[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[Senate]
[Pages 23036-23070]
[From the U.S. Government Publishing Office, www.gpo.gov]




             RENEWABLE ENERGY AND JOB CREATION ACT OF 2008

  On Tuesday, September 23, 2008, the Senate passed H.R. 6049, as 
amended, as follows:

                               H.R. 6049

       Resolved, That the bill from the House of Representatives 
     (H.R. 6049) entitled ``An Act to amend the Internal Revenue 
     Code of 1986 to provide incentives for energy production and 
     conservation, to extend certain expiring provisions, to 
     provide individual income tax relief, and for other 
     purposes.'', do pass with the following amendment:
       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Energy 
     Improvement and Extension Act of 2008''.
       (b) Reference.--Except as otherwise expressly provided, 
     whenever in this Act an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Internal Revenue Code of 
     1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:
Sec. 1. Short title, etc.

                 TITLE I--ENERGY PRODUCTION INCENTIVES

                Subtitle A--Renewable Energy Incentives

Sec. 101. Renewable energy credit.
Sec. 102. Production credit for electricity produced from marine 
              renewables.
Sec. 103. Energy credit.
Sec. 104. Energy credit for small wind property.
Sec. 105. Energy credit for geothermal heat pump systems.
Sec. 106. Credit for residential energy efficient property.
Sec. 107. New clean renewable energy bonds.
Sec. 108. Credit for steel industry fuel.
Sec. 109. Special rule to implement FERC and State electric 
              restructuring policy.

           Subtitle B--Carbon Mitigation and Coal Provisions

Sec. 111. Expansion and modification of advanced coal project 
              investment credit.
Sec. 112. Expansion and modification of coal gasification investment 
              credit.
Sec. 113. Temporary increase in coal excise tax; funding of Black Lung 
              Disability Trust Fund.
Sec. 114. Special rules for refund of the coal excise tax to certain 
              coal producers and exporters.
Sec. 115. Tax credit for carbon dioxide sequestration.
Sec. 116. Certain income and gains relating to industrial source carbon 
              dioxide treated as qualifying income for publicly traded 
              partnerships.
Sec. 117. Carbon audit of the tax code.

     TITLE II--TRANSPORTATION AND DOMESTIC FUEL SECURITY PROVISIONS

Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for 
              biomass ethanol plant property.
Sec. 202. Credits for biodiesel and renewable diesel.
Sec. 203. Clarification that credits for fuel are designed to provide 
              an incentive for United States production.
Sec. 204. Extension and modification of alternative fuel credit.
Sec. 205. Credit for new qualified plug-in electric drive motor 
              vehicles.
Sec. 206. Exclusion from heavy truck tax for idling reduction units and 
              advanced insulation.
Sec. 207. Alternative fuel vehicle refueling property credit.
Sec. 208. Certain income and gains relating to alcohol fuels and 
              mixtures, biodiesel fuels and mixtures, and alternative 
              fuels and mixtures treated as qualifying income for 
              publicly traded partnerships.
Sec. 209. Extension and modification of election to expense certain 
              refineries.
Sec. 210. Extension of suspension of taxable income limit on percentage 
              depletion for oil and natural gas produced from marginal 
              properties.
Sec. 211. Transportation fringe benefit to bicycle commuters.

        TITLE III--ENERGY CONSERVATION AND EFFICIENCY PROVISIONS

Sec. 301. Qualified energy conservation bonds.
Sec. 302. Credit for nonbusiness energy property.
Sec. 303. Energy efficient commercial buildings deduction.
Sec. 304. New energy efficient home credit.
Sec. 305. Modifications of energy efficient appliance credit for 
              appliances produced after 2007.
Sec. 306. Accelerated recovery period for depreciation of smart meters 
              and smart grid systems.
Sec. 307. Qualified green building and sustainable design projects.
Sec. 308. Special depreciation allowance for certain reuse and 
              recycling property.

                      TITLE IV--REVENUE PROVISIONS

Sec. 401. Limitation of deduction for income attributable to domestic 
              production of oil, gas, or primary products thereof.
Sec. 402. Elimination of the different treatment of foreign oil and gas 
              extraction income and foreign oil related income for 
              purposes of the foreign tax credit.
Sec. 403. Broker reporting of customer's basis in securities 
              transactions.
Sec. 404. 0.2 percent FUTA surtax.
Sec. 405. Increase and extension of Oil Spill Liability Trust Fund tax.

                 TITLE I--ENERGY PRODUCTION INCENTIVES

                Subtitle A--Renewable Energy Incentives

     SEC. 101. RENEWABLE ENERGY CREDIT.

       (a) Extension of Credit.--
       (1) 1-year extension for wind and refined coal 
     facilities.--Paragraphs (1) and (8) of section 45(d) are each 
     amended by striking ``January 1, 2009'' and inserting 
     ``January 1, 2010''.
       (2) 2-year extension for certain other facilities.--Each of 
     the following provisions of section 45(d) is amended by 
     striking ``January 1, 2009'' and inserting ``January 1, 
     2011'':
       (A) Clauses (i) and (ii) of paragraph (2)(A).
       (B) Clauses (i)(I) and (ii) of paragraph (3)(A).
       (C) Paragraph (4).
       (D) Paragraph (5).
       (E) Paragraph (6).
       (F) Paragraph (7).
       (G) Subparagraphs (A) and (B) of paragraph (9).
       (b) Modification of Refined Coal as a Qualified Energy 
     Resource.--
       (1) Elimination of increased market value test.--Section 
     45(c)(7)(A)(i) (defining refined coal), as amended by section 
     108, is amended--
       (A) by striking subclause (IV),
       (B) by adding ``and'' at the end of subclause (II), and

[[Page 23037]]

       (C) by striking ``, and'' at the end of subclause (III) and 
     inserting a period.
       (2) Increase in required emission reduction.--Section 
     45(c)(7)(B) (defining qualified emission reduction) is 
     amended by inserting ``at least 40 percent of the emissions 
     of'' after ``nitrogen oxide and''.
       (c) Trash Facility Clarification.--Paragraph (7) of section 
     45(d) is amended--
       (1) by striking ``facility which burns'' and inserting 
     ``facility (other than a facility described in paragraph (6)) 
     which uses'', and
       (2) by striking ``combustion''.
       (d) Expansion of Biomass Facilities.--
       (1) Open-loop biomass facilities.--Paragraph (3) of section 
     45(d) is amended by redesignating subparagraph (B) as 
     subparagraph (C) and by inserting after subparagraph (A) the 
     following new subparagraph:
       ``(B) Expansion of facility.--Such term shall include a new 
     unit placed in service after the date of the enactment of 
     this subparagraph in connection with a facility described in 
     subparagraph (A), but only to the extent of the increased 
     amount of electricity produced at the facility by reason of 
     such new unit.''.
       (2) Closed-loop biomass facilities.--Paragraph (2) of 
     section 45(d) is amended by redesignating subparagraph (B) as 
     subparagraph (C) and inserting after subparagraph (A) the 
     following new subparagraph:
       ``(B) Expansion of facility.--Such term shall include a new 
     unit placed in service after the date of the enactment of 
     this subparagraph in connection with a facility described in 
     subparagraph (A)(i), but only to the extent of the increased 
     amount of electricity produced at the facility by reason of 
     such new unit.''.
       (e) Modification of Rules for Hydropower Production.--
     Subparagraph (C) of section 45(c)(8) is amended to read as 
     follows:
       ``(C) Nonhydroelectric dam.--For purposes of subparagraph 
     (A), a facility is described in this subparagraph if--
       ``(i) the hydroelectric project installed on the 
     nonhydroelectric dam is licensed by the Federal Energy 
     Regulatory Commission and meets all other applicable 
     environmental, licensing, and regulatory requirements,
       ``(ii) the nonhydroelectric dam was placed in service 
     before the date of the enactment of this paragraph and 
     operated for flood control, navigation, or water supply 
     purposes and did not produce hydroelectric power on the date 
     of the enactment of this paragraph, and
       ``(iii) the hydroelectric project is operated so that the 
     water surface elevation at any given location and time that 
     would have occurred in the absence of the hydroelectric 
     project is maintained, subject to any license requirements 
     imposed under applicable law that change the water surface 
     elevation for the purpose of improving environmental quality 
     of the affected waterway.

     The Secretary, in consultation with the Federal Energy 
     Regulatory Commission, shall certify if a hydroelectric 
     project licensed at a nonhydroelectric dam meets the criteria 
     in clause (iii). Nothing in this section shall affect the 
     standards under which the Federal Energy Regulatory 
     Commission issues licenses for and regulates hydropower 
     projects under part I of the Federal Power Act.''.
       (f) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to property originally placed in service after December 31, 
     2008.
       (2) Refined coal.--The amendments made by subsection (b) 
     shall apply to coal produced and sold from facilities placed 
     in service after December 31, 2008.
       (3) Trash facility clarification.--The amendments made by 
     subsection (c) shall apply to electricity produced and sold 
     after the date of the enactment of this Act.
       (4) Expansion of biomass facilities.--The amendments made 
     by subsection (d) shall apply to property placed in service 
     after the date of the enactment of this Act.

     SEC. 102. PRODUCTION CREDIT FOR ELECTRICITY PRODUCED FROM 
                   MARINE RENEWABLES.

       (a) In General.--Paragraph (1) of section 45(c) is amended 
     by striking ``and'' at the end of subparagraph (G), by 
     striking the period at the end of subparagraph (H) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(I) marine and hydrokinetic renewable energy.''.
       (b) Marine Renewables.--Subsection (c) of section 45 is 
     amended by adding at the end the following new paragraph:
       ``(10) Marine and hydrokinetic renewable energy.--
       ``(A) In general.--The term `marine and hydrokinetic 
     renewable energy' means energy derived from--
       ``(i) waves, tides, and currents in oceans, estuaries, and 
     tidal areas,
       ``(ii) free flowing water in rivers, lakes, and streams,
       ``(iii) free flowing water in an irrigation system, canal, 
     or other man-made channel, including projects that utilize 
     nonmechanical structures to accelerate the flow of water for 
     electric power production purposes, or
       ``(iv) differentials in ocean temperature (ocean thermal 
     energy conversion).
       ``(B) Exceptions.--Such term shall not include any energy 
     which is derived from any source which utilizes a dam, 
     diversionary structure (except as provided in subparagraph 
     (A)(iii)), or impoundment for electric power production 
     purposes.''.
       (c) Definition of Facility.--Subsection (d) of section 45 
     is amended by adding at the end the following new paragraph:
       ``(11) Marine and hydrokinetic renewable energy 
     facilities.--In the case of a facility producing electricity 
     from marine and hydrokinetic renewable energy, the term 
     `qualified facility' means any facility owned by the 
     taxpayer--
       ``(A) which has a nameplate capacity rating of at least 150 
     kilowatts, and
       ``(B) which is originally placed in service on or after the 
     date of the enactment of this paragraph and before January 1, 
     2012.''.
       (d) Credit Rate.--Subparagraph (A) of section 45(b)(4) is 
     amended by striking ``or (9)'' and inserting ``(9), or 
     (11)''.
       (e) Coordination With Small Irrigation Power.--Paragraph 
     (5) of section 45(d), as amended by section 101, is amended 
     by striking ``January 1, 2012'' and inserting ``the date of 
     the enactment of paragraph (11)''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to electricity produced and sold after the date 
     of the enactment of this Act, in taxable years ending after 
     such date.

     SEC. 103. ENERGY CREDIT.

       (a) Extension of Credit.--
       (1) Solar energy property.--Paragraphs (2)(A)(i)(II) and 
     (3)(A)(ii) of section 48(a) are each amended by striking 
     ``January 1, 2009'' and inserting ``January 1, 2017''.
       (2) Fuel cell property.--Subparagraph (E) of section 
     48(c)(1) is amended by striking ``December 31, 2008'' and 
     inserting ``December 31, 2016''.
       (3) Microturbine property.--Subparagraph (E) of section 
     48(c)(2) is amended by striking ``December 31, 2008'' and 
     inserting ``December 31, 2016''.
       (b) Allowance of Energy Credit Against Alternative Minimum 
     Tax.--
       (1) In general.--Subparagraph (B) of section 38(c)(4), as 
     amended by the Housing Assistance Tax Act of 2008, is amended 
     by redesignating clause (vi) as clause (vi) and (vii), 
     respectively, and by inserting after clause (iv) the 
     following new clause:
       ``(v) the credit determined under section 46 to the extent 
     that such credit is attributable to the energy credit 
     determined under section 48,''.
       (2) Technical amendment.--Clause (vi) of section 
     38(c)(4)(B), as redesignated by paragraph (1), is amended by 
     striking ``section 47 to the extent attributable to'' and 
     inserting ``section 46 to the extent that such credit is 
     attributable to the rehabilitation credit under section 47, 
     but only with respect to''.
       (c) Energy Credit for Combined Heat and Power System 
     Property.--
       (1) In general.--Section 48(a)(3)(A) is amended by striking 
     ``or'' at the end of clause (iii), by inserting ``or'' at the 
     end of clause (iv), and by adding at the end the following 
     new clause:
       ``(v) combined heat and power system property,''.
       (2) Combined heat and power system property.--Subsection 
     (c) of section 48 is amended--
       (A) by striking ``Qualified Fuel Cell Property; Qualified 
     Microturbine Property'' in the heading and inserting 
     ``Definitions'', and
       (B) by adding at the end the following new paragraph:
       ``(3) Combined heat and power system property.--
       ``(A) Combined heat and power system property.--The term 
     `combined heat and power system property' means property 
     comprising a system--
       ``(i) which uses the same energy source for the 
     simultaneous or sequential generation of electrical power, 
     mechanical shaft power, or both, in combination with the 
     generation of steam or other forms of useful thermal energy 
     (including heating and cooling applications),
       ``(ii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy which is not used to produce 
     electrical or mechanical power (or combination thereof), and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or combination 
     thereof),

       ``(iii) the energy efficiency percentage of which exceeds 
     60 percent, and
       ``(iv) which is placed in service before January 1, 2017.
       ``(B) Limitation.--
       ``(i) In general.--In the case of combined heat and power 
     system property with an electrical capacity in excess of the 
     applicable capacity placed in service during the taxable 
     year, the credit under subsection (a)(1) (determined without 
     regard to this paragraph) for such year shall be equal to the 
     amount which bears the same ratio to such credit as the 
     applicable capacity bears to the capacity of such property.
       ``(ii) Applicable capacity.--For purposes of clause (i), 
     the term `applicable capacity' means 15 megawatts or a 
     mechanical energy capacity of more than 20,000 horsepower or 
     an equivalent combination of electrical and mechanical energy 
     capacities.
       ``(iii) Maximum capacity.--The term `combined heat and 
     power system property' shall not include any property 
     comprising a system if such system has a capacity in excess 
     of 50 megawatts or a mechanical energy capacity in excess of 
     67,000 horsepower or an equivalent combination of electrical 
     and mechanical energy capacities.
       ``(C) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of this 
     paragraph, the energy efficiency percentage of a system is 
     the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates,

[[Page 23038]]

     and expected to be consumed in its normal application, and
       ``(II) the denominator of which is the lower heating value 
     of the fuel sources for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(ii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(D) Systems using biomass.--If a system is designed to 
     use biomass (within the meaning of paragraphs (2) and (3) of 
     section 45(c) without regard to the last sentence of 
     paragraph (3)(A)) for at least 90 percent of the energy 
     source--
       ``(i) subparagraph (A)(iii) shall not apply, but
       ``(ii) the amount of credit determined under subsection (a) 
     with respect to such system shall not exceed the amount which 
     bears the same ratio to such amount of credit (determined 
     without regard to this subparagraph) as the energy efficiency 
     percentage of such system bears to 60 percent.''.
       (3) Conforming amendment.--Section 48(a)(1) is amended by 
     striking ``paragraphs (1)(B) and (2)(B)'' and inserting 
     ``paragraphs (1)(B), (2)(B), and (3)(B)''.
       (d) Increase of Credit Limitation for Fuel Cell Property.--
     Subparagraph (B) of section 48(c)(1) is amended by striking 
     ``$500'' and inserting ``$1,500''.
       (e) Public Utility Property Taken Into Account.--
       (1) In general.--Paragraph (3) of section 48(a) is amended 
     by striking the second sentence thereof.
       (2) Conforming amendments.--
       (A) Paragraph (1) of section 48(c) is amended by striking 
     subparagraph (D) and redesignating subparagraph (E) as 
     subparagraph (D).
       (B) Paragraph (2) of section 48(c) is amended by striking 
     subparagraph (D) and redesignating subparagraph (E) as 
     subparagraph (D).
       (f) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on the date of the enactment of this Act.
       (2) Allowance against alternative minimum tax.--The 
     amendments made by subsection (b) shall apply to credits 
     determined under section 46 of the Internal Revenue Code of 
     1986 in taxable years beginning after the date of the 
     enactment of this Act and to carrybacks of such credits.
       (3) Combined heat and power and fuel cell property.--The 
     amendments made by subsections (c) and (d) shall apply to 
     periods after the date of the enactment of this Act, in 
     taxable years ending after such date, under rules similar to 
     the rules of section 48(m) of the Internal Revenue Code of 
     1986 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).
       (4)  Public utility property.--The amendments made by 
     subsection (e) shall apply to periods after February 13, 
     2008, in taxable years ending after such date, under rules 
     similar to the rules of section 48(m) of the Internal Revenue 
     Code of 1986 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).

     SEC. 104. ENERGY CREDIT FOR SMALL WIND PROPERTY.

       (a) In General.--Section 48(a)(3)(A), as amended by section 
     103, is amended by striking ``or'' at the end of clause (iv), 
     by adding ``or'' at the end of clause (v), and by inserting 
     after clause (v) the following new clause:
       ``(vi) qualified small wind energy property,''.
       (b) 30 Percent Credit.--Section 48(a)(2)(A)(i) is amended 
     by striking ``and'' at the end of subclause (II) and by 
     inserting after subclause (III) the following new subclause:

       ``(IV) qualified small wind energy property, and''.

       (c) Qualified Small Wind Energy Property.--Section 48(c), 
     as amended by section 103, is amended by adding at the end 
     the following new paragraph:
       ``(4) Qualified small wind energy property.--
       ``(A) In general.--The term `qualified small wind energy 
     property' means property which uses a qualifying small wind 
     turbine to generate electricity.
       ``(B) Limitation.--In the case of qualified small wind 
     energy property placed in service during the taxable year, 
     the credit otherwise determined under subsection (a)(1) for 
     such year with respect to all such property of the taxpayer 
     shall not exceed $4,000.
       ``(C) Qualifying small wind turbine.--The term `qualifying 
     small wind turbine' means a wind turbine which has a 
     nameplate capacity of not more than 100 kilowatts.
       ``(D) Termination.--The term `qualified small wind energy 
     property' shall not include any property for any period after 
     December 31, 2016.''.
       (d) Conforming Amendment.--Section 48(a)(1), as amended by 
     section 103, is amended by striking ``paragraphs (1)(B), 
     (2)(B), and (3)(B)'' and inserting ``paragraphs (1)(B), 
     (2)(B), (3)(B), and (4)(B)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to periods after the date of the enactment of 
     this Act, in taxable years ending after such date, under 
     rules similar to the rules of section 48(m) of the Internal 
     Revenue Code of 1986 (as in effect on the day before the date 
     of the enactment of the Revenue Reconciliation Act of 1990).

     SEC. 105. ENERGY CREDIT FOR GEOTHERMAL HEAT PUMP SYSTEMS.

       (a) In General.--Subparagraph (A) of section 48(a)(3), as 
     amended by this Act, is amended by striking ``or'' at the end 
     of clause (v), by inserting ``or'' at the end of clause (vi), 
     and by adding at the end the following new clause:
       ``(vii) equipment which uses the ground or ground water as 
     a thermal energy source to heat a structure or as a thermal 
     energy sink to cool a structure, but only with respect to 
     periods ending before January 1, 2017,''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to periods after the date of the enactment of 
     this Act, in taxable years ending after such date, under 
     rules similar to the rules of section 48(m) of the Internal 
     Revenue Code of 1986 (as in effect on the day before the date 
     of the enactment of the Revenue Reconciliation Act of 1990).

     SEC. 106. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       (a) Extension.--Section 25D(g) is amended by striking 
     ``December 31, 2008'' and inserting ``December 31, 2016''.
       (b) Removal of Limitation for Solar Electric Property.--
       (1) In general.--Section 25D(b)(1), as amended by 
     subsections (c) and (d), is amended--
       (A) by striking subparagraph (A), and
       (B) by redesignating subparagraphs (B) through (E) as 
     subparagraphs (A) through and (D), respectively.
       (2) Conforming amendment.--Section 25D(e)(4)(A), as amended 
     by subsections (c) and (d), is amended--
       (A) by striking clause (i), and
       (B) by redesignating clauses (ii) through (v) as clauses 
     (i) and (iv), respectively.
       (c) Credit for Residential Wind Property.--
       (1) In general.--Section 25D(a) is amended by striking 
     ``and'' at the end of paragraph (2), by striking the period 
     at the end of paragraph (3) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(4) 30 percent of the qualified small wind energy 
     property expenditures made by the taxpayer during such 
     year.''.
       (2) Limitation.--Section 25D(b)(1) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) $500 with respect to each half kilowatt of capacity 
     (not to exceed $4,000) of wind turbines for which qualified 
     small wind energy property expenditures are made.''.
       (3) Qualified small wind energy property expenditures.--
       (A) In general.--Section 25D(d) is amended by adding at the 
     end the following new paragraph:
       ``(4) Qualified small wind energy property expenditure.--
     The term `qualified small wind energy property expenditure' 
     means an expenditure for property which uses a wind turbine 
     to generate electricity for use in connection with a dwelling 
     unit located in the United States and used as a residence by 
     the taxpayer.''.
       (B) No double benefit.--Section 45(d)(1) is amended by 
     adding at the end the following new sentence: ``Such term 
     shall not include any facility with respect to which any 
     qualified small wind energy property expenditure (as defined 
     in subsection (d)(4) of section 25D) is taken into account in 
     determining the credit under such section.''.
       (4) Maximum expenditures in case of joint occupancy.--
     Section 25D(e)(4)(A) is amended by striking ``and'' at the 
     end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) $1,667 in the case of each half kilowatt of capacity 
     (not to exceed $13,333) of wind turbines for which qualified 
     small wind energy property expenditures are made.''.
       (d) Credit for Geothermal Heat pump Systems.--
       (1) In general.--Section 25D(a), as amended by subsection 
     (c), is amended by striking ``and'' at the end of paragraph 
     (3), by striking the period at the end of paragraph (4) and 
     inserting ``, and'', and by adding at the end the following 
     new paragraph:
       ``(5) 30 percent of the qualified geothermal heat pump 
     property expenditures made by the taxpayer during such 
     year.''.
       (2) Limitation.--Section 25D(b)(1), as amended by 
     subsection (c), is amended by striking ``and'' at the end of 
     subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) $2,000 with respect to any qualified geothermal heat 
     pump property expenditures.''.
       (3) Qualified geothermal heat pump property expenditure.--
     Section 25D(d), as amended by subsection (c), is amended by 
     adding at the end the following new paragraph:
       ``(5) Qualified geothermal heat pump property 
     expenditure.--
       ``(A) In general.--The term `qualified geothermal heat pump 
     property expenditure' means an expenditure for qualified 
     geothermal heat pump property installed on or in connection 
     with a dwelling unit located in the United States and used as 
     a residence by the taxpayer.
       ``(B) Qualified geothermal heat pump property.--The term 
     `qualified geothermal heat pump property' means any equipment 
     which--
       ``(i) uses the ground or ground water as a thermal energy 
     source to heat the dwelling unit referred to in subparagraph 
     (A) or as a thermal energy sink to cool such dwelling unit, 
     and

[[Page 23039]]

       ``(ii) meets the requirements of the Energy Star program 
     which are in effect at the time that the expenditure for such 
     equipment is made.''.
       (4) Maximum expenditures in case of joint occupancy.--
     Section 25D(e)(4)(A), as amended by subsection (c), is 
     amended by striking ``and'' at the end of clause (iii), by 
     striking the period at the end of clause (iv) and inserting 
     ``, and'', and by adding at the end the following new clause:
       ``(v) $6,667 in the case of any qualified geothermal heat 
     pump property expenditures.''.
       (e) Credit Allowed Against Alternative Minimum Tax.--
       (1) In general.--Subsection (c) of section 25D is amended 
     to read as follows:
       ``(c) Limitation Based on Amount of Tax; Carryforward of 
     Unused Credit.--
       ``(1) 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 the 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) and section 27 for the taxable 
     year.
       ``(2) Carryforward of unused credit.--
       ``(A) Rule for years in which all personal credits allowed 
     against regular and alternative minimum tax.--In the case of 
     a taxable year to which section 26(a)(2) applies, if the 
     credit allowable under subsection (a) exceeds the limitation 
     imposed by section 26(a)(2) for such taxable year reduced by 
     the sum of the credits allowable under this subpart (other 
     than this section), such excess shall be carried to the 
     succeeding taxable year and added to the credit allowable 
     under subsection (a) for such succeeding taxable year.
       ``(B) Rule for other years.--In the case of a taxable year 
     to which section 26(a)(2) does not apply, if the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such succeeding 
     taxable year.''.
       (2) Conforming amendments.--
       (A) Section 23(b)(4)(B) is amended by inserting ``and 
     section 25D'' after ``this section''.
       (B) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
     and inserting ``, 25B, and 25D''.
       (C) Section 25B(g)(2) is amended by striking ``section 23'' 
     and inserting ``sections 23 and 25D''.
       (D) Section 26(a)(1) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25D''.
       (f) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2007.
       (2) Solar electric property limitation.--The amendments 
     made by subsection (b) shall apply to taxable years beginning 
     after December 31, 2008.
       (3) Application of egtrra sunset.--The amendments made by 
     subparagraphs (A) and (B) of subsection (e)(2) shall be 
     subject to title IX of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 in the same manner as the 
     provisions of such Act to which such amendments relate.

     SEC. 107. NEW CLEAN RENEWABLE ENERGY BONDS.

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

     ``SEC. 54C. NEW CLEAN RENEWABLE ENERGY BONDS.

       ``(a) New Clean Renewable Energy Bond.--For purposes of 
     this subpart, the term `new clean renewable energy bond' 
     means any bond issued as part of an issue if--
       ``(1) 100 percent of the available project proceeds of such 
     issue are to be used for capital expenditures incurred by 
     governmental bodies, public power providers, or cooperative 
     electric companies for one or more qualified renewable energy 
     facilities,
       ``(2) the bond is issued by a qualified issuer, and
       ``(3) the issuer designates such bond for purposes of this 
     section.
       ``(b) Reduced Credit Amount.--The annual credit determined 
     under section 54A(b) with respect to any new clean renewable 
     energy bond shall be 70 percent of the amount so determined 
     without regard to this subsection.
       ``(c) Limitation on Amount of Bonds Designated.--
       ``(1) In general.--The maximum aggregate face amount of 
     bonds which may be designated under subsection (a) by any 
     issuer shall not exceed the limitation amount allocated under 
     this subsection to such issuer.
       ``(2) National limitation on amount of bonds designated.--
     There is a national new clean renewable energy bond 
     limitation of $800,000,000 which shall be allocated by the 
     Secretary as provided in paragraph (3), except that--
       ``(A) not more than 33\1/3\ percent thereof may be 
     allocated to qualified projects of public power providers,
       ``(B) not more than 33\1/3\ percent thereof may be 
     allocated to qualified projects of governmental bodies, and
       ``(C) not more than 33\1/3\ percent thereof may be 
     allocated to qualified projects of cooperative electric 
     companies.
       ``(3) Method of allocation.--
       ``(A) Allocation among public power providers.--After the 
     Secretary determines the qualified projects of public power 
     providers which are appropriate for receiving an allocation 
     of the national new clean renewable energy bond limitation, 
     the Secretary shall, to the maximum extent practicable, make 
     allocations among such projects in such manner that the 
     amount allocated to each such project bears the same ratio to 
     the cost of such project as the limitation under paragraph 
     (2)(A) bears to the cost of all such projects.
       ``(B) Allocation among governmental bodies and cooperative 
     electric companies.--The Secretary shall make allocations of 
     the amount of the national new clean renewable energy bond 
     limitation described in paragraphs (2)(B) and (2)(C) among 
     qualified projects of governmental bodies and cooperative 
     electric companies, respectively, in such manner as the 
     Secretary determines appropriate.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified renewable energy facility.--The term 
     `qualified renewable energy facility' means a qualified 
     facility (as determined under section 45(d) without regard to 
     paragraphs (8) and (10) thereof and to any placed in service 
     date) owned by a public power provider, a governmental body, 
     or a cooperative electric company.
       ``(2) Public power provider.--The term `public power 
     provider' means a State utility with a service obligation, as 
     such terms are defined in section 217 of the Federal Power 
     Act (as in effect on the date of the enactment of this 
     paragraph).
       ``(3) Governmental body.--The term `governmental body' 
     means any State or Indian tribal government, or any political 
     subdivision thereof.
       ``(4) Cooperative electric company.--The term `cooperative 
     electric company' means a mutual or cooperative electric 
     company described in section 501(c)(12) or section 
     1381(a)(2)(C).
       ``(5) Clean renewable energy bond lender.--The term `clean 
     renewable energy bond lender' means a lender which is a 
     cooperative which is owned by, or has outstanding loans to, 
     100 or more cooperative electric companies and is in 
     existence on February 1, 2002, and shall include any 
     affiliated entity which is controlled by such lender.
       ``(6) Qualified issuer.--The term `qualified issuer' means 
     a public power provider, a cooperative electric company, a 
     governmental body, a clean renewable energy bond lender, or a 
     not-for-profit electric utility which has received a loan or 
     loan guarantee under the Rural Electrification Act.''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 54A(d) is amended to read as 
     follows:
       ``(1) Qualified tax credit bond.--The term `qualified tax 
     credit bond' means--
       ``(A) a qualified forestry conservation bond, or
       ``(B) a new clean renewable energy bond,
     which is part of an issue that meets requirements of 
     paragraphs (2), (3), (4), (5), and (6).''.
       (2) Subparagraph (C) of section 54A(d)(2) is amended to 
     read as follows:
       ``(C) Qualified purpose.--For purposes of this paragraph, 
     the term `qualified purpose' means--
       ``(i) in the case of a qualified forestry conservation 
     bond, a purpose specified in section 54B(e), and
       ``(ii) in the case of a new clean renewable energy bond, a 
     purpose specified in section 54C(a)(1).''.
       (3) The table of sections for subpart I of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 54C. Qualified clean renewable energy bonds.''.

       (c) Extension for Clean Renewable Energy Bonds.--Subsection 
     (m) of section 54 is amended by striking ``December 31, 
     2008'' and inserting ``December 31, 2009''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 108. CREDIT FOR STEEL INDUSTRY FUEL.

       (a) Treatment as Refined Coal.--
       (1) In general.--Subparagraph (A) of section 45(c)(7) of 
     the Internal Revenue Code of 1986 (relating to refined coal), 
     as amended by this Act, is amended to read as follows:
       ``(A) In general.--The term `refined coal' means a fuel--
       ``(i) which--

       ``(I) is a liquid, gaseous, or solid fuel produced from 
     coal (including lignite) or high carbon fly ash, including 
     such fuel used as a feedstock,
       ``(II) is sold by the taxpayer with the reasonable 
     expectation that it will be used for purpose of producing 
     steam,
       ``(III) is certified by the taxpayer as resulting (when 
     used in the production of steam) in a qualified emission 
     reduction, and
       ``(IV) is produced in such a manner as to result in an 
     increase of at least 50 percent in the market value of the 
     refined coal (excluding any increase caused by materials 
     combined or added during the production process), as compared 
     to the value of the feedstock coal, or

       ``(ii) which is steel industry fuel.''.
       (2) Steel industry fuel defined.--Paragraph (7) of section 
     45(c) of such Code is amended by adding at the end the 
     following new subparagraph:
       ``(C) Steel industry fuel.--
       ``(i) In general.--The term `steel industry fuel' means a 
     fuel which--

       ``(I) is produced through a process of liquifying coal 
     waste sludge and distributing it on coal, and
       ``(II) is used as a feedstock for the manufacture of coke.

[[Page 23040]]

       ``(ii) Coal waste sludge.--The term `coal waste sludge' 
     means the tar decanter sludge and related byproducts of the 
     coking process, including such materials that have been 
     stored in ground, in tanks and in lagoons, that have been 
     treated as hazardous wastes under applicable Federal 
     environmental rules absent liquefaction and processing with 
     coal into a feedstock for the manufacture of coke.''.
       (b) Credit Amount.--
       (1) In general.--Paragraph (8) of section 45(e) of the 
     Internal Revenue Code of 1986 (relating to refined coal 
     production facilities) is amended by adding at the end the 
     following new subparagraph
       ``(D) Special rule for steel industry fuel.--
       ``(i) In general.--In the case of a taxpayer who produces 
     steel industry fuel--

       ``(I) this paragraph shall be applied separately with 
     respect to steel industry fuel and other refined coal, and
       ``(II) in applying this paragraph to steel industry fuel, 
     the modifications in clause (ii) shall apply.

       ``(ii) Modifications.--

       ``(I) Credit amount.--Subparagraph (A) shall be applied by 
     substituting `$2 per barrel-of-oil equivalent' for `$4.375 
     per ton'.
       ``(II) Credit period.--In lieu of the 10-year period 
     referred to in clauses (i) and (ii)(II) of subparagraph (A), 
     the credit period shall be the period beginning on the later 
     of the date such facility was originally placed in service, 
     the date the modifications described in clause (iii) were 
     placed in service, or October 1, 2008, and ending on the 
     later of December 31, 2009, or the date which is 1 year after 
     the date such facility or the modifications described in 
     clause (iii) were placed in service.
       ``(III) No phaseout.--Subparagraph (B) shall not apply.

       ``(iii) Modifications.--The modifications described in this 
     clause are modifications to an existing facility which allow 
     such facility to produce steel industry fuel.
       ``(iv) Barrel-of-oil equivalent.--For purposes of this 
     subparagraph, a barrel-of-oil equivalent is the amount of 
     steel industry fuel that has a Btu content of 5,800,000 
     Btus.''.
       (2) Inflation adjustment.--Paragraph (2) of section 45(b) 
     of such Code is amended by inserting ``the $3 amount in 
     subsection (e)(8)(D)(ii)(I),'' after ``subsection 
     (e)(8)(A),''.
       (c) Termination.--Paragraph (8) of section 45(d) of the 
     Internal Revenue Code of 1986 (relating to refined coal 
     production facility), as amended by this Act, is amended to 
     read as follows:
       ``(8) Refined coal production facility.--In the case of a 
     facility that produces refined coal, the term `refined coal 
     production facility' means--
       ``(A) with respect to a facility producing steel industry 
     fuel, any facility (or any modification to a facility) which 
     is placed in service before January 1, 2010, and
       ``(B) with respect to any other facility producing refined 
     coal, any facility placed in service after the date of the 
     enactment of the American Jobs Creation Act of 2004 and 
     before January 1, 2010.''.
       (d) Coordination With Credit for Producing Fuel From a 
     Nonconventional Source.--
       (1) In general.--Subparagraph (B) of section 45(e)(9) of 
     the Internal Revenue Code of 1986 is amended--
       (A) by striking ``The term'' and inserting the following:
       ``(i) In general.--The term'', and
       (B) by adding at the end the following new clause:
       ``(ii) Exception for steel industry coal.--In the case of a 
     facility producing steel industry fuel, clause (i) shall not 
     apply to so much of the refined coal produced at such 
     facility as is steel industry fuel.''.
       (2) No double benefit.--Section 45K(g)(2) of such Code is 
     amended by adding at the end the following new subparagraph:
       ``(E) Coordination with section 45.--No credit shall be 
     allowed with respect to any qualified fuel which is steel 
     industry fuel (as defined in section 45(c)(7)) if a credit is 
     allowed to the taxpayer for such fuel under section 45.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to fuel produced and sold after September 30, 
     2008.

     SEC. 109. SPECIAL RULE TO IMPLEMENT FERC AND STATE ELECTRIC 
                   RESTRUCTURING POLICY.

       (a) Extension for Qualified Electric Utilities.--
       (1) In general.--Paragraph (3) of section 451(i) is amended 
     by inserting ``(before January 1, 2010, in the case of a 
     qualified electric utility)'' after ``January 1, 2008''.
       (2) Qualified electric utility.--Subsection (i) of section 
     451 is amended by redesignating paragraphs (6) through (10) 
     as paragraphs (7) through (11), respectively, and by 
     inserting after paragraph (5) the following new paragraph:
       ``(6) Qualified electric utility.--For purposes of this 
     subsection, the term `qualified electric utility' means a 
     person that, as of the date of the qualifying electric 
     transmission transaction, is vertically integrated, in that 
     it is both--
       ``(A) a transmitting utility (as defined in section 3(23) 
     of the Federal Power Act (16 U.S.C. 796(23))) with respect to 
     the transmission facilities to which the election under this 
     subsection applies, and
       ``(B) an electric utility (as defined in section 3(22) of 
     the Federal Power Act (16 U.S.C. 796(22))).''.
       (b) Extension of Period for Transfer of Operational Control 
     Authorized by FERC.--Clause (ii) of section 451(i)(4)(B) is 
     amended by striking ``December 31, 2007'' and inserting ``the 
     date which is 4 years after the close of the taxable year in 
     which the transaction occurs''.
       (c) Property Located Outside the United States Not Treated 
     as Exempt Utility Property.--Paragraph (5) of section 451(i) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) Exception for property located outside the united 
     states.--The term `exempt utility property' shall not include 
     any property which is located outside the United States.''.
       (d) Effective Dates.--
       (1) Extension.--The amendments made by subsection (a) shall 
     apply to transactions after December 31, 2007.
       (2) Transfers of operational control.--The amendment made 
     by subsection (b) shall take effect as if included in section 
     909 of the American Jobs Creation Act of 2004.
       (3) Exception for property located outside the united 
     states.--The amendment made by subsection (c) shall apply to 
     transactions after the date of the enactment of this Act.

