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CRS Report Highlights Tax Law Provisions in Effect Starting in 2002

JAN. 4, 2002

RS21101

DATED JAN. 4, 2002
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Citations: RS21101

 

CRS Report for Congress

 

Received through the CRS Web

 

 

Selected Tax Law Changes Effective

 

January 1, 2002

 

 

Marie B. Morris

 

Legislative Attorney

 

American Law Division

 

 

Summary

 

This is a brief list of tax laws changes which became effective on January 1, 2002. This list does not include inflation adjustments which occur because of administrative adjustments, unless they took effect because of a statutory change with a December 31, 2001 or January 1, 2002 effective date. For a complete listing of those administratively adjusted items, see IRS Revenue Procedure 2001-59, 2001-52 IRB 1, dated December 11, 2001. This list also excludes tax provisions expiring in 2002 and most conforming amendments, e.g., changes to credit ordering rules when a credit is amended, or changes to withholding rules when certain income is made tax-exempt.

 

[1] The first part of this report is a listing of the tax changes which were enacted during 2001 and effective at the beginning of 2002. The changes are listed under the statute which enacted the change by Internal Revenue Code section. Following the changes enacted in 2001 is a listing of previously enacted tax changes which became effective on January 1, 2002. They are listed by Internal Revenue Code section, but no attempt was made to identify the statutory source of the change.1

            Provisions in Economic Growth and Tax Relief

 

         Reconciliation Act of 2001, P.L. 107-16, which became

 

                     effective on January 1, 2002:

 

 

                Provision                             Citation

 

 

 Expansion of the adoption credit and adoption       IRC § 23

 

 assistance programs

 

 

 Increase in the per child amount of the child tax   IRC § 24

 

 credit

 

 

 Credit for deferrals and IRA contributions for      IRC § 25B

 

 certain individuals

 

 

 Marriage penalty relief and simplification earned   IRC § 32

 

 income tax credit

 

 

 Credit for pension plan start-up costs for small    IRC §§

 

 employers                                           45E, 196

 

 

 Credit for employer expenses for employer-provided  IRC § 45F

 

 child care

 

 

 Conforming amendments to above credit changes       IRC §§

 

                                                     25, 26, 38,

 

                                                     39, 51A

 

 

 Deduction for higher education expenses allowed in  IRC § 62

 

 computing adjusted gross income

 

 

 Rollovers allowed among various types of pension    IRC § 72

 

 plans, new rules for computing employee

 

 contributions to annuities

 

 

 Exclusion of certain health scholarships            IRC § 117(c)

 

 

 Exclusion for employer-provided educational         IRC § 127

 

 assistance to include graduate education

 

 

 Employer-provided retirement advice as fringe       IRC § 132

 

 benefit

 

 

 Use of qualified savings bonds in qualified         IRC § 135

 

 tuition programs

 

 

 Expansion of adoption assistance program and        IRC § 137

 

 adoption assistance credit

 

 

 Public educational facility bonds as exempt         IRC §§

 

 facility bonds                                      142(a)(11)-(13);

 

                                                     142(k),

 

                                                     146(g)(3);

 

                                                     147(h); 148(f)

 

 

 Increase in IRA contribution limits;                IRC § 219

 

 liberalization of rollover rules

 

 

 Expansion of deduction for student loan interest    IRC § 221

 

 

 Deduction for qualified tuition expenses            IRC § 222

 

 

 Increase in benefit and contribution limits for     IRC §§

 

 retirement plans                                    401(a)(17),

 

                                                     401(c)

 

 

 Rollovers among various types of plans liberalized  IRC §

 

                                                     401(a)(31)

 

 Modification of distribution rules for 401(k)       IRC § 401(k)

 

 plans

 

 

 Increase in benefit and contribution limits for     IRC § 401(k)

 

 SIMPLE 401(k) plans

 

 

 Liberalization of rollover, spousal rollover,       IRC § 402

 

 and hardship distribution rules

 

 

 Liberalization of restrictions on distributions,    IRC § 403(b)

 

 rollovers, purchase of service credits of 403(b)

 

 plans

 

 

 Modification of employer deduction limits for       IRC § 404

 

 qualified plans

 

 

 Modification of IRA, SIMPLE retirement accounts,    IRC § 408

 

 contribution limits, rollover rules

 

 

 Faster vesting of certain employer matching         IRC § 411

 

 contributions

 

 

 New rules permitting plan-to-plan transfers         IRC § 411

 

 

 New funding rules                                   IRC § 412

 

 

 Clarification of tax treatment of 457 plan          IRC § 414(p)

 

 (generally state and local plans) benefits upon

 

 divorce

 

 

