[House Report 107-252] [From the U.S. Government Publishing Office] 107th Congress Report HOUSE OF REPRESENTATIVES 1st Session 107-252 ====================================================================== PROVIDING FOR CONSIDERATION OF H.R. 3090, ECONOMIC SECURITY AND RECOVERY ACT OF 2001 _______ October 23, 2001.--Referred to the House Calendar and ordered to be printed _______ Mr. Linder, from the Committee on Rules, submitted the following R E P O R T [To accompany H. Res. 270] The Committee on Rules, having had under consideration House Resolution 270, by a nonrecord vote, report the same to the House with the recommendation that the resolution be adopted. summary of provisions of the resolution The resolution provides for consideration in the House of H.R. 3090, the Economic Security and Recovery Act of 2001, under a modified closed rule. The rule provides one hour of debate equally divided and controlled by the chairman and ranking minority member of the Committee on Ways and Means. The rule waives all points of order against consideration of the bill. The rule provides that the amendment recommended by the Committee on Ways and Means now printed in the bill shall be considered as adopted. The rule further provides for consideration of the amendment in the nature of a substitute printed in this report, if offered by Representative Rangel or his designee, which shall be considered as read and shall be separately debatable for one hour equally divided and controlled by the proponent and an opponent. The rule waives all points of order against the amendment in the nature of a substitute. Finally, the rule provides one motion to recommit with or without instructions. The waiver of all points of order includes a waiver of section 302 of the Congressional Budget Act of 1974 (prohibiting consideration of legislation providing new budget authority in excess of a committee's allocation of such authority) and section 401(b) of the Congressional Budget Act of 1974 (prohibiting consideration of legislation, as reported, providing new entitlement authority which becomes effective during the current fiscal year). The waivers of section 302 and 401 are necessary because Title V of the bill not only expands health benefits to the unemployed, thus providing new entitlement authority for the current fiscal year, but it does so in excess of the Committee's budget authority for the current fiscal year. summary of amendment made in order under the rule (Summary derived from information provided by sponsor.) Rangel--Democratic Substitute. Provides a rebate of $600 for joint filers ($500 for heads-of-household, $300 for single filers), reduced by any rebate already received, to individuals who filed tax returns for taxable year 2000 and who did not receive the maximum rebate from the recently-enacted bill. Dependent and non-resident aliens would not be eligible. Extends for one year all tax provisions that expire this year. Provides tax provisions to create $11 billion in interest-free financing for school construction and repair. Provides a five- year carryback of NOLs for taxable years 2001 or 2002 and waives the 90% AMT limitations in determining the portion of those losses allowed during the carryback period. Increases Sec. 179 expensing for taxable years 2001 and 2002 from $25,000 to $50,000 and increases the point at which the phaseout of Sec. 197 expensing begins from $200,000 to $400,000 for those taxable years. Waives, for taxable years 2001 and 2002, the 90% AMT limitations on loss carryovers for those years and on the allowance of the foreign tax credit. Provides assistance to individuals suffering disproportionately large tax liabilities due to the exercise of incentive stock options. Provides a one- year expansion of unemployment benefits that would provide up to an additional 26 weeks of benefits to those exhausting their rights to regular benefits, provides coverage to certain unemployed workers not currently covered by the system, and increases all unemployment benefits to the greater of 25% or $65 per week. Creates a temporary one-year program providing federal payment of 75% of COBRA continuation costs, and provides states with an enhanced match to offer Medicaid coverage to certain low-income unemployed individuals and their families. Provides a revenue offset freezing the top rate at 38.6%. Creates a trust fund setting aside resources for the portions of the Task Force recommendations that are outside the jurisdiction of the Committee on Ways and Means, such as community redevelopment efforts and public security and infrastructure improvements. text of amendment made in order under the rule An Amendment To Be Offered by Representative Rangel of New York, or a Designee; Debatable for 60 Minutes Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE, ETC. (a) Short Title.--This Act may be cited as the ``Fiscal Stimulus and Worker Relief Act of 2001''. (b) References to Internal Revenue Code of 1986.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c) Table of Contents.--The table of contents for this Act is as follows: Sec. 1. Short title, etc. TITLE I--TAX PROVISIONS Subtitle A--Supplemental Rebate Sec. 101. Supplemental rebate. Subtitle B--Extensions of Certain Expiring Provisions Sec. 111. Allowance of nonrefundable personal credits against regular and minimum tax liability. Sec. 112. Credit for qualified electric vehicles. Sec. 113. Credit for electricity produced from renewable resources. Sec. 114. Work Opportunity Credit. Sec. 115. Welfare-to-Work credit. Sec. 116. Deduction for clean-fuel vehicles and certain refueling property. Sec. 117. Taxable income limit on percentage depletion for oil and natural gas produced from marginal properties. Sec. 118. Qualified zone academy bonds. Sec. 119. Cover over of tax on distilled spirits. Sec. 120. Parity in the application of certain limits to mental health benefits. Sec. 121. Delay in effective date of requirement for approved diesel or kerosene terminals. Subtitle C--Other Provisions Sec. 131. Alternative minimum tax relief with respect to incentive stock options exercised during 2000. Sec. 132. Carryback for 2001 and 2002 net operating losses allowed for 5 years. Sec. 133. Temporary increase in expensing under section 179. Sec. 134. Temporary waiver of 90 percent AMT limitations. Sec. 135. Expansion of incentives for public schools. TITLE II--WORKER RELIEF Subtitle A--Temporary Unemployment Compensation Sec. 201. Short title. Sec. 202. Federal-State agreements. Sec. 203. Temporary Supplemental Unemployment Compensation Account. Sec. 204. Payments to States having agreements under this subtitle. Sec. 205. Financing provisions. Sec. 206. Fraud and overpayments. Sec. 207. Definitions. Sec. 208. Applicability. Subtitle B--Premium Assistance For COBRA Continuation Coverage Sec. 211. Premium assistance for COBRA continuation coverage. Subtitle C--Additional Assistance for Temporary Health Insurance Coverage Sec. 221. Optional temporary medicaid coverage for certain uninsured employees. Sec. 222. Optional temporary coverage for unsubsidized portion of COBRA continuation premiums. TITLE III--FREEZE OF TOP INDIVIDUAL INCOME TAX RATE AND DOMESTIC SECURITY TRUST FUND Sec. 301. Freeze of top individual income tax rate and domestic security trust fund. TITLE I--TAX PROVISIONS Subtitle A--Supplemental Rebate SEC. 101. SUPPLEMENTAL REBATE. (a) In General.--Section 6428 (relating to acceleration of 10 percent income tax rate bracket benefit for 2001) is amended by adding at the end the following new subsection: ``(f) Supplemental Rebate.-- ``(1) In general.--Each individual who was an eligible individual for such individual's first taxable year beginning in 2000 and who, before October 12, 2001, filed a return of tax imposed by subtitle A for such taxable year 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 supplemental refund amount for such taxable year. ``(2) Supplemental refund amount.--For purposes of this subsection, the supplemental refund amount is an amount equal to the excess (if any) of-- ``(A)(i) $600 in the case of taxpayers to whom section 1(a) applies, ``(ii) $500 in the case of taxpayers to whom section 1(b) applies, and ``(iii) $300 in the case of taxpayers to whom subsections (c) or (d) of section 1 applies, over ``(B) the taxpayer's advance refund amount under subsection (e). ``(3) Timing of payments.--In the case of any overpayment attributable to this subsection, the Secretary shall, to the maximum extent practicable, refund or credit such overpayment before December 31, 2001. ``(4) No interest.--No interest shall be allowed on any overpayment attributable to this subsection.'' (b) Conforming Amendments.-- (1) Paragraph (1) of section 6428(d) is amended by adding at the end the following new subparagraph: ``(C) Coordination With supplemental rebate.--No credit shall be allowed under subsection (a) to any individual who is entitled to a supplemental rebate amount under subsection (f).'' (2) Paragraph (3) of section 6428(e) is amended by striking ``December 31, 2001'' and inserting ``the date of the enactment of the Fiscal Stimulus and Worker Relief Act of 2001''. (c) Effective Date.