[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3648 Referred in Senate (RFS)]

  1st Session
                                H. R. 3648


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 4, 2007

     Received; read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 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.''.
    (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. LONG-TERM EXTENSION OF DEDUCTION FOR MORTGAGE INSURANCE 
              PREMIUMS.

    (a) In General.--Subparagraph (E) of section 163(h)(3) of the 
Internal Revenue Code of 1986 (relating to mortgage insurance premiums 
treated as interest) is amended by striking clauses (iii) and (iv) and 
inserting the following new clause:
                            ``(iii) Application.--Clause (i) shall not 
                        apply with respect to any mortgage insurance 
                        contract issued before January 1, 2007, or 
                        after December 31, 2014.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to contracts issued after December 31, 2006.

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. GAIN FROM SALE OF PRINCIPAL RESIDENCE ALLOCATED TO NONQUALIFIED 
              USE NOT EXCLUDED FROM INCOME.

    (a) In General.--Subsection (b) of section 121 of the Internal 
Revenue Code of 1986 (relating to limitations) is amended by adding at 
the end the following new paragraph:
            ``(4) Exclusion of gain allocated to nonqualified use.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to so much of the gain from the sale or exchange of 
                property as is allocated to periods of nonqualified 
                use.
                    ``(B) Gain allocated to periods of nonqualified 
                use.--For purposes of subparagraph (A), gain shall be 
                allocated to periods of nonqualified use based on the 
                ratio which--
                            ``(i) the aggregate periods of nonqualified 
                        use during the period such property was owned 
                        by the taxpayer, bears to
                            ``(ii) the period such property was owned 
                        by the taxpayer.
                    ``(C) Period of nonqualified use.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `period of 
                        nonqualified use' means any period (other than 
                        the portion of any period preceding January 1, 
                        2008) during which the property is not used as 
                        the principal residence of the taxpayer or the 
                        taxpayer's spouse or former spouse.
                            ``(ii) Exceptions.--The term `period of 
                        nonqualified use' does not include--
                                    ``(I) any portion of the 5-year 
                                period described in subsection (a) 
                                which is after the last date that such 
                                property is used as the principal 
                                residence of the taxpayer or the 
                                taxpayer's spouse,
                                    ``(II) any period (not to exceed an 
                                aggregate period of 10 years) during 
                                which the taxpayer or the taxpayer's 
                                spouse is serving on qualified official 
                                extended duty (as defined in subsection 
                                (d)(9)(C)) described in clause (i), 
                                (ii), or (iii) of subsection (d)(9)(A), 
                                and
                                    ``(III) any other period of 
                                temporary absence (not to exceed an 
                                aggregate period of 2 years) due to 
                                change of employment, health 
                                conditions, or such other unforeseen 
                                circumstances as may be specified by 
                                the Secretary.
                    ``(D) Coordination with recognition of gain 
                attributable to depreciation.--For purposes of this 
                paragraph--
                            ``(i) subparagraph (A) shall be applied 
                        after the application of subsection (d)(6), and
                            ``(ii) subparagraph (B) shall be applied 
                        without regard to any gain to which subsection 
                        (d)(6) applies.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales and exchanges after December 31, 2007.

SEC. 6. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

    Subparagraph (B) of section 401(1) of the Tax Increase Prevention 
and Reconciliation Act of 2005 is amended by striking the percentage 
contained therein and inserting ``116.75 percent''.

            Passed the House of Representatives October 4, 2007.

            Attest:

                                            LORRAINE C. MILLER,

                                                                 Clerk.