HR 3090 RFS
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Economic Security and Recovery Act of 2001’’.
(b) REFERENCES TO INTERNAL REVENUE CODE OF
1986.—Except as otherwise expressly provided, whenever
in this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—BUSINESS PROVISIONS
Sec. 101. Special depreciation allowance for certain property acquired after
September 10, 2001, and before September 11, 2004.
Sec. 102. Temporary increase in expensing under section 179.
Sec. 103. Repeal of alternative minimum tax on corporations.
Sec. 104. Carryback of certain net operating losses allowed for 5 years.
Sec. 105. Recovery period for depreciation of certain leasehold improvements.
TITLE II—INDIVIDUAL PROVISIONS
Sec. 201. Acceleration of 25 percent individual income tax rate.
Sec. 202. Repeal of 5-year holding period requirement for reduced individual
capital gains rates.
Sec. 203. Temporary increase in deduction for capital losses of taxpayers other
than corporations.
Sec. 204. Temporary expansion of penalty-free retirement plan distributions for
health insurance premiums of unemployed individuals.
TITLE III—EXTENSIONS OF CERTAIN EXPIRING PROVISIONS
Subtitle A—Two-Year Extensions
Sec. 301. Allowance of nonrefundable personal credits against regular and min-
imum tax liability.
Sec. 302. Credit for qualified electric vehicles.
Sec. 303. Credit for electricity produced from renewable resources.
Sec. 304. Work opportunity credit.
Sec. 305. Welfare-to-work credit.
Sec. 306. Deduction for clean-fuel vehicles and certain refueling property.
HR 3090 RFS
Sec. 307. Taxable income limit on percentage depletion for oil and natural gas
produced from marginal properties.
Sec. 308. Qualified zone academy bonds.
Sec. 309. Cover over of tax on distilled spirits.
Sec. 310. Parity in the application of certain limits to mental health benefits.
Sec. 311. Delay in effective date of requirement for approved diesel or kerosene
terminals.
Subtitle B—One-Year Extensions
Sec. 321. One-year extension of availability of medical savings accounts.
Subtitle C—Permanent Extensions
Sec. 331. Subpart F exemption for active financing.
Subtitle D—Other Provisions
Sec. 341. Excluded cancellation of indebtedness income of S corporation not to
result in adjustment to basis of stock of shareholders.
Sec. 342. Limitation on use of nonaccrual experience method of accounting.
TITLE IV—SUPPLEMENTAL REBATE; OTHER PROVISIONS
Sec. 401. Supplemental rebate.
Sec. 402. Special Reed Act transfer in fiscal year 2002.
TITLE V—HEALTH CARE ASSISTANCE FOR THE UNEMPLOYED
Sec. 501. Health care assistance for the unemployed.
TITLE I—BUSINESS PROVISIONS
SEC. 101. SPECIAL DEPRECIATION ALLOWANCE FOR CER-
TAIN 
PROPERTY 
ACQUIRED 
AFTER 
SEP-
TEMBER 10, 2001, AND BEFORE SEPTEMBER
11, 2004.
(a) IN GENERAL.—Section 168 (relating to acceler-
ated cost recovery system) is amended by adding at the
end the following new subsection:
‘‘(k) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY
ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE
SEPTEMBER 11, 2004.—
HR 3090 RFS
‘‘(1) ADDITIONAL ALLOWANCE.—In the case of
any qualified property—
‘‘(A) the depreciation deduction provided
by section 167(a) for the taxable year in which
such property is placed in service shall include
an allowance equal to 30 percent of the ad-
justed basis of the qualified property, and
‘‘(B) the adjusted basis of the qualified
property shall be reduced by the amount of
such deduction before computing the amount
otherwise allowable as a depreciation deduction
under this chapter for such taxable year and
any subsequent taxable year.
