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.
‘‘(3) REQUIREMENT
TO
USE
STRAIGHT
LINE
METHOD.—The applicable depreciation method under
section 168 shall be the straight line method in the
case of qualified leasehold improvement property.
‘‘(4) 9-YEAR RECOVERY PERIOD UNDER ALTER-
NATIVE SYSTEM.—For purposes of section 168(g), the
class life of qualified leasehold improvement property
shall be 9 years.
‘‘(c) INCREASE IN EXPENSING UNDER SECTION 179.—
‘‘(1) IN
GENERAL.—For purposes of section
179—
‘‘(A) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(i) $35,000, or
‘‘(ii) the cost of section 179 property
which is qualified New York Liberty Zone
property placed in service during the tax-
able year, and
‘‘(B) the amount taken into account under
section 179(b)(2) with respect to any section 179
property which is qualified New York Liberty
Zone property shall be 50 percent of the cost
thereof.
‘‘(2) RECAPTURE.—Rules similar to the rules
under section 179(d)(10) shall apply with respect to
any qualified New York Liberty Zone property which
ceases to be used in the New York Liberty Zone.
‘‘(d) TAX-EXEMPT BOND FINANCING.—
‘‘(1) IN GENERAL.—For purposes of this title,
any qualified New York Liberty Bond shall be treated
as an exempt facility bond.
‘‘(2) QUALIFIED NEW YORK LIBERTY BOND.—For
purposes of this subsection, the term ‘qualified New
York Liberty Bond’ means any bond issued as part
of an issue if—
‘‘(A) 95 percent or more of the net proceeds
(as defined in section 150(a)(3)) of such issue
are to be used for qualified project costs,
‘‘(B) such bond is issued by the State of
New York or any political subdivision thereof,
‘‘(C) the Governor of New York designates
such bond for purposes of this section, and
‘‘(D) such bond is issued during calendar
year 2002, 2003, or 2004.
‘‘(3) LIMITATION ON AMOUNT OF BONDS DES-
IGNATED.—The maximum aggregate face amount of
bonds which may be designated under this subsection
shall not exceed $15,000,000,000.
‘‘(4) QUALIFIED PROJECT COSTS.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
project costs’ means the cost of acquisition, con-
struction, reconstruction, and renovation of—
‘‘(i) nonresidential real property and
residential rental property (including fixed
tenant improvements associated with such
property) located in the New York Liberty
Zone, and
‘‘(ii) public utility property located in
the New York Liberty Zone.
‘‘(B) COSTS FOR CERTAIN PROPERTY OUT-
SIDE ZONE INCLUDED.—Such term includes the
cost of acquisition, construction, reconstruction,
and renovation of nonresidential real property
(including fixed tenant improvements associated
with such property) located outside the New York
Liberty Zone but within the City of New York,
New York, if such property is part of a project
which consists of at least 100,000 square feet of
usable office or other commercial space located in
a single building or multiple adjacent buildings.
‘‘(C) LIMITATIONS.—Such term shall not
include—
‘‘(i) costs for property located outside
the New York Liberty Zone to the extent
such costs exceed $7,000,000,000,
‘‘(ii) costs with respect to residential
rental property to the extent such costs ex-
ceed $3,000,000,000, and
‘‘(iii) costs with respect to property
used for retail sales of tangible property to
the extent such costs exceed $1,500,000,000.
‘‘(D) MOVABLE
FIXTURES
AND
EQUIP-
MENT.—Such term shall not include costs with
respect to movable fixtures and equipment.
‘‘(5) SPECIAL RULES.—In applying this title to
any qualified New York Liberty Bond, the following
modifications shall apply:
‘‘(A) Section 146 (relating to volume cap)
shall not apply.
‘‘(B) Section 147(c) (relating to limitation
on use for land acquisition) shall be determined
by reference to the aggregate authorized face
amount of all qualified New York Liberty Bonds
rather than the net proceeds of each issue.
‘‘(C) Section 147(d) (relating to acquisition
of existing property not permitted) shall be ap-
plied by substituting ‘50 percent’ for ‘15 percent’
each place it appears.
‘‘(D) Section 148(f)(4)(C) (relating to ex-
ception from rebate for certain proceeds to be
used to finance construction expenditures) shall
apply to construction proceeds of bonds issued
under this section.
‘‘(E) Financing provided by such a bond
shall not be taken into account under section
168(g)(5)(A) with respect to property substan-
tially all of the use of which is in the New York
Liberty Zone and is in the active conduct of a
trade or business by the taxpayer in such Zone.
