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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 12 Placed on Calendar Senate (PCS)]

                                                       Calendar No. 587
110th CONGRESS
  2d Session
                                 S. 12

     To promote home ownership, manufacturing, and economic growth.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           February 29, 2008

 Mr. McConnell (for himself, Mr. Alexander, Mr. Allard, Mr. Bond, Mr. 
Bunning, Mr. Cornyn, Mr. Craig, Mrs. Dole, Mr. Enzi, Mr. Grassley, Mr. 
 Gregg, Mrs. Hutchison, Mr. Inhofe, Mr. Isakson, Mr. Roberts, and Mr. 
  Hatch) introduced the following bill; which was read the first time

                             March 3, 2008

            Read the second time and placed on the calendar

_______________________________________________________________________

                                 A BILL

 
     To promote home ownership, manufacturing, and 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Homeownership, 
Manufacturing, and Economic Growth Act'' or the ``HOME Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
                       TITLE I--KEEPING TAXES LOW

Sec. 100. Amendment to 1986 Code.
              Subtitle A--Extension of Expiring Provisions

                   Part I--Individual Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 101. Nonbusiness energy property.
Sec. 102. Election to include combat pay as earned income for purposes 
                            of the earned income credit.
Sec. 103. Deduction for certain expenses of elementary and secondary 
                            school teachers.
Sec. 104. Distributions from retirement plans to individuals called to 
                            active duty.
Sec. 105. Modification of mortgage revenue bonds for veterans.
Sec. 106. Deduction for State and local sales taxes.
Sec. 107. Archer MSAs.
Sec. 108. Deduction of qualified tuition and related expenses.
Sec. 109. Tax-free distributions from individual retirement plans for 
                            charitable purposes.
Sec. 110. Stock in RIC for purposes of determining estates of 
                            nonresidents not citizens.
                 subpart b--provisions expiring in 2008

Sec. 111. Residential energy efficient property.
                    Part II--Business Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 121. Research activities.
Sec. 122. Indian employment credit.
Sec. 123. Railroad track maintenance.
Sec. 124. Production of fuel from a nonconventional source at certain 
                            facilities.
Sec. 125. Energy efficient appliances.
Sec. 126. 15-year straight-line cost recovery for qualified leasehold 
                            improvements and qualified restaurant 
                            improvements.
Sec. 127. Seven-year cost recovery period for motorsports racing track 
                            facility.
Sec. 128. Accelerated depreciation for business property on Indian 
                            reservation.
Sec. 129. Qualified conservation contributions.
Sec. 130. Enhanced charitable deduction for contributions of food 
                            inventory.
Sec. 131. Enhanced charitable deduction for contributions of book 
                            inventory.
Sec. 132. Enhanced charitable deduction for corporate contributions of 
                            computer equipment for educational 
                            purposes.
Sec. 133. Expensing of environmental remediation costs.
Sec. 134. Deduction allowable with respect to income attributable to 
                            domestic production activities in Puerto 
                            Rico.
Sec. 135. Special rule for sales or dispositions to implement FERC or 
                            State electric restructuring policy.
Sec. 136. Modification of tax treatment of certain payments to 
                            controlling exempt organizations.
Sec. 137. Suspension of taxable income limit with respect to marginal 
                            wells.
Sec. 138. Treatment of certain dividends of regulated investment 
                            companies.
Sec. 139. Basis adjustment to stock of S corporations making charitable 
                            contributions of property.
Sec. 140. Extension of qualified zone academy bonds.
Sec. 141. Tax incentives for investment in the District of Columbia.
Sec. 142. 0.2 percent FUTA surtax.
                 subpart b--provisions expiring in 2008

Sec. 146. Biodiesel and renewable diesel used as fuel.
Sec. 147. Electricity produced from certain renewable resources; 
                            production of refined coal and Indian coal.
Sec. 148. New markets tax credit.
Sec. 149. Extension of new energy efficient home credit.
Sec. 150. Extension of mine rescue team training credit.
Sec. 151. Extension of energy credit.
Sec. 152. 5-year NOL carryback for certain electric utility companies.
Sec. 153. Extension of energy efficient commercial buildings deduction.
Sec. 154. Extension of election to expense advanced mine safety 
                            equipment.
Sec. 155. Extension and modification of expensing rules for qualified 
                            film and television productions.
Sec. 156. Subpart F exception for active financing income.
Sec. 157. Extension of look-thru rule for related controlled foreign 
                            corporations.
                    Part III--Excise Tax Provisions

                 subpart a--provisions expiring in 2007

Sec. 161. Increase in limit on cover over of rum excise tax to Puerto 
                            Rico and the Virgin Islands.
Sec. 162. Parity in the application of certain limits to mental health 
                            benefits.
Sec. 163. Extension of economic development credit for American Samoa.
                 subpart b--provisions expiring in 2008

Sec. 166. Special rule for qualified methanol or ethanol fuel from 
                            coal.
Sec. 167. Biodiesel mixture credit and credit for fuels used for 
                            nontaxable purposes.
                 Part IV--Tax Administration Provisions

                 subpart a--provisions expiring in 2007

Sec. 171. Disclosures to facilitate combined employment tax reporting.
Sec. 172. Disclosure of return information to apprise appropriate 
                            officials of terrorist activities.
Sec. 173. Disclosure upon request of information relating to terrorist 
                            activities.
Sec. 174. Disclosure of return information to carry out income 
                            contingent repayment of student loans.
Sec. 175. Authority for undercover operations.
                 subpart b--provisions expiring in 2008

Sec. 176. Extension of reporting of interest of exempt organizations in 
                            insurance contracts.
Sec. 177. Disclosures relating to certain programs administered by the 
                            Department of Veterans Affairs.
               Subtitle B--Alternative Minimum Tax Relief

Sec. 181. 2-year extension of increased alternative minimum tax 
                            exemption amount.
Sec. 182. Extension of alternative minimum tax relief for nonrefundable 
                            personal credits.
                   Subtitle C--Additional Tax Relief

Sec. 191. Permanent extension of 2001 and 2003 tax relief provisions.
Sec. 192. Maximum corporate income tax rate reduced to 25 percent.
Sec. 193. 3-year carryback of certain credits.
Sec. 194. Election to accelerate AMT and R and D credits in lieu of 
                            bonus depreciation.
Sec. 195. Indexing of certain assets for purposes of determining gain 
                            or loss.
Sec. 196. Deferral of gain on sale of certain principal residences.
Sec. 197. Amount excluded from sale of principal residence indexed for 
                            inflation.
Sec. 198. Repeal of phasein for domestic production activities 
                            deduction.
                 TITLE II--KEEPING AMERICA COMPETITIVE

Sec. 201. Sense of Congress regarding the legislative initiatives 
                            required to strengthen and protect the well 
                            being of our Nation's capital markets.
Sec. 202. Directing the Securities and Exchange Commission to convene a 
                            public hearing on the impact of excessive 
                            litigation.
Sec. 203. Directing the Commission to establish formal processes and 
                            procedures for cost-benefit analyses of 
                            proposed and existing rules and 
                            regulations.
Sec. 204. Directing the Commission to define ``smaller public company'' 
                            to provide certainty to issuers.
Sec. 205. Mutual recognition.
Sec. 206. Supporting the Securities and Exchange Commission reform 
                            efforts to speed the process of rulemaking 
                            for self regulatory organizations.
Sec. 207. Eliminate the exemption from State regulation for certain 
                            securities designated by national 
                            securities exchanges.
Sec. 208. Directing the Commission to accelerate full conversion of 
                            IFRS and United States GAAP.
Sec. 209. Promoting market access for financial services.
                    TITLE III--PROTECTING HOMEOWNERS

Sec. 301. Subprime refinancing loans through use of qualified mortgage 
                            bonds.
Sec. 302. Expeditious distribution of funds already provided for 
                            mortgage foreclosure counseling.
Sec. 303. Credit for purchase of homes in or near foreclosure.
Sec. 304. Enhanced mortgage loan disclosures.
Sec. 305. Carryback of certain net operating losses allowed for 5 
                            years; temporary suspension of 90 percent 
                            AMT limit.
                 TITLE IV--REDUCING THE LITIGATION TAX

Sec. 401 Limitation on punitive damages for small businesses.
Sec. 402. Reasonableness review of attorney's fees.
Sec. 403. Partial award of attorney's fees for unreasonable lawsuits.
Sec. 404. Mandatory sanctions for frivolous lawsuits.
Sec. 405. Bar on junk science in the courtroom.

                       TITLE I--KEEPING TAXES LOW

SEC. 100. AMENDMENT TO 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

              Subtitle A--Extension of Expiring Provisions

                   PART I--INDIVIDUAL TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

SEC. 101. NONBUSINESS ENERGY PROPERTY.

    (a) Extension of Credit.--Section 25C(g) (relating to termination) 
is amended by striking ``December 31, 2007'' and inserting ``December 
31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

SEC. 102. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR PURPOSES 
              OF THE EARNED INCOME CREDIT.

    (a) In General.--Subclause (II) of section 32(c)(2)(B)(vi) 
(defining earned income) is amended by striking ``January 1, 2008'' and 
inserting ``January 1, 2010''.
    (b) Conforming Amendment.--Paragraph (4) of section 6428, as 
amended by the Economic Stimulus Act of 2008, is amended to read as 
follows:
            ``(4) Earned income.--The term `earned income' has the 
        meaning set forth in section 32(c)(2) except that such term 
        shall not include net earnings from self-employment which are 
        not taken into account in computing taxable income.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2007.

SEC. 103. DEDUCTION FOR CERTAIN EXPENSES OF ELEMENTARY AND SECONDARY 
              SCHOOL TEACHERS.

    (a) In General.--Subparagraph (D) of section 62(a)(2) (relating to 
certain expenses of elementary and secondary school teachers) is 
amended by striking ``or 2007'' and inserting ``2007, 2008, or 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 104. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS CALLED TO 
              ACTIVE DUTY.

