[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1037 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 1037
To amend the Internal Revenue Code of 1986 to provide tax relief for
small businesses, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 15, 2001
Mr. Manzullo (for himself, Ms. Velazquez, Mr. Hefley, Mrs. Kelly, Mr.
Issa, and Mr. Grucci) introduced the following bill; which was referred
to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide tax relief for
small businesses, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Employer Tax
Relief Act of 2001''.
(b) Amendment of 1986 Code.--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.--The table of contents is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--TAX RELIEF
Sec. 101. Deduction for health insurance costs of self-employed
individuals increased.
Sec. 102. Repeal of Federal unemployment surtax.
Sec. 103. Increase in expense treatment for small businesses.
Sec. 104. Increased deduction for business meal expenses.
Sec. 105. Clarification of cash accounting rules for small business.
Sec. 106. Alternative minimum tax.
Sec. 107. Permanent extension of research credit.
Sec. 108. Credit for expenses for long-term training of employees in
highly skilled small business trades.
TITLE II--TAX RELIEF FOR ENVIRONMENTAL PROTECTION
Sec. 201. Credit for dry or wet cleaning equipment using nonhazardous
primary process solvents.
Sec. 202. Credit for recycling or remanufacturing equipment.
TITLE III--TAX SIMPLIFICATION
Sec. 301. Depreciation modifications.
Sec. 302. Simplification of estimated tax rules.
Sec. 303. Exclusion from partnership filing requirements for married
couples as business co-owners.
Sec. 304. Increase in self-employment exemption amount.
Sec. 305. Repeal of recognition of gain rule for home office.
Sec. 306. Simplification of reporting requirements relating to higher
education tuition and related expenses.
TITLE IV--TAXPAYER PROTECTIONS
Sec. 401. Taxpayer's right to have an IRS examination take place at
another site.
Sec. 402. Clarification of electronic filing.
Sec. 403. Taxpayer's election with respect to recovery of costs and
certain fees.
Sec. 404. Repeal of the failure-to-pay penalty.
Sec. 405. Repeal of interest on penalties.
TITLE I--TAX RELIEF
SEC. 101. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS INCREASED.
(a) In General.--Section 162(l)(1) (relating to special rules for
health insurance costs of self-employed individuals) is amended to read
as follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to the amount paid during the taxable year for
insurance which constitutes medical care for the taxpayer, the
taxpayer's spouse, and dependents.''.
(b) Clarification of Limitations on Other Coverage.--The first
sentence of section 162(l)(2)(B) is amended to read as follows:
``Paragraph (1) shall not apply to any taxpayer for any calendar month
for which the taxpayer participates in any subsidized health plan
maintained by any employer (other than an employer described in section
401(c)(4)) of the taxpayer or the spouse of the taxpayer.''.
(c) Deduction Taken Into Account for Self-Employment Tax
Purposes.--Section 162(l) is amended by striking paragraph (4) and
redesignating paragraph (5) as paragraph (4).
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 102. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.
(a) In General.--Section 3301 (relating to rate of Federal
unemployment tax) is amended--
(1) by striking ``2007'' and inserting ``2000'', and
(2) by striking ``2008'' and inserting ``2001''.
(b) Effective Date.--The amendment made by this section shall apply
to calendar years beginning after December 31, 2000.
SEC. 103. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) In General.--Section 179(b)(1) (relating to dollar limitation)
is amended to read as follows:
``(1) Dollar limitation.--
``(A) In general.--The aggregate cost which may be
taken into account under subsection (a) for any taxable
year shall not exceed $50,000.
``(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2001,
the dollar amount contained in subparagraph (A) shall be increased by
an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
by substituting ``calendar year 2000'' for
``calendar year 1992'' in subparagraph (B)
thereof.
If any amount as adjusted under this subparagraph is
not a multiple of $1,000, such amount shall be rounded
to the nearest multiple of $1,000.''.
(b) Expansion of Phase-Out of Limitation.--Section 179(b)(2) is
amended to read as follows:
``(2) Reduction in limitation.--
``(A) In general.--The limitation under paragraph
(1) for any taxable year shall be reduced (but not
below zero) by the amount by which the cost of section
179 property for which a deduction is allowable
(without regard to this subsection) under subsection
(a) for such taxable year exceeds $400,000.
``(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2001,
the dollar amount contained in subparagraph (A) shall
be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
by substituting `calendar year 2000' for
`calendar year 1992' in subparagraph (B)
thereof.
If any amount as adjusted under this subparagraph is
not a multiple of $10,000, such amount shall be rounded
to the nearest multiple of $10,000.''.
(c) Time of Deduction.--The second sentence of section 179(a)
(relating to election to expense certain depreciable business assets)
is amended by inserting ``(or, if the taxpayer elects, the preceding
taxable year if the property was purchased in such preceding year)''
after ``service''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 104. INCREASED DEDUCTION FOR BUSINESS MEAL EXPENSES.
