[Congressional Record Volume 154, Number 34 (Friday, February 29, 2008)]
[Senate]
[Pages S1420-S1430]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself, Mr. Alexander, Mr. Allard, Mr. 
        Bond, Mr. Bunning, Mr. Cornyn, Mr. Craig, Mrs. Dole, Mr. Enzi, 
        Mr. Grassley, Mr. Gregg, Mrs. Hutchison, Mr. Inhofe, Mr. 
        Isakson, Mr. Roberts, and Mr. Hatch):
  S. 12. A bill to promote home ownership, manufacturing, and economic 
growth; read the first time.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the text 
of the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 12

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the 
     ``Homeownership, Manufacturing, and Economic Growth Act'' or 
     the ``HOME Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                       TITLE I--KEEPING TAXES LOW

Sec. 100. Amendment to 1986 Code.

              Subtitle A--Extension of Expiring Provisions

                   Part I--Individual Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 101. Nonbusiness energy property.
Sec. 102. Election to include combat pay as earned income for purposes 
              of the earned income credit.
Sec. 103. Deduction for certain expenses of elementary and secondary 
              school teachers.
Sec. 104. Distributions from retirement plans to individuals called to 
              active duty.
Sec. 105. Modification of mortgage revenue bonds for veterans.
Sec. 106. Deduction for State and local sales taxes.
Sec. 107. Archer MSAs.
Sec. 108. Deduction of qualified tuition and related expenses.
Sec. 109. Tax-free distributions from individual retirement plans for 
              charitable purposes.
Sec. 110. Stock in RIC for purposes of determining estates of 
              nonresidents not citizens.

                 subpart b--provisions expiring in 2008

Sec. 111. Residential energy efficient property.

                    Part II--Business Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 121. Research activities.
Sec. 122. Indian employment credit.
Sec. 123. Railroad track maintenance.
Sec. 124. Production of fuel from a nonconventional source at certain 
              facilities.
Sec. 125. Energy efficient appliances.
Sec. 126. 15-year straight-line cost recovery for qualified leasehold 
              improvements and qualified restaurant improvements.
Sec. 127. Seven-year cost recovery period for motorsports racing track 
              facility.
Sec. 128. Accelerated depreciation for business property on Indian 
              reservation.
Sec. 129. Qualified conservation contributions.
Sec. 130. Enhanced charitable deduction for contributions of food 
              inventory.
Sec. 131. Enhanced charitable deduction for contributions of book 
              inventory.
Sec. 132. Enhanced charitable deduction for corporate contributions of 
              computer equipment for educational purposes.
Sec. 133. Expensing of environmental remediation costs.
Sec. 134. Deduction allowable with respect to income attributable to 
              domestic production activities in Puerto Rico.
Sec. 135. Special rule for sales or dispositions to implement FERC or 
              State electric restructuring policy.
Sec. 136. Modification of tax treatment of certain payments to 
              controlling exempt organizations.
Sec. 137. Suspension of taxable income limit with respect to marginal 
              wells.
Sec. 138. Treatment of certain dividends of regulated investment 
              companies.
Sec. 139. Basis adjustment to stock of S corporations making charitable 
              contributions of property.
Sec. 140. Extension of qualified zone academy bonds.
Sec. 141. Tax incentives for investment in the District of Columbia.
Sec. 142. 0.2 percent FUTA surtax.

                 subpart b--provisions expiring in 2008

Sec. 146. Biodiesel and renewable diesel used as fuel.
Sec. 147. Electricity produced from certain renewable resources; 
              production of refined coal and Indian coal.
Sec. 148. New markets tax credit.
Sec. 149. Extension of new energy efficient home credit.
Sec. 150. Extension of mine rescue team training credit.
Sec. 151. Extension of energy credit.
Sec. 152. 5-year NOL carryback for certain electric utility companies.
Sec. 153. Extension of energy efficient commercial buildings deduction.
Sec. 154. Extension of election to expense advanced mine safety 
              equipment.
Sec. 155. Extension and modification of expensing rules for qualified 
              film and television productions.
Sec. 156. Subpart F exception for active financing income.
Sec. 157. Extension of look-thru rule for related controlled foreign 
              corporations.

                    Part III--Excise Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 161. Increase in limit on cover over of rum excise tax to Puerto 
              Rico and the Virgin Islands.
Sec. 162. Parity in the application of certain limits to mental health 
              benefits.
Sec. 163. Extension of economic development credit for American Samoa.

                 subpart b--provisions expiring in 2008

Sec. 166. Special rule for qualified methanol or ethanol fuel from 
              coal.
Sec. 167. Biodiesel mixture credit and credit for fuels used for 
              nontaxable purposes.

                 Part IV--Tax Administration Provisions

                 subpart a--provisions expiring in 2007

Sec. 171. Disclosures to facilitate combined employment tax reporting.
Sec. 172. Disclosure of return information to apprise appropriate 
              officials of terrorist activities.
Sec. 173. Disclosure upon request of information relating to terrorist 
              activities.
Sec. 174. Disclosure of return information to carry out income 
              contingent repayment of student loans.
Sec. 175. Authority for undercover operations.

                 subpart b--provisions expiring in 2008

Sec. 176. Extension of reporting of interest of exempt organizations in 
              insurance contracts.
Sec. 177. Disclosures relating to certain programs administered by the 
              Department of Veterans Affairs.

               Subtitle B--Alternative Minimum Tax Relief

Sec. 181. 2-year extension of increased alternative minimum tax 
              exemption amount.
Sec. 182. Extension of alternative minimum tax relief for nonrefundable 
              personal credits.

                   Subtitle C--Additional Tax Relief

Sec. 191. Permanent extension of 2001 and 2003 tax relief provisions.
Sec. 192. Maximum corporate income tax rate reduced to 25 percent.
Sec. 193. 3-year carryback of certain credits.
Sec. 194. Election to accelerate AMT and R and D credits in lieu of 
              bonus depreciation.
Sec. 195. Indexing of certain assets for purposes of determining gain 
              or loss.
Sec. 196. Deferral of gain on sale of certain principal residences.
Sec. 197. Amount excluded from sale of principal residence indexed for 
              inflation.
Sec. 198. Repeal of phasein for domestic production activities 
              deduction.

                 TITLE II--KEEPING AMERICA COMPETITIVE

Sec. 201. Sense of Congress regarding the legislative initiatives 
              required to strengthen and protect the well being of our 
              Nation's capital markets.
Sec. 202. Directing the Securities and Exchange Commission to convene a 
              public hearing on the impact of excessive litigation.
Sec. 203. Directing the Commission to establish formal processes and 
              procedures for cost-benefit analyses of proposed and 
              existing rules and regulations.

[[Page S1421]]

Sec. 204. Directing the Commission to define ``smaller public company'' 
              to provide certainty to issuers.
Sec. 205. Mutual recognition.
Sec. 206. Supporting the Securities and Exchange Commission reform 
              efforts to speed the process of rulemaking for self 
              regulatory organizations.
Sec. 207. Eliminate the exemption from State regulation for certain 
              securities designated by national securities exchanges.
Sec. 208. Directing the Commission to accelerate full conversion of 
              IFRS and United States GAAP.
Sec. 209. Promoting market access for financial services.

                    TITLE III--PROTECTING HOMEOWNERS

Sec. 301. Subprime refinancing loans through use of qualified mortgage 
              bonds.
Sec. 302. Expeditious distribution of funds already provided for 
              mortgage foreclosure counseling.
Sec. 303. Credit for purchase of homes in or near foreclosure.
Sec. 304. Enhanced mortgage loan disclosures.
Sec. 305. Carryback of certain net operating losses allowed for 5 
              years; temporary suspension of 90 percent AMT limit.

                 TITLE IV--REDUCING THE LITIGATION TAX

Sec. 401 Limitation on punitive damages for small businesses.
Sec. 402. Reasonableness review of attorney's fees.
Sec. 403. Partial award of attorney's fees for unreasonable lawsuits.
Sec. 404. Mandatory sanctions for frivolous lawsuits.
Sec. 405. Bar on junk science in the courtroom.

                       TITLE I--KEEPING TAXES LOW

     SEC. 100. AMENDMENT TO 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     title 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.

              Subtitle A--Extension of Expiring Provisions

                   PART I--INDIVIDUAL TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

     SEC. 101. NONBUSINESS ENERGY PROPERTY.

       (a) Extension of Credit.--Section 25C(g) (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after December 31, 
     2007.

     SEC. 102. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR 
                   PURPOSES OF THE EARNED INCOME CREDIT.

       (a) In General.--Subclause (II) of section 32(c)(2)(B)(vi) 
     (defining earned income) is amended by striking ``January 1, 
     2008'' and inserting ``January 1, 2010''.
       (b) Conforming Amendment.--Paragraph (4) of section 6428, 
     as amended by the Economic Stimulus Act of 2008, is amended 
     to read as follows:
       ``(4) Earned income.--The term `earned income' has the 
     meaning set forth in section 32(c)(2) except that such term 
     shall not include net earnings from self-employment which are 
     not taken into account in computing taxable income.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2007.

     SEC. 103. DEDUCTION FOR CERTAIN EXPENSES OF ELEMENTARY AND 
                   SECONDARY SCHOOL TEACHERS.

       (a) In General.--Subparagraph (D) of section 62(a)(2) 
     (relating to certain expenses of elementary and secondary 
     school teachers) is amended by striking ``or 2007'' and 
     inserting ``2007, 2008, or 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 104. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS 
                   CALLED TO ACTIVE DUTY.

       (a) In General.--Clause (iv) of section 72(t)(2)(G) is 
     amended by striking ``December 31, 2007'' and inserting 
     ``January 1, 2010''.
       (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. 105. 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 inserting ``and after the date 
     of the enactment of the HOME Act and before January 1, 2010'' 
     after ``January 1, 2008''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 106. DEDUCTION FOR STATE AND LOCAL SALES TAXES.

       (a) In General.--Subparagraph (I) of section 164(b)(5) is 
     amended by striking ``January 1, 2008'' and inserting 
     ``January 1, 2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 107. ARCHER MSAS.

       (a) In General.--Subsection (i) of section 220 (relating to 
     limitation on number of taxpayers having Archer MSAs) is 
     amended--
       (1) by striking ``2007'' each place it appears in 
     paragraphs (2) and (3)(B) and inserting ``2009'',
       (2) by striking ``2007'' in the heading of paragraph (3)(B) 
     and inserting ``2009''.
       (b) Conforming Amendments.--Subsection (j) of section 220 
     is amended--
       (1) by striking ``or 2006'' each place it appears in 
     paragraph (2) and inserting ``2006, 2007, or 2008'',
       (2) by striking ``or 2006'' in the heading for paragraph 
     (2) and inserting ``2006, 2007, or 2008'', and
       (3) by striking ``and 2006'' in paragraph (4) and inserting 
     ``2006, 2007, and 2008''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after December 31, 
     2007.

     SEC. 108. DEDUCTION OF QUALIFIED TUITION AND RELATED 
                   EXPENSES.

       (a) In General.--Subsection (e) of section 222 (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 109. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   PLANS FOR CHARITABLE PURPOSES.

       (a) In General.--Subparagraph (F) of section 408(d)(8) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made in taxable years beginning 
     after December 31, 2007.

     SEC. 110. STOCK IN RIC FOR PURPOSES OF DETERMINING ESTATES OF 
                   NONRESIDENTS NOT CITIZENS.

       (a) In General.--Paragraph (3) of section 2105(d) (relating 
     to stock in a RIC) is amended by striking ``December 31, 
     2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to decedents dying after December 31, 2007.

                 Subpart B--Provisions Expiring in 2008

     SEC. 111. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       Subsection (g) of section 25D (relating to termination) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.

                    PART II--BUSINESS TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

     SEC. 121. RESEARCH ACTIVITIES.