    (a) In General.--Clause (iv) of section 72(t)(2)(G) is amended by 
striking ``December 31, 2007'' and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to individuals ordered or called to active duty on or after December 
31, 2007.

SEC. 105. MODIFICATION OF MORTGAGE REVENUE BONDS FOR VETERANS.

    (a) Qualified Mortgage Bonds Used To Finance Residences for 
Veterans Without Regard to First-Time Homebuyer Requirement.--
Subparagraph (D) of section 143(d)(2) (relating to exceptions) is 
amended by inserting ``and after the date of the enactment of the HOME 
Act and before January 1, 2010'' after ``January 1, 2008''.
    (b) Effective Date.--The amendment made by this section shall apply 
to bonds issued after the date of the enactment of this Act.

SEC. 106. DEDUCTION FOR STATE AND LOCAL SALES TAXES.

    (a) In General.--Subparagraph (I) of section 164(b)(5) is amended 
by striking ``January 1, 2008'' and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 107. ARCHER MSAS.

    (a) In General.--Subsection (i) of section 220 (relating to 
limitation on number of taxpayers having Archer MSAs) is amended--
            (1) by striking ``2007'' each place it appears in 
        paragraphs (2) and (3)(B) and inserting ``2009'',
            (2) by striking ``2007'' in the heading of paragraph (3)(B) 
        and inserting ``2009''.
    (b) Conforming Amendments.--Subsection (j) of section 220 is 
amended--
            (1) by striking ``or 2006'' each place it appears in 
        paragraph (2) and inserting ``2006, 2007, or 2008'',
            (2) by striking ``or 2006'' in the heading for paragraph 
        (2) and inserting ``2006, 2007, or 2008'', and
            (3) by striking ``and 2006'' in paragraph (4) and inserting 
        ``2006, 2007, and 2008''.
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2007.

SEC. 108. DEDUCTION OF QUALIFIED TUITION AND RELATED EXPENSES.

    (a) In General.--Subsection (e) of section 222 (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 109. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR 
              CHARITABLE PURPOSES.

    (a) In General.--Subparagraph (F) of section 408(d)(8) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions made in taxable years beginning after December 31, 
2007.

SEC. 110. STOCK IN RIC FOR PURPOSES OF DETERMINING ESTATES OF 
              NONRESIDENTS NOT CITIZENS.

    (a) In General.--Paragraph (3) of section 2105(d) (relating to 
stock in a RIC) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to decedents dying after December 31, 2007.

                 Subpart B--Provisions Expiring in 2008

SEC. 111. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

    Subsection (g) of section 25D (relating to termination) is amended 
by striking ``December 31, 2008'' and inserting ``December 31, 2009''.

                    PART II--BUSINESS TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

SEC. 121. RESEARCH ACTIVITIES.

    (a) In General.--Section 41(h) (relating to termination) is amended 
by striking ``December 31, 2007'' and inserting ``December 31, 2009'' 
in paragraph (1)(B).
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 2007.

SEC. 122. INDIAN EMPLOYMENT CREDIT.

    (a) In General.--Subsection (f) of section 45A (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 123. RAILROAD TRACK MAINTENANCE.

    (a) In General.--Subsection (f) of section 45G (relating to 
application of section) is amended by striking ``January 1, 2008'' and 
inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to expenditures paid or incurred during taxable years beginning after 
December 31, 2007.

SEC. 124. PRODUCTION OF FUEL FROM A NONCONVENTIONAL SOURCE AT CERTAIN 
              FACILITIES.

    (a) In General.--Subsection (f)(1)(B) of section 45K (relating to 
extension for certain facilities) is amended by striking ``January 1, 
2008'' and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels produced and sold after December 31, 2007.

SEC. 125. ENERGY EFFICIENT APPLIANCES.

    (a) In General.--Subsection (b) of section 45M (relating to 
applicable amount) is amended by striking ``calendar year 2006 or 
2007'' each place it appears in paragraphs (1)(A)(i), (1)(B)(i), 
(1)(C)(ii)(I), and (1)(C)(iii)(I), and inserting ``calendar year 2006, 
2007, 2008, or 2009''.
    (b) Restart of Credit Limitation.--Paragraph (1) of section 45M(e) 
(relating to aggregate credit amount allowed) is amended by inserting 
``beginning after December 31, 2007'' after ``for all prior taxable 
years''.
    (c) Effective Date.--The amendments made by this section shall 
apply to appliances produced after December 31, 2007.

SEC. 126. 15-YEAR STRAIGHT-LINE COST RECOVERY FOR QUALIFIED LEASEHOLD 
              IMPROVEMENTS AND QUALIFIED RESTAURANT IMPROVEMENTS.

    (a) In General.--Clauses (iv) and (v) of section 168(e)(3)(E) 
(relating to 15-year property) are each amended by striking ``January 
1, 2008'' and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2007.

SEC. 127. SEVEN-YEAR COST RECOVERY PERIOD FOR MOTORSPORTS RACING TRACK 
              FACILITY.

    (a) In General.--Subparagraph (D) of section 168(i)(15) (relating 
to termination) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

SEC. 128. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON INDIAN 
              RESERVATION.

    (a) In General.--Paragraph (8) of section 168(j) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2007.

SEC. 129. QUALIFIED CONSERVATION CONTRIBUTIONS.

    (a) In General.--Clause (vi) of section 170(b)(1)(E) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Contributions by Corporate Farmers and Ranchers.--Clause (iii) 
of section 170(b)(2)(B) (relating to termination) is amended by 
striking ``December 31, 2007'' and inserting ``December 31, 2009''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2007.

SEC. 130. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
              INVENTORY.

    (a) In General.--Clause (iv) of section 170(e)(3)(C) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 2007.

SEC. 131. ENHANCED CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK 
              INVENTORY.

    (a) In General.--Clause (iv) of section 170(e)(3)(D) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Clerical Amendment.--Clause (iii) of section 170(e)(3)(D) 
(relating to certification by donee) is amended by inserting ``of 
books'' after ``to any contribution''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made after December 31, 2007.

SEC. 132. ENHANCED CHARITABLE DEDUCTION FOR CORPORATE CONTRIBUTIONS OF 
              COMPUTER EQUIPMENT FOR EDUCATIONAL PURPOSES.

    (a) In General.--Subparagraph (G) of section 170(e)(6) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 2007.

SEC. 133. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

    (a) In General.--Subsection (h) of section 198 (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to expenditures paid or incurred after December 31, 2007.

SEC. 134. DEDUCTION ALLOWABLE WITH RESPECT TO INCOME ATTRIBUTABLE TO 
              DOMESTIC PRODUCTION ACTIVITIES IN PUERTO RICO.

    (a) In General.--Subparagraph (C) of section 199(d)(8) (relating to 
termination) is amended--
            (1) by striking ``first 2 taxable years'' and inserting 
        ``first 4 taxable years'', and
            (2) by striking ``January 1, 2008'' and inserting ``January 
        1, 2010''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 135. SPECIAL RULE FOR SALES OR DISPOSITIONS TO IMPLEMENT FERC OR 
              STATE ELECTRIC RESTRUCTURING POLICY.

    (a) In General.--Paragraph (3) of section 451(i) (relating to 
qualifying electric transmission transaction) is amended by striking 
``January 1, 2008'' and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions occurring after December 31, 2007.

SEC. 136. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO 
              CONTROLLING EXEMPT ORGANIZATIONS.

    (a) In General.--Clause (iv) of section 512(b)(13)(E) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments received or accrued after December 31, 2007.

SEC. 137. SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT TO MARGINAL 
              WELLS.

    (a) In General.--Subparagraph (H) of section 613A(c)(6) (relating 
to temporary suspension of taxable income limit with respect to 
marginal production) is amended by striking ``January 1, 2008'' and 
inserting ``January 1, 2010''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 138. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED INVESTMENT 
              COMPANIES.

    (a) Interest-Related Dividends.--Subparagraph (C) of section 
871(k)(1) (defining interest-related dividend) is amended by striking 
``December 31, 2007'' and inserting ``December 31, 2009''.
    (b) Short-Term Capital Gain Dividends.--Subparagraph (C) of section 
871(k)(2) (defining short-term capital gain dividend) is amended by 
striking ``December 31, 2007'' and inserting ``December 31, 2009''.
    (c) Disposition of Investment in United States Real Property.--
Clause (ii) of section 897(h)(4)(A) (relating to termination) is 
amended by striking ``December 31, 2007'' and inserting ``December 31, 
2009''.
    (d) Effective Date.--The amendments made by this section shall 
apply to dividends with respect to taxable years of regulated 
investment companies beginning after December 31, 2007.

SEC. 139. BASIS ADJUSTMENT TO STOCK OF S CORPORATIONS MAKING CHARITABLE 
              CONTRIBUTIONS OF PROPERTY.

    (a) In General.--The last sentence of section 1367(a)(2) (relating 
to decreases in basis) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made in taxable years beginning after December 31, 
2007.

SEC. 140. EXTENSION OF QUALIFIED ZONE ACADEMY BONDS.

    (a) In General.--Paragraph (1) of section 1397E(e) is amended by 
striking ``and 2007'' and inserting ``2007, 2008, and 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to obligations issued after the date of the enactment of this Act.

SEC. 141. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF COLUMBIA.

    (a) Designation of DC Enterprise Zone.--Subsection (f) of section 
1400 (relating to time for which designation applicable) is amended by 
striking ``December 31, 2007'' each place it appears in paragraphs (1) 
and (2) and inserting ``December 31, 2009''.
    (b) Tax-Exempt DC Empowerment Zone Bonds.--Subsection (b) of 
section 1400A (relating to period of applicability) is amended by 
inserting ``, and after the date of the enactment of the HOME Act and 
before December 31, 2009'' after ``December 31, 2007''.
    (c) Acquisition Date for Eligibility for Zero-Percent Capital Gains 
Rate for Investment in DC.--ubsection (b) of section 1400B (relating to 
DC zone asset) is amended by striking ``January 1, 2008'' each place it 
appears in paragraphs (2)(A)(i), (3)(A), (4)(A)(i), and (4)(B)(i)(I) 
and inserting ``January 1, 2010''.
    (d) Tax Credit for First-Time DC Homebuyers.--Subsection (i) of 
section 1400C (relating to application of section) is amended by 
striking ``January 1, 2008'' and inserting ``January 1, 2010''.
    (e) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2007.

