II
Calendar No. 308
107TH CONGRESS
2D SESSION
H. R. 3529
IN THE SENATE OF THE UNITED STATES
DECEMBER 20 (legislative day, DECEMBER 18), 2001
Received and read the first time
JANUARY 23, 2002
Read the second time and placed on the calendar
AN ACT
To provide tax incentives for economic recovery and
assistance to displaced workers.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
HR 3529 PCS
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Economic Security and Worker Assistance Act of 2001’’.
(b) REFERENCES TO INTERNAL REVENUE CODE OF
1986.—Except as otherwise expressly provided, whenever
in this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
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
September 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 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.
HR 3529 PCS
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 reserva-
tions.
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 in-
creases for fiscal year 2002.
Sec. 322. 1-year extension of contingency fund under the TANF program.
TITLE IV—TAX BENEFITS FOR AREA OF NEW YORK CITY
DAMAGED IN TERRORIST ATTACKS ON SEPTEMBER 11, 2001
Sec. 401. Tax benefits for area of New York City damaged in terrorist attacks
on September 11, 2001.
TITLE V—RELIEF PROVISIONS FOR VICTIMS OF TERRORIST AT-
TACKS, PRESIDENTIALLY DECLARED DISASTERS, AND CERTAIN
OTHER DISASTERS
Subtitle A—Relief Provisions for Victims of Terrorist Attacks
Sec. 501. Income taxes of victims of terrorist attacks.
Sec. 502. Exclusion of certain death benefits.
Sec. 503. Estate tax reduction.
Sec. 504. Payments by charitable organizations treated as exempt payments.
Sec. 505. Exclusion of certain cancellations of indebtedness.
Subtitle B—Other Relief Provisions
Sec. 511. Exclusion for disaster relief payments.
Sec. 512. Authority to postpone certain deadlines and required actions.
Sec. 513. Application of certain provisions to terroristic or military actions.
Sec. 514. Clarification of due date for airline excise tax deposits.
Sec. 515. Treatment of certain structured settlement payments.
Sec. 516. Personal exemption deduction for certain disability trusts.
Sec. 517. Disclosure of tax information in terrorism and national security in-
vestigations.
TITLE VI—MISCELLANEOUS AND TECHNICAL PROVISIONS
Subtitle A—General Miscellaneous Provisions
Sec. 601. Allowance of electronic 1099’s.
Sec. 602. Excluded cancellation of indebtedness income of S corporation not to
result in adjustment to basis of stock of shareholders.
Sec. 603. Limitation on use of nonaccrual experience method of accounting.
Sec. 604. Exclusion for foster care payments to apply to payments by qualified
placement agencies.
Sec. 605. Interest rate range for additional funding requirements.
Sec. 606. Adjusted gross income determined by taking into account certain ex-
penses of elementary and secondary school teachers.
Subtitle B—Technical Corrections
HR 3529 PCS
Sec. 611. Amendments related to Economic Growth and Tax Relief Reconcili-
ation Act of 2001.
Sec. 612. Amendments related to Community Renewal Tax Relief Act of 2000.
Sec. 613. Amendments related to the Tax Relief Extension Act of 1999.
Sec. 614. Amendments related to the Taxpayer Relief Act of 1997.
Sec. 615. Amendment related to the Balanced Budget Act of 1997.
Sec. 616. Other technical corrections.
Sec. 617. Clerical amendments.
Sec. 618. Additional corrections.
TITLE VII—UNEMPLOYMENT ASSISTANCE
Sec. 701. Short title.
Sec. 702. Federal-State agreements.
Sec. 703. Temporary extended unemployment compensation account.
Sec. 704. Payments to States having agreements for the payment of temporary
extended unemployment compensation.
Sec. 705. Financing provisions.
Sec. 706. Fraud and overpayments.
Sec. 707. Definitions.
Sec. 708. Applicability.
Sec. 709. Special Reed Act transfer in fiscal year 2002.
TITLE VIII—DISPLACED WORKER HEALTH INSURANCE CREDIT
Sec. 801. Displaced worker health insurance credit.
Sec. 802. Advance payment of displaced worker health insurance credit.
