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Committee on Ways and Means

For Immediate Release
Contact: Press Office 202-225-8933
December 19, 2001
7:00 p.m.

HOUSE INTRODUCES BIPARTISAN BICAMERAL COMPROMISE

‘Economic Security and Worker Assistance Act of 2001’

Summary of H.R. 3529 

Individual Provisions

• Supplemental stimulus payments
  Provide $300 (single), $500 (head of household), or $600 (couples) payments to individuals who filed U.S. tax returns in 2000, but did not qualify for a full rebate check this summer.
• Accelerated rate reduction
  Reduce current 27.5% tax rate to 25% effective January 1, 2002.
• Alternative Minimum Tax relief
  Hold harmless so that accelerated rate reduction does not subject taxpayers to the AMT.  In addition, repeal the depreciation preference under the AMT and the 90% limitations on use of foreign tax credits and net operating losses. 

Business Tax Provisions

• 30% bonus depreciation for 36 months
  Allow taxpayers to claim an additional first-year depreciation deduction equal to 30% of the adjusted basis of qualifying property.
• Increase small business expensing for 24 months
  Increase the amount that can be expensed under sec. 179 from $24,000 to $35,000.  In addition, increase the beginning of the phase-out threshold from $200,000 to $325,000.
• Extend Net Operating Loss Carryback Period for 36 months
  Allow taxpayers the option of extending the NOL carryback period from 2 years to 5 years.  The 5-year carryback period would be allowed for losses generated in 2001 - 2002.
• Reduce cost recovery period for leasehold improvements
  Reduce the cost recovery period for leasehold improvements from 39 years to 15 years.
• Alternative Minimum Tax reform
  Repeal the depreciation preference under the AMT and the 90% limitations on use of foreign tax credits and net operating losses.  Effective for taxable years beginning after 12/31/01.
• Extension and reform of Subpart F exception
  Extend Subpart F exception for 5 years and allow use of foreign statement of insurance reserves at the discretion of the Treasury Department.

Extension of Expiring Provisions

•  2-year extension of expiring provisions

• Treatment of non-refundable personal credits under the AMT
• Work Opportunity tax credit
• Welfare-to-Work tax credit
• Tax credit for electricity produced from wind, closed-loop biomass and poultry litter
• Suspension of 100% net income limitation on percentage depletion method for oil and gas produced from marginal wells
• Qualified Zone Academy Bonds
• Increase in cover-over rate for rum excise taxes paid to Puerto Rico and Virgin Islands
• Deduction for clean fuel vehicles and refueling property
• Tax credit for electric vehicles
• Mental health parity compliance tax
• Suspension (i.e., 0% rate) of section 809 (for 2001-2003)

• 1-year extension of expiring provisions

• Archer Medical Savings Accounts
• Accelerated depreciation and employment tax credit for incentives on tribal land
• TANF Supplemental Grants program
• TANF contingency fund

• Permanent extension of expiring provisions

• Suspension of diesel and kerosene dying mandate

New York Reconstruction Incentives

• Authorize $15 billion of tax-exempt bonds
  Authorize the issuance of up to $15 billion of tax-exempt “Liberty Bonds” over the next three years for financing commercial, residential rental, and public utility property in the Liberty Zone. 
• Bonus depreciation deduction
  Enhance 30% bonus depreciation provision (described above) by: (1) extending the bonus to real property located in the zone and (2) extending the placed in service date to December 31, 2006 (or December 31, 2009 in the case of buildings.)  Property financed with Liberty Bonds also qualifies for the bonus depreciation.
•  Reduce recovery period for leasehold improvements
  Reduce cost recovery period for leasehold improvements from 15 years (as provided above) to 5 years for leasehold improvements made to commercial buildings located in the Liberty Zone.  Sunset for property placed in service after December 31, 2006.
• Increase small business expensing 
  Enhance the sec. 179 provision (described above) for qualifying property used in the Liberty zone by:  (1) increasing the amount that may be expensed by an additional $35,000 (for a total of $70,000) and (2) providing that only 50% of the cost of qualifying will be used to determine the phase-out.
• Increase time period for reinvesting gains
  Allow taxpayers to defer taxes on gains from insurance proceeds as long as the gains are reinvested in New York City within 5 years.  Current law provides a 2-year time period in most cases.

Victims Tax Relief

• Provides tax relief for victims of September 11, Oklahoma City bombing and anthrax attacks

• Income tax relief - Waives income tax liability for the year of death and the year prior to death for victims.  A special rule would provide a minimum benefit of $10,000 to each victim.  Include (but improve) Senate language which limits opportunities for tax avoidance.
• Estate tax relief - Provide a new estate tax rate structure that would effectively shield the first $8.5 million of the estate from Federal estate tax and the first $3 million of the estate from State estate tax. 
• Exclusion for special death benefits - Provide tax-free treatment of death benefits paid by an employer to an employee solely because the employee died as a result of the September 11, Oklahoma City bombing or anthrax attacks.
• Charitable organizations and private foundations - Allow charitable organizations to make pro rata payments prospectively to families of victims without demonstrating financial need.  Allow employers to set up private foundations for the purpose of making payments to families of employees who died.
• Discharge of indebtedness - Provides that income resulting from the discharge of indebtedness in 2001 is tax-free.

• Provides general tax relief provisions for victims of terrorist/military actions, Presidentially-declared disasters, and certain other disasters

• Clarifies that disaster relief payments (including payments made from the Victims Compensation Fund) are tax-free.
• Expands IRS, DOL and PBGC authority to postpone tax-related and pension-related deadlines for taxpayers affected by these disasters.

• Protects victims who sell structured settlements
  Creates a 40 percent excise tax on transactions in which structured settlement payments are sold for a lump sum unless the transaction is approved by a court as being in the victim’s best interest.
• Reduces the taxation of disability trusts
  Increases the exemption amount for disability trusts from $100/$300 to $3,000.
• Expands IRS disclosure rules
  Allows the IRS to share tax return and taxpayer information with Federal law enforcement agencies investigating terrorist attacks.  The new rules would sunset after three years.

 Miscellaneous and Technical Provisions

• Authorizes the electronic filing of 1099s as long as recipient consents
• Reverses Gitlitz Supreme Court decision
• Limits the use of the non-accrual experience method of accounting
• Allows foster care parents to deduct foster care payments made from private agencies as well as public agencies
• Increases interest rate band for the 30-year bond index applicable to pension funding and PBGC premium purposes.  Effective for 2 years.
• Technical corrections to previously enacted tax legislation
• Above-the-line deduction in 2001 and 2002 for teachers incurring classroom expenses

Dislocated Workers 

Unemployment Assistance

• Provides up to 13 weeks of extended benefits available in any State for those who became unemployed after March 15, 2001 (approximate start of recession) and who exhaust their regular benefits.
• Transfers $9 billion in surplus Federal unemployment funds (“Reed Act transfers”) to States, as provided in H.R. 3090.  This provision specifies that States have the option to use these funds to provide coverage for individuals seeking only part-time work, as well as those who would qualify under an alternative base period. 

Health Insurance Assistance

• Provides a refundable tax credit of up to 60% (no cap) of premiums paid by involuntarily unemployed workers.
• Allows involuntarily unemployed workers the right to guaranteed issue/no pre-existing condition coverage in the individual market as long as they were employed and covered by health insurance for the previous 12 consecutive months.
• Provides $4 billion in NEG block grants. 
• Provides immediate additional $4.6 billion directly to States to expend on health care services.