Job Creation and Worker Assistance Act of 2002
PL 107-147 (H.R.3090), enacted 03/09/2002

PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 21 
Public Law 107-147 
107th Congress 
An Act 
Mar. 9, 2002 
To provide tax incentives for economic recovery. 
[H.R. 3090] 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
Job Creation and 
Worker 
SECTION 1. SHORT TITLE; ETC. 
Assistance Act of 
(a) SHORT TITLE.—This Act may be cited as the "Job Creation 
f^^^ 
and Worker Assistance Act of 2002". 
governmental 
(b) REFERENCES TO INTERNAL REVENUE CODE OF 1986.—Except relations. 
as otherwise expressly provided, whenever in this Act an amend- 
26 USC l note, 
ment or repeal is expressed in terms of an amendment to, or 
repeal of, a section or other provision, the reference shall be consid-
ered 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. Carryback of certain net operating losses allowed for 5 years; temporary 
suspension of 90 percent AMT limit. 
TITLE I I — U N E M P L O Y M E N T ASSISTANCE 
Sec. 201. Short title. 
Sec. 202. Federal-State agreements. 
Sec. 203. Temporary extended unemployment compensation account. 
Sec. 204. Payments to States having agreements for the payment of temporary 
extended unemployment compensation. 
Sec. 205. Financing provisions. 
Sec. 206. Fraud and overpayments. 
Sec. 207. Definitions. 
Sec. 208. Applicability. 
Sec. 209. Special Reed Act transfer in fiscal year 2002. 
TITLE III—TAX INCENTIVES FOR NEW YORK CITY AND DISTRESSED AREAS 
Sec. 301. Tax benefits for area of New York City damaged in terrorist attacks on 
September 11, 2001. 
TITLE IV—MISCELLANEOUS AND TECHNICAL PROVISIONS 
Subtitle A—General Miscellaneous Provisions 
Sec. 401. Allowance of electronic 1099's. 
Sec. 402. Excluded cancellation of indebtedness income of S corporation not to 
result in adjustment to basis of stock of shareholders. 
Sec. 403. Limitation on use of nonaccrual experience method of accounting. 
Sec. 404. Exclusion for foster care payments to apply to payments by qualified 
placement agencies. 
Sec. 405. Interest rate range for additional funding requirements. 
Sec. 406. Adjusted gross income determined by taking into account certain 
expenses of elementary and secondary school teachers. 
116 STAT. 22 
PUBLIC LAW 107-147—MAR. 9, 2002 
Subtitle B—Technical Corrections 
Sec. 411. Amendments related to Economic Growth and Tax Relief Reconciliation 
Act of 2001. 
Sec. 412. Amendments related to Community Renewal Tax Relief Act of 2000. 
Sec. 413. Amendments related to the Tax Relief Extension Act of 1999. 
Sec. 414. Amendments related to the Taxpayer Relief Act of 1997. 
Sec. 415. Amendment related to the Balanced Budget Act of 1997. 
Sec. 416. Other technical corrections. 
Sec. 417. Clerical amendments. 
Sec. 418. Additional corrections. 
TITLE V—SOCIAL SECURITY HELD HARMLESS; BUDGETARY TREATMENT 
OF ACT 
Sec. 501. No impact on social security trust funds. 
Sec. 502. Emergency designation. 
TITLE VI—EXTENSIONS OF CERTAIN EXPIRING PROVISIONS 
Sec. 601. Allowance of nonrefundable personal credits against regular and min-
imum tax liability. 
Sec. 602. Credit for qualified electric vehicles. 
Sec. 603. Credit for electricity produced from certain renewable resources. 
Sec. 604. Work opportunity credit. 
Sec. 605. Welfare-to-work credit. 
Sec. 606. Deduction for clean-fuel vehicles and certain refueling property. 
Sec. 607. Taxable income limit on percentage depletion for oil and natural gas pro-
duced from marginal properties. 
Sec. 608. Qualified zone academy bonds. 
Sec. 609. Cover over of tax on distilled spirits. 
Sec. 610. Parity in the application of certain limits to mental health benefits. 
Sec. 611. Temporary special rules for taxation of life insiu"ance companies. 
Sec. 612. Availability of medical savings accounts. 
Sec. 613. Incentives for Indian employment and property on Indian reservations. 
Sec. 614. Subpart F exemption for active financing. 
Sec. 615. Repeal of requirement for approved diesel or kerosene terminals. 
Sec. 616. Reauthorization of TANF supplemental grants for population increases 
for fiscal year 2002. 
Sec. 617. 1-year extension of contingency fund under the TANF program. 
TITLE I—BUSINESS PROVISIONS 
SEC. 101. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN PROP-
ERTY ACQUIRED AFTER 
SEPTEMBER 
10, 2001, AND 
BEFORE SEPTEMBER 11,2004. 
26 use 168. 
(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 allowance 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 com-
puting 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— 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 23 
"(i)(I) to which this section apphes which has a 
recovery period of 20 years or less, 
"(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, 
"(III) which is water utility property, or 
"(IV) which is qualified leasehold improvement 
property, 
"(ii) the original use of which commences 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 acquisition 
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, or, in the case of property 
described in subparagraph (B), before January 1, 2006. 
"(B) CERTAIN PROPERTY HAVING LONGER PRODUCTION 
PERIODS TREATED AS QUALIFIED PROPERTY.— 
"(i) IN GENERAL.—The term 'qualified property' 
includes property— 
"(I) which meets the requirements of clauses 
(i), (ii), and (iii) of subparagraph (A), 
"(II) which has a recovery period of at least 
10 years or is transportation property, and 
"(III) which is subject to section 263A by rea-
son of clause (ii) or (iii) of subsection (f)(1)(B) 
thereof. 
"(ii) ONLY PRE-SEPTEMBER ll, 2004, BASIS ELIGIBLE 
AppUcabmty. 
FOR ADDITIONAL ALLOWANCE.—In the case of property 
which is qualified property solely by reason of clause 
(i), paragraph (1) shall apply only to the extent of 
the adjusted basis thereof attributable to manufacture, 
construction, or production before September 11, 2004. 
"(iii) TRANSPORTATION PROPERTY.—For purposes of 
this subparagraph, the term 'transportation property' 
means tangible personal property used in the trade 
or business of transporting persons or property. 
"(C) EXCEPTIONS.— 
"(i) ALTERNATIVE DEPRECIATION PROPERTY.—^The 
term 'qualified property' shall not include any property 
to which the alternative depreciation system under 
subsection (g) applies, determined— 
"(I) without regard to paragraph (7) of sub-
section (g) (relating to election to have system 
apply), and 
"(II) after 
application 
of section 
280F(b) 
(relating to listed property with limited business 
use). 
"(ii) QUALIFIED NEW YORK LIBERTY ZONE LEASE-
HOLD IMPROVEMENT PROPERTY.—^The term 'qualified 
property' shall not include any qualified New York 
116 STAT. 24 
PUBLIC LAW 107-147—MAR. 9, 2002 
Liberty Zone leasehold improvement property (as 
defined in section 1400L(c)(2)). 
"(iii) ELECTION OUT.—If a taxpayer makes an elec-
tion 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. 
"(D) SPECIAL RULES.— 
"(i) SELF-CONSTRUCTED PROPERTY.—In the case of 
a taxpayer manufacturing, constructing, or producing 
property for the taxpayer's own use, the requirements 
of clause (iii) of subparagraph (A) shall be treated 
as met if the taxpayer begins manufacturing, con-
structing, or producing the property after September 
10, 2001, and before September 11, 2004. 
"(ii) SALE-LEASEBACKS.—For purposes of subpara-
graph (AXii), if property— 
"(I) is originally placed in service after Sep-
tember 10, 2001, by a person, 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). 
"(E) 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)(l)(A)(i) by $4,600. 
"(ii) LISTED PROPERTY.—The deduction allowable 
under paragraph (1) shall be taken into account in 
computing any recapture 
amount 
under 
section 
280F(b)(2). 
"(F) DEDUCTION ALLOWED IN COMPUTING MINIUMUM 
TAX.—For purposes of determining alternative minimum 
taxable income under section 55, the deduction under sub-
section (a) for qualified property shall be determined under 
this section without regard to any adjustment under section 
56. 
"(3) QUALIFIED LEASEHOLD IMPROVEMENT PROPERTY.—For 
purposes of this subsection— 
"(A) IN GENERAL.—The term 'qualified 
leasehold 
improvement property' means any improvement 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 subsection (h)(7))— 
"(I) by the lessee (or any sublessee) of such 
portion, or 
"(II) by the lessor of such portion, 
"(ii) such portion is to be occupied exclusively by 
the lessee (or any sublessee) of such portion, and 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 25 
"(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 INCLUDED.—Such 
term shall not include any improvement for which the 
expenditure is attributable to— 
"(i) the enlargement of the building, 
"(ii) any elevator or escalator, 
"(iii) any 
structural 
component 
benefiting 
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 between related 
persons shall not be considered 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 relationship 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.", 
(b) EFFECTIVE DATE.—The amendments made by this section Applicability, 
shall apply to property placed in service after September 10, 2001, 26USC 168 note. 
in tEixable years ending after such date. 
SEC. 102. CARRYBACK OF CERTAIN NET OPERATING LOSSES ALLOWED 
FOR 5 YEARS; TEMPORARY SUSPENSION OF 90 PERCENT 
AMT LIMIT. 
(a) IN GENERAL.—^Paragraph (1) of section 172(b) (relating to 26 use 172. 
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 during 2001 or 2002, 
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 redesig-
nating subsection (j) as subsection (k) and by inserting after subjec-
tion (i) the following 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 deter-
mined 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 teixpayer's return for the taxable year of the net 
116 STAT. 26 
PUBLIC LAW 107-147—MAR. 9, 2002 
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 CARRYOVERS.— 
26 use 56. 
(1) IN GENERAL.—Subparagraph (A) of section 56(d)(1) 
(relating to general rule defining alternative tax net operating 
loss deduction) is amended to read as follows: 
"(A) the amount of such deduction shall not exceed 
the sum o
f
— 
"(i) the lesser of— 
"(I) the amount of such deduction attributable 
to net operating losses (other than the deduction 
attributable to carryovers described in clause 
(ii)(I)), or 
"(II) 90 percent of alternative minimum tax-
able income determined without regard to such 
deduction, plus 
"(ii) the lesser of— 
"(I) the amount of such deduction attributable 
to the sum of carrybacks of net operating losses 
for taxable years ending during 2001 or 2002 and 
carryforwards of net operating losses to taxable 
years ending during 2001 and 2002, or 
"(II) alternative minimum taxable income 
determined without regard to such deduction 
reduced by the amount determined under clause 
(i), and". 
Applicability. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
26 use 56 note. 
section shall apply to taxable years ending before January 
1, 2003. 
Applicability. 
(d) EFFECTIVE DATE.—Except as provided in subsection (c), 
26 use 172 note, the amendments made by this section shall apply to net operating 
losses for taxable years ending after December 31, 2000. 
Temporary 
TITLE II—UNEMPLOYMENT ASSISTANCE 
Extended 
Unemployment 
Compensation 
SEC. 201. SHORT TITLE. 
Act of 2002. 
Inter- 
This title may be cited as the "Temporary Extended Unemploy-
govemmental 
ment Compensation Act of 2002". 
relations. 
26 u s e 3304 
SEC. 202. FEDERAL-STATE AGREEMENTS. 
note. 
(a) IN GENERAL.—^Any State which desires to do so may enter 
into and participate in an agreement under this title with the 
Secretary of Labor (in this title referred to as the "Secretary"). 
Any State which is a party to an agreement under this title may, 
upon providing 30 days' written notice to the Secretary, terminate 
such agreement. 
(b) PROVISIONS OF AGREEMENT.—^Any agreement under sub-
section (a) shall provide that the State agency of the State will 
make payments of temporary extended unemployment compensa-
tion to individuals who— 
(1) have exhausted all rights to regular compensation under 
the State law or under Federal law with respect to a benefit 
year (excluding any benefit year that ended before March 15, 
2001); 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 27 
(2) have no rights to regular compensation or extended 
compensation with respect to a week under such law or any 
other State unemployment compensation law or to compensa-
tion under any other Federal law; 
(3) are not receiving compensation with respect to such 
week under the unemplo3anent compensation law of Canada; 
and 
(4) filed an initial claim for regular compensation on or 
afterMarch 15,2001. 
(c) EXHAUSTION OF BENEFITS.—For purposes of subsection 
(b)(1), an individual shall be deemed to have exhausted such individ-
ual's rights to regular compensation under a State law when— 
(1) no pa3mients of regular compensation can be made 
under such law because such individual has received all regular 
compensation available to such individual based on emplo3nnent 
or wages during such individual's base period; or 
(2) such individual's rights to such compensation have been 
terminated by reason of the expiration of the benefit year 
with respect to which such rights existed. 
