[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1836 Enrolled Bill (ENR)]
H.R.1836
One Hundred Seventh Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, two thousand and one
An Act
To provide for reconciliation pursuant to section 104 of the concurrent
resolution on the budget for fiscal year 2002.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

b5df52430f8d1d681f70b2581255f088b3faf3489521bb39f3ec7c6e8edd5fcd

(a) Short Title.--This Act may be cited as the ``Economic Growth
and Tax Relief Reconciliation 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 of this Act is as
follows:

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TITLE II

-TAX BENEFITS RELATING TO CHILDREN

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income to include only amounts includible in gross income;
simplification of earned income credit.
Subtitle A--Education Savings Incentives

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TITLE III

-MARRIAGE PENALTY RELIEF

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TITLE IV

-AFFORDABLE EDUCATION PROVISIONS

limitation on
student loan interest deduction.

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Health Service Corps Scholarship Program and the F. Edward
Hebert Armed Forces Health Professions Scholarship and
Financial Assistance Program.
Subtitle C--Liberalization of Tax-Exempt Financing Rules for Public
School Construction

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governmental bonds used to finance educational facilities.

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exempt facility bonds.
Subtitle D--Other Provisions

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Subtitle A--Repeal of Estate and Generation-Skipping Transfer Taxes

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Subtitle B--Reductions of Estate and Gift Tax Rates

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TITLE V

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

Subtitle C--Increase in Exemption Amounts

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gifts exemption, and GST exemption amounts.
Subtitle D--Credit for State Death Taxes

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taxes.
Subtitle E--Carryover Basis at Death; Other Changes Taking Effect With
Repeal

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December 31, 2009.
Subtitle F--Conservation Easements

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Subtitle G--Modifications of Generation-Skipping Transfer Tax

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Subtitle H--Extension of Time for Payment of Estate Tax

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with interests qualifying lending and finance businesses.

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valuations.
Subtitle A--Individual Retirement Accounts

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TITLE VI

-PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

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plans of State and local governments and tax-exempt
organizations.

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transportation services.
Subtitle C--Enhancing Fairness for Women

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similar workers.
Subtitle D--Increasing Portability for Participants

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457 plans.
Subtitle E--Strengthening Pension Security and Enforcement
Part I--General Provisions

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

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plans significantly reducing future benefit accruals.
Subtitle F--Reducing Regulatory Burdens

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deadlines by reason of Presidentially declared disaster.

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TITLE VIII

-OTHER PROVISIONS

the Nazi
regime or their heirs or estates.

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(a) In General.--Section 1 (relating to tax imposed) is amended by
adding at the end the following new subsection:
``(i) Rate Reductions After 2000.--
``(1) 10-percent rate bracket.--
``(A) In general.--In the case of taxable years beginning
after December 31, 2000--
``(i) the rate of tax under subsections (a), (b), (c),
and (d) on taxable income not over the initial bracket
amount shall be 10 percent, and
``(ii) the 15 percent rate of tax shall apply only to
taxable income over the initial bracket amount but not over
the maximum dollar amount for the 15-percent rate bracket.
``(B) Initial bracket amount.--For purposes of this
paragraph, the initial bracket amount is--
``(i) $14,000 ($12,000 in the case of taxable years
beginning before January 1, 2008) in the case of subsection
(a),
``(ii) $10,000 in the case of subsection (b), and
``(iii) \1/2\ the amount applicable under clause (i)
(after adjustment, if any, under subparagraph (C)) in the
case of subsections (c) and (d).
``(C) Inflation adjustment.--In prescribing the tables
under subsection (f) which apply with respect to taxable years
beginning in calendar years after 2000--
``(i) the Secretary shall make no adjustment to the
initial bracket amount for any taxable year beginning
before January 1, 2009,
``(ii) the cost-of-living adjustment used in making
adjustments to the initial bracket amount for any taxable
year beginning after December 31, 2008, shall be determined
under subsection (f)(3) by substituting `2007' for `1992'
in subparagraph (B) thereof, and
``(iii) such adjustment shall not apply to the amount
referred to in subparagraph (B)(iii).
If any amount after adjustment under the preceding sentence is
not a multiple of $50, such amount shall be rounded to the next
lowest multiple of $50.
``(D) Coordination with acceleration of 10 percent rate
bracket benefit for 2001.--This paragraph shall not apply to
any taxable year to which section 6428 applies.
``(2) Reductions in rates after june 30, 2001.--In the case of
taxable years beginning in a calendar year after 2000, the
corresponding percentage specified for such calendar year in the
following table shall be substituted for the otherwise applicable
tax rate in the tables under subsections (a), (b), (c), (d), and
(e).
------------------------------------------------------------------------
The corresponding percentages
``In the case of      shall be substituted for  the
taxable years           following percentages:
beginning during  -----------------------------------
calendar year:      28%      31%      36%     39.6%
------------------------------------------------------------------------
2001...............   27.5%    30.5%    35.5%    39.1%
2002 and 2003......   27.0%    30.0%    35.0%    38.6%
2004 and 2005......   26.0%    29.0%    34.0%    37.6%
2006 and thereafter   25.0%    28.0%    33.0%    35.0%
------------------------------------------------------------------------
``(3) Adjustment of tables.--The Secretary shall adjust the
tables prescribed under subsection (f) to carry out this
subsection.''.
(b) Acceleration of 10 Percent Rate Bracket Benefit for 2001.--
(1) In general.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds) is amended by adding at the end
the following new section:
``SEC. 6428. ACCELERATION OF 10 PERCENT INCOME TAX RATE BRACKET BENEFIT
FOR 2001.
``(a) In General.--In the case of an eligible individual, there
shall be allowed as a credit against the tax imposed by chapter 1 for
the taxpayer's first taxable year beginning in 2001 an amount equal to
5 percent of so much of the taxpayer's taxable income as does not
exceed the initial bracket amount (as defined in section 1(i)(1)(B)).
``(b) Limitation Based on Amount of Tax.--The credit allowed by
subsection (a) shall not exceed the excess (if any) of--
``(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(2) the sum of the credits allowable under part IV of
subchapter A of chapter 1 (other than the credits allowable under
subpart C thereof, relating to refundable credits).
``(c) Eligible Individual.--For purposes of this section, the term
`eligible individual' means any individual other than--
``(1) any estate or trust,
``(2) any nonresident alien individual, and
``(3) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable year
beginning in the calendar year in which the individual's taxable
year begins.
``(d) Special Rules.--
``(1) Coordination with advance refunds of credit.--
``(A) In general.--The amount of credit which would (but
for this paragraph) be allowable under this section shall be
reduced (but not below zero) by the aggregate refunds and
credits made or allowed to the taxpayer under subsection (e).
Any failure to so reduce the credit shall be treated as arising
out of a mathematical or clerical error and assessed according
to section 6213(b)(1).
``(B) Joint returns.--In the case of a refund or credit
made or allowed under subsection (e) with respect to a joint
return, half of such refund or credit shall be treated as
having been made or allowed to each individual filing such
return.
``(2) Coordination with estimated tax.--The credit under this
section shall be treated for purposes of section 6654(f) in the
same manner as a credit under subpart A of part IV of subchapter A
of chapter 1.
``(e) Advance Refunds of Credit Based on Prior Year Data.--
``(1) In general.--Each individual who was an eligible
individual for such individual's first taxable year beginning in
2000 shall be treated as having made a payment against the tax
imposed by chapter 1 for such first taxable year in an amount equal
to the advance refund amount for such taxable year.
``(2) Advance refund amount.--For purposes of paragraph (1),
the advance refund amount is the amount that would have been
allowed as a credit under this section for such first taxable year
if this section (other than subsection (d) and this subsection) had
applied to such taxable year.
``(3) Timing of payments.--In the case of any overpayment
attributable to this subsection, the Secretary shall, subject to
the provisions of this title, refund or credit such overpayment as
rapidly as possible and, to the extent practicable, before October
1, 2001. No refund or credit shall be made or allowed under this
subsection after December 31, 2001.
``(4) No interest.--No interest shall be allowed on any
overpayment attributable to this subsection.''.
(2) Clerical amendment.--The table of sections for subchapter B
of chapter 65 is amended by adding at the end the following new
item:
``Sec. 6428. Acceleration of 10 percent income tax rate bracket
benefit for 2001.''.
(c) Conforming Amendments.--
(1) Subparagraph (B) of section 1(g)(7) is amended by striking
``15 percent'' in clause (ii)(II) and inserting ``10 percent.''.
(2) Section 1(h) is amended--
(A) by striking ``28 percent'' both places it appears in
paragraphs (1)(A)(ii)(I) and (1)(B)(i) and inserting ``25
percent'', and
(B) by striking paragraph (13).
(3) Section 15 is amended by adding at the end the following
new subsection:
``(f) Rate Reductions Enacted by Economic Growth and Tax Relief
Reconciliation Act of 2001.--This section shall not apply to any change
in rates under subsection (i) of section 1 (relating to rate reductions
after 2000).''.
(4) Section 531 is amended by striking ``equal to'' and all
that follows and inserting ``equal to the product of the highest
rate of tax under section 1(c) and the accumulated taxable
income.''.
(5) Section 541 is amended by striking ``equal to'' and all
that follows and inserting ``equal to the product of the highest
rate of tax under section 1(c) and the undistributed personal
holding company income.''.
(6) Section 3402(p)(1)(B) is amended by striking ``7, 15, 28,
or 31 percent'' and inserting ``7 percent, any percentage
applicable to any of the 3 lowest income brackets in the table
under section 1(c),''.
(7) Section 3402(p)(2) is amended by striking ``15 percent''
and inserting ``10 percent''.
(8) Section 3402(q)(1) is amended by striking ``equal to 28
percent of such payment'' and inserting ``equal to the product of
the third lowest rate of tax applicable under section 1(c) and such
payment''.
(9) Section 3402(r)(3) is amended by striking ``31 percent''
and inserting ``the fourth lowest rate of tax applicable under
section 1(c)''.
(10) Section 3406(a)(1) is amended by striking ``equal to 31
percent of such payment'' and inserting ``equal to the product of
the fourth lowest rate of tax applicable under section 1(c) and
such payment''.
(11) Section 13273 of the Revenue Reconciliation Act of 1993 is
amended by striking ``28 percent'' and inserting ``the third lowest
rate of tax applicable under section 1(c) of the Internal Revenue
Code of 1986''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Amendments to withholding provisions.--The amendments made
by paragraphs (6), (7), (8), (9), (10), and (11) of subsection (c)
shall apply to amounts paid after the 60th day after the date of
the enactment of this Act. References to income brackets and rates
of tax in such paragraphs shall be applied without regard to
section 1(i)(1)(D) of the Internal Revenue Code of 1986.

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TITLE I

-INDIVIDUAL INCOME TAX RATE REDUCTIONS

(a) In General.--Paragraph (3) of section 151(d) (relating to
exemption amount) is amended by adding at the end the following new
subparagraphs:
``(E) Reduction of phaseout.--
``(i) In general.--In the case of taxable years
beginning after December 31, 2005, and before January 1,
2010, the reduction under subparagraph (A) shall be equal
to the applicable fraction of the amount which would (but
for this subparagraph) be the amount of such reduction.
``(ii) Applicable fraction.--For purposes of clause
(i), the applicable fraction shall be determined in
accordance with the following table:
``For taxable years beginning
The applicable
in calendar year--
fraction is--
2006 and 2007.....................................
\2/3\
2008 and 2009.....................................
\1/3\.
``(F) Termination.--This paragraph shall not apply to any
taxable year beginning after December 31, 2009.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2005.

58f4990ef1f9fd2b341c1e67ff30b273d65401f9858e1a158d6a2821944be707

(a) In General.--Section 68 is amended by adding at the end the
following new subsections:
``(f) Phaseout of Limitation.--
``(1) In general.--In the case of taxable years beginning after
December 31, 2005, and before January 1, 2010, the reduction under
subsection (a) shall be equal to the applicable fraction of the
amount which would (but for this subsection) be the amount of such
reduction.
``(2) Applicable fraction.--For purposes of paragraph (1), the
applicable fraction shall be determined in accordance with the
following table:
``For taxable years beginning
The applicable
in calendar year--
fraction is--
2006 and 2007.....................................
\2/3\
2008 and 2009.....................................
\1/3\.
``(g) Termination.--This section shall not apply to any taxable
year beginning after December 31, 2009.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2005.

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(a) Increase in Per Child Amount.--Subsection (a) of section 24
(relating to child tax credit) is amended to read as follows:
``(a) Allowance of Credit.--
``(1) In general.--There shall be allowed as a credit against
the tax imposed by this chapter for the taxable year with respect
to each qualifying child of the taxpayer an amount equal to the per
child amount.
``(2) Per child amount.--For purposes of paragraph (1), the per
child amount shall be determined as follows:
``In the case of any taxable year
beginning in--
The per child amount is--
2001, 2002, 2003, or 2004.................................
$  600
2005, 2006, 2007, or 2008.................................
700
2009......................................................
800
2010 or thereafter........................................
1,000.''.
(b) Credit Allowed Against Alternative Minimum Tax.--
(1) In general.--Subsection (b) of section 24 (relating to
child tax credit) is amended by adding at the end the following new
paragraph:
``(3) Limitation based on amount of tax.--The credit allowed
under subsection (a) for any taxable year shall not exceed the
excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under this subpart
(other than this section) and section 27 for the taxable
year.''.
(2) Conforming amendments.--
(A) The heading for section 24(b) is amended to read as
follows: ``Limitations.--''.
(B) The heading for section 24(b)(1) is amended to read as
follows: ``Limitation based on adjusted gross income.--''.
(C) Section 24(d), as amended by subsection (c), is
amended--
(i) by striking ``section 26(a)'' each place it appears
and inserting ``subsection (b)(3)'', and
(ii) in paragraph (1)(B) by striking ``aggregate amount
of credits allowed by this subpart'' and inserting ``amount
of credit allowed by this section''.
(D) Paragraph (1) of section 26(a) is amended by inserting
``(other than section 24)'' after ``this subpart''.
(E) Subsection (c) of section 23 is amended by striking
``and section 1400C'' and inserting ``and sections 24 and
1400C''.
(F) Subparagraph (C) of section 25(e)(1) is amended by
inserting ``, 24,'' after ``sections 23''.
(G) Section 904(h) is amended by inserting ``(other than
section 24)'' after ``chapter''.
(H) Subsection (d) of section 1400C is amended by inserting
``and section 24'' after ``this section''.
(c) Refundable Child Credit.--
(1) In general.--So much of section 24(d) (relating to
additional credit for families with 3 or more children) as precedes
paragraph (2) is amended to read as follows:
``(d) Portion of Credit Refundable.--
``(1) In general.--The aggregate credits allowed to a taxpayer
under subpart C shall be increased by the lesser of--
``(A) the credit which would be allowed under this section
without regard to this subsection and the limitation under
section 26(a), or
``(B) the amount by which the amount of credit allowed by
this section (determined without regard to this subsection)
would increase if the limitation imposed by section 26(a) were
increased by the greater of--
``(i) 15 percent (10 percent in the case of taxable
years beginning before January 1, 2005) of so much of the
taxpayer's earned income (within the meaning of section 32)
which is taken into account in computing taxable income for
the taxable year as exceeds $10,000, or
``(ii) in the case of a taxpayer with 3 or more
qualifying children, the excess (if any) of--
``(I) the taxpayer's social security taxes for the
taxable year, over
``(II) the credit allowed under section 32 for the
taxable year.
The amount of the credit allowed under this subsection shall not be
treated as a credit allowed under this subpart and shall reduce the
amount of credit otherwise allowable under subsection (a) without
regard to section 26(a).''.
(2) Inflation adjustment.--Subsection (d) of section 24 is
amended by adding at the end the following new paragraph:
``(4) Inflation adjustment.--In the case of any taxable year
beginning in a calendar year after 2001, the $10,000 amount
contained in paragraph (1)(B) shall be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, determined by substituting `calendar year 2000' for
`calendar year 1992' in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $50.''.
(3) Conforming amendment.--Section 32 is amended by striking
subsection (n).
(d) Elimination of Reduction of Credit to Taxpayer Subject to
Alternative Minimum Tax Provision.--Section 24(d) is amended--
(1) by striking paragraph (2), and
(2) by redesignating paragraphs (3) and (4) as paragraphs (2)
and (3), respectively.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31, 2001.

