H. R. 1836
One Hundred Seventh Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, two thousand and one
An Act
To provide for reconciliation pursuant to section 104 of the concurrent resolution
on the budget for fiscal year 2002.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Economic
Growth and Tax Relief Reconciliation Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—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.—The table of contents of this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I—INDIVIDUAL INCOME TAX RATE REDUCTIONS
Sec. 101. Reduction in income tax rates for individuals.
Sec. 102. Repeal of phaseout of personal exemptions.
Sec. 103. Phaseout of overall limitation on itemized deductions.
TITLE II—TAX BENEFITS RELATING TO CHILDREN
Sec. 201. Modifications to child tax credit.
Sec. 202. Expansion of adoption credit and adoption assistance programs.
Sec. 203. Refunds disregarded in the administration of Federal programs and feder-
ally assisted programs.
Sec. 204. Dependent care credit.
Sec. 205. Allowance of credit for employer expenses for child care assistance.
TITLE III—MARRIAGE PENALTY RELIEF
Sec. 301. Elimination of marriage penalty in standard deduction.
Sec. 302. Phaseout of marriage penalty in 15-percent bracket.
Sec. 303. Marriage penalty relief for earned income credit; earned income to include
only amounts includible in gross income; simplification of earned income
credit.
TITLE IV—AFFORDABLE EDUCATION PROVISIONS
Subtitle A—Education Savings Incentives
Sec. 401. Modifications to education individual retirement accounts.
Sec. 402. Modifications to qualified tuition programs.
Subtitle B—Educational Assistance
Sec. 411. Extension of exclusion for employer-provided educational assistance.
Sec. 412. Elimination of 60-month limit and increase in income limitation on
student loan interest deduction.
Sec. 413. Exclusion of certain amounts received under the National Health Service
Corps Scholarship Program and the F. Edward Hebert Armed Forces
Health Professions Scholarship and Financial Assistance Program.
H. R. 1836—2
Subtitle C—Liberalization of Tax-Exempt Financing Rules for Public School
Construction
Sec. 421. Additional increase in arbitrage rebate exception for governmental bonds
used to finance educational facilities.
Sec. 422. Treatment of qualified public educational facility bonds as exempt facility
bonds.
Subtitle D—Other Provisions
Sec. 431. Deduction for higher education expenses.
TITLE V—ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX
PROVISIONS
Subtitle A—Repeal of Estate and Generation-Skipping Transfer Taxes
Sec. 501. Repeal of estate and generation-skipping transfer taxes.
Subtitle B—Reductions of Estate and Gift Tax Rates
Sec. 511. Additional reductions of estate and gift tax rates.
Subtitle C—Increase in Exemption Amounts
Sec. 521. Increase in exemption equivalent of unified credit, lifetime gifts exemp-
tion, and GST exemption amounts.
Subtitle D—Credit for State Death Taxes
Sec. 531. Reduction of credit for State death taxes.
Sec. 532. Credit for State death taxes replaced with deduction for such taxes.
Subtitle E—Carryover Basis at Death; Other Changes Taking Effect With Repeal
Sec. 541. Termination of step-up in basis at death.
Sec. 542. Treatment of property acquired from a decedent dying after December 31,
2009.
Subtitle F—Conservation Easements
Sec. 551. Expansion of estate tax rule for conservation easements.
Subtitle G—Modifications of Generation-Skipping Transfer Tax
Sec. 561. Deemed allocation of GST exemption to lifetime transfers to trusts; retro-
active allocations.
Sec. 562. Severing of trusts.
Sec. 563. Modification of certain valuation rules.
Sec. 564. Relief provisions.
Subtitle H—Extension of Time for Payment of Estate Tax
Sec. 571. Increase in number of allowable partners and shareholders in closely held
businesses.
Sec. 572. Expansion of availability of installment payment for estates with inter-
ests qualifying lending and finance businesses.
Sec. 573. Clarification of availability of installment payment.
Subtitle I—Other Provisions
Sec. 581. Waiver of statute of limitation for taxes on certain farm valuations.