--The amendments made by this section shall take effect on the date of the enactment of this Act. Subtitle B--Extensions of Certain Expiring Provisions SEC. 111. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST REGULAR AND MINIMUM TAX LIABILITY. (a) In General.--Paragraph (2) of section 26(a) is amended-- (1) by striking ``rule for 2000 and 2001.--'' and inserting ``rule for 2000, 2001, and 2002.--'', and (2) by striking ``during 2000 or 2001,'' and inserting ``during 2000, 2001, or 2002,''. (b) Conforming Amendments.-- (1) Section 904(h) is amended by striking ``during 2000 or 2001'' and inserting ``during 2000, 2001, or 2002''. (2) The amendments made by sections 201(b), 202(f), and 618(f) of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to taxable years beginning during 2002. (c) Technical Correction.--Section 24(d)(1)(B) is amended by striking ``amount of credit allowed by this section'' and inserting ``aggregate amount of credits allowed by this subpart.''. (d) Effective Dates.-- (1) The amendments made by subsections (a) and (b) shall apply to taxable years beginning after December 31, 2001. (2) The amendment made by subsection (c) shall apply to taxable years beginning after December 31, 2000. SEC. 112. CREDIT FOR QUALIFIED ELECTRIC VEHICLES. (a) In General.--Section 30 is amended-- (1) in subsection (b)(2)-- (A) by striking ``December 31, 2001,'' and inserting ``December 31, 2002,'', and (B) in subparagraphs (A), (B), and (C), by striking ``2002'', ``2003'', and ``2004'', respectively, and inserting ``2003'', ``2004'', and ``2005'', respectively, and (2) in subsection (e), by striking ``December 31, 2004'' and inserting ``December 31, 2005''. (b) Effective Date.--The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2001. SEC. 113. CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE RESOURCES. (a) In General.--Subparagraphs (A), (B), and (C) of section 45(c)(3) are each amended by striking ``2002'' and inserting ``2003''. (b) Effective Date.--The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2001. SEC. 114. WORK OPPORTUNITY CREDIT. (a) In General.--Subparagraph (B) of section 51(c)(4) is amended by striking ``2001'' and inserting ``2002''. (b) Effective Date.--The amendment made by subsection (a) shall apply to individuals who begin work for the employer after December 31, 2001. SEC. 115. WELFARE-TO-WORK CREDIT. (a) In General.--Subsection (f) of section 51A is amended by striking ``2001'' and inserting ``2002''. (b) Effective Date.--The amendment made by subsection (a) shall apply to individuals who begin work for the employer after December 31, 2001. SEC. 116. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN REFUELING PROPERTY. (a) In General.--Section 179A is amended-- (1) in subsection (b)(1)(B)-- (A) by striking ``December 31, 2001,'' and inserting ``December 31, 2002,'', and (B) in clauses (i), (ii), and (iii), by striking ``2002'', ``2003'', and ``2004'', respectively, and inserting ``2003'', ``2004'', and ``2005'', respectively, and (2) in subsection (f), by striking ``December 31, 2004'' and inserting ``December 31, 2005''. (b) Effective Date.--The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2001. SEC. 117. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR OIL AND NATURAL GAS PRODUCED FROM MARGINAL PROPERTIES. (a) In General.--Subparagraph (H) of section 613A(c)(6) is amended by striking ``2002'' and inserting ``2003''. (b) Effective Date.--The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2001. SEC. 118. QUALIFIED ZONE ACADEMY BONDS. (a) In General.--Paragraph (1) of section 1397E(e) is amended by striking ``2000, and 2001'' and inserting ``2000, 2001, and 2002''. (b) Extension of Carryover of Unused Limitation From 1998.-- Paragraph (4) of section 1397E(e) is amended by striking ``3 years for carryforwards from 1998 or 1999'' and inserting ``4 years for carryforwards from 1998 and 3 years for carryforwards from 1999''. (c) Effective Date.--The amendments made by this section shall take effect on the date of enactment of this Act. SEC. 119. COVER OVER OF TAX ON DISTILLED SPIRITS. (a) In General.--Paragraph (1) of section 7652(f) is amended by striking ``January 1, 2002'' and inserting ``January 1, 2003''. (b) Effective Date.--The amendment made by subsection (a) shall take effect on the date of the enactment of this Act. SEC. 120. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH BENEFITS. (a) In General.--Subsection (f) of section 9812 is amended by striking ``2001'' and inserting ``2002''. (b) Effective Date.--The amendment made by subsection (a) shall apply to plan years beginning after December 31, 2001. SEC. 121. DELAY IN EFFECTIVE DATE OF REQUIREMENT FOR APPROVED DIESEL OR KEROSENE TERMINALS. Paragraph (2) of section 1032(f) of the Taxpayer Relief Act of 1997 (Public Law 105-34) is amended by striking ``January 1, 2002'' and inserting ``January 1, 2003''. Subtitle C--Other Provisions SEC. 131. ALTERNATIVE MINIMUM TAX RELIEF WITH RESPECT TO INCENTIVE STOCK OPTIONS EXERCISED DURING 2000. In the case of an incentive stock option (as defined in section 422 of the Internal Revenue Code of 1986) exercised during calendar year 2000 or 2001, the amount taken into account under section 56(b)(3) of such Code by reason of such exercise shall not exceed the amount that would have been taken into account if, on the date of such exercise, the fair market value of the stock acquired pursuant to such option had been-- (1) its fair market value as of-- (A) April 15, 2001, in the case of options exercised during 2000, and (B) December 31, 2001, in the case of options exercised during 2001, or (2) if such stock is sold or exchanged on or before the applicable date under paragraph (1), the amount realized on such sale or exchange. SEC. 132. CARRYBACK FOR 2001 AND 2002 NET OPERATING LOSSES ALLOWED FOR 5 YEARS. (a) In General.--Paragraph (1) of section 172(b) (relating to years to which loss may be carried) is amended by adding at the end the following new subparagraph: ``(H) In the case of a taxpayer which has a net operating loss for any taxable year beginning in 2001 or 2002, subparagraph (A)(i) shall be applied by substituting `5' for `2' and subparagraph (F) shall not apply.''. (b) Election to Disregard 5-Year Carryback for Net Operating Loss Arising in 2001 or 2002.--Section 172 of such Code (relating to net operating loss deduction) is amended by redesignating subsection (j) as subsection (k) and by inserting after subjection (i) the following new subsection: ``(j) Election to Disregard 5-Year Carryback for Net Operating Loss Arising in 2001 or 2002.--Any taxpayer entitled to a 5-year carryback under subsection (b)(1)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.''. (c) Suspension of 90 Percent AMT Limit on 2001 and 2002 NOL Carrybacks.--Subparagraph (A) of section 56(d)(1) (relating to general rule defining alternative tax net operating loss deduction) is amended to read as follows: ``(A) the amount of such deduction shall not exceed the sum of-- ``(i) the lesser of-- ``(I) the amount of such deduction attributable to net operating losses (other than the deduction attributable to carrybacks of net operating losses for taxable years beginning in 2001 or 2002), or ``(II) 90 percent of alternate minimum taxable income determined without regard to such deduction, plus ``(ii) the lesser of-- ``(I) the amount of such deduction attributable to carrybacks of net operating losses for taxable years beginning in 2001 or 2002, or ``(II) alternate minimum taxable income determined without regard to such deduction reduced by the amount determined under clause (i), and''. (d) Effective Date.--The amendments made by this section shall apply to net operating losses for taxable years beginning after 2000. SEC. 133. TEMPORARY INCREASE IN EXPENSING UNDER SECTION 179. (a) In General.--The table contained in section 179(b)(1) (relating to dollar limitation) is amended to read as follows: ``If the taxable year The applicable begins in: amount is: 2001 or 2002.................................. $50,000 2003 or thereafter............................ 25,000.'' (b) Temporary Increase in Amount of Property Triggering Phaseout of Maximum Benefit.--Paragraph (2) of section 179(b) of such Code is amended by inserting before the period ``($400,000 in the case of taxable years beginning during 2001 or 2002)''. (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2000. SEC. 134. TEMPORARY WAIVER OF 90 PERCENT AMT LIMITATIONS. Subparagraph (A) of section 56(b)(1) of the Internal Revenue Code of 1986 and paragraph (2) of section 59(a) of such Code shall not apply in determining alternative minimum tax liability for taxable years beginning in 2001 or 2002. SEC. 135. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS. (a) In General.--Chapter 1 is amended by adding at the end the following new subchapter: ``Subchapter Y--Public School Modernization Provisions ``Sec. 1400K. Credit to holders of qualified public school modernization bonds. ``Sec. 1400L. Qualified school construction bonds. ``Sec. 1400M. Qualified zone academy bonds. ``SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS. ``(a) Allowance of Credit.