[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3996 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 3996

 To amend the Internal Revenue Code of 1986 to extend certain expiring 
                  provisions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 30, 2007

  Mr. Rangel introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 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.
                      TITLE II--ONE-YEAR EXTENDERS

         Subtitle A--Extenders Primarily Affecting Individuals

Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Treatment of certain dividends of regulated investment 
                            companies.
Sec. 204. Parity in the application of certain limits to mental health 
                            benefits.
Sec. 205. Qualified conservation contributions.
Sec. 206. Tax-free distributions from individual retirement plans for 
                            charitable purposes.
Sec. 207. Deduction for certain expenses of elementary and secondary 
                            school teachers.
Sec. 208. Election to include combat pay as earned income for purposes 
                            of earned income tax credit.
Sec. 209. Modification of mortgage revenue bonds for veterans.
Sec. 210. Distributions from retirement plans to individuals called to 
                            active duty.
Sec. 211. Stock in RIC for purposes of determining estates of 
                            nonresidents not citizens.
Sec. 212. Qualified investment entities.
Sec. 213. Refundable child credit.
Sec. 214. State legislators' travel expenses away from home.
          Subtitle B--Extenders Primarily Affecting Businesses

Sec. 221. Research credit.
Sec. 222. Indian employment credit.
Sec. 223. New markets tax credit.
Sec. 224. Railroad track maintenance.
Sec. 225. Fifteen-year straight-line cost recovery for qualified 
                            leasehold improvements and qualified 
                            restaurant property.
Sec. 226. Seven-year cost recovery period for motorsports racing track 
                            facility.
Sec. 227. Accelerated depreciation for business property on Indian 
                            reservation.
Sec. 228. Expensing of environmental remediation costs.
Sec. 229. Deduction allowable with respect to income attributable to 
                            domestic production activities in Puerto 
                            Rico.
Sec. 230. Modification of tax treatment of certain payments to 
                            controlling exempt organizations.
Sec. 231. Extension and modification of credit to holders of qualified 
                            zone academy bonds.
Sec. 232. Tax incentives for investment in the District of Columbia.
Sec. 233. Extension of economic development credit for American Samoa.
Sec. 234. Enhanced charitable deduction for contributions of food 
                            inventory.
Sec. 235. Enhanced charitable deduction for contributions of book 
                            inventory to public schools.
Sec. 236. Enhanced deduction for qualified computer contributions.
Sec. 237. Basis adjustment to stock of S corporations making charitable 
                            contributions of property.
Sec. 238. Extension of work opportunity tax credit for Hurricane 
                            Katrina employees.
                      Subtitle C--Other Extenders

Sec. 241. Disclosure for combined employment tax reporting.
Sec. 242. Disclosure of return information to apprise appropriate 
                            officials of terrorist activities.
Sec. 243. Disclosure upon request of information relating to terrorist 
                            activities.
Sec. 244. Disclosure of return information to carry out income 
                            contingent repayment of student loans.
Sec. 245. Authority for undercover operations.
Sec. 246. Increase in limit on cover over of rum excise tax to Puerto 
                            Rico and the Virgin Islands.
Sec. 247. Disclosure of return information for certain veterans 
                            programs.
              TITLE III--MORTGAGE FORGIVENESS DEBT RELIEF

Sec. 301. Discharges of indebtedness on principal residence excluded 
                            from gross income.
Sec. 302. Long-term extension of deduction for mortgage insurance 
                            premiums.
Sec. 303. Alternative tests for qualifying as cooperative housing 
                            corporation.
Sec. 304. Gain from sale of principal residence allocated to 
                            nonqualified use not excluded from income.
                  TITLE IV--ADMINISTRATIVE PROVISIONS

Sec. 401. Repeal of authority to enter into private debt collection 
                            contracts.
Sec. 402. Delay of application of withholding requirement on certain 
                            governmental payments for goods and 
                            services.
Sec. 403. Clarification of entitlement of Virgin Islands residents to 
                            protections of limitations on assessment 
                            and collection of tax.
Sec. 404. Revision of tax rules on expatriation.
Sec. 405. Repeal of suspension of certain penalties and interest.
Sec. 406. Increase in information return penalties.
Sec. 407. Unused merchandise drawback.

