‘‘(2) QUALIFIED NEW YORK LIBERTY BOND.—For
purposes of this subsection, the term ‘qualified New
York Liberty Bond’ means any bond issued as part
of an issue if—
‘‘(A) 95 percent or more of the net proceeds
(as defined in section 150(a)(3)) of such issue
are to be used for qualified project costs,
‘‘(B) such bond is issued by the State of
New York or any political subdivision thereof,
‘‘(C) the Governor or the Mayor designates
such bond for purposes of this section, and
‘‘(D) such bond is issued after the the date
of the enactment of this section and before Janu-
ary 1, 2005.
‘‘(3) LIMITATIONS ON AMOUNT OF BONDS.—
‘‘(A) AGGREGATE AMOUNT DESIGNATED.—
The maximum aggregate face amount of bonds
which may be designated under this subsection
shall not exceed $8,000,000,000, of which not to
exceed $4,000,000,000 may be designated by the
Governor and not to exceed $4,000,000,000 may
be designated by the Mayor.
‘‘(B) SPECIFIC
LIMITATIONS.—The aggre-
gate face amount of bonds issued which are to be
used for—
‘‘(i) costs for property located outside
the New York Liberty Zone shall not exceed
$2,000,000,000,
‘‘(ii) residential rental property shall
not exceed $1,600,000,000, and
‘‘(iii) costs with respect to property
used for retail sales of tangible property
and functionally related and subordinate
property shall not exceed $800,000,000.
The limitations under clauses (i), (ii), and (iii)
shall be allocated proportionately between the
bonds designated by the Governor and the bonds
designated by the Mayor in proportion to the re-
spective amounts of bonds designated by each.
‘‘(C) MOVABLE PROPERTY.—No bonds shall
be issued which are to be used for movable fix-
tures and equipment.
‘‘(4) QUALIFIED PROJECT COSTS.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
project costs’ means the cost of acquisition, con-
struction, reconstruction, and renovation of—
‘‘(i) nonresidential real property and
residential rental property (including fixed
tenant improvements associated with such
property) located in the New York Liberty
Zone, and
‘‘(ii) public utility property (as de-
fined in section 168(i)(10)) located in the
New York Liberty Zone.
‘‘(B) COSTS FOR CERTAIN PROPERTY OUT-
SIDE ZONE INCLUDED.—Such term includes the
cost of acquisition, construction, reconstruction,
and renovation of nonresidential real property
(including fixed tenant improvements associated
with such property) located outside the New York
Liberty Zone but within the City of New York,
New York, if such property is part of a project
which consists of at least 100,000 square feet of
usable office or other commercial space located in
a single building or multiple adjacent buildings.
‘‘(5) SPECIAL RULES.—In applying this title to
any qualified New York Liberty Bond, the following
modifications shall apply:
‘‘(A) Section 146 (relating to volume cap)
shall not apply.
‘‘(B) Section 147(d) (relating to acquisition
of existing property not permitted) shall be ap-
plied by substituting ‘50 percent’ for ‘15 percent’
each place it appears.
‘‘(C) Section 148(f)(4)(C) (relating to excep-
tion from rebate for certain proceeds to be used
to finance construction expenditures) shall apply
to the available construction proceeds of bonds
issued under this section.
‘‘(D) Repayments of principal on financing
provided by the issue—
‘‘(i) may not be used to provide financ-
ing, and
‘‘(ii) must be used not later than the
close of the 1st semiannual period beginning
after the date of the repayment to redeem
bonds which are part of such issue.
The requirement of clause (ii) shall be treated as
met with respect to amounts received within 10
years after the date of issuance of the issue (or,
in the case of a refunding bond, the date of
issuance of the original bond) if such amounts
are used by the close of such 10 years to redeem
bonds which are part of such issue.
‘‘(E) Section 57(a)(5) shall not apply.
‘‘(6) SEPARATE ISSUE TREATMENT OF PORTIONS
OF AN ISSUE.—This subsection shall not apply to the
portion of an issue which (if issued as a separate
issue) would be treated as a qualified bond or as a
bond that is not a private activity bond (determined
without regard to paragraph (1)), if the issuer elects
to so treat such portion.
‘‘(e) ADVANCE REFUNDINGS OF CERTAIN TAX-EXEMPT
BONDS.—
‘‘(1) IN GENERAL.—With respect to a bond de-
scribed in paragraph (2) issued as part of an issue
90 percent (95 percent in the case of a bond described
in paragraph (2)(C)) or more of the net proceeds (as
defined in section 150(a)(3)) of which were used to fi-
nance facilities located within the City of New York,
New York (or property which is functionally related
and subordinate to facilities located within the City
of New York for the furnishing of water), one addi-
tional advanced refunding after the date of the enact-
ment of this section and before January 1, 2005, shall
be allowed under the applicable rules of section 149(d)
if—
‘‘(A) the Governor or the Mayor designates
the advance refunding bond for purposes of this
subsection, and
‘‘(B) the requirements of paragraph (4) are
met.
‘‘(2) BONDS DESCRIBED.—A bond is described in
this paragraph if such bond was outstanding on Sep-
tember 11, 2001, and is—
‘‘(A) a State or local bond (as defined in
section 103(c)(1)) which is a general obligation
of the City of New York, New York,
‘‘(B) a State or local bond (as so defined)
other than a private activity bond (as defined in
section 141(a)) issued by the New York Munic-
ipal Water Finance Authority or the Metropoli-
tan Transportation Authority of the State of
New York, or
‘‘(C) a qualified 501(c)(3) bond (as defined
in section 145(a)) which is a qualified hospital
bond (as defined in section 145(c)) issued by or
on behalf of the State of New York or the City
of New York, New York.
‘‘(3) AGGREGATE LIMIT.—For purposes of para-
graph (1), the maximum aggregate face amount of
bonds which may be designated under this subsection
by the Governor shall not exceed $4,500,000,000 and
the maximum aggregate face amount of bonds which
may be designated under this subsection by the Mayor
shall not exceed $4,500,000,000.
‘‘(4) ADDITIONAL REQUIREMENTS.—The require-
ments of this paragraph are met with respect to any
advance refunding of a bond described in paragraph
(2) if—
‘‘(A) no advance refundings of such bond
would be allowed under any provision of law
after September 11, 2001,
‘‘(B) the advance refunding bond is the only
other outstanding bond with respect to the re-
funded bond, and
‘‘(C) the requirements of section 148 are met
with respect to all bonds issued under this sub-
section.
‘‘(f) INCREASE IN EXPENSING UNDER SECTION 179.—
‘‘(1) IN
GENERAL.—For purposes of section
179—
‘‘(A) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(i) $35,000, or
‘‘(ii) the cost of section 179 property
which is qualified New York Liberty Zone
property placed in service during the tax-
able year, and
‘‘(B) the amount taken into account under
section 179(b)(2) with respect to any section 179
property which is qualified New York Liberty
Zone property shall be 50 percent of the cost
thereof.
‘‘(2) QUALIFIED NEW YORK LIBERTY ZONE PROP-
ERTY.—For purposes of this subsection, the term
‘qualified New York Liberty Zone property’ has the
meaning given such term by subsection (b)(2).
‘‘(3) RECAPTURE.—Rules similar to the rules
under section 179(d)(10) shall apply with respect to
any qualified New York Liberty Zone property which
ceases to be used in the New York Liberty Zone.
‘‘(g) EXTENSION OF REPLACEMENT PERIOD FOR NON-
RECOGNITION OF GAIN.—Notwithstanding subsections (g)
and (h) of section 1033, clause (i) of section 1033(a)(2)(B)
shall be applied by substituting ‘5 years’ for ‘2 years’ with
respect to property which is compulsorily or involuntarily
converted as a result of the terrorist attacks on September
11, 2001, in the New York Liberty Zone but only if substan-
tially all of the use of the replacement property is in the
City of New York, New York.
‘‘(h) NEW YORK LIBERTY ZONE.—For purposes of this
section, the term ‘New York Liberty Zone’ means the area
located on or south of Canal Street, East Broadway (east
of its intersection with Canal Street), or Grand Street (east
of its intersection with East Broadway) in the Borough of
Manhattan in the City of New York, New York.
‘‘(i) REFERENCES TO GOVERNOR AND MAYOR.—For
purposes of this section, the terms ‘Governor’ and ‘Mayor’
mean the Governor of the State of New York and the Mayor
of the City of New York, New York, respectively.’’.
