[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3996 Engrossed in House (EH)]
110th CONGRESS
1st Session
H. R. 3996
_______________________________________________________________________
AN ACT
To amend the Internal Revenue Code of 1986 to extend certain expiring
provisions, 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, ETC.
(a) Short Title.--This Act may be cited as the ``Temporary Tax
Relief Act of 2007''.
(b) Reference.--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--AMT RELIEF
Sec. 101. Extension of alternative minimum tax relief for nonrefundable
personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption
amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with
long-term unused credits for prior year
minimum tax liability, etc.
TITLE II--ADDITIONAL INDIVIDUAL TAX RELIEF
Sec. 201. Refundable child credit.
Sec. 202. Additional standard deduction for real property taxes for
nonitemizers.
TITLE III--ONE-YEAR EXTENDERS
Subtitle A--Extenders Primarily Affecting Individuals
Sec. 301. Deduction for State and local sales taxes.
Sec. 302. Deduction of qualified tuition and related expenses.
Sec. 303. Treatment of certain dividends of regulated investment
companies.
Sec. 304. Parity in the application of certain limits to mental health
benefits.
Sec. 305. Qualified conservation contributions.
Sec. 306. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 307. Deduction for certain expenses of elementary and secondary
school teachers.
Sec. 308. Election to include combat pay as earned income for purposes
of earned income tax credit.
Sec. 309. Modification of mortgage revenue bonds for veterans.
Sec. 310. Distributions from retirement plans to individuals called to
active duty.
Sec. 311. Stock in RIC for purposes of determining estates of
nonresidents not citizens.
Sec. 312. Qualified investment entities.
Sec. 313. State legislators' travel expenses away from home.
Subtitle B--Extenders Primarily Affecting Businesses
Sec. 321. Research credit.
Sec. 322. Indian employment credit.
Sec. 323. New markets tax credit.
Sec. 324. Railroad track maintenance.
Sec. 325. Fifteen-year straight-line cost recovery for qualified
leasehold improvements and qualified
restaurant property.
Sec. 326. Seven-year cost recovery period for motorsports racing track
facility.
Sec. 327. Accelerated depreciation for business property on Indian
reservation.
Sec. 328. Expensing of environmental remediation costs.
Sec. 329. Deduction allowable with respect to income attributable to
domestic production activities in Puerto
Rico.
Sec. 330. Modification of tax treatment of certain payments to
controlling exempt organizations.
Sec. 331. Extension and modification of credit to holders of qualified
zone academy bonds.
Sec. 332. Tax incentives for investment in the District of Columbia.
Sec. 333. Extension of economic development credit for American Samoa.
Sec. 334. Enhanced charitable deduction for contributions of food
inventory.
Sec. 335. Enhanced charitable deduction for contributions of book
inventory to public schools.
Sec. 336. Enhanced deduction for qualified computer contributions.
Sec. 337. Basis adjustment to stock of S corporations making charitable
contributions of property.
Sec. 338. Extension of work opportunity tax credit for Hurricane
Katrina employees.
Subtitle C--Other Extenders
Sec. 341. Disclosure for combined employment tax reporting.
Sec. 342. Disclosure of return information to apprise appropriate
officials of terrorist activities.
Sec. 343. Disclosure upon request of information relating to terrorist
activities.
Sec. 344. Disclosure of return information to carry out income
contingent repayment of student loans.
Sec. 345. Authority for undercover operations.
Sec. 346. Increase in limit on cover over of rum excise tax to Puerto
Rico and the Virgin Islands.
Sec. 347. Disclosure of return information for certain veterans
programs.
TITLE IV--MORTGAGE FORGIVENESS DEBT RELIEF
Sec. 401. Discharges of indebtedness on principal residence excluded
from gross income.
Sec. 402. Long-term extension of deduction for mortgage insurance
premiums.
Sec. 403. Alternative tests for qualifying as cooperative housing
corporation.
Sec. 404. Gain from sale of principal residence allocated to
nonqualified use not excluded from income.
TITLE V--ADMINISTRATIVE PROVISIONS
Sec. 501. Repeal of authority to enter into private debt collection
contracts.
Sec. 502. Delay of application of withholding requirement on certain
governmental payments for goods and
services.
Sec. 503. Clarification of entitlement of Virgin Islands residents to
protections of limitations on assessment
and collection of tax.
Sec. 504. Revision of tax rules on expatriation.
Sec. 505. Repeal of suspension of certain penalties and interest.
Sec. 506. Unused merchandise drawback.
TITLE VI--REVENUE PROVISIONS
Subtitle A--Nonqualified Deferred Compensation From Certain Tax
Indifferent Parties
Sec. 601. Nonqualified deferred compensation from certain tax
indifferent parties.
Subtitle B--Provisions Related to Certain Investment Partnerships
Sec. 611. Income of partners for performing investment management
services treated as ordinary income
received for performance of services.
Sec. 612. Indebtedness incurred by a partnership in acquiring
securities and commodities not treated as
acquisition indebtedness for organizations
which are partners with limited liability.
Sec. 613. Application to partnership interests and tax sharing
agreements of rule treating certain gain on
sales between related persons as ordinary
income.
Subtitle C--Other Provisions
Sec. 621. Delay in application of worldwide allocation of interest.
Sec. 622. Broker reporting of customer's basis in securities
transactions.
Sec. 623. Modification of penalty for failure to file partnership
returns.
Sec. 624. Penalty for failure to file S corporation returns.
Sec. 625. Time for payment of corporate estimated taxes.
TITLE I--AMT RELIEF
SEC. 101. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR NONREFUNDABLE
PERSONAL CREDITS.
(a) In General.--Paragraph (2) of section 26(a) (relating to
special rule for taxable years 2000 through 2006) is amended--
(1) by striking ``or 2006'' and inserting ``2006, or
2007'', and
(2) by striking ``2006'' in the heading thereof and
inserting ``2007''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 102. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION
AMOUNT.
(a) In General.--Paragraph (1) of section 55(d) (relating to
exemption amount) is amended--
(1) by striking ``($62,550 in the case of taxable years
beginning in 2006)'' in subparagraph (A) and inserting
``($66,250 in the case of taxable years beginning in 2007)'',
and
(2) by striking ``($42,500 in the case of taxable years
beginning in 2006)'' in subparagraph (B) and inserting
``($44,350 in the case of taxable years beginning in 2007)''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 103. INCREASE OF AMT REFUNDABLE CREDIT AMOUNT FOR INDIVIDUALS WITH
LONG-TERM UNUSED CREDITS FOR PRIOR YEAR MINIMUM TAX
LIABILITY, ETC.
(a) In General.--Paragraph (2) of section 53(e) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(2) AMT refundable credit amount.--For purposes of
paragraph (1), the term `AMT refundable credit amount' means,
with respect to any taxable year, the amount (not in excess of
the long-term unused minimum tax credit for such taxable year)
equal to the greater of--
``(A) 50 percent of the long-term unused minimum
tax credit for such taxable year, or
``(B) the amount (if any) of the AMT refundable
credit amount determined under this paragraph for the
taxpayer's preceding taxable year.''.
(b) Treatment of Certain Underpayments, Interest, and Penalties
Attributable to the Treatment of Incentive Stock Options.--Section 53
of such Code is amended by adding at the end the following new
subsection:
``(f) Treatment of Certain Underpayments, Interest, and Penalties
Attributable to the Treatment of Incentive Stock Options.--
``(1) Abatement.--Any underpayment of tax outstanding on
the date of the enactment of this subsection which is
attributable to the application of section 56(b)(3) for any
taxable year ending before January 1, 2007 (and any interest or
penalty with respect to such underpayment which is outstanding
on such date of enactment), is hereby abated. No credit shall
be allowed under this section with respect to any amount abated
under this paragraph.
``(2) Increase in credit for certain interest and penalties
already paid.--Any interest or penalty paid before the date of
the enactment of this subsection which would (but for such
payment) have been abated under paragraph (1) shall be treated
for purposes of this section as an amount of adjusted net
minimum tax imposed for the taxable year of the underpayment to
which such interest or penalty relates.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendment made by this section shall apply to taxable years
beginning after December 31, 2006.
(2) Abatement.--Section 53(f)(1) of the Internal Revenue
Code of 1986, as added by subsection (b), shall take effect on
the date of the enactment of this Act.
TITLE II--ADDITIONAL INDIVIDUAL TAX RELIEF
SEC. 201. REFUNDABLE CHILD CREDIT.
(a) Modification of Threshold Amount.--Clause (i) of section
24(d)(1)(B) is amended by inserting ``($8,500 in the case of taxable
years beginning in 2008)'' after ``$10,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2007.
SEC. 202. ADDITIONAL STANDARD DEDUCTION FOR REAL PROPERTY TAXES FOR
NONITEMIZERS.
(a) In General.--Section 63(c)(1) (defining standard deduction) is
amended by striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``, and'', and
by adding at the end the following new subparagraph:
``(C) in the case of any taxable year beginning in
2008, the real property tax deduction.''.
(b) Definition.--Section 63(c) is amended by adding at the end the
following new paragraph:
``(8) Real property tax deduction.--For purposes of
paragraph (1), the real property tax deduction is so much of
the amount of State and local real property taxes (within the
meaning of section 164) paid or accrued by the taxpayer during
the taxable year which do not exceed $350 ($700 in the case of
a joint return).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2007.
TITLE III--ONE-YEAR EXTENDERS
Subtitle A--Extenders Primarily Affecting Individuals
SEC. 301. DEDUCTION FOR STATE AND LOCAL SALES TAXES.
(a) In General.--Subparagraph (I) of section 164(b)(5) is amended
by striking ``January 1, 2008'' and inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2007.
SEC. 302. DEDUCTION OF QUALIFIED TUITION AND RELATED EXPENSES.
(a) In General.--Subsection (e) of section 222 (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2007.
SEC. 303. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED INVESTMENT
COMPANIES.
(a) Interest-Related Dividends.--Subparagraph (C) of section
871(k)(1) (defining interest-related dividend) is amended by striking
``December 31, 2007'' and inserting ``December 31, 2008''.