TITLE IX—EMPLOYMENT AND TRAINING ASSISTANCE AND
TEMPORARY HEALTH CARE COVERAGE ASSISTANCE
Sec. 901. Employment and training assistance and temporary health care cov-
erage assistance.
TITLE X—TEMPORARY STATE HEALTH CARE ASSISTANCE
Sec. 1001. Temporary State health care assistance.
TITLE XI—SOCIAL SECURITY HELD HARMLESS; BUDGETARY
TREATMENT OF ACT
Sec. 1101. No impact on social security trust funds.
Sec. 1102. Emergency designation.
TITLE I—INDIVIDUAL
PROVISIONS
SEC. 101. SUPPLEMENTAL STIMULUS PAYMENTS.
(a) IN GENERAL.—Section 6428 (relating to accel-
eration of 10 percent income tax rate bracket benefit for
HR 3529 PCS
2001) is amended by adding at the end the following new
subsection:
‘‘(f) SUPPLEMENTAL STIMULUS PAYMENTS.—
‘‘(1) IN GENERAL.—Each individual who was
an eligible individual for such individual’s first tax-
able 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 supplemental 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 ap-
plies, over
‘‘(B) 
the 
taxpayer’s 
advance 
refund
amount under subsection (e).
HR 3529 PCS
‘‘(3) TIMING
OF
PAYMENTS.—In the case of
any overpayment attributable to this subsection, the
Secretary shall, subject to the provisions of this title,
refund or credit such overpayment as rapidly as pos-
sible.
‘‘(4) NO INTEREST.—No interest shall be al-
lowed on any overpayment attributable to this sub-
section.’’
(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)’’.
(3) Paragraph (3) of section 6428(e) is amend-
ed by inserting before the period ‘‘(or, if earlier, the
date of the enactment of the Economic Security and
Worker Assistance Act of 2001)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
HR 3529 PCS
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 tax-
able years beginning in 2001, 2002, 2003, and
2004)’’ and inserting ‘‘($49,000 in the case of tax-
able years beginning in 2001, $52,200 in the case of
taxable years beginning 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 tax-
able years beginning in 2001, 2002, 2003, and
2004)’’ and inserting ‘‘($35,750 in the case of tax-
able years beginning in 2001, $37,350 in the case of
taxable years beginning in 2002 or 2003, and
$36,600 in the case of taxable years beginning in
2004)’’.
HR 3529 PCS
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 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 Rev-
enue 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 acceler-
ated cost recovery system) is amended by adding at the
end the following new subsection:
‘‘(k) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY
ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE
SEPTEMBER 11, 2004.—
‘‘(1) ADDITIONAL ALLOWANCE.—In the case of
any qualified property—
‘‘(A) the depreciation deduction provided
by section 167(a) for the taxable year in which
such property is placed in service shall include
an allowance equal to 30 percent of the ad-
justed basis of the qualified property, and
HR 3529 PCS
‘‘(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-
HR 3529 PCS
‘‘(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
attributable to manufacture, construction,
or production before September 11, 2004.
‘‘(iii) TRANSPORTATION PROPERTY.—
For purposes of this subparagraph, the
term ‘transportation property’ means tan-
gible personal property used in the trade
or business 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
HR 3529 PCS
‘‘(II) after application of section
280F(b) (relating to listed property
with limited business use).
‘‘(ii) ELECTION OUT.—If a taxpayer
makes an election under this clause with
respect to any class of property for any
taxable year, this subsection shall not
apply to all property in such class placed
in service during such taxable year.
‘‘(iii) QUALIFIED
LEASEHOLD
IM-
PROVEMENT PROPERTY.—The term ‘quali-
fied property’ shall not include any quali-
fied leasehold improvement property (as
defined in section 168(e)(6)).
‘‘(D) SPECIAL RULES.—
‘‘(i) 
SELF-CONSTRUCTED
PROP-
ERTY.—In the case of a taxpayer manufac-
turing, constructing, or producing property
for the taxpayer’s own use, the require-
ments of clause (iii) of subparagraph (A)
shall be treated as met if the taxpayer be-
gins manufacturing, constructing, or pro-
ducing the property after September 10,
2001, and before September 11, 2004.
