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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Employer Tax Relief Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
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shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents is
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 in-
creased.
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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TITLE I—TAX RELIEF
SEC. 101. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS INCREASED.
(a) IN GENERAL.—Section 162(l)(1) (relating to spe-
cial rules for health insurance costs of self-employed indi-
viduals) is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case
of an individual who is an employee within the
meaning of section 401(c)(1), there shall be allowed
as a deduction under this section an amount equal
to the amount paid during the taxable year for in-
surance which constitutes medical care for the tax-
payer, the taxpayer’s spouse, and dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) is
amended to read as follows: ‘‘Paragraph (1) shall not
apply to any taxpayer for any calendar month for which
the taxpayer participates in any subsidized health plan
maintained by any employer (other than an employer de-
scribed in section 401(c)(4)) of the taxpayer or the spouse
of the taxpayer.’’.
(c) DEDUCTION TAKEN INTO ACCOUNT FOR SELF-
EMPLOYMENT TAX PURPOSES.—Section 162(l) is amend-
ed by striking paragraph (4) and redesignating paragraph
(5) as paragraph (4).
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(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 102. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.
(a) IN GENERAL.—Section 3301 (relating to rate of
Federal unemployment tax) is amended—
(1) by striking ‘‘2007’’ and inserting ‘‘2000’’,
and
(2) by striking ‘‘2008’’ and inserting ‘‘2001’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to calendar years beginning after
December 31, 2000.
SEC. 103. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) IN GENERAL.—Section 179(b)(1) (relating to dol-
lar limitation) is amended to read as follows:
‘‘(1) DOLLAR LIMITATION.—
‘‘(A) IN
GENERAL.—The aggregate cost
which may be taken into account under sub-
section (a) for any taxable year shall not exceed
$50,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 2001, the dollar amount contained in
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subparagraph (A) shall be increased by an
amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘‘calendar year 2000’’
for ‘‘calendar year 1992’’ in subparagraph
(B) thereof.
If any amount as adjusted under this subpara-
graph is not a multiple of $1,000, such amount
shall be rounded to the nearest multiple of
$1,000.’’.
(b) EXPANSION OF PHASE-OUT OF LIMITATION.—
Section 179(b)(2) is amended to read as follows:
‘‘(2) REDUCTION IN LIMITATION.—
‘‘(A) IN GENERAL.—The limitation under
paragraph (1) for any taxable year shall be re-
duced (but not below zero) by the amount by
which the cost of section 179 property for
which a deduction is allowable (without regard
to this subsection) under subsection (a) for
such taxable year exceeds $400,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
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year after 2001, the dollar amount contained in
subparagraph (A) shall be increased by an
amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘calendar year 2000’
for ‘calendar year 1992’ in subparagraph
(B) thereof.
If any amount as adjusted under this subpara-
graph is not a multiple of $10,000, such
amount shall be rounded to the nearest multiple
of $10,000.’’.
(c) TIME OF DEDUCTION.—The second sentence of
section 179(a) (relating to election to expense certain de-
preciable business assets) is amended by inserting ‘‘(or,
if the taxpayer elects, the preceding taxable year if the
property was purchased in such preceding year)’’ after
‘‘service’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
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SEC. 104. INCREASED DEDUCTION FOR BUSINESS MEAL EX-
PENSES.
(a) IN GENERAL.—Section 274(n)(1) (relating to
only 50 percent of meal and entertainment expenses al-
lowed as deduction) is amended by striking ‘‘50 percent’’
in the text and inserting ‘‘the allowable percentage’’.
(b) ALLOWABLE PERCENTAGE.—Section 274(n) is
amended by redesignating paragraphs (2) and (3) as para-
graphs (3) and (4), respectively, and by inserting after
paragraph (1) the following new paragraph:
‘‘(2) ALLOWABLE PERCENTAGE.—For purposes
of paragraph (1), the allowable percentage is—
‘‘(A) in the case of amounts for items de-
scribed in paragraph (1)(B), 50 percent, and
‘‘(B) in the case of expenses for food or
beverages, 80 percent.’’.
(c) CLARIFICATION OF SPECIAL RULE FOR INDIVID-
UALS SUBJECT TO FEDERAL HOURS OF SERVICE.—Sec-
tion 274(n)(4) (relating to limited percentages of meal and
entertainment expenses allowed as deduction), as redesig-
nated by subsection (b), is amended to read as follows:
‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT
TO FEDERAL HOURS OF SERVICE.—In the case of
any expenses for food or beverages consumed while
away from home (within the meaning of section
162(a)(2)) by an individual during, or incident to,
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the period of duty subject to the hours of service
limitations of the Department of Transportation,
paragraph (2)(B) shall apply to such expenses.’’.
(d) CONFORMING AMENDMENT.—The heading for
subsection (n) of section 274 is amended by striking ‘‘50
PERCENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 105. CLARIFICATION OF CASH ACCOUNTING RULES
FOR SMALL BUSINESS.
(a) CASH ACCOUNTING PERMITTED.—Section 446
(relating to general rule for methods of accounting) is
amended by adding at the end the following new sub-
section:
‘‘(g) SMALL BUSINESS TAXPAYERS PERMITTED TO
USE CASH ACCOUNTING METHOD WITHOUT LIMITA-
TION.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this title, an eligible taxpayer shall not
be required to use an accrual method of accounting
for any taxable year.
