[Congressional Record Volume 147, Number 70 (Monday, May 21, 2001)]
[Senate]
[Pages S5280-S5399]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 689. Mr. KENNEDY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the appropriate place, insert:

     SEC. __. EXTENSION OF APPLICATION OF JOINT AND SURVIVOR 
                   ANNUITY RULES.

       (a) Application to All Defined Contribution Plans.--
       (1) Amendments to erisa.--
       (A) In general.--Section 205(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1055(a)) is amended by 
     striking ``to which this section applies''.
       (B) Conforming amendments.--
       (i) Section 205(b) of such Act (29 U.S.C. 1055(b)) is 
     amended to read as follows:
       ``(b)(1)(A) In the case of--
       ``(i) a tax credit employee stock ownership plan (as 
     defined in section 409(a) of the Internal Revenue Code of 
     1986), or
       ``(ii) an employee stock ownership plan (as defined in 
     section 4975(e)(7) of such Code),
     subsection (a) shall not apply to that portion of the 
     employee's accrued benefit to which the requirements of 
     section 409(h) of such Code apply.
       ``(B) Subparagraph (A) shall not apply with respect to any 
     participant unless--
       ``(i) such plan provides that the participant's 
     nonforfeitable accrued benefit (reduced by any security 
     interest held by the plan by reason of a loan outstanding to 
     such participant) is payable in full, on the death of the 
     participant, to the participant's surviving spouse (or, if 
     there is no surviving spouse or the surviving spouse consents 
     in the manner required under subsection (c)(2), to a 
     designated beneficiary),
       ``(ii) such participant does not elect the payment of 
     benefits in the form of a life annuity, and
       ``(iii) with respect to such participant, such plan is not 
     a direct or indirect transferee (in a transfer after December 
     31, 1984) of a plan to which, at the time of the transfer, 
     subsection (a) applied (or to which this clause applied with 
     respect to the participant).

     Clause (iii) shall apply only with respect to the transferred 
     assets (and income therefrom) if the plan separately accounts 
     for such assets and any income therefrom. A plan shall not be 
     treated as failing to meet the requirements of this 
     subparagraph merely because the plan provides that benefits 
     will not be payable to the surviving spouse of the 
     participant unless the participant and such spouse had been 
     married throughout the 1-year period ending on the earlier of 
     the participant's annuity starting date or the date of the 
     participant's death.
       ``(2) This section shall not apply to a plan which the 
     Secretary of the Treasury or his delegate has determined is a 
     plan described in section 404(c) of the Internal Revenue Code 
     of 1986 (or a continuation thereof) in which participation is 
     substantially limited to individuals who, before January 1, 
     1976, ceased employment covered by the plan.''
       (ii) Section 205(e)(2) of such Act (20 U.S.C. 1055(e)(2)) 
     is amended by striking ``individual account plan or 
     participant described in subparagraph (B) or (C) of 
     subsection (b)(1)'' and inserting ``individual account plan 
     to which this section applies, or any participant described 
     in subsection (b)(1)(B)''.
       (2) Amendments to internal revenue code.--
       (A) In general.--Section 401(a)(11)(A) of the Internal 
     Revenue Code of 1986 (relating to requirement of joint and 
     survivor annuity and preretirement survivor annuity) is 
     amended by striking the matter preceding clause (i) and 
     inserting:
       ``(A) In general.--Except as provided in section 417 and 
     subparagraph (B), a trust forming part of a plan shall not 
     constitute a qualified trust under this section unless such 
     plan provides--''.
       (B) Conforming amendments.--

[[Page S5281]]

       (i) Section 401(a)(11) of such Code is amended by striking 
     subparagraphs (B), (C), and (D) and inserting the following 
     new subparagraphs:
       ``(B) Exception for certain esop benefits.--
       ``(i) In general.--In the case of--

       ``(I) a tax credit employee stock ownership plan (as 
     defined in section 409(a)), or
       ``(II) an employee stock ownership plan (as defined in 
     section 4975(e)(7)),

     subparagraph (A) shall not apply to that portion of the 
     employee's accrued benefit to which the requirements of 
     section 409(h) apply.
       ``(ii) Nonforfeitable benefit must be paid in full, etc.--
     In the case of any participant, clause (i) shall not apply 
     unless--

       ``(I) such plan provides that the participant's 
     nonforfeitable accrued benefit (reduced by any security 
     interest held by the plan by reason of a loan outstanding to 
     such participant) is payable in full, on the death of the 
     participant, to the participant's surviving spouse (or, if 
     there is no surviving spouse or the surviving spouse consents 
     in the manner required under section 417(a)(2), to a 
     designated beneficiary),
       ``(II) such participant does not elect the payment of 
     benefits in the form of a life annuity, and
       ``(III) with respect to such participant, such plan is not 
     a direct or indirect transferee (in a transfer after December 
     31, 1984) of a plan to which, at the time of the transfer, 
     subparagraph (A) applied (or to which this subclause applied 
     with respect to the participant).

     Subclause (III) shall apply only with respect to the 
     transferred assets (and income therefrom) if the plan 
     separately accounts for such assets and any income therefrom.
       ``(C) Special rule where participant and spouse married 
     less than 1 year.--A plan shall not be treated as failing to 
     meet the requirements of subparagraph (B)(ii) merely because 
     the plan provides that benefits will not be payable to the 
     surviving spouse of the participant unless the participant 
     and such spouse had been married throughout the 1-year period 
     ending on the earlier of the participant's annuity starting 
     date or the date of the participant's death.''
       (ii) Section 401(a)(11) of such Code is amended by 
     redesignating subparagraphs (E) and (F) as subparagraphs (D) 
     and (E), respectively.
       (iii) Section 417(c)(2) of such Code is amended by striking 
     ``defined contribution plan or participant described in 
     clause (ii) or (iii) of section 401(a)(11)(B)'' and inserting 
     ``defined contribution plan to which section 401(a)(11) 
     applies, or any participant described in section 
     401(a)(11)(B)(ii),''.
       (b) Special Rules Relating to Defined Contribution Plans.--
       (1) Amendments to erisa.--
       (A) Payments in lieu of annuity.--Section 205 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1055) is amended by redesignating subsection (l) as 
     subsection (m) and by inserting after subsection (k) the 
     following new subsection:
       ``(l)(1) For purposes of this section, a defined 
     contribution plan shall be treated as providing--
       ``(A) a qualified joint and survivor annuity if the plan 
     provides that the account balance of the participant to which 
     the participant had a nonforfeitable right (within the 
     meaning of section 203) will be distributed in a series of 
     periodic payments (determined in accordance with tables 
     prescribed by the Secretary of the Treasury) over the joint 
     lives of the participant and the participant's spouse, and
       ``(B) a qualified preretirement survivor annuity if the 
     plan provides that the account balance of the participant (as 
     of the date of death) to which the participant had a 
     nonforfeitable right (as so defined) will be distributed to 
     the surviving spouse, at the option of the spouse, in either 
     such a series of periodic payments over the life of the 
     surviving spouse or in a lump sum if the plan provides for 
     lump sums.

     A plan shall not be treated as failing to meet the 
     requirements of subparagraph (A) if the plan provides that a 
     participant may, with the consent of the spouse, elect at any 
     time to have the plan pay all of the remaining portion of the 
     account balance in a lump sum.
       ``(2) In the case of a termination of a defined 
     contribution plan which is providing payments described in 
     paragraph (1), such plan shall be treated as meeting the 
     requirements of paragraph (1) if the plan--
       ``(A) purchases an irrevocable commitment from an insurer 
     in accordance with section 4041(b)(3)(A)(i) for each 
     participant or surviving spouse eligible to receive such 
     payments, or
       ``(B) in accordance with regulations to be prescribed by 
     the corporation, transfers to the corporation each 
     participant's or spouse's right to receive such payments, for 
     treatment and payment by the corporation to the participant 
     or spouse in a manner similar to the manner in which payments 
     are treated and made under section 4050.''
       (B) Restrictions on cash-outs.--Section 205(g) of such Act 
     (29 U.S.C. 1055(g)) is amended by adding at the end the 
     following:
       ``(4) In the case of a defined contribution plan, the plan 
     shall pay one-half of any distribution under paragraph (1) to 
     the participant and one-half to the participant's spouse 
     unless the spouse consents in writing to have the entire 
     distribution paid to the participant.''
       (2) Amendments to internal revenue code.--
       (A) Payments in lieu of annuity.--Section 417 of the 
     Internal Revenue Code of 1986 (relating to definitions and 
     special rules for purposes of survivor minimum annuity 
     requirements) is amended by adding at the end the following 
     new subsection:
       ``(g) Special Rules for Defined Contribution Plans.--For 
     purposes of this section--
       ``(1) Payments in lieu of annuities.--A defined 
     contribution plan shall be treated as providing--
       ``(A) a qualified joint and survivor annuity if the plan 
     provides that the account balance of the participant to which 
     the participant had a nonforfeitable right (within the 
     meaning of section 411(a)) will be distributed in a series of 
     periodic payments (determined in accordance with tables 
     prescribed by the Secretary) over the joint lives of the 
     participant and the participant's spouse, and
       ``(B) a qualified preretirement survivor annuity if the 
     plan provides that the account balance of the participant (as 
     of the date of death) to which the participant had a 
     nonforfeitable right (as so defined) will be distributed to 
     the surviving spouse, at the option of the spouse, in either 
     such a series of periodic payments over the life of the 
     surviving spouse or in a lump sum if the plan provides for 
     lump sums.

     A plan shall not be treated as failing to meet the 
     requirements of subparagraph (A) if the plan provides that a 
     participant may, with the consent of the spouse, elect at any 
     time to have the plan pay all of the remaining portion of the 
     account balance in a lump sum.
       ``(2) Plan termination.--In the case of a termination of a 
     defined contribution plan which is providing payments 
     described in paragraph (1), such plan shall be treated as 
     meeting the requirements of paragraph (1) if the plan--
       ``(A) purchases an irrevocable commitment from an insurer 
     in accordance with section 4041(b)(3)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 for each participant 
     or surviving spouse eligible to receive such payments, or
       ``(B) in accordance with regulations to be prescribed by 
     the Pension Benefit Guaranty Corporation, transfers to the 
     Corporation each participant's or spouse's right to receive 
     such payments, for treatment and payment by the Corporation 
     to the participant or spouse in a manner similar to the 
     manner in which payments are treated and made under section 
     4050 of such Act.''
       (B) Restrictions on cash-outs.--Section 417(e) of such Code 
     (relating to restrictions on cash-outs) is amended by adding 
     at the end the following:
       ``(4) Special rule for defined contribution plans.--In the 
     case of a defined contribution plan, the plan shall pay one-
     half of any distribution under paragraph (1) to the 
     participant and one-half to the participant's spouse unless 
     the spouse consents in writing to have the entire 
     distribution paid to the participant.''
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan years 
     beginning after December 31, 2001.
       (2) Special rule for collectively bargained plans.--In the 
     case of a plan maintained pursuant to 1 or more collective 
     bargaining agreements between employee representatives and 1 
     or more employers ratified on or before the date of enactment 
     of this Act, the amendments made by this section shall not, 
     in the case of employees covered by any such agreement, apply 
     to plan years beginning before the earlier of--
       (A) the later of--
       (i) January 1, 2002, or
       (ii) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof after the date of enactment of this 
     Act), or
       (B) January 1, 2003.
                                  ____

  SA 690. Mr. KENNEDY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the appropriate place, insert:

     SEC.   . QUALIFIED JOINT AND 75 PERCENT SURVIVOR ANNUITY.

       (a) Amendments to ERISA.--
       (1) Amount of annuity.--Paragraph (1) of section 205(a) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1055(a)) is amended by inserting ``or, at the election 
     of the participant, shall be provided in the form of a 
     qualified joint and 75 percent survivor annuity'' after 
     ``survivor annuity,''.
       (2) Definition.--Subsection (d) of section 205 of such Act 
     (29 U.S.C. 1055) is amended--
       (A) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively,
       (B) by inserting ``(1)'' after ``(d)'', and
       (C) by adding at the end the following new paragraph:
       ``(2) For purposes of this section, the term `qualified 
     joint and 75 percent survivor annuity' means an annuity for 
     the life of the participant with a survivor annuity for the 
     life of the spouse which is not less than 75 percent of (and 
     is not greater than 100 percent of) the amount of the annuity 
     which is payable during the joint lives of the participant 
     and the spouse.''
       (b) Amendments to Internal Revenue Code.--

[[Page S5282]]

       (1) Amount of annuity.--Clause (i) of section 401(a)(11)(A) 
     (relating to requirement of joint and survivor annuity and 
     preretirement survivor annuity) is amended by inserting ``or, 
     at the election of the participant, shall be provided in the 
     form of a qualified joint and 75 percent survivor annuity'' 
     after ``survivor annuity,''.
       (2) Definition.--Section 417(f) (relating to definitions 
     and special rules) is amended by adding at the end the 
     following new paragraph:
       ``(8) Definition of qualified joint and seventy five 
     percent survivor annuity.--The term `qualified joint and 75 
     percent survivor annuity' means an annuity for the life of 
     the participant with a survivor annuity for the life of the 
     spouse which is not less than 75 percent of (and is not 
     greater than 100 percent of) the amount of the annuity which 
     is payable during the joint lives of the participant and the 
     spouse.''
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to plan 
     years beginning after December 31, 2001.
       (2) Application to current employees.--The amendments made 
     by this section shall not apply to any employee who does not 
     have at least 1 hour of service in any plan year beginning 
     after December 31, 2001.
       (3) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to 1 or more collective bargaining 
     agreements between employee representatives and 1 or more 
     employers ratified on or before the date of the enactment of 
     this Act, the amendments made by this section shall not, in 
     the case of employees covered by any such agreement, apply to 
     plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of enactment), 
     or
       (ii) January 1, 2002, or
       (B) January 1, 2003.
                                  ____

  SA 691. Mr. KYL submitted an amendment intended to be proposed by him 
to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; as follows:

       At the end of subtitle D of title IV, add the following:

     SEC. __. CREDIT FOR CONTRIBUTIONS TO CHARITABLE ORGANIZATIONS 
                   WHICH PROVIDE SCHOLARSHIPS FOR STUDENTS 
                   ATTENDING ELEMENTARY AND SECONDARY SCHOOLS.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 30B. CREDIT FOR CONTRIBUTIONS TO CHARITABLE 
                   ORGANIZATIONS WHICH PROVIDE SCHOLARSHIPS FOR 
                   STUDENTS ATTENDING ELEMENTARY AND SECONDARY 
                   SCHOOLS.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the qualified charitable 
     contributions of the taxpayer for the taxable year.
       ``(b) Maximum Credit.--The credit allowed by subsection (a) 
     for any taxable year shall not exceed $250 ($500, in the case 
     of a joint return).
       ``(c) Qualified Charitable Contribution.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified charitable 
     contribution' means, with respect to any taxable year, the 
     amount allowable as a deduction under section 170 (determined 
     without regard to subsection (d)(1)) for cash contributions 
     to a school tuition organization.
       ``(2) School tuition organization.--
       ``(A) In general.--The term `school tuition organization' 
     means any organization described in section 170(c)(2) if the 
     annual disbursements of the organization for elementary and 
     secondary school scholarships are normally not less than 90 
     percent of the sum of such organization's annual gross income 
     and contributions and gifts.
       ``(B) Elementary and secondary school scholarship.--The 
     term `elementary and secondary school scholarship' means any 
     scholarship excludable from gross income under section 117 
     for expenses related to education at or below the 12th grade.
       ``(d) Special Rules.--
       ``(1) Denial of double benefit.--No deduction shall be 
     allowed under this chapter for any contribution for which 
     credit is allowed under this section.
       ``(2) Application with other credits.--The credit allowable 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(A) the regular tax for the taxable year, reduced by the 
     sum of the credits allowable under subpart A and the 
     preceding sections of this subpart, over
       ``(B) the tentative minimum tax for the taxable year.
       ``(3) Controlled groups.--All persons who are treated as 
     one employer under subsection (a) or (b) of section 52 shall 
     be treated as 1 taxpayer for purposes of this section.
       ``(e) Election To Have Credit Not Apply.--A taxpayer may 
     elect to have this section not apply for any taxable year.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     B of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following new item:

``Sec. 30B. Credit for contributions to charitable organizations which 
              provide scholarships for students attending elementary 
              and secondary schools.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.
                                  ____

  SA 692. Mr. WELLSTONE proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       Mr. Wellstone moves to commit the bill H.R. 1836, as 
     amended, to the Committee on Finance with instructions to 
     report the same back to the Senate not later than that date 
     that is 3 days after the date on which this motion is adopted 
     with the following amendments:

       (1) Establish a reserve account for purposes of providing 
     funds for Federal education programs.
       (2) Strike the reductions to the highest rate of tax under 
     section 1 of the Internal Revenue Code of 1986 contained in 
     section 101.
       (3) Provide for the deposit in the reserve account 
     described in paragraph (1) in each of fiscal years 2002 
     through 2011 of an amount equal to the amount that would 
     result from striking the reductions described in paragraph 
     (2) (as determined by the Joint Committee on Taxation).
       (4) Make available amounts in the reserve account described 
     in paragraph (1) in each of fiscal years 2002 through 2011 
     for purposes of funding Federal education programs, which 
     amounts shall be in addition to any other amounts available 
     for funding such programs during each such fiscal year.
                                  ____

  SA 693. Mr. LIEBERMAN (for himself and Mr. Daschle) submitted an 
amendment intended to be proposed by him to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 7, line 15, insert ``(12.5 percent in taxable years 
     beginning in 2001)'' after ``percent''.

       On page 13, between lines 15 and 16, insert the following:

     SEC. __. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT TAXES.

       (a) Refund.--
       (1) In general.--Subchapter B of chapter 65 (relating to 
     rules of special application in the case of abatements, 
     credits, and refunds) is amended by adding at the end the 
     following new section:

     ``SEC. 6428. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT 
                   TAXES.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, each individual shall be treated as having made a 
     payment against the tax imposed by chapter 1 for any taxable 
     year beginning in 2001, in an amount equal to the lesser of--
       ``(1) the amount of the taxpayer's liability for tax for 
     the taxpayer's last taxable year beginning in calendar year 
     2000, or
       ``(2) the taxpayer's applicable amount.
       ``(b) Liability for Tax.--For purposes of this section, the 
     liability for tax for the taxable year shall be the sum of--
       ``(1) the excess (if any) of--
       ``(A) the sum of--
       ``(i) the taxpayer's regular tax liability (within the 
     meaning of section 26(b)) for the taxable year, and
       ``(ii) the tax imposed by section 55(a) with respect to 
     such taxpayer for the taxable year, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A of chapter 1 (other than sections 31, 33, and 
     34) for the taxable year, and
       ``(2) the taxes imposed by sections 1401, 3101, 3111, 
     3201(a), 3211(a)(1), and 3221(a) on amounts received by the 
     taxpayer for the taxable year.
       ``(c) Applicable Amount.--For purposes of this section--
       ``(1) In general.--The applicable amount for any taxpayer 
     shall be determined under the following table:

``In the case of a taxpayer described in:     The applicable amount is:
  Section 1(a)................................................$600 ....

  Section 1(b)................................................$450 ....

  Section 1(c)................................................$300 ....

  Section 1(d)................................................$300 ....

  Paragraph (2)...............................................$300.....

       ``(2) Taxpayers with only payroll tax liability.--A 
     taxpayer is described in this paragraph if such taxpayer's 
     liability for tax for the taxable year does not include any 
     liability described in subsection (b)(1).
       ``(d) Date Payment Deemed Made.--
       ``(1) In general.--The payment provided by this section 
     shall be deemed made on the date of the enactment of this 
     section.
       ``(2) Remittance of payment.--The Secretary shall remit to 
     each taxpayer the payment described in paragraph (1) within 
     90 days after such date of enactment.
       ``(3) Claim for nonpayment.--Any taxpayer who erroneously 
     does not receive a payment described in paragraph (1) may 
     make claim for such payment in a manner and at such time as 
     the Secretary prescribes.
       ``(e) Certain Persons Not Eligible.--This section shall not 
     apply to--

[[Page S5283]]

       ``(1) any individual with respect to whom a deduction under 
     section 151 is allowable to another taxpayer for a taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins,
       ``(2) any estate or trust, or
       ``(3) any nonresident alien individual.''.
       (2) Determination of withholding tables.--Section 3402(a) 
     (relating to requirement of withholding) is amended by adding 
     at the following new paragraph:
       ``(3) Changes made by restoring earnings to lift 
     individuals and empower families (relief) act of 2001.--
     Notwithstanding the provisions of this subsection, the 
     Secretary shall modify the tables and procedures under 
     paragraph (1) to reflect the amendments made by section 101 
     of the Restoring Earnings To Lift Individuals and Empower 
     Families (RELIEF) Act of 2001 with respect to the 10-percent 
     rate bracket, and such modification shall take effect on July 
     1, 2001, as if the lowest rate of tax under section 1 (as 
     amended by such section 101) was the 10-percent rate 
     effective on such date.''.
       (3) Conforming Amendments.--
       (A) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting before the period ``, or enacted by the 
     Restoring Earnings To Lift Individuals and Empower Families 
     (RELIEF) Act of 2001''.
       (B) The table of sections for subchapter B of chapter 65 is 
     amended by adding at the end the following new item:

``Sec. 6428. Refund of individual income and employment taxes.''.
       (4) Effective Dates.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall take effect on 
     the date of the enactment of this Act.
       (B) Amendments to withholding provision.--The amendments 
     made by paragraph (2) shall apply to amounts paid after June 
     30, 2001.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reduction in the highest marginal tax rate in the 
     table contained in section 1(i)(2) of the Internal Revenue 
     Code of 1986, as added by section 101(a), as necessary to 
     offset the decrease in revenues to the Treasury for each 
     fiscal year resulting from the amendments made by subsection 
     (a).
                                  ____

  SA 694. Mr. REID (for himself and Mrs. Clinton) submitted an 
amendment intended to be proposed by him to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE AND WASTE PRODUCTS.

       (a) Increase in Credit Rate.--
       (1) In general.--Section 45(a)(1) is amended by striking 
     ``1.5 cents'' and inserting ``1.8 cents''.
       (2) Conforming amendments.--
       (A) Section 45(b)(2) is amended by striking ``1.5 cent'' 
     and inserting ``1.8 cent''.
       (B) Section 45(d)(2)(B) is amended by inserting ``(calendar 
     year 2001 in the case of the 1.8 cent amount in subsection 
     (a))'' after ``1992''.
       (b) Expansion of Qualified Resources.--
       (1) In general.--Section 45(c)(1) (relating to qualified 
     energy resources) is amended by striking ``and'' at the end 
     of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following:
       ``(D) alternative resources.''.
       (2) Definition of alternative resources.--Section 45(c) 
     (relating to definitions) is amended--
       (A) by redesignating paragraph (3) as paragraph (5),
       (B) by redesignating paragraph (4) as paragraph (3), and
       (C) by inserting after paragraph (3), as redesignated by 
     subparagraph (B), the following:
       ``(4) Alternative Resources.--
       ``(A) In general.--The term `alternative resources' means--
       ``(i) solar,
       ``(ii) biomass (other than closed loop biomass),
       ``(iii) municipal solid waste,
       ``(iv) incremental hydropower,
       ``(v) geothermal,
       ``(vi) landfill gas, and
       ``(vii) steel cogeneration.
       ``(B) Biomass.--The term `biomass' means any solid, 
     nonhazardous, cellulosic waste material or any organic 
     carbohydrate matter, which is segregated from other waste 
     materials, and which is derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) waste pallets, crates, dunnage, untreated wood waste 
     from construction or manufacturing activities, and landscape 
     or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste or post-consumer 
     wastepaper, or
       ``(iii) any of the following agriculture sources: orchard 
     tree crops, vineyard, grain, legumes, sugar, and other crop 
     by-products or residues, including any packaging and other 
     materials which are nontoxic and biodegradable and are 
     associated with the processing, feeding, selling, 
     transporting, and disposal of such agricultural materials.
       ``(C) Municipal solid waste.--The term `municipal solid 
     waste' has the same meaning given the term `solid waste' 
     under section 2(27) of the Solid Waste Utilization Act (42 
     U.S.C. 6903).
       ``(D) Incremental hydropower.--The term `incremental 
     hydropower' means additional generating capacity achieved 
     from--
       ``(i) increased efficiency, or
       ``(ii) additions of new capacity,
     at a licensed non-Federal hydroelectric project originally 
     placed in service before the date of the enactment of this 
     paragraph.
       ``(E) Geothermal.--The term `geothermal' means energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(F) Landfill gas.--The term `landfill gas' means gas 
     generated from the decomposition of any household solid 
     waste, commercial solid waste, and industrial solid waste 
     disposed of in a municipal solid waste landfill unit (as such 
     terms are defined in regulations promulgated under subtitle D 
     of the Solid Waste Disposal Act (42 U.S.C. 6941 et seq.).
       ``(G) Steel cogeneration.--The term `steel cogeneration' 
     means the production of electricity and steam (or other form 
     of thermal energy) from any or all waste sources defined in 
     paragraphs (2) and (3) and subparagraphs (B) and (C) of this 
     paragraph within an operating facility which produces or 
     integrates the production of coke, direct reduced iron ore,  
     iron, or steel provided that the cogeneration meets any 
     regulatory energy-efficiency standards established by the 
     Secretary, and only to the extent that such energy is 
     produced from--
       ``(i) gases or heat generated from the production of 
     metallurgical coke,
       ``(ii) gases or heat generated from the production of 
     direct reduced iron ore or iron, from blast furnace or direct 
     ironmaking processes, or
       ``(iii) gases or heat generated from the manufacture of 
     steel.''.
       (3) Qualified facility.--Section 45(c)(5) (defining 
     qualified facility), as redesignated by paragraph 2(A), is 
     amended by adding at the end the following:
       ``(D) Alternative resources facility.--
       ``(i) In general.--Except as provided in clauses (ii), 
     (iii), and (iv), in the case of a facility using alternative 
     resources to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this subparagraph.
       ``(ii) Biomass facility.--In the case of a facility using 
     biomass described in paragraph (4)(A)(ii) to produce 
     electricity, the term `qualified facility' means any facility 
     of the taxpayer.
       ``(iii) Geothermal facility.--In the case of a facility 
     using geothermal to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after December 31, 1992.
       ``(iv) Steel cogeneration facilities.--In the case of a 
     facility using steel cogeneration to produce electricity, the 
     term `qualified facility' means any facility permitted to 
     operate under the environmental requirements of the Clean Air 
     Act Amendments of 1990 which is owned by the taxpayer and 
     originally placed in service after the date of the enactment 
     of this subparagraph. Such a facility may be treated as 
     originally placed in service when such facility was last 
     upgraded to increase efficiency or generation capability 
     after such date.
       ``(v) Special rules.--In the case of a qualified facility 
     described in this subparagraph, the 10-year period referred 
     to in subsection (a) shall be treated as beginning no earlier 
     than the date of the enactment of this subparagraph.''.
       (4) Government-owned facility.--Section 45(d)(6) (relating 
     to credit eligibility in the case of government-owned 
     facilities using poultry waste) is amended--
       (A) by inserting ``or alternative resources'' after 
     ``poultry waste'', and
       (B) by inserting ``or alternative resources'' after 
     ``poultry waste'' in the heading thereof.
       (5) Qualified facilities with co-production.--Section 45(b) 
     (relating to limitations and adjustments) is amended by 
     adding at the end the following:
       ``(4) Increased credit for co-production facilities.--
       ``(A) In general.--In the case of a qualified facility 
     described in subsection (c)(3)(D)(i)  which has a co-
     production facility or a qualified facility described in 
     subparagraph (A), (B), or (C) of subsection (c)(3) which 
     adds a co-production facility after the date of the 
     enactment of this paragraph, the amount in effect under 
     subsection (a)(1) for an eligible taxable year of a 
     taxpayer shall (after adjustment under paragraph (2) and 
     before adjustment under paragraphs (1) and (3)) be 
     increased by .25 cents.
       ``(B) Co-production facility.--For purposes of subparagraph 
     (A), the term `co-production facility' means a facility 
     which--
       ``(i) enables a qualified facility to produce heat, 
     mechanical power, chemicals, liquid fuels, or minerals from 
     qualified energy resources in addition to electricity, and
       ``(ii) produces such energy on a continuous basis.
       ``(C) Eligible taxable year.--For purposes of subparagraph 
     (A), the term `eligible

[[Page S5284]]

     taxable year' means any taxable year in which the amount of 
     gross receipts attributable to the co-production facility of 
     a qualified facility are at least 10 percent of the amount of 
     gross receipts attributable to electricity produced by such 
     facility.''.
       (6) Qualified facilities located within qualified indian 
     lands.--Section 45(b) (relating to limitations and 
     adjustments), as amended by paragraph (5), is amended by 
     adding at the end the following:
       ``(5) Increased credit for qualified facility located 
     within qualified indian land.--In the case of a qualified 
     facility described in subsection (c)(3)(D) which--
       ``(A) is located within--
       ``(i) qualified Indian lands (as defined in section 
     7871(c)(3)), or
       ``(ii) lands which are held in trust by a Native 
     Corporation (as defined in section 3(m) of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1602(m)) for Alaska Natives, 
     and
       ``(B) is operated with the explicit written approval of the 
     Indian tribal government or Native Corporation (as so 
     defined) having jurisdiction over such lands,
     the amount in effect under subsection (a)(1) for a taxable 
     year shall (after adjustment under paragraphs (2) and (4) and 
     before adjustment under paragraphs (1) and (3)) be increased 
     by .25 cents.''.
       (7) Electricity produced from certain resources co-fired in 
     coal plants.--Section 45(d) (relating to definitions and 
     special rules) is amended by adding at the end the following:
       ``(8) Special rule for electricity produced from certain 
     resources co-fired in coal plants.--In the case of 
     electricity produced from biomass (including closed loop 
     biomass), municipal solid waste, or animal waste, co-fired in 
     a facility which produces electricity from coal--
       ``(A) subsection (a)(1) shall be applied by substituting `1 
     cent' for `1.8 cents',
       ``(B) such facility shall be considered a qualified 
     facility for purposes of this section, and
       ``(C) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph.''.
       (8) Conforming amendments.--
       (A) The heading for section 45 is amended by inserting 
     ``AND WASTE ENERGY'' after ``RENEWABLE''.
       (B) The item relating to section 45 in the table of 
     sections subpart D of part IV of subchapter A of chapter 1 is 
     amended by inserting ``and waste energy'' after 
     ``renewable''.
       (c) Additional Modifications of Renewable and Waste Energy 
     Resource Credit.--
       (1) Credits for certain tax exempt organizations and 
     governmental units.--Section 45(d) (relating to definitions 
     and special rules), as amended by subsection (b)(7), is 
     amended by adding at the end the following:
       ``(9) Credits for certain tax exempt organizations and 
     governmental units.--
       ``(A) Allowance of credit.--Any credit which would be 
     allowable under subsection (a) with respect to a qualified 
     facility of an entity if such entity were not exempt from tax 
     under this chapter shall be treated as a credit allowable 
     under subpart C to such entity if such entity is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C), 
     or
       ``(iii) an entity the income of which is excludable from 
     gross income under section 115.
       ``(B) Use of credit.--
       ``(i) Transfer of credit.--An entity described in 
     subparagraph (A) may assign, trade, sell, or otherwise 
     transfer any credit allowable to such entity under 
     subparagraph (A) to any taxpayer.
       ``(ii) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of an entity described in 
     clause (i) or (ii) of subparagraph (A), any credit allowable 
     to such entity under subparagraph (A) may be applied by such 
     entity, without penalty, as a prepayment of any loan, debt, 
     or other obligation the entity has incurred under subchapter 
     I of chapter 31 of title 7 of the Rural Electrification Act 
     of 1936 (7 U.S.C. 901 et seq.).
       ``(C) Credit not income.--Neither a transfer under clause 
     (i) or a use under clause (ii) of subparagraph (B) of any 
     credit allowable  under subparagraph (A) shall result in 
     income for purposes of section 501(c)(12).
       ``(D) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by an entity 
     described in subparagraph (A)(iii) from the transfer of any 
     credit under subparagraph (B)(i) shall be treated as arising 
     from an essential government function.
       ``(E) Credits not reduced by tax-exempt bonds or certain 
     other subsidies.--Subsection (b)(3) shall not apply to reduce 
     any credit allowable under subparagraph (A) with respect to--
       ``(i) proceeds described in subparagraph (A)(ii) of such 
     subsection, or
       ``(ii) any loan, debt, or other obligation incurred under 
     subchapter I of chapter 31 of title 7 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.),
     used to provide financing for any qualified facility.
       ``(F) Treatment of unrelated persons.--For purposes of this 
     paragraph, sales among and between entities described in 
     subparagraph (A) shall be treated as sales between unrelated 
     parties.''.
       (2) Coordination with other credits.--Section 45(d), as 
     amended by paragraph (1), is amended by adding at the end the 
     following:
       ``(10) Coordination with other credits.--This section shall 
     not apply to any qualified facility with respect to which a 
     credit under any other section is allowed for the taxable 
     year unless the taxpayer elects to waive the application of 
     such credit to such facility.''.
       (3) Expansion to include animal waste.--Section 45 
     (relating to electricity produced from certain renewable 
     resources), as amended by paragraphs (2) and (4) of 
     subsection (b), is amended--
       (A) by striking ``poultry'' each place it appears in 
     subsection (c)(1)(C) and subsection (d)(6) and inserting 
     ``animal'',
       (B) by striking ``poultry'' in the heading of paragraph (6) 
     of subsection (d) and inserting ``animal'',
       (C) by striking paragraph (3) of subsection (c) and 
     inserting the following:
       ``(3) Animal waste.--The term `animal waste' means poultry 
     manure and litter and other animal wastes, including--
       ``(A) wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure, and
       ``(B) byproducts, packaging, and other materials which are 
     nontoxic and biodegradable and are associated with the 
     processing, feeding, selling, transporting, and disposal of 
     such animal wastes.'', and
       (D) by striking subparagraph (C) of subsection (c)(5) and 
     inserting the following:
       ``(C) Animal waste facility.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of a facility using animal waste (other than 
     poultry) to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this clause.
       ``(ii) Poultry waste.--In the case of a facility using 
     animal waste relating to poultry to produce electricity, the 
     term `qualified facility' means any facility of the taxpayer 
     which is originally placed in service after December 31, 
     1999.''.
       (4) Treatment of qualified facilities not in compliance 
     with pollution laws.--Section 45(c)(5) (relating to qualified 
     facilities), as amended by paragraphs (2) and (3) of 
     subsection (b), is amended by adding at the end the 
     following:
       ``(E) Noncompliance with pollution laws.--For purposes of 
     this paragraph, a facility which is not in compliance with 
     the applicable State and Federal pollution prevention, 
     control, and permit requirements for any period of time shall 
     not be considered to be a qualified facility during such 
     period.''.
       (5) Permanent extension of qualified facility dates.--
     Section 45(c)(5) (relating to qualified facility), as 
     redesignated by subsection (b)(2), is amended by striking ``, 
     and before January 1, 2002'' in subparagraphs (A) and (B).
       (d) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year beginning before October 1, 2011, the decrease in 
     revenues to the Treasury for that fiscal year resulting from 
     the amendments made by this section.
       (e) Effective Date.--The amendments made by this section 
     shall apply to electricity and other energy produced after 
     the date of the enactment of this Act.
                                  ____

  SA 695. Mr. DODD (for himself and Mr. Reid) submitted an amendment 
intended to be proposed by him to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; as follows:

       On page 9, in the matter between lines 11 and 12, strike 
     ``37.6%'' in the item relating to 2005 and 2006 and insert 
     ``38%'' and strike ``36%'' in the item relating to 2007 and 
     thereafter and insert ``38%''.
       Strike title V and insert:

                  TITLE V--ESTATE AND GIFT TAX RELIEF

     SEC. 501. INCREASE IN AMOUNT OF UNIFIED CREDIT AGAINST ESTATE 
                   AND GIFT TAXES.

       (a) In General.--The table contained in section 2010(c) 
     (relating to applicable credit amount) is amended to read as 
     follows:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002, 2003, 2004, 2005, and 2006......................$1,000,000 
      2007 and 2008.........................................$1,125,000 
      2009..................................................$1,500,000 
      2010 or thereafter.................................$2,000,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.

     SEC. 502. INCREASE IN QUALIFIED FAMILY-OWNED BUSINESS 
                   INTEREST DEDUCTION AMOUNT.

       (a) In General.--Paragraph (2) of section 2057(a) (relating 
     to family-owned business interests) is amended to read as 
     follows:
       ``(2) Maximum deduction.--
       ``(A) In general.--The deduction allowed by this section 
     shall not exceed the sum of--
       ``(i) the applicable deduction amount, plus
       ``(ii) in the case of a decedent described in subparagraph 
     (C), the applicable unused spousal deduction amount.
       ``(B) Applicable deduction amount.--For purposes of this 
     subparagraph (A)(i), the applicable deduction amount is 
     determined in accordance with the following table:


[[Page S5285]]


``In the case of estates of decedentThe applicable deduction amount is:
      2002, 2003, 2004, 2005, and 2006.......................$1,375,000
      2007 and 2008..........................................$1,625,000
      2009...................................................$2,375,000
      2010 or thereafter....................................$3,375,000.
       ``(C) Applicable unused spousal deduction amount.--If an 
     immediately predeceased spouse of a decedent died after 
     December 31, 2001, and the estate of such immediately 
     predeceased spouse met the requirements of subsection (b)(1), 
     the applicable unused spousal deduction amount for such 
     decedent is equal to the excess of--
       ``(i) the applicable deduction amount allowable under this 
     section to the estate of such immediately predeceased spouse, 
     over
       ``(ii) the sum of--

       ``(I) the applicable deduction amount allowed under this 
     section to the estate of such immediately predeceased spouse, 
     plus
       ``(II) the amount of any increase in such estate's unified 
     credit under paragraph (3)(B) which was allowed to such 
     estate.''.

       (b) Conforming Amendments.--Section 2057(a)(3)(B) is 
     amended--
       (1) by striking ``$675,000'' both places it appears and 
     inserting ``the applicable deduction amount'', and
       (2) by striking ``$675,000'' in the heading and inserting 
     ``applicable deduction amount''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.
                                  ____

  SA 696. Mr. NELSON of Nebraska submitted an amendment intended to be 
proposed by him to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. CIRCUIT BREAKER.

       (a) In General.--In any fiscal year beginning with fiscal 
     year 2004, if the level of debt held by the public for that 
     fiscal year (as projected by the Office of Management and 
     Budget sequestration update report on August 20th for that 
     fiscal year) would exceed the level of debt held by the 
     public for that fiscal year set forth in the concurrent 
     resolution on the budget for fiscal year 2002 (H. Con. Res. 
     83, 107th Congress), any Member of Congress may move to 
     proceed to a bill that would make changes in law to reduce 
     discretionary spending and direct spending and increase 
     revenues in a manner that would reduce the debt held by the 
     public for the fiscal year to a level not exceeding the level 
     provided in this resolution for that fiscal year. The motion 
     to proceed shall be voted on at the end of 4 hours of debate.
       (b) Consideration of Legislation.--A bill considered under 
     subsection (a) shall be considered as provided in section 
     310(e) of the Congressional Budget Act of 1974 (2 U.S.C. 
     641(e)).
                                  ____

  SA 697. Mr. HATCH (for himself, Mr. Allen, Mr. Craig, Mr. Smith of 
Oregon, Mr. Reid, Mr. Brownback, Mr. Bennett, and Mr. Kerry) proposed 
an amendment to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; as follows:

       At the end of subtitle A of title VIII insert the 
     following:

     SEC. __. RESEARCH CREDIT.

       (a) Permanent Extension of Research Credit.--
       (1) In general.--Section 41 (relating to credit for 
     increasing research activities) is amended by striking 
     subsection (h).
       (2) Conforming Amendment.--Paragraph (1) of section 45C(b) 
     is amended by striking subparagraph (D).
       (3) Effective Date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.
       (b) Increases in Rates of Alternative Incremental Credit.--
       (1) In General.--Subparagraph (A) of section 41(c)(4) 
     (relating to election of alternative incremental credit) is 
     amended--
       (A) by striking ``2.65 percent'' and inserting ``3 
     percent'',
       (B) by striking ``3.2 percent'' and inserting ``4 
     percent'', and
       (C) by striking ``3.75 percent'' and inserting ``5 
     percent''.
       (2) Effective Date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
                                  ____

  SA 698. Mr. KENNEDY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, strike the matter between lines 11 and 12, and 
     insert:


------------------------------------------------------------------------
                                         The corresponding percentages
                                         shall be substituted for the
   ``In the case of taxable years           following percentages:
   beginning during calendar year:   -----------------------------------
                                        28%      31%      36%     39.6%
------------------------------------------------------------------------
2002, 2003, and 2004................    27%      30%      35%      39%
2005 and 2006.......................    26%      29%      34%     38.2%
2007 and thereafter.................    25%      28%      33%     36.6%
------------------------------------------------------------------------

       On page 62, between lines 7 and 8, insert:

     SEC. __. HOPE SCHOLARSHIP CREDIT AVAILABLE FOR COSTS OF 
                   ATTENDANCE.

       (a) In General.--Section 25A(f)(1) is amended by adding at 
     the end the following subparagraph:
       ``(D) Costs of attendance.--For purposes of determining the 
     amount of the Hope Scholarship Credit under subsection (b), 
     such term shall include the cost of attendance (as defined in 
     section 472 of the Higher Education Act of 1965 (20 U.S.C. 
     1087ll), as in effect on the date of enactment of this 
     subparagraph) of the eligible student at an eligible 
     educational institution.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 699. Mr. KENNEDY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, between lines 14 and 15, insert:
       ``(4) Reduction in top rate contingent on increases in 
     federal pell grant funding.--Notwithstanding paragraph (2), 
     the reductions in the 39.6 percent rate bracket which 
     (without regard to this paragraph) would take effect for 
     taxable years beginning in 2002, 2005, or 2007 shall not take 
     effect at all unless the Secretary of Education certifies to 
     the Secretary of the Treasury before November 1, 2001, 
     November 1, 2004, or November 1, 2006, whichever is 
     applicable, that during the fiscal year ending in 2001, or 
     during each of the 2 fiscal years ending in 2003 and 2004 or 
     2005 and 2006, whichever is applicable, the Federal 
     Government honored its commitment to fund the Federal Pell 
     Grant program under subpart I of part A of title IV of the 
     Higher Education Act of 1965 (20 U.S.C. 1070a) in an amount 
     sufficient to increase the maximum Federal Pell Grant amounts 
     awarded under such program to--
       ``(A) $4,250 for the 2002-2003 school year,
       ``(B) $4,650 for the 2003-2004 school year,
       ``(C) $5,050 for the 2004-2005 school year,
       ``(D) $5,450 for the 2005-2006 school year,
       ``(E) $5,850 for the 2006-2007 school year,
       ``(F) $6,250 for the 2007-2008 school year,
       ``(G) $6,650 for the 2008-2009 school year,
       ``(H) $7,050 for the 2009-2010 school year, and
       ``(I) $7,450 for the 2010-2011 school year.''.
                                  ____

  SA 700. Mr. KENNEDY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, between lines 14 and 15, insert:
       ``(4) Reduction in top rate contingent on head start 
     funding.--Notwithstanding paragraph (2), the reductions in 
     the 39.6 percent rate bracket which (without regard to this 
     paragraph) would take effect for taxable years beginning in 
     2005 or 2007 shall not take effect at all unless the 
     Secretary of Education certifies to the Secretary of the 
     Treasury before November 1, 2004, or November 1, 2006, 
     whichever is applicable, that during each of the 2 fiscal 
     years ending in 2003 and 2004 or 2005 and 2006, whichever is 
     applicable, the Federal Government honored its commitment to 
     fund the Head Start Act in an amount sufficient to enable 
     every eligible child access to such program.''.
                                  ____

  SA 701. Mr. HATCH (for Mr. Kerry (for himself and Mr. Hatch)) 
proposed an amendment to amendment SA 697 proposed by Mr. Hatch to the 
bill (H.R. 1836) to provide for reconciliation pursuant to section 104 
of the concurrent resolution on the budget for fiscal year 2002; as 
follows:

       At the end of the matter proposed to be inserted, add the 
     following:

     SEC. __. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 620, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       ``(a) General Rule.--For purposes of section 38, the 
     vaccine research credit determined under this section for the 
     taxable year is an amount equal to 30 percent of the 
     qualified vaccine research expenses for the taxable year.
       ``(b) Qualified Vaccine Research Expenses.--For purposes of 
     this section--
       ``(1) Qualified vaccine research expenses.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `qualified vaccine research expenses' 
     means the amounts which are paid or incurred by the taxpayer 
     during the taxable year which would be described in 
     subsection (b) of section 41 if such subsection were applied 
     with the modifications set forth in subparagraph (B).
       ``(B) Modifications; increased incentive for contract 
     research payments.--For

[[Page S5286]]

     purposes of subparagraph (A), subsection (b) of section 41 
     shall be applied--
       ``(i) by substituting `vaccine research' for `qualified 
     research' each place it appears in paragraphs (2) and (3) of 
     such subsection, and
       ``(ii) by substituting `100 percent' for `65 percent' in 
     paragraph (3)(A) of such subsection.
       ``(C) Exclusion for amounts funded by grants, etc.--The 
     term `qualified vaccine research expenses' shall not include 
     any amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(2) Vaccine research.--The term `vaccine research' means 
     research to develop vaccines and microbicides for--
       ``(A) malaria,
       ``(B) tuberculosis,
       ``(C) HIV, or
       ``(D) any infectious disease (of a single etiology) which, 
     according to the World Health Organization, causes over 
     1,000,000 human deaths annually.
       ``(c) Coordination With Credit for Increasing Research 
     Expenditures.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     qualified vaccine research expenses for a taxable year to 
     which an election under this section applies shall not be 
     taken into account for purposes of determining the credit 
     allowable under section 41 for such taxable year.
       ``(2) Expenses included in determining base period research 
     expenses.--Any qualified vaccine research expenses for any 
     taxable year which are qualified research expenses (within 
     the meaning of section 41(b)) shall be taken into account in 
     determining base period research expenses for purposes of 
     applying section 41 to subsequent taxable years.
       ``(d) Special Rules.--
       ``(1) Limitations on foreign testing.--No credit shall be 
     allowed under this section with respect to any vaccine 
     research (other than human clinical testing) conducted 
     outside the United States.
       ``(2) Pre-clinical research.--No credit shall be allowed 
     under this section for pre-clinical research unless such 
     research is pursuant to a research plan an abstract of which 
     has been filed with the Secretary before the beginning of 
     such year. The Secretary, in consultation with the Secretary 
     of Health and Human Services, shall prescribe regulations 
     specifying the requirements for such plans and procedures for 
     filing under this paragraph.
       ``(3) Certain rules made applicable.--Rules similar to the 
     rules of paragraphs (1) and (2) of section 41(f) shall apply 
     for purposes of this section.
       ``(4) Election.--This section (other than subsection (e)) 
     shall apply to any taxpayer for any taxable year only if such 
     taxpayer elects to have this section apply for such taxable 
     year.
       ``(e) Credit To Be Refundable for Certain Taxpayers.--
       ``(1) In general.--In the case of an electing qualified 
     taxpayer--
       ``(A) the credit under this section shall be determined 
     without regard to section 38(c), and
       ``(B) the credit so determined shall be allowed as a credit 
     under subpart C.
       ``(2) Electing qualified taxpayer.--For purposes of this 
     subsection, the term `electing qualified taxpayer' means, 
     with respect to any taxable year, any domestic C corporation 
     if--
       ``(A) the aggregate gross assets of such corporation at any 
     time during such taxable year are $500,000,000 or less,
       ``(B) the net income tax (as defined in section 38(c)) of 
     such corporation is zero for such taxable year and the 2 
     preceding taxable years,
       ``(C) as of the close of the taxable year, the corporation 
     is not under the jurisdiction of a court in a title 11 or 
     similar case (within the meaning of section 368(a)(3)(A)),
       ``(D) the corporation provides such assurances as the 
     Secretary requires that, not later than 2 taxable years after 
     the taxable year in which the taxpayer receives any refund of 
     a credit under this subsection, the taxpayer will make an 
     amount of qualified vaccine research expenses equal to the 
     amount of such refund, and
       ``(E) the corporation elects the application of this 
     subsection for such taxable year.
       ``(3) Aggregate gross assets.--Aggregate gross assets shall 
     be determined in the same manner as such assets are 
     determined under section 1202(d).
       ``(4) Controlled groups.--A corporation shall be treated as 
     meeting the requirement of paragraph (2)(B) only if each 
     person who is treated with such corporation as a single 
     employer under subsections (a) and (b) of section 52 also 
     meets such requirement.
       ``(5) Special rules.--
       ``(A) Recapture of credit.--The Secretary shall promulgate 
     such regulations as necessary and appropriate to provide for 
     the recapture of any credit allowed under this subsection in 
     cases where the taxpayer fails to make the expenditures 
     described in paragraph (2)(D).
       ``(B) Exclusion of certain qualified vaccine research 
     expenses.--For purposes of determining the credit under this 
     section for a taxable year, the qualified vaccine research 
     expenses taken into account for such taxable year shall not 
     include an amount paid or incurred during such taxable year 
     equal to the amount described in paragraph (2)(D) (and not 
     already taken into account under this subparagraph for a 
     previous taxable year).''.
       (b) Inclusion in General Business Credit.--
       (1) In general.--Section 38(b), as amended by section 620, 
     is amended by striking ``plus'' at the end of paragraph (14), 
     by striking the period at the end of paragraph (15) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(16) the vaccine research credit determined under section 
     45G.''.
       (2) Transition rule.--Section 39(d), as amended by section 
     620, is amended by adding at the end the following new 
     paragraph:
       ``(12) No carryback of section 45g credit before 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to the vaccine research 
     credit determined under section 45G may be carried back to a 
     taxable year ending before the date of the enactment of 
     section 45G.''.
       (c) Denial of Double Benefit.--Section 280C is amended by 
     adding at the end the following new subsection:
       ``(d) Credit for Qualified Vaccine Research Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the qualified vaccine research expenses (as 
     defined in section 45G(b)) otherwise allowable as a deduction 
     for the taxable year which is equal to the amount of the 
     credit determined for such taxable year under section 45G(a).
       ``(2) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (2), (3), and (4) of subsection (c) shall apply 
     for purposes of this subsection.''.
       (d) Deduction for Unused Portion of Credit.--Section 196(c) 
     (defining qualified business credits) is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the vaccine research credit determined under section 
     45G(a) (other than such credit determined under the rules of 
     section 280C(d)(2)).''.
       (e) Technical Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting ``or from section 45G(e) of such Code,'' 
     after ``1978,''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 620, is 
     amended by adding at the end the following new item:

``Sec. 45G. Credit for medical research related to developing vaccines 
              against widespread diseases.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
                                  ____

  SA 702. Mr. DASCHLE submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII insert the 
     following:

     SEC. __. WAIVER OF STATUTE OF LIMITATION FOR TAXES ON CERTAIN 
                   FARM VALUATIONS.

       If on the date of the enactment of this Act (or at any time 
     within 1 year after the date of the enactment) a refund or 
     credit of any overpayment of tax resulting from the 
     application of section 2032A(c)(7)(E) of the Internal Revenue 
     Code of 1986 is barred by any law or rule of law, the refund 
     or credit of such overpayment shall, nevertheless, be made or 
     allowed if claim therefor is filed before the date 1 year 
     after the date of the enactment of this Act.
                                  ____

  SA 703. Mr. BYRD proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       At the appropriate place, insert the following:

     SEC. __. ENSURING FUNDING FOR SOCIAL SECURITY AND MEDICARE 
                   SOLVENCY, PRESCRIPTION DRUGS, AND LONG-TERM 
                   DEBT REDUCTION.

       (a) In General.--Notwithstanding any other provision of 
     this Act--
       (1) except for section 1(i)(1) of the Internal Revenue Code 
     of 1986, as added by section 101 of this Act, and any 
     necessary conforming amendments, title I of this Act shall 
     not take effect; and
       (2) any provision of title V of this Act that takes effect 
     after 2006 shall not take effect.
       (b) Strategic Reserve Fund for Long-Term Debt and Needs.--
     Subtitle B of title II of H. Con. Res. 83 (107th Congress) is 
     amended by inserting at the end the following:

     ``SEC. 219. STRATEGIC RESERVE FUND FOR SOCIAL SECURITY 
                   REFORM, MEDICARE REFORM, AND PRESCRIPTION DRUG 
                   BENEFITS.

       If legislation is reported by the Committee on Finance of 
     the Senate or the Committee on Energy and Commerce or the 
     Committee on Ways and Means of the House of Representatives, 
     or an amendment thereto is offered or a conference report 
     thereon is submitted, that would strengthen social security, 
     extend the solvency of the Social Security Trust Funds, 
     maintain progressivity in the social security benefit system, 
     continue to lift more seniors out of poverty, extend

[[Page S5287]]

     the solvency of the Medicare Trust Funds or provide 
     prescription drug benefits, the chairman of the appropriate 
     Committee on the Budget shall, upon the approval of the 
     appropriate Committee on the Budget, revise the aggregates, 
     functional totals, allocations, and other appropriate levels 
     and limits in this resolution for that measure by not to 
     exceed $450,000,000,000 for the total of fiscal years 2002 
     through 2011, as long as that measure will not, when taken 
     together with all other previously enacted legislation, 
     reduce the on-budget surplus below the level of the Medicare 
     Hospital Insurance Trust Fund surplus in any fiscal year 
     provided in this resolution.''.
                                  ____

  SA 704. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 66, in the table set forth between lines 1 and 2, 
     strike that matter relating to years 2007, 2008, 2009, and 
     2010 and insert the following:

``2007 and 2008..............................................46 percent
``2009 and 2010..............................................45 percent

       On page 174, line 3, strike ``20'' and insert ``50''.

       On page 178, line 7, strike ``2 taxable'' and insert ``4 
     taxable''.

       On page 178, line 8, insert before the comma the following: 
     ``and each of the 6 taxable years for an employer with no 
     fewer than 25 employees''.
                                  ____

  SA 705. Mrs. HUTCHISON submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 19, beginning with line 21, strike all through the 
     matter preceding line 1 on page 20, and insert:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years                                      The applicable
   beginning in                                         percentage is--
  calendar year--
      2002.........................................................174 
      2003.........................................................180 
      2004.........................................................187 
      2005.........................................................193 
      2006 and thereafter.......................................200.''.

       On page 20, line 14, strike ``2005'' and insert ``2001''.

       On page 21, line 2, strike ``2005'' and insert ``2001''.

       On page 21, strike the matter following line 21, and 
     insert:

``For taxable years                                      The applicable
  beginning in                                          percentage is--
  calendar year--
      2002.........................................................174 
      2003.........................................................180 
      2004.........................................................187 
      2005.........................................................193 
      2006 and thereafter.......................................200.''.

       On page 22, line 15, strike ``2005'' and insert ``2001''.
                                  ____

  SA 706. Mrs. HUTCHISON submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 19, beginning with line 21, strike all through the 
     matter preceding line 1 on page 20, and insert:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years                                      The applicable
  beginning in                                          percentage is--
  calendar year--
      2002.........................................................174 
      2003.........................................................180 
      2004.........................................................187 
      2005.........................................................193 
      2006 and thereafter.......................................200.''.

       On page 20, line 14, strike ``2005'' and insert ``2001''.
                                  ____

  SA 707. Mr. JEFFORDS (for himself, Mr. Dodd, Mr. Kennedy, Mr. 
Rockefeller, and Mr. Levin) proposed an amendment to the bill H.R. 
1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; as follows:

       At the end of subtitle A of title II insert the following:

     SEC. __. DEPENDENT CARE CREDIT.

       (a) Increase in Dollar Limit.--Subsection (c) of section 21 
     (relating to expenses for household and dependent care 
     services necessary for gainful employment) is amended--
       (1) by striking ``$2,400'' in paragraph (1) and inserting 
     ``$3,000'',
       (2) by striking ``$4,800'' in paragraph (2) and inserting 
     ``$6,000'', and
       (3) by adding at the end the following new paragraph:
       ``(3) Inflation adjustment.--In the case of any taxable 
     year beginning after 2002, any dollar amount contained in 
     paragraph (1) or (2) 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 2001'' for 
     ``calendar year 1992.''.
       (b) Increase in Applicable Percentage.--Section 21(a)(2) 
     (defining applicable percentage) is amended--
       (1) by striking ``30 percent'' and inserting ``50 
     percent'', and
       (2) by striking ``$10,000'' and inserting ``$30,000''.
       (c) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year beginning before October 1, 2011, the decrease in 
     revenues to the Treasury for that fiscal year resulting from 
     the amendments made by this section.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

  SA 708. Mr. LIEBERMAN (for himself, Mrs. Feinstein, Mrs. Clinton, and 
Mr. Leahy) submitted an amendment intended to be proposed by him to the 
bill H.R. 1836, to provide for reconciliation pursuant to section 104 
of the concurrent resolution on the budget for fiscal year 2002; which 
was ordered to lie on the table; as follows:

       On page 9, strike the table between line 11 and 12, and 
     insert the following:


------------------------------------------------------------------------
                                         The corresponding percentages
                                         shall be substituted for the
   ``In the case of taxable years           following percentages:
   beginning during calendar year:   -----------------------------------
                                        28%      31%      36%     39.6%
------------------------------------------------------------------------
2002, 2003, and 2004................    27%      30%      35%     38.6%
2005 and 2006.......................    26%      29%      34%     38.6%
2007................................    25%      28%      33%     38.6%
2008 and thereafter.................    25%      28%      33%     37.6%
------------------------------------------------------------------------


       At the end insert the following:

                       TITLE __--BUSINESS RELIEF

                  Subtitle__--Productivity Incentives

     SEC. __01. INCREASED EXCLUSION AND OTHER MODIFICATIONS 
                   APPLICABLE TO QUALIFIED SMALL BUSINESS STOCK.

       (a) Increased Exclusion.--
       (1) In general.--Subsection (a) of section 1202 (relating 
     to 50-percent exclusion for gain from certain small business 
     stock) is amended by striking ``50 percent'' and inserting 
     ``100 percent''.
       (2) Conforming amendments.--
       (A) Subparagraph (A) of section 1(h)(5) is amended to read 
     as follows:
       ``(A) collectibles gain, over''.
       (B) Section 1(h) is amended by striking paragraph (8).
       (C) Paragraph (9) of section 1(h) is amended by striking 
     ``, gain described in paragraph (7)(A)(i), and section 1202 
     gain'' and inserting ``and gain described in paragraph 
     (7)(A)(i)''.
       (D) Section 1(h) is amended by redesignating paragraphs (9) 
     (as amended by subparagraph (C)), (10), (11), (12), and (13) 
     as paragraphs (8), (9), (10), (11), and (12), respectively.
       (E) The heading for section 1202 is amended by striking 
     ``PARTIAL'' and inserting ``100-PERCENT''.
       (F) The table of sections for part I of subchapter P of 
     chapter 1 is amended by striking ``Partial'' in the item 
     relating to section 1202 and inserting ``100-percent''.
       (b) Reduction in Holding Period.--
       (1) In general.--Subsection (a) of section 1202 (relating 
     to partial exclusion for gains from certain small business 
     stock) is amended by striking ``5 years'' and inserting ``3 
     years''.
       (2) Conforming amendment.--Subsections (g)(2)(A) and 
     (j)(1)(A) of section 1202 are each amended by striking ``5 
     years'' and inserting ``3 years''.
       (c) Exclusion Available to Corporations.--
       (1) In general.--Subsection (a) of section 1202 (relating 
     to partial exclusion for gains from certain small business 
     stock) is amended by striking ``other than a corporation''.
       (2) Technical amendment.--Subsection (c) of section 1202 is 
     amended by adding at the end the following new paragraph:
       ``(4) Stock held among members of controlled group not 
     eligible.--Stock of a member of a parent-subsidiary 
     controlled group (as defined in subsection (d)(3)) shall not 
     be treated as qualified small business stock while held by 
     another member of such group.''.
       (d) Repeal of Minimum Tax Preference.--
       (1) In general.--Subsection (a) of section 57 (relating to 
     items of tax preference) is amended by striking paragraph 
     (7).
       (2) Technical amendment.--Subclause (II) of section 
     53(d)(1)(B)(ii) is amended by striking ``, (5), and (7)'' and 
     inserting ``and (5)''.
       (e) Stock of Larger Businesses Eligible for Exclusion.--
       (1) In general.--Paragraph (1) of section 1202(d) (defining 
     qualified small business) is amended by striking 
     ``$50,000,000'' each place it appears and inserting 
     ``$300,000,000''.
       (2) Inflation adjustment.--Section 1202(d) (defining 
     qualified small business) is amended by adding at the end the 
     following:
       ``(4) Inflation adjustment of asset limitation.--In the 
     case of stock issued in any

[[Page S5288]]

     calendar year after 2002, the $300,000,000 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, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof

     .If any amount as adjusted under the preceding sentence is 
     not a multiple of $10,000, such amount shall be rounded to 
     the nearest multiple of $10,000.''.
       (f) Repeal of Per-Issuer Limitation.--Section 1202(b) 
     (relating to per-issuer limitations on taxpayer's eligible 
     gain) is repealed.
       (g) Other Modifications.--
       (1) Repeal of working capital limitation.--Section 
     1202(e)(6) (relating to working capital) is amended--
       (A) in subparagraph (B), by striking ``2 years'' and 
     inserting ``5 years''; and
       (B) by striking the last sentence.
       (2) Exception from redemption rules where business 
     purpose.--Section 1202(c)(3) (relating to certain purchases 
     by corporation of its own stock) is amended by adding at the 
     end the following new subparagraph:
       ``(D) Waiver where business purpose.--A purchase of stock 
     by the issuing corporation shall be disregarded for purposes 
     of subparagraph (B) if the issuing corporation establishes 
     that there was a business purpose for such purchase and one 
     of the principal purposes of the purchase was not to avoid 
     the limitations of this section.''.
       (h) Qualified Trade or Business.--Section 1202(e)(3) 
     (defining qualified trade or business) is amended by 
     inserting ``and'' at the end of subparagraph (C), by striking 
     ``, and'' at the end of subparagraph (D) and inserting a 
     period, and by striking subparagraph (E).
       (i) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section apply to stock issued after 
     the date of the enactment of this Act.
       (2) Special rule.--The amendments made by subsections (a), 
     (c), (e), (f), and (g)(1) apply to stock issued after August 
     10, 1993.

     SEC. __02. REPEAL OF MINIMUM TAX PREFERENCE FOR EXCLUSION FOR 
                   INCENTIVE STOCK OPTIONS.

       (a) In General.--Subsection (b) of section 56 (relating to 
     adjustments in computing alternative minimum taxable income) 
     is amended by striking paragraph (3).
       (b) Effective Date.--The amendment made by this section 
     shall apply to options exercised in calendar years beginning 
     after the date of the enactment of this Act.

     SEC. __03. 3-YEAR DEPRECIABLE LIFE FOR SEMICONDUCTOR 
                   MANUFACTURING EQUIPMENT.

       (a) In General.--Subparagraph (A) of section 168(e)(3) 
     (relating to classification of property) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iv) any semiconductor manufacturing equipment.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (B) of section 168(e)(3) is amended--
       (A) by striking clause (ii),
       (B) by redesignating clauses (iii) through (vi) as clauses 
     (ii) through (v), respectively, and
       (C) by striking ``clause (vi)(I)'' in the last sentence and 
     inserting ``clause (v)(I)''.
       (2) Subparagraph (B) of section 168(g)(3) is amended by 
     striking the items relating to subparagraph (B)(ii) and 
     subparagraph (B)(iii) and inserting the following:

      ``(A)(iv)......................................................3 
      ``(B)(ii)..................................................9.5''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to equipment placed in service after the date of 
     the enactment of this Act.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. __11. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 709. Mr. HUTCHINSON submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, insert the following:

     SEC. 803. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL 
                   SECURITY BENEFITS.

       (a) Restoration of Prior Law Formula.--Subsection (a) of 
     section 86 is amended to read as follows:
       ``(a) In General.--Gross income for the taxable year of any 
     taxpayer described in subsection (b) (notwithstanding section 
     207 of the Social Security Act) includes social security 
     benefits in an amount equal to the lesser of--
       ``(1) one-half of the social security benefits received 
     during the taxable year, or
       ``(2) one-half of the excess described in subsection 
     (b)(1).''
       (b) Repeal of Adjusted Base Amount.--Subsection (c) of 
     section 86 is amended to read as follows:
       ``(c) Base Amount.--For purposes of this section, the term 
     `base amount' means--
       ``(1) except as otherwise provided in this subsection, 
     $25,000,
       ``(2) $32,000 in the case of a joint return, and
       ``(3) zero in the case of a taxpayer who--
       ``(A) is married as of the close of the taxable year 
     (within the meaning of section 7703) but does not file a 
     joint return for such year, and
       ``(B) does not live apart from his spouse at all times 
     during the taxable year.''
       (c) Conforming Amendments.--
       (1) Subparagraph (A) of section 871(a)(3) is amended by 
     striking ``85 percent'' and inserting ``50 percent''.
       (2)(A) Subparagraph (A) of section 121(e)(1) of the Social 
     Security Amendments of 1983 (Public Law 98-21) is amended--
       (i) by striking ``(A) There'' and inserting ``There'';
       (ii) by striking ``(i)'' immediately following ``amounts 
     equivalent to''; and
       (iii) by striking ``, less (ii)'' and all that follows and 
     inserting a period.
       (B) Paragraph (1) of section 121(e) of such Act is amended 
     by striking subparagraph (B).
       (C) Paragraph (3) of section 121(e) of such Act is amended 
     by striking subparagraph (B) and by redesignating 
     subparagraph (C) as subparagraph (B).
       (D) Paragraph (2) of section 121(e) of such Act is amended 
     in the first sentence by striking ``paragraph (1)(A)'' and 
     inserting ``paragraph (1)''.
       (d) Maintenance of Transfers to Hospital Insurance Trust 
     Fund.--
       (1) Appropriation.--There are hereby appropriated to the 
     Hospital Insurance Trust Fund established under section 1817 
     of the Social Security Act amounts equal to the reduction in 
     revenues to the Treasury by reason of the enactment of this 
     section.
       (2) Transfer.--Amounts appropriated under paragraph (1) 
     shall be transferred from the general fund at such times and 
     in such manner as to replicate to the extent possible the 
     transfers which would have occurred to such Trust Fund had 
     this section not been enacted.
       (e) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years beginning after December 31, 2000.
       (2) Subsection (c)(1).--The amendment made by subsection 
     (c)(1) shall apply to benefits paid after December 31, 2000.
       (3) Subsection (c)(2).--The amendments made by subsection 
     (c)(2) shall apply to tax liabilities for taxable years 
     beginning after December 31, 2000.
                                  ____

  SA 710. Mr. HATCH submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle D of Title IV add the following:

     SEC. __. CONTRIBUTIONS OF BOOK INVENTORY.

       (a) In General.--Section 170(e)(3) (relating to certain 
     contributions of ordinary income and capital gain property) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) Special rule for contributions of book inventory for 
     educational purposes.--
       ``(i) Contributions of book inventory.--In determining 
     whether a qualified book contribution is a qualified 
     contribution, subparagraph (A) shall be applied without 
     regard to whether or not--

       ``(I) the donee is an organization described in the matter 
     preceding clause (i) of subparagraph (A), and
       ``(II) the property is to be used by the donee solely for 
     the care of the ill, the needy, or infants.

       ``(ii) Qualified book contribution.--For purposes of this 
     paragraph, the term `qualified book contribution' means a 
     charitable contribution of books, but only if the 
     contribution is to an organization--

       ``(I) described in subclause (I) or (III) of paragraph 
     (6)(B)(i), or
       ``(II) described in section 501(c)(3) and exempt from tax 
     under section 501(a) which is organized primarily to make 
     books available to the general public at no cost or to 
     operate a literacy program.''.

       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act.
                                  ____

  SA 711. Mrs. LINCOLN submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; as follows:

       On page 31, line 1, strike ``tuition, fees,''.

       On page 31, line 11, strike ``room and board,''.
                                  ____

  SA 712. Mr. LIEBERMAN (for himself and Mrs. Feinstein) submitted an 
amendment intended to be proposed by him to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:


[[Page S5289]]


       At the end of subtitle A of title VIII, insert the 
     following:

                      Subtitle B--Research Credits

     SEC. __. PERMANENT EXTENSION AND MODIFICATIONS RESEARCH 
                   CREDIT.

       (a) Permanent Extension of Research Credit.--
       (1) In general.--Section 41 (relating to credit for 
     increasing research activities) is amended by striking 
     subsection (h).
       (2) Conforming Amendment.--Paragraph (1) of section 45C(b) 
     is amended by striking subparagraph (D).
       (3) Effective Date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.
       (b) Increases in Rates of Alternative Incremental Credit.--
       (1) In General.--Subparagraph (A) of section 41(c)(4) 
     (relating to election of alternative incremental credit) is 
     amended--
       (A) by striking ``2.65 percent'' and inserting ``3 
     percent'',
       (B) by striking ``3.2 percent'' and inserting ``4 
     percent'', and
       (C) by striking ``3.75 percent'' and inserting ``5 
     percent''.
       (2) Effective Date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. __. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 620, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       ``(a) General Rule.--For purposes of section 38, the 
     vaccine research credit determined under this section for the 
     taxable year is an amount equal to 30 percent of the 
     qualified vaccine research expenses for the taxable year.
       ``(b) Qualified Vaccine Research Expenses.--For purposes of 
     this section--
       ``(1) Qualified vaccine research expenses.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `qualified vaccine research expenses' 
     means the amounts which are paid or incurred by the taxpayer 
     during the taxable year which would be described in 
     subsection (b) of section 41 if such subsection were applied 
     with the modifications set forth in subparagraph (B).
       ``(B) Modifications; increased incentive for contract 
     research payments.--For purposes of subparagraph (A), 
     subsection (b) of section 41 shall be applied--
       ``(i) by substituting `vaccine research' for `qualified 
     research' each place it appears in paragraphs (2) and (3) of 
     such subsection, and
       ``(ii) by substituting `100 percent' for `65 percent' in 
     paragraph (3)(A) of such subsection.
       ``(C) Exclusion for amounts funded by grants, etc.--The 
     term `qualified vaccine research expenses' shall not include 
     any amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(2) Vaccine research.--The term `vaccine research' means 
     research to develop vaccines and microbicides for--
       ``(A) malaria,
       ``(B) tuberculosis,
       ``(C) HIV, or
       ``(D) any infectious disease (of a single etiology) which, 
     according to the World Health Organization, causes over 
     1,000,000 human deaths annually.
       ``(c) Coordination With Credit for Increasing Research 
     Expenditures.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     qualified vaccine research expenses for a taxable year to 
     which an election under this section applies shall not be 
     taken into account for purposes of determining the credit 
     allowable under section 41 for such taxable year.
       ``(2) Expenses included in determining base period research 
     expenses.--Any qualified vaccine research expenses for any 
     taxable year which are qualified research expenses (within 
     the meaning of section 41(b)) shall be taken into account in 
     determining base period research expenses for purposes of 
     applying section 41 to subsequent taxable years.
       ``(d) Special Rules.--
       ``(1) Limitations on foreign testing.--No credit shall be 
     allowed under this section with respect to any vaccine 
     research (other than human clinical testing) conducted 
     outside the United States.
       ``(2) Pre-clinical research.--No credit shall be allowed 
     under this section for pre-clinical research unless such 
     research is pursuant to a research plan an abstract of which 
     has been filed with the Secretary before the beginning of 
     such year. The Secretary, in consultation with the Secretary 
     of Health and Human Services, shall prescribe regulations 
     specifying the requirements for such plans and procedures for 
     filing under this paragraph.
       ``(3) Certain rules made applicable.--Rules similar to the 
     rules of paragraphs (1) and (2) of section 41(f) shall apply 
     for purposes of this section.
       ``(4) Election.--This section (other than subsection (e)) 
     shall apply to any taxpayer for any taxable year only if such 
     taxpayer elects to have this section apply for such taxable 
     year.
       ``(e) Credit To Be Refundable for Certain Taxpayers.--
       ``(1) In general.--In the case of an electing qualified 
     taxpayer--
       ``(A) the credit under this section shall be determined 
     without regard to section 38(c), and
       ``(B) the credit so determined shall be allowed as a credit 
     under subpart C.
       ``(2) Electing qualified taxpayer.--For purposes of this 
     subsection, the term `electing qualified taxpayer' means, 
     with respect to any taxable year, any domestic C corporation 
     if--
       ``(A) the aggregate gross assets of such corporation at any 
     time during such taxable year are $500,000,000 or less,
       ``(B) the net income tax (as defined in section 38(c)) of 
     such corporation is zero for such taxable year and the 2 
     preceding taxable years,
       ``(C) as of the close of the taxable year, the corporation 
     is not under the jurisdiction of a court in a title 11 or 
     similar case (within the meaning of section 368(a)(3)(A)),
       ``(D) the corporation provides such assurances as the 
     Secretary requires that, not later than 2 taxable years after 
     the taxable year in which the taxpayer receives any refund of 
     a credit under this subsection, the taxpayer will make an 
     amount of qualified vaccine research expenses equal to the 
     amount of such refund, and
       ``(E) the corporation elects the application of this 
     subsection for such taxable year.
       ``(3) Aggregate gross assets.--Aggregate gross assets shall 
     be determined in the same manner as such assets are 
     determined under section 1202(d).
       ``(4) Controlled groups.--A corporation shall be treated as 
     meeting the requirement of paragraph (2)(B) only if each 
     person who is treated with such corporation as a single 
     employer under subsections (a) and (b) of section 52 also 
     meets such requirement.
       ``(5) Special rules.--
       ``(A) Recapture of credit.--The Secretary shall promulgate 
     such regulations as necessary and appropriate to provide for 
     the recapture of any credit allowed under this subsection in 
     cases where the taxpayer fails to make the expenditures 
     described in paragraph (2)(D).
       ``(B) Exclusion of certain qualified vaccine research 
     expenses.--For purposes of determining the credit under this 
     section for a taxable year, the qualified vaccine research 
     expenses taken into account for such taxable year shall not 
     include an amount paid or incurred during such taxable year 
     equal to the amount described in paragraph (2)(D) (and not 
     already taken into account under this subparagraph for a 
     previous taxable year).''.
       (b) Inclusion in General Business Credit.--
       (1) In general.--Section 38(b), as amended by section 620, 
     is amended by striking ``plus'' at the end of paragraph (14), 
     by striking the period at the end of paragraph (15) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(16) the vaccine research credit determined under section 
     45G.''.
       (2) Transition rule.--Section 39(d), as amended by section 
     620, is amended by adding at the end the following new 
     paragraph:
       ``(12) No carryback of section 45g credit before 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to the vaccine research 
     credit determined under section 45G may be carried back to a 
     taxable year ending before the date of the enactment of 
     section 45G.''.
       (c) Denial of Double Benefit.--Section 280C is amended by 
     adding at the end the following new subsection:
       ``(d) Credit for Qualified Vaccine Research Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the qualified vaccine research expenses (as 
     defined in section 45G(b)) otherwise allowable as a deduction 
     for the taxable year which is equal to the amount of the 
     credit determined for such taxable year under section 45G(a).
       ``(2) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (2), (3), and (4) of subsection (c) shall apply 
     for purposes of this subsection.''.
       (d) Deduction for Unused Portion of Credit.--Section 196(c) 
     (defining qualified business credits) is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the vaccine research credit determined under section 
     45G(a) (other than such credit determined under the rules of 
     section 280C(d)(2)).''.
       (e) Technical Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting ``or from section 45G(e) of such Code,'' 
     after ``1978,''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 620, is 
     amended by adding at the end the following new item:

``Sec. 45G. Credit for medical research related to developing vaccines 
              against widespread diseases.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. __. REVENUE OFFSET.

       The Secretary of the Treasury shall adjust each of the 
     corresponding percentages for

[[Page S5290]]

     the 39.6% rate which are contained in the table contained in 
     section 1(i)(2) of the Internal Revenue Code of 1986 (as 
     added by section 101 of this Act) to the extent necessary to 
     offset in each fiscal year beginning before October 1, 2011, 
     the decrease in revenues to the Treasury for that fiscal year 
     resulting from the amendments made by this subtitle.
                                  ____

  SA 713. Mr. DORGAN proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 63, beginning with line 4, strike all through page 
     70, line 20, and insert:

          Subtitle A--Reductions of Estate and Gift Tax Rates

     SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.

       (a) Maximum Rate of Tax Reduced.--
       (1) Reduction to 53%.--The table contained in section 
     2001(c)(1) is amended by striking the highest bracket and 
     inserting the following:

$1,025,800, plus 53% of the excess over $2,500,000.''..................

       (2) Reduction to 47%.--The table contained in section 
     2001(c)(1), as amended by paragraph (1), is amended by 
     striking the two highest brackets and inserting the 
     following:

$780,800, plus 47% of the excess over $2,000,000.''....................
       (3) Reduction to 45%.--The table contained in section 
     2001(c)(1), as amended by paragraphs (1) and (2), is amended 
     by striking the two highest brackets and inserting the 
     following:

$555,800, plus 45% of the excess over $1,500,000.''....................
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to estates of decedents dying, and gifts made, after 
     December 31, 2001.
       (2) Subsection (a)(2).--The amendment made by subsection 
     (a)(2) shall apply to estates of decedents dying, and gifts 
     made, after December 31, 2005.
       (3) Subsection (a)(3).--The amendments made by subsection 
     (a)(3) shall apply to estates of decedents dying, and gifts 
     made, after December 31, 2009.

               Subtitle B--Increase in Exemption Amounts

     SEC. 511. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT 
                   AND LIFETIME GIFTS EXEMPTION.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended by striking the table 
     and inserting the following new table:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002 through 2006.....................................$1,000,000 
      2007 and 2008.........................................$1,250,000 
      2009 and 2010.........................................$1,500,000 
      2011 and thereafter................................$4,000,000.''.
       (b) Lifetime Gift Exemption Increased to $1,000,000.--
     Paragraph (1) of section 2505(a) (relating to unified credit 
     against gift tax) is amended by inserting ``(determined as if 
     the applicable exclusion amount were $1,000,000)'' after 
     ``calendar year''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2001.

     SEC. 512. UNLIMITED QUALIFIED FAMILY-OWNED BUSINESS INTEREST 
                   DEDUCTION.

       (a) In General.--Section 2057(a) (relating to family-owned 
     business interests) is amended to read as follows:
       ``(a) General Rule.--For purposes of the tax imposed by 
     section 2001, in the case of an estate of a decedent to which 
     this section applies, the value of the taxable estate shall 
     be determined by deducting from the value of the gross estate 
     the adjusted value of the qualified family-owned business 
     interests of the decedent which are described in subsection 
     (b)(2).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2002.

       On page 79, beginning with line 7, strike all through page 
     106, line 6.
                                  ____

  SA 714. Mr. SESSIONS (for himself, Mr. McConnell, and Mr. Wyden) 
submitted an amendment intended to be proposed by him to the bill H.R. 
1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; which was 
ordered to lie on the table; as follows:

       On page 41, strike line 15 and all that follows through 
     line 18, and insert the following:
       ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall not apply to any transfer if such transfer occurs 
     within 12 months from the date of a previous transfer to any 
     qualified tuition program for the benefit of the designated 
     beneficiary.'', and
  SA 715. Mr. SESSIONS (for himself, Mr. McConnell, and Mr. Wyden) 
submitted an amendment intended to be proposed by him to the bill H.R. 
1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; which was 
ordered to lie on the table; as follows:

       At the end of subtitle A of title IV add the following:

     SEC. __. LIMITED INVESTMENT DIRECTION ALLOWED.

       Section 529(b)(5) (relating to no investment direction) is 
     amended by adding at the end the following new sentence: 
     ``For purposes of this paragraph, no contributor to, or 
     designated beneficiary under, a program shall be deemed to be 
     directly or indirectly directing the investment of any 
     contribution (or any earning thereon) if such contributor or 
     designated beneficiary periodically transfers from among the 
     investment options approved by the qualified tuition 
     program.''.
                                  ____

  SA 716. Mr. ALLEN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, fiscal year 2002; which was ordered to lie 
on the table; as follows:

       At the appropriate place insert the following:

     SEC.   . PERMANENT EXTENSION OF INTERNET TAX FREEDOM ACT 
                   MORATORIUM.

       (a) Permanent Extension; Internet Access Taxes.--Section 
     1101 of the Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by striking ``taxes during the period beginning on 
     October 1, 1998, and ending 3 years after the date of the 
     enactment of this Act'' and inserting `taxes after September 
     30, 1998:';
       (2) by striking paragraph (1) of subsection (a) and 
     inserting the following:
       ``(1) Taxes on Internet access.'';
       (3) by striking ``multiple'' in paragraph (2) of subsection 
     (a) and inserting ``Multiple'';
       (4) by striking subsection (d); and
       (5) by redesignating subsections (e) and (f) as subsections 
     (d) and (e), respectively.
       (b) Conforming Amendment.--Section 1104(10) of the Internet 
     Tax Freedom Act (47 U.S.C. 151 note) is amended by striking 
     ``unless'' and all that follows through ``1998''.
                                  ____

  SA 717. Mr. BINGAMAN (for himself, Mr. Reid, Mr. Johnson, Mrs. 
Clinton, and Mr. Kennedy) submitted an amendment intended to be 
proposed by him to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; as follows:

       At the end, add the following:

      TITLE IX--ENERGY CONSERVATION AND PRODUCTION TAX INCENTIVES

     SEC. 900. TABLE OF CONTENTS.

      TITLE IX--ENERGY CONSERVATION AND PRODUCTION TAX INCENTIVES

Sec. 900. Table of contents.

         Subtitle A--Energy-Efficient Property Used in Business

Sec. 901. Credit for certain energy-efficient property used in 
              business.
Sec. 902. Energy-efficient commercial building property deduction.
Sec. 903. Credit for energy-efficient appliances.

                 Subtitle B--Residential Energy Systems

Sec. 911. Credit for construction of new energy-efficient home.
Sec. 912. Credit for energy efficiency improvements to existing homes.
Sec. 913. Credit for residential solar, wind, and fuel cell energy 
              property.

           Subtitle C--Electricity Facilities and Production

Sec. 921. Incentive for distributed generation.
Sec. 922. Modifications to credit for electricity produced from 
              renewable and waste products.
Sec. 923. Treatment of facilities using bagasse to produce energy as 
              solid waste disposal facilities eligible for tax-exempt 
              financing.
Sec. 924. Property used in the transmission of electricity and natural 
              gas pipelines treated as 7-year property.

               Subtitle D--Tax Incentives for Ethanol Use

Sec. 931. Allocation of alcohol fuels credit to patrons of a 
              cooperative.
Sec. 932. Additional tax incentives for ethanol use.

 Subtitle E--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

Sec. 941. Credit for investment in qualifying advanced clean coal 
              technology.
Sec. 942. Credit for production from qualifying advanced clean coal 
              technology.
Sec. 943. Risk pool for qualifying advanced clean coal technology.

   Subtitle F--Tax Incentives for Qualified Energy Management Devices

Sec. 951. Credit for qualified energy management devices.
Sec. 952. 3-year applicable recovery period for depreciation of energy 
              management equipment.

                      Subtitle G--Other Provisions

Sec. 961. Alternative motor vehicle credit.
Sec. 962. Uniform dollar limitation for all types of transportation 
              fringe benefits.
Sec. 963. Clarification of Federal employee benefits.
Sec. 964. Extension of tax benefits for alcohol fuels.

[[Page S5291]]

          Subtitle H--Compliance With Congressional Budget Act

Sec. 971. Revenue offsets.
Sec. 972. Sunset of provisions of title.

         Subtitle A--Energy-Efficient Property Used in Business

     SEC. 901. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED 
                   IN BUSINESS.

       (a) In General.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment credit) 
     is amended by inserting after section 48 the following:

     ``SEC. 48A. ENERGY CREDIT.

       ``(a) In General.--For purposes of section 46, the energy 
     credit for any taxable year is the energy percentage of the 
     basis of each energy property placed in service during such 
     taxable year.
       ``(b) Energy Percentage.--
       ``(1) In general.--The energy percentage is--
       ``(A) except as otherwise provided in this subparagraph, 10 
     percent,
       ``(B) in the case of energy property described in clauses 
     (i), (iii), and (vi) of subsection (c)(1)(A), 20 percent,
       ``(C) in the case of energy property described in 
     subsection (c)(1)(A)(v), 15 percent,
       ``(D) in the case of energy property described in 
     subsection (c)(1)(A)(ii) relating to a high risk geothermal 
     well, 20 percent, and
       ``(E) in the case of energy property described in 
     subsection (c)(1)(A)(vii), 30 percent.
       ``(2) Coordination with rehabilitation.--The energy 
     percentage shall not apply to that portion of the basis of 
     any property which is attributable to qualified 
     rehabilitation expenditures.
       ``(c) Energy Property Defined.--
       ``(1) In general.--For purposes of this subpart, the term 
     `energy property' means any property--
       ``(A) which is--
       ``(i) solar energy property,
       ``(ii) geothermal energy property,
       ``(iii) energy-efficient building property other than 
     property described in clauses (iii)(I) and (v)(I) of 
     subsection (d)(3)(A),
       ``(iv) combined heat and power system property,
       ``(v) low core loss distribution transformer property,
       ``(vi) qualified anaerobic digester property, or
       ``(vii) qualified wind energy systems equipment property,
       ``(B)(i) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(ii) which is acquired by the taxpayer if the original 
     use of such property commences with the taxpayer.
       ``(C) which can reasonably be expected to remain in 
     operation for at least 5 years,
       ``(D) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable, and
       ``(E) which meets the performance and quality standards (if 
     any) which--
       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy), and
       ``(ii) are in effect at the time of the acquisition of the 
     property.
       ``(2) Exceptions.--
       ``(A) Public utility property.--Such term shall not include 
     any property which is public utility property (as defined in 
     section 46(f)(5) as in effect on the day before the date of 
     the enactment of the Revenue Reconciliation Act of 1990), 
     except for property described in paragraph (1)(A)(iv).
       ``(B) Certain wind equipment.--Such term shall not include 
     equipment described in paragraph (1)(A)(vii) which is taken 
     into account for purposes of section 45 for the taxable year.
       ``(d) Definitions Relating to Types of Energy Property.--
     For purposes of this section--
       ``(1) Solar energy property.--
       ``(A) In general.--The term `solar energy property' means 
     equipment which uses solar energy to generate electricity, to 
     heat or cool (or provide hot water for use in) a structure, 
     or to provide solar process heat.
       ``(B) Swimming pools, etc. used as storage medium.--The 
     term `solar energy property' shall not include property with 
     respect to which expenditures are properly allocable to a 
     swimming pool, hot tub, or any other energy storage medium 
     which has a function other than the function of such storage.
       ``(C) Solar panels.--No solar panel or other property 
     installed as a roof (or portion thereof) shall fail to be 
     treated as solar energy property solely because it 
     constitutes a structural component of the structure on which 
     it is installed.
       ``(2) Geothermal energy property.--
       ``(A) In general.--The term `geothermal energy property' 
     means equipment used to produce, distribute, or use energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(B) High risk geothermal well.--The term `high risk 
     geothermal well' means a geothermal deposit (within the 
     meaning of section 613(e)(2)) which requires high risk 
     drilling techniques. Such deposit may not be located in a 
     State or national park or in an area in which the relevant 
     State park authority or the National Park Service determines 
     the development of such a deposit will negatively impact on a 
     State or national park.
       ``(3) Energy-efficient building property.--
       ``(A) In general.--The term `energy-efficient building 
     property' means--
       ``(i) a fuel cell which--

       ``(I) generates electricity using an electrochemical 
     process,
       ``(II) has an electricity-only generation efficiency 
     greater than 30 percent, and
       ``(III) has a minimum generating capacity of 2 kilowatts,

       ``(ii) an electric heat pump hot water heater which yields 
     an energy factor of 1.7 or greater under test procedures 
     prescribed by the Secretary of Energy,
       ``(iii)(I) an electric heat pump which has a heating system 
     performance factor (HSPF) of at least 8.5 but less than 9 and 
     a cooling seasonal energy efficiency ratio (SEER) of at least 
     13.5 but less than 15,
       ``(II) an electric heat pump which has a heating system 
     performance factor (HSPF) of 9 or greater and a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(iv) a natural gas heat pump which has a coefficient of 
     performance of not less than 1.25 for heating and not less 
     than 0.70 for cooling,
       ``(v)(I) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of at least 13.5 but 
     less than 15,
       ``(II) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(vi) an advanced natural gas water heater which--

       ``(I) increases steady state efficiency and reduces standby 
     and vent losses, and
       ``(II) has an energy factor of at least 0.65,

       ``(vii) an advanced natural gas furnace which achieves a 90 
     percent AFUE and rated for seasonal electricity use of less 
     than 300 kWh per year, and
       ``(viii) natural gas cooling equipment which meets all 
     applicable standards of the American Society of Heating, 
     Refrigerating, and Air Conditioning Engineers and which--

       ``(I) has a coefficient of performance of not less than 
     .60, or
       ``(II) uses desiccant technology and has an efficiency 
     rating of not less than 50 percent.

       ``(B) Limitations.--The credit under subsection (a) for the 
     taxable year may not exceed--
       ``(i) $500 in the case of property described in 
     subparagraph (A) other than clauses (i), (iv), and (viii) 
     thereof,
       ``(ii) $500 for each kilowatt of capacity in the case of 
     any fuel cell described in subparagraph (A)(i),
       ``(iii) $1,000 in the case of any natural gas heat pump 
     described in subparagraph (A)(iv), and
       ``(iv) $150 for each ton of capacity in the case of any 
     natural gas cooling equipment described in subparagraph 
     (A)(viii).
       ``(4) Combined heat and power system property.--
       ``(A) In general.--The term `combined heat and power system 
     property' means property--
       ``(i) comprising a system for the same energy source for 
     the simultaneous or sequential generation of electrical 
     power, mechanical shaft power, or both, in combination with 
     steam, heat, or other forms of useful energy,
       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy, and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or a combination 
     thereof), and

       ``(iv) the energy efficiency percentage of which exceeds--

       ``(I) 60 percent in the case of a system with an electrical 
     capacity of less than 1 megawatt),
       ``(II) 65 percent in the case of a system with an 
     electrical capacity of not less than 1 megawatt and not in 
     excess of 50 megawatts), and
       ``(III) 70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts).

       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 46(f)(5) as in effect on the 
     day before the date of the enactment of the Revenue 
     Reconciliation Act of 1990), the taxpayer may only claim the 
     credit under subsection (a)(1) if, with respect to such

[[Page S5292]]

     property, the taxpayer uses a normalization method of 
     accounting.
       ``(5) Low core loss distribution transformer property.--The 
     term `low core loss distribution transformer property' means 
     a distribution transformer which has energy savings from a 
     highly efficient core of at least 20 percent more than the 
     average for power ratings reported by studies required under 
     section 124 of the Energy Policy Act of 1992.
       ``(6) Qualified anaerobic digester property.--The term 
     `qualified anaerobic digester property' means an anaerobic 
     digester for manure or crop waste which achieves at least 65 
     percent efficiency measured in terms of the fraction of 
     energy input converted to electricity and useful thermal 
     energy.
       ``(7) Qualified wind energy systems equipment property.--
     The term `qualified wind energy systems equipment property' 
     means wind energy systems equipment with a turbine size of 
     not more than 75 kilowatts rated capacity.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Special rule for property financed by subsidized 
     energy financing or industrial development bonds.--
       ``(A) Reduction of basis.--For purposes of applying the 
     energy percentage to any property, if such property is 
     financed in whole or in part by--
       ``(i) subsidized energy financing, or
       ``(ii) the proceeds of a private activity bond (within the 
     meaning of section 141) the interest on which is exempt from 
     tax under section 103, the amount taken into account as the 
     basis of such property shall not exceed the amount which (but 
     for this subparagraph) would be so taken into account 
     multiplied by the fraction determined under subparagraph (B).
       ``(B) Determination of fraction.--For purposes of 
     subparagraph (A), the fraction determined under this 
     subparagraph is 1 reduced by a fraction--
       ``(i) the numerator of which is that portion of the basis 
     of the property which is allocable to such financing or 
     proceeds, and
       ``(ii) the denominator of which is the basis of the 
     property.
       ``(C) Subsidized energy financing.--For purposes of 
     subparagraph (A), the term `subsidized energy financing' 
     means financing provided under a Federal, State, or local 
     program a principal purpose of which is to provide subsidized 
     financing for projects designed to conserve or produce 
     energy.
       ``(2) 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 section.
       ``(f) Application of Section.--
       ``(1) In general.--Except as provided by paragraph (2), 
     this section shall apply to property placed in service after 
     December 31, 2001, and before January 1, 2009.
       ``(2) Exceptions.--
       ``(A) Solar energy and geothermal energy property.--
     Paragraph (1) shall not apply to solar energy property or 
     geothermal energy property.
       ``(B) Certain electric heat pumps and central air 
     conditioners.--In the case of property which is described in 
     subsection (d)(3)(A)(iii)(I) or (d)(3)(A)(v)(I), this section 
     shall apply to property placed in service after December 31, 
     2001, and before January 1, 2006.''.
       (b) Conforming Amendments.--
       (1) Section 48 is amended to read as follows:

     ``SEC. 48. REFORESTATION CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     reforestation credit for any taxable year is 20 percent of 
     the portion of the amortizable basis of any qualified timber 
     property which was acquired during such taxable year and 
     which is taken into account under section 194 (after the 
     application of section 194(b)(1)).
       ``(b) Definitions.--For purposes of this subpart, the terms 
     `amortizable basis' and `qualified timber property' have the 
     respective meanings given to such terms by section 194.''.
       (2) Section 39(d), as amended by this Act, is amended by 
     adding at the end the following:
       ``(12) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit 
     determined under section 48A may be carried back to a taxable 
     year ending before January 1, 2002.''.
       (3) Section 280C is amended by adding at the end the 
     following:
       ``(d) Credit for Energy Property Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the expenses for energy property (as defined in 
     section 48A(c)) otherwise allowable as a deduction for the 
     taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 48A(a).
       ``(2) Similar rule where taxpayer capitalizes rather than 
     deducts expenses.--If--
       ``(A) the amount of the credit allowable for the taxable 
     year under section 48A (determined without regard to section 
     38(c)), exceeds
       ``(B) the amount allowable as a deduction for the taxable 
     year for expenses for energy property (determined without 
     regard to paragraph (1)), the amount chargeable to capital 
     account for the taxable year for such expenses shall be 
     reduced by the amount of such excess.
       ``(3) Controlled groups.--Paragraph (3) of subsection (b) 
     shall apply for purposes of this subsection.''.
       (4) Section 29(b)(3)(A)(i)(III) is amended by striking 
     `section 48(a)(4)(C)' and inserting `section 48A(e)(1)(C)'.
       (5) Section 50(a)(2)(E) is amended by striking `section 
     48(a)(5)' and inserting `section 48A(e)(2)'.
       (6) Section 168(e)(3)(B) is amended--
       (A) by striking clause (vi)(I) and inserting the following:
       ``(I) is described in paragraph (1) or (2) of section 
     48A(d) (or would be so described if `solar and wind' were 
     substituted for `solar' in paragraph (1)(B)),'', and
       (B) in the last sentence by striking ``section 48(a)(3)'' 
     and inserting ``section 48A(c)(2)(A)''.
       (c) Clerical Amendment.--The table of sections for subpart 
     E of part IV of subchapter A of chapter 1 is amended by 
     striking the item relating to section 48 and inserting the 
     following:

``Sec. 48. Reforestation credit.
``Sec. 48A. Energy credit.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 902. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY 
                   DEDUCTION.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by adding at the end the following:

     ``SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY.

       ``(a) In General.--There shall be allowed as a deduction 
     for the taxable year an amount equal to the energy-efficient 
     commercial building property expenditures made by a taxpayer 
     for the taxable year.
       ``(b) Maximum Amount of Deduction.--The amount of energy-
     efficient commercial building property expenditures taken 
     into account under subsection (a) shall not exceed an amount 
     equal to the product of--
       ``(1) $2.25, and
       ``(2) the square footage of the building with respect to 
     which the expenditures are made.
       ``(c) Year Deduction Allowed.--The deduction under 
     subsection (a) shall be allowed in the taxable year in which 
     the construction of the building is completed.
       ``(d) Energy-Efficient Commercial Building Property 
     Expenditures.--For purposes of this section--
       ``(1) In general.--The term `energy-efficient commercial 
     building property expenditures' means an amount paid or 
     incurred for energy-efficient commercial building property 
     installed on or in connection with new construction or 
     reconstruction of property--
       ``(A) for which depreciation is allowable under section 
     167,
       ``(B) which is located in the United States, and
       ``(C) the construction or erection of which is completed by 
     the taxpayer.

