943
HR 4 PP
ties owned by the mutual or coopera-
tive electric company (or its members).
‘‘(III) The delivery or sale of elec-
tric energy generated by a generation
facility meets the open access require-
ments of this subclause only if such fa-
cility is directly connected to distribu-
tion facilities owned by the mutual or
cooperative electric company (or its
members) which owns the generation
facility, and such distribution facilities
meet the open access requirements of
subclause (II).
‘‘(ii) Clause (i)(I) shall apply in the
case of a voluntarily filed tariff only if the
mutual or cooperative electric company files
a report with FERC within 90 days after
the date of the enactment of this subpara-
graph relating to whether or not such com-
pany will join a regional transmission or-
ganization.
‘‘(iii) A mutual or cooperative electric
company shall be treated as meeting the
open access requirements of clause (i)(I) if
944
HR 4 PP
a regional transmission organization con-
trols the transmission facilities.
‘‘(iv) References to FERC in this sub-
paragraph shall be treated as including ref-
erences to the Public Utility Commission of
Texas with respect to any ERCOT utility
(as defined in section 212(k)(2)(B) of the
Federal 
Power 
Act 
(16 
U.S.C.
824k(k)(2)(B))) or references to the Rural
Utilities Service with respect to any other
facility not subject to FERC jurisdiction.
‘‘(v) 
For 
purposes 
of 
this
subparagraph—
‘‘(I) The term ‘transmission facil-
ity’ means an electric output facility
(other than a generation facility) that
operates at an electric voltage of 69 kV
or greater. To the extent provided in
regulations, such term includes any
output facility that FERC determines
is a transmission facility under stand-
ards applied by FERC under the Fed-
eral Power Act (as in effect on the date
of the enactment of the Energy Tax In-
centives Act of 2002).
945
HR 4 PP
‘‘(II) The term ‘regional trans-
mission 
organization’ 
includes 
an
independent system operator.
‘‘(III) The term ‘FERC’ means
the Federal Energy Regulatory Com-
mission.
‘‘(F) The term ‘nuclear decommissioning
transaction’ means—
‘‘(i) any transfer into a trust, fund, or
instrument established to pay any nuclear
decommissioning costs if the transfer is in
connection with the transfer of the mutual
or cooperative electric company’s interest in
a nuclear power plant or nuclear power
plant unit,
‘‘(ii) any distribution from any trust,
fund, or instrument established to pay any
nuclear decommissioning costs, or
‘‘(iii) any earnings from any trust,
fund, or instrument established to pay any
nuclear decommissioning costs.
‘‘(G) The term ‘asset exchange or conversion
transaction’ means any voluntary exchange or
involuntary conversion of any property related
to generating, transmitting, distributing, or sell-
946
HR 4 PP
ing electric energy by a mutual or cooperative
electric company, the gain from which qualifies
for deferred recognition under section 1031 or
1033, but only if the replacement property ac-
quired by such company pursuant to such sec-
tion constitutes property which is used, or to be
used, for—
‘‘(i) generating, transmitting, distrib-
uting, or selling electric energy, or
‘‘(ii) producing, transmitting, distrib-
uting, or selling natural gas.’’.
(b) TREATMENT OF INCOME FROM LOAD LOSS TRANS-
ACTIONS.—Paragraph (12) of section 501(c), as amended
by subsection (a)(2), is amended by adding after subpara-
graph (G) the following new subparagraph:
‘‘(H)(i) In the case of a mutual or coopera-
tive electric company described in this para-
graph or an organization described in section
1381(a)(2)(C), income received or accrued from a
load loss transaction shall be treated as an
amount collected from members for the sole pur-
pose of meeting losses and expenses.
‘‘(ii) For purposes of clause (i), the term
‘load loss transaction’ means any wholesale or
retail sale of electric energy (other than to mem-
947
HR 4 PP
bers) to the extent that the aggregate sales during
the recovery period does not exceed the load loss
mitigation sales limit for such period.
‘‘(iii) For purposes of clause (ii), the load
loss mitigation sales limit for the recovery period
is the sum of the annual load losses for each year
of such period.
‘‘(iv) For purposes of clause (iii), a mutual
or cooperative electric company’s annual load
loss for each year of the recovery period is the
amount (if any) by which—
‘‘(I) the megawatt hours of electric en-
ergy sold during such year to members of
such electric company are less than
‘‘(II) the megawatt hours of electric en-
ergy sold during the base year to such mem-
bers.
