[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3648 Enrolled Bill (ENR)]

        H.R.3648

                       One Hundred Tenth Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

          Begun and held at the City of Washington on Thursday,
            the fourth day of January, two thousand and seven


                                 An Act


 
  To amend the Internal Revenue Code of 1986 to exclude discharges of 
 indebtedness on principal residences from gross income, and for other 
                                purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mortgage Forgiveness Debt Relief Act 
of 2007''.

SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED FROM 
              GROSS INCOME.

    (a) In General.--Paragraph (1) of section 108(a) of the Internal 
Revenue Code of 1986 is amended by striking ``or'' at the end of 
subparagraph (C), by striking the period at the end of subparagraph (D) 
and inserting ``, or'', and by inserting after subparagraph (D) the 
following new subparagraph:
            ``(E) the indebtedness discharged is qualified principal 
        residence indebtedness which is discharged before January 1, 
        2010.''.
    (b) Special Rules Relating to Qualified Principal Residence 
Indebtedness.--Section 108 of such Code is amended by adding at the end 
the following new subsection:
    ``(h) Special Rules Relating to Qualified Principal Residence 
Indebtedness.--
        ``(1) Basis reduction.--The amount excluded from gross income 
    by reason of subsection (a)(1)(E) shall be applied to reduce (but 
    not below zero) the basis of the principal residence of the 
    taxpayer.
        ``(2) Qualified principal residence indebtedness.--For purposes 
    of this section, the term `qualified principal residence 
    indebtedness' means acquisition indebtedness (within the meaning of 
    section 163(h)(3)(B), applied by substituting `$2,000,000 
    ($1,000,000' for `$1,000,000 ($500,000' in clause (ii) thereof) 
    with respect to the principal residence of the taxpayer.
        ``(3) Exception for certain discharges not related to 
    taxpayer's financial condition.--Subsection (a)(1)(E) shall not 
    apply to the discharge of a loan if the discharge is on account of 
    services performed for the lender or any other factor not directly 
    related to a decline in the value of the residence or to the 
    financial condition of the taxpayer.
        ``(4) Ordering rule.--If any loan is discharged, in whole or in 
    part, and only a portion of such loan is qualified principal 
    residence indebtedness, subsection (a)(1)(E) shall apply only to so 
    much of the amount discharged as exceeds the amount of the loan (as 
    determined immediately before such discharge) which is not 
    qualified principal residence indebtedness.
        ``(5) Principal residence.--For purposes of this subsection, 
    the term `principal residence' has the same meaning as when used in 
    section 121.''.
    (c) Coordination.--
        (1) Subparagraph (A) of section 108(a)(2) of such Code is 
    amended by striking ``and (D)'' and inserting ``(D), and (E)''.
        (2) Paragraph (2) of section 108(a) of such Code is amended by 
    adding at the end the following new subparagraph:
            ``(C) Principal residence exclusion takes precedence over 
        insolvency exclusion unless elected otherwise.--Paragraph 
        (1)(B) shall not apply to a discharge to which paragraph (1)(E) 
        applies unless the taxpayer elects to apply paragraph (1)(B) in 
        lieu of paragraph (1)(E).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to discharges of indebtedness on or after January 1, 2007.

SEC. 3. EXTENSION OF TREATMENT OF MORTGAGE INSURANCE PREMIUMS AS 
              INTEREST.

    (a) In General.--Subclause (I) of section 163(h)(3)(E)(iv) of the 
Internal Revenue Code of 1986 (relating to termination) is amended by 
striking ``December 31, 2007'' and inserting ``December 31, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or accrued after December 31, 2007.

SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE HOUSING 
              CORPORATION.

