Text: H.R.3090 — 107th Congress (2001-2002)All Information (Except Text)

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Public Law No: 107-147 (03/09/2002)

 
[107th Congress Public Law 147]
[From the U.S. Government Printing Office]


<DOC>
[DOCID: f:publ147.107]


[[Page 116 STAT. 21]]

Public Law 107-147
107th Congress

                                 An Act


 
    To provide tax incentives for economic recovery. <<NOTE: Mar. 9, 
                         2002 -  [H.R. 3090]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Job Creation and Worker 
Assistance Act of 2002. Inter-governmental relations.>> assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) <<NOTE: 26 USC 1 note.>>  Short Title.--This Act may be cited as 
the ``Job Creation and Worker Assistance Act of 2002''.

    (b) References to Internal Revenue Code of 1986.--Except as 
otherwise expressly provided, whenever in this Act an amendment or 
repeal is expressed in terms of an amendment to, or repeal of, a section 
or other provision, the reference shall be considered to be made to a 
section or other provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--

Sec. 1. Short title; etc.

                      TITLE I--BUSINESS PROVISIONS

Sec. 101. Special depreciation allowance for certain property acquired 
           after 
           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 II--UNEMPLOYMENT 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.

[[Page 116 STAT. 22]]

                    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 minimum 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 produced 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 insurance 
           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 PROPERTY ACQUIRED 
            AFTER SEPTEMBER 10, 2001, AND BEFORE SEPTEMBER 11, 2004.

    (a) In General.--Section 168 <<NOTE: 26 USC 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 
                computing the amount otherwise allowable as a 
                depreciation deduction under this chapter for such 
                taxable year and any subsequent taxable year.
            ``(2) Qualified property.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified property' 
                means property--

[[Page 116 STAT. 23]]

                          ``(i)(I) to which this section applies 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 reason of clause (ii) or (iii) 
                                of subsection (f)(1)(B) thereof.
                          ``(ii) <<NOTE: Applicability.>>  Only pre-
                      september 11, 2004, basis eligible 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 subsection (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 
                      leasehold improvement property.--The term 
                      `qualified property' shall not include any 
                      qualified New York

[[Page 116 STAT. 24]]

                      Liberty Zone leasehold improvement property (as 
                      defined in section 1400L(c)(2)).
                          ``(iii) Election out.--If a taxpayer makes an 
                      election under this clause with respect to any 
                      class of property for any taxable year, this 
                      subsection shall not apply to all property in such 
                      class placed in service during such taxable year.
                    ``(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, constructing, or producing the 
                      property after September 10, 2001, and before 
                      September 11, 2004.
                          ``(ii) Sale-leasebacks.--For purposes of 
                      subparagraph (A)(ii), if property--
                                    ``(I) is originally placed in 
                                service after September 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)(1)(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 subsection 
                (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

[[Page 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) <<NOTE: Applicability. 26 USC 168 note.>> Effective Date.--The 
amendments made by this section shall apply to property placed in 
service after September 10, 2001, in taxable years ending after such 
date.

SEC. 102. 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) <<NOTE: 26 USC 
172.>>  (relating to years to which loss may be carried) is amended by 
adding at the end the following new subparagraph:
                    ``(H) In the case of a taxpayer which has a net 
                operating loss for any taxable year ending 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 redesignating subsection 
(j) as subsection (k) and by inserting after subjection (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 determined without regard to 
subsection (b)(1)(H). Such election shall be made in such manner as may 
be prescribed by the Secretary and shall be made by the due date 
(including extensions of time) for filing the taxpayer's return for the 
taxable year of the net

[[Page 116 STAT. 26]]

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.--
            (1) <<NOTE: 26 USC 56.>> 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 of--
                          ``(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 taxable 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''.
            (2) <<NOTE: Applicability. 26 USC 56 note.>>  Effective 
        date.--The amendment made by this subsection shall apply to 
        taxable years ending before January 1, 2003.

    (d) <<NOTE: Applicability. 26 USC 172 note.>>  Effective Date.--
Except as provided in subsection (c), the amendments made by this 
section shall apply to net operating losses for taxable years ending 
after December 31, 2000.

   TITLE <<NOTE: Temporary Extended Unemployment Compensation Act of 
      2002. Inter-governmental relations. 26 USC 3304 note.>>  II--
UNEMPLOYMENT ASSISTANCE

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Temporary Extended Unemployment 
Compensation Act of 2002''.

