COMPARISON OF THE REVENUE PROVISIONS OF THE 

“FARM, NUTRITION, AND BIOENERGY ACT OF 2007” 

AS PASSED BY THE HOUSE OF REPRESENTATIVES 

AND 

THE “HEARTLAND, HABITAT, HARVEST, AND HORTICULTURE 

ACT OF 2007” AS PASSED BY THE SENATE 

Prepared by the Staff of the 

JOINT COMMITTEE ON TAXATION 

February 4, 2008 

JCX-15-08
i 

CONTENTS 

INTRODUCTION .....................................................................................................................................................HOUSE BILL ............................................................................................................................................................

Limit Tax Treaty Benefits with Respect to Certain Deductible Payments (sec. 12001 of the House bill and sec. Modifications to Corporate Estimated Tax Payments (sec. 13003 of the House bill and sec. 12506 of the Senate 

SENATE AMENDMENT .........................................................................................................................................

A.1. Supplemental Agricultural Disaster Assistance from the Agriculture Disaster Relief Trust Fund (sec. 1210

amendment and sec. 901 of the Trade Act of 1974)......................................................................................

B.1. Provide tax credit for eligible farmland enrolled in the conservation reserve program (sec. 12201 of the Se

and sec. 30D of the Code)..............................................................................................................................

B.2. Exclusion of Conservation Reserve Program Payments from SECA tax for individuals receiving social se

or disability payments (sec. 12202 of the Senate amendment and sec. 1402(a) of the Code).......................

B.3. Make permanent the special rule encouraging contributions of capital gain real property for conservation 

(sec. 12203 of the Senate amendment and sec. 170 of the Code)..................................................................

B.4. Provide tax credit for recovery and restoration of endangered species (sec. 12204 of the Senate amendmen

sec. 30D of the Code).....................................................................................................................................

B.5. Deduction for endangered species recovery expenditures (sec. 12205 of the Senate amendment and sec. 1B.6. Provide exclusion for certain payments and programs relating to fish and wildlife (sec. 12206 of the Sena

and sec. 126 of the Code)...............................................................................................................................
ii 

B.7. Provide tax credit for easements made pursuant to certain U.S.D.A. conservation programs (sec. 12207 of 

amendment and sec. 30F of the Code)...........................................................................................................

B.8. Exempt facility bonds for forest conservation activities (sec. 12211 of the Senate amendment and sec. 142 B.9. Deduction for qualified timber gain and timber REIT provisions (secs. 12212-12217 of the Senate amend

new sec. 1203, and secs. 856, 857 and 4981 of the Code).............................................................................

C.1. Credit for residential and business wind property (sec. 12301 of the Senate amendment and secs. 25D and 

C.2. Landowner incentive to encourage electric transmission build-out (sec. 12302 of the Senate amendment a

sec. 139B of the Code)...................................................................................................................................

C.3. Exception to reduction of renewable electricity credit (sec. 12303 of the bill and sec. 45 of the Code).......C.4. Expansion of special depreciation allowance to cellulosic biofuel plant property (sec. 12311 of the Senate 

and sec. 168(l) of the Code)...........................................................................................................................

C.5. Credit for Production of Cellulosic Biofuel (sec. 12312 of the Senate amendment and sec. 40 of the Code

C.6. Extension of small ethanol producer credit (sec. 12313 of the Senate amendment and sec. 40 of the Code)C.7. Credit for producers of fossil free alcohol (sec. 12314 of the Senate amendment and sec. 40 of the Code).C.8. Modification of alcohol credit (sec. 12315 of the Senate amendment and sec. 40 and 6426 of the Code) ...

C.9. Calculation of volume of alcohol for fuel credits (sec. 12316 of the Senate amendment and sec. 40 of the C.10. Ethanol tariff extension (sec. 12317 of the Senate amendment)..................................................................C.11. Limitations on, and reductions of, duty drawback on certain imported ethanol (sec. 12318 of the Senate 

C.12. Extension and modification of credit for biodiesel used as fuel (sec. 12321 of the Senate amendment and 

 and 6427 of the Code)..................................................................................................................................
iii 

C.13. Extension and modification of credit for renewable diesel used as fuel (sec. 12321 of the Senate amendm

 sec. 40A, 6426 and 6427 of the Code).........................................................................................................

C.14. Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuel (sec. 12

 Senate amendment and sec. 4083 of the Code) ...........................................................................................

C.15. Extension and modification of alternative fuel credit (sec. 12331 of the Senate amendment and secs. 642

 of the Code)..................................................................................................................................................

C.16. Extension of alternative fuel vehicle refueling property credit (sec. 12332 of the Senate amendment and 

 Code)............................................................................................................................................................

D.1. Qualified small issue bonds for farming (sec. 12401 of the Senate amendment and sec. 144 of the Code) .D.2. Modification of installment sale rules for certain farm property (sec. 12402 of the Senate amendment and 

Code)..............................................................................................................................................................

D.3. Allowance of section 1031 for exchanges involving certain mutual ditch, reservoir, or irrigation company 

(sec. 12403 of the Senate amendment and sec. 1031 of the Code)................................................................

D.4. Rural renaissance bonds (sec. 12404 of the Senate amendment and new sec. 54A of the Code) .................

D.5. Agricultural business security tax credit (sec. 12405 of the Senate amendment and new sec. 45O of the C

D.6. Credit for drug safety and effectiveness testing for minor animal species (sec. 12406 of the Senate amend

new sec. 45P of the Code)..............................................................................................................................

D.7. Reduce the recovery period for certain farming business machinery or equipment from seven to five year

(sec. 12407 of the Senate amendment and sec. 168 of the Code)..................................................................

D.8. Expensing of broadband internet access expenditures (sec. 12408 of the Senate amendment and new sec. 

D.9. Credit for Energy Efficient Motors.................................................................................................................E.1. Limitation on farming losses of certain taxpayers (sec. 12501 of the Senate amendment and sec. 461 of th
iv 

E.2. Increase and index dollar thresholds for farm optional method and nonfarm optional method for computin

from self-employment (sec. 502 of the Senate amendment and sec. 1402(a) of the Code) ..........................

E.3. Information reporting for commodity credit corporation transactions (sec. 12503 of the Senate amendmen

sec. 6039J of the Code)..................................................................................................................................

E.4. Modification of section 1031 treatment for certain real estate (sec. 12504 of the Senate amendment and se

Code)..............................................................................................................................................................

E.5. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004 (sec. 1250

amendment and sec. 470 of the Code)...........................................................................................................

E.6. Modifications to corporate estimated tax payments (sec. 13003 of the House bill and sec. 12506 of the Se

E.7. Denial of deduction for certain fines, penalties, and other amounts (sec. 12507 of the Senate amendment a

of the Code)....................................................................................................................................................

E.8. Increase in Information Return Penalties (sec. 12508 of the Senate amendment and secs. 6721, 6722, and 

Code)..............................................................................................................................................................

E.9(a) Three-year Depreciation for All Race Horses (sec. 12509(a) of the Senate amendment and sec. 168 of th

E.9(b) Reduction of holding period to 12 months for purposes of determining whether horses are section 1231 

 (sec. 12509(b) of the Senate amendment and section 1231 of the Code)...................................................

E.10(a) Increase in penalty for failure to file partnership returns (sec. 12511 of the Senate amendment and sec. 

 Code).........................................................................................................................................................

E.10(b) Limitation on disclosure of partnership, S corporation and trust returns (sec. 12511 of the Senate amen

 sec. 6103 of the Code) ..............................................................................................................................

E.11. Option to treat elective deferrals as after-tax contributions (sec. 12512 of the Senate amendment and sec

 Code)............................................................................................................................................................

E.12(a) Clarification of the economic substance doctrine (sec. 12521 of the Senate amendment and sec. 7701 o
v 

E.12(b) Penalty for understatements attributable to transactions lacking economic substance, etc. (sec. 12522 o

 amendment and new sec. 6662B of the Code)..........................................................................................

E.13. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions (s

 Senate amendment and sec. 163 of the Code) .............................................................................................

