107TH CONGRESS
2D SESSION
H.R. 622
HOUSE AMENDMENTS TO
SENATE AMENDMENTS
In the House of Representatives, U. S.,
February 14, 2002.
Resolved, That the House agree to the amendments of
the Senate to the bill (H.R. 622) entitled ‘‘An Act to amend
the Internal Revenue Code of 1986 to expand the adoption
credit, and for other purposes’’, with the following
HOUSE AMENDMENTS TO SENATE AMENDMENTS:
In lieu of the matter proposed to be inserted by the
amendment of the Senate, insert the following:
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Economic Security and Worker Assistance Act of 2002’’.
(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 provision,
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—INDIVIDUAL PROVISIONS
Sec. 101. Supplemental stimulus payments.
Sec. 102. Acceleration of 25 percent individual income tax rate.
TITLE II—BUSINESS PROVISIONS
Sec. 201. Special depreciation allowance for certain property acquired after Sep-
tember 10, 2001, and before September 11, 2004.
Sec. 202. Temporary increase in expensing under section 179.
Sec. 203. Alternative minimum tax reform.
Sec. 204. Carryback of certain net operating losses allowed for 5 years.
Sec. 205. Recovery period for depreciation of certain leasehold improvements.
TITLE III—EXTENSIONS OF CERTAIN EXPIRING PROVISIONS
Subtitle A—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 certain renewable resources.
Sec. 304. Work opportunity credit.
Sec. 305. Welfare-to-work credit.
Sec. 306. Deduction for clean-fuel vehicles and certain refueling property.
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. Temporary special rules for taxation of life insurance companies.
Sec. 312. Availability of medical savings accounts.
Sec. 313. Incentives for Indian employment and property on Indian reservations.
Sec. 314. Subpart F exemption for active financing.
Sec. 315. Repeal of requirement for approved diesel or kerosene terminals.
Subtitle B—Temporary Assistance for Needy Families
Sec. 321. Reauthorization of TANF supplemental grants for population increases
for fiscal year 2002.
Sec. 322. 1-year extension of contingency fund under the TANF program.
TITLE IV—TAX INCENTIVES FOR NEW YORK CITY AND DISTRESSED
AREAS
Sec. 401. Tax benefits for area of New York City damaged in terrorist attacks on
September 11, 2001.
TITLE V—MISCELLANEOUS AND TECHNICAL PROVISIONS
Subtitle A—General Miscellaneous Provisions
Sec. 501. Allowance of electronic 1099’s.
Sec. 502. Excluded cancellation of indebtedness income of S corporation not to re-
sult in adjustment to basis of stock of shareholders.
Sec. 503. Limitation on use of nonaccrual experience method of accounting.
Sec. 504. Exclusion for foster care payments to apply to payments by qualified
placement agencies.
Sec. 505. Interest rate range for additional funding requirements.
Sec. 506. Adjusted gross income determined by taking into account certain ex-
penses of elementary and secondary school teachers.
Subtitle B—Technical Corrections
Sec. 511. Amendments related to Economic Growth and Tax Relief Reconciliation
Act of 2001.
Sec. 512. Amendments related to Community Renewal Tax Relief Act of 2000.
Sec. 513. Amendments related to the Tax Relief Extension Act of 1999.
Sec. 514. Amendments related to the Taxpayer Relief Act of 1997.
Sec. 515. Amendment related to the Balanced Budget Act of 1997.
Sec. 516. Other technical corrections.
Sec. 517. Clerical amendments.
Sec. 518. Additional corrections.
TITLE VI—UNEMPLOYMENT ASSISTANCE
Sec. 601. Short title.
Sec. 602. Federal-State agreements.
Sec. 603. Temporary extended unemployment compensation account.
Sec. 604. Payments to States having agreements for the payment of temporary
extended unemployment compensation.
Sec. 605. Financing provisions.
Sec. 606. Fraud and overpayments.
Sec. 607. Definitions.
Sec. 608. Applicability.
Sec. 609. Special Reed Act transfer in fiscal year 2002.
TITLE VII—DISPLACED WORKER HEALTH INSURANCE CREDIT
Sec. 701. Displaced worker health insurance credit.
Sec. 702. Advance payment of displaced worker health insurance credit.
TITLE VIII—EMPLOYMENT AND TRAINING ASSISTANCE AND
TEMPORARY HEALTH CARE COVERAGE ASSISTANCE
Sec. 801. Employment and training assistance and temporary health care cov-
erage assistance.
TITLE IX—TEMPORARY STATE HEALTH CARE ASSISTANCE
Sec. 901. Temporary State health care assistance.
TITLE X—SOCIAL SECURITY HELD HARMLESS; BUDGETARY
TREATMENT OF ACT
Sec. 1001. No impact on social security trust funds.
Sec. 1002. Emergency designation.
TITLE I—INDIVIDUAL
PROVISIONS
SEC. 101. SUPPLEMENTAL STIMULUS PAYMENTS.
(a) IN GENERAL.—Section 6428 (relating to accelera-
tion of 10 percent income tax rate bracket benefit for 2001)
is amended by adding at the end the following new sub-
section:
‘‘(f) SUPPLEMENTAL STIMULUS PAYMENTS.—
‘‘(1) IN GENERAL.—Each individual who was an
eligible individual for such individual’s first taxable
year beginning in 2000 and who, before October 16,
2001, filed a return of tax imposed by subtitle A for
such taxable year shall be treated as having made a
payment against the tax imposed by chapter 1 for
such first taxable year in an amount equal to the sup-
plemental refund amount for such taxable year.
‘‘(2) SUPPLEMENTAL
REFUND
AMOUNT.—For
purposes of this subsection, the supplemental refund
amount is an amount equal to the excess (if any) of—
‘‘(A)(i) $600 in the case of taxpayers to
whom section 1(a) applies,
‘‘(ii) $500 in the case of taxpayers to whom
section 1(b) applies, and
‘‘(iii) $300 in the case of taxpayers to
whom subsections (c) or (d) of section 1 applies,
over
‘‘(B) the taxpayer’s advance refund amount
under subsection (e).
‘‘(3) TIMING OF PAYMENTS.—In the case of any
overpayment attributable to this subsection, the Sec-
retary shall, subject to the provisions of this title, re-
fund or credit such overpayment as rapidly as pos-
sible.
‘‘(4) NO INTEREST.—No interest shall be allowed
on any overpayment attributable to this subsection.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6428(d)(1) is
amended by striking ‘‘subsection (e)’’ and inserting
‘‘subsections (e) and (f)’’.
(2) Subparagraph (B) of section 6428(d)(1) is
amended by striking ‘‘subsection (e)’’ and inserting
‘‘subsection (e) or (f)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 102. ACCELERATION OF 25 PERCENT INDIVIDUAL IN-
COME TAX RATE.
(a) IN GENERAL.—The table contained in paragraph
(2) of section 1(i) (relating to reductions in rates after June
30, 2001) is amended—
(1) by striking ‘‘27.0%’’ and inserting ‘‘25.0%’’,
and
(2) by striking ‘‘26.0%’’ and inserting ‘‘25.0%’’.
(b) REDUCTION NOT TO INCREASE MINIMUM TAX.—
(1) Subparagraph (A) of section 55(d)(1) is
amended by striking ‘‘($49,000 in the case of taxable
years beginning in 2001, 2002, 2003, and 2004)’’ and
inserting ‘‘($49,000 in the case of taxable years begin-
ning in 2001, $52,200 in the case of taxable years be-
ginning in 2002 or 2003, and $50,700 in the case of
taxable years beginning in 2004)’’.
(2) Subparagraph (B) of section 55(d)(1) is
amended by striking ‘‘($35,750 in the case of taxable
years beginning in 2001, 2002, 2003, and 2004)’’ and
inserting ‘‘($35,750 in the case of taxable years begin-
ning in 2001, $37,350 in the case of taxable years be-
ginning in 2002 or 2003, and $36,600 in the case of
taxable years beginning in 2004)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
(d) SECTION 15 NOT TO APPLY.—No amendment
made by this section shall be treated as a change in a rate
of tax for purposes of section 15 of the Internal Revenue
Code of 1986.