‘‘(v) For purposes of clause (iv)(II), the
term ‘base year’ means—
‘‘(I) the calendar year preceding the
start-up year, or
‘‘(II) at the election of the electric com-
pany, the second or third calendar years
preceding the start-up year.
949
HR 4 PP
from members for the sole purpose of meeting
losses and expenses.’’.
(c) EXCEPTION FROM UNRELATED BUSINESS TAX-
ABLE INCOME.—Subsection (b) of section 512 (relating to
modifications) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(18) TREATMENT OF MUTUAL OR COOPERATIVE
ELECTRIC COMPANIES.—In the case of a mutual or
cooperative electric company described in section
501(c)(12), there shall be excluded income which is
treated as member income under subparagraph (H)
thereof.’’.
(d) CROSS REFERENCE.—Section 1381 is amended by
adding at the end the following new subsection:
‘‘(c) CROSS REFERENCE.—
‘‘For treatment of income from load loss trans-
actions of organizations described in subsection
(a)(2)(C), see section 501(c)(12)(H).’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 2404. SALES OR DISPOSITIONS TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION OR
STATE ELECTRIC RESTRUCTURING POLICY.
(a) IN GENERAL.—Section 451 (relating to general
rule for taxable year of inclusion) is amended by adding
at the end the following new subsection:
950
HR 4 PP
‘‘(i) SPECIAL RULE FOR SALES OR DISPOSITIONS TO
IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION
OR STATE ELECTRIC RESTRUCTURING POLICY.—
‘‘(1) IN GENERAL.—For purposes of this subtitle,
if a taxpayer elects the application of this subsection
to a qualifying electric transmission transaction in
any taxable year—
‘‘(A) any ordinary income derived from
such transaction which would be required to be
recognized under section 1245 or 1250 for such
taxable year (determined without regard to this
subsection), and
‘‘(B) any income derived from such trans-
action in excess of such ordinary income which
is required to be included in gross income for
such taxable year,
shall be so recognized and included ratably over the
8-taxable year period beginning with such taxable
year.
‘‘(2) 
QUALIFYING
ELECTRIC
TRANSMISSION
TRANSACTION.—For purposes of this subsection, the
term ‘qualifying electric transmission transaction’
means any sale or other disposition before January 1,
2007, of—
951
HR 4 PP
‘‘(A) property used by the taxpayer in the
trade or business of providing electric trans-
mission services, or
‘‘(B) any stock or partnership interest in a
corporation or partnership, as the case may be,
whose principal trade or business consists of pro-
viding electric transmission services,
but only if such sale or disposition is to an inde-
pendent transmission company.
‘‘(3) INDEPENDENT TRANSMISSION COMPANY.—
For purposes of this subsection, the term ‘independent
transmission company’ means—
‘‘(A) a regional transmission organization
approved by the Federal Energy Regulatory
Commission,
‘‘(B) a person—
‘‘(i) who the Federal Energy Regu-
latory Commission determines in its au-
thorization of the transaction under section
203 of the Federal Power Act (16 U.S.C.
824b) is not a market participant within
the meaning of such Commission’s rules ap-
plicable to regional transmission organiza-
tions, and
952
HR 4 PP
‘‘(ii) whose transmission facilities to
which the election under this subsection ap-
plies are under the operational control of a
Federal Energy Regulatory Commission-ap-
proved regional transmission organization
before the close of the period specified in
such authorization, but not later than the
close of the period applicable under para-
graph (1), or
‘‘(C) in the case of facilities subject to the
exclusive jurisdiction of the Public Utility Com-
mission of Texas, a person which is approved by
that Commission as consistent with Texas State
law regarding an independent transmission or-
ganization.
‘‘(4) ELECTION.—An election under paragraph
(1), once made, shall be irrevocable.
‘‘(5) NONAPPLICATION OF INSTALLMENT SALES
TREATMENT.—Section 453 shall not apply to any
qualifying electric transmission transaction with re-
spect to which an election to apply this subsection is
made.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to transactions occurring after the date
of the enactment of this Act.
953
HR 4 PP
SEC. 2405. APPLICATION OF TEMPORARY REGULATIONS TO
CERTAIN OUTPUT CONTRACTS.
