paragraph—

‘‘(i) COMMITMENT TO LEASE TREATED AS LEASE.—

A commitment to enter into a lease shall be treated

as a lease, and the parties to such commitment shall

be treated as lessor and lessee, respectively.

‘‘(ii) RELATED PERSONS.—A lease between related

persons shall not be considered a lease. For purposes

of the preceding sentence, the term ‘related persons’

means—

‘‘(I) members of an affiliated group (as defined

in section 1504), and

‘‘(II) persons having a relationship described

in subsection (b) of section 267; except that, for

purposes of this clause, the phrase ‘80 percent

or more’ shall be substituted for the phrase ‘more

than 50 percent’ each place it appears in such

subsection.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to property placed in service after September 10, 2001,

in taxable years ending after such date.

SEC. 102. CARRYBACK OF CERTAIN NET OPERATING LOSSES ALLOWED

FOR 5 YEARS; TEMPORARY SUSPENSION OF 90 PERCENT

AMT LIMIT.

(a) IN GENERAL.—Paragraph (1) of section 172(b) (relating to

years to which loss may be carried) is amended by adding at

the end the following new subparagraph:

‘‘(H) In the case of a taxpayer which has a net operating

loss for any taxable year ending during 2001 or 2002,

subparagraph (A)(i) shall be applied by substituting ‘5’

for ‘2’ and subparagraph (F) shall not apply.’’.

(b) ELECTION TO DISREGARD 5-YEAR CARRYBACK.—Section 172

(relating to net operating loss deduction) is amended by redesignating subsection (j) as subsection (k) and by inserting after subjection (i) the following new subsection:

‘‘(j) ELECTION TO DISREGARD 5-YEAR CARRYBACK FOR CERTAIN

NET OPERATING LOSSES.—Any taxpayer entitled to a 5-year

carryback under subsection (b)(1)(H) from any loss year may elect

to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall

be made in such manner as may be prescribed by the Secretary

and shall be made by the due date (including extensions of time)

for filing the taxpayer’s return for the taxable year of the net

26 USC 172.

Applicability.

26 USC 168 note.

116 STAT. 26 PUBLIC LAW 107–147—MAR. 9, 2002

operating loss. Such election, once made for any taxable year,

shall be irrevocable for such taxable year.’’.

(c) TEMPORARY SUSPENSION OF 90 PERCENT LIMIT ON CERTAIN

NOL CARRYOVERS.—

(1) IN GENERAL.—Subparagraph (A) of section 56(d)(1)

(relating to general rule defining alternative tax net operating

loss deduction) is amended to read as follows:

‘‘(A) the amount of such deduction shall not exceed

the sum of—

‘‘(i) the lesser of—

‘‘(I) the amount of such deduction attributable

to net operating losses (other than the deduction

attributable to carryovers described in clause

(ii)(I)), or

‘‘(II) 90 percent of alternative minimum taxable income determined without regard to such

deduction, plus

‘‘(ii) the lesser of—

‘‘(I) the amount of such deduction attributable

to the sum of carrybacks of net operating losses

for taxable years ending during 2001 or 2002 and

carryforwards of net operating losses to taxable

years ending during 2001 and 2002, or

‘‘(II) alternative minimum taxable income

determined without regard to such deduction

reduced by the amount determined under clause

(i), and’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years ending before January

1, 2003.

(d) EFFECTIVE DATE.—Except as provided in subsection (c),

the amendments made by this section shall apply to net operating

losses for taxable years ending after December 31, 2000.

TITLE II—UNEMPLOYMENT ASSISTANCE

SEC. 201. SHORT TITLE.

This title may be cited as the ‘‘Temporary Extended Unemployment Compensation Act of 2002’’.

SEC. 202. FEDERAL-STATE AGREEMENTS.

(a) IN GENERAL.—Any State which desires to do so may enter

into and participate in an agreement under this title with the

Secretary of Labor (in this title referred to as the ‘‘Secretary’’).

Any State which is a party to an agreement under this title may,

upon providing 30 days’ written notice to the Secretary, terminate

such agreement.

(b) PROVISIONS OF AGREEMENT.—Any agreement under subsection (a) shall provide that the State agency of the State will

make payments of temporary extended unemployment compensation to individuals who—

(1) have exhausted all rights to regular compensation under

the State law or under Federal law with respect to a benefit

year (excluding any benefit year that ended before March 15,

2001);

Temporary

Extended

Unemployment

Compensation

Act of 2002.

Intergovernmental

relations.

26 USC 3304

note.

Applicability.

26 USC 172 note.

Applicability.

26 USC 56 note.

26 USC 56.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 27

(2) have no rights to regular compensation or extended

compensation with respect to a week under such law or any

other State unemployment compensation law or to compensation under any other Federal law;

(3) are not receiving compensation with respect to such

week under the unemployment compensation law of Canada;

and

(4) filed an initial claim for regular compensation on or

after March 15, 2001.

(c) EXHAUSTION OF BENEFITS.—For purposes of subsection

(b)(1), an individual shall be deemed to have exhausted such individual’s rights to regular compensation under a State law when—

(1) no payments of regular compensation can be made

under such law because such individual has received all regular

compensation available to such individual based on employment

or wages during such individual’s base period; or

(2) such individual’s rights to such compensation have been

terminated by reason of the expiration of the benefit year

with respect to which such rights existed.

(d) WEEKLY BENEFIT AMOUNT, ETC.—For purposes of any agreement under this title—

(1) the amount of temporary extended unemployment compensation which shall be payable to any individual for any

week of total unemployment shall be equal to the amount

of the regular compensation (including dependents’ allowances)

payable to such individual during such individual’s benefit year

under the State law for a week of total unemployment;

(2) the terms and conditions of the State law which apply

to claims for regular compensation and to the payment thereof

shall apply to claims for temporary extended unemployment

compensation and the payment thereof, except—

(A) that an individual shall not be eligible for temporary extended unemployment compensation under this

title unless, in the base period with respect to which the

individual exhausted all rights to regular compensation

under the State law, the individual had 20 weeks of fulltime insured employment or the equivalent in insured

wages, as determined under the provisions of the State

law implementing section 202(a)(5) of the Federal-State

Extended Unemployment Compensation Act of 1970 (26

U.S.C. 3304 note); and

(B) where otherwise inconsistent with the provisions

of this title or with the regulations or operating instructions

of the Secretary promulgated to carry out this title; and

(3) the maximum amount of temporary extended unemployment compensation payable to any individual for whom a temporary extended unemployment compensation account is established under section 203 shall not exceed the amount established in such account for such individual.

(e) ELECTION BY STATES.—Notwithstanding any other provision

of Federal law (and if State law permits), the Governor of a State

that is in an extended benefit period may provide for the payment

of temporary extended unemployment compensation in lieu of

extended compensation to individuals who otherwise meet the

requirements of this section. Such an election shall not require

a State to trigger off an extended benefit period.

116 STAT. 28 PUBLIC LAW 107–147—MAR. 9, 2002

SEC. 203. TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION

ACCOUNT.

(a) IN GENERAL.—Any agreement under this title shall provide

that the State will establish, for each eligible individual who files

an application for temporary extended unemployment compensation, a temporary extended unemployment compensation account

with respect to such individual’s benefit year.

(b) AMOUNT IN ACCOUNT.—

(1) IN GENERAL.—The amount established in an account

under subsection (a) shall be equal to the lesser of—

(A) 50 percent of the total amount of regular compensation (including dependents’ allowances) payable to the individual during the individual’s benefit year under such law,

or

(B) 13 times the individual’s average weekly benefit

amount for the benefit year.

(2) WEEKLY BENEFIT AMOUNT.—For purposes of this subsection, an individual’s weekly benefit amount for any week

is the amount of regular compensation (including dependents’

allowances) under the State law payable to such individual

for such week for total unemployment.

(c) SPECIAL RULE.—

(1) IN GENERAL.—Notwithstanding any other provision of

this section, if, at the time that the individual’s account is

exhausted, such individual’s State is in an extended benefit

period (as determined under paragraph (2)), then, such account

shall be augmented by an amount equal to the amount originally established in such account (as determined under subsection (b)(1)).

(2) EXTENDED BENEFIT PERIOD.—For purposes of paragraph

(1), a State shall be considered to be in an extended benefit

period if, at the time of exhaustion (as described in paragraph

(1))—

(A) such a period is then in effect for such State under

the Federal-State Extended Unemployment Compensation

Act of 1970; or

(B) such a period would then be in effect for such

State under such Act if section 203(d) of such Act were

applied as if it had been amended by striking ‘‘5’’ each

place it appears and inserting ‘‘4’’.

SEC. 204. PAYMENTS TO STATES HAVING AGREEMENTS FOR THE PAYMENT OF TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION.

(a) GENERAL RULE.—There shall be paid to each State that

has entered into an agreement under this title an amount equal

to 100 percent of the temporary extended unemployment compensation paid to individuals by the State pursuant to such agreement.

(b) TREATMENT OF REIMBURSABLE COMPENSATION.—No payment shall be made to any State under this section in respect

of any compensation to the extent the State is entitled to reimbursement in respect of such compensation under the provisions of any

Federal law other than this title or chapter 85 of title 5, United

States Code. A State shall not be entitled to any reimbursement

under such chapter 85 in respect of any compensation to the extent

the State is entitled to reimbursement under this title in respect

of such compensation.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 29

(c) DETERMINATION OF AMOUNT.—Sums payable to any State

by reason of such State having an agreement under this title

shall be payable, either in advance or by way of reimbursement

(as may be determined by the Secretary), in such amounts as

the Secretary estimates the State will be entitled to receive under

this title for each calendar month, reduced or increased, as the

case may be, by any amount by which the Secretary finds that

the Secretary’s estimates for any prior calendar month were greater

or less than the amounts which should have been paid to the

State. Such estimates may be made on the basis of such statistical,

sampling, or other method as may be agreed upon by the Secretary

and the State agency of the State involved.

SEC. 205. FINANCING PROVISIONS.

(a) IN GENERAL.—Funds in the extended unemployment compensation account (as established by section 905(a) of the Social

Security Act (42 U.S.C. 1105(a)) of the Unemployment Trust Fund

(as established by section 904(a) of such Act (42 U.S.C. 1104(a))

shall be used for the making of payments to States having agreements entered into under this title.

(b) CERTIFICATION.—The Secretary shall from time to time certify to the Secretary of the Treasury for payment to each State

the sums payable to such State under this title. The Secretary

of the Treasury, prior to audit or settlement by the General

Accounting Office, shall make payments to the State in accordance

with such certification, by transfers from the extended unemployment compensation account (as so established) to the account of

such State in the Unemployment Trust Fund (as so established).

(c) ASSISTANCE TO STATES.—There are appropriated out of the

employment security administration account (as established by section 901(a) of the Social Security Act (42 U.S.C. 1101(a)) of the

Unemployment Trust Fund, without fiscal year limitation, such

funds as may be necessary for purposes of assisting States (as

provided in title III of the Social Security Act (42 U.S.C. 501

et seq.)) in meeting the costs of administration of agreements under

this title.

(d) APPROPRIATIONS FOR CERTAIN PAYMENTS.—There are appropriated from the general fund of the Treasury, without fiscal year

limitation, to the extended unemployment compensation account

(as so established) of the Unemployment Trust Fund (as so established) such sums as the Secretary estimates to be necessary to

make the payments under this section in respect of— (1) compensation payable under chapter 85 of title 5, United

States Code; and

(2) compensation payable on the basis of services to which

section 3309(a)(1) of the Internal Revenue Code of 1986 applies.

Amounts appropriated pursuant to the preceding sentence shall

not be required to be repaid.

SEC. 206. FRAUD AND OVERPAYMENTS.

(a) IN GENERAL.—If an individual knowingly has made, or

caused to be made by another, a false statement or representation

of a material fact, or knowingly has failed, or caused another

to fail, to disclose a material fact, and as a result of such false

statement or representation or of such nondisclosure such individual

has received an amount of temporary extended unemployment compensation under this title to which he was not entitled, such

individual—

116 STAT. 30 PUBLIC LAW 107–147—MAR. 9, 2002

(1) shall be ineligible for further temporary extended

unemployment compensation under this title in accordance with

the provisions of the applicable State unemployment compensation law relating to fraud in connection with a claim for

unemployment compensation; and

(2) shall be subject to prosecution under section 1001 of

title 18, United States Code.

(b) REPAYMENT.—In the case of individuals who have received

amounts of temporary extended unemployment compensation under

this title to which they were not entitled, the State shall require

such individuals to repay the amounts of such temporary extended

unemployment compensation to the State agency, except that the

State agency may waive such repayment if it determines that— (1) the payment of such temporary extended unemployment

compensation was without fault on the part of any such individual; and

(2) such repayment would be contrary to equity and good

conscience.

(c) RECOVERY BY STATE AGENCY.—

(1) IN GENERAL.—The State agency may recover the amount

to be repaid, or any part thereof, by deductions from any

temporary extended unemployment compensation payable to

such individual under this title or from any unemployment

compensation payable to such individual under any Federal

unemployment compensation law administered by the State

agency or under any other Federal law administered by the

State agency which provides for the payment of any assistance

or allowance with respect to any week of unemployment, during

the 3-year period after the date such individuals received the

payment of the temporary extended unemployment compensation to which they were not entitled, except that no single

deduction may exceed 50 percent of the weekly benefit amount

from which such deduction is made.