TITLE II—BUSINESS PROVISIONS
SEC. 201. 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 accelerated
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.—
‘‘(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 al-
lowance equal to 30 percent of the adjusted 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,
‘‘(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 September
10, 2001, and before September 11,
2004, and
‘‘(iv) which is placed in service by the
taxpayer before January 1, 2005, or, in the
case of property described in subparagraph
(B), before January 1, 2006.
‘‘(B) CERTAIN PROPERTY HAVING LONGER
PRODUCTION PERIODS TREATED AS QUALIFIED
PROPERTY.—
‘‘(i) IN GENERAL.—The term ‘qualified
property’ includes property—
‘‘(I) which meets the requirements
of clauses (i), (ii), and (iii) of sub-
paragraph (A),
‘‘(II) which has a recovery period
of at least 10 years or is transpor-
tation property, and
‘‘(III) which is subject to section
263A by reason of clause (ii) or (iii) of
subsection (f)(1)(B) thereof.
‘‘(ii) ONLY PRE-SEPTEMBER 11, 2004,
BASIS ELIGIBLE FOR ADDITIONAL ALLOW-
ANCE.—In the case of property which is
qualified property solely by reason of clause
(i), paragraph (1) shall apply only to the
extent of the adjusted basis thereof attrib-
utable to manufacture, construction, or pro-
duction before September 11, 2004.
‘‘(iii) TRANSPORTATION
PROPERTY.—
For purposes of this subparagraph, the term
‘transportation property’ means tangible
personal property used in the trade or busi-
ness of transporting persons or property.
‘‘(C) 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—
‘‘(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 re-
spect to any class of property for any tax-
able year, this subsection shall not apply to
all property in such class placed in service
during such taxable year.
‘‘(iii) 
QUALIFIED
LEASEHOLD
IM-
PROVEMENT
PROPERTY.—The term ‘quali-
fied property’ shall not include any quali-
fied leasehold improvement property (as de-
fined in section 168(e)(6)).
‘‘(D) SPECIAL RULES.—
‘‘(i) SELF-CONSTRUCTED PROPERTY.—
In the case of a taxpayer manufacturing,
constructing, or producing property for the
taxpayer’s own use, the requirements of
clause (iii) of subparagraph (A) shall be
treated as met if the taxpayer begins manu-
facturing, constructing, or producing the
property after September 10, 2001, and be-
fore 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 person,
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).
‘‘(E) COORDINATION WITH SECTION 280F.—
For purposes of section 280F—
‘‘(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 recap-
ture amount under section 280F(b)(2).’’.
(b) ALLOWANCE AGAINST ALTERNATIVE MINIMUM
TAX.—
(1) IN GENERAL.—Section 56(a)(1)(A) (relating
to depreciation adjustment for alternative minimum
tax) is amended by adding at the end the following
new clause:
‘‘(iii) ADDITIONAL
ALLOWANCE
FOR
CERTAIN PROPERTY ACQUIRED AFTER SEP-
TEMBER 10, 2001, AND BEFORE SEPTEMBER
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)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service after Sep-
tember 10, 2001, in taxable years ending after such date.
SEC. 202. 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 ..............................................................
$40,000
2004 or thereafter .......................................................
$25,000.’’.
(b) TEMPORARY INCREASE IN AMOUNT OF PROPERTY
TRIGGERING PHASEOUT OF MAXIMUM BENEFIT.—Para-
graph (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 Decem-
ber 31, 2001.
termined without regard to such deduction,
and’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 204. CARRYBACK OF CERTAIN NET OPERATING LOSSES
ALLOWED FOR 5 YEARS.
(a) IN GENERAL.—Paragraph (1) of section 172(b)
(relating to years to which loss may be carried) is amended
by adding at the end the following new subparagraph:
‘‘(H) In the case of a taxpayer which has
a net operating loss for any taxable year ending
during 2001 or 2002, subparagraph (A)(i) shall
be applied by substituting ‘5’ for ‘2’ and sub-
paragraph (F) shall not apply.’’.
(b) ELECTION TO DISREGARD 5-YEAR CARRYBACK.—
Section 172 (relating to net operating loss deduction) is
amended by redesignating subsection (j) as subsection (k)
and by inserting after subjection (i) the following new sub-
section:
‘‘(j) ELECTION TO DISREGARD 5-YEAR CARRYBACK
FOR CERTAIN NET OPERATING LOSSES.—Any taxpayer en-
titled to a 5-year carryback under subsection (b)(1)(H)
from any loss year may elect to have the carryback period
with respect to such loss year determined without regard
to subsection (b)(1)(H). Such election shall be made in such
manner as may be prescribed by the Secretary and shall
be made by the due date (including extensions of time) for
filing the taxpayer’s return for the taxable year of the net
operating loss. Such election, once made for any taxable
year, shall be irrevocable for such taxable year.’’.
(c) TEMPORARY SUSPENSION OF 90 PERCENT LIMIT
ON CERTAIN NOL CARRYBACKS.—
(1) IN GENERAL.—Subparagraph (A) of section
56(d)(1) (relating to general rule defining alternative
tax net operating loss deduction) is amended to read
as follows:
‘‘(A) the amount of such deduction shall not
exceed the sum of—
‘‘(i) the lesser of—
‘‘(I) the amount of such deduction
attributable to net operating losses
(other than the deduction attributable
to carrybacks described in clause
(ii)(I)), or
‘‘(II) 90 percent of alternative
minimum taxable income determined
without regard to such deduction, plus
‘‘(ii) the lesser of—
‘‘(I) the amount of such deduction
attributable to carrybacks of net oper-
ating losses for taxable years ending
during 2001 or 2002, or
‘‘(II) alternative minimum tax-
able income determined without regard
to such deduction reduced by the
amount determined under clause (i),
and’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to taxable years beginning
before January 1, 2002.
(d) EFFECTIVE DATE.—Except as provided in sub-
section (c), the amendments made by this section shall
apply to net operating losses for taxable years ending after
December 31, 2000.
SEC. 205. RECOVERY PERIOD FOR DEPRECIATION OF CER-
TAIN LEASEHOLD IMPROVEMENTS.
(a) 15-YEAR RECOVERY PERIOD.—Subparagraph (E)
of section 168(e)(3) (relating to 15-year property) is amend-
ed by striking ‘‘and’’ at the end of clause (ii), by striking
the period at the end of clause (iii) and inserting ‘‘, and’’,
and by adding at the end the following new clause:
‘‘(iv) any qualified leasehold improve-
ment property.’’.
(b) QUALIFIED LEASEHOLD IMPROVEMENT PROP-
ERTY.—Subsection (e) of section 168 is amended by adding
at the end the following new paragraph:
‘‘(6) 
QUALIFIED
LEASEHOLD
IMPROVEMENT
PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
leasehold improvement property’ means any im-
provement to an interior portion of a building
which is nonresidential real property if—
‘‘(i) such improvement is made under
or pursuant to a lease (as defined in sub-
section (h)(7))—
‘‘(I) by the lessee (or any subles-
see) of such portion, or
‘‘(II) by the lessor of such portion,
‘‘(ii) such portion is to be occupied ex-
clusively by the lessee (or any sublessee) of
such portion, and
‘‘(iii) such improvement is placed in
service more than 3 years after the date the
building was first placed in service.
‘‘(B) CERTAIN
IMPROVEMENTS
NOT
IN-
CLUDED.—Such term shall not include any im-
provement for which the expenditure is attrib-
utable to—
‘‘(i) the enlargement of the building,
‘‘(ii) any elevator or escalator,
‘‘(iii) any structural component bene-
fiting a common area, and
‘‘(iv) the internal structural framework
of the building.
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) COMMITMENT TO LEASE TREATED
AS LEASE.—A commitment to enter into a
lease shall be treated as a lease, and the
parties to such commitment shall be treated
as lessor and lessee, respectively.
‘‘(ii) RELATED PERSONS.—A lease be-
tween related persons shall not be considered
a lease. For purposes of the preceding sen-
tence, the term ‘related persons’ means—
‘‘(I) members of an affiliated
group (as defined in section 1504), and
‘‘(II) persons having a relation-
ship described in subsection (b) of sec-
tion 267; except that, for purposes of
this clause, the phrase ‘80 percent or
more’ shall be substituted for the
phrase ‘more than 50 percent’ each
place it appears in such subsection.