       (a) In General.--Section 41(h) (relating to termination) is 
     amended by striking ``December 31, 2007'' and inserting 
     ``December 31, 2009'' in paragraph (1)(B).
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after December 31, 
     2007.

     SEC. 122. INDIAN EMPLOYMENT CREDIT.

       (a) In General.--Subsection (f) of section 45A (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 123. RAILROAD TRACK MAINTENANCE.

       (a) In General.--Subsection (f) of section 45G (relating to 
     application of section) is amended by striking ``January 1, 
     2008'' and inserting ``January 1, 2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to expenditures paid or incurred during taxable 
     years beginning after December 31, 2007.

     SEC. 124. PRODUCTION OF FUEL FROM A NONCONVENTIONAL SOURCE AT 
                   CERTAIN FACILITIES.

       (a) In General.--Subsection (f)(1)(B) of section 45K 
     (relating to extension for certain facilities) is amended by 
     striking ``January 1, 2008'' and inserting ``January 1, 
     2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to fuels produced and sold after December 31, 
     2007.

     SEC. 125. ENERGY EFFICIENT APPLIANCES.

       (a) In General.--Subsection (b) of section 45M (relating to 
     applicable amount) is amended by striking ``calendar year 
     2006 or 2007'' each place it appears in paragraphs (1)(A)(i), 
     (1)(B)(i), (1)(C)(ii)(I), and (1)(C)(iii)(I), and inserting 
     ``calendar year 2006, 2007, 2008, or 2009''.
       (b) Restart of Credit Limitation.--Paragraph (1) of section 
     45M(e) (relating to aggregate credit amount allowed) is 
     amended by inserting ``beginning after December 31, 2007'' 
     after ``for all prior taxable years''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to appliances produced after December 31, 2007.

     SEC. 126. 15-YEAR STRAIGHT-LINE COST RECOVERY FOR QUALIFIED 
                   LEASEHOLD IMPROVEMENTS AND QUALIFIED RESTAURANT 
                   IMPROVEMENTS.

       (a) In General.--Clauses (iv) and (v) of section 
     168(e)(3)(E) (relating to 15-year property) are each amended 
     by striking ``January 1, 2008'' and inserting ``January 1, 
     2010''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2007.

     SEC. 127. SEVEN-YEAR COST RECOVERY PERIOD FOR MOTORSPORTS 
                   RACING TRACK FACILITY.

       (a) In General.--Subparagraph (D) of section 168(i)(15) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after December 31, 
     2007.

[[Page S1422]]

     SEC. 128. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON 
                   INDIAN RESERVATION.

       (a) In General.--Paragraph (8) of section 168(j) (relating 
     to termination) is amended by striking ``December 31, 2007'' 
     and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after December 31, 
     2007.

     SEC. 129. QUALIFIED CONSERVATION CONTRIBUTIONS.

       (a) In General.--Clause (vi) of section 170(b)(1)(E) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Contributions by Corporate Farmers and Ranchers.--
     Clause (iii) of section 170(b)(2)(B) (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contributions made in taxable years beginning 
     after December 31, 2007.

     SEC. 130. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF 
                   FOOD INVENTORY.

       (a) In General.--Clause (iv) of section 170(e)(3)(C) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after December 31, 2007.

     SEC. 131. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF 
                   BOOK INVENTORY.

       (a) In General.--Clause (iv) of section 170(e)(3)(D) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Clerical Amendment.--Clause (iii) of section 
     170(e)(3)(D) (relating to certification by donee) is amended 
     by inserting ``of books'' after ``to any contribution''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 2007.

     SEC. 132. ENHANCED CHARITABLE DEDUCTION FOR CORPORATE 
                   CONTRIBUTIONS OF COMPUTER EQUIPMENT FOR 
                   EDUCATIONAL PURPOSES.

       (a) In General.--Subparagraph (G) of section 170(e)(6) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after December 31, 2007.

     SEC. 133. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

       (a) In General.--Subsection (h) of section 198 (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to expenditures paid or incurred after December 
     31, 2007.

     SEC. 134. DEDUCTION ALLOWABLE WITH RESPECT TO INCOME 
                   ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES 
                   IN PUERTO RICO.

       (a) In General.--Subparagraph (C) of section 199(d)(8) 
     (relating to termination) is amended--
       (1) by striking ``first 2 taxable years'' and inserting 
     ``first 4 taxable years'', and
       (2) by striking ``January 1, 2008'' and inserting ``January 
     1, 2010''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 135. SPECIAL RULE FOR SALES OR DISPOSITIONS TO IMPLEMENT 
                   FERC OR STATE ELECTRIC RESTRUCTURING POLICY.

       (a) In General.--Paragraph (3) of section 451(i) (relating 
     to qualifying electric transmission transaction) is amended 
     by striking ``January 1, 2008'' and inserting ``January 1, 
     2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions occurring after December 31, 
     2007.

     SEC. 136. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS 
                   TO CONTROLLING EXEMPT ORGANIZATIONS.

       (a) In General.--Clause (iv) of section 512(b)(13)(E) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to payments received or accrued after December 
     31, 2007.

     SEC. 137. SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT TO 
                   MARGINAL WELLS.

       (a) In General.--Subparagraph (H) of section 613A(c)(6) 
     (relating to temporary suspension of taxable income limit 
     with respect to marginal production) is amended by striking 
     ``January 1, 2008'' and inserting ``January 1, 2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 138. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED 
                   INVESTMENT COMPANIES.

       (a) Interest-Related Dividends.--Subparagraph (C) of 
     section 871(k)(1) (defining interest-related dividend) is 
     amended by striking ``December 31, 2007'' and inserting 
     ``December 31, 2009''.
       (b) Short-Term Capital Gain Dividends.--Subparagraph (C) of 
     section 871(k)(2) (defining short-term capital gain dividend) 
     is amended by striking ``December 31, 2007'' and inserting 
     ``December 31, 2009''.
       (c) Disposition of Investment in United States Real 
     Property.--Clause (ii) of section 897(h)(4)(A) (relating to 
     termination) is amended by striking ``December 31, 2007'' and 
     inserting ``December 31, 2009''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to dividends with respect to taxable years of 
     regulated investment companies beginning after December 31, 
     2007.

     SEC. 139. BASIS ADJUSTMENT TO STOCK OF S CORPORATIONS MAKING 
                   CHARITABLE CONTRIBUTIONS OF PROPERTY.

       (a) In General.--The last sentence of section 1367(a)(2) 
     (relating to decreases in basis) is amended by striking 
     ``December 31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made in taxable years beginning 
     after December 31, 2007.

     SEC. 140. EXTENSION OF QUALIFIED ZONE ACADEMY BONDS.

       (a) In General.--Paragraph (1) of section 1397E(e) is 
     amended by striking ``and 2007'' and inserting ``2007, 2008, 
     and 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 141. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF 
                   COLUMBIA.

       (a) Designation of D.C. Enterprise Zone.--Subsection (f) of 
     section 1400 (relating to time for which designation 
     applicable) is amended by striking ``December 31, 2007'' each 
     place it appears in paragraphs (1) and (2) and inserting 
     ``December 31, 2009''.
       (b) Tax-Exempt D.C. Empowerment Zone Bonds.--Subsection (b) 
     of section 1400A (relating to period of applicability) is 
     amended by inserting ``, and after the date of the enactment 
     of the HOME Act and before December 31, 2009'' after 
     ``December 31, 2007''.
       (c) Acquisition Date for Eligibility for Zero-Percent 
     Capital Gains Rate for Investment in D.C..--Subsection (b) of 
     section 1400B (relating to D.C. zone asset) is amended by 
     striking ``January 1, 2008'' each place it appears in 
     paragraphs (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i)(I) and 
     inserting ``January 1, 2010''.
       (d) Tax Credit for First-Time D.C. Homebuyers.--Subsection 
     (i) of section 1400C (relating to application of section) is 
     amended by striking ``January 1, 2008'' and inserting 
     ``January 1, 2010''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to transactions after December 31, 2007.

     SEC. 142. 0.2 PERCENT FUTA SURTAX.

       (a) In General.--Section 3301 (relating to rate of tax) is 
     amended--
       (1) by striking ``through 2007'' in paragraph (1) and 
     inserting ``through 2009'', and
       (2) by striking ``calendar year 2008'' in paragraph (2) and 
     inserting ``calendar year 2010''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to wages paid after December 31, 2007.

                 Subpart B--Provisions Expiring in 2008

     SEC. 146. BIODIESEL AND RENEWABLE DIESEL USED AS FUEL.

       Subsection (g) of section 40A (relating to termination) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.

     SEC. 147. ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE 
                   RESOURCES; PRODUCTION OF REFINED COAL AND 
                   INDIAN COAL.

       Section 45(d) (relating to qualified facilities) is amended 
     by striking ``January 1, 2009'' each place it appears in 
     paragraphs (1), (2), (3), (4), (5), (6), (7), (8), (9), and 
     (10) and inserting ``January 1, 2010''.

     SEC. 148. NEW MARKETS TAX CREDIT.

       Subparagraph (D) of section 45D(f)(1) (relating to national 
     limitation on amount of investments designated) is amended by 
     striking ``and 2008'' and inserting ``2008, and 2009''.

     SEC. 149. EXTENSION OF NEW ENERGY EFFICIENT HOME CREDIT.

       Subsection (g) of section 45L (relating to termination) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.

     SEC. 150. EXTENSION OF MINE RESCUE TEAM TRAINING CREDIT.

       Section 45N(e) (relating to termination) is amended by 
     striking ``December 31, 2008'' and inserting ``December 31, 
     2009''.

     SEC. 151. EXTENSION OF ENERGY CREDIT.

       (a) Solar Energy Property.--Paragraphs (2)(A)(i)(II) and 
     (3)(A)(ii) of section 48(a) (relating to energy credit) are 
     each amended by striking ``January 1, 2009'' and inserting 
     ``January 1, 2010''.
       (b) Fuel Cell Property.--Subparagraph (E) of section 
     48(c)(1) (relating to qualified fuel cell property) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.
       (c) Microturbine Property.--Subparagraph (E) of section 
     48(c)(2) (relating to qualified microturbine property) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.

     SEC. 152. 5-YEAR NOL CARRYBACK FOR CERTAIN ELECTRIC UTILITY 
                   COMPANIES.

       Subparagraph (I)(i) of section 172(b)(1) (relating to 
     transmission property and pollution control investment) is 
     amended--
       (1) by striking ``January 1, 2009'' and inserting ``January 
     1, 2010'', and
       (2) by striking ``January 1, 2006'' and inserting ``January 
     1, 2007''.

     SEC. 153. EXTENSION OF ENERGY EFFICIENT COMMERCIAL BUILDINGS 
                   DEDUCTION.

       Section 179D(h) (relating to termination) is amended by 
     striking ``December 31, 2008'' and inserting ``December 31, 
     2009''.

[[Page S1423]]

     SEC. 154. EXTENSION OF ELECTION TO EXPENSE ADVANCED MINE 
                   SAFETY EQUIPMENT.

       Section 179E(g) (relating to termination) is amended by 
     striking ``December 31, 2008'' and inserting ``December 31, 
     2009''.

     SEC. 155. EXTENSION AND MODIFICATION OF EXPENSING RULES FOR 
                   QUALIFIED FILM AND TELEVISION PRODUCTIONS.

       Section 181(f) (relating to termination) is amended by 
     striking ``December 31, 2008'' and inserting ``December 31, 
     2009''.

     SEC. 156. SUBPART F EXCEPTION FOR ACTIVE FINANCING INCOME.

       (a) Exempt Insurance Income.--Paragraph (10) of section 
     953(e) (relating to application) is amended--
       (1) by striking ``January 1, 2009'' and inserting ``January 
     1, 2010'', and
       (2) by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.
       (b) Exception to Treatment as Foreign Personal Holding 
     Company Income.--Paragraph (9) of section 954(h) (relating to 
     application) is amended by striking ``January 1, 2009'' and 
     inserting ``January 1, 2010''.