(2) OPPORTUNITY FOR HEARING.—No repayment shall be

required, and no deduction shall be made, until a determination

has been made, notice thereof and an opportunity for a fair

hearing has been given to the individual, and the determination

has become final.

(d) REVIEW.—Any determination by a State agency under this

section shall be subject to review in the same manner and to

the same extent as determinations under the State unemployment

compensation law, and only in that manner and to that extent.

SEC. 207. DEFINITIONS.

In this title, the terms ‘‘compensation’’, ‘‘regular compensation’’,

‘‘extended compensation’’, ‘‘additional compensation’’, ‘‘benefit year’’,

‘‘base period’’, ‘‘State’’, ‘‘State agency’’, ‘‘State law’’, and ‘‘week’’ have

the respective meanings given such terms under section 205 of

the Federal-State Extended Unemployment Compensation Act of

1970 (26 U.S.C. 3304 note).

SEC. 208. APPLICABILITY.

An agreement entered into under this title shall apply to weeks

of unemployment—

(1) beginning after the date on which such agreement is

entered into; and

(2) ending before January 1, 2003.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 31

SEC. 209. SPECIAL REED ACT TRANSFER IN FISCAL YEAR 2002.

(a) REPEAL OF CERTAIN PROVISIONS ADDED BY THE BALANCED

BUDGET ACT OF 1997.—

(1) IN GENERAL.—The following provisions of section 903

of the Social Security Act (42 U.S.C. 1103) are repealed:

(A) Paragraph (3) of subsection (a).

(B) The last sentence of subsection (c)(2).

(2) SAVINGS PROVISION.—Any amounts transferred before

the date of enactment of this Act under the provision repealed

by paragraph (1)(A) shall remain subject to section 903 of

the Social Security Act, as last in effect before such date of

enactment.

(b) SPECIAL TRANSFER IN FISCAL YEAR 2002.—Section 903 of

the Social Security Act is amended by adding at the end the

following:

‘‘Special Transfer in Fiscal Year 2002

‘‘(d)(1) The Secretary of the Treasury shall transfer (as of the

date determined under paragraph (5)) from the Federal unemployment account to the account of each State in the Unemployment

Trust Fund the amount determined with respect to such State

under paragraph (2).

‘‘(2)(A) The amount to be transferred under this subsection

to a State account shall (as determined by the Secretary of Labor

and certified by such Secretary to the Secretary of the Treasury)

be equal to—

‘‘(i) the amount which would have been required to have

been transferred under this section to such account at the

beginning of fiscal year 2002 if—

‘‘(I) section 209(a)(1) of the Temporary Extended

Unemployment Compensation Act of 2002 had been enacted

before the close of fiscal year 2001, and

‘‘(II) section 5402 of Public Law 105–33 (relating to

increase in Federal unemployment account ceiling) had

not been enacted,

minus

‘‘(ii) the amount which was in fact transferred under this

section to such account at the beginning of fiscal year 2002.

‘‘(B) Notwithstanding the provisions of subparagraph (A)—

‘‘(i) the aggregate amount transferred to the States under

this subsection may not exceed a total of $8,000,000,000; and

‘‘(ii) all amounts determined under subparagraph (A) shall

be reduced ratably, if and to the extent necessary in order

to comply with the limitation under clause (i).

‘‘(3)(A) Except as provided in paragraph (4), amounts transferred to a State account pursuant to this subsection may be used

only in the payment of cash benefits—

‘‘(i) to individuals with respect to their unemployment,

and

‘‘(ii) which are allowable under subparagraph (B) or (C).

‘‘(B)(i) At the option of the State, cash benefits under this

paragraph may include amounts which shall be payable as—

‘‘(I) regular compensation, or

‘‘(II) additional compensation, upon the exhaustion of any

temporary extended unemployment compensation (if such State

has entered into an agreement under the Temporary Extended

116 STAT. 32 PUBLIC LAW 107–147—MAR. 9, 2002

Unemployment Compensation Act of 2002), for individuals

eligible for regular compensation under the unemployment compensation law of such State.

‘‘(ii) Any additional compensation under clause (i) may not

be taken into account for purposes of any determination relating

to the amount of any extended compensation for which an individual

might be eligible.

‘‘(C)(i) At the option of the State, cash benefits under this

paragraph may include amounts which shall be payable to 1 or

more categories of individuals not otherwise eligible for regular

compensation under the unemployment compensation law of such

State, including those described in clause (iii).

‘‘(ii) The benefits paid under this subparagraph to any individual may not, for any period of unemployment, exceed the maximum amount of regular compensation authorized under the

unemployment compensation law of such State for that same period,

plus any additional compensation (described in subparagraph (B)(i))

which could have been paid with respect to that amount.

‘‘(iii) The categories of individuals described in this clause

include the following:

‘‘(I) Individuals who are seeking, or available for, only

part-time (and not full-time) work.

‘‘(II) Individuals who would be eligible for regular compensation under the unemployment compensation law of such

State under an alternative base period.

‘‘(D) Amounts transferred to a State account under this subsection may be used in the payment of cash benefits to individuals

only for weeks of unemployment beginning after the date of enactment of this subsection.

‘‘(4) Amounts transferred to a State account under this subsection may be used for the administration of its unemployment

compensation law and public employment offices (including in

connection with benefits described in paragraph (3) and any recipients thereof), subject to the same conditions as set forth in subsection (c)(2) (excluding subparagraph (B) thereof, and deeming

the reference to ‘subsections (a) and (b)’ in subparagraph (D) thereof

to include this subsection).

‘‘(5) Transfers under this subsection shall be made within 10

days after the date of enactment of this paragraph.’’.

(c) LIMITATIONS ON TRANSFERS.—Section 903(b) of the Social

Security Act shall apply to transfers under section 903(d) of such

Act (as amended by this section). For purposes of the preceding

sentence, such section 903(b) shall be deemed to be amended as

follows:

(1) By substituting ‘‘the transfer date described in subsection (d)(5)’’ for ‘‘October 1 of any fiscal year’’.

(2) By substituting ‘‘remain in the Federal unemployment

account’’ for ‘‘be transferred to the Federal unemployment

account as of the beginning of such October 1’’.

(3) By substituting ‘‘fiscal year 2002 (after the transfer

date described in subsection (d)(5))’’ for ‘‘the fiscal year beginning on such October 1’’.

(4) By substituting ‘‘under subsection (d)’’ for ‘‘as of October

1 of such fiscal year’’.

(5) By substituting ‘‘(as of the close of fiscal year 2002)’’

for ‘‘(as of the close of such fiscal year)’’.

42 USC 1103.

Applicability.

Deadline.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 33

(d) TECHNICAL AMENDMENTS.—(1) Sections 3304(a)(4)(B) and

3306(f)(2) of the Internal Revenue Code of 1986 are amended by

inserting ‘‘or 903(d)(4)’’ before ‘‘of the Social Security Act’’. (2) Section 303(a)(5) of the Social Security Act is amended

in the second proviso by inserting ‘‘or 903(d)(4)’’ after ‘‘903(c)(2)’’.

(e) REGULATIONS.—The Secretary of Labor may prescribe any

operating instructions or regulations necessary to carry out this

section and the amendments made by this section.

TITLE III—TAX INCENTIVES FOR NEW

YORK CITY AND DISTRESSED AREAS

SEC. 301. TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED

IN TERRORIST ATTACKS ON SEPTEMBER 11, 2001.

(a) IN GENERAL.—Chapter 1 is amended by adding at the

end the following new subchapter:

‘‘Subchapter Y—New York Liberty Zone Benefits

‘‘Sec. 1400L. Tax benefits for New York Liberty Zone.

‘‘SEC. 1400L. TAX BENEFITS FOR NEW YORK LIBERTY ZONE.

‘‘(a) EXPANSION OF WORK OPPORTUNITY TAX CREDIT.—

‘‘(1) IN GENERAL.—For purposes of section 51, a New York

Liberty Zone business employee shall be treated as a member

of a targeted group.

‘‘(2) NEW YORK LIBERTY ZONE BUSINESS EMPLOYEE.—For

purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘New York Liberty Zone

business employee’ means, with respect to any period, any

employee of a New York Liberty Zone business if substantially all the services performed during such period by

such employee for such business are performed in the New

York Liberty Zone.

‘‘(B) INCLUSION OF CERTAIN EMPLOYEES OUTSIDE THE

NEW YORK LIBERTY ZONE.—

‘‘(i) IN GENERAL.—In the case of a New York Liberty Zone business described in subclause (II) of

subparagraph (C)(i), the term ‘New York Liberty Zone

business employee’ includes any employee of such business (not described in subparagraph (A)) if substantially all the services performed during such period

by such employee for such business are performed in

the City of New York, New York.

‘‘(ii) LIMITATION.—The number of employees of

such a business that are treated as New York Liberty

Zone business employees on any day by reason of

clause (i) shall not exceed the excess of—

‘‘(I) the number of employees of such business

on September 11, 2001, in the New York Liberty

Zone, over

‘‘(II) the number of New York Liberty Zone

business employees (determined without regard to

this subparagraph) of such business on the day

to which the limitation is being applied.

42 USC 503.

26 USC 3304,

3306.

116 STAT. 34 PUBLIC LAW 107–147—MAR. 9, 2002

The Secretary may require any trade or business to

have the number determined under subclause (I)

verified by the New York State Department of Labor.

‘‘(C) NEW YORK LIBERTY ZONE BUSINESS.—

‘‘(i) IN GENERAL.—The term ‘New York Liberty

Zone business’ means any trade or business which

is—

‘‘(I) located in the New York Liberty Zone,

or

‘‘(II) located in the City of New York, New

York, outside the New York Liberty Zone, as a

result of the physical destruction or damage of

such place of business by the September 11, 2001,

terrorist attack.

‘‘(ii) CREDIT NOT ALLOWED FOR LARGE

BUSINESSES.—The term ‘New York Liberty Zone business’ shall not include any trade or business for any

taxable year if such trade or business employed an

average of more than 200 employees on business days

during the taxable year.

‘‘(D) SPECIAL RULES FOR DETERMINING AMOUNT OF

CREDIT.—For purposes of applying subpart F of part IV

of subchapter B of this chapter to wages paid or incurred

to any New York Liberty Zone business employee—

‘‘(i) section 51(a) shall be applied by substituting

‘qualified wages’ for ‘qualified first-year wages’,

‘‘(ii) the rules of section 52 shall apply for purposes

of determining the number of employees under

subparagraph (B),

‘‘(iii) subsections (c)(4) and (i)(2) of section 51 shall

not apply, and

‘‘(iv) in determining qualified wages, the following

shall apply in lieu of section 51(b):

‘‘(I) QUALIFIED WAGES.—The term ‘qualified

wages’ means wages paid or incurred by the

employer to individuals who are New York Liberty

Zone business employees of such employer for work

performed during calendar year 2002 or 2003.

‘‘(II) ONLY FIRST $6,000 OF WAGES PER CALENDAR YEAR TAKEN INTO ACCOUNT.—The amount

of the qualified wages which may be taken into

account with respect to any individual shall not

exceed $6,000 per calendar year.

‘‘(b) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED

AFTER SEPTEMBER 10, 2001.—

‘‘(1) ADDITIONAL ALLOWANCE.—In the case of any qualified

New York Liberty Zone property—

‘‘(A) the depreciation deduction provided by section

167(a) for the taxable year in which such property is placed

in service shall include an allowance equal to 30 percent

of the adjusted basis of such property, and

‘‘(B) the adjusted basis of the qualified New York Liberty Zone property shall be reduced by the amount of

such deduction before computing the amount otherwise

allowable as a depreciation deduction under this chapter

for such taxable year and any subsequent taxable year.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 35

‘‘(2) QUALIFIED NEW YORK LIBERTY ZONE PROPERTY.—For

purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified New York Liberty Zone property’ means property—

‘‘(i)(I) which is described in section 168(k)(2)(A)(i),

or

‘‘(II) which is nonresidential real property, or residential rental property, which is described in subparagraph (B),

‘‘(ii) substantially all of the use of which is in

the New York Liberty Zone and is in the active conduct

of a trade or business by the taxpayer in such Zone,

‘‘(iii) the original use of which in the New York

Liberty Zone commences with the taxpayer after September 10, 2001,

‘‘(iv) which is acquired by the taxpayer by purchase

(as defined in section 179(d)) after September 10, 2001,

but only if no written binding contract for the acquisition was in effect before September 11, 2001, and

‘‘(v) which is placed in service by the taxpayer

on or before the termination date.

The term ‘termination date’ means December 31, 2006

(December 31, 2009, in the case of nonresidential real

property and residential rental property).

‘‘(B) ELIGIBLE REAL PROPERTY.—Nonresidential real

property or residential rental property is described in this

subparagraph only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the September 11, 2001, terrorist

attack. For purposes of the preceding sentence, property

shall be treated as replacing real property destroyed or

condemned if, as part of an integrated plan, such property

replaces real property which is included in a continuous

area which includes real property destroyed or condemned.

