[Congressional Record Volume 147, Number 173 (Thursday, December 13, 2001)]
[House]
[Pages H10115-H10141]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                VICTIMS OF TERRORISM RELIEF ACT OF 2001

  Mr. THOMAS. Mr. Speaker, I ask unanimous consent that it be in order 
at any time to take from the Speaker's table the bill (H.R. 2884) to 
amend the Internal Revenue Code of 1986 to provide tax relief for 
victims of the terrorist attacks against the United States on September 
11, 2001, with Senate amendments thereto, and to consider in the House, 
without intervention of any point of order, any motion, or any demand 
for division of the question, a single motion offered by the chairman 
of the Committee on Ways and Means or his designee that the House 
concur in the Senate amendments with the amendment I have placed at the 
desk; that the Senate amendments and the motion be considered as read; 
that the motion be debatable for 40 minutes, equally divided and 
controlled by the chairman and ranking minority member of the Committee 
on Ways and Means; and that after such debate, the motion be considered 
as adopted; and that the amendment I have placed at the desk be 
considered as read for the purpose of this request.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  Mr. RANGEL. Mr. Speaker, reserving the right to object. Mr. Speaker, 
I would ask the gentleman from California to describe the substance of 
the bill before us today and how it differs from the bill that was 
passed by the Senate.
  Mr. THOMAS. Mr. Speaker, will the gentleman yield?
  Mr. RANGEL. I yield to the gentleman from California.
  Mr. THOMAS. Mr. Speaker, perhaps in the explanation if we could start 
with the bill that originated in the House, which was an attempt to 
take current law that is available to service members and civilians 
overseas in a terrorist attack, which would provide income tax relief 
and estate tax relief, and we brought them to the gentleman's city to 
say that the New York area was, in fact, tantamount to a war zone and 
that the victims in that area should receive the same benefit as 
current law provides for people who are victims of terrorist acts 
overseas. That was the sum and substance of the bill we sent to the 
Senate.
  For the 3 months that the Senate has had the bill, they examined it 
in a number of different ways. They added a particular death benefit 
for those individuals who were involved not only in the September 11 
terrorist attacks, but also the Oklahoma City bombing of 6 years ago 
and for those individuals who, through no fault of their own, were 
victims from anthrax attacks.
  In addition to that, they added a number of particular provisions 
dealing with charitable organizations, disaster relief payments, 
victims' compensation funds, and a number of other items.
  What we did was examine those items and, where it was appropriate, 
offer a generic response. I will give the gentleman an example. 
Oftentimes, in dealing with disaster situations, disability trust funds 
will be established for individuals. The problem has been there has 
been no consistent approach to the way in which those disability funds 
would be treated from disaster to disaster. However, there is a typical 
response which occurs, but it has never been codified.
  What we tried to do in this, working together, is to find those areas 
in terms of structured settlements, disability trusts, and similar 
arrangements that could be handled on a consistent basis, regardless of 
which disaster is involved, using this particular vehicle to assist us 
in that broad-based arrangement.
  In addition to that, we have one additional amendment which examines 
the geographic area of New York that is a zone that is clearly 
described in the legislation and provide a number of tax measures to 
relieve those individuals, authorize the issue of tax-exempt private 
activity bonds, create a 30 percent bonus of depreciable property in 
the recovery zone as defined, a 10-year life on leaseholder build-outs 
for those individuals who own commercial property and want to rebuild 
it so that the vital aspects of New York City, which we visited, the 
restaurants and the shops and the others, can be restored as quickly as 
possible, and then extension of certain replacement period provisions 
which those of us on the Committee on Ways and Means know are extremely 
important in making sure that people make a decision quickly to move 
back in or to establish in the recovery zone to assist in the recovery 
of New York City.
  Mr. RANGEL. Mr. Speaker, further reserving the right to object, could 
the chairman of the committee share with a member of the committee with 
whom he discussed the remedies for the problems that we face in this 
city? The chairman constantly referred to ``we.'' Is there a particular 
group from the City of New York that the gentleman met and discussed 
these issues with?
  Mr. THOMAS. Mr. Speaker, if the gentleman will yield, I will tell the 
gentleman that I had the privilege at one time, for example, of 
accompanying the gentleman to Ground Zero, which I had not done, given 
the duties that we had here, and spent some time with a number of city 
business leaders that the gentleman and others were kind enough to 
bring together at the stock exchange location and, over lunch for 
several hours, listened to the particular concerns that those 
individuals had about the need and the way in which we needed to 
respond. I met with several New York City, New York State governmental 
teams, including the Mayor, and, of course, listening to on both sides 
of the aisle the members from the New York delegation, both from the 
city and the State.
  In addition to that, as we all know, there are several other States 
that are just across the river and our colleagues from New Jersey and 
Pennsylvania had significant concerns as well. All of those came 
together culminating in this package today.
  And I would be remiss if I did not thank the gentleman from New York 
(Mr. Rangel) for his immediate and continuing offering and the members' 
willingness to accept his kind invitation to come and visit the city, 
albeit not in the way most of us had visited New York in the past on 
those wonderful trips that we used to have, but a very realistic trip 
to understand firsthand what had happened to the Big Apple.
  Mr. RANGEL. Mr. Speaker, I withdraw my reservation, because it is so 
important to my city that we get as much relief as possible from both 
Houses. But it really never ceases to amaze me of the creative 
legislative ability of our distinguished chairman to bring together 
ideas and to pull them together without the input of the members of the 
committee, without hearings; it is just absolutely fascinating how the 
things that we have taken for granted that we do as a Congress or we do 
as a committee have been substituted by the inquiries that the Chair 
can make in the great City of New York and with people that have an 
interest in the City of New York.
  So this is not the time to object; this is the time to move the 
consideration of this bill forward.
  Mr. Speaker, I withdraw my reservation of objection.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  The text of the Senate amendments is as follows:

       Senate amendments:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Victims of 
     Terrorism Tax Relief Act of 2001''.

[[Page H10116]]

       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

      TITLE I--RELIEF PROVISIONS FOR VICTIMS OF TERRORIST ATTACKS

Sec. 101. Income and employment taxes of victims of terrorist attacks.
Sec. 102. Estate tax reduction.
Sec. 103. Payments by charitable organizations treated as exempt 
              payments.
Sec. 104. Exclusion of certain cancellations of indebtedness.
Sec. 105. Treatment of certain structured settlement payments and 
              disability trusts.
Sec. 106. No impact on social security trust funds.

 TITLE II--GENERAL RELIEF FOR VICTIMS OF DISASTERS AND TERRORISTIC OR 
                            MILITARY ACTIONS

Sec. 201. Exclusion for disaster relief payments.
Sec. 202. Authority to postpone certain deadlines and required actions.
Sec. 203. Internal Revenue Service disaster response team.
Sec. 204. Application of certain provisions to terroristic or military 
              actions.
Sec. 205. Clarification of due date for airline excise tax deposits.
Sec. 206. Coordination with Air Transportation Safety and System 
              Stabilization Act.

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

Sec. 301. Disclosure of tax information in terrorism and national 
              security investigations.

      TITLE I--RELIEF PROVISIONS FOR VICTIMS OF TERRORIST ATTACKS

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

       (a) In General.--Section 692 (relating to income taxes of 
     members of Armed Forces on death) is amended by adding at the 
     end the following new subsection:
       ``(d) Individuals Dying as a Result of Certain Terrorist 
     Attacks.--
       ``(1) In general.--In the case of any individual who dies 
     as a result of wounds or injury incurred as a result of the 
     terrorist attacks against the United States on April 19, 
     1995, or September 11, 2001, or who dies as a result of 
     illness incurred as a result of a terrorist attack involving 
     anthrax occurring on or after September 11, 2001, and before 
     January 1, 2002, any tax imposed by this subtitle shall not 
     apply--
       ``(A) with respect to the taxable year in which falls the 
     date of such individual's death, and
       ``(B) with respect to any prior taxable year in the period 
     beginning with the last taxable year ending before the 
     taxable year in which the wounds, injury, or illness were 
     incurred.
       ``(2) Exceptions.--
       ``(A) Taxation of certain benefits.--Subject to such rules 
     as the Secretary may prescribe, paragraph (1) shall not apply 
     to the amount of any tax imposed by this subtitle which would 
     be computed by only taking into account the items of income, 
     gain, or other amounts attributable to--
       ``(i) amounts payable in the taxable year by reason of the 
     death of an individual described in paragraph (1) which would 
     have been payable in such taxable year if the death had 
     occurred by reason of an event other than an event described 
     in paragraph (1), or
       ``(ii) amounts payable in the taxable year which would not 
     have been payable in such taxable year but for an action 
     taken after the date of the applicable terrorist attack.
       ``(B) No relief for perpetrators.--Paragraph (1) shall not 
     apply with respect to any individual identified by the 
     Attorney General to have been a participant or conspirator in 
     any event described in paragraph (1), or a representative of 
     such individual.''.
       (b) Refund of Other Taxes Paid.--Section 692, as amended by 
     subsection (a), is amended by adding at the end the following 
     new subsection:
       ``(e) Refund of Other Taxes Paid.--In determining the 
     amount of tax under this section to be credited or refunded 
     as an overpayment with respect to any individual for any 
     period, such amount shall be increased by an amount equal to 
     the amount of taxes imposed and collected under chapter 21 
     and sections 3201(a), 3211(a)(1), and 3221(a) with respect to 
     such individual for such period.''.
       (c) Conforming Amendments.--
       (1) Section 5(b)(1) is amended by inserting ``and victims 
     of certain terrorist attacks'' before ``on death''.
       (2) Section 6013(f)(2)(B) is amended by inserting ``and 
     victims of certain terrorist attacks'' before ``on death''.
       (d) Clerical Amendments.--
       (1) The heading of section 692 is amended to read as 
     follows:

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

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

``Sec. 692. Income and employment taxes of members of Armed Forces and 
              victims of certain terrorist attacks on death.''.
       (e) Effective Date; Waiver of Limitations.--
       (1) Effective date.--The amendments made by this section 
     shall apply to taxable years ending before, on, or after 
     September 11, 2001.
       (2) Waiver of limitations.--If refund or credit of any 
     overpayment of tax resulting from the amendments made by this 
     section is prevented at any time before the close of the 1-
     year period beginning on the date of the enactment of this 
     Act by the operation of any law or rule of law (including res 
     judicata), such refund or credit may nevertheless be made or 
     allowed if claim therefor is filed before the close of such 
     period.

     SEC. 102. ESTATE TAX REDUCTION.

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

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

       ``(a) In General.--Unless the executor elects not to have 
     this section apply, in applying section 2001 to the estate of 
     a qualified decedent, the rate schedule set forth in 
     subsection (c) shall be deemed to be the rate schedule set 
     forth in section 2001(c).
       ``(b) Qualified Decedent.--For purposes of this section, 
     the term `qualified decedent' means--
       ``(1) any citizen or resident of the United States dying 
     while in active service of the Armed Forces of the United 
     States, if such decedent--
       ``(A) was killed in action while serving in a combat zone, 
     as determined under section 112(c), or
       ``(B) died as a result of wounds, disease, or injury 
     suffered while serving in a combat zone (as determined under 
     section 112(c)), and while in the line of duty, by reason of 
     a hazard to which such decedent was subjected as an incident 
     of such service, or
       ``(2) any individual who died as a result of wounds or 
     injury incurred as a result of the terrorist attacks against 
     the United States on April 19, 1995, or September 11, 2001, 
     or who died as a result of illness incurred as a result of a 
     terrorist attack involving anthrax occurring on or after 
     September 11, 2001, and before January 1, 2002.
     Paragraph (2) shall not apply with respect to any individual 
     identified by the Attorney General to have been a participant 
     or conspirator in any such terrorist attack, or a 
     representative of such individual.
       ``(c) Rate Schedule.--

``If the amount with respect to which the tentative tax to be computed 
The tentative tax is:
1 percent of the amount by which such amount exceeds $100,000..........
$500 plus 2 percent of the excess over $150,000........................
$1,500 plus 3 percent of the excess over $200,000......................
$4,500 plus 4 percent of the excess over $300,000......................
$12,500 plus 5 percent of the excess over $500,000.....................
$22,500 plus 6 percent of the excess over $700,000.....................
$34,500 plus 7 percent of the excess over $900,000.....................
$48,500 plus 8 percent of the excess over $1,100,000...................
$88,500 plus 9 percent of the excess over $1,600,000...................
$133,500 plus 10 percent of the excess over $2,100,000.................
$183,500 plus 11 percent of the excess over $2,600,000.................
$238,500 plus 12 percent of the excess over $3,100,000.................
$298,500 plus 13 percent of the excess over $3,600,000.................
$363,500 plus 14 percent of the excess over $4,100,000.................
$503,500 plus 15 percent of the excess over $5,100,000.................
$653,500 plus 16 percent of the excess over $6,100,000.................
$813,500 plus 17 percent of the excess over $7,100,000.................
$983,500 plus 18 percent of the excess over $8,100,000.................
$1,163,500 plus 19 percent of the excess over $9,100,000...............
$1,353,500 plus 20 percent of the excess over $10,100,000..............

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

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

       (d) Effective Date; Waiver of Limitations.--

[[Page H10117]]

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

     SEC. 103. PAYMENTS BY CHARITABLE ORGANIZATIONS TREATED AS 
                   EXEMPT PAYMENTS.

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

     SEC. 104. EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS.

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

     SEC. 105. TREATMENT OF CERTAIN STRUCTURED SETTLEMENT PAYMENTS 
                   AND DISABILITY TRUSTS.

       (a) Imposition of Excise Tax on Persons Who Acquire Certain 
     Structured Settlement Payments in Factoring Transactions.--
       (1) In general.--Subtitle E is amended by adding at the end 
     the following new chapter:

       ``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

``Sec. 5891. Structured settlement factoring transactions for certain 
              victims of terrorism.

     ``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS FOR 
                   CERTAIN VICTIMS OF TERRORISM.

       ``(a) Imposition of Tax.--There is hereby imposed on any 
     person who acquires directly or indirectly structured 
     settlement payment rights in a structured settlement 
     factoring transaction a tax equal to 40 percent of the 
     factoring discount as determined under subsection (c)(4) with 
     respect to such factoring transaction.
       ``(b) Exception for Certain Approved Transactions.--
       ``(1) In general.--The tax under subsection (a) shall not 
     apply in the case of a structured settlement factoring 
     transaction in which the transfer of structured settlement 
     payment rights is approved in advance in a qualified order.
       ``(2) Qualified order.--For purposes of this section, the 
     term `qualified order' means a final order, judgment, or 
     decree which--
       ``(A) finds that the transfer described in paragraph (1)--
       ``(i) does not contravene any Federal or State statute or 
     the order of any court or responsible administrative 
     authority, and
       ``(ii) is in the best interest of the payee, taking into 
     account the welfare and support of the payee's dependents, 
     and
       ``(B) is issued--
       ``(i) under the authority of an applicable State statute by 
     an applicable State court, or
       ``(ii) by the responsible administrative authority (if any) 
     which has exclusive jurisdiction over the underlying action 
     or proceeding which was resolved by means of the structured 
     settlement.
       ``(3) Applicable state statute.--For purposes of this 
     section, the term `applicable State statute' means a statute 
     providing for the entry of an order, judgment, or decree 
     described in paragraph (2)(A) which is enacted by--
       ``(A) the State in which the payee of the structured 
     settlement is domiciled, or
       ``(B) if there is no statute described in subparagraph (A), 
     the State in which either the party to the structured 
     settlement (including an assignee under a qualified 
     assignment under section 130) or the person issuing the 
     funding asset for the structured settlement is domiciled or 
     has its principal place of business.
       ``(4) Applicable state court.--For purposes of this 
     section--
       ``(A) In general.--The term `applicable State court' means, 
     with respect to any applicable State statute, a court of the 
     State which enacted such statute.
       ``(B) Special rule.--In the case of an applicable State 
     statute described in paragraph (3)(B), such term also 
     includes a court of the State in which the payee of the 
     structured settlement is domiciled.
       ``(5) Qualified order dispositive.--A qualified order shall 
     be treated as dispositive for purposes of the exception under 
     this subsection.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Structured settlement.--The term `structured 
     settlement' means an arrangement--
       ``(A) which is established by--
       ``(i) suit or agreement for the periodic payment of damages 
     excludable from the gross income of the recipient under 
     section 104(a)(2), or
       ``(ii) agreement for the periodic payment of compensation 
     under any workers' compensation law excludable from the gross 
     income of the recipient under section 104(a)(1), and
       ``(B) under which the periodic payments are--
       ``(i) of the character described in subparagraphs (A) and 
     (B) of section 130(c)(2), and
       ``(ii) payable by a person who is a party to the suit or 
     agreement or to the workers' compensation claim or by a 
     person who has assumed the liability for such periodic 
     payments under a qualified assignment in accordance with 
     section 130.
       ``(2) Structured settlement payment rights.--The term 
     `structured settlement payment rights' means rights to 
     receive payments under a structured settlement relating to 
     claims for death, wounding, injury, or illness as a result of 
     the terrorist attacks against the United States on September 
     11, 2001, or a terrorist attack involving anthrax occurring 
     on or after September 11, 2001, and before January 1, 2002.
       ``(3) Structured settlement factoring transaction.--
       ``(A) In general.--The term `structured settlement 
     factoring transaction' means a transfer of structured 
     settlement payment rights (including portions of structured 
     settlement payments) made for consideration by means of sale, 
     assignment, pledge, or other form of encumbrance or 
     alienation for consideration.
       ``(B) Exception.--Such term shall not include--
       ``(i) the creation or perfection of a security interest in 
     structured settlement payment rights under a blanket security 
     agreement entered into with an insured depository institution 
     in the absence of any action to redirect the structured 
     settlement payments to such institution (or agent or 
     successor thereof) or otherwise to enforce such blanket 
     security interest as against the structured settlement 
     payment rights, or
       ``(ii) a subsequent transfer of structured settlement 
     payment rights acquired in a structured settlement factoring 
     transaction.
       ``(4) Factoring discount.--The term `factoring discount' 
     means an amount equal to the excess of--
       ``(A) the aggregate undiscounted amount of structured 
     settlement payments being acquired in the structured 
     settlement factoring transaction, over
       ``(B) the total amount actually paid by the acquirer to the 
     person from whom such structured settlement payments are 
     acquired.
       ``(5) Responsible administrative authority.--The term 
     `responsible administrative authority' means the 
     administrative authority which had jurisdiction over the 
     underlying action or proceeding which was resolved by means 
     of the structured settlement.
       ``(6) State.--The term `State' includes the Commonwealth of 
     Puerto Rico and any possession of the United States.
       ``(d) Coordination With Other Provisions.--
       ``(1) In general.--If the applicable requirements of 
     sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were 
     satisfied at the time the structured settlement involving 
     structured settlement payment rights was entered into, the 
     subsequent occurrence of a structured settlement factoring 
     transaction shall not affect the application of the 
     provisions of such sections to the parties to the structured 
     settlement (including an assignee under a qualified 
     assignment under section 130) in any taxable year.
       ``(2) No withholding of tax.--The provisions of section 
     3405 regarding withholding of tax shall not apply to the 
     person making the payments in the event of a structured 
     settlement factoring transaction.
       ``(3) No inference.--No inference shall be drawn from the 
     application of this subsection to only those payment rights 
     described in subsection (c)(2).''.
       (2) Clerical amendment.--The table of chapters for subtitle 
     E is amended by adding at the end the following new item:

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

       (3) Effective dates.--
       (A) In general.--The amendments made by this subsection 
     (other than the provisions of section 5891(d) of the Internal 
     Revenue Code of 1986, as added by this subsection) shall 
     apply to structured settlement factoring transactions (as 
     defined in section 5891(c) of such Code (as so added)) 
     entered into on or after the 30th day following the date of 
     the enactment of this Act.
       (B) Clarification of existing law.--Section 5891(d) of such 
     Code (as so added) shall apply to structured settlement 
     factoring transactions (as defined in section 5891(c) of such 
     Code (as so added)) entered into on or after such 30th day.
       (C) Transition rule.--In the case of a structured 
     settlement factoring transaction entered into during the 
     period beginning on the 30th day following the date of the 
     enactment of this Act and ending on July 1, 2002, no tax 
     shall be imposed under section 5891(a) of such Code if--
       (i) the structured settlement payee is domiciled in a State 
     (or possession of the United States) which has not enacted a 
     statute providing that the structured settlement factoring 
     transaction is ineffective unless the transaction has been

[[Page H10118]]

     approved by an order, judgment, or decree of a court (or 
     where applicable, a responsible administrative authority) 
     which finds that such transaction--

       (I) does not contravene any Federal or State statute or the 
     order of any court (or responsible administrative authority), 
     and
       (II) is in the best interest of the structured settlement 
     payee or is appropriate in light of a hardship faced by the 
     payee, and

       (ii) the person acquiring the structured settlement payment 
     rights discloses to the structured settlement payee in 
     advance of the structured settlement factoring transaction 
     the amounts and due dates of the payments to be transferred, 
     the aggregate amount to be transferred, the consideration to 
     be received by the structured settlement payee for the 
     transferred payments, the discounted present value of the 
     transferred payments (including the present value as 
     determined in the manner described in section 7520 of such 
     Code), and the expenses required under the terms of the 
     structured settlement factoring transaction to be paid by the 
     structured settlement payee or deducted from the proceeds of 
     such transaction.
       (b) Personal Exemption Deduction for Certain Disability 
     Trusts.--
       (1) In general.--Section 642(b) (relating to deduction for 
     personal exemption) is amended--
       (A) by striking ``An estate'' and inserting:
       ``(1) In general.--An estate'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Full personal exemption amount for certain disability 
     trusts.--Paragraph (1) shall not apply, and the deduction 
     under section 151 shall apply, to any disability trust 
     described in subsection (c)(2)(B)(iv), (d)(4)(A), or 
     (d)(4)(C) of section 1917 of the Social Security Act (42 
     U.S.C. 1396p) for a beneficiary disabled as the result of a 
     wounding, injury, or illness as a result of the terrorist 
     attacks against the United States on April 19, 1995, or 
     September 11, 2001, or a terrorist attack involving anthrax 
     occurring on or after September 11, 2001, and before January 
     1, 2002.''.
       (2) Effective date; waiver of limitations.--
       (A) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending before, on, or after 
     September 11, 2001.
       (B) Waiver of limitations.--If refund or credit of any 
     overpayment of tax resulting from the amendments made by this 
     subsection is prevented at any time before the close of the 
     1-year period beginning on the date of the enactment of this 
     Act by the operation of any law or rule of law (including res 
     judicata), such refund or credit may nevertheless be made or 
     allowed if claim therefor is filed before the close of such 
     period.