SEC. 142. 0.2 PERCENT FUTA SURTAX.

    (a) In General.--Section 3301 (relating to rate of tax) is 
amended--
            (1) by striking ``through 2007'' in paragraph (1) and 
        inserting ``through 2009'', and
            (2) by striking ``calendar year 2008'' in paragraph (2) and 
        inserting ``calendar year 2010''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wages paid after December 31, 2007.

                 Subpart B--Provisions Expiring in 2008

SEC. 146. BIODIESEL AND RENEWABLE DIESEL USED AS FUEL.

    Subsection (g) of section 40A (relating to termination) is amended 
by striking ``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 147. ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES; 
              PRODUCTION OF REFINED COAL AND INDIAN COAL.

    Section 45(d) (relating to qualified facilities) is amended by 
striking ``January 1, 2009'' each place it appears in paragraphs (1), 
(2), (3), (4), (5), (6), (7), (8), (9), and (10) and inserting 
``January 1, 2010''.

SEC. 148. NEW MARKETS TAX CREDIT.

    Subparagraph (D) of section 45D(f)(1) (relating to national 
limitation on amount of investments designated) is amended by striking 
``and 2008'' and inserting ``2008, and 2009''.

SEC. 149. EXTENSION OF NEW ENERGY EFFICIENT HOME CREDIT.

    Subsection (g) of section 45L (relating to termination) is amended 
by striking ``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 150. EXTENSION OF MINE RESCUE TEAM TRAINING CREDIT.

    Section 45N(e) (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 151. EXTENSION OF ENERGY CREDIT.

    (a) Solar Energy Property.--Paragraphs (2)(A)(i)(II) and (3)(A)(ii) 
of section 48(a) (relating to energy credit) are each amended by 
striking ``January 1, 2009'' and inserting ``January 1, 2010''.
    (b) Fuel Cell Property.--Subparagraph (E) of section 48(c)(1) 
(relating to qualified fuel cell property) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.
    (c) Microturbine Property.--Subparagraph (E) of section 48(c)(2) 
(relating to qualified microturbine property) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 152. 5-YEAR NOL CARRYBACK FOR CERTAIN ELECTRIC UTILITY COMPANIES.

    Subparagraph (I)(i) of section 172(b)(1) (relating to transmission 
property and pollution control investment) is amended--
            (1) by striking ``January 1, 2009'' and inserting ``January 
        1, 2010'', and
            (2) by striking ``January 1, 2006'' and inserting ``January 
        1, 2007''.

SEC. 153. EXTENSION OF ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

    Section 179D(h) (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 154. EXTENSION OF ELECTION TO EXPENSE ADVANCED MINE SAFETY 
              EQUIPMENT.

    Section 179E(g) (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 155. EXTENSION AND MODIFICATION OF EXPENSING RULES FOR QUALIFIED 
              FILM AND TELEVISION PRODUCTIONS.

    Section 181(f) (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

SEC. 156. SUBPART F EXCEPTION FOR ACTIVE FINANCING INCOME.

    (a) Exempt Insurance Income.--Paragraph (10) of section 953(e) 
(relating to application) is amended--
            (1) by striking ``January 1, 2009'' and inserting ``January 
        1, 2010'', and
            (2) by striking ``December 31, 2008'' and inserting 
        ``December 31, 2009''.
    (b) Exception to Treatment as Foreign Personal Holding Company 
Income.--Paragraph (9) of section 954(h) (relating to application) is 
amended by striking ``January 1, 2009'' and inserting ``January 1, 
2010''.

SEC. 157. EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN 
              CORPORATIONS.

    Subparagraph (B) of section 954(c)(6) (relating to application) is 
amended by striking ``January 1, 2009'' and inserting ``January 1, 
2010''.

                    PART III--EXCISE TAX PROVISIONS

                 Subpart A--Provisions Expiring in 2007

SEC. 161. INCREASE IN LIMIT ON COVER OVER OF RUM EXCISE TAX TO PUERTO 
              RICO AND THE VIRGIN ISLANDS.

    (a) In General.--Paragraph (1) of section 7652(f) is amended by 
inserting ``, and after the date of the enactment of the HOME Act and 
before January 1, 2010'' after ``January 1, 2008''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distilled spirits brought into the United States after the date of 
the enactment of this Act.

SEC. 162. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
              BENEFITS.

    (a) In General.--Subsection (f) of section 9812 (relating to 
application of section) is amended--
            (1) by striking ``and'' at the end of paragraph (2),
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``, and before the date of the enactment of the HOME 
        Act'', and
            (3) by adding at the end the following new paragraph:
            ``(4) after December 31, 2009.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Section 712(f) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1185a(f)) is amended by inserting ``, and before the 
date of the enactment of the HOME Act, and after December 31, 2009'' 
after ``December 31, 2007''.
    (c) Amendment to the Public Health Service Act.--Section 2705(f) of 
the Public Health Service Act (42 U.S.C. 300gg-5(f)) is amended by 
inserting ``, and before the date of the enactment of the HOME Act, and 
after December 31, 2009'' after ``December 31, 2006''.
    (d) Effective Date.--The amendments made by this section shall 
apply to benefits for services furnished on or after the date of the 
enactment of this Act.

SEC. 163. EXTENSION OF ECONOMIC DEVELOPMENT CREDIT FOR AMERICAN SAMOA.

    (a) In General.--Subsection (d) of section 119 of division A of the 
Tax Relief and Health Care Act of 2006 is amended--
            (1) by striking ``first two taxable years'' and inserting 
        ``first 4 taxable years'', and
            (2) by striking ``January 1, 2008'' and inserting ``January 
        1, 2010''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

                 Subpart B--Provisions Expiring in 2008

SEC. 166. SPECIAL RULE FOR QUALIFIED METHANOL OR ETHANOL FUEL FROM 
              COAL.

    Subparagraph (D) of section 4041(b)(2) (relating to termination) is 
amended by striking ``January 1, 2009'' and inserting ``January 1, 
2010''.

SEC. 167. BIODIESEL MIXTURE CREDIT AND CREDIT FOR FUELS USED FOR 
              NONTAXABLE PURPOSES.

    (a) Biodiesel Mixtures.--Paragraph (6) of section 6426(c) (relating 
to termination) is amended by striking ``December 31, 2008'' and 
inserting ``December 31, 2009''.
    (b) Biodiesel Used for Nontaxable Purposes.--Paragraph (5)(B) of 
section 6427(e) (relating to termination) is amended by striking 
``December 31, 2008'' and inserting ``December 31, 2009''.

                 PART IV--TAX ADMINISTRATION PROVISIONS

                 Subpart A--Provisions Expiring in 2007

SEC. 171. DISCLOSURES TO FACILITATE COMBINED EMPLOYMENT TAX REPORTING.

    (a) In General.--Subparagraph (B) of section 6103(d)(5) (relating 
to termination) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendments made by this subsection shall 
apply to disclosures after the date of the enactment of this Act.

SEC. 172. DISCLOSURE OF RETURN INFORMATION TO APPRISE APPROPRIATE 
              OFFICIALS OF TERRORIST ACTIVITIES.

    (a) In General.--Clause (iv) of section 6103(i)(3)(C) (relating to 
termination) is amended by striking ``December 31, 2007'' and inserting 
``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures after the date of the enactment of this Act.

SEC. 173. DISCLOSURE UPON REQUEST OF INFORMATION RELATING TO TERRORIST 
              ACTIVITIES.

    (a) In General.--Subparagraph (E) of section 6103(i)(7) (relating 
to termination) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures after the date of the enactment of this Act.

SEC. 174. DISCLOSURE OF RETURN INFORMATION TO CARRY OUT INCOME 
              CONTINGENT REPAYMENT OF STUDENT LOANS.

    (a) In General.--Subparagraph (D) of section 6103(l)(13) (relating 
to termination) is amended by striking ``December 31, 2007'' and 
inserting ``December 31, 2009''.
    (b) Effective Date.--The amendment made by this section shall apply 
to disclosures after the date of the enactment of this Act.

SEC. 175. AUTHORITY FOR UNDERCOVER OPERATIONS.

    (a) In General.--Paragraph (6) of section 7608(c) (relating to 
application of section) is amended by striking ``January 1, 2008'' each 
place it appears and inserting ``January 1, 2010''.
    (b) Effective Date.--The amendments made by this section shall 
apply to operations conducted after the date of the enactment of this 
Act.

                 Subpart B--Provisions Expiring in 2008

SEC. 176. EXTENSION OF REPORTING OF INTEREST OF EXEMPT ORGANIZATIONS IN 
              INSURANCE CONTRACTS.

    Section 6050V(e) (relating to termination) is amended by striking 
``the date which is 2 years after the date of the enactment of this 
section'' and inserting ``December 31, 2009''.

SEC. 177. DISCLOSURES RELATING TO CERTAIN PROGRAMS ADMINISTERED BY THE 
              DEPARTMENT OF VETERANS AFFAIRS.

    (a) In General.--Section 6103(l)(7)(D) (relating to programs to 
which rule applies) is amended by striking ``September 30, 2008'' and 
inserting ``December 31, 2009''.
    (b) Technical Amendment.--Section 6103(l)(7)(D)(viii)(III) is 
amended by striking ``sections 1710(a)(1)(I), 1710(a)(2), 1710(b), and 
1712(a)(2)(B)'' and inserting ``sections 1710(a)(2)(G), 1710(a)(3), and 
1710(b)''.