           Subtitle B--Carbon Mitigation and Coal Provisions

     SEC. 111. EXPANSION AND MODIFICATION OF ADVANCED COAL PROJECT 
                   INVESTMENT CREDIT.

       (a) Modification of Credit Amount.--Section 48A(a) is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) 30 percent of the qualified investment for such 
     taxable year in the case of projects described in clause 
     (iii) of subsection (d)(3)(B).''.
       (b) Expansion of Aggregate Credits.--Section 48A(d)(3)(A) 
     is amended by striking ``$1,300,000,000'' and inserting 
     ``$2,550,000,000''.
       (c) Authorization of Additional Projects.--
       (1) In general.--Subparagraph (B) of section 48A(d)(3) is 
     amended to read as follows:
       ``(B) Particular projects.--Of the dollar amount in 
     subparagraph (A), the Secretary is authorized to certify--
       ``(i) $800,000,000 for integrated gasification combined 
     cycle projects the application for which is submitted during 
     the period described in paragraph (2)(A)(i),
       ``(ii) $500,000,000 for projects which use other advanced 
     coal-based generation technologies the application for which 
     is submitted during the period described in paragraph 
     (2)(A)(i), and
       ``(iii) $1,250,000,000 for advanced coal-based generation 
     technology projects the application for which is submitted 
     during the period described in paragraph (2)(A)(ii).''.
       (2) Application period for additional projects.--
     Subparagraph (A) of section 48A(d)(2) is amended to read as 
     follows:
       ``(A) Application period.--Each applicant for certification 
     under this paragraph shall submit an application meeting the 
     requirements of subparagraph (B). An applicant may only 
     submit an application--
       ``(i) for an allocation from the dollar amount specified in 
     clause (i) or (ii) of paragraph (3)(B) during the 3-year 
     period beginning on the date the Secretary establishes the 
     program under paragraph (1), and
       ``(ii) for an allocation from the dollar amount specified 
     in paragraph (3)(B)(iii) during the 3-year period beginning 
     at the earlier of the termination of the period described in 
     clause (i) or the date prescribed by the Secretary.''.
       (3) Capture and sequestration of carbon dioxide emissions 
     requirement.--
       (A) In general.--Section 48A(e)(1) is amended by striking 
     ``and'' at the end of subparagraph (E), by striking the 
     period at the end of subparagraph (F) and inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(G) in the case of any project the application for which 
     is submitted during the period described in subsection 
     (d)(2)(A)(ii), the project includes equipment which separates 
     and sequesters at least 65 percent (70 percent in the case of 
     an application for reallocated credits under subsection 
     (d)(4)) of such project's total carbon dioxide emissions.''.
       (B) Highest priority for projects which sequester carbon 
     dioxide emissions.--Section 48A(e)(3) is amended by striking 
     ``and'' at the end of subparagraph (A)(iii), by striking the 
     period at the end of subparagraph (B)(iii) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) give highest priority to projects with the greatest 
     separation and sequestration percentage of total carbon 
     dioxide emissions.''.
       (C) Recapture of credit for failure to sequester.--Section 
     48A is amended by adding at the end the following new 
     subsection:
       ``(i) Recapture of Credit for Failure To Sequester.--The 
     Secretary shall provide for recapturing the benefit of any 
     credit allowable under subsection (a) with respect to any 
     project which fails to attain or maintain the separation and 
     sequestration requirements of subsection (e)(1)(G).''.
       (4) Additional priority for research partnerships.--Section 
     48A(e)(3)(B), as amended by paragraph (3)(B), is amended--
       (A) by striking ``and'' at the end of clause (ii),
       (B) by redesignating clause (iii) as clause (iv), and
       (C) by inserting after clause (ii) the following new 
     clause:

[[Page 23041]]

       ``(iii) applicant participants who have a research 
     partnership with an eligible educational institution (as 
     defined in section 529(e)(5)), and''.
       (5) Clerical amendment.--Section 48A(e)(3) is amended by 
     striking ``integrated gasification combined cycle'' in the 
     heading and inserting ``certain''.
       (d) Disclosure of Allocations.--Section 48A(d) is amended 
     by adding at the end the following new paragraph:
       ``(5) Disclosure of allocations.--The Secretary shall, upon 
     making a certification under this subsection or section 
     48B(d), publicly disclose the identity of the applicant and 
     the amount of the credit certified with respect to such 
     applicant.''.
       (e) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to credits the application for which is submitted during the 
     period described in section 48A(d)(2)(A)(ii) of the Internal 
     Revenue Code of 1986 and which are allocated or reallocated 
     after the date of the enactment of this Act.
       (2) Disclosure of allocations.--The amendment made by 
     subsection (d) shall apply to certifications made after the 
     date of the enactment of this Act.
       (3) Clerical amendment.--The amendment made by subsection 
     (c)(5) shall take effect as if included in the amendment made 
     by section 1307(b) of the Energy Tax Incentives Act of 2005.

     SEC. 112. EXPANSION AND MODIFICATION OF COAL GASIFICATION 
                   INVESTMENT CREDIT.

       (a) Modification of Credit Amount.--Section 48B(a) is 
     amended by inserting ``(30 percent in the case of credits 
     allocated under subsection (d)(1)(B))'' after ``20 percent''.
       (b) Expansion of Aggregate Credits.--Section 48B(d)(1) is 
     amended by striking ``shall not exceed $350,000,000'' and all 
     that follows and inserting ``shall not exceed--
       ``(A) $350,000,000, plus
       ``(B) $250,000,000 for qualifying gasification projects 
     that include equipment which separates and sequesters at 
     least 75 percent of such project's total carbon dioxide 
     emissions.''.
       (c) Recapture of Credit for Failure to Sequester.--Section 
     48B is amended by adding at the end the following new 
     subsection:
       ``(f) Recapture of Credit for Failure to Sequester.--The 
     Secretary shall provide for recapturing the benefit of any 
     credit allowable under subsection (a) with respect to any 
     project which fails to attain or maintain the separation and 
     sequestration requirements for such project under subsection 
     (d)(1).''.
       (d) Selection Priorities.--Section 48B(d) is amended by 
     adding at the end the following new paragraph:
       ``(4) Selection priorities.--In determining which 
     qualifying gasification projects to certify under this 
     section, the Secretary shall--
       ``(A) give highest priority to projects with the greatest 
     separation and sequestration percentage of total carbon 
     dioxide emissions, and
       ``(B) give high priority to applicant participants who have 
     a research partnership with an eligible educational 
     institution (as defined in section 529(e)(5)).''.
       (e) Eligible Projects Include Transportation Grade Liquid 
     Fuels.--Section 48B(c)(7) (defining eligible entity) is 
     amended by striking ``and'' at the end of subparagraph (F), 
     by striking the period at the end of subparagraph (G) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(H) transportation grade liquid fuels.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to credits described in section 48B(d)(1)(B) of 
     the Internal Revenue Code of 1986 which are allocated or 
     reallocated after the date of the enactment of this Act.

     SEC. 113. TEMPORARY INCREASE IN COAL EXCISE TAX; FUNDING OF 
                   BLACK LUNG DISABILITY TRUST FUND.

       (a) Extension of Temporary Increase.--Paragraph (2) of 
     section 4121(e) is amended--
       (1) by striking ``January 1, 2014'' in subparagraph (A) and 
     inserting ``December 31, 2018'', and
       (2) by striking ``January 1 after 1981'' in subparagraph 
     (B) and inserting ``December 31 after 2007''.
       (b) Restructuring of Trust Fund Debt.--
       (1) Definitions.--For purposes of this subsection--
       (A) Market value of the outstanding repayable advances, 
     plus accrued interest.--The term ``market value of the 
     outstanding repayable advances, plus accrued interest'' means 
     the present value (determined by the Secretary of the 
     Treasury as of the refinancing date and using the Treasury 
     rate as the discount rate) of the stream of principal and 
     interest payments derived assuming that each repayable 
     advance that is outstanding on the refinancing date is due on 
     the 30th anniversary of the end of the fiscal year in which 
     the advance was made to the Trust Fund, and that all such 
     principal and interest payments are made on September 30 of 
     the applicable fiscal year.
       (B) Refinancing date.--The term ``refinancing date'' means 
     the date occurring 2 days after the enactment of this Act.
       (C) Repayable advance.--The term ``repayable advance'' 
     means an amount that has been appropriated to the Trust Fund 
     in order to make benefit payments and other expenditures that 
     are authorized under section 9501 of the Internal Revenue 
     Code of 1986 and are required to be repaid when the Secretary 
     of the Treasury determines that monies are available in the 
     Trust Fund for such purpose.
       (D) Treasury rate.--The term ``Treasury rate'' means a rate 
     determined by the Secretary of the Treasury, taking into 
     consideration current market yields on outstanding marketable 
     obligations of the United States of comparable maturities.
       (E) Treasury 1-year rate.--The term ``Treasury 1-year 
     rate'' means a rate determined by the Secretary of the 
     Treasury, taking into consideration current market yields on 
     outstanding marketable obligations of the United States with 
     remaining periods to maturity of approximately 1 year, to 
     have been in effect as of the close of business 1 business 
     day prior to the date on which the Trust Fund issues 
     obligations to the Secretary of the Treasury under paragraph 
     (2)(B).
       (2) Refinancing of outstanding principal of repayable 
     advances and unpaid interest on such advances.--
       (A) Transfer to general fund.--On the refinancing date, the 
     Trust Fund shall repay the market value of the outstanding 
     repayable advances, plus accrued interest, by transferring 
     into the general fund of the Treasury the following sums:
       (i) The proceeds from obligations that the Trust Fund shall 
     issue to the Secretary of the Treasury in such amounts as the 
     Secretaries of Labor and the Treasury shall determine and 
     bearing interest at the Treasury rate, and that shall be in 
     such forms and denominations and be subject to such other 
     terms and conditions, including maturity, as the Secretary of 
     the Treasury shall prescribe.
       (ii) All, or that portion, of the appropriation made to the 
     Trust Fund pursuant to paragraph (3) that is needed to cover 
     the difference defined in that paragraph.
       (B) Repayment of obligations.--In the event that the Trust 
     Fund is unable to repay the obligations that it has issued to 
     the Secretary of the Treasury under subparagraph (A)(i) and 
     this subparagraph, or is unable to make benefit payments and 
     other authorized expenditures, the Trust Fund shall issue 
     obligations to the Secretary of the Treasury in such amounts 
     as may be necessary to make such repayments, payments, and 
     expenditures, with a maturity of 1 year, and bearing interest 
     at the Treasury 1-year rate. These obligations shall be in 
     such forms and denominations and be subject to such other 
     terms and conditions as the Secretary of the Treasury shall 
     prescribe.
       (C) Authority to issue obligations.--The Trust Fund is 
     authorized to issue obligations to the Secretary of the 
     Treasury under subparagraphs (A)(i) and (B). The Secretary of 
     the Treasury is authorized to purchase such obligations of 
     the Trust Fund. For the purposes of making such purchases, 
     the Secretary of the Treasury may use as a public debt 
     transaction the proceeds from the sale of any securities 
     issued under chapter 31 of title 31, United States Code, and 
     the purposes for which securities may be issued under such 
     chapter are extended to include any purchase of such Trust 
     Fund obligations under this subparagraph.
       (3) One-time appropriation.--There is hereby appropriated 
     to the Trust Fund an amount sufficient to pay to the general 
     fund of the Treasury the difference between--
       (A) the market value of the outstanding repayable advances, 
     plus accrued interest; and
       (B) the proceeds from the obligations issued by the Trust 
     Fund to the Secretary of the Treasury under paragraph 
     (2)(A)(i).
       (4) Prepayment of trust fund obligations.--The Trust Fund 
     is authorized to repay any obligation issued to the Secretary 
     of the Treasury under subparagraphs (A)(i) and (B) of 
     paragraph (2) prior to its maturity date by paying a 
     prepayment price that would, if the obligation being prepaid 
     (including all unpaid interest accrued thereon through the 
     date of prepayment) were purchased by a third party and held 
     to the maturity date of such obligation, produce a yield to 
     the third-party purchaser for the period from the date of 
     purchase to the maturity date of such obligation 
     substantially equal to the Treasury yield on outstanding 
     marketable obligations of the United States having a 
     comparable maturity to this period.

     SEC. 114. SPECIAL RULES FOR REFUND OF THE COAL EXCISE TAX TO 
                   CERTAIN COAL PRODUCERS AND EXPORTERS.

       (a) Refund.--
       (1) Coal producers.--
       (A) In general.--Notwithstanding subsections (a)(1) and (c) 
     of section 6416 and section 6511 of the Internal Revenue Code 
     of 1986, if--
       (i) a coal producer establishes that such coal producer, or 
     a party related to such coal producer, exported coal produced 
     by such coal producer to a foreign country or shipped coal 
     produced by such coal producer to a possession of the United 
     States, or caused such coal to be exported or shipped, the 
     export or shipment of which was other than through an 
     exporter who meets the requirements of paragraph (2),
       (ii) such coal producer filed an excise tax return on or 
     after October 1, 1990, and on or before the date of the 
     enactment of this Act, and
       (iii) such coal producer files a claim for refund with the 
     Secretary not later than the close of the 30-day period 
     beginning on the date of the enactment of this Act,

     then the Secretary shall pay to such coal producer an amount 
     equal to the tax paid under section 4121 of such Code on such 
     coal exported or shipped by the coal producer or a party 
     related to such coal producer, or caused by the coal producer 
     or a party related to such coal producer to be exported or 
     shipped.

[[Page 23042]]

       (B) Special rules for certain taxpayers.--For purposes of 
     this section--
       (i) In general.--If a coal producer or a party related to a 
     coal producer has received a judgment described in clause 
     (iii), such coal producer shall be deemed to have established 
     the export of coal to a foreign country or shipment of coal 
     to a possession of the United States under subparagraph 
     (A)(i).
       (ii) Amount of payment.--If a taxpayer described in clause 
     (i) is entitled to a payment under subparagraph (A), the 
     amount of such payment shall be reduced by any amount paid 
     pursuant to the judgment described in clause (iii).
       (iii) Judgment described.--A judgment is described in this 
     subparagraph if such judgment--

       (I) is made by a court of competent jurisdiction within the 
     United States,
       (II) relates to the constitutionality of any tax paid on 
     exported coal under section 4121 of the Internal Revenue Code 
     of 1986, and
       (III) is in favor of the coal producer or the party related 
     to the coal producer.

       (2) Exporters.--Notwithstanding subsections (a)(1) and (c) 
     of section 6416 and section 6511 of the Internal Revenue Code 
     of 1986, and a judgment described in paragraph (1)(B)(iii) of 
     this subsection, if--
       (A) an exporter establishes that such exporter exported 
     coal to a foreign country or shipped coal to a possession of 
     the United States, or caused such coal to be so exported or 
     shipped,
       (B) such exporter filed a tax return on or after October 1, 
     1990, and on or before the date of the enactment of this Act, 
     and
       (C) such exporter files a claim for refund with the 
     Secretary not later than the close of the 30-day period 
     beginning on the date of the enactment of this Act,

     then the Secretary shall pay to such exporter an amount equal 
     to $0.825 per ton of such coal exported by the exporter or 
     caused to be exported or shipped, or caused to be exported or 
     shipped, by the exporter.
       (b) Limitations.--Subsection (a) shall not apply with 
     respect to exported coal if a settlement with the Federal 
     Government has been made with and accepted by, the coal 
     producer, a party related to such coal producer, or the 
     exporter, of such coal, as of the date that the claim is 
     filed under this section with respect to such exported coal. 
     For purposes of this subsection, the term ``settlement with 
     the Federal Government'' shall not include any settlement or 
     stipulation entered into as of the date of the enactment of 
     this Act, the terms of which contemplate a judgment 
     concerning which any party has reserved the right to file an 
     appeal, or has filed an appeal.
       (c) Subsequent Refund Prohibited.--No refund shall be made 
     under this section to the extent that a credit or refund of 
     such tax on such exported or shipped coal has been paid to 
     any person.
       (d) Definitions.--For purposes of this section--
       (1) Coal producer.--The term ``coal producer'' means the 
     person in whom is vested ownership of the coal immediately 
     after the coal is severed from the ground, without regard to 
     the existence of any contractual arrangement for the sale or 
     other disposition of the coal or the payment of any royalties 
     between the producer and third parties. The term includes any 
     person who extracts coal from coal waste refuse piles or from 
     the silt waste product which results from the wet washing (or 
     similar processing) of coal.
       (2) Exporter.--The term ``exporter'' means a person, other 
     than a coal producer, who does not have a contract, fee 
     arrangement, or any other agreement with a producer or seller 
     of such coal to export or ship such coal to a third party on 
     behalf of the producer or seller of such coal and--
       (A) is indicated in the shipper's export declaration or 
     other documentation as the exporter of record, or
       (B) actually exported such coal to a foreign country or 
     shipped such coal to a possession of the United States, or 
     caused such coal to be so exported or shipped.
       (3) Related party.--The term ``a party related to such coal 
     producer'' means a person who--
       (A) is related to such coal producer through any degree of 
     common management, stock ownership, or voting control,
       (B) is related (within the meaning of section 144(a)(3) of 
     the Internal Revenue Code of 1986) to such coal producer, or
       (C) has a contract, fee arrangement, or any other agreement 
     with such coal producer to sell such coal to a third party on 
     behalf of such coal producer.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Treasury or the Secretary's designee.
       (e) Timing of Refund.--With respect to any claim for refund 
     filed pursuant to this section, the Secretary shall determine 
     whether the requirements of this section are met not later 
     than 180 days after such claim is filed. If the Secretary 
     determines that the requirements of this section are met, the 
     claim for refund shall be paid not later than 180 days after 
     the Secretary makes such determination.
       (f) Interest.--Any refund paid pursuant to this section 
     shall be paid by the Secretary with interest from the date of 
     overpayment determined by using the overpayment rate and 
     method under section 6621 of the Internal Revenue Code of 
     1986.
       (g) Denial of Double Benefit.--The payment under subsection 
     (a) with respect to any coal shall not exceed--
       (1) in the case of a payment to a coal producer, the amount 
     of tax paid under section 4121 of the Internal Revenue Code 
     of 1986 with respect to such coal by such coal producer or a 
     party related to such coal producer, and
       (2) in the case of a payment to an exporter, an amount 
     equal to $0.825 per ton with respect to such coal exported by 
     the exporter or caused to be exported by the exporter.
       (h) Application of Section.--This section applies only to 
     claims on coal exported or shipped on or after October 1, 
     1990, through the date of the enactment of this Act.
       (i) Standing Not Conferred.--
       (1) Exporters.--With respect to exporters, this section 
     shall not confer standing upon an exporter to commence, or 
     intervene in, any judicial or administrative proceeding 
     concerning a claim for refund by a coal producer of any 
     Federal or State tax, fee, or royalty paid by the coal 
     producer.
       (2) Coal producers.--With respect to coal producers, this 
     section shall not confer standing upon a coal producer to 
     commence, or intervene in, any judicial or administrative 
     proceeding concerning a claim for refund by an exporter of 
     any Federal or State tax, fee, or royalty paid by the 
     producer and alleged to have been passed on to an exporter.

     SEC. 115. TAX CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

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

     ``SEC. 45Q. CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

       ``(a) General Rule.--For purposes of section 38, the carbon 
     dioxide sequestration credit for any taxable year is an 
     amount equal to the sum of--
       ``(1) $20 per metric ton of qualified carbon dioxide which 
     is--
       ``(A) captured by the taxpayer at a qualified facility, and
       ``(B) disposed of by the taxpayer in secure geological 
     storage, and
       ``(2) $10 per metric ton of qualified carbon dioxide which 
     is--
       ``(A) captured by the taxpayer at a qualified facility, and
       ``(B) used by the taxpayer as a tertiary injectant in a 
     qualified enhanced oil or natural gas recovery project.
       ``(b) Qualified Carbon Dioxide.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified carbon dioxide' 
     means carbon dioxide captured from an industrial source 
     which--
       ``(A) would otherwise be released into the atmosphere as 
     industrial emission of greenhouse gas, and
       ``(B) is measured at the source of capture and verified at 
     the point of disposal or injection.
       ``(2) Recycled carbon dioxide.--The term `qualified carbon 
     dioxide' includes the initial deposit of captured carbon 
     dioxide used as a tertiary injectant. Such term does not 
     include carbon dioxide that is re-captured, recycled, and re-
     injected as part of the enhanced oil and natural gas recovery 
     process.
       ``(c) Qualified Facility.--For purposes of this section, 
     the term `qualified facility' means any industrial facility--
       ``(1) which is owned by the taxpayer,
       ``(2) at which carbon capture equipment is placed in 
     service, and
       ``(3) which captures not less than 500,000 metric tons of 
     carbon dioxide during the taxable year.
       ``(d) Special Rules and Other Definitions.--For purposes of 
     this section--
       ``(1) Only carbon dioxide captured and disposed of or used 
     within the united states taken into account.--The credit 
     under this section shall apply only with respect to qualified 
     carbon dioxide the capture and disposal or use of which is 
     within--
       ``(A) the United States (within the meaning of section 
     638(1)), or
       ``(B) a possession of the United States (within the meaning 
     of section 638(2)).
       ``(2) Secure geological storage.--The Secretary, in 
     consultation with the Administrator of the Environmental 
     Protection Agency, shall establish regulations for 
     determining adequate security measures for the geological 
     storage of carbon dioxide under subsection (a)(1)(B) such 
     that the carbon dioxide does not escape into the atmosphere. 
     Such term shall include storage at deep saline formations and 
     unminable coal seems under such conditions as the Secretary 
     may determine under such regulations.
       ``(3) Tertiary injectant.--The term `tertiary injectant' 
     has the same meaning as when used within section 193(b)(1).
       ``(4) Qualified enhanced oil or natural gas recovery 
     project.--The term `qualified enhanced oil or natural gas 
     recovery project' has the meaning given the term `qualified 
     enhanced oil recovery project' by section 43(c)(2), by 
     substituting `crude oil or natural gas' for `crude oil' in 
     subparagraph (A)(i) thereof.
       ``(5) Credit attributable to taxpayer.--Any credit under 
     this section shall be attributable to the person that 
     captures and physically or contractually ensures the disposal 
     of or the use as a tertiary injectant of the qualified carbon 
     dioxide, except to the extent provided in regulations 
     prescribed by the Secretary.
       ``(6) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any qualified carbon 
     dioxide which ceases to be captured, disposed of, or used as 
     a

[[Page 23043]]

     tertiary injectant in a manner consistent with the 
     requirements of this section.
       ``(7) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2009, there shall be 
     substituted for each dollar amount contained in subsection 
     (a) an amount equal to the product of--
       ``(A) such dollar amount, multiplied by
       ``(B) the inflation adjustment factor for such calendar 
     year determined under section 43(b)(3)(B) for such calendar 
     year, determined by substituting `2008' for `1990'.
       ``(e) Application of Section.--The credit under this 
     section shall apply with respect to qualified carbon dioxide 
     before the end of the calendar year in which the Secretary, 
     in consultation with the Administrator of the Environmental 
     Protection Agency, certifies that 75,000,000 metric tons of 
     qualified carbon dioxide have been captured and disposed of 
     or used as a tertiary injectant.''.
       (b) Conforming Amendment.--Section 38(b) (relating to 
     general business credit) is amended by striking ``plus'' at 
     the end of paragraph (32), by striking the period at the end 
     of paragraph (33) and inserting ``, plus'', and by adding at 
     the end of following new paragraph:
       ``(34) the carbon dioxide sequestration credit determined 
     under section 45Q(a).''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part IV of subchapter A of chapter 1 (relating to other 
     credits) is amended by adding at the end the following new 
     section:

``Sec. 45Q. Credit for carbon dioxide sequestration.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to carbon dioxide captured after the date of the 
     enactment of this Act.

     SEC. 116. CERTAIN INCOME AND GAINS RELATING TO INDUSTRIAL 
                   SOURCE CARBON DIOXIDE TREATED AS QUALIFYING 
                   INCOME FOR PUBLICLY TRADED PARTNERSHIPS.

       (a) In General.--Subparagraph (E) of section 7704(d)(1) 
     (defining qualifying income) is amended by inserting ``or 
     industrial source carbon dioxide'' after ``timber)''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act, 
     in taxable years ending after such date.

     SEC. 117. CARBON AUDIT OF THE TAX CODE.

       (a) Study.--The Secretary of the Treasury shall enter into 
     an agreement with the National Academy of Sciences to 
     undertake a comprehensive review of the Internal Revenue Code 
     of 1986 to identify the types of and specific tax provisions 
     that have the largest effects on carbon and other greenhouse 
     gas emissions and to estimate the magnitude of those effects.
       (b) Report.--Not later than 2 years after the date of 
     enactment of this Act, the National Academy of Sciences shall 
     submit to Congress a report containing the results of study 
     authorized under this section.
       (c) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $1,500,000 for 
     the period of fiscal years 2009 and 2010.

     TITLE II--TRANSPORTATION AND DOMESTIC FUEL SECURITY PROVISIONS

     SEC. 201. INCLUSION OF CELLULOSIC BIOFUEL IN BONUS 
                   DEPRECIATION FOR BIOMASS ETHANOL PLANT 
                   PROPERTY.

       (a) In General.--Paragraph (3) of section 168(l) is amended 
     to read as follows:
       ``(3) Cellulosic biofuel.--The term `cellulosic biofuel' 
     means any liquid fuel which is produced from any 
     lignocellulosic or hemicellulosic matter that is available on 
     a renewable or recurring basis.''.
       (b) Conforming Amendments.--Subsection (l) of section 168 
     is amended--
       (1) by striking ``cellulosic biomass ethanol'' each place 
     it appears and inserting ``cellulosic biofuel'',
       (2) by striking ``Cellulosic Biomass Ethanol'' in the 
     heading of such subsection and inserting ``Cellulosic 
     Biofuel'', and
       (3) by striking ``cellulosic biomass ethanol'' in the 
     heading of paragraph (2) thereof and inserting ``cellulosic 
     biofuel''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 202. CREDITS FOR BIODIESEL AND RENEWABLE DIESEL.

       (a) In General.--Sections 40A(g), 6426(c)(6), and 
     6427(e)(5)(B) are each amended by striking ``December 31, 
     2008'' and inserting ``December 31, 2009''.
       (b) Increase in Rate of Credit.--
       (1) Income tax credit.--Paragraphs (1)(A) and (2)(A) of 
     section 40A(b) are each amended by striking ``50 cents'' and 
     inserting ``$1.00''.
       (2) Excise tax credit.--Paragraph (2) of section 6426(c) is 
     amended to read as follows:
       ``(2) Applicable amount.--For purposes of this subsection, 
     the applicable amount is $1.00.''.
       (3) Conforming amendments.--
       (A) Subsection (b) of section 40A is amended by striking 
     paragraph (3) and by redesignating paragraphs (4) and (5) as 
     paragraphs (3) and (4), respectively.
       (B) Paragraph (2) of section 40A(f) is amended to read as 
     follows:
       ``(2) Exception.--Subsection (b)(4) shall not apply with 
     respect to renewable diesel.''.
       (C) Paragraphs (2) and (3) of section 40A(e) are each 
     amended by striking ``subsection (b)(5)(C)'' and inserting 
     ``subsection (b)(4)(C)''.
       (D) Clause (ii) of section 40A(d)(3)(C) is amended by 
     striking ``subsection (b)(5)(B)'' and inserting ``subsection 
     (b)(4)(B)''.
       (c) Uniform Treatment of Diesel Produced From Biomass.--
     Paragraph (3) of section 40A(f) is amended--
       (1) by striking ``diesel fuel'' and inserting ``liquid 
     fuel'',
       (2) by striking ``using a thermal depolymerization 
     process'', and
       (3) by inserting ``, or other equivalent standard approved 
     by the Secretary'' after ``D396''.
       (d) Coproduction of Renewable Diesel With Petroleum 
     Feedstock.--
       (1) In general.--Paragraph (3) of section 40A(f) is amended 
     by adding at the end the following new sentences: ``Such term 
     does not include any fuel derived from coprocessing biomass 
     with a feedstock which is not biomass. For purposes of this 
     paragraph, the term `biomass' has the meaning given such term 
     by section 45K(c)(3).''.
       (2) Conforming amendment.--Paragraph (3) of section 40A(f) 
     is amended by striking ``(as defined in section 45K(c)(3))''.
       (e) Eligibility of Certain Aviation Fuel.--Subsection (f) 
     of section 40A (relating to renewable diesel) is amended by 
     adding at the end the following new paragraph:
       ``(4) Certain aviation fuel.--
       ``(A) In general.--Except as provided in the last 3 
     sentences of paragraph (3), the term `renewable diesel' shall 
     include fuel derived from biomass which meets the 
     requirements of a Department of Defense specification for 
     military jet fuel or an American Society of Testing and 
     Materials specification for aviation turbine fuel.
       ``(B) Application of mixture credits.--In the case of fuel 
     which is treated as renewable diesel solely by reason of 
     subparagraph (A), subsection (b)(1) and section 6426(c) shall 
     be applied with respect to such fuel by treating kerosene as 
     though it were diesel fuel.''.
       (f) Modification Relating to Definition of Agri-
     Biodiesel.--Paragraph (2) of section 40A(d) (relating to 
     agri-biodiesel) is amended by striking ``and mustard seeds'' 
     and inserting ``mustard seeds, and camelina''.
       (g) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to fuel produced, and sold or used, after December 31, 2008.
       (2) Coproduction of renewable diesel with petroleum 
     feedstock.--The amendment made by subsection (d) shall apply 
     to fuel produced, and sold or used, after the date of the 
     enactment of this Act.

     SEC. 203. CLARIFICATION THAT CREDITS FOR FUEL ARE DESIGNED TO 
                   PROVIDE AN INCENTIVE FOR UNITED STATES 
                   PRODUCTION.

       (a) Alcohol Fuels Credit.--Subsection (d) of section 40 is 
     amended by adding at the end the following new paragraph:
       ``(7) Limitation to alcohol with connection to the united 
     states.--No credit shall be determined under this section 
     with respect to any alcohol which is produced outside the 
     United States for use as a fuel outside the United States. 
     For purposes of this paragraph, the term `United States' 
     includes any possession of the United States.''.
       (b) Biodiesel Fuels Credit.--Subsection (d) of section 40A 
     is amended by adding at the end the following new paragraph:
       ``(5) Limitation to biodiesel with connection to the united 
     states.--No credit shall be determined under this section 
     with respect to any biodiesel which is produced outside the 
     United States for use as a fuel outside the United States. 
     For purposes of this paragraph, the term `United States' 
     includes any possession of the United States.''.
       (c) Excise Tax Credit.--
       (1) In general.--Section 6426 is amended by adding at the 
     end the following new subsection:
       ``(i) Limitation to Fuels With Connection to the United 
     States.--
       ``(1) Alcohol.--No credit shall be determined under this 
     section with respect to any alcohol which is produced outside 
     the United States for use as a fuel outside the United 
     States.
       ``(2) Biodiesel and alternative fuels.--No credit shall be 
     determined under this section with respect to any biodiesel 
     or alternative fuel which is produced outside the United 
     States for use as a fuel outside the United States.

     For purposes of this subsection, the term `United States' 
     includes any possession of the United States.''.
       (2) Conforming amendment.--Subsection (e) of section 6427 
     is amended by redesignating paragraph (5) as paragraph (6) 
     and by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) Limitation to fuels with connection to the united 
     states.--No amount shall be payable under paragraph (1) or 
     (2) with respect to any mixture or alternative fuel if credit 
     is not allowed with respect to such mixture or alternative 
     fuel by reason of section 6426(i).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to claims for credit or payment made on or after 
     May 15, 2008.

     SEC. 204. EXTENSION AND MODIFICATION OF ALTERNATIVE FUEL 
                   CREDIT.

       (a) Extension.--
       (1) Alternative fuel credit.--Paragraph (4) of section 
     6426(d) (relating to alternative fuel credit) is amended by 
     striking ``September 30, 2009'' and inserting ``December 31, 
     2009''.
       (2) Alternative fuel mixture credit.--Paragraph (3) of 
     section 6426(e) (relating to alternative fuel mixture credit) 
     is amended by striking ``September 30, 2009'' and inserting 
     ``December 31, 2009''.
       (3) Payments.--Subparagraph (C) of section 6427(e)(5) 
     (relating to termination) is amended

[[Page 23044]]

     by striking ``September 30, 2009'' and inserting ``December 
     31, 2009''.
       (b) Modifications.--
       (1) Alternative fuel to include compressed or liquified 
     biomass gas.--Paragraph (2) of section 6426(d) (relating to 
     alternative fuel credit) is amended by striking ``and'' at 
     the end of subparagraph (E), by redesignating subparagraph 
     (F) as subparagraph (G), and by inserting after subparagraph 
     (E) the following new subparagraph:
       ``(F) compressed or liquefied gas derived from biomass (as 
     defined in section 45K(c)(3)), and''.
       (2) Credit allowed for aviation use of fuel.--Paragraph (1) 
     of section 6426(d) is amended by inserting ``sold by the 
     taxpayer for use as a fuel in aviation,'' after 
     ``motorboat,''.
       (c) Carbon Capture Requirement for Certain Fuels.--
       (1) In general.--Subsection (d) of section 6426, as amended 
     by subsection (a), is amended by redesignating paragraph (4) 
     as paragraph (5) and by inserting after paragraph (3) the 
     following new paragraph:
       ``(4) Carbon capture requirement.--
       ``(A) In general.--The requirements of this paragraph are 
     met if the fuel is certified, under such procedures as 
     required by the Secretary, as having been derived from coal 
     produced at a gasification facility which separates and 
     sequesters not less than the applicable percentage of such 
     facility's total carbon dioxide emissions.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage is--
       ``(i) 50 percent in the case of fuel produced after 
     September 30, 2009, and on or before December 30, 2009, and
       ``(ii) 75 percent in the case of fuel produced after 
     December 30, 2009.''.
       (2) Conforming amendment.--Subparagraph (E) of section 
     6426(d)(2) is amended by inserting ``which meets the 
     requirements of paragraph (4) and which is'' after ``any 
     liquid fuel''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to fuel sold or used after the date of the 
     enactment of this Act.

     SEC. 205. CREDIT FOR NEW QUALIFIED PLUG-IN ELECTRIC DRIVE 
                   MOTOR VEHICLES.

       (a) Plug-in Electric Drive Motor Vehicle Credit.--Subpart B 
     of part IV of subchapter A of chapter 1 (relating to other 
     credits) is amended by adding at the end the following new 
     section:

     ``SEC. 30D. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR 
                   VEHICLES.