‘‘(C) EXCEPTIONS.—

‘‘(i) 30 PERCENT ADDITIONAL ALLOWANCE PROPERTY.—Such term shall not include property to which

section 168(k) applies.

‘‘(ii) ALTERNATIVE DEPRECIATION PROPERTY.—The

term ‘qualified New York Liberty Zone property’ shall

not include any property described in section

168(k)(2)(C)(i).

‘‘(iii) QUALIFIED NEW YORK LIBERTY ZONE LEASEHOLD IMPROVEMENT PROPERTY.—Such term shall not

include any qualified New York Liberty Zone leasehold

improvement property.

‘‘(iv) ELECTION OUT.—For purposes of this subsection, rules similar to the rules of section

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

‘‘(D) SPECIAL RULES.—For purposes of this subsection,

rules similar to the rules of section 168(k)(2)(D) shall apply,

except that clause (i) thereof shall be applied without

regard to ‘and before September 11, 2004’.

‘‘(E) ALLOWANCE AGAINST ALTERNATIVE MINIMUM TAX.—

For purposes of this subsection, rules similar to the rules

of section 168(k)(2)(F) shall apply.

Applicability.

Applicability.

Applicability.

116 STAT. 36 PUBLIC LAW 107–147—MAR. 9, 2002

‘‘(c) 5-YEAR RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN

LEASEHOLD IMPROVEMENTS.—

‘‘(1) IN GENERAL.—For purposes of section 168, the term

‘5-year property’ includes any qualified New York Liberty Zone

leasehold improvement property.

‘‘(2) QUALIFIED NEW YORK LIBERTY ZONE LEASEHOLD

IMPROVEMENT PROPERTY.—For purposes of this section, the term

‘qualified New York Liberty Zone leasehold improvement property’ means qualified leasehold improvement property (as

defined in section 168(k)(3)) if—

‘‘(A) such building is located in the New York Liberty

Zone,

‘‘(B) such improvement is placed in service after September 10, 2001, and before January 1, 2007, and

‘‘(C) no written binding contract for such improvement

was in effect before September 11, 2001.

‘‘(3) REQUIREMENT TO USE STRAIGHT LINE METHOD.—The

applicable depreciation method under section 168 shall be the

straight line method in the case of qualified New York Liberty

Zone leasehold improvement property.

‘‘(4) 9-YEAR RECOVERY PERIOD UNDER ALTERNATIVE

SYSTEM.—For purposes of section 168(g), the class life of qualified New York Liberty Zone leasehold improvement property

shall be 9 years.

‘‘(d) TAX-EXEMPT BOND FINANCING.—

‘‘(1) IN GENERAL.—For purposes of this title, any qualified

New York Liberty Bond shall be treated as an exempt facility

bond.

‘‘(2) QUALIFIED NEW YORK LIBERTY BOND.—For purposes

of this subsection, the term ‘qualified New York Liberty Bond’

means any bond issued as part of an issue if—

‘‘(A) 95 percent or more of the net proceeds (as defined

in section 150(a)(3)) of such issue are to be used for qualified project costs,

‘‘(B) such bond is issued by the State of New York

or any political subdivision thereof,

‘‘(C) the Governor or the Mayor designates such bond

for purposes of this section, and

‘‘(D) such bond is issued after the date of the enactment

of this section and before January 1, 2005.

‘‘(3) LIMITATIONS ON AMOUNT OF BONDS.—

‘‘(A) AGGREGATE AMOUNT DESIGNATED.—The maximum

aggregate face amount of bonds which may be designated

under this subsection shall not exceed $8,000,000,000, of

which not to exceed $4,000,000,000 may be designated

by the Governor and not to exceed $4,000,000,000 may

be designated by the Mayor.

‘‘(B) SPECIFIC LIMITATIONS.—The aggregate face

amount of bonds issued which are to be used for—

‘‘(i) costs for property located outside the New York

Liberty Zone shall not exceed $2,000,000,000,

‘‘(ii) residential rental property shall not exceed

$1,600,000,000, and

‘‘(iii) costs with respect to property used for retail

sales of tangible property and functionally related and

subordinate property shall not exceed $800,000,000.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 37

The limitations under clauses (i), (ii), and (iii) shall be

allocated proportionately between the bonds designated by

the Governor and the bonds designated by the Mayor in

proportion to the respective amounts of bonds designated

by each.

‘‘(C) MOVABLE PROPERTY.—No bonds shall be issued

which are to be used for movable fixtures and equipment.

‘‘(4) QUALIFIED PROJECT COSTS.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘qualified project costs’ means the cost of acquisition, construction, reconstruction,

and renovation of— ‘‘(i) nonresidential real property and residential

rental property (including fixed tenant improvements

associated with such property) located in the New York

Liberty Zone, and ‘‘(ii) public utility property (as defined in section

168(i)(10)) located in the New York Liberty Zone.

‘‘(B) COSTS FOR CERTAIN PROPERTY OUTSIDE ZONE

INCLUDED.—Such term includes the cost of acquisition,

construction, reconstruction, and renovation of nonresidential real property (including fixed tenant improvements

associated with such property) located outside the New

York Liberty Zone but within the City of New York, New

York, if such property is part of a project which consists

of at least 100,000 square feet of usable office or other

commercial space located in a single building or multiple

adjacent buildings.

‘‘(5) SPECIAL RULES.—In applying this title to any qualified

New York Liberty Bond, the following modifications shall apply:

‘‘(A) Section 146 (relating to volume cap) shall not

apply.

‘‘(B) Section 147(d) (relating to acquisition of existing

property not permitted) shall be applied by substituting

‘50 percent’ for ‘15 percent’ each place it appears. ‘‘(C) Section 148(f)(4)(C) (relating to exception from

rebate for certain proceeds to be used to finance construction expenditures) shall apply to the available construction

proceeds of bonds issued under this section.

‘‘(D) Repayments of principal on financing provided

by the issue—

‘‘(i) may not be used to provide financing, and

‘‘(ii) must be used not later than the close of the

1st semiannual period beginning after the date of the

repayment to redeem bonds which are part of such

issue.

The requirement of clause (ii) shall be treated as met

with respect to amounts received within 10 years after

the date of issuance of the issue (or, in the case of a

refunding bond, the date of issuance of the original bond)

if such amounts are used by the close of such 10 years

to redeem bonds which are part of such issue.

‘‘(E) Section 57(a)(5) shall not apply.

‘‘(6) SEPARATE ISSUE TREATMENT OF PORTIONS OF AN

ISSUE.—This subsection shall not apply to the portion of an

issue which (if issued as a separate issue) would be treated

as a qualified bond or as a bond that is not a private activity

Applicability.

Applicability.

116 STAT. 38 PUBLIC LAW 107–147—MAR. 9, 2002

bond (determined without regard to paragraph (1)), if the issuer

elects to so treat such portion.

‘‘(e) ADVANCE REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.—

‘‘(1) IN GENERAL.—With respect to a bond described in

paragraph (2) issued as part of an issue 90 percent (95 percent

in the case of a bond described in paragraph (2)(C)) or more

of the net proceeds (as defined in section 150(a)(3)) of which

were used to finance facilities located within the City of New

York, New York (or property which is functionally related and

subordinate to facilities located within the City of New York

for the furnishing of water), one additional advanced refunding

after the date of the enactment of this section and before

January 1, 2005, shall be allowed under the applicable rules

of section 149(d) if—

‘‘(A) the Governor or the Mayor designates the advance

refunding bond for purposes of this subsection, and

‘‘(B) the requirements of paragraph (4) are met.

‘‘(2) BONDS DESCRIBED.—A bond is described in this paragraph if such bond was outstanding on September 11, 2001,

and is—

‘‘(A) a State or local bond (as defined in section

103(c)(1)) which is a general obligation of the City of New

York, New York,

‘‘(B) a State or local bond (as so defined) other than

a private activity bond (as defined in section 141(a)) issued

by the New York Municipal Water Finance Authority or

the Metropolitan Transportation Authority of the State

of New York, or

‘‘(C) a qualified 501(c)(3) bond (as defined in section

145(a)) which is a qualified hospital bond (as defined in

section 145(c)) issued by or on behalf of the State of New

York or the City of New York, New York.

‘‘(3) AGGREGATE LIMIT.—For purposes of paragraph (1), the

maximum aggregate face amount of bonds which may be designated under this subsection by the Governor shall not exceed

$4,500,000,000 and the maximum aggregate face amount of

bonds which may be designated under this subsection by the

Mayor shall not exceed $4,500,000,000.

‘‘(4) ADDITIONAL REQUIREMENTS.—The requirements of this

paragraph are met with respect to any advance refunding of

a bond described in paragraph (2) if—

‘‘(A) no advance refundings of such bond would be

allowed under any provision of law after September 11,

2001,

‘‘(B) the advance refunding bond is the only other

outstanding bond with respect to the refunded bond, and

‘‘(C) the requirements of section 148 are met with

respect to all bonds issued under this subsection.

‘‘(f) INCREASE IN EXPENSING UNDER SECTION 179.—

‘‘(1) IN GENERAL.—For purposes of section 179—

‘‘(A) the limitation under section 179(b)(1) shall be

increased by the lesser of—

‘‘(i) $35,000, or

‘‘(ii) the cost of section 179 property which is qualified New York Liberty Zone property placed in service

during the taxable year, and

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 39

‘‘(B) the amount taken into account under section

179(b)(2) with respect to any section 179 property which

is qualified New York Liberty Zone property shall be 50

percent of the cost thereof.

‘‘(2) QUALIFIED NEW YORK LIBERTY ZONE PROPERTY.—For

purposes of this subsection, the term ‘qualified New York Liberty Zone property’ has the meaning given such term by subsection (b)(2). ‘‘(3) RECAPTURE.—Rules similar to the rules under section

179(d)(10) shall apply with respect to any qualified New York

Liberty Zone property which ceases to be used in the New

York Liberty Zone.

‘‘(g) EXTENSION OF REPLACEMENT PERIOD FOR NONRECOGNITION

OF GAIN.—Notwithstanding subsections (g) and (h) of section 1033,

clause (i) of section 1033(a)(2)(B) shall be applied by substituting

‘5 years’ for ‘2 years’ with respect to property which is compulsorily

or involuntarily converted as a result of the terrorist attacks on

September 11, 2001, in the New York Liberty Zone but only if

substantially all of the use of the replacement property is in the

City of New York, New York. ‘‘(h) NEW YORK LIBERTY ZONE.—For purposes of this section,

the term ‘New York Liberty Zone’ means the area located on or

south of Canal Street, East Broadway (east of its intersection with

Canal Street), or Grand Street (east of its intersection with East

Broadway) in the Borough of Manhattan in the City of New York,

New York.

‘‘(i) REFERENCES TO GOVERNOR AND MAYOR.—For purposes of

this section, the terms ‘Governor’ and ‘Mayor’ mean the Governor

of the State of New York and the Mayor of the City of New

York, New York, respectively.’’.

(b) CREDIT ALLOWED AGAINST REGULAR AND MINIMUM TAX.—

(1) IN GENERAL.—Subsection (c) of section 38 (relating to

limitation based on amount of tax) is amended by redesignating

paragraph (3) as paragraph (4) and by inserting after paragraph

(2) the following new paragraph: ‘‘(3) SPECIAL RULES FOR NEW YORK LIBERTY ZONE BUSINESS

EMPLOYEE CREDIT.—

‘‘(A) IN GENERAL.—In the case of the New York Liberty

Zone business employee credit—

‘‘(i) this section and section 39 shall be applied

separately with respect to such credit, and

‘‘(ii) in applying paragraph (1) to such credit—

‘‘(I) the tentative minimum tax shall be treated

as being zero, and

‘‘(II) the limitation under paragraph (1) (as

modified by subclause (I)) shall be reduced by the

credit allowed under subsection (a) for the taxable

year (other than the New York Liberty Zone business employee credit).

‘‘(B) NEW YORK LIBERTY ZONE BUSINESS EMPLOYEE

CREDIT.—For purposes of this subsection, the term ‘New

York Liberty Zone business employee credit’ means the

portion of work opportunity credit under section 51 determined under section 1400L(a).’’.

(2) CONFORMING AMENDMENT.—Subclause (II) of section

38(c)(2)(A)(ii) is amended by inserting ‘‘or the New York Liberty

Zone business employee credit’’ after ‘‘employment credit’’.

Applicability.

26 USC 38.

Applicability.

Applicability.

116 STAT. 40 PUBLIC LAW 107–147—MAR. 9, 2002

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years ending after December

31, 2001.

(c) CLERICAL AMENDMENT.—The table of subchapters for

chapter 1 is amended by adding at the end the following new

item:

‘‘Subchapter Y—New York Liberty Zone Benefits.’’.

TITLE IV—MISCELLANEOUS AND

TECHNICAL PROVISIONS

Subtitle A—General Miscellaneous

Provisions

SEC. 401. ALLOWANCE OF ELECTRONIC 1099’S.

Any person required to furnish a statement under any section

of subpart B of part III of subchapter A of chapter 61 of the

Internal Revenue Code of 1986 for any taxable year ending after

the date of the enactment of this Act, may electronically furnish

such statement (without regard to any first class mailing requirement) to any recipient who has consented to the electronic provision

of the statement in a manner similar to the one permitted under

regulations issued under section 6051 of such Code or in such

other manner as provided by the Secretary.

