[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3373 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3373

To amend the Internal Revenue Code of 1986 to provide tax benefits for 
the recovery of the area of New York City damaged in the September 11, 
                        2001, terrorist attacks.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 29, 2001

 Mr. Houghton (for himself, Mr. Rangel, Mr. Fossella, Mr. Gilman, Mr. 
Towns, Mrs. McCarthy of New York, Mr. Quinn, Mr. King, Mrs. Kelly, Mr. 
Sweeney, Mr. Reynolds, Mr. Serrano, Mr. Walsh, Mr. McHugh, Mr. Grucci, 
 Mr. Engel, and Mr. Hinchey) 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 benefits for 
the recovery of the area of New York City damaged in the September 11, 
                        2001, terrorist attacks.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``New York Liberty Zone Tax Relief Act 
of 2001''.

SEC. 2. TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED IN TERRORIST 
              ATTACKS ON SEPTEMBER 11, 2001.

    (a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subchapter:

             ``Subchapter Y--New York Liberty Zone Benefits

                              ``Sec. 1400L. Tax benefits for New York 
                                        Liberty Zone.

``SEC. 1400L. TAX BENEFITS FOR NEW YORK LIBERTY ZONE.

    ``(a) Special Allowance for Certain Property Acquired After 
September 10, 2001.--
            ``(1) Additional allowance.--In the case of any qualified 
        New York Liberty Zone property--
                    ``(A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which such 
                property is placed in service shall include an 
                allowance equal to 30 percent of the adjusted basis of 
                such property, and
                    ``(B) the adjusted basis of the qualified New York 
                Liberty Zone property shall be reduced by the amount of 
                such deduction before computing the amount otherwise 
                allowable as a depreciation deduction under this 
                chapter for such taxable year and any subsequent 
                taxable year.
            ``(2) Qualified new york liberty zone property.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified New York 
                Liberty Zone property' means property--
                            ``(i)(I) to which section 168 applies 
                        (other than railroad grading and tunnel bores), 
                        or
                            ``(II) which is computer software (as 
                        defined in section 167(f)(1)(B)) for which a 
                        deduction is allowable under section 167(a) 
                        without regard to this subsection,
                            ``(ii) substantially all of the use of 
                        which is in the New York Liberty Zone and is in 
                        the active conduct of a trade or business by 
                        the taxpayer in such Zone,
                            ``(iii) the original use of which in the 
                        New York Liberty Zone commences with the 
                        taxpayer after September 10, 2001, and
                            ``(iv) which is acquired by the taxpayer by 
                        purchase (as defined in section 179(d)) after 
                        September 10, 2001, and placed in service by 
                        the taxpayer on or before the termination date, 
                        but only if no written binding contract for the 
                        acquisition was in effect before September 11, 
                        2001.
                The term `termination date' means December 31, 2006 
                (December 31, 2009, in the case of nonresidential real 
                property and residential rental property).
                    ``(B) Exceptions.--
                            ``(i) Alternative depreciation property.--
                        The term `qualified New York Liberty Zone 
                        property' shall not include any property to 
                        which the alternative depreciation system under 
                        section 168(g) applies, determined--
                                    ``(I) without regard to paragraph 
                                (7) of section 168(g) (relating to 
                                election to have system apply), and
                                    ``(II) after application of section 
                                280F(b) (relating to listed property 
                                with limited business use).
                            ``(ii) Election out.--If a taxpayer makes 
                        an election under this clause with respect to 
                        any class of property for any taxable year, 
                        this subsection shall not apply to all property 
                        in such class placed in service during such 
                        taxable year.
                    ``(C) Special rules relating to original use.--
                            ``(i) Self-constructed property.--In the 
                        case of a taxpayer manufacturing, constructing, 
                        or producing property for the taxpayer's own 
                        use, the requirements of clause (iv) of 
                        subparagraph (A) shall be treated as met if the 
                        taxpayer begins manufacturing, constructing, or 
                        producing the property after September 10, 
                        2001, and before the termination date.
                            ``(ii) Sale-leasebacks.--For purposes of 
                        subparagraph (A)(iii), if property--
                                    ``(I) is originally placed in 
                                service after September 10, 2001, by a 
                                person, and
                                    ``(II) sold and leased back by such 
                                person within 3 months after the date 
                                such property was originally placed in 
                                service,
                        such property shall be treated as originally 
                        placed in service not earlier than the date on 
                        which such property is used under the leaseback 
                        referred to in subclause (II).
                    ``(D) Allowance against alternative minimum tax.--
                The deduction allowed by this subsection shall be 
                allowed in determining alternative minimum taxable 
                income for purposes of the tax imposed by section 55.
