IB
Union Calendar No. 153
107TH CONGRESS
1ST SESSION
H. R. 3090
[Report No. 107–251]
To provide tax incentives for economic recovery.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 11, 2001
Mr. THOMAS introduced the following bill; which was referred to the
Committee on Ways and Means
OCTOBER 17, 2001
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on October 11, 2001]
A BILL
To provide tax incentives for economic recovery.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Economic Security and Recovery 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 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—BUSINESS PROVISIONS
Sec. 101. Special depreciation allowance for certain property acquired after Sep-
tember 10, 2001, and before September 11, 2004.
Sec. 102. Temporary increase in expensing under section 179.
Sec. 103. Repeal of alternative minimum tax on corporations.
Sec. 104. Carryback of certain net operating losses allowed for 5 years.
Sec. 105. Recovery period for depreciation of certain leasehold improvements.
TITLE II—INDIVIDUAL PROVISIONS
Sec. 201. Acceleration of 25 percent individual income tax rate.
Sec. 202. Repeal of 5-year holding period requirement for reduced individual cap-
ital gains rates.
Sec. 203. Temporary increase in deduction for capital losses of taxpayers other
than corporations.
Sec. 204. Temporary expansion of penalty-free retirement plan distributions for
health insurance premiums of unemployed individuals.
TITLE III—EXTENSIONS OF CERTAIN EXPIRING PROVISIONS
Subtitle A—Two-Year 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.
Sec. 310. Parity in the application of certain limits to mental health benefits.
Sec. 311. Delay in effective date of requirement for approved diesel or kerosene
terminals.
Subtitle B—One-Year Extensions
Sec. 321. One-year extension of availability of medical savings accounts.
Subtitle C—Permanent Extensions
Sec. 331. Subpart F exemption for active financing.
Subtitle D—Other Provisions
Sec. 341. Excluded cancellation of indebtedness income of S corporation not to re-
sult in adjustment to basis of stock of shareholders.
Sec. 342. Limitation on use of nonaccrual experience method of accounting.
TITLE IV—SUPPLEMENTAL REBATE; OTHER PROVISIONS
Sec. 401. Supplemental rebate.
Sec. 402. Special Reed Act transfer in fiscal year 2002.
TITLE V—HEALTH CARE ASSISTANCE FOR THE UNEMPLOYED
Sec. 501. Health care assistance for the unemployed.
TITLE I—BUSINESS PROVISIONS
SEC. 101. 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.
‘‘(B) 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-
(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. 102. 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 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.
SEC. 103. REPEAL OF ALTERNATIVE MINIMUM TAX ON COR-
PORATIONS.
(a) IN GENERAL.—So much of section 55 as precedes
subsection (b)(2) is amended to read as follows:
‘‘SEC. 55. ALTERNATIVE MINIMUM TAX FOR TAXPAYERS
OTHER THAN CORPORATIONS.
‘‘(a) IN GENERAL.—In the case of a taxpayer other
than a corporation, there is hereby imposed (in addition
to any other tax imposed by this subtitle) a tax equal to
the excess (if any) of—
‘‘(1) the tentative minimum tax for the taxable
year, over
‘‘(2) the regular tax for the taxable year.
‘‘(b) TENTATIVE MINIMUM TAX.—For purposes of this
part—
‘‘(1) AMOUNT OF TENTATIVE TAX.—
‘‘(A) IN GENERAL.—The tentative minimum
tax for the taxable year is the sum of—
‘‘(i) 26 percent of so much of the tax-
able excess as does not exceed $175,000, plus
‘‘(ii) 28 percent of so much of the tax-
able excess as exceeds $175,000.
The amount determined under the preceding sen-
tence shall be reduced by the alternative min-
imum tax foreign tax credit for the taxable year.
‘‘(B) TAXABLE
EXCESS.—For purposes of
this subsection, the term ‘taxable excess’ means so
much of the alternative minimum taxable income
for the taxable year as exceeds the exemption
amount.
‘‘(C) MARRIED
INDIVIDUAL
FILING
SEPA-
RATE RETURN.—In the case of a married indi-
vidual filing a separate return, clause (i) shall
be 
applied 
by 
substituting 
‘$87,500’ 
for
‘$175,000’ each place it appears. For purposes of
the preceding sentence, marital status shall be
determined under section 7703.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 55(b) is amended by
striking ‘‘paragraph (1)(A)(i)’’ and inserting ‘‘para-
graph (1)(A)’’.