SEC. 402. EXCLUDED CANCELLATION OF INDEBTEDNESS INCOME OF

S CORPORATION NOT TO RESULT IN ADJUSTMENT TO

BASIS OF STOCK OF SHAREHOLDERS.

(a) IN GENERAL.—Subparagraph (A) of section 108(d)(7)

(relating to certain provisions to be applied at corporate level)

is amended by inserting before the period ‘‘, including by not taking

into account under section 1366(a) any amount excluded under

subsection (a) of this section’’. (b) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in paragraph (2), the

amendment made by this section shall apply to discharges

of indebtedness after October 11, 2001, in taxable years ending

after such date.

(2) EXCEPTION.—The amendment made by this section shall

not apply to any discharge of indebtedness before March 1,

2002, pursuant to a plan of reorganization filed with a bankruptcy court on or before October 11, 2001.

SEC. 403. LIMITATION ON USE OF NONACCRUAL EXPERIENCE METHOD

OF ACCOUNTING.

(a) IN GENERAL.—Paragraph (5) of section 448(d) is amended

to read as follows:

‘‘(5) SPECIAL RULE FOR CERTAIN SERVICES.— ‘‘(A) IN GENERAL.—In the case of any person using

an accrual method of accounting with respect to amounts

to be received for the performance of services by such

person, such person shall not be required to accrue any

portion of such amounts which (on the basis of such person’s experience) will not be collected if—

Applicability.

26 USC 108 note.

26 USC 108.

26 USC 6041

note.

Applicability.

26 USC 38 note.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 41

‘‘(i) such services are in fields referred to in paragraph (2)(A), or ‘‘(ii) such person meets the gross receipts test of

subsection (c) for all prior taxable years.

‘‘(B) EXCEPTION.—This paragraph shall not apply to

any amount if interest is required to be paid on such

amount or there is any penalty for failure to timely pay

such amount. ‘‘(C) REGULATIONS.—The Secretary shall prescribe

regulations to permit taxpayers to determine amounts

referred to in subparagraph (A) using computations or formulas which, based on experience, accurately reflect the

amount of income that will not be collected by such person.

A taxpayer may adopt, or request consent of the Secretary

to change to, a computation or formula that clearly reflects

the taxpayer’s experience. A request under the preceding

sentence shall be approved if such computation or formula

clearly reflects the taxpayer’s experience.’’. (b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to taxable years ending after the date of the enactment of this Act.

(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of

any taxpayer required by the amendments made by this section

to change its method of accounting for its first taxable year

ending after the date of the enactment of this Act—

(A) such change shall be treated as initiated by the

taxpayer,

(B) such change shall be treated as made with the

consent of the Secretary of the Treasury, and

(C) the net amount of the adjustments required to

be taken into account by the taxpayer under section 481

of the Internal Revenue Code of 1986 shall be taken into

account over a period of 4 years (or if less, the number

of taxable years that the taxpayer used the method permitted under section 448(d)(5) of such Code as in effect

before the date of the enactment of this Act) beginning

with such first taxable year.

SEC. 404. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO

PAYMENTS BY QUALIFIED PLACEMENT AGENCIES.

(a) IN GENERAL.—The matter preceding subparagraph (B) of

section 131(b)(1) (defining qualified foster care payment) is amended

to read as follows:

‘‘(1) IN GENERAL.—The term ‘qualified foster care payment’

means any payment made pursuant to a foster care program

of a State or political subdivision thereof—

‘‘(A) which is paid by—

‘‘(i) a State or political subdivision thereof, or

‘‘(ii) a qualified foster care placement agency, and’’.

(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE INDIVIDUALS

PLACED BY QUALIFIED PLACEMENT AGENCIES.—Subparagraph (B)

of section 131(b)(2) (defining qualified foster individual) is amended

to read as follows:

‘‘(B) a qualified foster care placement agency.’’.

(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY DEFINED.— Subsection (b) of section 131 is amended by redesignating paragraph

26 USC 131.

Applicability.

26 USC 448 note.

116 STAT. 42 PUBLIC LAW 107–147—MAR. 9, 2002

(3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: ‘‘(3) QUALIFIED FOSTER CARE PLACEMENT AGENCY.—The

term ‘qualified foster care placement agency’ means any placement agency which is licensed or certified by— ‘‘(A) a State or political subdivision thereof, or

‘‘(B) an entity designated by a State or political subdivision thereof,

for the foster care program of such State or political subdivision

to make foster care payments to providers of foster care.’’. (d) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.

SEC. 405. INTEREST RATE RANGE FOR ADDITIONAL FUNDING

REQUIREMENTS.

(a) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.— (1) SPECIAL RULE.—Clause (i) of section 412(l)(7)(C)

(relating to interest rate) is amended by adding at the end

the following new subclause:

‘‘(III) SPECIAL RULE FOR 2002 AND 2003.—For

a plan year beginning in 2002 or 2003, notwithstanding subclause (I), in the case that the rate

of interest used under subsection (b)(5) exceeds

the highest rate permitted under subclause (I),

the rate of interest used to determine current

liability under this subsection may exceed the rate

of interest otherwise permitted under subclause

(I); except that such rate of interest shall not

exceed 120 percent of the weighted average

referred to in subsection (b)(5)(B)(ii).’’.

(2) QUARTERLY CONTRIBUTIONS.—Subsection (m) of section

412 is amended by adding at the end the following new paragraph:

‘‘(7) SPECIAL RULES FOR 2002 AND 2004.—In any case in

which the interest rate used to determine current liability

is determined under subsection (l)(7)(C)(i)(III)—

‘‘(A) 2002.—For purposes of applying paragraphs (1)

and (4)(B)(ii) for plan years beginning in 2002, the current

liability for the preceding plan year shall be redetermined

using 120 percent as the specified percentage determined

under subsection (l)(7)(C)(i)(II).

‘‘(B) 2004.—For purposes of applying paragraphs (1)

and (4)(B)(ii) for plan years beginning in 2004, the current

liability for the preceding plan year shall be redetermined

using 105 percent as the specified percentage determined

under subsection (l)(7)(C)(i)(II).’’.

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) SPECIAL RULE.—Clause (i) of section 302(d)(7)(C) of such

Act (29 U.S.C. 1082(d)(7)(C)) is amended by adding at the

end the following new subclause: ‘‘(III) SPECIAL RULE FOR 2002 AND 2003.—For

a plan year beginning in 2002 or 2003, notwithstanding subclause (I), in the case that the rate

of interest used under subsection (b)(5) exceeds

the highest rate permitted under subclause (I),

the rate of interest used to determine current

26 USC 412.

Applicability.

26 USC 131 note.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 43

liability under this subsection may exceed the rate

of interest otherwise permitted under subclause

(I); except that such rate of interest shall not

exceed 120 percent of the weighted average

referred to in subsection (b)(5)(B)(ii).’’.

(2) QUARTERLY CONTRIBUTIONS.—Subsection (e) of section

302 of such Act (29 U.S.C. 1082) is amended by adding at

the end the following new paragraph: ‘‘(7) SPECIAL RULES FOR 2002 AND 2004.—In any case in

which the interest rate used to determine current liability

is determined under subsection (d)(7)(C)(i)(III)— ‘‘(A) 2002.—For purposes of applying paragraphs (1)

and (4)(B)(ii) for plan years beginning in 2002, the current

liability for the preceding plan year shall be redetermined

using 120 percent as the specified percentage determined

under subsection (d)(7)(C)(i)(II). ‘‘(B) 2004.—For purposes of applying paragraphs (1)

and (4)(B)(ii) for plan years beginning in 2004, the current

liability for the preceding plan year shall be redetermined

using 105 percent as the specified percentage determined

under subsection (d)(7)(C)(i)(II).’’.

(c) PBGC.—Clause (iii) of section 4006(a)(3)(E) of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)(E))

is amended by adding at the end the following new subclause:

‘‘(IV) In the case of plan years beginning after December 31,

2001, and before January 1, 2004, subclause (II) shall be applied

by substituting ‘100 percent’ for ‘85 percent’. Subclause (III) shall

be applied for such years without regard to the preceding sentence.

Any reference to this clause by any other sections or subsections

shall be treated as a reference to this clause without regard to

this subclause.’’.

SEC. 406. ADJUSTED GROSS INCOME DETERMINED BY TAKING INTO

ACCOUNT CERTAIN EXPENSES OF ELEMENTARY AND

SECONDARY SCHOOL TEACHERS.

(a) IN GENERAL.—Section 62(a)(2) (relating to certain trade

and business deductions of employees) is amended by adding at

the end the following:

‘‘(D) CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL TEACHERS.—In the case of taxable years

beginning during 2002 or 2003, the deductions allowed

by section 162 which consist of expenses, not in excess

of $250, paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies

for courses of instruction in health or physical education),

computer equipment (including related software and services) and other equipment, and supplementary materials

used by the eligible educator in the classroom.’’.

(b) ELIGIBLE EDUCATOR.—Section 62 is amended by adding

at the end the following:

‘‘(d) DEFINITION; SPECIAL RULES.— ‘‘(1) ELIGIBLE EDUCATOR.—

‘‘(A) IN GENERAL.—For purposes of subsection (a)(2)(D),

the term ‘eligible educator’ means, with respect to any

taxable year, an individual who is a kindergarten through

grade 12 teacher, instructor, counselor, principal, or aide

in a school for at least 900 hours during a school year.

26 USC 62.

Applicability.

116 STAT. 44 PUBLIC LAW 107–147—MAR. 9, 2002

‘‘(B) SCHOOL.—The term ‘school’ means any school

which provides elementary education or secondary education (kindergarten through grade 12), as determined

under State law.

‘‘(2) COORDINATION WITH EXCLUSIONS.—A deduction shall

be allowed under subsection (a)(2)(D) for expenses only to the

extent the amount of such expenses exceeds the amount excludable under section 135, 529(c)(1), or 530(d)(2) for the taxable

year.’’. (c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.

Subtitle B—Technical Corrections

SEC. 411. AMENDMENTS RELATED TO ECONOMIC GROWTH AND TAX

RELIEF RECONCILIATION ACT OF 2001.

(a) AMENDMENTS RELATED TO SECTION 101 OF THE ACT.—

(1) IN GENERAL.—Subsection (b) of section 6428 is amended

to read as follows:

‘‘(b) CREDIT TREATED AS NONREFUNDABLE PERSONAL CREDIT.—

For purposes of this title, the credit allowed under this section

shall be treated as a credit allowable under subpart A of part

IV of subchapter A of chapter 1.’’.

(2) CONFORMING AMENDMENTS.—

(A) Subsection (d) of section 6428 is amended to read

as follows:

‘‘(d) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.—

‘‘(1) IN GENERAL.—The amount of credit which would (but

for this paragraph) be allowable under this section shall be

reduced (but not below zero) by the aggregate refunds and

credits made or allowed to the taxpayer under subsection (e).

Any failure to so reduce the credit shall be treated as arising

out of a mathematical or clerical error and assessed according

to section 6213(b)(1). ‘‘(2) JOINT RETURNS.—In the case of a refund or credit

made or allowed under subsection (e) with respect to a joint

return, half of such refund or credit shall be treated as having

been made or allowed to each individual filing such return.’’.

(B) Paragraph (2) of section 6428(e) is amended to

read as follows:

‘‘(2) ADVANCE REFUND AMOUNT.—For purposes of paragraph

(1), the advance refund amount is the amount that would

have been allowed as a credit under this section for such

first taxable year if—

‘‘(A) this section (other than subsections (b) and (d)

and this subsection) had applied to such taxable year,

and

‘‘(B) the credit for such taxable year were not allowed

to exceed the excess (if any) of—

‘‘(i) the sum of the regular tax liability (as defined

in section 26(b)) plus the tax imposed by section 55,

over

‘‘(ii) the sum of the credits allowable under part

IV of subchapter A of chapter 1 (other than the credits

allowable under subpart C thereof, relating to refundable credits).’’.

26 USC 6428.

Applicability.

26 USC 62 note.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 45

(b) AMENDMENT RELATED TO SECTION 201 OF THE ACT.— Subparagraph (B) of section 24(d)(1) is amended by striking

‘‘amount of credit allowed by this section’’ and inserting ‘‘aggregate

amount of credits allowed by this subpart’’.

(c) AMENDMENTS RELATED TO SECTION 202 OF THE ACT.— (1) CORRECTIONS TO CREDIT FOR ADOPTION EXPENSES.— (A) Paragraph (1) of section 23(a) is amended to read

as follows:

‘‘(1) IN GENERAL.—In the case of an individual, there shall

be allowed as a credit against the tax imposed by this chapter

the amount of the qualified adoption expenses paid or incurred

by the taxpayer.’’. (B) Subsection (a) of section 23 is amended by adding

at the end the following new paragraph:

‘‘(3) $10,000 CREDIT FOR ADOPTION OF CHILD WITH SPECIAL

NEEDS REGARDLESS OF EXPENSES.—In the case of an adoption

of a child with special needs which becomes final during a

taxable year, the taxpayer shall be treated as having paid

during such year qualified adoption expenses with respect to

such adoption in an amount equal to the excess (if any) of

$10,000 over the aggregate qualified adoption expenses actually

paid or incurred by the taxpayer with respect to such adoption

during such taxable year and all prior taxable years.’’. (C) Paragraph (2) of section 23(a) is amended by

striking the last sentence.