       ``(a) Allowance of Credit.--
       ``(1) In general.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     an amount equal to the applicable amount with respect to each 
     new qualified plug-in electric drive motor vehicle placed in 
     service by the taxpayer during the taxable year.
       ``(2) Applicable amount.--For purposes of paragraph (1), 
     the applicable amount is sum of--
       ``(A) $2,500, plus
       ``(B) $417 for each kilowatt hour of traction battery 
     capacity in excess of 4 kilowatt hours.
       ``(b) Limitations.--
       ``(1) Limitation based on weight.--The amount of the credit 
     allowed under subsection (a) by reason of subsection (a)(2) 
     shall not exceed--
       ``(A) $7,500, in the case of any new qualified plug-in 
     electric drive motor vehicle with a gross vehicle weight 
     rating of not more than 10,000 pounds,
       ``(B) $10,000, in the case of any new qualified plug-in 
     electric drive motor vehicle with a gross vehicle weight 
     rating of more than 10,000 pounds but not more than 14,000 
     pounds,
       ``(C) $12,500, in the case of any new qualified plug-in 
     electric drive motor vehicle with a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $15,000, in the case of any new qualified plug-in 
     electric drive motor vehicle with a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(2) Limitation on number of passenger vehicles and light 
     trucks eligible for credit.--
       ``(A) In general.--In the case of a new qualified plug-in 
     electric drive motor vehicle sold during the phaseout period, 
     only the applicable percentage of the credit otherwise 
     allowable under subsection (a) shall be allowed.
       ``(B) Phaseout period.--For purposes of this subsection, 
     the phaseout period is the period beginning with the second 
     calendar quarter following the calendar quarter which 
     includes the first date on which the total number of such new 
     qualified plug-in electric drive motor vehicles sold for use 
     in the United States after December 31, 2008, is at least 
     250,000.
       ``(C) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage is--
       ``(i) 50 percent for the first 2 calendar quarters of the 
     phaseout period,
       ``(ii) 25 percent for the 3d and 4th calendar quarters of 
     the phaseout period, and
       ``(iii) 0 percent for each calendar quarter thereafter.
       ``(D) Controlled groups.--Rules similar to the rules of 
     section 30B(f)(4) shall apply for purposes of this 
     subsection.
       ``(c) New Qualified Plug-in Electric Drive Motor Vehicle.--
     For purposes of this section, the term `new qualified plug-in 
     electric drive motor vehicle' means a motor vehicle--
       ``(1) which draws propulsion using a traction battery with 
     at least 4 kilowatt hours of capacity,
       ``(2) which uses an offboard source of energy to recharge 
     such battery,
       ``(3) which, in the case of a passenger vehicle or light 
     truck which has a gross vehicle weight rating of not more 
     than 8,500 pounds, has received a certificate of conformity 
     under the Clean Air Act and meets or exceeds the equivalent 
     qualifying California low emission vehicle standard under 
     section 243(e)(2) of the Clean Air Act for that make and 
     model year, and
       ``(A) in the case of a vehicle having a gross vehicle 
     weight rating of 6,000 pounds or less, the Bin 5 Tier II 
     emission standard established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle, and
       ``(B) in the case of a vehicle having a gross vehicle 
     weight rating of more than 6,000 pounds but not more than 
     8,500 pounds, the Bin 8 Tier II emission standard which is so 
     established,
       ``(4) the original use of which commences with the 
     taxpayer,
       ``(5) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(6) which is made by a manufacturer.
       ``(d) Application With Other Credits.--
       ``(1) Business credit treated as part of general business 
     credit.--So much of the credit which would be allowed under 
     subsection (a) for any taxable year (determined without 
     regard to this subsection) that is attributable to property 
     of a character subject to an allowance for depreciation shall 
     be treated as a credit listed in section 38(b) for such 
     taxable year (and not allowed under subsection (a)).
       ``(2) Personal credit.--
       ``(A) In general.--For purposes of this title, the credit 
     allowed under subsection (a) for any taxable year (determined 
     after application of paragraph (1)) shall be treated as a 
     credit allowable under subpart A for such taxable year.
       ``(B) 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 
     (determined after application of paragraph (1)) shall not 
     exceed the excess of--
       ``(i) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(ii) the sum of the credits allowable under subpart A 
     (other than this section and sections 23 and 25D) and section 
     27 for the taxable year.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Motor vehicle.--The term `motor vehicle' has the 
     meaning given such term by section 30(c)(2).
       ``(2) Other terms.--The terms `passenger automobile', 
     `light truck', and `manufacturer' have the meanings given 
     such terms in regulations prescribed by the Administrator of 
     the Environmental Protection Agency for purposes of the 
     administration of title II of the Clean Air Act (42 U.S.C. 
     7521 et seq.).
       ``(3) Traction battery capacity.--Traction battery capacity 
     shall be measured in kilowatt hours from a 100 percent state 
     of charge to a zero percent state of charge.
       ``(4) Reduction in basis.--For purposes of this subtitle, 
     the basis of any property for which a credit is allowable 
     under subsection (a) shall be reduced by the amount of such 
     credit so allowed.
       ``(5) No double benefit.--The amount of any deduction or 
     other credit allowable under this chapter for a new qualified 
     plug-in electric drive motor vehicle shall be reduced by the 
     amount of credit allowed under subsection (a) for such 
     vehicle for the taxable year.
       ``(6) Property used by tax-exempt entity.--In the case of a 
     vehicle the use of which is described in paragraph (3) or (4) 
     of section 50(b) and which is not subject to a lease, the 
     person who sold such vehicle to the person or entity using 
     such vehicle shall be treated as the taxpayer that placed 
     such vehicle in service, but only if such person clearly 
     discloses to such person or entity in a document the amount 
     of any credit allowable under subsection (a) with respect to 
     such vehicle (determined without regard to subsection 
     (b)(2)).
       ``(7) Property used outside united states, etc., not 
     qualified.--No credit shall be allowable under subsection (a) 
     with respect to any property referred to in section 50(b)(1) 
     or with respect to the portion of the cost of any property 
     taken into account under section 179.
       ``(8) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property which 
     ceases to be property eligible for such credit (including 
     recapture in the case of a lease period of less than the 
     economic life of a vehicle).
       ``(9) Election to not take credit.--No credit shall be 
     allowed under subsection (a) for any vehicle if the taxpayer 
     elects not to have this section apply to such vehicle.
       ``(10) Interaction with air quality and motor vehicle 
     safety standards.--Unless otherwise provided in this section, 
     a motor vehicle shall not be considered eligible for a credit 
     under this section unless such vehicle is in compliance 
     with--
       ``(A) the applicable provisions of the Clean Air Act for 
     the applicable make and model year of the vehicle (or 
     applicable air quality provisions of State law in the case of 
     a State which has adopted such provision under a waiver under 
     section 209(b) of the Clean Air Act), and
       ``(B) the motor vehicle safety provisions of sections 30101 
     through 30169 of title 49, United States Code.
       ``(f) Regulations.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall promulgate such

[[Page 23045]]

     regulations as necessary to carry out the provisions of this 
     section.
       ``(2) Coordination in prescription of certain 
     regulations.--The Secretary of the Treasury, in coordination 
     with the Secretary of Transportation and the Administrator of 
     the Environmental Protection Agency, shall prescribe such 
     regulations as necessary to determine whether a motor vehicle 
     meets the requirements to be eligible for a credit under this 
     section.
       ``(g) Termination.--This section shall not apply to 
     property purchased after December 31, 2014.''.
       (b) Coordination With Alternative Motor Vehicle Credit.--
     Section 30B(d)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(D) Exclusion of plug-in vehicles.--Any vehicle with 
     respect to which a credit is allowable under section 30D 
     (determined without regard to subsection (d) thereof) shall 
     not be taken into account under this section.''.
       (c) Credit Made Part of General Business Credit.--Section 
     38(b), as amended by this Act, is amended by striking 
     ``plus'' at the end of paragraph (33), by striking the period 
     at the end of paragraph (34) and inserting ``plus'', and by 
     adding at the end the following new paragraph:
       ``(35) the portion of the new qualified plug-in electric 
     drive motor vehicle credit to which section 30D(d)(1) 
     applies.''.
       (d) Conforming Amendments.--
       (1)(A) Section 24(b)(3)(B), as amended by section 106, is 
     amended by striking ``and 25D'' and inserting ``25D, and 
     30D''.
       (B) Section 25(e)(1)(C)(ii) is amended by inserting 
     ``30D,'' after ``25D,''.
       (C) Section 25B(g)(2), as amended by section 106, is 
     amended by striking ``and 25D'' and inserting ``, 25D, and 
     30D''.
       (D) Section 26(a)(1), as amended by section 106, is amended 
     by striking ``and 25D'' and inserting ``25D, and 30D''.
       (E) Section 1400C(d)(2) is amended by striking ``and 25D'' 
     and inserting ``25D, and 30D''.
       (2) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (35), by striking the period at the end of 
     paragraph (36) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(37) to the extent provided in section 30D(e)(4).''.
       (3) Section 6501(m) is amended by inserting ``30D(e)(9),'' 
     after ``30C(e)(5),''.
       (4) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 30D. New qualified plug-in electric drive motor vehicles.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.
       (f) Application of EGTRRA Sunset.--The amendment made by 
     subsection (d)(1)(A) shall be subject to title IX of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 in 
     the same manner as the provision of such Act to which such 
     amendment relates.

     SEC. 206. EXCLUSION FROM HEAVY TRUCK TAX FOR IDLING REDUCTION 
                   UNITS AND ADVANCED INSULATION.

       (a) In General.--Section 4053 is amended by adding at the 
     end the following new paragraphs:
       ``(9) Idling reduction device.--Any device or system of 
     devices which--
       ``(A) is designed to provide to a vehicle those services 
     (such as heat, air conditioning, or electricity) that would 
     otherwise require the operation of the main drive engine 
     while the vehicle is temporarily parked or remains stationary 
     using one or more devices affixed to a tractor, and
       ``(B) is determined by the Administrator of the 
     Environmental Protection Agency, in consultation with the 
     Secretary of Energy and the Secretary of Transportation, to 
     reduce idling of such vehicle at a motor vehicle rest stop or 
     other location where such vehicles are temporarily parked or 
     remain stationary.
       ``(10) Advanced insulation.--Any insulation that has an R 
     value of not less than R35 per inch.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales or installations after the date of the 
     enactment of this Act.

     SEC. 207. ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY CREDIT.

       (a) Extension of Credit.--Paragraph (2) of section 30C(g) 
     is amended by striking ``December 31, 2009'' and inserting 
     ``December 31, 2010''.
       (b) Inclusion of Electricity as a Clean-Burning Fuel.--
     Section 30C(c)(2) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Electricity.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 208. CERTAIN INCOME AND GAINS RELATING TO ALCOHOL FUELS 
                   AND MIXTURES, BIODIESEL FUELS AND MIXTURES, AND 
                   ALTERNATIVE FUELS AND MIXTURES TREATED AS 
                   QUALIFYING INCOME FOR PUBLICLY TRADED 
                   PARTNERSHIPS.

       (a) In General.--Subparagraph (E) of section 7704(d)(1), as 
     amended by this Act, is amended by striking ``or industrial 
     source carbon dioxide'' and inserting ``, industrial source 
     carbon dioxide, or the transportation or storage of any fuel 
     described in subsection (b), (c), (d), or (e) of section 
     6426, or any alcohol fuel defined in section 6426(b)(4)(A) or 
     any biodiesel fuel as defined in section 40A(d)(1)'' after 
     ``timber)''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act, 
     in taxable years ending after such date.

     SEC. 209. EXTENSION AND MODIFICATION OF ELECTION TO EXPENSE 
                   CERTAIN REFINERIES.

       (a) Extension.--Paragraph (1) of section 179C(c) (relating 
     to qualified refinery property) is amended--
       (1) by striking ``January 1, 2012'' in subparagraph (B) and 
     inserting ``January 1, 2014'', and
       (2) by striking ``January 1, 2008'' each place it appears 
     in subparagraph (F) and inserting ``January 1, 2010''.
       (b) Inclusion of Fuel Derived From Shale and Tar Sands.--
       (1) In general.--Subsection (d) of section 179C is amended 
     by inserting ``, or directly from shale or tar sands'' after 
     ``(as defined in section 45K(c))''.
       (2) Conforming amendment.--Paragraph (2) of section 179C(e) 
     is amended by inserting ``shale, tar sands, or'' before 
     ``qualified fuels''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 210. EXTENSION OF SUSPENSION OF TAXABLE INCOME LIMIT ON 
                   PERCENTAGE DEPLETION FOR OIL AND NATURAL GAS 
                   PRODUCED FROM MARGINAL PROPERTIES.

       Subparagraph (H) of section 613A(c)(6) (relating to oil and 
     gas produced from marginal properties) is amended by striking 
     ``for any taxable year'' and all that follows and inserting 
     ``for any taxable year--
       ``(i) beginning after December 31, 1997, and before January 
     1, 2008, or
       ``(ii) beginning after December 31, 2008, and before 
     January 1, 2010.''.

     SEC. 211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE COMMUTERS.

       (a) In General.--Paragraph (1) of section 132(f) is amended 
     by adding at the end the following:
       ``(D) Any qualified bicycle commuting reimbursement.''.
       (b) Limitation on Exclusion.--Paragraph (2) of section 
     132(f) is amended by striking ``and'' at the end of 
     subparagraph (A), by striking the period at the end of 
     subparagraph (B) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(C) the applicable annual limitation in the case of any 
     qualified bicycle commuting reimbursement.''.
       (c) Definitions.--Paragraph (5) of section 132(f) is 
     amended by adding at the end the following:
       ``(F) Definitions related to bicycle commuting 
     reimbursement.--
       ``(i) Qualified bicycle commuting reimbursement.--The term 
     `qualified bicycle commuting reimbursement' means, with 
     respect to any calendar year, any employer reimbursement 
     during the 15-month period beginning with the first day of 
     such calendar year for reasonable expenses incurred by the 
     employee during such calendar year for the purchase of a 
     bicycle and bicycle improvements, repair, and storage, if 
     such bicycle is regularly used for travel between the 
     employee's residence and place of employment.
       ``(ii) Applicable annual limitation.--The term `applicable 
     annual limitation' means, with respect to any employee for 
     any calendar year, the product of $20 multiplied by the 
     number of qualified bicycle commuting months during such 
     year.
       ``(iii) Qualified bicycle commuting month.--The term 
     `qualified bicycle commuting month' means, with respect to 
     any employee, any month during which such employee--

       ``(I) regularly uses the bicycle for a substantial portion 
     of the travel between the employee's residence and place of 
     employment, and
       ``(II) does not receive any benefit described in 
     subparagraph (A), (B), or (C) of paragraph (1).''.

       (d) Constructive Receipt of Benefit.--Paragraph (4) of 
     section 132(f) is amended by inserting ``(other than a 
     qualified bicycle commuting reimbursement)'' after 
     ``qualified transportation fringe''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

        TITLE III--ENERGY CONSERVATION AND EFFICIENCY PROVISIONS

     SEC. 301. QUALIFIED ENERGY CONSERVATION BONDS.

       (a) In General.--Subpart I of part IV of subchapter A of 
     chapter 1, as amended by section 107, is amended by adding at 
     the end the following new section:

     ``SEC. 54D. QUALIFIED ENERGY CONSERVATION BONDS.

       ``(a) Qualified Energy Conservation Bond.--For purposes of 
     this subchapter, the term `qualified energy conservation 
     bond' means any bond issued as part of an issue if--
       ``(1) 100 percent of the available project proceeds of such 
     issue are to be used for one or more qualified conservation 
     purposes,
       ``(2) the bond is issued by a State or local government, 
     and
       ``(3) the issuer designates such bond for purposes of this 
     section.
       ``(b) Reduced Credit Amount.--The annual credit determined 
     under section 54A(b) with respect to any qualified energy 
     conservation bond shall be 70 percent of the amount so 
     determined without regard to this subsection.
       ``(c) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount

[[Page 23046]]

     of bonds which may be designated under subsection (a) by any 
     issuer shall not exceed the limitation amount allocated to 
     such issuer under subsection (e).
       ``(d) National Limitation on Amount of Bonds Designated.--
     There is a national qualified energy conservation bond 
     limitation of $800,000,000.
       ``(e) Allocations.--
       ``(1) In general.--The limitation applicable under 
     subsection (d) shall be allocated by the Secretary among the 
     States in proportion to the population of the States.
       ``(2) Allocations to largest local governments.--
       ``(A) In general.--In the case of any State in which there 
     is a large local government, each such local government shall 
     be allocated a portion of such State's allocation which bears 
     the same ratio to the State's allocation (determined without 
     regard to this subparagraph) as the population of such large 
     local government bears to the population of such State.
       ``(B) Allocation of unused limitation to state.--The amount 
     allocated under this subsection to a large local government 
     may be reallocated by such local government to the State in 
     which such local government is located.
       ``(C) Large local government.--For purposes of this 
     section, the term `large local government' means any 
     municipality or county if such municipality or county has a 
     population of 100,000 or more.
       ``(3) Allocation to issuers; restriction on private 
     activity bonds.--Any allocation under this subsection to a 
     State or large local government shall be allocated by such 
     State or large local government to issuers within the State 
     in a manner that results in not less than 70 percent of the 
     allocation to such State or large local government being used 
     to designate bonds which are not private activity bonds.
       ``(f) Qualified Conservation Purpose.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified conservation 
     purpose' means any of the following:
       ``(A) Capital expenditures incurred for purposes of--
       ``(i) reducing energy consumption in publicly-owned 
     buildings by at least 20 percent,
       ``(ii) implementing green community programs,
       ``(iii) rural development involving the production of 
     electricity from renewable energy resources, or
       ``(iv) any qualified facility (as determined under section 
     45(d) without regard to paragraphs (8) and (10) thereof and 
     without regard to any placed in service date).
       ``(B) Expenditures with respect to research facilities, and 
     research grants, to support research in--
       ``(i) development of cellulosic ethanol or other nonfossil 
     fuels,
       ``(ii) technologies for the capture and sequestration of 
     carbon dioxide produced through the use of fossil fuels,
       ``(iii) increasing the efficiency of existing technologies 
     for producing nonfossil fuels,
       ``(iv) automobile battery technologies and other 
     technologies to reduce fossil fuel consumption in 
     transportation, or
       ``(v) technologies to reduce energy use in buildings.
       ``(C) Mass commuting facilities and related facilities that 
     reduce the consumption of energy, including expenditures to 
     reduce pollution from vehicles used for mass commuting.
       ``(D) Demonstration projects designed to promote the 
     commercialization of--
       ``(i) green building technology,
       ``(ii) conversion of agricultural waste for use in the 
     production of fuel or otherwise,
       ``(iii) advanced battery manufacturing technologies,
       ``(iv) technologies to reduce peak use of electricity, or
       ``(v) technologies for the capture and sequestration of 
     carbon dioxide emitted from combusting fossil fuels in order 
     to produce electricity.
       ``(E) Public education campaigns to promote energy 
     efficiency.
       ``(2) Special rules for private activity bonds.--For 
     purposes of this section, in the case of any private activity 
     bond, the term `qualified conservation purposes' shall not 
     include any expenditure which is not a capital expenditure.
       ``(g) Population.--
       ``(1) In general.--The population of any State or local 
     government shall be determined for purposes of this section 
     as provided in section 146(j) for the calendar year which 
     includes the date of the enactment of this section.
       ``(2) Special rule for counties.--In determining the 
     population of any county for purposes of this section, any 
     population of such county which is taken into account in 
     determining the population of any municipality which is a 
     large local government shall not be taken into account in 
     determining the population of such county.
       ``(h) Application to Indian Tribal Governments.--An Indian 
     tribal government shall be treated for purposes of this 
     section in the same manner as a large local government, 
     except that--
       ``(1) an Indian tribal government shall be treated for 
     purposes of subsection (e) as located within a State to the 
     extent of so much of the population of such government as 
     resides within such State, and
       ``(2) any bond issued by an Indian tribal government shall 
     be treated as a qualified energy conservation bond only if 
     issued as part of an issue the available project proceeds of 
     which are used for purposes for which such Indian tribal 
     government could issue bonds to which section 103(a) 
     applies.''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 54A(d), as amended by this 
     Act, is amended to read as follows:
       ``(1) Qualified tax credit bond.--The term `qualified tax 
     credit bond' means--
       ``(A) a qualified forestry conservation bond,
       ``(B) a new clean renewable energy bond, or
       ``(C) a qualified energy conservation bond,
     which is part of an issue that meets requirements of 
     paragraphs (2), (3), (4), (5), and (6).''.
       (2) Subparagraph (C) of section 54A(d)(2), as amended by 
     this Act, is amended to read as follows:
       ``(C) Qualified purpose.--For purposes of this paragraph, 
     the term `qualified purpose' means--
       ``(i) in the case of a qualified forestry conservation 
     bond, a purpose specified in section 54B(e),
       ``(ii) in the case of a new clean renewable energy bond, a 
     purpose specified in section 54C(a)(1), and
       ``(iii) in the case of a qualified energy conservation 
     bond, a purpose specified in section 54D(a)(1).''.
       (3) The table of sections for subpart I of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by adding at the end the following new item:

``Sec. 54D. Qualified energy conservation bonds.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 302. CREDIT FOR NONBUSINESS ENERGY PROPERTY.

       (a) Extension of Credit.--Section 25C(g) is amended by 
     striking ``placed in service after December 31, 2007'' and 
     inserting ``placed in service--
       ``(1) after December 31, 2007, and before January 1, 2009, 
     or
       ``(2) after December 31, 2009.''.
       (b) Qualified Biomass Fuel Property.--
       (1) In general.--Section 25C(d)(3) is amended--
       (A) by striking ``and'' at the end of subparagraph (D),
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``, and'', and
       (C) by adding at the end the following new subparagraph:
       ``(F) a stove which uses the burning of biomass fuel to 
     heat a dwelling unit located in the United States and used as 
     a residence by the taxpayer, or to heat water for use in such 
     a dwelling unit, and which has a thermal efficiency rating of 
     at least 75 percent.''.
       (2) Biomass fuel.--Section 25C(d) is amended by adding at 
     the end the following new paragraph:
       ``(6) Biomass fuel.--The term `biomass fuel' means any 
     plant-derived fuel available on a renewable or recurring 
     basis, including agricultural crops and trees, wood and wood 
     waste and residues (including wood pellets), plants 
     (including aquatic plants), grasses, residues, and fibers.''.
       (c) Modification of Water Heater Requirements.--Section 
     25C(d)(3)(E) is amended by inserting ``or a thermal 
     efficiency of at least 90 percent'' after ``0.80''.
       (d) Coordination With Credit for Qualified Geothermal Heat 
     pump Property Expenditures.--
       (1) In general.--Paragraph (3) of section 25C(d), as 
     amended by subsections (b) and (c), is amended by striking 
     subparagraph (C) and by redesignating subparagraphs (D), (E), 
     and (F) as subparagraphs (C), (D), and (E), respectively.
       (2) Conforming amendment.--Subparagraph (C) of section 
     25C(d)(2) is amended to read as follows:
       ``(C) Requirements and standards for air conditioners and 
     heat pumps.--The standards and requirements prescribed by the 
     Secretary under subparagraph (B) with respect to the energy 
     efficiency ratio (EER) for central air conditioners and 
     electric heat pumps--
       ``(i) shall require measurements to be based on published 
     data which is tested by manufacturers at 95 degrees 
     Fahrenheit, and
       ``(ii) may be based on the certified data of the Air 
     Conditioning and Refrigeration Institute that are prepared in 
     partnership with the Consortium for Energy Efficiency.''.
       (e) Modification of Qualified Energy Efficiency 
     Improvements.--
       (1) In general.--Paragraph (1) of section 25C(c) is amended 
     by inserting ``, or an asphalt roof with appropriate cooling 
     granules,'' before ``which meet the Energy Star program 
     requirements''.
       (2) Building envelope component.--Subparagraph (D) of 
     section 25C(c)(2) is amended--
       (A) by inserting ``or asphalt roof'' after ``metal roof'', 
     and
       (B) by inserting ``or cooling granules'' after ``pigmented 
     coatings''.
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made this section shall apply to expenditures made 
     after December 31, 2008.
       (2) Modification of qualified energy efficiency 
     improvements.--The amendments made by subsection (e) shall 
     apply to property placed in service after the date of the 
     enactment of this Act.

     SEC. 303. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

       Subsection (h) of section 179D is amended by striking 
     ``December 31, 2008'' and inserting ``December 31, 2013''.

[[Page 23047]]



     SEC. 304. 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. 305. MODIFICATIONS OF ENERGY EFFICIENT APPLIANCE CREDIT 
                   FOR APPLIANCES PRODUCED AFTER 2007.

       (a) In General.--Subsection (b) of section 45M is amended 
     to read as follows:
       ``(b) Applicable Amount.--For purposes of subsection (a)--
       ``(1) Dishwashers.--The applicable amount is--
       ``(A) $45 in the case of a dishwasher which is manufactured 
     in calendar year 2008 or 2009 and which uses no more than 324 
     kilowatt hours per year and 5.8 gallons per cycle, and
       ``(B) $75 in the case of a dishwasher which is manufactured 
     in calendar year 2008, 2009, or 2010 and which uses no more 
     than 307 kilowatt hours per year and 5.0 gallons per cycle 
     (5.5 gallons per cycle for dishwashers designed for greater 
     than 12 place settings).
       ``(2) Clothes washers.--The applicable amount is--
       ``(A) $75 in the case of a residential top-loading clothes 
     washer manufactured in calendar year 2008 which meets or 
     exceeds a 1.72 modified energy factor and does not exceed a 
     8.0 water consumption factor,
       ``(B) $125 in the case of a residential top-loading clothes 
     washer manufactured in calendar year 2008 or 2009 which meets 
     or exceeds a 1.8 modified energy factor and does not exceed a 
     7.5 water consumption factor,
       ``(C) $150 in the case of a residential or commercial 
     clothes washer manufactured in calendar year 2008, 2009, or 
     2010 which meets or exceeds 2.0 modified energy factor and 
     does not exceed a 6.0 water consumption factor, and
       ``(D) $250 in the case of a residential or commercial 
     clothes washer manufactured in calendar year 2008, 2009, or 
     2010 which meets or exceeds 2.2 modified energy factor and 
     does not exceed a 4.5 water consumption factor.
       ``(3) Refrigerators.--The applicable amount is--
       ``(A) $50 in the case of a refrigerator which is 
     manufactured in calendar year 2008, and consumes at least 20 
     percent but not more than 22.9 percent less kilowatt hours 
     per year than the 2001 energy conservation standards,
       ``(B) $75 in the case of a refrigerator which is 
     manufactured in calendar year 2008 or 2009, and consumes at 
     least 23 percent but no more than 24.9 percent less kilowatt 
     hours per year than the 2001 energy conservation standards,
       ``(C) $100 in the case of a refrigerator which is 
     manufactured in calendar year 2008, 2009, or 2010, and 
     consumes at least 25 percent but not more than 29.9 percent 
     less kilowatt hours per year than the 2001 energy 
     conservation standards, and
       ``(D) $200 in the case of a refrigerator manufactured in 
     calendar year 2008, 2009, or 2010 and which consumes at least 
     30 percent less energy than the 2001 energy conservation 
     standards.''.
       (b) Eligible Production.--
       (1) Similar treatment for all appliances.--Subsection (c) 
     of section 45M is amended--
       (A) by striking paragraph (2),
       (B) by striking ``(1) In general'' and all that follows 
     through ``the eligible'' and inserting ``The eligible'',
       (C) by moving the text of such subsection in line with the 
     subsection heading, and
       (D) by redesignating subparagraphs (A) and (B) as 
     paragraphs (1) and (2), respectively, and by moving such 
     paragraphs 2 ems to the left.
       (2) Modification of base period.--Paragraph (2) of section 
     45M(c), as amended by paragraph (1), is amended by striking 
     ``3-calendar year'' and inserting ``2-calendar year''.
       (c) Types of Energy Efficient Appliances.--Subsection (d) 
     of section 45M is amended to read as follows:
       ``(d) Types of Energy Efficient Appliance.--For purposes of 
     this section, the types of energy efficient appliances are--
       ``(1) dishwashers described in subsection (b)(1),
       ``(2) clothes washers described in subsection (b)(2), and
       ``(3) refrigerators described in subsection (b)(3).''.
       (d) Aggregate Credit Amount Allowed.--
       (1) Increase in limit.--Paragraph (1) of section 45M(e) is 
     amended to read as follows:
       ``(1) Aggregate credit amount allowed.--The aggregate 
     amount of credit allowed under subsection (a) with respect to 
     a taxpayer for any taxable year shall not exceed $75,000,000 
     reduced by the amount of the credit allowed under subsection 
     (a) to the taxpayer (or any predecessor) for all prior 
     taxable years beginning after December 31, 2007.''.
       (2) Exception for certain refrigerator and clothes 
     washers.--Paragraph (2) of section 45M(e) is amended to read 
     as follows:
       ``(2) Amount allowed for certain refrigerators and clothes 
     washers.--Refrigerators described in subsection (b)(3)(D) and 
     clothes washers described in subsection (b)(2)(D) shall not 
     be taken into account under paragraph (1).''.
       (e) Qualified Energy Efficient Appliances.--
       (1) In general.--Paragraph (1) of section 45M(f) is amended 
     to read as follows:
       ``(1) Qualified energy efficient appliance.--The term 
     `qualified energy efficient appliance' means--
       ``(A) any dishwasher described in subsection (b)(1),
       ``(B) any clothes washer described in subsection (b)(2), 
     and
       ``(C) any refrigerator described in subsection (b)(3).''.
       (2) Clothes washer.--Section 45M(f)(3) is amended by 
     inserting ``commercial'' before ``residential'' the second 
     place it appears.
       (3) Top-loading clothes washer.--Subsection (f) of section 
     45M is amended by redesignating paragraphs (4), (5), (6), and 
     (7) as paragraphs (5), (6), (7), and (8), respectively, and 
     by inserting after paragraph (3) the following new paragraph:
       ``(4) Top-loading clothes washer.--The term `top-loading 
     clothes washer' means a clothes washer which has the clothes 
     container compartment access located on the top of the 
     machine and which operates on a vertical axis.''.
       (4) Replacement of energy factor.--Section 45M(f)(6), as 
     redesignated by paragraph (3), is amended to read as follows:
       ``(6) Modified energy factor.--The term `modified energy 
     factor' means the modified energy factor established by the 
     Department of Energy for compliance with the Federal energy 
     conservation standard.''.
       (5) Gallons per cycle; water consumption factor.--Section 
     45M(f), as amended by paragraph (3), is amended by adding at 
     the end the following:
       ``(9) Gallons per cycle.--The term `gallons per cycle' 
     means, with respect to a dishwasher, the amount of water, 
     expressed in gallons, required to complete a normal cycle of 
     a dishwasher.
       ``(10) Water consumption factor.--The term `water 
     consumption factor' means, with respect to a clothes washer, 
     the quotient of the total weighted per-cycle water 
     consumption divided by the cubic foot (or liter) capacity of 
     the clothes washer.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to appliances produced after December 31, 2007.

     SEC. 306. ACCELERATED RECOVERY PERIOD FOR DEPRECIATION OF 
                   SMART METERS AND SMART GRID SYSTEMS.

       (a) In General.--Section 168(e)(3)(D) is amended by 
     striking ``and'' at the end of clause (i), by striking the 
     period at the end of clause (ii) and inserting a comma, and 
     by inserting after clause (ii) the following new clauses:
       ``(iii) any qualified smart electric meter, and
       ``(iv) any qualified smart electric grid system.''.
       (b) Definitions.--Section 168(i) is amended by inserting at 
     the end the following new paragraph:
       ``(18) Qualified smart electric meters.--
       ``(A) In general.--The term `qualified smart electric 
     meter' means any smart electric meter which--
       ``(i) is placed in service by a taxpayer who is a supplier 
     of electric energy or a provider of electric energy services, 
     and
       ``(ii) does not have a class life (determined without 
     regard to subsection (e)) of less than 10 years.
       ``(B) Smart electric meter.--For purposes of subparagraph 
     (A), the term `smart electric meter' means any time-based 
     meter and related communication equipment which is capable of 
     being used by the taxpayer as part of a system that--
       ``(i) measures and records electricity usage data on a 
     time-differentiated basis in at least 24 separate time 
     segments per day,
       ``(ii) provides for the exchange of information between 
     supplier or provider and the customer's electric meter in 
     support of time-based rates or other forms of demand 
     response,
       ``(iii) provides data to such supplier or provider so that 
     the supplier or provider can provide energy usage information 
     to customers electronically, and
       ``(iv) provides net metering.
       ``(19) Qualified smart electric grid systems.--
       ``(A) In general.--The term `qualified smart electric grid 
     system' means any smart grid property which--
       ``(i) is used as part of a system for electric distribution 
     grid communications, monitoring, and management placed in 
     service by a taxpayer who is a supplier of electric energy or 
     a provider of electric energy services, and
       ``(ii) does not have a class life (determined without 
     regard to subsection (e)) of less than 10 years.
       ``(B) Smart grid property.--For the purposes of 
     subparagraph (A), the term `smart grid property' means 
     electronics and related equipment that is capable of--
       ``(i) sensing, collecting, and monitoring data of or from 
     all portions of a utility's electric distribution grid,
       ``(ii) providing real-time, two-way communications to 
     monitor or manage such grid, and
       ``(iii) providing real time analysis of and event 
     prediction based upon collected data that can be used to 
     improve electric distribution system reliability, quality, 
     and performance.''.
       (c) Continued Application of 150 Percent Declining Balance 
     Method.--Paragraph (2) of section 168(b) is amended by 
     striking ``or'' at the end of subparagraph (B), by 
     redesignating subparagraph (C) as subparagraph (D), and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) any property (other than property described in 
     paragraph (3)) which is a qualified smart electric meter or 
     qualified smart electric grid system, or''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

[[Page 23048]]



     SEC. 307. QUALIFIED GREEN BUILDING AND SUSTAINABLE DESIGN 
                   PROJECTS.

       (a) In General.--Paragraph (8) of section 142(l) is amended 
     by striking ``September 30, 2009'' and inserting ``September 
     30, 2012''.
       (b) Treatment of Current Refunding Bonds.--Paragraph (9) of 
     section 142(l) is amended by striking ``October 1, 2009'' and 
     inserting ``October 1, 2012''.
       (c) Accountability.--The second sentence of section 701(d) 
     of the American Jobs Creation Act of 2004 is amended by 
     striking ``issuance,'' and inserting ``issuance of the last 
     issue with respect to such project,''.

     SEC. 308. SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN REUSE 
                   AND RECYCLING PROPERTY.

       (a) In General.--Section 168 is amended by adding at the 
     end the following new subsection:
       ``(m) Special Allowance for Certain Reuse and Recycling 
     Property.--
       ``(1) In general.--In the case of any qualified reuse and 
     recycling property--
       ``(A) the depreciation deduction provided by section 167(a) 
     for the taxable year in which such property is placed in 
     service shall include an allowance equal to 50 percent of the 
     adjusted basis of the qualified reuse and recycling property, 
     and
       ``(B) the adjusted basis of the qualified reuse and 
     recycling property shall be reduced by the amount of such 
     deduction before computing the amount otherwise allowable as 
     a depreciation deduction under this chapter for such taxable 
     year and any subsequent taxable year.
       ``(2) Qualified reuse and recycling property.--For purposes 
     of this subsection--
       ``(A) In general.--The term `qualified reuse and recycling 
     property' means any reuse and recycling property--
       ``(i) to which this section applies,
       ``(ii) which has a useful life of at least 5 years,
       ``(iii) the original use of which commences with the 
     taxpayer after August 31, 2008, and
       ``(iv) which is--

       ``(I) acquired by purchase (as defined in section 
     179(d)(2)) by the taxpayer after August 31, 2008, but only if 
     no written binding contract for the acquisition was in effect 
     before September 1, 2008, or
       ``(II) acquired by the taxpayer pursuant to a written 
     binding contract which was entered into after August 31, 
     2008.

       ``(B) Exceptions.--
       ``(i) Bonus depreciation property under subsection (k).--
     The term `qualified reuse and recycling property' shall not 
     include any property to which section 168(k) applies.
       ``(ii) Alternative depreciation property.--The term 
     `qualified reuse and recycling property' shall not include 
     any property to which the alternative depreciation system 
     under subsection (g) applies, determined without regard to 
     paragraph (7) of subsection (g) (relating to election to have 
     system apply).
       ``(iii) Election out.--If a taxpayer makes an election 
     under this clause with respect to any class of property for 
     any taxable year, this subsection shall not apply to all 
     property in such class placed in service during such taxable 
     year.
       ``(C) Special rule for self-constructed property.--In the 
     case of a taxpayer manufacturing, constructing, or producing 
     property for the taxpayer's own use, the requirements of 
     clause (iv) of subparagraph (A) shall be treated as met if 
     the taxpayer begins manufacturing, constructing, or producing 
     the property after August 31, 2008.
       ``(D) Deduction allowed in computing minimum tax.--For 
     purposes of determining alternative minimum taxable income 
     under section 55, the deduction under subsection (a) for 
     qualified reuse and recycling property shall be determined 
     under this section without regard to any adjustment under 
     section 56.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Reuse and recycling property.--
       ``(i) In general.--The term `reuse and recycling property' 
     means any machinery and equipment (not including buildings or 
     real estate), along with all appurtenances thereto, including 
     software necessary to operate such equipment, which is used 
     exclusively to collect, distribute, or recycle qualified 
     reuse and recyclable materials.
       ``(ii) Exclusion.--Such term does not include rolling stock 
     or other equipment used to transport reuse and recyclable 
     materials.
       ``(B) Qualified reuse and recyclable materials.--
       ``(i) In general.--The term `qualified reuse and recyclable 
     materials' means scrap plastic, scrap glass, scrap textiles, 
     scrap rubber, scrap packaging, recovered fiber, scrap ferrous 
     and nonferrous metals, or electronic scrap generated by an 
     individual or business.
       ``(ii) Electronic scrap.--For purposes of clause (i), the 
     term `electronic scrap' means--

       ``(I) any cathode ray tube, flat panel screen, or similar 
     video display device with a screen size greater than 4 inches 
     measured diagonally, or
       ``(II) any central processing unit.

       ``(C) Recycling or recycle.--The term `recycling' or 
     `recycle' means that process (including sorting) by which 
     worn or superfluous materials are manufactured or processed 
     into specification grade commodities that are suitable for 
     use as a replacement or substitute for virgin materials in 
     manufacturing tangible consumer and commercial products, 
     including packaging.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after August 31, 
     2008.

                      TITLE IV--REVENUE PROVISIONS

     SEC. 401. LIMITATION OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
                   DOMESTIC PRODUCTION OF OIL, GAS, OR PRIMARY 
                   PRODUCTS THEREOF.

       (a) In General.--Section 199(d) is amended by redesignating 
     paragraph (9) as paragraph (10) and by inserting after 
     paragraph (8) the following new paragraph:
       ``(9) Special rule for taxpayers with oil related qualified 
     production activities income.--
       ``(A) In general.--If a taxpayer has oil related qualified 
     production activities income for any taxable year beginning 
     after 2009, the amount otherwise allowable as a deduction 
     under subsection (a) shall be reduced by 3 percent of the 
     least of--
       ``(i) the oil related qualified production activities 
     income of the taxpayer for the taxable year,
       ``(ii) the qualified production activities income of the 
     taxpayer for the taxable year, or
       ``(iii) taxable income (determined without regard to this 
     section).
       ``(B) Oil related qualified production activities income.--
     For purposes of this paragraph, the term `oil related 
     qualified production activities income' means for any taxable 
     year the qualified production activities income which is 
     attributable to the production, refining, processing, 
     transportation, or distribution of oil, gas, or any primary 
     product thereof during such taxable year.
       ``(C) Primary product.--For purposes of this paragraph, the 
     term `primary product' has the same meaning as when used in 
     section 927(a)(2)(C), as in effect before its repeal.''.
       (b) Conforming Amendment.--Section 199(d)(2) (relating to 
     application to individuals) is amended by striking 
     ``subsection (a)(1)(B)'' and inserting ``subsections 
     (a)(1)(B) and (d)(9)(A)(iii)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 402. ELIMINATION OF THE DIFFERENT TREATMENT OF FOREIGN 
                   OIL AND GAS EXTRACTION INCOME AND FOREIGN OIL 
                   RELATED INCOME FOR PURPOSES OF THE FOREIGN TAX 
                   CREDIT.

