I

107TH CONGRESS

1ST SESSION H. R. 1037

To amend the Internal Revenue Code of 1986 to provide tax relief for

small businesses, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 15, 2001

Mr. MANZULLO (for himself, Ms. VELA ́ZQUEZ, Mr. HEFLEY, Mrs. KELLY, Mr.

ISSA, and Mr. GRUCCI) introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

tax relief for small businesses, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

5 (a) SHORT TITLE.—This Act may be cited as the

6 ‘‘Small Employer Tax Relief Act of 2001’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment

10 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 (c) TABLE OF CONTENTS.—The table of contents is

4 as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—TAX RELIEF

Sec. 101. Deduction for health insurance costs of self-employed individuals increased.

Sec. 102. Repeal of Federal unemployment surtax.

Sec. 103. Increase in expense treatment for small businesses.

Sec. 104. Increased deduction for business meal expenses.

Sec. 105. Clarification of cash accounting rules for small business.

Sec. 106. Alternative minimum tax.

Sec. 107. Permanent extension of research credit.

Sec. 108. Credit for expenses for long-term training of employees in highly

skilled small business trades.

TITLE II—TAX RELIEF FOR ENVIRONMENTAL PROTECTION

Sec. 201. Credit for dry or wet cleaning equipment using nonhazardous primary

process solvents.

Sec. 202. Credit for recycling or remanufacturing equipment.

TITLE III—TAX SIMPLIFICATION

Sec. 301. Depreciation modifications.

Sec. 302. Simplification of estimated tax rules.

Sec. 303. Exclusion from partnership filing requirements for married couples as

business co-owners.

Sec. 304. Increase in self-employment exemption amount.

Sec. 305. Repeal of recognition of gain rule for home office.

Sec. 306. Simplification of reporting requirements relating to higher education

tuition and related expenses.

TITLE IV—TAXPAYER PROTECTIONS

Sec. 401. Taxpayer’s right to have an IRS examination take place at another

site.

Sec. 402. Clarification of electronic filing.

Sec. 403. Taxpayer’s election with respect to recovery of costs and certain fees.

Sec. 404. Repeal of the failure-to-pay penalty.

Sec. 405. Repeal of interest on penalties.
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1 TITLE I—TAX RELIEF

2 SEC. 101. DEDUCTION FOR HEALTH INSURANCE COSTS OF

3 SELF-EMPLOYED INDIVIDUALS INCREASED.

4 (a) IN GENERAL.—Section 162(l)(1) (relating to spe5 cial rules for health insurance costs of self-employed indi6 viduals) is amended to read as follows:

7 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

8 of an individual who is an employee within the

9 meaning of section 401(c)(1), there shall be allowed

10 as a deduction under this section an amount equal

11 to the amount paid during the taxable year for in12 surance which constitutes medical care for the tax13 payer, the taxpayer’s spouse, and dependents.’’.

14 (b) CLARIFICATION OF LIMITATIONS ON OTHER COV15 ERAGE.—The first sentence of section 162(l)(2)(B) is

16 amended to read as follows: ‘‘Paragraph (1) shall not

17 apply to any taxpayer for any calendar month for which

18 the taxpayer participates in any subsidized health plan

19 maintained by any employer (other than an employer de20 scribed in section 401(c)(4)) of the taxpayer or the spouse

21 of the taxpayer.’’.

22 (c) DEDUCTION TAKEN INTO ACCOUNT FOR SELF23 EMPLOYMENT TAX PURPOSES.—Section 162(l) is amend24 ed by striking paragraph (4) and redesignating paragraph

25 (5) as paragraph (4).
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 102. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.

5 (a) IN GENERAL.—Section 3301 (relating to rate of

6 Federal unemployment tax) is amended—

7 (1) by striking ‘‘2007’’ and inserting ‘‘2000’’,

8 and

9 (2) by striking ‘‘2008’’ and inserting ‘‘2001’’.

10 (b) EFFECTIVE DATE.—The amendment made by

11 this section shall apply to calendar years beginning after

12 December 31, 2000.

13 SEC. 103. INCREASE IN EXPENSE TREATMENT FOR SMALL

14 BUSINESSES.

15 (a) IN GENERAL.—Section 179(b)(1) (relating to dol16 lar limitation) is amended to read as follows:

17 ‘‘(1) DOLLAR LIMITATION.—

18 ‘‘(A) IN GENERAL.—The aggregate cost

19 which may be taken into account under sub20 section (a) for any taxable year shall not exceed

21 $50,000.

22 ‘‘(B) INFLATION ADJUSTMENT.—In the

23 case of any taxable year beginning in a calendar

24 year after 2001, the dollar amount contained in
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1 subparagraph (A) shall be increased by an

2 amount equal to—

3 ‘‘(i) such dollar amount, multiplied by

4 ‘‘(ii) the cost-of-living adjustment de5 termined under section 1(f)(3) for the cal6 endar year in which the taxable year be7 gins, by substituting ‘‘calendar year 2000’’

8 for ‘‘calendar year 1992’’ in subparagraph

9 (B) thereof.

10 If any amount as adjusted under this subpara11 graph is not a multiple of $1,000, such amount

12 shall be rounded to the nearest multiple of

13 $1,000.’’.

14 (b) EXPANSION OF PHASE-OUT OF LIMITATION.—

15 Section 179(b)(2) is amended to read as follows:

16 ‘‘(2) REDUCTION IN LIMITATION.—

17 ‘‘(A) IN GENERAL.—The limitation under

18 paragraph (1) for any taxable year shall be re19 duced (but not below zero) by the amount by

20 which the cost of section 179 property for

21 which a deduction is allowable (without regard

22 to this subsection) under subsection (a) for

23 such taxable year exceeds $400,000.

24 ‘‘(B) INFLATION ADJUSTMENT.—In the

25 case of any taxable year beginning in a calendar
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1 year after 2001, the dollar amount contained in

2 subparagraph (A) shall be increased by an

3 amount equal to—

4 ‘‘(i) such dollar amount, multiplied by

5 ‘‘(ii) the cost-of-living adjustment de6 termined under section 1(f)(3) for the cal7 endar year in which the taxable year be8 gins, by substituting ‘calendar year 2000’

9 for ‘calendar year 1992’ in subparagraph

10 (B) thereof.

11 If any amount as adjusted under this subpara12 graph is not a multiple of $10,000, such

13 amount shall be rounded to the nearest multiple

14 of $10,000.’’.

15 (c) TIME OF DEDUCTION.—The second sentence of

16 section 179(a) (relating to election to expense certain de17 preciable business assets) is amended by inserting ‘‘(or,

18 if the taxpayer elects, the preceding taxable year if the

19 property was purchased in such preceding year)’’ after

20 ‘‘service’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 2000.
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1 SEC. 104. INCREASED DEDUCTION FOR BUSINESS MEAL EX2 PENSES.