G. Tax Benefits for Kansas Disaster Zone .........................................................................................................G.1. Suspension of Certain Limitations on Personal Casualty Losses (sec. 12701(a) of the Senate amendment a

1400S(b) of the Code)....................................................................................................................................

G.2. Extension of replacement period for nonrecognition of gain (sec. 12701 of the Senate amendment and sec

Code)..............................................................................................................................................................

G.3. Employee retention credit (sec. 12701 of the Senate amendment and sec. 1400R of the Code)...................G.4. Special Depreciation Allowance (sec. 12701 of the Senate amendment and sec. 1400N(d) of the Code) ...G.5. Increase in expensing under section 179 (sec. 12701 of the Senate amendment and sec. 1400N(e) of the C

G.6. Expensing for certain demolition and clean-up costs (sec. 12701 of the Senate amendment)......................G.7. Treatment of Public utility property disaster losses (sec. 12701 of the Senate amendment and sec. 1400N(G.8. Treatment of net operating losses attributable to storm losses (sec. 12701 of the Senate amendment and se

of the Code)....................................................................................................................................................

G.9. Representations regarding income eligibility for purposes of qualified residential rental project requireme

(sec. 12701 of the Senate amendment and sec. 1400N(n) of the Code) ........................................................

G.10. Use of retirement funds from retirement plans relating to the Kansas Disaster Zone (sec. 12701(10) of th

 amendment and sec. 1400Q of the Code) ...................................................................................................

H.1. Treatment of amounts received in connection with the Exxon Valdez litigation (sec. 12801 of the Senate a
vi 

H.2. Extend and modify the enhanced charitable deduction for contributions of food inventory (sec. 12802 of t

amendment and sec. 170 of the Code)...........................................................................................................

H.3. Mileage reimbursements to charitable volunteers excluded from gross income (sec. 12803 of the Senate a

sec. 139B of the Code)...................................................................................................................................

H.4. Technical correction relating to contributions of appreciated property by S corporations (sec. 12804 of the 

amendment and sec. 1368 of the Code).........................................................................................................

H.5. Application of rehabilitation credit and depreciation schedules to certain low-income housing for the elde

(sec. 12806 of the Senate amendment) ..........................................................................................................

H.6. Competitive certification awards modification authority (sec. 12807 of the bill and secs. 48A and 48B of H.7. Qualified forestry conservation bonds (sec. 12808 of the Senate amendment and new secs. 54A and 54B o
1 

INTRODUCTION 

This document,1 prepared by the staff of the Joint Committee on Taxation, presents in side-by-side forma

revenue provisions of the “Farm, Nutrition, and Bioenergy Act of 2007” as passed by the House of Representativ“Heartland, Habitat, Harvest, and Horticulture Act of 2007” as passed by the Senate. 

1 This document may be cited as follows, Joint Committee on Taxation, Comparison of the Revenue Provisions of 

and Bioenergy Act of 2007” as passed by the House of Representatives and the “Heartland, Habitat, Harvest, and Horticu

passed by the Senate (JCX-15-08), February 4, 2008. 
1 

Provision Present Law House Bill 

HOUSE BILL Limit Tax Treaty Benefits with Respect to Certain Deductible Payments (sec. 12001 of the House bill and sec. 894 of the Code) 

Foreign corporations generally are subject to a gross-basis U.S. tax at a flat 30-percent rate on the receipt of interest, dividends, rents, royalties, and certain similar types of income derived from U.S. sources, subject to certain exceptions. The tax (“U.S. withholding tax”) generally is collected by means of withholding by the person making the payment. U.S. withholding tax may be reduced or eliminated under an applicable tax treaty with a foreign country, but only if the recipient of 

the payment is both a resident of such foreign country and qualifies under any limitation-on-benefits provision contained in the U.S. tax treaty with such foreign country. Limitation-on-benefits provisions in income tax treaties are intended to deny treaty benefits in certain cases of treaty shopping or income base stripping engaged in by thirdcountry residents. Treaty shopping is said to occur when an entity that is resident in a country with respect to which there is no relevant tax treaty in force (or there is such a 

The provision limits tax treaty benefits otherwise available with respect to U.S. withholding tax imposed on deductible relatedparty payments. Under the provision, the amount of U.S. withholding tax imposed on deductible related-party payments may not be less than the amount that would be imposed if the payment were made directly to the “foreign parent corporation” of the payee, taking into account any income tax treaty between the United States and the country in which the foreign parent corporation is resident. A payment is a deductible related-party payment if it is made directly or indirectly by any entity to any other entity, it is allowable as a deduction for U.S. tax purposes, and both entities are members of the same “foreign controlled group of entities.” The provision also authorizes the Secretary to prescribe regulations 

that are necessary or appropriate to carry out the purposes of the provision. 

No pr
2 

Provision Present Law House Bill 

treaty in force but the taxpayer desires better benefits than those offered under that treaty) becomes resident in a treaty country or conducts a transaction in such a country for the purpose of qualifying for treaty benefits. U.S. tax treaties contain a variety of limitation-on-benefits provisions, some quite detailed. However, many older U.S. tax treaties may lack limitation-on-benefits provisions or lack the refinements now thought essential to such provisions. 

Effective for payments made after the date of enactment. 

Modifications to Corporate Estimated Tax Payments (sec. 13003 of the House bill and sec. 12506 of the Senate amendment) 

 See discussion of item E.6. of the 

Senate amendment below. 
3 

Provision Present Law House Bill 

SENATE AMENDMENT A.1. Supplemental Agricultural Disaster Assistance from the Agriculture Disaster Relief Trust Fund (sec. 12101 of the Senate amendment and sec. 901 of the Trade Act of 1974) The description of this provision was supplied by the Majority Staff of the Senate Finance Committee

The Farm Service Agency (“FSA”) of the United States Department of Agriculture (“USDA”) offers various ongoing programs for agricultural producers to facilitate recovery from losses caused by natural events. Ongoing programs include the Emergency Conservation Program (“ECP”), the Noninsured Crop Disaster Assistance Program (“NAP”), the Disaster Debt Set-Aside Program (“DSA”), and the Emergency Loan Program (“EM”). 

No provision. Amen

create Disast(“PADpaymewho sdeclarUSDAfunded percenthe gethat arcollecwithdrconsuHarmoThe Punder progradisastepermaprograprograassistahoney additioa new managprevenproducovera
4 

Provision Present Law House Bill 

B.1. Provide tax credit for eligible farmland enrolled in the conservation reserve program (sec. 12201 of the Senate amendment and sec. 30D of the Code) 

Under the Department of Agriculture’s conservation reserve program, eligible producers generally enter into contracts under which they agree to establish longterm, resource conserving covers on eligible farmland in exchange for annual contract payments. Present law does not provide an income tax credit for eligible farmland enrolled in the conservation reserve program. 

No provision Create

credit Agricufarmlaconsercredit any suprograTreasuwith thThe comay nminimEstablreservmillio2009 treprescreditthe prsuch yEffectand apconsercontraafter s
5 

Provision Present Law House Bill 

B.2. Exclusion of Conservation Reserve Program Payments from SECA tax for individuals receiving social security retirement or disability payments (sec. 12202 of the Senate amendment and sec. 1402(a) of the Code) 

Generally, the Self-Employment Contributions Act (“SECA”) tax is imposed on an individual’s net earnings from self-employment income within the social security wage base. Net earnings from selfemployment generally mean gross income (including the individual’s net distributive share of partnership income) derived by an individual from any trade or business carried on by the individual less applicable deductions. 

No provision. Exclu

prograemploSECA who aretiremThe trreservby othEffectDecem
6 

Provision Present Law House Bill 

B.3. Make permanent the special rule encouraging contributions of capital gain real property for conservation purposes (sec. 12203 of the Senate amendment and sec. 170 of the Code) 

Generally, contributions of capital gain property to charitable organizations described in section 170(b)(1)(A) (e.g., public charities, private foundations other than private non-operating foundations, and certain governmental units) are deductible up to 30 percent of the taxpayer’s contribution base (in the case of individuals) and 10 percent of the taxpayer’s contribution base (in the case of corporations). Contributions in excess of either contribution base may be carried over for up to five years. Effective for contributions made in taxable years beginning after December 31, 2005 and before January 1, 2008, qualified conservation contributions are subject to a higher percentage limitation: 50 percent of the contribution base in the case of individuals generally, and 100 percent of the contribution base in the case individual and corporate farmers or ranchers. In addition, qualified conservation contributions in excess of the applicable percentage limitation may be carried over for up to fifteen years. 