In the application of section 1–141–7(c)(4) of the
Treasury Temporary Regulations to output contracts en-
tered into after February 22, 1998, with respect to an issuer
participating in open access with respect to the issuer’s
transmission facilities, an output contract in existence on
or before such date that is amended after such date shall
be treated as a contract entered into after such date only
if the amendment increases the amount of output sold under
such contract by extending the term of the contract or in-
creasing the amount of output sold, but such treatment as
a contract entered into after such date shall begin on the
effective date of the amendment and shall apply only with
respect to the increased output to be provided under such
contract.
SEC. 2406. TREATMENT OF CERTAIN DEVELOPMENT IN-
COME OF COOPERATIVES.
(a) IN
GENERAL.—Subparagraph (C) of section
501(c)(12), as amended by this Act, is amended by striking
‘‘or’’ at the end of clause (iv), by striking the period at the
end of clause (v) and insert ‘‘, or’’, and by adding at the
end the following new clause:
‘‘(vi) from the receipt before January
1, 2007, of any money, property, capital, or
any other contribution in aid of construc-
954
HR 4 PP
tion or connection charge intended to facili-
tate the provision of electric service for the
purpose of developing qualified fuels from
nonconventional sources (within the mean-
ing of section 29).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
TITLE XXV—ADDITIONAL
PROVISIONS
SEC. 2501. EXTENSION OF ACCELERATED DEPRECIATION
AND WAGE CREDIT BENEFITS ON INDIAN RES-
ERVATIONS.
(a) SPECIAL RECOVERY PERIOD FOR PROPERTY ON
INDIAN RESERVATIONS.—Section 168(j)(8) (relating to ter-
mination), as amended by section 613(b) of the Job Cre-
ation and Worker Assistance Act of 2002, is amended by
striking ‘‘2004’’ and inserting ‘‘2005’’.
(b) INDIAN EMPLOYMENT CREDIT.—Section 45A(f)
(relating to termination), as amended by section 613(a) of
the Job Creation and Worker Assistance Act of 2002, is
amended by striking ‘‘2004’’ and inserting ‘‘2005’’.
955
HR 4 PP
SEC. 2502. STUDY OF EFFECTIVENESS OF CERTAIN PROVI-
SIONS BY GAO.
(a) STUDY.—The Comptroller General of the United
States shall undertake an ongoing analysis of—
(1) the effectiveness of the alternative motor vehi-
cles and fuel incentives provisions under title II and
the conservation and energy efficiency provisions
under title III, and
(2) the recipients of the tax benefits contained in
such provisions, including an identification of such
recipients by income and other appropriate measure-
ments.
Such analysis shall quantify the effectiveness of such provi-
sions by examining and comparing the Federal Govern-
ment’s forgone revenue to the aggregate amount of energy
actually conserved and tangible environmental benefits
gained as a result of such provisions.
(b) REPORTS.—The Comptroller General of the United
States shall report the analysis required under subsection
(a) to Congress not later than December 31, 2002, and an-
nually thereafter.
SEC. 2503. CREDIT FOR PRODUCTION OF ALASKA NATURAL
GAS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits), as
956
HR 4 PP
amended by this Act, is amended by adding at the end the
following new section:
‘‘SEC. 45M. ALASKA NATURAL GAS.
‘‘(a) IN GENERAL.—For purposes of section 38, the
Alaska natural gas credit of any taxpayer for any taxable
year is the credit amount per 1,000,000 Btu of Alaska nat-
ural gas entering any intake or tie-in point which was de-
rived from an area of the State of Alaska lying north of
64 degrees North latitude, which is attributable to the tax-
payer and sold by or on behalf of the taxpayer to an unre-
lated person during such taxable year (within the meaning
of section 45).
‘‘(b) CREDIT AMOUNT.—For purposes of this section—
‘‘(1) IN
GENERAL.—The credit amount per
1,000,000 Btu of Alaska natural gas entering any in-
take or tie-in point which was derived from an area
of the State of Alaska lying north of 64 degrees North
latitude (determined in United States dollars), is the
excess of—
‘‘(A) $3.25, over
‘‘(B) the average monthly price at the
AECO C Hub in Alberta, Canada, for Alaska
natural gas for the month in which occurs the
date of such entering.
