PUBLIC LAW 110–142—DEC. 20, 2007 121 STAT. 1803 

Public Law 110–142 

110th Congress 

An Act 

To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness 

on principal residences from gross income, and for other purposes. 

Be it enacted by the Senate and House of Representatives of 

the United States of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Mortgage Forgiveness Debt 

Relief Act of 2007’’. 

SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE 

EXCLUDED FROM GROSS INCOME. 

(a) IN GENERAL.—Paragraph (1) of section 108(a) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘or’’ at the end 

of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting ‘‘, or’’, and by inserting after subparagraph 

(D) the following new subparagraph: 

‘‘(E) the indebtedness discharged is qualified principal 

residence indebtedness which is discharged before January 

1, 2010.’’. 

(b) SPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.—Section 108 of such Code is amended by 

adding at the end the following new subsection: 

‘‘(h) SPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.— 

‘‘(1) BASIS REDUCTION.—The amount excluded from gross 

income by reason of subsection (a)(1)(E) shall be applied to 

reduce (but not below zero) the basis of the principal residence 

of the taxpayer. 

‘‘(2) QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.—For 

purposes of this section, the term ‘qualified principal residence 

indebtedness’ means acquisition indebtedness (within the 

meaning of section 163(h)(3)(B), applied by substituting 

‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’ in clause (ii) 

thereof) with respect to the principal residence of the taxpayer. 

‘‘(3) EXCEPTION FOR CERTAIN DISCHARGES NOT RELATED TO

TAXPAYER’S FINANCIAL CONDITION.—Subsection (a)(1)(E) shall 

not apply to the discharge of a loan if the discharge is on 

account of services performed for the lender or any other factor 

not directly related to a decline in the value of the residence 

or to the financial condition of the taxpayer. 

‘‘(4) ORDERING RULE.—If any loan is discharged, in whole 

or in part, and only a portion of such loan is qualified principal 

residence indebtedness, subsection (a)(1)(E) shall apply only 

to so much of the amount discharged as exceeds the amount 

26 USC 108. 

26 USC 1 note. 

Mortgage 

Forgiveness Debt 

Relief Act of 

2007. 

Dec. 20, 2007 

[H.R. 3648] 


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121 STAT. 1804 PUBLIC LAW 110–142—DEC. 20, 2007 

of the loan (as determined immediately before such discharge) 

which is not qualified principal residence indebtedness. 

‘‘(5) PRINCIPAL RESIDENCE.—For purposes of this subsection, 

the term ‘principal residence’ has the same meaning as when 

used in section 121.’’. 

(c) COORDINATION.— 

(1) Subparagraph (A) of section 108(a)(2) of such Code 

is amended by striking ‘‘and (D)’’ and inserting ‘‘(D), and (E)’’. 

(2) Paragraph (2) of section 108(a) of such Code is amended 

by adding at the end the following new subparagraph: 

‘‘(C) PRINCIPAL RESIDENCE EXCLUSION TAKES PRECEDENCE OVER INSOLVENCY EXCLUSION UNLESS ELECTED

OTHERWISE.—Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(E) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph 

(1)(E).’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to discharges of indebtedness on or after January 1, 

2007. 

SEC. 3. EXTENSION OF TREATMENT OF MORTGAGE INSURANCE PREMIUMS AS INTEREST. 

(a) IN GENERAL.—Subclause (I) of section 163(h)(3)(E)(iv) of 

the Internal Revenue Code of 1986 (relating to termination) is 

amended by striking ‘‘December 31, 2007’’ and inserting ‘‘December 

31, 2010’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to amounts paid or accrued after December 31, 2007. 

SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE 

HOUSING CORPORATION. 

(a) IN GENERAL.—Subparagraph (D) of section 216(b)(1) of the 

Internal Revenue Code of 1986 (defining cooperative housing corporation) is amended to read as follows: 

‘‘(D) meeting 1 or more of the following requirements 

for the taxable year in which the taxes and interest 

described in subsection (a) are paid or incurred: 

‘‘(i) 80 percent or more of the corporation’s gross 

income for such taxable year is derived from tenantstockholders. 

‘‘(ii) At all times during such taxable year, 80 

percent or more of the total square footage of the 

corporation’s property is used or available for use by 

the tenant-stockholders for residential purposes or purposes ancillary to such residential use. 

‘‘(iii) 90 percent or more of the expenditures of 

the corporation paid or incurred during such taxable 

year are paid or incurred for the acquisition, construction, management, maintenance, or care of the corporation’s property for the benefit of the tenant-stockholders.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years ending after the date of the enactment 

of this Act. 

26 USC 216 note. 

26 USC 163 note. 

26 USC 108 note. 

26 USC 108. 


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PUBLIC LAW 110–142—DEC. 20, 2007 121 STAT. 1805 

SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY MEDICAL 

RESPONDERS. 