(2) Paragraph (1) of section 55(c) is amended by
striking ‘‘, the section 936 credit allowable under sec-
tion 27(b), and the Puerto Rico economic activity
credit under section 30A’’.
(3)(A) Paragraph (1) of section 55(d) is amend-
ed by—
(i) by striking ‘‘FOR
TAXPAYERS
OTHER
THAN CORPORATIONS’’ in the heading, and
(ii) by striking ‘‘In the case of a taxpayer
other than a corporation, the’’ and inserting
‘‘The’’.
(B) Section 55(d) is amended by striking para-
graph (2) and by redesignating paragraph (3) as
paragraph (2).
(C) Subparagraph (A) of section 55(d)(2), as so
redesignated is amended by striking ‘‘or (2)’’.
(4) Section 55 is amended by striking subsection
(e).
(5)(A) The designation and heading for sub-
section (a) of section 56 is amended to read as fol-
lows:
‘‘(a) GENERAL RULES.—’’.
(B) Paragraph (1) of section 56(a) is amended
by striking subparagraph (D).
(C) Paragraph (6) of section 56(a) is amended—
(i) by striking ‘‘paragraph (2) or subsection
(b)(2)’’ and inserting ‘‘paragraph (2) or (9)’’,
and
(ii) by striking ‘‘or (5), or subsection
(b)(2)’’ and inserting ‘‘(5), or (9)’’.
(6)(A) Subsection (b) of section 56 is amended
by striking so much of such subsection as precedes
paragraph (1) and by redesignating paragraphs (1),
(2), and (3) as paragraphs (8), (9), and (10), respec-
tively, of subsection (a).
(B) Paragraph (9) of section 56(a), as so redesig-
nated, is amended by striking subparagraph (C) and
by redesignating subparagraph (D) as subparagraph
(C).
(7) Section 56 is amended by striking sub-
sections (c) and (g) and by redesignating subsections
(d) and (e) as subsections (b) and (c), respectively.
(8) Subparagraph (E) of section 57(a)(2) is
amended—
(A) by striking ‘‘FOR INDEPENDENT PRO-
DUCERS’’ in the heading, and
(B) by striking clause (i) and inserting the
following new clause:
‘‘(i) IN
GENERAL.—This paragraph
shall not apply to any taxable year begin-
ning after December 31, 1992.’’
(9) Subsection (a) of section 58 is amended by
striking paragraph (3) and by redesignating para-
graph (4) as paragraph (3).
(10)(A) Section 59 is amended by striking sub-
sections (b) and (f) and by redesignating subsections
(c), (d), (e), (g), (h), (i), and (j) as subsections (b),
(c), (d), (e), (f), (g), and (h), respectively.
(B) Paragraph (2) of section 59(d), as so redesig-
nated, is amended by striking ‘‘(determined without
regard to section 291)’’.
(C) 
Sections 
173(b), 
174(f)(2), 
263(c),
263A(c)(6), 616(e), 617(i), and 1016(a)(20) are each
amended by striking ‘‘59(e)’’ each place it appears
and inserting ‘‘59(d)’’.
(11) Subsection (d) of section 11 is amended by
striking ‘‘the taxes imposed by subsection (a) and sec-
tion 55’’ and inserting ‘‘the tax imposed by subsection
(a)’’.
(12) Section 12 is amended by striking para-
graph (7).
(13) Paragraph (6) of section 29(b) is amended
to read as follows:
‘‘(6) APPLICATION WITH OTHER CREDITS.—The
credit allowed by subsection (a) for any taxable year
shall not exceed the excess (if any) of the regular tax
for the taxable year reduced by the sum of the credits
allowable under subpart A and section 27. In the case
of a taxpayer other than a corporation, such excess
shall be further reduced (but not below zero) by the
tentative minimum tax for the taxable year.’’
(14) Paragraph (3) of section 30(b) is amended
to read as follows:
‘‘(3) APPLICATION WITH OTHER CREDITS.—The
credit allowed by subsection (a) for any taxable year
shall not exceed the excess (if any) of the regular tax
for the taxable year reduced by the sum of the credits
allowable under subpart A and sections 27 and 29. In
the case of a taxpayer other than a corporation, such
excess shall be further reduced (but not below zero) by
the tentative minimum tax for the taxable year.’’