(d) WEEKLY BENEFIT AMOUNT, ETC.—For purposes of any agree-
ment under this title— 
(1) the amount of temporary extended unemployment com-
pensation which shall be payable to any individual for any 
week of total unemployment shall be equal to the amount 
of the regular compensation (including dependents' allowances) 
payable to such individual during such individual's benefit year 
under the State law for a week of total unemplo3mient; 
(2) the terms and conditions of the State law which apply 
to claims for regular compensation and to the payment thereof 
shall apply to claims for temporary extended unemployment 
compensation and the payment thereof, except— 
(A) that an individual shall not be eligible for tem-
porary extended unemployment compensation under this 
title unless, in the base period with respect to which the 
individual exhausted all rights to regular compensation 
under the State law, the individual had 20 weeks of full-
time insured emplo5nnent or the equivalent in insured 
wages, as determined under the provisions of the State 
law implementing section 202(a)(5) of the Federal-State 
Extended Unemployment Compensation Act of 1970 (26 
U.S.C. 3304 note); and 
(B) where otherwise inconsistent with the provisions 
of this title or with the regulations or operating instructions 
of the Secretary promulgated to carry out this title; and 
(3) the maximum amount of temporary extended unemploy-
ment compensation payable to any individual for whom a tem-
porary extended unemployment compensation account is estab-
lished under section 203 shall not exceed the amount estab-
lished in such account for such individual. 
(e) ELECTION BY STATES.—^Notwithstanding any other provision 
of Federal law (and if State law permits), the Governor of a State 
that is in an extended benefit period may provide for the payment 
of temporary extended unemployment compensation in lieu of 
extended compensation to individuals who otherwise meet the 
requirements of this section. Such an election shall not require 
a State to trigger off an extended benefit period. 
116 STAT. 28 
PUBLIC LAW 107-147—MAR. 9, 2002 
SEC. 203. TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION 
ACCOUNT. 
(a) IN GENERAL.—^Any agreement under this title shall provide 
that the State will establish, for each eligible individual who files 
an application for temporary extended imemployment compensa-
tion, a temporary extended unemployment compensation account 
with respect to such individual's benefit year. 
(b) AMOUNT IN ACCOUNT.— 
(1) IN GENERAL.—The amount established in an account 
under subsection (a) shall be equal to the lesser of— 
(A) 50 percent of the total amount of regular compensa-
tion (including dependents' allowances) payable to the indi-
vidual during the individual's benefit year under such law, 
or 
(B) 13 times the individual's average weekly benefit 
amount for the benefit year. 
(2) WEEKLY BENEFIT AMOUNT.—For purposes of this sub-
section, an individual's weekly benefit amount for any week 
is the amount of regular compensation (including dependents' 
allowances) iinder the State law payable to such individual 
for such week for total unemplojnnent. 
(c) SPECIAL RULE.— 
(1) IN GENERAL.—^Notwithstanding any other provision of 
this section, if, at the time that the individual's account is 
exhausted, such individual's State is in an extended benefit 
period (as determined under paragraph (2)), then, such account 
shall be augmented by an amount equal to the amount origi-
nally established in such account (as determined under sub-
section (b)(1)). 
(2) EXTENDED BENEFIT PERIOD.—For purposes of paragraph 
(1), a State shall be considered to be in an extended benefit 
period if, at the time of exhaustion (as described in paragraph 
(1))— 
(A) such a period is then in effect for such State under 
the Federal-State Extended Unemployment Compensation 
Act of 1970; or 
(B) such a period would then be in effect for such 
State under such Act if section 203(d) of such Act were 
applied as if it had been amended by striking "5" each 
place it appears and inserting "4". 
SEC. 204. PAYMENTS TO STATES HAVING AGREEMENTS FOR THE PAY-
MENT OF TEMPORARY EXTENDED UNEMPLOYMENT COM-
PENSATION. 
(a) GENERAL RULE.—There shall be paid to each State that 
has entered into an agreement under this title an amount equal 
to 100 percent of the temporary extended unemployment compensa-
tion paid to individuals by the State pursuant to such agreement. 
(b) TREATMENT OF REIMBURSABLE COMPENSATION.—No pay-
ment shall be made to any State under this section in respect 
of any compensation to the extent the State is entitled to reimburse-
ment in respect of such compensation under the provisions of any 
Federal law other than this title or chapter 85 of title 5, United 
States Code. A State shall not be entitled to any reimbursement 
under such chapter 85 in respect of any compensation to the extent 
the State is entitled to reimbursement under this title in respect 
of such compensation. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 29 
(c) DETERMINATION OF AMOUNT.—Sums payable to any State 
by reason of such State having an agreement under this title 
shall be payable, either in advance or by way of reimbursement 
(as may be determined by the Secretary), in such amounts as 
the Secretary estimates the State will be entitled to receive under 
this title for each calendar month, reduced or increased, as the 
case may be, by any amount by which the Secretary finds that 
the Secretary's estimates for any prior calendar month were greater 
or less than the amounts which should have been paid to the 
State. Such estimates may be made on the basis of such statistical, 
sampling, or other method as may be agreed upon by the Secretary 
and the State agency of the State involved. 
SEC. 205. FINANCING PROVISIONS. 
(a) IN GENERAL.—Funds in the extended unemployment com-
gensation account (as established by section 905(a) of the Social 
ecurity Act (42 U.S.C. 1105(a)) of the Unemployment Trust Fund 
(as established by section 904(a) of such Act (42 U.S.C. 1104(a)) 
shall be used for the making of payments to States having agree-
ments entered into under this title. 
(b) CERTIFICATION.—The Secretary shall from time to time cer-
tify to the Secretary of the Treasury for payment to each State 
the sums payable to such State under this title. The Secretary 
of the Treasury, prior to audit or settlement by the Greneral 
Accounting Office, shall make payments to the State in accordance 
with such certification, by transfers from the extended unemploy-
ment compensation account (as so established) to the account of 
such State in the Unemployment Trust Fund (as so established). 
(c) ASSISTANCE TO STATES.—^There are appropriated out of the 
employment security administration account (as established by sec-
tion 901(a) of the Social Security Act (42 U.S.C. 1101(a)) of the 
Unemployment Trust Fund, without fiscal year limitation, such 
funds as may be necessary for purposes of assisting States (as 
provided in title III of the Social Security Act (42 U.S.C. 501 
et seq.)) in meeting the costs of administration of agreements under 
this title. 
(d) APPROPRIATIONS FOR CERTAIN PAYMENTS.—There are appro-
{)riated from the general fund of the Treasury, without fiscal year 
imitation, to the extended unemplo3mient compensation account 
(as so established) of the Unemployment Trust Fund (as so estab-
lished) such sums as the Secretary estimates to be necessary to 
make the payments under this section in respect of— 
(1) compensation payable under chapter 85 of title 5, United 
States Code; and 
(2) compensation payable on the basis of services to which 
section 3309(a)(1) of the Internal Revenue Code of 1986 applies. 
Amounts appropriated pursuant to the preceding sentence shall 
not be required to be repaid. 
SEC. 206. FRAUD AND OVERPAYMENTS. 
(a) IN GENERAL.—If £in individual knowingly has made, or 
caused to be made by another, a false statement or representation 
of a material fact, or knowingly has failed, or caused another 
to fail, to disclose a material fact, and as a result of such false 
statement or representation or of such nondisclosure such individual 
has received an amount of temporary extended unemplo5nnent com-
pensation under this title to which he was not entitled, such 
individual— 
116 STAT. 30 
PUBLIC LAW 107-147—MAR. 9, 2002 
(1) shall be ineligible for further temporary extended 
unemployment compensation under this title in accordance with 
the provisions of the applicable State unemployment compensa-
tion law relating to fraud in connection with a claim for 
unemployment compensation; and 
(2) shall be subject to prosecution under section 1001 of 
title 18, United States Code. 
(b) REPAYMENT.—In the case of individuals who have received 
amounts of temporary extended unemployment compensation under 
this title to which they were not entitled, the State shall require 
such individuals to repay the amounts of such temporary extended 
unemployment compensation to the State agency, except that the 
State agency may waive such repayment if it determines that— 
(1) the payment of such temporary extended unemployment 
compensation was without fault on the part of any such indi-
vidual; and 
(2) such repayment would be contrary to equity and good 
conscience. 
(c) RECOVERY BY STATE AGENCY.— 
(1) IN GENERAL.—The State agency may recover the amount 
to be repaid, or any part thereof, by deductions from any 
temporary extended unemployment compensation payable to 
such individual under this title or from any unemployment 
compensation payable to such individual under any Federal 
unemployment compensation law administered by the State 
agency or under any other Federal law administered by the 
State agency which provides for the payment of any assistance 
or allowance with respect to any week of unemployment, during 
the 3-year period after the date such individuals received the 
payment of the temporary extended unemployment compensa-
tion to which they were not entitled, except that no single 
deduction may exceed 50 percent of the weeldy benefit amount 
from which such deduction is made. 
(2) OPPORTUNITY FOR HEARING.—No repayment shall be 
required, and no deduction shall be made, until a determination 
has been made, notice thereof and an opportunity for a fair 
hearing has been given to the individual, and the determination 
has become final. 
(d) REVIEW.—Any determination by a State agency under this 
section shall be subject to review in the same manner and to 
the same extent as determinations under the State unemployment 
compensation law, and only in that manner and to that extent. 
SEC. 207. DEFINITIONS. 
In this title, the terms "compensation", "regular compensation", 
"extended compensation", "additional compensation", "benefit year", 
"base period", "State", "State agency", "State law", and "week" have 
the respective meanings given such terms under section 205 of 
the Federal-State Extended Unemployment Compensation Act of 
1970 (26 U.S.C. 3304 note). 
SEC. 208. APPLICABILITY. 
An agreement entered into under this title shall apply to weeks 
of unemployment— 
(1) beginning after the date on which such agreement is 
entered into; and 
(2) ending before January 1, 2003. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 31 
SEC. 209. 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 transferred before 
the date of enactment of this Act under the provision repealed 
by paragraph (1)(A) shall remain 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.—Section 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)) from the Federal unemploy-
ment account to the account of each State in the Unemployment 
Trust Fund the amount determined with respect to such State 
under paragraph (2). 
"(2)(A) The amount to be transferred under this subsection 
to a State account shall (as determined by the Secretary of Labor 
and certified by such Secretary to the Secretary of the Treasury) 
be equal to— 
"(i) the amount which would have been required to have 
been transferred under this section to such account at the 
beginning of fiscal year 2002 if— 
"(I) section 209(a)(1) of the Temporary Extended 
Unemployment Compensation Act of 2002 had been enacted 
before the close of fiscal year 2001, and 
"(II) section 5402 of Pubhc Law 105-33 (relating to 
increase in Federal unemployment account ceiling) had 
not been enacted, 
minus 
"(ii) the amount which was in fact transferred under this 
section to such account at the beginning of fiscal year 2002. 
"(B) Notwithstanding the provisions of subparagraph (A)— 
"(i) the aggregate amount transferred to the States under 
this subsection may not exceed a total of $8,000,000,000; and 
"(ii) all amounts determined under subparagraph (A) shall 
be reduced ratably, if and to the extent necessary in order 
to comply with the limitation under clause (i). 
"(3)(A) Except as provided in paragraph (4), amounts trans-
ferred 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 unemployment, 
and 
"(ii) which are allowable under subparagraph (B) or (C). 
"(BXi) At the option of the State, cash benefits under this 
paragraph may include amounts which shall be payable as— 
"(I) regular compensation, or 
"(II) additional compensation, upon the exhaustion of any 
temporary extended unemplojnnent compensation (if such State 
has entered into an agreement under the Temporary Extended 
116 STAT. 32 
PUBLIC LAW 107-147—MAR. 9, 2002 
Deadline. 
Applicability. 
42 use 1103. 
Unemployment Compensation Act of 2002), for individuals 
eligible for regular compensation under the unemployment com-
pensation law of such State. 
"(ii) Any additional compensation under clause (i) may not 
be taken into account for purposes of any determination relating 
to the amount of any extended compensation 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 payable to 1 or 
more categories of individuals not otherwise eligible for regular 
compensation under the unemployment compensation law of such 
State, including those described in clause (iii). 
"(ii) The benefits paid under this subparagraph to any indi-
vidual may not, for any period of unemployment, exceed the max-
imum amount of regular compensation authorized under the 
unemployment compensation law of such State for that same period, 
plus any additional compensation (described in subparagraph (B)(i)) 
which could have been paid with respect to that amount. 
"(iii) The categories of individuals described in this clause 
include the following: 
"(I) Individuals who are seeking, or available for, only 
part-time (and not full-time) work. 
"(II) Individuals who would be eligible for regular com-
pensation under the unemployment compensation law of such 
State under an alternative base period. 
"(D) Amounts transferred to a State account under this sub-
section may be used in the payment of cash benefits to individuals 
only for weeks of unemployment beginning after the date of enact-
ment of this subsection. 
"(4) Amounts transferred to a State account under this sub-
section may be used for the administration of its unemployment 
compensation law and public employment offices (including in 
connection with benefits described in paragraph (3) and any recipi-
ents thereof), subject to the same conditions as set forth in sub-
section (c)(2) (excluding subparagraph (B) thereof, and deeming 
the reference to 'subsections (a) and (b)' in subparagraph (D) thereof 
to include this subsection). 
"(5) Transfers under this subsection shall be made within 10 
days after the date of enactment of this paragraph.". 
(c) LIMITATIONS ON TRANSFERS.—Section 903(b) of the Social 
Security Act shall apply to transfers under section 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 sub-
section (d)(5)" for "October 1 of any fiscal year". 