3 (a) IN GENERAL.—Section 274(n)(1) (relating to

4 only 50 percent of meal and entertainment expenses al5 lowed as deduction) is amended by striking ‘‘50 percent’’

6 in the text and inserting ‘‘the allowable percentage’’.

7 (b) ALLOWABLE PERCENTAGE.—Section 274(n) is

8 amended by redesignating paragraphs (2) and (3) as para9 graphs (3) and (4), respectively, and by inserting after

10 paragraph (1) the following new paragraph:

11 ‘‘(2) ALLOWABLE PERCENTAGE.—For purposes

12 of paragraph (1), the allowable percentage is—

13 ‘‘(A) in the case of amounts for items de14 scribed in paragraph (1)(B), 50 percent, and

15 ‘‘(B) in the case of expenses for food or

16 beverages, 80 percent.’’.

17 (c) CLARIFICATION OF SPECIAL RULE FOR INDIVID18 UALS SUBJECT TO FEDERAL HOURS OF SERVICE.—Sec19 tion 274(n)(4) (relating to limited percentages of meal and

20 entertainment expenses allowed as deduction), as redesig21 nated by subsection (b), is amended to read as follows:

22 ‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT

23 TO FEDERAL HOURS OF SERVICE.—In the case of

24 any expenses for food or beverages consumed while

25 away from home (within the meaning of section

26 162(a)(2)) by an individual during, or incident to,
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1 the period of duty subject to the hours of service

2 limitations of the Department of Transportation,

3 paragraph (2)(B) shall apply to such expenses.’’.

4 (d) CONFORMING AMENDMENT.—The heading for

5 subsection (n) of section 274 is amended by striking ‘‘50

6 PERCENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.

7 (e) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 SEC. 105. CLARIFICATION OF CASH ACCOUNTING RULES

11 FOR SMALL BUSINESS.

12 (a) CASH ACCOUNTING PERMITTED.—Section 446

13 (relating to general rule for methods of accounting) is

14 amended by adding at the end the following new sub15 section:

16 ‘‘(g) SMALL BUSINESS TAXPAYERS PERMITTED TO

17 USE CASH ACCOUNTING METHOD WITHOUT LIMITA18 TION.—

19 ‘‘(1) IN GENERAL.—Notwithstanding any other

20 provision of this title, an eligible taxpayer shall not

21 be required to use an accrual method of accounting

22 for any taxable year.

23 ‘‘(2) ELIGIBLE TAXPAYER.—For purposes of

24 this subsection—
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1 ‘‘(A) IN GENERAL.—A taxpayer is an eligi2 ble taxpayer with respect to any taxable year

3 if—

4 ‘‘(i) for all prior taxable years begin5 ning after December 31, 1999, the tax6 payer (or any predecessor) met the gross

7 receipts test of subparagraph (B), and

8 ‘‘(ii) the taxpayer is not a tax shelter

9 (as defined in section 448(d)(3)).

10 ‘‘(B) GROSS RECEIPTS TEST.—A taxpayer

11 meets the gross receipts test of this subpara12 graph for any prior taxable year if the average

13 annual gross receipts of the taxpayer (or any

14 predecessor) for the 3-taxable-year period end15 ing with such prior taxable year does not exceed

16 $5,000,000. The rules of paragraphs (2) and

17 (3) of section 448(c) shall apply for purposes of

18 the preceding sentence.

19 ‘‘(C) INFLATION ADJUSTMENT.—In the

20 case of any taxable year beginning in a calendar

21 year after 2001, the dollar amount contained in

22 subparagraph (B) shall be increased by an

23 amount equal to—

24 ‘‘(i) such dollar amount, multiplied by
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1 ‘‘(ii) the cost-of-living adjustment de2 termined under section 1(f)(3) for the cal3 endar year in which the taxable year be4 gins, by substituting ‘‘calendar year 2000’’

5 for ‘‘calendar year 1992’’ in subparagraph

6 (B) thereof.

7 If any amount as adjusted under this subpara8 graph is not a multiple of $100,000, such

9 amount shall be rounded to the nearest multiple

10 of $100,000.’’.

11 (b) CLARIFICATION OF INVENTORY RULES FOR

12 SMALL BUSINESS.—Section 471 (relating to general rule

13 for inventories) is amended by redesignating subsection (c)

14 as subsection (d) and by inserting after subsection (b) the

15 following new subsection:

16 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

17 TO USE INVENTORIES.—

18 ‘‘(1) IN GENERAL.—An eligible taxpayer shall

19 not be required to use inventories under this section

20 for a taxable year.

21 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

22 INVENTORIES.—If an eligible taxpayer elects not to

23 use inventories with respect to any property for any

24 taxable year beginning after December 31, 2000,
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1 such property shall be treated as a material or sup2 ply which is not incidental.

3 ‘‘(3) ELIGIBLE TAXPAYER.—For purposes of

4 this subsection, the term ‘eligible taxpayer’ has the

5 meaning given such term by section 446(g)(2).’’.

6 (c) INDEXING OF GROSS RECEIPTS TEST.—Section

7 448(c) (relating to $5,000,000 gross receipts test) is

8 amended by adding at the end the following new para9 graph:

10 ‘‘(4) INFLATION ADJUSTMENT.—In the case of

11 any taxable year beginning in a calendar year after

12 2001, the dollar amount contained in paragraph (1)

13 shall be increased by an amount equal to—

14 ‘‘(A) such dollar amount, multiplied by

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar

17 year in which the taxable year begins, by sub18 stituting ‘‘calendar year 2000’’ for ‘‘calendar

19 year 1992’’ in subparagraph (B) thereof.

20 If any amount as adjusted under this paragraph is

21 not a multiple of $100,000, such amount shall be

22 rounded to the nearest multiple of $100,000.’’.

23 (d) EFFECTIVE DATE AND SPECIAL RULES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to taxable years beginning

3 after December 31, 2000.

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In

5 the case of any taxpayer changing the taxpayer’s

6 method of accounting for any taxable year under the

7 amendments made by this section—

8 (A) such change shall be treated as initi9 ated by the taxpayer;

10 (B) such change shall be treated as made

11 with the consent of the Secretary of the Treas12 ury; and

13 (C) the net amount of the adjustments re14 quired to be taken into account by the taxpayer

15 under section 481 of the Internal Revenue Code

16 of 1986 shall be taken into account over a pe17 riod (not greater than 4 taxable years) begin18 ning with such taxable year.

