[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3997 Engrossed in House (EH)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
110th CONGRESS
  1st Session
                                H. R. 3997

_______________________________________________________________________

                                 AN ACT


 
    To amend the Internal Revenue Code of 1986 to provide earnings 
    assistance and tax relief to members of the uniformed services, 
   volunteer firefighters, and Peace Corps volunteers, 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 ``Heroes Earnings 
Assistance and Relief Tax 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--BENEFITS FOR MILITARY AND VOLUNTEER FIREFIGHTERS

Sec. 101. Election to include combat pay as earned income for purposes 
                            of earned income tax credit.
Sec. 102. Modification of mortgage revenue bonds for veterans.
Sec. 103. Survivor and disability payments with respect to qualified 
                            military service.
Sec. 104. Treatment of differential military pay as wages.
Sec. 105. Exclusion from income for benefits provided to volunteer 
                            firefighters and emergency medical 
                            responders.
Sec. 106. Special period of limitation when uniformed services retired 
                            pay is reduced as a result of award of 
                            disability compensation.
Sec. 107. Distributions from retirement plans to individuals called to 
                            active duty.
Sec. 108. Disclosure of return information relating to veterans 
                            programs made permanent.
Sec. 109. Contributions of military death gratuities to Roth IRAs and 
                            Education Savings Accounts.
Sec. 110. Suspension of 5-year period during service with the Peace 
                            Corps.
         TITLE II--IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME

Sec. 201. Treatment of uniformed service cash remuneration as earned 
                            income.
Sec. 202. State annuities for certain veterans to be disregarded in 
                            determining supplemental security income 
                            benefits.
Sec. 203. Exclusion of AmeriCorps benefits for purposes of determining 
                            supplemental security income eligibility 
                            and benefit amounts.
Sec. 204. Effective date.
                     TITLE III--REVENUE PROVISIONS

Sec. 301. Modification of penalty for failure to file partnership 
                            returns.
Sec. 302. Penalty for failure to file S corporation returns.
Sec. 303. Increase in information return penalties.
Sec. 304. Increase in minimum penalty on failure to file a return of 
                            tax.

       TITLE I--BENEFITS FOR MILITARY AND VOLUNTEER FIREFIGHTERS

SEC. 101. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR PURPOSES 
              OF EARNED INCOME TAX CREDIT.

    (a) In General.--Clause (vi) of section 32(c)(2)(B) (defining 
earned income) is amended to read as follows:
                            ``(vi) a taxpayer may elect to treat 
                        amounts excluded from gross income by reason of 
                        section 112 as earned income.''.
    (b) Sunset Not Applicable.--Section 105 of the Working Families Tax 
Relief Act of 2004 (relating to application of EGTRRA sunset to this 
title) shall not apply to section 104(b) of such Act.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after December 31, 2007.

SEC. 102. 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 ``and before January 1, 2008''.
    (b) Increase in Bond Limitation for Alaska, Oregon, and 
Wisconsin.--Clause (ii) of section 143(l)(3)(B) (relating to State 
veterans limit) is amended by striking ``$25,000,000'' each place it 
appears and inserting ``$100,000,000''.
    (c) Definition of Qualified Veteran.--Paragraph (4) of section 
143(l) (defining qualified veteran) is amended to read as follows:
            ``(4) Qualified veteran.--For purposes of this subsection, 
        the term `qualified veteran' means any veteran who--
                    ``(A) served on active duty, and
                    ``(B) applied for the financing before the date 25 
                years after the last date on which such veteran left 
                active service.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2007.

SEC. 103. SURVIVOR AND DISABILITY PAYMENTS WITH RESPECT TO QUALIFIED 
              MILITARY SERVICE.