TITLE VI—PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT
PROVISIONS
Subtitle A—Individual Retirement Accounts
Sec. 601. Modification of IRA contribution limits.
Sec. 602. Deemed IRAs under employer plans.
Subtitle B—Expanding Coverage
Sec. 611. Increase in benefit and contribution limits.
Sec. 612. Plan loans for subchapter S owners, partners, and sole proprietors.
Sec. 613. Modification of top-heavy rules.
Sec. 614. Elective deferrals not taken into account for purposes of deduction limits.
Sec. 615. Repeal of coordination requirements for deferred compensation plans of
State and local governments and tax-exempt organizations.
Sec. 616. Deduction limits.
Sec. 617. Option to treat elective deferrals as after-tax Roth contributions.
H. R. 1836—3
Sec. 618. Nonrefundable credit to certain individuals for elective deferrals and IRA
contributions.
Sec. 619. Credit for pension plan startup costs of small employers.
Sec. 620. Elimination of user fee for requests to IRS regarding pension plans.
Sec. 621. Treatment of nonresident aliens engaged in international transportation
services.
Subtitle C—Enhancing Fairness for Women
Sec. 631. Catch-up contributions for individuals age 50 or over.
Sec. 632. Equitable treatment for contributions of employees to defined contribution
plans.
Sec. 633. Faster vesting of certain employer matching contributions.
Sec. 634. Modification to minimum distribution rules.
Sec. 635. Clarification of tax treatment of division of section 457 plan benefits upon
divorce.
Sec. 636. Provisions relating to hardship distributions.
Sec. 637. Waiver of tax on nondeductible contributions for domestic or similar
workers.
Subtitle D—Increasing Portability for Participants
Sec. 641. Rollovers allowed among various types of plans.
Sec. 642. Rollovers of IRAs into workplace retirement plans.
Sec. 643. Rollovers of after-tax contributions.
Sec. 644. Hardship exception to 60-day rule.
Sec. 645. Treatment of forms of distribution.
Sec. 646. Rationalization of restrictions on distributions.
Sec. 647. Purchase of service credit in governmental defined benefit plans.
Sec. 648. Employers may disregard rollovers for purposes of cash-out amounts.
Sec. 649. Minimum distribution and inclusion requirements for section 457 plans.
Subtitle E—Strengthening Pension Security and Enforcement
PART I—GENERAL PROVISIONS
Sec. 651. Repeal of 160 percent of current liability funding limit.
Sec. 652. Maximum contribution deduction rules modified and applied to all
defined benefit plans.
Sec. 653. Excise tax relief for sound pension funding.
Sec. 654. Treatment of multiemployer plans under section 415.
Sec. 655. Protection of investment of employee contributions to 401(k) plans.
Sec. 656. Prohibited allocations of stock in S corporation ESOP.
Sec. 657. Automatic rollovers of certain mandatory distributions.
Sec. 658. Clarification of treatment of contributions to multiemployer plan.
PART II—TREATMENT OF PLAN AMENDMENTS REDUCING FUTURE BENEFIT ACCRUALS
Sec. 659. Excise tax on failure to provide notice by defined benefit plans signifi-
cantly reducing future benefit accruals.
Subtitle F—Reducing Regulatory Burdens
Sec. 661. Modification of timing of plan valuations.
Sec. 662. ESOP dividends may be reinvested without loss of dividend deduction.
Sec. 663. Repeal of transition rule relating to certain highly compensated employ-
ees.
Sec. 664. Employees of tax-exempt entities.
Sec. 665. Clarification of treatment of employer-provided retirement advice.
Sec. 666. Repeal of the multiple use test.
Subtitle G—Miscellaneous Provisions
Sec. 671. Tax treatment and information requirements of Alaska Native Settlement
Trusts.
TITLE VII—ALTERNATIVE MINIMUM TAX
Sec. 701. Increase in alternative minimum tax exemption.