No provision. Make

regardcontriEffecttaxablDecem
7 

Provision Present Law House Bill 

B.4. Provide tax credit for recovery and restoration of endangered species (sec. 12204 of the Senate amendment and new sec. 30D of the Code) 

Present law does not provide an income tax credit for endangered species recovery expenditures. 

No provision. Establ

pursuaplan equalifagreemcredit”loss in attribuon the agreemreceiveasemeasemprotecallowealternahabitais alloalternaEffectbeginn2007. 
8 

Provision Present Law House Bill 

B.5. Deduction for endangered species recovery expenditures (sec. 12205 of the Senate amendment and sec. 175 of the Code) 

A taxpayer engaged in the business of farming may treat expenditures for the purpose of soil or water conservation in respect of land used in farming, or for the prevention or erosion of land used in farming, as not chargeable to capital account and as deductible subject to the limitation that the deduction may not exceed 25 percent of the farmer's gross income derived from farming during the taxable year. 

No provision. A taxp

of farmtax trewater for exspecifpursuaAct of are trecapitasubjecdeducpercenincomduring Effectincurrenactm
9 

Provision Present Law House Bill 

B.6. Provide exclusion for certain payments and programs relating to fish and wildlife (sec. 12206 of the Senate amendment and sec. 126 of the Code) 

Gross income does not include the excludable portion of payments made to taxpayers by the Federal and State governments for a share of the cost of improvements to property under certain conservation programs. 

No provision. Expan

to inclpaymefor Fisauthorand WIncentWildliPrivatPrograWildliHealth authorForestand thintegrauthorthe Co1978. Effectafter t
10 

Provision Present Law House Bill 

B.7. Provide tax credit for easements made pursuant to certain U.S.D.A. conservation programs (sec. 12207 of the Senate amendment and sec. 30F of the Code) 

Present law does not provide an income tax credit for easements placed on real property pursuant to the wetlands reserve program or the working grassland protection program. 

No provision. Establ

(1) the conserworki(in lieAgricuThe wcredit to the easemreservgrasslthe taxin perpless thof Agrpursuaprotecreservgrassloffset The prnationlimitareprescreditthe prEffectafter Staxabldate. 
11 

Provision Present Law House Bill 

B.8. Exempt facility bonds for forest conservation activities (sec. 12211 of the Senate amendment and sec. 142 of the Code) 

Tax exempt bonds

The definition of tax-exempt exempt facility bonds does not include bonds for forest conservation activities. Taxation of income from timber 

harvesting

An organization exempt from taxation generally is subject to tax on its unrelated business taxable income, generally defined to mean gross income (less deductions) derived from a trade or business, the conduct of which is not substantially related to the exercise or performance of the organization’s exempt purposes or functions, that is regularly carried on by the organization. Special unrelated trade or business income rules applicable to the cutting of timber are contained in sections 512(b)(5) and 631. Under these rules, the determination of whether income derived from the cutting of timber constitutes an unrelated trade or business income depends upon a variety of factors. 

No provision Establ

conserprovidavailathat acfor coFirst, $1.5 bconserfacilitprovisexclusincomharvesa qualacquirqualifbondsGenerissued 180 daenactmexcludactiviteffecti
12 

Provision Present Law House Bill 

B.9. Deduction for qualified timber gain and timber REIT provisions (secs. 12212-12217 of the Senate amendment and new sec. 1203, and secs. 856, 857 and 4981 of the Code) 

Gain from cutting timber held for at least one year can be treated as capital gain. The maximum capital gain rate is 15 percent for individuals but is the regular 35 percent rate for corporations. Real estate investment trusts (“REITs”) must derive most of their income from generally passive real estate activities and meet other requirements. REITs can deduct dividends paid and can declare capital gains dividends taxed at the shareholders' tax rates. IRS private rulings have held timber cutting capital gain to be qualified REIT income. Mineral royalty income is not qualified REIT income. A REIT can hold up to 20 percent of asset value in stock of a taxable REIT subsidiary (“TRS”) that can conduct active business but is taxed as a corporation. A 100 percent excise tax is imposed on REIT gain from sale of property held for sale to customers in the ordinary course of business. 

No provision. A taxp

of timnet caproviddeducTimbeincludwithouyear hSpeciaREIT,more tvalue connebusinea timbincomand th25 perThe experiod for timqualiffor coApplieafter tdoes nthe firafter t
13 

Provision Present Law House Bill 

A safe harbor excepts gain from certain property held at least 4 years. 

C.1. Credit for residential and business wind property (sec. 12301 of the Senate amendment and secs. 25D and 48 of the Code) 

A nonrefundable, 10-percent business energy credit is allowed for the cost of new property that is equipment that either (1) uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat, or (2) is used to produce, distribute, or use energy derived from a geothermal deposit, but only, in the case of electricity generated by geothermal power, up to the electric transmission stage. 

No provision. Provid

credit energy respecexceed taxpayexpen31, 20JanuarAlso pqualifproperconnethe Unresideresidewith rof capThe reavailaservicThe crthe alt
14 

Provision Present Law House Bill 

C.2. Landowner incentive to encourage electric transmission build-out (sec. 12302 of the Senate amendment and new sec. 139B of the Code) 

Gross income includes all income from whatever source derived unless a specific exclusion applies. 

No provision. Provid

incomtransmFor puqualifeasemby an transmeasemgranteto locatransmused tor moqualifsectioany plEffectafter t
15 

Provision Present Law House Bill 

C.3. Exception to reduction of renewable electricity credit (sec. 12303 of the bill and sec. 45 of the Code) 

An income tax credit is allowed for the production of electricity at qualified facilities using qualified energy resources. Qualified energy resources comprise wind, closedloop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, and qualified hydropower production. Qualified facilities are, generally, facilities that generate electricity using qualified energy resources. To be eligible for the credit, electricity produced from qualified energy resources at qualified facilities must be sold by the taxpayer to an unrelated person. In addition to the electricity production credit, an income tax credit is allowed for the production of refined coal and Indian coal at qualified facilities. 

No provision. Provid

reductby reabondsfinancthe pris not guaranrancheissued Agricuby secSecuriof 200Effectservic
16 

Provision Present Law House Bill 

C.4. Expansion of special depreciation allowance to cellulosic biofuel plant property (sec. 12311 of the Senate amendment and sec. 168(l) of the Code) 

Section 168(l) allows an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of qualified cellulosic biomass ethanol plant property. In order to qualify, the property generally must be placed in service before January 1, 2013. Qualified cellulosic biomass ethanol plant property means property used in the U.S. solely to produce cellulosic biomass ethanol. For this purpose, cellulosic biomass ethanol means ethanol derived from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. 

No provision. Expan

propersolely Cellulalcohohydrolignocmatter renewEffectservicafter ttaxabldate. 
17 

Provision Present Law House Bill 

C.5. Credit for Production of Cellulosic Biofuel (sec. 12312 of the Senate amendment and sec. 40 of the Code) 

In the case of ethanol, the Code provides a separate 10-cents-pergallon credit for up to 15 million gallons per year for small producers, defined generally as persons whose production capacity does not exceed 60 million gallons per year. The credit is includible in income and is treated as a general business credit, subject to the ordering rules and carryforward/carryback rules that apply to business credits generally. The alcohol fuels tax credit, of which the small producer credit is a part, is scheduled to expire after December 31, 2010. 

No provision. Provid

each gfuel prthe taxthe crethe creand thethanocelluloThis ccredit sectioThe cr2015. The prmilliosmall celluloEffectDecem

C.6. Extension of small ethanol producer credit (sec. 12313 of the Senate amendment and sec. 40 of the Code) 

The alcohol fuels credit is the sum of three credits: the alcohol mixture credit, the alcohol credit, and the small ethanol producer credit. Generally, the alcohol fuels credit expires after December 31, 2010. 