    (a) Plan Qualification Requirement for Death Benefits Under USERRA-
Qualified Active Military Service.--Subsection (a) of section 401 
(relating to requirements for qualification) is amended by inserting 
after paragraph (36) the following new paragraph:
            ``(37) Death benefits under userra-qualified active 
        military service.--A trust shall not constitute a qualified 
        trust unless the plan provides that, in the case of a 
        participant who dies while performing qualified military 
        service (as defined in section 414(u)), the survivors of the 
        participant are entitled to any additional benefits (other than 
        benefit accruals relating to the period of qualified military 
        service) provided under the plan had the participant resumed 
        and then terminated employment on account of death.''.
    (b) Treatment in the Case of Death or Disability Resulting From 
Active Military Service for Benefit Accrual Purposes.--Subsection (u) 
of section 414 (relating to special rules relating to veterans' 
reemployment rights under USERRA) is amended by redesignating 
paragraphs (9) and (10) as paragraphs (10) and (11), respectively, and 
by inserting after paragraph (8) the following new paragraph:
            ``(9) Treatment in the case of death or disability 
        resulting from active military service.--
                    ``(A) In general.--For benefit accrual purposes, an 
                employer sponsoring a retirement plan may treat an 
                individual who dies or becomes disabled (as defined 
                under the terms of the plan) while performing qualified 
                military service with respect to the employer 
                maintaining the plan as if the individual has resumed 
                employment in accordance with the individual's 
                reemployment rights under chapter 43 of title 38, 
                United States Code, on the day preceding death or 
                disability (as the case may be) and terminated 
                employment on the actual date of death or disability. 
                In the case of any such treatment, and subject to 
                subparagraphs (B) and (C), any full or partial 
                compliance by such plan with respect to the benefit 
                accrual requirements of paragraph (8) with respect to 
                such individual shall be treated for purposes of 
                paragraph (1) as if such compliance were required under 
                such chapter 43.
                    ``(B) Nondiscrimination requirement.--Subparagraph 
                (A) shall apply only if all individuals performing 
                qualified military service with respect to the employer 
                maintaining the plan (as determined under subsections 
                (b), (c), (m), and (o)) who die or became disabled as a 
                result of performing qualified military service prior 
                to reemployment by the employer are credited with 
                service and benefits on reasonably equivalent terms.
                    ``(C) Determination of benefits.--The amount of 
                employee contributions and the amount of elective 
                deferrals of an individual treated as reemployed under 
                subparagraph (A) for purposes of applying paragraph 
                (8)(C) shall be determined on the basis of the 
                individual's average actual employee contributions or 
                elective deferrals for the lesser of--
                            ``(i) the 12-month period of service with 
                        the employer immediately prior to qualified 
                        military service, or
                            ``(ii) if service with the employer is less 
                        than such 12-month period, the actual length of 
                        continuous service with the employer.''.
    (c) Conforming Amendments.--
            (1) Section 404(a)(2) is amended by striking ``and (31)'' 
        and inserting ``(31), and (37)''.
            (2) Section 403(b) is amended by adding at the end the 
        following new paragraph:
            ``(14) Death benefits under userra-qualified active 
        military service.--This subsection shall not apply to an 
        annuity contract unless such contract meets the requirements of 
        section 401(a)(37).''.
            (3) Section 457(g) is amended by adding at the end the 
        following new paragraph:
            ``(4) Death benefits under userra-qualified active military 
        service.--A plan described in paragraph (1) shall not be 
        treated as an eligible deferred compensation plan unless such 
        plan meets the requirements of section 401(a)(37).''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to deaths and disabilities occurring on or 
        after January 1, 2007.
            (2) Provisions relating to plan amendments.--
                    (A) In general.--If this subparagraph applies to 
                any plan or contract amendment, such plan or contract 
                shall be treated as being operated in accordance with 
                the terms of the plan during the period described in 
                subparagraph (B)(iii).
                    (B) Amendments to which subparagraph (A) applies.--
                            (i) In general.--Subparagraph (A) shall 
                        apply to any amendment to any plan or annuity 
                        contract which is made--
                                    (I) pursuant to the amendments made 
                                by subsection (a) or pursuant to any 
                                regulation issued by the Secretary of 
                                the Treasury under subsection (a), and
                                    (II) on or before the last day of 
                                the first plan year beginning on or 
                                after January 1, 2009.
                        In the case of a governmental plan (as defined 
                        in section 414(d) of the Internal Revenue Code 
                        of 1986), this clause shall be applied by 
                        substituting ``2011'' for ``2009'' in subclause 
                        (II).
                            (ii) Conditions.--This paragraph shall not 
                        apply to any amendment unless--
                                    (I) the plan or contract is 
                                operated as if such plan or contract 
                                amendment were in effect for the period 
                                described in clause (iii), and
                                    (II) such plan or contract 
                                amendment applies retroactively for 
                                such period.
                            (iii) Period described.--The period 
                        described in this clause is the period--
                                    (I) beginning on the effective date 
                                specified by the plan, and
                                    (II) ending on the date described 
                                in clause (i)(II) (or, if earlier, the 
                                date the plan or contract amendment is 
                                adopted).