    (a) In General.--Subparagraph (D) of section 216(b)(1) of the 
Internal Revenue Code of 1986 (defining cooperative housing 
corporation) is amended to read as follows:
            ``(D) meeting 1 or more of the following requirements for 
        the taxable year in which the taxes and interest described in 
        subsection (a) are paid or incurred:
                ``(i) 80 percent or more of the corporation's gross 
            income for such taxable year is derived from tenant-
            stockholders.
                ``(ii) At all times during such taxable year, 80 
            percent or more of the total square footage of the 
            corporation's property is used or available for use by the 
            tenant-stockholders for residential purposes or purposes 
            ancillary to such residential use.
                ``(iii) 90 percent or more of the expenditures of the 
            corporation paid or incurred during such taxable year are 
            paid or incurred for the acquisition, construction, 
            management, maintenance, or care of the corporation's 
            property for the benefit of the tenant-stockholders.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after the date of the enactment of this Act.

SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER 
              FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139A the 
following new section:

``SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY 
              MEDICAL RESPONDERS.

    ``(a) In General.--In the case of any member of a qualified 
volunteer emergency response organization, gross income shall not 
include--
        ``(1) any qualified State and local tax benefit, and
        ``(2) any qualified payment.
    ``(b) Denial of Double Benefits.--In the case of any member of a 
qualified volunteer emergency response organization--
        ``(1) the deduction under 164 shall be determined with regard 
    to any qualified State and local tax benefit, and
        ``(2) expenses paid or incurred by the taxpayer in connection 
    with the performance of services as such a member shall be taken 
    into account under section 170 only to the extent such expenses 
    exceed the amount of any qualified payment excluded from gross 
    income under subsection (a).
    ``(c) Definitions.--For purposes of this section--
        ``(1) Qualified state and local tax benefit.--The term 
    `qualified state and local tax benefit' means any reduction or 
    rebate of a tax described in paragraph (1), (2), or (3) of section 
    164(a) provided by a State or political division thereof on account 
    of services performed as a member of a qualified volunteer 
    emergency response organization.
        ``(2) Qualified payment.--
            ``(A) In general.--The term `qualified payment' means any 
        payment (whether reimbursement or otherwise) provided by a 
        State or political division thereof on account of the 
        performance of services as a member of a qualified volunteer 
        emergency response organization.
            ``(B) Applicable dollar limitation.--The amount determined 
        under subparagraph (A) for any taxable year shall not exceed 
        $30 multiplied by the number of months during such year that 
        the taxpayer performs such services.
        ``(3) Qualified volunteer emergency response organization.--The 
    term `qualified volunteer emergency response organization' means 
    any volunteer organization--
            ``(A) which is organized and operated to provide 
        firefighting or emergency medical services for persons in the 
        State or political subdivision, as the case may be, and
            ``(B) which is required (by written agreement) by the State 
        or political subdivision to furnish firefighting or emergency 
        medical services in such State or political subdivision.
    ``(d) Termination.--This section shall not apply with respect to 
taxable years beginning after December 31, 2010.''.
    (b) Clerical Amendment.--The table of sections for such part is 
amended by inserting after the item relating to section 139A the 
following new item:

``Sec. 139B. Benefits provided to volunteer firefighters and emergency 
          medical responders.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW-INCOME 
              HOUSING CREDIT.

    (a) In General.--Subclause (I) of section 42(i)(3)(D)(ii) of the 
Internal Revenue Code of 1986 (relating to certain students not to 
disqualify unit) is amended to read as follows:

                    ``(I) single parents and their children and such 
                parents are not dependents (as defined in section 152, 
                determined without regard to subsections (b)(1), 
                (b)(2), and (d)(1)(B) thereof) of another individual 
                and such children are not dependents (as so defined) of 
                another individual other than a parent of such 
                children, or.''.

    (b) Effective Date.--The amendment made by this section shall apply 
to--
        (1) housing credit amounts allocated before, on, or after the 
    date of the enactment of this Act, and
        (2) buildings placed in service before, on, or after such date 
    to the extent paragraph (1) of section 42(h) of the Internal 
    Revenue Code of 1986 does not apply to any building by reason of 
    paragraph (4) thereof.

SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL GAINS 
              EXCLUSION TO CERTAIN POST-MARRIAGE SALES OF PRINCIPAL 
              RESIDENCES BY SURVIVING SPOUSES.