     SEC. 157. EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED 
                   FOREIGN CORPORATIONS.

       Subparagraph (B) of section 954(c)(6) (relating to 
     application) is amended by striking ``January 1, 2009'' and 
     inserting ``January 1, 2010''.

                    PART III--EXCISE TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

     SEC. 161. INCREASE IN LIMIT ON COVER OVER OF RUM EXCISE TAX 
                   TO PUERTO RICO AND THE VIRGIN ISLANDS.

       (a) In General.--Paragraph (1) of section 7652(f) is 
     amended by inserting ``, and after the date of the enactment 
     of the HOME Act and before January 1, 2010'' after ``January 
     1, 2008''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distilled spirits brought into the United 
     States after the date of the enactment of this Act.

     SEC. 162. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                   MENTAL HEALTH BENEFITS.

       (a) In General.--Subsection (f) of section 9812 (relating 
     to application of section) is amended--
       (1) by striking ``and'' at the end of paragraph (2),
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``, and before the date of the enactment of the 
     HOME Act'', and
       (3) by adding at the end the following new paragraph:
       ``(4) after December 31, 2009.''.
       (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 inserting ``, and before the date of the enactment of the 
     HOME Act, and after December 31, 2009'' after ``December 31, 
     2007''.
       (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 inserting ``, and before the date of the 
     enactment of the HOME Act, and after December 31, 2009'' 
     after ``December 31, 2006''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to benefits for services furnished on or after 
     the date of the enactment of this Act.

     SEC. 163. EXTENSION OF ECONOMIC DEVELOPMENT CREDIT FOR 
                   AMERICAN SAMOA.

       (a) In General.--Subsection (d) of section 119 of division 
     A of the Tax Relief and Health Care Act of 2006 is amended--
       (1) by striking ``first two taxable years'' and inserting 
     ``first 4 taxable years'', and
       (2) by striking ``January 1, 2008'' and inserting ``January 
     1, 2010''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

                 Subpart B--Provisions Expiring in 2008

     SEC. 166. SPECIAL RULE FOR QUALIFIED METHANOL OR ETHANOL FUEL 
                   FROM COAL.

       Subparagraph (D) of section 4041(b)(2) (relating to 
     termination) is amended by striking ``January 1, 2009'' and 
     inserting ``January 1, 2010''.

     SEC. 167. BIODIESEL MIXTURE CREDIT AND CREDIT FOR FUELS USED 
                   FOR NONTAXABLE PURPOSES.

       (a) Biodiesel Mixtures.--Paragraph (6) of section 6426(c) 
     (relating to termination) is amended by striking ``December 
     31, 2008'' and inserting ``December 31, 2009''.
       (b) Biodiesel Used for Nontaxable Purposes.--Paragraph 
     (5)(B) of section 6427(e) (relating to termination) is 
     amended by striking ``December 31, 2008'' and inserting 
     ``December 31, 2009''.

                 PART IV--TAX ADMINISTRATION PROVISIONS

                 Subpart A--Provisions Expiring in 2007

     SEC. 171. DISCLOSURES TO FACILITATE COMBINED EMPLOYMENT TAX 
                   REPORTING.

       (a) In General.--Subparagraph (B) of section 6103(d)(5) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendments made by this subsection 
     shall apply to disclosures after the date of the enactment of 
     this Act.

     SEC. 172. DISCLOSURE OF RETURN INFORMATION TO APPRISE 
                   APPROPRIATE OFFICIALS OF TERRORIST ACTIVITIES.

       (a) In General.--Clause (iv) of section 6103(i)(3)(C) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to disclosures after the date of the enactment of 
     this Act.

     SEC. 173. DISCLOSURE UPON REQUEST OF INFORMATION RELATING TO 
                   TERRORIST ACTIVITIES.

       (a) In General.--Subparagraph (E) of section 6103(i)(7) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to disclosures after the date of the enactment of 
     this Act.

     SEC. 174. DISCLOSURE OF RETURN INFORMATION TO CARRY OUT 
                   INCOME CONTINGENT REPAYMENT OF STUDENT LOANS.

       (a) In General.--Subparagraph (D) of section 6103(l)(13) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to disclosures after the date of the enactment of 
     this Act.

     SEC. 175. AUTHORITY FOR UNDERCOVER OPERATIONS.

       (a) In General.--Paragraph (6) of section 7608(c) (relating 
     to application of section) is amended by striking ``January 
     1, 2008'' each place it appears and inserting ``January 1, 
     2010''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to operations conducted after the date of the 
     enactment of this Act.

                 Subpart B--Provisions Expiring in 2008

     SEC. 176. EXTENSION OF REPORTING OF INTEREST OF EXEMPT 
                   ORGANIZATIONS IN INSURANCE CONTRACTS.

       Section 6050V(e) (relating to termination) is amended by 
     striking ``the date which is 2 years after the date of the 
     enactment of this section'' and inserting ``December 31, 
     2009''.

     SEC. 177. DISCLOSURES RELATING TO CERTAIN PROGRAMS 
                   ADMINISTERED BY THE DEPARTMENT OF VETERANS 
                   AFFAIRS.

       (a) In General.--Section 6103(l)(7)(D) (relating to 
     programs to which rule applies) is amended by striking 
     ``September 30, 2008'' and inserting ``December 31, 2009''.
       (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)''.

               Subtitle B--Alternative Minimum Tax Relief

     SEC. 181. 2-YEAR EXTENSION OF INCREASED ALTERNATIVE MINIMUM 
                   TAX EXEMPTION AMOUNT.

       (a) In General.--Section 55(d)(1) is amended--
       (1) by striking ``$66,250'' and all that follows through 
     ``2007'' in subparagraph (A) and inserting ``the joint return 
     amount in the case of taxable years beginning in 2008 and 
     2009'', and
       (2) by striking ``$44,350'' and all that follows through 
     ``2007'' in subparagraph (B) and inserting ``the unmarried 
     individual return amount in the case of taxable years 
     beginning in 2008 and 2009''.
       (b) Joint Return Amount; Unmarried Individual Return 
     Amount.--Section 55(d) is amended by adding at the end the 
     following new paragraph:
       ``(4) Joint return amount; unmarried individual return 
     amount.--
       ``(A) Joint return amount.--For purposes of paragraph 
     (1)(A), the joint return amount shall be--
       ``(i) $69,950 for taxable years beginning in 2008, and
       ``(ii) $73,250 for taxable year beginning in 2009.
       ``(B) Unmarried individual return amount.--For purposes of 
     paragraph (1)(B), the unmarried individual return amount 
     shall be--
       ``(i) $46,200 for taxable years beginning in 2008, and
       ``(ii) $47,850 for taxable year beginning in 2009.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 182. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR 
                   NONREFUNDABLE PERSONAL CREDITS.

       (a) In General.--Paragraph (2) of section 26(a) is 
     amended--
       (1) by striking ``or 2007'' and inserting ``2007, 2008, or 
     2009'', and
       (2) by striking ``2007'' in the heading thereof and 
     inserting ``2009''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

                   Subtitle C--Additional Tax Relief

     SEC. 191. PERMANENT EXTENSION OF 2001 AND 2003 TAX RELIEF 
                   PROVISIONS.

       (a) Economic Growth and Tax Relief Reconciliation Act of 
     2001.--Title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 (relating to compliance with 
     Congressional Budget Act) is repealed.
       (b) Jobs and Growth Tax Relief Reconciliation Act of 
     2003.--Title III of the Jobs and Growth Tax Relief 
     Reconciliation Act of 2003 is amended by striking section 
     303.

[[Page S1424]]

     SEC. 192. MAXIMUM CORPORATE INCOME TAX RATE REDUCED TO 25 
                   PERCENT.

       (a) In General.--Paragraph (1) of section 11(b) (relating 
     to amount of tax on corporations) is amended to read as 
     follows:
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) shall be the sum of--
       ``(A) 15 percent of so much of the taxable income as does 
     not exceed $50,000, and
       ``(B) 25 percent of so much of the taxable income as 
     exceeds $50,000.''.
       (b) Personal Service Corporations.--Paragraph (2) of 
     section 11(b) is amended by striking ``35 percent'' and 
     inserting ``25 percent''.
       (c) Conforming Amendments.--Paragraphs (1) and (2) of 
     section 1445(e) are each amended by striking ``35 percent'' 
     and inserting ``25 percent''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008, except that the amendments made by subsection (c) shall 
     take effect on January 1, 2009.

     SEC. 193. 3-YEAR CARRYBACK OF CERTAIN CREDITS.

       (a) General Business Credit.--Subsection (a) of section 39 
     is amended by adding at the end the following new paragraph:
       ``(4) Special rule for 2007, 2008, and 2009.--In the case 
     of an excess described in paragraph (1) arising in a taxable 
     year beginning in 2007, 2008, or 2009--
       ``(A) paragraph (1)(A) shall be applied by substituting 
     `each of the 3 taxable years' for ``the taxable year',
       ``(B) paragraphs (2)(A) and (3)(C)(i) shall each be applied 
     by substituting `23 taxable years' for `21 taxable years',
       ``(C) paragraphs (2)(B) and (3)(C)(ii) shall be applied by 
     substituting `23 taxable years' for `20 taxable years'.''.
       (b) Foreign Tax Credit.--
       (1) In general.--Section 904(c) is amended by adding at the 
     end thereof the following: ``In the case of taxable years 
     beginning in 2007, 2008, or 2009, the first sentence of this 
     subsection shall, at the election of the taxpayer, be applied 
     by substituting `in the third preceding taxable year, the 
     second preceding taxable year, the first preceding taxable 
     year' for `the first preceding taxable year'.''.
       (2) Application of special refund rules.--Section 6411 
     (relating to tentative carryback and refund adjustments) is 
     amended by redesignating subsection (d) as subsection (e) and 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Application to Foreign Tax Credit Carryback.--Under 
     rules prescribed by the Secretary, in the case of taxable 
     years beginning in 2007, 2008, and 2009, this section shall 
     apply with respect to a foreign tax credit carryback provided 
     in section 904(c) in the same manner as this section applies 
     with respect to net operating loss carrybacks provided in 
     section 172(b), business credit carrybacks provided in 
     section 39, and capital loss carrybacks provided in 
     subsection (a)(1) or (c) of section 1212.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to general business credits and foreign tax 
     credits arising in taxable years beginning after December 31, 
     2006.

     SEC. 194. ELECTION TO ACCELERATE AMT AND R AND D CREDITS IN 
                   LIEU OF BONUS DEPRECIATION.

       (a) In General.--Section 168(k) is amended by adding at the 
     end the following new paragraph:
       ``(4) Election to accelerate amt and r and d credits in 
     lieu of bonus depreciation.--
       ``(A) In general.--If a corporation elects to have this 
     paragraph apply --
       ``(i) no additional depreciation shall be allowed under 
     paragraph (1) for any property placed in service during the 
     taxable year, and
       ``(ii) the limitations described in subparagraph (B) for 
     such taxable year shall be increased by an aggregate amount 
     not in excess of the bonus depreciation amount for such 
     taxable year.
       ``(B) Limitations to be increased.--The limitations 
     described in this subparagraph are--
       ``(i) the limitation under section 38(c), and
       ``(ii) the limitation under section 53(c).
       ``(C) Bonus depreciation amount.--For purposes of this 
     paragraph--
       ``(i) In general.--The bonus depreciation amount for any 
     taxable year is an amount equal to the product of the 
     applicable percentage and the excess (if any) of--

       ``(I) the aggregate amount of depreciation which would be 
     determined under this section for property placed in service 
     during the taxable year if no election under this paragraph 
     were made, over
       ``(II) the aggregate amount of depreciation allowable under 
     this section for property placed in service during the 
     taxable year.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage shall be--

       ``(I) 30 percent in the case of the limitation under 
     section 38(c), and
       ``(II) 20 percent in the case of the limitation under 
     section 53(c).

