[Congressional Record Volume 153, Number 194 (Tuesday, December 18, 2007)]
[House]
[Pages H16772-H16788]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




PROVIDING FOR CONCURRENCE BY HOUSE WITH AMENDMENT IN SENATE AMENDMENTS 
  TO H.R. 3997, HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT OF 2007

  Mr. LARSON of Connecticut. Mr. Speaker, I move to suspend the rules 
and agree to the resolution (H. Res. 884) providing for the concurrence 
by the House in the Senate amendments to H.R. 3997, with an amendment.
  The Clerk read the title of the resolution.
  The text of the resolution is as follows:

                              H. Res. 884

       Resolved, That upon the adoption of this resolution the 
     House shall be considered to have taken from the Speaker's 
     table the bill, H.R. 3997, with the Senate amendments 
     thereto, and to have (1) concurred in the Senate amendment to 
     the title of the bill, and (2) concurred in the Senate 
     amendment to the text of the bill with the following 
     amendment:
       In lieu of the matter proposed to be inserted by the 
     amendment of the Senate to the text of the bill, insert the 
     following:

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Heroes 
     Earnings Assistance and Relief Tax Act of 2007''.
       (b) Reference.--Except as otherwise expressly provided, 
     whenever in this Act an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Internal Revenue Code of 
     1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title, etc.

       TITLE I--BENEFITS FOR MILITARY AND VOLUNTEER FIREFIGHTERS

Sec. 101. Election to include combat pay as earned income for purposes 
              of earned income tax credit.
Sec. 102. Modification of mortgage revenue bonds for veterans.
Sec. 103. Survivor and disability payments with respect to qualified 
              military service.
Sec. 104. Treatment of differential military pay as wages.
Sec. 105. Extension of exclusion from income for benefits provided to 
              volunteer firefighters and emergency medical responders.
Sec. 106. Special period of limitation when uniformed services retired 
              pay is reduced as a result of award of disability 
              compensation.
Sec. 107. Distributions from retirement plans to individuals called to 
              active duty.
Sec. 108. Disclosure of return information relating to veterans 
              programs made permanent.
Sec. 109. Contributions of military death gratuities to Roth IRAs and 
              Education Savings Accounts.
Sec. 110. Suspension of 5-year period during service with the Peace 
              Corps.
Sec. 111. Credit for employer differential wage payments to employees 
              who are active duty members of the uniformed services.
Sec. 112. State payments to service members treated as qualified 
              military benefits.
Sec. 113. Permanent exclusion of gain from sale of a principal 
              residence by certain employees of the intelligence 
              community.
Sec. 114. Special disposition rules for unused benefits in health 
              flexible spending arrangements of individuals called to 
              active duty.

         TITLE II--IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME

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

                     TITLE III--REVENUE PROVISIONS

Sec. 301. Increase in penalty for failure to file partnership returns.

[[Page H16773]]

Sec. 302. Increase in penalty for failure to file S corporation 
              returns.
Sec. 303. Increase in minimum penalty on failure to file a return of 
              tax.
Sec. 304. Increase in information return penalties.
Sec. 305. Revision of tax rules on expatriation.

                  TITLE IV--TAX TECHNICAL CORRECTIONS

Sec. 401. Short title.
Sec. 402. Amendment related to the Tax Relief and Health Care Act of 
              2006.
Sec. 403. Amendments related to title XII of the Pension Protection Act 
              of 2006.
Sec. 404. Amendments related to the Tax Increase Prevention and 
              Reconciliation Act of 2005.
Sec. 405. Amendments related to the Safe, Accountable, Flexible, 
              Efficient Transportation Equity Act: A Legacy for Users.
Sec. 406. Amendments related to the Energy Policy Act of 2005.
Sec. 407. Amendments related to the American Jobs Creation Act of 2004.
Sec. 408. Amendments related to the Economic Growth and Tax Relief 
              Reconciliation Act of 2001.
Sec. 409. Amendments related to the Tax Relief Extension Act of 1999.
Sec. 410. Amendment related to the Internal Revenue Service 
              Restructuring and Reform Act of 1998.
Sec. 411. Clerical corrections.

   TITLE V--PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
                                BENEFITS

Sec. 501. Parity in application of certain limits to mental health 
              benefits.

       TITLE I--BENEFITS FOR MILITARY AND VOLUNTEER FIREFIGHTERS

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

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

     SEC. 102. MODIFICATION OF MORTGAGE REVENUE BONDS FOR 
                   VETERANS.

       (a) Qualified Mortgage Bonds Used To Finance Residences for 
     Veterans Without Regard to First-Time Homebuyer 
     Requirement.--Subparagraph (D) of section 143(d)(2) (relating 
     to exceptions) is amended by striking ``and before January 1, 
     2008''.
       (b) Increase in Bond Limitation for Alaska, Oregon, and 
     Wisconsin.--Clause (ii) of section 143(l)(3)(B) (relating to 
     State veterans limit) is amended by striking ``$25,000,000'' 
     each place it appears and inserting ``$100,000,000''.
       (c) Definition of Qualified Veteran.--Paragraph (4) of 
     section 143(l) (defining qualified veteran) is amended to 
     read as follows:
       ``(4) Qualified veteran.--For purposes of this subsection, 
     the term `qualified veteran' means any veteran who--
       ``(A) served on active duty, and
       ``(B) applied for the financing before the date 25 years 
     after the last date on which such veteran left active 
     service.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 2007.

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

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

       (I) pursuant to the amendments made by subsection (a) or 
     pursuant to any regulation issued by the Secretary of the 
     Treasury under subsection (a), and
       (II) on or before the last day of the first plan year 
     beginning on or after January 1, 2009.

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this clause 
     shall be applied by substituting ``2011'' for ``2009'' in 
     subclause (II).
       (ii) Conditions.--This paragraph shall not apply to any 
     amendment unless--

       (I) the plan or contract is operated as if such plan or 
     contract amendment were in effect for the period described in 
     clause (iii), and
       (II) such plan or contract amendment applies retroactively 
     for such period.

       (iii) Period described.--The period described in this 
     clause is the period--

       (I) beginning on the effective date specified by the plan, 
     and
       (II) ending on the date described in clause (i)(II) (or, if 
     earlier, the date the plan or contract amendment is adopted).

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

       (a) Income Tax Withholding on Differential Wage Payments.--
       (1) In general.--Section 3401 (relating to definitions) is 
     amended by adding at the end the following new subsection:
       ``(h) Differential Wage Payments to Active Duty Members of 
     the Uniformed Services.--
       ``(1) In general.--For purposes of subsection (a), any 
     differential wage payment shall be treated as a payment of 
     wages by the employer to the employee.
       ``(2) Differential wage payment.--For purposes of paragraph 
     (1), the term `differential wage payment' means any payment 
     which--
       ``(A) is made by an employer to an individual with respect 
     to any period during which the individual is performing 
     service in the uniformed services (as defined in chapter 43 
     of title 38, United States Code) while on active duty for a 
     period of more than 30 days, and
       ``(B) represents all or a portion of the wages the 
     individual would have received from the employer if the 
     individual were performing service for the employer.''.

[[Page H16774]]

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

     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this 
     subparagraph shall be applied by substituting ``2011'' for 
     ``2009'' in clause (ii).
       (B) Conditions.--This subsection shall not apply to any 
     plan or annuity contract amendment unless--
       (i) during the period beginning on the date the amendment 
     described in subparagraph (A)(i) takes effect and ending on 
     the date described in subparagraph (A)(ii) (or, if earlier, 
     the date the plan or contract amendment is adopted), the plan 
     or contract is operated as if such plan or contract amendment 
     were in effect, and
       (ii) such plan or contract amendment applies retroactively 
     for such period.

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

       Subsection (d) of section 139B (relating to termination), 
     as added to the Internal Revenue Code of 1986 by section 5 of 
     the Mortgage Forgiveness Debt Relief Act of 2007, is amended 
     by striking ``December 31, 2010'' and inserting ``December 
     31, 2015''.

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

       (a) In General.--Subsection (d) of section 6511 (relating 
     to special rules applicable to income taxes) is amended by 
     adding at the end the following new paragraph:
       ``(8) Special rules when uniformed services retired pay is 
     reduced as a result of award of disability compensation.--
       ``(A) Period of limitation on filing claim.--If the claim 
     for credit or refund relates to an overpayment of tax imposed 
     by subtitle A on account of--
       ``(i) the reduction of uniformed services retired pay 
     computed under section 1406 or 1407 of title 10, United 
     States Code, or
       ``(ii) the waiver of such pay under section 5305 of title 
     38 of such Code,

     as a result of an award of compensation under title 38 of 
     such Code pursuant to a determination by the Secretary of 
     Veterans Affairs, the 3-year period of limitation prescribed 
     in subsection (a) shall be extended, for purposes of 
     permitting a credit or refund based upon the amount of such 
     reduction or waiver, until the end of the 1-year period 
     beginning on the date of such determination.
       ``(B) Limitation to 5 taxable years.--Subparagraph (A) 
     shall not apply with respect to any taxable year which began 
     more than 5 years before the date of such determination.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to claims for credit or refund filed after the 
     date of the enactment of this Act.
       (c) Transition Rules.--In the case of a determination 
     described in paragraph (8) of section 6511(d) of the Internal 
     Revenue Code of 1986 (as added by this section) which is made 
     by the Secretary of Veterans Affairs after December 31, 2000, 
     and before the date of the enactment of this Act, such 
     paragraph--
       (1) shall not apply with respect to any taxable year which 
     began before January 1, 2001, and
       (2) shall be applied by substituting for ``the date of such 
     determination'' in subparagraph (A) thereof.

     SEC. 107. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS 
                   CALLED TO ACTIVE DUTY.

       (a) In General.--Clause (iv) of section 72(t)(2)(G) is 
     amended by striking ``, and before December 31, 2007''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to individuals ordered or called to active duty 
     on or after December 31, 2007.

     SEC. 108. DISCLOSURE OF RETURN INFORMATION RELATING TO 
                   VETERANS PROGRAMS MADE PERMANENT.

       (a) In General.--Subparagraph (D) of section 6103(l)(7) 
     (relating to disclosure of return information to Federal, 
     State, and local agencies administering certain programs 
     under the Social Security Act, the Food Stamp Act of 1977, or 
     title 38, United States Code or certain housing assistance 
     programs) is amended by striking the last sentence.
       (b) Technical Amendment.--Section 6103(l)(7)(D)(viii)(III) 
     is amended by striking ``sections 1710(a)(1)(I), 1710(a)(2), 
     1710(b), and 1712(a)(2)(B)'' and inserting ``sections 
     1710(a)(2)(G), 1710(a)(3), and 1710(b)''.

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

       (a) Provision in Effect Before Pension Protection Act.--
     Subsection (e) of section 408A (relating to qualified 
     rollover contribution), as in effect before the amendments 
     made by section 824 of the Pension Protection Act of 2006, is 
     amended to read as follows:
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified rollover 
     contribution' means a rollover contribution to a Roth IRA 
     from another such account, or from an individual retirement 
     plan, but only if such rollover contribution meets the 
     requirements of section 408(d)(3). Such term includes a 
     rollover contribution described in section 402A(c)(3)(A). For 
     purposes of section 408(d)(3)(B), there shall be disregarded 
     any qualified rollover contribution from an individual 
     retirement plan (other than a Roth IRA) to a Roth IRA.
       ``(2) Military death gratuity.--
       ``(A) In general.--The term `qualified rollover 
     contribution' includes a contribution to a Roth IRA 
     maintained for the benefit of an individual made before the 
     end of the 1-year period beginning on the date on which such 
     individual receives an amount under section 1477 of title 10, 
     United States Code, or section 1967 of title 38 of such Code, 
     with respect to a person, to the extent that such 
     contribution does not exceed--
       ``(i) the sum of the amounts received during such period by 
     such individual under such sections with respect to such 
     person, reduced by
       ``(ii) the amounts so received which were contributed to a 
     Coverdell education savings account under section 530(d)(9).
       ``(B) Annual limit on number of rollovers not to apply.--
     Section 408(d)(3)(B) shall not apply with respect to amounts 
     treated as a rollover by subparagraph (A).
       ``(C) Application of section 72.--For purposes of applying 
     section 72 in the case of a distribution which is not a 
     qualified distribution, the amount treated as a rollover by 
     reason of subparagraph (A) shall be treated as investment in 
     the contract.''.
       (b) Provision in Effect After Pension Protection Act.--
     Subsection (e) of section 408A, as in effect after the 
     amendments made by section 824 of the Pension Protection Act 
     of 2006, is amended to read as follows:
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section--

[[Page H16775]]

       ``(1) In general.--The term `qualified rollover 
     contribution' means a rollover contribution--
       ``(A) to a Roth IRA from another such account,
       ``(B) from an eligible retirement plan, but only if--
       ``(i) in the case of an individual retirement plan, such 
     rollover contribution meets the requirements of section 
     408(d)(3), and
       ``(ii) in the case of any eligible retirement plan (as 
     defined in section 402(c)(8)(B) other than clauses (i) and 
     (ii) thereof), such rollover contribution meets the 
     requirements of section 402(c), 403(b)(8), or 457(e)(16), as 
     applicable.