‘‘(D) IMPROVEMENTS MADE BY LESSOR.—
‘‘(i) IN GENERAL.—In the case of an
improvement made by the person who was
the lessor of such improvement when such
improvement was placed in service, such
improvement shall be qualified leasehold
improvement property (if at all) only so
long as such improvement is held by such
person.
‘‘(ii) EXCEPTION
FOR
CHANGES
IN
FORM
OF
BUSINESS.—Property shall not
cease to be qualified leasehold improvement
property under clause (i) by reason of—
‘‘(I) death,
‘‘(II) a transaction to which sec-
tion 381(a) applies, or
‘‘(III) a mere change in the form
of conducting the trade or business so
long as the property is retained in
such trade or business as qualified
leasehold improvement property and
the taxpayer retains a substantial in-
terest in such trade or business.
‘‘(iii) TREATMENT
OF
FAILURES
TO
MAINTAIN SUBSTANTIAL INTEREST IN TRADE
OR BUSINESS.—In the case of property to
which clause (ii)(III) would apply but for
the failure of the taxpayer to retain a sub-
stantial interest in a trade or business, the
remaining adjusted basis of such property
shall be depreciated under this section over
39 years.’’.
(c) REQUIREMENT TO USE STRAIGHT LINE METH-
OD.—Paragraph (3) of section 168(b) is amended by adding
at the end the following new subparagraph:
‘‘(G) Qualified leasehold improvement prop-
erty described in subsection (e)(6).’’.
(d) ALTERNATIVE SYSTEM.—The table contained in
section 168(g)(3)(B) is amended by adding at the end the
following new item:
‘‘(E)(iv) .......................................................................................
15’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to qualified leasehold improvement
property placed in service after September 10, 2001.
TITLE III—EXTENSIONS OF
CERTAIN EXPIRING PROVISIONS
Subtitle A—Extensions
SEC. 301. 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. 302. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.
(a) IN GENERAL.—Section 30 is amended—
(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.
SEC. 303. 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. 304. 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. 305. 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. 306. DEDUCTION FOR CLEAN-FUEL VEHICLES AND
CERTAIN REFUELING PROPERTY.
(a) IN GENERAL.—Section 179A is amended—
(1) in subsection (b)(1)(B)—
(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. 307. 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. 308. 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’’.
(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. 309. 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. 310. 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.
SEC. 311. 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. 312. 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’’.
(2) Subparagraph (A) of section 220(j)(4) is
amended by striking ‘‘and 2001’’ and inserting
‘‘2001, and 2002’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 2002.
SEC. 313. INCENTIVES FOR INDIAN EMPLOYMENT AND
PROPERTY ON INDIAN RESERVATIONS.
(a) EMPLOYMENT.—Subsection (f) of section 45A is
amended by striking ‘‘December 31, 2003’’ and inserting
‘‘December 31, 2004’’.
(b) PROPERTY.—Paragraph (8) of section 168(j) is
amended by striking ‘‘December 31, 2003’’ and inserting
‘‘December 31, 2004’’.
SEC. 314. SUBPART F EXEMPTION FOR ACTIVE FINANCING.
(a) IN GENERAL.—
(1) Section 953(e)(10) is amended—
(A) by striking ‘‘January 1, 2002’’ and in-
serting ‘‘January 1, 2007’’, and
(B) by striking ‘‘December 31, 2001’’ and
inserting ‘‘December 31, 2006’’.
(2) Section 954(h)(9) is amended by striking
‘‘January 1, 2002’’ and inserting ‘‘January 1, 2007’’.
(b) LIFE INSURANCE AND ANNUITY CONTRACTS.—
(1) IN GENERAL.—Subparagraph (B) of section
954(i)(4) is amended to read as follows:
‘‘(B) LIFE INSURANCE AND ANNUITY CON-
TRACTS.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), the amount of the reserve of
a qualifying insurance company or quali-
fying insurance company branch for any
life insurance or annuity contract shall be
equal to the greater of—
‘‘(I) the net surrender value of
such contract (as defined in section
807(e)(1)(A)), or
‘‘(II) the reserve determined under
paragraph (5).
‘‘(ii) RULING
REQUEST, 
ETC.—The
amount of the reserve under clause (i) shall
be the foreign statement reserve for the con-
tract (less any catastrophe, deficiency,
equalization, or similar reserves), if, pursu-
ant to a ruling request submitted by the
taxpayer or as provided in published guid-
ance, the Secretary determines that the fac-
tors taken into account in determining the
foreign statement reserve provide an appro-
priate means of measuring income.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 315. REPEAL OF REQUIREMENT FOR APPROVED DIE-
SEL OR KEROSENE TERMINALS.
(a) IN GENERAL.—Subsection (e) of section 4101 is
hereby repealed.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on January 1, 2002.
Subtitle B—Temporary Assistance
for Needy Families
SEC. 321. REAUTHORIZATION OF TANF SUPPLEMENTAL
GRANTS FOR POPULATION INCREASES FOR
FISCAL YEAR 2002.
Section 403(a)(3) of the Social Security Act (42 U.S.C.
603(a)(3)) is amended by adding at the end the following:
‘‘(H) REAUTHORIZATION
OF
GRANTS
FOR
FISCAL YEAR 2002.—Notwithstanding any other
provision of this paragraph—
‘‘(i) any State that was a qualifying
State under this paragraph for fiscal year
2001 or any prior fiscal year shall be enti-
tled to receive from the Secretary for fiscal
year 2002 a grant in an amount equal to
the amount required to be paid to the State
under this paragraph for the most recent
fiscal year in which the State was a quali-
fying State;
‘‘(ii) subparagraph (G) shall be ap-
plied as if ‘2002’ were substituted for
‘2001’; and
‘‘(iii) out of any money in the Treas-
ury of the United States not otherwise ap-
propriated, there are appropriated for fiscal
year 2002 such sums as are necessary for
grants under this subparagraph.’’.
SEC. 322. 1-YEAR EXTENSION OF CONTINGENCY FUND
UNDER THE TANF PROGRAM.
Section 403(b) of the Social Security Act (42 U.S.C.
603(b)) is amended—
(1) in paragraph (2), by striking ‘‘and 2001’’
and inserting ‘‘2001, and 2002’’; and
(2) in paragraph (3)(C)(ii), by striking ‘‘2001’’
and inserting ‘‘2002’’.
TITLE IV—TAX INCENTIVES FOR
NEW YORK CITY AND DIS-
TRESSED AREAS
SEC. 401. 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) to which section 168 applies
which has a recovery period of 20 years or
less or which is water utility property,
‘‘(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, or
‘‘(III) 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) 
ALTERNATIVE
DEPRECIATION
PROPERTY.—The term ‘qualified New York
Liberty Zone property’ shall not include
any property to which the alternative de-
preciation system under section 168(g) ap-
plies, determined—
‘‘(I) without regard to paragraph
(7) of section 168(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) 30 PERCENT ADDITIONAL ALLOW-
ANCE PROPERTY.—Such term shall not in-
clude property to which section 168(k) ap-
plies.
‘‘(iii) 
QUALIFIED
LEASEHOLD
IM-
PROVEMENT
PROPERTY.—Such term shall
not include any qualified leasehold improve-
ment property (as defined in section
168(e)(6)).
‘‘(iv) ELECTION OUT.—If a taxpayer
makes an election under this clause with re-
spect to any class of property for any tax-
able year, this subsection shall not apply to
all property in such class placed in service
during such taxable year.
‘‘(D) SPECIAL RULES.—
‘‘(i) SELF-CONSTRUCTED PROPERTY.—
In the case of a taxpayer manufacturing,
constructing, or producing property for the
taxpayer’s own use, the requirements of
clause (iv) of subparagraph (A) shall be
treated as met if the taxpayer begins manu-
facturing, constructing, or producing the
property after September 10, 2001.
‘‘(ii) 
SALE-LEASEBACKS.—For 
pur-
poses 
of 
subparagraph 
(A)(iii), 
if
property—
‘‘(I) is originally placed in service
after September 10, 2001, by a person,
and
‘‘(II) is 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).
‘‘(E) ALLOWANCE
AGAINST
ALTERNATIVE
MINIMUM TAX.—The deduction allowed by this
subsection shall be allowed in determining alter-
native minimum taxable income under section
55.
