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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 470 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 470

To amend the Internal Revenue Code of 1986 to provide for permanent tax 
                    incentives for economic growth.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 13, 2009

 Mr. Garrett of New Jersey (for himself, Mr. Price of Georgia, and Mr. 
 Jordan of Ohio) introduced the following bill; which was referred to 
 the Committee on Ways and Means, and in addition to the Committee on 
   Appropriations, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide for permanent tax 
                    incentives for economic growth.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Economic Recovery 
and Middle-Class Tax Relief Act of 2009''.
    (b) Table of Contents.--

Sec. 1. Short title.
                TITLE I--INCENTIVES FOR ECONOMIC GROWTH

                   Subtitle A--Income Tax Reductions

Sec. 101. 2003 tax reductions made permanent.
Sec. 102. 5 percent reduction in individual income tax rates.
Sec. 103. Repeal of alternative minimum tax on individuals.
Sec. 104. Reduction in corporate marginal income tax rates.
        Subtitle B--Reduction of Income Taxes on Capital Assets

Sec. 111. Indexing of certain assets for purposes of determining gain 
                            or loss.
Sec. 112. Reduced capital gains rate for corporations.
           Subtitle C--Other Provisions Related to Businesses

Sec. 121. Repeal of certain limitations on the expensing of section 179 
                            property.
Sec. 122. Research credit made permanent.
Sec. 123. 7-year carryback of net operating losses.
          Subtitle D--Other Provisions Relating to Individuals

Sec. 131. Child tax credit increased and made permanent.
Sec. 132. Distributions not required from individual retirement plans 
                            at age 70\1/2\.
Sec. 133. No IRA distribution during 2009 included in gross income.
  TITLE II--ACROSS-THE-BOARD RESCISSIONS IN NON-DEFENSE DISCRETIONARY 
                     SPENDING FOR FISCAL YEAR 2009

Sec. 201. Across-the-board rescissions in non-defense discretionary 
                            spending for fiscal year 2009.
             TITLE III--INCREASED INCENTIVES FOR EDUCATION

Sec. 301. Increased deduction for qualified higher education expenses.
Sec. 302. Increased deduction for interest on student loans.

                TITLE I--INCENTIVES FOR ECONOMIC GROWTH

                   Subtitle A--Income Tax Reductions

SEC. 101. 2003 TAX REDUCTIONS MADE PERMANENT.

    Section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 
2003 is hereby repealed.

SEC. 102. 5 PERCENT REDUCTION IN INDIVIDUAL INCOME TAX RATES.

    (a) In General.--Section 1 of the Internal Revenue Code of 1986 
(relating to tax imposed on individuals) is amended by adding at the 
end the following new subsection:
    ``(j) Rate Reductions After 2007.--
            ``(1) In general.--In the case of taxable years beginning 
        in a calendar year after 2007, the reduced percentage specified 
        in the following table shall be substituted for the otherwise 
        applicable tax rate in the tables under subsections (a), (b), 
        (c), (d), and (e).

``Otherwise applicable tax rate          Reduced percentage
  10...................................  9.5
  15...................................  14.25
  25...................................  23.75
  28...................................  26.6
  33...................................  31.35
  35...................................  33.25
 

            ``(2) Adjustment of tables.--The Secretary shall adjust the 
        tables prescribed under subsection (f) to carry out this 
        subsection.''.
    (b) Effective Date.--The amendment made by this subsection shall 
apply to taxable years beginning after December 31, 2007.
    (c) Repeal of EGTRRA Sunset of Rate Reductions.--Title IX of the 
Economic Growth and Tax Relief Reconciliation Act of 2001 shall not 
apply to the amendments made by section 101 of such Act.

SEC. 103. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.

    (a) In General.--Section 55(a) of the Internal Revenue Code of 1986 
(relating to alternative minimum tax imposed) is amended by adding at 
the end the following new flush sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer 
other than a corporation for any taxable year beginning after December 
31, 2008, shall be zero.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.

SEC. 104. REDUCTION IN CORPORATE MARGINAL INCOME TAX RATES.