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

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

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

     SEC. 111. CREDIT FOR EMPLOYER DIFFERENTIAL WAGE PAYMENTS TO 
                   EMPLOYEES WHO ARE ACTIVE DUTY MEMBERS OF THE 
                   UNIFORMED SERVICES.

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

     ``SEC. 45O. EMPLOYER WAGE CREDIT FOR EMPLOYEES WHO ARE ACTIVE 
                   DUTY MEMBERS OF THE UNIFORMED SERVICES.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible small business employer, the differential 
     wage payment credit for any taxable year is an amount equal 
     to 20 percent of the sum of the eligible differential wage 
     payments for each of the qualified employees of the taxpayer 
     during such taxable year.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Eligible differential wage payments.--The term 
     `eligible differential wage payments' means, with respect to 
     each qualified employee, so much of the differential wage 
     payments (as defined in section 3401(h)(2)) paid to such 
     employee for the taxable year as does not exceed $20,000.
       ``(2) Qualified employee.--The term `qualified employee' 
     means a person who has been an employee of the taxpayer for 
     the 91-day period immediately preceding the period for which 
     any differential wage payment is made.
       ``(3) Eligible small business employer.--
       ``(A) In general.--The term `eligible small business 
     employer' means, with respect to any taxable year, any 
     employer which--
       ``(i) employed an average of less than 50 employees on 
     business days during such taxable year, and
       ``(ii) under a written plan of the employer, provides 
     eligible differential wage payments to every qualified 
     employee of the employer.
       ``(B) Controlled groups.--For purposes of subparagraph (A), 
     all persons treated as a single employer under subsection 
     (b), (c), (m), or (o) of section 414 shall be treated as a 
     single employer.
       ``(c) Coordination With Other Credits.--The amount of 
     credit otherwise allowable under this chapter with respect to 
     compensation paid to any employee shall be reduced by the 
     credit determined under this section with respect to such 
     employee.
       ``(d) Disallowance for Failure To Comply With Employment or 
     Reemployment Rights of Members of the Reserve Components of 
     the Armed Forces of the United States.--No credit shall be 
     allowed under subsection (a) to a taxpayer for--
       ``(1) any taxable year, beginning after the date of the 
     enactment of this section, in which the taxpayer is under a 
     final order, judgment, or other process issued or required by 
     a district court of the United States under section 4323 of 
     title 38 of the United States Code with respect to a 
     violation of chapter 43 of such title, and
       ``(2) the 2 succeeding taxable years.
       ``(e) Certain Rules to Apply.--For purposes of this 
     section, rules similar to the rules of subsections (c), (d), 
     and (e) of section 52 shall apply.
       ``(f) Termination.--This section shall not apply to any 
     payments made after December 31, 2009.''.
       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) (relating to general business credit) is 
     amended by striking ``plus'' at the end of paragraph (30), by 
     striking the period at the end of paragraph (31) and 
     inserting ``, plus'', and by adding at the end of following 
     new paragraph:
       ``(32) the differential wage payment credit determined 
     under section 45O(a).''.
       (c) No Deduction for Compensation Taken Into Account for 
     Credit.--Section 280C(a) (relating to rule for employment 
     credits) is amended by inserting ``45O(a),'' after 
     ``45A(a),''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following new item:

``Sec. 45O. Employer wage credit for employees who are active duty 
              members of the uniformed services.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid after the date of the enactment 
     of this Act.

     SEC. 112. STATE PAYMENTS TO SERVICE MEMBERS TREATED AS 
                   QUALIFIED MILITARY BENEFITS.

       (a) In General.--Section 134(b) (defining qualified 
     military benefit) is amended by adding at the end the 
     following new paragraph:
       ``(6) Certain state payments.--The term `qualified military 
     benefit' includes any bonus payment by a State or political 
     subdivision thereof to any member or former member of the 
     uniformed services of the United States or any dependent of 
     such member only by reason of such member's service in an 
     combat zone (as defined in section 112(c)(2), determined 
     without regard to the parenthetical).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments

[[Page H16776]]

     made before, on, or after the date of the enactment of this 
     Act.

     SEC. 113. PERMANENT EXCLUSION OF GAIN FROM SALE OF A 
                   PRINCIPAL RESIDENCE BY CERTAIN EMPLOYEES OF THE 
                   INTELLIGENCE COMMUNITY.

       (a) In General.--Section 417(e) of division A of the Tax 
     Relief and Health Care Act of 2006 is amended by striking 
     ``and before January 1, 2011''.
       (b) Duty Station May Be Inside United States.--Section 
     121(d)(9)(C) (defining qualified official extended duty) is 
     amended by striking clause (vi).
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales or exchanges after December 31, 2010.

     SEC. 114. SPECIAL DISPOSITION RULES FOR UNUSED BENEFITS IN 
                   HEALTH FLEXIBLE SPENDING ARRANGEMENTS OF 
                   INDIVIDUALS CALLED TO ACTIVE DUTY.

       (a) In General.--Section 125 (relating to cafeteria plans) 
     is amended by redesignating subsections (h) and (i) as 
     subsection (i) and (j), respectively, and by inserting after 
     subsection (g) the following new subsection:
       ``(h) Special Rule for Unused Benefits in Health Flexible 
     Spending Arrangements of Individuals Called to Active Duty.--
       ``(1) In general.--For purposes of this title, a plan or 
     other arrangement shall not fail to be treated as a cafeteria 
     plan or health flexible spending arrangement merely because 
     such arrangement provides for qualified reservist 
     distributions.
       ``(2) Qualified reservist distribution.--For purposes of 
     this subsection, the term `qualified reservist distribution' 
     means, any distribution to an individual of all or a portion 
     of the balance in the employee's account under such 
     arrangement if--
       ``(A) such individual was (by reason of being a member of a 
     reserve component (as defined in section 101 of title 37, 
     United States Code)) ordered or called to active duty for a 
     period in excess of 179 days or for an indefinite period, and
       ``(B) such distribution is made during the period beginning 
     on the date of such order or call and ending on the last date 
     that reimbursements could otherwise be made under such 
     arrangement for the plan year which includes the date of such 
     order or call.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after the date of the 
     enactment of this Act.

         TITLE II--IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME

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

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

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

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

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

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

     SEC. 204. EFFECTIVE DATE.

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

                     TITLE III--REVENUE PROVISIONS

     SEC. 301. INCREASE IN PENALTY FOR FAILURE TO FILE PARTNERSHIP 
                   RETURNS.

       (a) Increase in Penalty Amount.--Paragraph (1) of section 
     6698(b) (relating to amount per month), as amended by section 
     8 of the Mortgage Forgiveness Debt Relief Act of 2007, is 
     amended by striking ``$85'' and inserting ``$100''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 8 of the Mortgage Forgiveness Debt Relief Act of 
     2007.

     SEC. 302. INCREASE IN PENALTY FOR FAILURE TO FILE S 
                   CORPORATION RETURNS.

       (a) In General.--Paragraph (1) of section 6699(b) (relating 
     to amount per month), as added to the Internal Revenue Code 
     of 1986 by section 9 of the Mortgage Forgiveness Debt Relief 
     Act of 2007, is amended by striking ``$85'' and inserting 
     ``$100''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 9 of the Mortgage Forgiveness Debt Relief Act of 
     2007.

     SEC. 303. INCREASE IN MINIMUM PENALTY ON FAILURE TO FILE A 
                   RETURN OF TAX.

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

     SEC. 304. INCREASE IN INFORMATION RETURN PENALTIES.

       (a) Failure to File Correct Information Returns.--
       (1) In general.--Subsections (a)(1), (b)(1)(A), and 
     (b)(2)(A) of section 6721 are each amended by striking 
     ``$50'' and inserting ``$100''.
       (2) Aggregate annual limitation.--Subsections (a)(1), 
     (d)(1)(A), and (e)(3)(A) of section 6721 are each amended by 
     striking ``$250,000'' and inserting ``$1,500,000''.
       (b) Reduction Where Correction Within 30 Days.--
       (1) In general.--Subparagraph (A) of section 6721(b)(1) is 
     amended by striking ``$15'' and inserting ``$50''.
       (2) Aggregate annual limitation.--Subsections (b)(1)(B) and 
     (d)(1)(B) of section 6721 are each amended by striking 
     ``$75,000'' and inserting ``$500,000''.
       (c) Reduction Where Correction on or Before August 1.--
       (1) In general.--Subparagraph (A) of section 6721(b)(2) is 
     amended by striking ``$30'' and inserting ``$75''.
       (2) Aggregate annual limitation.--Subsections (b)(2)(B) and 
     (d)(1)(C) of section 6721are each amended by striking 
     ``$150,000'' and inserting ``$1,000,000''.
       (d) Aggregate Annual Limitations for Persons With Gross 
     Receipts of Not More Than $5,000,000.--Paragraph (1) of 
     section 6721(d) is amended--
       (1) by striking ``$100,000'' in subparagraph (A) and 
     inserting ``$500,000'',
       (2) by striking ``$25,000'' in subparagraph (B) and 
     inserting ``$100,000'', and
       (3) by striking ``$50,000'' in subparagraph (C) and 
     inserting ``$250,000''.
       (e) Penalty in Case of Intentional Disregard.--Paragraph 
     (2) of section 6721(e) is amended by striking ``$100'' and 
     inserting ``$250''.
       (f) Failure to Furnish Correct Payee Statements.--
       (1) In general.--Subsection (a) of section 6722 is amended 
     by striking ``$50'' and inserting ``$100''.
       (2) Aggregate annual limitation.--Subsections (a) and 
     (c)(2)(A) of section 6722 are each amended by striking 
     ``$100,000'' and inserting ``$500,000''.
       (3) Penalty in case of intentional disregard.--Paragraph 
     (1) of section 6722(c) is amended by striking ``$100'' and 
     inserting ``$250''.
       (g) Failure To Comply With Other Information Reporting 
     Requirements.--Section 6723 is amended--
       (1) by striking ``$50'' and inserting ``$100'', and
       (2) by striking ``$100,000'' and inserting ``$500,000''.
       (h) Effective Date.--The amendments made by this section 
     shall apply with respect to information returns required to 
     be filed on or after January 1, 2008.

     SEC. 305. 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--

[[Page H16777]]

       ``(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.

[[Page H16778]]

       ``(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 unless the covered expatriate agrees 
     to such other treatment as the Secretary determines 
     appropriate.
       ``(5) Application.--This subsection shall apply to a 
     nongrantor trust only if the covered expatriate was a 
     beneficiary of the trust on the day before the expatriation 
     date.
       ``(g) Definitions and Special Rules Relating to 
     Expatriation.--For purposes of this section--
       ``(1) Covered expatriate.--
       ``(A) In general.--The term `covered expatriate' means an 
     expatriate who meets the requirements of subparagraph (A), 
     (B), or (C) of section 877(a)(2).
       ``(B) Exceptions.--An individual shall not be treated as 
     meeting the requirements of subparagraph (A) or (B) of 
     section 877(a)(2) if--
       ``(i) the individual--

       ``(I) became at birth a citizen of the United States and a 
     citizen of another country and, as of the expatriation date, 
     continues to be a citizen of, and is taxed as a resident of, 
     such other country, and
       ``(II) has been a resident of the United States (as defined 
     in section 7701(b)(1)(A)(ii)) for not more than 10 taxable 
     years during the 15-taxable year period ending with the 
     taxable year during which the expatriation date occurs, or