       ``(D) Allocation of bonus depreciation amounts.--
       ``(i) In general.--Subject to clauses (ii) and (iii), the 
     taxpayer shall, at such time and in such manner as the 
     Secretary may prescribe, specify the portion (if any) of the 
     bonus depreciation amount which is to be allocated to each of 
     the limitations described in subparagraph (B).
       ``(ii) Business credit limitation.--The portion of the 
     bonus depreciation amount allocated to the limitation 
     described in subparagraph (B)(i) shall not exceed an amount 
     equal to the portion of the credit allowable under section 38 
     for the taxable year which is allocable to business credit 
     carryforwards to such taxable year which are--

       ``(I) from taxable years beginning before January 1, 2006, 
     and
       ``(II) properly allocable (determined under the rules of 
     section 38(d)) to the research credit determined under 
     section 41(a).

       ``(iii) Alternative minimum tax credit limitation.--The 
     portion of the bonus depreciation amount allocated to the 
     limitation described in subparagraph (B)(ii) shall not exceed 
     an amount equal to the portion of the minimum tax credit 
     allowable under section 53 for the taxable year which is 
     allocable to the adjusted minimum tax imposed for taxable 
     years beginning before January 1, 2006.
       ``(E) Credit refundable.--Any aggregate increases in the 
     credits allowed under section 38 or 53 by reason of this 
     paragraph shall, for purposes of this title, be treated as a 
     credit allowed to the taxpayer under subpart C of part IV of 
     subchapter A.
       ``(F) Other rules.--
       ``(i) Election.--Any election under this paragraph 
     (including any allocation under subparagraph (D)) may be 
     revoked only with the consent of the Secretary.
       ``(ii) Deduction allowed in computing minimum tax.--
     Notwithstanding this paragraph, paragraph (2)(G) shall apply 
     with respect to the deduction computed under this section 
     (after application of this paragraph) with respect to 
     property placed in service during any applicable taxable 
     year.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2007, in taxable years ending after such date.

     SEC. 195. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 
                   DETERMINING GAIN OR LOSS.

       (a) In General.--Part II of subchapter O of chapter 1 
     (relating to basis rules of general application) is amended 
     by redesignating section 1023 as section 1024 and by 
     inserting after section 1022 the following new section:

     ``SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 
                   DETERMINING GAIN OR LOSS.

       ``(a) General Rule.--
       ``(1) Indexed basis substituted for adjusted basis.--Solely 
     for purposes of determining gain or loss on the sale or other 
     disposition by a taxpayer (other than a corporation) of an 
     indexed asset which has been held for more than 3 years, the 
     indexed basis of the asset shall be substituted for its 
     adjusted basis.
       ``(2) Exception for depreciation, etc.--The deductions for 
     depreciation, depletion, and amortization shall be determined 
     without regard to the application of paragraph (1) to the 
     taxpayer or any other person.
       ``(3) Written documentation requirement.--Paragraph (1) 
     shall apply only with respect to indexed assets for which the 
     taxpayer has written documentation of the original purchase 
     price paid or incurred by the taxpayer to acquire such asset.
       ``(b) Indexed Asset.--
       ``(1) In general.--For purposes of this section, the term 
     `indexed asset' means--
       ``(A) common stock in a C corporation (other than a foreign 
     corporation), or
       ``(B) tangible property,
     which is a capital asset or property used in the trade or 
     business (as defined in section 1231(b)).
       ``(2) Stock in certain foreign corporations included.--For 
     purposes of this section--
       ``(A) In general.--The term `indexed asset' includes common 
     stock in a foreign corporation which is regularly traded on 
     an established securities market.
       ``(B) Exception.--Subparagraph (A) shall not apply to--
       ``(i) stock in a passive foreign investment company (as 
     defined in section 1296), and
       ``(ii) stock in a foreign corporation held by a United 
     States person who meets the requirements of section 
     1248(a)(2).
       ``(C) Treatment of american depository receipts.--An 
     American depository receipt for common stock in a foreign 
     corporation shall be treated as common stock in such 
     corporation.
       ``(c) Indexed Basis.--For purposes of this section--
       ``(1) General rule.--The indexed basis for any asset is--
       ``(A) the adjusted basis of the asset, increased by
       ``(B) the applicable inflation adjustment.
       ``(2) Applicable inflation adjustment.--The applicable 
     inflation adjustment for any asset is an amount equal to--
       ``(A) the adjusted basis of the asset, multiplied by
       ``(B) the percentage (if any) by which--
       ``(i) the gross domestic product deflator for the last 
     calendar quarter ending before the asset is disposed of, 
     exceeds
       ``(ii) the gross domestic product deflator for the last 
     calendar quarter ending before the asset was acquired by the 
     taxpayer.
     The percentage under subparagraph (B) shall be rounded to the 
     nearest \1/10\ of 1 percentage point.
       ``(3) Gross domestic product deflator.--The gross domestic 
     product deflator for any calendar quarter is the implicit 
     price deflator for the gross domestic product for such 
     quarter (as shown in the last revision thereof released by 
     the Secretary of Commerce before the close of the following 
     calendar quarter).

[[Page S1425]]

       ``(d) Suspension of Holding Period Where Diminished Risk of 
     Loss; Treatment of Short Sales.--
       ``(1) In general.--If the taxpayer (or a related person) 
     enters into any transaction which substantially reduces the 
     risk of loss from holding any asset, such asset shall not be 
     treated as an indexed asset for the period of such reduced 
     risk.
       ``(2) Short sales.--
       ``(A) In general.--In the case of a short sale of an 
     indexed asset with a short sale period in excess of 3 years, 
     for purposes of this title, the amount realized shall be an 
     amount equal to the amount realized (determined without 
     regard to this paragraph) increased by the applicable 
     inflation adjustment. In applying subsection (c)(2) for 
     purposes of the preceding sentence, the date on which the 
     property is sold short shall be treated as the date of 
     acquisition and the closing date for the sale shall be 
     treated as the date of disposition.
       ``(B) Short sale period.--For purposes of subparagraph (A), 
     the short sale period begins on the day that the property is 
     sold and ends on the closing date for the sale.
       ``(e) Treatment of Regulated Investment Companies and Real 
     Estate Investment Trusts.--
       ``(1) Adjustments at entity level.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the adjustment under subsection (a) shall be 
     allowed to any qualified investment entity (including for 
     purposes of determining the earnings and profits of such 
     entity).
       ``(B) Exception for corporate shareholders.--Under 
     regulations--
       ``(i) in the case of a distribution by a qualified 
     investment entity (directly or indirectly) to a corporation--

       ``(I) the determination of whether such distribution is a 
     dividend shall be made without regard to this section, and
       ``(II) the amount treated as gain by reason of the receipt 
     of any capital gain dividend shall be increased by the 
     percentage by which the entity's net capital gain for the 
     taxable year (determined without regard to this section) 
     exceeds the entity's net capital gain for such year 
     determined with regard to this section, and

       ``(ii) there shall be other appropriate adjustments 
     (including deemed distributions) so as to ensure that the 
     benefits of this section are not allowed (directly or 
     indirectly) to corporate shareholders of qualified investment 
     entities.
     For purposes of the preceding sentence, any amount includible 
     in gross income under section 852(b)(3)(D) shall be treated 
     as a capital gain dividend and an S corporation shall not be 
     treated as a corporation.
       ``(C) Exception for qualification purposes.--This section 
     shall not apply for purposes of sections 851(b) and 856(c).
       ``(D) Exception for certain taxes imposed at entity 
     level.--
       ``(i) Tax on failure to distribute entire gain.--If any 
     amount is subject to tax under section 852(b)(3)(A) for any 
     taxable year, the amount on which tax is imposed under such 
     section shall be increased by the percentage determined under 
     subparagraph (B)(i)(II). A similar rule shall apply in the 
     case of any amount subject to tax under paragraph (2) or (3) 
     of section 857(b) to the extent attributable to the excess of 
     the net capital gain over the deduction for dividends paid 
     determined with reference to capital gain dividends only. The 
     first sentence of this clause shall not apply to so much of 
     the amount subject to tax under section 852(b)(3)(A) as is 
     designated by the company under section 852(b)(3)(D).
       ``(ii) Other taxes.--This section shall not apply for 
     purposes of determining the amount of any tax imposed by 
     paragraph (4), (5), or (6) of section 857(b).
       ``(2) Adjustments to interests held in entity.--
       ``(A) Regulated investment companies.--Stock in a regulated 
     investment company (within the meaning of section 851) shall 
     be an indexed asset for any calendar quarter in the same 
     ratio as--
       ``(i) the average of the fair market values of the indexed 
     assets held by such company at the close of each month during 
     such quarter, bears to
       ``(ii) the average of the fair market values of all assets 
     held by such company at the close of each such month.
       ``(B) Real estate investment trusts.--Stock in a real 
     estate investment trust (within the meaning of section 856) 
     shall be an indexed asset for any calendar quarter in the 
     same ratio as--
       ``(i) the fair market value of the indexed assets held by 
     such trust at the close of such quarter, bears to
       ``(ii) the fair market value of all assets held by such 
     trust at the close of such quarter.
       ``(C) Ratio of 80 percent or more.--If the ratio for any 
     calendar quarter determined under subparagraph (A) or (B) 
     would (but for this subparagraph) be 80 percent or more, such 
     ratio for such quarter shall be 100 percent.
       ``(D) Ratio of 20 percent or less.--If the ratio for any 
     calendar quarter determined under subparagraph (A) or (B) 
     would (but for this subparagraph) be 20 percent or less, such 
     ratio for such quarter shall be zero.
       ``(E) Look-thru of partnerships.--For purposes of this 
     paragraph, a qualified investment entity which holds a 
     partnership interest shall be treated (in lieu of holding a 
     partnership interest) as holding its proportionate share of 
     the assets held by the partnership.
       ``(3) Treatment of return of capital distributions.--Except 
     as otherwise provided by the Secretary, a distribution with 
     respect to stock in a qualified investment entity which is 
     not a dividend and which results in a reduction in the 
     adjusted basis of such stock shall be treated as allocable to 
     stock acquired by the taxpayer in the order in which such 
     stock was acquired.
       ``(4) Qualified investment entity.--For purposes of this 
     subsection, the term `qualified investment entity' means--
       ``(A) a regulated investment company (within the meaning of 
     section 851), and
       ``(B) a real estate investment trust (within the meaning of 
     section 856).
       ``(f) Other Pass-Thru Entities.--
       ``(1) Partnerships.--
       ``(A) In general.--In the case of a partnership, the 
     adjustment made under subsection (a) at the partnership level 
     shall be passed through to the partners.
       ``(B) Special rule in the case of section 754 elections.--
     In the case of a transfer of an interest in a partnership 
     with respect to which the election provided in section 754 is 
     in effect--
       ``(i) the adjustment under section 743(b)(1) shall, with 
     respect to the transferor partner, be treated as a sale of 
     the partnership assets for purposes of applying this section, 
     and
       ``(ii) with respect to the transferee partner, the 
     partnership's holding period for purposes of this section in 
     such assets shall be treated as beginning on the date of such 
     adjustment.
       ``(2) S corporations.--In the case of an S corporation, the 
     adjustment made under subsection (a) at the corporate level 
     shall be passed through to the shareholders. This section 
     shall not apply for purposes of determining the amount of any 
     tax imposed by section 1374 or 1375.
       ``(3) Common trust funds.--In the case of a common trust 
     fund, the adjustment made under subsection (a) at the trust 
     level shall be passed through to the participants.
       ``(4) Indexing adjustment disregarded in determining loss 
     on sale of interest in entity.--Notwithstanding the preceding 
     provisions of this subsection, for purposes of determining 
     the amount of any loss on a sale or exchange of an interest 
     in a partnership, S corporation, or common trust fund, the 
     adjustment made under subsection (a) shall not be taken into 
     account in determining the adjusted basis of such interest.
       ``(g) Dispositions Between Related Persons.--
       ``(1) In general.--This section shall not apply to any sale 
     or other disposition of property between related persons 
     except to the extent that the basis of such property in the 
     hands of the transferee is a substituted basis.
       ``(2) Related persons defined.--For purposes of this 
     section, the term `related persons' means--
       ``(A) persons bearing a relationship set forth in section 
     267(b), and
       ``(B) persons treated as single employer under subsection 
     (b) or (c) of section 414.
       ``(h) Transfers To Increase Indexing Adjustment.--If any 
     person transfers cash, debt, or any other property to another 
     person and the principal purpose of such transfer is to 
     secure or increase an adjustment under subsection (a), the 
     Secretary may disallow part or all of such adjustment or 
     increase.
       ``(i) Special Rules.--For purposes of this section--
       ``(1) Treatment of improvements, etc.--If there is an 
     addition to the adjusted basis of any tangible property or of 
     any stock in a corporation during the taxable year by reason 
     of an improvement to such property or a contribution to 
     capital of such corporation--
       ``(A) such addition shall never be taken into account under 
     subsection (c)(1)(A) if the aggregate amount thereof during 
     the taxable year with respect to such property or stock is 
     less than $1,000, and
       ``(B) such addition shall be treated as a separate asset 
     acquired at the close of such taxable year if the aggregate 
     amount thereof during the taxable year with respect to such 
     property or stock is $1,000 or more.
     A rule similar to the rule of the preceding sentence shall 
     apply to any other portion of an asset to the extent that 
     separate treatment of such portion is appropriate to carry 
     out the purposes of this section.
       ``(2) Assets which are not indexed assets throughout 
     holding period.--The applicable inflation adjustment shall be 
     appropriately reduced for periods during which the asset was 
     not an indexed asset.
       ``(3) Treatment of certain distributions.--A distribution 
     with respect to stock in a corporation which is not a 
     dividend shall be treated as a disposition.
       ``(4) Section cannot increase ordinary loss.--To the extent 
     that (but for this paragraph) this section would create or 
     increase a net ordinary loss to which section 1231(a)(2) 
     applies or an ordinary loss to which any other provision of 
     this title applies, such provision shall not apply. The 
     taxpayer shall be treated as having a long-term capital loss 
     in an amount equal to the amount of the ordinary loss to 
     which the preceding sentence applies.
       ``(5) Acquisition date where there has been prior 
     application of subsection (a)(1) with respect to the 
     taxpayer.--If there has been a prior application of 
     subsection (a)(1) to an asset while such asset was held by 
     the taxpayer, the date of acquisition of such asset by the 
     taxpayer shall be treated as not