‘‘(2) ELIGIBLE
TAXPAYER.—For purposes of
this subsection—
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‘‘(A) IN GENERAL.—A taxpayer is an eligi-
ble taxpayer with respect to any taxable year
if—
‘‘(i) for all prior taxable years begin-
ning after December 31, 1999, the tax-
payer (or any predecessor) met the gross
receipts test of subparagraph (B), and
‘‘(ii) the taxpayer is not a tax shelter
(as defined in section 448(d)(3)).
‘‘(B) GROSS RECEIPTS TEST.—A taxpayer
meets the gross receipts test of this subpara-
graph for any prior taxable year if the average
annual gross receipts of the taxpayer (or any
predecessor) for the 3-taxable-year period end-
ing with such prior taxable year does not exceed
$5,000,000. The rules of paragraphs (2) and
(3) of section 448(c) shall apply for purposes of
the preceding sentence.
‘‘(C) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 2001, the dollar amount contained in
subparagraph (B) shall be increased by an
amount equal to—
‘‘(i) such dollar amount, multiplied by
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‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘‘calendar year 2000’’
for ‘‘calendar year 1992’’ in subparagraph
(B) thereof.
If any amount as adjusted under this subpara-
graph is not a multiple of $100,000, such
amount shall be rounded to the nearest multiple
of $100,000.’’.
(b) CLARIFICATION
OF INVENTORY RULES
FOR
SMALL BUSINESS.—Section 471 (relating to general rule
for inventories) is amended by redesignating subsection (c)
as subsection (d) and by inserting after subsection (b) the
following new subsection:
‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED
TO USE INVENTORIES.—
‘‘(1) IN GENERAL.—An eligible taxpayer shall
not be required to use inventories under this section
for a taxable year.
‘‘(2) TREATMENT OF TAXPAYERS NOT USING
INVENTORIES.—If an eligible taxpayer elects not to
use inventories with respect to any property for any
taxable year beginning after December 31, 2000,
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such property shall be treated as a material or sup-
ply which is not incidental.
‘‘(3) ELIGIBLE
TAXPAYER.—For purposes of
this subsection, the term ‘eligible taxpayer’ has the
meaning given such term by section 446(g)(2).’’.
(c) INDEXING OF GROSS RECEIPTS TEST.—Section
448(c) (relating to $5,000,000 gross receipts test) is
amended by adding at the end the following new para-
graph:
‘‘(4) INFLATION ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year after
2001, the dollar amount contained in paragraph (1)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, by sub-
stituting ‘‘calendar year 2000’’ for ‘‘calendar
year 1992’’ in subparagraph (B) thereof.
If any amount as adjusted under this paragraph is
not a multiple of $100,000, such amount shall be
rounded to the nearest multiple of $100,000.’’.
(d) EFFECTIVE DATE AND SPECIAL RULES.—
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(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 2000.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer changing the taxpayer’s
method of accounting for any taxable year under the
amendments made by this section—
(A) such change shall be treated as initi-
ated by the taxpayer;
(B) such change shall be treated as made
with the consent of the Secretary of the Treas-
ury; and
(C) the net amount of the adjustments re-
quired 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 pe-
riod (not greater than 4 taxable years) begin-
ning with such taxable year.
SEC. 106. ALTERNATIVE MINIMUM TAX.
(a) REPEAL OF ALTERNATIVE MINIMUM TAX ON IN-
DIVIDUALS.—
(1) IN GENERAL.—Section 55(a) (relating to al-
ternative minimum tax) is amended by adding at the
end the following new flush sentence:
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‘‘For purposes of this title, the tentative minimum tax on
any taxpayer other than a corporation for any taxable year
beginning after December 31, 2004, shall be zero.’’.
(2) REDUCTION OF TAX ON INDIVIDUALS PRIOR
TO REPEAL.—Section 55 is amended by adding at
the end the following new subsection:
‘‘(f) PHASEOUT OF TAX ON INDIVIDUALS.—
‘‘(1) IN GENERAL.—The tax imposed by this
section on a taxpayer other than a corporation for
any taxable year beginning after December 31,
2000, and before January 1, 2005, shall be the ap-
plicable percentage of the tax which would be im-
posed but for this subsection.
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage shall be
determined in accordance with the following table:
‘‘For taxable years beginning
The applicable
in calendar year—
percentage is—
2001 .............................................................................
2002 .............................................................................
2003 .............................................................................
2004 .............................................................................
20.’’.
(3) 
NONREFUNDABLE
PERSONAL
CREDITS
FULLY
ALLOWED
AGAINST
REGULAR
TAX
LIABIL-
ITY.—
(A) IN GENERAL.—Section 26(a) (relating
to limitation based on amount of tax) is amend-
ed to read as follows:
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‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate amount of credits allowed by this subpart for
the taxable year shall not exceed the taxpayer’s regular
tax liability for the taxable year.’’.
(B) CHILD
CREDIT.—Section 24(d) is
amended by striking paragraph (2) and by re-
designating paragraph (3) as paragraph (2).
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2000.
(b) INCOME AVERAGING NOT TO INCREASE ALTER-
NATIVE MINIMUM TAX LIABILITY.—
(1) IN
GENERAL.—Section 55(c) (relating to
regular tax) is amended by redesignating paragraph
(2) as paragraph (3) and by inserting after para-
graph (1) the following:
‘‘(2) COORDINATION WITH INCOME AVERAGING
FOR FARMERS.—Solely for purposes of this section,
section 1301 (relating to averaging of farm income)
shall not apply in computing the regular tax.’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to taxable years begin-
ning after December 31, 2000.