(b) Short-Term Capital Gain Dividends.--Subparagraph (C) of section
871(k)(2) (defining short-term capital gain dividend) is amended by
striking ``December 31, 2007'' and inserting ``December 31, 2008''.
(c) Effective Date.--The amendments made by this section shall
apply to dividends with respect to taxable years of regulated
investment companies beginning after December 31, 2007.
SEC. 304. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH
BENEFITS.
(a) In General.--Paragraph (3) of section 9812(f) (relating to
application of section) is amended by striking ``December 31, 2007''
and inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to benefits for services furnished after December 31, 2007.
SEC. 305. QUALIFIED CONSERVATION CONTRIBUTIONS.
(a) In General.--Clause (vi) of section 170(b)(1)(E) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions made in taxable years beginning after December 31,
2007.
SEC. 306. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR
CHARITABLE PURPOSES.
(a) In General.--Subparagraph (F) of section 408(d)(8) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made in taxable years beginning after December 31,
2007.
SEC. 307. DEDUCTION FOR CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY
SCHOOL TEACHERS.
(a) In General.--Subparagraph (D) of section 62(a)(2) (relating to
certain expenses of elementary and secondary school teachers) is
amended by striking ``or 2007'' and inserting ``2007, or 2008''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2007.
SEC. 308. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR PURPOSES
OF EARNED INCOME TAX CREDIT.
(a) In General.--Subclause (II) of section 32(c)(2)(B)(vi)
(defining earned income) is amended by striking ``January 1, 2008'' and
inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending after December 31, 2007.
SEC. 309. MODIFICATION OF MORTGAGE REVENUE BONDS FOR VETERANS.
(a) Qualified Mortgage Bonds Used To Finance Residences for
Veterans Without Regard to First-Time Homebuyer Requirement.--
Subparagraph (D) of section 143(d)(2) (relating to exceptions) is
amended by striking ``January 1, 2008'' and inserting ``January 1,
2009''.
(b) Effective Date.--The amendment made by this section shall apply
to bonds issued after December 31, 2007.
SEC. 310. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS CALLED TO
ACTIVE DUTY.
(a) In General.--Clause (iv) of section 72(t)(2)(G) is amended by
striking ``December 31, 2007'' and inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to individuals ordered or called to active duty on or after December
31, 2007.
SEC. 311. STOCK IN RIC FOR PURPOSES OF DETERMINING ESTATES OF
NONRESIDENTS NOT CITIZENS.
(a) In General.--Paragraph (3) of section 2105(d) (relating to
stock in a RIC) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to decedents dying after December 31, 2007.
SEC. 312. QUALIFIED INVESTMENT ENTITIES.
(a) In General.--Clause (ii) of section 897(h)(4)(A) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on January 1, 2008.
SEC. 313. STATE LEGISLATORS' TRAVEL EXPENSES AWAY FROM HOME.
(a) In General.--Paragraph (2) of section 162(h) (relating to
legislative days) is amended by adding at the end the following flush
sentence: ``In the case of taxable years beginning in 2008, a
legislature shall be treated for purposes of this paragraph as in
session on any day in which it is formally called into session without
regard to whether legislation was considered on such day.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2007.
Subtitle B--Extenders Primarily Affecting Businesses
SEC. 321. RESEARCH CREDIT.
(a) In General.--Subparagraph (B) of section 41(h)(1) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Conforming Amendment.--Subparagraph (D) of section 45C(b)(1)
(relating to qualified clinical testing expenses) is amended by
striking ``December 31, 2007'' and inserting ``December 31, 2008''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after December 31, 2007.
SEC. 322. INDIAN EMPLOYMENT CREDIT.
(a) In General.--Subsection (f) of section 45A (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2007.
SEC. 323. NEW MARKETS TAX CREDIT.
Subparagraph (D) of section 45D(f)(1) (relating to national
limitation on amount of investments designated) is amended by striking
``and 2008'' and inserting ``2008, and 2009''.
SEC. 324. RAILROAD TRACK MAINTENANCE.
(a) In General.--Subsection (f) of section 45G (relating to
application of section) is amended by striking ``January 1, 2008'' and
inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to expenditures paid or incurred during taxable years beginning after
December 31, 2007.
SEC. 325. FIFTEEN-YEAR STRAIGHT-LINE COST RECOVERY FOR QUALIFIED
LEASEHOLD IMPROVEMENTS AND QUALIFIED RESTAURANT PROPERTY.
(a) In General.--Clauses (iv) and (v) of section 168(e)(3)(E)
(relating to 15-year property) are each amended by striking ``January
1, 2008'' and inserting ``January 1, 2009''.
(b) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2007.
SEC. 326. SEVEN-YEAR COST RECOVERY PERIOD FOR MOTORSPORTS RACING TRACK
FACILITY.
(a) In General.--Subparagraph (D) of section 168(i)(15) (relating
to termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service after December 31, 2007.
SEC. 327. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON INDIAN
RESERVATION.
(a) In General.--Paragraph (8) of section 168(j) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service after December 31, 2007.
SEC. 328. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) In General.--Subsection (h) of section 198 (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to expenditures paid or incurred after December 31, 2007.
SEC. 329. DEDUCTION ALLOWABLE WITH RESPECT TO INCOME ATTRIBUTABLE TO
DOMESTIC PRODUCTION ACTIVITIES IN PUERTO RICO.
(a) In General.--Subparagraph (C) of section 199(d)(8) (relating to
termination) is amended--
(1) by striking ``first 2 taxable years'' and inserting
``first 3 taxable years'', and
(2) by striking ``January 1, 2008'' and inserting ``January
1, 2009''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2007.
SEC. 330. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO
CONTROLLING EXEMPT ORGANIZATIONS.
(a) In General.--Clause (iv) of section 512(b)(13)(E) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to payments received or accrued after December 31, 2007.
SEC. 331. EXTENSION AND MODIFICATION OF CREDIT TO HOLDERS OF QUALIFIED
ZONE ACADEMY BONDS.
(a) In General.--Subsection (e) of section 1397E (relating to
limitation on amount of bonds designated) is amended by striking
``1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, and 2007'' and
inserting ``each of calendar years 1998 through 2008''.
(b) Modification of Arbitrage Rules.--
(1) In general.--Subsection (g) of section 1397E (relating
to special rules relating to arbitrage) is amended to read as
follows:
``(g) Special Rules Relating to Arbitrage.--
``(1) In general.--An issue shall be treated as meeting the
requirements of this subsection if the issuer satisfies the
requirements of section 148 with respect to the proceeds of the
issue.
``(2) Special rule for investments during expenditure
period.--An issue shall not be treated as failing to meet the
requirements of paragraph (1) by reason of any investment of
available project proceeds during the 5-year period described
in subsection (f)(1)(A) (including any extension of such period
under subsection (f)(2)).
``(3) Special rule for reserve funds.--An issue shall not
be treated as failing to meet the requirements of paragraph (1)
by reason of any fund which is expected to be used to repay
such issue if--
``(A) such fund is funded at a rate not more rapid
than equal annual installments,
``(B) such fund is funded in a manner that such
fund will not exceed the amount necessary to repay the
issue if invested at the maximum rate permitted under
subparagraph (C), and
``(C) the yield on such fund is not greater than
the discount rate determined under subsection (d)(3)
with respect to the issue.''.
(2) Application of available project proceeds to other
requirements.--Subsections (d)(1)(A), (d)(2)(A), (f)(1)(A),
(f)(1)(B), (f)(1)(C), and (f)(3) of section 1397E are each
amended by striking ``proceeds'' and inserting ``available
project proceeds''.
(3) Available project proceeds defined.--Subsection (i) of
section 1397E (relating to definitions) is amended by adding at
the end the following new paragraph:
``(4) Available project proceeds.--The term `available
project proceeds' means--
``(A) the excess of--
``(i) the proceeds from the sale of an
issue, over
``(ii) the issuance costs financed by the
issue (to the extent that such costs do not
exceed 2 percent of such proceeds), and
``(B) the proceeds from any investment of the
excess described in subparagraph (A).''.
(c) Effective Date.--
(1) Extension.--The amendment made by subsection (a) shall
apply to obligations issued after December 31, 2007.
(2) Modification of arbitrage rules.--The amendments made
by subsection (b) shall apply to obligations issued after the
date of the enactment of this Act.
SEC. 332. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF COLUMBIA.
(a) Designation of Zone.--
(1) In general.--Subsection (f) of section 1400 is amended
by striking ``2007'' both places it appears and inserting
``2008''.
(2) Effective date.--The amendments made by this subsection
shall apply to periods beginning after December 31, 2007.
(b) Tax-Exempt Economic Development Bonds.--
(1) In general.--Subsection (b) of section 1400A is amended
by striking ``2007'' and inserting ``2008''.
(2) Effective date.--The amendment made by this subsection
shall apply to bonds issued after December 31, 2007.
(c) Zero Percent Capital Gains Rate.--
(1) In general.--Subsection (b) of section 1400B is amended
by striking ``2008'' each place it appears and inserting
``2009''.
(2) Conforming amendments.--
(A) Section 1400B(e)(2) is amended--
(i) by striking ``2012'' and inserting
``2013'', and
(ii) by striking ``2012'' in the heading
thereof and inserting ``2013''.
(B) Section 1400B(g)(2) is amended by striking
``2012'' and inserting ``2013''.
(C) Section 1400F(d) is amended by striking
``2012'' and inserting ``2013''.
(3) Effective dates.--
(A) Extension.--The amendments made by paragraph
(1) shall apply to acquisitions after December 31,
2007.
(B) Conforming amendments.--The amendments made by
paragraph (2) shall take effect on the date of the
enactment of this Act.
(d) First-Time Homebuyer Credit.--
(1) In general.--Subsection (i) of section 1400C is amended
by striking ``2008'' and inserting ``2009''.
(2) Effective date.--The amendment made by this subsection
shall apply to property purchased after December 31, 2007.
SEC. 333. EXTENSION OF ECONOMIC DEVELOPMENT CREDIT FOR AMERICAN SAMOA.