    ``(b) 5-Year Recovery Period for Depreciation of Certain Leasehold 
Improvements.--
            ``(1) In general.--For purposes of section 168, the term 
        `5-year property' includes any qualified leasehold improvement 
        property.
            ``(2) Qualified leasehold improvement property.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified leasehold 
                improvement property' means any improvement to an 
                interior portion of a building which is nonresidential 
                real property if--
                            ``(i) such building is located in the New 
                        York Liberty Zone,
                            ``(ii) such improvement is made under or 
                        pursuant to a lease (as defined in section 
                        168(h)(7))--
                                    ``(I) by the lessee (or any 
                                sublessee) of such portion, or
                                    ``(II) by the lessor of such 
                                portion,
                            ``(iii) such portion is to be occupied 
                        exclusively by the lessee (or any sublessee) of 
                        such portion,
                            ``(iv) such improvement is placed in 
                        service--
                                    ``(I) after September 10, 2001, and 
                                more than 3 years after the date the 
                                building was first placed in service, 
                                and
                                    ``(II) before January 1, 2007, and
                            ``(v) no written binding contract for such 
                        improvement was in effect before September 11, 
                        2001.
                    ``(B) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                            ``(i) the enlargement of the building,
                            ``(ii) any elevator or escalator,
                            ``(iii) any structural component benefiting 
                        a common area, and
                            ``(iv) the internal structural framework of 
                        the building.
                    ``(C) Definitions and special rules.--For purposes 
                of this paragraph--
                            ``(i) Commitment to lease treated as 
                        lease.--A commitment to enter into a lease 
                        shall be treated as a lease, and the parties to 
                        such commitment shall be treated as lessor and 
                        lessee, respectively.
                            ``(ii) Related persons.--A lease between 
                        related persons shall not be considered a 
                        lease. For purposes of the preceding sentence, 
                        the term `related persons' means--
                                    ``(I) members of an affiliated 
                                group (as defined in section 1504), and
                                    ``(II) persons having a 
                                relationship described in subsection 
                                (b) of section 267; except that, for 
                                purposes of this clause, the phrase `80 
                                percent or more' shall be substituted 
for the phrase `more than 50 percent' each place it appears in such 
subsection.
                    ``(D) Improvements made by lessor.--
                            ``(i) In general.--In the case of an 
                        improvement made by the person who was the 
                        lessor of such improvement when such 
                        improvement was placed in service, such 
                        improvement shall be qualified leasehold 
                        improvement property (if at all) only so long 
                        as such improvement is held by such person.
                            ``(ii) Exception for changes in form of 
                        business.--Property shall not cease to be 
                        qualified leasehold improvement property under 
                        clause (i) by reason of--
                                    ``(I) death,
                                    ``(II) a transaction to which 
                                section 381(a) applies, or
                                    ``(III) a mere change in the form 
                                of conducting the trade or business so 
                                long as the property is retained in 
                                such trade or business as qualified 
                                leasehold improvement property and the 
                                taxpayer retains a substantial interest 
                                in such trade or business.
            ``(3) Requirement to use straight line method.--The 
        applicable depreciation method under section 168 shall be the 
        straight line method in the case of qualified leasehold 
        improvement property.
            ``(4) 9-year recovery period under alternative system.--For 
        purposes of section 168(g), the class life of qualified 
        leasehold improvement property shall be 9 years.
    ``(c) Increase in Expensing Under Section 179.--
            ``(1) In general.--For purposes of section 179--
                    ``(A) the limitation under section 179(b)(1) shall 
                be increased by the lesser of--
                            ``(i) $35,000, or
                            ``(ii) the cost of section 179 property 
                        which is qualified New York Liberty Zone 
                        property placed in service during the taxable 
                        year, and
                    ``(B) the amount taken into account under section 
                179(b)(2) with respect to any section 179 property 
                which is qualified New York Liberty Zone property shall 
                be 50 percent of the cost thereof.
            ``(2) Recapture.--Rules similar to the rules under section 
        179(d)(10) shall apply with respect to any qualified New York 
        Liberty Zone property which ceases to be used in the New York 
        Liberty Zone.
    ``(d) Tax-Exempt Bond Financing.--
            ``(1) In general.--For purposes of this title, any 
        qualified New York Liberty Bond shall be treated as an exempt 
        facility bond.
            ``(2) Qualified new york liberty bond.--For purposes of 
        this subsection, the term `qualified New York Liberty Bond' 
        means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the net proceeds (as 