[[Page S1426]]

     earlier than the date of the most recent such prior 
     application.
       ``(j) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter O of chapter 1 is amended by striking the item 
     relating to section 1023 and by inserting after the item 
     relating to section 1022 the following new item:

``Sec. 1023. Indexing of certain assets for purposes of determining 
              gain or loss.
``Sec. 1024. Cross references.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales and other dispositions of indexed assets 
     after the date of the enactment of this Act, in taxable years 
     ending after such date.

     SEC. 196. DEFERRAL OF GAIN ON SALE OF CERTAIN PRINCIPAL 
                   RESIDENCES.

       (a) In General.--Part III of subchapter O of chapter 1 of 
     subtitle A (relating to common nontaxable exchanges) is 
     amended by inserting after section 1033 the following new 
     section:

     ``SEC. 1034. DEFERRAL OF GAIN ON SALE OF CERTAIN PRINCIPAL 
                   RESIDENCES.

       ``(a) Deferral of Gain.--
       ``(1) In general.--In the case of a sale of a principal 
     residence by a taxpayer, the taxpayer's gain (if any) from 
     such sale shall be recognized only to the extent that the 
     taxpayer's adjusted sales price exceeds the taxpayer's cost 
     of purchasing a qualified residence.
       ``(2) Reduction of basis in qualified residence.--In the 
     case of a nonrecognition of gain on the sale of a principal 
     residence due to the purchase of a qualified residence under 
     paragraph (1), the taxpayer's basis in the qualified 
     residence shall be reduced by the amount of such gain.
       ``(b) Definitions.--
       ``(1) Adjusted sales price.--
       ``(A) In general.--For purposes of this section, the term 
     `adjusted sales price' means the amount realized, reduced by 
     the aggregate of the expenses for work performed on a 
     principal residence in order to assist in its sale.
       ``(B) Limitation.--The reduction provided in subparagraph 
     (A) applies only to expenses--
       ``(i) for work performed during the 90-day period ending on 
     the day on which the contract to sell the principal residence 
     is entered into,
       ``(ii) which are paid on or before the 30th day after the 
     date of the sale of the principal residence, and
       ``(iii) which are--

       ``(I) not allowable as deductions in computing taxable 
     income under section 63, and
       ``(II) not taken into account in computing the amount 
     realized from the sale of the principal residence.

       ``(2) Qualified residence.--For purposes of this section, 
     the term `qualified residence' means property that is--
       ``(A) purchased by the taxpayer for use as a principal 
     residence, and
       ``(B) purchased during the period beginning 2 years before 
     the date of the sale of the taxpayer's previous principal 
     residence and ending 2 years after the date of such sale.
       ``(c) Application of Section.--For purposes of this 
     section:
       ``(1) Exchange of residence for property.--An exchange by 
     the taxpayer of a principal residence for other property 
     shall be treated as a sale of such residence, and the 
     acquisition of a qualified residence on the exchange of 
     property shall be treated as a purchase of such residence.
       ``(2) Construction of residence.--A qualified residence any 
     part of which was constructed or reconstructed by the 
     taxpayer shall be treated as purchased by the taxpayer. In 
     determining the taxpayer's cost of purchasing a qualified 
     residence, there shall be included only so much of such cost 
     as is attributable to the acquisition, construction, 
     reconstruction, and improvements made which are properly 
     chargeable to capital account, during the period specified in 
     subsection (b)(2)(B).
       ``(3) Sale of new residence prior to sale of principal 
     residence.--If a residence is purchased by the taxpayer 
     before the date of the sale of the taxpayer's principal 
     residence, such purchased residence shall not be a qualified 
     residence under this section if such residence is sold or 
     otherwise disposed of by the taxpayer before the date of the 
     sale of the taxpayer's principal residence.
       ``(4) Multiple principal residences.--If the taxpayer, 
     during the period described in subsection (b)(2)(B), 
     purchases more than 1 residence which is used as the 
     taxpayer's principal residence at some time during the 2 
     years after the date of the sale of a principal residence for 
     which gain is deferred under this section, only the last of 
     such residences so used by the taxpayer within such 2 years 
     shall be a qualified residence under this section. If a 
     qualified residence is sold in a sale to which subsection 
     (d)(2) applies within 2 years after the sale of the 
     taxpayer's previous principal residence, for purposes of 
     applying the preceding sentence with respect to such 
     principal residence, the qualified residence sold shall be 
     treated as the last residence used during such 2-year period.
       ``(d) Limitation.--
       ``(1) In general.--Subsection (a) shall not apply with 
     respect to the sale of the taxpayer's principal residence if 
     within 2 years before the date of such sale the taxpayer sold 
     at a gain other property used by him as his principal 
     residence, and any part of such gain was deferred by reason 
     of subsection (a).
       ``(2) Subsequent sale connected with new principal place of 
     work.--Paragraph (1) shall not apply with respect to the sale 
     of the taxpayer's principal residence if--
       ``(A) such sale was in connection with the commencement of 
     work by the taxpayer (or the taxpayer's spouse, if such 
     spouse has the same principal residence as the taxpayer) as 
     an employee or as a self-employed individual at a new 
     principal place of work, and
       ``(B) the taxpayer would satisfy the conditions of section 
     217(c) if the principal residence so sold were treated as the 
     former residence for purposes of section 217.
       ``(e) Tenant-Stockholder in a Cooperative Housing 
     Corporation.--For purposes of this section, references to 
     property used by the taxpayer as a principal residence shall 
     include stock held by a tenant-stockholder (as defined in 
     section 216) in a cooperative housing corporation (as so 
     defined) if--
       ``(1) in the case of stock sold, the house or apartment 
     which the taxpayer was entitled to occupy as such stockholder 
     was used by the taxpayer as a principal residence, and
       ``(2) in the case of stock purchased, the taxpayer used as 
     a principal residence the house or apartment which the 
     taxpayer was entitled to occupy as such stockholder.
       ``(f) Joint Ownership.--In the case of a residence jointly 
     owned and used as a principal residence by 1 or more 
     taxpayers, or by a married couple filing separately, the gain 
     (if any) from the sale of such principal residence which may 
     be deferred under subsection (a) shall be allocated among 
     such taxpayers according to regulations which shall be 
     prescribed by the Secretary.
       ``(g) Members of the Armed Forces.--
       ``(1) In general.--The running of any period of time 
     specified in subsection (b)(2)(B) or (c) (other than the 2 
     years referred to in subsection (c)(4)) shall be suspended 
     during any time that the taxpayer (or the taxpayer's spouse, 
     if such spouse has the same principal residence as the 
     taxpayer) serves on extended active duty with the Armed 
     Forces of the United States after the date of the sale of the 
     principal residence for which gain is deferred under this 
     section, except that any period of time so suspended shall 
     not extend beyond the date that is 4 years after the date of 
     sale of such principal residence.
       ``(2) Members stationed outside the united states or 
     required to reside in government quarters.--In the case of a 
     taxpayer (or the taxpayer's spouse, if such spouse has the 
     same principal residence as the taxpayer) who, during any 
     period of time the running of which is suspended under 
     paragraph (1)--
       ``(A) is stationed outside the United States, or
       ``(B) after returning from a tour of duty outside of the 
     United States and pursuant to a determination by the 
     Secretary of Defense that adequate off-base housing is not 
     available at a remote base site, is required to reside in on-
     base Government quarters,

     any period of time so suspended shall not expire before the 
     day that is 1 year after the last day that such taxpayer or 
     spouse is so stationed or under such requirement, except that 
     any period so suspended shall not extend beyond the date 
     which is 8 years after the date of the sale of the principal 
     residence.
       ``(h) Individual Whose Tax Home Is Outside the United 
     States.--The running of any period of time specified in 
     subsection (b)(2)(B) or (c) (other than the 2 years referred 
     to in subsection (c)(4)) shall be suspended during any time 
     that the taxpayer (or the taxpayer's spouse, if such spouse 
     has the same principal residence as the taxpayer) has a tax 
     home (as defined in section 911(d)(3)) outside the United 
     States after the date of the sale of the principal residence 
     for which gain is deferred under this section, except that 
     any period of time so suspended shall not extend beyond the 
     date that is 4 years after the date of sale of such principal 
     residence.
       ``(i) Special Rule for Condemnation.--In the case of the 
     seizure, requisition, or condemnation of a principal 
     residence, or the sale or exchange of a principal residence 
     under threat or imminence thereof, the taxpayer may elect to 
     have this section apply in lieu of section 1033. If such 
     election is made, such seizure, requisition, or condemnation 
     shall be treated as the sale of the principal residence. Such 
     election shall be made at such time and in such manner as the 
     Secretary shall prescribe.
       ``(j) Statute of Limitations.--In the case of any sale of a 
     principal residence that results in gain--
       ``(1) the statutory period for the assessment of any 
     deficiency attributable to any part of such gain shall not 
     expire before the expiration of 3 years from the date the 
     Secretary is notified by the taxpayer (in such manner as the 
     Secretary shall prescribe) of--
       ``(A) the taxpayer's cost of purchasing any qualified 
     residence which results in nonrecognition of such gain,
       ``(B) the taxpayer's intention not to purchase such a 
     qualified residence during the period specified in subsection 
     (b)(2)(B), or
       ``(C) a failure to make such a purchase within such period, 
     and
       ``(2) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding the provisions of any 
     other law or rule of law which would otherwise prevent such 
     assessment.
       ``(k) Application of Exclusion on the Sale of a Principal 
     Residence.--In the case