TITLE VIII—OTHER PROVISIONS
Sec. 801. Time for payment of corporate estimated taxes.
Sec. 802. Expansion of authority to postpone certain tax-related deadlines by rea-
son of Presidentially declared disaster.
Sec. 803. No Federal income tax on restitution received by victims of the Nazi
regime or their heirs or estates.
TITLE IX—COMPLIANCE WITH CONGRESSIONAL BUDGET ACT
Sec. 901. Sunset of provisions of Act.
H. R. 1836—4
TITLE I—INDIVIDUAL INCOME TAX
RATE REDUCTIONS
SEC. 101. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.
(a) IN GENERAL.—Section 1 (relating to tax imposed) is amended
by adding at the end the following new subsection:
‘‘(i) RATE REDUCTIONS AFTER 2000.—
‘‘(1) 10-PERCENT RATE BRACKET.—
‘‘(A) IN GENERAL.—In the case of taxable years begin-
ning after December 31, 2000—
‘‘(i) the rate of tax under subsections (a), (b), (c),
and (d) on taxable income not over the initial bracket
amount shall be 10 percent, and
‘‘(ii) the 15 percent rate of tax shall apply only
to taxable income over the initial bracket amount but
not over the maximum dollar amount for the 15-percent
rate bracket.
‘‘(B) INITIAL BRACKET AMOUNT.—For purposes of this
paragraph, the initial bracket amount is—
‘‘(i) $14,000 ($12,000 in the case of taxable years
beginning before January 1, 2008) in the case of sub-
section (a),
‘‘(ii) $10,000 in the case of subsection (b), and
‘‘(iii) 1⁄2 the amount applicable under clause (i)
(after adjustment, if any, under subparagraph (C)) in
the case of subsections (c) and (d).
‘‘(C) INFLATION ADJUSTMENT.—In prescribing the tables
under subsection (f ) which apply with respect to taxable
years beginning in calendar years after 2000—
‘‘(i) the Secretary shall make no adjustment to
the initial bracket amount for any taxable year begin-
ning before January 1, 2009,
‘‘(ii) the cost-of-living adjustment used in making
adjustments to the initial bracket amount for any tax-
able year beginning after December 31, 2008, shall
be determined under subsection (f )(3) by substituting
‘2007’ for ‘1992’ in subparagraph (B) thereof, and
‘‘(iii) such adjustment shall not apply to the
amount referred to in subparagraph (B)(iii).
If any amount after adjustment under the preceding sen-
tence is not a multiple of $50, such amount shall be rounded
to the next lowest multiple of $50.
‘‘(D) COORDINATION WITH ACCELERATION OF 10 PERCENT
RATE BRACKET BENEFIT FOR 2001.—This paragraph shall
not apply to any taxable year to which section 6428 applies.
‘‘(2) REDUCTIONS IN RATES AFTER JUNE 30, 2001.—In the
case of taxable years beginning in a calendar year after 2000,
the corresponding percentage specified for such calendar year
in the following table shall be substituted for the otherwise
applicable tax rate in the tables under subsections (a), (b),
(c), (d), and (e).
H. R. 1836—5
‘‘In the case of taxable years
beginning during calendar year:
The corresponding percentages
shall be substituted for
the following percentages:
28%
31%
36%
39.6%
2001 ...........................................................
27.5%
30.5%
35.5%
39.1%
2002 and 2003 ..........................................
27.0%
30.0%
35.0%
38.6%
2004 and 2005 ..........................................
26.0%
29.0%
34.0%
37.6%
2006 and thereafter .................................
25.0%
28.0%
33.0%
35.0%
‘‘(3) ADJUSTMENT OF TABLES.—The Secretary shall adjust
the tables prescribed under subsection (f ) to carry out this
subsection.’’.
(b) ACCELERATION OF 10 PERCENT RATE BRACKET BENEFIT FOR
2001.—
(1) IN GENERAL.—Subchapter B of chapter 65 (relating to
abatements, credits, and refunds) is amended by adding at
the end the following new section:
‘‘SEC. 6428. ACCELERATION OF 10 PERCENT INCOME TAX RATE
BRACKET BENEFIT FOR 2001.