(2) By substituting "remain in the Federal unemployment 
account" for "be transferred to the Federal 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))" for "the fiscal year begin-
ning 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)". 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 33 
(d) TECHNICAL AMENDMENTS.—(1) Sections 3304(a)(4)(B) and 
3306(f)(2) of the Internal Revenue Code of 1986 are amended by 26 USC 3304, 
inserting "or 903(d)(4)" before "of the Social Security Act". 
3306. 
(2) Section 303(a)(5) of the Social Security Act is amended 42 USC 503. 
in the second proviso by inserting "or 903(d)(4)" after "903(c)(2)". 
(e) REGULATIONS.—The Secretary of Labor may prescribe any 
operating instructions or regulations necessary to carry out this 
section and the amendments made by this section. 
TITLE III—TAX INCENTIVES FOR NEW 
YORK CITY AND DISTRESSED AREAS 
SEC. 301. TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED 
IN TERRORIST ATTACKS ON SEPTEMBER 11,2001. 
(a) IN GENERAL.—Chapter 1 is amended by adding at the 
end the following new subchapter: 
"Subchapter Y—New York Liberty Zone Benefits 
"Sec. 1400L. Tax benefits for New York Liberty Zone. 
"SEC. 1400L. TAX BENEFITS FOR NEW YORK LIBERTY ZONE. 
"(a) EXPANSION OF WORK OPPORTUNITY TAX CREDIT.— 
"(1) IN GENERAL.—^For purposes of section 51, a New York 
Liberty Zone business employee shall be treated as a member 
of a targeted group. 
"(2) NEW YORK LIBERTY ZONE BUSINESS EMPLOYEE.—For 
purposes of this subsection— 
"(A) IN GENERAL.—^The term 'New York Liberty Zone 
business employee' means, with respect to any period, any 
employee of a New York Liberty Zone business if substan-
tially all the services performed during such period by 
such employee for such business are performed in the New 
York Liberty Zone. 
"(B) INCLUSION OF CERTAIN EMPLOYEES OUTSIDE THE 
NEW YORK LIBERTY ZONE.— 
"(i) IN GENERAL.—In the case of a New York Lib-
erty Zone business described in subclause (II) of 
subparagraph (C)(i), the term 'New York Liberty Zone 
business employee' includes any employee of such busi-
ness (not described in subparagraph (A)) if substan-
tially all the services performed during such period 
by such employee for such business are performed in 
the City of New York, New York. 
"(ii) LIMITATION.—The number of employees of 
such a business that are treated as New York Liberty 
Zone business employees on any day by reason of 
clause (i) shall not exceed the excess of— 
"(I) the number of employees of such business 
on September 11, 2001, in the New York Liberty 
Zone, over 
"(II) the number of New York Liberty Zone 
business employees (determined without regard to 
this subparagraph) of such business on the day 
to which the limitation is being applied. 
116 STAT. 34 
PUBLIC LAW 107-147—MAR. 9, 2002 
The Secretary may require any trade or business to 
have the number determined under subclause (I) 
verified by the New York State Department of Labor. 
"(C) NEW YORK LIBERTY ZONE BUSINESS.— 
"(i) IN GENERAL.—The term 'New York Liberty 
Zone business' means any trade or business which 
is— 
"(I) located in the New York Liberty Zone, 
or 
"(II) located in the City of New York, New 
York, outside the New York Liberty Zone, as a 
result of the physical destruction or damage of 
such place of business by the September 11, 2001, 
terrorist attack. 
"(ii) 
CREDIT 
NOT 
ALLOWED 
FOR 
LARGE 
BUSINESSES.—The term 'New York Liberty Zone busi-
ness' shall not include any trade or business for any 
taxable year if such trade or business employed an 
average of more than 200 employees on business days 
during the taxable year. 
"(D) 
SPECIAL RULES FOR DETERMINING AMOUNT OF 
CREDIT.—For purposes of applying subpart F of part IV 
of subchapter B of this chapter to wages paid or incurred 
to any New York Liberty Zone business employee— 
"(i) section 51(a) shall be applied by substituting 
'qualified wages' for 'qualified first-year wages', 
"(ii) the rules of section 52 shall apply for purposes 
of determining the number of employees 
under 
subparagraph (B), 
"(iii) subsections (c)(4) and (i)(2) of section 51 shall 
not apply, and 
"(iv) in determining qualified wages, the following 
shall apply in lieu of section 51(b): 
"(I) QUALIFIED WAGES.—The term 'qualified 
wages' means wages paid or incurred by the 
employer to individuals who are New York Liberty 
Zone business employees of such employer for work 
performed during calendar year 2002 or 2003. 
"(II) 
ONLY FIRST $6,OOO OF WAGES PER CAL-
ENDAR YEAR TAKEN INTO ACCOUNT.—^The amount 
of the qualified wages which may be taken into 
account with respect to any individual shall not 
exceed $6,000 per calendar year. 
"(b) 
SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED 
AFTER SEPTEMBER 10, 2001.— 
"(1) ADDITIONAL ALLOWANCE.—In the case of any qualified 
New York Liberty Zone 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 adjusted basis of such property, and 
"(B) the adjusted basis of the qualified New York Lib-
erty Zone 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. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 35 
"(2) QUALIFIED NEW YORK LIBERTY ZONE PROPERTY.—For 
purposes of this subsection— 
"(A) IN GENERAL.—The term 'qualified New York Lib-
erty Zone property' means property— 
"(i)(I) which is described in section 168(k)(2)(A)(i), 
or 
"(11) which is nonresidential real property, or resi-
dential rental property, which is described in subpara-
graph (B), 
"(ii) substEintially 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, 
"(iii) the original use of which in the New York 
Liberty Zone commences with the taxpayer after Sep-
tember 10, 2001, 
"(iv) which is acquired by the taxpayer by purchase 
(as defined in section 179(d)) after September 10, 2001, 
but only if no written binding contract for the acquisi-
tion was in effect before September 11, 2001, and 
"(v) which is placed in service by the tsixpayer 
on or before the termination date. 
The term 'termination date' means December 31, 2006 
(December 31, 2009, in the case of nonresidential real 
property and residential rental property). 
"(B) ELIGIBLE REAL PROPERTY.—^Nonresidential real 
property or residential rental property is described in this 
subparagraph only to the extent it rehabilitates real prop-
erty damaged, or replaces real property destroyed or con-
demned, as a result of the September 11, 2001, terrorist 
attack. For purposes of the preceding sentence, property 
shall be treated as replacing real property destroyed or 
condemned if, as part of an integrated plan, such property 
replaces real property which is included in a continuous 
area which includes real property destroyed or condemned. 
"(C) EXCEPTIONS.— 
"(i) 30 PERCENT ADDITIONAL ALLOWANCE PROP-
ERTY.—Such term shall not include property to which 
section 168(k) applies. 
"(ii) ALTERNATIVE DEPRECIATION PROPERTY.—^The 
term 'qualified New York Liberty Zone property' shall 
not 
include 
any 
property 
described 
in 
section 
168(k)(2)(C)(i). 
"(iii) QUALIFIED NEW YORK LIBERTY ZONE LEASE-
HOLD IMPROVEMENT PROPERTY.—Such term shall not 
include any qualified New York Liberty Zone leasehold 
improvement property. 
"(iv) ELECTION OUT.—^For purposes of this sub- Applicability, 
section, 
rules 
similar 
to 
the 
rules 
of 
section 
168(k)(2)(C)(iii) shall apply. 
"(D) SPECIAL RULES.—For purposes of this subsection. Applicability. 
rules similar to the rules of section 168(k)(2)(D) shall apply, 
except that clause (i) thereof shall be applied without 
regard to 'and before September 11, 2004'. 
"(E) ALLOWANCE AGAINST ALTERNATIVE MINIMUM TAX.— AppUcabiUty. 
For purposes of this subsection, rules similar to the rules 
of section 168(k)(2)(F) shall apply. 
116 STAT. 36 
PUBLIC LAW 107-147—MAE. 9, 2002 
"(c) 5-YEAR RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN 
LEASEHOLD IMPROVEMENTS.— 
"(1) IN GENERAL.—For purposes of section 168, the term 
'5-year property' includes any qualified New York Liberty Zone 
leasehold improvement property. 
"(2) 
QUALIFIED NEW 
YORK 
LIBERTY ZONE LEASEHOLD 
IMPROVEMENT PROPERTY.—^For purposes of this section, the term 
'qualified New York Liberty Zone leasehold improvement prop-
erty' means qualified leasehold improvement property (as 
defined in section 168(k)(3)) if— 
"(A) such building is located in the New York Liberty 
Zone, 
"(B) such improvement is placed in service after Sep-
tember 10, 2001, and before January 1, 2007, and 
"(C) no written binding contract for such improvement 
was in effect before September 11, 2001. 
"(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 New York Liberty 
Zone leasehold improvement property. 
"(4) 
9-YEAR 
RECOVERY 
PERIOD 
UNDER 
ALTERNATIVE 
SYSTEM.—For purposes of section 168(g), the class life of quali-
fied New York Liberty Zone leasehold improvement property 
shall be 9 years. 
"(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 quali-
fied project costs, 
"(B) such bond is issued by the State of New York 
or any political subdivision thereof, 
"(C) the Governor or the Mayor designates such bond 
for purposes of this section, and 
"(D) such bond is issued after the date of the enactment 
of this section and before January 1, 2005. 
"(3) LIMITATIONS ON AMOUNT OF BONDS.— 
"(A) AGGREGATE AMOUNT DESIGNATED.—The maximum 
aggregate face amount of bonds which may be designated 
under this subsection shall not exceed $8,000,000,000, of 
which not to exceed $4,000,000,000 may be designated 
by the Governor and not to exceed $4,000,000,000 may 
be designated by the Mayor. 
"(B) 
SPECIFIC 
LIMITATIONS.—The 
aggregate 
face 
amount of bonds issued which are to be used for— 
"(i) costs for property located outside the New York 
Liberty Zone shall not exceed $2,000,000,000, 
"(ii) residential rental property shall not exceed 
$1,600,000,000, and 
"(iii) costs with respect to property used for retail 
sales of tangible property and functionally related and 
subordinate property shall not exceed $800,000,000. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 37 
The limitations under clauses (i), (ii), and (iii) shall be 
allocated proportionately between the bonds designated by 
the Governor and the bonds designated by the Mayor in 
proportion to the respective amounts of bonds designated 
by each. 
"(C) MOVABLE PROPERTY.—No bonds shall be issued 
which are to be used for movable fixtures and equipment. 
"(4) QUALIFIED PROJECT COSTS.—For purposes of this 
subsection— 
"(A) IN GENERAL.—The term 'qualified project costs' 
means the cost of acquisition, construction, 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 (as defined in section 
168(i)(10)) located in the New York Liberty Zone. 
"(B) 
COSTS FOR CERTAIN PROPERTY OUTSIDE ZONE 
INCLUDED.—Such term includes the cost of acquisition, 
construction, reconstruction, and renovation of nonresiden-
tial 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. 
"(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(d) (relating to acquisition of existing Applicability. 
property not permitted) shall be applied by substituting 
'50 percent' for '15 percent' each place it appears. 
"(C) Section 148(f)(4)(C) (relating to exception from Applicability. 
rebate for certain proceeds to be used to finance construc-
tion expenditures) shall apply to the available construction 
proceeds of bonds issued under this section. 
"(D) Repayments of principal on financing provided 
by the issue— 
"(i) may not be used to provide financing, and 
"(ii) must be 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 a 
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. 
"(E) Section 57(a)(5) shall not apply. 
"(6) 
SEPARATE ISSUE TREATMENT OF PORTIONS OF AN 
ISSUE.—TTiis subsection shall not apply to the portion 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 
' 
116 STAT. 38 
PUBLIC LAW 107-147—MAR. 9, 2002 
bond (determined without regard to paragraph (1)), if the issuer 
elects to so treat such portion. 
"(e) ADVANCE REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.— 
"(1) IN GENERAL.—With respect to a bond described in 
paragraph (2) issued as part of an issue 90 percent (95 percent 
in the case of a bond described in paragraph (2)(C)) or more 
of the net proceeds (as defined in section 150(a)(3)) of which 
were used to finance faciUties located within the City of New 
York, New York (or property which is functionally related and 
subordinate to facilities located within the City of New York 
for the furnishing of water), one additional advanced refunding 
after the date of the enactment of this section and before 
January 1, 2005, shall be allowed under the applicable rules 
of section 149(d) if— 
"(A) the Governor or the Mayor designates the advance 
refunding bond for purposes of this subsection, and 
"(B) the requirements of paragraph (4) are met. 
"(2) BONDS DESCRIBED.—^A bond is described in this para-
graph if such bond was outstanding on September 11, 2001, 
and is— 
"(A) a State or local bond (as defined in section 
103(c)(1)) which is a general obligation of the City of New 
York, New York, 
"(B) a State or local bond (as so defined) other than 
a private activity bond (as defined in section 141(a)) issued 
by the New York Municipal Water Finance Authority or 
the Metropolitan Transportation Authority of the State 
of New York, or 
"(C) a qualified 501(c)(3) bond (as defined in section 
145(a)) which is a qualified hospital bond (as defined in 
section 145(c)) issued by or on behalf of the State of New 
York or the City of New York, New York. 
