Pub.L. 107-135 To amend title 38, United States Code, to enhance the authority of the ...

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[[Page 115 STAT. 2427]]

Public Law 107-134
107th Congress

                                 An Act


 
  To amend the Internal Revenue Code of 1986 to provide tax relief for 
  victims of the terrorist attacks against the United States, and for 
         other purposes. <<NOTE: Jan. 23, 2002 -  [H.R. 2884]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Victims of 
Terrorism Tax Relief Act of 2001.>> 

SECTION 1. SHORT TITLE; ETC.

    (a) <<NOTE: 26 USC 1 note.>> Short Title.--This Act may be cited as 
the ``Victims of Terrorism Tax Relief Act of 2001''.

    (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.

                TITLE I--VICTIMS OF TERRORISM TAX RELIEF

     Subtitle A--Relief Provisions for Victims of Terrorist Attacks

Sec. 101. Income taxes of victims of terrorist attacks.
Sec. 102. Exclusion of certain death benefits.
Sec. 103. Estate tax reduction.
Sec. 104. Payments by charitable organizations treated as exempt 
           payments.
Sec. 105. Exclusion of certain cancellations of indebtedness.

                   Subtitle B--Other Relief Provisions

Sec. 111. Exclusion for disaster relief payments.
Sec. 112. Authority to postpone certain deadlines and required actions.
Sec. 113. Application of certain provisions to terroristic or military 
           actions.
Sec. 114. Clarification of due date for airline excise tax deposits.
Sec. 115. Treatment of certain structured settlement payments.
Sec. 116. Personal exemption deduction for certain disability trusts.

   TITLE II--DISCLOSURE OF TAX INFORMATION IN TERRORISM AND NATIONAL 
                         SECURITY INVESTIGATIONS

Sec. 201. Disclosure of tax information in terrorism and national 
           security investigations.

           TITLE III--NO IMPACT ON SOCIAL SECURITY TRUST FUNDS

Sec. 301. No impact on social security trust funds.

[[Page 115 STAT. 2428]]

                TITLE I--VICTIMS OF TERRORISM TAX RELIEF

     Subtitle A--Relief Provisions for Victims of Terrorist Attacks

SEC. 101. INCOME TAXES OF VICTIMS OF TERRORIST ATTACKS.

    (a) In General.--Section 692 <<NOTE: 26 USC 692.>> (relating to 
income taxes of members of Armed Forces on death) is amended by adding 
at the end the following new subsection:

    ``(d) Individuals Dying as a Result of Certain Attacks.--
            ``(1) In general.--In the case of a specified terrorist 
        victim, any tax imposed by this chapter shall not apply--
                    ``(A) with respect to the taxable year in which 
                falls the date of death, and
                    ``(B) with respect to any prior taxable year in the 
                period beginning with the last taxable year ending 
                before the taxable year in which the wounds, injury, or 
                illness referred to in paragraph (3) were incurred.
            ``(2) $10,000 minimum benefit.--If, but for this paragraph, 
        the amount of tax not imposed by paragraph (1) with respect to a 
        specified terrorist victim is less than $10,000, then such 
        victim shall be treated as having made a payment against the tax 
        imposed by this chapter for such victim's last taxable year in 
        an amount equal to the excess of $10,000 over the amount of tax 
        not so imposed.
            ``(3) Taxation of certain benefits.--Subject to such rules 
        as the Secretary may prescribe, paragraph (1) shall not apply to 
        the amount of any tax imposed by this chapter which would be 
        computed by only taking into account the items of income, gain, 
        or other amounts attributable to--
                    ``(A) deferred compensation which would have been 
                payable after death if the individual had died other 
                than as a specified terrorist victim, or
                    ``(B) amounts payable in the taxable year which 
                would not have been payable in such taxable year but for 
                an action taken after September 11, 2001.
            ``(4) Specified terrorist victim.--For purposes of this 
        subsection, the term `specified terrorist victim' means any 
        decedent--
                    ``(A) who dies as a result of wounds or injury 
                incurred as a result of the terrorist attacks against 
                the United States on April 19, 1995, or September 11, 
                2001, or
                    ``(B) who dies as a result of illness incurred as a 
                result of an attack involving anthrax occurring on or 
                after September 11, 2001, and before January 1, 2002.
        Such term shall not include any individual identified by the 
        Attorney General to have been a participant or conspirator in 
        any such attack or a representative of such an individual.''.