‘‘(a) IN GENERAL.—In the case of an eligible individual, there
shall be allowed as a credit against the tax imposed by chapter
1 for the taxpayer’s first taxable year beginning in 2001 an amount
equal to 5 percent of so much of the taxpayer’s taxable income
as does not exceed the initial bracket amount (as defined in section
1(i)(1)(B)).
‘‘(b) LIMITATION BASED ON AMOUNT OF TAX.—The credit allowed
by subsection (a) shall not exceed the excess (if any) of—
‘‘(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
‘‘(2) the sum of the credits allowable under part IV of
subchapter A of chapter 1 (other than the credits allowable
under subpart C thereof, relating to refundable credits).
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this section, the
term ‘eligible individual’ means any individual other than—
‘‘(1) any estate or trust,
‘‘(2) any nonresident alien individual, and
‘‘(3) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual’s
taxable year begins.
‘‘(d) SPECIAL RULES.—
‘‘(1) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.—
‘‘(A) 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).
‘‘(B) JOINT RETURNS.—In the case of a refund or credit
made or allowed under subsection (e) with respect 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.
‘‘(2) COORDINATION WITH ESTIMATED TAX.—The credit under
this section shall be treated for purposes of section 6654(f )
H. R. 1836—6
in the same manner as a credit under subpart A of part IV
of subchapter A of chapter 1.
‘‘(e) ADVANCE REFUNDS
OF CREDIT BASED
ON PRIOR YEAR
DATA.—
‘‘(1) IN
GENERAL.—Each individual who was an eligible
individual for such individual’s first taxable year beginning
in 2000 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 advance refund amount for such taxable
year.
‘‘(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 this section (other than subsection (d)
and this subsection) had applied to such taxable year.
‘‘(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 possible and, to the extent practicable, before
October 1, 2001. No refund or credit shall be made or allowed
under this subsection after December 31, 2001.
‘‘(4) NO INTEREST.—No interest shall be allowed on any
overpayment attributable to this subsection.’’.
(2) CLERICAL AMENDMENT.—The table of sections for sub-
chapter B of chapter 65 is amended by adding at the end
the following new item:
‘‘Sec. 6428. Acceleration of 10 percent income tax rate bracket benefit for
2001.’’.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 1(g)(7) is amended by
striking ‘‘15 percent’’ in clause (ii)(II) and inserting ‘‘10 per-
cent.’’.
(2) Section 1(h) is amended—
(A) by striking ‘‘28 percent’’ both places it appears
in paragraphs (1)(A)(ii)(I) and (1)(B)(i) and inserting ‘‘25
percent’’, and
(B) by striking paragraph (13).
(3) Section 15 is amended by adding at the end the fol-
lowing new subsection:
‘‘(f ) RATE REDUCTIONS ENACTED BY ECONOMIC GROWTH AND
TAX RELIEF RECONCILIATION ACT OF 2001.—This section shall not
apply to any change in rates under subsection (i) of section 1
(relating to rate reductions after 2000).’’.
(4) Section 531 is amended by striking ‘‘equal to’’ and
all that follows and inserting ‘‘equal to the product of the
highest rate of tax under section 1(c) and the accumulated
taxable income.’’.
(5) Section 541 is amended by striking ‘‘equal to’’ and
all that follows and inserting ‘‘equal to the product of the
highest rate of tax under section 1(c) and the undistributed
personal holding company income.’’.
(6) Section 3402(p)(1)(B) is amended by striking ‘‘7, 15,
28, or 31 percent’’ and inserting ‘‘7 percent, any percentage
applicable to any of the 3 lowest income brackets in the table
under section 1(c),’’.
(7) Section 3402(p)(2) is amended by striking ‘‘15 percent’’
and inserting ‘‘10 percent’’.
H. R. 1836—8
fraction of the amount which would (but for this subsection)
be the amount of such reduction.