SEC. 104. TREATMENT OF DIFFERENTIAL MILITARY PAY AS WAGES.

    (a) Income Tax Withholding on Differential Wage Payments.--
            (1) In general.--Section 3401 (relating to definitions) is 
        amended by adding at the end the following new subsection:
    ``(h) Differential Wage Payments to Active Duty Members of the 
Uniformed Services.--
            ``(1) In general.--For purposes of subsection (a), any 
        differential wage payment shall be treated as a payment of 
        wages by the employer to the employee.
            ``(2) Differential wage payment.--For purposes of paragraph 
        (1), the term `differential wage payment' means any payment 
        which--
                    ``(A) is made by an employer to an individual with 
                respect to any period during which the individual is 
                performing service in the uniformed services (as 
                defined in chapter 43 of title 38, United States Code) 
                while on active duty for a period of more than 30 days, 
                and
                    ``(B) represents all or a portion of the wages the 
                individual would have received from the employer if the 
                individual were performing service for the employer.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to remuneration paid after December 31, 2007.
    (b) Treatment of Differential Wage Payments for Retirement Plan 
Purposes.--
            (1) Pension plans.--
                    (A) In general.--Section 414(u) (relating to 
                special rules relating to veterans' reemployment rights 
                under USERRA), as amended by section 103(b), is amended 
                by adding at the end the following new paragraph:
            ``(12) Treatment of differential wage payments.--
                    ``(A) In general.--Except as provided in this 
                paragraph, for purposes of applying this title to a 
                retirement plan to which this subsection applies--
                            ``(i) an individual receiving a 
                        differential wage payment shall be treated as 
                        an employee of the employer making the payment,
                            ``(ii) the differential wage payment shall 
                        be treated as compensation, and
                            ``(iii) the plan shall not be treated as 
                        failing to meet the requirements of any 
                        provision described in paragraph (1)(C) by 
                        reason of any contribution or benefit which is 
                        based on the differential wage payment.
                    ``(B) Special rule for distributions.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A)(i), for purposes of section 
                        401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii), 
                        403(b)(11)(A), or 457(d)(1)(A)(ii), an 
                        individual shall be treated as having been 
                        severed from employment during any period the 
                        individual is performing service in the 
                        uniformed services described in section 
                        3401(h)(2)(A).
                            ``(ii) Limitation.--If an individual elects 
                        to receive a distribution by reason of clause 
                        (i), the plan shall provide that the individual 
                        may not make an elective deferral or employee 
                        contribution during the 6-month period 
                        beginning on the date of the distribution.
                    ``(C) Nondiscrimination requirement.--Subparagraph 
                (A)(iii) shall apply only if all employees of an 
                employer (as determined under subsections (b), (c), 
                (m), and (o)) performing service in the uniformed 
                services described in section 3401(h)(2)(A) are 
                entitled to receive differential wage payments on 
                reasonably equivalent terms and, if eligible to 
                participate in a retirement plan maintained by the 
                employer, to make contributions based on the payments 
                on reasonably equivalent terms. For purposes of 
                applying this subparagraph, the provisions of 
                paragraphs (3), (4), and (5) of section 410(b) shall 
                apply.
                    ``(D) Differential wage payment.--For purposes of 
                this paragraph, the term `differential wage payment' 
                has the meaning given such term by section 
                3401(h)(2).''.
                    (B) Conforming amendment.--The heading for section 
                414(u) is amended by inserting ``and to Differential 
                Wage Payments to Members on Active Duty'' after 
                ``USERRA''.
            (2) Differential wage payments treated as compensation for 
        individual retirement plans.--Section 219(f)(1) (defining 
        compensation) is amended by adding at the end the following new 
        sentence: ``The term compensation includes any differential 
        wage payment (as defined in section 3401(h)(2)).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2007.
    (c) Provisions Relating to Plan Amendments.--
            (1) In general.--If this subsection applies to any plan or 
        annuity contract amendment, such plan or contract shall be 
        treated as being operated in accordance with the terms of the 
        plan or contract during the period described in paragraph 
        (2)(B)(i).
            (2) Amendments to which section applies.--
                    (A) In general.--This subsection shall apply to any 
                amendment to any plan or annuity contract which is 
                made--
                            (i) pursuant to any amendment made by 
                        subsection (b)(1), and
                            (ii) on or before the last day of the first 
                        plan year beginning on or after January 1, 
                        2009.
                In the case of a governmental plan (as defined in 
                section 414(d) of the Internal Revenue Code of 1986), 
                this subparagraph shall be applied by substituting 
                ``2011'' for ``2009'' in clause (ii).
                    (B) Conditions.--This subsection shall not apply to 
                any plan or annuity contract amendment unless--
                            (i) during the period beginning on the date 
                        the amendment described in subparagraph (A)(i) 
                        takes effect and ending on the date described 
                        in subparagraph (A)(ii) (or, if earlier, the 
                        date the plan or contract amendment is 
                        adopted), the plan or contract is operated as 
                        if such plan or contract amendment were in 
                        effect, and
                            (ii) such plan or contract amendment 
                        applies retroactively for such period.

