[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2345 Placed on Calendar Senate (PCS)]






                                                       Calendar No. 482
110th CONGRESS
  1st Session
                                S. 2345

                          [Report No. 110-228]

To amend the Internal Revenue Code of 1986 and to extend the financing 
     for the Airport and Airway Trust Fund, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 13, 2007

   Mr. Baucus, from the Committee on Finance, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 and to extend the financing 
     for the Airport and Airway Trust Fund, 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 ``American 
Infrastructure Investment and Improvement Act of 2007''.
    (b) Amendment of 1986 Code.--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--AIRPORT AND AIRWAY TRUST FUND PROVISIONS AND RELATED TAXES

Sec. 101. Extension of taxes funding Airport and Airway Trust Fund.
Sec. 102. Extension of Airport and Airway Trust Fund expenditure 
                            authority.
Sec. 103. Modification of excise tax on kerosene used in aviation .
Sec. 104. Increase in tax on use of international air facilities.
Sec. 105. Air Traffic Control System Modernization Account.
Sec. 106. Treatment of fractional aircraft ownership programs.
Sec. 107. Termination of exemption for small aircraft on nonestablished 
                            lines.
Sec. 108. Transparency in passenger tax disclosures.
Sec. 109. Required funding of new accruals under air carrier pension 
                            plans.
           TITLE II--INCREASED FUNDING FOR HIGHWAY TRUST FUND

Sec. 201. Replenish emergency spending from Highway Trust Fund.
Sec. 202. Suspension of transfers from highway trust fund for certain 
                            repayments and credit.
Sec. 203. Taxation of taxable fuels in foreign trade zones.
Sec. 204. Clarification of penalty for sale of fuel failing to meet EPA 
                            regulations.
Sec. 205. Treatment of qualified alcohol fuel mixtures and qualified 
                            biodiesel fuel mixtures as taxable fuels.
Sec. 206. Calculation of volume of alcohol for fuel credits.
Sec. 207. Bulk transfer exception not to apply to finished gasoline.
Sec. 208. Increase and extension of Oil Spill Liability Trust Fund tax.
Sec. 209. Application of rules treating inverted corporations as 
                            domestic corporations to certain 
                            transactions occurring after March 20, 
                            2002.
Sec. 210. Denial of deduction for punitive damages.
Sec. 211. Fuel technical corrections.
Sec. 212. Motor fuel tax enforcement advisory commission.
Sec. 213. Highway Trust Fund conforming expenditure amendment.
    TITLE III--ADDITIONAL INFRASTRUCTURE MODIFICATIONS AND REVENUE 
                               PROVISIONS

Sec. 301. Restructuring of New York Liberty Zone tax credits.
Sec. 302. Participants in government section 457 plans allowed to treat 
                            elective deferrals as Roth contributions.
Sec. 303. Increased information return penalties.
Sec. 304. Exemption of certain commercial cargo from harbor maintenance 
                            tax.
Sec. 305. Credit to holders of qualified rail infrastructure bonds.
Sec. 306. Repeal of suspension of certain penalties and interest.
Sec. 307. Denial of deduction for certain fines, penalties, and other 
                            amounts.
Sec. 308. Revision of tax rules on expatriation.

  TITLE I--AIRPORT AND AIRWAY TRUST FUND PROVISIONS AND RELATED TAXES

SEC. 101. EXTENSION OF TAXES FUNDING AIRPORT AND AIRWAY TRUST FUND.

    (a) Fuel Taxes.--Subparagraph (B) of section 4081(d)(2) is amended 
by striking ``September 30, 2007'' and inserting ``September 30, 
2011''.
    (b) Ticket Taxes.--
            (1) Persons.--Clause (ii) of section 4261(j)(1)(A) is 
        amended by striking ``September 30, 2007'' and inserting 
        ``September 30, 2011''.
            (2) Property.--Clause (ii) of section 4271(d)(1)(A) is 
        amended by striking ``September 30, 2007'' and inserting 
        ``September 30, 2011''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2007.

SEC. 102. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXPENDITURE 
              AUTHORITY.

    (a) In General.--Paragraph (1) of section 9502(d) is amended--
            (1) by striking ``October 1, 2007'' in the matter preceding 
        subparagraph (A) and inserting ``October 1, 2011'', and
            (2) by striking the semicolon at the end of subparagraph 
        (A) and inserting ``or the Aviation Investment and 
        Modernization Act of 2007;''.
    (b) Conforming Amendment.--Paragraph (2) of section 9502(f) is 
amended by striking ``October 1, 2007'' and inserting ``October 1, 
2011''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2007.

SEC. 103. MODIFICATION OF EXCISE TAX ON KEROSENE USED IN AVIATION .

    (a) Rate of Tax on Aviation-Grade Kerosene.--
            (1) In general.--Subparagraph (A) of section 4081(a)(2) 
        (relating to rates of tax) is amended by striking ``and'' at 
        the end of clause (ii), by striking the period at the end of 
        clause (iii) and inserting ``, and'', and by adding at the end 
        the following new clause:
                            ``(iv) in the case of aviation-grade 
                        kerosene, 35.9 cents per gallon.''.
            (2) Fuel removed directly into fuel tank of airplane used 
        in noncommercial aviation.--Subparagraph (C) of section 
        4081(a)(2) is amended to read as follows:
                    ``(C) Taxes imposed on fuel used in commercial 
                aviation.--In the case of aviation-grade kerosene which 
                is removed from any refinery or terminal directly into 
                the fuel tank of an aircraft for use in commercial 
                aviation by a person registered for such use under 
                section 4101, the rate of tax under subparagraph 
                (A)(iv) shall be 4.3 cents per gallon.''.
            (3) Exemption for aviation-grade kerosene removed into an 
        aircraft.--Subsection (e) of section 4082 is amended--
                    (A) by striking ``kerosene'' and inserting 
                ``aviation-grade kerosene'',
                    (B) by striking ``section 4081(a)(2)(A)(iii)'' and 
                inserting ``section 4081(a)(2)(A)(iv)'', and
                    (C) by striking ``Kerosene'' in the heading and 
                inserting ``Aviation-Grade Kerosene''.
            (4) Conforming amendments.--
                    (A) Clause (iii) of section 4081(a)(2)(A) is 
                amended by inserting ``other than aviation-grade 
                kerosene'' after ``kerosene''.
                    (B) The following provisions are each amended by 
                striking ``kerosene'' and inserting ``aviation-grade 
                kerosene'':
                            (i) Section 4081(a)(3)(A)(ii).
                            (ii) Section 4081(a)(3)(A)(iv).
                            (iii) Section 4081(a)(3)(D).
                    (C) Section 4081(a)(3)(D) is amended--
                            (i) by striking ``paragraph (2)(C)(i)'' in 
                        clause (i) and inserting ``paragraph (2)(C)'', 
                        and
                            (ii) by striking ``paragraph (2)(C)(ii)'' 
                        in clause (ii) and inserting ``paragraph 
                        (2)(A)(iv)''.
                    (D) Section 4081(a)(4) is amended--
                            (i) in the heading by striking ``kerosene'' 
                        and inserting ``aviation-grade kerosene'', and
                            (ii) by striking ``paragraph (2)(C)(i)'' 
                        and inserting ``paragraph (2)(C)''.
                    (E) Section 4081(d)(2) is amended by striking 
                ``(a)(2)(C)(ii)'' and inserting ``(a)(2)(A)(iv)''.
    (b) Retail Tax on Aviation Fuel.--
            (1) Exemption for previously taxed fuel.--Paragraph (2) of 
        section 4041(c) is amended by inserting ``at the rate specified 
        in subsection (a)(2)(A)(iv) thereof'' after ``section 4081''.
            (2) Rate of tax.--Paragraph (3) of section 4041(c) is 
        amended to read as follows:
            ``(3) Rate of tax.--The rate of tax imposed by this 
        subsection shall be the rate of tax in effect under section 
        4081(a)(2)(A)(iv) (4.3 cents per gallon with respect to any 
        sale or use for commercial aviation).''.
    (c) Refunds Relating to Aviation-Grade Kerosene.--
            (1) Kerosene used in commercial aviation.--Clause (ii) of 
        section 6427(l)(4)(A) is amended by striking ``specified in 
        section 4041(c) or 4081(a)(2)(A)(iii), as the case may be,'' 
        and inserting ``so imposed''.
            (2) Kerosene used in aviation.--Paragraph (4) of section 
        6427(l) is amended--
                    (A) by striking subparagraph (B) and redesignating 
                subparagraph (C) as subparagraph (B), and
                    (B) by amending subparagraph (B), as redesignated 
                by subparagraph (A), to read as follows:
                    ``(B) Payments to ultimate, registered vendor.--
                With respect to any kerosene used in aviation (other 
                than kerosene to which paragraph (6) applies), if the 
                ultimate purchaser of such kerosene waives (at such 
                time and in such form and manner as the Secretary shall 
                prescribe) the right to payment under paragraph (1) and 
                assigns such right to the ultimate vendor, then the 
                Secretary shall pay (without interest) the amount which 
                would be paid under paragraph (1) to such ultimate 
                vendor, but only if such ultimate vendor--
                            ``(i) is registered under section 4101, and
                            ``(ii) meets the requirements of 
                        subparagraph (A), (B), or (D) of section 
                        6416(a)(1).''.
            (3) Aviation-grade kerosene not used in aviation.--
        Subsection (l) of section 6427 is amended by redesignating 
        paragraph (5) as paragraph (6) and by inserting after paragraph 
        (4) the following new paragraph:
            ``(5) Refunds for aviation-grade kerosene not used in 
        aviation.--If tax has been imposed under section 4081 at the 
        rate specified in section 4081(a)(2)(A)(iv) and the fuel is 
        used other than in an aircraft, the Secretary shall pay 
        (without interest) to the ultimate purchaser of such fuel an 
        amount equal to the amount of tax imposed on such fuel reduced 
        by the amount of tax that would be imposed under section 4041 
        if no tax under section 4081 had been imposed.''.
            (4) Conforming amendments.--
                    (A) Section 4082(d)(2)(B) is amended by striking 
                ``6427(l)(5)(B)'' and inserting ``6427(l)(6)(B)''.
                    (B) Section 6427(i)(4) is amended--
                            (i) by striking ``(4)(C)'' the first two 
                        places it occurs and inserting ``(4)(B)'', and
                            (ii) by striking ``, (l)(4)(C)(ii), and'' 
                        and inserting ``and''.
                    (C) The heading of section 6427(l) is amended by 
                striking ``Diesel Fuel and Kerosene'' and inserting 
                ``Diesel Fuel, Kerosene, and Aviation Fuel''.
                    (D) Section 6427(l)(1) is amended by striking 
                ``paragraph (4)(C)(i)'' and inserting ``paragraph 
                (4)(B)''.
                    (E) Section 6427(l)(4) is amended--
                            (i) by striking ``kerosene used in 
                        aviation'' in the heading and inserting 
                        ``aviation-grade kerosene used in commercial 
                        aviation'', and
                            (ii) in subparagraph (A)--
                                    (I) by striking ``kerosene'' and 
                                inserting ``aviation-grade kerosene'',
                                    (II) by striking ``Kerosene used in 
                                commercial aviation'' in the heading 
                                and inserting ``In general''.
    (d) Transfers to the Airport and Airway Trust Fund.--
            (1) In general.--Subparagraph (C) of section 9502(b)(1) is 
        amended to read as follows:
                    ``(C) section 4081 with respect to aviation 
                gasoline and aviation-grade kerosene, and''.
            (2) Transfers on account of certain refunds.--
                    (A) In general.--Subsection (d) of section 9502 is 
                amended--
                            (i) in paragraph (2) by striking ``(other 
                        than subsection (l)(4) thereof)'', and
                            (ii) in paragraph (3) by striking ``(other 
                        than payments made by reason of paragraph (4) 
                        of section 6427(l))''.
                    (B) Conforming amendments.--
                            (i) Section 9503(b)(4) is amended by 
                        striking ``or'' at the end of subparagraph (C), 
                        by striking the period at the end of 
                        subparagraph (D) and inserting a comma, and by 
                        inserting after subparagraph (D) the following:
                    ``(E) section 4081 to the extent attributable to 
                the rate specified in clause (ii) or (iv) of section 
                4081(a)(2)(A), or
                    ``(F) section 4041(c).''.
                            (ii) Section 9503(c) is amended by striking 
                        the last paragraph (relating to transfers from 
                        the Trust Fund for certain aviation fuel 
                        taxes).
                            (iii) Section 9502(a) is amended--
                                    (I) by striking ``appropriated, 
                                credited, or paid into'' and inserting 
                                ``appropriated or credited to'', and
                                    (II) by striking ``, section 
                                9503(c)(7),''.
    (e) Effective Date.--The amendments made by this section shall 
apply to fuels removed, entered, or sold after December 31, 2007.
    (f) Floor Stocks Tax.--
            (1) Imposition of tax.--In the case of aviation fuel which 
        is held on January 1, 2008, by any person, there is hereby 
        imposed a floor stocks tax on aviation fuel equal to--
                    (A) the tax which would have been imposed before 
                such date on such fuel had the amendments made by this 
                section been in effect at all times before such date, 
                reduced by
                    (B) the sum of--
                            (i) the tax imposed before such date on 
                        such fuel under section 4081 of the Internal 
                        Revenue Code of 1986, as in effect on such 
                        date, and
                            (ii) in the case of kerosene held 
                        exclusively for such person's own use, the 
                        amount which such person would (but for this 
                        clause) reasonably expect (as of such date) to 
                        be paid as a refund under section 6427(l) of 
                        such Code with respect to such kerosene.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding aviation 
                fuel on January 1, 2008, shall be liable for such tax.
                    (B) Time and method of payment.--The tax imposed by 
                paragraph (1) shall be paid at such time and in such 
                manner as the Secretary of the Treasury shall 
                prescribe.
            (3) Transfer of floor stock tax revenues to trust funds.--
        For purposes of determining the amount transferred to the 
        Airport and Airway Trust Fund, the tax imposed by this 
        subsection shall be treated as imposed by section 
        4081(a)(2)(A)(iv) of the Internal Revenue Code of 1986.
            (4) Definitions.--For purposes of this subsection--
                    (A) Aviation fuel.--The term ``aviation fuel'' 
                means aviation-grade kerosene and aviation gasoline, as 
                such terms are used within the meaning of section 4081 
                of the Internal Revenue Code of 1986.
                    (B) Held by a person.--Aviation fuel shall be 
                considered as held by a person if title thereto has 
                passed to such person (whether or not delivery to the 
                person has been made).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
            (5) Exception for exempt uses.--The tax imposed by 
        paragraph (1) shall not apply to any aviation fuel held by any 
        person exclusively for any use to the extent a credit or refund 
        of the tax is allowable under the Internal Revenue Code of 1986 
        for such use.
            (6) Exception for certain amounts of fuel.--
                    (A) In general.--No tax shall be imposed by 
                paragraph (1) on any aviation fuel held on January 1, 
                2008, by any person if the aggregate amount of such 
                aviation fuel held by such person on such date does not 
                exceed 2,000 gallons. The preceding sentence shall 
                apply only if such person submits to the Secretary (at 
                the time and in the manner required by the Secretary) 
                such information as the Secretary shall require for 
                purposes of this subparagraph.
                    (B) Exempt fuel.--For purposes of subparagraph (A), 
                there shall not be taken into account any aviation fuel 
                held by any person which is exempt from the tax imposed 
                by paragraph (1) by reason of paragraph (6).
                    (C) Controlled groups.--For purposes of this 
                subsection--
                            (i) Corporations.--
                                    (I) In general.--All persons 
                                treated as a controlled group shall be 
                                treated as 1 person.
                                    (II) Controlled group.--The term 
                                ``controlled group'' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563 of the Internal Revenue 
                                Code of 1986; except that for such 
                                purposes the phrase ``more than 50 
                                percent'' shall be substituted for the 
                                phrase ``at least 80 percent'' each 
                                place it appears in such subsection.
                            (ii) Nonincorporated persons under common 
                        control.--Under regulations prescribed by the 
                        Secretary, principles similar to the principles 
                        of subparagraph (A) shall apply to a group of 
                        persons under common control if 1 or more of 
                        such persons is not a corporation.
            (7) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 4081 of the Internal Revenue Code of 1986 on 
        the aviation fuel involved shall, insofar as applicable and not 
        inconsistent with the provisions of this subsection, apply with 
        respect to the floor stock taxes imposed by paragraph (1) to 
        the same extent as if such taxes were imposed by such section.