(15)(A) Paragraph (1) of section 38(c) is amend-
ed to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) CORPORATIONS.—In the case of a cor-
poration, the credit allowed under subsection (a)
for any taxable year shall not exceed the excess
(if any) of the taxpayer’s net income tax over 25
percent of so much of the taxpayer’s net regular
tax liability as exceeds $25,000.
‘‘(B) TAXPAYERS
OTHER
THAN
CORPORA-
TIONS.—In the case of a taxpayer other than a
corporation, the credit allowed under subsection
(a) for any taxable year shall not exceed the ex-
cess (if any) of the taxpayer’s net income tax
over the greater of—
‘‘(i) the tentative minimum tax for the
taxable year, or
‘‘(ii) 25 percent of so much of the tax-
payer’s net regular tax liability as exceeds
$25,000.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) the term ‘net income tax’ means
the sum of the regular tax liability and the
tax imposed by section 55, reduced by the
credits allowable under subparts A and B of
this part, and
‘‘(ii) the term ‘net regular tax liability’
means the regular tax liability reduced by
the sum of the credits allowable under sub-
parts A and B of this part.’’
(B) Clause (ii) of section 38(c)(2)(A) is amended
to read as follows:
‘‘(ii) for purposes of applying para-
graph (1) to such credit—
‘‘(I) the applicable limitation
under paragraph (1) (as modified by
subclause (II) in the case of a taxpayer
other than a corporation) shall be re-
duced by the credit allowed under sub-
section (a) for the taxable year (other
than the empowerment zone employ-
ment credit), and
‘‘(II) in the case of a taxpayer
other than a corporation, 75 percent of
the tentative minimum tax shall be
substituted for the tentative minimum
tax under subparagraph (B)(i) there-
of.’’
(C) Paragraph (3) of section 38(c) is amended
by striking ‘‘subparagraph (B) of’’ each place it ap-
pears.
(16)(A) Subclause (I) of section 53(d)(1)(B)(ii)
is amended by striking ‘‘subsection (b)(1)’’ and in-
serting ‘‘subsection (a)(8)’’.
(B) Clause (iv) of section 53(d)(1)(B) is hereby
repealed.
(17)(A) Part VII of subchapter A of chapter 1 is
hereby repealed.
(B) The table of parts for subchapter A of chap-
ter 1 is amended by striking the item relating to part
VII.
(C) Paragraph (2) of section 26(b) is amended
by striking subparagraph (B) and by redesignating
the succeeding subparagraphs accordingly.
(D) Subsection (c) of section 30A is amended by
striking paragraph (1) and redesignating the suc-
ceeding paragraphs accordingly.
(E) Subsection (a) of section 164 is amended by
striking paragraph (5).
(F) Subsection (a) of section 275 is amended by
striking ‘‘Paragraph (1) shall not apply to the tax
imposed by section 59A.’’
(G) Paragraph (1) of section 882(a) is amended
by striking ‘‘59A,’’.
(H) Paragraph (3) of section 936(a) is amended
by striking subparagraph (A) and redesignating the
succeeding subparagraphs accordingly.
(I) Subsection (a) of section 1561 is amended by
adding ‘‘and’’ at the end of paragraph (2), by strik-
ing ‘‘, and’’ at the end of paragraph (3) and inserting
a period, and by striking paragraph (4).
(J) Subparagraph (A) of section 6425(c)(1) is
amended by adding ‘‘plus’’ at the end of clause (i),
by striking ‘‘plus’’ at the end of clause (ii) and insert-
ing ‘‘over’’, and by striking clause (iii).
(18) Section 382(l) (relating to limitation on net
operating loss carryforwards and certain built-in
losses following ownership change) is amended by
striking paragraph (7) and by redesignating para-
graph (8) as paragraph (7).
(19) Paragraph (2) of section 815(c) (relating to
distributions to shareholders from pre-1984 policy-
holders surplus account) is amended by striking the
last sentence.
(20) Section 847 (relating to special estimated
tax payments) is amended—
(A) in paragraph (9), by striking the last
sentence; and
(B) in paragraph (10), by inserting ‘‘and’’
at the end of subparagraph (A) and by striking
subparagraph (B) and redesignating subpara-
graph (C) as subparagraph (B).
(21) Section 848 (relating to capitalization of
certain policy acquisition expenses) is amended by
striking subsection (i) and by redesignating sub-
section (j) as subsection (i).