SEC. 105. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER 
              FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.

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

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

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

``Sec. 139B. Benefits provided to volunteer firefighters and emergency 
                            medical responders.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 106. SPECIAL PERIOD OF LIMITATION WHEN UNIFORMED SERVICES RETIRED 
              PAY IS REDUCED AS A RESULT OF AWARD OF DISABILITY 
              COMPENSATION.

    (a) In General.--Subsection (d) of section 6511 (relating to 
special rules applicable to income taxes) is amended by adding at the 
end the following new paragraph:
            ``(8) Special rules when uniformed services retired pay is 
        reduced as a result of award of disability compensation.--
                    ``(A) Period of limitation on filing claim.--If the 
                claim for credit or refund relates to an overpayment of 
                tax imposed by subtitle A on account of--
                            ``(i) the reduction of uniformed services 
                        retired pay computed under section 1406 or 1407 
                        of title 10, United States Code, or
                            ``(ii) the waiver of such pay under section 
                        5305 of title 38 of such Code,
                as a result of an award of compensation under title 38 
                of such Code pursuant to a determination by the 
                Secretary of Veterans Affairs, the 3-year period of 
                limitation prescribed in subsection (a) shall be 
                extended, for purposes of permitting a credit or refund 
                based upon the amount of such reduction or waiver, 
                until the end of the 1-year period beginning on the 
                date of such determination.
                    ``(B) Limitation to 5 taxable years.--Subparagraph 
                (A) shall not apply with respect to any taxable year 
                which began more than 5 years before the date of such 
                determination.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to claims for credit or refund filed after the date of the 
enactment of this Act.
    (c) Transition Rules.--In the case of a determination described in 
paragraph (8) of section 6511(d) of the Internal Revenue Code of 1986 
(as added by this section) which is made by the Secretary of Veterans 
Affairs after December 31, 2000, and before the date of the enactment 
of this Act, such paragraph--
            (1) shall not apply with respect to any taxable year which 
        began before January 1, 2001, and
            (2) shall be applied by substituting for ``the date of such 
        determination'' in subparagraph (A) thereof.

SEC. 107. 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 ``, and before December 31, 2007''.
    (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. 108. DISCLOSURE OF RETURN INFORMATION RELATING TO VETERANS 
              PROGRAMS MADE PERMANENT.

    (a) In General.--Subparagraph (D) of section 6103(l)(7) (relating 
to disclosure of return information to Federal, State, and local 
agencies administering certain programs under the Social Security Act, 
the Food Stamp Act of 1977, or title 38, United States Code or certain 
housing assistance programs) is amended by striking the last sentence.
    (b) Effective Date.--The amendments made by this section shall 
apply to requests made after September 30, 2008.

SEC. 109. CONTRIBUTIONS OF MILITARY DEATH GRATUITIES TO ROTH IRAS AND 
              EDUCATION SAVINGS ACCOUNTS.

