[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2884 Enrolled Bill (ENR)]

        H.R.2884

                      One Hundred Seventh Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

         Begun and held at the City of Washington on Wednesday,
             the third day of January, two thousand and one


                                 An Act


 
  To amend the Internal Revenue Code of 1986 to provide tax relief for 
  victims of the terrorist attacks against the United States, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Victims of 
Terrorism 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 for this Act is as 
follows:

Sec. 1. Short title; etc.

                TITLE I--VICTIMS OF TERRORISM TAX RELIEF

     Subtitle A--Relief Provisions for Victims of Terrorist Attacks

Sec. 101. Income taxes of victims of terrorist attacks.
Sec. 102. Exclusion of certain death benefits.
Sec. 103. Estate tax reduction.
Sec. 104. Payments by charitable organizations treated as exempt 
          payments.
Sec. 105. Exclusion of certain cancellations of indebtedness.

                   Subtitle B--Other Relief Provisions

Sec. 111. Exclusion for disaster relief payments.
Sec. 112. Authority to postpone certain deadlines and required actions.
Sec. 113. Application of certain provisions to terroristic or military 
          actions.
Sec. 114. Clarification of due date for airline excise tax deposits.
Sec. 115. Treatment of certain structured settlement payments.
Sec. 116. Personal exemption deduction for certain disability trusts.

   TITLE II--DISCLOSURE OF TAX INFORMATION IN TERRORISM AND NATIONAL 
                         SECURITY INVESTIGATIONS

Sec. 201. Disclosure of tax information in terrorism and national 
          security investigations.

           TITLE III--NO IMPACT ON SOCIAL SECURITY TRUST FUNDS

Sec. 301. No impact on social security trust funds.

                TITLE I--VICTIMS OF TERRORISM TAX RELIEF
     Subtitle A--Relief Provisions for Victims of Terrorist Attacks

SEC. 101. INCOME TAXES OF VICTIMS OF TERRORIST ATTACKS.

    (a) In General.--Section 692 (relating to income taxes of members 
of Armed Forces on death) is amended by adding at the end the following 
new subsection:
    ``(d) Individuals Dying as a Result of Certain Attacks.--
        ``(1) In general.--In the case of a specified terrorist victim, 
    any tax imposed by this chapter shall not apply--
            ``(A) with respect to the taxable year in which falls the 
        date of death, and
            ``(B) with respect to any prior taxable year in the period 
        beginning with the last taxable year ending before the taxable 
        year in which the wounds, injury, or illness referred to in 
        paragraph (3) were incurred.
        ``(2) $10,000 minimum benefit.--If, but for this paragraph, the 
    amount of tax not imposed by paragraph (1) with respect to a 
    specified terrorist victim is less than $10,000, then such victim 
    shall be treated as having made a payment against the tax imposed 
    by this chapter for such victim's last taxable year in an amount 
    equal to the excess of $10,000 over the amount of tax not so 
    imposed.
        ``(3) Taxation of certain benefits.--Subject to such rules as 
    the Secretary may prescribe, paragraph (1) shall not apply to the 
    amount of any tax imposed by this chapter which would be computed 
    by only taking into account the items of income, gain, or other 
    amounts attributable to--
            ``(A) deferred compensation which would have been payable 
        after death if the individual had died other than as a 
        specified terrorist victim, or
            ``(B) amounts payable in the taxable year which would not 
        have been payable in such taxable year but for an action taken 
        after September 11, 2001.
        ``(4) Specified terrorist victim.--For purposes of this 
    subsection, the term `specified terrorist victim' means any 
    decedent--
            ``(A) who dies as a result of wounds or injury incurred as 
        a result of the terrorist attacks against the United States on 
        April 19, 1995, or September 11, 2001, or
            ``(B) who dies as a result of illness incurred as a result 
        of an attack involving anthrax occurring on or after September 
        11, 2001, and before January 1, 2002.
    Such term shall not include any individual identified by the 
    Attorney General to have been a participant or conspirator in any 
    such attack or a representative of such an individual.''.
    (b) Conforming Amendments.--
        (1) Section 5(b)(1) is amended by inserting ``and victims of 
    certain terrorist attacks'' before ``on death''.
        (2) Section 6013(f)(2)(B) is amended by inserting ``and victims 
    of certain terrorist attacks'' before ``on death''.
    (c) Clerical Amendments.--
        (1) The heading of section 692 is amended to read as follows:

``SEC. 692. INCOME TAXES OF MEMBERS OF ARMED FORCES AND VICTIMS OF 
              CERTAIN TERRORIST ATTACKS ON DEATH.''.

        (2) The item relating to section 692 in the table of sections 
    for part II of subchapter J of chapter 1 is amended to read as 
    follows:

        ``Sec. 692. Income taxes of members of Armed Forces and victims 
                  of certain terrorist attacks on death.''.

    (d) Effective Date; Waiver of Limitations.--
        (1) Effective date.--The amendments made by this section shall 
    apply to taxable years ending before, on, or after September 11, 
    2001.
        (2) Waiver of limitations.--If refund or credit of any 
    overpayment of tax resulting from the amendments made by this 
    section is prevented at any time before the close of the 1-year 
    period beginning on the date of the enactment of this Act by the 
    operation of any law or rule of law (including res judicata), such 
    refund or credit may nevertheless be made or allowed if claim 
    therefor is filed before the close of such period.

SEC. 102. EXCLUSION OF CERTAIN DEATH BENEFITS.