[[Page S1427]]

     of a sale of a principal residence by a taxpayer to which 
     section 121 applies, the amount of the gain on such sale that 
     may be deferred under subsection (a) of this section shall be 
     reduced by the amount of gain on such sale that is excluded 
     from gross income under section 121(a).''.
       (b) Conforming Amendments.--
       (1) Coordination with section 121.--
       (A) Section 121 (relating to exclusion of gain from sale of 
     principal residence) is amended by adding at the end the 
     following new subsection:
       ``(h) Coordination With Section 1034 Deferral.--For 
     deferral of gain from the sale of a principal residence in 
     the case of a purchase of another qualified residence, see 
     section 1034.''.
       (B) Subsection (g) of section 121 (relating to residences 
     acquired in rollovers under section 1034) is amended by 
     striking ``(as in effect on the day before the date of the 
     enactment of this section)''.
       (2) Extension of period of limitation.--Section 6503 
     (relating to suspension of running of period of limitation) 
     is amended--
       (A) by redesignating subsection (k) as subsection (l), and
       (B) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Extension of Time for Assessment of Tax Liability on 
     Gain From the Sale of Certain Principal Residences.--The 
     running of any period of limitations for collection of any 
     amount of tax liability on gain from the sale of a principal 
     residence that is deferred under section 1034 shall be 
     suspended for the period of any extension of time specified 
     under section 1034(j).''.
       (3) Reduction in basis.--Subsection (a) of section 1016 
     (relating to general rule) is amended--
       (A) by striking ``and'' at the end of paragraph (36),
       (B) by striking the period at the end of paragraph (37) and 
     inserting ``, and'', and
       (C) by adding at the end the following new paragraph:
       ``(38) to the extent provided in section 1034(a)(2).''.
       (c) Clerical Amendment.--The table of sections for part III 
     of subchapter O of chapter 1 of subtitle A (relating to 
     common nontaxable exchanges) is amended by inserting after 
     the item relating to section 1033 the following new item:

``Sec. 1034. Deferral of gain on sale of certain principal 
              residences.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to sales in taxable years beginning after the 
     date of the enactment of this Act.

     SEC. 197. AMOUNT EXCLUDED FROM SALE OF PRINCIPAL RESIDENCE 
                   INDEXED FOR INFLATION.

       (a) In General.--Section 121 is amended by adding at the 
     end the following new subsection:
       ``(h) Inflation Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning after 2008, the $250,000 amount under subsection 
     (b)(1) shall be increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2007' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(2) Rounding.--If any amount as adjusted under 
     subparagraph (A) is not a multiple of $1,000, such amount 
     shall be rounded to the next lowest multiple of $1,000.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (A) of section 121(b)(2) is amended--
       (A) by striking ``Paragraph (1) shall be applied by 
     substituting `$500,000' for `$250,000' '' and inserting ``The 
     dollar amount under paragraph (1) shall be twice the dollar 
     amount otherwise in effect under such paragraph'', and
       (B) by striking ``$500,000'' in the heading and inserting 
     ``Increased''.
       (2) Section 121(b)(4) is amended by striking ``paragraph 
     (1) shall be applied by substituting `$500,000' for 
     `$250,000' '' and inserting ``the dollar amount under 
     paragraph (1) shall be twice the dollar amount otherwise in 
     effect under such paragraph''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales occurring after December 31, 2008.

     SEC. 198. REPEAL OF PHASEIN FOR DOMESTIC PRODUCTION 
                   ACTIVITIES DEDUCTION.

       (a) In General.--Subsection (a) of section 199 (relating to 
     income attributable to domestic production activities) is 
     amended to read as follows:
       ``(a) Allowance of Deduction.--There shall be allowed as a 
     deduction an amount equal to 9 percent of the lesser of--
       ``(1) the qualified production activities income of the 
     taxpayer for the taxable year, or
       ``(2) taxable income (determined without regard to this 
     section) for the taxable year.''.
       (b) Conforming Amendments.--Section 199 is amended by 
     striking ``subsection (a)(1)(B)'' each place it appears and 
     inserting ``subsection (a)(2)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

                 TITLE II--KEEPING AMERICA COMPETITIVE

     SEC. 201. SENSE OF CONGRESS REGARDING THE LEGISLATIVE 
                   INITIATIVES REQUIRED TO STRENGTHEN AND PROTECT 
                   THE WELL BEING OF OUR NATION'S CAPITAL MARKETS.

       (a) Findings.--Congress finds the following:
       (1) America's capital markets are a foundation of our 
     Nation's economic well being and security.
       (2) Healthy capital markets foster investment in the United 
     States economy, helping to sustain and create jobs.
       (3) The American economy is fundamentally strong, but a 
     correction in the residential housing market, credit turmoil, 
     and high oil prices are hampering economic growth.
       (4) American businesses and investors face ever increasing 
     competition from international competitors and markets.
       (5) Economic policies that maintain low tax rates on 
     capital gains and dividends have historically fostered 
     sustained growth in the American economy.
       (b) Sense of Congress.--It is the sense of the Congress 
     that--
       (1) Congress should not pass legislation that would create 
     new or greater uncertainty in the financial markets;
       (2) Congress should not pass legislation that would serve 
     to further constrict liquidity in the marketplace;
       (3) Congress should not pass legislation that would make 
     credit more expensive and less accessible in the United 
     States than in other world markets;
       (4) Congress should not pass legislation that would inhibit 
     or impair capital formation and long-term investments;
       (5) Congress should maintain existing tax policy regarding 
     capital formation and long-term investment, except in the 
     case of illegitimate tax shelter activity;
       (6) Congress should pass legislation to extend permanently 
     the 2001 and 2003 tax rate cuts, including the 15 percent 
     capital gains and dividend rates, and to simplify and lower 
     corporate tax rates; and
       (7) Congress should promote the entrepreneurship and 
     economic development fostered by long-term, private 
     investment.

     SEC. 202. DIRECTING THE SECURITIES AND EXCHANGE COMMISSION TO 
                   CONVENE A PUBLIC HEARING ON THE IMPACT OF 
                   EXCESSIVE LITIGATION.

       (a) Findings.--Congress finds that--
       (1) companies listed on United States securities exchanges 
     face the potential of extraordinary litigation costs that 
     companies listed abroad do not;
       (2) securities class action settlements in the United 
     States for 2006 totaled $10,600,000,000 (not counting the 
     Enron-related settlements of approximately $7,100,000,000), 
     reflecting an increase of--
       (A) 255 percent from 2004;
       (B) more than 500 percent from 2000 (not including the 
     $3,100,000,000 Cendant settlement); and
       (C) an astonishing 7,000 percent from 1995;
       (3) while many such claims are legitimate, the sheer number 
     of cases and the staggering settlement amounts illustrate the 
     growing impact of the tort system on the United States 
     economy; and
       (4) by contrast, such private shareholder class action 
     suits do not exist in the United Kingdom and other European 
     Union countries.
       (b) Public Hearing.--Not later than 60 days after the date 
     of enactment of this Act, the Chairman of the Securities and 
     Exchange Commission (in this section referred to as the 
     ``Commission'') shall convene a public hearing on the impact 
     of excessive litigation on the competitiveness of companies 
     listed on United States securities exchanges.

     SEC. 203. DIRECTING THE COMMISSION TO ESTABLISH FORMAL 
                   PROCESSES AND PROCEDURES FOR COST-BENEFIT 
                   ANALYSES OF PROPOSED AND EXISTING RULES AND 
                   REGULATIONS.

       (a) Study.--Not later than 180 days after the date of 
     enactment of this Act, the Commission shall submit to 
     Congress a study of its existing processes and procedures for 
     conducting cost-benefit analyses of proposed and existing 
     rules and regulations, and shall report to Congress on ways 
     in which the Commission could perform more rigorous and 
     informed cost-benefit analyses of such rules and regulations.
       (b) Proposed Rule.--
       (1) In general.--Not later than 180 days after the date of 
     submission to Congress of the report under subsection (a), 
     the Commission shall issue a final rule to establish formal 
     processes and procedures for conducting cost-benefit analyses 
     of proposed and existing rules and regulations.
       (2) Certain content required.--At a minimum, processes and 
     procedures proposed by the Commission under this subsection 
     shall include provisions directing the Commission--
       (A) to assess all costs and benefits of available 
     regulatory alternatives, including both quantifiable measures 
     (to the extent that such measures can be usefully estimated) 
     and qualitative measures of costs and benefits that are 
     difficult to quantify, but nevertheless essential to 
     consider;
       (B) to design its rules and regulations in the most cost-
     effective manner to achieve the regulatory objective, 
     considering incentives for innovation, consistency, 
     predictability, the costs of enforcement and compliance, and 
     flexibility;
       (C) to assess both the costs and the benefits of the 
     intended rule or regulation and propose or adopt a rule or 
     regulation only upon a reasoned determination that the 
     benefits of the intended rule or regulation justify its 
     costs;

[[Page S1428]]

       (D) to base its decisions on the best reasonably obtainable 
     economic and other information concerning the need for, and 
     consequences of, the intended rule or regulation;
       (E) to tailor its rules and regulations to impose the least 
     possible burden on individuals, businesses of differing 
     sizes, and other entities, consistent with obtaining the 
     regulatory objectives, taking into account, among other 
     things, and to the extent practicable, the cumulative costs; 
     and
       (F) to establish a process for reexamining existing rules 
     and regulations, or, at a minimum, those rules and 
     regulations that the Commission, industry participants, or 
     others identify as imposing unjustifiable costs or 
     competitive burdens, that shall be designed to determine 
     whether the rules and regulations are working as intended, 
     whether there are satisfactory alternatives of a less 
     burdensome nature, and whether changes should be made.
       (3) Periodic review.--Each rule and regulation of the 
     Commission that is subject to review pursuant to paragraph 
     (2)(F) shall be reviewed not less frequently than 2 years 
     after the date of its issuance in final form, and once every 
     10 years thereafter.

     SEC. 204. DIRECTING THE COMMISSION TO DEFINE ``SMALLER PUBLIC 
                   COMPANY'' TO PROVIDE CERTAINTY TO ISSUERS.

       (a) Rule Revision Required.--Not later than 90 days after 
     the date of enactment of this Act, the Commission, pursuant 
     to its authority to amend rules of the Public Company 
     Accounting Oversight Board under section 107 of the Sarbanes-
     Oxley Act of 2002, shall revise Auditing Standard No. 5 of 
     the Oversight Board, as in effect on the date of enactment of 
     this Act, to include a definition of the term ``smaller 
     public company''.
       (b) Definition of Smaller Public Company.--For purposes of 
     the rule revision required under subsection (a), the term 
     ``smaller public company'' shall mean an issuer for which an 
     annual report is required by section 13(a) or 15(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)) 
     that--
       (1) has a total market capitalization at the beginning of 
     the relevant reporting period of less than $700,000,000; and
       (2) has total revenues for that reporting period of less 
     than $250,000,000.

     SEC. 205. MUTUAL RECOGNITION.

