Victims of Terrorism Tax Relief Act of 2001 (P.L. 107-134)
Victims of Terrorism Tax Relief Act of 2001 (P.L. 107-134)
- Jurisdictions
- LanguageEnglish
H.R. 2884, Enrolled Bill
H.R.2884
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 amend the Internal Revenue Code of 1986 to provide tax relief for victims of the terrorist attacks against the United States, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
(a) SHORT TITLE.--This Act may be cited as the 'Victims of Terrorism Tax Relief Act of 2001'.
(b) AMENDMENT OF 1986 CODE.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.--The table of contents for this Act is as follows:
Sec. 1. Short title; etc.
Subtitle A--Relief Provisions for Victims of Terrorist Attacks
Sec. 101. Income taxes of victims of terrorist attacks.
Sec. 102. Exclusion of certain death benefits.
Sec. 103. Estate tax reduction.
Sec. 104. Payments by charitable organizations treated as exempt payments.
Sec. 105. Exclusion of certain cancellations of indebtedness.
Subtitle B--Other Relief Provisions
Sec. 111. Exclusion for disaster relief payments.
Sec. 112. Authority to postpone certain deadlines and required actions.
Sec. 113. Application of certain provisions to terroristic o rmilitary actions.
Sec. 114. Clarification of due date for airline excise tax deposits.
Sec. 115. Treatment of certain structured settlement payments.
Sec. 116. Personal exemption deduction for certain disability trusts.
Subtitle A--Relief Provisions for Victims of Terrorist Attacks
SEC. 101. INCOME TAXES OF VICTIMS OF TERRORIST ATTACKS.
(a) IN GENERAL.--Section 692 (relating to income taxes of members of Armed Forces on death) is amended by adding at the end the following new subsection:
'(d) INDIVIDUALS DYING AS A RESULT OF CERTAIN ATTACKS.--
'(1) IN GENERAL.--In the case of a specified terrorist victim, any tax imposed by this chapter shall not apply--
'(A) with respect to the taxable year in which falls the date of death, and
'(B) with respect to any prior taxable year in the period beginning with the last taxable year ending before the taxable year in which the wounds, injury, or illness referred to in paragraph (3) were incurred.
'(2) $10,000 MINIMUM BENEFIT.--If, but for this paragraph, the amount of tax not imposed by paragraph (1) with respect to a specified terrorist victim is less than $10,000, then such victim shall be treated as having made a payment against the tax imposed by this chapter for such victim's last taxable year in an amount equal to the excess of $10,000 over the amount of tax not so imposed.
'(3) TAXATION OF CERTAIN BENEFITS.--Subject to such rules as the Secretary may prescribe, paragraph (1) shall not apply to the amount of any tax imposed by this chapter which would be computed by only taking into account the items of income, gain, or other amounts attributable to--
'(A) deferred compensation which would have been payable after death if the individual had died other than as a specified terrorist victim, or
'(B) amounts payable in the taxable year which would not have been payable in such taxable year but for an action taken after September 11, 2001.
'(4) SPECIFIED TERRORIST VICTIM.--For purposes of this subsection, the term 'specified terrorist victim' means any decedent--
'(A) who dies as a result of wounds or injury incurred as a result of the terrorist attacks against the United States on April 19, 1995, or September 11, 2001, or
'(B) who dies as a result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002.
Such term shall not include any individual identified by the Attorney General to have been a participant or conspirator in any such attack or a representative of such an individual.'.
(b) CONFORMING AMENDMENTS.--
(1) Section 5(b)(1) is amended by inserting 'and victims of certain terrorist attacks' before 'on death'.
(2) Section 6013(f)(2)(B) is amended by inserting 'and victims of certain terrorist attacks' before 'on death'.
(c) CLERICAL AMENDMENTS.--
(1) The heading of section 692 is amended to read as follows:
(d) EFFECTIVE DATE; WAIVER OF LIMITATIONS.--
(1) EFFECTIVE DATE.--The amendments made by this section shall apply to taxable years ending before, on, or after September 11, 2001.
(2) WAIVER OF LIMITATIONS.--If refund or credit of any overpayment of tax resulting from the amendments made by this section is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.
(a) IN GENERAL.--Section 101 (relating to certain death benefits) is amended by adding at the end the following new subsection:
'(i) CERTAIN EMPLOYEE DEATH BENEFITS PAYABLE BY REASON OF DEATH OF CERTAIN TERRORIST VICTIMS.--
'(1) IN GENERAL..--Gross income does not include amounts (whether in a single sum or otherwise) paid by an employer by reason of the death of an employee who is a specified terrorist victim (as defined in section 692(d)(4)).
'(2) LIMITATION.--
'(A) IN GENERAL.--Subject to such rules as the Secretary may prescribe, paragraph (1) shall not apply to amounts which would have been payable after death if the individual had died other than as a specified terrorist victim (as so defined).