       ``(ii)(I) the individual's relinquishment of United States 
     citizenship occurs before such individual attains age 18\1/
     2\, and
       ``(II) the individual has been a resident of the United 
     States (as so defined) for not more than 10 taxable years 
     before the date of relinquishment.
       ``(C) Covered expatriates also subject to tax as citizens 
     or residents.--In the case of any covered expatriate who is 
     subject to tax as a citizen or resident of the United States 
     for any period beginning after the expatriation date, such 
     individual shall not be treated as a covered expatriate 
     during such period for purposes of subsections (d)(1) and (f) 
     and section 2801.
       ``(2) Expatriate.--The term `expatriate' means--
       ``(A) any United States citizen who relinquishes his 
     citizenship, and
       ``(B) any long-term resident of the United States who 
     ceases to be a lawful permanent resident of the United States 
     (within the meaning of section 7701(b)(6)).
       ``(3) Expatriation date.--The term `expatriation date' 
     means--
       ``(A) the date an individual relinquishes United States 
     citizenship, or
       ``(B) in the case of a long-term resident of the United 
     States, the date on which the individual ceases to be a 
     lawful permanent resident of the United States (within the 
     meaning of section 7701(b)(6)).
       ``(4) Relinquishment of citizenship.--A citizen shall be 
     treated as relinquishing his United States citizenship on the 
     earliest of--
       ``(A) the date the individual renounces his United States 
     nationality before a diplomatic or consular officer of the 
     United States pursuant to paragraph (5) of section 349(a) of 
     the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
       ``(B) the date the individual furnishes to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
       ``(C) the date the United States Department of State issues 
     to the individual a certificate of loss of nationality, or
       ``(D) the date a court of the United States cancels a 
     naturalized citizen's certificate of naturalization.
     Subparagraph (A) or (B) shall not apply to any individual 
     unless the renunciation or voluntary relinquishment is 
     subsequently approved by the issuance to the individual of a 
     certificate of loss of nationality by the United States 
     Department of State.
       ``(5) Long-term resident.--The term `long-term resident' 
     has the meaning given to such term by section 877(e)(2).
       ``(6) Early distribution tax.--The term `early distribution 
     tax' means any increase in tax imposed under section 72(t), 
     220(e)(4), 223(f)(4), 409A(a)(1)(B), 529(c)(6), or 530(d)(4).
       ``(h) Other Rules.--
       ``(1) Termination of deferrals, etc.--In the case of any 
     covered expatriate, notwithstanding any other provision of 
     this title--
       ``(A) any time period for acquiring property which would 
     result in the reduction in the amount of gain recognized with 
     respect to property disposed of by the taxpayer shall 
     terminate on the day before the expatriation date, and
       ``(B) any extension of time for payment of tax shall cease 
     to apply on the day before the expatriation date and the 
     unpaid portion of such tax shall be due and payable at the 
     time and in the manner prescribed by the Secretary.
       ``(2) Step-up in basis.--Solely for purposes of determining 
     any tax imposed by reason of subsection (a), property which 
     was held by an individual on the date the individual first 
     became a resident of the United States (within the meaning of 
     section 7701(b)) shall be treated as having a basis on such 
     date of not less than the fair market value of such property 
     on such date. The preceding sentence shall not apply if the 
     individual elects not to have such sentence apply. Such an 
     election, once made, shall be irrevocable.
       ``(3) Coordination with section 684.--If the expatriation 
     of any individual would result in the recognition of gain 
     under section 684, this section shall be applied after the 
     application of section 684.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Tax on Gifts and Bequests Received by United States 
     Citizens and Residents From Expatriates.--
       (1) In general.--Subtitle B (relating to estate and gift 
     taxes) is amended by inserting after chapter 14 the following 
     new chapter:

           ``CHAPTER 15--GIFTS AND BEQUESTS FROM EXPATRIATES

``Sec. 2801. Imposition of tax.

     ``SEC. 2801. IMPOSITION OF TAX.

       ``(a) In General.--If, during any calendar year, any United 
     States citizen or resident receives any covered gift or 
     bequest, there is hereby imposed a tax equal to the product 
     of--
       ``(1) the highest rate of tax specified in the table 
     contained in section 2001(c) as in effect on the date of such 
     receipt (or, if greater, the highest rate of tax specified in 
     the table applicable under section 2502(a) as in effect on 
     the date), and
       ``(2) the value of such covered gift or bequest.
       ``(b) Tax To Be Paid by Recipient.--The tax imposed by 
     subsection (a) on any covered gift or bequest shall be paid 
     by the person receiving such gift or bequest.
       ``(c) Exception for Certain Gifts.--Subsection (a) shall 
     apply only to the extent that the value of covered gifts and 
     bequests received by any person during the calendar year 
     exceeds the dollar amount in effect under section 2503(b) for 
     such calendar year.
       ``(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) Exceptions for transfers to spouse or charity.--Such 
     term shall not include any property with respect to which a 
     deduction would be allowed under section 2055, 2056, 2522, or 
     2523, whichever is appropriate, if the decedent or donor were 
     a United States person.
       ``(4) 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

[[Page H16779]]

     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 from transferors whose expatriation 
     date is on or after such date of enactment.

                  TITLE IV--TAX TECHNICAL CORRECTIONS

     SEC. 401. SHORT TITLE.

       This title may be cited as the ``Tax Technical Corrections 
     Act of 2007''.

     SEC. 402. AMENDMENT RELATED TO THE TAX RELIEF AND HEALTH CARE 
                   ACT OF 2006.

       (a) Amendment Related to Section 402 of Division A of the 
     Act.--Subparagraph (A) of section 53(e)(2) is amended to read 
     as follows:
       ``(A) In general.--The term `AMT refundable credit amount' 
     means, with respect to any taxable year, the amount (not in 
     excess of the long-term unused minimum tax credit for such 
     taxable year) equal to the greater of--
       ``(i) $5,000,
       ``(ii) 20 percent of the long-term unused minimum tax 
     credit for such taxable year, or
       ``(iii) the amount (if any) of the AMT refundable credit 
     amount determined under this paragraph for the taxpayer's 
     preceding taxable year (as determined before any reduction 
     under subparagraph (B)).''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the provision of the Tax 
     Relief and Health Care Act of 2006 to which it relates.

     SEC. 403. AMENDMENTS RELATED TO TITLE XII OF THE PENSION 
                   PROTECTION ACT OF 2006.

       (a) Amendment Related to Section 1201 of the Act.--
     Subparagraph (D) of section 408(d)(8) is amended by striking 
     ``all amounts distributed from all individual retirement 
     plans were treated as 1 contract under paragraph (2)(A) for 
     purposes of determining the inclusion of such distribution 
     under section 72'' and inserting ``all amounts in all 
     individual retirement plans of the individual were 
     distributed during such taxable year and all such plans were 
     treated as 1 contract for purposes of determining under 
     section 72 the aggregate amount which would have been so 
     includible''.
       (b) Amendment Related to Section 1203 of the Act.--
     Subsection (d) of section 1366 is amended by adding at the 
     end the following new paragraph:
       ``(4) Application of limitation on charitable 
     contributions.--In the case of any charitable contribution of 
     property to which the second sentence of section 1367(a)(2) 
     applies, paragraph (1) shall not apply to the extent of the 
     excess (if any) of--
       ``(A) the shareholder's pro rata share of such 
     contribution, over
       ``(B) the shareholder's pro rata share of the adjusted 
     basis of such property.''.
       (c) Amendment Related to Section 1215 of the Act.--
     Subclause (I) of section 170(e)(7)(D)(i) is amended by 
     striking ``related'' and inserting ``substantial and 
     related''.
       (d) Amendments Related to Section 1218 of the Act.--
       (1) Section 2055 is amended by striking subsection (g) and 
     by redesignating subsection (h) as subsection (g).
       (2) Subsection (e) of section 2522 is amended--
       (A) by striking paragraphs (2) and (4),
       (B) by redesignating paragraph (3) as paragraph (2), and
       (C) by adding at the end of paragraph (2), as so 
     redesignated, the following new subparagraph:
       ``(C) Initial fractional contribution.--For purposes of 
     this paragraph, the term `initial fractional contribution' 
     means, with respect to any donor, the first gift of an 
     undivided portion of the donor's entire interest in any 
     tangible personal property for which a deduction is allowed 
     under subsection (a) or (b).''.
       (e) Amendments Related to Section 1219 of the Act.--
       (1) Paragraph (2) of section 6695A(a) is amended by 
     inserting ``a substantial estate or gift tax valuation 
     understatement (within the meaning of section 6662(g)),'' 
     before ``or a gross valuation misstatement''.
       (2) Paragraph (1) of section 6696(d) is amended by striking 
     ``or under section 6695'' and inserting ``, section 6695, or 
     6695A''.
       (f) Amendment Related to Section 1221 of the Act.--
     Subparagraph (A) of section 4940(c)(4) is amended to read as 
     follows:
       ``(A) There shall not be taken into account any gain or 
     loss from the sale or other disposition of property to the 
     extent that such gain or loss is taken into account for 
     purposes of computing the tax imposed by section 511.''.
       (g) Amendment Related to Section 1225 of the Act.--
       (1) Subsection (b) of section 6104 is amended--
       (A) by striking ``Information'' in the heading, and
       (B) by adding at the end the following: ``Any annual return 
     which is filed under section 6011 by an organization 
     described in section 501(c)(3) and which relates to any tax 
     imposed by section 511 (relating to imposition of tax on 
     unrelated business income of charitable, etc., organizations) 
     shall be treated for purposes of this subsection in the same 
     manner as if furnished under section 6033.''.
       (2) Clause (ii) of section 6104(d)(1)(A) is amended to read 
     as follows:
       ``(ii) any annual return which is filed under section 6011 
     by an organization described in section 501(c)(3) and which 
     relates to any tax imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc., organizations),''.
       (3) Paragraph (2) of section 6104(d) is amended by striking 
     ``section 6033'' and inserting ``section 6011 or 6033''.
       (h) Amendment Related to Section 1231 of the Act.--
     Subsection (b) of section 4962 is amended by striking ``or 
     D'' and inserting ``D, or G''.
       (i) Amendment Related to Section 1242 of the Act.--
       (1) Subclause (II) of section 4958(c)(3)(A)(i) is amended 
     by striking ``paragraph (1), (2), or (4) of section 509(a)'' 
     and inserting ``subparagraph (C)(ii)''.
       (2) Clause (ii) of section 4958(c)(3)(C) is amended to read 
     as follows:
       ``(ii) Exception.--Such term shall not include--

       ``(I) any organization described in paragraph (1), (2), or 
     (4) of section 509(a), and
       ``(II) any organization which is treated as described in 
     such paragraph (2) by reason of the last sentence of section 
     509(a) and which is a supported organization (as defined in 
     section 509(f)(3)) of the organization to which subparagraph 
     (A) applies.''.

       (j) 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 they relate.

     SEC. 404. AMENDMENTS RELATED TO THE TAX INCREASE PREVENTION 
                   AND RECONCILIATION ACT OF 2005.

       (a) Amendments Related to Section 103 of the Act.--
     Paragraph (6) of section 954(c) is amended by redesignating 
     subparagraph (B) as subparagraph (C) and inserting after 
     subparagraph (A) the following new subparagraph:
       ``(B) Exception.--Subparagraph (A) shall not apply in the 
     case of any interest, rent, or royalty to the extent such 
     interest, rent, or royalty creates (or increases) a deficit 
     which under section 952(c) may reduce the subpart F income of 
     the payor or another controlled foreign corporation.''.

[[Page H16780]]