               Subtitle B--Alternative Minimum Tax Relief

SEC. 181. 2-YEAR EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX 
              EXEMPTION AMOUNT.

    (a) In General.--Section 55(d)(1) is amended--
            (1) by striking ``$66,250'' and all that follows through 
        ``2007'' in subparagraph (A) and inserting ``the joint return 
        amount in the case of taxable years beginning in 2008 and 
        2009'', and
            (2) by striking ``$44,350'' and all that follows through 
        ``2007'' in subparagraph (B) and inserting ``the unmarried 
        individual return amount in the case of taxable years beginning 
        in 2008 and 2009''.
    (b) Joint Return Amount; Unmarried Individual Return Amount.--
Section 55(d) is amended by adding at the end the following new 
paragraph:
            ``(4) Joint return amount; unmarried individual return 
        amount.--
                    ``(A) Joint return amount.--For purposes of 
                paragraph (1)(A), the joint return amount shall be--
                            ``(i) $69,950 for taxable years beginning 
                        in 2008, and
                            ``(ii) $73,250 for taxable year beginning 
                        in 2009.
                    ``(B) Unmarried individual return amount.--For 
                purposes of paragraph (1)(B), the unmarried individual 
                return amount shall be--
                            ``(i) $46,200 for taxable years beginning 
                        in 2008, and
                            ``(ii) $47,850 for taxable year beginning 
                        in 2009.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 182. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR NONREFUNDABLE 
              PERSONAL CREDITS.

    (a) In General.--Paragraph (2) of section 26(a) is amended--
            (1) by striking ``or 2007'' and inserting ``2007, 2008, or 
        2009'', and
            (2) by striking ``2007'' in the heading thereof and 
        inserting ``2009''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

                   Subtitle C--Additional Tax Relief

SEC. 191. PERMANENT EXTENSION OF 2001 AND 2003 TAX RELIEF PROVISIONS.

    (a) Economic Growth and Tax Relief Reconciliation Act of 2001.--
Title IX of the Economic Growth and Tax Relief Reconciliation Act of 
2001 (relating to compliance with Congressional Budget Act) is 
repealed.
    (b) Jobs and Growth Tax Relief Reconciliation Act of 2003.--Title 
III of the Jobs and Growth Tax Relief Reconciliation Act of 2003 is 
amended by striking section 303.

SEC. 192. MAXIMUM CORPORATE INCOME TAX RATE REDUCED TO 25 PERCENT.

    (a) In General.--Paragraph (1) of section 11(b) (relating to amount 
of tax on corporations) is amended to read as follows:
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be the sum of--
                    ``(A) 15 percent of so much of the taxable income 
                as does not exceed $50,000, and
                    ``(B) 25 percent of so much of the taxable income 
                as exceeds $50,000.''.
    (b) Personal Service Corporations.--Paragraph (2) of section 11(b) 
is amended by striking ``35 percent'' and inserting ``25 percent''.
    (c) Conforming Amendments.--Paragraphs (1) and (2) of section 
1445(e) 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 January 1, 
2009.

SEC. 193. 3-YEAR CARRYBACK OF CERTAIN CREDITS.

    (a) General Business Credit.--Subsection (a) of section 39 is 
amended by adding at the end the following new paragraph:
            ``(4) Special rule for 2007, 2008, and 2009.--In the case 
        of an excess described in paragraph (1) arising in a taxable 
        year beginning in 2007, 2008, or 2009--
                    ``(A) paragraph (1)(A) shall be applied by 
                substituting `each of the 3 taxable years' for ``the 
                taxable year',
                    ``(B) paragraphs (2)(A) and (3)(C)(i) shall each be 
                applied by substituting `23 taxable years' for `21 
                taxable years', and
                    ``(C) paragraphs (2)(B) and (3)(C)(ii) shall be 
                applied by substituting `23 taxable years' for `20 
                taxable years'.''.
    (b) Foreign Tax Credit.--
            (1) In general.--Section 904(c) is amended by adding at the 
        end thereof the following: ``In the case of taxable years 
        beginning in 2007, 2008, or 2009, the first sentence of this 
        subsection shall, at the election of the taxpayer, be applied 
        by substituting `in the third preceding taxable year, the 
        second preceding taxable year, the first preceding taxable 
        year' for `the first preceding taxable year'.''.
            (2) Application of special refund rules.--Section 6411 
        (relating to tentative carryback and refund adjustments) is 
        amended by redesignating subsection (d) as subsection (e) and 
        by inserting after subsection (c) the following new subsection:
    ``(d) Application to Foreign Tax Credit Carryback.--Under rules 
prescribed by the Secretary, in the case of taxable years beginning in 
2007, 2008, and 2009, this section shall apply with respect to a 
foreign tax credit carryback provided in section 904(c) in the same 
manner as this section applies with respect to net operating loss 
carrybacks provided in section 172(b), business credit carrybacks 
provided in section 39, and capital loss carrybacks provided in 
subsection (a)(1) or (c) of section 1212.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to general business credits and foreign tax credits arising in 
taxable years beginning after December 31, 2006.

SEC. 194. ELECTION TO ACCELERATE AMT AND R AND D CREDITS IN LIEU OF 
              BONUS DEPRECIATION.

    (a) In General.--Section 168(k) is amended by adding at the end the 
following new paragraph:
            ``(4) Election to accelerate amt and r and d credits in 
        lieu of bonus depreciation.--
                    ``(A) In general.--If a corporation elects to have 
                this paragraph apply --
                            ``(i) no additional depreciation shall be 
                        allowed under paragraph (1) for any property 
                        placed in service during the taxable year, and
                            ``(ii) the limitations described in 
                        subparagraph (B) for such taxable year shall be 
                        increased by an aggregate amount not in excess 
                        of the bonus depreciation amount for such 
                        taxable year.
                    ``(B) Limitations to be increased.--The limitations 
                described in this subparagraph are--
                            ``(i) the limitation under section 38(c), 
                        and
                            ``(ii) the limitation under section 53(c).
                    ``(C) Bonus depreciation amount.--For purposes of 
                this paragraph--
                            ``(i) In general.--The bonus depreciation 
                        amount for any taxable year is an amount equal 
                        to the product of the applicable percentage and 
                        the excess (if any) of--
                                    ``(I) the aggregate amount of 
                                depreciation which would be determined 
                                under this section for property placed 
                                in service during the taxable year if 
                                no election under this paragraph were 
                                made, over
                                    ``(II) the aggregate amount of 
                                depreciation allowable under this 
                                section for property placed in service 
                                during the taxable year.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage shall 
                        be--
                                    ``(I) 30 percent in the case of the 
                                limitation under section 38(c), and
                                    ``(II) 20 percent in the case of 
                                the limitation under section 53(c).
                    ``(D) Allocation of bonus depreciation amounts.--
                            ``(i) In general.--Subject to clauses (ii) 
                        and (iii), the taxpayer shall, at such time and 
                        in such manner as the Secretary may prescribe, 
                        specify the portion (if any) of the bonus 
                        depreciation amount which is to be allocated to 
                        each of the limitations described in 
                        subparagraph (B).
                            ``(ii) Business credit limitation.--The 
                        portion of the bonus depreciation amount 
                        allocated to the limitation described in 
                        subparagraph (B)(i) shall not exceed an amount 
                        equal to the portion of the credit allowable 
                        under section 38 for the taxable year which is 
                        allocable to business credit carryforwards to 
                        such taxable year which are--
                                    ``(I) from taxable years beginning 
                                before January 1, 2006, and
                                    ``(II) properly allocable 
                                (determined under the rules of section 
                                38(d)) to the research credit 
                                determined under section 41(a).
                            ``(iii) Alternative minimum tax credit 
                        limitation.--The portion of the bonus 
                        depreciation amount allocated to the limitation 
                        described in subparagraph (B)(ii) shall not 
                        exceed an amount equal to the portion of the 
                        minimum tax credit allowable under section 53 
                        for the taxable year which is allocable to the 
                        adjusted minimum tax imposed for taxable years 
                        beginning before January 1, 2006.
                    ``(E) Credit refundable.--Any aggregate increases 
                in the credits allowed under section 38 or 53 by reason 
                of this paragraph shall, for purposes of this title, be 
                treated as a credit allowed to the taxpayer under 
                subpart C of part IV of subchapter A.
                    ``(F) Other rules.--
                            ``(i) Election.--Any election under this 
                        paragraph (including any allocation under 
                        subparagraph (D)) may be revoked only with the 
                        consent of the Secretary.
                            ``(ii) Deduction allowed in computing 
                        minimum tax.--Notwithstanding this paragraph, 
                        paragraph (2)(G) shall apply with respect to 
                        the deduction computed under this section 
                        (after application of this paragraph) with 
                        respect to property placed in service during 
                        any applicable taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2007, in taxable 
years ending after such date.

SEC. 195. 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 in a passive foreign investment 
                        company (as defined in section 1296), and
                            ``(ii) stock in a foreign corporation held 
                        by a United States person who meets the 
                        requirements of section 1248(a)(2).
                    ``(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.''.
    (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 item:

``Sec. 1023. Indexing of certain assets for purposes of determining 
                            gain or loss.
``Sec. 1024. 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. 196. DEFERRAL OF GAIN ON SALE OF CERTAIN PRINCIPAL RESIDENCES.

    (a) In General.--Part III of subchapter O of chapter 1 of subtitle 
A (relating to common nontaxable exchanges) is amended by inserting 
after section 1033 the following new section:

``SEC. 1034. DEFERRAL OF GAIN ON SALE OF CERTAIN PRINCIPAL RESIDENCES.