'(B) EXCEPTION.--Subparagraph (A) shall not apply to incidental death benefits paid from a plan described in section 401(a) and exempt from tax under section 501(a).
'(3) TREATMENT OF SELF-EMPLOYED INDIVIDUALS.--For purposes of paragraph (1), the term 'employee' includes a self-employed individual (as defined in section 401(c)(1)).'.
(b) EFFECTIVE DATE; WAIVER OF LIMITATIONS.--
(1) EFFECTIVE DATE.--The amendment made by this section shall apply to taxable years ending before, on, or after September 11, 2001.
(2) WAIVER OF LIMITATIONS.--If refund or credit of any overpayment of tax resulting from the amendments made by this section is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.
(a) IN GENERAL.--Section 2201 is amended to read as follows:
'SEC. 2201. COMBAT ZONE-RELATED DEATHS OF MEMBERS OF THE ARMED FORCES AND DEATHS OF VICTIMS OF CERTAIN TERRORIST ATTACKS.
'(a) IN GENERAL.--Unless the executor elects not to have this section apply, in applying sections 2001 and 2101 to the estate of a qualified decedent, the rate schedule set forth in subsection (c) shall be deemed to be the rate schedule set forth in section 2001(c).
'(b) QUALIFIED DECEDENT.--For purposes of this section, the term 'qualified decedent' means--
'(1) any citizen or resident of the United States dying while in active service of the Armed Forces of the United States, if such decedent--
'(A) was killed in action while serving in a combat zone, as determined under section 112(c), or
'(B) died as a result of wounds, disease, or injury suffered while serving in a combat zone (as determined under section 112(c)), and while in the line of duty, by reason of a hazard to which such decedent was subjected as an incident of such service, and
'(2) any specified terrorist victim (as defined in section 692(d)(4)).
'(c) RATE SCHEDULE.--
'If the amount with respect
to which the tentative
tax to be computed is: The tentative tax is:
Not over $150,000 1 percent of the amount by
which such amount exceeds
$100,000.
Over $150,000 but not $500 plus 2 percent of the
over $200,000 excess over $150,000.
Over $200,000 but not $1,500 plus 3 percent of the
over $300,000 excess over $200,000.
Over $300,000 but not $4,500 plus 4 percent of the
over $500,000 excess over $300,000.
Over $500,000 but not $12,500 plus 5 percent of the
over $700,000 excess over $500,000.
Over $700,000 but not $22,500 plus 6 percent of the
over $900,000 excess over $700,000.
Over $900,000 but not $34,500 plus 7 percent of the
over $1,100,000 excess over $900,000.
Over $1,100,000 but not $48,500 plus 8 percent of the
over $1,600,000 excess over $1,100,000.
Over $1,600,000 but not $88,500 plus 9 percent of the
over $2,100,000 excess over $1,600,000.
Over $2,100,000 but not $133,500 plus 10 percent of the
over $2,600,000 excess over $2,100,000.
Over $2,600,000 but not $183,500 plus 11 percent of the
over $3,100,000 excess over $2,600,000.
Over $3,100,000 but not $238,500 plus 12 percent of the
over $3,600,000 excess over $3,100,000.
Over $3,600,000 but not $298,500 plus 13 percent of the
over $4,100,000 excess over $3,600,000.
Over $4,100,000 but not $363,500 plus 14 percent of the
over $5,100,000 excess over $4,100,000.
Over $5,100,000 but not $503,500 plus 15 percent of the
over $6,100,000 excess over $5,100,000.
Over $6,100,000 but not $653,500 plus 16 percent of the
over $7,100,000 excess over $6,100,000.
Over $7,100,000 but not $813,500 plus 17 percent of the
over $8,100,000 excess over $7,100,000.
Over $8,100,000 but not $983,500 plus 18 percent of the
over $9,100,000 excess over $8,100,000.
Over $9,100,000 but not $1,163,500 plus 19 percent of the
over $10,100,000 excess over $9,100,000.
Over $10,100,000 $1,353,500 plus 20 percent of the
excess over $10,100,000.
(b) CONFORMING AMENDMENTS.--
(1) Section 2011 is amended by striking subsection (d) and by redesignating subsections (e), (f), and (g) as subsections (d), (e), and (f), respectively.
(2) Section 2053(d)(3)(B) is amended by striking 'section 2011(e)' and inserting 'section 2011(d)'.
(3) Paragraph (9) of section 532(c) of the Economic Growth and Tax Relief Reconciliation Act of 2001 is repealed.
(c) CLERICAL AMENDMENT.--The item relating to section 2201 in the table of sections for subchapter C of chapter 11 is amended to read as follows:
'Sec. 2201. Combat zone-related deaths of members of the Armed Forces and deaths of victims of certain terrorist attacks.'.
