SECTION 1. ABOVE-THE-LINE DEDUCTION FOR INTEREST ON INDEBTEDNESS WITH 
              RESPECT TO THE PURCHASE OF CERTAIN MOTOR VEHICLES.

    (a) In General.--Paragraph (2) of section 163(h) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``and'' at the end of subparagraph (E),
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``, and'', and
            (3) by adding at the end the following new subparagraph:
                    ``(G) any qualified motor vehicle interest (within 
                the meaning of paragraph (5)).''.
    (b) Qualified Motor Vehicle Interest.--Section 163(h) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(5) Qualified motor vehicle interest.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified motor 
                vehicle interest' means any interest which is paid or 
                accrued during the taxable year on any indebtedness 
                which--
                            ``(i) is incurred after November 12, 2008, 
                        and before January 1, 2010, in acquiring any 
                        qualified motor vehicle of the taxpayer, and
                            ``(ii) is secured by such qualified motor 
                        vehicle.
                Such term also includes any indebtedness secured by 
                such qualified motor vehicle resulting from the 
                refinancing of indebtedness meeting the requirements of 
                the preceding sentence (or this sentence); but only to 
                the extent the amount of the indebtedness resulting 
                from such refinancing does not exceed the amount of the 
                refinanced indebtedness.
                    ``(B) Dollar limitation.--The aggregate amount of 
                indebtedness treated as described in subparagraph (A) 
                for any period shall not exceed $49,500 ($24,750 in the 
                case of a separate return by a married individual).
                    ``(C) Income limitation.--The amount otherwise 
                treated as interest under subparagraph (A) for any 
                taxable year (after the application of subparagraph 
                (B)) shall be reduced (but not below zero) by the 
                amount which bears the same ratio to the amount which 
                is so treated as--
                            ``(i) the excess (if any) of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $125,000 ($250,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000.
                For purposes of the preceding sentence, the term 
                `modified adjusted gross income' means the adjusted 
                gross income of the taxpayer for the taxable year 
                increased by any amount excluded from gross income 
                under section 911, 931, or 933.
                    ``(D) Qualified motor vehicle.--The term `qualified 
                motor vehicle' means a passenger automobile (within the 
                meaning of section 30B(h)(3)) or a light truck (within 
                the meaning of such section)--
                            ``(i) which is acquired for use by the 
                        taxpayer and not for resale after November 12, 
                        2008, and before January 1, 2010,
                            ``(ii) the original use of which commences 
                        with the taxpayer, and
                            ``(iii) which has a gross vehicle weight 
                        rating of not more than 8,500 pounds.''.
    (c) Deduction Allowed Above-the-Line.--Section 62(a) of the 
Internal Revenue Code of 1986 is amended by inserting after paragraph 
(21) the following new paragraph:
            ``(22) Qualified motor vehicle interest.--The deduction 
        allowed under section 163 by reason of subsection (h)(2)(G) 
        thereof.''.
    (d) Reporting of Qualified Motor Vehicle Interest.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new section:

``SEC. 6050X. RETURNS RELATING TO QUALIFIED MOTOR VEHICLE INTEREST 
              RECEIVED IN TRADE OR BUSINESS FROM INDIVIDUALS.

    ``(a) Qualified Motor Vehicle Interest.--Any person--
            ``(1) who is engaged in a trade or business, and
            ``(2) who, in the course of such trade or business, 
        receives from any individual interest aggregating $600 or more 
        for any calendar year on any indebtedness secured by a 
        qualified motor vehicle (as defined in section 163(h)(5)(D)),
shall make the return described in subsection (b) with respect to each 
individual from whom such interest was received at such time as the 
Secretary may by regulations prescribe.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe,
            ``(2) contains--
                    ``(A) the name and address of the individual from 
                whom the interest described in subsection (a)(2) was 
                received,
                    ``(B) the amount of such interest received for the 
                calendar year, and
                    ``(C) such other information as the Secretary may 
                prescribe.
    ``(c) Application to Governmental Units.--For purposes of 
subsection (a)--
            ``(1) Treated as persons.--The term `person' includes any 
        governmental unit (and any agency or instrumentality thereof).
            ``(2) Special rules.--In the case of a governmental unit or 
        any agency or instrumentality thereof--
                    ``(A) subsection (a) shall be applied without 
                regard to the trade or business requirement contained 
                therein, and
                    ``(B) any return required under subsection (a) 
                shall be made by the officer or employee appropriately 
                designated for the purpose of making such return.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return a written statement showing--
            ``(1) the name, address, and phone number of the 
        information contact of the person required to make such return, 
        and
            ``(2) the aggregate amount of interest described in 
        subsection (a)(2) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) was required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of interest received by any person on behalf 
of another person, only the person first receiving such interest shall 
be required to make the return under subsection (a).''.
            (2) Amendments relating to penalties.--
                    (A) Section 6721(e)(2)(A) of such Code is amended 
                by striking ``or 6050L'' and inserting ``6050L, or 
                6050X''.
                    (B) Section 6722(c)(1)(A) of such Code is amended 
                by striking ``or 6050L(c)'' and inserting ``6050L(c), 
                or 6050X(d)''.
                    (C) Subparagraph (B) of section 6724(d)(1) of such 
                Code is amended by redesignating clauses (xvi) through 
                (xxii) as clauses (xvii) through (xxiii), respectively, 
                and by inserting after clause (xii) the following new 
                clause:
                            ``(xvi) section 6050X (relating to returns 
                        relating to qualified motor vehicle interest 
                        received in trade or business from 
                        individuals),''.
                    (D) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking the period at the end of 
                subparagraph (DD) and inserting ``, or'' and by 
                inserting after subparagraph (DD) the following new 
                subparagraph:
                    ``(EE) section 6050X(d) (relating to returns 
                relating to qualified motor vehicle interest received 
                in trade or business from individuals).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050W 
        the following new item:

``Sec. 6050X. Returns relating to qualified motor vehicle interest 
                            received in trade or business from 
                            individuals.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 2. ABOVE-THE-LINE DEDUCTION FOR STATE SALES TAX AND EXCISE TAX ON 
              THE PURCHASE OF CERTAIN MOTOR VEHICLES.

    (a) In General.--Subsection (a) of section 164 of the Internal 
Revenue Code of 1986 is amended by inserting after paragraph (5) the 
following new paragraph:
            ``(6) Qualified motor vehicle taxes.''.
    (b) Qualified Motor Vehicle Taxes.--Subsection (b) of section 164 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new paragraph:
            ``(6) Qualified motor vehicle taxes.--
                    ``(A) In general.--For purposes of this section, 
                the term `qualified motor vehicle taxes' means any 
                State or local sales or excise tax imposed on the 
                purchase of a qualified motor vehicle (as defined in 
                section 163(h)(5)(D)).
                    ``(B) Income limitation.--The amount otherwise 
                taken into account under subparagraph (A) for any 
                taxable year shall be reduced (but not below zero) by 
                the amount which bears the same ratio to the amount 
                which is so treated as--
                            ``(i) the excess (if any) of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $125,000 ($250,000 in the 
                                case of a joint return), bears to
                            ``(ii) $10,000.
                For purposes of the preceding sentence, the term 
                `modified adjusted gross income' means the adjusted 
                gross income of the taxpayer for the taxable year 
                increased by any amount excluded from gross income 
                under section 911, 931, or 933.
                    ``(C) Qualified motor vehicle taxes not included in 
                cost of acquired property.--The last sentence of 
                subsection (a) shall not apply to any qualified motor 
                vehicle taxes.
                    ``(D) Coordination with general sales tax.--This 
                paragraph shall not apply in the case of a taxpayer who 
                makes an election under paragraph (5) for the taxable 
                year.''.
    (c) Conforming Amendments.--Paragraph (5) of section 163(h) of the 
Internal Revenue Code of 1986, as added by section 1, is amended--
            (1) by adding at the end the following new subparagraph:
                    ``(E) Exclusion.--If the indebtedness described in 
                subparagraph (A) includes the amounts of any State or 
                local sales or excise taxes paid or accrued by the 
                taxpayer in connection with the acquisition of a 
                qualified motor vehicle, the aggregate amount of such 
                indebtedness taken into account under such subparagraph 
                shall be reduced, but not below zero, by the amount of 
                any such taxes for which a deduction is allowed under 
                section 164(a) by reason of paragraph (6) thereof.'', 
                and
            (2) by inserting ``, after the application of subparagraph 
        (E),'' after ``for any period'' in subparagraph (B).
    (d) Deduction Allowed Above-the-Line.--Section 62(a) of the 
Internal Revenue Code of 1986, as amended by section 1, is amended by 
inserting after paragraph (22) the following new paragraph:
            ``(23) Qualified motor vehicle taxes.--The deduction 
        allowed under section 164 by reason of subsection (a)(6) 
        thereof.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.
Amends the Internal Revenue Code to allow individual taxpayers a deduction from gross income for: (1) interest paid on indebtedness (up to $49,500) incurred after November 12, 2008, and before January 1, 2010, for the purchase of a motor vehicle (i.e., passenger automobile or light truck) with a gross vehicle weight rating of not more than 8,500 pounds; and (2) state and local sales and excise taxes imposed on the purchase of such a motor vehicle.
A bill to amend the Internal Revenue Code of 1986 to allow an above-the-line deduction against individual income tax for interest on indebtedness and for State sales and excise taxes with respect to the purchase of certain motor vehicles.