       (a) In General.--Subsections (a) and (b) of section 907 
     (relating to special rules in case of foreign oil and gas 
     income) are amended to read as follows:
       ``(a) Reduction in Amount Allowed as Foreign Tax Under 
     Section 901.--In applying section 901, the amount of any 
     foreign oil and gas taxes paid or accrued (or deemed to have 
     been paid) during the taxable year which would (but for this 
     subsection) be taken into account for purposes of section 901 
     shall be reduced by the amount (if any) by which the amount 
     of such taxes exceeds the product of--
       ``(1) the amount of the combined foreign oil and gas income 
     for the taxable year,
       ``(2) multiplied by--
       ``(A) in the case of a corporation, the percentage which is 
     equal to the highest rate of tax specified under section 
     11(b), or
       ``(B) in the case of an individual, a fraction the 
     numerator of which is the tax against which the credit under 
     section 901(a) is taken and the denominator of which is the 
     taxpayer's entire taxable income.
       ``(b) Combined Foreign Oil and Gas Income; Foreign Oil and 
     Gas Taxes.--For purposes of this section--
       ``(1) Combined foreign oil and gas income.--The term 
     `combined foreign oil and gas income' means, with respect to 
     any taxable year, the sum of--
       ``(A) foreign oil and gas extraction income, and
       ``(B) foreign oil related income.
       ``(2) Foreign oil and gas taxes.--The term `foreign oil and 
     gas taxes' means, with respect to any taxable year, the sum 
     of--
       ``(A) oil and gas extraction taxes, and
       ``(B) any income, war profits, and excess profits taxes 
     paid or accrued (or deemed to have been paid or accrued under 
     section 902 or 960) during the taxable year with respect to 
     foreign oil related income (determined without regard to 
     subsection (c)(4)) or loss which would be taken into account 
     for purposes of section 901 without regard to this 
     section.''.
       (b) Recapture of Foreign Oil and Gas Losses.--Paragraph (4) 
     of section 907(c) (relating to recapture of foreign oil and 
     gas extraction losses by recharacterizing later extraction 
     income) is amended to read as follows:
       ``(4) Recapture of foreign oil and gas losses by 
     recharacterizing later combined foreign oil and gas income.--
       ``(A) In general.--The combined foreign oil and gas income 
     of a taxpayer for a taxable year (determined without regard 
     to this paragraph) shall be reduced--
       ``(i) first by the amount determined under subparagraph 
     (B), and
       ``(ii) then by the amount determined under subparagraph 
     (C).

     The aggregate amount of such reductions shall be treated as 
     income (from sources without the United States) which is not 
     combined foreign oil and gas income.
       ``(B) Reduction for pre-2009 foreign oil extraction 
     losses.--The reduction under this paragraph shall be equal to 
     the lesser of--
       ``(i) the foreign oil and gas extraction income of the 
     taxpayer for the taxable year (determined without regard to 
     this paragraph), or
       ``(ii) the excess of--

       ``(I) the aggregate amount of foreign oil extraction losses 
     for preceding taxable years beginning after December 31, 
     1982, and before January 1, 2009, over
       ``(II) so much of such aggregate amount as was 
     recharacterized under this paragraph (as in

[[Page 23049]]

     effect before and after the date of the enactment of the 
     Energy Improvement and Extension Act of 2008) for preceding 
     taxable years beginning after December 31, 1982.

       ``(C) Reduction for post-2008 foreign oil and gas losses.--
     The reduction under this paragraph shall be equal to the 
     lesser of--
       ``(i) the combined foreign oil and gas income of the 
     taxpayer for the taxable year (determined without regard to 
     this paragraph), reduced by an amount equal to the reduction 
     under subparagraph (A) for the taxable year, or
       ``(ii) the excess of--

       ``(I) the aggregate amount of foreign oil and gas losses 
     for preceding taxable years beginning after December 31, 
     2008, over
       ``(II) so much of such aggregate amount as was 
     recharacterized under this paragraph for preceding taxable 
     years beginning after December 31, 2008.

       ``(D) Foreign oil and gas loss defined.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `foreign oil and gas loss' means the amount by which--

       ``(I) the gross income for the taxable year from sources 
     without the United States and its possessions (whether or not 
     the taxpayer chooses the benefits of this subpart for such 
     taxable year) taken into account in determining the combined 
     foreign oil and gas income for such year, is exceeded by
       ``(II) the sum of the deductions properly apportioned or 
     allocated thereto.

       ``(ii) Net operating loss deduction not taken into 
     account.--For purposes of clause (i), the net operating loss 
     deduction allowable for the taxable year under section 172(a) 
     shall not be taken into account.
       ``(iii) Expropriation and casualty losses not taken into 
     account.--For purposes of clause (i), there shall not be 
     taken into account--

       ``(I) any foreign expropriation loss (as defined in section 
     172(h) (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990)) for the 
     taxable year, or
       ``(II) any loss for the taxable year which arises from 
     fire, storm, shipwreck, or other casualty, or from theft,

     to the extent such loss is not compensated for by insurance 
     or otherwise.
       ``(iv) Foreign oil extraction loss.--For purposes of 
     subparagraph (B)(ii)(I), foreign oil extraction losses shall 
     be determined under this paragraph as in effect on the day 
     before the date of the enactment of the Energy Improvement 
     and Extension Act of 2008.''.
       (c) Carryback and Carryover of Disallowed Credits.--Section 
     907(f) (relating to carryback and carryover of disallowed 
     credits) is amended--
       (1) by striking ``oil and gas extraction taxes'' each place 
     it appears and inserting ``foreign oil and gas taxes'', and
       (2) by adding at the end the following new paragraph:
       ``(4) Transition rules for pre-2009 and 2009 disallowed 
     credits.--
       ``(A) Pre-2009 credits.--In the case of any unused credit 
     year beginning before January 1, 2009, this subsection shall 
     be applied to any unused oil and gas extraction taxes carried 
     from such unused credit year to a year beginning after 
     December 31, 2008--
       ``(i) by substituting `oil and gas extraction taxes' for 
     `foreign oil and gas taxes' each place it appears in 
     paragraphs (1), (2), and (3), and
       ``(ii) by computing, for purposes of paragraph (2)(A), the 
     limitation under subparagraph (A) for the year to which such 
     taxes are carried by substituting `foreign oil and gas 
     extraction income' for `foreign oil and gas income' in 
     subsection (a).
       ``(B) 2009 credits.--In the case of any unused credit year 
     beginning in 2009, the amendments made to this subsection by 
     the Energy Improvement and Extension Act of 2008 shall be 
     treated as being in effect for any preceding year beginning 
     before January 1, 2009, solely for purposes of determining 
     how much of the unused foreign oil and gas taxes for such 
     unused credit year may be deemed paid or accrued in such 
     preceding year.''.
       (d) Conforming Amendment.--Section 6501(i) is amended by 
     striking ``oil and gas extraction taxes'' and inserting 
     ``foreign oil and gas taxes''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 403. BROKER REPORTING OF CUSTOMER'S BASIS IN SECURITIES 
                   TRANSACTIONS.

       (a) In General.--
       (1) Broker reporting for securities transactions.--Section 
     6045 is amended by adding at the end the following new 
     subsection:
       ``(g) Additional Information Required in the Case of 
     Securities Transactions, etc.--
       ``(1) In general.--If a broker is otherwise required to 
     make a return under subsection (a) with respect to the gross 
     proceeds of the sale of a covered security, the broker shall 
     include in such return the information described in paragraph 
     (2).
       ``(2) Additional information required.--
       ``(A) In general.--The information required under paragraph 
     (1) to be shown on a return with respect to a covered 
     security of a customer shall include the customer's adjusted 
     basis in such security and whether any gain or loss with 
     respect to such security is long-term or short-term (within 
     the meaning of section 1222).
       ``(B) Determination of adjusted basis.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--The customer's adjusted basis shall be 
     determined--

       ``(I) in the case of any security (other than any stock for 
     which an average basis method is permissible under section 
     1012), in accordance with the first-in first-out method 
     unless the customer notifies the broker by means of making an 
     adequate identification of the stock sold or transferred, and
       ``(II) in the case of any stock for which an average basis 
     method is permissible under section 1012, in accordance with 
     the broker's default method unless the customer notifies the 
     broker that he elects another acceptable method under section 
     1012 with respect to the account in which such stock is held.

       ``(ii) Exception for wash sales.--Except as otherwise 
     provided by the Secretary, the customer's adjusted basis 
     shall be determined without regard to section 1091 (relating 
     to loss from wash sales of stock or securities) unless the 
     transactions occur in the same account with respect to 
     identical securities.
       ``(3) Covered security.--For purposes of this subsection--
       ``(A) In general.--The term `covered security' means any 
     specified security acquired on or after the applicable date 
     if such security--
       ``(i) was acquired through a transaction in the account in 
     which such security is held, or
       ``(ii) was transferred to such account from an account in 
     which such security was a covered security, but only if the 
     broker received a statement under section 6045A with respect 
     to the transfer.
       ``(B) Specified security.--The term `specified security' 
     means--
       ``(i) any share of stock in a corporation,
       ``(ii) any note, bond, debenture, or other evidence of 
     indebtedness,
       ``(iii) any commodity, or contract or derivative with 
     respect to such commodity, if the Secretary determines that 
     adjusted basis reporting is appropriate for purposes of this 
     subsection, and
       ``(iv) any other financial instrument with respect to which 
     the Secretary determines that adjusted basis reporting is 
     appropriate for purposes of this subsection.
       ``(C) Applicable date.--The term `applicable date' means--
       ``(i) January 1, 2011, in the case of any specified 
     security which is stock in a corporation (other than any 
     stock described in clause (ii)),
       ``(ii) January 1, 2012, in the case of any stock for which 
     an average basis method is permissible under section 1012, 
     and
       ``(iii) January 1, 2013, or such later date determined by 
     the Secretary in the case of any other specified security.
       ``(4) Treatment of s corporations.--In the case of the sale 
     of a covered security acquired by an S corporation (other 
     than a financial institution) after December 31, 2011, such S 
     corporation shall be treated in the same manner as a 
     partnership for purposes of this section.
       ``(5) Special rules for short sales.--In the case of a 
     short sale, reporting under this section shall be made for 
     the year in which such sale is closed.''.
       (2) Broker information required with respect to options.--
     Section 6045, as amended by subsection (a), is amended by 
     adding at the end the following new subsection:
       ``(h) Application to Options on Securities.--
       ``(1) Exercise of option.--For purposes of this section, if 
     a covered security is acquired or disposed of pursuant to the 
     exercise of an option that was granted or acquired in the 
     same account as the covered security, the amount received 
     with respect to the grant or paid with respect to the 
     acquisition of such option shall be treated as an adjustment 
     to gross proceeds or as an adjustment to basis, as the case 
     may be.
       ``(2) Lapse or closing transaction.--In the case of the 
     lapse (or closing transaction (as defined in section 
     1234(b)(2)(A))) of an option on a specified security or the 
     exercise of a cash-settled option on a specified security, 
     reporting under subsections (a) and (g) with respect to such 
     option shall be made for the calendar year which includes the 
     date of such lapse, closing transaction, or exercise.
       ``(3) Prospective application.--Paragraphs (1) and (2) 
     shall not apply to any option which is granted or acquired 
     before January 1, 2013.
       ``(4) Definitions.--For purposes of this subsection, the 
     terms `covered security' and `specified security' shall have 
     the meanings given such terms in subsection (g)(3).''.
       (3) Extension of period for statements sent to customers.--
       (A) In general.--Subsection (b) of section 6045 is amended 
     by striking ``January 31'' and inserting ``February 15''.
       (B) Statements related to substitute payments.--Subsection 
     (d) of section 6045 is amended--
       (i) by striking ``at such time and'', and
       (ii) by inserting after ``other item.'' the following new 
     sentence: ``The written statement required under the 
     preceding sentence shall be furnished on or before February 
     15 of the year following the calendar year in which the 
     payment was made.''.
       (C) Other statements.--Subsection (b) of section 6045 is 
     amended by adding at the end the following: ``In the case of 
     a consolidated reporting statement (as defined in 
     regulations) with respect to any customer, any statement 
     which would otherwise be required to be furnished on or 
     before January 31 of a calendar year with respect to any item 
     reportable to the taxpayer shall instead be required to be 
     furnished on or before February 15 of such calendar year if 
     furnished with such consolidated reporting statement.''.
       (b) Determination of Basis of Certain Securities on Account 
     by Account or Average Basis Method.--Section 1012 is 
     amended--

[[Page 23050]]

       (1) by striking ``The basis of property'' and inserting the 
     following:
       ``(a) In General.--The basis of property'',
       (2) by striking ``The cost of real property'' and inserting 
     the following:
       ``(b) Special Rule for Apportioned Real Estate Taxes.--The 
     cost of real property'', and
       (3) by adding at the end the following new subsections:
       ``(c) Determinations by Account.--
       ``(1) In general.--In the case of the sale, exchange, or 
     other disposition of a specified security on or after the 
     applicable date, the conventions prescribed by regulations 
     under this section shall be applied on an account by account 
     basis.
       ``(2) Application to certain funds.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     any stock for which an average basis method is permissible 
     under section 1012 which is acquired before January 1, 2012, 
     shall be treated as a separate account from any such stock 
     acquired on or after such date.
       ``(B) Election fund for treatment as single account.--If a 
     fund described in subparagraph (A) elects to have this 
     subparagraph apply with respect to one or more of its 
     stockholders--
       ``(i) subparagraph (A) shall not apply with respect to any 
     stock in such fund held by such stockholders, and
       ``(ii) all stock in such fund which is held by such 
     stockholders shall be treated as covered securities described 
     in section 6045(g)(3) without regard to the date of the 
     acquisition of such stock.

     A rule similar to the rule of the preceding sentence shall 
     apply with respect to a broker holding such stock as a 
     nominee.
       ``(3) Definitions.--For purposes of this section, the terms 
     `specified security' and `applicable date' shall have the 
     meaning given such terms in section 6045(g).
       ``(d) Average Basis for Stock Acquired Pursuant to a 
     Dividend Reinvestment Plan.--
       ``(1) In general.--In the case of any stock acquired after 
     December 31, 2010, in connection with a dividend reinvestment 
     plan, the basis of such stock while held as part of such plan 
     shall be determined using one of the methods which may be 
     used for determining the basis of stock in an open-end fund.
       ``(2) Treatment after transfer.--In the case of the 
     transfer to another account of stock to which paragraph (1) 
     applies, such stock shall have a cost basis in such other 
     account equal to its basis in the dividend reinvestment plan 
     immediately before such transfer (properly adjusted for any 
     fees or other charges taken into account in connection with 
     such transfer).
       ``(3) Separate accounts; election for treatment as single 
     account.--Rules similar to the rules of subsection (c)(2) 
     shall apply for purposes of this subsection.
       ``(4) Dividend reinvestment plan.--For purposes of this 
     subsection--
       ``(A) In general.--The term `dividend reinvestment plan' 
     means any arrangement under which dividends on any stock are 
     reinvested in stock identical to the stock with respect to 
     which the dividends are paid.
       ``(B) Initial stock acquisition treated as acquired in 
     connection with plan.--Stock shall be treated as acquired in 
     connection with a dividend reinvestment plan if such stock is 
     acquired pursuant to such plan or if the dividends paid on 
     such stock are subject to such plan.''.
       (c) Information by Transferors To Aid Brokers.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6045 the 
     following new section:

     ``SEC. 6045A. INFORMATION REQUIRED IN CONNECTION WITH 
                   TRANSFERS OF COVERED SECURITIES TO BROKERS.

       ``(a) Furnishing of Information.--Every applicable person 
     which transfers to a broker (as defined in section 
     6045(c)(1)) a security which is a covered security (as 
     defined in section 6045(g)(3)) in the hands of such 
     applicable person shall furnish to such broker a written 
     statement in such manner and setting forth such information 
     as the Secretary may by regulations prescribe for purposes of 
     enabling such broker to meet the requirements of section 
     6045(g).
       ``(b) Applicable Person.--For purposes of subsection (a), 
     the term `applicable person' means--
       ``(1) any broker (as defined in section 6045(c)(1)), and
       ``(2) any other person as provided by the Secretary in 
     regulations.
       ``(c) Time for Furnishing Statement.--Except as otherwise 
     provided by the Secretary, any statement required by 
     subsection (a) shall be furnished not later than 15 days 
     after the date of the transfer described in such 
     subsection.''.
       (2) Assessable penalties.--Paragraph (2) of section 
     6724(d), as amended by the Housing Assistance Tax Act of 
     2008, is amended by redesignating subparagraphs (I) through 
     (DD) as subparagraphs (J) through (EE), respectively, and by 
     inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) section 6045A (relating to information required in 
     connection with transfers of covered securities to 
     brokers),''.
       (3) Clerical amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6045 the 
     following new item:

``Sec. 6045A. Information required in connection with transfers of 
              covered securities to brokers.''.
       (d) Additional Issuer Information To Aid Brokers.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61, as amended by subsection (b), is amended by 
     inserting after section 6045A the following new section:

     ``SEC. 6045B. RETURNS RELATING TO ACTIONS AFFECTING BASIS OF 
                   SPECIFIED SECURITIES.

       ``(a) In General.--According to the forms or regulations 
     prescribed by the Secretary, any issuer of a specified 
     security shall make a return setting forth--
       ``(1) a description of any organizational action which 
     affects the basis of such specified security of such issuer,
       ``(2) the quantitative effect on the basis of such 
     specified security resulting from such action, and
       ``(3) such other information as the Secretary may 
     prescribe.
       ``(b) Time for Filing Return.--Any return required by 
     subsection (a) shall be filed not later than the earlier of--
       ``(1) 45 days after the date of the action described in 
     subsection (a), or
       ``(2) January 15 of the year following the calendar year 
     during which such action occurred.
       ``(c) Statements To Be Furnished to Holders of Specified 
     Securities or Their Nominees.--According to the forms or 
     regulations prescribed by the Secretary, every person 
     required to make a return under subsection (a) with respect 
     to a specified security shall furnish to the nominee with 
     respect to the specified security (or certificate holder if 
     there is no nominee) a written statement showing--
       ``(1) the name, address, and phone number of the 
     information contact of the person required to make such 
     return,
       ``(2) the information required to be shown on such return 
     with respect to such security, and
       ``(3) such other information as the Secretary may 
     prescribe.

     The written statement required under the preceding sentence 
     shall be furnished to the holder on or before January 15 of 
     the year following the calendar year during which the action 
     described in subsection (a) occurred.
       ``(d) Specified Security.--For purposes of this section, 
     the term `specified security' has the meaning given such term 
     by section 6045(g)(3)(B). No return shall be required under 
     this section with respect to actions described in subsection 
     (a) with respect to a specified security which occur before 
     the applicable date (as defined in section 6045(g)(3)(C)) 
     with respect to such security.
       ``(e) Public Reporting in Lieu of Return.--The Secretary 
     may waive the requirements under subsections (a) and (c) with 
     respect to a specified security, if the person required to 
     make the return under subsection (a) makes publicly 
     available, in such form and manner as the Secretary 
     determines necessary to carry out the purposes of this 
     section--
       ``(1) the name, address, phone number, and email address of 
     the information contact of such person, and
       ``(2) the information described in paragraphs (1), (2), and 
     (3) of subsection (a).''.
       (2) Assessable penalties.--
       (A) Subparagraph (B) of section 6724(d)(1), as amended by 
     the Housing Assistance Tax Act of 2008, is amended by 
     redesignating clause (iv) and each of the clauses which 
     follow as clauses (v) through (xxiii), respectively, and by 
     inserting after clause (iii) the following new clause:
       ``(iv) section 6045B(a) (relating to returns relating to 
     actions affecting basis of specified securities),''.
       (B) Paragraph (2) of section 6724(d), as amended by the 
     Housing Assistance Tax Act of 2008 and by subsection (c)(2), 
     is amended by redesignating subparagraphs (J) through (EE) as 
     subparagraphs (K) through (FF), respectively, and by 
     inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) subsections (c) and (e) of section 6045B (relating to 
     returns relating to actions affecting basis of specified 
     securities),''.
       (3) Clerical amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61, as amended by 
     subsection (b)(3), is amended by inserting after the item 
     relating to section 6045A the following new item:

``Sec. 6045B. Returns relating to actions affecting basis of specified 
              securities.''.
       (e) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on January 1, 2011.
       (2) Extension of period for statements sent to customers.--
     The amendments made by subsection (a)(3) shall apply to 
     statements required to be furnished after December 31, 2008.

     SEC. 404. 0.2 PERCENT FUTA SURTAX.

       (a) In General.--Section 3301 (relating to rate of tax) is 
     amended--
       (1) by striking ``through 2008'' in paragraph (1) and 
     inserting ``through 2009'', and
       (2) by striking ``calendar year 2009'' 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, 2008.

     SEC. 405. INCREASE AND EXTENSION OF OIL SPILL LIABILITY TRUST 
                   FUND TAX.

       (a) Increase in Rate.--
       (1) In general.--Section 4611(c)(2)(B) (relating to rates) 
     is amended by striking ``is 5 cents a barrel.'' and inserting 
     ``is--
       ``(i) in the case of crude oil received or petroleum 
     products entered before January 1, 2017, 8 cents a barrel, 
     and
       ``(ii) in the case of crude oil received or petroleum 
     products entered after December 31, 2016, 9 cents a 
     barrel.''.

[[Page 23051]]

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

      DIVISION B--TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This division may be cited as the ``Tax 
     Extenders and Alternative Minimum Tax Relief Act of 2008''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this division an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents of this 
     division is as follows:

      DIVISION B--TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF

Sec. 1. Short title; amendment of 1986 Code; table of contents.

                TITLE I--ALTERNATIVE MINIMUM TAX RELIEF

Sec. 101. Extension of alternative minimum tax relief for nonrefundable 
              personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption 
              amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with 
              long-term unused credits for prior year minimum tax 
              liability, etc.

            TITLE II--EXTENSION OF INDIVIDUAL TAX PROVISIONS

Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Deduction for certain expenses of elementary and secondary 
              school teachers.
Sec. 204. Additional standard deduction for real property taxes for 
              nonitemizers.
Sec. 205. Tax-free distributions from individual retirement plans for 
              charitable purposes.
Sec. 206. Treatment of certain dividends of regulated investment 
              companies.
Sec. 207. Stock in RIC for purposes of determining estates of 
              nonresidents not citizens.
Sec. 208. Qualified investment entities.

            TITLE III--EXTENSION OF BUSINESS TAX PROVISIONS

Sec. 301. Extension and modification of research credit.
Sec. 302. New markets tax credit.
Sec. 303. Subpart F exception for active financing income.
Sec. 304. Extension of look-thru rule for related controlled foreign 
              corporations.
Sec. 305. Extension of 15-year straight-line cost recovery for 
              qualified leasehold improvements and qualified restaurant 
              improvements; 15-year straight-line cost recovery for 
              certain improvements to retail space.
Sec. 306. Modification of tax treatment of certain payments to 
              controlling exempt organizations.
Sec. 307. Basis adjustment to stock of S corporations making charitable 
              contributions of property.
Sec. 308. Increase in limit on cover over of rum excise tax to Puerto 
              Rico and the Virgin Islands.
Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety 
              equipment.
Sec. 312. Deduction allowable with respect to income attributable to 
              domestic production activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian 
              reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track 
              facility.
Sec. 318. Expensing of environmental remediation costs.
Sec. 319. Extension of work opportunity tax credit for Hurricane 
              Katrina employees.
Sec. 320. Extension of increased rehabilitation credit for structures 
              in the Gulf Opportunity Zone.
Sec. 321. Enhanced deduction for qualified computer contributions.
Sec. 322. Tax incentives for investment in the District of Columbia.
Sec. 323. Enhanced charitable deductions for contributions of food 
              inventory.
Sec. 324. Extension of enhanced charitable deduction for contributions 
              of book inventory.
Sec. 325. Extension and modification of duty suspension on wool 
              products; wool research fund; wool duty refunds.

          TITLE IV--EXTENSION OF TAX ADMINISTRATION PROVISIONS

Sec. 401. Permanent authority for undercover operations.
Sec. 402. Permanent authority for disclosure of information relating to 
              terrorist activities.

        TITLE V--ADDITIONAL TAX RELIEF AND OTHER TAX PROVISIONS

                     Subtitle A--General Provisions

Sec. 501. $8,500 income threshold used to calculate refundable portion 
              of child tax credit.
Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed 
              for use by children.
Sec. 504. Income averaging for amounts received in connection with the 
              Exxon Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as 
              5-year property.
Sec. 506. Modification of penalty on understatement of taxpayer's 
              liability by tax return preparer.

 Subtitle B--Paul Wellstone and Pete Domenici Mental Health Parity and 
                      Addiction Equity Act of 2008

Sec. 511. Short title.
Sec. 512. Mental health parity.

                       TITLE VI--OTHER PROVISIONS

Sec. 601. Secure rural schools and community self-determination 
              program.
Sec. 602. Transfer to abandoned mine reclamation fund.

                       TITLE VII--DISASTER RELIEF

        Subtitle A--Heartland and Hurricane Ike Disaster Relief

Sec. 701. Short title.
Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern 
              severe storms, tornados, and flooding.
Sec. 703. Reporting requirements relating to disaster relief 
              contributions.
Sec. 704. Temporary tax-exempt bond financing and low-income housing 
              tax relief for areas damaged by Hurricane Ike.

                  Subtitle B--National Disaster Relief

Sec. 706. Losses attributable to federally declared disasters.
Sec. 707. Expensing of Qualified Disaster Expenses.
Sec. 708. Net operating losses attributable to federally declared 
              disasters.
Sec. 709. Waiver of certain mortgage revenue bond requirements 
              following federally declared disasters.
Sec. 710. Special depreciation allowance for qualified disaster 
              property.
Sec. 711. Increased expensing for qualified disaster assistance 
              property.
Sec. 712. Coordination with Heartland disaster relief.

TITLE VIII--SPENDING REDUCTIONS AND APPROPRIATE REVENUE RAISERS FOR NEW 
                           TAX RELIEF POLICY

Sec. 801. Nonqualified deferred compensation from certain tax 
              indifferent parties.

                TITLE I--ALTERNATIVE MINIMUM TAX RELIEF

     SEC. 101. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR 
                   NONREFUNDABLE PERSONAL CREDITS.

       (a) In General.--Paragraph (2) of section 26(a) (relating 
     to special rule for taxable years 2000 through 2007) is 
     amended--
       (1) by striking ``or 2007'' and inserting ``2007, or 
     2008'', and
       (2) by striking ``2007'' in the heading thereof and 
     inserting ``2008''.
       (b)  Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 102. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX 
                   EXEMPTION AMOUNT.

       (a) In General.--Paragraph (1) of section 55(d) (relating 
     to exemption amount) is amended--
       (1) by striking ``($66,250 in the case of taxable years 
     beginning in 2007)'' in subparagraph (A) and inserting 
     ``($69,950 in the case of taxable years beginning in 2008)'', 
     and
       (2) by striking ``($44,350 in the case of taxable years 
     beginning in 2007)'' in subparagraph (B) and inserting 
     ``($46,200 in the case of taxable years beginning in 2008)''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 103. INCREASE OF AMT REFUNDABLE CREDIT AMOUNT FOR 
                   INDIVIDUALS WITH LONG-TERM UNUSED CREDITS FOR 
                   PRIOR YEAR MINIMUM TAX LIABILITY, ETC.

       (a) In General.--Paragraph (2) of section 53(e) is amended 
     to read as follows:
       ``(2) AMT refundable credit amount.--For purposes of 
     paragraph (1), the term `AMT refundable credit amount' means, 
     with respect to

[[Page 23052]]

     any taxable year, the amount (not in excess of the long-term 
     unused minimum tax credit for such taxable year) equal to the 
     greater of--
       ``(A) 50 percent of the long-term unused minimum tax credit 
     for such taxable year, or
       ``(B) the amount (if any) of the AMT refundable credit 
     amount determined under this paragraph for the taxpayer's 
     preceding taxable year (determined without regard to 
     subsection (f)(2)).''.
       (b) Treatment of Certain Underpayments, Interest, and 
     Penalties Attributable to the Treatment of Incentive Stock 
     Options.--Section 53 is amended by adding at the end the 
     following new subsection:
       ``(f) Treatment of Certain Underpayments, Interest, and 
     Penalties Attributable to the Treatment of Incentive Stock 
     Options.--
       ``(1) Abatement.--Any underpayment of tax outstanding on 
     the date of the enactment of this subsection which is 
     attributable to the application of section 56(b)(3) for any 
     taxable year ending before January 1, 2008, and any interest 
     or penalty with respect to such underpayment which is 
     outstanding on such date of enactment, is hereby abated. The 
     amount determined under subsection (b)(1) shall not include 
     any tax abated under the preceding sentence.
       ``(2) Increase in credit for certain interest and penalties 
     already paid.--The AMT refundable credit amount, and the 
     minimum tax credit determined under subsection (b), for the 
     taxpayer's first 2 taxable years beginning after December 31, 
     2007, shall each be increased by 50 percent of the aggregate 
     amount of the interest and penalties which were paid by the 
     taxpayer before the date of the enactment of this subsection 
     and which would (but for such payment) have been abated under 
     paragraph (1).''.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2007.
       (2) Abatement.--Section 53(f)(1), as added by subsection 
     (b), shall take effect on the date of the enactment of this 
     Act.

            TITLE II--EXTENSION OF INDIVIDUAL TAX PROVISIONS

     SEC. 201. 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. 202. 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. 203. 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 subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 204. ADDITIONAL STANDARD DEDUCTION FOR REAL PROPERTY 
                   TAXES FOR NONITEMIZERS.

       (a) In General.--Subparagraph (C) of section 63(c)(1), as 
     added by the Housing Assistance Tax Act of 2008, is amended 
     by inserting ``or 2009'' after ``2008''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 205. 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. 206. 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) 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. 207. 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.

     SEC. 208. QUALIFIED INVESTMENT ENTITIES.

       (a) In General.--Clause (ii) of section 897(h)(4)(A) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 2008.

            TITLE III--EXTENSION OF BUSINESS TAX PROVISIONS

     SEC. 301. EXTENSION AND MODIFICATION OF RESEARCH CREDIT.

       (a) Extension.--
       (1) In general.--Section 41(h) (relating to termination) is 
     amended by striking ``December 31, 2007'' and inserting 
     ``December 31, 2009'' in paragraph (1)(B).
       (2) Conforming amendment.--Subparagraph (D) of section 
     45C(b)(1) (relating to special rule) is amended by striking 
     ``after December 31, 2007'' and inserting ``after December 
     31, 2009''.
       (b) Termination of Alternative Incremental Credit.--Section 
     41(h) is amended by redesignating paragraph (2) as paragraph 
     (3), and by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Termination of alternative incremental credit.--No 
     election under subsection (c)(4) shall apply to taxable years 
     beginning after December 31, 2008.''.
       (c) Modification of Alternative Simplified Credit.--
     Paragraph (5)(A) of section 41(c) (relating to election of 
     alternative simplified credit) is amended by striking ``12 
     percent'' and inserting ``14 percent (12 percent in the case 
     of taxable years ending before January 1, 2009)''.
       (d) Technical Correction.--Paragraph (3) of section 41(h) 
     is amended to read as follows:
       ``(2) Computation for taxable year in which credit 
     terminates.--In the case of any taxable year with respect to 
     which this section applies to a number of days which is less 
     than the total number of days in such taxable year--
       ``(A) the amount determined under subsection (c)(1)(B) with 
     respect to such taxable year shall be the amount which bears 
     the same ratio to such amount (determined without regard to 
     this paragraph) as the number of days in such taxable year to 
     which this section applies bears to the total number of days 
     in such taxable year, and
       ``(B) for purposes of subsection (c)(5), the average 
     qualified research expenses for the preceding 3 taxable years 
     shall be the amount which bears the same ratio to such 
     average qualified research expenses (determined without 
     regard to this paragraph) as the number of days in such 
     taxable year to which this section applies bears to the total 
     number of days in such taxable year.''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2007.
       (2) Extension.--The amendments made by subsection (a) shall 
     apply to amounts paid or incurred after December 31, 2007.

     SEC. 302. 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. 303. 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. 304. EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED 
                   FOREIGN CORPORATIONS.

       (a) In General.--Subparagraph (C) of section 954(c)(6) 
     (relating to application) is amended by striking ``January 1, 
     2009'' and inserting ``January 1, 2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years of foreign corporations 
     beginning after December 31, 2007, and to taxable years of 
     United States shareholders with or within which such taxable 
     years of foreign corporations end.

     SEC. 305. EXTENSION OF 15-YEAR STRAIGHT-LINE COST RECOVERY 
                   FOR QUALIFIED LEASEHOLD IMPROVEMENTS AND 
                   QUALIFIED RESTAURANT IMPROVEMENTS; 15-YEAR 
                   STRAIGHT-LINE COST RECOVERY FOR CERTAIN 
                   IMPROVEMENTS TO RETAIL SPACE.

       (a) Extension of Leasehold and Restaurant Improvements.--
       (1) 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''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to property placed in service after December 31, 
     2007.
       (b) Treatment to Include New Construction.--
       (1) In general.--Paragraph (7) of section 168(e) (relating 
     to classification of property) is amended to read as follows:
       ``(7) Qualified restaurant property.--
       ``(A) In general.--The term `qualified restaurant property' 
     means any section 1250 property which is--
       ``(i) a building, if such building is placed in service 
     after December 31, 2008, and before January 1, 2010, or

[[Page 23053]]

       ``(ii) an improvement to a building,
     if more than 50 percent of the building's square footage is 
     devoted to preparation of, and seating for on-premises 
     consumption of, prepared meals.
       ``(B) Exclusion from bonus depreciation.--Property 
     described in this paragraph shall not be considered qualified 
     property for purposes of subsection (k).''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to property placed in service after December 31, 
     2008.
       (c) Recovery Period for Depreciation of Certain 
     Improvements to Retail Space.--
       (1) 15-year recovery period.--Section 168(e)(3)(E) 
     (relating to 15-year property) is amended by striking ``and'' 
     at the end of clause (vii), by striking the period at the end 
     of clause (viii) and inserting ``, and'', and by adding at 
     the end the following new clause:
       ``(ix) any qualified retail improvement property placed in 
     service after December 31, 2008, and before January 1, 
     2010.''.
       (2) Qualified retail improvement property.--Section 168(e) 
     is amended by adding at the end the following new paragraph:
       ``(8) Qualified retail improvement property.--
       ``(A) In general.--The term `qualified retail improvement 
     property' means any improvement to an interior portion of a 
     building which is nonresidential real property if--
       ``(i) such portion is open to the general public and is 
     used in the retail trade or business of selling tangible 
     personal property to the general public, and
       ``(ii) such improvement is placed in service more than 3 
     years after the date the building was first placed in 
     service.
       ``(B) Improvements made by owner.--In the case of an 
     improvement made by the owner of such improvement, such 
     improvement shall be qualified retail improvement property 
     (if at all) only so long as such improvement is held by such 
     owner. Rules similar to the rules under paragraph (6)(B) 
     shall apply for purposes of the preceding sentence.
       ``(C) Certain improvements not included.--Such term shall 
     not include any improvement for which the expenditure is 
     attributable to--
       ``(i) the enlargement of the building,
       ``(ii) any elevator or escalator,
       ``(iii) any structural component benefitting a common area, 
     or
       ``(iv) the internal structural framework of the building.
       ``(D) Exclusion from bonus depreciation.--Property 
     described in this paragraph shall not be considered qualified 
     property for purposes of subsection (k).
       ``(E) Termination.--Such term shall not include any 
     improvement placed in service after December 31, 2009.''.
       (3) Requirement to use straight line method.--Section 
     168(b)(3) is amended by adding at the end the following new 
     subparagraph:
       ``(I) Qualified retail improvement property described in 
     subsection (e)(8).''.
       (4) Alternative system.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (E)(viii) the following new item:

``(E)(ix)....................................................      39''.
 


       (5) Effective date.--The amendments made by this subsection 
     shall apply to property placed in service after December 31, 
     2008.

     SEC. 306. 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. 307. 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. 308. INCREASE IN LIMIT ON COVER OVER OF RUM EXCISE TAX 
                   TO PUERTO RICO AND THE VIRGIN ISLANDS.

       (a) In General.--Paragraph (1) of section 7652(f) is 
     amended by striking ``January 1, 2008'' and inserting 
     ``January 1, 2010''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distilled spirits brought into the United 
     States after December 31, 2007.

     SEC. 309. 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.

     SEC. 310. 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. 311. 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. 312. 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. 313. QUALIFIED ZONE ACADEMY BONDS.