(d) EFFECTIVE DATE; WAIVER OF LIMITATIONS.--
(1) EFFECTIVE DATE.--The amendments made by this section shall apply to estates of decedents--
(A) dying on or after September 11, 2001; and
(B) in the case of individuals dying as a result of the April 19, 1995, terrorist attack, dying on or after April 19, 1995.
(2) WAIVER OF LIMITATIONS.--If refund or credit of any overpayment of tax resulting from the amendments made by this section is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.
(a) IN GENERAL.--For purposes of the Internal Revenue Code of 1986--
(1) payments made by an organization described in section 501(c)(3) of such Code by reason of the death, injury, wounding, or illness of an individual incurred as the result of the terrorist attacks against the United States on September 11, 2001, or an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002, shall be treated as related to the purpose or function constituting the basis for such organization's exemption under section 501 of such Code if such payments are made in good faith using a reasonable and objective formula which is consistently applied; and
(2) in the case of a private foundation (as defined in section 509 of such Code), any payment described in paragraph (1) shall not be treated as made to a disqualified person for purposes of section 4941 of such Code.
(b) EFFECTIVE DATE.--This section shall apply to payments made on or after September 11, 2001.
SEC. 105. EXCLUSION OF CERTAIN CANCELLATIONS OF INDEBTEDNESS.
(a) IN GENERAL.--For purposes of the Internal Revenue Code of 1986--
(1) gross income shall not include any amount which (but for this section) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of any taxpayer if the discharge is by reason of the death of an individual incurred as the result of the terrorist attacks against the United States on September 11, 2001, or as the result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002; and
(2) return requirements under section 6050P of such Code shall not apply to any discharge described in paragraph (1).
(b) EFFECTIVE DATE.--This section shall apply to discharges made on or after September 11, 2001, and before January 1, 2002.
SEC. 111. EXCLUSION FOR DISASTER RELIEF PAYMENTS.
(a) IN GENERAL.--Part III of subchapter B of chapter 1 (relating to items specifically excluded from gross income) is amended by redesignating section 139 as section 140 and inserting after section 138 the following new section:
'SEC. 139. DISASTER RELIEF PAYMENTS.
'(a) GENERAL RULE.--Gross income shall not include any amount received by an individual as a qualified disaster relief payment.
'(b) QUALIFIED DISASTER RELIEF PAYMENT DEFINED.--For purposes of this section, the term 'qualified disaster relief payment' means any amount paid to or for the benefit of an individual--
'(1) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster,
'(2) to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster,
'(3) by a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster, or
'(4) if such amount is paid by a Federal, State, or local government, or agency or instrumentality thereof, in connection with a qualified disaster in order to promote the general welfare,
but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.
'(c) QUALIFIED DISASTER DEFINED.--For purposes of this section, the term 'qualified disaster' means--
'(1) a disaster which results from a terroristic or military action (as defined in section 692(c)(2)),
'(2) a Presidentially declared disaster (as defined in section 1033(h)(3)),
'(3) a disaster which results from an accident involving a common carrier, or from any other event, which is determined by the Secretary to be of a catastrophic nature, or
'(4) with respect to amounts described in subsection (b)(4), a disaster which is determined by an applicable Federal, State, or local authority (as determined by the Secretary) to warrant assistance from the Federal, State, or local government or agency or instrumentality thereof.
'(d) COORDINATION WITH EMPLOYMENT TAXES.--For purposes of chapter 2 and subtitle C, a qualified disaster relief payment shall not be treated as net earnings from self-employment, wages, or compensation subject to tax.
'(e) NO RELIEF FOR CERTAIN INDIVIDUALS.--Subsections (a) and (f) shall not apply with respect to any individual identified by the Attorney General to have been a participant or conspirator in a terroristic action (as so defined), or a representative of such individual.
'(f) EXCLUSION OF CERTAIN ADDITIONAL PAYMENTS.--Gross income shall not include any amount received as payment under section 406 of the Air Transportation Safety and System Stabilization Act.'.
(b) CONFORMING AMENDMENTS.--The table of sections for part III of subchapter B of chapter 1 is amended by striking the item relating to section 139 and inserting the following new items:
'Sec. 139. Disaster relief payments.
'Sec. 140. Cross references to other Acts.'.
(c) EFFECTIVE DATE.--The amendments made by this section shall apply to taxable years ending on or after September 11, 2001.
SEC. 112. AUTHORITY TO POSTPONE CERTAIN DEADLINES AND REQUIRED ACTIONS.
(a) EXPANSION OF AUTHORITY RELATING TO DISASTERS AND TERRORISTIC OR MILITARY ACTIONS.--Section 7508A is amended to read as follows:
'SEC. 7508A. AUTHORITY TO POSTPONE CERTAIN DEADLINES BY REASON OF PRESIDENTIALLY DECLARED DISASTER OR TERRORISTIC OR MILITARY ACTIONS.