     Such property includes all residential rental property, 
     including low-rise multifamily structures and single family 
     housing property which is not within the scope of Standard 
     90.1-1999 (described in paragraph (3)).
       ``(2) Labor costs included.--Such term includes 
     expenditures for labor costs properly allocable to the onsite 
     preparation, assembly, or original installation of the 
     property.
       ``(3) Energy expenditures excluded.--Such term does not 
     include any expenditures taken into account in determining 
     any credit allowed under section 48A.
       ``(e) Energy-Efficient Commercial Building Property.--For 
     purposes of subsection (d)--
       ``(1) In general.--The term `energy-efficient commercial 
     building property' means any property which reduces total 
     annual energy and power costs with respect to the lighting, 
     heating, cooling, ventilation, and hot water supply systems 
     of the building by 50 percent or more in comparison to a 
     reference building which meets the requirements of Standard 
     90.1-1999 of the American Society of Heating, Refrigerating, 
     and Air Conditioning Engineers and the Illuminating 
     Engineering Society of North America using methods of 
     calculation under subparagraph (B) and certified by qualified 
     professionals as provided under paragraph (6).
       ``(2) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power consumption and cost, taking 
     into consideration the provisions of the 1998 California 
     Nonresidential ACM Manual. These procedures shall meet the 
     following requirements:
       ``(A) In calculating tradeoffs and energy performance, the 
     regulations shall prescribe the costs per unit of energy and 
     power, such as kilowatt hour, kilowatt, gallon of fuel oil, 
     and cubic foot or Btu of natural gas, which may be dependent 
     on time of usage.
       ``(B) The calculational methodology shall require that 
     compliance be demonstrated for a whole building. If some 
     systems of the building, such as lighting, are designed later 
     than other systems of the building, the method shall provide 
     that either--
       ``(i) the expenses taken into account under paragraph (1) 
     shall not occur until the date

[[Page S5293]]

     designs for all energy-using systems of the building are 
     completed, or
       ``(ii) the expenses taken into account under paragraph (1) 
     shall be a fraction of such expenses based on the performance 
     of less than all energy-using systems in accordance with 
     subparagraph (C), and the energy performance of all systems 
     and components not yet designed shall be assumed to comply 
     minimally with the requirements of such Standard 90.1-1999.
       ``(C) The expenditures in connection with the design of 
     subsystems in the building, such as the envelope, the 
     heating, ventilation, air conditioning and water heating 
     system, and the lighting system shall be allocated to the 
     appropriate building subsystem based on system-specific 
     energy cost savings targets in regulations promulgated by the 
     Secretary of Energy which are equivalent, using the 
     calculation methodology, to the whole building requirement of 
     50 percent savings.
       ``(D) The calculational methods under this paragraph need 
     not comply fully with section 11 of such Standard 90.1-1999.
       ``(E) The calculational methods shall be fuel neutral, such 
     that the same energy efficiency features shall qualify a 
     building for the deduction under this section regardless of 
     whether the heating source is a gas or oil furnace or an 
     electric heat pump.
       ``(F) The calculational methods shall provide appropriate 
     calculated energy savings for design methods and technologies 
     not otherwise credited in either such Standard 90.1-1999 or 
     in the 1998 California Nonresidential ACM Manual, including 
     the following:
       ``(i) Natural ventilation.
       ``(ii) Evaporative cooling.
       ``(iii) Automatic lighting controls such as occupancy 
     sensors, photocells, and timeclocks.
       ``(iv) Daylighting.
       ``(v) Designs utilizing semi-conditioned spaces which 
     maintain adequate comfort conditions without air conditioning 
     or without heating.
       ``(vi) Improved fan system efficiency, including reductions 
     in static pressure.
       ``(vii) Advanced unloading mechanisms for mechanical 
     cooling, such as multiple or variable speed compressors.
       ``(viii) The calculational methods may take into account 
     the extent of commissioning in the building, and allow the 
     taxpayer to take into account measured performance which 
     exceeds typical performance.
       ``(3) Computer software.--
       ``(A) In general.--Any calculation under this subsection 
     shall be prepared by qualified computer software.
       ``(B) Qualified computer software.--For purposes of this 
     paragraph, the term `qualified computer software' means 
     software--
       ``(i) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power consumption and costs as 
     required by the Secretary,
       ``(ii) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(iii) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.
       ``(4) Allocation of deduction for public property.--In the 
     case of energy-efficient commercial building property 
     installed on or in public property, the Secretary shall 
     promulgate a regulation to allow the allocation of the 
     deduction to the person primarily responsible for designing 
     the property in lieu of the public entity which is the owner 
     of such property. Such person shall be treated as the 
     taxpayer for purposes of this section.
       ``(5) Notice to owner.--The qualified individual shall 
     provide an explanation to the owner of the building regarding 
     the energy efficiency features of the building and its 
     projected annual energy costs as provided in the notice under 
     paragraph (3)(B)(iii).
       ``(6) Certification.--
       ``(A) In general.--Except as provided in this paragraph, 
     the Secretary, in consultation with the Secretary of Energy, 
     shall establish requirements for certification and compliance 
     procedures similar to the procedures under section 45H(d).
       ``(B) Qualified individuals.--Individuals qualified to 
     determine compliance shall be only those individuals who are 
     recognized by an organization certified by the Secretary for 
     such purposes.
       ``(C) Proficiency of qualified individuals.--The Secretary 
     shall consult with nonprofit organizations and State agencies 
     with expertise in energy efficiency calculations and 
     inspections to develop proficiency tests and training 
     programs to qualify individuals to determine compliance.
       ``(f) Termination.--This section shall not apply with 
     respect to any energy-efficient commercial building property 
     expenditures in connection with property--
       ``(1) the plans for which are not certified under 
     subsection (e)(6) on or before December 31, 2006, and
       ``(2) the construction of which is not completed on or 
     before December 31, 2008.''.
       (b) Conforming Amendments.--Section 1016(a) is amended by 
     striking ``and'' at the end of paragraph (26), by striking 
     the period at the end of paragraph (27) and inserting ``, 
     and'', and by inserting the following:
       ``(28) for amounts allowed as a deduction under section 
     199(a).''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding at the end 
     the following:

``Sec. 199. Energy-efficient commercial building property.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 903. CREDIT FOR ENERGY-EFFICIENT APPLIANCES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following:

     ``SEC. 45G. ENERGY-EFFICIENT APPLIANCE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the 
     energy-efficient appliance credit determined under this 
     section for the taxable year is an amount equal to the 
     applicable amount determined under subsection (b) with 
     respect to qualified energy-efficient appliances produced by 
     the taxpayer during the calendar year ending with or within 
     the taxable year.
       ``(b) Applicable Amount.--For purposes of subsection (a), 
     the applicable amount determined under this subsection with 
     respect to a taxpayer is the sum of--
       ``(1) in the case of an energy-efficient clothes washer 
     described in subsection (d)(2)(A) or an energy-efficient 
     refrigerator described in subsection (d)(3)(B)(i), an amount 
     equal to--
       ``(A) $50, multiplied by
       ``(B) the number of such washers and refrigerators produced 
     by the taxpayer during such calendar year, and
       ``(2) in the case of an energy-efficient clothes washer 
     described in subsection (d)(2)(B) or an energy-efficient 
     refrigerator described in subsection (d)(3)(B)(ii), an amount 
     equal to--
       ``(A) $100, multiplied by
       ``(B) the number of such washers and refrigerators produced 
     by the taxpayer during such calendar year.
       ``(c) Limitation on Maximum Credit.--
       ``(1) In general.--The maximum amount of credit allowed 
     under subsection (a) with respect to a taxpayer for all 
     taxable years shall be--
       ``(A) $30,000,000 with respect to the credit determined 
     under subsection (b)(1), and
       ``(B) $30,000,000 with respect to the credit determined 
     under subsection (b)(2).
       ``(2) Limitation based on gross receipts.--The credit 
     allowed under subsection (a) with respect to a taxpayer for 
     the taxable year shall not exceed an amount equal to 2 
     percent of the average annual gross receipts of the taxpayer 
     for the 3 taxable years preceding the taxable year in which 
     the credit is determined.
       ``(3) Gross receipts.--For purposes of this subsection, the 
     rules of paragraphs (2) and (3) of section 448(c) shall 
     apply.
       ``(d) Qualified Energy-Efficient Appliance.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified energy-efficient 
     appliance' means--
       ``(A) an energy-efficient clothes washer, or
       ``(B) an energy-efficient refrigerator.
       ``(2) Energy-efficient clothes washer.--The term `energy-
     efficient clothes washer' means a residential clothes washer, 
     including a residential style coin operated washer, which is 
     manufactured with--
       ``(A) a 1.26 Modified Energy Factor (referred to in this 
     paragraph as `MEF') (as determined by the Secretary of 
     Energy), or
       ``(B) a 1.42 MEF (as determined by the Secretary of Energy) 
     (1.5 MEF for calendar years beginning after 2004).
       ``(3) Energy-efficient refrigerator.--The term `energy-
     efficient refrigerator' means an automatic defrost 
     refrigerator-freezer which--
       ``(A) has an internal volume of at least 16.5 cubic feet, 
     and
       ``(B) consumes--
       ``(i) 10 percent less kWh per year than the energy 
     conservation standards promulgated by the Department of 
     Energy for such refrigerator for 2001, or
       ``(ii) 15 percent less kWh per year than such energy 
     conservation standards.
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as one 
     person for purposes of subsection (a).
       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, in 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply--
       ``(1) with respect to energy-efficient refrigerators 
     described in subsection (d)(3)(B)(i) produced in calendar 
     years beginning after 2005, and
       ``(2) with respect to all other qualified energy-efficient 
     appliances produced in calendar years beginning after 
     2007.''.
       (b) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by section 901(b)(2), is 
     amended by adding at the end the following:
       ``(13) No carryback of energy-efficient appliance credit 
     before 2002.--No portion of the unused business credit for 
     any taxable year which is attributable to the energy-
     efficient appliance credit determined under section 45G may 
     be carried to a taxable year beginning before January 1, 
     2002.''.

[[Page S5294]]

       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by section 902(b)(3), is amended by adding at the end the 
     following:
       ``(e) Credit for Energy-Efficient Appliance Expenses.--No 
     deduction shall be allowed for that portion of the expenses 
     for qualified energy-efficient appliances (as defined in 
     section 45G(d)) otherwise allowable as a deduction for the 
     taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45G(a).''.
       (d) Conforming Amendment.--Section 38(b), as amended by 
     this Act, (relating to general business credit) is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following:
       ``(16) the energy-efficient appliance credit determined 
     under section 45G(a).''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by inserting after the item relating to 
     section 45F the following:

``Sec. 45G. Energy-efficient appliance credit.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                 Subtitle B--Residential Energy Systems

     SEC. 911. CREDIT FOR CONSTRUCTION OF NEW ENERGY-EFFICIENT 
                   HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 903(a), is amended by inserting after section 45G 
     the following:

     ``SEC. 45H. NEW ENERGY-EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy-efficient property 
     installed in a qualified new energy-efficient home during 
     construction of such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a dwelling shall not exceed--
       ``(i) in the case of a dwelling described in subsection 
     (c)(3)(D)(i), $1,500, and
       ``(ii) in the case of a dwelling described in subsection 
     (c)(3)(D)(ii), $2,500.
       ``(B) Prior credit amounts on same dwelling taken into 
     account.--If a credit was allowed under subsection (a) with 
     respect to a dwelling in 1 or more prior taxable years, the 
     amount of the credit otherwise allowable for the taxable year 
     with respect to that dwelling shall not exceed the amount 
     under clause (i) or (ii) (as the case may be), reduced by the 
     sum of the credits allowed under subsection (a) with respect 
     to the dwelling for all prior taxable years.
       ``(2) Coordination with rehabilitation and energy 
     credits.--For purposes of this section--
       ``(A) the basis of any property referred to in subsection 
     (a) 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 48A(a)), and
       ``(B) expenditures taken into account under either section 
     47 or 48A(a) shall not be taken into account under this 
     section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means the person who constructed the new energy-efficient 
     home, or in the case of a manufactured home which conforms to 
     Federal Manufactured Home Construction and Safety Standards 
     (24 C.F.R. 3280), the manufactured home producer of such 
     home.
       ``(2) Energy-efficient property.--The term `energy-
     efficient property' means any energy-efficient building 
     envelope component, and any energy-efficient heating or 
     cooling equipment which can, individually or in combination 
     with other components, meet the requirements of this section.
       ``(3) Qualified new energy-efficient home.--The term 
     `qualified new energy-efficient home' means a dwelling--
       ``(A) located in the United States,
       ``(B) the construction of which is substantially completed 
     after December 31, 2000,
       ``(C) the original use of which is as a principal residence 
     (within the meaning of section 121) which commences with the 
     person who acquires such dwelling from the eligible 
     contractor, and
       ``(D) which is certified to have a projected level of 
     annual heating and cooling energy consumption, measured in 
     terms of average annual energy cost to the homeowner which is 
     at least--
       ``(i) 30 percent less than the annual level of heating and 
     cooling energy consumption of a reference dwelling 
     constructed in accordance with the standards of chapter 4 of 
     the 2000 International Energy Conservation Code, or
       ``(ii) 50 percent less than such annual level of heating 
     and cooling energy consumption.
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Acquire.--The term `acquire' includes purchase and, 
     in the case of reconstruction and rehabilitation, such term 
     includes a binding written contract for such reconstruction 
     or rehabilitation.
       ``(6) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain of a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(7) Manufactured home included.--The term `dwelling' 
     includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(d) Certification.--
       ``(1) Method.--A certification described in subsection 
     (c)(3)(D) shall be determined on the basis of 1 of the 
     following methods:
       ``(A) A component-based method, using the applicable 
     technical energy efficiency specifications or ratings 
     (including product labeling requirements) for the energy-
     efficient building envelope component or energy-efficient 
     heating or cooling equipment. The Secretary shall, in 
     consultation with the Administrator of the Environmental 
     Protection Agency, develop prescriptive component-based 
     packages that are equivalent in energy performance to 
     properties that qualify under subparagraph (B).
       ``(B) An energy performance-based method that calculates 
     projected energy usage and cost reductions in the dwelling in 
     relation to a reference dwelling--
       ``(i) heated by the same energy source and heating system 
     type, and
       ``(ii) constructed in accordance with the standards of 
     chapter 4 of the 2000 International Energy Conservation Code.

     Computer software shall be used in support of an energy 
     performance-based method certification under subparagraph 
     (B). Such software shall meet procedures and methods for 
     calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy. Such regulations on 
     the specifications for software and verification protocols 
     shall be based on the 1998 California Residential Alternative 
     Calculation Method Approval Manual.
       ``(2) Provider.--Such certification shall be provided by--
       ``(A) in the case of a method described in paragraph 
     (1)(A), a local building regulatory authority, a utility, a 
     manufactured home production inspection primary inspection 
     agency (IPIA), or a home energy rating organization, or
       ``(B) in the case of a method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--
       ``(A) In general.--Such certification shall be made in 
     writing in a manner that specifies in readily verifiable 
     fashion the energy-efficient building envelope components and 
     energy-efficient heating or cooling equipment installed and 
     their respective rated energy efficiency performance, and in 
     the case of a method described in paragraph (1)(B), 
     accompanied by written analysis documenting the proper 
     application of a permissible energy performance calculation 
     method to the specific circumstances of such dwelling.
       ``(B) Form provided to buyer.--A form documenting the 
     energy-efficient building envelope components and energy-
     efficient heating or cooling equipment installed and their 
     rated energy efficiency performance shall be provided to the 
     buyer of the dwelling. The form shall include labeled R-value 
     for insulation products, NFRC-labeled U-factor and Solar Heat 
     Gain Coefficient for windows, skylights, and doors, labeled 
     AFUE ratings for furnaces and boilers, labeled HSPF ratings 
     for electric heat pumps, and labeled SEER ratings for air 
     conditioners.
       ``(C) Ratings label affixed in dwelling.--A permanent label 
     documenting the ratings in subparagraph (B) shall be affixed 
     to the front of the electrical distribution panel of the 
     dwelling, or shall be otherwise permanently displayed in a 
     readily inspectable location in the dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for energy performance-based certification 
     methods, the Secretary, after examining the requirements for 
     energy consultants and home energy ratings providers 
     specified by the Mortgage Industry National Accreditation 
     Procedures for Home Energy Rating Systems, shall prescribe 
     procedures for calculating annual energy usage and cost 
     reductions for heating and cooling and for the reporting of 
     the results. Such regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     home to qualify for the credit under this section regardless 
     of whether the dwelling uses a gas or oil furnace or boiler 
     or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the homebuyer.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Accreditation Procedures for Home Energy Rating 
     Systems.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to

[[Page S5295]]

     any property, the increase in the basis of such property 
     which would (but for this subsection) result from such 
     expenditure shall be reduced by the amount of the credit so 
     allowed.
       ``(f) Termination.--Subsection (a) shall apply to dwellings 
     purchased during the period beginning on January 1, 2001, and 
     ending on December 31, 2005.''.
       (b) Credit Made Part of General Business Credit.--
     Subsection (b) of section 38 (relating to current year 
     business credit), as amended by section 903(d), is amended by 
     striking ``plus'' at the end of paragraph (15), by striking 
     the period at the end of paragraph (16) and inserting ``, 
     plus'', and by adding at the end the following:
       ``(17) the new energy-efficient home credit determined 
     under section 45H.''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by section 903(c), is amended by adding at the end the 
     following:
       ``(f) New Energy-Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a new 
     energy-efficient home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45H.''.
       (d) Credit Allowed Against Regular and Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for new energy efficient home credit.--
       ``(A) In general.--In the case of the new energy efficient 
     home 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) subparagraphs (A) and (B) 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 new 
     energy efficient home credit).

       ``(B) New energy efficient home credit.--For purposes of 
     this subsection, the term `new energy efficient home credit' 
     means the credit allowable under subsection (a) by reason of 
     section 45H.''.
       (2) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by inserting ``or the new energy 
     efficient home credit'' after ``employment credit''.
       (e) Limitation on Carryback.--Subsection (d) of section 39, 
     as amended by section 903(b), is amended by adding at the end 
     the following:
       ``(14) No carryback of new energy-efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45H may be carried back to 
     any taxable year ending before January 1, 2001.''.
       (f) Deduction for Certain Unused Business Credits.--
     Subsection (c) of section 196 is amended by striking ``and'' 
     at the end of paragraph (7), by striking the period at the 
     end of paragraph (8) and inserting ``, and'', and by adding 
     after paragraph (8) the following:
       ``(9) the new energy-efficient home credit determined under 
     section 45H.''.
       (g) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 903(d), is amended by inserting after the item 
     relating to section 45G the following:

``Sec. 45H. New energy-efficient home credit.''.

       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2000.

     SEC. 912. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by this Act, is amended by inserting after section 
     25C the following new section:

     ``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed by this section 
     with respect to a dwelling shall not exceed $2,000.
       ``(2) Prior credit amounts for taxpayer on same dwelling 
     taken into account.--If a credit was allowed to the taxpayer 
     under subsection (a) with respect to a dwelling in 1 or more 
     prior taxable years, the amount of the credit otherwise 
     allowable for the taxable year with respect to that dwelling 
     shall not exceed the amount of $2,000 reduced by the sum of 
     the credits allowed under subsection (a) to the taxpayer with 
     respect to the dwelling for all prior taxable years.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under subpart A of part IV of 
     subchapter A (other than this section), such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which is certified to meet or exceed the 
     prescriptive criteria for such component in the 2000 
     International Energy Conservation Code, or any combination of 
     energy efficiency measures which achieves at least a 30 
     percent reduction in heating and cooling energy usage for the 
     dwelling (as measured in terms of energy cost to the 
     taxpayer), if--
       ``(1) such component or combinations of measures is 
     installed in or on a dwelling--
       ``(A) located in the United States, and
       ``(B) owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component or combination of 
     measures commences with the taxpayer, and
       ``(3) such component or combination of measures reasonably 
     can be expected to remain in use for at least 5 years.
       ``(e) Certification.--The certification described in 
     subsection (d) shall be--
       ``(1) in the case of any component described in subsection 
     (d), determined on the basis of applicable energy efficiency 
     ratings (including product labeling requirements) for 
     affected building envelope components,
       ``(2) in the case of combinations of measures described in 
     subsection (d), determined by the performance-based methods 
     described in section 45H(d),
       ``(3) provided by a third party, such as a local building 
     regulatory authority, a utility, a manufactured home 
     production inspection primary inspection agency (IPIA), or a 
     home energy rating organization, consistent with the 
     requirements of section 45H(d)(2), and
       ``(4) made in writing on forms which specify in readily 
     inspectable fashion the energy-efficient components and other 
     measures and their respective efficiency ratings, and which 
     shall include a permanent label affixed to the electrical 
     distribution panel as described in section 45H(d)(3)(C).
       ``(f) Definitions and Special Rules.--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures for the qualified energy 
     efficiency improvements made during such calendar year by any 
     of such individuals with respect to such dwelling unit shall 
     be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having paid his proportionate share of the cost of 
     qualified energy efficiency improvements made by such 
     association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain or a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(5) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Termination.--Subsection (a) shall apply to qualified 
     energy efficiency improvements installed during the period 
     beginning

[[Page S5296]]

     on the date of the enactment of this section and ending on 
     December 31, 2005.''.
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 23, as amended by this Act, 
     is amended by inserting ``25D,'' after ``25C,''.
       (2) Subparagraph (C) of section 25(e)(1), as amended by 
     this Act, is amended by inserting ``25D,'' after ``25C,''.
       (3) Subsection (h) of seciton 904, as amended by this Act, 
     is amended by by striking ``or 25C'' and inserting ``, 25C, 
     or 25D''.
       (4) Subsection (d) of section 1400C is amended by inserting 
     ``and section 25C'' and inserting ``, section 25C, and 
     section 25D''.
       (4) Subsection (a) of section 1016, as amended by section 
     902(b), is amended by striking ``and'' at the end of 
     paragraph (27), by striking the period at the end of 
     paragraph (28) and inserting ``; and'', and by adding at the 
     end the following:
       ``(29) to the extent provided in section 25D(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 25C the 
     following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after the date of 
     the enactment of this Act.

     SEC. 913. CREDIT FOR RESIDENTIAL SOLAR, WIND, AND FUEL CELL 
                   ENERGY PROPERTY.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 912(a), is amended by inserting after 
     section 25D the following:

     ``SEC. 25E. RESIDENTIAL SOLAR, WIND, AND FUEL CELL ENERGY 
                   PROPERTY.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the sum 
     of--
       ``(1) 15 percent of the qualified photovoltaic property 
     expenditures,
       ``(2) 15 percent of the qualified solar water heating 
     property expenditures,
       ``(3) 30 percent of the qualified wind energy property 
     expenditures, and
       ``(4) 20 percent for the qualified fuel cell property 
     expenditures,
     made by the taxpayer during the taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed under subsection 
     (a)(2) shall not exceed $2,000 for each system of solar 
     energy property.
       ``(2) Type of property.--No expenditure may be taken into 
     account under this section unless such expenditure is made by 
     the taxpayer for property installed on or in connection with 
     a dwelling unit which is located in the United States and 
     which is used as a residence.
       ``(3) Safety certifications.--No credit shall be allowed 
     under this section for an item of property unless--
       ``(A) in the case of solar water heating property, such 
     property is certified for performance and safety by the non-
     profit Solar Rating Certification Corporation or a comparable 
     entity endorsed by the government of the State in which such 
     property is installed, and
       ``(B) in the case of a photovoltaic, wind energy, or fuel 
     cell property, such property meets appropriate fire and 
     electric code requirements.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified solar water heating property expenditure.--
     The term `qualified solar water heating property expenditure' 
     means an expenditure for property which uses solar energy to 
     heat water for use in a dwelling unit with respect to which a 
     majority of the energy is derived from the sun.
       ``(2) Qualified photovoltaic property expenditure.--The 
     term `qualified photovoltaic property expenditure' means an 
     expenditure for property which uses solar energy to generate 
     electricity for use in a dwelling unit.
       ``(3) Solar panels.--No expenditure relating to a solar 
     panel or other property installed as a roof (or portion 
     thereof) shall fail to be treated as property described in 
     paragraph (1) or (2) solely because it constitutes a 
     structural component of the structure on which it is 
     installed.
       ``(4) Qualified wind energy property expenditure.--The term 
     `qualified wind energy property expenditure' means an 
     expenditure for property which uses wind energy to generate 
     electricity for use in a dwelling unit.
       ``(5) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for property which uses an electrochemical fuel 
     cell system to generate electricity for use in a dwelling 
     unit.
       ``(6) Labor costs.--Expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property described in paragraph (1), (2), 
     (4), or (5) and for piping or wiring to interconnect such 
     property to the dwelling unit shall be taken into account for 
     purposes of this section.
       ``(7) Energy storage medium.--Expenditures which are 
     properly allocable to a swimming pool, hot tub, or any other 
     energy storage medium which has a function other than the 
     function of such storage shall not be taken into account for 
     purposes of this section.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be determined by treating 
     all of such individuals as 1 taxpayer whose taxable year is 
     such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which such individual owns, such individual 
     shall be treated as having made his proportionate share of 
     any expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Joint ownership of items of solar or wind energy 
     property.--
       ``(A) In general.--Any expenditure otherwise qualifying as 
     an expenditure described in paragraph (1), (2), or (4) of 
     subsection (c) shall not be treated as failing to so qualify 
     merely because such expenditure was made with respect to 2 or 
     more dwelling units.
       ``(B) Limits applied separately.--In the case of any 
     expenditure described in subparagraph (A), the amount of the 
     credit allowable under subsection (a) shall (subject to 
     paragraph (1)) be computed separately with respect to the 
     amount of the expenditure made for each dwelling unit.
       ``(5) Allocation in certain cases.--If less than 80 percent 
     of the use of an item is for nonbusiness residential 
     purposes, only that portion of the expenditures for such item 
     which is properly allocable to use for nonbusiness 
     residential purposes shall be taken into account. For 
     purposes of this paragraph, use for a swimming pool shall be 
     treated as use which is not for residential purposes.
       ``(6) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(7) Reduction of credit for grants, tax-exempt bonds, and 
     subsidized energy financing.--The rules of section 29(b)(3) 
     shall apply for purposes of this section.
       ``(e) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--The credit allowed under this section 
     shall not apply to taxable years beginning after December 31, 
     2011.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016, as amended by section 
     912(b)(4), is amended by striking ``and'' at the end of 
     paragraph (28), by striking the period at the end of 
     paragraph (29) and inserting ``; and'', and by adding at the 
     end the following:
       ``(30) to the extent provided in section 25E(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25E.''.
       (2) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 912(b)(2), 
     is amended by inserting after the item relating to section 
     25D the following:

``Sec. 25E. Residential solar, wind, and fuel cell energy property.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures made after the date of the 
     enactment

[[Page S5297]]

     of this Act, in taxable years ending after such date.

           Subtitle C--Electricity Facilities and Production

     SEC. 921. INCENTIVE FOR DISTRIBUTED GENERATION.

       (a) Depreciation of Distributed Power Property.--
       (1) In general.--Subparagraph (C) of section 168(e)(3) 
     (relating to 7-year property) is amended by redesignating 
     clause (ii) as clause (iii) and by inserting after clause (i) 
     the following:
       ``(ii) any distributed power property, and''.
       (2) 10-year class life.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (C)(i) the following:

``(C)(ii).........................................................10''.

       (b) Distributed Power Property.--Section 168(i) is amended 
     by adding at the end the following:
       ``(15) Distributed power property.--The term `distributed 
     power property' means property--
       ``(A) which is used in the generation of electricity for 
     primary use--
       ``(i) in nonresidential real or residential rental property 
     used in the taxpayer's trade or business, or
       ``(ii) in the taxpayer's industrial manufacturing process 
     or plant activity, with a rated total capacity in excess of 
     500 kilowatts,
       ``(B) which also may produce usable thermal energy or 
     mechanical power for use in a heating or cooling application, 
     as long as at least 40 percent of the total useful energy 
     produced consists of--
       ``(i) with respect to assets described in subparagraph 
     (A)(i), electrical power (whether sold or used by the 
     taxpayer), or
       ``(ii) with respect to assets described in subparagraph 
     (A)(ii), electrical power (whether sold or used by the 
     taxpayer) and thermal or mechanical energy used in the 
     taxpayer's industrial manufacturing process or plant 
     activity,
       ``(C) which is not used to transport primary fuel to the 
     generating facility or to distribute energy within or outside 
     of the facility,
       ``(D) which is not operated with diesel fuel, and
       ``(E) where it is reasonably expected that not more than 50 
     percent of the produced electricity will be sold to, or used 
     by, unrelated persons.

     For purposes of subparagraph (B), energy output is determined 
     on the basis of expected annual output levels, measured in 
     British thermal units (Btu), using standard conversion 
     factors established by the Secretary.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 922. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE AND WASTE PRODUCTS.

       (a) Increase in Credit Rate.--
       (1) In general.--Section 45(a)(1) is amended by striking 
     ``1.5 cents'' and inserting ``1.8 cents''.
       (2) Conforming amendments.--
       (A) Section 45(b)(2) is amended by striking ``1.5 cent'' 
     and inserting ``1.8 cent''.
       (B) Section 45(d)(2)(B) is amended by inserting ``(calendar 
     year 2001 in the case of the 1.8 cent amount in subsection 
     (a))'' after ``1992''.
       (b) Expansion of Qualified Resources.--
       (1) In general.--Section 45(c)(1) (relating to qualified 
     energy resources) is amended by striking ``and'' at the end 
     of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following:
       ``(D) alternative resources.''.
       (2) Definition of alternative resources.--Section 45(c) 
     (relating to definitions) is amended--
       (A) by redesignating paragraph (3) as paragraph (5),
       (B) by redesignating paragraph (4) as paragraph (3), and
       (C) by inserting after paragraph (3), as redesignated by 
     subparagraph (B), the following:
       ``(4) Alternative Resources.--
       ``(A) In general.--The term `alternative resources' means--
       ``(i) solar,
       ``(ii) biomass (other than closed loop biomass),
       ``(iii) municipal solid waste,
       ``(iv) incremental hydropower,
       ``(v) geothermal,
       ``(vi) landfill gas, and
       ``(vii) steel cogeneration.
       ``(B) Biomass.--The term `biomass' means any solid, 
     nonhazardous, cellulosic waste material or any organic 
     carbohydrate matter, which is segregated from other waste 
     materials, and which is derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) waste pallets, crates, dunnage, untreated wood waste 
     from construction or manufacturing activities, and landscape 
     or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste or post-consumer 
     wastepaper, or
       ``(iii) any of the following agriculture sources: orchard 
     tree crops, vineyard, grain, legumes, sugar, and other crop 
     by-products or residues, including any packaging and other 
     materials which are nontoxic and biodegradable and are 
     associated with the processing, feeding, selling, 
     transporting, and disposal of such agricultural materials.
       ``(C) Municipal solid waste.--The term `municipal solid 
     waste' has the same meaning given the term `solid waste' 
     under section 2(27) of the Solid Waste Utilization Act (42 
     U.S.C. 6903).
       ``(D) Incremental hydropower.--The term `incremental 
     hydropower' means additional generating capacity achieved 
     from--
       ``(i) increased efficiency, or
       ``(ii) additions of new capacity,
     at a licensed non-Federal hydroelectric project originally 
     placed in service before the date of the enactment of this 
     paragraph.
       ``(E) Geothermal.--The term `geothermal' means energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(F) Landfill gas.--The term `landfill gas' means gas 
     generated from the decomposition of any household solid 
     waste, commercial solid waste, and industrial solid waste 
     disposed of in a municipal solid waste landfill unit (as such 
     terms are defined in regulations promulgated under subtitle D 
     of the Solid Waste Disposal Act (42 U.S.C. 6941 et seq.).
       ``(G) Steel cogeneration.--The term `steel cogeneration' 
     means the production of electricity and steam (or other form 
     of thermal energy) from any or all waste sources defined in 
     paragraphs (2) and (3) and subparagraphs (B) and (C) of this 
     paragraph within an operating facility which produces or 
     integrates the production of coke, direct reduced iron ore, 
     iron, or steel provided that the cogeneration meets any 
     regulatory energy-efficiency standards established by the 
     Secretary, and only to the extent that such energy is 
     produced from--
       ``(i) gases or heat generated from the production of 
     metallurgical coke,
       ``(ii) gases or heat generated from the production of 
     direct reduced iron ore or iron, from blast furnace or direct 
     ironmaking processes, or
       ``(iii) gases or heat generated from the manufacture of 
     steel.''.
       (3) Qualified facility.--Section 45(c)(5) (defining 
     qualified facility), as redesignated by paragraph 2(A), is 
     amended by adding at the end the following:
       ``(D) Alternative resources facility.--
       ``(i) In general.--Except as provided in clauses (ii), 
     (iii), and (iv), in the case of a facility using alternative 
     resources to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this subparagraph.
       ``(ii) Biomass facility.--In the case of a facility using 
     biomass described in paragraph (4)(A)(ii) to produce 
     electricity, the term `qualified facility' means any facility 
     of the taxpayer.
       ``(iii) Geothermal facility.--In the case of a facility 
     using geothermal to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after December 31, 1992.
       ``(iv) Steel cogeneration facilities.--In the case of a 
     facility using steel cogeneration to produce electricity, the 
     term `qualified facility' means any facility permitted to 
     operate under the environmental requirements of the Clean Air 
     Act Amendments of 1990 which is owned by the taxpayer and 
     originally placed in service after the date of the enactment 
     of this subparagraph. Such a facility may be treated as 
     originally placed in service when such facility was last 
     upgraded to increase efficiency or generation capability 
     after such date.
       ``(v) Special rules.--In the case of a qualified facility 
     described in this subparagraph, the 10-year period referred 
     to in subsection (a) shall be treated as beginning no earlier 
     than the date of the enactment of this subparagraph.''.
       (4) Government-owned facility.--Section 45(d)(6) (relating 
     to credit eligibility in the case of government-owned 
     facilities using poultry waste) is amended--
       (A) by inserting ``or alternative resources'' after 
     ``poultry waste'', and
       (B) by inserting ``or alternative resources'' after 
     ``poultry waste'' in the heading thereof.
       (5) Qualified facilities with co-production.--Section 45(b) 
     (relating to limitations and adjustments) is amended by 
     adding at the end the following:
       ``(4) Increased credit for co-production facilities.--
       ``(A) In general.--In the case of a qualified facility 
     described in subsection (c)(3)(D)(i) which has a co-
     production facility or a qualified facility described in 
     subparagraph (A), (B), or (C) of subsection (c)(3) which adds 
     a co-production facility after the date of the enactment of 
     this paragraph, the amount in effect under subsection (a)(1) 
     for an eligible taxable year of a taxpayer shall (after 
     adjustment under paragraph (2) and before adjustment under 
     paragraphs (1) and (3)) be increased by .25 cents.
       ``(B) Co-production facility.--For purposes of subparagraph 
     (A), the term `co-production facility' means a facility 
     which--
       ``(i) enables a qualified facility to produce heat, 
     mechanical power, chemicals, liquid fuels, or minerals from 
     qualified energy resources in addition to electricity, and
       ``(ii) produces such energy on a continuous basis.
       ``(C) Eligible taxable year.--For purposes of subparagraph 
     (A), the term `eligible

[[Page S5298]]

     taxable year' means any taxable year in which the amount of 
     gross receipts attributable to the co-production facility of 
     a qualified facility are at least 10 percent of the amount of 
     gross receipts attributable to electricity produced by such 
     facility.''.
       (6) Qualified facilities located within qualified indian 
     lands.--Section 45(b) (relating to limitations and 
     adjustments), as amended by paragraph (5), is amended by 
     adding at the end the following:
       ``(5) Increased credit for qualified facility located 
     within qualified indian land.--In the case of a qualified 
     facility described in subsection (c)(3)(D) which--
       ``(A) is located within--
       ``(i) qualified Indian lands (as defined in section 
     7871(c)(3)), or
       ``(ii) lands which are held in trust by a Native 
     Corporation (as defined in section 3(m) of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1602(m)) for Alaska Natives, 
     and
       ``(B) is operated with the explicit written approval of the 
     Indian tribal government or Native Corporation (as so 
     defined) having jurisdiction over such lands,

     the amount in effect under subsection (a)(1) for a taxable 
     year shall (after adjustment under paragraphs (2) and (4) and 
     before adjustment under paragraphs (1) and (3)) be increased 
     by .25 cents.''.
       (7) Electricity produced from certain resources co-fired in 
     coal plants.--Section 45(d) (relating to definitions and 
     special rules) is amended by adding at the end the following:
       ``(8) Special rule for electricity produced from certain 
     resources co-fired in coal plants.--In the case of 
     electricity produced from biomass (including closed loop 
     biomass), municipal solid waste, or animal waste, co-fired in 
     a facility which produces electricity from coal--
       ``(A) subsection (a)(1) shall be applied by substituting `1 
     cent' for `1.8 cents',
       ``(B) such facility shall be considered a qualified 
     facility for purposes of this section, and
       ``(C) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph.''.
       (8) Conforming amendments.--
       (A) The heading for section 45 is amended by inserting 
     ``AND WASTE ENERGY'' after ``RENEWABLE''.
       (B) The item relating to section 45 in the table of 
     sections subpart D of part IV of subchapter A of chapter 1 is 
     amended by inserting ``and waste energy'' after 
     ``renewable''.
       (c) Additional Modifications of Renewable and Waste Energy 
     Resource Credit.--
       (1) Credits for certain tax exempt organizations and 
     governmental units.--Section 45(d) (relating to definitions 
     and special rules), as amended by subsection (b)(7), is 
     amended by adding at the end the following:
       ``(9) Credits for certain tax exempt organizations and 
     governmental units.--
       ``(A) Allowance of credit.--Any credit which would be 
     allowable under subsection (a) with respect to a qualified 
     facility of an entity if such entity were not exempt from tax 
     under this chapter shall be treated as a credit allowable 
     under subpart C to such entity if such entity is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C), 
     or
       ``(iii) any State or political subdivision thereof, any 
     possession of the United States, any Indian tribal government 
     (within the meaning of section 7871), or any agency or 
     instrumentality of any of the foregoing.
       ``(B) Use of credit.--
       ``(i) Transfer of credit.--An entity described in 
     subparagraph (A) may assign, trade, sell, or otherwise 
     transfer any credit allowable to such entity under 
     subparagraph (A) to any taxpayer.
       ``(ii) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of an entity described in 
     clause (i) or (ii) of subparagraph (A), any credit allowable 
     to such entity under subparagraph (A) may be applied by such 
     entity, without penalty, as a prepayment of any loan, debt, 
     or other obligation the entity has incurred under subchapter 
     I of chapter 31 of title 7 of the Rural Electrification Act 
     of 1936 (7 U.S.C. 901 et seq.).
       ``(C) Credit not income.--Neither a transfer under clause 
     (i) or a use under clause (ii) of subparagraph (B) of any 
     credit allowable under subparagraph (A) shall result in 
     income for purposes of section 501(c)(12).
       ``(D) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by an entity 
     described in subparagraph (A)(iii) from the transfer of any 
     credit under subparagraph (B)(i) shall be treated as arising 
     from an essential government function.
       ``(E) Credits not reduced by tax-exempt bonds or certain 
     other subsidies.--Subsection (b)(3) shall not apply to reduce 
     any credit allowable under subparagraph (A) with respect to--
       ``(i) proceeds described in subparagraph (A)(ii) of such 
     subsection, or
       ``(ii) any loan, debt, or other obligation incurred under 
     subchapter I of chapter 31 of title 7 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.),
     used to provide financing for any qualified facility.
       ``(F) Treatment of unrelated persons.--For purposes of this 
     paragraph, sales among and between entities described in 
     subparagraph (A) shall be treated as sales between unrelated 
     parties.''.
       (2) Coordination with other credits.--Section 45(d), as 
     amended by paragraph (1), is amended by adding at the end the 
     following:
       ``(10) Coordination with other credits.--This section shall 
     not apply to any qualified facility with respect to which a 
     credit under any other section is allowed for the taxable 
     year unless the taxpayer elects to waive the application of 
     such credit to such facility.''.
       (3) Expansion to include animal waste.--Section 45 
     (relating to electricity produced from certain renewable 
     resources), as amended by paragraphs (2) and (4) of 
     subsection (b), is amended--
       (A) by striking ``poultry'' each place it appears in 
     subsection (c)(1)(C) and subsection (d)(6) and inserting 
     ``animal'',
       (B) by striking ``poultry'' in the heading of paragraph (6) 
     of subsection (d) and inserting ``animal'',
       (C) by striking paragraph (3) of subsection (c) and 
     inserting the following:
       ``(3) Animal waste.--The term `animal waste' means poultry 
     manure and litter and other animal wastes, including--
       ``(A) wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure, and
       ``(B) byproducts, packaging, and other materials which are 
     nontoxic and biodegradable and are associated with the 
     processing, feeding, selling, transporting, and disposal of 
     such animal wastes.'', and
       (D) by striking subparagraph (C) of subsection (c)(5) and 
     inserting the following:
       ``(C) Animal waste facility.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of a facility using animal waste (other than 
     poultry) to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this clause.
       ``(ii) Poultry waste.--In the case of a facility using 
     animal waste relating to poultry to produce electricity, the 
     term `qualified facility' means any facility of the taxpayer 
     which is originally placed in service after December 31, 
     1999.''.
       (4) Treatment of qualified facilities not in compliance 
     with pollution laws.--Section 45(c)(5) (relating to qualified 
     facilities), as amended by paragraphs (2) and (3) of 
     subsection (b), is amended by adding at the end the 
     following:
       ``(E) Noncompliance with pollution laws.--For purposes of 
     this paragraph, a facility which is not in compliance with 
     the applicable State and Federal pollution prevention, 
     control, and permit requirements for any period of time shall 
     not be considered to be a qualified facility during such 
     period.''.
       (5) Permanent extension of qualified facility dates.--
     Section 45(c)(5) (relating to qualified facility), as 
     redesignated by subsection (b)(2), is amended by striking ``, 
     and before January 1, 2002'' in subparagraphs (A) and (B).
       (d) Effective Date.--The amendments made by this section 
     shall apply to electricity and other energy produced after 
     the date of the enactment of this Act.

     SEC. 923. TREATMENT OF FACILITIES USING BAGASSE TO PRODUCE 
                   ENERGY AS SOLID WASTE DISPOSAL FACILITIES 
                   ELIGIBLE FOR TAX-EXEMPT FINANCING.

       (a) In General.--Section 142 (relating to exempt facility 
     bond) is amended by adding at the end the following:
       ``(k) Solid Waste Disposal Facilities.--For purposes of 
     subsection (a)(6), the term `solid waste disposal facilities' 
     includes property located in Hawaii and used for the 
     collection, storage, treatment, utilization, processing, or 
     final disposal of bagasse in the manufacture of ethanol.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 924. PROPERTY USED IN THE TRANSMISSION OF ELECTRICITY 
                   AND NATURAL GAS PIPELINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) Depreciation of Property Used in the Transmission of 
     Electricity and Natural Gas Pipelines.--
       (1) In general.--Subparagraph (C) of section 168(e)(3) 
     (relating to 7-year property), as amended by section 
     921(a)(1), is amended by striking ``and'' at the end of 
     clause (ii), by redesignating clause (iii) as clause (v), and 
     by inserting after clause (ii) the following:
       ``(iii) any property used in the transmission of 
     electricity,
       ``(iv) any gas pipeline, and''.
       (2) 10-year class life.--The table contained in section 
     168(g)(3)(B), as amended by section 921(a)(2), is amended by 
     inserting after the item relating to subparagraph (C)(ii) the 
     following:

``(C)(iii)........................................................10''.
``(C)(iv).........................................................10''.

       (b) Definitions.--Section 168(i), as amended by section 
     921(b), is amended by adding at the end the following:
       ``(16) Property used in the transmission of electricity.--
     The term `property used in the transmission of electricity' 
     means property used in the transmission of electricity for 
     sale.
       ``(17) Gas pipeline.--The term `gas pipeline' means the 
     pipe, storage facilities, equipment, distribution 
     infrastructure, and appurtenances used to deliver natural 
     gas.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to property placed in

[[Page S5299]]

     service after the date of the enactment of this Act.
       (2) Accounting rule for public utility property.--If any 
     gas pipeline is public utility property (as defined in 
     section 46(f)(5) of the Internal Revenue Code of 1986, as in 
     effect on the day before the date of the enactment of the 
     Revenue Reconciliation Act of 1990), the amendments made by 
     this section shall only apply to such property if, with 
     respect to such property, the taxpayer uses a normalization 
     method of accounting.

               Subtitle D--Tax Incentives for Ethanol Use

     SEC. 931. ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A 
                   COOPERATIVE.

       (a) In General.--Section 40(d) (relating to alcohol used as 
     fuel) is amended by adding at the end the following:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization made on a 
     timely filed return (including extensions) for such year, be 
     apportioned pro rata among patrons of the organization on the 
     basis of the quantity or value of business done with or for 
     such patrons for the taxable year. Such an election, once 
     made, shall be irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons pursuant to subparagraph 
     (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) for the taxable year of the organization, and
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron in which 
     the patronage dividend for the taxable year referred to in 
     subparagraph (A) is includible in gross income.
       ``(C) Special rule for decreasing credit for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     cooperative organization's return for such year, an amount 
     equal to the excess of such reduction over the amount not 
     apportioned to the patrons under subparagraph (A) for the 
     taxable year shall be treated as an increase in tax imposed 
     by this chapter on the organization. Any such increase shall 
     not be treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this subpart or 
     subpart A, B, E, or G of this part.''.
       (b) Technical Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol fuels credit between cooperative 
     organizations and their patrons, see section 40(d)(6).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 932. ADDITIONAL TAX INCENTIVES FOR ETHANOL USE.

       (a) Diesel Fuel Mixed With Alcohol Treated Same as 
     Gasoline.--
       (1) Qualified alcohol mixture.--Section 4081(c)(3)(B) 
     (defining qualified alcohol mixture) is amended to read as 
     follows:
       ``(B) Qualified alcohol mixture.--The term `qualified 
     alcohol mixture' means any mixture of gasoline or diesel fuel 
     with alcohol if at least 5.7 percent of such mixture is 
     alcohol.''.
       (2) Alcohol mixture rates.--
       (A) In general.--Section 4081(c)(4)(A) (relating to alcohol 
     mixture rates for gasoline mixtures) is amended--
       (i) by striking ``which contains gasoline'' in clauses (i) 
     and (ii), and
       (ii) by striking ``10 percent gasohol'', ``7.7 percent 
     gasohol'', and ``5.7 percent gasohol'' each place such terms 
     appear in clauses (i) and (ii), and inserting ``a 10 percent 
     mixture'', ``a 7.7 percent mixture'', and ``a 5.7 percent 
     mixture'', respectively.
       (B) Definitions.--Section 4081(c)(4) is amended by striking 
     subparagraphs (B), (C), and (D) and inserting:
       ``(B) 10 percent mixture.--The term `10 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 10 percent of such mixture is alcohol.
       ``(C) 7.7 percent mixture.--The term `7.7 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 7.7 percent of such mixture is alcohol.
       ``(D) 5.7 percent mixture.--The term `5.7 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 5.7 percent of such mixture is alcohol.''
       (C) Conforming amendments.--
       (i) The heading for section 4081(c)(4) is amended by 
     striking ``gasoline'' and inserting ``alcohol''.
       (ii) Section 4081(c) is amended by striking paragraph (5) 
     and by redesignating paragraphs (6), (7), and (8) as 
     paragraphs (5), (6), and (7), respectively.
       (b) Definition of Alcohol.--Section 4081(c)(3)(A) (defining 
     alcohol) is amended by striking ``and ethanol'' and inserting 
     ``, ethanol, or other alcohol,''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2001.

 Subtitle E--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

     SEC. 941. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN 
                   COAL TECHNOLOGY.

       (a) Allowance of Qualifying Advanced Clean Coal Technology 
     Facility Credit.--Section 46 (relating to amount of 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 the following:
       ``(4) the qualifying advanced clean coal technology 
     facility credit.''.
       (b) Amount of Qualifying Advanced Clean Coal Technology 
     Facility Credit.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment 
     credit), as amended by section 901(a), is amended by 
     inserting after section 48A the following:

     ``SEC. 48B. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY 
                   FACILITY CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying advanced clean coal technology facility credit for 
     any taxable year is an amount equal to 10 percent of the 
     qualified investment in a qualifying advanced clean coal 
     technology facility for such taxable year.
       ``(b) Qualifying Advanced Clean Coal Technology Facility.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `qualifying advanced clean coal technology facility' means a 
     facility of the taxpayer which--
       ``(A)(i)(I) replaces a conventional technology facility of 
     the taxpayer and the original use of which commences with the 
     taxpayer, or
       ``(II) is a retrofitted or repowered conventional 
     technology facility, the retrofitting or repowering of which 
     is completed by the taxpayer (but only with respect to that 
     portion of the basis which is properly attributable to such 
     retrofitting or repowering), or
       ``(ii) is acquired through purchase (as defined by section 
     179(d)(2)),
       ``(B) is depreciable under section 167,
       ``(C) has a useful life of not less than 4 years,
       ``(D) is located in the United States, and
       ``(E) uses qualifying advanced clean coal technology.
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a facility 
     which--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such facility 
     was originally placed in service, for a period of not less 
     than 12 years,

     such facility shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback (or lease) referred to in 
     subparagraph (B). The preceding sentence shall not apply to 
     any property if the lessee and lessor of such property make 
     an election under this sentence. Such an election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(3) Qualifying advanced clean coal technology.--For 
     purposes of paragraph (1)--
       ``(A) In general.--The term `qualifying advanced clean coal 
     technology' means, with respect to clean coal technology, 
     multiple applications, with a combined capacity of not more 
     than 5,000 megawatts, of integrated gasification combined 
     cycle technology, with or without fuel or chemical co-
     production--
       ``(i) installed as a new, retrofit, or repowering 
     application,
       ``(ii) operated between 2001 and 2015,
       ``(iii) with a design net heat rate of not more than 8,550 
     Btu per kilowatt hour when the design coal has a heat content 
     of more than 8,000 Btu per pound, or a design net heat rate 
     of not more than 9,900 Btu per kilowatt hour when the design 
     coal has a heat content of 8,000 Btu per pound or less, and
       ``(iv) with a net thermal efficiency on any fuel or 
     chemical co-production of not less than 39 percent (higher 
     heating value).
       ``(B) Exceptions.--Such term shall not include clean coal 
     technology projects receiving or scheduled to receive funding 
     under the Clean Coal Technology Program of the Department of 
     Energy.
       ``(C) Clean coal technology.--The term `clean coal 
     technology' means advanced technology which uses coal to 
     produce 75 percent or more of its thermal output as 
     electricity and which exceeds the performance of conventional 
     technology.
       ``(D) Conventional technology.--The term `conventional 
     technology' means--
       ``(i) coal-fired combustion technology with a design net 
     heat rate of not less than 9,500 Btu per kilowatt hour (HHV) 
     and a carbon equivalents emission rate of not more than 0.54 
     pounds of carbon per kilowatt hour when the design coal has a 
     heat content of more than 8,000 Btu per pound,
       ``(ii) coal-fired combustion technology with a design net 
     heat rate of not less than 10,500 Btu per kilowatt hour (HHV) 
     and a carbon equivalents emission rate of not more than 0.60 
     pounds of carbon per kilowatt hour when the design coal has a 
     heat content of 8,000 Btu per pound or less, or
       ``(iii) natural gas-fired combustion technology with a 
     design net heat rate of not less than 7,500 Btu per kilowatt 
     hour (HHV) and a carbon equivalents emission rate of not more 
     than 0.24 pounds of carbon per kilowatt hour.
       ``(E) Design net heat rate.--The design net heat rate shall 
     be based on the design annual heat input to and the design 
     annual net

[[Page S5300]]

     electrical output from the qualifying advanced clean coal 
     technology (determined without regard to such technology's 
     co-generation of steam).
       ``(F) Selection criteria.--Selection criteria for clean 
     coal technology facilities--
       ``(i) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(ii) shall include primary criteria of minimum design net 
     heat rate, maximum design thermal efficiency, and lowest cost 
     to the government, and
       ``(iii) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(4) Noncompliance with pollution laws.--For purposes of 
     this subsection, a facility which is not in compliance with 
     the applicable State and Federal pollution prevention, 
     control, and permit requirements for any period of time shall 
     not be considered to be a qualifying advanced clean coal 
     technology facility during such period.
       ``(c) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualifying advanced clean 
     coal technology facility placed in service by the taxpayer 
     during such taxable year.
       ``(d) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (c) without regard 
     to this section) shall be increased by an amount equal to the 
     aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which it is reasonable to believe will qualify as a 
     qualifying advanced clean coal technology facility which is 
     being constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Nonself-constructed property.--In the case of 
     nonself-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Nonself-constructed property.--The term `nonself-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualifying advanced clean coal 
     technology facility to be taken into account.--Construction 
     shall be taken into account only if, for purposes of this 
     subpart, expenditures therefor are properly chargeable to 
     capital account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(e) Credits for Certain Tax Exempt Organizations and 
     Governmental Units.--
       ``(1) Allowance of credit.--Any credit which would be 
     allowable under subsection (a) with respect to a qualifying 
     advanced clean coal technology facility of an entity if such 
     entity were not exempt from tax under this chapter shall be 
     treated as a credit allowable under subpart C to such entity 
     if such entity is--
       ``(A) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(B) an organization described in section 1381(a)(2)(C),
       ``(C) any State or political subdivision thereof, any 
     possession of the United States, any Indian tribal government 
     (within the meaning of section 7871), or any agency or 
     instrumentality of any of the foregoing, or
       ``(D) the Tennessee Valley Authority.
       ``(2) Use of credit.--
       ``(A) Transfer of credit.--An entity described in 
     subparagraph (A), (B), or (C) of paragraph (1) may assign, 
     trade, sell, or otherwise transfer any credit allowable to 
     such entity under paragraph (1) to any taxpayer.
       ``(B) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of an entity described in 
     subparagraph (A) or (B) of paragraph (1), any credit 
     allowable to such entity under paragraph (1) may be applied 
     by such entity, without penalty, as a prepayment of any loan, 
     debt, or other obligation the entity has incurred under 
     subchapter I of chapter 31 of title 7 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.).
       ``(C) Use by tva.--
       ``(i) In general.--Notwithstanding any other provision of 
     law, in the case of an entity described in paragraph (1)(D), 
     any credit allowable under paragraph (1) to such entity may 
     be applied as a credit against the payments required to be 
     made in any fiscal year under section 15d(e) of the Tennessee 
     Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an 
     annual return on the appropriations investment and an annual 
     repayment sum.
       ``(ii) Treatment of credits.--The aggregate amount of 
     credits described in paragraph (1) shall be treated in the 
     same manner and to the same extent as if such credits were a 
     payment in cash and shall be applied first against the annual 
     return on the appropriations investment.
       ``(iii) Credit carryover.--With respect to any fiscal year, 
     if the aggregate amount of credits described in paragraph (1) 
     exceeds the aggregate amount of payment obligations described 
     in clause (i), the excess amount shall remain available for 
     application as credits against the amounts of such payment 
     obligations in succeeding fiscal years in the same manner as 
     described in this subparagraph.
       ``(3) Credit not income.--Neither a transfer under 
     subparagraph (A) or a use under subparagraph (B) of paragraph 
     (2) of any credit allowable under paragraph (1) shall result 
     in income for purposes of section 501(c)(12).
       ``(4) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by an entity 
     described in paragraph (1)(C) from the transfer of any credit 
     under paragraph (2)(A) shall be treated as arising from an 
     essential government function.
       ``(f) Coordination With Other Credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48A is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.
       ``(g) Termination.--This section shall not apply with 
     respect to any qualified investment made more than 10 years 
     after the effective date of this section.''.
       (c) Recapture.--Section 50(a) (relating to other special 
     rules) is amended by adding at the end the following:
       ``(6) Special rules relating to qualifying advanced clean 
     coal technology facility.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48B, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying advanced clean coal technology facility (as 
     defined by section 48B(b)(1)) multiplied by a fraction whose 
     numerator is the number of years remaining to fully 
     depreciate under this title the qualifying advanced clean 
     coal technology facility disposed of, and whose denominator 
     is the total number of years over which such facility would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     qualifying advanced clean coal technology facility property 
     shall be treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying advanced clean coal technology facility 
     under section 48B, except that the amount of the increase in 
     tax under subparagraph (A) of this paragraph shall be 
     substituted in lieu of the amount described in such paragraph 
     (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying advanced clean coal 
     technology facility.''.
       (d) Transitional Rule.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transitional rules), as 
     amended by section 911(e), is amended by adding at the end 
     the following:
       ``(15) No carryback of section 48b credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology facility credit determined under 
     section 48B may be carried back to a taxable year ending 
     before January 1, 2002.''.
       (e) Technical Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following:
       ``(iv) the portion of the basis of any qualifying advanced 
     clean coal technology facility attributable to any qualified 
     investment (as defined by section 48B(c)).''.
       (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
     inserting ``(2), and (6)''.
       (3) Section 50(c) is amended by adding at the end the 
     following:
       ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
     apply to any advanced clean coal technology facility credit 
     under section 48B.''.
       (4) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1, as

[[Page S5301]]

     amended by section 901(c), is amended by inserting after the 
     item relating to section 48A the following:

``Sec. 48B. Qualifying advanced clean coal technology facility 
              credit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 2001, under rules 
     similar to the rules of section 48(m) of the Internal Revenue 
     Code of 1986 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).

     SEC. 942. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY.

       (a) Credit for Production From Qualifying Advanced Clean 
     Coal Technology.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business related credits), as amended by section 911(a), is 
     amended by adding at the end the following:

     ``SEC. 45I. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying advanced clean coal technology production credit 
     of any taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of advanced clean coal 
     technology production credit, multiplied by
       ``(2) the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying advanced clean coal technology facility during the 
     10-year period beginning on the date the facility was 
     originally placed in service.
       ``(b) Applicable Amount.--For purposes of this section, the 
     applicable amount of advanced clean coal technology 
     production credit with respect to production from a 
     qualifying advanced clean coal technology facility shall be 
     determined as follows:
       ``(1) Where the design coal has a heat content of more than 
     8,000 Btu per pound:
       ``(A) In the case of a facility originally placed in 
     service before 2008, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 8,400...............        $.0050             $.0030
More than 8,400 but not more than         $.0010             $.0010
 8,550.
More than 8,550 but not more than         $.0005            $.0005.
 8,750.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2007 and before 2012, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 7,770...............        $.0090             $.0075
More than 7,770 but not more than         $.0070             $.0050
 8,125.
More than 8,125 but not more than         $.0060            $.0040.
 8,350.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2011 and before 2015, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 7,380...............        $.0120             $.0090
More than 7,380 but not more than         $.0095            $.0070.
 7,720.
------------------------------------------------------------------------

       ``(2) Where the design coal has a heat content of not more 
     than 8,000 Btu per pound:
       ``(A) In the case of a facility originally placed in 
     service before 2008, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 8,500...............        $.0050             $.0030
More than 8,500 but not more than         $.0010             $.0010
 8,650.
More than 8,650 but not more than         $.0005            $.0005.
 8,750.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2007 and before 2012, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 8,000...............        $.0090             $.0075
More than 8,000 but not more than         $.0070             $.0050
 8,250.
More than 8,250 but not more than         $.0060            $.0040.
 8,400.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2011 and before 2015, if--

------------------------------------------------------------------------
                                          The applicable amount is:
  ``The facility design net heat   -------------------------------------
 rate, Btu/kWh (HHV) is equal to:    For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not more than 7,800...............        $.0120             $.0090
More than 7,800 but not more than         $.0095            $.0070.
 7,950.
------------------------------------------------------------------------

       ``(3) Where the clean coal technology facility is producing 
     fuel or chemicals:
       ``(A) In the case of a facility originally placed in 
     service before 2008, if--

------------------------------------------------------------------------
                                          The applicable amount is:
 ``The facility design net thermal -------------------------------------
   efficiency (HHV) is equal to:     For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not less than 40.6 percent........        $.0050             $.0030
Less than 40.6 but not less than          $.0010             $.0010
 40 percent.
Less than 40 but not less than 39         $.0005            $.0005.
 percent.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2007 and before 2012, if--

------------------------------------------------------------------------
                                          The applicable amount is:
 ``The facility design net thermal -------------------------------------
   efficiency (HHV) is equal to:     For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not less than 43.9 percent........        $.0090             $.0075
Less than 43.9 but not less than          $.0070             $.0050
 42 percent.
Less than 42 but not less than            $.0060            $.0040.
 40.9 percent.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2011 and before 2015, if--

------------------------------------------------------------------------
                                          The applicable amount is:
 ``The facility design net thermal -------------------------------------
   efficiency (HHV) is equal to:     For 1st 5 years   For 2d 5 years of
                                     of such service      such service
------------------------------------------------------------------------
Not less than 44.2 percent........        $.0120             $.0090
Less than 44.2 but not less than          $.0095            $.0070.
 43.6 percent.
------------------------------------------------------------------------

       ``(c) Inflation Adjustment Factor.--For calendar years 
     after 2001, each amount in paragraphs (1), (2), and (3) shall 
     be adjusted by multiplying such amount by the inflation 
     adjustment factor for the calendar year in which the amount 
     is applied. If any amount as increased under the preceding 
     sentence is not a multiple of 0.01 cent, such amount shall be 
     rounded to the nearest multiple of 0.01 cent.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) In general.--Any term used in this section which is 
     also used in section 48B shall have the meaning given such 
     term in section 48B.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 45(d) and section 48B(e) shall apply.
       ``(3) Inflation adjustment factor.--The term `inflation 
     adjustment factor' means, with respect to a calendar year, a 
     fraction the numerator of which is the GDP implicit price 
     deflator for the preceding calendar year and the denominator 
     of which is the GDP implicit price deflator for the calendar 
     year 2000.
       ``(4) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means the most recent revision of the 
     implicit price deflator for the gross domestic product as 
     computed by the Department of Commerce before March 15 of the 
     calendar year.''.
       (b) Credit Treated as Business Credit.--Section 38(b), as 
     amended by section 911(b), is amended by striking ``plus'' at 
     the end of paragraph (16), by striking the period at the end 
     of paragraph (17) and inserting ``, plus'', and by adding at 
     the end the following:
       ``(18) the qualifying advanced clean coal technology 
     production credit determined under section 45I(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by section 941(d), is amended 
     by adding at the end the following:
       ``(16) No carryback of section 45i credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology production credit determined under 
     section 45I may be carried back to a taxable year ending 
     before the date of the enactment of section 45I.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 911(g), is amended by adding at the end the 
     following:

``Sec. 45I. Credit for production from qualifying advanced clean coal 
              technology.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 943. RISK POOL FOR QUALIFYING ADVANCED CLEAN COAL 
                   TECHNOLOGY.

       (a) Establishment.--The Secretary of the Treasury shall 
     establish a financial risk pool which shall be available to 
     any United States owner of a qualifying advanced clean coal 
     technology which has qualified for an advanced clean coal 
     technology production credit (as defined in section 45I of 
     the Internal Revenue Code of 1986, as added by section 942) 
     to offset for the first 3 years of the operation of such 
     technology the costs (not to exceed 5 percent of the total 
     cost of installation) for modifications resulting from the 
     technology's failure to achieve its design performance.
       (b) Authorization of Appropriations.--There is authorized 
     to be appropriated such sums as are necessary to carry out 
     the purposes of this section.

   Subtitle F--Tax Incentives for Qualified Energy Management Devices

     SEC. 951. CREDIT FOR QUALIFIED ENERGY MANAGEMENT DEVICES.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to foreign

[[Page S5302]]

     tax credits, etc.) is amended by inserting after section 30A 
     the following new section:

     ``SEC. 30B. CREDIT FOR QUALIFIED ENERGY MANAGEMENT DEVICES.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to 20 percent of the cost of any 
     qualified energy management device placed in service by the 
     taxpayer during the taxable year.
       ``(b) Qualified Energy Management Device.--For purposes of 
     this section, the term `qualified energy management device' 
     means equipment, systems, software, and related devices which 
     have as a purpose allowing electric energy and natural gas 
     consumers, suppliers, and service providers to manage the 
     purchase, sale, and use of electricity and natural gas in 
     response to energy price and usage signals, in order to 
     improve the efficiency of energy and energy facility 
     utilization.
       ``(c) Special Rules.--
       ``(1) Denial of double benefit.--No deduction or other 
     credit shall be allowed under this chapter for any 
     expenditure for which credit is allowed under this section.
       ``(2) Application with other credits.--The credit allowable 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(A) the regular tax for the taxable year, reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, and 30, over
       ``(B) the tentative minimum tax for the taxable year.
       ``(3) Basis reduction.--The basis of any property for which 
     a credit is allowable under subsection (a) shall be reduced 
     by the amount of such credit.
       ``(4) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property that ceases 
     to be property eligible for such credit.
       ``(5) Property used outside the united states, etc., not 
     qualified.--No credit shall be allowed under subsection (a) 
     with respect to any property referred to in section 50(b)(1) 
     or with respect to the portion of the cost of any property 
     taken into account under section 179.
       ``(6) Election to not take credit.--No credit shall be 
     allowed under subsection (a) for any energy management device 
     if the taxpayer elects to not have this section apply to such 
     device.''.
       (b) Conforming Amendments.--
       (1) The table of contents for subpart B of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 30A the following new item:

``Sec. 30B. Credit for qualified energy management devices.''.
       (2) Section 1016(a), as amended by this title, is amended 
     by striking ``and'' at the end of paragraph (29), by striking 
     the period at the end of paragraph (30) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(31) to the extent provided in section 30B(c)(1).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     enactment.

     SEC. 952. 3-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION 
                   OF ENERGY MANAGEMENT EQUIPMENT.

       (a) In General.--Section 168(e)(3)(A) (relating to 
     classification of property) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) any qualified energy management equipment.''.
       (b) Definition of Qualified Energy Management Equipment.--
     Section 168(i) (relating to definitions and special rules), 
     as amended by this title, is amended by inserting at the end 
     the following new subsection:
       ``(18) Qualified energy management equipment.--The term 
     `qualified energy management equipment' means monitoring 
     devices and meters, related communications equipment or 
     systems, and associated equipment and devices, designed to 
     improve the efficiency of energy and energy facility 
     utilization, including equipment which--
       ``(A) allows interactive communication relating to energy 
     usage and cost between energy consumers, suppliers, and 
     service providers,
       ``(B) allows energy consumers, suppliers, and service 
     providers to respond to energy price signals in order to 
     manage the purchase and use of energy, or
       ``(C) allows for similar synchronized demand-side energy 
     management.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after date of 
     enactment.

                      Subtitle G--Other Provisions

     SEC. 961. ALTERNATIVE MOTOR VEHICLE CREDIT.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to foreign tax credit, etc.), as amended 
     by section 951, is amended by adding at the end the 
     following:

     ``SEC. 30C. ALTERNATIVE MOTOR VEHICLE CREDIT.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the sum of--
       ``(1) the new qualified fuel cell motor vehicle credit 
     determined under subsection (b),
       ``(2) the new qualified hybrid motor vehicle credit 
     determined under subsection (c), and
       ``(3) the new qualified alternative fuel motor vehicle 
     credit determined under subsection (d).
       ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified fuel cell motor vehicle credit determined under 
     this subsection with respect to a new qualified fuel cell 
     motor vehicle placed in service by the taxpayer during the 
     taxable year is--
       ``(A) $4,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $20,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(2) Increase for fuel efficiency.--
       ``(A) In general.--The amount determined under paragraph 
     (1)(A) with respect to a new qualified fuel cell motor 
     vehicle which is a passenger automobile or light truck shall 
     be increased by--
       ``(i) $1,000, if such vehicle achieves at least 150 percent 
     but less than 175 percent of the 2000 model year city fuel 
     economy,
       ``(ii) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2000 model year city 
     fuel economy,
       ``(iii) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2000 model year city 
     fuel economy,
       ``(iv) $2,500, if such vehicle achieves at least 225 
     percent but less than 250 percent of the 2000 model year city 
     fuel economy,
       ``(v) $3,000, if such vehicle achieves at least 250 percent 
     but less than 275 percent of the 2000 model year city fuel 
     economy,
       ``(vi) $3,500, if such vehicle achieves at least 275 
     percent but less than 300 percent of the 2000 model year city 
     fuel economy, and
       ``(vii) $4,000, if such vehicle achieves at least 300 
     percent of the 2000 model year city fuel economy.
       ``(B) 2000 model year city fuel economy.--For purposes of 
     subparagraph (A), the 2000 model year city fuel economy with 
     respect to a vehicle shall be determined in accordance with 
     the following tables:
       ``(i) In the case of a passenger automobile:

``If vehicle inertia weight clThe 0000 model year city fuel economy is:
  1,500 or 1,750 lbs..........................................43.7 mpg 
  2,000 lbs...................................................38.3 mpg 
  2,250 lbs...................................................34.1 mpg 
  2,500 lbs...................................................30.7 mpg 
  2,750 lbs...................................................27.9 mpg 
  3,000 lbs...................................................25.6 mpg 
  3,500 lbs...................................................22.0 mpg 
  4,000 lbs...................................................19.3 mpg 
  4,500 lbs...................................................17.2 mpg 
  5,000 lbs...................................................15.5 mpg 
  5,500 lbs...................................................14.1 mpg 
  6,000 lbs...................................................12.9 mpg 
  6,500 lbs...................................................11.9 mpg 
  7,000 or 8,500 lbs..........................................11.1 mpg.
       ``(ii) In the case of a light truck:

``If vehicle inertia weight clThe 0000 model year city fuel economy is:
  1,500 or 1,750 lbs..........................................37.6 mpg 
  2,000 lbs...................................................33.7 mpg 
  2,250 lbs...................................................30.6 mpg 
  2,500 lbs...................................................28.0 mpg 
  2,750 lbs...................................................25.9 mpg 
  3,000 lbs...................................................24.1 mpg 
  3,500 lbs...................................................21.3 mpg 
  4,000 lbs...................................................19.0 mpg 
  4,500 lbs...................................................17.3 mpg 
  5,000 lbs...................................................15.8 mpg 
  5,500 lbs...................................................14.6 mpg 
  6,000 lbs...................................................13.6 mpg 
  6,500 lbs...................................................12.8 mpg 
  7,000 or 8,500 lbs..........................................12.0 mpg.
       ``(C) Vehicle inertia weight class.--For purposes of 
     subparagraph (B), the term `vehicle inertia weight class' has 
     the same meaning as when defined in regulations prescribed by 
     the Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(3) New qualified fuel cell motor vehicle.--For purposes 
     of this subsection, the term `new qualified fuel cell motor 
     vehicle' means a motor vehicle--
       ``(A) which is propelled by power derived from one or more 
     cells which convert chemical energy directly into electricity 
     by combining oxygen with hydrogen fuel which is stored on 
     board the vehicle in any form and may or may not require 
     reformation prior to use,
       ``(B) which, in the case of a passenger automobile or light 
     truck--
       ``(i) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(ii) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,
       ``(C) the original use of which commences with the 
     taxpayer,

[[Page S5303]]

       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(c) New Qualified Hybrid Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified hybrid motor vehicle credit determined under this 
     subsection with respect to a new qualified hybrid motor 
     vehicle placed in service by the taxpayer during the taxable 
     year is the credit amount determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) In general.--The credit amount determined under this 
     paragraph shall be determined in accordance with the 
     following tables:
       ``(i) In the case of a new qualified hybrid motor vehicle 
     which is a passenger automobile or light truck and which 
     provides the following percentage of the maximum available 
     power:

``If percentage of the maximum available power is:The credit amount is:
  At least 5 percent but less than 10 percent.................$250 ....

  At least 10 percent but less than 20 percent....................$500 
  At least 20 percent but less than 30 percent................$750 ....

  At least 30 percent.......................................$1,000.....

       ``(ii) In the case of a new qualified hybrid motor vehicle 
     which is a heavy duty hybrid motor vehicle and which provides 
     the following percentage of the maximum available power:

       ``(I) If such vehicle has a gross vehicle weight rating of 
     not more than 14,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$1,500 ....

  At least 30 percent but less than 40 percent..............$1,750 ....

  At least 40 percent but less than 50 percent..............$2,000 ....

  At least 50 percent but less than 60 percent..............$2,250 ....

  At least 60 percent.......................................$2,500.....

       ``(II) If such vehicle has a gross vehicle weight rating of 
     more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$4,000 ....

  At least 30 percent but less than 40 percent..............$4,500 ....

  At least 40 percent but less than 50 percent..............$5,000 ....

  At least 50 percent but less than 60 percent..............$5,500 ....

  At least 60 percent.......................................$6,000.....

       ``(III) If such vehicle has a gross vehicle weight rating 
     of more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$6,000 ....

  At least 30 percent but less than 40 percent..............$7,000 ....

  At least 40 percent but less than 50 percent..............$8,000 ....

  At least 50 percent but less than 60 percent..............$9,000 ....

  At least 60 percent......................................$10,000.....

       ``(B) Increase for fuel efficiency.--
       ``(i) Amount.--The amount determined under subparagraph 
     (A)(i) with respect to a passenger automobile or light truck 
     shall be increased by--

       ``(I) $500, if such vehicle achieves at least 125 percent 
     but less than 150 percent of the 2000 model year city fuel 
     economy,
       ``(II) $1,000, if such vehicle achieves at least 150 
     percent but less than 175 percent of the 2000 model year city 
     fuel economy,
       ``(III) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2000 model year city 
     fuel economy,
       ``(IV) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2000 model year city 
     fuel economy,
       ``(V) $2,500, if such vehicle achieves at least 225 percent 
     but less than 250 percent of the 2000 model year city fuel 
     economy, and
       ``(VI) $3,000, if such vehicle achieves at least 250 
     percent of the 2000 model year city fuel economy.

       ``(ii) 2000 model year city fuel economy.--For purposes of 
     clause (i), the 2000 model year city fuel economy with 
     respect to a vehicle shall be determined using the tables 
     provided in subsection (b)(2)(B) with respect to such 
     vehicle.
       ``(C) Increase for accelerated emissions performance.--The 
     amount determined under subparagraph (A)(ii) with respect to 
     an applicable heavy duty hybrid motor vehicle shall be 
     increased by the increase credit amount determined in 
     accordance with the following tables:
       ``(i) In the case of a vehicle which has a gross vehicle 
     weight rating of not more than 14,000 pounds:

``If the model year is:                  The increase credit amount is:
  2002......................................................$3,500 ....

  2003......................................................$3,000 ....

  2004......................................................$2,500 ....

  2005......................................................$2,000 ....

  2006......................................................$1,500.....

       ``(ii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 14,000 pounds but not more than 
     26,000 pounds:

``If the model year is:                  The increase credit amount is:
  2002......................................................$9,000 ....

  2003......................................................$7,750 ....

  2004......................................................$6,500 ....

  2005......................................................$5,250 ....

  2006......................................................$4,000.....

       ``(iii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 26,000 pounds:

The increase credit amount is:
  2002.....................................................$14,000 ....

  2003.....................................................$12,000 ....

  2004.....................................................$10,000 ....

  2005......................................................$8,000 ....

  2006......................................................$6,000.....

       ``(D) Definitions.--
       ``(i) Applicable heavy duty hybrid motor vehicle.--For 
     purposes of subparagraph (C), the term `applicable heavy duty 
     hybrid motor vehicle' means a heavy duty hybrid motor vehicle 
     which is powered by an internal combustion or heat engine 
     which is certified as meeting the emission standards set in 
     the regulations prescribed by the Administrator of the 
     Environmental Protection Agency for 2007 and later model year 
     diesel heavy duty engines or 2008 and later model year 
     ottocycle heavy duty engines, as applicable.
       ``(ii) Heavy duty hybrid motor vehicle.--For purposes of 
     this paragraph, the term `heavy duty hybrid motor vehicle' 
     means a new qualified hybrid motor vehicle which has a gross 
     vehicle weight rating of more than 10,000 pounds and draws 
     propulsion energy from both of the following onboard sources 
     of stored energy:

       ``(I) An internal combustion or heat engine using 
     consumable fuel which, for 2002 and later model vehicles, has 
     received a certificate of conformity under the Clean Air Act 
     and meets or exceeds a level of not greater than 3.0 grams 
     per brake horsepower-hour of oxides of nitrogen and 0.01 per 
     brake horsepower-hour of particulate matter.
       ``(II) A rechargeable energy storage system.

       ``(iii) Maximum available power.--

       ``(I) Passenger automobile or light truck.--For purposes of 
     subparagraph (A)(i), the term `maximum available power' means 
     the maximum power available from the battery or other 
     electrical storage device, during a standard 10 second pulse 
     power test, divided by the sum of the battery or other 
     electrical storage device and the SAE net power of the heat 
     engine.
       ``(II) Heavy duty hybrid motor vehicle.--For purposes of 
     subparagraph (A)(ii), the term `maximum available power' 
     means the maximum power available from the battery or other 
     electrical storage device, during a standard 10 second pulse 
     power test, divided by the vehicle's total traction power. 
     The term `total traction power' means the sum of the electric 
     motor peak power and the heat engine peak power of the 
     vehicle, except that if the electric motor is the sole means 
     by which the vehicle can be driven, the total traction power 
     is the peak electric motor power.

       ``(3) New qualified hybrid motor vehicle.--For purposes of 
     this subsection, the term `new qualified hybrid motor 
     vehicle' means a motor vehicle--
       ``(A) which draws propulsion energy from onboard sources of 
     stored energy which are both--
       ``(i) an internal combustion or heat engine using 
     combustible fuel, and
       ``(ii) a rechargeable energy storage system,
       ``(B) which, in the case of a passenger automobile or light 
     truck--
       ``(i) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(ii) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,
       ``(C) the original use of which commences with the 
     taxpayer,
       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(d) New Qualified Alternative Fuel Motor Vehicle 
     Credit.--
       ``(1) Allowance of credit.--Except as provided in paragraph 
     (5), the credit determined under this subsection is an amount 
     equal to the applicable percentage of the incremental cost of 
     any new qualified alternative fuel motor vehicle placed in 
     service by the taxpayer during the taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage with respect to any new 
     qualified alternative fuel motor vehicle is--
       ``(A) 50 percent, plus
       ``(B) 30 percent, if such vehicle--
       ``(i) has received a certificate of conformity under the 
     Clean Air Act and meets or exceeds the most stringent 
     standard available for certification under the Clean Air Act 
     for that make and model year vehicle (other than a zero 
     emission standard), or
       ``(ii) has received an order from an applicable State 
     certifying the vehicle for sale or lease in California and 
     meets or exceeds the most stringent standard available for 
     certification under the State laws of California (enacted in 
     accordance with a waiver granted under section 209(b) of the 
     Clean Air Act) for

[[Page S5304]]

     that make and model year vehicle (other than a zero emission 
     standard).
       ``(3) Incremental cost.--For purposes of this subsection, 
     the incremental cost of any new qualified alternative fuel 
     motor vehicle is equal to the amount of the excess of the 
     manufacturer's suggested retail price for such vehicle over 
     such price for a gasoline or diesel fuel motor vehicle of the 
     same model, to the extent such amount does not exceed--
       ``(A) $5,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $25,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(4) Qualified alternative fuel motor vehicle defined.--
     For purposes of this subsection--
       ``(A) In general.--The term `qualified alternative fuel 
     motor vehicle' means any motor vehicle--
       ``(i) which is only capable of operating on an alternative 
     fuel,
       ``(ii) the original use of which commences with the 
     taxpayer,
       ``(iii) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(iv) which is made by a manufacturer.
       ``(B) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, and any liquid at least 85 percent 
     of the volume of which consists of methanol.
       ``(5) Credit for mixed-fuel vehicles.--
       ``(A) In general.--In the case of a mixed-fuel vehicle 
     placed in service by the taxpayer during the taxable year, 
     the credit determined under this subsection is an amount 
     equal to--
       ``(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle, and
       ``(ii) in the case of a 95/5 mixed-fuel vehicle, 95 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle.
       ``(B) Mixed-fuel vehicle.--For purposes of this subsection, 
     the term `mixed-fuel vehicle' means any motor vehicle 
     described in subparagraph (C) or (D) of paragraph (3), 
     which--
       ``(i) is certified by the manufacturer as being able to 
     perform efficiently in normal operation on a combination of 
     an alternative fuel and a petroleum-based fuel,
       ``(ii) either--

       ``(I) has received a certificate of conformity under the 
     Clean Air Act, or
       ``(II) has received an order from an applicable State 
     certifying the vehicle for sale or lease in California and 
     meets or exceeds the low emission vehicle standard under 
     section 88.105-94 of title 40, Code of Federal Regulations, 
     for that make and model year vehicle,

       ``(iii) the original use of which commences with the 
     taxpayer,
       ``(iv) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(v) which is made by a manufacturer.
       ``(C) 75/25 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `75/25 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 75 percent 
     alternative fuel and not more than 25 percent petroleum-based 
     fuel.
       ``(D) 95/5 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `95/5 mixed-fuel vehicle' means a mixed-
     fuel vehicle which operates using at least 95 percent 
     alternative fuel and not more than 5 percent petroleum-based 
     fuel.
       ``(e) Application With Other Credits.--The credit allowed 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(1) the regular tax for the taxable year reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, 30, and 30B, over
       ``(2) the tentative minimum tax for the taxable year.
       ``(f) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Consumable fuel.--The term `consumable fuel' means 
     any solid, liquid, or gaseous matter which releases energy 
     when consumed by an auxiliary power unit.
       ``(2) Motor vehicle.--The term `motor vehicle' has the 
     meaning given such term by section 30(c)(2).
       ``(3) 2000 model year city fuel economy.--The 2000 model 
     year city fuel economy with respect to any vehicle shall be 
     measured under rules similar to the rules under section 
     4064(c).
       ``(4) Other terms.--The terms `automobile', `passenger 
     automobile', `light truck', and `manufacturer' have the 
     meanings given such terms in regulations prescribed by the 
     Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(5)  Reduction in basis.--For purposes of this subtitle, 
     the basis of any property for which a credit is allowable 
     under subsection (a) shall be reduced by the amount of such 
     credit so allowed (determined without regard to subsection 
     (e)).
       ``(6) No double benefit.--The amount of any deduction or 
     credit allowable under this chapter--
       ``(A) for any incremental cost taken into account in 
     computing the amount of the credit determined under 
     subsection (d) shall be reduced by the amount of such credit 
     attributable to such cost, and
       ``(B) with respect to a vehicle described under subsection 
     (b) or (c), shall be reduced by the amount of credit allowed 
     under subsection (a) for such vehicle for the taxable year.
       ``(7) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a motor 
     vehicle which is acquired by an entity exempt from tax under 
     this chapter, the person which sells or leases such vehicle 
     to the entity shall be treated as the taxpayer with respect 
     to the vehicle for purposes of this section and the credit 
     shall be allowed to such person, but only if the person 
     clearly discloses to the entity in any sale or lease document 
     the specific amount of any credit otherwise allowable to the 
     entity under this section and reduces the sale or lease price 
     of such vehicle by an equivalent amount of such credit.
       ``(8) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property which 
     ceases to be property eligible for such credit (including 
     recapture in the case of a lease period of less than the 
     economic life of a vehicle).
       ``(9) Property used outside united states, etc., not 
     qualified.--No credit shall be allowed under subsection (a) 
     with respect to any property referred to in section 50(b) or 
     with respect to the portion of the cost of any property taken 
     into account under section 179.
       ``(10) Election to not take credit.--No credit shall be 
     allowed under subsection (a) for any vehicle if the taxpayer 
     elects to not have this section apply to such vehicle.
       ``(11) Carryforward allowed.--
       ``(A) In general.--If the credit amount allowable under 
     subsection (a) for a taxable year exceeds the amount of the 
     limitation under subsection (e) for such taxable year 
     (referred to as the `unused credit year' in this paragraph), 
     such excess shall be allowed as a credit carryforward for 
     each of the 20 taxable years following the unused credit 
     year.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryforward under 
     subparagraph (A).
       ``(12) Interaction with air quality and motor vehicle 
     safety standards.--Unless otherwise provided in this section, 
     a motor vehicle shall not be considered eligible for a credit 
     under this section unless such vehicle is in compliance 
     with--
       ``(A) the applicable provisions of the Clean Air Act for 
     the applicable make and model year of the vehicle (or 
     applicable air quality provisions of State law in the case of 
     a State which has adopted such provision under a waiver under 
     section 209(b) of the Clean Air Act), and
       ``(B) the motor vehicle safety provisions of sections 30101 
     through 30169 of title 49, United States Code.
       ``(g) Regulations.--
       ``(1) In general.--The Secretary shall promulgate such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(2) Administrator of environmental protection agency.--
     The Administrator of the Environmental Protection Agency, in 
     coordination with the Secretary of Transportation and the 
     Secretary of the Treasury, shall prescribe such regulations 
     as necessary to determine whether a motor vehicle meets the 
     requirements to be eligible for a credit under this section.
       ``(h) Termination.--This section shall not apply to any 
     property placed in service after--
       ``(1) in the case of a new qualified fuel cell motor 
     vehicle (as described in subsection (b)), December 31, 2011, 
     and
       ``(2) in the case of any other property, December 31, 
     2007.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a), as amended by section 951, is amended 
     by striking ``and'' at the end of paragraph (30), by striking 
     the period at the end of paragraph (31) and inserting ``, 
     and'', and by adding at the end the following:
       ``(32) to the extent provided in section 30C(f)(4).''.
       (2) Section 53(d)(1)(B)(iii) is amended by inserting ``, or 
     not allowed under section 30C solely by reason of the 
     application of section 30C(e)(2)'' before the period.
       (3) Section 55(c)(2) is amended by inserting ``30C(e),'' 
     after ``30(b)(3)''.
       (4) Section 6501(m) is amended by inserting ``30C(f)(9),'' 
     after ``30(d)(4),''.
       (5) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1, as amended by section 951, is 
     amended by inserting after the item relating to section 30B 
     the following:

``Sec. 30C. Alternative motor vehicle credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, in taxable years ending after such date.

     SEC. 962. UNIFORM DOLLAR LIMITATION FOR ALL TYPES OF 
                   TRANSPORTATION FRINGE BENEFITS.

       (a) In General.--Subparagraph (A) of section 132(f)(2) 
     (relating to limitation on exclusion) is amended by striking 
     ``$65'' and inserting ``$175''.
       (b) Conforming Amendment.--Section 9010 of the 
     Transportation Equity Act for the 21st

[[Page S5305]]

     Century is amended by striking subsection (c).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 963. CLARIFICATION OF FEDERAL EMPLOYEE BENEFITS.

       Section 7905 of title 5, United States Code, is amended--
       (1) in subsection (a)--
       (A) in paragraph (2)(C) by inserting ``and'' after the 
     semicolon;
       (B) in paragraph (3) by striking ``; and'' and inserting a 
     period; and
       (C) by striking paragraph (4); and
       (2) in subsection (b)(2)(A) by amending subparagraph (A) to 
     read as follows:
       ``(A) a qualified transportation fringe as defined in 
     section 132(f)(1) of the Internal Revenue Code of 1986;''.

     SEC. 964. EXTENSION OF TAX BENEFITS FOR ALCOHOL FUELS.

       (a) In General.--The following provisions are each amended 
     by striking ``2007'' each place it appears and inserting 
     ``2011'':
       (1) Subparagraphs (C)(ii) and (D) of section 4041(b)(2) 
     (relating to qualified methanol and ethanol fuel).
       (2) Section 4041(k)(3) (relating to termination of rates 
     relating to fuels containing alcohol).
       (3) Section 4081(c)(8) (relating to termination of special 
     rate for taxable fuels mixed with alcohol).
       (4) Section 4091(c)(5) (relating to termination of reduced 
     rate of tax for aviation fuel in alcohol mixture, etc.).
       (b) Extension of Refund Authority.--Paragraph (4) of 
     section 6427(f) (relating to refund for gasoline, diesel 
     fuel, and aviation fuel used to produce certain alcohol 
     fuels) is amended by striking ``2007'' and inserting 
     ``2011''.
       (c) Credit for Alcohol Used as a Fuel.--Paragraph (1) of 
     section 40(e) (relating to termination of credit for alcohol 
     used as a fuel) is amended--
       (1) by striking ``December 31, 2007'' in subparagraph (A) 
     and inserting ``December 31, 2011'', and
       (2) by striking ``January 1, 2008'' and inserting ``January 
     1, 2012''.
       (d) Tariff Schedule.--Headings 9901.00.50 and 9901.00.52 of 
     the Harmonized Tariff Schedule of the United States (19 
     U.S.C. 3007) are each amended in the effective period column 
     by striking ``10/1/2007'' each place it appears and inserting 
     ``10/1/2011''.
       (e) Reduced Credit for Ethanol Blenders.--Section 40(h) 
     (relating to reduced credit for ethanol blenders) is 
     amended--
       (1) by striking ``2007'' in paragraph (1) and inserting 
     ``2011'', and
       (2) by striking ``2005, 2006, or 2007'' in the table 
     contained in paragraph (2) and inserting ``2005 through 
     2011''.
       (f) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2002.

          Subtitle H--Compliance With Congressional Budget Act

     SEC. 971. REVENUE OFFSET

       The Secretary of the Treasury shall adjust the top marginal 
     rates of tax under section 1 of the Internal Revenue Code of 
     1986 (as amended by section 101 of this Act) to the extent 
     necessary to offset in each fiscal year beginning before 
     October 1, 2011, the decrease in revenues to the Treasury for 
     that fiscal year resulting from the amendments made by this 
     title.

     SEC. 972. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 718. Mr. BOND submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII add the following:

     SEC. __. 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) (relating to other 
     coverage) 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) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 719. Mrs. CARNAHAN (for herself and Mr. Daschle) submitted an 
amendment intended to be proposed by her to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 9, strike lines 5 through 12 and insert the 
     following:
       ``(2) Reductions in rates after 2001.--
       ``(A) In general.--Each rate of tax (other than the 10 
     percent rate) in the tables under subsections (a), (b), (c), 
     (d), and (e) shall be reduced by 1 percentage point for 
     taxable years beginning during a calendar year after the 
     trigger year.
       ``(B) Trigger year.--For purposes of subparagraph (A), the 
     trigger year is--
       ``(i) 2002, in the case of the 15 percent rate,
       ``(ii) 2003, in the case of the 28 percent rate,
       ``(iii) 2004, in the case of the 31 percent rate,
       ``(iv) 2005, in the case of the 36 percent rate, and
       ``(v) 2006, in the case of the 39.6 percent rate.
       ``(C) No increase in refundable credits.--In determining 
     the portion of any credit under subpart C of part IV 
     (relating to refundable credits) which is treated as an 
     overpayment of tax under section 6404, there shall be 
     disregarded any increase in such portion solely by reason of 
     any reduction in rates under subparagraph (A) as described in 
     clause (i) or (ii) of subparagraph (B).
       ``(3) Adjustment of tables.--The Secretary''.
                                  ____

  SA 720. Mr. BAYH submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 44, between lines 9 and 10, insert the following:

     SEC. 411A. CERTAIN POSTSECONDARY EDUCATIONAL BENEFITS 
                   PROVIDED BY AN EMPLOYER TO CHILDREN OF 
                   EMPLOYEES EXCLUDABLE FROM GROSS INCOME UNDER 
                   EDUCATIONAL ASSISTANCE PROGRAMS.

       (a) In General.--Section 127 (relating to educational 
     assistance programs), as amended by section 411, is amended 
     by redesignating subsection (d) as subsection (e) and 
     inserting after subsection (c) the following:
       ``(d) Post Secondary Educational Benefits Provided to 
     Children of Employees.--
       ``(1) In general.--For purposes of this section, 
     educational assistance provided by the employer to a child 
     (as defined in section 151(c)(3)) of an employee of such 
     employer pursuant to an educational assistance program shall 
     be treated as educational assistance provided for the 
     exclusive benefit of the employee.
       ``(2) Dollar limitations.--The amount excluded from the 
     gross income of the employee by reason of paragraph (1) for a 
     taxable year with respect to amounts provided to each child 
     of such employee shall not exceed $2,000.
       ``(3) Limitation on educational assistance.--Paragraph (1) 
     shall only apply to expenses paid or incurred in connection 
     with the enrollment or attendance of a child of an employee 
     at an educational institution described in section 
     529(e)(5).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of 
     enactment of this Act.
                                  ____

  SA 721. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; as follows:

       On page 9, between lines 11 and 12, strike the table and 
     insert the following:


------------------------------------------------------------------------
                                The corresponding percentages shall be
  ``In the case of taxable    substituted for the following percentages:
   years beginning during    -------------------------------------------
       calendar year:            28%        31%        36%       39.6%
------------------------------------------------------------------------
2002, 2003, and 2004........     27%        30%        35%       39.1%
2005 and 2006...............     26%        29%        34%       39.1%
2007 and 2008...............     25%        28%        33%        39%
2009 and 2010...............     25%        28%        33%        38%
2011 and thereafter.........     25%        28%        33%        37%
------------------------------------------------------------------------


       Strike section 701 and insert:

     SEC. 701. ALTERNATIVE MINIMUM TAX EXEMPTION FOR CERTAIN 
                   INDIVIDUAL TAXPAYERS.

       (a) Exemption.--Section 55 (relating to imposition of 
     alternative minimum tax) is amended by adding at the end the 
     following:
       ``(f) Exemption for Certain Individuals.--
       ``(1) Reduction in tentative minimum tax.--
       ``(A) In general.--In the case of an individual, the 
     tentative minimum tax for any taxable year (determined 
     without regard to this subsection) shall be reduced by the 
     applicable percentage.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage with respect to a taxpayer is 
     100 percent reduced (but not below zero) by 10 percentage 
     points for each $1,000 (or fraction thereof) by which the 
     taxpayer's adjusted gross income for the taxable year exceeds 
     $100,000.
       ``(2) Prospective application if subsection ceases to 
     apply.--If paragraph (1)

[[Page S5306]]

     applies to a taxpayer for any taxable year and then ceases to 
     apply to a subsequent taxable year, the rules of paragraphs 
     (2) through (5) of subsection (e) shall apply to the taxpayer 
     to the extent such rules are applicable to individuals.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 722. Mr. DASCHLE submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       Strike all after the first word and insert the following:

             1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Economic 
     Stimulus Tax Cut 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) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; etc.

            TITLE I--INDIVIDUAL INCOME AND EMPLOYMENT TAXES

                         Subtitle A--In General

Sec. 101. Refund of individual income and employment taxes.
Sec. 102. Reduction in income tax rates for individuals.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 111. Sunset of provisions of title.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

Sec. 201. Modifications to child tax credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 211. Sunset of provisions of title.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

Sec. 301. Elimination of marriage penalty in standard deduction.
Sec. 302. Marriage penalty relief for earned income credit; earned 
              income to include only amounts includible in gross 
              income; simplification of earned income credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 311. Sunset of provisions of title.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

Sec. 401. Modifications to qualified tuition programs.

                   Subtitle B--Educational Assistance

Sec. 411. Permanent extension of exclusion for employer-provided 
              educational assistance.
Sec. 412. Elimination of 60-month limit and increase in income 
              limitation on student loan interest deduction.
Sec. 413. Exclusion of certain amounts received under the National 
              Health Service Corps Scholarship Program and the F. 
              Edward Hebert Armed Forces Health Professions Scholarship 
              and Financial Assistance Program.

  Subtitle C--Liberalization of Tax-Exempt Financing Rules for Public 
                          School Construction

Sec. 421. Expansion of incentives for public schools.
Sec. 422. Application of certain labor standards on construction 
              projects financed under public school modernization 
              program.
Sec. 423. Employment and training activities relating to construction 
              or reconstruction of public school facilities.

               Subtitle D--Indian School Construction Act

Sec. 431. Indian school construction.

                      Subtitle E--Other Provisions

Sec. 441. Deduction for higher education expenses.

          Subtitle F--Compliance With Congressional Budget Act

Sec. 451. Sunset of provisions of title.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

Sec. 501. Increase in amount of unified credit against estate and gift 
              taxes.
Sec. 502. Increase in qualified family-owned business interest 
              deduction amount.
Sec. 503. Sunset of provisions of title.

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

Sec. 601. Modification of IRA contribution limits.
Sec. 602. Deemed IRAs under employer plans.
Sec. 603. Tax-free distributions from individual retirement accounts 
              for charitable purposes.

                     Subtitle B--Expanding Coverage

Sec. 611. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 612. Modification of top-heavy rules.
Sec. 613. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 614. Repeal of coordination requirements for deferred compensation 
              plans of State and local governments and tax-exempt 
              organizations.
Sec. 615. Deduction limits.
Sec. 616. Option to treat elective deferrals as after-tax Roth 
              contributions.
Sec. 617. Nonrefundable credit to certain individuals for elective 
              deferrals and IRA contributions.
Sec. 618. Credit for qualified pension plan contributions of small 
              employers.
Sec. 619. Credit for pension plan startup costs of small employers.
Sec. 620. Elimination of user fee for requests to IRS regarding new 
              pension plans.
Sec. 621. Treatment of nonresident aliens engaged in international 
              transportation services.

                Subtitle C--Enhancing Fairness for Women

Sec. 631. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 632. Faster vesting of certain employer matching contributions.
Sec. 633. Modifications to minimum distribution rules.
Sec. 634. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 635. Provisions relating to hardship distributions.
Sec. 636. Waiver of tax on nondeductible contributions for domestic or 
              similar workers.

          Subtitle D--Increasing Portability for Participants

Sec. 641. Rollovers allowed among various types of plans.
Sec. 642. Rollovers of IRAs into workplace retirement plans.
Sec. 643. Rollovers of after-tax contributions.
Sec. 644. Hardship exception to 60-day rule.
Sec. 645. Treatment of forms of distribution.
Sec. 646. Rationalization of restrictions on distributions.
Sec. 647. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 648. Employers may disregard rollovers for purposes of cash-out 
              amounts.
Sec. 649. Minimum distribution and inclusion requirements for section 
              457 plans.

       Subtitle E--Strengthening Pension Security and Enforcement

                       Part I--General Provisions

Sec. 651. Repeal of 160 percent of current liability funding limit.
Sec. 652. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 653. Excise tax relief for sound pension funding.
Sec. 654. Treatment of multiemployer plans under section 415.
Sec. 655. Protection of investment of employee contributions to 401(k) 
              plans.
Sec. 656. Prohibited allocations of stock in S corporation ESOP.
Sec. 657. Automatic rollovers of certain mandatory distributions.
Sec. 658. Clarification of treatment of contributions to multiemployer 
              plan.

 Part II--Treatment of Plan Amendments Reducing Future Benefit Accruals

Sec. 659. Notice required for pension plan amendments having the effect 
              of significantly reducing future benefit accruals.

                Subtitle F--Reducing Regulatory Burdens

Sec. 661. Modification of timing of plan valuations.
Sec. 662. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 663. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 664. Employees of tax-exempt entities.
Sec. 665. Clarification of treatment of employer-provided retirement 
              advice.
Sec. 666. Reporting simplification.
Sec. 667. Improvement of employee plans compliance resolution system.
Sec. 668. Repeal of the multiple use test.
Sec. 669. Flexibility in nondiscrimination, coverage, and line of 
              business rules.
Sec. 670. Extension to all governmental plans of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.

                   Subtitle G--Other ERISA Provisions

Sec. 681. Missing participants.

[[Page S5307]]

Sec. 682. Reduced PBGC premium for new plans of small employers.
Sec. 683. Reduction of additional PBGC premium for new and small plans.
Sec. 684. Authorization for PBGC to pay interest on premium overpayment 
              refunds.
Sec. 685. Substantial owner benefits in terminated plans.

                  Subtitle H--Miscellaneous Provisions

Sec. 691. Tax treatment and information requirements of Alaska Native 
              settlement trusts.

          Subtitle I--Compliance With Congressional Budget Act

Sec. 695. Sunset of provisions of title.

              TITLE VII--EXTENSIONS OF EXPIRING PROVISIONS

                         Subtitle A--In General

Sec. 701. Permanent extension of research credit.
Sec. 702. Work opportunity credit and welfare-to-work credit.
Sec. 703. Taxable income limit on percentage depletion for marginal 
              production.
Sec. 704. Subpart F exemption for active financing income.
Sec. 705. Parity in the application of certain limits to mental health 
              benefits.
Sec. 706. Deduction for clean-fuel vehicles and certain refueling 
              property.
Sec. 707. Luxury tax on passenger vehicles.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 711. Sunset of provisions of title.

                  TITLE VIII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

Sec. 801. Alternative minimum tax exemption for certain individual 
              taxpayers.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 811. Sunset of provisions of title.

               TITLE IX--TAX RELIEF FOR ADOPTIVE PARENTS

                         Subtitle A--In General

Sec. 901. Expansion of adoption credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 911. Sunset of provisions of title.

           TITLE X--SELF-EMPLOYED HEALTH INSURANCE DEDUCTION

                         Subtitle A--In General

Sec. 1001. Full deduction for health insurance costs of self-employed 
              individuals.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 1011. Sunset of provisions of title.

           TITLE XI--ENERGY SECURITY AND TAX INCENTIVE POLICY

         Subtitle A--Energy-Efficient Property Used in Business

Sec. 1101. Credit for certain energy-efficient property used in 
              business.
Sec. 1102. Energy-efficient commercial building property deduction.
Sec. 1103. Credit for energy-efficient appliances.

                 Subtitle B--Residential Energy Systems

Sec. 1111. Credit for construction of new energy-efficient home.
Sec. 1112. Credit for energy efficiency improvements to existing homes.
Sec. 1113. Credit for residential solar, wind, and fuel cell energy 
              property.

           Subtitle C--Electricity Facilities and Production

Sec. 1121. Incentive for distributed generation.
Sec. 1122. Modifications to credit for electricity produced from 
              renewable and waste products.
Sec. 1123. Treatment of facilities using bagasse to produce energy as 
              solid waste disposal facilities eligible for tax-exempt 
              financing.
Sec. 1124. Depreciation of property used in the transmission of 
              electricity.

               Subtitle D--Tax Incentives for Ethanol Use

Sec. 1131. Small ethanol producer credit.
Sec. 1132. Additional tax incentives for ethanol use.

                  Subtitle E--Commuter Benefits Equity

Sec. 1141. Uniform dollar limitation for all types of transportation 
              fringe benefits.
Sec. 1142. Clarification of Federal employee benefits.

      Subtitle F--Tax Credit for Energy Conservation Expenditures.

Sec. 1151. Energy conservation expenditures.

                  Subtitle G--Hybrid Vehicle Incentive

Sec. 1161. Expansion of clean-fuel vehicle deduction to include hybrid 
              vehicles.