(a) In General.--Subsection (d) of section 119 of division A of the
Tax Relief and Health Care Act of 2006 is amended--
(1) by striking ``first two taxable years'' and inserting
``first 3 taxable years'', and
(2) by striking ``January 1, 2008'' and inserting ``January
1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2007.
SEC. 334. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Clause (iv) of section 170(e)(3)(C) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions made after December 31, 2007.
SEC. 335. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK
INVENTORY TO PUBLIC SCHOOLS.
(a) In General.--Clause (iv) of section 170(e)(3)(D) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions made after December 31, 2007.
SEC. 336. ENHANCED DEDUCTION FOR QUALIFIED COMPUTER CONTRIBUTIONS.
(a) In General.--Subparagraph (G) of section 170(e)(6) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions made during taxable years beginning after December 31,
2007.
SEC. 337. BASIS ADJUSTMENT TO STOCK OF S CORPORATIONS MAKING CHARITABLE
CONTRIBUTIONS OF PROPERTY.
(a) In General.--The last sentence of section 1367(a)(2) (relating
to decreases in basis) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Technical Amendment Related to Section 1203 of the Pension
Protection Act of 2006.--Subsection (d) of section 1366 is amended by
adding at the end the following new paragraph:
``(4) Application of limitation on charitable
contributions.--In the case of any charitable contribution of
property to which the second sentence of section 1367(a)(2)
applies, paragraph (1) shall not apply to the extent of the
excess (if any) of--
``(A) the shareholder's pro rata share of such
contribution, over
``(B) the shareholder's pro rata share of the
adjusted basis of such property.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
made in taxable years beginning after December 31, 2007.
(2) Technical amendment.--The amendment made by subsection
(b) shall take effect as if included in the provision of the
Pension Protection Act of 2006 to which it relates.
SEC. 338. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR HURRICANE
KATRINA EMPLOYEES.
(a) In General.--Paragraph (1) of section 201(b) of the Katrina
Emergency Tax Relief Act of 2005 is amended by striking ``2-year'' and
inserting ``3-year''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to individuals hired after August 27, 2007.
Subtitle C--Other Extenders
SEC. 341. DISCLOSURE FOR COMBINED EMPLOYMENT TAX REPORTING.
(a) In General.--Subparagraph (B) of section 6103(d)(5) (relating
to termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to disclosures after December 31, 2007.
SEC. 342. DISCLOSURE OF RETURN INFORMATION TO APPRISE APPROPRIATE
OFFICIALS OF TERRORIST ACTIVITIES.
(a) In General.--Clause (iv) of section 6103(i)(3)(C) (relating to
termination) is amended by striking ``December 31, 2007'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to disclosures after December 31, 2007.
SEC. 343. DISCLOSURE UPON REQUEST OF INFORMATION RELATING TO TERRORIST
ACTIVITIES.
(a) In General.--Subparagraph (E) of section 6103(i)(7) (relating
to termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to disclosures after December 31, 2007.
SEC. 344. DISCLOSURE OF RETURN INFORMATION TO CARRY OUT INCOME
CONTINGENT REPAYMENT OF STUDENT LOANS.
(a) In General.--Subparagraph (D) of section 6103(l)(13) (relating
to termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2008''.
(b) Effective Date.--The amendment made by this section shall apply
to requests made after December 31, 2007.
SEC. 345. AUTHORITY FOR UNDERCOVER OPERATIONS.
(a) In General.--Paragraph (6) of section 7608(c) (relating to
application of section) is amended by striking ``January 1, 2008'' each
place it appears and inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall take
effect on January 1, 2008.
SEC. 346. INCREASE IN LIMIT ON COVER OVER OF RUM EXCISE TAX TO PUERTO
RICO AND THE VIRGIN ISLANDS.
(a) In General.--Paragraph (1) of section 7652(f) is amended by
striking ``January 1, 2008'' and inserting ``January 1, 2009''.
(b) Effective Date.--The amendment made by this section shall apply
to distilled spirits brought into the United States after December 31,
2007.
SEC. 347. DISCLOSURE OF RETURN INFORMATION FOR CERTAIN VETERANS
PROGRAMS.
(a) In General.--The last sentence of paragraph (7) of section
6103(l) is amended by striking ``September 30, 2008'' and inserting
``December 31, 2008''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to requests made after September 30, 2008.
TITLE IV--MORTGAGE FORGIVENESS DEBT RELIEF
SEC. 401. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED
FROM GROSS INCOME.
(a) In General.--Paragraph (1) of section 108(a) 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 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) is amended by
striking ``and (D)'' and inserting ``(D), and (E)''.
(2) Paragraph (2) of section 108(a) 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. 402. LONG-TERM EXTENSION OF DEDUCTION FOR MORTGAGE INSURANCE
PREMIUMS.
(a) In General.--Subparagraph (E) of section 163(h)(3) (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. 403. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE HOUSING
CORPORATION.
(a) In General.--Subparagraph (D) of section 216(b)(1) (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. 404. GAIN FROM SALE OF PRINCIPAL RESIDENCE ALLOCATED TO
NONQUALIFIED USE NOT EXCLUDED FROM INCOME.
(a) In General.--Subsection (b) of section 121 (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.
TITLE V--ADMINISTRATIVE PROVISIONS
SEC. 501. REPEAL OF AUTHORITY TO ENTER INTO PRIVATE DEBT COLLECTION
CONTRACTS.
(a) In General.--Subchapter A of chapter 64 is amended by striking
section 6306.
(b) Conforming Amendments.--
(1) Subchapter B of chapter 76 is amended by striking
section 7433A.
(2) Section 7811 is amended by striking subsection (g).
(3) Section 1203 of the Internal Revenue Service
Restructuring Act of 1998 is amended by striking subsection
(e).
(4) The table of sections for subchapter A of chapter 64 is
amended by striking the item relating to section 6306.
(5) The table of sections for subchapter B of chapter 76 is
amended by striking the item relating to section 7433A.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on the date of the enactment of this Act.
(2) Exception for existing contracts, etc.--The amendments
made by this section shall not apply to any contract which was
entered into before July 18, 2007, and is not renewed or
extended on or after such date.
(3) Unauthorized contracts and extensions treated as
void.--Any qualified tax collection contract (as defined in
section 6306 of the Internal Revenue Code of 1986, as in effect
before its repeal) which is entered into on or after July 18,
2007, and any extension or renewal on or after such date of any
qualified tax collection contract (as so defined) shall be
void.
SEC. 502. DELAY OF APPLICATION OF WITHHOLDING REQUIREMENT ON CERTAIN
GOVERNMENTAL PAYMENTS FOR GOODS AND SERVICES.
(a) In General.--Subsection (b) of section 511 of the Tax Increase
Prevention and Reconciliation Act of 2005 is amended by striking
``December 31, 2010'' and inserting ``December 31, 2011''.
(b) Report to Congress.--Not later than 6 months after the date of
the enactment of this Act, the Secretary of the Treasury shall submit
to the Committee on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate a report with respect to the
withholding requirements of section 3402(t) of the Internal Revenue
Code of 1986, including a detailed analysis of--
(1) the problems, if any, which are anticipated in
administering and complying with such requirements,
(2) the burdens, if any, that such requirements will place
on governments and businesses (taking into account such
mechanisms as may be necessary to administer such
requirements), and
(3) the application of such requirements to small
expenditures for services and goods by governments.
SEC. 503. CLARIFICATION OF ENTITLEMENT OF VIRGIN ISLANDS RESIDENTS TO
PROTECTIONS OF LIMITATIONS ON ASSESSMENT AND COLLECTION
OF TAX.
(a) In General.--Subsection (c) of section 932 (relating to
treatment of Virgin Islands residents) is amended by adding at the end
the following new paragraph:
``(5) Treatment of income tax return filed with virgin
islands.--An income tax return filed with the Virgin Islands by
an individual claiming to be described in paragraph (1) for the
taxable year shall be treated for purposes of subtitle F in the
same manner as if such return were an income tax return filed
with the United States for such taxable year. The preceding
sentence shall not apply where such return is false or
fraudulent with the intent to evade tax or otherwise is a
willful attempt in any manner to defeat or evade tax.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after 1986.
SEC. 504. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of chapter 1
is amended by inserting after section 877 the following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--All property of a covered expatriate
shall be treated as sold on the day before the expatriation
date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this
title, any gain arising from such sale shall be taken
into account for the taxable year of the sale, and
``(B) any loss arising from such sale shall be
taken into account for the taxable year of the sale to
the extent otherwise provided by this title, except
that section 1091 shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into account
under the preceding sentence, determined without regard to
paragraph (3).
``(3) Exclusion for certain gain.--
``(A) In general.--The amount which would (but for
this paragraph) be includible in the gross income of
any individual by reason of paragraph (1) shall be
reduced (but not below zero) by $600,000.
``(B) Adjustment for inflation.--
``(i) In general.--In the case of any
taxable year beginning in a calendar year after
2008, the dollar amount in subparagraph (A)
shall be increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for the calendar year in which
the taxable year begins, by
substituting `calendar year 2007' for
`calendar year 1992' in subparagraph
(B) thereof.
``(ii) Rounding.--If any amount as adjusted
under clause (i) is not a multiple of $1,000,
such amount shall be rounded to the nearest
multiple of $1,000.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as sold
by reason of subsection (a), the time for payment of the
additional tax attributable to such property shall be extended
until the due date of the return for the taxable year in which
such property is disposed of (or, in the case of property
disposed of in a transaction in which gain is not recognized in
whole or in part, until such other date as the Secretary may
prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to such property
bears to the total gain taken into account under subsection (a)
with respect to all property to which subsection (a) applies.
``(3) Termination of extension.--The due date for payment
of tax may not be extended under this subsection later than the
due date for the return of tax imposed by this chapter for the
taxable year which includes the date of death of the expatriate
(or, if earlier, the time that the security provided with
respect to the property fails to meet the requirements of
paragraph (4), unless the taxpayer corrects such failure within
the time specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under
paragraph (1) with respect to any property unless
adequate security is provided with respect to such
property.