'(a) IN GENERAL.--In the case of a taxpayer determined by the Secretary to be affected by a Presidentially declared disaster (as defined in section 1033(h)(3)) or a terroristic or military action (as defined in section 692(c)(2)), the Secretary may specify a period of up to 1 year that may be disregarded in determining, under the internal revenue laws, in respect of any tax liability of such taxpayer--
'(1) whether any of the acts described in paragraph (1) of section 7508(a) were performed within the time prescribed therefor (determined without regard to extension under any other provision of this subtitle for periods after the date (determined by the Secretary) of such disaster or action),
'(2) the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date, and
'(3) the amount of any credit or refund.
'(b) SPECIAL RULES REGARDING PENSIONS, ETC.--In the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such plan, affected by a disaster or action described in subsection (a), the Secretary may specify a period of up to 1 year which may be disregarded in determining the date by which any action is required or permitted to be completed under this title. No plan shall be treated as failing to be operated in accordance with the terms of the plan solely as the result of disregarding any period by reason of the preceding sentence.
'(c) SPECIAL RULES FOR OVERPAYMENTS.--The rules of section 7508(b) shall apply for purposes of this section.'.
(b) CLARIFICATION OF SCOPE OF ACTS SECRETARY MAY POSTPONE.--Section 7508(a)(1)(K) (relating to time to be disregarded) is amended by striking 'in regulations prescribed under this section'.
(c) CONFORMING AMENDMENTS TO ERISA.--
(1) Part 5 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1131 et seq.) is amended by adding at the end the following new section:
'In the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such plan, affected by a Presidentially declared disaster (as defined in section 1033(h)(3) of the Internal Revenue Code of 1986) or a terroristic or military action (as defined in section 692(c)(2) of such Code), the Secretary may, notwithstanding any other provision of law, prescribe, by notice or otherwise, a period of up to 1 year which may be disregarded in determining the date by which any action is required or permitted to be completed under this Act. No plan shall be treated as failing to be operated in accordance with the terms of the plan solely as the result of disregarding any period by reason of the preceding sentence.'.
(2) Section 4002 of Employee Retirement Income Security Act of 1974 (29 U.S.C. 1302) is amended by adding at the end the following new subsection:
'(i) SPECIAL RULES REGARDING DISASTERS, ETC.--In the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such plan, affected by a Presidentially declared disaster (as defined in section 1033(h)(3) of the Internal Revenue Code of 1986) or a terroristic or military action (as defined in section 692(c)(2) of such Code), the corporation may, notwithstanding any other provision of law, prescribe, by notice or otherwise, a period of up to 1 year which may be disregarded in determining the date by which any action is required or permitted to be completed under this Act. No plan shall be treated as failing to be operated in accordance with the terms of the plan solely as the result of disregarding any period by reason of the preceding sentence.'.
(d) ADDITIONAL CONFORMING AMENDMENTS.--
(1) Section 6404 is amended--
(A) by striking subsection (h);
(B) by redesignating subsection (i) as subsection (h); and
(C) by adding at the end the following new subsection:
'For authority to suspend running of interest, etc. by reason of Presidentially declared disaster or terroristic or military action, see section 7508A.'.
(2) Section 6081(c) is amended to read as follows:
'(c) CROSS REFERENCES.--
'For time for performing certain acts postponed by reason of war, see section 7508, and by reason of Presidentially declared disaster or terroristic or military action, see section 7508A.'.
(3) Section 6161(d) is amended by adding at the end the following new paragraph:
'(3) POSTPONEMENT OF CERTAIN ACTS.--
'For time for performing certain acts postponed by reason of war, see section 7508, and by reason of Presidentially declared disaster or terroristic or military action, see section 7508A.'.
(e) CLERICAL AMENDMENTS.--
(1) The item relating to section 7508A in the table of sections for chapter 77 is amended to read as follows:
(f) EFFECTIVE DATE.--The amendments made by this section shall apply to disasters and terroristic or military actions occurring on or after September 11, 2001, with respect to any action of the Secretary of the Treasury, the Secretary of Labor, or the Pension Benefit Guaranty Corporation occurring on or after the date of the enactment of this Act.
SEC. 113. APPLICATION OF CERTAIN PROVISIONS TO TERRORISTIC OR MILITARY ACTIONS.
(a) DISABILITY INCOME.--Section 104(a)(5) (relating to compensation for injuries or sickness) is amended by striking 'a violent attack' and all that follows through the period and inserting 'a terroristic or military action (as defined in section 692(c)(2)).'.