    (b) Conforming Amendments.--
            (1) Section 5(b)(1) is amended by inserting ``and victims of 
        certain terrorist attacks'' before ``on death''.
            (2) Section 6013(f)(2)(B) is amended by inserting ``and 
        victims of certain terrorist attacks'' before ``on death''.

    (c) Clerical Amendments.--

[[Page 115 STAT. 2429]]

            (1) The heading of section 692 <<NOTE: 26 USC 692.>> is 
        amended to read as follows:

``SEC. 692. INCOME TAXES OF MEMBERS OF ARMED FORCES AND VICTIMS OF 
            CERTAIN TERRORIST ATTACKS ON DEATH.''.

            (2) The item relating to section 692 in the table of 
        sections for part II of subchapter J of chapter 1 is amended to 
        read as follows:

                ``Sec. 692. Income taxes of members of Armed Forces and 
                                victims of certain terrorist attacks on 
                                death.''.

    (d) <<NOTE: 26 USC 692 note.>> Effective Date; Waiver of 
Limitations.--
            (1) <<NOTE: Applicability.>> Effective date.--The amendments 
        made by this section shall apply to taxable years ending before, 
        on, or after September 11, 2001.
            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendments made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by the 
        operation of any law or rule of law (including res judicata), 
        such refund or credit may nevertheless be made or allowed if 
        claim therefor is filed before the close of such period.

SEC. 102. EXCLUSION OF CERTAIN DEATH BENEFITS.

    (a) In General.--Section 101 (relating to certain death benefits) is 
amended by adding at the end the following new subsection:
    ``(i) Certain Employee Death Benefits Payable by Reason of Death of 
Certain Terrorist Victims.--
            ``(1) In general.--Gross income does not include amounts 
        (whether in a single sum or otherwise) paid by an employer by 
        reason of the death of an employee who is a specified terrorist 
        victim (as defined in section 692(d)(4)).
            ``(2) Limitation.--
                    ``(A) In general.--Subject to such rules as the 
                Secretary may prescribe, paragraph (1) shall not apply 
                to amounts which would have been payable after death if 
                the individual had died other than as a specified 
                terrorist victim (as so defined).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to incidental death benefits paid from a plan described 
                in section 401(a) and exempt from tax under section 
                501(a).
            ``(3) Treatment of self-employed individuals.--For purposes 
        of paragraph (1), the term `employee' includes a self-employed 
        individual (as defined in section 401(c)(1)).''.

    (b) <<NOTE: 26 USC 101 note.>> Effective Date; Waiver of 
Limitations.--
            (1) <<NOTE: Applicability.>> Effective date.--The amendment 
        made by this section shall apply to taxable years ending before, 
        on, or after September 11, 2001.
            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendments made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by the 
        operation of any law or rule of law (including res judicata), 
        such refund or credit may nevertheless be made or allowed if 
        claim therefor is filed before the close of such period.

[[Page 115 STAT. 2430]]

SEC. 103. ESTATE TAX REDUCTION.

    (a) In General.--Section 2201 <<NOTE: 26 USC 2201.>> is amended to 
read as follows:

``SEC. 2201. COMBAT ZONE-RELATED DEATHS OF MEMBERS OF THE ARMED FORCES 
            AND DEATHS OF VICTIMS OF CERTAIN TERRORIST ATTACKS.

    ``(a) In General.--Unless the executor elects not to have this 
section apply, in applying sections 2001 and 2101 to the estate of a 
qualified decedent, the rate schedule set forth in subsection (c) shall 
be deemed to be the rate schedule set forth in section 2001(c).
    ``(b) Qualified Decedent.--For purposes of this section, the term 
`qualified decedent' means--
            ``(1) any citizen or resident of the United States dying 
        while in active service of the Armed Forces of the United 
        States, if such decedent--
                    ``(A) was killed in action while serving in a combat 
                zone, as determined under section 112(c), or
                    ``(B) died as a result of wounds, disease, or injury 
                suffered while serving in a combat zone (as determined 
                under section 112(c)), and while in the line of duty, by 
                reason of a hazard to which such decedent was subjected 
                as an incident of such service, and
            ``(2) any specified terrorist victim (as defined in section 
        692(d)(4)).