(D) Paragraph (1) of section 23(b) is amended by

striking ‘‘subsection (a)(1)(A)’’ and inserting ‘‘subsection

(a)’’.

(E) Subsection (i) of section 23 is amended by striking

‘‘the dollar limitation in subsection (b)(1)’’ and inserting

‘‘the dollar amounts in subsections (a)(3) and (b)(1)’’.

(F) Expenses paid or incurred during any taxable year

beginning before January 1, 2002, may be taken into

account in determining the credit under section 23 of the

Internal Revenue Code of 1986 only to the extent the

aggregate of such expenses does not exceed the applicable

limitation under section 23(b)(1) of such Code as in effect

on the day before the date of the enactment of the Economic

Growth and Tax Relief Reconciliation Act of 2001.

(2) CORRECTIONS TO EXCLUSION FOR EMPLOYER-PROVIDED

ADOPTION ASSISTANCE.—

(A) Subsection (a) of section 137 is amended to read

as follows:

‘‘(a) EXCLUSION.—

‘‘(1) IN GENERAL.—Gross income of an employee does not

include amounts paid or expenses incurred by the employer

for qualified adoption expenses in connection with the adoption

of a child by an employee if such amounts are furnished pursuant to an adoption assistance program.

‘‘(2) $10,000 EXCLUSION FOR ADOPTION OF CHILD WITH SPECIAL NEEDS REGARDLESS OF EXPENSES.—In the case of an adoption of a child with special needs which becomes final during

a taxable year, the qualified adoption expenses with respect

to such adoption for such year shall be increased by an amount

equal to the excess (if any) of $10,000 over the actual aggregate

qualified adoption expenses with respect to such adoption

during such taxable year and all prior taxable years.’’.

26 USC 23 note.

26 USC 24.

116 STAT. 46 PUBLIC LAW 107–147—MAR. 9, 2002

(B) Paragraph (2) of section 137(b) is amended by

striking ‘‘subsection (a)(1)’’ and inserting ‘‘subsection (a)’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December

31, 2002; except that the amendments made by paragraphs

(1)(C), (1)(D), and (2)(B) shall apply to taxable years beginning

after December 31, 2001.

(d) AMENDMENTS RELATED TO SECTION 205 OF THE ACT.—

(1) Section 45F(d)(4)(B) is amended by striking ‘‘subpart

A, B, or D of this part’’ and inserting ‘‘this chapter or for

purposes of section 55’’.

(2) Section 38(b)(15) is amended by striking ‘‘45F’’ and

inserting ‘‘45F(a)’’.

(e) AMENDMENTS RELATED TO SECTION 301 OF THE ACT.—

(1) Section 63(c)(2) is amended—

(A) in subparagraph (A), by striking ‘‘subparagraph

(C)’’ and inserting ‘‘subparagraph (D)’’,

(B) by striking ‘‘or’’ at the end of subparagraph (B),

(C) by redesignating subparagraph (C) as subparagraph (D),

(D) by inserting after subparagraph (B) the following

new subparagraph:

‘‘(C) one-half of the amount in effect under subparagraph (A) in the case of a married individual filing a

separate return, or’’, and

(E) by inserting the following flush sentence at the

end:

‘‘If any amount determined under subparagraph (A) is not

a multiple of $50, such amount shall be rounded to the

next lowest multiple of $50.’’.

(2)(A) Section 63(c)(4) is amended by striking ‘‘paragraph

(2) or (5)’’ and inserting ‘‘paragraph (2)(B), (2)(D), or (5)’’.

(B) Section 63(c)(4)(B)(i) is amended by striking ‘‘paragraph

(2)’’ and inserting ‘‘paragraph (2)(B), (2)(D),’’.

(C) Section 63(c)(4) is amended by striking the flush sentence at the end (as added by section 301(c)(2) of Public Law

107–17).

(f) AMENDMENT RELATED TO SECTION 401 OF THE ACT.—Section

530(d)(4)(B)(iv) is amended by striking ‘‘because the taxpayer

elected under paragraph (2)(C) to waive the application of paragraph

(2)’’ and inserting ‘‘by application of paragraph (2)(C)(i)(II)’’.

(g) AMENDMENTS RELATED TO SECTION 511 OF THE ACT.—

(1) Section 2511(c) is amended by striking ‘‘taxable gift

under section 2503,’’ and inserting ‘‘transfer of property by

gift,’’.

(2) Section 2101(b) is amended by striking the last sentence.

(h) AMENDMENT RELATED TO SECTION 532 OF THE ACT.—Section

2016 is amended by striking ‘‘any State, any possession of the

United States, or the District of Columbia,’’.

(i) AMENDMENTS RELATING TO SECTION 602 OF THE ACT.—

(1) Subparagraph (A) of section 408(q)(3) is amended to

read as follows:

‘‘(A) QUALIFIED EMPLOYER PLAN.—The term ‘qualified

employer plan’ has the meaning given such term by section

72(p)(4)(A)(i); except that such term shall also include an

eligible deferred compensation plan (as defined in section

Applicability.

26 USC 23 note.

26 USC 137.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 47

457(b)) of an eligible employer described in section

457(e)(1)(A).’’. (2) Section 4(c) of Employee Retirement Income Security

Act of 1974 is amended—

(A) by inserting ‘‘and part 5 (relating to administration

and enforcement)’’ before the period at the end, and

(B) by adding at the end the following new sentence:

‘‘Such provisions shall apply to such accounts and annuities

in a manner similar to their application to a simplified

employee pension under section 408(k) of the Internal Revenue Code of 1986.’’.

(j) AMENDMENTS RELATING TO SECTION 611 OF THE ACT.— (1) Section 408(k) is amended— (A) in paragraph (2)(C) by striking ‘‘$300’’ and inserting ‘‘$450’’, and

(B) in paragraph (8) by striking ‘‘$300’’ both places

it appears and inserting ‘‘$450’’. (2) Section 409(o)(1)(C)(ii) is amended— (A) by striking ‘‘$500,000’’ both places it appears and

inserting ‘‘$800,000’’, and

(B) by striking ‘‘$100,000’’ and inserting ‘‘$160,000’’. (3) Section 611(i) of the Economic Growth and Tax Relief

Reconciliation Act of 2001 is amended by adding at the end

the following new paragraph: ‘‘(3) SPECIAL RULE.—In the case of plan that, on June

7, 2001, incorporated by reference the limitation of section

415(b)(1)(A) of the Internal Revenue Code of 1986, section

411(d)(6) of such Code and section 204(g)(1) of the Employee

Retirement Income Security Act of 1974 do not apply to a

plan amendment that—

‘‘(A) is adopted on or before June 30, 2002,

‘‘(B) reduces benefits to the level that would have

applied without regard to the amendments made by subsection (a) of this section, and

‘‘(C) is effective no earlier than the years described

in paragraph (2).’’.

(k) AMENDMENTS RELATING TO SECTION 613 OF THE ACT.—

(1) Section 416(c)(1)(C)(iii) is amended by striking ‘‘EXCEPTION FOR FROZEN PLAN’’ and inserting ‘‘EXCEPTION FOR PLAN

UNDER WHICH NO KEY EMPLOYEE (OR FORMER KEY EMPLOYEE)

BENEFITS FOR PLAN YEAR’’.

(2) Section 416(g)(3)(B) is amended by striking ‘‘separation

from service’’ and inserting ‘‘severance from employment’’.

(l) AMENDMENTS RELATING TO SECTIONS 614 and 616 OF THE

ACT.—

(1) Section 404(a)(12) is amended by striking ‘‘(9),’’ and

inserting ‘‘(9) and subsection (h)(1)(C),’’.

(2) Section 404(n) is amended by striking ‘‘subsection (a),’’

and inserting ‘‘subsection (a) or paragraph (1)(C) of subsection

(h)’’.

(3) Section 402(h)(2)(A) is amended by striking ‘‘15 percent’’ and inserting ‘‘25 percent’’.

(4) Section 404(a)(7)(C) is amended to read as follows:

‘‘(C) PARAGRAPH NOT TO APPLY IN CERTAIN CASES.—

‘‘(i) BENEFICIARY TEST.—This paragraph shall not

have the effect of reducing the amount otherwise

deductible under paragraphs (1), (2), and (3), if no

26 USC 415 note.

26 USC 408.

Applicability.

29 USC 1003.

116 STAT. 48 PUBLIC LAW 107–147—MAR. 9, 2002

employee is a beneficiary under more than 1 trust

or under a trust and an annuity plan. ‘‘(ii) ELECTIVE DEFERRALS.—If, in connection with

1 or more defined contribution plans and 1 or more

defined benefit plans, no amounts (other than elective

deferrals (as defined in section 402(g)(3))) are contributed to any of the defined contribution plans for the

taxable year, then subparagraph (A) shall not apply

with respect to any of such defined contribution plans

and defined benefit plans.’’. (m) AMENDMENT RELATING TO SECTION 618 OF THE ACT.— Section 25B(d)(2)(A) is amended to read as follows: ‘‘(A) IN GENERAL.—The qualified retirement savings

contributions determined under paragraph (1) shall be

reduced (but not below zero) by the aggregate distributions

received by the individual during the testing period from

any entity of a type to which contributions under paragraph

(1) may be made. The preceding sentence shall not apply

to the portion of any distribution which is not includible

in gross income by reason of a trustee-to-trustee transfer

or a rollover distribution.’’. (n) AMENDMENTS RELATING TO SECTION 619 OF THE ACT.—

(1) Section 45E(e)(1) is amended by striking ‘‘(n)’’ and

inserting ‘‘(m)’’.

(2) Section 619(d) of the Economic Growth and Tax Relief

Reconciliation Act of 2001 is amended by striking ‘‘established’’

and inserting ‘‘first effective’’.

(o) AMENDMENTS RELATING TO SECTION 631 OF THE ACT.—

(1) Section 402(g)(1) is amended by adding at the end

the following:

‘‘(C) CATCH-UP CONTRIBUTIONS.—In addition to

subparagraph (A), in the case of an eligible participant

(as defined in section 414(v)), gross income shall not include

elective deferrals in excess of the applicable dollar amount

under subparagraph (B) to the extent that the amount

of such elective deferrals does not exceed the applicable

dollar amount under section 414(v)(2)(B)(i) for the taxable

year (without regard to the treatment of the elective deferrals by an applicable employer plan under section 414(v)).’’.

(2) Section 401(a)(30) is amended by striking ‘‘402(g)(1)’’

and inserting ‘‘402(g)(1)(A)’’.

(3) Section 414(v)(2) is amended by adding at the end

the following:

‘‘(D) AGGREGATION OF PLANS.—For purposes of this

paragraph, plans described in clauses (i), (ii), and (iv) of

paragraph (6)(A) that are maintained by the same employer

(as determined under subsection (b), (c), (m) or (o)) shall

be treated as a single plan, and plans described in clause

(iii) of paragraph (6)(A) that are maintained by the same

employer shall be treated as a single plan.’’.

(4) Section 414(v)(3)(A)(i) is amended by striking ‘‘section

402(g), 402(h), 403(b), 404(a), 404(h), 408(k), 408(p), 415, or

457’’ and inserting ‘‘sections 401(a)(30), 402(h), 403(b), 408,

415(c), and 457(b)(2) (determined without regard to section

457(b)(3))’’.

(5) Section 414(v)(3)(B) is amended by striking ‘‘section

401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),

26 USC 38 note.

26 USC 25B.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 49

403(b)(12), 408(k), 408(p), 408B, 410(b), or 416’’ and inserting ‘‘section 401(a)(4), 401(k)(3), 401(k)(11), 403(b)(12), 408(k),

410(b), or 416’’. (6) Section 414(v)(4)(B) is amended by inserting before

the period at the end the following: ‘‘, except that a plan

described in clause (i) of section 410(b)(6)(C) shall not be treated

as a plan of the employer until the expiration of the transition

period with respect to such plan (as determined under clause

(ii) of such section)’’.

(7) Section 414(v)(5) is amended—

(A) by striking ‘‘, with respect to any plan year,’’ in

the matter preceding subparagraph (A),

(B) by amending subparagraph (A) to read as follows:

‘‘(A) who would attain age 50 by the end of the taxable

year,’’, and

(C) in subparagraph (B) by striking ‘‘plan year’’ and

inserting ‘‘plan (or other applicable) year’’.

(8) Section 414(v)(6)(C) is amended to read as follows:

‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—This subsection shall not apply to a participant for any year for

which a higher limitation applies to the participant under

section 457(b)(3).’’.

(9) Section 457(e) is amended by adding at the end the

following new paragraph:

‘‘(18) COORDINATION WITH CATCH-UP CONTRIBUTIONS FOR

INDIVIDUALS AGE 50 OR OLDER.—In the case of an individual

who is an eligible participant (as defined by section 414(v))

and who is a participant in an eligible deferred compensation

plan of an employer described in paragraph (1)(A), subsections

(b)(3) and (c) shall be applied by substituting for the amount

otherwise determined under the applicable subsection the

greater of—

‘‘(A) the sum of—

‘‘(i) the plan ceiling established for purposes of

subsection (b)(2) (without regard to subsection (b)(3)),

plus

‘‘(ii) the applicable dollar amount for the taxable

year determined under section 414(v)(2)(B)(i), or

‘‘(B) the amount determined under the applicable subsection (without regard to this paragraph).’’.