(b) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax) is
amended by redesignating paragraph (3) as para-
graph (4) and by inserting after paragraph (2) the
following new paragraph:
‘‘(3) SPECIAL RULES FOR NEW YORK LIBERTY
ZONE BUSINESS EMPLOYEE CREDIT.—
‘‘(A) IN GENERAL.—In the case of the New
York Liberty Zone business employee credit—
‘‘(i) this section and section 39 shall be
applied separately with respect to such
credit, and
‘‘(ii) in applying paragraph (1) to
such credit—
‘‘(I) the tentative minimum tax
shall be treated as being zero, 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 tax-
able year (other than the New York
Liberty Zone business employee credit).
‘‘(B) NEW YORK LIBERTY ZONE BUSINESS
EMPLOYEE CREDIT.—For purposes of this sub-
section, the term ‘New York Liberty Zone busi-
ness employee credit’ means the portion of work
opportunity credit under section 51 determined
under section 1400L(a).’’.
(2) CONFORMING
AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) is amended by inserting ‘‘or
the New York Liberty Zone business employee credit’’
after ‘‘employment credit’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years ending
after December 31, 2001.
(c) CLERICAL AMENDMENT.—The table of subchapters
for chapter 1 is amended by adding at the end the following
new item:
‘‘Subchapter Y—New York Liberty Zone Benefits.’’.
TITLE IV—MISCELLANEOUS AND
TECHNICAL PROVISIONS
Subtitle A—General Miscellaneous
Provisions
SEC. 401. ALLOWANCE OF ELECTRONIC 1099’S.
Any person required to furnish a statement under any
section of subpart B of part III of subchapter A of chapter
61 of the Internal Revenue Code of 1986 for any taxable
year ending after the date of the enactment of this Act, may
electronically furnish such statement (without regard to any
first class mailing requirement) to any recipient who has
consented to the electronic provision of the statement in a
manner similar to the one permitted under regulations
issued under section 6051 of such Code or in such other
manner as provided by the Secretary.
SEC. 402. EXCLUDED CANCELLATION OF INDEBTEDNESS IN-
COME OF S CORPORATION NOT TO RESULT IN
ADJUSTMENT TO BASIS OF STOCK OF SHARE-
HOLDERS.
(a) IN
GENERAL.—Subparagraph (A) of section
108(d)(7) (relating to certain provisions to be applied at
corporate level) is amended by inserting before the period
‘‘, including by not taking into account under section
1366(a) any amount excluded under subsection (a) of this
section’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendment made by this section shall
apply to discharges of indebtedness after October 11,
2001, in taxable years ending after such date.
(2) EXCEPTION.—The amendment made by this
section shall not apply to any discharge of indebted-
ness before March 1, 2002, pursuant to a plan of reor-
ganization filed with a bankruptcy court on or before
October 11, 2001.
SEC. 403. LIMITATION ON USE OF NONACCRUAL EXPERI-
ENCE METHOD OF ACCOUNTING.
(a) IN GENERAL.—Paragraph (5) of section 448(d) is
amended to read as follows:
‘‘(5) SPECIAL RULE FOR CERTAIN SERVICES.—
‘‘(A) IN GENERAL.—In the case of any per-
son using an accrual method of accounting with
respect to amounts to be received for the perform-
ance of services by such person, such person shall
not be required to accrue any portion of such
amounts which (on the basis of such person’s ex-
perience) will not be collected if—
‘‘(i) such services are in fields referred
to in paragraph (2)(A), or
‘‘(ii) such person meets the gross re-
ceipts test of subsection (c) for all prior tax-
able years.
‘‘(B) EXCEPTION.—This paragraph shall
not apply to any amount if interest is required
to be paid on such amount or there is any pen-
alty for failure to timely pay such amount.
‘‘(C) REGULATIONS.—The Secretary shall
prescribe regulations to permit taxpayers to de-
termine amounts referred to in subparagraph
(A) using computations or formulas which, based
on experience, accurately reflect the amount of
income that will not be collected by such person.
A taxpayer may adopt, or request consent of the
Secretary to change to, a computation or for-
mula that clearly reflects the taxpayer’s experi-
ence. A request under the preceding sentence
shall be approved if such computation or for-
mula clearly reflects the taxpayer’s experience.’’.
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to taxable years ending after
the date of the enactment of this Act.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer required by the amendments
made by this section to change its method of account-
ing for its first taxable year ending after the date of
the enactment of this Act—
(A) such change shall be treated as initiated
by the taxpayer,
(B) such change shall be treated as made
with the consent of the Secretary of the Treasury,
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 period
of 4 years (or if less, the number of taxable years
that the taxpayer used the method permitted
under section 448(d)(5) of such Code as in effect
before the date of the enactment of this Act) be-
ginning with such first taxable year.
SEC. 404. EXCLUSION FOR FOSTER CARE PAYMENTS TO
APPLY TO PAYMENTS BY QUALIFIED PLACE-
MENT AGENCIES.
(a) IN GENERAL.—The matter preceding subpara-
graph (B) of section 131(b)(1) (defining qualified foster care
payment) is amended to read as follows:
‘‘(1) IN
GENERAL.—The term ‘qualified foster
care payment’ means any payment made pursuant to
a foster care program of a State or political subdivi-
sion thereof—
‘‘(A) which is paid by—
‘‘(i) a State or political subdivision
thereof, or
‘‘(ii) a qualified foster care placement
agency, and’’.
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE IN-
DIVIDUALS PLACED
BY QUALIFIED PLACEMENT AGEN-
CIES.—Subparagraph (B) of section 131(b)(2) (defining
qualified foster individual) is amended to read as follows:
‘‘(B) a qualified foster care placement agen-
cy.’’.
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY
DEFINED.—Subsection (b) of section 131 is amended by re-
designating paragraph (3) as paragraph (4) and by insert-
ing after paragraph (2) the following new paragraph:
‘‘(3) QUALIFIED
FOSTER
CARE
PLACEMENT
AGENCY.—The term ‘qualified foster care placement
agency’ means any placement agency which is li-
censed or certified by—
‘‘(A) a State or political subdivision thereof,
or
‘‘(B) an entity designated by a State or po-
litical subdivision thereof,
for the foster care program of such State or political
subdivision to make foster care payments to providers
of foster care.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 405. INTEREST RATE RANGE FOR ADDITIONAL FUND-
ING REQUIREMENTS.
(a) AMENDMENTS TO THE INTERNAL REVENUE CODE
OF 1986.—
(1) SPECIAL
RULE.—Clause (i) of section
412(l)(7)(C) (relating to interest rate) is amended by
adding at the end the following new subclause:
‘‘(III) SPECIAL
RULE
FOR 2002
AND 2003.—For a plan year beginning
in 2002 or 2003, notwithstanding sub-
clause (I), in the case that the rate of
interest used under subsection (b)(5)
exceeds the highest rate permitted
under subclause (I), the rate of interest
used to determine current liability
under this subsection may exceed the
rate of interest otherwise permitted
under subclause (I); except that such
rate of interest shall not exceed 120
percent of the weighted average referred
to in subsection (b)(5)(B)(ii).’’.
(2) 
QUARTERLY
CONTRIBUTIONS.—Subsection
(m) of section 412 is amended by adding at the end
the following new paragraph:
‘‘(7) SPECIAL RULES FOR 2002 AND 2004.—In
any case in which the interest rate used to determine
current liability is determined under subsection
(l)(7)(C)(i)(III)—
‘‘(A) 2002.—For purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years be-
ginning in 2002, the current liability for the
preceding plan year shall be redetermined using
120 percent as the specified percentage deter-
mined under subsection (l)(7)(C)(i)(II).
‘‘(B) 2004.—For purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years be-
ginning in 2004, the current liability for the
preceding plan year shall be redetermined using
105 percent as the specified percentage deter-
mined under subsection (l)(7)(C)(i)(II).’’.
(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) SPECIAL
RULE.—Clause (i) of section
302(d)(7)(C) of such Act (29 U.S.C. 1082(d)(7)(C)) is
amended by adding at the end the following new sub-
clause:
‘‘(III) SPECIAL
RULE
FOR 2002
AND 2003.—For a plan year beginning
in 2002 or 2003, notwithstanding sub-
clause (I), in the case that the rate of
interest used under subsection (b)(5)
exceeds the highest rate permitted
under subclause (I), the rate of interest
used to determine current liability
under this subsection may exceed the
rate of interest otherwise permitted
under subclause (I); except that such
rate of interest shall not exceed 120
percent of the weighted average referred
to in subsection (b)(5)(B)(ii).’’.