SEC. 104. INCREASE IN TAX ON USE OF INTERNATIONAL AIR FACILITIES.

    (a) In General.--Section 4261(c)(1) is amended by striking 
``$12.00'' and inserting ``$16.65''.
    (b) Inflation Adjustment.--Section 4261(e)(4)(B) is amended--
            (1) by striking ``and'' at the end of clause (i),
            (2) by striking ``amounts contained in subsection (c).'' in 
        clause (ii) and inserting ``amount contained in subsection 
        (c)(3), and'', and
            (3) by adding at the end the following new clause:
                            ``(iii) 2008 in the case of the dollar 
                        amount contained in subsection (c)(1).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2008.

SEC. 105. AIR TRAFFIC CONTROL SYSTEM MODERNIZATION ACCOUNT.

    (a) In General.--Section 9502 (relating to the Airport and Airway 
Trust Fund) is amended by adding at the end the following new 
subsection:
    ``(g) Establishment of Air Traffic Control System Modernization 
Account.--
            ``(1) Creation of account.--There is established in the 
        Airport and Airway Trust Fund a separate account to be known as 
        the `Air Traffic Control System Modernization Account' 
        consisting of such amounts as may be transferred or credited to 
        the Air Traffic Control System Modernization Account as 
        provided in this subsection or section 9602(b).
            ``(2) Transfers to air traffic control system modernization 
        account.--The Secretary of the Treasury shall annually transfer 
        from the Airport and Airway Trust Fund to the Air Traffic 
        Control System Modernization Account an amount equal to 
        $400,000,000.
            ``(3) Expenditures from account.--Amounts in the Air 
        Traffic Control System Modernization Account shall be available 
        to the Administrator of the Federal Aviation Administration for 
        expenditures relating the modernization of the air traffic 
        control system (including facility and equipment account 
        expenditures) approved by the Air Traffic Control Modernization 
        Oversight Board.''.
    (b) Conforming Amendment.--Section 9502(d)(1) is amended by 
striking ``Amounts'' and inserting ``Except as provided in subsection 
(g), amounts''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 106. TREATMENT OF FRACTIONAL AIRCRAFT OWNERSHIP PROGRAMS.

    (a) Departure Tax in Lieu of Persons and Property Tax.--
            (1) Departure tax.--
                    (A) In general.--Subchapter C of chapter 33 is 
                amended by redesignating part III as part IV and by 
                inserting after part II the following new part:

                         ``PART III--DEPARTURES

``Sec. 4266. Fractional aircraft ownership programs.

``SEC. 4266. FRACTIONAL AIRCRAFT OWNERSHIP PROGRAMS.

    ``(a) In General.--There is hereby imposed a tax of $58 on each 
departure of an aircraft which is part of a fractional ownership 
aircraft program.
    ``(b) Fractional Ownership Aircraft Program.--For purposes of this 
section--
            ``(1) In general.--The term `fractional ownership aircraft 
        program' means a program under which--
                    ``(A) a single fractional ownership program manager 
                provides fractional ownership program management 
                services on behalf of the fractional owners,
                    ``(B) 2 or more airworthy aircraft are part of the 
                program,
                    ``(C) there are 1 or more fractional owners per 
                program aircraft, with at least 1 program aircraft 
                having more than 1 owner,
                    ``(D) each fractional owner possesses at least a 
                minimum fractional ownership interest in 1 or more 
                program aircraft,
                    ``(E) there exists a dry-lease exchange arrangement 
                among all of the fractional owners, and
                    ``(F) there are multi-year program agreements 
                covering the fractional ownership, fractional ownership 
                program management services, and dry-lease aircraft 
                exchange aspects of the program.
            ``(2) Minimum fractional ownership interest.--The term 
        `minimum fractional ownership interest' means, with respect to 
        each type of aircraft--
                    ``(A) a fractional ownership interest equal to or 
                greater than \1/16\ of at least 1 subsonic, fixed wing 
                or powered lift program aircraft, or
                    ``(B) a fractional ownership interest equal to or 
                greater than \1/32\ of a least 1 rotorcraft program 
                aircraft.
            ``(3) Dry-lease exchange arrangement.--A `dry-lease 
        aircraft exchange' means an agreement, documented by the 
        written program agreements, under which the program aircraft 
        are available, on an as needed basis without crew, to each 
        fractional owner.
    ``(c) Application of Taxes.--
            ``(1) In general.--The taxes imposed by this section shall 
        apply to departures during the period beginning on January 1, 
        2008, and ending on September 30, 2011.''.
                    (B) Transfer of revenues to airport and airway 
                trust fund.--Section 9502(b)(1)(B) is amended by 
                striking ``and 4271'' and inserting ``4266, and 4271''.
                    (C) Conforming amendments.--The table of parts for 
                subchapter C of chapter 33 is amended by redesignating 
                the item relating to part III as relating to part IV 
                and by inserting after the item relating to part II the 
                following new item:

``Part III. Departures.''.
            (2) Exemption from tax on transportation of persons.--
        Section 4261, as amended by section 101(b)(1), is amended by 
        redesignating subsection (j) as subsection (k) and by inserting 
        after subsection (i) the following new subsection:
    ``(j) Exemption for Aircraft in Fractional Ownership Aircraft 
Programs.--No tax shall be imposed by this section on any air 
transportation by an aircraft which is part of a fractional ownership 
aircraft program (as defined by section 4266(b)).''.
    (b) Treatment of Programs Under Fuel Taxes.--Subsection (b) of 
section 4083 is amended by adding at the end the following new 
sentence: ``Such term shall not include the use of any aircraft which 
is part of a fractional ownership aircraft program (as defined by 
section 4266(b)).''.
    (c) Effective Dates.--
            (1) Departure tax.--The amendments made by subsection (a) 
        shall apply to transportation beginning after December 31, 
        2007.
            (2) Fuel taxes.--The amendment made by subsection (b) shall 
        apply to fuel sold or used after December 31, 2007.