(b) EXEMPTION FROM INCOME TAX FOR CERTAIN MILITARY OR CIVILIAN EMPLOYEES.--Section 692(c) is amended--
(1) by striking 'outside the United States' in paragraph (1); and
(2) by striking 'SUSTAINED OVERSEAS' in the heading.
(c) EFFECTIVE DATE.--The amendments made by this section shall apply to taxable years ending on or after September 11, 2001.
SEC. 114. CLARIFICATION OF DUE DATE FOR AIRLINE EXCISE TAX DEPOSITS.
(a) IN GENERAL.--Paragraph (3) of section 301(a) of the Air Transportation Safety and System Stabilization Act (Public Law 107-42) is amended to read as follows:
'(3) AIRLINE-RELATED DEPOSIT.--For purposes of this subsection, the term 'airline-related deposit' means any deposit of taxes imposed by subchapter C of chapter 33 of such Code (relating to transportation by air).'.
(b) EFFECTIVE DATE.--The amendment made by this section shall take effect as if included in section 301 of the Air Transportation Safety and System Stabilization Act (Public Law 107-42).
SEC. 115. TREATMENT OF CERTAIN STRUCTURED SETTLEMENT PAYMENTS.
(a) IN GENERAL.--Subtitle E is amended by adding at the end the following new chapter:
'CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS
'Sec. 5891. Structured settlement factoring transactions.
'SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.
'(a) IMPOSITION OF TAX.--There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.
'(b) EXCEPTION FOR CERTAIN APPROVED TRANSACTIONS.--
'(1) IN GENERAL.--The tax under subsection (a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured settlement payment rights is approved in advance in a qualified order.
'(2) QUALIFIED ORDER..--For purposes of this section, the term 'qualified order' means a final order, judgment, or decree which--
'(A) finds that the transfer described in paragraph (1)--
'(i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and
'(ii) is in the best interest of the payee, taking into account the welfare and support of the payee's dependents, and
'(B) is issued--
'(i) under the authority of an applicable State statute by an applicable State court, or
'(ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.
'(A) the State in which the payee of the structured settlement is domiciled, or
'(B) if there is no statute described in subparagraph (A), the State in which either the party to the structured settlement (including an assignee under a qualified assignment under section 130) or the person issuing the funding asset for the structured settlement is domiciled or has its principal place of business.
'(4) APPLICABLE STATE COURT.--For purposes of this section--
'(A) IN GENERAL.--The term 'applicable State court' means, with respect to any applicable State statute, a court of the State which enacted such statute.
'(B) SPECIAL RULE--In the case of an applicable State statute described in paragraph (3)(B), such term also includes a court of the State in which the payee of the structured settlement is domiciled.
'(5) QUALIFIED ORDER DISPOSITIVE.--A qualified order shall be treated as dispositive for purposes of the exception under this subsection.
'(c) DEFINITIONS.--For purposes of this section--
'(1) STRUCTURED SETTLEMENT.--The term 'structured settlement' means an arrangement--
'(A) which is established by--
'(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or
'(ii) agreement for the periodic payment of compensation under any workers' compensation law excludable from the gross income of the recipient under section 104(a)(1), and
'(B) under which the periodic payments are--
'(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and
'(ii) payable by a person who is a party to the suit or agreement or to the workers' compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.
'(3) STRUCTURED SETTLEMENT FACTORING TRANSACTION.--
'(A) IN GENERAL.--The term 'structured settlement factoring transaction' means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration.
'(B) EXCEPTION.--Such term shall not include--
'(i) the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution in the absence of any action to redirect the structured settlement payments to such institution (or agent or successor thereof) or otherwise to enforce such blanket security interest as against the structured settlement payment rights, or
'(ii) a subsequent transfer of structured settlement payment rights acquired in a structured settlement factoring transaction.
'(A) the aggregate undiscounted amount of structured settlement payments being acquired in the structured settlement factoring transaction, over
'(B) the total amount actually paid by the acquirer to the person from whom such structured settlement payments are acquired.
'(5) RESPONSIBLE ADMINISTRATIVE AUTHORITY.--The term 'responsible administrative authority' means the administrative authority which had jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.
'(6) STATE.--The term 'State' includes the Commonwealth of Puerto Rico and any possession of the United States.
'(d) COORDINATION WITH OTHER PROVISIONS.--
'(1) IN GENERAL.--If the applicable requirements of sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the time the structured settlement involving structured settlement payment rights was entered into, the subsequent occurrence of a structured settlement factoring transaction shall not affect the application of the provisions of such sections to the parties to the structured settlement (including an assignee under a qualified assignment under section 130) in any taxable year.
'(2) NO WITHHOLDING OF TAX.--The provisions of section 3405 regarding withholding of tax shall not apply to the person making the payments in the event of a structured settlement factoring transaction.'.