(p) AMENDMENTS RELATING TO SECTION 632 OF THE ACT.—

(1) Section 403(b)(1) is amended in the matter following

subparagraph (E) by striking ‘‘then amounts contributed’’ and

all that follows and inserting the following:

‘‘then contributions and other additions by such employer

for such annuity contract shall be excluded from the gross

income of the employee for the taxable year to the extent

that the aggregate of such contributions and additions (when

expressed as an annual addition (within the meaning of section

415(c)(2))) does not exceed the applicable limit under section

415. The amount actually distributed to any distributee under

such contract shall be taxable to the distributee (in the year

in which so distributed) under section 72 (relating to annuities).

For purposes of applying the rules of this subsection to contributions and other additions by an employer for a taxable year,

amounts transferred to a contract described in this paragraph

by reason of a rollover contribution described in paragraph

26 USC 414.

116 STAT. 50 PUBLIC LAW 107–147—MAR. 9, 2002

(8) of this subsection or section 408(d)(3)(A)(ii) shall not be

considered contributed by such employer.’’.

(2) Section 403(b) is amended by striking paragraph (6).

(3) Section 403(b)(3) is amended—

(A) in the first sentence by inserting the following

before the period at the end: ‘‘, and which precedes the

taxable year by no more than five years’’, and

(B) in the second sentence by striking ‘‘or any amount

received by a former employee after the fifth taxable year

following the taxable year in which such employee was

terminated’’.

(4) Section 415(c)(7) is amended to read as follows:

‘‘(7) SPECIAL RULES RELATING TO CHURCH PLANS.—

‘‘(A) ALTERNATIVE CONTRIBUTION LIMITATION.—

‘‘(i) IN GENERAL.—Notwithstanding any other

provision of this subsection, at the election of a participant who is an employee of a church or a convention

or association of churches, including an organization

described in section 414(e)(3)(B)(ii), contributions and

other additions for an annuity contract or retirement

income account described in section 403(b) with respect

to such participant, when expressed as an annual addition to such participant’s account, shall be treated as

not exceeding the limitation of paragraph (1) if such

annual addition is not in excess of $10,000.

‘‘(ii) $40,000 AGGREGATE LIMITATION.—The total

amount of additions with respect to any participant

which may be taken into account for purposes of this

subparagraph for all years may not exceed $40,000.

‘‘(B) NUMBER OF YEARS OF SERVICE FOR DULY ORDAINED,

COMMISSIONED, OR LICENSED MINISTERS OR LAY

EMPLOYEES.—For purposes of this paragraph—

‘‘(i) all years of service by—

‘‘(I) a duly ordained, commissioned, or licensed

minister of a church, or

‘‘(II) a lay person,

as an employee of a church, a convention or association

of churches, including an organization described in

section 414(e)(3)(B)(ii), shall be considered as years

of service for 1 employer, and

‘‘(ii) all amounts contributed for annuity contracts

by each such church (or convention or association of

churches) or such organization during such years for

such minister or lay person shall be considered to

have been contributed by 1 employer.

‘‘(C) FOREIGN MISSIONARIES.—In the case of any individual described in subparagraph (D) performing services

outside the United States, contributions and other additions for an annuity contract or retirement income account

described in section 403(b) with respect to such employee,

when expressed as an annual addition to such employee’s

account, shall not be treated as exceeding the limitation

of paragraph (1) if such annual addition is not in excess

of the greater of $3,000 or the employee’s includible compensation determined under section 403(b)(3).

26 USC 403.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 51

‘‘(D) ANNUAL ADDITION.—For purposes of this paragraph, the term ‘annual addition’ has the meaning given

such term by paragraph (2).

‘‘(E) CHURCH, CONVENTION OR ASSOCIATION OF

CHURCHES.—For purposes of this paragraph, the terms

‘church’ and ‘convention or association of churches’ have

the same meaning as when used in section 414(e).’’.

(5) Section 457(e)(5) is amended to read as follows:

‘‘(5) INCLUDIBLE COMPENSATION.—The term ‘includible compensation’ has the meaning given to the term ‘participant’s

compensation’ by section 415(c)(3).’’.

(6) Section 402(g)(7)(B) is amended by striking ‘‘2001.’’ and

inserting ‘‘2001).’’.

(q) AMENDMENTS RELATING TO SECTION 643 OF THE ACT.—

(1) Section 401(a)(31)(C)(i) is amended by inserting ‘‘is a

qualified trust which is part of a plan which is a defined

contribution plan and’’ before ‘‘agrees’’.

(2) Section 402(c)(2) is amended by adding at the end

the following flush sentence:

‘‘In the case of a transfer described in subparagraph (A) or

(B), the amount transferred shall be treated as consisting first

of the portion of such distribution that is includible in gross

income (determined without regard to paragraph (1)).’’.

(r) AMENDMENTS RELATING TO SECTION 648 OF THE ACT.—

(1) Section 417(e) is amended—

(A) in paragraph (1) by striking ‘‘exceed the dollar

limit under section 411(a)(11)(A)’’ and inserting ‘‘exceed

the amount that can be distributed without the participant’s consent under section 411(a)(11)’’, and

(B) in paragraph (2)(A) by striking ‘‘exceeds the dollar

limit under section 411(a)(11)(A)’’ and inserting ‘‘exceeds

the amount that can be distributed without the participant’s consent under section 411(a)(11)’’.

(2) Section 205(g) of the Employee Retirement Income Security Act of 1974 is amended—

(A) in paragraph (1) by striking ‘‘exceed the dollar

limit under section 203(e)(1)’’ and inserting ‘‘exceed the

amount that can be distributed without the participant’s

consent under section 203(e)’’, and

(B) in paragraph (2)(A) by striking ‘‘exceeds the dollar

limit under section 203(e)(1)’’ and inserting ‘‘exceeds the

amount that can be distributed without the participant’s

consent under section 203(e)’’.

(s) AMENDMENT RELATING TO SECTION 652 OF THE ACT.—Section 404(a)(1)(D)(iv) is amended by striking ‘‘PLANS MAINTAINED

BY PROFESSIONAL SERVICE EMPLOYERS’’ and inserting ‘‘SPECIAL RULE

FOR TERMINATING PLANS’’.

(t) AMENDMENTS RELATING TO SECTION 657 OF THE ACT.—

Section 404(c)(3) of the Employee Retirement Income Security Act

of 1974 is amended—

(1) by striking ‘‘the earlier of’’ in subparagraph (A) the

second place it appears, and

(2) by striking ‘‘if the transfer’’ and inserting ‘‘a transfer

that’’.

(u) AMENDMENTS RELATING TO SECTION 659 OF THE ACT.—

(1) Section 4980F is amended—

29 USC 1104.

29 USC 1055.

26 USC 457.

116 STAT. 52 PUBLIC LAW 107–147—MAR. 9, 2002

(A) in subsection (e)(1) by striking ‘‘written notice’’

and inserting ‘‘the notice described in paragraph (2)’’,

(B) by amending subsection (f)(2)(A) to read as follows:

‘‘(A) any defined benefit plan described in section 401(a)

which includes a trust exempt from tax under section

501(a), or’’, and

(C) in subsection (f)(3) by striking ‘‘significantly’’ both

places it appears.

(2) Section 204(h)(9) of the Employee Retirement Income

Security Act of 1974 is amended by striking ‘‘significantly’’

both places it appears.

(3) Section 659(c)(3)(B) of the Economic Growth and Tax

Relief Reconciliation Act of 2001 is amended by striking ‘‘(or’’

and inserting ‘‘(and’’.

(v) AMENDMENTS RELATING TO SECTION 661 OF THE ACT.—

(1) Section 412(c)(9)(B) is amended—

(A) in clause (ii) by striking ‘‘125 percent’’ and inserting

‘‘100 percent’’, and

(B) by adding at the end the following new clause:

‘‘(iv) LIMITATION.—A change in funding method to

use a prior year valuation, as provided in clause (ii),

may not be made unless as of the valuation date within

the prior plan year, the value of the assets of the

plan are not less than 125 percent of the plan’s current

liability (as defined in paragraph (7)(B)).’’.

(2) Section 302(c)(9)(B) of the Employee Retirement Income

Security Act of 1974 is amended—

(A) in clause (ii) by striking ‘‘125 percent’’ and inserting

‘‘100 percent’’, and

(B) by adding at the end the following new clause:

‘‘(iv) A change in funding method to use a prior year valuation,

as provided in clause (ii), may not be made unless as of the valuation

date within the prior plan year, the value of the assets of the

plan are not less than 125 percent of the plan’s current liability

(as defined in paragraph (7)(B)).’’.

(w) AMENDMENTS RELATING TO SECTION 662 OF THE ACT.—

(1) Section 404(k) is amended—

(A) in paragraph (1) by striking ‘‘during the taxable

year’’,

(B) in paragraph (2)(B) by striking ‘‘(A)(iii)’’ and

inserting ‘‘(A)(iv)’’,

(C) in paragraph (4)(B) by striking ‘‘(iii)’’ and inserting

‘‘(iv)’’, and

(D) by redesignating subparagraph (B) of paragraph

(4) (as amended by subparagraph (C)) as subparagraph

(C) of paragraph (4) and by inserting after subparagraph

(A) the following new subparagraph:

‘‘(B) REINVESTMENT DIVIDENDS.—For purposes of

subparagraph (A), an applicable dividend reinvested pursuant to clause (iii)(II) of paragraph (2)(A) shall be treated

as paid in the taxable year of the corporation in which

such dividend is reinvested in qualifying employer securities or in which the election under clause (iii) of paragraph

(2)(A) is made, whichever is later.’’.

(2) Section 404(k) is amended by adding at the end the

following new paragraph:

29 USC 1082.

26 USC 412.

26 USC 4980F

note.

29 USC 1054.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 53

‘‘(7) FULL VESTING.—In accordance with section 411, an

applicable dividend described in clause (iii)(II) of paragraph

(2)(A) shall be subject to the requirements of section 411(a)(1).’’. (x) EFFECTIVE DATE.—Except as provided in subsection (c),

the amendments made by this section shall take effect as if included

in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 to which they relate.

SEC. 412. AMENDMENTS RELATED TO COMMUNITY RENEWAL TAX

RELIEF ACT OF 2000.

(a) AMENDMENT RELATED TO SECTION 101 OF THE ACT.—Section

469(i)(3)(E) is amended by striking clauses (ii), (iii), and (iv) and

inserting the following: ‘‘(ii) second to the portion of such loss to which

subparagraph (C) applies, ‘‘(iii) third to the portion of the passive activity

credit to which subparagraph (B) or (D) does not apply, ‘‘(iv) fourth to the portion of such credit to which

subparagraph (B) applies, and’’. (b) AMENDMENT RELATED TO SECTION 306 OF THE ACT.—Section

151(c)(6)(C) is amended— (1) by striking ‘‘FOR EARNED INCOME CREDIT.—For purposes

of section 32, an’’ and inserting ‘‘FOR PRINCIPAL PLACE OF ABODE

REQUIREMENTS.—An’’, and

(2) by striking ‘‘requirement of section 32(c)(3)(A)(ii)’’ and

inserting ‘‘principal place of abode requirements of section

2(a)(1)(B), section 2(b)(1)(A), and section 32(c)(3)(A)(ii)’’.

(c) AMENDMENT RELATED TO SECTION 309 OF THE ACT.— Subparagraph (A) of section 358(h)(1) is amended to read as follows: ‘‘(A) which is assumed by another person as part of

the exchange, and’’. (d) AMENDMENTS RELATED TO SECTION 401 OF THE ACT.— (1)(A) Section 1234A is amended by inserting ‘‘or’’ after

the comma at the end of paragraph (1), by striking ‘‘or’’ at

the end of paragraph (2), and by striking paragraph (3).

(B)(i) Section 1234B is amended in subsection (a)(1) and

in subsection (b) by striking ‘‘sale or exchange’’ the first place

it appears in each subsection and inserting ‘‘sale, exchange,

or termination’’. (ii) Section 1234B is amended by adding at the end the

following new subsection:

‘‘(f) CROSS REFERENCE.—

‘‘For special rules relating to dealer securities futures contracts,

see section 1256.’’.

(2) Section 1091(e) is amended—

(A) in the heading, by striking ‘‘SECURITIES.—’’ and

inserting ‘‘SECURITIES AND SECURITIES FUTURES CON- TRACTS TO SELL.—’’,

(B) by inserting after ‘‘closing of a short sale of’’ the

following: ‘‘(or the sale, exchange, or termination of a securities futures contract to sell)’’, (C) in paragraph (2), by inserting after ‘‘short sale

of’’ the following: ‘‘(or securities futures contracts to sell)’’,

and

(D) by adding at the end the following:

‘‘For purposes of this subsection, the term ‘securities futures contract’ has the meaning provided by section 1234B(c).’’.