e6fc9caf9100fe741c11c7f6e7f114f35360dc3cb7249c3ffe734bf39e799232

PROGRAMS.
(a) In General.--
(1) Adoption credit.--Section 23(a)(1) (relating to allowance
of credit) is amended to read as follows:
``(1) In general.--In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter--
``(A) in the case of an adoption of a child other than a
child with special needs, the amount of the qualified adoption
expenses paid or incurred by the taxpayer, and
``(B) in the case of an adoption of a child with special
needs, $10,000.''.
(2) Adoption assistance programs.--Section 137(a) (relating to
adoption assistance programs) is amended to read as follows:
``(a) In General.--Gross income of an employee does not include
amounts paid or expenses incurred by the employer for adoption expenses
in connection with the adoption of a child by an employee if such
amounts are furnished pursuant to an adoption assistance program. The
amount of the exclusion shall be--
``(1) in the case of an adoption of a child other than a child
with special needs, the amount of the qualified adoption expenses
paid or incurred by the taxpayer, and
``(2) in the case of an adoption of a child with special needs,
$10,000.''.
(b) Dollar Limitations.--
(1) Dollar amount of allowed expenses.--
(A) Adoption expenses.--Section 23(b)(1) (relating to
allowance of credit) is amended--
(i) by striking ``$5,000'' and inserting ``$10,000'',
(ii) by striking ``($6,000, in the case of a child with
special needs)'', and
(iii) by striking ``subsection (a)'' and inserting
``subsection (a)(1)(A)''.
(B) Adoption assistance programs.--Section 137(b)(1)
(relating to dollar limitations for adoption assistance
programs) is amended--
(i) by striking ``$5,000'' and inserting ``$10,000'',
and
(ii) by striking ``($6,000, in the case of a child with
special needs)'', and
(iii) by striking ``subsection (a)'' and inserting
``subsection (a)(1)''.
(2) Phase-out limitation.--
(A) Adoption expenses.--Clause (i) of section 23(b)(2)(A)
(relating to income limitation) is amended by striking
``$75,000'' and inserting ``$150,000''.
(B) Adoption assistance programs.--Section 137(b)(2)(A)
(relating to income limitation) is amended by striking
``$75,000'' and inserting ``$150,000''.
(c) Year Credit Allowed.--Section 23(a)(2) (relating to year credit
allowed) is amended by adding at the end the following new flush
sentence:
``In the case of the adoption of a child with special needs, the
credit allowed under paragraph (1) shall be allowed for the taxable
year in which the adoption becomes final.''.
(d) Repeal of Terminations.--
(1) Children without special needs.--Paragraph (2) of section
23(d) (relating to definition of eligible child) is amended to read
as follows:
``(2) Eligible child.--The term `eligible child' means any
individual who--
``(A) has not attained age 18, or
``(B) is physically or mentally incapable of caring for
himself.''.
(2) Adoption assistance programs.--Section 137 (relating to
adoption assistance programs) is amended by striking subsection
(f).
(e) Adjustment of Dollar and Income Limitations for Inflation.--
(1) Adoption credit.--Section 23 (relating to adoption
expenses) is amended by redesignating subsection (h) as subsection
(i) and by inserting after subsection (g) the following new
subsection:
``(h) Adjustments for Inflation.--In the case of a taxable year
beginning after December 31, 2002, each of the dollar amounts in
subsection (a)(1)(B) and paragraphs (1) and (2)(A)(i) of subsection (b)
shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
determined by substituting `calendar year 2001' for `calendar year
1992' in subparagraph (B) thereof.''.
(2) Adoption assistance programs.--Section 137 (relating to
adoption assistance programs), as amended by subsection (d), is
amended by adding at the end the following new subsection:
``(f) Adjustments for Inflation.--In the case of a taxable year
beginning after December 31, 2002, each of the dollar amounts in
subsection (a)(2) and paragraphs (1) and (2)(A) of subsection (b) shall
be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
determined by substituting `calendar year 2001' for `calendar year
1992' in subparagraph (B) thereof.''.
(f) Credit Allowed Against Alternative Minimum Tax.--
(1) In general.--Subsection (b) of section 23 is amended by
adding at the end the following new paragraph:
``(4) Limitation based on amount of tax.--The credit allowed
under subsection (a) for any taxable year shall not exceed the
excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under this subpart
(other than this section) and section 27 for the taxable
year.''.
(2) Conforming amendments.--
(A) Section 23(c), as amended by section 201(b), is
amended--
(i) by striking ``section 26(a)'' and inserting
``subsection (b)(4)'', and
(ii) by striking ``reduced by the sum of the credits
allowable under this subpart (other than this section and
sections 24 and 1400C)''.
(B) Section 24(b)(3)(B), as added by section 201(b), is
amended by striking ``this section'' and inserting ``this
section and section 23''.
(C) Sections 26(a)(1), 904(h), and 1400C(d), as amended by
section 201(b), are each amended by striking ``section 24'' and
inserting ``sections 23 and 24''.
(g) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2001.
(2) Subsection (a).--The amendments made by subsection (a)
shall apply to taxable years beginning after December 31, 2002.

ace397d1f72a6b62bb91473b79f6b95e0c22ef173ee25c5d392c67b9590c8b4a

AND FEDERALLY ASSISTED PROGRAMS.
Any payment considered to have been made to any individual by
reason of section 24 of the Internal Revenue Code of 1986, as amended
by section 201, shall not be taken into account as income and shall not
be taken into account as resources for the month of receipt and the
following month, for purposes of determining the eligibility of such
individual or any other individual for benefits or assistance, or the
amount or extent of benefits or assistance, under any Federal program
or under any State or local program financed in whole or in part with
Federal funds.

9270abe88372e3cd5f2048cb47632b7b0cfd7c691ae5cf65370ba12697de8085

(a) Increase in Dollar Limit.--Subsection (c) of section 21
(relating to expenses for household and dependent care services
necessary for gainful employment) is amended--
(1) by striking ``$2,400'' in paragraph (1) and inserting
``$3,000'', and
(2) by striking ``$4,800'' in paragraph (2) and inserting
``$6,000''.
(b) Increase in Applicable Percentage.--Section 21(a)(2) (defining
applicable percentage) is amended--
(1) by striking ``30 percent'' and inserting ``35 percent'',
and
(2) by striking ``$10,000'' and inserting ``$15,000''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.

46e16e562a93cade745c33b4efb2f1fc35e2650a016565710e03e595fe395e2c

ASSISTANCE.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 619, is
further amended by adding at the end the following:
``SEC. 45F. EMPLOYER-PROVIDED CHILD CARE CREDIT.
``(a) In General.--For purposes of section 38, the employer-
provided child care credit determined under this section for the
taxable year is an amount equal to the sum of--
``(1) 25 percent of the qualified child care expenditures, and
``(2) 10 percent of the qualified child care resource and
referral expenditures,
of the taxpayer for such taxable year.
``(b) Dollar Limitation.--The credit allowable under subsection (a)
for any taxable year shall not exceed $150,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified child care expenditure.--
``(A) In general.--The term `qualified child care
expenditure' means any amount paid or incurred--
``(i) to acquire, construct, rehabilitate, or expand
property--
``(I) which is to be used as part of a qualified
child care facility of the taxpayer,
``(II) with respect to which a deduction for
depreciation (or amortization in lieu of depreciation)
is allowable, and
``(III) which does not constitute part of the
principal residence (within the meaning of section 121)
of the taxpayer or any employee of the taxpayer,
``(ii) for the operating costs of a qualified child
care facility of the taxpayer, including costs related to
the training of employees, to scholarship programs, and to
the providing of increased compensation to employees with
higher levels of child care training, or
``(iii) under a contract with a qualified child care
facility to provide child care services to employees of the
taxpayer.
``(B) Fair market value.--The term `qualified child care
expenditures' shall not include expenses in excess of the fair
market value of such care.
``(2) Qualified child care facility.--
``(A) In general.--The term `qualified child care facility'
means a facility--
``(i) the principal use of which is to provide child
care assistance, and
``(ii) which meets the requirements of all applicable
laws and regulations of the State or local government in
which it is located, including the licensing of the
facility as a child care facility.
Clause (i) shall not apply to a facility which is the principal
residence (within the meaning of section 121) of the operator
of the facility.
``(B) Special rules with respect to a taxpayer.--A facility
shall not be treated as a qualified child care facility with
respect to a taxpayer unless--
``(i) enrollment in the facility is open to employees
of the taxpayer during the taxable year,
``(ii) if the facility is the principal trade or
business of the taxpayer, at least 30 percent of the
enrollees of such facility are dependents of employees of
the taxpayer, and
``(iii) the use of such facility (or the eligibility to
use such facility) does not discriminate in favor of
employees of the taxpayer who are highly compensated
employees (within the meaning of section 414(q)).
``(3) Qualified child care resource and referral expenditure.--
``(A) In general.--The term `qualified child care resource
and referral expenditure' means any amount paid or incurred
under a contract to provide child care resource and referral
services to an employee of the taxpayer.
``(B) Nondiscrimination.--The services shall not be treated
as qualified unless the provision of such services (or the
eligibility to use such services) does not discriminate in
favor of employees of the taxpayer who are highly compensated
employees (within the meaning of section 414(q)).
``(d) Recapture of Acquisition and Construction Credit.--
``(1) In general.--If, as of the close of any taxable year,
there is a recapture event with respect to any qualified child care
facility of the taxpayer, then the tax of the taxpayer under this
chapter for such taxable year shall be increased by an amount equal
to the product of--
``(A) the applicable recapture percentage, and
``(B) the aggregate decrease in the credits allowed under
section 38 for all prior taxable years which would have
resulted if the qualified child care expenditures of the
taxpayer described in subsection (c)(1)(A) with respect to such
facility had been zero.
``(2) Applicable recapture percentage.--
``(A) In general.--For purposes of this subsection, the
applicable recapture percentage shall be determined from the
following table:
The applicable
recapture
``If the recapture event
occurs in:
percentage is:
Years 1-3.......................................
100
Year 4..........................................
85
Year 5..........................................
70
Year 6..........................................
55
Year 7..........................................
40
Year 8..........................................
25
Years 9 and 10..................................
10
Years 11 and thereafter.........................
0.
``(B) Years.--For purposes of subparagraph (A), year 1
shall begin on the first day of the taxable year in which the
qualified child care facility is placed in service by the
taxpayer.
``(3) Recapture event defined.--For purposes of this
subsection, the term `recapture event' means--
``(A) Cessation of operation.--The cessation of the
operation of the facility as a qualified child care facility.
``(B) Change in ownership.--
``(i) In general.--Except as provided in clause (ii),
the disposition of a taxpayer's interest in a qualified
child care facility with respect to which the credit
described in subsection (a) was allowable.
``(ii) Agreement to assume recapture liability.--Clause
(i) shall not apply if the person acquiring such interest
in the facility agrees in writing to assume the recapture
liability of the person disposing of such interest in
effect immediately before such disposition. In the event of
such an assumption, the person acquiring the interest in
the facility shall be treated as the taxpayer for purposes
of assessing any recapture liability (computed as if there
had been no change in ownership).
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable year shall
be increased under paragraph (1) only with respect to credits
allowed by reason of this section which were used to reduce tax
liability. In the case of credits not so used to reduce tax
liability, the carryforwards and carrybacks under section 39
shall be appropriately adjusted.
``(B) No credits against tax.--Any increase in tax under
this subsection shall not be treated as a tax imposed by this
chapter for purposes of determining the amount of any credit
under subpart A, B, or D of this part.
``(C) No recapture by reason of casualty loss.--The
increase in tax under this subsection shall not apply to a
cessation of operation of the facility as a qualified child
care facility by reason of a casualty loss to the extent such
loss is restored by reconstruction or replacement within a
reasonable period established by the Secretary.
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons which are treated as a
single employer under subsections (a) and (b) of section 52 shall
be treated as a single taxpayer.
``(2) Pass-thru in the case of estates and trusts.--Under
regulations prescribed by the Secretary, rules similar to the rules
of subsection (d) of section 52 shall apply.
``(3) Allocation in the case of partnerships.--In the case of
partnerships, the credit shall be allocated among partners under
regulations prescribed by the Secretary.
``(f) No Double Benefit.--
``(1) Reduction in basis.--For purposes of this subtitle--
``(A) In general.--If a credit is determined under this
section with respect to any property by reason of expenditures
described in subsection (c)(1)(A), the basis of such property
shall be reduced by the amount of the credit so determined.
``(B) Certain dispositions.--If, during any taxable year,
there is a recapture amount determined with respect to any
property the basis of which was reduced under subparagraph (A),
the basis of such property (immediately before the event
resulting in such recapture) shall be increased by an amount
equal to such recapture amount. For purposes of the preceding
sentence, the term `recapture amount' means any increase in tax
(or adjustment in carrybacks or carryovers) determined under
subsection (d).
``(2) Other deductions and credits.--No deduction or credit
shall be allowed under any other provision of this chapter with
respect to the amount of the credit determined under this
section.''.
(b) Conforming Amendments.--
(1) Section 38(b), as amended by section 619, is amended by
striking ``plus'' at the end of paragraph (13), by striking the
period at the end of paragraph (14) and inserting ``, plus'', and
by adding at the end the following:
``(15) the employer-provided child care credit determined under
section 45F.''.
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following:
``Sec. 45F. Employer-provided child care credit.''.
(3) Section 1016(a) is amended by striking ``and'' at the end
of paragraph (26), by striking the period at the end of paragraph
(27) and inserting ``, and'', and by adding at the end the
following:
``(28) in the case of a facility with respect to which a credit
was allowed under section 45F, to the extent provided in section
45F(f)(1).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.

311b46bcb6bc1e21da2e74e0e48370fbd43ae3c5ad1efc2b45462351a9b47123

(a) In General.--Paragraph (2) of section 63(c) (relating to
standard deduction) is amended--
(1) by striking ``$5,000'' in subparagraph (A) and inserting
``the applicable percentage of the dollar amount in effect under
subparagraph (C) for the taxable year'';
(2) by adding ``or'' at the end of subparagraph (B);
(3) by striking ``in the case of'' and all that follows in
subparagraph (C) and inserting ``in any other case.''; and
(4) by striking subparagraph (D).
(b) Applicable Percentage.--Section 63(c) (relating to standard
deduction) is amended by adding at the end the following new paragraph:
``(7) Applicable percentage.--For purposes of paragraph (2),
the applicable percentage shall be determined in accordance with
the following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2005..............................................
174
2006..............................................
184
2007..............................................
187
2008..............................................
190
2009 and thereafter...............................
200.''.
(c) Technical Amendments.--
(1) Subparagraph (B) of section 1(f)(6) is amended by striking
``(other than with'' and all that follows through ``shall be
applied'' and inserting ``(other than with respect to sections
63(c)(4) and 151(d)(4)(A)) shall be applied''.
(2) Paragraph (4) of section 63(c) is amended by adding at the
end the following flush sentence:
``The preceding sentence shall not apply to the amount referred to
in paragraph (2)(A).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.