    (a) In General.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(i) Certain Employee Death Benefits Payable by Reason of Death of 
Certain Terrorist Victims.--
        ``(1) In general.--Gross income does not include amounts 
    (whether in a single sum or otherwise) paid by an employer by 
    reason of the death of an employee who is a specified terrorist 
    victim (as defined in section 692(d)(4)).
        ``(2) Limitation.--
            ``(A) In general.--Subject to such rules as the Secretary 
        may prescribe, paragraph (1) shall not apply to amounts which 
        would have been payable after death if the individual had died 
        other than as a specified terrorist victim (as so defined).
            ``(B) Exception.--Subparagraph (A) shall not apply to 
        incidental death benefits paid from a plan described in section 
        401(a) and exempt from tax under section 501(a).
        ``(3) Treatment of self-employed individuals.--For purposes of 
    paragraph (1), the term `employee' includes a self-employed 
    individual (as defined in section 401(c)(1)).''.
    (b) Effective Date; Waiver of Limitations.--
        (1) Effective date.--The amendment made by this section shall 
    apply to taxable years ending before, on, or after September 11, 
    2001.
        (2) Waiver of limitations.--If refund or credit of any 
    overpayment of tax resulting from the amendments made by this 
    section is prevented at any time before the close of the 1-year 
    period beginning on the date of the enactment of this Act by the 
    operation of any law or rule of law (including res judicata), such 
    refund or credit may nevertheless be made or allowed if claim 
    therefor is filed before the close of such period.

SEC. 103. ESTATE TAX REDUCTION.

    (a) In General.--Section 2201 is amended to read as follows:

``SEC. 2201. COMBAT ZONE-RELATED DEATHS OF MEMBERS OF THE ARMED FORCES 
              AND DEATHS OF VICTIMS OF CERTAIN TERRORIST ATTACKS.

    ``(a) In General.--Unless the executor elects not to have this 
section apply, in applying sections 2001 and 2101 to the estate of a 
qualified decedent, the rate schedule set forth in subsection (c) shall 
be deemed to be the rate schedule set forth in section 2001(c).
    ``(b) Qualified Decedent.--For purposes of this section, the term 
`qualified decedent' means--
        ``(1) any citizen or resident of the United States dying while 
    in active service of the Armed Forces of the United States, if such 
    decedent--
            ``(A) was killed in action while serving in a combat zone, 
        as determined under section 112(c), or
            ``(B) died as a result of wounds, disease, or injury 
        suffered while serving in a combat zone (as determined under 
        section 112(c)), and while in the line of duty, by reason of a 
        hazard to which such decedent was subjected as an incident of 
        such service, and
        ``(2) any specified terrorist victim (as defined in section 
    692(d)(4)).
    ``(c) Rate Schedule.--

``If the amount with respect to which the tentative tax to be computed 
    is:
The tentative tax is:
  Not over $150,000
  1 percent of the amount by which such amount exceeds $100,000.
  Over $150,000 but not over $200,000
  $500 plus 2 percent of the excess over $150,000.
  Over $200,000 but not over $300,000
  $1,500 plus 3 percent of the excess over $200,000.
  Over $300,000 but not over $500,000
  $4,500 plus 4 percent of the excess over $300,000.
  Over $500,000 but not over $700,000
  $12,500 plus 5 percent of the excess over $500,000.
  Over $700,000 but not over $900,000
  $22,500 plus 6 percent of the excess over $700,000.
  Over $900,000 but not over $1,100,000
  $34,500 plus 7 percent of the excess over $900,000.
  Over $1,100,000 but not over $1,600,000
  $48,500 plus 8 percent of the excess over $1,100,000.
  Over $1,600,000 but not over $2,100,000
  $88,500 plus 9 percent of the excess over $1,600,000.
  Over $2,100,000 but not over $2,600,000
  $133,500 plus 10 percent of the excess over $2,100,000.
  Over $2,600,000 but not over $3,100,000
  $183,500 plus 11 percent of the excess over $2,600,000.
  Over $3,100,000 but not over $3,600,000
  $238,500 plus 12 percent of the excess over $3,100,000.
  Over $3,600,000 but not over $4,100,000
  $298,500 plus 13 percent of the excess over $3,600,000.
  Over $4,100,000 but not over $5,100,000
  $363,500 plus 14 percent of the excess over $4,100,000.
  Over $5,100,000 but not over $6,100,000
  $503,500 plus 15 percent of the excess over $5,100,000.
  Over $6,100,000 but not over $7,100,000
  $653,500 plus 16 percent of the excess over $6,100,000.
  Over $7,100,000 but not over $8,100,000
  $813,500 plus 17 percent of the excess over $7,100,000.
  Over $8,100,000 but not over $9,100,000
  $983,500 plus 18 percent of the excess over $8,100,000.
  Over $9,100,000 but not over $10,100,000
  $1,163,500 plus 19 percent of the excess over $9,100,000.
  Over $10,100,000
  $1,353,500 plus 20 percent of the excess over $10,100,000.

    ``(d) Determination of Unified Credit.--In the case of an estate to 
which this section applies, subsection (a) shall not apply in 
determining the credit under section 2010.''.
    (b) Conforming Amendments.--
        (1) Section 2011 is amended by striking subsection (d) and by 
    redesignating subsections (e), (f), and (g) as subsections (d), 
    (e), and (f), respectively.
        (2) Section 2053(d)(3)(B) is amended by striking ``section 
    2011(e)'' and inserting ``section 2011(d)''.
        (3) Paragraph (9) of section 532(c) of the Economic Growth and 
    Tax Relief Reconciliation Act of 2001 is repealed.
    (c) Clerical Amendment.--The item relating to section 2201 in the 
table of sections for subchapter C of chapter 11 is amended to read as 
follows:

        ``Sec. 2201. Combat zone-related deaths of members of the Armed 
                  Forces and deaths of victims of certain terrorist 
                  attacks.''.