    (a) Provision in Effect Before Pension Protection Act.--Subsection 
(e) of section 408A (relating to qualified rollover contribution), as 
in effect before the amendments made by section 824 of the Pension 
Protection Act of 2006, is amended to read as follows:
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified rollover 
        contribution' means a rollover contribution to a Roth IRA from 
        another such account, or from an individual retirement plan, 
        but only if such rollover contribution meets the requirements 
        of section 408(d)(3). Such term includes a rollover 
        contribution described in section 402A(c)(3)(A). For purposes 
        of section 408(d)(3)(B), there shall be disregarded any 
        qualified rollover contribution from an individual retirement 
        plan (other than a Roth IRA) to a Roth IRA.
            ``(2) Military death gratuity.--
                    ``(A) In general.--The term `qualified rollover 
                contribution' includes a contribution to a Roth IRA 
                maintained for the benefit of an individual made before 
                the end of the 1-year period beginning on the date on 
                which such individual receives an amount under section 
                1477 of title 10, United States Code, or section 1967 
                of title 38 of such Code, with respect to a person, to 
                the extent that such contribution does not exceed--
                            ``(i) the sum of the amounts received 
                        during such period by such individual under 
                        such sections with respect to such person, 
                        reduced by
                            ``(ii) the amounts so received which were 
                        contributed to a Coverdell education savings 
                        account under section 530(d)(9).
                    ``(B) Annual limit on number of rollovers not to 
                apply.--Section 408(d)(3)(B) shall not apply with 
                respect to amounts treated as a rollover by 
                subparagraph (A).
                    ``(C) Application of section 72.--For purposes of 
                applying section 72 in the case of a distribution which 
                is not a qualified distribution, the amount treated as 
                a rollover by reason of subparagraph (A) shall be 
                treated as investment in the contract.''.
    (b) Provision in Effect After Pension Protection Act.--Subsection 
(e) of section 408A, as in effect after the amendments made by section 
824 of the Pension Protection Act of 2006, is amended to read as 
follows:
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified rollover 
        contribution' means a rollover contribution--
                    ``(A) to a Roth IRA from another such account,
                    ``(B) from an eligible retirement plan, but only 
                if--
                            ``(i) in the case of an individual 
                        retirement plan, such rollover contribution 
                        meets the requirements of section 408(d)(3), 
                        and
                            ``(ii) in the case of any eligible 
                        retirement plan (as defined in section 
                        402(c)(8)(B) other than clauses (i) and (ii) 
                        thereof), such rollover contribution meets the 
                        requirements of section 402(c), 403(b)(8), or 
                        457(e)(16), as applicable.
                For purposes of section 408(d)(3)(B), there shall be 
                disregarded any qualified rollover contribution from an 
                individual retirement plan (other than a Roth IRA) to a 
                Roth IRA.
            ``(2) Military death gratuity.--
                    ``(A) In general.--The term `qualified rollover 
                contribution' includes a contribution to a Roth IRA 
                maintained for the benefit of an individual made before 
                the end of the 1-year period beginning on the date on 
                which such individual receives an amount under section 
                1477 of title 10, United States Code, or section 1967 
                of title 38 of such Code, with respect to a person, to 
                the extent that such contribution does not exceed--
                            ``(i) the sum of the amounts received 
                        during such period by such individual under 
                        such sections with respect to such person, 
                        reduced by
                            ``(ii) the amounts so received which were 
                        contributed to a Coverdell education savings 
                        account under section 530(d)(9).
                    ``(B) Annual limit on number of rollovers not to 
                apply.--Section 408(d)(3)(B) shall not apply with 
                respect to amounts treated as a rollover by the 
                subparagraph (A).
                    ``(C) Application of section 72.--For purposes of 
                applying section 72 in the case of a distribution which 
                is not a qualified distribution, the amount treated as 
                a rollover by reason of subparagraph (A) shall be 
                treated as investment in the contract.''.
    (c) Education Savings Accounts.--Subsection (d) of section 530 is 
amended by adding at the end the following new paragraph:
            ``(9) Military death gratuity.--
                    ``(A) In general.--For purposes of this section, 
                the term `rollover contribution' includes a 
                contribution to a Coverdell education savings account 
                made before the end of the 1-year period beginning on 
                the date on which the contributor receives an amount 
                under section 1477 of title 10, United States Code, or 
                section 1967 of title 38 of such Code, with respect to 
                a person, to the extent that such contribution does not 
                exceed--
                            ``(i) the sum of the amounts received 
                        during such period by such contributor under 
                        such sections with respect to such person, 
                        reduced by
                            ``(ii) the amounts so received which were 
                        contributed to a Roth IRA under section 
                        408A(e)(2) or to another Coverdell education 
                        savings account.
                    ``(B) Annual limit on number of rollovers not to 
                apply.--The last sentence of paragraph (5) shall not 
                apply with respect to amounts treated as a rollover by 
                the subparagraph (A).
                    ``(C) Application of section 72.--For purposes of 
                applying section 72 in the case of a distribution which 
                is includible in gross income under paragraph (1), the 
                amount treated as a rollover by reason of subparagraph 
                (A) shall be treated as investment in the contract.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided by paragraphs (2) and 
        (3), the amendments made by this section shall apply with 
        respect to deaths from injuries occurring on or after the date 
        of the enactment of this Act.
            (2) Application of amendments to deaths from injuries 
        occurring on or after october 7, 2001, and before enactment.--
        The amendments made by this section shall apply to any 
        contribution made pursuant to section 408A(e)(2) or 530(d)(5) 
        of the Internal Revenue Code of 1986, as amended by this Act, 
        with respect to amounts received under section 1477 of title 
        10, United States Code, or under section 1967 of title 38 of 
        such Code, for deaths from injuries occurring on or after 
        October 7, 2001, and before the date of the enactment of this 
        Act if such contribution is made not later than 1 year after 
        the date of the enactment of this Act.
            (3) Pension protection act changes.--Section 408A(e)(1) of 
        the Internal Revenue Code of 1986 (as in effect after the 
        amendments made by subsection (b)) shall apply to taxable years 
        beginning after December 31, 2007.