    (a) General Rule.--Paragraph (1) of section 11(b) of the Internal 
Revenue Code of 1986 is amended--
            (1) by inserting ``and'' at the end of subparagraph (A),
            (2) by striking ``but does not exceed $75,000,'' in 
        subparagraph (B) and inserting a period,
            (3) by striking subparagraphs (C) and (D), and
            (4) by striking the last 2 sentences.
    (b) Personal Service Corporations.--Paragraph (2) of section 11(b) 
of such Code is amended by striking ``35 percent'' and inserting ``25 
percent''.
    (c) Conforming Amendments.--Paragraphs (1) and (2) of section 
1445(e) of such Code are each amended by striking ``35 percent'' and 
inserting ``25 percent''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008, except that 
the amendments made by subsection (c) shall take effect on the date of 
the enactment of this Act.

        Subtitle B--Reduction of Income Taxes on Capital Assets

SEC. 111. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN 
              OR LOSS.

    (a) In General.--Part II of subchapter O of chapter 1 (relating to 
basis rules of general application) is amended by redesignating section 
1023 as section 1024 and by inserting after section 1022 the following 
new section:

``SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING 
              GAIN OR LOSS.

    ``(a) General Rule.--
            ``(1) Indexed basis substituted for adjusted basis.--Solely 
        for purposes of determining gain or loss on the sale or other 
        disposition by a taxpayer (other than a corporation) of an 
        indexed asset which has been held for more than 3 years, the 
        indexed basis of the asset shall be substituted for its 
        adjusted basis.
            ``(2) Exception for depreciation, etc.--The deductions for 
        depreciation, depletion, and amortization shall be determined 
        without regard to the application of paragraph (1) to the 
        taxpayer or any other person.
            ``(3) Written documentation requirement.--Paragraph (1) 
        shall apply only with respect to indexed assets for which the 
        taxpayer has written documentation of the original purchase 
        price paid or incurred by the taxpayer to acquire such asset.
    ``(b) Indexed Asset.--
            ``(1) In general.--For purposes of this section, the term 
        `indexed asset' means--
                    ``(A) common stock in a C corporation (other than a 
                foreign corporation), or
                    ``(B) tangible property,
        which is a capital asset or property used in the trade or 
        business (as defined in section 1231(b)).
            ``(2) Stock in certain foreign corporations included.--For 
        purposes of this section--
                    ``(A) In general.--The term `indexed asset' 
                includes common stock in a foreign corporation which is 
                regularly traded on an established securities market.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to--
                            ``(i) stock of a foreign investment 
                        company,
                            ``(ii) stock in a passive foreign 
                        investment company (as defined in section 
                        1296),
                            ``(iii) stock in a foreign corporation held 
                        by a United States person who meets the 
                        requirements of section 1248(a)(2), and
                            ``(iv) stock in a foreign personal holding 
                        company.
                    ``(C) Treatment of american depository receipts.--
                An American depository receipt for common stock in a 
                foreign corporation shall be treated as common stock in 
                such corporation.
    ``(c) Indexed Basis.--For purposes of this section--
            ``(1) General rule.--The indexed basis for any asset is--
                    ``(A) the adjusted basis of the asset, increased by
                    ``(B) the applicable inflation adjustment.
            ``(2) Applicable inflation adjustment.--The applicable 
        inflation adjustment for any asset is an amount equal to--
                    ``(A) the adjusted basis of the asset, multiplied 
                by
                    ``(B) the percentage (if any) by which--
                            ``(i) the gross domestic product deflator 
                        for the last calendar quarter ending before the 
                        asset is disposed of, exceeds
                            ``(ii) the gross domestic product deflator 
                        for the last calendar quarter ending before the 
                        asset was acquired by the taxpayer.
        The percentage under subparagraph (B) shall be rounded to the 
        nearest \1/10\ of 1 percentage point.
            ``(3) Gross domestic product deflator.--The gross domestic 
        product deflator for any calendar quarter is the implicit price 
        deflator for the gross domestic product for such quarter (as 
        shown in the last revision thereof released by the Secretary of 
        Commerce before the close of the following calendar quarter).
    ``(d) Suspension of Holding Period Where Diminished Risk of Loss; 
Treatment of Short Sales.--
            ``(1) In general.--If the taxpayer (or a related person) 
        enters into any transaction which substantially reduces the 
        risk of loss from holding any asset, such asset shall not be 
        treated as an indexed asset for the period of such reduced 
        risk.
            ``(2) Short sales.--
                    ``(A) In general.--In the case of a short sale of 
                an indexed asset with a short sale period in excess of 
                3 years, for purposes of this title, the amount 
                realized shall be an amount equal to the amount 
                realized (determined without regard to this paragraph) 
                increased by the applicable inflation adjustment. In 
                applying subsection (c)(2) for purposes of the 
                preceding sentence, the date on which the property is 
                sold short shall be treated as the date of acquisition 
                and the closing date for the sale shall be treated as 
                the date of disposition.
                    ``(B) Short sale period.--For purposes of 
                subparagraph (A), the short sale period begins on the 
                day that the property is sold and ends on the closing 