57c47634e77772a7e052f0d4b9d58f13c11a6b4cf1093c05aedb0fd5f5ace4da

(a) In General.--Section 1(f) (relating to adjustments in tax
tables so that inflation will not result in tax increases) is amended
by adding at the end the following new paragraph:
``(8) Phaseout of marriage penalty in 15-percent bracket.--
``(A) In general.--With respect to taxable years beginning
after December 31, 2004, in prescribing the tables under
paragraph (1)--
``(i) the maximum taxable income in the 15-percent rate
bracket in the table contained in subsection (a) (and the
minimum taxable income in the next higher taxable income
bracket in such table) shall be the applicable percentage
of the maximum taxable income in the 15-percent rate
bracket in the table contained in subsection (c) (after any
other adjustment under this subsection), and
``(ii) the comparable taxable income amounts in the
table contained in subsection (d) shall be \1/2\ of the
amounts determined under clause (i).
``(B) Applicable percentage.--For purposes of subparagraph
(A), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2005..............................................
180
2006..............................................
187
2007..............................................
193
2008 and thereafter...............................
200.
``(C) Rounding.--If any amount determined under
subparagraph (A)(i) is not a multiple of $50, such amount shall
be rounded to the next lowest multiple of $50.''.
(b) Technical Amendments.--
(1) Subparagraph (A) of section 1(f)(2) is amended by inserting
``except as provided in paragraph (8),'' before ``by increasing''.
(2) The heading for subsection (f) of section 1 is amended by
inserting ``Phaseout of Marriage Penalty in 15-Percent Bracket;''
before ``Adjustments''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.

850436a22293023800420e875cda902f2713e3f9b31c3d0f60a552e3d7d3d400

INCOME TO INCLUDE ONLY AMOUNTS INCLUDIBLE IN GROSS
INCOME; SIMPLIFICATION OF EARNED INCOME CREDIT.
(a) Increased Phaseout Amount.--
(1) In general.--Section 32(b)(2) (relating to amounts) is
amended--
(A) by striking ``Amounts.--The earned'' and inserting
``Amounts.--
``(A) In general.--Subject to subparagraph (B), the
earned'', and
(B) by adding at the end the following new subparagraph:
``(B) Joint returns.--In the case of a joint return filed
by an eligible individual and such individual's spouse, the
phaseout amount determined under subparagraph (A) shall be
increased by--
``(i) $1,000 in the case of taxable years beginning in
2002, 2003, and 2004,
``(ii) $2,000 in the case of taxable years beginning in
2005, 2006, and 2007, and
``(iii) $3,000 in the case of taxable years beginning
after 2007.''.
(2) Inflation adjustment.--Paragraph (1)(B) of section 32(j)
(relating to inflation adjustments) is amended to read as follows:
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, determined--
``(i) in the case of amounts in subsections (b)(2)(A)
and (i)(1), by substituting `calendar year 1995' for
`calendar year 1992' in subparagraph (B) thereof, and
``(ii) in the case of the $3,000 amount in subsection
(b)(2)(B)(iii), by substituting `calendar year 2007' for
`calendar year 1992' in subparagraph (B) of such section
1.''.
(3) Rounding.--Section 32(j)(2)(A) (relating to rounding) is
amended by striking ``subsection (b)(2)'' and inserting
``subsection (b)(2)(A) (after being increased under subparagraph
(B) thereof)''.
(b) Earned Income To Include Only Amounts Includible in Gross
Income.--Clause (i) of section 32(c)(2)(A) (defining earned income) is
amended by inserting ``, but only if such amounts are includible in
gross income for the taxable year'' after ``other employee
compensation''.
(c) Repeal of Reduction of Credit to Taxpayers Subject to
Alternative Minimum Tax.--Section 32(h) is repealed.
(d) Replacement of Modified Adjusted Gross Income With Adjusted
Gross Income.--
(1) In general.--Section 32(a)(2)(B) is amended by striking
``modified''.
(2) Conforming amendments.--
(A) Section 32(c) is amended by striking paragraph (5).
(B) Section 32(f)(2)(B) is amended by striking ``modified''
each place it appears.
(e) Relationship Test.--
(1) In general.--Clause (i) of section 32(c)(3)(B) (relating to
relationship test) is amended to read as follows:
``(i) In general.--An individual bears a relationship
to the taxpayer described in this subparagraph if such
individual is--
``(I) a son, daughter, stepson, or stepdaughter, or
a descendant of any such individual,
``(II) a brother, sister, stepbrother, or
stepsister, or a descendant of any such individual, who
the taxpayer cares for as the taxpayer's own child, or
``(III) an eligible foster child of the
taxpayer.''.
(2) Eligible foster child.--
(A) In general.--Clause (iii) of section 32(c)(3)(B) is
amended to read as follows:
``(iii) Eligible foster child.--For purposes of clause
(i), the term `eligible foster child' means an individual
not described in subclause (I) or (II) of clause (i) who--
``(I) is placed with the taxpayer by an authorized
placement agency, and
``(II) the taxpayer cares for as the taxpayer's own
child.''.
(B) Conforming amendment.--Section 32(c)(3)(A)(ii) is
amended by striking ``except as provided in subparagraph
(B)(iii),''.
(f) 2 or More Claiming Qualifying Child.--Section 32(c)(1)(C) is
amended to read as follows:
``(C) 2 or more claiming qualifying child.--
``(i) In general.--Except as provided in clause (ii),
if (but for this paragraph) an individual may be claimed,
and is claimed, as a qualifying child by 2 or more
taxpayers for a taxable year beginning in the same calendar
year, such individual shall be treated as the qualifying
child of the taxpayer who is--
``(I) a parent of the individual, or
``(II) if subclause (I) does not apply, the
taxpayer with the highest adjusted gross income for
such taxable year.
``(ii) More than 1 claiming credit.--If the parents
claiming the credit with respect to any qualifying child do
not file a joint return together, such child shall be
treated as the qualifying child of--
``(I) the parent with whom the child resided for
the longest period of time during the taxable year, or
``(II) if the child resides with both parents for
the same amount of time during such taxable year, the
parent with the highest adjusted gross income.''.
(g) Expansion of Mathematical Error Authority.--Paragraph (2) of
section 6213(g) is amended by striking ``and'' at the end of
subparagraph (K), by striking the period at the end of subparagraph (L)
and inserting ``, and'', and by inserting after subparagraph (L) the
following new subparagraph:
``(M) the entry on the return claiming the credit under
section 32 with respect to a child if, according to the Federal
Case Registry of Child Support Orders established under section
453(h) of the Social Security Act, the taxpayer is a
noncustodial parent of such child.''.
(h) Clerical Amendment.--Subparagraph (E) of section 32(c)(3) is
amended by striking ``subparagraphs (A)(ii) and (B)(iii)(II)'' and
inserting ``subparagraph (A)(ii)''.
(i) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2001.
(2) Subsection (g).--The amendment made by subsection (g) shall
take effect on January 1, 2004.
Subtitle A--Education Savings Incentives

f0275ba009c4032c9e0277976a72219fa2da4720f923951359e52f40f97eee41

(a) Maximum Annual Contributions.--
(1) In general.--Section 530(b)(1)(A)(iii) (defining education
individual retirement account) is amended by striking ``$500'' and
inserting ``$2,000''.
(2) Conforming amendment.--Section 4973(e)(1)(A) is amended by
striking ``$500'' and inserting ``$2,000''.
(b) Modification of AGI Limits To Remove Marriage Penalty.--Section
530(c)(1) (relating to reduction in permitted contributions based on
adjusted gross income) is amended--
(1) by striking ``$150,000'' in subparagraph (A)(ii) and
inserting ``$190,000'', and
(2) by striking ``$10,000'' in subparagraph (B) and inserting
``$30,000''.
(c) Tax-Free Expenditures for Elementary and Secondary School
Expenses.--
(1) In general.--Section 530(b)(2) (defining qualified higher
education expenses) is amended to read as follows:
``(2) Qualified education expenses.--
``(A) In general.--The term `qualified education expenses'
means--
``(i) qualified higher education expenses (as defined
in section 529(e)(3)), and
``(ii) qualified elementary and secondary education
expenses (as defined in paragraph (4)).
``(B) Qualified state tuition programs.--Such term shall
include any contribution to a qualified State tuition program
(as defined in section 529(b)) on behalf of the designated
beneficiary (as defined in section 529(e)(1)); but there shall
be no increase in the investment in the contract for purposes
of applying section 72 by reason of any portion of such
contribution which is not includible in gross income by reason
of subsection (d)(2).''.
(2) Qualified elementary and secondary education expenses.--
Section 530(b) (relating to definitions and special rules) is
amended by adding at the end the following new paragraph:
``(4) Qualified elementary and secondary education expenses.--
``(A) In general.--The term `qualified elementary and
secondary education expenses' means--
``(i) expenses for tuition, fees, academic tutoring,
special needs services in the case of a special needs
beneficiary, books, supplies, and other equipment which are
incurred in connection with the enrollment or attendance of
the designated beneficiary of the trust as an elementary or
secondary school student at a public, private, or religious
school,
``(ii) expenses for room and board, uniforms,
transportation, and supplementary items and services
(including extended day programs) which are required or
provided by a public, private, or religious school in
connection with such enrollment or attendance, and
``(iii) expenses for the purchase of any computer
technology or equipment (as defined in section
170(e)(6)(F)(i)) or Internet access and related services,
if such technology, equipment, or services are to be used
by the beneficiary and the beneficiary's family during any
of the years the beneficiary is in school.
Clause (iii) shall not include expenses for computer software
designed for sports, games, or hobbies unless the software is
predominantly educational in nature.
``(B) School.--The term `school' means any school which
provides elementary education or secondary education
(kindergarten through grade 12), as determined under State
law.''.
(3) Conforming amendments.--Section 530 is amended--
(A) by striking ``higher'' each place it appears in
subsections (b)(1) and (d)(2), and
(B) by striking ``higher'' in the heading for subsection
(d)(2).
(d) Waiver of Age Limitations for Children With Special Needs.--
Section 530(b)(1) (defining education individual retirement account) is
amended by adding at the end the following flush sentence:
``The age limitations in subparagraphs (A)(ii) and (E), and
paragraphs (5) and (6) of subsection (d), shall not apply to any
designated beneficiary with special needs (as determined under
regulations prescribed by the Secretary).''.
(e) Entities Permitted To Contribute to Accounts.--Section
530(c)(1) (relating to reduction in permitted contributions based on
adjusted gross income) is amended by striking ``The maximum amount
which a contributor'' and inserting ``In the case of a contributor who
is an individual, the maximum amount the contributor''.
(f) Time When Contributions Deemed Made.--
(1) In general.--Section 530(b) (relating to definitions and
special rules), as amended by subsection (c)(2), is amended by
adding at the end the following new paragraph:
``(5) Time when contributions deemed made.--An individual shall
be deemed to have made a contribution to an education individual
retirement account on the last day of the preceding taxable year if
the contribution is made on account of such taxable year and is
made not later than the time prescribed by law for filing the
return for such taxable year (not including extensions thereof).''.
(2) Extension of time to return excess contributions.--
Subparagraph (C) of section 530(d)(4) (relating to additional tax
for distributions not used for educational expenses) is amended--
(A) by striking clause (i) and inserting the following new
clause:
``(i) such distribution is made before the first day of
the sixth month of the taxable year following the taxable
year, and'', and
(B) by striking ``due date of return'' in the heading and
inserting ``certain date''.
(g) Coordination With Hope and Lifetime Learning Credits and
Qualified Tuition Programs.--
(1) In general.--Section 530(d)(2)(C) is amended to read as
follows:
``(C) Coordination with hope and lifetime learning credits
and qualified tuition programs.--For purposes of subparagraph
(A)--
``(i) Credit coordination.--The total amount of
qualified higher education expenses with respect to an
individual for the taxable year shall be reduced--
``(I) as provided in section 25A(g)(2), and
``(II) by the amount of such expenses which were
taken into account in determining the credit allowed to
the taxpayer or any other person under section 25A.
``(ii) Coordination with qualified tuition programs.--
If, with respect to an individual for any taxable year--
``(I) the aggregate distributions during such year
to which subparagraph (A) and section 529(c)(3)(B)
apply, exceed
``(II) the total amount of qualified education
expenses (after the application of clause (i)) for such
year,
the taxpayer shall allocate such expenses among such
distributions for purposes of determining the amount of the
exclusion under subparagraph (A) and section
529(c)(3)(B).''.
(2) Conforming amendments.--
(A) Subsection (e) of section 25A is amended to read as
follows:
``(e) Election Not To Have Section Apply.--A taxpayer may elect not
to have this section apply with respect to the qualified tuition and
related expenses of an individual for any taxable year.''.
(B) Section 135(d)(2)(A) is amended by striking
``allowable'' and inserting ``allowed''.
(C) Section 530(d)(2)(D) is amended--
(i) by striking ``or credit'' and inserting ``, credit,
or exclusion'', and
(ii) by striking ``credit or deduction'' in the heading
and inserting ``deduction, credit, or exclusion''.
(D) Section 4973(e)(1) is amended by adding ``and'' at the
end of subparagraph (A), by striking subparagraph (B), and by
redesignating subparagraph (C) as subparagraph (B).
(h) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.