``(B) Adequate security.--For purposes of
subparagraph (A), security with respect to any property
shall be treated as adequate security if--
``(i) it is a bond which is furnished to,
and accepted by, the Secretary, which is
conditioned on the payment of tax (and interest
thereon), and which meets the requirements of
section 6325, or
``(ii) it is another form of security for
such payment (including letters of credit) that
meets such requirements as the Secretary may
prescribe.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer makes an irrevocable
waiver of any right under any treaty of the United States which
would preclude assessment or collection of any tax imposed by
reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable.
``(7) Interest.--For purposes of section 6601, the last
date for the payment of tax shall be determined without regard
to the election under this subsection.
``(c) Exception for Certain Property.--Subsection (a) shall not
apply to--
``(1) any deferred compensation item (as defined in
subsection (d)(4)),
``(2) any specified tax deferred account (as defined in
subsection (e)(2)), and
``(3) any interest in a nongrantor trust (as defined in
subsection (f)(3)).
``(d) Treatment of Deferred Compensation Items.--
``(1) Withholding on eligible deferred compensation
items.--
``(A) In general.--In the case of any eligible
deferred compensation item, the payor shall deduct and
withhold from any taxable payment to a covered
expatriate with respect to such item a tax equal to 30
percent thereof.
``(B) Taxable payment.--For purposes of
subparagraph (A), the term `taxable payment' means with
respect to a covered expatriate any payment to the
extent it would be includible in the gross income of
the covered expatriate if such expatriate continued to
be subject to tax as a citizen or resident of the
United States. A deferred compensation item shall be
taken into account as a payment under the preceding
sentence when such item would be so includible.
``(2) Other deferred compensation items.--In the case of
any deferred compensation item which is not an eligible
deferred compensation item--
``(A)(i) with respect to any deferred compensation
item to which clause (ii) does not apply, an amount
equal to the present value of the covered expatriate's
accrued benefit shall be treated as having been
received by such individual on the day before the
expatriation date as a distribution under the plan, and
``(ii) with respect to any deferred compensation
item referred to in paragraph (4)(D), the rights of the
covered expatriate to such item shall be treated as
becoming transferable and not subject to a substantial
risk of forfeiture on the day before the expatriation
date,
``(B) no early distribution tax shall apply by
reason of such treatment, and
``(C) appropriate adjustments shall be made to
subsequent distributions from the plan to reflect such
treatment.
``(3) Eligible deferred compensation items.--For purposes
of this subsection, the term `eligible deferred compensation
item' means any deferred compensation item with respect to
which--
``(A) the payor of such item is--
``(i) a United States person, or
``(ii) a person who is not a United States
person but who elects to be treated as a United
States person for purposes of paragraph (1) and
meets such requirements as the Secretary may
provide to ensure that the payor will meet the
requirements of paragraph (1), and
``(B) the covered expatriate--
``(i) notifies the payor of his status as a
covered expatriate, and
``(ii) makes an irrevocable waiver of any
right to claim any reduction under any treaty
with the United States in withholding on such
item.
``(4) Deferred compensation item.--For purposes of this
subsection, the term `deferred compensation item' means--
``(A) any interest in a plan or arrangement
described in section 219(g)(5),
``(B) any interest in a foreign pension plan or
similar retirement arrangement or program,
``(C) any item of deferred compensation, and
``(D) any property, or right to property, which the
individual is entitled to receive in connection with
the performance of services to the extent not
previously taken into account under section 83 or in
accordance with section 83.
``(5) Exception.--Paragraphs (1) and (2) shall not apply to
any deferred compensation item which is attributable to
services performed outside the United States while the covered
expatriate was not a citizen or resident of the United States.
``(6) Special rules.--
``(A) Application of withholding rules.--Rules
similar to the rules of subchapter B of chapter 3 shall
apply for purposes of this subsection.
``(B) Application of tax.--Any item subject to the
withholding tax imposed under paragraph (1) shall be
subject to tax under section 871.
``(C) Coordination with other withholding
requirements.--Any item subject to withholding under
paragraph (1) shall not be subject to withholding under
section 1441 or chapter 24.
``(e) Treatment of Specified Tax Deferred Accounts.--
``(1) Account treated as distributed.--In the case of any
interest in a specified tax deferred account held by a covered
expatriate on the day before the expatriation date--
``(A) the covered expatriate shall be treated as
receiving a distribution of his entire interest in such
account on the day before the expatriation date,
``(B) no early distribution tax shall apply by
reason of such treatment, and
``(C) appropriate adjustments shall be made to
subsequent distributions from the account to reflect
such treatment.
``(2) Specified tax deferred account.--For purposes of
paragraph (1), the term `specified tax deferred account' means
an individual retirement plan (as defined in section
7701(a)(37)) other than any arrangement described in subsection
(k) or (p) of section 408, a qualified tuition program (as
defined in section 529), a Coverdell education savings account
(as defined in section 530), a health savings account (as
defined in section 223), and an Archer MSA (as defined in
section 220).
``(f) Special Rules for Nongrantor Trusts.--
``(1) In general.--In the case of a distribution (directly
or indirectly) of any property from a nongrantor trust to a
covered expatriate--
``(A) the trustee shall deduct and withhold from
such distribution an amount equal to 30 percent of the
taxable portion of the distribution, and
``(B) if the fair market value of such property
exceeds its adjusted basis in the hands of the trust,
gain shall be recognized to the trust as if such
property were sold to the expatriate at its fair market
value.
``(2) Taxable portion.--For purposes of this subsection,
the term `taxable portion' means, with respect to any
distribution, that portion of the distribution which would be
includible in the gross income of the covered expatriate if
such expatriate continued to be subject to tax as a citizen or
resident of the United States.
``(3) Nongrantor trust.--For purposes of this subsection,
the term `nongrantor trust' means the portion of any trust that
the individual is not considered the owner of under subpart E
of part I of subchapter J. The determination under the
preceding sentence shall be made immediately before the
expatriation date.
``(4) Special rules relating to withholding.--For purposes
of this subsection--
``(A) rules similar to the rules of subsection
(d)(6) shall apply, and
``(B) the covered expatriate shall be treated as
having waived any right to claim any reduction under
any treaty with the United States in withholding on any
distribution to which paragraph (1)(A) applies.
``(5) Application.--This subsection shall apply to a
nongrantor trust only if the covered expatriate was a
beneficiary of the trust on the day before the expatriation
date.
``(g) Definitions and Special Rules Relating to Expatriation.--For
purposes of this section--
``(1) Covered expatriate.--
``(A) In general.--The term `covered expatriate'
means an expatriate who meets the requirements of
subparagraph (A), (B), or (C) of section 877(a)(2).
``(B) Exceptions.--An individual shall not be
treated as meeting the requirements of subparagraph (A)
or (B) of section 877(a)(2) if--
``(i) the individual--
``(I) became at birth a citizen of
the United States and a citizen of
another country and, as of the
expatriation date, continues to be a
citizen of, and is taxed as a resident
of, such other country, and
``(II) has been a resident of the
United States (as defined in section
7701(b)(1)(A)(ii)) for not more than 10
taxable years during the 15-taxable
year period ending with the taxable
year during which the expatriation date
occurs, or
``(ii)(I) the individual's relinquishment
of United States citizenship occurs before such
individual attains age 18\1/2\, and
``(II) the individual has been a resident
of the United States (as so defined) for not
more than 10 taxable years before the date of
relinquishment.
``(C) Covered expatriates also subject to tax as
citizens or residents.--In the case of any covered
expatriate who is subject to tax as a citizen or
resident of the United States for any period beginning
after the expatriation date, such individual shall not
be treated as a covered expatriate during such period
for purposes of subsections (d)(1) and (f) and section
2801.
``(2) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
his citizenship, and
``(B) any long-term resident of the United States
who ceases to be a lawful permanent resident of the
United States (within the meaning of section
7701(b)(6)).
``(3) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United
States citizenship, or
``(B) in the case of a long-term resident of the
United States, the date on which the individual ceases
to be a lawful permanent resident of the United States
(within the meaning of section 7701(b)(6)).
``(4) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing his United States citizenship on the
earliest of--
``(A) the date the individual renounces his United
States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5)
of section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the
United States Department of State a signed statement of
voluntary relinquishment of United States nationality
confirming the performance of an act of expatriation
specified in paragraph (1), (2), (3), or (4) of section
349(a) of the Immigration and Nationality Act (8 U.S.C.
1481(a)(1)-(4)),
``(C) the date the United States Department of
State issues to the individual a certificate of loss of
nationality, or
``(D) the date a court of the United States cancels
a naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(5) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(6) Early distribution tax.--The term `early distribution
tax' means any increase in tax imposed under section 72(t),
220(e)(4), 223(f)(4), 409A(a)(1)(B), 529(c)(6), or 530(d)(4).
``(h) Other Rules.--
``(1) Termination of deferrals, etc.--In the case of any
covered expatriate, notwithstanding any other provision of this
title--
``(A) any time period for acquiring property which
would result in the reduction in the amount of gain
recognized with respect to property disposed of by the
taxpayer shall terminate on the day before the
expatriation date, and
``(B) any extension of time for payment of tax
shall cease to apply on the day before the expatriation
date and the unpaid portion of such tax shall be due
and payable at the time and in the manner prescribed by
the Secretary.
``(2) Step-up in basis.--Solely for purposes of determining
any tax imposed by reason of subsection (a), property which was
held by an individual on the date the individual first became a
resident of the United States (within the meaning of section
7701(b)) shall be treated as having a basis on such date of not
less than the fair market value of such property on such date.
The preceding sentence shall not apply if the individual elects
not to have such sentence apply. Such an election, once made,
shall be irrevocable.
``(3) Coordination with section 684.--If the expatriation
of any individual would result in the recognition of gain under
section 684, this section shall be applied after the
application of section 684.
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section.''.
(b) Tax on Gifts and Bequests Received by United States Citizens
and Residents From Expatriates.--
(1) In general.--Subtitle B (relating to estate and gift
taxes) is amended by inserting after chapter 14 the following
new chapter:
``CHAPTER 15--GIFTS AND BEQUESTS FROM EXPATRIATES
``Sec. 2801. Imposition of tax.
``SEC. 2801. IMPOSITION OF TAX.