          Subtitle H--Compliance With Congressional Budget Act

Sec. 1171. Sunset of provisions of title.

                      TITLE XII--OTHER PROVISIONS

                         Subtitle A--In General

Sec. 1201. Expansion of authority to postpone certain tax-related 
              deadlines by reason of presidentially declared disaster.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 1211. Sunset of provisions of title.

            TITLE I--INDIVIDUAL INCOME AND EMPLOYMENT TAXES

                         Subtitle A--In General

     SEC. 101. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT TAXES.

       (a) In General.--Subchapter B of chapter 65 (relating to 
     rules of special application in the case of abatements, 
     credits, and refunds) is amended by adding at the end the 
     following new section:

     ``SEC. 6428. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT 
                   TAXES.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, each individual shall be treated as having made a 
     payment against the tax imposed by chapter 1 for any taxable 
     year beginning in 2001, in an amount equal to the lesser of--
       ``(1) the amount of the taxpayer's liability for tax for 
     the taxpayer's last taxable year beginning in calendar year 
     2000, or
       ``(2) the taxpayer's applicable amount.
       ``(b) Liability for Tax.--For purposes of this section, the 
     liability for tax for the taxable year shall be the sum of--
       ``(1) the excess (if any) of--
       ``(A) the sum of--
       ``(i) the taxpayer's regular tax liability (within the 
     meaning of section 26(b)) for the taxable year, and
       ``(ii) the tax imposed by section 55(a) with respect to 
     such taxpayer for the taxable year, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A of chapter 1 (other than sections 31, 33, and 
     34) for the taxable year, and
       ``(2) the taxes imposed by sections 1401, 3101, 3111, 
     3201(a), 3211(a)(1), and 3221(a) on amounts received by the 
     taxpayer for the taxable year.
       ``(c) Applicable Amount.--For purposes of this section--
       ``(1) In general.--The applicable amount for any taxpayer 
     shall be determined under the following table:

``In the case of a taxpayer described in:     The applicable amount is:
    Section 1(a)..............................................$600 ....

    Section 1(b)..............................................$450 ....

    Section 1(c)..............................................$300 ....

    Section 1(d)..............................................$300 ....

    Paragraph (2).............................................$300.....

       ``(2) Taxpayers with only payroll tax liability.--A 
     taxpayer is described in this paragraph if such taxpayer's 
     liability for tax for the taxable year does not include any 
     liability described in subsection (b)(1).
       ``(d) Date Payment Deemed Made.--
       ``(1) In general.--The payment provided by this section 
     shall be deemed made on the date of the enactment of this 
     section.
       ``(2) Remittance of payment.--The Secretary shall remit to 
     each taxpayer the payment described in paragraph (1) within 
     90 days after such date of enactment.
       ``(3) Claim for nonpayment.--Any taxpayer who erroneously 
     does not receive a payment described in paragraph (1) may 
     make claim for such payment in a manner and at such time as 
     the Secretary prescribes.
       ``(e) Certain Persons Not Eligible.--This section shall not 
     apply to--
       ``(1) any individual with respect to whom a deduction under 
     section 151 is allowable to another taxpayer for a taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins,
       ``(2) any estate or trust, or
       ``(3) any nonresident alien individual.''.
       (b) Conforming Amendment.--Section 1324(b)(2) of title 31, 
     United States Code, is amended by inserting before the period 
     ``, or enacted by the Economic Stimulus Tax Cut Act of 
     2001''.
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 65 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new item:

``Sec. 6428. Refund of individual income and employment taxes.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 102. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

       (a) In General.--Section 1 is amended by adding at the end 
     the following new subsection:
       ``(i) Rate Reductions After 2000.--
       ``(1) New lowest rate bracket.--
       ``(A) In general.--In the case of taxable years beginning 
     after December 31, 2000--
       ``(i) the rate of tax under subsections (a), (b), (c), and 
     (d) on taxable income not over the initial bracket amount 
     shall be 10 percent (12.5 percent in taxable years beginning 
     in 2001), and
       ``(ii) the 15 percent rate of tax shall apply only to 
     taxable income over the initial bracket amount.
       ``(B) Initial bracket amount.--For purposes of this 
     subsection, the initial bracket amount is--
       ``(i) $12,000 in the case of subsection (a),
       ``(ii) $10,000 in the case of subsection (b), and
       ``(iii) \1/2\ the amount applicable under clause (i) in the 
     case of subsections (c) and (d).
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar years after 2001--
       ``(i) the Secretary shall make no adjustment to the initial 
     bracket amount for any taxable year beginning before January 
     1, 2003,
       ``(ii) the cost-of-living adjustment used in making 
     adjustments to the initial bracket amount for any taxable 
     year beginning after December 31, 2002, shall be determined 
     under subsection (f)(3) by substituting `2001' for `1992' in 
     subparagraph (B) thereof, and

[[Page S5308]]

       ``(iii) such adjustment shall not apply to the amount 
     referred to in subparagraph (B)(iii).
     If any amount after adjustment under the preceding sentence 
     is not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.
       ``(2) Adjustment of tables.--The Secretary shall adjust the 
     tables prescribed under subsection (f) to carry out this 
     subsection.''.
       (b) Determination of Withholding Tables.--Section 3402(a) 
     of the Internal Revenue Code of 1986 (relating to requirement 
     of withholding) is amended by adding at the following new 
     paragraph:
       ``(3) Changes made by section 102 of the economic stimulus 
     tax cut act of 2001.--Notwithstanding the provisions of this 
     subsection, the Secretary shall modify the tables and 
     procedures under paragraph (1) to reflect the amendments made 
     by section 102 of the Economic Stimulus Tax Cut Act of 2001, 
     and such modification shall take effect on July 1, 2001, as 
     if the lowest rate of tax under section 1 (as amended by such 
     section 102) was a 10-percent rate effective on such date.''.
       (c) Conforming Amendments.--
       (1) Subparagraph (B) of section 1(g)(7) of the Internal 
     Revenue Code of 1986 is amended--
       (A) by striking ``15 percent'' in clause (ii)(II) and 
     inserting ``the first bracket percentage'', and
       (B) by adding at the end the following flush sentence:
     ``For purposes of clause (ii), the first bracket percentage 
     is the percentage applicable to the lowest income bracket in 
     the table under subsection (c).''.
       (2) Section 1(h) of such Code is amended by striking 
     paragraph (13).
       (3) Section 15 of such Code is amended by adding at the end 
     the following new subsection:
       ``(f) Rate Reductions Enacted by Economic Stimulus Tax Cut 
     Act of 2001.--This section shall not apply to any change in 
     rates under subsection (i) of section 1 (relating to rate 
     reductions in 2001).''.
       (4) Section 3402(p)(2) of such Code is amended by striking 
     ``equal to 15 percent of such payment'' and inserting ``equal 
     to the product of the lowest rate of tax under section 1(c) 
     and such payment''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Amendments to withholding provision.--The amendments 
     made by subsection (b) and subsection (c)(4) shall apply to 
     amounts paid after June 30, 2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 111. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

     SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT.

       (a) Increase in Per Child Amount.--
       (1) In general.--Subsection (a) of section 24 (relating to 
     child tax credit) is amended to read as follows:
       ``(a) Allowance of Credit.--
       ``(1) In general.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     with respect to each qualifying child of the taxpayer an 
     amount equal to the per child amount.
       ``(2) Per child amount.--For purposes of paragraph (1), the 
     per child amount shall be determined as follows:

``In the case of any taxable year beginning inThe per child amount is--
  2002, 2003, 2004, 2005, 2006, or 2007.......................$600 ....

  2008.......................................................  700 ....

  2009.......................................................  800 ....

  2010.......................................................  900 ....

  2011 or thereafter......................................1,000.''.....

       (2) Inflation adjustment.--
       ``(g) Inflation Adjustment.--In the case of any taxable 
     year beginning after 2001, any dollar amount contained in 
     subsection (a)(2) 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.''.
       (b) Credit Allowed Against Alternative Minimum Tax.--
       (1) In general.--Subsection (b) of section 24 (relating to 
     child tax credit) is amended by adding at the end the 
     following new paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for any taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) and section 27 for the taxable 
     year.''.
       (2) Conforming amendments.--
       (A) The heading for section 24(b) is amended to read as 
     follows: ``Limitations.--''.
       (B) The heading for section 24(b)(1) is amended to read as 
     follows: ``Limitation based on adjusted gross income.--''.
       (C) Section 24(d) is amended--
       (i) by striking ``section 26(a)'' each place it appears and 
     inserting ``subsection (b)(3)'', and
       (ii) in paragraph (1)(B) by striking ``aggregate amount of 
     credits allowed by this subpart'' and inserting ``amount of 
     credit allowed by this section''.
       (D) Paragraph (1) of section 26(a) is amended by inserting 
     ``(other than section 24)'' after ``this subpart''.
       (E) Subsection (c) of section 23 is amended by striking 
     ``and section 1400C'' and inserting ``and sections 24 and 
     1400C''.
       (F) Subparagraph (C) of section 25(e)(1) is amended by 
     inserting ``, 24,'' after ``sections 23''.
       (G) Section 904(h) is amended by inserting ``(other than 
     section 24)'' after ``chapter''.
       (H) Subsection (d) of section 1400C is amended by inserting 
     ``and section 24'' after ``this section''.
       (c) Refundable Child Credit.--
       (1) In general.--So much of section 24(d) (relating to 
     additional credit for families with 3 or more children) as 
     precedes paragraph (2) is amended to read as follows:
       ``(d) Portion of Credit Refundable.--
       ``(1) In general.--The aggregate credits allowed to a 
     taxpayer under subpart C shall be increased by the lesser 
     of--
       ``(A) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     subsection (b)(3), or
       ``(B) the amount by which the amount of credit allowed by 
     this section (determined without regard to this subsection) 
     would increase if the limitation imposed by subsection (b)(3) 
     were increased by--
       ``(i) in the case of a taxpayer not described in clause 
     (ii), 15 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) for the taxable year as 
     exceeds $8,000, and
       ``(ii) in the case of a taxpayer with 3 or more qualifying 
     children, the excess (if any) of--

       ``(I) the taxpayer's social security taxes for the taxable 
     year, over
       ``(II) the credit allowed under section 32 for the taxable 
     year.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to subsection (b)(3).''.
       (2) Conforming amendment.--Section 32 is amended by 
     striking subsection (n).
       (d) Elimination of Reduction of Credit to Taxpayer Subject 
     to Alternative Minimum Tax Provision.--Section 24(d) is 
     amended--
       (1) by striking paragraph (2), and
       (2) by redesignating paragraph (3) as paragraph (2).
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 211. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

     SEC. 301. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``the applicable percentage of the dollar amount in 
     effect under subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Applicable Percentage.--Section 63(c) (relating to 
     standard deduction) is amended by adding at the end the 
     following new paragraph:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2002.........................................................174 
      2003.........................................................180 
      2004.........................................................187 
      2005.........................................................193 
      2006 and thereafter.......................................200.''.
       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``(other than with'' and all that follows through 
     ``shall be applied'' and inserting ``(other than with respect 
     to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 302. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT; 
                   EARNED INCOME TO INCLUDE ONLY AMOUNTS 
                   INCLUDIBLE IN GROSS INCOME; SIMPLIFICATION OF 
                   EARNED INCOME CREDIT.

       (a) Increased Phaseout Amount.--
       (1) In general.--Section 32(b)(2) (relating to amounts) is 
     amended--
       (A) by striking ``Amounts.--The earned'' and inserting 
     ``Amounts.--

[[Page S5309]]

       ``(A) In general.--Subject to subparagraph (B), the 
     earned'', and
       (B) by adding at the end the following new subparagraph:
       ``(B) Joint returns.--In the case of a joint return filed 
     by an eligible individual and such individual's spouse, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $3,500.''.
       (2) Inflation adjustment.--Paragraph (1)(B) of section 
     32(j) (relating to inflation adjustments) is amended to read 
     as follows:
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined--
       ``(i) in the case of amounts in subsections (b)(2)(A) and 
     (i)(1), by substituting `calendar year 1995' for `calendar 
     year 1992' in subparagraph (B) thereof, and
       ``(ii) in the case of the $3,500 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2001' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (3) Rounding.--Section 32(j)(2)(A) (relating to rounding) 
     is amended by striking ``subsection (b)(2)'' and inserting 
     ``subsection (b)(2)(A) (after being increased under 
     subparagraph (B) thereof)''.
       (b) Earned Income To Include Only Amounts Includible in 
     Gross Income.--Clause (i) of section 32(c)(2)(A) (defining 
     earned income) is amended by inserting ``, but only if such 
     amounts are includible in gross income for the taxable year'' 
     after ``other employee compensation''.
       (c) Repeal of Reduction of Credit to Taxpayers Subject to 
     Alternative Minimum Tax.--Section 32(h) is repealed.
       (d) Replacement of Modified Adjusted Gross Income With 
     Adjusted Gross Income.--
       (1) In general.--Section 32(a)(2)(B) is amended by striking 
     ``modified''.
       (2) Conforming amendments.--
       (A) Section 32(c) is amended by striking paragraph (5).
       (B) Section 32(f)(2)(B) is amended by striking ``modified'' 
     each place it appears.
       (e) Relationship Test.--
       (1) In general.--Clause (i) of section 32(c)(3)(B) 
     (relating to relationship test) is amended to read as 
     follows:
       ``(i) In general.--An individual bears a relationship to 
     the taxpayer described in this subparagraph if such 
     individual is--

       ``(I) a son, daughter, stepson, or stepdaughter, or a 
     descendant of any such individual,
       ``(II) a brother, sister, stepbrother, or stepsister, or a 
     descendant of any such individual, who the taxpayer cares for 
     as the taxpayer's own child, or
       ``(III) an eligible foster child of the taxpayer.''.

       (2) Eligible foster child.--
       (A) In general.--Clause (iii) of section 32(c)(3)(B) is 
     amended to read as follows:
       ``(iii) Eligible foster child.--For purposes of clause (i), 
     the term `eligible foster child' means an individual not 
     described in subclause (I) or (II) of clause (i) who--

       ``(I) is placed with the taxpayer by an authorized 
     placement agency, and
       ``(II) the taxpayer cares for as the taxpayer's own 
     child.''.

       (B) Conforming amendment.--Section 32(c)(3)(A)(ii) is 
     amended by striking ``except as provided in subparagraph 
     (B)(iii),''.
       (f) 2 or More Claiming Qualifying Child.--Section 
     32(c)(1)(C) is amended to read as follows:
       ``(C) 2 or more claiming qualifying child.--
       ``(i) In general.--Except as provided in clause (ii), if 
     (but for this paragraph) an individual may be claimed, and is 
     claimed, as a qualifying child by 2 or more taxpayers for a 
     taxable year beginning in the same calendar year, such 
     individual shall be treated as the qualifying child of the 
     taxpayer who is--

       ``(I) a parent of the individual, or
       ``(II) if subclause (I) does not apply, the taxpayer with 
     the highest adjusted gross income for such taxable year.

       ``(ii) More than 1 claiming credit.--If the parents 
     claiming the credit with respect to any qualifying child do 
     not file a joint return together, such child shall be treated 
     as the qualifying child of--

       ``(I) the parent with whom the child resided for the 
     longest period of time during the taxable year, or
       ``(II) if the child resides with both parents for the same 
     amount of time during such taxable year, the parent with the 
     highest adjusted gross income.''.

       (g) Expansion of Mathematical Error Authority.--Paragraph 
     (2) of section 6213(g) is amended by striking ``and'' at the 
     end of subparagraph (K), by striking the period at the end of 
     subparagraph (L) and inserting ``, and'', and by inserting 
     after subparagraph (L) the following new subparagraph:
       ``(M) the entry on the return claiming the credit under 
     section 32 with respect to a child if, according to the 
     Federal Case Registry of Child Support Orders established 
     under section 453(h) of the Social Security Act, the taxpayer 
     is a noncustodial parent of such child.''
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2001.
       (2) Subsection (g).--The amendment made by subsection (g) 
     shall take effect on January 1, 2004.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 311. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

     SEC. 401. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

       (a) Eligible Educational Institutions Permitted To Maintain 
     Qualified Tuition Programs.--
       (1) In general.--Section 529(b)(1) (defining qualified 
     State tuition program) is amended--
       (A) by inserting ``or by 1 or more eligible educational 
     institutions'' after ``maintained by a State or agency or 
     instrumentality thereof '' in the matter preceding 
     subparagraph (A), and
       (B) by adding at the end the following new flush sentence:
     ``Except to the extent provided in regulations, a program 
     established and maintained by 1 or more eligible educational 
     institutions shall not be treated as a qualified tuition 
     program unless such program has received a ruling or 
     determination that such program meets the applicable 
     requirements for a qualified tuition program.''.
       (2) Private qualified tuition programs limited to benefit 
     plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
     inserting ``in the case of a program established and 
     maintained by a State or agency or instrumentality thereof,'' 
     before ``may make''.
       (3) Conforming amendments.--
       (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
     530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are amended by 
     striking ``qualified State tuition'' each place it appears 
     and inserting ``qualified tuition''.
       (B) The headings for sections 72(e)(9) and 135(c)(2)(C) are 
     amended by striking ``qualified state tuition'' each place it 
     appears and inserting ``qualified tuition''.
       (C) The headings for sections 529(b) and 530(b)(2)(B) are 
     amended by striking ``Qualified state tuition'' each place it 
     appears and inserting ``Qualified tuition''.
       (D) The heading for section 529 is amended by striking 
     ``state''.
       (E) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (b) Exclusion From Gross Income of Education Distributions 
     From Qualified Tuition Programs.--
       (1) In general.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
       ``(B) Distributions for qualified higher education 
     expenses.--For purposes of this paragraph--
       ``(i) In-kind distributions.--No amount shall be includible 
     in gross income under subparagraph (A) by reason of a 
     distribution which consists of providing a benefit to the 
     distributee which, if paid for by the distributee, would 
     constitute payment of a qualified higher education expense.
       ``(ii) Cash distributions.--In the case of distributions 
     not described in clause (i), if--

       ``(I) such distributions do not exceed the qualified higher 
     education expenses (reduced by expenses described in clause 
     (i)), no amount shall be includible in gross income, and
       ``(II) in any other case, the amount otherwise includible 
     in gross income shall be reduced by an amount which bears the 
     same ratio to such amount as such expenses bear to such 
     distributions.

       ``(iii) Exception for institutional programs.--In the case 
     of any taxable year beginning before January 1, 2004, clauses 
     (i) and (ii) shall not apply with respect to any distribution 
     during such taxable year under a qualified tuition program 
     established and maintained by 1 or more eligible educational 
     institutions.
       ``(iv) Treatment as distributions.--Any benefit furnished 
     to a designated beneficiary under a qualified tuition program 
     shall be treated as a distribution to the beneficiary for 
     purposes of this paragraph.
       ``(v) Coordination with hope and lifetime learning 
     credits.--The total amount of qualified higher education 
     expenses with respect to an individual for the taxable year 
     shall be reduced--

       ``(I) as provided in section 25A(g)(2), and
       ``(II) by the amount of such expenses which were taken into 
     account in determining the credit allowed to the taxpayer or 
     any other person under section 25A.

       ``(vi) Coordination with education individual retirement 
     accounts.--If, with respect to an individual for any taxable 
     year--

       ``(I) the aggregate distributions to which clauses (i) and 
     (ii) and section 530(d)(2)(A) apply, exceed
       ``(II) the total amount of qualified higher education 
     expenses otherwise taken into account under clauses (i) and 
     (ii) (after the application of clause (v)) for such year,

     the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under clauses (i) and (ii) and section 
     530(d)(2)(A).''.
       (2) Conforming amendments.--
       (A) Section 135(d)(2)(B) is amended by striking ``the 
     exclusion under section 530(d)(2)'' and inserting ``the 
     exclusions under sections 529(c)(3)(B) and 530(d)(2)''.
       (B) Section 221(e)(2)(A) is amended by inserting ``529,'' 
     after ``135,''.
       (c) Rollover to Different Program for Benefit of Same 
     Designated Beneficiary.--Section 529(c)(3)(C) (relating to 
     change in beneficiaries) is amended--

[[Page S5310]]

       (1) by striking ``transferred to the credit'' in clause (i) 
     and inserting ``transferred--

       ``(I) to another qualified tuition program for the benefit 
     of the designated beneficiary, or
       ``(II) to the credit'',

       (2) by adding at the end the following new clause:
       ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall only apply to the first 3 transfers with respect to a 
     designated beneficiary.'', and
       (3) by inserting ``or programs'' after ``beneficiaries'' in 
     the heading.
       (d) Member of Family Includes First Cousin.--Section 
     529(e)(2) (defining member of family) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and by inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) any first cousin of such beneficiary.''.
       (e) Adjustment of Limitation on Room and Board 
     Distributions.--Section 529(e)(3)(B)(ii) is amended to read 
     as follows:
       ``(ii) Limitation.--The amount treated as qualified higher 
     education expenses by reason of clause (i) shall not exceed--

       ``(I) the allowance (applicable to the student) for room 
     and board included in the cost of attendance (as defined in 
     section 472 of the Higher Education Act of 1965 (20 U.S.C. 
     1087ll), as in effect on the date of the enactment of the 
     Economic Stimulus Tax Cut Act of 2001) as determined by the 
     eligible educational institution for such period, or
       ``(II) if greater, the actual invoice amount the student 
     residing in housing owned or operated by the eligible 
     educational institution is charged by such institution for 
     room and board costs for such period.''.

       (f) Technical Amendments.--Section 529(c)(3)(D) is 
     amended--
       (1) by inserting ``except to the extent provided by the 
     Secretary,'' before ``all distributions'' in clause (ii), and
       (2) by inserting ``except to the extent provided by the 
     Secretary,'' before ``the value'' in clause (iii).
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                   Subtitle B--Educational Assistance

     SEC. 411. PERMANENT EXTENSION OF EXCLUSION FOR EMPLOYER-
                   PROVIDED EDUCATIONAL ASSISTANCE.

       (a) In General.--Section 127 (relating to exclusion for 
     educational assistance programs) is amended by striking 
     subsection (d) and by redesignating subsection (e) as 
     subsection (d).
       (b) Repeal of Limitation on Graduate Education.--The last 
     sentence of section 127(c)(1) is amended by striking ``, and 
     such term also does not include any payment for, or the 
     provision of any benefits with respect to, any graduate level 
     course of a kind normally taken by an individual pursuing a 
     program leading to a law, business, medical, or other 
     advanced academic or professional degree''.
       (c) Conforming Amendment.--Section 51A(b)(5)(B)(iii) is 
     amended by striking ``or would be so excludable but for 
     section 127(d)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to expenses relating to courses 
     beginning after December 31, 2001.

     SEC. 412. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN 
                   INCOME LIMITATION ON STUDENT LOAN INTEREST 
                   DEDUCTION.

       (a) Elimination of 60-Month Limit.--
       (1) In general.--Section 221 (relating to interest on 
     education loans), as amended by section 402(b)(2)(B), is 
     amended by striking subsection (d) and by redesignating 
     subsections (e), (f), and (g) as subsections (d), (e), and 
     (f), respectively.
       (2) Conforming amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 2001, in taxable years ending after such date.
       (b) Increase in Income Limitation.--
       (1) In general.--Section 221(b)(2)(B) (relating to amount 
     of reduction) is amended by striking clauses (i) and (ii) and 
     inserting the following:
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $50,000 ($100,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).''.
       (2) Conforming amendment.--Section 221(g)(1) is amended by 
     striking ``$40,000 and $60,000 amounts'' and inserting 
     ``$50,000 and $100,000 amounts''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 413. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL HEALTH SERVICE CORPS SCHOLARSHIP 
                   PROGRAM AND THE F. EDWARD HEBERT ARMED FORCES 
                   HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL 
                   ASSISTANCE PROGRAM.

       (a) In General.--Section 117(c) (relating to the exclusion 
     from gross income amounts received as a qualified 
     scholarship) is amended--
       (1) by striking ``Subsections (a)'' and inserting the 
     following:
       ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     amount received by an individual under--
       ``(A) the National Health Service Corps Scholarship Program 
     under section 338A(g)(1)(A) of the Public Health Service Act, 
     or
       ``(B) the Armed Forces Health Professions Scholarship and 
     Financial Assistance program under subchapter I of chapter 
     105 of title 10, United States Code.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to amounts received in taxable years beginning 
     after December 31, 2001.

  Subtitle C--Liberalization of Tax-Exempt Financing Rules for Public 
                          School Construction

     SEC. 421. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

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

         ``Subchapter Y--Public School Modernization Provisions

``Sec. 1400K. Credit to holders of qualified public school 
              modernization bonds.
``Sec. 1400L. Qualified school construction bonds.
``Sec. 1400M. Qualified zone academy bonds.

     ``SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified public school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified public school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the day 
     before the date of issuance of the issue) on outstanding 
     long-term corporate debt obligations (determined under 
     regulations prescribed by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified zone academy bond, and
       ``(B) a qualified school construction bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.
     Such term includes the last day on which the bond is 
     outstanding.
       ``(e) Other Definitions.--For purposes of this subchapter--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.

[[Page S5311]]

       ``(4) Public school facility.--The term `public school 
     facility' shall not include--
       ``(A) any stadium or other facility primarily used for 
     athletic contests or exhibitions or other events for which 
     admission is charged to the general public, or
       ``(B) any facility which is not owned by a State or local 
     government or any agency or instrumentality of a State or 
     local government.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(g) Recapture of Portion of Credit Where Cessation of 
     Compliance.--
       ``(1) In general.--If any bond which when issued purported 
     to be a qualified public school modernization bond ceases to 
     be a qualified public school modernization bond, the issuer 
     shall pay to the United States (at the time required by the 
     Secretary) an amount equal to the sum of--
       ``(A) the aggregate of the credits allowable under this 
     section with respect to such bond (determined without regard 
     to subsection (c)) for taxable years ending during the 
     calendar year in which such cessation occurs and the 2 
     preceding calendar years, and
       ``(B) interest at the underpayment rate under section 6621 
     on the amount determined under subparagraph (A) for each 
     calendar year for the period beginning on the first day of 
     such calendar year.
       ``(2) Failure to pay.--If the issuer fails to timely pay 
     the amount required by paragraph (1) with respect to such 
     bond, the tax imposed by this chapter on each holder of any 
     such bond which is part of such issue shall be increased (for 
     the taxable year of the holder in which such cessation 
     occurs) by the aggregate decrease in the credits allowed 
     under this section to such holder for taxable years beginning 
     in such 3 calendar years which would have resulted solely 
     from denying any credit under this section with respect to 
     such issue for such taxable years.
       ``(3) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (2) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     paragraph (2) shall not be treated as a tax imposed by this 
     chapter for purposes of determining--
       ``(i) the amount of any credit allowable under this part, 
     or
       ``(ii) the amount of the tax imposed by section 55.
       ``(h) Bonds Held by Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(i) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified public school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the qualified public school modernization bond as if 
     it were a stripped bond and to the credit under this section 
     as if it were a stripped coupon.
       ``(j) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     public school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(k) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(l) Reporting.--Issuers of qualified public school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).
       ``(m) Termination.--This section shall not apply to any 
     bond issued after September 30, 2006.

     ``SEC. 1400L. QUALIFIED SCHOOL CONSTRUCTION BONDS.

       ``(a) Qualified School Construction Bond.--For purposes of 
     this subchapter, the term `qualified school construction 
     bond' means any bond issued as part of an issue if--
       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility or for the acquisition of land on 
     which such a facility is to be constructed with part of the 
     proceeds of such issue,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)(4)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
     There is a national qualified school construction bond 
     limitation for each calendar year. Such limitation is--
       ``(1) $11,000,000,000 for 2002,
       ``(2) $11,000,000,000 for 2003, and
       ``(3) except as provided in subsection (f), zero after 
     2003.
       ``(d) 60 Percent of Limitation Allocated Among States.--
       ``(1) In general.--60 percent of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     by the Secretary among the States in proportion to the 
     respective numbers of children in each State who have 
     attained age 5 but not age 18 for the most recent fiscal year 
     ending before such calendar year. The limitation amount 
     allocated to a State under the preceding sentence shall be 
     allocated by the State to issuers within such State.
       ``(2) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,
     is not less than an amount equal to such State's minimum 
     percentage of the amount to be allocated under paragraph (1) 
     for the calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(3) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(4) Allocations for indian schools.--In addition to the 
     amounts otherwise allocated under this subsection, 
     $200,000,000 for calendar year 2002, and $200,000,000 for 
     calendar year 2003, shall be allocated by the Secretary of 
     the Interior for purposes of the construction, 
     rehabilitation, and repair of schools funded by the Bureau of 
     Indian Affairs. In the case of amounts allocated under the 
     preceding sentence, Indian tribal governments (as defined in 
     section 7871) shall be treated as qualified issuers for 
     purposes of this subchapter.
       ``(e) 40 Percent of Limitation Allocated Among Largest 
     School Districts.--
       ``(1) In general.--40 percent of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     under paragraph (2) by the Secretary among local educational 
     agencies which are large local educational agencies for such 
     year.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency received for Basic Grants 
     under subpart 2 of part A of title I of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
     the most recent fiscal year ending before such calendar year.
       ``(3) Allocation of unused limitation to state.--The amount 
     allocated under this subsection to a large local educational 
     agency for any calendar year may be reallocated by such 
     agency to the State in which such agency is located for such 
     calendar year. Any amount reallocated to a State under the 
     preceding sentence may be allocated as provided in subsection 
     (d)(1).
       ``(4) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among the 100 local educational agencies with the 
     largest numbers of children aged 5 through 17 from families 
     living below the poverty level, as determined by the 
     Secretary using the most recent data available from the 
     Department of Commerce that are satisfactory to the 
     Secretary, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in subparagraph (A)) that the 
     Secretary of Education determines (based on the most recent 
     data available satisfactory to the Secretary) are in 
     particular need of assistance, based on a low level of 
     resources for school

[[Page S5312]]

     construction, a high level of enrollment growth, or such 
     other factors as the Secretary deems appropriate.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,
     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (d)(4) or (e).
       ``(g) Special Rules Relating to Arbitrage.--
       ``(1) In general.--A bond shall not be treated as failing 
     to meet the requirement of subsection (a)(1) solely by reason 
     of the fact that the proceeds of the issue of which such bond 
     is a part are invested for a temporary period (but not more 
     than 36 months) until such proceeds are needed for the 
     purpose for which such issue was issued.
       ``(2) Binding commitment requirement.--Paragraph (1) shall 
     apply to an issue only if, as of the date of issuance, there 
     is a reasonable expectation that--
       ``(A) at least 10 percent of the proceeds of the issue will 
     be spent within the 6-month period beginning on such date for 
     the purpose for which such issue was issued, and
       ``(B) the remaining proceeds of the issue will be spent 
     with due diligence for such purpose.
       ``(3) Earnings on proceeds.--Any earnings on proceeds 
     during the temporary period shall be treated as proceeds of 
     the issue for purposes of applying subsection (a)(1) and 
     paragraph (1) of this subsection.

     ``SEC. 1400M. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     subchapter--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
     Rules similar to the rules of section 1400L(g) shall apply 
     for purposes of paragraph (1).
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(C) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(D)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) acquiring the land on which such facility is to be 
     constructed with part of the proceeds of such issue,
       ``(C) providing equipment for use at such academy,
       ``(D) developing course materials for education to be 
     provided at such academy, and
       ``(E) training teachers and other school personnel in such 
     academy.
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $400,000,000 for 1999,
       ``(C) $400,000,000 for 2000,
       ``(D) $400,000,000 for 2001,
       ``(E) $1,400,000,000 for 2002,
       ``(F) $1,400,000,000 for 2003, and
       ``(G) except as provided in paragraph (3), zero after 2003.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998, 1999, 2000, and 2001 limitations.--The national 
     zone academy bond limitations for calendar years 1998, 1999, 
     2000, and 2001 shall be allocated by the Secretary among the 
     States on the basis of their respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget).
       ``(ii) Limitation after 2001.--The national zone academy 
     bond limitation for any calendar year after 2001 shall be 
     allocated by the Secretary among the States in proportion to 
     the respective amounts each such State received for Basic 
     Grants under subpart 2 of part A of title I of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) 
     for the most recent fiscal year ending before such calendar 
     year.
       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State to qualified zone academies 
     within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) (or the corresponding 
     provisions of prior law) with respect to qualified zone 
     academies within such State,
     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess.''
       (b) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest) is amended by adding 
     at the end the following new paragraph:
       ``(8) Reporting of credit on qualified public school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400K(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400K(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''
       (c) Conforming Amendments.--
       (1) Subchapter U of chapter 1 is amended by striking part 
     IV, by redesignating part V as part IV, and by redesignating 
     section 1397F as section 1397E.
       (2) The table of subchapters for chapter 1 is amended by 
     adding at the end the following new item:

``Subchapter Y. Public school modernization provisions.''
       (3) The table of parts of subchapter U of chapter 1 is 
     amended by striking the last 2 items and inserting the 
     following item:

``Part IV. Regulations.''
       (d) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to obligations issued after December 31, 2001.
       (2) Repeal of restriction on zone academy bond holders.--In 
     the case of bonds to which section 1397E of the Internal 
     Revenue Code of 1986 (as in effect before the date of the 
     enactment of this Act) applies, the limitation of such 
     section to eligible taxpayers

[[Page S5313]]

     (as defined in subsection (d)(6) of such section) shall not 
     apply after the date of the enactment of this Act.

     SEC. 422. APPLICATION OF CERTAIN LABOR STANDARDS ON 
                   CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC 
                   SCHOOL MODERNIZATION PROGRAM.

       Section 439 of the General Education Provisions Act 
     (relating to labor standards) is amended--
       (1) by inserting ``(a)'' before ``All laborers and 
     mechanics'', and
       (2) by adding at the end the following:
       ``(b)(1) For purposes of this section, the term `applicable 
     program' also includes the qualified zone academy bond 
     provisions enacted by section 226 of the Taxpayer Relief Act 
     of 1997 and the program established by section 421 of the 
     Economic Stimulus Tax Cut Act of 2001.
       ``(2) A State or local government participating in a 
     program described in paragraph (1) shall--
       ``(A) in the awarding of contracts, give priority to 
     contractors with substantial numbers of employees residing in 
     the local education area to be served by the school being 
     constructed; and
       ``(B) include in the construction contract for such school 
     a requirement that the contractor give priority in hiring new 
     workers to individuals residing in such local education area.
       ``(3) In the case of a program described in paragraph (1), 
     nothing in this subsection or subsection (a) shall be 
     construed to deny any tax credit allowed under such program. 
     If amounts are required to be withheld from contractors to 
     pay wages to which workers are entitled, such amounts shall 
     be treated as expended for construction purposes in 
     determining whether the requirements of such program are 
     met.''.

     SEC. 423. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO 
                   CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL 
                   FACILITIES.

       (a) In General.--Section 134 of the Workforce Investment 
     Act of 1998 (29 U.S.C. 2864) is amended by adding at the end 
     the following:
       ``(f) Local Employment and Training Activities Relating to 
     Construction or Reconstruction of Public School Facilities.--
       ``(1) In general.--In order to provide training services 
     related to construction or reconstruction of public school 
     facilities receiving funding assistance under an applicable 
     program, each State shall establish a specialized program of 
     training meeting the following requirements:
       ``(A) The specialized program provides training for jobs in 
     the construction industry.
       ``(B) The program provides trained workers for projects for 
     the construction or reconstruction of public school 
     facilities receiving funding assistance under an applicable 
     program.
       ``(C) The program ensures that skilled workers (residing in 
     the area to be served by the school facilities) will be 
     available for the construction or reconstruction work.
       ``(2) Coordination.--The specialized program established 
     under paragraph (1) shall be integrated with other activities 
     under this Act, with the activities carried out under the 
     National Apprenticeship Act of 1937 by the State 
     Apprenticeship Council or through the Bureau of 
     Apprenticeship and Training in the Department of Labor, as 
     appropriate, and with activities carried out under the Carl 
     D. Perkins Vocational and Technical Education Act of 1998. 
     Nothing in this subsection shall be construed to require 
     services duplicative of those referred to in the preceding 
     sentence.
       ``(3) Applicable program.--In this subsection, the term 
     `applicable program' has the meaning given the term in 
     section 439(b) of the General Education Provisions Act 
     (relating to labor standards).''.
       (b) State Plan.--Section 112(b)(17)(A) of the Workforce 
     Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is 
     amended--
       (1) in clause (iii), by striking ``and'' at the end;
       (2) by redesignating clause (iv) as clause (v); and
       (3) by inserting after clause (iii) the following:
       ``(iv) how the State will establish and carry out a 
     specialized program of training under section 134(f); and''.

               Subtitle D--Indian School Construction Act

     SEC. 431. INDIAN SCHOOL CONSTRUCTION.

       (a) Definitions.--In this section:
       (1) Bureau.--The term ``Bureau'' means the Bureau of Indian 
     Affairs of the Department of the Interior.
       (2) Indian.--The term ``Indian'' means any individual who 
     is a member of a tribe.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior.
       (4) Tribal school.--The term ``tribal school'' means an 
     elementary school, secondary school, or dormitory that is 
     operated by a tribal organization or the Bureau for the 
     education of Indian children and that receives financial 
     assistance for its operation under an appropriation for the 
     Bureau under section 102, 103(a), or 208 of the Indian Self-
     Determination and Education Assistance Act (25 U.S.C. 450f, 
     450h(a), and 458d) or under the Tribally Controlled Schools 
     Act of 1988 (25 U.S.C. 2501 et seq.) under a contract, a 
     grant, or an agreement, or for a Bureau-operated school.
       (5) Tribe.--The term ``tribe'' has the meaning given the 
     term ``Indian tribal government'' by section 7701(a)(40) of 
     the Internal Revenue Code of 1986, including the application 
     of section 7871(d) of such Code. Such term includes any 
     consortium of tribes approved by the Secretary.
       (b) Issuance of Bonds.--
       (1) In general.--The Secretary shall establish a pilot 
     program under which eligible tribes have the authority to 
     issue qualified tribal school modernization bonds to provide 
     funding for the construction, rehabilitation, or repair of 
     tribal schools, including the advance planning and design 
     thereof.
       (2) Eligibility.--
       (A) In general.--To be eligible to issue any qualified 
     tribal school modernization bond under the program under 
     paragraph (1), a tribe shall--
       (i) prepare and submit to the Secretary a plan of 
     construction that meets the requirements of subparagraph (B);
       (ii) provide for quarterly and final inspection of the 
     project by the Bureau; and
       (iii) pledge that the facilities financed by such bond will 
     be used primarily for elementary and secondary educational 
     purposes for not less than the period such bond remains 
     outstanding.
       (B) Plan of construction.--A plan of construction meets the 
     requirements of this subparagraph if such plan--
       (i) contains a description of the construction to be 
     undertaken with funding provided under a qualified tribal 
     school modernization bond;
       (ii) demonstrates that a comprehensive survey has been 
     undertaken concerning the construction needs of the tribal 
     school involved;
       (iii) contains assurances that funding under the bond will 
     be used only for the activities described in the plan;
       (iv) contains response to the evaluation criteria contained 
     in Instructions and Application for Replacement School 
     Construction, Revision 6, dated February 6, 1999; and
       (v) contains any other reasonable and related information 
     determined appropriate by the Secretary.
       (C) Priority.--In determining whether a tribe is eligible 
     to participate in the program under this subsection, the 
     Secretary shall give priority to tribes that, as demonstrated 
     by the relevant plans of construction, will fund projects--
       (i) described in the Education Facilities Replacement 
     Construction Priorities List as of FY 2000 of the Bureau of 
     Indian Affairs (65 Fed. Reg. 4623-4624);
       (ii) described in any subsequent priorities list published 
     in the Federal Register; or
       (iii) which meet the criteria for ranking schools as 
     described in Instructions and Application for Replacement 
     School Construction, Revision 6, dated February 6, 1999.
       (D) Advance planning and design funding.--A tribe may 
     propose in its plan of construction to receive advance 
     planning and design funding from the tribal school 
     modernization escrow account established under paragraph 
     (6)(B). Before advance planning and design funds are 
     allocated from the escrow account, the tribe shall agree to 
     issue qualified tribal school modernization bonds after the 
     receipt of such funds and agree as a condition of each bond 
     issuance that the tribe will deposit into such account or a 
     fund managed by the trustee as described in paragraph (4)(C) 
     an amount equal to the amount of such funds received from the 
     escrow account.
       (3) Permissible activities.--In addition to the use of 
     funds permitted under paragraph (1), a tribe may use amounts 
     received through the issuance of a qualified tribal school 
     modernization bond to--
       (A) enter into and make payments under contracts with 
     licensed and bonded architects, engineers, and construction 
     firms in order to determine the needs of the tribal school 
     and for the design and engineering of the school;
       (B) enter into and make payments under contracts with 
     financial advisors, underwriters, attorneys, trustees, and 
     other professionals who would be able to provide assistance 
     to the tribe in issuing bonds; and
       (C) carry out other activities determined appropriate by 
     the Secretary.
       (4) Bond trustee.--
       (A) In general.--Notwithstanding any other provision of 
     law, any qualified tribal school modernization bond issued by 
     a tribe under this subsection shall be subject to a trust 
     agreement between the tribe and a trustee.
       (B) Trustee.--Any bank or trust company that meets 
     requirements established by the Secretary may be designated 
     as a trustee under subparagraph (A).
       (C) Content of trust agreement.--A trust agreement entered 
     into by a tribe under this paragraph shall specify that the 
     trustee, with respect to any bond issued under this 
     subsection shall--
       (i) act as a repository for the proceeds of the bond;
       (ii) make payments to bondholders;
       (iii) receive, as a condition to the issuance of such bond, 
     a transfer of funds from the tribal school modernization 
     escrow account established under paragraph (6)(B) or from 
     other funds furnished by or on behalf of the tribe in an 
     amount, which together with interest earnings from the 
     investment of such funds in obligations of or fully 
     guaranteed by the United States or from other investments 
     authorized by paragraph (10), will produce moneys sufficient 
     to timely pay in full the entire principal amount of such 
     bond on the stated maturity date therefor;

[[Page S5314]]

       (iv) invest the funds received pursuant to clause (iii) as 
     provided by such clause; and
       (v) hold and invest the funds in a segregated fund or 
     account under the agreement, which fund or account shall be 
     applied solely to the payment of the costs of items described 
     in paragraph (3).
       (D) Requirements for making direct payments.--
       (i) In general.--Notwithstanding any other provision of 
     law, the trustee shall make any payment referred to in 
     subparagraph (C)(v) in accordance with requirements that the 
     tribe shall prescribe in the trust agreement entered into 
     under subparagraph (C). Before making a payment to a 
     contractor under subparagraph (C)(v), the trustee shall 
     require an inspection of the project by a local financial 
     institution or an independent inspecting architect or 
     engineer, to ensure the completion of the project.
       (ii) Contracts.--Each contract referred to in paragraph (3) 
     shall specify, or be renegotiated to specify, that payments 
     under the contract shall be made in accordance with this 
     paragraph.
       (5) Payments of principal and interest.--
       (A) Principal.--No principal payments on any qualified 
     tribal school modernization bond shall be required until the 
     final, stated maturity of such bond, which stated maturity 
     shall be within 15 years from the date of issuance. Upon the 
     expiration of such period, the entire outstanding principal 
     under the bond shall become due and payable.
       (B) Interest.--In lieu of interest on a qualified tribal 
     school modernization bond there shall be awarded a tax credit 
     under section 1400K of the Internal Revenue Code of 1986.
       (6) Bond guarantees.--
       (A) In general.--Payment of the principal portion of a 
     qualified tribal school modernization bond issued under this 
     subsection shall be guaranteed solely by amounts deposited 
     with each respective bond trustee as described in paragraph 
     (4)(C)(iii).
       (B) Establishment of account.--
       (i) In general.--Notwithstanding any other provision of 
     law, beginning in fiscal year 2002, from amounts made 
     available for school replacement under the construction 
     account of the Bureau, the Secretary is authorized to deposit 
     not more than $30,000,000 each fiscal year into a tribal 
     school modernization escrow account.
       (ii) Payments.--The Secretary shall use any amounts 
     deposited in the escrow account under clauses (i) and (iii) 
     to make payments to trustees appointed and acting pursuant to 
     paragraph (4) or to make payments described in paragraph 
     (2)(D).
       (iii) Transfers of excess proceeds.--Excess proceeds held 
     under any trust agreement that are not needed for any of the 
     purposes described in clauses (iii) and (v) of paragraph 
     (4)(C) shall be transferred, from time to time, by the 
     trustee for deposit into the tribal school modernization 
     escrow account.
       (7) Limitations.--
       (A) Obligation to repay.--Notwithstanding any other 
     provision of law, the principal amount on any qualified 
     tribal school modernization bond issued under this subsection 
     shall be repaid only to the extent of any escrowed funds 
     furnished under paragraph (4)(C)(iii). No qualified tribal 
     school modernization bond issued by a tribe shall be an 
     obligation of, nor shall payment of the principal thereof be 
     guaranteed by, the United States, the tribes, nor their 
     schools.
       (B) Land and facilities.--Any land or facilities purchased 
     or improved with amounts derived from qualified tribal school 
     modernization bonds issued under this subsection shall not be 
     mortgaged or used as collateral for such bonds.
       (8) Sale of bonds.--Qualified tribal school modernization 
     bonds may be sold at a purchase price equal to, in excess of, 
     or at a discount from the par amount thereof.
       (9) Treatment of trust agreement earnings.--Any amounts 
     earned through the investment of funds under the control of a 
     trustee under any trust agreement described in paragraph (4) 
     shall not be subject to Federal income tax.
       (10) Investment of sinking funds.--Any sinking fund 
     established for the purpose of the payment of principal on a 
     qualified tribal school modernization bond shall be invested 
     in obligations issued by or guaranteed by the United States 
     or in such other assets as the Secretary of the Treasury may 
     by regulation allow.
       (c) Expansion of Incentives for Tribal Schools.--Chapter 1, 
     as amended by section 421, is amended by adding at the end 
     the following new subchapter:

         ``Subchapter Z--Tribal School Modernization Provisions

``Sec. 1400N. Credit to holders of qualified tribal school 
              modernization bonds.

     ``SEC. 1400N. CREDIT TO HOLDERS OF QUALIFIED TRIBAL SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified tribal school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified tribal school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified tribal school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the date of 
     sale of the issue) on outstanding long-term corporate 
     obligations (as determined by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Tribal School Modernization Bond; Other 
     Definitions.--For purposes of this section--
       ``(1) Qualified tribal school modernization bond.--
       ``(A) In general.--The term `qualified tribal school 
     modernization bond' means, subject to subparagraph (B), any 
     bond issued as part of an issue under section 421(c) of the 
     Economic Stimulus Tax Cut Act of 2001, as in effect on the 
     date of the enactment of this section, if--
       ``(i) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a school facility funded by the Bureau of Indian Affairs of 
     the Department of the Interior or for the acquisition of land 
     on which such a facility is to be constructed with part of 
     the proceeds of such issue,
       ``(ii) the bond is issued by a tribe,
       ``(iii) the issuer designates such bond for purposes of 
     this section, and
       ``(iv) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(B) National limitation on amount of bonds designated.--
       ``(i) National limitation.--There is a national qualified 
     tribal school modernization bond limitation for each calendar 
     year. Such limitation is--

       ``(I) $200,000,000 for 2002,
       ``(II) $200,000,000 for 2003, and
       ``(III) zero after 2004.

       ``(ii) Allocation of limitation.--The national qualified 
     tribal school modernization bond limitation shall be 
     allocated to tribes by the Secretary of the Interior subject 
     to the provisions of section 421(c) of the Economic Stimulus 
     Tax Cut Act of 2001, as in effect on the date of the 
     enactment of this section.
       ``(iii) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (d)(1) 
     with respect to any tribe shall not exceed the limitation 
     amount allocated to such government under clause (ii) for 
     such calendar year.
       ``(iv) Carryover of unused limitation.--If for any calendar 
     year--

       ``(I) the limitation amount under this subparagraph, 
     exceeds
       ``(II) the amount of qualified tribal school modernization 
     bonds issued during such year,

     the limitation amount under this subparagraph for the 
     following calendar year shall be increased by the amount of 
     such excess. The preceding sentence shall not apply if such 
     following calendar year is after 2010.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.
     Such term includes the last day on which the bond is 
     outstanding.
       ``(3) Bond.--The term `bond' includes any obligation.
       ``(4) Tribe.--The term `tribe' has the meaning given the 
     term `Indian tribal government' by section 7701(a)(40), 
     including the application of section 7871(d). Such term 
     includes any consortium of tribes approved by the Secretary 
     of the Interior.
       ``(e) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this

[[Page S5315]]

     section (determined without regard to subsection (c)) and the 
     amount so included shall be treated as interest income.
       ``(f) Bonds Held by Regulated Investment Companies.--If any 
     qualified tribal school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(g) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified tribal school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the qualified tribal school modernization bond as if 
     it were a stripped bond and to the credit under this section 
     as if it were a stripped coupon.
       ``(h) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     tribal school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(i) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(j) Credit Treated as Allowed Under Part IV of Subchapter 
     A.--For purposes of subtitle F, the credit allowed by this 
     section shall be treated as a credit allowable under part IV 
     of subchapter A of this chapter.
       ``(k) Reporting.--Issuers of qualified tribal school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).''.
       (d) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest), as amended by 
     section 421, is amended by adding at the end the following 
     new paragraph:
       ``(9) Reporting of credit on qualified tribal school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400N(e) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400N(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''
       (e) Conforming Amendments.--The table of subchapters for 
     chapter 1, as amended by section 421, is amended by adding at 
     the end the following new item:

``Subchapter Z. Tribal school modernization provisions.''
       (f) Additional Provisions.--
       (1) Sovereign immunity.--This section and the amendments 
     made by this section shall not be construed to impact, limit, 
     or affect the sovereign immunity of the Federal Government or 
     any State or tribal government.
       (2) Application.--This section and the amendments made by 
     this section shall take effect on the date of the enactment 
     of this Act with respect to bonds issued after December 31, 
     2001, regardless of the status of regulations promulgated 
     thereunder.

                      Subtitle E--Other Provisions

     SEC. 441. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

       (a) Deduction Allowed.--Part VII of subchapter B of chapter 
     1 (relating to additional itemized deductions for 
     individuals) is amended by redesignating section 222 as 
     section 223 and by inserting after section 221 the following:

     ``SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.

       ``(a) Allowance of Deduction.--In the case of an 
     individual, there shall be allowed as a deduction an amount 
     equal to the qualified tuition and related expenses paid by 
     the taxpayer during the taxable year.
       ``(b) Dollar limitations.--
       ``(1) In general.--The amount allowed as a deduction under 
     subsection (a) with respect to the taxpayer for any taxable 
     year shall not exceed the applicable dollar limit.
       ``(2) Applicable dollar limit.--
       ``(A) 2002 and 2003.--In the case of a taxable year 
     beginning in 2002 or 2003, the applicable dollar limit shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $3,000, and--
       ``(ii) in the case of any other taxpayer, zero.
       ``(B) 2004 and 2005.--In the case of a taxable year 
     beginning in 2004 or 2005, the applicable dollar amount shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $5,000, and
       ``(ii) in the case of any other taxpayer, zero.
       ``(C) Adjusted gross income.--For purposes of this 
     paragraph, adjusted gross income shall be determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, and 469.
       ``(c) No Double Benefit.--
       ``(1) In general.--No deduction shall be allowed under 
     subsection (a) for any expense for which a deduction is 
     allowed to the taxpayer under any other provision of this 
     chapter.
       ``(2) Coordination with other education incentives.--
       ``(A) Denial of deduction if credit elected.--No deduction 
     shall be allowed under subsection (a) for a taxable year with 
     respect to the qualified tuition and related expenses with 
     respect to an individual if the taxpayer or any other person 
     elects to have section 25A apply with respect to such 
     individual for such year.
       ``(B) Coordination with exclusions.--The total amount of 
     qualified tuition and related expenses shall be reduced by 
     the amount of such expenses taken into account in determining 
     any amount excluded under section 135, 529(c)(1), or 
     530(d)(2).
       ``(3) Dependents.--No deduction shall be allowed under 
     subsection (a) to any individual with respect to whom a 
     deduction under section 151 is allowable to another taxpayer 
     for a taxable year beginning in the calendar year in which 
     such individual's taxable year begins.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified tuition and related expenses.--The term 
     `qualified tuition and related expenses' has the meaning 
     given such term by section 25A(f). Such expenses shall be 
     reduced in the same manner as under section 25A(g)(2).
       ``(2) Identification requirement.--No deduction shall be 
     allowed under subsection (a) to a taxpayer with respect to 
     the qualified tuition and related expenses of an individual 
     unless the taxpayer includes the name and taxpayer 
     identification number of the individual on the return of tax 
     for the taxable year.
       ``(3) Limitation on taxable year of deduction.--
       ``(A) In general.--A deduction shall be allowed under 
     subsection (a) for qualified tuition and related expenses for 
     any taxable year only to the extent such expenses are in 
     connection with enrollment at an institution of higher 
     education during the taxable year.
       ``(B) Certain prepayments allowed.--Subparagraph (A) shall 
     not apply to qualified tuition and related expenses paid 
     during a taxable year if such expenses are in connection with 
     an academic term beginning during such taxable year or during 
     the first 3 months of the next taxable year.
       ``(4) No deduction for married individuals filing separate 
     returns.--If the taxpayer is a married individual (within the 
     meaning of section 7703), this section shall apply only if 
     the taxpayer and the taxpayer's spouse file a joint return 
     for the taxable year.
       ``(5) Nonresident aliens.--If the taxpayer is a nonresident 
     alien individual for any portion of the taxable year, this 
     section shall apply only if such individual is treated as a 
     resident alien of the United States for purposes of this 
     chapter by reason of an election under subsection (g) or (h) 
     of section 6013.
       ``(6) Regulations.--The Secretary may prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including regulations requiring recordkeeping 
     and information reporting.''.
       (b) Deduction Allowed in Computing Adjusted Gross Income.--
     Section 62(a) is amended by inserting after paragraph (17) 
     the following:
       ``(18) Higher education expenses.--The deduction allowed by 
     section 222.''.
       (c) Conforming Amendments.--
       (1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) 
     are each amended by inserting ``222,'' after ``221,''.
       (2) Section 221(b)(2)(C) is amended by inserting ``222,'' 
     before ``911''.
       (3) Section 469(i)(3)(E) is amended by striking ``and 221'' 
     and inserting ``, 221, and 222''.
       (4) The table of sections for part VII of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     222 and inserting the following:

``Sec. 222. Qualified tuition and related expenses.
``Sec. 223. Cross reference.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments made in taxable years beginning after 
     December 31, 2001.

          Subtitle F--Compliance With Congressional Budget Act

     SEC. 451. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

     SEC. 501. INCREASE IN AMOUNT OF UNIFIED CREDIT AGAINST ESTATE 
                   AND GIFT TAXES.

       (a) In General.--The table contained in section 2010(c) 
     (relating to applicable credit amount) is amended to read as 
     follows:


[[Page S5316]]


``In the case of estates of decedentThe applicable exclusion amount is:
    2002, 2003, 2004, 2005, and 2006........................$1,000,000 
    2007 and 2008...........................................$1,125,000 
    2009....................................................$1,500,000 
    2010 or thereafter...................................$2,000,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.

     SEC. 502. INCREASE IN QUALIFIED FAMILY-OWNED BUSINESS 
                   INTEREST DEDUCTION AMOUNT.

       (a) In General.--Paragraph (2) of section 2057(a) (relating 
     to family-owned business interests) is amended to read as 
     follows:
       ``(2) Maximum deduction.--
       ``(A) In general.--The deduction allowed by this section 
     shall not exceed the sum of--
       ``(i) the applicable deduction amount, plus
       ``(ii) in the case of a decedent described in subparagraph 
     (C), the applicable unused spousal deduction amount.
       ``(B) Applicable deduction amount.--For purposes of this 
     subparagraph (A)(i), the applicable deduction amount is 
     determined in accordance with the following table:

``In the case of estates of decedentThe applicable deduction amount is:
    2002, 2003, 2004, 2005, and 2006.........................$1,375,000
    2007 and 2008............................................$1,625,000
    2009.....................................................$2,375,000
    2010 or thereafter......................................$3,375,000.
       ``(C) Applicable unused spousal deduction amount.--With 
     respect to a decedent whose immediately predeceased spouse 
     died after December 31, 2001, and the estate of such 
     immediately predeceased spouse met the requirements of 
     subsection (b)(1), the applicable unused spousal deduction 
     amount for such decedent is equal to the excess of--
       ``(i) the applicable deduction amount allowable under this 
     section to the estate of such immediately predeceased spouse, 
     over
       ``(ii) the sum of--

       ``(I) the applicable deduction amount allowed under this 
     section to the estate of such immediately predeceased spouse, 
     plus
       ``(II) the amount of any increase in such estate's unified 
     credit under paragraph (3)(B) which was allowed to such 
     estate.''.

       (b) Conforming Amendments.--Section 2057(a)(3)(B) is 
     amended--
       (1) by striking ``$675,000'' both places it appears and 
     inserting ``the applicable deduction amount'', and
       (2) by striking ``$675,000'' in the heading and inserting 
     ``applicable deduction amount''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.

     SEC. 503. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

     SEC. 601. MODIFICATION OF IRA CONTRIBUTION LIMITS.

       (a) Increase in Contribution Limit.--
       (1) In general.--Paragraph (1)(A) of section 219(b) 
     (relating to maximum amount of deduction) is amended by 
     striking ``$2,000'' and inserting ``the deductible amount''.
       (2) Deductible amount.--Section 219(b) is amended by adding 
     at the end the following new paragraph:
       ``(5) Deductible amount.--For purposes of paragraph (1)(A), 
     the deductible amount shall be determined in accordance with 
     the following table:

``For taxable years beginning in:             The deductible amount is:
    2002 through 2005...........................................$2,500 
    2006 and thereafter......................................$3,000.''.
       (b) Conforming Amendments.--
       (1) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 408(b) is amended by striking ``$2,000'' in the 
     matter following paragraph (4) and inserting ``the dollar 
     amount in effect under section 219(b)(1)(A)''.
       (4) Section 408(j) is amended by striking ``$2,000''.
       (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
     inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 602. DEEMED IRAS UNDER EMPLOYER PLANS.

       (a) In General.--Section 408 (relating to individual 
     retirement accounts) is amended by redesignating subsection 
     (q) as subsection (r) and by inserting after subsection (p) 
     the following new subsection:
       ``(q) Deemed IRAs Under Qualified Employer Plans.--
       ``(1) General rule.--If--
       ``(A) a qualified employer plan elects to allow employees 
     to make voluntary employee contributions to a separate 
     account or annuity established under the plan, and
       ``(B) under the terms of the qualified employer plan, such 
     account or annuity meets the applicable requirements of this 
     section or section 408A for an individual retirement account 
     or annuity,
     then such account or annuity shall be treated for purposes of 
     this title in the same manner as an individual retirement 
     plan and not as a qualified employer plan (and contributions 
     to such account or annuity as contributions to an individual 
     retirement plan and not to the qualified employer plan). For 
     purposes of subparagraph (B), the requirements of subsection 
     (a)(5) shall not apply.
       ``(2) Special rules for qualified employer plans.--For 
     purposes of this title, a qualified employer plan shall not 
     fail to meet any requirement of this title solely by reason 
     of establishing and maintaining a program described in 
     paragraph (1).
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Qualified employer plan.--The term `qualified 
     employer plan' has the meaning given such term by section 
     72(p)(4); except such term shall only include an eligible 
     deferred compensation plan (as defined in section 457(b)) 
     which is maintained by an eligible employer described in 
     section 457(e)(1)(A).
       ``(B) Voluntary employee contribution.--The term `voluntary 
     employee contribution' means any contribution (other than a 
     mandatory contribution within the meaning of section 
     411(c)(2)(C))--
       ``(i) which is made by an individual as an employee under a 
     qualified employer plan which allows employees to elect to 
     make contributions described in paragraph (1), and
       ``(ii) with respect to which the individual has designated 
     the contribution as a contribution to which this subsection 
     applies.''.
       (b) Amendment of ERISA.--
       (1) In general.--Section 4 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1003) is amended by 
     adding at the end the following new subsection:
       ``(c) If a pension plan allows an employee to elect to make 
     voluntary employee contributions to accounts and annuities as 
     provided in section 408(q) of the Internal Revenue Code of 
     1986, such accounts and annuities (and contributions thereto) 
     shall not be treated as part of such plan (or as a separate 
     pension plan) for purposes of any provision of this title 
     other than section 403(c), 404, or 405 (relating to exclusive 
     benefit, and fiduciary and co-fiduciary responsibilities).''.
       (2) Conforming amendment.--Section 4(a) of such Act (29 
     U.S.C. 1003(a)) is amended by inserting ``or (c)'' after 
     ``subsection (b)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2002.

     SEC. 603. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account to an 
     organization described in section 170(c), no amount shall be 
     includible in the gross income of the account holder or 
     beneficiary.
       ``(B) Special rules relating to charitable remainder 
     trusts, pooled income funds, and charitable gift annuities.--
       ``(i) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account--

       ``(I) to a charitable remainder annuity trust or a 
     charitable remainder unitrust (as such terms are defined in 
     section 664(d)),
       ``(II) to a pooled income fund (as defined in section 
     642(c)(5)), or
       ``(III) for the issuance of a charitable gift annuity (as 
     defined in section 501(m)(5)),

     no amount shall be includible in gross income of the account 
     holder or beneficiary. The preceding sentence shall apply 
     only if no person holds any interest in the amounts in the 
     trust, fund, or annuity attributable to such distribution 
     other than one or more of the following: the individual for 
     whose benefit such account is maintained, the spouse of such 
     individual, or any organization described in section 170(c).
       ``(ii) Determination of inclusion of amounts distributed.--
     In determining the amount includible in the gross income of 
     the distributee of a distribution from a trust described in 
     clause (i)(I) or an annuity described in clause (i)(III), the 
     portion of any qualified charitable distribution to such 
     trust or for such annuity which would (but for this 
     subparagraph) have been includible in gross income--

       ``(I) in the case of any such trust, shall be treated as 
     income described in section 664(b)(1), or
       ``(II) in the case of any such annuity, shall not be 
     treated as an investment in the contract.

       ``(iii) No inclusion for distribution to pooled income 
     fund.--No amount shall be includible in the gross income of a 
     pooled income fund (as so defined) by reason of a qualified 
     charitable distribution to such fund.
       ``(C) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the account is maintained has 
     attained age 70\1/2\, and
       ``(ii) which is a charitable contribution (as defined in 
     section 170(c)) made directly from the account to--

[[Page S5317]]

       ``(I) an organization described in section 170(c), or
       ``(II) a trust, fund, or annuity described in subparagraph 
     (B).

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction to the taxpayer for the taxable year under section 
     170 (before the application of section 170(b)) for qualified 
     charitable distributions shall be reduced (but not below 
     zero) by the sum of the amounts of the qualified charitable 
     distributions during such year which (but for this paragraph) 
     would have been includible in the gross income of the 
     taxpayer for such year.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2009.

                     Subtitle B--Expanding Coverage

     SEC. 611. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

       (a) In General.--Subparagraph (B) of section 4975(f)(6) 
     (relating to exemptions not to apply to certain transactions) 
     is amended by adding at the end the following new clause:
       ``(iii) Loan exception.--For purposes of subparagraph 
     (A)(i), the term `owner-employee' shall only include a person 
     described in subclause (II) or (III) of clause (i).''.
       (b) Amendment of ERISA.--Section 408(d)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) For purposes of paragraph (1)(A), the term `owner-
     employee' shall only include a person described in clause 
     (ii) or (iii) of subparagraph (A).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 612. MODIFICATION OF TOP-HEAVY RULES.

       (a) Simplification of Definition of Key Employee.--
       (1) In general.--Section 416(i)(1)(A) (defining key 
     employee) is amended--
       (A) by striking ``or any of the 4 preceding plan years'' in 
     the matter preceding clause (i);
       (B) by striking clause (i) and inserting the following:
       ``(i) an officer of the employer having an annual 
     compensation greater than the amount in effect under section 
     414(q)(1)(B)(i) for such plan year,'';
       (C) by striking clause (ii) and redesignating clauses (iii) 
     and (iv) as clauses (ii) and (iii), respectively;
       (D) by striking the second sentence in the matter following 
     clause (iii), as redesignated by subparagraph (C); and
       (E) by adding at the end the following: ``For purposes of 
     this subparagraph, in the case of an employee who is not 
     employed during the preceding plan year or is employed for a 
     portion of such year, such employee shall be treated as a key 
     employee if it can be reasonably anticipated that such 
     employee will be described in 1 of the preceding clauses for 
     the current plan year.''.
       (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
     amended by striking ``and subparagraph (A)(ii)''.
       (b) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by adding at the end 
     the following: ``Employer matching contributions (as defined 
     in section 401(m)(4)(A)) shall be taken into account for 
     purposes of this subparagraph.''.
       (c) Distributions During Last Year Before Determination 
     Date Taken Into Account.--
       (1) In general.--Paragraph (3) of section 416(g) is amended 
     to read as follows:
       ``(3) Distributions during last year before determination 
     date taken into account.--
       ``(A) In general.--For purposes of determining--
       ``(i) the present value of the cumulative accrued benefit 
     for any employee, or
       ``(ii) the amount of the account of any employee,
     such present value or amount shall be increased by the 
     aggregate distributions made with respect to such employee 
     under the plan during the 1-year period ending on the 
     determination date. The preceding sentence shall also apply 
     to distributions under a terminated plan which if it had not 
     been terminated would have been required to be included in an 
     aggregation group.
       ``(B) 5-year period in case of in-service distribution.--In 
     the case of any distribution made for a reason other than 
     separation from service, death, or disability, subparagraph 
     (A) shall be applied by substituting `5-year period' for `1-
     year period'.''.
       (2) Benefits not taken into account.--Subparagraph (E) of 
     section 416(g)(4) is amended--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date''; and
       (B) by striking ``5-year period'' and inserting ``1-year 
     period''.
       (d) Frozen Plan Exempt From Minimum Benefit Requirement.--
     Subparagraph (C) of section 416(c)(1) (relating to defined 
     benefit plans) is amended--
       (A) by striking ``clause (ii)'' in clause (i) and inserting 
     ``clause (ii) or (iii)''; and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the meaning of section 410(b)) no key 
     employee or former key employee.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 613. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

       (a) In General.--Section 404 (relating to deduction for 
     contributions of an employer to an employees' trust or 
     annuity plan and compensation under a deferred payment plan) 
     is amended by adding at the end the following new subsection:
       ``(n) Elective Deferrals Not Taken Into Account for 
     Purposes of Deduction Limits.--
       ``(1) In general.--The applicable percentage of the amount 
     of any elective deferrals (as defined in section 402(g)(3)) 
     shall not be subject to any limitation contained in paragraph 
     (3), (7), or (9) of subsection (a), and such elective 
     deferrals shall not be taken into account in applying any 
     such limitation to any other contributions.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in:       The applicable percentage is:  
    2002 through 2010.......................................25 percent 
    2011 and thereafter.................................100 percent.''.

       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 614. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED 
                   COMPENSATION PLANS OF STATE AND LOCAL 
                   GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 457 (relating to 
     deferred compensation plans of State and local governments 
     and tax-exempt organizations) is amended to read as follows:
       ``(c) Limitation.--The maximum amount of the compensation 
     of any one individual which may be deferred under subsection 
     (a) during any taxable year shall not exceed the amount in 
     effect under subsection (b)(2)(A) (as modified by any 
     adjustment provided under subsection (b)(3)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2001.

     SEC. 615. DEDUCTION LIMITS.

       (a) Modification of Limits.--
       (1) Stock bonus and profit sharing trusts.--
       (A) In general.--Subclause (I) of section 404(a)(3)(A)(i) 
     (relating to stock bonus and profit sharing trusts) is 
     amended by striking ``15 percent'' and inserting ``25 
     percent''.
       (B) Conforming amendment.--Subparagraph (C) of section 
     404(h)(1) is amended by striking ``15 percent'' each place it 
     appears and inserting ``25 percent''.
       (2) Defined contribution plans.--
       (A) In general.--Clause (v) of section 404(a)(3)(A) 
     (relating to stock bonus and profit sharing trusts) is 
     amended to read as follows:
       ``(v) Defined contribution plans subject to the funding 
     standards.--Except as provided by the Secretary, a defined 
     contribution plan which is subject to the funding standards 
     of section 412 shall be treated in the same manner as a stock 
     bonus or profit-sharing plan for purposes of this 
     subparagraph.''
       (B) Conforming amendments.--
       (i) Section 404(a)(1)(A) is amended by inserting ``(other 
     than a trust to which paragraph (3) applies)'' after 
     ``pension trust''.
       (ii) Section 404(h)(2) is amended by striking ``stock bonus 
     or profit-sharing trust'' and inserting ``trust subject to 
     subsection (a)(3)(A)''.
       (iii) The heading of section 404(h)(2) is amended by 
     striking ``stock bonus and profit-sharing trust'' and 
     inserting ``certain trusts''.
       (b) Compensation.--
       (1) In general.--Section 404(a) (relating to general rule) 
     is amended by adding at the end the following:
       ``(12) Definition of compensation.--For purposes of 
     paragraphs (3), (7), (8), and (9), the term `compensation' 
     shall include amounts treated as `participant's compensation' 
     under subparagraph (C) or (D) of section 415(c)(3).''.
       (2) Conforming amendments.--
       (A) Subparagraph (B) of section 404(a)(3) is amended by 
     striking the last sentence thereof.
       (B) Clause (i) of section 4972(c)(6)(B) is amended by 
     striking ``(within the meaning of section 404(a))'' and 
     inserting ``(within the meaning of section 404(a) and as 
     adjusted under section 404(a)(12))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 616. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   ROTH CONTRIBUTIONS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to deferred compensation, etc.) is 
     amended by inserting after section 402 the following new 
     section:

     ``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS ROTH 
                   CONTRIBUTIONS.

       ``(a) General Rule.--If an applicable retirement plan 
     includes a qualified Roth contribution program--
       ``(1) any designated Roth contribution made by an employee 
     pursuant to the program shall be treated as an elective 
     deferral

[[Page S5318]]

     for purposes of this chapter, except that such contribution 
     shall not be excludable from gross income, and
       ``(2) such plan (and any arrangement which is part of such 
     plan) shall not be treated as failing to meet any requirement 
     of this chapter solely by reason of including such program.
       ``(b) Qualified Roth Contribution Program.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified Roth contribution 
     program' means a program under which an employee may elect to 
     make designated Roth contributions in lieu of all or a 
     portion of elective deferrals the employee is otherwise 
     eligible to make under the applicable retirement plan.
       ``(2) Separate accounting required.--A program shall not be 
     treated as a qualified Roth contribution program unless the 
     applicable retirement plan--
       ``(A) establishes separate accounts (`designated Roth 
     accounts') for the designated Roth contributions of each 
     employee and any earnings properly allocable to the 
     contributions, and
       ``(B) maintains separate recordkeeping with respect to each 
     account.
       ``(c) Definitions and Rules Relating to Designated Roth 
     Contributions.--For purposes of this section--
       ``(1) Designated roth contribution.--The term `designated 
     Roth contribution' means any elective deferral which--
       ``(A) is excludable from gross income of an employee 
     without regard to this section, and
       ``(B) the employee designates (at such time and in such 
     manner as the Secretary may prescribe) as not being so 
     excludable.
       ``(2) Designation limits.--The amount of elective deferrals 
     which an employee may designate under paragraph (1) shall not 
     exceed the excess (if any) of--
       ``(A) the maximum amount of elective deferrals excludable 
     from gross income of the employee for the taxable year 
     (without regard to this section), over
       ``(B) the aggregate amount of elective deferrals of the 
     employee for the taxable year which the employee does not 
     designate under paragraph (1).
       ``(3) Rollover contributions.--
       ``(A) In general.--A rollover contribution of any payment 
     or distribution from a designated Roth account which is 
     otherwise allowable under this chapter may be made only if 
     the contribution is to--
       ``(i) another designated Roth account of the individual 
     from whose account the payment or distribution was made, or
       ``(ii) a Roth IRA of such individual.
       ``(B) Coordination with limit.--Any rollover contribution 
     to a designated Roth account under subparagraph (A) shall not 
     be taken into account for purposes of paragraph (1).
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) Exclusion.--Any qualified distribution from a 
     designated Roth account shall not be includible in gross 
     income.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' has 
     the meaning given such term by section 408A(d)(2)(A) (without 
     regard to clause (iv) thereof).
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a designated Roth account shall not be 
     treated as a qualified distribution if such payment or 
     distribution is made within the 5-taxable-year period 
     beginning with the earlier of--
       ``(i) the first taxable year for which the individual made 
     a designated Roth contribution to any designated Roth account 
     established for such individual under the same applicable 
     retirement plan, or
       ``(ii) if a rollover contribution was made to such 
     designated Roth account from a designated Roth account 
     previously established for such individual under another 
     applicable retirement plan, the first taxable year for which 
     the individual made a designated Roth contribution to such 
     previously established account.
       ``(C) Distributions of excess deferrals and contributions 
     and earnings thereon.--The term `qualified distribution' 
     shall not include any distribution of any excess deferral 
     under section 402(g)(2) or any excess contribution under 
     section 401(k)(8), and any income on the excess deferral or 
     contribution.
       ``(3) Treatment of distributions of certain excess 
     deferrals.--Notwithstanding section 72, if any excess 
     deferral under section 402(g)(2) attributable to a designated 
     Roth contribution is not distributed on or before the 1st 
     April 15 following the close of the taxable year in which 
     such excess deferral is made, the amount of such excess 
     deferral shall--
       ``(A) not be treated as investment in the contract, and
       ``(B) be included in gross income for the taxable year in 
     which such excess is distributed.
       ``(4) Aggregation rules.--Section 72 shall be applied 
     separately with respect to distributions and payments from a 
     designated Roth account and other distributions and payments 
     from the plan.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and
       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1)(A) (as added by 
     section 201(c)(1)) the following new sentence: ``The 
     preceding sentence shall not apply the portion of such excess 
     as does not exceed the designated Roth contributions of the 
     individual for the taxable year.''; and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:
     ``If any portion of an eligible rollover distribution is 
     attributable to payments or distributions from a designated 
     Roth account (as defined in section 402A), an eligible 
     retirement plan with respect to such portion shall include 
     only another designated Roth account and a Roth IRA.''.
       (d) Reporting Requirements.--
       (1) W-2 information.--Section 6051(a)(8) is amended by 
     inserting ``, including the amount of designated Roth 
     contributions (as defined in section 402A)'' before the comma 
     at the end.
       (2) Information.--Section 6047 is amended by redesignating 
     subsection (f) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Designated Roth Contributions.--The Secretary shall 
     require the plan administrator of each applicable retirement 
     plan (as defined in section 402A) to make such returns and 
     reports regarding designated Roth contributions (as defined 
     in section 402A) to the Secretary, participants and 
     beneficiaries of the plan, and such other persons as the 
     Secretary may prescribe.''.
       (e) Conforming Amendments.--
       (1) Section 408A(e) is amended by adding after the first 
     sentence the following new sentence: ``Such term includes a 
     rollover contribution described in section 402A(c)(3)(A).''.
       (2) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 402 the following new item:

``Sec. 402A. Optional treatment of elective deferrals as Roth 
              contributions.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 617. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR 
                   ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25A the following new 
     section:

     ``SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY 
                   CERTAIN INDIVIDUALS.

       ``(a) Allowance of Credit.--In the case of an eligible 
     individual, there shall be allowed as a credit against the 
     tax imposed by this subtitle for the taxable year an amount 
     equal to the applicable percentage of so much of the 
     qualified retirement savings contributions of the eligible 
     individual for the taxable year as do not exceed $2,000.
       ``(b) Applicable Percentage.--For purposes of this section, 
     the applicable percentage is the percentage determined in 
     accordance with the following table:

----------------------------------------------------------------------------------------------------------------
                                      Adjusted Gross Income
-------------------------------------------------------------------------------------------------
          Joint return                  Head of a household               All other cases           Applicable
-------------------------------------------------------------------------------------------------   percentage
      Over           Not over          Over          Not over          Over          Not over
----------------------------------------------------------------------------------------------------------------
           $0          $30,000              $0         $22,500              $0         $15,000              50
       30,000           32,500          22,500          24,375          15,000          16,250              20
       32,500           50,000          24,375          37,500          16,250          25,000              10
       50,000    ...............        37,500    ..............        25,000    ..............             0
----------------------------------------------------------------------------------------------------------------


       ``(c) Eligible Individual.--For purposes of this section--
       ``(1) In general.--The term `eligible individual' means any 
     individual if such individual has attained the age of 18 as 
     of the close of the taxable year.

[[Page S5319]]

       ``(2) Dependents and full-time students not eligible.--The 
     term `eligible individual' shall not include--
       ``(A) any individual with respect to whom a deduction under 
     section 151 is allowed to another taxpayer for a taxable year 
     beginning in the calendar year in which such individual's 
     taxable year begins, and
       ``(B) any individual who is a student (as defined in 
     section 151(c)(4)).
       ``(d) Qualified Retirement Savings Contributions.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified retirement savings 
     contributions' means, with respect to any taxable year, the 
     sum of--
       ``(A) the amount of the qualified retirement contributions 
     (as defined in section 219(e)) made by the eligible 
     individual,
       ``(B) the amount of--
       ``(i) any elective deferrals (as defined in section 
     402(g)(3)) of such individual, and
       ``(ii) any elective deferral of compensation by such 
     individual under an eligible deferred compensation plan (as 
     defined in section 457(b)) of an eligible employer described 
     in section 457(e)(1)(A), and
       ``(C) the amount of voluntary employee contributions by 
     such individual to any qualified retirement plan (as defined 
     in section 4974(c)).
       ``(2) Reduction for certain distributions.--
       ``(A) In general.--The qualified retirement savings 
     contributions determined under paragraph (1) shall be reduced 
     (but not below zero) by the sum of--
       ``(i) any distribution from a qualified retirement plan (as 
     defined in section 4974(c)), or from an eligible deferred 
     compensation plan (as defined in section 457(b)), received by 
     the individual during the testing period which is includible 
     in gross income, and
       ``(ii) any distribution from a Roth IRA received by the 
     individual during the testing period which is not a qualified 
     rollover contribution (as defined in section 408A(e)) to a 
     Roth IRA.
       ``(B) Testing period.--For purposes of subparagraph (A), 
     the testing period, with respect to a taxable year, is the 
     period which includes--
       ``(i) such taxable year,
       ``(ii) the 2 preceding taxable years, and
       ``(iii) the period after such taxable year and before the 
     due date (including extensions) for filing the return of tax 
     for such taxable year.
       ``(C) Excepted distributions.--There shall not be taken 
     into account under subparagraph (A)--
       ``(i) any distribution referred to in section 72(p), 
     401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
       ``(ii) any distribution to which section 408A(d)(3) 
     applies.
       ``(D) Treatment of distributions received by spouse of 
     individual.--For purposes of determining distributions 
     received by an individual under subparagraph (A) for any 
     taxable year, any distribution received by the spouse of such 
     individual shall be treated as received by such individual if 
     such individual and spouse file a joint return for such 
     taxable year and for the taxable year during which the spouse 
     receives the distribution.
       ``(e) Adjusted Gross Income.--For purposes of this section, 
     adjusted gross income shall be determined without regard to 
     sections 911, 931, and 933.
       ``(f) Investment in the Contract.--Notwithstanding any 
     other provision of law, a qualified retirement savings 
     contribution shall not fail to be included in determining the 
     investment in the contract for purposes of section 72 by 
     reason of the credit under this section.
       ``(g) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2006.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25B, as added by subsection (a), 
     is amended by inserting after subsection (f) the following 
     new subsection:
       ``(g) Limitation Based on Amount of Tax.--The aggregate 
     credit allowed by this section for the taxable year shall not 
     exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the sum of the credits allowed by sections 
     21, 22, 23, 24, 25, and 25A plus
       ``(2) the tax imposed by section 55 for such taxable 
     year.''
       (2) Conforming amendments.--
       (A) Section 26(a)(1), as amended by section 201, is amended 
     by inserting ``or section 25B'' after ``section 24''.
       (B) Section 23(c), as amended by section 201, is amended by 
     striking ``sections 24'' and inserting ``sections 24, 25B,''.
       (C) Section 25(e)(1)(C), as amended by section 201, is 
     amended by inserting ``25B,'' after ``24,''.
       (D) Section 904(h), as amended by section 201, is amended 
     by inserting ``or 25B'' after ``section 24''.
       (E) Section 1400C(d), as amended by section 201, is amended 
     by inserting ``and section 25B'' after ``section 24''.
       (c) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Elective deferrals and IRA contributions by certain 
              individuals.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 618. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF 
                   SMALL EMPLOYERS.

       (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. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     contribution credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the amount 
     which would (but for subsection (f)(1)) be allowed as a 
     deduction under section 404 for such taxable year for 
     qualified employer contributions made to any qualified 
     retirement plan on behalf of any employee who is not a highly 
     compensated employee.
       ``(b) Credit Limited to 3 Years.--The credit allowable by 
     this section shall be allowed only with respect to the period 
     of 3 taxable years beginning with the first taxable year for 
     which a credit is allowable with respect to a plan under this 
     section.
       ``(c) Qualified Employer Contribution.--For purposes of 
     this section--
       ``(1) Defined contribution plans.--In the case of a defined 
     contribution plan, the term `qualified employer contribution' 
     means the amount of nonelective and matching contributions to 
     the plan made by the employer on behalf of any employee who 
     is not a highly compensated employee to the extent such 
     amount does not exceed 3 percent of such employee's 
     compensation from the employer for the year.
       ``(2) Defined benefit plans.--In the case of a defined 
     benefit plan, the term `qualified employer contribution' 
     means the amount of employer contributions to the plan made 
     on behalf of any employee who is not a highly compensated 
     employee to the extent that the accrued benefit of such 
     employee derived from employer contributions for the year 
     does not exceed the equivalent (as determined under 
     regulations prescribed by the Secretary and without regard to 
     contributions and benefits under the Social Security Act) of 
     3 percent of such employee's compensation from the employer 
     for the year.
       ``(d) Qualified Retirement Plan.--
       ``(1) In general.--The term `qualified retirement plan' 
     means any plan described in section 401(a) which includes a 
     trust exempt from tax under section 501(a) if the plan 
     meets--
       ``(A) the contribution requirements of paragraph (2),
       ``(B) the vesting requirements of paragraph (3), and
       ``(C) the distribution requirements of paragraph (4).
       ``(2) Contribution requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met if, under the plan--
       ``(i) the employer is required to make nonelective 
     contributions of at least 1 percent of compensation (or the 
     equivalent thereof in the case of a defined benefit plan) for 
     each employee who is not a highly compensated employee who is 
     eligible to participate in the plan, and
       ``(ii) allocations of nonelective employer contributions, 
     in the case of a defined contribution plan, are either in 
     equal dollar amounts for all employees covered by the plan or 
     bear a uniform relationship to the total compensation, or the 
     basic or regular rate of compensation, of the employees 
     covered by the plan (and an equivalent requirement is met 
     with respect to a defined benefit plan).
       ``(B) Compensation limitation.--The compensation taken into 
     account under subparagraph (A) for any year shall not exceed 
     the limitation in effect for such year under section 
     401(a)(17).
       ``(3) Vesting requirements.--The requirements of this 
     paragraph are met if the plan satisfies the requirements of 
     either of the following subparagraphs:
       ``(A) 3-year vesting.--A plan satisfies the requirements of 
     this subparagraph if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(B) 5-year graded vesting.--A plan satisfies the 
     requirements of this subparagraph if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

``Years of service:                   The nonforfeitable percentage is:
  1.............................................................20 ....

  2.............................................................40 ....

  3.............................................................60 ....

  4.............................................................80 ....

  5............................................................100.....

       ``(4) Distribution requirements.--In the case of a profit-
     sharing or stock bonus plan, the requirements of this 
     paragraph are met if, under the plan, qualified employer 
     contributions are distributable only as provided in section 
     401(k)(2)(B).
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Eligible employer.--
       ``(A) In general.--The term `eligible employer' means, with 
     respect to any year, an employer which has no more than 20 
     employees who received at least $5,000 of compensation from 
     the employer for the preceding year.
       ``(B) Requirement for new qualified employer plans.--Such 
     term shall not include

[[Page S5320]]

     an employer if, during the 3-taxable year period immediately 
     preceding the 1st taxable year for which the credit under 
     this section is otherwise allowable for a qualified employer 
     plan of the employer, the employer or any member of any 
     controlled group including the employer (or any predecessor 
     of either) established or maintained a qualified employer 
     plan with respect to which contributions were made, or 
     benefits were accrued, for substantially the same employees 
     as are in the qualified employer plan.
       ``(2) Highly compensated employee.--The term `highly 
     compensated employee' has the meaning given such term by 
     section 414(q) (determined without regard to section 
     414(q)(1)(B)(ii)).
       ``(f) Special Rules.--
       ``(1) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of the qualified employer 
     contributions paid or incurred for the taxable year which is 
     equal to the credit determined under subsection (a).
       ``(2) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable year.
       ``(3) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(g) Recapture of Credit on Forfeited Contributions.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     any accrued benefit which is forfeitable by reason of 
     subsection (d)(3) is forfeited, the employer's tax imposed by 
     this chapter for the taxable year in which the forfeiture 
     occurs shall be increased by 35 percent of the employer 
     contributions from which such benefit is derived to the 
     extent such contributions were taken into account in 
     determining the credit under this section.
       ``(2) Reallocated contributions.--Paragraph (1) shall not 
     apply to any contribution which is reallocated by the 
     employer under the plan to employees who are not highly 
     compensated employees.''.
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit) 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 an eligible employer (as defined in 
     section 45E(e)), the small employer pension plan contribution 
     credit determined under section 45E(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(10) No carryback of small employer pension plan 
     contribution credit before january 1, 2003.--No portion of 
     the unused business credit for any taxable year which is 
     attributable to the small employer pension plan contribution 
     credit determined under section 45E may be carried back to a 
     taxable year beginning before January 1, 2003.''
       (2) Subsection (c) of section 196 is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the small employer pension plan contribution credit 
     determined under section 45E(a).''
       (3) 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. Small employer pension plan contributions.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions paid or incurred in taxable 
     years beginning after December 31, 2002.

     SEC. 619. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 618, is amended by adding at the end the following 
     new section:

     ``SEC. 45F. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     startup cost credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the 
     qualified startup costs paid or incurred by the taxpayer 
     during the taxable year.
       ``(b) Dollar Limitation.--The amount of the credit 
     determined under this section for any taxable year shall not 
     exceed--
       ``(1) $500 for the first credit year and each of the 2 
     taxable years immediately following the first credit year, 
     and
       ``(2) zero for any other taxable year.
       ``(c) Eligible Employer.--For purposes of this section--
       ``(1) In general.--The term `eligible employer' has the 
     meaning given such term by section 408(p)(2)(C)(i).
       ``(2) Requirement for new qualified employer plans.--Such 
     term shall not include an employer if, during the 3-taxable 
     year period immediately preceding the 1st taxable year for 
     which the credit under this section is otherwise allowable 
     for a qualified employer plan of the employer, the employer 
     or any member of any controlled group including the employer 
     (or any predecessor of either) established or maintained a 
     qualified employer plan with respect to which contributions 
     were made, or benefits were accrued, for substantially the 
     same employees as are in the qualified employer plan.
       ``(d) Other Definitions.--For purposes of this section--
       ``(1) Qualified startup costs.--
       ``(A) In general.--The term `qualified startup costs' means 
     any ordinary and necessary expenses of an eligible employer 
     which are paid or incurred in connection with--
       ``(i) the establishment or administration of an eligible 
     employer plan, or
       ``(ii) the retirement-related education of employees with 
     respect to such plan.
       ``(B) Plan must have at least 1 participant.--Such term 
     shall not include any expense in connection with a plan that 
     does not have at least 1 employee eligible to participate who 
     is not a highly compensated employee.
       ``(2) Eligible employer plan.--The term `eligible employer 
     plan' means a qualified employer plan within the meaning of 
     section 4972(d).
       ``(3) First credit year.--The term `first credit year' 
     means--
       ``(A) the taxable year which includes the date that the 
     eligible employer plan to which such costs relate becomes 
     effective, or
       ``(B) at the election of the eligible employer, the taxable 
     year preceding the taxable year referred to in subparagraph 
     (A).
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(2) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of the qualified startup costs paid 
     or incurred for the taxable year which is equal to the credit 
     determined under subsection (a).
       ``(3) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable 
     year.''
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit), as 
     amended by section 618, is amended by striking ``plus'' at 
     the end of paragraph (13), by striking the period at the end 
     of paragraph (14) and inserting ``, plus'', and by adding at 
     the end the following new paragraph:
       ``(15) in the case of an eligible employer (as defined in 
     section 45F(c)), the small employer pension plan startup cost 
     credit determined under section 45F(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d), as amended by section 618(c), is amended 
     by adding at the end the following new paragraph:
       ``(11) No carryback of small employer pension plan startup 
     cost credit before january 1, 2002.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the small employer pension plan startup cost credit 
     determined under section 45F may be carried back to a taxable 
     year beginning before January 1, 2002.''
       (2) Subsection (c) of section 196, as amended by section 
     618(c), is amended by striking ``and'' at the end of 
     paragraph (9), by striking the period at the end of paragraph 
     (10) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(11) the small employer pension plan startup cost credit 
     determined under section 45F(a).''
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 618(c), is 
     amended by adding at the end the following new item:

``Sec. 45F. Small employer pension plan startup costs.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2001, with respect to qualified 
     employer plans established after such date.

     SEC. 620. ELIMINATION OF USER FEE FOR REQUESTS TO IRS 
                   REGARDING NEW PENSION PLANS.

       (a) Elimination of Certain User Fees.--The Secretary of the 
     Treasury or the Secretary's delegate shall not require 
     payment of user fees under the program established under 
     section 10511 of the Revenue Act of 1987 for requests to the 
     Internal Revenue Service for ruling letters, opinion letters, 
     and determination letters or similar requests with respect to 
     the qualified status of a new pension benefit plan or any 
     trust which is part of the plan.
       (b) New Pension Benefit Plan.--For purposes of this 
     section--
       (1) In general.--The term ``new pension benefit plan'' 
     means a pension, profit-sharing, stock bonus, annuity, or 
     employee stock ownership plan which is maintained by one or 
     more eligible employers if such employer (or any predecessor 
     employer) has not made a prior request described in 
     subsection (a) for such plan (or any predecessor plan).
       (2) Eligible employer.--
       (A) In general.--The term ``eligible employer'' means an 
     employer which has--
       (i) no more than 100 employees for the preceding year, and
       (ii) at least one employee who is not a highly compensated 
     employee (as defined in section 414(q)) and is participating 
     in the plan.

[[Page S5321]]

       (B) New plan requirement.--The term ``eligible employer'' 
     shall not include an employer if, during the 3-taxable year 
     period immediately preceding the taxable year in which the 
     request is made, the employer or any member of any controlled 
     group including the employer (or any predecessor of either) 
     established or maintained a qualified employer plan with 
     respect to which contributions were made, or benefits were 
     accrued for service, for substantially the same employees as 
     are in the qualified employer plan.
       (c) Determination of Average Fees Charged.--For purposes of 
     any determination of average fees charged, any request to 
     which subsection (a) applies shall not be taken into account.
       (d) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2001.

     SEC. 621. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN 
                   INTERNATIONAL TRANSPORTATION SERVICES.

       (a) Exclusion From Income Sourcing Rules.--The second 
     sentence of section 861(a)(3) (relating to gross income from 
     sources within the United States) is amended by striking 
     ``except for purposes of sections 79 and 105 and subchapter 
     D,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to remuneration for services performed in plan 
     years beginning after December 31, 2001.

                Subtitle C--Enhancing Fairness for Women

     SEC. 631. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES 
                   TO DEFINED CONTRIBUTION PLANS.

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``the 
     applicable percentage''.
       (2) Applicable percentage.--Section 415(c) is amended by 
     adding at the end the following new paragraph:
       ``(8) Applicable percentage.--For purposes of paragraph 
     (1)(B), the applicable percentage shall be determined in 
     accordance with the following table:

``For years beginning in:                 The applicable percentage is:
    2002 through 2010.......................................50 percent 
    2011 and thereafter.................................100 percent.''.

       (3) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the fifth taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (4) Conforming amendments.--
       (A) Subsection (f) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Economic Stimulus Tax Cut Act of 2001)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 611(c)(3)) is amended by inserting before the 
     period at the end the following: ``(as in effect before the 
     enactment of the Economic Stimulus Tax Cut Act of 2001)''.
       (H) Section 664(g) is amended--
       (i) in paragraph (3)(E) by striking ``limitations under 
     section 415(c)'' and inserting ``applicable limitation under 
     paragraph (7)'', and
       (ii) by adding at the end the following new paragraph:
       ``(7) Applicable limitation.--
       ``(A) In general.--For purposes of paragraph (3)(E), the 
     applicable limitation under this paragraph with respect to a 
     participant is an amount equal to the lesser of--
       ``(i) $30,000, or
       ``(ii) 25 percent of the participant's compensation (as 
     defined in section 415(c)(3)).
       ``(B) Cost-of-living adjustment.--The Secretary shall 
     adjust annually the $30,000 amount under subparagraph (A)(i) 
     at the same time and in the same manner as under section 
     415(d), except that the base period shall be the calendar 
     quarter beginning October 1, 1993, and any increase under 
     this subparagraph which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.''.
       (5) Effective date.--
       (A) Except as provided in subparagraph (B), the amendments 
     made by this subsection shall apply to years beginning after 
     December 31, 2001.
       (B) The amendments made by paragraphs (3) and (4) shall 
     apply to years beginning after December 31, 2010.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to limitation years beginning after December 31, 2000.
       (B) Exclusion allowance.--Effective for limitation years 
     beginning in 2001, in the case of any annuity contract 
     described in section 403(b) of the Internal Revenue Code of 
     1986, the amount of the contribution disqualified by reason 
     of section 415(g) of such Code shall reduce the exclusion 
     allowance as provided in section 403(b)(2) of such Code.
       (3) Modification of 403(b) exclusion allowance to conform 
     to 415 modification.--The Secretary of the Treasury shall 
     modify the regulations regarding the exclusion allowance 
     under section 403(b)(2) of the Internal Revenue Code of 1986 
     to render void the requirement that contributions to a 
     defined benefit pension plan be treated as previously 
     excluded amounts for purposes of the exclusion allowance. For 
     taxable years beginning after December 31, 2000, such 
     regulations shall be applied as if such requirement were 
     void.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``the applicable percentage''.
       (2) Applicable percentage.--Section 457 is amended by 
     adding at the end the following new subsection:
       ``(h) Applicable Percentage.--For purposes of subsection 
     (b)(2)(A), the applicable percentage shall be determined in 
     accordance with the following table:

``For years beginning in:                 The applicable percentage is:
    2002 through 2010.......................................50 percent 
    2011 and thereafter.................................100 percent.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

     SEC. 632. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

       (a) In General.--Section 411(a) (relating to minimum 
     vesting standards) is amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (12), a plan''; and
       (2) by adding at the end the following:
       ``(12) Faster vesting for matching contributions.--In the 
     case of matching contributions (as defined in section 
     401(m)(4)(A)), paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
    ``Years of service:                                percentage is:  
      2.............................................................20 
      3.............................................................40 
      4.............................................................60 
      5.............................................................80 
      6.........................................................100.''.
       (b) Amendment of ERISA.--Section 203(a) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is 
     amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (4), a plan'', and
       (2) by adding at the end the following:
       ``(4) In the case of matching contributions (as defined in 
     section 401(m)(4)(A) of the Internal Revenue Code of 1986), 
     paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and

[[Page S5322]]

       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
  2.............................................................20 ....

  3.............................................................40 ....

  4.............................................................60 ....

  5.............................................................80 ....

  6.........................................................100.''.....

       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2001.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment); or
       (ii) January 1, 2002; or
       (B) January 1, 2006.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 633. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.

       (a) Life Expectancy Tables.--The Secretary of the Treasury 
     shall modify the life expectancy tables under the regulations 
     relating to minimum distribution requirements under sections 
     401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of 
     the Internal Revenue Code to reflect current life expectancy.
       (b) Repeal of Rule Where Distributions Had Begun Before 
     Death Occurs.--
       (1) In general.--Subparagraph (B) of section 401(a)(9) is 
     amended by striking clause (i) and redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (2) Conforming changes.--
       (A) Clause (i) of section 401(a)(9)(B) (as so redesignated) 
     is amended--
       (i) by striking ``for other cases'' in the heading; and
       (ii) by striking ``the distribution of the employee's 
     interest has begun in accordance with subparagraph (A)(ii)'' 
     and inserting ``his entire interest has been distributed to 
     him''.
       (B) Clause (ii) of section 401(a)(9)(B) (as so 
     redesignated) is amended by striking ``clause (ii)'' and 
     inserting ``clause (i)''.
       (C) Clause (iii) of section 401(a)(9)(B) (as so 
     redesignated) is amended--
       (i) by striking ``clause (iii)(I)'' and inserting ``clause 
     (ii)(I)'';
       (ii) by striking ``clause (iii)(III)'' in subclause (I) and 
     inserting ``clause (ii)(III)'';
       (iii) by striking ``the date on which the employee would 
     have attained age 70\1/2\,'' in subclause (I) and inserting 
     ``April 1 of the calendar year following the calendar year in 
     which the spouse attains 70\1/2\,''; and
       (iv) by striking ``the distributions to such spouse 
     begin,'' in subclause (II) and inserting ``his entire 
     interest has been distributed to him,''.
       (3) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to years 
     beginning after December 31, 2001.
       (B) Distributions to surviving spouse.--
       (i) In general.--In the case of an employee described in 
     clause (ii), distributions to the surviving spouse of the 
     employee shall not be required to commence prior to the date 
     on which such distributions would have been required to begin 
     under section 401(a)(9)(B) of the Internal Revenue Code of 
     1986 (as in effect on the day before the date of the 
     enactment of this Act).
       (ii) Certain employees.--An employee is described in this 
     clause if such employee dies before--

       (I) the date of the enactment of this Act, and
       (II) the required beginning date (within the meaning of 
     section 401(a)(9)(C) of the Internal Revenue Code of 1986) of 
     the employee.

     SEC. 634. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

       (a) In General.--Section 414(p)(11) (relating to 
     application of rules to governmental and church plans) is 
     amended--
       (1) by inserting ``or an eligible deferred compensation 
     plan (within the meaning of section 457(b))'' after 
     ``subsection (e))''; and
       (2) in the heading, by striking ``governmental and church 
     plans'' and inserting ``certain other plans''.
       (b) Waiver of Certain Distribution Requirements.--Paragraph 
     (10) of section 414(p) is amended by striking ``and section 
     409(d)'' and inserting ``section 409(d), and section 
     457(d)''.
       (c) Tax Treatment of Payments From a Section 457 Plan.--
     Subsection (p) of section 414 is amended by redesignating 
     paragraph (12) as paragraph (13) and inserting after 
     paragraph (11) the following new paragraph:
       ``(12) Tax treatment of payments from a section 457 plan.--
     If a distribution or payment from an eligible deferred 
     compensation plan described in section 457(b) is made 
     pursuant to a qualified domestic relations order, rules 
     similar to the rules of section 402(e)(1)(A) shall apply to 
     such distribution or payment.''.
       (d) Effective Date.--
       (1) In general.--The amendment made by subsection (c) shall 
     apply to transfers, distributions, and payments made after 
     December 31, 2001.
       (2) Amendments relating to assignments in divorce, etc., 
     proceedings.--The amendments made by subsections (a) and (b) 
     shall take effect on January 1, 2002, except that in the case 
     of a domestic relations order entered before such date, the 
     plan administrator--
       (A) shall treat such order as a qualified domestic 
     relations order if such administrator is paying benefits 
     pursuant to such order on such date, and
       (B) may treat any other such order entered before such date 
     as a qualified domestic relations order even if such order 
     does not meet the requirements of such amendments.