(c) EXPANSION OF THE EXEMPTION FROM THE AL-
TERNATIVE MINIMUM TAX FOR SMALL CORPORATIONS.—
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(1) IN GENERAL.—Section 55(e)(1)(A) (relating
to exemption for small corporations) is amended to
read as follows:
‘‘(A) 
$10,000,000 
GROSS
RECEIPTS
TEST.—The tentative minimum tax of a cor-
poration shall be zero for any taxable year if
the corporation’s average annual gross receipts
for all 3-taxable-year periods ending before such
taxable year does not exceed $10,000,000. For
purposes of the preceding sentence, only taxable
years beginning after December 31, 1997, shall
be taken into account.’’.
(2) GROSS RECEIPTS TEST FOR FIRST 3-YEAR
PERIOD.—Section 55(e)(1)(B) is amended to read as
follows:
‘‘(B) $7,500,000 GROSS
RECEIPTS
TEST
FOR FIRST 3-YEAR PERIOD.—Subparagraph (A)
shall be applied by substituting ‘$7,500,000’ for
‘$10,000,000’ for the first 3-taxable-year period
(or portion thereof) of the corporation which is
taken into account under subparagraph (A).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2000.
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SEC. 107. PERMANENT EXTENSION OF RESEARCH CREDIT.
(a) IN GENERAL.—Section 41 (relating to credit for
increasing research activities) is amended by striking sub-
section (h).
(b) CONFORMING AMENDMENT.—Section 45C(b)(1)
is amended by striking subparagraph (D).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
the date of the enactment of this Act.
SEC. 108. CREDIT FOR EXPENSES FOR LONG-TERM TRAIN-
ING OF EMPLOYEES IN HIGHLY SKILLED
SMALL BUSINESS TRADES.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45E. EXPENSES FOR LONG-TERM TRAINING OF EM-
PLOYEES IN HIGHLY SKILLED SMALL BUSI-
NESS TRADES.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of a small business employer, the highly skilled
trades training credit determined under this section for
the taxable year is $15,000 for each employee having a
qualified training year ending with or within such taxable
year (whether or not such employee is an employee of the
taxpayer as of the close of such taxable year).
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‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) SMALL BUSINESS EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘small busi-
ness employer’ means, with respect to any tax-
able year, any employer who employed an aver-
age of 250 or fewer employees on business days
during such taxable year.
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of subparagraph (A), all persons treated
as a single employer under subsection (b), (c),
(m), or (o) of section 414 shall be treated as a
single employer.
‘‘(2) QUALIFIED TRAINING YEAR.—
‘‘(A) IN
GENERAL.—The term ‘qualified
training year’ means each year during the
training period in which the employee received
at least 1,500 hours of training (including on-
the-job training and training at multi-employer
training facilities) from the taxpayer (or any
predecessor) under a qualified training program
as an apprentice in any highly skilled trade.
‘‘(B) HIGHLY SKILLED TRADES.—For pur-
poses of subparagraph (A), the term ‘highly
skilled trades’ means—
‘‘(i) precision machinists,
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‘‘(ii) die makers,
‘‘(iii) mold makers,
‘‘(iv) tool and die designers,
‘‘(v) heating, ventilating, air condi-
tioning, refrigeration, and roofing contrac-
tors,
‘‘(vi) the trade of masonry,
‘‘(vii) plumbers,
‘‘(viii) pipefitters,
‘‘(ix) patternmakers,
‘‘(x) foundry technicians,
‘‘(xi) electricians,
‘‘(xii) recreational marine production
and design workers,
‘‘(xiii) 2-way radio technicians, and
‘‘(xiv) other highly skilled trades spec-
ified in regulations prescribed by the Sec-
retary.
Such term shall not include any trade if the
customary apprenticeship period for such trade
is less than 2 years.
‘‘(C) QUALIFIED TRAINING PROGRAM.—
‘‘(i) IN GENERAL.—The term ‘quali-
fied training program’ means a written
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plan of study and training for individuals
in, or entering into, highly skilled trades.
‘‘(ii) DESCRIPTION OF PROGRAMS.—A
plan under clause (i) must be a program
described in one of the following sub-
clauses:
‘‘(I) An apprenticeship program
registered and certified with the Sec-
retary of Labor under section 1 of the
National 
Apprenticeship 
Act 
(29
U.S.C. 50).
‘‘(II) A program licensed, reg-
istered, or certified by the workforce
investment board or apprenticeship
agency or council of a State or admin-
istered in compliance with apprentice-
ship laws of a State.
‘‘(III) A program conducted by a
vocational 
or 
technical 
education
school, community college, or indus-
trial or trade training organization.
‘‘(IV) A program which conforms
to apprentice training programs devel-
oped or administered by an employer
trade group or committee.
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‘‘(V) An industry sponsored or
administered program which is clearly
identified and commonly recognized
within an industry and which meets
the requirements of clause (iii).
