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 provi-
sion, 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
September 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
capital 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
result 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 acceler-
ated 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 allowance equal to 30 percent of the ad-
justed 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 Sep-
tember 10, 2001, and before Sep-
tember 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
respect to any class of property for any
taxable year, this subsection shall not
apply to all property in such class placed
in service during such taxable year.
‘‘(iii) REPAIRED OR RECONSTRUCTED
PROPERTY.—Except as otherwise provided
in regulations, the term ‘qualified property’
shall not include any repaired or recon-
structed property.
‘‘(iv) 
QUALIFIED
LEASEHOLD
IM-
PROVEMENT PROPERTY.—The term ‘quali-
fied property’ shall not include any quali-
fied leasehold improvement property (as
defined in section 168(e)(6)).
‘‘(C) SPECIAL RULES RELATING TO ORIGI-
NAL USE.—
‘‘(i) 
SELF-CONSTRUCTED
PROP-
ERTY.—In the case of a taxpayer manufac-
turing, constructing, or producing property
for the taxpayer’s own use, the require-
ments of clause (iii) of subparagraph (A)
shall be treated as met if the taxpayer be-
gins manufacturing, constructing, or pro-
ducing the property after September 10,
2001, and before September 11, 2004.
‘‘(ii) SALE-LEASEBACKS.—For pur-
poses 
of 
subparagraph 
(A)(ii), 
if
property—
‘‘(I) is originally placed in service
after September 10, 2001, by a per-
son, and
‘‘(II) sold and leased back by
such person within 3 months after the
date such property was originally
placed in service,
such property shall be treated as originally
placed in service not earlier than the date
on which such property is used under the
leaseback referred to in subclause (II).
‘‘(D) 
COORDINATION
WITH
SECTION
280F.—For purposes of section 280F—
‘‘(i) AUTOMOBILES.—In the case of a
passenger automobile (as defined in section
280F(d)(5)) which is qualified property,
the Secretary shall increase the limitation
under section 280F(a)(1)(A)(i) by $4,600.
‘‘(ii) LISTED PROPERTY.—The deduc-
tion allowable under paragraph (1) shall be
taken into account in computing any re-
capture 
amount 
under 
section
280F(b)(2).’’
(b) ALLOWANCE AGAINST ALTERNATIVE MINIMUM
TAX.—
(1) IN GENERAL.—Section 56(a)(1)(A) (relat-
ing to depreciation adjustment for alternative min-
imum tax) is amended by adding at the end the fol-
lowing new clause:
‘‘(iii) ADDITIONAL
ALLOWANCE
FOR
CERTAIN PROPERTY ACQUIRED AFTER SEP-
TEMBER
10, 
2001, 
AND
BEFORE
SEP-
TEMBER
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
September 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 PROP-
ERTY TRIGGERING PHASEOUT OF MAXIMUM BENEFIT.—
Paragraph (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
December 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 min-
imum 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
sentence shall be reduced by the alternative
minimum 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 in-
come for the taxable year as exceeds the exemp-
tion 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
‘‘paragraph (1)(A)’’.
(2) Paragraph (1) of section 55(c) is amended
by striking ‘‘, the section 936 credit allowable under
section 27(b), and the Puerto Rico economic activity
credit under section 30A’’.
(3)(A) Paragraph (1) of section 55(d) is
amended 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 sub-
section (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 sub-
section (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), re-
spectively, of subsection (a).
(B) Paragraph (9) of section 56(a), as so redes-
ignated, is amended by striking subparagraph (C)
and by redesignating subparagraph (D) as subpara-
graph (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 redes-
ignated, is amended by striking ‘‘(determined with-
out 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 ap-
pears and inserting ‘‘59(d)’’.
(11) Subsection (d) of section 11 is amended by
striking ‘‘the taxes imposed by subsection (a) and
section 55’’ and inserting ‘‘the tax imposed by sub-
section (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 reg-
ular 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 corpora-
tion, 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 reg-
ular 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
amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) CORPORATIONS.—In the case of 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 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 liabil-
ity’ means the regular tax liability reduced
by the sum of the credits allowable under
subparts A and B of this part.’’
(B) Clause (ii) of section 38(c)(2)(A) is amend-
ed 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 tax-
payer other than a corporation) shall
be reduced by the credit allowed
under subsection (a) for the taxable
year (other than the empowerment
zone employment 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
chapter 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 amend-
ed 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
striking ‘‘, and’’ at the end of paragraph (3) and in-
serting 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 in-
serting ‘‘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 pol-
icyholders 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)
(defining 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, which-
ever 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)
(relating to failure by corporation to pay estimated
income 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 fol-
lowing 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
December 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
subpart C of part IV of subchapter A of chap-
ter 1 of such Code (relating to refundable cred-
its).