     SEC. 635. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.

       (a) Safe Harbor Relief.--
       (1) In general.--The Secretary of the Treasury shall revise 
     the regulations relating to hardship distributions under 
     section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 
     1986 to provide that the period an employee is prohibited 
     from making elective and employee contributions in order for 
     a distribution to be deemed necessary to satisfy financial 
     need shall be equal to 6 months.
       (2) Effective date.--The revised regulations under this 
     subsection shall apply to years beginning after December 31, 
     2001.
       (b) Hardship Distributions Not Treated as Eligible Rollover 
     Distributions.--
       (1) Modification of definition of eligible rollover.--
     Subparagraph (C) of section 402(c)(4) (relating to eligible 
     rollover distribution) is amended to read as follows:
       ``(C) any distribution which is made upon hardship of the 
     employee.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to distributions made after December 31, 2001.

     SEC. 636. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR 
                   DOMESTIC OR SIMILAR WORKERS.

       (a) In General.--Section 4972(c)(6) (relating to exceptions 
     to nondeductible contributions), as amended by section 616, 
     is amended by striking ``or'' at the end of subparagraph (A), 
     by striking the period and inserting ``, or'' at the end of 
     subparagraph (B), and by inserting after subparagraph (B) the 
     following new subparagraph:
       ``(C) so much of the contributions to a simple retirement 
     account (within the meaning of section 408(p)) or a simple 
     plan (within the meaning of section 401(k)(11)) which are not 
     deductible when contributed solely because such contributions 
     are not made in connection with a trade or business of the 
     employer.''
       (b) Exclusion of Certain Contributions.--Section 
     4972(c)(6), as amended by subsection (a), is amended by 
     adding at the end the following new sentence: ``Subparagraph 
     (C) shall not apply to contributions made on behalf of the 
     employer or a member of the employer's family (as defined in 
     section 447(e)(1)).''.
       (c) No Inference.--Nothing in the amendments made by this 
     section shall be construed to infer the proper treatment of 
     nondeductible contributions under the laws in effect before 
     such amendments.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle D--Increasing Portability for Participants

     SEC. 641. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,
     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.

[[Page S5323]]

       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).
     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A), or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b) and which is maintained by an 
     eligible employer described in section 457(e)(1)(A).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an eligible employer described in section 457(e)(1)(A) shall 
     be treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''.
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403(b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting ``, and'', and by inserting after clause 
     (v) the following new clause:
       ``(vi) an annuity contract described in section 403(b).''.
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''.
       (d) Spousal Rollovers.--Section 402(c)(9) (relating to 
     rollover where spouse receives distribution after death of 
     employee) is amended by striking ``; except that'' and all 
     that follows up to the end period.
       (e) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f)(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended to 
     read as follows:
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A), 
     except that section 402(f) shall be applied to the payor in 
     lieu of the plan administrator.''.
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8),'' and inserting ``403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of any amendment made by this section.

     SEC. 642. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

       (a) In General.--Subparagraph (A) of section 408(d)(3) 
     (relating to rollover amounts) is amended by adding ``or'' at 
     the end of clause (i), by striking clauses (ii) and (iii), 
     and by adding at the end the following:
       ``(ii) the entire amount received (including money and any 
     other property) is paid into an eligible retirement plan for 
     the benefit of such individual not later than the 60th day 
     after the date on which the payment or distribution is 
     received, except that the maximum amount which may be paid 
     into such plan may not exceed the portion of the amount 
     received which is includible in gross income (determined 
     without regard to this paragraph).
     For purposes of clause (ii), the term `eligible retirement 
     plan' means an eligible retirement plan described in clause 
     (iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''.
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of the amendments made by this section.

     SEC. 643. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

       (a) Rollovers From Exempt Trusts.--Paragraph (2) of section 
     402(c) (relating to maximum amount which may be rolled over) 
     is amended by adding at the end the following: ``The 
     preceding sentence shall not apply to such distribution to 
     the extent--
       ``(A) such portion is transferred in a direct trustee-to-
     trustee transfer to a qualified trust which is part of a plan 
     which is a defined contribution plan and which agrees to 
     separately account for amounts so transferred, including 
     separately accounting for the portion of such distribution 
     which is includible in gross income and the portion of such 
     distribution which is not so includible, or
       ``(B) such portion is transferred to an eligible retirement 
     plan described in clause (i) or (ii) of paragraph (8)(B).''.
       (b) Optional Direct Transfer of Eligible Rollover 
     Distributions.--Subparagraph (B) of section 401(a)(31) 
     (relating to limitation) is amended by adding at the end the 
     following: ``The preceding sentence shall not apply to such 
     distribution if the plan to which such distribution is 
     transferred--
       ``(i) agrees to separately account for amounts so 
     transferred, including separately accounting for the portion 
     of such distribution which is includible in gross income and 
     the portion of such distribution which is not so includible, 
     or

[[Page S5324]]

       ``(ii) is an eligible retirement plan described in clause 
     (i) or (ii) of section 402(c)(8)(B).''.
       (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) 
     of section 408(d) (relating to special rules for applying 
     section 72) is amended by inserting at the end the following:
       ``(H) Application of section 72.--
       ``(i) In general.--If--

       ``(I) a distribution is made from an individual retirement 
     plan, and
       ``(II) a rollover contribution is made to an eligible 
     retirement plan described in section 402(c)(8)(B)(iii), (iv), 
     (v), or (vi) with respect to all or part of such 
     distribution,

     then, notwithstanding paragraph (2), the rules of clause (ii) 
     shall apply for purposes of applying section 72.
       ``(ii) Applicable rules.--In the case of a distribution 
     described in clause (i)--

       ``(I) section 72 shall be applied separately to such 
     distribution,
       ``(II) notwithstanding the pro rata allocation of income 
     on, and investment in, the contract to distributions under 
     section 72, the portion of such distribution rolled over to 
     an eligible retirement plan described in clause (i) shall be 
     treated as from income on the contract (to the extent of the 
     aggregate income on the contract from all individual 
     retirement plans of the distributee), and
       ``(III) appropriate adjustments shall be made in applying 
     section 72 to other distributions in such taxable year and 
     subsequent taxable years.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after December 31, 2001.

     SEC. 644. HARDSHIP EXCEPTION TO 60-DAY RULE.

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 643, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 645. TREATMENT OF FORMS OF DISTRIBUTION.

       (a) Plan Transfers.--
       (1) Amendment of internal revenue code.--Paragraph (6) of 
     section 411(d) (relating to accrued benefit not to be 
     decreased by amendment) is amended by adding at the end the 
     following:
       ``(D) Plan transfers.--
       ``(i) In general.--A defined contribution plan (in this 
     subparagraph referred to as the `transferee plan') shall not 
     be treated as failing to meet the requirements of this 
     subsection merely because the transferee plan does not 
     provide some or all of the forms of distribution previously 
     available under another defined contribution plan (in this 
     subparagraph referred to as the `transferor plan') to the 
     extent that--

       ``(I) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(II) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in subclause 
     (I),
       ``(III) the transfer described in subclause (I) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(IV) the election described in subclause (III) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election, and
       ``(V) the transferee plan allows the participant or 
     beneficiary described in subclause (III) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.

       ``(ii) Special rule for mergers, etc.--Clause (i) shall 
     apply to plan mergers and other transactions having the 
     effect of a direct transfer, including consolidations of 
     benefits attributable to different employers within a 
     multiple employer plan.''.
       (2) Amendment of erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following:
       ``(4)(A) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this subparagraph referred to 
     as the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan;
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i);
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan;
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election; and
       ``(v) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.
       ``(B) Subparagraph (A) shall apply to plan mergers and 
     other transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.
       (b) Regulations.--
       (1) Amendment of internal revenue code.--The last sentence 
     of paragraph (6)(B) of section 411(d) (relating to accrued 
     benefit not to be decreased by amendment) is amended to read 
     as follows: ``The Secretary shall by regulations provide that 
     this subparagraph shall not apply to any plan amendment which 
     reduces or eliminates benefits or subsidies which create 
     significant burdens or complexities for the plan and plan 
     participants, unless such amendment adversely affects the 
     rights of any participant in a more than de minimis 
     manner.''.
       (2) Amendment of erisa.--The last sentence of section 
     204(g)(2) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
     ``The Secretary of the Treasury shall by regulations provide 
     that this paragraph shall not apply to any plan amendment 
     which reduces or eliminates benefits or subsidies which 
     create significant burdens or complexities for the plan and 
     plan participants, unless such amendment adversely affects 
     the rights of any participant in a more than de minimis 
     manner.''.
       (3) Secretary directed.--Not later than December 31, 2002, 
     the Secretary of the Treasury is directed to issue 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986 and section 204(g) of the Employee Retirement 
     Income Security Act of 1974, including the regulations 
     required by the amendment made by this subsection. Such 
     regulations shall apply to plan years beginning after 
     December 31, 2002, or such earlier date as is specified by 
     the Secretary of the Treasury.

     SEC. 646. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

       (a) Modification of Same Desk Exception.--
       (1) Section 401(k).--
       (A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash 
     or deferred arrangements) is amended by striking ``separation 
     from service'' and inserting ``severance from employment''.
       (B) Subparagraph (A) of section 401(k)(10) (relating to 
     distributions upon termination of plan or disposition of 
     assets or subsidiary) is amended to read as follows:
       ``(A) In general.--An event described in this subparagraph 
     is the termination of the plan without establishment or 
     maintenance of another defined contribution plan (other than 
     an employee stock ownership plan as defined in section 
     4975(e)(7)).''.
       (C) Section 401(k)(10) is amended--
       (i) in subparagraph (B)--

       (I) by striking ``An event'' in clause (i) and inserting 
     ``A termination''; and
       (II) by striking ``the event'' in clause (i) and inserting 
     ``the termination'';

       (ii) by striking subparagraph (C); and
       (iii) by striking ``or disposition of assets or 
     subsidiary'' in the heading.
       (2) Section 403(b).--
       (A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are 
     each amended by striking ``separates from service'' and 
     inserting ``has a severance from employment''.
       (B) The heading for paragraph (11) of section 403(b) is 
     amended by striking ``separation from service'' and inserting 
     ``severance from employment''.
       (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
     amended by striking ``is separated from service'' and 
     inserting ``has a severance from employment''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

[[Page S5325]]

     SEC. 647. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (b) 457 Plans.--Subsection (e) of section 457, as amended 
     by section 641, is amended by adding after paragraph (16) the 
     following new paragraph:
       ``(17) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to trustee-to-trustee transfers after December 
     31, 2001.

     SEC. 648. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

       (a) Qualified Plans.--
       (1) Amendment of internal revenue code.--Section 411(a)(11) 
     (relating to restrictions on certain mandatory distributions) 
     is amended by adding at the end the following:
       ``(D) Special rule for rollover contributions.--A plan 
     shall not fail to meet the requirements of this paragraph if, 
     under the terms of the plan, the present value of the 
     nonforfeitable accrued benefit is determined without regard 
     to that portion of such benefit which is attributable to 
     rollover contributions (and earnings allocable thereto). For 
     purposes of this subparagraph, the term `rollover 
     contributions' means any rollover contribution under sections 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
     457(e)(16).''.
       (2) Amendment of erisa.--Section 203(e) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
     amended by adding at the end the following:
       ``(4) A plan shall not fail to meet the requirements of 
     this subsection if, under the terms of the plan, the present 
     value of the nonforfeitable accrued benefit is determined 
     without regard to that portion of such benefit which is 
     attributable to rollover contributions (and earnings 
     allocable thereto). For purposes of this subparagraph, the 
     term `rollover contributions' means any rollover contribution 
     under sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code 
     of 1986.''.
       (b) Eligible Deferred Compensation Plans.--Clause (i) of 
     section 457(e)(9)(A) is amended by striking ``such amount'' 
     and inserting ``the portion of such amount which is not 
     attributable to rollover contributions (as defined in section 
     411(a)(11)(D))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 649. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR 
                   SECTION 457 PLANS.

       (a) Minimum Distribution Requirements.--Paragraph (2) of 
     section 457(d) (relating to distribution requirements) is 
     amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     minimum distribution requirements of this paragraph if such 
     plan meets the requirements of section 401(a)(9).''.
       (b) Inclusion in Gross Income.--
       (1) Year of inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.
       (2) Conforming amendments.--
       (A) So much of paragraph (9) of section 457(e) as precedes 
     subparagraph (A) is amended to read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in subsection (e)(1)(B)--''.
       (B) Section 457(d) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rule for government plan.--An eligible 
     deferred compensation plan of an employer described in 
     subsection (e)(1)(A) shall not be treated as failing to meet 
     the requirements of this subsection solely by reason of 
     making a distribution described in subsection (e)(9)(A).''.
       (c) Modification of Transition Rules for Existing 457 
     Plans.--
       (1) In general.--Section 1107(c)(3)(B) of the Tax Reform 
     Act of 1986 is amended by striking ``or'' at the end of 
     clause (i), by striking the period at the end of clause (ii) 
     and inserting ``, or'' and by inserting after clause (ii) the 
     following new clause:
       ``(iii) are deferred pursuant to an agreement with an 
     individual covered by an agreement described in clause (ii), 
     to the extent the annual amount under such agreement with the 
     individual does not exceed--

       ``(I) the amount described in clause (ii)(II), multiplied 
     by
       ``(II) the cumulative increase in the Consumer Price Index 
     (as published by the Bureau of Labor Statistics of the 
     Department of Labor).''.

       (2) Conforming amendment.--The fourth sentence of section 
     1107(c)(3)(B) of the Tax Reform Act of 1986 is amended by 
     striking ``This subparagraph'' and inserting ``Clauses (i) 
     and (ii) of this subparagraph''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act with respect to increases in the 
     Consumer Price Index after September 30, 1993.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to distributions after December 31, 2001.

       Subtitle E--Strengthening Pension Security and Enforcement

                       PART I--GENERAL PROVISIONS

     SEC. 651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY FUNDING 
                   LIMIT.

       (a) Amendments to Internal Revenue Code.--Section 412(c)(7) 
     (relating to full-funding limitation) is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage''; and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

``In the case of any plan year beginning The applicable percentage is--
      2002.........................................................160 
      2003.........................................................165 
      2004......................................................170.''.
       (b) Amendment of ERISA.--Section 302(c)(7) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) 
     is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage'', and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

``In the case of any plan year beginning The applicable percentage is--
      2002.........................................................160 
      2003.........................................................165 
      2004......................................................170.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 652. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

       (a) In General.--Subparagraph (D) of section 404(a)(1) 
     (relating to special rule in case of certain plans) is 
     amended to read as follows:
       ``(D) Special rule in case of certain plans.--
       ``(i) In general.--In the case of any defined benefit plan, 
     except as provided in regulations, the maximum amount 
     deductible under the limitations of this paragraph shall not 
     be less than the unfunded termination liability (determined 
     as if the proposed termination date referred to in section 
     4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
     Security Act of 1974 were the last day of the plan year).
       ``(ii) Plans with less than 100 participants.--For purposes 
     of this subparagraph, in the case of a plan which has less 
     than 100 participants for the plan year, termination 
     liability shall not include the liability attributable to 
     benefit increases for highly compensated employees (as 
     defined in section 414(q)) resulting from a plan amendment 
     which is made or becomes effective, whichever is later, 
     within the last 2 years before the termination date.
       ``(iii) Rule for determining number of participants.--For 
     purposes of determining whether a plan has more than 100 
     participants, all defined benefit plans maintained by the 
     same employer (or any member of such employer's controlled 
     group (within the meaning of section 412(l)(8)(C))) shall be 
     treated as one plan, but only employees of such member or 
     employer shall be taken into account.

[[Page S5326]]

       ``(iv) Plans maintained by professional service 
     employers.--Clause (i) shall not apply to a plan described in 
     section 4021(b)(13) of the Employee Retirement Income 
     Security Act of 1974.''.
       (b) Conforming Amendment.--Paragraph (6) of section 4972(c) 
     is amended to read as follows:
       ``(6) Exceptions.--In determining the amount of 
     nondeductible contributions for any taxable year, there shall 
     not be taken into account so much of the contributions to one 
     or more defined contribution plans which are not deductible 
     when contributed solely because of section 404(a)(7) as does 
     not exceed the greater of--
       ``(A) the amount of contributions not in excess of 6 
     percent of compensation (within the meaning of section 
     404(a)) paid or accrued (during the taxable year for which 
     the contributions were made) to beneficiaries under the 
     plans, or
       ``(B) the sum of--
       ``(i) the amount of contributions described in section 
     401(m)(4)(A), plus
       ``(ii) the amount of contributions described in section 
     402(g)(3)(A).
     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 653. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

       (a) In General.--Subsection (c) of section 4972 (relating 
     to nondeductible contributions) is amended by adding at the 
     end the following new paragraph:
       ``(7) Defined benefit plan exception.--In determining the 
     amount of nondeductible contributions for any taxable year, 
     an employer may elect for such year not to take into account 
     any contributions to a defined benefit plan except to the 
     extent that such contributions exceed the full-funding 
     limitation (as defined in section 412(c)(7), determined 
     without regard to subparagraph (A)(i)(I) thereof). For 
     purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to defined contribution plans and then to amounts 
     described in this paragraph. If an employer makes an election 
     under this paragraph for a taxable year, paragraph (6) shall 
     not apply to such employer for such taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 654. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--
       (1) In general.--Paragraph (11) of section 415(b) (relating 
     to limitation for defined benefit plans) is amended to read 
     as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f)), subparagraph (B) of paragraph (1) 
     shall not apply.''.
       (2) Conforming amendment.--Section 415(b)(7) (relating to 
     benefits under certain collectively bargained plans) is 
     amended by inserting ``(other than a multiemployer plan)'' 
     after ``defined benefit plan'' in the matter preceding 
     subparagraph (A).
       (b) Combining and Aggregation of Plans.--
       (1) Combining of plans.--Subsection (f) of section 415 
     (relating to combining of plans) is amended by adding at the 
     end the following:
       ``(3) Exception for multiemployer plans.--Notwithstanding 
     paragraph (1) and subsection (g), a multiemployer plan (as 
     defined in section 414(f)) shall not be combined or 
     aggregated with any other plan maintained by an employer for 
     purposes of applying subsection (b)(1)(B) to such plan or any 
     other such plan.''.
       (2) Conforming amendment for aggregation of plans.--
     Subsection (g) of section 415 (relating to aggregation of 
     plans) is amended by striking ``The Secretary'' and inserting 
     ``Except as provided in subsection (f)(3), the Secretary''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 655. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS 
                   TO 401(K) PLANS.

       (a) In General.--Section 1524(b) of the Taxpayer Relief Act 
     of 1997 is amended to read as follows:
       ``(b) Effective Date.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to elective 
     deferrals for plan years beginning after December 31, 1998.
       ``(2) Nonapplication to previously acquired property.--The 
     amendments made by this section shall not apply to any 
     elective deferral which is invested in assets consisting of 
     qualifying employer securities, qualifying employer real 
     property, or both, if such assets were acquired before 
     January 1, 1999.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply as if included in the provision of the Taxpayer 
     Relief Act of 1997 to which it relates.

     SEC. 656. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION 
                   ESOP.

       (a) In General.--Section 409 (relating to qualifications 
     for tax credit employee stock ownership plans) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Prohibited Allocations of Securities in an S 
     Corporation.--
       ``(1) In general.--An employee stock ownership plan holding 
     employer securities consisting of stock in an S corporation 
     shall provide that no portion of the assets of the plan 
     attributable to (or allocable in lieu of) such employer 
     securities may, during a nonallocation year, accrue (or be 
     allocated directly or indirectly under any plan of the 
     employer meeting the requirements of section 401(a)) for the 
     benefit of any disqualified person.
       ``(2) Failure to meet requirements.--
       ``(A) In general.--If a plan fails to meet the requirements 
     of paragraph (1), the plan shall be treated as having 
     distributed to any disqualified person the amount allocated 
     to the account of such person in violation of paragraph (1) 
     at the time of such allocation.
       ``(B) Cross reference.--

  ``For excise tax relating to violations of paragraph (1) and 
ownership of synthetic equity, see section 4979A

     .  ``(3) Nonallocation year.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonallocation year' means any 
     plan year of an employee stock ownership plan if, at any time 
     during such plan year--
       ``(i) such plan holds employer securities consisting of 
     stock in an S corporation, and
       ``(ii) disqualified persons own at least 50 percent of the 
     number of shares of stock in the S corporation.
       ``(B) Attribution rules.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The rules of section 318(a) shall apply 
     for purposes of determining ownership, except that--

       ``(I) in applying paragraph (1) thereof, the members of an 
     individual's family shall include members of the family 
     described in paragraph (4)(D), and
       ``(II) paragraph (4) thereof shall not apply.

       ``(ii) Deemed-owned shares.--Notwithstanding the employee 
     trust exception in section 318(a)(2)(B)(i), an individual 
     shall be treated as owning deemed-owned shares of the 
     individual.
     Solely for purposes of applying paragraph (5), this 
     subparagraph shall be applied after the attribution rules of 
     paragraph (5) have been applied.
       ``(4) Disqualified person.--For purposes of this 
     subsection--
       ``(A) In general.--The term `disqualified person' means any 
     person if--
       ``(i) the aggregate number of deemed-owned shares of such 
     person and the members of such person's family is at least 20 
     percent of the number of deemed-owned shares of stock in the 
     S corporation, or
       ``(ii) in the case of a person not described in clause (i), 
     the number of deemed-owned shares of such person is at least 
     10 percent of the number of deemed-owned shares of stock in 
     such corporation.
       ``(B) Treatment of family members.--In the case of a 
     disqualified person described in subparagraph (A)(i), any 
     member of such person's family with deemed-owned shares shall 
     be treated as a disqualified person if not otherwise treated 
     as a disqualified person under subparagraph (A).
       ``(C) Deemed-owned shares.--
       ``(i) In general.--The term `deemed-owned shares' means, 
     with respect to any person--

       ``(I) the stock in the S corporation constituting employer 
     securities of an employee stock ownership plan which is 
     allocated to such person under the plan, and
       ``(II) such person's share of the stock in such corporation 
     which is held by such plan but which is not allocated under 
     the plan to participants.

       ``(ii) Person's share of unallocated stock.--For purposes 
     of clause (i)(II), a person's share of unallocated S 
     corporation stock held by such plan is the amount of the 
     unallocated stock which would be allocated to such person if 
     the unallocated stock were allocated to all participants in 
     the same proportions as the most recent stock allocation 
     under the plan.
       ``(D) Member of family.--For purposes of this paragraph, 
     the term `member of the family' means, with respect to any 
     individual--
       ``(i) the spouse of the individual,
       ``(ii) an ancestor or lineal descendant of the individual 
     or the individual's spouse,
       ``(iii) a brother or sister of the individual or the 
     individual's spouse and any lineal descendant of the brother 
     or sister, and
       ``(iv) the spouse of any individual described in clause 
     (ii) or (iii).
     A spouse of an individual who is legally separated from such 
     individual under a decree of divorce or separate maintenance 
     shall not be treated as such individual's spouse for purposes 
     of this subparagraph.
       ``(5) Treatment of synthetic equity.--For purposes of 
     paragraphs (3) and (4), in the case of a person who owns 
     synthetic equity in the S corporation, except to the extent 
     provided in regulations, the shares of stock in such 
     corporation on which such synthetic equity is based shall be 
     treated as outstanding stock in such corporation and deemed-
     owned shares of such person if such treatment of synthetic 
     equity of 1 or more such persons results in--
       ``(A) the treatment of any person as a disqualified person, 
     or
       ``(B) the treatment of any year as a nonallocation year.
     For purposes of this paragraph, synthetic equity shall be 
     treated as owned by a person in the same manner as stock is 
     treated as

[[Page S5327]]

     owned by a person under the rules of paragraphs (2) and (3) 
     of section 318(a). If, without regard to this paragraph, a 
     person is treated as a disqualified person or a year is 
     treated as a nonallocation year, this paragraph shall not be 
     construed to result in the person or year not being so 
     treated.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Employee stock ownership plan.--The term `employee 
     stock ownership plan' has the meaning given such term by 
     section 4975(e)(7).
       ``(B) Employer securities.--The term `employer security' 
     has the meaning given such term by section 409(l).
       ``(C) Synthetic equity.--The term `synthetic equity' means 
     any stock option, warrant, restricted stock, deferred 
     issuance stock right, or similar interest or right that gives 
     the holder the right to acquire or receive stock of the S 
     corporation in the future. Except to the extent provided in 
     regulations, synthetic equity also includes a stock 
     appreciation right, phantom stock unit, or similar right to a 
     future cash payment based on the value of such stock or 
     appreciation in such value.
       ``(7) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection.''.
       (b) Coordination With Section 4975(e)(7).--The last 
     sentence of section 4975(e)(7) (defining employee stock 
     ownership plan) is amended by inserting ``, section 409(p),'' 
     after ``409(n)''.
       (c) Excise Tax.--
       (1) Application of tax.--Subsection (a) of section 4979A 
     (relating to tax on certain prohibited allocations of 
     employer securities) is amended--
       (A) by striking ``or'' at the end of paragraph (1), and
       (B) by striking all that follows paragraph (2) and 
     inserting the following:
       ``(3) there is any allocation of employer securities which 
     violates the provisions of section 409(p), or a nonallocation 
     year described in subsection (e)(2)(C) with respect to an 
     employee stock ownership plan, or
       ``(4) any synthetic equity is owned by a disqualified 
     person in any nonallocation year,
     there is hereby imposed a tax on such allocation or ownership 
     equal to 50 percent of the amount involved.''.
       (2) Liability.--Section 4979A(c) (defining liability for 
     tax) is amended to read as follows:
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid--
       ``(1) in the case of an allocation referred to in paragraph 
     (1) or (2) of subsection (a), by--
       ``(A) the employer sponsoring such plan, or
       ``(B) the eligible worker-owned cooperative,
     which made the written statement described in section 
     664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may 
     be), and
       ``(2) in the case of an allocation or ownership referred to 
     in paragraph (3) or (4) of subsection (a), by the S 
     corporation the stock in which was so allocated or owned.''.
       (3) Definitions.--Section 4979A(e) (relating to 
     definitions) is amended to read as follows:
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Definitions.--Except as provided in paragraph (2), 
     terms used in this section have the same respective meanings 
     as when used in sections 409 and 4978.
       ``(2) Special rules relating to tax imposed by reason of 
     paragraph (3) or (4) of subsection (a).--
       ``(A) Prohibited allocations.--The amount involved with 
     respect to any tax imposed by reason of subsection (a)(3) is 
     the amount allocated to the account of any person in 
     violation of section 409(p)(1).
       ``(B) Synthetic equity.--The amount involved with respect 
     to any tax imposed by reason of subsection (a)(4) is the 
     value of the shares on which the synthetic equity is based.
       ``(C) Special rule during first nonallocation year.--For 
     purposes of subparagraph (A), the amount involved for the 
     first nonallocation year of any employee stock ownership plan 
     shall be determined by taking into account the total value of 
     all the deemed-owned shares of all disqualified persons with 
     respect to such plan.
       ``(D) Statute of limitations.--The statutory period for the 
     assessment of any tax imposed by this section by reason of 
     paragraph (3) or (4) of subsection (a) shall not expire 
     before the date which is 3 years from the later of--
       ``(i) the allocation or ownership referred to in such 
     paragraph giving rise to such tax, or
       ``(ii) the date on which the Secretary is notified of such 
     allocation or ownership.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2002.
       (2) Exception for certain plans.--In the case of any--
       (A) employee stock ownership plan established after July 
     11, 2000, or
       (B) employee stock ownership plan established on or before 
     such date if employer securities held by the plan consist of 
     stock in a corporation with respect to which an election 
     under section 1362(a) of the Internal Revenue Code of 1986 is 
     not in effect on such date,
     the amendments made by this section shall apply to plan years 
     ending after July 11, 2000.

     SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY 
                   DISTRIBUTIONS.

       (a) Direct Transfers of Mandatory Distributions.--
       (1) In general.--Section 401(a)(31) (relating to optional 
     direct transfer of eligible rollover distributions), as 
     amended by section 643, is amended by redesignating 
     subparagraphs (B), (C), and (D) as subparagraphs (C), (D), 
     and (E), respectively, and by inserting after subparagraph 
     (A) the following new subparagraph:
       ``(B) Certain mandatory distributions.--
       ``(i) In general.--In case of a trust which is part of an 
     eligible plan, such trust shall not constitute a qualified 
     trust under this section unless the plan of which such trust 
     is a part provides that if--

       ``(I) a distribution described in clause (ii) in excess of 
     $1,000 is made, and
       ``(II) the distributee does not make an election under 
     subparagraph (A) and does not elect to receive the 
     distribution directly,

     the plan administrator shall make such transfer to an 
     individual retirement account or annuity of a designated 
     trustee or issuer and shall notify the distributee in writing 
     (either separately or as part of the notice under section 
     402(f)) that the distribution may be transferred without cost 
     or penalty to another individual account or annuity.
       ``(ii) Eligible plan.--For purposes of clause (i), the term 
     `eligible plan' means a plan which provides that any 
     nonforfeitable accrued benefit for which the present value 
     (as determined under section 411(a)(11)) does not exceed 
     $5,000 shall be immediately distributed to the 
     participant.''.
       (2) Conforming amendments.--
       (A) The heading of section 401(a)(31) is amended by 
     striking ``Optional direct'' and inserting ``Direct''.
       (B) Section 401(a)(31)(C), as redesignated by paragraph 
     (1), is amended by striking ``Subparagraph (A)'' and 
     inserting ``Subparagraphs (A) and (B)''.
       (b) Notice Requirement.--Section 402(f)(1) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D), and by adding at the end the following new 
     subparagraph:
       ``(E) if applicable, of the provision requiring a direct 
     trustee-to-trustee transfer of a distribution under section 
     401(a)(31)(B) unless the recipient elects otherwise.''.
       (c) Fiduciary Rules.--
       (1) In general.--Section 404(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
     adding at the end the following new paragraph:
       ``(3) In the case of a pension plan which makes a transfer 
     to an individual retirement account or annuity of a 
     designated trustee or issuer under section 401(a)(31)(B) of 
     the Internal Revenue Code of 1986, the participant or 
     beneficiary shall, for purposes of paragraph (1), be treated 
     as exercising control over the assets in the account or 
     annuity upon the earlier of--
       ``(A) a rollover of all or a portion of the amount to 
     another individual retirement account or annuity; or
       ``(B) one year after the transfer is made.''.
       (2) Regulations.--
       (A) Automatic rollover safe harbor.--The Secretary of Labor 
     shall promulgate regulations to provide guidance regarding 
     meeting the fiduciary requirements of section 404(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1104(a)) in the case of a pension plan which makes a transfer 
     under section 401(a)(31)(B) of the Internal Revenue Code of 
     1986.
       (B) Use of low-cost individual retirement plans.--The 
     Secretary of the Treasury and the Secretary of Labor shall 
     promulgate such regulations as necessary to encourage the use 
     of low-cost individual retirement plans for purposes of 
     transfers under section 401(a)(31)(B) of the Internal Revenue 
     Code of 1986 and for other uses as appropriate to promote the 
     preservation of assets for retirement income purposes.
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsection (c) are prescribed.

     SEC. 658. CLARIFICATION OF TREATMENT OF CONTRIBUTIONS TO 
                   MULTIEMPLOYER PLAN.

       (a) Not Considered Method of Accounting.--For purposes of 
     section 446 of the Internal Revenue Code of 1986, a 
     determination under section 404(a)(6) of such Code regarding 
     the taxable year with respect to which a contribution to a 
     multiemployer pension plan is deemed made shall not be 
     treated as a method of accounting of the taxpayer. No 
     deduction shall be allowed for any taxable year for any 
     contribution to a multiemployer pension plan with respect to 
     which a deduction was previously allowed.
       (b) Regulations.--The Secretary of the Treasury shall 
     promulgate such regulations as necessary to clarify that a 
     taxpayer shall not be allowed, with respect to any taxable 
     year, an aggregate amount of deductions for contributions to 
     a multiemployer pension plan which exceeds the amount of such 
     contributions made or deemed made under section 404(a)(6) of 
     the Internal Revenue Code of 1986 to such plan.
       (c) Effective Date.--Subsection (a), and any regulations 
     promulgated under subsection (b), shall be effective for 
     years ending after the date of the enactment of this Act.

[[Page S5328]]

 PART II--TREATMENT OF PLAN AMENDMENTS REDUCING FUTURE BENEFIT ACCRUALS

     SEC. 659. NOTICE REQUIRED FOR PENSION PLAN AMENDMENTS HAVING 
                   THE EFFECT OF SIGNIFICANTLY REDUCING FUTURE 
                   BENEFIT ACCRUALS.

       (a) Excise Tax.--
       (1) In general.--Chapter 43 (relating to qualified pension, 
     etc., plans) is amended by adding at the end the following 
     new section:

     ``SEC. 4980F. FAILURE TO PROVIDE NOTICE OF PENSION PLAN 
                   AMENDMENTS REDUCING BENEFIT ACCRUALS.

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of an applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the notice to which the failure 
     relates is provided or the failure is otherwise corrected.
       ``(c) Limitations on Amount of Tax.--
       ``(1) Tax not to apply where failure not discovered and 
     reasonable diligence exercised.--No tax shall be imposed by 
     subsection (a) on any failure during any period for which it 
     is established to the satisfaction of the Secretary that any 
     person subject to liability for the tax under subsection (d) 
     did not know that the failure existed and exercised 
     reasonable diligence to meet the requirements of subsection 
     (e).
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) any person subject to liability for the tax under 
     subsection (d) exercised reasonable diligence to meet the 
     requirements of subsection (e), and
       ``(B) such person provides the notice described in 
     subsection (e) during the 30-day period beginning on the 
     first date such person knew, or exercising reasonable 
     diligence would have known, that such failure existed.
       ``(3) Overall limitation for unintentional failures.--
       ``(A) In general.--If the person subject to liability for 
     tax under subsection (d) exercised reasonable diligence to 
     meet the requirements of subsection (e), the tax imposed by 
     subsection (a) for failures during the taxable year of the 
     employer (or, in the case of a multiemployer plan, the 
     taxable year of the trust forming part of the plan) shall not 
     exceed $500,000. For purposes of the preceding sentence, all 
     multiemployer plans of which the same trust forms a part 
     shall be treated as 1 plan.
       ``(B) Taxable years in the case of certain controlled 
     groups.--For purposes of this paragraph, if all persons who 
     are treated as a single employer for purposes of this section 
     do not have the same taxable year, the taxable years taken 
     into account shall be determined under principles similar to 
     the principles of section 1561.
       ``(4) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive or otherwise inequitable relative to the 
     failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plan Amendments Significantly 
     Reducing Benefit Accruals.--
       ``(1) In general.--If the sponsor of an applicable pension 
     plan adopts an amendment which has the effect of 
     significantly reducing the rate of future benefit accrual of 
     1 or more participants, the plan administrator shall, not 
     later than the 45th day before the effective date of the 
     amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,
       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2) Requirement to provide benefit estimation tool kit.--
       ``(A) In general.--If a plan amendment results in the 
     significant restructuring of the plan benefit formula (as 
     determined under regulations prescribed by the Secretary), 
     the plan administrator shall, not later than the 15th day 
     before the effective date of the amendment, provide a benefit 
     estimation tool kit described in subparagraph (B) to each 
     applicable individual. If such plan amendment occurs within 
     12 months of an event described in section 410(b)(6)(C), the 
     plan administrator shall in no event be required to provide 
     the benefit estimation tool kit to applicable individuals 
     affected by the event before the date which is 12 months 
     after the date on which notice under paragraph (1) is given 
     to such applicable individuals.
       ``(B) Benefit estimation tool kit.--The benefit estimation 
     tool kit described in this subparagraph shall include the 
     following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of section 411(d)(6)(B)(i)) is included in the 
     lump sum distribution.
       ``(3) Notice to designee.--Any notice under paragraph (1) 
     or (2) may be provided to a person designated, in writing, by 
     the person to which it would otherwise be provided.
       ``(4) Form of explanation.--The information required to be 
     provided under this subsection shall be provided in a manner 
     calculated to be reasonably understood by the average plan 
     participant.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Applicable individual.--
       ``(A) In general.--The term `applicable individual' means, 
     with respect to any plan amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 414(p)(8)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 414(p)(1)(A)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Exception for participants with less than 1 year of 
     participation.--Such term shall not include a participant who 
     has less than 1 year of participation (within the meaning of 
     section 411(b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(2) Applicable pension plan.--The term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 412.
     Such term shall not include a governmental plan (within the 
     meaning of section 414(d)), a church plan (within the meaning 
     of section 414(e)) with respect to which an election under 
     section 410(d) has not been made, or any other plan to which 
     section 204(h) of the Employee Retirement Income Security Act 
     of 1974 does not apply.
       ``(3) Early retirement.--A plan amendment which eliminates 
     or significantly reduces any early retirement benefit or 
     retirement-type subsidy (within the meaning of section 
     411(d)(6)(B)(i)) shall be treated as having the effect of 
     significantly reducing the rate of future benefit accrual.
       ``(g) Regulations.--The Secretary shall, not later than 1 
     year after the date of the enactment of this section, issue--
       ``(1) the regulations described in subsection (e)(2)(A) and 
     section 204(h)(2)(A) of the Employee Retirement Income 
     Security Act of 1974, and
       ``(2) guidance for both of the examples described in 
     subsection (e)(1)(D) and section 204(h)(1)(D) of the Employee 
     Retirement Income Security Act of 1974 and the benefit 
     estimation tool kit described in subsection (e)(2)(B) and 
     section 204(h)(2)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(h) New Technologies.--The Secretary may by regulation 
     allow any notice under paragraph (1) or (2) of subsection (e) 
     to be provided by using new technologies. Such regulations 
     shall ensure that at least one option for providing such 
     notice is not dependent on new technologies.''
       (2) Conforming amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980F. Failure to provide notice of pension plan amendments 
              reducing benefit accruals.''
       (b) Amendment of ERISA.--Section 204(h) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is 
     amended to read as follows:
       ``(h)(1) If an applicable pension plan is amended so as to 
     provide a significant reduction in the rate of future benefit 
     accrual of 1 or more participants, the plan administrator 
     shall, not later than the 45th day before the effective date 
     of the amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,

[[Page S5329]]

       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2)(A) If a plan amendment results in the significant 
     restructuring of the plan benefit formula (as determined 
     under regulations prescribed by the Secretary of the 
     Treasury), the plan administrator shall, not later than the 
     15th day before the effective date of the amendment, provide 
     a benefit estimation tool kit described in subparagraph (B) 
     to each applicable individual. If such plan amendment occurs 
     within 12 months of an event described in section 
     410(b)(6)(C) of the Internal Revenue Code of 1986, the plan 
     administrator shall in no event be required to provide the 
     benefit estimation tool kit to applicable individuals 
     affected by the event before the date which is 12 months 
     after the date on which notice under paragraph (1) is given 
     to such applicable individuals.
       ``(B) The benefit estimation tool kit described in this 
     subparagraph shall include the following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of subsection (g)(2)(A)) is included in the lump 
     sum distribution.
       ``(3) Any notice under paragraph (1) or (2) may be provided 
     to a person designated, in writing, by the person to which it 
     would otherwise be provided.
       ``(4) The information required to be provided under this 
     subsection shall be provided in a manner calculated to be 
     reasonably understood by the average participant.
       ``(5)(A) In the case of any failure to exercise due 
     diligence in meeting any requirement of this subsection with 
     respect to any plan amendment, the provisions of the 
     applicable pension plan shall be applied as if such plan 
     amendment entitled all applicable individuals to the greater 
     of--
       ``(i) the benefits to which they would have been entitled 
     without regard to such amendment, or
       ``(ii) the benefits under the plan with regard to such 
     amendment.
       ``(B) For purposes of subparagraph (A), there is a failure 
     to exercise due diligence in meeting the requirements of this 
     subsection if such failure is within the control of the plan 
     sponsor and is--
       ``(i) an intentional failure (including any failure to 
     promptly provide the required notice or information after the 
     plan administrator discovers an unintentional failure to meet 
     the requirements of this subsection),
       ``(ii) a failure to provide most of the individuals with 
     most of the information they are entitled to receive under 
     this subsection, or
       ``(iii) a failure to exercise due diligence which is 
     determined under regulations prescribed by the Secretary of 
     the Treasury.
       ``(C) For excise tax on failure to meet requirements, see 
     section 4980F of the Internal Revenue Code of 1986.
       ``(5)(A) For purposes of this subsection, the term 
     `applicable individual' means, with respect to any plan 
     amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 206(d)(3)(K)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 206(d)(3)(B)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Such term shall not include a participant who has 
     less than 1 year of participation (within the meaning of 
     subsection (b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(6) For purposes of this subsection, the term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 302.
       ``(7) For purposes of this subsection, a plan amendment 
     which eliminates or significantly reduces any early 
     retirement benefit or retirement-type subsidy (within the 
     meaning of section 204(g)(2)(A)) shall be treated as having 
     the effect of significantly reducing the rate of future 
     benefit accrual.
       ``(8) The Secretary of the Treasury may by regulation allow 
     any notice under this subsection to be provided by using new 
     technologies. Such regulation shall ensure that at least one 
     option for providing such notice is not dependent on new 
     technologies.''
       (c) Regulations Relating to Early Retirement Subsidies.--
     The Secretary of the Treasury or the Secretary's delegate 
     shall, not later than 1 year after the date of the enactment 
     of this Act, issue regulations relating to early retirement 
     benefits or retirement-type subsidies described in section 
     411(d)(6)(B)(i) of the Internal Revenue Code of 1986 and 
     section 204(g)(2)(A) of the Employee Retirement Income 
     Security Act of 1974.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Transition.--Until such time as the Secretary of the 
     Treasury issues regulations under section 4980F(e)(2) of the 
     Internal Revenue Code of 1986 and section 204(h)(2) of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     the amendments made by this section), a plan shall be treated 
     as meeting the requirements of such sections if it makes a 
     good faith effort to comply with such requirements.
       (3) Special notice rules.--The period for providing any 
     notice required by the amendments made by this section shall 
     not end before the date which is 3 months after the date of 
     the enactment of this Act.
       (d) Study.--The Secretary of the Treasury shall prepare a 
     report on the effects of significant restructurings of plan 
     benefit formulas of traditional defined benefit plans. Such 
     study shall examine the effects of such restructurings on 
     longer service participants, including the incidence and 
     effects of ``wear away'' provisions under which participants 
     earn no additional benefits for a period of time after 
     restructuring. As soon as practicable, but not later than one 
     year after the date of enactment of this Act, the Secretary 
     shall submit such report, together with recommendations 
     thereon, to the Committee on Ways and Means and the Committee 
     on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate.

                Subtitle F--Reducing Regulatory Burdens

     SEC. 661. MODIFICATION OF TIMING OF PLAN VALUATIONS.

       (a) In General.--Paragraph (9) of section 412(c) (relating 
     to annual valuation) is amended to read as follows:
       ``(9) Annual valuation.--
       ``(A) In general.--For purposes of this section, a 
     determination of experience gains and losses and a valuation 
     of the plan's liability shall be made not less frequently 
     than once every year, except that such determination shall be 
     made more frequently to the extent required in particular 
     cases under regulations prescribed by the Secretary.
       ``(B) Valuation date.--
       ``(i) Current year.--Except as provided in clause (ii), the 
     valuation referred to in subparagraph (A) shall be made as of 
     a date within the plan year to which the valuation refers or 
     within one month prior to the beginning of such year.
       ``(ii) Election to use prior year valuation.--The valuation 
     referred to in subparagraph (A) may be made as of a date 
     within the plan year prior to the year to which the valuation 
     refers if--

       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).

       ``(iii) Adjustments.--Information under clause (ii) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Election.--An election under clause (ii), once made, 
     shall be irrevocable without the consent of the Secretary.''.
       (b) Amendment of ERISA.--Paragraph (9) of section 302(c) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1053(c)) is amended--
       (1) by inserting ``(A)'' after ``(9)'', and
       (2) by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), the valuation 
     referred to in subparagraph (A) shall be made as of a date 
     within the plan year to which the valuation refers or within 
     one month prior to the beginning of such year.
       ``(ii) The valuation referred to in subparagraph (A) may be 
     made as of a date within the plan year prior to the year to 
     which the valuation refers if--
       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).
       ``(iii) Information under clause (ii) shall, in accordance 
     with regulations, be actuarially adjusted to reflect 
     significant differences in participants.
       ``(iv) An election under clause (ii), once made, shall be 
     irrevocable without the consent of the Secretary of the 
     Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 662. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

       (a) In General.--Section 404(k)(2)(A) (defining applicable 
     dividends) is amended by striking ``or'' at the end of clause 
     (ii), by redesignating clause (iii) as clause (iv), and by 
     inserting after clause (ii) the following new clause:

[[Page S5330]]

       ``(iii) is, at the election of such participants or their 
     beneficiaries--

       ``(I) payable as provided in clause (i) or (ii), or
       ``(II) paid to the plan and reinvested in qualifying 
     employer securities, or''.

       (b) Limitation on Amount of Deduction.--Section 404(k)(1) 
     (relating to deduction for dividends paid on certain employer 
     securities) is amended to read as follows:
       ``(1) Deduction allowed.--
       ``(A) In general.--In the case of a C corporation, there 
     shall be allowed as a deduction for the taxable year an 
     amount equal to--
       ``(i) the amount of any applicable dividend described in 
     clause (i), (ii), or (iv) of paragraph (2)(A), and
       ``(ii) the applicable percentage of any applicable dividend 
     described in clause (iii),
     paid in cash by such corporation during the taxable year with 
     respect to applicable employer securities. Such deduction 
     shall be in addition to the deduction allowed subsection (a).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in:                                    percentage is:  
      2002, 2003, and 2004..................................25 percent 
      2005, 2006, and 2007..................................50 percent 
      2008, 2009, and 2010..................................75 percent 
      2011 and thereafter..............................100 percent.''. 
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 663. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (4) of section 1114(c) of the 
     Tax Reform Act of 1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 664. EMPLOYEES OF TAX-EXEMPT ENTITIES.

       (a) In General.--The Secretary of the Treasury shall modify 
     Treasury Regulations section 1.410(b)-6(g) to provide that 
     employees of an organization described in section 
     403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are 
     eligible to make contributions under section 403(b) of such 
     Code pursuant to a salary reduction agreement may be treated 
     as excludable with respect to a plan under section 401(k) or 
     (m) of such Code that is provided under the same general 
     arrangement as a plan under such section 401(k), if--
       (1) no employee of an organization described in section 
     403(b)(1)(A)(i) of such Code is eligible to participate in 
     such section 401(k) plan or section 401(m) plan; and
       (2) 95 percent of the employees who are not employees of an 
     organization described in section 403(b)(1)(A)(i) of such 
     Code are eligible to participate in such plan under such 
     section 401(k) or (m).
       (b) Effective Date.--The modification required by 
     subsection (a) shall apply as of the same date set forth in 
     section 1426(b) of the Small Business Job Protection Act of 
     1996.

     SEC. 665. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

       (a) In General.--Subsection (a) of section 132 (relating to 
     exclusion from gross income) is amended by striking ``or'' at 
     the end of paragraph (5), by striking the period at the end 
     of paragraph (6) and inserting ``, or'', and by adding at the 
     end the following new paragraph:
       ``(7) qualified retirement planning services.''.
       (b) Qualified Retirement Planning Services Defined.--
     Section 132 is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Qualified Retirement Planning Services.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning services' means any retirement 
     planning advice or information provided to an employee and 
     his spouse by an employer maintaining a qualified employer 
     plan.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such services are available on substantially the same terms 
     to each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 666. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year and each plan year beginning on or after January 1, 
     1994, need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated); or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation);
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan of the business that covers the 
     employees of the business;
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses);
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control; and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2002.

     SEC. 667. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION 
                   SYSTEM.

       The Secretary of the Treasury shall continue to update and 
     improve the Employee Plans Compliance Resolution System (or 
     any successor program) giving special attention to--
       (1) increasing the awareness and knowledge of small 
     employers concerning the availability and use of the program;
       (2) taking into account special concerns and circumstances 
     that small employers face with respect to compliance and 
     correction of compliance failures;
       (3) extending the duration of the self-correction period 
     under the Self-Correction Program for significant compliance 
     failures;
       (4) expanding the availability to correct insignificant 
     compliance failures under the Self-Correction Program during 
     audit; and
       (5) assuring that any tax, penalty, or sanction that is 
     imposed by reason of a compliance failure is not excessive 
     and bears a reasonable relationship to the nature, extent, 
     and severity of the failure.

     SEC. 668. REPEAL OF THE MULTIPLE USE TEST.

       (a) In General.--Paragraph (9) of section 401(m) is amended 
     to read as follows:
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and subsection (k), including regulations 
     permitting appropriate aggregation of plans and 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 669. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND 
                   LINE OF BUSINESS RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test; and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.
     Subparagraph (B) shall only apply to the extent provided by 
     the Secretary.
       (2) Effective dates.--
       (A) Regulations.--The regulation required by paragraph (1) 
     shall apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under paragraph 
     (1)(A) shall not apply before the first year beginning not 
     less than 120 days after the date on which such condition is 
     prescribed.
       (b) Coverage Test.--
       (1) In general.--Section 410(b)(1) (relating to minimum 
     coverage requirements) is amended by adding at the end the 
     following:
       ``(D) In the case that the plan fails to meet the 
     requirements of subparagraphs (A), (B) and (C), the plan--
       ``(i) satisfies subparagraph (B), as in effect immediately 
     before the enactment of the Tax Reform Act of 1986,
       ``(ii) is submitted to the Secretary for a determination of 
     whether it satisfies the requirement described in clause (i), 
     and
       ``(iii) satisfies conditions prescribed by the Secretary by 
     regulation that appropriately limit the availability of this 
     subparagraph.
     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.
       (c) Line of Business Rules.--The Secretary of the Treasury 
     shall, on or before December 31, 2001, modify the existing 
     regulations issued under section 414(r) of the Internal 
     Revenue Code of 1986 in order to expand

[[Page S5331]]

     (to the extent that the Secretary determines appropriate) the 
     ability of a pension plan to demonstrate compliance with the 
     line of business requirements based upon the facts and 
     circumstances surrounding the design and operation of the 
     plan, even though the plan is unable to satisfy the 
     mechanical tests currently used to determine compliance.

     SEC. 670. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM 
                   ON APPLICATION OF CERTAIN NONDISCRIMINATION 
                   RULES APPLICABLE TO STATE AND LOCAL PLANS.

       (a) In General.--
       (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
     (H) of section 401(a)(26) are each amended by striking 
     ``section 414(d))'' and all that follows and inserting 
     ``section 414(d)).''.
       (2) Subparagraph (G) of section 401(k)(3) and paragraph (2) 
     of section 1505(d) of the Taxpayer Relief Act of 1997 are 
     each amended by striking ``maintained by a State or local 
     government or political subdivision thereof (or agency or 
     instrumentality thereof)''.
       (b) Conforming Amendments.--
       (1) The heading for subparagraph (G) of section 401(a)(5) 
     is amended to read as follows: ``Governmental plans''.
       (2) The heading for subparagraph (H) of section 401(a)(26) 
     is amended to read as follows: ``Exception for governmental 
     plans''.
       (3) Subparagraph (G) of section 401(k)(3) is amended by 
     inserting ``Governmental plans.--'' after ``(G)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

                   Subtitle G--Other ERISA Provisions

     SEC. 681. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''.
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) did 
     not establish or maintain a plan to which this title applies 
     with respect to which benefits were accrued for substantially 
     the same employees as are in the new single-employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2001.

     SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause (ii) for any plan year shall be an 
     amount equal to the product of the amount determined under 
     clause (ii) and the applicable percentage. For purposes of 
     this clause, the term `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.
     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), as amended by section 682(b), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether the 25-or-fewer-employees limitation has 
     been satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2001.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual

[[Page S5332]]

     who, at any time during the 60-month period ending on the 
     date the determination is being made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.
     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.
     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2001, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2002.

                  Subtitle H--Miscellaneous Provisions

     SEC. 691. TAX TREATMENT AND INFORMATION REQUIREMENTS OF 
                   ALASKA NATIVE SETTLEMENT TRUSTS.

       (a) Treatment of Alaska Native Settlement Trusts.--Subpart 
     A of part I of subchapter J of chapter 1 (relating to general 
     rules for taxation of trusts and estates) is amended by 
     adding at the end the following new section:

     ``SEC. 646. TAX TREATMENT OF ELECTING ALASKA NATIVE 
                   SETTLEMENT TRUSTS.

       ``(a) In General.--If an election under this section is in 
     effect with respect to any Settlement Trust, the provisions 
     of this section shall apply in determining the income tax 
     treatment of the Settlement Trust and its beneficiaries with 
     respect to the Settlement Trust.
       ``(b) Taxation of Income of Trust.--Except as provided in 
     subsection (f)(1)(B)(ii)--
       ``(1) In general.--There is hereby imposed on the taxable 
     income of an electing Settlement Trust, other than its net 
     capital gain, a tax at the lowest rate specified in section 
     1(c).
       ``(2) Capital gain.--In the case of an electing Settlement 
     Trust with a net capital gain for the taxable year, a tax is 
     hereby imposed on such gain at the rate of tax which would 
     apply to such gain if the taxpayer were subject to a tax on 
     its other taxable income at only the lowest rate specified in 
     section 1(c).
     Any such tax shall be in lieu of the income tax otherwise 
     imposed by this chapter on such income or gain.
       ``(c) One-Time Election.--
       ``(1) In general.--A Settlement Trust may elect to have the 
     provisions of this section apply to the trust and its 
     beneficiaries.
       ``(2) Time and method of election.--An election under 
     paragraph (1) shall be made by the trustee of such trust--
       ``(A) on or before the due date (including extensions) for 
     filing the Settlement Trust's return of tax for the first 
     taxable year of such trust ending after the date of the 
     enactment of this section, and
       ``(B) by attaching to such return of tax a statement 
     specifically providing for such election.
       ``(3) Period election in effect.--Except as provided in 
     subsection (f), an election under this subsection--
       ``(A) shall apply to the first taxable year described in 
     paragraph (2)(A) and all subsequent taxable years, and
       ``(B) may not be revoked once it is made.
       ``(d) Contributions to Trust.--
       ``(1) Beneficiaries of electing trust not taxed on 
     contributions.--In the case of an electing Settlement Trust, 
     no amount shall be includible in the gross income of a 
     beneficiary of such trust by reason of a contribution to such 
     trust.
       ``(2) Earnings and profits.--The earnings and profits of 
     the sponsoring Native Corporation shall not be reduced on 
     account of any contribution to such Settlement Trust:
       ``(e) Tax Treatment of Distributions to Beneficiaries.--
     Amounts distributed by an electing Settlement Trust during 
     any taxable year shall be considered as having the following 
     characteristics in the hands of the recipient beneficiary:
       ``(1) First, as amounts excludable from gross income for 
     the taxable year to the extent of the taxable income of such 
     trust for such taxable year (decreased by any income tax paid 
     by the trust with respect to the income) plus any amount 
     excluded from gross income of the trust under section 103.
       ``(2) Second, as amounts excludable from gross income to 
     the extent of the amount described in paragraph (1) for all 
     taxable years for which an election is in effect under 
     subsection (c) with respect to the trust, and not previously 
     taken into account under paragraph (1).
       ``(3) Third, as amounts distributed by the sponsoring 
     Native Corporation with respect to its stock (within the 
     meaning of section 301(a)) during such taxable year and 
     taxable to the recipient beneficiary as amounts described in 
     section 301(c)(1), to the extent of current or accumulated 
     earnings and profits of the sponsoring Native Corporation as 
     of the close of such taxable year after proper adjustment is 
     made for all distributions made by the sponsoring Native 
     Corporation during such taxable year.
       ``(4) Fourth, as amounts distributed by the trust in excess 
     of the distributable net income of such trust for such 
     taxable year.
     Amounts distributed to which paragraph (3) applies shall not 
     be treated as a corporate distribution subject to section 
     311(b), and for purposes of determining the amount of a 
     distribution for purposes of paragraph (3) and the basis to 
     the recipients, section 643(e) and not section 301(b) or (d) 
     shall apply.
       ``(f) Special Rules Where Transfer Restrictions Modified.--
       ``(1) Transfer of beneficial interests.--If, at any time, a 
     beneficial interest in an electing Settlement Trust may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such interest were 
     Settlement Common Stock--
       ``(A) no election may be made under subsection (c) with 
     respect to such trust, and
       ``(B) if such an election is in effect as of such time--
       ``(i) such election shall cease to apply as of the first 
     day of the taxable year in which such disposition is first 
     permitted,
       ``(ii) the provisions of this section shall not apply to 
     such trust for such taxable year and all taxable years 
     thereafter, and
       ``(iii) the distributable net income of such trust shall be 
     increased by the current or accumulated earnings and profits 
     of the sponsoring Native Corporation as of the close of such 
     taxable year after proper adjustment is made for all 
     distributions made by the sponsoring Native Corporation 
     during such taxable year.
     In no event shall the increase under clause (iii) exceed the 
     fair market value of the trust's assets as of the date the 
     beneficial interest of the trust first becomes so disposable. 
     The earnings and profits of the sponsoring Native Corporation 
     shall be adjusted as of the last day of such taxable year by 
     the amount of earnings and profits so included in the 
     distributable net income of the trust.
       ``(2) Stock in corporation.--If--
       ``(A) stock in the sponsoring Native Corporation may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such stock were 
     Settlement Common Stock, and

[[Page S5333]]

       ``(B) at any time after such disposition of stock is first 
     permitted, such corporation transfers assets to a Settlement 
     Trust,
     paragraph (1)(B) shall be applied to such trust on and after 
     the date of the transfer in the same manner as if the trust 
     permitted dispositions of beneficial interests in the trust 
     in a manner not permitted by such section 7(h).
       ``(3) Certain distributions.--For purposes of this section, 
     the surrender of an interest in a Native Corporation or an 
     electing Settlement Trust in order to accomplish the whole or 
     partial redemption of the interest of a shareholder or 
     beneficiary in such corporation or trust, or to accomplish 
     the whole or partial liquidation of such corporation or 
     trust, shall be deemed to be a transfer permitted by section 
     7(h) of the Alaska Native Claims Settlement Act.
       ``(g) Taxable Income.--For purposes of this title, the 
     taxable income of an electing Settlement Trust shall be 
     determined under section 641(b) without regard to any 
     deduction under section 651 or 661.
       ``(h) Definitions.--For purposes of this section--
       ``(1) Electing settlement trust.--The term `electing 
     Settlement Trust' means a Settlement Trust which has made the 
     election, effective for a taxable year, described in 
     subsection (c).
       ``(2) Native corporation.--The term `Native Corporation' 
     has the meaning given such term by section 3(m) of the Alaska 
     Native Claims Settlement Act (43 U.S.C. 1602(m)).
       ``(3) Settlement common stock.--The term `Settlement Common 
     Stock' has the meaning given such term by section 3(p) of the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1602(p)).
       ``(4) Settlement trust.--The term `Settlement Trust' means 
     a trust that constitutes a settlement trust under section 
     3(t) of the Alaska Native Claims Settlement Act (43 U.S.C. 
     1602(t)).
       ``(5) Sponsoring native corporation.--The term `sponsoring 
     Native Corporation' means the Native Corporation which 
     transfers assets to an electing Settlement Trust.
       ``(i) Special Loss Disallowance Rule.--Any loss that would 
     otherwise be recognized by a shareholder upon a disposition 
     of a share of stock of a sponsoring Native Corporation shall 
     be reduced (but not below zero) by the per share loss 
     adjustment factor. The per share loss adjustment factor shall 
     be the aggregate of all contributions to all electing 
     Settlement Trusts sponsored by such Native Corporation made 
     on or after the first day each trust is treated as an 
     electing Settlement Trust expressed on a per share basis and 
     determined as of the day of each such contribution.
       ``(j) Cross Reference.--

  ``For information required with respect to electing Settlement Trusts 
and sponsoring Native Corporations, see section 6039H.''.
       (b) Reporting.--Subpart A of part III of subchapter A of 
     chapter 61 of subtitle F (relating to information concerning 
     persons subject to special provisions) is amended by 
     inserting after section 6039G the following new section:

     ``SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NATIVE 
                   SETTLEMENT TRUSTS AND SPONSORING NATIVE 
                   CORPORATIONS.

       ``(a) Requirement.--The fiduciary of an electing Settlement 
     Trust (as defined in section 646(h)(1)) shall include with 
     the return of income of the trust a statement containing the 
     information required under subsection (c).
       ``(b) Application With Other Requirements.--The filing of 
     any statement under this section shall be in lieu of the 
     reporting requirements under section 6034A to furnish any 
     statement to a beneficiary regarding amounts distributed to 
     such beneficiary (and such other reporting rules as the 
     Secretary deems appropriate).
       ``(c) Required Information.--The information required under 
     this subsection shall include--
       ``(1) the amount of distributions made during the taxable 
     year to each beneficiary,
       ``(2) the treatment of such distribution under the 
     applicable provision of section 646, including the amount 
     that is excludable from the recipient beneficiary's gross 
     income under section 646, and
       ``(3) the amount (if any) of any distribution during such 
     year that is deemed to have been made by the sponsoring 
     Native Corporation (as defined in section 646(h)(5)).
       ``(d) Sponsoring Native Corporation.--
       ``(1) In general.--The electing Settlement Trust shall, on 
     or before the date on which the statement under subsection 
     (a) is required to be filed, furnish such statement to the 
     sponsoring Native Corporation (as so defined).
       ``(2) Distributees.--The sponsoring Native Corporation 
     shall furnish each recipient of a distribution described in 
     section 646(e)(3) a statement containing the amount deemed to 
     have been distributed to such recipient by such corporation 
     for the taxable year.''.
       (c) Clerical Amendment.--
       (1) The table of sections for subpart A of part I of 
     subchapter J of chapter 1 of such Code is amended by adding 
     at the end the following new item:

``Sec. 646. Tax treatment of electing Alaska Native Settlement 
              Trusts.''.
       (2) The table of sections for subpart A of part III of 
     subchapter A of chapter 61 of subtitle F of such Code is 
     amended by inserting after the item relating to section 6039G 
     the following new item:

``Sec. 6039H. Information with respect to Alaska Native Settlement 
              Trusts and sponsoring Native Corporations.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act and to contributions made to electing 
     Settlement Trusts for such year or any subsequent year.

          Subtitle I--Compliance With Congressional Budget Act

     SEC. 695. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

              TITLE VII--EXTENSIONS OF EXPIRING PROVISIONS

                         Subtitle A--In General

     SECTION 701. PERMANENT EXTENSION OF RESEARCH CREDIT.

       (a) Permanent Extension.--
       (1) In general.--Section 41 (relating to credit for 
     increasing research activities) is amended by striking 
     subsection (h).
       (2) Conforming amendment.--Paragraph (1) of section 45C(b) 
     is amended by striking subparagraph (D).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.
       (b) Increase in Rates of Alternative Incremental Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) 
     (relating to election of alternative incremental credit) is 
     amended--
       (A) by striking ``2.65 percent'' and inserting ``3 
     percent'',
       (B) by striking ``3.2 percent'' and inserting ``4 
     percent'', and
       (C) by striking ``3.75 percent'' and inserting ``5 
     percent''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 702. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

       (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) 
     (relating to termination) are each amended by striking 
     ``2001'' and inserting ``2003''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after December 31, 2001.

     SEC. 703. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   MARGINAL PRODUCTION.

       (a) Temporary Extension.--Subparagraph (H) of section 
     613A(c)(6) is amended by striking ``January 1, 2002'' and 
     inserting ``January 1, 2004''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 704. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) Temporary Extension.--Section 953(e)(10) is amended--
       (1) by striking ``January 1, 2002'' and inserting ``January 
     1, 2004'', and
       (2) by striking ``December 31, 2001'' and inserting 
     ``December 31, 2003''.
       (b) Conforming Amendment.--Section 954(h)(9) is amended by 
     striking ``January 1, 2002'' and inserting ``January 1, 
     2004''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 705. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                   MENTAL HEALTH BENEFITS.

       (a) Temporary Extension.--Subsection (f) of section 9812 is 
     amended by striking ``on or after September 30, 2001'' and 
     inserting ``after September 30, 2003''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to benefits for services furnished after 
     September 30, 2001.

     SEC. 706. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN 
                   REFUELING PROPERTY.

       (a) Temporary Extension.--Subsection (f) of section 179A is 
     amended by striking ``December 31, 2004'' and inserting 
     ``December 31, 2006''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2004.

     SEC. 707. LUXURY TAX ON PASSENGER VEHICLES.

       (a) Temporary Extension.--Subsection (g) of section 4001 is 
     amended by striking ``December 31, 2002'' and inserting 
     ``December 31, 2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to any sale, use, or installation after December 
     31, 2002.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 711. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                  TITLE VIII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

     SEC. 801. ALTERNATIVE MINIMUM TAX EXEMPTION FOR CERTAIN 
                   INDIVIDUAL TAXPAYERS.

       (a) Exemption.--Section 55 (relating to imposition of 
     alternative minimum tax) is amended by adding at the end the 
     following:
       ``(f) Exemption for Certain Individuals.--
       ``(1) In general.--In the case of an individual, the 
     tentative minimum tax shall be

[[Page S5334]]

     zero for any taxable year if the adjusted gross income of the 
     taxpayer for the taxable year does not exceed $80,000.
       ``(2) Prospective application if subsection ceases to 
     apply.--If paragraph (1) applies to a taxpayer for any 
     taxable year and then ceases to apply to a subsequent taxable 
     year, the rules of paragraphs (2) through (5) of subsection 
     (e) shall apply to the taxpayer to the extent such rules are 
     applicable to individuals.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 811. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

               TITLE IX--TAX RELIEF FOR ADOPTIVE PARENTS

                         Subtitle A--In General

     SEC. 901. EXPANSION OF ADOPTION CREDIT.

       (a) In General.--
       (1) Adoption credit.--Section 23(a)(1) (relating to 
     allowance of credit) is amended to read as follows:
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter--
       ``(A) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(B) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (2) Adoption assistance programs.--Section 137(a) (relating 
     to adoption assistance programs) is amended to read as 
     follows:
       ``(a) In General.--Gross income of an employee does not 
     include amounts paid or expenses incurred by the employer for 
     adoption expenses in connection with the adoption of a child 
     by an employee if such amounts are furnished pursuant to an 
     adoption assistance program. The amount of the exclusion 
     shall be--
       ``(1) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(2) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (b) Dollar Limitations.--
       (1) Dollar amount of allowed expenses.--
       (A) Adoption expenses.--Section 23(b)(1) (relating to 
     allowance of credit) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'',
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)(A)''.
       (B) Adoption assistance programs.--Section 137(b)(1) 
     (relating to dollar limitations for adoption assistance 
     programs) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'', and
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)''.
       (2) Phase-out limitation.--
       (A) Adoption expenses.--Clause (i) of section 23(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (B) Adoption assistance programs.--Section 137(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (c) Year Credit Allowed.--Section 23(a)(2) is amended by 
     adding at the end the following new flush sentence:
     ``In the case of the adoption of a child with special needs, 
     the credit allowed under paragraph (1) shall be allowed for 
     the taxable year in which the adoption becomes final.''.
       (d) Repeal of Sunset Provisions.--
       (1) Children without special needs.--Paragraph (2) of 
     section 23(d) (relating to definition of eligible child) is 
     amended to read as follows:
       ``(2) Eligible child.--The term `eligible child' means any 
     individual who--
       ``(A) has not attained age 18, or
       ``(B) is physically or mentally incapable of caring for 
     himself.''.
       (2) Adoption assistance programs.--Section 137 (relating to 
     adoption assistance programs) is amended by striking 
     subsection (f).
       (e) Adjustment of Dollar and Income Limitations for 
     Inflation.--
       (1) Adoption credit.--Section 23 is amended by 
     redesignating subsection (h) as subsection (i) and by 
     inserting after subsection (g) the following new subsection:
       ``(h) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(1)(B) and paragraphs (1) and 
     (2)(A)(i) of subsection (b) shall be increased by an amount 
     equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (2) Adoption assistance programs.--Section 137, as amended 
     by subsection (d), is amended by adding at the end the 
     following new subsection:
       ``(f) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of 
     subsection (b) shall be increased by an amount equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (f) Limitation Based on Amount of Tax.--
       (1) In general.--Subsection (c) of section 23 is amended by 
     striking ``the limitation imposed'' and all that follows 
     through ``1400C)'' and inserting ``the applicable tax 
     limitation''.
       (2) Applicable tax limitation.--Subsection (d) of section 
     23 is amended by adding at the end the following new 
     paragraph:
       ``(4) Applicable tax limitation.--The term `applicable tax 
     limitation' means the sum of--
       ``(A) the taxpayer's regular tax liability for the taxable 
     year, reduced (but not below zero) by the sum of the credits 
     allowed by sections 21, 22, 24 (other than the amount of the 
     increase under subsection (d) thereof), 25, and 25A, and
       ``(B) the tax imposed by section 55 for such taxable 
     year.''.
       (3) Conforming amendments.--
       (A) Subsection (a) of section 26 (relating to limitation 
     based on amount of tax) is amended by inserting ``(other than 
     section 23)'' after ``allowed by this subpart''.
       (B) Paragraph (1) of section 53(b) (relating to minimum tax 
     credit) is amended by inserting ``reduced by the aggregate 
     amount taken into account under section 23(d)(3)(B) for all 
     such prior taxable years,'' after ``1986,''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 911. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

           TITLE X--SELF-EMPLOYED HEALTH INSURANCE DEDUCTION

                         Subtitle A--In General

     SEC. 1001. FULL DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                   EMPLOYED INDIVIDUALS.

       (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) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 1011. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

           TITLE XI--ENERGY SECURITY AND TAX INCENTIVE POLICY

         Subtitle A--Energy-Efficient Property Used in Business

     SEC. 1101. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED 
                   IN BUSINESS.

       (a) In General.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment credit) 
     is amended by inserting after section 48 the following:

     ``SEC. 48A. ENERGY CREDIT.

       ``(a) In General.--For purposes of section 46, the energy 
     credit for any taxable year is the energy percentage of the 
     basis of each energy property placed in service during such 
     taxable year.
       ``(b) Energy Percentage.--
       ``(1) In general.--The energy percentage is--
       ``(A) except as otherwise provided in this subparagraph, 10 
     percent,
       ``(B) in the case of energy property described in clauses 
     (i), (iii), and (vi) of subsection (c)(1)(A), 20 percent,
       ``(C) in the case of energy property described in 
     subsection (c)(1)(A)(v), 15 percent,
       ``(D) in the case of energy property described in 
     subsection (c)(1)(A)(ii) relating to a high risk geothermal 
     well, 20 percent, and
       ``(E) in the case of energy property described in 
     subsection (c)(1)(A)(vii), 30 percent.
       ``(2) Coordination with rehabilitation.--The energy 
     percentage shall not apply to that portion of the basis of 
     any property which is attributable to qualified 
     rehabilitation expenditures.
       ``(c) Energy Property Defined.--
       ``(1) In general.--For purposes of this subpart, the term 
     `energy property' means any property--
       ``(A) which is--
       ``(i) solar energy property,
       ``(ii) geothermal energy property,
       ``(iii) energy-efficient building property other than 
     property described in clauses (iii)(I) and (v)(I) of 
     subsection (d)(3)(A),

[[Page S5335]]

       ``(iv) combined heat and power system property,
       ``(v) low core loss distribution transformer property,
       ``(vi) qualified anaerobic digester property, or
       ``(vii) qualified wind energy systems equipment property,
       ``(B)(i) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(ii) which is acquired by the taxpayer if the original 
     use of such property commences with the taxpayer.
       ``(C) which can reasonably be expected to remain in 
     operation for at least 5 years,
       ``(D) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable, and
       ``(E) which meets the performance and quality standards (if 
     any) which--
       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy), and
       ``(ii) are in effect at the time of the acquisition of the 
     property.
       ``(2) Exceptions.--
       ``(A) Public utility property.--Such term shall not include 
     any property which is public utility property (as defined in 
     section 46(f)(5) as in effect on the day before the date of 
     the enactment of the Revenue Reconciliation Act of 1990), 
     except for property described in paragraph (1)(A)(iv).
       ``(B) Certain wind equipment.--Such term shall not include 
     equipment described in paragraph (1)(A)(vii) which is taken 
     into account for purposes of section 45 for the taxable year.
       ``(d) Definitions Relating to Types of Energy Property.--
     For purposes of this section--
       ``(1) Solar energy property.--
       ``(A) In general.--The term `solar energy property' means 
     equipment which uses solar energy to generate electricity, to 
     heat or cool (or provide hot water for use in) a structure, 
     or to provide solar process heat.
       ``(B) Swimming pools, etc. used as storage medium.--The 
     term `solar energy property' shall not include property with 
     respect to which expenditures are properly allocable to a 
     swimming pool, hot tub, or any other energy storage medium 
     which has a function other than the function of such storage.
       ``(C) Solar panels.--No solar panel or other property 
     installed as a roof (or portion thereof) shall fail to be 
     treated as solar energy property solely because it 
     constitutes a structural component of the structure on which 
     it is installed.
       ``(2) Geothermal energy property.--
       ``(A) In general.--The term `geothermal energy property' 
     means equipment used to produce, distribute, or use energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(B) High risk geothermal well.--The term `high risk 
     geothermal well' means a geothermal deposit (within the 
     meaning of section 613(e)(2)) which requires high risk 
     drilling techniques. Such deposit may not be located in a 
     State or national park or in an area in which the relevant 
     State park authority or the National Park Service determines 
     the development of such a deposit will negatively impact on a 
     State or national park.
       ``(3) Energy-efficient building property.--
       ``(A) In general.--The term `energy-efficient building 
     property' means--
       ``(i) a fuel cell which--

       ``(I) generates electricity using an electrochemical 
     process,
       ``(II) has an electricity-only generation efficiency 
     greater than 30 percent, and
       ``(III) has a minimum generating capacity of 2 kilowatts,

       ``(ii) an electric heat pump hot water heater which yields 
     an energy factor of 1.7 or greater under test procedures 
     prescribed by the Secretary of Energy,
       ``(iii)(I) an electric heat pump which has a heating system 
     performance factor (HSPF) of at least 8.5 but less than 9 and 
     a cooling seasonal energy efficiency ratio (SEER) of at least 
     13.5 but less than 15,
       ``(II) an electric heat pump which has a heating system 
     performance factor (HSPF) of 9 or greater and a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(iv) a natural gas heat pump which has a coefficient of 
     performance of not less than 1.25 for heating and not less 
     than 0.70 for cooling,
       ``(v)(I) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of at least 13.5 but 
     less than 15,
       ``(II) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(vi) an advanced natural gas water heater which--

       ``(I) increases steady state efficiency and reduces standby 
     and vent losses, and
       ``(II) has an energy factor of at least 0.65,

       ``(vii) an advanced natural gas furnace which achieves a 90 
     percent AFUE and rated for seasonal electricity use of less 
     than 300 kWh per year, and
       ``(viii) natural gas cooling equipment which meets all 
     applicable standards of the American Society of Heating, 
     Refrigerating, and Air Conditioning Engineers and which--

       ``(I) has a coefficient of performance of not less than 
     .60, or
       ``(II) uses desiccant technology and has an efficiency 
     rating of not less than 50 percent.

       ``(B) Limitations.--The credit under subsection (a) for the 
     taxable year may not exceed--
       ``(i) $500 in the case of property described in 
     subparagraph (A) other than clauses (i), (iv), and (viii) 
     thereof,
       ``(ii) $1,000 for each kilowatt of capacity in the case of 
     any fuel cell described in subparagraph (A)(i),
       ``(iii) $1,000 in the case of any natural gas heat pump 
     described in subparagraph (A)(iv), and
       ``(iv) $150 for each ton of capacity in the case of any 
     natural gas cooling equipment described in subparagraph 
     (A)(viii).
       ``(4) Combined heat and power system property.--
       ``(A) In general.--The term `combined heat and power system 
     property' means property--
       ``(i) comprising a system for the same energy source for 
     the simultaneous or sequential generation of electrical 
     power, mechanical shaft power, or both, in combination with 
     steam, heat, or other forms of useful energy,
       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy, and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or a combination 
     thereof), and

       ``(iv) the energy efficiency percentage of which exceeds--

       ``(I) 60 percent in the case of a system with an electrical 
     capacity of less than 1 megawatt),
       ``(II) 65 percent in the case of a system with an 
     electrical capacity of not less than 1 megawatt and not in 
     excess of 50 megawatts), and
       ``(III) 70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts).

       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 46(f)(5) as in effect on the 
     day before the date of the enactment of the Revenue 
     Reconciliation Act of 1990), the taxpayer may only claim the 
     credit under subsection (a)(1) if, with respect to such 
     property, the taxpayer uses a normalization method of 
     accounting.
       ``(5) Low core loss distribution transformer property.--The 
     term `low core loss distribution transformer property' means 
     a distribution transformer which has energy savings from a 
     highly efficient core of at least 20 percent more than the 
     average for power ratings reported by studies required under 
     section 124 of the Energy Policy Act of 1992.
       ``(6) Qualified anaerobic digester property.--The term 
     `qualified anaerobic digester property' means an anaerobic 
     digester for manure or crop waste which achieves at least 65 
     percent efficiency measured in terms of the fraction of 
     energy input converted to electricity and useful thermal 
     energy.
       ``(7) Qualified wind energy systems equipment property.--
     The term `qualified wind energy systems equipment property' 
     means wind energy systems equipment with a turbine size of 
     not more than 75 kilowatts rated capacity.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Special rule for property financed by subsidized 
     energy financing or industrial development bonds.--
       ``(A) Reduction of basis.--For purposes of applying the 
     energy percentage to any property, if such property is 
     financed in whole or in part by--
       ``(i) subsidized energy financing, or
       ``(ii) the proceeds of a private activity bond (within the 
     meaning of section 141) the interest on which is exempt from 
     tax under section 103, the amount taken into account as the 
     basis of such property shall not exceed the amount which (but 
     for this subparagraph) would be so taken into account 
     multiplied by the fraction determined under subparagraph (B).
       ``(B) Determination of fraction.--For purposes of 
     subparagraph (A), the fraction determined under this 
     subparagraph is 1 reduced by a fraction--
       ``(i) the numerator of which is that portion of the basis 
     of the property which is allocable to such financing or 
     proceeds, and
       ``(ii) the denominator of which is the basis of the 
     property.

[[Page S5336]]

       ``(C) Subsidized energy financing.--For purposes of 
     subparagraph (A), the term `subsidized energy financing' 
     means financing provided under a Federal, State, or local 
     program a principal purpose of which is to provide subsidized 
     financing for projects designed to conserve or produce 
     energy.
       ``(2) 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 section.
       ``(f) Application of Section.--
       ``(1) In general.--Except as provided by paragraph (2), 
     this section shall apply to property placed in service after 
     December 31, 2001, and before January 1, 2009.
       ``(2) Exceptions.--
       ``(A) Solar energy and geothermal energy property.--
     Paragraph (1) shall not apply to solar energy property or 
     geothermal energy property.
       ``(B) Certain electric heat pumps and central air 
     conditioners.--In the case of property which is described in 
     subsection (d)(3)(A)(iii)(I) or (d)(3)(A)(v)(I), this section 
     shall apply to property placed in service after December 31, 
     2001, and before January 1, 2006.''.
       (b) Conforming Amendments.--
       (1) Section 48 is amended to read as follows:

     ``SEC. 48. REFORESTATION CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     reforestation credit for any taxable year is 20 percent of 
     the portion of the amortizable basis of any qualified timber 
     property which was acquired during such taxable year and 
     which is taken into account under section 194 (after the 
     application of section 194(b)(1)).
       ``(b) Definitions.--For purposes of this subpart, the terms 
     `amortizable basis' and `qualified timber property' have the 
     respective meanings given to such terms by section 194.''.
       (2) Section 39(d), as amended by this Act, is amended by 
     adding at the end the following:
       ``(12) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit 
     determined under section 48A may be carried back to a taxable 
     year ending before January 1, 2002.''.
       (3) Section 280C is amended by adding at the end the 
     following:
       ``(d) Credit for Energy Property Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the expenses for energy property (as defined in 
     section 48A(c)) otherwise allowable as a deduction for the 
     taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 48A(a).
       ``(2) Similar rule where taxpayer capitalizes rather than 
     deducts expenses.--If--
       ``(A) the amount of the credit allowable for the taxable 
     year under section 48A (determined without regard to section 
     38(c)), exceeds
       ``(B) the amount allowable as a deduction for the taxable 
     year for expenses for energy property (determined without 
     regard to paragraph (1)), the amount chargeable to capital 
     account for the taxable year for such expenses shall be 
     reduced by the amount of such excess.
       ``(3) Controlled groups.--Paragraph (3) of subsection (b) 
     shall apply for purposes of this subsection.''.
       (4) Section 29(b)(3)(A)(i)(III) is amended by striking 
     `section 48(a)(4)(C)' and inserting `section 48A(e)(1)(C)'.
       (5) Section 50(a)(2)(E) is amended by striking `section 
     48(a)(5)' and inserting `section 48A(e)(2)'.
       (6) Section 168(e)(3)(B) is amended--
       (A) by striking clause (vi)(I) and inserting the following:
       ``(I) is described in paragraph (1) or (2) of section 
     48A(d) (or would be so described if `solar and wind' were 
     substituted for `solar' in paragraph (1)(B)),'', and
       (B) in the last sentence by striking ``section 48(a)(3)'' 
     and inserting ``section 48A(c)(2)(A)''.
       (c) Clerical Amendment.--The table of sections for subpart 
     E of part IV of subchapter A of chapter 1 is amended by 
     striking the item relating to section 48 and inserting the 
     following:

``Sec. 48. Reforestation credit.
``Sec. 48A. Energy credit.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 1102. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY 
                   DEDUCTION.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by adding at the end the following:

     ``SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY.

       ``(a) In General.--There shall be allowed as a deduction 
     for the taxable year an amount equal to the energy-efficient 
     commercial building property expenditures made by a taxpayer 
     for the taxable year.
       ``(b) Maximum Amount of Deduction.--The amount of energy-
     efficient commercial building property expenditures taken 
     into account under subsection (a) shall not exceed an amount 
     equal to the product of--
       ``(1) $2.25, and
       ``(2) the square footage of the building with respect to 
     which the expenditures are made.
       ``(c) Year Deduction Allowed.--The deduction under 
     subsection (a) shall be allowed in the taxable year in which 
     the construction of the building is completed.
       ``(d) Energy-Efficient Commercial Building Property 
     Expenditures.--For purposes of this section--
       ``(1) In general.--The term `energy-efficient commercial 
     building property expenditures' means an amount paid or 
     incurred for energy-efficient commercial building property 
     installed on or in connection with new construction or 
     reconstruction of property--
       ``(A) for which depreciation is allowable under section 
     167,
       ``(B) which is located in the United States, and
       ``(C) the construction or erection of which is completed by 
     the taxpayer.
     Such property includes all residential rental property, 
     including low-rise multifamily structures and single family 
     housing property which is not within the scope of Standard 
     90.1-1999 (described in paragraph (3)).
       ``(2) Labor costs included.--Such term includes 
     expenditures for labor costs properly allocable to the onsite 
     preparation, assembly, or original installation of the 
     property.
       ``(3) Energy expenditures excluded.--Such term does not 
     include any expenditures taken into account in determining 
     any credit allowed under section 48A.
       ``(e) Energy-Efficient Commercial Building Property.--For 
     purposes of subsection (d)--
       ``(1) In general.--The term `energy-efficient commercial 
     building property' means any property which reduces total 
     annual energy and power costs with respect to the lighting, 
     heating, cooling, ventilation, and hot water supply systems 
     of the building by 50 percent or more in comparison to a 
     reference building which meets the requirements of Standard 
     90.1-1999 of the American Society of Heating, Refrigerating, 
     and Air Conditioning Engineers and the Illuminating 
     Engineering Society of North America using methods of 
     calculation under subparagraph (B) and certified by qualified 
     professionals as provided under paragraph (6).
       ``(2) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power consumption and cost, taking 
     into consideration the provisions of the 1998 California 
     Nonresidential ACM Manual. These procedures shall meet the 
     following requirements:
       ``(A) In calculating tradeoffs and energy performance, the 
     regulations shall prescribe the costs per unit of energy and 
     power, such as kilowatt hour, kilowatt, gallon of fuel oil, 
     and cubic foot or Btu of natural gas, which may be dependent 
     on time of usage.
       ``(B) The calculational methodology shall require that 
     compliance be demonstrated for a whole building. If some 
     systems of the building, such as lighting, are designed later 
     than other systems of the building, the method shall provide 
     that either--
       ``(i) the expenses taken into account under paragraph (1) 
     shall not occur until the date designs for all energy-using 
     systems of the building are completed, or
       ``(ii) the expenses taken into account under paragraph (1) 
     shall be a fraction of such expenses based on the performance 
     of less than all energy-using systems in accordance with 
     subparagraph (C), and the energy performance of all systems 
     and components not yet designed shall be assumed to comply 
     minimally with the requirements of such Standard 90.1-1999.
       ``(C) The expenditures in connection with the design of 
     subsystems in the building, such as the envelope, the 
     heating, ventilation, air conditioning and water heating 
     system, and the lighting system shall be allocated to the 
     appropriate building subsystem based on system-specific 
     energy cost savings targets in regulations promulgated by the 
     Secretary of Energy which are equivalent, using the 
     calculation methodology, to the whole building requirement of 
     50 percent savings.
       ``(D) The calculational methods under this paragraph need 
     not comply fully with section 11 of such Standard 90.1-1999.
       ``(E) The calculational methods shall be fuel neutral, such 
     that the same energy efficiency features shall qualify a 
     building for the deduction under this section regardless of 
     whether the heating source is a gas or oil furnace or an 
     electric heat pump.
       ``(F) The calculational methods shall provide appropriate 
     calculated energy savings for design methods and technologies 
     not otherwise credited in either such Standard 90.1-1999 or 
     in the 1998 California Nonresidential ACM Manual, including 
     the following:
       ``(i) Natural ventilation.
       ``(ii) Evaporative cooling.
       ``(iii) Automatic lighting controls such as occupancy 
     sensors, photocells, and timeclocks.
       ``(iv) Daylighting.
       ``(v) Designs utilizing semi-conditioned spaces which 
     maintain adequate comfort conditions without air conditioning 
     or without heating.
       ``(vi) Improved fan system efficiency, including reductions 
     in static pressure.
       ``(vii) Advanced unloading mechanisms for mechanical 
     cooling, such as multiple or variable speed compressors.

[[Page S5337]]

       ``(viii) The calculational methods may take into account 
     the extent of commissioning in the building, and allow the 
     taxpayer to take into account measured performance which 
     exceeds typical performance.
       ``(3) Computer software.--
       ``(A) In general.--Any calculation under this subsection 
     shall be prepared by qualified computer software.
       ``(B) Qualified computer software.--For purposes of this 
     paragraph, the term `qualified computer software' means 
     software--
       ``(i) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power consumption and costs as 
     required by the Secretary,
       ``(ii) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(iii) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.
       ``(4) Allocation of deduction for public property.--In the 
     case of energy-efficient commercial building property 
     installed on or in public property, the Secretary shall 
     promulgate a regulation to allow the allocation of the 
     deduction to the person primarily responsible for designing 
     the property in lieu of the public entity which is the owner 
     of such property. Such person shall be treated as the 
     taxpayer for purposes of this section.
       ``(5) Notice to owner.--The qualified individual shall 
     provide an explanation to the owner of the building regarding 
     the energy efficiency features of the building and its 
     projected annual energy costs as provided in the notice under 
     paragraph (3)(B)(iii).
       ``(6) Certification.--
       ``(A) In general.--Except as provided in this paragraph, 
     the Secretary, in consultation with the Secretary of Energy, 
     shall establish requirements for certification and compliance 
     procedures similar to the procedures under section 45H(d).
       ``(B) Qualified individuals.--Individuals qualified to 
     determine compliance shall be only those individuals who are 
     recognized by an organization certified by the Secretary for 
     such purposes.
       ``(C) Proficiency of qualified individuals.--The Secretary 
     shall consult with nonprofit organizations and State agencies 
     with expertise in energy efficiency calculations and 
     inspections to develop proficiency tests and training 
     programs to qualify individuals to determine compliance.
       ``(f) Termination.--This section shall not apply with 
     respect to any energy-efficient commercial building property 
     expenditures in connection with property--
       ``(1) the plans for which are not certified under 
     subsection (e)(6) on or before December 31, 2006, and
       ``(2) the construction of which is not completed on or 
     before December 31, 2008.''.
       (b) Conforming Amendments.--Section 1016(a) is amended by 
     striking ``and'' at the end of paragraph (26), by striking 
     the period at the end of paragraph (27) and inserting ``, 
     and'', and by inserting the following:
       ``(28) for amounts allowed as a deduction under section 
     199(a).''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding at the end 
     the following:

``Sec. 199. Energy-efficient commercial building property.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 1103. CREDIT FOR ENERGY-EFFICIENT APPLIANCES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following:

     ``SEC. 45G. ENERGY-EFFICIENT APPLIANCE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the 
     energy-efficient appliance credit determined under this 
     section for the taxable year is an amount equal to the 
     applicable amount determined under subsection (b) with 
     respect to qualified energy-efficient appliances produced by 
     the taxpayer during the calendar year ending with or within 
     the taxable year.
       ``(b) Applicable Amount.--For purposes of subsection (a), 
     the applicable amount determined under this subsection with 
     respect to a taxpayer is the sum of--
       ``(1) in the case of an energy-efficient clothes washer 
     described in subsection (d)(2)(A) or an energy-efficient 
     refrigerator described in subsection (d)(3)(B)(i), an amount 
     equal to--
       ``(A) $50, multiplied by
       ``(B) the number of such washers and refrigerators produced 
     by the taxpayer during such calendar year, and
       ``(2) in the case of an energy-efficient clothes washer 
     described in subsection (d)(2)(B) or an energy-efficient 
     refrigerator described in subsection (d)(3)(B)(ii), an amount 
     equal to--
       ``(A) $100, multiplied by
       ``(B) the number of such washers and refrigerators produced 
     by the taxpayer during such calendar year.
       ``(c) Limitation on Maximum Credit.--
       ``(1) In general.--The maximum amount of credit allowed 
     under subsection (a) with respect to a taxpayer for all 
     taxable years shall be--
       ``(A) $30,000,000 with respect to the credit determined 
     under subsection (b)(1), and
       ``(B) $30,000,000 with respect to the credit determined 
     under subsection (b)(2).
       ``(2) Limitation based on gross receipts.--The credit 
     allowed under subsection (a) with respect to a taxpayer for 
     the taxable year shall not exceed an amount equal to 2 
     percent of the average annual gross receipts of the taxpayer 
     for the 3 taxable years preceding the taxable year in which 
     the credit is determined.
       ``(3) Gross receipts.--For purposes of this subsection, the 
     rules of paragraphs (2) and (3) of section 448(c) shall 
     apply.
       ``(d) Qualified Energy-Efficient Appliance.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified energy-efficient 
     appliance' means--
       ``(A) an energy-efficient clothes washer, or
       ``(B) an energy-efficient refrigerator.
       ``(2) Energy-efficient clothes washer.--The term `energy-
     efficient clothes washer' means a residential clothes washer, 
     including a residential style coin operated washer, which is 
     manufactured with--
       ``(A) a 1.26 Modified Energy Factor (referred to in this 
     paragraph as `MEF') (as determined by the Secretary of 
     Energy), or
       ``(B) a 1.42 MEF (as determined by the Secretary of Energy) 
     (1.5 MEF for calendar years beginning after 2004).
       ``(3) Energy-efficient refrigerator.--The term `energy-
     efficient refrigerator' means an automatic defrost 
     refrigerator-freezer which--
       ``(A) has an internal volume of at least 16.5 cubic feet, 
     and
       ``(B) consumes--
       ``(i) 10 percent less kWh per year than the energy 
     conservation standards promulgated by the Department of 
     Energy for such refrigerator for 2001, or
       ``(ii) 15 percent less kWh per year than such energy 
     conservation standards.
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as one 
     person for purposes of subsection (a).
       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, in 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply--
       ``(1) with respect to energy-efficient refrigerators 
     described in subsection (d)(3)(B)(i) produced in calendar 
     years beginning after 2005, and
       ``(2) with respect to all other qualified energy-efficient 
     appliances produced in calendar years beginning after 
     2007.''.
       (b) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by section 1101(b)(2), is 
     amended by adding at the end the following:
       ``(13) No carryback of energy-efficient appliance credit 
     before 2002.--No portion of the unused business credit for 
     any taxable year which is attributable to the energy-
     efficient appliance credit determined under section 45G may 
     be carried to a taxable year beginning before January 1, 
     2002.''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by section 1102(b)(3), is amended by adding at the end the 
     following:
       ``(e) Credit for Energy-Efficient Appliance Expenses.--No 
     deduction shall be allowed for that portion of the expenses 
     for qualified energy-efficient appliances (as defined in 
     section 45G(d)) otherwise allowable as a deduction for the 
     taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45G(a).''.
       (d) Conforming Amendment.--Section 38(b), as amended by 
     this Act, (relating to general business credit) is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following:
       ``(16) the energy-efficient appliance credit determined 
     under section 45G(a).''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by inserting after the item relating to 
     section 45F the following:

``Sec. 45G. Energy-efficient appliance credit.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                 Subtitle B--Residential Energy Systems

     SEC. 1111. CREDIT FOR CONSTRUCTION OF NEW ENERGY-EFFICIENT 
                   HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 1103(a), is amended by inserting after section 45G 
     the following:

     ``SEC. 45H. NEW ENERGY-EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy-efficient property 
     installed in a qualified new energy-efficient home during 
     construction of such home.

[[Page S5338]]

       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a dwelling shall not exceed--
       ``(i) in the case of a dwelling described in subsection 
     (c)(3)(D)(i), $1,500, and
       ``(ii) in the case of a dwelling described in subsection 
     (c)(3)(D)(ii), $2,500.
       ``(B) Prior credit amounts on same dwelling taken into 
     account.--If a credit was allowed under subsection (a) with 
     respect to a dwelling in 1 or more prior taxable years, the 
     amount of the credit otherwise allowable for the taxable year 
     with respect to that dwelling shall not exceed the amount 
     under clause (i) or (ii) (as the case may be), reduced by the 
     sum of the credits allowed under subsection (a) with respect 
     to the dwelling for all prior taxable years.
       ``(2) Coordination with rehabilitation and energy 
     credits.--For purposes of this section--
       ``(A) the basis of any property referred to in subsection 
     (a) 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 48A(a)), and
       ``(B) expenditures taken into account under either section 
     47 or 48A(a) shall not be taken into account under this 
     section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means the person who constructed the new energy-efficient 
     home, or in the case of a manufactured home which conforms to 
     Federal Manufactured Home Construction and Safety Standards 
     (24 C.F.R. 3280), the manufactured home producer of such 
     home.
       ``(2) Energy-efficient property.--The term `energy-
     efficient property' means any energy-efficient building 
     envelope component, and any energy-efficient heating or 
     cooling equipment which can, individually or in combination 
     with other components, meet the requirements of this section.
       ``(3) Qualified new energy-efficient home.--The term 
     `qualified new energy-efficient home' means a dwelling--
       ``(A) located in the United States,
       ``(B) the construction of which is substantially completed 
     after December 31, 2000,
       ``(C) the original use of which is as a principal residence 
     (within the meaning of section 121) which commences with the 
     person who acquires such dwelling from the eligible 
     contractor, and
       ``(D) which is certified to have a projected level of 
     annual heating and cooling energy consumption, measured in 
     terms of average annual energy cost to the homeowner which is 
     at least--
       ``(i) 30 percent less than the annual level of heating and 
     cooling energy consumption of a reference dwelling 
     constructed in accordance with the standards of chapter 4 of 
     the 2000 International Energy Conservation Code, or
       ``(ii) 50 percent less than such annual level of heating 
     and cooling energy consumption.
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Acquire.--The term `acquire' includes purchase and, 
     in the case of reconstruction and rehabilitation, such term 
     includes a binding written contract for such reconstruction 
     or rehabilitation.
       ``(6) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain of a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(7) Manufactured home included.--The term `dwelling' 
     includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(d) Certification.--
       ``(1) Method.--A certification described in subsection 
     (c)(3)(D) shall be determined on the basis of 1 of the 
     following methods:
       ``(A) A component-based method, using the applicable 
     technical energy efficiency specifications or ratings 
     (including product labeling requirements) for the energy-
     efficient building envelope component or energy-efficient 
     heating or cooling equipment. The Secretary shall, in 
     consultation with the Administrator of the Environmental 
     Protection Agency, develop prescriptive component-based 
     packages that are equivalent in energy performance to 
     properties that qualify under subparagraph (B).
       ``(B) An energy performance-based method that calculates 
     projected energy usage and cost reductions in the dwelling in 
     relation to a reference dwelling--
       ``(i) heated by the same energy source and heating system 
     type, and
       ``(ii) constructed in accordance with the standards of 
     chapter 4 of the 2000 International Energy Conservation Code.
     Computer software shall be used in support of an energy 
     performance-based method certification under subparagraph 
     (B). Such software shall meet procedures and methods for 
     calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy. Such regulations on 
     the specifications for software and verification protocols 
     shall be based on the 1998 California Residential Alternative 
     Calculation Method Approval Manual.
       ``(2) Provider.--Such certification shall be provided by--
       ``(A) in the case of a method described in paragraph 
     (1)(A), a local building regulatory authority, a utility, a 
     manufactured home production inspection primary inspection 
     agency (IPIA), or a home energy rating organization, or
       ``(B) in the case of a method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--
       ``(A) In general.--Such certification shall be made in 
     writing in a manner that specifies in readily verifiable 
     fashion the energy-efficient building envelope components and 
     energy-efficient heating or cooling equipment installed and 
     their respective rated energy efficiency performance, and in 
     the case of a method described in paragraph (1)(B), 
     accompanied by written analysis documenting the proper 
     application of a permissible energy performance calculation 
     method to the specific circumstances of such dwelling.
       ``(B) Form provided to buyer.--A form documenting the 
     energy-efficient building envelope components and energy-
     efficient heating or cooling equipment installed and their 
     rated energy efficiency performance shall be provided to the 
     buyer of the dwelling. The form shall include labeled R-value 
     for insulation products, NFRC-labeled U-factor and Solar Heat 
     Gain Coefficient for windows, skylights, and doors, labeled 
     AFUE ratings for furnaces and boilers, labeled HSPF ratings 
     for electric heat pumps, and labeled SEER ratings for air 
     conditioners.
       ``(C) Ratings label affixed in dwelling.--A permanent label 
     documenting the ratings in subparagraph (B) shall be affixed 
     to the front of the electrical distribution panel of the 
     dwelling, or shall be otherwise permanently displayed in a 
     readily inspectable location in the dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for energy performance-based certification 
     methods, the Secretary, after examining the requirements for 
     energy consultants and home energy ratings providers 
     specified by the Mortgage Industry National Accreditation 
     Procedures for Home Energy Rating Systems, shall prescribe 
     procedures for calculating annual energy usage and cost 
     reductions for heating and cooling and for the reporting of 
     the results. Such regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     home to qualify for the credit under this section regardless 
     of whether the dwelling uses a gas or oil furnace or boiler 
     or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the homebuyer.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Accreditation Procedures for Home Energy Rating 
     Systems.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--Subsection (a) shall apply to dwellings 
     purchased during the period beginning on January 1, 2001, and 
     ending on December 31, 2005.''.
       (b) Credit Made Part of General Business Credit.--
     Subsection (b) of section 38 (relating to current year 
     business credit), as amended by section 1103(d), is amended 
     by striking ``plus'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``, plus'', and by adding at the end the following:
       ``(17) the new energy-efficient home credit determined 
     under section 45H.''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by section 1103(c), is amended by adding at the end the 
     following:
       ``(f) New Energy-Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a new 
     energy-efficient home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45H.''.
       (d) Credit Allowed Against Regular and Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for new energy efficient home credit.--
       ``(A) In general.--In the case of the new energy efficient 
     home 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) subparagraphs (A) and (B) thereof shall not apply, 
     and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced

[[Page S5339]]

     by the credit allowed under subsection (a) for the taxable 
     year (other than the new energy efficient home credit).