19 SEC. 106. ALTERNATIVE MINIMUM TAX.

20 (a) REPEAL OF ALTERNATIVE MINIMUM TAX ON IN21 DIVIDUALS.—

22 (1) IN GENERAL.—Section 55(a) (relating to al23 ternative minimum tax) is amended by adding at the

24 end the following new flush sentence:
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1 ‘‘For purposes of this title, the tentative minimum tax on

2 any taxpayer other than a corporation for any taxable year

3 beginning after December 31, 2004, shall be zero.’’.

4 (2) REDUCTION OF TAX ON INDIVIDUALS PRIOR

5 TO REPEAL.—Section 55 is amended by adding at

6 the end the following new subsection:

7 ‘‘(f) PHASEOUT OF TAX ON INDIVIDUALS.—

8 ‘‘(1) IN GENERAL.—The tax imposed by this

9 section on a taxpayer other than a corporation for

10 any taxable year beginning after December 31,

11 2000, and before January 1, 2005, shall be the ap12 plicable percentage of the tax which would be im13 posed but for this subsection.

14 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

15 of paragraph (1), the applicable percentage shall be

16 determined in accordance with the following table:

‘‘For taxable years beginning The applicable

in calendar year— percentage is—

2001 ............................................................................. 80

2002 ............................................................................. 60

2003 ............................................................................. 40

2004 ............................................................................. 20.’’.

17 (3) NONREFUNDABLE PERSONAL CREDITS

18 FULLY ALLOWED AGAINST REGULAR TAX LIABIL19 ITY.—

20 (A) IN GENERAL.—Section 26(a) (relating

21 to limitation based on amount of tax) is amend22 ed to read as follows:
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1 ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The

2 aggregate amount of credits allowed by this subpart for

3 the taxable year shall not exceed the taxpayer’s regular

4 tax liability for the taxable year.’’.

5 (B) CHILD CREDIT.—Section 24(d) is

6 amended by striking paragraph (2) and by re7 designating paragraph (3) as paragraph (2).

8 (4) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to taxable years begin10 ning after December 31, 2000.

11 (b) INCOME AVERAGING NOT TO INCREASE ALTER12 NATIVE MINIMUM TAX LIABILITY.—

13 (1) IN GENERAL.—Section 55(c) (relating to

14 regular tax) is amended by redesignating paragraph

15 (2) as paragraph (3) and by inserting after para16 graph (1) the following:

17 ‘‘(2) COORDINATION WITH INCOME AVERAGING

18 FOR FARMERS.—Solely for purposes of this section,

19 section 1301 (relating to averaging of farm income)

20 shall not apply in computing the regular tax.’’.

21 (2) EFFECTIVE DATE.—The amendment made

22 by this subsection shall apply to taxable years begin23 ning after December 31, 2000.

24 (c) EXPANSION OF THE EXEMPTION FROM THE AL25 TERNATIVE MINIMUM TAX FOR SMALL CORPORATIONS.—
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1 (1) IN GENERAL.—Section 55(e)(1)(A) (relating

2 to exemption for small corporations) is amended to

3 read as follows:

4 ‘‘(A) $10,000,000 GROSS RECEIPTS

5 TEST.—The tentative minimum tax of a cor6 poration shall be zero for any taxable year if

7 the corporation’s average annual gross receipts

8 for all 3-taxable-year periods ending before such

9 taxable year does not exceed $10,000,000. For

10 purposes of the preceding sentence, only taxable

11 years beginning after December 31, 1997, shall

12 be taken into account.’’.

13 (2) GROSS RECEIPTS TEST FOR FIRST 3-YEAR

14 PERIOD.—Section 55(e)(1)(B) is amended to read as

15 follows:

16 ‘‘(B) $7,500,000 GROSS RECEIPTS TEST

17 FOR FIRST 3-YEAR PERIOD.—Subparagraph (A)

18 shall be applied by substituting ‘$7,500,000’ for

19 ‘$10,000,000’ for the first 3-taxable-year period

20 (or portion thereof) of the corporation which is

21 taken into account under subparagraph (A).’’.

22 (3) EFFECTIVE DATE.—The amendments made

23 by this subsection shall apply to taxable years begin24 ning after December 31, 2000.
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1 SEC. 107. PERMANENT EXTENSION OF RESEARCH CREDIT.

2 (a) IN GENERAL.—Section 41 (relating to credit for

3 increasing research activities) is amended by striking sub4 section (h).

5 (b) CONFORMING AMENDMENT.—Section 45C(b)(1)

6 is amended by striking subparagraph (D).

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to amounts paid or incurred after

9 the date of the enactment of this Act.

10 SEC. 108. CREDIT FOR EXPENSES FOR LONG-TERM TRAIN11 ING OF EMPLOYEES IN HIGHLY SKILLED

12 SMALL BUSINESS TRADES.

13 (a) IN GENERAL.—Subpart D of part IV of sub14 chapter A of chapter 1 (relating to business-related cred15 its) is amended by adding at the end the following new

16 section:

17 ‘‘SEC. 45E. EXPENSES FOR LONG-TERM TRAINING OF EM18 PLOYEES IN HIGHLY SKILLED SMALL BUSI19 NESS TRADES.

20 ‘‘(a) GENERAL RULE.—For purposes of section 38,

21 in the case of a small business employer, the highly skilled

22 trades training credit determined under this section for

23 the taxable year is $15,000 for each employee having a

24 qualified training year ending with or within such taxable

25 year (whether or not such employee is an employee of the

26 taxpayer as of the close of such taxable year).
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1 ‘‘(b) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) SMALL BUSINESS EMPLOYER.—

3 ‘‘(A) IN GENERAL.—The term ‘small busi4 ness employer’ means, with respect to any tax5 able year, any employer who employed an aver6 age of 250 or fewer employees on business days

7 during such taxable year.

8 ‘‘(B) CONTROLLED GROUPS.—For pur9 poses of subparagraph (A), all persons treated

10 as a single employer under subsection (b), (c),

11 (m), or (o) of section 414 shall be treated as a

12 single employer.

13 ‘‘(2) QUALIFIED TRAINING YEAR.—

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

15 training year’ means each year during the

16 training period in which the employee received

17 at least 1,500 hours of training (including on18 the-job training and training at multi-employer

19 training facilities) from the taxpayer (or any

20 predecessor) under a qualified training program

21 as an apprentice in any highly skilled trade.

22 ‘‘(B) HIGHLY SKILLED TRADES.—For pur23 poses of subparagraph (A), the term ‘highly

24 skilled trades’ means—

25 ‘‘(i) precision machinists,
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1 ‘‘(ii) die makers,

2 ‘‘(iii) mold makers,

3 ‘‘(iv) tool and die designers,

4 ‘‘(v) heating, ventilating, air condi5 tioning, refrigeration, and roofing contrac6 tors,

7 ‘‘(vi) the trade of masonry,

8 ‘‘(vii) plumbers,

9 ‘‘(viii) pipefitters,

10 ‘‘(ix) patternmakers,

11 ‘‘(x) foundry technicians,

12 ‘‘(xi) electricians,

13 ‘‘(xii) recreational marine production

14 and design workers,

15 ‘‘(xiii) 2-way radio technicians, and

16 ‘‘(xiv) other highly skilled trades spec17 ified in regulations prescribed by the Sec18 retary.