(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
January 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 liability.
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 Sep-
tember 11, 2004, subparagraph (A)(i) shall be
applied by substituting ‘5’ for ‘2’ and subpara-
graph (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 fol-
lowing new subsection:
‘‘(j) ELECTION TO DISREGARD 5-YEAR CARRYBACK
FOR CERTAIN NET OPERATING LOSSES.—Any taxpayer
entitled 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
section 56(b)(1) (relating to general rule defining alter-
native 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 deduc-
tion attributable to net operating
losses (other than the deduction at-
tributable to carrybacks described in
clause (ii)(I)), or
‘‘(II) 90 percent of alternate
minimum taxable income determined
without regard to such deduction, plus
‘‘(ii) the lesser of—
‘‘(I) the amount of such deduc-
tion attributable to carrybacks of net
operating losses for taxable years end-
ing after September 10, 2001, and be-
fore 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
amended 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 add-
ing 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 por-
tion,
‘‘(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 frame-
work of the building.
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) COMMITMENT TO LEASE TREAT-
ED
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 consid-
ered a lease. For purposes of the preceding
sentence, 
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
section 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 improve-
ment 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 add-
ing at the end the following new subparagraph:
‘‘(G) Qualified leasehold improvement property
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 tax-
able years beginning in 2001, 2002, 2003, and
2004)’’ and inserting ‘‘($49,000 in the case of tax-
able years beginning in 2001, $52,200 in the case of
taxable years beginning 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 tax-
able years beginning in 2001, 2002, 2003, and
2004)’’ and inserting ‘‘($35,750 in the case of tax-
able years beginning in 2001, $37,350 in the case of
taxable years beginning 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
December 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 Rev-
enue 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 insert-
ing ‘‘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 Tax-
payer 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),
respectively.
(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 section 1(h)(2) shall apply for purposes of sub-
paragraphs (B) and (C).’’.
(4) Paragraph (7) of section 57(a) is amended
by striking the last sentence and by striking ‘‘42
percent’’ and inserting ‘‘28 percent’’.
(c) TRANSITIONAL RULES
FOR TAXABLE YEARS
WHICH INCLUDE OCTOBER 12, 2001.—For purposes of
applying 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 col-
lectibles gain or loss, gain described in
section (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 ef-
fect on the day before the date of the
enactment 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 (with-
out regard to this subsection), plus
(B) 10 percent of the excess (if any) of—
(i) the amount on which a tax is de-
termined under such subparagraph (with-
out 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 sub-
paragraph (A)(i)(I) of paragraph (1) of
this subsection 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 de-
termined under such subparagraph (C)
(without 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 para-
graphs (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
respective meanings that such terms have in such
section.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided by this subsection, the amendments made by
this section 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
subsection (b)(1) shall take effect as if included in
section 311 of the Taxpayer Relief Act of 1997, and
the Internal Revenue Code of 1986 shall be applied
and administered as if subsection (e) of such section
311 had never been enacted.
(4) SMALL
BUSINESS
STOCK.—The amend-
ments made by subsection (b)(4) shall apply to dis-
positions 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
(relating 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 tax-
able years beginning in 2001, and by substituting ‘$5,000’
for ‘$3,000’ and ‘$2,500’ for ‘$1,500’ in the case of tax-
able years beginning in 2002.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 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 unem-
ployment compensation for 4 consecutive
weeks after September 10, 2001, and be-
fore January 1, 2003—
‘‘(I) clause (i) shall apply to dis-
tributions from all qualified retire-
ment plans (as defined in section
4974(c)), and
‘‘(II) such 4 consecutive weeks
shall be substituted for the 12 con-
secutive 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 enactment 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’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 310. PARITY IN THE APPLICATION OF CERTAIN LIMITS
TO MENTAL HEALTH BENEFITS.
(a) IN GENERAL.—Subsection (f) of section 9812 is
amended by striking ‘‘2001’’ and inserting ‘‘2003’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to plan years beginning after
December 31, 2001.
SEC. 311. DELAY IN EFFECTIVE DATE OF REQUIREMENT
FOR APPROVED DIESEL OR KEROSENE TER-
MINALS.
Paragraph (2) of section 1032(f) of the Taxpayer Re-
lief Act of 1997 (Public Law 105–34) is amended by strik-
ing ‘‘January 1, 2002’’ and inserting ‘‘January 1, 2004’’.
Subtitle B—One-Year Extensions
SEC. 321. ONE-YEAR EXTENSION OF AVAILABILITY OF MED-
ICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Paragraphs (2) and (3)(B) of sec-
tion 220(i) (defining cut-off year) are each amended by
striking ‘‘2002’’ each place it appears and inserting
‘‘2003’’.
(b) CONFORMING AMENDMENTS.—