(22) Paragraph (1) of section 882(a) (relating to
tax on income of foreign corporations connected with
United States business) is amended by striking ‘‘55,’’.
(23) Paragraph (1) of section 962(a) (relating to
election by individuals to be subject to tax at cor-
porate rates) is amended by striking ‘‘sections 11 and
55’’ and inserting ‘‘section 11’’.
(24) Subsection (a) of section 1561 (relating to
limitations on certain multiple tax benefits in the
case of certain controlled corporations) is amended by
striking the last sentence.
(25) Subparagraph (A) of section 6425(c)(1) (de-
fining income tax liability), as amended by para-
graph (17) is amended to read as follows:
‘‘(A) the tax imposed by section 11 or
1201(a), or subchapter L of chapter 1, whichever
is applicable, over’’.
(26)(A) Paragraph (2) of section 6655(e) is
amended—
(i) by striking ‘‘, alternative minimum tax-
able income, and modified alternative minimum
taxable income’’ each place it appears in sub-
paragraphs (A) and (B)(i), and
(ii) by striking clause (iii) of subparagraph
(B).
(B) Subparagraph (A) of section 6655(g)(1) (re-
lating to failure by corporation to pay estimated in-
come tax), is amended to read as follows:
‘‘(A) the sum of—
‘‘(i) the tax imposed by section 11 or
1201(a), or subchapter L of chapter 1,
whichever applies, plus
‘‘(ii) the tax imposed by section 887,
over’’.
(27) The table of sections for part VI of sub-
chapter A of chapter 1 is amended by striking the
item relating to section 55 and inserting the following
new item:
‘‘Sec. 55. Alternative minimum tax for taxpayers other than cor-
porations.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
(d) REFUND OF UNUSED MINIMUM TAX CREDIT.—
(1) IN GENERAL.—In the case of a corporation—
(A) section 53(c) of the Internal Revenue
Code of 1986 shall not apply to such corpora-
tion’s first taxable year beginning after Decem-
ber 31, 2000, and
(B) for purposes of such Code (other than
section 53 of such Code), the credit allowed by
section 53 of such Code for such first taxable
year shall be treated as if it were allowed by sub-
part C of part IV of subchapter A of chapter 1
of such Code (relating to refundable credits).
(2) 
SPECIAL
RULES
RELATING
TO
CARRYBACKS.—In the case of a carryback of a cor-
poration from a taxable year beginning after Decem-
ber 31, 2000, to a taxable year beginning before Janu-
ary 1, 2001—
(A) the tax imposed by section 55 of such
Code shall not be increased or decreased by rea-
son of such a carryback,
(B) tentative minimum tax shall not be in-
creased or decreased by reason of such a
carryback for purposes of determining the
amount of any credit other than the credit al-
lowed by section 38, and
(C) the amount of such a carryback which
is taken into account in determining tentative
minimum tax for purposes of section 38(c) shall
be the amount of such carryback which is taken
into account in determining regular tax liabil-
ity.
SEC. 104. 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
after September 10, 2001, and before September
11, 2004, subparagraph (A)(i) shall be applied
by substituting ‘5’ for ‘2’ and subparagraph (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.—Subparagraph (A) of sec-
tion 56(b)(1) (relating to general rule defining alternative
tax net operating loss deduction), as amended by section
103, 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 alternate min-
imum taxable income determined with-
out 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
after September 10, 2001, and before
September 11, 2004, or
‘‘(II) alternate minimum taxable
income determined without regard to
such deduction reduced by the amount
determined under clause (i), and’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to net operating losses for taxable years
ending after September 10, 2001.
SEC. 105. 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.’’
(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 II—INDIVIDUAL
PROVISIONS
SEC. 201. 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 .
SEC. 202. REPEAL OF 5-YEAR HOLDING PERIOD REQUIRE-
MENT FOR REDUCED INDIVIDUAL CAPITAL
GAINS RATES.
(a) IN GENERAL.—
(1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each
amended by striking ‘‘10 percent’’ and inserting ‘‘8
percent’’.
(2) The following sections are each amended by
striking ‘‘20 percent’’ and inserting ‘‘18 percent’’:
(A) Section 1(h)(1)(C).
(B) Section 55(b)(3)(C).
(C) Section 1445(e)(1).