(a) In General.--Section 274(n)(1) (relating to only 50 percent of
meal and entertainment expenses allowed as deduction) is amended by
striking ``50 percent'' in the text and inserting ``the allowable
percentage''.
(b) Allowable Percentage.--Section 274(n) is amended by
redesignating paragraphs (2) and (3) as paragraphs (3) and (4),
respectively, and by inserting after paragraph (1) the following new
paragraph:
``(2) Allowable percentage.--For purposes of paragraph (1),
the allowable percentage is--
``(A) in the case of amounts for items described in
paragraph (1)(B), 50 percent, and
``(B) in the case of expenses for food or
beverages, 80 percent.''.
(c) Clarification of Special Rule for Individuals Subject to
Federal Hours of Service.--Section 274(n)(4) (relating to limited
percentages of meal and entertainment expenses allowed as deduction),
as redesignated by subsection (b), is amended to read as follows:
``(4) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or beverages
consumed while away from home (within the meaning of section
162(a)(2)) by an individual during, or incident to, the period
of duty subject to the hours of service limitations of the
Department of Transportation, paragraph (2)(B) shall apply to
such expenses.''.
(d) Conforming Amendment.--The heading for subsection (n) of
section 274 is amended by striking ``50 Percent'' and inserting
``Limited Percentages''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 105. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL BUSINESS.
(a) Cash Accounting Permitted.--Section 446 (relating to general
rule for methods of accounting) is amended by adding at the end the
following new subsection:
``(g) Small Business Taxpayers Permitted to Use Cash Accounting
Method Without Limitation.--
``(1) In general.--Notwithstanding any other provision of
this title, an eligible taxpayer shall not be required to use
an accrual method of accounting for any taxable year.
``(2) Eligible taxpayer.--For purposes of this subsection--
``(A) In general.--A taxpayer is an eligible
taxpayer with respect to any taxable year if--
``(i) for all prior taxable years beginning
after December 31, 1999, the taxpayer (or any
predecessor) met the gross receipts test of
subparagraph (B), and
``(ii) the taxpayer is not a tax shelter
(as defined in section 448(d)(3)).
``(B) Gross receipts test.--A taxpayer meets the
gross receipts test of this subparagraph for any prior
taxable year if the average annual gross receipts of
the taxpayer (or any predecessor) for the 3-taxable-
year period ending with such prior taxable year does
not exceed $5,000,000. The rules of paragraphs (2) and
(3) of section 448(c) shall apply for purposes of the
preceding sentence.
``(C) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2001,
the dollar amount contained in subparagraph (B) shall
be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
by substituting ``calendar year 2000'' for
``calendar year 1992'' in subparagraph (B)
thereof.
If any amount as adjusted under this subparagraph is
not a multiple of $100,000, such amount shall be
rounded to the nearest multiple of $100,000.''.
(b) Clarification of Inventory Rules for Small Business.--Section
471 (relating to general rule for inventories) is amended by
redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Small Business Taxpayers Not Required To Use Inventories.--
``(1) In general.--An eligible taxpayer shall not be
required to use inventories under this section for a taxable
year.
``(2) Treatment of taxpayers not using inventories.--If an
eligible taxpayer elects not to use inventories with respect to
any property for any taxable year beginning after December 31,
2000, such property shall be treated as a material or supply
which is not incidental.
``(3) Eligible taxpayer.--For purposes of this subsection,
the term `eligible taxpayer' has the meaning given such term by
section 446(g)(2).''.
(c) Indexing of Gross Receipts Test.--Section 448(c) (relating to
$5,000,000 gross receipts test) is amended by adding at the end the
following new paragraph:
``(4) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2001, the dollar amount
contained in paragraph (1) shall be increased by an amount
equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, by substituting ``calendar
year 2000'' for ``calendar year 1992'' in subparagraph
(B) thereof.
If any amount as adjusted under this paragraph is not a
multiple of $100,000, such amount shall be rounded to the
nearest multiple of $100,000.''.
(d) Effective Date and Special Rules.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
(2) Change in method of accounting.--In the case of any
taxpayer changing the taxpayer's method of accounting for any
taxable year under the amendments made by this section--
(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 (not greater than 4 taxable
years) beginning with such taxable year.
SEC. 106. ALTERNATIVE MINIMUM TAX.
(a) Repeal of Alternative Minimum Tax on Individuals.--
(1) In general.--Section 55(a) (relating to alternative
minimum tax) is amended by adding at the end the following new
flush sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer
other than a corporation for any taxable year beginning after December
31, 2004, shall be zero.''.
(2) Reduction of tax on individuals prior to repeal.--
Section 55 is amended by adding at the end the following new
subsection:
``(f) Phaseout of Tax on Individuals.--
``(1) In general.--The tax imposed by this section on a
taxpayer other than a corporation for any taxable year
beginning after December 31, 2000, and before January 1, 2005,
shall be the applicable percentage of the tax which would be
imposed but for this subsection.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2001................................... 80
2002................................... 60
2003................................... 40
2004................................... 20.''.