     SEC. 106. NO IMPACT ON SOCIAL SECURITY TRUST FUND.

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

 TITLE II--GENERAL RELIEF FOR VICTIMS OF DISASTERS AND TERRORISTIC OR 
                            MILITARY ACTIONS

     SEC. 201. EXCLUSION FOR DISASTER RELIEF PAYMENTS.

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

     ``SEC. 139. DISASTER RELIEF PAYMENTS.

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

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

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

     SEC. 202. AUTHORITY TO POSTPONE CERTAIN DEADLINES AND 
                   REQUIRED ACTIONS.

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

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

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

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

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

[[Page H10119]]

     section 692(c)(2) of such Code), the corporation may, 
     notwithstanding any other provision of law, prescribe, by 
     notice or otherwise, a period of up to one year which may be 
     disregarded in determining the date by which any action is 
     required or permitted to be completed under this Act. No plan 
     shall be treated as failing to be operated in accordance with 
     the terms of the plan solely as the result of disregarding 
     any period by reason of the preceding sentence.''.
       (d) Additional Conforming Amendments.--
       (1) Section 6404 is amended--
       (A) by striking subsection (h),
       (B) by redesignating subsection (i) as subsection (h), and
       (C) by adding at the end the following new subsection:
       ``(i) Cross Reference.--

  ``For authority of the Secretary to abate certain amounts by reason 
of Presidentially declared disaster or terroristic or military action, 
see section 7508A.''.

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

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

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

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

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

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

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

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

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

     SEC. 203. INTERNAL REVENUE SERVICE DISASTER RESPONSE TEAM.

       (a) In General.--Section 7508A, as amended by section 
     202(a), is amended by adding at the end the following new 
     subsection:
       ``(d) 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 defined in section 
     1033(h)(3)) or a terroristic or military action (as defined 
     in section 692(c)(2)).''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 204. APPLICATION OF CERTAIN PROVISIONS TO TERRORISTIC OR 
                   MILITARY ACTIONS.

       (a) Exclusion for Death Benefits.--Section 101 (relating to 
     certain death benefits) is amended by adding at the end the 
     following new subsection:
       ``(i) Certain Employee Death Benefits Payable by Reason of 
     Death From Terroristic or Military Actions.--
       ``(1) In general.--Gross income does not include amounts 
     which are received (whether in a single sum or otherwise) if 
     such amounts are paid by an employer by reason of the death 
     of an employee incurred as a result of a terroristic or 
     military action (as defined in section 692(c)(2)).
       ``(2) No relief for certain individuals.--Paragraph (1) 
     shall not apply with respect to any individual identified by 
     the Attorney General to have been a participant or 
     conspirator in a terroristic action (as so defined), or a 
     representative of such individual.
       ``(3) Treatment of self-employed individuals.--For purposes 
     of this subsection, the term `employee' includes a self-
     employed person (as described in section 401(c)(1)).''.
       (b) Disability Income.--Section 104(a)(5) (relating to 
     compensation for injuries or sickness) is amended by striking 
     ``a violent attack'' and all that follows through the period 
     and inserting ``a terroristic or military action (as defined 
     in section 692(c)(2)).''.
       (c) Exemption From Income Tax for Certain Military or 
     Civilian Employees.--Section 692(c) is amended--
       (1) by striking ``outside the United States'' in paragraph 
     (1), and
       (2) by striking ``Sustained Overseas'' in the heading.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after September 11, 
     2001.

     SEC. 205. CLARIFICATION OF DUE DATE FOR AIRLINE EXCISE TAX 
                   DEPOSITS.

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

     SEC. 206. COORDINATION WITH AIR TRANSPORTATION SAFETY AND 
                   SYSTEM STABILIZATION ACT.

       No reduction in Federal tax liability by reason of any 
     provision of, or amendment made by, this Act shall be 
     considered as being received from a collateral source for 
     purposes of section 402(4) of the Air Transportation Safety 
     and System Stabilization Act (Public Law 107-42).

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

     SEC. 301. DISCLOSURE OF TAX INFORMATION IN TERRORISM AND 
                   NATIONAL SECURITY INVESTIGATIONS.

       (a) Disclosure Without a Request of Information Relating to 
     Terrorist Activities, Etc.--Paragraph (3) of section 6103(i) 
     (relating to disclosure of return information to apprise 
     appropriate officials of criminal activities or emergency 
     circumstances) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Terrorist activities, etc.--
       ``(i) In general.--Except as provided in paragraph (6), the 
     Secretary may disclose in writing return information (other 
     than taxpayer return information) that may be related to a 
     terrorist incident, threat, or activity to the extent 
     necessary to apprise the head of the appropriate Federal law 
     enforcement agency responsible for investigating or 
     responding to such terrorist incident, threat, or activity.

     The head of the agency may disclose such return information 
     to officers and employees of such agency to the extent 
     necessary to investigate or respond to such terrorist 
     incident, threat, or activity.
       ``(ii) Disclosure to the department of justice.--Returns 
     and taxpayer return information may also be disclosed to the 
     Attorney General under clause (i) to the extent necessary 
     for, and solely for use in preparing, an application under 
     paragraph (7)(D).
       ``(iii) Taxpayer identity.--For purposes of this 
     subparagraph, a taxpayer's identity shall not be treated as 
     taxpayer return information.
       ``(iv) Termination.--No disclosure may be made under this 
     subparagraph after December 31, 2003.''.
       (b) Disclosure Upon Request of Information Relating to 
     Terrorist Activities, Etc.--Subsection (i) of section 6103 
     (relating to disclosure to Federal officers or employees for 
     administration of Federal laws not relating to tax 
     administration) is amended by redesignating paragraph (7) as 
     paragraph (8) and by inserting after paragraph (6) the 
     following new paragraph:
       ``(7) Disclosure upon request of information relating to 
     terrorist activities, etc.--
       ``(A) Disclosure to law enforcement agencies.--
       ``(i) In general.--Except as provided in paragraph (6), 
     upon receipt by the Secretary of a written request which 
     meets the requirements of clause (iii), the Secretary may 
     disclose return information (other than taxpayer return 
     information) to officers and employees of any Federal law 
     enforcement agency who are personally and directly engaged in 
     the response to or investigation of any terrorist incident, 
     threat, or activity.
       ``(ii) Disclosure to state and local law enforcement 
     agencies.--The head of any Federal law enforcement agency may 
     disclose return information obtained under clause (i) to 
     officers and employees of any State or local law enforcement 
     agency but only if such agency is part of a team with the 
     Federal law enforcement agency in such response or 
     investigation and such information is disclosed only to 
     officers and employees who are personally and directly 
     engaged in such response or investigation.
       ``(iii) Requirements.--A request meets the requirements of 
     this clause if--

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

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

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

[[Page H10120]]

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

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

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

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

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

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

     The head of such Federal agency may disclose such information 
     to officers and employees of such agency to the extent 
     necessary to investigate or respond to such terrorist 
     incident, threat, or activity.
       ``(E) Termination.--No disclosure may be made under this 
     paragraph after December 31, 2003.''.
       (c) Conforming Amendments.--
       (1) Section 6103(a)(2) is amended by inserting ``any local 
     law enforcement agency receiving information under subsection 
     (i)(7)(A),'' after ``State,''.
       (2) Section 6103(b) is amended by adding at the end the 
     following new paragraph:
       ``(11) Terrorist incident, threat, or activity.--The term 
     `terrorist incident, threat, or activity' means an incident, 
     threat, or activity involving an act of domestic terrorism 
     (as defined in section 2331(5) of title 18, United States 
     Code) or international terrorism (as defined in section 
     2331(1) of such title).''.
       (3) The heading of section 6103(i)(3) is amended by 
     inserting ``or terrorist'' after ``criminal''.
       (4) Paragraph (4) of section 6103(i) is amended--
       (A) in subparagraph (A) by inserting ``or (7)(C)'' after 
     ``paragraph (1)'', and
       (B) in subparagraph (B) by striking ``or (3)(A)'' and 
     inserting ``(3)(A) or (C), or (7)''.
       (5) Paragraph (6) of section 6103(i) is amended--
       (A) by striking ``(3)(A)'' and inserting ``(3)(A) or (C)'', 
     and
       (B) by striking ``or (7)'' and inserting ``(7), or (8)''.
       (6) Section 6103(p)(3) is amended--
       (A) in subparagraph (A) by striking ``(7)(A)(ii)'' and 
     inserting ``(8)(A)(ii)'', and
       (B) in subparagraph (C) by striking ``(i)(3)(B)(i)'' and 
     inserting ``(i)(3)(B)(i) or (7)(A)(ii)''.
       (7) Section 6103(p)(4) is amended--
       (A) in the matter preceding subparagraph (A)--
       (i) by striking ``or (5),'' the first place it appears and 
     inserting ``(5), or (7),'', and
       (ii) by striking ``(i)(3)(B)(i),'' and inserting 
     ``(i)(3)(B)(i) or (7)(A)(ii),'', and
       (B) in subparagraph (F)(ii) by striking ``or (5),'' the 
     first place it appears and inserting ``(5) or (7),''.
       (8) Section 6103(p)(6)(B)(i) is amended by striking 
     ``(i)(7)(A)(ii)'' and inserting ``(i)(8)(A)(ii)''.
       (9) Section 6105(b) is amended--
       (A) by striking ``or'' at the end of paragraph (2),
       (B) by striking ``paragraphs (1) or (2)'' in paragraph (3) 
     and inserting ``paragraph (1), (2), or (3)'',
       (C) by redesignating paragraph (3) as paragraph (4), and
       (D) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) to the disclosure of tax convention information on 
     the same terms as return information may be disclosed under 
     paragraph (3)(C) or (7) of section 6103(i), except that in 
     the case of tax convention information provided by a foreign 
     government, no disclosure may be made under this paragraph 
     without the written consent of the foreign government, or''.
       (10) Section 7213(a)(2) is amended by striking 
     ``(i)(3)(B)(i),'' and inserting ``(i)(3)(B)(i) or 
     (7)(A)(ii),''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to disclosures made on or after the date of the 
     enactment of this Act.
       Amend the title so as to read: ``An Act to amend the 
     Internal Revenue Code of 1986 to provide tax relief for 
     victims of the terrorist attacks against the United States, 
     and for other purposes.''.


                      Motion Offered By Mr. Thomas

  Mr. THOMAS. Mr. Speaker, pursuant to the order of the House, I offer 
a motion.
  The SPEAKER pro tempore. The Clerk will designate the motion.
  The text of the motion is as follows:

       Mr. Thomas moves that:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment to the text of the bill, insert the following:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Victims of 
     Terrorism Tax Relief Act of 2001''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

      TITLE I--RELIEF PROVISIONS FOR VICTIMS OF TERRORIST ATTACKS

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

                   TITLE II--OTHER RELIEF PROVISIONS

Sec. 201. Exclusion for disaster relief payments.
Sec. 202. Authority to postpone certain deadlines and required actions.
Sec. 203. Application of certain provisions to terroristic or military 
              actions.
Sec. 204. Clarification of due date for airline excise tax deposits.
Sec. 205. Treatment of certain structured settlement payments.
Sec. 206. Personal exemption deduction for certain disability trusts.

TITLE III--TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED IN TERRORIST 
                     ATTACKS ON SEPTEMBER 11, 2001

Sec. 301. Tax benefits for area of New York City damaged in terrorist 
              attacks on September 11, 2001.

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

Sec. 401. Disclosure of tax information in terrorism and national 
              security investigations.

           TITLE V--NO IMPACT ON SOCIAL SECURITY TRUST FUNDS

Sec. 501. No impact on social security trust funds.

      TITLE I--RELIEF PROVISIONS FOR VICTIMS OF TERRORIST ATTACKS

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

       (a) In General.--Section 692 (relating to income taxes of 
     members of Armed Forces on death) is amended by adding at the 
     end the following new subsection:
       ``(d) Individuals Dying as a Result of Certain Attacks.--
       ``(1) In general.--In the case of a specified terrorist 
     victim, any tax imposed by this chapter shall not apply--
       ``(A) with respect to the taxable year in which falls the 
     date of death, and
       ``(B) with respect to any prior taxable year in the period 
     beginning with the last taxable year ending before the 
     taxable year in which the wounds, injury, or illness referred 
     to in paragraph (2) were incurred.
       ``(2) Specified terrorist victim.--For purposes of this 
     subsection, the term `specified terrorist victim' means any 
     decedent--
       ``(A) who dies as a result of wounds or injury incurred as 
     a result of the terrorist attacks against the United States 
     on April 19, 1995, or September 11, 2001, or
       ``(B) who dies as a result of illness incurred as a result 
     of an attack involving anthrax occurring on or after 
     September 11, 2001, and before January 1, 2002.

     Such term shall not include any individual identified by the 
     Attorney General to have been a participant or conspirator in 
     any such

[[Page H10121]]

     attack or a representative of such an individual.''.
       (b) Conforming Amendments.--
       (1) Section 5(b)(1) is amended by inserting ``and victims 
     of certain terrorist attacks'' before ``on death''.
       (2) Section 6013(f)(2)(B) is amended by inserting ``and 
     victims of certain terrorist attacks'' before ``on death''.
       (c) Clerical Amendments.--
       (1) The heading of section 692 is amended to read as 
     follows:

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

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

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

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

     SEC. 102. EXCLUSION OF CERTAIN DEATH BENEFITS.

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

     SEC. 103. ESTATE TAX REDUCTION.

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

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

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

``If the amount with respect to which the tentative tax to be computed 
The tentative tax is:
1 percent of the amount by which such amount exceeds $100,000..........
$500 plus 2 percent of the excess over $150,000........................
$1,500 plus 3 percent of the excess over $200,000......................
$4,500 plus 4 percent of the excess over $300,000......................
$12,500 plus 5 percent of the excess over $500,000.....................
$22,500 plus 6 percent of the excess over $700,000.....................
$34,500 plus 7 percent of the excess over $900,000.....................
$48,500 plus 8 percent of the excess over $1,100,000...................
$88,500 plus 9 percent of the excess over $1,600,000...................
$133,500 plus 10 percent of the excess over $2,100,000.................
$183,500 plus 11 percent of the excess over $2,600,000.................
$238,500 plus 12 percent of the excess over $3,100,000.................
$298,500 plus 13 percent of the excess over $3,600,000.................
$363,500 plus 14 percent of the excess over $4,100,000.................
$503,500 plus 15 percent of the excess over $5,100,000.................
$653,500 plus 16 percent of the excess over $6,100,000.................
$813,500 plus 17 percent of the excess over $7,100,000.................
$983,500 plus 18 percent of the excess over $8,100,000.................
$1,163,500 plus 19 percent of the excess over $9,100,000...............
$1,353,500 plus 20 percent of the excess over $10,100,000..............

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

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

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

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

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

                   TITLE II--OTHER RELIEF PROVISIONS

     SEC. 201. EXCLUSION FOR DISASTER RELIEF PAYMENTS.

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

     ``SEC. 139. DISASTER RELIEF PAYMENTS.

       ``(a) General Rule.--Gross income shall not include any 
     amount received by an individual as a qualified disaster 
     relief payment.
       ``(b) Qualified Disaster Relief Payment Defined.--For 
     purposes of this section, the term `qualified disaster relief 
     payment' means any amount paid to or for the benefit of an 
     individual--
       ``(1) to reimburse or pay reasonable and necessary 
     personal, family, living, or funeral expenses incurred as a 
     result of a qualified disaster,
       ``(2) to reimburse or pay reasonable and necessary expenses 
     incurred for the repair or rehabilitation of a personal 
     residence or repair or replacement of its contents to the 
     extent that the need for such repair, rehabilitation, or 
     replacement is attributable to a qualified disaster,

[[Page H10122]]

       ``(3) by a person engaged in the furnishing or sale of 
     transportation as a common carrier by reason of the death or 
     personal physical injuries incurred as a result of a 
     qualified disaster, or
       ``(4) if such amount is paid by a Federal, State, or local 
     government, or agency or instrumentality thereof, in 
     connection with a qualified disaster in order to promote the 
     general welfare,

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

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

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

     SEC. 202. AUTHORITY TO POSTPONE CERTAIN DEADLINES AND 
                   REQUIRED ACTIONS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     SEC. 203. APPLICATION OF CERTAIN PROVISIONS TO TERRORISTIC OR 
                   MILITARY ACTIONS.

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

     SEC. 204. CLARIFICATION OF DUE DATE FOR AIRLINE EXCISE TAX 
                   DEPOSITS.

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

[[Page H10123]]

     SEC. 205. TREATMENT OF CERTAIN STRUCTURED SETTLEMENT 
                   PAYMENTS.

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

       ``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

``Sec. 5891. Structured settlement factoring transactions.

     ``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.

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

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

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

     SEC. 206. PERSONAL EXEMPTION DEDUCTION FOR CERTAIN DISABILITY 
                   TRUSTS.

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

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

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

[[Page H10124]]

       ``(I) such trust is a disability trust described in 
     subsection (c)(2)(B)(iv), (d)(4)(A), or (d)(4)(C) of section 
     1917 of the Social Security Act (42 U.S.C. 1396p), and
       ``(II) all of the beneficiaries of the trust as of the 
     close of the taxable year are determined to have been 
     disabled (within the meaning of section 1614(a)(3) of the 
     Social Security Act, 42 U.S.C. 1382c(a)(3)) for some portion 
     of such year.

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

TITLE III--TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED IN TERRORIST 
                     ATTACKS ON SEPTEMBER 11, 2001

     SEC. 301. TAX BENEFITS FOR AREA OF NEW YORK CITY DAMAGED IN 
                   TERRORIST ATTACKS ON SEPTEMBER 11, 2001.

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

             ``Subchapter Y--New York Liberty Zone Benefits

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

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

       ``(a) Special Allowance for Certain Property Acquired After 
     September 10, 2001.--
       ``(1) Additional allowance.--In the case of any qualified 
     New York Liberty Zone property--
       ``(A) the depreciation deduction provided by section 167(a) 
     for the taxable year in which such property is placed in 
     service shall include an allowance equal to 30 percent of the 
     adjusted basis of such property, and
       ``(B) the adjusted basis of the qualified New York Liberty 
     Zone property shall be reduced by the amount of such 
     deduction before computing the amount otherwise allowable as 
     a depreciation deduction under this chapter for such taxable 
     year and any subsequent taxable year.
       ``(2) Qualified new york liberty zone property.--For 
     purposes of this subsection--
       ``(A) In general.--The term `qualified New York Liberty 
     Zone property' means property--
       ``(i)(I) to which section 168 applies (other than railroad 
     grading and tunnel bores), or
       ``(II) which is computer software (as defined in section 
     167(f)(1)(B)) for which a deduction is allowable under 
     section 167(a) without regard to this subsection,
       ``(ii) substantially all of the use of which is in the New 
     York Liberty Zone and is in the active conduct of a trade or 
     business by the taxpayer in such Zone,
       ``(iii) the original use of which in the New York Liberty 
     Zone commences with the taxpayer after September 10, 2001, 
     and
       ``(iv) which is acquired by the taxpayer by purchase (as 
     defined in section 179(d)) after September 10, 2001, and 
     placed in service by the taxpayer on or before the 
     termination date, but only if no written binding contract for 
     the acquisition was in effect before September 11, 2001.

     The term `termination date' means December 31, 2006 (December 
     31, 2009, in the case of nonresidential real property and 
     residential rental property).
       ``(B) Exceptions.--
       ``(i) Alternative depreciation property.--The term 
     `qualified New York Liberty Zone property' shall not include 
     any property to which the alternative depreciation system 
     under section 168(g) applies, determined--

       ``(I) without regard to paragraph (7) of section 168(g) 
     (relating to election to have system apply), and
       ``(II) after application of section 280F(b) (relating to 
     listed property with limited business use).