                date for the sale.
    ``(e) Treatment of Regulated Investment Companies and Real Estate 
Investment Trusts.--
            ``(1) Adjustments at entity level.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the adjustment under subsection (a) 
                shall be allowed to any qualified investment entity 
                (including for purposes of determining the earnings and 
                profits of such entity).
                    ``(B) Exception for corporate shareholders.--Under 
                regulations--
                            ``(i) in the case of a distribution by a 
                        qualified investment entity (directly or 
                        indirectly) to a corporation--
                                    ``(I) the determination of whether 
                                such distribution is a dividend shall 
                                be made without regard to this section, 
                                and
                                    ``(II) the amount treated as gain 
                                by reason of the receipt of any capital 
                                gain dividend shall be increased by the 
                                percentage by which the entity's net 
                                capital gain for the taxable year 
                                (determined without regard to this 
                                section) exceeds the entity's net 
                                capital gain for such year determined 
                                with regard to this section, and
                            ``(ii) there shall be other appropriate 
                        adjustments (including deemed distributions) so 
                        as to ensure that the benefits of this section 
                        are not allowed (directly or indirectly) to 
                        corporate shareholders of qualified investment 
                        entities.
                For purposes of the preceding sentence, any amount 
                includible in gross income under section 852(b)(3)(D) 
                shall be treated as a capital gain dividend and an S 
                corporation shall not be treated as a corporation.
                    ``(C) Exception for qualification purposes.--This 
                section shall not apply for purposes of sections 851(b) 
                and 856(c).
                    ``(D) Exception for certain taxes imposed at entity 
                level.--
                            ``(i) Tax on failure to distribute entire 
                        gain.--If any amount is subject to tax under 
                        section 852(b)(3)(A) for any taxable year, the 
                        amount on which tax is imposed under such 
                        section shall be increased by the percentage 
                        determined under subparagraph (B)(i)(II). A 
                        similar rule shall apply in the case of any 
                        amount subject to tax under paragraph (2) or 
                        (3) of section 857(b) to the extent 
                        attributable to the excess of the net capital 
                        gain over the deduction for dividends paid 
                        determined with reference to capital gain 
                        dividends only. The first sentence of this 
                        clause shall not apply to so much of the amount 
                        subject to tax under section 852(b)(3)(A) as is 
                        designated by the company under section 
                        852(b)(3)(D).
                            ``(ii) Other taxes.--This section shall not 
                        apply for purposes of determining the amount of 
                        any tax imposed by paragraph (4), (5), or (6) 
                        of section 857(b).
            ``(2) Adjustments to interests held in entity.--
                    ``(A) Regulated investment companies.--Stock in a 
                regulated investment company (within the meaning of 
                section 851) shall be an indexed asset for any calendar 
                quarter in the same ratio as--
                            ``(i) the average of the fair market values 
                        of the indexed assets held by such company at 
                        the close of each month during such quarter, 
                        bears to
                            ``(ii) the average of the fair market 
                        values of all assets held by such company at 
                        the close of each such month.
                    ``(B) Real estate investment trusts.--Stock in a 
                real estate investment trust (within the meaning of 
                section 856) shall be an indexed asset for any calendar 
                quarter in the same ratio as--
                            ``(i) the fair market value of the indexed 
                        assets held by such trust at the close of such 
                        quarter, bears to
                            ``(ii) the fair market value of all assets 
                        held by such trust at the close of such 
                        quarter.
                    ``(C) Ratio of 80 percent or more.--If the ratio 
                for any calendar quarter determined under subparagraph 
                (A) or (B) would (but for this subparagraph) be 80 
                percent or more, such ratio for such quarter shall be 
                100 percent.
                    ``(D) Ratio of 20 percent or less.--If the ratio 
                for any calendar quarter determined under subparagraph 
                (A) or (B) would (but for this subparagraph) be 20 
                percent or less, such ratio for such quarter shall be 
                zero.
                    ``(E) Look-thru of partnerships.--For purposes of 
                this paragraph, a qualified investment entity which 
                holds a partnership interest shall be treated (in lieu 
                of holding a partnership interest) as holding its 
                proportionate share of the assets held by the 
                partnership.
            ``(3) Treatment of return of capital distributions.--Except 
        as otherwise provided by the Secretary, a distribution with 
        respect to stock in a qualified investment entity which is not 
        a dividend and which results in a reduction in the adjusted 