(a) IN GENERAL.—Part III of subchapter B of chapter 1 of 

the Internal Revenue Code of 1986 (relating to items specifically 

excluded from gross income) is amended by inserting after section 

139A the following new section: 

‘‘SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND 

EMERGENCY MEDICAL RESPONDERS. 

‘‘(a) IN GENERAL.—In the case of any member of a qualified 

volunteer emergency response organization, gross income shall not 

include— 

‘‘(1) any qualified State and local tax benefit, and 

‘‘(2) any qualified payment. 

‘‘(b) DENIAL OF DOUBLE BENEFITS.—In the case of any member 

of a qualified volunteer emergency response organization— 

‘‘(1) the deduction under 164 shall be determined with 

regard to any qualified State and local tax benefit, and 

‘‘(2) expenses paid or incurred by the taxpayer in connection 

with the performance of services as such a member shall be 

taken into account under section 170 only to the extent such 

expenses exceed the amount of any qualified payment excluded 

from gross income under subsection (a). 

‘‘(c) DEFINITIONS.—For purposes of this section— 

‘‘(1) QUALIFIED STATE AND LOCAL TAX BENEFIT.—The term 

‘qualified state and local tax benefit’ means any reduction or 

rebate of a tax described in paragraph (1), (2), or (3) of section 

164(a) provided by a State or political division thereof on 

account of services performed as a member of a qualified volunteer emergency response organization. 

‘‘(2) QUALIFIED PAYMENT.— 

‘‘(A) IN GENERAL.—The term ‘qualified payment’ means 

any payment (whether reimbursement or otherwise) provided by a State or political division thereof on account 

of the performance of services as a member of a qualified 

volunteer emergency response organization. 

‘‘(B) APPLICABLE DOLLAR LIMITATION.—The amount 

determined under subparagraph (A) for any taxable year 

shall not exceed $30 multiplied by the number of months 

during such year that the taxpayer performs such services. 

‘‘(3) QUALIFIED VOLUNTEER EMERGENCY RESPONSE

ORGANIZATION.—The term ‘qualified volunteer emergency 

response organization’ means any volunteer organization— 

‘‘(A) which is organized and operated to provide firefighting or emergency medical services for persons in the 

State or political subdivision, as the case may be, and 

‘‘(B) which is required (by written agreement) by the 

State or political subdivision to furnish firefighting or emergency medical services in such State or political subdivision. 

‘‘(d) TERMINATION.—This section shall not apply with respect 

to taxable years beginning after December 31, 2010.’’. 

26 USC 139B. 


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121 STAT. 1806 PUBLIC LAW 110–142—DEC. 20, 2007 

(b) CLERICAL AMENDMENT.—The table of sections for such part 

is amended by inserting after the item relating to section 139A 

the following new item: 

‘‘Sec. 139B. Benefits provided to volunteer firefighters and emergency medical responders.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2007. 

SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOWINCOME HOUSING CREDIT. 

(a) IN GENERAL.—Subclause (I) of section 42(i)(3)(D)(ii) of the 

Internal Revenue Code of 1986 (relating to certain students not 

to disqualify unit) is amended to read as follows: 

‘‘(I) single parents and their children and such 

parents are not dependents (as defined in section 

152, determined without regard to subsections 

(b)(1), (b)(2), and (d)(1)(B) thereof) of another individual and such children are not dependents (as 

so defined) of another individual other than a 

parent of such children, or.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to— 

(1) housing credit amounts allocated before, on, or after 

the date of the enactment of this Act, and 

(2) buildings placed in service before, on, or after such 

date to the extent paragraph (1) of section 42(h) of the Internal 

Revenue Code of 1986 does not apply to any building by reason 

of paragraph (4) thereof. 

SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL 

GAINS EXCLUSION TO CERTAIN POST-MARRIAGE SALES 

OF PRINCIPAL RESIDENCES BY SURVIVING SPOUSES. 

(a) SALE WITHIN 2 YEARS OF SPOUSE’S DEATH.—Section 121(b) 

of the Internal Revenue Code of 1986 (relating to limitations) is 

amended by adding at the end the following new paragraph: 

‘‘(4) SPECIAL RULE FOR CERTAIN SALES BY SURVIVING

SPOUSES.—In the case of a sale or exchange of property by 

an unmarried individual whose spouse is deceased on the date 

of such sale, paragraph (1) shall be applied by substituting 

‘$500,000’ for ‘$250,000’ if such sale occurs not later than 2 

years after the date of death of such spouse and the requirements of paragraph (2)(A) were met immediately before such 

date of death.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to sales or exchanges after December 31, 2007. 

SEC. 8. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP RETURNS; LIMITATION ON DISCLOSURE. 