    (d) Effective Date; Waiver of Limitations.--
        (1) Effective date.--The amendments made by this section shall 
    apply to estates of decedents--
            (A) dying on or after September 11, 2001; and
            (B) in the case of individuals dying as a result of the 
        April 19, 1995, terrorist attack, dying on or after April 19, 
        1995.
        (2) Waiver of limitations.--If refund or credit of any 
    overpayment of tax resulting from the amendments made by this 
    section is prevented at any time before the close of the 1-year 
    period beginning on the date of the enactment of this Act by the 
    operation of any law or rule of law (including res judicata), such 
    refund or credit may nevertheless be made or allowed if claim 
    therefor is filed before the close of such period.

SEC. 104. PAYMENTS BY CHARITABLE ORGANIZATIONS TREATED AS EXEMPT 
              PAYMENTS.

    (a) In General.--For purposes of the Internal Revenue Code of 
1986--
        (1) payments made by an organization described in section 
    501(c)(3) of such Code by reason of the death, injury, wounding, or 
    illness of an individual incurred as the result of the terrorist 
    attacks against the United States on September 11, 2001, or an 
    attack involving anthrax occurring on or after September 11, 2001, 
    and before January 1, 2002, shall be treated as related to the 
    purpose or function constituting the basis for such organization's 
    exemption under section 501 of such Code if such payments are made 
    in good faith using a reasonable and objective formula which is 
    consistently applied; and
        (2) in the case of a private foundation (as defined in section 
    509 of such Code), any payment described in paragraph (1) shall not 
    be treated as made to a disqualified person for purposes of section 
    4941 of such Code.
    (b) Effective Date.--This section shall apply to payments made on 
or after September 11, 2001.

SEC. 105. EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS.

    (a) In General.--For purposes of the Internal Revenue Code of 
1986--
        (1) gross income shall not include any amount which (but for 
    this section) would be includible in gross income by reason of the 
    discharge (in whole or in part) of indebtedness of any taxpayer if 
    the discharge is by reason of the death of an individual incurred 
    as the result of the terrorist attacks against the United States on 
    September 11, 2001, or as the result of illness incurred as a 
    result of an attack involving anthrax occurring on or after 
    September 11, 2001, and before January 1, 2002; and
        (2) return requirements under section 6050P of such Code shall 
    not apply to any discharge described in paragraph (1).
    (b) Effective Date.--This section shall apply to discharges made on 
or after September 11, 2001, and before January 1, 2002.

                  Subtitle B--Other Relief Provisions

SEC. 111. EXCLUSION FOR DISASTER RELIEF PAYMENTS.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by 
redesignating section 139 as section 140 and inserting after section 
138 the following new section:

``SEC. 139. DISASTER RELIEF PAYMENTS.

    ``(a) General Rule.--Gross income shall not include any amount 
received by an individual as a qualified disaster relief payment.
    ``(b) Qualified Disaster Relief Payment Defined.--For purposes of 
this section, the term `qualified disaster relief payment' means any 
amount paid to or for the benefit of an individual--
        ``(1) to reimburse or pay reasonable and necessary personal, 
    family, living, or funeral expenses incurred as a result of a 
    qualified disaster,
        ``(2) to reimburse or pay reasonable and necessary expenses 
    incurred for the repair or rehabilitation of a personal residence 
    or repair or replacement of its contents to the extent that the 
    need for such repair, rehabilitation, or replacement is 
    attributable to a qualified disaster,
        ``(3) by a person engaged in the furnishing or sale of 
    transportation as a common carrier by reason of the death or 
    personal physical injuries incurred as a result of a qualified 
    disaster, or
        ``(4) if such amount is paid by a Federal, State, or local 
    government, or agency or instrumentality thereof, in connection 
    with a qualified disaster in order to promote the general welfare,
but only to the extent any expense compensated by such payment is not 
otherwise compensated for by insurance or otherwise.
    ``(c) Qualified Disaster Defined.--For purposes of this section, 
the term `qualified disaster' means--
        ``(1) a disaster which results from a terroristic or military 
    action (as defined in section 692(c)(2)),
        ``(2) a Presidentially declared disaster (as defined in section 
    1033(h)(3)),
        ``(3) a disaster which results from an accident involving a 
    common carrier, or from any other event, which is determined by the 
    Secretary to be of a catastrophic nature, or
        ``(4) with respect to amounts described in subsection (b)(4), a 
    disaster which is determined by an applicable Federal, State, or 
    local authority (as determined by the Secretary) to warrant 
    assistance from the Federal, State, or local government or agency 
    or instrumentality thereof.
    ``(d) Coordination With Employment Taxes.--For purposes of chapter 
2 and subtitle C, a qualified disaster relief payment shall not be 
treated as net earnings from self-employment, wages, or compensation 
subject to tax.
    ``(e) No Relief for Certain Individuals.--Subsections (a) and (f) 
shall not apply with respect to any individual identified by the 
Attorney General to have been a participant or conspirator in a 
terroristic action (as so defined), or a representative of such 
individual.
    ``(f) Exclusion of Certain Additional Payments.--Gross income shall 
not include any amount received as payment under section 406 of the Air 
Transportation Safety and System Stabilization Act.''.
    (b) Conforming Amendments.--The table of sections for part III of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 139 and inserting the following new items:

        ``Sec. 139. Disaster relief payments.
        ``Sec. 140. Cross references to other Acts.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after September 11, 2001.

SEC. 112. AUTHORITY TO POSTPONE CERTAIN DEADLINES AND REQUIRED ACTIONS.

    (a) Expansion of Authority Relating to Disasters and Terroristic or 
Military Actions.--Section 7508A is amended to read as follows:

``SEC. 7508A. AUTHORITY TO POSTPONE CERTAIN DEADLINES BY REASON OF 
              PRESIDENTIALLY DECLARED DISASTER OR TERRORISTIC OR 
              MILITARY ACTIONS.