(b) CLERICAL AMENDMENT.--The table of chapters for subtitle E is amended by adding at the end the following new item:
'Chapter 55. Structured settlement factoring transactions.'.
(c) EFFECTIVE DATES.--
(1) IN GENERAL.--The amendments made by this section (other than the provisions of section 5891(d) of the Internal Revenue Code of 1986, as added by this section) shall apply to structured settlement factoring transactions (as defined in section 5891(c) of such Code (as so added)) entered into on or after the 30th day following the date of the enactment of this Act.
(2) CLARIFICATION OF EXISTING LAW--Section 5891(d) of such Code (as so added) shall apply to structured settlement factoring transactions (as defined in section 5891(c) of such Code (as so added)) entered into before, on, or after such 30th day.
(3) TRANSITION RULE.--In the case of a structured settlement factoring transaction entered into during the period beginning on the 30th day following the date of the enactment of this Act and ending on July 1, 2002, no tax shall be imposed under section 5891(a) of such Code if--
(A) the structured settlement payee is domiciled in a State (or possession of the United States) which has not enacted a statute providing that the structured settlement factoring transaction is ineffective unless the transaction has been approved by an order, judgment, or decree of a court (or where applicable, a responsible administrative authority) which finds that such transaction--
(i) does not contravene any Federal or State statute or the order of any court (or responsible administrative authority); and
(ii) is in the best interest of the structured settlement payee or is appropriate in light of a hardship faced by the payee; and
(B) the person acquiring the structured settlement payment rights discloses to the structured settlement payee in advance of the structured settlement factoring transaction the amounts and due dates of the payments to be transferred, the aggregate amount to be transferred, the consideration to be received by the structured settlement payee for the transferred payments, the discounted present value of the transferred payments (including the present value as determined in the manner described in section 7520 of such Code), and the expenses required under the terms of the structured settlement factoring transaction to be paid by the structured settlement payee or deducted from the proceeds of such transaction.
(a) IN GENERAL.--Subsection (b) of section 642 (relating to deduction for personal exemption) is amended to read as follows:
'(b) DEDUCTION FOR PERSONAL EXEMPTION.--
'(1) ESTATES.--An estate shall be allowed a deduction of $600.
'(2) TRUSTS.--
'(A) IN GENERAL.--Except as otherwise provided in this paragraph, a trust shall be allowed a deduction of $100.
'(B) TRUSTS DISTRIBUTING INCOME CURRENTLY.--A trust which, under its governing instrument, is required to distribute all of its income currently shall be allowed a deduction of $300.
'(C) DISABILITY TRUSTS.--
'(i) IN GENERAL.--A qualified disability trust shall be allowed a deduction equal to the exemption amount under section 151(d), determined--
'(I) by treating such trust as an individual described in section 151(d)(3)(C)(iii), and
'(II) by applying section 67(e) (without the reference to section 642(b)) for purposes of determining the adjusted gross income of the trust.
'(ii) QUALIFIED DISABILITY TRUST.--For purposes of clause (i), the term 'qualified disability trust' means any trust if--
'(I) such trust is a disability trust described in subsection (c)(2)(B)(iv) of section 1917 of the Social Security Act (42 U.S.C. 1396p), and
'(II) all of the beneficiaries of the trust as of the close of the taxable year are determined by the Commissioner of Social Security to have been disabled (within the meaning of section 1614(a)(3) of the Social Security Act, 42 U.S.C. 1382c(a)(3)) for some portion of such year.
A trust shall not fail to meet the requirements of subclause (II) merely because the corpus of the trust may revert to a person who is not so disabled after the trust ceases to have any beneficiary who is so disabled.
(b) EFFECTIVE DATE.--The amendment made by this section shall apply to taxable years ending on or after September 11, 2001.
SEC. 201. DISCLOSURE OF TAX INFORMATION IN TERRORISM AND NATIONAL SECURITY INVESTIGATIONS.
(a) DISCLOSURE WITHOUT A REQUEST OF INFORMATION RELATING TO TERRORIST ACTIVITIES, ETC.--Paragraph (3) of section 6103(i) (relating to disclosure of return information to apprise appropriate officials of criminal activities or emergency circumstances) is amended by adding at the end the following new subparagraph:
'(i) IN GENERAL.--Except as provided in paragraph (6), the Secretary may disclose in writing return information (other than taxpayer return information) that may be related to a terrorist incident, threat, or activity to the extent necessary to apprise the head of the appropriate Federal law enforcement agency responsible for investigating or responding to such terrorist incident, threat, or activity. The head of the agency may disclose such return information to officers and employees of such agency to the extent necessary to investigate or respond to such terrorist incident, threat, or activity.
'(ii) DISCLOSURE TO THE DEPARTMENT OF JUSTICE.--Returns and taxpayer return information may also be disclosed to the Attorney General under clause (i) to the extent necessary for, and solely for use in preparing, an application under paragraph (7)(D).
