Pub.L. 107-017 To extend for 4 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted. <> ...

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                in calendar years after 2000--
                          ``(i) the Secretary shall make no adjustment 
                      to the initial bracket amount for any taxable year 
                      beginning before January 1, 2009,
                          ``(ii) the cost-of-living adjustment used in 
                      making adjustments to the initial bracket amount 
                      for any taxable year beginning after December 31, 
                      2008, shall be determined under subsection (f )(3) 
                      by substituting `2007' for `1992' in subparagraph 
                      (B) thereof, and
                          ``(iii) such adjustment shall not apply to the 
                      amount referred to in subparagraph (B)(iii).
                If any amount after adjustment under the preceding 
                sentence is not a multiple of $50, such amount shall be 
                rounded to the next lowest multiple of $50.
                    ``(D) Coordination with acceleration of 10 percent 
                rate bracket benefit for 2001.--This paragraph shall not 
                apply to any taxable year to which section 6428 applies.
            ``(2) Reductions in rates after june 30, 2001.--In the case 
        of taxable years beginning in a calendar year after 2000, the 
        corresponding percentage specified for such calendar year in the 
        following table shall be substituted for the otherwise 
        applicable tax rate in the tables under subsections (a), (b), 
        (c), (d), and (e).

[[Page 115 STAT. 42]]



------------------------------------------------------------------------
                                         The corresponding percentages
                 ``In the case of        shall be substituted for  the
                   taxable years            following percentages:
                 beginning during    -----------------------------------
                  calendar year:        28%      31%      36%     39.6%
------------------------------------------------------------------------
              2001..................   27.5%    30.5%    35.5%    39.1%
              2002 and 2003.........   27.0%    30.0%    35.0%    38.6%
              2004 and 2005.........   26.0%    29.0%    34.0%    37.6%
              2006 and thereafter...   25.0%    28.0%    33.0%    35.0%
------------------------------------------------------------------------

            ``(3) Adjustment of tables.--The Secretary shall adjust the 
        tables prescribed under subsection (f ) to carry out this 
        subsection.''.

    (b) Acceleration of 10 Percent Rate Bracket Benefit for 2001.--
            (1) In general.--Subchapter B of chapter 65 (relating to 
        abatements, credits, and refunds) is amended by adding at the 
        end the following new section:

``SEC. 6428. ACCELERATION OF 10 PERCENT INCOME TAX RATE BRACKET BENEFIT 
            FOR 2001.

    ``(a) In General.--In the case of an eligible individual, there 
shall be allowed as a credit against the tax imposed by chapter 1 for 
the taxpayer's first taxable year beginning in 2001 an amount equal to 5 
percent of so much of the taxpayer's taxable income as does not exceed 
the initial bracket amount (as defined in section 1(i)(1)(B)).
    ``(b) Limitation Based on Amount of Tax.--The credit allowed by 
subsection (a) shall not exceed the excess (if any) of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under part IV of 
        subchapter A of chapter 1 (other than the credits allowable 
        under subpart C thereof, relating to refundable credits).

    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual other than--
            ``(1) any estate or trust,
            ``(2) any nonresident alien individual, and
            ``(3) any individual with respect to whom a deduction under 
        section 151 is allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which the individual's taxable 
        year begins.

    ``(d) Special Rules.--
            ``(1) Coordination with advance refunds of credit.--
                    ``(A) In general.--The amount of credit which would 
                (but for this paragraph) be allowable under this section 
                shall be reduced (but not below zero) by the aggregate 
                refunds and credits made or allowed to the taxpayer 
                under subsection (e). Any failure to so reduce the 
                credit shall be treated as arising out of a mathematical 
                or clerical error and assessed according to section 
                6213(b)(1).
                    ``(B) Joint returns.--In the case of a refund or 
                credit made or allowed under subsection (e) with respect 
                to a joint return, half of such refund or credit shall 
                be treated as having been made or allowed to each 
                individual filing such return.
            ``(2) Coordination with estimated tax.--The credit under 
        this section shall be treated for purposes of section 6654(f )

[[Page 115 STAT. 43]]

        in the same manner as a credit under subpart A of part IV of 
        subchapter A of chapter 1.