    ``(a) Deferral of Gain.--
            ``(1) In general.--In the case of a sale of a principal 
        residence by a taxpayer, the taxpayer's gain (if any) from such 
        sale shall be recognized only to the extent that the taxpayer's 
        adjusted sales price exceeds the taxpayer's cost of purchasing 
        a qualified residence.
            ``(2) Reduction of basis in qualified residence.--In the 
        case of a nonrecognition of gain on the sale of a principal 
        residence due to the purchase of a qualified residence under 
        paragraph (1), the taxpayer's basis in the qualified residence 
        shall be reduced by the amount of such gain.
    ``(b) Definitions.--
            ``(1) Adjusted sales price.--
                    ``(A) In general.--For purposes of this section, 
                the term `adjusted sales price' means the amount 
                realized, reduced by the aggregate of the expenses for 
                work performed on a principal residence in order to 
                assist in its sale.
                    ``(B) Limitation.--The reduction provided in 
                subparagraph (A) applies only to expenses--
                            ``(i) for work performed during the 90-day 
                        period ending on the day on which the contract 
                        to sell the principal residence is entered 
                        into,
                            ``(ii) which are paid on or before the 30th 
                        day after the date of the sale of the principal 
                        residence, and
                            ``(iii) which are--
                                    ``(I) not allowable as deductions 
                                in computing taxable income under 
                                section 63, and
                                    ``(II) not taken into account in 
                                computing the amount realized from the 
                                sale of the principal residence.
            ``(2) Qualified residence.--For purposes of this section, 
        the term `qualified residence' means property that is--
                    ``(A) purchased by the taxpayer for use as a 
                principal residence, and
                    ``(B) purchased during the period beginning 2 years 
                before the date of the sale of the taxpayer's previous 
                principal residence and ending 2 years after the date 
                of such sale.
    ``(c) Application of Section.--For purposes of this section:
            ``(1) Exchange of residence for property.--An exchange by 
        the taxpayer of a principal residence for other property shall 
        be treated as a sale of such residence, and the acquisition of 
        a qualified residence on the exchange of property shall be 
        treated as a purchase of such residence.
            ``(2) Construction of residence.--A qualified residence any 
        part of which was constructed or reconstructed by the taxpayer 
        shall be treated as purchased by the taxpayer. In determining 
        the taxpayer's cost of purchasing a qualified residence, there 
        shall be included only so much of such cost as is attributable 
        to the acquisition, construction, reconstruction, and 
        improvements made which are properly chargeable to capital 
        account, during the period specified in subsection (b)(2)(B).
            ``(3) Sale of new residence prior to sale of principal 
        residence.--If a residence is purchased by the taxpayer before 
        the date of the sale of the taxpayer's principal residence, 
        such purchased residence shall not be a qualified residence 
        under this section if such residence is sold or otherwise 
        disposed of by the taxpayer before the date of the sale of the 
        taxpayer's principal residence.
            ``(4) Multiple principal residences.--If the taxpayer, 
        during the period described in subsection (b)(2)(B), purchases 
        more than 1 residence which is used as the taxpayer's principal 
        residence at some time during the 2 years after the date of the 
        sale of a principal residence for which gain is deferred under 
        this section, only the last of such residences so used by the 
        taxpayer within such 2 years shall be a qualified residence 
        under this section. If a qualified residence is sold in a sale 
        to which subsection (d)(2) applies within 2 years after the 
        sale of the taxpayer's previous principal residence, for 
        purposes of applying the preceding sentence with respect to 
        such principal residence, the qualified residence sold shall be 
        treated as the last residence used during such 2-year period.
    ``(d) Limitation.--
            ``(1) In general.--Subsection (a) shall not apply with 
        respect to the sale of the taxpayer's principal residence if 
        within 2 years before the date of such sale the taxpayer sold 
        at a gain other property used by him as his principal 
        residence, and any part of such gain was deferred by reason of 
        subsection (a).
            ``(2) Subsequent sale connected with new principal place of 
        work.--Paragraph (1) shall not apply with respect to the sale 
        of the taxpayer's principal residence if--
                    ``(A) such sale was in connection with the 
                commencement of work by the taxpayer (or the taxpayer's 
                spouse, if such spouse has the same principal residence 
                as the taxpayer) as an employee or as a self-employed 
                individual at a new principal place of work, and
                    ``(B) the taxpayer would satisfy the conditions of 
                section 217(c) if the principal residence so sold were 
                treated as the former residence for purposes of section 
                217.
    ``(e) Tenant-Stockholder in a Cooperative Housing Corporation.--For 
purposes of this section, references to property used by the taxpayer 
as a principal residence shall include stock held by a tenant-
stockholder (as defined in section 216) in a cooperative housing 
corporation (as so defined) if--
            ``(1) in the case of stock sold, the house or apartment 
        which the taxpayer was entitled to occupy as such stockholder 
        was used by the taxpayer as a principal residence, and
            ``(2) in the case of stock purchased, the taxpayer used as 
        a principal residence the house or apartment which the taxpayer 
        was entitled to occupy as such stockholder.
    ``(f) Joint Ownership.--In the case of a residence jointly owned 
and used as a principal residence by 1 or more taxpayers, or by a 
married couple filing separately, the gain (if any) from the sale of 
such principal residence which may be deferred under subsection (a) 
shall be allocated among such taxpayers according to regulations which 
shall be prescribed by the Secretary.
    ``(g) Members of the Armed Forces.--
            ``(1) In general.--The running of any period of time 
        specified in subsection (b)(2)(B) or (c) (other than the 2 
        years referred to in subsection (c)(4)) shall be suspended 
        during any time that the taxpayer (or the taxpayer's spouse, if 
        such spouse has the same principal residence as the taxpayer) 
        serves on extended active duty with the Armed Forces of the 
        United States after the date of the sale of the principal 
        residence for which gain is deferred under this section, except 
        that any period of time so suspended shall not extend beyond 
        the date that is 4 years after the date of sale of such 
        principal residence.
            ``(2) Members stationed outside the united states or 
        required to reside in government quarters.--In the case of a 
        taxpayer (or the taxpayer's spouse, if such spouse has the same 
        principal residence as the taxpayer) who, during any period of 
        time the running of which is suspended under paragraph (1)--
                    ``(A) is stationed outside the United States, or
                    ``(B) after returning from a tour of duty outside 
                of the United States and pursuant to a determination by 
                the Secretary of Defense that adequate off-base housing 
                is not available at a remote base site, is required to 
                reside in on-base Government quarters,
        any period of time so suspended shall not expire before the day 
        that is 1 year after the last day that such taxpayer or spouse 
        is so stationed or under such requirement, except that any 
        period so suspended shall not extend beyond the date which is 8 
        years after the date of the sale of the principal residence.
    ``(h) Individual Whose Tax Home Is Outside the United States.--The 
running of any period of time specified in subsection (b)(2)(B) or (c) 
(other than the 2 years referred to in subsection (c)(4)) shall be 
suspended during any time that the taxpayer (or the taxpayer's spouse, 
if such spouse has the same principal residence as the taxpayer) has a 
tax home (as defined in section 911(d)(3)) outside the United States 
after the date of the sale of the principal residence for which gain is 
deferred under this section, except that any period of time so 
suspended shall not extend beyond the date that is 4 years after the 
date of sale of such principal residence.
    ``(i) Special Rule for Condemnation.--In the case of the seizure, 
requisition, or condemnation of a principal residence, or the sale or 
exchange of a principal residence under threat or imminence thereof, 
the taxpayer may elect to have this section apply in lieu of section 
1033. If such election is made, such seizure, requisition, or 
condemnation shall be treated as the sale of the principal residence. 
Such election shall be made at such time and in such manner as the 
Secretary shall prescribe.
    ``(j) Statute of Limitations.--In the case of any sale of a 
principal residence that results in gain--
            ``(1) the statutory period for the assessment of any 
        deficiency attributable to any part of such gain shall not 
        expire before the expiration of 3 years from the date the 
        Secretary is notified by the taxpayer (in such manner as the 
        Secretary shall prescribe) of--
                    ``(A) the taxpayer's cost of purchasing any 
                qualified residence which results in nonrecognition of 
                such gain,
                    ``(B) the taxpayer's intention not to purchase such 
                a qualified residence during the period specified in 
                subsection (b)(2)(B), or
                    ``(C) a failure to make such a purchase within such 
                period, and
            ``(2) such deficiency may be assessed before the expiration 
        of such 3-year period notwithstanding the provisions of any 
        other law or rule of law which would otherwise prevent such 
        assessment.
    ``(k) Application of Exclusion on the Sale of a Principal 
Residence.--In the case of a sale of a principal residence by a 
taxpayer to which section 121 applies, the amount of the gain on such 
sale that may be deferred under subsection (a) of this section shall be 
reduced by the amount of gain on such sale that is excluded from gross 
income under section 121(a).''.
    (b) Conforming Amendments.--
            (1) Coordination with section 121.--
                    (A) Section 121 (relating to exclusion of gain from 
                sale of principal residence) is amended by adding at 
                the end the following new subsection:
    ``(h) Coordination With Section 1034 Deferral.--For deferral of 
gain from the sale of a principal residence in the case of a purchase 
of another qualified residence, see section 1034.''.
                    (B) Subsection (g) of section 121 (relating to 
                residences acquired in rollovers under section 1034) is 
                amended by striking ``(as in effect on the day before 
                the date of the enactment of this section)''.
            (2) Extension of period of limitation.--Section 6503 
        (relating to suspension of running of period of limitation) is 
        amended--
                    (A) by redesignating subsection (k) as subsection 
                (l), and
                    (B) by inserting after subsection (j) the following 
                new subsection:
    ``(k) Extension of Time for Assessment of Tax Liability on Gain 
From the Sale of Certain Principal Residences.--The running of any 
period of limitations for collection of any amount of tax liability on 
gain from the sale of a principal residence that is deferred under 
section 1034 shall be suspended for the period of any extension of time 
specified under section 1034(j).''.
            (3) Reduction in basis.--Subsection (a) of section 1016 
        (relating to general rule) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (36),
                    (B) by striking the period at the end of paragraph 
                (37) and inserting ``, and'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(38) to the extent provided in section 1034(a)(2).''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter O of chapter 1 of subtitle A (relating to common nontaxable 
exchanges) is amended by inserting after the item relating to section 
1033 the following new item:

``Sec. 1034. Deferral of gain on sale of certain principal 
                            residences.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to sales in taxable years beginning after the date of the 
enactment of this Act.