    ``(a) In General.--In the case of a taxpayer determined by the 
Secretary to be affected by a Presidentially declared disaster (as 
defined in section 1033(h)(3)) or a terroristic or military action (as 
defined in section 692(c)(2)), the Secretary may specify a period of up 
to 1 year that may be disregarded in determining, under the internal 
revenue laws, in respect of any tax liability of such taxpayer--
        ``(1) whether any of the acts described in paragraph (1) of 
    section 7508(a) were performed within the time prescribed therefor 
    (determined without regard to extension under any other provision 
    of this subtitle for periods after the date (determined by the 
    Secretary) of such disaster or action),
        ``(2) the amount of any interest, penalty, additional amount, 
    or addition to the tax for periods after such date, and
        ``(3) the amount of any credit or refund.
    ``(b) Special Rules Regarding Pensions, Etc.--In the case of a 
pension or other employee benefit plan, or any sponsor, administrator, 
participant, beneficiary, or other person with respect to such plan, 
affected by a disaster or action described in subsection (a), the 
Secretary may specify a period of up to 1 year which may be disregarded 
in determining the date by which any action is required or permitted to 
be completed under this title. No plan shall be treated as failing to 
be operated in accordance with the terms of the plan solely as the 
result of disregarding any period by reason of the preceding sentence.
    ``(c) Special Rules for Overpayments.--The rules of section 7508(b) 
shall apply for purposes of this section.''.
    (b) Clarification of Scope of Acts Secretary May Postpone.--Section 
7508(a)(1)(K) (relating to time to be disregarded) is amended by 
striking ``in regulations prescribed under this section''.
    (c) Conforming Amendments to ERISA.--
        (1) Part 5 of subtitle B of title I of the Employee Retirement 
    Income Security Act of 1974 (29 U.S.C. 1131 et seq.) is amended by 
    adding at the end the following new section:

``SEC. 518. AUTHORITY TO POSTPONE CERTAIN DEADLINES BY REASON OF 
              PRESIDENTIALLY DECLARED DISASTER OR TERRORISTIC OR 
              MILITARY ACTIONS.

    ``In the case of a pension or other employee benefit plan, or any 
sponsor, administrator, participant, beneficiary, or other person with 
respect to such plan, affected by a Presidentially declared disaster 
(as defined in section 1033(h)(3) of the Internal Revenue Code of 1986) 
or a terroristic or military action (as defined in section 692(c)(2) of 
such Code), the Secretary may, notwithstanding any other provision of 
law, prescribe, by notice or otherwise, a period of up to 1 year which 
may be disregarded in determining the date by which any action is 
required or permitted to be completed under this Act. No plan shall be 
treated as failing to be operated in accordance with the terms of the 
plan solely as the result of disregarding any period by reason of the 
preceding sentence.''.
        (2) Section 4002 of Employee Retirement Income Security Act of 
    1974 (29 U.S.C. 1302) is amended by adding at the end the following 
    new subsection:
    ``(i) Special Rules Regarding Disasters, Etc.--In the case of a 
pension or other employee benefit plan, or any sponsor, administrator, 
participant, beneficiary, or other person with respect to such plan, 
affected by a Presidentially declared disaster (as defined in section 
1033(h)(3) of the Internal Revenue Code of 1986) or a terroristic or 
military action (as defined in section 692(c)(2) of such Code), the 
corporation may, notwithstanding any other provision of law, prescribe, 
by notice or otherwise, a period of up to 1 year which may be 
disregarded in determining the date by which any action is required or 
permitted to be completed under this Act. No plan shall be treated as 
failing to be operated in accordance with the terms of the plan solely 
as the result of disregarding any period by reason of the preceding 
sentence.''.
    (d) Additional Conforming Amendments.--
        (1) Section 6404 is amended--
            (A) by striking subsection (h);
            (B) by redesignating subsection (i) as subsection (h); and
            (C) by adding at the end the following new subsection:
    ``(i) Cross Reference.--

          ``For authority to suspend running of interest, etc. by reason 
        of Presidentially declared disaster or terroristic or military 
        action, see section 7508A.''.

        (2) Section 6081(c) is amended to read as follows:
    ``(c) Cross References.--

          ``For time for performing certain acts postponed by reason of 
        war, see section 7508, and by reason of Presidentially declared 
        disaster or terroristic or military action, see section 
        7508A.''.

        (3) Section 6161(d) is amended by adding at the end the 
    following new paragraph:
        ``(3) Postponement of certain acts.--

          ``For time for performing certain acts postponed by reason of 
        war, see section 7508, and by reason of Presidentially declared 
        disaster or terroristic or military action, see section 
        7508A.''.

    (e) Clerical Amendments.--
        (1) The item relating to section 7508A in the table of sections 
    for chapter 77 is amended to read as follows:

        ``Sec. 7508A. Authority to postpone certain deadlines by reason 
                  of Presidentially declared disaster or terroristic or 
                  military actions.''.

        (2) The table of contents for the Employee Retirement Income 
    Security Act of 1974 is amended by inserting after the item 
    relating to section 517 the following new item:

        ``Sec. 518. Authority to postpone certain deadlines by reason of 
                  Presidentially declared disaster or terroristic or 
                  military actions.''.

    (f) Effective Date.--The amendments made by this section shall 
apply to disasters and terroristic or military actions occurring on or 
after September 11, 2001, with respect to any action of the Secretary 
of the Treasury, the Secretary of Labor, or the Pension Benefit 
Guaranty Corporation occurring on or after the date of the enactment of 
this Act.

SEC. 113. APPLICATION OF CERTAIN PROVISIONS TO TERRORISTIC OR MILITARY 
              ACTIONS.