       ``(ii) Qualified leasehold improvement property.--Such term 
     shall not include qualified leasehold improvement property.
       ``(iii) Election out.--If a taxpayer makes an election 
     under this clause with respect to any class of property for 
     any taxable year, this subsection shall not apply to all 
     property in such class placed in service during such taxable 
     year.
       ``(C) Special rules relating to original use.--
       ``(i) Self-constructed property.--In the case of a taxpayer 
     manufacturing, constructing, or producing property for the 
     taxpayer's own use, the requirements of clause (iv) of 
     subparagraph (A) shall be treated as met if the taxpayer 
     begins manufacturing, constructing, or producing the property 
     after September 10, 2001, and before the termination date.
       ``(ii) Sale-leasebacks.--For purposes of subparagraph 
     (A)(iii), if property--

       ``(I) is originally placed in service after September 10, 
     2001, by a person, and
       ``(II) sold and leased back by such person within 3 months 
     after the date such property was originally placed in 
     service,

     such property shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback referred to in subclause (II).
       ``(D) Allowance against alternative minimum tax.--The 
     deduction allowed by this subsection shall be allowed in 
     determining alternative minimum taxable income under section 
     55.
       ``(b) 5-Year Recovery Period for Depreciation of Certain 
     Leasehold Improvements.--
       ``(1) In general.--For purposes of section 168, the term 
     `5-year property' includes any qualified leasehold 
     improvement property.
       ``(2) Qualified leasehold improvement property.--For 
     purposes of this section--
       ``(A) In general.--The term `qualified leasehold 
     improvement property' means any improvement to an interior 
     portion of a building which is nonresidential real property 
     if--
       ``(i) such building is located in the New York Liberty 
     Zone,
       ``(ii) such improvement is made under or pursuant to a 
     lease (as defined in section 168(h)(7))--

       ``(I) by the lessee (or any sublessee) of such portion, or
       ``(II) by the lessor of such portion,

       ``(iii) such portion is to be occupied exclusively by the 
     lessee (or any sublessee) of such portion,
       ``(iv) such improvement is placed in service--

       ``(I) after September 10, 2001, and more than 3 years after 
     the date the building was first placed in service, and
       ``(II) before January 1, 2007, and

       ``(v) no written binding contract for such improvement was 
     in effect before September 11, 2001.
       ``(B) Certain improvements not included.--Such term shall 
     not include any improvement for which the expenditure is 
     attributable to--
       ``(i) the enlargement of the building,
       ``(ii) any elevator or escalator,
       ``(iii) any structural component benefiting a common area, 
     and
       ``(iv) the internal structural framework of the building.
       ``(C) Definitions and special rules.--For purposes of this 
     paragraph--
       ``(i) Commitment to lease treated as lease.--A commitment 
     to enter into a lease shall be treated as a lease, and the 
     parties to such commitment shall be treated as lessor and 
     lessee, respectively.
       ``(ii) Related persons.--A lease between related persons 
     shall not be considered a lease. For purposes of the 
     preceding sentence, the term `related persons' means--

       ``(I) members of an affiliated group (as defined in section 
     1504), and
       ``(II) persons having a relationship described in 
     subsection (b) of section 267; except that, for purposes of 
     this clause, the phrase `80 percent or more' shall be 
     substituted for the phrase `more than 50 percent' each place 
     it appears in such subsection.

       ``(D) Improvements made by lessor.--
       ``(i) In general.--In the case of an improvement made by 
     the person who was the lessor of such improvement when such 
     improvement was placed in service, such improvement shall be 
     qualified leasehold improvement property (if at all) only so 
     long as such improvement is held by such person.
       ``(ii) Exception for changes in form of business.--Property 
     shall not cease to be qualified leasehold improvement 
     property under clause (i) by reason of--

       ``(I) death,
       ``(II) a transaction to which section 381(a) applies, or
       ``(III) a mere change in the form of conducting the trade 
     or business so long as the property is retained in such trade 
     or business as qualified leasehold improvement property and 
     the taxpayer retains a substantial interest in such trade or 
     business.

       ``(3) Requirement to use straight line method.--The 
     applicable depreciation method under section 168 shall be the 
     straight line method in the case of qualified leasehold 
     improvement property.
       ``(4) 9-year recovery period under alternative system.--For 
     purposes of section 168(g), the class life of qualified 
     leasehold improvement property shall be 9 years.
       ``(c) Increase in Expensing Under Section 179.--
       ``(1) In general.--For purposes of section 179--
       ``(A) the limitation under section 179(b)(1) shall be 
     increased by the lesser of--
       ``(i) $35,000, or
       ``(ii) the cost of section 179 property which is qualified 
     New York Liberty Zone property placed in service during the 
     taxable year, and
       ``(B) the amount taken into account under section 179(b)(2) 
     with respect to any section 179 property which is qualified 
     New York Liberty Zone property shall be 50 percent of the 
     cost thereof.
       ``(2) Recapture.--Rules similar to the rules under section 
     179(d)(10) shall apply with respect to any qualified New York 
     Liberty Zone property which ceases to be used in the New York 
     Liberty Zone.
       ``(d) Tax-Exempt Bond Financing.--
       ``(1) In general.--For purposes of this title, any 
     qualified New York Liberty Bond shall be treated as an exempt 
     facility bond.
       ``(2) Qualified new york liberty bond.--For purposes of 
     this subsection, the term `qualified New York Liberty Bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the net proceeds (as defined in 
     section 150(a)(3)) of such issue are to be used for qualified 
     project costs,

[[Page H10125]]

       ``(B) such bond is issued by the State of New York or any 
     political subdivision thereof,
       ``(C) the Governor of New York designates such bond for 
     purposes of this section, and
       ``(D) such bond is issued during calendar year 2002, 2003, 
     or 2004.
       ``(3) Limitation on amount of bonds designated.--The 
     maximum aggregate face amount of bonds which may be 
     designated under this subsection shall not exceed 
     $15,000,000,000.
       ``(4) Qualified project costs.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified project costs' means 
     the cost of acquisition, construction, reconstruction, and 
     renovation of--
       ``(i) nonresidential real property and residential rental 
     property (including fixed tenant improvements associated with 
     such property) located in the New York Liberty Zone, and
       ``(ii) public utility property located in the New York 
     Liberty Zone.
       ``(B) Costs for certain property outside zone included.--
     Such term includes the cost of acquisition, construction, 
     reconstruction, and renovation of nonresidential real 
     property (including fixed tenant improvements associated with 
     such property) located outside the New York Liberty Zone but 
     within the City of New York, New York, if such property is 
     part of a project which consists of at least 100,000 square 
     feet of usable office or other commercial space located in a 
     single building or multiple adjacent buildings.
       ``(C) Limitations.--Such term shall not include--
       ``(i) costs for property located outside the New York 
     Liberty Zone to the extent such costs exceed $7,000,000,000,
       ``(ii) costs with respect to residential rental property to 
     the extent such costs exceed $3,000,000,000, and
       ``(iii) costs with respect to property used for retail 
     sales of tangible property to the extent such costs exceed 
     $1,500,000,000.
       ``(D) Movable fixtures and equipment.--Such term shall not 
     include costs with respect to movable fixtures and equipment.
       ``(5) Special rules.--In applying this title to any 
     qualified New York Liberty Bond, the following modifications 
     shall apply:
       ``(A) Section 146 (relating to volume cap) shall not apply.
       ``(B) Section 147(c) (relating to limitation on use for 
     land acquisition) shall be determined by reference to the 
     aggregate authorized face amount of all qualified New York 
     Liberty Bonds rather than the net proceeds of each issue.
       ``(C) Section 147(d) (relating to acquisition of existing 
     property not permitted) shall be applied by substituting `50 
     percent' for `15 percent' each place it appears.
       ``(D) Section 148(f)(4)(C) (relating to exception from 
     rebate for certain proceeds to be used to finance 
     construction expenditures) shall apply to construction 
     proceeds of bonds issued under this section.
       ``(E) Financing provided by such a bond shall not be taken 
     into account under section 168(g)(5)(A) with respect to 
     property substantially all of the use of which is in the New 
     York Liberty Zone and is in the active conduct of a trade or 
     business by the taxpayer in such Zone.
       ``(F) Repayments of principal on financing provided by the 
     issue--
       ``(i) may not be used to provide financing, and
       ``(ii) are used not later than the close of the 1st 
     semiannual period beginning after the date of the repayment 
     to redeem bonds which are part of such issue.

     The requirement of clause (ii) shall be treated as met with 
     respect to amounts received within 10 years after the date of 
     issuance of the issue (or, in the case of refunding bond, the 
     date of issuance of the original bond) if such amounts are 
     used by the close of such 10 years to redeem bonds which are 
     part of such issue.
       ``(G) Section 57(a)(5) shall not apply.
       ``(6) Separate issue treatment of portions of an issue.--
     This subsection shall not apply to the portion of the 
     proceeds of an issue which (if issued as a separate issue) 
     would be treated as a qualified bond or as a bond that is not 
     a private activity bond (determined without regard to 
     subsection (a)), if the issuer elects to so treat such 
     portion.
       ``(e) Extension of Replacement Period for Nonrecognition of 
     Gain.--Notwithstanding subsections (g) and (h) of section 
     1033, clause (i) of section 1033(a)(2)(B) shall be applied by 
     substituting `5 years' for `2 years' with respect to property 
     which is compulsorily or involuntarily converted as a result 
     of the terrorist attacks on September 11, 2001, in the New 
     York Liberty Zone but only if substantially all of the use of 
     the replacement property is in the City of New York, New 
     York.
       ``(f) New York Liberty Zone.--For purposes of this section, 
     the term `New York Liberty Zone' means the area located on or 
     south of Canal Street, East Broadway (east of its 
     intersection with Canal Street), or Grand Street (east of its 
     intersection with East Broadway) in the Borough of Manhattan 
     in the City of New York, New York.''
       (b) Clerical Amendment.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subchapter Y. New York Liberty Zone Benefits.''

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

     SEC. 401. DISCLOSURE OF TAX INFORMATION IN TERRORISM AND 
                   NATIONAL SECURITY INVESTIGATIONS.

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

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

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

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

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

       ``(I) who is an officer or employee of the Department of 
     Justice or the Department of the Treasury who is appointed by 
     the President with the advice and consent of the Senate or 
     who is the Director of the United States Secret Service, and

[[Page H10126]]

       ``(II) who is responsible for the collection and analysis 
     of intelligence and counterintelligence information 
     concerning any terrorist incident, threat, or activity.

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

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

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

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

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

           TITLE V--NO IMPACT ON SOCIAL SECURITY TRUST FUNDS

     SEC. 501. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS.

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

  The SPEAKER pro tempore. Pursuant to the order of the House of today, 
the gentleman from California (Mr. Thomas) and the gentleman from New 
York (Mr. Rangel) each will control 20 minutes.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to thank the gentleman from New York for his kind 
observation. The Tuesday event precipitated a need for rapid response. 
On Thursday, the House moved. Three months later this bill now presents 
itself to us. I find it ironic that if the gentleman says he has been 
closed out of participation in this particular piece of legislation, 
the last time I checked, his party controlled the Senate and I would 
expect that at some time over the 3 months that the Senate was mulling 
over what it was going to do with this bill, he would have an 
opportunity to examine various provisions.
  It is my pleasure to yield to the ranking member, the gentleman from 
New York (Mr. Rangel).
  Mr. RANGEL. Mr. Speaker, let me say this, that as long as the 
gentleman and I have served in this House of Representatives, I am 
confident that we will treasure this jurisdiction of the Committee on 
Ways and Means and try to protect it the best we can, no matter which 
party is in charge of this House. But I would hope that any Member of 
this House serving on any committee that has any interest in 
legislation in his or her jurisdiction would never have to appeal to 
the other body to be heard. I thank the gentleman for yielding.

                              {time}  1515

  Mr. THOMAS. Mr. Speaker, I appreciate the gentleman's comments. That 
means, then, that perhaps he was closed out on the other side, and that 
I will be doubly sensitive to make sure that if the gentleman's own 
Members on the other side will not work with him, that we will continue 
to work with him.
  Mr. Speaker, it is my pleasure to yield 2 minutes to the gentleman 
from New York (Mr. Houghton), someone who has had a major impact on 
this legislation.
  Mr. HOUGHTON. Mr. Speaker, I thank the gentleman for yielding time to 
me, and I thank the gentleman from California (Mr. Thomas) and the 
gentleman from New York (Mr. Rangel) for their work.
  Mr. Speaker, I am honored to stand here with several of my New York 
colleagues in introducing a bill which

[[Page H10127]]

 really is going to provide much needed tax incentives for businesses 
to rebuild in lower Manhattan after all the massive destruction caused 
by the terrorist attacks of September 11.
  None of us will ever forget the terrible losses of that day, the loss 
of life, and the most tragic being the heartache to so many families. 
The World Trade Center was destroyed, other buildings were damaged or 
collapsed, and of course the price tag is horrendous, here.
  This bill includes really five provisions. I know it may be a little 
tedious, but I want to go through them, because I think it is 
important.
  First of all, it is to authorize New York State to issue up to $15 
billion in tax-exempt private activity bonds over the next 3 years to 
help renovate and rebuild commercial property, residential property, 
and also private utility infrastructure;
  Second, it allows taxpayers to claim an additional 30 percent first-
year depreciation deduction for property located in the liberty zone, 
including buildings and building improvements;
  Third, it provides a 5-year life for depreciating certain leasehold 
improvements;
  Fourth, next to the last, is to increase by $35,000 to $59,000 the 
amount that can be expensed by small businesses under section 179;
  Lastly, it increases the replacement period for 2 to 5 years for 
property that was involuntarily converted in lower Manhattan so 
taxpayers would not have to recognize the gain.
  Mr. Speaker, I know these are detailed and sometimes technical 
issues, but it is very important, and this bill can be the new 
lifeblood, the new hope, the expectancy of a rebuilt New York.
  Therefore, I want to thank the gentleman from California (Chairman 
Thomas), the gentleman from New York (Mr. Rangel), and my colleagues 
for being able to work on this bill. Obviously, I urge everyone to 
support the bill.
  Mr. RANGEL. Mr. Speaker, I yield such time as he may consume to the 
gentleman from New Jersey (Mr. Holt).
  Mr. HOLT. Mr. Speaker, I thank the distinguished ranking member from 
the Committee on Ways and Means for yielding time to me.
  Mr. Speaker, I rise in support of seeing that we provide full 
recognition in debt and tax relief for the surviving families from this 
terrible tragedy, this terrible event.
  Mr. Speaker, the workers in the World Trade Center and the passengers 
on board these planes were targeted because they were Americans working 
in a symbolic building or on board American planes. They were 
victimized as much as if they were soldiers, and the surviving families 
have had the bottom yanked out from under their feet, under their 
lives.
  I know that Americans, big-hearted in their generous support for 
these surviving families, want them to have tax relief: income, 
payroll, no taxability of debt, and credit card forgiveness. I know 
Americans, in their big-hearted generosity, want that for these people 
that they have reached out to.
  Mr. Speaker, I hope that will be the result of this.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from New York (Mr. Fossella), someone who has been on top of 
this from day one, and I appreciate his advice and counsel.
  (Mr. FOSSELLA asked and was given permission to revise and extend his 
remarks.)
  Mr. FOSSELLA. Mr. Speaker, I thank the chairman for yielding time to 
me, and for his leadership on this matter. I thank my colleagues on 
both sides of the aisle for once again coming forward to assist New 
York in its time of need.
  Mr. Speaker, we understand after September 11 that not only was New 
York and America attacked, but we have to come together as a country to 
help New York rebuild. Anybody who has been to downtown Manhattan, 
Ground Zero, as it has come to be known, has really witnessed 
devastation. We have seen the utter destruction, day in and day out. We 
have brave men and women who are still recovering the remains of those 
who were there and perished; but we also have just a scene out of a bad 
movie.
  Simultaneously, what has happened is that a lot of businesses are 
hurting. A lot of businesses who employ thousands of people in downtown 
Manhattan are either going out of business or are on the brink of 
bankruptcy, with employees who perhaps have no health insurance.
  A lot of different problems have resonated since September 11 above 
and beyond, if you will, the utter destruction that has taken place. 
What the gentleman from California (Chairman Thomas) and the gentleman 
from New York (Mr. Houghton) who have stood up before will do in this 
proposal is provide incentives for businesses to come back to New York, 
back to downtown Manhattan specifically in this newly-created zone, and 
to build, whether it is through accelerated small business expensing 
benefits or a 5-year recovery period for leasehold improvements; again, 
an incentive to come and to rebuild.
  There is nothing we can do to ever turn back the clock to September 
10, but what the Congress can do, in addition to the ongoing 
appropriations, which I believe is going to be a multiyear process, and 
I credit the President for fulfilling his commitment, this is another 
vehicle to help New York rebuild and to provide incentives.
  Over and above this proposal, I think it is important to understand 
that the surest way to help New York and perhaps the best way to help 
New York is to implement significant tax relief for folks who are 
working in Manhattan and the other boroughs. That is the surest and, as 
I see it, is the long-term positive effect on rebuilding.
  I want to thank the gentleman from California (Mr. Thomas) for being 
so diligent, and the gentleman from New York (Mr. Rangel) for bringing 
this forward. This is going to help New York and help New York City, 
and it is going to help the people that I represent in Staten Island 
and Brooklyn, many of whom worked in downtown Manhattan.
  Again, it is just another boost, I think, from the Congress and from 
Washington that we are going to stand shoulder-to-shoulder with the 
people from New York.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I include for the Record, since there is no committee 
report, the Joint Committee on Taxation's technical explanation of the 
bill.
  The material referred to is as follows:

  Technical Explanation of H.R. 2884, the ``Victims of Terrorism Tax 
 Relief Act of 2001,'' as Considered by the House on December 13, 2001

       (Prepared by the staff of the Joint Committee on Taxation)

                              Introduction

       This document, prepared by the staff of the Joint committee 
     on Taxation, contains a technical explanation of H.R. 2884, 
     the ``Victims of Terrorism Tax Relief Act of 2001,'' as 
     Considered by the House on December 13, 2002.

                             I. Background

       Historically, the Congress has provided Federal tax relief 
     for members of the U.S. Armed Forces who serve in combat 
     zones. In addition, the Congress has taken action on several 
     occasions to provide Federal tax relief for service members 
     and other individuals whose lives have been affected by 
     particular instances of hostile action involving the United 
     States. In 1970, the Congress enacted legislation that 
     provided tax relief to individuals who had been removed from 
     a U.S. vessel and dies while being illegally detained by the 
     Democratic People's Republic of Korea during 1968. 
     Specifically, the legislation treated these individuals as 
     having served in a combat zone for purposes of tax provisions 
     that apply only to individuals serving in designated combat 
     zones. Thus, service personnel who were crewmembers of the 
     U.S.S. Pueblo (which was illegally detained in 1968 by North 
     Korea), and who died during the detention, were eligible for 
     the income tax exclusion (and other special tax rules) 
     available for service personnel who die in combat zones.
       In 1980, the Congress enacted legislation concerning the 
     American hostages who were held captive in Iran between 
     November 4, 1979, and December 31, 1981, and who died as a 
     result of injury or disease or physical or mental disability 
     that was incurred or aggravated while in captive status. The 
     legislation provided that no Federal income tax would be 
     imposed with respect to the year in which the individual died 
     or any prior year ending on or after the first day the 
     individual was in captive status. This legislation applied to 
     military and civilian personnel of the United States, as well 
     as to certain other U.S. taxpayers taken captive outside Iran 
     on or before December 31, 1981. Moreover, if there had been 
     any unpaid income tax liability of

[[Page H10128]]

     such an individual from years prior to captivity, the 
     liability was forgiven. This total income tax exemption for 
     American hostages who died as a result of captive status was 
     available only if death occurred within two years after the 
     individual ceased to be in captive status.
       In 1984, the Congress enacted legislation after hostile 
     action occurred in Lebanon and Grenada involving U.S. 
     military and civilian personnel. This legislation provided 
     special Federal income tax rules for certain individuals who 
     die while in active service as a member of the Armed Forces 
     of the United States or while in the civilian employment of 
     the United States. Under the legislation, if death occurs as 
     a result of wounds or injuries incurred outside the United 
     States in a terrorist or military action, then no Federal 
     income tax applies with respect to income of the individual 
     for the year of death or for any earlier year in the period 
     beginning with the last year ending before the year in which 
     the wounds or injuries were incurred (sec. 692(c)). The 
     legislation only applies to injuries or wounds that are 
     incurred in a terrorist or military action. Thus, for 
     example, the legislation would not have applied with respect 
     to a U.S. serviceperson stationed in Lebanon who died as a 
     result of an accidental fall because, if not caused by 
     hostile forces, such an injury was not incurred in a 
     terrorist or military action. In order to apply the special 
     tax rules provided by the legislation to other hostile 
     actions that occurred before the date of enactment (such as 
     the attempt to rescue the American hostages in Iran), the 
     legislation was made effective with respect to all taxable 
     years of individuals dying as a result of wounds or 
     injuries incurred after December 31, 1979.
       The 1984 legislation applies to the year preceding the year 
     in which the wounds or injuries were incurred because the 
     Congress determined that forgiveness of income tax only for 
     the period from the year of the injuries or wounds to the 
     year of death would have inequitable results in certain 
     circumstances. Under such a limitation, a soldier who is 
     killed in a terrorist attack on a U.S. base in a foreign 
     country on January 31 would be exempt from income tax only on 
     one month's income, while a soldier who is killed in an 
     attack on December 31 would be exempt from income tax on an 
     entire year's income. Accordingly, the Congress concluded 
     that it is more equitable to extend the tax forgiveness under 
     the provision to income for the year preceding the year of 
     injury.
       In 1990, the Congress enacted legislation providing limited 
     income tax benefits to victims of the terrorist attack that 
     resulted in the downing of Pan American Airways Flight 103 
     over Lockerie, Scotland on December 21, 1988. The legislation 
     provided that, in the case of any individual whose death was 
     a direct result of the terrorist attack involving Flight 103, 
     the income tax provisions of subtitle A of the Internal 
     Revenue Code did not apply with respect to: (1) the taxable 
     year that included December 21, 1988; and (2) the prior 
     taxable year. However, the income tax benefit in each taxable 
     year was limited to an amount equal to 28 percent of the 
     annual rate of basic pay at Level V of the U.S. Executive 
     Schedule as of December 21, 1988. This limitation was 
     intended to limit the amount of tax relief to that which was 
     provided to personnel of the United States who were on Flight 
     103, thus providing equal relief to all of the victims who 
     were on Flight 103. In addition, the legislation required the 
     President to submit recommendations to Congress concerning 
     whether future legislation should be enacted to authorize the 
     United States to provide monetary and tax relief as 
     compensation to U.S. citizens who are victims of terrorism. 
     The legislation also authorized the President to establish a 
     board to develop criteria for compensation and to recommend 
     changes to existing laws to establish a single comprehensive 
     approach to victim compensation for terrorist acts.
       In 1991, the Congress enacted legislation extending the 
     benefits of the suspension of time provisions under section 
     7508 to any individual (and the spouse of such an individual) 
     who performed certain services that preceded the designation 
     of a combat zone with regard to Operation Desert Shield. The 
     individuals eligible for such benefits included individuals 
     who provided services in the Armed Forces of the United 
     States (or in support of the Armed Services) if such services 
     were performed in the area designated by the President as the 
     ``Persian Gulf Desert Shield Area'' and such services were 
     performed during the period beginning August 2, 1990, and 
     ending on the date on which any portion of the area was 
     designated by the President as a combat zone. After January 
     17, 1991 (the date on which the Persian Gulf Desert Shield 
     Area became designated as a combat zone by the President), 
     individuals performing such services became eligible for the 
     benefits of the present-law tax provisions applicable to 
     service in a designated combat zone. An Executive Order 
     terminating the designation of the Persian Gulf Desert Shield 
     Area as a combat zone has not been issued.
       In 1996, the Congress enacted legislation concerning 
     certain individuals serving in portions of former Yugoslavia 
     (i.e., Bosnia and Herzegovina, Croatia, and Macedonai) as 
     part of Operation Joint Endeavor and Operation Able Sentry. 
     This legislation provided that such service is treated in the 
     same manner as if it were performed in a designated combat 
     zone for purposes of the tax provisions, applicable to 
     service in a designated combat zone. The legislation also 
     made the suspension of time provisions of section 7508 
     applicable to certain other individuals participating in 
     Operation Joint Endeavor. In addition, the legislation 
     increased the maximum officer combat pay exclusion from $500 
     per month to the highest rate of pay applicable to enlisted 
     personnel plus the amount of hostile fire/imminent danger pay 
     received by the officer.
       In 1997, the Congress enacted legislation authorizing 
     procedural tax benefits with regard to Presidentially 
     declared disasters in general. The legislation provided that 
     the Secretary of the Treasury may prescribe regulations under 
     which a period of up to 90 days may be disregarded for 
     performing various acts under the Internal Revenue Code, such 
     as filing tax returns, paying taxes, or filing a claim for 
     credit or refund of tax, for any taxpayer determined by the 
     Secretary to be affected by a Presidentially declared 
     disaster (sec. 7508A). In 2001, the Congress amended section 
     7508A to extend from 90 to 120 the authorized period of days 
     that may be disregarded by the Secretary.