--In the case of a taxpayer who holds a qualified public school modernization bond on a credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond. ``(b) Amount of Credit.-- ``(1) In general.--The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified public school modernization bond is 25 percent of the annual credit determined with respect to such bond. ``(2) Annual credit.--The annual credit determined with respect to any qualified public school modernization bond is the product of-- ``(A) the applicable credit rate, multiplied by ``(B) the outstanding face amount of the bond. ``(3) Applicable credit rate.--For purposes of paragraph (1), the applicable credit rate with respect to an issue is the rate equal to an average market yield (as of the day before the date of issuance of the issue) on outstanding long-term corporate debt obligations (determined under regulations prescribed by the Secretary). ``(4) Special rule for issuance and redemption.--In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed. ``(c) Limitation Based on Amount of Tax.-- ``(1) In general.--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 part IV of subchapter A (other than subpart C thereof, relating to refundable credits). ``(2) Carryover of unused credit.--If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year. ``(d) Qualified Public School Modernization Bond; Credit Allowance Date.--For purposes of this section-- ``(1) Qualified public school modernization bond.-- The term `qualified public school modernization bond' means-- ``(A) a qualified zone academy bond, and ``(B) a qualified school construction bond. ``(2) Credit allowance date.--The term `credit allowance date' means-- ``(A) March 15, ``(B) June 15, ``(C) September 15, and ``(D) December 15. Such term includes the last day on which the bond is outstanding. ``(e) Other Definitions.--For purposes of this subchapter-- ``(1) Local educational agency.--The term `local educational agency' has the meaning given to such term by section 14101 of the Elementary and Secondary Education Act of 1965. Such term includes the local educational agency that serves the District of Columbia but does not include any other State agency. ``(2) Bond.--The term `bond' includes any obligation. ``(3) State.--The term `State' includes the District of Columbia and any possession of the United States. ``(4) Public school facility.--The term `public school facility' shall not include-- ``(A) any stadium or other facility primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public, or ``(B) any facility which is not owned by a State or local government or any agency or instrumentality of a State or local government. ``(f) Credit Included in Gross Income.--Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income. ``(g) Recapture of Portion of Credit Where Cessation of Compliance.-- ``(1) In general.--If any bond which when issued purported to be a qualified public school modernization bond ceases to be a qualified public school modernization bond, the issuer shall pay to the United States (at the time required by the Secretary) an amount equal to the sum of-- ``(A) the aggregate of the credits allowable under this section with respect to such bond (determined without regard to subsection (c)) for taxable years ending during the calendar year in which such cessation occurs and the 2 preceding calendar years, and ``(B) interest at the underpayment rate under section 6621 on the amount determined under subparagraph (A) for each calendar year for the period beginning on the first day of such calendar year. ``(2) Failure to pay.--If the issuer fails to timely pay the amount required by paragraph (1) with respect to such bond, the tax imposed by this chapter on each holder of any such bond which is part of such issue shall be increased (for the taxable year of the holder in which such cessation occurs) by the aggregate decrease in the credits allowed under this section to such holder for taxable years beginning in such 3 calendar years which would have resulted solely from denying any credit under this section with respect to such issue for such taxable years. ``(3) Special rules.-- ``(A) Tax benefit rule.--The tax for the taxable year shall be increased under paragraph (2) 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 paragraph (2) shall not be treated as a tax imposed by this chapter for purposes of determining-- ``(i) the amount of any credit allowable under this part, or ``(ii) the amount of the tax imposed by section 55. ``(h) Bonds Held by Regulated Investment Companies.--If any qualified public school modernization bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary. ``(i) Credits May Be Stripped.--Under regulations prescribed by the Secretary-- ``(1) In general.--There may be a separation (including at issuance) of the ownership of a qualified public school modernization bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond. ``(2) Certain rules to apply.--In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified public school modernization bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. ``(j) Treatment for Estimated Tax Purposes.--Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a qualified public school modernization bonds on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date. ``(k) Credit May Be Transferred.--Nothing in any law or rule of law shall be construed to limit the transferability of the credit allowed by this section through sale and repurchase agreements. ``(k) Reporting.--Issuers of qualified public school modernization bonds shall submit reports similar to the reports required under section 149(e). ``(l) Penalty on Contractors Failing To Pay Prevailing Wage.-- ``(1) In general.--If the Secretary of Labor certifies to the Secretary that any contractor on any project funded by any qualified public school modernization bond has failed, during any portion of such contractor's taxable year, to pay prevailing wages as would be required under section 439 of the General Education Provisions Act if such funding were an applicable program under such section, the tax imposed by chapter 1 on such contractor for such taxable year shall be increased by 100 percent of the amount involved in such failure. The preceding sentence shall not apply to the extent the Secretary of Labor determines that such failure is due to reasonable cause and not willful neglect. ``(2) Amount involved.--For purposes of paragraph (1), the amount involved with respect to any failure is the excess of the amount of wages such contractor would be so required to pay under such section over the amount of wages paid. ``(3) No credits against tax.--The tax imposed by this section shall not be treated as a tax imposed by this chapter for purposes of determining-- ``(A) the amount of any credit allowable under this chapter, or ``(B) the amount of the minimum tax imposed by section 55. ``(m) Termination.--This section shall not apply to any bond issued after September 30, 2006. ``SEC. 1400L. QUALIFIED SCHOOL CONSTRUCTION BONDS. ``(a) Qualified School Construction Bond.--For purposes of this subchapter, the term `qualified school construction bond' means any bond issued as part of an issue if-- ``(1) 95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue, ``(2) the bond is issued by a State or local government within the jurisdiction of which such school is located, ``(3) the issuer designates such bond for purposes of this section, and ``(4) the term of each bond which is part of such issue does not exceed 15 years. ``(b) Limitation on Amount of Bonds Designated.--The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) by any issuer shall not exceed the sum of-- ``(1) the limitation amount allocated under subsection (d) for such calendar year to such issuer, and ``(2) if such issuer is a large local educational agency (as defined in subsection (e)(4)) or is issuing on behalf of such an agency, the limitation amount allocated under subsection (e) for such calendar year to such agency. ``(c) National Limitation on Amount of Bonds Designated.-- There is a national qualified school construction bond limitation for each calendar year. Such limitation is-- ``(1) $11,000,000,000 for 2002, and ``(2) except as provided in subsection (f), zero after 2002. ``(d) 60 Percent of Limitation Allocated Among States.-- ``(1) In general.--60 percent of the limitation applicable under subsection (c) for any calendar year shall be allocated by the Secretary among the States in proportion to the respective numbers of children in each State who have attained age 5 but not age 18 for the most recent fiscal year ending before such calendar year. The limitation amount allocated to a State under the preceding sentence shall be allocated by the State to issuers within such State. ``(2) Minimum allocations to states.-- ``(A) In general.