‘‘(iii) REQUIREMENTS.—A program
meets the requirements of this clause if
such program—
‘‘(I) is accessible to individuals
without discrimination on the basis of
race, sex, color, religion, or national
origin,
‘‘(II) provides an overview of the
trade, including the history and mod-
ern developments in such trade,
‘‘(III) provides related instruc-
tion of the fundamental, intermediate,
and advanced skills, techniques, and
materials of the trade,
‘‘(IV) provides training in math,
measurement, and blueprint reading
skills, if such skills are required in the
trade,
‘‘(V) provides training on trade
specific tools and equipment,
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‘‘(VI) provides on-the-job train-
ing which allows performance of work
under close supervision of an instruc-
tor or skilled worker, and
‘‘(VII) provides periodic review
and evaluation of participants to dem-
onstrate proficiency in skills, including
the use of tests and assessment of in-
dividual and group projects.
‘‘(3) TRAINING
PERIOD.—The term ‘training
period’ means, with respect to an employee, the
period—
‘‘(A) beginning on the date that the em-
ployee begins employment with the taxpayer as
an apprentice in the highly skilled trade, and
‘‘(B) ending on the earlier of—
‘‘(i) the date that such apprenticeship
with the employer ends, or
‘‘(ii) the date which is 4 years after
the date referred to in subparagraph (A).
‘‘(c) COORDINATION WITH OTHER CREDITS.—The
amount of credit otherwise allowable under sections 51(a)
and 1396(a) with respect to any employee shall be reduced
by the credit allowed by this section with respect to such
employee.’’.
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(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 is amended by
striking ‘‘plus’’ at the end of paragraph (12), by striking
the period at the end of paragraph (13) and inserting ‘‘,
plus’’, and by adding at the end the following new para-
graph:
‘‘(14) in the case of a small business employer
(as defined in section 45E(b)), the highly skilled
trades training credit determined under section
45E(a).’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C is
amended by adding at the end the following new sub-
section:
‘‘(d) CREDIT FOR TRAINING EXPENSES FOR EM-
PLOYEES
IN
HIGHLY
SKILLED
SMALL
BUSINESS
TRADES.—No deduction shall be allowed for that portion
of the expenses otherwise allowable as a deduction for the
taxable year which is equal to the amount of the credit
determined for the taxable year under section 45E(a).’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
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.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid or incurred in
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the taxable years ending after the date of the enactment
of this Act.
TITLE II—TAX RELIEF FOR
ENVIRONMENTAL PROTECTION
SEC. 201. CREDIT FOR DRY OR WET CLEANING EQUIPMENT
USING NONHAZARDOUS PRIMARY PROCESS
SOLVENTS.
(a) IN GENERAL.—Section 46 of the Internal Rev-
enue Code of 1986 (relating to amount of investment cred-
it) is amended by striking ‘‘and’’ at the end of paragraph
(2), by striking the period at the end of paragraph (3)
and inserting ‘‘, and’’, and by adding at the end thereof
the following paragraph:
‘‘(4) the dry or wet cleaning equipment credit.’’.
(b) DRY OR WET CLEANING EQUIPMENT CREDIT.—
Section 48 of such Code is amended by adding at the end
the following new subsection:
‘‘(c) DRY OR WET CLEANING EQUIPMENT USING
NONHAZARDOUS PRIMARY PROCESS SOLVENTS.—
‘‘(1) IN GENERAL.—For purposes of section 46,
the dry or wet cleaning equipment credit for any
taxable year is 20 percent of the basis of each quali-
fied dry or wet cleaning property placed in service
during the taxable year (40 percent of such basis in
the case of such property placed in service in an em-
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powerment zone, enterprise community, or renewal
community).
‘‘(2) LIMITATION.—The credit under this sub-
section for the taxable year shall apply to qualified
dry or wet cleaning property placed in service during
such year at each business premise of the taxpayer.
‘‘(3) QUALIFIED DRY OR WET CLEANING PROP-
ERTY.—For purposes of this subsection, the term
‘qualified dry or wet cleaning property’ means equip-
ment designed primarily to clean textiles by profes-
sionals using special technology, detergents and ad-
ditives to minimize potential for adverse effects, or
appropriately dry or apply restorative finishing pro-
cedures to such textiles if—
‘‘(A) such equipment does not use any haz-
ardous solvent as the primary process solvent,
‘‘(B) the original use of such property
commences with the taxpayer, and
‘‘(C) with respect to which depreciation (or
amortization in lieu of depreciation) is allow-
able.
‘‘(4) PRIMARY
PROCESS
SOLVENT.—For pur-
poses of paragraph (3), the term ‘primary process
solvent’ means the primary liquid in which clothing,
other fabric, and sensitive textiles are cleaned or
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which is used to appropriately dry or apply restora-
tive finishing procedures to textiles, cleaned, exclud-
ing detergent formulations.
‘‘(5) HAZARDOUS SOLVENT.—For purposes of
paragraph (3), the term ‘hazardous solvent’ means
any solvent any portion of which consists of a
chlorinated solvent, a volatile organic compound, or
any other hazardous regulated substance, or which
contains any substance determined by the Adminis-
trator of the Environmental Protection Agency, the
Director of the National Institute for Occupational
Safety and Health, the Director of the International
Agency for Research on Cancer, the Director of the
National 
Institute 
of 
Environmental 
Health
Sciences’ National Toxicology Program, or the direc-
tor of any other appropriate Federal agency to
possess—
‘‘(A) carcinogenic potential in humans, or
‘‘(B) bioaccumulative properties.’’.