II. Description of H.R. 2884, The ``Victims of Terrorism Tax Relief Act 
                               of 2001''


     A. Relief Provisions for Victims of Specific Terrorist Attacks

     1. Income taxes of victims of terrorist attacks (sec. 101 of 
         the bill and sec. 692 of the Code)

                              Present Law

       An individual in active service as a member of the Armed 
     Forces who dies while serving in a combat zone (or as result 
     of wounds, disease, or injury received while serving in a 
     combat zone) is not subject to income tax or self-employment 
     tax for the year of death (as well as for any prior taxable 
     year ending on or after the first day the individual served 
     in the combat zone) (sec. 6929a)(1)). Special computational 
     rules apply in the case of joint returns. Military and 
     civilian employees of the United States are entitled to a 
     similar exemption if they die as a result of wounds or injury 
     which was incurred outside the United States in terrorist or 
     military action (sec. 692(c)).
       The exemption applies not only to the tax liability of the 
     individual attributable to income received before the date of 
     death and reported on the decedent's final return. The 
     exemption applies also to the liability of another person to 
     the extent the liability is attributable to an amount 
     received after the individual's death which would have been 
     includible in the individual's income for the taxable year in 
     which the date of death falls (determined as if the 
     individual had survived). For example, the individual's final 
     wage payment, or interest or dividends payable in the year of 
     death with respect to the individual's assets, are exempt 
     from income tax when paid to another person or the 
     individual's estate after the date of death but before the 
     end of the taxable year of the decedent (determined without 
     regard to the death).
       This exemption is available for the year of death and for 
     prior taxable years beginning with the taxable year prior to 
     the taxable year in which the wounds or injury were incurred. 
     Thus, for example, if someone is injured and dies in the year 
     the injury occurred, the exemption applies for the year of 
     death and the prior taxable year. Similarly, if someone is 
     injured and dies two years later, this exemption is available 
     for the taxable year of death as well as the three prior 
     taxable years (i.e., the year preceding the injury, the year 
     of the injury, and the two years following the year of the 
     injury).

                        Explanation of Provision

       Application of relief to victims of September 11, 2001, 
     April 19, 1995, and anthrax attacks. The bill extends relief 
     similar to the present-law treatment of military or civilian 
     employees of the United States who die as a result of 
     terrorist or military activity outside the United States to 
     individuals who die as a result of wounds or injury which 
     were incurred as a result of the terrorist attacks that 
     occurred on September 11, 2001, or April 19, 1995, 
     and individuals who die as a result of illness incurred 
     due to an attack involving anthrax that occurs on or after 
     September 11, 2001, and before January 1, 2002. Under the 
     bill, such individuals generally are exempt from income 
     tax for the year of death and for prior taxable years 
     beginning with the taxable year prior to the taxable year 
     in which the wounds or injury occurred. The exemption 
     applies to these individuals whether killed in an attack 
     (e.g., in the case of the September 11, 2001, attack in 
     one of the four airplanes or on the ground) or in rescue 
     or recovery operations.
       The provision does not apply to any individual identified 
     by the Attorney General to have been a participant or 
     conspirator in any terrorist attack to which the provision 
     applies, or a representative of such individual.
       Simplified refund procedures. It is intended that the 
     Secretary will establish procedures to simplify refunds of 
     these amounts, including expanding the directions in Revenue 
     Procedure 85-35 to include specific instructions for Form 
     1041.

                             Effective Date

       The provision is effective for taxable years ending before, 
     on, or after September 11, 2001.
       A special rule extends the period of limitations to permit 
     the filing of a claim for refund resulting from this 
     provision until one year after the date of enactment, if that 
     period would otherwise have expired before that date.
       2. Exclusion of certain death benefits (sec. 102 of the 
     bill and sec. 101 of the Code)

[[Page H10129]]

                              Present Law

       In general, gross income includes income from whatever 
     source derived (sec. 61), including payments made as a result 
     of the death of an individual. Certain exceptions to this 
     general rule of inclusion may apply to such payments in 
     certain cases.
       For example, gross income generally does not include the 
     amount of any damages (other than punitive damages) received 
     (whether by suit or agreement and whether as lump sums or as 
     periodic payments) on account of personal physical injury 
     (including death) or sickness (sec. 104(a)(2)). Further, 
     gross income does not include amounts received (whether in a 
     single sum or otherwise) under a life insurance contract if 
     such amounts are paid by reason of the death of the insured 
     (sec. 101(a)).
       In addition, gifts are not includible in gross income (sec. 
     102). However, with very limited exceptions, payments made by 
     an employer to, or for the benefit of, an employee are not 
     excluded from gross income as gifts (sec. 102(c)). In 
     business contexts in which section 102(c) does not apply, 
     payments are excludable as gifts only if objective inquiry 
     demonstrates that the payments were made out of ``detached 
     and disinterested generosity'' and not in return for past 
     or future services or from motives of anticipated benefit.

                        Explanation of Provision

       The bill generally provides an exclusion from gross income 
     for amounts received if such amounts are paid by an employer 
     (whether in a single sum or otherwise) by reason of the death 
     of an employee who dies as a result of wounds or injury which 
     were incurred as a result of the terrorist attacks that 
     occurred on September 11, 2001, or April 19, 1995, or as a 
     result of illness incurred due to an attack involving anthrax 
     that occurs on or after September 11, 2001, and before 
     January 1, 2002. Subject to rules prescribed by the 
     Secretary, the exclusion does not apply to amounts that would 
     have been payable if the individual had died for a reason 
     other than the attack. For example, the provision does not 
     apply to payments by an employer under a nonqualified 
     deferred compensation plan to the extent that the amounts 
     would have been payable if the death had occurred for another 
     reason.
       For purposes of the exclusion, self-employed individuals 
     are treated as employees. Thus, for example, payments by a 
     partnership to the surviving spouse of a partner who died as 
     a result of the September 11, 2001, attacks may be excludable 
     under the provision.
       The provision does not apply to any individual identified 
     by the Attorney General to have been a participant or 
     conspirator in any terrorist attack to which the provision 
     applies, or a representative of such individual.
       No change to present law is intended as to the 
     deductibility of death benefits paid by the employer or 
     otherwise merely because the payments are excludable by the 
     recipient. Thus, it is intended that payments excludable from 
     income under the provision are deductible to the same extent 
     they would be if they were includible in income.
       The bill is not intended to narrow the scope of any 
     applicable exclusion under present law. Accordingly, payments 
     that are not specifically excludable under the bill remain 
     excludable to the same extent provided under present law.
       In connection with the September 11, 2001, terrorist 
     attacks, insurance companies may pay death benefits under a 
     life insurance contract even if the contract terms provide 
     for an exclusion for death occurring as a result of an act of 
     terrorism or act of war. It is understood that such a death 
     payment would fall within the present-law exclusion (under 
     sec. 101(a)) for payments made under the contract if it 
     otherwise meets the requirements of the present-law 
     exclusion.

                             Effective Date

       The provision is effective for taxable years ending before, 
     on, or after September 11, 2001.
       A special rule extends the period of limitations to permit 
     the filing of a claim for refund resulting from this 
     provision until one year after the date of enactment, if that 
     period would otherwise have expired before that date.
       3. Estate tax reduction (sec. 103 of the bill and sec. 2201 
           of the Code)

                              Present Law

       Present law provides a reduction in Federal estate tax for 
     taxable estates of U.S. citizens or residents who are active 
     members of the U.S. Armed Forces and who are killed in action 
     while serving in a combat zone (sec. 2201). This provision 
     also applies to active service members who die as a result of 
     wound, disease, or injury suffered while serving in a combat 
     zone by reason of a hazard to which the service member was 
     subjected as an incident of such service.
       In general, the effect of section 2201 is to replace the 
     Federal estate tax that would otherwise be imposed with a 
     Federal estate tax equal to 125 percent of the maximum State 
     death tax credit determined under section 2011(b). Credits 
     against the tax, including the unified credit of section 2010 
     and the State death tax credit of section 2011, then apply to 
     reduce (or eliminate) the amount of the estate tax payable.
       The reduction in Federal estate taxes under section 2201 is 
     equal in amount to the ``additional estate tax'' with respect 
     to the estates of decedents dying before January 1, 2005. The 
     additional estate tax is the difference between the Federal 
     estate tax imposed by section 2001 and 125 percent of the 
     maximum State death tax credit determined under section 
     2011(b). With respect to the estates of decedents dying after 
     December 31, 2004, section 2001 provides that the additional 
     estate tax is the difference between the Federal estate tax 
     imposed by section 2001 and 125 percent of the maximum state 
     death tax credit determined under section 2011(b) as in 
     effect prior to its repeal by the Economic Growth and Tax 
     Relief Reconciliation Act of 2001.

                        Explanation of Provision

       The bill generally treats individuals who die from wounds 
     or injury incurred as a result of the terrorist attacks that 
     occurred on September 11, 2001, or April 19, 1995, as a 
     result of illness incurred due to an attack involving anthrax 
     that occurs on or after September 11, 2001, and before 
     January 1, 2002, in the same manner as if they were active 
     members of the U.S. Armed Forces killed in action while 
     serving in a combat zone or dying as a result of wounds or 
     injury suffered while serving in a combat zone for purposes 
     of section 2201. Consequently, the estates of these 
     individuals are eligible for the reduction in Federal estate 
     tax provided by section 2201. The provision applies 
     regardless of whether the individual was killed in the 
     attack itself (e.g., in the case of the September 11, 
     2001, attack, in one of the four airplanes or on the 
     ground) or in rescue or recovery operations. The provision 
     does not apply to any individual identified by the 
     Attorney General to have been a participant or conspirator 
     in any terrorist attack to which the provision applies, or 
     a representative or such individual.
       The bill also changes the general operation of section 
     2201, as it applies to both the estates of service members 
     who qualify for special estate tax treatment under present 
     law and to the estates of individuals who qualify for the 
     special treatment under the bill. Under the bill, the Federal 
     estate tax is determined in the same manner for all estates 
     that are eligible for Federal estate tax reduction under 
     section 2201. In addition, the executor of an estate that is 
     eligible for special estate tax treatment under section 2201 
     may elect not to have section 2201 apply to the estate. Thus, 
     in the event that an estate may receive more favorable 
     treatment without the application of section 2201 in the year 
     of death than it would under section 2201, the executor may 
     elect not to apply the provisions of section 2201, and the 
     estate tax owed (if any) would be determined pursuant to the 
     generally applicable rules.
       Under the bill, section 2201 no longer reduces Federal 
     estate tax by the amount of the additional estate tax. 
     Instead, the bill provides that the Federal estate tax 
     liability of eligible estates is determined under section 
     2001, using a rate schedule that is equal to 125 percent of 
     the present-law maximum State death tax credit amount. This 
     rate schedule is used to compute the tax under section 
     2001(b) (i.e., both the tentative tax under section 
     2001(b)(1) and the hypothetical gift tax under section 
     2201(b)(2) is computed using this rate schedule). As a result 
     of this provision, the estate tax is unified with the gift 
     tax for purposes of section 2201 so that a single graduated 
     (but reduced) rate schedule applies to transfers made by the 
     individual at death, based upon the cumulative taxable 
     transfers made both during lifetime and at death.
       In addition, while the bill provides an alternative reduced 
     rate table for purposes of determining the tax under section 
     2201(b), the amount of the unified credit nevertheless is 
     determined as if section 2201 did not apply, based upon the 
     unified credit as in effect on the date of death. For 
     example, in the case of victims of the September 11, 2001, 
     terrorist attack, the applicable unified credit amount under 
     section 2010(c) would be determined by reference to the 
     actual section 2001(c) rate table.
       As a conforming amendment, the bill repeals section 2011(d) 
     because it no longer will have any application to taxpayers.

                             Effective Date

       The provision applies to estates of decedents dying on or 
     after September 11, 2001, or, in the case of victims of the 
     Oklahoma City terrorist attack, estates of decedents dying on 
     or after April 19, 1995.
       A special rule extends the period of limitations to permit 
     the filing of a claim for refund resulting from this 
     provision until one year after the date of enactment, if that 
     period would otherwise have expired before that date.
       4. Payments by charitable organizations treated as exempt 
           payments (sec. 104 of the bill and secs. 501 and 4941 
           of the Code)

                              Present Law

       In general, organizations described in section 501(c)(3) of 
     the Code are exempt from taxation. Contributions to such 
     organizations generally are tax deductible (sec. 170). 
     Section 501(c)(3) organizations must be organized and 
     operated exclusively for exempt purposes and no part of the 
     net earnings of such organizations may inure to the benefit 
     of any private shareholder or individual. An organization is 
     not organized or operated exclusively for one or more exempt 
     purposes unless the organization serves a public rather than 
     a private interest. Thus, an organization described in 
     section 501(c)(3) generally must serve a charitable class of 
     persons that is indefinite or of sufficient size.
       Tax-exempt private foundations are a type of organization 
     described in section 501(c)(3)

[[Page H10130]]

     and are subject to special rules. Private foundations are 
     subject to excise taxes on acts of self-dealing between the 
     private foundation and a disqualified person with respect to 
     the foundation (sec. 4941). For example, it is self-dealing 
     if the income or assets of a private foundation are 
     transferred to, or used by or for the benefit of a 
     disqualified person, such as a substantial contributor to the 
     foundation or a person in control of the foundation, and the 
     benefit is not incidental or tenuous.

                        Explanation of Provision

       In light of the extraordinary distress caused by the 
     attacks on the United States of September 11, 2001, and the 
     subsequent attacks involving anthrax, the bill provides that 
     organizations described in section 501(c)(3) that make 
     payments by reason of the death, injury, wounding, or illness 
     of an individual incurred as a result of the September 11, 
     2001, attacks, or as a result of an attack involving anthrax 
     occurring on or after September 11, 2001, and before January 
     1, 2002, are not required to make a specific assessment of 
     need for the payments to be related to the purpose of 
     function constituting the basis for the organization's 
     exemption. This rule applies provided that the organization 
     makes the payments in good faith using a reasonable and 
     objective formula which is consistently applied and the 
     payments further a public rather than a private interest. 
     Therefore, as under present law, payments must serve a 
     charitable class. For example, under this standard, a 
     charitable organization that assists families of firefighters 
     killed in the line of duty could make a pro-rata distribution 
     to the families of firefighters killed in the attacks, even 
     though the specific financial needs of each family are not 
     directly considered. Similarly, if the amount of a 
     distribution is based on the number of dependents of a 
     charitable class of persons killed in the attacks and this 
     standard is applied consistently among distributions, the 
     specific needs of each recipient do not have to be taken into 
     account. However, it would not be appropriate for a charity 
     to make pro-rata payments based on the recipients' living 
     expenses before September 11 if the result generally is to 
     provide significantly greater assistance to person in a 
     better position to provide for themselves than to persons 
     with fewer financial resources. Although such a distribution 
     might be based on objective criteria, it would not, under the 
     statutory standard, be a reasonable formula for distributing 
     assistance in an equitable manner. Similarly, although 
     specific assessments of need are not required, payments that 
     do not further public purposes are not permitted. The bill 
     does not change the substantive standards for exemption under 
     section 501(c)(3), including the prohibition on private 
     inurement. It is impossible to list or anticipate the kinds 
     of payments that meet the statutory test, but, in general, 
     charitable that make distributions in good faith using a 
     reasonable and objective formula will be treated as acting 
     consistently with exempt purposes. A charity that makes 
     payments subject to this provision should indicate clearly on 
     the charity's information return, for example by notation at 
     the top of the relevant page of the return, that the charity 
     relied on this provision in making distributions. The bill 
     also provides that if a private foundation makes payments 
     under the conditions described above, the payment is not 
     treated as made to a disqualified person for purposes of 
     section 4941.
       For charities making payments in connection with the 
     September 11 attacks or attacks involving anthrax, but not in 
     reliance on this provision, present law rules apply. It is 
     expected that, because of the severity of distress arising 
     out of the September 11 and anthrax attacks and the extensive 
     variety of needs that the thousands of victims and their 
     family members may have, a wide array of expenses will be 
     consistent with operation for exclusively charitable 
     purposes. For instance, payments to permit a surviving spouse 
     with young children to remain at home with the children 
     rather than being forced to enter the workplace seem to be 
     appropriate to maintain the psychological well-being of the 
     entire family. Similarly, assistance with elementary and 
     secondary school tuition to permit a child to remain in the 
     same educational environment seems to be appropriate, as does 
     assistance needed for higher education. Assistance with rent 
     or mortgage payments for the family's principal resident or 
     car loans also seems to be appropriate to forestall losses of 
     a home or transportation that would cause additional trauma 
     to families already suffering. Other types of assistance that 
     the scope of the tragedy makes it difficult to anticipate may 
     also serve a charitable purpose.

                             Effective Date

       The provision applies to payments made on or after 
     September 11, 2001.


B. General Relief for Victims of Disasters and Terroristic or Military 
                                Actions

       1. Exclusion of disaster relief payments (sec. 201 of the 
           bill and new sec. 139 of the Code)

                              Present Law

       Taxation of disaster relief payments. Gross income includes 
     all income from whatever source derived unless a specific 
     exception applies (sec. 61). There is no specific statutory 
     exclusion from income for disaster payments. However, various 
     types of disaster payments made to individuals have been 
     excluded from gross income under a general welfare exception. 
     The exception has been held to exclude from income payments 
     made under legislatively provided social benefit programs for 
     the promotion of the general welfare. The general welfare 
     exception generally applies if the payments (1) are made from 
     a governmental general welfare fund, (2) are for the 
     promotion of the general welfare (on the basis of need and 
     not to all residents), and (3) are made without respect to 
     services rendered by the recipient. The exclusion generally 
     applies to payments for food, medical, housing, personal 
     property, transportation, and funeral expenses.
       The general welfare exception generally does not apply to 
     payments in the nature of income replacement, such as 
     payments to individuals for lost wages or unemployment 
     compensation or payments in the nature of income replacement 
     to businesses. Income replacement payments are includable in 
     gross income, unless another exception applies.
       Disaster relief payments may be excludable under other 
     provisions. For example, payments made by charitable relief 
     organizations may be excluded from the gross income of the 
     recipients as gifts. Payments made in a business context 
     generally are not treated as gifts. Factual issues may arise 
     as to whether a payment in the context of a business 
     relationship is a gift or taxable compensation for services. 
     In general, payments made by an employer to, or for the 
     benefit of, an employee are not excluded from gross income as 
     gifts (sec. 102(c)).
       Under present law, gross income generally does not include 
     payments received as damages (other than punitive damages) on 
     account of personal physical injury (including death) or 
     sickness (sec. 104(a)(2)). Such payments are excluded from 
     gross income regardless of whether received by suit or 
     agreement and whether received as a lump sum or as periodic 
     payments.
       Section 406 of the Air Transportation Safety and System 
     Stabilization Act provides for the payment of compensation 
     for eligible individuals who suffered physical harm or death 
     as a result of the terrorist-related aircraft crashes of 
     September 11, 2001. There is no statutory provision 
     specifically addressing the taxation of such compensation; 
     however, such compensation may be excludable from income 
     under generally applicable Code provisions (e.g., section 
     104).
       Rules relating to charitable organizations. In general, 
     organizations described in section 501(c)(3) of the Code are 
     exempt from taxation. Contributions to such organizations 
     generally are tax deductible (sec. 170). Section 501(c)(3) 
     organizations must be organized and operated exclusively for 
     exempt purposes and no part of the net earnings of such 
     organizations may inure to the benefit of any private 
     shareholder or individual. An organization is not organized 
     or operated exclusively for one or more exempt purposes 
     unless it serves a public rather than a private interest. 
     Thus, an organization described in section 501(c)(3) 
     generally must serve a charitable class of persons that is 
     indefinite or of sufficient size.
       Tax-exempt private foundations are a type of organization 
     described in section 501(c)(3) and are subject to special 
     rules. Private foundations are subject to excise taxes on 
     acts of self-dealing between the private foundation and a 
     disqualified person with respect to the foundation (sec. 
     4941). For example, it is self-dealing if the income or 
     assets of a private foundation are transferred to, or used by 
     or for the benefit of a disqualified person, such as a 
     substantial contributor to the foundation or a person in 
     control of the foundation, and the benefit is not incidental 
     or tenuous. Private foundations also are subject to excise 
     taxes on taxable expenditures (sec. 4945). For example, it is 
     a taxable expenditure if a private foundation pays an amount 
     that does not further certain charitable purposes, or makes a 
     grant to an individual for educational or other similar 
     purposes without following certain procedures.