SEC. 107. TERMINATION OF EXEMPTION FOR SMALL AIRCRAFT ON NONESTABLISHED 
              LINES.

    (a) In General.--Section 4281 is amended to read as follows:

``SEC. 4281. SMALL AIRCRAFT OPERATED SOLELY FOR SIGHTSEEING.

    ``The taxes imposed by sections 4261 and 4271 shall not apply to 
transportation by an aircraft having a maximum certificated takeoff 
weight of 6,000 pounds or less at any time during which such aircraft 
is being operated on a flight the sole purpose of which is sightseeing. 
For purposes of the preceding sentence, the term `maximum certificated 
takeoff weight' means the maximum such weight contained in the type 
certificate or airworthiness certificate.''.
    (b) Conforming Amendment.--The item relating to section 4281 in the 
table of sections for part III of subchapter C of chapter 33 is amended 
by striking ``on nonestablished lines'' and inserting ``operated solely 
for sightseeing''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transportation beginning after December 31, 2007.

SEC. 108. TRANSPARENCY IN PASSENGER TAX DISCLOSURES.

    (a) In General.--Section 7275 (relating to penalty for offenses 
relating to certain airline tickets and advertising) is amended--
            (1) by redesignating subsection (c) as subsection (d),
            (2) by striking ``subsection (a) or (b)'' in subsection 
        (d), as so redesignated, and inserting ``subsection (a), (b), 
        or (c)'', and
            (3) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Non-Tax Charges.--
            ``(1) In general.--In the case of transportation by air for 
        which disclosure on the ticket or advertising for such 
        transportation of the amounts paid for passenger taxes is 
        required by subsection (a)(2) or (b)(1)(B), it shall be 
        unlawful for the disclosure of the amount of such taxes on such 
        ticket or advertising to include any amounts not attributable 
        to the taxes imposed by subsection (a), (b), or (c) of section 
        4261.
            ``(2) Inclusion in transportation cost.--Nothing in this 
        subsection shall prohibit the inclusion of amounts not 
        attributable to the taxes imposed by subsection (a), (b), or 
        (c) of section 4261 in the disclosure of the amount paid for 
        transportation as required by subsection (a)(1) or (b)(1)(A), 
        or in a separate disclosure of amounts not attributable to such 
        taxes.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transportation beginning after December 31, 2007.

SEC. 109. REQUIRED FUNDING OF NEW ACCRUALS UNDER AIR CARRIER PENSION 
              PLANS.

    (a) In General.--Section 402(a) of the Pension Protection Act of 
2006, as amended by section 6615(a) of the U. S. Troop Readiness, 
Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007 (Public Law 110-28), is amended--
            (1) in paragraph (2)--
                    (A) by striking ``to its first taxable year 
                beginning in 2008'',
                    (B) by striking ``for such taxable year'' and 
                inserting ``for its first plan year beginning in 
                2008'', and
                    (C) by striking ``and by using, in determining the 
                funding target for each of the 10 plan years during 
                such period, an interest rate of 8.25 percent (rather 
                than the segment rates calculated on the basis of the 
                corporate bond yield curve)'', and
            (2) by adding at the end the following new flush matter:
``If the plan sponsor of an eligible plan elects the application of 
paragraph (2), the plan sponsor may also elect, in determining the 
funding target for each of the 10 plan years during the period 
described in paragraph (2), to use an interest rate of 8.25 percent 
(rather than the segment rates calculated on the basis of the corporate 
bond yield curve). Notwithstanding the preceding sentence, in the case 
of any plan year of the eligible plan for which such 8.25 percent 
interest rate is used, the minimum required contribution under section 
303 of such Act and section 430 of such Code shall in no event be less 
than the target normal cost of the plan for such plan year (as 
determined under section 303(b) of such Act and section 430(b) of such 
Code). A plan sponsor may revoke the election to use the 8.25 percent 
interest rate and if the revocation is made, the revocation shall apply 
to the plan year for which made and all subsequent plan years and the 
plan sponsor may not elect to use the 8.25 percent interest rate for 
any subsequent plan year.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Pension Protection Act 
of 2006 to which such amendments relate.

           TITLE II--INCREASED FUNDING FOR HIGHWAY TRUST FUND

SEC. 201. REPLENISH EMERGENCY SPENDING FROM HIGHWAY TRUST FUND.

    (a) In General.--Section 9503(b) is amended--
            (1) by adding at the end the following new paragraph:
            ``(7) Emergency spending replenishment.--There is hereby 
        appropriated to the Highway Trust Fund $3,400,000,000.'', and
            (2) by striking ``Amounts Equivalent to Certain Taxes and 
        Penalties'' in the heading and inserting ``Certain Amounts''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 202. SUSPENSION OF TRANSFERS FROM HIGHWAY TRUST FUND FOR CERTAIN 
              REPAYMENTS AND CREDIT.

    Section 9503(c)(2) is amended by adding at the end the following 
new subparagraph:
                    ``(D) Temporary suspension.--This paragraph shall 
                not apply to amounts estimated by the Secretary to be 
                attributable to the 6-month period beginning on the 
                date of the enactment of the American Infrastructure 
                Investment and Improvement Act of 2007.''.

SEC. 203. TAXATION OF TAXABLE FUELS IN FOREIGN TRADE ZONES.

    (a) Tax Imposed on Removals and Entries in Foreign Trade Zones.--
            (1) In general.--Subsection (a) of section 4083 (relating 
        to definitions) is amended by adding at the end the following 
        new paragraph:
            ``(4) United states.--The term `United States' includes any 
        foreign trade zone or bonded warehouse located in the United 
        States.''.
            (2) Conforming amendment.--Section 4081(a)(1)(A) (relating 
        to imposition of tax) is amended--
                    (A) in clause (i), by inserting ``in the United 
                States'' after ``refinery''; and
                    (B) in clause (ii), by inserting ``in the United 
                States'' after ``terminal''.
    (b) Treatment of Taxable Fuel in Foreign Trade Zones.--Paragraph 
(2) of section 81c(a) of title 19, United States Code, is amended by 
inserting ``(other than the provisions relating to taxable fuel (as 
defined under section 4083(a) of the Internal Revenue Code of 1986))'' 
after ``thereunder''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to removals and entries after December 31, 2007.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall take effect on January 1, 2008.

SEC. 204. CLARIFICATION OF PENALTY FOR SALE OF FUEL FAILING TO MEET EPA 
              REGULATIONS.

    (a) In General.--Subsection (a) of section 6720A (relating to 
penalty with respect to certain adulterated fuels) is amended by 
striking ``applicable EPA regulations (as defined in section 
45H(c)(3))'' and inserting ``the requirements for diesel fuel under 
section 211 of the Clean Air Act, as determined by the Secretary,''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any transfer, sale, or holding out for sale or resale 
occurring after the date of the enactment of this Act.

SEC. 205. TREATMENT OF QUALIFIED ALCOHOL FUEL MIXTURES AND QUALIFIED 
              BIODIESEL FUEL MIXTURES AS TAXABLE FUELS.

    (a) In General.--
            (1) Qualified alcohol fuel mixtures.--Paragraph (2) of 
        section 4083(a) (relating to gasoline) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (A),
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C), and
                    (C) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) includes any qualified mixture (as defined in 
                section 40(b)(1)(B)) which is a mixture of alcohol and 
                special fuel, and''.
            (2) Qualified biodiesel fuel mixtures.--Subparagraph (A) of 
        section 4083(a)(3) (relating to diesel fuel) is amended by 
        striking ``and'' at the end of clause (ii), by redesignating 
        clause (iii) as clause (iv), and inserting after clause (ii) 
        the following new clause:
                            ``(iii) any qualified biodiesel mixture (as 
                        defined in section 40A(b)(1)(B)), and''.
    (b) Effective Date.--The amendments made by this section shall 
apply to fuels removed, entered, or sold after December 31, 2007.

SEC. 206. CALCULATION OF VOLUME OF ALCOHOL FOR FUEL CREDITS.

    (a) In General.--Paragraph (4) of section 40(d) (relating to volume 
of alcohol) is amended by striking ``the volume of alcohol'' and all 
that follows and inserting ``the volume of alcohol shall not include 
any denaturant added to such alcohol.''.
    (b) Conforming Amendment for Excise Tax Credit.--Section 6426(b) 
(relating to alcohol fuel mixture credit) is amended by redesignating 
paragraph (5) as paragraph (6) and by inserting after paragraph (4) the 
following new paragraph:
            ``(5) Volume of alcohol.--For purposes of determining under 
        subsection (a) the number of gallons of alcohol with respect to 
        which a credit is allowable under subsection (a), the volume of 
        alcohol shall not include any denaturant added to such 
        alcohol.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fuel sold or used after December 31, 2007.

SEC. 207. BULK TRANSFER EXCEPTION NOT TO APPLY TO FINISHED GASOLINE.

    (a) In General.--Subparagraph (B) of section 4081(a)(1) (relating 
to tax on removal, entry, or sale) is amended by adding at the end the 
following new clause:
                            ``(iii) Exception for finished gasoline.--
                        Clause (i) shall not apply to any finished 
                        gasoline.''.
    (b) Exception to Tax on Finished Gasoline for Prior Taxable 
Removals.--Paragraph (1) of section 4081(a) is amended by adding at the 
end the following new subparagraph:
                    ``(C) Exemption for previously taxed finished 
                gasoline.--The tax imposed by this paragraph shall not 
                apply to the removal of gasoline described in 
                subparagraph (B)(iii) from any terminal if there was a 
                prior taxable removal or entry of such fuel under 
                clause (i), (ii), or (iii) of subparagraph (A). The 
                preceding sentence shall not apply to the volume of any 
                product added to such gasoline at the terminal unless 
                there was a prior taxable removal or entry of such 
                product under clause (i), (ii), or (iii) of 
                subparagraph (A).''.
    (c) Effective Date.--The amendment made by this section shall apply 
to fuel removed, entered, or sold after December 31, 2007.

SEC. 208. INCREASE AND EXTENSION OF OIL SPILL LIABILITY TRUST FUND TAX.