'(iii) TAXPAYER IDENTITY.--For purposes of this subparagraph, a taxpayer's identity shall not be treated as taxpayer return information.
'(iv) TERMINATION.--No disclosure may be made under this subparagraph after December 31, 2003.'.
'(7) DISCLOSURE UPON REQUEST OF INFORMATION RELATING TO TERRORIST ACTIVITIES, ETC.--
'(A) DISCLOSURE TO LAW ENFORCEMENT AGENCIES.--
'(i) IN GENERAL.--Except as provided in paragraph (6), upon receipt by the Secretary of a written request which meets the requirements of clause (iii), the Secretary may disclose return information (other than taxpayer return information) to officers and employees of any Federal law enforcement agency who are personally and directly engaged in the response to or investigation of any terrorist incident, threat, or activity.
'(ii) DISCLOSURE TO STATE AND LOCAL LAW ENFORCEMENT AGENCIES.--The head of any Federal law enforcement agency may disclose return information obtained under clause (i) to officers and employees of any State or local law enforcement agency but only if such agency is part of a team with the Federal law enforcement agency in such response or investigation and such information is disclosed only to officers and employees who are personally and directly engaged in such response or investigation.
'(iii) REQUIREMENTS.--A request meets the requirements of this clause if--
'(I) the request is made by the head of any Federal law enforcement agency (or his delegate) involved in the response to or investigation of any terrorist incident, threat, or activity, and
'(II) the request sets forth the specific reason or reasons why such disclosure may be relevant to a terrorist incident, threat, or activity.
'(iv) LIMITATION ON USE OF INFORMATION.--Information disclosed under this subparagraph shall be solely for the use of the officers and employees to whom such information is disclosed in such response or investigation.
'(B) DISCLOSURE TO INTELLIGENCE AGENCIES.--
'(i) IN GENERAL.--Except as provided in paragraph (6), upon receipt by the Secretary of a written request which meets the requirements of clause (ii), the Secretary may disclose return information (other than taxpayer return information) to those officers and employees of the Department of Justice, the Department of the Treasury, and other Federal intelligence agencies who are personally and directly engaged in the collection or analysis of intelligence and counterintelligence information or investigation concerning any terrorist incident, threat, or activity. For purposes of the preceding sentence, the information disclosed under the preceding sentence shall be solely for the use of such officers and employees in such investigation, collection, or analysis.
'(ii) REQUIREMENTS.--A request meets the requirements of this subparagraph if the request--
'(I) is made by an individual described in clause (iii), and
'(II) sets forth the specific reason or reasons why such disclosure may be relevant to a terrorist incident, threat, or activity.
'(iii) REQUESTING INDIVIDUALS.--An individual described in this subparagraph is an individual--
'(I) who is an officer or employee of the Department of Justice or the Department of the Treasury who is appointed by the President with the advice and consent of the Senate or who is the Director of the United States Secret Service, and
'(II) who is responsible for the collection and analysis of intelligence and counterintelligence information concerning any terrorist incident, threat, or activity.
'(iv) TAXPAYER IDENTITY.--For purposes of this subparagraph, a taxpayer's identity shall not be treated as taxpayer return information.
'(C) DISCLOSURE UNDER EX PARTE ORDERS.--
'(i) IN GENERAL.--Except as provided in paragraph (6), any return or return information with respect to any specified taxable period or periods shall, pursuant to and upon the grant of an ex parte order by a Federal district court judge or magistrate under clause (ii), be open (but only to the extent necessary as provided in such order) to inspection by, or disclosure to, officers and employees of any Federal law enforcement agency or Federal intelligence agency who are personally and directly engaged in any investigation, response to, or analysis of intelligence and counterintelligence information concerning any terrorist incident, threat, or activity. Return or return information opened to inspection or disclosure pursuant to the preceding sentence shall be solely for the use of such officers and employees in the investigation, response, or analysis, and in any judicial, administrative, or grand jury proceedings, pertaining to such terrorist incident, threat, or activity.
'(ii) APPLICATION FOR ORDER.--The Attorney General, the Deputy Attorney General, the Associate Attorney General, any Assistant Attorney General, or any United States attorney may authorize an application to a Federal district court judge or magistrate for the order referred to in clause (i). Upon such application, such judge or magistrate may grant such order if he determines on the basis of the facts submitted by the applicant that--
'(I) there is reasonable cause to believe, based upon information believed to be reliable, that the return or return information may be relevant to a matter relating to such terrorist incident, threat, or activity, and
'(II) the return or return information is sought exclusively for use in a Federal investigation, analysis, or proceeding concerning any terrorist incident, threat, or activity.