19 Such term shall not include any trade if the

20 customary apprenticeship period for such trade

21 is less than 2 years.

22 ‘‘(C) QUALIFIED TRAINING PROGRAM.—

23 ‘‘(i) IN GENERAL.—The term ‘quali24 fied training program’ means a written
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1 plan of study and training for individuals

2 in, or entering into, highly skilled trades.

3 ‘‘(ii) DESCRIPTION OF PROGRAMS.—A

4 plan under clause (i) must be a program

5 described in one of the following sub6 clauses:

7 ‘‘(I) An apprenticeship program

8 registered and certified with the Sec9 retary of Labor under section 1 of the

10 National Apprenticeship Act (29

11 U.S.C. 50).

12 ‘‘(II) A program licensed, reg13 istered, or certified by the workforce

14 investment board or apprenticeship

15 agency or council of a State or admin16 istered in compliance with apprentice17 ship laws of a State.

18 ‘‘(III) A program conducted by a

19 vocational or technical education

20 school, community college, or indus21 trial or trade training organization.

22 ‘‘(IV) A program which conforms

23 to apprentice training programs devel24 oped or administered by an employer

25 trade group or committee.
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1 ‘‘(V) An industry sponsored or

2 administered program which is clearly

3 identified and commonly recognized

4 within an industry and which meets

5 the requirements of clause (iii).

6 ‘‘(iii) REQUIREMENTS.—A program

7 meets the requirements of this clause if

8 such program—

9 ‘‘(I) is accessible to individuals

10 without discrimination on the basis of

11 race, sex, color, religion, or national

12 origin,

13 ‘‘(II) provides an overview of the

14 trade, including the history and mod15 ern developments in such trade,

16 ‘‘(III) provides related instruc17 tion of the fundamental, intermediate,

18 and advanced skills, techniques, and

19 materials of the trade,

20 ‘‘(IV) provides training in math,

21 measurement, and blueprint reading

22 skills, if such skills are required in the

23 trade,

24 ‘‘(V) provides training on trade

25 specific tools and equipment,
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1 ‘‘(VI) provides on-the-job train2 ing which allows performance of work

3 under close supervision of an instruc4 tor or skilled worker, and

5 ‘‘(VII) provides periodic review

6 and evaluation of participants to dem7 onstrate proficiency in skills, including

8 the use of tests and assessment of in9 dividual and group projects.

10 ‘‘(3) TRAINING PERIOD.—The term ‘training

11 period’ means, with respect to an employee, the

12 period—

13 ‘‘(A) beginning on the date that the em14 ployee begins employment with the taxpayer as

15 an apprentice in the highly skilled trade, and

16 ‘‘(B) ending on the earlier of—

17 ‘‘(i) the date that such apprenticeship

18 with the employer ends, or

19 ‘‘(ii) the date which is 4 years after

20 the date referred to in subparagraph (A).

21 ‘‘(c) COORDINATION WITH OTHER CREDITS.—The

22 amount of credit otherwise allowable under sections 51(a)

23 and 1396(a) with respect to any employee shall be reduced

24 by the credit allowed by this section with respect to such

25 employee.’’.
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1 (b) CREDIT MADE PART OF GENERAL BUSINESS

2 CREDIT.—Subsection (b) of section 38 is amended by

3 striking ‘‘plus’’ at the end of paragraph (12), by striking

4 the period at the end of paragraph (13) and inserting ‘‘,

5 plus’’, and by adding at the end the following new para6 graph:

7 ‘‘(14) in the case of a small business employer

8 (as defined in section 45E(b)), the highly skilled

9 trades training credit determined under section

10 45E(a).’’.

11 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C is

12 amended by adding at the end the following new sub13 section:

14 ‘‘(d) CREDIT FOR TRAINING EXPENSES FOR EM15 PLOYEES IN HIGHLY SKILLED SMALL BUSINESS

16 TRADES.—No deduction shall be allowed for that portion

17 of the expenses otherwise allowable as a deduction for the

18 taxable year which is equal to the amount of the credit

19 determined for the taxable year under section 45E(a).’’.

20 (d) CLERICAL AMENDMENT.—The table of sections

21 for subpart D of part IV of subchapter A of chapter 1

22 is amended by adding at the end the following new item:

‘‘Sec. 45E. Expenses for long-term training of employees in highly

skilled small business trades.’’.

23 (e) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to expenses paid or incurred in
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1 the taxable years ending after the date of the enactment

2 of this Act.

3 TITLE II—TAX RELIEF FOR

4 ENVIRONMENTAL PROTECTION

5 SEC. 201. CREDIT FOR DRY OR WET CLEANING EQUIPMENT

6 USING NONHAZARDOUS PRIMARY PROCESS

7 SOLVENTS.

8 (a) IN GENERAL.—Section 46 of the Internal Rev9 enue Code of 1986 (relating to amount of investment cred10 it) is amended by striking ‘‘and’’ at the end of paragraph

11 (2), by striking the period at the end of paragraph (3)

12 and inserting ‘‘, and’’, and by adding at the end thereof

13 the following paragraph:

14 ‘‘(4) the dry or wet cleaning equipment credit.’’.

15 (b) DRY OR WET CLEANING EQUIPMENT CREDIT.—

16 Section 48 of such Code is amended by adding at the end

17 the following new subsection:

18 ‘‘(c) DRY OR WET CLEANING EQUIPMENT USING

19 NONHAZARDOUS PRIMARY PROCESS SOLVENTS.—

20 ‘‘(1) IN GENERAL.—For purposes of section 46,

21 the dry or wet cleaning equipment credit for any

22 taxable year is 20 percent of the basis of each quali23 fied dry or wet cleaning property placed in service

24 during the taxable year (40 percent of such basis in

25 the case of such property placed in service in an em-
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1 powerment zone, enterprise community, or renewal

2 community).

3 ‘‘(2) LIMITATION.—The credit under this sub4 section for the taxable year shall apply to qualified

5 dry or wet cleaning property placed in service during

6 such year at each business premise of the taxpayer.