(3) Nonrefundable personal credits fully allowed against
regular tax liability.--
(A) In general.--Section 26(a) (relating to
limitation based on amount of tax) is amended to read
as follows:
``(a) Limitation Based on Amount of Tax.--The aggregate amount of
credits allowed by this subpart for the taxable year shall not exceed
the taxpayer's regular tax liability for the taxable year.''.
(B) Child credit.--Section 24(d) is amended by
striking paragraph (2) and by redesignating paragraph
(3) as paragraph (2).
(4) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2000.
(b) Income Averaging Not To Increase Alternative Minimum Tax
Liability.--
(1) In general.--Section 55(c) (relating to regular tax) is
amended by redesignating paragraph (2) as paragraph (3) and by
inserting after paragraph (1) the following:
``(2) Coordination with income averaging for farmers.--
Solely for purposes of this section, section 1301 (relating to
averaging of farm income) shall not apply in computing the
regular tax.''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31, 2000.
(c) Expansion of the Exemption From the Alternative Minimum Tax for
Small Corporations.--
(1) In general.--Section 55(e)(1)(A) (relating to exemption
for small corporations) is amended to read as follows:
``(A) $10,000,000 gross receipts test.--The
tentative minimum tax of a corporation shall be zero
for any taxable year if the corporation's average
annual gross receipts for all 3-taxable-year periods
ending before such taxable year does not exceed
$10,000,000. For purposes of the preceding sentence,
only taxable years beginning after December 31, 1997,
shall be taken into account.''.
(2) Gross receipts test for first 3-year period.--Section
55(e)(1)(B) is amended to read as follows:
``(B) $7,500,000 gross receipts test for first 3-
year period.--Subparagraph (A) shall be applied by
substituting `$7,500,000' for `$10,000,000' for the
first 3-taxable-year period (or portion thereof) of the
corporation which is taken into account under
subparagraph (A).''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2000.
SEC. 107. PERMANENT EXTENSION OF RESEARCH CREDIT.
(a) In General.--Section 41 (relating to credit for increasing
research activities) is amended by striking subsection (h).
(b) Conforming Amendment.--Section 45C(b)(1) is amended by striking
subparagraph (D).
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after the date of the enactment of
this Act.
SEC. 108. CREDIT FOR EXPENSES FOR LONG-TERM TRAINING OF EMPLOYEES IN
HIGHLY SKILLED SMALL BUSINESS TRADES.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business-related credits) is amended by adding at the end
the following new section:
``SEC. 45E. EXPENSES FOR LONG-TERM TRAINING OF EMPLOYEES IN HIGHLY
SKILLED SMALL BUSINESS TRADES.
``(a) General Rule.--For purposes of section 38, in the case of a
small business employer, the highly skilled trades training credit
determined under this section for the taxable year is $15,000 for each
employee having a qualified training year ending with or within such
taxable year (whether or not such employee is an employee of the
taxpayer as of the close of such taxable year).
``(b) Definitions.--For purposes of this section--
``(1) Small business employer.--
``(A) In general.--The term `small business
employer' means, with respect to any taxable year, any
employer who employed an average of 250 or fewer
employees on business days during such taxable year.
``(B) Controlled groups.--For purposes of
subparagraph (A), all persons treated as a single
employer under subsection (b), (c), (m), or (o) of
section 414 shall be treated as a single employer.
``(2) Qualified training year.--
``(A) In general.--The term `qualified training
year' means each year during the training period in
which the employee received at least 1,500 hours of
training (including on-the-job training and training at
multi-employer training facilities) from the taxpayer
(or any predecessor) under a qualified training program
as an apprentice in any highly skilled trade.
``(B) Highly skilled trades.--For purposes of
subparagraph (A), the term `highly skilled trades'
means--
``(i) precision machinists,
``(ii) die makers,
``(iii) mold makers,
``(iv) tool and die designers,
``(v) heating, ventilating, air
conditioning, refrigeration, and roofing
contractors,
``(vi) the trade of masonry,
``(vii) plumbers,
``(viii) pipefitters,
``(ix) patternmakers,
``(x) foundry technicians,
``(xi) electricians,
``(xii) recreational marine production and
design workers,
``(xiii) 2-way radio technicians, and
``(xiv) other highly skilled trades
specified in regulations prescribed by the
Secretary.
Such term shall not include any trade if the customary
apprenticeship period for such trade is less than 2
years.
``(C) Qualified training program.--
``(i) In general.--The term `qualified
training program' means a written plan of study
and training for individuals in, or entering
into, highly skilled trades.
``(ii) Description of programs.--A plan
under clause (i) must be a program described in
one of the following subclauses:
``(I) An apprenticeship program
registered and certified with the
Secretary of Labor under section 1 of
the National Apprenticeship Act (29
U.S.C. 50).