(c) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
of such Code (relating to limitation based on amount
of tax) is amended by redesignating paragraph (3)
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as paragraph (4) and by inserting after paragraph
(2) the following:
‘‘(3) SPECIAL RULES FOR DRY OR WET CLEAN-
ING EQUIPMENT CREDIT.—
‘‘(A) IN GENERAL.—In the case of the dry
or wet cleaning equipment credit—
‘‘(i) this section and section 39 shall
be applied separately with respect to the
credit, and
‘‘(ii) in applying paragraph (1) to the
credit—
‘‘(I) subparagraph (A) thereof
shall not apply, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the dry or
wet cleaning equipment credit).
‘‘(B) DRY OR WET CLEANING EQUIPMENT
CREDIT.—For purposes of this subsection, the
term ‘dry or wet cleaning equipment credit’
means the credit allowable under subsection (a)
by reason of section 46(4).’’.
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(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) of such Code is amended
by inserting ‘‘or the dry or wet cleaning equipment
credit’’ after ‘‘employment credit’’.
(d) CLERICAL AMENDMENTS.—
(1) The section heading for section 48 of such
Code is amended to read as follows:
‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY
OR WET CLEANING EQUIPMENT CREDIT.’’.
(2) The item relating to section 48 in the table
of sections for subpart E of part IV of subchapter
A of chapter 1 of such Code is amended to read as
follows:
‘‘Sec. 48. Energy credit; reforestation credit; dry or wet cleaning
equipment credit.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2000.
SEC. 202. CREDIT FOR RECYCLING OR REMANUFACTURING
EQUIPMENT.
(a) IN GENERAL.—Section 46 (relating to amount of
investment credit), as amended by section 201, is amended
by striking ‘‘and’’ at the end of paragraph (3), by striking
the period at the end of paragraph (4) and inserting ‘‘,
and’’, and by adding at the end the following new para-
graph:
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‘‘(5) the reclamation credit.’’
(b) RECLAMATION CREDIT.—Section 48 (relating to
energy credit and reforestation credit), as so amended, is
amended by adding at the end the following new sub-
section:
‘‘(d) RECLAMATION CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 46,
the reclamation credit for any taxable year is 20
percent of the basis of each qualified reclamation
property placed in service during the taxable year.
‘‘(2) QUALIFIED RECLAMATION PROPERTY.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘qualified reclamation prop-
erty’ means property—
‘‘(i) which is qualified recycling prop-
erty or qualified remanufacturing property,
‘‘(ii) which is tangible property (not
including a building and its structural
components),
‘‘(iii) with respect to which deprecia-
tion (or amortization in lieu of deprecia-
tion) is allowable,
‘‘(iv) which has a useful life of at least
5 years, and
‘‘(v) which is—
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‘‘(I) acquired by purchase (as de-
fined in section 179(d)(2)) by the tax-
payer if the original use of such prop-
erty commences with the taxpayer, or
‘‘(II) constructed by or for the
taxpayer.
‘‘(B) DOLLAR LIMITATION.—
‘‘(i) IN GENERAL.—The basis of quali-
fied reclamation property taken into ac-
count under paragraph (1) for any taxable
year shall not exceed $10,000,000 for a
taxpayer.
‘‘(ii) TREATMENT
OF
CONTROLLED
GROUP.—For purposes of clause (i)—
‘‘(I) all component members of a
controlled group shall be treated as
one taxpayer, and
‘‘(II) the Secretary shall appor-
tion the dollar limitation in such
clause among the component members
of such controlled group in such man-
ner as he shall by regulation pre-
scribe.
‘‘(iii) TREATMENT OF PARTNERSHIPS
AND S CORPORATIONS.—In the case of a
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partnership, the dollar limitation in clause
(i) shall apply with respect to the partner-
ship and with respect to each partner. A
similar rule shall apply in the case of an
S corporation and its shareholders.
‘‘(iv) 
CONTROLLED
GROUP
DE-
FINED.—For purposes of clause (ii), the
term ‘controlled group’ has the meaning
given such term by section 1563(a), except
that ‘more than 50 percent’ shall be sub-
stituted for ‘at least 80 percent’ each place
it appears in section 1563(a)(1).
‘‘(3) CERTAIN PROGRESS EXPENDITURE RULES
MADE APPLICABLE.—Rules similar to the rules of
subsections (c)(4) and (d) of section 46 (as in effect
on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990) shall apply for
purposes of this subsection.
‘‘(4) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) QUALIFIED RECYCLING PROPERTY.—
The term ‘qualified recycling property’ means
equipment used exclusively to collect, distribute,
or sort used ferrous or nonferrous metals. The
term does not include equipment used to collect,
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distribute, or sort precious metals such as gold,
silver, or platinum unless such use is coinci-
dental to the collection, distribution, or sorting
of other used ferrous or nonferrous metals.
‘‘(B) 
QUALIFIED
REMANUFACTURING
PROPERTY.—The term ‘qualified remanufac-
turing property’ means equipment used pri-
marily by the taxpayer in the business of re-
building or remanufacturing a used product or
part, but only if—
‘‘(i) the rebuilt or remanufactured
product or part includes 50 percent or less
virgin material, and
‘‘(ii) the equipment is not used pri-
marily in a process occurring after the
product or part is rebuilt or remanufac-
tured.
‘‘(5) COORDINATION
WITH
REHABILITATION
AND
ENERGY
CREDITS.—For purposes of this
section—
‘‘(A) the basis of any qualified reclamation
property shall be reduced by that portion of the
basis of any property which is attributable to
qualified rehabilitation expenditures (as defined
in section 47(c)(2)) or to the energy percentage
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of energy property (as determined under section
48(a)), and
‘‘(B) expenditures taken into account
under either section 47 or 48(a) shall not be
taken into account under this section.’’.