SEC. 202. FEDERAL-STATE AGREEMENTS.

    (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 subsection (a) 
shall provide that the State agency of the State will make payments of 
temporary extended unemployment compensation 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);

[[Page 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 compensation under any 
        other Federal law;
            (3) are not receiving compensation with respect to such week 
        under the unemployment compensation law of Canada; and
            (4) filed an initial claim for regular compensation on or 
        after March 15, 2001.

    (c) Exhaustion of Benefits.--For purposes of subsection (b)(1), an 
individual shall be deemed to have exhausted such individual's rights to 
regular compensation under a State law when--
            (1) no payments of regular compensation can be made under 
        such law because such individual has received all regular 
        compensation available to such individual based on employment 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 agreement under 
this title--
            (1) the amount of temporary extended unemployment 
        compensation 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 unemployment;
            (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 
                temporary 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 employment 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 unemployment 
        compensation payable to any individual for whom a temporary 
        extended unemployment compensation account is established under 
        section 203 shall not exceed the amount established 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.

[[Page 116 STAT. 28]]

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 unemployment compensation, 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 
                compensation (including dependents' allowances) payable 
                to the individual 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 subsection, 
        an individual's weekly benefit amount for any week is the amount 
        of regular compensation (including dependents' allowances) under 
        the State law payable to such individual for such week for total 
        unemployment.

    (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 originally 
        established in such account (as determined under subsection 
        (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 PAYMENT OF 
            TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION.

    (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 compensation paid to 
individuals by the State pursuant to such agreement.
    (b) Treatment of Reimbursable Compensation.--No payment shall be 
made to any State under this section in respect of any compensation to 
the extent the State is entitled to reimbursement 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.

[[Page 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 compensation 
account (as established by section 905(a) of the Social Security 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 agreements entered into under this 
title.
    (b) Certification.--The Secretary shall from time to time certify 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 General Accounting Office, shall make 
payments to the State in accordance with such certification, by 
transfers from the extended unemployment 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 section 
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 appropriated 
from the general fund of the Treasury, without fiscal year limitation, 
to the extended unemployment compensation account (as so established) of 
the Unemployment Trust Fund (as so established) 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 an 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 unemployment compensation under this title to which 
he was not entitled, such individual--

[[Page 116 STAT. 30]]

            (1) shall be ineligible for further temporary extended 
        unemployment compensation under this title in accordance with 
        the provisions of the applicable State unemployment compensation 
        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 
        individual; 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 compensation to which they were not entitled, 
        except that no single deduction may exceed 50 percent of the 
        weekly 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.

[[Page 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 unemployment 
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 Public 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 transferred to 
a State account pursuant to this subsection may be used only in the 
payment of cash benefits--
            ``(i) to individuals with respect to their unemployment, and
            ``(ii) which are allowable under subparagraph (B) or (C).

    ``(B)(i) At the option of the State, cash benefits under this 
paragraph may include amounts which shall be payable as--
            ``(I) regular compensation, or
            ``(II) additional compensation, upon the exhaustion of any 
        temporary extended unemployment compensation (if such State has 
        entered into an agreement under the Temporary Extended

[[Page 116 STAT. 32]]

        Unemployment Compensation Act of 2002), for individuals eligible 
        for regular compensation under the unemployment compensation law 
        of such State.

    ``(ii) Any additional compensation under clause (i) may not be taken 
into account for purposes of any 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 individual 
may not, for any period of unemployment, exceed the maximum 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 
        compensation under the unemployment compensation law of such 
        State under an alternative base period.

    ``(D) Amounts transferred to a State account under this subsection 
may be used in the payment of cash benefits to individuals only for 
weeks of unemployment beginning after the date of enactment of this 
subsection.
    ``(4) Amounts transferred to a State account under this subsection 
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 recipients thereof), subject to the 
same conditions as set forth in subsection (c)(2) (excluding 
subparagraph (B) thereof, and deeming the reference to `subsections (a) 
and (b)' in subparagraph (D) thereof to include this subsection).
    ``(5) <<NOTE: Deadline.>>  Transfers under this subsection shall be 
made within 10 days after the date of enactment of this paragraph.''.