‘‘(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(e)(6)) 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.
‘‘(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 V—MISCELLANEOUS AND
TECHNICAL PROVISIONS
Subtitle A—General Miscellaneous
Provisions
SEC. 501. 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. 502. 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. 503. 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. 504. 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. 505. 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. 506. 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. 511. 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 allowable 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)).’’.
(2) Section 401(a)(30) is amended by striking
‘‘402(g)(1)’’ and inserting ‘‘402(g)(1)(A)’’.
(3) Section 414(v)(2) is amended by adding at
the end the following:
‘‘(D) AGGREGATION OF PLANS.—For pur-
poses of this paragraph, plans described in
clauses (i), (ii), and (iv) of paragraph (6)(A)
that are maintained by the same employer (as
determined under subsection (b), (c), (m) or (o))
shall be treated as a single plan, and plans de-
scribed in clause (iii) of paragraph (6)(A) that
are maintained by the same employer shall be
treated as a single plan.’’.
(4) Section 414(v)(3)(A)(i) is amended by strik-
ing ‘‘section 402(g), 402(h), 403(b), 404(a), 404(h),
408(k), 408(p), 415, or 457’’ and inserting ‘‘section
401(a)(30), 402(h), 403(b), 408, 415(c), and 457(b)(2)
(determined without regard to section 457(b)(3))’’.
(5) Section 414(v)(3)(B) is amended by striking
‘‘section 401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),
401(k)(12), 403(b)(12), 408(k), 408(p), 408B, 410(b),
or 416’’ and inserting ‘‘section 401(a)(4), 401(k)(3),
401(k)(11), 403(b)(12), 408(k), 410(b), or 416’’.
(6) Section 414(v)(4)(B) is amended by inserting
before the period at the end the following: ‘‘, except
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:
‘‘(5) INCLUDIBLE COMPENSATION.—The term ‘in-
cludible compensation’ has the meaning given to the
term 
‘participant’s 
compensation’ 
by 
section
415(c)(3).’’.
(6) Section 402(g)(7)(B) is amended by striking
‘‘2001.’’ and inserting ‘‘2001).’’.
(q) AMENDMENTS RELATING TO SECTION 643 OF THE
ACT.—
(1) Section 401(a)(31)(C)(i) is amended by in-
serting ‘‘is a qualified trust which is part of a plan
which is a defined contribution plan and’’ before
‘‘agrees’’.
(2) Section 402(c)(2) is amended by adding at
the end the following flush sentence:
‘‘In the case of a transfer described in subparagraph
(A) or (B), the amount transferred shall be treated as
consisting first of the portion of such distribution that
is includible in gross income (determined without re-
gard to paragraph (1)).’’.
(r) AMENDMENTS RELATING TO SECTION 648 OF THE
ACT.—
(1) Section 417(e) is amended—
(A) in paragraph (1) by striking ‘‘exceed
the dollar limit under section 411(a)(11)(A)’’
and inserting ‘‘exceed the amount that can be
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. 512. 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 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) 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 by adding at the end the following:
‘‘(E) entering into a securities futures con-
tract (as so defined) to sell shall be treated as en-
tering into a short sale, and the sale, exchange,
or termination of a securities futures contract to
sell shall be treated as the closing of a short
sale.’’.
(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. 513. 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. 514. 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. 515. 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. 516. 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) 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.
(c) 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.
(d) 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.
(e) 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. 517. CLERICAL AMENDMENTS.
(1) The subsection (g) of section 25B that relates
to termination is redesignated as subsection (h).
(2) Section 51A(c)(1) is amended by striking
‘‘51(d)(10)’’ and inserting ‘‘51(d)(11)’’.
(3) 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’’.
(4) Section 351(h)(1) is amended by inserting a
comma after ‘‘liability’’.
(5) Section 741 is amended by striking ‘‘which
have appreciated substantially in value’’.
(6) Section 857(b)(7)(B)(i) is amended by strik-
ing ‘‘subsection 856(d)’’ and inserting ‘‘section
856(d)’’.
(7) Section 1394(c)(2) is amended by striking
‘‘subparagraph (A)’’ and inserting ‘‘paragraph (1)’’.
(8)(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)’’.
(9) Section 1221(b)(1)(B)(i) is amended by strik-
ing ‘‘1256(b))’’ and inserting ‘‘1256(b)))’’.
(10) Section 618(b)(2) of the Economic Growth
and Tax Relief Reconciliation Act of 2001 (Public
Law 107–16; 115 Stat. 108) is amended—
(A) in subparagraph (A) by striking
‘‘203(d)’’ and inserting ‘‘202(f)’’, and
(B) in subparagraphs (C), (D), and (E) by
striking ‘‘203’’ and inserting ‘‘202(f)’’.
(11)(A) Section 525 of the Ticket to Work and
Work Incentives Improvement Act of 1999 (Public
Law 106–170; 113 Stat. 1928) is amended by striking
‘‘7200’’ and inserting ‘‘7201’’.
(B) Section 532(c)(2) of such Act (113 Stat.
1930) is amended—
(i) in subparagraph (D), by striking
‘‘341(d)(3)’’ and inserting ‘‘341(d)’’, and
(ii) in subparagraph (Q), by striking
‘‘954(c)(1)(B)(iii) and inserting ‘‘954(c)(1)(B)’’.
SEC. 518. 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 VI—UNEMPLOYMENT
ASSISTANCE
SEC. 601. SHORT TITLE.
This title may be cited as the ‘‘Temporary Extended
Unemployment Compensation Act of 2002’’.
SEC. 602. FEDERAL-STATE AGREEMENTS.
(a) IN GENERAL.—Any State which desires to do so
may enter into and participate in an agreement under this
title with the Secretary of Labor (in this title referred to
as the ‘‘Secretary’’). Any State which is a party to an
agreement under this title may, upon providing 30 days’
written notice to the Secretary, terminate such agreement.
(b) PROVISIONS
OF AGREEMENT.—Any agreement
under subsection (a) shall provide that the State agency of
the State will make payments of temporary extended unem-
ployment compensation to individuals who—
(1) have exhausted all rights to regular com-
pensation under the State law or under Federal law
with respect to a benefit year (excluding any benefit
year that ended before March 15, 2001);
(2) have no rights to regular compensation or ex-
tended compensation with respect to a week under
such law or any other State unemployment compensa-
tion law or to compensation under any other Federal
law;
(3) are not receiving compensation with respect
to such week under the unemployment compensation
law of Canada; and
(4) filed an initial claim for regular compensa-
tion on or after March 15, 2001.
(c) EXHAUSTION OF BENEFITS.—For purposes of sub-
section (b)(1), an individual shall be deemed to have ex-
hausted such individual’s rights to regular compensation
under a State law when—
(1) no payments of regular compensation can be
made under such law because such individual has re-
ceived all regular compensation available to such in-
dividual based on employment or wages during such
individual’s base period; or
(2) such individual’s rights to such compensation
have been terminated by reason of the expiration of
the benefit year with respect to which such rights ex-
isted.
(d) WEEKLY BENEFIT AMOUNT, ETC.—For purposes
of any agreement under this title—
(1) the amount of temporary extended unemploy-
ment compensation which shall be payable to any in-
dividual for any week of total unemployment shall be
100
equal to the amount of the regular compensation (in-
cluding dependents’ allowances) payable to such indi-
vidual during such individual’s benefit year under
the State law for a week of total unemployment;
(2) the terms and conditions of the State law
which apply to claims for regular compensation and
to the payment thereof shall apply to claims for tem-
porary extended unemployment compensation and the
payment thereof, except—
(A) that an individual shall not be eligible
for temporary extended unemployment com-
pensation under this title unless, in the base pe-
riod with respect to which the individual ex-
hausted all rights to regular compensation under
the State law, the individual had 20 weeks of
full-time insured employment or the equivalent
in insured wages, as determined under the provi-
sions of the State law implementing section
202(a)(5) of the Federal-State Extended Unem-
ployment Compensation Act of 1970 (26 U.S.C.
