I
107TH CONGRESS
1ST SESSION
H. R. 1669
To provide incentives to encourage private sector efforts to reduce earthquake
losses, to establish a national disaster mitigation program, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 1, 2001
Mr. THOMPSON of California (for himself, Mr. LEWIS of California, Mr. BACA,
Mr. 
BERMAN, 
Mrs. 
BONO, 
Mr. 
CALVERT, 
Mr. 
CONDIT, 
Mr.
CUNNINGHAM, Mrs. DAVIS of California, Mr. DOOLITTLE, Mr. DREIER,
Mr. FILNER, Ms. HARMAN, Mr. HERGER, Mr. HONDA, Mr. HORN, Mr.
HUNTER, Mr. INSLEE, Mr. ISSA, Ms. LOFGREN, Mr. GEORGE MILLER
of California, Mrs. NAPOLITANO, Mr. OSE, Mr. RADANOVICH, Ms.
SANCHEZ, Mr. SHERMAN, Mrs. TAUSCHER, Mr. WAXMAN, Ms. WOOLSEY,
Mr. MATSUI, Ms. PELOSI, Mr. BLUMENAUER, Mr. SCHIFF, Mrs. CAPPS,
Mr. LANTOS, Ms. WATERS, Ms. LEE, Ms. ESHOO, Mr. THOMAS, Mr.
FARR of California, and Mr. MCKEON) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committees on Financial Services, and Science, for a period
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To provide incentives to encourage private sector efforts to
reduce earthquake losses, to establish a national disaster
mitigation program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Earthquake Loss Re-
duction Act of 2001’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—Congress finds the following:
(1) After 23 years of research funded by the
National Earthquake Hazards Reduction Program,
a substantial body of knowledge exists about earth
sciences, geotechnical, and structural engineering
and human behavior relating earthquakes.
(2) The foremost challenge as we enter the 21st
century is putting this knowledge to work by reduc-
ing future losses to improve the safety of Americans
and the performance of State and local government
facilities and private buildings and facilities.
(3) Earthquakes and tsunamis cause great dan-
ger to human life and property throughout the
United States and continue to threaten Americans
significantly in over 40 States and territories.
(4) Too few States and local communities have
sufficiently identified and assessed their risk and im-
plemented adequate measures to reduce losses from
such disasters and to ensure that their critical public
infrastructure and facilities will continue to function
after the disaster.
(5) Too much of the Nation’s stocks of housing
and commercial buildings remain inherently vulner-
able to earthquake shaking. Future losses in these
facilities can be lessened using currently feasible
technology.
(6) Too much of local government infrastruc-
ture remain at risk and are likely to be non-func-
tional in the aftermath of foreseeable earthquake
events at the time when the services they provide are
critically necessary.
(7) Federal, State and local government ex-
penditures for disaster assistance and recovery have
increased without commensurate reduction in the
likelihood of future losses from such earthquakes.
(8) Feasible techniques for reducing future
earthquake losses are readily available.
(9) Without economic incentives, it is unlikely
that States and local communities and the public
will be able to implement available measures to re-
duce losses and ensure continued functionality of
their infrastructure.
(b) PURPOSE.—It is the purpose of this Act to estab-
lish a national disaster mitigation program that—
(1) reduces the loss of life and property, human
suffering, economic disruption, and disaster assist-
ance costs resulting from earthquakes;
(2) offers financial incentives to encourage pri-
vate sector efforts to reduce earthquake losses;
(3) provides matching funds to encourage and
assist States and local governments and the private
sector in their efforts to implement measures de-
signed to ensure the continued functionality of pub-
lic infrastructure, commerce, and habitation after
earthquakes; and
(4) creates Federal, State and local government
partnerships to reduce the vulnerability of public in-
frastructure, commercial enterprises, and residential
buildings to earthquakes.
SEC. 3. NONREFUNDABLE CREDIT FOR EXPENSES RE-
LATED TO SEISMIC RETROFIT OF PRINCIPAL
RESIDENCE.
(a) GENERAL RULE.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25A the following:
‘‘SEC. 25B. EXPENSES RELATED TO SEISMIC RETROFIT OF
PRINCIPAL RESIDENCE.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to
50 percent of so much of the qualified seismic retrofit ex-
penses of the taxpayer for the taxable year as do not ex-
ceed $6,000.
‘‘(b) QUALIFIED SEISMIC RETROFIT EXPENSES.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified seismic
retrofit expenses’ means amounts paid or incurred
by the taxpayer during the taxable year in relation
to any seismic retrofit construction of the principal
residence of the taxpayer.