    (c) <<NOTE: Applicability.>>  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) <<NOTE: 42 USC 1103.>>  shall be 
deemed to be amended as follows:
            (1) By substituting ``the transfer date described in 
        subsection (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 
        beginning on such October 1''.
            (4) By substituting ``under subsection (d)'' for ``as of 
        October 1 of such fiscal year''.
            (5) By substituting ``(as of the close of fiscal year 
        2002)'' for ``(as of the close of such fiscal year)''.

[[Page 116 STAT. 33]]

    (d) Technical Amendments.--(1) Sections 3304(a)(4)(B) and 3306(f)(2) 
of the Internal Revenue Code of 1986 <<NOTE: 26 USC 3304, 3306.>>  are 
amended by inserting ``or 903(d)(4)'' before ``of the Social Security 
Act''.

    (2) Section 303(a)(5) of the Social Security Act <<NOTE: 42 USC 
503.>>  is amended 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 
                substantially 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 
                      Liberty Zone business described in subclause (II) 
                      of subparagraph (C)(i), the term `New York Liberty 
                      Zone business employee' includes any employee of 
                      such business (not described in subparagraph (A)) 
                      if substantially 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.

[[Page 116 STAT. 34]]

                      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 
                      business' 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 $6,000 of wages 
                                per calendar 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 
                Liberty 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.

[[Page 116 STAT. 35]]

            ``(2) Qualified new york liberty zone property.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified New York 
                Liberty Zone property' means property--
                          ``(i)(I) which is described in section 
                      168(k)(2)(A)(i), or
                          ``(II) which is nonresidential real property, 
                      or residential rental property, which is described 
                      in subparagraph (B),
                          ``(ii) substantially 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 September 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 acquisition was in effect before 
                      September 11, 2001, and
                          ``(v) which is placed in service by the 
                      taxpayer 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 property damaged, or replaces real property 
                destroyed or condemned, 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 
                      property.--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 
                      leasehold improvement property.--Such term shall 
                      not include any qualified New York Liberty Zone 
                      leasehold improvement property.
                          ``(iv) <<NOTE: Applicability.>>  Election 
                      out.--For purposes of this subsection, rules 
                      similar to the rules of section 168(k)(2)(C)(iii) 
                      shall apply.
                    ``(D) <<NOTE: Applicability.>>  Special rules.--For 
                purposes of this subsection, 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) <<NOTE: Applicability.>>  Allowance against 
                alternative minimum tax.--For purposes of this 
                subsection, rules similar to the rules of section 
                168(k)(2)(F) shall apply.

[[Page 116 STAT. 36]]

    ``(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 property' 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 
                September 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 qualified 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 qualified 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.

[[Page 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 
                nonresidential real property (including fixed tenant 
                improvements associated with such property) located 
                outside the New York Liberty Zone but within the City of 
                New York, New York, if such property is part of a 
                project which consists of at least 100,000 square feet 
                of usable office or other commercial space located in a 
                single building or multiple adjacent buildings.
            ``(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) <<NOTE: Applicability.>>  Section 147(d) 
                (relating to acquisition of existing property not 
                permitted) shall be applied by substituting `50 percent' 
                for `15 percent' each place it appears.
                    ``(C) <<NOTE: Applicability.>>  Section 148(f)(4)(C) 
                (relating to exception from rebate for certain proceeds 
                to be used to finance construction 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.--
        This 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

[[Page 116 STAT. 38]]

        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 facilities 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 
        paragraph 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 designated 
        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 qualified New York Liberty Zone property placed 
                      in service during the taxable year, and

[[Page 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 
        Liberty Zone property' has the meaning given such term by 
        subsection (b)(2).
            ``(3) <<NOTE: Applicability.>>  Recapture.--Rules similar to 
        the rules under section 179(d)(10) shall apply with respect to 
        any qualified New York Liberty Zone property which ceases to be 
        used in the New York Liberty Zone.

    ``(g) <<NOTE: Applicability.>>  Extension of Replacement Period for 
Nonrecognition 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 <<NOTE: 26 USC 
        38.>>  (relating to 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) <<NOTE: Applicability.>>  this section 
                      and section 39 shall be applied 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 business 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 
                determined 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''.

[[Page 116 STAT. 40]]

            (3) <<NOTE: Applicability. 26 USC 38 note.>>  Effective 
        date.--The amendments made by this subsection shall apply to 
        taxable years ending after December 31, 2001.