7 ‘‘(3) QUALIFIED DRY OR WET CLEANING PROP8 ERTY.—For purposes of this subsection, the term

9 ‘qualified dry or wet cleaning property’ means equip10 ment designed primarily to clean textiles by profes11 sionals using special technology, detergents and ad12 ditives to minimize potential for adverse effects, or

13 appropriately dry or apply restorative finishing pro14 cedures to such textiles if—

15 ‘‘(A) such equipment does not use any haz16 ardous solvent as the primary process solvent,

17 ‘‘(B) the original use of such property

18 commences with the taxpayer, and

19 ‘‘(C) with respect to which depreciation (or

20 amortization in lieu of depreciation) is allow21 able.

22 ‘‘(4) PRIMARY PROCESS SOLVENT.—For pur23 poses of paragraph (3), the term ‘primary process

24 solvent’ means the primary liquid in which clothing,

25 other fabric, and sensitive textiles are cleaned or
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1 which is used to appropriately dry or apply restora2 tive finishing procedures to textiles, cleaned, exclud3 ing detergent formulations.

4 ‘‘(5) HAZARDOUS SOLVENT.—For purposes of

5 paragraph (3), the term ‘hazardous solvent’ means

6 any solvent any portion of which consists of a

7 chlorinated solvent, a volatile organic compound, or

8 any other hazardous regulated substance, or which

9 contains any substance determined by the Adminis10 trator of the Environmental Protection Agency, the

11 Director of the National Institute for Occupational

12 Safety and Health, the Director of the International

13 Agency for Research on Cancer, the Director of the

14 National Institute of Environmental Health

15 Sciences’ National Toxicology Program, or the direc16 tor of any other appropriate Federal agency to

17 possess—

18 ‘‘(A) carcinogenic potential in humans, or

19 ‘‘(B) bioaccumulative properties.’’.

20 (c) CREDIT ALLOWED AGAINST REGULAR AND MIN21 IMUM TAX.—

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

23 of such Code (relating to limitation based on amount

24 of tax) is amended by redesignating paragraph (3)
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1 as paragraph (4) and by inserting after paragraph

2 (2) the following:

3 ‘‘(3) SPECIAL RULES FOR DRY OR WET CLEAN4 ING EQUIPMENT CREDIT.—

5 ‘‘(A) IN GENERAL.—In the case of the dry

6 or wet cleaning equipment credit—

7 ‘‘(i) this section and section 39 shall

8 be applied separately with respect to the

9 credit, and

10 ‘‘(ii) in applying paragraph (1) to the

11 credit—

12 ‘‘(I) subparagraph (A) thereof

13 shall not apply, and

14 ‘‘(II) the limitation under para15 graph (1) (as modified by subclause

16 (I)) shall be reduced by the credit al17 lowed under subsection (a) for the

18 taxable year (other than the dry or

19 wet cleaning equipment credit).

20 ‘‘(B) DRY OR WET CLEANING EQUIPMENT

21 CREDIT.—For purposes of this subsection, the

22 term ‘dry or wet cleaning equipment credit’

23 means the credit allowable under subsection (a)

24 by reason of section 46(4).’’.
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1 (2) CONFORMING AMENDMENT.—Subclause (II)

2 of section 38(c)(2)(A)(ii) of such Code is amended

3 by inserting ‘‘or the dry or wet cleaning equipment

4 credit’’ after ‘‘employment credit’’.

5 (d) CLERICAL AMENDMENTS.—

6 (1) The section heading for section 48 of such

7 Code is amended to read as follows:

8 ‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY

9 OR WET CLEANING EQUIPMENT CREDIT.’’.

10 (2) The item relating to section 48 in the table

11 of sections for subpart E of part IV of subchapter

12 A of chapter 1 of such Code is amended to read as

13 follows:

‘‘Sec. 48. Energy credit; reforestation credit; dry or wet cleaning

equipment credit.’’.

14 (e) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to property placed in service after

16 December 31, 2000.

17 SEC. 202. CREDIT FOR RECYCLING OR REMANUFACTURING

18 EQUIPMENT.

19 (a) IN GENERAL.—Section 46 (relating to amount of

20 investment credit), as amended by section 201, is amended

21 by striking ‘‘and’’ at the end of paragraph (3), by striking

22 the period at the end of paragraph (4) and inserting ‘‘,

23 and’’, and by adding at the end the following new para24 graph:
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1 ‘‘(5) the reclamation credit.’’

2 (b) RECLAMATION CREDIT.—Section 48 (relating to

3 energy credit and reforestation credit), as so amended, is

4 amended by adding at the end the following new sub5 section:

6 ‘‘(d) RECLAMATION CREDIT.—

7 ‘‘(1) IN GENERAL.—For purposes of section 46,

8 the reclamation credit for any taxable year is 20

9 percent of the basis of each qualified reclamation

10 property placed in service during the taxable year.

11 ‘‘(2) QUALIFIED RECLAMATION PROPERTY.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 section, the term ‘qualified reclamation prop14 erty’ means property—

15 ‘‘(i) which is qualified recycling prop16 erty or qualified remanufacturing property,

17 ‘‘(ii) which is tangible property (not

18 including a building and its structural

19 components),

20 ‘‘(iii) with respect to which deprecia21 tion (or amortization in lieu of deprecia22 tion) is allowable,

23 ‘‘(iv) which has a useful life of at least

24 5 years, and

25 ‘‘(v) which is—
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1 ‘‘(I) acquired by purchase (as de2 fined in section 179(d)(2)) by the tax3 payer if the original use of such prop4 erty commences with the taxpayer, or

5 ‘‘(II) constructed by or for the

6 taxpayer.

7 ‘‘(B) DOLLAR LIMITATION.—

8 ‘‘(i) IN GENERAL.—The basis of quali9 fied reclamation property taken into ac10 count under paragraph (1) for any taxable

11 year shall not exceed $10,000,000 for a

12 taxpayer.

13 ‘‘(ii) TREATMENT OF CONTROLLED

14 GROUP.—For purposes of clause (i)—

15 ‘‘(I) all component members of a

16 controlled group shall be treated as

17 one taxpayer, and

18 ‘‘(II) the Secretary shall appor19 tion the dollar limitation in such

20 clause among the component members

21 of such controlled group in such man22 ner as he shall by regulation pre23 scribe.

24 ‘‘(iii) TREATMENT OF PARTNERSHIPS

25 AND S CORPORATIONS.—In the case of a
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1 partnership, the dollar limitation in clause

2 (i) shall apply with respect to the partner3 ship and with respect to each partner. A

4 similar rule shall apply in the case of an

5 S corporation and its shareholders.

6 ‘‘(iv) CONTROLLED GROUP DE7 FINED.—For purposes of clause (ii), the

8 term ‘controlled group’ has the meaning

9 given such term by section 1563(a), except

10 that ‘more than 50 percent’ shall be sub11 stituted for ‘at least 80 percent’ each place

12 it appears in section 1563(a)(1).