       (b) Amendments Related to Section 202 of the Act.--
       (1) Subparagraph (A) of section 355(b)(2) is amended to 
     read as follows:
       ``(A) it is engaged in the active conduct of a trade or 
     business,''.
       (2) Paragraph (3) of section 355(b) is amended to read as 
     follows:
       ``(3) Special rules for determining active conduct in the 
     case of affiliated groups.--
       ``(A) In general.--For purposes of determining whether a 
     corporation meets the requirements of paragraph (2)(A), all 
     members of such corporation's separate affiliated group shall 
     be treated as one corporation.
       ``(B) Separate affiliated group.--For purposes of this 
     paragraph, the term `separate affiliated group' means, with 
     respect to any corporation, the affiliated group which would 
     be determined under section 1504(a) if such corporation were 
     the common parent and section 1504(b) did not apply.
       ``(C) Treatment of trade or business conducted by acquired 
     member.--If a corporation became a member of a separate 
     affiliated group as a result of one or more transactions in 
     which gain or loss was recognized in whole or in part, any 
     trade or business conducted by such corporation (at the time 
     that such corporation became such a member) shall be treated 
     for purposes of paragraph (2) as acquired in a transaction in 
     which gain or loss was recognized in whole or in part.
       ``(D) Regulations.--The Secretary shall prescribe such 
     regulations as are necessary or appropriate to carry out the 
     purposes of this paragraph, including regulations which 
     provide for the proper application of subparagraphs (B), (C), 
     and (D) of paragraph (2), and modify the application of 
     subsection (a)(3)(B), in connection with the application of 
     this paragraph.''.
       (3) The Internal Revenue Code of 1986 shall be applied and 
     administered as if the amendments made by section 202 of the 
     Tax Increase Prevention and Reconciliation Act of 2005 and by 
     section 410 of division A of the Tax Relief and Health Care 
     Act of 2006 had never been enacted.
       (c) Amendment Related to Section 515 of the Act.--
     Subsection (f) of section 911 is amended to read as follows:
       ``(f) Determination of Tax Liability.--
       ``(1) In general.--If, for any taxable year, any amount is 
     excluded from gross income of a taxpayer under subsection 
     (a), then, notwithstanding sections 1 and 55--
       ``(A) if such taxpayer has taxable income for such taxable 
     year, the tax imposed by section 1 for such taxable year 
     shall be equal to the excess (if any) of--
       ``(i) the tax which would be imposed by section 1 for such 
     taxable year if the taxpayer's taxable income were increased 
     by the amount excluded under subsection (a) for such taxable 
     year, over
       ``(ii) the tax which would be imposed by section 1 for such 
     taxable year if the taxpayer's taxable income were equal to 
     the amount excluded under subsection (a) for such taxable 
     year, and
       ``(B) if such taxpayer has a taxable excess (as defined in 
     section 55(b)(1)(A)(ii)) for such taxable year, the amount 
     determined under the first sentence of section 55(b)(1)(A)(i) 
     for such taxable year shall be equal to the excess (if any) 
     of--
       ``(i) the amount which would be determined under such 
     sentence for such taxable year (subject to the limitation of 
     section 55(b)(3)) if the taxpayer's taxable excess (as so 
     defined) were increased by the amount excluded under 
     subsection (a) for such taxable year, over
       ``(ii) the amount which would be determined under such 
     sentence for such taxable year if the taxpayer's taxable 
     excess (as so defined) were equal to the amount excluded 
     under subsection (a) for such taxable year.
       ``(2) Special rules.--
       ``(A) Regular tax.--In applying section 1(h) for purposes 
     of determining the tax under paragraph (1)(A)(i) for any 
     taxable year in which, without regard to this subsection, the 
     taxpayer's net capital gain exceeds taxable income (hereafter 
     in this subparagraph referred to as the capital gain 
     excess)--
       ``(i) the taxpayer's net capital gain (determined without 
     regard to section 1(h)(11)) shall be reduced (but not below 
     zero) by such capital gain excess,
       ``(ii) the taxpayer's qualified dividend income shall be 
     reduced by so much of such capital gain excess as exceeds the 
     taxpayer's net capital gain (determined without regard to 
     section 1(h)(11) and the reduction under clause (i)), and
       ``(iii) adjusted net capital gain, unrecaptured section 
     1250 gain, and 28-percent rate gain shall each be determined 
     after increasing the amount described in section 1(h)(4)(B) 
     by such capital gain excess.
       ``(B) Alternative minimum tax.--In applying section 
     55(b)(3) for purposes of determining the tax under paragraph 
     (1)(B)(i) for any taxable year in which, without regard to 
     this subsection, the taxpayer's net capital gain exceeds the 
     taxable excess (as defined in section 55(b)(1)(A)(ii))--
       ``(i) the rules of subparagraph (A) shall apply, except 
     that such subparagraph shall be applied by substituting `the 
     taxable excess (as defined in section 55(b)(1)(A)(ii))' for 
     `taxable income', and
       ``(ii) the reference in section 55(b)(3)(B) to the excess 
     described in section 1(h)(1)(B) shall be treated as a 
     reference to such excess as determined under the rules of 
     subparagraph (A) for purposes of determining the tax under 
     paragraph (1)(A)(i).
       ``(C) Definitions.--Terms used in this paragraph which are 
     also used in section 1(h) shall have the respective meanings 
     given such terms by section 1(h), except that in applying 
     subparagraph (B) the adjustments under part VI of subchapter 
     A shall be taken into account.''.
       (d) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect as if included in the provisions of the Tax Increase 
     Prevention and Reconciliation Act of 2005 to which they 
     relate.
       (2) Modification of active business definition under 
     section 355.--
       (A) In general.--Except as otherwise provided in this 
     paragraph, the amendments made by subsection (b) shall apply 
     to distributions made after May 17, 2006.
       (B) Transition rule.--The amendments made by subsection (b) 
     shall not apply to any distribution pursuant to a transaction 
     which is--
       (i) made pursuant to an agreement which was binding on May 
     17, 2006, and at all times thereafter,
       (ii) described in a ruling request submitted to the 
     Internal Revenue Service on or before such date, or
       (iii) described on or before such date in a public 
     announcement or in a filing with the Securities and Exchange 
     Commission.
       (C) Election out of transition rule.--Subparagraph (B) 
     shall not apply if the distributing corporation elects not to 
     have such subparagraph apply to distributions of such 
     corporation. Any such election, once made, shall be 
     irrevocable.
       (D) Special rule for certain pre-enactment distributions.--
     For purposes of determining the continued qualification under 
     section 355(b)(2)(A) of the Internal Revenue Code of 1986 of 
     distributions made on or before May 17, 2006, as a result of 
     an acquisition, disposition, or other restructuring after 
     such date, such distribution shall be treated as made on the 
     date of such acquisition, disposition, or restructuring for 
     purposes of applying subparagraphs (A) through (C) of this 
     paragraph. The preceding sentence shall only apply with 
     respect to the corporation that undertakes such acquisition, 
     disposition, or other restructuring, and only if such 
     application results in continued qualification under section 
     355(b)(2)(A) of such Code.
       (3) Amendment related to section 515 of the act.--The 
     amendment made by subsection (c) shall apply to taxable years 
     beginning after December 31, 2006.

     SEC. 405. AMENDMENTS RELATED TO THE SAFE, ACCOUNTABLE, 
                   FLEXIBLE, EFFICIENT TRANSPORTATION EQUITY ACT: 
                   A LEGACY FOR USERS.

       (a) Amendments Related to Section 11113 of the Act.--
       (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 striking ``alcohol fuel and biodiesel mixture 
     credit'' and inserting ``mixture credits and the alternative 
     fuel credit'' in the heading thereof.
       (2) Subparagraph (F) of section 6426(d)(2) is amended by 
     striking ``hydrocarbons'' and inserting ``fuel''.
       (3) 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 with respect to which credit may be determined under 
     subsection (b) or (c) or under section 40 or 40A.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     SAFETEA-LU to which they relate.

     SEC. 406. AMENDMENTS RELATED TO THE ENERGY POLICY ACT OF 
                   2005.

       (a) Amendment Related to Section 1306 of the Act.--
     Paragraph (2) of section 45J(b) is amended to read as 
     follows:
       ``(2) Amount of national limitation.--The aggregate amount 
     of national megawatt capacity limitation allocated by the 
     Secretary under paragraph (3) shall not exceed 6,000 
     megawatts.''.
       (b) Amendments Related to Section 1342 of the Act.--
       (1) 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 qualified alternative fuel vehicle 
     refueling property placed in service by the taxpayer during 
     the taxable year at a location shall not
     exceed--''.
       (2) 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):

[[Page H16781]]

       ``(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 defined in section 40A(d)(1)), 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.''.
       (c) Amendments Related to Section 1351 of the Act.--
       (1) Paragraph (3) of section 41(a) is amended by inserting 
     ``for energy research'' before the period at the end.
       (2) Paragraph (6) of section 41(f) is amended by adding at 
     the end the following new subparagraph:
       ``(E) Energy research.--The term `energy research' does not 
     include any research which is not qualified research.''.
       (d) Amendments Related to Section 1362 of the Act.--
       (1)(A) 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.''.
       (B) 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.''.
       (C) 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.
       (2)(A) 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.''.
       (B) 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), respectively, 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.''.
       (C) Subsection (e) of section 4082 is amended--
       (i) by striking ``an aircraft, the rate of tax under 
     section 4081(a)(2)(A)(iii) shall be zero.'' and inserting 
     ``an aircraft--
       ``(1) the rate of tax under section 4081(a)(2)(A)(iii) 
     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)).
       (D) 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).''.
       (3) Paragraph (5) of section 4041(d) is amended by 
     inserting ``(b)(1)(A),'' after ``subsections''.
       (e) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect as if included in the provisions of the Energy Policy 
     Act of 2005 to which they relate.
       (2) Nonapplication of exemption for off-highway business 
     use.--The amendment made by subsection (d)(3) shall apply to 
     fuel sold for use or used after the date of the enactment of 
     this Act.
       (3) Amendment made by the safetea-lu.--The amendment made 
     by subsection (d)(2)(C)(ii) shall take effect as if included 
     in section 11161 of the SAFETEA-LU.

     SEC. 407. AMENDMENTS RELATED TO THE AMERICAN JOBS CREATION 
                   ACT OF 2004.

       (a) Amendments Related to Section 339 of the Act.--
       (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.
       (b) Amendments Related to Section 710 of the Act.--
       (1) Clause (ii) of section 45(c)(3)(A) is amended by 
     striking ``which is segregated from other waste materials 
     and''.
       (2) Subparagraph (B) of section 45(d)(2) is amended by 
     inserting ``and'' at the end of clause (i), by striking 
     clause (ii), and by redesignating clause (iii) as clause 
     (ii).
       (c) Amendments Related to Section 848 of the Act.--
       (1) Paragraph (2) of section 470(c) is amended to read as 
     follows:
       ``(2) Tax-exempt use property.--
       ``(A) In general.--The term `tax-exempt use property' has 
     the meaning given to such term by section 168(h), except that 
     such section shall be applied--
       ``(i) without regard to paragraphs (1)(C) and (3) thereof, 
     and
       ``(ii) as if section 197 intangible property (as defined in 
     section 197), and property described in paragraph (1)(B) or 
     (2) of section 167(f), were tangible property.
       ``(B) Exception for partnerships.--Such term shall not 
     include any property which would (but for this subparagraph) 
     be tax-exempt use property solely by reason of section 
     168(h)(6).
       ``(C) Cross reference.--For treatment of partnerships as 
     leases to which section 168(h) applies, see section 
     7701(e).''.
       (2) Subparagraph (A) of section 470(d)(1) is amended by 
     striking ``(at any time during the lease term)'' and 
     inserting ``(at all times during the lease term)''.
       (d) Amendments Related to Section 888 of the Act.--
       (1) Subparagraph (A) of section 1092(a)(2) is amended by 
     striking ``and'' at the end of clause (ii), by redesignating 
     clause (iii) as clause (iv), and by inserting after clause 
     (ii) the following new clause:
       ``(iii) if the application of clause (ii) does not result 
     in an increase in the basis of any offsetting position in the 
     identified straddle, the basis of each of the offsetting 
     positions in the identified straddle shall be increased in a 
     manner which--

       ``(I) is reasonable, consistent with the purposes of this 
     paragraph, and consistently applied by the taxpayer, and
       ``(II) results in an aggregate increase in the basis of 
     such offsetting positions which is equal to the loss 
     described in clause (ii), and''.

       (2)(A) Subparagraph (B) of section 1092(a)(2) is amended by 
     adding at the end the following flush sentence:
     ``A straddle shall be treated as clearly identified for 
     purposes of clause (i) only if such identification includes 
     an identification of the positions in the straddle which are 
     offsetting with respect other positions in the straddle.''.
       (B) Subparagraph (A) of section 1092(a)(2) is amended--
       (i) by striking ``identified positions'' in clause (i) and 
     inserting ``positions'',
       (ii) by striking ``identified position'' in clause (ii) and 
     inserting ``position'', and
       (iii) by striking ``identified offsetting positions'' in 
     clause (ii) and inserting ``offsetting positions''.

[[Page H16782]]

       (C) Subparagraph (B) of section 1092(a)(3) is amended by 
     striking ``identified offsetting position'' and inserting 
     ``offsetting position''.
       (3) Paragraph (2) of section 1092(a) is amended by 
     redesignating subparagraph (C) as subparagraph (D) and 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Application to liabilities and obligations.--Except 
     as otherwise provided by the Secretary, rules similar to the 
     rules of clauses (ii) and (iii) of subparagraph (A) shall 
     apply for purposes of this paragraph with respect to any 
     position which is, or has been, a liability or obligation.''.
       (4) Subparagraph (D) of section 1092(a)(2), as redesignated 
     by paragraph (3), is amended by inserting ``the rules for the 
     application of this section to a position which is or has 
     been a liability or obligation, methods of loss allocation 
     which satisfy the requirements of subparagraph (A)(iii),'' 
     before ``and the ordering rules''.
       (e) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect as if included in the provisions of the American Jobs 
     Creation Act of 2004 to which they relate.
       (2) Identification requirement of amendment related to 
     section 888 of the american jobs creation act of 2004.--The 
     amendment made by subsection (d)(2)(A) shall apply to 
     straddles acquired after the date of the enactment of this 
     Act.

     SEC. 408. AMENDMENTS RELATED TO THE ECONOMIC GROWTH AND TAX 
                   RELIEF RECONCILIATION ACT OF 2001.

       (a) Amendments Related to Section 617 of the Act.--
       (1) Subclause (II) of section 402(g)(7)(A)(ii) is amended 
     by striking ``for prior taxable years'' and inserting 
     ``permitted for prior taxable years by reason of this 
     paragraph''.
       (2) Subparagraph (A) of section 3121(v)(1) is amended by 
     inserting ``or consisting of designated Roth contributions 
     (as defined in section 402A(c))'' before the comma at the 
     end.
       (b) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 to 
     which they relate.

     SEC. 409. AMENDMENTS RELATED TO THE TAX RELIEF EXTENSION ACT 
                   OF 1999.

       (a) Amendment Related to Section 507 of the Act.--Clause 
     (i) of section 45(e)(7)(A) is amended by striking ``placed in 
     service by the taxpayer'' and inserting ``originally placed 
     in service''.
       (b) Amendment Related to Section 542 of the Act.--Clause 
     (ii) of section 856(d)(9)(D) is amended to read as follows:
       ``(ii) Lodging facility.--The term `lodging facility' means 
     a--

       ``(I) hotel,
       ``(II) motel, or
       ``(III) other establishment more than one-half of the 
     dwelling units in which are used on a transient basis.''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the Tax 
     Relief Extension Act of 1999 to which they relate.