    (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

SEC. 401. ALLOWANCE OF ELECTRONIC 1099'S. <<NOTE: 26 USC 6041 note.>> 

    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 requirement) 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 <<NOTE: 26 USC 108.>>  
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) <<NOTE: 26 USC 108 note.>>  Effective Date.--
            (1) <<NOTE: Applicability.>>  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 bankruptcy 
        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 
                person's experience) will not be collected if--

[[Page 116 STAT. 41]]

                          ``(i) such services are in fields referred to 
                      in paragraph (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 
                formulas which, based on experience, accurately reflect 
                the amount of income that will not be collected by such 
                person. A taxpayer may adopt, or request consent of the 
                Secretary to change to, a computation or 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) <<NOTE: 26 USC 448 note.>>  Effective Date.--
            (1) <<NOTE: Applicability.>>  In general.--The amendments 
        made by this section shall apply to taxable years ending after 
        the date of the enactment of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of 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 
                permitted 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) <<NOTE: 26 USC 131.>>  (defining qualified foster care 
payment) is amended 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

[[Page 116 STAT. 42]]

(3) as paragraph (4) and by inserting after paragraph (2) the following 
new paragraph:
            ``(3) Qualified foster care placement agency.--The term 
        `qualified foster care placement agency' means any placement 
        agency which is licensed or certified by--
                    ``(A) a State or political subdivision thereof, or
                    ``(B) an entity designated by a State or political 
                subdivision thereof,
        for the foster care program of such State or political 
        subdivision to make foster care payments to providers of foster 
        care.''.

    (d) <<NOTE: Applicability. 26 USC 131 note.>>  Effective Date.--The 
amendments made by this section 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.--
            (1) Special rule.--Clause (i) of section <<NOTE: 26 USC 
        412.>> 412(l)(7)(C) (relating to interest rate) 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, notwithstanding 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.--Subsection (m) of section 412 
        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 (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 
                (l)(7)(C)(i)(II).''.

    (b) Amendments to the Employee Retirement Income Security 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, notwithstanding 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

[[Page 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) <<NOTE: Applicability.>>  In the case of plan years beginning 
after December 31, 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) <<NOTE: 26 USC 62.>>  (relating to 
certain trade and business deductions of employees) is amended by adding 
at the end the following:
                    ``(D) Certain expenses of elementary and secondary 
                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 connection 
                with books, supplies (other than nonathletic supplies 
                for courses of instruction in health or physical 
                education), computer equipment (including related 
                software and services) 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.

[[Page 116 STAT. 44]]

                    ``(B) School.--The term `school' means any school 
                which provides elementary education or secondary 
                education (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 excludable 
        under section 135, 529(c)(1), or 530(d)(2) for the taxable 
        year.''.

    (c) <<NOTE: Applicability. 26 USC 62 note.>>  Effective Date.--The 
amendments made by this section 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.--
            (1) In general.--Subsection (b) of section 6428 <<NOTE: 26 
        USC 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 amount 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) of--
                          ``(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 refundable credits).''.

[[Page 116 STAT. 45]]

    (b) Amendment Related to Section 201 of the Act.--Subparagraph (B) 
of section 24(d)(1) <<NOTE: 26 USC 24.>>  is amended by striking 
``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) <<NOTE: 26 USC 23 note.>>  Expenses paid or 
                incurred during any taxable year 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 pursuant to 
        an adoption assistance program.
            ``(2) $10,000 exclusion 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 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.''.

[[Page 116 STAT. 46]]

                    (B) Paragraph (2) of section 137(b) <<NOTE: 26 USC 
                137.>>  is amended by striking ``subsection (a)(1)'' and 
                inserting ``subsection (a)''.
            (3) <<NOTE: Applicability. 26 USC 23 note.>>  Effective 
        date.--The amendments made by this subsection 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 
                subparagraph (D),
                    (D) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) one-half of the amount in effect under 
                subparagraph (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 
        sentence 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

[[Page 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 <<NOTE: 29 USC 1003.>>  is amended--
                    (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 <<NOTE: Applicability.>>  provisions shall apply 
                to such accounts and annuities in a manner similar to 
                their application to a simplified employee pension under 
                section 408(k) of the Internal Revenue Code of 1986.''.

    (j) Amendments Relating to Section 611 of the Act.--
            (1) Section 408(k) <<NOTE: 26 USC 408.>>  is amended--
                    (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)(1)(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 <<NOTE: 26 USC 415 note.>>  is 
        amended by adding at the end 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 
                subsection (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)(1)(C)(iii) is amended by striking 
        ``Exception 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''.