    ``(c) Rate Schedule.--

``If the amount with respeThe tentative tax is:
        which the tentative tax to 
        be computed is:
    Not over $150,000.....1 percent of the amount by which such amount 
                              exceeds $100,000.
    Over $150,000 but not $500 plus 2 percent of the excess over 
        $200,000.             $150,000.
    Over $200,000 but not $1,500 plus 3 percent of the excess over 
        $300,000.             $200,000.
    Over $300,000 but not $4,500 plus 4 percent of the excess over 
        $500,000.             $300,000.
    Over $500,000 but not $12,500 plus 5 percent of the excess over 
        $700,000.             $500,000.
    Over $700,000 but not $22,500 plus 6 percent of the excess over 
        $900,000.             $700,000.
    Over $900,000 but not $34,500 plus 7 percent of the excess over 
        $1,100,000.           $900,000.
    Over $1,100,000 but no$48,500 plus 8 percent of the excess over 
        $1,600,000.           $1,100,000.
    Over $1,600,000 but no$88,500 plus 9 percent of the excess over 
        $2,100,000.           $1,600,000.
    Over $2,100,000 but no$133,500 plus 10 percent of the excess over 
        $2,600,000.           $2,100,000.
    Over $2,600,000 but no$183,500 plus 11 percent of the excess over 
        $3,100,000.           $2,600,000.
    Over $3,100,000 but no$238,500 plus 12 percent of the excess over 
        $3,600,000.           $3,100,000.
    Over $3,600,000 but no$298,500 plus 13 percent of the excess over 
        $4,100,000.           $3,600,000.
    Over $4,100,000 but no$363,500 plus 14 percent of the excess over 
        $5,100,000.           $4,100,000.
    Over $5,100,000 but no$503,500 plus 15 percent of the excess over 
        $6,100,000.           $5,100,000.
    Over $6,100,000 but no$653,500 plus 16 percent of the excess over 
        $7,100,000.           $6,100,000.
    Over $7,100,000 but no$813,500 plus 17 percent of the excess over 
        $8,100,000.           $7,100,000.

[[Page 115 STAT. 2431]]

    Over $8,100,000 but no$983,500 plus 18 percent of the excess over 
        $9,100,000.           $8,100,000.
    Over $9,100,000 but no$1,163,500 plus 19 percent of the excess over 
        $10,100,000.          $9,100,000.
    Over $10,100,000......$1,353,500 plus 20 percent of the excess over 
                              $10,100,000.

    ``(d) Determination of Unified Credit.--In the case of an estate to 
which this section applies, subsection (a) shall not apply in 
determining the credit under section 2010.''.
    (b) Conforming Amendments.--
            (1) Section 2011 <<NOTE: 26 USC 2011.>> is amended by 
        striking subsection (d) and by redesignating subsections (e), 
        (f), and (g) as subsections (d), (e), and (f), respectively.
            (2) Section 2053(d)(3)(B) is amended by striking ``section 
        2011(e)'' and inserting ``section 2011(d)''.
            (3) Paragraph (9) of section 532(c) of the Economic Growth 
        and Tax Relief Reconciliation Act of 2001 <<NOTE: Ante, p. 
        75.>> is repealed.

    (c) Clerical Amendment.--The item relating to section 2201 in the 
table of sections for subchapter C of chapter 11 is amended to read as 
follows:

                ``Sec. 2201. Combat zone-related deaths of members of 
                                the Armed Forces and deaths of victims 
                                of certain terrorist attacks.''.

    (d) <<NOTE: 26 USC 2011 note. Applicability.>> Effective Date; 
Waiver of Limitations.--
            (1) Effective date.--The amendments made by this section 
        shall apply to estates of decedents--
                    (A) dying on or after September 11, 2001; and
                    (B) in the case of individuals dying as a result of 
                the April 19, 1995, terrorist attack, dying on or after 

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