26 USC 469.

26 USC 25B note.

116 STAT. 54 PUBLIC LAW 107–147—MAR. 9, 2002

(3)(A) Section 1233(e)(2) is amended by striking ‘‘and’’ at

the end of subparagraph (C), by striking the period and

inserting ‘‘; and’’ at the end of subparagraph (D), and inserting

after subparagraph (D) the following:

‘‘(E) entering into a securities futures contract (as so

defined) to sell shall be considered to be a short sale,

and the settlement of such contract shall be considered

to be the closing of such short sale.’’.

(B) Section 1234B(b) is amended by inserting after ‘‘or

this section,’’ the following: ‘‘or in section 1233,’’.

(e) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the Community

Renewal Tax Relief Act of 2000 to which they relate.

SEC. 413. AMENDMENTS RELATED TO THE TAX RELIEF EXTENSION

ACT OF 1999.

(a) AMENDMENTS RELATED TO SECTION 545 OF THE ACT.—Section 857(b)(7) is amended—

(1) in clause (i) of subparagraph (B), by striking ‘‘the

amount of which’’ and inserting ‘‘to the extent the amount

of the rents’’, and

(2) in subparagraph (C), by striking ‘‘if the amount’’ and

inserting ‘‘to the extent the amount’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in section 545 of the Tax Relief

Extension Act of 1999.

SEC. 414. AMENDMENTS RELATED TO THE TAXPAYER RELIEF ACT OF

1997.

(a) AMENDMENTS RELATED TO SECTION 311 OF THE ACT.—Section 311(e) of the Taxpayer Relief Act of 1997 (Public Law 105–

34; 111 Stat. 836) is amended—

(1) in paragraph (2)(A), by striking ‘‘recognized’’ and

inserting ‘‘included in gross income’’, and

(2) by adding at the end the following new paragraph:

‘‘(5) DISPOSITION OF INTEREST IN PASSIVE ACTIVITY.—Section

469(g)(1)(A) of the Internal Revenue Code of 1986 shall not

apply by reason of an election made under paragraph (1).’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in section 311 of the Taxpayer

Relief Act of 1997.

SEC. 415. AMENDMENT RELATED TO THE BALANCED BUDGET ACT OF

1997.

(a) AMENDMENT RELATED TO SECTION 4006 OF THE ACT.—

Section 26(b)(2) is amended by striking ‘‘and’’ at the end of subparagraph (P), by striking the period and inserting ‘‘, and’’ at the

end of subparagraph (Q), and by adding at the end the following

new subparagraph:

‘‘(R) section 138(c)(2) (relating to penalty for distributions from Medicare+Choice MSA not used for qualified

medical expenses if minimum balance not maintained).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect as if included in section 4006 of the Balanced

Budget Act of 1997.

26 USC 26 note.

26 USC 1 note.

26 USC 1 note.

26 USC 857 note.

26 USC 151 note.

26 USC 1233.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 55

SEC. 416. OTHER TECHNICAL CORRECTIONS.

(a) COORDINATION OF ADVANCED PAYMENTS OF EARNED INCOME

CREDIT.—

(1) Section 32(g)(2) is amended by striking ‘‘subpart’’ and

inserting ‘‘part’’. (2) The amendment made by this subsection shall take

effect as if included in section 474 of the Tax Reform Act

of 1984.

(b) SPECIAL RULE RELATED TO WASH SALE LOSSES.— (1) Section 1256(f) is amended by adding at the end the

following new paragraph: ‘‘(5) SPECIAL RULE RELATED TO LOSSES.—Section 1091

(relating to loss from wash sales of stock or securities)

shall not apply to any loss taken into account by reason

of paragraph (1) of subsection (a).’’. (2) The amendment made by this subsection shall take

effect as if included in section 5075 of the Technical and Miscellaneous Revenue Act of 1988.

(c) DISCLOSURE BY SOCIAL SECURITY ADMINISTRATION TO FED- ERAL CHILD SUPPORT AGENCIES.— (1) Section 6103(l)(8) is amended—

(A) in the heading, by striking ‘‘STATE AND LOCAL’’

and inserting ‘‘FEDERAL, STATE, AND LOCAL’’, and

(B) in subparagraph (A), by inserting ‘‘Federal or’’

before ‘‘State or local’’.

(2) The amendments made by this subsection shall take

effect on the date of the enactment of this Act.

(d) TREATMENT OF SETTLEMENTS UNDER PARTNERSHIP AUDIT

RULES.—

(1) The following provisions are each amended by inserting

‘‘or the Attorney General (or his delegate)’’ after ‘‘Secretary’’

each place it appears:

(A) Paragraphs (1) and (2) of section 6224(c).

(B) Section 6229(f)(2).

(C) Section 6231(b)(1)(C).

(D) Section 6234(g)(4)(A).

(2) The amendments made by this subsection shall apply

with respect to settlement agreements entered into after the

date of the enactment of this Act.

(e) AMENDMENT RELATED TO PROCEDURE AND ADMINISTRATION.—

(1) Section 6331(k)(3) (relating to no levy while certain

offers pending or installment agreement pending or in effect)

is amended to read as follows:

‘‘(3) CERTAIN RULES TO APPLY.—Rules similar to the rules

of—

‘‘(A) paragraphs (3) and (4) of subsection (i), and

‘‘(B) except in the case of paragraph (2)(C), paragraph

(5) of subsection (i),

shall apply for purposes of this subsection.’’.

(2) The amendment made by this subsection shall take

effect on the date of the enactment of this Act.

(f) MODIFIED ENDOWMENT CONTRACTS.—Paragraph (2) of section 318(a) of the Community Renewal Tax Relief Act of 2000

(114 Stat. 2763A–645) is repealed, and clause (ii) of section

7702A(c)(3)(A) shall read and be applied as if the amendment

made by such paragraph had not been enacted.

26 USC 7702A

and note.

Applicability.

Effective date.

26 USC 6331

note.

Applicability.

26 USC 6224

note.

Effective date.

26 USC 6103

note.

Effective date.

26 USC 1256

note.

Effective date.

26 USC 32 note.

26 USC 32.

116 STAT. 56 PUBLIC LAW 107–147—MAR. 9, 2002

SEC. 417. CLERICAL AMENDMENTS.

(1) The subsection (g) of section 25B that relates to termination is redesignated as subsection (h).

(2) The second sentence of section 42(h)(3)(C) is amended

by striking ‘‘the amounts described in’’ and all that follows

through the period and inserting ‘‘the amounts described in

clauses (ii) through (iv) over the aggregate housing credit dollar

amount allocated for such year.’’. (3) Clause (ii) of section 42(m)(1)(B) is amended by striking

the second ‘‘and’’ at the end of subclause (II) and by inserting ‘‘and’’ at the end of subclause (III).

(4) Section 51A(c)(1) is amended by striking ‘‘51(d)(10)’’ and inserting ‘‘51(d)(11)’’. (5) The flush sentence at the end of clause (ii) of section

56(a)(1)(A) is amended by striking ‘‘such 1250’’ and inserting ‘‘such section 1250’’. (6) Section 151(c)(6)(B)(iii) is amended by inserting ‘‘as’’ before ‘‘such terms’’. (7) Section 170(e)(6)(B)(i)(III) is amended by striking ‘‘2000,’’ and inserting ‘‘2000),’’. (8) Section 172(b)(1)(F)(i) is amended— (A) by striking ‘‘3 years’’ and inserting ‘‘3 taxable

years’’, and

(B) by striking ‘‘2 years’’ and inserting ‘‘2 taxable

years’’. (9) Section 351(h)(1) is amended by inserting a comma

after ‘‘liability’’. (10) Section 475(g)(3) is amended by striking ‘‘sections’’ and inserting ‘‘section’’. (11) Section 529(e)(3)(B)(i) is amended by striking ‘‘subsection (b)(7)’’ and inserting ‘‘subsection (b)(6)’’. (12) Section 741 is amended by striking ‘‘which have appreciated substantially in value’’. (13) Section 857(b)(7)(B)(i) is amended by striking ‘‘subsection 856(d)’’ and inserting ‘‘section 856(d)’’. (14) Subparagraph (B) of section 943(e)(4) is amended by

aligning the left margin of the flush language with subparagraph (A).

(15) Subparagraph (B) of section 995(b)(3) is amended by

striking ‘‘International Security Assistance and Arms Export

Control Act of 1976’’ and inserting ‘‘Arms Export Control Act’’. (16) Section 1394(c)(2) is amended by striking ‘‘subparagraph (A)’’ and inserting ‘‘paragraph (1)’’. (17)(A) The section heading for section 4980E is amended

to read as follows:

‘‘SEC. 4980E. FAILURE OF EMPLOYER TO MAKE COMPARABLE ARCHER

MSA CONTRIBUTIONS.’’.

(B) The item relating to section 4980E in the table of

sections for chapter 43 is amended to read as follows:

‘‘Sec. 4980E. Failure of employer to make comparable Archer MSA contributions.’’.

(18) Section 6105(c)(1) is amended by striking ‘‘any’’ in

subparagraphs (C) and (E).

(19)(A) Section 6227(d) is amended by striking ‘‘subsection

(b)’’ and inserting ‘‘subsection (c)’’.

(B) Section 6228 is amended—

26 USC 25B.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 57

(i) in subsection (a)(1), by striking ‘‘subsection (b) of

section 6227’’ and inserting ‘‘subsection (c) of section 6227’’,

(ii) in subsection (a)(3)(A), by striking ‘‘subsection (b)

of’’, and

(iii) in subsections (b)(1) and (b)(2)(A), by striking ‘‘subsection (c) of section 6227’’ and inserting ‘‘subsection (d)

of section 6227’’.

(C) Section 6231(b)(2)(B)(i) is amended by striking ‘‘section

6227(c)’’ and inserting ‘‘section 6227(d)’’.

(20) Section 1221(b)(1)(B)(i) is amended by striking

‘‘1256(b))’’ and inserting ‘‘1256(b)))’’.

(21) Section 159 of the Community Renewal Tax Relief

Act of 2000 (114 Stat. 2763A–624) is amended by striking

‘‘fuctions’’ and inserting ‘‘functions’’.

(22) The amendment to section 170(e)(6)(B)(iv) made by

section 165(b)(1) of the Community Renewal Tax Relief Act

of 2000 (114 Stat. 2763A–626) shall be applied as if it struck

‘‘in any of the grades K–12’’.

(23) Section 618(b)(2) of the Economic Growth and Tax

Relief Reconciliation Act of 2001 (Public Law 107–16; 115 Stat.

108) is amended—

(A) in subparagraph (A) by striking ‘‘203(d)’’ and

inserting ‘‘202(f)’’, and

(B) in subparagraphs (C), (D), and (E) by striking

‘‘203’’ and inserting ‘‘202(f)’’.

(24)(A) Section 525 of the Ticket to Work and Work Incentives Improvement Act of 1999 (Public Law 106–170; 113 Stat.

1928) is amended by striking ‘‘7200’’ and inserting ‘‘7201’’.

(B) Section 532(c)(2) of such Act (113 Stat. 1930) is

amended—

(i) in subparagraph (D), by striking ‘‘341(d)(3)’’ and

inserting ‘‘341(d)’’, and

(ii) in subparagraph (Q), by striking ‘‘954(c)(1)(B)(iii)

and inserting ‘‘954(c)(1)(B)’’.

SEC. 418. ADDITIONAL CORRECTIONS.

(a) AMENDMENTS RELATED TO SECTION 202 OF THE ECONOMIC

GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001.—

(1) Subsection (h) of section 23 is amended—

(A) by striking ‘‘subsection (a)(1)(B)’’ and inserting

‘‘subsection (a)(3)’’, and

(B) by adding at the end the following new flush sentence:

‘‘If any amount as increased under the preceding sentence is not

a multiple of $10, such amount shall be rounded to the nearest

multiple of $10.’’.

(2) Subsection (f) of section 137 is amended by adding

at the end the following new flush sentence:

‘‘If any amount as increased under the preceding sentence is not

a multiple of $10, such amount shall be rounded to the nearest

multiple of $10.’’.

(b) AMENDMENTS RELATED TO SECTION 204 OF THE ECONOMIC

GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001.—Section

21(d)(2) is amended—

(1) in subparagraph (A) by striking ‘‘$200’’ and inserting

‘‘$250’’, and

26 USC 954.

26 USC 341.

7 USC 7212 note.

26 USC 26, 904,

1400C.

26 USC 24.

26 USC 170.

Applicability.

26 USC 1400E

note.

26 USC 6231.

116 STAT. 58 PUBLIC LAW 107–147—MAR. 9, 2002

(2) in subparagraph (B) by striking ‘‘$400’’ and inserting

‘‘$500’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect as if included in the provisions of the Economic

Growth and Tax Relief Reconciliation Act of 2001 to which they

relate.

TITLE V—SOCIAL SECURITY HELD

HARMLESS; BUDGETARY TREATMENT

OF ACT

SEC. 501. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS.

(a) IN GENERAL.—Nothing in this Act (or an amendment made

by this Act) shall be construed to alter or amend title II of the

Social Security Act (or any regulation promulgated under that Act).

(b) TRANSFERS.—

(1) ESTIMATE OF SECRETARY.—The Secretary of the

Treasury shall annually estimate the impact that the enactment

of this Act has on the income and balances of the trust funds

established under section 201 of the Social Security Act (42

U.S.C. 401).