``(II) A program licensed,
registered, or certified by the
workforce investment board or
apprenticeship agency or council of a
State or administered in compliance
with apprenticeship laws of a State.
``(III) A program conducted by a
vocational or technical education
school, community college, or
industrial or trade training
organization.
``(IV) A program which conforms to
apprentice training programs developed
or administered by an employer trade
group or committee.
``(V) An industry sponsored or
administered program which is clearly
identified and commonly recognized
within an industry and which meets the
requirements of clause (iii).
``(iii) Requirements.--A program meets the
requirements of this clause if such program--
``(I) is accessible to individuals
without discrimination on the basis of
race, sex, color, religion, or national
origin,
``(II) provides an overview of the
trade, including the history and modern
developments in such trade,
``(III) provides related
instruction of the fundamental,
intermediate, and advanced skills,
techniques, and materials of the trade,
``(IV) provides training in math,
measurement, and blueprint reading
skills, if such skills are required in
the trade,
``(V) provides training on trade
specific tools and equipment,
``(VI) provides on-the-job training
which allows performance of work under
close supervision of an instructor or
skilled worker, and
``(VII) provides periodic review
and evaluation of participants to
demonstrate proficiency in skills,
including the use of tests and
assessment of individual and group
projects.
``(3) Training period.--The term `training period' means,
with respect to an employee, the period--
``(A) beginning on the date that the employee
begins employment with the taxpayer as an apprentice in
the highly skilled trade, and
``(B) ending on the earlier of--
``(i) the date that such apprenticeship
with the employer ends, or
``(ii) the date which is 4 years after the
date referred to in subparagraph (A).
``(c) Coordination With Other Credits.--The amount of credit
otherwise allowable under sections 51(a) and 1396(a) with respect to
any employee shall be reduced by the credit allowed by this section
with respect to such employee.''.
(b) Credit Made Part of General Business Credit.--Subsection (b) of
section 38 is amended by striking ``plus'' at the end of paragraph
(12), by striking the period at the end of paragraph (13) and inserting
``, plus'', and by adding at the end the following new paragraph:
``(14) in the case of a small business employer (as defined
in section 45E(b)), the highly skilled trades training credit
determined under section 45E(a).''.
(c) Denial of Double Benefit.--Section 280C is amended by adding at
the end the following new subsection:
``(d) Credit for Training Expenses for Employees in Highly Skilled
Small Business Trades.--No deduction shall be allowed for that portion
of the expenses otherwise allowable as a deduction for the taxable year
which is equal to the amount of the credit determined for the taxable
year under section 45E(a).''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following new item:
``Sec. 45E. Expenses for long-term
training of employees in highly
skilled small business
trades.''.
(e) Effective Date.--The amendments made by this section shall
apply to expenses paid or incurred in the taxable years ending after
the date of the enactment of this Act.
TITLE II--TAX RELIEF FOR ENVIRONMENTAL PROTECTION
SEC. 201. CREDIT FOR DRY OR WET CLEANING EQUIPMENT USING NONHAZARDOUS
PRIMARY PROCESS SOLVENTS.
(a) In General.--Section 46 of the Internal Revenue Code of 1986
(relating to amount of investment credit) is amended by striking
``and'' at the end of paragraph (2), by striking the period at the end
of paragraph (3) and inserting ``, and'', and by adding at the end
thereof the following paragraph:
``(4) the dry or wet cleaning equipment credit.''.
(b) Dry or Wet Cleaning Equipment Credit.--Section 48 of such Code
is amended by adding at the end the following new subsection:
``(c) Dry or Wet Cleaning Equipment Using Nonhazardous Primary
Process Solvents.--
``(1) In general.--For purposes of section 46, the dry or
wet cleaning equipment credit for any taxable year is 20
percent of the basis of each qualified dry or wet cleaning
property placed in service during the taxable year (40 percent
of such basis in the case of such property placed in service in
an empowerment zone, enterprise community, or renewal
community).
``(2) Limitation.--The credit under this subsection for the
taxable year shall apply to qualified dry or wet cleaning
property placed in service during such year at each business
premise of the taxpayer.
``(3) Qualified dry or wet cleaning property.--For purposes
of this subsection, the term `qualified dry or wet cleaning
property' means equipment designed primarily to clean textiles
by professionals using special technology, detergents and
additives to minimize potential for adverse effects, or
appropriately dry or apply restorative finishing procedures to
such textiles if--
``(A) such equipment does not use any hazardous
solvent as the primary process solvent,
``(B) the original use of such property commences
with the taxpayer, and
``(C) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable.
``(4) Primary process solvent.--For purposes of paragraph
(3), the term `primary process solvent' means the primary
liquid in which clothing, other fabric, and sensitive textiles
are cleaned or which is used to appropriately dry or apply
restorative finishing procedures to textiles, cleaned,
excluding detergent formulations.