(c) SPECIAL BASIS ADJUSTMENT RULE.—Paragraph
(3) of section 50(c) (relating to basis adjustment to invest-
ment credit property) is amended by striking ‘‘energy
credit or reforestation credit’’ and inserting ‘‘energy cred-
it, reforestation credit, or reclamation credit’’.
(d) CLERICAL AMENDMENTS.—
(1) The section heading for section 48 is
amended to read as follows:
‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY
OR WET CLEANING EQUIPMENT CREDIT; REC-
LAMATION CREDIT.’’
(2) The item relating to section 48 in the table
of sections for subpart E of part IV of subchapter
A of chapter 1 is amended to read as follows:
‘‘Sec. 48. Energy credit; reforestation credit; dry or wet cleaning
equipment credit; reclamation credit.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service on
or after January 1, 2002.
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TITLE III—TAX SIMPLIFICATION
SEC. 301. DEPRECIATION MODIFICATIONS.
(a) COMPUTER SOFTWARE ELIGIBLE FOR EXPENS-
ING.—
(1) IN GENERAL.—The heading and first sen-
tence of section 179(d)(1) (relating to section 179
property) are amended to read as follows:
‘‘(1) SECTION 179 PROPERTY.—For purposes of
this section, the term ‘section 179 property’ means
property—
‘‘(A) which is—
‘‘(i) tangible property to which section
168 applies, or
‘‘(ii) computer software (as defined in
section 197(e)(3)(B)) to which section 167
applies,
‘‘(B) which is section 1245 property (as
defined in section 1245(a)(3)), and
‘‘(C) which is acquired by purchase for use
in the active conduct of a trade or business.’’.
(2) NO
COMPUTER
SOFTWARE
INCLUDED
AS
SECTION 197 INTANGIBLE.—
(A) IN GENERAL.—Section 197(e)(3)(A) is
amended to read as follows:
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‘‘(A) IN
GENERAL.—Any computer soft-
ware.’’.
(B) CONFORMING
AMENDMENT.—Section
167(f)(1)(B) is amended by striking ‘‘; except
that such term shall not include any such soft-
ware which is an amortizable section 197 intan-
gible’’.
(b) 2-YEAR APPLICABLE RECOVERY PERIOD
FOR
DEPRECIATION OF COMPUTERS AND PERIPHERAL EQUIP-
MENT.—
(1) IN GENERAL.—Section 168(c) (relating to
applicable recovery period) is amended by adding at
the end the following flush sentence:
‘‘In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall
be 2 years.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 168(g)(3)(C) (relating to alter-
native depreciation system for certain property)
is amended to read as follows:
‘‘(C) QUALIFIED TECHNOLOGICAL EQUIP-
MENT.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), in the case of any
qualified technological equipment, the re-
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covery period used for purposes of para-
graph (2) shall be 5 years.
‘‘(ii) COMPUTERS
OR
PERIPHERAL
EQUIPMENT.—In the case of any computer
or peripheral equipment, the recovery pe-
riod used for purposes of paragraph (2)
shall be 2 years.’’.
(B) Section 168(j)(2) (relating to deprecia-
tion of property on Indian reservations) is
amended by adding at the end the following
flush sentence:
‘‘In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall
be 1 year.’’.
(C) Section 467(e)(3)(A) (relating to cer-
tain payments for the use of property or serv-
ices) is amended by adding at the end the fol-
lowing flush sentence:
‘‘In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall
be 2 years.’’.
(c) 2-YEAR DEPRECIATION PERIOD FOR COMPUTER
SOFTWARE.—Section 167(f)(1)(A) is amended by striking
‘‘36 months’’ and inserting ‘‘24 months’’.
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(d) ADJUSTMENTS ON DEPRECIATION LIMITS FOR
LUXURY AUTOMOBILES.—
(1) IN GENERAL.—Section 280F(a)(1)(A) (re-
lating to limitation on amount of depreciation for
luxury automobiles) is amended—
(A) by striking ‘‘$2,560’’ in clause (i) and
inserting ‘‘$5,400’’;
(B) by striking ‘‘$4,100’’ in clause (ii) and
inserting ‘‘$8,500’’;
(C) by striking ‘‘$2,450’’ in clause (iii) and
inserting ‘‘$5,100’’; and
(D) by striking ‘‘$1,475’’ in clause (iv) and
inserting ‘‘$3,000’’.
(2) 
CONFORMING
AMENDMENT.—Section
280F(a)(1)(B)(ii) (relating to disallowed deductions
allowed for years after recovery period) is amended
by striking ‘‘$1,475’’ each place that it appears and
inserting ‘‘$3,000’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 2000.
SEC. 302. SIMPLIFICATION OF ESTIMATED TAX RULES.
(a) IN GENERAL.—Section 6654(d)(1) (relating to
failure by an individual to pay estimated income tax) is
amended by striking subparagraph (C).
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(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 303. EXCLUSION FROM PARTNERSHIP FILING RE-
QUIREMENTS FOR MARRIED COUPLES AS
BUSINESS CO-OWNERS.