‘‘(2) SEISMIC RETROFIT CONSTRUCTION.—The
term ‘seismic retrofit construction’ means any addi-
tion or improvement—
‘‘(A) which is certified by the State dis-
aster agency or other applicable agency—
‘‘(i) as resulting in the mitigation of
the risk of damage to existing property
from an earthquake, and
‘‘(ii) as being in addition to any addi-
tion or improvement required by any State
or local law with respect to such property,
and
‘‘(B) which is placed in service at least 5
years after the date the building is first placed
in service.
Such term does not include the cost of acquiring
such property (or any interest therein).
‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used
in section 121.
‘‘(c) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under any other provision of this chapter
with respect to any amount of qualified seismic retrofit
expenses taken into account under subsection (a).
‘‘(d) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect
to any residence, the basis of such residence shall be re-
duced by the amount of the credit so allowed.’’.
(b) CONFORMING AMENDMENTS.—
(1) The table of sections for subpart A of part
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after the
item relating to section 25A the following new item:
‘‘Sec. 25B. Expenses related to seismic retrofit of principal resi-
dence.’’.
(2) Subsection (a) of section 1016 of such Code
is amended by striking ‘‘and’’ at the end of para-
graph (26), by striking the period at the end of
paragraph (27) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(28) in the case of a residence with respect to
which a credit was allowed under section 25B, to the
extent provided in section 25B(d).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid or incurred in
taxable years beginning after December 31, 2000.
SEC. 4. RECOVERY PERIOD FOR DEPRECIATION OF CER-
TAIN SEISMIC RETROFIT EXPENSES.
(a) TREATMENT
AS 5-YEAR PROPERTY.—Section
168(e)(3)(B) of the Internal Revenue Code of 1986 (relat-
ing to 5-year property) is amended by striking ‘‘and’’ at
the end of clause (v), by striking the period and inserting
‘‘, and’’ at the end of clause (vi), and by inserting after
clause (vi) the following new clause:
‘‘(vii) any qualified seismic retrofit
property.’’.
(b) DEFINITION OF QUALIFIED SEISMIC RETROFIT
PROPERTY.—Section 168(i) of the Internal Revenue Code
of 1986 (relating to definitions and special rules) is
‘‘(ii) which is placed in service at least
5 years after the date the building is first
placed in service.
Such term does not include the cost of acquir-
ing such property (or any interest therein).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualified seismic retrofit prop-
erty placed in service after December 31, 2000.
SEC. 5. QUALIFIED SEISMIC RETROFITTING BONDS.
(a) IN GENERAL.— Section 144 of the Internal Rev-
enue Code of 1986 (relating to qualified small issue bond;
qualified student loan bond; qualified redevelopment bond)
is amended by adding at the end the following new sub-
section:
‘‘(d) QUALIFIED SEISMIC RETROFITTING BOND.—
For purposes of this part—
‘‘(1) IN GENERAL.—The term ‘qualified seismic
retrofitting bond’ means any bond issued as part of
an issue 95 percent or more of the net proceeds of
which are to be used—
‘‘(A) for seismic retrofitting expenditures,
and
‘‘(B) in a manner which meets the require-
ments of paragraph (3).
‘‘(2) SEISMIC RETROFITTING EXPENDITURE.—
For purposes of paragraph (1), the term ‘seismic
retrofitting expenditure’ means any amount properly
chargeable to capital account—
‘‘(A) which is certified by the State dis-
aster agency or other applicable agency—
‘‘(i) as resulting in the mitigation of
the risk of damage to existing property
from an earthquake, and
‘‘(ii) as being in addition to any addi-
tion or improvement required by any State
or local law with respect to such property,
and
‘‘(B) which is placed in service at least 5
years after the date the building is first placed
in service.
Such term does not include the cost of acquiring
such property (or any interest therein).
‘‘(3) USE OF PROCEEDS REQUIREMENTS.—The
use of the proceeds of an issue meets the require-
ments of this paragraph if within the 26-month pe-
riod beginning with the date of issue—
‘‘(A) at least 95 percent of the net pro-
ceeds of such issue are used for seismic retro-
fitting expenditures or are used to finance 1 or
more loans to ultimate borrowers for such ex-
penditures, or
‘‘(B) to the extent not so used under sub-
paragraph (A), such proceeds in excess of
$10,000 are used to redeem bonds which are
part of such issue.’’.