957
HR 4 PP
‘‘(2) INFLATION
ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year after
the first calendar year ending after the date described
in subsection (g)(1), the dollar amount contained in
paragraph (1)(A) shall be increased to an amount
equal to such dollar amount multiplied by the infla-
tion adjustment factor for such calendar year (deter-
mined under section 43(b)(3)(B) by substituting ‘the
calendar year ending before the date described in sec-
tion 45M(g)(1)’ for ‘1990’).
‘‘(c) ALASKA NATURAL GAS.—For purposes of this sec-
tion, the term ‘Alaska natural gas’ means natural gas enter-
ing any intake or tie-in point which was derived from an
area of the State of Alaska lying north of 64 degrees North
latitude produced in compliance with the applicable State
and Federal pollution prevention, control, and permit re-
quirements from the area generally known as the North
Slope of Alaska (including the continental shelf thereof
within the meaning of section 638(l)), determined without
regard to the area of the Alaska National Wildlife Refuge
(including the continental shelf thereof within the meaning
of section 638(l)).
‘‘(d) RECAPTURE.—
‘‘(1) 
IN
GENERAL.—With 
respect 
to 
each
1,000,000 Btu of Alaska natural gas entering any in-
958
HR 4 PP
take or tie-in point which was derived from an area
of the State of Alaska lying north of 64 degrees North
latitude after the date which is 3 years after the date
described in subsection (g)(1), if the average monthly
price described in subsection (b)(1)(B) exceeds 150
percent of the amount described in subsection
(b)(1)(A) for the month in which occurs the date of
such entering, the taxpayer’s tax under this chapter
for the taxable year shall be increased by an amount
equal to the lesser of—
‘‘(A) such excess, or
‘‘(B) the aggregate decrease in the credits
allowed under section 38 for all prior taxable
years which would have resulted if the Alaska
natural gas credit received by the taxpayer for
such years had been zero.
‘‘(2) SPECIAL RULES.—
‘‘(A) TAX BENEFIT RULE.—The tax for the
taxable year shall be increased under paragraph
(1) only with respect to credits allowed by reason
of this section which were used to reduce tax li-
ability. In the case of credits not so used to re-
duce tax liability, the carryforwards and
carrybacks under section 39 shall be appro-
priately adjusted.
959
HR 4 PP
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for pur-
poses of determining the amount of any credit
under this chapter or for purposes of section 55.
‘‘(e) APPLICATION OF RULES.—For purposes of this
section, rules similar to the rules of paragraphs (3), (4),
and (5) of section 45(d) shall apply.
‘‘(f) NO DOUBLE BENEFIT.—The amount of any de-
duction or other credit allowable under this chapter for any
fuel taken into account in computing the amount of the
credit determined under subsection (a) shall be reduced by
the amount of such credit attributable to such fuel.
‘‘(g) APPLICATION OF SECTION.—This section shall
apply to Alaska natural gas entering any intake or tie-in
point which was derived from an area of the State of Alaska
lying north of 64 degrees North latitude for the period—
‘‘(1) beginning with the later of—
‘‘(A) January 1, 2010, or
‘‘(B) the initial date for the interstate
transportation of such Alaska natural gas, and
‘‘(2) except with respect to subsection (d), ending
with the date which is 15 years after the date de-
scribed in paragraph (1).’’.
960
HR 4 PP
(b) CREDIT TREATED AS BUSINESS CREDIT.—Section
38(b), as amended by this Act, is amended by striking
‘‘plus’’ at the end of paragraph (22), by striking the period
at the end of paragraph (23) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
‘‘(24) The Alaska natural gas credit determined
under section 45M(a).’’.
(c) ALLOWING CREDIT AGAINST ENTIRE REGULAR
TAX AND MINIMUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
(relating to limitation based on amount of tax), as
amended by this Act, is amended by redesignating
paragraph (5) as paragraph (6) and by inserting
after paragraph (4) the following new paragraph:
‘‘(5) SPECIAL RULES FOR ALASKA NATURAL GAS
CREDIT.—
‘‘(A) IN GENERAL.—In the case of the Alas-
ka natural gas credit—
‘‘(i) this section and section 39 shall be
applied separately with respect to the cred-
it, and
‘‘(ii) in applying paragraph (1) to the
credit—
961
HR 4 PP
‘‘(I) the amounts in subpara-
graphs (A) and (B) thereof 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 Alaska nat-
ural gas credit).