                        Explanation of Provision

       Taxation of disaster relief payments. The bill clarifies 
     that any amount received as payment under section 406 of the 
     Air Transportation Safety and System Stabilization Act is 
     excludable from gross income. In addition, the bill provides 
     a specific exclusion from income for qualified disaster 
     relief payments. No inference is intended as to the 
     taxability of such payments under present law. In addition, 
     the provision is not intended to preclude the exclusion of 
     other types of payments under the general welfare exception 
     or other Code provisions.
       Qualified disaster relief payments include payments, from 
     any source, to, or for the benefit of, an individual to 
     reimburse or pay reasonable and necessary personal, family, 
     living, or funeral expenses incurred as a result of a 
     qualified disaster. Personal, family, and living expenses are 
     intended to have the same meaning as when used in section 
     262.
       Qualified disaster relief payments also include payments, 
     from any source, to reimburse or pay reasonable and necessary 
     expenses incurred for the repair or rehabilitation of a 
     personal residence, or for the repair or replacement of its 
     contents, to the extent that the need for the repair, 
     rehabilitation, or replacement is attributable to a qualified 
     disaster. For purposes of determining the tax basis of a 
     rehabilitated residence, it is intended that qualified 
     disaster relief payments be treated in the same manner as 
     amounts received on an involuntary conversion of a principal 
     residence under section

[[Page H10131]]

     121(d)(5) and sections 1033(b) and (h). A residence is not 
     precluded from being a personal residence solely because the 
     taxpayer does not own the residence; a rented residence can 
     qualify as a personal residence.
       Qualified disaster relief payments also include payments by 
     a person engaged in the furnishing or sale of transportation 
     as a common carrier on account of death or personal physical 
     injuries incurred as a result of a qualified disaster. Thus, 
     for example, payments made by commercial airlines to families 
     of passengers killed as a result of a qualified disaster 
     would be excluded from gross income.
       Qualified disaster relief payments also include amounts 
     paid by a Federal, State or local government in connection 
     with a qualified disaster in order to promote the general 
     welfare. As under the present law general welfare exception, 
     the exclusion does not apply to payments in the nature of 
     income replacement, such as payments to individuals of lost 
     wages, unemployment compensation, or payments in the nature 
     of business income replacement.
       Qualified disaster relief payments do not include payments 
     for any expenses compensated for by insurance or otherwise. 
     No change from present law in intended as to the 
     deductibility of qualified disaster relief payments, made by 
     an employer or otherwise, merely because the payments are 
     excludable by the recipients. In addition, in light of the 
     extraordinary circumstances surrounding a qualified disaster, 
     it is anticipated that individuals will not be required to 
     account for actual expenses in order to qualify for the 
     exclusion, provided that the amount of the payments can be 
     reasonably expected to be commensurate with the expenses 
     incurred.
       Particular payments may come within more than one category 
     of qualified disaster relief payments; the categories are not 
     intended to be mutually exclusive. Qualified disaster relief 
     payments also are excludable for purposes of self-employment 
     taxes and employment taxes. Thus, no withholding applies to 
     qualified disaster relief payments.
       Under the bill, a qualified disaster includes a disaster 
     which results from a terroristic or military action (as 
     defined in section 692(c)(2), as amended by the bill), a 
     Presidentially declared disaster, a disaster which results 
     from an accident involving a common carrier or from any other 
     event which would be determined by the Secretary to be of a 
     catastrophic nature, or, for purposes of payments made by a 
     Federal, State or local government, a disaster designated by 
     Federal, State or local authorities to warrant assistance.
       The exclusion from income under section 139 does not apply 
     to any individual identified by the Attorney General to have 
     been a participant or conspirator in the terrorist-related 
     aircraft crashes of September 11, 2001, or any other 
     terrorist attack, or to a representative of such individual.
       Rules applicable to charitable organizations making 
     disaster relief payments. Recognizing that employers and 
     employees may also contribute to section 501(c)(3) 
     organizations that make disaster relief payments, 
     clarification of the type of disaster relief grants such 
     organizations may make consistent with exempt purposes to 
     assist individuals in distress as a result of the September 
     11 attacks, and more generally, may be helpful. Because the 
     bill provides a special rule for certain payments made by 
     reason of death, injury, wounding, or illness of an 
     individual as a result of the September 11 attacks, and 
     certain attacks involving anthrax, the following discussion 
     relates to disaster relief generally.
       Generally speaking a charitable organization must serve a 
     public rather than a private interest. Providing assistance 
     to relieve distress for individuals suffering the effects of 
     a disaster generally serves a public rather than a private 
     interest if the assistance benefits the community as a whole, 
     or if the recipients otherwise lack the resources to meet 
     their physical, mental and emotional needs. Such assistance 
     could include cash grants to provide for food, clothing, 
     housing, medical care, federal costs, transportation, 
     education and other needs. All such grants must be need-
     based, taking into account the family's financial resources 
     and their physical, mental and emotional well-being.
       Charitable organizations generally are in the best position 
     to determine the type and amount of, and appropriate 
     beneficiaries for, disaster relief. Accordingly, it is 
     expected that the Secretary will presume that a charity 
     providing cash assistance in good faith to victims (and their 
     family members) of a qualified disaster is acting consistent 
     with the requirements of section 501(c)(3) if the class of 
     beneficiaries is sufficiently large or indefinite and the 
     charity can demonstrate that it is applying consistent, 
     objective criteria for assessing need.
       In addition to the rules described above that are 
     applicable to all charities, special rules apply with respect 
     to disaster relief provided by private foundations controlled 
     by an employer. In such cases, clarification of the 
     appropriate treatment of the foundation and the payments may 
     be helpful. In general, a private foundation that is 
     established and controlled by an employer violates the 
     requirements of section 501(c)(3) if it provides benefits to 
     a class of beneficiaries composed exclusively of the 
     employer's employees, and such benefits are a form of 
     compensation. The IRS recently held in a private letter 
     ruling, and in similar rulings, that a private foundation 
     that is established, funded and controlled by a particular 
     employer for the purpose of providing disaster relief for 
     employees of a particular employer does not qualify as a 
     charitable organization under section 501(c)(3), because the 
     foundation is not operated solely for charitable purposes and 
     is providing a benefit on behalf of the employer in violation 
     of the prohibition on private inurement. Although private 
     letter rulings do not constitute precedent for other 
     taxpayers, considerable uncertainty exists regarding IRS' 
     position relating to employer-controlled private 
     foundations making disaster relief payments to employee-
     beneficiaries.
       If payments in connection with a qualified disaster are 
     made by a private foundation to employees (and their family 
     members) of an employer that controls the foundation, the 
     presumption that the charity acts consistently with the 
     requirements of section 501(c)(3) applies if the class of 
     beneficiaries is large or indefinite and if recipients are 
     selected based on an objective determination of need by an 
     independent committee of the private foundation, a majority 
     of the members of which are persons other than persons who 
     are in a position to exercise substantial influence over the 
     affairs of the controlling employer (determined under 
     principles similar to those in effect under section 4958). 
     The presumption does not apply to grants made to, or for the 
     benefit of, a disqualified person or member of the selection 
     committee. However, the absence of an independent selection 
     committee does not necessarily mean that a foundation 
     violates the requirements of section 501(c)(3). Other 
     procedures and standards may be adequate substitutes to 
     ensure that any benefit to the employer is incidental and 
     tenuous. Similarly, providing need-based payments to 
     employees and their survivors in response to a disaster other 
     than a qualified disaster may well further charitable 
     purposes consistent with the requirements of section 
     501(c)(3).
       It is intended that an employer-controlled private 
     foundation is not providing an inappropriate benefit and is 
     not disqualified from exemption under section 501(c)(3) if it 
     makes a payment to an employee or a family member of an 
     employee (who is employed by an employer who controls the 
     foundation) relieves distress caused by a qualified disaster 
     as defined under section 139, provided that it awards grants 
     based on an objective determination of need using either an 
     independent selection committee or adequate substitute 
     procedures, as described above. It is further intended that 
     section 102(c) of the Code, which provides that a transfer 
     from an employer to, or for the benefit of, an employee 
     generally is not excludable from income as a gift, does not 
     apply to such payments. It is further expected that the 
     Service will reconsider the ruling position it has taken to 
     ensure that private foundations established and controlled by 
     employers will have appropriate guidance, consistent with the 
     principles outlined above, on the circumstances under which 
     they may provide disaster assistance in connection with a 
     qualified disaster specifically to the employers' employees.
       It is intended that the making by a private foundation of 
     disaster relief payments that qualify for the presumption 
     stated above (1) will not be treated as an act of self-
     dealing under section 4941 merely because the recipient is an 
     employee (or family member of an employee) of a disqualified 
     person with respect to the foundation, (2) will be treated as 
     in furtherance of section 170(c)(2)(B) purposes, and (3) will 
     be considered to meet the requirements of section 4945(g) to 
     the extent that they apply. Moreover, contributions to a 
     section 501(c)(3) organization administering relief in a 
     manner outlined above (including those made by employers and 
     any of their employees) are deductible under the generally 
     applicable rules of section 170. Finally, it is confirmed 
     that need-based payments made by an employer-controlled 
     foundation to an individual for exclusive charitable purposes 
     generally are excludable from the recipients' income as 
     gifts. Thus, such payments made by a foundation to relieve 
     distress caused by a qualified disaster are excludable from 
     the recipients' income regardless of whether they fall 
     within the scope of section 139, or any other such 
     provision of the Code providing for an exclusion. The IRS 
     is directed to issue prompt guidance to taxpayers relating 
     to the requirements applicable to private foundations 
     making disaster assistance payments. The principles 
     discussed above should apply to foundations and public 
     charities providing relief in response to both the 
     September 11, 2001, disaster and future qualified 
     disasters.

                             Effective Date

       The provision applies to taxable years ending on or after 
     September 11, 2001.
       2. Authority to postpone certain deadlines and required 
           actions (sec. 202 of the bill, sec. 7508A of the Code, 
           and new sec. 518 and sec. 4002 of the Employee 
           Retirement Income Security Act of 1974)

                              Present Law

       In general. In general, the Secretary of the Treasury may 
     prescribe regulations under which a period of up to 120 days 
     may be disregarded for performing various acts under the 
     Internal Revenue Code, such as filing tax returns, paying 
     taxes, or filing a claim for credit or refund of tax, for any 
     taxpayer determined by the Secretary to be affected by a 
     Presidentially declared disaster (sec. 7508A).
       The suspension of time may apply to the following acts: (1) 
     Filing any return of income, estate, or gift tax (except 
     employment

[[Page H10132]]

     and withholding taxes); (2) payment of any income, estate, or 
     gift tax (except employment and withholding taxes); (3) 
     filing a petition with the Tax Court for redetermination of a 
     deficiency, or for review of a decision rendered by the Tax 
     Court; (4) allowance of a credit or refund of any tax; (5) 
     filing a claim for credit or refund of any tax; (6) bringing 
     suit upon any such claim for credit or refund; (7) assessment 
     of any tax; (8) giving or making any notice or demand for the 
     payment of any tax; or with respect to any liability to the 
     United States in respect of any tax; (9) collection of the 
     amount of any liability in respect of any tax; (10) bringing 
     suit by the United States in respect of any liability in 
     respect of any tax; and (11) any other act required or 
     permitted under the internal revenue laws specified in 
     regulations prescribed by the Secretary of the Treasury.
       Individuals may, if they choose, perform any of these acts 
     during the period of suspension.
       On September 13, 2001, the IRS issued Notice 2001-61 
     providing relief to taxpayers affected by the September 11, 
     2001, terrorist attack. Prior to issuance of this notice, the 
     President had declared certain affected areas to be disaster 
     areas. In addition, on September 14, 2001, the IRS issued 
     Notice 2001-63 providing additional tax relief to taxpayers 
     who found it difficult to meet their tax filing and payment 
     obligations.
       Employee benefit plans. Questions have arisen about the 
     scope of section 7508A in relation to employee benefit plans. 
     Some acts related to employee benefit plans are not clearly 
     covered by the suspension. For example, a plan sponsor or 
     plan administrator may be required to provide a notice to 
     plan participants or to make a plan contribution, or a plan 
     participant may be required to make a benefit election or 
     take a distribution under the plan. In addition, some acts 
     related to employee benefit plans may be required or provided 
     for under the Employee Retirement Income Security Act 
     (``ERISA'') or under the terms of the plan, rather than under 
     the Internal Revenue Code. For example, on September 14, 
     2001, the Department of Labor issued News Release No. 01-36, 
     announcing that the Pension and Welfare Benefits 
     Administration, the Internal Revenue Service, and the Pension 
     Benefit Guaranty Corporation were extending the deadline for 
     filing Form 5500 and Form 5500-EZ.

                        Explanation of Provision

       In general. The bill redrafts section 7508A to expand its 
     scope and to clarify its application. Specifically, the bill 
     permits the Secretary to suspend the period of time under 
     this provision for up to one year (increased from up to 120 
     days). The bill also clarifies that interest on underpayments 
     may be waived or abated pursuant to section 7508A with 
     respect to either a declared disaster or a terroristic or 
     military action. The bill clarifies that the Secretary of the 
     Treasury has the authority to postpone actions pursuant to 
     section 7508A in response to a terroristic or military 
     action, regardless of whether a disaster area has been 
     declared by the President in connection with the action. The 
     bill facilitates the prompt issuance of guidance by the 
     Secretary of the Treasury with respect to section 7508A by 
     removing the requirement that regulations be published 
     listing the scope of additional actions that may be postponed 
     pursuant to section 7508(a)(1)(K); accordingly, the Secretary 
     may provide authoritative guidance via a notice or other 
     mechanism of the Secretary's choice that may be issued 
     more rapidly. It is intended that the Secretary construe 
     this authority as broadly as is necessary and appropriate 
     to respond to specific disasters or terroristic or 
     military actions. The authority to postpone ``any ... 
     act'' is sufficiently broad to encompass, for example, 
     specific deadlines enumerated in the Code, such as those 
     in section 1031 (relating to the exchange of property held 
     for productive use or investment). Similarly, it is 
     intended that the Secretary utilize this authority to 
     address issues that arise from the discovery of tax 
     information subsequent to the filing of a tax return that 
     would affect the tax liability reported on that return.
       Employee benefit plans. The bill expands and clarifies the 
     scope of the deadlines and required actions that may be 
     postponed pursuant to section 7508A. The bill provides that 
     the Secretary of the Treasury may prescribe a period of up to 
     one year which may be disregarded in determining the date by 
     which any action by a pension or other employee benefit plan, 
     or by a plan sponsor, administrator, participant, beneficiary 
     or other person would be required or permitted to be 
     completed. The bill provides similar authority to the 
     Secretary of Labor and the Pension Benefit Guaranty 
     Corporation with respect to actions within their respective 
     jurisdictions.
       The bill is not limited to actions under the Internal 
     Revenue Code. Accordingly, actions under ERISA or under the 
     terms of the plan come within the scope of this provision. 
     Acts performed within the extended period are considered 
     timely under the Internal Revenue Code, ERISA, and the plan. 
     In addition, a plan is not treated as operating in a manner 
     inconsistent with its terms or in violation of its terms 
     merely because acts provided for under the plan are performed 
     during the extended period.
       Examples of acts covered by the provision include (1) the 
     filing of a form with the IRS, Department of Labor or the 
     pension Benefit Guaranty Corporation, (2) an employer's 
     contribution to the plan of required quarterly amounts for 
     the current year or the prior year minimum funding amounts, 
     (3) the filing of an application for a waiver of the minimum 
     funding standard, (4) the payment of premiums to the Pension 
     Benefit Guarantee Corporation, (5) a participant's election 
     of a form of benefits under a plan, (6) the plan 
     administrator's distribution of benefits in accordance with a 
     participant's election, (7) notice to an employee of 
     eligibility for continuation coverage under a group health 
     plan, and (8) an employee's election of continuation 
     coverage.

                             Effective Date

       The provision applies to disasters and terroristic or 
     military actions occurring on or after September 11, 2001, 
     with respect to any action of the Secretary of the Treasury, 
     the Secretary of Labor, or the Pension Benefit Guaranty 
     Corporation on or after the date of the enactment.
       3. Application of certain provisions to terroristic or 
           military actions (sec. 203 of the bill and secs. 104 
           and 692 of the Code)

                              Present Law

       Taxation of disability income of U.S. employees related to 
     terrorist activity outside the United States. Gross income 
     does not include amounts received by an individual as 
     disability income attributable to injuries incurred as a 
     direct result of a terrorist attack (as determined by the 
     Secretary of State) which occurred while the individual was 
     performing official duties as an employee of the United 
     States outside the United States (sec. 104(a)(5)).
       Income tax relief for military and civilian U.S. employees 
     who die as a result of terrorist activity outside the United 
     States. Military and civilian employees of the United States 
     who die as a result of wounds or injury incurred outside the 
     United States in a terroristic or military action are not 
     subject to income tax for the year of death and for prior 
     taxable years beginning with the taxable year prior to the 
     taxable year in which the wounds or injury were incurred. 
     Accordingly, if such an individual is injured and dies in the 
     same taxable year, this exemption from income tax is 
     available for the taxable year of death as well as the prior 
     taxable year.

                        Explanation of Provision

       Taxation of disability income related to terrorist 
     activity. The bill expands the present-law exclusion from 
     gross income for disability income of U.S. civilian employees 
     attributable to a terrorist attack outside the United States 
     to apply to disability income received by any individual 
     attributable to a terroristic or military action. The bill is 
     not intended to apply to amounts that would have been payable 
     even if the individual had not become disabled as a result of 
     a terrorist or military action.
       Income tax relief for individuals who die as a result of 
     terrorist activity. The bill extends the income tax relief 
     provided under present law to U.S. military and civilian 
     personnel who die as a result of terroristic activity or 
     military action outside the United States to such personnel 
     regardless of where the terroristic activity or military 
     action occurred.

                             Effective Date

       The provision is effective for taxable years ending on or 
     after September 11, 2001.
       4. Clarification of due date for airline excise tax 
           deposits (sec. 204 of the bill and sec. 301 of the Air 
           Transportation Safety And Stabilization Act)

                              Present Law

       Section 301 of the Air Transportation Safety and System 
     Stabilization Act provides a special rule for the deposit of 
     certain taxes. If a deposit of these taxes was required to be 
     made after September 10, 2001, and before November 15, 2001, 
     they are treated as timely made if deposited by November 15, 
     2001. The Secretary of the Treasury is given the authority to 
     extend this deadline further, but no later than January 15, 
     2002. For eligible air carriers, the special deposit rules 
     are applicable to the excise taxes imposed on air travel. The 
     special deposit rules were also applied inadvertently to the 
     deposit of the following employment taxes: both the employer 
     and employee portions of FICA, railroad retirement taxes, and 
     income taxes withheld by employers from employees.

                        Explanation of Provision

       The applicability of these special deposit rules to 
     employment taxes is repealed. The applicability of these 
     special deposit rules to excise taxes is unaffected. It is 
     intended that no penalties be imposed with respect to taxes 
     that were not deposited timely in reliance on the provisions 
     of the Air Transportation Safety and System Stabilization Act 
     prior to the enactment of this provision.

                             Effective Date

       The provision is effective as if included in section 301 of 
     the Air Transportation Safety and System Stabilization Act.
       5. Treatment of purchase of structured settlements (sec. 
           205 of the bill and new sec. 5891 of the Code)

                              Present Law

       Present law provides tax-favored treatment for structured 
     settlement arrangements for the payment of damages on account 
     of personal injury or sickness.
       Under present law, an exclusion from gross income is 
     provided for amounts received for agreeing to a qualified 
     assignment to the extent that the amount received does not 
     exceed the aggregate cost of any qualified

[[Page H10133]]

     funding asset (sec. 130). A qualified assignment means any 
     assignment of a liability to make periodic payments as 
     damages (whether by suit or agreement) on account of a 
     personal injury or sickness (in a case involving physical 
     injury or physical sickness), provided the liability is 
     assumed from a person who is a party to the suit or 
     agreement, and the terms of the assignment satisfy certain 
     requirements. Generally, these requirements are that (1) the 
     periodic payments are fixed as to amount and time; (2) the 
     payments cannot be accelerated, deferred, increased, or 
     decreased by the recipient; (3) the assignee's obligation is 
     no greater than that of the assignor; and (4) the payments 
     are excludable by the recipient under section 104(a)(1) or 
     (2) as workmen's compensation for personal injuries or 
     sickness, or as damages on account of personal physical 
     injuries or physical sickness.
       A qualified funding asset means an annuity contract issued 
     by an insurance company licensed in the U.S., or any 
     obligation of the United States, provided the annuity 
     contract or obligation meets statutory requirements. Ann 
     annuity that is a qualified funding asset is not subject to 
     the rule requiring current inclusion of the income on the 
     contract which generally applies to annuity contract holders 
     that are not natural persons (e.g., corporations) (sec. 
     72(u)(3)(C)). In addition, when the payments on the annuity 
     are received by the structured settlement company and 
     included in income, the company generally may deduct the 
     corresponding payments to the injured person, who, in turn, 
     excludes the payments from his or her income (sec. 104). 
     Thus, neither the amount received for agreeing to the 
     qualified assignment of the liability to pay damages, nor the 
     income on the annuity that funds the liability to pay 
     damages, generally is subject to tax.
       The exclusion for recipients of the periodic payments 
     received under a structured settlement arrangement as damages 
     for personal physical injuries or physical sickness can be 
     contrasted with the treatment of investment earnings that are 
     not paid as damages. If a recipient of damages chooses to 
     receive a lump sum payment (excludable from income under sec. 
     104), and then to invest it himself, generally the earnings 
     on the investment are includable in income. For example, if 
     he recipient uses the lump sum to purchase an annuity 
     contract providing for periodic payments, then a portion of 
     each payment under the annuity contract is includable in 
     income, and the balance is excludable under present-law rules 
     based on the ratio of the individual's investment in the 
     contract to the expected return on the contract (sec. 72(b)).
       Present law provides that the payments to the injured 
     person under the qualified assignment cannot be accelerated, 
     deferred, increased, or decreased by the recipient (sec. 
     130). Consistent with these requirements, it is understood 
     that contracts under structured settlement arrangements 
     generally contain anti-assignment clauses. It is understood, 
     however, that injured persons may nonetheless be willing to 
     accept discounted lump sum payments from certain 
     ``factoring'' companies in exchange for their payment 
     streams. The tax effect on the parties of these transactions 
     may not be completely clear under present law.