``(5) Hazardous solvent.--For purposes of paragraph (3),
the term `hazardous solvent' means any solvent any portion of
which consists of a chlorinated solvent, a volatile organic
compound, or any other hazardous regulated substance, or which
contains any substance determined by the Administrator of the
Environmental Protection Agency, the Director of the National
Institute for Occupational Safety and Health, the Director of
the International Agency for Research on Cancer, the Director
of the National Institute of Environmental Health Sciences'
National Toxicology Program, or the director of any other
appropriate Federal agency to possess--
``(A) carcinogenic potential in humans, or
``(B) bioaccumulative properties.''.
(c) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 of such Code
(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:
``(3) Special rules for dry or wet cleaning equipment
credit.--
``(A) In general.--In the case of the dry or wet
cleaning equipment credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraph (A) thereof
shall not apply, 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 dry or wet
cleaning equipment credit).
``(B) dry or wet cleaning equipment credit.--For
purposes of this subsection, the term `dry or wet
cleaning equipment credit' means the credit allowable
under subsection (a) by reason of section 46(4).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``or the
dry or wet cleaning equipment credit'' after ``employment
credit''.
(d) Clerical Amendments.--
(1) The section heading for section 48 of such Code is
amended to read as follows:
``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY OR WET CLEANING
EQUIPMENT CREDIT.''.
(2) The item relating to section 48 in the table of
sections for subpart E of part IV of subchapter A of chapter 1
of such Code is amended to read as follows:
``Sec. 48. Energy credit; reforestation
credit; dry or wet cleaning
equipment credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2000.
SEC. 202. CREDIT FOR RECYCLING OR REMANUFACTURING EQUIPMENT.
(a) In General.--Section 46 (relating to amount of investment
credit), as amended by section 201, is amended by striking ``and'' at
the end of paragraph (3), by striking the period at the end of
paragraph (4) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(5) the reclamation credit.''
(b) Reclamation Credit.--Section 48 (relating to energy credit and
reforestation credit), as so amended, is amended by adding at the end
the following new subsection:
``(d) Reclamation Credit.--
``(1) In general.--For purposes of section 46, the
reclamation credit for any taxable year is 20 percent of the
basis of each qualified reclamation property placed in service
during the taxable year.
``(2) Qualified reclamation property.--
``(A) In general.--For purposes of this section,
the term `qualified reclamation property' means
property--
``(i) which is qualified recycling property
or qualified remanufacturing property,
``(ii) which is tangible property (not
including a building and its structural
components),
``(iii) with respect to which depreciation
(or amortization in lieu of depreciation) is
allowable,
``(iv) which has a useful life of at least
5 years, and
``(v) which is--
``(I) acquired by purchase (as
defined in section 179(d)(2)) by the
taxpayer if the original use of such
property commences with the taxpayer,
or
``(II) constructed by or for the
taxpayer.
``(B) Dollar limitation.--
``(i) In general.--The basis of qualified
reclamation property taken into account under
paragraph (1) for any taxable year shall not
exceed $10,000,000 for a taxpayer.
``(ii) Treatment of controlled group.--For
purposes of clause (i)--
``(I) all component members of a
controlled group shall be treated as
one taxpayer, and
``(II) the Secretary shall
apportion the dollar limitation in such
clause among the component members of
such controlled group in such manner as
he shall by regulation prescribe.
``(iii) Treatment of partnerships and s
corporations.--In the case of a partnership,
the dollar limitation in clause (i) shall apply
with respect to the partnership and with
respect to each partner. A similar rule shall
apply in the case of an S corporation and its
shareholders.
``(iv) Controlled group defined.--For
purposes of clause (ii), the term `controlled
group' has the meaning given such term by
section 1563(a), except that `more than 50
percent' shall be substituted for `at least 80
percent' each place it appears in section
1563(a)(1).
``(3) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of
section 46 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this subsection.
``(4) Definitions.--For purposes of this subsection--
``(A) Qualified recycling property.--The term
`qualified recycling property' means equipment used
exclusively to collect, distribute, or sort used
ferrous or nonferrous metals. The term does not include
equipment used to collect, distribute, or sort
precious metals such as gold, silver, or platinum unless such use is
coincidental to the collection, distribution, or sorting of other used
ferrous or nonferrous metals.
``(B) Qualified remanufacturing property.--The term
`qualified remanufacturing property' means equipment
used primarily by the taxpayer in the business of
rebuilding or remanufacturing a used product or part,
but only if--
``(i) the rebuilt or remanufactured product
or part includes 50 percent or less virgin
material, and
``(ii) the equipment is not used primarily
in a process occurring after the product or
part is rebuilt or remanufactured.