13 ‘‘(3) CERTAIN PROGRESS EXPENDITURE RULES

14 MADE APPLICABLE.—Rules similar to the rules of

15 subsections (c)(4) and (d) of section 46 (as in effect

16 on the day before the date of the enactment of the

17 Revenue Reconciliation Act of 1990) shall apply for

18 purposes of this subsection.

19 ‘‘(4) DEFINITIONS.—For purposes of this

20 subsection—

21 ‘‘(A) QUALIFIED RECYCLING PROPERTY.—

22 The term ‘qualified recycling property’ means

23 equipment used exclusively to collect, distribute,

24 or sort used ferrous or nonferrous metals. The

25 term does not include equipment used to collect,
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1 distribute, or sort precious metals such as gold,

2 silver, or platinum unless such use is coinci3 dental to the collection, distribution, or sorting

4 of other used ferrous or nonferrous metals.

5 ‘‘(B) QUALIFIED REMANUFACTURING

6 PROPERTY.—The term ‘qualified remanufac7 turing property’ means equipment used pri8 marily by the taxpayer in the business of re9 building or remanufacturing a used product or

10 part, but only if—

11 ‘‘(i) the rebuilt or remanufactured

12 product or part includes 50 percent or less

13 virgin material, and

14 ‘‘(ii) the equipment is not used pri15 marily in a process occurring after the

16 product or part is rebuilt or remanufac17 tured.

18 ‘‘(5) COORDINATION WITH REHABILITATION

19 AND ENERGY CREDITS.—For purposes of this

20 section—

21 ‘‘(A) the basis of any qualified reclamation

22 property shall be reduced by that portion of the

23 basis of any property which is attributable to

24 qualified rehabilitation expenditures (as defined

25 in section 47(c)(2)) or to the energy percentage
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1 of energy property (as determined under section

2 48(a)), and

3 ‘‘(B) expenditures taken into account

4 under either section 47 or 48(a) shall not be

5 taken into account under this section.’’.

6 (c) SPECIAL BASIS ADJUSTMENT RULE.—Paragraph

7 (3) of section 50(c) (relating to basis adjustment to invest8 ment credit property) is amended by striking ‘‘energy

9 credit or reforestation credit’’ and inserting ‘‘energy cred10 it, reforestation credit, or reclamation credit’’.

11 (d) CLERICAL AMENDMENTS.—

12 (1) The section heading for section 48 is

13 amended to read as follows:

14 ‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY

15 OR WET CLEANING EQUIPMENT CREDIT; REC16 LAMATION CREDIT.’’

17 (2) The item relating to section 48 in the table

18 of sections for subpart E of part IV of subchapter

19 A of chapter 1 is amended to read as follows:

‘‘Sec. 48. Energy credit; reforestation credit; dry or wet cleaning

equipment credit; reclamation credit.’’

20 (e) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to property placed in service on

22 or after January 1, 2002.
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1 TITLE III—TAX SIMPLIFICATION

2 SEC. 301. DEPRECIATION MODIFICATIONS.

3 (a) COMPUTER SOFTWARE ELIGIBLE FOR EXPENS4 ING.—

5 (1) IN GENERAL.—The heading and first sen6 tence of section 179(d)(1) (relating to section 179

7 property) are amended to read as follows:

8 ‘‘(1) SECTION 179 PROPERTY.—For purposes of

9 this section, the term ‘section 179 property’ means

10 property—

11 ‘‘(A) which is—

12 ‘‘(i) tangible property to which section

13 168 applies, or

14 ‘‘(ii) computer software (as defined in

15 section 197(e)(3)(B)) to which section 167

16 applies,

17 ‘‘(B) which is section 1245 property (as

18 defined in section 1245(a)(3)), and

19 ‘‘(C) which is acquired by purchase for use

20 in the active conduct of a trade or business.’’.

21 (2) NO COMPUTER SOFTWARE INCLUDED AS

22 SECTION 197 INTANGIBLE.—

23 (A) IN GENERAL.—Section 197(e)(3)(A) is

24 amended to read as follows:
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1 ‘‘(A) IN GENERAL.—Any computer soft2 ware.’’.

3 (B) CONFORMING AMENDMENT.—Section

4 167(f)(1)(B) is amended by striking ‘‘; except

5 that such term shall not include any such soft6 ware which is an amortizable section 197 intan7 gible’’.

8 (b) 2-YEAR APPLICABLE RECOVERY PERIOD FOR

9 DEPRECIATION OF COMPUTERS AND PERIPHERAL EQUIP10 MENT.—

11 (1) IN GENERAL.—Section 168(c) (relating to

12 applicable recovery period) is amended by adding at

13 the end the following flush sentence:

14 ‘‘In the case of 5-year property which is a computer or

15 peripheral equipment, the applicable recovery period shall

16 be 2 years.’’.

17 (2) CONFORMING AMENDMENTS.—

18 (A) Section 168(g)(3)(C) (relating to alter19 native depreciation system for certain property)

20 is amended to read as follows:

21 ‘‘(C) QUALIFIED TECHNOLOGICAL EQUIP22 MENT.—

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in clause (ii), in the case of any

25 qualified technological equipment, the re-
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1 covery period used for purposes of para2 graph (2) shall be 5 years.

3 ‘‘(ii) COMPUTERS OR PERIPHERAL

4 EQUIPMENT.—In the case of any computer

5 or peripheral equipment, the recovery pe6 riod used for purposes of paragraph (2)

7 shall be 2 years.’’.

8 (B) Section 168(j)(2) (relating to deprecia9 tion of property on Indian reservations) is

10 amended by adding at the end the following

11 flush sentence:

12 ‘‘In the case of 5-year property which is a computer or

13 peripheral equipment, the applicable recovery period shall

14 be 1 year.’’.

15 (C) Section 467(e)(3)(A) (relating to cer16 tain payments for the use of property or serv17 ices) is amended by adding at the end the fol18 lowing flush sentence:

19 ‘‘In the case of 5-year property which is a computer or

20 peripheral equipment, the applicable recovery period shall

21 be 2 years.’’.

22 (c) 2-YEAR DEPRECIATION PERIOD FOR COMPUTER

23 SOFTWARE.—Section 167(f)(1)(A) is amended by striking

24 ‘‘36 months’’ and inserting ‘‘24 months’’.
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1 (d) ADJUSTMENTS ON DEPRECIATION LIMITS FOR

2 LUXURY AUTOMOBILES.—

3 (1) IN GENERAL.—Section 280F(a)(1)(A) (re4 lating to limitation on amount of depreciation for

5 luxury automobiles) is amended—

6 (A) by striking ‘‘$2,560’’ in clause (i) and

7 inserting ‘‘$5,400’’;

8 (B) by striking ‘‘$4,100’’ in clause (ii) and

9 inserting ‘‘$8,500’’;

10 (C) by striking ‘‘$2,450’’ in clause (iii) and

11 inserting ‘‘$5,100’’; and

12 (D) by striking ‘‘$1,475’’ in clause (iv) and

13 inserting ‘‘$3,000’’.