    (l) 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

[[Page 116 STAT. 48]]

                      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 contributed 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.--Section 
25B(d)(2)(A) <<NOTE: 26 USC 25B.>>  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)(1) is amended by striking ``(n)'' and 
        inserting ``(m)''.
            (2) Section 619(d) of the Economic Growth and Tax Relief 
        Reconciliation Act of 2001 <<NOTE: 26 USC 38 note.>>  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 deferrals 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:
                    ``(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)(11), 401(k)(12),

[[Page 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)(11), 403(b)(12), 408(k), 
        410(b), or 416''.
            (6) Section 414(v)(4)(B) <<NOTE: 26 USC 414.>>  is amended 
        by inserting before 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 
                subsection 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 
                subsection (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 contributions 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

[[Page 116 STAT. 50]]

        (8) of this subsection or section 408(d)(3)(A)(ii) shall not be 
        considered contributed by such employer.''.
            (2) Section 403(b) <<NOTE: 26 USC 403.>>  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 
                      participant 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 addition 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 lay 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 
                individual described in subparagraph (D) performing 
                services outside the United States, contributions and 
                other additions 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 compensation determined under 
                section 403(b)(3).

[[Page 116 STAT. 51]]

                    ``(D) Annual addition.--For purposes of this 
                paragraph, 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) <<NOTE: 26 USC 457.>>  is amended to 
        read as follows:
            ``(5) Includible compensation.--The term `includible 
        compensation' 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)(11)(A)'' and inserting 
                ``exceed the amount that can be distributed without the 
                participant's consent under section 411(a)(11)'', and
                    (B) in paragraph (2)(A) by striking ``exceeds the 
                dollar limit under section 411(a)(11)(A)'' and inserting 
                ``exceeds the amount that can be distributed without the 
                participant's consent under section 411(a)(11)''.
            (2) Section 205(g) of the Employee Retirement Income 
        Security Act of 1974 <<NOTE: 29 USC 1055.>>  is amended--
                    (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.--Section 
404(a)(1)(D)(iv) is amended by striking ``Plans maintained by 
professional service employers'' and inserting ``Special 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 <<NOTE: 29 USC 1104.>>  is amended--
            (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--

[[Page 116 STAT. 52]]

                    (A) in subsection (e)(1) by striking ``written 
                notice'' and inserting ``the notice described in 
                paragraph (2)'',
                    (B) by amending subsection (f)(2)(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 <<NOTE: 29 USC 1054.>>  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 <<NOTE: 26 USC 4980F note.>>  
        is amended by striking ``(or'' and inserting ``(and''.

    (v) Amendments Relating to Section 661 of the Act.--
            (1) Section 412(c)(9)(B) <<NOTE: 26 USC 412.>>  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 <<NOTE: 29 USC 1082.>>  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 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)).''.
    (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 (2)(B) by striking ``(A)(iii)'' 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 
                pursuant 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 securities 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:

[[Page 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) <<NOTE: 26 USC 25B note.>>  Effective Date.--Except as provided 
in subsection (c), 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.

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) <<NOTE: 26 USC 469.>>  is amended by striking clauses (ii), 
(iii), and (iv) and 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 
                Contracts To Sell.--'',
                    (B) by inserting after ``closing of a short sale 
                of'' the following: ``(or the sale, exchange, or 
                termination of a securities 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 
contract' has the meaning provided by section 1234B(c).''.

[[Page 116 STAT. 54]]

            (3)(A) Section 1233(e)(2) <<NOTE: 26 USC 1233.>>  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,''.

    (e) <<NOTE: 26 USC 151 note.>>  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.--Section 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''.

    (b) <<NOTE: 26 USC 857 note.>>  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.--Section 311(e) of 
the Taxpayer Relief Act of 1997 (Public Law 105-34; 111 Stat. 
836) <<NOTE: 26 USC 1 note.>>  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).''.

    (b) <<NOTE: 26 USC 1 note.>>  Effective Date.--The amendments made 
by this section shall take effect as if included in section 311 of the 
Taxpayer Relief Act of 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 subparagraph (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 
                distributions from Medicare+Choice MSA not used for 
                qualified medical expenses if minimum balance not 
                maintained).''.

    (b) <<NOTE: 26 USC 26 note.>>  Effective Date.--The amendment made 
by this section shall take effect as if included in section 4006 of the 
Balanced Budget Act of 1997.