'(i) IN GENERAL.--Except as provided in paragraph (6), the Secretary may authorize an application to a Federal district court judge or magistrate for the order referred to in subparagraph (C)(i). Upon such application, such judge or magistrate may grant such order if he determines on the basis of the facts submitted by the applicant that the requirements of subparagraph (C)(ii)(I) are met.
'(ii) LIMITATION ON USE OF INFORMATION.--Information disclosed under clause (i)--
'(I) may be disclosed only to the extent necessary to apprise the head of the appropriate Federal law enforcement agency responsible for investigating or responding to a terrorist incident, threat, or activity, and
'(II) shall be solely for use in a Federal investigation, analysis, or proceeding concerning any terrorist incident, threat, or activity.
The head of such Federal agency may disclose such information to officers and employees of such agency to the extent necessary to investigate or respond to such terrorist incident, threat, or activity.
'(E) TERMINATION.--No disclosure may be made under this paragraph after December 31, 2003.'.
(1) Section 6103(a)(2) is amended by inserting 'any local law enforcement agency receiving information under subsection (i)(7)(A),' after 'State,'.
(2) Section 6103(b) is amended by adding at the end the following new paragraph:
'(11) TERRORIST INCIDENT, THREAT, OR ACTIVITY.--The term 'terrorist incident, threat, or activity' means an incident, threat, or activity involving an act of domestic terrorism (as defined in section 2331(5) of title 18, United States Code) or international terrorism (as defined in section 2331(1) of such title).'.
(3) The heading of section 6103(i)(3) is amended by inserting 'OR TERRORIST' after 'CRIMINAL'.
(4) Paragraph (4) of section 6103(i) is amended--
(A) in subparagraph (A) by inserting 'or (7)(C)' after 'paragraph (1)'; and
(B) in subparagraph (B) by striking 'or (3)(A)' and inserting '(3)(A) or (C), or (7)'.
(5) Paragraph (6) of section 6103(i) is amended--
(A) by striking '(3)(A)' and inserting '(3)(A) or (C)'; and
(B) by striking 'or (7)' and inserting '(7), or (8)'.
(6) Section 6103(p)(3) is amended--
(A) in subparagraph (A) by striking '(7)(A)(ii)' and inserting '(8)(A)(ii)'; and
(B) in subparagraph (C) by striking '(i)(3)(B)(i)' and inserting '(i)(3)(B)(i) or (7)(A)(ii)'.
(7) Section 6103(p)(4) is amended--
(A) in the matter preceding subparagraph (A)--
(i) by striking 'or (5),' the first place it appears and inserting '(5), or (7),'; and
(ii) by striking '(i)(3)(B)(i),' and inserting '(i)(3)(B)(i) or (7)(A)(ii),'; and
(B) in subparagraph (F)(ii) by striking 'or (5),' the first place it appears and inserting '(5) or (7),'.
(8) Section 6103(p)(6)(B)(i) is amended by striking '(i)(7)(A)(ii)' and inserting '(i)(8)(A)(ii)'.
(9) Section 6105(b) is amended--
(A) by striking 'or' at the end of paragraph (2);
(B) by striking 'paragraphs (1) or (2)' in paragraph (3) and inserting 'paragraph (1), (2), or (3)';
(C) by redesignating paragraph (3) as paragraph (4); and
(D) by inserting after paragraph (2) the following new paragraph:
'(3) to the disclosure of tax convention information on the same terms as return information may be disclosed under paragraph (3)(C) or (7) of section 6103(i), except that in the case of tax convention information provided by a foreign government, no disclosure may be made under this paragraph without the written consent of the foreign government, or'.
(10) Section 7213(a)(2) is amended by striking '(i)(3)(B)(i),' and inserting '(i)(3)(B)(i) or (7)(A)(ii),'.
(d) EFFECTIVE DATE.--The amendments made by this section shall apply to disclosures made on or after the date of the enactment of this Act.
SEC. 301. NO IMPACT ON SOCIAL SECURITY TRUST FUNDS.
(a) IN GENERAL.--Nothing in this Act (or an amendment made by this Act) shall be construed to alter or amend title II of the Social Security Act (or any regulation promulgated under that Act).
(b) TRANSFERS.--
(1) ESTIMATE OF SECRETARY.--The Secretary of the Treasury shall annually estimate the impact that the enactment of this Act has on the income and balances of the trust funds established under section 201 of the Social Security Act (42 U.S.C. 401).
(2) TRANSFER OF FUNDS.--If, under paragraph (1), the Secretary of the Treasury estimates that the enactment of this Act has a negative impact on the income and balances of the trust funds established under section 201 of the Social Security Act (42 U.S.C. 401), the Secretary shall transfer, not less frequently than quarterly, from the general revenues of the Federal Government an amount sufficient so as to ensure that the income and balances of such trust funds are not reduced as a result of the enactment of this Act.
Vice President of the United States and President of the Senate.
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