(2) TRANSFER OF FUNDS.—If, under paragraph (1), the Secretary of the Treasury estimates that the enactment of this

Act has a negative impact on the income and balances of

the trust funds established under section 201 of the Social

Security Act (42 U.S.C. 401), the Secretary shall transfer, not

less frequently than quarterly, from the general revenues of

the Federal Government an amount sufficient so as to ensure

that the income and balances of such trust funds are not

reduced as a result of the enactment of this Act.

SEC. 502. EMERGENCY DESIGNATION.

Congress designates as emergency requirements pursuant to

section 252(e) of the Balanced Budget and Emergency Deficit Control Act of 1985 the following amounts:

(1) An amount equal to the amount by which revenues

are reduced by this Act below the recommended levels of Federal revenues for fiscal year 2002, the total of fiscal years

2002 through 2006, and the total of fiscal years 2002 through

2011, provided in the conference report accompanying H. Con.

Res. 83, the concurrent resolution on the budget for fiscal

year 2002.

(2) Amounts equal to the amounts of new budget authority

and outlays provided in this Act in excess of the allocations

under section 302(a) of the Congressional Budget Act of 1974

to the Committee on Finance of the Senate for fiscal year

2002, the total of fiscal years 2002 through 2006, and the

total of fiscal years 2002 through 2011.

42 USC 401 note.

26 USC 21 note.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 59

TITLE VI—EXTENSIONS OF CERTAIN

EXPIRING PROVISIONS

SEC. 601. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS

AGAINST REGULAR AND MINIMUM TAX LIABILITY.

(a) IN GENERAL.—Paragraph (2) of section 26(a) is amended— (1) by striking ‘‘RULE FOR 2000 AND 2001.—’’ and inserting ‘‘RULE FOR 2000, 2001, 2002, AND 2003.—’’, and

(2) by striking ‘‘during 2000 or 2001,’’ and inserting ‘‘during

2000, 2001, 2002, or 2003,’’. (b) CONFORMING AMENDMENTS.— (1) Section 904(h) is amended by striking ‘‘during 2000

or 2001’’ and inserting ‘‘during 2000, 2001, 2002, or 2003’’. (2) The amendments made by sections 201(b), 202(f), and

618(b) of the Economic Growth and Tax Relief Reconciliation

Act of 2001 shall not apply to taxable years beginning during

2002 and 2003.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.

SEC. 602. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

(a) IN GENERAL.—Section 30 is amended—

(1) in subsection (b)(2)—

(A) by striking ‘‘December 31, 2001,’’ and inserting

‘‘December 31, 2003,’’, and

(B) in subparagraphs (A), (B), and (C), by striking

‘‘2002’’, ‘‘2003’’, and ‘‘2004’’, respectively, and inserting

‘‘2004’’, ‘‘2005’’, and ‘‘2006’’, respectively, and

(2) in subsection (e), by striking ‘‘December 31, 2004’’ and

inserting ‘‘December 31, 2006’’.

(b) CONFORMING AMENDMENTS.—

(1) Subparagraph (C) of section 280F(a)(1) is amended by

adding at the end the following new clause:

‘‘(iii) APPLICATION OF SUBPARAGRAPH.—This

subparagraph shall apply to property placed in service

after August 5, 1997, and before January 1, 2007.’’. (2) Subsection (b) of section 971 of the Taxpayer Relief

Act of 1997 is amended by striking ‘‘and before January 1,

2005’’. (c) EFFECTIVE DATE.—The amendments made by this section

shall apply to property placed in service after December 31, 2001.

SEC. 603. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN

RENEWABLE RESOURCES.

(a) IN GENERAL.—Subparagraphs (A), (B), and (C) of section

45(c)(3) are both amended by striking ‘‘2002’’ and inserting ‘‘2004’’.

(b) EFFECTIVE DATE.—The amendments made by subsection

(a) shall apply to facilities placed in service after December 31,

2001.

SEC. 604. WORK OPPORTUNITY CREDIT.

(a) IN GENERAL.—Subparagraph (B) of section 51(c)(4) is

amended by striking ‘‘2001’’ and inserting ‘‘2003’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to individuals who begin work for the employer after

December 31, 2001.

Applicability.

26 USC 51 note.

Applicability.

26 USC 45 note.

Applicability.

26 USC 30 note.

26 USC 280F

note.

Applicability.

26 USC 26 note.

26 USC 23 note.

26 USC 26.

116 STAT. 60 PUBLIC LAW 107–147—MAR. 9, 2002

SEC. 605. WELFARE-TO-WORK CREDIT.

(a) IN GENERAL.—Subsection (f) of section 51A is amended

by striking ‘‘2001’’ and inserting ‘‘2003’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to individuals who begin work for the employer after

December 31, 2001.

SEC. 606. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN

REFUELING PROPERTY.

(a) IN GENERAL.—Section 179A is amended—

(1) in subsection (b)(1)(B)—

(A) by striking ‘‘December 31, 2001,’’ and inserting

‘‘December 31, 2003,’’, and

(B) in clauses (i), (ii), and (iii), by striking ‘‘2002’’,

‘‘2003’’, and ‘‘2004’’, respectively, and inserting ‘‘2004’’,

‘‘2005’’, and ‘‘2006’’, respectively, and

(2) in subsection (f), by striking ‘‘December 31, 2004’’ and

inserting ‘‘December 31, 2006’’.

(b) EFFECTIVE DATE.—The amendments made by subsection

(a) shall apply to property placed in service after December 31,

2001.

SEC. 607. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR

OIL AND NATURAL GAS PRODUCED FROM MARGINAL

PROPERTIES.

(a) IN GENERAL.—Subparagraph (H) of section 613A(c)(6) is

amended by striking ‘‘2002’’ and inserting ‘‘2004’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to taxable years beginning after December 31, 2001.

SEC. 608. QUALIFIED ZONE ACADEMY BONDS.

(a) IN GENERAL.—Paragraph (1) of section 1397E(e) is amended

by striking ‘‘2000, and 2001’’ and inserting ‘‘2000, 2001, 2002,

and 2003’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to obligations issued after the date of the enactment

of this Act.

SEC. 609. COVER OVER OF TAX ON DISTILLED SPIRITS.

(a) IN GENERAL.—Paragraph (1) of section 7652(f) is amended

by striking ‘‘January 1, 2002’’ and inserting ‘‘January 1, 2004’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to articles brought into the United States after December

31, 2001.

SEC. 610. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO

MENTAL HEALTH BENEFITS.

(a) IN GENERAL.—Subsection (f) of section 9812, as amended

by the Departments of Labor, Health and Human Services, and

Education, and Related Agencies Appropriations Act, 2002, is

amended to read as follows:

‘‘(f) APPLICATION OF SECTION.—This section shall not apply

to benefits for services furnished—

‘‘(1) on or after September 30, 2001, and before January

10, 2002, and

‘‘(2) after December 31, 2003.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to plan years beginning after December 31, 2000.

26 USC 9812

note.

Applicability.

26 USC 7652

note.

Applicability.

26 USC 1397E

note.

Applicability.

26 USC 613A

note.

Applicability.

26 USC 179A

note.

Applicability.

26 USC 51A note.

26 USC 51A.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 61

SEC. 611. TEMPORARY SPECIAL RULES FOR TAXATION OF LIFE INSURANCE COMPANIES.

(a) REDUCTION IN MUTUAL LIFE INSURANCE COMPANY DEDUC- TIONS NOT TO APPLY IN CERTAIN YEARS.—Section 809 (relating

to reduction in certain deductions of material life insurance companies) is amended by adding at the end the following:

‘‘(j) DIFFERENTIAL EARNINGS RATE TREATED AS ZERO FOR CERTAIN YEARS.—Notwithstanding subsection (c) or (f), the differential

earnings rate shall be treated as zero for purposes of computing

both the differential earnings amount and the recomputed differential earnings amount for a mutual life insurance company’s taxable

years beginning in 2001, 2002, or 2003.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 2000.

SEC. 612. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

(a) IN GENERAL.—Paragraphs (2) and (3)(B) of section 220(i)

(defining cut-off year) are each amended by striking ‘‘2002’’ each

place it appears and inserting ‘‘2003’’.

(b) CONFORMING AMENDMENTS.—

(1) Paragraph (2) of section 220(j) is amended by striking

‘‘1998, 1999, or 2001’’ each place it appears and inserting ‘‘1998,

1999, 2001, or 2002’’.

(2) Subparagraph (A) of section 220(j)(4) is amended by

striking ‘‘and 2001’’ and inserting ‘‘2001, and 2002’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect on January 1, 2002.

SEC. 613. INCENTIVES FOR INDIAN EMPLOYMENT AND PROPERTY ON

INDIAN RESERVATIONS.

(a) EMPLOYMENT.—Subsection (f) of section 45A is amended

by striking ‘‘December 31, 2003’’ and inserting ‘‘December 31, 2004’’.

(b) PROPERTY.—Paragraph (8) of section 168(j) is amended by

striking ‘‘December 31, 2003’’ and inserting ‘‘December 31, 2004’’.

SEC. 614. SUBPART F EXEMPTION FOR ACTIVE FINANCING.

(a) IN GENERAL.—

(1) Section 953(e)(10) is amended—

(A) by striking ‘‘January 1, 2002’’ and inserting

‘‘January 1, 2007’’, and

(B) by striking ‘‘December 31, 2001’’ and inserting

‘‘December 31, 2006’’.

(2) Section 954(h)(9) is amended by striking ‘‘January 1,

2002’’ and inserting ‘‘January 1, 2007’’.

(b) LIFE INSURANCE AND ANNUITY CONTRACTS.—

(1) IN GENERAL.—Subparagraph (B) of section 954(i)(4) is

amended to read as follows:

‘‘(B) LIFE INSURANCE AND ANNUITY CONTRACTS.—

‘‘(i) IN GENERAL.—Except as provided in clause

(ii), the amount of the reserve of a qualifying insurance

company or qualifying insurance company branch for

any life insurance or annuity contract shall be equal

to the greater of—

‘‘(I) the net surrender value of such contract

(as defined in section 807(e)(1)(A)), or

‘‘(II) the reserve determined under paragraph

(5).

26 USC 220 note.

Applicability.

26 USC 809 note.

26 USC 809.

116 STAT. 62 PUBLIC LAW 107–147—MAR. 9, 2002

‘‘(ii) RULING REQUEST, ETC.—The amount of the

reserve under clause (i) shall be the foreign statement

reserve for the contract (less any catastrophe, deficiency, equalization, or similar reserves), if, pursuant

to a ruling request submitted by the taxpayer or as

provided in published guidance, the Secretary determines that the factors taken into account in determining the foreign statement reserve provide an appropriate means of measuring income.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.

SEC. 615. REPEAL OF REQUIREMENT FOR APPROVED DIESEL OR KEROSENE TERMINALS.

(a) IN GENERAL.—Subsection (e) of section 4101 is hereby

repealed.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall take effect on January 1, 2002.

SEC. 616. REAUTHORIZATION OF TANF SUPPLEMENTAL GRANTS FOR

POPULATION INCREASES FOR FISCAL YEAR 2002.

Section 403(a)(3) of the Social Security Act (42 U.S.C. 603(a)(3))

is amended by adding at the end the following:

‘‘(H) REAUTHORIZATION OF GRANTS FOR FISCAL YEAR

2002.—Notwithstanding any other provision of this

paragraph—

‘‘(i) any State that was a qualifying State under

this paragraph for fiscal year 2001 or any prior fiscal

year shall be entitled to receive from the Secretary

for fiscal year 2002 a grant in an amount equal to

the amount required to be paid to the State under

this paragraph for the most recent fiscal year in which

the State was a qualifying State;

‘‘(ii) subparagraph (G) shall be applied as if ‘2002’

were substituted for ‘2001’; and

‘‘(iii) out of any money in the Treasury of the

United States not otherwise appropriated, there are

appropriated for fiscal year 2002 such sums as are

necessary for grants under this subparagraph.’’.

SEC. 617. 1-YEAR EXTENSION OF CONTINGENCY FUND UNDER THE

TANF PROGRAM.

Section 403(b) of the Social Security Act (42 U.S.C. 603(b))

is amended—

(1) in paragraph (2), by striking ‘‘and 2001’’ and inserting

‘‘2001, and 2002’’; and

Applicability.

26 USC 4101

note.

26 USC 4101.

Applicability.

26 USC 953 note.

PUBLIC LAW 107–147—MAR. 9, 2002 116 STAT. 63

LEGISLATIVE HISTORY—H.R. 3090:

HOUSE REPORTS: No. 107–251 (Comm. on Ways and Means).

CONGRESSIONAL RECORD:

Vol. 147 (2001): Oct. 24, considered and passed House.

Nov. 13, 14, considered in Senate.

Vol. 148 (2002): Feb. 14, considered and passed Senate, amended.

Mar. 7, House concurred in Senate amendment with an

amendment. House amendment considered in Senate.

Mar. 8, Senate concurred in House amendment.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 38 (2002):

Mar. 9, Presidential remarks.

Æ

(2) in paragraph (3)(C)(ii), by striking ‘‘2001’’ and inserting ‘‘2002’’.

Approved March 9, 2002.