‘‘(B) ALASKA NATURAL GAS CREDIT.—For
purposes of this subsection, the term ‘Alaska nat-
ural gas credit’ means the credit allowable under
subsection (a) by reason of section 45M(a).’’.
(2) CONFORMING AMENDMENTS.—Subclause (II)
of section 38(c)(2)(A)(ii), as amended by this Act,
subclause (II) of section 38(c)(3)(A)(ii), as amended
by 
this 
Act, 
and 
subclause 
(II) 
of 
section
38(c)(4)(A)(ii), as added by this Act, are each amend-
ed by inserting ‘‘or the Alaska natural gas credit’’
after ‘‘producer credit’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by adding at the end the
following new item:
‘‘Sec. 45M. Alaska natural gas.’’.
962
HR 4 PP
SEC. 2504. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-
FREE SALES ENTERPRISES.
(a) PROHIBITION.—Section 555(b) of the Tariff Act of
1930 (19 U.S.C. 1555(b)) is amended—
(1) by redesignating paragraphs (6) through (8)
as paragraphs (7) through (9), respectively; and
(2) by inserting after paragraph (5) the fol-
lowing:
‘‘(6) Any gasoline or diesel fuel sold at a duty-
free sales enterprise shall be considered to be entered
for consumption into the customs territory of the
United States.’’.
(b) CONSTRUCTION.—The amendments made by this
section shall not be construed to create any inference with
respect to the interpretation of any provision of law as such
provision was in effect on the day before the date of enact-
ment of this Act.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of enactment of this Act.
SEC. 2505. TREATMENT OF DAIRY PROPERTY.
(a) QUALIFIED DISPOSITION
OF DAIRY PROPERTY
TREATED AS INVOLUNTARY CONVERSION.—
(1) IN GENERAL.—Section 1033 (relating to in-
voluntary conversions) is amended by designating
subsection (k) as subsection (l) and inserting after
subsection (j) the following new subsection:
963
HR 4 PP
‘‘(k) QUALIFIED DISPOSITION TO IMPLEMENT BOVINE
TUBERCULOSIS ERADICATION PROGRAM.—
‘‘(1) IN GENERAL.—For purposes of this subtitle,
if a taxpayer elects the application of this subsection
to a qualified disposition:
‘‘(A) TREATMENT AS INVOLUNTARY CONVER-
SION.—Such disposition shall be treated as an
involuntary conversion to which this section ap-
plies.
‘‘(B) MODIFICATION OF SIMILAR PROPERTY
REQUIREMENT.—Property to be held by the tax-
payer either for productive use in a trade or
business or for investment shall be treated as
property similar or related in service or use to
the property disposed of.
‘‘(C) EXTENSION OF PERIOD FOR REPLAC-
ING PROPERTY.—Subsection (a)(2)(B)(i) shall be
applied by substituting ‘4 years’ for ‘2 years’.
‘‘(D) WAIVER OF UNRELATED PERSON RE-
QUIREMENT.—Subsection (i) (relating to replace-
ment property must be acquired from unrelated
person in certain cases) shall not apply.
‘‘(E) EXPANDED CAPITAL GAIN FOR CATTLE
AND
HORSES.—Section 1231(b)(3)(A) shall be
964
HR 4 PP
applied by substituting ‘1 month’ for ‘24
months’.
‘‘(2) QUALIFIED DISPOSITION.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, the term ‘qualified disposition’ means
the disposition of dairy property which is cer-
tified by the Secretary of Agriculture as having
been the subject of an agreement under the bovine
tuberculosis eradication program, as imple-
mented pursuant to the Declaration of Emer-
gency Because of Bovine Tuberculosis (65 Fed-
eral Register 63,227 (2000)).
‘‘(B) PAYMENTS RECEIVED IN CONNECTION
WITH THE BOVINE TUBERCULOSIS ERADICATION
PROGRAM.—For purposes of this subsection, any
amount received by a taxpayer in connection
with an agreement under such bovine tuber-
culosis eradication program shall be treated as
received in a qualified disposition.
‘‘(C) TRANSMITTAL OF CERTIFICATIONS.—
The Secretary of Agriculture shall transmit cop-
ies of certifications under this paragraph to the
Secretary.