(a) EXTENSION OF TIME LIMITATION.—Section 6698(a) of the 

Internal Revenue Code of 1986 (relating to failure to file partnership 

returns) is amended by striking ‘‘5 months’’ and inserting ‘‘12 

months’’. 

(b) INCREASE IN PENALTY AMOUNT.—Paragraph (1) of section 

6698(b) of such Code is amended by striking ‘‘$50’’ and inserting 

‘‘$85’’. 

26 USC 121 note. 

26 USC 42 note. 

26 USC 42. 

26 USC 139B 

note. 


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PUBLIC LAW 110–142—DEC. 20, 2007 121 STAT. 1807 

(c) LIMITATION ON DISCLOSURE OF TAXPAYER RETURNS TO PART- NERS, S CORPORATION SHAREHOLDERS, TRUST BENEFICIARIES, AND

ESTATE BENEFICIARIES.— 

(1) IN GENERAL.—Section 6103(e) of such Code (relating 

to disclosure to persons having material interest) is amended 

by adding at the end the following new paragraph: 

‘‘(10) LIMITATION ON CERTAIN DISCLOSURES UNDER THIS SUB- SECTION.—In the case of an inspection or disclosure under 

this subsection relating to the return of a partnership, S corporation, trust, or an estate, the information inspected or disclosed shall not include any supporting schedule, attachment, 

or list which includes the taxpayer identity information of 

a person other than the entity making the return or the person 

conducting the inspection or to whom the disclosure is made.’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall take effect on the date of the enactment of this 

Act. 

(d) EFFECTIVE DATE.—The amendments made by subsections 

(a) and (b) shall apply to returns required to be filed after the 

date of the enactment of this Act. 

SEC. 9. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS. 

(a) IN GENERAL.—Part I of subchapter B of chapter 68 of 

the Internal Revenue Code of 1986 (relating to assessable penalties) 

is amended by adding at the end the following new section: 

‘‘SEC. 6699. FAILURE TO FILE S CORPORATION RETURN. 

‘‘(a) GENERAL RULE.—In addition to the penalty imposed by 

section 7203 (relating to willful failure to file return, supply 

information, or pay tax), if any S corporation required to file a 

return under section 6037 for any taxable year— 

‘‘(1) fails to file such return at the time prescribed therefor 

(determined with regard to any extension of time for filing), 

or 

‘‘(2) files a return which fails to show the information 

required under section 6037, 

such S corporation shall be liable for a penalty determined under 

subsection (b) for each month (or fraction thereof) during which 

such failure continues (but not to exceed 12 months), unless it 

is shown that such failure is due to reasonable cause. 

‘‘(b) AMOUNT PER MONTH.—For purposes of subsection (a), the 

amount determined under this subsection for any month is the 

product of— 

‘‘(1) $85, multiplied by 

‘‘(2) the number of persons who were shareholders in the 

S corporation during any part of the taxable year. 

‘‘(c) ASSESSMENT OF PENALTY.—The penalty imposed by subsection (a) shall be assessed against the S corporation. 

‘‘(d) DEFICIENCY PROCEDURES NOT TO APPLY.—Subchapter B 

of chapter 63 (relating to deficiency procedures for income, estate, 

gift, and certain excise taxes) shall not apply in respect of the 

assessment or collection of any penalty imposed by subsection (a).’’. 

(b) CLERICAL AMENDMENT.—The table of sections for part I 

of subchapter B of chapter 68 of such Code is amended by adding 

at the end the following new item: 

‘‘Sec. 6699. Failure to file S corporation return.’’. 

Penalties. 

26 USC 6699. 

26 USC 6103 

note. 

26 USC 6103. 


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121 STAT. 1808 PUBLIC LAW 110–142—DEC. 20, 2007 

LEGISLATIVE HISTORY—H.R. 3648: 

HOUSE REPORTS: No. 110–356 (Comm. on Ways and Means). 

CONGRESSIONAL RECORD, Vol. 153 (2007): 

Oct. 4, considered and passed House. 

Dec. 14, considered and passed Senate, amended. 

Dec. 18, House concurred in Senate amendment. 

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 43 (2007): 

Dec. 20, Presidential remarks. 

Æ 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to returns required to be filed after the date of the 

enactment of this Act. 

SEC. 10. MODIFICATION OF REQUIRED INSTALLMENT OF CORPORATE 

ESTIMATED TAXES WITH RESPECT TO CERTAIN DATES. 

The percentage under subparagraph (B) of section 401(1) of 

the Tax Increase Prevention and Reconciliation Act of 2005 in 

effect on the date of the enactment of this Act is increased by 

1.50 percentage points. 

Approved December 20, 2007. 

26 USC 6655 

note. 

26 USC 6699 

note. 


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