5105d75786b3dfecdae3fe577c84f9b1073e96d600abea96a7cd472adee5099e

(a) Eligible Educational Institutions Permitted To Maintain
Qualified Tuition Programs.--
(1) In general.--Section 529(b)(1) (defining qualified State
tuition program) is amended--
(A) by inserting ``or by 1 or more eligible educational
institutions'' after ``maintained by a State or agency or
instrumentality thereof'' in the matter preceding subparagraph
(A), and
(B) by adding at the end the following new flush sentence:
``Except to the extent provided in regulations, a program
established and maintained by 1 or more eligible educational
institutions shall not be treated as a qualified tuition program
unless such program provides that amounts are held in a qualified
trust and such program has received a ruling or determination that
such program meets the applicable requirements for a qualified
tuition program. For purposes of the preceding sentence, the term
`qualified trust' means a trust which is created or organized in
the United States for the exclusive benefit of designated
beneficiaries and with respect to which the requirements of
paragraphs (2) and (5) of section 408(a) are met.''.
(2) Private qualified tuition programs limited to benefit
plans.--Clause (ii) of section 529(b)(1)(A) is amended by inserting
``in the case of a program established and maintained by a State or
agency or instrumentality thereof,'' before ``may make''.
(3) Additional tax on nonqualified withdrawals.--Section 529 is
amended--
(A) by striking paragraph (3) of subsection (b) and by
redesignating paragraphs (4), (5), (6), and (7) of such
subsection as paragraphs (3), (4), (5), and (6), respectively,
and
(B) by adding at the end of subsection (c) the following
new paragraph:
``(6) Additional tax.--The tax imposed by section 530(d)(4)
shall apply to any payment or distribution from a qualified tuition
program in the same manner as such tax applies to a payment or
distribution from an education individual retirement account. This
paragraph shall not apply to any payment or distribution in any
taxable year beginning before January 1, 2004, which is includible
in gross income but used for qualified higher education expenses of
the designated beneficiary.''.
(4) Conforming amendments.--
(A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529,
530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are amended by
striking ``qualified State tuition'' each place it appears and
inserting ``qualified tuition''.
(B) The headings for sections 72(e)(9) and 135(c)(2)(C) are
amended by striking ``qualified state tuition'' each place it
appears and inserting ``qualified tuition''.
(C) The headings for sections 529(b) and 530(b)(2)(B) are
amended by striking ``Qualified state tuition'' each place it
appears and inserting ``Qualified tuition''.
(D) The heading for section 529 is amended by striking
``state''.
(E) The item relating to section 529 in the table of
sections for part VIII of subchapter F of chapter 1 is amended
by striking ``State''.
(b) Exclusion From Gross Income of Education Distributions From
Qualified Tuition Programs.--
(1) In general.--Section 529(c)(3)(B) (relating to
distributions) is amended to read as follows:
``(B) Distributions for qualified higher education
expenses.--For purposes of this paragraph--
``(i) In-kind distributions.--No amount shall be
includible in gross income under subparagraph (A) by reason
of a distribution which consists of providing a benefit to
the distributee which, if paid for by the distributee,
would constitute payment of a qualified higher education
expense.
``(ii) Cash distributions.--In the case of
distributions not described in clause (i), if--
``(I) such distributions do not exceed the
qualified higher education expenses (reduced by
expenses described in clause (i)), no amount shall be
includible in gross income, and
``(II) in any other case, the amount otherwise
includible in gross income shall be reduced by an
amount which bears the same ratio to such amount as
such expenses bear to such distributions.
``(iii) Exception for institutional programs.--In the
case of any taxable year beginning before January 1, 2004,
clauses (i) and (ii) shall not apply with respect to any
distribution during such taxable year under a qualified
tuition program established and maintained by 1 or more
eligible educational institutions.
``(iv) Treatment as distributions.--Any benefit
furnished to a designated beneficiary under a qualified
tuition program shall be treated as a distribution to the
beneficiary for purposes of this paragraph.
``(v) Coordination with hope and lifetime learning
credits.--The total amount of qualified higher education
expenses with respect to an individual for the taxable year
shall be reduced--
``(I) as provided in section 25A(g)(2), and
``(II) by the amount of such expenses which were
taken into account in determining the credit allowed to
the taxpayer or any other person under section 25A.
``(vi) Coordination with education individual
retirement accounts.--If, with respect to an individual for
any taxable year--
``(I) the aggregate distributions to which clauses
(i) and (ii) and section 530(d)(2)(A) apply, exceed
``(II) the total amount of qualified higher
education expenses otherwise taken into account under
clauses (i) and (ii) (after the application of clause
(v)) for such year,
the taxpayer shall allocate such expenses among such
distributions for purposes of determining the amount of the
exclusion under clauses (i) and (ii) and section
530(d)(2)(A).''.
(2) Conforming amendments.--
(A) Section 135(d)(2)(B) is amended by striking ``the
exclusion under section 530(d)(2)'' and inserting ``the
exclusions under sections 529(c)(3)(B) and 530(d)(2)''.
(B) Section 221(e)(2)(A) is amended by inserting ``529,''
after ``135,''.
(c) Rollover to Different Program for Benefit of Same Designated
Beneficiary.--Section 529(c)(3)(C) (relating to change in
beneficiaries) is amended--
(1) by striking ``transferred to the credit'' in clause (i) and
inserting ``transferred--
``(I) to another qualified tuition program for the
benefit of the designated beneficiary, or
``(II) to the credit'',
(2) by adding at the end the following new clause:
``(iii) Limitation on certain rollovers.--Clause (i)(I)
shall not apply to any transfer if such transfer occurs
within 12 months from the date of a previous transfer to
any qualified tuition program for the benefit of the
designated beneficiary.'', and
(3) by inserting ``or programs'' after ``beneficiaries'' in the
heading.
(d) Member of Family Includes First Cousin.--Section 529(e)(2)
(defining member of family) is amended by striking ``and'' at the end
of subparagraph (B), by striking the period at the end of subparagraph
(C) and by inserting ``; and'', and by adding at the end the following
new subparagraph:
``(D) any first cousin of such beneficiary.''.
(e) Adjustment of Limitation on Room and Board Distributions.--
Section 529(e)(3)(B)(ii) is amended to read as follows:
``(ii) Limitation.--The amount treated as qualified
higher education expenses by reason of clause (i) shall not
exceed--
``(I) the allowance (applicable to the student) for
room and board included in the cost of attendance (as
defined in section 472 of the Higher Education Act of
1965 (20 U.S.C. 1087ll), as in effect on the date of
the enactment of the Economic Growth and Tax Relief
Reconciliation Act of 2001) as determined by the
eligible educational institution for such period, or
``(II) if greater, the actual invoice amount the
student residing in housing owned or operated by the
eligible educational institution is charged by such
institution for room and board costs for such
period.''.
(f) Special Needs Services.--Subparagraph (A) of section 529(e)(3)
(defining qualified higher education expenses) is amended to read as
follows:
``(A) In general.--The term `qualified higher education
expenses' means--
``(i) tuition, fees, books, supplies, and equipment
required for the enrollment or attendance of a designated
beneficiary at an eligible educational institution; and
``(ii) expenses for special needs services in the case
of a special needs beneficiary which are incurred in
connection with such enrollment or attendance.''.
(g) Technical Amendments.--Section 529(c)(3)(D) is amended--
(1) by inserting ``except to the extent provided by the
Secretary,'' before ``all distributions'' in clause (ii), and
(2) by inserting ``except to the extent provided by the
Secretary,'' before ``the value'' in clause (iii).
(h) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
Subtitle B--Educational Assistance

32177f61debfe8ca6cd0368abe48ecede41e008cbb8c4721cc02e825b551fc41

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

1c30387806767c917cda8104be40d0182c359878066e414d503e58455a896e9a

LIMITATION ON STUDENT LOAN INTEREST DEDUCTION.
(a) Elimination of 60-Month Limit.--
(1) In general.--Section 221 (relating to interest on education
loans), as amended by section 402(b)(2)(B), is amended by striking
subsection (d) and by redesignating subsections (e), (f), and (g)
as subsections (d), (e), and (f), respectively.
(2) Conforming amendment.--Section 6050S(e) is amended by
striking ``section 221(e)(1)'' and inserting ``section 221(d)(1)''.
(3) Effective date.--The amendments made by this subsection
shall apply with respect to any loan interest paid after December
31, 2001, in taxable years ending after such date.
(b) Increase in Income Limitation.--
(1) In general.--Section 221(b)(2)(B) (relating to amount of
reduction) is amended by striking clauses (i) and (ii) and
inserting the following:
``(i) the excess of--
``(I) the taxpayer's modified adjusted gross income
for such taxable year, over
``(II) $50,000 ($100,000 in the case of a joint
return), bears to
``(ii) $15,000 ($30,000 in the case of a joint
return).''.
(2) Conforming amendment.--Section 221(g)(1) is amended by
striking ``$40,000 and $60,000 amounts'' and inserting ``$50,000
and $100,000 amounts''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after December 31, 2001.

81831626705c68b3ef835c661715907a13ac0e773627e5a1fe5d0d2bd73bfc79

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

ce9e007a9dd60155ed56cb469ebe9a5843c2354140c71f24bcf0b2d4961d425c

GOVERNMENTAL BONDS USED TO FINANCE EDUCATIONAL
FACILITIES.
(a) In General.--Section 148(f)(4)(D)(vii) (relating to increase in
exception for bonds financing public school capital expenditures) is
amended by striking ``$5,000,000'' the second place it appears and
inserting ``$10,000,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to obligations issued in calendar years beginning after December
31, 2001.

dfee618e8d1c00bb36891306198a016a94e48486f9f35a4582e4016217c9497f

EXEMPT FACILITY BONDS.
(a) Treatment as Exempt Facility Bond.--Subsection (a) of section
142 (relating to exempt facility bond) is amended by striking ``or'' at
the end of paragraph (11), by striking the period at the end of
paragraph (12) and inserting ``, or'', and by adding at the end the
following new paragraph:
``(13) qualified public educational facilities.''.
(b) Qualified Public Educational Facilities.--Section 142 (relating
to exempt facility bond) is amended by adding at the end the following
new subsection:
``(k) Qualified Public Educational Facilities.--
``(1) In general.--For purposes of subsection (a)(13), the term
`qualified public educational facility' means any school facility
which is--
``(A) part of a public elementary school or a public
secondary school, and
``(B) owned by a private, for-profit corporation pursuant
to a public-private partnership agreement with a State or local
educational agency described in paragraph (2).
``(2) Public-private partnership agreement described.--A
public-private partnership agreement is described in this paragraph
if it is an agreement--
``(A) under which the corporation agrees--
``(i) to do 1 or more of the following: construct,
rehabilitate, refurbish, or equip a school facility, and
``(ii) at the end of the term of the agreement, to
transfer the school facility to such agency for no
additional consideration, and
``(B) the term of which does not exceed the term of the
issue to be used to provide the school facility.
``(3) School facility.--For purposes of this subsection, the
term `school facility' means--
``(A) any school building,
``(B) any functionally related and subordinate facility and
land with respect to such building, including any stadium or
other facility primarily used for school events, and
``(C) any property, to which section 168 applies (or would
apply but for section 179), for use in a facility described in
subparagraph (A) or (B).
``(4) Public schools.--For purposes of this subsection, the
terms `elementary school' and `secondary school' have the meanings
given such terms by section 14101 of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 8801), as in effect on the date of
the enactment of this subsection.
``(5) Annual aggregate face amount of tax-exempt financing.--
``(A) In general.--An issue shall not be treated as an
issue described in subsection (a)(13) if the aggregate face
amount of bonds issued by the State pursuant thereto (when
added to the aggregate face amount of bonds previously so
issued during the calendar year) exceeds an amount equal to the
greater of--
``(i) $10 multiplied by the State population, or
``(ii) $5,000,000.
``(B) Allocation rules.--
``(i) In general.--Except as otherwise provided in this
subparagraph, the State may allocate the amount described
in subparagraph (A) for any calendar year in such manner as
the State determines appropriate.
``(ii) Rules for carryforward of unused limitation.--A
State may elect to carry forward an unused limitation for
any calendar year for 3 calendar years following the
calendar year in which the unused limitation arose under
rules similar to the rules of section 146(f), except that
the only purpose for which the carryforward may be elected
is the issuance of exempt facility bonds described in
subsection (a)(13).''.
(c) Exemption From General State Volume Caps.--Paragraph (3) of
section 146(g) (relating to exception for certain bonds) is amended--
(1) by striking ``or (12)'' and inserting ``(12), or (13)'',
and
(2) by striking ``and environmental enhancements of
hydroelectric generating facilities'' and inserting ``environmental
enhancements of hydroelectric generating facilities, and qualified
public educational facilities''.
(d) Exemption From Limitation on Use for Land Acquisition.--Section
147(h) (relating to certain rules not to apply to mortgage revenue
bonds, qualified student loan bonds, and qualified 501(c)(3) bonds) is
amended by adding at the end the following new paragraph:
``(3) Exempt facility bonds for qualified public-private
schools.--Subsection (c) shall not apply to any exempt facility
bond issued as part of an issue described in section 142(a)(13)
(relating to qualified public educational facilities).''.
(e) Conforming Amendment.--The heading for section 147(h) is
amended by striking ``Mortgage Revenue Bonds, Qualified Student Loan
Bonds, and Qualified 501(c)(3) Bonds'' and inserting ``Certain Bonds''.
(f) Effective Date.--The amendments made by this section shall
apply to bonds issued after December 31, 2001.
Subtitle D--Other Provisions

044124e4273bebca042076584ad7bae44ff7556392d7dfc67f1e7c311843f737

(a) Deduction Allowed.--Part VII of subchapter B of chapter 1
(relating to additional itemized deductions for individuals) is amended
by redesignating section 222 as section 223 and by inserting after
section 221 the following:
``SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.
``(a) Allowance of Deduction.--In the case of an individual, there
shall be allowed as a deduction an amount equal to the qualified
tuition and related expenses paid by the taxpayer during the taxable
year.
``(b) Dollar limitations.--
``(1) In general.--The amount allowed as a deduction under
subsection (a) with respect to the taxpayer for any taxable year
shall not exceed the applicable dollar limit.
``(2) Applicable dollar limit.--
``(A) 2002 and 2003.--In the case of a taxable year
beginning in 2002 or 2003, the applicable dollar limit shall be
equal to--
``(i) in the case of a taxpayer whose adjusted gross
income for the taxable year does not exceed $65,000
($130,000 in the case of a joint return), $3,000, and--
``(ii) in the case of any other taxpayer, zero.
``(B) 2004 and 2005.--In the case of a taxable year
beginning in 2004 or 2005, the applicable dollar amount shall
be equal to--
``(i) in the case of a taxpayer whose adjusted gross
income for the taxable year does not exceed $65,000
($130,000 in the case of a joint return), $4,000,
``(ii) in the case of a taxpayer not described in
clause (i) whose adjusted gross income for the taxable year
does not exceed $80,000 ($160,000 in the case of a joint
return), $2,000, and
``(iii) in the case of any other taxpayer, zero.
``(C) Adjusted gross income.--For purposes of this
paragraph, adjusted gross income shall be determined--
``(i) without regard to this section and sections 911,
931, and 933, and
``(ii) after application of sections 86, 135, 137, 219,
221, and 469.
``(c) No Double Benefit.--
``(1) In general.--No deduction shall be allowed under
subsection (a) for any expense for which a deduction is allowed to
the taxpayer under any other provision of this chapter.
``(2) Coordination with other education incentives.--
``(A) Denial of deduction if credit elected.--No deduction
shall be allowed under subsection (a) for a taxable year with
respect to the qualified tuition and related expenses with
respect to an individual if the taxpayer or any other person
elects to have section 25A apply with respect to such
individual for such year.
``(B) Coordination with exclusions.--The total amount of
qualified tuition and related expenses shall be reduced by the
amount of such expenses taken into account in determining any
amount excluded under section 135, 529(c)(1), or 530(d)(2). For
purposes of the preceding sentence, the amount taken into
account in determining the amount excluded under section
529(c)(1) shall not include that portion of the distribution
which represents a return of any contributions to the plan.
``(3) Dependents.--No deduction shall be allowed under
subsection (a) to any individual with respect to whom a deduction
under section 151 is allowable to another taxpayer for a taxable
year beginning in the calendar year in which such individual's
taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified tuition and related expenses.--The term
`qualified tuition and related expenses' has the meaning given such
term by section 25A(f). Such expenses shall be reduced in the same
manner as under section 25A(g)(2).
``(2) Identification requirement.--No deduction shall be
allowed under subsection (a) to a taxpayer with respect to the
qualified tuition and related expenses of an individual unless the
taxpayer includes the name and taxpayer identification number of
the individual on the return of tax for the taxable year.
``(3) Limitation on taxable year of deduction.--
``(A) In general.--A deduction shall be allowed under
subsection (a) for qualified tuition and related expenses for
any taxable year only to the extent such expenses are in
connection with enrollment at an institution of higher
education during the taxable year.
``(B) Certain prepayments allowed.--Subparagraph (A) shall
not apply to qualified tuition and related expenses paid during
a taxable year if such expenses are in connection with an
academic term beginning during such taxable year or during the
first 3 months of the next taxable year.
``(4) No deduction for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if the
taxpayer and the taxpayer's spouse file a joint return for the
taxable year.
``(5) Nonresident aliens.--If the taxpayer is a nonresident
alien individual for any portion of the taxable year, this section
shall apply only if such individual is treated as a resident alien
of the United States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.
``(6) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out this
section, including regulations requiring recordkeeping and
information reporting.
``(e) Termination.--This section shall not apply to taxable years
beginning after December 31, 2005.''.
(b) Deduction Allowed in Computing Adjusted Gross Income.--Section
62(a) is amended by inserting after paragraph (17) the following:
``(18) Higher education expenses.--The deduction allowed by
section 222.''.
(c) Conforming Amendments.--
(1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) are
each amended by inserting ``222,'' after ``221,''.
(2) Section 221(b)(2)(C) is amended by inserting ``222,''
before ``911''.
(3) Section 469(i)(3)(F) is amended by striking ``and 221'' and
inserting ``, 221, and 222''.
(4) The table of sections for part VII of subchapter B of
chapter 1 is amended by striking the item relating to section 222
and inserting the following:
``Sec. 222. Qualified tuition and related expenses.
``Sec. 223. Cross reference.''.
(d) Effective Date.--The amendments made by this section shall
apply to payments made in taxable years beginning after December 31,
2001.
Subtitle A--Repeal of Estate and Generation-Skipping Transfer Taxes