    (a) Increase in Rate.--
            (1) In general.--Section 4611(c)(2)(B) (relating to rates) 
        is amended by striking ``5 cents'' and inserting ``10 cents''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply on and after the first day of the first calendar 
        quarter beginning more than 60 days after the date of the 
        enactment of this Act.
    (b) Extension.--
            (1) In general.--Section 4611(f) (relating to application 
        of Oil Spill Liability Trust Fund financing rate) is amended by 
        striking paragraphs (2) and (3) and inserting the following new 
        paragraph:
            ``(2) Termination.--The Oil Spill Liability Trust Fund 
        financing rate shall not apply after December 31, 2017.''.
            (2) Conforming amendment.--Section 4611(f)(1) is amended by 
        striking ``paragraphs (2) and (3)'' and inserting ``paragraph 
        (2)''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.

SEC. 209. APPLICATION OF RULES TREATING INVERTED CORPORATIONS AS 
              DOMESTIC CORPORATIONS TO CERTAIN TRANSACTIONS OCCURRING 
              AFTER MARCH 20, 2002.

    (a) In General.--Section 7874(b) (relating to inverted corporations 
treated as domestic corporations) is amended to read as follows:
    ``(b) Inverted Corporations Treated as Domestic Corporations.--
            ``(1) In general.--Notwithstanding section 7701(a)(4), a 
        foreign corporation shall be treated for purposes of this title 
        as a domestic corporation if such corporation would be a 
        surrogate foreign corporation if subsection (a)(2) were applied 
        by substituting `80 percent' for `60 percent'.
            ``(2) Special rule for certain transactions occurring after 
        march 20, 2002.--
                    ``(A) In general.--If--
                            ``(i) paragraph (1) does not apply to a 
                        foreign corporation, but
                            ``(ii) paragraph (1) would apply to such 
                        corporation if, in addition to the substitution 
                        under paragraph (1), subsection (a)(2) were 
                        applied by substituting `March 20, 2002' for 
                        `March 4, 2003' each place it appears,
                then paragraph (1) shall apply to such corporation but 
                only with respect to taxable years of such corporation 
                beginning after the date of the enactment of the 
                American Infrastructure Investment and Improvement Act 
                of 2007.
                    ``(B) Special rules.--Subject to such rules as the 
                Secretary may prescribe, in the case of a corporation 
                to which paragraph (1) applies by reason of this 
                paragraph--
                            ``(i) the corporation shall be treated, as 
                        of the close of its first taxable year ending 
                        after the date of the enactment of the American 
                        Infrastructure Investment and Improvement Act 
                        of 2007, as having transferred all of its 
                        assets, liabilities, and earnings and profits 
                        to a domestic corporation in a transaction with 
                        respect to which no tax is imposed under this 
                        title,
                            ``(ii) the bases of the assets transferred 
                        in the transaction to the domestic corporation 
                        shall be the same as the bases of the assets in 
                        the hands of the foreign corporation, subject 
                        to any adjustments under this title for built-
                        in losses,
                            ``(iii) the basis of the stock of any 
                        shareholder in the domestic corporation shall 
                        be the same as the basis of the stock of the 
                        shareholder in the foreign corporation for 
                        which it is treated as exchanged, and
                            ``(iv) the transfer of any earnings and 
                        profits by reason of clause (i) shall be 
                        disregarded in determining any deemed dividend 
                        or foreign tax creditable to the domestic 
                        corporation with respect to such transfer.
                    ``(C) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary or appropriate to 
                carry out this paragraph, including regulations to 
                prevent the avoidance of the purposes 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. 210. DENIAL OF DEDUCTION FOR PUNITIVE DAMAGES.

    (a) Disallowance of Deduction.--
            (1) In general.--Section 162(g) (relating to treble damage 
        payments under the antitrust laws) is amended--
                    (A) by redesignating paragraphs (1) and (2) as 
                subparagraphs (A) and (B), respectively,
                    (B) by striking ``If'' and inserting:
            ``(1) Treble damages.--If'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2) Punitive damages.--No deduction shall be allowed 
        under this chapter for any amount paid or incurred for punitive 
        damages in connection with any judgment in, or settlement of, 
        any action. This paragraph shall not apply to punitive damages 
        described in section 104(c).''.
            (2) Conforming amendment.--The heading for section 162(g) 
        is amended by inserting ``Or Punitive Damages'' after ``Laws''.
    (b) Inclusion in Income of Punitive Damages Paid by Insurer or 
Otherwise.--
            (1) In general.--Part II of subchapter B of chapter 1 
        (relating to items specifically included in gross income) is 
        amended by adding at the end the following new section:

``SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSURANCE OR OTHERWISE.

    ``Gross income shall include any amount paid to or on behalf of a 
taxpayer as insurance or otherwise by reason of the taxpayer's 
liability (or agreement) to pay punitive damages.''.
            (2) Reporting requirements.--Section 6041 (relating to 
        information at source) is amended by adding at the end the 
        following new subsection:
    ``(h) Section To Apply to Punitive Damages Compensation.--This 
section shall apply to payments by a person to or on behalf of another 
person as insurance or otherwise by reason of the other person's 
liability (or agreement) to pay punitive damages.''.
            (3) Conforming amendment.--The table of sections for part 
        II of subchapter B of chapter 1 is amended by adding at the end 
        the following new item:

``Sec. 91. Punitive damages compensated by insurance or otherwise.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to damages paid or incurred on or after the date of the enactment 
of this Act.

SEC. 211. FUEL TECHNICAL CORRECTIONS.

    (a) Amendments Related to Section 11113 of the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users.--
            (1) Paragraph (3) of section 6427(i) is amended--
                    (A) by inserting ``or under subsection (e)(2) by 
                any person with respect to an alternative fuel (as 
                defined in section 6426(d)(2))'' after ``section 6426'' 
                in subparagraph (A),
                    (B) by inserting ``or (e)(2)'' after ``subsection 
                (e)(1)'' in subparagraphs (A)(i) and (B), and
                    (C) by inserting ``and alternative fuel credit'' 
                after ``mixture credit'' in the heading thereof.
            (2)(A) Subparagraph (F) of section 6426(d)(2) is amended by 
        striking ``hydrocarbons'' and inserting ``fuel''.
            (B) Section 6426 is amended by adding at the end the 
        following new subsection:
    ``(h) Denial of Double Benefit.--No credit shall be determined 
under subsection (d) or (e) with respect to any fuel which is described 
in subsection (b) or (c) or section 40 or 40A.''.
            (3) The amendments made by this subsection shall take 
        effect as if included in section 11113 of the SAFETEA-LU.
    (b) Amendments Related to the Energy Policy Act of 2005.--
            (1) Amendment related to section 1342 of the act.--
                    (A) So much of subsection (b) of section 30C as 
                precedes paragraph (1) thereof is amended to read as 
                follows:
    ``(b) Limitation.--The credit allowed under subsection (a) with 
respect to all alternative fuel vehicle refueling property placed in 
service by the taxpayer during the taxable year at a location shall not 
exceed--''.
                    (B) Subsection (c) of section 30C is amended to 
                read as follows:
    ``(c) Qualified Alternative Fuel Vehicle Refueling Property.--For 
purposes of this section, the term `qualified alternative fuel vehicle 
refueling property' has the same meaning as the term `qualified clean-
fuel vehicle refueling property' would have under section 179A if--
            ``(1) paragraph (1) of section 179A(d) did not apply to 
        property installed on property which is used as the principal 
        residence (within the meaning of section 121) of the taxpayer, 
        and
            ``(2) only the following were treated as clean burning 
        fuels for purposes of section 179A(d):
                    ``(A) Any fuel at least 85 percent of the volume of 
                which consists of one or more of the following: 
                ethanol, natural gas, compressed natural gas, liquified 
                natural gas, liquefied petroleum gas, or hydrogen.
                    ``(B) Any mixture--
                            ``(i) which consists of two or more of the 
                        following: biodiesel (as so defined), diesel 
                        fuel (as defined in section 4083(a)(3)), or 
                        kerosene, and
                            ``(ii) at least 20 percent of the volume of 
                        which consists of biodiesel (as so defined) 
                        determined without regard to any kerosene in 
                        such mixture.''.
            (2) Amendments related to section 1362 of the act.--
                    (A)(i) Paragraph (1) of section 4041(d) is amended 
                by adding at the end the following new sentence: ``No 
                tax shall be imposed under the preceding sentence on 
                the sale or use of any liquid if tax was imposed with 
                respect to such liquid under section 4081 at the 
                Leaking Underground Storage Tank Trust Fund financing 
                rate.''.
                    (ii) Paragraph (3) of section 4042(b) is amended to 
                read as follows:
            ``(3) Exception for fuel on which leaking underground 
        storage tank trust fund financing rate separately imposed.--The 
        Leaking Underground Storage Tank Trust Fund financing rate 
        under paragraph (2)(B) shall not apply to the use of any fuel 
        if tax was imposed with respect to such fuel under section 
        4041(d) or 4081 at the Leaking Underground Storage Tank Trust 
        Fund financing rate.''.
                    (iii) Notwithstanding section 6430 of the Internal 
                Revenue Code of 1986, a refund, credit, or payment may 
                be made under subchapter B of chapter 65 of such Code 
                for taxes imposed with respect to any liquid after 
                September 30, 2005, and before the date of the 
                enactment of this Act under section 4041(d)(1) or 4042 
                of such Code at the Leaking Underground Storage Tank 
                Trust Fund financing rate to the extent that tax was 
                imposed with respect to such liquid under section 4081 
                at the Leaking Underground Storage Tank Trust Fund 
                financing rate.
                    (B)(i) Paragraph (5) of section 4041(d) is 
                amended--
                            (I) by striking ``(other than with respect 
                        to any sale for export under paragraph (3) 
                        thereof)'', and
                            (II) by adding at the end the following new 
                        sentence: ``The preceding sentence shall not 
                        apply with respect to subsection (g)(3) and so 
                        much of subsection (g)(1) as relates to vessels 
                        (within the meaning of section 4221(d)(3)) 
                        employed in foreign trade or trade between the 
                        United States and any of its possessions.''
                    (ii) Section 4082 is amended--
                            (I) by striking ``(other than such tax at 
                        the Leaking Underground Storage Tank Trust Fund 
                        financing rate imposed in all cases other than 
                        for export)'' in subsection (a), and
                            (II) by redesignating subsections (f) and 
                        (g) as subsections (g) and (h) and by inserting 
                        after subsection (e) the following new 
                        subsection:
    ``(f) Exception for Leaking Underground Storage Tank Trust Fund 
Financing Rate.--
            ``(1) In general.--Subsection (a) shall not apply to the 
        tax imposed under section 4081 at the Leaking Underground 
        Storage Tank Trust Fund financing rate.
            ``(2) Exception for export, etc.--Paragraph (1) shall not 
        apply with respect to any fuel if the Secretary determines that 
        such fuel is destined for export or for use by the purchaser as 
        supplies for vessels (within the meaning of section 4221(d)(3)) 
        employed in foreign trade or trade between the United States 
        and any of its possessions.''.
                    (iii) Subsection (e) of section 4082, as amended by 
                this Act, is amended--
                            (I) by striking ``an aircraft, the rate of 
                        tax under section 4081(a)(2)(A)(iv) shall be 
                        zero.'' and inserting ``an aircraft--
            ``(1) the rate of tax under section 4081(a)(2)(A)(iv) shall 
        be zero, and
            ``(2) if such aircraft is employed in foreign trade or 
        trade between the United States and any of its possessions, the 
        increase in such rate under section 4081(a)(2)(B) shall be 
        zero.''; and
                            (II) by moving the last sentence flush with 
                        the margin of such subsection (following the 
                        paragraph (2) added by clause (i)).
                    (iv) Section 6430 is amended to read as follows:

``SEC. 6430. TREATMENT OF TAX IMPOSED AT LEAKING UNDERGROUND STORAGE 
              TANK TRUST FUND FINANCING RATE.