--The Secretary shall adjust the allocations under this subsection for any calendar year for each State to the extent necessary to ensure that the sum of-- ``(i) the amount allocated to such State under this subsection for such year, and ``(ii) the aggregate amounts allocated under subsection (e) to large local educational agencies in such State for such year, is not less than an amount equal to such State's minimum percentage of the amount to be allocated under paragraph (1) for the calendar year. ``(B) Minimum percentage.--A State's minimum percentage for any calendar year is the minimum percentage described in section 1124(d) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6334(d)) for such State for the most recent fiscal year ending before such calendar year. ``(3) Allocations to certain possessions.--The amount to be allocated under paragraph (1) to any possession of the United States other than Puerto Rico shall be the amount which would have been allocated if all allocations under paragraph (1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). In making other allocations, the amount to be allocated under paragraph (1) shall be reduced by the aggregate amount allocated under this paragraph to possessions of the United States. ``(4) Allocations for indian schools.--In addition to the amounts otherwise allocated under this subsection, $200,000,000 for calendar year 2002, and $200,000,000 for calendar year 2003, shall be allocated by the Secretary of the Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. In the case of amounts allocated under the preceding sentence, Indian tribal governments (as defined in section 7871) shall be treated as qualified issuers for purposes of this subchapter. ``(e) 40 Percent of Limitation Allocated Among Largest School Districts.-- ``(1) In general.--40 percent of the limitation applicable under subsection (c) for any calendar year shall be allocated under paragraph (2) by the Secretary among local educational agencies which are large local educational agencies for such year. ``(2) Allocation formula.--The amount to be allocated under paragraph (1) for any calendar year shall be allocated among large local educational agencies in proportion to the respective amounts each such agency received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year. ``(3) Allocation of unused limitation to state.--The amount allocated under this subsection to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for such calendar year. Any amount reallocated to a State under the preceding sentence may be allocated as provided in subsection (d)(1). ``(4) Large local educational agency.--For purposes of this section, the term `large local educational agency' means, with respect to a calendar year, any local educational agency if such agency is-- ``(A) among the 100 local educational agencies with the largest numbers of children aged 5 through 17 from families living below the poverty level, as determined by the Secretary using the most recent data available from the Department of Commerce that are satisfactory to the Secretary, or ``(B) 1 of not more than 25 local educational agencies (other than those described in subparagraph (A)) that the Secretary of Education determines (based on the most recent data available satisfactory to the Secretary) are in particular need of assistance, based on a low level of resources for school construction, a high level of enrollment growth, or such other factors as the Secretary deems appropriate. ``(f) Carryover of Unused Limitation.--If for any calendar year-- ``(1) the amount allocated under subsection (d) to any State, exceeds ``(2) the amount of bonds issued during such year which are designated under subsection (a) pursuant to such allocation, the limitation amount under such subsection for such State for the following calendar year shall be increased by the amount of such excess. A similar rule shall apply to the amounts allocated under subsection (d)(4) or (e). ``(g) Special Rules Relating to Arbitrage.-- ``(1) In general.--A bond shall not be treated as failing to meet the requirement of subsection (a)(1) solely by reason of the fact that the proceeds of the issue of which such bond is a part are invested for a temporary period (but not more than 36 months) until such proceeds are needed for the purpose for which such issue was issued. ``(2) Binding commitment requirement.--Paragraph (1) shall apply to an issue only if, as of the date of issuance, there is a reasonable expectation that-- ``(A) at least 10 percent of the proceeds of the issue will be spent within the 6-month period beginning on such date for the purpose for which such issue was issued, and ``(B) the remaining proceeds of the issue will be spent with due diligence for such purpose. ``(3) Earnings on proceeds.--Any earnings on proceeds during the temporary period shall be treated as proceeds of the issue for purposes of applying subsection (a)(1) and paragraph (1) of this subsection. ``SEC. 1400M. QUALIFIED ZONE ACADEMY BONDS. ``(a) Qualified Zone Academy Bond.--For purposes of this subchapter-- ``(1) In general.--The term `qualified zone academy bond' means any bond issued as part of an issue if-- ``(A) 95 percent or more of the proceeds of such issue are to be used for a qualified purpose with respect to a qualified zone academy established by a local educational agency, ``(B) the bond is issued by a State or local government within the jurisdiction of which such academy is located, ``(C) the issuer-- ``(i) designates such bond for purposes of this section, ``(ii) certifies that it has written assurances that the private business contribution requirement of paragraph (2) will be met with respect to such academy, and ``(iii) certifies that it has the written approval of the local educational agency for such bond issuance, and ``(D) the term of each bond which is part of such issue does not exceed 15 years. Rules similar to the rules of section 1400L(g) shall apply for purposes of paragraph (1). ``(2) Private business contribution requirement.-- ``(A) In general.--For purposes of paragraph (1), the private business contribution requirement of this paragraph is met with respect to any issue if the local educational agency that established the qualified zone academy has written commitments from private entities to make qualified contributions having a present value (as of the date of issuance of the issue) of not less than 10 percent of the proceeds of the issue. ``(B) Qualified contributions.--For purposes of subparagraph (A), the term `qualified contribution' means any contribution (of a type and quality acceptable to the local educational agency) of-- ``(i) equipment for use in the qualified zone academy (including state-of-the-art technology and vocational equipment), ``(ii) technical assistance in developing curriculum or in training teachers in order to promote appropriate market driven technology in the classroom, ``(iii) services of employees as volunteer mentors, ``(iv) internships, field trips, or other educational opportunities outside the academy for students, or ``(v) any other property or service specified by the local educational agency. ``(3) Qualified zone academy.--The term `qualified zone academy' means any public school (or academic program within a public school) which is established by and operated under the supervision of a local educational agency to provide education or training below the postsecondary level if-- ``(A) such public school or program (as the case may be) is designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates, and better prepare students for the rigors of college and the increasingly complex workforce, ``(B) students in such public school or program (as the case may be) will be subject to the same academic standards and assessments as other students educated by the local educational agency, ``(C) the comprehensive education plan of such public school or program is approved by the local educational agency, and ``(D)(i) such public school is located in an empowerment zone or enterprise community (including any such zone or community designated after the date of the enactment of this section), or ``(ii) there is a reasonable expectation (as of the date of issuance of the bonds) that at least 35 percent of the students attending such school or participating in such program (as the case may be) will be eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act. ``(4) Qualified purpose.--The term `qualified purpose' means, with respect to any qualified zone academy-- ``(A) constructing, rehabilitating, or repairing the public school facility in which the academy is established, ``(B) acquiring the land on which such facility is to be constructed with part of the proceeds of such issue, ``(C) providing equipment for use at such academy, ``(D) developing course materials for education to be provided at such academy, and ``(E) training teachers and other school personnel in such academy. ``(b) Limitations on Amount of Bonds Designated.-- ``(1) In general.--There is a national zone academy bond limitation for each calendar year. Such limitation is-- ``(A) $400,000,000 for 1998, ``(B) $400,000,000 for 1999, ``(C) $400,000,000 for 2000, ``(D) $400,000,000 for 2001, ``(E) $1,400,000,000 for 2002, and ``(F) except as provided in paragraph (3), zero after 2002. ``(2) Allocation of limitation.