(a) IN GENERAL.—Section 6031 (relating to return
of partnership income) is amended by adding the following
the new subsection:
‘‘(f) EXCEPTION FOR A MARRIED INDIVIDUALS AS
PARTNERSHIP CO-OWNERS.—This section shall not apply
to a partnership for any taxable year if—
‘‘(1) all of the capital or profits interests in the
partnership are owned by 2 individuals who are a
married couple (as determined under section 7703),
‘‘(2) such individuals elect the application of
this subsection for such taxable year, and
‘‘(3) such individuals file a joint return for all
taxable years of such individuals which include items
from such taxable year of the partnership.
The Secretary shall prescribe regulations for the retention
of such records as may be necessary for the administration
of this chapter in any case where an election is made
under this subchapter.’’.
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(b) MARRIED COUPLES AS BUSINESS CO-OWNERS
PERMITTED TO FILE SEPARATE SELF-EMPLOYMENT
TAX SCHEDULES.—Section 6017 (relating to self-employ-
ment tax returns) is amended by adding the following new
sentence: ‘‘The preceding sentence shall apply even if the
husband and wife elect, under section 6031(f), to be ex-
cluded from the filing requirements of section 6031.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 304. INCREASE IN SELF-EMPLOYMENT EXEMPTION
AMOUNT.
(a) IN GENERAL.—Paragraph (2) of section 1402(b)
(defining self-employment income) is amended by striking
‘‘$400’’ and inserting ‘‘$740’’.
(b) ADJUSTMENT
FOR INFLATION.—Section 1402
(definitions relating to self-employment income) is amend-
ed by adding at the end the following new subsection:
‘‘(l) ADJUSTMENT FOR INFLATION.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 2001, the
$740 amount contained in subsection (b)(2) shall be
increased by an amount equal to—
‘‘(A) $740, multiplied by
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‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins by sub-
stituting ‘calendar year 2000’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(2) ROUNDING.—If any increase determined
under paragraph (1) is not a multiple of $10, such
increase shall be rounded to the next lowest multiple
of $10.’’.
(c) RETURN REQUIREMENTS.—Section 6017 (relat-
ing to self-employment tax returns) is amended by striking
‘‘of $400 or more’’ and inserting ‘‘of an amount which
equals or exceeds the amount in effect under section
1402(b)(2)’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (3) and (4) of section 1402(e)
are each amended by striking ‘‘of $400 or more’’
and inserting ‘‘which equals or exceeds the amount
in effect for the taxable year under subsection
(b)(2)’’.
(2) Subsection (h) of section 1402 is amended
by striking ‘‘$400’’ and inserting ‘‘the amount in ef-
fect for the taxable year under subsection (b)(2)’’.
(3) Subparagraph (B) of section 1402(j)(2) is
amended to read as follows:
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‘‘(B) FLOOR.—In applying paragraph (2)
of subsection (b) to church employee income,
‘$200’ shall be substituted for the amount in ef-
fect for the taxable year under such paragraph
(2) (as adjusted by subsection (l)).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 305. REPEAL OF RECOGNITION OF GAIN RULE FOR
HOME OFFICE.
(a) IN GENERAL.—Subsection (d) of section 121 is
amended by striking paragraph (6) and redesignating
paragraphs (7) and (8) as paragraphs (6) and (7), respec-
tively.
(b) EXCEPTION TO TREATMENT AS GAIN FROM DIS-
POSITION OF PRINCIPAL RESIDENCE.—Subsection (d) of
section 1250 is amended by adding at the end the fol-
lowing new paragraph:
‘‘(9) HOME OFFICE.—Subsection (a) shall not
apply to property described in section 280A(c)(1)
which is a portion of the principal residence (within
the meaning of section 121) of the taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales and exchanges occurring
after December 31, 2000.
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SEC. 306. SIMPLIFICATION OF REPORTING REQUIREMENTS
RELATING TO HIGHER EDUCATION TUITION
AND RELATED EXPENSES.
(a) AMENDMENT RELATING TO PERSONS REQUIRED
TO MAKE RETURN.—Paragraph (1) of section 6050S(a)
(relating to returns relating to higher education tuition
and related expenses) is amended to read as follows:
‘‘(1) which is an eligible educational institution
which receives payments for qualified tuition and re-
lated expenses with respect to any individual for any
calendar year;’’.
(b) AMENDMENTS RELATING TO FORM AND MANNER
OF RETURNS.—
(1) Paragraph (2) of section 6050S(b) is
amended by striking subparagraph (B) and redesig-
nating subparagraphs (C) and (D) as subparagraphs
(B) and (C), respectively.
(2) Subparagraph (B) of section 6050S(b)(2),
as redesignated by paragraph (1), is amended—
(A) in clause (i), by inserting ‘‘, or the ag-
gregate amount of qualified tuition and related
expenses assessed,’’ after ‘‘received’’ and by in-
serting ‘‘and’’ after the comma at the end,
(B) by striking clauses (ii) and (iii), and
(C) by redesignating clause (iv) as clause
(ii).
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(c) CONFORMING AMENDMENTS.—Subsection (d) of
section 6050S is amended—
(1) by striking ‘‘or (B)’’, and
(2) in paragraph (2), by striking ‘‘subpara-
graph (C)’’ and inserting ‘‘subparagraph (B)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid or assessed after
December 31, 2001 (in taxable years ending after such
date), for education furnished in academic periods begin-
ning after such date.
TITLE IV—TAXPAYER
PROTECTIONS
SEC. 401. TAXPAYER’S RIGHT TO HAVE AN IRS EXAMINA-
TION TAKE PLACE AT ANOTHER SITE.