    (a) Disability Income.--Section 104(a)(5) (relating to compensation 
for injuries or sickness) is amended by striking ``a violent attack'' 
and all that follows through the period and inserting ``a terroristic 
or military action (as defined in section 692(c)(2)).''.
    (b) Exemption From Income Tax for Certain Military or Civilian 
Employees.--Section 692(c) is amended--
        (1) by striking ``outside the United States'' in paragraph (1); 
    and
        (2) by striking ``Sustained Overseas'' in the heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after September 11, 2001.

SEC. 114. CLARIFICATION OF DUE DATE FOR AIRLINE EXCISE TAX DEPOSITS.

    (a) In General.--Paragraph (3) of section 301(a) of the Air 
Transportation Safety and System Stabilization Act (Public Law 107-42) 
is amended to read as follows:
        ``(3) Airline-related deposit.--For purposes of this 
    subsection, the term `airline-related deposit' means any deposit of 
    taxes imposed by subchapter C of chapter 33 of such Code (relating 
    to transportation by air).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in section 301 of the Air Transportation Safety 
and System Stabilization Act (Public Law 107-42).

SEC. 115. TREATMENT OF CERTAIN STRUCTURED SETTLEMENT PAYMENTS.

    (a) In General.--Subtitle E is amended by adding at the end the 
following new chapter:

       ``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

        ``Sec. 5891. Structured settlement factoring transactions.

``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.

    ``(a) Imposition of Tax.--There is hereby imposed on any person who 
acquires directly or indirectly structured settlement payment rights in 
a structured settlement factoring transaction a tax equal to 40 percent 
of the factoring discount as determined under subsection (c)(4) with 
respect to such factoring transaction.
    ``(b) Exception for Certain Approved Transactions.--
        ``(1) In general.--The tax under subsection (a) shall not apply 
    in the case of a structured settlement factoring transaction in 
    which the transfer of structured settlement payment rights is 
    approved in advance in a qualified order.
        ``(2) Qualified order.--For purposes of this section, the term 
    `qualified order' means a final order, judgment, or decree which--
            ``(A) finds that the transfer described in paragraph (1)--
                ``(i) does not contravene any Federal or State statute 
            or the order of any court or responsible administrative 
            authority, and
                ``(ii) is in the best interest of the payee, taking 
            into account the welfare and support of the payee's 
            dependents, and
            ``(B) is issued--
                ``(i) under the authority of an applicable State 
            statute by an applicable State court, or
                ``(ii) by the responsible administrative authority (if 
            any) which has exclusive jurisdiction over the underlying 
            action or proceeding which was resolved by means of the 
            structured settlement.
        ``(3) Applicable state statute.--For purposes of this section, 
    the term `applicable State statute' means a statute providing for 
    the entry of an order, judgment, or decree described in paragraph 
    (2)(A) which is enacted by--
            ``(A) the State in which the payee of the structured 
        settlement is domiciled, or
            ``(B) if there is no statute described in subparagraph (A), 
        the State in which either the party to the structured 
        settlement (including an assignee under a qualified assignment 
        under section 130) or the person issuing the funding asset for 
        the structured settlement is domiciled or has its principal 
        place of business.
        ``(4) Applicable state court.--For purposes of this section--
            ``(A) In general.--The term `applicable State court' means, 
        with respect to any applicable State statute, a court of the 
        State which enacted such statute.
            ``(B) Special rule.--In the case of an applicable State 
        statute described in paragraph (3)(B), such term also includes 
        a court of the State in which the payee of the structured 
        settlement is domiciled.
        ``(5) Qualified order dispositive.--A qualified order shall be 
    treated as dispositive for purposes of the exception under this 
    subsection.
    ``(c) Definitions.--For purposes of this section--
        ``(1) Structured settlement.--The term `structured settlement' 
    means an arrangement--
            ``(A) which is established by--
                ``(i) suit or agreement for the periodic payment of 
            damages excludable from the gross income of the recipient 
            under section 104(a)(2), or
                ``(ii) agreement for the periodic payment of 
            compensation under any workers' compensation law excludable 
            from the gross income of the recipient under section 
            104(a)(1), and
            ``(B) under which the periodic payments are--
                ``(i) of the character described in subparagraphs (A) 
            and (B) of section 130(c)(2), and
                ``(ii) payable by a person who is a party to the suit 
            or agreement or to the workers' compensation claim or by a 
            person who has assumed the liability for such periodic 
            payments under a qualified assignment in accordance with 
            section 130.
        ``(2) Structured settlement payment rights.--The term 
    `structured settlement payment rights' means rights to receive 
    payments under a structured settlement.
        ``(3) Structured settlement factoring transaction.--
            ``(A) In general.--The term `structured settlement 
        factoring transaction' means a transfer of structured 
        settlement payment rights (including portions of structured 
        settlement payments) made for consideration by means of sale, 
        assignment, pledge, or other form of encumbrance or alienation 
        for consideration.
            ``(B) Exception.--Such term shall not include--
                ``(i) the creation or perfection of a security interest 
            in structured settlement payment rights under a blanket 
            security agreement entered into with an insured depository 
            institution in the absence of any action to redirect the 
            structured settlement payments to such institution (or 
            agent or successor thereof) or otherwise to enforce such 
            blanket security interest as against the structured 
            settlement payment rights, or
                ``(ii) a subsequent transfer of structured settlement 
            payment rights acquired in a structured settlement 
            factoring transaction.
        ``(4) Factoring discount.--The term `factoring discount' means 
    an amount equal to the excess of--
            ``(A) the aggregate undiscounted amount of structured 
        settlement payments being acquired in the structured settlement 
        factoring transaction, over
            ``(B) the total amount actually paid by the acquirer to the 
        person from whom such structured settlement payments are 
        acquired.
        ``(5) Responsible administrative authority.--The term 
    `responsible administrative authority' means the administrative 
    authority which had jurisdiction over the underlying action or 
    proceeding which was resolved by means of the structured 
    settlement.
        ``(6) State.--The term `State' includes the Commonwealth of 
    Puerto Rico and any possession of the United States.
    ``(d) Coordination With Other Provisions.--
        ``(1) In general.--If the applicable requirements of sections 
    72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the 
    time the structured settlement involving structured settlement 
    payment rights was entered into, the subsequent occurrence of a 
    structured settlement factoring transaction shall not affect the 
    application of the provisions of such sections to the parties to 
    the structured settlement (including an assignee under a qualified 
    assignment under section 130) in any taxable year.
        ``(2) No withholding of tax.--The provisions of section 3405 
    regarding withholding of tax shall not apply to the person making 
    the payments in the event of a structured settlement factoring 
    transaction.''.
    (b) Clerical Amendment.--The table of chapters for subtitle E is 
amended by adding at the end the following new item:

        ``Chapter 55. Structured settlement factoring transactions.''.

    (c) Effective Dates.--
        (1) In general.--The amendments made by this section (other 
    than the provisions of section 5891(d) of the Internal Revenue Code 
    of 1986, as added by this section) shall apply to structured 
    settlement factoring transactions (as defined in section 5891(c) of 
    such Code (as so added)) entered into on or after the 30th day 
    following the date of the enactment of this Act.
        (2) Clarification of existing law.--Section 5891(d) of such 
    Code (as so added) shall apply to structured settlement factoring 
    transactions (as defined in section 5891(c) of such Code (as so 
    added)) entered into before, on, or after such 30th day.
        (3) Transition rule.--In the case of a structured settlement 
    factoring transaction entered into during the period beginning on 
    the 30th day following the date of the enactment of this Act and 
    ending on July 1, 2002, no tax shall be imposed under section 
    5891(a) of such Code if--
            (A) the structured settlement payee is domiciled in a State 
        (or possession of the United States) which has not enacted a 
        statute providing that the structured settlement factoring 
        transaction is ineffective unless the transaction has been 
        approved by an order, judgment, or decree of a court (or where 
        applicable, a responsible administrative authority) which finds 
        that such transaction--
                (i) does not contravene any Federal or State statute or 
            the order of any court (or responsible administrative 
            authority); and
                (ii) is in the best interest of the structured 
            settlement payee or is appropriate in light of a hardship 
            faced by the payee; and
            (B) the person acquiring the structured settlement payment 
        rights discloses to the structured settlement payee in advance 
        of the structured settlement factoring transaction the amounts 
        and due dates of the payments to be transferred, the aggregate 
        amount to be transferred, the consideration to be received by 
        the structured settlement payee for the transferred payments, 
        the discounted present value of the transferred payments 
        (including the present value as determined in the manner 
        described in section 7520 of such Code), and the expenses 
        required under the terms of the structured settlement factoring 
        transaction to be paid by the structured settlement payee or 
        deducted from the proceeds of such transaction.

SEC. 116. PERSONAL EXEMPTION DEDUCTION FOR CERTAIN DISABILITY TRUSTS.

    (a) In General.--Subsection (b) of section 642 (relating to 
deduction for personal exemption) is amended to read as follows:
    ``(b) Deduction for Personal Exemption.--
        ``(1) Estates.--An estate shall be allowed a deduction of $600.
        ``(2) Trusts.--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, a trust shall be allowed a deduction of $100.
            ``(B) Trusts distributing income currently.--A trust which, 
        under its governing instrument, is required to distribute all 
        of its income currently shall be allowed a deduction of $300.
            ``(C) Disability trusts.--
                ``(i) In general.--A qualified disability trust shall 
            be allowed a deduction equal to the exemption amount under 
            section 151(d), determined--

                    ``(I) by treating such trust as an individual 
                described in section 151(d)(3)(C)(iii), and
                    ``(II) by applying section 67(e) (without the 
                reference to section 642(b)) for purposes of 
                determining the adjusted gross income of the trust.

                ``(ii) Qualified disability trust.--For purposes of 
            clause (i), the term `qualified disability trust' means any 
            trust if--

                    ``(I) such trust is a disability trust described in 
                subsection (c)(2)(B)(iv) of section 1917 of the Social 
                Security Act (42 U.S.C. 1396p), and
                    ``(II) all of the beneficiaries of the trust as of 
                the close of the taxable year are determined by the 
                Commissioner of Social Security to have been disabled 
                (within the meaning of section 1614(a)(3) of the Social 
                Security Act, 42 U.S.C. 1382c(a)(3)) for some portion 
                of such year.

            A trust shall not fail to meet the requirements of 
            subclause (II) merely because the corpus of the trust may 
            revert to a person who is not so disabled after the trust 
            ceases to have any beneficiary who is so disabled.
        ``(3) Deductions in lieu of personal exemption.--The deductions 
    allowed by this subsection shall be in lieu of the deductions 
    allowed under section 151 (relating to deduction for personal 
    exemption).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending on or after September 11, 2001.

   TITLE II--DISCLOSURE OF TAX INFORMATION IN TERRORISM AND NATIONAL 
                        SECURITY INVESTIGATIONS

SEC. 201. DISCLOSURE OF TAX INFORMATION IN TERRORISM AND NATIONAL 
              SECURITY INVESTIGATIONS.