    (a) Sale Within 2 Years of Spouse's Death.--Section 121(b) of the 
Internal Revenue Code of 1986 (relating to limitations) is amended by 
adding at the end the following new paragraph:
        ``(4) Special rule for certain sales by surviving spouses.--In 
    the case of a sale or exchange of property by an unmarried 
    individual whose spouse is deceased on the date of such sale, 
    paragraph (1) shall be applied by substituting `$500,000' for 
    `$250,000' if such sale occurs not later than 2 years after the 
    date of death of such spouse and the requirements of paragraph 
    (2)(A) were met immediately before such date of death.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales or exchanges after December 31, 2007.

SEC. 8. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP 
              RETURNS; LIMITATION ON DISCLOSURE.

    (a) Extension of Time Limitation.--Section 6698(a) of the Internal 
Revenue Code of 1986 (relating to failure to file partnership returns) 
is amended by striking ``5 months'' and inserting ``12 months''.
    (b) Increase in Penalty Amount.--Paragraph (1) of section 6698(b) 
of such Code is amended by striking ``$50'' and inserting ``$85''.
    (c) Limitation on Disclosure of Taxpayer Returns to Partners, S 
Corporation Shareholders, Trust Beneficiaries, and Estate 
Beneficiaries.--
        (1) In general.--Section 6103(e) of such Code (relating to 
    disclosure to persons having material interest) is amended by 
    adding at the end the following new paragraph:
        ``(10) Limitation on certain disclosures under this 
    subsection.--In the case of an inspection or disclosure under this 
    subsection relating to the return of a partnership, S corporation, 
    trust, or an estate, the information inspected or disclosed shall 
    not include any supporting schedule, attachment, or list which 
    includes the taxpayer identity information of a person other than 
    the entity making the return or the person conducting the 
    inspection or to whom the disclosure is made.''.
        (2) Effective date.--The amendment made by this subsection 
    shall take effect on the date of the enactment of this Act.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to returns required to be filed after the date of the 
enactment of this Act.

SEC. 9. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS.

    (a) In General.--Part I of subchapter B of chapter 68 of the 
Internal Revenue Code of 1986 (relating to assessable penalties) is 
amended by adding at the end the following new section:

``SEC. 6699. FAILURE TO FILE S CORPORATION RETURN.

    ``(a) General Rule.--In addition to the penalty imposed by section 
7203 (relating to willful failure to file return, supply information, 
or pay tax), if any S corporation required to file a return under 
section 6037 for any taxable year--
        ``(1) fails to file such return at the time prescribed therefor 
    (determined with regard to any extension of time for filing), or
        ``(2) files a return which fails to show the information 
    required under section 6037,
such S corporation shall be liable for a penalty determined under 
subsection (b) for each month (or fraction thereof) during which such 
failure continues (but not to exceed 12 months), unless it is shown 
that such failure is due to reasonable cause.
    ``(b) Amount Per Month.--For purposes of subsection (a), the amount 
determined under this subsection for any month is the product of--
        ``(1) $85, multiplied by
        ``(2) the number of persons who were shareholders in the S 
    corporation during any part of the taxable year.
    ``(c) Assessment of Penalty.--The penalty imposed by subsection (a) 
shall be assessed against the S corporation.
    ``(d) Deficiency Procedures Not To Apply.--Subchapter B of chapter 
63 (relating to deficiency procedures for income, estate, gift, and 
certain excise taxes) shall not apply in respect of the assessment or 
collection of any penalty imposed by subsection (a).''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 of such Code is amended by adding at the end 
the following new item:

``Sec. 6699. Failure to file S corporation return.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed after the date of the enactment 
of this Act.

SEC. 10. MODIFICATION OF REQUIRED INSTALLMENT OF CORPORATE ESTIMATED 
              TAXES WITH RESPECT TO CERTAIN DATES.

    The percentage under subparagraph (B) of section 401(1) of the Tax 
Increase Prevention and Reconciliation Act of 2005 in effect on the 
date of the enactment of this Act is increased by 1.50 percentage 
points.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.