No provision. Exten

compocredit (throu
18 

Provision Present Law House Bill 

C.7. Credit for producers of fossil free alcohol (sec. 12314 of the Senate amendment and sec. 40 of the Code) 

The alcohol fuels credit is the sum of three credits: the alcohol mixture credit, the alcohol credit, and the small ethanol producer credit. Generally, the alcohol fuels credit expires after December 31, 2010. 

No provision. The pr

compocreditproduprovidper-gamillioat a focalendSmall as a pralcohonot exyear. which used isuch fbioma45K(cThe crDecem
19 

Provision Present Law House Bill 

C.8. Modification of alcohol credit (sec. 12315 of the Senate amendment and sec. 40 and 6426 of the Code) 

Taxpayers are eligible for an income tax credit of 51 cents per gallon of ethanol (60 cents in the case of alcohol other than ethanol) used in the production of a qualified mixture (the “alcohol mixture credit”). A “qualified mixture” means a mixture of alcohol and gasoline (or of alcohol and a special fuel) sold by the taxpayer as fuel, or used as fuel by the taxpayer producing such mixture. The term “alcohol” includes methanol and ethanol but does not include (1) alcohol produced from petroleum, natural gas, or coal (including peat), or (2) alcohol with a proof of less than 150. 

No provision. The 5

for ethper gacalendwhich (inclubeen pthe UnenactmSecretAdminEnviroEffect
20 

Provision Present Law House Bill 

C.9. Calculation of volume of alcohol for fuel credits (sec. 12316 of the Senate amendment and sec. 40 of the Code) 

The Code provides a per-gallon credit for the volume of alcohol used as a fuel or in a qualified mixture. For purposes of determining the number of gallons of alcohol with respect to which the credit is allowable, the volume of alcohol includes any denaturant, including gasoline. The denaturant must be added under a formula approved by the Secretary and the denaturant cannot exceed five percent of the volume of such alcohol (including denaturants). 

No provision. Reduc

denatuvolumEffectDecem
21 

Provision Present Law House Bill 

C.10. Ethanol tariff extension (sec. 12317 of the Senate amendment) 

9901.00.50 of the Harmonized Tariff Schedule of the United States imposes a cumulative general duty of 14.27 cents per liter (approximately 54 cents per gallon) to imports of ethyl alcohol, and any mixture containing ethyl alcohol, if used as a fuel or in producing a mixture to be used as a fuel, that are entered into the United States prior to January 1, 2009. The temporary duty under 9901.00.50 offsets the alcohol fuels credit of 51 cents per gallon that is available to taxpayers that blend ethanol with gasoline; both domestic and imported ethanol is eligible for the alcohol fuels credit. 9901.00.52 of the Harmonized Tariff Schedule of the United States imposes a general duty of 5.99 cents per liter to imports of ethyl tertiary-butyl ether, and any mixture containing ethyl tertiarybutyl ether, that are entered into the United States prior to January 1, 2009. 

No provision. Modif

period classif9901.0Tariff States to befEffect
22 

Provision Present Law House Bill 

C.11. Limitations on, and reductions of, duty drawback on certain imported ethanol (sec. 12318 of the Senate amendment) 

9901.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”), imposes an additional duty on ethanol that is used as fuel or use to make fuel. Subsection (b) of Section 1313 of the Tariff Act of 1930, as amended, permits the refund of duty if the duty-paid good, or a substitute good, is used to make an article that is exported. Subsection (j)(2) of Section 1313 permits the refund of duty if the duty-paid good, or a substitute good, is exported. Subsection (p) of section 1313 permits the substitution on exportation for drawback eligibility 

of one motor fuel for another motor fuel. A person who manufactures or acquires gasoline with ethanol subject to the duty imposed by 9901.00.50 of the HTSUS, can export jet fuel (which does not involve the use of ethanol) and obtain a refund of the duty paid under 9901.00.50 of the HTSUS. 

No provision. Elimin

refund 9901.0substito the HTSUduty imthe HTpurpoprevendrawbfuel foalcohoEffectafter tthe da
23 

Provision Present Law House Bill 

C.12. Extension and modification of credit for biodiesel used as fuel (sec. 12321 of the Senate amendment and sec. 40A, 6426 and 6427 of the Code) 

The Code provides an income tax credit for biodiesel fuels (the “biodiesel fuels credit”). The biodiesel fuels credit is the sum of the biodiesel mixture credit, the biodiesel credit, and the small agribiodiesel producer credit. The credit does not apply to fuel sold or used after December 31, 2008. The Code also provides an excise tax credit for biodiesel mixtures. If any person produces a biodiesel fuel mixture in such person’s trade or business, the Secretary is to pay such person an amount equal to the biodiesel mixture credit. The Secretary is not required to make payments with respect to biodiesel fuel mixtures sold or used after December 31, 2008. 

No provision. Gener

two ye2010) tax crefor biobiodiebiodieextend(throuprovisillustrsourcebiodieEffectthe da
24 

Provision Present Law House Bill 

C.13. Extension and modification of credit for renewable diesel used as fuel (sec. 12321 of the Senate amendment and sec. 40A, 6426 and 6427 of the Code) 

The Code provides a tax incentive of $1.00 per gallon relating to renewable diesel that is part of a qualified mixture with diesel fuel. This incentive may be taken as an income tax credit, an excise tax credit, or as a payment from the Secretary. The incentive is available only to the person who produced and sold or used the mixture in their trade or business and is based on the gallons of renewable diesel in the mixture. The provisions relating to renewable diesel do not apply after December 31, 2008. Pursuant to IRS Notice 2007-37, the Secretary provided that fuel produced as a result of coprocessing biomass and petroleum feedstock (“co-produced fuel”) qualifies for the renewable diesel incentives to the extent of the fuel attributable to the biomass in the mixture. In co-produced fuel, the fuel attributable to the biomass does not exist as a distinct separate quantity prior to mixing. 

No provision. Provid

produclaim milliocontaiThe 6determNo crein excproduExpanrenewderivethermthat mDeparspecifan AmMaterturbinExtenrenewcreditpaymetwo ye2010)Effectthe da
25 

Provision Present Law House Bill 

C.14. Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuel (sec. 12322 of the Senate amendment and sec. 4083 of the Code) 

An excise tax is imposed upon (1) the removal of any taxable fuel from a refinery or terminal, (2) the entry of any taxable fuel into the United States, or (3) the sale of any taxable fuel to any person who is not registered with the IRS to receive untaxed fuel, unless there was a prior taxable removal or entry. 

No provision. Adds 

mixtufuel mtaxablModifrequirEffectentere2007. 
26 

Provision Present Law House Bill 

C.15. Extension and modification of alternative fuel credit (sec. 12331 of the Senate amendment and secs. 6426 and 6427 of the Code) 

The alternative fuel credit is allowed against section 4041 liability and the alternative fuel mixture credit is allowed against section 4081 liability. The credits 

generally expire after September 

30, 2009. A person may file a claim for payment equal to the amount of the alternative fuel credit and alternative fuel mixture credits. These payment provisions generally also expire after September 30, 2009. 

No provision. Exten

tax creexcise paymeDecemother tincentunchaexpire law. TbiomaThe pralternamixtuuse, apurpoTo quliquid througprocesbeen da gasiand seof sucdioxidEffectthe da
27 

Provision Present Law House Bill 

C.16. Extension of alternative fuel vehicle refueling property credit (sec. 12332 of the Senate amendment and sec. 30C of the Code) 

Taxpayers may claim a 30-percent credit for the cost of installing qualified clean-fuel vehicle refueling property to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. The credit is available for property placed in service after December 31, 2005, and (except in the case of hydrogen refueling property) before January 1, 2010. In the case of hydrogen refueling property, the property must be placed in service before January 1, 2015. 