14 (2) CONFORMING AMENDMENT.—Section

15 280F(a)(1)(B)(ii) (relating to disallowed deductions

16 allowed for years after recovery period) is amended

17 by striking ‘‘$1,475’’ each place that it appears and

18 inserting ‘‘$3,000’’.

19 (e) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to property placed in service after

21 December 31, 2000.

22 SEC. 302. SIMPLIFICATION OF ESTIMATED TAX RULES.

23 (a) IN GENERAL.—Section 6654(d)(1) (relating to

24 failure by an individual to pay estimated income tax) is

25 amended by striking subparagraph (C).
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

4 SEC. 303. EXCLUSION FROM PARTNERSHIP FILING RE5 QUIREMENTS FOR MARRIED COUPLES AS

6 BUSINESS CO-OWNERS.

7 (a) IN GENERAL.—Section 6031 (relating to return

8 of partnership income) is amended by adding the following

9 the new subsection:

10 ‘‘(f) EXCEPTION FOR A MARRIED INDIVIDUALS AS

11 PARTNERSHIP CO-OWNERS.—This section shall not apply

12 to a partnership for any taxable year if—

13 ‘‘(1) all of the capital or profits interests in the

14 partnership are owned by 2 individuals who are a

15 married couple (as determined under section 7703),

16 ‘‘(2) such individuals elect the application of

17 this subsection for such taxable year, and

18 ‘‘(3) such individuals file a joint return for all

19 taxable years of such individuals which include items

20 from such taxable year of the partnership.

21 The Secretary shall prescribe regulations for the retention

22 of such records as may be necessary for the administration

23 of this chapter in any case where an election is made

24 under this subchapter.’’.
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1 (b) MARRIED COUPLES AS BUSINESS CO-OWNERS

2 PERMITTED TO FILE SEPARATE SELF-EMPLOYMENT

3 TAX SCHEDULES.—Section 6017 (relating to self-employ4 ment tax returns) is amended by adding the following new

5 sentence: ‘‘The preceding sentence shall apply even if the

6 husband and wife elect, under section 6031(f), to be ex7 cluded from the filing requirements of section 6031.’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 the date of the enactment of this Act.

11 SEC. 304. INCREASE IN SELF-EMPLOYMENT EXEMPTION

12 AMOUNT.

13 (a) IN GENERAL.—Paragraph (2) of section 1402(b)

14 (defining self-employment income) is amended by striking

15 ‘‘$400’’ and inserting ‘‘$740’’.

16 (b) ADJUSTMENT FOR INFLATION.—Section 1402

17 (definitions relating to self-employment income) is amend18 ed by adding at the end the following new subsection:

19 ‘‘(l) ADJUSTMENT FOR INFLATION.—

20 ‘‘(1) IN GENERAL.—In the case of any taxable

21 year beginning in a calendar year after 2001, the

22 $740 amount contained in subsection (b)(2) shall be

23 increased by an amount equal to—

24 ‘‘(A) $740, multiplied by
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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar

3 year in which the taxable year begins by sub4 stituting ‘calendar year 2000’ for ‘calendar year

5 1992’ in subparagraph (B) thereof.

6 ‘‘(2) ROUNDING.—If any increase determined

7 under paragraph (1) is not a multiple of $10, such

8 increase shall be rounded to the next lowest multiple

9 of $10.’’.

10 (c) RETURN REQUIREMENTS.—Section 6017 (relat11 ing to self-employment tax returns) is amended by striking

12 ‘‘of $400 or more’’ and inserting ‘‘of an amount which

13 equals or exceeds the amount in effect under section

14 1402(b)(2)’’.

15 (d) CONFORMING AMENDMENTS.—

16 (1) Paragraphs (3) and (4) of section 1402(e)

17 are each amended by striking ‘‘of $400 or more’’

18 and inserting ‘‘which equals or exceeds the amount

19 in effect for the taxable year under subsection

20 (b)(2)’’.

21 (2) Subsection (h) of section 1402 is amended

22 by striking ‘‘$400’’ and inserting ‘‘the amount in ef23 fect for the taxable year under subsection (b)(2)’’.

24 (3) Subparagraph (B) of section 1402(j)(2) is

25 amended to read as follows:
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1 ‘‘(B) FLOOR.—In applying paragraph (2)

2 of subsection (b) to church employee income,

3 ‘$200’ shall be substituted for the amount in ef4 fect for the taxable year under such paragraph

5 (2) (as adjusted by subsection (l)).’’.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to taxable years beginning after

8 December 31, 2000.

9 SEC. 305. REPEAL OF RECOGNITION OF GAIN RULE FOR

10 HOME OFFICE.

11 (a) IN GENERAL.—Subsection (d) of section 121 is

12 amended by striking paragraph (6) and redesignating

13 paragraphs (7) and (8) as paragraphs (6) and (7), respec14 tively.

15 (b) EXCEPTION TO TREATMENT AS GAIN FROM DIS16 POSITION OF PRINCIPAL RESIDENCE.—Subsection (d) of

17 section 1250 is amended by adding at the end the fol18 lowing new paragraph:

19 ‘‘(9) HOME OFFICE.—Subsection (a) shall not

20 apply to property described in section 280A(c)(1)

21 which is a portion of the principal residence (within

22 the meaning of section 121) of the taxpayer.’’.

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to sales and exchanges occurring

25 after December 31, 2000.
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1 SEC. 306. SIMPLIFICATION OF REPORTING REQUIREMENTS

2 RELATING TO HIGHER EDUCATION TUITION

3 AND RELATED EXPENSES.

4 (a) AMENDMENT RELATING TO PERSONS REQUIRED

5 TO MAKE RETURN.—Paragraph (1) of section 6050S(a)

6 (relating to returns relating to higher education tuition

7 and related expenses) is amended to read as follows:

8 ‘‘(1) which is an eligible educational institution

9 which receives payments for qualified tuition and re10 lated expenses with respect to any individual for any

11 calendar year;’’.

12 (b) AMENDMENTS RELATING TO FORM AND MANNER

13 OF RETURNS.—

14 (1) Paragraph (2) of section 6050S(b) is

15 amended by striking subparagraph (B) and redesig16 nating subparagraphs (C) and (D) as subparagraphs

17 (B) and (C), respectively.