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

     ``SEC. 54E. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bonds.--For purposes of this 
     subchapter, the term `qualified zone academy bond' means any 
     bond issued as part of an issue if--
       ``(1) 100 percent of the available project proceeds of such 
     issue are to be used for a qualified purpose with respect to 
     a qualified zone academy established by an eligible local 
     education agency,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located, and
       ``(3) the issuer--
       ``(A) designates such bond for purposes of this section,
       ``(B) certifies that it has written assurances that the 
     private business contribution requirement of subsection (b) 
     will be met with respect to such academy, and
       ``(C) certifies that it has the written approval of the 
     eligible local education agency for such bond issuance.
       ``(b)  Private Business Contribution Requirement.--For 
     purposes of subsection (a), the private business contribution 
     requirement of this subsection is met with respect to any 
     issue if the eligible local education agency that established 
     the qualified zone academy has written commitments from 
     private entities to make qualified contributions having a 
     present value (as of the date of issuance of the issue) of 
     not less than 10 percent of the proceeds of the issue.
       ``(c) Limitation on Amount of Bonds Designated.--
       ``(1) National limitation.--There is a national zone 
     academy bond limitation for each calendar year. Such 
     limitation is $400,000,000 for 2008 and 2009, and, except as 
     provided in paragraph (4), zero thereafter.
       ``(2) Allocation of limitation.--The national zone academy 
     bond limitation for a calendar year shall be allocated by the 
     Secretary among the States on the basis of their respective 
     populations of individuals below the poverty line (as defined 
     by the Office of Management and Budget). The limitation 
     amount allocated to a State under the preceding sentence 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(3) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     paragraph (2) for such calendar year.
       ``(4) Carryover of unused limitation.--
       ``(A) In general.--If for any calendar year--
       ``(i) the limitation amount for any State, exceeds
       ``(ii) the amount of bonds issued during such year which 
     are designated under subsection (a) with respect to qualified 
     zone academies within such State,

     the limitation amount for such State for the following 
     calendar year shall be increased by the amount of such 
     excess.
       ``(B) Limitation on carryover.--Any carryforward of a 
     limitation amount may be carried only to the first 2 years 
     following the unused limitation year. For purposes of the 
     preceding sentence, a limitation amount shall be treated as 
     used on a first-in first-out basis.
       ``(C) Coordination with section 1397e.--Any carryover 
     determined under section 1397E(e)(4) (relating to carryover 
     of unused limitation) with respect to any State to calendar 
     year 2008 or 2009 shall be treated for purposes of this 
     section as a carryover with respect to such State for such 
     calendar year under subparagraph (A), and the limitation of 
     subparagraph (B) shall apply to such carryover taking into 
     account the calendar years to which such carryover relates.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of an eligible local education agency to 
     provide education or training below the postsecondary level 
     if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the eligible 
     local education agency,
       ``(C) the comprehensive education plan of such public 
     school or program is approved by the eligible local education 
     agency, and

[[Page 23054]]

       ``(D)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(2) Eligible local education agency.--For purposes of 
     this section, the term `eligible local education agency' 
     means any local educational agency as defined in section 9101 
     of the Elementary and Secondary Education Act of 1965.
       ``(3) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) rehabilitating or repairing the public school 
     facility in which the academy is established,
       ``(B) providing equipment for use at such academy,
       ``(C) developing course materials for education to be 
     provided at such academy, and
       ``(D) training teachers and other school personnel in such 
     academy.
       ``(4) Qualified contributions.--The term `qualified 
     contribution' means any contribution (of a type and quality 
     acceptable to the eligible local education agency) of--
       ``(A) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(B) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(C) services of employees as volunteer mentors,
       ``(D) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(E) any other property or service specified by the 
     eligible local education agency.''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 54A(d), as amended by this 
     Act, is amended by striking ``or'' at the end of subparagraph 
     (B), by inserting ``or'' at the end of subparagraph (C), and 
     by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) a qualified zone academy bond,''.
       (2) Subparagraph (C) of section 54A(d)(2), as amended by 
     this Act, is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     inserting ``, and'', and by adding at the end the following 
     new clause:
       ``(iv) in the case of a qualified zone academy bond, a 
     purpose specified in section 54E(a)(1).''.
       (3) Section 1397E is amended by adding at the end the 
     following new subsection:
       ``(m) Termination.--This section shall not apply to any 
     obligation issued after the date of the enactment of the Tax 
     Extenders and Alternative Minimum Tax Relief Act of 2008.''.
       (4) The table of sections for subpart I of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

       ``Sec. 54E. Qualified zone academy bonds.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 314. 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. 315. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON 
                   INDIAN RESERVATIONS.

       (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. 316. 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) Credit Allowed Against Alternative Minimum Tax.--
     Subparagraph (B) of section 38(c)(4), as amended by this Act, 
     is amended--
       (1) by redesignating clauses (v), (vi), and (vii) as 
     clauses (vi), (vii), and (viii), respectively, and
       (2) by inserting after clause (iv) the following new 
     clause:
       ``(v) the credit determined under section 45G,''.
       (c) Effective Dates.--
       (1) The amendment made by subsection (a) shall apply to 
     expenditures paid or incurred during taxable years beginning 
     after December 31, 2007.
       (2) The amendments made by subsection (b) shall apply to 
     credits determined under section 45G of the Internal Revenue 
     Code of 1986 in taxable years beginning after December 31, 
     2007, and to carrybacks of such credits.

     SEC. 317. 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.

     SEC. 318. 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. 319. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR 
                   HURRICANE KATRINA EMPLOYEES.

       (a) In General.--Paragraph (1) of section 201(b) of the 
     Katrina Emergency Tax Relief Act of 2005 is amended by 
     striking ``2-year'' and inserting ``4-year''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals hired after August 27, 2007.

     SEC. 320. EXTENSION OF INCREASED REHABILITATION CREDIT FOR 
                   STRUCTURES IN THE GULF OPPORTUNITY ZONE.

       (a) In General.--Subsection (h) of section 1400N is amended 
     by striking ``December 31, 2008'' and inserting ``December 
     31, 2009''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to expenditures paid or incurred after the date 
     of the enactment of this Act.

     SEC. 321. ENHANCED DEDUCTION FOR QUALIFIED COMPUTER 
                   CONTRIBUTIONS.

       (a) In General.--Subparagraph (G) of section 170(e)(6) 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 during taxable years 
     beginning after December 31, 2007.

     SEC. 322. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF 
                   COLUMBIA.

       (a) Designation of Zone.--
       (1) In general.--Subsection (f) of section 1400 is amended 
     by striking ``2007'' both places it appears and inserting 
     ``2009''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to periods beginning after December 31, 2007.
       (b) Tax-Exempt Economic Development Bonds.--
       (1) In general.--Subsection (b) of section 1400A is amended 
     by striking ``2007'' and inserting ``2009''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to bonds issued after December 31, 2007.
       (c) Zero Percent Capital Gains Rate.--
       (1) In general.--Subsection (b) of section 1400B is amended 
     by striking ``2008'' each place it appears and inserting 
     ``2010''.
       (2) Conforming amendments.--
       (A) Section 1400B(e)(2) is amended--
       (i) by striking ``2012'' and inserting ``2014'', and
       (ii) by striking ``2012'' in the heading thereof and 
     inserting ``2014''.
       (B) Section 1400B(g)(2) is amended by striking ``2012'' and 
     inserting ``2014''.
       (C) Section 1400F(d) is amended by striking ``2012'' and 
     inserting ``2014''.
       (3) Effective dates.--
       (A) Extension.--The amendments made by paragraph (1) shall 
     apply to acquisitions after December 31, 2007.
       (B) Conforming amendments.--The amendments made by 
     paragraph (2) shall take effect on the date of the enactment 
     of this Act.
       (d) First-Time Homebuyer Credit.--
       (1) In general.--Subsection (i) of section 1400C is amended 
     by striking ``2008'' and inserting ``2010''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to property purchased after December 31, 2007.

     SEC. 323. ENHANCED CHARITABLE DEDUCTIONS FOR CONTRIBUTIONS OF 
                   FOOD INVENTORY.

       (a) Increased Amount of Deduction.--
       (1) 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''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to contributions made after December 31, 2007.
       (b) Temporary Suspension of Limitations on Charitable 
     Contributions.--
       (1) In general.--Section 170(b) is amended by adding at the 
     end the following new paragraph:
       ``(3) Temporary suspension of limitations on charitable 
     contributions.--In the case of a qualified farmer or rancher 
     (as defined in paragraph (1)(E)(v)), any charitable 
     contribution of food--
       ``(A) to which subsection (e)(3)(C) applies (without regard 
     to clause (ii) thereof), and
       ``(B) which is made during the period beginning on the date 
     of the enactment of this paragraph and before January 1, 
     2009,

     shall be treated for purposes of paragraph (1)(E) or (2)(B), 
     whichever is applicable, as if it were a qualified 
     conservation contribution which is made by a qualified farmer 
     or rancher and which otherwise meets the requirements of such 
     paragraph.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 324. EXTENSION OF ENHANCED CHARITABLE DEDUCTION FOR 
                   CONTRIBUTIONS OF BOOK INVENTORY.

       (a) Extension.--Clause (iv) of section 170(e)(3)(D) 
     (relating to termination) is amended by striking ``December 
     31, 2007'' and inserting ``December 31, 2009''.

[[Page 23055]]

       (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. 325. EXTENSION AND MODIFICATION OF DUTY SUSPENSION ON 
                   WOOL PRODUCTS; WOOL RESEARCH FUND; WOOL DUTY 
                   REFUNDS.

       (a) Extension of Temporary Duty Reductions.--Each of the 
     following headings of the Harmonized Tariff Schedule of the 
     United States is amended by striking the date in the 
     effective period column and inserting ``12/31/2014'':
       (1) Heading 9902.51.11 (relating to fabrics of worsted 
     wool).
       (2) Heading 9902.51.13 (relating to yarn of combed wool).
       (3) Heading 9902.51.14 (relating to wool fiber, waste, 
     garnetted stock, combed wool, or wool top).
       (4) Heading 9902.51.15 (relating to fabrics of combed 
     wool).
       (5) Heading 9902.51.16 (relating to fabrics of combed 
     wool).
       (b) Extension of Duty Refunds and Wool Research Trust 
     Fund.--
       (1) In general.--Section 4002(c) of the Wool Suit and 
     Textile Trade Extension Act of 2004 (Public Law 108-429; 118 
     Stat. 2603) is amended--
       (A) in paragraph (3)(C), by striking ``2010'' and inserting 
     ``2015''; and
       (B) in paragraph (6)(A), by striking ``through 2009'' and 
     inserting ``through 2014''.
       (2) Sunset.--Section 506(f) of the Trade and Development 
     Act of 2000 (Public 106-200; 114 Stat. 303 (7 U.S.C. 7101 
     note)) is amended by striking ``2010'' and inserting 
     ``2015''.

          TITLE IV--EXTENSION OF TAX ADMINISTRATION PROVISIONS

     SEC. 401. PERMANENT AUTHORITY FOR UNDERCOVER OPERATIONS.

       (a) In General.--Section 7608(c) (relating to rules 
     relating to undercover operations) is amended by striking 
     paragraph (6).
       (b) Effective Date.--The amendment made by this section 
     shall apply to operations conducted after the date of the 
     enactment of this Act.

     SEC. 402. PERMANENT AUTHORITY FOR DISCLOSURE OF INFORMATION 
                   RELATING TO TERRORIST ACTIVITIES.

       (a) Disclosure of Return Information to Apprise Appropriate 
     Officials of Terrorist Activities.--Subparagraph (C) of 
     section 6103(i)(3) is amended by striking clause (iv).
       (b) Disclosure Upon Request of Information Relating to 
     Terrorist Activities.--Paragraph (7) of section 6103(i) is 
     amended by striking subparagraph (E).
       (c) Effective Date.--The amendments made by this section 
     shall apply to disclosures after the date of the enactment of 
     this Act.

        TITLE V--ADDITIONAL TAX RELIEF AND OTHER TAX PROVISIONS

                     Subtitle A--General Provisions

     SEC. 501. $8,500 INCOME THRESHOLD USED TO CALCULATE 
                   REFUNDABLE PORTION OF CHILD TAX CREDIT.

       (a) In General.--Section 24(d) is amended by adding at the 
     end the following new paragraph:
       ``(4) Special rule for 2008.--Notwithstanding paragraph 
     (3), in the case of any taxable year beginning in 2008, the 
     dollar amount in effect for such taxable year under paragraph 
     (1)(B)(i) shall be $8,500.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.

     SEC. 502. PROVISIONS RELATED TO FILM AND TELEVISION 
                   PRODUCTIONS.

       (a) Extension 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''.
       (b) Modification of Limitation on Expensing.--Subparagraph 
     (A) of section 181(a)(2) is amended to read as follows:
       ``(A) In general.--Paragraph (1) shall not apply to so much 
     of the aggregate cost of any qualified film or television 
     production as exceeds $15,000,000.''.
       (c) Modifications to Deduction for Domestic Activities.--
       (1) Determination of w-2 wages.--Paragraph (2) of section 
     199(b) is amended by adding at the end the following new 
     subparagraph:
       ``(D) Special rule for qualified film.--In the case of a 
     qualified film, such term shall include compensation for 
     services performed in the United States by actors, production 
     personnel, directors, and producers.''.
       (2) Definition of qualified film.--Paragraph (6) of section 
     199(c) is amended by adding at the end the following: ``A 
     qualified film shall include any copyrights, trademarks, or 
     other intangibles with respect to such film. The methods and 
     means of distributing a qualified film shall not affect the 
     availability of the deduction under this section.''.
       (3) Partnerships.--Subparagraph (A) of section 199(d)(1) is 
     amended by striking ``and'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``, and'', and by adding at the end the following new clause:
       ``(iv) in the case of each partner of a partnership, or 
     shareholder of an S corporation, who owns (directly or 
     indirectly) at least 20 percent of the capital interests in 
     such partnership or of the stock of such S corporation--

       ``(I) such partner or shareholder shall be treated as 
     having engaged directly in any film produced by such 
     partnership or S corporation, and
       ``(II) such partnership or S corporation shall be treated 
     as having engaged directly in any film produced by such 
     partner or shareholder.''.

       (d) Conforming Amendment.--Section 181(d)(3)(A) is amended 
     by striking ``actors'' and all that follows and inserting 
     ``actors, production personnel, directors, and producers.''.
       (e) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to qualified film and television productions commencing after 
     December 31, 2007.
       (2) Deduction.--The amendments made by subsection (c) shall 
     apply to taxable years beginning after December 31, 2007.

     SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS 
                   DESIGNED FOR USE BY CHILDREN.

       (a) In General.--Paragraph (2) of section 4161(b) is 
     amended by redesignating subparagraph (B) as subparagraph (C) 
     and by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) Exemption for certain wooden arrow shafts.--
     Subparagraph (A) shall not apply to any shaft consisting of 
     all natural wood with no laminations or artificial means of 
     enhancing the spine of such shaft (whether sold separately or 
     incorporated as part of a finished or unfinished product) of 
     a type used in the manufacture of any arrow which after its 
     assembly--
       ``(i) measures \5/16\ of an inch or less in diameter, and
       ``(ii) is not suitable for use with a bow described in 
     paragraph (1)(A).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to shafts first sold after the date of enactment 
     of this Act.

     SEC. 504. INCOME AVERAGING FOR AMOUNTS RECEIVED IN CONNECTION 
                   WITH THE EXXON VALDEZ LITIGATION.

       (a) Income Averaging of Amounts Received From the Exxon 
     Valdez Litigation.--For purposes of section 1301 of the 
     Internal Revenue Code of 1986--
       (1) any qualified taxpayer who receives any qualified 
     settlement income in any taxable year shall be treated as 
     engaged in a fishing business (determined without regard to 
     the commercial nature of the business), and
       (2) such qualified settlement income shall be treated as 
     income attributable to such a fishing business for such 
     taxable year.
       (b) Contributions of Amounts Received to Retirement 
     Accounts.--
       (1) In general.--Any qualified taxpayer who receives 
     qualified settlement income during the taxable year may, at 
     any time before the end of the taxable year in which such 
     income was received, make one or more contributions to an 
     eligible retirement plan of which such qualified taxpayer is 
     a beneficiary in an aggregate amount not to exceed the lesser 
     of--
       (A) $100,000 (reduced by the amount of qualified settlement 
     income contributed to an eligible retirement plan in prior 
     taxable years pursuant to this subsection), or
       (B) the amount of qualified settlement income received by 
     the individual during the taxable year.
       (2) Time when contributions deemed made.--For purposes of 
     paragraph (1), a qualified taxpayer shall be deemed to have 
     made a contribution to an eligible retirement plan on the 
     last day of the taxable year in which such income is received 
     if the contribution is made on account of such taxable year 
     and is made not later than the time prescribed by law for 
     filing the return for such taxable year (not including 
     extensions thereof).
       (3) Treatment of contributions to eligible retirement 
     plans.--For purposes of the Internal Revenue Code of 1986, if 
     a contribution is made pursuant to paragraph (1) with respect 
     to qualified settlement income, then--
       (A) except as provided in paragraph (4)--
       (i) to the extent of such contribution, the qualified 
     settlement income shall not be included in taxable income, 
     and
       (ii) for purposes of section 72 of such Code, such 
     contribution shall not be considered to be investment in the 
     contract,
       (B) the qualified taxpayer shall, to the extent of the 
     amount of the contribution, be treated--
       (i) as having received the qualified settlement income--

       (I) in the case of a contribution to an individual 
     retirement plan (as defined under section 7701(a)(37) of such 
     Code), in a distribution described in section 408(d)(3) of 
     such Code, and
       (II) in the case of any other eligible retirement plan, in 
     an eligible rollover distribution (as defined under section 
     402(f)(2) of such Code), and

       (ii) as having transferred the amount to the eligible 
     retirement plan in a direct trustee to trustee transfer 
     within 60 days of the distribution,
       (C) section 408(d)(3)(B) of the Internal Revenue Code of 
     1986 shall not apply with respect to amounts treated as a 
     rollover under this paragraph, and
       (D) section 408A(c)(3)(B) of the Internal Revenue Code of 
     1986 shall not apply with respect to amounts contributed to a 
     Roth IRA (as defined under section 408A(b) of such Code) or a 
     designated Roth contribution to an applicable retirement plan 
     (within the meaning of section 402A of such Code) under this 
     paragraph.
       (4) Special rule for roth iras and roth 401(k)s.--For 
     purposes of the Internal Revenue Code of 1986, if a 
     contribution is made pursuant to paragraph (1) with respect 
     to qualified settlement income to a Roth IRA (as defined 
     under section 408A(b) of such Code) or as a designated Roth 
     contribution to an applicable retirement plan (within the 
     meaning of section 402A of such Code), then--

[[Page 23056]]

       (A) the qualified settlement income shall be includible in 
     taxable income, and
       (B) for purposes of section 72 of such Code, such 
     contribution shall be considered to be investment in the 
     contract.
       (5) Eligible retirement plan.--For purpose of this 
     subsection, the term ``eligible retirement plan'' has the 
     meaning given such term under section 402(c)(8)(B) of the 
     Internal Revenue Code of 1986.
       (c) Treatment of Qualified Settlement Income Under 
     Employment Taxes.--
       (1) SECA.--For purposes of chapter 2 of the Internal 
     Revenue Code of 1986 and section 211 of the Social Security 
     Act, no portion of qualified settlement income received by a 
     qualified taxpayer shall be treated as self-employment 
     income.
       (2) FICA.--For purposes of chapter 21 of the Internal 
     Revenue Code of 1986 and section 209 of the Social Security 
     Act, no portion of qualified settlement income received by a 
     qualified taxpayer shall be treated as wages.
       (d) Qualified Taxpayer.--For purposes of this section, the 
     term ``qualified taxpayer'' means--
       (1) any individual who is a plaintiff in the civil action 
     In re Exxon Valdez, No. 89-095-CV (HRH) (Consolidated) (D. 
     Alaska); or
       (2) any individual who is a beneficiary of the estate of 
     such a plaintiff who--
       (A) acquired the right to receive qualified settlement 
     income from that plaintiff; and
       (B) was the spouse or an immediate relative of that 
     plaintiff.
       (e) Qualified Settlement Income.--For purposes of this 
     section, the term ``qualified settlement income'' means any 
     interest and punitive damage awards which are--
       (1) otherwise includible in taxable income, and
       (2) received (whether as lump sums or periodic payments) in 
     connection with the civil action In re Exxon Valdez, No. 89-
     095-CV (HRH) (Consolidated) (D. Alaska) (whether pre- or 
     post-judgment and whether related to a settlement or 
     judgment).

     SEC. 505. CERTAIN FARMING BUSINESS MACHINERY AND EQUIPMENT 
                   TREATED AS 5-YEAR PROPERTY.

       (a) In General.--Section 168(e)(3)(B) (defining 5-year 
     property) is amended by striking ``and'' at the end of clause 
     (v), by striking the period at the end of clause (vi)(III) 
     and inserting ``, and'', and by inserting after clause (vi) 
     the following new clause:
       ``(vii) any machinery or equipment (other than any grain 
     bin, cotton ginning asset, fence, or other land improvement) 
     which is used in a farming business (as defined in section 
     263A(e)(4)), the original use of which commences with the 
     taxpayer after December 31, 2008, and which is placed in 
     service before January 1, 2010.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes) is amended by inserting after the item 
     relating to subparagraph (B)(iii) the following:

  (B)(vii)...................................................      10''.
 

       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2008.

     SEC. 506. MODIFICATION OF PENALTY ON UNDERSTATEMENT OF 
                   TAXPAYER'S LIABILITY BY TAX RETURN PREPARER.

       (a) In General.--Subsection (a) of section 6694 is amended 
     to read as follows:
       ``(a) Understatement Due to Unreasonable Positions.--
       ``(1) In general.--If a tax return preparer--
       ``(A) prepares any return or claim of refund with respect 
     to which any part of an understatement of liability is due to 
     a position described in paragraph (2), and
       ``(B) knew (or reasonably should have known) of the 
     position,

     such tax return preparer shall pay a penalty with respect to 
     each such return or claim in an amount equal to the greater 
     of $1,000 or 50 percent of the income derived (or to be 
     derived) by the tax return preparer with respect to the 
     return or claim.
       ``(2) Unreasonable position.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, a position is described in this paragraph unless 
     there is or was substantial authority for the position.
       ``(B) Disclosed positions.--If the position was disclosed 
     as provided in section 6662(d)(2)(B)(ii)(I) and is not a 
     position to which subparagraph (C) applies, the position is 
     described in this paragraph unless there is a reasonable 
     basis for the position.
       ``(C) Tax shelters and reportable transactions.--If the 
     position is with respect to a tax shelter (as defined in 
     section 6662(d)(2)(C)(ii)) or a reportable transaction to 
     which section 6662A applies, the position is described in 
     this paragraph unless it is reasonable to believe that the 
     position would more likely than not be sustained on its 
     merits.
       ``(3) Reasonable cause exception.--No penalty shall be 
     imposed under this subsection if it is shown that there is 
     reasonable cause for the understatement and the tax return 
     preparer acted in good faith.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply--
       (1) in the case of a position other than a position 
     described in subparagraph (C) of section 6694(a)(2) of the 
     Internal Revenue Code of 1986 (as amended by this section), 
     to returns prepared after May 25, 2007, and
       (2) in the case of a position described in such 
     subparagraph (C), to returns prepared for taxable years 
     ending after the date of the enactment of this Act.

 Subtitle B--Paul Wellstone and Pete Domenici Mental Health Parity and 
                      Addiction Equity Act of 2008

     SEC. 511. SHORT TITLE.

       This subtitle may be cited as the ``Paul Wellstone and Pete 
     Domenici Mental Health Parity and Addiction Equity Act of 
     2008''.

     SEC. 512. MENTAL HEALTH PARITY.

       (a) Amendments to ERISA.--Section 712 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1185a) is 
     amended--
       (1) in subsection (a), by adding at the end the following:
       ``(3) Financial requirements and treatment limitations.--
       ``(A) In general.--In the case of a group health plan (or 
     health insurance coverage offered in connection with such a 
     plan) that provides both medical and surgical benefits and 
     mental health or substance use disorder benefits, such plan 
     or coverage shall ensure that--
       ``(i) the financial requirements applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant financial requirements 
     applied to substantially all medical and surgical benefits 
     covered by the plan (or coverage), and there are no separate 
     cost sharing requirements that are applicable only with 
     respect to mental health or substance use disorder benefits; 
     and
       ``(ii) the treatment limitations applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant treatment limitations 
     applied to substantially all medical and surgical benefits 
     covered by the plan (or coverage) and there are no separate 
     treatment limitations that are applicable only with respect 
     to mental health or substance use disorder benefits.
       ``(B) Definitions.--In this paragraph:
       ``(i) Financial requirement.--The term `financial 
     requirement' includes deductibles, copayments, coinsurance, 
     and out-of-pocket expenses, but excludes an aggregate 
     lifetime limit and an annual limit subject to paragraphs (1) 
     and (2),
       ``(ii) Predominant.--A financial requirement or treatment 
     limit is considered to be predominant if it is the most 
     common or frequent of such type of limit or requirement.
       ``(iii) Treatment limitation.--The term `treatment 
     limitation' includes limits on the frequency of treatment, 
     number of visits, days of coverage, or other similar limits 
     on the scope or duration of treatment.
       ``(4) Availability of plan information.--The criteria for 
     medical necessity determinations made under the plan with 
     respect to mental health or substance use disorder benefits 
     (or the health insurance coverage offered in connection with 
     the plan with respect to such benefits) shall be made 
     available by the plan administrator (or the health insurance 
     issuer offering such coverage) in accordance with regulations 
     to any current or potential participant, beneficiary, or 
     contracting provider upon request. The reason for any denial 
     under the plan (or coverage) of reimbursement or payment for 
     services with respect to mental health or substance use 
     disorder benefits in the case of any participant or 
     beneficiary shall, on request or as otherwise required, be 
     made available by the plan administrator (or the health 
     insurance issuer offering such coverage) to the participant 
     or beneficiary in accordance with regulations.
       ``(5) Out-of-network providers.--In the case of a plan or 
     coverage that provides both medical and surgical benefits and 
     mental health or substance use disorder benefits, if the plan 
     or coverage provides coverage for medical or surgical 
     benefits provided by out-of-network providers, the plan or 
     coverage shall provide coverage for mental health or 
     substance use disorder benefits provided by out-of-network 
     providers in a manner that is consistent with the 
     requirements of this section.'';
       (2) in subsection (b), by amending paragraph (2) to read as 
     follows:
       ``(2) in the case of a group health plan (or health 
     insurance coverage offered in connection with such a plan) 
     that provides mental health or substance use disorder 
     benefits, as affecting the terms and conditions of the plan 
     or coverage relating to such benefits under the plan or 
     coverage, except as provided in subsection (a).'';
       (3) in subsection (c)--
       (A) in paragraph (1)(B)--
       (i) by inserting ``(or 1 in the case of an employer 
     residing in a State that permits small groups to include a 
     single individual)'' after ``at least 2'' the first place 
     that such appears; and
       (ii) by striking ``and who employs at least 2 employees on 
     the first day of the plan year''; and
       (B) by striking paragraph (2) and inserting the following:
       ``(2) Cost exemption.--
       ``(A) In general.--With respect to a group health plan (or 
     health insurance coverage offered in connection with such a 
     plan), if the application of this section to such plan (or 
     coverage) results in an increase for the plan year involved 
     of the actual total costs of coverage with respect to medical 
     and surgical benefits and mental health and substance use 
     disorder benefits under the plan (as determined and certified 
     under subparagraph (C)) by an amount that exceeds the 
     applicable percentage described in subparagraph (B) of the 
     actual total plan costs, the provisions of this section shall 
     not apply to such plan (or coverage) during the following 
     plan year, and such exemption shall apply to the plan (or 
     coverage) for 1 plan year. An employer may elect to continue 
     to apply

[[Page 23057]]

     mental health and substance use disorder parity pursuant to 
     this section with respect to the group health plan (or 
     coverage) involved regardless of any increase in total costs.
       ``(B) Applicable percentage.--With respect to a plan (or 
     coverage), the applicable percentage described in this 
     subparagraph shall be--
       ``(i) 2 percent in the case of the first plan year in which 
     this section is applied; and
       ``(ii) 1 percent in the case of each subsequent plan year.
       ``(C) Determinations by actuaries.--Determinations as to 
     increases in actual costs under a plan (or coverage) for 
     purposes of this section shall be made and certified by a 
     qualified and licensed actuary who is a member in good 
     standing of the American Academy of Actuaries. All such 
     determinations shall be in a written report prepared by the 
     actuary. The report, and all underlying documentation relied 
     upon by the actuary, shall be maintained by the group health 
     plan or health insurance issuer for a period of 6 years 
     following the notification made under subparagraph (E).
       ``(D) 6-month determinations.--If a group health plan (or a 
     health insurance issuer offering coverage in connection with 
     a group health plan) seeks an exemption under this paragraph, 
     determinations under subparagraph (A) shall be made after 
     such plan (or coverage) has complied with this section for 
     the first 6 months of the plan year involved.
       ``(E) Notification.--
       ``(i) In general.--A group health plan (or a health 
     insurance issuer offering coverage in connection with a group 
     health plan) that, based upon a certification described under 
     subparagraph (C), qualifies for an exemption under this 
     paragraph, and elects to implement the exemption, shall 
     promptly notify the Secretary, the appropriate State 
     agencies, and participants and beneficiaries in the plan of 
     such election.
       ``(ii) Requirement.--A notification to the Secretary under 
     clause (i) shall include--

       ``(I) a description of the number of covered lives under 
     the plan (or coverage) involved at the time of the 
     notification, and as applicable, at the time of any prior 
     election of the cost-exemption under this paragraph by such 
     plan (or coverage);
       ``(II) for both the plan year upon which a cost exemption 
     is sought and the year prior, a description of the actual 
     total costs of coverage with respect to medical and surgical 
     benefits and mental health and substance use disorder 
     benefits under the plan; and
       ``(III) for both the plan year upon which a cost exemption 
     is sought and the year prior, the actual total costs of 
     coverage with respect to mental health and substance use 
     disorder benefits under the plan.

       ``(iii) Confidentiality.--A notification to the Secretary 
     under clause (i) shall be confidential. The Secretary shall 
     make available, upon request and on not more than an annual 
     basis, an anonymous itemization of such notifications, that 
     includes--

       ``(I) a breakdown of States by the size and type of 
     employers submitting such notification; and
       ``(II) a summary of the data received under clause (ii).

       ``(F) Audits by appropriate agencies.--To determine 
     compliance with this paragraph, the Secretary may audit the 
     books and records of a group health plan or health insurance 
     issuer relating to an exemption, including any actuarial 
     reports prepared pursuant to subparagraph (C), during the 6 
     year period following the notification of such exemption 
     under subparagraph (E). A State agency receiving a 
     notification under subparagraph (E) may also conduct such an 
     audit with respect to an exemption covered by such 
     notification.'';
       (4) in subsection (e), by striking paragraph (4) and 
     inserting the following:
       ``(4) Mental health benefits.--The term `mental health 
     benefits' means benefits with respect to services for mental 
     health conditions, as defined under the terms of the plan and 
     in accordance with applicable Federal and State law.
       ``(5) Substance use disorder benefits.--The term `substance 
     use disorder benefits' means benefits with respect to 
     services for substance use disorders, as defined under the 
     terms of the plan and in accordance with applicable Federal 
     and State law.'';
       (5) by striking subsection (f);
       (6) by inserting after subsection (e) the following:
       ``(f) Secretary Report.--The Secretary shall, by January 1, 
     2012, and every two years thereafter, submit to the 
     appropriate committees of Congress a report on compliance of 
     group health plans (and health insurance coverage offered in 
     connection with such plans) with the requirements of this 
     section. Such report shall include the results of any surveys 
     or audits on compliance of group health plans (and health 
     insurance coverage offered in connection with such plans) 
     with such requirements and an analysis of the reasons for any 
     failures to comply.
       ``(g) Notice and Assistance.--The Secretary, in cooperation 
     with the Secretaries of Health and Human Services and 
     Treasury, as appropriate, shall publish and widely 
     disseminate guidance and information for group health plans, 
     participants and beneficiaries, applicable State and local 
     regulatory bodies, and the National Association of Insurance 
     Commissioners concerning the requirements of this section and 
     shall provide assistance concerning such requirements and the 
     continued operation of applicable State law. Such guidance 
     and information shall inform participants and beneficiaries 
     of how they may obtain assistance under this section, 
     including, where appropriate, assistance from State consumer 
     and insurance agencies.'';
       (7) by striking ``mental health benefits'' and inserting 
     ``mental health and substance use disorder benefits'' each 
     place it appears in subsections (a)(1)(B)(i), (a)(1)(C), 
     (a)(2)(B)(i), and (a)(2)(C); and
       (8) by striking ``mental health benefits'' and inserting 
     ``mental health or substance use disorder benefits'' each 
     place it appears (other than in any provision amended by the 
     previous paragraph).
       (b) Amendments to Public Health Service Act.--Section 2705 
     of the Public Health Service Act (42 U.S.C. 300gg-5) is 
     amended--
       (1) in subsection (a), by adding at the end the following:
       ``(3) Financial requirements and treatment limitations.--
       ``(A) In general.--In the case of a group health plan (or 
     health insurance coverage offered in connection with such a 
     plan) that provides both medical and surgical benefits and 
     mental health or substance use disorder benefits, such plan 
     or coverage shall ensure that--
       ``(i) the financial requirements applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant financial requirements 
     applied to substantially all medical and surgical benefits 
     covered by the plan (or coverage), and there are no separate 
     cost sharing requirements that are applicable only with 
     respect to mental health or substance use disorder benefits; 
     and
       ``(ii) the treatment limitations applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant treatment limitations 
     applied to substantially all medical and surgical benefits 
     covered by the plan (or coverage) and there are no separate 
     treatment limitations that are applicable only with respect 
     to mental health or substance use disorder benefits.
       ``(B) Definitions.--In this paragraph:
       ``(i) Financial requirement.--The term `financial 
     requirement' includes deductibles, copayments, coinsurance, 
     and out-of-pocket expenses, but excludes an aggregate 
     lifetime limit and an annual limit subject to paragraphs (1) 
     and (2).
       ``(ii) Predominant.--A financial requirement or treatment 
     limit is considered to be predominant if it is the most 
     common or frequent of such type of limit or requirement.
       ``(iii) Treatment limitation.--The term `treatment 
     limitation' includes limits on the frequency of treatment, 
     number of visits, days of coverage, or other similar limits 
     on the scope or duration of treatment.
       ``(4) Availability of plan information.--The criteria for 
     medical necessity determinations made under the plan with 
     respect to mental health or substance use disorder benefits 
     (or the health insurance coverage offered in connection with 
     the plan with respect to such benefits) shall be made 
     available by the plan administrator (or the health insurance 
     issuer offering such coverage) in accordance with regulations 
     to any current or potential participant, beneficiary, or 
     contracting provider upon request. The reason for any denial 
     under the plan (or coverage) of reimbursement or payment for 
     services with respect to mental health or substance use 
     disorder benefits in the case of any participant or 
     beneficiary shall, on request or as otherwise required, be 
     made available by the plan administrator (or the health 
     insurance issuer offering such coverage) to the participant 
     or beneficiary in accordance with regulations.
       ``(5) Out-of-network providers.--In the case of a plan or 
     coverage that provides both medical and surgical benefits and 
     mental health or substance use disorder benefits, if the plan 
     or coverage provides coverage for medical or surgical 
     benefits provided by out-of-network providers, the plan or 
     coverage shall provide coverage for mental health or 
     substance use disorder benefits provided by out-of-network 
     providers in a manner that is consistent with the 
     requirements of this section.'';
       (2) in subsection (b), by amending paragraph (2) to read as 
     follows:
       ``(2) in the case of a group health plan (or health 
     insurance coverage offered in connection with such a plan) 
     that provides mental health or substance use disorder 
     benefits, as affecting the terms and conditions of the plan 
     or coverage relating to such benefits under the plan or 
     coverage, except as provided in subsection (a).'';
       (3) in subsection (c)--
       (A) in paragraph (1), by inserting before the period the 
     following: ``(as defined in section 2791(e)(4), except that 
     for purposes of this paragraph such term shall include 
     employers with 1 employee in the case of an employer residing 
     in a State that permits small groups to include a single 
     individual)''; and
       (B) by striking paragraph (2) and inserting the following:
       ``(2) Cost exemption.--
       ``(A) In general.--With respect to a group health plan (or 
     health insurance coverage offered in connection with such a 
     plan), if the application of this section to such plan (or 
     coverage) results in an increase for the plan year involved 
     of the actual total costs of coverage with respect to medical 
     and surgical benefits and mental health and substance use 
     disorder benefits under the plan (as determined and certified 
     under subparagraph (C)) by an amount that exceeds the 
     applicable percentage described in subparagraph (B) of the 
     actual total plan costs, the provisions of this section shall 
     not apply to such plan (or coverage) during the following 
     plan year, and such exemption shall

[[Page 23058]]

      apply to the plan (or coverage) for 1 plan year. An employer 
     may elect to continue to apply mental health and substance 
     use disorder parity pursuant to this section with respect to 
     the group health plan (or coverage) involved regardless of 
     any increase in total costs.
       ``(B) Applicable percentage.--With respect to a plan (or 
     coverage), the applicable percentage described in this 
     subparagraph shall be--
       ``(i) 2 percent in the case of the first plan year in which 
     this section is applied; and
       ``(ii) 1 percent in the case of each subsequent plan year.
       ``(C) Determinations by actuaries.--Determinations as to 
     increases in actual costs under a plan (or coverage) for 
     purposes of this section shall be made and certified by a 
     qualified and licensed actuary who is a member in good 
     standing of the American Academy of Actuaries. All such 
     determinations shall be in a written report prepared by the 
     actuary. The report, and all underlying documentation relied 
     upon by the actuary, shall be maintained by the group health 
     plan or health insurance issuer for a period of 6 years 
     following the notification made under subparagraph (E).
       ``(D) 6-month determinations.--If a group health plan (or a 
     health insurance issuer offering coverage in connection with 
     a group health plan) seeks an exemption under this paragraph, 
     determinations under subparagraph (A) shall be made after 
     such plan (or coverage) has complied with this section for 
     the first 6 months of the plan year involved.
       ``(E) Notification.--
       ``(i) In general.--A group health plan (or a health 
     insurance issuer offering coverage in connection with a group 
     health plan) that, based upon a certification described under 
     subparagraph (C), qualifies for an exemption under this 
     paragraph, and elects to implement the exemption, shall 
     promptly notify the Secretary, the appropriate State 
     agencies, and participants and beneficiaries in the plan of 
     such election.
       ``(ii) Requirement.--A notification to the Secretary under 
     clause (i) shall include--

       ``(I) a description of the number of covered lives under 
     the plan (or coverage) involved at the time of the 
     notification, and as applicable, at the time of any prior 
     election of the cost-exemption under this paragraph by such 
     plan (or coverage);
       ``(II) for both the plan year upon which a cost exemption 
     is sought and the year prior, a description of the actual 
     total costs of coverage with respect to medical and surgical 
     benefits and mental health and substance use disorder 
     benefits under the plan; and
       ``(III) for both the plan year upon which a cost exemption 
     is sought and the year prior, the actual total costs of 
     coverage with respect to mental health and substance use 
     disorder benefits under the plan.