‘‘(3) ALLOWANCE OF THE ADJUSTED BASIS OF
CERTIFIED DAIRY PROPERTY AS A DEPRECIATION DE-
965
HR 4 PP
DUCTION.—The adjusted basis of any property cer-
tified under paragraph (2)(A) shall be allowed as a
depreciation deduction under section 167 for the tax-
able year which includes the date of the certification
described in paragraph (2)(A).
‘‘(4) DAIRY
PROPERTY.—For purposes of this
subsection, the term ‘dairy property’ means all tan-
gible or intangible property used in connection with
a dairy business or a dairy processing plant.
‘‘(5) SPECIAL
RULES
FOR
CERTAIN
BUSINESS
ORGANIZATIONS.—
‘‘(A) S CORPORATIONS.—In the case of an
S corporation, gain on a qualified disposition
shall not be treated as recognized for the pur-
poses of section 1374 (relating to tax imposed on
certain built-in gains).
‘‘(B) PARTNERSHIPS.—In the case of a
partnership which dissolves in anticipation of a
qualified disposition (including in anticipation
of receiving the amount described in paragraph
(2)(B)), the dairy property owned by the part-
ners of such partnership at the time of such dis-
position shall be treated, for the purposes of this
section and notwithstanding any regulation or
966
HR 4 PP
rule of law, as owned by such partners at the
time of such disposition.
‘‘(6) TERMINATION.—This subsection shall not
apply to dispositions made after December 31, 2006.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to dispositions made and
amounts received in taxable years ending after May
22, 2001.
(b) DEDUCTION
OF QUALIFIED RECLAMATION EX-
PENDITURES.—
(1) IN GENERAL.—Part VI of subchapter B of
chapter 1 (relating to itemized deductions for individ-
uals and corporations), as amended by this Act, is
amended by adding at the end the following new sec-
tion:
‘‘SEC. 199B. EXPENSING OF DAIRY PROPERTY RECLAMA-
TION COSTS.
‘‘(a) IN GENERAL.—Notwithstanding section 280B (re-
lating to demolition of structures), a taxpayer may elect
to treat any qualified reclamation expenditure which is
paid or incurred by the taxpayer as an expense which is
not chargeable to capital account. Any expenditure which
is so treated shall be allowed as a deduction for the taxable
year in which it is paid or incurred.
‘‘(b) QUALIFIED RECLAMATION EXPENDITURE.—
967
HR 4 PP
‘‘(1) IN GENERAL.—For purposes of this sub-
paragraph, the term ‘qualified reclamation expendi-
ture’ means amounts otherwise chargeable to capital
account and paid or incurred to convert any real
property certified under section 1033(k)(2) (relating
to qualified disposition) into unimproved land.
‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR DE-
PRECIABLE PROPERTY.—A rule similar to the rule of
section 198(b)(2) (relating to special rule for expendi-
tures for depreciable property) shall apply for pur-
poses of paragraph (1).
‘‘(c) DEDUCTION RECAPTURED
AS ORDINARY IN-
COME.—Rules similar to the rules of section 198(e) (relating
to deduction recaptured as ordinary income on sale, etc.)
shall apply with respect to any qualified reclamation ex-
penditure.
‘‘(d) TERMINATION.—This section shall not apply to
expenditures paid or incurred after December 31, 2006.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part VI of subchapter B of chapter 1, as
amended by this Act, is amended by adding at the
end the following new item:
‘‘Sec. 199B. Expensing of dairy property reclamation costs.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to expenditures paid or
incurred in taxable years ending after May 22, 2001.
968
HR 4 PP
SEC. 2506. CLARIFICATION OF EXCISE TAX EXEMPTIONS
FOR AGRICULTURAL AERIAL APPLICATORS.
(a) NO WAIVER BY FARM OWNER, TENANT, OR OPER-
ATOR
NECESSARY.—Subparagraph 
(B) 
of 
section
6420(c)(4) (relating to certain farming use other than by
owner, etc.) is amended to read as follows:
‘‘(B) if the person so using the gasoline is
an aerial or other applicator of fertilizers or
other substances and is the ultimate purchaser of
the gasoline, then subparagraph (A) of this para-
graph shall not apply and the aerial or other ap-
plicator shall be treated as having used such gas-
oline on a farm for farming purposes.’’.