(2) QUARTERLY CONTRIBUTIONS.—Subsection (e)
of section 302 of such Act (29 U.S.C. 1082) is amend-
ed by adding at the end the following new paragraph:
‘‘(7) SPECIAL RULES FOR 2002 AND 2004.—In
any case in which the interest rate used to determine
current liability is determined under subsection
(d)(7)(C)(i)(III)—
‘‘(A) 2002.—For purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years be-
ginning in 2002, the current liability for the
preceding plan year shall be redetermined using
120 percent as the specified percentage deter-
mined under subsection (d)(7)(C)(i)(II).
‘‘(B) 2004.—For purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years be-
ginning in 2004, the current liability for the
preceding plan year shall be redetermined using
105 percent as the specified percentage deter-
mined under subsection (d)(7)(C)(i)(II).’’.
(c) PBGC.—Clause (iii) of section 4006(a)(3)(E) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1306(a)(3)(E)) is amended by adding at the end the
following new subclause:
‘‘(IV) In the case of plan years beginning after Decem-
ber 31, 2001, and before January 1, 2004, subclause (II)
shall be applied by substituting ‘100 percent’ for ‘85 per-
cent’. Subclause (III) shall be applied for such years with-
out regard to the preceding sentence. Any reference to this
clause by any other sections or subsections shall be treated
as a reference to this clause without regard to this sub-
clause.’’.
SEC. 406. ADJUSTED GROSS INCOME DETERMINED BY TAK-
ING INTO ACCOUNT CERTAIN EXPENSES OF
ELEMENTARY 
AND 
SECONDARY 
SCHOOL
TEACHERS.
(a) IN GENERAL.—Section 62(a)(2) (relating to cer-
tain trade and business deductions of employees) is amend-
ed by adding at the end the following:
‘‘(D) CERTAIN EXPENSES OF ELEMENTARY
AND
SECONDARY
SCHOOL
TEACHERS.—In the
case of taxable years beginning during 2002 or
2003, the deductions allowed by section 162
which consist of expenses, not in excess of $250,
paid or incurred by an eligible educator in con-
nection with books, supplies (other than nonath-
letic supplies for courses of instruction in health
or physical education), computer equipment (in-
cluding related software and services) and other
equipment, and supplementary materials used
by the eligible educator in the classroom.’’.
(b) ELIGIBLE EDUCATOR.—Section 62 is amended by
adding at the end the following:
‘‘(d) DEFINITION; SPECIAL RULES.—
‘‘(1) ELIGIBLE EDUCATOR.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a)(2)(D), the term ‘eligible educator’
means, with respect to any taxable year, an in-
dividual who is a kindergarten through grade 12
teacher, instructor, counselor, principal, or aide
in a school for at least 900 hours during a school
year.
‘‘(B) SCHOOL.—The term ‘school’ means
any school which provides elementary education
or secondary education (kindergarten through
grade 12), as determined under State law.
‘‘(2) COORDINATION WITH EXCLUSIONS.—A de-
duction shall be allowed under subsection (a)(2)(D)
for expenses only to the extent the amount of such ex-
penses exceeds the amount excludable under section
135, 529(c)(1), or 530(d)(2) for the taxable year.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
Subtitle B—Technical Corrections
SEC. 411. AMENDMENTS RELATED TO ECONOMIC GROWTH
AND TAX RELIEF RECONCILIATION ACT OF
2001.
(a) AMENDMENTS RELATED TO SECTION 101 OF THE
ACT.—
(1) IN GENERAL.—Subsection (b) of section 6428
is amended to read as follows:
‘‘(b) CREDIT TREATED
AS NONREFUNDABLE PER-
SONAL CREDIT.—For purposes of this title, the credit al-
lowed under this section shall be treated as a credit allow-
able under subpart A of part IV of subchapter A of chapter
1.’’.
(2) CONFORMING AMENDMENTS.—
(A) Subsection (d) of section 6428 is
amended to read as follows:
‘‘(d) COORDINATION
WITH ADVANCE REFUNDS
OF
CREDIT.—
‘‘(1) IN GENERAL.—The amount of credit which
would (but for this paragraph) be allowable under
this section shall be reduced (but not below zero) by
the aggregate refunds and credits made or allowed to
the taxpayer under subsection (e). Any failure to so
reduce the credit shall be treated as arising out of a
mathematical or clerical error and assessed according
to section 6213(b)(1).
‘‘(2) JOINT RETURNS.—In the case of a refund or
credit made or allowed under subsection (e) with re-
spect to a joint return, half of such refund or credit
shall be treated as having been made or allowed to
each individual filing such return.’’.
(B) Paragraph (2) of section 6428(e) is
amended to read as follows:
‘‘(2) ADVANCE REFUND AMOUNT.—For purposes
of paragraph (1), the advance refund amount is the
amount that would have been allowed as a credit
under this section for such first taxable year if—
‘‘(A) this section (other than subsections (b)
and (d) and this subsection) had applied to such
taxable year, and
‘‘(B) the credit for such taxable year were
not allowed to exceed the excess (if any) of—
‘‘(i) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax
imposed by section 55, over
‘‘(ii) the sum of the credits allowable
under part IV of subchapter A of chapter 1
(other than the credits allowable under sub-
part C thereof, relating to refundable cred-
its).’’.
(b) AMENDMENT RELATED TO SECTION 201 OF THE
ACT.—Subparagraph (B) of section 24(d)(1) is amended by
striking ‘‘amount of credit allowed by this section’’ and in-
serting ‘‘aggregate amount of credits allowed by this sub-
part’’.
(c) AMENDMENTS RELATED TO SECTION 202 OF THE
ACT.—
(1) CORRECTIONS TO CREDIT FOR ADOPTION EX-
PENSES.—
(A) Paragraph (1) of section 23(a) is
amended to read as follows:
‘‘(1) IN GENERAL.—In the case of an individual,
there shall be allowed as a credit against the tax im-
posed by this chapter the amount of the qualified
adoption expenses paid or incurred by the taxpayer.’’.
(B) Subsection (a) of section 23 is amended
by adding at the end the following new para-
graph:
‘‘(3) $10,000 CREDIT FOR ADOPTION OF CHILD
WITH SPECIAL NEEDS REGARDLESS OF EXPENSES.—
In the case of an adoption of a child with special
needs which becomes final during a taxable year, the
taxpayer shall be treated as having paid during such
year qualified adoption expenses with respect to such
adoption in an amount equal to the excess (if any)
of $10,000 over the aggregate qualified adoption ex-
penses actually paid or incurred by the taxpayer with
respect to such adoption during such taxable year and
all prior taxable years.’’.
(C) Paragraph (2) of section 23(a) is
amended by striking the last sentence.
(D) Paragraph (1) of section 23(b) is
amended by striking ‘‘subsection (a)(1)(A)’’ and
inserting ‘‘subsection (a)’’.
(E) Subsection (i) of section 23 is amended
by striking ‘‘the dollar limitation in subsection
(b)(1)’’ and inserting ‘‘the dollar amounts in
subsections (a)(3) and (b)(1)’’.
(F) Expenses paid or incurred during any
taxable year beginning before January 1, 2002,
may be taken into account in determining the
credit under section 23 of the Internal Revenue
Code of 1986 only to the extent the aggregate of
such expenses does not exceed the applicable limi-
tation under section 23(b)(1) of such Code as in
effect on the day before the date of the enactment
of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001.
(2) CORRECTIONS
TO
EXCLUSION
FOR
EM-
PLOYER-PROVIDED ADOPTION ASSISTANCE.—
(A) Subsection (a) of section 137 is amend-
ed to read as follows:
‘‘(a) EXCLUSION.—
‘‘(1) IN GENERAL.—Gross income of an employee
does not include amounts paid or expenses incurred
by the employer for qualified adoption expenses in
connection with the adoption of a child by an em-
ployee if such amounts are furnished pursuant to an
adoption assistance program.