``(5) Coordination with rehabilitation and energy
credits.--For purposes of this section--
``(A) the basis of any qualified reclamation
property shall be reduced by that portion of the basis
of any property which is attributable to qualified
rehabilitation expenditures (as defined in section
47(c)(2)) or to the energy percentage of energy
property (as determined under section 48(a)), and
``(B) expenditures taken into account under either
section 47 or 48(a) shall not be taken into account
under this section.''.
(c) Special Basis Adjustment Rule.--Paragraph (3) of section 50(c)
(relating to basis adjustment to investment credit property) is amended
by striking ``energy credit or reforestation credit'' and inserting
``energy credit, reforestation credit, or reclamation credit''.
(d) Clerical Amendments.--
(1) The section heading for section 48 is amended to read
as follows:
``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY OR WET CLEANING
EQUIPMENT CREDIT; RECLAMATION CREDIT.''
(2) The item relating to section 48 in the table of
sections for subpart E of part IV of subchapter A of chapter 1
is amended to read as follows:
``Sec. 48. Energy credit; reforestation
credit; dry or wet cleaning
equipment credit; reclamation
credit.''
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service on or after January 1, 2002.
TITLE III--TAX SIMPLIFICATION
SEC. 301. DEPRECIATION MODIFICATIONS.
(a) Computer Software Eligible for Expensing.--
(1) In general.--The heading and first sentence of section
179(d)(1) (relating to section 179 property) are amended to
read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property to which section
168 applies, or
``(ii) computer software (as defined in
section 197(e)(3)(B)) to which section 167
applies,
``(B) which is section 1245 property (as defined in
section 1245(a)(3)), and
``(C) which is acquired by purchase for use in the
active conduct of a trade or business.''.
(2) No computer software included as section 197
intangible.--
(A) In general.--Section 197(e)(3)(A) is amended to
read as follows:
``(A) In general.--Any computer software.''.
(B) Conforming amendment.--Section 167(f)(1)(B) is
amended by striking ``; except that such term shall not
include any such software which is an amortizable
section 197 intangible''.
(b) 2-Year Applicable Recovery Period for Depreciation of Computers
and Peripheral Equipment.--
(1) In general.--Section 168(c) (relating to applicable
recovery period) is amended by adding at the end the following
flush sentence:
``In the case of 5-year property which is a computer or peripheral
equipment, the applicable recovery period shall be 2 years.''.
(2) Conforming amendments.--
(A) Section 168(g)(3)(C) (relating to alternative
depreciation system for certain property) is amended to
read as follows:
``(C) Qualified technological equipment.--
``(i) In general.--Except as provided in
clause (ii), in the case of any qualified
technological equipment, the recovery period
used for purposes of paragraph (2) shall be 5
years.
``(ii) Computers or peripheral equipment.--
In the case of any computer or peripheral
equipment, the recovery period used for
purposes of paragraph (2) shall be 2 years.''.
(B) Section 168(j)(2) (relating to depreciation of
property on Indian reservations) is amended by adding
at the end the following flush sentence:
``In the case of 5-year property which is a computer or peripheral
equipment, the applicable recovery period shall be 1 year.''.
(C) Section 467(e)(3)(A) (relating to certain
payments for the use of property or services) is
amended by adding at the end the following flush
sentence:
``In the case of 5-year property which is a computer or peripheral
equipment, the applicable recovery period shall be 2 years.''.
(c) 2-Year Depreciation Period for Computer Software.--Section
167(f)(1)(A) is amended by striking ``36 months'' and inserting ``24
months''.
(d) Adjustments on Depreciation Limits for Luxury Automobiles.--
(1) In general.--Section 280F(a)(1)(A) (relating to
limitation on amount of depreciation for luxury automobiles) is
amended--
(A) by striking ``$2,560'' in clause (i) and
inserting ``$5,400'';
(B) by striking ``$4,100'' in clause (ii) and
inserting ``$8,500'';
(C) by striking ``$2,450'' in clause (iii) and
inserting ``$5,100''; and
(D) by striking ``$1,475'' in clause (iv) and
inserting ``$3,000''.
(2) Conforming amendment.--Section 280F(a)(1)(B)(ii)
(relating to disallowed deductions allowed for years after
recovery period) is amended by striking ``$1,475'' each place
that it appears and inserting ``$3,000''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2000.
SEC. 302. SIMPLIFICATION OF ESTIMATED TAX RULES.
(a) In General.--Section 6654(d)(1) (relating to failure by an
individual to pay estimated income tax) is amended by striking
subparagraph (C).
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 303. EXCLUSION FROM PARTNERSHIP FILING REQUIREMENTS FOR MARRIED
COUPLES AS BUSINESS CO-OWNERS.
(a) In General.--Section 6031 (relating to return of partnership
income) is amended by adding the following the new subsection:
``(f) Exception for a Married Individuals as Partnership Co-
Owners.--This section shall not apply to a partnership for any taxable
year if--
``(1) all of the capital or profits interests in the
partnership are owned by 2 individuals who are a married couple
(as determined under section 7703),
``(2) such individuals elect the application of this
subsection for such taxable year, and
``(3) such individuals file a joint return for all taxable
years of such individuals which include items from such taxable
year of the partnership.