‘‘(2) APPLICABLE FRACTION.—For purposes of paragraph (1),
the applicable fraction shall be determined in accordance with
the following table:
‘‘For taxable years beginning
The applicable
in calendar year—
fraction is—
2006 and 2007 ............................................................................
2⁄3
2008 and 2009 ............................................................................
1⁄3.
‘‘(g) TERMINATION.—This section shall not apply to any taxable
year beginning after December 31, 2009.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2005.
TITLE II—TAX BENEFITS RELATING TO
CHILDREN
SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT.
(a) INCREASE IN PER CHILD AMOUNT.—Subsection (a) of section
24 (relating to child tax credit) is amended to read as follows:
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—There shall be allowed as a credit against
the tax imposed by this chapter for the taxable year with
respect to each qualifying child of the taxpayer an amount
equal to the per child amount.
‘‘(2) PER CHILD AMOUNT.—For purposes of paragraph (1),
the per child amount shall be determined as follows:
‘‘In the case of any taxable year
beginning in—
The per child amount is—
2001, 2002, 2003, or 2004 ................................................................
$
600
2005, 2006, 2007, or 2008 ................................................................
700
2009 ...................................................................................................
800
2010 or thereafter .............................................................................
1,000.’’.
(b) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.—
(1) IN GENERAL.—Subsection (b) of section 24 (relating to
child tax credit) is amended by adding at the end the following
new paragraph:
‘‘(3) LIMITATION BASED ON AMOUNT OF TAX.—The credit
allowed under subsection (a) for any taxable year shall not
exceed the excess of—
‘‘(A) the sum of the regular tax liability (as defined
in section 26(b)) plus the tax imposed by section 55, over
‘‘(B) the sum of the credits allowable under this subpart
(other than this section) and section 27 for the taxable
year.’’.
(2) CONFORMING AMENDMENTS.—
(A) The heading for section 24(b) is amended to read
as follows: ‘‘LIMITATIONS.—’’.
(B) The heading for section 24(b)(1) is amended to
read as follows: ‘‘LIMITATION BASED ON ADJUSTED GROSS
INCOME.—’’.
(C) Section 24(d), as amended by subsection (c), is
amended—
(i) by striking ‘‘section 26(a)’’ each place it appears
and inserting ‘‘subsection (b)(3)’’, and
H. R. 1836—9
(ii) in paragraph (1)(B) by striking ‘‘aggregate
amount of credits allowed by this subpart’’ and
inserting ‘‘amount of credit allowed by this section’’.
(D) Paragraph (1) of section 26(a) is amended by
inserting ‘‘(other than section 24)’’ after ‘‘this subpart’’.
(E) Subsection (c) of section 23 is amended by striking
‘‘and section 1400C’’ and inserting ‘‘and sections 24 and
1400C’’.
(F) Subparagraph (C) of section 25(e)(1) is amended
by inserting ‘‘, 24,’’ after ‘‘sections 23’’.
(G) Section 904(h) is amended by inserting ‘‘(other
than section 24)’’ after ‘‘chapter’’.
(H) Subsection (d) of section 1400C is amended by
inserting ‘‘and section 24’’ after ‘‘this section’’.
(c) REFUNDABLE CHILD CREDIT.—
(1) IN
GENERAL.—So much of section 24(d) (relating to
additional credit for families with 3 or more children) as pre-
cedes paragraph (2) is amended to read as follows:
‘‘(d) PORTION OF CREDIT REFUNDABLE.—
‘‘(1) IN GENERAL.—The aggregate credits allowed to a tax-
payer under subpart C shall be increased by the lesser of—
‘‘(A) the credit which would be allowed under this
section without regard to this subsection and the limitation
under section 26(a), or
‘‘(B) the amount by which the amount of credit allowed
by this section (determined without regard to this sub-
section) would increase if the limitation imposed by section
26(a) were increased by the greater of—
‘‘(i) 15 percent (10 percent in the case of taxable
years beginning before January 1, 2005) of so much
of the taxpayer’s earned income (within the meaning
of section 32) which is taken into account in computing
taxable income for the taxable year as exceeds $10,000,
or
‘‘(ii) in the case of a taxpayer with 3 or more
qualifying children, the excess (if any) of—
‘‘(I) the taxpayer’s social security taxes for the
taxable year, over
‘‘(II) the credit allowed under section 32 for
the taxable year.