‘‘(2) $10,000 EXCLUSION FOR ADOPTION OF CHILD
WITH SPECIAL NEEDS REGARDLESS OF EXPENSES.—
In the case of an adoption of a child with special
needs which becomes final during a taxable year, the
qualified adoption expenses with respect to such adop-
tion for such year shall be increased by an amount
equal to the excess (if any) of $10,000 over the actual
aggregate qualified adoption expenses with respect to
such adoption during such taxable year and all prior
taxable years.’’.
(B) Paragraph (2) of section 137(b) is
amended by striking ‘‘subsection (a)(1)’’ and in-
serting ‘‘subsection (a)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2002; except that the amend-
ments made by paragraphs (1)(C), (1)(D), and (2)(B)
shall apply to taxable years beginning after December
31, 2001.
(d) AMENDMENTS RELATED TO SECTION 205 OF THE
ACT.—
(1) Section 45F(d)(4)(B) is amended by striking
‘‘subpart A, B, or D of this part’’ and inserting ‘‘this
chapter or for purposes of section 55’’.
(2) Section 38(b)(15) is amended by striking
‘‘45F’’ and inserting ‘‘45F(a)’’.
(e) AMENDMENTS RELATED TO SECTION 301 OF THE
ACT.—
(1) Section 63(c)(2) is amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (C)’’ and inserting ‘‘subparagraph
(D)’’,
(B) by striking ‘‘or’’ at the end of subpara-
graph (B),
(C) by redesignating subparagraph (C) as
subparagraph (D),
(D) by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) one-half of the amount in effect under
subparagraph (A) in the case of a married indi-
vidual filing a separate return, or’’, and
(E) by inserting the following flush sentence
at the end:
‘‘If any amount determined under subparagraph
(A) is not a multiple of $50, such amount shall
be rounded to the next lowest multiple of $50.’’.
(2)(A) Section 63(c)(4) is amended by striking
‘‘paragraph (2) or (5)’’ and inserting ‘‘paragraph
(2)(B), (2)(D), or (5)’’.
(B) Section 63(c)(4)(B)(i) is amended by strik-
ing ‘‘paragraph (2)’’ and inserting ‘‘paragraph
(2)(B), (2)(D),’’.
(C) Section 63(c)(4) is amended by striking the
flush sentence at the end (as added by section
301(c)(2) of Public Law 107–17).
(f) AMENDMENT RELATED TO SECTION 401 OF THE
ACT.—Section 530(d)(4)(B)(iv) is amended by striking ‘‘be-
cause the taxpayer elected under paragraph (2)(C) to waive
the application of paragraph (2)’’ and inserting ‘‘by appli-
cation of paragraph (2)(C)(i)(II)’’.
(g) AMENDMENTS RELATED TO SECTION 511 OF THE
ACT.—
(1) Section 2511(c) is amended by striking ‘‘tax-
able gift under section 2503,’’ and inserting ‘‘transfer
of property by gift,’’.
(2) Section 2101(b) is amended by striking the
last sentence.
(h) AMENDMENT RELATED TO SECTION 532 OF THE
ACT.—Section 2016 is amended by striking ‘‘any State,
any possession of the United States, or the District of Co-
lumbia,’’.
(i) AMENDMENTS RELATING TO SECTION 602 OF THE
ACT.—
(1) Subparagraph (A) of section 408(q)(3) is
amended to read as follows:
‘‘(A) QUALIFIED
EMPLOYER
PLAN.—The
term ‘qualified employer plan’ has the meaning
given such term by section 72(p)(4)(A)(i); except
that such term shall also include an eligible de-
ferred compensation plan (as defined in section
457(b)) of an eligible employer described in sec-
tion 457(e)(1)(A).’’.
(2) Section 4(c) of Employee Retirement Income
Security Act of 1974 is amended—
(A) by inserting ‘‘and part 5 (relating to
administration and enforcement)’’ before the pe-
riod at the end, and
(B) by adding at the end the following new
sentence: ‘‘Such provisions shall apply to such
accounts and annuities in a manner similar to
their application to a simplified employee pen-
sion under section 408(k) of the Internal Rev-
enue Code of 1986.’’.
(j) AMENDMENTS RELATING TO SECTION 611 OF THE
ACT.—
(1) Section 408(k) is amended—
(A) in paragraph (2)(C) by striking ‘‘$300’’
and inserting ‘‘$450’’, and
(B) in paragraph (8) by striking ‘‘$300’’
both places it appears and inserting ‘‘$450’’.
(2) Section 409(o)(1)(C)(ii) is amended—
(A) by striking ‘‘$500,000’’ both places it
appears and inserting ‘‘$800,000’’, and
(B) by striking ‘‘$100,000’’ and inserting
‘‘$160,000’’.
(3) Section 611(i) of the Economic Growth and
Tax Relief Reconciliation Act of 2001 is amended by
adding at the end the following new paragraph:
‘‘(3) SPECIAL RULE.—In the case of plan that,
on June 7, 2001, incorporated by reference the limita-
tion of section 415(b)(1)(A) of the Internal Revenue
Code of 1986, section 411(d)(6) of such Code and sec-
tion 204(g)(1) of the Employee Retirement Income
Security Act of 1974 do not apply to a plan amend-
ment that—
‘‘(A) is adopted on or before June 30, 2002,
‘‘(B) reduces benefits to the level that would
have applied without regard to the amendments
made by subsection (a) of this section, and
‘‘(C) is effective no earlier than the years
described in paragraph (2).’’.
(k) AMENDMENTS RELATING TO SECTION 613 OF THE
ACT.—
(1) Section 416(c)(1)(C)(iii) is amended by
striking ‘‘EXCEPTION FOR FROZEN PLAN’’ and insert-
ing ‘‘EXCEPTION FOR PLAN UNDER WHICH NO KEY
EMPLOYEE (OR FORMER KEY EMPLOYEE) BENEFITS
FOR PLAN YEAR’’.
(2) Section 416(g)(3)(B) is amended by striking
‘‘separation from service’’ and inserting ‘‘severance
from employment’’.
(l) AMENDMENTS RELATING TO SECTIONS 614 and 616
OF THE ACT.—
(1) Section 404(a)(12) is amended by striking
‘‘(9),’’ and inserting ‘‘(9) and subsection (h)(1)(C),’’.
(2) Section 404(n) is amended by striking ‘‘sub-
section (a),’’ and inserting ‘‘subsection (a) or para-
graph (1)(C) of subsection (h)’’.
(3) Section 402(h)(2)(A) is amended by striking
‘‘15 percent’’ and inserting ‘‘25 percent’’.
(4) Section 404(a)(7)(C) is amended to read as
follows:
‘‘(C) PARAGRAPH NOT TO APPLY IN CER-
TAIN CASES.—
‘‘(i) BENEFICIARY TEST.—This para-
graph shall not have the effect of reducing
the amount otherwise deductible under
paragraphs (1), (2), and (3), if no employee
is a beneficiary under more than 1 trust or
under a trust and an annuity plan.
‘‘(ii) ELECTIVE
DEFERRALS.—If, in
connection with 1 or more defined contribu-
tion plans and 1 or more defined benefit
plans, no amounts (other than elective de-
ferrals (as defined in section 402(g)(3))) are
contributed to any of the defined contribu-
tion plans for the taxable year, then sub-
paragraph (A) shall not apply with respect
to any of such defined contribution plans
and defined benefit plans.’’.
(m) AMENDMENT RELATING TO SECTION 618 OF THE
ACT.—Section 25B(d)(2)(A) is amended to read as follows:
‘‘(A) IN
GENERAL.—The qualified retire-
ment savings contributions determined under
paragraph (1) shall be reduced (but not below
zero) by the aggregate distributions received by
the individual during the testing period from
any entity of a type to which contributions
under paragraph (1) may be made. The pre-
ceding sentence shall not apply to the portion of
any distribution which is not includible in gross
income by reason of a trustee-to-trustee transfer
or a rollover distribution.’’.
(n) AMENDMENTS RELATING TO SECTION 619 OF THE
ACT.—
(1) Section 45E(e)(1) is amended by striking
‘‘(n)’’ and inserting ‘‘(m)’’.
(2) Section 619(d) of the Economic Growth and
Tax Relief Reconciliation Act of 2001 is amended by
striking ‘‘established’’ and inserting ‘‘first effective’’.