                        Explanation of Provision

       The bill generally imposes an excise tax on any person who 
     acquires certain payment rights under a structured settlement 
     arrangement from a structured settlement recipient for 
     consideration. The amount of the excise tax is 40 percent of 
     the excess of (1) the undiscounted amount of the payments 
     being acquired, over (2) the total amount actually paid to 
     acquire them.
       The 40-percent excise tax does not apply, however, if the 
     transfer is approved in advance in a final order, judgment or 
     decree that: (1) finds that the transfer does not contravene 
     any Federal or State statute or the order of any court or 
     responsible administrative authority; (2) finds that the 
     transfer is in the best interest of the payee, taking into 
     account the welfare and support of the payee's dependents; 
     and (3) is issued under an applicable State statute by a 
     court or is issued by the responsible administrative 
     authority. Rules are provided for determining the 
     applicable State statute.
       The provision also provides that the acquisition 
     transaction does not affect the application of certain 
     present-law rules, if those rules were satisfied at the time 
     the structured settlement was entered into. The rules are 
     section 130 (relating to an exclusion from gross income for 
     personal injury liability assignments), section 72 (relating 
     to annuities), sections 104(a)(1) and (2) (relating to an 
     exclusion for amounts received under workers' compensation 
     acts and for damages on account of personal physical injuries 
     or physical sickness), and section 461(h) (relating to the 
     time of economic performance in determining the taxable year 
     of a deduction).

                             Effective Date

       The provision generally is effective for acquisition 
     transactions entered into on or after 30 days following 
     enactment. A transition rule applies during the period from 
     that date to July 1, 2002. Under the transition rule, if no 
     applicable State law (relating to the best interest of the 
     payee) applies to a transfer during that period, then the 
     exception from the 40 percent excise tax is available without 
     the otherwise required court (or administrative) order, 
     provided certain disclosure requirements are met. Under the 
     transition rule, the person acquiring the structured 
     settlement payments is required to disclose in advance to the 
     payee: (1) the amounts and due dates of the payments to be 
     transferred; (2) the aggregate amount to be transferred; (3) 
     the consideration to be received by the payee; (4) the 
     discounted present value of the transferred payments; and (5) 
     the expenses to be paid by the payee or deducted from the 
     payees's proceeds.
       The provision providing that the acquisition transaction 
     does not affect the application of certain present-law rules 
     is effective for transactions entered into on or after the 
     30th day following enactment.
       6. Personal exemption deduction for certain disability 
           trusts (sec. 206 of the bill and sec. 642 of the Code)

                              Present Law

       Present law provides a $300 personal exemption for trusts 
     that are required by their governing instruments to currently 
     distribute all of their income. For other trusts, present law 
     provides a $100 personal exemption. These deductions are in 
     lieu of the personal exemption that generally is provided 
     under section 151 for individuals (sec. 642(b)).
       Under present law, a grantor who transfers property to a 
     trust while retaining certain powers or interests over the 
     trust is treated as the owner of the trust for income tax 
     purposes under the so-called ``grantor trust rules'' (secs. 
     671-677). Similarly, a third party who is not adverse to the 
     grantor is treated as the owner of the trust under these 
     rules to the extent that the third party is granted certain 
     powers over the trust. If a grantor or third party is treated 
     as the owner of a trust (a ``grantor trust''), the income and 
     deductions of the trust are included directly in the taxable 
     income of the grantor or third party. Because the personal 
     exemption under section 642(b) applies to income that is 
     taxable to a trust (rather than a grantor or third party), 
     the personal exemption under section 642(b) does not apply to 
     grantor trusts.

                        Explanation of Provision

       The bill provides that certain disability trusts may claim 
     a personal exemption in an amount that is based upon the 
     personal exemption provided for individuals under section 
     151(d), rather than the $300 or $100 personal exemption 
     provided under present law. The provision applies to 
     disability trusts described in certain subsections of 42 
     U.S.C. sec. 1396p (relating to liens, adjustments, transfers 
     of assets, and the treatment of trust amounts for purposes of 
     determining eligibility for benefits under Medicaid State 
     plans).
       The provision only applies to disability trusts the 
     beneficiaries of which are disabled (other than holders of a 
     remainder or reversionary interest in the trust), within the 
     meaning of 42 U.S.C. sec. 1382c(a)(3) (relating to the 
     definition of a ``disabled individual'' for purposes of 
     determining eligibility for Supplemental Security Income), 
     and only if such beneficiaries are receiving government 
     disability benefits based upon a determination of disability 
     under 42 U.S.C. sec. 1382c(a)(3).
       The provision applies if all of the beneficiaries of the 
     trust at the end of the taxable year are determined under 42 
     U.S.C. sec. 1382c(a)(3) to be disabled for some portion of 
     such year. Thus, a disability trust may claim the personal 
     exemption under the provision even if one or more of the 
     beneficiaries becomes no longer disabled during the taxable 
     year. However, the trust may claim the personal exemption for 
     the following taxable year only if such individual or 
     individuals are no longer beneficiaries of the trust at the 
     end of the following taxable year (i.e., all remaining 
     beneficiaries of the trust at the end of the following 
     taxable year are disabled or were disabled during some 
     portion of such year). In the case of a disability trust with 
     a single beneficiary, the trust may claim the personal 
     exemption under the provision for the taxable year during 
     which the beneficiary becomes no longer disabled, but not for 
     subsequent taxable years.
       The personal exemption provided for disability trusts under 
     the provision is equal in amount to the section 151(d) 
     personal exemption for unmarried individuals with no 
     dependents and is subject to a phaseout, which is determined 
     by reference to the phaseout of the personal exemption for 
     such individuals under sec. 151(d)(3)(C)(iii). For purposes 
     of computing the phaseout of the personal exemption under the 
     provision, the adjusted gross income of the trust is 
     determined by reference to section 67(e) (relating to the 
     determination of adjusted gross income of estates and trusts 
     for purposes of computing the 2-percent floor on 
     miscellaneous itemized deductions).
       The provision does not affect the determination of whether 
     a disability trust is treated as a grantor trust under the 
     present-law grantor trust rules, and does not change the 
     inapplicability of the personal exemption under section 
     642(b) to grantor trusts. Thus, the provision does not apply 
     to disability trusts that are treated as grantor trusts.

                             Effective Date

       The provision applies to taxable years of disability trusts 
     ending on or after September 11, 2001.

[[Page H10134]]

C. Tax Benefits for Area of New York City Damaged in Terrorist Attacks 
                         on September 11, 2001

       1. Special depreciation allowance for certain property 
           (sec. 301(a) of the bill and new sec. 1400L of the 
           Code)

                              Present Law

       Depreciation deductions. A taxpayer is allowed to recover, 
     through annual depreciation deductions, the cost of certain 
     property used in a trade or business or for the production of 
     income. The amount of the depreciation deduction allowed with 
     respect to tangible property for a taxable year is determined 
     under the modified accelerated cost recovery system 
     (``MACRS''). Under MACRS, different types of property 
     generally are assigned applicable recovery periods and 
     depreciation methods. The recovery periods applicable to most 
     tangible personal property (generally tangible property other 
     than residential rental property and nonresidential real 
     property) range from 3 to 25 years. The depreciation methods 
     generally applicable to tangible personal property are the 
     200-percent and 150-percent declining balance methods, 
     switching to the straight-line method for the taxable year in 
     which the depreciation deduction would be maximized. In lieu 
     of depreciation, a taxpayer with a sufficiently small amount 
     of annual investment may elect to deduct up to $24,000 (for 
     taxable years beginning in 2001 or 2002) of the cost of 
     qualifying property placed in service for the taxable year 
     (sec. 179). For taxable years beginning in 2003 and 
     thereafter, the amount deductible under section 179 is 
     increased to $25,000.
       Section 167(f)(1) provides that capitalized computer 
     software costs, other than computer software to which section 
     197 applies, are recovered ratably over 36 months.

                        Explanation of Provision

       The provision allows an additional first-year depreciation 
     deduction equal to 30 percent of the adjusted basis of 
     qualified New York Liberty Zone (``Liberty Zone'') property. 
     The additional depreciation deduction is allowed for both 
     regular tax and alternative minimum tax purposes for the 
     taxable year in which the property is placed in service. The 
     basis of the property and the depreciation allowances in the 
     year of purchase and later years are appropriately adjusted 
     to reflect the additional first-year depreciation deduction. 
     A taxpayer is allowed to elect out of the additional first-
     year depreciation for any class of property for any taxable 
     year.
       Property qualifies for the additional first-year 
     depreciation deduction if the property is (1) property to 
     which MACRS applies except qualified leasehold improvement 
     property and any railroad grading or tunnel bore, or (2) 
     computer software other than computer software covered by 
     section 197 and, substantially all of the use of such 
     property is in the Liberty Zone. In order to be qualified 
     Liberty Zone property, the original use of the property in 
     the Liberty Zone must commence with the taxpayer on or after 
     September 11, 2001. A special rule precludes the additional 
     first-year depreciation deduction for property that is 
     required to be depreciated under the alternative depreciation 
     system of MACRS.
       In addition, property qualifies only if acquired by 
     purchase by the taxpayer (1) after September 10, 2001 and 
     placed in service on or before December 31, 2006, and no 
     binding written contract for the acquisition is in effect 
     before September 11, 2001. For nonresidential real property 
     and residential rental property the property must be placed 
     in service on or before December 31, 2009 in lieu of December 
     31, 2006. Finally, property that is manufactured, 
     constructed, or produced by the taxpayer for use by the 
     taxpayer qualifies if the taxpayer begins the manufacture, 
     construction, or production of the property after September 
     10, 2001, and the property is placed in service on or before 
     December 31, 2006 (and all other requirements are met). 
     Property that is manufactured, constructed, or produced for 
     the taxpayer by another person under a contract that is 
     entered into prior to the manufacture, construction, or 
     production of the property is considered to be manufactured, 
     constructed, or produced by the taxpayer.
       The Liberty Zone means the area located on or south of 
     Canal Street, East Broadway (east of its intersection with 
     Canal Street), or Grand Street (east of its intersection with 
     East Broadway) in the Borough of Manhattan in the City of New 
     York, New York.
       The following examples illustrate the operation of the 
     provision.
       Example 1.--Assume that on March 1, 2002, a calendar year 
     taxpayer acquires and places in service qualified property in 
     the Liberty Zone that costs $1 million. Under the provision, 
     the taxpayer is allowed an additional first-year depreciation 
     deduction of $300,000. The remaining $700,000 of adjusted 
     basis is recovered in 2002 and subsequent years pursuant to 
     the depreciation rules of present law.
       Example 2.--Assume that on March 1, 2002, a calendar year 
     taxpayer acquires and places in service qualified property in 
     the Liberty Zone that costs $100,000. In addition, assume 
     that the property qualifies for the expensing election under 
     section 179. Under the provision, the taxpayer is first 
     allowed a $59,000 deduction under section 179. The taxpayer 
     then is allowed an additional first-year depreciation 
     deduction of $12,300 based on $41,000 ($100,000 original cost 
     less the section 179 deduction of $59,000) of adjusted basis. 
     Finally, the remaining adjusted basis of $28,700 ($41,000 
     adjusted basis less $12,300 additional first-year 
     depreciation) is to be recovered in 2002 and subsequent years 
     pursuant to the depreciation rules of present law.
       2. Treatment of qualified leasehold improvement property 
           (sec. 301(b) of the bill and new sec. 1400L of the 
           Code)

                              Present Law

       Depreciation of leasehold improvements. Depreciation 
     allowances for property used in a trade or business generally 
     are determined under the modified Accelerated Cost Recovery 
     System (``MACRS'') of section 168. Depreciation allowances 
     for improvements made on leased property are determined under 
     MACRS, even if the MACRS recovery period assigned to the 
     property is longer than the term of the lease (sec. 
     168(i)(8)). This rule applies regardless whether the lessor 
     or lessee places the leasehold improvements in service. If a 
     leasehold improvement constitutes an addition or improvement 
     to nonresidential real property already placed in service, 
     the improvement is depreciated using the straight-line method 
     over a 39-year recovery period, beginning in the month the 
     addition or improvement was placed in service (secs. 
     168(b)(3), (c)(1), (d)(2), and (i)(6)).
       Treatment of dispositions of leasehold improvements. A 
     lessor of leased property that disposes of a leasehold 
     improvement which was made by the lessor for the lessee of 
     the property may take the adjusted basis of the improvement 
     into account for purposes of determining gain or loss if the 
     improvement is irrevocably disposed of or abandoned by the 
     lessor at the termination of the lease. This rule conforms 
     the treatment of lessors and lessees with respect to 
     leasehold improvements disposed of at the end of a term or 
     lease. For purposes of applying this rule, it is expected 
     that a lessor must be able to separately account for the 
     adjusted basis of the leasehold improvement that is 
     irrevocably disposed of or abandoned. This rule does not 
     apply to the extent section 280B applies to the demolition of 
     a structure, a portion of which may include leasehold 
     improvements.

                        Explanation of Provision

       The provision provides that 5-year property for purposes of 
     the depreciation rules of section 168 includes qualified 
     leasehold improvement property place in service after 
     September 10, 2001 and before January 1, 2007. The straight-
     line method is required to be used with respect to qualified 
     leasehold improvement property.
       Qualified leasehold improvement property is any improvement 
     to an interior portion of a building that is nonresidential 
     real property if such building is located in the New York 
     Liberty Zone, provided certain requirements are met. The 
     improvement must be made under or pursuant to a lease either 
     by the lessee (or sublessee) of that portion of the building, 
     or by the lessor of that portion of the building. That 
     portion of the building is to be occupied exclusively by the 
     lessee (or any sublessee). The improvement must be placed in 
     service more than three years after the date the building was 
     first placed in service.
       Qualified leasehold improvement property does not include 
     any improvement for which the expenditure is attributable to 
     the enlargement of the building, any elevator or escalator, 
     any structural component benefiting a common area, or the 
     internal structural framework of the building.
       A 9-year period is specified as the class life of qualified 
     leasehold improvement property for purposes of the 
     alternative depreciation system. Therefore, the general rule 
     that the class life for nonresidential real and residential 
     rental property is 40 years does not apply to qualified 
     leasehold improvement property.
       For purposes of the provision, a commitment to enter into a 
     lease is treated as a lease, and the parties to the 
     commitment are treated as lessor and lessee. A lease between 
     related persons is not considered a lease for this purpose.
       Under the provision, an improvement made by the person who 
     was the lessor of the improvement when it was placed in 
     service generally is treated as qualified leasehold 
     improvement property only so long as the improvement is held 
     by that person. Exceptions are provided under this rule in 
     the case of certain changes in form of business. Under these 
     exceptions, property does not cease to be qualified leasehold 
     improvement property under the provision by reason of (1) 
     death, (2) a transaction to which section 381 (relating to 
     carryovers in certain corporate acquisitions) applies, or (3) 
     a mere change in the form of conducting the trade or business 
     so long as the property is retained in the business as 
     qualified leasehold improvement property and the taxpayer 
     retains a substantial interest in the business.
       3. Increase in expensing treatment for business property 
           used in the New York Liberty Zone (sec. 301(c) of the 
           bill and new sec. 1400L of the Code)

                              Present Law

       Present law provides that, in lieu of depreciation, a 
     taxpayer with a sufficiently small amount of annual 
     investment may elect to deduct up to $24,000 (for taxable 
     years beginning in 2001 or 2002) of the cost of qualifying 
     property placed in service for the taxable year (sec. 179). 
     This amount is increased to $25,000 of the cost of qualified 
     property placed in service for taxable years beginning in 
     2003 and thereafter. The $24,000 ($25,000 for taxable years 
     beginning in 2003 and thereafter) amount is phased-out (but 
     not below

[[Page H10135]]

     zero) by the amount by which the cost of qualifying property 
     placed in service during the taxable year exceeds $200,000.
       Additional section 179 incentives are provided with respect 
     to a qualified zone property used by a business in an 
     empowerment zone (sec. 1397A). Such a business may elect to 
     deduct an additional $20,000 (i.e., a total of $44,000) of 
     the cost of qualified zone property placed in service in year 
     2001. The $20,000 amount is increased to $35,000 for taxable 
     years beginning in 2002 and thereafter. In addition, the 
     phase-out range is applied by taking into account only 50 
     percent of the cost of qualified zone property that is 
     section 179 property.
       The amount eligible to be expensed for a taxable year may 
     not exceed the taxable income for a taxable year that is 
     derived from the active conduct of a trade or business 
     (determined without regard to this provision). Any amount 
     that is not allowed as a deduction because of the taxable 
     income limitation may be carried forward to succeeding 
     taxable years (subject to similar limitations). No general 
     business credit under section 38 is allowed with respect to 
     any amount for which a deduction is allowed under section 
     179.

                        Explanation of Provision

       The provision increases the amount a taxpayer can deduct 
     under section 179 for qualifying property used in the New 
     York Liberty Zone. Specifically, the provision increases the 
     maximum dollar amount that may be deducted under section 179 
     by the lesser of (1) $35,000 or (2) the cost of qualifying 
     property placed in service during the taxable year. This 
     amount is in addition to the amount otherwise deductible 
     under the present-law rules of section 179.
       Qualifying property means section 179 property purchased 
     and placed in service by the taxpayer after September 10, 
     2001 and before January 1, 2007, where (1) substantially all 
     of its use in the New York Liberty Zone in the active conduct 
     of a trade or business by the taxpayer in the zone, and (2) 
     the original use of which in the New York Liberty Zone 
     commences with the taxpayer after September 10, 2001.
       As under present law with respect to empowerment zones, the 
     phase-out range for the section 179 deduction attributable to 
     New York Liberty Zone property is applied by taking into 
     account only 50 percent of the cost of New York Liberty Zone 
     property that is section 179 property. Also, no general 
     business credit under section 38 is allowed with respect to 
     any amount for which a deduction is allowed under section 
     179.
       4. Authorize issuance of tax-exempt private activity bonds 
           for rebuilding the portion of New York City damaged in 
           the September 11, 2001, terrorist attack (sec. 301(d) 
           of the bill and new sec. 1400L of the Code)

                              Present Law

     Rules governing issuance of tax-exempt bonds
       In general
       Interest on debt incurred by States or local governments is 
     excluded from income if the proceeds of the borrowing are 
     used to carry out governmental functions of those entities or 
     the debt is repaid with governmental funds (sec. 103). 
     Interest on bonds that nominally are issued by States or 
     local governments, but the proceeds of which are used 
     (directly or indirectly) by a private person and payment of 
     which is derived from funds of such a private person is 
     taxable unless the purpose of the borrowing is approved 
     specifically in the Code or in a non-Code provision of a 
     revenue Act. These bonds are called ``private activity 
     bonds.'' The term ``private person'' includes the Federal 
     Government and all other individuals and entities other than 
     States or local governments.
       Private activities eligible for financing with tax-exempt 
           private activity bonds
       Present law includes several exceptions permitting States 
     or local governments to act as conduits providing tax-exempt 
     financing for private activities. Both capital expenditures 
     and limited working capital expenditures of charitable 
     organizations described in section 501(c)(3) of the Code 
     (``qualified 501(c)(3) bonds'') may be financed with tax-
     exempt bonds.
       States or local governments may issue tax-exempt ``exempt-
     facility bonds'' to finance property for certain private 
     businesses. Business facilities eligible for this financing 
     include transportation (airports, ports, local mass 
     commuting, and high speed intercity rail facilities); 
     privately owned and/or privately operated public works 
     facilities (sewage, solid waste disposal, local district 
     heating or cooling, and hazardous waste disposal facilities); 
     privately owned and/or operated low-income rental housing; 
     and certain private facilites for the local furnishing of 
     electricity or gas. A further provision allows tax-exempt 
     financing for ``environmental enhancements of hydro-electric 
     generating facilities.'' Tax-exempt financing also is 
     authorized for capital expenditures for small manufacturing 
     facilities and land and equipment for first-time farmers 
     (``qualified small-issue bonds''), local redevelopment 
     activities (``qualified redevelopment bonds''), and eligible 
     empowerment zone and enterprise community businesses.
       Tax-exempt private activity bonds also may be issued to 
     finance limited non-business purposes: certain student loans 
     and mortgage loans for owner-occupied housing (``qualified 
     mortgage bonds'' and ``qualified veterans' mortgage bonds''). 
     Purchasers of houses financed with qualified mortgage bonds 
     must be first-time homebuyers satisfying prescribed income 
     limits, the purchase prices of the houses is limited, the 
     amount by which interest rates charged to homebuyers may 
     exceed the interest paid by issuers is restricted, and a 
     recapture provision applies to target the benefit to 
     purchasers having longer-term need for the subsidy provided 
     by the bonds. Qualified veterans' mortgage bonds are not 
     subject to these limitations, but these bonds may only be 
     issued by five States and may only be used to finance 
     mortgage loans to veterans who served on active duty before 
     January 1, 1977.
       With the exception of qualified 501(c)(3) bonds, private 
     activity bonds may not be issued to finance working capital 
     requirements of private businesses.
       In most cases, the aggregate volume of tax-exempt private 
     activity bonds that may be issued in a State is restricted by 
     annual volume limits. These annual volume limits are equal to 
     $62.50 per resident of the State, or $187.5 million of 
     greater. The volume limits are scheduled to increase to the 
     greater of $75 per resident of the State or $225 million in 
     calendar year 2002. After 2002, the volume limits will be 
     indexed annually for inflation.
       Arbitrage restrictions on tax-exempt bonds
       The Federal income tax does not apply to the income of 
     States and local governments that is derived from the 
     exercise of an essential governmental function. To prevent 
     these tax-exempt entities from issuing more Federally 
     subsidized tax-exempt bonds than is necessary for the 
     activity being financed or from issuing such bonds earlier 
     than needed for the purpose of the borrowing, the Code 
     includes arbitrage restrictions limiting the ability to 
     profit from investment of tax-exempt bond proceeds. In 
     general, arbitrage profits may be earned only during 
     specified periods (e.g., defined ``temporary periods'' before 
     funds are needed for the purpose of the borrowing) or on 
     specified types of investments (e.g. ``reasonably required 
     reserve or replacement funds''). Subject to limited 
     exceptions, profits that are earned during these periods or 
     on such investments must be rebated to the Federal 
     Government. Governmental bonds are subject to less 
     restrictive arbitrage rules than most private activity bonds.
       Miscellaneous additional restrictions on tax-exempt bonds
       Several additional restrictions apply to the issuance of 
     tax-exempt bonds. First, private activity bonds (other than 
     qualified 501(c)(3) bonds) may not be advance refunded. 
     Governmental bonds and qualified 501(c)(3) bonds may be 
     advance refunded one time. An advance refunding occurs when 
     the refunded bonds are not retired within 90 days of issuance 
     of the refunding bonds.
       Issuance of private activity bonds is subject to 
     restrictions on use of proceeds for the acquisition of land 
     and existing property, use of proceeds to finance certain 
     specified facilities, (e.g., airplanes, skyboxes, other 
     luxury boxes, health club facilities, gambling facilities, 
     and liquor stores) and use of proceeds to pay costs of 
     issuance (e.g., bond counsel and underwriter fees). 
     Additionally, the term of the bonds generally may not exceed 
     120 percent of the economic life of the property being 
     financed and certain public approval requirements (similar 
     to requirements that typically apply under State law to 
     issuance of governmental debt) apply under Federal law to 
     issuance of private activity bonds. Present law precludes 
     substantial users of property financed with private 
     activity bonds from owning the bonds to prevent their 
     deducting tax-exempt interest paid to themselves. Finally, 
     owners of most private-activity-bond-financed property are 
     subject to special ``change-in-use'' penalties if the use 
     of the bond-financed property changes to a use that is not 
     eligible for tax-exempt financing while the bonds are 
     outstanding.