[[Page 116 STAT. 55]]

SEC. 416. OTHER TECHNICAL CORRECTIONS.

    (a) Coordination of Advanced Payments of Earned Income Credit.--
            (1) Section 32(g)(2) <<NOTE: 26 USC 32.>>  is amended by 
        striking ``subpart'' and inserting ``part''.
            (2) <<NOTE: Effective date. 26 USC 32 note.>>  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) <<NOTE: Effective date. 26 USC 1256 note.>>  The 
        amendment made by this subsection shall take effect as if 
        included in section 5075 of the Technical and Miscellaneous 
        Revenue Act of 1988.

    (c) Disclosure by Social Security Administration to Federal Child 
Support Agencies.--
            (1) Section 6103(l)(8) 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) <<NOTE: Effective date. 26 USC 6103 note.>>  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) <<NOTE: Applicability. 26 USC 6224 note.>>  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 Administration.--
            (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) <<NOTE: Effective date. 26 USC 6331 note.>>  The 
        amendment made by this subsection shall take effect on the date 
        of the enactment of this Act.

    (f) <<NOTE: Applicability.>>  Modified Endowment Contracts.--
Paragraph (2) of section 318(a) of the Community Renewal Tax Relief Act 
of 2000 (114 Stat. 2763A-645) <<NOTE: 26 USC 7702A and note.>>  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.

[[Page 116 STAT. 56]]

SEC. 417. CLERICAL AMENDMENTS.

            (1) The subsection (g) of section 25B <<NOTE: 26 USC 25B.>>  
        that relates to termination 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)(1)(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)(1) is amended by striking ``51(d)(10)'' 
        and inserting ``51(d)(11)''.
            (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'' 
        before ``such terms''.
            (7) Section 170(e)(6)(B)(i)(III) is amended by striking 
        ``2000,'' and inserting ``2000),''.
            (8) Section 172(b)(1)(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 
        ``subsection (b)(7)'' and inserting ``subsection (b)(6)''.
            (12) Section 741 is amended by striking ``which have 
        appreciated substantially in value''.
            (13) Section 857(b)(7)(B)(i) is amended by striking 
        ``subsection 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 subparagraph 
        (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 
        ``subparagraph (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 
                            contributions.''.

            (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--

[[Page 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 ``subsection (c) of section 6227'' and 
                inserting ``subsection (d) of section 6227''.
            (C) Section 6231(b)(2)(B)(i) <<NOTE: 26 USC 6231.>>  is 
        amended by striking ``section 6227(c)'' and inserting ``section 
        6227(d)''.
            (20) Section 1221(b)(1)(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) <<NOTE: 26 USC 1400E note.>>  is 
        amended by striking ``fuctions'' and inserting ``functions''.
            (22) <<NOTE: Applicability.>>  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) <<NOTE: 26 
        USC 170.>>  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) <<NOTE: 26 USC 24.>>  in subparagraph (A) by 
                striking ``203(d)'' and inserting ``202(f)'', and
                    (B) <<NOTE: 26 USC 26, 904, 1400C.>>  in 
                subparagraphs (C), (D), and (E) by striking ``203'' and 
                inserting ``202(f)''.
            (24)(A) Section 525 of the Ticket to Work and Work 
        Incentives Improvement Act of 1999 (Public Law 106-170; 113 
        Stat. 1928) <<NOTE: 7 USC 7212 note.>>  is amended by striking 
        ``7200'' and inserting ``7201''.
            (B) Section 532(c)(2) of such Act (113 Stat. 1930) is 
        amended--
                    (i) <<NOTE: 26 USC 341.>>  in subparagraph (D), by 
                striking ``341(d)(3)'' and inserting ``341(d)'', and
                    (ii) <<NOTE: 26 USC 954.>>  in subparagraph (Q), by 
                striking ``954(c)(1)(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 (a)(3)'', and
                    (B) 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.''.
            (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

[[Page 116 STAT. 58]]

            (2) in subparagraph (B) by striking ``$400'' and inserting 
        ``$500''.

    (c) <<NOTE: 26 USC 21 note.>>  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

SEC. 501. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS. <<NOTE: 42 USC 401 
            note.>> 

    (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 
        Secretary 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 Control 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 Federal 
        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.

[[Page 116 STAT. 59]]

           TITLE VI--EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

SEC. 601. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR 
            AND MINIMUM TAX LIABILITY.