       ``(B) New energy efficient home credit.--For purposes of 
     this subsection, the term `new energy efficient home credit' 
     means the credit allowable under subsection (a) by reason of 
     section 45H.''.
       (2) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by inserting ``or the new energy 
     efficient home credit'' after ``employment credit''.
       (e) Limitation on Carryback.--Subsection (d) of section 39, 
     as amended by section 1103(b), is amended by adding at the 
     end the following:
       ``(14) No carryback of new energy-efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45H may be carried back to 
     any taxable year ending before January 1, 2001.''.
       (f) Deduction for Certain Unused Business Credits.--
     Subsection (c) of section 196 is amended by striking ``and'' 
     at the end of paragraph (7), by striking the period at the 
     end of paragraph (8) and inserting ``, and'', and by adding 
     after paragraph (8) the following:
       ``(9) the new energy-efficient home credit determined under 
     section 45H.''.
       (g) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 1103(d), is amended by inserting after the item 
     relating to section 45G the following:

``Sec. 45H. New energy-efficient home credit.''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2000.

     SEC. 1112. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by this Act, is amended by inserting after section 
     25C the following new section:

     ``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed by this section 
     with respect to a dwelling shall not exceed $2,000.
       ``(2) Prior credit amounts for taxpayer on same dwelling 
     taken into account.--If a credit was allowed to the taxpayer 
     under subsection (a) with respect to a dwelling in 1 or more 
     prior taxable years, the amount of the credit otherwise 
     allowable for the taxable year with respect to that dwelling 
     shall not exceed the amount of $2,000 reduced by the sum of 
     the credits allowed under subsection (a) to the taxpayer with 
     respect to the dwelling for all prior taxable years.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under subpart A of part IV of 
     subchapter A (other than this section), such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which is certified to meet or exceed the 
     prescriptive criteria for such component in the 2000 
     International Energy Conservation Code, or any combination of 
     energy efficiency measures which achieves at least a 30 
     percent reduction in heating and cooling energy usage for the 
     dwelling (as measured in terms of energy cost to the 
     taxpayer), if--
       ``(1) such component or combinations of measures is 
     installed in or on a dwelling--
       ``(A) located in the United States, and
       ``(B) owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component or combination of 
     measures commences with the taxpayer, and
       ``(3) such component or combination of measures reasonably 
     can be expected to remain in use for at least 5 years.
       ``(e) Certification.--The certification described in 
     subsection (d) shall be--
       ``(1) in the case of any component described in subsection 
     (d), determined on the basis of applicable energy efficiency 
     ratings (including product labeling requirements) for 
     affected building envelope components,
       ``(2) in the case of combinations of measures described in 
     subsection (d), determined by the performance-based methods 
     described in section 45H(d),
       ``(3) provided by a third party, such as a local building 
     regulatory authority, a utility, a manufactured home 
     production inspection primary inspection agency (IPIA), or a 
     home energy rating organization, consistent with the 
     requirements of section 45H(d)(2), and
       ``(4) made in writing on forms which specify in readily 
     inspectable fashion the energy-efficient components and other 
     measures and their respective efficiency ratings, and which 
     shall include a permanent label affixed to the electrical 
     distribution panel as described in section 45H(d)(3)(C).
       ``(f) Definitions and Special Rules.--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures for the qualified energy 
     efficiency improvements made during such calendar year by any 
     of such individuals with respect to such dwelling unit shall 
     be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having paid his proportionate share of the cost of 
     qualified energy efficiency improvements made by such 
     association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain or a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(5) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Termination.--Subsection (a) shall apply to qualified 
     energy efficiency improvements installed during the period 
     beginning on the date of the enactment of this section and 
     ending on December 31, 2005.''.
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 23, as amended by this Act, 
     is amended by inserting ``25D,'' after ``25C,''.
       (2) Subparagraph (C) of section 25(e)(1), as amended by 
     this Act, is amended by inserting ``25D,'' after ``25C,''.
       (3) Subsection (h) of section 904, as amended by this Act, 
     is amended by by striking ``or 25C'' and inserting ``, 25C, 
     or 25D''.
       (4) Subsection (d) of section 1400C is amended by inserting 
     ``and section 25C'' and inserting ``, section 25C, and 
     section 25D''.
       (4) Subsection (a) of section 1016, as amended by section 
     1102(b), is amended by striking ``and'' at the end of 
     paragraph (27), by striking the period at the end of 
     paragraph (28) and inserting ``; and'', and by adding at the 
     end the following:
       ``(29) to the extent provided in section 25D(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 25C the 
     following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after the date of 
     the enactment of this Act.

     SEC. 1113. CREDIT FOR RESIDENTIAL SOLAR, WIND, AND FUEL CELL 
                   ENERGY PROPERTY.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 1112(a), is amended by inserting after 
     section 25D the following:

     ``SEC. 25E. RESIDENTIAL SOLAR, WIND, AND FUEL CELL ENERGY 
                   PROPERTY.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a

[[Page S5340]]

     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the sum of--
       ``(1) 15 percent of the qualified photovoltaic property 
     expenditures,
       ``(2) 15 percent of the qualified solar water heating 
     property expenditures,
       ``(3) 30 percent of the qualified wind energy property 
     expenditures, and
       ``(4) 25 percent for the qualified fuel cell property 
     expenditures,
     made by the taxpayer during the taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed under subsection 
     (a)(2) shall not exceed $2,000 for each system of solar 
     energy property.
       ``(2) Type of property.--No expenditure may be taken into 
     account under this section unless such expenditure is made by 
     the taxpayer for property installed on or in connection with 
     a dwelling unit which is located in the United States and 
     which is used as a residence.
       ``(3) Safety certifications.--No credit shall be allowed 
     under this section for an item of property unless--
       ``(A) in the case of solar water heating property, such 
     property is certified for performance and safety by the non-
     profit Solar Rating Certification Corporation or a comparable 
     entity endorsed by the government of the State in which such 
     property is installed, and
       ``(B) in the case of a photovoltaic, wind energy, or fuel 
     cell property, such property meets appropriate fire and 
     electric code requirements.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified solar water heating property expenditure.--
     The term `qualified solar water heating property expenditure' 
     means an expenditure for property which uses solar energy to 
     heat water for use in a dwelling unit with respect to which a 
     majority of the energy is derived from the sun.
       ``(2) Qualified photovoltaic property expenditure.--The 
     term `qualified photovoltaic property expenditure' means an 
     expenditure for property which uses solar energy to generate 
     electricity for use in a dwelling unit.
       ``(3) Solar panels.--No expenditure relating to a solar 
     panel or other property installed as a roof (or portion 
     thereof) shall fail to be treated as property described in 
     paragraph (1) or (2) solely because it constitutes a 
     structural component of the structure on which it is 
     installed.
       ``(4) Qualified wind energy property expenditure.--The term 
     `qualified wind energy property expenditure' means an 
     expenditure for property which uses wind energy to generate 
     electricity for use in a dwelling unit.
       ``(5) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for property which uses an electrochemical fuel 
     cell system to generate electricity for use in a dwelling 
     unit.
       ``(6) Labor costs.--Expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property described in paragraph (1), (2), 
     (4), or (5) and for piping or wiring to interconnect such 
     property to the dwelling unit shall be taken into account for 
     purposes of this section.
       ``(7) Energy storage medium.--Expenditures which are 
     properly allocable to a swimming pool, hot tub, or any other 
     energy storage medium which has a function other than the 
     function of such storage shall not be taken into account for 
     purposes of this section.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be determined by treating 
     all of such individuals as 1 taxpayer whose taxable year is 
     such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which such individual owns, such individual 
     shall be treated as having made his proportionate share of 
     any expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Joint ownership of items of solar or wind energy 
     property.--
       ``(A) In general.--Any expenditure otherwise qualifying as 
     an expenditure described in paragraph (1), (2), or (4) of 
     subsection (c) shall not be treated as failing to so qualify 
     merely because such expenditure was made with respect to 2 or 
     more dwelling units.
       ``(B) Limits applied separately.--In the case of any 
     expenditure described in subparagraph (A), the amount of the 
     credit allowable under subsection (a) shall (subject to 
     paragraph (1)) be computed separately with respect to the 
     amount of the expenditure made for each dwelling unit.
       ``(5) Allocation in certain cases.--If less than 80 percent 
     of the use of an item is for nonbusiness residential 
     purposes, only that portion of the expenditures for such item 
     which is properly allocable to use for nonbusiness 
     residential purposes shall be taken into account. For 
     purposes of this paragraph, use for a swimming pool shall be 
     treated as use which is not for residential purposes.
       ``(6) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(7) Reduction of credit for grants, tax-exempt bonds, and 
     subsidized energy financing.--The rules of section 29(b)(3) 
     shall apply for purposes of this section.
       ``(e) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--The credit allowed under this section 
     shall not apply to taxable years beginning after December 31, 
     2011.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016, as amended by section 
     1112(b)(4), is amended by striking ``and'' at the end of 
     paragraph (28), by striking the period at the end of 
     paragraph (29) and inserting ``; and'', and by adding at the 
     end the following:
       ``(30) to the extent provided in section 25E(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25E.''.
       (2) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 1112(b)(2), 
     is amended by inserting after the item relating to section 
     25D the following:

``Sec. 25E. Residential solar, wind, and fuel cell energy property.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures made after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

           Subtitle C--Electricity Facilities and Production

     SEC. 1121. INCENTIVE FOR DISTRIBUTED GENERATION.

       (a) Depreciation of Distributed Power Property.--
       (1) In general.--Subparagraph (C) of section 168(e)(3) 
     (relating to 7-year property) is amended by redesignating 
     clause (ii) as clause (iii) and by inserting after clause (i) 
     the following:
       ``(ii) any distributed power property, and''.
       (2) 10-year class life.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (C)(i) the following:

``(C)(ii).........................................................10''.

       (b) Distributed Power Property.--Section 168(i) is amended 
     by adding at the end the following:
       ``(15) Distributed power property.--The term `distributed 
     power property' means property--
       ``(A) which is used in the generation of electricity for 
     primary use--
       ``(i) in nonresidential real or residential rental property 
     used in the taxpayer's trade or business, or
       ``(ii) in the taxpayer's industrial manufacturing process 
     or plant activity, with a rated total capacity in excess of 
     500 kilowatts,
       ``(B) which also may produce usable thermal energy or 
     mechanical power for use in a heating or cooling application, 
     as long as at least 40 percent of the total useful energy 
     produced consists of--
       ``(i) with respect to assets described in subparagraph 
     (A)(i), electrical power (whether sold or used by the 
     taxpayer), or
       ``(ii) with respect to assets described in subparagraph 
     (A)(ii), electrical power (whether sold or used by the 
     taxpayer) and thermal or mechanical energy used in the 
     taxpayer's industrial manufacturing process or plant 
     activity,
       ``(C) which is not used to transport primary fuel to the 
     generating facility or to

[[Page S5341]]

     distribute energy within or outside of the facility, and
       ``(D) where it is reasonably expected that not more than 50 
     percent of the produced electricity will be sold to, or used 
     by, unrelated persons.
     For purposes of subparagraph (B), energy output is determined 
     on the basis of expected annual output levels, measured in 
     British thermal units (Btu), using standard conversion 
     factors established by the Secretary.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 1122. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE AND WASTE PRODUCTS.

       (a) Increase in Credit Rate.--
       (1) In general.--Section 45(a)(1) is amended by striking 
     ``1.5 cents'' and inserting ``1.8 cents''.
       (2) Conforming amendments.--
       (A) Section 45(b)(2) is amended by striking ``1.5 cent'' 
     and inserting ``1.8 cent''.
       (B) Section 45(d)(2)(B) is amended by inserting ``(calendar 
     year 2001 in the case of the 1.8 cent amount in subsection 
     (a))'' after ``1992''.
       (b) Expansion of Qualified Resources.--
       (1) In general.--Section 45(c)(1) (relating to qualified 
     energy resources) is amended by striking ``and'' at the end 
     of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following:
       ``(D) alternative resources.''.
       (2) Definition of alternative resources.--Section 45(c) 
     (relating to definitions) is amended--
       (A) by redesignating paragraph (3) as paragraph (5),
       (B) by redesignating paragraph (4) as paragraph (3), and
       (C) by inserting after paragraph (3), as redesignated by 
     subparagraph (B), the following:
       ``(4) Alternative Resources.--
       ``(A) In general.--The term `alternative resources' means--
       ``(i) solar,
       ``(ii) biomass (other than closed loop biomass),
       ``(iii) municipal solid waste,
       ``(iv) incremental hydropower,
       ``(v) geothermal,
       ``(vi) landfill gas, and
       ``(vii) steel cogeneration.
       ``(B) Biomass.--The term `biomass' means any solid, 
     nonhazardous, cellulosic waste material or any organic 
     carbohydrate matter, which is segregated from other waste 
     materials, and which is derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) waste pallets, crates, dunnage, untreated wood waste 
     from construction or manufacturing activities, and landscape 
     or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste or post-consumer 
     wastepaper, or
       ``(iii) any of the following agriculture sources: orchard 
     tree crops, vineyard, grain, legumes, sugar, and other crop 
     by-products or residues, including any packaging and other 
     materials which are nontoxic and biodegradable and are 
     associated with the processing, feeding, selling, 
     transporting, and disposal of such agricultural materials.
       ``(C) Municipal solid waste.--The term `municipal solid 
     waste' has the same meaning given the term `solid waste' 
     under section 2(27) of the Solid Waste Utilization Act (42 
     U.S.C. 6903).
       ``(D) Incremental hydropower.--The term `incremental 
     hydropower' means additional generating capacity achieved 
     from--
       ``(i) increased efficiency, or
       ``(ii) additions of new capacity,
     at a licensed non-Federal hydroelectric project originally 
     placed in service before the date of the enactment of this 
     paragraph.
       ``(E) Geothermal.--The term `geothermal' means energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(F) Landfill gas.--The term `landfill gas' means gas 
     generated from the decomposition of any household solid 
     waste, commercial solid waste, and industrial solid waste 
     disposed of in a municipal solid waste landfill unit (as such 
     terms are defined in regulations promulgated under subtitle D 
     of the Solid Waste Disposal Act (42 U.S.C. 6941 et seq.).
       ``(G) Steel cogeneration.--The term `steel cogeneration' 
     means the production of electricity and steam (or other form 
     of thermal energy) from any or all waste sources defined in 
     paragraphs (2) and (3) and subparagraphs (B) and (C) of this 
     paragraph within an operating facility which produces or 
     integrates the production of coke, direct reduced iron ore, 
     iron, or steel provided that the cogeneration meets any 
     regulatory energy-efficiency standards established by the 
     Secretary, and only to the extent that such energy is 
     produced from--
       ``(i) gases or heat generated from the production of 
     metallurgical coke,
       ``(ii) gases or heat generated from the production of 
     direct reduced iron ore or iron, from blast furnace or direct 
     ironmaking processes, or
       ``(iii) gases or heat generated from the manufacture of 
     steel.''.
       (3) Qualified facility.--Section 45(c)(5) (defining 
     qualified facility), as redesignated by paragraph 2(A), is 
     amended by adding at the end the following:
       ``(D) Alternative resources facility.--
       ``(i) In general.--Except as provided in clauses (ii), 
     (iii), and (iv), in the case of a facility using alternative 
     resources to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this subparagraph.
       ``(ii) Biomass facility.--In the case of a facility using 
     biomass described in paragraph (4)(A)(ii) to produce 
     electricity, the term `qualified facility' means any facility 
     of the taxpayer.
       ``(iii) Geothermal facility.--In the case of a facility 
     using geothermal to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after December 31, 1992.
       ``(iv) Steel cogeneration facilities.--In the case of a 
     facility using steel cogeneration to produce electricity, the 
     term `qualified facility' means any facility permitted to 
     operate under the environmental requirements of the Clean Air 
     Act Amendments of 1990 which is owned by the taxpayer and 
     originally placed in service after the date of the enactment 
     of this subparagraph. Such a facility may be treated as 
     originally placed in service when such facility was last 
     upgraded to increase efficiency or generation capability 
     after such date.
       ``(v) Special rules.--In the case of a qualified facility 
     described in this subparagraph, the 10-year period referred 
     to in subsection (a) shall be treated as beginning no earlier 
     than the date of the enactment of this subparagraph.''.
       (4) Government-owned facility.--Section 45(d)(6) (relating 
     to credit eligibility in the case of government-owned 
     facilities using poultry waste) is amended--
       (A) by inserting ``or alternative resources'' after 
     ``poultry waste'', and
       (B) by inserting ``or alternative resources'' after 
     ``poultry waste'' in the heading thereof.
       (5) Qualified facilities with co-production.--Section 45(b) 
     (relating to limitations and adjustments) is amended by 
     adding at the end the following:
       ``(4) Increased credit for co-production facilities.--
       ``(A) In general.--In the case of a qualified facility 
     described in subsection (c)(3)(D)(i) which has a co-
     production facility or a qualified facility described in 
     subparagraph (A), (B), or (C) of subsection (c)(3) which adds 
     a co-production facility after the date of the enactment of 
     this paragraph, the amount in effect under subsection (a)(1) 
     for an eligible taxable year of a taxpayer shall (after 
     adjustment under paragraph (2) and before adjustment under 
     paragraphs (1) and (3)) be increased by .25 cents.
       ``(B) Co-production facility.--For purposes of subparagraph 
     (A), the term `co-production facility' means a facility 
     which--
       ``(i) enables a qualified facility to produce heat, 
     mechanical power, chemicals, liquid fuels, or minerals from 
     qualified energy resources in addition to electricity, and
       ``(ii) produces such energy on a continuous basis.
       ``(C) Eligible taxable year.--For purposes of subparagraph 
     (A), the term `eligible taxable year' means any taxable year 
     in which the amount of gross receipts attributable to the co-
     production facility of a qualified facility are at least 10 
     percent of the amount of gross receipts attributable to 
     electricity produced by such facility.''.
       (6) Qualified facilities located within qualified indian 
     lands.--Section 45(b) (relating to limitations and 
     adjustments), as amended by paragraph (5), is amended by 
     adding at the end the following:
       ``(5) Increased credit for qualified facility located 
     within qualified indian land.--In the case of a qualified 
     facility described in subsection (c)(3)(D) which--
       ``(A) is located within--
       ``(i) qualified Indian lands (as defined in section 
     7871(c)(3)), or
       ``(ii) lands which are held in trust by a Native 
     Corporation (as defined in section 3(m) of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1602(m)) for Alaska Natives, 
     and
       ``(B) is operated with the explicit written approval of the 
     Indian tribal government or Native Corporation (as so 
     defined) having jurisdiction over such lands,
     the amount in effect under subsection (a)(1) for a taxable 
     year shall (after adjustment under paragraphs (2) and (4) and 
     before adjustment under paragraphs (1) and (3)) be increased 
     by .25 cents.''.
       (7) Electricity produced from certain resources co-fired in 
     coal plants.--Section 45(d) (relating to definitions and 
     special rules) is amended by adding at the end the following:
       ``(8) Special rule for electricity produced from certain 
     resources co-fired in coal plants.--In the case of 
     electricity produced from biomass (including closed loop 
     biomass), municipal solid waste, or animal waste, co-fired in 
     a facility which produces electricity from coal--
       ``(A) subsection (a)(1) shall be applied by substituting `1 
     cent' for `1.8 cents',
       ``(B) such facility shall be considered a qualified 
     facility for purposes of this section, and
       ``(C) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no

[[Page S5342]]

     earlier than the date of the enactment of this paragraph.''.
       (8) Conforming amendments.--
       (A) The heading for section 45 is amended by inserting 
     ``and waste energy'' after ``renewable''.
       (B) The item relating to section 45 in the table of 
     sections subpart D of part IV of subchapter A of chapter 1 is 
     amended by inserting ``and waste energy'' after 
     ``renewable''.
       (c) Additional Modifications of Renewable and Waste Energy 
     Resource Credit.--
       (1) Credits for certain tax exempt organizations and 
     governmental units.--Section 45(d) (relating to definitions 
     and special rules), as amended by subsection (b)(7), is 
     amended by adding at the end the following:
       ``(9) Credits for certain tax exempt organizations and 
     governmental units.--
       ``(A) Allowance of credit.--Any credit which would be 
     allowable under subsection (a) with respect to a qualified 
     facility of an entity if such entity were not exempt from tax 
     under this chapter shall be treated as a credit allowable 
     under subpart C to such entity if such entity is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C), 
     or
       ``(iii) any State or political subdivision thereof, any 
     possession of the United States, any Indian tribal government 
     (within the meaning of section 7871), or any agency or 
     instrumentality of any of the foregoing.
       ``(B) Use of credit.--
       ``(i) Transfer of credit.--An entity described in 
     subparagraph (A) may assign, trade, sell, or otherwise 
     transfer any credit allowable to such entity under 
     subparagraph (A) to any taxpayer.
       ``(ii) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of an entity described in 
     clause (i) or (ii) of subparagraph (A), any credit allowable 
     to such entity under subparagraph (A) may be applied by such 
     entity, without penalty, as a prepayment of any loan, debt, 
     or other obligation the entity has incurred under subchapter 
     I of chapter 31 of title 7 of the Rural Electrification Act 
     of 1936 (7 U.S.C. 901 et seq.).
       ``(C) Credit not income.--Neither a transfer under clause 
     (i) or a use under clause (ii) of subparagraph (B) of any 
     credit allowable under subparagraph (A) shall result in 
     income for purposes of section 501(c)(12).
       ``(D) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by an entity 
     described in subparagraph (A)(iii) from the transfer of any 
     credit under subparagraph (B)(i) shall be treated as arising 
     from an essential government function.
       ``(E) Credits not reduced by tax-exempt bonds or certain 
     other subsidies.--Subsection (b)(3) shall not apply to reduce 
     any credit allowable under subparagraph (A) with respect to--
       ``(i) proceeds described in subparagraph (A)(ii) of such 
     subsection, or
       ``(ii) any loan, debt, or other obligation incurred under 
     subchapter I of chapter 31 of title 7 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.),
     used to provide financing for any qualified facility.
       ``(F) Treatment of unrelated persons.--For purposes of this 
     paragraph, sales among and between entities described in 
     subparagraph (A) shall be treated as sales between unrelated 
     parties.''.
       (2) Coordination with other credits.--Section 45(d), as 
     amended by paragraph (1), is amended by adding at the end the 
     following:
       ``(10) Coordination with other credits.--This section shall 
     not apply to any qualified facility with respect to which a 
     credit under any other section is allowed for the taxable 
     year unless the taxpayer elects to waive the application of 
     such credit to such facility.''.
       (3) Expansion to include animal waste.--Section 45 
     (relating to electricity produced from certain renewable 
     resources), as amended by paragraphs (2) and (4) of 
     subsection (b), is amended--
       (A) by striking ``poultry'' each place it appears in 
     subsection (c)(1)(C) and subsection (d)(6) and inserting 
     ``animal'',
       (B) by striking ``poultry'' in the heading of paragraph (6) 
     of subsection (d) and inserting ``animal'',
       (C) by striking paragraph (3) of subsection (c) and 
     inserting the following:
       ``(3) Animal waste.--The term `animal waste' means poultry 
     manure and litter and other animal wastes, including--
       ``(A) wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure, and
       ``(B) byproducts, packaging, and other materials which are 
     nontoxic and biodegradable and are associated with the 
     processing, feeding, selling, transporting, and disposal of 
     such animal wastes.'', and
       (D) by striking subparagraph (C) of subsection (c)(5) and 
     inserting the following:
       ``(C) Animal waste facility.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of a facility using animal waste (other than 
     poultry) to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this clause.
       ``(ii) Poultry waste.--In the case of a facility using 
     animal waste relating to poultry to produce electricity, the 
     term `qualified facility' means any facility of the taxpayer 
     which is originally placed in service after December 31, 
     1999.''.
       (4) Treatment of qualified facilities not in compliance 
     with pollution laws.--Section 45(c)(5) (relating to qualified 
     facilities), as amended by paragraphs (2) and (3) of 
     subsection (b), is amended by adding at the end the 
     following:
       ``(E) Noncompliance with pollution laws.--For purposes of 
     this paragraph, a facility which is not in compliance with 
     the applicable State and Federal pollution prevention, 
     control, and permit requirements for any period of time shall 
     not be considered to be a qualified facility during such 
     period.''.
       (5) Extension of qualified facility dates.--Section 
     45(c)(5) (relating to qualified facility), as redesignated by 
     subsection (b)(2), is amended by striking ``, and before 
     January 1, 2002'' in subparagraphs (A) and (B).
       (d) Effective Date.--The amendments made by this section 
     shall apply to electricity and other energy produced after 
     the date of the enactment of this Act and before January 1, 
     2007.

     SEC. 1123. TREATMENT OF FACILITIES USING BAGASSE TO PRODUCE 
                   ENERGY AS SOLID WASTE DISPOSAL FACILITIES 
                   ELIGIBLE FOR TAX-EXEMPT FINANCING.

       (a) In General.--Section 142 (relating to exempt facility 
     bond) is amended by adding at the end the following:
       ``(k) Solid Waste Disposal Facilities.--For purposes of 
     subsection (a)(6), the term `solid waste disposal facilities' 
     includes property located in Hawaii and used for the 
     collection, storage, treatment, utilization, processing, or 
     final disposal of bagasse in the manufacture of ethanol.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 1124. DEPRECIATION OF PROPERTY USED IN THE TRANSMISSION 
                   OF ELECTRICITY.

       (a) Depreciation of Property Used in the Transmission of 
     Electricity.--
       (1) In general.--Subparagraph (C) of section 168(e)(3) 
     (relating to 7-year property), as amended by section 
     1121(a)(1), is amended by striking ``and'' at the end of 
     clause (ii), by redesignating clause (iii) as clause (iv), 
     and by inserting after clause (ii) the following:
       ``(iii) any property used in the transmission of 
     electricity, and''.
       (2) 10-year class life.--The table contained in section 
     168(g)(3)(B), as amended by section 1121(a)(2), is amended by 
     inserting after the item relating to subparagraph (C)(ii) the 
     following:

``(C)(iii)........................................................10''.
       (b) Definition of Property Used in the Transmission of 
     Electricity.--Section 168(i), as amended by section 1121(b), 
     is amended by adding at the end the following:
       ``(16) Property used in the transmission of electricity.--
     The term `property used in the transmission of electricity' 
     means property used in the transmission of electricity for 
     sale.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

               Subtitle D--Tax Incentives for Ethanol Use

     SEC. 1131. SMALL ETHANOL PRODUCER CREDIT.

       (a) Allocation of Alcohol Fuels Credit to Patrons of a 
     Cooperative.--Section 40(g) (relating to alcohol used as 
     fuel) is amended by adding at the end the following new 
     paragraph:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) Election to allocate.--
       ``(i) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization, be apportioned 
     pro rata among patrons of the organization on the basis of 
     the quantity or value of business done with or for such 
     patrons for the taxable year.
       ``(ii) Form and effect of election.--An election under 
     clause (i) for any taxable year shall be made on a timely 
     filed return for such year. Such election, once made, shall 
     be irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons under subparagraph (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) with respect to the organization for the 
     taxable year,
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron for which 
     the patronage dividends for the taxable year described in 
     subparagraph (A) are included in gross income, and
       ``(iii) shall be included in gross income of such patrons 
     for the taxable year in the manner and to the extent provided 
     in section 87.
       ``(C) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(i) such reduction, over
       ``(ii) the amount not apportioned to such patrons under 
     subparagraph (A) for the taxable year,
     shall be treated as an increase in tax imposed by this 
     chapter on the organization.

[[Page S5343]]

      Such increase shall not be treated as tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under this subpart or subpart A, B, E, or G.''.
       (b) Improvements to Small Ethanol Producer Credit.--
       (1) Definition of small ethanol producer.--Section 40(g) 
     (relating to definitions and special rules for eligible small 
     ethanol producer credit) is amended by striking 
     ``30,000,000'' each place it appears and inserting 
     ``60,000,000''.
       (2) Small ethanol producer credit not a passive activity 
     credit.--Clause (i) of section 469(d)(2)(A) is amended by 
     striking ``subpart D'' and inserting ``subpart D, other than 
     section 40(a)(3),''.
       (3) Allowing credit against minimum tax.--
       (A) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for small ethanol producer credit.--
       ``(A) In general.--In the case of the small ethanol 
     producer 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) subparagraphs (A) and (B) 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 small 
     ethanol producer credit).

       ``(B) Small ethanol producer credit.--For purposes of this 
     subsection, the term `small ethanol producer credit' means 
     the credit allowable under subsection (a) by reason of 
     section 40(a)(3).''.
       (B) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by striking ``(other'' and all 
     that follows through ``credit)'' and inserting ``(other than 
     the empowerment zone employment credit or the small ethanol 
     producer credit)''.
       (4) Small ethanol producer credit not added back to income 
     under section 87.--Section 87 (relating to income inclusion 
     of alcohol fuel credit) is amended to read as follows:

     ``SEC. 87. ALCOHOL FUEL CREDIT.

       ``Gross income includes an amount equal to the sum of--
       ``(1) the amount of the alcohol mixture credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a)(1), and
       ``(2) the alcohol credit determined with respect to the 
     taxpayer for the taxable year under section 40(a)(2).''.
       (c) Conforming Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following new subsection:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol fuels credit between cooperative 
     organizations and their patrons, see section 40(g)(6).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 1132. ADDITIONAL TAX INCENTIVES FOR ETHANOL USE.

       (a) Diesel Fuel Mixed With Alcohol Treated Same as 
     Gasoline.--
       (1) Qualified alcohol mixture.--Section 4081(c)(3)(B) 
     (defining qualified alcohol mixture) is amended to read as 
     follows:
       ``(B) Qualified alcohol mixture.--The term `qualified 
     alcohol mixture' means any mixture of gasoline or diesel fuel 
     with alcohol if at least 5.7 percent of such mixture is 
     alcohol.''.
       (2) Alcohol mixture rates.--
       (A) In general.--Section 4081(c)(4)(A) (relating to alcohol 
     mixture rates for gasoline mixtures) is amended--
       (i) by striking ``which contains gasoline'' in clauses (i) 
     and (ii), and
       (ii) by striking ``10 percent gasohol'', ``7.7 percent 
     gasohol'', and ``5.7 percent gasohol'' each place such terms 
     appear in clauses (i) and (ii), and inserting ``a 10 percent 
     mixture'', ``a 7.7 percent mixture'', and ``a 5.7 percent 
     mixture'', respectively.
       (B) Definitions.--Section 4081(c)(4) is amended by striking 
     subparagraphs (B), (C), and (D) and inserting:
       ``(B) 10 percent mixture.--The term `10 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 10 percent of such mixture is alcohol.
       ``(C) 7.7 percent mixture.--The term `7.7 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 7.7 percent of such mixture is alcohol.
       ``(D) 5.7 percent mixture.--The term `5.7 percent mixture' 
     means any mixture of alcohol with gasoline or diesel if at 
     least 5.7 percent of such mixture is alcohol.''
       (C) Conforming amendments.--
       (i) The heading for section 4081(c)(4) is amended by 
     striking ``gasoline'' and inserting ``alcohol''.
       (ii) Section 4081(c) is amended by striking paragraph (5) 
     and by redesignating paragraphs (6), (7), and (8) as 
     paragraphs (5), (6), and (7), respectively.
       (b) Definition of Alcohol.--Section 4081(c)(3)(A) (defining 
     alcohol) is amended by striking ``and ethanol'' and inserting 
     ``, ethanol, or other alcohol,''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2001.

                  Subtitle E--Commuter Benefits Equity

     SEC. 1141. UNIFORM DOLLAR LIMITATION FOR ALL TYPES OF 
                   TRANSPORTATION FRINGE BENEFITS.

       (a) In General.--Subparagraph (A) of section 132(f)(2) 
     (relating to limitation on exclusion) is amended by striking 
     ``$65'' and inserting ``$175''.
       (b) Conforming Amendment.--Section 9010 of the 
     Transportation Equity Act for the 21st Century is amended by 
     striking subsection (c).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 1142. CLARIFICATION OF FEDERAL EMPLOYEE BENEFITS.

       Section 7905 of title 5, United States Code, is amended--
       (1) in subsection (a)--
       (A) in paragraph (2)(C) by inserting ``and'' after the 
     semicolon;
       (B) in paragraph (3) by striking ``; and'' and inserting a 
     period; and
       (C) by striking paragraph (4); and
       (2) in subsection (b)(2)(A) by amending subparagraph (A) to 
     read as follows:
       ``(A) a qualified transportation fringe as defined in 
     section 132(f)(1) of the Internal Revenue Code of 1986;''.

      Subtitle F--Tax Credit for Energy Conservation Expenditures.

     SEC. 1151. ENERGY CONSERVATION EXPENDITURES.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 (relating to refundable credits) is amended by 
     redesignating section 35 as section 36 and by inserting after 
     section 34 the following new section:

     ``SEC. 35. ENERGY CONSERVATION EXPENDITURES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle for the taxable year an amount equal to the 
     energy conservation expenditures made by the taxpayer during 
     such year.
       ``(b) Maximum Credit.--The amount of the credit allowed 
     under subsection (a) with respect to each dwelling unit for 
     the taxable year shall not exceed $2,000.
       ``(c) Energy Conservation Expenditures.--For purposes of 
     this section--
       ``(1) In general.--The term `energy conservation 
     expenditures' means expenditures made by the taxpayer for 
     qualified energy property--
       ``(A) which is certified to equal or exceed energy 
     conservation standards for such property or for the 
     installation of such property as prescribed by the Secretary, 
     in consultation with the Secretary of Energy, and
       ``(B) which is installed on or in connection with a 
     dwelling unit--
       ``(i) which is located in the United States, and
       ``(ii) which is used by the taxpayer as a residence.
     Such term includes expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or 
     installation of the property.
       ``(2) Qualified energy property.--
       ``(A) In general.--The term `qualified energy property' 
     means--
       ``(i) swimming pool and hot tub covers,
       ``(ii) ceiling insulation,
       ``(iii) weatherstripping,
       ``(iv) water heater insulation blankets,
       ``(v) low-flow showerheads,
       ``(vi) caulking in ceilings,
       ``(vii) insulation of plenums and ducts,
       ``(viii) installation of storm windows with a U-value of 
     0.45 or less,
       ``(ix) thermal doors and windows,
       ``(x) duty cyclers,
       ``(xi) clock thermostats,
       ``(xii) evaporative coolers,
       ``(xiii) whole house fans,
       ``(xiv) external shading devices,
       ``(xv) thermal energy storage devices with central control 
     systems,
       ``(xvi) controls and automatic switching devices between 
     natural and electric lighting, or
       ``(xvii) any other property that the Secretary of Energy 
     determines to be an effective device for the conservation of 
     energy.
       ``(d) Certification.--
       ``(1) Products.--A certification with respect to a 
     qualified energy property shall be made by the manufacturer 
     of such property.
       ``(2) Installation.--A certification with respect to the 
     installation of a qualified energy property shall be made by 
     the person who sold or installed the property.
       ``(3) Form of certifications.--Certifications referred to 
     in this subsection shall be in such form as the Secretary 
     shall prescribe, and, except in the case of a certification 
     by a representative of a local building regulatory authority, 
     shall include the taxpayer identification number of the 
     person making the certification.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which if jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be

[[Page S5344]]

     determined by treating all of such individuals as 1 taxpayer 
     whose taxable year is such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having made his proportionate share of any 
     expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Joint ownership of energy items.--
       ``(A) In general.--Any expenditure otherwise qualifying as 
     a energy conservation expenditure shall not be treated as 
     failing to so qualify merely because such expenditure was 
     made with respect to 2 or more dwelling units.
       ``(B) Limits applied separately.--In the case of any 
     expenditure described in subparagraph (A), the amount of the 
     credit allowable under subsection (a) shall (subject to 
     paragraph (1)) be computed separately with respect to the 
     amount of the expenditure made for each dwelling unit.
       ``(5) Allocation in certain cases.--If less than 80 percent 
     of the use of an item is for nonbusiness residential 
     purposes, only that portion of the expenditures for such item 
     which is properly allocable to use for nonbusiness 
     residential purposes shall be taken into account.
       ``(6) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(7) Other applicable rules.--Rules similar to the rules 
     of paragraphs (4) and (5) of section 48(a) shall apply for 
     purposes of this section.
       ``(f) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(g) Denial of Double Benefit.--No deduction or other 
     credit shall be allowed under this chapter for any 
     expenditure for which credit is allowed under this section.
       ``(h) Election To Have Credit Not Apply.--A taxpayer may 
     elect to have this section not apply for any taxable year.
       ``(i) Application of Section.--This section shall apply to 
     expenditures with respect to property placed in service after 
     December 31, 2000.''.
       (b) Conforming Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by striking ``or'' before ``enacted'' and by 
     inserting before the period at the end ``, or from section 35 
     of such Code''.
       (2) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 35 and inserting the following new items:

``Sec. 35. Energy conservation expenditures.
``Sec. 36. Overpayments of tax.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2000.

                  Subtitle G--Hybrid Vehicle Incentive

     SEC. 1161. EXPANSION OF CLEAN-FUEL VEHICLE DEDUCTION TO 
                   INCLUDE HYBRID VEHICLES.

       (a) In General.--Section 179A(c) (defining qualified clean-
     fuel vehicle property) is amended by adding at the end the 
     following new paragraph:
       ``(4) Qualified hybrid vehicle included.--
       ``(A) In general.--The term `qualified clean-fuel vehicle 
     property' includes any qualified hybrid vehicle.
       ``(B) Qualified hybrid vehicle.--
       ``(i) In general.--The term `qualified hybrid vehicle' 
     means any motor vehicle which--

       ``(I) is propelled by a combination of a fuel which is not 
     a clean-burning fuel and electricity, and
       ``(II) has a city fuel economy of not less than 50 miles 
     per gallon.

       ``(ii) City fuel economy.--The term `city fuel economy' has 
     the meaning given the term in section 600.002-85 of title 40, 
     Code of Federal Regulations (or a successor regulation).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

          Subtitle H--Compliance With Congressional Budget Act

     SEC. 1171. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                      TITLE XII--OTHER PROVISIONS

                         Subtitle A--In General

     SEC. 1201. EXPANSION OF AUTHORITY TO POSTPONE CERTAIN TAX-
                   RELATED DEADLINES BY REASON OF PRESIDENTIALLY 
                   DECLARED DISASTER.

       (a) In General.--Section 7508A (relating to authority to 
     postpone certain tax-related deadlines by reason of 
     presidentially declared disaster) is amended by adding at the 
     end the following new subsection:
       ``(c) Duties of Disaster Response Team.--The Secretary 
     shall establish as a permanent office in the national office 
     of the Internal Revenue Service a disaster response team 
     which, in coordination with the Federal Emergency Management 
     Agency, shall assist taxpayers in clarifying and resolving 
     Federal tax matters associated with or resulting from any 
     Presidentially declared disaster (as so defined). One of the 
     duties of the disaster response team shall be to extend in 
     appropriate cases the 90-day period described in subsection 
     (a) by not more than 30 days.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of enactment of this Act.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 1211. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 723. Mr. SMITH of New Hampshire proposed an amendment to amendment 
SA 680 proposed by Mr.homeowners Smith, of New Hampshire to the bill 
(H.R. 1836) to provide for reconciliation pursuant to section 104 of 
the concurrent resolution on the budget for fiscal year 2002; as 
follows:

       At the appropriate place, add the following:

     SEC.   . PERMANENT MORATORIUM ON IMPOSITION OF TAXES ON THE 
                   INTERNET

       Section 1101(a) of the Internet Tax Freedom Act (title XI 
     of division C of the Omnibus Consolidated and Emergency 
     Supplemental Appropriations Act, 1999; 47 U.S.C. 151 note) is 
     amended by striking ``during the period beginning on October 
     1, 1998, and ending 3 years after the date of the enactment 
     of this Act'' and inserting ``after September 30, 1998''.
                                  ____

  SA 724. Mr. FEINGOLD proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. ELIMINATION OF MEDICAID ESTATE RECOVERY 
                   REQUIREMENT.

       (a) Medicaid Amendment.--
       (1) In general.--Section 1396p(b) of Title 42, U.S.C., is 
     amended--
       (A) in paragraph (1), by striking ``except that'' and all 
     that follows and inserting ``except that, in the case of an 
     individual described in subsection (a)(1)(B), the State shall 
     seek adjustment or recovery upon sale of the property subject 
     to a lien imposed on account of medical assistance paid on 
     behalf of the individual.'';
       (B) in paragraph (2)(B), by striking ``in the case of a 
     lien on an individual's home under subsection (a)(1)(B),'';
       (C) in paragraph (3), by striking ``(other than paragraph 
     (1)(C)''; and
       (D) by striking paragraph (4).
       (2) Effective Date.--The amendments made by paragraph (1) 
     shall apply to individuals dying on or after the date of 
     enactment of this Act.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reductions of the rates of tax under section 
     2001(c) of the Internal Revenue Code of 1986 (as amended by 
     section 511 of this Act) with respect to estates of decedents 
     dying and gifts made in such manner as to increase revenues 
     by $120,000,000 in each fiscal year beginning before October 
     1, 2011.
                                  ____

  SA 725. Mr. FEINGOLD proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:


[[Page S5345]]


       On page 7, line 24, strike ``$12,000'' and insert 
     ``$15,000''.
       On page 8, line 1, strike ``$10,000'' and insert 
     ``$11,250''.
       On page 9, in the table between lines 11 and 12, strike the 
     column relating to 39.6 percent.
                                  ____

  SA 726. Mr. FEINGOLD proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 9, between lines 4 and 5, insert the following:
       ``(D) Adjustments after 2010.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar year 2011, the Secretary shall, 
     in addition to the adjustments made under subparagraph (C) of 
     this subsection, increase the initial bracket amounts for 
     subsection (a) and subsection (b) so as to decrease revenues 
     by the amount of revenues generated by the other provisions 
     of the amendment creating this provision.''
       On page 63, strike line 4 and all that follows through page 
     64, line 16.
       On page 65, in line 12, strike ``and before 2011''.
       On page 66, in the table after line 1, strike ``2007, 2008, 
     2009, and 2010'' and insert ``2007 and thereafter''.
       On page 68, between lines 14 and 15, following the item 
     relating to 2010, insert the following:

2001 and thereafter........................................$100,000,000

       On page 106, after line 6, insert the following:
       ``(g) Notwithstanding any other provision of law, this 
     subtitle shall not apply to property subject to the estate 
     tax.''
                                  ____

  SA 727. Mr. HARKIN proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 11, strike lines 14 through 22 and insert the 
     following:
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to 
     taxable years beginning after December 31, 2000.
       (2) Amendments to withholding provisions.--The amendments 
     made by paragraphs (6), (7), (8), (9), (10), and (11) of 
     subsection (b) shall apply to amounts paid after the 60th day 
     after the date of the enactment of this Act.
       (3) Assurance of trust fund solvency.--
       (A) CBO certification.--The reductions in the tax rate 
     relating to the highest rate bracket under the amendments 
     made by this section shall not take effect unless the 
     Congressional Budget Office submits to Congress and the 
     Secretary of the Treasury a certification that legislation 
     has been enacted that ensures the solvency of--
       (i) the Federal Old-Age and Survivors Insurance Trust Fund 
     and the Federal Disability Insurance Trust Fund for a period 
     of not less than 75 years; and
       (ii) the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund for a 
     period of not less than 50 years.
       (B) Application.--
       (i) In general.--Except as provided in clause (ii), the 
     reductions in the tax rate relating to the highest rate 
     bracket under the amendments made by this section shall begin 
     with the rate for the taxable year beginning after the date 
     on which the Congressional Budget Office submits the 
     certification described in subparagraph (A).
       (ii) Retroactive application.--If the Congressional Budget 
     Office submits the certification described in subparagraph 
     (A) before October 1, 2002, this subsection shall be applied 
     as if this paragraph had not been enacted.
                                  ____

  SA 728. Mr. HARKIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, strike the table between lines 11 and 12 and 
     insert the following:


------------------------------------------------------------------------
                                         The corresponding percentages
                                         shall be substituted for the
   ``In the case of taxable years           following percentages:
   beginning during calendar year:   -----------------------------------
                                        10%      28%      31%      36%
------------------------------------------------------------------------
2002, 2003, and 2004................     9%      27%      30%      35%
2005 and 2006.......................    8.5%     26%      29%      34%
2007 and thereafter.................     8%      25%      28%     33%''.
------------------------------------------------------------------------

                                                                 
                                  ____
  SA 729. Mr. HARKIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle D of title IV, add the following:

     SEC. __. CREDIT FOR CERTAIN EMERGENCY RESPONSE PROFESSIONAL 
                   EXPENSES.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to other credits) is amended by adding at 
     the end the following new section:

     ``SEC. 30B. CREDIT TO EMERGENCY RESPONSE PROFESSIONALS FOR 
                   CERTAIN EXPENSES.

       ``(a) Allowance of Credit.--In the case of an eligible 
     emergency response professional, there shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to 50 percent of the qualified 
     expenses which are paid or incurred by the taxpayer during 
     such taxable year.
       ``(b) Maximum Credit.--The credit allowed by subsection (a) 
     for any taxable year shall not exceed $250.
       ``(c) Definitions.--
       ``(1) Eligible emergency response professional.--The term 
     `eligible emergency response professional' includes--
       ``(A) a full-time employee of any police department or fire 
     department which is organized and operated by a governmental 
     entity to provide police protection, firefighting service, or 
     emergency medical services for any area within the 
     jurisdiction of such governmental entity,
       ``(B) an emergency medical technician licensed by a State 
     who is employed by a State or non-profit to provide emergency 
     medical services, and
       ``(C) a member of a volunteer fire department which is 
     organized to provide firefighting or emergency medical 
     services for any area within the jurisdiction of a 
     governmental entity which is not provided with any other 
     firefighting services.
       ``(2) Governmental entity.--The term `governmental entity' 
     means a State (or political subdivision thereof), Indian 
     tribal (or political subdivision thereof), or Federal 
     government.
       ``(3) Qualified expenses.--The term `qualified expenses' 
     means unreimbursed expenses for police and firefighter 
     activities, as determined by the Secretary.
       ``(d) Special Rules.--
       ``(1) Denial of double benefit.--No deduction shall be 
     allowed under this chapter for any expense for which credit 
     is allowed under this section.
       ``(2) Application with other credits.--The credit allowable 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(A) the regular tax for the taxable year, reduced by the 
     sum of the credits allowable under subpart A and the 
     preceding sections of this subpart, over
       ``(B) the tentative minimum tax for the taxable year.
       ``(e) Election To Have Credit Not Apply.--A taxpayer may 
     elect to have this section not apply for any taxable year.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     B of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following new item:

``Sec. 30B. Credit to emergency response professionals for certain 
              expenses.''.

       (c) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year after December 31, 2002, the decrease in revenues to the 
     Treasury for that fiscal year resulting from the amendments 
     made by this section.
       (d) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred after December 31, 
     2001.
                                  ____

  SA 730. Mr. HARKIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle D of title IV, add the following:

     SEC. __. CREDIT FOR CERTAIN HIGHER EDUCATION LOANS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 432, is amended by inserting after section 
     25B the following new section:

     ``SEC. 25C. CERTAIN HIGHER EDUCATION LOANS.

       ``(a) Allowance of Credit.--In the case of a qualified 
     individual, there shall be allowed as a credit against the 
     tax imposed by this chapter for the taxable year an amount 
     equal to the interest and principle paid by the taxpayer 
     during the taxable year on any qualified education loan.
       ``(b) Maximum Credit.--The credit allowed by subsection (a) 
     for a qualified individual shall not exceed $2,000.
       ``(c) Dependents Not Eligible for Credit.--No credit shall 
     be allowed by this section to an individual for the taxable 
     year if a deduction under section 151 with respect to such 
     individual is allowed to another taxpayer for the taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Dependent.--The term `dependent' has the meaning 
     given such term by section 152.
       ``(2) Nurse.--The term `nurse' means--
       ``(A) an individual who is--
       ``(i) licensed or certified by a State to provide nursing 
     or nursing-related services, and
       ``(ii) employed to perform such services on a full-time 
     basis for at least 6 months in the taxable year in which the 
     credit described in subsection (a) is claimed, or

[[Page S5346]]

       ``(B) any other licensed or certified health professional 
     practicing in a health profession shortage area, as defined 
     in section 332(a)(1) of the Public Health Service Act (42 
     U.S.C. 254e(a)(1)).
       ``(3) Qualified education loan.--The term `qualified 
     education loan' has the meaning given such term by section 
     221(e)(1).
       ``(4) Qualified individual.--The term `qualified 
     individual' means a teacher or a nurse.
       ``(5) Teacher.--The term `teacher' means--
       ``(A) a certified individual who is a kindergarten through 
     grade 12 classroom teacher, instructor, counselor, aide, or 
     principal in any State, Federal, or tribally licensed 
     elementary or secondary school on a full-time basis for an 
     academic year ending during a taxable year, or
       ``(B) a head start teacher in a licensed head start program 
     recognized by the Secretary of Health and Human Services.
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--No credit shall be allowed 
     under this section if any amount of interest or principle on 
     a qualified education loan is taken into account for any 
     deduction or credit under any other provision of this chapter 
     for the taxable year.
       ``(2) Married couples must file joint return.--If the 
     taxpayer is married at the close of the taxable year, the 
     credit shall be allowed under subsection (a) only if the 
     taxpayer and the taxpayer's spouse file a joint return for 
     the taxable year.
       ``(3) Marital status.--Marital status shall be determined 
     in accordance with section 7703.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 25B the 
     following new item:

``Sec. 25C. Certain higher education loans.''.
       (c) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year beginning before October 1, 2011, the decrease in 
     revenues to the Treasury for that fiscal year resulting from 
     the amendments made by this section.
       (d) Effective Date.--The amendments made under subsection 
     (a) and (b) shall apply to any qualified education loan (as 
     defined in section 25C(d)(3) of the Internal Revenue Code of 
     1986, as added by this section) incurred on, before, or after 
     December 31, 2001, but only with respect to any loan interest 
     or principle payment due in taxable years beginning after 
     December 31, 2001.
                                  ____

  SA 731. Mr. HARKIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, strike the table between line 11 and 12 and 
     insert the following:

------------------------------------------------------------------------
                                  The corresponding percentages
   ``In the case of taxable       shall be substituted for the
    years beginning during           following percentages:
        calendar year:        -----------------------------------
                                 28%      31%      36%     39.6%
-----------------------------------------------------------------
2002.........................    27%      30%      35%      39%
2003 and 2004................    27%      30%      35%     38.6%
2005 and 2006................    26%      29%      34%      38%
2007 and thereafter..........    25%      28%      33%      36%
------------------------------------------------------------------------

       At the end add the following:

            TITLE __--SCHOOL CONSTRUCTION AND MODERNIZATION

  Subtitle A--Liberalization of Tax-Exempt Financing Rules for Public 
                          School Construction

     SEC. __01. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

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

         ``Subchapter Y--Public School Modernization Provisions

``Sec. 1400K. Credit to holders of qualified public school 
              modernization bonds.
``Sec. 1400L. Qualified school construction bonds.
``Sec. 1400M. Qualified zone academy bonds.

     ``SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified public school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified public school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the day 
     before the date of issuance of the issue) on outstanding 
     long-term corporate debt obligations (determined under 
     regulations prescribed by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified zone academy bond, and
       ``(B) a qualified school construction bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.
     Such term includes the last day on which the bond is 
     outstanding.
       ``(e) Other Definitions.--For purposes of this subchapter--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.
       ``(4) Public school facility.--The term `public school 
     facility' shall not include--
       ``(A) any stadium or other facility primarily used for 
     athletic contests or exhibitions or other events for which 
     admission is charged to the general public, or
       ``(B) any facility which is not owned by a State or local 
     government or any agency or instrumentality of a State or 
     local government.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(g) Recapture of Portion of Credit Where Cessation of 
     Compliance.--
       ``(1) In general.--If any bond which when issued purported 
     to be a qualified public school modernization bond ceases to 
     be a qualified public school modernization bond, the issuer 
     shall pay to the United States (at the time required by the 
     Secretary) an amount equal to the sum of--
       ``(A) the aggregate of the credits allowable under this 
     section with respect to such bond (determined without regard 
     to subsection (c)) for taxable years ending during the 
     calendar year in which such cessation occurs and the 2 
     preceding calendar years, and
       ``(B) interest at the underpayment rate under section 6621 
     on the amount determined under subparagraph (A) for each 
     calendar year for the period beginning on the first day of 
     such calendar year.
       ``(2) Failure to pay.--If the issuer fails to timely pay 
     the amount required by paragraph (1) with respect to such 
     bond, the tax imposed by this chapter on each holder of any 
     such bond which is part of such issue shall be increased (for 
     the taxable year of the holder in which such cessation 
     occurs) by the aggregate decrease in the credits allowed 
     under this section to such holder for taxable years beginning 
     in such 3 calendar years which would have resulted solely 
     from denying any credit under this section with respect to 
     such issue for such taxable years.
       ``(3) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (2) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     paragraph (2) shall not be

[[Page S5347]]

     treated as a tax imposed by this chapter for purposes of 
     determining--
       ``(i) the amount of any credit allowable under this part, 
     or
       ``(ii) the amount of the tax imposed by section 55.
       ``(h) Bonds Held by Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(i) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified public school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the qualified public school modernization bond as if 
     it were a stripped bond and to the credit under this section 
     as if it were a stripped coupon.
       ``(j) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     public school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(k) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(l) Reporting.--Issuers of qualified public school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).
       ``(m) Termination.--This section shall not apply to any 
     bond issued after September 30, 2006.

     ``SEC. 1400L. QUALIFIED SCHOOL CONSTRUCTION BONDS.

       ``(a) Qualified School Construction Bond.--For purposes of 
     this subchapter, the term `qualified school construction 
     bond' means any bond issued as part of an issue if--
       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility or for the acquisition of land on 
     which such a facility is to be constructed with part of the 
     proceeds of such issue,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)(4)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
     There is a national qualified school construction bond 
     limitation for each calendar year. Such limitation is--
       ``(1) $11,000,000,000 for 2002,
       ``(2) $11,000,000,000 for 2003, and
       ``(3) except as provided in subsection (f), zero after 
     2003.
       ``(d) 60 Percent of Limitation Allocated Among States.--
       ``(1) In general.--60 percent of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     by the Secretary among the States in proportion to the 
     respective numbers of children in each State who have 
     attained age 5 but not age 18 for the most recent fiscal year 
     ending before such calendar year. The limitation amount 
     allocated to a State under the preceding sentence shall be 
     allocated by the State to issuers within such State.
       ``(2) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,

     is not less than an amount equal to such State's minimum 
     percentage of the amount to be allocated under paragraph (1) 
     for the calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(3) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(4) Allocations for indian schools.--In addition to the 
     amounts otherwise allocated under this subsection, 
     $200,000,000 for calendar year 2002, and $200,000,000 for 
     calendar year 2003, shall be allocated by the Secretary of 
     the Interior for purposes of the construction, 
     rehabilitation, and repair of schools funded by the Bureau of 
     Indian Affairs. In the case of amounts allocated under the 
     preceding sentence, Indian tribal governments (as defined in 
     section 7871) shall be treated as qualified issuers for 
     purposes of this subchapter.
       ``(e) 40 Percent of Limitation Allocated Among Largest 
     School Districts.--
       ``(1) In general.--40 percent of the limitation applicable 
     under subsection (c) for any calendar year shall be allocated 
     under paragraph (2) by the Secretary among local educational 
     agencies which are large local educational agencies for such 
     year.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency received for Basic Grants 
     under subpart 2 of part A of title I of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
     the most recent fiscal year ending before such calendar year.
       ``(3) Allocation of unused limitation to state.--The amount 
     allocated under this subsection to a large local educational 
     agency for any calendar year may be reallocated by such 
     agency to the State in which such agency is located for such 
     calendar year. Any amount reallocated to a State under the 
     preceding sentence may be allocated as provided in subsection 
     (d)(1).
       ``(4) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among the 100 local educational agencies with the 
     largest numbers of children aged 5 through 17 from families 
     living below the poverty level, as determined by the 
     Secretary using the most recent data available from the 
     Department of Commerce that are satisfactory to the 
     Secretary, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in subparagraph (A)) that the 
     Secretary of Education determines (based on the most recent 
     data available satisfactory to the Secretary) are in 
     particular need of assistance, based on a low level of 
     resources for school construction, a high level of enrollment 
     growth, or such other factors as the Secretary deems 
     appropriate.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,

     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (d)(4) or (e).
       ``(g) Special Rules Relating to Arbitrage.--
       ``(1) In general.--A bond shall not be treated as failing 
     to meet the requirement of subsection (a)(1) solely by reason 
     of the fact that the proceeds of the issue of which such bond 
     is a part are invested for a temporary period (but not more 
     than 36 months) until such proceeds are needed for the 
     purpose for which such issue was issued.
       ``(2) Binding commitment requirement.--Paragraph (1) shall 
     apply to an issue only if, as of the date of issuance, there 
     is a reasonable expectation that--
       ``(A) at least 10 percent of the proceeds of the issue will 
     be spent within the 6-month period beginning on such date for 
     the purpose for which such issue was issued, and
       ``(B) the remaining proceeds of the issue will be spent 
     with due diligence for such purpose.
       ``(3) Earnings on proceeds.--Any earnings on proceeds 
     during the temporary period shall be treated as proceeds of 
     the issue for purposes of applying subsection (a)(1) and 
     paragraph (1) of this subsection.

     ``SEC. 1400M. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     subchapter--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,

[[Page S5348]]

       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
     Rules similar to the rules of section 1400L(g) shall apply 
     for purposes of paragraph (1).
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(C) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(D)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) acquiring the land on which such facility is to be 
     constructed with part of the proceeds of such issue,
       ``(C) providing equipment for use at such academy,
       ``(D) developing course materials for education to be 
     provided at such academy, and
       ``(E) training teachers and other school personnel in such 
     academy.
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $400,000,000 for 1999,
       ``(C) $400,000,000 for 2000,
       ``(D) $400,000,000 for 2001,
       ``(E) $1,400,000,000 for 2002,
       ``(F) $1,400,000,000 for 2003, and
       ``(G) except as provided in paragraph (3), zero after 2003.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998, 1999, 2000, and 2001 limitations.--The national 
     zone academy bond limitations for calendar years 1998, 1999, 
     2000, and 2001 shall be allocated by the Secretary among the 
     States on the basis of their respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget).
       ``(ii) Limitation after 2001.--The national zone academy 
     bond limitation for any calendar year after 2001 shall be 
     allocated by the Secretary among the States in proportion to 
     the respective amounts each such State received for Basic 
     Grants under subpart 2 of part A of title I of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) 
     for the most recent fiscal year ending before such calendar 
     year.
       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State to qualified zone academies 
     within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) (or the corresponding 
     provisions of prior law) with respect to qualified zone 
     academies within such State,

     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess.''.
       (b) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest) is amended by adding 
     at the end the following new paragraph:
       ``(8) Reporting of credit on qualified public school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400K(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400K(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''.
       (c) Conforming Amendments.--
       (1) Subchapter U of chapter 1 is amended by striking part 
     IV, by redesignating part V as part IV, and by redesignating 
     section 1397F as section 1397E.
       (2) The table of subchapters for chapter 1 is amended by 
     adding at the end the following new item:

``Subchapter Y. Public school modernization provisions.''.

       (3) The table of parts of subchapter U of chapter 1 is 
     amended by striking the last 2 items and inserting the 
     following item:

``Part IV. Regulations.''.

       (d) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to obligations issued after December 31, 2001.
       (2) Repeal of restriction on zone academy bond holders.--In 
     the case of bonds to which section 1397E of the Internal 
     Revenue Code of 1986 (as in effect before the date of the 
     enactment of this Act) applies, the limitation of such 
     section to eligible taxpayers (as defined in subsection 
     (d)(6) of such section) shall not apply after the date of the 
     enactment of this Act.

     SEC. __02. APPLICATION OF CERTAIN LABOR STANDARDS ON 
                   CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC 
                   SCHOOL MODERNIZATION PROGRAM.

       Section 439 of the General Education Provisions Act 
     (relating to labor standards) is amended--
       (1) by inserting ``(a)'' before ``All laborers and 
     mechanics'', and
       (2) by adding at the end the following:
       ``(b)(1) For purposes of this section, the term `applicable 
     program' also includes the qualified zone academy bond 
     provisions enacted by section 226 of the Taxpayer Relief Act 
     of 1997 and the program established by section __01 of the 
     Restoring Earnings To Lift Individuals and Empower Families 
     (RELIEF) Act of 2001.
       ``(2) A State or local government participating in a 
     program described in paragraph (1) shall--
       ``(A) in the awarding of contracts, give priority to 
     contractors with substantial numbers of employees residing in 
     the local education area to be served by the school being 
     constructed; and
       ``(B) include in the construction contract for such school 
     a requirement that the contractor give priority in hiring new 
     workers to individuals residing in such local education area.
       ``(3) In the case of a program described in paragraph (1), 
     nothing in this subsection or subsection (a) shall be 
     construed to deny any tax credit allowed under such program. 
     If amounts are required to be withheld from contractors to 
     pay wages to which workers are entitled, such amounts shall 
     be treated as expended for construction purposes in 
     determining whether the requirements of such program are 
     met.''.

     SEC. __03. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO 
                   CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL 
                   FACILITIES.

       (a) In General.--Section 134 of the Workforce Investment 
     Act of 1998 (29 U.S.C. 2864) is amended by adding at the end 
     the following:
       ``(f) Local Employment and Training Activities Relating to 
     Construction or Reconstruction of Public School Facilities.--
       ``(1) In general.--In order to provide training services 
     related to construction or reconstruction of public school 
     facilities receiving

[[Page S5349]]

     funding assistance under an applicable program, each State 
     shall establish a specialized program of training meeting the 
     following requirements:
       ``(A) The specialized program provides training for jobs in 
     the construction industry.
       ``(B) The program provides trained workers for projects for 
     the construction or reconstruction of public school 
     facilities receiving funding assistance under an applicable 
     program.
       ``(C) The program ensures that skilled workers (residing in 
     the area to be served by the school facilities) will be 
     available for the construction or reconstruction work.
       ``(2) Coordination.--The specialized program established 
     under paragraph (1) shall be integrated with other activities 
     under this Act, with the activities carried out under the 
     National Apprenticeship Act of 1937 by the State 
     Apprenticeship Council or through the Bureau of 
     Apprenticeship and Training in the Department of Labor, as 
     appropriate, and with activities carried out under the Carl 
     D. Perkins Vocational and Technical Education Act of 1998. 
     Nothing in this subsection shall be construed to require 
     services duplicative of those referred to in the preceding 
     sentence.
       ``(3) Applicable program.--In this subsection, the term 
     `applicable program' has the meaning given the term in 
     section 439(b) of the General Education Provisions Act 
     (relating to labor standards).''.
       (b) State Plan.--Section 112(b)(17)(A) of the Workforce 
     Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is 
     amended--
       (1) in clause (iii), by striking ``and'' at the end;
       (2) by redesignating clause (iv) as clause (v); and
       (3) by inserting after clause (iii) the following:
       ``(iv) how the State will establish and carry out a 
     specialized program of training under section 134(f); and''.

               Subtitle B--Indian School Construction Act

     SEC. __11. INDIAN SCHOOL CONSTRUCTION.

       (a) Definitions.--In this section:
       (1) Bureau.--The term ``Bureau'' means the Bureau of Indian 
     Affairs of the Department of the Interior.
       (2) Indian.--The term ``Indian'' means any individual who 
     is a member of a tribe.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior.
       (4) Tribal school.--The term ``tribal school'' means an 
     elementary school, secondary school, or dormitory that is 
     operated by a tribal organization or the Bureau for the 
     education of Indian children and that receives financial 
     assistance for its operation under an appropriation for the 
     Bureau under section 102, 103(a), or 208 of the Indian Self-
     Determination and Education Assistance Act (25 U.S.C. 450f, 
     450h(a), and 458d) or under the Tribally Controlled Schools 
     Act of 1988 (25 U.S.C. 2501 et seq.) under a contract, a 
     grant, or an agreement, or for a Bureau-operated school.
       (5) Tribe.--The term ``tribe'' has the meaning given the 
     term ``Indian tribal government'' by section 7701(a)(40) of 
     the Internal Revenue Code of 1986, including the application 
     of section 7871(d) of such Code. Such term includes any 
     consortium of tribes approved by the Secretary.
       (b) Issuance of Bonds.--
       (1) In general.--The Secretary shall establish a pilot 
     program under which eligible tribes have the authority to 
     issue qualified tribal school modernization bonds to provide 
     funding for the construction, rehabilitation, or repair of 
     tribal schools, including the advance planning and design 
     thereof.
       (2) Eligibility.--
       (A) In general.--To be eligible to issue any qualified 
     tribal school modernization bond under the program under 
     paragraph (1), a tribe shall--
       (i) prepare and submit to the Secretary a plan of 
     construction that meets the requirements of subparagraph (B);
       (ii) provide for quarterly and final inspection of the 
     project by the Bureau; and
       (iii) pledge that the facilities financed by such bond will 
     be used primarily for elementary and secondary educational 
     purposes for not less than the period such bond remains 
     outstanding.
       (B) Plan of construction.--A plan of construction meets the 
     requirements of this subparagraph if such plan--
       (i) contains a description of the construction to be 
     undertaken with funding provided under a qualified tribal 
     school modernization bond;
       (ii) demonstrates that a comprehensive survey has been 
     undertaken concerning the construction needs of the tribal 
     school involved;
       (iii) contains assurances that funding under the bond will 
     be used only for the activities described in the plan;
       (iv) contains response to the evaluation criteria contained 
     in Instructions and Application for Replacement School 
     Construction, Revision 6, dated February 6, 1999; and
       (v) contains any other reasonable and related information 
     determined appropriate by the Secretary.
       (C) Priority.--In determining whether a tribe is eligible 
     to participate in the program under this subsection, the 
     Secretary shall give priority to tribes that, as demonstrated 
     by the relevant plans of construction, will fund projects--
       (i) described in the Education Facilities Replacement 
     Construction Priorities List as of FY 2000 of the Bureau of 
     Indian Affairs (65 Fed. Reg. 4623-4624);
       (ii) described in any subsequent priorities list published 
     in the Federal Register; or
       (iii) which meet the criteria for ranking schools as 
     described in Instructions and Application for Replacement 
     School Construction, Revision 6, dated February 6, 1999.
       (D) Advance planning and design funding.--A tribe may 
     propose in its plan of construction to receive advance 
     planning and design funding from the tribal school 
     modernization escrow account established under paragraph 
     (6)(B). Before advance planning and design funds are 
     allocated from the escrow account, the tribe shall agree to 
     issue qualified tribal school modernization bonds after the 
     receipt of such funds and agree as a condition of each bond 
     issuance that the tribe will deposit into such account or a 
     fund managed by the trustee as described in paragraph (4)(C) 
     an amount equal to the amount of such funds received from the 
     escrow account.
       (3) Permissible activities.--In addition to the use of 
     funds permitted under paragraph (1), a tribe may use amounts 
     received through the issuance of a qualified tribal school 
     modernization bond to--
       (A) enter into and make payments under contracts with 
     licensed and bonded architects, engineers, and construction 
     firms in order to determine the needs of the tribal school 
     and for the design and engineering of the school;
       (B) enter into and make payments under contracts with 
     financial advisors, underwriters, attorneys, trustees, and 
     other professionals who would be able to provide assistance 
     to the tribe in issuing bonds; and
       (C) carry out other activities determined appropriate by 
     the Secretary.
       (4) Bond trustee.--
       (A) In general.--Notwithstanding any other provision of 
     law, any qualified tribal school modernization bond issued by 
     a tribe under this subsection shall be subject to a trust 
     agreement between the tribe and a trustee.
       (B) Trustee.--Any bank or trust company that meets 
     requirements established by the Secretary may be designated 
     as a trustee under subparagraph (A).
       (C) Content of trust agreement.--A trust agreement entered 
     into by a tribe under this paragraph shall specify that the 
     trustee, with respect to any bond issued under this 
     subsection shall--
       (i) act as a repository for the proceeds of the bond;
       (ii) make payments to bondholders;
       (iii) receive, as a condition to the issuance of such bond, 
     a transfer of funds from the tribal school modernization 
     escrow account established under paragraph (6)(B) or from 
     other funds furnished by or on behalf of the tribe in an 
     amount, which together with interest earnings from the 
     investment of such funds in obligations of or fully 
     guaranteed by the United States or from other investments 
     authorized by paragraph (10), will produce moneys sufficient 
     to timely pay in full the entire principal amount of such 
     bond on the stated maturity date therefor;
       (iv) invest the funds received pursuant to clause (iii) as 
     provided by such clause; and
       (v) hold and invest the funds in a segregated fund or 
     account under the agreement, which fund or account shall be 
     applied solely to the payment of the costs of items described 
     in paragraph (3).
       (D) Requirements for making direct payments.--
       (i) In general.--Notwithstanding any other provision of 
     law, the trustee shall make any payment referred to in 
     subparagraph (C)(v) in accordance with requirements that the 
     tribe shall prescribe in the trust agreement entered into 
     under subparagraph (C). Before making a payment to a 
     contractor under subparagraph (C)(v), the trustee shall 
     require an inspection of the project by a local financial 
     institution or an independent inspecting architect or 
     engineer, to ensure the completion of the project.
       (ii) Contracts.--Each contract referred to in paragraph (3) 
     shall specify, or be renegotiated to specify, that payments 
     under the contract shall be made in accordance with this 
     paragraph.
       (5) Payments of principal and interest.--
       (A) Principal.--No principal payments on any qualified 
     tribal school modernization bond shall be required until the 
     final, stated maturity of such bond, which stated maturity 
     shall be within 15 years from the date of issuance. Upon the 
     expiration of such period, the entire outstanding principal 
     under the bond shall become due and payable.
       (B) Interest.--In lieu of interest on a qualified tribal 
     school modernization bond there shall be awarded a tax credit 
     under section 1400K of the Internal Revenue Code of 1986.
       (6) Bond guarantees.--
       (A) In general.--Payment of the principal portion of a 
     qualified tribal school modernization bond issued under this 
     subsection shall be guaranteed solely by amounts deposited 
     with each respective bond trustee as described in paragraph 
     (4)(C)(iii).
       (B) Establishment of account.--
       (i) In general.--Notwithstanding any other provision of 
     law, beginning in fiscal year 2002, from amounts made 
     available for school replacement under the construction 
     account of the Bureau, the Secretary is authorized to deposit 
     not more than $30,000,000 each fiscal year into a tribal 
     school modernization escrow account.

[[Page S5350]]

       (ii) Payments.--The Secretary shall use any amounts 
     deposited in the escrow account under clauses (i) and (iii) 
     to make payments to trustees appointed and acting pursuant to 
     paragraph (4) or to make payments described in paragraph 
     (2)(D).
       (iii) Transfers of excess proceeds.--Excess proceeds held 
     under any trust agreement that are not needed for any of the 
     purposes described in clauses (iii) and (v) of paragraph 
     (4)(C) shall be transferred, from time to time, by the 
     trustee for deposit into the tribal school modernization 
     escrow account.
       (7) Limitations.--
       (A) Obligation to repay.--Notwithstanding any other 
     provision of law, the principal amount on any qualified 
     tribal school modernization bond issued under this subsection 
     shall be repaid only to the extent of any escrowed funds 
     furnished under paragraph (4)(C)(iii). No qualified tribal 
     school modernization bond issued by a tribe shall be an 
     obligation of, nor shall payment of the principal thereof be 
     guaranteed by, the United States, the tribes, nor their 
     schools.
       (B) Land and facilities.--Any land or facilities purchased 
     or improved with amounts derived from qualified tribal school 
     modernization bonds issued under this subsection shall not be 
     mortgaged or used as collateral for such bonds.
       (8) Sale of bonds.--Qualified tribal school modernization 
     bonds may be sold at a purchase price equal to, in excess of, 
     or at a discount from the par amount thereof.
       (9) Treatment of trust agreement earnings.--Any amounts 
     earned through the investment of funds under the control of a 
     trustee under any trust agreement described in paragraph (4) 
     shall not be subject to Federal income tax.
       (10) Investment of sinking funds.--Any sinking fund 
     established for the purpose of the payment of principal on a 
     qualified tribal school modernization bond shall be invested 
     in obligations issued by or guaranteed by the United States 
     or in such other assets as the Secretary of the Treasury may 
     by regulation allow.
       (c) Expansion of Incentives for Tribal Schools.--Chapter 1, 
     as amended by section __01, is amended by adding at the end 
     the following new subchapter:

         ``Subchapter Z--Tribal School Modernization Provisions

``Sec. 1400N. Credit to holders of qualified tribal school 
              modernization bonds.

     ``SEC. 1400N. CREDIT TO HOLDERS OF QUALIFIED TRIBAL SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified tribal school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified tribal school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified tribal school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the date of 
     sale of the issue) on outstanding long-term corporate 
     obligations (as determined by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Tribal School Modernization Bond; Other 
     Definitions.--For purposes of this section--
       ``(1) Qualified tribal school modernization bond.--
       ``(A) In general.--The term `qualified tribal school 
     modernization bond' means, subject to subparagraph (B), any 
     bond issued as part of an issue under section __01(c) of the 
     Restoring Earnings To Lift Individuals and Empower Families 
     (RELIEF) Act of 2001, as in effect on the date of the 
     enactment of this section, if--
       ``(i) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a school facility funded by the Bureau of Indian Affairs of 
     the Department of the Interior or for the acquisition of land 
     on which such a facility is to be constructed with part of 
     the proceeds of such issue,
       ``(ii) the bond is issued by a tribe,
       ``(iii) the issuer designates such bond for purposes of 
     this section, and
       ``(iv) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(B) National limitation on amount of bonds designated.--
       ``(i) National limitation.--There is a national qualified 
     tribal school modernization bond limitation for each calendar 
     year. Such limitation is--

       ``(I) $200,000,000 for 2002,
       ``(II) $200,000,000 for 2003, and
       ``(III) zero after 2004.

       ``(ii) Allocation of limitation.--The national qualified 
     tribal school modernization bond limitation shall be 
     allocated to tribes by the Secretary of the Interior subject 
     to the provisions of section __01(c) of the Restoring 
     Earnings To Lift Individuals and Empower Families (RELIEF) 
     Act of 2001, as in effect on the date of the enactment of 
     this section.
       ``(iii) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (d)(1) 
     with respect to any tribe shall not exceed the limitation 
     amount allocated to such government under clause (ii) for 
     such calendar year.
       ``(iv) Carryover of unused limitation.--If for any calendar 
     year--

       ``(I) the limitation amount under this subparagraph, 
     exceeds
       ``(II) the amount of qualified tribal school modernization 
     bonds issued during such year,

     the limitation amount under this subparagraph for the 
     following calendar year shall be increased by the amount of 
     such excess. The preceding sentence shall not apply if such 
     following calendar year is after 2010.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.

     Such term includes the last day on which the bond is 
     outstanding.
       ``(3) Bond.--The term `bond' includes any obligation.
       ``(4) Tribe.--The term `tribe' has the meaning given the 
     term `Indian tribal government' by section 7701(a)(40), 
     including the application of section 7871(d). Such term 
     includes any consortium of tribes approved by the Secretary 
     of the Interior.
       ``(e) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(f) Bonds Held by Regulated Investment Companies.--If any 
     qualified tribal school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(g) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified tribal school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the qualified tribal school modernization bond as if 
     it were a stripped bond and to the credit under this section 
     as if it were a stripped coupon.
       ``(h) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     tribal school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(i) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(j) Credit Treated as Allowed Under Part IV of Subchapter 
     A.--For purposes of subtitle F, the credit allowed by this 
     section shall be treated as a credit allowable under part IV 
     of subchapter A of this chapter.
       ``(k) Reporting.--Issuers of qualified tribal school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).''.
       (d) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest), as amended by 
     section __01, is amended by adding at the end the following 
     new paragraph:

[[Page S5351]]

       ``(9) Reporting of credit on qualified tribal school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400N(e) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400N(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''.
       (e) Conforming Amendments.--The table of subchapters for 
     chapter 1, as amended by section __01, is amended by adding 
     at the end the following new item:

``Subchapter Z. Tribal school modernization provisions.''.
       (f) Additional Provisions.--
       (1) Sovereign immunity.--This section and the amendments 
     made by this section shall not be construed to impact, limit, 
     or affect the sovereign immunity of the Federal Government or 
     any State or tribal government.
       (2) Application.--This section and the amendments made by 
     this section shall take effect on the date of the enactment 
     of this Act with respect to bonds issued after December 31, 
     2001, regardless of the status of regulations promulgated 
     thereunder.

          Subtitle C--Compliance With Congressional Budget Act

     SEC. __31. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 732. Mr. CAMPBELL submitted an amendment intended to be proposed 
to amendment SA 440 submitted by Mr. Campbell and intended to be 
proposed to the bill (S. 1) to extend programs and activities under the 
Elementary and Secondary Education Act of 1965; which was ordered to 
lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. SENIOR OPPORTUNITIES.

       (a) Twenty-First Century Community Learning Centers.--
     Section 1609(a)(2) (as amended in section 151) is further 
     amended--
       (1) in subparagraph (G), by striking ``and'' after the 
     semicolon;
       (2) in subparagraph (H), by striking the period and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(I) if the organization plans to use seniors as 
     volunteers in activities carried out through the center, a 
     description of how the organization will encourage and use 
     appropriately qualified seniors to serve as the 
     volunteers.''.
       (b) Safe and Drug-Free Schools and Communities; Governor's 
     Programs.--Section 4114(d) (as amended in section 401) is 
     further amended--
       (1) in paragraph (14), by striking ``and'' after the 
     semicolon;
       (2) in paragraph (15), by striking the period and inserting 
     ``; and''; and
       (3) by adding at the end the following:
       ``(16) drug and violence prevention activities that use the 
     services of appropriately qualified seniors.''.
       (c) Safe and Drug-Free Schools and Communities; Local Drug 
     and Violence Prevention Programs.--Section 4116(b) (as 
     amended in section 401) is further amended--
       (1) in paragraph (2)--
       (A) in the matter preceding subparagraph (A), by inserting 
     ``(including mentoring by appropriately qualified seniors)'' 
     after ``mentoring''; and
       (B) in subparagraph (C)--
       (i) in clause (i), by striking ``and'' after the semicolon;
       (ii) in clause (ii), by inserting ``and'' after the 
     semicolon; and
       (iii) by adding at the end the following:
       ``(iii) drug and violence prevention activities that use 
     the services of appropriately qualified seniors;'';
       (2) in paragraph (4)(C), by inserting ``(including 
     mentoring by appropriately qualified seniors)'' after 
     ``mentoring programs''; and
       (3) in paragraph (8), by inserting ``, which may involve 
     appropriately qualified seniors working with students'' after 
     ``settings''.
       (d) Safe and Drug-Free Schools and Communities; Federal 
     Activities.--Section 4121(a) (as amended in section 401) is 
     further amended--
       (1) in paragraph (10), by inserting ``, including projects 
     and activities that promote the interaction of youth and 
     appropriately qualified seniors'' after ``responsibility''; 
     and
       (2) in paragraph (13), by inserting ``, including 
     activities that integrate appropriately qualified seniors in 
     activities'' after ``title''.
       (e) Indian, Native Hawaiian, and Alaska Native Education; 
     Formula Grants.--Section 7115(b) (as amended in section 701) 
     is further amended--
       (1) in paragraph (10), by striking ``and'' after the 
     semicolon;
       (2) in paragraph (11), by striking the period and inserting 
     ``; and''; and
       (3) by adding at the end the following:
       ``(12) activities that recognize and support the unique 
     cultural and educational needs of Indian children, and 
     incorporate appropriately qualified tribal elders and 
     seniors.''.
       (f) Indian, Native Hawaiian, and Alaska Native Education; 
     Special Programs and Projects.--Section 7121(c)(1) (as 
     amended in section 701) is further amended--
       (1) in subparagraph (K), by striking ``or'' after the 
     semicolon;
       (2) in subparagraph (L), by striking ``(L)'' and inserting 
     ``(M)''; and
       (3) by inserting after subparagraph (K) the following:
       ``(L) activities that recognize and support the unique 
     cultural and educational needs of Indian children, and 
     incorporate appropriately qualified tribal elders and 
     seniors; or''.
       (g) Indian, Native Hawaiian, and Alaska Native Education; 
     Professional Development.--The second sentence of section 
     7122(d)(1) (as amended in section 701) is further amended by 
     striking the period and inserting ``, and may include 
     programs designed to train tribal elders and seniors.''.
       (h) Indian, Native Hawaiian, and Alaska Native Education; 
     Native Hawaiian Programs.--Section 7205(a)(3)(H) (as amended 
     in section 701) is further amended--
       (1) in clause (ii), by striking ``and'' after the 
     semicolon;
       (2) in clause (iii), by inserting ``and'' at the end; and
       (3) by adding at the end the following:
       ``(iv) programs that recognize and support the unique 
     cultural and educational needs of Native Hawaiian children, 
     and incorporate appropriately qualified Native Hawaiian 
     elders and seniors;''.
       (i) Indian, Native Hawaiian, and Alaska Native Education; 
     Alaska Native Programs.--Section 7304(a)(2)(F) (as amended in 
     section 701) is further amended--
       (1) in clause (i), by striking ``and'' after the semicolon;
       (2) in clause (ii), by inserting ``and'' after the 
     semicolon; and
       (3) by adding at the end the following:
       ``(iii) may include activities that recognize and support 
     the unique cultural and educational needs of Alaskan Native 
     children, and incorporate appropriately qualified Alaskan 
     Native elders and seniors;''.
                                  ____

  SA 733. Mr. DURBIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, insert the following:

     SEC. __. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following:

     ``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of a small employer, the employee health insurance 
     expenses credit determined under this section is an amount 
     equal to the applicable percentage of the amount paid by the 
     taxpayer during the taxable year for qualified employee 
     health insurance expenses of each qualified employee.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a)--
       ``(1) In general.--Except as provided in paragraphs (2), 
     (3), and (4), the applicable percentage is equal to--
       ``(A) 25 percent in the case of self-only coverage, and
       ``(B) 35 percent in the case of family coverage (as defined 
     in section 220(c)(5)).
       ``(2) Coverage for first 3 years.--
       ``(A) In general.--In the case of the first 3 successive 
     years of health insurance coverage for qualified employees by 
     a small employer, beginning with the first year coverage, 
     paragraph (1) shall be applied by substituting for `25 
     percent' and `35 percent', respectively, the following 
     percentages:

 
                                          Self-only
           In the case of:                coverage       Family coverage
                                       percentage is:    percentage is:
 
First year coverage.................                60                70
Second year coverage................                50                60
Third year coverage.................                40                50
 


       ``(B) First year coverage.--For purposes of subparagraph 
     (A), the term `first year coverage' means the first taxable 
     year in which the small employer pays qualified employee 
     health insurance expenses but only if such small employer did 
     not provide health insurance coverage for any qualified 
     employee during the 2 taxable years immediately preceding the 
     taxable year.
       ``(3) High participation bonus.--
       ``(A) In general.--With respect to any taxable year during 
     which a small employer pays qualified employee health 
     insurance expenses for the applicable coverage percentage of 
     the eligible qualified employees of the small employer, the 
     applicable percentage otherwise determined for such taxable 
     year under paragraph (1) or (2) shall be increased by the 
     applicable percentage points.
       ``(B) Applicable coverage percentage; applicable percentage 
     points.--For purposes of subparagraph (A), the coverage 
     percentage and applicable percentage points shall be 
     determined under the following table:


[[Page S5352]]


``Applicable coverage percentage:         Applicable Percentage points:
  More than 70 but not more than 80.............................10 ....

  More than 80 but not more than 90.............................15 ....

  More than 90..................................................20.....

       ``(C) Eligible qualified employee.--For purposes of 
     subparagraph (A), the term `eligible qualified employee' 
     means any qualified employee who is not provided health 
     insurance coverage during the taxable year under--
       ``(i) a health plan of the employee's spouse,
       ``(ii) title XVIII, XIX, or XXI of the Social Security Act,
       ``(iii) chapter 17 of title 38, United States Code,
       ``(iv) chapter 55 of title 10, United States Code,
       ``(v) chapter 89 of title 5, United States Code,
       ``(vi) the Indian Health Care Improvement Act, or
       ``(vii) any other provision of law.
       ``(4) Limitation based on wages.--
       ``(A) In general.--The percentage which would (but for this 
     paragraph) be taken into account as the applicable percentage 
     for purposes of subsection (a) for the taxable year shall be 
     reduced (but not below zero) by the percentage determined 
     under subparagraph (B).
       ``(B) Amount of reduction.--The percentage determined under 
     this subparagraph is the percentage which bears the same 
     ratio to the percentage which would be so taken into account 
     as--
       ``(i) the excess of--

       ``(I) the qualified employee's wages at an annual rate 
     during such taxable year, over
       ``(II) $20,000, bears to

       ``(ii) $5,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Small employer.--
       ``(A) In general.--The term `small employer' means, with 
     respect to any calendar year, any employer if such employer 
     employed an average of 25 or fewer employees on business days 
     during either of the 2 preceding calendar years. For purposes 
     of the preceding sentence, a preceding calendar year may be 
     taken into account only if the employer was in existence 
     throughout such year.
       ``(B) Employers not in existence in preceding year.--In the 
     case of an employer which was not in existence throughout the 
     1st preceding calendar year, the determination under 
     subparagraph (A) shall be based on the average number of 
     employees that it is reasonably expected such employer will 
     employ on business days in the current calendar year.
       ``(2) Qualified employee health insurance expenses.--
       ``(A) In general.--The term `qualified employee health 
     insurance expenses' means any amount paid by an employer for 
     health insurance coverage to the extent such amount is 
     attributable to coverage provided to any employee while such 
     employee is a qualified employee.
       ``(B) Exception for amounts paid under salary reduction 
     arrangements.--No amount paid or incurred for health 
     insurance coverage pursuant to a salary reduction arrangement 
     shall be taken into account under subparagraph (A).
       ``(C) Health insurance coverage.--The term `health 
     insurance coverage' has the meaning given such term by 
     section 9832(b)(1).
       ``(3) Qualified employee.--
       ``(A) In general.--The term `qualified employee' means, 
     with respect to any period, an employee of an employer if the 
     total amount of wages paid or incurred by such employer to 
     such employee at an annual rate during the taxable year 
     exceeds $5,000 but does not exceed $25,000.
       ``(B) Treatment of certain employees.--For purposes of 
     subparagraph (A), the term `employee'--
       ``(i) shall not include an employee within the meaning of 
     section 401(c)(1), and
       ``(ii) shall include a leased employee within the meaning 
     of section 414(n).
       ``(C) Wages.--The term `wages' has the meaning given such 
     term by section 3121(a) (determined without regard to any 
     dollar limitation contained in such section).
       ``(D) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2001, the $30,000 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 under section 1(f)(3) 
     for the calendar year in which the taxable year begins, 
     determined by substituting `calendar year 2000' for `calendar 
     year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any increase determined under clause 
     (i) is not a multiple of $100, such amount shall be rounded 
     to the nearest multiple of $100.
       ``(d) Certain rules made applicable.--For purposes of this 
     section, rules similar to the rules of section 52 shall 
     apply.
       ``(e) Denial of Double Benefit.--No deduction or credit 
     under any other provision of this chapter shall be allowed 
     for the amount of the credit with respect to qualified 
     employee health insurance expenses taken into account under 
     subsection (a).''.
       (b) Credit To Be Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``, plus'', and by adding at the 
     end the following:
       ``(16) the employee health insurance expenses credit 
     determined under section 45G.''.
       (c) No Carrybacks.--Subsection (d) of section 39 (relating 
     to carryback and carryforward of unused credits), as amended 
     by this Act, is amended by adding at the end the following:
       ``(12) No carryback of section 45G credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the employee health 
     insurance expenses credit determined under section 45G may be 
     carried back to a taxable year ending before the date of the 
     enactment of section 45G.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following:

``Sec. 45G. Employee health insurance expenses.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2001.
       On page 9, between lines 11 and 12, strike the table and 
     insert the following:


------------------------------------------------------------------------
                                         The corresponding percentages
                                         shall be substituted for the
   ``In the case of taxable years           following percentages:
   beginning during calendar year:   -----------------------------------
                                        28%      31%      36%     39.6%
------------------------------------------------------------------------
2002................................    27%      30%      35%     39.2%
2003................................    27%      30%      35%     39.3%
2004................................    27%      30%      35%     39.3%
2005................................    26%      29%      34%     38.6%
2006................................    26%      29%      34%     38.6%
2007................................    25%      28%      33%     38.6%
2008................................    25%      28%      33%     38.6%
2009................................    25%      28%      33%     38.6%
2010................................    25%      28%      33%     38.6%
2011 and thereafter.................    25%      28%      33%     38.6%
------------------------------------------------------------------------

                                                                 
                                  ____
  SA 734. Mr. GRAHAM submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 55, strike line 8 and insert the following: 
     529(c)(1), or 530(d)(2). For purposes of the preceding 
     sentence, the amount taken into account in determining the 
     amount excluded under section 529(c)(1) shall not include 
     that portion of the distribution which represents a return of 
     any contributions to the plan.
                                  ____

  SA 735. Mr. TORRICELLI submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC.   . DEFINITION OF FAMILY FOR PURPOSES OF QUALIFIED 
                   FAMILY OWNED BUSINESS INTERESTS.

       (a) Definition of Family.--Section 2057(i)(2) (relating to 
     member of the family) is amended by inserting before the 
     period ``, except such term shall include a lineal descendant 
     of a grandparent of the individual and the spouse of any such 
     lineal descendant''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after December 31, 
     2001.
                                  ____

  SA 736. Mr. GRAMM proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       At the appropriate place, insert the following:

     ``SEC.  . MID-COURSE REVIEW.

       ``(a) In General.--Notwithstanding any other provision of 
     law, if at the end of fiscal year 2003 or 2010, the Secretary 
     of the Treasury certifies that the actual reduction in debt 
     held by the public since fiscal year 2001 is less than the 
     actual surplus of the Old Age, Survivors, and Disability 
     Insurance Trust Fund and the Medicare Federal Hospital 
     Insurance Trust Fund since fiscal year 2001, any Member of 
     Congress may introduce and may make a privileged motion to 
     proceed to a bill that implements a mid-course review.
       ``(b) Mid-Course Review Legislation.--To qualify under 
     subsection (a), a bill must delay any provision of this Act 
     or any subsequent Act that takes effect in fiscal year 2004 
     or 2011 and results in a revenue reduction or causes 
     increased outlays through mandatory spending, and must also 
     limit discretionary spending in fiscal year 2004 or 2011 to 
     the level provided for the prior fiscal year plus an 
     adjustment for inflation. It shall not be in order to 
     consider any amendment to mid-course review legislation that 
     does not affect spending and tax reductions 
     proportionately.''

[[Page S5353]]

       ``(c) Prevention of Unintended Tax Increases or Benefit 
     Cuts.--Notwithstanding any other provision of law, any 
     provision of this Act or any subsequent Act that would be 
     affected by the legislation described in subsection (b) shall 
     become final if no mid-course review legislation is enacted 
     into law.
                                  ____

  SA 737. Ms. COLLINS submitted an amendment intended to be proposed by 
her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. __. CREDIT FOR PURCHASE OF FISHING SAFETY EQUIPMENT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. FISHING SAFETY EQUIPMENT CREDIT.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible taxpayer, the fishing safety equipment 
     credit determined under this section for the taxable year is 
     75 percent of the amount of qualified fishing safety 
     equipment expenses paid or incurred by the taxpayer during 
     the taxable year.
       ``(b) Limitation on Maximum Credit.--The credit allowed 
     under subsection (a) with respect to a taxpayer for the 
     taxable year shall not exceed $1,500.
       ``(c) Eligible Taxpayer.--For purposes of this section, the 
     term `eligible taxpayer' means a taxpayer engaged in a 
     fishing business.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Fishing business.--The term `fishing business' means 
     the conduct of commercial fishing as defined in section 3 of 
     the Magnuson-Stevens Fishery Conservation and Management Act 
     (16 U.S.C. 1802).''.
       ``(2) Qualified Fishing Safety Equipment Expenses.--
       ``(A) In general.--The term `qualified fishing safety 
     equipment expenses' means an amount paid or incurred for 
     fishing safety equipment for use by the taxpayer in 
     connection with a fishing business.
       ``(B) Fishing safety equipment.--The term `fishing safety 
     equipment' means--
       ``(i) lifesaving equipment required to be carried by a 
     vessel under section 4502 of title 46, United States Code, 
     and
       ``(ii) any maintenance of such equipment required under 
     such section.
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as one 
     person for purposes of subsection (a).
       ``(f) Denial of Double Benefit.--No deduction shall be 
     allowed under this chapter (other than a credit under this 
     section) for any amount taken into account in determining the 
     credit under this section.
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section with respect to any 
     equipment, the basis of such equipment shall be reduced by 
     the amount of the credit so allowed.''.
       (b) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(12) No carryback of fishing safety equipment credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     fishing safety equipment credit determined under section 45G 
     may be carried to a taxable year ending before the date of 
     the enactment of section 45G.''.
       (c) Conforming Amendments.--
       (1) Section 38(b) (relating to general business credit), as 
     amended by this Act, is amended by striking ``plus'' at the 
     end of paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(16) the fishing safety equipment credit determined under 
     section 45G(a).''.
       (2) Subsection (a) of section 1016 is amended by striking 
     ``and'' at the end of paragraph (26), by striking the period 
     at the end of paragraph (27) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(28) in the case of equipment with respect to which a 
     credit was allowed under section 45G, to the extent provided 
     in section 45G(g).''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by inserting after the item relating to 
     section 45F the following new item:

``Sec. 45G. Fishing safety equipment credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 738. Ms. COLLINS submitted an amendment intended to be proposed by 
her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII add the following:

     SEC. __. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE RESOURCES.

       (a) Qualified Facilities Include All Biomass Facilities.--
       (1) In general.--Subparagraph (B) of section 45(c)(1) 
     (relating to credit for electricity produced from certain 
     renewable resources) is amended to read as follows:
       ``(B) biomass, and''.
       (2) Biomass defined.--Paragraph (2) of section 45(c) is 
     amended to read as follows:
       ``(2) Biomass.--The term `biomass' means--
       ``(A) any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity, or
       ``(B) any solid, nonhazardous, cellulosic waste material 
     which is segregated from other waste materials and which is 
     derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) urban sources, including waste pallets, crates, and 
     dunnage, manufacturing and construction wood wastes (other 
     than pressure-treated, chemically-treated, or painted wood 
     wastes), and landscape or right-of-way tree trimmings, but 
     not including unsegregated municipal solid waste (garbage) or 
     paper which is commonly recycled, or
       ``(iii) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.''.
       (b) Extension and Modification of Placed in Service 
     Rules.--
       (1) In general.--Subparagraph (B) of section 45(c)(3) is 
     amended to read as follows:
       ``(B) Biomass facilities.--In the case of a facility using 
     biomass to produce electricity, the term `qualified facility' 
     means, with respect to any month, any facility owned or 
     leased by the taxpayer which is originally placed in service 
     before July 1, 2001, if, for such month, biomass comprises 
     not less than 75 percent (on a Btu basis) of the average 
     monthly fuel input of the facility for the taxable year which 
     includes such month.''.
       (2) Special rules.--Section 45(c)(3) is amended by adding 
     at the end the following:
       ``(D) Special rules.--In the case of a qualified facility 
     described in subparagraph (B)--
       ``(i) the 10-year period referred to in subsection (a) 
     shall be treated as beginning not earlier than the date of 
     the enactment of this paragraph, and
       ``(ii) subsection (b)(3) shall not apply to any such 
     facility originally placed in service before January 1, 
     1997.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to electricity produced after the date of the 
     enactment of this Act.
                                  ____

  SA 739. Ms. COLLINS submitted an amendment intended to be proposed by 
her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII add the following:

     SEC. __. INCREASED EXCLUSION AND OTHER MODIFICATIONS 
                   APPLICABLE TO QUALIFIED SMALL BUSINESS STOCK.

       (a) Increased Exclusion.--Section 1202(a) (relating to 
     partial exclusion for gain from certain small business stock) 
     is amended by striking ``50 percent'' each place it appears 
     and inserting ``75 percent''.
       (b) Reduction in Holding Period.--
       (1) In general.--Section 1202(a) (relating to partial 
     exclusion for gain from certain small business stock) is 
     amended by striking ``5 years'' and inserting ``3 years''.
       (2) Conforming amendments.--Subsections (g)(2)(A) and 
     (j)(1)(A) of section 1202 are each amended by striking ``5 
     years'' and inserting ``3 years''.
       (c) Repeal of Minimum Tax Preference.--
       (1) In general.--Section 57(a) (relating to items of tax 
     preference) is amended by striking paragraph (7).
       (2) Technical amendment.--Section 53(d)(1)(B)(ii)(II) is 
     amended by striking ``, (5), and (7)'' and inserting ``and 
     (5)''.
       (d) Other Modifications.--
       (1) Working capital limitation.--
       (A) In general.--Section 1202(e)(6) (relating to working 
     capital) is amended--
       (i) in subparagraph (B), by striking ``2 years'' and 
     inserting ``5 years''; and
       (ii) by striking ``2 years'' in the last sentence and 
     inserting ``5 years''.
       (B) Limitation on assets treated as used in active conduct 
     of business.--The second sentence of section 1202(e)(6) is 
     amended by inserting ``described in subparagraph (A)'' after 
     ``of the corporation''.
       (2) Exception from redemption rules where business 
     purpose.--Section 1202(c)(3) (relating to certain purchases 
     by corporation of its own stock) is amended by adding at the 
     end the following:
       ``(D) Waiver where business purpose.--A purchase of stock 
     by the issuing corporation shall be disregarded for purposes 
     of subparagraph (B) if the issuing corporation establishes 
     that there was a business purpose for such purchase and one 
     of the principal purposes of the purchase was not to avoid 
     the limitations of this section.''.