-- ``(A) Allocation among states.-- ``(i) 1998, 1999, 2000, and 2001 limitations.--The national zone academy bond limitations for calendar years 1998, 1999, 2000, and 2001 shall be allocated by the Secretary among the States on the basis of their respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). ``(ii) Limitation after 2001.--The national zone academy bond limitation for any calendar year after 2001 shall be allocated by the Secretary among the States in proportion to the respective amounts each such State received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year. ``(B) Allocation to local educational agencies.--The limitation amount allocated to a State under subparagraph (A) shall be allocated by the State to qualified zone academies within such State. ``(C) Designation subject to limitation amount.--The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) with respect to any qualified zone academy shall not exceed the limitation amount allocated to such academy under subparagraph (B) for such calendar year. ``(3) Carryover of unused limitation.--If for any calendar year-- ``(A) the limitation amount under this subsection for any State, exceeds ``(B) the amount of bonds issued during such year which are designated under subsection (a) (or the corresponding provisions of prior law) with respect to qualified zone academies within such State, the limitation amount under this subsection for such State for the following calendar year shall be increased by the amount of such excess.'' (b) Reporting.--Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph: ``(8) Reporting of credit on qualified public school modernization bonds.-- ``(A) In general.--For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 1400K(f) and such amounts shall be treated as paid on the credit allowance date (as defined in section 1400K(d)(2)). ``(B) Reporting to corporations, etc.--Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i). ``(C) Regulatory authority.--The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'' (c) Conforming Amendments.-- (1) Subchapter U of chapter 1 is amended by striking part IV, by redesignating part V as part IV, and by redesignating section 1397F as section 1397E. (2) The table of subchapters for chapter 1 is amended by adding at the end the following new item: ``Subchapter Y. Public school modernization provisions.'' (3) The table of parts of subchapter U of chapter 1 is amended by striking the last 2 items and inserting the following item: ``Part IV. Regulations.'' (e) Effective Dates.-- (1) In general.--Except as otherwise provided in this subsection, the amendments made by this section shall apply to obligations issued after December 31, 2001. (2) Repeal of restriction on zone academy bond holders.--In the case of bonds to which section 1397E of the Internal Revenue Code of 1986 (as in effect before the date of the enactment of this Act) applies, the limitation of such section to eligible taxpayers (as defined in subsection (d)(6) of such section) shall not apply after the date of the enactment of this Act. TITLE II--WORKER RELIEF Subtitle A--Temporary Unemployment Compensation SEC. 201. SHORT TITLE. This subtitle may be cited as the ``Temporary Unemployment Compensation Act of 2001''. SEC. 202. FEDERAL-STATE AGREEMENTS. (a) In General.--Any State which desires to do so may enter into and participate in an agreement under this subtitle with the Secretary of Labor (hereinafter in this subtitle referred to as the ``Secretary''). Any State which is a party to an agreement under this subtitle may, upon providing 30 days' written notice to the Secretary, terminate such agreement. (b) Provisions of Agreement.-- (1) In general.--Any agreement under subsection (a) shall provide that the State agency of the State will make-- (A) payments of regular compensation to individuals in amounts and to the extent that they would be determined if the State law were applied with the modifications described in paragraph (2), and (B) payments of temporary supplemental unemployment compensation to individuals who-- (i) have exhausted all rights to regular compensation under the State law, (ii) do not, with respect to a week, have any rights to compensation (excluding extended compensation) under the State law of any other State (whether one that has entered into an agreement under this subtitle or otherwise) nor compensation under any other Federal law (other than under the Federal-State Extended Unemployment Compensation Act of 1970), and are not paid or entitled to be paid any additional compensation under any State or Federal law, and (iii) are not receiving compensation with respect to such week under the unemployment compensation law of Canada. (2) Modifications described.--The modifications described in this paragraph are as follows: (A) An individual shall be eligible for regular compensation if the individual would be so eligible, determined by applying-- (i) the base period that would otherwise apply under the State law if this subtitle had not been enacted, or (ii) a base period ending at the close of the calendar quarter most recently completed before the date of the individual's application for benefits, whichever results in the greater amount. (B) An individual shall not be denied regular compensation under the State law's provisions relating to availability for work, active search for work, or refusal to accept work, solely by virtue of the fact that such individual is seeking, or available for, only part-time (and not full-time) work. (C)(i) Subject to clause (ii), the amount of regular compensation (including dependents' allowances) payable for any week shall be equal to the amount determined under the State law (before the application of this subparagraph), plus an additional-- (I) 25 percent, or (II) $65, whichever is greater. (ii) In no event may the total amount determined under clause (i) with respect to any individual exceed the average weekly insured wages of that individual in that calendar quarter of the base period in which such individual's insured wages were the highest (or one such quarter if his wages were the same for more than one such quarter). (c) Nonreduction Rule.--Under the agreement, subsection (b)(2)(C) shall not apply (or shall cease to apply) with respect to a State upon a determination by the Secretary that the method governing the computation of regular compensation under the State law of that State has been modified in a way such that-- (1) the average weekly amount of regular compensation which will be payable during the period of the agreement (determined disregarding the modifications described in subsection (b)(2)) will be less than (2) the average weekly amount of regular compensation which would otherwise have been payable during such period under the State law, as in effect on September 11, 2001. (d) Coordination Rules.-- (1) Regular compensation payable under a federal law.--The modifications described in subsection (b)(2) shall also apply in determining the amount of benefits payable under any Federal law to the extent that those benefits are determined by reference to regular compensation payable under the State law of the State involved. (2) TSUC to serve as second-tier benefits.-- Notwithstanding any other provision of law, extended benefits shall not be payable to any individual for any week for which temporary supplemental unemployment compensation is payable to such individual. (e) Exhaustion of Benefits.--For purposes of subsection (b)(1)(B)(i), an individual shall be considered to have exhausted such individual's rights to regular compensation under a State law when-- (1) no payments of regular compensation can be made under such law because such individual has received all regular compensation available to such individual based on employment or wages during such individual's base period, or (2) such individual's rights to such compensation have been terminated by reason of the expiration of the benefit year with respect to which such rights existed. (f) Weekly Benefit Amount, Terms and Conditions, etc. Relating to TSUC.--For purposes of any agreement under this subtitle-- (1) the amount of temporary supplemental unemployment compensation which shall be payable to an individual for any week of total unemployment shall be equal to the amount of regular compensation (including dependents' allowances) payable to such individual under the State law for a week for total unemployment during such individual's benefit year, (2) the terms and conditions of the State law which apply to claims for regular compensation and to the payment thereof shall apply to claims for temporary supplemental unemployment compensation and the payment thereof, except where inconsistent with the provisions of this subtitle or with the regulations or operating instructions of the Secretary promulgated to carry out this subtitle, and (3) the maximum amount of temporary supplemental unemployment compensation payable to any individual for whom a temporary supplemental unemployment compensation account is established under section 203 shall not exceed the amount established in such account for such individual. SEC. 203. TEMPORARY SUPPLEMENTAL UNEMPLOYMENT COMPENSATION ACCOUNT. (a) In General.