‘‘(F) Repayments of principal on financing
provided by the issue—
‘‘(i) may not be used to provide financ-
ing, and
‘‘(ii) are used not later than the close
of the 1st semiannual period beginning after
the date of the repayment to redeem bonds
which are part of such issue.
The requirement of clause (ii) shall be treated as
met with respect to amounts received within 10
years after the date of issuance of the issue (or,
in the case of refunding bond, the date of
issuance of the original bond) if such amounts
are used by the close of such 10 years to redeem
bonds which are part of such issue.
‘‘(G) Section 57(a)(5) shall not apply.
‘‘(6) SEPARATE ISSUE TREATMENT OF PORTIONS
OF AN ISSUE.—This subsection shall not apply to the
portion of the proceeds of an issue which (if issued as
a separate issue) would be treated as a qualified bond
or as a bond that is not a private activity bond (de-
termined without regard to subsection (a)), if the
issuer elects to so treat such portion.
‘‘(e) EXTENSION OF REPLACEMENT PERIOD FOR NON-
RECOGNITION OF GAIN.—Notwithstanding subsections (g)
and (h) of section 1033, clause (i) of section 1033(a)(2)(B)
shall be applied by substituting ‘5 years’ for ‘2 years’ with
respect to property which is compulsorily or involuntarily
converted as a result of the terrorist attacks on September
11, 2001, in the New York Liberty Zone but only if substan-
tially all of the use of the replacement property is in the
City of New York, New York.
‘‘(f) NEW YORK LIBERTY ZONE.—For purposes of this
section, the term ‘New York Liberty Zone’ means the area
located on or south of Canal Street, East Broadway (east
of its intersection with Canal Street), or Grand Street (east
of its intersection with East Broadway) in the Borough of
Manhattan in the City of New York, New York.’’
(b) CLERICAL AMENDMENT.—The table of subchapters
for chapter 1 is amended by adding at the end the following
new item:
‘‘Subchapter Y. New York Liberty Zone Benefits.’’
TITLE IV—DISCLOSURE OF TAX
INFORMATION IN TERRORISM
AND NATIONAL SECURITY IN-
VESTIGATIONS
SEC. 401. DISCLOSURE OF TAX INFORMATION IN TER-
RORISM AND NATIONAL SECURITY INVES-
TIGATIONS.
(a) DISCLOSURE WITHOUT A REQUEST OF INFORMA-
TION RELATING TO TERRORIST ACTIVITIES, ETC.—Para-
graph (3) of section 6103(i) (relating to disclosure of return
information to apprise appropriate officials of criminal ac-
tivities or emergency circumstances) is amended by adding
at the end the following new subparagraph:
‘‘(C) TERRORIST ACTIVITIES, ETC.—
‘‘(i) IN GENERAL.—Except as provided
in paragraph (6), the Secretary may dis-
close in writing return information (other
than taxpayer return information) that
may be related to a terrorist incident,
threat, or activity to the extent necessary to
apprise the head of the appropriate Federal
law enforcement agency responsible for in-
vestigating or responding to such terrorist
incident, threat, or activity. The head of the
agency may disclose such return informa-
tion to officers and employees of such agen-
cy to the extent necessary to investigate or
respond to such terrorist incident, threat, or
activity.
‘‘(ii) DISCLOSURE
TO
THE
DEPART-
MENT OF JUSTICE.—Returns and taxpayer
return information may also be disclosed to
the Attorney General under clause (i) to the
extent necessary for, and solely for use in
preparing, an application under paragraph
(7)(D).
‘‘(iii) TAXPAYER IDENTITY.—For pur-
poses of this subparagraph, a taxpayer’s
identity shall not be treated as taxpayer re-
turn information.
‘‘(iv) 
TERMINATION.—No 
disclosure
may be made under this subparagraph after
December 31, 2003.’’.
(b) DISCLOSURE UPON REQUEST OF INFORMATION
RELATING TO TERRORIST ACTIVITIES, ETC.—Subsection
(i) of section 6103 (relating to disclosure to Federal officers
or employees for administration of Federal laws not relat-
ing to tax administration) is amended by redesignating
paragraph (7) as paragraph (8) and by inserting after
paragraph (6) the following new paragraph:
‘‘(7) DISCLOSURE UPON REQUEST OF INFORMA-
TION RELATING TO TERRORIST ACTIVITIES, ETC.—
‘‘(A) DISCLOSURE TO LAW ENFORCEMENT
AGENCIES.—
‘‘(i) IN GENERAL.—Except as provided
in paragraph (6), upon receipt by the Sec-
retary of a written request which meets the
requirements of clause (iii), the Secretary
may disclose return information (other than
taxpayer return information) to officers and
employees of any Federal law enforcement
agency who are personally and directly en-
gaged in the response to or investigation of
any terrorist incident, threat, or activity.