``(a) In General.--If, during any calendar year, any United States
citizen or resident receives any covered gift or bequest, there is
hereby imposed a tax equal to the product of--
``(1) the highest rate of tax specified in the table
contained in section 2001(c) as in effect on the date of such
receipt (or, if greater, the highest rate of tax specified in
the table applicable under section 2502(a) as in effect on the
date), and
``(2) the value of such covered gift or bequest.
``(b) Tax To Be Paid by Recipient.--The tax imposed by subsection
(a) on any covered gift or bequest shall be paid by the person
receiving such gift or bequest.
``(c) Exception for Certain Gifts.--Subsection (a) shall apply only
to the extent that the value of covered gifts and bequests received by
any person during the calendar year exceeds $10,000.
``(d) Tax Reduced by Foreign Gift or Estate Tax.--The tax imposed
by subsection (a) on any covered gift or bequest shall be reduced by
the amount of any gift or estate tax paid to a foreign country with
respect to such covered gift or bequest.
``(e) Covered Gift or Bequest.--
``(1) In general.--For purposes of this chapter, the term
`covered gift or bequest' means--
``(A) any property acquired by gift directly or
indirectly from an individual who, at the time of such
acquisition, is a covered expatriate, and
``(B) any property acquired directly or indirectly
by reason of the death of an individual who,
immediately before such death, was a covered
expatriate.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Such term shall not include--
``(A) any property shown on a timely filed return
of tax imposed by chapter 12 which is a taxable gift by
the covered expatriate, and
``(B) any property included in the gross estate of
the covered expatriate for purposes of chapter 11 and
shown on a timely filed return of tax imposed by
chapter 11 of the estate of the covered expatriate.
``(3) Transfers in trust.--
``(A) Domestic trusts.--In the case of a covered
gift or bequest made to a domestic trust--
``(i) subsection (a) shall apply in the
same manner as if such trust were a United
States citizen, and
``(ii) the tax imposed by subsection (a) on
such gift or bequest shall be paid by such
trust.
``(B) Foreign trusts.--
``(i) In general.--In the case of a covered
gift or bequest made to a foreign trust,
subsection (a) shall apply to any distribution
attributable to such gift or bequest from such
trust (whether from income or corpus) to a
United States citizen or resident in the same
manner as if such distribution were a covered
gift or bequest.
``(ii) Deduction for tax paid by
recipient.--There shall be allowed as a
deduction under section 164 the amount of tax
imposed by this section which is paid or
accrued by a United States citizen or resident
by reason of a distribution from a foreign
trust, but only to the extent such tax is
imposed on the portion of such distribution
which is included in the gross income of such
citizen or resident.
``(iii) Election to be treated as domestic
trust.--Solely for purposes of this section, a
foreign trust may elect to be treated as a
domestic trust. Such an election may be revoked
with the consent of the Secretary.
``(f) Covered Expatriate.--For purposes of this section, the term
`covered expatriate' has the meaning given to such term by section
877A(g)(1).''.
(2) Clerical amendment.--The table of chapters for subtitle
B is amended by inserting after the item relating to chapter 14
the following new item:
``Chapter 15. Gifts and Bequests From Expatriates.''.
(c) Definition of Termination of United States Citizenship.--
(1) In general.--Section 7701(a) is amended by adding at
the end the following new paragraph:
``(50) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to
be treated as a United States citizen before the date
on which the individual's citizenship is treated as
relinquished under section 877A(g)(4).
``(B) Dual citizens.--Under regulations prescribed
by the Secretary, subparagraph (A) shall not apply to
an individual who became at birth a citizen of the
United States and a citizen of another country.''.
(2) Conforming amendments.--
(A) Paragraph (1) of section 877(e) is amended to
read as follows:
``(1) In general.--Any long-term resident of the United
States who ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)) shall
be treated for purposes of this section and sections 2107,
2501, and 6039G in the same manner as if such resident were a
citizen of the United States who lost United States citizenship
on the date of such cessation or commencement.''.
(B) Paragraph (6) of section 7701(b) is amended by
adding at the end the following flush sentence:
``An individual shall cease to be treated as a lawful permanent
resident of the United States if such individual commences to
be treated as a resident of a foreign country under the
provisions of a tax treaty between the United States and the
foreign country, does not waive the benefits of such treaty
applicable to residents of the foreign country, and notifies
the Secretary of the commencement of such treatment.''.
(C) Section 7701 is amended by striking subsection
(n) and by redesignating subsections (o) and (p) as
subsections (n) and (o), respectively.
(d) Information Returns.--Section 6039G is amended--
(1) by inserting ``or 877A'' after ``section 877(b)'' in
subsection (a), and
(2) by inserting ``or 877A'' after ``section 877(a)'' in
subsection (d).
(e) Clerical Amendment.--The table of sections for subpart A of
part II of subchapter N of chapter 1 is amended by inserting after the
item relating to section 877 the following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(f) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates (as
defined in section 877A(g) of the Internal Revenue Code of
1986, as added by this section) whose expatriation date (as so
defined) is on or after the date of the enactment of this Act.
(2) Gifts and bequests.--Chapter 15 of the Internal Revenue
Code of 1986 (as added by subsection (b)) shall apply to
covered gifts and bequests (as defined in section 2801 of such
Code, as so added) received on or after the date of the
enactment of this Act, regardless of when the transferor
expatriated.
SEC. 505. REPEAL OF SUSPENSION OF CERTAIN PENALTIES AND INTEREST.
(a) In General.--Section 6404 is amended by striking subsection (g)
and by redesignating subsection (h) as subsection (g).
(b) Effective Date.--The amendment made by subsection (a) shall
apply to notices provided by the Secretary of the Treasury, or his
delegate, after the date which is 6 months after the date of the
enactment of the Small Business and Work Opportunity Tax Act of 2007.
SEC. 506. UNUSED MERCHANDISE DRAWBACK.
(a) In General.--Section 313(j)(2) of the Tariff Act of 1930 (19
U.S.C. 1313(j)(2)) is amended by adding at the end the following: ``For
purposes of subparagraph (A) of this paragraph, wine of the same color
having a price variation not to exceed 50 percent between the imported
wine and the exported wine shall be deemed to be commercially
interchangeable.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply with respect to claims filed for drawback under section 313(j)(2)
of the Tariff Act of 1930 on or after the date of the enactment of this
Act.
TITLE VI--REVENUE PROVISIONS
Subtitle A--Nonqualified Deferred Compensation From Certain Tax
Indifferent Parties
SEC. 601. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX
INDIFFERENT PARTIES.
(a) In General.--Subpart B of part II of subchapter E of chapter 1
(relating to taxable year for which items of gross income included) is
amended by inserting after section 457 the following new section:
``SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX
INDIFFERENT PARTIES.
``(a) In General.--Any compensation which is deferred under a
nonqualified deferred compensation plan of a nonqualified entity shall
be taken into account for purposes of this chapter when there is no
substantial risk of forfeiture of the rights to such compensation.
``(b) Nonqualified Entity.--For purposes of this section, the term
`nonqualified entity' means--
``(1) any foreign corporation unless substantially all of
such income is--
``(A) effectively connected with the conduct of a
trade or business in the United States, or
``(B) subject to a comprehensive foreign income
tax, and
``(2) any partnership unless substantially all of such
income is allocated to persons other than--
``(A) foreign persons with respect to whom such
income is not subject to a comprehensive foreign income
tax, and
``(B) organizations which are exempt from tax under
this title.
``(c) Ascertainability of Amounts of Compensation.--
``(1) In general.--If the amount of any compensation is not
ascertainable at the time that such compensation is otherwise
to be taken into account under subsection (a)--
``(A) such amount shall be so taken into account
when ascertainable, and
``(B) the tax imposed under this chapter for the
taxable year in which such compensation is taken into
account under subparagraph (A) shall be increased by
the sum of--
``(i) the amount of interest determined
under paragraph (2), and
``(ii) an amount equal to 20 percent of the
amount of such compensation.
``(2) Interest.--For purposes of paragraph (1)(B)(i), the
interest determined under this paragraph for any taxable year
is the amount of interest at the underpayment rate under
section 6621 plus 1 percentage point on the underpayments that
would have occurred had the deferred compensation been
includible in gross income for the taxable year in which first
deferred or, if later, the first taxable year in which such
deferred compensation is not subject to a substantial risk of
forfeiture.
``(d) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Substantial risk of forfeiture.--The rights of a
person to compensation shall be treated as subject to a
substantial risk of forfeiture only if such person's rights to
such compensation are conditioned upon the future performance
of substantial services by any individual.
``(2) Comprehensive foreign income tax.--The term
`comprehensive foreign income tax' means, with respect to any
foreign person, the income tax of a foreign country if--
``(A) such person is eligible for the benefits of a
comprehensive income tax treaty between such foreign
country and the United States, or
``(B) such person demonstrates to the satisfaction
of the Secretary that such foreign country has a
comprehensive income tax.
Such term shall not include any tax unless such tax includes
rules for the deductibility of deferred compensation which are
similar to the rules of this title.
``(3) Nonqualified deferred compensation plan.--The term
`nonqualified deferred compensation plan' has the meaning given
such term under section 409A(d), except that such term shall
include any plan that provides a right to compensation based on
the appreciation in value of a specified number of equity units
of the service recipient.
``(4) Application of rules.--Rules similar to the rules of
paragraphs (5) and (6) of section 409A(d) shall apply.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including regulations disregarding a substantial risk of
forfeiture in cases where necessary to carry out the purposes of this
section.''.
(b) Conforming Amendment.--Section 26(b)(2) is amended by striking
``and'' at the end of subparagraph (S), by striking the period at the
end of subparagraph (T) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(U) section 457A(c)(1)(B) (relating to
ascertainability of amounts of compensation).''.
(c) Clerical Amendment.--The table of sections of subpart B of part
II of subchapter E of chapter 1 is amended by inserting after the item
relating to section 457 the following new item:
``Sec. 457A. Nonqualified deferred compensation from certain tax
indifferent parties.''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
amounts deferred which are attributable to services performed
after December 31, 2007.