    ``(e) Advance Refunds of Credit Based on Prior Year Data.--
            ``(1) In general.--Each individual who was an eligible 
        individual for such individual's first taxable year beginning in 
        2000 shall be treated as having made a payment against the tax 
        imposed by chapter 1 for such first taxable year in an amount 
        equal to the advance refund amount for such taxable year.
            ``(2) Advance refund amount.--For purposes of paragraph (1), 
        the advance refund amount is the amount that would have been 
        allowed as a credit under this section for such first taxable 
        year if this section (other than subsection (d) and this 
        subsection) had applied to such taxable year.
            ``(3) Timing of payments.--In the case of any overpayment 
        attributable to this subsection, the Secretary shall, subject to 
        the provisions of this title, refund or credit such overpayment 
        as rapidly as possible and, to the extent practicable, before 
        October 1, 2001. No refund or credit shall be made or allowed 
        under this subsection after December 31, 2001.
            ``(4) No interest.--No interest shall be allowed on any 
        overpayment attributable to this subsection.''.
            (2) Clerical amendment.--The table of sections for 
        subchapter B of chapter 65 is amended by adding at the end the 
        following new item:
                ``Sec. 6428. Acceleration of 10 percent income tax rate 
                                bracket benefit for 2001.''.

    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 1(g)(7) <<NOTE: 26 USC 1.>>  
        is amended by striking ``15 percent'' in clause (ii)(II) and 
        inserting ``10 percent.''.
            (2) Section 1(h) is amended--
                    (A) by striking ``28 percent'' both places it 
                appears in paragraphs (1)(A)(ii)(I) and (1)(B)(i) and 
                inserting ``25 percent'', and
                    (B) by striking paragraph (13).
            (3) Section 15 is amended by adding at the end the following 
        new subsection:

    ``(f ) Rate Reductions Enacted by Economic Growth and Tax Relief 
Reconciliation Act of 2001.--This section shall not apply to any change 
in rates under subsection (i) of section 1 (relating to rate reductions 
after 2000).''.
            (4) Section 531 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to the product of the highest 
        rate of tax under section 1(c) and the accumulated taxable 
        income.''.
            (5) Section 541 is amended by striking ``equal to'' and all 
        that follows and inserting ``equal to the product of the highest 
        rate of tax under section 1(c) and the undistributed personal 
        holding company income.''.
            (6) Section 3402(p)(1)(B) is amended by striking ``7, 15, 
        28, or 31 percent'' and inserting ``7 percent, any percentage 
        applicable to any of the 3 lowest income brackets in the table 
        under section 1(c),''.
            (7) Section 3402(p)(2) is amended by striking ``15 percent'' 
        and inserting ``10 percent''.

[[Page 115 STAT. 44]]

            (8) Section 3402(q)(1) <<NOTE: 26 USC 3402.>>  is amended by 
        striking ``equal to 28 percent of such payment'' and inserting 
        ``equal to the product of the third lowest rate of tax 
        applicable under section 1(c) and such payment''.
            (9) Section 3402(r)(3) is amended by striking ``31 percent'' 
        and inserting ``the fourth lowest rate of tax applicable under 
        section 1(c)''.
            (10) Section 3406(a)(1) is amended by striking ``equal to 31 
        percent of such payment'' and inserting ``equal to the product 
        of the fourth lowest rate of tax applicable under section 1(c) 
        and such payment''.
            (11) Section 13273 of the Revenue Reconciliation Act of 1993 
        is amended by striking ``28 percent'' and inserting ``the third 
        lowest rate of tax applicable under section 1(c) of the Internal 
        Revenue Code of 1986''.

    (d) <<NOTE: 26 USC 1 note.>>  Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Amendments to withholding provisions.--The amendments 
        made by paragraphs (6), (7), (8), (9), (10), and (11) of 
        subsection (c) shall apply to amounts paid after the 60th day 
        after the date of the enactment of this Act. References to 
        income brackets and rates of tax in such paragraphs shall be 
        applied without regard to section 1(i)(1)(D) of the Internal 
        Revenue Code of 1986.

SEC. 102. REPEAL OF PHASEOUT OF PERSONAL EXEMPTIONS.