[[Page S5354]]

       (e) Excluded Qualified Trade or Business.--Section 
     1202(e)(3) (relating to qualified trade or business) is 
     amended--
       (1) by inserting ``, and is anticipated to continue to 
     be,'' before ``the reputation'' in subparagraph (A), and
       (2) by inserting ``but not including the business of 
     raising fish or any business involving biotechnology 
     applications'' after ``trees'' in subparagraph (C).
       (f) Increase in Cap on Eligible Gain for Joint Returns.--
       (1) In general.--Section 1202(b)(1)(A) (relating to per-
     issuer limitations on taxpayer's eligible gain) is amended by 
     inserting ``($20,000,000 in the case of a joint return)'' 
     after ``$10,000,000''.
       (2) Conforming amendment.--Section 1202(b)(3) is amended by 
     striking subparagraph (A) and redesignating subparagraphs (B) 
     and (C) as subparagraphs (A) and (B), respectively.
       (g) Decrease in Capital Gains Rate.--
       (1) In general.--Subparagraph (A) of section 1(h)(5) 
     (relating to 28-percent gain) is amended to read as follows:
       ``(A) collectibles gain, over''.
       (2) Conforming amendments.--
       (A) Section 1(h) is amended by striking paragraph (8).
       (B) Paragraph (9) of section 1(h) is amended by striking 
     ``, gain described in paragraph (7)(A)(i), and section 1202 
     gain'' and inserting ``and gain described in paragraph 
     (7)(A)(i)''.
       (h) Increase in Rollover Period for Qualified Small 
     Business Stock.--Subsections (a)(1) and (b)(3) of section 
     1045 (relating to rollover of gain from qualified small 
     business stock to another qualified small business stock) are 
     each amended by striking ``60-day'' and inserting ``180-
     day''.
       (i) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to stock issued 
     after the date of the enactment of this Act.
       (2) Special rule.--The amendments made by subsections (a) 
     and (d)(1) apply to stock issued after August 10, 1993.
                                  ____

  SA 740. Ms. SNOWE (for herself and Mrs. Lincoln) submitted an 
amendment intended to be proposed by her to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 18, between lines 14 and 15, insert the following:

     SEC. 202. REFUNDS DISREGARDED IN THE ADMINISTRATION OF 
                   FEDERAL PROGRAMS AND FEDERALLY ASSISTED 
                   PROGRAMS.

       Any payment considered to have been made to any individual 
     by reason of section 24 of the Internal Revenue Code of 1986, 
     as amended by section 201, shall not be taken into account as 
     income and shall not be taken into account as resources for 
     the month of receipt and the following month, for purposes of 
     determining the eligibility of such individual or any other 
     individual for benefits or assistance, or the amount or 
     extent of benefits or assistance, under any Federal program 
     or under any State or local program financed in whole or in 
     part with Federal funds.
                                  ____

  SA 741. Ms. SNOWE (for herself, Mrs. Lincoln, Mr. Jeffords, Mr. 
Chaffee, Mr. DeWine, Mr. Kerry, Mr. Dodd, Mr. Rockefeller, Ms. Collins, 
and Mr. Smith of Oregon) submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 18, between lines 14 and 15, insert:

     SEC. 202. SENSE OF THE SENATE ON THE MODIFICATIONS TO THE 
                   CHILD TAX CREDIT.

       (a) Findings.--
       (1) There are over 12,000,000 children in poverty in the 
     United States--about 78 percent of these children live in 
     working families.
       (2) The child tax credit was originally designed to benefit 
     families with children in recognition of the costs associated 
     with raising children.
       (3) There are 15,400,000 children whose families would not 
     benefit from the doubling of the child tax credit unless it 
     is made refundable and another 7,000,000 children live in 
     families who will not receive an increased benefit under the 
     bill unless the credit is made refundable.
       (4) A person who earns the Federal minimum wage and works 
     40 hours a week for 50 weeks a year earns approximately 
     $10,300.
       (5) The provision included in section 201 would give 
     families with children the benefit of a partially refundable 
     child tax credit based on 15 cents of their income for every 
     dollar earned above $10,000.
       (6) For a family earning $15,000 that is an additional $750 
     to help make ends meet.
       (7) Doubling the child tax credit to $1,000 and making it 
     partially refundable will benefit over 37,000,000 families 
     with dependent children.
       (8) The expansion of the child tax credit included in 
     section 201 is a meaningful and a responsible effort on the 
     part of the Senate to address the needs of low income working 
     families to promote work and such an expansion would provide 
     the benefit of a child tax credit to 10,700,000 more children 
     than the provision passed by the House of Representatives.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that the ``10-15'' child tax credit provision included in 
     section 201 is a worthy start, and should be maintained as 
     part of the final package.
                                  ____

  SA 742. Mrs. MURRAY (for herself and Mr. Smith of Oregon) submitted 
an amendment intended to be proposed by her to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 52, between lines 11 and 12, insert the following:

     SEC. 423. TREATMENT OF BONDS ISSUED TO ACQUIRE RENEWABLE 
                   RESOURCES ON LAND SUBJECT TO CONSERVATION 
                   EASEMENT.

       (a) In General.--Section 145 (defining qualified 501(c)(3) 
     bond) is amended by redesignating subsection (e) as 
     subsection (f) and by inserting after subsection (d) the 
     following new subsection:
       ``(e) Bonds Issued To Acquire Renewable Resources on Land 
     Subject to Conservation Easement.--
       ``(1) In general.--If--
       ``(A) the proceeds of any bond are used to acquire land (or 
     a long-term lease thereof) together with any renewable 
     resource associated with the land (including standing timber, 
     agricultural crops, or water rights) from an unaffiliated 
     person,
       ``(B) the land is subject to a conservation restriction--
       ``(i) which is granted in perpetuity to an unaffiliated 
     person that is--

       ``(I) a 501(c)(3) organization, or
       ``(II) a Federal, State, or local government conservation 
     organization,

       ``(ii) which meets the requirements of clauses (ii) and 
     (iii)(II) of section 170(h)(4)(A),
       ``(iii) which exceeds the requirements of relevant 
     environmental and land use statutes and regulations, and
       ``(iv) which obligates the owner of the land to pay the 
     costs incurred by the holder of the conservation restriction 
     in monitoring compliance with such restriction,
       ``(C) a management plan which meets the requirements of the 
     statutes and regulations referred to in subparagraph (B)(iii) 
     is developed for the conservation of the renewable resources, 
     and
       ``(D) such bond would be a qualified 501(c)(3) bond (after 
     the application of paragraph (2)) but for the failure to use 
     revenues derived by the 501(c)(3) organization from the sale, 
     lease, or other use of such resource as otherwise required by 
     this part,

     such bond shall not fail to be a qualified 501(c)(3) bond by 
     reason of the failure to so use such revenues if the revenues 
     which are not used as otherwise required by this part are 
     used in a manner consistent with the stated charitable 
     purposes of the 501(c)(3) organization.
       ``(2) Treatment of timber, etc.--
       ``(A) In general.--For purposes of subsection (a), the cost 
     of any renewable resource acquired with proceeds of any bond 
     described in paragraph (1) shall be treated as a cost of 
     acquiring the land associated with the renewable resource and 
     such land shall not be treated as used for a private business 
     use because of the sale or leasing of the renewable resource 
     to, or other use of the renewable resource by, an 
     unaffiliated person to the extent that such sale, leasing, or 
     other use does not constitute an unrelated trade or business, 
     determined by applying section 513(a).
       ``(B) Application of bond maturity limitation.--For 
     purposes of section 147(b), the cost of any land or renewable 
     resource acquired with proceeds of any bond described in 
     paragraph (1) shall have an economic life commensurate with 
     the economic and ecological feasibility of the financing of 
     such land or renewable resource.
       ``(C) Unaffiliated person.--For purposes of this 
     subsection, the term `unaffiliated person' means any person 
     who controls not more than 20 percent of the governing body 
     of another person.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to obligations issued after January 1, 2002, and 
     before January 1, 2007.
       (c) Revenue Offset.--The Secretary of the Treasury shall 
     adjust one or more of the amendments made by this Act to any 
     section of the Internal Revenue Code of 1986 to the extent 
     necessary to offset in each fiscal year beginning before 
     October 1, 2011, the decrease in revenues to the Treasury for 
     that fiscal year resulting from the amendment made by this 
     section.
                                  ____

  SA 743. Mr. BAUCUS (for Mr. Conrad) proposed an amendment to the bill 
H.R. 1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; as follows:

       On page 9, strike the matter between lines 11 and 12, and 
     insert:


------------------------------------------------------------------------
                                  The corresponding percentages shall be
                                       substituted for the following
 ``In the case of taxable years                percentages:
 beginning during calendar year: ---------------------------------------
                                     28%       31%       36%      39.6%
------------------------------------------------------------------------
2002, 2003, and 2004............     27%       30%       35%      38.6%

[[Page S5355]]

 
2005 and 2006...................     26%       29%       35%      38.6%
2007 and thereafter.............     25%       28%       35%      38.6%
------------------------------------------------------------------------


       On page 13, between lines 15 and 16, insert:

     SEC. 104. INCREASE IN STANDARD DEDUCTION.

       (a) In General.--Section 63(c) (relating to standard 
     deduction), as amended by section 301, is amended by adding 
     at the end the following:
       ``(8) Additional increase in basic standard deduction.--In 
     the case of taxable years beginning after December 31, 2004--
       ``(A) the basic standard deduction in effect for the 
     taxable year under subparagraph (B) or (C) of paragraph (2) 
     (without regard to this paragraph) shall be increased by--
       ``(i) $600 in the case of taxable years beginning in 2005 
     and 2006, and
       ``(ii) $1,600 in the case of taxable years beginning after 
     2006, and
       ``(B) the basic standard deduction in effect for the 
     taxable year under subparagraph (A) of paragraph (2) (without 
     regard to this paragraph) shall be increased by the 
     applicable percentage (as defined in paragraph (7)) of the 
     increase under subparagraph (A) of this paragraph.''
       (b) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 2004.
                                  ____

  SA 744. Mr. Baucus (for Mr. Conrad) proposed an amendment to the bill 
H.R. 1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; as follows:

       On page 9, in the matter between lines 11 and 12, strike 
     ``36%'' in the item relating to 2007 and thereafter and 
     insert ``36.6%''.

       On page 13, between lines 15 and 16, insert:

     SEC. 104. INCREASE IN STANDARD DEDUCTION.

       (a) In General.--Section 63(c) (relating to standard 
     deduction), as amended by section 301, is amended by adding 
     at the end the following:
       ``(8) Additional increase in basic standard deduction.--In 
     the case of taxable years beginning after December 31, 2006--
       ``(A) the basic standard deduction in effect for the 
     taxable year under subparagraph (B) or (C) of paragraph (2) 
     (without regard to this paragraph) shall be increased by 
     $300, and
       ``(B) the basic standard deduction in effect for the 
     taxable year under subparagraph (A) of paragraph (2) (without 
     regard to this paragraph) shall be increased by the 
     applicable percentage (as defined in paragraph (7)) of the 
     increase under subparagraph (A) of this paragraph.''
       (b) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 2006.
                                  ____

  SA 745. Mr. WARNER (for Mr. Stevens (for himself, Mr. Inouye, Mr. 
Thompson, Mr. Hollings, Mr. Murkowski, Mr. Bingaman, Mr. Thurmond, Mr. 
Thomas, Ms. Collins, and Mr. Warner)) proposed an amendment to the bill 
H.R. 1696, to expedite the construction of the World War II memorial in 
the District of Columbia; as follows:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. APPROVAL OF WORLD WAR II MEMORIAL SITE AND DESIGN.

       Notwithstanding any other provision of law, the World War 
     II Memorial described in plans approved by the Commission of 
     Fine Arts on July 20, 2000 and November 16, 2000, and 
     selected by the National Capital Planning Commission on 
     September 21, 2000 and December 14, 2000, and in accordance 
     with the special use permit issued by the Secretary of the 
     Interior on January 23, 2001, and numbered NCR-NACC-5700-
     0103, shall be constructed expeditiously at the dedicated 
     Rainbow Pool site in the District of Columbia in a manner 
     consistent with such plans and permits, subject to design 
     modifications, if any, approved in accordance with applicable 
     laws and regulations.

     SEC. 2. APPLICATION OF COMMEMORATIVE WORKS ACT.

       Elements of the memorial design and construction not 
     approved as of the date of enactment of this Act shall be 
     considered and approved in accordance with the requirements 
     of the Commemorative Works Act (40 U.S.C. 1001 et seq.).

     SEC. 3. JUDICIAL REVIEW.

       The decision to locate the memorial at the Rainbow Pool 
     site in the District of Columbia and the actions by the 
     Commission of Fine Arts on July 20, 2000 and November 16, 
     2000, the actions by the National Capital Planning Commission 
     on September 21, 2000 and December 14, 2000, and the issuance 
     of the special use permit identified in section 1 shall not 
     be subject to judicial review.
                                  ____

  SA 746. Mrs. BOXER submitted an amendment intended to be proposed by 
her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII add the following:

     SEC. __. EXPANSION OF WORK OPPORTUNITY TAX CREDIT.

       (a) In General.--Section 51(d)(1) (relating to members of 
     targeted groups) is amended by striking ``or'' at the end of 
     subparagraph (G), by striking the period at the end of 
     subparagraph (H) and inserting ``, or'', and by adding at the 
     end the following:
       ``(I) a qualified low-income veteran.''
       (b) Qualified Low-Income Veteran.--Section 51(d) (relating 
     to members of targeted groups) is amended by redesignating 
     paragraphs (10) through (12) as paragraphs (11) through (13), 
     respectively, and by inserting after paragraph (9) the 
     following:
       ``(10) Qualified low-income veteran.--
       ``(A) In general.--The term `qualified low-income veteran' 
     means any veteran whose gross income for the taxable year 
     preceding the taxable year including the hiring date, was 
     below the poverty line (as defined by the Office of 
     Management and Budget) for such preceding taxable year .
       ``(B) Veteran.--The term `veteran' has the meaning given 
     such term by paragraph (3)(B).
       ``(C) Special rules for determining amount of credit.--For 
     purposes of applying this subpart to wages paid or incurred 
     to any qualified low-income veteran--
       ``(i) subsection (a) shall be applied by substituting `50 
     percent of the qualified first-year wages and 25 percent of 
     the qualified second-year wages' for `40 percent of the 
     qualified first year wages', and
       ``(ii) in lieu of paragraphs (2) and (3) of subsection (b), 
     the following definitions and special rule shall apply:

       ``(I) Qualified first-year wages.--The term `qualified 
     first-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning with the day the individual begins 
     work for the employer.
       ``(II) Qualified second-year wages.--The term `qualified 
     second-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning on the day after the last day of the 
     1-year period with respect to such individual determined 
     under subclause (I).
       ``(III) Only first $20,000 of wages per year taken into 
     account.--The amount of the qualified first and second year 
     wages which may be taken into account with respect to any 
     individual shall not exceed $20,000 per year.''.

       (c) Permanence of Credit.--Section 51(c)(4) (relating to 
     termination) is amended by inserting ``(except for wages paid 
     to a qualified low-income veteran)'' after ``individual''.
       (d) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year beginning before October 1, 2011, the decrease in 
     revenues to the Treasury for that fiscal year resulting from 
     the amendments made by this section.
       (e) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after the date of the enactment of this Act.
                                  ____

  SA 747. Mr. REID (for Mr. Carper) proposed an amendment to the bill 
H.R. 1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; which was 
ordered to lie on the table; as follows:

       Strike all after the first word and insert the following:

             1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Economic 
     Stimulus Tax Cut 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) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; etc.

            TITLE I--INDIVIDUAL INCOME AND EMPLOYMENT TAXES

                         Subtitle A--In General

Sec. 101. Refund of individual income and employment taxes.
Sec. 102. Reduction in income tax rates for individuals.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 111. Sunset of provisions of title.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

Sec. 201. Modifications to child tax credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 211. Sunset of provisions of title.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

Sec. 301. Elimination of marriage penalty in standard deduction.
Sec. 302. Phaseout of marriage penalty in 15-percent bracket.

[[Page S5356]]

Sec. 303. Marriage penalty relief for earned income credit; earned 
              income to include only amounts includible in gross 
              income; simplification of earned income credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 311. Sunset of provisions of title.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

Sec. 401. Modifications to qualified tuition programs.

                   Subtitle B--Educational Assistance

Sec. 411. Permanent extension of exclusion for employer-provided 
              educational assistance.
Sec. 412. Elimination of 60-month limit and increase in income 
              limitation on student loan interest deduction.
Sec. 413. Exclusion of certain amounts received under the National 
              Health Service Corps Scholarship Program and the F. 
              Edward Hebert Armed Forces Health Professions Scholarship 
              and Financial Assistance Program.

                      Subtitle C--Other Provisions

Sec. 421. Deduction for higher education expenses.

          Subtitle D--Compliance With Congressional Budget Act

Sec. 431. Sunset of provisions of title.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

Sec. 501. Increase in amount of unified credit against estate and gift 
              taxes.
Sec. 502. Increase in qualified family-owned business interest 
              deduction amount.
Sec. 503. Sunset of provisions of title.

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

Sec. 601. Modification of IRA contribution limits.
Sec. 602. Deemed IRAs under employer plans.
Sec. 603. Tax-free distributions from individual retirement accounts 
              for charitable purposes.

                     Subtitle B--Expanding Coverage

Sec. 611. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 612. Modification of top-heavy rules.
Sec. 613. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 614. Repeal of coordination requirements for deferred compensation 
              plans of State and local governments and tax-exempt 
              organizations.
Sec. 615. Deduction limits.
Sec. 616. Option to treat elective deferrals as after-tax Roth 
              contributions.
Sec. 617. Nonrefundable credit to certain individuals for elective 
              deferrals and IRA contributions.
Sec. 618. Credit for qualified pension plan contributions of small 
              employers.
Sec. 619. Credit for pension plan startup costs of small employers.
Sec. 620. Elimination of user fee for requests to IRS regarding new 
              pension plans.
Sec. 621. Treatment of nonresident aliens engaged in international 
              transportation services.

                Subtitle C--Enhancing Fairness for Women

Sec. 631. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 632. Faster vesting of certain employer matching contributions.
Sec. 633. Modifications to minimum distribution rules.
Sec. 634. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 635. Provisions relating to hardship distributions.
Sec. 636. Waiver of tax on nondeductible contributions for domestic or 
              similar workers.

          Subtitle D--Increasing Portability for Participants

Sec. 641. Rollovers allowed among various types of plans.
Sec. 642. Rollovers of IRAs into workplace retirement plans.
Sec. 643. Rollovers of after-tax contributions.
Sec. 644. Hardship exception to 60-day rule.
Sec. 645. Treatment of forms of distribution.
Sec. 646. Rationalization of restrictions on distributions.
Sec. 647. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 648. Employers may disregard rollovers for purposes of cash-out 
              amounts.
Sec. 649. Minimum distribution and inclusion requirements for section 
              457 plans.

       Subtitle E--Strengthening Pension Security and Enforcement

                       Part I--General Provisions

Sec. 651. Repeal of 160 percent of current liability funding limit.
Sec. 652. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 653. Excise tax relief for sound pension funding.
Sec. 654. Treatment of multiemployer plans under section 415.
Sec. 655. Protection of investment of employee contributions to 401(k) 
              plans.
Sec. 656. Prohibited allocations of stock in S corporation ESOP.
Sec. 657. Automatic rollovers of certain mandatory distributions.
Sec. 658. Clarification of treatment of contributions to multiemployer 
              plan.

 Part II--Treatment of Plan Amendments Reducing Future Benefit Accruals

Sec. 659. Notice required for pension plan amendments having the effect 
              of significantly reducing future benefit accruals.

                Subtitle F--Reducing Regulatory Burdens

Sec. 661. Modification of timing of plan valuations.
Sec. 662. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 663. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 664. Employees of tax-exempt entities.
Sec. 665. Clarification of treatment of employer-provided retirement 
              advice.
Sec. 666. Reporting simplification.
Sec. 667. Improvement of employee plans compliance resolution system.
Sec. 668. Repeal of the multiple use test.
Sec. 669. Flexibility in nondiscrimination, coverage, and line of 
              business rules.
Sec. 670. Extension to all governmental plans of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.

                   Subtitle G--Other ERISA Provisions

Sec. 681. Missing participants.
Sec. 682. Reduced PBGC premium for new plans of small employers.
Sec. 683. Reduction of additional PBGC premium for new and small plans.
Sec. 684. Authorization for PBGC to pay interest on premium overpayment 
              refunds.
Sec. 685. Substantial owner benefits in terminated plans.

                  Subtitle H--Miscellaneous Provisions

Sec. 691. Tax treatment and information requirements of Alaska Native 
              settlement trusts.

          Subtitle I--Compliance With Congressional Budget Act

Sec. 695. Sunset of provisions of title.

              TITLE VII--EXTENSIONS OF EXPIRING PROVISIONS

                         Subtitle A--In General

Sec. 701. Permanent extension of research credit.
Sec. 702. Work opportunity credit and welfare-to-work credit.
Sec. 703. Taxable income limit on percentage depletion for marginal 
              production.
Sec. 704. Subpart F exemption for active financing income.
Sec. 705. Parity in the application of certain limits to mental health 
              benefits.
Sec. 706. Deduction for clean-fuel vehicles and certain refueling 
              property.
Sec. 707. Luxury tax on passenger vehicles.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 711. Sunset of provisions of title.

                  TITLE VIII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

Sec. 801. Alternative minimum tax exemption for certain individual 
              taxpayers.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 811. Sunset of provisions of title.

                   TITLE IX--ENSURING DEBT REDUCTION

Sec. 901. Ensuring debt reduction.

                       TITLE X--OTHER PROVISIONS

                         Subtitle A--In General

Sec. 1001. Expansion of authority to postpone certain tax-related 
              deadlines by reason of presidentially declared disaster.
Sec. 1002. Historic homeownership rehabilitation credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 1011. Sunset of provisions of title.

           TITLE XI--ENERGY SECURITY AND TAX INCENTIVE POLICY

         Subtitle A--Energy-Efficient Property Used in Business

Sec. 1101. Credit for certain energy-efficient property used in 
              business.
Sec. 1102. Energy-efficient commercial building property deduction.

                 Subtitle B--Residential Energy Systems

Sec. 1111. Credit for construction of new energy-efficient home.
Sec. 1112. Credit for energy efficiency improvements to existing homes.
Sec. 1113. Credit for residential solar, wind, and fuel cell energy 
              property.

[[Page S5357]]

           Subtitle C--Electricity Facilities and Production

Sec. 1121. Modifications to credit for electricity produced from 
              renewable and waste products.

          Subtitle D--Compliance With Congressional Budget Act

Sec. 1131. Sunset of provisions of title.

            TITLE I--INDIVIDUAL INCOME AND EMPLOYMENT TAXES

                         Subtitle A--In General

     SEC. 101. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT TAXES.

       (a) In General.--Subchapter B of chapter 65 (relating to 
     rules of special application in the case of abatements, 
     credits, and refunds) is amended by adding at the end the 
     following new section:

     ``SEC. 6428. REFUND OF INDIVIDUAL INCOME AND EMPLOYMENT 
                   TAXES.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, each individual shall be treated as having made a 
     payment against the tax imposed by chapter 1 for any taxable 
     year beginning in 2001, in an amount equal to the lesser of--
       ``(1) the amount of the taxpayer's liability for tax for 
     the taxpayer's last taxable year beginning in calendar year 
     2000, or
       ``(2) the taxpayer's applicable amount.
       ``(b) Liability for Tax.--For purposes of this section, the 
     liability for tax for the taxable year shall be the sum of--
       ``(1) the excess (if any) of--
       ``(A) the sum of--
       ``(i) the taxpayer's regular tax liability (within the 
     meaning of section 26(b)) for the taxable year, and
       ``(ii) the tax imposed by section 55(a) with respect to 
     such taxpayer for the taxable year, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A of chapter 1 (other than sections 31, 33, and 
     34) for the taxable year, and
       ``(2) the taxes imposed by sections 1401, 3101, 3111, 
     3201(a), 3211(a)(1), and 3221(a) on amounts received by the 
     taxpayer for the taxable year.
       ``(c) Applicable Amount.--For purposes of this section--
       ``(1) In general.--The applicable amount for any taxpayer 
     shall be determined under the following table:

``In the case of a taxpayer described in:     The applicable amount is:
    Section 1(a)..............................................$600 ....

    Section 1(b)..............................................$450 ....

    Section 1(c)..............................................$300 ....

    Section 1(d)..............................................$300 ....

    Paragraph (2).............................................$300.....

       ``(2) Taxpayers with only payroll tax liability.--A 
     taxpayer is described in this paragraph if such taxpayer's 
     liability for tax for the taxable year does not include any 
     liability described in subsection (b)(1).
       ``(d) Date Payment Deemed Made.--
       ``(1) In general.--The payment provided by this section 
     shall be deemed made on the date of the enactment of this 
     section.
       ``(2) Remittance of payment.--The Secretary shall remit to 
     each taxpayer the payment described in paragraph (1) within 
     90 days after such date of enactment.
       ``(3) Claim for nonpayment.--Any taxpayer who erroneously 
     does not receive a payment described in paragraph (1) may 
     make claim for such payment in a manner and at such time as 
     the Secretary prescribes.
       ``(e) Certain Persons Not Eligible.--This section shall not 
     apply to--
       ``(1) any individual with respect to whom a deduction under 
     section 151 is allowable to another taxpayer for a taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins,
       ``(2) any estate or trust, or
       ``(3) any nonresident alien individual.''.
       (b) Conforming Amendment.--Section 1324(b)(2) of title 31, 
     United States Code, is amended by inserting before the period 
     ``, or enacted by the Economic Stimulus Tax Cut Act of 
     2001''.
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 65 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new item:

``Sec. 6428. Refund of individual income and employment taxes.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 102. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

       (a) In General.--Section 1 is amended by adding at the end 
     the following new subsection:
       ``(i) Rate Reductions After 2000.--
       ``(1) New lowest rate bracket.--
       ``(A) In general.--In the case of taxable years beginning 
     after December 31, 2000--
       ``(i) the rate of tax under subsections (a), (b), (c), and 
     (d) on taxable income not over the initial bracket amount 
     shall be 10 percent, and
       ``(ii) the 15 percent rate of tax shall apply only to 
     taxable income over the initial bracket amount but not over 
     the maximum dollar amount for the 15-percent rate bracket.
       ``(B) Initial bracket amount.--For purposes of this 
     subsection, the initial bracket amount is--
       ``(i) $12,000 in the case of subsection (a),
       ``(ii) $10,000 in the case of subsection (b), and
       ``(iii) \1/2\ the amount applicable under clause (i) (after 
     adjustment, if any, under subparagraph (C)) in the case of 
     subsections (c) and (d).
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar years after 2001--
       ``(i) the Secretary shall make no adjustment to the initial 
     bracket amount for any taxable year beginning before January 
     1, 2007,
       ``(ii) the cost-of-living adjustment used in making 
     adjustments to the initial bracket amount for any taxable 
     year beginning after December 31, 2006, shall be determined 
     under subsection (f)(3) by substituting `2005' for `1992' in 
     subparagraph (B) thereof, and
       ``(iii) such adjustment shall not apply to the amount 
     referred to in subparagraph (B)(iii).
     If any amount after adjustment under the preceding sentence 
     is not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.
       ``(2) Reductions in rates after 2001.--
       ``(A) In general.--Each rate of tax (other than the 10 
     percent rate) in the tables under subsections (a), (b), (c), 
     (d), and (e) shall be reduced by 1 percentage point for 
     taxable years beginning during a calendar year after the 
     trigger year.
       ``(B) Trigger year.--For purposes of subparagraph (A), the 
     trigger year is--
       ``(i) 2002, in the case of the 15 percent rate,
       ``(ii) 2003, in the case of the 28 percent rate,
       ``(iii) 2004, in the case of the 31 percent rate,
       ``(iv) 2005, in the case of the 36 percent rate, and
       ``(v) 2006, in the case of the 39.6 percent rate.
       ``(3) Adjustment of tables.--The Secretary shall adjust the 
     tables prescribed under subsection (f) to carry out this 
     subsection.''.
       (b) Determination of Withholding Tables.--Section 3402(a) 
     of the Internal Revenue Code of 1986 (relating to requirement 
     of withholding) is amended by adding at the following new 
     paragraph:
       ``(3) Changes made by section 102 of the economic stimulus 
     tax cut act of 2001.--Notwithstanding the provisions of this 
     subsection, the Secretary shall modify the tables and 
     procedures under paragraph (1) to reflect the amendments made 
     by section 102 of the Economic Stimulus Tax Cut Act of 2001, 
     and such modification shall take effect on July 1, 2001, as 
     if the lowest rate of tax under section 1 (as amended by such 
     section 102) was a 10-percent rate effective on such date.''.
       (c) Conforming Amendments.--
       (1) Subparagraph (B) of section 1(g)(7) of the Internal 
     Revenue Code of 1986 is amended--
       (A) by striking ``15 percent'' in clause (ii)(II) and 
     inserting ``the first bracket percentage'', and
       (B) by adding at the end the following flush sentence:
     ``For purposes of clause (ii), the first bracket percentage 
     is the percentage applicable to the lowest income bracket in 
     the table under subsection (c).''.
       (2) Section 1(h) of such Code is amended by striking 
     paragraph (13).
       (3) Section 15 of such Code is amended by adding at the end 
     the following new subsection:
       ``(f) Rate Reductions Enacted by Economic Stimulus Tax Cut 
     Act of 2001.--This section shall not apply to any change in 
     rates under subsection (i) of section 1 (relating to rate 
     reductions in 2001).''.
       (4) Section 3402(p)(2) of such Code is amended by striking 
     ``equal to 15 percent of such payment'' and inserting ``equal 
     to the product of the lowest rate of tax under section 1(c) 
     and such payment''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Amendments to withholding provision.--The amendments 
     made by subsection (b) and subsection (c)(4) shall apply to 
     amounts paid after June 30, 2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 111. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

     SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT.

       (a) Increase in Per Child Amount.--
       (1) In general.--Subsection (a) of section 24 (relating to 
     child tax credit) is amended to read as follows:
       ``(a) Allowance of Credit.--
       ``(1) In general.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     with respect to each qualifying child of the taxpayer an 
     amount equal to the per child amount.
       ``(2) Per child amount.--For purposes of paragraph (1), the 
     per child amount shall be determined as follows:

``In the case of any taxable year beginning inThe per child amount is--
    2002, 2003, 2004, 2005, 2006, or 2007.........................$600 
    2008...........................................................700 
    2009...........................................................800 
    2010...........................................................900 
    2011 or thereafter........................................1,000.''.
       (2) Inflation adjustment.--
       ``(g) Inflation Adjustment.--In the case of any taxable 
     year beginning after 2001, any

[[Page S5358]]

     dollar amount contained in subsection (a)(2) 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.''.
       (b) Credit Allowed Against Alternative Minimum Tax.--
       (1) In general.--Subsection (b) of section 24 (relating to 
     child tax credit) is amended by adding at the end the 
     following new paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for any taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) and section 27 for the taxable 
     year.''.
       (2) Conforming amendments.--
       (A) The heading for section 24(b) is amended to read as 
     follows: ``Limitations.--''.
       (B) The heading for section 24(b)(1) is amended to read as 
     follows: ``Limitation based on adjusted gross income.--''.
       (C) Section 24(d) is amended--
       (i) by striking ``section 26(a)'' each place it appears and 
     inserting ``subsection (b)(3)'', and
       (ii) in paragraph (1)(B) by striking ``aggregate amount of 
     credits allowed by this subpart'' and inserting ``amount of 
     credit allowed by this section''.
       (D) Paragraph (1) of section 26(a) is amended by inserting 
     ``(other than section 24)'' after ``this subpart''.
       (E) Subsection (c) of section 23 is amended by striking 
     ``and section 1400C'' and inserting ``and sections 24 and 
     1400C''.
       (F) Subparagraph (C) of section 25(e)(1) is amended by 
     inserting ``, 24,'' after ``sections 23''.
       (G) Section 904(h) is amended by inserting ``(other than 
     section 24)'' after ``chapter''.
       (H) Subsection (d) of section 1400C is amended by inserting 
     ``and section 24'' after ``this section''.
       (c) Refundable Child Credit.--
       (1) In general.--So much of section 24(d) (relating to 
     additional credit for families with 3 or more children) as 
     precedes paragraph (2) is amended to read as follows:
       ``(d) Portion of Credit Refundable.--
       ``(1) In general.--The aggregate credits allowed to a 
     taxpayer under subpart C shall be increased by the lesser 
     of--
       ``(A) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     subsection (b)(3), or
       ``(B) the amount by which the amount of credit allowed by 
     this section (determined without regard to this subsection) 
     would increase if the limitation imposed by subsection (b)(3) 
     were increased by--
       ``(i) in the case of a taxpayer not described in clause 
     (ii), 15 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) for the taxable year as 
     exceeds $8,000, and
       ``(ii) in the case of a taxpayer with 3 or more qualifying 
     children, the excess (if any) of--

       ``(I) the taxpayer's social security taxes for the taxable 
     year, over
       ``(II) the credit allowed under section 32 for the taxable 
     year.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to subsection (b)(3).''.
       (2) Conforming amendment.--Section 32 is amended by 
     striking subsection (n).
       (d) Elimination of Reduction of Credit to Taxpayer Subject 
     to Alternative Minimum Tax Provision.--Section 24(d) is 
     amended--
       (1) by striking paragraph (2), and
       (2) by redesignating paragraph (3) as paragraph (2).
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 211. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

     SEC. 301. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``the applicable percentage of the dollar amount in 
     effect under subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Applicable Percentage.--Section 63(c) (relating to 
     standard deduction) is amended by adding at the end the 
     following new paragraph:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in calendar year--        percentage is--
      2002.........................................................174 
      2003.........................................................180 
      2004.........................................................187 
      2005.........................................................193 
      2006 and thereafter.......................................200.''.

       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``(other than with'' and all that follows through 
     ``shall be applied'' and inserting ``(other than with respect 
     to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 302. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT BRACKET.

       (a) In General.--Section 1(f) (relating to adjustments in 
     tax tables so that inflation will not result in tax 
     increases) is amended by adding at the end the following new 
     paragraph:
       ``(8) Phaseout of marriage penalty in 15-percent bracket.--
       ``(A) In general.--With respect to taxable years beginning 
     after December 31, 2005, in prescribing the tables under 
     paragraph (1)--
       ``(i) the maximum taxable income in the 15-percent rate 
     bracket in the table contained in subsection (a) (and the 
     minimum taxable income in the next higher taxable income 
     bracket in such table) shall be the applicable percentage of 
     the maximum taxable income in the 15-percent rate bracket in 
     the table contained in subsection (c) (after any other 
     adjustment under this subsection), and
       ``(ii) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under clause (i).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

2``For taxable years beginning in calendaThe applicable percentage is--
      2006.........................................................174 
      2007.........................................................180 
      2008.........................................................187 
      2009.........................................................193 
      2010 and thereafter.........................................200. 
       ``(C) Rounding.--If any amount determined under 
     subparagraph (A)(i) is not a multiple of $50, such amount 
     shall be rounded to the next lowest multiple of $50.''.
       (b) Technical Amendments.--
       (1) Subparagraph (A) of section 1(f)(2) is amended by 
     inserting ``except as provided in paragraph (8),'' before 
     ``by increasing''.
       (2) The heading for subsection (f) of section 1 is amended 
     by inserting ``Phaseout of Marriage Penalty in 15-Percent 
     Bracket;'' before ``Adjustments''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 303. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT; 
                   EARNED INCOME TO INCLUDE ONLY AMOUNTS 
                   INCLUDIBLE IN GROSS INCOME; SIMPLIFICATION OF 
                   EARNED INCOME CREDIT.

       (a) Increased Phaseout Amount.--
       (1) In general.--Section 32(b)(2) (relating to amounts) is 
     amended--
       (A) by striking ``Amounts.--The earned'' and inserting 
     ``Amounts.--
       ``(A) In general.--Subject to subparagraph (B), the 
     earned'', and
       (B) by adding at the end the following new subparagraph:
       ``(B) Joint returns.--In the case of a joint return filed 
     by an eligible individual and such individual's spouse, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $3,000.''.
       (2) Inflation adjustment.--Paragraph (1)(B) of section 
     32(j) (relating to inflation adjustments) is amended to read 
     as follows:
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined--
       ``(i) in the case of amounts in subsections (b)(2)(A) and 
     (i)(1), by substituting `calendar year 1995' for `calendar 
     year 1992' in subparagraph (B) thereof, and
       ``(ii) in the case of the $3,000 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2001' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (3) Rounding.--Section 32(j)(2)(A) (relating to rounding) 
     is amended by striking ``subsection (b)(2)'' and inserting 
     ``subsection (b)(2)(A) (after being increased under 
     subparagraph (B) thereof)''.
       (b) Earned Income To Include Only Amounts Includible in 
     Gross Income.--Clause (i) of section 32(c)(2)(A) (defining 
     earned income) is amended by inserting ``, but only if such 
     amounts are includible in gross income for the taxable year'' 
     after ``other employee compensation''.
       (c) Repeal of Reduction of Credit to Taxpayers Subject to 
     Alternative Minimum Tax.--Section 32(h) is repealed.
       (d) Replacement of Modified Adjusted Gross Income With 
     Adjusted Gross Income.--
       (1) In general.--Section 32(a)(2)(B) is amended by striking 
     ``modified''.

[[Page S5359]]

       (2) Conforming amendments.--
       (A) Section 32(c) is amended by striking paragraph (5).
       (B) Section 32(f)(2)(B) is amended by striking ``modified'' 
     each place it appears.
       (e) Relationship Test.--
       (1) In general.--Clause (i) of section 32(c)(3)(B) 
     (relating to relationship test) is amended to read as 
     follows:
       ``(i) In general.--An individual bears a relationship to 
     the taxpayer described in this subparagraph if such 
     individual is--

       ``(I) a son, daughter, stepson, or stepdaughter, or a 
     descendant of any such individual,
       ``(II) a brother, sister, stepbrother, or stepsister, or a 
     descendant of any such individual, who the taxpayer cares for 
     as the taxpayer's own child, or
       ``(III) an eligible foster child of the taxpayer.''.

       (2) Eligible foster child.--
       (A) In general.--Clause (iii) of section 32(c)(3)(B) is 
     amended to read as follows:
       ``(iii) Eligible foster child.--For purposes of clause (i), 
     the term `eligible foster child' means an individual not 
     described in subclause (I) or (II) of clause (i) who--

       ``(I) is placed with the taxpayer by an authorized 
     placement agency, and
       ``(II) the taxpayer cares for as the taxpayer's own 
     child.''.

       (B) Conforming amendment.--Section 32(c)(3)(A)(ii) is 
     amended by striking ``except as provided in subparagraph 
     (B)(iii),''.
       (f) 2 or More Claiming Qualifying Child.--Section 
     32(c)(1)(C) is amended to read as follows:
       ``(C) 2 or more claiming qualifying child.--
       ``(i) In general.--Except as provided in clause (ii), if 
     (but for this paragraph) an individual may be claimed, and is 
     claimed, as a qualifying child by 2 or more taxpayers for a 
     taxable year beginning in the same calendar year, such 
     individual shall be treated as the qualifying child of the 
     taxpayer who is--

       ``(I) a parent of the individual, or
       ``(II) if subclause (I) does not apply, the taxpayer with 
     the highest adjusted gross income for such taxable year.

       ``(ii) More than 1 claiming credit.--If the parents 
     claiming the credit with respect to any qualifying child do 
     not file a joint return together, such child shall be treated 
     as the qualifying child of--

       ``(I) the parent with whom the child resided for the 
     longest period of time during the taxable year, or
       ``(II) if the child resides with both parents for the same 
     amount of time during such taxable year, the parent with the 
     highest adjusted gross income.''.

       (g) Expansion of Mathematical Error Authority.--Paragraph 
     (2) of section 6213(g) is amended by striking ``and'' at the 
     end of subparagraph (K), by striking the period at the end of 
     subparagraph (L) and inserting ``, and'', and by inserting 
     after subparagraph (L) the following new subparagraph:
       ``(M) the entry on the return claiming the credit under 
     section 32 with respect to a child if, according to the 
     Federal Case Registry of Child Support Orders established 
     under section 453(h) of the Social Security Act, the taxpayer 
     is a noncustodial parent of such child.''
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2001.
       (2) Subsection (g).--The amendment made by subsection (g) 
     shall take effect on January 1, 2004.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 311. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

     SEC. 401. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

       (a) Eligible Educational Institutions Permitted To Maintain 
     Qualified Tuition Programs.--
       (1) In general.--Section 529(b)(1) (defining qualified 
     State tuition program) is amended--
       (A) by inserting ``or by 1 or more eligible educational 
     institutions'' after ``maintained by a State or agency or 
     instrumentality thereof '' in the matter preceding 
     subparagraph (A), and
       (B) by adding at the end the following new flush sentence:
     ``Except to the extent provided in regulations, a program 
     established and maintained by 1 or more eligible educational 
     institutions shall not be treated as a qualified tuition 
     program unless such program has received a ruling or 
     determination that such program meets the applicable 
     requirements for a qualified tuition program.''.
       (2) Private qualified tuition programs limited to benefit 
     plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
     inserting ``in the case of a program established and 
     maintained by a State or agency or instrumentality thereof,'' 
     before ``may make''.
       (3) Conforming amendments.--
       (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
     530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are amended by 
     striking ``qualified State tuition'' each place it appears 
     and inserting ``qualified tuition''.
       (B) The headings for sections 72(e)(9) and 135(c)(2)(C) are 
     amended by striking ``qualified state tuition'' each place it 
     appears and inserting ``qualified tuition''.
       (C) The headings for sections 529(b) and 530(b)(2)(B) are 
     amended by striking ``Qualified state tuition'' each place it 
     appears and inserting ``Qualified tuition''.
       (D) The heading for section 529 is amended by striking 
     ``state''.
       (E) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (b) Exclusion From Gross Income of Education Distributions 
     From Qualified Tuition Programs.--
       (1) In general.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
       ``(B) Distributions for qualified higher education 
     expenses.--For purposes of this paragraph--
       ``(i) In-kind distributions.--No amount shall be includible 
     in gross income under subparagraph (A) by reason of a 
     distribution which consists of providing a benefit to the 
     distributee which, if paid for by the distributee, would 
     constitute payment of a qualified higher education expense.
       ``(ii) Cash distributions.--In the case of distributions 
     not described in clause (i), if--

       ``(I) such distributions do not exceed the qualified higher 
     education expenses (reduced by expenses described in clause 
     (i)), no amount shall be includible in gross income, and
       ``(II) in any other case, the amount otherwise includible 
     in gross income shall be reduced by an amount which bears the 
     same ratio to such amount as such expenses bear to such 
     distributions.

       ``(iii) Exception for institutional programs.--In the case 
     of any taxable year beginning before January 1, 2004, clauses 
     (i) and (ii) shall not apply with respect to any distribution 
     during such taxable year under a qualified tuition program 
     established and maintained by 1 or more eligible educational 
     institutions.
       ``(iv) Treatment as distributions.--Any benefit furnished 
     to a designated beneficiary under a qualified tuition program 
     shall be treated as a distribution to the beneficiary for 
     purposes of this paragraph.
       ``(v) Coordination with hope and lifetime learning 
     credits.--The total amount of qualified higher education 
     expenses with respect to an individual for the taxable year 
     shall be reduced--

       ``(I) as provided in section 25A(g)(2), and
       ``(II) by the amount of such expenses which were taken into 
     account in determining the credit allowed to the taxpayer or 
     any other person under section 25A.

       ``(vi) Coordination with education individual retirement 
     accounts.--If, with respect to an individual for any taxable 
     year--

       ``(I) the aggregate distributions to which clauses (i) and 
     (ii) and section 530(d)(2)(A) apply, exceed
       ``(II) the total amount of qualified higher education 
     expenses otherwise taken into account under clauses (i) and 
     (ii) (after the application of clause (v)) for such year,

     the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under clauses (i) and (ii) and section 
     530(d)(2)(A).''.
       (2) Conforming amendments.--
       (A) Section 135(d)(2)(B) is amended by striking ``the 
     exclusion under section 530(d)(2)'' and inserting ``the 
     exclusions under sections 529(c)(3)(B) and 530(d)(2)''.
       (B) Section 221(e)(2)(A) is amended by inserting ``529,'' 
     after ``135,''.
       (c) Rollover to Different Program for Benefit of Same 
     Designated Beneficiary.--Section 529(c)(3)(C) (relating to 
     change in beneficiaries) is amended--
       (1) by striking ``transferred to the credit'' in clause (i) 
     and inserting ``transferred--

       ``(I) to another qualified tuition program for the benefit 
     of the designated beneficiary, or
       ``(II) to the credit'',

       (2) by adding at the end the following new clause:
       ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall only apply to the first 3 transfers with respect to a 
     designated beneficiary.'', and
       (3) by inserting ``or programs'' after ``beneficiaries'' in 
     the heading.
       (d) Member of Family Includes First Cousin.--Section 
     529(e)(2) (defining member of family) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and by inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) any first cousin of such beneficiary.''.
       (e) Adjustment of Limitation on Room and Board 
     Distributions.--Section 529(e)(3)(B)(ii) is amended to read 
     as follows:
       ``(ii) Limitation.--The amount treated as qualified higher 
     education expenses by reason of clause (i) shall not exceed--

       ``(I) the allowance (applicable to the student) for room 
     and board included in the cost of attendance (as defined in 
     section 472 of the Higher Education Act of 1965 (20 U.S.C. 
     1087ll), as in effect on the date of the enactment of the 
     Economic Stimulus Tax Cut Act of 2001) as determined by the 
     eligible educational institution for such period, or
       ``(II) if greater, the actual invoice amount the student 
     residing in housing owned or operated by the eligible 
     educational institution

[[Page S5360]]

     is charged by such institution for room and board costs for 
     such period.''.

       (f) Technical Amendments.--Section 529(c)(3)(D) is 
     amended--
       (1) by inserting ``except to the extent provided by the 
     Secretary,'' before ``all distributions'' in clause (ii), and
       (2) by inserting ``except to the extent provided by the 
     Secretary,'' before ``the value'' in clause (iii).
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                   Subtitle B--Educational Assistance

     SEC. 411. PERMANENT EXTENSION OF EXCLUSION FOR EMPLOYER-
                   PROVIDED EDUCATIONAL ASSISTANCE.

       (a) In General.--Section 127 (relating to exclusion for 
     educational assistance programs) is amended by striking 
     subsection (d) and by redesignating subsection (e) as 
     subsection (d).
       (b) Repeal of Limitation on Graduate Education.--The last 
     sentence of section 127(c)(1) is amended by striking ``, and 
     such term also does not include any payment for, or the 
     provision of any benefits with respect to, any graduate level 
     course of a kind normally taken by an individual pursuing a 
     program leading to a law, business, medical, or other 
     advanced academic or professional degree''.
       (c) Conforming Amendment.--Section 51A(b)(5)(B)(iii) is 
     amended by striking ``or would be so excludable but for 
     section 127(d)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to expenses relating to courses 
     beginning after December 31, 2001.

     SEC. 412. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN 
                   INCOME LIMITATION ON STUDENT LOAN INTEREST 
                   DEDUCTION.

       (a) Elimination of 60-Month Limit.--
       (1) In general.--Section 221 (relating to interest on 
     education loans), as amended by section 402(b)(2)(B), is 
     amended by striking subsection (d) and by redesignating 
     subsections (e), (f), and (g) as subsections (d), (e), and 
     (f), respectively.
       (2) Conforming amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 2001, in taxable years ending after such date.
       (b) Increase in Income Limitation.--
       (1) In general.--Section 221(b)(2)(B) (relating to amount 
     of reduction) is amended by striking clauses (i) and (ii) and 
     inserting the following:
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $50,000 ($100,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).''.
       (2) Conforming amendment.--Section 221(g)(1) is amended by 
     striking ``$40,000 and $60,000 amounts'' and inserting 
     ``$50,000 and $100,000 amounts''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 413. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL HEALTH SERVICE CORPS SCHOLARSHIP 
                   PROGRAM AND THE F. EDWARD HEBERT ARMED FORCES 
                   HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL 
                   ASSISTANCE PROGRAM.

       (a) In General.--Section 117(c) (relating to the exclusion 
     from gross income amounts received as a qualified 
     scholarship) is amended--
       (1) by striking ``Subsections (a)'' and inserting the 
     following:
       ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     amount received by an individual under--
       ``(A) the National Health Service Corps Scholarship Program 
     under section 338A(g)(1)(A) of the Public Health Service Act, 
     or
       ``(B) the Armed Forces Health Professions Scholarship and 
     Financial Assistance program under subchapter I of chapter 
     105 of title 10, United States Code.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to amounts received in taxable years beginning 
     after December 31, 2001.

                      Subtitle C--Other Provisions

     SEC. 421. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

       (a) Deduction Allowed.--Part VII of subchapter B of chapter 
     1 (relating to additional itemized deductions for 
     individuals) is amended by redesignating section 222 as 
     section 223 and by inserting after section 221 the following:

     ``SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.

       ``(a) Allowance of Deduction.--In the case of an 
     individual, there shall be allowed as a deduction an amount 
     equal to the qualified tuition and related expenses paid by 
     the taxpayer during the taxable year.
       ``(b) Dollar limitations.--
       ``(1) In general.--The amount allowed as a deduction under 
     subsection (a) with respect to the taxpayer for any taxable 
     year shall not exceed the applicable dollar limit.
       ``(2) Applicable dollar limit.--
       ``(A) 2002 and 2003.--In the case of a taxable year 
     beginning in 2002 or 2003, the applicable dollar limit shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $3,000, and--
       ``(ii) in the case of any other taxpayer, zero.
       ``(B) 2004 and 2005.--In the case of a taxable year 
     beginning in 2004 or 2005, the applicable dollar amount shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $5,000, and
       ``(ii) in the case of any other taxpayer, zero.
       ``(C) 2006 through 2011.--
       ``(i) In general.--In the case of a taxable year beginning 
     in 2006, 2007, 2008, 2009, 2010, or 2011, the applicable 
     dollar amount shall be equal to the applicable dollar amount 
     determined in the table contained in clause (ii), reduced 
     (but not below zero) by the amount determined under clause 
     (iii).
       ``(ii) Applicable dollar amount.--

``Taxable year beginning in:                  Applicable dollar amount:
    2006....................................................$5,000 ....

    2007....................................................$6,000 ....

    2008....................................................$7,000 ....

    2009....................................................$8,000 ....

    2010....................................................$9,000 ....

    2011...................................................$10,000.....

       ``(iii) Amount of reduction.--The amount determined under 
     this clause for any taxable year is the amount which bears 
     the same ratio to the applicable dollar amount determined in 
     the table contained in clause (ii) for such taxable year as--

       ``(I) the excess of--

       ``(aa) the taxpayer's adjusted gross income for such 
     taxable year, over
       ``(bb) $65,000 ($130,000 in the case of a joint return), 
     bears to

       ``(II) $10,000 ($20,000 in the case of a joint return).

       ``(D) Adjusted gross income.--For purposes of this 
     paragraph, adjusted gross income shall be determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, and 469.
       ``(c) No Double Benefit.--
       ``(1) In general.--No deduction shall be allowed under 
     subsection (a) for any expense for which a deduction is 
     allowed to the taxpayer under any other provision of this 
     chapter.
       ``(2) Coordination with other education incentives.--
       ``(A) Denial of deduction if credit elected.--No deduction 
     shall be allowed under subsection (a) for a taxable year with 
     respect to the qualified tuition and related expenses with 
     respect to an individual if the taxpayer or any other person 
     elects to have section 25A apply with respect to such 
     individual for such year.
       ``(B) Coordination with exclusions.--The total amount of 
     qualified tuition and related expenses shall be reduced by 
     the amount of such expenses taken into account in determining 
     any amount excluded under section 135, 529(c)(1), or 
     530(d)(2).
       ``(3) Dependents.--No deduction shall be allowed under 
     subsection (a) to any individual with respect to whom a 
     deduction under section 151 is allowable to another taxpayer 
     for a taxable year beginning in the calendar year in which 
     such individual's taxable year begins.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified tuition and related expenses.--The term 
     `qualified tuition and related expenses' has the meaning 
     given such term by section 25A(f). Such expenses shall be 
     reduced in the same manner as under section 25A(g)(2).
       ``(2) Identification requirement.--No deduction shall be 
     allowed under subsection (a) to a taxpayer with respect to 
     the qualified tuition and related expenses of an individual 
     unless the taxpayer includes the name and taxpayer 
     identification number of the individual on the return of tax 
     for the taxable year.
       ``(3) Limitation on taxable year of deduction.--
       ``(A) In general.--A deduction shall be allowed under 
     subsection (a) for qualified tuition and related expenses for 
     any taxable year only to the extent such expenses are in 
     connection with enrollment at an institution of higher 
     education during the taxable year.
       ``(B) Certain prepayments allowed.--Subparagraph (A) shall 
     not apply to qualified tuition and related expenses paid 
     during a taxable year if such expenses are in connection with 
     an academic term beginning during such taxable year or during 
     the first 3 months of the next taxable year.
       ``(4) No deduction for married individuals filing separate 
     returns.--If the taxpayer is a married individual (within the 
     meaning of section 7703), this section shall apply only if 
     the taxpayer and the taxpayer's spouse file a joint return 
     for the taxable year.
       ``(5) Nonresident aliens.--If the taxpayer is a nonresident 
     alien individual for any portion of the taxable year, this 
     section shall apply only if such individual is treated as a 
     resident alien of the United States for purposes of this 
     chapter by reason of an election under subsection (g) or (h) 
     of section 6013.

[[Page S5361]]

       ``(6) Regulations.--The Secretary may prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including regulations requiring recordkeeping 
     and information reporting.''.
       (b) Deduction Allowed in Computing Adjusted Gross Income.--
     Section 62(a) is amended by inserting after paragraph (17) 
     the following:
       ``(18) Higher education expenses.--The deduction allowed by 
     section 222.''.
       (c) Conforming Amendments.--
       (1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) 
     are each amended by inserting ``222,'' after ``221,''.
       (2) Section 221(b)(2)(C) is amended by inserting ``222,'' 
     before ``911''.
       (3) Section 469(i)(3)(E) is amended by striking ``and 221'' 
     and inserting ``, 221, and 222''.
       (4) The table of sections for part VII of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     222 and inserting the following:

``Sec. 222. Qualified tuition and related expenses.
``Sec. 223. Cross reference.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments made in taxable years beginning after 
     December 31, 2001.

          Subtitle D--Compliance With Congressional Budget Act

     SEC. 431. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

     SEC. 501. INCREASE IN AMOUNT OF UNIFIED CREDIT AGAINST ESTATE 
                   AND GIFT TAXES.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to unified credit against estate tax) is amended to read as 
     follows:
       ``(c) Applicable credit amount.--For purposes of this 
     section--
       ``(1) In general.--The applicable credit amount is the 
     amount of the tentative tax which would be determined under 
     the rate schedule set forth in section 2001(c) if the amount 
     with respect to which such tentative tax is to be computed 
     were the applicable exclusion amount.
       ``(2) Applicable exclusion amount.--The applicable 
     exclusion amount is equal to the sum of--
       ``(A) the decedent's exclusion amount, plus
       ``(B) in the case of a decedent described in paragraph (4), 
     the unused spousal exclusion amount.
       ``(3) Decedent's exclusion amount.--
       ``(A) In general.--For purposes of paragraph (2)(A), the 
     decedent's exclusion amount is $2,000,000.
       ``(B) Inflation adjustment of basis adjustment amounts.--
       ``(i) In general.--In the case of decedents dying in a 
     calendar year after 2006, the $2,000,000 dollar amount in 
     subparagraph (A) shall be increased by an amount equal to the 
     product of--
       ``(i) such dollar amount, and
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `2005' for `1992' in subparagraph (B) thereof.
       ``(B) Rounding.--If any increase determined under 
     subparagraph (A) is not a multiple of $250,000, such increase 
     shall be rounded to the next lowest multiple thereof.
       ``(4) Unused spousal exclusion amount.--With respect to a 
     decedent whose immediately predeceased spouse died after 
     December 31, 2005, the unused spousal exclusion amount for 
     such decedent is equal to the excess of--
       ``(A) the applicable exclusion amount allowable under this 
     subsection to the estate of such immediately predeceased 
     spouse, over
       ``(B) the applicable exclusion amount allowed under this 
     section to the estate of such immediately predeceased 
     spouse.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2005.

     SEC. 502. INCREASE IN QUALIFIED FAMILY-OWNED BUSINESS 
                   INTEREST DEDUCTION AMOUNT.

       (a) In General.--Paragraph (2) of section 2057(a) (relating 
     to family-owned business interests) is amended to read as 
     follows:
       ``(2) Maximum deduction.--
       ``(A) In general.--The deduction allowed by this section 
     shall not exceed the sum of--
       ``(i) the applicable deduction amount, plus
       ``(ii) in the case of a decedent described in subparagraph 
     (C), the applicable unused spousal deduction amount.
       ``(B) Applicable deduction amount.--For purposes of this 
     subparagraph (A)(i), the applicable deduction amount is 
     determined in accordance with the following table:

``In the case of estates of decedentThe applicable deduction amount is:
      2002, 2003, 2004, 2005, and 2006.......................$1,375,000
      2007 and 2008..........................................$1,625,000
      2009...................................................$2,375,000
      2010 or thereafter....................................$3,375,000.
       ``(C) Applicable unused spousal deduction amount.--With 
     respect to a decedent whose immediately predeceased spouse 
     died after December 31, 2001, and the estate of such 
     immediately predeceased spouse met the requirements of 
     subsection (b)(1), the applicable unused spousal deduction 
     amount for such decedent is equal to the excess of--
       ``(i) the applicable deduction amount allowable under this 
     section to the estate of such immediately predeceased spouse, 
     over
       ``(ii) the sum of--

       ``(I) the applicable deduction amount allowed under this 
     section to the estate of such immediately predeceased spouse, 
     plus
       ``(II) the amount of any increase in such estate's unified 
     credit under paragraph (3)(B) which was allowed to such 
     estate.''.

       (b) Conforming Amendments.--Section 2057(a)(3)(B) is 
     amended--
       (1) by striking ``$675,000'' both places it appears and 
     inserting ``the applicable deduction amount'', and
       (2) by striking ``$675,000'' in the heading and inserting 
     ``applicable deduction amount''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.

     SEC. 503. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

     SEC. 601. MODIFICATION OF IRA CONTRIBUTION LIMITS.

       (a) Increase in Contribution Limit.--
       (1) In general.--Paragraph (1)(A) of section 219(b) 
     (relating to maximum amount of deduction) is amended by 
     striking ``$2,000'' and inserting ``the deductible amount''.
       (2) Deductible amount.--Section 219(b) is amended by adding 
     at the end the following new paragraph:
       ``(5) Deductible amount.--For purposes of paragraph (1)(A), 
     the deductible amount shall be determined in accordance with 
     the following table:

``For taxable years beginning in:             The deductible amount is:
      2002 through 2005.........................................$2,500 
      2006 and thereafter....................................$3,000.''.
       (b) Conforming Amendments.--
       (1) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 408(b) is amended by striking ``$2,000'' in the 
     matter following paragraph (4) and inserting ``the dollar 
     amount in effect under section 219(b)(1)(A)''.
       (4) Section 408(j) is amended by striking ``$2,000''.
       (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
     inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 602. DEEMED IRAS UNDER EMPLOYER PLANS.

       (a) In General.--Section 408 (relating to individual 
     retirement accounts) is amended by redesignating subsection 
     (q) as subsection (r) and by inserting after subsection (p) 
     the following new subsection:
       ``(q) Deemed IRAs Under Qualified Employer Plans.--
       ``(1) General rule.--If--
       ``(A) a qualified employer plan elects to allow employees 
     to make voluntary employee contributions to a separate 
     account or annuity established under the plan, and
       ``(B) under the terms of the qualified employer plan, such 
     account or annuity meets the applicable requirements of this 
     section or section 408A for an individual retirement account 
     or annuity,

     then such account or annuity shall be treated for purposes of 
     this title in the same manner as an individual retirement 
     plan and not as a qualified employer plan (and contributions 
     to such account or annuity as contributions to an individual 
     retirement plan and not to the qualified employer plan). For 
     purposes of subparagraph (B), the requirements of subsection 
     (a)(5) shall not apply.
       ``(2) Special rules for qualified employer plans.--For 
     purposes of this title, a qualified employer plan shall not 
     fail to meet any requirement of this title solely by reason 
     of establishing and maintaining a program described in 
     paragraph (1).
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Qualified employer plan.--The term `qualified 
     employer plan' has the meaning given such term by section 
     72(p)(4); except such term shall only include an eligible 
     deferred compensation plan (as defined in section 457(b)) 
     which is maintained by an eligible employer described in 
     section 457(e)(1)(A).
       ``(B) Voluntary employee contribution.--The term `voluntary 
     employee contribution' means any contribution (other than a 
     mandatory contribution within the meaning of section 
     411(c)(2)(C))--
       ``(i) which is made by an individual as an employee under a 
     qualified employer plan which allows employees to elect to 
     make contributions described in paragraph (1), and
       ``(ii) with respect to which the individual has designated 
     the contribution as a contribution to which this subsection 
     applies.''.
       (b) Amendment of ERISA.--
       (1) In general.--Section 4 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1003) is amended by 
     adding at the end the following new subsection:

[[Page S5362]]

       ``(c) If a pension plan allows an employee to elect to make 
     voluntary employee contributions to accounts and annuities as 
     provided in section 408(q) of the Internal Revenue Code of 
     1986, such accounts and annuities (and contributions thereto) 
     shall not be treated as part of such plan (or as a separate 
     pension plan) for purposes of any provision of this title 
     other than section 403(c), 404, or 405 (relating to exclusive 
     benefit, and fiduciary and co-fiduciary responsibilities).''.
       (2) Conforming amendment.--Section 4(a) of such Act (29 
     U.S.C. 1003(a)) is amended by inserting ``or (c)'' after 
     ``subsection (b)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2002.

     SEC. 603. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account to an 
     organization described in section 170(c), no amount shall be 
     includible in the gross income of the account holder or 
     beneficiary.
       ``(B) Special rules relating to charitable remainder 
     trusts, pooled income funds, and charitable gift annuities.--
       ``(i) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account--

       ``(I) to a charitable remainder annuity trust or a 
     charitable remainder unitrust (as such terms are defined in 
     section 664(d)),
       ``(II) to a pooled income fund (as defined in section 
     642(c)(5)), or
       ``(III) for the issuance of a charitable gift annuity (as 
     defined in section 501(m)(5)),

     no amount shall be includible in gross income of the account 
     holder or beneficiary. The preceding sentence shall apply 
     only if no person holds any interest in the amounts in the 
     trust, fund, or annuity attributable to such distribution 
     other than one or more of the following: the individual for 
     whose benefit such account is maintained, the spouse of such 
     individual, or any organization described in section 170(c).
       ``(ii) Determination of inclusion of amounts distributed.--
     In determining the amount includible in the gross income of 
     the distributee of a distribution from a trust described in 
     clause (i)(I) or an annuity described in clause (i)(III), the 
     portion of any qualified charitable distribution to such 
     trust or for such annuity which would (but for this 
     subparagraph) have been includible in gross income--

       ``(I) in the case of any such trust, shall be treated as 
     income described in section 664(b)(1), or
       ``(II) in the case of any such annuity, shall not be 
     treated as an investment in the contract.

       ``(iii) No inclusion for distribution to pooled income 
     fund.--No amount shall be includible in the gross income of a 
     pooled income fund (as so defined) by reason of a qualified 
     charitable distribution to such fund.
       ``(C) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the account is maintained has 
     attained age 70\1/2\, and
       ``(ii) which is a charitable contribution (as defined in 
     section 170(c)) made directly from the account to--

       ``(I) an organization described in section 170(c), or
       ``(II) a trust, fund, or annuity described in subparagraph 
     (B).

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction to the taxpayer for the taxable year under section 
     170 (before the application of section 170(b)) for qualified 
     charitable distributions shall be reduced (but not below 
     zero) by the sum of the amounts of the qualified charitable 
     distributions during such year which (but for this paragraph) 
     would have been includible in the gross income of the 
     taxpayer for such year.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2009.

                     Subtitle B--Expanding Coverage

     SEC. 611. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

       (a) In General.--Subparagraph (B) of section 4975(f)(6) 
     (relating to exemptions not to apply to certain transactions) 
     is amended by adding at the end the following new clause:
       ``(iii) Loan exception.--For purposes of subparagraph 
     (A)(i), the term `owner-employee' shall only include a person 
     described in subclause (II) or (III) of clause (i).''.
       (b) Amendment of ERISA.--Section 408(d)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) For purposes of paragraph (1)(A), the term `owner-
     employee' shall only include a person described in clause 
     (ii) or (iii) of subparagraph (A).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 612. MODIFICATION OF TOP-HEAVY RULES.

       (a) Simplification of Definition of Key Employee.--
       (1) In general.--Section 416(i)(1)(A) (defining key 
     employee) is amended--
       (A) by striking ``or any of the 4 preceding plan years'' in 
     the matter preceding clause (i);
       (B) by striking clause (i) and inserting the following:
       ``(i) an officer of the employer having an annual 
     compensation greater than the amount in effect under section 
     414(q)(1)(B)(i) for such plan year,'';
       (C) by striking clause (ii) and redesignating clauses (iii) 
     and (iv) as clauses (ii) and (iii), respectively;
       (D) by striking the second sentence in the matter following 
     clause (iii), as redesignated by subparagraph (C); and
       (E) by adding at the end the following: ``For purposes of 
     this subparagraph, in the case of an employee who is not 
     employed during the preceding plan year or is employed for a 
     portion of such year, such employee shall be treated as a key 
     employee if it can be reasonably anticipated that such 
     employee will be described in 1 of the preceding clauses for 
     the current plan year.''.
       (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
     amended by striking ``and subparagraph (A)(ii)''.
       (b) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by adding at the end 
     the following: ``Employer matching contributions (as defined 
     in section 401(m)(4)(A)) shall be taken into account for 
     purposes of this subparagraph.''.
       (c) Distributions During Last Year Before Determination 
     Date Taken Into Account.--
       (1) In general.--Paragraph (3) of section 416(g) is amended 
     to read as follows:
       ``(3) Distributions during last year before determination 
     date taken into account.--
       ``(A) In general.--For purposes of determining--
       ``(i) the present value of the cumulative accrued benefit 
     for any employee, or
       ``(ii) the amount of the account of any employee,

     such present value or amount shall be increased by the 
     aggregate distributions made with respect to such employee 
     under the plan during the 1-year period ending on the 
     determination date. The preceding sentence shall also apply 
     to distributions under a terminated plan which if it had not 
     been terminated would have been required to be included in an 
     aggregation group.
       ``(B) 5-year period in case of in-service distribution.--In 
     the case of any distribution made for a reason other than 
     separation from service, death, or disability, subparagraph 
     (A) shall be applied by substituting `5-year period' for `1-
     year period'.''.
       (2) Benefits not taken into account.--Subparagraph (E) of 
     section 416(g)(4) is amended--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date''; and
       (B) by striking ``5-year period'' and inserting ``1-year 
     period''.
       (d) Frozen Plan Exempt From Minimum Benefit Requirement.--
     Subparagraph (C) of section 416(c)(1) (relating to defined 
     benefit plans) is amended--
       (A) by striking ``clause (ii)'' in clause (i) and inserting 
     ``clause (ii) or (iii)''; and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the meaning of section 410(b)) no key 
     employee or former key employee.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 613. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

       (a) In General.--Section 404 (relating to deduction for 
     contributions of an employer to an employees' trust or 
     annuity plan and compensation under a deferred payment plan) 
     is amended by adding at the end the following new subsection:
       ``(n) Elective Deferrals Not Taken Into Account for 
     Purposes of Deduction Limits.--
       ``(1) In general.--The applicable percentage of the amount 
     of any elective deferrals (as defined in section 402(g)(3)) 
     shall not be subject to any limitation contained in paragraph 
     (3), (7), or (9) of subsection (a), and such elective 
     deferrals shall not be taken into account in applying any 
     such limitation to any other contributions.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in:       The applicable percentage is:  
      2002 through 2010.....................................25 percent 
      2011 and thereafter...............................100 percent.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 614. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED 
                   COMPENSATION PLANS OF STATE AND LOCAL 
                   GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 457 (relating to 
     deferred compensation plans

[[Page S5363]]

     of State and local governments and tax-exempt organizations) 
     is amended to read as follows:
       ``(c) Limitation.--The maximum amount of the compensation 
     of any one individual which may be deferred under subsection 
     (a) during any taxable year shall not exceed the amount in 
     effect under subsection (b)(2)(A) (as modified by any 
     adjustment provided under subsection (b)(3)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2001.

     SEC. 615. DEDUCTION LIMITS.

       (a) Modification of Limits.--
       (1) Stock bonus and profit sharing trusts.--
       (A) In general.--Subclause (I) of section 404(a)(3)(A)(i) 
     (relating to stock bonus and profit sharing trusts) is 
     amended by striking ``15 percent'' and inserting ``25 
     percent''.
       (B) Conforming amendment.--Subparagraph (C) of section 
     404(h)(1) is amended by striking ``15 percent'' each place it 
     appears and inserting ``25 percent''.
       (2) Defined contribution plans.--
       (A) In general.--Clause (v) of section 404(a)(3)(A) 
     (relating to stock bonus and profit sharing trusts) is 
     amended to read as follows:
       ``(v) Defined contribution plans subject to the funding 
     standards.--Except as provided by the Secretary, a defined 
     contribution plan which is subject to the funding standards 
     of section 412 shall be treated in the same manner as a stock 
     bonus or profit-sharing plan for purposes of this 
     subparagraph.''
       (B) Conforming amendments.--
       (i) Section 404(a)(1)(A) is amended by inserting ``(other 
     than a trust to which paragraph (3) applies)'' after 
     ``pension trust''.
       (ii) Section 404(h)(2) is amended by striking ``stock bonus 
     or profit-sharing trust'' and inserting ``trust subject to 
     subsection (a)(3)(A)''.
       (iii) The heading of section 404(h)(2) is amended by 
     striking ``stock bonus and profit-sharing trust'' and 
     inserting ``certain trusts''.
       (b) Compensation.--
       (1) In general.--Section 404(a) (relating to general rule) 
     is amended by adding at the end the following:
       ``(12) Definition of compensation.--For purposes of 
     paragraphs (3), (7), (8), and (9), the term `compensation' 
     shall include amounts treated as `participant's compensation' 
     under subparagraph (C) or (D) of section 415(c)(3).''.
       (2) Conforming amendments.--
       (A) Subparagraph (B) of section 404(a)(3) is amended by 
     striking the last sentence thereof.
       (B) Clause (i) of section 4972(c)(6)(B) is amended by 
     striking ``(within the meaning of section 404(a))'' and 
     inserting ``(within the meaning of section 404(a) and as 
     adjusted under section 404(a)(12))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 616. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   ROTH CONTRIBUTIONS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to deferred compensation, etc.) is 
     amended by inserting after section 402 the following new 
     section:

     ``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS ROTH 
                   CONTRIBUTIONS.

       ``(a) General Rule.--If an applicable retirement plan 
     includes a qualified Roth contribution program--
       ``(1) any designated Roth contribution made by an employee 
     pursuant to the program shall be treated as an elective 
     deferral for purposes of this chapter, except that such 
     contribution shall not be excludable from gross income, and
       ``(2) such plan (and any arrangement which is part of such 
     plan) shall not be treated as failing to meet any requirement 
     of this chapter solely by reason of including such program.
       ``(b) Qualified Roth Contribution Program.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified Roth contribution 
     program' means a program under which an employee may elect to 
     make designated Roth contributions in lieu of all or a 
     portion of elective deferrals the employee is otherwise 
     eligible to make under the applicable retirement plan.
       ``(2) Separate accounting required.--A program shall not be 
     treated as a qualified Roth contribution program unless the 
     applicable retirement plan--
       ``(A) establishes separate accounts (`designated Roth 
     accounts') for the designated Roth contributions of each 
     employee and any earnings properly allocable to the 
     contributions, and
       ``(B) maintains separate recordkeeping with respect to each 
     account.
       ``(c) Definitions and Rules Relating to Designated Roth 
     Contributions.--For purposes of this section--
       ``(1) Designated roth contribution.--The term `designated 
     Roth contribution' means any elective deferral which--
       ``(A) is excludable from gross income of an employee 
     without regard to this section, and
       ``(B) the employee designates (at such time and in such 
     manner as the Secretary may prescribe) as not being so 
     excludable.
       ``(2) Designation limits.--The amount of elective deferrals 
     which an employee may designate under paragraph (1) shall not 
     exceed the excess (if any) of--
       ``(A) the maximum amount of elective deferrals excludable 
     from gross income of the employee for the taxable year 
     (without regard to this section), over
       ``(B) the aggregate amount of elective deferrals of the 
     employee for the taxable year which the employee does not 
     designate under paragraph (1).
       ``(3) Rollover contributions.--
       ``(A) In general.--A rollover contribution of any payment 
     or distribution from a designated Roth account which is 
     otherwise allowable under this chapter may be made only if 
     the contribution is to--
       ``(i) another designated Roth account of the individual 
     from whose account the payment or distribution was made, or
       ``(ii) a Roth IRA of such individual.
       ``(B) Coordination with limit.--Any rollover contribution 
     to a designated Roth account under subparagraph (A) shall not 
     be taken into account for purposes of paragraph (1).
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) Exclusion.--Any qualified distribution from a 
     designated Roth account shall not be includible in gross 
     income.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' has 
     the meaning given such term by section 408A(d)(2)(A) (without 
     regard to clause (iv) thereof).
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a designated Roth account shall not be 
     treated as a qualified distribution if such payment or 
     distribution is made within the 5-taxable-year period 
     beginning with the earlier of--
       ``(i) the first taxable year for which the individual made 
     a designated Roth contribution to any designated Roth account 
     established for such individual under the same applicable 
     retirement plan, or
       ``(ii) if a rollover contribution was made to such 
     designated Roth account from a designated Roth account 
     previously established for such individual under another 
     applicable retirement plan, the first taxable year for which 
     the individual made a designated Roth contribution to such 
     previously established account.
       ``(C) Distributions of excess deferrals and contributions 
     and earnings thereon.--The term `qualified distribution' 
     shall not include any distribution of any excess deferral 
     under section 402(g)(2) or any excess contribution under 
     section 401(k)(8), and any income on the excess deferral or 
     contribution.
       ``(3) Treatment of distributions of certain excess 
     deferrals.--Notwithstanding section 72, if any excess 
     deferral under section 402(g)(2) attributable to a designated 
     Roth contribution is not distributed on or before the 1st 
     April 15 following the close of the taxable year in which 
     such excess deferral is made, the amount of such excess 
     deferral shall--
       ``(A) not be treated as investment in the contract, and
       ``(B) be included in gross income for the taxable year in 
     which such excess is distributed.
       ``(4) Aggregation rules.--Section 72 shall be applied 
     separately with respect to distributions and payments from a 
     designated Roth account and other distributions and payments 
     from the plan.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and
       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1)(A) (as added by 
     section 201(c)(1)) the following new sentence: ``The 
     preceding sentence shall not apply the portion of such excess 
     as does not exceed the designated Roth contributions of the 
     individual for the taxable year.''; and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:
     ``If any portion of an eligible rollover distribution is 
     attributable to payments or distributions from a designated 
     Roth account (as defined in section 402A), an eligible 
     retirement plan with respect to such portion shall include 
     only another designated Roth account and a Roth IRA.''.
       (d) Reporting Requirements.--
       (1) W-2 information.--Section 6051(a)(8) is amended by 
     inserting ``, including the amount of designated Roth 
     contributions (as defined in section 402A)'' before the comma 
     at the end.
       (2) Information.--Section 6047 is amended by redesignating 
     subsection (f) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Designated Roth Contributions.--The Secretary shall 
     require the plan administrator of each applicable retirement 
     plan (as defined in section 402A) to make such returns and 
     reports regarding designated Roth

[[Page S5364]]

     contributions (as defined in section 402A) to the Secretary, 
     participants and beneficiaries of the plan, and such other 
     persons as the Secretary may prescribe.''.
       (e) Conforming Amendments.--
       (1) Section 408A(e) is amended by adding after the first 
     sentence the following new sentence: ``Such term includes a 
     rollover contribution described in section 402A(c)(3)(A).''.
       (2) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 402 the following new item:

``Sec. 402A. Optional treatment of elective deferrals as Roth 
              contributions.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 617. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR 
                   ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25A the following new 
     section:

     ``SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY 
                   CERTAIN INDIVIDUALS.

       ``(a) Allowance of Credit.--In the case of an eligible 
     individual, there shall be allowed as a credit against the 
     tax imposed by this subtitle for the taxable year an amount 
     equal to the applicable percentage of so much of the 
     qualified retirement savings contributions of the eligible 
     individual for the taxable year as do not exceed $2,000.
       ``(b) Applicable Percentage.--For purposes of this section, 
     the applicable percentage is the percentage determined in 
     accordance with the following table:


----------------------------------------------------------------------------------------------------------------
                                      Adjusted Gross Income
-------------------------------------------------------------------------------------------------
          Joint return                  Head of a household               All other cases           Applicable
-------------------------------------------------------------------------------------------------   percentage
      Over           Not over          Over          Not over          Over          Not over
----------------------------------------------------------------------------------------------------------------
           $0          $30,000              $0         $22,500              $0         $15,000              50
       30,000           32,500          22,500          24,375          15,000          16,250              20
       32,500           50,000          24,375          37,500          16,250          25,000              10
       50,000    ...............        37,500    ..............        25,000    ..............             0
----------------------------------------------------------------------------------------------------------------


       ``(c) Eligible Individual.--For purposes of this section--
       ``(1) In general.--The term `eligible individual' means any 
     individual if such individual has attained the age of 18 as 
     of the close of the taxable year.
       ``(2) Dependents and full-time students not eligible.--The 
     term `eligible individual' shall not include--
       ``(A) any individual with respect to whom a deduction under 
     section 151 is allowed to another taxpayer for a taxable year 
     beginning in the calendar year in which such individual's 
     taxable year begins, and
       ``(B) any individual who is a student (as defined in 
     section 151(c)(4)).
       ``(d) Qualified Retirement Savings Contributions.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified retirement savings 
     contributions' means, with respect to any taxable year, the 
     sum of--
       ``(A) the amount of the qualified retirement contributions 
     (as defined in section 219(e)) made by the eligible 
     individual,
       ``(B) the amount of--
       ``(i) any elective deferrals (as defined in section 
     402(g)(3)) of such individual, and
       ``(ii) any elective deferral of compensation by such 
     individual under an eligible deferred compensation plan (as 
     defined in section 457(b)) of an eligible employer described 
     in section 457(e)(1)(A), and
       ``(C) the amount of voluntary employee contributions by 
     such individual to any qualified retirement plan (as defined 
     in section 4974(c)).
       ``(2) Reduction for certain distributions.--
       ``(A) In general.--The qualified retirement savings 
     contributions determined under paragraph (1) shall be reduced 
     (but not below zero) by the sum of--
       ``(i) any distribution from a qualified retirement plan (as 
     defined in section 4974(c)), or from an eligible deferred 
     compensation plan (as defined in section 457(b)), received by 
     the individual during the testing period which is includible 
     in gross income, and
       ``(ii) any distribution from a Roth IRA received by the 
     individual during the testing period which is not a qualified 
     rollover contribution (as defined in section 408A(e)) to a 
     Roth IRA.
       ``(B) Testing period.--For purposes of subparagraph (A), 
     the testing period, with respect to a taxable year, is the 
     period which includes--
       ``(i) such taxable year,
       ``(ii) the 2 preceding taxable years, and
       ``(iii) the period after such taxable year and before the 
     due date (including extensions) for filing the return of tax 
     for such taxable year.
       ``(C) Excepted distributions.--There shall not be taken 
     into account under subparagraph (A)--
       ``(i) any distribution referred to in section 72(p), 
     401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
       ``(ii) any distribution to which section 408A(d)(3) 
     applies.
       ``(D) Treatment of distributions received by spouse of 
     individual.--For purposes of determining distributions 
     received by an individual under subparagraph (A) for any 
     taxable year, any distribution received by the spouse of such 
     individual shall be treated as received by such individual if 
     such individual and spouse file a joint return for such 
     taxable year and for the taxable year during which the spouse 
     receives the distribution.
       ``(e) Adjusted Gross Income.--For purposes of this section, 
     adjusted gross income shall be determined without regard to 
     sections 911, 931, and 933.
       ``(f) Investment in the Contract.--Notwithstanding any 
     other provision of law, a qualified retirement savings 
     contribution shall not fail to be included in determining the 
     investment in the contract for purposes of section 72 by 
     reason of the credit under this section.
       ``(g) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2006.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25B, as added by subsection (a), 
     is amended by inserting after subsection (f) the following 
     new subsection:
       ``(g) Limitation Based on Amount of Tax.--The aggregate 
     credit allowed by this section for the taxable year shall not 
     exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the sum of the credits allowed by sections 
     21, 22, 23, 24, 25, and 25A plus
       ``(2) the tax imposed by section 55 for such taxable 
     year.''
       (2) Conforming amendments.--
       (A) Section 26(a)(1), as amended by section 201, is amended 
     by inserting ``or section 25B'' after ``section 24''.
       (B) Section 23(c), as amended by section 201, is amended by 
     striking ``sections 24'' and inserting ``sections 24, 25B,''.
       (C) Section 25(e)(1)(C), as amended by section 201, is 
     amended by inserting ``25B,'' after ``24,''.
       (D) Section 904(h), as amended by section 201, is amended 
     by inserting ``or 25B'' after ``section 24''.
       (E) Section 1400C(d), as amended by section 201, is amended 
     by inserting ``and section 25B'' after ``section 24''.
       (c) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Elective deferrals and IRA contributions by certain 
              individuals.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 618. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF 
                   SMALL EMPLOYERS.

       (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. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     contribution credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the amount 
     which would (but for subsection (f)(1)) be allowed as a 
     deduction under section 404 for such taxable year for 
     qualified employer contributions made to any qualified 
     retirement plan on behalf of any employee who is not a highly 
     compensated employee.
       ``(b) Credit Limited to 3 Years.--The credit allowable by 
     this section shall be allowed only with respect to the period 
     of 3 taxable years beginning with the first taxable year for 
     which a credit is allowable with respect to a plan under this 
     section.
       ``(c) Qualified Employer Contribution.--For purposes of 
     this section--
       ``(1) Defined contribution plans.--In the case of a defined 
     contribution plan, the term `qualified employer contribution' 
     means the amount of nonelective and matching contributions to 
     the plan made by the employer on behalf of any employee who 
     is not a highly compensated employee to the extent such 
     amount does not exceed 3 percent of such employee's 
     compensation from the employer for the year.
       ``(2) Defined benefit plans.--In the case of a defined 
     benefit plan, the term `qualified employer contribution' 
     means the amount of employer contributions to the plan made 
     on

[[Page S5365]]

     behalf of any employee who is not a highly compensated 
     employee to the extent that the accrued benefit of such 
     employee derived from employer contributions for the year 
     does not exceed the equivalent (as determined under 
     regulations prescribed by the Secretary and without regard to 
     contributions and benefits under the Social Security Act) of 
     3 percent of such employee's compensation from the employer 
     for the year.
       ``(d) Qualified Retirement Plan.--
       ``(1) In general.--The term `qualified retirement plan' 
     means any plan described in section 401(a) which includes a 
     trust exempt from tax under section 501(a) if the plan 
     meets--
       ``(A) the contribution requirements of paragraph (2),
       ``(B) the vesting requirements of paragraph (3), and
       ``(C) the distribution requirements of paragraph (4).
       ``(2) Contribution requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met if, under the plan--
       ``(i) the employer is required to make nonelective 
     contributions of at least 1 percent of compensation (or the 
     equivalent thereof in the case of a defined benefit plan) for 
     each employee who is not a highly compensated employee who is 
     eligible to participate in the plan, and
       ``(ii) allocations of nonelective employer contributions, 
     in the case of a defined contribution plan, are either in 
     equal dollar amounts for all employees covered by the plan or 
     bear a uniform relationship to the total compensation, or the 
     basic or regular rate of compensation, of the employees 
     covered by the plan (and an equivalent requirement is met 
     with respect to a defined benefit plan).
       ``(B) Compensation limitation.--The compensation taken into 
     account under subparagraph (A) for any year shall not exceed 
     the limitation in effect for such year under section 
     401(a)(17).
       ``(3) Vesting requirements.--The requirements of this 
     paragraph are met if the plan satisfies the requirements of 
     either of the following subparagraphs:
       ``(A) 3-year vesting.--A plan satisfies the requirements of 
     this subparagraph if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(B) 5-year graded vesting.--A plan satisfies the 
     requirements of this subparagraph if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

``Years of                                           The nonforfeitable
  service:                                               percentage is:
  1.............................................................20 ....

  2.............................................................40 ....

  3.............................................................60 ....

  4.............................................................80 ....

  5............................................................100.....

       ``(4) Distribution requirements.--In the case of a profit-
     sharing or stock bonus plan, the requirements of this 
     paragraph are met if, under the plan, qualified employer 
     contributions are distributable only as provided in section 
     401(k)(2)(B).
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Eligible employer.--
       ``(A) In general.--The term `eligible employer' means, with 
     respect to any year, an employer which has no more than 20 
     employees who received at least $5,000 of compensation from 
     the employer for the preceding year.
       ``(B) Requirement for new qualified employer plans.--Such 
     term shall not include an employer if, during the 3-taxable 
     year period immediately preceding the 1st taxable year for 
     which the credit under this section is otherwise allowable 
     for a qualified employer plan of the employer, the employer 
     or any member of any controlled group including the employer 
     (or any predecessor of either) established or maintained a 
     qualified employer plan with respect to which contributions 
     were made, or benefits were accrued, for substantially the 
     same employees as are in the qualified employer plan.
       ``(2) Highly compensated employee.--The term `highly 
     compensated employee' has the meaning given such term by 
     section 414(q) (determined without regard to section 
     414(q)(1)(B)(ii)).
       ``(f) Special Rules.--
       ``(1) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of the qualified employer 
     contributions paid or incurred for the taxable year which is 
     equal to the credit determined under subsection (a).
       ``(2) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable year.
       ``(3) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(g) Recapture of Credit on Forfeited Contributions.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     any accrued benefit which is forfeitable by reason of 
     subsection (d)(3) is forfeited, the employer's tax imposed by 
     this chapter for the taxable year in which the forfeiture 
     occurs shall be increased by 35 percent of the employer 
     contributions from which such benefit is derived to the 
     extent such contributions were taken into account in 
     determining the credit under this section.
       ``(2) Reallocated contributions.--Paragraph (1) shall not 
     apply to any contribution which is reallocated by the 
     employer under the plan to employees who are not highly 
     compensated employees.''.
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit) 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 an eligible employer (as defined in 
     section 45E(e)), the small employer pension plan contribution 
     credit determined under section 45E(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(10) No carryback of small employer pension plan 
     contribution credit before january 1, 2003.--No portion of 
     the unused business credit for any taxable year which is 
     attributable to the small employer pension plan contribution 
     credit determined under section 45E may be carried back to a 
     taxable year beginning before January 1, 2003.''
       (2) Subsection (c) of section 196 is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the small employer pension plan contribution credit 
     determined under section 45E(a).''
       (3) 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. Small employer pension plan contributions.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions paid or incurred in taxable 
     years beginning after December 31, 2002.

     SEC. 619. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 618, is amended by adding at the end the following 
     new section:

     ``SEC. 45F. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     startup cost credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the 
     qualified startup costs paid or incurred by the taxpayer 
     during the taxable year.
       ``(b) Dollar Limitation.--The amount of the credit 
     determined under this section for any taxable year shall not 
     exceed--
       ``(1) $500 for the first credit year and each of the 2 
     taxable years immediately following the first credit year, 
     and
       ``(2) zero for any other taxable year.
       ``(c) Eligible Employer.--For purposes of this section--
       ``(1) In general.--The term `eligible employer' has the 
     meaning given such term by section 408(p)(2)(C)(i).
       ``(2) Requirement for new qualified employer plans.--Such 
     term shall not include an employer if, during the 3-taxable 
     year period immediately preceding the 1st taxable year for 
     which the credit under this section is otherwise allowable 
     for a qualified employer plan of the employer, the employer 
     or any member of any controlled group including the employer 
     (or any predecessor of either) established or maintained a 
     qualified employer plan with respect to which contributions 
     were made, or benefits were accrued, for substantially the 
     same employees as are in the qualified employer plan.
       ``(d) Other Definitions.--For purposes of this section--
       ``(1) Qualified startup costs.--
       ``(A) In general.--The term `qualified startup costs' means 
     any ordinary and necessary expenses of an eligible employer 
     which are paid or incurred in connection with--
       ``(i) the establishment or administration of an eligible 
     employer plan, or
       ``(ii) the retirement-related education of employees with 
     respect to such plan.
       ``(B) Plan must have at least 1 participant.--Such term 
     shall not include any expense in connection with a plan that 
     does not have at least 1 employee eligible to participate who 
     is not a highly compensated employee.
       ``(2) Eligible employer plan.--The term `eligible employer 
     plan' means a qualified employer plan within the meaning of 
     section 4972(d).
       ``(3) First credit year.--The term `first credit year' 
     means--
       ``(A) the taxable year which includes the date that the 
     eligible employer plan to which such costs relate becomes 
     effective, or
       ``(B) at the election of the eligible employer, the taxable 
     year preceding the taxable year referred to in subparagraph 
     (A).
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(2) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of

[[Page S5366]]

     the qualified startup costs paid or incurred for the taxable 
     year which is equal to the credit determined under subsection 
     (a).
       ``(3) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable 
     year.''
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit), as 
     amended by section 618, is amended by striking ``plus'' at 
     the end of paragraph (13), by striking the period at the end 
     of paragraph (14) and inserting ``, plus'', and by adding at 
     the end the following new paragraph:
       ``(15) in the case of an eligible employer (as defined in 
     section 45F(c)), the small employer pension plan startup cost 
     credit determined under section 45F(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d), as amended by section 618(c), is amended 
     by adding at the end the following new paragraph:
       ``(11) No carryback of small employer pension plan startup 
     cost credit before january 1, 2002.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the small employer pension plan startup cost credit 
     determined under section 45F may be carried back to a taxable 
     year beginning before January 1, 2002.''
       (2) Subsection (c) of section 196, as amended by section 
     618(c), is amended by striking ``and'' at the end of 
     paragraph (9), by striking the period at the end of paragraph 
     (10) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(11) the small employer pension plan startup cost credit 
     determined under section 45F(a).''
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 618(c), is 
     amended by adding at the end the following new item:

``Sec. 45F. Small employer pension plan startup costs.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2001, with respect to qualified 
     employer plans established after such date.

     SEC. 620. ELIMINATION OF USER FEE FOR REQUESTS TO IRS 
                   REGARDING NEW PENSION PLANS.

       (a) Elimination of Certain User Fees.--The Secretary of the 
     Treasury or the Secretary's delegate shall not require 
     payment of user fees under the program established under 
     section 10511 of the Revenue Act of 1987 for requests to the 
     Internal Revenue Service for ruling letters, opinion letters, 
     and determination letters or similar requests with respect to 
     the qualified status of a new pension benefit plan or any 
     trust which is part of the plan.
       (b) New Pension Benefit Plan.--For purposes of this 
     section--
       (1) In general.--The term ``new pension benefit plan'' 
     means a pension, profit-sharing, stock bonus, annuity, or 
     employee stock ownership plan which is maintained by one or 
     more eligible employers if such employer (or any predecessor 
     employer) has not made a prior request described in 
     subsection (a) for such plan (or any predecessor plan).
       (2) Eligible employer.--
       (A) In general.--The term ``eligible employer'' means an 
     employer which has--
       (i) no more than 100 employees for the preceding year, and
       (ii) at least one employee who is not a highly compensated 
     employee (as defined in section 414(q)) and is participating 
     in the plan.
       (B) New plan requirement.--The term ``eligible employer'' 
     shall not include an employer if, during the 3-taxable year 
     period immediately preceding the taxable year in which the 
     request is made, the employer or any member of any controlled 
     group including the employer (or any predecessor of either) 
     established or maintained a qualified employer plan with 
     respect to which contributions were made, or benefits were 
     accrued for service, for substantially the same employees as 
     are in the qualified employer plan.
       (c) Determination of Average Fees Charged.--For purposes of 
     any determination of average fees charged, any request to 
     which subsection (a) applies shall not be taken into account.
       (d) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2001.

     SEC. 621. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN 
                   INTERNATIONAL TRANSPORTATION SERVICES.

       (a) Exclusion From Income Sourcing Rules.--The second 
     sentence of section 861(a)(3) (relating to gross income from 
     sources within the United States) is amended by striking 
     ``except for purposes of sections 79 and 105 and subchapter 
     D,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to remuneration for services performed in plan 
     years beginning after December 31, 2001.

                Subtitle C--Enhancing Fairness for Women

     SEC. 631. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES 
                   TO DEFINED CONTRIBUTION PLANS.

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``the 
     applicable percentage''.
       (2) Applicable percentage.--Section 415(c) is amended by 
     adding at the end the following new paragraph:
       ``(8) Applicable percentage.--For purposes of paragraph 
     (1)(B), the applicable percentage shall be determined in 
     accordance with the following table:

``For years beginning in:                 The applicable percentage is:
  2002 through 2010.........................................50 percent 
  2011 and thereafter...................................100 percent.''.

       (3) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the fifth taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (4) Conforming amendments.--
       (A) Subsection (f) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Economic Stimulus Tax Cut Act of 2001)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 611(c)(3)) is amended by inserting before the 
     period at the end the following: ``(as in effect before the 
     enactment of the Economic Stimulus Tax Cut Act of 2001)''.
       (H) Section 664(g) is amended--
       (i) in paragraph (3)(E) by striking ``limitations under 
     section 415(c)'' and inserting ``applicable limitation under 
     paragraph (7)'', and
       (ii) by adding at the end the following new paragraph:
       ``(7) Applicable limitation.--
       ``(A) In general.--For purposes of paragraph (3)(E), the 
     applicable limitation under this paragraph with respect to a 
     participant is an amount equal to the lesser of--
       ``(i) $30,000, or
       ``(ii) 25 percent of the participant's compensation (as 
     defined in section 415(c)(3)).
       ``(B) Cost-of-living adjustment.--The Secretary shall 
     adjust annually the $30,000 amount under subparagraph (A)(i) 
     at the same time and in the same manner as under section 
     415(d), except that the base period shall be the calendar 
     quarter beginning October 1, 1993, and any increase under 
     this subparagraph which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.''.
       (5) Effective date.--
       (A) Except as provided in subparagraph (B), the amendments 
     made by this subsection shall apply to years beginning after 
     December 31, 2001.
       (B) The amendments made by paragraphs (3) and (4) shall 
     apply to years beginning after December 31, 2010.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--

[[Page S5367]]

       (A) In general.--The amendment made by paragraph (1) shall 
     apply to limitation years beginning after December 31, 2000.
       (B) Exclusion allowance.--Effective for limitation years 
     beginning in 2001, in the case of any annuity contract 
     described in section 403(b) of the Internal Revenue Code of 
     1986, the amount of the contribution disqualified by reason 
     of section 415(g) of such Code shall reduce the exclusion 
     allowance as provided in section 403(b)(2) of such Code.
       (3) Modification of 403(b) exclusion allowance to conform 
     to 415 modification.--The Secretary of the Treasury shall 
     modify the regulations regarding the exclusion allowance 
     under section 403(b)(2) of the Internal Revenue Code of 1986 
     to render void the requirement that contributions to a 
     defined benefit pension plan be treated as previously 
     excluded amounts for purposes of the exclusion allowance. For 
     taxable years beginning after December 31, 2000, such 
     regulations shall be applied as if such requirement were 
     void.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``the applicable percentage''.
       (2) Applicable percentage.--Section 457 is amended by 
     adding at the end the following new subsection:
       ``(h) Applicable Percentage.--For purposes of subsection 
     (b)(2)(A), the applicable percentage shall be determined in 
     accordance with the following table:

``For years beginning in:                 The applicable percentage is:
    2002 through 2010.......................................50 percent 
    2011 and thereafter.................................100 percent.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

     SEC. 632. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

       (a) In General.--Section 411(a) (relating to minimum 
     vesting standards) is amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (12), a plan''; and
       (2) by adding at the end the following:
       ``(12) Faster vesting for matching contributions.--In the 
     case of matching contributions (as defined in section 
     401(m)(4)(A)), paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
    ``Years of service:                                  percentage is:
      2.............................................................20 
      3.............................................................40 
      4.............................................................60 
      5.............................................................80 
      6.........................................................100.''.
       (b) Amendment of ERISA.--Section 203(a) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is 
     amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (4), a plan'', and
       (2) by adding at the end the following:
       ``(4) In the case of matching contributions (as defined in 
     section 401(m)(4)(A) of the Internal Revenue Code of 1986), 
     paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
  2.............................................................20 ....

  3.............................................................40 ....

  4.............................................................60 ....

  5.............................................................80 ....

  6.........................................................100.''.....

       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2001.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment); or
       (ii) January 1, 2002; or
       (B) January 1, 2006.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 633. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.

       (a) Life Expectancy Tables.--The Secretary of the Treasury 
     shall modify the life expectancy tables under the regulations 
     relating to minimum distribution requirements under sections 
     401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of 
     the Internal Revenue Code to reflect current life expectancy.
       (b) Repeal of Rule Where Distributions Had Begun Before 
     Death Occurs.--
       (1) In general.--Subparagraph (B) of section 401(a)(9) is 
     amended by striking clause (i) and redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (2) Conforming changes.--
       (A) Clause (i) of section 401(a)(9)(B) (as so redesignated) 
     is amended--
       (i) by striking ``for other cases'' in the heading; and
       (ii) by striking ``the distribution of the employee's 
     interest has begun in accordance with subparagraph (A)(ii)'' 
     and inserting ``his entire interest has been distributed to 
     him''.
       (B) Clause (ii) of section 401(a)(9)(B) (as so 
     redesignated) is amended by striking ``clause (ii)'' and 
     inserting ``clause (i)''.
       (C) Clause (iii) of section 401(a)(9)(B) (as so 
     redesignated) is amended--
       (i) by striking ``clause (iii)(I)'' and inserting ``clause 
     (ii)(I)'';
       (ii) by striking ``clause (iii)(III)'' in subclause (I) and 
     inserting ``clause (ii)(III)'';
       (iii) by striking ``the date on which the employee would 
     have attained age 70\1/2\,'' in subclause (I) and inserting 
     ``April 1 of the calendar year following the calendar year in 
     which the spouse attains 70\1/2\,''; and
       (iv) by striking ``the distributions to such spouse 
     begin,'' in subclause (II) and inserting ``his entire 
     interest has been distributed to him,''.
       (3) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to years 
     beginning after December 31, 2001.
       (B) Distributions to surviving spouse.--
       (i) In general.--In the case of an employee described in 
     clause (ii), distributions to the surviving spouse of the 
     employee shall not be required to commence prior to the date 
     on which such distributions would have been required to begin 
     under section 401(a)(9)(B) of the Internal Revenue Code of 
     1986 (as in effect on the day before the date of the 
     enactment of this Act).
       (ii) Certain employees.--An employee is described in this 
     clause if such employee dies before--

       (I) the date of the enactment of this Act, and
       (II) the required beginning date (within the meaning of 
     section 401(a)(9)(C) of the Internal Revenue Code of 1986) of 
     the employee.

     SEC. 634. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

       (a) In General.--Section 414(p)(11) (relating to 
     application of rules to governmental and church plans) is 
     amended--
       (1) by inserting ``or an eligible deferred compensation 
     plan (within the meaning of section 457(b))'' after 
     ``subsection (e))''; and
       (2) in the heading, by striking ``governmental and church 
     plans'' and inserting ``certain other plans''.
       (b) Waiver of Certain Distribution Requirements.--Paragraph 
     (10) of section 414(p) is amended by striking ``and section 
     409(d)'' and inserting ``section 409(d), and section 
     457(d)''.
       (c) Tax Treatment of Payments From a Section 457 Plan.--
     Subsection (p) of section 414 is amended by redesignating 
     paragraph (12) as paragraph (13) and inserting after 
     paragraph (11) the following new paragraph:
       ``(12) Tax treatment of payments from a section 457 plan.--
     If a distribution or payment from an eligible deferred 
     compensation plan described in section 457(b) is made 
     pursuant to a qualified domestic relations order, rules 
     similar to the rules of section 402(e)(1)(A) shall apply to 
     such distribution or payment.''.
       (d) Effective Date.--
       (1) In general.--The amendment made by subsection (c) shall 
     apply to transfers, distributions, and payments made after 
     December 31, 2001.
       (2) Amendments relating to assignments in divorce, etc., 
     proceedings.--The amendments made by subsections (a) and (b) 
     shall take effect on January 1, 2002, except that in the case 
     of a domestic relations order entered before such date, the 
     plan administrator--
       (A) shall treat such order as a qualified domestic 
     relations order if such administrator is paying benefits 
     pursuant to such order on such date, and
       (B) may treat any other such order entered before such date 
     as a qualified domestic relations order even if such order 
     does not meet the requirements of such amendments.