    ``No refunds, credits, or payments shall be made under this 
subchapter for any tax imposed at the Leaking Underground Storage Tank 
Trust Fund financing rate, except in the case of fuels--
            ``(1) which are exempt from tax under section 4081(a) by 
        reason of section 4082(f)(2),
            ``(2) which are exempt from tax under section 4041(d) by 
        reason of the last sentence of paragraph (5) thereof, or
            ``(3) with respect to which the rate increase under section 
        4081(a)(2)(B) is zero by reason of section 4082(e)(2).''.
                    (C) Paragraph (5) of section 4041(d) is amended by 
                inserting ``(b)(1)(A),'' after ``subsections''.
            (3) Effective date.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by this subsection 
                shall take effect as if included in the provisions of 
                the Energy Policy Act of 2005 to which they relate.
                    (B) Nonapplication of exemption for off-highway 
                business use.--The amendment made by paragraph (2)(C) 
                shall apply to fuel sold for use or used after the date 
                of the enactment of this Act.
                    (C) Amendment made by the safetea-lu.--The 
                amendment made by paragraph (2)(B)(iii)(II) shall take 
                effect as if included in section 11161 of the SAFETEA-
                LU.
    (c) Amendments Related to Section 339 of the American Jobs Creation 
Act of 2004.--
            (1)(A) Section 45H is amended by striking subsection (d) 
        and by redesignating subsections (e), (f), and (g) as 
        subsections (d), (e), and (f), respectively.
            (B) Subsection (d) of section 280C is amended to read as 
        follows:
    ``(d) Credit for Low Sulfur Diesel Fuel Production.--The deductions 
otherwise allowed under this chapter for the taxable year shall be 
reduced by the amount of the credit determined for the taxable year 
under section 45H(a).''.
            (C) Subsection (a) of section 1016 is amended by striking 
        paragraph (31) and by redesignating paragraphs (32) through 
        (37) as paragraphs (31) through (36), respectively.
            (2)(A) Section 45H, as amended by paragraph (1), is amended 
        by adding at the end the following new subsection:
    ``(g) Election to Not Take Credit.--No credit shall be determined 
under subsection (a) for the taxable year if the taxpayer elects not to 
have subsection (a) apply to such taxable year.''.
            (B) Subsection (m) of section 6501 is amended by inserting 
        ``45H(g),'' after ``45C(d)(4),''.
            (3)(A) Subsections (b)(1)(A), (c)(2), (e)(1), and (e)(2) of 
        section 45H (as amended by paragraph (1)) and section 179B(a) 
        are each amended by striking ``qualified capital costs'' and 
        inserting ``qualified costs''.
            (B) The heading of paragraph (2) of section 45H(c) is 
        amended by striking ``capital''.
            (C) Subsection (a) of section 179B is amended by inserting 
        ``and which are properly chargeable to capital account'' before 
        the period at the end.
            (4) The amendments made by this subsection shall take 
        effect as if included in section 339 of the American Jobs 
        Creation Act of 2004.

SEC. 212. MOTOR FUEL TAX ENFORCEMENT ADVISORY COMMISSION.

    (a) In General.--Section 11141 of the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users is amended to 
read as follows:

``SEC. 11141. MOTOR FUEL TAX ENFORCEMENT ADVISORY COMMISSION.

    ``(a) Establishment.--There is established a Motor Fuel Tax 
Enforcement Advisory Commission (in this section referred to as the 
`Commission').
    ``(b) Membership.--
            ``(1) Appointment.--The Commission shall be composed of 14 
        members, of which--
                    ``(A) 1 shall be appointed by the Administrator of 
                the Federal Highway Administration as a representative 
                of the Federal Highway Administration,
                    ``(B) 1 shall be appointed by the Inspector General 
                for the Department of Transportation as a 
                representative the Office of Inspector General for the 
                Department of Transportation,
                    ``(C) 1 shall be appointed by the Secretary of 
                Transportation as a representative of the Department of 
                Transportation,
                    ``(D) 1 shall be appointed by the Secretary of 
                Homeland Security to be a representative of the 
                Department of Homeland Security,
                    ``(E) 1 shall be appointed by the Secretary of 
                Defense to be a representative of the Department of 
                Defense,
                    ``(F) 1 shall be appointed by the Attorney General 
                to be a representative of the Department of Justice,
                    ``(G) 2 shall be appointed by the Chairman of the 
                Committee on Finance of the Senate,
                    ``(H) 2 shall be appointed by the Ranking Member of 
                the Committee on Finance of the Senate,
                    ``(I) 2 shall be appointed by Chairman of the 
                Committee on Ways and Means of the House of 
                Representatives, and
                    ``(J) 2 shall be appointed by Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives.
            ``(2) Qualification for certain members.--Of the members 
        appointed under subparagraphs (G), (H), (I) and (J)--
                    ``(A) at least 1 shall be representative from the 
                Federation of State Tax Administrators,
                    ``(B) at least 1shall be a representative from any 
                State department of transportation,
                    ``(C) at least 1 shall be a representative from 
                industries relating to fuel distribution, and
                    ``(D) at least 1 shall be a representative from 
                industries relating to fuel distribution (such a 
                refiners, distributors, pipeline operators, and 
                terminal operators).
            ``(3) Terms.--Members shall be appointed for the life of 
        the Commission.
            ``(4) Vacancies.--A vacancy in the Commission shall be 
        filled in the manner in which the original appointment was 
        made.
            ``(5) Travel expenses.--Members of the Commission shall 
        serve without pay but shall receive travel expenses, including 
        per diem in lieu of subsistence, in accordance with sections 
        5702 and 5703 of title 5, United States Code.
            ``(6) Chairman.--The Chairman of the Commission shall be 
        elected by the members.
    ``(c) Duties.--
            ``(1) In general.--The Commission shall--
                    ``(A) review motor fuel revenue collections, 
                historical and current;
                    ``(B) review the progress of investigations;
                    ``(C) develop and review legislative proposals with 
                respect to motor fuel taxes;
                    ``(D) monitor the progress of administrative 
                regulation projects relating to motor fuel taxes;
                    ``(E) evaluate and make recommendations to the 
                President and Congress regarding--
                            ``(i) the effectiveness of existing Federal 
                        enforcement programs regarding motor fuel 
                        taxes,
                            ``(ii) enforcement personnel allocation, 
                        and
                            ``(iii) proposals for regulatory projects, 
                        legislation, and funding.
            ``(2) Report.--Not later than September 30, 2009, the 
        Commission shall submit to Congress a final report that 
        contains a detailed statement on the findings and conclusions 
        of the Commission, together with recommendations for such 
        legislation and administrative action as the Commission 
        considers appropriate or necessary.
    ``(d) Powers.--
            ``(1) Hearings.--The Commission may hold such hearings for 
        the purpose of carrying out this Act, sit and act at such times 
        and places, take such testimony, and receive such evidence as 
        the Commission considers advisable to carry out this Act. The 
        Commission may administer oaths and affirmations to witnesses 
        appearing before the Commission.
            ``(2) Obtaining data.--The Commission may secure directly 
        from any department or agency of the United States, information 
        (other than information required by any law to be kept 
        confidential by such department or agency) necessary for the 
        Commission to carry out its duties under this section. Upon 
        request of the Commission, the head of that department or 
        agency shall furnish such nonconfidential information to the 
        Commission. The Commission shall also gather evidence through 
        such means as it may determine appropriate, including through 
        holding hearings and soliciting comments by means of Federal 
        Register notices.
            ``(3) Postal services.--The Commission may use the United 
        States mails in the same manner and under the same conditions 
        as other departments and agencies of the Federal Government.
            ``(4) Gifts.--The Commission may accept, hold, administer, 
        and utilize gifts, donations, and requests of property, both 
        real and personal, for the purposes of aiding or facilitating 
        the work of the Commission. Gifts and bequests of money, and 
        the proceeds from the sale of any other property received as 
        gifts or bequests, shall be deposited in the Treasury in a 
        separate fund and shall be disbursed upon order of the 
        Commission. For purposes of Federal income, estate, and gift 
        taxation, property accepted under this section shall be 
        considered as a gift or bequest to or for the use of the United 
        States.
    ``(e) Support Services.--
            ``(1) Administrative support services.--Upon the request of 
        the Commission, the Secretary of Transportation shall provide 
        to the Commission administrative support services necessary to 
        enable the Commission to carry out its duties under this Act.
            ``(2) Detail of government employees.--Any Federal 
        Government employee may be detailed to the Commission without 
        reimbursement, and such detail shall be without interruption or 
        loss of civil service status or privilege.
            ``(3) Voluntary services.--
                    ``(A) In general.--Notwithstanding the provisions 
                of section 1342 of title 31, United States Code, the 
                Commission is authorized to accept and utilize the 
                services of volunteers serving without compensation. 
                The Commission may reimburse such volunteers for local 
                travel and office supplies, and for other travel 
                expenses, including per diem in lieu of subsistence as 
                authorized by section 5703, United States Code.
                    ``(B) Treatment of volunteers.--A person providing 
                volunteer services to the Commission shall be 
                considered an employee of the Federal Government in the 
                performance of those services for the purposes of the 
                following provisions of law:
                            ``(i) chapter 81 of title 5, United States 
                        Code, relating to compensation for work-related 
                        injuries;
                            ``(ii) chapter 171 of title 28, United 
                        States Code, relating to tort claims; and
                            ``(iii) chapter 11 of title 18, United 
                        States Code, relating to conflicts of interest.
            ``(4) Consultation.--Upon request of the Commission, 
        representatives of the Department of the Treasury and the 
        Internal Revenue Service shall be available for consultation to 
        assist the Commission in carrying out its duties under this 
        section.
            ``(5) Cooperation.--The staff of the Department of 
        Transportation, the Department of Homeland Security, the 
        Department of Justice, and the Department of Defense shall 
        cooperate with the Commission as necessary.
    ``(f) Inapplicability of Federal Advisory Committee Act.--The 
Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the 
Commission.
    ``(g) Termination.--
            ``(1) In general.--The Commission shall terminate on the 
        date that is 90 days after the date on which the Commission 
        submits the report required under subsection (c)(2).
            ``(2) Records.--Not later than the date on which the 
        Commission terminates, the Commission shall transmit all 
        records of the Commission to the National Archives.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 213. HIGHWAY TRUST FUND CONFORMING EXPENDITURE AMENDMENT.