"(3) AGGREGATE LIMIT.—For purposes of paragraph (1), the 
maximum aggregate face amount of bonds which may be des-
ignated under this subsection by the Governor shall not exceed 
$4,500,000,000 and the maximum aggregate face amount of 
bonds which may be designated under this subsection by the 
Mayor shall not exceed $4,500,000,000. 
"(4) ADDITIONAL REQUIREMENTS.—The requirements of this 
paragraph are met with respect to any advance refunding of 
a bond described in paragraph (2) if— 
"(A) no advance refundings of such bond would be 
allowed under any provision of law after September 11, 
2001, 
"(B) the advance refunding bond is the only other 
outstanding bond with respect to the refunded bond, and 
"(C) the requirements of section 148 are met with 
respect to all bonds issued under this subsection. 
"(f) 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 quali-
fied New York Liberty Zone property placed in service 
during the taxable year, and 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 39 
"(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) QUALIFIED NEW YORK LIBERTY ZONE PROPERTY.—For 
purposes of this subsection, the term 'qualified New York Lib-
erty Zone property' has the meaning given such term by sub-
section (b)(2). 
"(3) RECAPTURE.—Rules similar to the rules under section Applicability. 
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. 
"(g) EXTENSION OF REPLACEMENT PERIOD FOR NONRECOGNITION AppUcabmty. 
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 
substantially all of the use of the replacement property is in the 
City of New York, New York. 
"(h) 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. 
"(i) REFERENCES TO GOVERNOR AND MAYOR.—For purposes of 
this section, the terms 'Governor' and 'Mayor' mean the Governor 
of the State of New York and the Mayor of the City of New 
York, New York, respectively.". 
(b) CREDIT ALLOWED AGAINST REGULAR AND MINIMUM TAX.— 
(1) IN GENERAL.—Subsection (c) of section 38 (relating to 26USC38. 
limitation based on amount of tax) is amended by redesignating 
paragraph (3) as paragraph (4) and by inserting after paragraph 
(2) the following new paragraph: 
"(3) SPECIAL RULES FOR NEW YORK LIBERTY ZONE BUSINESS 
EMPLOYEE CREDIT.— 
"(A) IN GENERAL.—In the case of the New York Liberty 
Zone business employee credit— 
"(i) this section and section 39 shall be applied Applicability. 
separately with respect to such credit, and 
"(ii) in applying paragraph (1) to such credit— 
"(I) the tentative minimum tax shall be treated 
as being zero, and 
"(II) the limitation under paragraph (1) (as 
modified by subclause (I)) shall be reduced by the 
credit allowed under subsection (a) for the taxable 
year (other than the New York Liberty Zone busi-
ness employee credit). 
"(B) 
NEW YORK LIBERTY ZONE BUSINESS EMPLOYEE 
CREDIT.—For purposes of this subsection, the term 'New 
York Liberty Zone business employee credit' means the 
portion of work opportunity credit under section 51 deter-
mined under section 1400L(a).". 
(2) CONFORMING AMENDMENT.—Subclause (II) of section 
38(c)(2)(A)(ii) is amended by inserting "or the New York Liberty 
Zone business employee credit" after "employment credit". 
99-194 0-03-3 :QL 3 Parti 
116 STAT. 40 
PUBLIC LAW 107-147—MAR. 9, 2002 
Applicability. 
26 u s e 38 note. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to taxable years ending after December 
31, 200L 
(c) 
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—MISCELLANEOUS AND 
TECHNICAL PROVISIONS 
Subtitle A—General Miscellaneous 
Provisions 
26 u s e 6041 
note. 
26 u s e 108. 
26 u s e 108 note. 
Applicability. 
SEC. 401. ALLOWANCE OF ELECTRONIC 1099'S. 
Any person required to furnish a statement under any section 
of subpart B of part III of subchapter A of chapter 61 of the 
Internal Revenue Code of 1986 for any taxable year ending after 
the date of the enactment of this Act, may electronically furnish 
such statement (without regard to any first class mailing require-
ment) to any recipient who has consented to the electronic provision 
of the statement in a manner similar to the one permitted under 
regulations issued under section 6051 of such Code or in such 
other manner as provided by the Secretary. 
SEC. 402. EXCLUDED CANCELLATION OF INDEBTEDNESS INCOME OF 
S CORPORATION NOT TO RESULT IN ADJUSTMENT TO 
BASIS OF STOCK OF SHAREHOLDERS. 
(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.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendment made by this section shall apply to discharges 
of indebtedness after October 11, 2001, in taxable years ending 
after such date. 
(2) EXCEPTION.—The amendment made by this section shall 
not apply to any discharge of indebtedness before March 1, 
2002, pursuant to a plan of reorganization filed with a bank-
ruptcy court on or before October 11, 2001. 
SEC. 403. LIMITATION ON USE OF NONACCRUAL EXPERIENCE 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 person using 
an accrual method of accounting with respect to amounts 
to be received for the performance of services by such 
person, such person shall not be required to accrue any 
; 
portion of such amounts which (on the basis of such per-
son's experience) will not be collected i
f
— 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 41 
"(i) such services are in fields referred to in para-
graph (2)(A), or 
"(ii) such person meets the gross receipts test of 
subsection (c) for all prior taxable 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 penalty for failure to timely pay 
such amount. 
"(C) REGULATIONS.—The Secretary shall 
prescribe 
regulations to permit taxpayers to determine amounts 
referred to in subparagraph (A) using computations or for-
mulas 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 formula that clearly reflects 
the taxpayer's experience. A request under the preceding 
sentence shall be approved if such computation or formula 
clearly reflects the taxpayer's experience.", 
(b) EFFECTIVE DATE.— 
26 use 448 note. 
(1) IN GENERAL.—The amendments made by this section Applicability, 
shall apply to taxable years ending after the date of the enact-
ment 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 accounting 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 required 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 per-
mitted under section 448(d)(5) of such Code as in effect 
before the date of the enactment of this Act) beginning 
with such first taxable year. 
SEC. 404. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO 
PAYMENTS BY QUALIFIED PLACEMENT AGENCIES. 
(a) IN GENERAL.—The matter preceding subparagraph (B) of 
section 131(b)(1) (defining qualified foster care payment) is amended 
26 USC 131. 
to read as follows: 
"(1) IN GENERAL.—^The term 'qualified foster care payment' 
means any payment made pursuant to a foster care program 
of a State or political subdivision thereof— 
"(A) which is paid by— 
"(i) a State or political subdivision thereof, or 
"(ii) a qualified foster care placement agency, and". 
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE INDIVIDUALS 
PLACED BY QUALIFIED PLACEMENT AGENCIES.—Subparagraph (B) 
of section 131(b)(2) (defining qualified foster individual) is amended 
to read as follows: 
"(B) a qualified foster care placement agency.". 
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY DEFINED.— 
Subsection (b) of section 131 is amended by redesignating paragraph 
116 STAT. 42 
PUBLIC LAW 107-147—MAR. 9, 2002 
(3) as paragraph (4) and by inserting after paragraph (2) the fol-
lowing new paragraph: 
"(3) 
QUALIFIED FOSTER CARE PLACEMENT AGENCY.—^The 
term 'qualified foster care placement agency' means any place-
ment agency which is licensed or certified by— 
"(A) a State or political subdivision thereof, or 
"(B) an entity designated by a State or political subdivi-
sion thereof, 
for the foster care program of such State or political subdivision 
to make foster care payments to providers of foster care.". 
Applicability. 
(d) EFFECTIVE DATE.—The amendments made by this section 
26 use 131 note, 
shall apply to taxable years beginning after December 31, 2001. 
SEC. 405. INTEREST RATE RANGE FOR ADDITIONAL FUNDING 
REQUIREMENTS. 
(a) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.— 
26 use 412. 
(1) 
SPECIAL 
RULE.—Clause (i) of section 
412(1)(7)(C) 
(relating to interest rate) is amended by adding at the end 
the following new subclause: 
"(III) SPECL\L RULE FOR 2002 AND 2003.—For 
a plan year beginning in 2002 or 2003, notwith-
standing subclause (I), in the case that the rate 
of interest used under subsection (b)(5) exceeds 
the highest rate permitted under subclause (I), 
the rate of interest used to determine current 
liability under this subsection may exceed the rate 
of interest otherwise permitted under subclause 
(I); except that such rate of interest shall not 
exceed 120 percent of the weighted 
average 
referred to in subsection (b)(5)(B)(ii).". 
(2) QUARTERLY cONTRiBUTiONS.^^ubsection (m) of section 
412 is amended by adding at the end the following new para-
graph: 
"(7) SPECIAL RULES FOR 2002 AND 2004.—In any case in 
which the interest rate used to determine current liability 
is determined under subsection (l)(7)(C)(i)(III)— 
"(A) 2002.—For purposes of applying paragraphs (1) 
and (4)(B)(ii) for plan years beginning in 2002, the current 
liability for the preceding plan year shall be redetermined 
using 120 percent as the specified percentage determined 
under subsection (l)(7)(C)(i)(II). 
"(B) 2004.—For purposes of applying paragraphs (1) 
and (4)(B)(ii) for plan years beginning in 2004, the current 
liability for the preceding plan year shall be redetermined 
using 105 percent as the specified percentage determined 
under subsection (lX7)(C)(i)(II).". 
(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU-
RITY ACT OF 1974.— 
(1) SPECIAL RULE.—Clause (i) of section 302(d)(7)(C) of such 
Act (29 U.S.C. 1082(d)(7)(C)) is amended by adding at the 
end the following new subclause: 
"(III) SPECIAL RULE FOR 2002 AND 2003.—For 
a plan year beginning in 2002 or 2003, notwith-
standing subclause (I), in the case that the rate 
of interest used under subsection (b)(5) exceeds 
the highest rate permitted under subclause (I), 
the rate of interest used to determine current 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 43 
liability under this subsection may exceed the rate 
of interest otherwise permitted under subclause 
(I); except that such rate of interest shall not 
exceed 120 percent of the weighted 
average 
referred to in subsection (b)(5)(B)(ii).". 
(2) QUARTERLY CONTRIBUTIONS.—Subsection (e) of section 
302 of such Act (29 U.S.C. 1082) is amended by adding at 
the end the following new paragraph: 
"(7) SPECIAL RULES FOR 2002 AND 2004.—In any case in 
which the interest rate used to determine current liability 
is determined under subsection (d)(7)(C)(i)(III)— 
"(A) 2002.—For purposes of applying paragraphs (1) 
and (4)(B)(ii) for plan years beginning in 2002, the current 
liability for the preceding plan year shall be redetermined 
using 120 percent as the specified percentage determined 
under subsection (d)(7)(C)(i)(II). 
"(B) 2004.—For purposes of applying paragraphs (1) 
and (4)(B)(ii) for plan years beginning in 2004, the current 
liability for the preceding plan year shall be redetermined 
using 105 percent as the specified percentage determined 
under subsection (d)(7)(C)(i)(II).". 
(c) PBGC—Clause (iii) of section 4006(a)(3)(E) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)(E)) 
is amended by adding at the end the following new subclause: 
"(IV) In the case of plan years beginning after December 31, Applicability. 
2001, and before January 1, 2004, subclause (II) shall be applied 
by substituting '100 percent' for '85 percent'. Subclause (III) shall 
be applied for such years without regard to the preceding sentence. 
Any reference to this clause by any other sections or subsections 
shall be treated as a reference to this clause without regard to 
this subclause.". 
SEC. 406. 
ADJUSTED 
GROSS 
INCOME 
DETERMINED 
BY 
TAKING 
INTO 
ACCOUNT CERTAIN EXPENSES OF ELEMENTARY AND 
SECONDARY 
SCHOOL 
TEACHERS. 
(a) IN GENERAL.—Section 62(a)(2) (relating to certain trade 26USC62. 
and business deductions of employees) is amended by adding at 
the end the following: 
"(D) 
CERTAIN EXPENSES OF ELEMENTARY AND SEC-
ONDARY SCHOOL TEACHERS.—In the case of taxable years 
beginning during 2002 or 2003, the deductions allowed 
by section 162 which consist of expenses, not in excess 
of $250, paid or incurred by an eligible educator in connec-
tion with books, supplies (other than nonathletic supplies 
for courses of instruction in health or physical education), 
computer equipment (including related software and serv-
ices) and other equipment, and supplementary materials 
used by the eligible educator in the classroom.". 
(b) ELIGIBLE EDUCATOR.—Section 62 is amended by adding 
at the end the following: 
"(d) DEFINITION; SPECIAL RULES.— 
"(1) ELIGIBLE EDUCATOR.— 
"(A) IN GENERAL.—For purposes of subsection (a)(2)(D), 
the term 'eligible educator' means, with respect to any 
taxable year, an individual who is a kindergarten through 
grade 12 teacher, instructor, counselor, principal, or aide 
in a school for at least 900 hours during a school year. 
116 STAT. 44 
PUBLIC LAW 107-147—MAR. 9, 2002 
"(B) SCHOOL.—The term 'school' means any school 
which provides elementary education or secondary edu-
cation (kindergarten through grade 12), as determined 
under State law. 