(2) Application to existing deferrals.--In the case of any
amount deferred to which the amendments made by this section do
not apply solely by reason of the fact that the amount is
attributable to services performed before January 1, 2008, to
the extent such amount is not includible in gross income in a
taxable year beginning before 2017, such amounts shall be
includible in gross income in the later of--
(A) the last taxable year beginning before 2017, or
(B) the taxable year in which there is no
substantial risk of forfeiture of the rights to such
compensation (determined in the same manner as
determined for purposes of section 457A of the Internal
Revenue Code of 1986, as added by this section).
(3) Accelerated payments.--No later than 60 days after the
date of the enactment of this Act, the Secretary shall issue
guidance providing a limited period of time during which a
nonqualified deferred compensation arrangement attributable to
services performed on or before December 31, 2007, may, without
violating the requirements of section 409A(a) of the Internal
Revenue Code of 1986, be amended to conform the date of
distribution to the date the amounts are required to be
included in income.
Subtitle B--Provisions Related to Certain Investment Partnerships
SEC. 611. INCOME OF PARTNERS FOR PERFORMING INVESTMENT MANAGEMENT
SERVICES TREATED AS ORDINARY INCOME RECEIVED FOR
PERFORMANCE OF SERVICES.
(a) In General.--Part I of subchapter K of chapter 1 is amended by
adding at the end the following new section:
``SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT
SERVICES TO PARTNERSHIP.
``(a) Treatment of Distributive Share of Partnership Items.--For
purposes of this title, in the case of an investment services
partnership interest--
``(1) In general.--Notwithstanding section 702(b)--
``(A) any net income with respect to such interest
for any partnership taxable year shall be treated as
ordinary income for the performance of services, and
``(B) any net loss with respect to such interest
for such year, to the extent not disallowed under
paragraph (2) for such year, shall be treated as an
ordinary loss.
``(2) Treatment of losses.--
``(A) Limitation.--Any net loss with respect to
such interest shall be allowed for any partnership
taxable year only to the extent that such loss does not
exceed the excess (if any) of--
``(i) the aggregate net income with respect
to such interest for all prior partnership
taxable years, over
``(ii) the aggregate net loss with respect
to such interest not disallowed under this
subparagraph for all prior partnership taxable
years.
``(B) Carryforward.--Any net loss for any
partnership taxable year which is not allowed by reason
of subparagraph (A) shall be treated as an item of loss
with respect to such partnership interest for the
succeeding partnership taxable year.
``(C) Basis adjustment.--No adjustment to the basis
of a partnership interest shall be made on account of
any net loss which is not allowed by reason of
subparagraph (A).
``(D) Exception for basis attributable to purchase
of a partnership interest.--In the case of an
investment services partnership interest acquired by
purchase, paragraph (1)(B) shall not apply to so much
of any net loss with respect to such interest for any
taxable year as does not exceed the excess of--
``(i) the basis of such interest
immediately after such purchase, over
``(ii) the aggregate net loss with respect
to such interest to which paragraph (1)(B) did
not apply by reason of this subparagraph for
all prior taxable years.
Any net loss to which paragraph (1)(B) does not apply
by reason of this subparagraph shall not be taken into
account under subparagraph (A).
``(E) Prior partnership years.--Any reference in
this paragraph to prior partnership taxable years shall
only include prior partnership taxable years to which
this section applies.
``(3) Net income and loss.--For purposes of this section--
``(A) Net income.--The term `net income' means,
with respect to any investment services partnership
interest, for any partnership taxable year, the excess
(if any) of--
``(i) all items of income and gain taken
into account by the holder of such interest
under section 702 with respect to such interest
for such year, over
``(ii) all items of deduction and loss so
taken into account.
``(B) Net loss.--The term `net loss' means with
respect to such interest for such year, the excess (if
any) of the amount described in subparagraph (A)(ii)
over the amount described in subparagraph (A)(i).
``(b) Dispositions of Partnership Interests.--
``(1) Gain.--Any gain on the disposition of an investment
services partnership interest shall be treated as ordinary
income for the performance of services.
``(2) Loss.--Any loss on the disposition of an investment
services partnership interest shall be treated as an ordinary
loss to the extent of the excess (if any) of--
``(A) the aggregate net income with respect to such
interest for all partnership taxable years, over
``(B) the aggregate net loss with respect to such
interest allowed under subsection (a)(2) for all
partnership taxable years.
``(3) Disposition of portion of interest.--In the case of
any disposition of an investment services partnership interest,
the amount of net loss which otherwise would have (but for
subsection (a)(2)(C)) applied to reduce the basis of such
interest shall be disregarded for purposes of this section for
all succeeding partnership taxable years.
``(4) Distributions of partnership property.--In the case
of any distribution of appreciated property by a partnership
with respect to any investment services partnership interest,
gain shall be recognized by the partnership in the same manner
as if the partnership sold such property at fair market value
at the time of the distribution. For purposes of this
paragraph, the term `appreciated property' means any property
with respect to which gain would be determined if sold as
described in the preceding sentence.
``(5) Application of section 751.--In applying section
751(a), an investment services partnership interest shall be
treated as an inventory item.
``(c) Investment Services Partnership Interest.--For purposes of
this section--
``(1) In general.--The term `investment services
partnership interest' means any interest in a partnership which
is held by any person if such person provides (directly or
indirectly) a substantial quantity of any of the following
services with respect to the assets of the partnership in the
conduct of the trade or business of providing such services:
``(A) Advising as to the advisability of investing
in, purchasing, or selling any specified asset.
``(B) Managing, acquiring, or disposing of any
specified asset.
``(C) Arranging financing with respect to acquiring
specified assets.
``(D) Any activity in support of any service
described in subparagraphs (A) through (C).
For purposes of this paragraph, the term `specified asset'
means securities (as defined in section 475(c)(2) without
regard to the last sentence thereof), real estate, commodities
(as defined in section 475(e)(2))), or options or derivative
contracts with respect to securities (as so defined), real
estate, or commodities (as so defined).
``(2) Exception for certain capital interests.--
``(A) In general.--If--
``(i) a portion of an investment services
partnership interest is acquired on account of
a contribution of invested capital, and
``(ii) the partnership makes a reasonable
allocation of partnership items between the
portion of the distributive share that is with
respect to invested capital and the portion of
such distributive share that is not with
respect to invested capital,
then subsection (a) shall not apply to the portion of
the distributive share that is with respect to invested
capital. An allocation will not be treated as
reasonable for purposes of this subparagraph if such
allocation would result in the partnership allocating a
greater portion of income to invested capital than any
other partner not providing services would have been
allocated with respect to the same amount of invested
capital.
``(B) Special rule for dispositions.--In any case
to which subparagraph (A) applies, subsection (b) shall
not apply to any gain or loss allocable to invested
capital. The portion of any gain or loss attributable
to invested capital is the proportion of such gain or
loss which is based on the distributive share of gain
or loss that would have been allocable to invested
capital under subparagraph (A) if the partnership sold
all of its assets immediately before the disposition.
``(C) Invested capital.--For purposes of this
paragraph, the term `invested capital' means, the fair
market value at the time of contribution of any money
or other property contributed to the partnership.
``(D) Treatment of certain loans.--
``(i) Proceeds of partnership loans not
treated as invested capital of service
providing partners.--For purposes of this
paragraph, an investment services partnership
interest shall not be treated as acquired on
account of a contribution of invested capital
to the extent that such capital is attributable
to the proceeds of any loan or other advance
made or guaranteed, directly or indirectly, by
any partner or the partnership.
``(ii) Loans from nonservice providing
partners to the partnership treated as invested
capital.--For purposes of this paragraph, any
loan or other advance to the partnership made
or guaranteed, directly or indirectly, by a
partner not providing services to the
partnership shall be treated as invested
capital of such partner and amounts of income
and loss treated as allocable to invested
capital shall be adjusted accordingly.
``(d) Other Income and Gain in Connection With Investment
Management Services.--
``(1) In general.--If--
``(A) a person performs (directly or indirectly)
investment management services for any entity,
``(B) such person holds a disqualified interest
with respect to such entity, and
``(C) the value of such interest (or payments
thereunder) is substantially related to the amount of
income or gain (whether or not realized) from the
assets with respect to which the investment management
services are performed,
any income or gain with respect to such interest shall be
treated as ordinary income for the performance of services.
Rules similar to the rules of subsection (c)(2) shall apply
where such interest was acquired on account of invested capital
in such entity.
``(2) Definitions.--For purposes of this subsection--
``(A) Disqualified interest.--The term
`disqualified interest' means, with respect to any
entity--
``(i) any interest in such entity other
than indebtedness,
``(ii) convertible or contingent debt of
such entity,
``(iii) any option or other right to
acquire property described in clause (i) or
(ii), and
``(iv) any derivative instrument entered
into (directly or indirectly) with such entity
or any investor in such entity.
Such term shall not include a partnership interest and
shall not include stock in a taxable corporation.
``(B) Taxable corporation.--The term `taxable
corporation' means--
``(i) a domestic C corporation, or
``(ii) a foreign corporation subject to a
comprehensive foreign income tax (as defined in
section 457A(d)(4)).
``(C) Investment management services.--The term
`investment management services' means a substantial
quantity of any of the services described in subsection
(c)(1) which are provided in the conduct of the trade
or business of providing such services.
``(e) Regulations.--The Secretary shall prescribe such regulations
as are necessary or appropriate to carry out the purposes of this
section, including regulations to--
``(1) prevent the avoidance of the purposes of this
section, and
``(2) coordinate this section with the other provisions of
this subchapter.
``(f) Cross Reference.--For 40 percent no fault penalty on certain
underpayments due to the avoidance of this section, see section
6662.''.
(b) Application to Real Estate Investment Trusts.--Subsection (c)
of section 856 is amended by adding at the end the following new
paragraph:
``(8) Exception from recharacterization of income from
investment services partnership interests.--
``(A) In general.--Paragraphs (2), (3), and (4)
shall be applied without regard to section 710
(relating to special rules for partners providing
investment management services to partnership).
``(B) Special rule for partnerships owned by
reits.--Section 7704 shall be applied without regard to
section 710 in the case of a partnership which meets
each of the following requirements:
``(i) Such partnership is treated as
publicly traded under section 7704 solely by
reason of interests in such partnership being
convertible into interests in a real estate
investment trust which is publicly traded.