    (a) In General.--Subsections (c)(1) and (e)(3) of section 9503 are 
each amended by inserting ``, as amended by An Act to authorize 
additional funds for emergency repairs and reconstruction of the 
Interstate I-35 bridge located in Minneapolis, Minnesota, that 
collapsed on August 1, 2007, to waive the $100,000,000 limitation on 
emergency relief funds for those emergency repairs and reconstruction, 
and for other purposes,'' after ``Users''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of An Act to authorize 
additional funds for emergency repairs and reconstruction of the 
Interstate I-35 bridge located in Minneapolis, Minnesota, that 
collapsed on August 1, 2007, to waive the $100,000,000 limitation on 
emergency relief funds for those emergency repairs and reconstruction, 
and for other purposes.

    TITLE III--ADDITIONAL INFRASTRUCTURE MODIFICATIONS AND REVENUE 
                               PROVISIONS

SEC. 301. RESTRUCTURING OF NEW YORK LIBERTY ZONE TAX CREDITS.

    (a) In General.--Part I of subchapter Y of chapter 1 is amended by 
redesignating section 1400L as 1400K and by adding at the end the 
following new section:

``SEC. 1400L. NEW YORK LIBERTY ZONE TAX CREDITS.

    ``(a) In General.--In the case of a New York Liberty Zone 
governmental unit, there shall be allowed as a credit against any taxes 
imposed for any payroll period by section 3402 for which such 
governmental unit is liable under section 3403 an amount equal to so 
much of the portion of the qualifying project expenditure amount 
allocated under subsection (b)(3) to such governmental unit for the 
calendar year as is allocated by such governmental unit to such period 
under subsection (b)(4).
    ``(b) Qualifying Project Expenditure Amount.--For purposes of this 
section--
            ``(1) In general.--The term `qualifying project expenditure 
        amount' means, with respect to any calendar year, the sum of--
                    ``(A) the total expenditures paid or incurred 
                during such calendar year by all New York Liberty Zone 
                governmental units and the Port Authority of New York 
                and New Jersey for any portion of qualifying projects 
                located wholly within the City of New York, New York, 
                and
                    ``(B) any such expenditures--
                            ``(i) paid or incurred in any preceding 
                        calendar year which begins after the date of 
                        enactment of this section, and
                            ``(ii) not previously allocated under 
                        paragraph (3).
            ``(2) Qualifying project.--The term `qualifying project' 
        means any transportation infrastructure project, including 
        highways, mass transit systems, railroads, airports, ports, and 
        waterways, in or connecting with the New York Liberty Zone (as 
        defined in section 1400K(h)), which is designated as a 
        qualifying project under this section jointly by the Governor 
        of the State of New York and the Mayor of the City of New York, 
        New York.
            ``(3) General allocation.--
                    ``(A) In general.--The Governor of the State of New 
                York and the Mayor of the City of New York, New York, 
                shall jointly allocate to each New York Liberty Zone 
                governmental unit the portion of the qualifying project 
                expenditure amount which may be taken into account by 
                such governmental unit under subsection (a) for any 
                calendar year in the credit period.
                    ``(B) Aggregate limit.--The aggregate amount which 
                may be allocated under subparagraph (A) for all 
                calendar years in the credit period shall not exceed 
                $2,000,000,000.
                    ``(C) Annual limit.--
                            ``(i) In general.--The aggregate amount 
                        which may be allocated under subparagraph (A) 
                        for any calendar year in the credit period 
                        shall not exceed the sum of--
                                    ``(I) the applicable limit, plus
                                    ``(II) the aggregate amount 
                                authorized to be allocated under this 
                                paragraph for all preceding calendar 
                                years in the credit period which was 
                                not so allocated.
                            ``(ii) Applicable limit.--For purposes of 
                        clause (i), the applicable limit for any 
                        calendar year in the credit period is 
                        $169,000,000 and in the case of any calendar 
                        year after 2019, zero.
                    ``(D) Unallocated amounts at end of credit 
                period.--If, as of the close of the credit period, the 
                amount under subparagraph (B) exceeds the aggregate 
                amount allocated under subparagraph (A) for all 
                calendar years in the credit period, the Governor of 
                the State of New York and the Mayor of the City of New 
                York, New York, may jointly allocate to New York 
                Liberty Zone governmental units for any calendar year 
                in the 5-year period following the credit period an 
                amount equal to--
                            ``(i) the lesser of--
                                    ``(I) such excess, or
                                    ``(II) the qualifying project 
                                expenditure amount for such calendar 
                                year, reduced by
                            ``(ii) the aggregate amount allocated under 
                        this subparagraph for all preceding calendar 
                        years.
            ``(4) Allocation to payroll periods.--Each New York Liberty 
        Zone governmental unit which has been allocated a portion of 
        the qualifying project expenditure amount under paragraph (3) 
        for a calendar year may allocate such portion to payroll 
        periods beginning in such calendar year as such governmental 
        unit determines appropriate.
    ``(c) Carryover of Unused Allocations.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        the amount allocated under subsection (b)(3) to a New York 
        Liberty Zone governmental unit for any calendar year exceeds 
        the aggregate taxes imposed by section 3402 for which such 
        governmental unit is liable under section 3403 for periods 
        beginning in such year, such excess shall be carried to the 
        succeeding calendar year and added to the allocation of such 
        governmental unit for such succeeding calendar year. No amount 
        may be carried under the preceding sentence to a calendar year 
        after 2024.
            ``(2) Reallocation.--If a New York Liberty Zone 
        governmental unit does not use an amount allocated to it under 
        subsection (b)(3) within the time prescribed by the Governor of 
        the State of New York and the Mayor of the City of New York, 
        New York, then such amount shall after such time be treated for 
        purposes of subsection (b)(3) in the same manner as if it had 
        never been allocated.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Credit period.--The term `credit period' means the 
        12-year period beginning on January 1, 2008.
            ``(2) New york liberty zone governmental unit.--The term 
        `New York Liberty Zone governmental unit' means--
                    ``(A) the State of New York,
                    ``(B) the City of New York, New York, and
                    ``(C) any agency or instrumentality of such State 
                or City.
            ``(3) Treatment of funds.--Any expenditure for a qualifying 
        project taken into account for purposes of the credit under 
        this section shall be considered State and local funds for the 
        purpose of any Federal program.
            ``(4) Treatment of credit amounts for purposes of 
        withholding taxes.--For purposes of this title, a New York 
        Liberty Zone governmental unit shall be treated as having paid 
        to the Secretary, on the day on which wages are paid to 
        employees, an amount equal to the amount of the credit allowed 
        to such entity under subsection (a) with respect to such wages, 
        but only if such governmental unit deducts and withholds wages 
        for such payroll period under section 3401 (relating to wage 
        withholding).
    ``(e) Reporting.--The Governor of the State of New York and the 
Mayor of the City of New York, New York, shall jointly submit to the 
Secretary an annual report--
            ``(1) which certifies--
                    ``(A) the qualifying project expenditure amount for 
                the calendar year, and
                    ``(B) the amount allocated to each New York Liberty 
                Zone governmental unit under subsection (b)(3) for the 
                calendar year, and
            ``(2) includes such other information as the Secretary may 
        require to carry out this section.
    ``(f) Guidance.--The Secretary may prescribe such guidance as may 
be necessary or appropriate to ensure compliance with the purposes of 
this section.
    ``(g) Termination.--No credit shall be allowed under subsection (a) 
for any calender year after 2024.''.
    (b) Termination of Special Allowance and Expensing.--Section 
1400K(b)(2)(A)(v), as redesignated by subsection (a), is amended by 
striking ``the termination date'' and inserting ``the date of the 
enactment of the American Infrastructure Investment and Improvement Act 
of 2007 or the termination date if pursuant to a binding contract in 
effect on such enactment date''.
    (c) Conforming Amendments.--
            (1) Section 38(c)(3)(B) is amended by striking ``section 
        1400L(a)'' and inserting ``section 1400K(a)''.
            (2) Section 168(k)(2)(D)(ii) is amended by striking 
        ``section 1400L(c)(2)'' and inserting ``1400K(c)(2)''.
            (3) The table of sections for part I of subchapter Y of 
        chapter 1 is amended by striking ``1400L'' and inserting 
        ``1400K''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to periods 
        beginning after December 31, 2007.
            (2) Termination of special allowance and expensing.--The 
        amendment made by subsection (b) shall take effect on the date 
        of the enactment of this Act.

SEC. 302. PARTICIPANTS IN GOVERNMENT SECTION 457 PLANS ALLOWED TO TREAT 
              ELECTIVE DEFERRALS AS ROTH CONTRIBUTIONS.

    (a) In General.--Section 402A(e)(1) (defining applicable retirement 
plan) 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:
                    ``(C) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A).''.
    (b) Elective Deferrals.--Section 402A(e)(2) (defining elective 
deferral) is amended to read as follows:
            ``(2) Elective deferral.--The term `elective deferral' 
        means--
                    ``(A) any elective deferral described in 
                subparagraph (A) or (C) of section 402(g)(3), and
                    ``(B) any elective deferral of compensation by an 
                individual under an eligible deferred compensation plan 
                (as defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 303. INCREASED INFORMATION RETURN PENALTIES.