(a) IN GENERAL.—Section 7605(a) (relating to time
and place of examination) is amended to read as follows:
‘‘(a) TIME AND PLACE.—
‘‘(1) IN GENERAL.—The time and place of ex-
amination pursuant to the provisions of section
6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 shall be
such time and place as may be fixed by the Sec-
retary and as are reasonable under the cir-
cumstances. In the case of a summons under author-
ity of paragraph (2) of section 7602, or under the
corresponding authority of section 6420(e)(2),
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6421(g)(2), or 6427(j)(2), the date fixed for appear-
ance before the Secretary shall not be less than 10
days from the date of the summons.
‘‘(2) LIMITATION.—Upon request of a taxpayer,
the Secretary shall conduct any examination de-
scribed in paragraph (1) at a location other than the
taxpayer’s residence or place of business, if such lo-
cation is reasonably accessible to the Secretary and
the taxpayer’s original books and records pertinent
to the examination are available at such location.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to examinations occurring after the
date of the enactment of this Act.
SEC. 402. CLARIFICATION OF ELECTRONIC FILING.
(a) IN GENERAL.—Section 2001(a) of the Internal
Revenue Service Restructuring and Reform Act of 1998
(relating to electronic filing of tax and information re-
turns) is amended by—
(1) striking ‘‘and’’ at the end of paragraph (2);
(2) redesignating paragraph (3) as paragraph
(4); and
(3) inserting after paragraph (2) the following
new paragraph:
‘‘(3) electronic filing shall be a voluntary option
for taxpayers; and’’.
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(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years after the date of
the enactment of this Act.
SEC. 403. TAXPAYER’S ELECTION WITH RESPECT TO RE-
COVERY OF COSTS AND CERTAIN FEES.
(a) IN GENERAL.—
(1) Section 504(f) of title 5, United States
Code, is amended to read as follows:
‘‘(f) A party may elect to recover costs, fees, or other
expenses under this section or under section 7430 of the
Internal Revenue Code of 1986.’’.
(2) Section 2412(e) of title 28, United States
Code, is amended to read as follows:
‘‘(e) A party may elect to recover costs, fees, or other
expenses under this section or under section 7430 of the
Internal Revenue Code of 1986.’’.
(b) COORDINATION.—Section 7430 (relating to
awarding of costs and certain fees) is amended by adding
at the end the following new subsection:
‘‘(h) COORDINATION WITH EQUAL ACCESS TO JUS-
TICE ACT.—This section shall not apply to any adminis-
trative or judicial proceeding with respect to which a tax-
payer elects to recover costs, fees, or other expenses under
section 504 of title 5, United States Code, or section 2412
of title 28, United States Code.’’.
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(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to proceedings initiated after the
date of the enactment of this Act.
SEC. 404. REPEAL OF THE FAILURE-TO-PAY PENALTY.
(a) IN GENERAL.—Section 6651(a) is amended by
striking paragraphs (2) and (3).
(b) CONFORMING AMENDMENTS.—
(1) Section 6651(a) is amended—
(A) by striking ‘‘In the case of failure—
‘‘(1) to’’ and inserting ‘‘In the case of failure
to’’, and
(B) by striking the semicolon at the end of
paragraph (1) and inserting a period.
(2) Section 6651(b) is amended—
(A) by striking ‘‘For purposes of—
‘‘(1) subsection (a)(1)’’ and inserting ‘‘For pur-
poses of subsection (a)’’,
(B) by striking the comma at the end of
paragraph (1) and inserting a period, and
(C) by striking paragraphs (2) and (3).
(3) Section 6651 is amended by striking sub-
sections (c), (d), and (e).
(4) Section 6651(f) is amended by striking
‘‘paragraph (1) of’’.
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(5) Section 6651(g) is amended to read as fol-
lows:
‘‘(g) TREATMENT OF RETURNS PREPARED BY SEC-
RETARY UNDER SECTION 6020(b).—In the case of any
return made by the Secretary under section 6020(b), such
return shall be disregarded for purposes of determining
the amount of the addition under subsection (a).’’.
(6) Section 6651, as amended by paragraphs
(3) and (4), is amended by redesignating subsections
(f) and (g) as subsections (c) and (d), respectively.
(7) The heading of section 6651 is amended to
read as follows:
‘‘SEC. 6651. FAILURE TO FILE TAX RETURN.’’.
(8) The table of sections for subchapter A of
chapter 68 is amended by striking the item relating
to section 6651 and inserting the following new
item:
‘‘Sec. 6651. Failure to file tax return.’’.
(9) Section 5684(c)(2) is amended by striking
‘‘or pay tax’’.
(10) Section 6601(e)(2)(A) is amended by
striking ‘‘section 6651(a)(1)’’ and inserting ‘‘section
6651(a)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall be effective for failures to pay occurring
after the date of the enactment of this Act.
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SEC. 405. REPEAL OF INTEREST ON PENALTIES.
(a) IN GENERAL.—Section 6601(e)(2), as amended
by section 304, is amended by striking subparagraph (A)
and inserting the following new subparagraph:
‘‘(A) IN GENERAL.—No interest shall be
imposed under subsection (1) in respect of any
assessable penalty, additional amount, or addi-
tion to the tax applied under chapter 68.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall be effective for assessable penalties, addi-
tional amounts, or additions to tax imposed after the date
of the enactment of this Act.
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