The amount of the credit allowed under this subsection shall
not be treated as a credit allowed under this subpart and
shall reduce the amount of credit otherwise allowable under
subsection (a) without regard to section 26(a).’’.
(2) INFLATION ADJUSTMENT.—Subsection (d) of section 24
is amended by adding at the end the following new paragraph:
‘‘(4) INFLATION ADJUSTMENT.—In the case of any taxable
year beginning in a calendar year after 2001, the $10,000
amount contained in paragraph (1)(B) shall be increased by
an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f )(3) for the calendar year in which the taxable
year begins, determined by substituting ‘calendar year
2000’ for ‘calendar year 1992’ in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall
be rounded to the nearest multiple of $50.’’.
H. R. 1836—10
(3) CONFORMING AMENDMENT.—Section 32 is amended by
striking subsection (n).
(d) ELIMINATION OF REDUCTION OF CREDIT TO TAXPAYER SUB-
JECT TO ALTERNATIVE MINIMUM TAX PROVISION.—Section 24(d) is
amended—
(1) by striking paragraph (2), and
(2) by redesignating paragraphs (3) and (4) as paragraphs
(2) and (3), respectively.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) SUBSECTION (b).—The amendments made by subsection
(b) shall apply to taxable years beginning after December 31,
2001.
SEC. 202. EXPANSION OF ADOPTION CREDIT AND ADOPTION ASSIST-
ANCE PROGRAMS.
(a) IN GENERAL.—
(1) ADOPTION CREDIT.—Section 23(a)(1) (relating to allow-
ance of credit) 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 imposed by this chapter—
‘‘(A) in the case of an adoption of a child other than
a child with special needs, the amount of the qualified
adoption expenses paid or incurred by the taxpayer, and
‘‘(B) in the case of an adoption of a child with special
needs, $10,000.’’.
(2) ADOPTION
ASSISTANCE
PROGRAMS.—Section 137(a)
(relating to adoption assistance programs) is amended to read
as follows:
‘‘(a) IN GENERAL.—Gross income of an employee does not
include amounts paid or expenses incurred by the employer for
adoption expenses in connection with the adoption of a child by
an employee if such amounts are furnished pursuant to an adoption
assistance program. The amount of the exclusion shall be—
‘‘(1) in the case of an adoption of a child other than a
child with special needs, the amount of the qualified adoption
expenses paid or incurred by the taxpayer, and
‘‘(2) in the case of an adoption of a child with special
needs, $10,000.’’.
(b) DOLLAR LIMITATIONS.—
(1) DOLLAR AMOUNT OF ALLOWED EXPENSES.—
(A) ADOPTION EXPENSES.—Section 23(b)(1) (relating to
allowance of credit) is amended—
(i) by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’,
(ii) by striking ‘‘($6,000, in the case of a child
with special needs)’’, and
(iii) by striking ‘‘subsection (a)’’ and inserting ‘‘sub-
section (a)(1)(A)’’.
(B) 
ADOPTION
ASSISTANCE
PROGRAMS.—Section
137(b)(1) (relating to dollar limitations for adoption assist-
ance programs) is amended—
(i) by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’,
and
(ii) by striking ‘‘($6,000, in the case of a child
with special needs)’’, and
H. R. 1836—11
(iii) by striking ‘‘subsection (a)’’ and inserting ‘‘sub-
section (a)(1)’’.
(2) PHASE-OUT LIMITATION.—
(A) 
ADOPTION
EXPENSES.—Clause 
(i) 
of 
section
23(b)(2)(A) (relating to income limitation) is amended by
striking ‘‘$75,000’’ and inserting ‘‘$150,000’’.