    (a) Disclosure Without a Request of Information Relating to 
Terrorist Activities, Etc.--Paragraph (3) of section 6103(i) (relating 
to disclosure of return information to apprise appropriate officials of 
criminal activities or emergency circumstances) is amended by adding at 
the end the following new subparagraph:
            ``(C) Terrorist activities, etc.--
                ``(i) In general.--Except as provided in paragraph (6), 
            the Secretary may disclose in writing return information 
            (other than taxpayer return information) that may be 
            related to a terrorist incident, threat, or activity to the 
            extent necessary to apprise the head of the appropriate 
            Federal law enforcement agency responsible for 
            investigating or responding to such terrorist incident, 
            threat, or activity. The head of the agency may disclose 
            such return information to officers and employees of such 
            agency to the extent necessary to investigate or respond to 
            such terrorist incident, threat, or activity.
                ``(ii) Disclosure to the department of justice.--
            Returns and taxpayer return information may also be 
            disclosed to the Attorney General under clause (i) to the 
            extent necessary for, and solely for use in preparing, an 
            application under paragraph (7)(D).
                ``(iii) Taxpayer identity.--For purposes of this 
            subparagraph, a taxpayer's identity shall not be treated as 
            taxpayer return information.
                ``(iv) Termination.--No disclosure may be made under 
            this subparagraph after December 31, 2003.''.
    (b) Disclosure Upon Request of Information Relating to Terrorist 
Activities, Etc.--Subsection (i) of section 6103 (relating to 
disclosure to Federal officers or employees for administration of 
Federal laws not relating to tax administration) is amended by 
redesignating paragraph (7) as paragraph (8) and by inserting after 
paragraph (6) the following new paragraph:
        ``(7) Disclosure upon request of information relating to 
    terrorist activities, etc.--
            ``(A) Disclosure to law enforcement agencies.--
                ``(i) In general.--Except as provided in paragraph (6), 
            upon receipt by the Secretary of a written request which 
            meets the requirements of clause (iii), the Secretary may 
            disclose return information (other than taxpayer return 
            information) to officers and employees of any Federal law 
            enforcement agency who are personally and directly engaged 
            in the response to or investigation of any terrorist 
            incident, threat, or activity.
                ``(ii) Disclosure to state and local law enforcement 
            agencies.--The head of any Federal law enforcement agency 
            may disclose return information obtained under clause (i) 
            to officers and employees of any State or local law 
            enforcement agency but only if such agency is part of a 
            team with the Federal law enforcement agency in such 
            response or investigation and such information is disclosed 
            only to officers and employees who are personally and 
            directly engaged in such response or investigation.
                ``(iii) Requirements.--A request meets the requirements 
            of this clause if--

                    ``(I) the request is made by the head of any 
                Federal law enforcement agency (or his delegate) 
                involved in the response to or investigation of any 
                terrorist incident, threat, or activity, and
                    ``(II) the request sets forth the specific reason 
                or reasons why such disclosure may be relevant to a 
                terrorist incident, threat, or activity.

                ``(iv) Limitation on use of information.--Information 
            disclosed under this subparagraph shall be solely for the 
            use of the officers and employees to whom such information 
            is disclosed in such response or investigation.
            ``(B) Disclosure to intelligence agencies.--
                ``(i) In general.--Except as provided in paragraph (6), 
            upon receipt by the Secretary of a written request which 
            meets the requirements of clause (ii), the Secretary may 
            disclose return information (other than taxpayer return 
            information) to those officers and employees of the 
            Department of Justice, the Department of the Treasury, and 
            other Federal intelligence agencies who are personally and 
            directly engaged in the collection or analysis of 
            intelligence and counterintelligence information or 
            investigation concerning any terrorist incident, threat, or 
            activity. For purposes of the preceding sentence, the 
            information disclosed under the preceding sentence shall be 
            solely for the use of such officers and employees in such 
            investigation, collection, or analysis.
                ``(ii) Requirements.--A request meets the requirements 
            of this subparagraph if the request--

                    ``(I) is made by an individual described in clause 
                (iii), and
                    ``(II) sets forth the specific reason or reasons 
                why such disclosure may be relevant to a terrorist 
                incident, threat, or activity.

                ``(iii) Requesting individuals.--An individual 
            described in this subparagraph is an individual--

                    ``(I) who is an officer or employee of the 
                Department of Justice or the Department of the Treasury 
                who is appointed by the President with the advice and 
                consent of the Senate or who is the Director of the 
                United States Secret Service, and
                    ``(II) who is responsible for the collection and 
                analysis of intelligence and counterintelligence 
                information concerning any terrorist incident, threat, 
                or activity.

                ``(iv) Taxpayer identity.--For purposes of this 
            subparagraph, a taxpayer's identity shall not be treated as 
            taxpayer return information.
            ``(C) Disclosure under ex parte orders.--
                ``(i) In general.--Except as provided in paragraph (6), 
            any return or return information with respect to any 
            specified taxable period or periods shall, pursuant to and 
            upon the grant of an ex parte order by a Federal district 
            court judge or magistrate under clause (ii), be open (but 
            only to the extent necessary as provided in such order) to 
            inspection by, or disclosure to, officers and employees of 
            any Federal law enforcement agency or Federal intelligence 
            agency who are personally and directly engaged in any 
            investigation, response to, or analysis of intelligence and 
            counterintelligence information concerning any terrorist 
            incident, threat, or activity. Return or return information 
            opened to inspection or disclosure pursuant to the 
            preceding sentence shall be solely for the use of such 
            officers and employees in the investigation, response, or 
            analysis, and in any judicial, administrative, or grand 
            jury proceedings, pertaining to such terrorist incident, 
            threat, or activity.
                ``(ii) Application for order.--The Attorney General, 
            the Deputy Attorney General, the Associate Attorney 
            General, any Assistant Attorney General, or any United 
            States attorney may authorize an application to a Federal 
            district court judge or magistrate for the order referred 
            to in clause (i). Upon such application, such judge or 
            magistrate may grant such order if he determines on the 
            basis of the facts submitted by the applicant that--

                    ``(I) there is reasonable cause to believe, based 
                upon information believed to be reliable, that the 
                return or return information may be relevant to a 
                matter relating to such terrorist incident, threat, or 
                activity, and
                    ``(II) the return or return information is sought 
                exclusively for use in a Federal investigation, 
                analysis, or proceeding concerning any terrorist 
                incident, threat, or activity.