``(ii) 50 percent or more of the capital
and profits interests of such partnership are
owned, directly or indirectly, at all times
during the taxable year by such real estate
investment trust (determined with the
application of section 267(c)).
``(iii) Such partnership meets the
requirements of paragraphs (2), (3), and (4)
(applied without regard to section 710).''.
(c) Imposition of Penalty on Underpayments.--
(1) In general.--Subsection (b) of section 6662 is amended
by inserting after paragraph (5) the following new paragraph:
``(6) The application of subsection (d) of section 710 or
the regulations prescribed under section 710(e) to prevent the
avoidance of the purposes of section 710.''.
(2) Amount of penalty.--
(A) In general.--Section 6662 is amended by adding
at the end the following new subsection:
``(i) Increase in Penalty in Case of Property Transferred for
Investment Management Services.--In the case of any portion of an
underpayment to which this section applies by reason of subsection
(b)(6), subsection (a) shall be applied with respect to such portion by
substituting `40 percent' for `20 percent'.''.
(B) Conforming amendments.--Subparagraph (B) of
section 6662A(e)(2) is amended--
(i) by striking ``section 6662(h)'' and
inserting ``subsection (h) or (i) of section
6662'', and
(ii) by striking ``gross valuation
misstatement penalty'' in the heading and
inserting ``certain increased underpayment
penalties''.
(3) Reasonable cause exception not applicable.--Subsection
(c) of section 6664 is amended--
(A) by redesignating paragraphs (2) and (3) as
paragraphs (3) and (4), respectively,
(B) by striking ``paragraph (2)'' in paragraph (4),
as so redesignated, and inserting ``paragraph (3)'',
and
(C) by inserting after paragraph (1) the following
new paragraph:
``(2) Exception.--Paragraph (1) shall not apply to any
portion of an underpayment to which this section applies by
reason of subsection (b)(6).''.
(d) Conforming Amendments.--
(1) Subsection (d) of section 731 is amended by inserting
``section 710(b)(4) (relating to distributions of partnership
property),'' before ``section 736''.
(2) Section 741 is amended by inserting ``or section 710
(relating to special rules for partners providing investment
management services to partnership)'' before the period at the
end.
(3) Paragraph (13) of section 1402(a) is amended--
(A) by striking ``other than guaranteed'' and
inserting ``other than--
``(A) guaranteed'',
(B) by striking the semi-colon at the end and
inserting ``, and'', and
(C) by adding at the end the following new
subparagraph:
``(B) any income treated as ordinary income under
section 710 received by an individual who provides
investment management services (as defined in section
710(d)(2));''.
(4) Paragraph (12) of section 211(a) of the Social Security
Act is amended--
(A) by striking ``other than guaranteed'' and
inserting ``other than--
``(A) guaranteed'',
(B) by striking the semi-colon at the end and
inserting ``, and'', and
(C) by adding at the end the following new
subparagraph:
``(B) any income treated as ordinary income under
section 710 of the Internal Revenue Code of 1986
received by an individual who provides investment
management services (as defined in section 710(d)(2) of
such Code);''.
(5) The table of sections for part I of subchapter K of
chapter 1 is amended by adding at the end the following new
item:
``Sec. 710. Special rules for partners providing investment management
services to partnership.''.
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years ending after November 1, 2007.
(2) Partnership taxable years which include effective
date.--In applying section 710(a) of the Internal Revenue Code
of 1986 (as added by this section) in the case of any
partnership taxable year which includes November 1, 2007, the
amount of the net income referred to in such section shall be
treated as being the lesser of the net income for the entire
partnership taxable year or the net income determined by only
taking into account items attributable to the portion of the
partnership taxable year which is after such date.
(3) Dispositions of partnership interests.--Section 710(b)
of the Internal Revenue Code of 1986 (as added by this section)
shall apply to dispositions and distributions after November 1,
2007.
(4) Other income and gain in connection with investment
management services.--Section 710(d) of such Code (as added by
this section) shall take effect on November 1, 2007.
(5) Publicly traded partnerships.--For purposes of applying
section 7704, the amendments made by this section shall apply
to taxable years beginning after December 31, 2009.
SEC. 612. INDEBTEDNESS INCURRED BY A PARTNERSHIP IN ACQUIRING
SECURITIES AND COMMODITIES NOT TREATED AS ACQUISITION
INDEBTEDNESS FOR ORGANIZATIONS WHICH ARE PARTNERS WITH
LIMITED LIABILITY.
(a) In General.--Subsection (c) of section 514 (relating to
acquisition indebtedness) is amended by adding at the end the following
new paragraph:
``(10) Securities and commodities acquired by partnerships
in which an organization is a partner with limited liability.--
``(A) In general.--In the case of any organization
which is a partner with limited liability in a
partnership, the term `acquisition indebtedness' does
not, for purposes of this section, include indebtedness
incurred or continued by such partnership in purchasing
or carrying any qualified security or commodity.
``(B) Qualified security or commodity.--For
purposes of this paragraph, the term `qualified
security or commodity' means any security (as defined
in section 475(c)(2) without regard to the last
sentence thereof), any commodity (as defined in section
475(e)(2)), or any option or derivative contract with
respect to such a security or commodity.
``(C) Application to tiered partnerships and other
pass-thru entities.--Rules similar to the rules of
subparagraph (A) shall apply in the case of tiered
partnerships and other pass-thru entities.
``(D) Regulations.--The Secretary may prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including
regulations to prevent the abuse of this paragraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 613. APPLICATION TO PARTNERSHIP INTERESTS AND TAX SHARING
AGREEMENTS OF RULE TREATING CERTAIN GAIN ON SALES BETWEEN
RELATED PERSONS AS ORDINARY INCOME.
(a) Partnership Interests.--Subsection (a) of section 1239 is
amended to read as follows:
``(a) Treatment of Gain as Ordinary Income.--In the case of a sale
or exchange of property, directly or indirectly, between related
persons, any gain recognized to the transferor shall be treated as
ordinary income if--
``(1) such property is, in the hands of the transferee, of
a character which is subject to the allowance for depreciation
provided in section 167, or
``(2) such property is an interest in a partnership, but
only to the extent of gain attributable to unrealized
appreciation in property which is of a character subject to the
allowance for depreciation provided in section 167.''.
(b) Tax Sharing Agreements.--Section 1239 (relating to gain from
sale of depreciable property between certain related taxpayers) is
amended by adding at the end the following new subsection:
``(f) Application to Tax Sharing Agreements.--
``(1) In general.--If there is a tax sharing agreement with
respect to any sale or exchange, the transferee and the
transferor shall be treated as related persons for purposes of
this section.
``(2) Tax sharing agreement.--For purposes of this
subsection, the term `tax sharing agreement' means any
agreement which provides for the payment to the transferor of
any amount which is determined by reference to any portion of
the tax benefit realized by the transferee with respect to the
depreciation (or amortization) of the property transferred.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to sales and
exchanges after the date of the enactment of this Act.
(2) Exception for binding contracts.--The amendment made by
subsection (b) shall not apply to any sale or exchange pursuant
to a written binding contract which includes a tax sharing
agreement and which is in effect on November 1, 2007, and not
modified thereafter in any material respect.
Subtitle C--Other Provisions
SEC. 621. DELAY IN APPLICATION OF WORLDWIDE ALLOCATION OF INTEREST.
(a) In General.--Paragraphs (5)(D) and (6) of section 864(f) are
each amended by striking ``December 31, 2008'' and inserting ``December
31, 2017''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2008.
SEC. 622. BROKER REPORTING OF CUSTOMER'S BASIS IN SECURITIES
TRANSACTIONS.
(a) In General.--
(1) Broker reporting for securities transactions.--Section
6045 (relating to returns of brokers) is amended by adding at
the end the following new subsection:
``(g) Additional Information Required in the Case of Securities
Transactions.--
``(1) In general.--If a broker is otherwise required to
make a return under subsection (a) with respect to the gross
proceeds of the sale of a covered security, the broker shall
include in such return the information described in paragraph
(2).
``(2) Additional information required.--
``(A) In general.--The information required under
paragraph (1) to be shown on a return with respect to a
covered security of a customer shall include the
customer's adjusted basis in such security and whether
any gain or loss with respect to such security is long-
term or short-term (within the meaning of section
1222).
``(B) Determination of adjusted basis.--For
purposes of subparagraph (A)--
``(i) In general.--The customer's adjusted
basis shall be determined--
``(I) in the case of any stock
(other than any stock in an open-end
fund), in accordance with the first-in
first-out method unless the customer
notifies the broker by means of making
an adequate identification of the stock
sold or transferred,
``(II) in the case of any stock in
an open-end fund acquired before
January 1, 2011, in accordance with any
acceptable method under section 1012
with respect to the account in which
such interest is held,
``(III) in the case of any stock in
an open-end fund acquired after
December 31, 2010, in accordance with
the broker's default method unless the
customer notifies the broker that he
elects another acceptable method under
section 1012 with respect to the
account in which such interest is held,
and
``(IV) in any other case, under the
method for making such determination
under section 1012.
``(ii) Exception for wash sales.--Except as
otherwise provided by the Secretary, the
customer's adjusted basis shall be determined
without regard to section 1091 (relating to
loss from wash sales of stock or securities)
unless the transactions occur in the same
account with respect to identical securities.
``(3) Covered security.--For purposes of this subsection--
``(A) In general.--The term `covered security'
means any specified security acquired on or after the
applicable date if such security--
``(i) was acquired through a transaction in
the account in which such security is held, or
``(ii) was transferred to such account from
an account in which such security was a covered
security, but only if the broker received a
statement under section 6045A with respect to
the transfer.
``(B) Specified security.--The term `specified
security' means--
``(i) any share of stock in a corporation,
``(ii) any note, bond, debenture, or other
evidence of indebtedness,
``(iii) any commodity, or contract or
derivative with respect to such commodity, if
the Secretary determines that adjusted basis
reporting is appropriate for purposes of this
subsection, and
``(iv) any other financial instrument with
respect to which the Secretary determines that
adjusted basis reporting is appropriate for
purposes of this subsection.