The Secretary shall prescribe regulations for the retention of such
records as may be necessary for the administration of this chapter in
any case where an election is made under this subchapter.''.
(b) Married Couples as Business Co-Owners Permitted To File
Separate Self-Employment Tax Schedules.--Section 6017 (relating to
self-employment tax returns) is amended by adding the following new
sentence: ``The preceding sentence shall apply even if the husband and
wife elect, under section 6031(f), to be excluded from the filing
requirements of section 6031.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 304. INCREASE IN SELF-EMPLOYMENT EXEMPTION AMOUNT.
(a) In General.--Paragraph (2) of section 1402(b) (defining self-
employment income) is amended by striking ``$400'' and inserting
``$740''.
(b) Adjustment for Inflation.--Section 1402 (definitions relating
to self-employment income) is amended by adding at the end the
following new subsection:
``(l) Adjustment for Inflation.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 2001, the $740 amount
contained in subsection (b)(2) shall be increased by an amount
equal to--
``(A) $740, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins by substituting `calendar year
2000' for `calendar year 1992' in subparagraph (B)
thereof.
``(2) Rounding.--If any increase determined under paragraph
(1) is not a multiple of $10, such increase shall be rounded to
the next lowest multiple of $10.''.
(c) Return Requirements.--Section 6017 (relating to self-employment
tax returns) is amended by striking ``of $400 or more'' and inserting
``of an amount which equals or exceeds the amount in effect under
section 1402(b)(2)''.
(d) Conforming Amendments.--
(1) Paragraphs (3) and (4) of section 1402(e) are each
amended by striking ``of $400 or more'' and inserting ``which
equals or exceeds the amount in effect for the taxable year
under subsection (b)(2)''.
(2) Subsection (h) of section 1402 is amended by striking
``$400'' and inserting ``the amount in effect for the taxable
year under subsection (b)(2)''.
(3) Subparagraph (B) of section 1402(j)(2) is amended to
read as follows:
``(B) Floor.--In applying paragraph (2) of
subsection (b) to church employee income, `$200' shall
be substituted for the amount in effect for the taxable
year under such paragraph (2) (as adjusted by
subsection (l)).''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 305. REPEAL OF RECOGNITION OF GAIN RULE FOR HOME OFFICE.
(a) In General.--Subsection (d) of section 121 is amended by
striking paragraph (6) and redesignating paragraphs (7) and (8) as
paragraphs (6) and (7), respectively.
(b) Exception to Treatment as Gain From Disposition of Principal
Residence.--Subsection (d) of section 1250 is amended by adding at the
end the following new paragraph:
``(9) Home office.--Subsection (a) shall not apply to
property described in section 280A(c)(1) which is a portion of
the principal residence (within the meaning of section 121) of
the taxpayer.''.
(c) Effective Date.--The amendments made by this section shall
apply to sales and exchanges occurring after December 31, 2000.
SEC. 306. SIMPLIFICATION OF REPORTING REQUIREMENTS RELATING TO HIGHER
EDUCATION TUITION AND RELATED EXPENSES.
(a) Amendment Relating to Persons Required To Make Return.--
Paragraph (1) of section 6050S(a) (relating to returns relating to
higher education tuition and related expenses) is amended to read as
follows:
``(1) which is an eligible educational institution which
receives payments for qualified tuition and related expenses
with respect to any individual for any calendar year;''.
(b) Amendments Relating to Form and Manner of Returns.--
(1) Paragraph (2) of section 6050S(b) is amended by
striking subparagraph (B) and redesignating subparagraphs (C)
and (D) as subparagraphs (B) and (C), respectively.
(2) Subparagraph (B) of section 6050S(b)(2), as
redesignated by paragraph (1), is amended--
(A) in clause (i), by inserting ``, or the
aggregate amount of qualified tuition and related
expenses assessed,'' after ``received'' and by
inserting ``and'' after the comma at the end,
(B) by striking clauses (ii) and (iii), and
(C) by redesignating clause (iv) as clause (ii).
(c) Conforming Amendments.--Subsection (d) of section 6050S is
amended--
(1) by striking ``or (B)'', and
(2) in paragraph (2), by striking ``subparagraph (C)'' and
inserting ``subparagraph (B)''.
(d) Effective Date.--The amendments made by this section shall
apply to expenses paid or assessed after December 31, 2001 (in taxable
years ending after such date), for education furnished in academic
periods beginning after such date.
TITLE IV--TAXPAYER PROTECTIONS
SEC. 401. TAXPAYER'S RIGHT TO HAVE AN IRS EXAMINATION TAKE PLACE AT
ANOTHER SITE.