            ``(D) Special rule for ex parte disclosure by the irs.--
                ``(i) In general.--Except as provided in paragraph (6), 
            the Secretary may authorize an application to a Federal 
            district court judge or magistrate for the order referred 
            to in subparagraph (C)(i). Upon such application, such 
            judge or magistrate may grant such order if he determines 
            on the basis of the facts submitted by the applicant that 
            the requirements of subparagraph (C)(ii)(I) are met.
                ``(ii) Limitation on use of information.--Information 
            disclosed under clause (i)--

                    ``(I) may be disclosed only to the extent necessary 
                to apprise the head of the appropriate Federal law 
                enforcement agency responsible for investigating or 
                responding to a terrorist incident, threat, or 
                activity, and
                    ``(II) shall be solely for use in a Federal 
                investigation, analysis, or proceeding concerning any 
                terrorist incident, threat, or activity.

            The head of such Federal agency may disclose such 
            information to officers and employees of such agency to the 
            extent necessary to investigate or respond to such 
            terrorist incident, threat, or activity.
            ``(E) Termination.--No disclosure may be made under this 
        paragraph after December 31, 2003.''.
    (c) Conforming Amendments.--
        (1) Section 6103(a)(2) is amended by inserting ``any local law 
    enforcement agency receiving information under subsection 
    (i)(7)(A),'' after ``State,''.
        (2) Section 6103(b) is amended by adding at the end the 
    following new paragraph:
        ``(11) Terrorist incident, threat, or activity.--The term 
    `terrorist incident, threat, or activity' means an incident, 
    threat, or activity involving an act of domestic terrorism (as 
    defined in section 2331(5) of title 18, United States Code) or 
    international terrorism (as defined in section 2331(1) of such 
    title).''.
        (3) The heading of section 6103(i)(3) is amended by inserting 
    ``or terrorist'' after ``criminal''.
        (4) Paragraph (4) of section 6103(i) is amended--
            (A) in subparagraph (A) by inserting ``or (7)(C)'' after 
        ``paragraph (1)''; and
            (B) in subparagraph (B) by striking ``or (3)(A)'' and 
        inserting ``(3)(A) or (C), or (7)''.
        (5) Paragraph (6) of section 6103(i) is amended--
            (A) by striking ``(3)(A)'' and inserting ``(3)(A) or (C)''; 
        and
            (B) by striking ``or (7)'' and inserting ``(7), or (8)''.
        (6) Section 6103(p)(3) is amended--
            (A) in subparagraph (A) by striking ``(7)(A)(ii)'' and 
        inserting ``(8)(A)(ii)''; and
            (B) in subparagraph (C) by striking ``(i)(3)(B)(i)'' and 
        inserting ``(i)(3)(B)(i) or (7)(A)(ii)''.
        (7) Section 6103(p)(4) is amended--
            (A) in the matter preceding subparagraph (A)--
                (i) by striking ``or (5),'' the first place it appears 
            and inserting ``(5), or (7),''; and
                (ii) by striking ``(i)(3)(B)(i),'' and inserting 
            ``(i)(3)(B)(i) or (7)(A)(ii),''; and
            (B) in subparagraph (F)(ii) by striking ``or (5),'' the 
        first place it appears and inserting ``(5) or (7),''.
        (8) Section 6103(p)(6)(B)(i) is amended by striking 
    ``(i)(7)(A)(ii)'' and inserting ``(i)(8)(A)(ii)''.
        (9) Section 6105(b) is amended--
            (A) by striking ``or'' at the end of paragraph (2);
            (B) by striking ``paragraphs (1) or (2)'' in paragraph (3) 
        and inserting ``paragraph (1), (2), or (3)'';
            (C) by redesignating paragraph (3) as paragraph (4); and
            (D) by inserting after paragraph (2) the following new 
        paragraph:
        ``(3) to the disclosure of tax convention information on the 
    same terms as return information may be disclosed under paragraph 
    (3)(C) or (7) of section 6103(i), except that in the case of tax 
    convention information provided by a foreign government, no 
    disclosure may be made under this paragraph without the written 
    consent of the foreign government, or''.
        (10) Section 7213(a)(2) is amended by striking 
    ``(i)(3)(B)(i),'' and inserting ``(i)(3)(B)(i) or (7)(A)(ii),''.
    (d) Effective Date.--The amendments made by this section shall 
apply to disclosures made on or after the date of the enactment of this 
Act.

          TITLE III--NO IMPACT ON SOCIAL SECURITY TRUST FUNDS

SEC. 301. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS.

    (a) In General.--Nothing in this Act (or an amendment made by this 
Act) shall be construed to alter or amend title II of the Social 
Security Act (or any regulation promulgated under that Act).
    (b) Transfers.--
        (1) Estimate of secretary.--The Secretary of the Treasury shall 
    annually estimate the impact that the enactment of this Act has on 
    the income and balances of the trust funds established under 
    section 201 of the Social Security Act (42 U.S.C. 401).
        (2) Transfer of funds.--If, under paragraph (1), the Secretary 
    of the Treasury estimates that the enactment of this Act has a 
    negative impact on the income and balances of the trust funds 
    established under section 201 of the Social Security Act (42 U.S.C. 
    401), the Secretary shall transfer, not less frequently than 
    quarterly, from the general revenues of the Federal Government an 
    amount sufficient so as to ensure that the income and balances of 
    such trust funds are not reduced as a result of the enactment of 
    this Act.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.