SEC. 197. AMOUNT EXCLUDED FROM SALE OF PRINCIPAL RESIDENCE INDEXED FOR 
              INFLATION.

    (a) In General.--Section 121 is amended by adding at the end the 
following new subsection:
    ``(h) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2008, the $250,000 amount under subsection 
        (b)(1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2007' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under 
        subparagraph (A) is not a multiple of $1,000, such amount shall 
        be rounded to the next lowest multiple of $1,000.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 121(b)(2) is amended--
                    (A) by striking ``Paragraph (1) shall be applied by 
                substituting `$500,000' for `$250,000''' and inserting 
                ``The dollar amount under paragraph (1) shall be twice 
                the dollar amount otherwise in effect under such 
                paragraph'', and
                    (B) by striking ``$500,000'' in the heading and 
                inserting ``Increased''.
            (2) Section 121(b)(4) is amended by striking ``paragraph 
        (1) shall be applied by substituting `$500,000' for 
        `$250,000''' and inserting ``the dollar amount under paragraph 
        (1) shall be twice the dollar amount otherwise in effect under 
        such paragraph''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales occurring after December 31, 2008.

SEC. 198. REPEAL OF PHASEIN FOR DOMESTIC PRODUCTION ACTIVITIES 
              DEDUCTION.

    (a) In General.--Subsection (a) of section 199 (relating to income 
attributable to domestic production activities) is amended to read as 
follows:
    ``(a) Allowance of Deduction.--There shall be allowed as a 
deduction an amount equal to 9 percent of the lesser of--
            ``(1) the qualified production activities income of the 
        taxpayer for the taxable year, or
            ``(2) taxable income (determined without regard to this 
        section) for the taxable year.''.
    (b) Conforming Amendments.--Section 199 is amended by striking 
``subsection (a)(1)(B)'' each place it appears and inserting 
``subsection (a)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

                 TITLE II--KEEPING AMERICA COMPETITIVE

SEC. 201. SENSE OF CONGRESS REGARDING THE LEGISLATIVE INITIATIVES 
              REQUIRED TO STRENGTHEN AND PROTECT THE WELL BEING OF OUR 
              NATION'S CAPITAL MARKETS.

    (a) Findings.--Congress finds the following:
            (1) America's capital markets are a foundation of our 
        Nation's economic well being and security.
            (2) Healthy capital markets foster investment in the United 
        States economy, helping to sustain and create jobs.
            (3) The American economy is fundamentally strong, but a 
        correction in the residential housing market, credit turmoil, 
        and high oil prices are hampering economic growth.
            (4) American businesses and investors face ever increasing 
        competition from international competitors and markets.
            (5) Economic policies that maintain low tax rates on 
        capital gains and dividends have historically fostered 
        sustained growth in the American economy.
    (b) Sense of Congress.--It is the sense of the Congress that--
            (1) Congress should not pass legislation that would create 
        new or greater uncertainty in the financial markets;
            (2) Congress should not pass legislation that would serve 
        to further constrict liquidity in the marketplace;
            (3) Congress should not pass legislation that would make 
        credit more expensive and less accessible in the United States 
        than in other world markets;
            (4) Congress should not pass legislation that would inhibit 
        or impair capital formation and long-term investments;
            (5) Congress should maintain existing tax policy regarding 
        capital formation and long-term investment, except in the case 
        of illegitimate tax shelter activity;
            (6) Congress should pass legislation to extend permanently 
        the 2001 and 2003 tax rate cuts, including the 15 percent 
        capital gains and dividend rates, and to simplify and lower 
        corporate tax rates; and
            (7) Congress should promote the entrepreneurship and 
        economic development fostered by long-term, private investment.

SEC. 202. DIRECTING THE SECURITIES AND EXCHANGE COMMISSION TO CONVENE A 
              PUBLIC HEARING ON THE IMPACT OF EXCESSIVE LITIGATION.

    (a) Findings.--Congress finds that--
            (1) companies listed on United States securities exchanges 
        face the potential of extraordinary litigation costs that 
        companies listed abroad do not;
            (2) securities class action settlements in the United 
        States for 2006 totaled $10,600,000,000 (not counting the 
        Enron-related settlements of approximately $7,100,000,000), 
        reflecting an increase of--
                    (A) 255 percent from 2004;
                    (B) more than 500 percent from 2000 (not including 
                the $3,100,000,000 Cendant settlement); and
                    (C) an astonishing 7,000 percent from 1995;
            (3) while many such claims are legitimate, the sheer number 
        of cases and the staggering settlement amounts illustrate the 
        growing impact of the tort system on the United States economy; 
        and
            (4) by contrast, such private shareholder class action 
        suits do not exist in the United Kingdom and other European 
        Union countries.
    (b) Public Hearing.--Not later than 60 days after the date of 
enactment of this Act, the Chairman of the Securities and Exchange 
Commission (in this section referred to as the ``Commission'') shall 
convene a public hearing on the impact of excessive litigation on the 
competitiveness of companies listed on United States securities 
exchanges.

SEC. 203. DIRECTING THE COMMISSION TO ESTABLISH FORMAL PROCESSES AND 
              PROCEDURES FOR COST-BENEFIT ANALYSES OF PROPOSED AND 
              EXISTING RULES AND REGULATIONS.

    (a) Study.--Not later than 180 days after the date of enactment of 
this Act, the Commission shall submit to Congress a study of its 
existing processes and procedures for conducting cost-benefit analyses 
of proposed and existing rules and regulations, and shall report to 
Congress on ways in which the Commission could perform more rigorous 
and informed cost-benefit analyses of such rules and regulations.
    (b) Proposed Rule.--
            (1) In general.--Not later than 180 days after the date of 
        submission to Congress of the report under subsection (a), the 
        Commission shall issue a final rule to establish formal 
        processes and procedures for conducting cost-benefit analyses 
        of proposed and existing rules and regulations.
            (2) Certain content required.--At a minimum, processes and 
        procedures proposed by the Commission under this subsection 
        shall include provisions directing the Commission--
                    (A) to assess all costs and benefits of available 
                regulatory alternatives, including both quantifiable 
                measures (to the extent that such measures can be 
                usefully estimated) and qualitative measures of costs 
                and benefits that are difficult to quantify, but 
                nevertheless essential to consider;
                    (B) to design its rules and regulations in the most 
                cost-effective manner to achieve the regulatory 
                objective, considering incentives for innovation, 
                consistency, predictability, the costs of enforcement 
                and compliance, and flexibility;
                    (C) to assess both the costs and the benefits of 
                the intended rule or regulation and propose or adopt a 
                rule or regulation only upon a reasoned determination 
                that the benefits of the intended rule or regulation 
                justify its costs;
                    (D) to base its decisions on the best reasonably 
                obtainable economic and other information concerning 
                the need for, and consequences of, the intended rule or 
                regulation;
                    (E) to tailor its rules and regulations to impose 
                the least possible burden on individuals, businesses of 
                differing sizes, and other entities, consistent with 
                obtaining the regulatory objectives, taking into 
                account, among other things, and to the extent 
                practicable, the cumulative costs; and
                    (F) to establish a process for reexamining existing 
                rules and regulations, or, at a minimum, those rules 
                and regulations that the Commission, industry 
                participants, or others identify as imposing 
                unjustifiable costs or competitive burdens, that shall 
                be designed to determine whether the rules and 
                regulations are working as intended, whether there are 
                satisfactory alternatives of a less burdensome nature, 
                and whether changes should be made.
            (3) Periodic review.--Each rule and regulation of the 
        Commission that is subject to review pursuant to paragraph 
        (2)(F) shall be reviewed not less frequently than 2 years after 
        the date of its issuance in final form, and once every 10 years 
        thereafter.

SEC. 204. DIRECTING THE COMMISSION TO DEFINE ``SMALLER PUBLIC COMPANY'' 
              TO PROVIDE CERTAINTY TO ISSUERS.

    (a) Rule Revision Required.--Not later than 90 days after the date 
of enactment of this Act, the Commission, pursuant to its authority to 
amend rules of the Public Company Accounting Oversight Board under 
section 107 of the Sarbanes-Oxley Act of 2002, shall revise Auditing 
Standard No. 5 of the Oversight Board, as in effect on the date of 
enactment of this Act, to include a definition of the term ``smaller 
public company''.
    (b) Definition of Smaller Public Company.--For purposes of the rule 
revision required under subsection (a), the term ``smaller public 
company'' shall mean an issuer for which an annual report is required 
by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m, 78o(d)) that--
            (1) has a total market capitalization at the beginning of 
        the relevant reporting period of less than $700,000,000; and
            (2) has total revenues for that reporting period of less 
        than $250,000,000.

SEC. 205. MUTUAL RECOGNITION.