(o) AMENDMENTS RELATING TO SECTION 631 OF THE
ACT.—
(1) Section 402(g)(1) is amended by adding at
the end the following:
‘‘(C) CATCH-UP CONTRIBUTIONS.—In addi-
tion to subparagraph (A), in the case of an eligi-
ble participant (as defined in section 414(v)),
gross income shall not include elective deferrals
in excess of the applicable dollar amount under
subparagraph (B) to the extent that the amount
of such elective deferrals does not exceed the ap-
plicable 
dollar 
amount 
under 
section
414(v)(2)(B)(i) for the taxable year (without re-
gard to the treatment of the elective deferrals by
an applicable employer plan under section
414(v)).’’.
that a plan described in clause (i) of section
410(b)(6)(C) shall not be treated as a plan of the em-
ployer until the expiration of the transition period
with respect to such plan (as determined under clause
(ii) of such section)’’.
(7) Section 414(v)(5) is amended—
(A) by striking ‘‘, with respect to any plan
year,’’ in the matter preceding subparagraph
(A),
(B) by amending subparagraph (A) to read
as follows:
‘‘(A) who would attain age 50 by the end of
the taxable year,’’, and
(C) in subparagraph (B) by striking ‘‘plan
year’’ and inserting ‘‘plan (or other applicable)
year’’.
(8) Section 414(v)(6)(C) is amended to read as
follows:
‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—
This subsection shall not apply to a participant
for any year for which a higher limitation ap-
plies 
to 
the 
participant 
under 
section
457(b)(3).’’.
(9) Section 457(e) is amended by adding at the
end the following new paragraph:
‘‘(18) COORDINATION WITH CATCH-UP CONTRIBU-
TIONS FOR INDIVIDUALS AGE 50 OR OLDER.— In the
case of an individual who is an eligible participant
(as defined by section 414(v)) and who is a partici-
pant in an eligible deferred compensation plan of an
employer described in paragraph (1)(A), subsections
(b)(3) and (c) shall be applied by substituting for the
amount otherwise determined under the applicable
subsection the greater of—
‘‘(A) the sum of—
‘‘(i) the plan ceiling established for
purposes of subsection (b)(2) (without re-
gard to subsection (b)(3)), plus
‘‘(ii) the applicable dollar amount for
the taxable year determined under section
414(v)(2)(B)(i), or
‘‘(B) the amount determined under the ap-
plicable subsection (without regard to this para-
graph).’’.
(p) AMENDMENTS RELATING TO SECTION 632 OF THE
ACT.—
(1) Section 403(b)(1) is amended in the matter
following subparagraph (E) by striking ‘‘then
amounts contributed’’ and all that follows and insert-
ing the following:
‘‘then contributions and other additions by such
employer for such annuity contract shall be excluded
from the gross income of the employee for the taxable
year to the extent that the aggregate of such contribu-
tions and additions (when expressed as an annual ad-
dition (within the meaning of section 415(c)(2))) does
not exceed the applicable limit under section 415. The
amount actually distributed to any distributee under
such contract shall be taxable to the distributee (in the
year in which so distributed) under section 72 (relat-
ing to annuities). For purposes of applying the rules
of this subsection to contributions and other additions
by an employer for a taxable year, amounts trans-
ferred to a contract described in this paragraph by
reason of a rollover contribution described in para-
graph 
(8) 
of 
this 
subsection 
or 
section
408(d)(3)(A)(ii) shall not be considered contributed
by such employer.’’.
(2) Section 403(b) is amended by striking para-
graph (6).
(3) Section 403(b)(3) is amended—
(A) in the first sentence by inserting the fol-
lowing before the period at the end: ‘‘, and which
precedes the taxable year by no more than five
years’’, and
(B) in the second sentence by striking ‘‘or
any amount received by a former employee after
the fifth taxable year following the taxable year
in which such employee was terminated’’.
(4) Section 415(c)(7) is amended to read as fol-
lows:
‘‘(7) SPECIAL
RULES
RELATING
TO
CHURCH
PLANS.—
‘‘(A) ALTERNATIVE CONTRIBUTION LIMITA-
TION.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of this subsection, at the
election of a participant who is an em-
ployee of a church or a convention or asso-
ciation of churches, including an organiza-
tion described in section 414(e)(3)(B)(ii),
contributions and other additions for an
annuity contract or retirement income ac-
count described in section 403(b) with re-
spect to such participant, when expressed as
an annual addition to such participant’s
account, shall be treated as not exceeding
the limitation of paragraph (1) if such an-
nual addition is not in excess of $10,000.
‘‘(ii) 
$40,000 
AGGREGATE
LIMITA-
TION.—The total amount of additions with
respect to any participant which may be
taken into account for purposes of this sub-
paragraph for all years may not exceed
$40,000.
‘‘(B) NUMBER OF YEARS OF SERVICE FOR
DULY ORDAINED, COMMISSIONED, OR LICENSED
MINISTERS OR LAY EMPLOYEES.—For purposes
of this paragraph—
‘‘(i) all years of service by—
‘‘(I) a duly ordained, commis-
sioned, or licensed minister of a
church, or
‘‘(II) a lay person,
as an employee of a church, a convention or
association of churches, including an orga-
nization 
described 
in 
section
414(e)(3)(B)(ii), shall be considered as
years of service for 1 employer, and
‘‘(ii) all amounts contributed for annu-
ity contracts by each such church (or con-
vention or association of churches) or such
organization during such years for such
minister or lay person shall be considered to
have been contributed by 1 employer.
‘‘(C) FOREIGN MISSIONARIES.—In the case
of any individual described in subparagraph (D)
performing services outside the United States,
contributions and other additions for an annuity
contract or retirement income account described
in section 403(b) with respect to such employee,
when expressed as an annual addition to such
employee’s account, shall not be treated as ex-
ceeding the limitation of paragraph (1) if such
annual addition is not in excess of the greater of
$3,000 or the employee’s includible compensation
determined under section 403(b)(3).
‘‘(D) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph (2).
‘‘(E) CHURCH, CONVENTION
OR
ASSOCIA-
TION OF CHURCHES.—For purposes of this para-
graph, the terms ‘church’ and ‘convention or as-
sociation of churches’ have the same meaning as
when used in section 414(e).’’.
(5) Section 457(e)(5) is amended to read as fol-
lows:
distributed without the participant’s consent
under section 411(a)(11)’’, and
(B) in paragraph (2)(A) by striking ‘‘ex-
ceeds 
the 
dollar 
limit 
under 
section
411(a)(11)(A)’’ 
and 
inserting 
‘‘exceeds 
the
amount that can be distributed without the par-
ticipant’s consent under section 411(a)(11)’’.
(2) Section 205(g) of the Employee Retirement
Income Security Act of 1974 is amended—
(A) in paragraph (1) by striking ‘‘exceed
the dollar limit under section 203(e)(1)’’ and in-
serting ‘‘exceed the amount that can be distrib-
uted without the participant’s consent under sec-
tion 203(e)’’, and
(B) in paragraph (2)(A) by striking ‘‘ex-
ceeds the dollar limit under section 203(e)(1)’’
and inserting ‘‘exceeds the amount that can be
distributed without the participant’s consent
under section 203(e)’’.
(s) AMENDMENT RELATING TO SECTION 652 OF THE
ACT.—Section 404(a)(1)(D)(iv) is amended by striking
‘‘PLANS MAINTAINED BY PROFESSIONAL SERVICE EMPLOY-
ERS’’ and inserting ‘‘SPECIAL RULE FOR TERMINATING
PLANS’’.
(t) AMENDMENTS RELATING TO SECTION 657 OF THE
ACT.—Section 404(c)(3) of the Employee Retirement In-
come Security Act of 1974 is amended—
(1) by striking ‘‘the earlier of’’ in subparagraph
(A) the second place it appears, and
(2) by striking ‘‘if the transfer’’ and inserting ‘‘a
transfer that’’.
(u) AMENDMENTS RELATING TO SECTION 659 OF THE
ACT.—
(1) Section 4980F is amended—
(A) in subsection (e)(1) by striking ‘‘written
notice’’ and inserting ‘‘the notice described in
paragraph (2)’’,
(B) by amending subsection (f)(2)(A) to
read as follows:
‘‘(A) any defined benefit plan described in
section 401(a) which includes a trust exempt
from tax under section 501(a), or’’, and
(C) in subsection (f)(3) by striking ‘‘signifi-
cantly’’ both places it appears.