3f331042f5d231bc56665218995a0bdf2373c4774394884db7efab92380a5171

(a) Estate Tax Repeal.--Subchapter C of chapter 11 of subtitle B
(relating to miscellaneous) is amended by adding at the end the
following new section:
``SEC. 2210. TERMINATION.
``(a) In General.--Except as provided in subsection (b), this
chapter shall not apply to the estates of decedents dying after
December 31, 2009.
``(b) Certain Distributions From Qualified Domestic Trusts.--In
applying section 2056A with respect to the surviving spouse of a
decedent dying before January 1, 2010--
``(1) section 2056A(b)(1)(A) shall not apply to distributions
made after December 31, 2020, and
``(2) section 2056A(b)(1)(B) shall not apply after December 31,
2009.''.
(b) Generation-Skipping Transfer Tax Repeal.--Subchapter G of
chapter 13 of subtitle B (relating to administration) is amended by
adding at the end the following new section:
``SEC. 2664. TERMINATION.
``This chapter shall not apply to generation-skipping transfers
after December 31, 2009.''.
(c) Conforming Amendments.--
(1) The table of sections for subchapter C of chapter 11 is
amended by adding at the end the following new item:
``Sec. 2210. Termination.''.
(2) The table of sections for subchapter G of chapter 13 is
amended by adding at the end the following new item:
``Sec. 2664. Termination.''.
(d) Effective Date.--The amendments made by this section shall
apply to the estates of decedents dying, and generation-skipping
transfers, after December 31, 2009.
Subtitle B--Reductions of Estate and Gift Tax Rates

efde0af2711822ff38d1eadc551f462ab265f708f3272e14bee637b7666bf2ae

(a) Maximum Rate of Tax Reduced to 50 Percent.--The table contained
in section 2001(c)(1) is amended by striking the two highest brackets
and inserting the following:
``Over $2,500,000
$1,025,800, plus 50% of the excess over $2,500,000.''.
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c) of
section 2001 is amended by striking paragraph (2).
(c) Additional Reductions of Maximum Rate of Tax.--Subsection (c)
of section 2001, as amended by subsection (b), is amended by adding at
the end the following new paragraph:
``(2) Phasedown of maximum rate of tax.--
``(A) In general.--In the case of estates of decedents
dying, and gifts made, in calendar years after 2002 and before
2010, the tentative tax under this subsection shall be
determined by using a table prescribed by the Secretary (in
lieu of using the table contained in paragraph (1)) which is
the same as such table; except that--
``(i) the maximum rate of tax for any calendar year
shall be determined in the table under subparagraph (B),
and
``(ii) the brackets and the amounts setting forth the
tax shall be adjusted to the extent necessary to reflect
the adjustments under subparagraph (A).
``(B) Maximum rate.--
The maximum
``In calendar year:
rate is:
2003......................................................
49 percent
2004......................................................
48 percent
2005......................................................
47 percent
2006......................................................
46 percent
2007, 2008, and 2009......................................
45 percent.''.
(d) Maximum Gift Tax Rate Reduced to Maximum Individual Rate After
2009.--Subsection (a) of section 2502 (relating to rate of tax) is
amended to read as follows:
``(a) Computation of Tax.--
``(1) In general.--The tax imposed by section 2501 for each
calendar year shall be an amount equal to the excess of--
``(A) a tentative tax, computed under paragraph (2), on the
aggregate sum of the taxable gifts for such calendar year and
for each of the preceding calendar periods, over
``(B) a tentative tax, computed under paragraph (2), on the
aggregate sum of the taxable gifts for each of the preceding
calendar periods.
``(2) Rate schedule.--
``If the amount with respect to which the tentative tax to be computed
is:
The tentative tax is:
Not over $10,000
18% of such amount.
Over $10,000 but not over $20,000
$1,800, plus 20% of the excess over $10,000.
Over $20,000 but not over $40,000
$3,800, plus 22% of the excess over $20,000.
Over $40,000 but not over $60,000
$8,200, plus 24% of the excess over $40,000.
Over $60,000 but not over $80,000
$13,000, plus 26% of the excess over $60,000.
Over $80,000 but not over $100,000
$18,200, plus 28% of the excess over $80,000.
Over $100,000 but not over $150,000
$23,800, plus 30% of the excess over $100,000.
Over $150,000 but not over $250,000
$38,800, plus 32% of the excess over $150,000.
Over $250,000 but not over $500,000
$70,800, plus 34% of the excess over $250,000.
Over $500,000
$155,800, plus 35% of the excess over $500,000.''.
(e) Treatment of Certain Transfers in Trust.--Section 2511
(relating to transfers in general) is amended by adding at the end the
following new subsection:
``(c) Treatment of Certain Transfers in Trust.--Notwithstanding any
other provision of this section and except as provided in regulations,
a transfer in trust shall be treated as a taxable gift under section
2503, unless the trust is treated as wholly owned by the donor or the
donor's spouse under subpart E of part I of subchapter J of chapter
1.''.
(f) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall apply to estates of decedents dying,
and gifts made, after December 31, 2001.
(2) Subsection (c).--The amendment made by subsection (c) shall
apply to estates of decedents dying, and gifts made, after December
31, 2002.
(3) Subsections (d) and (e).--The amendments made by
subsections (d) and (e) shall apply to gifts made after December
31, 2009.
Subtitle C--Increase in Exemption Amounts

002a7caf4ff01a75fb485887c4dbd27da5fd9f542070b4e1cb49fe1770e7d0aa

GIFTS EXEMPTION, AND GST EXEMPTION AMOUNTS.
(a) In General.--Subsection (c) of section 2010 (relating to
applicable credit amount) is amended by striking the table and
inserting the following new table:
``In the case of estates of decedents
The applicable
dying during:
exclusion amount is:
2002 and 2003.................................
$1,000,000
2004 and 2005.................................
$1,500,000
2006, 2007, and 2008..........................
$2,000,000
2009..........................................
$3,500,000.''.
(b) Lifetime Gift Exemption Increased to $1,000,000.--
(1) For periods before estate tax repeal.--Paragraph (1) of
section 2505(a) (relating to unified credit against gift tax) is
amended by inserting ``(determined as if the applicable exclusion
amount were $1,000,000)'' after ``calendar year''.
(2) For periods after estate tax repeal.--Paragraph (1) of
section 2505(a) (relating to unified credit against gift tax), as
amended by paragraph (1), is amended to read as follows:
``(1) the amount of the tentative tax which would be determined
under the rate schedule set forth in section 2502(a)(2) if the
amount with respect to which such tentative tax is to be computed
were $1,000,000, reduced by''.
(c) GST Exemption.--
(1) In general.--Subsection (a) of 2631 (relating to GST
exemption) is amended by striking ``of $1,000,000'' and inserting
``amount''.
(2) Exemption amount.--Subsection (c) of section 2631 is
amended to read as follows:
``(c) GST Exemption Amount.--For purposes of subsection (a), the
GST exemption amount for any calendar year shall be equal to the
applicable exclusion amount under section 2010(c) for such calendar
year.''.
(d) Repeal of Special Benefit for Family-Owned Business
Interests.--Section 2057 (relating to family-owned business interests)
is amended by adding at the end the following new subsection:
``(j) Termination.--This section shall not apply to the estates of
decedents dying after December 31, 2003.''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraphs (2) and (3),
the amendments made by this section shall apply to estates of
decedents dying, and gifts made, after December 31, 2001.
(2) Subsection (b)(2).--The amendments made by subsection
(b)(2) shall apply to gifts made after December 31, 2009.
(3) Subsections (c) and (d).--The amendments made by
subsections (c) and (d) shall apply to estates of decedents dying,
and generation-skipping transfers, after December 31, 2003.
Subtitle D--Credit for State Death Taxes

39b1813971eddbb50b06ee521cfed84c5e2165b94db2f1bc581b02ad6e168ad5

(a) In General.--Section 2011(b) (relating to amount of credit) is
amended--
(1) by striking ``Credit.--The credit allowed'' and inserting
``Credit.--
``(1) In general.--Except as provided in paragraph (2), the
credit allowed'',
(2) by striking ``For purposes'' and inserting the following:
``(3) Adjusted taxable estate.--For purposes'', and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) Reduction of maximum credit.--
``(A) In general.--In the case of estates of decedents
dying after December 31, 2001, the credit allowed by this
section shall not exceed the applicable percentage of the
credit otherwise determined under paragraph (1).
``(B) Applicable percentage.--
``In the case of estates of decedents
The applicable
dying during:
percentage is:
2002..........................................
75 percent
2003..........................................
50 percent
2004..........................................
25 percent.''.
(b) Effective Date.--The amendments made by this subsection shall
apply to estates of decedents dying after December 31, 2001.

c34e02f1340ef64de3d8a69672b75e503c1c7f73a27eb6f0dc057af8e0695384

TAXES.
(a) Repeal of Credit.--Section 2011 (relating to credit for State
death taxes) is amended by adding at the end the following new
subsection:
``(g) Termination.--This section shall not apply to the estates of
decedents dying after December 31, 2004.''.
(b) Deduction for State Death Taxes.--Part IV of subchapter A of
chapter 11 is amended by adding at the end the following new section:
``SEC. 2058. STATE DEATH TAXES.
``(a) Allowance of Deduction.--For purposes of the tax imposed by
section 2001, the value of the taxable estate shall be determined by
deducting from the value of the gross estate the amount of any estate,
inheritance, legacy, or succession taxes actually paid to any State or
the District of Columbia, in respect of any property included in the
gross estate (not including any such taxes paid with respect to the
estate of a person other than the decedent).
``(b) Period of Limitations.--The deduction allowed by this section
shall include only such taxes as were actually paid and deduction
therefor claimed before the later of--
``(1) 4 years after the filing of the return required by
section 6018, or
``(2) if--
``(A) a petition for redetermination of a deficiency has
been filed with the Tax Court within the time prescribed in
section 6213(a), the expiration of 60 days after the decision
of the Tax Court becomes final,
``(B) an extension of time has been granted under section
6161 or 6166 for payment of the tax shown on the return, or of
a deficiency, the date of the expiration of the period of the
extension, or
``(C) a claim for refund or credit of an overpayment of tax
imposed by this chapter has been filed within the time
prescribed in section 6511, the latest of the expiration of--
``(i) 60 days from the date of mailing by certified
mail or registered mail by the Secretary to the taxpayer of
a notice of the disallowance of any part of such claim,
``(ii) 60 days after a decision by any court of
competent jurisdiction becomes final with respect to a
timely suit instituted upon such claim, or
``(iii) 2 years after a notice of the waiver of
disallowance is filed under section 6532(a)(3).
Notwithstanding sections 6511 and 6512, refund based on the deduction
may be made if the claim for refund is filed within the period provided
in the preceding sentence. Any such refund shall be made without
interest.''.
(c) Conforming Amendments.--
(1) Subsection (a) of section 2012 is amended by striking ``the
credit for State death taxes provided by section 2011 and''.
(2) Subparagraph (A) of section 2013(c)(1) is amended by
striking ``2011,''.
(3) Paragraph (2) of section 2014(b) is amended by striking ``,
2011,''.
(4) Sections 2015 and 2016 are each amended by striking ``2011
or''.
(5) Subsection (d) of section 2053 is amended to read as
follows:
``(d) Certain Foreign Death Taxes.--
``(1) In general.--Notwithstanding the provisions of subsection
(c)(1)(B), for purposes of the tax imposed by section 2001, the
value of the taxable estate may be determined, if the executor so
elects before the expiration of the period of limitation for
assessment provided in section 6501, by deducting from the value of
the gross estate the amount (as determined in accordance with
regulations prescribed by the Secretary) of any estate, succession,
legacy, or inheritance tax imposed by and actually paid to any
foreign country, in respect of any property situated within such
foreign country and included in the gross estate of a citizen or
resident of the United States, upon a transfer by the decedent for
public, charitable, or religious uses described in section 2055.
The determination under this paragraph of the country within which
property is situated shall be made in accordance with the rules
applicable under subchapter B (sec. 2101 and following) in
determining whether property is situated within or without the
United States. Any election under this paragraph shall be exercised
in accordance with regulations prescribed by the Secretary.
``(2) Condition for allowance of deduction.--No deduction shall
be allowed under paragraph (1) for a foreign death tax specified
therein unless the decrease in the tax imposed by section 2001
which results from the deduction provided in paragraph (1) will
inure solely for the benefit of the public, charitable, or
religious transferees described in section 2055 or section
2106(a)(2). In any case where the tax imposed by section 2001 is
equitably apportioned among all the transferees of property
included in the gross estate, including those described in sections
2055 and 2106(a)(2) (taking into account any exemptions, credits,
or deductions allowed by this chapter), in determining such
decrease, there shall be disregarded any decrease in the Federal
estate tax which any transferees other than those described in
sections 2055 and 2106(a)(2) are required to pay.
``(3) Effect on credit for foreign death taxes of deduction
under this subsection.--
``(A) Election.--An election under this subsection shall be
deemed a waiver of the right to claim a credit, against the
Federal estate tax, under a death tax convention with any
foreign country for any tax or portion thereof in respect of
which a deduction is taken under this subsection.
``(B) Cross reference.--
``See section 2014(f) for the effect of a deduction taken
under this paragraph on the credit for foreign death taxes.''.
(6) Subparagraph (A) of section 2056A(b)(10) is amended--
(A) by striking ``2011,'', and
(B) by inserting ``2058,'' after ``2056,''.
(7)(A) Subsection (a) of section 2102 is amended to read as
follows:
``(a) In General.--The tax imposed by section 2101 shall be
credited with the amounts determined in accordance with sections 2012
and 2013 (relating to gift tax and tax on prior transfers).''.
(B) Section 2102 is amended by striking subsection (b) and by
redesignating subsection (c) as subsection (b).
(C) Section 2102(b)(5) (as redesignated by subparagraph (B))
and section 2107(c)(3) are each amended by striking ``2011 to 2013,
inclusive,'' and inserting ``2012 and 2013''.
(8) Subsection (a) of section 2106 is amended by adding at the
end the following new paragraph:
``(4) State death taxes.--The amount which bears the same ratio
to the State death taxes as the value of the property, as
determined for purposes of this chapter, upon which State death
taxes were paid and which is included in the gross estate under
section 2103 bears to the value of the total gross estate under

e6c02a011b977bde207a5378800a80d9f4c85b31fc7112c90d7f5aae3cdaaf33

taxes' means the taxes described in section 2011(a).''.
(9) Section 2201 is amended--
(A) by striking ``as defined in section 2011(d)'', and
(B) by adding at the end the following new flush sentence:
``For purposes of this section, the additional estate tax is the
difference between the tax imposed by section 2001 or 2101 and the
amount equal to 125 percent of the maximum credit provided by section
2011(b), as in effect before its repeal by the Economic Growth and Tax
Relief Reconciliation Act of 2001.''.
(10) Section 2604 (relating to credit for certain State taxes)
is amended by adding at the end the following new subsection:
``(c) Termination.--This section shall not apply to the generation-
skipping transfers after December 31, 2004.''.
(11) Paragraph (2) of section 6511(i) is amended by striking
``2011(c), 2014(b),'' and inserting ``2014(b)''.
(12) Subsection (c) of section 6612 is amended by striking
``section 2011(c) (relating to refunds due to credit for State
taxes),''.
(13) The table of sections for part II of subchapter A of
chapter 11 is amended by striking the item relating to section
2011.
(14) The table of sections for part IV of subchapter A of
chapter 11 is amended by adding at the end the following new item:
``Sec. 2058. State death taxes.''.
(15) The table of sections for subchapter A of chapter 13 is
amended by striking the item relating to section 2604.
(d) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and generation-skipping transfers,
after December 31, 2004.
Subtitle E--Carryover Basis at Death; Other Changes Taking Effect With
Repeal

60776b13cbfb967634a2244259abe63cb9acc875fc8b7516d96fc4297ef963c5

Section 1014 (relating to basis of property acquired from a
decedent) is amended by adding at the end the following new subsection:
``(f) Termination.--This section shall not apply with respect to
decedents dying after December 31, 2009.''.