(B) 
ADOPTION
ASSISTANCE
PROGRAMS.—Section
137(b)(2)(A) (relating to income limitation) is amended by
striking ‘‘$75,000’’ and inserting ‘‘$150,000’’.
(c) YEAR CREDIT ALLOWED.—Section 23(a)(2) (relating to year
credit allowed) is amended by adding at the end the following
new flush sentence:
‘‘In the case of the adoption of a child with special needs,
the credit allowed under paragraph (1) shall be allowed for
the taxable year in which the adoption becomes final.’’.
(d) REPEAL OF TERMINATIONS.—
(1) CHILDREN WITHOUT SPECIAL NEEDS.—Paragraph (2) of
section 23(d) (relating to definition of eligible child) is amended
to read as follows:
‘‘(2) ELIGIBLE CHILD.—The term ‘eligible child’ means any
individual who—
‘‘(A) has not attained age 18, or
‘‘(B) is physically or mentally incapable of caring for
himself.’’.
(2) ADOPTION ASSISTANCE PROGRAMS.—Section 137 (relating
to adoption assistance programs) is amended by striking sub-
section (f ).
(e) ADJUSTMENT
OF DOLLAR
AND INCOME LIMITATIONS
FOR
INFLATION.—
(1) ADOPTION
CREDIT.—Section 23 (relating to adoption
expenses) is amended by redesignating subsection (h) as sub-
section (i) and by inserting after subsection (g) the following
new subsection:
‘‘(h) ADJUSTMENTS FOR INFLATION.—In the case of a taxable
year beginning after December 31, 2002, each of the dollar amounts
in subsection (a)(1)(B) and paragraphs (1) and (2)(A)(i) of subsection
(b) shall be increased by an amount equal to—
‘‘(1) such dollar amount, multiplied by
‘‘(2) the cost-of-living adjustment determined under section
1(f )(3) for the calendar year in which the taxable year begins,
determined by substituting ‘calendar year 2001’ for ‘calendar
year 1992’ in subparagraph (B) thereof.’’.
(2) ADOPTION ASSISTANCE PROGRAMS.—Section 137 (relating
to adoption assistance programs), as amended by subsection
(d), is amended by adding at the end the following new sub-
section:
‘‘(f ) ADJUSTMENTS FOR INFLATION.—In the case of a taxable
year beginning after December 31, 2002, each of the dollar amounts
in subsection (a)(2) and paragraphs (1) and (2)(A) of subsection
(b) shall be increased by an amount equal to—
‘‘(1) such dollar amount, multiplied by
‘‘(2) the cost-of-living adjustment determined under section
1(f )(3) for the calendar year in which the taxable year begins,
determined by substituting ‘calendar year 2001’ for ‘calendar
year 1992’ in subparagraph (B) thereof.’’.
(f ) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.—
H. R. 1836—12
(1) IN GENERAL.—Subsection (b) of section 23 is amended
by adding at the end the following new paragraph:
‘‘(4) LIMITATION BASED ON AMOUNT OF TAX.—The credit
allowed under subsection (a) for any taxable year shall not
exceed the excess of—
‘‘(A) the sum of the regular tax liability (as defined
in section 26(b)) plus the tax imposed by section 55, over
‘‘(B) the sum of the credits allowable under this subpart
(other than this section) and section 27 for the taxable
year.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 23(c), as amended by section 201(b), is
amended—
(i) by striking ‘‘section 26(a)’’ and inserting ‘‘sub-
section (b)(4)’’, and
(ii) by striking ‘‘reduced by the sum of the credits
allowable under this subpart (other than this section
and sections 24 and 1400C)’’.
(B) Section 24(b)(3)(B), as added by section 201(b),
is amended by striking ‘‘this section’’ and inserting ‘‘this
section and section 23’’.
(C) Sections 26(a)(1), 904(h), and 1400C(d), as amended
by section 201(b), are each amended by striking ‘‘section
24’’ and inserting ‘‘sections 23 and 24’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2001.