‘‘(2) QUALIFIED PROPERTY.—For purposes of
this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
property’ means property—
‘‘(i)(I) to which this section applies
which has a recovery period of 20 years or
less or which is water utility property, or
‘‘(II) which is computer software (as
defined in section 167(f)(1)(B)) for which
a deduction is allowable under section
167(a) without regard to this subsection,
HR 3090 RFS
‘‘(ii) the original use of which com-
mences with the taxpayer after September
10, 2001,
‘‘(iii) which is—
‘‘(I) acquired by the taxpayer
after September 10, 2001, and before
September 11, 2004, but only if no
written binding contract for the acqui-
sition was in effect before September
11, 2001, or
‘‘(II) acquired by the taxpayer
pursuant to a written binding contract
which was entered into after Sep-
tember 10, 2001, and before Sep-
tember 11, 2004, and
‘‘(iv) which is placed in service by the
taxpayer before January 1, 2005.
‘‘(B) EXCEPTIONS.—
‘‘(i) 
ALTERNATIVE
DEPRECIATION
PROPERTY.—The term ‘qualified property’
shall not include any property to which the
alternative depreciation system under sub-
section (g) applies, determined—
HR 3090 RFS
‘‘(I) without regard to paragraph
(7) of subsection (g) (relating to elec-
tion to have system apply), and
‘‘(II) after application of section
280F(b) (relating to listed property
with limited business use).
‘‘(ii) ELECTION OUT.—If a taxpayer
makes an election under this clause with
respect to any class of property for any
taxable year, this subsection shall not
apply to all property in such class placed
in service during such taxable year.
‘‘(iii) REPAIRED OR RECONSTRUCTED
PROPERTY.—Except as otherwise provided
in regulations, the term ‘qualified property’
shall not include any repaired or recon-
structed property.
‘‘(iv) 
QUALIFIED
LEASEHOLD
IM-
PROVEMENT PROPERTY.—The term ‘quali-
fied property’ shall not include any quali-
fied leasehold improvement property (as
defined in section 168(e)(6)).
‘‘(C) SPECIAL RULES RELATING TO ORIGI-
NAL USE.—
HR 3090 RFS
‘‘(i) 
SELF-CONSTRUCTED
PROP-
ERTY.—In the case of a taxpayer manufac-
turing, constructing, or producing property
for the taxpayer’s own use, the require-
ments of clause (iii) of subparagraph (A)
shall be treated as met if the taxpayer be-
gins manufacturing, constructing, or pro-
ducing the property after September 10,
2001, and before September 11, 2004.
‘‘(ii) SALE-LEASEBACKS.—For pur-
poses 
of 
subparagraph 
(A)(ii), 
if
property—
‘‘(I) is originally placed in service
after September 10, 2001, by a per-
son, and
‘‘(II) sold and leased back by
such person within 3 months after the
date such property was originally
placed in service,
such property shall be treated as originally
placed in service not earlier than the date
on which such property is used under the
leaseback referred to in subclause (II).
‘‘(D) 
COORDINATION
WITH
SECTION
280F.—For purposes of section 280F—
HR 3090 RFS
‘‘(i) AUTOMOBILES.—In the case of a
passenger automobile (as defined in section
280F(d)(5)) which is qualified property,
the Secretary shall increase the limitation
under section 280F(a)(1)(A)(i) by $4,600.
‘‘(ii) LISTED PROPERTY.—The deduc-
tion allowable under paragraph (1) shall be
taken into account in computing any re-
capture 
amount 
under 
section
280F(b)(2).’’
(b) ALLOWANCE AGAINST ALTERNATIVE MINIMUM
TAX.—
(1) IN GENERAL.—Section 56(a)(1)(A) (relat-
ing to depreciation adjustment for alternative min-
imum tax) is amended by adding at the end the fol-
lowing new clause:
‘‘(iii) ADDITIONAL
ALLOWANCE
FOR
CERTAIN PROPERTY ACQUIRED AFTER SEP-
TEMBER
10, 
2001, 
AND
BEFORE
SEP-
TEMBER
11, 2004.—The deduction under
section 168(k) shall be allowed.’’
(2) CONFORMING AMENDMENT.—Clause (i) of
section 56(a)(1)(A) is amended by striking ‘‘clause
(ii)’’ both places it appears and inserting ‘‘clauses
(ii) and (iii)’’.
HR 3090 RFS
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
September 10, 2001, in taxable years ending after such
date.
SEC. 102. TEMPORARY INCREASE IN EXPENSING UNDER
SECTION 179.