b3ccad4e9c93f729246e7f76bf71433cad249a1f9b585d905130685f30a9becb

cfeaa37f2126ae40b52c2dae368ea893c8fafca40a353a5bcc266e44549cbd11

(a) Repeal of Certain Restrictions on Where Land Is Located.--
Clause (i) of section 2031(c)(8)(A) (defining land subject to a
qualified conservation easement) is amended to read as follows:
``(i) which is located in the United States or any
possession of the United States,''.
(b) Clarification of Date for Determining Value of Land and
Easement.--Section 2031(c)(2) (defining applicable percentage) is
amended by adding at the end the following new sentence: ``The values
taken into account under the preceding sentence shall be such values as
of the date of the contribution referred to in paragraph (8)(B).''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying after December 31, 2000.
Subtitle G--Modifications of Generation-Skipping Transfer Tax

f0a457e98c2a291a6863a2e2f070ea3f71b72160dec5eecac05272e092e85d0a

TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 (relating to special rules for
allocation of GST exemption) is amended by redesignating subsection (c)
as subsection (e) and by inserting after subsection (b) the following
new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to GST
Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion ratio for
such property zero. If the amount of the indirect skip exceeds such
unused portion, the entire unused portion shall be allocated to the
property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that portion of
such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b) with
respect to a direct skip occurring during or before the
calendar year in which the indirect skip is made, or
``(C) treated as allocated under paragraph (1) with respect
to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this subsection, the
term `indirect skip' means any transfer of property (other than
a direct skip) subject to the tax imposed by chapter 12 made to
a GST trust.
``(B) GST trust.--The term `GST trust' means a trust that
could have a generation-skipping transfer with respect to the
transferor unless--
``(i) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may
be withdrawn by one or more individuals who are non-skip
persons--
``(I) before the date that the individual attains
age 46,
``(II) on or before one or more dates specified in
the trust instrument that will occur before the date
that such individual attains age 46, or
``(III) upon the occurrence of an event that, in
accordance with regulations prescribed by the
Secretary, may reasonably be expected to occur before
the date that such individual attains age 46,
``(ii) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may
be withdrawn by one or more individuals who are non-skip
persons and who are living on the date of death of another
person identified in the instrument (by name or by class)
who is more than 10 years older than such individuals,
``(iii) the trust instrument provides that, if one or
more individuals who are non-skip persons die on or before
a date or event described in clause (i) or (ii), more than
25 percent of the trust corpus either must be distributed
to the estate or estates of one or more of such individuals
or is subject to a general power of appointment exercisable
by one or more of such individuals,
``(iv) the trust is a trust any portion of which would
be included in the gross estate of a non-skip person (other
than the transferor) if such person died immediately after
the transfer,
``(v) the trust is a charitable lead annuity trust
(within the meaning of section 2642(e)(3)(A)) or a
charitable remainder annuity trust or a charitable
remainder unitrust (within the meaning of section 664(d)),
or
``(vi) the trust is a trust with respect to which a
deduction was allowed under section 2522 for the amount of
an interest in the form of the right to receive annual
payments of a fixed percentage of the net fair market value
of the trust property (determined yearly) and which is
required to pay principal to a non-skip person if such
person is alive when the yearly payments for which the
deduction was allowed terminate.
For purposes of this subparagraph, the value of transferred
property shall not be considered to be includible in the gross
estate of a non-skip person or subject to a right of withdrawal
by reason of such person holding a right to withdraw so much of
such property as does not exceed the amount referred to in
section 2503(b) with respect to any transferor, and it shall be
assumed that powers of appointment held by non-skip persons
will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which section
2642(f) applies shall be deemed to have been made only at the close
of the estate tax inclusion period. The fair market value of such
transfer shall be the fair market value of the trust property at
the close of the estate tax inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by such individual
to a particular trust, and
``(ii) may elect to treat any trust as a GST trust for
purposes of this subsection with respect to any or all
transfers made by such individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect skips.--An
election under subparagraph (A)(i)(I) shall be deemed to be
timely if filed on a timely filed gift tax return for the
calendar year in which the transfer was made or deemed to
have been made pursuant to paragraph (4) or on such later
date or dates as may be prescribed by the Secretary.
``(ii) Other elections.--An election under clause
(i)(II) or (ii) of subparagraph (A) may be made on a timely
filed gift tax return for the calendar year for which the
election is to become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been made,
``(B) such person--
``(i) is a lineal descendant of a grandparent of the
transferor or of a grandparent of the transferor's spouse
or former spouse, and
``(ii) is assigned to a generation below the generation
assignment of the transferor, and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1) by
the transferor is made on a gift tax return filed on or before the
date prescribed by section 6075(b) for gifts made within the
calendar year within which the non-skip person's death occurred--
``(A) the value of such transfer or transfers for purposes
of section 2642(a) shall be determined as if such allocation
had been made on a timely filed gift tax return for each
calendar year within which each transfer was made,
``(B) such allocation shall be effective immediately before
such death, and
``(C) the amount of the transferor's unused GST exemption
available to be allocated shall be determined immediately
before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may permit
income or corpus to be paid to such person on a date or dates in
the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b) is
amended by striking ``with respect to a prior direct skip'' and
inserting ``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal Revenue
Code of 1986 (as added by subsection (a)), and the amendment made
by subsection (b), shall apply to transfers subject to chapter 11
or 12 made after December 31, 2000, and to estate tax inclusion
periods ending after December 31, 2000.
(2) Retroactive allocations.--Section 2632(d) of the Internal
Revenue Code of 1986 (as added by subsection (a)) shall apply to
deaths of non-skip persons occurring after December 31, 2000.

ee8800eca2e6b23da2b47221ace8fe20990914e9af09c3349e6b05522af69cf1

(a) In General.--Subsection (a) of section 2642 (relating to
inclusion ratio) is amended by adding at the end the following new
paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a qualified
severance, the trusts resulting from such severance shall be
treated as separate trusts thereafter for purposes of this
chapter.
``(B) Qualified severance.--For purposes of subparagraph
(A)--
``(i) In general.--The term `qualified severance' means
the division of a single trust and the creation (by any
means available under the governing instrument or under
local law) of two or more trusts if--
``(I) the single trust was divided on a fractional
basis, and
``(II) the terms of the new trusts, in the
aggregate, provide for the same succession of interests
of beneficiaries as are provided in the original trust.
``(ii) Trusts with inclusion ratio greater than zero.--
If a trust has an inclusion ratio of greater than zero and
less than 1, a severance is a qualified severance only if
the single trust is divided into two trusts, one of which
receives a fractional share of the total value of all trust
assets equal to the applicable fraction of the single trust
immediately before the severance. In such case, the trust
receiving such fractional share shall have an inclusion
ratio of zero and the other trust shall have an inclusion
ratio of 1.
``(iii) Regulations.--The term `qualified severance'
includes any other severance permitted under regulations
prescribed by the Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the manner in
which the qualified severance shall be reported to the
Secretary.''.
(b) Effective Date.--The amendment made by this section shall apply
to severances after December 31, 2000.

1210f816f37bfa16264027ab78a2217c61907e6a6e784267c18fe278bc936533

(a) Gifts for Which Gift Tax Return Filed or Deemed Allocation
Made.--Paragraph (1) of section 2642(b) (relating to valuation rules,
etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to any
transfers of property is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for such transfer or
is deemed to be made under section 2632 (b)(1) or (c)(1)--
``(A) the value of such property for purposes of subsection
(a) shall be its value as finally determined for purposes of
chapter 12 (within the meaning of section 2001(f)(2)), or, in
the case of an allocation deemed to have been made at the close
of an estate tax inclusion period, its value at the time of the
close of the estate tax inclusion period, and
``(B) such allocation shall be effective on and after the
date of such transfer, or, in the case of an allocation deemed
to have been made at the close of an estate tax inclusion
period, on and after the close of such estate tax inclusion
period.''.
(b) Transfers at Death.--Subparagraph (A) of section 2642(b)(2) is
amended to read as follows:
``(A) Transfers at death.--If property is transferred as a
result of the death of the transferor, the value of such
property for purposes of subsection (a) shall be its value as
finally determined for purposes of chapter 11; except that, if
the requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met, the
value of such property shall be determined as of the time of
the distribution concerned.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers subject to chapter 11 or 12 of the Internal Revenue
Code of 1986 made after December 31, 2000.

618252326c0b1461e1ea1d7e9e526848262df10b2907ec76b0f3ba07562d08a3

(a) In General.--Section 2642 is amended by adding at the end the
following new subsection:
``(g) Relief Provisions.--
``(1) Relief from late elections.--
``(A) In general.--The Secretary shall by regulation
prescribe such circumstances and procedures under which
extensions of time will be granted to make--
``(i) an allocation of GST exemption described in
paragraph (1) or (2) of subsection (b), and
``(ii) an election under subsection (b)(3) or (c)(5) of
section 2632.
Such regulations shall include procedures for requesting
comparable relief with respect to transfers made before the
date of the enactment of this paragraph.
``(B) Basis for determinations.--In determining whether to
grant relief under this paragraph, the Secretary shall take
into account all relevant circumstances, including evidence of
intent contained in the trust instrument or instrument of
transfer and such other factors as the Secretary deems
relevant. For purposes of determining whether to grant relief
under this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly prescribed by
statute.
``(2) Substantial compliance.--An allocation of GST exemption
under section 2632 that demonstrates an intent to have the lowest
possible inclusion ratio with respect to a transfer or a trust
shall be deemed to be an allocation of so much of the transferor's
unused GST exemption as produces the lowest possible inclusion
ratio. In determining whether there has been substantial
compliance, all relevant circumstances shall be taken into account,
including evidence of intent contained in the trust instrument or
instrument of transfer and such other factors as the Secretary
deems relevant.''.
(b) Effective Dates.--
(1) Relief from late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a)) shall
apply to requests pending on, or filed after, December 31, 2000.
(2) Substantial compliance.--Section 2642(g)(2) of such Code
(as so added) shall apply to transfers subject to chapter 11 or 12
of the Internal Revenue Code of 1986 made after December 31, 2000.
No implication is intended with respect to the availability of
relief from late elections or the application of a rule of
substantial compliance on or before such date.
Subtitle H--Extension of Time for Payment of Estate Tax

14136a1c2ad3c4cffd7c5e3dc0488e6c6d8e4bc18f4f94e1f8fb376f8fe03da5

CLOSELY HELD BUSINESSES.
(a) In General.--Paragraphs (1)(B)(ii), (1)(C)(ii), and
(9)(B)(iii)(I) of section 6166(b) (relating to definitions and special
rules) are each amended by striking ``15'' and inserting ``45''.
(b) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying after December 31, 2001.

8af143631d43a52ef793c0b400e91358f569b7b0e199a44eea1606bc1256fce5

WITH INTERESTS QUALIFYING LENDING AND FINANCE BUSINESSES.
(a) In General.--Section 6166(b) (relating to definitions and
special rules) is amended by adding at the end the following new
paragraph:
``(10) Stock in qualifying lending and finance business treated
as stock in an active trade or business company.--
``(A) In general.--If the executor elects the benefits of
this paragraph, then--
``(i) Stock in qualifying lending and finance business
treated as stock in an active trade or business company.--
For purposes of this section, any asset used in a
qualifying lending and finance business shall be treated as
an asset which is used in carrying on a trade or business.
``(ii) 5-year deferral for principal not to apply.--The
executor shall be treated as having selected under
subsection (a)(3) the date prescribed by section 6151(a).
``(iii) 5 equal installments allowed.--For purposes of
applying subsection (a)(1), `5' shall be substituted for
`10'.
``(B) Definitions.--For purposes of this paragraph--
``(i) Qualifying lending and finance business.--The
term `qualifying lending and finance business' means a
lending and finance business, if--
``(I) based on all the facts and circumstances
immediately before the date of the decedent's death,
there was substantial activity with respect to the
lending and finance business, or
``(II) during at least 3 of the 5 taxable years
ending before the date of the decedent's death, such
business had at least 1 full-time employee
substantially all of whose services were the active
management of such business, 10 full-time, nonowner
employees substantially all of whose services were
directly related to such business, and $5,000,000 in
gross receipts from activities described in clause
(ii).
``(ii) Lending and finance business.--The term `lending
and finance business' means a trade or business of--
``(I) making loans,
``(II) purchasing or discounting accounts
receivable, notes, or installment obligations,
``(III) engaging in rental and leasing of real and
tangible personal property, including entering into
leases and purchasing, servicing, and disposing of
leases and leased assets,
``(IV) rendering services or making facilities
available in the ordinary course of a lending or
finance business, and
``(V) rendering services or making facilities
available in connection with activities described in
subclauses (I) through (IV) carried on by the
corporation rendering services or making facilities
available, or another corporation which is a member of
the same affiliated group (as defined in section 1504
without regard to section 1504(b)(3)).
``(iii) Limitation.--The term `qualifying lending and
finance business' shall not include any interest in an
entity, if the stock or debt of such entity or a controlled
group (as defined in section 267(f)(1)) of which such
entity was a member was readily tradable on an established
securities market or secondary market (as defined by the
Secretary) at any time within 3 years before the date of
the decedent's death.''.
(b) Effective Date.--The amendment made by this section shall apply
to estates of decedents dying after December 31, 2001.

0e0237b91c1b8b23adc0b279ab94b22037db3d0de77b9f01e0343f31efaafd0f

(a) In General.--Subparagraph (B) of section 6166(b)(8) (relating
to all stock must be non-readily-tradable stock) is amended to read as
follows:
``(B) All stock must be non-readily-tradable stock.--
``(i) In general.--No stock shall be taken into account
for purposes of applying this paragraph unless it is non-
readily-tradable stock (within the meaning of paragraph
(7)(B)).
``(ii) Special application where only holding company
stock is non-readily-tradable stock.--If the requirements
of clause (i) are not met, but all of the stock of each
holding company taken into account is non-readily-tradable,
then this paragraph shall apply, but subsection (a)(1)
shall be applied by substituting `5' for `10'.''.
(b) Effective Date.--The amendment made by this section shall apply
to estates of decedents dying after December 31, 2001.
Subtitle I--Other Provisions

88c4abbc2abc8c97f4422c825441635c88e5745ab73f2d29208eeab664c1b63b

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

e27d3eb57a37c108688fecae491bc7d5b487cf66141e6bf6b8b99758867dfda8

(a) Increase in Contribution Limit.--
(1) In general.--Paragraph (1)(A) of section 219(b) (relating
to maximum amount of deduction) is amended by striking ``$2,000''
and inserting ``the deductible amount''.
(2) Deductible amount.--Section 219(b) is amended by adding at
the end the following new paragraph:
``(5) Deductible amount.--For purposes of paragraph (1)(A)--
``(A) In general.--The deductible amount shall be
determined in accordance with the following table:
``For taxable years
The deductible
beginning in:
amount is:
2002 through 2004.................................
$3,000
2005 through 2007.................................
$4,000
2008 and thereafter...............................
$5,000.
``(B) Catch-up contributions for individuals 50 or older.--
``(i) In general.--In the case of an individual who has
attained the age of 50 before the close of the taxable
year, the deductible amount for such taxable year shall be
increased by the applicable amount.
``(ii) Applicable amount.--For purposes of clause (i),
the applicable amount shall be the amount determined in
accordance with the following table:
``For taxable years
The applicable
beginning in:
amount is:
2002 through 2005.................................
$500
2006 and thereafter...............................
$1,000.
``(C) Cost-of-living adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2008, the $5,000 amount
under subparagraph (A) shall be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2007' for `calendar year 1992' in
subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $500, such amount
shall be rounded to the next lower multiple of $500.''.
(b) Conforming Amendments.--
(1) Section 408(a)(1) is amended by striking ``in excess of
$2,000 on behalf of any individual'' and inserting ``on behalf of
any individual in excess of the amount in effect for such taxable
year under section 219(b)(1)(A)''.
(2) Section 408(b)(2)(B) is amended by striking ``$2,000'' and
inserting ``the dollar amount in effect under section
219(b)(1)(A)''.
(3) Section 408(b) is amended by striking ``$2,000'' in the
matter following paragraph (4) and inserting ``the dollar amount in
effect under section 219(b)(1)(A)''.
(4) Section 408(j) is amended by striking ``$2,000''.
(5) Section 408(p)(8) is amended by striking ``$2,000'' and
inserting ``the dollar amount in effect under section
219(b)(1)(A)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.

