(2) By substituting ‘‘remain in the Federal un-
employment account’’ for ‘‘be transferred to the Fed-
eral unemployment account as of the beginning of
such October 1’’.
(3) By substituting ‘‘fiscal year 2002 (after the
transfer date described in subsection (d)(5))’’ for ‘‘the
fiscal year beginning on such October 1’’.
(4) By substituting ‘‘under subsection (d)’’ for
‘‘as of October 1 of such fiscal year’’.
(5) By substituting ‘‘(as of the close of fiscal year
2002)’’ for ‘‘(as of the close of such fiscal year)’’.
(d) 
TECHNICAL
AMENDMENTS.—(1) 
Sections
3304(a)(4)(B) and 3306(f)(2) of the Internal Revenue Code
of 1986 are amended by inserting ‘‘or 903(d)(4)’’ before ‘‘of
the Social Security Act’’.
(2) Section 303(a)(5) of the Social Security Act is
amended in the second proviso by inserting ‘‘or 903(d)(4)’’
after ‘‘903(c)(2)’’.
(e) REGULATIONS.—The Secretary of Labor may pre-
scribe any operating instructions or regulations necessary
to carry out this section and the amendments made by this
section.
TITLE III—TAX INCENTIVES FOR
NEW YORK CITY AND DIS-
TRESSED AREAS
SEC. 301. TAX BENEFITS FOR AREA OF NEW YORK CITY
DAMAGED IN TERRORIST ATTACKS ON SEP-
TEMBER 11, 2001.
(a) IN GENERAL.—Chapter 1 is amended by adding
at the end the following new subchapter:
‘‘Subchapter Y—New York Liberty Zone
Benefits
‘‘Sec. 1400L. Tax benefits for New York Liberty Zone.
‘‘SEC. 1400L. TAX BENEFITS FOR NEW YORK LIBERTY ZONE.
‘‘(a) EXPANSION OF WORK OPPORTUNITY TAX CRED-
IT.—
‘‘(1) IN GENERAL.—For purposes of section 51,
a New York Liberty Zone business employee shall be
treated as a member of a targeted group.
‘‘(2) NEW YORK LIBERTY ZONE BUSINESS EM-
PLOYEE.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘New York
Liberty Zone business employee’ means, with re-
spect to any period, any employee of a New York
Liberty Zone business if substantially all the
services performed during such period by such
employee for such business are performed in the
New York Liberty Zone.
‘‘(B) INCLUSION
OF
CERTAIN
EMPLOYEES
OUTSIDE THE NEW YORK LIBERTY ZONE.—
‘‘(i) IN GENERAL.—In the case of a
New York Liberty Zone business described
in subclause (II) of subparagraph (C)(i),
the term ‘New York Liberty Zone business
employee’ includes any employee of such
business (not described in subparagraph
(A)) if substantially all the services per-
formed during such period by such employee
for such business are performed in the City
of New York, New York.
‘‘(ii) LIMITATION.—The number of em-
ployees of such a business that are treated
as New York Liberty zone business employ-
ees on any day by reason of clause (i) shall
not exceed the excess of—
‘‘(I) the number of employees of
such business on September 11, 2001,
in the New York Liberty Zone, over
‘‘(II) the number of New York
Liberty Zone business employees (de-
termined without regard to this sub-
paragraph) of such business on the day
to which the limitation is being ap-
plied.
The Secretary may require any trade or
business to have the number determined
under subclause (I) verified by the New
York State Department of Labor.
‘‘(C) NEW
YORK
LIBERTY
ZONE
BUSI-
NESS.—
‘‘(i) IN
GENERAL.—The term ‘New
York Liberty Zone business’ means any
trade or business which is—
‘‘(I) located in the New York Lib-
erty Zone, or
‘‘(II) located in the City of New
York, New York, outside the New York
Liberty Zone, as a result of the phys-
ical destruction or damage of such
place of business by the September 11,
2001, terrorist attack.
‘‘(ii) CREDIT
NOT
ALLOWED
FOR
LARGE BUSINESSES.—The term ‘New York
Liberty Zone business’ shall not include any
trade or business for any taxable year if
such trade or business employed an average
of more than 200 employees on business
days during the taxable year.
‘‘(D) SPECIAL
RULES
FOR
DETERMINING
AMOUNT OF CREDIT.—For purposes of applying
subpart F of part IV of subchapter B of this
chapter to wages paid or incurred to any New
York Liberty Zone business employee—
‘‘(i) section 51(a) shall be applied by
substituting ‘qualified wages’ for ‘qualified
first-year wages’,
‘‘(ii) the rules of section 52 shall apply
for purposes of determining the number of
employees under subparagraph (B),
‘‘(iii) subsections (c)(4) and (i)(2) of
section 51 shall not apply, and
‘‘(iv) in determining qualified wages,
the following shall apply in lieu of section
51(b):
‘‘(I) 
QUALIFIED
WAGES.—The
term ‘qualified wages’ means wages
paid or incurred by the employer to
individuals who are New York Liberty
Zone business employees of such em-
ployer for work performed during cal-
endar year 2002 or 2003.