     SEC. 410. AMENDMENT RELATED TO THE INTERNAL REVENUE SERVICE 
                   RESTRUCTURING AND REFORM ACT OF 1998.

       (a) Amendment Related to Section 3509 of the Act.--
     Paragraph (3) of section 6110(i) is amended by inserting 
     ``and related background file documents'' after ``Chief 
     Counsel advice'' in the matter preceding subparagraph (A).
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the provision of the 
     Internal Revenue Service Restructuring and Reform Act of 1998 
     to which it relates.

     SEC. 411. CLERICAL CORRECTIONS.

       (a) In General.--
       (1) Paragraph (5) of section 21(e) is amended by striking 
     ``section 152(e)(3)(A)'' in the flush matter after 
     subparagraph (B) and inserting ``section 152(e)(4)(A)''.
       (2) Paragraph (3) of section 25C(c) is amended by striking 
     ``section 3280'' and inserting ``part 3280''.
       (3) Paragraph (2) of section 26(b) is amended by 
     redesignating subparagraphs (S) and (T) as subparagraphs (U) 
     and (V), respectively, and by inserting after subparagraph 
     (R) the following new subparagraphs:
       ``(S) sections 106(e)(3)(A)(ii), 223(b)(8)(B)(i)(II), and 
     408(d)(9)(D)(i)(II) (relating to certain failures to maintain 
     high deductible health plan coverage),
       ``(T) section 170(o)(3)(B) (relating to recapture of 
     certain deductions for fractional gifts),''.
       (4) Subsection (a) of section 34 is amended--
       (A) in paragraph (1), by striking ``with respect to 
     gasoline used during the taxable year on a farm for farming 
     purposes'',
       (B) in paragraph (2), by striking ``with respect to 
     gasoline used during the taxable year (A) otherwise than as a 
     fuel in a highway vehicle or (B) in vehicles while engaged in 
     furnishing certain public passenger land transportation 
     service'', and
       (C) in paragraph (3), by striking ``with respect to fuels 
     used for nontaxable purposes or resold during the taxable 
     year''.
       (5) Paragraph (2) of section 35(d) is amended--
       (A) by striking ``paragraph (2) or (4) of'', and
       (B) by striking ``(within the meaning of section 
     152(e)(1))'' and inserting ``(as defined in section 
     152(e)(4)(A))''.
       (6) Subsection (b) of section 38 is amended--
       (A) by striking ``and'' each place it appears at the end of 
     any paragraph,
       (B) by striking ``plus'' each place it appears at the end 
     of any paragraph, and
       (C) by inserting ``plus'' at the end of paragraph (30).
       (7) Paragraphs (2) and (3) of section 45L(c) are each 
     amended by striking ``section 3280'' and inserting ``part 
     3280''.
       (8) Subsection (c) of section 48 is amended by striking 
     ``subsection'' in the text preceding paragraph (1) and 
     inserting ``section''.
       (9) Paragraphs (1)(B) and (2)(B) of section 48(c) are each 
     amended by striking ``paragraph (1)'' and inserting 
     ``subsection (a)''.
       (10) Clause (ii) of section 48A(d)(4)(B) is amended by 
     striking ``subsection'' both places it appears.
       (11) The last sentence of section 125(b)(2) is amended by 
     striking ``last sentence'' and inserting ``second sentence''.
       (12) Subclause (II) of section 167(g)(8)(C)(ii) is amended 
     by striking ``section 263A(j)(2)'' and inserting ``section 
     263A(i)(2)''.
       (13)(A) Clause (vii) of section 170(b)(1)(A) is amended by 
     striking ``subparagraph (E)'' and inserting ``subparagraph 
     (F)''.
       (B) Clause (ii) of section 170(e)(1)(B) is amended by 
     striking ``subsection (b)(1)(E)'' and inserting ``subsection 
     (b)(1)(F)''.
       (C) Clause (i) of section 1400S(a)(2)(A) is amended by 
     striking ``subparagraph (F)'' and inserting ``subparagraph 
     (G)''.
       (D) Subparagraph (A) of section 4942(i)(1) is amended by 
     striking ``section 170(b)(1)(E)(ii)'' and inserting ``section 
     170(b)(1)(F)(ii)''.
       (14) Subclause (II) of section 170(e)(1)(B)(i) is amended 
     by inserting ``, but without regard to clause (ii) thereof'' 
     after ``paragraph (7)(C)''.
       (15)(A) Subparagraph (A) of section 170(o)(1) and 
     subparagraph (A) of section 2522(e)(1) are each amended by 
     striking ``all interest in the property is'' and inserting 
     ``all interests in the property are''.
       (B) Section 170(o)(3)(A)(i), and section 2522(e)(2)(A)(i) 
     (as redesignated by section 403(d)(2)), are each amended--
       (i) by striking ``interest'' and inserting ``interests'', 
     and
       (ii) by striking ``before'' and inserting ``on or before''.
       (16)(A) Subparagraph (C) of section 852(b)(4) is amended to 
     read as follows:
       ``(C) Determination of holding periods.--For purposes of 
     this paragraph, in determining the period for which the 
     taxpayer has held any share of stock--
       ``(i) the rules of paragraphs (3) and (4) of section 246(c) 
     shall apply, and
       ``(ii) there shall not be taken into account any day which 
     is more than 6 months after the date on which such share 
     becomes ex-dividend.''.
       (B) Subparagraph (B) of section 857(b)(8) is amended to 
     read as follows:
       ``(B) Determination of holding periods.--For purposes of 
     this paragraph, in determining the period for which the 
     taxpayer has held any share of stock or beneficial interest--
       ``(i) the rules of paragraphs (3) and (4) of section 246(c) 
     shall apply, and
       ``(ii) there shall not be taken into account any day which 
     is more than 6 months after the date on which such share or 
     interest becomes ex-dividend.''.
       (17) Paragraph (2) of section 856(l) is amended by striking 
     the last sentence and inserting the following: ``For purposes 
     of subparagraph (B), securities described in subsection 
     (m)(2)(A) shall not be taken into account.''.
       (18) Subparagraph (F) of section 954(c)(1) is amended to 
     read as follows:
       ``(F) Income from notional principal contracts.--
       ``(i) In general.--Net income from notional principal 
     contracts.
       ``(ii) Coordination with other categories of foreign 
     personal holding company income.--Any item of income, gain, 
     deduction, or loss from a notional principal contract entered 
     into for purposes of hedging any item described in any 
     preceding subparagraph shall not be taken into account for 
     purposes of this subparagraph but shall be taken into account 
     under such other subparagraph.''.
       (19) Paragraph (1) of section 954(c) is amended by 
     redesignating subparagraph (I) as subparagraph (H).
       (20) Paragraph (33) of section 1016(a), as redesignated by 
     section 407(a)(1)(C), is amended by striking ``section 
     25C(e)'' and inserting ``section 25C(f)''.
       (21) Paragraph (36) of section 1016(a), as redesignated by 
     section 407(a)(1)(C), is amended by striking ``section 
     30C(f)'' and inserting ``section 30C(e)(1)''.
       (22) Subparagraph (G) of section 1260(c)(2) is amended by 
     adding ``and'' at the end.
       (23)(A) Section 1297 is amended by striking subsection (d) 
     and by redesignating subsections (e) and (f) as subsections 
     (d) and (e), respectively.
       (B) Subparagraph (G) of section 1260(c)(2) is amended by 
     striking ``subsection (e)'' and inserting ``subsection (d)''.
       (C) Subparagraph (B) of section 1298(a)(2) is amended by 
     striking ``Section 1297(e)'' and inserting ``Section 
     1297(d)''.
       (24) Paragraph (1) of section 1362(f) is amended--
       (A) by striking ``, section 1361(b)(3)(B)(ii), or section 
     1361(c)(1)(A)(ii)'' and inserting ``or section 
     1361(b)(3)(B)(ii)'', and

[[Page H16783]]

       (B) by striking ``, section 1361(b)(3)(C), or section 
     1361(c)(1)(D)(iii)'' in subparagraph (B) and inserting ``or 
     section 1361(b)(3)(C)''.
       (25) Paragraph (2) of section 1400O is amended by striking 
     ``under of'' and inserting ``under''.
       (26) The table of sections for part II of subchapter Y of 
     chapter 1 is amended by adding at the end the following new 
     item:

``Sec. 1400T. Special rules for mortgage revenue bonds.''.
       (27) Subsection (b) of section 4082 is amended to read as 
     follows:
       ``(b) Nontaxable Use.--For purposes of this section, the 
     term `nontaxable use' means--
       ``(1) any use which is exempt from the tax imposed by 
     section 4041(a)(1) other than by reason of a prior imposition 
     of tax,
       ``(2) any use in a train, and
       ``(3) any use described in section 4041(a)(1)(C)(iii)(II).
     The term `nontaxable use' does not include the use of 
     kerosene in an aircraft and such term shall not include any 
     use described in section 6421(e)(2)(C).''.
       (28) Paragraph (4) of section 4101(a) (relating to 
     registration in event of change of ownership) is redesignated 
     as paragraph (5).
       (29) Paragraph (6) of section 4965(c) is amended by 
     striking ``section 4457(e)(1)(A)'' and inserting ``section 
     457(e)(1)(A)''.
       (30) Subpart C of part II of subchapter A of chapter 51 is 
     amended by redesignating section 5432 (relating to 
     recordkeeping by wholesale dealers) as section 5121.
       (31) Paragraph (2) of section 5732(c), as redesignated by 
     section 11125(b)(20)(A) of the SAFETEA-LU, is amended by 
     striking ``this subpart'' and inserting ``this subchapter''.
       (32) Subsection (b) of section 6046 is amended--
       (A) by striking ``subsection (a)(1)'' and inserting 
     ``subsection (a)(1)(A)'', and
       (B) by striking ``paragraph (2) or (3) of subsection (a)'' 
     and inserting ``subparagraph (B) or (C) of subsection 
     (a)(1)''.
       (33)(A) Subparagraph (A) of section 6103(b)(5) is amended 
     by striking ``the Canal Zone,''.
       (B) Section 7651 is amended by striking paragraph (4) and 
     by redesignating paragraph (5) as paragraph (4).
       (34) Subparagraph (A) of section 6211(b)(4) is amended by 
     striking ``and 34'' and inserting ``34, and 35''.
       (35) Subparagraphs (A) and (B) of section 6230(a)(3) are 
     each amended by striking ``section 6013(e)'' and inserting 
     ``section 6015''.
       (36) Paragraph (3) of section 6427(e) (relating to 
     termination), as added by section 11113 of the SAFETEA-LU, is 
     redesignated as paragraph (5) and moved after paragraph (4).
       (37) Clause (ii) of section 6427(l)(4)(A) is amended by 
     striking ``section 4081(a)(2)(iii)'' and inserting ``section 
     4081(a)(2)(A)(iii)''.
       (38)(A) Section 6427, as amended by section 1343(b)(1) of 
     the Energy Policy Act of 2005, is amended by striking 
     subsection (p) (relating to gasohol used in noncommercial 
     aviation) and redesignating subsection (q) as subsection (p).
       (B) The Internal Revenue Code of 1986 shall be applied and 
     administered as if the amendments made by paragraph (2) of 
     section 11151(a) of the SAFETEA-LU had never been enacted.
       (39) Subsection (a) of section 6695A is amended by striking 
     ``then such person'' in paragraph (2) and inserting the 
     following:
     ``then such person''.
       (40) Subparagraph (C) of section 6707A(e)(2) is amended by 
     striking ``section 6662A(e)(2)(C)'' and inserting ``section 
     6662A(e)(2)(B)''.
       (41)(A) Paragraph (3) of section 9002 is amended by 
     striking ``section 309(a)(1)'' and inserting ``section 
     306(a)(1)''.
       (B) Paragraph (1) of section 9004(a) is amended by striking 
     ``section 320(b)(1)(B)'' and inserting ``section 
     315(b)(1)(B)''.
       (C) Paragraph (3) of section 9032 is amended by striking 
     ``section 309(a)(1)'' and inserting ``section 306(a)(1)''.
       (D) Subsection (b) of section 9034 is amended by striking 
     ``section 320(b)(1)(A)'' and inserting ``section 
     315(b)(1)(A)''.
       (42) Section 9006 is amended by striking ``Comptroller 
     General'' each place it appears and inserting ``Commission''.
       (43) Subsection (c) of section 9503 is amended by 
     redesignating paragraph (7) (relating to transfers from the 
     trust fund for certain aviation fuels taxes) as paragraph 
     (6).
       (44) Paragraph (1) of section 1301(g) of the Energy Policy 
     Act of 2005 is amended by striking ``shall take effect of the 
     date of the enactment'' and inserting ``shall take effect on 
     the date of the enactment''.
       (45) The Internal Revenue Code of 1986 shall be applied and 
     administered as if the amendments made by section 1(a) of 
     Public Law 109-433 had never been enacted.
       (b) Clerical Amendments Related to the Tax Relief and 
     Health Care Act of 2006.--
       (1) Amendment related to section 209 of division a of the 
     act.--Paragraph (3) of section 168(l) is amended by striking 
     ``enzymatic''.
       (2) Amendments related to section 419 of division a of the 
     act.--
       (A) Clause (iv) of section 6724(d)(1)(B) is amended by 
     inserting ``or (h)(1)'' after ``section 6050H(a)''.
       (B) Subparagraph (K) of section 6724(d)(2) is amended by 
     inserting ``or (h)(2)'' after ``section 6050H(d)''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the provision of the Tax 
     Relief and Health Care Act of 2006 to which they relate.
       (c) Clerical Amendments Related to the Gulf Opportunity 
     Zone Act of 2005.--
       (1) Amendments related to section 402 of the act.--
     Subparagraph (B) of section 24(d)(1) is amended--
       (A) by striking ``the excess (if any) of'' in the matter 
     preceding clause (i) and inserting ``the greater of'', and
       (B) by striking ``section'' in clause (ii)(II) and 
     inserting ``section 32''.
       (2) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the provisions of the 
     Gulf Opportunity Zone Act of 2005 to which they relate.
       (d) Clerical Amendments Related to the Safe, Accountable, 
     Flexible, Efficient Transportation Equity Act: A Legacy for 
     Users.--
       (1) Amendments related to section 11163 of the act.--
     Subparagraph (C) of section 6416(a)(4) is amended--
       (A) by striking ``ultimate vendor'' and all that follows 
     through ``has certified'' and inserting ``ultimate vendor or 
     credit card issuer has certified'', and
       (B) by striking ``all ultimate purchasers of the vendor'' 
     and all that follows through ``are certified'' and inserting 
     ``all ultimate purchasers of the vendor or credit card issuer 
     are certified''.
       (2) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the provisions of the 
     Safe, Accountable, Flexible, Efficient Transportation Equity 
     Act: A Legacy for Users to which they relate.
       (e) Clerical Amendments Related to the Energy Policy Act of 
     2005.--
       (1) Amendment related to section 1344 of the act.--
     Subparagraph (B) of section 6427(e)(5), as redesignated by 
     subsection (a)(36), is amended by striking ``2006'' and 
     inserting ``2008''.
       (2) Amendments related to section 1351 of the act.--
     Subparagraphs (A)(ii) and (B)(ii) of section 41(f)(1) are 
     each amended by striking ``qualified research expenses and 
     basic research payments'' and inserting ``qualified research 
     expenses, basic research payments, and amounts paid or 
     incurred to energy research consortiums,''.
       (3) Effective date.--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.
       (f) Clerical Amendments Related to the American Jobs 
     Creation Act of 2004.--
       (1) Amendment related to section 301 of the act.--Section 
     9502 is amended by striking subsection (e) and redesignating 
     subsection (f) as subsection (e).
       (2) Amendment related to section 413 of the act.--
     Subsection (b) of section 1298 is amended by striking 
     paragraph (7) and by redesignating paragraphs (8) and (9) as 
     paragraphs (7) and (8), respectively.
       (3) Amendment related to section 895 of the act.--Clause 
     (iv) of section 904(f)(3)(D) is amended by striking ``a 
     controlled group'' and inserting ``an affiliated group''.
       (4) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the provisions of the 
     American Jobs Creation Act of 2004 to which they relate.
       (g) Clerical Amendments Related to the FSC Repeal and 
     Extraterritorial Income Exclusion Act of 2000.--
       (1) Subclause (I) of section 56(g)(4)(C)(ii) is amended by 
     striking ``921'' and inserting ``921 (as in effect before its 
     repeal by the FSC Repeal and Extraterritorial Income 
     Exclusion Act of 2000)''.
       (2) Clause (iv) of section 54(g)(4)(C) is amended by 
     striking ``a cooperative described in section 927(a)(4)'' and 
     inserting ``an organization to which part I of subchapter T 
     (relating to tax treatment of cooperatives) applies which is 
     engaged in the marketing of agricultural or horticultural 
     products''.
       (3) Paragraph (4) of section 245(c) is amended by adding at 
     the end the following new subparagraph:
       ``(C) FSC.--The term `FSC' has the meaning given such term 
     by section 922.''.
       (4) Subsection (c) of section 245 is amended by inserting 
     at the end the following new paragraph:
       ``(5) References to prior law.--Any reference in this 
     subsection to section 922, 923, or 927 shall be treated as a 
     reference to such section as in effect before its repeal by 
     the FSC Repeal and Extraterritorial Income Exclusion Act of 
     2000.''.
       (5) Paragraph (4) of section 275(a) is amended by striking 
     ``if'' and all that follows and inserting ``if the taxpayer 
     chooses to take to any extent the benefits of section 901.''.
       (6)(A) Subsection (a) of section 291 is amended by striking 
     paragraph (4) and by redesignating paragraph (5) as paragraph 
     (4).
       (B) Paragraph (1) of section 291(c) is amended by striking 
     ``subsection (a)(5)'' and inserting ``subsection (a)(4)''.
       (7)(A) Paragraph (4) of section 441(b) is amended by 
     striking ``FSC or''.
       (B) Subsection (h) of section 441 is amended--
       (i) by striking ``FSC or'' each place it appears, and
       (ii) by striking ``FSC's and'' in the heading thereof.
       (8) Subparagraph (B) of section 884(d)(2) is amended by 
     inserting before the comma ``(as in effect before their 
     repeal by the FSC Repeal and Extraterritorial Income 
     Exclusion Act of 2000)''.
       (9) Section 901 is amended by striking subsection (h).

[[Page H16784]]

       (10) Clause (v) of section 904(d)(2)(B) is amended--
       (A) by inserting ``and'' at the end of subclause (I), by 
     striking subclause (II), and by redesignating subclause (III) 
     as subclause (II),
       (B) by striking ``a FSC (or a former FSC)'' in subclause 
     (II) (as so redesignated) and inserting ``a former FSC (as 
     defined in section 922)'', and
       (C) by adding at the end the following:
     ``Any reference in subclause (II) to section 922, 923, or 927 
     shall be treated as a reference to such section as in effect 
     before its repeal by the FSC Repeal and Extraterritorial 
     Income Exclusion Act of 2000.''.
       (11) Subsection (b) of section 906 is amended by striking 
     paragraph (5) and redesignating paragraphs (6) and (7) as 
     paragraphs (5) and (6), respectively.
       (12) Subparagraph (B) of section 936(f)(2) is amended by 
     striking ``FSC or''.
       (13) Section 951 is amended by striking subsection (c) and 
     by redesignating subsection (d) as subsection (c).
       (14) Subsection (b) of section 952 is amended by striking 
     the second sentence.
       (15)(A) Paragraph (2) of section 956(c) is amended--
       (i) by striking subparagraph (I) and by redesignating 
     subparagraphs (J) through (M) as subparagraphs (I) through 
     (L), respectively, and
       (ii) by striking ``subparagraphs (J), (K), and (L)'' in the 
     flush sentence at the end and inserting ``subparagraphs (I), 
     (J), and (K)''.
       (B) Clause (ii) of section 954(c)(2)(C) is amended by 
     striking ``section 956(c)(2)(J)'' and inserting ``section 
     956(c)(2)(I)''.
       (16) Paragraph (1) of section 992(a) is amended by striking 
     subparagraph (E), by inserting ``and'' at the end of 
     subparagraph (C), and by striking ``, and'' at the end of 
     subparagraph (D) and inserting a period.
       (17) Paragraph (5) of section 1248(d) is amended--
       (A) by inserting ``(as defined in section 922)'' after ``a 
     FSC'', and
       (B) by adding at the end the following new sentence: ``Any 
     reference in this paragraph to section 922, 923, or 927 shall 
     be treated as a reference to such section as in effect before 
     its repeal by the FSC Repeal and Extraterritorial Income 
     Exclusion Act of 2000.''.
       (18) Subparagraph (D) of section 1297(b)(2) is amended by 
     striking ``foreign trade income of a FSC or''.
       (19)(A) Paragraph (1) of section 6011(c) is amended by 
     striking ``or former DISC or a FSC or former FSC'' and 
     inserting ``, former DISC, or former FSC (as defined in 
     section 922 as in effect before its repeal by the FSC Repeal 
     and Extraterritorial Income Exclusion Act of 2000)''.
       (B) Subsection (c) of section 6011 is amended by striking 
     ``and FSC's'' in the heading thereof.
       (20) Subsection (c) of section 6072 is amended by striking 
     ``a FSC or former FSC'' and inserting ``a former FSC (as 
     defined in section 922 as in effect before its repeal by the 
     FSC Repeal and Extraterritorial Income Exclusion Act of 
     2000)''.
       (21) Section 6686 is amended by inserting ``FORMER'' before 
     ``FSC'' in the heading thereof.

   TITLE V--PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
                                BENEFITS

     SEC. 501. PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL 
                   HEALTH BENEFITS.

       (a) Amendment to the Internal Revenue Code of 1986.--
     Section 9812(f)(3) of the Internal Revenue Code of 1986 is 
     amended by striking ``2007'' and inserting ``2008''.
       (b) Amendment to the Employee Retirement Income Security 
     Act of 1974.--Section 712(f) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1185a(f)) is amended 
     by striking ``2007'' and inserting ``2008''.
       (c) Amendment to the Public Health Service Act.--Section 
     2705(f) of the Public Health Service Act (42 U.S.C. 300gg-
     5(f)) is amended by striking ``2007'' and inserting ``2008''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to benefits for services furnished after December 
     31, 2007.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Connecticut (Mr. Larson) and the gentleman from New York (Mr. Reynolds) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Connecticut.
  Mr. LARSON of Connecticut. Mr. Speaker, I yield myself such time as I 
may consume.
  I want to thank Mr. Rangel, Mr. Neal and Mr. McCrery, and since this 
was a bipartisan effort, all the hard work that went into this on both 
sides of the aisle. This legislation comes at a time when most of us 
are preparing to head home for the Christmas holidays.
  Mr. Speaker, I can't tell you how our hearts all go out to those men 
and women who serve in our military who have sacrificed so much on our 
behalf. It is getting more and more difficult for many Americans to 
make ends meet. Why shouldn't we be doing everything we possibly can to 
make it easier on our military, our veterans, our first responders and 
their families? We should be making it easier, as this bill does, for 
those earning combat pay to qualify for an earned income tax credit. We 
should make it easier for veterans to get housing, disability 
assistance, and other benefits. This bill makes it easier for the 
spouses of fallen soldiers to draw from a loved one's retirement 
savings without penalty. And it makes tax breaks from State and local 
governments to volunteer first responders Federal income-tax free.
  It wasn't lost on Chairman Rangel, Chairman Neal or the entire Ways 
and Means Committee, as I said previously, that with respect to the 
events that took place on September 11, it wasn't the military, the 
FBI, the CIA, the INS that responded at the World Trade Center, at the 
Pentagon, or in the fields of Pennsylvania. It was first responders. 
Therefore, Mr. Speaker, it is so vitally important that this 
legislation pass so that we provide an opportunity for those first 
responders who are so in need of the very rudiments that our government 
provides them in order to provide the great depth of service covering 
over 70 percent of the country in terms of the service they provide for 
this Nation to make sure that what little incremental benefits they get 
from their municipality, their county, or their State are not taxed by 
the IRS.
  So I am proud to be part of this legislation that we move forward.
  And with that I reserve my time.
  Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. REYNOLDS asked and was given permission to revise and extend his 
remarks.)
  Mr. REYNOLDS. Mr. Speaker, as my colleague, the gentleman from 
Connecticut, has outlined a number of provisions in this bill, we come 
together today not as Democrats or Republicans, but as Americans. We 
are united in our respect for those who wear the uniform of the United 
States Armed Forces, and we are united in our desire to ensure that 
Federal programs within the Ways and Means Committee's jurisdiction 
from the Tax Code to the SSI program work effectively for members of 
the military, veterans, first responders and their families.
  Let me begin by also thanking Chairman Rangel and Ranking Member 
McCrery, as well as Chairman Neal, Chairman McDermott, and Ranking 
Members English and Weller, for their outstanding leadership in 
crafting this legislation. This bill is a great example of what we can 
accomplish when we put our differences aside and work together. I am 
hopeful that the revisions we are making to this legislation today will 
be taken up in short order by the other body.
  I would also like to highlight two specific provisions in the bill 
that have been of particular interest to me during my time in Congress. 
The first provision, section 202, is modeled on legislation, the Blind 
Veterans Fairness Act, that I first introduced in the year 2000. My 
legislation would correct a problem in the Federal SSI rules and 
affects blind veterans in four States, New York, New Jersey, 
Pennsylvania and Massachusetts, that provide these veterans modest 
annuities in recognition of the substantial sacrifice they have made to 
serving our country.