(b) EXEMPTION INCLUDES FUEL USED BETWEEN AIR-
FIELD AND FARM.—Section 6420(c)(4), as amended by sub-
section (a), is amended by adding at the end the following
new flush sentence:
‘‘For purposes of this paragraph, in the case of an
aerial applicator, gasoline shall be treated as used on
a farm for farming purposes if the gasoline is used
for the direct flight between the airfield and 1 or more
farms.’’.
(c) EXEMPTION FROM TAX ON AIR TRANSPORTATION
OF PERSONS FOR FORESTRY PURPOSES EXTENDED TO
FIXED-WING AIRCRAFT.—Subsection (f) of section 4261 (re-
969
HR 4 PP
lating to tax on air transportation of persons) is amended
to read as follows:
‘‘(f) EXEMPTION FOR CERTAIN USES.—No tax shall be
imposed under subsection (a) or (b) on air transportation—
‘‘(1) by helicopter for the purpose of transporting
individuals, equipment, or supplies in the exploration
for, or the development or removal of, hard minerals,
oil, or gas, or
‘‘(2) by helicopter or by fixed-wing aircraft for
the purpose of the planting, cultivation, cutting, or
transportation of, or caring for, trees (including log-
ging operations),
but only if the helicopter or fixed-wing aircraft does not
take off from, or land at, a facility eligible for assistance
under the Airport and Airway Development Act of 1970,
or otherwise use services provided pursuant to section 44509
or 44913(b) or subchapter I of chapter 471 of title 49,
United States Code, during such use. In the case of heli-
copter transportation described in paragraph (1), this sub-
section shall be applied by treating each flight segment as
a distinct flight.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to fuel use or air transportation after
December 31, 2001, and before January 1, 2003.
970
HR 4 PP
SEC. 2507. MODIFICATION OF RURAL AIRPORT DEFINITION.
(a) IN GENERAL.—Clause (ii) of section 4261(e)(1)(B)
(defining rural airport) is amended by striking the period
at the end of subclause (II) and inserting ‘‘, or’’ and by
adding at the end the following new subclause:
‘‘(III) is not connected by paved
roads to another airport.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after 2002.
SEC. 2508. EXEMPTION FROM TICKET TAXES FOR TRANS-
PORTATION PROVIDED BY SEAPLANES.
(a) IN GENERAL.—The taxes imposed by sections 4261
and 4271 shall not apply to transportation by a seaplane
with respect to any segment consisting of a takeoff from,
and a landing on, water.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after 2002.
DIVISION I—IRAQ OIL IMPORT
RESTRICTION
TITLE XXVI—IRAQ OIL IMPORT
RESTRICTION
SEC. 2601. SHORT TITLE AND FINDINGS.
(a) SHORT TITLE.—This title can be cited as the ‘‘Iraq
Petroleum Import Restriction Act of 2002’’.
(b) FINDINGS.—Congress finds that—
(1) the Government of the Republic of Iraq—
971
HR 4 PP
(A) has failed to comply with the terms of
United Nations Security Council Resolution 687
regarding unconditional Iraqi acceptance of the
destruction, removal, or rendering harmless,
under international supervision, of all nuclear,
chemical and biological weapons and all stocks of
agents and all related subsystems and compo-
nents and all research, development, support and
manufacturing facilities, as well as all ballistic
missiles with a range greater than 150 kilo-
meters and related major parts, and repair and
production facilities and has failed to allow
United Nations inspectors access to sites used for
the production or storage of weapons of mass de-
struction;
(B) routinely contravenes the terms and.