(b) BONDS TREATED AS QUALIFIED BONDS.—Para-
graph (1) of section 141(e) of the Internal Revenue Code
of 1986 (defining qualified bond) is amended by striking
‘‘or’’ at the end of subparagraph (F), by redesignating
subparagraph (G) as subparagraph (H), and by inserting
after subparagraph (F) the following new subparagraph:
‘‘(G) a qualified seismic retrofitting bond,
or’’.
(c) BONDS INCLUDED FOR PURPOSES OF SMALL
ISSUER EXEMPTION STATUS.—Subclause (I) of section
265(b)(3)(C)(ii) of the Internal Revenue Code of 1986 (re-
lating to obligations not taken into account in determining
status as qualified small issuer) is amended by inserting
‘‘, or a qualified seismic retrofitting bond, as defined in
section 144(d)(1)’’ after ‘‘section 145’’.
(d) EXCEPTION
FROM
VOLUME
CAP.—Section
146(g) of the Internal Revenue Code of 1986 (relating to
exception for certain bonds) is amended by striking ‘‘and’’
at the end of paragraph (3), by striking the period at the
end of paragraph (4) and inserting a comma, and by add-
ing after paragraph (4) the following new paragraphs:
‘‘(5) any qualified mortgage bond if 95 percent
or more of the net proceeds of the bond are to be
used to provide home improvement loans in connec-
tion with seismic retrofitting expenditures (as de-
fined in section 144(d)(2) without regard to the cap-
ital account requirement), and
‘‘(6) any qualified seismic retrofitting bond.’’.
(e) PROCEEDS
OF MORTGAGE REVENUE BONDS
USED IN CONNECTION WITH SEISMIC RETROFITTING.—
(1) IN
GENERAL.—Paragraph (4) of section
143(k) of the Internal Revenue Code of 1986 (relat-
ing to other definitions and special rules for quali-
fied mortgage bonds) is amended to read as follows:
‘‘(4) QUALIFIED HOME IMPROVEMENT LOAN.—
The term ‘qualified home improvement loan’
means—
‘‘(A) the financing (in an amount which
does not exceed $15,000)—
‘‘(i) of alterations, repairs, and im-
provements on or in connection with an ex-
isting residence by the owner thereof, but
‘‘(ii) only for such items as substan-
tially protect or improve the basic livability
or energy efficiency of the property, and
‘‘(B) the financing (in an amount which
does not exceed $20,000) of seismic retrofitting
expenditures (as defined in section 144(d)(2)
without regard to the capital account require-
ment) in connection with an existing residence
by the owner thereof.’’.
(2) 
EXCEPTION
FROM
INCOME
REQUIRE-
MENTS.—Section 143(f) of such Code (relating to
income requirements) is amended by adding at the
end the following new paragraph:
‘‘(7) EXCEPTION
FOR
CERTAIN
QUALIFIED
HOME IMPROVEMENT LOANS.—Paragraph (1) shall
not apply with respect to any qualified home im-
provement 
loan 
(as 
defined 
in 
subsection
(k)(4)(B).’’.
(f) CLERICAL AMENDMENTS.—
(1) The heading of section 144 of the Internal
Revenue Code of 1986 is amended by striking
‘‘BOND.’’ and inserting ‘‘BOND; QUALIFIED SEIS-
MIC RETROFITTING BOND.’’.
(2) The item relating to section 144 in the table
of sections for subpart A of part IV of subchapter
B of chapter 1 of such Code is amended by striking
‘‘bond.’’ and inserting ‘‘bond; qualified seismic retro-
fitting bond.’’
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to bonds issued after the date of
the enactment of this Act.
SEC. 6. TREATMENT OF PASSIVE LOSSES OF CERTAIN
PARTNERSHIPS ENGAGED IN SEISMIC RET-
ROFITTING.
(a) IN GENERAL.—Section 469 of the Internal Rev-
enue Code of 1986 (relating to passive activity losses and
credits limited) is amended by adding at the end the fol-
lowing new subsection:
‘‘(n) EXEMPTION
FOR
SEISMIC
RETROFITTING
TRADE OR BUSINESS.—
‘‘(1) IN GENERAL.—In the case of any natural
person, subsection (a) shall not apply to that portion
of the passive activity loss or the deduction equiva-
lent (within the meaning of subsection (j)(5)) of the
passive activity credit for any taxable year which is
attributable to any seismic retrofitting activity which
such person engages in during the taxable year,
whether or not the taxpayer materially participates
in such activity.