3304 note); and
(B) where otherwise inconsistent with the
provisions of this title or with the regulations or
operating instructions of the Secretary promul-
gated to carry out this title; and
101
(3) the maximum amount of temporary extended
unemployment compensation payable to any indi-
vidual for whom a temporary extended unemployment
compensation account is established under section 603
shall not exceed the amount established in such ac-
count for such individual.
(e) ELECTION
BY
STATES.—Notwithstanding any
other provision of Federal law (and if State law permits),
the Governor of a State that is in an extended benefit period
may provide for the payment of temporary extended unem-
ployment compensation in lieu of extended compensation
to individuals who otherwise meet the requirements of this
section. Such an election shall not require a State to trigger
off an extended benefit period.
SEC. 603. TEMPORARY EXTENDED UNEMPLOYMENT COM-
PENSATION ACCOUNT.
(a) IN GENERAL.—Any agreement under this title
shall provide that the State will establish, for each eligible
individual who files an application for temporary extended
unemployment compensation, a temporary extended unem-
ployment compensation account with respect to such indi-
vidual’s benefit year.
(b) AMOUNT IN ACCOUNT.—
102
(1) IN GENERAL.—The amount established in an
account under subsection (a) shall be equal to the less-
er of—
(A) 50 percent of the total amount of reg-
ular compensation (including dependents’ allow-
ances) payable to the individual during the indi-
vidual’s benefit year under such law, or
(B) 13 times the individual’s average week-
ly benefit amount for the benefit year.
(2) WEEKLY BENEFIT AMOUNT.—For purposes of
this subsection, an individual’s weekly benefit amount
for any week is the amount of regular compensation
(including dependents’ allowances) under the State
law payable to such individual for such week for total
unemployment.
(c) SPECIAL RULE.—
(1) IN
GENERAL.—Notwithstanding any other
provision of this section, if, at the time that the indi-
vidual’s account is exhausted, such individual’s State
is in an extended benefit period (as determined under
paragraph (2)), then, such account shall be aug-
mented by an amount equal to the amount originally
established in such account (as determined under sub-
section (b)(1)).
103
(2) EXTENDED BENEFIT PERIOD.—For purposes
of paragraph (1), a State shall be considered to be in
an extended benefit period if, at the time of exhaus-
tion (as described in paragraph (1))—
(A) such a period is then in effect for such
State under the Federal-State Extended Unem-
ployment Compensation Act of 1970; or
(B) such a period would then be in effect for
such State under such Act if section 203(d) of
such Act were applied as if it had been amended
by striking ‘‘5’’ each place it appears and insert-
ing ‘‘4’’.
SEC. 604. PAYMENTS TO STATES HAVING AGREEMENTS FOR
THE PAYMENT OF TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION.
(a) GENERAL RULE.—There shall be paid to each
State that has entered into an agreement under this title
an amount equal to 100 percent of the temporary extended
unemployment compensation paid to individuals by the
State pursuant to such agreement.
(b) TREATMENT
OF
REIMBURSABLE
COMPENSA-
TION.—No payment shall be made to any State under this
section in respect of any compensation to the extent the
State is entitled to reimbursement in respect of such com-
pensation under the provisions of any Federal law other
104
than this title or chapter 85 of title 5, United States Code.
A State shall not be entitled to any reimbursement under
such chapter 85 in respect of any compensation to the extent
the State is entitled to reimbursement under this title in
respect of such compensation.
(c) DETERMINATION OF AMOUNT.—Sums payable to
any State by reason of such State having an agreement
under this title shall be payable, either in advance or by
way of reimbursement (as may be determined by the Sec-
retary), in such amounts as the Secretary estimates the
State will be entitled to receive under this title for each cal-
endar month, reduced or increased, as the case may be, by
any amount by which the Secretary finds that the Sec-
retary’s estimates for any prior calendar month were great-
er or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of
such statistical, sampling, or other method as may be agreed
upon by the Secretary and the State agency of the State
involved.
SEC. 605. FINANCING PROVISIONS.
(a) IN GENERAL.—Funds in the extended unemploy-
ment compensation account (as established by section
905(a) of the Social Security Act (42 U.S.C. 1105(a)) of
the Unemployment Trust Fund (as established by section
904(a) of such Act (42 U.S.C. 1104(a)) shall be used for
105
the making of payments to States having agreements en-
tered into under this title.
(b) CERTIFICATION.—The Secretary shall from time to
time certify to the Secretary of the Treasury for payment
to each State the sums payable to such State under this
title. The Secretary of the Treasury, prior to audit or settle-
ment by the General Accounting Office, shall make pay-
ments to the State in accordance with such certification,
by transfers from the extended unemployment compensation
account (as so established) to the account of such State in
the Unemployment Trust Fund (as so established).
(c) ASSISTANCE TO STATES.—There are appropriated
out of the employment security administration account (as
established by section 901(a) of the Social Security Act (42
U.S.C. 1101(a)) of the Unemployment Trust Fund, without
fiscal year limitation, such funds as may be necessary for
purposes of assisting States (as provided in title III of the
Social Security Act (42 U.S.C. 501 et seq.)) in meeting the
costs of administration of agreements under this title.
(d) APPROPRIATIONS
FOR
CERTAIN
PAYMENTS.—
There are appropriated from the general fund of the Treas-
ury, without fiscal year limitation, to the extended unem-
ployment compensation account (as so established) of the
Unemployment Trust Fund (as so established) such sums
106
as the Secretary estimates to be necessary to make the pay-
ments under this section in respect of—
(1) compensation payable under chapter 85 of
title 5, United States Code; and
(2) compensation payable on the basis of services
to which section 3309(a)(1) of the Internal Revenue
Code of 1986 applies.
Amounts appropriated pursuant to the preceding sentence
shall not be required to be repaid.
SEC. 606. FRAUD AND OVERPAYMENTS.
(a) IN GENERAL.—If an individual knowingly has
made, or caused to be made by another, a false statement
or representation of a material fact, or knowingly has
failed, or caused another to fail, to disclose a material fact,
and as a result of such false statement or representation
or of such nondisclosure such individual has received an
amount of temporary extended unemployment compensa-
tion under this title to which he was not entitled, such
individual—
(1) shall be ineligible for further temporary ex-
tended unemployment compensation under this title
in accordance with the provisions of the applicable
State unemployment compensation law relating to
fraud in connection with a claim for unemployment
compensation; and
107
(2) shall be subject to prosecution under section
1001 of title 18, United States Code.
(b) REPAYMENT.—In the case of individuals who have
received amounts of temporary extended unemployment
compensation under this title to which they were not enti-
tled, the State shall require such individuals to repay the
amounts of such temporary extended unemployment com-
pensation to the State agency, except that the State agency
may waive such repayment if it determines that—
(1) the payment of such temporary extended un-
employment compensation was without fault on the
part of any such individual; and
(2) such repayment would be contrary to equity
and good conscience.
(c) RECOVERY BY STATE AGENCY.—
(1) IN GENERAL.—The State agency may recover
the amount to be repaid, or any part thereof, by de-
ductions from any temporary extended unemployment
compensation payable to such individual under this
title or from any unemployment compensation pay-
able to such individual under any Federal unemploy-
ment compensation law administered by the State
agency or under any other Federal law administered
by the State agency which provides for the payment
of any assistance or allowance with respect to any
108
week of unemployment, during the 3-year period after
the date such individuals received the payment of the
temporary extended unemployment compensation to
which they were not entitled, except that no single de-
duction may exceed 50 percent of the weekly benefit
amount from which such deduction is made.
(2) OPPORTUNITY FOR HEARING.—No repayment
shall be required, and no deduction shall be made,
until a determination has been made, notice thereof
and an opportunity for a fair hearing has been given
to the individual, and the determination has become
final.
(d) REVIEW.—Any determination by a State agency
under this section shall be subject to review in the same
manner and to the same extent as determinations under
the State unemployment compensation law, and only in
that manner and to that extent.
SEC. 607. DEFINITIONS.
In this title, the terms ‘‘compensation’’, ‘‘regular com-
pensation’’, ‘‘extended compensation’’, ‘‘additional com-
pensation’’, ‘‘benefit year’’, ‘‘base period’’, ‘‘State’’, ‘‘State
agency’’, ‘‘State law’’, and ‘‘week’’ have the respective mean-
ings given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26
U.S.C. 3304 note).
109
SEC. 608. APPLICABILITY.