(2) Section 204(h)(9) of the Employee Retire-
ment Income Security Act of 1974 is amended by
striking ‘‘significantly’’ both places it appears.
(3) Section 659(c)(3)(B) of the Economic Growth
and Tax Relief Reconciliation Act of 2001 is amended
by striking ‘‘(or’’ and inserting ‘‘(and’’.
(v) AMENDMENTS RELATING TO SECTION 661 OF THE
ACT.—
(1) Section 412(c)(9)(B) is amended—
(A) in clause (ii) by striking ‘‘125 percent’’
and inserting ‘‘100 percent’’, and
(B) by adding at the end the following new
clause:
‘‘(iv) LIMITATION.—A change in fund-
ing method to use a prior year valuation,
as provided in clause (ii), may not be made
unless as of the valuation date within the
prior plan year, the value of the assets of
the plan are not less than 125 percent of the
plan’s current liability (as defined in para-
graph (7)(B)).’’.
(2) Section 302(c)(9)(B) of the Employee Retire-
ment Income Security Act of 1974 is amended—
(A) in clause (ii) by striking ‘‘125 percent’’
and inserting ‘‘100 percent’’, and
(B) by adding at the end the following new
clause:
‘‘(iv) A change in funding method to use a prior year
valuation, as provided in clause (ii), may not be made un-
less as of the valuation date within the prior plan year,
the value of the assets of the plan are not less than 125
percent of the plan’s current liability (as defined in para-
graph (7)(B)).’’.
(w) AMENDMENTS RELATING TO SECTION 662 OF THE
ACT.—
(1) Section 404(k) is amended—
(A) in paragraph (1) by striking ‘‘during
the taxable year’’,
(B) in paragraph (2)(B) by striking
‘‘(A)(iii)’’ and inserting ‘‘(A)(iv)’’,
(C) in paragraph (4)(B) by striking ‘‘(iii)’’
and inserting ‘‘(iv)’’, and
(D) by redesignating subparagraph (B) of
paragraph (4) (as amended by subparagraph
(C)) as subparagraph (C) of paragraph (4) and
by inserting after subparagraph (A) the fol-
lowing new subparagraph:
‘‘(B) REINVESTMENT DIVIDENDS.—For pur-
poses of subparagraph (A), an applicable divi-
dend reinvested pursuant to clause (iii)(II) of
paragraph (2)(A) shall be treated as paid in the
taxable year of the corporation in which such
dividend is reinvested in qualifying employer se-
curities or in which the election under clause
(iii) of paragraph (2)(A) is made, whichever is
later.’’.
(2) Section 404(k) is amended by adding at the
end the following new paragraph:
‘‘(7) FULL VESTING.—In accordance with section
411, an applicable dividend described in clause
(iii)(II) of paragraph (2)(A) shall be subject to the re-
quirements of section 411(a)(1).’’.
(x) EFFECTIVE DATE.—Except as provided in sub-
section (c), the amendments made by this section shall take
effect as if included in the provisions of the Economic
Growth and Tax Relief Reconciliation Act of 2001 to which
they relate.
SEC. 412. AMENDMENTS RELATED TO COMMUNITY RE-
NEWAL TAX RELIEF ACT OF 2000.
(a) AMENDMENT RELATED TO SECTION 101 OF THE
ACT.—Section 469(i)(3)(E) is amended by striking clauses
(ii), (iii), and (iv) and inserting the following:
‘‘(ii) second to the portion of such loss
to which subparagraph (C) applies,
‘‘(iii) third to the portion of the pas-
sive activity credit to which subparagraph
(B) or (D) does not apply,
‘‘(iv) fourth to the portion of such cred-
it to which subparagraph (B) applies, and’’.
(b) AMENDMENT RELATED TO SECTION 306 OF THE
ACT.—Section 151(c)(6)(C) is amended—
(1) by striking ‘‘FOR EARNED INCOME CREDIT.—
For purposes of section 32, an’’ and inserting ‘‘FOR
PRINCIPAL PLACE OF ABODE REQUIREMENTS.—An’’,
and
(2) 
by 
striking 
‘‘requirement 
of 
section
32(c)(3)(A)(ii)’’ and inserting ‘‘principal place of
abode requirements of section 2(a)(1)(B), section
2(b)(1)(A), and section 32(c)(3)(A)(ii)’’.
(c) AMENDMENT RELATED TO SECTION 309 OF THE
ACT.—Subparagraph (A) of section 358(h)(1) is amended
to read as follows:
‘‘(A) which is assumed by another person as
part of the exchange, and’’.
(d) AMENDMENTS RELATED TO SECTION 401 OF THE
ACT.—
(1)(A) Section 1234A is amended by inserting
‘‘or’’ after the comma at the end of paragraph (1), by
striking ‘‘or’’ at the end of paragraph (2), and by
striking paragraph (3).
(B)(i) Section 1234B is amended in subsection
(a)(1) and in subsection (b) by striking ‘‘sale or ex-
change’’ the first place it appears in each subsection
and inserting ‘‘sale, exchange, or termination’’.
(ii) Section 1234B is amended by adding at the
end the following new subsection:
‘‘(f) CROSS REFERENCE.—
‘‘For special rules relating to dealer securities fu-
tures contracts, see section 1256.’’.
(2) Section 1091(e) is amended—
(A) in the heading, by striking ‘‘SECURI-
TIES.—’’ and inserting ‘‘SECURITIES AND SECU-
RITIES FUTURES CONTRACTS TO SELL.—’’,
(B) by inserting after ‘‘closing of a short
sale of’’ the following: ‘‘(or the sale, exchange, or
termination of a securities futures contract to
sell)’’,
(C) in paragraph (2), by inserting after
‘‘short sale of’’ the following: ‘‘(or securities fu-
tures contracts to sell)’’, and
(D) by adding at the end the following:
‘‘For purposes of this subsection, the term ‘securities futures
contract’ has the meaning provided by section 1234B(c).’’.
(3)(A) Section 1233(e)(2) is amended by striking
‘‘and’’ at the end of subparagraph (C), by striking the
period and inserting ‘‘; and’’ at the end of subpara-
graph (D), and inserting after subparagraph (D) the
following:
‘‘(E) entering into a securities futures con-
tract (as so defined) to sell shall be considered to
be a short sale, and the settlement of such con-
tract shall be considered to be the closing of such
short sale.’’.
(B) Section 1234B(b) is amended by inserting
after ‘‘or this section,’’ the following: ‘‘or in section
1233,’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Community Renewal Tax Relief Act of 2000 to which
they relate.
SEC. 413. AMENDMENTS RELATED TO THE TAX RELIEF EX-
TENSION ACT OF 1999.
(a) AMENDMENTS RELATED TO SECTION 545 OF THE
ACT.—Section 857(b)(7) is amended—
(1) in clause (i) of subparagraph (B), by strik-
ing ‘‘the amount of which’’ and inserting ‘‘to the ex-
tent the amount of the rents’’, and
(2) in subparagraph (C), by striking ‘‘if the
amount’’ and inserting ‘‘to the extent the amount’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in section 545 of the
Tax Relief Extension Act of 1999.
SEC. 414. AMENDMENTS RELATED TO THE TAXPAYER RE-
LIEF ACT OF 1997.
(a) AMENDMENTS RELATED TO SECTION 311 OF THE
ACT.—Section 311(e) of the Taxpayer Relief Act of 1997
(Public Law 105–34; 111 Stat. 836) is amended—
(1) in paragraph (2)(A), by striking ‘‘recog-
nized’’ and inserting ‘‘included in gross income’’, and
(2) by adding at the end the following new para-
graph:
‘‘(5) DISPOSITION OF INTEREST IN PASSIVE AC-
TIVITY.—Section 469(g)(1)(A) of the Internal Revenue
Code of 1986 shall not apply by reason of an election
made under paragraph (1).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in section 311 of the
Taxpayer Relief Act of 1997.
SEC. 415. AMENDMENT RELATED TO THE BALANCED BUDG-
ET ACT OF 1997.
(a) AMENDMENT RELATED TO SECTION 4006 OF THE
ACT.—Section 26(b)(2) is amended by striking ‘‘and’’ at
the end of subparagraph (P), by striking the period and
inserting ‘‘, and’’ at the end of subparagraph (Q), and by
adding at the end the following new subparagraph:
‘‘(R) section 138(c)(2) (relating to penalty
for distributions from Medicare+Choice MSA
not used for qualified medical expenses if min-
imum balance not maintained).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in section 4006 of
the Balanced Budget Act of 1997.