                              {time}  1630

  Regrettably, under current Federal law, these State annuities 
actually reduce any SSI payments for which blind veterans would 
otherwise be eligible. As we heard from Michelle LaRock of our New York 
City's Division of Veterans Affairs at our Ways and Means hearing in 
October, this quirk in the Federal SSI rules creates a hardship not 
only for the affected veterans themselves, but for the States that 
administer these annuity programs as well. As in years past, the bill I 
introduced in the 110th Congress, H.R. 649, has enjoyed bipartisan 
support.
  Let me turn briefly to a separate provision, section 107 of the bill, 
which will permanently allow penalty-free withdrawals from IRAs, 
401(k)s, and other retirement funds for Reservists and National 
Guardsmen called to active duty. As we all know, when Guardsmen and 
Reservists are called up from our States, they often face significant 
reductions in pay compared to their civilian salaries, put an economic 
strain on their families. To lessen this economic hardship, many of 
them

[[Page H16785]]

choose to draw down on their retirement funds.
  Unfortunately, under prior law, they faced a 10 percent ``early 
withdrawal tax'' when they did so, and they faced restrictions on 
making repayments to their retirement funds upon returning from active 
duty. Last year's Pension Protection Act provided relief from this 10 
percent penalty tax and permitted unlimited repayments within 2 years 
after leaving active duty, but only for Guardsmen and Reservists called 
to active duty before December 31, 2007.
  To ensure that this important relief remains available on a permanent 
basis going forward, I introduced H.R. 867, the Guardsmen and 
Reservists' Tax Fairness Act on February 7 of this year. This 
legislation has also attracted a bipartisan group of cosponsors, as 
well as endorsements from several leading veterans service 
organizations.
  Mr. Speaker, we recently got a great reminder of the time-sensitivity 
of this particular provision from the area I represent in Western New 
York. Just days ago, it was announced that 100 members of the 107th Air 
Refueling Wing, stationed at Niagara Falls Air Reserve Station, will be 
deployed to the Middle East in January as part of the global war on 
terror. Unless this tax benefit is made permanent, these brave men and 
women, and countless more just like them across the country, will lose 
their eligibility simply because the calendar has flipped to 2008 
before their date of deployment.
  I sincerely hope that our colleagues on the other side of the Capitol 
will recognize the urgency of this issue and ensure that the provision 
is sent to the President's desk before adjourning for the year.
  With that, Mr. Speaker, I reserve the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, at this time I yield 2 
minutes to a senior member of the Ways and Means Committee, Mr. 
McDermott, from Washington State.
  Mr. McDERMOTT. Thank you, Mr. Larson.
  Mr. Speaker, I would like to highlight the importance of two 
provisions in the bill before us, which relate to how the Supplemental 
Security Income program, or SSI program, treats military families and 
others who desire to serve this Nation. Under current law, some 
military families lose part of their SSI benefits because a portion of 
their compensation is counted as unearned income. Under current rules, 
the amount of unearned income a disabled person receives reduces their 
SSI benefits. H.R. 3997 would stop treating military families this way, 
which occurs because of a kink in the law.
  A similar inequity occurs with respect to AmeriCorps volunteers. For 
purposes of determining SSI benefits, current law provides disparate 
treatment to volunteers who are disabled. In some cases, these would-be 
volunteers would experience a loss or reduction of their SSI benefits 
if they choose to serve their community, despite their disability, 
through AmeriCorps. This only occurs because of an oversight in the 
statute, and the HEART Act corrects it, removing an important barrier 
to service.
  In short, Mr. Speaker, it's important that the bill that the 
President signs includes these provisions. With the SSI corrections 
included, H.R. 3997 says to American families that a Nation blessed by 
your service and sacrifice is one that will treat you fairly and 
justly.
  Mr. REYNOLDS. Mr. Speaker, I yield 2 minutes to the gentleman from 
California, Mr. Herger, a very senior member of the Committee on Ways 
and Means.
  Mr. HERGER. Mr. Speaker, an important provision of the HEART Act 
would help veterans in my home State achieve the American Dream of 
homeownership. In our pursuit of this provision, I join with my 
California colleague, Susan Davis, to introduce a stand-alone 
legislation on this issue, and I thank her for her leadership.
  Currently, several States are allowed to issue what are called 
Qualified Veteran Mortgage Bonds, which are tax-exempt bonds. In 
California, the CalVet Home Loan Program uses the proceeds from these 
bonds to help pay for low-cost mortgages for our Nation's heroes 
returning from war. For our State and Texas, however, until this 
provision today, only veterans who ended their military service before 
1977 were allowed to receive these low-cost home loans using proceeds 
from qualified veterans mortgage bonds. Now all veterans, regardless of 
when they serve, will be eligible under the QVMB-financed program. 
Governor Arnold Schwarzenegger and his administration deserve credit 
for their unwavering support of this change.
  This provision has been several years in coming. I am very pleased to 
say that it will help many recent California servicemen and women 
purchase their own home, regardless of when they served.
  Mr. LARSON of Connecticut. Mr. Speaker, at this time I yield 2 
minutes to the gentleman from North Dakota (Mr. Pomeroy) who brought 
with us to the committee compelling testimony from Victoria Johnson.
  Mr. POMEROY. I thank the gentleman for yielding.
  I hold this picture of Major Alan Johnson and his wife Victoria and 
their daughter Megan. Alan Johnson lost his life last January 26 in 
service to our country in Iraq. Major Johnson had served in the 
National Guard and the Army Reserve for 26 years. Additionally, he had 
a civilian job. He was still in the public sector. He was sergeant of 
the Corrections Department of Yakima County in the State of Washington, 
shift supervisor, one of the largest jails in the State of Washington.
  You can imagine how awful the surprise for Victoria Johnson, deep in 
her grief of losing her husband, to learn that his pension in the State 
of Washington was treated as though, on the day he left on his 
deployment, he quit work. They offered only return of the amounts he 
had paid into the pension plan. Now, if he had been an active 
Washington State employee, she would have received a lifetime annuity 
benefit. But the law didn't provide for that, and her circumstance has 
alerted us to a loophole that must be addressed.
  Legislation introduced by Congressman Doc Hastings and me, the HEROES 
Act, addresses this flaw in our law, a law that presently allows for 
reintegration of pension benefits for our returning soldiers. This will 
also mean that should they lose their life in service to our country 
during their deployment, they are treated as though their life was lost 
while a fully employed participant in the pension plan.
  This is desperately necessary. Do it because it is right. Do it for 
the memory of Major Alan Johnson.
  Mr. REYNOLDS. Mr. Speaker, I yield 2 minutes to my good friend, the 
gentleman from Texas (Mr. Brady).
  Mr. BRADY of Texas. Mr. Speaker, I rise in support of this bill on 
the floor today that will provide additional tax relief to our Nation's 
veterans, especially those who are seeking to purchase homes.
  Among the many important provisions of this bill, it updates current 
law to ensure that veterans who have served after 1977 can qualify for 
low-interest home loans financed by Qualified Veterans Mortgage Bonds. 
It allows veterans who are not first-time homebuyers to also benefit 
from this special program.
  This bill is important to our home State of Texas. This will enable 
the Texas Veterans Land Board, headed by Land Commissioner Jerry 
Paterson, to expand its existing low-interest loan program to thousands 
of more Texas veterans, helping a new generation of veterans own a 
piece of the American Dream.
  For all the sacrifice our veterans make to defend our country, it is 
only right that we help them upon their return home to America.
  I thank Chairman Rangel, Mr. Larson and all of those who have 
contributed to this bill, as well as Mr. Reynolds, who has worked so 
hard, and Republicans who are supporting this bipartisan bill.
  Mr. LARSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
distinguished gentleman from Texas (Mr. Doggett), a member of the 
committee.
  Mr. DOGGETT. Mr. Speaker, you would think there would be no 
disagreement that support for our troops which begins on the 
battlefield shouldn't end there, yet some Senate Republicans deleted 
from this very legislation an important provision authorizing 
eligibility for below-market affordable home loans of up to $325,000 
through our Texas Veterans Land

[[Page H16786]]

Board for our Texas veterans. These are the servicemen and women who 
served in Iraq and in Afghanistan and over the last 30 years who are 
excluded from the current program.
  Today we say once more to these Senate obstructionists, stop and 
remember that those who fight to keep our homes safe deserve a fighting 
chance at homeownership. This bill is truly a way to honor our vets, 
not only with our words, but with our deeds; in this case, deeds to a 
home. When our vets are willing to pay the ultimate price for our 
freedom, we can afford the price of correcting this disparity.
  This bill also prevents the expiration of existing group health 
insurance guarantees for mental health coverage. While maintaining this 
protection is very important, what we really need is prompt approval of 
full equity in all health insurance coverage so that mental health 
services are not treated differently from physical health services. 
Whether it is a broken leg or a broken spirit, folks need affordable 
access to professional care that includes treatment for addiction and 
depression. I salute our colleagues Congressman Kennedy and Congressman 
Ramstad in their bipartisan effort for mental health parity, including 
addiction and depression. Let's get it done in 2008.
  Approval of today's bill encourages equity, equity in covering 
veterans whenever they have served, and at least a little equity in 
mental health coverage.
  Mr. REYNOLDS. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Kansas (Mr. Moran).
  Mr. MORAN of Kansas. I thank the gentleman from New York for yielding 
to me.
  I, like the gentlemen are from Texas, am here in a state of 
disappointment. But mine is the reverse. A provision that was included 
in the Senate is not included in the House version of this bill. It is 
a piece of legislation that I introduced earlier this session and one 
that was offered as an amendment when this bill was considered by the 
House Ways and Means Committee, and it failed on a party-line vote. 
This provision, as I say, is included in the Senate bill, but it was 
removed when it was returned to the House, and it received unanimous 
approval by the Senate.
  This is a commonsense clarification to the Tax Code to prevent lower 
income military personnel from being discriminated against when 
applying to live in affordable housing built under the low income 
housing tax credit. Our Nation's military families deserve access to 
safe, decent, affordable housing, and they should be given a fair 
opportunity to qualify for it.
  This provision would clarify that members of the military will not 
have their military housing allowance counted against them as income 
when applying for affordable rental housing. The IRS does not consider 
military housing allowance as income, but, unfortunately, the 
Department of Housing and Urban Development does. The result is that 
some servicemembers, particularly enlisted ones, are considered to earn 
too much and are, thus, disqualified from living in affordable housing. 
Comparatively low-income civilians will qualify because they are 
treated differently by the IRS.
  This clarification is needed now more than ever. A number of military 
installations across the country are experiencing housing shortages as 
a result the 2005 BRAC. For example, Fort Riley, an Army post located 
in the State of Kansas, is nearly doubling in size and will see an 
influx of nearly 30,000 people. Without access to adequate affordable 
housing opportunities, many families stationed at Fort Riley are being 
forced to live far away from post.

                              {time}  1645

  The House acted this year to exempt military housing allowance from 
income eligibility requirements under Head Start. Unfortunately, this 
discrimination persists when military families apply to live in 
affordable housing, and enlisted servicemembers and their families 
continue to be treated unfairly in communities across the country.
  Mr. Speaker, while I support this legislation, I again am here to 
object to the exclusion of language that would level the playing field 
for our military enlisted men. I have introduced legislation to correct 
this issue; and should it not be resolved in this legislation, I urge 
my colleagues to join me in supporting H.R. 1481.
  Mr. LARSON of Connecticut. At this time, I yield 2 minutes to the 
preeminent authority in this Nation on mental health, and someone who 
has spoken with great passion and dignity on this floor as a cosponsor, 
along with Mr. Ramstad, of important legislation, Mr. Kennedy from 
Rhode Island, for 2 minutes.
  Mr. KENNEDY. I thank the gentleman from Connecticut for his great 
work and for his very kind words. And I would like to thank Chairman 
Rangel and Chairman Stark for their work to pass a 1-year extension to 
the current mental health parity law. I would also like to thank them 
for their tireless work and dedication to passing H.R. 1424, the Paul 
Wellstone Mental Health and Addiction Equity Act.
  While I am pleased that the current law is being extended in this 
bill which will ensure that annual and lifetime limits for mental 
health benefits cannot be more restrictive than physical health 
benefits, I must express my disappointment that a stronger mental 
health parity law which includes equitable treatment limits, financial 
limits, and out-of-network parity has not been passed yet and signed by 
the President this year. After three hearings, five markups in the 
House, and with 273 bipartisan cosponsors, this bill has been closely 
scrutinized by both political parties.
  I hope we will return early next year and pass this bill, not as a 
political victory for some, but for people like Katie Kevlock, a 16-
year-old girl from Pennsylvania who lost her battle to addiction. She 
showed up one day to her mother and said she was addicted, confessed to 
her mother she was addicted. Her mother took her to the hospital. The 
hospital said she needed insurance coverage. She went to her insurance 
system. Her insurer said they couldn't cover her unless she had OD'ed. 
They couldn't give her residential treatment unless she OD'ed. So she 
had to wait until she OD'ed. But what happened? As Katie's mom said, 
not everyone survives that first OD. And it was in the case of Katie, 
her first OD killed her. Katie died without the treatment that she 
needed to overcome her addiction. That should not happen in this 
country. We need to pass parity, and that is why we need to pass 1424.
  Mr. REYNOLDS. Mr. Speaker, I reserve the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, I would like to recognize the 
preeminent authority on smart growth in this country, Mr. Blumenauer 
from Oregon, who cares deeply about veterans concerns in that State and 
all across the country, for 2 minutes.
  Mr. BLUMENAUER. Mr. Speaker, I appreciate the gentleman's courtesy as 
I appreciate his leadership.
  One of the most important things the United States did in the 
aftermath of World War II was to help returning veterans with housing. 
In my home State of Oregon, in 1945 we established a veterans home loan 
program which, for over 60 years, has provided over a third of a 
million loans, a value that is approaching $8 billion, which has 
changed the lives of the veterans and their families as it has helped 
revitalize communities.
  Unfortunately, in Oregon, as in other States like Alaska, Wisconsin, 
California, and Texas, we are bumping up against limits in dealing with 
this program. We do not have the bonding capacity to be able to deal 
with the flood of returning veterans from Iraq and Afghanistan, who are 
every bit as worthy of our help and support as veterans from Korea or 
World War II.
  The House legislation that went forward corrected this situation, 
adding an increase in the bond cap; and it made a modification for 
eligible veterans of more recent wars to be included. Unfortunately, 
the other body, inexplicably, following rules that Daniel Webster and 
John C. Calhoun would recognize today, allowed a minority to strip away 
these important provisions.
  It is important for us to repass this legislation that affirms that 
we are going to do right by veterans in Alaska, Oregon, Wisconsin, 
California and Texas, raise those limits, and extend the coverage to 
warriors that are returning from these conflicts.
  I strongly urge my colleagues to not just pass this legislation but 
to make clear to our friends in the other body