conditions of UNSC Resolution 661, authorizing
the export of petroleum products from Iraq in ex-
change for food, medicine and other humani-
tarian products by conducting a routine and ex-
tensive program to sell such products outside of
the channels established by UNSC Resolution
661 in exchange for military equipment and ma-
terials to be used in pursuit of its program to de-
velop weapons of mass destruction in order to
972
HR 4 PP
threaten the United States and its allies in the
Persian Gulf and surrounding regions;
(C) has failed to adequately draw down
upon the amounts received in the Escrow Ac-
count established by UNSC Resolution 986 to
purchase food, medicine and other humanitarian
products required by its citizens, resulting in
massive humanitarian suffering by the Iraqi
people;
(D) conducts a periodic and systematic
campaign to harass and obstruct the enforcement
of the United States- and United Kingdom-en-
forced ‘‘No-Fly Zones’’ in effect in the Republic
of Iraq;
(E) routinely manipulates the petroleum ex-
port production volumes permitted under UNSC
Resolution 661 in order to create uncertainty in
global energy markets, and therefore threatens
the economic security of the United States;
(F) pays bounties to the families of suicide
bombers in order to encourage the murder of
Israeli civilians;
(2) further imports of petroleum products from
the Republic of Iraq are inconsistent with the na-
tional security and foreign policy interests of the
973
HR 4 PP
United States and should be eliminated until such
time as they are not so inconsistent.
SEC. 2602. PROHIBITION ON IRAQI-ORIGIN PETROLEUM IM-
PORTS.
The direct or indirect import from Iraq of Iraqi-origin
petroleum and petroleum products is prohibited, notwith-
standing an authorization by the Committee established by
UNSC Resolution 661 or its designee, or any other order
to the contrary.
SEC. 2603. TERMINATION/PRESIDENTIAL CERTIFICATION.
This title will remain in effect until such time as the
President, after consultation with the relevant committees
in Congress, certifies to the Congress that—
(1) Iraq is in substantial compliance with the
terms of—
(A) UNSC Resolution 687; and
(B) UNSC Resolution 986 prohibiting
smuggling of oil in circumvention of the ‘‘Oil-
for-Food’’ program; and
(2) ceases the practice of compensating the fami-
lies of suicide bombers in order to encourage the mur-
der of Israeli citizens; or that
(3) resuming the importation of Iraqi-origin pe-
troleum and petroleum products would not be incon-
974
HR 4 PP
sistent with the national security and foreign policy
interests of the United States.
SEC. 2604. HUMANITARIAN INTERESTS.
It is the sense of the Senate that the President should
make all appropriate efforts to ensure that the humani-
tarian needs of the Iraqi people are not negatively affected
by this Act, and should encourage through public, private,
domestic and international means the direct or indirect
sale, donation or other transfer to appropriate nongovern-
mental health and humanitarian organizations and indi-
viduals within Iraq of food, medicine and other humani-
tarian products.
SEC. 2605. DEFINITIONS.
(a) 661 COMMITTEE.—The term 661 Committee means
the Security Council Committee established by UNSC Reso-
lution 661, and persons acting for or on behalf of the Com-
mittee under its specific delegation of authority for the rel-
evant matter or category of activity, including the overseers
appointed by the United Nations Secretary-General to ex-
amine and approve agreements for purchases of petroleum
and petroleum products from the Government of Iraq pur-
suant to UNSC Resolution 986.
(b) UNSC RESOLUTION 661.—The term UNSC Reso-
lution 661 means United Nations Security Council Resolu-
975
HR 4 PP
tion No. 661, adopted August 6, 1990, prohibiting certain
transactions with respect to Iraq and Kuwait.
(c) UNSC RESOLUTION 687.—The term UNSC Reso-
lution 687 means United Nations Security Council Resolu-
tion 687, adopted April 3, 1991.
(d) UNSC RESOLUTION 986.—The term UNSC Reso-
lution 986 means United Nations Security Council Resolu-
tion 986, adopted April 14, 1995.
SEC. 2606. EFFECTIVE DATE.
The prohibition on importation of Iraqi-origin petro-
leum and petroleum products shall be effective 30 days after
enactment of this Act.
DIVISION J—MISCELLANEOUS
TITLE XXVII—MISCELLANEOUS
PROVISION
SEC. 2701. FAIR TREATMENT OF PRESIDENTIAL JUDICIAL
NOMINEES.
It is the sense of the Senate that, in the interests of
the administration of justice, the Senate Judiciary Com-
mittee should along with its other legislative and oversight
responsibilities, continue to hold regular hearings on judi-
cial nominees and should, in accordance with the precedents
and practices of the Committee, schedule hearings on the
976
HR 4 PP
nominees submitted by the President on May 9, 2001, and
resubmitted on September 5, 2001, expeditiously.
Attest:
Secretary.
107TH CONGRESS
2D SESSION
H. R. 4
AMENDMENT
April 26, 2002
Ordered to be printed as passed