[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.
                                 <all>