striking ‘‘or’’ at the end of both subparagraphs (A) and
(C), by striking the period at the end of subparagraph (D)
and inserting ‘‘, or’’, and by inserting after subparagraph
(D) the following new subparagraph:
‘‘(E) in the case of an individual, the in-
debtedness discharged is qualified residential in-
debtedness.’’.
(b) 
QUALIFIED
RESIDENTIAL
INDEBTEDNESS
SHORTFALL.—Section 108 (relating to discharge of in-
debtedness) is amended by adding at the end the following
new subsection:
‘‘(h) QUALIFIED RESIDENTIAL INDEBTEDNESS.—
‘‘(1) 
LIMITATIONS.—The 
amount 
excluded
under subparagraph (E) of subsection (a)(1) with
respect to any qualified residential indebtedness
shall not exceed the excess (if any) of—
‘‘(A) the outstanding principal amount of
such indebtedness (immediately before the dis-
charge), over
‘‘(B) the sum of—
‘‘(i) the amount realized from the sale
of the real property securing such indebt-
edness reduced by the cost of such sale,
and
‘‘(ii) the outstanding principal amount
of any other indebtedness secured by such
property.
‘‘(2) 
QUALIFIED
RESIDENTIAL
INDEBTED-
NESS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
residential indebtedness’ means indebtedness
which—
‘‘(i) was incurred or assumed by the
taxpayer in connection with real property
used as the principal residence (within the
meaning of section 121) of the taxpayer
and is secured by such real property,
‘‘(ii) is incurred or assumed to ac-
quire, construct, reconstruct, or substan-
tially improve such real property, and
‘‘(iii) with respect to which such tax-
payer makes an election to have this para-
graph apply.
‘‘(B) REFINANCED INDEBTEDNESS.—Such
term shall include indebtedness resulting from
the refinancing of indebtedness under subpara-
graph (A)(ii), but only to the extent the amount
of the indebtedness resulting from such refi-
nancing does not exceed the amount of the refi-
nanced indebtedness.
‘‘(C) EXCEPTIONS.—Such term shall not
include qualified farm indebtedness or qualified
real property business indebtedness.’’.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 108(a) is
amended—
(A) in subparagraph (A) by striking ‘‘and
(D)’’ and inserting ‘‘(D), and (E)’’; and
(B) by amending subparagraph (B) to read
as follows:
‘‘(B) 
INSOLVENCY
EXCLUSION
TAKES
PRECEDENCE OVER QUALIFIED FARM EXCLU-
SION; QUALIFIED
REAL
PROPERTY
BUSINESS
EXCLUSION; 
AND
QUALIFIED
RESIDENTIAL
SHORTFALL
EXCLUSION.—Subparagraphs (C),
(D), and (E) of paragraph (1) shall not apply
to a discharge to the extent the taxpayer is in-
solvent.’’.
(2) Paragraph (1) of section 108(b) is amended
by striking ‘‘or (C)’’ and inserting ‘‘(C), or (E)’’.
(3) Subsection (c) of section 121 of such Code
is amended by adding at the end the following new
paragraph:
‘‘(4) SPECIAL RULE RELATING TO DISCHARGE
OF
INDEBTEDNESS.—The amount of gain which
(but for this paragraph) would be excluded from
gross income under subsection (a) with respect to a
principal residence shall be reduced by the amount
excluded 
from 
gross 
income 
under 
section
108(a)(1)(E) with respect to such residence.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to discharges after December 31,
2000.
TITLE 
III—AMENDMENTS 
TO
THE FAIR LABOR STANDARDS
ACT OF 1938
SEC. 301. SHORT TITLE.
This title may be cited as the ‘‘Minimum Wage In-
crease Act of 2001’’.
SEC. 302. MINIMUM WAGE.
Section 6(a)(1) of the Fair Labor Standards Act of
1938 (29 U.S.C. 206(a)(1)) is amended to read as follows:
‘‘(1) except as otherwise provided in this sec-
tion, not less than—
‘‘(A) $5.15 an hour beginning September
1, 1997,
‘‘(B) $5.65 an hour beginning September
1, 2001, and