(D) 
The 
second 
sentence 
of 
section
7518(g)(6)(A).
(E) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 311 of the Taxpayer
Relief Act of 1997 is repealed.
(2) Section 1(h) is amended—
(A) by striking paragraphs (2) and (9),
(B) 
by 
redesignating 
paragraphs 
(3)
through (8) as paragraphs (2) through (7), re-
spectively, and
(C) by redesignating paragraphs (10), (11),
and (12) as paragraphs (8), (9), and (10), re-
spectively.
(3) Paragraph (3) of section 55(b) is amended by
striking ‘‘In the case of taxable years beginning after
December 31, 2000, rules similar to the rules of sec-
tion 1(h)(2) shall apply for purposes of subpara-
graphs (B) and (C).’’.
(4) Paragraph (7) of section 57(a) is amended
by striking the last sentence and by striking ‘‘42 per-
cent’’ and inserting ‘‘28 percent’’.
(c) TRANSITIONAL
RULES
FOR
TAXABLE
YEARS
WHICH INCLUDE OCTOBER 12, 2001.—For purposes of ap-
plying section 1(h) of the Internal Revenue Code of 1986
in the case of a taxable year which includes October 12,
2001—
(1) The amount of tax determined under sub-
paragraph (B) of section 1(h)(1) of such Code shall be
the sum of—
(A) 8 percent of the lesser of—
(i) the sum of—
(I) the net capital gain taking
into account only gain or loss properly
taken into account for the portion of
the taxable year on or after October 12,
(determined without regard to collect-
ibles gain or loss, gain described in sec-
tion (1)(h)(6)(A)(i) of such Code, and
section 1202 gain), and
(II) the qualified 5-year gain (as
defined in section 1(h)(9) of the Inter-
nal Revenue Code of 1986, as in effect
on the day before the date of the enact-
ment of this Act) properly taken into
account for the portion of the taxable
year before October 12, 2001, or
(ii) the amount on which a tax is de-
termined under such subparagraph (without
regard to this subsection), plus
(B) 10 percent of the excess (if any) of—
(i) the amount on which a tax is deter-
mined under such subparagraph (without
regard to this subsection), over
(ii) the amount on which a tax is de-
termined under subparagraph (A).
(2) The amount of tax determined under sub-
paragraph (C) of section (1)(h)(1) of such Code shall
be the sum of—
(A) 18 percent of the lesser of—
(i) the excess (if any) of the amount of
net capital gain determined under subpara-
graph (A)(i)(I) of paragraph (1) of this sub-
section over the amount on which a tax is
determined under subparagraph (A) of
paragraph (1) of this subsection, or
(ii) the amount on which a tax is de-
termined under such subparagraph (C)
(without regard to this subsection), plus
(B) 20 percent of the excess (if any) of—
(i) the amount on which a tax is deter-
mined under such subparagraph (C) (with-
out regard to this subsection), over
(ii) the amount on which a tax is de-
termined under subparagraph (A) of this
paragraph.
(3) For purposes of applying section 55(b)(3) of
such Code, rules similar to the rules of paragraphs (1)
and (2) of this subsection shall apply.
(4) In applying this subsection with respect to
any pass-thru entity, the determination of when gains
and loss are properly taken into account shall be
made at the entity level.
(5) Terms used in this subsection which are also
used in section 1(h) of such Code shall have the re-
spective meanings that such terms have in such sec-
tion.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as otherwise provided
by this subsection, the amendments made by this sec-
tion shall apply to taxable years ending on or after
October 12, 2001.
(2) WITHHOLDING.—The amendment made by
subsection (a)(2)(C) shall apply to amounts paid
after the date of the enactment of this Act.
(3) ELECTION TO RECOGNIZE GAIN ON ASSESTS
HELD ON JANUARY 1, 2001.—The repeal made by sub-
section (b)(1) shall take effect as if included in section
311 of the Taxpayer Relief Act of 1997, and the Inter-
nal Revenue Code of 1986 shall be applied and ad-
ministered as if subsection (e) of such section 311 had
never been enacted.
(4) SMALL BUSINESS STOCK.—The amendments
made by subsection (b)(4) shall apply to dispositions
on or after October 12, 2001.
SEC. 203. TEMPORARY INCREASE IN DEDUCTION FOR CAP-
ITAL LOSSES OF TAXPAYERS OTHER THAN
CORPORATIONS.
