[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3996 Placed on Calendar Senate (PCS)]






                                                       Calendar No. 487
110th CONGRESS
  1st Session
                                H. R. 3996


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 13, 2007

                    Received and read the first time

                           November 14, 2007

            Read the second time and placed on the calendar

_______________________________________________________________________

                                 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:

                                            LORRAINE C. MILLER,

                                                                 Clerk.
                                                       Calendar No. 487

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.

_______________________________________________________________________

                           November 14, 2007

            Read the second time and placed on the calendar