                defined in section 150(a)(3)) of such issue are to be 
                used for qualified project costs,
                    ``(B) such bond is issued by the State of New York 
                or any political subdivision thereof,
                    ``(C) the Governor of New York designates such bond 
                for purposes of this section, and
                    ``(D) such bond is issued during calendar year 
                2002, 2003, or 2004.
            ``(3) Limitation on amount of bonds designated.--The 
        maximum aggregate face amount of bonds which may be designated 
        under this subsection shall not exceed $15,000,000,000.
            ``(4) Qualified project costs.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified project 
                costs' means the cost of acquisition, construction, 
                reconstruction, and renovation of--
                            ``(i) nonresidential real property and 
                        residential rental property (including fixed 
                        tenant improvements associated with such 
                        property) located in the New York Liberty Zone, 
                        and
                            ``(ii) public utility property located in 
                        the New York Liberty Zone.
                    ``(B) Costs for certain property outside zone 
                included.--Such term includes the cost of acquisition, 
                construction, reconstruction, and renovation of 
                nonresidential real property (including fixed tenant 
                improvements associated with such property) located 
                outside the New York Liberty Zone but within the City 
                of New York, New York, if such property is part of a 
                project which consists of at least 100,000 square feet 
                of usable office or other commercial space located in a 
single building or multiple adjacent buildings.
                    ``(C) Limitations.--Such term shall not include--
                            ``(i) costs for property located outside 
                        the New York Liberty Zone to the extent such 
                        costs exceed $7,000,000,000,
                            ``(ii) costs with respect to residential 
                        rental property to the extent such costs exceed 
                        $3,000,000,000, and
                            ``(iii) costs with respect to property used 
                        for retail sales of tangible property to the 
                        extent such costs exceed $1,500,000,000.
                    ``(D) Movable fixtures and equipment.--Such term 
                shall not include costs with respect to movable 
                fixtures and equipment.
            ``(5) Special rules.--In applying this title to any 
        qualified New York Liberty Bond, the following modifications 
        shall apply:
                    ``(A) Section 146 (relating to volume cap) shall 
                not apply.
                    ``(B) Section 147(c) (relating to limitation on use 
                for land acquisition) shall be determined by reference 
                to the aggregate authorized face amount of all 
                qualified New York Liberty Bonds rather than the net 
                proceeds of each issue.
                    ``(C) Section 147(d) (relating to acquisition of 
                existing property not permitted) shall be applied by 
                substituting `50 percent' for `15 percent' each place 
                it appears.
                    ``(D) Section 148(f)(4)(C) (relating to exception 
                from rebate for certain proceeds to be used to finance 
                construction expenditures) shall apply to construction 
                proceeds of bonds issued under this section.
                    ``(E) Financing provided by such a bond shall not 
                be taken into account under section 168(g)(5)(A) with 
                respect to property substantially all of the use of 
                which is in the New York Liberty Zone and is in the 
                active conduct of a trade or business by the taxpayer 
                in such Zone.
                    ``(F) Repayments of principal on financing provided 
                by the issue--
                            ``(i) may not be used to provide financing, 
                        and
                            ``(ii) are used not later than the close of 
                        the 1st semiannual period beginning after the 
                        date of the repayment to redeem bonds which are 
                        part of such issue.
                The requirement of clause (ii) shall be treated as met 
                with respect to amounts received within 10 years after 
                the date of issuance of the issue (or, in the case of 
                refunding bond, the date of issuance of the original 
                bond) if such amounts are used by the close of such 10 
                years to redeem bonds which are part of such issue.
                    ``(G) Section 57(a)(5) shall not apply.
            ``(6) Separate issue treatment of portions of an issue.--
        This subsection shall not apply to the portion of the proceeds 
        of an issue which (if issued as a separate issue) would be 
        treated as a qualified bond or as a bond that is not a private 
        activity bond (determined without regard to subsection (a)), if 
        the issuer elects to so treat such portion.
    ``(e) Extension of Replacement Period for Nonrecognition of Gain.--
Notwithstanding subsections (g) and (h) of section 1033, clause (i) of 
section 1033(a)(2)(B) shall be applied by substituting `5 years' for `2 
years' with respect to property which is compulsorily or involuntarily 
converted as a result of the terrorist attacks on September 11, 2001, 
in the New York Liberty Zone but only if substantially all of the use 
of the replacement property is in the City of New York, New York.
    ``(f) New York Liberty Zone.--For purposes of this section, the 
term `New York Liberty Zone' means the area located on or south of 
Canal Street, East Broadway (east of its intersection with Canal 
Street), or Grand Street (east of its intersection with East Broadway) 
in the Borough of Manhattan in the City of New York, New York.''
    (b) Clerical Amendment.--The table of subchapters for chapter 1 of 
such Code is amended by adding at the end the following new item:

                              ``Subchapter Y. New York Liberty Zone 
                                        Benefits.''
                                 <all>