‘‘(ii) DISCLOSURE
TO
STATE
AND
LOCAL LAW ENFORCEMENT AGENCIES.—The
head of any Federal law enforcement agency
may disclose return information obtained
under clause (i) to officers and employees of
any State or local law enforcement agency
but only if such agency is part of a team
with the Federal law enforcement agency in
such response or investigation and such in-
formation is disclosed only to officers and
employees who are personally and directly
engaged in such response or investigation.
‘‘(iii) 
REQUIREMENTS.—A 
request
meets the requirements of this clause if—
‘‘(I) the request is made by the
head of any Federal law enforcement
agency (or his delegate) involved in the
response to or investigation of any ter-
rorist incident, threat, or activity, and
‘‘(II) the request sets forth the spe-
cific reason or reasons why such disclo-
sure may be relevant to a terrorist in-
cident, threat, or activity.
‘‘(iv) LIMITATION ON USE OF INFORMA-
TION.—Information disclosed under this
subparagraph shall be solely for the use of
the officers and employees to whom such in-
formation is disclosed in such response or
investigation.
‘‘(B) DISCLOSURE TO INTELLIGENCE AGEN-
CIES.—
‘‘(i) IN GENERAL.—Except as provided
in paragraph (6), upon receipt by the Sec-
retary of a written request which meets the
requirements of clause (ii), the Secretary
may disclose return information (other than
taxpayer return information) to those offi-
cers and employees of the Department of
Justice, the Department of the Treasury,
and other Federal intelligence agencies who
are personally and directly engaged in the
collection or analysis of intelligence and
counterintelligence information or inves-
tigation concerning any terrorist incident,
threat, or activity. For purposes of the pre-
ceding sentence, the information disclosed
under the preceding sentence shall be solely
for the use of such officers and employees in
such investigation, collection, or analysis.
‘‘(ii) 
REQUIREMENTS.—A 
request
meets the requirements of this subparagraph
if the request—
‘‘(I) is made by an individual de-
scribed in clause (iii), and
‘‘(II) sets forth the specific reason
or reasons why such disclosure may be
relevant to a terrorist incident, threat,
or activity.
‘‘(iii) REQUESTING INDIVIDUALS.—An
individual described in this subparagraph
is an individual—
‘‘(I) who is an officer or employee
of the Department of Justice or the De-
partment of the Treasury who is ap-
pointed by the President with the ad-
vice and consent of the Senate or who
is the Director of the United States Se-
cret Service, and
‘‘(II) who is responsible for the
collection and analysis of intelligence
and 
counterintelligence 
information
concerning 
any 
terrorist 
incident,
threat, or activity.
‘‘(iv) TAXPAYER IDENTITY.—For pur-
poses of this subparagraph, a taxpayer’s
identity shall not be treated as taxpayer re-
turn information.
‘‘(C) DISCLOSURE
UNDER
EX
PARTE
OR-
DERS.—
‘‘(i) IN GENERAL.—Except as provided
in paragraph (6), any return or return in-
formation with respect to any specified tax-
able period or periods shall, pursuant to
and upon the grant of an ex parte order by
a Federal district court judge or magistrate
under clause (ii), be open (but only to the
extent necessary as provided in such order)
to inspection by, or disclosure to, officers
and employees of any Federal law enforce-
ment agency or Federal intelligence agency
who are personally and directly engaged in
any investigation, response to, or analysis
of intelligence and counterintelligence infor-
mation concerning any terrorist incident,
threat, or activity. Return or return infor-
mation opened to inspection or disclosure
pursuant to the preceding sentence shall be
solely for the use of such officers and em-
ployees in the investigation, response, or
analysis, and in any judicial, administra-
tive, or grand jury proceedings, pertaining
to such terrorist incident, threat, or activ-
ity.
‘‘(ii) APPLICATION FOR ORDER.—The
Attorney General, the Deputy Attorney Gen-
eral, the Associate Attorney General, any
Assistant Attorney General, or any United
States attorney may authorize an applica-
tion to a Federal district court judge or
magistrate for the order referred to in clause
(i). Upon such application, such judge or
magistrate may grant such order if he de-
termines on the basis of the facts submitted
by the applicant that—
‘‘(I) there is reasonable cause to
believe, based upon information be-
lieved to be reliable, that the return or
return information may be relevant to
a matter relating to such terrorist inci-
dent, threat, or activity, and
‘‘(II) the return or return infor-
mation is sought exclusively for use in
a Federal investigation, analysis, or
proceeding concerning any terrorist in-
cident, threat, or activity.