       (a) Findings.--Congress finds that--
       (1) there is an ongoing and pressing need to update the 
     United States financial regulatory structure to address the 
     increasingly global nature of the financial marketplace;
       (2) existing regulations on cross-border activities are 
     outdated, and predate the revolution in communications 
     technology and the accompanying transformations in global 
     markets;
       (3) existing regulations on cross-border activities are 
     complex, inefficient, not flexible enough to meet modern 
     market needs, and have the effect of chilling innovation and 
     imposing significant and unnecessary burdens on United States 
     investors;
       (4) the Commission has delayed the timetable for Commission 
     action on key elements of reexamining and developing new 
     approaches to cross-border regulation, including much needed 
     reform to Commission rule 240.15a-6 of title 17, Code of 
     Federal Regulations, as in effect on the date of enactment of 
     this Act, and potential recognition of foreign regulatory 
     regimes; and
       (5) such delay postpones the regulatory changes needed to 
     eliminate unnecessary inefficiencies from international 
     financial transactions, and poses an increasingly significant 
     risk to the effective modernization and competitiveness of 
     United States capital markets.
       (b) Modernization of Cross-Border Rules Applicable to 
     Brokers and Dealers.--
       (1) In general.--The Commission shall, by rule, exempt any 
     foreign broker or dealer from the registration requirements 
     of the Securities Exchange Act of 1934, and any other 
     regulation applicable to registered or unregistered brokers 
     or dealers, to the extent that the foreign broker or dealer 
     effects transactions in securities with or for, or induces or 
     attempts to induce the purchase or sale of any security by--
       (A) a qualified investor, as defined in section 3(a)(54) of 
     the Securities Exchange Act of 1934;
       (B) an investor that is a resident outside of the United 
     States; and
       (C) any person described in Commission rule 240.15a-6(a)(4) 
     of title 17, Code of Federal Regulations, as in effect on the 
     date of enactment of this Act.
       (2) Definition of foreign broker or dealer.--As used in 
     this section, the term ``Foreign broker or dealer'' has the 
     same meaning as in section 240.15a-6(b)(3) of title 17, Code 
     of Federal Regulations, as in effect on the date of enactment 
     of this Act.
       (3) Regulatory authority.--The Commission may, upon a 
     finding that such action is necessary to protect United 
     States investors and consistent with this section, require a 
     foreign broker or dealer and its associated persons--
       (A) to file documentation to establish that the foreign 
     broker or dealer and its associated persons are not subject 
     to statutory disqualification;
       (B) to consent to service of process for any civil action 
     brought by or proceeding before the Commission or a self-
     regulatory organization; and
       (C) to agree to provide any information or documents that 
     the Commission reasonably requests, relating to effecting 
     transactions in securities with or for, or inducing or 
     attempting to induce the purchase or sale of any security by 
     persons described in subparagraphs (A) through (C) of 
     paragraph (1), subject to limitations recognizing potential 
     conflicts with applicable foreign laws or regulations.
       (4) Limitation on state action.--No State or political 
     subdivision thereof, or any self-regulatory organization, may 
     impose any registration, licensing, qualification, or other 
     legal requirement applicable to a foreign broker or dealer or 
     associated person thereof that is exempt from Commission 
     registration and regulation pursuant to this subsection, 
     except that the State or political subdivision thereof, or 
     such self-regulatory organization, may require the foreign 
     broker or dealer to provide copies of any documents filed 
     with the Commission, as described in this subsection.
       (5) Timing of regulations.--Final regulations to carry out 
     this subsection shall be issued by the Commission, and such 
     regulations shall become effective, not later than 180 days 
     after the date of enactment of this Act.
       (c) Mutual Recognition Rules.--
       (1) In general.--The Commission shall issue regulations 
     designed to provide for a framework for mutual recognition of 
     foreign regulatory regimes, so that foreign brokers, dealers, 
     and exchanges shall be regulated based on regulation in their 
     home country, and shall not be subject to duplicative 
     regulatory requirements, except to the extent that the 
     Commission finds necessary to protect United States 
     investors.
       (2) Implementation.--The Commission shall adopt regulations 
     that provide an expeditious and transparent implementation 
     mechanism for this section, based on objective qualification 
     criteria and fixed timelines, that is designed to enable 
     foreign brokers, dealers, and exchanges to operate in the 
     United States and abroad based on regulation in their home 
     country.
       (3) Limitation.--The regulations required by this 
     subsection--
       (A) shall not require individualized review and approval 
     process for foreign brokers, dealers, and exchanges to be 
     eligible to rely on regulation in their home country, but 
     shall permit such brokers, dealers, and exchanges to make a 
     supplemental showing, on an individual exemptive basis, to 
     demonstrate their qualifications to do business with relevant 
     classes of investors; and
       (B) may not create regulatory distinctions that limit 
     trading of portfolios containing both United States and non-
     United States securities or impose other requirements that 
     are inconsistent with the business objectives of investors.
       (4) Timing.--The Commission shall issue proposed 
     regulations to carry out this subsection not later than 90 
     days after the date of enactment of this Act, and shall make 
     such regulations effective reasonably promptly thereafter.
       (5) Exemption authority.--The Commission may, by rule, 
     provide for such exemptions to the provisions of this 
     subsection as the Commission determines appropriate.

     SEC. 206. SUPPORTING THE SECURITIES AND EXCHANGE COMMISSION 
                   REFORM EFFORTS TO SPEED THE PROCESS OF 
                   RULEMAKING FOR SELF REGULATORY ORGANIZATIONS.

       (a) Findings.--Congress finds that--
       (1) United States capital markets are evolving quickly, and 
     United States equity exchanges face increasing competition, 
     both domestically and internationally;
       (2) the Commission has recognized this transformation in 
     the competitive landscape and announced a project to redesign 
     the rule approval process for exchanges to make it more 
     efficient;
       (3) rather than approving rule filings by self regulatory 
     organizations within the 35-day period prescribed under the 
     Securities Exchange Act of 1934, the Commission has routinely 
     requested that exchanges agree to extend deadlines while 
     rules are weighed and considered within the agency, 
     potentially resulting in years before exchange rule filings 
     are finally approved;
       (4) this antiquated and overly rigid regulatory model does 
     not recognize the new realities of international competition 
     among exchanges or new competition from innovative products 
     that compete with traditional asset classes; and
       (5) competitors to United States equity exchanges operate 
     under different regulatory regimes, which can allow such 
     competitors to adapt to rapidly changing business 
     environments while United States exchanges are frozen in rule 
     approval process review by the Commission for months or 
     years.
       (b) Rulemaking.--The Commission shall promulgate rules 
     under section 19 of the Securities Exchange Act of 1934, to 
     speed the process of rulemaking to enable self-regulatory 
     organizations to respond to competitive inequities and better 
     meet customer needs. Such rules and other actions should be 
     completed not later than 180 days after the date of enactment 
     of this Act, and should predate or be coterminous with any 
     foreign exchange mutual recognition regime established under 
     this Act.

     SEC. 207. ELIMINATE THE EXEMPTION FROM STATE REGULATION FOR 
                   CERTAIN SECURITIES DESIGNATED BY NATIONAL 
                   SECURITIES EXCHANGES.

       Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. 
     77r(b)(1)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``or the American Stock Exchange, or 
     listed, or authorized for listing,

[[Page S1429]]

     on the National Market System of the Nasdaq Stock Market (or 
     any successor to such entities)'' and inserting ``, the 
     American Stock Exchange, or the Nasdaq Stock Market (or any 
     successor to such entities)''; and
       (B) by inserting before the semicolon at the end the 
     following: ``, except that a security listed, or authorized 
     for listing, on the New York Stock Exchange, the American 
     Stock Exchange, or the Nasdaq Stock Market (or any successor 
     to any such entity) shall not be a covered security if the 
     exchange adopts listing standards pursuant to section 19(b) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) 
     that designates a tier or segment of such securities as 
     securities that are not covered securities for purposes of 
     this section and such security is listed, or authorized for 
     listing, on such tier or segment''; and
       (2) in subparagraph (B), by inserting ``covered'' after 
     ``applicable to''.

     SEC. 208. DIRECTING THE COMMISSION TO ACCELERATE FULL 
                   CONVERSION OF IFRS AND UNITED STATES GAAP.

       (a) Findings.--Congress finds that--
       (1) the accounting framework applied in more than 100 
     countries around the world is the International Financial 
     Reporting Standard (in this section referred to as ``IFRS'');
       (2) a number of additional important United States trading 
     partners, including Canada, Brazil, Chile, India, and South 
     Korea, have announced dates to shift to IFRS; and
       (3) the difficulty and expense of reconciling IFRS with 
     generally accepted accounting principles employed in the 
     United States (in this section referred to as ``GAAP''), the 
     accounting framework within which companies whose shares are 
     listed on United States exchanges must report their financial 
     information, is among the highest hurdles for foreign 
     companies considering a United States listing, and one of the 
     most compelling incentives for foreign-based businesses to 
     list their shares on exchanges based somewhere other than the 
     United States.
       (b) Acceleration of Effort.--The Commission shall--
       (1) accelerate efforts to offer to both United States- and 
     foreign-based companies the option of reporting financial 
     information using either IFRS or GAAP; and
       (2) accelerate efforts with the Commission's foreign 
     counterparts to achieve full conversion of IFRS and GAAP.

     SEC. 209. PROMOTING MARKET ACCESS FOR FINANCIAL SERVICES.

       (a) Findings.--Congress finds that--
       (1) there is a need to consistently monitor and increase 
     Government advocacy for United States financial services 
     firms' attempts to gain overseas financial market access;
       (2) the presence of foreign financial services firms in the 
     United States and their activities should be documented to 
     find which countries' firms enjoy full market access in the 
     United States, while their home governments deny national 
     treatment to American financial services firms; and
       (3) an analysis of the results achieved from the U.S.-China 
     Strategic Economic Dialogue (referred to as ``SED'') and how 
     such results specifically apply to United States financial 
     services firms, including benchmarks and timeframes for 
     future improvements, should be compiled to assess the 
     efficacy of the negotiations.
       (b) Amendments to Financial Reports Act.--The Financial 
     Reports Act of 1988 (22 U.S.C. 5351 et seq.) is amended--
       (1) in section 3602--
       (A) in the section heading, by striking ``QUADRENNIAL'' and 
     inserting ``ANNUAL'';
       (B) by striking ``Not less frequently than every 4 years, 
     beginning December 1, 1990'' and inserting ``Beginning July 
     1, 2008, and annually thereafter,''; and
       (C) by striking ``to the Congress'' and inserting ``to the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate and the Committee on Financial Services of the House 
     of Representatives''; and
       (2) in section 3603--
       (A) by redesignating subsections (b), (c), and (d) as 
     subsections (c), (d), and (e), respectively; and
       (B) by inserting after subsection (a) the following:
       ``(b) Report on SED.--
       ``(1) In general.--The Secretary shall include in the 
     initial report required under section 3602, a summary of the 
     results of the most recent United States-China Strategic 
     Economic Dialogue (in this subsection referred to as `SED') 
     and the results of the SED as it relates to promoting market 
     access for financial institutions.
       ``(2) Progress report.--The reports required under section 
     3602 shall include a progress report on the implementation of 
     any agreements resulting from the SED, a description of the 
     remaining challenges, if any, in improving market access for 
     financial institutions, and a plan, including benchmarks and 
     time frames, for dealing with the remaining challenges.
       ``(3) Specific content.--Each report described in this 
     subsection shall specifically address issues regarding--
       ``(A) foreign investment rules;
       ``(B) the problems of a dual-share stock market;
       ``(C) the openness of the derivatives market;
       ``(D) restrictions on foreign bank branching;
       ``(E) the ability to offer insurance (including innovative 
     products); and
       ``(F) regulatory and procedural transparency.''.

                    TITLE III--PROTECTING HOMEOWNERS

     SEC. 301. SUBPRIME REFINANCING LOANS THROUGH USE OF QUALIFIED 
                   MORTGAGE BONDS.