       ``(iii) Confidentiality.--A notification to the Secretary 
     under clause (i) shall be confidential. The Secretary shall 
     make available, upon request and on not more than an annual 
     basis, an anonymous itemization of such notifications, that 
     includes--

       ``(I) a breakdown of States by the size and type of 
     employers submitting such notification; and
       ``(II) a summary of the data received under clause (ii).

       ``(F) Audits by appropriate agencies.--To determine 
     compliance with this paragraph, the Secretary may audit the 
     books and records of a group health plan or health insurance 
     issuer relating to an exemption, including any actuarial 
     reports prepared pursuant to subparagraph (C), during the 6 
     year period following the notification of such exemption 
     under subparagraph (E). A State agency receiving a 
     notification under subparagraph (E) may also conduct such an 
     audit with respect to an exemption covered by such 
     notification.'';
       (4) in subsection (e), by striking paragraph (4) and 
     inserting the following:
       ``(4) Mental health benefits.--The term `mental health 
     benefits' means benefits with respect to services for mental 
     health conditions, as defined under the terms of the plan and 
     in accordance with applicable Federal and State law.
       ``(5) Substance use disorder benefits.--The term `substance 
     use disorder benefits' means benefits with respect to 
     services for substance use disorders, as defined under the 
     terms of the plan and in accordance with applicable Federal 
     and State law.'';
       (5) by striking subsection (f);
       (6) by striking ``mental health benefits'' and inserting 
     ``mental health and substance use disorder benefits'' each 
     place it appears in subsections (a)(1)(B)(i), (a)(1)(C), 
     (a)(2)(B)(i), and (a)(2)(C); and
       (7) by striking ``mental health benefits'' and inserting 
     ``mental health or substance use disorder benefits'' each 
     place it appears (other than in any provision amended by the 
     previous paragraph).
       (c) Amendments to Internal Revenue Code.--Section 9812 of 
     the Internal Revenue Code of 1986 is amended--
       (1) in subsection (a), by adding at the end the following:
       ``(3) Financial requirements and treatment limitations.--
       ``(A) In general.--In the case of a group health plan that 
     provides both medical and surgical benefits and mental health 
     or substance use disorder benefits, such plan shall ensure 
     that--
       ``(i) the financial requirements applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant financial requirements 
     applied to substantially all medical and surgical benefits 
     covered by the plan, and there are no separate cost sharing 
     requirements that are applicable only with respect to mental 
     health or substance use disorder benefits; and
       ``(ii) the treatment limitations applicable to such mental 
     health or substance use disorder benefits are no more 
     restrictive than the predominant treatment limitations 
     applied to substantially all medical and surgical benefits 
     covered by the plan and there are no separate treatment 
     limitations that are applicable only with respect to mental 
     health or substance use disorder benefits.
       ``(B) Definitions.--In this paragraph:
       ``(i) Financial requirement.--The term `financial 
     requirement' includes deductibles, copayments, coinsurance, 
     and out-of-pocket expenses, but excludes an aggregate 
     lifetime limit and an annual limit subject to paragraphs (1) 
     and (2),
       ``(ii) Predominant.--A financial requirement or treatment 
     limit is considered to be predominant if it is the most 
     common or frequent of such type of limit or requirement.
       ``(iii) Treatment limitation.--The term `treatment 
     limitation' includes limits on the frequency of treatment, 
     number of visits, days of coverage, or other similar limits 
     on the scope or duration of treatment.
       ``(4) Availability of plan information.--The criteria for 
     medical necessity determinations made under the plan with 
     respect to mental health or substance use disorder benefits 
     shall be made available by the plan administrator in 
     accordance with regulations to any current or potential 
     participant, beneficiary, or contracting provider upon 
     request. The reason for any denial under the plan of 
     reimbursement or payment for services with respect to mental 
     health or substance use disorder benefits in the case of any 
     participant or beneficiary shall, on request or as otherwise 
     required, be made available by the plan administrator to the 
     participant or beneficiary in accordance with regulations.
       ``(5) Out-of-network providers.--In the case of a plan that 
     provides both medical and surgical benefits and mental health 
     or substance use disorder benefits, if the plan provides 
     coverage for medical or surgical benefits provided by out-of-
     network providers, the plan shall provide coverage for mental 
     health or substance use disorder benefits provided by out-of-
     network providers in a manner that is consistent with the 
     requirements of this section.'';
       (2) in subsection (b), by amending paragraph (2) to read as 
     follows:
       ``(2) in the case of a group health plan that provides 
     mental health or substance use disorder benefits, as 
     affecting the terms and conditions of the plan relating to 
     such benefits under the plan, except as provided in 
     subsection (a).'';
       (3) in subsection (c)--
       (A) by amending paragraph (1) to read as follows:
       ``(1) Small employer exemption.--
       ``(A) In general.--This section shall not apply to any 
     group health plan for any plan year of a small employer.
       ``(B) Small employer.--For purposes of subparagraph (A), 
     the term `small employer' means, with respect to a calendar 
     year and a plan year, an employer who employed an average of 
     at least 2 (or 1 in the case of an employer residing in a 
     State that permits small groups to include a single 
     individual) but not more than 50 employees on business days 
     during the preceding calendar year. For purposes of the 
     preceding sentence, all persons treated as a single employer 
     under subsection (b), (c), (m), or (o) of section 414 shall 
     be treated as 1 employer and rules similar to rules of 
     subparagraphs (B) and (C) of section 4980D(d)(2) shall 
     apply.''; and
       (B) by striking paragraph (2) and inserting the following:
       ``(2) Cost exemption.--
       ``(A) In general.--With respect to a group health plan, if 
     the application of this section to such plan results in an 
     increase for the plan year involved of the actual total costs 
     of coverage with respect to medical and surgical benefits and 
     mental health and substance use disorder benefits under the 
     plan (as determined and certified under subparagraph (C)) by 
     an amount that exceeds the applicable percentage described in 
     subparagraph (B) of the actual total plan costs, the 
     provisions of this section shall not apply to such plan 
     during the following plan year, and such exemption shall 
     apply to the plan for 1 plan year. An employer may elect to 
     continue to apply mental health and substance use disorder 
     parity pursuant to this section with respect to the group 
     health plan involved regardless of any increase in total 
     costs.
       ``(B) Applicable percentage.--With respect to a plan, the 
     applicable percentage described in this subparagraph shall 
     be--
       ``(i) 2 percent in the case of the first plan year in which 
     this section is applied; and
       ``(ii) 1 percent in the case of each subsequent plan year.
       ``(C) Determinations by actuaries.--Determinations as to 
     increases in actual costs under a plan for purposes of this 
     section shall be made and certified by a qualified and 
     licensed actuary who is a member in good standing of the 
     American Academy of Actuaries. All such determinations shall 
     be in a written report prepared by the actuary. The report, 
     and all underlying documentation relied upon by the actuary, 
     shall be maintained by the group health plan for a period of 
     6 years following the notification made under subparagraph 
     (E).
       ``(D) 6-month determinations.--If a group health plan seeks 
     an exemption under this paragraph, determinations under 
     subparagraph (A)

[[Page 23059]]

     shall be made after such plan has complied with this section 
     for the first 6 months of the plan year involved.
       ``(E) Notification.--
       ``(i) In general.--A group health plan that, based upon a 
     certification described under subparagraph (C), qualifies for 
     an exemption under this paragraph, and elects to implement 
     the exemption, shall promptly notify the Secretary, the 
     appropriate State agencies, and participants and 
     beneficiaries in the plan of such election.
       ``(ii) Requirement.--A notification to the Secretary under 
     clause (i) shall include--

       ``(I) a description of the number of covered lives under 
     the plan involved at the time of the notification, and as 
     applicable, at the time of any prior election of the cost-
     exemption under this paragraph by such plan;
       ``(II) for both the plan year upon which a cost exemption 
     is sought and the year prior, a description of the actual 
     total costs of coverage with respect to medical and surgical 
     benefits and mental health and substance use disorder 
     benefits under the plan; and
       ``(III) for both the plan year upon which a cost exemption 
     is sought and the year prior, the actual total costs of 
     coverage with respect to mental health and substance use 
     disorder benefits under the plan.

       ``(iii) Confidentiality.--A notification to the Secretary 
     under clause (i) shall be confidential. The Secretary shall 
     make available, upon request and on not more than an annual 
     basis, an anonymous itemization of such notifications, that 
     includes--

       ``(I) a breakdown of States by the size and type of 
     employers submitting such notification; and
       ``(II) a summary of the data received under clause (ii).

       ``(F) Audits by appropriate agencies.--To determine 
     compliance with this paragraph, the Secretary may audit the 
     books and records of a group health plan relating to an 
     exemption, including any actuarial reports prepared pursuant 
     to subparagraph (C), during the 6 year period following the 
     notification of such exemption under subparagraph (E). A 
     State agency receiving a notification under subparagraph (E) 
     may also conduct such an audit with respect to an exemption 
     covered by such notification.'';
       (4) in subsection (e), by striking paragraph (4) and 
     inserting the following:
       ``(4) Mental health benefits.--The term `mental health 
     benefits' means benefits with respect to services for mental 
     health conditions, as defined under the terms of the plan and 
     in accordance with applicable Federal and State law.
       ``(5) Substance use disorder benefits.--The term `substance 
     use disorder benefits' means benefits with respect to 
     services for substance use disorders, as defined under the 
     terms of the plan and in accordance with applicable Federal 
     and State law.'';
       (5) by striking subsection (f);
       (6) by striking ``mental health benefits'' and inserting 
     ``mental health and substance use disorder benefits'' each 
     place it appears in subsections (a)(1)(B)(i), (a)(1)(C), 
     (a)(2)(B)(i), and (a)(2)(C); and
       (7) by striking ``mental health benefits'' and inserting 
     ``mental health or substance use disorder benefits'' each 
     place it appears (other than in any provision amended by the 
     previous paragraph).
       (d) Regulations.--Not later than 1 year after the date of 
     enactment of this Act, the Secretaries of Labor, Health and 
     Human Services, and the Treasury shall issue regulations to 
     carry out the amendments made by subsections (a), (b), and 
     (c), respectively.
       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to group health plans for plan years 
     beginning after the date that is 1 year after the date of 
     enactment of this Act, regardless of whether regulations have 
     been issued to carry out such amendments by such effective 
     date, except that the amendments made by subsections (a)(5), 
     (b)(5), and (c)(5), relating to striking of certain sunset 
     provisions, shall take effect on January 1, 2009.
       (2) Special rule for collective bargaining agreements.--In 
     the case of a group health plan maintained pursuant to one or 
     more collective bargaining agreements between employee 
     representatives and one or more employers ratified before the 
     date of the enactment of this Act, the amendments made by 
     this section shall not apply to plan years beginning before 
     the later of--
       (A) the date on which the last of the collective bargaining 
     agreements relating to the plan terminates (determined 
     without regard to any extension thereof agreed to after the 
     date of the enactment of this Act), or
       (B) January 1, 2009.

     For purposes of subparagraph (A), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.
       (f) Assuring Coordination.--The Secretary of Health and 
     Human Services, the Secretary of Labor, and the Secretary of 
     the Treasury may ensure, through the execution or revision of 
     an interagency memorandum of understanding among such 
     Secretaries, that--
       (1) regulations, rulings, and interpretations issued by 
     such Secretaries relating to the same matter over which two 
     or more such Secretaries have responsibility under this 
     section (and the amendments made by this section) are 
     administered so as to have the same effect at all times; and
       (2) coordination of policies relating to enforcing the same 
     requirements through such Secretaries in order to have a 
     coordinated enforcement strategy that avoids duplication of 
     enforcement efforts and assigns priorities in enforcement.
       (g) Conforming Clerical Amendments.--
       (1) ERISA heading.--
       (A) In general.--The heading of section 712 of the Employee 
     Retirement Income Security Act of 1974 is amended to read as 
     follows:

     ``SEC. 712. PARITY IN MENTAL HEALTH AND SUBSTANCE USE 
                   DISORDER BENEFITS.''.

       (B) Clerical amendment.--The table of contents in section 1 
     of such Act is amended by striking the item relating to 
     section 712 and inserting the following new item:

``Sec. 712. Parity in mental health and substance use disorder 
              benefits.''.

       (2) PHSA heading.--The heading of section 2705 of the 
     Public Health Service Act is amended to read as follows:

     ``SEC. 2705. PARITY IN MENTAL HEALTH AND SUBSTANCE USE 
                   DISORDER BENEFITS.''.

       (3) IRC heading.--
       (A) In general.--The heading of section 9812 of the 
     Internal Revenue Code of 1986 is amended to read as follows:

     ``SEC. 9812. PARITY IN MENTAL HEALTH AND SUBSTANCE USE 
                   DISORDER BENEFITS.''.

       (B) Clerical amendment.--The table of sections for 
     subchapter B of chapter 100 of such Code is amended by 
     striking the item relating to section 9812 and inserting the 
     following new item:

``Sec. 9812. Parity in mental health and substance use disorder 
              benefits.''.

       (h) GAO Study on Coverage and Exclusion of Mental Health 
     and Substance Use Disorder Diagnoses.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study that analyzes the specific 
     rates, patterns, and trends in coverage and exclusion of 
     specific mental health and substance use disorder diagnoses 
     by health plans and health insurance. The study shall include 
     an analysis of--
       (A) specific coverage rates for all mental health 
     conditions and substance use disorders;
       (B) which diagnoses are most commonly covered or excluded;
       (C) whether implementation of this Act has affected trends 
     in coverage or exclusion of such diagnoses; and
       (D) the impact of covering or excluding specific diagnoses 
     on participants' and enrollees' health, their health care 
     coverage, and the costs of delivering health care.
       (2) Reports.--Not later than 3 years after the date of the 
     enactment of this Act, and 2 years after the date of 
     submission the first report under this paragraph, the 
     Comptroller General shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).

                       TITLE VI--OTHER PROVISIONS

     SEC. 601. SECURE RURAL SCHOOLS AND COMMUNITY SELF-
                   DETERMINATION PROGRAM.

       (a) Reauthorization of the Secure Rural Schools and 
     Community Self-Determination Act of 2000.--The Secure Rural 
     Schools and Community Self-Determination Act of 2000 (16 
     U.S.C. 500 note; Public Law 106-393) is amended by striking 
     sections 1 through 403 and inserting the following:

     ``SECTION 1. SHORT TITLE.

       ``This Act may be cited as the `Secure Rural Schools and 
     Community Self-Determination Act of 2000'.

     ``SEC. 2. PURPOSES.

       ``The purposes of this Act are--
       ``(1) to stabilize and transition payments to counties to 
     provide funding for schools and roads that supplements other 
     available funds;
       ``(2) to make additional investments in, and create 
     additional employment opportunities through, projects that--
       ``(A)(i) improve the maintenance of existing 
     infrastructure;
       ``(ii) implement stewardship objectives that enhance forest 
     ecosystems; and
       ``(iii) restore and improve land health and water quality;
       ``(B) enjoy broad-based support; and
       ``(C) have objectives that may include--
       ``(i) road, trail, and infrastructure maintenance or 
     obliteration;
       ``(ii) soil productivity improvement;
       ``(iii) improvements in forest ecosystem health;
       ``(iv) watershed restoration and maintenance;
       ``(v) the restoration, maintenance, and improvement of 
     wildlife and fish habitat;
       ``(vi) the control of noxious and exotic weeds; and
       ``(vii) the reestablishment of native species; and
       ``(3) to improve cooperative relationships among--
       ``(A) the people that use and care for Federal land; and
       ``(B) the agencies that manage the Federal land.

     ``SEC. 3. DEFINITIONS.

       ``In this Act:
       ``(1) Adjusted share.--The term `adjusted share' means the 
     number equal to the quotient obtained by dividing--
       ``(A) the number equal to the quotient obtained by 
     dividing--
       ``(i) the base share for the eligible county; by
       ``(ii) the income adjustment for the eligible county; by
       ``(B) the number equal to the sum of the quotients obtained 
     under subparagraph (A) and paragraph (8)(A) for all eligible 
     counties.

[[Page 23060]]

       ``(2) Base share.--The term `base share' means the number 
     equal to the average of--
       ``(A) the quotient obtained by dividing--
       ``(i) the number of acres of Federal land described in 
     paragraph (7)(A) in each eligible county; by
       ``(ii) the total number acres of Federal land in all 
     eligible counties in all eligible States; and
       ``(B) the quotient obtained by dividing--
       ``(i) the amount equal to the average of the 3 highest 25-
     percent payments and safety net payments made to each 
     eligible State for each eligible county during the 
     eligibility period; by
       ``(ii) the amount equal to the sum of the amounts 
     calculated under clause (i) and paragraph (9)(B)(i) for all 
     eligible counties in all eligible States during the 
     eligibility period.
       ``(3) County payment.--The term `county payment' means the 
     payment for an eligible county calculated under section 
     101(b).
       ``(4) Eligible county.--The term `eligible county' means 
     any county that--
       ``(A) contains Federal land (as defined in paragraph (7)); 
     and
       ``(B) elects to receive a share of the State payment or the 
     county payment under section 102(b).
       ``(5) Eligibility period.--The term `eligibility period' 
     means fiscal year 1986 through fiscal year 1999.
       ``(6) Eligible state.--The term `eligible State' means a 
     State or territory of the United States that received a 25-
     percent payment for 1 or more fiscal years of the eligibility 
     period.
       ``(7) Federal land.--The term `Federal land' means--
       ``(A) land within the National Forest System, as defined in 
     section 11(a) of the Forest and Rangeland Renewable Resources 
     Planning Act of 1974 (16 U.S.C. 1609(a)) exclusive of the 
     National Grasslands and land utilization projects designated 
     as National Grasslands administered pursuant to the Act of 
     July 22, 1937 (7 U.S.C. 1010-1012); and
       ``(B) such portions of the revested Oregon and California 
     Railroad and reconveyed Coos Bay Wagon Road grant land as are 
     or may hereafter come under the jurisdiction of the 
     Department of the Interior, which have heretofore or may 
     hereafter be classified as timberlands, and power-site land 
     valuable for timber, that shall be managed, except as 
     provided in the former section 3 of the Act of August 28, 
     1937 (50 Stat. 875; 43 U.S.C. 1181c), for permanent forest 
     production.
       ``(8) 50-percent adjusted share.--The term `50-percent 
     adjusted share' means the number equal to the quotient 
     obtained by dividing--
       ``(A) the number equal to the quotient obtained by 
     dividing--
       ``(i) the 50-percent base share for the eligible county; by
       ``(ii) the income adjustment for the eligible county; by
       ``(B) the number equal to the sum of the quotients obtained 
     under subparagraph (A) and paragraph (1)(A) for all eligible 
     counties.
       ``(9) 50-percent base share.--The term `50-percent base 
     share' means the number equal to the average of--
       ``(A) the quotient obtained by dividing--
       ``(i) the number of acres of Federal land described in 
     paragraph (7)(B) in each eligible county; by
       ``(ii) the total number acres of Federal land in all 
     eligible counties in all eligible States; and
       ``(B) the quotient obtained by dividing--
       ``(i) the amount equal to the average of the 3 highest 50-
     percent payments made to each eligible county during the 
     eligibility period; by
       ``(ii) the amount equal to the sum of the amounts 
     calculated under clause (i) and paragraph (2)(B)(i) for all 
     eligible counties in all eligible States during the 
     eligibility period.
       ``(10) 50-percent payment.--The term `50-percent payment' 
     means the payment that is the sum of the 50-percent share 
     otherwise paid to a county pursuant to title II of the Act of 
     August 28, 1937 (chapter 876; 50 Stat. 875; 43 U.S.C. 1181f), 
     and the payment made to a county pursuant to the Act of May 
     24, 1939 (chapter 144; 53 Stat. 753; 43 U.S.C. 1181f-1 et 
     seq.).
       ``(11) Full funding amount.--The term `full funding amount' 
     means--
       ``(A) $500,000,000 for fiscal year 2008; and
       ``(B) for fiscal year 2009 and each fiscal year thereafter, 
     the amount that is equal to 90 percent of the full funding 
     amount for the preceding fiscal year.
       ``(12) Income adjustment.--The term `income adjustment' 
     means the square of the quotient obtained by dividing--
       ``(A) the per capita personal income for each eligible 
     county; by
       ``(B) the median per capita personal income of all eligible 
     counties.
       ``(13) Per capita personal income.--The term `per capita 
     personal income' means the most recent per capita personal 
     income data, as determined by the Bureau of Economic 
     Analysis.
       ``(14) Safety net payments.--The term `safety net payments' 
     means the special payment amounts paid to States and counties 
     required by section 13982 or 13983 of the Omnibus Budget 
     Reconciliation Act of 1993 (Public Law 103-66; 16 U.S.C. 500 
     note; 43 U.S.C. 1181f note).
       ``(15) Secretary concerned.--The term `Secretary concerned' 
     means--
       ``(A) the Secretary of Agriculture or the designee of the 
     Secretary of Agriculture with respect to the Federal land 
     described in paragraph (7)(A); and
       ``(B) the Secretary of the Interior or the designee of the 
     Secretary of the Interior with respect to the Federal land 
     described in paragraph (7)(B).
       ``(16) State payment.--The term `State payment' means the 
     payment for an eligible State calculated under section 
     101(a).
       ``(17) 25-percent payment.--The term `25-percent payment' 
     means the payment to States required by the sixth paragraph 
     under the heading of `FOREST SERVICE' in the Act of May 23, 
     1908 (35 Stat. 260; 16 U.S.C. 500), and section 13 of the Act 
     of March 1, 1911 (36 Stat. 963; 16 U.S.C. 500).

 ``TITLE I--SECURE PAYMENTS FOR STATES AND COUNTIES CONTAINING FEDERAL 
                                  LAND

     ``SEC. 101. SECURE PAYMENTS FOR STATES CONTAINING FEDERAL 
                   LAND.

       ``(a) State Payment.--For each of fiscal years 2008 through 
     2011, the Secretary of Agriculture shall calculate for each 
     eligible State an amount equal to the sum of the products 
     obtained by multiplying--
       ``(1) the adjusted share for each eligible county within 
     the eligible State; by
       ``(2) the full funding amount for the fiscal year.
       ``(b) County Payment.--For each of fiscal years 2008 
     through 2011, the Secretary of the Interior shall calculate 
     for each eligible county that received a 50-percent payment 
     during the eligibility period an amount equal to the product 
     obtained by multiplying--
       ``(1) the 50-percent adjusted share for the eligible 
     county; by
       ``(2) the full funding amount for the fiscal year.

     ``SEC. 102. PAYMENTS TO STATES AND COUNTIES.

       ``(a) Payment Amounts.--Except as provided in section 103, 
     the Secretary of the Treasury shall pay to--
       ``(1) a State or territory of the United States an amount 
     equal to the sum of the amounts elected under subsection (b) 
     by each county within the State or territory for--
       ``(A) if the county is eligible for the 25-percent payment, 
     the share of the 25-percent payment; or
       ``(B) the share of the State payment of the eligible 
     county; and
       ``(2) a county an amount equal to the amount elected under 
     subsection (b) by each county for--
       ``(A) if the county is eligible for the 50-percent payment, 
     the 50-percent payment; or
       ``(B) the county payment for the eligible county.
       ``(b) Election To Receive Payment Amount.--
       ``(1) Election; submission of results.--
       ``(A) In general.--The election to receive a share of the 
     State payment, the county payment, a share of the State 
     payment and the county payment, a share of the 25-percent 
     payment, the 50-percent payment, or a share of the 25-percent 
     payment and the 50-percent payment, as applicable, shall be 
     made at the discretion of each affected county by August 1, 
     2008 (or as soon thereafter as the Secretary concerned 
     determines is practicable), and August 1 of each second 
     fiscal year thereafter, in accordance with paragraph (2), and 
     transmitted to the Secretary concerned by the Governor of 
     each eligible State.
       ``(B) Failure to transmit.--If an election for an affected 
     county is not transmitted to the Secretary concerned by the 
     date specified under subparagraph (A), the affected county 
     shall be considered to have elected to receive a share of the 
     State payment, the county payment, or a share of the State 
     payment and the county payment, as applicable.
       ``(2) Duration of election.--
       ``(A) In general.--A county election to receive a share of 
     the 25-percent payment or 50-percent payment, as applicable, 
     shall be effective for 2 fiscal years.
       ``(B) Full funding amount.--If a county elects to receive a 
     share of the State payment or the county payment, the 
     election shall be effective for all subsequent fiscal years 
     through fiscal year 2011.
       ``(3) Source of payment amounts.--The payment to an 
     eligible State or eligible county under this section for a 
     fiscal year shall be derived from--
       ``(A) any amounts that are appropriated to carry out this 
     Act;
       ``(B) any revenues, fees, penalties, or miscellaneous 
     receipts, exclusive of deposits to any relevant trust fund, 
     special account, or permanent operating funds, received by 
     the Federal Government from activities by the Bureau of Land 
     Management or the Forest Service on the applicable Federal 
     land; and
       ``(C) to the extent of any shortfall, out of any amounts in 
     the Treasury of the United States not otherwise appropriated.
       ``(c) Distribution and Expenditure of Payments.--
       ``(1) Distribution method.--A State that receives a payment 
     under subsection (a) for Federal land described in section 
     3(7)(A) shall distribute the appropriate payment amount among 
     the appropriate counties in the State in accordance with--
       ``(A) the Act of May 23, 1908 (16 U.S.C. 500); and
       ``(B) section 13 of the Act of March 1, 1911 (36 Stat. 963; 
     16 U.S.C. 500).
       ``(2) Expenditure purposes.--Subject to subsection (d), 
     payments received by a State under subsection (a) and 
     distributed to counties in accordance with paragraph (1) 
     shall be expended as required by the laws referred to in 
     paragraph (1).
       ``(d) Expenditure Rules for Eligible Counties.--
       ``(1) Allocations.--

[[Page 23061]]

       ``(A) Use of portion in same manner as 25-percent payment 
     or 50-percent payment, as applicable.--Except as provided in 
     paragraph (3)(B), if an eligible county elects to receive its 
     share of the State payment or the county payment, not less 
     than 80 percent, but not more than 85 percent, of the funds 
     shall be expended in the same manner in which the 25-percent 
     payments or 50-percent payment, as applicable, are required 
     to be expended.
       ``(B) Election as to use of balance.--Except as provided in 
     subparagraph (C), an eligible county shall elect to do 1 or 
     more of the following with the balance of any funds not 
     expended pursuant to subparagraph (A):
       ``(i) Reserve any portion of the balance for projects in 
     accordance with title II.
       ``(ii) Reserve not more than 7 percent of the total share 
     for the eligible county of the State payment or the county 
     payment for projects in accordance with title III.
       ``(iii) Return the portion of the balance not reserved 
     under clauses (i) and (ii) to the Treasury of the United 
     States.
       ``(C) Counties with modest distributions.--In the case of 
     each eligible county to which more than $100,000, but less 
     than $350,000, is distributed for any fiscal year pursuant to 
     either or both of paragraphs (1)(B) and (2)(B) of subsection 
     (a), the eligible county, with respect to the balance of any 
     funds not expended pursuant to subparagraph (A) for that 
     fiscal year, shall--
       ``(i) reserve any portion of the balance for--

       ``(I) carrying out projects under title II;
       ``(II) carrying out projects under title III; or
       ``(III) a combination of the purposes described in 
     subclauses (I) and (II); or

       ``(ii) return the portion of the balance not reserved under 
     clause (i) to the Treasury of the United States.
       ``(2) Distribution of funds.--
       ``(A) In general.--Funds reserved by an eligible county 
     under subparagraph (B)(i) or (C)(i) of paragraph (1) for 
     carrying out projects under title II shall be deposited in a 
     special account in the Treasury of the United States.
       ``(B) Availability.--Amounts deposited under subparagraph 
     (A) shall--
       ``(i) be available for expenditure by the Secretary 
     concerned, without further appropriation; and
       ``(ii) remain available until expended in accordance with 
     title II.
       ``(3) Election.--
       ``(A) Notification.--
       ``(i) In general.--An eligible county shall notify the 
     Secretary concerned of an election by the eligible county 
     under this subsection not later than September 30, 2008 (or 
     as soon thereafter as the Secretary concerned determines is 
     practicable), and each September 30 thereafter for each 
     succeeding fiscal year.
       ``(ii) Failure to elect.--Except as provided in 
     subparagraph (B), if the eligible county fails to make an 
     election by the date specified in clause (i), the eligible 
     county shall--

       ``(I) be considered to have elected to expend 85 percent of 
     the funds in accordance with paragraph (1)(A); and
       ``(II) return the balance to the Treasury of the United 
     States.

       ``(B) Counties with minor distributions.--In the case of 
     each eligible county to which less than $100,000 is 
     distributed for any fiscal year pursuant to either or both of 
     paragraphs (1)(B) and (2)(B) of subsection (a), the eligible 
     county may elect to expend all the funds in the same manner 
     in which the 25-percent payments or 50-percent payments, as 
     applicable, are required to be expended.
       ``(e) Time for Payment.--The payments required under this 
     section for a fiscal year shall be made as soon as 
     practicable after the end of that fiscal year.

     ``SEC. 103. TRANSITION PAYMENTS TO STATES.

       ``(a) Definitions.--In this section:
       ``(1) Adjusted amount.--The term `adjusted amount' means, 
     with respect to a covered State--
       ``(A) for fiscal year 2008, 90 percent of--
       ``(i) the sum of the amounts paid for fiscal year 2006 
     under section 102(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the covered State that have 
     elected under section 102(b) to receive a share of the State 
     payment for fiscal year 2008; and
       ``(ii) the sum of the amounts paid for fiscal year 2006 
     under section 103(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the State of Oregon that have 
     elected under section 102(b) to receive the county payment 
     for fiscal year 2008;
       ``(B) for fiscal year 2009, 81 percent of--
       ``(i) the sum of the amounts paid for fiscal year 2006 
     under section 102(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the covered State that have 
     elected under section 102(b) to receive a share of the State 
     payment for fiscal year 2009; and
       ``(ii) the sum of the amounts paid for fiscal year 2006 
     under section 103(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the State of Oregon that have 
     elected under section 102(b) to receive the county payment 
     for fiscal year 2009; and
       ``(C) for fiscal year 2010, 73 percent of--
       ``(i) the sum of the amounts paid for fiscal year 2006 
     under section 102(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the covered State that have 
     elected under section 102(b) to receive a share of the State 
     payment for fiscal year 2010; and
       ``(ii) the sum of the amounts paid for fiscal year 2006 
     under section 103(a)(2) (as in effect on September 29, 2006) 
     for the eligible counties in the State of Oregon that have 
     elected under section 102(b) to receive the county payment 
     for fiscal year 2010.
       ``(2) Covered state.--The term `covered State' means each 
     of the States of California, Louisiana, Oregon, Pennsylvania, 
     South Carolina, South Dakota, Texas, and Washington.
       ``(b) Transition Payments.--For each of fiscal years 2008 
     through 2010, in lieu of the payment amounts that otherwise 
     would have been made under paragraphs (1)(B) and (2)(B) of 
     section 102(a), the Secretary of the Treasury shall pay the 
     adjusted amount to each covered State and the eligible 
     counties within the covered State, as applicable.
       ``(c) Distribution of Adjusted Amount.--Except as provided 
     in subsection (d), it is the intent of Congress that the 
     method of distributing the payments under subsection (b) 
     among the counties in the covered States for each of fiscal 
     years 2008 through 2010 be in the same proportion that the 
     payments were distributed to the eligible counties in fiscal 
     year 2006.
       ``(d) Distribution of Payments in California.--The 
     following payments shall be distributed among the eligible 
     counties in the State of California in the same proportion 
     that payments under section 102(a)(2) (as in effect on 
     September 29, 2006) were distributed to the eligible counties 
     for fiscal year 2006:
       ``(1) Payments to the State of California under subsection 
     (b).
       ``(2) The shares of the eligible counties of the State 
     payment for California under section 102 for fiscal year 
     2011.
       ``(e) Treatment of Payments.--For purposes of this Act, any 
     payment made under subsection (b) shall be considered to be a 
     payment made under section 102(a).

              ``TITLE II--SPECIAL PROJECTS ON FEDERAL LAND

     ``SEC. 201. DEFINITIONS.

       ``In this title:
       ``(1) Participating county.--The term `participating 
     county' means an eligible county that elects under section 
     102(d) to expend a portion of the Federal funds received 
     under section 102 in accordance with this title.
       ``(2) Project funds.--The term `project funds' means all 
     funds an eligible county elects under section 102(d) to 
     reserve for expenditure in accordance with this title.
       ``(3) Resource advisory committee.--The term `resource 
     advisory committee' means--
       ``(A) an advisory committee established by the Secretary 
     concerned under section 205; or
       ``(B) an advisory committee determined by the Secretary 
     concerned to meet the requirements of section 205.
       ``(4) Resource management plan.--The term `resource 
     management plan' means--
       ``(A) a land use plan prepared by the Bureau of Land 
     Management for units of the Federal land described in section 
     3(7)(B) pursuant to section 202 of the Federal Land Policy 
     and Management Act of 1976 (43 U.S.C. 1712); or
       ``(B) a land and resource management plan prepared by the 
     Forest Service for units of the National Forest System 
     pursuant to section 6 of the Forest and Rangeland Renewable 
     Resources Planning Act of 1974 (16 U.S.C. 1604).

     ``SEC. 202. GENERAL LIMITATION ON USE OF PROJECT FUNDS.

       ``(a) Limitation.--Project funds shall be expended solely 
     on projects that meet the requirements of this title.
       ``(b) Authorized Uses.--Project funds may be used by the 
     Secretary concerned for the purpose of entering into and 
     implementing cooperative agreements with willing Federal 
     agencies, State and local governments, private and nonprofit 
     entities, and landowners for protection, restoration, and 
     enhancement of fish and wildlife habitat, and other resource 
     objectives consistent with the purposes of this Act on 
     Federal land and on non-Federal land where projects would 
     benefit the resources on Federal land.

     ``SEC. 203. SUBMISSION OF PROJECT PROPOSALS.

       ``(a) Submission of Project Proposals to Secretary 
     Concerned.--
       ``(1) Projects funded using project funds.--Not later than 
     September 30 for fiscal year 2008 (or as soon thereafter as 
     the Secretary concerned determines is practicable), and each 
     September 30 thereafter for each succeeding fiscal year 
     through fiscal year 2011, each resource advisory committee 
     shall submit to the Secretary concerned a description of any 
     projects that the resource advisory committee proposes the 
     Secretary undertake using any project funds reserved by 
     eligible counties in the area in which the resource advisory 
     committee has geographic jurisdiction.
       ``(2) Projects funded using other funds.--A resource 
     advisory committee may submit to the Secretary concerned a 
     description of any projects that the committee proposes the 
     Secretary undertake using funds from State or local 
     governments, or from the private sector, other than project 
     funds and funds appropriated and otherwise available to do 
     similar work.
       ``(3) Joint projects.--Participating counties or other 
     persons may propose to pool project funds or other funds, 
     described in paragraph (2), and jointly propose a project or 
     group of projects to a resource advisory committee 
     established under section 205.
       ``(b) Required Description of Projects.--In submitting 
     proposed projects to the Secretary concerned under subsection 
     (a), a resource advisory committee shall include in the 
     description of each proposed project the following 
     information:
       ``(1) The purpose of the project and a description of how 
     the project will meet the purposes of this title.
       ``(2) The anticipated duration of the project.

[[Page 23062]]

       ``(3) The anticipated cost of the project.
       ``(4) The proposed source of funding for the project, 
     whether project funds or other funds.
       ``(5)(A) Expected outcomes, including how the project will 
     meet or exceed desired ecological conditions, maintenance 
     objectives, or stewardship objectives.
       ``(B) An estimate of the amount of any timber, forage, and 
     other commodities and other economic activity, including jobs 
     generated, if any, anticipated as part of the project.
       ``(6) A detailed monitoring plan, including funding needs 
     and sources, that--
       ``(A) tracks and identifies the positive or negative 
     impacts of the project, implementation, and provides for 
     validation monitoring; and
       ``(B) includes an assessment of the following:
       ``(i) Whether or not the project met or exceeded desired 
     ecological conditions; created local employment or training 
     opportunities, including summer youth jobs programs such as 
     the Youth Conservation Corps where appropriate.
       ``(ii) Whether the project improved the use of, or added 
     value to, any products removed from land consistent with the 
     purposes of this title.
       ``(7) An assessment that the project is to be in the public 
     interest.
       ``(c) Authorized Projects.--Projects proposed under 
     subsection (a) shall be consistent with section 2.

     ``SEC. 204. EVALUATION AND APPROVAL OF PROJECTS BY SECRETARY 
                   CONCERNED.