‘‘(D) SPECIAL RULE FOR EX PARTE DISCLO-
SURE BY THE IRS.—
‘‘(i) IN GENERAL.—Except as provided
in paragraph (6), the Secretary may au-
thorize an application to a Federal district
court judge or magistrate for the order re-
ferred to in subparagraph (C)(i). Upon such
application, such judge or magistrate may
grant such order if he determines on the
basis of the facts submitted by the applicant
that the requirements of subparagraph
(C)(ii)(I) are met.
‘‘(ii) LIMITATION ON USE OF INFORMA-
TION.—Information disclosed under clause
(i)—
‘‘(I) may be disclosed only to the
extent necessary to apprise the head of
the appropriate Federal law enforce-
ment agency responsible for inves-
tigating or responding to a terrorist
incident, threat, or activity, and
‘‘(II) shall be solely for use in a
Federal investigation, analysis, or pro-
ceeding concerning any terrorist inci-
dent, threat, or activity.
The head of such Federal agency may dis-
close such information to officers and em-
ployees of such agency to the extent nec-
essary to investigate or respond to such ter-
rorist incident, threat, or activity.
‘‘(E) TERMINATION.—No disclosure may be
made under this paragraph after December 31,
2003.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 6103(a)(2) is amended by inserting
‘‘any local law enforcement agency receiving informa-
tion under subsection (i)(7)(A),’’ after ‘‘State,’’.
(2) Section 6103(b) is amended by adding at the
end the following new paragraph:
‘‘(11) TERRORIST INCIDENT, THREAT, OR ACTIV-
ITY.—The term ‘terrorist incident, threat, or activity’
means an incident, threat, or activity involving an
act of domestic terrorism (as defined in section
2331(5) of title 18, United States Code) or inter-
national terrorism (as defined in section 2331(1) of
such title).’’.
(3) The heading of section 6103(i)(3) is amended
by inserting ‘‘OR TERRORIST’’ after ‘‘CRIMINAL’’.
(4) 
Paragraph 
(4) 
of 
section 
6103(i) 
is
amended—
(A) in subparagraph (A) by inserting ‘‘or
(7)(C)’’ after ‘‘paragraph (1)’’, and
(B) in subparagraph (B) by striking ‘‘or
(3)(A)’’ and inserting ‘‘(3)(A) or (C), or (7)’’.
(5) 
Paragraph 
(6) 
of 
section 
6103(i) 
is
amended—
(A) by striking ‘‘(3)(A)’’ and inserting
‘‘(3)(A) or (C)’’, and
(B) by striking ‘‘or (7)’’ and inserting ‘‘(7),
or (8)’’.
(6) Section 6103(p)(3) is amended—
(A) in subparagraph (A) by striking
‘‘(7)(A)(ii)’’ and inserting ‘‘(8)(A)(ii)’’, and
(B) in subparagraph (C) by striking
‘‘(i)(3)(B)(i)’’ and inserting ‘‘(i)(3)(B)(i) or
(7)(A)(ii)’’.
(7) Section 6103(p)(4) is amended—
(A) in the matter preceding subparagraph
(A)—
(i) by striking ‘‘or (5),’’ the first place
it appears and inserting ‘‘(5), or (7),’’, and
(ii) by striking ‘‘(i)(3)(B)(i),’’ and in-
serting ‘‘(i)(3)(B)(i) or (7)(A)(ii),’’, and
(B) in subparagraph (F)(ii) by striking ‘‘or
(5),’’ the first place it appears and inserting ‘‘(5)
or (7),’’.
(8) Section 6103(p)(6)(B)(i) is amended by
striking ‘‘(i)(7)(A)(ii)’’ and inserting ‘‘(i)(8)(A)(ii)’’.
(9) Section 6105(b) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (2),
(B) by striking ‘‘paragraphs (1) or (2)’’ in
paragraph (3) and inserting ‘‘paragraph (1),
(2), or (3)’’,
(C) by redesignating paragraph (3) as
paragraph (4), and
(D) by inserting after paragraph (2) the fol-
lowing new paragraph:
‘‘(3) to the disclosure of tax convention informa-
tion on the same terms as return information may be
disclosed under paragraph (3)(C) or (7) of section
6103(i), except that in the case of tax convention in-
formation provided by a foreign government, no dis-
under section 201 of the Social Security Act (42
U.S.C. 401), the Secretary shall transfer, not less fre-
quently than quarterly, from the general revenues of
the Federal Government an amount sufficient so as to
ensure that the income and balances of such trust
funds are not reduced as a result of the enactment of
this Act.
Attest:
Clerk.
107TH CONGRESS
1ST SESSION
H.R. 2884
HOUSE AMENDMENT TO
SENATE AMENDMENTS