    (a) Findings.--Congress finds that--
            (1) there is an ongoing and pressing need to update the 
        United States financial regulatory structure to address the 
        increasingly global nature of the financial marketplace;
            (2) existing regulations on cross-border activities are 
        outdated, and predate the revolution in communications 
        technology and the accompanying transformations in global 
        markets;
            (3) existing regulations on cross-border activities are 
        complex, inefficient, not flexible enough to meet modern market 
        needs, and have the effect of chilling innovation and imposing 
        significant and unnecessary burdens on United States investors;
            (4) the Commission has delayed the timetable for Commission 
        action on key elements of reexamining and developing new 
        approaches to cross-border regulation, including much needed 
        reform to Commission rule 240.15a-6 of title 17, Code of 
        Federal Regulations, as in effect on the date of enactment of 
        this Act, and potential recognition of foreign regulatory 
        regimes; and
            (5) such delay postpones the regulatory changes needed to 
        eliminate unnecessary inefficiencies from international 
        financial transactions, and poses an increasingly significant 
        risk to the effective modernization and competitiveness of 
        United States capital markets.
    (b) Modernization of Cross-Border Rules Applicable to Brokers and 
Dealers.--
            (1) In general.--The Commission shall, by rule, exempt any 
        foreign broker or dealer from the registration requirements of 
        the Securities Exchange Act of 1934, and any other regulation 
        applicable to registered or unregistered brokers or dealers, to 
        the extent that the foreign broker or dealer effects 
        transactions in securities with or for, or induces or attempts 
        to induce the purchase or sale of any security by--
                    (A) a qualified investor, as defined in section 
                3(a)(54) of the Securities Exchange Act of 1934;
                    (B) an investor that is a resident outside of the 
                United States; and
                    (C) any person described in Commission rule 
                240.15a-6(a)(4) of title 17, Code of Federal 
                Regulations, as in effect on the date of enactment of 
                this Act.
            (2) Definition of foreign broker or dealer.--As used in 
        this section, the term ``Foreign broker or dealer'' has the 
        same meaning as in section 240.15a-6(b)(3) of title 17, Code of 
        Federal Regulations, as in effect on the date of enactment of 
        this Act.
            (3) Regulatory authority.--The Commission may, upon a 
        finding that such action is necessary to protect United States 
        investors and consistent with this section, require a foreign 
        broker or dealer and its associated persons--
                    (A) to file documentation to establish that the 
                foreign broker or dealer and its associated persons are 
                not subject to statutory disqualification;
                    (B) to consent to service of process for any civil 
                action brought by or proceeding before the Commission 
                or a self-regulatory organization; and
                    (C) to agree to provide any information or 
                documents that the Commission reasonably requests, 
                relating to effecting transactions in securities with 
                or for, or inducing or attempting to induce the 
                purchase or sale of any security by persons described 
                in subparagraphs (A) through (C) of paragraph (1), 
                subject to limitations recognizing potential conflicts 
                with applicable foreign laws or regulations.
            (4) Limitation on state action.--No State or political 
        subdivision thereof, or any self-regulatory organization, may 
        impose any registration, licensing, qualification, or other 
        legal requirement applicable to a foreign broker or dealer or 
        associated person thereof that is exempt from Commission 
        registration and regulation pursuant to this subsection, except 
        that the State or political subdivision thereof, or such self-
        regulatory organization, may require the foreign broker or 
        dealer to provide copies of any documents filed with the 
        Commission, as described in this subsection.
            (5) Timing of regulations.--Final regulations to carry out 
        this subsection shall be issued by the Commission, and such 
        regulations shall become effective, not later than 180 days 
        after the date of enactment of this Act.
    (c) Mutual Recognition Rules.--
            (1) In general.--The Commission shall issue regulations 
        designed to provide for a framework for mutual recognition of 
        foreign regulatory regimes, so that foreign brokers, dealers, 
        and exchanges shall be regulated based on regulation in their 
        home country, and shall not be subject to duplicative 
        regulatory requirements, except to the extent that the 
        Commission finds necessary to protect United States investors.
            (2) Implementation.--The Commission shall adopt regulations 
        that provide an expeditious and transparent implementation 
        mechanism for this section, based on objective qualification 
        criteria and fixed timelines, that is designed to enable 
        foreign brokers, dealers, and exchanges to operate in the 
        United States and abroad based on regulation in their home 
        country.
            (3) Limitation.--The regulations required by this 
        subsection--
                    (A) shall not require individualized review and 
                approval process for foreign brokers, dealers, and 
                exchanges to be eligible to rely on regulation in their 
                home country, but shall permit such brokers, dealers, 
                and exchanges to make a supplemental showing, on an 
                individual exemptive basis, to demonstrate their 
                qualifications to do business with relevant classes of 
                investors; and
                    (B) may not create regulatory distinctions that 
                limit trading of portfolios containing both United 
                States and non-United States securities or impose other 
                requirements that are inconsistent with the business 
                objectives of investors.
            (4) Timing.--The Commission shall issue proposed 
        regulations to carry out this subsection not later than 90 days 
        after the date of enactment of this Act, and shall make such 
        regulations effective reasonably promptly thereafter.
            (5) Exemption authority.--The Commission may, by rule, 
        provide for such exemptions to the provisions of this 
        subsection as the Commission determines appropriate.

SEC. 206. SUPPORTING THE SECURITIES AND EXCHANGE COMMISSION REFORM 
              EFFORTS TO SPEED THE PROCESS OF RULEMAKING FOR SELF 
              REGULATORY ORGANIZATIONS.

    (a) Findings.--Congress finds that--
            (1) United States capital markets are evolving quickly, and 
        United States equity exchanges face increasing competition, 
        both domestically and internationally;
            (2) the Commission has recognized this transformation in 
        the competitive landscape and announced a project to redesign 
        the rule approval process for exchanges to make it more 
        efficient;
            (3) rather than approving rule filings by self regulatory 
        organizations within the 35-day period prescribed under the 
        Securities Exchange Act of 1934, the Commission has routinely 
        requested that exchanges agree to extend deadlines while rules 
        are weighed and considered within the agency, potentially 
        resulting in years before exchange rule filings are finally 
        approved;
            (4) this antiquated and overly rigid regulatory model does 
        not recognize the new realities of international competition 
        among exchanges or new competition from innovative products 
        that compete with traditional asset classes; and
            (5) competitors to United States equity exchanges operate 
        under different regulatory regimes, which can allow such 
        competitors to adapt to rapidly changing business environments 
        while United States exchanges are frozen in rule approval 
        process review by the Commission for months or years.
    (b) Rulemaking.--The Commission shall promulgate rules under 
section 19 of the Securities Exchange Act of 1934, to speed the process 
of rulemaking to enable self-regulatory organizations to respond to 
competitive inequities and better meet customer needs. Such rules and 
other actions should be completed not later than 180 days after the 
date of enactment of this Act, and should predate or be coterminous 
with any foreign exchange mutual recognition regime established under 
this Act.

SEC. 207. ELIMINATE THE EXEMPTION FROM STATE REGULATION FOR CERTAIN 
              SECURITIES DESIGNATED BY NATIONAL SECURITIES EXCHANGES.

    Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. 
77r(b)(1)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``or the American Stock Exchange, 
                or listed, or authorized for listing, on the National 
                Market System of the Nasdaq Stock Market (or any 
                successor to such entities)'' and inserting ``, the 
                American Stock Exchange, or the Nasdaq Stock Market (or 
                any successor to such entities)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, except that a security listed, or 
                authorized for listing, on the New York Stock Exchange, 
                the American Stock Exchange, or the Nasdaq Stock Market 
                (or any successor to any such entity) shall not be a 
                covered security if the exchange adopts listing 
                standards pursuant to section 19(b) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78s(b)) that designates 
                a tier or segment of such securities as securities that 
                are not covered securities for purposes of this section 
                and such security is listed, or authorized for listing, 
                on such tier or segment''; and
            (2) in subparagraph (B), by inserting ``covered'' after 
        ``applicable to''.

SEC. 208. DIRECTING THE COMMISSION TO ACCELERATE FULL CONVERSION OF 
              IFRS AND UNITED STATES GAAP.

    (a) Findings.--Congress finds that--
            (1) the accounting framework applied in more than 100 
        countries around the world is the International Financial 
        Reporting Standard (in this section referred to as ``IFRS'');
            (2) a number of additional important United States trading 
        partners, including Canada, Brazil, Chile, India, and South 
        Korea, have announced dates to shift to IFRS; and
            (3) the difficulty and expense of reconciling IFRS with 
        generally accepted accounting principles employed in the United 
        States (in this section referred to as ``GAAP''), the 
        accounting framework within which companies whose shares are 
        listed on United States exchanges must report their financial 
        information, is among the highest hurdles for foreign companies 
        considering a United States listing, and one of the most 
        compelling incentives for foreign-based businesses to list 
        their shares on exchanges based somewhere other than the United 
        States.
    (b) Acceleration of Effort.--The Commission shall--
            (1) accelerate efforts to offer to both United States- and 
        foreign-based companies the option of reporting financial 
        information using either IFRS or GAAP; and
            (2) accelerate efforts with the Commission's foreign 
        counterparts to achieve full conversion of IFRS and GAAP.

SEC. 209. PROMOTING MARKET ACCESS FOR FINANCIAL SERVICES.

    (a) Findings.--Congress finds that--
            (1) there is a need to consistently monitor and increase 
        Government advocacy for United States financial services firms' 
        attempts to gain overseas financial market access;
            (2) the presence of foreign financial services firms in the 
        United States and their activities should be documented to find 
        which countries' firms enjoy full market access in the United 
        States, while their home governments deny national treatment to 
        American financial services firms; and
            (3) an analysis of the results achieved from the U.S.-China 
        Strategic Economic Dialogue (referred to as ``SED'') and how 
        such results specifically apply to United States financial 
        services firms, including benchmarks and timeframes for future 
        improvements, should be compiled to assess the efficacy of the 
        negotiations.
    (b) Amendments to Financial Reports Act.--The Financial Reports Act 
of 1988 (22 U.S.C. 5351 et seq.) is amended--
            (1) in section 3602--
                    (A) in the section heading, by striking 
                ``quadrennial'' and inserting ``annual'';
                    (B) by striking ``Not less frequently than every 4 
                years, beginning December 1, 1990'' and inserting 
                ``Beginning July 1, 2008, and annually thereafter,''; 
                and
                    (C) by striking ``to the Congress'' and inserting 
                ``to the Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on Financial 
                Services of the House of Representatives''; and
            (2) in section 3603--
                    (A) by redesignating subsections (b), (c), and (d) 
                as subsections (c), (d), and (e), respectively; and
                    (B) by inserting after subsection (a) the 
                following:
    ``(b) Report on SED.--
            ``(1) In general.--The Secretary shall include in the 
        initial report required under section 3602, a summary of the 
        results of the most recent United States-China Strategic 
        Economic Dialogue (in this subsection referred to as `SED') and 
        the results of the SED as it relates to promoting market access 
        for financial institutions.
            ``(2) Progress report.--The reports required under section 
        3602 shall include a progress report on the implementation of 
        any agreements resulting from the SED, a description of the 
        remaining challenges, if any, in improving market access for 
        financial institutions, and a plan, including benchmarks and 
        time frames, for dealing with the remaining challenges.
            ``(3) Specific content.--Each report described in this 
        subsection shall specifically address issues regarding--
                    ``(A) foreign investment rules;
                    ``(B) the problems of a dual-share stock market;
                    ``(C) the openness of the derivatives market;
                    ``(D) restrictions on foreign bank branching;
                    ``(E) the ability to offer insurance (including 
                innovative products); and
                    ``(F) regulatory and procedural transparency.''.