     SEC. 635. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.

       (a) Safe Harbor Relief.--
       (1) In general.--The Secretary of the Treasury shall revise 
     the regulations relating to hardship distributions under 
     section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 
     1986 to provide that the period an employee is prohibited 
     from making elective and employee contributions in order for 
     a distribution to be deemed necessary to satisfy financial 
     need shall be equal to 6 months.
       (2) Effective date.--The revised regulations under this 
     subsection shall apply to years beginning after December 31, 
     2001.
       (b) Hardship Distributions Not Treated as Eligible Rollover 
     Distributions.--
       (1) Modification of definition of eligible rollover.--
     Subparagraph (C) of section 402(c)(4) (relating to eligible 
     rollover distribution) is amended to read as follows:
       ``(C) any distribution which is made upon hardship of the 
     employee.''.

[[Page S5368]]

       (2) Effective date.--The amendment made by this subsection 
     shall apply to distributions made after December 31, 2001.

     SEC. 636. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR 
                   DOMESTIC OR SIMILAR WORKERS.

       (a) In General.--Section 4972(c)(6) (relating to exceptions 
     to nondeductible contributions), as amended by section 616, 
     is amended by striking ``or'' at the end of subparagraph (A), 
     by striking the period and inserting ``, or'' at the end of 
     subparagraph (B), and by inserting after subparagraph (B) the 
     following new subparagraph:
       ``(C) so much of the contributions to a simple retirement 
     account (within the meaning of section 408(p)) or a simple 
     plan (within the meaning of section 401(k)(11)) which are not 
     deductible when contributed solely because such contributions 
     are not made in connection with a trade or business of the 
     employer.''
       (b) Exclusion of Certain Contributions.--Section 
     4972(c)(6), as amended by subsection (a), is amended by 
     adding at the end the following new sentence: ``Subparagraph 
     (C) shall not apply to contributions made on behalf of the 
     employer or a member of the employer's family (as defined in 
     section 447(e)(1)).''.
       (c) No Inference.--Nothing in the amendments made by this 
     section shall be construed to infer the proper treatment of 
     nondeductible contributions under the laws in effect before 
     such amendments.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle D--Increasing Portability for Participants

     SEC. 641. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,

     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A), or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b) and which is maintained by an 
     eligible employer described in section 457(e)(1)(A).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an eligible employer described in section 457(e)(1)(A) shall 
     be treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''.
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403(b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting ``, and'', and by inserting after clause 
     (v) the following new clause:
       ``(vi) an annuity contract described in section 403(b).''.
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''.
       (d) Spousal Rollovers.--Section 402(c)(9) (relating to 
     rollover where spouse receives distribution after death of 
     employee) is amended by striking ``; except that'' and all 
     that follows up to the end period.
       (e) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f)(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended to 
     read as follows:
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A), 
     except that section 402(f) shall be applied to the payor in 
     lieu of the plan administrator.''.
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8),'' and inserting ``403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of any amendment made by this section.

[[Page S5369]]

     SEC. 642. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

       (a) In General.--Subparagraph (A) of section 408(d)(3) 
     (relating to rollover amounts) is amended by adding ``or'' at 
     the end of clause (i), by striking clauses (ii) and (iii), 
     and by adding at the end the following:
       ``(ii) the entire amount received (including money and any 
     other property) is paid into an eligible retirement plan for 
     the benefit of such individual not later than the 60th day 
     after the date on which the payment or distribution is 
     received, except that the maximum amount which may be paid 
     into such plan may not exceed the portion of the amount 
     received which is includible in gross income (determined 
     without regard to this paragraph).

     For purposes of clause (ii), the term `eligible retirement 
     plan' means an eligible retirement plan described in clause 
     (iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''.
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of the amendments made by this section.

     SEC. 643. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

       (a) Rollovers From Exempt Trusts.--Paragraph (2) of section 
     402(c) (relating to maximum amount which may be rolled over) 
     is amended by adding at the end the following: ``The 
     preceding sentence shall not apply to such distribution to 
     the extent--
       ``(A) such portion is transferred in a direct trustee-to-
     trustee transfer to a qualified trust which is part of a plan 
     which is a defined contribution plan and which agrees to 
     separately account for amounts so transferred, including 
     separately accounting for the portion of such distribution 
     which is includible in gross income and the portion of such 
     distribution which is not so includible, or
       ``(B) such portion is transferred to an eligible retirement 
     plan described in clause (i) or (ii) of paragraph (8)(B).''.
       (b) Optional Direct Transfer of Eligible Rollover 
     Distributions.--Subparagraph (B) of section 401(a)(31) 
     (relating to limitation) is amended by adding at the end the 
     following: ``The preceding sentence shall not apply to such 
     distribution if the plan to which such distribution is 
     transferred--
       ``(i) agrees to separately account for amounts so 
     transferred, including separately accounting for the portion 
     of such distribution which is includible in gross income and 
     the portion of such distribution which is not so includible, 
     or
       ``(ii) is an eligible retirement plan described in clause 
     (i) or (ii) of section 402(c)(8)(B).''.
       (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) 
     of section 408(d) (relating to special rules for applying 
     section 72) is amended by inserting at the end the following:
       ``(H) Application of section 72.--
       ``(i) In general.--If--

       ``(I) a distribution is made from an individual retirement 
     plan, and
       ``(II) a rollover contribution is made to an eligible 
     retirement plan described in section 402(c)(8)(B)(iii), (iv), 
     (v), or (vi) with respect to all or part of such 
     distribution,

     then, notwithstanding paragraph (2), the rules of clause (ii) 
     shall apply for purposes of applying section 72.
       ``(ii) Applicable rules.--In the case of a distribution 
     described in clause (i)--

       ``(I) section 72 shall be applied separately to such 
     distribution,
       ``(II) notwithstanding the pro rata allocation of income 
     on, and investment in, the contract to distributions under 
     section 72, the portion of such distribution rolled over to 
     an eligible retirement plan described in clause (i) shall be 
     treated as from income on the contract (to the extent of the 
     aggregate income on the contract from all individual 
     retirement plans of the distributee), and
       ``(III) appropriate adjustments shall be made in applying 
     section 72 to other distributions in such taxable year and 
     subsequent taxable years.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after December 31, 2001.

     SEC. 644. HARDSHIP EXCEPTION TO 60-DAY RULE.

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 643, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 645. TREATMENT OF FORMS OF DISTRIBUTION.

       (a) Plan Transfers.--
       (1) Amendment of internal revenue code.--Paragraph (6) of 
     section 411(d) (relating to accrued benefit not to be 
     decreased by amendment) is amended by adding at the end the 
     following:
       ``(D) Plan transfers.--
       ``(i) In general.--A defined contribution plan (in this 
     subparagraph referred to as the `transferee plan') shall not 
     be treated as failing to meet the requirements of this 
     subsection merely because the transferee plan does not 
     provide some or all of the forms of distribution previously 
     available under another defined contribution plan (in this 
     subparagraph referred to as the `transferor plan') to the 
     extent that--

       ``(I) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(II) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in subclause 
     (I),
       ``(III) the transfer described in subclause (I) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(IV) the election described in subclause (III) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election, and
       ``(V) the transferee plan allows the participant or 
     beneficiary described in subclause (III) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.

       ``(ii) Special rule for mergers, etc.--Clause (i) shall 
     apply to plan mergers and other transactions having the 
     effect of a direct transfer, including consolidations of 
     benefits attributable to different employers within a 
     multiple employer plan.''.
       (2) Amendment of erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following:
       ``(4)(A) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this subparagraph referred to 
     as the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan;
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i);
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan;
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election; and
       ``(v) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.
       ``(B) Subparagraph (A) shall apply to plan mergers and 
     other transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

[[Page S5370]]

       (b) Regulations.--
       (1) Amendment of internal revenue code.--The last sentence 
     of paragraph (6)(B) of section 411(d) (relating to accrued 
     benefit not to be decreased by amendment) is amended to read 
     as follows: ``The Secretary shall by regulations provide that 
     this subparagraph shall not apply to any plan amendment which 
     reduces or eliminates benefits or subsidies which create 
     significant burdens or complexities for the plan and plan 
     participants, unless such amendment adversely affects the 
     rights of any participant in a more than de minimis 
     manner.''.
       (2) Amendment of erisa.--The last sentence of section 
     204(g)(2) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
     ``The Secretary of the Treasury shall by regulations provide 
     that this paragraph shall not apply to any plan amendment 
     which reduces or eliminates benefits or subsidies which 
     create significant burdens or complexities for the plan and 
     plan participants, unless such amendment adversely affects 
     the rights of any participant in a more than de minimis 
     manner.''.
       (3) Secretary directed.--Not later than December 31, 2002, 
     the Secretary of the Treasury is directed to issue 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986 and section 204(g) of the Employee Retirement 
     Income Security Act of 1974, including the regulations 
     required by the amendment made by this subsection. Such 
     regulations shall apply to plan years beginning after 
     December 31, 2002, or such earlier date as is specified by 
     the Secretary of the Treasury.

     SEC. 646. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

       (a) Modification of Same Desk Exception.--
       (1) Section 401(k).--
       (A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash 
     or deferred arrangements) is amended by striking ``separation 
     from service'' and inserting ``severance from employment''.
       (B) Subparagraph (A) of section 401(k)(10) (relating to 
     distributions upon termination of plan or disposition of 
     assets or subsidiary) is amended to read as follows:
       ``(A) In general.--An event described in this subparagraph 
     is the termination of the plan without establishment or 
     maintenance of another defined contribution plan (other than 
     an employee stock ownership plan as defined in section 
     4975(e)(7)).''.
       (C) Section 401(k)(10) is amended--
       (i) in subparagraph (B)--

       (I) by striking ``An event'' in clause (i) and inserting 
     ``A termination''; and
       (II) by striking ``the event'' in clause (i) and inserting 
     ``the termination'';

       (ii) by striking subparagraph (C); and
       (iii) by striking ``or disposition of assets or 
     subsidiary'' in the heading.
       (2) Section 403(b).--
       (A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are 
     each amended by striking ``separates from service'' and 
     inserting ``has a severance from employment''.
       (B) The heading for paragraph (11) of section 403(b) is 
     amended by striking ``separation from service'' and inserting 
     ``severance from employment''.
       (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
     amended by striking ``is separated from service'' and 
     inserting ``has a severance from employment''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 647. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (b) 457 Plans.--Subsection (e) of section 457, as amended 
     by section 641, is amended by adding after paragraph (16) the 
     following new paragraph:
       ``(17) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to trustee-to-trustee transfers after December 
     31, 2001.

     SEC. 648. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

       (a) Qualified Plans.--
       (1) Amendment of internal revenue code.--Section 411(a)(11) 
     (relating to restrictions on certain mandatory distributions) 
     is amended by adding at the end the following:
       ``(D) Special rule for rollover contributions.--A plan 
     shall not fail to meet the requirements of this paragraph if, 
     under the terms of the plan, the present value of the 
     nonforfeitable accrued benefit is determined without regard 
     to that portion of such benefit which is attributable to 
     rollover contributions (and earnings allocable thereto). For 
     purposes of this subparagraph, the term `rollover 
     contributions' means any rollover contribution under sections 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
     457(e)(16).''.
       (2) Amendment of erisa.--Section 203(e) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
     amended by adding at the end the following:
       ``(4) A plan shall not fail to meet the requirements of 
     this subsection if, under the terms of the plan, the present 
     value of the nonforfeitable accrued benefit is determined 
     without regard to that portion of such benefit which is 
     attributable to rollover contributions (and earnings 
     allocable thereto). For purposes of this subparagraph, the 
     term `rollover contributions' means any rollover contribution 
     under sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code 
     of 1986.''.
       (b) Eligible Deferred Compensation Plans.--Clause (i) of 
     section 457(e)(9)(A) is amended by striking ``such amount'' 
     and inserting ``the portion of such amount which is not 
     attributable to rollover contributions (as defined in section 
     411(a)(11)(D))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 649. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR 
                   SECTION 457 PLANS.

       (a) Minimum Distribution Requirements.--Paragraph (2) of 
     section 457(d) (relating to distribution requirements) is 
     amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     minimum distribution requirements of this paragraph if such 
     plan meets the requirements of section 401(a)(9).''.
       (b) Inclusion in Gross Income.--
       (1) Year of inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.
       (2) Conforming amendments.--
       (A) So much of paragraph (9) of section 457(e) as precedes 
     subparagraph (A) is amended to read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in subsection (e)(1)(B)--''.
       (B) Section 457(d) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rule for government plan.--An eligible 
     deferred compensation plan of an employer described in 
     subsection (e)(1)(A) shall not be treated as failing to meet 
     the requirements of this subsection solely by reason of 
     making a distribution described in subsection (e)(9)(A).''.
       (c) Modification of Transition Rules for Existing 457 
     Plans.--
       (1) In general.--Section 1107(c)(3)(B) of the Tax Reform 
     Act of 1986 is amended by striking ``or'' at the end of 
     clause (i), by striking the period at the end of clause (ii) 
     and inserting ``, or'' and by inserting after clause (ii) the 
     following new clause:
       ``(iii) are deferred pursuant to an agreement with an 
     individual covered by an agreement described in clause (ii), 
     to the extent the annual amount under such agreement with the 
     individual does not exceed--

       ``(I) the amount described in clause (ii)(II), multiplied 
     by
       ``(II) the cumulative increase in the Consumer Price Index 
     (as published by the Bureau of Labor Statistics of the 
     Department of Labor).''.

       (2) Conforming amendment.--The fourth sentence of section 
     1107(c)(3)(B) of the Tax Reform Act of 1986 is amended by 
     striking ``This subparagraph'' and inserting ``Clauses (i) 
     and (ii) of this subparagraph''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act with respect to increases in the 
     Consumer Price Index after September 30, 1993.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to distributions after December 31, 2001.

[[Page S5371]]

       Subtitle E--Strengthening Pension Security and Enforcement

                       PART I--GENERAL PROVISIONS

     SEC. 651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY FUNDING 
                   LIMIT.

       (a) Amendments to Internal Revenue Code.--Section 412(c)(7) 
     (relating to full-funding limitation) is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage''; and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

``In the case of any plan year beginning The applicable percentage is--
      2002.........................................................160 
      2003.........................................................165 
      2004......................................................170.''.

       (b) Amendment of ERISA.--Section 302(c)(7) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) 
     is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage'', and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

``In the case of any plan year beginning The applicable percentage is--
      2002.........................................................160 
      2003.........................................................165 
      2004......................................................170.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 652. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

       (a) In General.--Subparagraph (D) of section 404(a)(1) 
     (relating to special rule in case of certain plans) is 
     amended to read as follows:
       ``(D) Special rule in case of certain plans.--
       ``(i) In general.--In the case of any defined benefit plan, 
     except as provided in regulations, the maximum amount 
     deductible under the limitations of this paragraph shall not 
     be less than the unfunded termination liability (determined 
     as if the proposed termination date referred to in section 
     4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
     Security Act of 1974 were the last day of the plan year).
       ``(ii) Plans with less than 100 participants.--For purposes 
     of this subparagraph, in the case of a plan which has less 
     than 100 participants for the plan year, termination 
     liability shall not include the liability attributable to 
     benefit increases for highly compensated employees (as 
     defined in section 414(q)) resulting from a plan amendment 
     which is made or becomes effective, whichever is later, 
     within the last 2 years before the termination date.
       ``(iii) Rule for determining number of participants.--For 
     purposes of determining whether a plan has more than 100 
     participants, all defined benefit plans maintained by the 
     same employer (or any member of such employer's controlled 
     group (within the meaning of section 412(l)(8)(C))) shall be 
     treated as one plan, but only employees of such member or 
     employer shall be taken into account.
       ``(iv) Plans maintained by professional service 
     employers.--Clause (i) shall not apply to a plan described in 
     section 4021(b)(13) of the Employee Retirement Income 
     Security Act of 1974.''.
       (b) Conforming Amendment.--Paragraph (6) of section 4972(c) 
     is amended to read as follows:
       ``(6) Exceptions.--In determining the amount of 
     nondeductible contributions for any taxable year, there shall 
     not be taken into account so much of the contributions to one 
     or more defined contribution plans which are not deductible 
     when contributed solely because of section 404(a)(7) as does 
     not exceed the greater of--
       ``(A) the amount of contributions not in excess of 6 
     percent of compensation (within the meaning of section 
     404(a)) paid or accrued (during the taxable year for which 
     the contributions were made) to beneficiaries under the 
     plans, or
       ``(B) the sum of--
       ``(i) the amount of contributions described in section 
     401(m)(4)(A), plus
       ``(ii) the amount of contributions described in section 
     402(g)(3)(A).

     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 653. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

       (a) In General.--Subsection (c) of section 4972 (relating 
     to nondeductible contributions) is amended by adding at the 
     end the following new paragraph:
       ``(7) Defined benefit plan exception.--In determining the 
     amount of nondeductible contributions for any taxable year, 
     an employer may elect for such year not to take into account 
     any contributions to a defined benefit plan except to the 
     extent that such contributions exceed the full-funding 
     limitation (as defined in section 412(c)(7), determined 
     without regard to subparagraph (A)(i)(I) thereof). For 
     purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to defined contribution plans and then to amounts 
     described in this paragraph. If an employer makes an election 
     under this paragraph for a taxable year, paragraph (6) shall 
     not apply to such employer for such taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 654. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--
       (1) In general.--Paragraph (11) of section 415(b) (relating 
     to limitation for defined benefit plans) is amended to read 
     as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f)), subparagraph (B) of paragraph (1) 
     shall not apply.''.
       (2) Conforming amendment.--Section 415(b)(7) (relating to 
     benefits under certain collectively bargained plans) is 
     amended by inserting ``(other than a multiemployer plan)'' 
     after ``defined benefit plan'' in the matter preceding 
     subparagraph (A).
       (b) Combining and Aggregation of Plans.--
       (1) Combining of plans.--Subsection (f) of section 415 
     (relating to combining of plans) is amended by adding at the 
     end the following:
       ``(3) Exception for multiemployer plans.--Notwithstanding 
     paragraph (1) and subsection (g), a multiemployer plan (as 
     defined in section 414(f)) shall not be combined or 
     aggregated with any other plan maintained by an employer for 
     purposes of applying subsection (b)(1)(B) to such plan or any 
     other such plan.''.
       (2) Conforming amendment for aggregation of plans.--
     Subsection (g) of section 415 (relating to aggregation of 
     plans) is amended by striking ``The Secretary'' and inserting 
     ``Except as provided in subsection (f)(3), the Secretary''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 655. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS 
                   TO 401(K) PLANS.

       (a) In General.--Section 1524(b) of the Taxpayer Relief Act 
     of 1997 is amended to read as follows:
       ``(b) Effective Date.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to elective 
     deferrals for plan years beginning after December 31, 1998.
       ``(2) Nonapplication to previously acquired property.--The 
     amendments made by this section shall not apply to any 
     elective deferral which is invested in assets consisting of 
     qualifying employer securities, qualifying employer real 
     property, or both, if such assets were acquired before 
     January 1, 1999.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply as if included in the provision of the Taxpayer 
     Relief Act of 1997 to which it relates.

     SEC. 656. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION 
                   ESOP.

       (a) In General.--Section 409 (relating to qualifications 
     for tax credit employee stock ownership plans) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Prohibited Allocations of Securities in an S 
     Corporation.--
       ``(1) In general.--An employee stock ownership plan holding 
     employer securities consisting of stock in an S corporation 
     shall provide that no portion of the assets of the plan 
     attributable to (or allocable in lieu of) such employer 
     securities may, during a nonallocation year, accrue (or be 
     allocated directly or indirectly under any plan of the 
     employer meeting the requirements of section 401(a)) for the 
     benefit of any disqualified person.
       ``(2) Failure to meet requirements.--
       ``(A) In general.--If a plan fails to meet the requirements 
     of paragraph (1), the plan shall be treated as having 
     distributed to any disqualified person the amount allocated 
     to the account of such person in violation of paragraph (1) 
     at the time of such allocation.
       ``(B) Cross reference.--

  ``For excise tax relating to violations of paragraph (1) and 
ownership of synthetic equity, see section 4979A.

       ``(3) Nonallocation year.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonallocation year' means any 
     plan year of an employee stock ownership plan if, at any time 
     during such plan year--
       ``(i) such plan holds employer securities consisting of 
     stock in an S corporation, and
       ``(ii) disqualified persons own at least 50 percent of the 
     number of shares of stock in the S corporation.
       ``(B) Attribution rules.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The rules of section 318(a) shall apply 
     for purposes of determining ownership, except that--

[[Page S5372]]

       ``(I) in applying paragraph (1) thereof, the members of an 
     individual's family shall include members of the family 
     described in paragraph (4)(D), and
       ``(II) paragraph (4) thereof shall not apply.

       ``(ii) Deemed-owned shares.--Notwithstanding the employee 
     trust exception in section 318(a)(2)(B)(i), an individual 
     shall be treated as owning deemed-owned shares of the 
     individual.
     Solely for purposes of applying paragraph (5), this 
     subparagraph shall be applied after the attribution rules of 
     paragraph (5) have been applied.
       ``(4) Disqualified person.--For purposes of this 
     subsection--
       ``(A) In general.--The term `disqualified person' means any 
     person if--
       ``(i) the aggregate number of deemed-owned shares of such 
     person and the members of such person's family is at least 20 
     percent of the number of deemed-owned shares of stock in the 
     S corporation, or
       ``(ii) in the case of a person not described in clause (i), 
     the number of deemed-owned shares of such person is at least 
     10 percent of the number of deemed-owned shares of stock in 
     such corporation.
       ``(B) Treatment of family members.--In the case of a 
     disqualified person described in subparagraph (A)(i), any 
     member of such person's family with deemed-owned shares shall 
     be treated as a disqualified person if not otherwise treated 
     as a disqualified person under subparagraph (A).
       ``(C) Deemed-owned shares.--
       ``(i) In general.--The term `deemed-owned shares' means, 
     with respect to any person--

       ``(I) the stock in the S corporation constituting employer 
     securities of an employee stock ownership plan which is 
     allocated to such person under the plan, and
       ``(II) such person's share of the stock in such corporation 
     which is held by such plan but which is not allocated under 
     the plan to participants.

       ``(ii) Person's share of unallocated stock.--For purposes 
     of clause (i)(II), a person's share of unallocated S 
     corporation stock held by such plan is the amount of the 
     unallocated stock which would be allocated to such person if 
     the unallocated stock were allocated to all participants in 
     the same proportions as the most recent stock allocation 
     under the plan.
       ``(D) Member of family.--For purposes of this paragraph, 
     the term `member of the family' means, with respect to any 
     individual--
       ``(i) the spouse of the individual,
       ``(ii) an ancestor or lineal descendant of the individual 
     or the individual's spouse,
       ``(iii) a brother or sister of the individual or the 
     individual's spouse and any lineal descendant of the brother 
     or sister, and
       ``(iv) the spouse of any individual described in clause 
     (ii) or (iii).
     A spouse of an individual who is legally separated from such 
     individual under a decree of divorce or separate maintenance 
     shall not be treated as such individual's spouse for purposes 
     of this subparagraph.
       ``(5) Treatment of synthetic equity.--For purposes of 
     paragraphs (3) and (4), in the case of a person who owns 
     synthetic equity in the S corporation, except to the extent 
     provided in regulations, the shares of stock in such 
     corporation on which such synthetic equity is based shall be 
     treated as outstanding stock in such corporation and deemed-
     owned shares of such person if such treatment of synthetic 
     equity of 1 or more such persons results in--
       ``(A) the treatment of any person as a disqualified person, 
     or
       ``(B) the treatment of any year as a nonallocation year.
     For purposes of this paragraph, synthetic equity shall be 
     treated as owned by a person in the same manner as stock is 
     treated as owned by a person under the rules of paragraphs 
     (2) and (3) of section 318(a). If, without regard to this 
     paragraph, a person is treated as a disqualified person or a 
     year is treated as a nonallocation year, this paragraph shall 
     not be construed to result in the person or year not being so 
     treated.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Employee stock ownership plan.--The term `employee 
     stock ownership plan' has the meaning given such term by 
     section 4975(e)(7).
       ``(B) Employer securities.--The term `employer security' 
     has the meaning given such term by section 409(l).
       ``(C) Synthetic equity.--The term `synthetic equity' means 
     any stock option, warrant, restricted stock, deferred 
     issuance stock right, or similar interest or right that gives 
     the holder the right to acquire or receive stock of the S 
     corporation in the future. Except to the extent provided in 
     regulations, synthetic equity also includes a stock 
     appreciation right, phantom stock unit, or similar right to a 
     future cash payment based on the value of such stock or 
     appreciation in such value.
       ``(7) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection.''.
       (b) Coordination With Section 4975(e)(7).--The last 
     sentence of section 4975(e)(7) (defining employee stock 
     ownership plan) is amended by inserting ``, section 409(p),'' 
     after ``409(n)''.
       (c) Excise Tax.--
       (1) Application of tax.--Subsection (a) of section 4979A 
     (relating to tax on certain prohibited allocations of 
     employer securities) is amended--
       (A) by striking ``or'' at the end of paragraph (1), and
       (B) by striking all that follows paragraph (2) and 
     inserting the following:
       ``(3) there is any allocation of employer securities which 
     violates the provisions of section 409(p), or a nonallocation 
     year described in subsection (e)(2)(C) with respect to an 
     employee stock ownership plan, or
       ``(4) any synthetic equity is owned by a disqualified 
     person in any nonallocation year,
     there is hereby imposed a tax on such allocation or ownership 
     equal to 50 percent of the amount involved.''.
       (2) Liability.--Section 4979A(c) (defining liability for 
     tax) is amended to read as follows:
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid--
       ``(1) in the case of an allocation referred to in paragraph 
     (1) or (2) of subsection (a), by--
       ``(A) the employer sponsoring such plan, or
       ``(B) the eligible worker-owned cooperative,
     which made the written statement described in section 
     664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may 
     be), and
       ``(2) in the case of an allocation or ownership referred to 
     in paragraph (3) or (4) of subsection (a), by the S 
     corporation the stock in which was so allocated or owned.''.
       (3) Definitions.--Section 4979A(e) (relating to 
     definitions) is amended to read as follows:
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Definitions.--Except as provided in paragraph (2), 
     terms used in this section have the same respective meanings 
     as when used in sections 409 and 4978.
       ``(2) Special rules relating to tax imposed by reason of 
     paragraph (3) or (4) of subsection (a).--
       ``(A) Prohibited allocations.--The amount involved with 
     respect to any tax imposed by reason of subsection (a)(3) is 
     the amount allocated to the account of any person in 
     violation of section 409(p)(1).
       ``(B) Synthetic equity.--The amount involved with respect 
     to any tax imposed by reason of subsection (a)(4) is the 
     value of the shares on which the synthetic equity is based.
       ``(C) Special rule during first nonallocation year.--For 
     purposes of subparagraph (A), the amount involved for the 
     first nonallocation year of any employee stock ownership plan 
     shall be determined by taking into account the total value of 
     all the deemed-owned shares of all disqualified persons with 
     respect to such plan.
       ``(D) Statute of limitations.--The statutory period for the 
     assessment of any tax imposed by this section by reason of 
     paragraph (3) or (4) of subsection (a) shall not expire 
     before the date which is 3 years from the later of--
       ``(i) the allocation or ownership referred to in such 
     paragraph giving rise to such tax, or
       ``(ii) the date on which the Secretary is notified of such 
     allocation or ownership.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2002.
       (2) Exception for certain plans.--In the case of any--
       (A) employee stock ownership plan established after July 
     11, 2000, or
       (B) employee stock ownership plan established on or before 
     such date if employer securities held by the plan consist of 
     stock in a corporation with respect to which an election 
     under section 1362(a) of the Internal Revenue Code of 1986 is 
     not in effect on such date,
     the amendments made by this section shall apply to plan years 
     ending after July 11, 2000.

     SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY 
                   DISTRIBUTIONS.

       (a) Direct Transfers of Mandatory Distributions.--
       (1) In general.--Section 401(a)(31) (relating to optional 
     direct transfer of eligible rollover distributions), as 
     amended by section 643, is amended by redesignating 
     subparagraphs (B), (C), and (D) as subparagraphs (C), (D), 
     and (E), respectively, and by inserting after subparagraph 
     (A) the following new subparagraph:
       ``(B) Certain mandatory distributions.--
       ``(i) In general.--In case of a trust which is part of an 
     eligible plan, such trust shall not constitute a qualified 
     trust under this section unless the plan of which such trust 
     is a part provides that if--

       ``(I) a distribution described in clause (ii) in excess of 
     $1,000 is made, and
       ``(II) the distributee does not make an election under 
     subparagraph (A) and does not elect to receive the 
     distribution directly,

     the plan administrator shall make such transfer to an 
     individual retirement account or annuity of a designated 
     trustee or issuer and shall notify the distributee in writing 
     (either separately or as part of the notice under section 
     402(f)) that the distribution may be transferred without cost 
     or penalty to another individual account or annuity.
       ``(ii) Eligible plan.--For purposes of clause (i), the term 
     `eligible plan' means a plan which provides that any 
     nonforfeitable accrued benefit for which the present value 
     (as determined under section 411(a)(11)) does not exceed 
     $5,000 shall be immediately distributed to the 
     participant.''.
       (2) Conforming amendments.--
       (A) The heading of section 401(a)(31) is amended by 
     striking ``Optional direct'' and inserting ``Direct''.

[[Page S5373]]

       (B) Section 401(a)(31)(C), as redesignated by paragraph 
     (1), is amended by striking ``Subparagraph (A)'' and 
     inserting ``Subparagraphs (A) and (B)''.
       (b) Notice Requirement.--Section 402(f)(1) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D), and by adding at the end the following new 
     subparagraph:
       ``(E) if applicable, of the provision requiring a direct 
     trustee-to-trustee transfer of a distribution under section 
     401(a)(31)(B) unless the recipient elects otherwise.''.
       (c) Fiduciary Rules.--
       (1) In general.--Section 404(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
     adding at the end the following new paragraph:
       ``(3) In the case of a pension plan which makes a transfer 
     to an individual retirement account or annuity of a 
     designated trustee or issuer under section 401(a)(31)(B) of 
     the Internal Revenue Code of 1986, the participant or 
     beneficiary shall, for purposes of paragraph (1), be treated 
     as exercising control over the assets in the account or 
     annuity upon the earlier of--
       ``(A) a rollover of all or a portion of the amount to 
     another individual retirement account or annuity; or
       ``(B) one year after the transfer is made.''.
       (2) Regulations.--
       (A) Automatic rollover safe harbor.--The Secretary of Labor 
     shall promulgate regulations to provide guidance regarding 
     meeting the fiduciary requirements of section 404(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1104(a)) in the case of a pension plan which makes a transfer 
     under section 401(a)(31)(B) of the Internal Revenue Code of 
     1986.
       (B) Use of low-cost individual retirement plans.--The 
     Secretary of the Treasury and the Secretary of Labor shall 
     promulgate such regulations as necessary to encourage the use 
     of low-cost individual retirement plans for purposes of 
     transfers under section 401(a)(31)(B) of the Internal Revenue 
     Code of 1986 and for other uses as appropriate to promote the 
     preservation of assets for retirement income purposes.
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsection (c) are prescribed.

     SEC. 658. CLARIFICATION OF TREATMENT OF CONTRIBUTIONS TO 
                   MULTIEMPLOYER PLAN.

       (a) Not Considered Method of Accounting.--For purposes of 
     section 446 of the Internal Revenue Code of 1986, a 
     determination under section 404(a)(6) of such Code regarding 
     the taxable year with respect to which a contribution to a 
     multiemployer pension plan is deemed made shall not be 
     treated as a method of accounting of the taxpayer. No 
     deduction shall be allowed for any taxable year for any 
     contribution to a multiemployer pension plan with respect to 
     which a deduction was previously allowed.
       (b) Regulations.--The Secretary of the Treasury shall 
     promulgate such regulations as necessary to clarify that a 
     taxpayer shall not be allowed, with respect to any taxable 
     year, an aggregate amount of deductions for contributions to 
     a multiemployer pension plan which exceeds the amount of such 
     contributions made or deemed made under section 404(a)(6) of 
     the Internal Revenue Code of 1986 to such plan.
       (c) Effective Date.--Subsection (a), and any regulations 
     promulgated under subsection (b), shall be effective for 
     years ending after the date of the enactment of this Act.

 PART II--TREATMENT OF PLAN AMENDMENTS REDUCING FUTURE BENEFIT ACCRUALS

     SEC. 659. NOTICE REQUIRED FOR PENSION PLAN AMENDMENTS HAVING 
                   THE EFFECT OF SIGNIFICANTLY REDUCING FUTURE 
                   BENEFIT ACCRUALS.

       (a) Excise Tax.--
       (1) In general.--Chapter 43 (relating to qualified pension, 
     etc., plans) is amended by adding at the end the following 
     new section:

     ``SEC. 4980F. FAILURE TO PROVIDE NOTICE OF PENSION PLAN 
                   AMENDMENTS REDUCING BENEFIT ACCRUALS.

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of an applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the notice to which the failure 
     relates is provided or the failure is otherwise corrected.
       ``(c) Limitations on Amount of Tax.--
       ``(1) Tax not to apply where failure not discovered and 
     reasonable diligence exercised.--No tax shall be imposed by 
     subsection (a) on any failure during any period for which it 
     is established to the satisfaction of the Secretary that any 
     person subject to liability for the tax under subsection (d) 
     did not know that the failure existed and exercised 
     reasonable diligence to meet the requirements of subsection 
     (e).
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) any person subject to liability for the tax under 
     subsection (d) exercised reasonable diligence to meet the 
     requirements of subsection (e), and
       ``(B) such person provides the notice described in 
     subsection (e) during the 30-day period beginning on the 
     first date such person knew, or exercising reasonable 
     diligence would have known, that such failure existed.
       ``(3) Overall limitation for unintentional failures.--
       ``(A) In general.--If the person subject to liability for 
     tax under subsection (d) exercised reasonable diligence to 
     meet the requirements of subsection (e), the tax imposed by 
     subsection (a) for failures during the taxable year of the 
     employer (or, in the case of a multiemployer plan, the 
     taxable year of the trust forming part of the plan) shall not 
     exceed $500,000. For purposes of the preceding sentence, all 
     multiemployer plans of which the same trust forms a part 
     shall be treated as 1 plan.
       ``(B) Taxable years in the case of certain controlled 
     groups.--For purposes of this paragraph, if all persons who 
     are treated as a single employer for purposes of this section 
     do not have the same taxable year, the taxable years taken 
     into account shall be determined under principles similar to 
     the principles of section 1561.
       ``(4) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive or otherwise inequitable relative to the 
     failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plan Amendments Significantly 
     Reducing Benefit Accruals.--
       ``(1) In general.--If the sponsor of an applicable pension 
     plan adopts an amendment which has the effect of 
     significantly reducing the rate of future benefit accrual of 
     1 or more participants, the plan administrator shall, not 
     later than the 45th day before the effective date of the 
     amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,
       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2) Requirement to provide benefit estimation tool kit.--
       ``(A) In general.--If a plan amendment results in the 
     significant restructuring of the plan benefit formula (as 
     determined under regulations prescribed by the Secretary), 
     the plan administrator shall, not later than the 15th day 
     before the effective date of the amendment, provide a benefit 
     estimation tool kit described in subparagraph (B) to each 
     applicable individual. If such plan amendment occurs within 
     12 months of an event described in section 410(b)(6)(C), the 
     plan administrator shall in no event be required to provide 
     the benefit estimation tool kit to applicable individuals 
     affected by the event before the date which is 12 months 
     after the date on which notice under paragraph (1) is given 
     to such applicable individuals.
       ``(B) Benefit estimation tool kit.--The benefit estimation 
     tool kit described in this subparagraph shall include the 
     following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of section 411(d)(6)(B)(i)) is included in the 
     lump sum distribution.
       ``(3) Notice to designee.--Any notice under paragraph (1) 
     or (2) may be provided to a person designated, in writing, by 
     the person to which it would otherwise be provided.
       ``(4) Form of explanation.--The information required to be 
     provided under this subsection shall be provided in a manner 
     calculated to be reasonably understood by the average plan 
     participant.

[[Page S5374]]

       ``(f) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Applicable individual.--
       ``(A) In general.--The term `applicable individual' means, 
     with respect to any plan amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 414(p)(8)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 414(p)(1)(A)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Exception for participants with less than 1 year of 
     participation.--Such term shall not include a participant who 
     has less than 1 year of participation (within the meaning of 
     section 411(b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(2) Applicable pension plan.--The term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 412.
     Such term shall not include a governmental plan (within the 
     meaning of section 414(d)), a church plan (within the meaning 
     of section 414(e)) with respect to which an election under 
     section 410(d) has not been made, or any other plan to which 
     section 204(h) of the Employee Retirement Income Security Act 
     of 1974 does not apply.
       ``(3) Early retirement.--A plan amendment which eliminates 
     or significantly reduces any early retirement benefit or 
     retirement-type subsidy (within the meaning of section 
     411(d)(6)(B)(i)) shall be treated as having the effect of 
     significantly reducing the rate of future benefit accrual.
       ``(g) Regulations.--The Secretary shall, not later than 1 
     year after the date of the enactment of this section, issue--
       ``(1) the regulations described in subsection (e)(2)(A) and 
     section 204(h)(2)(A) of the Employee Retirement Income 
     Security Act of 1974, and
       ``(2) guidance for both of the examples described in 
     subsection (e)(1)(D) and section 204(h)(1)(D) of the Employee 
     Retirement Income Security Act of 1974 and the benefit 
     estimation tool kit described in subsection (e)(2)(B) and 
     section 204(h)(2)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(h) New Technologies.--The Secretary may by regulation 
     allow any notice under paragraph (1) or (2) of subsection (e) 
     to be provided by using new technologies. Such regulations 
     shall ensure that at least one option for providing such 
     notice is not dependent on new technologies.''
       (2) Conforming amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980F. Failure to provide notice of pension plan amendments 
              reducing benefit accruals.''
       (b) Amendment of ERISA.--Section 204(h) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is 
     amended to read as follows:
       ``(h)(1) If an applicable pension plan is amended so as to 
     provide a significant reduction in the rate of future benefit 
     accrual of 1 or more participants, the plan administrator 
     shall, not later than the 45th day before the effective date 
     of the amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,
       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2)(A) If a plan amendment results in the significant 
     restructuring of the plan benefit formula (as determined 
     under regulations prescribed by the Secretary of the 
     Treasury), the plan administrator shall, not later than the 
     15th day before the effective date of the amendment, provide 
     a benefit estimation tool kit described in subparagraph (B) 
     to each applicable individual. If such plan amendment occurs 
     within 12 months of an event described in section 
     410(b)(6)(C) of the Internal Revenue Code of 1986, the plan 
     administrator shall in no event be required to provide the 
     benefit estimation tool kit to applicable individuals 
     affected by the event before the date which is 12 months 
     after the date on which notice under paragraph (1) is given 
     to such applicable individuals.
       ``(B) The benefit estimation tool kit described in this 
     subparagraph shall include the following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of subsection (g)(2)(A)) is included in the lump 
     sum distribution.
       ``(3) Any notice under paragraph (1) or (2) may be provided 
     to a person designated, in writing, by the person to which it 
     would otherwise be provided.
       ``(4) The information required to be provided under this 
     subsection shall be provided in a manner calculated to be 
     reasonably understood by the average participant.
       ``(5)(A) In the case of any failure to exercise due 
     diligence in meeting any requirement of this subsection with 
     respect to any plan amendment, the provisions of the 
     applicable pension plan shall be applied as if such plan 
     amendment entitled all applicable individuals to the greater 
     of--
       ``(i) the benefits to which they would have been entitled 
     without regard to such amendment, or
       ``(ii) the benefits under the plan with regard to such 
     amendment.
       ``(B) For purposes of subparagraph (A), there is a failure 
     to exercise due diligence in meeting the requirements of this 
     subsection if such failure is within the control of the plan 
     sponsor and is--
       ``(i) an intentional failure (including any failure to 
     promptly provide the required notice or information after the 
     plan administrator discovers an unintentional failure to meet 
     the requirements of this subsection),
       ``(ii) a failure to provide most of the individuals with 
     most of the information they are entitled to receive under 
     this subsection, or
       ``(iii) a failure to exercise due diligence which is 
     determined under regulations prescribed by the Secretary of 
     the Treasury.
       ``(C) For excise tax on failure to meet requirements, see 
     section 4980F of the Internal Revenue Code of 1986.
       ``(5)(A) For purposes of this subsection, the term 
     `applicable individual' means, with respect to any plan 
     amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 206(d)(3)(K)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 206(d)(3)(B)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Such term shall not include a participant who has 
     less than 1 year of participation (within the meaning of 
     subsection (b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(6) For purposes of this subsection, the term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 302.
       ``(7) For purposes of this subsection, a plan amendment 
     which eliminates or significantly reduces any early 
     retirement benefit or retirement-type subsidy (within the 
     meaning of section 204(g)(2)(A)) shall be treated as having 
     the effect of significantly reducing the rate of future 
     benefit accrual.
       ``(8) The Secretary of the Treasury may by regulation allow 
     any notice under this subsection to be provided by using new 
     technologies. Such regulation shall ensure that at least one 
     option for providing such notice is not dependent on new 
     technologies.''
       (c) Regulations Relating to Early Retirement Subsidies.--
     The Secretary of the Treasury or the Secretary's delegate 
     shall, not later than 1 year after the date of the enactment 
     of this Act, issue regulations relating to early retirement 
     benefits or retirement-type subsidies described in section 
     411(d)(6)(B)(i) of the Internal Revenue Code of 1986 and 
     section 204(g)(2)(A) of the Employee Retirement Income 
     Security Act of 1974.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Transition.--Until such time as the Secretary of the 
     Treasury issues regulations under section 4980F(e)(2) of the 
     Internal Revenue Code of 1986 and section 204(h)(2) of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     the amendments made by this section), a plan shall be treated 
     as meeting the requirements of such sections if it makes a 
     good faith effort to comply with such requirements.
       (3) Special notice rules.--The period for providing any 
     notice required by the amendments made by this section shall 
     not end before the date which is 3 months after the date of 
     the enactment of this Act.
       (d) Study.--The Secretary of the Treasury shall prepare a 
     report on the effects of significant restructurings of plan 
     benefit formulas of traditional defined benefit plans. Such 
     study shall examine the effects of such restructurings on 
     longer service participants, including the incidence and 
     effects of ``wear away'' provisions under which participants 
     earn no additional benefits for a period of time after 
     restructuring. As soon as practicable, but not later than one 
     year after the date of enactment of this Act, the Secretary

[[Page S5375]]

     shall submit such report, together with recommendations 
     thereon, to the Committee on Ways and Means and the Committee 
     on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate.

                Subtitle F--Reducing Regulatory Burdens

     SEC. 661. MODIFICATION OF TIMING OF PLAN VALUATIONS.

       (a) In General.--Paragraph (9) of section 412(c) (relating 
     to annual valuation) is amended to read as follows:
       ``(9) Annual valuation.--
       ``(A) In general.--For purposes of this section, a 
     determination of experience gains and losses and a valuation 
     of the plan's liability shall be made not less frequently 
     than once every year, except that such determination shall be 
     made more frequently to the extent required in particular 
     cases under regulations prescribed by the Secretary.
       ``(B) Valuation date.--
       ``(i) Current year.--Except as provided in clause (ii), the 
     valuation referred to in subparagraph (A) shall be made as of 
     a date within the plan year to which the valuation refers or 
     within one month prior to the beginning of such year.
       ``(ii) Election to use prior year valuation.--The valuation 
     referred to in subparagraph (A) may be made as of a date 
     within the plan year prior to the year to which the valuation 
     refers if--

       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).

       ``(iii) Adjustments.--Information under clause (ii) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Election.--An election under clause (ii), once made, 
     shall be irrevocable without the consent of the Secretary.''.
       (b) Amendment of ERISA.--Paragraph (9) of section 302(c) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1053(c)) is amended--
       (1) by inserting ``(A)'' after ``(9)'', and
       (2) by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), the valuation 
     referred to in subparagraph (A) shall be made as of a date 
     within the plan year to which the valuation refers or within 
     one month prior to the beginning of such year.
       ``(ii) The valuation referred to in subparagraph (A) may be 
     made as of a date within the plan year prior to the year to 
     which the valuation refers if--
       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).
       ``(iii) Information under clause (ii) shall, in accordance 
     with regulations, be actuarially adjusted to reflect 
     significant differences in participants.
       ``(iv) An election under clause (ii), once made, shall be 
     irrevocable without the consent of the Secretary of the 
     Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 662. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

       (a) In General.--Section 404(k)(2)(A) (defining applicable 
     dividends) is amended by striking ``or'' at the end of clause 
     (ii), by redesignating clause (iii) as clause (iv), and by 
     inserting after clause (ii) the following new clause:
       ``(iii) is, at the election of such participants or their 
     beneficiaries--

       ``(I) payable as provided in clause (i) or (ii), or
       ``(II) paid to the plan and reinvested in qualifying 
     employer securities, or''.

       (b) Limitation on Amount of Deduction.--Section 404(k)(1) 
     (relating to deduction for dividends paid on certain employer 
     securities) is amended to read as follows:
       ``(1) Deduction allowed.--
       ``(A) In general.--In the case of a C corporation, there 
     shall be allowed as a deduction for the taxable year an 
     amount equal to--
       ``(i) the amount of any applicable dividend described in 
     clause (i), (ii), or (iv) of paragraph (2)(A), and
       ``(ii) the applicable percentage of any applicable dividend 
     described in clause (iii),
     paid in cash by such corporation during the taxable year with 
     respect to applicable employer securities. Such deduction 
     shall be in addition to the deduction allowed subsection (a).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in:         The applicable percentage is:
    2002, 2003, and 2004....................................25 percent 
    2005, 2006, and 2007....................................50 percent 
    2008, 2009, and 2010....................................75 percent 
    2011 and thereafter.................................100 percent.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 663. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (4) of section 1114(c) of the 
     Tax Reform Act of 1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 664. EMPLOYEES OF TAX-EXEMPT ENTITIES.

       (a) In General.--The Secretary of the Treasury shall modify 
     Treasury Regulations section 1.410(b)-6(g) to provide that 
     employees of an organization described in section 
     403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are 
     eligible to make contributions under section 403(b) of such 
     Code pursuant to a salary reduction agreement may be treated 
     as excludable with respect to a plan under section 401(k) or 
     (m) of such Code that is provided under the same general 
     arrangement as a plan under such section 401(k), if--
       (1) no employee of an organization described in section 
     403(b)(1)(A)(i) of such Code is eligible to participate in 
     such section 401(k) plan or section 401(m) plan; and
       (2) 95 percent of the employees who are not employees of an 
     organization described in section 403(b)(1)(A)(i) of such 
     Code are eligible to participate in such plan under such 
     section 401(k) or (m).
       (b) Effective Date.--The modification required by 
     subsection (a) shall apply as of the same date set forth in 
     section 1426(b) of the Small Business Job Protection Act of 
     1996.

     SEC. 665. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

       (a) In General.--Subsection (a) of section 132 (relating to 
     exclusion from gross income) is amended by striking ``or'' at 
     the end of paragraph (5), by striking the period at the end 
     of paragraph (6) and inserting ``, or'', and by adding at the 
     end the following new paragraph:
       ``(7) qualified retirement planning services.''.
       (b) Qualified Retirement Planning Services Defined.--
     Section 132 is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Qualified Retirement Planning Services.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning services' means any retirement 
     planning advice or information provided to an employee and 
     his spouse by an employer maintaining a qualified employer 
     plan.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such services are available on substantially the same terms 
     to each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 666. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year and each plan year beginning on or after January 1, 
     1994, need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated); or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation);
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan of the business that covers the 
     employees of the business;
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses);
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control; and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2002.

     SEC. 667. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION 
                   SYSTEM.

       The Secretary of the Treasury shall continue to update and 
     improve the Employee Plans Compliance Resolution System (or 
     any successor program) giving special attention to--
       (1) increasing the awareness and knowledge of small 
     employers concerning the availability and use of the program;
       (2) taking into account special concerns and circumstances 
     that small employers face with respect to compliance and 
     correction of compliance failures;

[[Page S5376]]

       (3) extending the duration of the self-correction period 
     under the Self-Correction Program for significant compliance 
     failures;
       (4) expanding the availability to correct insignificant 
     compliance failures under the Self-Correction Program during 
     audit; and
       (5) assuring that any tax, penalty, or sanction that is 
     imposed by reason of a compliance failure is not excessive 
     and bears a reasonable relationship to the nature, extent, 
     and severity of the failure.

     SEC. 668. REPEAL OF THE MULTIPLE USE TEST.

       (a) In General.--Paragraph (9) of section 401(m) is amended 
     to read as follows:
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and subsection (k), including regulations 
     permitting appropriate aggregation of plans and 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 669. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND 
                   LINE OF BUSINESS RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test; and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.
     Subparagraph (B) shall only apply to the extent provided by 
     the Secretary.
       (2) Effective dates.--
       (A) Regulations.--The regulation required by paragraph (1) 
     shall apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under paragraph 
     (1)(A) shall not apply before the first year beginning not 
     less than 120 days after the date on which such condition is 
     prescribed.
       (b) Coverage Test.--
       (1) In general.--Section 410(b)(1) (relating to minimum 
     coverage requirements) is amended by adding at the end the 
     following:
       ``(D) In the case that the plan fails to meet the 
     requirements of subparagraphs (A), (B) and (C), the plan--
       ``(i) satisfies subparagraph (B), as in effect immediately 
     before the enactment of the Tax Reform Act of 1986,
       ``(ii) is submitted to the Secretary for a determination of 
     whether it satisfies the requirement described in clause (i), 
     and
       ``(iii) satisfies conditions prescribed by the Secretary by 
     regulation that appropriately limit the availability of this 
     subparagraph.
     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.
       (c) Line of Business Rules.--The Secretary of the Treasury 
     shall, on or before December 31, 2001, modify the existing 
     regulations issued under section 414(r) of the Internal 
     Revenue Code of 1986 in order to expand (to the extent that 
     the Secretary determines appropriate) the ability of a 
     pension plan to demonstrate compliance with the line of 
     business requirements based upon the facts and circumstances 
     surrounding the design and operation of the plan, even though 
     the plan is unable to satisfy the mechanical tests currently 
     used to determine compliance.

     SEC. 670. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM 
                   ON APPLICATION OF CERTAIN NONDISCRIMINATION 
                   RULES APPLICABLE TO STATE AND LOCAL PLANS.

       (a) In General.--
       (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
     (H) of section 401(a)(26) are each amended by striking 
     ``section 414(d))'' and all that follows and inserting 
     ``section 414(d)).''.
       (2) Subparagraph (G) of section 401(k)(3) and paragraph (2) 
     of section 1505(d) of the Taxpayer Relief Act of 1997 are 
     each amended by striking ``maintained by a State or local 
     government or political subdivision thereof (or agency or 
     instrumentality thereof)''.
       (b) Conforming Amendments.--
       (1) The heading for subparagraph (G) of section 401(a)(5) 
     is amended to read as follows: ``Governmental plans''.
       (2) The heading for subparagraph (H) of section 401(a)(26) 
     is amended to read as follows: ``Exception for governmental 
     plans''.
       (3) Subparagraph (G) of section 401(k)(3) is amended by 
     inserting ``Governmental plans.--'' after ``(G)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

                   Subtitle G--Other ERISA Provisions

     SEC. 681. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''.
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) did 
     not establish or maintain a plan to which this title applies 
     with respect to which benefits were accrued for substantially 
     the same employees as are in the new single-employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2001.

     SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause

[[Page S5377]]

     (ii) for any plan year shall be an amount equal to the 
     product of the amount determined under clause (ii) and the 
     applicable percentage. For purposes of this clause, the term 
     `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.
     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), as amended by section 682(b), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether the 25-or-fewer-employees limitation has 
     been satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2001.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.

     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.

     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2001, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2002.

                  Subtitle H--Miscellaneous Provisions

     SEC. 691. TAX TREATMENT AND INFORMATION REQUIREMENTS OF 
                   ALASKA NATIVE SETTLEMENT TRUSTS.

       (a) Treatment of Alaska Native Settlement Trusts.--Subpart 
     A of part I of subchapter J of chapter 1 (relating to general 
     rules for taxation of trusts and estates) is amended by 
     adding at the end the following new section:

     ``SEC. 646. TAX TREATMENT OF ELECTING ALASKA NATIVE 
                   SETTLEMENT TRUSTS.

       ``(a) In General.--If an election under this section is in 
     effect with respect to any Settlement Trust, the provisions 
     of this section shall apply in determining the income tax 
     treatment of the Settlement Trust and its beneficiaries with 
     respect to the Settlement Trust.
       ``(b) Taxation of Income of Trust.--Except as provided in 
     subsection (f)(1)(B)(ii)--
       ``(1) In general.--There is hereby imposed on the taxable 
     income of an electing Settlement Trust, other than its net 
     capital gain, a tax at the lowest rate specified in section 
     1(c).
       ``(2) Capital gain.--In the case of an electing Settlement 
     Trust with a net capital gain for the taxable year, a tax is 
     hereby imposed on such gain at the rate of tax which would 
     apply to such gain if the taxpayer were subject to a tax on 
     its other taxable income at only the lowest rate specified in 
     section 1(c).

     Any such tax shall be in lieu of the income tax otherwise 
     imposed by this chapter on such income or gain.
       ``(c) One-Time Election.--
       ``(1) In general.--A Settlement Trust may elect to have the 
     provisions of this section apply to the trust and its 
     beneficiaries.
       ``(2) Time and method of election.--An election under 
     paragraph (1) shall be made by the trustee of such trust--
       ``(A) on or before the due date (including extensions) for 
     filing the Settlement Trust's return of tax for the first 
     taxable year of such trust ending after the date of the 
     enactment of this section, and
       ``(B) by attaching to such return of tax a statement 
     specifically providing for such election.
       ``(3) Period election in effect.--Except as provided in 
     subsection (f), an election under this subsection--
       ``(A) shall apply to the first taxable year described in 
     paragraph (2)(A) and all subsequent taxable years, and
       ``(B) may not be revoked once it is made.
       ``(d) Contributions to Trust.--
       ``(1) Beneficiaries of electing trust not taxed on 
     contributions.--In the case of an electing Settlement Trust, 
     no amount shall be includible in the gross income of a 
     beneficiary of such trust by reason of a contribution to such 
     trust.

[[Page S5378]]

       ``(2) Earnings and profits.--The earnings and profits of 
     the sponsoring Native Corporation shall not be reduced on 
     account of any contribution to such Settlement Trust:
       ``(e) Tax Treatment of Distributions to Beneficiaries.--
     Amounts distributed by an electing Settlement Trust during 
     any taxable year shall be considered as having the following 
     characteristics in the hands of the recipient beneficiary:
       ``(1) First, as amounts excludable from gross income for 
     the taxable year to the extent of the taxable income of such 
     trust for such taxable year (decreased by any income tax paid 
     by the trust with respect to the income) plus any amount 
     excluded from gross income of the trust under section 103.
       ``(2) Second, as amounts excludable from gross income to 
     the extent of the amount described in paragraph (1) for all 
     taxable years for which an election is in effect under 
     subsection (c) with respect to the trust, and not previously 
     taken into account under paragraph (1).
       ``(3) Third, as amounts distributed by the sponsoring 
     Native Corporation with respect to its stock (within the 
     meaning of section 301(a)) during such taxable year and 
     taxable to the recipient beneficiary as amounts described in 
     section 301(c)(1), to the extent of current or accumulated 
     earnings and profits of the sponsoring Native Corporation as 
     of the close of such taxable year after proper adjustment is 
     made for all distributions made by the sponsoring Native 
     Corporation during such taxable year.
       ``(4) Fourth, as amounts distributed by the trust in excess 
     of the distributable net income of such trust for such 
     taxable year.

     Amounts distributed to which paragraph (3) applies shall not 
     be treated as a corporate distribution subject to section 
     311(b), and for purposes of determining the amount of a 
     distribution for purposes of paragraph (3) and the basis to 
     the recipients, section 643(e) and not section 301(b) or (d) 
     shall apply.
       ``(f) Special Rules Where Transfer Restrictions Modified.--
       ``(1) Transfer of beneficial interests.--If, at any time, a 
     beneficial interest in an electing Settlement Trust may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such interest were 
     Settlement Common Stock--
       ``(A) no election may be made under subsection (c) with 
     respect to such trust, and
       ``(B) if such an election is in effect as of such time--
       ``(i) such election shall cease to apply as of the first 
     day of the taxable year in which such disposition is first 
     permitted,
       ``(ii) the provisions of this section shall not apply to 
     such trust for such taxable year and all taxable years 
     thereafter, and
       ``(iii) the distributable net income of such trust shall be 
     increased by the current or accumulated earnings and profits 
     of the sponsoring Native Corporation as of the close of such 
     taxable year after proper adjustment is made for all 
     distributions made by the sponsoring Native Corporation 
     during such taxable year.
     In no event shall the increase under clause (iii) exceed the 
     fair market value of the trust's assets as of the date the 
     beneficial interest of the trust first becomes so disposable. 
     The earnings and profits of the sponsoring Native Corporation 
     shall be adjusted as of the last day of such taxable year by 
     the amount of earnings and profits so included in the 
     distributable net income of the trust.
       ``(2) Stock in corporation.--If--
       ``(A) stock in the sponsoring Native Corporation may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such stock were 
     Settlement Common Stock, and
       ``(B) at any time after such disposition of stock is first 
     permitted, such corporation transfers assets to a Settlement 
     Trust,
     paragraph (1)(B) shall be applied to such trust on and after 
     the date of the transfer in the same manner as if the trust 
     permitted dispositions of beneficial interests in the trust 
     in a manner not permitted by such section 7(h).
       ``(3) Certain distributions.--For purposes of this section, 
     the surrender of an interest in a Native Corporation or an 
     electing Settlement Trust in order to accomplish the whole or 
     partial redemption of the interest of a shareholder or 
     beneficiary in such corporation or trust, or to accomplish 
     the whole or partial liquidation of such corporation or 
     trust, shall be deemed to be a transfer permitted by section 
     7(h) of the Alaska Native Claims Settlement Act.
       ``(g) Taxable Income.--For purposes of this title, the 
     taxable income of an electing Settlement Trust shall be 
     determined under section 641(b) without regard to any 
     deduction under section 651 or 661.
       ``(h) Definitions.--For purposes of this section--
       ``(1) Electing settlement trust.--The term `electing 
     Settlement Trust' means a Settlement Trust which has made the 
     election, effective for a taxable year, described in 
     subsection (c).
       ``(2) Native corporation.--The term `Native Corporation' 
     has the meaning given such term by section 3(m) of the Alaska 
     Native Claims Settlement Act (43 U.S.C. 1602(m)).
       ``(3) Settlement common stock.--The term `Settlement Common 
     Stock' has the meaning given such term by section 3(p) of the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1602(p)).
       ``(4) Settlement trust.--The term `Settlement Trust' means 
     a trust that constitutes a settlement trust under section 
     3(t) of the Alaska Native Claims Settlement Act (43 U.S.C. 
     1602(t)).
       ``(5) Sponsoring native corporation.--The term `sponsoring 
     Native Corporation' means the Native Corporation which 
     transfers assets to an electing Settlement Trust.
       ``(i) Special Loss Disallowance Rule.--Any loss that would 
     otherwise be recognized by a shareholder upon a disposition 
     of a share of stock of a sponsoring Native Corporation shall 
     be reduced (but not below zero) by the per share loss 
     adjustment factor. The per share loss adjustment factor shall 
     be the aggregate of all contributions to all electing 
     Settlement Trusts sponsored by such Native Corporation made 
     on or after the first day each trust is treated as an 
     electing Settlement Trust expressed on a per share basis and 
     determined as of the day of each such contribution.
       ``(j) Cross Reference.--

  ``For information required with respect to electing Settlement Trusts 
and sponsoring Native Corporations, see section 6039H.''.
       (b) Reporting.--Subpart A of part III of subchapter A of 
     chapter 61 of subtitle F (relating to information concerning 
     persons subject to special provisions) is amended by 
     inserting after section 6039G the following new section:

     ``SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NATIVE 
                   SETTLEMENT TRUSTS AND SPONSORING NATIVE 
                   CORPORATIONS.

       ``(a) Requirement.--The fiduciary of an electing Settlement 
     Trust (as defined in section 646(h)(1)) shall include with 
     the return of income of the trust a statement containing the 
     information required under subsection (c).
       ``(b) Application With Other Requirements.--The filing of 
     any statement under this section shall be in lieu of the 
     reporting requirements under section 6034A to furnish any 
     statement to a beneficiary regarding amounts distributed to 
     such beneficiary (and such other reporting rules as the 
     Secretary deems appropriate).
       ``(c) Required Information.--The information required under 
     this subsection shall include--
       ``(1) the amount of distributions made during the taxable 
     year to each beneficiary,
       ``(2) the treatment of such distribution under the 
     applicable provision of section 646, including the amount 
     that is excludable from the recipient beneficiary's gross 
     income under section 646, and
       ``(3) the amount (if any) of any distribution during such 
     year that is deemed to have been made by the sponsoring 
     Native Corporation (as defined in section 646(h)(5)).
       ``(d) Sponsoring Native Corporation.--
       ``(1) In general.--The electing Settlement Trust shall, on 
     or before the date on which the statement under subsection 
     (a) is required to be filed, furnish such statement to the 
     sponsoring Native Corporation (as so defined).
       ``(2) Distributees.--The sponsoring Native Corporation 
     shall furnish each recipient of a distribution described in 
     section 646(e)(3) a statement containing the amount deemed to 
     have been distributed to such recipient by such corporation 
     for the taxable year.''.
       (c) Clerical Amendment.--
       (1) The table of sections for subpart A of part I of 
     subchapter J of chapter 1 of such Code is amended by adding 
     at the end the following new item:

``Sec. 646. Tax treatment of electing Alaska Native Settlement 
              Trusts.''.
       (2) The table of sections for subpart A of part III of 
     subchapter A of chapter 61 of subtitle F of such Code is 
     amended by inserting after the item relating to section 6039G 
     the following new item:

``Sec. 6039H. Information with respect to Alaska Native Settlement 
              Trusts and sponsoring Native Corporations.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act and to contributions made to electing 
     Settlement Trusts for such year or any subsequent year.

          Subtitle I--Compliance With Congressional Budget Act

     SEC. 695. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

              TITLE VII--EXTENSIONS OF EXPIRING PROVISIONS

                         Subtitle A--In General

     SECTION 701. PERMANENT EXTENSION OF RESEARCH CREDIT.

       (a) Permanent Extension.--
       (1) In general.--Section 41 (relating to credit for 
     increasing research activities) is amended by striking 
     subsection (h).
       (2) Conforming amendment.--Paragraph (1) of section 45C(b) 
     is amended by striking subparagraph (D).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.
       (b) Increase in Rates of Alternative Incremental Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) 
     (relating to election of alternative incremental credit) is 
     amended--

[[Page S5379]]

       (A) by striking ``2.65 percent'' and inserting ``3 
     percent'',
       (B) by striking ``3.2 percent'' and inserting ``4 
     percent'', and
       (C) by striking ``3.75 percent'' and inserting ``5 
     percent''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 702. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

       (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) 
     (relating to termination) are each amended by striking 
     ``2001'' and inserting ``2003''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after December 31, 2001.

     SEC. 703. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   MARGINAL PRODUCTION.

       (a) Temporary Extension.--Subparagraph (H) of section 
     613A(c)(6) is amended by striking ``January 1, 2002'' and 
     inserting ``January 1, 2004''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 704. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) Temporary Extension.--Section 953(e)(10) is amended--
       (1) by striking ``January 1, 2002'' and inserting ``January 
     1, 2004'', and
       (2) by striking ``December 31, 2001'' and inserting 
     ``December 31, 2003''.
       (b) Conforming Amendment.--Section 954(h)(9) is amended by 
     striking ``January 1, 2002'' and inserting ``January 1, 
     2004''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 705. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                   MENTAL HEALTH BENEFITS.

       (a) Temporary Extension.--Subsection (f) of section 9812 is 
     amended by striking ``on or after September 30, 2001'' and 
     inserting ``after September 30, 2003''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to benefits for services furnished after 
     September 30, 2001.

     SEC. 706. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN 
                   REFUELING PROPERTY.

       (a) Temporary Extension.--Subsection (f) of section 179A is 
     amended by striking ``December 31, 2004'' and inserting 
     ``December 31, 2006''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2004.

     SEC. 707. LUXURY TAX ON PASSENGER VEHICLES.

       (a) Temporary Extension.--Subsection (g) of section 4001 is 
     amended by striking ``December 31, 2002'' and inserting 
     ``December 31, 2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to any sale, use, or installation after December 
     31, 2002.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 711. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                  TITLE VIII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

     SEC. 801. ALTERNATIVE MINIMUM TAX EXEMPTION FOR CERTAIN 
                   INDIVIDUAL TAXPAYERS.

       (a) Exemption.--Section 55 (relating to imposition of 
     alternative minimum tax) is amended by adding at the end the 
     following:
       ``(f) Exemption for Certain Individuals.--
       ``(1) In general.--In the case of an individual, the 
     tentative minimum tax shall be zero for any taxable year if 
     the adjusted gross income of the taxpayer for the taxable 
     year does not exceed $80,000.
       ``(2) Prospective application if subsection ceases to 
     apply.--If paragraph (1) applies to a taxpayer for any 
     taxable year and then ceases to apply to a subsequent taxable 
     year, the rules of paragraphs (2) through (5) of subsection 
     (e) shall apply to the taxpayer to the extent such rules are 
     applicable to individuals.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 811. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                   TITLE IX--ENSURING DEBT REDUCTION

     SEC. 901. ENSURING DEBT REDUCTION.

       (a) Trigger.--
       (1) In general.--Notwithstanding any other provision of 
     this Act or any other law, the effective date of a provision 
     of law described in paragraph (2) shall be delayed as 
     provided in paragraph (3).
       (2) Provision described.--A provision of law described in 
     this paragraph is--
       (A) a provision of this Act that takes effect in calendar 
     year 2003, 2003, 2004, 2005, 2006, or 2007 and results in a 
     revenue reduction; or
       (B) a provision of law that--
       (i) is enacted after the date of enactment of this Act; and
       (ii) takes effect in fiscal year 2002, 2003, 2004, 2005, 
     2006, or 2007 and causes increased outlays through mandatory 
     spending (except for automatic or annually enacted cost of 
     living adjustments for benefits enacted prior to the date of 
     enactment of this Act).
       (3) Delay.--If, on September 30 of fiscal year 2002, 2003, 
     2004, 2005, 2006, or 2007, the Secretary of the Treasury 
     determines that the limit on the debt held by the public in 
     section 253A(a) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 has been exceeded for that fiscal year, 
     the effective date of any provision of law described in 
     paragraph (2) that takes effect during the next fiscal year 
     shall be delayed by 1 calendar year.
       (4) Discretionary spending limitation.--Notwithstanding any 
     other provision of law, in any fiscal year subject to the 
     delay provisions of paragraph (3), the amount of budget 
     authority for discretionary spending in each discretionary 
     spending account shall be the level provided for that account 
     in the preceding fiscal year plus an adjustment for 
     inflation.
       (5) Reports to Congress.--On July 1 and September 5 of each 
     fiscal year, the Secretary of the Treasury shall report to 
     Congress the estimated amount of the debt held by the public 
     for the fiscal year ending on September 30 of that year.
       (6) Congressional Action.--
       (A) Trigger.--
       (i) Modification.--In fiscal year 2002, 2003, 2004, 2005, 
     2006, or 2007, if the level of debt held by the public at the 
     end of the preceding fiscal year, as determined by the 
     Secretary of the Treasury, would be below the debt target for 
     that fiscal year in section 253A(a) of the Balanced Budget 
     and Emergency Deficit Control Act of 1985 as a result of the 
     effect of the triggering of paragraphs (3) and (4), any 
     Member of Congress may move to proceed to a bill that would 
     increase the rate of discretionary spending and make changes 
     in the provisions of law described in paragraph (2) to 
     increase direct spending and reduce revenues 
     (proportionately) in a manner that would increase the debt 
     held by the public for that fiscal year to a level not 
     exceeding the level provided in section 253A(a) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985. 
     The motion to proceed shall be voted on at the end of 4 hours 
     of debate. A bill considered under this clause shall be 
     considered as provided in sections 310(e) and 313 of the 
     Congressional Budget Act of 1974 (2 U.S.C. 641(e) and 644). 
     Any amendment offered to the bill shall maintain the 
     proportionality requirement.
       (ii) Waiver.--

       (I) In General.--The delay and limitation provided in 
     paragraphs (3) and (4) may be disapproved by a joint 
     resolution. A joint resolution considered under this 
     subclause shall not be advanced to third reading in either 
     House unless a motion to proceed to third reading is agreed 
     to by three-fifths of the Members, duly chosen and sworn.
       (II) Low Growth.--(aa) The delay and limitation provided in 
     paragraphs (3) and (4) may be disapproved by a joint 
     resolution for low growth as provided in this subclause. A 
     joint resolution considered under this subclause shall not be 
     advanced to third reading in either House unless a motion to 
     proceed to third reading is agreed to by a majority of the 
     whole body.
       (bb) For purposes of this subclause, a period of low growth 
     occurs when the most recent of the Department of Commerce's 
     advance, preliminary, or final reports of actual real 
     economic growth indicate that the rate of real economic 
     growth (as measured by real GDP) for each of the most 
     recently reported quarter and the immediately preceding 
     quarter is less than 1 percent.

       (B) Other fiscal years.--
       (i) In general.--In fiscal year 2008, 2009, or 2010, if the 
     level of debt held by the public at the end of the preceding 
     fiscal year, as determined by the Secretary of the Treasury, 
     would exceed the debt target for that fiscal year in section 
     253A(a) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 as a result of the effect of the triggering of 
     paragraphs (3) and (4), any Member of Congress may move to 
     proceed to a bill that would defer changes in law that take 
     effect in that fiscal year that would increase direct 
     spending (except for automatic or annually enacted cost of 
     living adjustments for benefits enacted prior to the date of 
     enactment of this Act) and decrease revenues and freeze the 
     amount of discretionary spending in each discretionary 
     spending account for that fiscal year at the level provided 
     for that account in the preceding fiscal year plus an 
     adjustment for inflation (all proportionately) in a manner 
     that would reduce the debt held by the public for that fiscal 
     year to a level not exceeding the level provided in section 
     253A(a) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985. The motion to proceed shall be voted on at the 
     end of 4 hours of debate. Any amendment offered to the bill 
     shall either defer effective dates or adjust discretionary 
     spending and maintain the proportionality requirement.
       (ii) Consideration of legislation.--A bill considered under 
     clause (i) shall be considered as provided in sections 310(e) 
     and 313 of the Congressional Budget Act of 1974 (2 U.S.C. 
     641(e) and 644).
       (b) Public Debt Targets.--The Balanced Budget and Emergency 
     Deficit Control Act of 1985 is amended--
       (1) in section 250(c)(1), by inserting `` ` debt held by 
     the public' '' after ``outlays', ''; and
       (2) by inserting after section 253 the following:

[[Page S5380]]

     ``SEC. 253A. DEBT HELD BY THE PUBLIC LIMIT.

       ``(a) Limit.--The debt held by the public shall not 
     exceed--
       ``(1) for fiscal year 2002, $2,955,000,000,000;
       ``(2) for fiscal year 2003, $2,747,000,000,000;
       ``(3) for fiscal year 2004, $2,524,000,000,000;
       ``(4) for fiscal year 2005, $2,279,000,000,000;
       ``(5) for fiscal year 2006, $2,011,000,000,000;
       ``(6) for fiscal year 2007, $1,724,000,000,000;
       ``(7) for fiscal year 2008, $1,418,000,000,000;
       ``(8) for fiscal year 2009, $1,089,000,000,000; and
       ``(9) for fiscal year 2010, $878,000,000,000.
       ``(b) Adjustments to Debt Targets.--
       ``(1) In general.--The debt held by the public targets may 
     be adjusted in a specific fiscal year if the Secretary of the 
     Treasury certifies that the target cannot be reached 
     because--
       ``(A) the Department of the Treasury will be unable to 
     redeem a sufficient amount of securities from holders of 
     Federal debt to achieve the target; or
       ``(B) the social security and medicare revenues are less 
     than assumed in the concurrent resolution on the budget for 
     fiscal year 2002 (H. Con. Res. 83).
       ``(2) Certification.--The certification shall--
       ``(A) be transmitted by the President to Congress;
       ``(B) outline the specific reasons that the targets cannot 
     be achieved; and
       ``(C) not be the result of a budget surpluses being 
     available to redeem debt held by the public.
       ``(3) Congressional action.--The adjustment provided in 
     this subsection may be disapproved by a joint resolution. A 
     joint resolution considered under this paragraph shall not be 
     advanced to third reading in either House unless a motion to 
     proceed to third reading is agreed to by a majority of the 
     whole body.
       ``(c) Suspension of Limit on Debt Held by the Public for 
     War.--If a declaration of war is in effect, the limit on the 
     debt held by the public established in this section is 
     suspended.''.
       (c) Congressional Budget Process.--
       (1) Point of order.--Section 301 of the Congressional 
     Budget Act of 1974 is amended by adding at the end the 
     following:
       ``(j) Debt Held by the Public Point of Order.--It shall not 
     be in order in the Senate to consider any concurrent 
     resolution on the budget or amendment, motion, or conference 
     report thereto that would--
       ``(1) increase the limit on the debt held by the public in 
     section 253A(a) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985; or
       ``(2) provide additional borrowing authority that would 
     result in the limit on the debt held by the public in section 
     253A(a) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 being exceeded.''.
       (2) Supermajority waiver and appeal.--Subsections (c)(1) 
     and (d)(2) of section 904 of the Congressional Budget Act of 
     1974 are amended by striking ``305(b)(2),'' and inserting 
     ``301(j), 305(b)(2),''.
       (3) Additional amendments to the budget act.--The 
     Congressional Budget Act of 1974 is amended--
       (A) in section 3, by adding at the end the following:
       ``(11)(A) The term `debt held by the public' means the 
     outstanding face amount of all debt obligations issued by the 
     United States Government that are held by outside investors, 
     including individuals, corporations, State or local 
     governments, foreign governments, and the Federal Reserve 
     System.
       ``(B) For the purpose of this paragraph, the term `face 
     amount', for any month, of any debt obligation issued on a 
     discount basis that is not redeemable before maturity at the 
     option of the holder of the obligation is an amount equal to 
     the sum of--
       ``(i) the original issue price of the obligation; plus
       ``(ii) the portion of the discount on the obligation 
     attributable to periods before the beginning of such 
     month.''; and
       (B) in section 301(a) by--
       (i) redesignating paragraphs (6) and (7) as paragraphs (7) 
     and (8), respectively; and
       (ii) inserting after paragraph (5) the following:
       ``(6) the debt held by the public; and''.
       (d) Rule of Construction.--This section and the amendments 
     made by this section shall have no effect on Social Security 
     or Medicare as in effect on the day before the date of 
     enactment of this section.

                       TITLE X--OTHER PROVISIONS

                         Subtitle A--In General

     SEC. 1001. EXPANSION OF AUTHORITY TO POSTPONE CERTAIN TAX-
                   RELATED DEADLINES BY REASON OF PRESIDENTIALLY 
                   DECLARED DISASTER.

       (a) In General.--Section 7508A (relating to authority to 
     postpone certain tax-related deadlines by reason of 
     presidentially declared disaster) is amended by adding at the 
     end the following new subsection:
       ``(c) Duties of Disaster Response Team.--The Secretary 
     shall establish as a permanent office in the national office 
     of the Internal Revenue Service a disaster response team 
     which, in coordination with the Federal Emergency Management 
     Agency, shall assist taxpayers in clarifying and resolving 
     Federal tax matters associated with or resulting from any 
     Presidentially declared disaster (as so defined). One of the 
     duties of the disaster response team shall be to extend in 
     appropriate cases the 90-day period described in subsection 
     (a) by not more than 30 days.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of enactment of this Act.

     SEC. 1002. HISTORIC HOMEOWNERSHIP REHABILITATION CREDIT.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25A the following new 
     section:

     ``SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION CREDIT.

       ``(a) General Rule.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter for the taxable year an amount equal to 20 percent of 
     the qualified rehabilitation expenditures made by the 
     taxpayer with respect to a qualified historic home.
       ``(b) Dollar Limitation.--
       ``(1) In general.--The credit allowed by subsection (a) 
     with respect to any residence of a taxpayer shall not exceed 
     $40,000 ($20,000 in the case of a married individual filing a 
     separate return).
       ``(2) Carryforward of credit unused by reason of limitation 
     based on tax liability.--If the credit allowable under 
     subsection (a) for any taxable year exceeds the limitation 
     imposed by section 26(a) for such taxable year reduced by the 
     sum of the credits allowable under this subpart (other than 
     this section), such excess shall be carried to the succeeding 
     taxable year and added to the credit allowable under 
     subsection (a) for such succeeding taxable year.
       ``(c) Qualified Rehabilitation Expenditure.--For purposes 
     of this section:
       ``(1) In general.--The term `qualified rehabilitation 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(A) in connection with the certified rehabilitation of a 
     qualified historic home, and
       ``(B) for property for which depreciation would be 
     allowable under section 168 if the qualified historic home 
     were used in a trade or business.
       ``(2) Certain expenditures not included.--
       ``(A) Exterior.--Such term shall not include any 
     expenditure in connection with the rehabilitation of a 
     building unless at least 5 percent of the total expenditures 
     made in the rehabilitation process are allocable to the 
     rehabilitation of the exterior of such building.
       ``(B) Other rules to apply.--Rules similar to the rules of 
     clauses (ii) and (iii) of section 47(c)(2)(B) shall apply.
       ``(3) Mixed use or multifamily building.--If only a portion 
     of a building is used as the principal residence of the 
     taxpayer, only qualified rehabilitation expenditures which 
     are properly allocable to such portion shall be taken into 
     account under this section.
       ``(d) Certified Rehabilitation.--For purposes of this 
     section:
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `certified rehabilitation' has the 
     meaning given such term by section 47(c)(2)(C).
       ``(2) Factors to be considered in the case of targeted area 
     residences, etc.--
       ``(A) In general.--For purposes of applying section 
     47(c)(2)(C) under this section with respect to the 
     rehabilitation of a building to which this paragraph applies, 
     consideration shall be given to--
       ``(i) the feasibility of preserving existing architectural 
     and design elements of the interior of such building,
       ``(ii) the risk of further deterioration or demolition of 
     such building in the event that certification is denied 
     because of the failure to preserve such interior elements, 
     and
       ``(iii) the effects of such deterioration or demolition on 
     neighboring historic properties.
       ``(B) Buildings to which this paragraph applies.--This 
     paragraph shall apply with respect to any building--
       ``(i) any part of which is a targeted area residence within 
     the meaning of section 143(j)(1), or
       ``(ii) which is located within an enterprise community or 
     empowerment zone as designated under section 1391, or a 
     renewal community designated under section 1400(e),
     but shall not apply with respect to any building which is 
     listed in the National Register.
       ``(3) Approved state program.--The term `certified 
     rehabilitation' includes a certification made by--
       ``(A) a State Historic Preservation Officer who administers 
     a State Historic Preservation Program approved by the 
     Secretary of the Interior pursuant to section 101(b)(1) of 
     the National Historic Preservation Act, or
       ``(B) a local government, certified pursuant to section 
     101(c)(1) of the National Historic Preservation Act and 
     authorized by a State Historic Preservation Officer, or the 
     Secretary of the Interior where there is no approved State 
     program,

     subject to such terms and conditions as may be specified by 
     the Secretary of the Interior for the rehabilitation of 
     buildings within the jurisdiction of such officer (or local 
     government) for purposes of this section.
       ``(e) Definitions and Special Rules.--For purposes of this 
     section:
       ``(1) Qualified historic home.--The term `qualified 
     historic home' means a certified historic structure--
       ``(A) which has been substantially rehabilitated, and
       ``(B) which (or any portion of which)--
       ``(i) is owned by the taxpayer, and
       ``(ii) is used (or will, within a reasonable period, be 
     used) by such taxpayer as his principal residence.

[[Page S5381]]

       ``(2) Substantially rehabilitated.--The term `substantially 
     rehabilitated' has the meaning given such term by section 
     47(c)(1)(C); except that, in the case of any building 
     described in subsection (d)(2), clause (i)(I) thereof shall 
     not apply.
       ``(3) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 121.
       ``(4) Certified historic structure.--
       ``(A) In general.--The term `certified historic structure' 
     means any building (and its structural components) which--
       ``(i) is listed in the National Register, or
       ``(ii) is located in a registered historic district (as 
     defined in section 47(c)(3)(B)) within which only qualified 
     census tracts (or portions thereof) are located, and is 
     certified by the Secretary of the Interior as being of 
     historic significance to the district.
       ``(B) Certain structures included.--Such term includes any 
     building (and its structural components) which is designated 
     as being of historic significance under a statute of a State 
     or local government, if such statute is certified by the 
     Secretary of the Interior to the Secretary as containing 
     criteria which will substantially achieve the purpose of 
     preserving and rehabilitating buildings of historic 
     significance.
       ``(C) Qualified census tracts.--For purposes of 
     subparagraph (A)(ii)--
       ``(i) In general.--The term `qualified census tract' means 
     a census tract in which the median income is less than twice 
     the statewide median family income.
       ``(ii) Data used.--The determination under clause (i) shall 
     be made on the basis of the most recent decennial census for 
     which data are available.
       ``(5) Rehabilitation not complete before certification.--A 
     rehabilitation shall not be treated as complete before the 
     date of the certification referred to in subsection (d).
       ``(6) Lessees.--A taxpayer who leases his principal 
     residence shall, for purposes of this section, be treated as 
     the owner thereof if the remaining term of the lease (as 
     of the date determined under regulations prescribed by the 
     Secretary) is not less than such minimum period as the 
     regulations require.
       ``(7) Tenant-stockholder in cooperative housing 
     corporation.--If the taxpayer holds stock as a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     stockholder shall be treated as owning the house or apartment 
     which the taxpayer is entitled to occupy as such stockholder.
       ``(8) Allocation of expenditures relating to exterior of 
     building containing cooperative or condominium units.--The 
     percentage of the total expenditures made in the 
     rehabilitation of a building containing cooperative or 
     condominium residential units allocated to the rehabilitation 
     of the exterior of the building shall be attributed 
     proportionately to each cooperative or condominium 
     residential unit in such building for which a credit under 
     this section is claimed.
       ``(f) When Expenditures Taken Into Account.--In the case of 
     a building other than a building to which subsection (g) 
     applies, qualified rehabilitation expenditures shall be 
     treated for purposes of this section as made--
       ``(1) on the date the rehabilitation is completed, or
       ``(2) to the extent provided by the Secretary by 
     regulation, when such expenditures are properly chargeable to 
     capital account.
     Regulations under paragraph (2) shall include a rule similar 
     to the rule under section 50(a)(2) (relating to recapture if 
     property ceases to qualify for progress expenditures).
       ``(g) Allowance of Credit for Purchase of Rehabilitated 
     Historic Home.--
       ``(1) In general.--In the case of a qualified purchased 
     historic home, the taxpayer shall be treated as having made 
     (on the date of purchase) the expenditures made by the seller 
     of such home. For purposes of the preceding sentence, 
     expenditures made by the seller shall be deemed to be 
     qualified rehabilitation expenditures if such expenditures, 
     if made by the purchaser, would be qualified rehabilitation 
     expenditures.
       ``(2) Qualified purchased historic home.--For purposes of 
     this subsection, the term `qualified purchased historic home' 
     means any substantially rehabilitated certified historic 
     structure purchased by the taxpayer if--
       ``(A) the taxpayer is the first purchaser of such structure 
     after the date rehabilitation is completed, and the purchase 
     occurs within 5 years after such date,
       ``(B) the structure (or a portion thereof) will, within a 
     reasonable period, be the principal residence of the 
     taxpayer,
       ``(C) no credit was allowed to the seller under this 
     section or section 47 with respect to such rehabilitation, 
     and
       ``(D) the taxpayer is furnished with such information as 
     the Secretary determines is necessary to determine the credit 
     under this subsection.
       ``(h) Historic Rehabilitation Mortgage Credit 
     Certificate.--
       ``(1) In general.--The taxpayer may elect, in lieu of the 
     credit otherwise allowable under this section, to receive a 
     historic rehabilitation mortgage credit certificate. An 
     election under this paragraph shall be made--
       ``(A) in the case of a building to which subsection (g) 
     applies, at the time of purchase, or
       ``(B) in any other case, at the time rehabilitation is 
     completed.
       ``(2) Historic rehabilitation mortgage credit 
     certificate.--For purposes of this subsection, the term 
     `historic rehabilitation mortgage credit certificate' means a 
     certificate--
       ``(A) issued to the taxpayer, in accordance with procedures 
     prescribed by the Secretary, with respect to a certified 
     rehabilitation,
       ``(B) the face amount of which shall be equal to the credit 
     which would (but for this subsection) be allowable under 
     subsection (a) to the taxpayer with respect to such 
     rehabilitation,
       ``(C) which may only be transferred by the taxpayer to a 
     lending institution (including a nondepository institution) 
     in connection with a loan--
       ``(i) that is secured by the building with respect to which 
     the credit relates, and
       ``(ii) the proceeds of which may not be used for any 
     purpose other than the acquisition or rehabilitation of such 
     building, and
       ``(D) in exchange for which such lending institution 
     provides to the taxpayer--
       ``(i) a reduction in the rate of interest on the loan which 
     results in interest payment reductions which are 
     substantially equivalent on a present value basis to the face 
     amount of such certificate, or
       ``(ii) if the taxpayer so elects with respect to a 
     specified amount of the face amount of such a certificate 
     relating to a building--

       ``(I) which is a targeted area residence (within the 
     meaning of section 143(j)(1)), or
       ``(II) which is located in an enterprise community or 
     empowerment zone as designated under section 1391, or a 
     renewal community as designated under section 1400(e),

     a payment which is substantially equivalent to such specified 
     amount to be used to reduce the taxpayer's cost of purchasing 
     the building (and only the remainder of such face amount 
     shall be taken into account under clause (i)).
       ``(3) Method of discounting.--The present value under 
     paragraph (2)(D)(i) shall be determined--
       ``(A) for a period equal to the term of the loan referred 
     to in subparagraph (D)(i),
       ``(B) by using the convention that any payment on such loan 
     in any taxable year within such period is deemed to have been 
     made on the last day of such taxable year,
       ``(C) by using a discount rate equal to 65 percent of the 
     average of the annual Federal mid-term rate and the annual 
     Federal long-term rate applicable under section 1274(d)(1) to 
     the month in which the taxpayer makes an election under 
     paragraph (1) and compounded annually, and
       ``(D) by assuming that the credit allowable under this 
     section for any year is received on the last day of such 
     year.
       ``(4) Use of certificate by lender.--The amount of the 
     credit specified in the certificate shall be allowed to the 
     lender only to offset the regular tax (as defined in section 
     55(c)) of such lender. The lender may carry forward all 
     unused amounts under this subsection until exhausted.
       ``(5) Historic rehabilitation mortgage credit certificate 
     not treated as taxable income.--Notwithstanding any other 
     provision of law, no benefit accruing to the taxpayer through 
     the use of a historic rehabilitation mortgage credit 
     certificate shall be included in gross income for purposes of 
     this title.
       ``(i) Recapture.--
       ``(1) In general.--If, before the end of the 5-year period 
     beginning on the date on which the rehabilitation of the 
     building is completed (or, if subsection (g) applies, the 
     date of purchase of such building by the taxpayer)--
       ``(A) the taxpayer disposes of such taxpayer's interest in 
     such building, or
       ``(B) such building ceases to be used as the principal 
     residence of the taxpayer or ceases to be a certified 
     historic structure,
     the taxpayer's tax imposed by this chapter for the taxable 
     year in which such disposition or cessation occurs shall be 
     increased by the recapture percentage of the credit allowed 
     under this section for all prior taxable years with respect 
     to such rehabilitation.
       ``(2) Recapture percentage.--For purposes of paragraph (1), 
     the recapture percentage shall be determined in accordance 
     with the table under section 50(a)(1)(B), deeming such table 
     to be amended--
       ``(A) by striking `If the property ceases to be investment 
     credit property within--' and inserting `If the disposition 
     or cessation occurs within--', and
       ``(B) in clause (i) by striking `One full year after placed 
     in service' and inserting `One full year after the taxpayer 
     becomes entitled to the credit'.
       ``(3) Transfer between spouses or incident to divorce.--In 
     the case of any transfer described in subsection (a) of 
     section 1041 (relating to transfers between spouses or 
     incident to divorce)--
       ``(A) the foregoing provisions of this subsection shall not 
     apply, and
       ``(B) the same tax treatment under this subsection with 
     respect to the transferred property shall apply to the 
     transferee as would have applied to the transferor.
       ``(j) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property (including any purchase under 
     subsection (g) and any transfer under subsection (h)), the 
     increase in the basis of such property which would (but for 
     this subsection) result from such expenditure shall be 
     reduced by the amount of the credit so allowed.

[[Page S5382]]

       ``(k) Processing Fees.--Any State may impose a fee for the 
     processing of applications for the certification of any 
     rehabilitation under this section provided that the amount of 
     such fee is used only to defray expenses associated with the 
     processing of such applications.
       ``(l) Denial of Double Benefit.--No credit shall be allowed 
     under this section for any amount for which credit is allowed 
     under section 47.
       ``(m) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including regulations where less than all of 
     a building is used as a principal residence and where more 
     than 1 taxpayer use the same dwelling unit as their principal 
     residence.''
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 23 is amended by striking 
     ``and section 1400C'' and inserting ``and sections 25B and 
     1400C''.
       (2) Subparagraph (C) of section 25(e)(1) is amended by 
     inserting ``, 25B,'' after ``sections 23''.
       (3) Subsection (d) of section 1400C is amended by striking 
     ``other than this section)'' and inserting ``other than this 
     section and section 25B)''.
       (4) Subsection (a) of section 1016 is amended by striking 
     ``and'' at the end of paragraph (26), by striking the period 
     at the end of paragraph (27) and inserting ``, and'', and by 
     adding at the end the following new item:
       ``(28) to the extent provided in section 25B(j).''
       (c) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Historic homeownership rehabilitation credit.''
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to rehabilitations the physical work 
     on which begins after the date of enactment of this Act.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 1011. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

           TITLE XI--ENERGY SECURITY AND TAX INCENTIVE POLICY

         Subtitle A--Energy-Efficient Property Used in Business

     SEC. 1101. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED 
                   IN BUSINESS.

       (a) In General.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment credit) 
     is amended by inserting after section 48 the following:

     ``SEC. 48A. ENERGY CREDIT.

       ``(a) In General.--For purposes of section 46, the energy 
     credit for any taxable year is the energy percentage of the 
     basis of each energy property placed in service during such 
     taxable year.
       ``(b) Energy Percentage.--
       ``(1) In general.--The energy percentage is--
       ``(A) except as otherwise provided in this subparagraph, 10 
     percent,
       ``(B) in the case of energy property described in clauses 
     (i), (iii), and (vi) of subsection (c)(1)(A), 20 percent,
       ``(C) in the case of energy property described in 
     subsection (c)(1)(A)(v), 15 percent,
       ``(D) in the case of energy property described in 
     subsection (c)(1)(A)(ii) relating to a high risk geothermal 
     well, 20 percent, and
       ``(E) in the case of energy property described in 
     subsection (c)(1)(A)(vii), 30 percent.
       ``(2) Coordination with rehabilitation.--The energy 
     percentage shall not apply to that portion of the basis of 
     any property which is attributable to qualified 
     rehabilitation expenditures.
       ``(c) Energy Property Defined.--
       ``(1) In general.--For purposes of this subpart, the term 
     `energy property' means any property--
       ``(A) which is--
       ``(i) solar energy property,
       ``(ii) geothermal energy property,
       ``(iii) energy-efficient building property other than 
     property described in clauses (iii)(I) and (v)(I) of 
     subsection (d)(3)(A),
       ``(iv) combined heat and power system property,
       ``(v) low core loss distribution transformer property,
       ``(vi) qualified anaerobic digester property, or
       ``(vii) qualified wind energy systems equipment property,
       ``(B)(i) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(ii) which is acquired by the taxpayer if the original 
     use of such property commences with the taxpayer.
       ``(C) which can reasonably be expected to remain in 
     operation for at least 5 years,
       ``(D) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable, and
       ``(E) which meets the performance and quality standards (if 
     any) which--
       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy), and
       ``(ii) are in effect at the time of the acquisition of the 
     property.
       ``(2) Exceptions.--
       ``(A) Public utility property.--Such term shall not include 
     any property which is public utility property (as defined in 
     section 46(f)(5) as in effect on the day before the date of 
     the enactment of the Revenue Reconciliation Act of 1990), 
     except for property described in paragraph (1)(A)(iv).
       ``(B) Certain wind equipment.--Such term shall not include 
     equipment described in paragraph (1)(A)(vii) which is taken 
     into account for purposes of section 45 for the taxable year.
       ``(d) Definitions Relating to Types of Energy Property.--
     For purposes of this section--
       ``(1) Solar energy property.--
       ``(A) In general.--The term `solar energy property' means 
     equipment which uses solar energy to generate electricity, to 
     heat or cool (or provide hot water for use in) a structure, 
     or to provide solar process heat.
       ``(B) Swimming pools, etc. used as storage medium.--The 
     term `solar energy property' shall not include property with 
     respect to which expenditures are properly allocable to a 
     swimming pool, hot tub, or any other energy storage medium 
     which has a function other than the function of such storage.
       ``(C) Solar panels.--No solar panel or other property 
     installed as a roof (or portion thereof) shall fail to be 
     treated as solar energy property solely because it 
     constitutes a structural component of the structure on which 
     it is installed.
       ``(2) Geothermal energy property.--
       ``(A) In general.--The term `geothermal energy property' 
     means equipment used to produce, distribute, or use energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(B) High risk geothermal well.--The term `high risk 
     geothermal well' means a geothermal deposit (within the 
     meaning of section 613(e)(2)) which requires high risk 
     drilling techniques. Such deposit may not be located in a 
     State or national park or in an area in which the relevant 
     State park authority or the National Park Service determines 
     the development of such a deposit will negatively impact on a 
     State or national park.
       ``(3) Energy-efficient building property.--
       ``(A) In general.--The term `energy-efficient building 
     property' means--
       ``(i) a fuel cell which--

       ``(I) generates electricity using an electrochemical 
     process,
       ``(II) has an electricity-only generation efficiency 
     greater than 30 percent, and
       ``(III) has a minimum generating capacity of 2 kilowatts,

       ``(ii) an electric heat pump hot water heater which yields 
     an energy factor of 1.7 or greater under test procedures 
     prescribed by the Secretary of Energy,
       ``(iii)(I) an electric heat pump which has a heating system 
     performance factor (HSPF) of at least 8.5 but less than 9 and 
     a cooling seasonal energy efficiency ratio (SEER) of at least 
     13.5 but less than 15,
       ``(II) an electric heat pump which has a heating system 
     performance factor (HSPF) of 9 or greater and a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(iv) a natural gas heat pump which has a coefficient of 
     performance of not less than 1.25 for heating and not less 
     than 0.70 for cooling,
       ``(v)(I) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of at least 13.5 but 
     less than 15,
       ``(II) a central air conditioner which has a cooling 
     seasonal energy efficiency ratio (SEER) of 15 or greater,
       ``(vi) an advanced natural gas water heater which--

       ``(I) increases steady state efficiency and reduces standby 
     and vent losses, and
       ``(II) has an energy factor of at least 0.65,

       ``(vii) an advanced natural gas furnace which achieves a 90 
     percent AFUE and rated for seasonal electricity use of less 
     than 300 kWh per year, and
       ``(viii) natural gas cooling equipment which meets all 
     applicable standards of the American Society of Heating, 
     Refrigerating, and Air Conditioning Engineers and which--

       ``(I) has a coefficient of performance of not less than 
     .60, or
       ``(II) uses desiccant technology and has an efficiency 
     rating of not less than 50 percent.

       ``(B) Limitations.--The credit under subsection (a) for the 
     taxable year may not exceed--
       ``(i) $500 in the case of property described in 
     subparagraph (A) other than clauses (i), (iv), and (viii) 
     thereof,
       ``(ii) $1,000 for each kilowatt of capacity in the case of 
     any fuel cell described in subparagraph (A)(i),
       ``(iii) $1,000 in the case of any natural gas heat pump 
     described in subparagraph (A)(iv), and
       ``(iv) $150 for each ton of capacity in the case of any 
     natural gas cooling equipment described in subparagraph 
     (A)(viii).
       ``(4) Combined heat and power system property.--
       ``(A) In general.--The term `combined heat and power system 
     property' means property--
       ``(i) comprising a system for the same energy source for 
     the simultaneous or sequential generation of electrical 
     power, mechanical shaft power, or both, in combination with 
     steam, heat, or other forms of useful energy,

[[Page S5383]]

       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy, and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or a combination 
     thereof), and

       ``(iv) the energy efficiency percentage of which exceeds--

       ``(I) 60 percent in the case of a system with an electrical 
     capacity of less than 1 megawatt),
       ``(II) 65 percent in the case of a system with an 
     electrical capacity of not less than 1 megawatt and not in 
     excess of 50 megawatts), and
       ``(III) 70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts).