(a) IN GENERAL.—Subsection (b) of section 1211 (re-
lating to limitation on capital losses for taxpayers other
than corporations) is amended by adding at the end the
following flush sentence:
‘‘Paragraph (1) shall be applied by substituting ‘$4,000’ for
‘$3,000’ and ‘$2,000’ for ‘$1,500’ in the case of taxable
years beginning in 2001, and by substituting ‘$5,000’ for
‘$3,000’ and ‘$2,500’ for ‘$1,500’ in the case of taxable
years beginning in 2002.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2000.
SEC. 204. TEMPORARY EXPANSION OF PENALTY-FREE RE-
TIREMENT 
PLAN 
DISTRIBUTIONS 
FOR
HEALTH INSURANCE PREMIUMS OF UNEM-
PLOYED INDIVIDUALS.
(a) IN
GENERAL.—Subparagraph (D) of section
72(t)(2) is amended by adding at the end the following new
clause:
‘‘(iv) SPECIAL
RULES
FOR
INDIVID-
UALS
RECEIVING
UNEMPLOYMENT
COM-
PENSATION AFTER SEPTEMBER 10, 2001, AND
BEFORE JANUARY 1, 2003.—In the case of an
individual who receives unemployment com-
pensation for 4 consecutive weeks after Sep-
tember 10, 2001, and before January 1,
2003—
‘‘(I) clause (i) shall apply to dis-
tributions from all qualified retirement
plans (as defined in section 4974(c)),
and
‘‘(II) such 4 consecutive weeks
shall be substituted for the 12 consecu-
tive weeks referred to in subclause (I)
of clause (i).’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions after the date of the en-
actment of this Act.
TITLE III—EXTENSIONS OF
CERTAIN EXPIRING PROVISIONS
Subtitle A—Two-Year 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(f) of the Economic Growth and Tax
Relief Reconciliation Act of 2001 shall not apply to
taxable years beginning during 2002 and 2003.
(c) TECHNICAL CORRECTION.—Section 24(d)(1)(B) is
amended by striking ‘‘amount of credit allowed by this sec-
tion’’ and inserting ‘‘aggregate amount of credits allowed
by this subpart’’.
(d) EFFECTIVE DATES.—
(1) The amendments made by subsections (a)
and (b) shall apply to taxable years beginning after
December 31, 2001.
(2) The amendment made by subsection (c) shall
apply to taxable years beginning after December 31,
2000.
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 take effect on the date of the enactment of this
Act.
SEC. 303. CREDIT FOR ELECTRICITY PRODUCED FROM RE-
NEWABLE RESOURCES.
(a) IN GENERAL.—Subparagraphs (A), (B), and (C)
of section 45(c)(3) are each amended by striking ‘‘2002’’
and inserting ‘‘2004’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall take effect on the date of the enactment
of this Act.
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 take effect on the date of the enactment
of this Act.
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 take effect on 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 take effect on the date of the enactment
of this Act.
(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 the date of the enactment of this
Act.
Subtitle C—Permanent Extensions
SEC. 331. SUBPART F EXEMPTION FOR ACTIVE FINANCING.
(a) IN GENERAL.—
(1) Section 953(e)(10) is amended—
(A) by striking ‘‘, and before January 1,
2002,’’, and
(B) by striking the second sentence.
(2) Section 954(h)(9) is amended by striking ‘‘,
and before January 1, 2002,’’.
(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.—The amount
of the reserve under clause (i) shall be the
foreign statement reserve for the contract
(less any catastrophe, deficiency, equali-
zation, or similar reserves), if, pursuant to
a ruling request submitted by the taxpayer,
the Secretary determines that the factors
taken into account in determining the for-
eign 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.
Subtitle D—Other Provisions
SEC. 341. 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.—The amendment made by this
section shall apply to discharges of indebtedness after Octo-
ber 11, 2001, in taxable years ending after such date.
SEC. 342. 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 only if such computation or
formula clearly reflects the taxpayer’s experi-
ence.’’.
(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.
TITLE IV—SUPPLEMENTAL
REBATE; OTHER PROVISIONS
SEC. 401. SUPPLEMENTAL REBATE.
(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 REBATE.—
‘‘(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)’’.