``(C) Applicable date.--The term `applicable date'
means--
``(i) January 1, 2009, in the case of any
specified security which is stock in a
corporation, and
``(ii) January 1, 2011, or such later date
determined by the Secretary in the case of any
other specified security.
``(4) Open-end fund.--For purposes of this subsection, the
term `open-end fund' means a regulated investment company (as
defined in section 851) which is offering for sale or has
outstanding any redeemable security of which it is the issuer
and the shares of which are not traded on an established
securities exchange.''.
(2) Broker information required with respect to options.--
Section 6045, as amended by subsection (a), is amended by
adding at the end the following new subsection:
``(h) Application to Options on Covered Securities.--
``(1) Exercise of option.--For purposes of this section, in
the case of any exercise of an option on a covered security
where the taxpayer is the grantor of the option and the option
was acquired in the same account as the covered security, the
amount received for the grant of an option on a covered
security shall be treated as an adjustment to gross proceeds or
as an adjustment to basis, as the case may be. A similar rule
shall apply in the case of the exercise of an option where the
taxpayer is not the grantor of the option.
``(2) Lapse or closing transaction.--For purposes of this
section, in the case of the lapse (or closing transaction (as
defined in section 1234(b)(2)(A))) of an option on a covered
security where the taxpayer is the grantor of the option, this
section shall apply as if the premium received for such option
were gross proceeds received on the date of the lapse or
closing transaction, and the cost (if any) of the closing
transaction shall be taken into account as adjusted basis. A
similar rule shall apply in the case of a lapse or closing
transaction where the taxpayer is not the grantor of the
option.
``(3) Prospective application.--Paragraphs (1) and (2)
shall not apply to any option which is granted or acquired
before January 1, 2011.
``(4) Covered security.--For purposes of this subsection,
the term `covered security' shall have the meaning given such
term in subsection (g)(3).''.
(3) Extension of period for statements sent to customers.--
(A) In general.--Subsection (b) of section 6045 is
amended by striking ``January 31'' and inserting
``February 15''.
(B) Statements related to substitute payments.--
Subsection (d) of section 6045 is amended--
(i) by striking ``at such time and'', and
(ii) by inserting after ``other item.'' the
following new sentence: ``The written statement
required under the preceding sentence shall be
furnished on or before February 15 of the year
following the calendar year during which such
payment was made.''.
(C) Other statements.--Subsection (b) of section
6045 is amended by adding at the end the following:
``In the case of a consolidated reporting statement (as
defined in regulations) with respect to any account
which includes the statement required by this
subsection, any statement which would otherwise be
required to be furnished on or before January 31 under
section 6042(c), 6049(c)(2)(A), or 6050N(b) with
respect to any item in such account shall instead be
required to be furnished on or before February 15 if
furnished as part of such consolidated reporting
statement.''.
(b) Determination of Basis of Certain Securities on Account by
Account Method.--Section 1012 (relating to basis of property-cost) is
amended--
(1) by striking ``The basis of property'' and inserting the
following:
``(a) In General.--The basis of property'',
(2) by striking ``The cost of real property'' and inserting
the following:
``(b) Special Rule for Apportioned Real Estate Taxes.--The cost of
real property'', and
(3) by adding at the end the following new subsection:
``(c) Determinations by Account.--
``(1) In general.--In the case of the sale, exchange, or
other disposition of a specified security on or after the
applicable date, the conventions prescribed by regulations
under this section shall be applied on an account by account
basis.
``(2) Application to open-end funds.--
``(A) In general.--Except as provided in
subparagraph (B), any stock in an open-end fund
acquired before January 1, 2009, shall be treated as a
separate account from any such stock acquired on or
after such date.
``(B) Election by open-end fund for treatment as
single account.--If an open-end fund elects (at such
time and in such form and manner as the Secretary may
prescribe) to have this subparagraph apply with respect
to one or more of its stockholders--
``(i) subparagraph (A) shall not apply with
respect to any stock in such fund held by such
stockholders, and
``(ii) all stock in such fund which is held
by such stockholders shall be treated as
covered securities described in section
6045(g)(3) without regard to the date of the
acquisition of such stock.
``(3) Definitions.--For purposes of this section, the terms
`specified security', `applicable date', and `open-end fund'
shall have the meaning given such terms in section 6045(g).''.
(c) Information by Transferors To Aid Brokers.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 is amended by inserting after section 6045 the
following new section:
``SEC. 6045A. INFORMATION REQUIRED IN CONNECTION WITH TRANSFERS OF
COVERED SECURITIES TO BROKERS.
``(a) Furnishing of Information.--Every applicable person which
transfers to a broker (as defined in section 6045(c)(1)) a security
which is a covered security (as defined in section 6045(g)(3)) in the
hands of such applicable person shall furnish to such broker a written
statement in such manner and setting forth such information as the
Secretary may by regulations prescribe for purposes of enabling such
broker to meet the requirements of section 6045(g).
``(b) Applicable Person.--For purposes of subsection (a), the term
`applicable person' means--
``(1) any broker (as defined in section 6045(c)(1)), and
``(2) any other person as provided by the Secretary in
regulations.
``(c) Time for Furnishing Statement.--Any statement required by
subsection (a) shall be furnished not later than the earlier of--
``(1) 45 days after the date of the transfer described in
subsection (a), or
``(2) January 15 of the year following the calendar year
during which such transfer occurred.''.
(2) Assessable penalties.--Paragraph (2) of section 6724(d)
(defining payee statement) is amended by redesignating
subparagraphs (I) through (CC) as subparagraphs (J) through
(DD), respectively, and by inserting after subparagraph (H) the
following new subparagraph:
``(I) section 6045A (relating to information
required in connection with transfers of covered
securities to brokers).''.
(3) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6045 the following
new item:
``Sec. 6045A. Information required in connection with transfers of
covered securities to brokers.''.
(d) Additional Issuer Information To Aid Brokers.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 of the Internal Revenue Code of 1986, as amended by
subsection (b), is amended by inserting after section 6045A the
following new section:
``SEC. 6045B. RETURNS RELATING TO ACTIONS AFFECTING BASIS OF SPECIFIED
SECURITIES.
``(a) In General.--According to the forms or regulations prescribed
by the Secretary, any issuer of a specified security shall make a
return setting forth--
``(1) a description of any organizational action which
affects the basis of such specified security of such issuer,
``(2) the quantitative effect on the basis of such
specified security resulting from such action, and
``(3) such other information as the Secretary may
prescribe.
``(b) Time for Filing Return.--Any return required by subsection
(a) shall be filed not later than the earlier of--
``(1) 45 days after the date of the action described in
subsection (a), or
``(2) January 31 of the year following the calendar year
during which such action occurred.
``(c) Statements To Be Furnished to Holders of Specified Securities
or Their Nominees.--According to the forms or regulations prescribed by
the Secretary, every person required to make a return under subsection
(a) with respect to a specified security shall furnish to the nominee
with respect to the specified security (or certificate holder if there
is no nominee) a written statement showing--
``(1) the name, address, and phone number of the
information contact of the person required to make such return,
``(2) the information required to be shown on such return
with respect to such security, and
``(3) such other information as the Secretary may
prescribe.
The written statement required under the preceding sentence shall be
furnished to the holder on or before January 31 of the year following
the calendar year during which the action described in subsection (a)
occurred.
``(d) Specified Security.--For purposes of this section, the term
`specified security' has the meaning given such term by section
6045(g)(3)(B). No return shall be required under this section with
respect to actions described in subsection (a) with respect to a
specified security which occur before the applicable date (as defined
in section 6045(g)(3)(C) with respect to such security.
``(e) Public Reporting in Lieu of Return.--The Secretary may waive
the requirements under subsections (a) and (c) with respect to a
specified security, if the person required to make the return under
subsection (a) makes publicly available, in such form and manner as the
Secretary determines necessary to carry out the purposes of this
section--
``(1) the name, address, phone number, and email address of
the information contact of such person, and
``(2) the information described in paragraphs (1), (2), and
(3) of subsection (a).''.
(2) Assessable penalties.--
(A) Subparagraph (B) of section 6724(d)(1) of such
Code (defining information return) is amended by
redesignating clauses (iv) through (xix) as clauses (v)
through (xx), respectively, and by inserting after
clause (iii) the following new clause:
``(iv) section 6045B(a) (relating to
returns relating to actions affecting basis of
specified securities),''.
(B) Paragraph (2) of section 6724(d) of such Code
(defining payee statement), as amended by subsection
(c)(2), is amended by redesignating subparagraphs (J)
through (DD) as subparagraphs (K) through (EE),
respectively, and by inserting after subparagraph (I)
the following new subparagraph:
``(J) subsections (c) and (e) of section 6045B
(relating to returns relating to actions affecting
basis of specified securities).''.
(3) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 of such Code, as
amended by subsection (b)(3), is amended by inserting after the
item relating to section 6045A the following new item:
``Sec. 6045B. Returns relating to actions affecting basis of specified
securities.''.
(e) Effective Date.--The amendments made by this section shall take
effect on January 1, 2009.
SEC. 623. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP
RETURNS.
Section 6698 is amended by adding at the end the following new
subsection:
``(e) Modifications.--In the case of any return required to be
filed after the date of the enactment of this subsection--
``(1) the dollar amount in effect under subsection (b)(1)
shall be increased by $25, and
``(2) the limitation on the number of months taken into
account under subsection (a) shall not be less than 12
months.''.
SEC. 624. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS.
(a) In General.--Part I of subchapter B of chapter 68 (relating to
assessable penalties) is amended by adding at the end the following new
section:
``SEC. 6699A. 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) $25, 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 is amended by adding at the end the
following new item:
``Sec. 6699A. 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. 625. 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 ``115 percent''
and inserting ``181 percent''.
Passed the House of Representatives November 9, 2007.
Attest:
Clerk.
110th CONGRESS
1st Session
H. R. 3996
_______________________________________________________________________
AN ACT
To amend the Internal Revenue Code of 1986 to extend certain expiring
provisions, and for other purposes.