       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 46(f)(5) as in effect on the 
     day before the date of the enactment of the Revenue 
     Reconciliation Act of 1990), the taxpayer may only claim the 
     credit under subsection (a)(1) if, with respect to such 
     property, the taxpayer uses a normalization method of 
     accounting.
       ``(5) Low core loss distribution transformer property.--The 
     term `low core loss distribution transformer property' means 
     a distribution transformer which has energy savings from a 
     highly efficient core of at least 20 percent more than the 
     average for power ratings reported by studies required under 
     section 124 of the Energy Policy Act of 1992.
       ``(6) Qualified anaerobic digester property.--The term 
     `qualified anaerobic digester property' means an anaerobic 
     digester for manure or crop waste which achieves at least 65 
     percent efficiency measured in terms of the fraction of 
     energy input converted to electricity and useful thermal 
     energy.
       ``(7) Qualified wind energy systems equipment property.--
     The term `qualified wind energy systems equipment property' 
     means wind energy systems equipment with a turbine size of 
     not more than 75 kilowatts rated capacity.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Special rule for property financed by subsidized 
     energy financing or industrial development bonds.--
       ``(A) Reduction of basis.--For purposes of applying the 
     energy percentage to any property, if such property is 
     financed in whole or in part by--
       ``(i) subsidized energy financing, or
       ``(ii) the proceeds of a private activity bond (within the 
     meaning of section 141) the interest on which is exempt from 
     tax under section 103, the amount taken into account as the 
     basis of such property shall not exceed the amount which (but 
     for this subparagraph) would be so taken into account 
     multiplied by the fraction determined under subparagraph (B).
       ``(B) Determination of fraction.--For purposes of 
     subparagraph (A), the fraction determined under this 
     subparagraph is 1 reduced by a fraction--
       ``(i) the numerator of which is that portion of the basis 
     of the property which is allocable to such financing or 
     proceeds, and
       ``(ii) the denominator of which is the basis of the 
     property.
       ``(C) Subsidized energy financing.--For purposes of 
     subparagraph (A), the term `subsidized energy financing' 
     means financing provided under a Federal, State, or local 
     program a principal purpose of which is to provide subsidized 
     financing for projects designed to conserve or produce 
     energy.
       ``(2) 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 section.
       ``(f) Application of Section.--
       ``(1) In general.--Except as provided by paragraph (2), 
     this section shall apply to property placed in service after 
     December 31, 2001, and before January 1, 2009.
       ``(2) Exceptions.--
       ``(A) Solar energy and geothermal energy property.--
     Paragraph (1) shall not apply to solar energy property or 
     geothermal energy property.
       ``(B) Certain electric heat pumps and central air 
     conditioners.--In the case of property which is described in 
     subsection (d)(3)(A)(iii)(I) or (d)(3)(A)(v)(I), this section 
     shall apply to property placed in service after December 31, 
     2001, and before January 1, 2006.''.
       (b) Conforming Amendments.--
       (1) Section 48 is amended to read as follows:

     ``SEC. 48. REFORESTATION CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     reforestation credit for any taxable year is 20 percent of 
     the portion of the amortizable basis of any qualified timber 
     property which was acquired during such taxable year and 
     which is taken into account under section 194 (after the 
     application of section 194(b)(1)).
       ``(b) Definitions.--For purposes of this subpart, the terms 
     `amortizable basis' and `qualified timber property' have the 
     respective meanings given to such terms by section 194.''.
       (2) Section 39(d), as amended by this Act, is amended by 
     adding at the end the following:
       ``(12) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit 
     determined under section 48A may be carried back to a taxable 
     year ending before January 1, 2002.''.
       (3) Section 280C is amended by adding at the end the 
     following:
       ``(d) Credit for Energy Property Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the expenses for energy property (as defined in 
     section 48A(c)) otherwise allowable as a deduction for the 
     taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 48A(a).
       ``(2) Similar rule where taxpayer capitalizes rather than 
     deducts expenses.--If--
       ``(A) the amount of the credit allowable for the taxable 
     year under section 48A (determined without regard to section 
     38(c)), exceeds
       ``(B) the amount allowable as a deduction for the taxable 
     year for expenses for energy property (determined without 
     regard to paragraph (1)), the amount chargeable to capital 
     account for the taxable year for such expenses shall be 
     reduced by the amount of such excess.
       ``(3) Controlled groups.--Paragraph (3) of subsection (b) 
     shall apply for purposes of this subsection.''.
       (4) Section 29(b)(3)(A)(i)(III) is amended by striking 
     `section 48(a)(4)(C)' and inserting `section 48A(e)(1)(C)'.
       (5) Section 50(a)(2)(E) is amended by striking `section 
     48(a)(5)' and inserting `section 48A(e)(2)'.
       (6) Section 168(e)(3)(B) is amended--
       (A) by striking clause (vi)(I) and inserting the following:
       ``(I) is described in paragraph (1) or (2) of section 
     48A(d) (or would be so described if `solar and wind' were 
     substituted for `solar' in paragraph (1)(B)),'', and
       (B) in the last sentence by striking ``section 48(a)(3)'' 
     and inserting ``section 48A(c)(2)(A)''.
       (c) Clerical Amendment.--The table of sections for subpart 
     E of part IV of subchapter A of chapter 1 is amended by 
     striking the item relating to section 48 and inserting the 
     following:

``Sec. 48. Reforestation credit.
``Sec. 48A. Energy credit.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 1102. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY 
                   DEDUCTION.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by adding at the end the following:

     ``SEC. 199. ENERGY-EFFICIENT COMMERCIAL BUILDING PROPERTY.

       ``(a) In General.--There shall be allowed as a deduction 
     for the taxable year an amount equal to the energy-efficient 
     commercial building property expenditures made by a taxpayer 
     for the taxable year.
       ``(b) Maximum Amount of Deduction.--The amount of energy-
     efficient commercial building property expenditures taken 
     into account under subsection (a) shall not exceed an amount 
     equal to the product of--
       ``(1) $2.25, and
       ``(2) the square footage of the building with respect to 
     which the expenditures are made.
       ``(c) Year Deduction Allowed.--The deduction under 
     subsection (a) shall be allowed in the taxable year in which 
     the construction of the building is completed.
       ``(d) Energy-Efficient Commercial Building Property 
     Expenditures.--For purposes of this section--
       ``(1) In general.--The term `energy-efficient commercial 
     building property expenditures' means an amount paid or 
     incurred for energy-efficient commercial building property 
     installed on or in connection with new construction or 
     reconstruction of property--
       ``(A) for which depreciation is allowable under section 
     167,
       ``(B) which is located in the United States, and
       ``(C) the construction or erection of which is completed by 
     the taxpayer.

[[Page S5384]]

     Such property includes all residential rental property, 
     including low-rise multifamily structures and single family 
     housing property which is not within the scope of Standard 
     90.1-1999 (described in paragraph (3)).
       ``(2) Labor costs included.--Such term includes 
     expenditures for labor costs properly allocable to the onsite 
     preparation, assembly, or original installation of the 
     property.
       ``(3) Energy expenditures excluded.--Such term does not 
     include any expenditures taken into account in determining 
     any credit allowed under section 48A.
       ``(e) Energy-Efficient Commercial Building Property.--For 
     purposes of subsection (d)--
       ``(1) In general.--The term `energy-efficient commercial 
     building property' means any property which reduces total 
     annual energy and power costs with respect to the lighting, 
     heating, cooling, ventilation, and hot water supply systems 
     of the building by 50 percent or more in comparison to a 
     reference building which meets the requirements of Standard 
     90.1-1999 of the American Society of Heating, Refrigerating, 
     and Air Conditioning Engineers and the Illuminating 
     Engineering Society of North America using methods of 
     calculation under subparagraph (B) and certified by qualified 
     professionals as provided under paragraph (6).
       ``(2) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power consumption and cost, taking 
     into consideration the provisions of the 1998 California 
     Nonresidential ACM Manual. These procedures shall meet the 
     following requirements:
       ``(A) In calculating tradeoffs and energy performance, the 
     regulations shall prescribe the costs per unit of energy and 
     power, such as kilowatt hour, kilowatt, gallon of fuel oil, 
     and cubic foot or Btu of natural gas, which may be dependent 
     on time of usage.
       ``(B) The calculational methodology shall require that 
     compliance be demonstrated for a whole building. If some 
     systems of the building, such as lighting, are designed later 
     than other systems of the building, the method shall provide 
     that either--
       ``(i) the expenses taken into account under paragraph (1) 
     shall not occur until the date designs for all energy-using 
     systems of the building are completed, or
       ``(ii) the expenses taken into account under paragraph (1) 
     shall be a fraction of such expenses based on the performance 
     of less than all energy-using systems in accordance with 
     subparagraph (C), and the energy performance of all systems 
     and components not yet designed shall be assumed to comply 
     minimally with the requirements of such Standard 90.1-1999.
       ``(C) The expenditures in connection with the design of 
     subsystems in the building, such as the envelope, the 
     heating, ventilation, air conditioning and water heating 
     system, and the lighting system shall be allocated to the 
     appropriate building subsystem based on system-specific 
     energy cost savings targets in regulations promulgated by the 
     Secretary of Energy which are equivalent, using the 
     calculation methodology, to the whole building requirement of 
     50 percent savings.
       ``(D) The calculational methods under this paragraph need 
     not comply fully with section 11 of such Standard 90.1-1999.
       ``(E) The calculational methods shall be fuel neutral, such 
     that the same energy efficiency features shall qualify a 
     building for the deduction under this section regardless of 
     whether the heating source is a gas or oil furnace or an 
     electric heat pump.
       ``(F) The calculational methods shall provide appropriate 
     calculated energy savings for design methods and technologies 
     not otherwise credited in either such Standard 90.1-1999 or 
     in the 1998 California Nonresidential ACM Manual, including 
     the following:
       ``(i) Natural ventilation.
       ``(ii) Evaporative cooling.
       ``(iii) Automatic lighting controls such as occupancy 
     sensors, photocells, and timeclocks.
       ``(iv) Daylighting.
       ``(v) Designs utilizing semi-conditioned spaces which 
     maintain adequate comfort conditions without air conditioning 
     or without heating.
       ``(vi) Improved fan system efficiency, including reductions 
     in static pressure.
       ``(vii) Advanced unloading mechanisms for mechanical 
     cooling, such as multiple or variable speed compressors.
       ``(viii) The calculational methods may take into account 
     the extent of commissioning in the building, and allow the 
     taxpayer to take into account measured performance which 
     exceeds typical performance.
       ``(3) Computer software.--
       ``(A) In general.--Any calculation under this subsection 
     shall be prepared by qualified computer software.
       ``(B) Qualified computer software.--For purposes of this 
     paragraph, the term `qualified computer software' means 
     software--
       ``(i) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power consumption and costs as 
     required by the Secretary,
       ``(ii) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(iii) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.
       ``(4) Allocation of deduction for public property.--In the 
     case of energy-efficient commercial building property 
     installed on or in public property, the Secretary shall 
     promulgate a regulation to allow the allocation of the 
     deduction to the person primarily responsible for designing 
     the property in lieu of the public entity which is the owner 
     of such property. Such person shall be treated as the 
     taxpayer for purposes of this section.
       ``(5) Notice to owner.--The qualified individual shall 
     provide an explanation to the owner of the building regarding 
     the energy efficiency features of the building and its 
     projected annual energy costs as provided in the notice under 
     paragraph (3)(B)(iii).
       ``(6) Certification.--
       ``(A) In general.--Except as provided in this paragraph, 
     the Secretary, in consultation with the Secretary of Energy, 
     shall establish requirements for certification and compliance 
     procedures similar to the procedures under section 45H(d).
       ``(B) Qualified individuals.--Individuals qualified to 
     determine compliance shall be only those individuals who are 
     recognized by an organization certified by the Secretary for 
     such purposes.
       ``(C) Proficiency of qualified individuals.--The Secretary 
     shall consult with nonprofit organizations and State agencies 
     with expertise in energy efficiency calculations and 
     inspections to develop proficiency tests and training 
     programs to qualify individuals to determine compliance.
       ``(f) Termination.--This section shall not apply with 
     respect to any energy-efficient commercial building property 
     expenditures in connection with property--
       ``(1) the plans for which are not certified under 
     subsection (e)(6) on or before December 31, 2006, and
       ``(2) the construction of which is not completed on or 
     before December 31, 2008.''.
       (b) Conforming Amendments.--Section 1016(a) is amended by 
     striking ``and'' at the end of paragraph (26), by striking 
     the period at the end of paragraph (27) and inserting ``, 
     and'', and by inserting the following:
       ``(28) for amounts allowed as a deduction under section 
     199(a).''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding at the end 
     the following:

``Sec. 199. Energy-efficient commercial building property.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                 Subtitle B--Residential Energy Systems

     SEC. 1111. CREDIT FOR CONSTRUCTION OF NEW ENERGY-EFFICIENT 
                   HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 1103(a), is amended by inserting after section 45G 
     the following:

     ``SEC. 45H. NEW ENERGY-EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy-efficient property 
     installed in a qualified new energy-efficient home during 
     construction of such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a dwelling shall not exceed--
       ``(i) in the case of a dwelling described in subsection 
     (c)(3)(D)(i), $1,500, and
       ``(ii) in the case of a dwelling described in subsection 
     (c)(3)(D)(ii), $2,500.
       ``(B) Prior credit amounts on same dwelling taken into 
     account.--If a credit was allowed under subsection (a) with 
     respect to a dwelling in 1 or more prior taxable years, the 
     amount of the credit otherwise allowable for the taxable year 
     with respect to that dwelling shall not exceed the amount 
     under clause (i) or (ii) (as the case may be), reduced by the 
     sum of the credits allowed under subsection (a) with respect 
     to the dwelling for all prior taxable years.
       ``(2) Coordination with rehabilitation and energy 
     credits.--For purposes of this section--
       ``(A) the basis of any property referred to in subsection 
     (a) 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 48A(a)), and
       ``(B) expenditures taken into account under either section 
     47 or 48A(a) shall not be taken into account under this 
     section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means the person who constructed the new energy-efficient 
     home, or in the case of a manufactured home which conforms to 
     Federal Manufactured Home Construction and Safety Standards 
     (24 C.F.R. 3280), the manufactured home producer of such 
     home.
       ``(2) Energy-efficient property.--The term `energy-
     efficient property' means any energy-efficient building 
     envelope component, and any energy-efficient heating or 
     cooling equipment which can, individually or in combination 
     with other components, meet the requirements of this section.

[[Page S5385]]

       ``(3) Qualified new energy-efficient home.--The term 
     `qualified new energy-efficient home' means a dwelling--
       ``(A) located in the United States,
       ``(B) the construction of which is substantially completed 
     after December 31, 2000,
       ``(C) the original use of which is as a principal residence 
     (within the meaning of section 121) which commences with the 
     person who acquires such dwelling from the eligible 
     contractor, and
       ``(D) which is certified to have a projected level of 
     annual heating and cooling energy consumption, measured in 
     terms of average annual energy cost to the homeowner which is 
     at least--
       ``(i) 30 percent less than the annual level of heating and 
     cooling energy consumption of a reference dwelling 
     constructed in accordance with the standards of chapter 4 of 
     the 2000 International Energy Conservation Code, or
       ``(ii) 50 percent less than such annual level of heating 
     and cooling energy consumption.
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Acquire.--The term `acquire' includes purchase and, 
     in the case of reconstruction and rehabilitation, such term 
     includes a binding written contract for such reconstruction 
     or rehabilitation.
       ``(6) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain of a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(7) Manufactured home included.--The term `dwelling' 
     includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(d) Certification.--
       ``(1) Method.--A certification described in subsection 
     (c)(3)(D) shall be determined on the basis of 1 of the 
     following methods:
       ``(A) A component-based method, using the applicable 
     technical energy efficiency specifications or ratings 
     (including product labeling requirements) for the energy-
     efficient building envelope component or energy-efficient 
     heating or cooling equipment. The Secretary shall, in 
     consultation with the Administrator of the Environmental 
     Protection Agency, develop prescriptive component-based 
     packages that are equivalent in energy performance to 
     properties that qualify under subparagraph (B).
       ``(B) An energy performance-based method that calculates 
     projected energy usage and cost reductions in the dwelling in 
     relation to a reference dwelling--
       ``(i) heated by the same energy source and heating system 
     type, and
       ``(ii) constructed in accordance with the standards of 
     chapter 4 of the 2000 International Energy Conservation Code.
     Computer software shall be used in support of an energy 
     performance-based method certification under subparagraph 
     (B). Such software shall meet procedures and methods for 
     calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy. Such regulations on 
     the specifications for software and verification protocols 
     shall be based on the 1998 California Residential Alternative 
     Calculation Method Approval Manual.
       ``(2) Provider.--Such certification shall be provided by--
       ``(A) in the case of a method described in paragraph 
     (1)(A), a local building regulatory authority, a utility, a 
     manufactured home production inspection primary inspection 
     agency (IPIA), or a home energy rating organization, or
       ``(B) in the case of a method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--
       ``(A) In general.--Such certification shall be made in 
     writing in a manner that specifies in readily verifiable 
     fashion the energy-efficient building envelope components and 
     energy-efficient heating or cooling equipment installed and 
     their respective rated energy efficiency performance, and in 
     the case of a method described in paragraph (1)(B), 
     accompanied by written analysis documenting the proper 
     application of a permissible energy performance calculation 
     method to the specific circumstances of such dwelling.
       ``(B) Form provided to buyer.--A form documenting the 
     energy-efficient building envelope components and energy-
     efficient heating or cooling equipment installed and their 
     rated energy efficiency performance shall be provided to the 
     buyer of the dwelling. The form shall include labeled R-value 
     for insulation products, NFRC-labeled U-factor and Solar Heat 
     Gain Coefficient for windows, skylights, and doors, labeled 
     AFUE ratings for furnaces and boilers, labeled HSPF ratings 
     for electric heat pumps, and labeled SEER ratings for air 
     conditioners.
       ``(C) Ratings label affixed in dwelling.--A permanent label 
     documenting the ratings in subparagraph (B) shall be affixed 
     to the front of the electrical distribution panel of the 
     dwelling, or shall be otherwise permanently displayed in a 
     readily inspectable location in the dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for energy performance-based certification 
     methods, the Secretary, after examining the requirements for 
     energy consultants and home energy ratings providers 
     specified by the Mortgage Industry National Accreditation 
     Procedures for Home Energy Rating Systems, shall prescribe 
     procedures for calculating annual energy usage and cost 
     reductions for heating and cooling and for the reporting of 
     the results. Such regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     home to qualify for the credit under this section regardless 
     of whether the dwelling uses a gas or oil furnace or boiler 
     or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the homebuyer.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Accreditation Procedures for Home Energy Rating 
     Systems.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--Subsection (a) shall apply to dwellings 
     purchased during the period beginning on January 1, 2001, and 
     ending on December 31, 2005.''.
       (b) Credit Made Part of General Business Credit.--
     Subsection (b) of section 38 (relating to current year 
     business credit), as amended by section 1103(d), is amended 
     by striking ``plus'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``, plus'', and by adding at the end the following:
       ``(17) the new energy-efficient home credit determined 
     under section 45H.''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by section 1103(c), is amended by adding at the end the 
     following:
       ``(f) New Energy-Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a new 
     energy-efficient home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45H.''.
       (d) Credit Allowed Against Regular and Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for new energy efficient home credit.--
       ``(A) In general.--In the case of the new energy efficient 
     home 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) subparagraphs (A) and (B) 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 new 
     energy efficient home credit).

       ``(B) New energy efficient home credit.--For purposes of 
     this subsection, the term `new energy efficient home credit' 
     means the credit allowable under subsection (a) by reason of 
     section 45H.''.
       (2) Conforming amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by inserting ``or the new energy 
     efficient home credit'' after ``employment credit''.
       (e) Limitation on Carryback.--Subsection (d) of section 39, 
     as amended by section 1103(b), is amended by adding at the 
     end the following:
       ``(14) No carryback of new energy-efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45H may be carried back to 
     any taxable year ending before January 1, 2001.''.
       (f) Deduction for Certain Unused Business Credits.--
     Subsection (c) of section 196 is amended by striking ``and'' 
     at the end of paragraph (7), by striking the period at the 
     end of paragraph (8) and inserting ``, and'', and by adding 
     after paragraph (8) the following:
       ``(9) the new energy-efficient home credit determined under 
     section 45H.''.
       (g) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 1103(d), is amended by inserting after the item 
     relating to section 45G the following:

``Sec. 45H. New energy-efficient home credit.''.

       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2000.

     SEC. 1112. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by this Act, is amended by inserting after section 
     25C the following new section:

[[Page S5386]]

     ``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES

     .  ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed by this section 
     with respect to a dwelling shall not exceed $2,000.
       ``(2) Prior credit amounts for taxpayer on same dwelling 
     taken into account.--If a credit was allowed to the taxpayer 
     under subsection (a) with respect to a dwelling in 1 or more 
     prior taxable years, the amount of the credit otherwise 
     allowable for the taxable year with respect to that dwelling 
     shall not exceed the amount of $2,000 reduced by the sum of 
     the credits allowed under subsection (a) to the taxpayer with 
     respect to the dwelling for all prior taxable years.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under subpart A of part IV of 
     subchapter A (other than this section), such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which is certified to meet or exceed the 
     prescriptive criteria for such component in the 2000 
     International Energy Conservation Code, or any combination of 
     energy efficiency measures which achieves at least a 30 
     percent reduction in heating and cooling energy usage for the 
     dwelling (as measured in terms of energy cost to the 
     taxpayer), if--
       ``(1) such component or combinations of measures is 
     installed in or on a dwelling--
       ``(A) located in the United States, and
       ``(B) owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component or combination of 
     measures commences with the taxpayer, and
       ``(3) such component or combination of measures reasonably 
     can be expected to remain in use for at least 5 years.
       ``(e) Certification.--The certification described in 
     subsection (d) shall be--
       ``(1) in the case of any component described in subsection 
     (d), determined on the basis of applicable energy efficiency 
     ratings (including product labeling requirements) for 
     affected building envelope components,
       ``(2) in the case of combinations of measures described in 
     subsection (d), determined by the performance-based methods 
     described in section 45H(d),
       ``(3) provided by a third party, such as a local building 
     regulatory authority, a utility, a manufactured home 
     production inspection primary inspection agency (IPIA), or a 
     home energy rating organization, consistent with the 
     requirements of section 45H(d)(2), and
       ``(4) made in writing on forms which specify in readily 
     inspectable fashion the energy-efficient components and other 
     measures and their respective efficiency ratings, and which 
     shall include a permanent label affixed to the electrical 
     distribution panel as described in section 45H(d)(3)(C).
       ``(f) Definitions and Special Rules.--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures for the qualified energy 
     efficiency improvements made during such calendar year by any 
     of such individuals with respect to such dwelling unit shall 
     be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having paid his proportionate share of the cost of 
     qualified energy efficiency improvements made by such 
     association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) insulation material or system which is specifically 
     and primarily designed to reduce the heat loss or gain or a 
     dwelling when installed in or on such dwelling, and
       ``(B) exterior windows (including skylights) and doors.
       ``(5) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Termination.--Subsection (a) shall apply to qualified 
     energy efficiency improvements installed during the period 
     beginning on the date of the enactment of this section and 
     ending on December 31, 2005.''.
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 23, as amended by this Act, 
     is amended by inserting ``25D,'' after ``25C,''.
       (2) Subparagraph (C) of section 25(e)(1), as amended by 
     this Act, is amended by inserting ``25D,'' after ``25C,''.
       (3) Subsection (h) of seciton 904, as amended by this Act, 
     is amended by by striking ``or 25C'' and inserting ``, 25C, 
     or 25D''.
       (4) Subsection (d) of section 1400C is amended by inserting 
     ``and section 25C'' and inserting ``, section 25C, and 
     section 25D''.
       (4) Subsection (a) of section 1016, as amended by section 
     1102(b), is amended by striking ``and'' at the end of 
     paragraph (27), by striking the period at the end of 
     paragraph (28) and inserting ``; and'', and by adding at the 
     end the following:
       ``(29) to the extent provided in section 25D(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 25C the 
     following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after the date of 
     the enactment of this Act.

     SEC. 1113. CREDIT FOR RESIDENTIAL SOLAR, WIND, AND FUEL CELL 
                   ENERGY PROPERTY.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 1112(a), is amended by inserting after 
     section 25D the following:

     ``SEC. 25E. RESIDENTIAL SOLAR, WIND, AND FUEL CELL ENERGY 
                   PROPERTY.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the sum 
     of--
       ``(1) 15 percent of the qualified photovoltaic property 
     expenditures,
       ``(2) 15 percent of the qualified solar water heating 
     property expenditures,
       ``(3) 30 percent of the qualified wind energy property 
     expenditures, and
       ``(4) 25 percent for the qualified fuel cell property 
     expenditures,

     made by the taxpayer during the taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed under subsection 
     (a)(2) shall not exceed $2,000 for each system of solar 
     energy property.
       ``(2) Type of property.--No expenditure may be taken into 
     account under this section unless such expenditure is made by 
     the taxpayer for property installed on or in connection with 
     a dwelling unit which is located in the United States and 
     which is used as a residence.
       ``(3) Safety certifications.--No credit shall be allowed 
     under this section for an item of property unless--
       ``(A) in the case of solar water heating property, such 
     property is certified for performance and safety by the non-
     profit Solar Rating Certification Corporation or a comparable 
     entity endorsed by the government of the State in which such 
     property is installed, and
       ``(B) in the case of a photovoltaic, wind energy, or fuel 
     cell property, such property meets appropriate fire and 
     electric code requirements.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified solar water heating property expenditure.--
     The term `qualified solar water heating property expenditure' 
     means an expenditure for property which uses solar energy to 
     heat water for use in a dwelling unit with respect to which a 
     majority of the energy is derived from the sun.

[[Page S5387]]

       ``(2) Qualified photovoltaic property expenditure.--The 
     term `qualified photovoltaic property expenditure' means an 
     expenditure for property which uses solar energy to generate 
     electricity for use in a dwelling unit.
       ``(3) Solar panels.--No expenditure relating to a solar 
     panel or other property installed as a roof (or portion 
     thereof) shall fail to be treated as property described in 
     paragraph (1) or (2) solely because it constitutes a 
     structural component of the structure on which it is 
     installed.
       ``(4) Qualified wind energy property expenditure.--The term 
     `qualified wind energy property expenditure' means an 
     expenditure for property which uses wind energy to generate 
     electricity for use in a dwelling unit.
       ``(5) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for property which uses an electrochemical fuel 
     cell system to generate electricity for use in a dwelling 
     unit.
       ``(6) Labor costs.--Expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property described in paragraph (1), (2), 
     (4), or (5) and for piping or wiring to interconnect such 
     property to the dwelling unit shall be taken into account for 
     purposes of this section.
       ``(7) Energy storage medium.--Expenditures which are 
     properly allocable to a swimming pool, hot tub, or any other 
     energy storage medium which has a function other than the 
     function of such storage shall not be taken into account for 
     purposes of this section.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be determined by treating 
     all of such individuals as 1 taxpayer whose taxable year is 
     such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which such individual owns, such individual 
     shall be treated as having made his proportionate share of 
     any expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Joint ownership of items of solar or wind energy 
     property.--
       ``(A) In general.--Any expenditure otherwise qualifying as 
     an expenditure described in paragraph (1), (2), or (4) of 
     subsection (c) shall not be treated as failing to so qualify 
     merely because such expenditure was made with respect to 2 or 
     more dwelling units.
       ``(B) Limits applied separately.--In the case of any 
     expenditure described in subparagraph (A), the amount of the 
     credit allowable under subsection (a) shall (subject to 
     paragraph (1)) be computed separately with respect to the 
     amount of the expenditure made for each dwelling unit.
       ``(5) Allocation in certain cases.--If less than 80 percent 
     of the use of an item is for nonbusiness residential 
     purposes, only that portion of the expenditures for such item 
     which is properly allocable to use for nonbusiness 
     residential purposes shall be taken into account. For 
     purposes of this paragraph, use for a swimming pool shall be 
     treated as use which is not for residential purposes.
       ``(6) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(7) Reduction of credit for grants, tax-exempt bonds, and 
     subsidized energy financing.--The rules of section 29(b)(3) 
     shall apply for purposes of this section.
       ``(e) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--The credit allowed under this section 
     shall not apply to taxable years beginning after December 31, 
     2011.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016, as amended by section 
     1112(b)(4), is amended by striking ``and'' at the end of 
     paragraph (28), by striking the period at the end of 
     paragraph (29) and inserting ``; and'', and by adding at the 
     end the following:
       ``(30) to the extent provided in section 25E(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25E.''.
       (2) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 1112(b)(2), 
     is amended by inserting after the item relating to section 
     25D the following:

``Sec. 25E. Residential solar, wind, and fuel cell energy property.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures made after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

           Subtitle C--Electricity Facilities and Production

     SEC. 1121. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE AND WASTE PRODUCTS.

       (a) Increase in Credit Rate.--
       (1) In general.--Section 45(a)(1) is amended by striking 
     ``1.5 cents'' and inserting ``1.8 cents''.
       (2) Conforming amendments.--
       (A) Section 45(b)(2) is amended by striking ``1.5 cent'' 
     and inserting ``1.8 cent''.
       (B) Section 45(d)(2)(B) is amended by inserting ``(calendar 
     year 2001 in the case of the 1.8 cent amount in subsection 
     (a))'' after ``1992''.
       (b) Expansion of Qualified Resources.--
       (1) In general.--Section 45(c)(1) (relating to qualified 
     energy resources) is amended by striking ``and'' at the end 
     of subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``, and'', and by adding at 
     the end the following:
       ``(D) alternative resources.''.
       (2) Definition of alternative resources.--Section 45(c) 
     (relating to definitions) is amended--
       (A) by redesignating paragraph (3) as paragraph (5),
       (B) by redesignating paragraph (4) as paragraph (3), and
       (C) by inserting after paragraph (3), as redesignated by 
     subparagraph (B), the following:
       ``(4) Alternative Resources.--
       ``(A) In general.--The term `alternative resources' means--
       ``(i) solar,
       ``(ii) biomass (other than closed loop biomass),
       ``(iii) municipal solid waste,
       ``(iv) incremental hydropower,
       ``(v) geothermal,
       ``(vi) landfill gas, and
       ``(vii) steel cogeneration.
       ``(B) Biomass.--The term `biomass' means any solid, 
     nonhazardous, cellulosic waste material or any organic 
     carbohydrate matter, which is segregated from other waste 
     materials, and which is derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) waste pallets, crates, dunnage, untreated wood waste 
     from construction or manufacturing activities, and landscape 
     or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste or post-consumer 
     wastepaper, or
       ``(iii) any of the following agriculture sources: orchard 
     tree crops, vineyard, grain, legumes, sugar, and other crop 
     by-products or residues, including any packaging and other 
     materials which are nontoxic and biodegradable and are 
     associated with the processing, feeding, selling, 
     transporting, and disposal of such agricultural materials.
       ``(C) Municipal solid waste.--The term `municipal solid 
     waste' has the same meaning given the term `solid waste' 
     under section 2(27) of the Solid Waste Utilization Act (42 
     U.S.C. 6903).
       ``(D) Incremental hydropower.--The term `incremental 
     hydropower' means additional generating capacity achieved 
     from--
       ``(i) increased efficiency, or
       ``(ii) additions of new capacity

     ,at a licensed non-Federal hydroelectric project originally 
     placed in service before the date of the enactment of this 
     paragraph.
       ``(E) Geothermal.--The term `geothermal' means energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(F) Landfill gas.--The term `landfill gas' means gas 
     generated from the decomposition of any household solid 
     waste, commercial solid waste, and industrial solid waste 
     disposed of in a municipal solid waste landfill

[[Page S5388]]

     unit (as such terms are defined in regulations promulgated 
     under subtitle D of the Solid Waste Disposal Act (42 U.S.C. 
     6941 et seq.).
       ``(G) Steel cogeneration.--The term `steel cogeneration' 
     means the production of electricity and steam (or other form 
     of thermal energy) from any or all waste sources defined in 
     paragraphs (2) and (3) and subparagraphs (B) and (C) of this 
     paragraph within an operating facility which produces or 
     integrates the production of coke, direct reduced iron ore, 
     iron, or steel provided that the cogeneration meets any 
     regulatory energy-efficiency standards established by the 
     Secretary, and only to the extent that such energy is 
     produced from--
       ``(i) gases or heat generated from the production of 
     metallurgical coke,
       ``(ii) gases or heat generated from the production of 
     direct reduced iron ore or iron, from blast furnace or direct 
     ironmaking processes, or
       ``(iii) gases or heat generated from the manufacture of 
     steel.''.
       (3) Qualified facility.--Section 45(c)(5) (defining 
     qualified facility), as redesignated by paragraph 2(A), is 
     amended by adding at the end the following:
       ``(D) Alternative resources facility.--
       ``(i) In general.--Except as provided in clauses (ii), 
     (iii), and (iv), in the case of a facility using alternative 
     resources to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this subparagraph.
       ``(ii) Biomass facility.--In the case of a facility using 
     biomass described in paragraph (4)(A)(ii) to produce 
     electricity, the term `qualified facility' means any facility 
     of the taxpayer.
       ``(iii) Geothermal facility.--In the case of a facility 
     using geothermal to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after December 31, 1992.
       ``(iv) Steel cogeneration facilities.--In the case of a 
     facility using steel cogeneration to produce electricity, the 
     term `qualified facility' means any facility permitted to 
     operate under the environmental requirements of the Clean Air 
     Act Amendments of 1990 which is owned by the taxpayer and 
     originally placed in service after the date of the enactment 
     of this subparagraph. Such a facility may be treated as 
     originally placed in service when such facility was last 
     upgraded to increase efficiency or generation capability 
     after such date.
       ``(v) Special rules.--In the case of a qualified facility 
     described in this subparagraph, the 10-year period referred 
     to in subsection (a) shall be treated as beginning no earlier 
     than the date of the enactment of this subparagraph.''.
       (4) Government-owned facility.--Section 45(d)(6) (relating 
     to credit eligibility in the case of government-owned 
     facilities using poultry waste) is amended--
       (A) by inserting ``or alternative resources'' after 
     ``poultry waste'', and
       (B) by inserting ``or alternative resources'' after 
     ``poultry waste'' in the heading thereof.
       (5) Qualified facilities with co-production.--Section 45(b) 
     (relating to limitations and adjustments) is amended by 
     adding at the end the following:
       ``(4) Increased credit for co-production facilities.--
       ``(A) In general.--In the case of a qualified facility 
     described in subsection (c)(3)(D)(i) which has a co-
     production facility or a qualified facility described in 
     subparagraph (A), (B), or (C) of subsection (c)(3) which adds 
     a co-production facility after the date of the enactment of 
     this paragraph, the amount in effect under subsection (a)(1) 
     for an eligible taxable year of a taxpayer shall (after 
     adjustment under paragraph (2) and before adjustment under 
     paragraphs (1) and (3)) be increased by .25 cents.
       ``(B) Co-production facility.--For purposes of subparagraph 
     (A), the term `co-production facility' means a facility 
     which--
       ``(i) enables a qualified facility to produce heat, 
     mechanical power, chemicals, liquid fuels, or minerals from 
     qualified energy resources in addition to electricity, and
       ``(ii) produces such energy on a continuous basis.
       ``(C) Eligible taxable year.--For purposes of subparagraph 
     (A), the term `eligible taxable year' means any taxable year 
     in which the amount of gross receipts attributable to the co-
     production facility of a qualified facility are at least 10 
     percent of the amount of gross receipts attributable to 
     electricity produced by such facility.''.
       (6) Qualified facilities located within qualified indian 
     lands.--Section 45(b) (relating to limitations and 
     adjustments), as amended by paragraph (5), is amended by 
     adding at the end the following:
       ``(5) Increased credit for qualified facility located 
     within qualified indian land.--In the case of a qualified 
     facility described in subsection (c)(3)(D) which--
       ``(A) is located within--
       ``(i) qualified Indian lands (as defined in section 
     7871(c)(3)), or
       ``(ii) lands which are held in trust by a Native 
     Corporation (as defined in section 3(m) of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1602(m)) for Alaska Natives, 
     and
       ``(B) is operated with the explicit written approval of the 
     Indian tribal government or Native Corporation (as so 
     defined) having jurisdiction over such lands,

     the amount in effect under subsection (a)(1) for a taxable 
     year shall (after adjustment under paragraphs (2) and (4) and 
     before adjustment under paragraphs (1) and (3)) be increased 
     by .25 cents.''.
       (7) Electricity produced from certain resources co-fired in 
     coal plants.--Section 45(d) (relating to definitions and 
     special rules) is amended by adding at the end the following:
       ``(8) Special rule for electricity produced from certain 
     resources co-fired in coal plants.--In the case of 
     electricity produced from biomass (including closed loop 
     biomass), municipal solid waste, or animal waste, co-fired in 
     a facility which produces electricity from coal--
       ``(A) subsection (a)(1) shall be applied by substituting `1 
     cent' for `1.8 cents',
       ``(B) such facility shall be considered a qualified 
     facility for purposes of this section, and
       ``(C) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph.''.
       (8) Conforming amendments.--
       (A) The heading for section 45 is amended by inserting 
     ``AND WASTE ENERGY'' after ``RENEWABLE''.
       (B) The item relating to section 45 in the table of 
     sections subpart D of part IV of subchapter A of chapter 1 is 
     amended by inserting ``and waste energy'' after 
     ``renewable''.
       (c) Additional Modifications of Renewable and Waste Energy 
     Resource Credit.--
       (1) Credits for certain tax exempt organizations and 
     governmental units.--Section 45(d) (relating to definitions 
     and special rules), as amended by subsection (b)(7), is 
     amended by adding at the end the following:
       ``(9) Credits for certain tax exempt organizations and 
     governmental units.--
       ``(A) Allowance of credit.--Any credit which would be 
     allowable under subsection (a) with respect to a qualified 
     facility of an entity if such entity were not exempt from tax 
     under this chapter shall be treated as a credit allowable 
     under subpart C to such entity if such entity is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C), 
     or
       ``(iii) any State or political subdivision thereof, any 
     possession of the United States, any Indian tribal government 
     (within the meaning of section 7871), or any agency or 
     instrumentality of any of the foregoing.
       ``(B) Use of credit.--
       ``(i) Transfer of credit.--An entity described in 
     subparagraph (A) may assign, trade, sell, or otherwise 
     transfer any credit allowable to such entity under 
     subparagraph (A) to any taxpayer.
       ``(ii) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of an entity described in 
     clause (i) or (ii) of subparagraph (A), any credit allowable 
     to such entity under subparagraph (A) may be applied by such 
     entity, without penalty, as a prepayment of any loan, debt, 
     or other obligation the entity has incurred under subchapter 
     I of chapter 31 of title 7 of the Rural Electrification Act 
     of 1936 (7 U.S.C. 901 et seq.).

       ``(C) Credit not income.--Neither a transfer under clause 
     (i) or a use under clause (ii) of subparagraph (B) of any 
     credit allowable under subparagraph (A) shall result in 
     income for purposes of section 501(c)(12).
       ``(D) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by an entity 
     described in subparagraph (A)(iii) from the transfer of any 
     credit under subparagraph (B)(i) shall be treated as arising 
     from an essential government function.
       ``(E) Credits not reduced by tax-exempt bonds or certain 
     other subsidies.--Subsection (b)(3) shall not apply to reduce 
     any credit allowable under subparagraph (A) with respect to--
       ``(i) proceeds described in subparagraph (A)(ii) of such 
     subsection, or
       ``(ii) any loan, debt, or other obligation incurred under 
     subchapter I of chapter 31 of title 7 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.),
     used to provide financing for any qualified facility.
       ``(F) Treatment of unrelated persons.--For purposes of this 
     paragraph, sales among and between entities described in 
     subparagraph (A) shall be treated as sales between unrelated 
     parties.''.
       (2) Coordination with other credits.--Section 45(d), as 
     amended by paragraph (1), is amended by adding at the end the 
     following:
       ``(10) Coordination with other credits.--This section shall 
     not apply to any qualified facility with respect to which a 
     credit under any other section is allowed for the taxable 
     year unless the taxpayer elects to waive the application of 
     such credit to such facility.''.
       (3) Expansion to include animal waste.--Section 45 
     (relating to electricity produced from certain renewable 
     resources), as amended by paragraphs (2) and (4) of 
     subsection (b), is amended--
       (A) by striking ``poultry'' each place it appears in 
     subsection (c)(1)(C) and subsection (d)(6) and inserting 
     ``animal'',
       (B) by striking ``poultry'' in the heading of paragraph (6) 
     of subsection (d) and inserting ``animal'',
       (C) by striking paragraph (3) of subsection (c) and 
     inserting the following:
       ``(3) Animal waste.--The term `animal waste' means poultry 
     manure and litter and other animal wastes, including--

[[Page S5389]]

       ``(A) wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure, and
       ``(B) byproducts, packaging, and other materials which are 
     nontoxic and biodegradable and are associated with the 
     processing, feeding, selling, transporting, and disposal of 
     such animal wastes.'', and
       (D) by striking subparagraph (C) of subsection (c)(5) and 
     inserting the following:
       ``(C) Animal waste facility.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of a facility using animal waste (other than 
     poultry) to produce electricity, the term `qualified 
     facility' means any facility of the taxpayer which is 
     originally placed in service after the date of the enactment 
     of this clause.
       ``(ii) Poultry waste.--In the case of a facility using 
     animal waste relating to poultry to produce electricity, the 
     term `qualified facility' means any facility of the taxpayer 
     which is originally placed in service after December 31, 
     1999.''.
       (4) Treatment of qualified facilities not in compliance 
     with pollution laws.--Section 45(c)(5) (relating to qualified 
     facilities), as amended by paragraphs (2) and (3) of 
     subsection (b), is amended by adding at the end the 
     following:
       ``(E) Noncompliance with pollution laws.--For purposes of 
     this paragraph, a facility which is not in compliance with 
     the applicable State and Federal pollution prevention, 
     control, and permit requirements for any period of time shall 
     not be considered to be a qualified facility during such 
     period.''.
       (5) Extension of qualified facility dates.--Section 
     45(c)(5) (relating to qualified facility), as redesignated by 
     subsection (b)(2), is amended by striking ``, and before 
     January 1, 2002'' in subparagraphs (A) and (B).
       (d) Effective Date.--The amendments made by this section 
     shall apply to electricity and other energy produced after 
     the date of the enactment of this Act and before January 1, 
     2007.

          Subtitle D--Compliance With Congressional Budget Act

     SEC. 1131. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 748. Mr. NELSON of Florida submitted an amendment intended to be 
proposed by him to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; which was ordered to lie on the table; as follows:

       On page 66, before line 2, insert the following:
       ``(C) Coordination with credit for state death taxes.--
       ``(i) In general.--Rules similar to the rules of 
     subparagraph (A) shall apply to the table contained in 
     section 2011(b) except that the Secretary shall prescribe 
     percentage point reductions which maintain the proportionate 
     relationship (as in effect before any reduction under this 
     paragraph) between the credit under section 2011 and the tax 
     rates under this subsection.''.
       (d) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code of 1986 (as amended by section 101 of 
     this Act) to the extent necessary to offset in each fiscal 
     year beginning before October 1, 2011, the decrease in 
     revenues to the Treasury for that fiscal year resulting from 
     section 2001(c)(2)(C) of the Internal Revenue Code of 1986 
     (as added by the amendments made by subsection (c)).

       Beginning on page 70, line 20, strike all through page 79, 
     line 6.
                                  ____

  SA 749. Mr. JEFFORDS submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 280, line 25, strike ``one-participant'' and insert 
     ``eligible''.
       On page 281, line 5, strike ``One-particpant'' and insert 
     ``Eligible''.
       On page 281, line 7, strike ``one-participant'' and insert 
     ``eligible''.
       On page 281, strike lines 10 through 13 and insert the 
     following:
       (i) covered only an individual or an individual and the 
     individual's spouse and such individual (or individual and 
     spouse) wholly owned the trade or business (whether or not 
     incorporated); or
       On page 281, on lines 14 and 15, strike ``one or more 
     partners (and their spouses)'' and insert ``the partners or 
     the partners and their spouses''.
       On page 281, line 24, strike ``the employer (and the 
     employer's spouse)'' and insert ``the individuals described 
     in subparagraph (A)(i)''.
       Beginning on page 288, strike line 1 and all that follows 
     through page 299, line 24, and insert the following:

                   Subtitle G--Other ERISA Provisions

     SEC. 681. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''.
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) 
     did not establish or maintain a plan to which this title 
     applies with respect to which benefits were accrued for 
     substantially the same employees as are in the new single-
     employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2001.

     SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause (ii) for any plan year shall be an 
     amount equal to the product of the amount determined under 
     clause (ii) and the applicable

[[Page S5390]]

     percentage. For purposes of this clause, the term `applicable 
     percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.

     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), as amended by section 682(b), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether the 25-or-fewer-employees limitation has 
     been satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2001.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.

     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.

     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2001, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2002.

     SEC. 686. PERIODIC PENSION BENEFITS STATEMENTS.

       (a) In General.--Section 105(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended 
     to read as follows:
       ``(a)(1) Except as provided in paragraph (2)--
       ``(A) the administrator of an individual account plan shall 
     furnish a pension benefit statement--
       ``(i) to a plan participant at least once annually, and
       ``(ii) to a plan beneficiary upon written request, and
       ``(B) the administrator of a defined benefit plan shall 
     furnish a pension benefit statement--
       ``(i) at least once every 3 years to each participant with 
     a nonforfeitable accrued benefit who is employed by the 
     employer maintaining the plan at the time the statement is 
     furnished to participants, and
       ``(ii) to a plan participant or plan beneficiary of the 
     plan upon written request.
       ``(2) A pension benefit statement under paragraph (1)--
       ``(A) shall indicate, on the basis of the latest available 
     information and reasonable estimates--
       ``(i) the total benefits accrued, and
       ``(ii) the nonforfeitable pension benefits, if any, which 
     have accrued, or the earliest date on which benefits will 
     become nonforfeitable,
       ``(B) shall be written in a manner calculated to be 
     understood by the average plan participant,
       ``(C) shall include a statement that the summary annual 
     report is available upon request, and
       ``(D) may be provided in written, electronic, or other 
     appropriate form.
       ``(3)(A) In the case of a defined benefit plan, the 
     requirements of paragraph (1)(B)(i) shall be treated as met 
     with respect to a participant if the administrator provides 
     the participant at least once each year with notice of the 
     availability of the pension benefit statement and the ways in 
     which the participant may obtain such statement. Such notice 
     shall be provided in written, electronic, or other 
     appropriate form, and may be included with other 
     communications to the participant if done in a manner 
     reasonably designed to attract the attention of the 
     participant.
       ``(B) The Secretary may provide that years in which no 
     employee or former employee benefits (within the meaning of 
     section 410(b) of the Internal Revenue Code of 1986) under 
     the plan need not be taken into account in determining the 3-
     year period under paragraph (1)(B)(i).''.
       (b) Conforming Amendments.--
       (1) Section 105 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1025) is amended by striking 
     subsection (d).

[[Page S5391]]

       (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
     amended to read as follows:
       ``(b) In no case shall a participant or beneficiary of a 
     plan be entitled to more than one statement described in 
     subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is 
     applicable, in any 12-month period.''.
       (c) Model Statements.--The Secretary of Labor shall develop 
     a model benefit statement, written in a manner calculated to 
     be understood by the average plan participant, that may be 
     used by plan administrators in complying with the 
     requirements of section 105 of the Employee Retirement Income 
     Security Act of 1974.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan years 
     beginning after December 31, 2001.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply, with 
     respect to employees covered by any such agreement, for plan 
     years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment), or
       (ii) January 1, 2002, or
       (B) January 1, 2003.

     SEC. 687. BENEFIT SUSPENSION NOTICE.

       (a) Modification of Regulation.--The Secretary of Labor 
     shall modify the regulation under section 203(a)(3)(B) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1053(a)(3)(B)) to provide that the notification required by 
     such regulation--
       (1) in the case of an employee who, after commencement of 
     payment of benefits under the plan, returns to service for 
     which benefit payments may be suspended under such section 
     203(a)(3)(B) shall be made during the first calendar month or 
     payroll period in which the plan withholds payments, and
       (2) in the case of any employee who is not described in 
     paragraph (1)--
       (A) may be included in the summary plan description for the 
     plan furnished in accordance with section 104(b) of such Act 
     (29 U.S.C. 1024(b)), rather than in a separate notice, and
       (B) need not include a copy of the relevant plan 
     provisions.
       (b) Effective Date.--The modification made under this 
     section shall apply to plan years beginning after December 
     31, 2001.

     SEC. 688. STUDIES.

       (a) Report on Pension Coverage.--Not later than 5 years 
     after the date of the enactment of this Act, the Secretary of 
     the Treasury, jointly with the Secretary of Labor, shall 
     submit a report to the Committee on Ways and Means and the 
     Committee on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor and Pensions of the 
     Senate a report on the effect of the provisions of the 
     Restoring Earnings to Lift Individuals and Empower Families 
     Act of 2001 on pension coverage, including--
       (1) any expansion of coverage for low- and middle-income 
     workers;
       (2) levels of pension benefits;
       (3) quality of pension coverage;
       (4) worker's access to and participation in plans; and
       (5) retirement security.
       (b) Study of Preretirement Use of Benefits.--
       (1) In general.--The Secretary of the Treasury, jointly 
     with the Secretary of Labor, shall conduct a study of--
       (A) current tax provisions allowing individuals to access 
     individual retirement plans and qualified retirement plan 
     benefits of such individual prior to retirement, including an 
     analysis of--
       (i) the extent of use of such current provisions by 
     individuals; and
       (ii) the extent to which such provisions undermine the goal 
     of accumulating adequate resources for retirement; and
       (B) the types of investment decisions made by individual 
     retirement plan beneficiaries and participants in self-
     directed qualified retirement plans, including an analysis 
     of--
       (i) current restrictions on investments; and
       (ii) the extent to which additional restrictions on 
     investments would facilitate the accumulation of adequate 
     income for retirement.
       (2) Report.--Not later than January 1, 2003, the Secretary 
     of the Treasury, jointly with the Secretary of Labor, shall 
     submit a report to the Committee on Ways and Means and the 
     Committee on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor and Pensions of the 
     Senate containing the results of the study conducted under 
     paragraph (1) and any recommendations.

     SEC. 689. ANNUAL REPORT DISSEMINATION.

       (a) In General.--Section 104(b)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) 
     is amended by striking ``shall furnish'' and inserting 
     ``shall make available for examination (and, upon request, 
     shall furnish)''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to reports for years beginning after December 31, 
     2000.

     SEC. 690. CIVIL PENALTIES FOR BREACH OF FIDUCIARY 
                   RESPONSIBILITY.

       (a) Imposition and Amount of Penalty Made Discretionary.--
     Section 502(l)(1) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
       (1) by striking ``shall'' and inserting ``may'', and
       (2) by striking ``equal to'' and inserting ``not greater 
     than''.
       (b) Applicable Recovery Amount.--Section 502(l)(2) of such 
     Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
       ``(2) For purposes of paragraph (1), the term `applicable 
     recovery amount' means any amount which is recovered from any 
     fiduciary or other person (or from any other person on behalf 
     of any such fiduciary or other person) with respect to a 
     breach or violation described in paragraph (1) on or after 
     the 30th day following receipt by such fiduciary or other 
     person of written notice from the Secretary of the violation, 
     whether paid voluntarily or by order of a court in a judicial 
     proceeding instituted by the Secretary under paragraph (2) or 
     (5) of subsection (a). The Secretary may, in the 
     Secretary's sole discretion, extend the 30-day period 
     described in the preceding sentence.''.
       (c) Other Rules.--Section 502(l) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by 
     adding at the end the following new paragraph:
       ``(5) A person shall be jointly and severally liable for 
     the penalty described in paragraph (1) to the same extent 
     that such person is jointly and severally liable for the 
     applicable recovery amount on which the penalty is based.
       ``(6) No penalty shall be assessed under this subsection 
     unless the person against whom the penalty is assessed is 
     given notice and opportunity for a hearing with respect to 
     the violation and applicable recovery amount.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to any breach of fiduciary responsibility or other 
     violation of part 4 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 occurring on or after 
     the date of enactment of this Act.
       (2) Transition rule.--In applying the amendment made by 
     subsection (b) (relating to applicable recovery amount), a 
     breach or other violation occurring before the date of 
     enactment of this Act which continues after the 180th day 
     after such date (and which may have been discontinued at any 
     time during its existence) shall be treated as having 
     occurred after such date of enactment.

     SEC. 690A. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) Amendment of internal revenue code.--
       (A) In general.--Subparagraph (A) of section 417(a)(6) is 
     amended by striking ``90-day'' and inserting ``180-day''.
       (B) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under sections 402(f), 
     411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
     substitute ``180 days'' for ``90 days'' each place it appears 
     in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), 
     and 1.417(e)-1(b).
       (2) Amendment of erisa.--Section 205(c)(7)(A) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1055(c)(7)(A)) is amended by striking ``90-day'' and 
     inserting ``180-day''.
       (3) Effective date.--The amendments made by paragraphs 
     (1)(A) and (2) and the modifications required by paragraph 
     (1)(B) shall apply to years beginning after December 31, 
     2001.
       (b) Consent Regulation Inapplicable to Certain 
     Distributions.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 411(a)(11) of the Internal 
     Revenue Code of 1986 to provide that the description of a 
     participant's right, if any, to defer receipt of a 
     distribution shall also describe the consequences of failing 
     to defer such receipt.
       (2) Model statement.--The Secretary of the Treasury shall 
     develop a model statement, written in a manner calculated to 
     be understood by the average plan participant, regarding 
     participants' rights to defer receipt of a distribution and 
     the consequences of so doing, that may be used by plan 
     administrators in complying with the requirements of this 
     section.
       (3) Effective date.--The modifications required by 
     paragraph (1) shall apply to years beginning after December 
     31, 2001.
       (c) Disclosure of Optional Forms of Benefits.--
       (1) Amendment of internal revenue code.--Section 417(a)(3) 
     (relating to plan to provide written explanation) is amended 
     by adding at the end the following:
       ``(C) Explanation of optional forms of benefits.--
       ``(i) In general.--If--

       ``(I) a plan provides optional forms of benefits, and
       ``(II) the present values of such forms of benefits are not 
     actuarially equivalent as of the annuity starting date,

     then each written explanation required to be provided under 
     subparagraph (A) shall include the information described in 
     clause (ii).
       ``(ii) Information.--A plan to which this subparagraph 
     applies shall include sufficient information (as determined 
     in accordance

[[Page S5392]]

     with regulations prescribed by the Secretary) to allow the 
     participant to understand the differences in the present 
     values of the optional forms of benefits provided by the plan 
     and the effect the participant's election as to the form of 
     benefit will have on the value of the benefits available 
     under the plan. Any such information shall be provided in a 
     manner calculated to be reasonably understood by the average 
     plan participant.''
       (2) Amendment of erisa.--Section 205(c)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1055(c)(3)) 
     is amended by adding at the end the following:
       ``(C)(i) If--
       ``(I) a plan provides optional forms of benefits, and
       ``(II) the present values of such forms of benefits are not 
     actuarially equivalent as of the annuity starting date,

     then such plan shall include the information described in 
     clause (ii) with each written explanation required to be 
     provided under subparagraph (A).
       ``(ii) A plan to which this subparagraph applies shall 
     include sufficient information (as determined in accordance 
     with regulations prescribed by the Secretary of the Treasury) 
     to allow the participant to understand the differences in the 
     present values of the optional forms of benefits provided by 
     the plan and the effect the participant's election as to the 
     form of benefit will have on the value of the benefits 
     available under the plan. Any such information shall be 
     provided in a manner calculated to be reasonably understood 
     by the average plan participant.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

     SEC. 690B. AMENDMENTS REGARDING NATIONAL SUMMIT ON RETIREMENT 
                   SAVINGS.

       Section 517 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1147) is amended--
       (1) in subsection (a), by striking ``2001 and 2005 on or 
     after September 1 of each year involved'' and inserting 
     ``2001 or 2002, and 2005 and 2009. Such Summit shall be 
     convened in the calendar year 2001 or the first calendar 
     quarter of 2002 and shall be convened on or after September 1 
     of each year thereafter'';
       (2) in subsection (e)(2)--
       (A) by striking ``Committee on Labor and Human Resources'' 
     in subparagraph (D) and inserting ``Committee on Health, 
     Education, Labor, and Pensions'';
       (B) by striking subparagraph (F) and inserting the 
     following:
       ``(F) the Chairman and Ranking Member of the Subcommittee 
     on Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the House of Representatives 
     and the Chairman and Ranking Member of the Subcommittee on 
     Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the Senate;'';
       (C) by redesignating subparagraph (G) as subparagraph (J); 
     and
       (D) by inserting after subparagraph (F) the following new 
     subparagraphs:
       ``(G) the Chairman and Ranking Member of the Committee on 
     Finance of the Senate;
       ``(H) the Chairman and Ranking Member of the Committee on 
     Ways and Means of the House of Representatives;
       ``(I) the Chairman and Ranking Member of the Subcommittee 
     on Employer-Employee Relations of the Committee on Education 
     and the Workforce of the House of Representatives; and'';
       (3) in subsection (e)(3)(A)--
       (A) by striking ``There shall be no more than 200 
     additional participants.'' and inserting ``The participants 
     in the National Summit shall also include additional 
     participants appointed under this subparagraph.'';
       (B) by striking ``one-half shall be appointed by the 
     President,'' in clause (i) and inserting ``not more than 100 
     participants shall be appointed under this clause by the 
     President,'', and by striking ``and'' at the end of clause 
     (i);
       (C) by striking ``one-half shall be appointed by the 
     elected leaders of Congress'' in clause (ii) and inserting 
     ``not more than 100 participants shall be appointed under 
     this clause by the elected leaders of Congress'', and by 
     striking the period at the end of clause (ii) and inserting 
     ``; and''; and
       (D) by adding at the end the following new clause:
       ``(iii) The President, in consultation with the elected 
     leaders of Congress referred to in subsection (a), may 
     appoint under this clause additional participants to the 
     National Summit. The number of such additional participants 
     appointed under this clause may not exceed the lesser of 3 
     percent of the total number of all additional participants 
     appointed under this paragraph, or 10. Such additional 
     participants shall not be Federal, State, or local government 
     employees.'';
       (4) in subsection (f)(1)(C), by inserting ``, no later than 
     90 days prior to the date of the commencement of the National 
     Summit,'' after ``comment'' in paragraph (1)(C);
       (5) in subsection (g), by inserting ``, in consultation 
     with the congressional leaders specified in subsection 
     (e)(2),'' after ``report'';
       (6) in subsection (i)--
       (A) by striking ``1997'' in paragraph (1) and inserting 
     ``2001''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Reception and representation authority.--The 
     Secretary is hereby granted reception and representation 
     authority limited specifically to the events at the National 
     Summit. The Secretary shall use any private contributions 
     accepted in connection with the National Summit prior to 
     using funds appropriated for purposes of the National Summit 
     pursuant to this paragraph.
       ``(4) Funds available.--Of the funds appropriated to the 
     Pension and Welfare Benefits Administration for fiscal year 
     2001, $500,000 shall remain available without fiscal year 
     limitation through September 30, 2002, for the purpose of 
     defraying the costs of the National Summit.''; and
       (7) in subsection (k)--
       (A) by striking ``shall enter into a contract on a sole-
     source basis'' and inserting ``may enter into a contract''; 
     and
       (B) by striking ``fiscal year 1998'' and inserting ``fiscal 
     years 2001 or 2002, and 2005, and 2009''.

       On page 310, strike lines 10 and 11 and insert the 
     following:

                      Subtitle I--Plan Amendments

     SEC. 692. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) except as provided by the Secretary of the Treasury, 
     such plan shall not fail to meet the requirements of section 
     411(d)(6) of the Internal Revenue Code of 1986 or section 
     204(g) of the Employee Retirement Income Security Act of 1974 
     by reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this Act, or pursuant 
     to any regulation issued under this Act, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2005.

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this paragraph 
     shall be applied by substituting ``2007'' for ``2005''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan); and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),

     the plan or contract is operated as if such plan or contract 
     amendment were in effect; and
       (B) such plan or contract amendment applies retroactively 
     for such period.

Subtitle J--Compliance With Congressional Budget Act
                                  ____


  SA 750. Mr. TORRICELLI submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle B of title IV add the following:

     SEC. __. EXCLUSION FROM INCOME OF CERTAIN AMOUNTS CONTRIBUTED 
                   TO COVERDELL EDUCATION SAVINGS ACCOUNTS.

       (a) In General.--Section 127 (relating to education 
     assistance programs), as amended by section 411(a), is 
     amended by redesignating subsection (d) as subsection (e) and 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Qualified Coverdell Education Savings Account 
     Contributions.--
       ``(1) In general.--Gross income of an employee shall not 
     include amounts paid or incurred by the employer for a 
     qualified Coverdell education savings account contribution on 
     behalf of the employee.
       ``(2) Qualified coverdell education savings account 
     contribution.--For purposes of this subsection--
       ``(A) In general.--The term `qualified Coverdell education 
     savings account contribution' means an amount contributed 
     pursuant to an educational assistance program described in 
     subsection (b) by an employer to a Coverdell education 
     savings account established and maintained for the benefit of 
     an employee or the employee's spouse, or any lineal 
     descendent of either.
       ``(B) Dollar limit.--A contribution by an employer to a 
     Coverdell education savings account shall not be treated as a 
     qualified Coverdell education savings account contribution to 
     the extent that the contribution, when added to prior 
     contributions by the employer during the calendar year to 
     Coverdell education savings accounts established and 
     maintained for the same beneficiary, exceeds $500.
       ``(3) Special rules.--
       ``(A) Contributions not treated as educational assistance 
     in determining maximum exclusion.--For purposes of subsection 
     (a)(2), qualified Coverdell education savings account 
     contributions shall not be treated as educational assistance.
       ``(B) Self-employed not treated as employee.--For purposes 
     of this subsection, subsection (c)(2) shall not apply.

[[Page S5393]]

       ``(C) Adjusted gross income phaseout of account 
     contribution not applicable to individual employers.--The 
     limitation under section 530(c) shall not apply to a 
     qualified Coverdell education savings account contribution 
     made by an employer who is an individual.
       ``(D) Contributions not treated as an investment in the 
     contract.--For purposes of section 530(d), a qualified 
     Coverdell education savings account contribution shall not be 
     treated as an investment in the contract.''.
       (E) FICA Exclusion.--For purposes of section 530(d), the 
     exclusion from FICA taxes shall not apply.
       (b) Reporting Requirement.--Section 6051(a) (relating to 
     receipts for employees) is amended by striking ``and'' at the 
     end of paragraph (10), by striking the period at the end of 
     paragraph (11) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(12) the amount of any qualified Coverdell education 
     savings account contribution under section 127(d) with 
     respect to such employee.''.
       (c) Conforming Amendment.--Section 221(e)(2)(A) is amended 
     by inserting ``(other than under subsection (d) thereof)'' 
     after ``section 127''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions made in taxable years beginning 
     after December 31, 2001.
                                  ____

  SA 751. Mr. ALLEN proposed an amendment to amendment SA 685 submitted 
by Mr. Bayh and intended to be proposed to the bill (H.R. 1836) to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       At the end of the amendment, add the following:

                     TITLE __--TAX CUT ACCELERATOR

     SEC. __. TAX CUT ACCELERATOR.

       (a) Reporting Additional Surpluses.--If any report provided 
     pursuant to section 202(e)(1) of the Congressional Budget Act 
     of 1974, estimates an on-budget surplus, excluding social 
     security and medicare surplus accounts, that exceeds such an 
     on-budget surplus set forth in such a report for the 
     preceding year, the chairman of the Committee on the Budget 
     of the Senate shall make adjustments in the resolution for 
     the next fiscal year as provided in subsection (b).
       (b) Adjustments.--The chairman of the Committee on the 
     Budget of the Senate shall make the following adjustments in 
     an amount not to exceed the difference between the on-budget 
     surpluses in the reports referred to in subsection (a):
       (1) Reduce the on-budget revenue aggregate by that amount 
     for the fiscal years included in such reports.
       (2) Adjust the instruction to the Committee on Finance to 
     increase the reduction in revenues by the sum of the amounts 
     for the period of such fiscal years in such manner as to not 
     produce an on-budget deficit in the next fiscal year, over 
     the next 5 fiscal years, or over the next 10 fiscal years and 
     to require a report of reconciliation legislation by the 
     Committee on Finance not later than March 15.
       (3) Adjust such other levels in such resolution, as 
     appropriate, and the Senate pay-as-you-go scorecard.
                                  ____

  SA 752. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. TREATMENT OF CONSERVATION RESERVE PROGRAM PAYMENTS 
                   AS RENTALS FROM REAL ESTATE.

       (a) In General.--Section 1402(a)(1) (defining net earnings 
     from self-employment) is amended by inserting ``and including 
     payments under section 1233(2) of the Food Security Act of 
     1985 (16 U.S.C. 3833(2))'' after ``crop shares''.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reductions of the highest brackets and maximum 
     rates of tax under section 2001(c) of the Internal Revenue 
     Code of 1986 (as amended by section 511 of this Act) with 
     respect to estates of decedents dying and gifts made to the 
     extent necessary to offset in each fiscal year beginning 
     before October 1, 2011, the decrease in revenues to the 
     Treasury for that fiscal year resulting from the amendment 
     made by subsection (a).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to payments made before, on, or after the date of 
     the enactment of this Act.
                                  ____

  SA 753. Mr. DORGAN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII add the following:

     SEC. __. ACCELERATION OF BENEFITS OF WAGE TAX CREDITS FOR 
                   EMPOWERMENT ZONES.

       (a) In General.--Section 113(d) of the Community Renewal 
     Tax Relief Act of 2000 is amended by striking ``December 31, 
     2001'' and inserting ``the earlier of--
       ``(1) the date of the enactment of the Restoring Earnings 
     To Lift Individuals and Empower Families (RELIEF) Act of 
     2001, or
       ``(2) July 1, 2001''.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reductions of the highest brackets and maximum 
     rates of tax under section 2001(c) of the Internal Revenue 
     Code of 1986 (as amended by section 511 of this Act) with 
     respect to estates of decedents dying and gifts made to the 
     extent necessary to offset in each fiscal year beginning 
     before October 1, 2011, the decrease in revenues to the 
     Treasury for that fiscal year resulting from the amendment 
     made by subsection (a).
                                  ____

  SA 754. Mr. KOHL submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 18, between lines 14 and 15, insert the following:

     SEC. 202. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD 
                   CARE ASSISTANCE.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business related credits), as amended by sections 619 and 
     620, is further amended by adding at the end the following:

     ``SEC. 45G. EMPLOYER-PROVIDED CHILD CARE CREDIT.

       ``(a) In General.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to the sum 
     of--
       ``(1) 25 percent of the qualified child care expenditures, 
     and
       ``(2) 10 percent of the qualified child care resource and 
     referral expenditures,
     of the taxpayer for such taxable year.
       ``(b) Dollar Limitation.--The credit allowable under 
     subsection (a) for any taxable year shall not exceed 
     $150,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified child care expenditure.--
       ``(A) In general.--The term `qualified child care 
     expenditure' means any amount paid or incurred--
       ``(i) to acquire, construct, rehabilitate, or expand 
     property--

       ``(I) which is to be used as part of a qualified child care 
     facility of the taxpayer,
       ``(II) with respect to which a deduction for depreciation 
     (or amortization in lieu of depreciation) is allowable, and
       ``(III) which does not constitute part of the principal 
     residence (within the meaning of section 121) of the taxpayer 
     or any employee of the taxpayer,

       ``(ii) for the operating costs of a qualified child care 
     facility of the taxpayer, including costs related to the 
     training of employees, to scholarship programs, and to the 
     providing of increased compensation to employees with higher 
     levels of child care training, or
       ``(iii) under a contract with a qualified child care 
     facility to provide child care services to employees of the 
     taxpayer.
       ``(B) Fair market value.--The term `qualified child care 
     expenditures' shall not include expenses in excess of the 
     fair market value of such care.
       ``(2) Qualified child care facility.--
       ``(A) In general.--The term `qualified child care facility' 
     means a facility--
       ``(i) the principal use of which is to provide child care 
     assistance, and
       ``(ii) which meets the requirements of all applicable laws 
     and regulations of the State or local government in which it 
     is located, including the licensing of the facility as a 
     child care facility.
     Clause (i) shall not apply to a facility which is the 
     principal residence (within the meaning of section 121) of 
     the operator of the facility.
       ``(B) Special rules with respect to a taxpayer.--A facility 
     shall not be treated as a qualified child care facility with 
     respect to a taxpayer unless--
       ``(i) enrollment in the facility is open to employees of 
     the taxpayer during the taxable year,
       ``(ii) if the facility is the principal trade or business 
     of the taxpayer, at least 30 percent of the enrollees of such 
     facility are dependents of employees of the taxpayer, and
       ``(iii) the use of such facility (or the eligibility to use 
     such facility) does not discriminate in favor of employees of 
     the taxpayer who are highly compensated employees (within the 
     meaning of section 414(q)).
       ``(3) Qualified child care resource and referral 
     expenditure.--
       ``(A) In general.--The term `qualified child care resource 
     and referral expenditure' means any amount paid or incurred 
     under a contract to provide child care resource and referral 
     services to an employee of the taxpayer.
       ``(B) Nondiscrimination.--The services shall not be treated 
     as qualified unless the provision of such services (or the 
     eligibility to use such services) does not discriminate in 
     favor of employees of the taxpayer who are highly compensated 
     employees (within the meaning of section 414(q)).
       ``(d) Recapture of Acquisition and Construction Credit.--
       ``(1) In general.--If, as of the close of any taxable year, 
     there is a recapture event with respect to any qualified 
     child care facility of

[[Page S5394]]

     the taxpayer, then the tax of the taxpayer under this chapter 
     for such taxable year shall be increased by an amount equal 
     to the product of--
       ``(A) the applicable recapture percentage, and
       ``(B) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted if the qualified child care expenditures of the 
     taxpayer described in subsection (c)(1)(A) with respect to 
     such facility had been zero.
       ``(2) Applicable recapture percentage.--
       ``(A) In general.--For purposes of this subsection, the 
     applicable recapture percentage shall be determined from the 
     following table:

  ``If the recapture event occurThe applicable recapture percentage is:
    Years 1-3....................................................100   
    Year 4........................................................85   
    Year 5........................................................70   
    Year 6........................................................55   
    Year 7........................................................40   
    Year 8........................................................25   
    Years 9 and 10................................................10   
    Years 11 and thereafter........................................0.  

       ``(B) Years.--For purposes of subparagraph (A), year 1 
     shall begin on the first day of the taxable year in which the 
     qualified child care facility is placed in service by the 
     taxpayer.
       ``(3) Recapture event defined.--For purposes of this 
     subsection, the term `recapture event' means--
       ``(A) Cessation of operation.--The cessation of the 
     operation of the facility as a qualified child care facility.
       ``(B) Change in ownership.--
       ``(i) In general.--Except as provided in clause (ii), the 
     disposition of a taxpayer's interest in a qualified child 
     care facility with respect to which the credit described in 
     subsection (a) was allowable.
       ``(ii) Agreement to assume recapture liability.--Clause (i) 
     shall not apply if the person acquiring such interest in the 
     facility agrees in writing to assume the recapture liability 
     of the person disposing of such interest in effect 
     immediately before such disposition. In the event of such an 
     assumption, the person acquiring the interest in the facility 
     shall be treated as the taxpayer for purposes of assessing 
     any recapture liability (computed as if there had been no 
     change in ownership).
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under subpart A, B, or D of this part.
       ``(C) No recapture by reason of casualty loss.--The 
     increase in tax under this subsection shall not apply to a 
     cessation of operation of the facility as a qualified 
     child care facility by reason of a casualty loss to the 
     extent such loss is restored by reconstruction or 
     replacement within a reasonable period established by the 
     Secretary.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons which are treated as 
     a single employer under subsections (a) and (b) of section 52 
     shall be treated as a single taxpayer.
       ``(2) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(3) Allocation in the case of partnerships.--In the case 
     of partnerships, the credit shall be allocated among partners 
     under regulations prescribed by the Secretary.
       ``(f) No Double Benefit.--
       ``(1) Reduction in basis.--For purposes of this subtitle--
       ``(A) In general.--If a credit is determined under this 
     section with respect to any property by reason of 
     expenditures described in subsection (c)(1)(A), the basis of 
     such property shall be reduced by the amount of the credit so 
     determined.
       ``(B) Certain dispositions.--If, during any taxable year, 
     there is a recapture amount determined with respect to any 
     property the basis of which was reduced under subparagraph 
     (A), the basis of such property (immediately before the event 
     resulting in such recapture) shall be increased by an amount 
     equal to such recapture amount. For purposes of the preceding 
     sentence, the term `recapture amount' means any increase in 
     tax (or adjustment in carrybacks or carryovers) determined 
     under subsection (d).
       ``(2) Other deductions and credits.--No deduction or credit 
     shall be allowed under any other provision of this chapter 
     with respect to the amount of the credit determined under 
     this section.''.
       (b) Conforming Amendments.--
       (1) Section 38(b) of the Internal Revenue Code of 1986 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:
       ``(14) the employer-provided child care credit determined 
     under section 45G.''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 of such Code is amended by adding 
     at the end the following:

``Sec. 45G. Employer-provided child care credit.''
       (3) Section 1016(a) of such Code is amended by striking 
     ``and'' at the end of paragraph (26), by striking the period 
     at the end of paragraph (27) and inserting ``, and'', and by 
     adding at the end the following:
       ``(28) in the case of a facility with respect to which a 
     credit was allowed under section 45G, to the extent provided 
     in section 45G(f)(1).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 755. Mr. CONRAD submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 63, beginning with line 4, strike all through page 
     70, line 20, and insert:

          Subtitle A--Reductions of Estate and Gift Tax Rates

     SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.

       (a) Maximum Rate of Tax Reduced.--The table contained in 
     section 2001(c)(1) is amended by striking the two highest 
     brackets and inserting the following:

$1,025,800, plus 50% of the excess over $2,500,000.''..................

       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2001.

               Subtitle B--Increase in Exemption Amounts

     SEC. 511. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT, 
                   LIFETIME GIFTS EXEMPTION, AND GST EXEMPTION 
                   AMOUNTS.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended by striking the table 
     and inserting the following new table:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002 and 2003.........................................$1,000,000 
      2004..................................................$1,500,000 
      2005..................................................$2,000,000 
      2006..................................................$3,000,000 
      2007, 2008, and 2009..................................$3,500,000 
      2010..................................................$4,500,000 
      2011 and thereafter................................$5,000,000.''.

       (b) Lifetime Gift Exemption Increased to $1,000,000.--
     Paragraph (1) of section 2505(a) (relating to unified credit 
     against gift tax) is amended by inserting ``(determined as if 
     the applicable exclusion amount were $1,000,000)'' after 
     ``calendar year''.
       (c) GST Exemption.--
       (1) In general.--Subsection (a) of 2631 (relating to GST 
     exemption) is amended by striking ``of $1,000,000'' and 
     inserting ``amount''.
       (2) Exemption amount.--Subsection (c) of section 2631 is 
     amended to read as follows:
       ``(c) GST Exemption Amount.--For purposes of subsection 
     (a), the GST exemption amount for any calendar year shall be 
     equal to the applicable exclusion amount under section 
     2010(c) for such calendar year.''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to estates of 
     decedents dying, and gifts made, after December 31, 2001.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall apply to estates of decedents dying, and generation-
     skipping transfers made, after December 31, 2003.

     SEC. 512. INCREASE IN QUALIFIED FAMILY-OWNED BUSINESS 
                   INTEREST DEDUCTION AMOUNT.

       (a) In General.--Paragraph (2) of section 2057(a) (relating 
     to family-owned business interests) is amended to read as 
     follows:
       ``(2) Maximum deduction.--
       ``(A) In general.--The deduction allowed by this section 
     shall not exceed the applicable deduction amount.
       ``(B) Applicable deduction amount.--For purposes of 
     subparagraph (A), the applicable deduction amount is 
     determined in accordance with the following table:

``In the case of estates of decedentThe applicable deduction amount is:
      2002 through 2010.....................................$5,000,000 
      2011 or thereafter.................................$7,500,000.''.

       (b) Coordination with Unified Credit.--Section 2057(a)(3) 
     is amended to read as follows:
       ``(3) Coordination with unified credit.--If this subsection 
     applies to an estate, the applicable exclusion amount under 
     section 2010 which applies to the estate without regard to 
     this section shall be equal to the lesser of--
       ``(A) such applicable exclusion amount, or
       ``(B) the excess (if any) of the applicable deduction 
     amount over the deduction allowed under this section.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 2001.
       On page 79, beginning with line 7, strike all through page 
     106, line 6.
                                  ____

  SA 756. Mr. LEVIN submitted an amendment intended to be proposed by

[[Page S5395]]

him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. __. ADJUSTMENT TO RATES IN RESPONSE TO BREACH OF LIMITS.

       If, in fiscal year 2002, the discretionary spending level 
     assumed in the concurrent resolution on the budget for fiscal 
     year 2002 (H. Con. Res. 83) for such year is exceeded, the 
     Secretary of the Treasury shall adjust the reduction in the 
     highest marginal tax rate in the table contained in section 
     1(i)(2) of the Internal Revenue Code of 1986, as added by 
     section 101(a), for taxable years beginning in calendar years 
     after such fiscal year as necessary to offset the decrease in 
     the Treasury resulting from such excess.
                                  ____

  SA 757. Mr. LEVIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 13, between lines 15 and 16, insert the following:

     SEC. __. WIDENING OF 10 PERCENT BRACKET.

       (a) In General.--Section 1(i)(1)(B), as added by section 
     101(a) of this Act, is further amended--
       (1) in clause (i), by striking ``$12,000'' and inserting 
     ``$20,000'', and
       (2) in clause (ii), by striking ``$10,000'' and inserting 
     ``$16,500''.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reduction in the marginal tax rates in the table 
     contained in section 1(i)(2) of the Internal Revenue Code of 
     1986, as added by section 101(a), as necessary to offset the 
     decrease in revenues to the Treasury for each fiscal year 
     resulting from the amendments made by subsection (a). Such 
     adjustment shall be made first to the reduction of the 
     highest marginal tax rate and then, if necessary, to the 
     reduction of each next highest rate.
                                  ____

  SA 758. Mr. LEVIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       
       On page 312, after line 20, insert the following:

     SEC. __. FURTHER INCREASE IN ALTERNATIVE MINIMUM TAX 
                   EXEMPTION.

       (a) In General.--Section 55(d)(1) (relating to exemption 
     amount for taxpayers other than corporations), as amended by 
     section 701(a), is further amended--
       (1) in subparagraph (A), by striking ``$45,000 ($49,000 in 
     the case of taxable years beginning in 2001, 2002, 2003, 
     2004, 2005, and 2006)'' and inserting ``$49,000''; and
       (2) in subparagraph (B), by striking ``$33,750 ($35,750 in 
     the case of taxable years beginning in 2001, 2002, 2003, 
     2004, 2005, and 2006)'' and inserting ``$35,750''.
       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reduction in the highest marginal tax rate in the 
     table contained in section 1(i)(2) of the Internal Revenue 
     Code of 1986, as added by section 101(a), for calendar years 
     after 2006 as necessary to offset the decrease in revenues to 
     the Treasury for each fiscal year beginning before October 1, 
     2011, resulting from the amendments made by subsection (a).
                                  ____

  SA 759. Mr. LEVIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       Beginning on page 68, strike line 12 and all that follows 
     through page 70, line 19, and insert the following:
       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended by striking the table 
     and inserting the following new table:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002 through 2010..................................$4,000,000.''.
       (b) Lifetime Gift Exemption Increased to $1,000,000.--
       (1) For periods before estate tax repeal.--Paragraph (1) of 
     section 2505(a) (relating to unified credit against gift tax) 
     is amended by inserting ``(determined as if the applicable 
     exclusion amount were $1,000,000)'' after ``calendar year''.
       (2) For periods after estate tax repeal.--Paragraph (1) of 
     section 2505(a) (relating to unified credit against gift 
     tax), as amended by paragraph (1), is amended to read as 
     follows:
       ``(1) the amount of the tentative tax which would be 
     determined under the rate schedule set forth in section 
     2502(a)(2) if the amount with respect to which such tentative 
     tax is to be computed were $1,000,000, reduced by''.
       (c) GST Exemption.--
       (1) In general.--Subsection (a) of 2631 (relating to GST 
     exemption) is amended by striking ``of $1,000,000'' and 
     inserting ``amount''.
       (2) Exemption amount.--Subsection (c) of section 2631 is 
     amended to read as follows:
       ``(c) GST Exemption Amount.--For purposes of subsection 
     (a), the GST exemption amount for any calendar year shall be 
     equal to the applicable exclusion amount under section 
     2010(c) for such calendar year.''.
       (d) Repeal of Special Benefit for Family-Owned Business 
     Interests.--
       (1) In general.--Section 2057 is hereby repealed.
       (2) Conforming amendments.--
       (A) Paragraph (10) of section 2031(c) is amended by 
     inserting ``(as in effect on the day before the date of the 
     enactment of this parenthetical)'' before the period.
       (B) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2057.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to estates of 
     decedents dying and gifts and generation-skipping transfers 
     made after December 31, 2001.
       (2) Subsection (b)(2).--The amendments made by subsection 
     (b)(2) shall apply to gifts made after December 31, 2010.
       (f) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reduction in the highest marginal tax rate in the 
     table contained in section 1(i)(2) of the Internal Revenue 
     Code of 1986, as added by section 101(a) of this Act, as 
     necessary to offset the decrease in revenues to the Treasury 
     for each fiscal year resulting from the amendments made by 
     this section as compared to the amendments made by section 
     521 of the Restoring Earnings To Lift Individuals and Empower 
     Families (RELIEF) Act of 2001 as reported by the Finance 
     Committee of the Senate on May 16, 2001.
                                  ____

  SA 760. Mr. LEVIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. __. ACCELERATION OF FULL IMPLEMENTATION OF TUTITION 
                   DEDUCTION AND REPEAL OF TERMINATION.

       (a) Deduction for Higher Education Expenses.--
       (1) Maximum amount of deduction.--Section 222(b)(2) 
     (relating to applicable dollar amount), as added by section 
     431(a) of this Act, is amended to read as follows:
       ``(2) Applicable dollar limit.--
       ``(A) In general.--The applicable dollar limit shall be 
     equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $5,000,
       ``(ii) in the case of a taxpayer not described in clause 
     (i) whose adjusted gross income for the taxable year does not 
     exceed $80,000 ($160,000 in the case of a joint return), 
     $2,000, and
       ``(iii) in the case of any other taxpayer, zero.
       ``(B) Adjusted gross income.--For purposes of this 
     paragraph, adjusted gross income shall be determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, and 469.''.
       (2) Repeal of termination.--Section 222(e) (relating to 
     termination), as added by section 431(a) of this Act, is 
     repealed.
       (b) Effective Date.--The amendments made by this section 
     shall apply to payments made in taxable years beginning after 
     December 31, 2001.
       (c) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the reduction in the highest marginal tax rate in the 
     table contained in section 1(i)(2) of the Internal Revenue 
     Code of 1986, as added by section 101(a) of this Act, as 
     necessary to offset the decrease in revenues to the Treasury 
     for each fiscal year resulting from the amendments made by 
     this section.
                                  ____

  SA 760. Mr. HARKIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title I, add the following:

     SEC. __. REDUCTION OF RATES.

       (a) In General.--The table contained in section 1(i)(2) 
     (relating to reductions in rates after 2001), as added by 
     section 101 of this Act, is further amended to read as 
     follows:


------------------------------------------------------------------------
                                The corresponding percentages shall be
  ``In the case of taxable    substituted for the following percentages:
   years beginning during    -------------------------------------------
       calendar year:            10%        28%        31%        36%
------------------------------------------------------------------------
2002, 2003, and 2004........     9.5%       27%        30%        35%
2005 and 2006...............     8.8%       26%        29%        34%
2007 and thereafter.........      8%        25%        28%       33%''.
------------------------------------------------------------------------

       (b) Revenue Offset.--The Secretary of the Treasury shall 
     adjust the highest rate of tax under section 1 of the 
     Internal Revenue Code

[[Page S5396]]

     of 1986 (as amended by section 101 of this Act) to the extent 
     necessary to offset in each fiscal year beginning before 
     October 1, 2011, the decrease in revenues to the Treasury for 
     that fiscal year resulting from the amendment made by this 
     section regarding the lowest rate of tax under section 1 of 
     such Code (as amended by section 101 of this Act).
                                  ____

  SA 762. Mr. JEFFORDS submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 280, line 25, strike ``one-participant'' and insert 
     ``eligible''.

       On page 281, line 5, strike ``One-particpant'' and insert 
     ``Eligible''.

       On page 281, line 7, strike ``one-participant'' and insert 
     ``eligible''.

       On page 281, strike lines 10 through 13 and insert the 
     following:
       (i) covered only an individual or an individual and the 
     individual's spouse and such individual (or individual and 
     spouse) wholly owned the trade or business (whether or not 
     incorporated); or

       On page 281, on lines 14 and 15, strike ``one or more 
     partners (and their spouses)'' and insert ``the partners or 
     the partners and their spouses''.

       On page 281, line 24, strike ``the employer (and the 
     employer's spouse)'' and insert ``the individuals described 
     in subparagraph (A)(i)''.

       Beginning on page 288, strike line 1 and all that follows 
     through page 299, line 24, and insert the following:

                   Subtitle G--Other ERISA Provisions

     SEC. 681. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''.
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) 
     did not establish or maintain a plan to which this title 
     applies with respect to which benefits were accrued for 
     substantially the same employees as are in the new single-
     employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2001.

     SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause (ii) for any plan year shall be an 
     amount equal to the product of the amount determined under 
     clause (ii) and the applicable percentage. For purposes of 
     this clause, the term `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.
     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), as amended by section 682(b), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether the 25-or-fewer-employees limitation has 
     been satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2001.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual

[[Page S5397]]

     who, at any time during the 60-month period ending on the 
     date the determination is being made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.
     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.
     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2001, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2002.

     SEC. 686. PERIODIC PENSION BENEFITS STATEMENTS.

       (a) In General.--Section 105(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended 
     to read as follows:
       ``(a)(1) Except as provided in paragraph (2)--
       ``(A) the administrator of an individual account plan shall 
     furnish a pension benefit statement--
       ``(i) to a plan participant at least once annually, and
       ``(ii) to a plan beneficiary upon written request, and
       ``(B) the administrator of a defined benefit plan shall 
     furnish a pension benefit statement--
       ``(i) at least once every 3 years to each participant with 
     a nonforfeitable accrued benefit who is employed by the 
     employer maintaining the plan at the time the statement is 
     furnished to participants, and
       ``(ii) to a plan participant or plan beneficiary of the 
     plan upon written request.
       ``(2) A pension benefit statement under paragraph (1)--
       ``(A) shall indicate, on the basis of the latest available 
     information and reasonable estimates--
       ``(i) the total benefits accrued, and
       ``(ii) the nonforfeitable pension benefits, if any, which 
     have accrued, or the earliest date on which benefits will 
     become nonforfeitable,
       ``(B) shall be written in a manner calculated to be 
     understood by the average plan participant,
       ``(C) shall include a statement that the summary annual 
     report is available upon request, and
       ``(D) may be provided in written, electronic, or other 
     appropriate form.
       ``(3)(A) In the case of a defined benefit plan, the 
     requirements of paragraph (1)(B)(i) shall be treated as met 
     with respect to a participant if the administrator provides 
     the participant at least once each year with notice of the 
     availability of the pension benefit statement and the ways in 
     which the participant may obtain such statement. Such notice 
     shall be provided in written, electronic, or other 
     appropriate form, and may be included with other 
     communications to the participant if done in a manner 
     reasonably designed to attract the attention of the 
     participant.
       ``(B) The Secretary may provide that years in which no 
     employee or former employee benefits (within the meaning of 
     section 410(b) of the Internal Revenue Code of 1986) under 
     the plan need not be taken into account in determining the 3-
     year period under paragraph (1)(B)(i).''.
       (b) Conforming Amendments.--
       (1) Section 105 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1025) is amended by striking 
     subsection (d).
       (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
     amended to read as follows:
       ``(b) In no case shall a participant or beneficiary of a 
     plan be entitled to more than one statement described in 
     subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is 
     applicable, in any 12-month period.''.
       (c) Model Statements.--The Secretary of Labor shall develop 
     a model benefit statement, written in a manner calculated to 
     be understood by the average plan participant, that may be 
     used by plan administrators in complying with the 
     requirements of section 105 of the Employee Retirement Income 
     Security Act of 1974.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan years 
     beginning after December 31, 2001.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply, with 
     respect to employees covered by any such agreement, for plan 
     years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment), or
       (ii) January 1, 2002, or
       (B) January 1, 2003.

     SEC. 687. BENEFIT SUSPENSION NOTICE.

       (a) Modification of Regulation.--The Secretary of Labor 
     shall modify the regulation under section 203(a)(3)(B) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1053(a)(3)(B)) to provide that the notification required by 
     such regulation--
       (1) in the case of an employee who, after commencement of 
     payment of benefits under the plan, returns to service for 
     which benefit payments may be suspended under such section 
     203(a)(3)(B) shall be made during the first calendar month or 
     payroll period in which the plan withholds payments, and
       (2) in the case of any employee who is not described in 
     paragraph (1)--
       (A) may be included in the summary plan description for the 
     plan furnished in accordance with section 104(b) of such Act 
     (29 U.S.C. 1024(b)), rather than in a separate notice, and
       (B) need not include a copy of the relevant plan 
     provisions.
       (b) Effective Date.--The modification made under this 
     section shall apply to plan years beginning after December 
     31, 2001.

     SEC. 688. STUDIES.

       (a) Report on Pension Coverage.--Not later than 5 years 
     after the date of the enactment of this Act, the Secretary of 
     the Treasury, jointly with the Secretary of Labor, shall 
     submit a report to the Committee on Ways and Means and the 
     Committee on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor and Pensions of the 
     Senate a report on the effect of the provisions of the 
     Restoring Earnings to Lift Individuals and Empower Families 
     Act of 2001 on pension coverage, including--
       (1) any expansion of coverage for low- and middle-income 
     workers;
       (2) levels of pension benefits;
       (3) quality of pension coverage;
       (4) worker's access to and participation in plans; and
       (5) retirement security.

[[Page S5398]]

       (b) Study of Preretirement Use of Benefits.--
       (1) In general.--The Secretary of the Treasury, jointly 
     with the Secretary of Labor, shall conduct a study of--
       (A) current tax provisions allowing individuals to access 
     individual retirement plans and qualified retirement plan 
     benefits of such individual prior to retirement, including an 
     analysis of--
       (i) the extent of use of such current provisions by 
     individuals; and
       (ii) the extent to which such provisions undermine the goal 
     of accumulating adequate resources for retirement; and
       (B) the types of investment decisions made by individual 
     retirement plan beneficiaries and participants in self-
     directed qualified retirement plans, including an analysis 
     of--
       (i) current restrictions on investments; and
       (ii) the extent to which additional restrictions on 
     investments would facilitate the accumulation of adequate 
     income for retirement.
       (2) Report.--Not later than January 1, 2003, the Secretary 
     of the Treasury, jointly with the Secretary of Labor, shall 
     submit a report to the Committee on Ways and Means and the 
     Committee on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor and Pensions of the 
     Senate containing the results of the study conducted under 
     paragraph (1) and any recommendations.

     SEC. 689. ANNUAL REPORT DISSEMINATION.

       (a) In General.--Section 104(b)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) 
     is amended by striking ``shall furnish'' and inserting 
     ``shall make available for examination (and, upon request, 
     shall furnish)''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to reports for years beginning after December 31, 
     2000.

     SEC. 690. CIVIL PENALTIES FOR BREACH OF FIDUCIARY 
                   RESPONSIBILITY.

       (a) Imposition and Amount of Penalty Made Discretionary.--
     Section 502(l)(1) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
       (1) by striking ``shall'' and inserting ``may'', and
       (2) by striking ``equal to'' and inserting ``not greater 
     than''.
       (b) Applicable Recovery Amount.--Section 502(l)(2) of such 
     Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
       ``(2) For purposes of paragraph (1), the term `applicable 
     recovery amount' means any amount which is recovered from any 
     fiduciary or other person (or from any other person on behalf 
     of any such fiduciary or other person) with respect to a 
     breach or violation described in paragraph (1) on or after 
     the 30th day following receipt by such fiduciary or other 
     person of written notice from the Secretary of the violation, 
     whether paid voluntarily or by order of a court in a judicial 
     proceeding instituted by the Secretary under paragraph (2) or 
     (5) of subsection (a). The Secretary may, in the 
     Secretary's sole discretion, extend the 30-day period 
     described in the preceding sentence.''.
       (c) Other Rules.--Section 502(l) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by 
     adding at the end the following new paragraph:
       ``(5) A person shall be jointly and severally liable for 
     the penalty described in paragraph (1) to the same extent 
     that such person is jointly and severally liable for the 
     applicable recovery amount on which the penalty is based.
       ``(6) No penalty shall be assessed under this subsection 
     unless the person against whom the penalty is assessed is 
     given notice and opportunity for a hearing with respect to 
     the violation and applicable recovery amount.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to any breach of fiduciary responsibility or other 
     violation of part 4 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 occurring on or after 
     the date of enactment of this Act.
       (2) Transition rule.--In applying the amendment made by 
     subsection (b) (relating to applicable recovery amount), a 
     breach or other violation occurring before the date of 
     enactment of this Act which continues after the 180th day 
     after such date (and which may have been discontinued at any 
     time during its existence) shall be treated as having 
     occurred after such date of enactment.

     SEC. 690A. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) Amendment of internal revenue code.--
       (A) In general.--Subparagraph (A) of section 417(a)(6) is 
     amended by striking ``90-day'' and inserting ``180-day''.
       (B) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under sections 402(f), 
     411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
     substitute ``180 days'' for ``90 days'' each place it appears 
     in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), 
     and 1.417(e)-1(b).
       (2) Amendment of erisa.--Section 205(c)(7)(A) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1055(c)(7)(A)) is amended by striking ``90-day'' and 
     inserting ``180-day''.
       (3) Effective date.--The amendments made by paragraphs 
     (1)(A) and (2) and the modifications required by paragraph 
     (1)(B) shall apply to years beginning after December 31, 
     2001.
       (b) Consent Regulation Inapplicable to Certain 
     Distributions.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 411(a)(11) of the Internal 
     Revenue Code of 1986 to provide that the description of a 
     participant's right, if any, to defer receipt of a 
     distribution shall also describe the consequences of failing 
     to defer such receipt.
       (2) Model statement.--The Secretary of the Treasury shall 
     develop a model statement, written in a manner calculated to 
     be understood by the average plan participant, regarding 
     participants' rights to defer receipt of a distribution and 
     the consequences of so doing, that may be used by plan 
     administrators in complying with the requirements of this 
     section.
       (3) Effective date.--The modifications required by 
     paragraph (1) shall apply to years beginning after December 
     31, 2001.
       (c) Disclosure of Optional Forms of Benefits.--
       (1) Amendment of internal revenue code.--Section 417(a)(3) 
     (relating to plan to provide written explanation) is amended 
     by adding at the end the following:
       ``(C) Explanation of optional forms of benefits.--
       ``(i) In general.--If--

       ``(I) a plan provides optional forms of benefits, and
       ``(II) the present values of such forms of benefits are not 
     actuarially equivalent as of the annuity starting date,

     then each written explanation required to be provided under 
     subparagraph (A) shall include the information described in 
     clause (ii).
       ``(ii) Information.--A plan to which this subparagraph 
     applies shall include sufficient information (as determined 
     in accordance with regulations prescribed by the Secretary) 
     to allow the participant to understand the differences in the 
     present values of the optional forms of benefits provided by 
     the plan and the effect the participant's election as to the 
     form of benefit will have on the value of the benefits 
     available under the plan. Any such information shall be 
     provided in a manner calculated to be reasonably understood 
     by the average plan participant.''
       (2) Amendment of erisa.--Section 205(c)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1055(c)(3)) 
     is amended by adding at the end the following:
       ``(C)(i) If--
       ``(I) a plan provides optional forms of benefits, and
       ``(II) the present values of such forms of benefits are not 
     actuarially equivalent as of the annuity starting date,
     then such plan shall include the information described in 
     clause (ii) with each written explanation required to be 
     provided under subparagraph (A).
       ``(ii) A plan to which this subparagraph applies shall 
     include sufficient information (as determined in accordance 
     with regulations prescribed by the Secretary of the Treasury) 
     to allow the participant to understand the differences in the 
     present values of the optional forms of benefits provided by 
     the plan and the effect the participant's election as to the 
     form of benefit will have on the value of the benefits 
     available under the plan. Any such information shall be 
     provided in a manner calculated to be reasonably understood 
     by the average plan participant.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

     SEC. 690B. AMENDMENTS REGARDING NATIONAL SUMMIT ON RETIREMENT 
                   SAVINGS.

       Section 517 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1147) is amended--
       (1) in subsection (a), by striking ``2001 and 2005 on or 
     after September 1 of each year involved'' and inserting 
     ``2001 or 2002, and 2005 and 2009. Such Summit shall be 
     convened in the calendar year 2001 or the first calendar 
     quarter of 2002 and shall be convened on or after September 1 
     of each year thereafter'';
       (2) in subsection (e)(2)--
       (A) by striking ``Committee on Labor and Human Resources'' 
     in subparagraph (D) and inserting ``Committee on Health, 
     Education, Labor, and Pensions'';
       (B) by striking subparagraph (F) and inserting the 
     following:
       ``(F) the Chairman and Ranking Member of the Subcommittee 
     on Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the House of Representatives 
     and the Chairman and Ranking Member of the Subcommittee on 
     Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the Senate;'';
       (C) by redesignating subparagraph (G) as subparagraph (J); 
     and
       (D) by inserting after subparagraph (F) the following new 
     subparagraphs:
       ``(G) the Chairman and Ranking Member of the Committee on 
     Finance of the Senate;
       ``(H) the Chairman and Ranking Member of the Committee on 
     Ways and Means of the House of Representatives;
       ``(I) the Chairman and Ranking Member of the Subcommittee 
     on Employer-Employee Relations of the Committee on Education 
     and the Workforce of the House of Representatives; and'';
       (3) in subsection (e)(3)(A)--
       (A) by striking ``There shall be no more than 200 
     additional participants.'' and inserting ``The participants 
     in the National Summit shall also include additional 
     participants appointed under this subparagraph.'';

[[Page S5399]]

       (B) by striking ``one-half shall be appointed by the 
     President,'' in clause (i) and inserting ``not more than 100 
     participants shall be appointed under this clause by the 
     President,'', and by striking ``and'' at the end of clause 
     (i);
       (C) by striking ``one-half shall be appointed by the 
     elected leaders of Congress'' in clause (ii) and inserting 
     ``not more than 100 participants shall be appointed under 
     this clause by the elected leaders of Congress'', and by 
     striking the period at the end of clause (ii) and inserting 
     ``; and''; and
       (D) by adding at the end the following new clause:
       ``(iii) The President, in consultation with the elected 
     leaders of Congress referred to in subsection (a), may 
     appoint under this clause additional participants to the 
     National Summit. The number of such additional participants 
     appointed under this clause may not exceed the lesser of 3 
     percent of the total number of all additional participants 
     appointed under this paragraph, or 10. Such additional 
     participants shall not be Federal, State, or local government 
     employees.'';
       (4) in subsection (f)(1)(C), by inserting ``, no later than 
     90 days prior to the date of the commencement of the National 
     Summit,'' after ``comment'' in paragraph (1)(C);
       (5) in subsection (g), by inserting ``, in consultation 
     with the congressional leaders specified in subsection 
     (e)(2),'' after ``report'';
       (6) in subsection (i)--
       (A) by striking ``1997'' in paragraph (1) and inserting 
     ``2001''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Reception and representation authority.--The 
     Secretary is hereby granted reception and representation 
     authority limited specifically to the events at the National 
     Summit. The Secretary shall use any private contributions 
     accepted in connection with the National Summit prior to 
     using funds appropriated for purposes of the National Summit 
     pursuant to this paragraph.
       ``(4) Funds available.--Of the funds appropriated to the 
     Pension and Welfare Benefits Administration for fiscal year 
     2001, $500,000 shall remain available without fiscal year 
     limitation through September 30, 2002, for the purpose of 
     defraying the costs of the National Summit.''; and
       (7) in subsection (k)--
       (A) by striking ``shall enter into a contract on a sole-
     source basis'' and inserting ``may enter into a contract''; 
     and
       (B) by striking ``fiscal year 1998'' and inserting ``fiscal 
     years 2001 or 2002, and 2005, and 2009''.

       On page 310, strike lines 10 and 11 and insert the 
     following:

                      Subtitle I--Plan Amendments

     SEC. 692. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) except as provided by the Secretary of the Treasury, 
     such plan shall not fail to meet the requirements of section 
     411(d)(6) of the Internal Revenue Code of 1986 or section 
     204(g) of the Employee Retirement Income Security Act of 1974 
     by reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this Act, or pursuant 
     to any regulation issued under this Act, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2005.
     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this paragraph 
     shall be applied by substituting ``2007'' for ``2005''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan); and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),
     the plan or contract is operated as if such plan or contract 
     amendment were in effect; and
       (B) such plan or contract amendment applies retroactively 
     for such period.

Subtitle J--Compliance With Congressional Budget Act
                                  ____
                                  

                          ____________________