        basis of such stock shall be treated as allocable to stock 
        acquired by the taxpayer in the order in which such stock was 
        acquired.
            ``(4) Qualified investment entity.--For purposes of this 
        subsection, the term `qualified investment entity' means--
                    ``(A) a regulated investment company (within the 
                meaning of section 851), and
                    ``(B) a real estate investment trust (within the 
                meaning of section 856).
    ``(f) Other Pass-Thru Entities.--
            ``(1) Partnerships.--
                    ``(A) In general.--In the case of a partnership, 
                the adjustment made under subsection (a) at the 
                partnership level shall be passed through to the 
                partners.
                    ``(B) Special rule in the case of section 754 
                elections.--In the case of a transfer of an interest in 
                a partnership with respect to which the election 
                provided in section 754 is in effect--
                            ``(i) the adjustment under section 
                        743(b)(1) shall, with respect to the transferor 
                        partner, be treated as a sale of the 
                        partnership assets for purposes of applying 
                        this section, and
                            ``(ii) with respect to the transferee 
                        partner, the partnership's holding period for 
                        purposes of this section in such assets shall 
                        be treated as beginning on the date of such 
                        adjustment.
            ``(2) S corporations.--In the case of an S corporation, the 
        adjustment made under subsection (a) at the corporate level 
        shall be passed through to the shareholders. This section shall 
        not apply for purposes of determining the amount of any tax 
        imposed by section 1374 or 1375.
            ``(3) Common trust funds.--In the case of a common trust 
        fund, the adjustment made under subsection (a) at the trust 
        level shall be passed through to the participants.
            ``(4) Indexing adjustment disregarded in determining loss 
        on sale of interest in entity.--Notwithstanding the preceding 
        provisions of this subsection, for purposes of determining the 
        amount of any loss on a sale or exchange of an interest in a 
        partnership, S corporation, or common trust fund, the 
        adjustment made under subsection (a) shall not be taken into 
        account in determining the adjusted basis of such interest.
    ``(g) Dispositions Between Related Persons.--
            ``(1) In general.--This section shall not apply to any sale 
        or other disposition of property between related persons except 
        to the extent that the basis of such property in the hands of 
        the transferee is a substituted basis.
            ``(2) Related persons defined.--For purposes of this 
        section, the term `related persons' means--
                    ``(A) persons bearing a relationship set forth in 
                section 267(b), and
                    ``(B) persons treated as single employer under 
                subsection (b) or (c) of section 414.
    ``(h) Transfers To Increase Indexing Adjustment.--If any person 
transfers cash, debt, or any other property to another person and the 
principal purpose of such transfer is to secure or increase an 
adjustment under subsection (a), the Secretary may disallow part or all 
of such adjustment or increase.
    ``(i) Special Rules.--For purposes of this section--
            ``(1) Treatment of improvements, etc.--If there is an 
        addition to the adjusted basis of any tangible property or of 
        any stock in a corporation during the taxable year by reason of 
        an improvement to such property or a contribution to capital of 
        such corporation--
                    ``(A) such addition shall never be taken into 
                account under subsection (c)(1)(A) if the aggregate 
                amount thereof during the taxable year with respect to 
                such property or stock is less than $1,000, and
                    ``(B) such addition shall be treated as a separate 
                asset acquired at the close of such taxable year if the 
                aggregate amount thereof during the taxable year with 
                respect to such property or stock is $1,000 or more.
        A rule similar to the rule of the preceding sentence shall 
        apply to any other portion of an asset to the extent that 
        separate treatment of such portion is appropriate to carry out 
        the purposes of this section.
            ``(2) Assets which are not indexed assets throughout 
        holding period.--The applicable inflation adjustment shall be 
        appropriately reduced for periods during which the asset was 
        not an indexed asset.
            ``(3) Treatment of certain distributions.--A distribution 
        with respect to stock in a corporation which is not a dividend 
        shall be treated as a disposition.
            ``(4) Section cannot increase ordinary loss.--To the extent 
        that (but for this paragraph) this section would create or 
        increase a net ordinary loss to which section 1231(a)(2) 
        applies or an ordinary loss to which any other provision of 
        this title applies, such provision shall not apply. The 
        taxpayer shall be treated as having a long-term capital loss in 
        an amount equal to the amount of the ordinary loss to which the 
        preceding sentence applies.
            ``(5) Acquisition date where there has been prior 
        application of subsection (a)(1) with respect to the 
        taxpayer.--If there has been a prior application of subsection 
        (a)(1) to an asset while such asset was held by the taxpayer, 
        the date of acquisition of such asset by the taxpayer shall be 
        treated as not earlier than the date of the most recent such 
        prior application.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.
    ``(k) Termination.--For purposes of this section, the term `indexed 
asset' shall not include any asset acquired after December 31, 2009.''.
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter O of chapter 1 is amended by striking the item relating to 
section 1023 and by inserting after the item relating to section 1022 
the following new items:

``Sec. 1022. Indexing of certain assets for purposes of determining 
                            gain or loss.
``Sec. 1023. Cross references.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and other dispositions of indexed assets after the date 
of the enactment of this Act, in taxable years ending after such date.

SEC. 112. REDUCED CAPITAL GAINS RATE FOR CORPORATIONS.

    (a) In General.--Section 1201 of the Internal Revenue Code of 1986 
is amended by striking ``35 percent'' both places it appears and 
inserting ``15 percent''.
    (b) Alternative Minimum Tax.--Section 55(b) of such Code is amended 
by adding at the end the following new paragraph:
            ``(5) Maximum rate of tax on net capital gain of 
        corporations.--The amount determined under paragraph (1)(B)(i) 
        shall not exceed the sum of--
                    ``(A) the amount determined under such paragraph 
                computed at the rates and in the same manner as if this 
                paragraph had not been enacted on the taxable excess 
                reduced by the net capital gain, plus
                    ``(B) the amount determined under section 1201.''.
    (c) Technical Amendments.--
            (1) Section 1445(e)(1) of such Code, as amended by section 
        104, is amended by striking ``25 percent (or, to the extent 
        provided in regulations, 15 percent)'' and inserting ``15 
        percent''.
            (2) Section 1445(e)(2) of such Code, as so amended, is 
        amended by striking ``25 percent'' and inserting ``15 
        percent''.
            (3) Section 7518(g)(6)(A) of such Code is amended by 
        striking ``(34 percent in the case of a corporation)''.
            (4) Section 607(h)(6)(A) of the Merchant Marine Act, 1936 
        is amended by striking ``(34 percent in the case of a 
        corporation)''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2008.
            (2) Withholding.--The amendment made by subsection (c)(2) 
        shall apply to amounts paid after the date of the enactment of 
        this Act.

           Subtitle C--Other Provisions Related to Businesses

SEC. 121. REPEAL OF CERTAIN LIMITATIONS ON THE EXPENSING OF SECTION 179 
              PROPERTY.

    (a) In General.--Section 179 of the Internal Revenue Code of 1986 
is amended by striking subsection (b) and by redesignating subsections 
(c), (d), and (e) as subsections (b), (c), and (d), respectively.
    (b) Expensing of Section 1250 Property.--Subparagraph (B) of 
section 179(c)(1) of such Code, as redesignated by subsection (a), is 
amended by inserting ``or section 1250 property (as defined in section 
1250(c))'' after ``section 1245 property (as defined in section 
1245(a)(3))''.
    (c) Conforming Amendments.--
            (1) Subsection (c) of section 179 of such Code, as 
        redesignated by subsection (a), is amended by striking 
        paragraphs (6) and (8), and by redesignating paragraphs (7), 
        (9), and (10) as paragraphs (6), (7), and (8), respectively.
            (2) Paragraph (6) of section 179(c) of such Code, as 
        redesignated by paragraph (1) and subsection (a), is amended by 
        striking ``paragraphs (2) and (6)'' and inserting ``paragraph 
        (2)''.
            (3) Section 179 of such Code, as amended by subsection (a), 
        is amended by striking subsection (d).
            (4) Sections 42(d)(2)(B)(i), 1397D(d)(1), 
        1400B(b)(4)(A)(i), and 1400F(b)(4)(A)(i) of such Code are each 
        amended by striking ``section 179(d)(2)'' and inserting 
        ``section 179(c)(2)''.
            (5) Subclause (I) of section 42(d)(2)(D)(iii) of such Code 
        is amended--
                    (A) by striking ``section 179(d)'' and inserting 
                ``section 179(c)'', and
                    (B) by striking ``section 179(d)(7)'' and inserting 
                ``section 179(c)(6)''.
            (6)(A) Subpart B of part III of subchapter U of chapter 1 
        of such Code is hereby repealed.
            (B) The table of subparts for such part III is amended by 
        striking the item relating to subpart B.
            (7)(A) Part III of subchapter X of chapter 1 of such Code 
        is amended by striking section 1400J.
            (B) The table of sections for such part is amended by 
        striking the item relating to section 1400J.
            (C) Paragraph (3) of section 1400E(b) of such Code is 
        amended by striking ``sections 1400F and 1400J'' and inserting 
        ``section 1400F''.
            (8) Clause (iv) of section 1400L(b)(2)(A) of such Code is 
        amended by striking ``section 179(d)'' and inserting ``section 
        179(c)''.
            (9) Section 1400L of such Code is amended by striking 
        subsection (f).
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2008.