SEC. 416. OTHER TECHNICAL CORRECTIONS.
(a) COORDINATION
OF
ADVANCED
PAYMENTS
OF
EARNED INCOME CREDIT.—
(1) Section 32(g)(2) is amended by striking
‘‘subpart’’ and inserting ‘‘part’’.
(2) The amendment made by this subsection
shall take effect as if included in section 474 of the
Tax Reform Act of 1984.
(b) SPECIAL
RULE
RELATED
TO
WASH
SALE
LOSSES.—
(1) Section 1256(f) is amended by adding at the
end the following new paragraph:
‘‘(5) SPECIAL RULE RELATED TO LOSSES.—
Section 1091 (relating to loss from wash sales of
stock or securities) shall not apply to any loss
taken into account by reason of paragraph (1) of
subsection (a).’’.
(2) The amendment made by this subsection
shall take effect as if included in section 5075 of the
Technical and Miscellaneous Revenue Act of 1988.
(c) DISCLOSURE BY SOCIAL SECURITY ADMINISTRA-
TION TO FEDERAL CHILD SUPPORT AGENCIES.—
(1) Section 6103(l)(8) is amended—
(A) in the heading, by striking ‘‘STATE AND
LOCAL’’ and inserting ‘‘FEDERAL, STATE, AND
LOCAL’’, and
(B) in subparagraph (A), by inserting
‘‘Federal or’’ before ‘‘State or local’’.
(2) The amendments made by this subsection
shall take effect on the date of the enactment of this
Act.
(d) TREATMENT OF SETTLEMENTS UNDER PARTNER-
SHIP AUDIT RULES.—
(1) The following provisions are each amended
by inserting ‘‘or the Attorney General (or his dele-
gate)’’ after ‘‘Secretary’’ each place it appears:
(A) Paragraphs (1) and (2) of section
6224(c).
(B) Section 6229(f)(2).
(C) Section 6231(b)(1)(C).
(D) Section 6234(g)(4)(A).
(2) The amendments made by this subsection
shall apply with respect to settlement agreements en-
tered into after the date of the enactment of this Act.
(e) AMENDMENT RELATED TO PROCEDURE AND AD-
MINISTRATION.—
(1) Section 6331(k)(3) (relating to no levy while
certain offers pending or installment agreement pend-
ing or in effect) is amended to read as follows:
‘‘(3) CERTAIN RULES TO APPLY.—Rules similar
to the rules of—
‘‘(A) paragraphs (3) and (4) of subsection
(i), and
‘‘(B) except in the case of paragraph (2)(C),
paragraph (5) of subsection (i),
shall apply for purposes of this subsection.’’.
(2) The amendment made by this subsection
shall take effect on the date of the enactment of this
Act.
(f) MODIFIED ENDOWMENT CONTRACTS.—Paragraph
(2) of section 318(a) of the Community Renewal Tax Relief
Act of 2000 (114 Stat. 2763A–645) is repealed, and clause
(ii) of section 7702A(c)(3)(A) shall read and be applied as
if the amendment made by such paragraph had not been
enacted.
SEC. 417. CLERICAL AMENDMENTS.
(1) The subsection (g) of section 25B that relates
to termination is redesignated as subsection (h).
(2) The second sentence of section 42(h)(3)(C) is
amended by striking ‘‘the amounts described in’’ and
all that follows through the period and inserting ‘‘the
amounts described in clauses (ii) through (iv) over the
aggregate housing credit dollar amount allocated for
such year.’’.
(3) Clause (ii) of section 42(m)(1)(B) is amend-
ed by striking the second ‘‘and’’ at the end of sub-
clause (II) and by inserting ‘‘and’’ at the end of sub-
clause (III).
(4) Section 51A(c)(1) is amended by striking
‘‘51(d)(10)’’ and inserting ‘‘51(d)(11)’’.
(5) The flush sentence at the end of clause (ii)
of section 56(a)(1)(A) is amended by striking ‘‘such
1250’’ and inserting ‘‘such section 1250’’.
(6) Section 151(c)(6)(B)(iii) is amended by in-
serting ‘‘as’’ before ‘‘such terms’’.
(7) Section 170(e)(6)(B)(i)(III) is amended by
striking ‘‘2000,’’ and inserting ‘‘2000),’’.
(8) Section 172(b)(1)(F)(i) is amended—
(A) by striking ‘‘3 years’’ and inserting ‘‘3
taxable years’’, and
(B) by striking ‘‘2 years’’ and inserting ‘‘2
taxable years’’.
(9) Section 351(h)(1) is amended by inserting a
comma after ‘‘liability’’.
(10) Section 475(g)(3) is amended by striking
‘‘sections’’ and inserting ‘‘section’’.
(11) Section 529(e)(3)(B)(i) is amended by strik-
ing ‘‘subsection (b)(7)’’ and inserting ‘‘subsection
(b)(6)’’.
(12) Section 741 is amended by striking ‘‘which
have appreciated substantially in value’’.
(13) Section 857(b)(7)(B)(i) is amended by strik-
ing ‘‘subsection 856(d)’’ and inserting ‘‘section
856(d)’’.
(14) Subparagraph (B) of section 943(e)(4) is
amended by aligning the left margin of the flush lan-
guage with subparagraph (A).
(15) Subparagraph (B) of section 995(b)(3) is
amended by striking ‘‘International Security Assist-
ance and Arms Export Control Act of 1976’’ and in-
serting ‘‘Arms Export Control Act’’.
(16) Section 1394(c)(2) is amended by striking
‘‘subparagraph (A)’’ and inserting ‘‘paragraph (1)’’.
(17)(A) The section heading for section 4980E is
amended to read as follows:
‘‘SEC. 4980E. FAILURE OF EMPLOYER TO MAKE COM-
PARABLE ARCHER MSA CONTRIBUTIONS.’’.
(B) The item relating to section 4980E in the
table of sections for chapter 43 is amended to read as
follows:
‘‘Sec. 4980E. Failure of employer to make comparable Archer MSA contribu-
tions.’’.
(18) Section 6105(c)(1) is amended by striking
‘‘any’’ in subparagraphs (C) and (E).
(19)(A) Section 6227(d) is amended by striking
‘‘subsection (b)’’ and inserting ‘‘subsection (c)’’.
(B) Section 6228 is amended—
(i) in subsection (a)(1), by striking ‘‘sub-
section (b) of section 6227’’ and inserting ‘‘sub-
section (c) of section 6227’’,
(ii) in subsection (a)(3)(A), by striking
‘‘subsection (b) of’’, and
(iii) in subsections (b)(1) and (b)(2)(A), by
striking ‘‘subsection (c) of section 6227’’ and in-
serting ‘‘subsection (d) of section 6227’’.
(C) Section 6231(b)(2)(B)(i) is amended by
striking ‘‘section 6227(c)’’ and inserting ‘‘section
6227(d)’’.
(20) Section 1221(b)(1)(B)(i) is amended by
striking ‘‘1256(b))’’ and inserting ‘‘1256(b)))’’.
SEC. 418. ADDITIONAL CORRECTIONS.
(a) AMENDMENTS RELATED TO SECTION 202 OF THE
ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION
ACT OF 2001.—
(1) Subsection (h) of section 23 is amended—
(A) by striking ‘‘subsection (a)(1)(B)’’ and
inserting ‘‘subsection (a)(3)’’, and
(B) by adding at the end the following new
flush sentence:
‘‘If any amount as increased under the preceding sentence
is not a multiple of $10, such amount shall be rounded to
the nearest multiple of $10.’’.
(2) Subsection (f) of section 137 is amended by
adding at the end the following new flush sentence:
‘‘If any amount as increased under the preceding sentence
is not a multiple of $10, such amount shall be rounded to
the nearest multiple of $10.’’.
(b) AMENDMENTS RELATED TO SECTION 204 OF THE
ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION
ACT OF 2001.—Section 21(d)(2) is amended—
(1) in subparagraph (A) by striking ‘‘$200’’ and
inserting ‘‘$250’’, and
(2) in subparagraph (B) by striking ‘‘$400’’ and
inserting ‘‘$500’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Economic Growth and Tax Relief Reconciliation Act
of 2001 to which they relate.