(2) SUBSECTION (a).—The amendments made by subsection
(a) shall apply to taxable years beginning after December 31,
2002.
SEC. 203. REFUNDS DISREGARDED IN THE ADMINISTRATION OF FED-
ERAL PROGRAMS AND FEDERALLY ASSISTED PRO-
GRAMS.
Any payment considered to have been made to any individual
by reason of section 24 of the Internal Revenue Code of 1986,
as amended by section 201, shall not be taken into account as
income and shall not be taken into account as resources for the
month of receipt and the following month, for purposes of deter-
mining the eligibility of such individual or any other individual
for benefits or assistance, or the amount or extent of benefits
or assistance, under any Federal program or under any State or
local program financed in whole or in part with Federal funds.
SEC. 204. DEPENDENT CARE CREDIT.
(a) INCREASE IN DOLLAR LIMIT.—Subsection (c) of section 21
(relating to expenses for household and dependent care services
necessary for gainful employment) is amended—
(1) by striking ‘‘$2,400’’ in paragraph (1) and inserting
‘‘$3,000’’, and
(2) by striking ‘‘$4,800’’ in paragraph (2) and inserting
‘‘$6,000’’.
(b) INCREASE
IN APPLICABLE PERCENTAGE.—Section 21(a)(2)
(defining applicable percentage) is amended—
(1) by striking ‘‘30 percent’’ and inserting ‘‘35 percent’’,
and
(2) by striking ‘‘$10,000’’ and inserting ‘‘$15,000’’.
H. R. 1836—57
2032A(c)(7)(E) of the Internal Revenue Code of 1986 is barred
by any law or rule of law, the refund or credit of such overpayment
shall, nevertheless, be made or allowed if claim therefor is filed
before the date 1 year after the date of the enactment of this
Act.
TITLE VI—PENSION AND INDIVIDUAL
RETIREMENT ARRANGEMENT PROVI-
SIONS
Subtitle A—Individual Retirement
Accounts
SEC. 601. MODIFICATION OF IRA CONTRIBUTION LIMITS.
(a) INCREASE IN CONTRIBUTION LIMIT.—
(1) IN
GENERAL.—Paragraph (1)(A) of section 219(b)
(relating to maximum amount of deduction) is amended by
striking ‘‘$2,000’’ and inserting ‘‘the deductible amount’’.
(2) DEDUCTIBLE AMOUNT.—Section 219(b) is amended by
adding at the end the following new paragraph:
‘‘(5) DEDUCTIBLE
AMOUNT.—For purposes of paragraph
(1)(A)—
‘‘(A) IN
GENERAL.—The deductible amount shall be
determined in accordance with the following table:
‘‘For taxable years
The deductible
beginning in:
amount is:
2002 through 2004 .....................................................................
$3,000
2005 through 2007 .....................................................................
$4,000
2008 and thereafter ...................................................................
$5,000.
‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS 50 OR
OLDER.—
‘‘(i) IN GENERAL.—In the case of an individual who
has attained the age of 50 before the close of the
taxable year, the deductible amount for such taxable
year shall be increased by the applicable amount.
‘‘(ii) APPLICABLE AMOUNT.—For purposes of clause
(i), the applicable amount shall be the amount deter-
mined in accordance with the following table:
‘‘For taxable years
The applicable
beginning in:
amount is:
2002 through 2005 .....................................................................
$500
2006 and thereafter ...................................................................
$1,000.
‘‘(C) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any taxable year
beginning in a calendar year after 2008, the $5,000
amount under subparagraph (A) shall be increased
by an amount equal to—
‘‘(I) such dollar amount, multiplied by
‘‘(II) the cost-of-living adjustment determined
under section 1(f )(3) for the calendar year in which
the taxable year begins, determined by sub-
stituting ‘calendar year 2007’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(ii) ROUNDING RULES.—If any amount after adjust-
ment under clause (i) is not a multiple of $500, such