SEC. 122. RESEARCH CREDIT MADE PERMANENT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for increasing research activities) is amended by 
striking subsection (h).
    (b) Conforming Amendment.--Paragraph (1) of section 45C(b) of such 
Code is amended by striking subparagraph (D).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2009.

SEC. 123. 7-YEAR CARRYBACK OF NET OPERATING LOSSES.

    (a) In General.--Clause (i) section 172(b)(1)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``2 taxable years'' and 
inserting ``7 taxable years''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 172(b) of such Code is amended 
        by striking subparagraphs (F), (G), (H), (I), and (J).
            (2) Section 172 of such Code is amended by striking 
        subsections (i), (j), and (k) and by redesignating subsection 
        (l) as subsection (i).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to net operating 
        losses for taxable years ending after December 31, 2007.
            (2) Election.--In the case of a net operating loss for a 
        taxable year ending during 2008, any election made under 
        section 172(b)(3) of the Internal Revenue Code of 1986 may 
        (notwithstanding such section) be revoked before January 1, 
        2010.

          Subtitle D--Other Provisions Relating to Individuals

SEC. 131. CHILD TAX CREDIT INCREASED AND MADE PERMANENT.

    (a) Increased Credit.--Subsection (a) of section 24 of the Internal 
Revenue Code of 1986 is amended by striking ``$1,000'' and inserting 
``$5,000''.
    (b) Increased Credit Not Refundable.--Subparagraph (A) of section 
24(d)(1) of such Code is amended to read as follows:
                    ``(A) the credit which would be allowed under this 
                section--
                            ``(i) without regard to this subsection and 
                        the limitation under section 26(a)(2) or 
                        subsection (b)(3), as the case may be, and
                            ``(ii) if subsection (a) were applied by 
                        substituting `$1,000' for `$5,000', or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 132. DISTRIBUTIONS NOT REQUIRED FROM INDIVIDUAL RETIREMENT PLANS 
              AT AGE 70\1/2\.

    Paragraph (9) of section 401(a) of the Internal Revenue Code of 
1986 (relating to required distributions) is amended by adding at the 
end the following new subparagraph:
                    ``(I) Exception for individual retirement plans.--
                The requirements of this paragraph shall not apply to 
                any individual retirement plan for any calendar year 
                after 2009.''.

SEC. 133. NO IRA DISTRIBUTION DURING 2009 INCLUDED IN GROSS INCOME.

    Subsection (d) of section 408 of the Internal Revenue Code of 1986 
(relating to individual retirement accounts) is amended by adding at 
the end the following new paragraph:
            ``(10) Distributions during 2009.--
                    ``(A) In general.--Gross income of an individual 
                for the taxable year does not include any distribution 
                during 2009 from an individual retirement plan (other 
                than a plan described in subsection (k) or (p)) to the 
                extent such distribution is otherwise includible in 
                gross income.
                    ``(B) Application of section 72.--Notwithstanding 
                section 72, in determining the extent to which an 
                amount is treated as otherwise includible in gross 
                income for purposes of subparagraph (A), the aggregate 
                amount distributed from an individual retirement plan 
                shall be treated as includible in gross income to the 
                extent that such amount does not exceed the aggregate 
                amount which would have been so includible if all 
                amounts from all individual retirement plans were 
                distributed. Proper adjustments shall be made in 
                applying section 72 to other distributions in such 
                taxable year and subsequent taxable years.''.