(a) In General.--Section 7605(a) (relating to time and place of
examination) is amended to read as follows:
``(a) Time and Place.--
``(1) In general.--The time and place of examination
pursuant to the provisions of section 6420(e)(2), 6421(g)(2),
6427(j)(2), or 7602 shall be such time and place as may be
fixed by the Secretary and as are reasonable under the
circumstances. In the case of a summons under authority of
paragraph (2) of section 7602, or under the corresponding
authority of section 6420(e)(2), 6421(g)(2), or 6427(j)(2), the
date fixed for appearance before the Secretary shall not be
less than 10 days from the date of the summons.
``(2) Limitation.--Upon request of a taxpayer, the
Secretary shall conduct any examination described in paragraph
(1) at a location other than the taxpayer's residence or place
of business, if such location is reasonably accessible to the
Secretary and the taxpayer's original books and records
pertinent to the examination are available at such location.''.
(b) Effective Date.--The amendment made by this section shall apply
to examinations occurring after the date of the enactment of this Act.
SEC. 402. CLARIFICATION OF ELECTRONIC FILING.
(a) In General.--Section 2001(a) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (relating to electronic filing of
tax and information returns) is amended by--
(1) striking ``and'' at the end of paragraph (2);
(2) redesignating paragraph (3) as paragraph (4); and
(3) inserting after paragraph (2) the following new
paragraph:
``(3) electronic filing shall be a voluntary option for
taxpayers; and''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years after the date of the enactment of this Act.
SEC. 403. TAXPAYER'S ELECTION WITH RESPECT TO RECOVERY OF COSTS AND
CERTAIN FEES.
(a) In General.--
(1) Section 504(f) of title 5, United States Code, is
amended to read as follows:
``(f) A party may elect to recover costs, fees, or other expenses
under this section or under section 7430 of the Internal Revenue Code
of 1986.''.
(2) Section 2412(e) of title 28, United States Code, is
amended to read as follows:
``(e) A party may elect to recover costs, fees, or other expenses
under this section or under section 7430 of the Internal Revenue Code
of 1986.''.
(b) Coordination.--Section 7430 (relating to awarding of costs and
certain fees) is amended by adding at the end the following new
subsection:
``(h) Coordination With Equal Access to Justice Act.--This section
shall not apply to any administrative or judicial proceeding with
respect to which a taxpayer elects to recover costs, fees, or other
expenses under section 504 of title 5, United States Code, or section
2412 of title 28, United States Code.''.
(c) Effective Date.--The amendments made by this section shall
apply to proceedings initiated after the date of the enactment of this
Act.
SEC. 404. REPEAL OF THE FAILURE-TO-PAY PENALTY.
(a) In General.--Section 6651(a) is amended by striking paragraphs
(2) and (3).
(b) Conforming Amendments.--
(1) Section 6651(a) is amended--
(A) by striking ``In the case of failure--
``(1) to'' and inserting ``In the case of failure to'', and
(B) by striking the semicolon at the end of
paragraph (1) and inserting a period.
(2) Section 6651(b) is amended--
(A) by striking ``For purposes of--
``(1) subsection (a)(1)'' and inserting ``For purposes of
subsection (a)'',
(B) by striking the comma at the end of paragraph
(1) and inserting a period, and
(C) by striking paragraphs (2) and (3).
(3) Section 6651 is amended by striking subsections (c),
(d), and (e).
(4) Section 6651(f) is amended by striking ``paragraph (1)
of''.
(5) Section 6651(g) is amended to read as follows:
``(g) Treatment of Returns Prepared by Secretary Under Section
6020(b).--In the case of any return made by the Secretary under section
6020(b), such return shall be disregarded for purposes of determining
the amount of the addition under subsection (a).''.
(6) Section 6651, as amended by paragraphs (3) and (4), is
amended by redesignating subsections (f) and (g) as subsections
(c) and (d), respectively.
(7) The heading of section 6651 is amended to read as
follows:
``SEC. 6651. FAILURE TO FILE TAX RETURN.''.
(8) The table of sections for subchapter A of chapter 68 is
amended by striking the item relating to section 6651 and
inserting the following new item:
``Sec. 6651. Failure to file tax
return.''.
(9) Section 5684(c)(2) is amended by striking ``or pay
tax''.
(10) Section 6601(e)(2)(A) is amended by striking ``section
6651(a)(1)'' and inserting ``section 6651(a)''.
(c) Effective Date.--The amendments made by this section shall be
effective for failures to pay occurring after the date of the enactment
of this Act.
SEC. 405. REPEAL OF INTEREST ON PENALTIES.
(a) In General.--Section 6601(e)(2), as amended by section 304, is
amended by striking subparagraph (A) and inserting the following new
subparagraph:
``(A) In general.--No interest shall be imposed
under subsection (1) in respect of any assessable
penalty, additional amount, or addition to the tax
applied under chapter 68.''.
(b) Effective Date.--The amendment made by this section shall be
effective for assessable penalties, additional amounts, or additions to
tax imposed after the date of the enactment of this Act.
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