‘‘(II) 
ONLY
FIRST
$6,000
OF
WAGES
PER
CALENDAR
YEAR
TAKEN
INTO
ACCOUNT.—The amount of the
qualified wages which may be taken
into account with respect to any indi-
vidual shall not exceed $6,000 per cal-
endar year.
‘‘(b) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY
ACQUIRED AFTER SEPTEMBER 10, 2001.—
‘‘(1) ADDITIONAL ALLOWANCE.—In the case of
any qualified New York Liberty Zone property—
‘‘(A) the depreciation deduction provided by
section 167(a) for the taxable year in which such
property is placed in service shall include an al-
lowance equal to 30 percent of the adjusted basis
of such property, and
‘‘(B) the adjusted basis of the qualified New
York Liberty Zone property shall be reduced by
the amount of such deduction before computing
the amount otherwise allowable as a depreciation
deduction under this chapter for such taxable
year and any subsequent taxable year.
‘‘(2) QUALIFIED NEW YORK LIBERTY ZONE PROP-
ERTY.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
New 
York 
Liberty 
Zone 
property’ 
means
property—
‘‘(i)(I) which is described in section
168(k)(2)(A)(i), or
‘‘(II) which is nonresidential real
property, or residential rental property,
which is described in subparagraph (B),
‘‘(ii) substantially all of the use of
which is in the New York Liberty Zone and
is in the active conduct of a trade or busi-
ness by the taxpayer in such Zone,
‘‘(iii) the original use of which in the
New York Liberty Zone commences with the
taxpayer after September 10, 2001,
‘‘(iv) which is acquired by the tax-
payer by purchase (as defined in section
179(d)) after September 10, 2001, but only
if no written binding contract for the acqui-
sition was in effect before September 11,
2001, and
‘‘(v) which is placed in service by the
taxpayer on or before the termination date.
The term ‘termination date’ means December 31,
2006 (December 31, 2009, in the case of nonresi-
dential real property and residential rental
property).
‘‘(B) ELIGIBLE REAL PROPERTY.—Nonresi-
dential real property or residential rental prop-
erty is described in this subparagraph only to
the extent it rehabilitates real property damaged,
or replaces real property destroyed or con-
demned, as a result of the September 11, 2001,
terrorist attack. For purposes of the preceding
sentence, property shall be treated as replacing
real property destroyed or condemned if, as part
of an integrated plan, such property replaces
real property which is included in a continuous
area which includes real property destroyed or
condemned.
‘‘(C) EXCEPTIONS.—
‘‘(i) 30 PERCENT ADDITIONAL ALLOW-
ANCE PROPERTY.—Such term shall not in-
clude property to which section 168(k) ap-
plies.
‘‘(ii) 
ALTERNATIVE
DEPRECIATION
PROPERTY.—The term ‘qualified New York
Liberty Zone property’ shall not include
any 
property 
described 
in 
section
168(k)(2)(C)(i).
‘‘(iii) QUALIFIED NEW YORK LIBERTY
ZONE
LEASEHOLD
IMPROVEMENT
PROP-
ERTY.—Such term shall not include any
qualified New York Liberty Zone leasehold
improvement property.
‘‘(iv) ELECTION OUT.—For purposes of
this subsection, rules similar to the rules of
section 168(k)(2)(C)(iii) shall apply.
‘‘(D) SPECIAL RULES.—For purposes of this
subsection, rules similar to the rules of section
168(k)(2)(D) shall apply, except that clause (i)
thereof shall be applied without regard to ‘and
before September 11, 2004’.
‘‘(E) ALLOWANCE
AGAINST
ALTERNATIVE
MINIMUM TAX.—For purposes of this subsection,
rules similar to the rules of section 168(k)(2)(F)
shall apply.
‘‘(c) 5-YEAR RECOVERY PERIOD FOR DEPRECIATION
OF CERTAIN LEASEHOLD IMPROVEMENTS.—
‘‘(1) IN GENERAL.—For purposes of section 168,
the term ‘5-year property’ includes any qualified New
York Liberty Zone leasehold improvement property.
‘‘(2) QUALIFIED
NEW
YORK
LIBERTY
ZONE
LEASEHOLD IMPROVEMENT PROPERTY.—For purposes
of this section, the term ‘qualified New York Liberty
Zone leasehold improvement property’ means quali-
fied leasehold improvement property (as defined in
section 168(k)(3)) if—
‘‘(A) such building is located in the New
York Liberty Zone,
‘‘(B) such improvement is placed in service
after September 10, 2001, and before January 1,
2007, and
‘‘(C) no written binding contract for such
improvement was in effect before September 11,
2001.
‘‘(3) REQUIREMENT
TO
USE
STRAIGHT
LINE
METHOD.—The applicable depreciation method under
section 168 shall be the straight line method in the
case of qualified New York Liberty Zone leasehold im-
provement property.
‘‘(4) 9-YEAR RECOVERY PERIOD UNDER ALTER-
NATIVE SYSTEM.—For purposes of section 168(g), the
class life of qualified New York Liberty Zone leasehold
improvement property shall be 9 years.
‘‘(d) TAX-EXEMPT BOND FINANCING.—
‘‘(1) IN GENERAL.—For purposes of this title,
any qualified New York Liberty Bond shall be treated
as an exempt facility bond.