"(2) COORDINATION WITH EXCLUSIONS.^A deduction shall 
be allowed under subsection (a)(2)(D) for expenses only to the 
extent the amount of such expenses exceeds the amount exclud-
able under section 135, 529(c)(1), or o30(d)(2) for the taxable 
year.". 
Applicability. 
(c) EFFECTIVE DATE.—^The amendments made by this section 
26 use 62 note. 
shall apply to taxable years beginning after December 31, 2001. 
Subtitle B—^Technical Corrections 
SEC. 411. AMENDMENTS RELATED TO ECONOMIC GROWTH AND TAX 
RELIEF RECONCILIATION ACT OF 2001. 
(a) AMENDMENTS RELATED TO SECTION 101 OF THE ACT.— 
26 use 6428. 
(1) IN GENERAL.—Subsection (b) of section 6428 is amended 
to read as follows: 
"(b) CREDIT TREATED AS NONREFUNDABLE PERSONAL CREDIT.— 
For purposes of this title, the credit allowed under this section 
shall be treated as a credit allowable under subpart A of part 
IV of subchapter A of chapter 1.". 
(2) CONFORMING AMENDMENTS.— 
(A) Subsection (d) of section 6428 is amended to read 
as follows: 
"(d) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.— 
"(1) IN GENERAL.—^The amoimt of credit which would (but 
for this paragraph) be allowable under this section shall be 
reduced (but not below zero) by the aggregate refunds and 
credits made or allowed to the taxpayer under subsection (e). 
Any failure to so reduce the credit shall be treated as arising 
out of a mathematical or clerical error and assessed according 
to section 6213(b)(1). 
"(2) JOINT RETURNS.—In the case of a refund or credit 
made or allowed under subsection (e) with respect to a joint 
return, half of such refund or credit shall be treated as having 
been made or allowed to each individual filing such return.". 
(B) Paragraph (2) of section 6428(e) is amended to 
read as follows: 
"(2) ADVANCE REFUND AMOUNT.—^For purposes of paragraph 
(1), the advance refund amount is the amount that would 
have been allowed as a credit under this section for such 
first taxable year if— 
"(A) this section (other than subsections (b) and (d) 
and this subsection) had applied to such taxable year, 
and 
"(B) the credit for such taxable year were not allowed 
to exceed the excess (if any) o
f
— 
"(i) the sum of the regular tax liability (as defined 
in section 26(b)) plus the tax imposed by section 55, 
over 
"(ii) the sum of the credits allowable under part 
IV of subchapter A of chapter 1 (other than the credits 
allowable under subpart C thereof, relating to refund-
able credits).". 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 45 
(b) AMENDMENT RELATED TO SECTION 201 
OF THE ACT.— 
Subparagraph (B) of section 24(d)(1) is amended by striking 26USC24. 
"amount of credit allowed by this section" and inserting "aggregate 
amount of credits allowed by this subpart". 
(c) AMENDMENTS RELATED TO SECTION 202 OF THE ACT.— 
(1) CORRECTIONS TO CREDIT FOR ADOPTION EXPENSES.— 
(A) Paragraph (1) of section 23(a) is amended to read 
as follows: 
"(1) IN GENERAL.—In the case of an individual, there shall 
be allowed as a credit against the tax imposed by this chapter 
the amount of the qualified adoption expenses paid or incurred 
by the taxpayer.". 
(B) Subsection (a) of section 23 is amended by adding 
at the end the following new paragraph: 
"(3) $10,000 CREDIT FOR ADOPTION OF CHILD WITH SPECIAL 
NEEDS REGARDLESS OF EXPENSES.—In the case of an adoption 
of a child with special needs which becomes final during a 
taxable year, the taxpayer shall be treated as having paid 
during such year qualified adoption expenses with respect to 
such adoption in an amount equal to the excess (if any) of 
$10,000 over the aggregate qualified adoption expenses actually 
paid or incurred by the taxpayer with respect to such adoption 
during such taxable year and all prior taxable years.". 
(C) Paragraph (2) of section 23(a) is amended by 
striking the last sentence. 
(D) Paragraph (1) of section 23(b) is amended by 
striking "subsection (a)(1)(A)" and inserting "subsection 
(a)". 
(E) Subsection (i) of section 23 is amended by striking 
"the dollar limitation in subsection (b)(1)" and inserting 
"the dollar amounts in subsections (a)(3) and (b)(1)". 
(F) Expenses paid or incurred during any taxable year 
26 USC 23 note, 
beginning before January 1, 2002, may be taken into 
account in determining the credit under section 23 of the 
Internal Revenue Code of 1986 only to the extent the 
aggregate of such expenses does not exceed the applicable 
limitation under section 23(b)(1) of such Code as in effect 
on the day before the date of the enactment of the Economic 
Growth and Tax Relief Reconciliation Act of 2001. 
(2) CORRECTIONS TO EXCLUSION FOR EMPLOYER-PROVIDED 
ADOPTION ASSISTANCE.— 
(A) Subsection (a) of section 137 is amended to read 
as follows: 
"(a) EXCLUSION.— 
"(1) IN GENERAL.—Gross income of an employee does not 
include amounts paid or expenses incurred by the employer 
for qualified adoption expenses in connection with the adoption 
of a child by an employee if such amounts are furnished pursu-
ant to an adoption assistance program. 
"(2) $10,000 EXCLUSION FOR ADOPTION OF CHILD WITH SPE-
CIAL NEEDS REGARDLESS OF EXPENSES.—In the case of an adop-
tion of a child with special needs which becomes final during 
a taxable year, the qualified adoption expenses with respect 
to such adoption for such year shall be increased by an amount 
equal to the excess (if any) of $10,000 over the actual aggregate 
qualified adoption expenses with respect to such adoption 
during such taxable year and all prior taxable years.". 
116 STAT. 46 
PUBLIC LAW 107-147—MAR. 9, 2002 
26 use 137. 
Applicability. 
26 use 23 note. 
(B) Paragraph (2) of section 137(b) is amended by 
striking "subsection (a)(1)" and inserting "subsection (a)". 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to taxable years beginning after December 
31, 2002; except that the amendments made by paragraphs 
(1)(C), (1)(D), and (2)(B) shall apply to taxable years beginning 
after December 31, 2001. 
(d) AMENDMENTS RELATED TO SECTION 205 OF THE ACT.— 
(1) Section 45F(d)(4)(B) is amended by striking "subpart 
A, B, or D of this part" and inserting "this chapter or for 
purposes of section 55". 
(2) Section 38(b)(15) is amended by striking "45F" and 
inserting "45F(a)". 
(e) AMENDMENTS RELATED TO SECTION 301 OF THE ACT.— 
(1) Section 63(c)(2) is amended— 
(A) in subparagraph (A), by striking "subparagraph 
(C)" and inserting "subparagraph (D)", 
(B) by striking "or" at the end of subparagraph (B), 
(C) by redesignating subparagraph (C) as subpara-
graph (D), 
(D) by inserting after subparagraph (B) the following 
new subparagraph: 
"(C) one-half of the amount in effect under subpara-
graph (A) in the case of a married individual filing a 
separate return, or", and 
(E) by inserting the following flush sentence at the 
end: 
"If any amount determined under subparagraph (A) is not 
a multiple of $50, such amount shall be rounded to the 
next lowest multiple of $50.". 
(2)(A) Section 63(c)(4) is amended by striking "paragraph 
(2) or (5)" and inserting "paragraph (2)(B), (2)(D), or (5)". 
(B) Section 63(c)(4)(B)(i) is amended by striking "paragraph 
(2)" and inserting "paragraph (2)(B), (2)(D),". 
(C) Section 63(c)(4) is amended by striking the flush sen-
tence at the end (as added by section 301(c)(2) of Public Law 
107-17). 
(f) AMENDMENT RELATED TO SECTION 401 OF THE ACT.—Section 
530(d)(4)(B)(iv) is amended by striking "because the taxpayer 
elected under paragraph (2)(C) to waive the application of paragraph 
(2)" and inserting "by application of paragraph (2)(C)(i)(II)". 
(g) AMENDMENTS RELATED TO SECTION 511 OF THE ACT.— 
(1) Section 2511(c) is amended by striking "taxable gift 
under section 2503," and inserting "transfer of property by 
gift,". 
(2) Section 2101(b) is amended by striking the last sentence. 
(h) AMENDMENT RELATED TO SECTION 532 OF THE ACT.—Section 
2016 is amended by striking "any State, any possession of the 
United States, or the District of Columbia,". 
(i) AMENDMENTS RELATING TO SECTION 602 OF THE ACT.— 
(1) Subparagraph (A) of section 408(q)(3) is amended to 
read as follows: 
"(A) QUALIFIED EMPLOYER PLAN.—The term 'qualified 
employer plan' has the meaning given such term by section 
72(p)(4)(A)(i); except that such term shall also include an 
eligible deferred compensation plan (as defined in section 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 47 
457(b)) of an eligible employer described in section 
457(e)(1)(A).". 
(2) Section 4(c) of Employee Retirement Income Security 
Act of 1974 is amended— 
29 USC 1003. 
(A) by inserting "and part 5 (relating to administration 
and enforcement)" before the period at the end, and 
(B) by adding at the end the following new sentence: 
"Such provisions shall apply to such accounts and annuities Applicability. 
in a manner similar to their application to a simplified 
employee pension under section 408(k) of the Internal Rev-
enue Code of 1986.". 
(j) AMENDMENTS RELATING TO SECTION 611 OF THE ACT.— 
(1) Section 408(k) is amended— 
26 USC 408. 
(A) in paragraph (2)(C) by striking "$300" and inserting 
"$450", and 
(B) in paragraph (8) by striking "$300" both places 
it appears and inserting "$450". 
(2) Section 409(o)( l)(C)(ii) is amended— 
(A) by striking "$500,000" both places it appears and 
inserting "$800,000", and 
(B) by striking "$100,000" and inserting "$160,000". 
(3) Section 611(i) of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 is amended by adding at the end 26 USC 415 note, 
the following new paragraph: 
"(3) SPECIAL RULE.—In the case of plan that, on June 
7, 2001, incorporated by reference the limitation of section 
415(b)(1)(A) of the Internal Revenue Code of 1986, section 
411(d)(6) of such Code and section 204(g)(1) of the Employee 
Retirement Income Security Act of 1974 do not apply to a 
plan amendment that— 
"(A) is adopted on or before June 30, 2002, 
"(B) reduces benefits to the level that would have 
applied without regard to the amendments made by sub-
section (a) of this section, and 
"(C) is effective no earlier than the years described 
in paragraph (2).". 
(k) AMENDMENTS RELATING TO SECTION 613 OF THE ACT.— 
(1) Section 416(c)(l)(C)(iii) is amended by striking "EXCEP-
TION FOR FROZEN PLAN" and inserting "EXCEPTION FOR PLAN 
UNDER WHICH NO KEY EMPLOYEE (OR FORMER KEY EMPLOYEE) 
BENEFITS FOR PLAN YEAR". 
(2) Section 416(g)(3)(B) is amended by striking "separation 
from service" and inserting "severance from employment". 
(1) AMENDMENTS RELATING TO SECTIONS 614 and 616 OF THE 
ACT.— 
(1) Section 404(a)(12) is amended by striking "(9)," and 
inserting "(9) and subsection (h)(1)(C),". 
(2) Section 404(n) is amended by striking "subsection (a)," 
and inserting "subsection (a) or paragraph (1)(C) of subsection 
(h)". 
(3) Section 402(h)(2)(A) is amended by striking "15 percent" 
and inserting "25 percent". 
(4) Section 404(a)(7)(C) is amended to read as follows: 
"(C) PARAGRAPH NOT TO APPLY IN CERTAIN CASES.— 
"(i) BENEFICIARY TEST.—This paragraph shall not 
have the effect of reducing the amount otherwise 
deductible under paragraphs (1), (2), and (3), if no 
116 STAT. 48 
PUBLIC LAW 107-147—MAR. 9, 2002 
employee is a beneficiary under more than 1 trust 
or under a trust and an annuity plan. 
"(ii) ELECTIVE DEFERRALS.—^If, in connection with 
1 or more defined contribution plans and 1 or more 
defined benefit plans, no amounts (other than elective 
deferrals (as defined in section 402(g)(3))) are contrib-
uted to any of the defined contribution plans for the 
taxable year, then subparagraph (A) shall not apply 
with respect to any of such defined contribution plans 
and defined benefit plans.", 
(m) AMENDMENT RELATING TO SECTION 618 
OF THE ACT.— 
26 use 25B. 
Section 25B(d)(2)(A) is amended to read as follows: 
"(A) IN GENERAL.—^The qualified retirement savings 
contributions determined under paragraph (1) shall be 
reduced (but not below zero) by the aggregate distributions 
received by the individual during the testing period from 
any entity of a type to which contributions under paragraph 
(1) may be made. The preceding sentence shall not apply 
to the portion of any distribution which is not includible 
in gross income by reason of a trustee-to-trustee transfer 
or a rollover distribution.", 
(n) AMENDMENTS RELATING TO SECTION 619 
OF THE ACT.— 
(1) Section 45E(e)(l) is amended by striking "(n)" and 
inserting "(m)". 
(2) Section 619(d) of the Economic Growth and Tax Relief 
26 use 38 note. 