No provision. Exten

2010) hydroproperEffect
28 

Provision Present Law House Bill 

D.1. Qualified small issue bonds for farming (sec. 12401 of the Senate amendment and sec. 144 of the Code) 

Qualified small issue bonds are tax-exempt bonds issued by State and local governments to finance private business manufacturing facilities (including certain directly related and ancillary facilities) or the acquisition of land and equipment by certain first-time farmers. A first-time farmer means any individual who has not at any time had any direct ownership interest in substantial farmland in the operation of which such individual materially participated. In addition, an individual does not qualify as a first-time farmer if such individual has received more than $250,000 in qualified small issue bond financing. Substantial farmland means any parcel of land unless (1) such parcel is smaller than 30 percent of the median size of a farm in the county in which such parcel is located and (2) the fair market value of the land does not at any time while held by the individual exceed $125,000. 

No provision. Increa

qualifavaila$450,0for infeliminfrom tfarmlaEffectdate o
29 

Provision Present Law House Bill 

D.2. Modification of installment sale rules for certain farm property (sec. 12402 of the Senate amendment and sec. 453 of the Code) 

Taxpayers are permitted to recognize as gain on a disposition of property only that proportion of payments received in a taxable year that is the same as the proportion that the gross profit bears to the total contract price (the “installment method”). Notwithstanding any installment sale, the aggregate amount that would be treated as ordinary income under section 1245 or section 1250 for the taxable year of the disposition if all payments to be received were received in the taxable year of disposition is recognized in the year of the disposition. 

No provision. Repea

of recany sihorticin sectvine bEffect
30 

Provision Present Law House Bill 

D.3. Allowance of section 1031 for exchanges involving certain mutual ditch, reservoir, or irrigation company stock (sec. 12403 of the Senate amendment and sec. 1031 of the Code) 

An exchange of property, like a sale, generally is a taxable event. However, no gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged for property of a “likekind.” If section 1031 applies to an exchange of properties, the basis of the property received in the exchange is equal to the basis of the property transferred, decreased by any money received by the taxpayer, and further adjusted for any gain or loss recognized on the exchange. In general, this nonrecognition rule does not apply to any exchange of stock in trade or other property held primarily for sale; stocks, bonds or notes; other securities or evidences of indebtedness or interest; interests in a partnership; certificates of trust or beneficial interests; or choses in action. 

No provision. The n

to shareservat the compadescri(deterpercencollecpurpoexpencompathe higwhich organistatute represintereEffectof ena
31 

Provision Present Law House Bill 

D.4. Rural renaissance bonds (sec. 12404 of the Senate amendment and new sec. 54A of the Code) 

As an alternative to traditional taxexempt bonds, the Code permits three types of tax-credit bonds. States and local governments have the authority to issue qualified zone academy bonds (“QZABS”), clean renewable energy bonds (“CREBS”), and “Gulf tax credit bonds.” 

No provision. Provid

credit BondsThe temeansdescrithe CoDevellearninauthorsubtitlFood, and Trrural epursuaElectrrural tauthorElectrbroadbauthorthe Ru1936; facilitsectioConsoDevelEffectdate o
32 

Provision Present Law House Bill 

D.5. Agricultural business security tax credit (sec. 12405 of the Senate amendment and new sec. 45O of the Code) 

Present law does not provide a credit for agricultural business security. 

No provision. Establ

qualifexpenwith rbusinecompocreditThe crper faby the creditthe prieach tlimiteonly aincurr2012. expenof the Effectincurr
33 

Provision Present Law House Bill 

D.6. Credit for drug safety and effectiveness testing for minor animal species (sec. 12406 of the Senate amendment and new sec. 45P of the Code) 

Present law does not provide a credit for drug safety and effectiveness testing for use in a minor animal species. 

No provision. The pr

electio50 persafety expentaxablnew ain a motherwsafety expenamounA quathat owsubjecthe dedrug fspecieFederaAct. A “miother tmajor means chickeas welSecretSecretregula
34 

Provision Present Law House Bill 

 The cr

a taxptax. Effectafter t
35 

Provision Present Law House Bill 

D.7. Reduce the recovery period for certain farming business machinery or equipment from seven to five years (sec. 12407 of the Senate amendment and sec. 168 of the Code) 

A taxpayer is allowed to recover, through annual depreciation deductions, the cost of certain property used in a trade or business or for the production of income. The amount of the depreciation deduction allowed with respect to tangible property for a taxable year is determined under the modified accelerated cost recovery system (“MACRS”). The class lives of assets placed in service after 1986 are generally set forth in Revenue Procedure 87-56. Asset class 01.1 includes machinery and equipment, grain bins, and fences (but no other land improvements), that are used in the production of crops or plants, vines, and trees; livestock; the operation of farm dairies, nurseries, greenhouses, sod farms, mushrooms cellars, cranberry bogs, apiaries, and fur farms; and the performance of agricultural, animal husbandry, and horticultural services. These assets are assigned a class life of 10 years and a recovery period of seven years. 

No provision. Provid

seven-any mthan aasset, improfarminservicoriginthe taxthe tera trade cultivaharveshorticfarminprocesnormaraisingagricuproduEffectplaced enactm
36 

Provision Present Law House Bill 

D.8. Expensing of broadband internet access expenditures (sec. 12408 of the Senate amendment and new sec. 191 of the Code) 

A taxpayer is allowed to recover, through annual depreciation deductions, the cost of certain property used in a trade or business or for the production of income. The amount of the depreciation deduction allowed with respect to tangible property for a taxable year is determined under the modified accelerated cost recovery system (“MACRS”). Under MACRS, different types of property generally are assigned applicable recovery periods and depreciation methods. The recovery periods applicable to most tangible personal property (generally tangible property other than residential rental property and nonresidential real property) range from 3 to 25 years. The depreciation methods generally applicable to tangible personal property are the 200-percent and 150-percent declining balance methods, switching to the straightline method for the taxable year in which the depreciation deduction would be maximized. 

No provision. Taxpa

qualifpaid onot chbut ratdeductaxablgenerabroadbthrougqualifExpenelectioequipmwhich taxpayqualifincurrand on 31 thadate. Effect
37 

Provision Present Law House Bill 

D.9. Credit for Energy Efficient Motors 

Present law does not provide a credit for energy efficient motors 

No provision The pr

tax crequalifmotorenergy credit and ththat a taxabl$1,250efficiedefiniof 500 meets levels 12-13 Manu(2006which and (cin the applieplaced enactmfrom tThe crthe alt
38 

Provision Present Law House Bill 

E.1. Limitation on farming losses of certain taxpayers (sec. 12501 of the Senate amendment and sec. 461 of the Code) 

Farming income and expenses are reported by individuals, estates, trusts, and partnerships on IRS Schedule F, Profit and Loss from Farming. For taxpayers who materially participate (as defined in section 469(h)), net farming losses are reported in full as a reduction to income from both passive and nonpassive sources. To the extent taxpayers do not materially participate in the farming activity, the passive activity rules in section 469 may limit the ability to use such losses to reduce income from nonpassive sources. 

No provision. Limits 

can be estateSchedwhere AgricuCCC lin a paforwaEffectbeginn2007. 
39 

Provision Present Law House Bill 

E.2. Increase and index dollar thresholds for farm optional method and nonfarm optional method for computing net earnings from self-employment (sec. 502 of the Senate amendment and sec. 1402(a) of the Code) 

Self-employment income subject to the SECA tax is determined as the net earnings from selfemployment. An individual may use one of three methods to calculate net earnings from selfemployment. Under the generally applicable rule, net earnings from self-employment means gross income (including the individual’s net distributive share of partnership income) derived by an individual from any trade or business carried on by the individual, less the deductions attributable to the trade or business that are allowed under the SECA tax rules. Alternatively, an individual may elect to use one of two optional methods for calculating net earnings from selfemployment. These methods are: (1) the farm optional method; and (2) the nonfarm optional method. The farm optional method allows individuals to pay SECA taxes (and secure Social Security benefit coverage) when they have low net income or losses from farming. The nonfarm optional method is similar to the farm optional method. 