18 (2) Subparagraph (B) of section 6050S(b)(2),

19 as redesignated by paragraph (1), is amended—

20 (A) in clause (i), by inserting ‘‘, or the ag21 gregate amount of qualified tuition and related

22 expenses assessed,’’ after ‘‘received’’ and by in23 serting ‘‘and’’ after the comma at the end,

24 (B) by striking clauses (ii) and (iii), and

25 (C) by redesignating clause (iv) as clause

26 (ii).
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1 (c) CONFORMING AMENDMENTS.—Subsection (d) of

2 section 6050S is amended—

3 (1) by striking ‘‘or (B)’’, and

4 (2) in paragraph (2), by striking ‘‘subpara5 graph (C)’’ and inserting ‘‘subparagraph (B)’’.

6 (d) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to expenses paid or assessed after

8 December 31, 2001 (in taxable years ending after such

9 date), for education furnished in academic periods begin10 ning after such date.

11 TITLE IV—TAXPAYER

12 PROTECTIONS

13 SEC. 401. TAXPAYER’S RIGHT TO HAVE AN IRS EXAMINA14 TION TAKE PLACE AT ANOTHER SITE.

15 (a) IN GENERAL.—Section 7605(a) (relating to time

16 and place of examination) is amended to read as follows:

17 ‘‘(a) TIME AND PLACE.—

18 ‘‘(1) IN GENERAL.—The time and place of ex19 amination pursuant to the provisions of section

20 6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 shall be

21 such time and place as may be fixed by the Sec22 retary and as are reasonable under the cir23 cumstances. In the case of a summons under author24 ity of paragraph (2) of section 7602, or under the

25 corresponding authority of section 6420(e)(2),
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1 6421(g)(2), or 6427(j)(2), the date fixed for appear2 ance before the Secretary shall not be less than 10

3 days from the date of the summons.

4 ‘‘(2) LIMITATION.—Upon request of a taxpayer,

5 the Secretary shall conduct any examination de6 scribed in paragraph (1) at a location other than the

7 taxpayer’s residence or place of business, if such lo8 cation is reasonably accessible to the Secretary and

9 the taxpayer’s original books and records pertinent

10 to the examination are available at such location.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to examinations occurring after the

13 date of the enactment of this Act.

14 SEC. 402. CLARIFICATION OF ELECTRONIC FILING.

15 (a) IN GENERAL.—Section 2001(a) of the Internal

16 Revenue Service Restructuring and Reform Act of 1998

17 (relating to electronic filing of tax and information re18 turns) is amended by—

19 (1) striking ‘‘and’’ at the end of paragraph (2);

20 (2) redesignating paragraph (3) as paragraph

21 (4); and

22 (3) inserting after paragraph (2) the following

23 new paragraph:

24 ‘‘(3) electronic filing shall be a voluntary option

25 for taxpayers; and’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years after the date of

3 the enactment of this Act.

4 SEC. 403. TAXPAYER’S ELECTION WITH RESPECT TO RE5 COVERY OF COSTS AND CERTAIN FEES.

6 (a) IN GENERAL.—

7 (1) Section 504(f) of title 5, United States

8 Code, is amended to read as follows:

9 ‘‘(f) A party may elect to recover costs, fees, or other

10 expenses under this section or under section 7430 of the

11 Internal Revenue Code of 1986.’’.

12 (2) Section 2412(e) of title 28, United States

13 Code, is amended to read as follows:

14 ‘‘(e) A party may elect to recover costs, fees, or other

15 expenses under this section or under section 7430 of the

16 Internal Revenue Code of 1986.’’.

17 (b) COORDINATION.—Section 7430 (relating to

18 awarding of costs and certain fees) is amended by adding

19 at the end the following new subsection:

20 ‘‘(h) COORDINATION WITH EQUAL ACCESS TO JUS21 TICE ACT.—This section shall not apply to any adminis22 trative or judicial proceeding with respect to which a tax23 payer elects to recover costs, fees, or other expenses under

24 section 504 of title 5, United States Code, or section 2412

25 of title 28, United States Code.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to proceedings initiated after the

3 date of the enactment of this Act.

4 SEC. 404. REPEAL OF THE FAILURE-TO-PAY PENALTY.

5 (a) IN GENERAL.—Section 6651(a) is amended by

6 striking paragraphs (2) and (3).

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 6651(a) is amended—

9 (A) by striking ‘‘In the case of failure—

10 ‘‘(1) to’’ and inserting ‘‘In the case of failure

11 to’’, and

12 (B) by striking the semicolon at the end of

13 paragraph (1) and inserting a period.

14 (2) Section 6651(b) is amended—

15 (A) by striking ‘‘For purposes of—

16 ‘‘(1) subsection (a)(1)’’ and inserting ‘‘For pur17 poses of subsection (a)’’,

18 (B) by striking the comma at the end of

19 paragraph (1) and inserting a period, and

20 (C) by striking paragraphs (2) and (3).

21 (3) Section 6651 is amended by striking sub22 sections (c), (d), and (e).

23 (4) Section 6651(f) is amended by striking

24 ‘‘paragraph (1) of’’.
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1 (5) Section 6651(g) is amended to read as fol2 lows:

3 ‘‘(g) TREATMENT OF RETURNS PREPARED BY SEC4 RETARY UNDER SECTION 6020(b).—In the case of any

5 return made by the Secretary under section 6020(b), such

6 return shall be disregarded for purposes of determining

7 the amount of the addition under subsection (a).’’.

8 (6) Section 6651, as amended by paragraphs

9 (3) and (4), is amended by redesignating subsections

10 (f) and (g) as subsections (c) and (d), respectively.

11 (7) The heading of section 6651 is amended to

12 read as follows:

13 ‘‘SEC. 6651. FAILURE TO FILE TAX RETURN.’’.

14 (8) The table of sections for subchapter A of

15 chapter 68 is amended by striking the item relating

16 to section 6651 and inserting the following new

17 item:

‘‘Sec. 6651. Failure to file tax return.’’.

18 (9) Section 5684(c)(2) is amended by striking

19 ‘‘or pay tax’’.

20 (10) Section 6601(e)(2)(A) is amended by

21 striking ‘‘section 6651(a)(1)’’ and inserting ‘‘section

22 6651(a)’’.

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall be effective for failures to pay occurring

25 after the date of the enactment of this Act.
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1 SEC. 405. REPEAL OF INTEREST ON PENALTIES.

2 (a) IN GENERAL.—Section 6601(e)(2), as amended

3 by section 304, is amended by striking subparagraph (A)

4 and inserting the following new subparagraph:

5 ‘‘(A) IN GENERAL.—No interest shall be

6 imposed under subsection (1) in respect of any

7 assessable penalty, additional amount, or addi8 tion to the tax applied under chapter 68.’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 this section shall be effective for assessable penalties, addi11 tional amounts, or additions to tax imposed after the date

12 of the enactment of this Act.

Æ