       ``(a) Conditions for Approval of Proposed Project.--The 
     Secretary concerned may make a decision to approve a project 
     submitted by a resource advisory committee under section 203 
     only if the proposed project satisfies each of the following 
     conditions:
       ``(1) The project complies with all applicable Federal laws 
     (including regulations).
       ``(2) The project is consistent with the applicable 
     resource management plan and with any watershed or subsequent 
     plan developed pursuant to the resource management plan and 
     approved by the Secretary concerned.
       ``(3) The project has been approved by the resource 
     advisory committee in accordance with section 205, including 
     the procedures issued under subsection (e) of that section.
       ``(4) A project description has been submitted by the 
     resource advisory committee to the Secretary concerned in 
     accordance with section 203.
       ``(5) The project will improve the maintenance of existing 
     infrastructure, implement stewardship objectives that enhance 
     forest ecosystems, and restore and improve land health and 
     water quality.
       ``(b) Environmental Reviews.--
       ``(1) Request for payment by county.--The Secretary 
     concerned may request the resource advisory committee 
     submitting a proposed project to agree to the use of project 
     funds to pay for any environmental review, consultation, or 
     compliance with applicable environmental laws required in 
     connection with the project.
       ``(2) Conduct of environmental review.--If a payment is 
     requested under paragraph (1) and the resource advisory 
     committee agrees to the expenditure of funds for this 
     purpose, the Secretary concerned shall conduct environmental 
     review, consultation, or other compliance responsibilities in 
     accordance with Federal laws (including regulations).
       ``(3) Effect of refusal to pay.--
       ``(A) In general.--If a resource advisory committee does 
     not agree to the expenditure of funds under paragraph (1), 
     the project shall be deemed withdrawn from further 
     consideration by the Secretary concerned pursuant to this 
     title.
       ``(B) Effect of withdrawal.--A withdrawal under 
     subparagraph (A) shall be deemed to be a rejection of the 
     project for purposes of section 207(c).
       ``(c) Decisions of Secretary Concerned.--
       ``(1) Rejection of projects.--
       ``(A) In general.--A decision by the Secretary concerned to 
     reject a proposed project shall be at the sole discretion of 
     the Secretary concerned.
       ``(B) No administrative appeal or judicial review.--
     Notwithstanding any other provision of law, a decision by the 
     Secretary concerned to reject a proposed project shall not be 
     subject to administrative appeal or judicial review.
       ``(C) Notice of rejection.--Not later than 30 days after 
     the date on which the Secretary concerned makes the rejection 
     decision, the Secretary concerned shall notify in writing the 
     resource advisory committee that submitted the proposed 
     project of the rejection and the reasons for rejection.
       ``(2) Notice of project approval.--The Secretary concerned 
     shall publish in the Federal Register notice of each project 
     approved under subsection (a) if the notice would be required 
     had the project originated with the Secretary.
       ``(d) Source and Conduct of Project.--Once the Secretary 
     concerned accepts a project for review under section 203, the 
     acceptance shall be deemed a Federal action for all purposes.
       ``(e) Implementation of Approved Projects.--
       ``(1) Cooperation.--Notwithstanding chapter 63 of title 31, 
     United States Code, using project funds the Secretary 
     concerned may enter into contracts, grants, and cooperative 
     agreements with States and local governments, private and 
     nonprofit entities, and landowners and other persons to 
     assist the Secretary in carrying out an approved project.
       ``(2) Best value contracting.--
       ``(A) In general.--For any project involving a contract 
     authorized by paragraph (1) the Secretary concerned may elect 
     a source for performance of the contract on a best value 
     basis.
       ``(B) Factors.--The Secretary concerned shall determine 
     best value based on such factors as--
       ``(i) the technical demands and complexity of the work to 
     be done;
       ``(ii)(I) the ecological objectives of the project; and
       ``(II) the sensitivity of the resources being treated;
       ``(iii) the past experience by the contractor with the type 
     of work being done, using the type of equipment proposed for 
     the project, and meeting or exceeding desired ecological 
     conditions; and
       ``(iv) the commitment of the contractor to hiring highly 
     qualified workers and local residents.
       ``(3) Merchantable timber contracting pilot program.--
       ``(A) Establishment.--The Secretary concerned shall 
     establish a pilot program to implement a certain percentage 
     of approved projects involving the sale of merchantable 
     timber using separate contracts for--
       ``(i) the harvesting or collection of merchantable timber; 
     and
       ``(ii) the sale of the timber.
       ``(B) Annual percentages.--Under the pilot program, the 
     Secretary concerned shall ensure that, on a nationwide basis, 
     not less than the following percentage of all approved 
     projects involving the sale of merchantable timber are 
     implemented using separate contracts:
       ``(i) For fiscal year 2008, 35 percent.
       ``(ii) For fiscal year 2009, 45 percent.
       ``(iii) For each of fiscal years 2010 and 2011, 50 percent.
       ``(C) Inclusion in pilot program.--The decision whether to 
     use separate contracts to implement a project involving the 
     sale of merchantable timber shall be made by the Secretary 
     concerned after the approval of the project under this title.
       ``(D) Assistance.--
       ``(i) In general.--The Secretary concerned may use funds 
     from any appropriated account available to the Secretary for 
     the Federal land to assist in the administration of projects 
     conducted under the pilot program.
       ``(ii) Maximum amount of assistance.--The total amount 
     obligated under this subparagraph may not exceed $1,000,000 
     for any fiscal year during which the pilot program is in 
     effect.
       ``(E) Review and report.--
       ``(i) Initial report.--Not later than September 30, 2010, 
     the Comptroller General shall submit to the Committees on 
     Agriculture, Nutrition, and Forestry and Energy and Natural 
     Resources of the Senate and the Committees on Agriculture and 
     Natural Resources of the House of Representatives a report 
     assessing the pilot program.
       ``(ii) Annual report.--The Secretary concerned shall submit 
     to the Committees on Agriculture, Nutrition, and Forestry and 
     Energy and Natural Resources of the Senate and the Committees 
     on Agriculture and Natural Resources of the House of 
     Representatives an annual report describing the results of 
     the pilot program.
       ``(f) Requirements for Project Funds.--The Secretary shall 
     ensure that at least 50 percent of all project funds be used 
     for projects that are primarily dedicated--
       ``(1) to road maintenance, decommissioning, or 
     obliteration; or
       ``(2) to restoration of streams and watersheds.

     ``SEC. 205. RESOURCE ADVISORY COMMITTEES.

       ``(a) Establishment and Purpose of Resource Advisory 
     Committees.--
       ``(1) Establishment.--The Secretary concerned shall 
     establish and maintain resource advisory committees to 
     perform the duties in subsection (b), except as provided in 
     paragraph (4).
       ``(2) Purpose.--The purpose of a resource advisory 
     committee shall be--
       ``(A) to improve collaborative relationships; and
       ``(B) to provide advice and recommendations to the land 
     management agencies consistent with the purposes of this 
     title.
       ``(3) Access to resource advisory committees.--To ensure 
     that each unit of Federal land has access to a resource 
     advisory committee, and that there is sufficient interest in 
     participation on a committee to ensure that membership can be 
     balanced in terms of the points of view represented and the 
     functions to be performed, the Secretary concerned may, 
     establish resource advisory committees for part of, or 1 or 
     more, units of Federal land.
       ``(4) Existing advisory committees.--
       ``(A) In general.--An advisory committee that meets the 
     requirements of this section, a resource advisory committee 
     established before September 29, 2006, or an advisory 
     committee determined by the Secretary concerned before 
     September 29, 2006, to meet the requirements of this section 
     may be deemed by the Secretary concerned to be a resource 
     advisory committee for the purposes of this title.
       ``(B) Charter.--A charter for a committee described in 
     subparagraph (A) that was filed on or before September 29, 
     2006, shall be considered to be filed for purposes of this 
     Act.
       ``(C) Bureau of land management advisory committees.--The 
     Secretary of the Interior may deem a resource advisory 
     committee meeting the requirements of subpart 1784 of part 
     1780 of title 43, Code of Federal Regulations, as a resource 
     advisory committee for the purposes of this title.
       ``(b) Duties.--A resource advisory committee shall--
       ``(1) review projects proposed under this title by 
     participating counties and other persons;
       ``(2) propose projects and funding to the Secretary 
     concerned under section 203;

[[Page 23063]]

       ``(3) provide early and continuous coordination with 
     appropriate land management agency officials in recommending 
     projects consistent with purposes of this Act under this 
     title;
       ``(4) provide frequent opportunities for citizens, 
     organizations, tribes, land management agencies, and other 
     interested parties to participate openly and meaningfully, 
     beginning at the early stages of the project development 
     process under this title;
       ``(5)(A) monitor projects that have been approved under 
     section 204; and
       ``(B) advise the designated Federal official on the 
     progress of the monitoring efforts under subparagraph (A); 
     and
       ``(6) make recommendations to the Secretary concerned for 
     any appropriate changes or adjustments to the projects being 
     monitored by the resource advisory committee.
       ``(c) Appointment by the Secretary.--
       ``(1) Appointment and term.--
       ``(A) In general.--The Secretary concerned, shall appoint 
     the members of resource advisory committees for a term of 4 
     years beginning on the date of appointment.
       ``(B) Reappointment.--The Secretary concerned may reappoint 
     members to subsequent 4-year terms.
       ``(2) Basic requirements.--The Secretary concerned shall 
     ensure that each resource advisory committee established 
     meets the requirements of subsection (d).
       ``(3) Initial appointment.--Not later than 180 days after 
     the date of the enactment of this Act, the Secretary 
     concerned shall make initial appointments to the resource 
     advisory committees.
       ``(4) Vacancies.--The Secretary concerned shall make 
     appointments to fill vacancies on any resource advisory 
     committee as soon as practicable after the vacancy has 
     occurred.
       ``(5) Compensation.--Members of the resource advisory 
     committees shall not receive any compensation.
       ``(d) Composition of Advisory Committee.--
       ``(1) Number.--Each resource advisory committee shall be 
     comprised of 15 members.
       ``(2) Community interests represented.--Committee members 
     shall be representative of the interests of the following 3 
     categories:
       ``(A) 5 persons that--
       ``(i) represent organized labor or non-timber forest 
     product harvester groups;
       ``(ii) represent developed outdoor recreation, off highway 
     vehicle users, or commercial recreation activities;
       ``(iii) represent--

       ``(I) energy and mineral development interests; or
       ``(II) commercial or recreational fishing interests;

       ``(iv) represent the commercial timber industry; or
       ``(v) hold Federal grazing or other land use permits, or 
     represent nonindustrial private forest land owners, within 
     the area for which the committee is organized.
       ``(B) 5 persons that represent--
       ``(i) nationally recognized environmental organizations;
       ``(ii) regionally or locally recognized environmental 
     organizations;
       ``(iii) dispersed recreational activities;
       ``(iv) archaeological and historical interests; or
       ``(v) nationally or regionally recognized wild horse and 
     burro interest groups, wildlife or hunting organizations, or 
     watershed associations.
       ``(C) 5 persons that--
       ``(i) hold State elected office (or a designee);
       ``(ii) hold county or local elected office;
       ``(iii) represent American Indian tribes within or adjacent 
     to the area for which the committee is organized;
       ``(iv) are school officials or teachers; or
       ``(v) represent the affected public at large.
       ``(3) Balanced representation.--In appointing committee 
     members from the 3 categories in paragraph (2), the Secretary 
     concerned shall provide for balanced and broad representation 
     from within each category.
       ``(4) Geographic distribution.--The members of a resource 
     advisory committee shall reside within the State in which the 
     committee has jurisdiction and, to extent practicable, the 
     Secretary concerned shall ensure local representation in each 
     category in paragraph (2).
       ``(5) Chairperson.--A majority on each resource advisory 
     committee shall select the chairperson of the committee.
       ``(e) Approval Procedures.--
       ``(1) In general.--Subject to paragraph (3), each resource 
     advisory committee shall establish procedures for proposing 
     projects to the Secretary concerned under this title.
       ``(2) Quorum.--A quorum must be present to constitute an 
     official meeting of the committee.
       ``(3) Approval by majority of members.--A project may be 
     proposed by a resource advisory committee to the Secretary 
     concerned under section 203(a), if the project has been 
     approved by a majority of members of the committee from each 
     of the 3 categories in subsection (d)(2).
       ``(f) Other Committee Authorities and Requirements.--
       ``(1) Staff assistance.--A resource advisory committee may 
     submit to the Secretary concerned a request for periodic 
     staff assistance from Federal employees under the 
     jurisdiction of the Secretary.
       ``(2) Meetings.--All meetings of a resource advisory 
     committee shall be announced at least 1 week in advance in a 
     local newspaper of record and shall be open to the public.
       ``(3) Records.--A resource advisory committee shall 
     maintain records of the meetings of the committee and make 
     the records available for public inspection.

     ``SEC. 206. USE OF PROJECT FUNDS.

       ``(a) Agreement Regarding Schedule and Cost of Project.--
       ``(1) Agreement between parties.--The Secretary concerned 
     may carry out a project submitted by a resource advisory 
     committee under section 203(a) using project funds or other 
     funds described in section 203(a)(2), if, as soon as 
     practicable after the issuance of a decision document for the 
     project and the exhaustion of all administrative appeals and 
     judicial review of the project decision, the Secretary 
     concerned and the resource advisory committee enter into an 
     agreement addressing, at a minimum, the following:
       ``(A) The schedule for completing the project.
       ``(B) The total cost of the project, including the level of 
     agency overhead to be assessed against the project.
       ``(C) For a multiyear project, the estimated cost of the 
     project for each of the fiscal years in which it will be 
     carried out.
       ``(D) The remedies for failure of the Secretary concerned 
     to comply with the terms of the agreement consistent with 
     current Federal law.
       ``(2) Limited use of federal funds.--The Secretary 
     concerned may decide, at the sole discretion of the Secretary 
     concerned, to cover the costs of a portion of an approved 
     project using Federal funds appropriated or otherwise 
     available to the Secretary for the same purposes as the 
     project.
       ``(b) Transfer of Project Funds.--
       ``(1) Initial transfer required.--As soon as practicable 
     after the agreement is reached under subsection (a) with 
     regard to a project to be funded in whole or in part using 
     project funds, or other funds described in section 203(a)(2), 
     the Secretary concerned shall transfer to the applicable unit 
     of National Forest System land or Bureau of Land Management 
     District an amount of project funds equal to--
       ``(A) in the case of a project to be completed in a single 
     fiscal year, the total amount specified in the agreement to 
     be paid using project funds, or other funds described in 
     section 203(a)(2); or
       ``(B) in the case of a multiyear project, the amount 
     specified in the agreement to be paid using project funds, or 
     other funds described in section 203(a)(2) for the first 
     fiscal year.
       ``(2) Condition on project commencement.--The unit of 
     National Forest System land or Bureau of Land Management 
     District concerned, shall not commence a project until the 
     project funds, or other funds described in section 203(a)(2) 
     required to be transferred under paragraph (1) for the 
     project, have been made available by the Secretary concerned.
       ``(3) Subsequent transfers for multiyear projects.--
       ``(A) In general.--For the second and subsequent fiscal 
     years of a multiyear project to be funded in whole or in part 
     using project funds, the unit of National Forest System land 
     or Bureau of Land Management District concerned shall use the 
     amount of project funds required to continue the project in 
     that fiscal year according to the agreement entered into 
     under subsection (a).
       ``(B) Suspension of work.--The Secretary concerned shall 
     suspend work on the project if the project funds required by 
     the agreement in the second and subsequent fiscal years are 
     not available.

     ``SEC. 207. AVAILABILITY OF PROJECT FUNDS.

       ``(a) Submission of Proposed Projects To Obligate Funds.--
     By September 30, 2008 (or as soon thereafter as the Secretary 
     concerned determines is practicable), and each September 30 
     thereafter for each succeeding fiscal year through fiscal 
     year 2011, a resource advisory committee shall submit to the 
     Secretary concerned pursuant to section 203(a)(1) a 
     sufficient number of project proposals that, if approved, 
     would result in the obligation of at least the full amount of 
     the project funds reserved by the participating county in the 
     preceding fiscal year.
       ``(b) Use or Transfer of Unobligated Funds.--Subject to 
     section 208, if a resource advisory committee fails to comply 
     with subsection (a) for a fiscal year, any project funds 
     reserved by the participating county in the preceding fiscal 
     year and remaining unobligated shall be available for use as 
     part of the project submissions in the next fiscal year.
       ``(c) Effect of Rejection of Projects.--Subject to section 
     208, any project funds reserved by a participating county in 
     the preceding fiscal year that are unobligated at the end of 
     a fiscal year because the Secretary concerned has rejected 
     one or more proposed projects shall be available for use as 
     part of the project submissions in the next fiscal year.
       ``(d) Effect of Court Orders.--
       ``(1) In general.--If an approved project under this Act is 
     enjoined or prohibited by a Federal court, the Secretary 
     concerned shall return the unobligated project funds related 
     to the project to the participating county or counties that 
     reserved the funds.
       ``(2) Expenditure of funds.--The returned funds shall be 
     available for the county to expend in the same manner as the 
     funds reserved by the county under subparagraph (B) or (C)(i) 
     of section 102(d)(1).

     ``SEC. 208. TERMINATION OF AUTHORITY.

       ``(a) In General.--The authority to initiate projects under 
     this title shall terminate on September 30, 2011.
       ``(b) Deposits in Treasury.--Any project funds not 
     obligated by September 30, 2012, shall be deposited in the 
     Treasury of the United States.

[[Page 23064]]



                       ``TITLE III--COUNTY FUNDS

     ``SEC. 301. DEFINITIONS.

       ``In this title:
       ``(1) County funds.--The term `county funds' means all 
     funds an eligible county elects under section 102(d) to 
     reserve for expenditure in accordance with this title.
       ``(2) Participating county.--The term `participating 
     county' means an eligible county that elects under section 
     102(d) to expend a portion of the Federal funds received 
     under section 102 in accordance with this title.

     ``SEC. 302. USE.

       ``(a) Authorized Uses.--A participating county, including 
     any applicable agencies of the participating county, shall 
     use county funds, in accordance with this title, only--
       ``(1) to carry out activities under the Firewise 
     Communities program to provide to homeowners in fire-
     sensitive ecosystems education on, and assistance with 
     implementing, techniques in home siting, home construction, 
     and home landscaping that can increase the protection of 
     people and property from wildfires;
       ``(2) to reimburse the participating county for search and 
     rescue and other emergency services, including firefighting, 
     that are--
       ``(A) performed on Federal land after the date on which the 
     use was approved under subsection (b);
       ``(B) paid for by the participating county; and
       ``(3) to develop community wildfire protection plans in 
     coordination with the appropriate Secretary concerned.
       ``(b) Proposals.--A participating county shall use county 
     funds for a use described in subsection (a) only after a 45-
     day public comment period, at the beginning of which the 
     participating county shall--
       ``(1) publish in any publications of local record a 
     proposal that describes the proposed use of the county funds; 
     and
       ``(2) submit the proposal to any resource advisory 
     committee established under section 205 for the participating 
     county.

     ``SEC. 303. CERTIFICATION.

       ``(a) In General.--Not later than February 1 of the year 
     after the year in which any county funds were expended by a 
     participating county, the appropriate official of the 
     participating county shall submit to the Secretary concerned 
     a certification that the county funds expended in the 
     applicable year have been used for the uses authorized under 
     section 302(a), including a description of the amounts 
     expended and the uses for which the amounts were expended.
       ``(b) Review.--The Secretary concerned shall review the 
     certifications submitted under subsection (a) as the 
     Secretary concerned determines to be appropriate.

     ``SEC. 304. TERMINATION OF AUTHORITY.

       ``(a) In General.--The authority to initiate projects under 
     this title terminates on September 30, 2011.
       ``(b) Availability.--Any county funds not obligated by 
     September 30, 2012, shall be returned to the Treasury of the 
     United States.

                  ``TITLE IV--MISCELLANEOUS PROVISIONS

     ``SEC. 401. REGULATIONS.

       ``The Secretary of Agriculture and the Secretary of the 
     Interior shall issue regulations to carry out the purposes of 
     this Act.

     ``SEC. 402. AUTHORIZATION OF APPROPRIATIONS.

       ``There are authorized to be appropriated such sums as are 
     necessary to carry out this Act for each of fiscal years 2008 
     through 2011.

     ``SEC. 403. TREATMENT OF FUNDS AND REVENUES.

       ``(a) Relation to Other Appropriations.--Funds made 
     available under section 402 and funds made available to a 
     Secretary concerned under section 206 shall be in addition to 
     any other annual appropriations for the Forest Service and 
     the Bureau of Land Management.
       ``(b) Deposit of Revenues and Other Funds.--All revenues 
     generated from projects pursuant to title II, including any 
     interest accrued from the revenues, shall be deposited in the 
     Treasury of the United States.''.
       (b) Forest Receipt Payments to Eligible States and 
     Counties.--
       (1) Act of may 23, 1908.--The sixth paragraph under the 
     heading ``FOREST SERVICE'' in the Act of May 23, 1908 (16 
     U.S.C. 500) is amended in the first sentence by striking 
     ``twenty-five percentum'' and all that follows through 
     ``shall be paid'' and inserting the following: ``an amount 
     equal to the annual average of 25 percent of all amounts 
     received for the applicable fiscal year and each of the 
     preceding 6 fiscal years from each national forest shall be 
     paid''.
       (2) Weeks law.--Section 13 of the Act of March 1, 1911 
     (commonly known as the ``Weeks Law'') (16 U.S.C. 500) is 
     amended in the first sentence by striking ``twenty-five 
     percentum'' and all that follows through ``shall be paid'' 
     and inserting the following: ``an amount equal to the annual 
     average of 25 percent of all amounts received for the 
     applicable fiscal year and each of the preceding 6 fiscal 
     years from each national forest shall be paid''.
       (c) Payments in Lieu of Taxes.--
       (1) In general.--Section 6906 of title 31, United States 
     Code, is amended to read as follows:

     ``Sec. 6906. Funding

       ``For each of fiscal years 2008 through 2012--
       ``(1) each county or other eligible unit of local 
     government shall be entitled to payment under this chapter; 
     and
       ``(2) sums shall be made available to the Secretary of the 
     Interior for obligation or expenditure in accordance with 
     this chapter.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 69 of title 31, United States Code, is amended by 
     striking the item relating to section 6906 and inserting the 
     following:

``6906. Funding.''.

       (3) Budget scorekeeping.--
       (A) In general.--Notwithstanding the Budget Scorekeeping 
     Guidelines and the accompanying list of programs and accounts 
     set forth in the joint explanatory statement of the committee 
     of conference accompanying Conference Report 105-217, the 
     section in this title regarding Payments in Lieu of Taxes 
     shall be treated in the baseline for purposes of section 257 
     of the Balanced Budget and Emergency Deficit Control Act of 
     1985 (as in effect prior to September 30, 2002), and by the 
     Chairmen of the House and Senate Budget Committees, as 
     appropriate, for purposes of budget enforcement in the House 
     and Senate, and under the Congressional Budget Act of 1974 as 
     if Payment in Lieu of Taxes (14-1114-0-1-806) were an account 
     designated as Appropriated Entitlements and Mandatories for 
     Fiscal Year 1997 in the joint explanatory statement of the 
     committee of conference accompanying Conference Report 105-
     217.
       (B) Effective date.--This paragraph shall remain in effect 
     for the fiscal years to which the entitlement in section 6906 
     of title 31, United States Code (as amended by paragraph 
     (1)), applies.

     SEC. 602. TRANSFER TO ABANDONED MINE RECLAMATION FUND.

       Subparagraph (C) of section 402(i)(1) of the Surface Mining 
     Control and Reclamation Act of 1977 (30 U.S.C. 1232(i)(1)) is 
     amended by striking ``and $9,000,000 on October 1, 2009'' and 
     inserting ``$9,000,000 on October 1, 2009, and $9,000,000 on 
     October 1, 2010''.

                       TITLE VII--DISASTER RELIEF

        Subtitle A--Heartland and Hurricane Ike Disaster Relief

     SEC. 701. SHORT TITLE.

       This subtitle may be cited as the ``Heartland Disaster Tax 
     Relief Act of 2008''.

     SEC. 702. TEMPORARY TAX RELIEF FOR AREAS DAMAGED BY 2008 
                   MIDWESTERN SEVERE STORMS, TORNADOS, AND 
                   FLOODING.

       (a) In General.--Subject to the modifications described in 
     this section, the following provisions of or relating to the 
     Internal Revenue Code of 1986 shall apply to any Midwestern 
     disaster area in addition to the areas to which such 
     provisions otherwise apply:
       (1) Go zone benefits.--
       (A) Section 1400N (relating to tax benefits) other than 
     subsections (b), (d), (e), (i), (j), (m), and (o) thereof.
       (B) Section 1400O (relating to education tax benefits).
       (C) Section 1400P (relating to housing tax benefits).
       (D) Section 1400Q (relating to special rules for use of 
     retirement funds).
       (E) Section 1400R(a) (relating to employee retention credit 
     for employers).
       (F) Section 1400S (relating to additional tax relief) other 
     than subsection (d) thereof.
       (G) Section 1400T (relating to special rules for mortgage 
     revenue bonds).
       (2) Other benefits included in katrina emergency tax relief 
     act of 2005.--Sections 302, 303, 304, 401, and 405 of the 
     Katrina Emergency Tax Relief Act of 2005.
       (b) Midwestern Disaster Area.--
       (1) In general.--For purposes of this section and for 
     applying the substitutions described in subsections (d) and 
     (e), the term ``Midwestern disaster area'' means an area--
       (A) with respect to which a major disaster has been 
     declared by the President on or after May 20, 2008, and 
     before August 1, 2008, under section 401 of the Robert T. 
     Stafford Disaster Relief and Emergency Assistance Act by 
     reason of severe storms, tornados, or flooding occurring in 
     any of the States of Arkansas, Illinois, Indiana, Iowa, 
     Kansas, Michigan, Minnesota, Missouri, Nebraska, and 
     Wisconsin, and
       (B) determined by the President to warrant individual or 
     individual and public assistance from the Federal Government 
     under such Act with respect to damages attributable to such 
     severe storms, tornados, or flooding.
       (2) Certain benefits available to areas eligible only for 
     public assistance.--For purposes of applying this section to 
     benefits under the following provisions, paragraph (1) shall 
     be applied without regard to subparagraph (B):
       (A) Sections 1400Q, 1400S(b), and 1400S(d) of the Internal 
     Revenue Code of 1986.
       (B) Sections 302, 401, and 405 of the Katrina Emergency Tax 
     Relief Act of 2005.
       (c) References.--
       (1) Area.--Any reference in such provisions to the 
     Hurricane Katrina disaster area or the Gulf Opportunity Zone 
     shall be treated as a reference to any Midwestern disaster 
     area and any reference to the Hurricane Katrina disaster area 
     or the Gulf Opportunity Zone within a State shall be treated 
     as a reference to all Midwestern disaster areas within the 
     State.
       (2) Items attributable to disaster.--Any reference in such 
     provisions to any loss, damage, or other item attributable to 
     Hurricane Katrina shall be treated as a reference to any 
     loss, damage, or other item attributable to the severe 
     storms, tornados, or flooding giving rise to any Presidential 
     declaration described in subsection (b)(1)(A).

[[Page 23065]]

       (3) Applicable disaster date.--For purposes of applying the 
     substitutions described in subsections (d) and (e), the term 
     ``applicable disaster date'' means, with respect to any 
     Midwestern disaster area, the date on which the severe 
     storms, tornados, or flooding giving rise to the Presidential 
     declaration described in subsection (b)(1)(A) occurred.
       (d) Modifications to 1986 Code.--The following provisions 
     of the Internal Revenue Code of 1986 shall be applied with 
     the following modifications:
       (1) Tax-exempt bond financing.--Section 1400N(a)--
       (A) by substituting ``qualified Midwestern disaster area 
     bond'' for ``qualified Gulf Opportunity Zone Bond'' each 
     place it appears, except that in determining whether a bond 
     is a qualified Midwestern disaster area bond--
       (i) paragraph (2)(A)(i) shall be applied by only treating 
     costs as qualified project costs if--

       (I) in the case of a project involving a private business 
     use (as defined in section 141(b)(6)), either the person 
     using the property suffered a loss in a trade or business 
     attributable to the severe storms, tornados, or flooding 
     giving rise to any Presidential declaration described in 
     subsection (b)(1)(A) or is a person designated for purposes 
     of this section by the Governor of the State in which the 
     project is located as a person carrying on a trade or 
     business replacing a trade or business with respect to which 
     another person suffered such a loss, and
       (II) in the case of a project relating to public utility 
     property, the project involves repair or reconstruction of 
     public utility property damaged by such severe storms, 
     tornados, or flooding, and

       (ii) paragraph (2)(A)(ii) shall be applied by treating an 
     issue as a qualified mortgage issue only if 95 percent or 
     more of the net proceeds (as defined in section 150(a)(3)) of 
     the issue are to be used to provide financing for mortgagors 
     who suffered damages to their principal residences 
     attributable to such severe storms, tornados, or flooding.
       (B) by substituting ``any State in which a Midwestern 
     disaster area is located'' for ``the State of Alabama, 
     Louisiana, or Mississippi'' in paragraph (2)(B),
       (C) by substituting ``designated for purposes of this 
     section (on the basis of providing assistance to areas in the 
     order in which such assistance is most needed)'' for 
     ``designated for purposes of this section'' in paragraph 
     (2)(C),
       (D) by substituting ``January 1, 2013'' for ``January 1, 
     2011'' in paragraph (2)(D),
       (E) in paragraph (3)(A)--
       (i) by substituting ``$1,000'' for ``$2,500'', and
       (ii) by substituting ``before the earliest applicable 
     disaster date for Midwestern disaster areas within the 
     State'' for ``before August 28, 2005'',
       (F) by substituting ``qualified Midwestern disaster area 
     repair or construction'' for ``qualified GO Zone repair or 
     construction'' each place it appears,
       (G) by substituting ``after the date of the enactment of 
     the Heartland Disaster Tax Relief Act of 2008 and before 
     January 1, 2013'' for ``after the date of the enactment of 
     this paragraph and before January 1, 2011'' in paragraph 
     (7)(C), and
       (H) by disregarding paragraph (8) thereof.
       (2) Low-income housing credit.--Section 1400N(c)--
       (A) only with respect to calendar years 2008, 2009, and 
     2010,
       (B) by substituting ``Disaster Recovery Assistance housing 
     amount'' for ``Gulf Opportunity housing amount'' each place 
     it appears,
       (C) in paragraph (1)(B)--
       (i) by substituting ``$8.00'' for ``$18.00'', and
       (ii) by substituting ``before the earliest applicable 
     disaster date for Midwestern disaster areas within the 
     State'' for ``before August 28, 2005'', and
       (D) determined without regard to paragraphs (2), (3), (4), 
     (5), and (6) thereof.
       (3) Expensing for certain demolition and clean-up costs.--
     Section 1400N(f)--
       (A) by substituting ``qualified Disaster Recovery 
     Assistance clean-up cost'' for ``qualified Gulf Opportunity 
     Zone clean-up cost'' each place it appears,
       (B) by substituting ``beginning on the applicable disaster 
     date and ending on December 31, 2010'' for ``beginning on 
     August 28, 2005, and ending on December 31, 2007'' in 
     paragraph (2), and
       (C) by treating costs as qualified Disaster Recovery 
     Assistance clean-up costs only if the removal of debris or 
     demolition of any structure was necessary due to damage 
     attributable to the severe storms, tornados, or flooding 
     giving rise to any Presidential declaration described in 
     subsection (b)(1)(A).
       (4) Extension of expensing for environmental remediation 
     costs.--Section 1400N(g)--
       (A) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'' each place it appears,
       (B) by substituting ``January 1, 2011'' for ``January 1, 
     2008'' in paragraph (1),
       (C) by substituting ``December 31, 2010'' for ``December 
     31, 2007'' in paragraph (1), and
       (D) by treating a site as a qualified contaminated site 
     only if the release (or threat of release) or disposal of a 
     hazardous substance at the site was attributable to the 
     severe storms, tornados, or flooding giving rise to any 
     Presidential declaration described in subsection (b)(1)(A).
       (5) Increase in rehabilitation credit.--Section 1400N(h), 
     as amended by this Act--
       (A) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'',
       (B) by substituting ``December 31, 2011'' for ``December 
     31, 2009'' in paragraph (1), and
       (C) by only applying such subsection to qualified 
     rehabilitation expenditures with respect to any building or 
     structure which was damaged or destroyed as a result of the 
     severe storms, tornados, or flooding giving rise to any 
     Presidential declaration described in subsection (b)(1)(A).
       (6) Treatment of net operating losses attributable to 
     disaster losses.--Section 1400N(k)--
       (A) by substituting ``qualified Disaster Recovery 
     Assistance loss'' for ``qualified Gulf Opportunity Zone 
     loss'' each place it appears,
       (B) by substituting ``after the day before the applicable 
     disaster date, and before January 1, 2011'' for ``after 
     August 27, 2005, and before January 1, 2008'' each place it 
     appears,
       (C) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'' in paragraph (2)(B)(ii)(I),
       (D) by substituting ``qualified Disaster Recovery 
     Assistance property'' for ``qualified Gulf Opportunity Zone 
     property'' in paragraph (2)(B)(iv), and
       (E) by substituting ``qualified Disaster Recovery 
     Assistance casualty loss'' for ``qualified Gulf Opportunity 
     Zone casualty loss'' each place it appears.
       (7) Credit to holders of tax credit bonds.--Section 
     1400N(l)--
       (A) by substituting ``Midwestern tax credit bond'' for 
     ``Gulf tax credit bond'' each place it appears,
       (B) by substituting ``any State in which a Midwestern 
     disaster area is located or any instrumentality of the 
     State'' for ``the State of Alabama, Louisiana, or 
     Mississippi'' in paragraph (4)(A)(i),
       (C) by substituting ``after December 31, 2008 and before 
     January 1, 2010'' for ``after December 31, 2005, and before 
     January 1, 2007'',
       (D) by substituting ``shall not exceed $100,000,000 for any 
     State with an aggregate population located in all Midwestern 
     disaster areas within the State of at least 2,000,000, 
     $50,000,000 for any State with an aggregate population 
     located in all Midwestern disaster areas within the State of 
     at least 1,000,000 but less than 2,000,000, and zero for any 
     other State. The population of a State within any area shall 
     be determined on the basis of the most recent census estimate 
     of resident population released by the Bureau of Census 
     before the earliest applicable disaster date for Midwestern 
     disaster areas within the State.'' for ``shall not exceed'' 
     and all that follows in paragraph (4)(C), and
       (E) by substituting ``the earliest applicable disaster date 
     for Midwestern disaster areas within the State'' for ``August 
     28, 2005'' in paragraph (5)(A).
       (8) Education tax benefits.--Section 1400O, by substituting 
     ``2008 or 2009'' for ``2005 or 2006''.
       (9) Housing tax benefits.--Section 1400P, by substituting 
     ``the applicable disaster date'' for ``August 28, 2005'' in 
     subsection (c)(1).
       (10) Special rules for use of retirement funds.--Section 
     1400Q--
       (A) by substituting ``qualified Disaster Recovery 
     Assistance distribution'' for ``qualified hurricane 
     distribution'' each place it appears,
       (B) by substituting ``on or after the applicable disaster 
     date and before January 1, 2010'' for ``on or after August 
     25, 2005, and before January 1, 2007'' in subsection 
     (a)(4)(A)(i),
       (C) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'' in subsections (a)(4)(A)(i) and 
     (c)(3)(B),
       (D) by disregarding clauses (ii) and (iii) of subsection 
     (a)(4)(A) thereof,
       (E) by substituting ``qualified storm damage distribution'' 
     for ``qualified Katrina distribution'' each place it appears,
       (F) by substituting ``after the date which is 6 months 
     before the applicable disaster date and before the date which 
     is the day after the applicable disaster date'' for ``after 
     February 28, 2005, and before August 29, 2005'' in subsection 
     (b)(2)(B)(ii),
       (G) by substituting ``the Midwestern disaster area, but not 
     so purchased or constructed on account of severe storms, 
     tornados, or flooding giving rise to the designation of the 
     area as a disaster area'' for ``the Hurricane Katrina 
     disaster area, but not so purchased or constructed on account 
     of Hurricane Katrina'' in subsection (b)(2)(B)(iii),
       (H) by substituting ``beginning on the applicable disaster 
     date and ending on the date which is 5 months after the date 
     of the enactment of the Heartland Disaster Tax Relief Act of 
     2008'' for ``beginning on August 25, 2005, and ending on 
     February 28, 2006'' in subsection (b)(3)(A),
       (I) by substituting ``qualified storm damage individual'' 
     for ``qualified Hurricane Katrina individual'' each place it 
     appears,
       (J) by substituting ``December 31, 2009'' for ``December 
     31, 2006'' in subsection (c)(2)(A),
       (K) by disregarding subparagraphs (C) and (D) of subsection 
     (c)(3) thereof,
       (L) by substituting ``beginning on the date of the 
     enactment of the Heartland Disaster Tax Relief Act of 2008 
     and ending on December 31, 2009'' for ``beginning on 
     September 24, 2005, and ending on December 31, 2006'' in 
     subsection (c)(4)(A)(i),
       (M) by substituting ``the applicable disaster date'' for 
     ``August 25, 2005'' in subsection (c)(4)(A)(ii), and
       (N) by substituting ``January 1, 2010'' for ``January 1, 
     2007'' in subsection (d)(2)(A)(ii).
       (11) Employee retention credit for employers affected by 
     severe storms, tornados, and flooding.--Section 1400R(a)--
       (A) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'' each place it appears,

[[Page 23066]]

       (B) by substituting ``January 1, 2009'' for ``January 1, 
     2006'' both places it appears, and
       (C) only with respect to eligible employers who employed an 
     average of not more than 200 employees on business days 
     during the taxable year before the applicable disaster date.
       (12) Temporary suspension of limitations on charitable 
     contributions.--Section 1400S(a), by substituting the 
     following paragraph for paragraph (4) thereof:
       ``(4) Qualified contributions.--
       ``(A) In general.--For purposes of this subsection, the 
     term `qualified contribution' means any charitable 
     contribution (as defined in section 170(c)) if--
       ``(i) such contribution--

       ``(I) is paid during the period beginning on the earliest 
     applicable disaster date for all States and ending on 
     December 31, 2008, in cash to an organization described in 
     section 170(b)(1)(A), and
       ``(II) is made for relief efforts in 1 or more Midwestern 
     disaster areas,

       ``(ii) the taxpayer obtains from such organization 
     contemporaneous written acknowledgment (within the meaning of 
     section 170(f)(8)) that such contribution was used (or is to 
     be used) for relief efforts in 1 or more Midwestern disaster 
     areas, and
       ``(iii) the taxpayer has elected the application of this 
     subsection with respect to such contribution.
       ``(B) Exception.--Such term shall not include a 
     contribution by a donor if the contribution is--
       ``(i) to an organization described in section 509(a)(3), or
       ``(ii) for establishment of a new, or maintenance of an 
     existing, donor advised fund (as defined in section 
     4966(d)(2)).
       ``(C) Application of election to partnerships and s 
     corporations.--In the case of a partnership or S corporation, 
     the election under subparagraph (A)(iii) shall be made 
     separately by each partner or shareholder.''.
       (13) Suspension of certain limitations on personal casualty 
     losses.--Section 1400S(b)(1), by substituting ``the 
     applicable disaster date'' for ``August 25, 2005''.
       (14) Special rule for determining earned income.--Section 
     1400S(d)--
       (A) by treating an individual as a qualified individual if 
     such individual's principal place of abode on the applicable 
     disaster date was located in a Midwestern disaster area,
       (B) by treating the applicable disaster date with respect 
     to any such individual as the applicable date for purposes of 
     such subsection, and
       (C) by treating an area as described in paragraph 
     (2)(B)(ii) thereof if the area is a Midwestern disaster area 
     only by reason of subsection (b)(2) of this section (relating 
     to areas eligible only for public assistance).
       (15) Adjustments regarding taxpayer and dependency 
     status.--Section 1400S(e), by substituting ``2008 or 2009'' 
     for ``2005 or 2006''.
       (e) Modifications to Katrina Emergency Tax Relief Act of 
     2005.--The following provisions of the Katrina Emergency Tax 
     Relief Act of 2005 shall be applied with the following 
     modifications:
       (1) Additional exemption for housing displaced 
     individual.--Section 302--
       (A) by substituting ``2008 or 2009'' for ``2005 or 2006'' 
     in subsection (a) thereof,
       (B) by substituting ``Midwestern displaced individual'' for 
     ``Hurricane Katrina displaced individual'' each place it 
     appears, and
       (C) by treating an area as a core disaster area for 
     purposes of applying subsection (c) thereof if the area is a 
     Midwestern disaster area without regard to subsection (b)(2) 
     of this section (relating to areas eligible only for public 
     assistance).
       (2) Increase in standard mileage rate.--Section 303, by 
     substituting ``beginning on the applicable disaster date and 
     ending on December 31, 2008'' for ``beginning on August 25, 
     2005, and ending on December 31, 2006''.
       (3) Mileage reimbursements for charitable volunteers.--
     Section 304--
       (A) by substituting ``beginning on the applicable disaster 
     date and ending on December 31, 2008'' for ``beginning on 
     August 25, 2005, and ending on December 31, 2006'' in 
     subsection (a), and
       (B) by substituting ``the applicable disaster date'' for 
     ``August 25, 2005'' in subsection (a).
       (4) Exclusion of certain cancellation of indebtedness 
     income.--Section 401--
       (A) by treating an individual whose principal place of 
     abode on the applicable disaster date was in a Midwestern 
     disaster area (determined without regard to subsection (b)(2) 
     of this section) as an individual described in subsection 
     (b)(1) thereof, and by treating an individual whose principal 
     place of abode on the applicable disaster date was in a 
     Midwestern disaster area solely by reason of subsection 
     (b)(2) of this section as an individual described in 
     subsection (b)(2) thereof,
       (B) by substituting ``the applicable disaster date'' for 
     ``August 28, 2005'' both places it appears, and
       (C) by substituting ``January 1, 2010'' for ``January 1, 
     2007'' in subsection (e).
       (5) Extension of replacement period for nonrecognition of 
     gain.--Section 405, by substituting ``on or after the 
     applicable disaster date'' for ``on or after August 25, 
     2005''.