--Any agreement under this subtitle shall provide that the State will establish, for each eligible individual who files an application for temporary supplemental unemployment compensation, a temporary supplemental unemployment compensation account. (b) Amount in Account.-- (1) In general.--The amount established in an account under subsection (a) shall be equal to the product obtained by multiplying an individual's weekly benefit amount by the applicable factor under paragraph (3). (2) Weekly benefit amount.--For purposes of this subsection, an individual's weekly benefit amount for any week is the amount of regular compensation (including dependents' allowances) under the State law payable to such individual for a week of total unemployment in such individual's benefit year. (3) Applicable factor.-- (A) General rule.--The applicable factor under this paragraph is 13, unless the individual's benefit year begins or ends during a period of high unemployment within such individual's State, in which case the applicable factor is 26. (B) Period of high unemployment.--For purposes of this paragraph, a period of high unemployment within a State shall begin and end, if at all, in a way (to be set forth in the State's agreement under this subtitle) similar to the way in which an extended benefit period would under section 203 of the Federal- State Extended Unemployment Compensation Act of 1970, subject to the following: (i) To determine if there is a State ``on'' or ``off'' indicator, apply section 203(f) of such Act, but-- (I) substitute ``5 percent'' for ``6.5 percent'' in paragraph (1)(A)(i) thereof, and (II) disregard paragraph (1)(A)(ii) thereof and the last sentence of paragraph (1) thereof. (ii) To determine the beginning and ending dates of a period of high unemployment within a State, apply section 203(a) and (b) of such Act, except that-- (I) in applying such section 203(a), deem paragraphs (1) and (2) thereof to be amended by striking ``the third week after'', and (II) in applying such section 203(b), deem paragraph (1)(A) thereof amended by striking ``thirteen'' and inserting ``twenty-six'' and paragraph (1)(B) thereof amended by striking ``fourteenth'' and inserting ``twenty-seventh''. (4) Rule of construction.--For purposes of any computation under paragraph (1) (and any determination of amount under section 202(f)(1)), the modification described in section 202(b)(2)(C) (relating to increased benefits) shall be deemed to have been in effect with respect to the entirety of the benefit year involved. (c) Eligibility Period.--An individual whose applicable factor under subsection (b)(3) is 26 shall be eligible for temporary supplemental unemployment compensation for each week of total unemployment in his benefit year which begins in the State's period of high unemployment and, if his benefit year ends within such period, any such weeks thereafter which begin in such period of high unemployment, not to exceed a total of 26 weeks. SEC. 204. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS SUBTITLE. (a) General Rule.--There shall be paid to each State which has entered into an agreement under this subtitle an amount equal to-- (1) 100 percent of any regular compensation made payable to individuals by such State by virtue of the modifications which are described in section 202(b)(2) and deemed to be in effect with respect to such State pursuant to section 202(b)(1)(A), (2) 100 percent of any regular compensation-- (A) which is paid to individuals by such State by reason of the fact that its State law contains provisions comparable to the modifications described in section 202(b)(2)(A)-(B), but only (B) to the extent that those amounts would, if such amounts were instead payable by virtue of the State law's being deemed to be so modified pursuant to section 202(b)(1)(A), have been reimbursable under paragraph (1), and (3) 100 percent of the temporary supplemental unemployment compensation paid to individuals by the State pursuant to such agreement. (b) Determination of Amount.--Sums under subsection (a) payable to any State by reason of such State having an agreement under this subtitle shall be payable, either in advance or by way of reimbursement (as may be determined by the Secretary), in such amounts as the Secretary estimates the State will be entitled to receive under this subtitle for each calendar month, reduced or increased, as the case may be, by any amount by which the Secretary finds that the Secretary's estimates for any prior calendar month were greater or less than the amounts which should have been paid to the State. Such estimates may be made on the basis of such statistical, sampling, or other method as may be agreed upon by the Secretary and the State agency of the State involved. (c) Administrative Expenses, Etc.--There is hereby appropriated out of the employment security administration account of the Unemployment Trust Fund (as established by section 901(a) of the Social Security Act) $500,000,000 to reimburse States for the costs of the administration of agreements under this subtitle (including any improvements in technology in connection therewith) and to provide reemployment services to unemployment compensation claimants in States having agreements under this subtitle. Each State's share of the amount appropriated by the preceding sentence shall be determined by the Secretary according to the factors described in section 302(a) of the Social Security Act and certified by the Secretary to the Secretary of the Treasury. SEC. 205. FINANCING PROVISIONS. (a) In General.--Funds in the extended unemployment compensation account (as established by section 905(a) of the Social Security Act), and the Federal unemployment account (as established by section 904(g) of the Social Security Act), of the Unemployment Trust Fund shall be used, in accordance with subsection (b), for the making of payments (described in section 204(a)) to States having agreements entered into under this subtitle. (b) Certification.--The Secretary shall from time to time certify to the Secretary of the Treasury for payment to each State the sums described in section 204(a) which are payable to such State under this subtitle. The Secretary of the Treasury, prior to audit or settlement by the General Accounting Office, shall make payments to the State in accordance with such certification by transfers from the extended unemployment compensation account (or, to the extent that there are insufficient funds in that account, from the Federal unemployment account) to the account of such State in the Unemployment Trust Fund. SEC. 206. FRAUD AND OVERPAYMENTS. (a) In General.--If an individual knowingly has made, or caused to be made by another, a false statement or representation of a material fact, or knowingly has failed, or caused another to fail, to disclose a material fact, and as a result of such false statement or representation or of such nondisclosure such individual has received any regular compensation or temporary supplemental unemployment compensation under this subtitle to which he was not entitled, such individual-- (1) shall be ineligible for any further benefits under this subtitle in accordance with the provisions of the applicable State unemployment compensation law relating to fraud in connection with a claim for unemployment compensation, and (2) shall be subject to prosecution under section 1001 of title 18, United States Code. (b) Repayment.--In the case of individuals who have received any regular compensation or temporary supplemental unemployment compensation under this subtitle to which they were not entitled, the State shall require such individuals to repay those benefits to the State agency, except that the State agency may waive such repayment if it determines that-- (1) the payment of such benefits was without fault on the part of any such individual, and (2) such repayment would be contrary to equity and good conscience. (c) Recovery by State Agency.-- (1) In general.--The State agency may recover the amount to be repaid, or any part thereof, by deductions from any regular compensation or temporary supplemental unemployment compensation payable to such individual under this subtitle or from any unemployment compensation payable to such individual under any Federal unemployment compensation law administered by the State agency or under any other Federal law administered by the State agency which provides for the payment of any assistance or allowance with respect to any week of unemployment, during the 3-year period after the date such individuals received the payment of the regular compensation or temporary supplemental unemployment compensation to which they were not entitled, except that no single deduction may exceed 50 percent of the weekly benefit amount from which such deduction is made. (2) Opportunity for hearing.