Reconciliation Act of 2001 is amended by striking "established" 
and inserting "first effective". 
(o) AMENDMENTS RELATING TO SECTION 631 OF THE ACT.— 
(1) Section 402(g)(1) is amended by adding at the end 
the following: 
"(C) 
CATCH-UP 
CONTRIBUTIONS.—In 
addition 
to 
subparagraph (A), in the case of an eligible participant 
(as defined in section 414(v)), gross income shall not include 
elective deferrals in excess of the applicable dollar amount 
under subparagraph (B) to the extent that the amount 
of such elective deferrals does not exceed the applicable 
dollar amount under section 414(v)(2)(B)(i) for the taxable 
year (without regard to the treatment of the elective defer-
rals by an applicable employer plan under section 414(v)).". 
(2) Section 401(a)(30) is amended by striking "402(g)(1)" 
and inserting "402(g)(1)(A)". 
(3) Section 414(v)(2) is amended by adding at the end 
the following: 
I 
"(D) AGGREGATION OF PLANS.—For purposes of this 
paragraph, plans described in clauses (i), (ii), and (iv) of 
paragraph (6)(A) that are maintained by the same employer 
(as determined under subsection (b), (c), (m) or (o)) shall 
be treated as a single plan, and plans described in clause 
(iii) of paragraph (6)(A) that are maintained by the same 
employer shall be treated as a single plan.". 
(4) Section 414(v)(3)(A)(i) is amended by striking "section 
402(g), 402(h), 403(b), 404(a), 404(h), 408(k), 408(p), 415, or 
457" and inserting "sections 401(a)(30), 402(h), 403(b), 408, 
415(c), and 457(b)(2) (determined without regard to section 
457(b)(3))". 
(5) Section 414(v)(3)(B) is amended by striking "section 
401(a)(4), 
401(a)(26), 
401(k)(3), 
401(k)(ll), 
401(k)(12), 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 49 
403(b)(12), 408(k), 408(p), 408B, 410(b), or 416" and inserting 
"section 401(a)(4), 401(k)(3), 401(k)(ll), 403(b)(12), 408(k), 
410(b), or 416". 
(6) Section 414(v)(4)(B) is amended by inserting before 26USC414. 
the period at the end the following: ", except that a plan 
described in clause (i) of section 410(b)(6)(C) shall not be treated 
as a plan of the employer until the expiration of the transition 
period with respect to such plan (as determined under clause 
(ii) of such section)". 
(7) Section 414(v)(5) is amended— 
(A) by striking ", with respect to any plan year," in 
the matter preceding subparagraph (A), 
(B) by amending subparagraph (A) to read as follows: 
"(A) who would attain age 50 by the end of the taxable 
year,", and 
(C) in subparagraph (B) by striking "plan year" and 
inserting "plan (or other applicable) year". 
(8) Section 414(v)(6)(C) is amended to read as follows: 
"(C) EXCEPTION FOR SECTION 457 PLANS.—^This sub-
section shall not apply to a participant for any year for 
which a higher limitation applies to the participant under 
section 457(b)(3).". 
(9) Section 457(e) is amended by adding at the end the 
following new paragraph: 
"(18) 
COORDINATION WITH CATCH-UP CONTRIBUTIONS FOR 
INDIVIDUALS AGE 50 OR OLDER.—In the case of an individual 
who is an eligible participant (as defined by section 414(v)) 
and who is a participant in an eligible deferred compensation 
plan of an employer described in paragraph (1)(A), subsections 
(b)(3) and (c) shall be applied by substituting for the amount 
otherwise determined under the applicable subsection the 
greater of— 
"(A) the sum of— 
"(i) the plan ceiling established for purposes of 
subsection (b)(2) (without regard to subsection (b)(3)), 
plus 
"(ii) the applicable dollar amount for the taxable 
year determined under section 414(v)(2)(B)(i), or 
"(B) the amount determined under the applicable sub-
section (without regard to this paragraph).", 
(p) AMENDMENTS RELATING TO SECTION 632 OF THE ACT.— 
(1) Section 403(b)(1) is amended in the matter following 
subparagraph (E) by striking "then amounts contributed" and 
all that follows and inserting the following: 
"then contributions and other additions by such employer 
for such annuity contract shall be excluded from the gross 
income of the employee for the taxable year to the extent 
that the aggregate of such contributions and additions (when 
expressed as an annual addition (within the meaning of section 
415(c)(2))) does not exceed the applicable limit under section 
415. The amount actually distributed to any distributee under 
such contract shall be taxable to the distributee (in the year 
in which so distributed) under section 72 (relating to annuities). 
For purposes of applying the rules of this subsection to contribu-
tions and other additions by an employer for a taxable year, 
amounts transferred to a contract described in this paragraph 
by reason of a rollover contribution described in paragraph 
116 STAT. 50 
PUBLIC LAW 107-147—MAR. 9, 2002 
(8) of this subsection or section 408(d)(3)(A)(ii) shall not be 
considered contributed by such employer.". 
26 use 403. 
(2) Section 403(b) is amended by striking paragraph (6). 
(3) Section 403(b)(3) is amended— 
(A) in the first sentence by inserting the following 
before the period at the end: ", and which precedes the 
taxable year by no more than five years", and 
(B) in the second sentence by striking "or any amount 
received by a former employee after the fifth taxable year 
following the taxable year in which such employee was 
terminated". 
(4) Section 415(c)(7) is amended to read as follows: 
"(7) SPECIAL RULES RELATING TO CHURCH PLANS.— 
"(A) ALTERNATIVE CONTRIBUTION LIMITATION.— 
"(i) IN GENERAL.—^Notwithstanding any 
other 
provision of this subsection, at the election of a partici-
pant who is an employee of a church or a convention 
or association of churches, including an organization 
described in section 414(e)(3)(B)(ii), contributions and 
other additions for an annuity contract or retirement 
income account described in section 403(b) with respect 
to such participant, when expressed as an annual addi-
tion to such participant's account, shall be treated as 
not exceeding the limitation of paragraph (1) if such 
annual addition is not in excess of $10,000. 
"(ii) $40,000 AGGREGATE LIMITATION.—The total 
amount of additions with respect to any participant 
which may be taken into account for purposes of this 
subparagraph for all years may not exceed $40,000. 
"(B) NUMBER OF YEARS OF SERVICE FOR DULY ORDAINED, 
COMMISSIONED, 
OR 
LICENSED 
MINISTERS 
OR 
L
A
Y 
EMPLOYEES.—^For purposes of this paragraph— 
"(i) all years of service by— 
"(I) a duly ordained, commissioned, or licensed 
minister of a church, or 
"(II) a lay person, 
as an employee of a church, a convention or association 
of churches, including an organization described in 
section 414(e)(3)(B)(ii), shall be considered as years 
of service for 1 employer, and 
"(ii) all amounts contributed for annuity contracts 
by each such church (or convention or association of 
churches) or such organization during such years for 
such minister or lay person shall be considered to 
have been contributed by 1 employer. 
"(C) FOREIGN MISSIONARIES.—In the case of any indi-
vidual described in subparagraph (D) performing services 
outside the United States, contributions and other addi-
tions for an annuity contract or retirement income account 
described in section 403(b) with respect to such employee, 
when expressed as an annual addition to such employee's 
account, shall not be treated as exceeding the limitation 
of paragraph (1) if such annual addition is not in excess 
of the greater of $3,000 or the employee's includible com-
pensation determined under section 403(b)(3). 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 51 
"(D) ANNUAL ADDITION.—For purposes of this para-
graph, the term 'annual addition' has the meaning given 
such term by paragraph (2). 
"(E) 
CHURCH, 
CONVENTION 
OR 
ASSOCIATION 
OF 
CHURCHES.—For purposes of this paragraph, the terms 
'church' and 'convention or association of churches' have 
the same meaning as when used in section 414(e).". 
(5) Section 457(e)(5) is amended to read as follows: 
26 USC 457. 
"(5) INCLUDIBLE COMPENSATION.—The term 'includible com-
pensation' has the meaning given to the term 'participant's 
compensation' by section 415(c)(3).". 
(6) Section 402(g)(7)(B) is amended by striking "2001." and 
inserting "2001).". 
(q) AMENDMENTS RELATING TO SECTION 643 OF THE ACT.— 
(1) Section 401(a)(31)(C)(i) is amended by inserting "is a 
qualified trust which is part of a plan which is a defined 
contribution plan and" before "agrees". 
(2) Section 402(c)(2) is amended by adding at the end 
the following flush sentence: 
"In the case of a transfer described in subparagraph (A) or 
(B), the amount transferred shall be treated as consisting first 
of the portion of such distribution that is includible in gross 
income (determined without regard to paragraph (1)).". 
(r) AMENDMENTS RELATING TO SECTION 648 OF THE ACT.— 
(1) Section 417(e) is amended— 
(A) in paragraph (1) by striking "exceed the dollar 
limit under section 411(a)(ll)(A)" and inserting "exceed 
the amount that can be distributed without the partici-
pant's consent under section 411(a)(ll)", and 
(B) in paragraph (2)(A) by striking "exceeds the dollar 
limit under section 411(a)(ll)(A)" and inserting "exceeds 
the amount that can be distributed without the partici-
pant's consent under section 411(a)(ll)". 
(2) Section 205(g) of the Employee Retirement Income Secu-
rity Act of 1974 is amended— 
29 USC 1055. 
(A) in paragraph (1) by striking "exceed the dollar 
limit under section 203(e)(1)" and inserting "exceed the 
amount that can be distributed without the participant's 
consent under section 203(e)", and 
(B) in paragraph (2)(A) by striking "exceeds the dollar 
limit under section 203(e)(1)" and inserting "exceeds the 
amount that can be distributed without the participant's 
consent under section 203(e)". 
(s) AMENDMENT RELATING TO SECTION 652 OF THE ACT.—Sec-
tion 404(a)(l)(D)(iv) is amended by striking "PLANS MAINTAINED 
BY PROFESSIONAL SERVICE EMPLOYERS" and inserting "SPECLfy;. RULE 
FOR TERMINATING PLANS". 
(t) AMENDMENTS RELATING TO SECTION 657 OF THE ACT.— 
Section 404(c)(3) of the Employee Retirement Income Security Act 
of 1974 is amended— 
29 USC 1104. 
(1) by striking "the earlier of in subparagraph (A) the 
second place it appears, and 
(2) by striking "if the transfer" and inserting "a transfer 
that". 
(u) AMENDMENTS RELATING TO SECTION 659 OF THE ACT.— 
(1) Section 4980F is amended— 
116 STAT. 52 
PUBLIC LAW 107-147—MAR. 9, 2002 
29 use 1054. 
26 use 4980F 
note. 
26 use 412. 
29 use 1082. 
(A) in subsection (e)(1) by striking "written notice" 
and inserting "the notice described in paragraph (2)", 
(B) by amending subsection (f)C2)(A) to read as follows: 
"(A) any defined benefit plan described in section 401(a) 
which includes a trust exempt from tax under section 
501(a), or", and 
(C) in subsection (f)(3) by striking "significantly" both 
places it appears. 
(2) Section 204(h)(9) of the Employee Retirement Income 
Security Act of 1974 is amended by striking "significantly" 
both places it appears. 
(3) Section 659(c)(3)(B) of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 is amended by striking "(or" 
and inserting "(and". 
(v) AMENDMENTS RELATING TO SECTION 661 OF THE ACT.— 
(1) Section 412(c)(9XB) is amended— 
(A) in clause (ii) by striking "125 percent" and inserting 
"100 percent", and 
(B) by adding at the end the following new clause: 
"(iv) LIMITATION.—^A change in funding method to 
use a prior year valuation, as provided in clause (ii), 
may not be made unless as of the valuation date within 
the prior plan year, the value of the assets of the 
plan are not less than 125 percent of the plan's current 
liability (as defined in paragraph (7)(B)).". 
(2) Section 302(c)(9)(B) of the Employee Retirement Income 
Security Act of 1974 is amended— 
(A) in clause (ii) by striking "125 percent" and inserting 
"100 percent", and 
(B) by adding at the end the following new clause: 
"(iv) A change in fimding method to use a prior year valuation, 
as provided in clause (ii), may not be made unless as of the valuation 
date within the prior plan year, the value of the assets of the 
plan are not less than 125 percent of the plan's current liability 
(as defined in paragraph (7XB)).". 
(w) AMENDMENTS RELATING TO SECTION 662 
OF THE ACT.— 
(1) Section 404(k) is amended— 
(A) in paragraph (1) by striking "during the taxable 
year", 
(B) in paragraph (2XB) by striking "(AXiii)" and 
inserting "(A)(iv)", 
(C) in paragraph (4)(B) by striking "(iii)" and inserting 
"(iv)", and 
(D) by redesignating subparagraph (B) of paragraph 
(4) (as amended by subparagraph (C)) as subparagraph 
(C) of paragraph (4) and by inserting after subparagraph 
(A) the following new subparagraph: 
"(B) 
REINVESTMENT 
DIVIDENDS.—For 
purposes 
of 
subparagraph (A), an applicable dividend reinvested pursu-
ant to clause (iii)(II) of paragraph (2)(A) shall be treated 
as paid in the taxable year of the corporation in which 
such dividend is reinvested in qualifying employer securi-
ties or in which the election under clause (iii) of paragraph 
(2)(A) is made, whichever is later.". 