An agreement entered into under this title shall apply
to weeks of unemployment—
(1) beginning after the date on which such agree-
ment is entered into; and
(2) ending before January 1, 2003.
SEC. 609. SPECIAL REED ACT TRANSFER IN FISCAL YEAR
2002.
(a) REPEAL OF CERTAIN PROVISIONS ADDED BY THE
BALANCED BUDGET ACT OF 1997.—
(1) IN GENERAL.—The following provisions of
section 903 of the Social Security Act (42 U.S.C.
1103) are repealed:
(A) Paragraph (3) of subsection (a).
(B) The last sentence of subsection (c)(2).
(2) SAVINGS PROVISION.—Any amounts trans-
ferred before the date of enactment of this Act under
the provision repealed by paragraph (1)(A) shall re-
main subject to section 903 of the Social Security Act,
as last in effect before such date of enactment.
(b) SPECIAL TRANSFER IN FISCAL YEAR 2002.—Sec-
tion 903 of the Social Security Act is amended by adding
at the end the following:
‘‘Special Transfer in Fiscal Year 2002
‘‘(d)(1) The Secretary of the Treasury shall transfer
(as of the date determined under paragraph (5)) from the
110
Federal unemployment account to the account of each State
in the Unemployment Trust Fund the amount determined
with respect to such State under paragraph (2).
‘‘(2)(A) The amount to be transferred under this sub-
section to a State account shall (as determined by the Sec-
retary of Labor and certified by such Secretary to the Sec-
retary of the Treasury) be equal to—
‘‘(i) the amount which would have been required
to have been transferred under this section to such ac-
count at the beginning of fiscal year 2002 if—
‘‘(I) section 609(a)(1) of the Temporary Ex-
tended Unemployment Compensation Act of 2002
had been enacted before the close of fiscal year
2001, and
‘‘(II) section 5402 of Public Law 105–33
(relating to increase in Federal unemployment
account ceiling) had not been enacted,
minus
‘‘(ii) the amount which was in fact transferred
under this section to such account at the beginning of
fiscal year 2002.
‘‘(B) Notwithstanding the provisions of subparagraph
(A)—
111
‘‘(i) the aggregate amount transferred to the
States under this subsection may not exceed a total
of $8,000,000,000; and
‘‘(ii) all amounts determined under subpara-
graph (A) shall be reduced ratably, if and to the ex-
tent necessary in order to comply with the limitation
under clause (i).
‘‘(3)(A) Except as provided in paragraph (4), amounts
transferred to a State account pursuant to this subsection
may be used only in the payment of cash benefits—
‘‘(i) to individuals with respect to their unem-
ployment, and
‘‘(ii) which are allowable under subparagraph
(B) or (C).
‘‘(B)(i) At the option of the State, cash benefits under
this paragraph may include amounts which shall be pay-
able as—
‘‘(I) regular compensation, or
‘‘(II) additional compensation, upon the exhaus-
tion of any temporary extended unemployment com-
pensation (if such State has entered into an agree-
ment under the Temporary Extended Unemployment
Compensation Act of 2002), for individuals eligible
for regular compensation under the unemployment
compensation law of such State.
112
‘‘(ii) Any additional compensation under clause (i)
may not be taken into account for purposes of any deter-
mination relating to the amount of any extended compensa-
tion for which an individual might be eligible.
‘‘(C)(i) At the option of the State, cash benefits under
this paragraph may include amounts which shall be pay-
able to 1 or more categories of individuals not otherwise
eligible for regular compensation under the unemployment
compensation law of such State, including those described
in clause (iii).
‘‘(ii) The benefits paid under this subparagraph to any
individual may not, for any period of unemployment, ex-
ceed the maximum amount of regular compensation author-
ized under the unemployment compensation law of such
State for that same period, plus any additional compensa-
tion (described in subparagraph (B)(i)) which could have
been paid with respect to that amount.
‘‘(iii) The categories of individuals described in this
clause include the following:
‘‘(I) Individuals who are seeking, or available
for, only part-time (and not full-time) work.
‘‘(II) Individuals who would be eligible for reg-
ular compensation under the unemployment com-
pensation law of such State under an alternative base
period.
113
‘‘(D) Amounts transferred to a State account under
this subsection may be used in the payment of cash benefits
to individuals only for weeks of unemployment beginning
after the date of enactment of this subsection.
‘‘(4) Amounts transferred to a State account under this
subsection may be used for the administration of its unem-
ployment compensation law and public employment offices
(including in connection with benefits described in para-
graph (3) and any recipients thereof), subject to the same
conditions as set forth in subsection (c)(2) (excluding sub-
paragraph (B) thereof, and deeming the reference to ‘sub-
sections (a) and (b)’ in subparagraph (D) thereof to include
this subsection).
‘‘(5) Transfers under this subsection shall be made
within 10 days after the date of enactment of this para-
graph.’’.
(c) LIMITATIONS ON TRANSFERS.—Section 903(b) of
the Social Security Act shall apply to transfers under sec-
tion 903(d) of such Act (as amended by this section). For
purposes of the preceding sentence, such section 903(b) shall
be deemed to be amended as follows:
(1) By substituting ‘‘the transfer date described
in subsection (d)(5)’’ for ‘‘October 1 of any fiscal
year’’.
114
(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.
115
TITLE VII—DISPLACED WORKER
HEALTH INSURANCE CREDIT
SEC. 701. DISPLACED WORKER HEALTH INSURANCE CRED-
IT.
(a) IN GENERAL.—Subchapter B of chapter 65 is
amended by inserting after section 6428 the following new
section:
‘‘SEC. 6429. DISPLACED WORKER HEALTH INSURANCE
CREDIT.
‘‘(a) IN GENERAL.—In the case of an individual, there
shall be allowed as a credit against the tax imposed by sub-
title A an amount equal to 60 percent of the amount paid
during the taxable year for coverage for the taxpayer, the
taxpayer’s spouse, and dependents of the taxpayer under
qualified health insurance during eligible coverage months.
‘‘(b) ONLY 12 ELIGIBLE COVERAGE MONTHS.—The
number of eligible coverage months taken into account
under subsection (a) for all taxable years shall not exceed
12.
‘‘(c) ELIGIBLE COVERAGE MONTH.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘eligible coverage
month’ means any month during 2002 or 2003 if, as
of the first day of such month—
‘‘(A) the taxpayer is unemployed,
116
‘‘(B) the taxpayer is covered by qualified
health insurance,
‘‘(C) the premium for coverage under such
insurance for such month is paid by the tax-
payer, and
‘‘(D) the taxpayer does not have other speci-
fied coverage.
‘‘(2) SPECIAL RULES.—
‘‘(A) TREATMENT OF FIRST MONTH OF EM-
PLOYMENT.—The taxpayer shall be treated as
meeting the requirement of paragraph (1)(A) for
the first month beginning on or after the date
that the taxpayer ceases to be unemployed by
reason of beginning work for an employer.
‘‘(B) INITIAL CLAIM MUST BE AFTER MARCH
15, 2001.—The taxpayer shall not be treated as
meeting the requirement of paragraph (1)(A)
with respect to any unemployment if the initial
claim for regular compensation for such unem-
ployment is filed on or before March 15, 2001.
‘‘(C) JOINT
RETURNS.—In the case of a
joint return, the requirements of paragraph (1)
shall be treated as met if at least 1 spouse satis-
fies such requirements.
117
‘‘(3) OTHER
SPECIFIED
COVERAGE.—For pur-
poses of this subsection, an individual has other speci-
fied coverage for any month if, as of the first day of
such month—
‘‘(A) SUBSIDIZED COVERAGE.—
‘‘(i) IN GENERAL.—Such individual is
covered under any qualified health insur-
ance under which at least 50 percent of the
cost of coverage (determined under section
4980B) is paid or incurred by an employer
(or former employer) of the taxpayer or the
taxpayer’s spouse.
‘‘(ii) 
TREATMENT
OF
CAFETERIA
PLANS
AND
FLEXIBLE
SPENDING
AC-
COUNTS.—For purposes of clause (i), the
cost of benefits—
‘‘(I) which are chosen under a caf-
eteria plan (as defined in section
125(d)), or provided under a flexible
spending or similar arrangement, of
such an employer, and
‘‘(II) which are not includible in
gross income under section 106,
shall be treated as borne by such employer.