  TITLE II--ACROSS-THE-BOARD RESCISSIONS IN NON-DEFENSE DISCRETIONARY 
                     SPENDING FOR FISCAL YEAR 2009

SEC. 201. ACROSS-THE-BOARD RESCISSIONS IN NON-DEFENSE DISCRETIONARY 
              SPENDING FOR FISCAL YEAR 2009.

    (a) Across-the-Board Rescissions.--There is hereby rescinded an 
amount equal to 1 percent of--
            (1) the budget authority provided (or obligation limitation 
        imposed) for fiscal year 2009 for any non-defense discretionary 
        account in any fiscal year 2009 appropriation Act;
            (2) the budget authority provided in any advance 
        appropriation for fiscal year 2009 for any non-defense 
        discretionary account in any prior fiscal year appropriation 
        Act; and
            (3) the contract authority provided in fiscal year 2009 for 
        any program that is subject to a limitation contained in any 
        fiscal year 2009 appropriation Act for any non-defense 
        discretionary account.
    (b) Non-Defense Discretionary Account.--For purposes of subsection 
(a), the term ``non-defense discretionary account'' means any 
discretionary account, other than--
            (1) any account included in a Department of Defense 
        Appropriations Act;
            (2) any account included in a Military Quality of Life and 
        Veterans Affairs Appropriations Act; or
            (3) any account for Department of Energy defense activities 
        included in an Energy and Water Development Appropriations Act.
    (c) Proportionate Application.--Any rescission made by subsection 
(a) shall be applied proportionately--
            (1) to each discretionary account and each item of budget 
        authority described in such subsection; and
            (2) within each such account and item, to each program, 
        project, and activity (with programs, projects, and activities 
        as delineated in the appropriation Act or accompanying reports 
        for the relevant fiscal year covering such account or item, or 
        for accounts and items not included in appropriation Acts, as 
        delineated in the most recently submitted President's budget).
    (d) Subsequent Appropriation Laws.--In the case of any fiscal year 
2009 appropriation Act enacted after the enactment of this section, any 
rescission required by subsection (a) shall take effect immediately 
after the enactment of such Act.
    (e) OMB Report.--Within 30 days after the enactment of this section 
(or, if later, 30 days after the enactment of any fiscal year 2009 
appropriation Act), the Director of the Office of Management and Budget 
shall submit to the Committees on Appropriations of the House of 
Representatives and the Senate a report specifying the account and 
amount of each rescission made pursuant to subsection (a).

             TITLE III--INCREASED INCENTIVES FOR EDUCATION

SEC. 301. INCREASED DEDUCTION FOR QUALIFIED HIGHER EDUCATION EXPENSES.

    (a) In General.--Paragraph (2) of section 222(b) of the Internal 
Revenue Code of 1986 (relating to dollar limitations on qualified 
tuition and related expenses) is amended to read as follows:
            ``(2) Dollar limitations.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after 2008, the applicable dollar amount 
                shall be equal to--
                            ``(i) in the case of a taxpayer whose 
                        adjusted gross income for the taxable year does 
                        not exceed $75,000 ($150,000 in the case of a 
                        joint return), $6,000,
                            ``(ii) in the case of a taxpayer not 
                        described in clause (i) whose adjusted gross 
                        income for the taxable year does not exceed 
                        $90,000 ($180,000 in the case of a joint 
                        return), $2,000, and
                            ``(iii) in the case of any other taxpayer, 
                        zero.
                    ``(B) Adjusted gross income.--For purposes of this 
                paragraph, adjusted gross income shall be determined--
                            ``(i) without regard to this section and 
                        sections 199, 911, 931, and 933, and
                            ``(ii) after application of sections 86, 
                        135, 137, 219, 221, and 469.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.

SEC. 302. INCREASED DEDUCTION FOR INTEREST ON STUDENT LOANS.

    (a) Increased Deduction.--Paragraph (1) of section 223(b) of the 
Internal Revenue Code of 1986 (relating to interest on education loans) 
is amended to read as follows:
            ``(1) Maximum deduction.--Except as provided in paragraph 
        (2), the deduction allowed by subsection (a) for the taxable 
        year shall not exceed $3,750.''.
    (b) Expanded Income Eligibility.--Subclause (II) of section 
223(b)(2)(B)(i) of such Code is amended by striking ``$50,000 
($100,000'' and inserting ``$75,000 ($150,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.
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