[[Page H16787]]

that this is one of our go-home items of legislation that we are going 
to insist upon.
  Mr. REYNOLDS. Mr. Speaker, I reserve the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, might I inquire how much time 
we have left.
  The SPEAKER pro tempore. The gentleman from Connecticut has 8 
minutes; the gentleman from New York controls 9 minutes.
  Mr. LARSON of Connecticut. Mr. Speaker, I would like to refer Members 
to the ``Technical Explanation of the Tax Technical Correction Act of 
2007,'' JCX-119-07, prepared by the nonpartisan Joint Committee on 
Taxation, for a description of the legislative intent behind the 
technical corrections contained in title IV of this bill, H. Res. 884.
  Mr. Speaker, at this time I recognize one of the leaders in this body 
and part of the Firefighter Caucus, the gentleman from New Jersey, my 
dear friend, Mr. Pascrell, for 2 minutes.
  Mr. PASCRELL. Mr. Speaker, I would like to reiterate the words of the 
gentleman from New York. This bill is a significant reminder of why we 
are here. Beyond the acrimony of the last few weeks, this bill goes to 
the center of what we should be all about. I commend the gentleman from 
New York.
  With this bill, we take up a tax measure that is not geared towards 
increasing the fortunes of the already fortunate, but instead we 
provide a measure of relief for those brave men and women serving in 
the military and as first responders.
  I am glad to see that this bill excludes from income certain 
reimbursable expenses incurred in the line of duty by volunteer 
firefighters. And I commend my friend, John Larson, who has worked on 
this issue for some time now. I am truly heartened that we are 
permanently extending combat pay in the calculations of the earned 
income tax credit.
  Recent law allowed members of the Armed Forces to include combat pay, 
which is generally nontaxable for purposes of computing their earned 
income credit. But this will only last through the 2006 tax year. Many 
of us have worked for some time to make this proposal permanent. I am 
tremendously pleased that this provision has been made.
  There is no reason a member of the Armed Forces should lose their 
earned income tax credit when they are mobilized to serve this country. 
This is unacceptable. I want to thank Chairman Rangel for all his work 
and diligence on this critical issue. And I want to say, Mr. Speaker, I 
hope we have many more bills like this between now and the time we take 
off, because it is important to indicate to the American people that we 
can cross party lines.
  Mr. REYNOLDS. Mr. Speaker, I certainly agree with the gentleman from 
New Jersey, our distinguished member from Ways and Means. This is a 
bipartisan piece of legislation. As both the manager of the bill, Mr. 
Larson of Connecticut, has outlined and as I have outlined, as we share 
strong support and we put Democrat and Republican views aside, and 
represented clearly what is best for America as we deal with our 
veterans and as we deal with our firefighters. And so both sides of the 
aisle today join strongly in a clear message of support of this 
legislation as it comes again before the House and goes to the other 
body, in hopes that the other body will see fit to support the type of 
legislation that is coming with such bipartisan support of not only the 
Ways and Means Committee but through what I believe will be the entire 
House.
  I reserve the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, at this time I recognize the 
gentlelady from San Diego, California, Susan Davis, for 1 minute.
  Mrs. DAVIS of California. I thank my colleague.
  Mr. Speaker, on November 6, we passed the Heroes Earnings Assistance 
and Relief Tax Act, and today we reaffirm our commitment to those who 
volunteer to protect the United States by putting forward a final 
product that reflects our commitment to veterans and servicemembers. I 
want to thank the hard work of the House Ways and Means Committee and 
the Senate Finance Committee for the hard act.
  My colleagues have highlighted a number of provisions. I wanted to 
just do two. One provision adjusts how the Social Security 
Administration calculates income for SSI eligibility to help military 
families keep their SSI benefits.
  I really want to thank a number of my families in my district in San 
Diego who shared their stories with me and gave me this opportunity to 
help make a change in this legislation. And the second I believe has 
already been mentioned, and that removes a date of service requirement, 
preventing those returning from Iraq and Afghanistan to fully take 
advantage of the federally supported Qualified Veterans Mortgage Bond 
program. This legislation, I believe, Mr. Speaker, demonstrates our 
Nation's appreciation for our military families and veterans, and I 
encourage my colleagues to vote for it.
  Mr. REYNOLDS. Mr. Speaker, I reserve the balance of my time.
  Mr. LARSON of Connecticut. At this time, Mr. Speaker, I recognize the 
distinguished gentleman from California (Mr. Farr) for 1 minute.
  Mr. FARR. Mr. Speaker, I thank the gentleman for yielding. Mr. 
Speaker, I rise today in strong support of this legislation, the Heroes 
Earnings Assistance and Tax Relief Act of 2007.
  This holiday season, Congress can provide tax relief to members of 
our military, our veterans, our volunteer firefighters, and to Peace 
Corps volunteers through the passage of this legislation. I am pleased 
that the committee included in the legislation a section of the bill 
that I authored which became section 106 earlier this year, and The 
Military Coalition who wrote in support of this language said: ``The 
consortium of uniformed services and veterans associations representing 
more than 5 million current and former military servicemembers and 
their families and survivors is writing in support of your planned 
legislation to rectify the longstanding problem encountered by many 
disabled veterans when filing for disability compensation with the 
Department of Veterans Affairs.''
  This bill corrects that, and I am very pleased with it and ask my 
colleagues to support the bill.
  Mr. REYNOLDS. Mr. Speaker, I reserve the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, I recognize the gentlelady 
from New York City, Ms. Clarke, for 1\1/2\ minutes.
  Ms. CLARKE. I thank the gentleman from Connecticut (Mr. Larson) for 
his leadership in this body and the management of this bill.
  Mr. Speaker, the extended military deployments in Iraq and 
Afghanistan have placed a great economic burden and hardship on many of 
our military families. Countless thousands of families are forced to 
not only cope with anguish of having a family member serving in harm's 
way, but also must deal with the economic hardships. That is why I am 
proud that H.R. 3933, a bill that I introduced, has a significant place 
in the heart of the HEART Act, which makes permanent three provisions 
that bring vital tax relief to help our soldiers and their families.
  This bill assures military compensation is excluded from income if it 
is earned in the combat zone or while hospitalized for wounds, 
diseases, or injuries received in combat, and permits active duty 
Reservists to make penalty free withdrawals from retirement plans and 
ends the penalties.
  I want to thank Mr. Rangel for his consistent leadership on this 
issue and for including my bill, H.R. 3933, as part of the HEART Act of 
2007. I am just proud to have been able to play a part in paying down 
on the debt of gratitude we owe to our women and men that serve and 
protect us on the front lines.
  Mr. REYNOLDS. Mr. Speaker, I reserve the balance of my time.


                             General Leave

  Mr. LARSON of Connecticut. Mr. Speaker, I ask unanimous consent that 
all Members may have 5 legislative days within which to revise and 
extend their remarks and include extraneous materials on H.R. 3997, as 
amended.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Connecticut?
  There was no objection.
  Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume 
to close debate on our side.
  Let me first take a moment again to thank Chairman Rangel and Ranking 
Member McCrery for their ongoing

[[Page H16788]]

work on this important bill and for including two specific provisions I 
described earlier regarding SSI benefits for blind veterans and 
penalty-free withdrawals by National Guardsmen and Reservists.
  Even more importantly, I want to thank my chairman and ranking member 
for working so hard to cultivate a true spirit of bipartisanship when 
we deal with issues where we can find common ground.

                              {time}  1700

  Today on this legislation, which is very important for both Guardsmen 
and Reservists and veterans who are serving our country and have served 
our country, and for our first responders and our firefighters, today 
is one where we have worked hard to take a number of bills and put them 
together and make it an opportunity to get results in 2007 that will be 
the Heroes Earnings Assistance and Relief Tax Act. I urge a ``yes'' 
vote.
  I yield back the balance of my time.
  Mr. LARSON of Connecticut. Mr. Speaker, let me rise and join the 
sentiment expressed by the gentleman from New York (Mr. Reynolds), and 
I think everybody on our committee, in expressing not only the sheer 
joy and delight of having a ranking member and the chairman of the 
committee work as closely as they have throughout the year, whether we 
agreed or disagreed. It is quite a contrast from previous years. I 
think that Mr. Rangel deserves an incredible amount of credit for the 
manner in which he has conducted himself, as does Mr. McCrery, as 
evident by the concern that has been expressed by both sides as we take 
up this important legislation today.
  Further, let me add, as has been expressed here by many, we should 
make sure that this bill is taken up in the Senate. They have a 
responsibility over in that body to make sure that they address the 
concerns of so many in our military, as eloquently expressed here today 
by so many Members on and off the committee who care deeply about 
issues that impact veterans and our volunteer firefighters as well.
  I also want to thank the members of the Ways and Means staff, and 
especially Eileen Shatz, who is serving for her last week on the Ways 
and Means Committee; Janice Mays; John Buckley; Aruna Kalyanam, who has 
been here throughout the day; Kase Jubboori; Mildeen Worrell, who have 
all done great work on behalf of the committee; Chairman Neal, who also 
has been outstanding with this legislation and the hearings that he 
conducted in our committee; Melissa Mueller from the subcommittee 
staff, who was key. And also from my staff, I want to thank Amy 
O'Donnell. We call her the tax missionary. And also John Renfrew and 
Jackie Primeau, who have done such an outstanding job.
  Mr. RAMSTAD. Mr. Speaker, I rise in strong support of the Defenders 
of Freedom Tax Relief Act, which provides important tax relief to the 
heroes who are defending our country, both abroad and here at home.
  I also appreciate that the bill includes a one-year extension of the 
1996 mental health parity law, which prohibits insurers from 
discriminating against mental health treatment with aggregate lifetime 
or annual dollar limits.
  But we must go much further to end insurance discrimination and 
expand access to treatment for mental illness and chemical addiction. 
We must knock down the barriers of higher copays and deductibles, 
limited treatment stays, and the lack of out-of-network benefits that 
do not apply to any other disease. We must pass the Paul Wellstone 
Mental Health and Addiction Equity Act.
  It's a national disgrace that 270,000 Americans were denied addiction 
treatment last year. It's a national tragedy that 150,000 of our fellow 
Americans died last year from chemical addiction and 30,000 Americans 
committed suicide from depression. And it's a national crisis that 
untreated addiction and mental illness cost our economy over $550 
billion last year.
  And think of the costs that can't be measured in dollars and cents--
human suffering, broken families, shattered dreams; ruined careers and 
destroyed lives.
  Passing mental health parity is not only the right things to do; it's 
the cost-effective thing to do. We have all the empirical data to prove 
that equity for mental health and addiction treatment will save 
billions of dollars nationally while not raising premiums more than 
two-tenths of one percent.
  This legislation has 273 cosponsors and passed three House committees 
with wide bipartisan support. It must absolutely be one of the first 
orders of business when Congress reconvenes in January.
  It's time to end the discrimination against people who need treatment 
for mental illness and addiction. It's time to prohibit health insurers 
from placing discriminatory restrictions on treatment. It's time to 
provide greater access to treatment. It's time to pass the Paul 
Wellstone Mental Health and Addiction Equity Act.
  The American people cannot afford to wait any longer for Congress to 
act.
  Mr. LARSON of Connecticut. Mr. Speaker, I yield back the balance of 
my time.
  The SPEAKER pro tempore (Mr. Snyder). The question is on the motion 
offered by the gentleman from Connecticut (Mr. Larson) that the House 
suspend the rules and agree to the resolution, H. Res. 884.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. LARSON of Connecticut. Mr. Speaker, on that I demand the yeas and 
nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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