    (a) In General.--Paragraph (2) of section 26(a) <<NOTE: 26 USC 
26.>>  is amended--
            (1) by striking ``rule for 2000 and 2001.--'' and inserting 
        ``rule for 2000, 2001, 2002, and 2003.--'', and
            (2) by striking ``during 2000 or 2001,'' and 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) <<NOTE: 26 USC 23 note.>>  The amendments made by 
        sections 201(b), 202(f), and 618(b) of the Economic Growth and 
        Tax Relief Reconciliation Act of 2001 shall not apply to taxable 
        years beginning during 2002 and 2003.

    (c) <<NOTE: Applicability. 26 USC 26 note.>>  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)(1) 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 <<NOTE: 26 USC 280F note.>>  is amended by striking 
        ``and before January 1, 2005''.

    (c) <<NOTE: Applicability. 26 USC 30 note.>>  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 RENEWABLE 
            RESOURCES.

    (a) In General.--Subparagraphs (A), (B), and (C) of section 45(c)(3) 
are both amended by striking ``2002'' and inserting ``2004''.
    (b) <<NOTE: Applicability. 26 USC 45 note.>>  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) <<NOTE: Applicability. 26 USC 51 note.>>  Effective Date.--The 
amendment made by subsection (a) shall apply to individuals who begin 
work for the employer after December 31, 2001.

[[Page 116 STAT. 60]]

SEC. 605. WELFARE-TO-WORK CREDIT.

    (a) In General.--Subsection (f) of section 51A <<NOTE: 26 USC 
51A.>>  is amended by striking ``2001'' and inserting ``2003''.

    (b) <<NOTE: Applicability. 26 USC 51A note.>>  Effective Date.--The 
amendment made by subsection (a) shall apply to individuals who begin 
work for the employer after December 31, 2001.

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) <<NOTE: Applicability. 26 USC 179A note.>>  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) <<NOTE: Applicability. 26 USC 613A note.>>  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) <<NOTE: Applicability. 26 USC 1397E note.>>  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) <<NOTE: Applicability. 26 USC 7652 note.>>  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 
            BENEFITS.

    (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) <<NOTE: 26 USC 9812 note.>>  Effective Date.--The amendment made 
by subsection (a) shall apply to plan years beginning after December 31, 
2000.

[[Page 116 STAT. 61]]

SEC. 611. TEMPORARY SPECIAL RULES FOR TAXATION OF LIFE INSURANCE 
            COMPANIES.

    (a) Reduction in Mutual Life Insurance Company Deductions Not To 
Apply in Certain Years.--Section 809 <<NOTE: 26 USC 809.>>  (relating to 
reduction in certain deductions of material life insurance companies) is 
amended by adding at the end the following:

    ``(j) Differential Earnings Rate Treated as Zero for Certain 
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 differential earnings 
amount for a mutual life insurance company's taxable years beginning in 
2001, 2002, or 2003.''.
    (b) <<NOTE: Applicability. 26 USC 809 note.>>  Effective Date.--The 
amendment made by this section shall apply to taxable years beginning 
after December 31, 2000.

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) <<NOTE: 26 USC 220 note.>>  Effective Date.--The amendments made 
by this section 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).

[[Page 116 STAT. 62]]

                          ``(ii) Ruling request, etc.--The amount of the 
                      reserve under clause (i) shall be the foreign 
                      statement reserve for the contract (less any 
                      catastrophe, deficiency, equalization, or similar 
                      reserves), if, pursuant to a ruling request 
                      submitted by the taxpayer or as provided in 
                      published guidance, the Secretary determines that 
                      the factors taken into account in determining the 
                      foreign statement reserve provide an appropriate 
                      means of measuring income.''.

    (c) <<NOTE: Applicability. 26 USC 953 note.>>  Effective Date.--The 
amendments made by this section shall apply to taxable years beginning 
after December 31, 2001.

SEC. 615. REPEAL OF REQUIREMENT FOR APPROVED DIESEL OR KEROSENE 
            TERMINALS.

    (a) In General.--Subsection (e) of section 4101 <<NOTE: 26 USC 
4101.>>  is hereby repealed.

    (b) <<NOTE: 26 USC 4101 note.>>  Effective Date.--The amendment made 
by subsection (a) 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;
                          ``(ii) <<NOTE: Applicability.>>  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

[[Page 116 STAT. 63]]

            (2) in paragraph (3)(C)(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.

                                  <all>