(2) Section 404(k) is amended by adding at the end the 
following new paragraph: 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 53 
"(7) FULL VESTING.—In accordance with section 411, an 
applicable dividend described in clause (iii)(II) of paragraph 
(2)(A) shall be subject to the requirements of section 411(a)(1).". 
(x) EFFECTIVE DATE.—Except as provided in subsection (c), 26 use 25B note. 
the amendments made by this section shall take effect as if included 
in the provisions of the Economic Growth and Tax Relief Reconcili-
ation Act of 2001 to which they relate. 
SEC. 412. AMENDMENTS RELATED TO COMMUNITY RENEWAL TAX 
RELIEF ACT OF 2000. 
(a) AMENDMENT RELATED TO SECTION 101 OF THE ACT.—Section 
469(i)(3)(E) is amended by striking clauses (ii), (iii), and (iv) and 26USC469. 
inserting the following: 
"(ii) second to the portion of such loss to which 
subparagraph (C) applies, 
"(iii) third to the portion of the passive activity 
credit to which subparagraph (B) or (D) does not apply, 
"(iv) fourth to the portion of such credit to which 
subparagraph (B) applies, and". 
(b) AMENDMENT RELATED TO SECTION 306 OF THE ACT.—Section 
151(c)(6)(C) is amended— 
(1) by striking "FOR EARNED INCOME CREDIT.—For purposes 
of section 32, an" and inserting "FOR PRINCIPAL PLACE OF ABODE 
REQUIREMENTS.—An", and 
(2) by striking "requirement of section 32(c)(3)(A)(ii)" and 
inserting "principal place of abode requirements of section 
2(a)(1)(B), section 2(b)(1)(A), and section 32(c)(3)(A)(ii)". 
(c) AMENDMENT RELATED TO SECTION 309 OF THE ACT.— 
Subparagraph (A) of section 358(h)( 1) is amended to read as follows: 
"(A) which is assumed by another person as part of 
the exchange, and". 
(d) AMENDMENTS RELATED TO SECTION 401 OF THE ACT.— 
(1)(A) Section 1234A is amended by inserting "or" after 
the comma at the end of paragraph (1), by striking "or" at 
the end of paragraph (2), and by striking paragraph (3). 
(B)(i) Section 1234B is amended in subsection (a)(1) and 
in subsection (b) by striking "sale or exchange" the first place 
it appears in each subsection and inserting "sale, exchange, 
or termination". 
(ii) Section 1234B is amended by adding at the end the 
following new subsection: 
"(f) CROSS REFERENCE.— 
"For special rules relating to dealer securities futures contracts, 
see section 1256.". 
(2) Section 1091(e) is amended— 
(A) in the heading, by striking "SECURITIES.—" and 
inserting 
"SECURITIES AND SECURITIES 
FUTURES 
CON-
TRACTS To SELL.—", 
(B) by inserting after "closing of a short sale of the 
following: "(or the sale, exchange, or termination of a securi-
ties futures contract to sell)", 
(C) in paragraph (2), by inserting after "short sale 
of the following: "(or securities futures contracts to sell)", 
and 
(D) by adding at the end the following: 
"For purposes of this subsection, the term 'securities futures con-
tract' has the meaning provided by section 1234B(c).". 
116 STAT. 54 
PUBLIC LAW 107-147—MAR. 9, 2002 
26 use 1233. 
(3)(A) Section 1233(e)(2) is amended by striking "and" at 
the end of subparagraph (C), by striking the period and 
inserting "; and" at the end of subparagraph (D), and inserting 
after subparagraph (D) the following: 
"(E) entering into a securities futures contract (as so 
defined) to sell shall be considered to be a short sale, 
and the settlement of such contract shall be considered 
to be the closing of such short sale.". 
(B) Section 1234B(b) is amended by inserting after "or 
this section," the following: "or in section 1233,". 
26 use 151 note. 
(e) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in the provisions of the Community 
Renewal Tax Relief Act of 2000 to which they relate. 
SEC. 413. AMENDMENTS RELATED TO THE TAX RELIEF EXTENSION 
ACT OF 1999. 
(a) AMENDMENTS RELATED TO SECTION 545 OF THE ACT.—Sec-
tion 857(b)(7) is amended— 
(1) in clause (i) of subparagraph (B), by striking "the 
amount of which" and inserting "to the extent the amount 
of the rents", and 
(2) in subparagraph (C), by striking "if the amount" and 
inserting "to the extent the amount". 
26 use 857 note. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in section 545 of the Tax Relief 
Extension Act of 1999. 
SEC. 414. AMENDMENTS RELATED TO THE TAXPAYER RELIEF ACT OF 
1997. 
(a) AMENDMENTS RELATED TO SECTION 311 OF THE ACT.—Sec-
tion 311(e) of the Taxpayer Relief Act of 1997 (PubHc Law 105-
26 use 1 note. 
34; 111 Stat. 836) is amended— 
(1) in paragraph (2)(A), by striking "recognized" and 
inserting "included in gross income", and 
(2) by adding at the end the following new paragraph: 
"(5) DISPOSITION OF INTEREST IN PASSIVE ACTIVITY.—Section 
469(g)(1)(A) of the Internal Revenue Code of 1986 shall not 
apply by reason of an election made under paragraph (1).". 
26 use 1 note. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in section 311 of the Taxpayer 
ReliefActof 1997. 
SEC. 415. AMENDMENT RELATED TO THE BALANCED BUDGET ACT OF 
1997. 
(a) AMENDMENT RELATED TO SECTION 4006 OF THE ACT.— 
Section 26(b)(2) is amended by striking "and" at the end of subpara-
graph (P), by striking the period and inserting ", and" at the 
end of subparagraph (Q), and by adding at the end the following 
new subparagraph: 
"(R) section 138(c)(2) (relating to penalty for distribu-
tions from Medicare+Choice MSA not used for qualified 
medical expenses if minimum balance not maintained).". 
26 use 26 note. 
(b) EFFECTIVE DATE.—^The amendment made by this section 
shall take effect as if included in section 4006 of the Balanced 
Budget Act of 1997. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 55 
SEC. 
416. 
OTHER 
TECHNICAL 
CORRECTIONS. 
(a) COORDINATION OF ADVANCED PAYMENTS OF EARNED INCOME 
CREDIT.— 
(1) Section 32(g)(2) is amended by striking "subpart" and 
inserting "part". 
(2) The amendment made by this subsection shall take 
effect as if included in section 474 of the Tax Reform Act 
of 1984. 
(b) SPECIAL RULE RELATED TO WASH SALE LOSSES.— 
(1) Section 1256(f) is amended by adding at the end the 
following new paragraph: 
"(5) SPECIAL RULE RELATED TO LOSSES.—Section 1091 
(relating to loss from wash sales of stock or securities) 
shall not apply to any loss taken into account by reason 
of paragraph (1) of subsection (a).". 
(2) The amendment made by this subsection shall take 
effect as if included in section 5075 of the Technical and Mis-
cellaneous Revenue Act of 1988. 
(c) DISCLOSURE BY SOCIAL SECURITY ADMINISTRATION TO FED-
ERAL CHILD SUPPORT AGENCIES.— 
(1) Section 6103(1X8) is amended— 
(A) in the heading, by striking "STATE AND LOCAL" 
and inserting "FEDERAL, STATE, AND LOCAL", and 
(B) in subparagraph (A), by inserting "Federal or" 
before "State or local". 
(2) The amendments made by this subsection shall take 
effect on the date of the enactment of this Act. 
(d) TREATMENT OF SETTLEMENTS UNDER PARTNERSHIP AUDIT 
RULES.— 
(1) The following provisions are each amended by inserting 
"or the Attorney General (or his delegate)" after "Secretary" 
each place it appears: 
(A) Paragraphs (1) and (2) of section 6224(c). 
(B) Section 6229(f)(2). 
(C) Section 6231(b)(1)(C). 
(D) Section 6234(g)(4)(A). 
(2) The amendments made by this subsection shall apply 
with respect to settlement agreements entered into after the 
date of the enactment of this Act. 
(e) AMENDMENT RELATED TO PROCEDURE AND ADMINISTRA-
TION.— 
(1) Section 6331(k)(3) (relating to no levy while certain 
offers pending or installment agreement pending or in effect) 
is amended to read as follows: 
"(3) CERTAIN RULES TO APPLY.—^Rules similar to the rules 
of— 
"(A) paragraphs (3) and (4) of subsection (i), and 
"(B) except in the case of paragraph (2)(C), paragraph 
(5) of subsection (i), 
shall apply for purposes of this subsection.". 
(2) The amendment made by this subsection shall take 
effect on the date of the enactment of this Act. 
(f) MODIFIED ENDOWMENT CONTRACTS.—Paragraph (2) of sec-
tion 318(a) of the Community Renewal Tax Relief Act of 2000 
(114 Stat. 2763A-645) is repealed, and clause (ii) of section 
7702A(c)(3)(A) shall read and be applied as if the amendment 
made by such paragraph had not been enacted. 
26 u s e 32. 
Effective date. 
26 u s e 32 note. 
Effective date. 
26 u s e 1256 
note. 
Effective date. 
26 u s e 6103 
note. 
Applicability. 
26 u s e 6224 
note. 
Effective date. 
26 u s e 6331 
note. 
Applicability. 
26 u s e 7702A 
and note. 
X 
116 STAT. 56 
PUBLIC LAW 107-147—MAR. 9, 2002 
SEC. 417. CLERICAL AMENDMENTS. 
26USC25B. 
(1) The subsection (g) of section 25B that relates to termi-
nation is redesignated as subsection (h). 
(2) The second sentence of section 42(h)(3)(C) is amended 
by striking "the amounts described in" and all that follows 
through the period and inserting "the amounts described in 
clauses (ii) through (iv) over the aggregate housing credit dollar 
amount allocated for such year.". 
(3) Clause (ii) of section 42(m)(l)(B) is amended by striking 
the second "and" at the end of subclause (II) and by inserting 
"and" at the end of subclause (III). 
(4) Section 51A(c)(l) is amended by striking "51(d)(10)" 
and inserting "51(d)(ll)". 
(5) The flush sentence at the end of clause (ii) of section 
56(a)(1)(A) is amended by striking "such 1250" and inserting 
"such section 1250". 
(6) Section 151(c)(6)(B)(iii) is amended by inserting "as" 
(7) Section 170(e)(6)(B)(i)(III) is amended by striking 
"2000," and inserting "2000),". 
(8) Section 172(b)(l)(F)(i) is amended— 
(A) by striking "3 years" and inserting "3 taxable 
years", and 
(B) by striking "2 years" and inserting "2 taxable 
years". 
(9) Section 351(h)(1) is amended by inserting a comma 
after "liability". 
(10) Section 475(g)(3) is amended by striking "sections" 
and inserting "section". 
(11) Section 529(e)(3)(B)(i) is amended by striking "sub-
section (b)(7)" and inserting "subsection (b)(6)". 
(12) Section 741 is amended by striking "which have appre-
ciated substantially in value". 
(13) Section 857(b)(7)(B)(i) is amended by striking "sub-
section 856(d)" and inserting "section 856(d)". 
(14) Subparagraph (B) of section 943(e)(4) is amended by 
aligning the left margin of the flush language with subpara-
graph (A). 
(15) Subparagraph (B) of section 995(b)(3) is amended by 
striking "International Security Assistance and Arms Export 
Control Act of 1976" and inserting "Arms Export Control Act". 
(16) Section 1394(c)(2) is amended by striking "subpara-
graph (A)" and inserting "paragraph (1)". 
(17)(A) The section heading for section 4980E is amended 
to read as follows: 
"SEC. 4980E. FAILURE OF EMPLOYER TO MAKE COMPARABLE ARCHER 
MSA CONTRIBUTIONS.". 
(B) The item relating to section 4980E in the table of 
sections for chapter 43 is amended to read as follows: 
"Sec. 4980E. Failure of employer to make comparable Archer MSA contribu-
tions.". 
(18) Section 6105(c)(1) is amended by striking "any" in 
subparagraphs (C) and (E). 
(19)(A) Section 6227(d) is amended by striking "subsection 
(b)" and inserting "subsection (c)". 
(B) Section 6228 is amended— 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 57 
(i) in subsection (a)(1), by striking "subsection (b) of 
section 6227" and inserting "subsection (c) of section 6227", 
(ii) in subsection (a)(3)(A), by striking "subsection (b) 
of, and 
(iii) in subsections (b)(1) and (b)(2)(A), by striking "sub-
section (c) of section 6227" and inserting "subsection (d) 
of section 6227". 
(C) Section 623 l(b)(2)(BXi) is amended by striking "section 
6227(c)" and inserting "section 6227(d)". 
(20) Section 
1221(b)(l)(B)(i) is amended by 
striking 
"1256(b))" and inserting "1256(b)))". 
(21) Section 159 of the Community Renewal Tax Relief 
Act of 2000 (114 Stat. 2763A-624) is amended by striking 
"factions" and inserting "functions". 
(22) The amendment to section 170(e)(6)(B)(iv) made by 
section 165(b)(1) of the Community Renewal Tax Relief Act 
of 2000 (114 Stat. 2763A-626) shall be applied as if it struck 
"in any of the grades K-12". 