--No repayment shall be required, and no deduction shall be made, until a determination has been made, notice thereof and an opportunity for a fair hearing has been given to the individual, and the determination has become final. (d) Review.--Any determination by a State agency under this section shall be subject to review in the same manner and to the same extent as determinations under the State unemployment compensation law, and only in that manner and to that extent. SEC. 207. DEFINITIONS. For purposes of this subtitle: (1) In general.--The terms ``compensation'', ``regular compensation'', ``extended compensation'', ``additional compensation'', ``benefit year'', ``base period'', ``State'', ``State agency'', ``State law'', and ``week'' have the respective meanings given such terms under section 205 of the Federal-State Extended Unemployment Compensation Act of 1970, subject to paragraph (2). (2) State law and regular compensation.--In the case of a State entering into an agreement under this subtitle-- (A) ``State law'' shall be considered to refer to the State law of such State, applied in conformance with the modifications described in section 202(b)(2), subject to section 202(c), and (B) ``regular compensation'' shall be considered to refer to such compensation, determined under its State law (applied in the manner described in subparagraph (A)), except as otherwise provided or where the context clearly indicates otherwise. SEC. 208. APPLICABILITY. (a) In General.--An agreement entered into under this subtitle shall apply to weeks of unemployment-- (1) beginning after the date on which such agreement is entered into, and (2) ending before January 1, 2003. (b) Specific Rules.--Under such an agreement-- (1) the modification described in section 202(b)(2)(A) (relating to alternative base periods) shall not apply except in the case of initial claims filed after September 11, 2001, (2) the modifications described in section 202(b)(2)(B)-(C) (relating to part-time employment and increased benefits, respectively) shall apply to weeks of unemployment (described in subsection (a)), irrespective of the date on which an individual's claim for benefits is filed, and (3) the payments described in section 202(b)(1)(B) (relating to temporary supplemental unemployment compensation) shall not apply except in the case of individuals exhausting their rights to regular compensation (as described in clause (i) thereof) after September 11, 2001. Subtitle B--Premium Assistance for COBRA Continuation Coverage SEC. 211. PREMIUM ASSISTANCE FOR COBRA CONTINUATION COVERAGE. (a) Establishment.-- (1) In general.--Not later than 60 days after the date of enactment of this Act, the Secretary of the Treasury, in consultation with the Secretary of Labor, shall establish a program under which premium assistance for COBRA continuation coverage shall be provided for qualified individuals under this section. (2) Qualified individuals.--For purposes of this section, a qualified individual is an individual who-- (A) establishes that the individual-- (i) on or after July 1, 2001, and before the end of the 1-year period beginning on the date of the enactment of this Act, became entitled to elect COBRA continuation coverage; and (ii) has elected such coverage; and (B) enrolls in the premium assistance program under this section by not later than the end of such 1-year period. (b) Limitation of Period of Premium Assistance.--Premium assistance provided under this subsection shall end with respect to an individual on the earlier of-- (1) the date the individual is no longer covered under COBRA continuation coverage; or (2) 12 months after the date the individual is first enrolled in the premium assistance program established under this section. (c) Payment, and Crediting of Assistance.-- (1) Amount of assistance.--Premium assistance provided under this section shall be equal to 75 percent of the amount of the premium required for the COBRA continuation coverage. (2) Provision of assistance.--Premium assistance provided under this section shall be provided through the establishment of direct payment arrangements with the administrator of the group health plan (or other entity) that provides or administers the COBRA continuation coverage. It shall be a fiduciary duty of such administrator (or other entity) to enter into such arrangements under this section. (3) Premiums payable by qualified individual reduced by amount of assistance.--Premium assistance provided under this section shall be credited by such administrator (or other entity) against the premium otherwise owed by the individual involved for such coverage. (d) Change in COBRA Notice.-- (1) General notice.-- (A) In general.--In the case of notices provided under section 4980B(f)(6) of the Internal Revenue Code of 1986 with respect to individuals who, on or after July 1, 2001, and before the end of the 1-year period beginning on the date of the enactment of this Act, become entitled to elect COBRA continuation coverage, such notices shall include an additional notification to the recipient of the availability of premium assistance for such coverage under this section. (B) Alternative notice.--In the case of COBRA continuation coverage to which the notice provision under section 4980B(f)(6) of the Internal Revenue Code of 1986 does not apply, the Secretary of the Treasury shall, in coordination with administrators of the group health plans (or other entities) that provide or administer the COBRA continuation coverage involved, assure provision of such notice. (C) Form.--The requirement of the additional notification under this paragraph may be met by amendment of existing notice forms or by inclusion of a separate document with the notice otherwise required. (2) Specific requirements.--Each additional notification under paragraph (1) shall include-- (A) the forms necessary for establishing eligibility under subsection (a)(2)(A) and enrollment under subsection (a)(2)(B) in connection with the coverage with respect to each covered employee or other qualified beneficiary; (B) the name, address, and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with the premium assistance; and (C) the following statement displayed in a prominent manner: ``You may be eligible to receive assistance with payment of 75 percent of your COBRA continuation coverage premiums for a duration of not to exceed 12 months.''. (3) Notice relating to retroactive coverage.--In the case of such notices previously transmitted before the date of the enactment of this Act in the case of an individual described in paragraph (1) who has elected (or is still eligible to elect) COBRA continuation coverage as of the date of the enactment of this Act, the administrator of the group health plan (or other entity) involved or the Secretary of the Treasury (in the case described in the paragraph (1)(B)) shall provide (within 60 days after the date of the enactment of this Act) for the additional notification required to be provided under paragraph (1). (4) Model notices.--The Secretary shall prescribe models for the additional notification required under this subsection. (f) Obligation of Funds.--This section constitutes budget authority in advance of appropriations Acts and represents the obligation of the Federal Government to provide for the payment of premium assistance under this section. (g) Prompt Issuance of Guidance.--The Secretary of the Treasury, in consultation with the Secretary of Labor, shall issue guidance under this section not later than 30 days after the date of the enactment of this Act. (h) Definitions.--In this section: (1) Administrator.--The term ``administrator'' has the meaning given such term in section 3(16) of the Employee Retirement Income Security Act of 1974. (2) COBRA continuation coverage.--The term ``COBRA continuation coverage'' means continuation coverage provided pursuant to title XXII of the Public Health Service Act, section 4980B of the Internal Revenue Code of 1986 (other than subsection (f)(1) of such section insofar as it relates to pediatric vaccines), part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 609), section 8905a of title 5, United States Code, or under a State program that provides continuation coverage comparable to such continuation coverage. (3) Group health plan.--The term ``group health plan'' has the meaning given such term in section 9832(a) of the Internal Revenue Code of 1986. (4) State.--The term ``State'' includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. Subtitle C--Additional Assistance for Temporary Health Insurance Coverage SEC. 221. OPTIONAL TEMPORARY MEDICAID COVERAGE FOR CERTAIN UNINSURED EMPLOYEES. (a) In General.--Notwithstanding any other provision of law, with respect to any month before the ending month, a State may elect to provide, under its medicaid program under title XIX of the Social Security Act, medical assistance in the case of an individual-- (1)(A) who has become totally or partially separated from employment on or after July 1, 2001, and before the end of such ending month; or (B) whose hours of employment have been reduced on or after July 1, 2001, and before the end of such ending month; (2) who is not eligible for COBRA continuation coverage; and (3) who is uninsured. (b) Limitation of Period of Coverage.