No provision. Modif

so thaeligiblSocial each tindexiprovismodifoptionEffectbeginn2007. 
40 

Provision Present Law House Bill 

E.3. Information reporting for commodity credit corporation transactions (sec. 12503 of the Senate amendment and new sec. 6039J of the Code) 

The Farm Security and Rural Investment Act of 2002 authorizes a marketing assistance loan program through the Commodity Credit Corporation (“CCC”). Under such program, the CCC may make loans for eligible commodities at a specified rate per unit of commodity (the original loan rate). If a taxpayer uses cash or CCC certificates to repay a CCC loan, and the loan is repaid at a time when the repayment rate is less than the original loan rate, the difference between the original loan amount and the lesser repayment amount is market gain. For transactions after January 1, 2001, IRS Notice 2007-63 provides that the CCC reports market gain associated with the repayment of a CCC loan whether the taxpayer repays the loan with cash or uses CCC certificates in repayment of the loan. The CCC reports the market gain on Form 1099-G, Certain Government Payments. 

No provision. Codifi

Notice CCC rassociCCC lthe taxcash orepaymEffectafter J
41 

Provision Present Law House Bill 

E.4. Modification of section 1031 treatment for certain real estate (sec. 12504 of the Senate amendment and sec. 1031 of the Code) 

An exchange of property, like a sale, generally is a taxable event. However, no gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged for property of a “like kind” that is to be held for productive use in a trade or business or for investment. 

No provision. Modif

nonrecexchaagricunonagunless is permprograof this agricureal prfarminto whitaxablof succertain paymepaymeprovisconserEffectafter t
42 

Provision Present Law House Bill 

E.5. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004 (sec. 12505 of the Senate amendment and sec. 470 of the Code) 

Present law provides for the deferral of losses attributable to certain tax exempt use property, generally effective for leases entered into after March 12, 2004. The deferral provision does not apply to property located in the United States that is subject to a lease with respect to which a formal application: (1) was submitted for approval to the Federal Transit Administration (an agency of the Department of Transportation) after June 30, 2003, and before March 13, 2004; (2) was approved by the Federal Transit Administration before January 1, 2006; and (3) includes a description and the fair market value of such property (the “qualified transportation property exception”). 

No provision. Chang

loss dcertain provisalso apor beflessee With rare deyears 2006. EffectprovisCreatirelates
43 

Provision Present Law House Bill 

E.6. Modifications to corporate estimated tax payments (sec. 13003 of the House bill and sec. 12506 of the Senate amendment) 

In general, corporations are required to make quarterly estimated tax payments of their income tax liability. For a corporation whose taxable year is a calendar year, these estimated tax payments must be made by April 15, June 15, September 15, and December 15. Under present law, in the case of a corporation with assets of at least $1 billion, the payments due in July, August, and September, 2012, are increased to 115.00 percent of the payment otherwise due and the next required payment shall be reduced accordingly. 

Increases the required corporate estimated tax payments due for July, August and September 2012 by 1.25 percentage points. (The statutory language of this provision is no longer applicable as the result of legislation enacted after House passage of H.R. 2419.) 

IncreaestimaJuly, Aby 7.0
44 

Provision Present Law House Bill 

E.7. Denial of deduction for certain fines, penalties, and other amounts (sec. 12507 of the Senate amendment and sec. 162(f) of the Code) 

Under present law, no deduction is allowed as a trade or business expense under section 162(a) for the payment to a government of a fine or similar penalty for the violation of any law (sec. 162(f)). Treasury regulations provide that a fine or similar penalty includes an amount: (1) paid pursuant to conviction or a plea of guilty or nolo contendere for a crime... (2) paid as a civil penalty imposed by Federal, State, or local law... (3) paid in settlement of the taxpayer’s actual or potential liability for a fine or penalty (civil or criminal) ... Compensatory damages paid to a government do not constitute a fine or penalty. There is a lack of clarity and consistency regarding the deductibility of payments in settlements and under certain final determinations. 

No provision Amou

by suito, or governviolatiinvestpotentwhich governunder tax prExcepproperto comcertain Goverand tapurpoEffectincurrenactmdoes nincurragreemdate. 
45 

Provision Present Law House Bill 

 requir

bindinpurpoobtainenactm

E.8. Increase in Information Return Penalties (sec. 12508 of the Senate amendment and secs. 6721, 6722, and 6723 of the Code) 

Under section 6721 of the Code, any person required to file a correct information return who fails to do so on or before the prescribed filing date is subject to a penalty that varies based on when, if at all, the correct information return is filed. Section 6722 of the Code also imposes penalties for failing to furnish correct payee statements to taxpayers. In addition, section 6723 imposes a penalty for failing to comply with other information reporting requirements. 

No provision. Increa

to file failing statemwith orequirEffectinformfiled o
46 

Provision Present Law House Bill 

E.9(a) Three-year Depreciation for All Race Horses (sec. 12509(a) of the Senate amendment and sec. 168 of the Code) 

A taxpayer is allowed to recover, through annual depreciation deductions, the cost of certain property used in a trade or business or for the production of income. The amount of the depreciation deduction allowed with respect to tangible property for a taxable year is determined under the modified accelerated cost recovery system (“MACRS”). The class lives of assets placed in service after 1986 are generally set forth in Revenue Procedure 87-56. Any race horse that is more than two years old at the time it is placed is assigned a three-year recovery period. A seven year recovery period is assigned to any race horse that is two years old or younger at the time it is place in service. 

No provision. Provid

period Effectservicenactm

E.9(b) Reduction of holding period to 12 months for purposes of determining whether horses are section 1231 assets (sec. 12509(b) of the Senate amendment and section 1231 of the Code) 

Under present law, gain from the sale or exchange of a horse held for draft, breeding, or sporting purposes qualifies for long-term capital gain treatment if the horse has been held for 24 months or more. 

No provision. Reduc

period Effectbeginn2007. 
47 

Provision Present Law House Bill 

E.10(a) Increase in penalty for failure to file partnership returns (sec. 12511 of the Senate amendment and sec. 6698 of the Code) 

Under present law, a partnership is required to file a tax return for each taxable year. The partnership’s tax return is required to include the names and addresses of the individuals who would be entitled to share in the taxable income if distributed and the amount of the distributive share of each individual. In addition to applicable criminal penalties, present law imposes a civil penalty for the failure to timely file a partnership return. Generally, the penalty is $85 per partner for each month (or fraction of a month) that the failure continues, up to a maximum of five months. For returns required to be filed for taxable years beginning in 2008, the penalty is increased by $1 per partner. 

No provision. Increa

file peto $10numbepartnetaxablwas refractiothe faimaximThe prthe Foattachpartnepartnepartneinspecpartnerule apsharehand hebenefibenefiGenerenactm
48 

Provision Present Law House Bill 

E.10(b) Limitation on disclosure of partnership, S corporation and trust returns (sec. 12511 of the Senate amendment and sec. 6103 of the Code) 

As a general rule, returns and return information are confidential and cannot be inspected or disclosed unless a specific exception applies (sec. 6103(a)). Present law provides that a return of a partnership, S corporation, estate, or trust is open to inspection by or disclosure to certain persons considered to have a material interest (sec. 6103(e)(1)). For this purpose, a return includes any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return (sec. 6103(b)(1)). 

No provision. The pr

Forms other tare nopartneinspecpartnerule apsharehand hebenefibenefiprovis8(c) oMortgRelief 
49 

Provision Present Law House Bill 

E.11. Option to treat elective deferrals as after-tax contributions (sec. 12512 of the Senate amendment and sec. 402A of the Code) 

Plans qualified under Code section 401(a) and tax-sheltered annuities described in section 403(b) are permitted to include a Roth contribution program. As part of establishing a qualified Roth contribution program, an applicable retirement plan must establish a separate account, referred to as a designated Roth account, for the designated Roth contributions of each employee and any earnings on such contributions. In addition, the plan must maintain separate recordkeeping with respect to each account. Designated Roth contributions generally are includible in an employee’s gross income. Qualified distributions from a designated Roth account are excludable from gross income. 

No provision. Gover

may incontriplan pdesigncould the plasubjecThus, designgeneraincomsubseqcontrisuch cgross qualifthe prrequirRoth cpermiEffectbeginn2007. 
50 

Provision Present Law House Bill 

E.12(a) Clarification of the economic substance doctrine (sec. 12521 of the Senate amendment and sec. 7701 of the Code) 

Economic substance doctrine

Courts have denied claimed tax benefits if the transaction that gives rise to those benefits lacks “economic substance.” Courts have articulated different standards for determining whether “economic substance” is present. Certain reasonable cause defenses are available. 