(23) Section 618(b)(2) of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 (Public Law 107-16; 115 Stat. 
108) is amended— 
(A) in subparagraph (A) by striking "203(d)" and 
inserting "202(f)", and 
(B) in subparagraphs (C), (D), and (E) by striking 
"203" and inserting "202(f)". 
(24)(A) Section 525 of the Ticket to Work and Work Incen-
tives Improvement Act of 1999 (Public Law 106-170; 113 Stat. 
1928) is amended by striking "7200" and inserting "7201". 
(B) Section 532(c)(2) of such Act (113 Stat. 1930) is 
amended— 
(i) in subparagraph (D), by striking "341(d)(3)" and 
inserting "341(d)", and 
(ii) in subparagraph (Q), by striking "954(c)(l)(B)(iii) 
and inserting "954(c)(1)(B)". 
SEC. 418. ADDITIONAL CORRECTIONS. 
(a) AMENDMENTS RELATED TO SECTION 202 OF THE ECONOMIC 
GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001.— 
(1) Subsection (h) of section 23 is amended— 
(A) by striking "subsection (a)(1)(B)" and inserting 
"subsection (aX3)", and 
(B) by adding at the end the following new flush sen-
tence: 
"If any amount as increased under the preceding sentence is not 
a multiple of $10, such amount shall be rounded to the nearest 
multiple of $10.". 
(2) Subsection (f) of section 137 is amended by adding 
at the end the following new flush sentence: 
"If any amount as increased under the preceding sentence is not 
a multiple of $10, such amount shall be rounded to the nearest 
multiple of $10.". 
(b) AMENDMENTS RELATED TO SECTION 204 OF THE ECONOMIC 
GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001.—Section 
21(d)(2) is amended— 
(1) in subparagraph (A) by striking "$200" and inserting 
"$250", and 
26 use 6231. 
26 use 1400E 
note. 
Applicability. 
26 use 170. 
26 use 24. 
26 use 26,904, 
1400e. 
7 use 7212 note. 
26 use 341. 
26 use 954. 
116 STAT. 58 
PUBLIC LAW 107-147—MAR. 9, 2002 
(2) in subparagraph (B) by striking "$400" and inserting 
"$500". 
26 use 21 note. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in the provisions of the Economic 
Growth and Tax Relief Reconciliation Act of 2001 to which they 
relate. 
TITLE 
V—SOCIAL 
SECURITY 
HELD 
HARMLESS; BUDGETARY TREATMENT 
OF ACT 
42 u s e 401 note. 
SEC. 501. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS. 
(a) IN GENERAL.—Nothing in this Act (or an amendment made 
by this Act) shall be construed to alter or amend title II of the 
Social Security Act (or any regulation promulgated under that Act). 
(b) TRANSFERS.— 
(1) 
ESTIMATE 
OF SECRETARY.—The Secretary 
of 
the 
Treasury shall annually estimate the impact that the enactment 
of this Act has on the income and balances of the trust funds 
established under section 201 of the Social Security Act (42 
U.S.C. 401). 
(2) TRANSFER OF FUNDS.—If, under paragraph (1), the Sec-
retary of the Treasury estimates that the enactment of this 
Act has a negative impact on the income and balances of 
the trust funds established under section 201 of the Social 
Security Act (42 U.S.C. 401), the Secretary shall transfer, not 
less frequently 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. 
SEC. 502. EMERGENCY DESIGNATION. 
Congress designates as emergency requirements pursuant to 
section 252(e) of the Balanced Budget and Emergency Deficit Con-
trol Act of 1985 the following amounts: 
(1) An amount equal to the amount by which revenues 
are reduced by this Act below the recommended levels of Fed-
eral revenues for fiscal year 2002, the total of fiscal years 
2002 through 2006, and the total of fiscal years 2002 through 
2011, provided in the conference report accompanying H. Con, 
Res. 83, the concurrent resolution on the budget for fiscal 
year 2002. 
(2) Amounts equal to the amounts of new budget authority 
and outlays provided in this Act in excess of the allocations 
under section 302(a) of the Congressional Budget Act of 1974 
to the Committee on Finance of the Senate for fiscal year 
2002, the total of fiscal years 2002 through 2006, and the 
total of fiscal years 2002 through 2011. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 59 
TITLE VI—EXTENSIONS OF CERTAIN 
EXPIRING PROVISIONS 
26 u s e 23 note. 
Applicability. 
26 u s e 26 note. 
SEC. 601. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS 
AGAINST REGULAR AND MINIMUM TAX LIABILITY. 
(a) IN GENERAL.—Paragraph (2) of section 26(a) is amended— 
26 use 26 
(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 inserting "during 
2000, 2001, 2002, or 2003,". 
(b) CONFORMING AMENDMENTS.— 
(1) Section 904(h) is amended by striking "during 2000 
or 2001" and inserting "during 2000, 2001, 2002, or 2003". 
(2) The amendments made by sections 201(b), 202(f), and 
618(b) of the Economic Growth and Tax ReUef ReconciHation 
Act of 2001 shall not apply to taxable years beginning during 
2002 and 2003. 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply to taxable years beginning after December 31, 2001. 
SEC. 602. 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", respectively, 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)(l) is amended by 
adding at the end the following new clause: 
"(iii) 
APPLICATION 
OF 
SUBPARAGRAPH.—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 apply to property placed in service after December 31, 2001. 
SEC. 603. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN 
R E N E W A B L E RESOURCES. 
(a) IN GENERAL.—Subparagraphs (A), (B), and (C) of section 
45(c)(3) are both amended by striking "2002" and inserting "2004". 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
(a) shall apply to facilities placed in service after December 31, 
2001. 
SEC. 604. 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 subsection (a) 
shall apply to individuals who begin work for the employer after 
December 31, 2001. 
., 
, 
26 u s e 280F 
note. 
Applicability. 
26 u s e 30 note. 
Applicability. 
26 u s e 45 note. 
Applicability. 
26 u s e 51 note. 
116 STAT. 60 
PUBLIC LAW 107-147—MAR. 9, 2002 
26 u s e 51A. 
Applicability. 
26 u s e 51A note. 
Applicability. 
26 u s e 179A 
note. 
Applicability. 
26 u s e 613A 
note. 
Applicability. 
26 u s e 1397E 
note. 
Applicability. 
26 u s e 7652 
note. 
26 u s e 9812 
note. 
SEC. 605. 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 subsection (a) 
shall apply to individuals who begin work for the employer after 
December 31, 200 L 
SEC. 606. 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", respectively, and 
(2) in subsection (f), by striking "December 31, 2004" and 
inserting "December 31, 2006". 
(b) EFFECTIVE DATE.—The amendments made by subsection 
(a) shall apply to property placed in service after December 31, 
2001. 
SEC. 607. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION 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 subsection (a) 
shall apply to taxable years beginning after December 31, 2001. 
SEC. 608. 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 subsection (a) 
shall apply to obligations issued after the date of the enactment 
of this Act. 
SEC. 609. 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 subsection (a) 
shall apply to articles brought into the United States after December 
31, 2001. 
SEC. 610. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
MENTAL HEALTH BEIVEFITS. 
(a) IN GENERAL.—Subsection (f) of section 9812, as amended 
by the Departments of Labor, Health and Human Services, and 
Education, and Related Agencies Appropriations Act, 2002, is 
amended to read as follows: 
"(f) APPLICATION OF SECTION.—This section shall not apply 
to benefits for services furnished— 
"(1) on or after September 30, 2001, and before January 
10, 2002, and 
"(2) after December 31, 2003.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to plan years beginning after December 31, 2000. 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 61 
SEC. 611. TEMPORARY SPECIAL RULES FOR TAXATION OF LIFE INSUR-
ANCE COMPANIES. 
(a) REDUCTION IN MUTUAL LIFE INSURANCE COMPANY DEDUC-
TIONS NOT TO APPLY IN CERTAIN YEARS.—Section 809 (relating 
26 use 809. 
to reduction in certain deductions of material life insurance compa-
nies) is amended by adding at the end the following: 
"(j) DIFFERENTIAL EARNINGS RATE TREATED AS ZERO FOR CER-
TAIN YEARS.—Notwithstanding subsection (c) or (f), the differential 
earnings rate shall be treated as zero for purposes of computing 
both the differential earnings amount and the recomputed differen-
tial earnings amount for a mutual life insurance company's taxable 
years beginning in 2001, 2002, or 2003.". 
(b) EFFECTIVE DATE.—The amendment made by this section Applicability, 
shall apply to taxable years beginning after December 31, 2000. 26 USC 809 note. 
SEC. 612. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS. 
(a) IN GENERAL.—Paragraphs (2) and (3)(B) of section 220(i) 
(defining cut-ofF year) are each amended by striking "2002" each 
place it appears and inserting "2003". 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 220(j) is amended by striking 
"1998, 1999, or 2001" each place it appears and inserting "1998, 
1999, 2001, or 2002". 
(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 
26 use 220 note, 
shall take effect on January 1, 2002. 
SEC. 613. INCENTIVES FOR INDIAN EMPLOYMENT AND PROPERTY ON 
INDIAN RESERVATIONS. 
(a) EMPLOYMENT.—Subsection (f) of section 45A is amended 
by striking "December 31, 2003" and inserting "December 31, 2004". 
(b) PROPERTY.—Paragraph (8) of section 168(j) is amended by 
striking "December 31, 2003" and inserting "December 31, 2004". 
SEC. 614. SUBPART F EXEMPTION FOR ACTIVE FINANCING. 
(a) IN GENERAL.— 
(1) Section 953(e)( 10) is amended— 
(A) by striking "January 1, 2002" and inserting 
"January 1, 2007", and 
(B) by striking "December 31, 2001" and inserting 
"December 31, 2006". 
(2) Section 954(h)(9) is amended by striking "January 1, 
2002" and inserting "January 1, 2007". 
(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 CONTRACTS.— 
"(i) IN GENERAL.—Except as provided in clause 
(ii), the amount of the reserve of a qualifying insurance 
company or qualifying 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). 
116 STAT. 62 
PUBLIC LAW 107-147—MAR. 9, 2002 
"(ii) RULING REQUEST, ETC.—^The amount of the 
reserve under clause (i) shall be the foreign statement 
reserve for the contract (less any catastrophe, defi-
ciency, equalization, or similar reserves), if, pursuant 
to a ruling request submitted by the taxpayer or as 
provided in published guidance, the Secretary deter-
mines that the factors taken into account in deter-
mining the foreign statement reserve provide an appro-
priate means of measuring income.". 
Applicability. 
(c) EFFECTIVE DATE.—The amendments made by this section 
26 use 953 note, shall apply to taxable years beginning after December 31, 2001. 
SEC. 
615. 
REPEAL 
OF 
REQUIREMENT 
FOR 
APPROVED 
DIESEL 
OR 
KER-
OSENE 
TERMINALS. 
26 use 4101. 
(a) IN GENERAL.—Subsection (e) of section 4101 is hereby 
repealed. 
26 use 4101 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
note. 
shall take effect on January 1, 2002. 
SEC. 616. REAUTHORIZATION OF TANF SUPPLEMENTAL GRANTS FOR 
POPULATION INCREASES FOR FISCAL YEAR 2002. 
Section 403(a)(3) of the Social Security Act (42 U.S.C. 603(a)(3)) 
is amended by adding at the end the following: 
"(H) 
REAUTHORIZATION OF GRANTS FOR FISCAL YEAR 
2002.—Notwithstanding 
any 
other 
provision 
of 
this 
paragraph— 
"(i) any State that was a qualifying State under 
this paragraph for fiscal year 2001 or any prior fiscal 
year shall be entitled to receive from the Secretary 
for fiscal year 2002 a grant in an amount equal to 
the amount required to be paid to the State under 
this paragraph for the most recent fiscal year in which 
the State was a qualifying State; 
Applicability. 
"(ii) subparagraph (G) shall be applied as if '2002' 
were substituted for '2001'; and 
"(iii) out of any money in the Treasury of the 
United States not otherwise appropriated, there are 
appropriated for fiscal year 2002 such sums as are 
necessary for grants under this subparagraph.". 
SEC. 617. 1-YEAR EXTENSION OF CONTINGENCY FUND UNDER THE 
TANF PROGRAM. 
Section 403(b) of the Social Security Act (42 U.S.C. 603(b)) 
is amended— 
(1) in paragraph (2), by striking "and 2001" and inserting 
"2001, and 2002"; and 
PUBLIC LAW 107-147—MAR. 9, 2002 
116 STAT. 63 
(2) in paragraph (3XC)(ii), by striking "2001" and inserting 
"2002". 
Approved March 9, 2002. 
LEGISLATIVE HISTORY—H.R. 3090: 
HOUSE REPORTS: No. 107-251 (Comm. on Ways and Means). 
CONGRESSIONAL RECORD: 
Vol. 147 (2001): Oct. 24, considered and passed House. 
Nov. 13, 14, considered in Senate. 
Vol. 148 (2002): Feb. 14, considered and passed Senate, amended. 
Mar. 7, House concurred in Senate amendment with an 
amendment. House amendment considered in Senate. 
Mar. 8, Senate concurred in House amendment. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 38 (2002): 
Mar. 9, Presidential remarks.