     SEC. 703. REPORTING REQUIREMENTS RELATING TO DISASTER RELIEF 
                   CONTRIBUTIONS.

       (a) In General.--Section 6033(b) (relating to returns of 
     certain organizations described in section 501(c)(3)) is 
     amended by striking ``and'' at the end of paragraph (13), by 
     redesignating paragraph (14) as paragraph (15), and by adding 
     after paragraph (13) the following new paragraph:
       ``(14) such information as the Secretary may require with 
     respect to disaster relief activities, including the amount 
     and use of qualified contributions to which section 1400S(a) 
     applies, and''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which (determined 
     without regard to any extension) occurs after December 31, 
     2008.

     SEC. 704. TEMPORARY TAX-EXEMPT BOND FINANCING AND LOW-INCOME 
                   HOUSING TAX RELIEF FOR AREAS DAMAGED BY 
                   HURRICANE IKE.

       (a) Tax-Exempt Bond Financing.--Section 1400N(a) of the 
     Internal Revenue Code of 1986 shall apply to any Hurricane 
     Ike disaster area in addition to any other area referenced in 
     such section, but with the following modifications:
       (1) By substituting ``qualified Hurricane Ike disaster area 
     bond'' for ``qualified Gulf Opportunity Zone Bond'' each 
     place it appears, except that in determining whether a bond 
     is a qualified Hurricane Ike disaster area bond--
       (A) paragraph (2)(A)(i) shall be applied by only treating 
     costs as qualified project costs if--
       (i) in the case of a project involving a private business 
     use (as defined in section 141(b)(6)), either the person 
     using the property suffered a loss in a trade or business 
     attributable to Hurricane Ike or is a person designated for 
     purposes of this section by the Governor of the State in 
     which the project is located as a person carrying on a trade 
     or business replacing a trade or business with respect to 
     which another person suffered such a loss, and
       (ii) in the case of a project relating to public utility 
     property, the project involves repair or reconstruction of 
     public utility property damaged by Hurricane Ike, and
       (B) paragraph (2)(A)(ii) shall be applied by treating an 
     issue as a qualified mortgage issue only if 95 percent or 
     more of the net proceeds (as defined in section 150(a)(3)) of 
     the issue are to be used to provide financing for mortgagors 
     who suffered damages to their principal residences 
     attributable to Hurricane Ike.
       (2) By substituting ``any State in which any Hurricane Ike 
     disaster area is located'' for ``the State of Alabama, 
     Louisiana, or Mississippi'' in paragraph (2)(B).
       (3) By substituting ``designated for purposes of this 
     section (on the basis of providing assistance to areas in the 
     order in which such assistance is most needed)'' for 
     ``designated for purposes of this section'' in paragraph 
     (2)(C).
       (4) By substituting ``January 1, 2013'' for ``January 1, 
     2011'' in paragraph (2)(D).
       (5) By substituting the following for subparagraph (A) of 
     paragraph (3):
       ``(A) Aggregate amount designated.--The maximum aggregate 
     face amount of bonds which may be designated under this 
     subsection with respect to any State shall not exceed the 
     product of $2,000 multiplied by the portion of the State 
     population which is in--
       ``(i) in the case of Texas, the counties of Brazoria, 
     Chambers, Galveston, Jefferson, and Orange, and
       ``(ii) in the case of Louisiana, the parishes of Calcasieu 
     and Cameron,
     (as determined on the basis of the most recent census 
     estimate of resident population released by the Bureau of 
     Census before September 13, 2008).''.
       (6) By substituting ``qualified Hurricane Ike disaster area 
     repair or construction'' for ``qualified GO Zone repair or 
     construction'' each place it appears.
       (7) By substituting ``after the date of the enactment of 
     the Heartland Disaster Tax Relief Act of 2008 and before 
     January 1, 2013'' for ``after the date of the enactment of 
     this paragraph and before January 1, 2011'' in paragraph 
     (7)(C).
       (8) By disregarding paragraph (8) thereof.
       (9) By substituting ``any Hurricane Ike disaster area'' for 
     ``the Gulf Opportunity Zone'' each place it appears.
       (b) Low-Income Housing Credit.--Section 1400N(c) of the 
     Internal Revenue Code of 1986 shall apply to any Hurricane 
     Ike disaster area in addition to any other area referenced in 
     such section, but with the following modifications:
       (1) Only with respect to calendar years 2008, 2009, and 
     2010.
       (2) By substituting ``any Hurricane Ike disaster area'' for 
     ``the Gulf Opportunity Zone'' each place it appears.
       (3) By substituting ``Hurricane Ike Recovery Assistance 
     housing amount'' for ``Gulf Opportunity housing amount'' each 
     place it appears.
       (4) By substituting the following for subparagraph (B) of 
     paragraph (1):
       ``(B) Hurricane ike housing amount.--For purposes of 
     subparagraph (A), the term `Hurricane Ike housing amount' 
     means, for any calendar year, the amount equal to the product 
     of $16.00 multiplied by the portion of the State population 
     which is in--
       ``(i) in the case of Texas, the counties of Brazoria, 
     Chambers, Galveston, Jefferson, and Orange, and
       ``(ii) in the case of Louisiana, the parishes of Calcasieu 
     and Cameron,
     (as determined on the basis of the most recent census 
     estimate of resident population released by the Bureau of 
     Census before September 13, 2008).''.
       (5) Determined without regard to paragraphs (2), (3), (4), 
     (5), and (6) thereof.
       (c) Hurricane Ike Disaster Area.--For purposes of this 
     section and for applying the substitutions described in 
     subsections (a) and (b), the term ``Hurricane Ike disaster 
     area'' means an area in the State of Texas or Louisiana--

[[Page 23067]]

       (1) with respect to which a major disaster has been 
     declared by the President on September 13, 2008, under 
     section 401 of the Robert T. Stafford Disaster Relief and 
     Emergency Assistance Act by reason of Hurricane Ike, and
       (2) determined by the President to warrant individual or 
     individual and public assistance from the Federal Government 
     under such Act with respect to damages attributable to 
     Hurricane Ike.

                  Subtitle B--National Disaster Relief

     SEC. 706. LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED 
                   DISASTERS.

       (a) Waiver of Adjusted Gross Income Limitation.--
       (1) In general.--Subsection (h) of section 165 is amended 
     by redesignating paragraphs (3) and (4) as paragraphs (4) and 
     (5), respectively, and by inserting after paragraph (2) the 
     following new paragraph:
       ``(3) Special rule for losses in federally declared 
     disasters.--
       ``(A) In general.--If an individual has a net disaster loss 
     for any taxable year, the amount determined under paragraph 
     (2)(A)(ii) shall be the sum of--
       ``(i) such net disaster loss, and
       ``(ii) so much of the excess referred to in the matter 
     preceding clause (i) of paragraph (2)(A) (reduced by the 
     amount in clause (i) of this subparagraph) as exceeds 10 
     percent of the adjusted gross income of the individual.
       ``(B) Net disaster loss.--For purposes of subparagraph (A), 
     the term `net disaster loss' means the excess of--
       ``(i) the personal casualty losses--

       ``(I) attributable to a federally declared disaster 
     occurring before January 1, 2010, and
       ``(II) occurring in a disaster area, over

       ``(ii) personal casualty gains.
       ``(C) Federally declared disaster.--For purposes of this 
     paragraph--
       ``(i) Federally declared disaster.--The term `federally 
     declared disaster' means any disaster subsequently determined 
     by the President of the United States to warrant assistance 
     by the Federal Government under the Robert T. Stafford 
     Disaster Relief and Emergency Assistance Act.
       ``(ii) Disaster area.--The term `disaster area' means the 
     area so determined to warrant such assistance.''.
       (2) Conforming amendments.--
       (A) Section 165(h)(4)(B) (as so redesignated) is amended by 
     striking ``paragraph (2)'' and inserting ``paragraphs (2) and 
     (3)''.
       (B) Section 165(i)(1) is amended by striking ``loss'' and 
     all that follows through ``Act'' and inserting ``loss 
     occurring in a disaster area (as defined by clause (ii) of 
     subsection (h)(3)(C)) and attributable to a federally 
     declared disaster (as defined by clause (i) of such 
     subsection)''.
       (C) Section 165(i)(4) is amended by striking 
     ``Presidentially declared disaster (as defined by section 
     1033(h)(3))'' and inserting ``federally declared disaster (as 
     defined by subsection (h)(3)(C)(i)''.
       (D)(i) So much of subsection (h) of section 1033 as 
     precedes subparagraph (A) of paragraph (1) thereof is amended 
     to read as follows:
       ``(h) Special Rules for Property Damaged by Federally 
     Declared Disasters.--
       ``(1) Principal residences.--If the taxpayer's principal 
     residence or any of its contents is located in a disaster 
     area and is compulsorily or involuntarily converted as a 
     result of a federally declared disaster--''.
       (ii) Paragraph (2) of section 1033(h) is amended by 
     striking ``investment'' and all that follows through 
     ``disaster'' and inserting ``investment located in a disaster 
     area and compulsorily or involuntarily converted as a result 
     of a federally declared disaster''.
       (iii) Paragraph (3) of section 1033(h) is amended to read 
     as follows:
       ``(3) Federally declared disaster; disaster area.--The 
     terms ``federally declared disaster'' and ``disaster area'' 
     shall have the respective meaning given such terms by section 
     165(h)(3)(C).''.
       (iv) Section 139(c)(2) is amended to read as follows:
       ``(2) federally declared disaster (as defined by section 
     165(h)(3)(C)(i)),''.
       (v) Subclause (II) of section 172(b)(1)(F)(ii) is amended 
     by striking ``Presidentially declared disasters (as defined 
     in section 1033(h)(3))'' and inserting ``federally declared 
     disasters (as defined by subsection (h)(3)(C)(i))''.
       (vi) Subclause (III) of section 172(b)(1)(F)(ii) is amended 
     by striking ``Presidentially declared disasters'' and 
     inserting ``federally declared disasters''.
       (vii) Subsection (a) of section 7508A is amended by 
     striking ``Presidentially declared disaster (as defined in 
     section 1033(h)(3))'' and inserting ``federally declared 
     disaster (as defined by section 165(h)(3)(C)(i))''.
       (b) Increase in Standard Deduction by Disaster Casualty 
     Loss.--
       (1) In general.--Paragraph (1) of section 63(c), as amended 
     by the Housing Assistance Tax Act of 2008, is amended by 
     striking ``and'' at the end of subparagraph (B), by striking 
     the period at the end of subparagraph (C) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) the disaster loss deduction.''.
       (2) Disaster loss deduction.--Subsection (c) of section 63, 
     as amended by the Housing Assistance Tax Act of 2008, is 
     amended by adding at the end the following new paragraph:
       ``(8) Disaster loss deduction.--For the purposes of 
     paragraph (1), the term `disaster loss deduction' means the 
     net disaster loss (as defined in section 165(h)(3)(B)).''.
       (3) Allowance in computing alternative minimum taxable 
     income.--Subparagraph (E) of section 56(b)(1) is amended by 
     adding at the end the following new sentence: ``The preceding 
     sentence shall not apply to so much of the standard deduction 
     as is determined under section 63(c)(1)(D).''.
       (c) Increase in Limitation on Individual Loss Per 
     Casualty.--Paragraph (1) of section 165(h) is amended by 
     striking ``$100'' and inserting ``$500 ($100 for taxable 
     years beginning after December 31, 2009)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to disasters 
     declared in taxable years beginning after December 31, 2007.
       (2) Increase in limitation on individual loss per 
     casualty.--The amendment made by subsection (c) shall apply 
     to taxable years beginning after December 31, 2008.

     SEC. 707. EXPENSING OF QUALIFIED DISASTER EXPENSES.

       (a) In General.--Part VI of subchapter B of chapter 1 is 
     amended by inserting after section 198 the following new 
     section:

     ``SEC. 198A. EXPENSING OF QUALIFIED DISASTER EXPENSES.

       ``(a) In General.--A taxpayer may elect to treat any 
     qualified disaster expenses which are paid or incurred by the 
     taxpayer as an expense which is not chargeable to capital 
     account. Any expense which is so treated shall be allowed as 
     a deduction for the taxable year in which it is paid or 
     incurred.
       ``(b) Qualified Disaster Expense.--For purposes of this 
     section, the term `qualified disaster expense' means any 
     expenditure--
       ``(1) which is paid or incurred in connection with a trade 
     or business or with business-related property,
       ``(2) which is--
       ``(A) for the abatement or control of hazardous substances 
     that were released on account of a federally declared 
     disaster occurring before January 1, 2010,
       ``(B) for the removal of debris from, or the demolition of 
     structures on, real property which is business-related 
     property damaged or destroyed as a result of a federally 
     declared disaster occurring before such date, or
       ``(C) for the repair of business-related property damaged 
     as a result of a federally declared disaster occurring before 
     such date, and
       ``(3) which is otherwise chargeable to capital account.
       ``(c) Other Definitions.--For purposes of this section--
       ``(1) Business-related property.--The term `business-
     related property' means property--
       ``(A) held by the taxpayer for use in a trade or business 
     or for the production of income, or
       ``(B) described in section 1221(a)(1) in the hands of the 
     taxpayer.
       ``(2) Federally declared disaster.--The term `federally 
     declared disaster' has the meaning given such term by section 
     165(h)(3)(C)(i).
       ``(d) Deduction Recaptured as Ordinary Income on Sale, 
     etc.--Solely for purposes of section 1245, in the case of 
     property to which a qualified disaster expense would have 
     been capitalized but for this section--
       ``(1) the deduction allowed by this section for such 
     expense shall be treated as a deduction for depreciation, and
       ``(2) such property (if not otherwise section 1245 
     property) shall be treated as section 1245 property solely 
     for purposes of applying section 1245 to such deduction.
       ``(e) Coordination With Other Provisions.--Sections 198, 
     280B, and 468 shall not apply to amounts which are treated as 
     expenses under this section.
       ``(f) 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 VI 
     of subchapter B of chapter 1 is amended by inserting after 
     the item relating to section 198 the following new item:

``Sec. 198A. Expensing of Qualified Disaster Expenses.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after December 31, 
     2007 in connection with disaster declared after such date.

     SEC. 708. NET OPERATING LOSSES ATTRIBUTABLE TO FEDERALLY 
                   DECLARED DISASTERS.

       (a) In General.--Paragraph (1) of section 172(b) is amended 
     by adding at the end the following new subparagraph:
       ``(J) Certain losses attributable federally declared 
     disasters.--In the case of a taxpayer who has a qualified 
     disaster loss (as defined in subsection (j)), such loss shall 
     be a net operating loss carryback to each of the 5 taxable 
     years preceding the taxable year of such loss.''.
       (b) Qualified Disaster Loss.--Section 172 is amended by 
     redesignating subsections (j) and (k) as subsections (k) and 
     (l), respectively, and by inserting after subsection (i) the 
     following new subsection:
       ``(j) Rules Relating to Qualified Disaster Losses.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified disaster loss' means 
     the lesser of--
       ``(A) the sum of--
       ``(i) the losses allowable under section 165 for the 
     taxable year--

       ``(I) attributable to a federally declared disaster (as 
     defined in section 165(h)(3)(C)(i)) occurring before January 
     1, 2010, and
       ``(II) occurring in a disaster area (as defined in section 
     165(h)(3)(C)(ii)), and

       ``(ii) the deduction for the taxable year for qualified 
     disaster expenses which is allowable

[[Page 23068]]

     under section 198A(a) or which would be so allowable if not 
     otherwise treated as an expense, or
       ``(B) the net operating loss for such taxable year.
       ``(2) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), a qualified disaster loss for any 
     taxable year shall be treated in a manner similar to the 
     manner in which a specified liability loss is treated.
       ``(3) Election.--Any taxpayer entitled to a 5-year 
     carryback under subsection (b)(1)(J) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year determined without regard to subsection (b)(1)(J). Such 
     election shall be made in such manner as may be prescribed by 
     the Secretary and shall be made by the due date (including 
     extensions of time) for filing the taxpayer's return for the 
     taxable year of the net operating loss. Such election, once 
     made for any taxable year, shall be irrevocable for such 
     taxable year.
       ``(4) Exclusion.--The term `qualified disaster loss' shall 
     not include any loss with respect to any property described 
     in section 1400N(p)(3).''.
       (c) Loss Deduction Allowed in Computing Alternative Minimum 
     Taxable Income.--Subsection (d) of section 56 is amended by 
     adding at the end the following new paragraph:
       ``(3) Net operating loss attributable to federally declared 
     disasters.--In the case of a taxpayer which has a qualified 
     disaster loss (as defined by section 172(b)(1)(J)) for the 
     taxable year, paragraph (1) shall be applied by increasing 
     the amount determined under subparagraph (A)(ii)(I) thereof 
     by the sum of the carrybacks and carryovers of such loss.''.
       (d) Conforming Amendments.--
       (1) Clause (ii) of section 172(b)(1)(F) is amended by 
     inserting ``or qualified disaster loss (as defined in 
     subsection (j))'' before the period at the end of the last 
     sentence.
       (2) Paragraph (1) of section 172(i) is amended by adding at 
     the end the following new flush sentence:

     ``Such term shall not include any qualified disaster loss (as 
     defined in subsection (j)).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to losses arising in taxable years beginning 
     after December 31, 2007, in connection with disasters 
     declared after such date.

     SEC. 709. WAIVER OF CERTAIN MORTGAGE REVENUE BOND 
                   REQUIREMENTS FOLLOWING FEDERALLY DECLARED 
                   DISASTERS.

       (a) In General.--Subsection (k) of section 143 is amended 
     by adding at the end the following new paragraph:
       ``(12) Special rules for residences destroyed in federally 
     declared disasters.--
       ``(A) Principal residence destroyed.--At the election of 
     the taxpayer, if the principal residence (within the meaning 
     of section 121) of such taxpayer is--
       ``(i) rendered unsafe for use as a residence by reason of a 
     federally declared disaster occurring before January 1, 2010, 
     or
       ``(ii) demolished or relocated by reason of an order of the 
     government of a State or political subdivision thereof on 
     account of a federally declared disaster occurring before 
     such date,

     then, for the 2-year period beginning on the date of the 
     disaster declaration, subsection (d)(1) shall not apply with 
     respect to such taxpayer and subsection (e) shall be applied 
     by substituting `110' for `90' in paragraph (1) thereof.
       ``(B) Principal residence damaged.--
       ``(i) In general.--At the election of the taxpayer, if the 
     principal residence (within the meaning of section 121) of 
     such taxpayer was damaged as the result of a federally 
     declared disaster occurring before January 1, 2010, any 
     owner-financing provided in connection with the repair or 
     reconstruction of such residence shall be treated as a 
     qualified rehabilitation loan.
       ``(ii) Limitation.--The aggregate owner-financing to which 
     clause (i) applies shall not exceed the lesser of--

       ``(I) the cost of such repair or reconstruction, or
       ``(II) $150,000.

       ``(C) Federally declared disaster.--For purposes of this 
     paragraph, the term `federally declared disaster' has the 
     meaning given such term by section 165(h)(3)(C)(i).
       ``(D) Election; denial of double benefit.--
       ``(i) Election.--An election under this paragraph may not 
     be revoked except with the consent of the Secretary.
       ``(ii) Denial of double benefit.--If a taxpayer elects the 
     application of this paragraph, paragraph (11) shall not apply 
     with respect to the purchase or financing of any residence by 
     such taxpayer.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to disasters occurring after December 31, 2007.

     SEC. 710. SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED 
                   DISASTER PROPERTY.

       (a) In General.--Section 168, as amended by this Act, is 
     amended by adding at the end the following new subsection:
       ``(n) Special Allowance for Qualified Disaster Assistance 
     Property.--
       ``(1) In general.--In the case of any qualified disaster 
     assistance property--
       ``(A) the depreciation deduction provided by section 167(a) 
     for the taxable year in which such property is placed in 
     service shall include an allowance equal to 50 percent of the 
     adjusted basis of the qualified disaster assistance property, 
     and
       ``(B) the adjusted basis of the qualified disaster 
     assistance property shall be reduced by the amount of such 
     deduction before computing the amount otherwise allowable as 
     a depreciation deduction under this chapter for such taxable 
     year and any subsequent taxable year.
       ``(2) Qualified disaster assistance property.--For purposes 
     of this subsection--
       ``(A) In general.--The term `qualified disaster assistance 
     property' means any property--
       ``(i)(I) which is described in subsection (k)(2)(A)(i), or
       ``(II) which is nonresidential real property or residential 
     rental property,
       ``(ii) substantially all of the use of which is--

       ``(I) in a disaster area with respect to a federally 
     declared disaster occurring before January 1, 2010, and
       ``(II) in the active conduct of a trade or business by the 
     taxpayer in such disaster area,

       ``(iii) which--

       ``(I) rehabilitates property damaged, or replaces property 
     destroyed or condemned, as a result of such federally 
     declared disaster, except that, for purposes of this clause, 
     property shall be treated as replacing property destroyed or 
     condemned if, as part of an integrated plan, such property 
     replaces property which is included in a continuous area 
     which includes real property destroyed or condemned, and
       ``(II) is similar in nature to, and located in the same 
     county as, the property being rehabilitated or replaced,

       ``(iv) the original use of which in such disaster area 
     commences with an eligible taxpayer on or after the 
     applicable disaster date,
       ``(v) which is acquired by such eligible taxpayer by 
     purchase (as defined in section 179(d)) on or after the 
     applicable disaster date, but only if no written binding 
     contract for the acquisition was in effect before such date, 
     and
       ``(vi) which is placed in service by such eligible taxpayer 
     on or before the date which is the last day of the third 
     calendar year following the applicable disaster date (the 
     fourth calendar year in the case of nonresidential real 
     property and residential rental property).
       ``(B) Exceptions.--
       ``(i) Other bonus depreciation property.--The term 
     `qualified disaster assistance property' shall not include--

       ``(I) any property to which subsection (k) (determined 
     without regard to paragraph (4)), (l), or (m) applies,
       ``(II) any property to which section 1400N(d) applies, and
       ``(III) any property described in section 1400N(p)(3).

       ``(ii) Alternative depreciation property.--The term 
     `qualified disaster assistance property' shall not include 
     any property to which the alternative depreciation system 
     under subsection (g) applies, determined without regard to 
     paragraph (7) of subsection (g) (relating to election to have 
     system apply).
       ``(iii) Tax-exempt bond financed property.--Such term shall 
     not include any property any portion of which is financed 
     with the proceeds of any obligation the interest on which is 
     exempt from tax under section 103.
       ``(iv) Qualified revitalization buildings.--Such term shall 
     not include any qualified revitalization building with 
     respect to which the taxpayer has elected the application of 
     paragraph (1) or (2) of section 1400I(a).
       ``(v) Election out.--If a taxpayer makes an election under 
     this clause with respect to any class of property for any 
     taxable year, this subsection shall not apply to all property 
     in such class placed in service during such taxable year.
       ``(C) Special rules.--For purposes of this subsection, 
     rules similar to the rules of subparagraph (E) of subsection 
     (k)(2) shall apply, except that such subparagraph shall be 
     applied--
       ``(i) by substituting `the applicable disaster date' for 
     `December 31, 2007' each place it appears therein,
       ``(ii) without regard to `and before January 1, 2009' in 
     clause (i) thereof, and
       ``(iii) by substituting `qualified disaster assistance 
     property' for `qualified property' in clause (iv) thereof.
       ``(D) Allowance against alternative minimum tax.--For 
     purposes of this subsection, rules similar to the rules of 
     subsection (k)(2)(G) shall apply.
       ``(3) Other definitions.--For purposes of this subsection--
       ``(A) Applicable disaster date.--The term `applicable 
     disaster date' means, with respect to any federally declared 
     disaster, the date on which such federally declared disaster 
     occurs.
       ``(B) Federally declared disaster.--The term `federally 
     declared disaster' has the meaning given such term under 
     section 165(h)(3)(C)(i).
       ``(C) Disaster area.--The term `disaster area' has the 
     meaning given such term under section 165(h)(3)(C)(ii).
       ``(D) Eligible taxpayer.--The term `eligible taxpayer' 
     means a taxpayer who has suffered an economic loss 
     attributable to a federally declared disaster.
       ``(4) Recapture.--For purposes of this subsection, rules 
     similar to the rules under section 179(d)(10) shall apply 
     with respect to any qualified disaster assistance property 
     which ceases to be qualified disaster assistance property.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after December 31, 
     2007, with respect disasters declared after such date.

     SEC. 711. INCREASED EXPENSING FOR QUALIFIED DISASTER 
                   ASSISTANCE PROPERTY.

       (a) In General.--Section 179 is amended by adding at the 
     end the following new subsection:
       ``(e) Special Rules for Qualified Disaster Assistance 
     Property.--

[[Page 23069]]

       ``(1) In general.--For purposes of this section--
       ``(A) the dollar amount in effect under subsection (b)(1) 
     for the taxable year shall be increased by the lesser of--
       ``(i) $100,000, or
       ``(ii) the cost of qualified section 179 disaster 
     assistance property placed in service during the taxable 
     year, and
       ``(B) the dollar amount in effect under subsection (b)(2) 
     for the taxable year shall be increased by the lesser of--
       ``(i) $600,000, or
       ``(ii) the cost of qualified section 179 disaster 
     assistance property placed in service during the taxable 
     year.
       ``(2) Qualified section 179 disaster assistance property.--
     For purposes of this subsection, the term `qualified section 
     179 disaster assistance property' means section 179 property 
     (as defined in subsection (d)) which is qualified disaster 
     assistance property (as defined in section 168(n)(2)).
       ``(3) Coordination with empowerment zones and renewal 
     communities.--For purposes of sections 1397A and 1400J, 
     qualified section 179 disaster assistance property shall not 
     be treated as qualified zone property or qualified renewal 
     property, unless the taxpayer elects not to take such 
     qualified section 179 disaster assistance property into 
     account for purposes of this subsection.
       ``(4) Recapture.--For purposes of this subsection, rules 
     similar to the rules under subsection (d)(10) shall apply 
     with respect to any qualified section 179 disaster assistance 
     property which ceases to be qualified section 179 disaster 
     assistance property.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after December 31, 
     2007, with respect disasters declared after such date.

     SEC. 712. COORDINATION WITH HEARTLAND DISASTER RELIEF.

       The amendments made by this subtitle, other than the 
     amendments made by sections 706(a)(2), 710, and 711, shall 
     not apply to any disaster described in section 702(c)(1)(A), 
     or to any expenditure or loss resulting from such disaster.

TITLE VIII--SPENDING REDUCTIONS AND APPROPRIATE REVENUE RAISERS FOR NEW 
                           TAX RELIEF POLICY

     SEC. 801. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX 
                   INDIFFERENT PARTIES.

       (a) In General.--Subpart B of part II of subchapter E of 
     chapter 1 is amended by inserting after section 457 the 
     following new section:

     ``SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN 
                   TAX INDIFFERENT PARTIES.

       ``(a) In General.--Any compensation which is deferred under 
     a nonqualified deferred compensation plan of a nonqualified 
     entity shall be includible in gross income when there is no 
     substantial risk of forfeiture of the rights to such 
     compensation.
       ``(b) Nonqualified Entity.--For purposes of this section, 
     the term `nonqualified entity' means--
       ``(1) any foreign corporation unless substantially all of 
     its income is--
       ``(A) effectively connected with the conduct of a trade or 
     business in the United States, or
       ``(B) subject to a comprehensive foreign income tax, and
       ``(2) any partnership unless substantially all of its 
     income is allocated to persons other than--
       ``(A) foreign persons with respect to whom such income is 
     not subject to a comprehensive foreign income tax, and
       ``(B) organizations which are exempt from tax under this 
     title.
       ``(c) Determinability of Amounts of Compensation.--
       ``(1) In general.--If the amount of any compensation is not 
     determinable at the time that such compensation is otherwise 
     includible in gross income under subsection (a)--
       ``(A) such amount shall be so includible in gross income 
     when determinable, and
       ``(B) the tax imposed under this chapter for the taxable 
     year in which such compensation is includible in gross income 
     shall be increased by the sum of--
       ``(i) the amount of interest determined under paragraph 
     (2), and
       ``(ii) an amount equal to 20 percent of the amount of such 
     compensation.
       ``(2) Interest.--For purposes of paragraph (1)(B)(i), the 
     interest determined under this paragraph for any taxable year 
     is the amount of interest at the underpayment rate under 
     section 6621 plus 1 percentage point on the underpayments 
     that would have occurred had the deferred compensation been 
     includible in gross income for the taxable year in which 
     first deferred or, if later, the first taxable year in which 
     such deferred compensation is not subject to a substantial 
     risk of forfeiture.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Substantial risk of forfeiture.--
       ``(A) In general.--The rights of a person to compensation 
     shall be treated as subject to a substantial risk of 
     forfeiture only if such person's rights to such compensation 
     are conditioned upon the future performance of substantial 
     services by any individual.
       ``(B) Exception for compensation based on gain recognized 
     on an investment asset.--
       ``(i) In general.--To the extent provided in regulations 
     prescribed by the Secretary, if compensation is determined 
     solely by reference to the amount of gain recognized on the 
     disposition of an investment asset, such compensation shall 
     be treated as subject to a substantial risk of forfeiture 
     until the date of such disposition.
       ``(ii) Investment asset.--For purposes of clause (i), the 
     term `investment asset' means any single asset (other than an 
     investment fund or similar entity)--

       ``(I) acquired directly by an investment fund or similar 
     entity,
       ``(II) with respect to which such entity does not (nor does 
     any person related to such entity) participate in the active 
     management of such asset (or if such asset is an interest in 
     an entity, in the active management of the activities of such 
     entity), and
       ``(III) substantially all of any gain on the disposition of 
     which (other than such deferred compensation) is allocated to 
     investors in such entity.

       ``(iii) Coordination with special rule.--Paragraph (3)(B) 
     shall not apply to any compensation to which clause (i) 
     applies.
       ``(2) Comprehensive foreign income tax.--The term 
     `comprehensive foreign income tax' means, with respect to any 
     foreign person, the income tax of a foreign country if--
       ``(A) such person is eligible for the benefits of a 
     comprehensive income tax treaty between such foreign country 
     and the United States, or
       ``(B) such person demonstrates to the satisfaction of the 
     Secretary that such foreign country has a comprehensive 
     income tax.
       ``(3) Nonqualified deferred compensation plan.--
       ``(A) In general.--The term `nonqualified deferred 
     compensation plan' has the meaning given such term under 
     section 409A(d), except that such term shall include any plan 
     that provides a right to compensation based on the 
     appreciation in value of a specified number of equity units 
     of the service recipient.
       ``(B) Exception.--Compensation shall not be treated as 
     deferred for purposes of this section if the service provider 
     receives payment of such compensation not later than 12 
     months after the end of the taxable year of the service 
     recipient during which the right to the payment of such 
     compensation is no longer subject to a substantial risk of 
     forfeiture.
       ``(4) Exception for certain compensation with respect to 
     effectively connected income.--In the case a foreign 
     corporation with income which is taxable under section 882, 
     this section shall not apply to compensation which, had such 
     compensation had been paid in cash on the date that such 
     compensation ceased to be subject to a substantial risk of 
     forfeiture, would have been deductible by such foreign 
     corporation against such income.
       ``(5) Application of rules.--Rules similar to the rules of 
     paragraphs (5) and (6) of section 409A(d) shall apply.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations 
     disregarding a substantial risk of forfeiture in cases where 
     necessary to carry out the purposes of this section.''.
       (b) Conforming Amendment.--Section 26(b)(2), as amended by 
     the Housing Assistance Tax Act of 2008, is amended by 
     striking ``and'' at the end of subparagraph (V), by striking 
     the period at the end of subparagraph (W) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(X) section 457A(c)(1)(B) (relating to determinability of 
     amounts of compensation).''.
       (c) Clerical Amendment.--The table of sections of subpart B 
     of part II of subchapter E of chapter 1 is amended by 
     inserting after the item relating to section 457 the 
     following new item:

``Sec. 457A. Nonqualified deferred compensation from certain tax 
              indifferent parties.''.

       (d) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to amounts deferred which are attributable to services 
     performed after December 31, 2008.
       (2) Application to existing deferrals.--In the case of any 
     amount deferred to which the amendments made by this section 
     do not apply solely by reason of the fact that the amount is 
     attributable to services performed before January 1, 2009, to 
     the extent such amount is not includible in gross income in a 
     taxable year beginning before 2018, such amounts shall be 
     includible in gross income in the later of--
       (A) the last taxable year beginning before 2018, or
       (B) the taxable year in which there is no substantial risk 
     of forfeiture of the rights to such compensation (determined 
     in the same manner as determined for purposes of section 457A 
     of the Internal Revenue Code of 1986, as added by this 
     section).
       (3) Accelerated payments.--No later than 120 days after the 
     date of the enactment of this Act, the Secretary shall issue 
     guidance providing a limited period of time during which a 
     nonqualified deferred compensation arrangement attributable 
     to services performed on or before December 31, 2008, may, 
     without violating the requirements of section 409A(a) of the 
     Internal Revenue Code of 1986, be amended to conform the date 
     of distribution to the date the amounts are required to be 
     included in income.
       (4) Certain back-to-back arrangements.--If the taxpayer is 
     also a service recipient and maintains one or more 
     nonqualified deferred compensation arrangements for its 
     service providers under which any amount is attributable to 
     services performed on or before December 31, 2008, the 
     guidance issued under paragraph (4) shall permit such 
     arrangements to be amended

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     to conform the dates of distribution under such arrangement 
     to the date amounts are required to be included in the income 
     of such taxpayer under this subsection.
       (5) Accelerated payment not treated as material 
     modification.--Any amendment to a nonqualified deferred 
     compensation arrangement made pursuant to paragraph (4) or 
     (5) shall not be treated as a material modification of the 
     arrangement for purposes of section 409A of the Internal 
     Revenue Code of 1986.

     

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