       (a) Use of Qualified Mortgage Bonds Proceeds for Subprime 
     Refinancing Loans.--Section 143(k) of the Internal Revenue 
     Code of 1986 (relating to other definitions and special 
     rules) is amended by adding at the end the following:
       ``(12) Special rules for subprime refinancings.--
       ``(A) In general.--Notwithstanding the requirements of 
     subsection (i)(1), the proceeds of a qualified mortgage issue 
     may be used to refinance a mortgage on a residence which was 
     originally financed by the mortgagor through a qualified 
     subprime loan.
       ``(B) Special rules.--In applying this paragraph to any 
     case in which the proceeds of a qualified mortgage issue are 
     used for any refinancing described in subparagraph (A)--
       ``(i) subsection (a)(2)(D)(i) shall be applied by 
     substituting `12-month period' for `42-month period' each 
     place it appears,
       ``(ii) subsection (d) (relating to 3-year requirement) 
     shall not apply, and
       ``(iii) subsection (e) (relating to purchase price 
     requirement) shall be applied by using the market value of 
     the residence at the time of refinancing in lieu of the 
     acquisition cost.
       ``(C) Qualified subprime loan.--The term `qualified 
     subprime loan' means an adjustable rate single-family 
     residential mortgage loan originated after December 31, 2001, 
     and before January 1, 2008, that the bond issuer determines 
     would be reasonably likely to cause financial hardship to the 
     borrower if not refinanced.
       ``(D) Termination.--This paragraph shall not apply to any 
     bonds issued after December 31, 2010.''.
       (b) Increased Volume Cap for Certain Bonds.--
       (1) In general.--Subsection (d) of section 146 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following:
       ``(5) Increase and set aside for housing bonds for 2008.--
       ``(A) Increase for 2008.--In the case of calendar year 
     2008, the State ceiling for each State shall be increased by 
     an amount equal to $10,000,000,000 multiplied by a fraction--
       ``(i) the numerator of which is the population of such 
     State (as reported in the most recent decennial census), and
       ``(ii) the denominator of which is the total population of 
     all States (as reported in the most recent decennial census).
       ``(B) Set aside.--
       ``(i) In general.--Any amount of the State ceiling for any 
     State which is attributable to an increase under this 
     paragraph shall be allocated solely for one or more qualified 
     purposes.
       ``(ii) Qualified purpose.--For purposes of this paragraph, 
     the term `qualified purpose' means--

       ``(I) the issuance of exempt facility bonds used solely to 
     provide qualified residential rental projects, or
       ``(II) a qualified mortgage issue (determined by 
     substituting `12-month period' for `42-month period' each 
     place it appears in section 143(a)(2)(D)(i)).''.

       (2) Carryforward of unused limitations.--Subsection (f) of 
     section 146 of such Code is amended by adding at the end the 
     following:
       ``(6) Special rules for increased volume cap under 
     subsection (d)(5).--
       ``(A) In general.--No amount which is attributable to the 
     increase under subsection (d)(5) may be used--
       ``(i) for a carryforward purpose other than a qualified 
     purpose (as defined in subsection (d)(5)), and
       ``(ii) to issue any bond after calendar year 2010.
       ``(B) Ordering rules.--For purposes of subparagraph (A), 
     any carryforward of an issuing authority's volume cap for 
     calendar year 2008 shall be treated as attributable to such 
     increase to the extent of such increase.''.
       (c) Alternative Minimum Tax.--
       (1) In general.--Clause (ii) of section 57(a)(5)(C) of the 
     Internal Revenue Code of 1986 is amended by striking ``shall 
     not include'' and all that follows and inserting ``shall not 
     include--

       ``(I) any qualified 501(c)(3) bond (as defined in section 
     145), or
       ``(II) any qualified mortgage bond (as defined in section 
     143(a)) or qualified veteran's mortgage bond (as defined in 
     section 143(b)) issued after the date of the enactment of 
     this subclause and before January 1, 2011.''.

       (2) Conforming amendment.--The heading for section 
     57(a)(5)(C)(ii) of the Internal Revenue Code of 1986 is 
     amended by striking ``qualified 501(c)(3) bonds'' and 
     inserting ``certain bond''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 302. EXPEDITIOUS DISTRIBUTION OF FUNDS ALREADY PROVIDED 
                   FOR MORTGAGE FORECLOSURE COUNSELING.

       Upon certification by the Neighborhood Reinvestment 
     Corporation under paragraph (4) under the heading 
     ``Neighborhood Reinvestment Corporation--Payment to the 
     Neighborhood Reinvestment Corporation'' of Public Law 110-161 
     that Housing and Urban Development or Neighborhood 
     Reinvestment

[[Page S1430]]

     Corporation-approved counseling intermediaries and State 
     Housing Finance Agencies have the need for additional 
     portions of the $180,000,000 provided therein for mortgage 
     foreclosure mitigation activities in States and areas with 
     high rates of mortgage foreclosures, defaults, or related 
     activities beyond the initial awards, and the expertise to 
     use such funds effectively, the Neighborhood Reinvestment 
     Corporation shall expeditiously continue to award such funds 
     as need and expertise is shown.

     SEC. 303. CREDIT FOR PURCHASE OF HOMES IN OR NEAR 
                   FORECLOSURE.

       (a) Allowance of Credit.--Subpart A of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 (relating to refundable credits) is amended by inserting 
     after section 25D the following new section:

     ``SEC. 25E. CREDIT FOR PURCHASE OF HOMES IN OR NEAR 
                   FORECLOSURE.

       ``(a) Allowance of Credit.--
       ``(1) In general.--In the case of an individual who is a 
     purchaser of a qualified principal residence during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter an amount equal to so much of the 
     purchase price of the residence as does not exceed $15,000.
       ``(2) Allocation of credit amount.--The amount of the 
     credit allowed under paragraph (1) shall be equally divided 
     among the 3 taxable years beginning with the taxable year in 
     which the purchase of the qualified principal residence is 
     made.
       ``(b) Limitations.--
       ``(1) Date of purchase.--The credit allowed under 
     subsection (a) shall be allowed only with respect to 
     purchases made--
       ``(A) after February 29, 2008, and
       ``(B) before March 1, 2009.
       ``(2) Limitation based on amount of tax.--In the case of a 
     taxable year to which section 26(a)(2) does not apply, the 
     credit allowed under subsection (a) for any taxable year 
     shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) for the taxable year.
       ``(3) One-time only.--
       ``(A) In general.--If a credit is allowed under this 
     section in the case of any individual (and such individual's 
     spouse, if married) with respect to the purchase of any 
     qualified principal residence, no credit shall be allowed 
     under this section in any taxable year with respect to the 
     purchase of any other qualified principal residence by such 
     individual or a spouse of such individual.
       ``(B) Joint purchase.--In the case of a purchase of a 
     qualified principal residence by 2 or more unmarried 
     individuals or by 2 married individuals filing separately, no 
     credit shall be allowed under this section if a credit under 
     this section has been allowed to any of such individuals in 
     any taxable year with respect to the purchase of any other 
     qualified principal residence.
       ``(c) Qualified Principal Residence.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified principal residence' means an eligible single-
     family residence that is purchased to be the principal 
     residence of the purchaser.
       ``(2) Eligible single-family residence.--
       ``(A) In general.--For purposes of this subsection, the 
     term `eligible single-family residence' means a single-family 
     structure that is--
       ``(i) a new previously unoccupied residence for which a 
     building permit is issued and construction begins on or 
     before September 1, 2007, but only if such residence is 
     purchased by the taxpayer directly from the person to whom 
     such building permit was issued,
       ``(ii) an owner-occupied residence with respect to which 
     the owner's acquisition indebtedness (as defined in section 
     163(h)(3)(B), determined without regard to clause (ii) 
     thereof) is in default on or before March 1, 2008, or
       ``(iii) a residence with respect to which a foreclosure 
     event has taken place and which is owned by the mortgagor or 
     the mortgagor's agent, but only if such residence was 
     occupied as a principal residence by the mortgagee for at 
     least 1 year prior to the foreclosure event.
       ``(B) Certification.--In the case of an eligible single-
     family residence described in subparagraph (A)(i), no credit 
     shall be allowed under this section unless the purchaser 
     submits a certification by the seller of such residence that 
     such residence meets the requirements of such subparagraph.
       ``(d) Denial of Double Benefit.--No credit shall be allowed 
     under this section for any purchase for which a credit is 
     allowed under section 1400C.
       ``(e) Recapture in the Case of Certain Dispositions.--In 
     the event that a taxpayer--
       ``(1) disposes of the qualified principal residence with 
     respect to which a credit is allowed under subsection (a), or
       ``(2) fails to occupy such residence as the taxpayer's 
     principal residence,
     at any time within 36 months after the date on which the 
     taxpayer purchased such residence, then the remaining portion 
     of the credit allowed under subsection (a) shall be 
     disallowed in the taxable year during which such disposition 
     occurred or in which the taxpayer failed to occupy the 
     residence as a principal residence, and in any subsequent 
     taxable year in which the remaining portion of the credit 
     would, but for this subsection, have been allowed.
       ``(f) Special Rules.--
       ``(1) Joint purchase.--
       ``(A) Married individuals filing separately.--In the case 
     of 2 married individuals filing separately, subsection (a) 
     shall be applied to each such individual by substituting 
     `$7,500' for `$15,000' in subsection (a)(1).
       ``(B) Unmarried individuals.--If 2 or more individuals who 
     are not married purchase a qualified principal residence, the 
     amount of the credit allowed under subsection (a) shall be 
     allocated among such individuals in such manner as the 
     Secretary may prescribe, except that the total amount of the 
     credits allowed to all such individuals shall not exceed 
     $15,000.
       ``(2) Purchase.--In defining the purchase of a qualified 
     principal residence, rules similar to the rules of paragraphs 
     (2) and (3) of section 1400C(e) (as in effect on the date of 
     the enactment of this section) shall apply.
       ``(3) Reporting requirement.--Rules similar to the rules of 
     section 1400C(f) (as so in effect) shall apply.
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section with respect to the 
     purchase of any residence, the basis of such residence shall 
     be reduced by the amount of the credit so allowed.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 25D the following new item:

``Sec. 25E. Credit for certain home purchases.''.

     SEC. 304. ENHANCED MORTGAGE LOAN DISCLOSURES.

       (a) Truth in Lending Act Disclosures.--Section 128(b)(2) of 
     the Truth in Lending Act (15 U.S.C. 1638(b)(2)) is amended--
       (1) by inserting ``(A)'' before ``In the'';
       (2) by striking ``a residential mortgage transaction, as 
     defined in section 103(w)'' and inserting ``any extension of 
     credit that is secured by the dwelling of a consumer'';
       (3) by striking ``shall be made in accordance'' and all 
     that follows through ``extended, or''; and
       (4) by striking ``If the'' and all that follows through the 
     end of the paragraph and inserting the following:
       ``(B) In the case of an extension of credit that is secured 
     by the dwelling of a consumer, in addition to the other 
     disclosures required by subsection (a), the disclosures 
     provided under this paragraph shall--
       ``(i) state in conspicuous type size and format, the 
     following: `You are not required to complete this agreement 
     merely because you have received these disclosures or signed 
     a loan application.'; and
       ``(ii) be furnished to the borrower not later than 7 
     business days before the date of consummation of the 
     transaction, and at the time of consummation of the 
     transaction, subject to subparagraph (D).
       ``(C) In the case of an extension of credit that is secured 
     by the dwelling of a consumer, under which the annual rate of 
     interest is variable, or with respect to which the regular 
     payments may otherwise be variable, in addition to the other 
     disclosures required by subsection (a), the disclosures 
     provided under this paragraph shall--
       ``(i) label the payment schedule as follows: `Payment 
     Schedule: Payments Will Vary Based on Interest Rate Changes';
       ``(ii) state the maximum amount of the regular required 
     payments on the loan, based on the maximum interest rate 
     allowed, introduced with the following language in 
     conspicuous type size and format: `Your payment can go as 
     high as $_______