SEC. 110. SUSPENSION OF 5-YEAR PERIOD DURING SERVICE WITH THE PEACE 
              CORPS.

    (a) In General.--Subsection (d) of section 121 (relating to special 
rules) is amended by adding at the end the following new paragraph:
            ``(12) Peace corps.--
                    ``(A) In general.--At the election of an individual 
                with respect to a property, the running of the 5-year 
                period described in subsections (a) and (c)(1)(B) and 
                paragraph (7) of this subsection with respect to such 
                property shall be suspended during any period that such 
                individual or such individual's spouse is serving 
                outside the United States--
                            ``(i) on qualified official extended duty 
                        (as defined in paragraph (9)(C)) as an employee 
                        of the Peace Corps, or
                            ``(ii) as an enrolled volunteer or 
                        volunteer leader under section 5 or 6 (as the 
                        case may be) of the Peace Corps Act (22 U.S.C. 
                        2504, 2505).
                    ``(B) Applicable rules.--For purposes of 
                subparagraph (A), rules similar to the rules of 
                subparagraphs (B) and (D) shall apply.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2007.

         TITLE II--IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME

SEC. 201. TREATMENT OF UNIFORMED SERVICE CASH REMUNERATION AS EARNED 
              INCOME.

    (a) In General.--Section 1612(a)(1)(A) of the Social Security Act 
(42 U.S.C. 1382a(a)(1)(A)) is amended by inserting ``(and, in the case 
of cash remuneration paid for service as a member of a uniformed 
service (other than payments described in paragraph (2)(H) of this 
subsection or subsection (b)(20)), without regard to the limitations 
contained in section 209(d))'' before the semicolon.
    (b) Certain Housing Payments Treated as In-Kind Support and 
Maintenance.--Section 1612(a)(2) of such Act (42 U.S.C. 1382a(a)(2)) is 
amended--
            (1) by striking ``and'' at the end of subparagraph (F);
            (2) by striking the period at the end of subparagraph (G) 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(H) payments to or on behalf of a member of a 
                uniformed service for housing of the member (and his or 
                her dependents, if any) on a facility of a uniformed 
                service, including payments provided under section 403 
                of title 37, United States Code, for housing that is 
                acquired or constructed under subchapter IV of chapter 
                169 of title 10 of such Code, or any related provision 
                of law, and any such payments shall be treated as 
                support and maintenance in kind subject to subparagraph 
                (A) of this paragraph.''.