TITLE 
V—SOCIAL 
SECURITY
HELD 
HARMLESS; 
BUDG-
ETARY TREATMENT OF ACT
SEC. 501. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS.
(a) IN GENERAL.—Nothing in this Act (or an amend-
ment made by this Act) shall be construed to alter or amend
title II of the Social Security Act (or any regulation pro-
mulgated under that Act).
(b) TRANSFERS.—
(1) ESTIMATE OF SECRETARY.—The Secretary of
the Treasury shall annually estimate the impact that
the enactment of this Act has on the income and
balances of the trust funds established under section
201 of the Social Security Act (42 U.S.C. 401).
(2) TRANSFER OF FUNDS.—If, under paragraph
(1), the Secretary of the Treasury estimates that the
enactment of this Act has a negative impact on the
income and balances of the trust funds established
under section 201 of the Social Security Act (42
U.S.C. 401), the Secretary shall transfer, not less fre-
quently than quarterly, from the general revenues of
the Federal Government an amount sufficient so as to
ensure that the income and balances of such trust
funds are not reduced as a result of the enactment of
this Act.
SEC. 502. EMERGENCY DESIGNATION.
Congress designates as emergency requirements pursu-
ant to section 252(e) of the Balanced Budget and Emer-
gency Deficit Control Act of 1985 the following amounts:
(1) An amount equal to the amount by which
revenues are reduced by this Act below the rec-
ommended levels of Federal revenues for fiscal year
2002, the total of fiscal years 2002 through 2006, and
the total of fiscal years 2002 through 2011, provided
in the conference report accompanying H. Con. Res.
83, the concurrent resolution on the budget for fiscal
year 2002.
(2) Amounts equal to the amounts of new budget
authority and outlays provided in this Act in excess
of the allocations under section 302(a) of the Congres-
sional Budget Act of 1974 to the Committee on Fi-
nance of the Senate for fiscal year 2002, the total of
fiscal years 2002 through 2006, and the total of fiscal
years 2002 through 2011.
100
TITLE VI—EXTENSIONS OF
CERTAIN EXPIRING PROVISIONS
SEC. 601. ALLOWANCE OF NONREFUNDABLE PERSONAL
CREDITS AGAINST REGULAR AND MINIMUM
TAX LIABILITY.
(a) IN GENERAL.—Paragraph (2) of section 26(a) is
amended—
(1) by striking ‘‘RULE FOR 2000 AND 2001.—’’
and inserting ‘‘RULE FOR 2000, 2001, 2002, AND 2003.—
’’, and
(2) by striking ‘‘during 2000 or 2001,’’ and in-
serting ‘‘during 2000, 2001, 2002, or 2003,’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 904(h) is amended by striking ‘‘dur-
ing 2000 or 2001’’ and inserting ‘‘during 2000, 2001,
2002, or 2003’’.
(2) The amendments made by sections 201(b),
202(f), and 618(b) of the Economic Growth and Tax
Relief Reconciliation Act of 2001 shall not apply to
taxable years beginning during 2002 and 2003.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 602. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.
(a) IN GENERAL.—Section 30 is amended—
101
(1) in subsection (b)(2)—
(A) by striking ‘‘December 31, 2001,’’ and
inserting ‘‘December 31, 2003,’’, and
(B) in subparagraphs (A), (B), and (C), by
striking ‘‘2002’’, ‘‘2003’’, and ‘‘2004’’, respec-
tively, and inserting ‘‘2004’’, ‘‘2005’’, and
‘‘2006’’, respectively, and
(2) in subsection (e), by striking ‘‘December 31,
2004’’ and inserting ‘‘December 31, 2006’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (C) of section 280F(a)(1) is
amended by adding at the end the following new
clause:
‘‘(iii) 
APPLICATION
OF
SUBPARA-
GRAPH.—This subparagraph shall apply to
property placed in service after August 5,
1997, and before January 1, 2007.’’.
(2) Subsection (b) of section 971 of the Taxpayer
Relief Act of 1997 is amended by striking ‘‘and before
January 1, 2005’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after De-
cember 31, 2001.
102
SEC. 603. CREDIT FOR ELECTRICITY PRODUCED FROM CER-
TAIN RENEWABLE RESOURCES.
(a) IN GENERAL.—Subparagraphs (A), (B), and (C)
of section 45(c)(3) are both amended by striking ‘‘2002’’
and inserting ‘‘2004’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to facilities placed in service after
December 31, 2001.
SEC. 604. WORK OPPORTUNITY CREDIT.
(a) IN
GENERAL.—Subparagraph (B) of section
51(c)(4) is amended by striking ‘‘2001’’ and inserting
‘‘2003’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to individuals who begin work for
the employer after December 31, 2001.
SEC. 605. WELFARE-TO-WORK CREDIT.
(a) IN GENERAL.—Subsection (f) of section 51A is
amended by striking ‘‘2001’’ and inserting ‘‘2003’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to individuals who begin work for
the employer after December 31, 2001.
SEC. 606. DEDUCTION FOR CLEAN-FUEL VEHICLES AND
CERTAIN REFUELING PROPERTY.
(a) IN GENERAL.—Section 179A is amended—
(1) in subsection (b)(1)(B)—
103
(A) by striking ‘‘December 31, 2001,’’ and
inserting ‘‘December 31, 2003,’’, and
(B) in clauses (i), (ii), and (iii), by striking
‘‘2002’’, ‘‘2003’’, and ‘‘2004’’, respectively, and
inserting ‘‘2004’’, ‘‘2005’’, and ‘‘2006’’, respec-
tively, and
(2) in subsection (f), by striking ‘‘December 31,
2004’’ and inserting ‘‘December 31, 2006’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to property placed in service after
December 31, 2001.
SEC. 607. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLE-
TION FOR OIL AND NATURAL GAS PRODUCED
FROM MARGINAL PROPERTIES.
(a) IN
GENERAL.—Subparagraph (H) of section
613A(c)(6) is amended by striking ‘‘2002’’ and inserting
‘‘2004’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2001.
SEC. 608. QUALIFIED ZONE ACADEMY BONDS.
(a) IN GENERAL.—Paragraph (1) of section 1397E(e)
is amended by striking ‘‘2000, and 2001’’ and inserting
‘‘2000, 2001, 2002, and 2003’’.
104
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to obligations issued after the date
of the enactment of this Act.
SEC. 609. COVER OVER OF TAX ON DISTILLED SPIRITS.
(a) IN GENERAL.—Paragraph (1) of section 7652(f) is
amended by striking ‘‘January 1, 2002’’ and inserting
‘‘January 1, 2004’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to articles brought into the United
States after December 31, 2001.
SEC. 610. PARITY IN THE APPLICATION OF CERTAIN LIMITS
TO MENTAL HEALTH BENEFITS.
(a) IN GENERAL.—Subsection (f) of section 9812, as
amended by the Departments of Labor, Health and Human
Services, and Education, and Related Agencies Appropria-
tions Act, 2002, is amended to read as follows:
‘‘(f) APPLICATION OF SECTION.—This section shall not
apply to benefits for services furnished—
‘‘(1) on or after September 30, 2001, and before
January 10, 2002, and
‘‘(2) after December 31, 2003.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to plan years beginning after Decem-
ber 31, 2000.
105
SEC. 611. TEMPORARY SPECIAL RULES FOR TAXATION OF
LIFE INSURANCE COMPANIES.
(a) REDUCTION IN MUTUAL LIFE INSURANCE COM-
PANY DEDUCTIONS NOT TO APPLY IN CERTAIN YEARS.—
Section 809 (relating to reduction in certain deductions of
material life insurance companies) is amended by adding
at the end the following:
‘‘(j) DIFFERENTIAL EARNINGS RATE TREATED
AS
ZERO FOR CERTAIN YEARS.—Notwithstanding subsection
(c) or (f), the differential earnings rate shall be treated as
zero for purposes of computing both the differential earnings
amount and the recomputed differential earnings amount
for a mutual life insurance company’s taxable years begin-
ning in 2001, 2002, or 2003.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 612. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Paragraphs (2) and (3)(B) of sec-
tion 220(i) (defining cut-off year) are each amended by
striking ‘‘2002’’ each place it appears and inserting
‘‘2003’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 220(j) is amended
by striking ‘‘1998, 1999, or 2001’’ each place it ap-
pears and inserting ‘‘1998, 1999, 2001, or 2002’’.