                        Explanation of Provision

       The provision authorizes issuance of $15 billion of tax-
     exempt private activity bonds to finance the construction and 
     rehabilitation of commercial and residential rental real 
     property in a newly designated Liberty Zone (``Zone'') of New 
     York City. Property eligible for financing with these bonds 
     includes buildings and their structural components, fixed 
     tenant improvements, and public utility property (e.g., gas, 
     water, electric and telecommunication lines), all as 
     designated by the Governor of New York. Bonds authorized 
     under the provision for the Zone may be issued during the 
     period January 1, 2002 through December 31, 2004. The Zone is 
     defined as the area located on or south of Canal Street, East 
     Broadway (east of its intersection with Canal Street), or 
     Grand Street (east of its intersection with East Broadway) in 
     the Borough of Manhattan.
       If the Governor determines that it is not feasible to use 
     all of the authorized bond proceeds for property located in 
     the Zone, up to $7 billion of bond proceeds may be used for 
     the construction and rehabilitation of nonresidential real 
     property (including fixed tenant improvements) located 
     outside the Zone and within New York City. Bond-financed 
     property located outside the Zone is required to meet the 
     additional requirement that the project have at least 100,000 
     square feet of usable office or other commercial space in a 
     single building or multiple adjacent buildings.
       Subject to the following exceptions and modifications, 
     issuance of these tax-exempt

[[Page H10136]]

     bonds is subject to the general rules applicable to issuance 
     of exempt-facility private activity bonds: (1) Issuance of 
     the bonds is not subject to the aggregate annual State 
     private activity bond volume limits (sec. 146); (2) the 
     restriction on use of private activity bond proceeds to 
     finance land acquisition is determined by reference to the 
     $15 billion amount of bonds authorized under the provision 
     rather than by reference to individual bond issues (sec. 
     147(c)); (3) the restriction on acquisition of existing 
     property is applied using a minimum requirement of 50 percent 
     of the cost of acquiring the building being devoted to 
     rehabilitation (sec. 147(d)); (4) the special arbitrage 
     expenditure rules for certain construction bond proceeds 
     apply to construction proceeds of the bonds (sec. 
     148(f)(4)(C)); (5) loan repayments may not be used to 
     originate new loans; (6) interest on the bonds is not a 
     preference item for purposes of the alternative minimum tax 
     preference for private activity bond interest (sec. 
     57(a)(5)); and (7) property located within the Zone that is 
     financed with proceeds of these bonds (but not such property 
     that is located outside the Zone) is not considered tax-
     exempt bond financed property to the extent of such financing 
     and is eligible for cost recovery deductions computed under 
     the general MACRS system and the bonus depreciation provided 
     under the provision (to the extent that the property 
     otherwise qualifies for these benefits).

                             Effective Date

       The provision is effective for bonds issued during the 
     period January 1, 2002 through December 31, 2004.
       5. Extension of replacement period for certain property 
           involuntarily converted in the New York Liberty Zone 
           (sec. 301(e) of the bill and new sec. 1400L of the 
           Code)

                              Present Law

       A taxpayer may elect not to recognize gain with respect to 
     property that is involuntarily converted if the taxpayer 
     acquires within an applicable period (the ``replacement 
     period'') property similar or related in service or use (sec. 
     1033). If the taxpayer does not replace the converted 
     property with property similar or related in service or use, 
     then gain generally is recognized. If the taxpayer elects to 
     apply the rules of section 1033, gain on the converted 
     property is recognized only to the extent that the amount 
     realized on the conversion exceeds the cost of the 
     replacement property. In general, the replacement period 
     begins with the date of the disposition of the converted 
     property and ends two years after the close of the first 
     taxable year in which any part of the gain upon conversion is 
     realized. The replacement period is extended to three years 
     if the converted property is real property held for the 
     productive use in a trade business or for investment.
       Special rules apply for property converted in a 
     Presidentially declared disaster. With respect to a principal 
     residence that is converted in a Presidentially declared 
     disaster, no gain is recognized by reason of the receipt of 
     insurance proceeds for unscheduled personal property that was 
     part of the contents of such residence. In addition, the 
     replacement period for the replacement of such a principal 
     residence is extended to four years after the close of the 
     first taxable year in which any part of the gain upon 
     conversion is realized. With respect to investment or 
     business property that is converted in a Presidentially 
     declared disaster, any tangible property acquired and held 
     for productive use in a business is treated as similar or 
     related in service or use to the converted property.

                        Explanation of Provision

       The provision extends the replacement period to five years 
     for a taxpayer to purchase property to replace property that 
     was involuntarily converted within the New York Liberty Zone 
     as a result of the terrorist attacks that occurred on 
     September 11, 2001. However, the five-year period is 
     available but only if substantially all of the use of the 
     replacement property is in New York City. In all other cases, 
     the present-law replacement period rules continue to apply.

                             Effective Date

       The provision is effective for property in the New York 
     Liberty Zone involuntarily converted as a result of the 
     terrorist attacks occurring on September 11, 2001.


  D. Disclosure of Tax Information in Terrorism and National Security 
                             Investigations

            (sec. 401 of the bill and sec. 6103 of the Code)

                              Present Law

       In general. Returns and return information are confidential 
     (sec. 6103). A ``return'' is any tax return, information 
     return, declaration of estimated tax, or claim for refund 
     filed under the Code on behalf of or with respect to any 
     person. The term return also includes any amendment or 
     supplement, including supporting schedules, attachments, or 
     lists, which are supplemental to or are part of a filed 
     return. Return information is defined broadly. It includes 
     the following information: A taxpayer's identity, the nature, 
     source or amount of income, payments, receipts, deductions, 
     exemptions, credits, assets, liabilities, net worth, tax 
     liability, tax withheld, deficiencies, overassessments, or 
     tax payments; whether the taxpayer's return was, is being, or 
     will be examined or subject to other investigation or 
     processing; any other data, received by, recorded by, 
     prepared by, furnished to, or collected by the Secretary with 
     respect to a return or with respect to the determination of 
     the existence, or possible existence, of liability (or the 
     amount thereof) of any person under this title for any tax, 
     penalty, interest, fine, forfeiture, or other imposition, or 
     offense; any part of any written determination or any 
     background file document relating to such written 
     determination which is not open to public inspection under 
     section 6110; Any advance pricing agreement entered into by a 
     taxpayer and the Secretary and any background information 
     related to the agreement or any application for an advance 
     pricing agreement; and any agreement under section 7121 
     (relating to closing agreements), and any similar agreement, 
     and any background information related to such agreement or 
     request for such agreement (sec. 6103(b)(2)).
       The term ``return information'' does not include data in a 
     form that cannot be associated with or otherwise identify, 
     directly or indirectly, a particular taxpayer. ``Taxpayer 
     return information'' means return information which is filed 
     with,or furnished to, the Internal Revenue Service by or on 
     behalf of the taxpayer to whom such return information 
     relates.
       Section 6103 provides that returns and return information 
     may not be disclosed by the IRS, other Federal employees, 
     State employees, and certain others having access to the 
     information except as provided in the Internal Revenue Code. 
     Section 6103 contains a number of exceptions to this general 
     rule of nondisclosure that authorize disclosure in 
     specially identified circumstances (including nontax 
     criminal investigations) when certain conditions are 
     satisfied.
       Recordkeeping and safeguard requirements also are imposed. 
     These requirements establish a system of records to keep 
     track of disclosure requests and disclosures and to ensure 
     that the information is securely stored and that access to 
     the information is restricted to authorized persons. These 
     conditions and safeguards are intended to ensure that an 
     individual's right to privacy is not unduly compromised and 
     the information is not misused or improperly disclosed. The 
     IRS also must submit reports to the Joint Committee on 
     Taxation and to the public regarding requests for and 
     disclosures made of returns and return information 90 days 
     after the close of the calendar year (sec. 6103(p)(3)). 
     Criminal and civil sanctions apply to the unauthorized 
     disclosure or inspection of returns and return information 
     (secs. 7213, 7213A, and 7431).
     Disclosure of returns and return information for use in 
         nontax criminal investgations--by ex parte court order
       A Federal agency enforcing a nontax criminal law must 
     obtain an ex parte court order to receive a return or 
     taxpayer return information (i.e., that information submitted 
     by or on behalf of a taxpayer to the IRS) (sec. 6103(i)(1)). 
     Only the Attorney General, Deputy Attorney General, Assistant 
     Attorney Generals, United States Attorneys, Independent 
     Counsels, or an attorney in charge of an organized crime 
     strike force may authorize an application for the order.
       For a judge or magistrate to grant such an order, the 
     application must demonstrate that: There is reasonable cause 
     to believe, based upon information believed to be reliable, 
     that a specific criminal act has been committed; there is 
     reasonable cause to believe that the return or return 
     information is or may be relevant to a matter relating to the 
     commission of such act; the return or return information is 
     sought exclusively for use in a Federal criminal 
     investigation or proceeding concerning such act; and the 
     information sought reasonably cannot be obtained, under the 
     circumstances, from another source.
       Pursuant to the ex parte order, the information may be 
     disclosed to officers and employees of the Federal agency who 
     are personally and directly engaged in (1) the preparation 
     for any judicial or administrative proceeding pertaining to 
     the enforcement of a specifically designated Federal criminal 
     statute (not involving tax administration) to which the 
     United States or such agency is a party, (2) any 
     investigation which may result in such a proceeding, or (3) 
     any Federal grand jury proceeding pertaining to enforcement 
     of such a criminal statute to which the United States or such 
     agency is or may be a party.
       A Federal agency may obtain, by ex parte court order, the 
     return and return information of a fugitive from justice for 
     purposes of locating such individual (sec. 6103(i)(5)). The 
     application for an ex parte order must establish that (1) a 
     Federal felony arrest warrant has been issued and taxpayer is 
     a fugitive from justice, (2) the return or return information 
     is sought exclusively for locating the fugitive taxpayer, and 
     (3) reasonable cause exists to believe the information may be 
     relevant in determining the location of the fugitive. Only 
     the Attorney General, Deputy Attorney General, Assistant 
     Attorney Generals, United States Attorneys, Independent 
     Counsels, or an attorney in charge of an organized crime 
     strike force may authorize an application for this order. 
     Once a court grants the application for an ex parte order, 
     the return or return information may be disclosed to any 
     Federal agency exclusively for purposes of locating the 
     fugitive individual.
     Agency request procedure for disclosure of return information 
         other than taxpayer return information to the IRS for use 
         in criminal investigations
       For nontax criminal investigations, Federal agencies can 
     obtain return information, other than taxpayer return 
     information,

[[Page H10137]]

     without a court order. For nontax criminal purposes, the head 
     of a Federal agency and other persons specifically identified 
     by section 6103 may make a written request for return 
     information that was not provided to the IRS by the taxpayer 
     or his representative (sec. 6103(i)(2)). The written request 
     must contain: The taxpayer's name, and address; the taxable 
     period for which the information is sought; the statutory 
     authority under which the criminal investigation or judicial, 
     administrative or grand jury proceeding is being conducted; 
     and the reasons why such disclosure is or may be relevant to 
     the investigation or proceeding. Unlike the requirements for 
     an ex parte order, the requesting agency does not have to 
     demonstrate that the information sought is not reasonably 
     available elsewhere.
     Disclosure of return information to apprise appropriate 
         officials of criminal activities or emergency 
         circumstances
       Criminal activities
       Section 6103 permits the IRS to disclose return information 
     (other than taxpayer return information) that may be evidence 
     of a crime (sec. 6103(i)(3)(A)). The IRS may make the 
     disclosure in writing to the head of a Federal agency charged 
     with enforcing the laws to which the crime relates. Return 
     information also may be disclosed to apprise Federal law 
     enforcement of the imminent flight of any individual from 
     Federal prosecution. The IRS may not disclose returns under 
     this provision.
       Emergency circumstances
       In cases of imminent danger of death or physical injury to 
     an individual, the IRS may disclose return information to 
     Federal and State law enforcement agencies (sec. 
     6103(i)(3)(B)). The statute does not grant authority, 
     however, to disclose return information to local 
     law enforcement, such as city, county, or town police. The 
     statute does not permit the IRS to disclose return 
     information concerning terrorist activities if there is no 
     imminent danger of death or physical injury to an 
     individual.
       Tax convention information. With limited exceptions, the 
     Code prohibits the disclosure of tax convention information 
     (sec. 6105). A tax convention is any: (1) income tax or gift 
     and estate tax convention, or (2) other convention or 
     bilateral agreement (including multilateral conventions and 
     agreements and any agreement with a possession of the United 
     States) providing for the avoidance of double taxation, the 
     prevention of fiscal evasion, nondiscrimination with respect 
     to taxes, the exchange of tax relevant information with the 
     United States, or mutual assistance in tax matters. Tax 
     convention information is any: (1) agreement entered into 
     with the competent authority of one or more foreign 
     governments pursuant to a tax convention; (2) application for 
     relief under a tax convention; (3) background information 
     related to such agreement or application; (4) document 
     implementing such agreement; and (5) other information 
     exchanged pursuant to a tax convention which is treated as 
     confidential or secret under the tax convention.
       The general rule that tax convention information cannot be 
     disclosed does not apply to the disclosure of tax convention 
     information to persons or authorities (including courts and 
     administrative bodies) that are entitled to disclosure under 
     the tax convention and any generally applicable procedural 
     rules regarding applications for relief under a tax 
     convention. It also does not apply to the disclosure of tax 
     convention information not relating to a particular taxpayer 
     if the IRS determines, after consultation with the parties to 
     the tax convention, that such disclosure would not impair tax 
     administration.

                        Explanation of Provision

       In general. The bill expands the availability of returns 
     and return information for purposes of investigating 
     terrorist incidents, threats, or activities, and for 
     analyzing intelligence concerning terrorist incidents, 
     threats, or activities. In general, under the bill, returns 
     and taxpayer return information must be obtained pursuant to 
     an ex parte court order. Return information, other than 
     taxpayer return information, generally is available upon a 
     written request meeting specific requirements. Present-law 
     safeguards, recordkeeping, reporting requirements, and civil 
     and criminal penalties for unauthorized disclosures apply to 
     disclosures made pursuant to the bill. The bill also permits 
     the disclosure of tax convention information for the same 
     purposes and in the same manner that return information is 
     made available under the bill. No disclosures may be made 
     under the bill after December 31, 2003.
     Disclosure of returns and return information taxpayer return 
         information--by ex parte court order
       Ex parte court orders sought by Federal law enforcement and 
     Federal intelligence agencies.--The bill permits, pursuant to 
     an ex parte court order, the disclosure of returns and return 
     information (including taxpayer return information) to 
     certain officers and employees of a Federal law enforcement 
     agency or Federal intelligence agency. These officers and 
     employees are required to be personally and directly 
     engaged in any investigation of, response to, or analysis 
     of intelligence and counterintelligence information 
     concerning any terrorist incident, threat, or activity. 
     These officers and employees are permitted to use this 
     information solely for their use in the investigation, 
     response, or analysis, and in any judicial, 
     administrative, or grand jury proceeding, pertaining to 
     any such terrorist incident, threat, or activity.
       The Attorney General, Deputy Attorney General, Associate 
     Attorney General, an Assistant Attorney General, or a United 
     States attorney, may authorize the application for the ex 
     parte court order to be submitted to a Federal district court 
     judge or magistrate. The Federal district court judge or 
     magistrate would grant the order if based on the facts 
     submitted he or she determines that: There is reasonable 
     cause to believe, based upon information believed to be 
     reliable, that the return or return information may be 
     relevant to a matter relating to such terrorist incident, 
     threat, or activity; and the return or return information is 
     sought exclusively for the use in a Federal investigation, 
     analysis, or proceeding concerning any terrorist incident, 
     threat, or activity.
       Special rule for ex parte court ordered disclosure 
     initiated by the IRS.--If the Secretary of Treasury possesses 
     returns or return information that may be related to a 
     terrorist incident, threat or activity, the Secretary of the 
     Treasury (or his delegate), may on his own initiative, 
     authorize an application for an ex parte court order to 
     permit disclosure to Federal law enforcement. In order to 
     grant the order, the Federal district court judge or 
     magistrate must determine that there is reasonable cause to 
     believe, based upon information believed to be reliable, that 
     the return or return information may be relevant to a matter 
     relating to such terrorist incident, threat, or activity. 
     Under the bill, the information may be disclosed only to the 
     extent necessary to apprise the appropriate federal law 
     enforcement agency responsible for investigating or 
     responding to a terrorist incident, threat, or activity and 
     for officers and employees of that agency to investigate or 
     respond to such terrorist incident, threat, or activity. 
     Further, use of the information is limited to use in a 
     Federal investigation, analysis, or proceeding concerning a 
     terrorist incident, threat, or activity. Because the 
     Department of Justice represents the Secretary of the 
     Treasury in Federal district court, the Secretary is 
     permitted to disclose returns and return information to the 
     Department of Justice as necessary and solely for the purpose 
     of obtaining the special IRS ex parte court order.
     Disclosure of return information other than taxpayer return 
         information
       Disclosure by the IRS without a request.--The bill permits 
     the IRS to disclose return information, other than taxpayer 
     return information, related to a terrorist incident, threat, 
     or activity to the extent necessary to apprise the head of 
     the appropriate Federal law enforcement agency responsible 
     for investigating or responding to such terrorist incident, 
     threat or activity. As under present law Code section 
     6103(i)(3)(A), the IRS on its own initiative and without a 
     written request may make this disclosure. The head of the 
     Federal law enforcement agency may disclose information to 
     officers and employees of such agency to the extent necessary 
     to investigate or respond to such terrorist incident, threat, 
     or activity. A taxpayer's identity is not treated as 
     return information supplied by the taxpayer or his or her 
     representative.
       Disclosure upon written request of a Federal law 
     enforcement agency.--The bill permits the IRS to disclose 
     return information, other than taxpayer return information, 
     to officers, and employees of Federal law enforcement upon a 
     written request satisfying certain requirements. The request 
     must: (1) be made by the head of the Federal law enforcement 
     agency (or his delegate) involved in the response to or 
     investigation of terrorist incidents, threats, or activities, 
     and (2) set forth the specific reason or reasons why such 
     disclosure may be relevant to a terrorist incident, threat, 
     or activity. The information is to be disclosed to officers 
     and employees of the Federal law enforcement agency who would 
     be personally and directly involved in the response to or 
     investigation of terrorist incidents, threats, or activities. 
     The information is to be used by such officers and employees 
     solely for such response or investigation.
       The bill permits the redisclosure by a Federal law 
     enforcement agency to officers and employees of State and 
     local law enforcement personally and directly engaged in the 
     response to or investigation of the terrorist incident, 
     threat, or activity. The State or local law enforcement 
     agency must be part of an investigative or response team with 
     the Federal law enforcement agency for these disclosures to 
     be made.
       Disclosure upon request from the Departments of Justice or 
     Treasury for intelligence analysis of terrorist activity.--
     Upon written request satisfying certain requirements 
     discussed below, the IRS is to disclose return information 
     (other than taxpayer return information) to officers and 
     employees of the Department of Justice, Department of 
     Treasury, and other Federal intelligence agencies, who are 
     personally and directly engaged in the collection or analysis 
     of intelligence and counterintelligence or investigation 
     concerning terrorist incidents, threats, or activities. Use 
     of the information is limited to use by such officers and 
     employees in such investigation, collection, or analysis.
       The written request is to set forth the specific reasons 
     why the information to be disclosed is relevant to a 
     terrorist incident, threat, or activity. The request is to be 
     made by an individual who is (1) an officer or employee of 
     the Department of Justice or the

[[Page H10138]]

     Department of Treasury, (2) appointed by the President with 
     the advice and consent of the Senate, and (3) responsible for 
     the collection, and analysis of intelligence and 
     counterintelligence information concerning terrorist 
     incidents, threats, or activities. The Director of the United 
     States Secret Service also is an authorized requester under 
     the bill.
       Tax convention information. The bill permits the disclosure 
     of tax convention information on the same terms as return 
     information may be disclosed under the bill, except that in 
     the case of tax convention information provided by a foreign 
     government, no disclosure may be made under this paragraph 
     without the written consent of the foreign government.
       Definitions. The term ``terrorist incident threat, or 
     activity'' is statutorily defined to mean an incident, 
     threat, or activity involving an act of domestic terrorism or 
     international terrorism, as both of those terms were defined 
     in the recently enacted USA PATRIOT Act.