    (a) Failure to File Correct Information Returns.--
            (1) In general.--Section 6721(a)(1) (relating to imposition 
        of penalty) is amended--
                    (A) by striking ``$50'' and inserting ``$250'', and
                    (B) by striking ``$250,000'' and inserting 
                ``$3,000,000''.
            (2) Reduction where correction in specified period.--
                    (A) Correction within 30 days.--Section 6721(b)(1) 
                is amended--
                            (i) by striking ``$15'' and inserting 
                        ``$50'',
                            (ii) by striking ``in lieu of $50'' and 
                        inserting ``in lieu of $250'', and
                            (iii) by striking ``$75,000'' and inserting 
                        ``$500,000''.
                    (B) Failures corrected on or before august 1.--
                Section 6721(b)(2) is amended--
                            (i) by striking ``$30'' and inserting 
                        ``$100'',
                            (ii) by striking ``$50'' and inserting 
                        ``$250'', and
                            (iii) by striking ``$150,000'' and 
                        inserting ``$1,500,000''.
            (3) Lower limitation for persons with gross receipts of not 
        more than $5,000,000.--Section 6721(d)(1) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$100,000'' and inserting 
                        ``$1,000,000'', and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$3,000,000'',
                    (B) in subparagraph (B)--
                            (i) by striking ``$25,000'' and inserting 
                        ``$175,000'', and
                            (ii) by striking ``$75,000'' and inserting 
                        ``$500,000'', and
                    (C) in subparagraph (C)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$500,000'', and
                            (ii) by striking ``$150,000'' and inserting 
                        ``$1,500,000''.
            (4) Penalty in case of intentional disregard.--Section 
        6721(e) is amended--
                    (A) by striking ``$100'' in paragraph (2) and 
                inserting ``$500'',
                    (B) by striking ``$250,000'' in paragraph (3)(A) 
                and inserting ``$3,000,000''.
    (b) Failure to Furnish Correct Payee Statements.--
            (1) In general.--Section 6722(a) is amended--
                    (A) by striking ``$50'' and inserting ``$250'', and
                    (B) by striking ``$100,000'' and inserting 
                ``$1,000,000''.
            (2) Penalty in case of intentional disregard.--Section 
        6722(c) is amended--
                    (A) by striking ``$100'' in paragraph (1) and 
                inserting ``$500'', and
                    (B) by striking ``$100,000'' in paragraph (2)(A) 
                and inserting ``$1,000,000''.
    (c) Failure to Comply With Other Information Reporting 
Requirements.--Section 6723 is amended--
            (1) by striking ``$50'' and inserting ``$250'', and
            (2) by striking ``$100,000'' and inserting ``$1,000,000''.
    (d) 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. EXEMPTION OF CERTAIN COMMERCIAL CARGO FROM HARBOR MAINTENANCE 
              TAX.

    (a) In General.--Section 4462 is amended--
            (1) by redesignating subsection (i) as subsection (j), and
            (2) by inserting after subsection (h) the following new 
        subsection:
    ``(i) Exemption for Certain Cargo Transported on the Great Lakes 
Saint Lawrence Seaway System.--
            ``(1) In general.--No tax shall be imposed under section 
        4461(a) with respect to--
                    ``(A) commercial cargo (other than bulk cargo) 
                loaded at a port in the United States located in the 
                Great Lakes Saint Lawrence Seaway System and unloaded 
                at another port in the United States located in such 
                system, and
                    ``(B) commercial cargo (other than bulk cargo) 
                unloaded at a port in the United States located in the 
                Great Lakes Saint Lawrence Seaway System which was 
                loaded at a port in Canada located in such system.
            ``(2) Bulk cargo.--For purposes of this subsection, the 
        term `bulk cargo' shall have the meaning given such term by 
        section 53101(1) of title 46, United States Code (as in effect 
        on the date of the enactment of this section).
            ``(3) Great lakes saint lawrence seaway system.--For 
        purposes of this subsection, the term `Great Lakes Saint 
        Lawrence Seaway System' means the waterway between Duluth, 
        Minnesota and Sept. Iles, Quebec, encompassing the five Great 
        Lakes, their connecting channels, and the Saint Lawrence 
        River.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 305. CREDIT TO HOLDERS OF QUALIFIED RAIL INFRASTRUCTURE BONDS.

    (a) In General.--Subpart H of part IV of subchapter A of chapter 1 
(relating to credits against tax) is amended by adding at the end the 
following new section:

``SEC. 54A. CREDIT TO HOLDERS OF QUALIFIED RAIL INFRASTRUCTURE BONDS.

    ``(a) Allowance of Credit.--If a taxpayer holds a qualified rail 
infrastructure bond on 1 or more credit allowance dates of the bond 
occurring during any taxable year, there shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of the credits determined under subsection (b) with 
respect to such dates.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a qualified rail infrastructure bond is 25 percent of the 
        annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified rail infrastructure bond is the 
        product of--
                    ``(A) the credit rate determined by the Secretary 
                under paragraph (3) for the day on which such bond was 
                sold, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Determination.--For purposes of paragraph (2), with 
        respect to any qualified rail infrastructure bond, the 
        Secretary shall determine daily or cause to be determined daily 
        a credit rate which shall apply to the first day on which there 
        is a binding, written contract for the sale or exchange of the 
        bond. The credit rate for any day is the credit rate which the 
        Secretary or the Secretary's designee estimates will permit the 
        issuance of qualified rail infrastructure bonds with a 
        specified maturity or redemption date, without discount and 
        without interest cost to the qualified issuer.
            ``(4) Credit allowance date.--For purposes of this section, 
        the term `credit allowance date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term also includes the last day on which the bond is 
        outstanding.
            ``(5) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed or matures.
    ``(c) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this part 
        (other than this subpart, subpart C, and section 1400N(l)).
    ``(d) Qualified Rail Infrastructure Bond.--For purposes of this 
section--
            ``(1) In general.--The term `qualified rail infrastructure 
        bond' means any bond issued as part of an issue if--
                    ``(A) the bond is issued by a qualified issuer 
                pursuant to an allocation by the Secretary to such 
                issuer of a portion of the national qualified rail 
                infrastructure bond annual limitation under subsection 
                (f)(2) by not later than the end of the calendar year 
                following the year of such allocation,
                    ``(B) 95 percent or more of the proceeds of such 
                issue are to be used for capital expenditures incurred 
                for 1 or more qualified projects,
                    ``(C) the qualified issuer designates such bond for 
                purposes of this section and the bond is in registered 
                form, and
                    ``(D) the issue meets the requirements of 
                subsection (h).
            ``(2) Qualified project; special use rules.--
                    ``(A) In general.--The term `qualified project' 
                means a project eligible under subsection (b) of 
                section 26101 of title 49, United States Code, which 
                the Secretary determines was selected using the 
                criteria of subsection (c) of such section 26101 by the 
                Secretary of Transportation, that makes a substantial 
                contribution to improving a rail transportation 
                corridor for intercity passenger rail use.
                    ``(B) Certification required regarding certain 
                projects.--The Secretary shall not consider a project 
                to be a qualified project unless an applicant certifies 
                to the Secretary that--
                            ``(i) if a project involves a rail 
                        transportation corridor which includes the use 
                        of rights-of-way owned by a freight railroad, 
                        the applicant has entered into a written 
                        agreement with such freight railroad regarding 
                        the use of the rights-of-way and has received 
                        assurances that collective bargaining 
                        agreements between such freight railroad and 
                        its employees (including terms regarding the 
                        contracting of work performed on such corridor) 
                        shall remain in full force and effect during 
                        the term of such written agreement,
                            ``(ii) any person which provides railroad 
                        transportation over infrastructure improved or 
                        acquired pursuant to this section, is a rail 
                        carrier as defined by section 10102 of title 
                        49, United States Code, and
                            ``(iii) the applicant shall, with respect 
                        to improvements to rail infrastructure made 
                        pursuant to this section, comply with the 
                        standards applicable to construction work in 
                        such title 49, in the same manner in which the 
                        National Railroad Passenger Corporation is 
                        required to comply with such standards.
                    ``(C) Refinancing rules.--For purposes of paragraph 
                (1)(B), a qualified project may be refinanced with 
                proceeds of a qualified rail infrastructure bond only 
                if the indebtedness being refinanced (including any 
                obligation directly or indirectly refinanced by such 
                indebtedness) was originally incurred after the date of 
                the enactment of this section.
                    ``(D) Reimbursement.--For purposes of paragraph 
                (1)(B), a qualified rail infrastructure bond may be 
                issued to reimburse for amounts paid after the date of 
                the enactment of this section with respect to a 
                qualified project, but only if--
                            ``(i) prior to the payment of the original 
                        expenditure, the issuer declared its intent to 
                        reimburse such expenditure with the proceeds of 
                        a qualified rail infrastructure bond,
                            ``(ii) not later than 60 days after payment 
                        of the original expenditure, the qualified 
                        issuer adopts an official intent to reimburse 
                        the original expenditure with such proceeds, 
                        and
                            ``(iii) the reimbursement is made not later 
                        than 18 months after the date the original 
                        expenditure is paid.
                    ``(E) Treatment of changes in use.--For purposes of 
                paragraph (1)(B), the proceeds of an issue shall not be 
                treated as used for a qualified project to the extent 
                that a qualified issuer takes any action within its 
                control which causes such proceeds not to be used for a 
                qualified project. The Secretary shall prescribe 
                regulations specifying remedial actions that may be 
                taken (including conditions to taking such remedial 
                actions) to prevent an action described in the 
                preceding sentence from causing a bond to fail to be a 
                qualified rail infrastructure bond.
    ``(e) Maturity Limitations.--
            ``(1) Duration of term.--A bond shall not be treated as a 
        qualified rail infrastructure bond if the maturity of such bond 
        exceeds the maximum term determined by the Secretary under 
        paragraph (2) with respect to such bond.
            ``(2) Maximum term.--During each calendar month, the 
        Secretary shall determine the maximum term permitted under this 
        paragraph for bonds issued during the following calendar month. 
        Such maximum term shall be the term which the Secretary 
        estimates will result in the present value of the obligation to 
        repay the principal on the bond being equal to 50 percent of 
        the face amount of such bond. Such present value shall be 
        determined without regard to the requirements of paragraph (3) 
        and using as a discount rate the average annual interest rate 
        of tax-exempt obligations having a term of 10 years or more 
        which are issued during the month. If the term as so determined 
        is not a multiple of a whole year, such term shall be rounded 
        to the next highest whole year.
            ``(3) Ratable principal amortization required.--A bond 
        shall not be treated as a qualified rail infrastructure bond 
        unless it is part of an issue which provides for an equal 
        amount of principal to be paid by the qualified issuer during 
        each calendar year that the issue is outstanding.
    ``(f) Annual Limitation on Amount of Bonds Designated.--
            ``(1) National annual limitation.--There is a national 
        qualified rail infrastructure bond annual limitation for each 
        calendar year. Such limitation is $900,000,000 for 2008, 2009, 
        and 2010, and, except as provided in paragraph (3), zero 
        thereafter.
            ``(2) Allocation by secretary.--The national qualified rail 
        infrastructure bond annual limitation for a calendar year shall 
        be allocated by the Secretary among qualified projects in such 
        manner as the Secretary determines appropriate.
            ``(3) Carryover of unused limitation.--If for any calendar 
        year, the national qualified rail infrastructure bond annual 
        limitation for such year exceeds the amount of bonds allocated 
        during such year, such limitation for the following calendar 
        year shall be increased by the amount of such excess. Any 
        carryforward of a limitation may be carried only to the first 2 
        years following the unused limitation year. For purposes of the 
        preceding sentence, a limitation shall be treated as used on a 
        first-in first-out basis.
    ``(g) Credit Treated as Interest.--For purposes of this title, the 
credit determined under subsection (a) shall be treated as interest 
which is includible in gross income.
    ``(h) Special Rules Relating to Expenditures.--
            ``(1) In general.--An issue shall be treated as meeting the 
        requirements of this subsection if, as of the date of issuance, 
        the qualified issuer reasonably expects--
                    ``(A) at least 95 percent of the proceeds of the 
                issue are to be spent for 1 or more qualified projects 
                within the 5-year period beginning on the date of 
                issuance of the qualified rail infrastructure bond,
                    ``(B) a binding commitment with a third party to 
                spend at least 10 percent of the proceeds of the issue 
                will be incurred within the 6-month period beginning on 
                the date of issuance of the qualified rail 
                infrastructure bond, and
                    ``(C) such projects will be completed with due 
                diligence and the proceeds from the sale of the issue 
                will be spent with due diligence.
            ``(2) Extension of period.--Upon submission of a request 
        prior to the expiration of the period described in paragraph 
        (1)(A), the Secretary may extend such period if the qualified 
        issuer establishes that the failure to satisfy the 5-year 
        requirement is due to reasonable cause and the related projects 
        will continue to proceed with due diligence.
            ``(3) Failure to spend required amount of bond proceeds 
        within 5 years.--To the extent that less than 95 percent of the 
        proceeds of such issue are expended by the close of the 5-year 
        period beginning on the date of issuance (or if an extension 
        has been obtained under paragraph (2), by the close of the 
        extended period), the qualified issuer shall redeem all of the 
        nonqualified bonds within 90 days after the end of such period. 
        For purposes of this paragraph, the amount of the nonqualified 
        bonds required to be redeemed shall be determined in the same 
        manner as under section 142.
    ``(i) Special Rules Relating to Arbitrage.--A bond which is part of 
an issue shall not be treated as a qualified rail infrastructure bond 
unless, with respect to the issue of which the bond is a part, the 
qualified issuer satisfies the arbitrage requirements of section 148 
with respect to proceeds of the issue.
    ``(j) Special Rules Relating to Pool Bonds.--No portion of a pooled 
financing bond may be allocable to loan unless the borrower has entered 
into a written loan commitment for such portion prior to the issue date 
of such issue.
    ``(k) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bond.--The term `bond' includes any obligation.
            ``(2) Pooled financing bond.--The term `pooled financing 
        bond' shall have the meaning given such term by section 
        149(f)(4)(A).
            ``(3) Qualified issuer.--The term `qualified issuer' means 
        1 or more States or an interstate compact of States.
            ``(4) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
            ``(5) S corporations and partnerships.--In the case of a 
        qualified rail infrastructure bond held by an S corporation or 
        partnership, the allocation of the credit allowed by this 
        section to the shareholders of the corporation or partners of 
        such partnership shall be treated as a distribution.
            ``(6) Bonds held by regulated investment companies.--If any 
        qualified rail infrastructure bond is held by a regulated 
        investment company, the credit determined under subsection (a) 
        shall be allowed to shareholders of such company under 
        procedures prescribed by the Secretary.
            ``(7) Reporting.--Issuers of qualified rail infrastructure 
        bonds shall submit reports similar to the reports required 
        under section 149(e).
            ``(8) Termination.--This section shall not apply with 
        respect to any bond issued after December 31, 2012.''.
    (b) Reporting.--Subsection (d) of section 6049 (relating to returns 
regarding payments of interest) is amended by adding at the end the 
following new paragraph:
            ``(9) Reporting of credit on qualified rail infrastructure 
        bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 54A(g) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 54A(b)(4)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A), subsection 
                (b)(4) shall be applied without regard to subparagraphs 
                (A), (H), (I), (J), (K), and (L)(i) of such subsection.
                    ``(C) Regulatory authority.--The Secretary may 
                prescribe such regulations as are necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations which require more 
                frequent or more detailed reporting.''.
    (c) Conforming Amendments.--
            (1) The table of sections for subpart H of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