SEC. 202. STATE ANNUITIES FOR CERTAIN VETERANS TO BE DISREGARDED IN 
              DETERMINING SUPPLEMENTAL SECURITY INCOME BENEFITS.

    (a) Income Disregard.--Section 1612(b) of the Social Security Act 
(42 U.S.C. 1382a(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (22);
            (2) by striking the period at the end of paragraph (23) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(24) any annuity paid by a State to the individual (or 
        such spouse) on the basis of the individual's being a veteran 
        (as defined in section 101 of title 38, United States Code), 
        and blind, disabled, or aged.''.
    (b) Resource Disregard.--Section 1613(a) of such Act (42 U.S.C. 
1382b(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (14);
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (15) the following:
            ``(16) for the month of receipt and every month thereafter, 
        any annuity paid by a State to the individual (or such spouse) 
        on the basis of the individual's being a veteran (as defined in 
        section 101 of title 38, United States Code), and blind, 
        disabled, or aged.''.

SEC. 203. EXCLUSION OF AMERICORPS BENEFITS FOR PURPOSES OF DETERMINING 
              SUPPLEMENTAL SECURITY INCOME ELIGIBILITY AND BENEFIT 
              AMOUNTS.

    Section 1612(b) of the Social Security Act (42 U.S.C. 1382a(b)), as 
amended by section 202(a) of this Act, is amended--
            (1) in paragraph (23), by striking ``and'' at the end;
            (2) in paragraph (24), by striking the period and inserting 
        ``; and''; and
            (3) by adding at the end the following:
            ``(25) any benefit (whether cash or in-kind) conferred upon 
        (or paid on behalf of) a  participant in an AmeriCorps position 
        approved by the Corporation for  National and Community Service 
        under section 123 of the National and Community Service Act of 
        1990 (42 U.S.C. 12573).''.

SEC. 204. EFFECTIVE DATE.

    The amendments made by this title shall be effective with respect 
to benefits payable for months beginning after 60 days after the date 
of the enactment of this Act.

                     TITLE III--REVENUE PROVISIONS

SEC. 301. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP 
              RETURNS.

    (a) Extension of Time Limitation.--Subsection (a) of section 6698 
(relating to general rule) is amended by striking ``5 months'' and 
inserting ``12 months''.
    (b) Increase in Penalty Amount.--Paragraph (1) of section 6698(b) 
is amended by striking ``$50'' and inserting ``$100''.
    (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. 302. 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. 6699. FAILURE TO FILE S CORPORATION RETURN.

    ``(a) General Rule.--In addition to the penalty imposed by section 
7203 (relating to willful failure to file return, supply information, 
or pay tax), if any S corporation required to file a return under 
section 6037 for any taxable year--
            ``(1) fails to file such return at the time prescribed 
        therefor (determined with regard to any extension of time for 
        filing), or
            ``(2) files a return which fails to show the information 
        required under section 6037,
such S corporation shall be liable for a penalty determined under 
subsection (b) for each month (or fraction thereof) during which such 
failure continues (but not to exceed 12 months), unless it is shown 
that such failure is due to reasonable cause.
    ``(b) Amount Per Month.--For purposes of subsection (a), the amount 
determined under this subsection for any month is the product of--
            ``(1) $100, 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. 6699. Failure to file S corporation return.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed after the date of the enactment 
of this Act.

SEC. 303. INCREASE IN INFORMATION RETURN PENALTIES.

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

SEC. 304. INCREASE IN MINIMUM PENALTY ON FAILURE TO FILE A RETURN OF 
              TAX.

    (a) In General.--Subsection (a) of section 6651 is amended by 
striking ``$100'' in the last sentence and inserting ``$225''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns the due date for the filing of which (including extensions) 
is after December 31, 2007.

            Passed the House of Representatives November 6, 2007.

            Attest:

                                                                 Clerk.
110th CONGRESS

  1st Session

                               H. R. 3997

_______________________________________________________________________

                                 AN ACT

    To amend the Internal Revenue Code of 1986 to provide earnings 
    assistance and tax relief to members of the uniformed services, 
   volunteer firefighters, and Peace Corps volunteers, and for other 
                               purposes.