--Assistance under this section shall end with respect to an individual on the earlier of-- (1) the date the individual is no longer uninsured; or (2) 12 months after the date the individual is first determined to be eligible for medical assistance under this section. (c) Special Rules.--In the case of medical assistance provided under this section-- (1) the Federal medical assistance percentage under section 1905(b) of the Social Security Act shall be the enhanced FMAP (as defined in section 2105(b) of such Act); (2) a State may elect to apply alternative income, asset, and resource limitations and the provisions of section 1916(g) of such Act, except that in no case shall a State cover individuals with higher family income without covering individuals with a lower family income; (3) such medical assistance shall not be provided for periods before the date the individual becomes uninsured; (4) a State may elect to make eligible for such assistance a spouse or children of an individual eligible for medical assistance under paragraph (1), if such spouse or children are uninsured; (5) individuals eligible for medical assistance under this section shall be deemed to be described in the list of individuals described in the matter preceding paragraph (1) of section 1905(a) of such Act; and (6) the Secretary of Health and Human Services shall not count, for purposes of section 1108(f) of the Social Security Act, such amount of payments under this section as bears a reasonable relationship to the average national proportion of payments made under this section for the 50 States and the District of Columbia to the payments otherwise made under title XIX for such States and District. (d) Definitions.--For purposes of this subtitle: (1) Uninsured.--The term ``uninsured'' means, with respect to an individual, that the individual is not covered under-- (A) a group health plan (as defined in section 2791(a) of the Public Health Service Act), (B) health insurance coverage (as defined in section 2791(b)(1) of the Public Health Service Act), or (C) a program under title XVIII, XIX, or XXI of the Social Security Act, other than under such title XIX pursuant to this section. For purposes of this paragraph, such coverage under subparagraph (A) or (B) shall not include coverage consisting solely of coverage of excepted benefits (as defined in section 2791(c) of the Public Health Service Act). (2) COBRA continuation coverage.--The term ``COBRA continuation coverage'' means coverage under a group health plan provided by an employer pursuant to title XXII of the Public Health Service Act, section 4980B of the Internal Revenue Code of 1986, part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or section 8905a of title 5, United States Code. (3) State.--The term ``State'' has the meaning given such term for purposes of title XIX of the Social Security Act. (4) Ending month.--The term ``ending month'' means the last month that begins before the date that is 1 year after the date of the enactment of this Act. (e) Effective Date.--This section shall take effect upon its enactment, whether or not regulations implementing this section are issued. (f) Limitation on Election.--A State may not elect to provide coverage under this section unless the State elects to provide coverage under section 222. SEC. 222. OPTIONAL TEMPORARY COVERAGE FOR UNSUBSIDIZED PORTION OF COBRA CONTINUATION PREMIUMS. (a) In General.--Notwithstanding any other provision of law, with respect to COBRA continuation coverage provided for any month through the ending month, a State may elect to provide payment of the unsubsidized portion of the premium for COBRA continuation coverage in the case of any individual-- (1)(A) who has become totally or partially separated from employment on or after July 1, 2001, and before the end of the ending month; or (B) whose hours of employment have been reduced on or after July 1, 2001, and before the end of such ending month; and (2) who is eligible for, and has elected coverage under, COBRA continuation coverage. (b) Limitation of Period of Coverage.--Premium assistance under this section shall end with respect to an individual on the earlier of-- (1) the date the individual is no longer covered under COBRA continuation coverage; or (2) 12 months after the date the individual is first determined to be eligible for premium assistance under this section. (c) Financial Payment to States.--A State providing premium assistance under this section shall be entitled to payment under section 1903(a) of the Social Security Act with respect to such assistance (and administrative expenses relating to such assistance) in the same manner as such State is entitled to payment with respect to medical assistance (and such administrative expenses) under such section, except that, for purposes of this subsection, any reference to the Federal medical assistance percentage shall be deemed a reference to the enhanced FMAP (as defined in section 2105(b) of such Act). The provisions of subsection (c)(6) of section 221 shall apply with respect to this section in the same manner as it applies under such section. (d) Unsubsidized Portion of Premium for COBRA Continuation Coverage.--For purposes of this section, the term ``unsubsidized portion of premium for COBRA continuation coverage'' means that portion of the premium for COBRA continuation coverage for which there is no financial assistance available under section 211. (e) Effective Date.--This section shall take effect upon its enactment, whether or not regulations implementing this section are issued. (f) Limitation on Election.--A State may not elect to provide coverage under this section unless the State elects to provide coverage under section 221. TITLE III--FREEZE OF TOP INDIVIDUAL INCOME TAX RATE AND DOMESTIC SECURITY TRUST FUND SEC. 301. FREEZE OF TOP INDIVIDUAL INCOME TAX RATE AND DOMESTIC SECURITY TRUST FUND. (a) Freeze of Top Individual Income Tax Rate.--Paragraph (2) of section 1(i) (relating to reductions in rates after June 30, 2001) is amended-- (A) by striking ``37.6'' and inserting ``38.6'', and (B) by striking ``35.0'' and inserting ``38.6''. (b) Domestic Security Trust Fund.--Subchapter A of chapter 98 (relating to trust fund code) is amended by adding at the end the following new section: ``SEC. 9511. DOMESTIC SECURITY TRUST FUND. ``(a) Creation of Trust Fund.--There is established in the Treasury of the United States a trust fund to be known as the `Domestic Security Trust Fund', consisting of such amounts as may be transferred or credited to the Trust Fund as provided in this section and section 9602(b). ``(b) Transfers to Fund.--There are hereby transferred from the General Fund of the Treasury to the Domestic Security Trust Fund so much of the additional amounts received in the Treasury by reason of the amendment made by section 301(a) of the Fiscal Stimulus and Worker Relief Act of 2001 (relating to freeze in top individual income tax rate) as does not exceed the sum of-- ``(1) $32,000,000,000, plus ``(2) the amount determined by the Secretary to be necessary to pay the interest on any repayable advance made to the Trust Fund. ``(c) Expenditures.--Amounts in the Domestic Security Trust Fund shall be available, as provided by appropriation Acts, for purposes of making the following expenditures to the extent such expenditures are hereafter authorized by law: ``(1) $7,000,000,000 for domestic economic development programs. ``(2) $25,000,000,000 for programs to significantly enhance safety and security of transportation systems, facilities, and environmental protection, including the emergency management systems and emergency response training. ``(d) Repayable Advances.-- ``(1) In general.--If amounts in the Trust Fund are not sufficient for the purposes of subsection (c), the Secretary shall transfer from the General Fund of the Treasury to the Trust Fund such additional amounts as may be necessary for such purposes. Such amounts shall be transferred as repayable advances. ``(2) Repayment of advances.-- ``(A) In general.--Advances made to the Trust Fund shall be repaid, and interest on such advances shall be paid, to the General Fund of the Treasury when the Secretary determines that moneys are available for such purposes in the Trust Fund. ``(B) Rate of interest.--Interest on advances made to the Trust Fund shall be at a rate determined by the Secretary of the Treasury (as of the close of the calendar month preceding the month in which the advance is made) to be equal to the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the anticipated period during which the advance will be outstanding and shall be compounded annually.''. (c) Clerical Amendment.--The table of sections for subchapter A of chapter 98 is amended by adding at the end the following new item: ``Sec. 9511. Domestic security trust fund.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2001.