No provision. If a co

econorelevasubstachangfrom FconseqeconotaxpayFederainto suA purpbenefiof FedFederapurpobenefito FedFederasubstanon-FIf profpresenexpecmust bthe prnet Fetaxes extent regula
51 

Provision Present Law House Bill 

 Applie

after t

E.12(b) Penalty for understatements attributable to transactions lacking economic substance, etc. (sec. 12522 of the Senate amendment and new sec. 6662B of the Code) 

An accuracy-related penalty under section 6662 applies to the portion of any underpayment that is attributable to (1) negligence, (2) any substantial understatement of income tax, (3) any substantial valuation misstatement, and certain other items. A separate 30-percent accuracyrelated penalty under section 6662A 20-percent if transaction is adequately disclosed) applies to “listed transactions” and to “reportable transactions” with a significant tax avoidance purpose. This penalty is imposed on the amount of income reduction attributable to the transaction times the maximum rate of tax, without reduction for other loses or offsets. Certain reasonable cause defenses are generally available to the above penalties. 

No Provision. Impos

undertransasubstapercenthere iexceppenaltIRS Clevel dpenalthave oopposPenaltnonecreductmaximreduct(simil6662A avoidaApplieafter t
52 

Provision Present Law House Bill 

E.13. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions (sec. 12523 of the Senate amendment and sec. 163 of the Code) 

No deduction for interest is allowed for interest paid or accrued on any underpayment of tax which is attributable to the portion of any reportable transaction understatement with respect to which the relevant facts were not adequately disclosed. The Secretary of the Treasury is authorized to define reportable transactions for this purpose. 

No provision. Exten

intereor acctax whnonecunderpdiscloApplieafter t
53 

Provision Present Law House Bill 

G. Tax Benefits for Kansas Disaster Zone 

No Provision No provision. Defini

For puwhethunder applicDisastrespechad beunder StaffoEmergreason tornadand dewarranand puFederaAct wattributornadGenerCountarea. 
54 

Provision Present Law House Bill 

G.1. Suspension of Certain Limitations on Personal Casualty Losses (sec. 12701(a) of the Senate amendment and section 1400S(b) of the Code) 

Under present law, a taxpayer may generally claim a deduction for any loss sustained during the taxable year and not compensated by insurance or otherwise (sec. 165). For individual taxpayers, deductible losses must be incurred in a trade or business or other profit-seeking activity or consist of property losses arising from fire, storm, shipwreck, or other casualty, or from theft. Personal casualty or theft losses are deductible only if they exceed $100 per casualty or theft. In addition, aggregate net casualty and theft losses are deductible only to the extent they exceed 10 percent of an individual taxpayer's adjusted gross income. 

No provision. Provid

"Kanstwo limcasualreceivHurricWilmadisastenot extheft. deducwhethexceed adjustpurpothreshor thezone cdisregeffectiseparalosses
55 

Provision Present Law House Bill 

G.2. Extension of replacement period for nonrecognition of gain (sec. 12701 of the Senate amendment and sec. 1033 of the Code) 

Generally, a taxpayer realizes gain to the extent the sales price (and any other consideration received) exceeds the taxpayer’s basis in the property. The realized gain is subject to current income tax unless the gain is deferred or not recognized under a special tax provision. Under section 1033, gain realized by a taxpayer from an involuntary conversion of property is deferred to the extent the taxpayer purchases property similar or related in service or use to the converted property within the applicable period The applicable period to replace the converted property begins with the date of the disposition of the converted property (or if earlier, the earliest date of the threat or imminence of requisition or condemnation of the converted property) and ends two years after the close of the first taxable year in which any part of the gain upon conversion is realized (the “replacement period”). 

No provision. Exten

replactaxpayproperthat is and thinvoluMay 44, 200Substareplacthis arEffect
56 

Provision Present Law House Bill 

G.3. Employee retention credit (sec. 12701 of the Senate amendment and sec. 1400R of the Code) 

For employers affected by Hurricanes Katrina, Rita, or Wilma, section 1400R provides a credit of 40 percent of the qualified wages (up to a maximum of $6,000 in qualified wages per employee) paid by an eligible employer to an eligible employee. 

No provision. Exten

modifsize liaffectetornadThe reaffectetornademploaveragemplothe tax2007. Effect

G.4. Special Depreciation Allowance (sec. 12701 of the Senate amendment and sec. 1400N(d) of the Code) 

For qualified Gulf Opportunity Zone property, the Code provides an additional first-year depreciation deduction equal to 50 percent of the adjusted basis. 

No provision. Provid

deprecpercenqualifproperEffect
57 

Provision Present Law House Bill 

G.5. Increase in expensing under section 179 (sec. 12701 of the Senate amendment and sec. 1400N(e) of the Code) 

For qualified section 179 Gulf Opportunity Zone property, the maximum amount that a taxpayer may elect to deduct is increased by the lesser of $100,000 or the cost of qualified section 179 Gulf Opportunity Zone property for the taxable year. The provision applies with respect to qualified section 179 Gulf Opportunity Zone property acquired on or after August 28, 2005, and placed in service on or before December 31, 2007. This placed in service date was extended to December 31, 2008 for property substantially all of the use of which is in one or more specified portions of the GO Zone. The threshold for reducing the amount expensed is computed by increasing the $500,000 presentlaw amount by the lesser of (1) $600,000, or (2) the cost of qualified section 179 Gulf Opportunity Zone property placed in service during the taxable year. Neither the $100,000 nor $600,000 amounts are indexed for inflation. 

No provision. The m

taxpaysectiolesser qualifAssistyear. respecRecovacquirand plDecemfor redis com$500,0the lesthe coRecovplaced year. $600,0inflatiQualifAssist179 pr179(drequirEffect
58 

Provision Present Law House Bill 

G.6. Expensing for certain demolition and clean-up costs (sec. 12701 of the Senate amendment) 

A taxpayer is permitted a deduction for 50 percent of any qualified Gulf Opportunity Zone clean-up cost paid or incurred during the period beginning on August 28, 2005, and ending on December 31, 2007. The remaining 50 percent is capitalized and treated as described above. A qualified Gulf Opportunity Zone clean-up cost is an amount paid or incurred for the removal of debris from, or the demolition of structures on, real property located in the Gulf Opportunity Zone to the extent that the amount would otherwise be capitalized. In order to qualify, the property must be held for use in a trade or business, for the production of income, or as inventory. 

No provision. A taxp

for 50 Recovpaid obeginnending The reas undGulf Ocost is for the the deproperOpporthe amcapitapropertrade oproduinventEffect
59 

Provision Present Law House Bill 

G.7. Treatment of Public utility property disaster losses (sec. 12701 of the Senate amendment and sec. 1400N(o) of the Code) 

Section 1400N(o) provides an election for taxpayers who incurred casualty losses attributable to Hurricane Katrina with respect to public utility property located in the Gulf Opportunity Zone. Under the election, such losses may be taken into account in the fifth taxable year (rather than the 1st taxable year) immediately preceding the taxable year in which the loss occurred. If the application of this provision results in the creation or increase of a net operating loss for the year in which the casualty loss is taken into account, the net operating loss may be carried back or carried over as under present law applicable to net operating losses for such year. 

No provision. Provid

who inattribuand toutility Kansaelectiointo acyear (ryear) itaxabloccurrprovisincreathe yeis takeoperator carrlaw aplosses definiunder to the DisastEffect
60 

Provision Present Law House Bill 

G.8. Treatment of net operating losses attributable to storm losses (sec. 12701 of the Senate amendment and sec. 1400N(k) of the Code) 

In general, a net operating loss (“NOL”) may be carried back two years and carried over 20 years to offset taxable income in such years. Different rules apply with respect to NOLs arising in certain circumstances. A three-year carryback applies with respect to NOLs (1) arising from casualty or theft losses of individuals, or (2) attributable to Presidentially declared disasters for taxpayers engaged in a farming business or a small business. A five-year carryback applies to NOLs (1) arising from a farming loss (regardless of whether the loss was incurred in a Presidentially declared disaster area), or (2) certain amounts related to Hurricane Katrina and the Gulf Opportunity Zone. Special rules also apply to real estate investment trusts (no carryback), specified liability losses (10-year carryback), and excess interest losses (no carryback to any year preceding a corporate equity reduction transaction). Additionally, a special rule applies to certain electric utility companies. 