(3) Paragraph (3) of section 6428(e) is amended
by striking ‘‘December 31, 2001’’ and inserting ‘‘the
date of the enactment of the Economic Security and
Recovery Act of 2001’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 402. 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)(A)) from
the Federal unemployment account to the account of each
State in the Unemployment Trust Fund the amount deter-
mined with respect to such State under paragraph (2).
‘‘(2) 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—
‘‘(A) 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 section
402(a)(1) of the Economic Security and Recovery Act
of 2001 had been enacted before the close of fiscal year
2001, minus
‘‘(B) the amount which was in fact transferred
under this section to such account at the beginning of
fiscal year 2002.
‘‘(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 regular or additional compensation for individuals
eligible for regular compensation under the unemployment
compensation law of such State.
‘‘(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.
‘‘(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 benefits (de-
scribed in subparagraph (B)(i)) which could have been paid
with respect to that amount.
‘‘(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—
‘‘(i) beginning after the date of enactment of this
subsection, and
‘‘(ii) ending on or before March 11, 2003.
‘‘(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—
‘‘(A) shall be made on such date as the Secretary
of Labor (in consultation with the Secretary of the
Treasury) shall determine, but in no event later than
10 days after the date of enactment of this subsection,
and
‘‘(B) may, notwithstanding any other provision
of this subsection, be made only to the extent that they
do not to exceed—
‘‘(i) the balance in the Federal unemploy-
ment account as of the date determined under
subparagraph (A), or
‘‘(ii) the total amount that was transferred
under this section to the Federal unemployment
account at the beginning of fiscal year 2002,
whichever is less.’’
(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)(A)’’ for ‘‘October 1 of any fiscal
year’’.
(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)(A))’’ 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.
TITLE V—HEALTH CARE ASSIST-
ANCE FOR THE UNEMPLOYED
SEC. 501. HEALTH CARE ASSISTANCE FOR THE UNEM-
PLOYED.
Title XX of the Social Security Act (42 U.S.C. 1397–
1397f) is amended by adding at the end the following:
‘‘SEC. 2008. GRANTS FOR HEALTH CARE ASSISTANCE FOR
THE UNEMPLOYED.
‘‘(a) FUNDING.—For purposes of section 2003, the
amount specified in section 2003(c) for fiscal year 2002 is
increased by $3,000,000,000.
‘‘(b) USE OF FUNDS.—Notwithstanding any other pro-
vision of this title, to the extent that an amount paid to
a State under section 2002 is attributable to funds made
available by reason of subsection (a) of this section—
‘‘(1) the State shall use the amount to assist an
unemployed individual who is not eligible for Federal
health coverage to purchase health care coverage for
the individual or any member of the family of the in-
dividual who is not so eligible; and
‘‘(2) the amount—
‘‘(A) shall be used to supplement, not sup-
plant, any other Federal, State, or local funds
that are used for the provision of health care cov-
erage; and
‘‘(B) may not be included in determining
the amount of non-Federal contributions re-
quired under any program.
‘‘(c) DEFINITIONS.—In this section:
‘‘(1) UNEMPLOYED INDIVIDUAL.—The term ‘un-
employed individual’ means an individual who—
‘‘(A) is without a job (determined in accord-
ance with the criteria used by the Bureau of
Labor Statistics of the Department of Labor in
defining individuals as unemployed);
‘‘(B) is seeking and available for work; and
‘‘(C) has or had a benefit year (within the
meaning of section 205 of the Federal-State Ex-
tended Unemployment Compensation Act of
1970) beginning on or after January 1, 2001.
‘‘(2) FEDERAL HEALTH COVERAGE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘Federal health coverage’
means coverage under any medical care program
described in—
‘‘(i) title XVIII, XIX, or XXI of this
Act (other than under section 1928);
‘‘(ii) chapter 55 of title 10, United
States Code;
‘‘(iii) chapter 17 of title 38, United
States Code;
‘‘(iv) chapter 89 of title 5, United
States Code (other than coverage which is
comparable to continuation coverage under
section 4980B of the Internal Revenue Code
of 1986); or
‘‘(v) the Indian Health Care Improve-
ment Act.
‘‘(B) SPECIAL RULE.—Such term does not
include coverage under a qualified long-term
care insurance contract.’’.
Union Calendar No. 153
107TH CONGRESS
1ST SESSION
H.R. 3090
[Report No. 107–251]
A BILL
To provide tax incentives for economic recovery.
OCTOBER 17, 2001
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union,
and ordered to be printed