(a) IN GENERAL.—The table contained in section
179(b)(1) (relating to dollar limitation) is amended to
read as follows:
‘‘If the taxable year
The applicable
begins in:
amount is:
2001 .......................................................................
$24,000
2002 or 2003 .........................................................
$35,000
2004 or thereafter .................................................
$25,000.’’.
(b) TEMPORARY INCREASE IN AMOUNT OF PROP-
ERTY TRIGGERING PHASEOUT OF MAXIMUM BENEFIT.—
Paragraph (2) of section 179(b) is amended by inserting
before the period ‘‘($325,000 in the case of taxable years
beginning during 2002 or 2003)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 103. REPEAL OF ALTERNATIVE MINIMUM TAX ON COR-
PORATIONS.
(a) IN GENERAL.—So much of section 55 as precedes
subsection (b)(2) is amended to read as follows:
HR 3090 RFS
‘‘SEC. 55. ALTERNATIVE MINIMUM TAX FOR TAXPAYERS
OTHER THAN CORPORATIONS.
‘‘(a) IN GENERAL.—In the case of a taxpayer other
than a corporation, there is hereby imposed (in addition
to any other tax imposed by this subtitle) a tax equal to
the excess (if any) of—
‘‘(1) the tentative minimum tax for the taxable
year, over
‘‘(2) the regular tax for the taxable year.
‘‘(b) TENTATIVE MINIMUM TAX.—For purposes of
this part—
‘‘(1) AMOUNT OF TENTATIVE TAX.—
‘‘(A) IN
GENERAL.—The tentative min-
imum tax for the taxable year is the sum of—
‘‘(i) 26 percent of so much of the tax-
able excess as does not exceed $175,000,
plus
‘‘(ii) 28 percent of so much of the tax-
able excess as exceeds $175,000.
The amount determined under the preceding
sentence shall be reduced by the alternative
minimum tax foreign tax credit for the taxable
year.
‘‘(B) TAXABLE EXCESS.—For purposes of
this subsection, the term ‘taxable excess’ means
so much of the alternative minimum taxable in-
HR 3090 RFS
come for the taxable year as exceeds the exemp-
tion amount.
‘‘(C) MARRIED INDIVIDUAL FILING SEPA-
RATE RETURN.—In the case of a married indi-
vidual filing a separate return, clause (i) shall
be applied by substituting ‘$87,500’ for
‘$175,000’ each place it appears. For purposes
of the preceding sentence, marital status shall
be determined under section 7703.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 55(b) is amended
by striking ‘‘paragraph (1)(A)(i)’’ and inserting
‘‘paragraph (1)(A)’’.
(2) Paragraph (1) of section 55(c) is amended
by striking ‘‘, the section 936 credit allowable under
section 27(b), and the Puerto Rico economic activity
credit under section 30A’’.
(3)(A) Paragraph (1) of section 55(d) is
amended by—
(i) by striking ‘‘FOR
TAXPAYERS
OTHER
THAN CORPORATIONS’’ in the heading, and
(ii) by striking ‘‘In the case of a taxpayer
other than a corporation, the’’ and inserting
‘‘The’’.
HR 3090 RFS
(B) Section 55(d) is amended by striking para-
graph (2) and by redesignating paragraph (3) as
paragraph (2).
(C) Subparagraph (A) of section 55(d)(2), as so
redesignated is amended by striking ‘‘or (2)’’.
(4) Section 55 is amended by striking sub-
section (e).
(5)(A) The designation and heading for sub-
section (a) of section 56 is amended to read as fol-
lows:
‘‘(a) GENERAL RULES.—’’.
(B) Paragraph (1) of section 56(a) is amended
by striking subparagraph (D).
(C) 
Paragraph 
(6) 
of 
section 
56(a) 
is
amended—
(i) by striking ‘‘paragraph (2) or sub-
section (b)(2)’’ and inserting ‘‘paragraph (2) or
(9)’’, and
(ii) by striking ‘‘or (5), or subsection
(b)(2)’’ and inserting ‘‘(5), or (9)’’.
(6)(A) Subsection (b) of section 56 is amended
by striking so much of such subsection as precedes
paragraph (1) and by redesignating paragraphs (1),
(2), and (3) as paragraphs (8), (9), and (10), re-
spectively, of subsection (a).