No provision. Provid

certain to the OpporsectioEffect
61 

Provision Present Law House Bill 

G.9. Representations regarding income eligibility for purposes of qualified residential rental project requirements (sec. 12701 of the Senate amendment and sec. 1400N(n) of the Code) 

Subject to certain requirements, qualified private activity bonds may be issued to finance residential rental property or owner-occupied housing. Residential rental property may be financed with exempt facility bonds if the financed project is a “qualified residential rental project.” A project is a qualified residential rental project if 20 percent or more of the residential units in such project are occupied by individuals 

whose income is 50 percent or less of area median gross income (the “20-50 test”). Alternatively, a project is a qualified residential rental project if 40 percent or more of the residential units in such project are occupied by individuals whose income is 60 percent or less of area median gross income (the “40-60 test”). The issuer must elect to apply either the 20-50 test or the 40-60 test. Operators of qualified residential rental projects must annually certify that such project meets the requirements for qualification, including meeting the 20-50 test or the 40-60 test. 

No provision. Under 

of a quprojecreprestenantsevere Kiowa surrouMay 4determindivilimitarental is in cor the appliebegins beginnindiviEffect
62 

Provision Present Law House Bill 

G.10. Use of retirement funds from retirement plans relating to the Kansas Disaster Zone (sec. 12701(10) of the Senate amendment and sec. 1400Q of the Code) 

Section 1400Q provides special rules relating to the use of retirement funds in the case of individuals affected by certain hurricanes. Specifically, (1) the 10-percent early distribution tax does not apply to qualified hurricane distributions, (2) a qualified hurricane distribution (and certain other distributions relating to the purchase of a primary residence) may be recontributed to a retirement plan, (3) gross income attributable to a qualified hurricane distribution is included ratably over a three-year period, (4) certain rules that would otherwise restrict the ability of a plan to permit a distribution (and rules that require advance notice and withholding with respect to plan distributions) are made inapplicable to a qualified hurricane distribution; and (5) rules relating to the maximum amount and repayment term of plan loans are modified. 

No provision. Provid

providrespecin conand stKansaEffect
63 

Provision Present Law House Bill 

H.1. Treatment of amounts received in connection with the Exxon Valdez litigation (sec. 12801 of the Senate amendment) 

Income averagingIndividuals engaged in a farming business or fishing business may elect to average the taxable income attributable to the farming or fishing business over a 3-year period. Contributions to qualified 

retirement plans and IRAsThe Code provides for the favorable tax treatment of a variety of retirement savings plans sponsored by employers for the benefit of employees, provided that such plans meet certain qualification requirements. Such plans are commonly referred to as qualified retirement plans. The Code also provides for two types of individual retirement accounts (“IRAs”): traditional IRAs and Roth IRAs. 

No provision. Incom

Any qqualiftaxablengagthe qushall battribufor the applyirules afishing Contri

A quaqualifa taxabefore one or eligiblretiremretiremamoununder for all (1) the settlemEffectenactm
64 

Provision Present Law House Bill 

H.2. Extend and modify the enhanced charitable deduction for contributions of food inventory (sec. 12802 of the Senate amendment and sec. 170 of the Code) 

For certain contributions of inventory, C corporations may claim an enhanced charitable deduction equal to the lesser of (1) basis plus one-half of the item’s appreciation (i.e., basis plus onehalf of fair market value in excess of basis) or (2) two times basis to be eligible for the enhanced deduction. For contributions of “apparently wholesome food” inventory made before December 31, 2007, a special rule allowed such enhanced deduction to all taxpayers. For non C corporations, such deduction is allowed up to 10 percent of the taxpayer’s aggregate net income for the taxable year from all trades or businesses from which such contributions were made for such year. 

No provision. Exten

the encharitainventbefore additiomodifthat, in deducaccousectiorequirunder elect tcontri25 pervalue. Effectafter D
65 

Provision Present Law House Bill 

H.3. Mileage reimbursements to charitable volunteers excluded from gross income (sec. 12803 of the Senate amendment and sec. 139B of the Code) 

In determining the amount treated as a charitable contribution where a taxpayer operates a vehicle in providing donated services to a charity, the taxpayer either may deduct actual out-of-pocket expenditures or, in the case of a passenger automobile, may use the charitable standard mileage rate. The charitable standard mileage rate is set by statute at 14 cents per mile (sec. 170(i)). The taxpayer may also deduct (under either computation method), any parking fees and tolls incurred in rendering the services, but may not deduct any amount (regardless of the computation method used) for general repair or maintenance expenses, depreciation, insurance, registration fees, etc. Regardless of the computation method used, the taxpayer must keep reliable written records of expenses incurred. If the charitable standard mileage rate is not used to determine the deduction, the taxpayer generally must maintain reliable written records of actual expenses incurred. 

No provision. Exclu

amounorgani170(c) and prreimbexpenpassenbenefian ambusineprescrperiodthat reapplicexpenexclusto expvoluntdoes nin percompeamendvoluntcredit excludamendEffectbeginnenactm
66 

Provision Present Law House Bill 

H.4. Technical correction relating to contributions of appreciated property by S corporations (sec. 12804 of the Senate amendment and sec. 1368 of the Code) 

The Pension Protection Act of 2006 enacted a provision relating to the tax treatment of contributions of appreciated property by S corporations. 

No provision. Make

provisof appcorporcorrecpresendeducdoes napprecthe shthe cosharehadjusttechnicontaiwas enCorrec
67 

Provision Present Law House Bill 

H.5. Application of rehabilitation credit and depreciation schedules to certain low-income housing for the elderly (sec. 12806 of the Senate amendment) 

In general

The Tax Reform Act of 1986 generally provided for a less generous: (1) rehabilitation credit; and (2) depreciation schedule than did prior-law. Section 251(d)(4)(X) of the Tax Reform Act of 1986 (the "1986 Act") provided grandfather relief from the modifications to the rehabilitation credit and depreciation schedules preserving the pre-1986 Act benefits for a particular project. Low-income housing credit

The low-income housing credit is not available to any building eligible for the pre-1986 Act depreciation schedule. 

No provision. Repea

Tax Rfor prothe daThe steligibihousinproper251(dbe elim
68 

Provision Present Law House Bill 

H.6. Competitive certification awards modification authority (sec. 12807 of the bill and secs. 48A and 48B of the Code) 

Qualifying advanced coal project 

creditAn investment tax credit is available for power generation projects that use integrated gasification combined cycle (“IGCC”) or other advanced coalbased electricity generation technologies. The credit amount is 20 percent for investments in qualifying IGCC projects and 15 percent for investments in qualifying projects that use other advanced coal-based electricity generation technologies. Qualifying gasification project creditA 20 percent investment tax credit is available for investments in certain qualifying coal gasification projects. Only property which is part of a qualifying gasification project and necessary for the gasification technology of such project is eligible for the gasification credit. 

No provision. Direct

implem(relatiabovethe comodifcompeany asin certmodifis consuch srecipieinvolvimproand seemissitranspbroadeno moSecretamounthe taxsectioof the modifprojeccertifiEffecton, or 
69 

Provision Present Law House Bill 

H.7. Qualified forestry conservation bonds (sec. 12808 of the Senate amendment and new secs. 54A and 54B of the Code) 

As an alternative to tax-exempt bonds, the Code permits three types of tax-credit bonds. States and local governments have the authority to issue qualified zone academy bonds (“QZABS”), clean renewable energy bonds (“CREBS”), and “Gulf tax credit bonds.” 

No provision. Create

credit conserforestrbonds financconser“qualiprojecState oorganiperson meets (1) somacquirUnited (2) at must bStates and noacquirbe donland mconserapprovand Wamounbe at lThere qualifbonds