``Sec. 54A. Credit to holders of qualified rail infrastructure 
                            bonds.''.
            (2) Section 54(c)(2) is amended by inserting ``, section 
        54A,'' after ``subpart C''.
    (d) Issuance of Regulations.--The Secretary of Treasury shall issue 
regulations required under section 54A of the Internal Revenue Code of 
1986 (as added by this section) not later than 120 days after the date 
of the enactment of this Act.
    (e) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 306. REPEAL OF SUSPENSION OF CERTAIN PENALTIES AND INTEREST.

    (a) In General.--Section 6404 is amended by striking subsection 
(g).
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section 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.
            (2) Exception for certain taxpayers.--The amendments made 
        by this section shall not apply to any taxpayer with respect to 
        whom a suspension of any interest, penalty, addition to tax, or 
        other amount is in effect on the date which is 6 months after 
        the date of the enactment of the Small Business and Work 
        Opportunity Tax Act of 2007.

SEC. 307. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER 
              AMOUNTS.

    (a) In General.--Subsection (f) of section 162 (relating to trade 
or business expenses) is amended to read as follows:
    ``(f) Fines, Penalties, and Other Amounts.--
            ``(1) In general.--Except as provided in paragraph (2), no 
        deduction otherwise allowable shall be allowed under this 
        chapter for any amount paid or incurred (whether by suit, 
        agreement, or otherwise) to, or at the direction of, a 
        government or entity described in paragraph (4) in relation 
        to--
                    ``(A) the violation of any law, or
                    ``(B) an investigation or inquiry into the 
                potential violation of any law which is initiated by 
                such government or entity.
            ``(2) Exception for amounts constituting restitution or 
        paid to come into compliance with law.--Paragraph (1) shall not 
        apply to any amount which--
                    ``(A) the taxpayer establishes--
                            ``(i) constitutes restitution (or 
                        remediation of property) for damage or harm 
                        caused by, or which may be caused by, the 
                        violation of any law or the potential violation 
                        of any law, or
                            ``(ii) is paid to come into compliance with 
                        any law which was violated or involved in the 
                        investigation or inquiry, and
                    ``(B) is identified as an amount described in 
                clause (i) or (ii) of subparagraph (A), as the case may 
                be, in the court order or settlement agreement, except 
                that the requirement of this subparagraph shall not 
                apply in the case of any settlement agreement which 
                requires the taxpayer to pay or incur an amount not 
                greater than $1,000,000.
        A taxpayer shall not meet the requirements of subparagraph (A) 
        solely by reason an identification under subparagraph (B). This 
        paragraph shall not apply to any amount paid or incurred as 
        reimbursement to the government or entity for the costs of any 
        investigation or litigation unless such amount is paid or 
        incurred for a cost or fee regularly charged for any routine 
        audit or other customary review performed by the government or 
        entity.
            ``(3) Exception for amounts paid or incurred as the result 
        of certain court orders.--Paragraph (1) shall not apply to any 
        amount paid or incurred by order of a court in a suit in which 
        no government or entity described in paragraph (4) is a party.
            ``(4) Certain nongovernmental regulatory entities.--An 
        entity is described in this paragraph if it is--
                    ``(A) a nongovernmental entity which exercises 
                self-regulatory powers (including imposing sanctions) 
                in connection with a qualified board or exchange (as 
                defined in section 1256(g)(7)), or
                    ``(B) to the extent provided in regulations, a 
                nongovernmental entity which exercises self-regulatory 
                powers (including imposing sanctions) as part of 
                performing an essential governmental function.
            ``(5) Exception for taxes due.--Paragraph (1) shall not 
        apply to any amount paid or incurred as taxes due.''.
    (b) Reporting of Deductible Amounts.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 is amended by inserting after section 6050V the 
        following new section:

``SEC. 6050W. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND 
              OTHER AMOUNTS.

    ``(a) Requirement of Reporting.--
            ``(1) In general.--The appropriate official of any 
        government or entity which is described in section 162(f)(4) 
        which is involved in a suit or agreement described in paragraph 
        (2) shall make a return in such form as determined by the 
        Secretary setting forth--
                    ``(A) the amount required to be paid as a result of 
                the suit or agreement to which paragraph (1) of section 
                162(f) applies,
                    ``(B) any amount required to be paid as a result of 
                the suit or agreement which constitutes restitution or 
                remediation of property, and
                    ``(C) any amount required to be paid as a result of 
                the suit or agreement for the purpose of coming into 
                compliance with any law which was violated or involved 
                in the investigation or inquiry.
            ``(2) Suit or agreement described.--
                    ``(A) In general.--A suit or agreement is described 
                in this paragraph if--
                            ``(i) it is--
                                    ``(I) a suit with respect to a 
                                violation of any law over which the 
                                government or entity has authority and 
                                with respect to which there has been a 
                                court order, or
                                    ``(II) an agreement which is 
                                entered into with respect to a 
                                violation of any law over which the 
                                government or entity has authority, or 
                                with respect to an investigation or 
                                inquiry by the government or entity 
                                into the potential violation of any law 
                                over which such government or entity 
                                has authority, and
                            ``(ii) the aggregate amount involved in all 
                        court orders and agreements with respect to the 
                        violation, investigation, or inquiry is $600 or 
                        more.
                    ``(B) Adjustment of reporting threshold.--The 
                Secretary may adjust the $600 amount in subparagraph 
                (A)(ii) as necessary in order to ensure the efficient 
                administration of the internal revenue laws.
            ``(3) Time of filing.--The return required under this 
        subsection shall be filed not later than--
                    ``(A) 30 days after the date on which a court order 
                is issued with respect to the suit or the date the 
                agreement is entered into, as the case may be, or
                    ``(B) the date specified by the Secretary.
    ``(b) Statements To Be Furnished to Individuals Involved in the 
Settlement.--Every person required to make a return under subsection 
(a) shall furnish to each person who is a party to the suit or 
agreement a written statement showing--
            ``(1) the name of the government or entity, and
            ``(2) the information supplied to the Secretary under 
        subsection (a)(1).
The written statement required under the preceding sentence shall be 
furnished to the person at the same time the government or entity 
provides the Secretary with the information required under subsection 
(a).
    ``(c) Appropriate Official Defined.--For purposes of this section, 
the term `appropriate official' means the officer or employee having 
control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.''.
            (2) Conforming 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 6050V the 
        following new item:

``Sec. 6050W. Information with respect to certain fines, penalties, and 
                            other amounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred on or after the date of the enactment 
of this Act, except that such amendments shall not apply to amounts 
paid or incurred under any binding order or agreement entered into 
before such date. Such exception shall not apply to an order or 
agreement requiring court approval unless the approval was obtained 
before such date.

SEC. 308. 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.
    ``(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.
                                                       Calendar No. 482

110th CONGRESS

  1st Session

                                S. 2345

                          [Report No. 110-228]

_______________________________________________________________________

                                 A BILL

To amend the Internal Revenue Code of 1986 and to extend the financing 
     for the Airport and Airway Trust Fund, and for other purposes.

_______________________________________________________________________

                           November 13, 2007

                 Read twice and placed on the calendar