HR 3090 RFS
(B) Paragraph (9) of section 56(a), as so redes-
ignated, is amended by striking subparagraph (C)
and by redesignating subparagraph (D) as subpara-
graph (C).
(7) Section 56 is amended by striking sub-
sections (c) and (g) and by redesignating subsections
(d) and (e) as subsections (b) and (c), respectively.
(8) Subparagraph (E) of section 57(a)(2) is
amended—
(A) by striking ‘‘FOR INDEPENDENT PRO-
DUCERS’’ in the heading, and
(B) by striking clause (i) and inserting the
following new clause:
‘‘(i) IN
GENERAL.—This paragraph
shall not apply to any taxable year begin-
ning after December 31, 1992.’’
(9) Subsection (a) of section 58 is amended by
striking paragraph (3) and by redesignating para-
graph (4) as paragraph (3).
(10)(A) Section 59 is amended by striking sub-
sections (b) and (f) and by redesignating subsections
(c), (d), (e), (g), (h), (i), and (j) as subsections (b),
(c), (d), (e), (f), (g), and (h), respectively.
HR 3090 RFS
(B) Paragraph (2) of section 59(d), as so redes-
ignated, is amended by striking ‘‘(determined with-
out regard to section 291)’’.
(C) 
Sections 
173(b), 
174(f)(2), 
263(c),
263A(c)(6), 616(e), 617(i), and 1016(a)(20) are
each amended by striking ‘‘59(e)’’ each place it ap-
pears and inserting ‘‘59(d)’’.
(11) Subsection (d) of section 11 is amended by
striking ‘‘the taxes imposed by subsection (a) and
section 55’’ and inserting ‘‘the tax imposed by sub-
section (a)’’.
(12) Section 12 is amended by striking para-
graph (7).
(13) Paragraph (6) of section 29(b) is amended
to read as follows:
‘‘(6) APPLICATION
WITH
OTHER
CREDITS.—
The credit allowed by subsection (a) for any taxable
year shall not exceed the excess (if any) of the reg-
ular tax for the taxable year reduced by the sum of
the credits allowable under subpart A and section
27. In the case of a taxpayer other than a corpora-
tion, such excess shall be further reduced (but not
below zero) by the tentative minimum tax for the
taxable year.’’
HR 3090 RFS
(14) Paragraph (3) of section 30(b) is amended
to read as follows:
‘‘(3) APPLICATION
WITH
OTHER
CREDITS.—
The credit allowed by subsection (a) for any taxable
year shall not exceed the excess (if any) of the reg-
ular tax for the taxable year reduced by the sum of
the credits allowable under subpart A and sections
27 and 29. In the case of a taxpayer other than a
corporation, such excess shall be further reduced
(but not below zero) by the tentative minimum tax
for the taxable year.’’
(15)(A) Paragraph (1) of section 38(c) is
amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) CORPORATIONS.—In the case of a
corporation, the credit allowed under subsection
(a) for any taxable year shall not exceed the ex-
cess (if any) of the taxpayer’s net income tax
over 25 percent of so much of the taxpayer’s
net regular tax liability as exceeds $25,000.
‘‘(B) TAXPAYERS OTHER THAN CORPORA-
TIONS.—In the case of a taxpayer other than a
corporation, the credit allowed under subsection
(a) for any taxable year shall not exceed the ex-
HR 3090 RFS
cess (if any) of the taxpayer’s net income tax
over the greater of—
‘‘(i) the tentative minimum tax for the
taxable year, or
‘‘(ii) 25 percent of so much of the tax-
payer’s net regular tax liability as exceeds
$25,000.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) the term ‘net income tax’ means
the sum of the regular tax liability and the
tax imposed by section 55, reduced by the
credits allowable under subparts A and B
of this part, and
‘‘(ii) the term ‘net regular tax liabil-
ity’ means the regular tax liability reduced
by the sum of the credits allowable under
subparts A and B of this part.’’
(B) Clause (ii) of section 38(c)(2)(A) is amend-
ed to read as follows:
‘‘(ii) for purposes of applying para-
graph (1) to such credit—
‘‘(I) the applicable limitation
under paragraph (1) (as modified by
subclause (II) in the case of a tax-