To amend the Internal Revenue Code of 1986 to exempt from tax income from domestic manufacturing activities.

Summary: Restore U.S. Manufacturing Act of 2007 - Amends the Internal Revenue Code to allow a 100% tax deduction for qualified manufacturing activities income. Defines "qualified manufacturing activities income" as the excess of domestic manufacturing gross receipts over the cost of goods sold, and other expenses, losses, or deductions, properly allocable to such receipts.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Restore U.S. Manufacturing Act of 
2007''.

SEC. 2. DOMESTIC MANUFACTURING INCOME EXEMPT FROM TAX.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by adding at the end the 
following new section:

``SEC. 200. INCOME ATTRIBUTABLE TO DOMESTIC MANUFACTURING ACTIVITIES.

    ``(a) Allowance of Deduction.--There shall be allowed as a 
deduction an amount equal to 100 percent of the lesser of--
            ``(1) the qualified manufacturing activities income of the 
        taxpayer for the taxable year, or
            ``(2) taxable income (determined without regard to this 
        section) for the taxable year.
    ``(b) Qualified Manufacturing Activities Income.--For purposes of 
this section--
            ``(1) In general.--The term `qualified manufacturing 
        activities income' for any taxable year means an amount equal 
        to the excess (if any) of--
                    ``(A) the taxpayer's domestic manufacturing gross 
                receipts for such taxable year, over
                    ``(B) the sum of--
                            ``(i) the cost of goods sold that are 
                        allocable to such receipts, and
                            ``(ii) other expenses, losses, or 
                        deductions (other than the deduction allowed 
                        under this section), which are properly 
                        allocable to such receipts.
            ``(2) Allocation method.--The Secretary shall prescribe 
        rules for the proper allocation of items described in paragraph 
        (1) for purposes of determining qualified manufacturing 
        activities income. Such rules shall provide for the proper 
        allocation of items whether or not such items are directly 
        allocable to domestic manufacturing gross receipts.
            ``(3) Special rules for determining costs.--Rules similar 
        to the rules of section 199(c)(3) shall apply for purposes of 
        this subsection.
            ``(4) Domestic manufacturing gross receipts.--
                    ``(A) In general.--The term `domestic manufacturing 
                gross receipts' means the gross receipts of the 
                taxpayer which are derived from any lease, rental, 
                license, sale, exchange, or other disposition of 
                qualifying manufacturing property which was 
                manufactured or produced by the taxpayer in whole or in 
                significant part within the United States.
                    ``(B) Exception for inherently domestic 
                activities.--Such term shall not include gross receipts 
                of the taxpayer which are derived from inherently 
                domestic activities, including--
                            ``(i) the raising or harvesting of any 
                        agricultural or horticultural commodity,
                            ``(ii) the cutting of trees,
                            ``(iii) the extraction of ores or minerals,
                            ``(iv) the production of electricity, 
                        natural gas, or potable water, and
                            ``(v) the construction of real property.
            ``(5) Qualified manufacturing property.--The term 
        `qualified manufacturing property' means--
                    ``(A) tangible personal property,
                    ``(B) any computer software,
                    ``(C) any qualified film (as defined in section 
                199(c)(6)), and
                    ``(D) any property described in section 168(f)(4).
    ``(c) Special Rules.--
            ``(1) Application to individuals.--In the case of an 
        individual, subsection (a)(2) shall be applied by substituting 
        `adjusted gross income' for `taxable income'. For purposes of 
        the preceding sentence, adjusted gross income shall be 
        determined--
                    ``(A) after application of sections 86, 135, 137, 
                199, 219, 221, 222, and 469, and
                    ``(B) without regard to this section.
            ``(2) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Subparagraphs (C) and (D) of section 
                199(c)(4) (relating to government contracts and certain 
                partnerships).
                    ``(B) Section 199(c)(7) (relating to related 
                persons).
                    ``(C) Section 199(d) (relating to definitions and 
                special rules) other than paragraph (2).''.
    (b) Coordination With Section 199.--
            (1) Paragraph (4) of section 199(c) of such Code is amended 
        by redesignating subparagraphs (B), (C), and (D) as 
        subparagraphs (C), (D), and (E), respectively, and by inserting 
        after subparagraph (A) the following new subparagraph:
                    ``(B) Exception for domestic manufacturing gross 
                receipts.--Such term shall not include domestic 
                manufacturing gross receipts (as defined in section 
                200(b)(4)).''.
            (2) The heading for subparagraph (C) of section 199(c)(4) 
        of such Code, as redesignated by paragraph (1), is amended by 
        striking ``Exceptions'' and inserting ``Other Exceptions''.
    (c) Minimum Tax.--Section 56(g)(4)(C) of such Code (relating to 
disallowance of items not deductible in computing earnings and profits) 
is amended by adding at the end the following new clause:
                            ``(vi) Deduction for domestic 
                        manufacturing.--Clause (i) shall not apply to 
                        any amount allowable as a deduction under 
                        section 200.''.
    (d) Technical Amendments.--
            (1) Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), and 
        219(g)(3)(A)(ii) of such Code are each amended by inserting 
        ``200,'' before ``221''.
            (2) Clause (i) of section 221(b)(2)(C) of such Code is 
        amended by inserting by inserting ``200,'' before ``222''.
            (3) Clause (i) of section 222(b)(2)(C) of such Code is 
        amended by inserting ``199,'' before ``911''.
            (4) Paragraph (1) of section 246(b) of such Code is amended 
        by inserting ``200,'' after ``199,''.
            (5) Clause (iii) of section 469(i)(3)(F) of such Code is 
        amended by inserting ``200,'' before ``219,''.
            (6) Subsection (a) of section 613 of such Code is amended 
        by striking ``the deduction under section 199'' and inserting 
        ``the deductions under section 199 and 200''.
            (7) Paragraph (16) of section 1402(a) of such Code is 
        amended by striking ``the deduction provided by section 199'' 
        and inserting ``the deductions provided by sections 199 and 
        200''.
            (8) The table of sections for part VI of subchapter B of 
        chapter 1 of such Code is amended by adding at the end the 
        following new item:

``Sec. 200. Income attributable to domestic manufacturing 
                            activities.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.