294223e43fb15634c3b11cbffa48c8cfa330a8b337365eab9abdca3023225a3f

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

e0bb8748f1b4028ae1ec434d7602742910e39a0288a310d59ddfe3c84906f916

(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating to
limitation for defined benefit plans) is amended by striking
``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended in the headings and the text, by striking ``$90,000''
and inserting ``$160,000'',
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000''' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$160,000'''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking ``the
social security retirement age'' each place it appears in the
heading and text and inserting ``age 62'' and by striking the
second sentence.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking ``the
social security retirement age'' each place it appears in the
heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section 415
(related to cost-of-living adjustments) is amended--
(A) by striking ``$90,000'' in paragraph (1)(A) and
inserting ``$160,000''; and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading and
inserting ``$160,000''; and
(ii) by striking ``October 1, 1986'' and inserting
``July 1, 2001''.
(5) Conforming amendments.--
(A) Section 415(b)(2) is amended by striking subparagraph
(F).
(B) Section 415(b)(9) is amended to read as follows:
``(9) Special rule for commercial airline pilots.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of any participant who is a commercial airline
pilot, if, as of the time of the participant's retirement,
regulations prescribed by the Federal Aviation Administration
require an individual to separate from service as a commercial
airline pilot after attaining any age occurring on or after age
60 and before age 62, paragraph (2)(C) shall be applied by
substituting such age for age 62.
``(B) Individuals who separate from service before age
60.--If a participant described in subparagraph (A) separates
from service before age 60, the rules of paragraph (2)(C) shall
apply.''.
(C) Section 415(b)(10)(C)(i) is amended by striking
``applied without regard to paragraph (2)(F)''.
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is amended
by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section 415
(related to cost-of-living adjustments) is amended--
(A) by striking ``$30,000'' in paragraph (1)(C) and
inserting ``$40,000''; and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading and
inserting ``$40,000''; and
(ii) by striking ``October 1, 1993'' and inserting
``July 1, 2001''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l), 408(k),
and 505(b)(7) are each amended by striking ``$150,000'' each place
it appears and inserting ``$200,000''.
(2) Base period and rounding of cost-of-living adjustment.--
Subparagraph (B) of section 401(a)(17) is amended--
(A) by striking ``October 1, 1993'' and inserting ``July 1,
2001''; and
(B) by striking ``$10,000'' both places it appears and
inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended to read
as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections (e)(3) and
(h)(1)(B), the elective deferrals of any individual for any
taxable year shall be included in such individual's gross
income to the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be the
amount determined in accordance with the following table:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2002..............................................
$11,000
2003..............................................
$12,000
2004..............................................
$13,000
2005..............................................
$14,000
2006 or thereafter................................
$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section 402(g)
is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable years
beginning after December 31, 2006, the Secretary shall adjust the
$15,000 amount under paragraph (1)(B) at the same time and in the
same manner as under section 415(d), except that the base period
shall be the calendar quarter beginning July 1, 2005, and any
increase under this paragraph which is not a multiple of $500 shall
be rounded to the next lowest multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on exclusion for
elective deferrals), as amended by paragraphs (1) and (2), is
further amended by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5),
(6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is amended by striking
``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is amended by
striking ``(other than paragraph (4) thereof)''.
(e) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred compensation
plans of State and local governments and tax-exempt organizations)
is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the applicable
dollar amount''; and
(B) in subsection (b)(3)(A) by striking ``$15,000'' and
inserting ``twice the dollar amount in effect under subsection
(b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount shall be
the amount determined in accordance with the following table:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2002..............................................
$11,000
2003..............................................
$12,000
2004..............................................
$13,000
2005..............................................
$14,000
2006 or thereafter................................
$15,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2006, the Secretary shall
adjust the $15,000 amount under subparagraph (A) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2005, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A) (relating
to general rule for qualified salary reduction arrangement) is
amended by striking ``$6,000'' and inserting ``the applicable
dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of 408(p)(2) is
amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of subparagraph
(A)(ii), the applicable dollar amount shall be the amount
determined in accordance with the following table:
``For years
The applicable
beginning in
dollar amount:
calendar year:
2002..........................................
$7,000
2003..........................................
$8,000
2004..........................................
$9,000
2005 or thereafter............................
$10,000.
``(ii) Cost-of-living adjustment.--In the case of a
year beginning after December 31, 2005, the Secretary shall
adjust the $10,000 amount under clause (i) at the same time
and in the same manner as under section 415(d), except that
the base period taken into account shall be the calendar
quarter beginning July 1, 2004, and any increase under this
subparagraph which is not a multiple of $500 shall be
rounded to the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Subclause (I) of section 401(k)(11)(B)(i) is amended by
striking ``$6,000'' and inserting ``the amount in effect under
section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking subparagraph
(E).
(g) Certain Compensation Limits.--
(1) In general.--Subparagraph (A) of section 401(c)(2)
(defining earned income) is amended by adding at the end thereof
the following new sentence: ``For purposes of this part only (other
than sections 419 and 419A), this subparagraph shall be applied as
if the term `trade or business' for purposes of section 1402
included service described in section 1402(c)(6).''.
(2) Simple retirement accounts.--Clause (ii) of section
408(p)(6)(A) (defining self-employed) is amended by adding at the
end the following new sentence: ``The preceding sentence shall be
applied as if the term `trade or business' for purposes of section
1402 included service described in section 1402(c)(6).''.
(h) Rounding Rule Relating to Defined Benefit Plans and Defined
Contribution Plans.--Paragraph (4) of section 415(d) is amended to read
as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under subparagraph (A)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
``(B) $40,000 amount.--Any increase under subparagraph (C)
of paragraph (1) which is not a multiple of $1,000 shall be
rounded to the next lowest multiple of $1,000.''.
(i) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 2001.
(2) Defined benefit plans.--The amendments made by subsection
(a) shall apply to years ending after December 31, 2001.

23c6e86496f2655607541a351df1ecdc5141715f9df9a6ffa06dfb7dc72012c9

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

d1118168f32487412be1634925d859eb2b08e8412cf1e7de1a5ecf00cd3c90fd

(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key employee)
is amended--
(A) by striking ``or any of the 4 preceding plan years'' in
the matter preceding clause (i);
(B) by striking clause (i) and inserting the following:
``(i) an officer of the employer having an annual
compensation greater than $130,000,'';
(C) by striking clause (ii) and redesignating clauses (iii)
and (iv) as clauses (ii) and (iii), respectively; and
(D) by striking the second sentence in the matter following
clause (iii), as redesignated by subparagraph (C), and by
inserting the following: ``in the case of plan years beginning
after December 31, 2002, the $130,000 amount in clause (i)
shall be adjusted at the same time and in the same manner as
under section 415(d), except that the base period shall be the
calendar quarter beginning July 1, 2001, and any increase under
this sentence which is not a multiple of $5,000 shall be
rounded to the next lower multiple of $5,000.''.
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is amended
by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined
contribution plans) is amended by adding at the end the following:
``Employer matching contributions (as defined in section 401(m)(4)(A))
shall be taken into account for purposes of this subparagraph (and any
reduction under this sentence shall not be taken into account in
determining whether section 401(k)(4)(A) applies).''.
(c) Distributions During Last Year Before Determination Date Taken
Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended to
read as follows:
``(3) Distributions during last year before determination date
taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative accrued
benefit for any employee, or
``(ii) the amount of the account of any employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such employee
under the plan during the 1-year period ending on the
determination date. The preceding sentence shall also apply to
distributions under a terminated plan which if it had not been
terminated would have been required to be included in an
aggregation group.
``(B) 5-year period in case of in-service distribution.--In
the case of any distribution made for a reason other than
separation from service, death, or disability, subparagraph (A)
shall be applied by substituting `5-year period' for `1-year
period'.''.
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date''; and
(B) by striking ``5-year period'' and inserting ``1-year
period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of section 416(g)
(relating to other special rules for top-heavy plans) is amended by
adding at the end the following new subparagraph:
``(H) Cash or deferred arrangements using alternative
methods of meeting nondiscrimination requirements.--The term
`top-heavy plan' shall not include a plan which consists solely
of--
``(i) a cash or deferred arrangement which meets the
requirements of section 401(k)(12), and
``(ii) matching contributions with respect to which the
requirements of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a
top-heavy plan because it is a member of an aggregation group
which is a top-heavy group, contributions under the plan may be
taken into account in determining whether any other plan in the
group meets the requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit
plans) is amended--
(A) by striking ``clause (ii)'' in clause (i) and inserting
``clause (ii) or (iii)''; and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For purposes of
determining an employee's years of service with the
employer, any service with the employer shall be
disregarded to the extent that such service occurs during a
plan year when the plan benefits (within the meaning of
section 410(b)) no key employee or former key employee.''.
(f) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2001.

adb2c2d81d8877e8609f03765ac1c55a88dc2c0ed5c6c2746ea40e5accc1afab

DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or annuity plan and
compensation under a deferred payment plan) is amended by adding at the
end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for Purposes of
Deduction Limits.--Elective deferrals (as defined in section 402(g)(3))
shall not be subject to any limitation contained in paragraph (3), (7),
or (9) of subsection (a), and such elective deferrals shall not be
taken into account in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2001.

af3e7cede9b3fb0f0987fee1106528db27dcc30c3d49ede62da39a227c6f98fd

PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 611, is amended to read as
follows:
``(c) Limitation.--The maximum amount of the compensation of any
one individual which may be deferred under subsection (a) during any
taxable year shall not exceed the amount in effect under subsection
(b)(2)(A) (as modified by any adjustment provided under subsection
(b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 2001.

2964505f138e6e3527038853383f5601932a6109b48b5554248d076ed44d6a9e

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

77c3d955b32cd01c4bbece0987caf770af0c92de99030f5e0302c58baddb40a3

CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of chapter 1
(relating to deferred compensation, etc.) is amended by inserting after
section 402 the following new section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS ROTH
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan includes a
qualified Roth contribution program--
``(1) any designated Roth contribution made by an employee
pursuant to the program shall be treated as an elective deferral
for purposes of this chapter, except that such contribution shall
not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement of
this chapter solely by reason of including such program.
``(b) Qualified Roth Contribution Program.--For purposes of this
section--
``(1) In general.--The term `qualified Roth contribution
program' means a program under which an employee may elect to make
designated Roth contributions in lieu of all or a portion of
elective deferrals the employee is otherwise eligible to make under
the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified Roth contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated Roth
accounts') for the designated Roth contributions of each
employee and any earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with respect to each
account.
``(c) Definitions and Rules Relating to Designated Roth
Contributions.--For purposes of this section--
``(1) Designated roth contribution.--The term `designated Roth
contribution' means any elective deferral which--
``(A) is excludable from gross income of an employee
without regard to this section, and
``(B) the employee designates (at such time and in such
manner as the Secretary may prescribe) as not being so
excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals excludable
from gross income of the employee for the taxable year (without
regard to this section), over
``(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any payment
or distribution from a designated Roth account which is
otherwise allowable under this chapter may be made only if the
contribution is to--
``(i) another designated Roth account of the individual
from whose account the payment or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover contribution
to a designated Roth account under subparagraph (A) shall not
be taken into account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a designated
Roth account shall not be includible in gross income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified distribution' has
the meaning given such term by section 408A(d)(2)(A) (without
regard to clause (iv) thereof).
``(B) Distributions within nonexclusion period.--A payment
or distribution from a designated Roth account shall not be
treated as a qualified distribution if such payment or
distribution is made within the 5-taxable-year period beginning
with the earlier of--
``(i) the first taxable year for which the individual
made a designated Roth contribution to any designated Roth
account established for such individual under the same
applicable retirement plan, or
``(ii) if a rollover contribution was made to such
designated Roth account from a designated Roth account
previously established for such individual under another
applicable retirement plan, the first taxable year for
which the individual made a designated Roth contribution to
such previously established account.
``(C) Distributions of excess deferrals and contributions
and earnings thereon.--The term `qualified distribution' shall
not include any distribution of any excess deferral under
section 402(g)(2) or any excess contribution under section
401(k)(8), and any income on the excess deferral or
contribution.
``(3) Treatment of distributions of certain excess deferrals.--
Notwithstanding section 72, if any excess deferral under section
402(g)(2) attributable to a designated Roth contribution is not
distributed on or before the 1st April 15 following the close of
the taxable year in which such excess deferral is made, the amount
of such excess deferral shall--
``(A) not be treated as investment in the contract, and
``(B) be included in gross income for the taxable year in
which such excess is distributed.
``(4) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated Roth account and other distributions and payments from
the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(2) Elective deferral.--The term `elective deferral' means
any elective deferral described in subparagraph (A) or (C) of
section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to limitation on
exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1)(A) (as added by
section 201(c)(1)) the following new sentence: ``The preceding
sentence shall not apply the portion of such excess as does not
exceed the designated Roth contributions of the individual for the
taxable year.''; and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph (2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is amended by
adding at the end the following:
``If any portion of an eligible rollover distribution is
attributable to payments or distributions from a designated
Roth account (as defined in section 402A), an eligible
retirement plan with respect to such portion shall include only
another designated Roth account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated Roth contributions
(as defined in section 402A)'' before the comma at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f) as subsection (g) and by inserting after subsection
(e) the following new subsection:
``(f) Designated Roth Contributions.--The Secretary shall require
the plan administrator of each applicable retirement plan (as defined
in section 402A) to make such returns and reports regarding designated
Roth contributions (as defined in section 402A) to the Secretary,
participants and beneficiaries of the plan, and such other persons as
the Secretary may prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of subchapter
D of chapter 1 is amended by inserting after the item relating to
section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as Roth
contributions.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.