118
‘‘(B) COVERAGE
UNDER
MEDICARE, MED-
ICAID, OR SCHIP.—Such individual—
‘‘(i) is entitled to benefits under part A
of title XVIII of the Social Security Act or
is enrolled under part B of such title, or
‘‘(ii) is enrolled in the program under
title XIX or XXI of such Act.
‘‘(C) CERTAIN
OTHER
COVERAGE.—Such
individual—
‘‘(i) is enrolled in a health benefits
plan under chapter 89 of title 5, United
States Code, or
‘‘(ii) is entitled to receive benefits
under chapter 55 of title 10, United States
Code.
‘‘(4) DETERMINATION OF UNEMPLOYMENT.—For
purposes of paragraph (1), an individual shall be
treated as unemployed during any period—
‘‘(A) for which such individual is receiving
unemployment compensation (as defined in sec-
tion 85(b)), or
‘‘(B) for which such individual is certified
by a State agency (or by any other entity des-
ignated by the Secretary) as otherwise being en-
119
titled to receive unemployment compensation (as
so defined) but for—
‘‘(i) the termination of the period dur-
ing which such compensation was payable,
or
‘‘(ii) an exhaustion of such individ-
ual’s rights to such compensation.
‘‘(d) QUALIFIED HEALTH INSURANCE.—For purposes
of this section, the term ‘qualified health insurance’ means
insurance which constitutes medical care; except that such
term shall not include any insurance if substantially all
of its coverage is of excepted benefits described in section
9832(c).
‘‘(e) COORDINATION WITH ADVANCE PAYMENTS OF
CREDIT.—
‘‘(1) RECAPTURE
OF
EXCESS
ADVANCE
PAY-
MENTS.—If any payment is made by the Secretary
under section 7527 during any calendar year to a
provider of qualified health insurance for an indi-
vidual, then the tax imposed by this chapter for the
individual’s last taxable year beginning in such cal-
endar year shall be increased by the aggregate
amount of such payments.
‘‘(2) RECONCILIATION OF PAYMENTS ADVANCED
AND CREDIT ALLOWED.—Any increase in tax under
120
paragraph (1) shall not be treated as tax imposed by
this chapter for purposes of determining the amount
of any credit (other than the credit allowed by sub-
section (a)) allowable under part IV of subchapter A
of chapter 1.
‘‘(f) SPECIAL RULES.—
‘‘(1) 
COORDINATION
WITH
OTHER
DEDUC-
TIONS.—Amounts taken into account under subsection
(a) shall not be taken into account in determining
any deduction allowed under section 162(l) or 213.
‘‘(2) MSA DISTRIBUTIONS.—Amounts distributed
from an Archer MSA (as defined in section 220(d))
shall not be taken into account under subsection (a).
‘‘(3) DENIAL OF CREDIT TO DEPENDENTS.—No
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which
such individual’s taxable year begins.
‘‘(4) CREDIT TREATED AS REFUNDABLE CRED-
IT.—For purposes of this title, the credit allowed
under this section shall be treated as a credit allow-
able under subpart C of part IV of subchapter A of
chapter 1.
121
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations and other guidance as may be
necessary or appropriate to carry out this section and
section 7527.’’.
(b) INCREASED ACCESS TO HEALTH INSURANCE FOR
INDIVIDUALS ELIGIBLE FOR TAX CREDIT THROUGH USE
OF GUARANTEED ISSUE, QUALIFIED HIGH RISK POOLS,
AND OTHER APPROPRIATE STATE MECHANISMS.—
(1) IN
GENERAL.—Notwithstanding any other
provision of law, in applying section 2741 of the Pub-
lic Health Service Act (42 U.S.C. 300gg–41)) and
any alternative State mechanism under section 2744
of such Act (42 U.S.C.300gg–44)), in determining
who is an eligible individual (as defined in section
2741(b) of such Act) in the case of an individual who
may be covered by insurance for which credit is al-
lowable under section 6429 of the Internal Revenue
Code of 1986 for an eligible coverage month, if the in-
dividual seeks to obtain health insurance coverage
under such section during an eligible coverage month
under such section—
(A) paragraph (1) of such section 2741(b)
shall be applied as if any reference to 18 months
is deemed a reference to 12 months, and
122
(B) paragraphs (4) and (5) of such section
2741(b) shall not apply.
(2) PROMOTION OF STATE HIGH RISK POOLS.—
Title XXVII of the Public Health Service Act is
amended by inserting after section 2744 the following
new section:
‘‘SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.
‘‘(a) SEED GRANTS TO STATES.—The Secretary shall
provide from the funds appropriated under subsection (c)(1)
a grant of up to $1,000,000 to each State that has not cre-
ated a qualified high risk pool as of the date of the enact-
ment of this section for the State’s costs of creation and
initial operation of such a pool.
‘‘(b) MATCHING FUNDS FOR OPERATION OF POOLS.—
‘‘(1) IN GENERAL.—In the case of a State that
has established a qualified high risk pool that restricts
premiums charged under the pool to no more than
150 percent of the premium for applicable standard
risk rates and that offers a choice of two or more cov-
erage options through the pool, from the funds appro-
priated under subsection (c)(2) and allotted to the
State under paragraph (2), the Secretary shall pro-
vide a grant of up to 50 percent of the losses incurred
by the State in connection with the operation of the
pool.
123
‘‘(2) ALLOTMENT.—The amounts appropriated
under subsection (c)(2) for a fiscal year shall be made
available to the States in accordance with a formula
that is based upon the number of uninsured individ-
uals in the States.
‘‘(3) CONSTRUCTION.—Nothing in this subsection
shall be construed as preventing a State from
supplementing the funds made available under this
subsection for the support and operation of qualified
high risk pools.
‘‘(c) FUNDING.—Out of any money in the Treasury of
the United States not otherwise appropriated, there are
appropriated—
‘‘(1) $20,000,000 for fiscal year 2002 to carry
out subsection (a); and
‘‘(2) $40,000,000 for each of fiscal years 2002
and 2003.
Funds appropriated under this subsection for a fiscal year
shall remain available for obligation through the end of the
following fiscal year. Nothing in this section shall be con-
strued as providing a State with an entitlement to a grant
under this section.
‘‘(d) QUALIFIED HIGH RISK POOL AND STATE DE-
FINED.—For purposes of this section, the term ‘qualified
high risk pool’ has the meaning given such term in section
124
2744(c)(2) and the term ‘State’ means any of the 50 States
and the District of Columbia.’’.
(3) CONSTRUCTION.—Nothing in this subsection
shall be construed as affecting the ability of a State
to use mechanisms, described in sections 2741(c) and
2744 of the Public Health Service Act, as an alter-
native to applying the guaranteed availability provi-
sions of section 2741(a) of such Act.
(c) INFORMATION REPORTING.—
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 (relating to information con-
cerning transactions with other persons) is amended
by inserting after section 6050S the following new
section:
‘‘SEC. 6050T. RETURNS RELATING TO DISPLACED WORKER
HEALTH INSURANCE CREDIT.
‘‘(a) REQUIREMENT OF REPORTING.—Every person—
‘‘(1) who, in connection with a trade or business
conducted by such person, receives payments during
any calendar year from any individual for coverage
of such individual or any other individual under
qualified health insurance (as defined in section
6429(d)), and
‘‘(2) who claims a reimbursement for an advance
credit amount,
125
shall, at such time as the Secretary may prescribe, make
the return described in subsection (b) with respect to each
individual from whom such payments were received or for
whom such a reimbursement is claimed.
‘‘(b) FORM AND MANNER OF RETURNS.—A return is
described in this subsection if such return—
‘‘(1) is in such form as the Secretary may pre-
scribe, and
‘‘(2) contains—
‘‘(A) the name, address, and TIN of each
individual referred to in subsection (a),
‘‘(B) the aggregate of the advance credit
amounts provided to such individual and for
which reimbursement is claimed,
‘‘(C) the number of months for which such
advance credit amounts are so provided, and
‘‘(D) such other information as the Sec-
retary may prescribe.
‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—
Every person required to make a return under subsection
(a) shall furnish to each individual whose name is required
to be set forth in such return a written statement showing—
126
‘‘(1) the name and address of the person required
to make such return and the phone number of the in-
formation contact for such person, and
‘‘(2) the information required to be shown on the
return with respect to such individual.
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the year
following the calendar year for which the return under sub-
section (a) is required to be made.
‘‘(d) ADVANCE CREDIT AMOUNT.—For purposes of this
section, the term ‘advance credit amount’ means an amount
for which the person can claim a reimbursement pursuant
to a program established by the Secretary under section
7527.’’.
(2) ASSESSABLE PENALTIES.—
(A) Subparagraph (B) of section 6724(d)(1)
(relating to definitions) is amended by redesig-
nating clauses (xi) through (xvii) as clauses (xii)
through (xviii), respectively, and by inserting
after clause (x) the following new clause:
‘‘(xi) section 6050T (relating to returns
relating to displaced worker health insur-
ance credit),’’.
(B) Paragraph (2) of section 6724(d) is
amended by striking ‘‘or’’ at the end of subpara-
127
graph (Z), by striking the period at the end of
subparagraph (AA) and inserting ‘‘, or’’, and by
adding after subparagraph (AA) the following
new subparagraph:
‘‘(BB) section 6050T (relating to returns re-
lating to displaced worker health insurance cred-
it).’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of
chapter 61 is amended by inserting after the item re-
lating to section 6050S the following new item:
‘‘Sec. 6050T. Returns relating to displaced worker health insurance
credit.’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title 31,
United States Code, is amended by inserting before
the period ‘‘, or from section 6429 of such Code’’.
(2) The table of sections for subchapter B of
chapter 65 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 6429. Displaced worker health insurance credit.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
128
SEC. 702. ADVANCE PAYMENT OF DISPLACED WORKER
HEALTH INSURANCE CREDIT.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 7527. ADVANCE PAYMENT OF DISPLACED WORKER
HEALTH INSURANCE CREDIT.
‘‘(a) GENERAL RULE.—The Secretary shall establish
a program for making payments on behalf of eligible indi-
viduals to providers of health insurance for such individ-
uals.
‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this sec-
tion, the term ‘eligible individual’ means any individual
for whom a qualified health insurance credit eligibility cer-
tificate is in effect.
‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI-
BILITY CERTIFICATE.—For purposes of this section, a
qualified health insurance credit eligibility certificate is a
statement certified by a State agency (or by any other enti-
ty designated by the Secretary) which—
‘‘(1) certifies that the individual was unem-
ployed (within the meaning of section 6429) as of the
first day of any month, and
‘‘(2) provides such other information as the Sec-
retary may require for purposes of this section.’’.
129
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 77 is amended by adding at the end the following
new item:
‘‘Sec. 7527. Advance payment of displaced worker health insurance
credit.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
TITLE VIII—EMPLOYMENT AND
TRAINING ASSISTANCE AND
TEMPORARY 
HEALTH 
CARE
COVERAGE ASSISTANCE
SEC. 801. EMPLOYMENT AND TRAINING ASSISTANCE AND
TEMPORARY HEALTH CARE COVERAGE AS-
SISTANCE.
(a) IN GENERAL.—Section 173(a) of the Workforce In-
vestment Act of 1998 (29 U.S.C. 2918(a)) is amended—
(1) in paragraph (2), by striking ‘‘and’’ at the
end;
(2) in paragraph (3), by striking the period at
the end and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(4) to the Governor of any State or outlying
area who applies for assistance under subsection (f)
to provide employment and training assistance and
temporary health care coverage assistance to workers
130
affected by major economic dislocations, such as plant
closures, mass layoffs, or multiple layoffs, including
those dislocations caused by the terrorist attacks of
September 11, 2001.’’.
(b) REQUIREMENTS.—Section 173 of the Workforce In-
vestment Act of 1998 (29 U.S.C. 2918) is amended by add-
ing at the end the following:
‘‘(f) ADDITIONAL RELIEF FOR MAJOR ECONOMIC DIS-
LOCATIONS.—
‘‘(1) GRANT RECIPIENT ELIGIBILITY.—
‘‘(A) IN GENERAL.—To be eligible to receive
a grant under subsection (a)(4), a Governor shall
submit an application, for assistance described
in subparagraph (B), to the Secretary at such
time, in such manner, and containing such in-
formation as the Secretary may require.
‘‘(B) TYPES OF ASSISTANCE.—
‘‘(i) 
IN
GENERAL.—Assistance 
de-
scribed in this subparagraph is—
‘‘(I) employment and training as-
sistance, including employment and
training activities described in section
134; and
131
‘‘(II) temporary health care cov-
erage assistance described in para-
graph (4).
‘‘(ii) MINIMUM ALLOCATION TO TEM-
PORARY HEALTH CARE COVERAGE ASSIST-
ANCE.—Not less than 30 percent of the cost
of assistance requested in any application
submitted under this subsection shall consist
of the cost for temporary health care cov-
erage assistance described in paragraph (4).
‘‘(iii) ENCOURAGEMENT
OF
CERTAIN
TYPES
OF
HEALTH
CARE
COVERAGE.—In
publishing requirements for applications
under this subsection, the Secretary shall
encourage the use of private health coverage
alternatives.
‘‘(C) MINIMUM AWARD REQUIREMENT FOR
ELIGIBLE STATES AND OUTLYING AREAS.—
‘‘(i) REQUIREMENTS.—In any case in
which the requirements of this section are
met in connection with one or more appli-
cations of the Governor of any State or out-
lying area for assistance described in sub-
paragraph (B), the Governor—
132
‘‘(I) shall be awarded at least 1
grant under subsection (a)(4) pursuant
to such applications, and
‘‘(II) except as provided in clause
(ii), shall be awarded not less than
$5,000,000 in total grants awarded
under (a)(4).
‘‘(ii) EXCEPTION TO MINIMUM GRANT
REQUIREMENTS.—The 
Secretary 
may
award to a Governor a total amount less
than the minimum total amount specified
in clause (i)(II), as appropriate, if the
Governor—
‘‘(I) requests less than such min-
imum total amount, or
‘‘(II) fails to demonstrate to the
Secretary that there are a sufficient
number of eligible recipients to justify
the awarding of grants in such min-
imum total amount.
‘‘(2) STATE
ADMINISTRATION.—The Governor
may designate one or more local workforce investment
boards or other entities with the capability to respond
to the circumstances relating to the particular closure,
133
layoff, or other dislocation to administer the grant
under subsection (a)(4).
‘‘(3) PARTICIPANT ELIGIBILITY.—An individual
shall be eligible to receive assistance described in
paragraph (1)(B) under a grant awarded under sub-
section (a)(4) if such individual is a dislocated work-
er and the Governor has certified that a major eco-
nomic dislocation, such as a plant closure, mass lay-
off, or multiple layoff, including a dislocation caused
by the terrorist attacks of September 11, 2001, con-
tributed importantly to the dislocation.
‘‘(4) TEMPORARY HEALTH CARE COVERAGE AS-
SISTANCE.—
‘‘(A) IN GENERAL.—Temporary health care
coverage assistance described in this paragraph
consists of health care coverage premium assist-
ance provided to qualified individuals under this
paragraph with respect to premiums for coverage
for themselves, for their spouses, for their depend-
ents, or for any combination thereof, other than
premiums for excluded health insurance cov-
erage.
‘‘(B) QUALIFIED
INDIVIDUALS.—For pur-
poses of this paragraph—
134
‘‘(i) IN
GENERAL.—Subject to clause
(ii), a qualified individual is an individual
who—
‘‘(I) is a dislocated worker re-
ferred to in paragraph (3) with respect
to whom the Governor has made the
certification regarding the dislocation
as required under such paragraph, and
‘‘(II) is receiving or has received
employment and training assistance as
described in paragraph (1)(B)(i)(I).
‘‘(ii) 
LIMITATION.—An 
individual
shall not be treated as a qualified indi-
vidual if—
‘‘(I) such individual is eligible for
coverage under the program under title
XIX of the Social Security Act appli-
cable in the State or outlying area, or
‘‘(II) such individual is eligible
for coverage under the program under
title XXI of such Act applicable in the
State or outlying area,
unless such eligibility is effective solely in
connection with eligibility for health care
coverage premium assistance under a pro-