                          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.

                      TITLE II--ONE-YEAR EXTENDERS

         Subtitle A--Extenders Primarily Affecting Individuals

SEC. 201. 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. 202. 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. 203. 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. 204. 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. 205. 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. 206. 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. 207. 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. 208. 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. 209. 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. 210. 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. 211. 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. 212. 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. 213. 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. 214. 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. 221. 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. 222. 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. 223. 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. 224. 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. 225. 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. 226. 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. 227. 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. 228. 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. 229. 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. 230. 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. 231. 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. 232. 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. 233. 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. 234. 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. 235. 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. 236. 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. 237. 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. 238. 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. 241. 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. 242. 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. 243. 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. 244. 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. 245. 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. 246. 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. 247. 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 III--MORTGAGE FORGIVENESS DEBT RELIEF

SEC. 301. 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. 302. 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. 303. 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. 304. 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 IV--ADMINISTRATIVE PROVISIONS

SEC. 401. 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. 402. 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. 403. 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. 404. 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. 405. 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. 406. INCREASE IN INFORMATION RETURN PENALTIES.

    (a) Failure To File Correct Information Returns.--
            (1) In general.--Subsections (a)(1), (b)(1)(A), and 
        (b)(2)(A) of section 6721 are each amended by striking ``$50'' 
        and inserting ``$100''.
            (2) Aggregate annual limitation.--Subsections (a)(1), 
        (d)(1)(A), and (e)(3)(A) of section 6721 are each amended by 
        striking ``$250,000'' and inserting ``$600,000''.
    (b) Reduction Where Correction Within 30 Days.--
            (1) In general.--Subparagraph (A) of section 6721(b)(1) is 
        amended by striking ``$15'' and inserting ``$25''.
            (2) Aggregate annual limitation.--Subsections (b)(1)(B) and 
        (d)(1)(B) of section 6721 are each amended by striking 
        ``$75,000'' and inserting ``$200,000''.
    (c) Reduction Where Correction on or Before August 1.--
            (1) In general.--Subparagraph (A) of section 6721(b)(2) is 
        amended by striking ``$30'' and inserting ``$60''.
            (2) Aggregate annual limitation.--Subsections (b)(2)(B) and 
        (d)(1)(C) of section 6721 are each amended by striking 
        ``$150,000'' and inserting ``$400,000''.
    (d) Aggregate Annual Limitations for Persons With Gross Receipts of 
Not More Than $5,000,000.--Paragraph (1) of section 6721(d) is 
amended--
            (1) by striking ``$100,000'' in subparagraph (A) and 
        inserting ``$250,000'',
            (2) by striking ``$25,000'' in subparagraph (B) and 
        inserting ``$75,000'', and
            (3) by striking ``$50,000'' in subparagraph (C) and 
        inserting ``$150,000''.
    (e) Penalty in Case of Intentional Disregard.--Paragraph (2) of 
section 6721(e) is amended by striking ``$100'' and inserting ``$250''.
    (f) Failure To Furnish Correct Payee Statements.--
            (1) In general.--Subsection (a) of section 6722 is amended 
        by striking ``$50'' and inserting ``$100''.
            (2) Aggregate annual limitation.--Subsections (a) and 
        (c)(2)(A) of section 6722 are each amended by striking 
        ``$100,000'' and inserting ``$600,000''.
            (3) Penalty in case of intentional disregard.--Paragraph 
        (1) of section 6722(c) is amended by striking ``$100'' and 
        inserting ``$250''.
    (g) Failure To Comply With Other Information Reporting 
Requirements.--Section 6723 is amended--
            (1) by striking ``$50'' and inserting ``$100'', and
            (2) by striking ``$100,000'' and inserting ``$600,000''.
    (h) Effective Date.--The amendments made by this section shall 
apply with respect to information returns required to be filed on or 
after January 1, 2008.

SEC. 407. 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 
shall be deemed to be commercially interchangeable.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.
                                 <all>