                             Effective Date

       The provision is effective for disclosures made on or after 
     the date of enactment.


   E. No Impact on Social Security Trust Funds (sec. 501 of the bill)

                              Present Law

       Present law provides for the transfer of Social Security 
     taxes and certain self-employment taxes to the Social 
     Security trust fund. In addition, the income tax collected 
     with respect to a portion of Social Security benefits 
     included in gross income is transferred to the Social 
     Security trust fund.

                         Explanation Provision

       The bill provides that the Secretary is to annually 
     estimate the impact of the bill on the income and balances of 
     the Social Security trust fund. If the Secretary determines 
     that the bill has a negative impact on the income and 
     balances of the fund, then the Secretary is to transfer from 
     the general revenues of the Federal government an amount 
     sufficient so as to ensure that the income and balances of 
     the Social Security trust funds are not reduced as a result 
     of the bill. Such transfers are to be made not less 
     frequently than quarterly.
       The bill provides that the provisions of the bill are not 
     to be construed as an amendment of title II of the Social 
     Security Act.

                             Effective Date

       The provision is effective on the date of enactment.

  Mr. Speaker, I yield 2 minutes to the gentleman from New Jersey (Mr. 
Frelinghuysen).
  (Mr. FRELINGHUYSEN asked and was given permission to revise and 
extend his remarks.)
  Mr. FRELINGHUYSEN. Mr. Speaker, I rise in support of the bill.
  Mr. Speaker, I met with many of the families of the victims of 
September 11. I have attended funeral masses and funerals, and I have 
met personally, as other Members have from our area, with some of the 
widows of the victims of these attacks when they visited Capitol Hill 
on December 5. They need our help and they need it now. Many are from 
home towns in my district and throughout the State of New Jersey and 
New York and Connecticut and Virginia and Pennsylvania.
  As one of the widows recently recounted to me, the charities have 
helped with the immediate aftermath, but this tax relief bill will help 
some of their present concerns, and the victims' compensation fund will 
help them as they move forward into the future.
  While we can never replace their loss, we can help alleviate some of 
the pain for these victims as they think about their immediate and 
future financial needs, and about how they will provide for their 
families in the coming years. We do so with this bill.
  In this bill, we waive income tax liability for 2 years for the 
victims. We provide relief from the State tax, and make sure that 
charitable relief and other forms of financial assistance remain tax-
free.
  On behalf of the victims from New Jersey and the other States, Mr. 
Speaker, I want to thank the Speaker, the gentleman from Illinois (Mr. 
Hastert), the majority leader, and particular, the chairman of the 
Committee on Ways and Means, for bringing up this bill expeditiously.
  Our hearts go out to these families, and I want to thank my 
congressional colleagues for moving on this bill.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1 minute to the 
gentleman from New York (Mr. Reynolds), a member of the New York 
delegation.
  Mr. REYNOLDS. Mr. Speaker, I thank the gentleman for yielding time to 
me, and I want to thank him for his leadership in moving this 
legislation before we end this week's work, with the hope of continuing 
and getting a resolve before we end the session.
  I thank him for his leadership, along with that of our ranking 
member, the gentleman from New York (Mr. Rangel), and particularly the 
gentleman from New York (Mr. Fossella), who has worked diligently, as 
well as the New York City representative helping our conference 
understand clearly some of the agenda needed.
  Then also we must turn to the gentleman from New York (Mr. Houghton), 
who has the very, very important ingredient of his expertise so he was 
able to work with the gentleman from California (Mr. Thomas) in helping 
him in this legislation. That comes from listening to our Governor and 
mayor on the agendas of what it is going to take to rebuild tens of 
millions of lost square footage of space in those 15 blocks of lower 
Manhattan, let alone the countless loss of jobs that have occurred in 
that tragedy.
  Mr. Speaker, this is part of a working, fundamental solution to bring 
that to fruition. I salute all for bringing it to the floor today.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from New Jersey (Mr. Ferguson).
  (Mr. FERGUSON asked and was given permission to revise and extend his 
remarks.)
  Mr. FERGUSON. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I want to thank the chairman of the Committee on Ways 
and Means, the ranking member, and members on both sides of the aisle 
for working on this important legislation.
  On September 11, our Nation and the world was struck with tragedy. 
But for 81 families in the district that I represent in New Jersey, it 
also meant the loss of a loved one in their own family. They have been 
struggling for 3 months to put their lives back together. People, 
Americans across the Nation and people around the world have stepped up 
to help them in many different ways: People have donated their time, 
their energy, their blood, their money. They have been assisted in many 
ways.
  But as we know, as time goes on, the attention begins to wane and the 
realities of life, of mortgage payments, of credit card payments, of 
tuition bills and other commitments, long-term real-life commitments, 
begin to build up. We have to make sure that we do not forget those who 
have experienced this tragedy firsthand.
  As my colleague, the gentleman from New Jersey (Mr. Frelinghuysen) 
mentioned a moment ago, we have had an opportunity to meet with scores 
of, unfortunately, mostly widows from our districts, from New Jersey 
and from around our region, who are now dealing with the aftermath. 
They are not only dealing with the emotional and the physical 
excruciating pain of the loss of a loved one, but they are also 
struggling to rebuild their lives, to help their kids to think about 
the future and not simply to think about these tragedies of the recent 
past.
  We need to do our part in this Congress, and that is why I am 
delighted and proud that we worked so hard and so quickly 2 days after 
this tragedy to pass this important legislation out of this Chamber and 
to send it to the other body, and am pleased now that the other body 
has done their work and that we have brought this back.
  I am pleased that now, today, we will be able to say to these 
families that we have not failed them, we continue to stand by them, 
and we will be here with them today and tomorrow and next month and 
next year to help them. Whether it is tax relief or education relief or 
simply being a friend and neighbor, we are there to support them and 
support their work in rebuilding their lives. I thank this Congress for 
working.
  Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from New 
York (Mr. Nadler), in whose district the Twin Towers once stood high.
  Mr. NADLER. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, lower Manhattan, as we all know, is devastated by the 
attacks on the World Trade Center. Over 20 million square feet of 
office was destroyed and another 15 million rendered unusable, and 
125,000 jobs out of the 300,000 private sector jobs in lower Manhattan 
were destroyed. It will take a strong private-public partnership to

[[Page H10139]]

revive lower Manhattan economically. A package of tax incentives, 
intelligently arranged, would stimulate private investment in the area.
  The Houghton bill and the proposals by Senator Schumer and Clinton, 
with the gentleman from New York (Mr. Rangel), should be seen in 
tandem.
  The Houghton bill is important and constructive for the long-term 
economic strength of New York, but does little, if anything, for our 
immediate critical needs. The Schumer-Clinton-Rangel package contains 
measures that are vital for the immediate survival of small businesses 
in lower Manhattan.

                              {time}  1530

  The Houghton package represents an important element of the package. 
We need to nurse lower Manhattan back to health, but before businesses 
will return to lower Manhattan, we must rebuild the neighborhood's 
infrastructure in utilities and transportation. We must rebuild power 
lines, phone systems, sewers and water mains. We have to restore public 
transportation. This will take time. Utility facilities are so badly 
damaged that now cables guarded by police over land are the only 
facilities bringing power to downtown. We are literally one snowplow 
away from a blackout in lower Manhattan.
  Small businesses are in critical shape and need an immediate boost. 
The Houghton boost will not help the small businesses survive the 
transitional period until the neighborhood is rebuilt and their sales 
recover. We must ease the period of transition until larger businesses 
return to the area.
  Small businesses in lower Manhattan will lose an estimated $5 billion 
in sales in the last quarter of 2001 alone. Many have seen their sales 
decline by up to 80 percent because of disruption and damage to the 
area. Mr. Speaker, 10,000 of the 14,000 small businesses in lower 
Manhattan are at risk of failure within the next several months as a 
direct result of the attack. If we do not give them help to enable them 
to survive, the longer-term proposals in the Houghton bill will come 
too late to revive lower Manhattan, because if 10,000 small businesses 
fail in lower Manhattan, the larger businesses will not want to return 
and residents will not want to return.
  The elements of the Houghton bill are excellent and important for our 
long-term needs, but must be supplemented by the provisions for short-
term aid, especially long-term grants, especially business grants to 
our small businesses and the other elements of the Rangel-Clinton-
Schumer package. That package could provide immediate assistance for 
these businesses through expansion of the work opportunity tax credit. 
The work opportunity tax credit expansion and the cash grants are the 
two things we need immediately.
  So I urge the House to adopt the Houghton bill, but to be under no 
illusion that the Houghton bill, absent the work opportunity tax credit 
of the Rangel bill and absent large and immediate infusion of cash 
grants to small businesses, will save the situation.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from New York (Mr. Gilman).
  (Mr. GILMAN asked and was given permission to revise and extend his 
remarks.)
  Mr. GILMAN. Mr. Speaker, I rise in strong support of H.R. 3373, the 
New York Liberty Zone Tax Relief Act of 2000. I urge my colleagues to 
join in supporting this vitally needed legislation which provides a 
number of tax provisions that are designed to help the city and State 
of New York to recover economically from the devastating barbaric 
attack of September 11, and I commend my colleagues, the gentleman from 
California (Mr. Thomas), the gentleman from New York (Mr. Rangel) and 
the gentleman from New York (Mr. Houghton) for their diligent work on 
this measure.
  New York City, and particularly lower Manhattan, was devastated by 
the terrorist attacks of September 11. Over 25 million square feet of 
office space has been destroyed, 15,000 jobs have been displaced in 
lower Manhattan, representing 2 percent of all the private sector jobs 
in New York City. Not only do we need to rebuild the economy in lower 
Manhattan, we also need to rebuild its infrastructure, power lines, 
water mains, public transportation and sewer lines.
  Small businesses in lower Manhattan are fighting for their very 
survival.
  This bill includes five key provisions which create some liberty 
zones, encouraging investment and includes issuing tax exempt liberty 
bonds to finance liberty zone commercial, residential rental and public 
utility property.
  It also includes allowance of a first year 30 percent depreciation 
and a 5-year recovery period for leasehold improvements and a small 
business first year depreciation of $35,000.
  This victim tax relief bill also increases the replacement period for 
reinvesting insurance proceeds.
  Mr. Speaker, I am pleased to stand with my New York colleagues in 
supporting this legislation which will help rebuild a key portion of 
the economy of New York City and help our State. Accordingly, I urge my 
colleagues to join in passing this very urgently needed bill.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from New Jersey (Mr. Smith).
  Mr. SMITH of New Jersey. Mr. Speaker, I thank the gentleman from 
California (Mr. Thomas) for yielding me the time. I thank him also for 
staying, true to his word. He said he would have this bill on the floor 
in three days. Actually, he had the bill on the floor just a few days 
after the horrific event of 9/11. We want to thank him, all of us from 
New Jersey, for bringing this very important legislation back to the 
floor with the Senate changes.
  Passage of this bill, Mr. Speaker, will provide immediate and 
substantial tax rebates to the spouses and children of nearly 3,500 
victims who met tragic deaths in the horrific attacks on September 11.
  Seven hundred New Jersey residents, more than 50 from my own 
District, never came home on September 11. They were the first victims 
and the first heroes of America's war on terrorism.
  There are additional heroes, Mr. Speaker, namely, the wives, the 
widows of those who were murdered on September 11. Over the last 
several weeks, both my wife, Marie, and I and members of my staff have 
met many of the widows, and we have been moved greatly by their loss as 
well as by their courage. Last week, my wife and I, as well as other 
members of the New Jersey delegation, joined with several of those 
widows from our State in a meeting with Speaker Hastert, and he, too, 
was moved by what they had to say.
  These brave women courageously reminded Congress of the heartbreaking 
burdens that they have faced since the shock of 9/11. They made it very 
clear that this tax relief is a matter of survival to them. Much of the 
money has run out that they had saved personally. For many of them, the 
assistance they got from charitable contributions ran out on December 
1. The Victims Compensation Fund has not kicked in yet. There had to be 
something to provide very real money a bridge for these individuals.
  The Victims Tax Relief Bill will help to do that.
  Among the more moving remarks, and there were many that we have heard 
over the last several months, were the comments of Sheila Martello, who 
lost her husband Jim in the World Trade Center. Last week Mrs. Martello 
said ``we do not want to be here in Washington fighting for this 
benefit. We would rather be doing what we do best, raising our 
children.''
  Again, I want to thank the chairman for his leadership on this. I 
thank the Speaker for his personal commitment. Both Mr. Thomas and 
Speaker Hastert moved very quickly right after this tragedy, along with 
the gentleman from New York (Mr. Rangel). This is a good, bipartisan 
bill and will help these people through this very, very difficult time. 
It could not come at a more important time for them.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from New York (Mr. Grucci), actually Long Island.
  (Mr. GRUCCI asked and was given permission to revise and extend his 
remarks.)
  Mr. GRUCCI. Mr. Speaker, I would like to thank the distinguished 
gentleman from California (Mr. Thomas), chairman of the Committee on 
Ways and Means, and the gentleman from New York (Mr. Rangel), the 
ranking member, for their commitment and their work on this program to 
help restore economic viability to New York

[[Page H10140]]

and to our country as a whole. I think this bill, the Houghton bill, is 
an excellent tool to accomplish that.
  When we look back at the tragedy that has happened, nothing can ever 
replace the loss of life and the ache in the people's hearts that are 
experiencing that loss of life. In my district alone, I went to a 
number of various funerals and memorial services for where there was no 
funeral able to be given.
  And you can see, the pain in the hearts and in the face of people, 
the children, the surviving spouses, the friends, the neighbors, and 
they will always have that pain.
  There is a secondary pain that is out there, Mr. Speaker. There is a 
pain that is being experienced by many who worked all of their life to 
try to build a business, to try to create something for their family, 
for their children, to allow them to have something for future 
generations, and that was wiped out on September 11, gone completely. 
Devastation has set in and the only way to help them restore that kind 
of dream once again, the dream to be a small business entrepreneur in 
this country, which is something that people come here for.
  I know my family, my family had migrated to this country for that 
very purpose, to raise their children, to raise a business and to have 
something. Well, this bill will put $6.1 billion into our economy and 
it will enable people to do that. It will give them their hopes and 
their dreams back and it will enable them to build the more than 25 
million square feet of space that was lost, spaces like delicatessens 
and boutiques and haberdasheries, and, yes, the major conglomerates and 
businesses of our country where hundreds of thousands people were 
employed.
  This bill is a good bill. It is a bipartisan bill, and I urge my 
colleagues in this House to support it and to help America get back on 
their feet and help New York get back on its feet.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York (Mr. Sweeney) who, without his involvement and active 
participation in structuring work with the governmental officials in 
New York, we would not have been able to move with the haste with which 
we did.
  (Mr. SWEENEY asked and was given permission to revise and extend his 
remarks.)
  Mr. SWEENEY. Mr. Speaker, I am proud and happy to be here on the 
floor today.
  On September 11 all of America suffered losses. Some of us suffered 
more direct losses. And certainly in the last 3 months it has been an 
extreme struggle trying to figure out the right process, the right way 
to help make New Yorkers and the victims of those attacks whole again.
  I want to salute the ranking member, the gentleman from New York (Mr. 
Rangel) for working hard in a bipartisan fashion on this. I want to 
especially salute the gentleman from New York (Mr. Houghton) from the 
Committee on Ways and Means, a fellow New Yorker and a colleague who 
has dedicated every ounce of energy he has had to this effort and to 
this particular bill.
  I especially want to recognize the chairman of the Committee on Ways 
and Means who made commitments repeatedly the day after the attacks and 
repeatedly throughout this that he was going to work with us in New 
York to get this done. He has worked diligently. He has done it at 
breakneck speed getting the bill to the floor in 3 days. I am extremely 
gratified.
  The fact is, Mr. Speaker, the change in New York will be incremental. 
The rebuilding efforts will be incremental. This is an important step 
in the right direction. This is one of the reasons that I have been so 
outspoken from this side of the aisle for the need for us to pay 
attention and keep focused and the gentleman from California (Chairman 
Thomas) kept focus and kept us focused in bringing this bill, and I am 
deeply grateful for that.
  I would urge our friends and colleagues in the other body to move 
their bill. They have had it for 3 months. It is time that we move on 
each of these pieces as expeditiously as we can so we can ensure New 
Yorkers suffer no greater damage than they already have. Indeed, the 
rebuilding efforts are going to take time but the commitment and the 
moral obligation on the part of this body and this Congress is going to 
be longstanding and must be abided by.
  I support this bill. I will urge my colleagues to support it, and 
once again I thank the chairman for his support.
  The SPEAKER pro tempore (Mr. Thornberry). The gentleman from 
California (Mr. Thomas) has 1 minute remaining. The gentleman from New 
York (Mr. Rangel) has 16 minutes remaining.
  Mr. RANGEL. Mr. Speaker, I want to join with my colleagues from New 
York in supporting the concept of this bill and especially the 
gentleman from New York (Mr. Houghton) who has been really a great 
pleasure working with over the years and especially as relates to 
restoring life, both economic life to our great city and our great 
State.
  We do not know whether this is going to come back from the other 
side, but we do know that there is other legislation that has not 
passed over there, and working closely with the gentleman from 
California (Mr. Thomas), I do hope that we can bring the best ideas 
that have come out of both Houses and do the best that we can this year 
by the city of New York.
  I would like to say on behalf of delegation once again how grateful 
we are for the groundswell of support that we have received from this 
House of Representatives. If ever we thought that we were not a part of 
the Nation, all over the country and the world stood with us and we are 
deeply appreciative. We have a long way to go. We have had some 
legislative setbacks. But I am confident that as the President moves 
forward to remove this type of risk from other congressional districts, 
other parts of the country, that we would realize more that the 
Americans who lost their lives on September 11 are the same type of 
courageous Americans that lost their lives at Pearl Harbor or at any 
beachhead that we have had in the United States.
  We can never restore the lives to these great people or the heroes 
that went there to save lives at the risk of their own. But we can let 
friend and foe alike know that when you strike one part of our great 
country, you have struck all parts of it. And regardless of our 
backgrounds or party labels, we do come together as a Nation. And in 
that spirit, I hope we move forward with this legislation and join with 
our colleagues on the other side to see what more we can do to repair 
the harm that has been done.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The gentleman from California (Mr. Thomas) 
has 1 minute remaining.
  Mr. THOMAS. Mr. Speaker, Mr. Speaker, I yield myself my remaining 
time.
  Mr. Speaker, I do want to thank my colleague from New York for the 
kind courtesies and generosities that he has displayed and, most 
importantly, the House's willingness to move as quickly as we did and 
recognize that these individuals were, in fact, victims in war and 
deserve to be focussed on, not just in terms of the symbolism because, 
clearly, although there were tragedies elsewhere in the United States 
on that same day, it is not unfair to say that New York City took it on 
the chin for the rest of the country. And that I, too, have been 
pleased with the outpouring of response.
  We now know that those who died did not die in vain in terms of the 
symbolism, the rallying of the moral fiber of this country. But at the 
same time, we have to address the very real physical and material needs 
of these people who, after all, lost loved ones and had lives 
devastated.
  In that regard, I am very pleased to say that this is not the end of 
our continued focus on the need of these individuals in New York City 
and elsewhere.
  Mrs. McCARTHY of New York. Mr. Speaker, I rise in support of H.R. 
2884, the Victims of Terrorism Relief Act, which I am a proud 
cosponsor.
  This legislation provides much needed tax relief to the victims of 
the September 11th terrorist attacks. The terrorist attacks on the 
World Trade Center, the Pentagon, and Pennsylvania directly affected 
25,000 families, and left 15,000 children without a parent. Figures 
show that 35% of those who died were between the ages of 35 and 45, and 
85% were 25-55 years old. Not only did these families lose an important 
part of their lives, but they lost a source of financial support they 
need and deserve.

[[Page H10141]]

  I am overcome by the outpouring of support during this difficult 
time. However, spouses who lost a loved one in the attack are still 
enduring financial hardships. Even though many charitable organizations 
have provided some form of relief, the Federal government must do more. 
Easing their federal tax liability is a step in the right direction.
  In addition, this legislation addresses some of the recovery concerns 
within the New York City area damaged by the terrorist attacks. The 
creation of the New York Liberty Zone provides numerous tax benefits 
for qualified property. In order to rebuild, we must also help those 
businesses that were impacted by the senseless acts of terrorism.
  September 11th will forever be synonymous with other historical 
events that Americans have endured. It will serve as yet another 
reminder of how Americans come together during difficult times, as well 
as send a simple message to those who hide behind terrorism--America 
Will Never Fear You and We Will Always Take Care Of Our Own.
  Mr. THOMAS. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant the order of the House of today, the motion is agreed to.
  A motion to reconsider was laid on the table.

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