HR 3529 PCS
‘‘(ii) SALE-LEASEBACKS.—For pur-
poses 
of 
subparagraph 
(A)(ii), 
if
property—
‘‘(I) is originally placed in service
after September 10, 2001, by a per-
son, and
‘‘(II) sold and leased back by
such person within 3 months after the
date such property was originally
placed in service,
such property shall be treated as originally
placed in service not earlier than the date
on which such property is used under the
leaseback referred to in subclause (II).
‘‘(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 re-
HR 3529 PCS
capture 
amount 
under 
section
280F(b)(2).’’
(b) ALLOWANCE AGAINST ALTERNATIVE MINIMUM
TAX.—
(1) IN GENERAL.—Section 56(a)(1)(A) (relat-
ing to depreciation adjustment for alternative min-
imum tax) is amended by adding at the end the fol-
lowing new clause:
‘‘(iii) ADDITIONAL
ALLOWANCE
FOR
CERTAIN PROPERTY ACQUIRED AFTER SEP-
TEMBER
10, 
2001, 
AND
BEFORE
SEP-
TEMBER
11, 2004.—The deduction under
section 168(k) shall be allowed.’’
(2) CONFORMING AMENDMENT.—Clause (i) of
section 56(a)(1)(A) is amended by striking ‘‘clause
(ii)’’ both places it appears and inserting ‘‘clauses
(ii) and (iii)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
September 10, 2001, in taxable years ending after such
date.
HR 3529 PCS
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 .........................................................
$35,000
2004 or thereafter .................................................
$25,000.’’
(b) TEMPORARY INCREASE IN AMOUNT OF PROP-
ERTY TRIGGERING PHASEOUT OF MAXIMUM BENEFIT.—
Paragraph (2) of section 179(b) is amended by inserting
before the period ‘‘($325,000 in the case of taxable years
beginning during 2002 or 2003)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 203. ALTERNATIVE MINIMUM TAX REFORM.
(a) REPEAL OF PREFERENCE FOR DEPRECIATION.—
(1) Paragraph (1) of section 56(a) is amended
by adding at the end the following new subpara-
graph:
‘‘(E) 
TERMINATION.—This 
paragraph
shall not apply to property placed in service in
taxable years beginning after December 31,
2001.’’
HR 3529 PCS
(2) Paragraph (5) of section 56(a) is amended
by adding at the end: ‘‘This paragraph shall not
apply to property placed in service in taxable years
beginning after December 31, 2001.’’
(b) REPEAL OF 90 PERCENT LIMITATION ON FOR-
EIGN TAX CREDITS.—
(1) Subsection (a) of section 59 is amended by
striking paragraph (2) and by redesignating para-
graphs (3) and (4) as paragraphs (2) and (3), re-
spectively.
(2) Subclause (II) of section 53(d)(1)(B)(i) is
amended by striking ‘‘and if section 59(a)(2) did not
apply’’.
(c) REPEAL OF 90 PERCENT LIMITATION ON NET
OPERATING LOSS DEDUCTION.—Subparagraph (A) of
section 56(d)(1), as amended by section 204, is amended
to read as follows:
‘‘(A) the amount of such deduction shall
not exceed alternative minimum taxable income
determined without regard to such deduction,
and’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
HR 3529 PCS
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 fol-
lowing new subsection:
‘‘(j) ELECTION TO DISREGARD 5-YEAR CARRYBACK
FOR CERTAIN NET OPERATING LOSSES.—Any taxpayer
entitled 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.’’
HR 3529 PCS
(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 alter-
native 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 deduc-
tion attributable to net operating
losses (other than the deduction at-
tributable 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 deduc-
tion attributable to carrybacks of net
operating losses for taxable years end-
ing during 2001 or 2002, or
‘‘(II) alternative minimum tax-
able income determined without re-
gard to such deduction reduced by the
HR 3529 PCS
amount determined under clause (i),
and’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to taxable years begin-
ning 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
amended 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 add-
ing at the end the following new paragraph:
‘‘(6) QUALIFIED
LEASEHOLD
IMPROVEMENT
PROPERTY.—
HR 3529 PCS
‘‘(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 por-
tion,
‘‘(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
HR 3529 PCS
‘‘(iv) the internal structural frame-
work of the building.
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) COMMITMENT TO LEASE TREAT-
ED
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 consid-
ered a lease. For purposes of the preceding
sentence, 
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
section 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.—