a392aa56a2650e33da9a6be41a1f31ec92d3ebb4594b4ad7b772ea77e6ee651d

DEFERRALS AND IRA CONTRIBUTIONS.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 25A the following new section:
``SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN
INDIVIDUALS.
``(a) Allowance of Credit.--In the case of an eligible individual,
there shall be allowed as a credit against the tax imposed by this
subtitle for the taxable year an amount equal to the applicable
percentage of so much of the qualified retirement savings contributions
of the eligible individual for the taxable year as do not exceed
$2,000.
``(b) Applicable Percentage.--For purposes of this section, the
applicable percentage is the percentage determined in accordance with
the following table:
------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------
Joint return           Head of a        All other cases   Applicable
---------------------      household     -------------------- percentage
--------------------
Over     Not over    Over    Not over    Over    Not over
------------------------------------------------------------------------
$30,000    ........  $22,500   ........  $15,000          50
30,000     32,500     22,500    24,375    15,000    16,250          20
32,500     50,000     24,375    37,500    16,250    25,000          10
50,000    .........   37,500   ........   25,000   ........          0
------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual' means any
individual if such individual has attained the age of 18 as of the
close of the taxable year.
``(2) Dependents and full-time students not eligible.--The term
`eligible individual' shall not include--
``(A) any individual with respect to whom a deduction under
section 151 is allowed to another taxpayer for a taxable year
beginning in the calendar year in which such individual's
taxable year begins, and
``(B) any individual who is a student (as defined in
section 151(c)(4)).
``(d) Qualified Retirement Savings Contributions.--For purposes of
this section--
``(1) In general.--The term `qualified retirement savings
contributions' means, with respect to any taxable year, the sum
of--
``(A) the amount of the qualified retirement contributions
(as defined in section 219(e)) made by the eligible individual,
``(B) the amount of--
``(i) any elective deferrals (as defined in section
402(g)(3)) of such individual, and
``(ii) any elective deferral of compensation by such
individual under an eligible deferred compensation plan (as
defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A), and
``(C) the amount of voluntary employee contributions by
such individual to any qualified retirement plan (as defined in
section 4974(c)).
``(2) Reduction for certain distributions.--
``(A) In general.--The qualified retirement savings
contributions determined under paragraph (1) shall be reduced
(but not below zero) by the sum of--
``(i) any distribution from a qualified retirement plan
(as defined in section 4974(c)), or from an eligible
deferred compensation plan (as defined in section 457(b)),
received by the individual during the testing period which
is includible in gross income, and
``(ii) any distribution from a Roth IRA or a Roth
account received by the individual during the testing
period which is not a qualified rollover contribution (as
defined in section 408A(e)) to a Roth IRA or a rollover
under section 402(c)(8)(B) to a Roth account.
``(B) Testing period.--For purposes of subparagraph (A),
the testing period, with respect to a taxable year, is the
period which includes--
``(i) such taxable year,
``(ii) the 2 preceding taxable years, and
``(iii) the period after such taxable year and before
the due date (including extensions) for filing the return
of tax for such taxable year.
``(C) Excepted distributions.--There shall not be taken
into account under subparagraph (A)--
``(i) any distribution referred to in section 72(p),
401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
``(ii) any distribution to which section 408A(d)(3)
applies.
``(D) Treatment of distributions received by spouse of
individual.--For purposes of determining distributions received
by an individual under subparagraph (A) for any taxable year,
any distribution received by the spouse of such individual
shall be treated as received by such individual if such
individual and spouse file a joint return for such taxable year
and for the taxable year during which the spouse receives the
distribution.
``(e) Adjusted Gross Income.--For purposes of this section,
adjusted gross income shall be determined without regard to sections
911, 931, and 933.
``(f) Investment in the Contract.--Notwithstanding any other
provision of law, a qualified retirement savings contribution shall not
fail to be included in determining the investment in the contract for
purposes of section 72 by reason of the credit under this section.
``(g) Termination.--This section shall not apply to taxable years
beginning after December 31, 2006.''.
(b) Credit Allowed Against Regular Tax and Alternative Minimum
Tax.--
(1) In general.--Section 25B, as added by subsection (a), is
amended by inserting after subsection (f) the following new
subsection:
``(g) Limitation Based on Amount of Tax.--The credit allowed under
subsection (a) for the taxable year shall not exceed the excess of--
``(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(2) the sum of the credits allowable under this subpart
(other than this section and section 23) and section 27 for the
taxable year.''.
(2) Conforming amendments.--
(A) Section 24(b)(3)(B), as amended by sections 201(b) and
203(d), is amended by striking ``section 23'' and inserting
``sections 23 and 25B''.
(B) Section 25(e)(1)(C), as amended by section 201(b), is
amended by inserting ``25B,'' after ``24,''.
(C) Section 26(a)(1), as amended by sections 201(b) and
203, is amended by striking ``and 24'' and inserting ``, 24,
and 25B''.
(D) Section 904(h), as amended by sections 201(b) and 203,
is amended by striking ``and 24'' and inserting ``, 24, and
25B''.
(E) Section 1400C(d), as amended by sections 201(b) and
203, is amended by striking ``and 24'' and inserting ``, 24,
and 25B''.
(c) Conforming Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1, as amended by section 432, is
amended by inserting after the item relating to section 25A the
following new item:
``Sec. 25B. Elective deferrals and IRA contributions by certain
individuals.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.

07f6891592a2d9062886452031ae8b209fdb01caca132a5edf5b17939b3cbd40

(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by adding at the end
the following new section:
``SEC. 45E. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer, the small employer pension plan startup cost credit
determined under this section for any taxable year is an amount equal
to 50 percent of the qualified startup costs paid or incurred by the
taxpayer during the taxable year.
``(b) Dollar Limitation.--The amount of the credit determined under
this section for any taxable year shall not exceed--
``(1) $500 for the first credit year and each of the 2 taxable
years immediately following the first credit year, and
``(2) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has the meaning
given such term by section 408(p)(2)(C)(i).
``(2) Requirement for new qualified employer plans.--Such term
shall not include an employer if, during the 3-taxable year period
immediately preceding the 1st taxable year for which the credit
under this section is otherwise allowable for a qualified employer
plan of the employer, the employer or any member of any controlled
group including the employer (or any predecessor of either)
established or maintained a qualified employer plan with respect to
which contributions were made, or benefits were accrued, for
substantially the same employees as are in the qualified employer
plan.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified startup costs' means
any ordinary and necessary expenses of an eligible employer
which are paid or incurred in connection with--
``(i) the establishment or administration of an
eligible employer plan, or
``(ii) the retirement-related education of employees
with respect to such plan.
``(B) Plan must have at least 1 participant.--Such term
shall not include any expense in connection with a plan that
does not have at least 1 employee eligible to participate who
is not a highly compensated employee.
``(2) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of section
4972(d).
``(3) First credit year.--The term `first credit year' means--
``(A) the taxable year which includes the date that the
eligible employer plan to which such costs relate becomes
effective, or
``(B) at the election of the eligible employer, the taxable
year preceding the taxable year referred to in subparagraph
(A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52, or subsection
(n) or (o) of section 414, shall be treated as one person. All
eligible employer plans shall be treated as 1 eligible employer
plan.
``(2) Disallowance of deduction.--No deduction shall be allowed
for that portion of the qualified startup costs paid or incurred
for the taxable year which is equal to the credit determined under
subsection (a).
``(3) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer elects to
have this section not apply for such taxable year.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) (defining current year business credit) is amended by striking
``plus'' at the end of paragraph (12), by striking the period at the
end of paragraph (13) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(14) in the case of an eligible employer (as defined in
section 45E(c)), the small employer pension plan startup cost
credit determined under section 45E(a).''.
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the following
new paragraph:
``(10) No carryback of small employer pension plan startup cost
credit before january 1, 2002.--No portion of the unused business
credit for any taxable year which is attributable to the small
employer pension plan startup cost credit determined under section
45E may be carried back to a taxable year beginning before January
1, 2002.''.
(2) Subsection (c) of section 196 is amended by striking
``and'' at the end of paragraph (8), by striking the period at the
end of paragraph (9) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(10) the small employer pension plan startup cost credit
determined under section 45E(a).''.
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45E. Small employer pension plan startup costs.''.
(d) Effective Date.--The amendments made by this section shall
apply to costs paid or incurred in taxable years beginning after
December 31, 2001, with respect to qualified employer plans established
after such date.

319cadb84b65830e9ee00c8bb83da3051b2c950ad2a6b8fd885fee5365d8a3c0

PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment of user
fees under the program established under section 10511 of the Revenue
Act of 1987 for requests to the Internal Revenue Service for
determination letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible employers or any
trust which is part of the plan. The preceding sentence shall not apply
to any request--
(1) made after the later of--
(A) the fifth plan year the pension benefit plan is in
existence; or
(B) the end of any remedial amendment period with respect
to the plan beginning within the first 5 plan years; or
(2) made by the sponsor of any prototype or similar plan which
the sponsor intends to market to participating employers.
(b) Pension Benefit Plan.--For purposes of this section, the term
``pension benefit plan'' means a pension, profit-sharing, stock bonus,
annuity, or employee stock ownership plan.
(c) Eligible Employer.--For purposes of this section, the term
``eligible employer'' means an eligible employer (as defined in section
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986) which has at
least one employee who is not a highly compensated employee (as defined
in section 414(q)) and is participating in the plan. The determination
of whether an employer is an eligible employer under this section shall
be made as of the date of the request described in subsection (a).
(d) Determination of Average Fees Charged.--For purposes of any
determination of average fees charged, any request to which subsection
(a) applies shall not be taken into account.
(e) Effective Date.--The provisions of this section shall apply
with respect to requests made after December 31, 2001.

139efc45706151959da2ccd166e6f804ec3e998d7274603e90743e1c8c5c476c

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

a635e15e5f4c6cb2c1e43ed04344a6dba24a70c88ad52a6dd0838d116d4c0906

(a) In General.--Section 414 (relating to definitions and special
rules) is amended by adding at the end the following new subsection:
``(v) Catch-up Contributions for Individuals Age 50 or Over.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title solely
because the plan permits an eligible participant to make additional
elective deferrals in any plan year.
``(2) Limitation on amount of additional deferrals.--
``(A) In general.--A plan shall not permit additional
elective deferrals under paragraph (1) for any year in an
amount greater than the lesser of--
``(i) the applicable dollar amount, or
``(ii) the excess (if any) of--
``(I) the participant's compensation (as defined in
section 415(c)(3)) for the year, over
``(II) any other elective deferrals of the
participant for such year which are made without regard
to this subsection.
``(B) Applicable dollar amount.--For purposes of this
paragraph--
``(i) In the case of an applicable employer plan other
than a plan described in section 401(k)(11) or 408(p), the
applicable dollar amount shall be determined in accordance
with the following table:
``For taxable years
The applicable
beginning in:
dollar amount is:
2002......................................................
$1,000
2003......................................................
$2,000
2004......................................................
$3,000
2005......................................................
$4,000
2006 and thereafter.......................................
$5,000.
``(ii) In the case of an applicable employer plan
described in section 401(k)(11) or 408(p), the applicable
dollar amount shall be determined in accordance with the
following table:
``For taxable years
The applicable
beginning in:
dollar amount is:
2002......................................................
$500
2003......................................................
$1,000
2004......................................................
$1,500
2005......................................................
$2,000
2006 and thereafter.......................................
$2,500.
``(C) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2006, the Secretary shall adjust
annually the $5,000 amount in subparagraph (B)(i) and the
$2,500 amount in subparagraph (B)(ii) for increases in the
cost-of-living at the same time and in the same manner as
adjustments under section 415(d); except that the base period
taken into account shall be the calendar quarter beginning July
1, 2005, and any increase under this subparagraph which is not
a multiple of $500 shall be rounded to the next lower multiple
of $500.''.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1)--
``(A) such contribution shall not, with respect to the year
in which the contribution is made--
``(i) be subject to any otherwise applicable limitation
contained in section 402(g), 402(h), 403(b), 404(a),
404(h), 408(k), 408(p), 415, or 457, or
``(ii) be taken into account in applying such
limitations to other contributions or benefits under such
plan or any other such plan, and
``(B) except as provided in paragraph (4), such plan shall
not be treated as failing to meet the requirements of section
401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),
403(b)(12), 408(k), 408(p), 408B, 410(b), or 416 by reason of
the making of (or the right to make) such contribution.
``(4) Application of nondiscrimination rules.--
``(A) In general.--An applicable employer plan shall be
treated as failing to meet the nondiscrimination requirements
under section 401(a)(4) with respect to benefits, rights, and
features unless the plan allows all eligible participants to
make the same election with respect to the additional elective
deferrals under this subsection.
``(B) Aggregation.--For purposes of subparagraph (A), all
plans maintained by employers who are treated as a single
employer under subsection (b), (c), (m), or (o) of section 414
shall be treated as 1 plan.
``(5) Eligible participant.--For purposes of this subsection,
the term `eligible participant' means, with respect to any plan
year, a participant in a plan--
``(A) who has attained the age of 50 before the close of
the plan year, and
``(B) with respect to whom no other elective deferrals may
(without regard to this subsection) be made to the plan for the
plan year by reason of the application of any limitation or
other restriction described in paragraph (3) or comparable
limitation or restriction contained in the terms of the plan.
``(6) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable employer plan.--The term `applicable
employer plan' means--
``(i) an employees' trust described in section 401(a)
which is exempt from tax under section 501(a),
``(ii) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b),
``(iii) an eligible deferred compensation plan under
section 457 of an eligible employer described in section
457(e)(1)(A), and
``(iv) an arrangement meeting the requirements of
section 408 (k) or (p).
``(B) Elective deferral.--The term `elective deferral' has
the meaning given such term by subsection (u)(2)(C).
``(C) Exception for section 457 plans.--This subsection
shall not apply to an applicable employer plan described in
subparagraph (A)(iii) for any year to which section 457(b)(3)
applies.''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions in taxable years beginning after December 31, 2001.

d0a002f3cbb39be56f244848b64e9ac9ec54ace43d3a769f97c3efa1a750cd21

CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is amended
by striking ``25 percent'' and inserting ``100 percent''.
(2) Application to section 403(b).--Section 403(b) is amended--
(A) by striking ``the exclusion allowance for such taxable
year'' in paragraph (1) and inserting ``the applicable limit
under section 415'',
(B) by striking paragraph (2), and
(C) by inserting ``or any amount received by a former
employee after the fifth taxable year following the taxable
year in which such employee was terminated'' before the period
at the end of the second sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by striking
``section 403(b)(2)(D)(iii))'' and inserting ``section
403(b)(2)(D)(iii), as in effect before the enactment of the
Economic Growth and Tax Relief Reconciliation Act of 2001''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``, and the
amount of the contribution for such portion shall reduce the
exclusion allowance as provided in section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the end the
following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term `participant's
compensation' means the participant's includible compensation
determined under section 403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph (4).
(F) Section 415(c)(7) is amended to read as follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other provision of
this subsection, at the election of a participant who is an
employee of a church or a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), contributions and other additions for an
annuity contract or retirement income account described in
section 403(b) with respect to such participant, when expressed
as an annual addition to such participant's account, shall be
treated as not exceeding the limitation of paragraph (1) if
such annual addition is not in excess of $10,000.
``(B) $40,000 aggregate limitation.--The total amount of
additions with respect to any participant which may be taken
into account for purposes of this subparagraph for all years
may not exceed $40,000.
``(C) Annual addition.--For purposes of this paragraph, the
term `annual addition' has the meaning given such term by
paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 611(c)(3)) is amended by inserting before the period
at the end the following: ``(as in effect before the enactment
of the Economic Growth and Tax Relief Reconciliation Act of
2001''.
(H) Section 664(g) is amended--
(i) in paragraph (3)(E) by striking ``limitations under
section 415(c)'' and inserting ``applicable limitation
under paragraph (7)'', and
(ii) by adding at the end the following new paragraph:
``(7) Applicable limitation.--
``(A) In general.--For purposes of paragraph (3)(E), the
applicable limitation under this paragraph with respect to a
participant is an amount equal to the lesser of--
``(i) $30,000, or
``(ii) 25 percent of the participant's compensation (as
defined in section 415(c)(3)).
``(B) Cost-of-living adjustment.--The Secretary shall
adjust annually the $30,000 amount under subparagraph (A)(i) at
the same time and in the same manner as under section 415(d),
except that the base period shall be the calendar quarter
beginning October 1, 1993, and any increase under this
subparagraph which is not a multiple of $5,000 shall be rounded
to the next lowest multiple of $5,000.''.
(4) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended by
adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For purposes
of this section, any annuity contract described in section 403(b)
for the benefit of a participant shall be treated as a defined
contribution plan maintained by each employer with respect to which
the participant has the control required under subsection (b) or
(c) of section 414 (as modified by subsection (h)). For purposes of
this section, any contribution by an employer to a simplified
employee pension plan for an individual for a taxable year shall be
treated as an employer contribution to a defined contribution plan
for such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph (1) shall
apply to limitation years beginning after December 31, 1999.
(B) Exclusion allowance.--Effective for limitation years
beginning in 2000, in the case of any annuity contract
described in section 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disqualified by reason of
section 415(g) of such Code shall reduce the exclusion
allowance as provided in section 403(b)(2) of such Code.
(3) Election to modify section 403(b) exclusion allowance to
conform to section 415 modification.--In the case of taxable years
beginning after December 31, 1999, and before January 1, 2002, a
plan may disregard the requirement in the regulations regarding the
exclusion allowance under section 403(b)(2) of the Internal Revenue
Code of 1986 that contributions to a defined benefit pension plan
be treated as previously excluded amounts for purposes of the
exclusion allowance.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred compensation
plans) is amended by striking ``33\1/3\ percent'' and inserting
``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2001.

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Tax Cut Reconciliation bill — HR. 1836

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