 Catch-up contributions for individuals over 50      IRC § 414(v)

 

 

 Increase in benefit and contribution limits for     IRC § 415

 

 defined benefit plans, multiemployer plans,

 

 equitable treatment for defined contribution plans

 

 

 Modification of top-heavy plan rules                IRC § 416

 

 

 Increase in benefit and contributions limits for    IRC § 457

 

 plans of state and local governments and tax-

 

 exempt organization, minimum distribution and

 

 income inclusion requirements, new rollover rules

 

 

 Modifications to qualified tuition programs         IRC § 529

 

 

 Modification to education IRAs                      IRC § 530

 

 

 Exclusion of nonresident alien income from          IRC § 861

 

 international transportation services from income

 

 sourcing rules

 

 

 Conforming certain new tax credit rules to the      IRC § 1400C

 

 DC first-time homebuyer credit

 

 

 Reduction in maximum estate tax rate to 50%;        IRC § 2001(c)

 

 repeal of phaseout of graduated rates

 

 

 Increase in unified credit to $700,000 exemption    IRC § 2010(c)

 

 equivalent

 

 

 Reduction of credit for state death taxes           IRC § 2011

 

 

 Lifetime gift exemption increased to $1,000,000     IRC § 2505(a)

 

 

 Increase in number of allowable partners or         IRC § 6166

 

 shareholders in closely held business to 45;

 

 clarification of definition of non-readily

 

 tradeable stock; qualifying lending and financial

 

 businesses permitted to use installment payment

 

 

 Reporting requirements for qualified tuition        IRC § 6693

 

 programs

 

 

 Elimination of user fees for ruling requests to     EGTRRA § 620

 

 IRS about new pension plans

 

 

 ERISA amendments to conform to various tax changes  EGTRRA §§

 

                                                     612-663

 

 

       Provision in the Fallen Hero Survivor Benefit Fairness

 

          Act of 2001, P.L. 107-15 effective January 1, 2002:

 

 

                Provision                             Citation

 

 

 Extends the tax-exemption for survivor annuities    IRC § 101(h)

 

 to survivors of public safety officers killed in

 

 the line of duty prior to January 1, 1997

 

 

        Provisions in the Railroad Retirement and Survivors'

 

          Improvement Act of 2001, P.L. 107-90, which became

 

                     effective on January 1, 2002:

 

 

                Provision                             Citation

 

 

 National Railroad Retirement Investment Trust as    IRC §

 

 a tax-exempt organization                           501(c)(28)

 

 

 Repeal of supplemental annuity tax on railroad      IRC § 3211,

 

 employers and employee representatives.             3221

 

 

 Tier II tax rate adjustment to 15.6 percent for     IRC § 3221

 

 employers

 

 

 Tier II tax rate adjustment to 14.75 percent on     IRC § 3211

 

 employee representatives

 

 

 Tier II tax rate adjustment to 4.9 percent on       IRC § 3201

 

 employees

 

 

 Provisions enacted prior to 2001 which became effective

 

 as of January 1, 2002, not including expiring provisions:

 

 

                Provision                             Citation

 

 

 Reduction in electric vehicle tax credit            IRC § 30

 

 

 Puerto Rico economic activity credit limited        IRC § 30A

 

 

 Increase in qualified transportation fringe         IRC § 132(f)

 

 benefit to $100 per month

 

 

 Deduction for health insurance for self-employed    IRC § 162(l)

 

 increases to 70%

 

 

 Deduction for clean fuel vehicle reduced            IRC § 179A

 

 

 Increase in deduction for meals away from home      IRC § 274(n)

 

 for certain transportation workers

 

 

 Coordination of foreign income tax credit with      IRC § 904

 

 nonrefundable personal credits

 

 

 Increase in exclusion amount for U.S. citizens      IRC § 911

 

 living abroad

 

 

 Reduction in empowerment zone employment credit     IRC § 1396

 

 

 Increase in qualified conservation easement         IRC § 2031

 

 exclusion limitation to $500,000

 

 

 Reduction in tax of luxury passenger vehicles       IRC § 4001

 

 

 Certain approved terminals of registered persons    IRC § 4041

 

 required to offer dyed diesel fuel and kerosene

 

 for non-taxable purposes

 

 

 Increase in tax on transportation of persons        IRC § 4261

 

 by air

 

 

 Tobacco excise tax rates increase                   IRC § 5701

 

 

 Change in amount of required payment of estimated   IRC § 6654

 

 taxes for high income taxpayers

 

FOOTNOTE

 

 

1 The source can be determined by consulting the notes following the statutory language of the citation in either the Internal Revenue Code or title 26 of the U.S. Code.

 

END OF FOOTNOTE
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