    (a) In General.--Paragraph (3) of section 151(d) (relating to 
exemption amount) is amended by adding at the end the following new 
subparagraphs:
                    ``(E) Reduction of phaseout.--
                          ``(i) In general.--In the case of taxable 
                      years beginning after December 31, 2005, and 
                      before January 1, 2010, the reduction under 
                      subparagraph (A) shall be equal to the applicable 
                      fraction of the amount which would (but for this 
                      subparagraph) be the amount of such reduction.
                          ``(ii) Applicable fraction.--For purposes of 
                      clause (i), the applicable fraction shall be 
                      determined in accordance with the following table:

                ``For taxable years beginning             The applicable
                  in calendar year--                       fraction is--
                    2006 and 2007...............................  \2/3\ 
                    2008 and 2009...............................  \1/3\.

                    ``(F) Termination.--This paragraph shall not apply 
                to any taxable year beginning after December 31, 
                2009.''.

    (b) <<NOTE: Applicability. 26 USC 151 note.>>  Effective Date.--The 
amendment made by this section shall apply to taxable years beginning 
after December 31, 2005.

SEC. 103. PHASEOUT OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

    (a) In General.--Section 68 is amended by adding at the end the 
following new subsections:
    ``(f ) Phaseout of Limitation.--
            ``(1) In general.--In the case of taxable years beginning 
        after December 31, 2005, and before January 1, 2010, the 
        reduction under subsection (a) shall be equal to the applicable

[[Page 115 STAT. 45]]

        fraction of the amount which would (but for this subsection) be 
        the amount of such reduction.
            ``(2) Applicable fraction.--For purposes of paragraph (1), 
        the applicable fraction shall be determined in accordance with 
        the following table:

                ``For taxable years beginning             The applicable
                  in calendar year--                       fraction is--
                    2006 and 2007...............................  \2/3\ 
                    2008 and 2009...............................  \1/3\.

    ``(g) Termination.--This section shall not apply to any taxable year 
beginning after December 31, 2009.''.
    (b) <<NOTE: Applicability. 26 USC 68 note.>>  Effective Date.--The 
amendment made by this section shall apply to taxable years beginning 
after December 31, 2005.

               TITLE II--TAX BENEFITS RELATING TO CHILDREN

SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT.

    (a) Increase in Per Child Amount.--Subsection (a) of section 24 
(relating to child tax credit) <<NOTE: 26 USC 24.>>  is amended to read 
as follows:

    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year 
        with respect to each qualifying child of the taxpayer an amount 
        equal to the per child amount.
            ``(2) Per child amount.--For purposes of paragraph (1), the 
        per child amount shall be determined as follows:
``In the case of any taxab    The per child amount is--
        beginning in--
2001, 2002, 2003, or 2004                                        $  600 
2005, 2006, 2007, or 2008                                           700 
2009                                                                800 
2010 or thereafter                                             1,000.''.

    (b) Credit Allowed Against Alternative Minimum Tax.--
            (1) In general.--Subsection (b) of section 24 (relating to 
        child tax credit) is amended by adding at the end the following 
        new paragraph:
            ``(3) Limitation based on amount of tax.--The credit allowed 
        under subsection (a) for any taxable year shall not exceed the 
        excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section) and section 27 for the 
                taxable year.''.
            (2) Conforming amendments.--
                    (A) The heading for section 24(b) is amended to read 
                as follows: ``Limitations.--''.
                    (B) The heading for section 24(b)(1) is amended to 
                read as follows: ``Limitation based on adjusted gross 
                income.--''.
                    (C) Section 24(d), as amended by subsection (c), is 
                amended--
                          (i) by striking ``section 26(a)'' each place 
                      it appears and inserting ``subsection (b)(3)'', 
                      and

[[Page 115 STAT. 46]]

                          (ii) in paragraph (1)(B) by striking 
                      ``aggregate amount of credits allowed by this 
                      subpart'' and inserting ``amount of credit allowed 
                      by this section''.
                    (D) Paragraph (1) of section 26(a) <<NOTE: 26 USC 
                26.>>  is amended by inserting ``(other than section 
                24)'' after ``this subpart''.
                    (E) Subsection (c) of section 23 is amended by 
                striking ``and section 1400C'' and inserting ``and 

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