                    TITLE III--PROTECTING HOMEOWNERS

SEC. 301. SUBPRIME REFINANCING LOANS THROUGH USE OF QUALIFIED MORTGAGE 
              BONDS.

    (a) Use of Qualified Mortgage Bonds Proceeds for Subprime 
Refinancing Loans.--Section 143(k) of the Internal Revenue Code of 1986 
(relating to other definitions and special rules) is amended by adding 
at the end the following:
            ``(12) Special rules for subprime refinancings.--
                    ``(A) In general.--Notwithstanding the requirements 
                of subsection (i)(1), the proceeds of a qualified 
                mortgage issue may be used to refinance a mortgage on a 
                residence which was originally financed by the 
                mortgagor through a qualified subprime loan.
                    ``(B) Special rules.--In applying this paragraph to 
                any case in which the proceeds of a qualified mortgage 
                issue are used for any refinancing described in 
                subparagraph (A)--
                            ``(i) subsection (a)(2)(D)(i) shall be 
                        applied by substituting `12-month period' for 
                        `42-month period' each place it appears,
                            ``(ii) subsection (d) (relating to 3-year 
                        requirement) shall not apply, and
                            ``(iii) subsection (e) (relating to 
                        purchase price requirement) shall be applied by 
                        using the market value of the residence at the 
                        time of refinancing in lieu of the acquisition 
                        cost.
                    ``(C) Qualified subprime loan.--The term `qualified 
                subprime loan' means an adjustable rate single-family 
                residential mortgage loan originated after December 31, 
                2001, and before January 1, 2008, that the bond issuer 
                determines would be reasonably likely to cause 
                financial hardship to the borrower if not refinanced.
                    ``(D) Termination.--This paragraph shall not apply 
                to any bonds issued after December 31, 2010.''.
    (b) Increased Volume Cap for Certain Bonds.--
            (1) In general.--Subsection (d) of section 146 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following:
            ``(5) Increase and set aside for housing bonds for 2008.--
                    ``(A) Increase for 2008.--In the case of calendar 
                year 2008, the State ceiling for each State shall be 
                increased by an amount equal to $10,000,000,000 
                multiplied by a fraction--
                            ``(i) the numerator of which is the 
                        population of such State (as reported in the 
                        most recent decennial census), and
                            ``(ii) the denominator of which is the 
                        total population of all States (as reported in 
                        the most recent decennial census).
                    ``(B) Set aside.--
                            ``(i) In general.--Any amount of the State 
                        ceiling for any State which is attributable to 
                        an increase under this paragraph shall be 
                        allocated solely for one or more qualified 
                        purposes.
                            ``(ii) Qualified purpose.--For purposes of 
                        this paragraph, the term `qualified purpose' 
                        means--
                                    ``(I) the issuance of exempt 
                                facility bonds used solely to provide 
                                qualified residential rental projects, 
                                or
                                    ``(II) a qualified mortgage issue 
                                (determined by substituting `12-month 
                                period' for `42-month period' each 
                                place it appears in section 
                                143(a)(2)(D)(i)).''.
            (2) Carryforward of unused limitations.--Subsection (f) of 
        section 146 of such Code is amended by adding at the end the 
        following:
            ``(6) Special rules for increased volume cap under 
        subsection (d)(5).--
                    ``(A) In general.--No amount which is attributable 
                to the increase under subsection (d)(5) may be used--
                            ``(i) for a carryforward purpose other than 
                        a qualified purpose (as defined in subsection 
                        (d)(5)), and
                            ``(ii) to issue any bond after calendar 
                        year 2010.
                    ``(B) Ordering rules.--For purposes of subparagraph 
                (A), any carryforward of an issuing authority's volume 
                cap for calendar year 2008 shall be treated as 
                attributable to such increase to the extent of such 
                increase.''.
    (c) Alternative Minimum Tax.--
            (1) In general.--Clause (ii) of section 57(a)(5)(C) of the 
        Internal Revenue Code of 1986 is amended by striking ``shall 
        not include'' and all that follows and inserting ``shall not 
        include--
                                    ``(I) any qualified 501(c)(3) bond 
                                (as defined in section 145), or
                                    ``(II) any qualified mortgage bond 
                                (as defined in section 143(a)) or 
                                qualified veteran's mortgage bond (as 
                                defined in section 143(b)) issued after 
                                the date of the enactment of this 
                                subclause and before January 1, 
                                2011.''.
            (2) Conforming amendment.--The heading for section 
        57(a)(5)(C)(ii) of the Internal Revenue Code of 1986 is amended 
        by striking ``qualified 501(c)(3) bonds'' and inserting 
        ``certain bond''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 302. EXPEDITIOUS DISTRIBUTION OF FUNDS ALREADY PROVIDED FOR 
              MORTGAGE FORECLOSURE COUNSELING.

    Upon certification by the Neighborhood Reinvestment Corporation 
under paragraph (4) under the heading ``Neighborhood Reinvestment 
Corporation--Payment to the Neighborhood Reinvestment Corporation'' of 
Public Law 110-161 that Housing and Urban Development or Neighborhood 
Reinvestment Corporation-approved counseling intermediaries and State 
Housing Finance Agencies have the need for additional portions of the 
$180,000,000 provided therein for mortgage foreclosure mitigation 
activities in States and areas with high rates of mortgage 
foreclosures, defaults, or related activities beyond the initial 
awards, and the expertise to use such funds effectively, the 
Neighborhood Reinvestment Corporation shall expeditiously continue to 
award such funds as need and expertise is shown.

SEC. 303. CREDIT FOR PURCHASE OF HOMES IN OR NEAR FORECLOSURE.

    (a) Allowance of Credit.--Subpart A of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating to refundable 
credits) is amended by inserting after section 25D the following new 
section:

``SEC. 25E. CREDIT FOR PURCHASE OF HOMES IN OR NEAR FORECLOSURE.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an individual who is a 
        purchaser of a qualified principal residence during the taxable 
        year, there shall be allowed as a credit against the tax 
        imposed by this chapter an amount equal to so much of the 
        purchase price of the residence as does not exceed $15,000.
            ``(2) Allocation of credit amount.--The amount of the 
        credit allowed under paragraph (1) shall be equally divided 
        among the 3 taxable years beginning with the taxable year in 
        which the purchase of the qualified principal residence is 
        made.
    ``(b) Limitations.--
            ``(1) Date of purchase.--The credit allowed under 
        subsection (a) shall be allowed only with respect to purchases 
        made--
                    ``(A) after February 29, 2008, and
                    ``(B) before March 1, 2009.
            ``(2) Limitation based on amount of tax.--In the case of a 
        taxable year to which section 26(a)(2) does not apply, the 
        credit allowed under subsection (a) for any taxable year shall 
        not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section) for the taxable year.
            ``(3) One-time only.--
                    ``(A) In general.--If a credit is allowed under 
                this section in the case of any individual (and such 
                individual's spouse, if married) with respect to the 
                purchase of any qualified principal residence, no 
                credit shall be allowed under this section in any 
                taxable year with respect to the purchase of any other 
                qualified principal residence by such individual or a 
                spouse of such individual.
                    ``(B) Joint purchase.--In the case of a purchase of 
                a qualified principal residence by 2 or more unmarried 
                individuals or by 2 married individuals filing 
                separately, no credit shall be allowed under this 
                section if a credit under this section has been allowed 
                to any of such individuals in any taxable year with 
                respect to the purchase of any other qualified 
                principal residence.
    ``(c) Qualified Principal Residence.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified principal residence' means an eligible single-family 
        residence that is purchased to be the principal residence of 
        the purchaser.
            ``(2) Eligible single-family residence.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `eligible single-family residence' means a 
                single-family structure that is--
                            ``(i) a new previously unoccupied residence 
                        for which a building permit is issued and 
                        construction begins on or before September 1, 
                        2007, but only if such residence is purchased 
                        by the taxpayer directly from the person to 
                        whom such building permit was issued,
                            ``(ii) an owner-occupied residence with 
                        respect to which the owner's acquisition 
                        indebtedness (as defined in section 
                        163(h)(3)(B), determined without regard to 
                        clause (ii) thereof) is in default on or before 
                        March 1, 2008, or
                            ``(iii) a residence with respect to which a 
                        foreclosure event has taken place and which is 
                        owned by the mortgagor or the mortgagor's 
                        agent, but only if such residence was occupied 
                        as a principal residence by the mortgagee for 
                        at least 1 year prior to the foreclosure event.
                    ``(B) Certification.--In the case of an eligible 
                single-family residence described in subparagraph 
                (A)(i), no credit shall be allowed under this section 
                unless the purchaser submits a certification by the 
                seller of such residence that such residence meets the 
                requirements of such subparagraph.
    ``(d) Denial of Double Benefit.--No credit shall be allowed under 
this section for any purchase for which a credit is allowed under 
section 1400C.
    ``(e) Recapture in the Case of Certain Dispositions.--In the event 
that a taxpayer--
            ``(1) disposes of the qualified principal residence with 
        respect to which a credit is allowed under subsection (a), or
            ``(2) fails to occupy such residence as the taxpayer's 
        principal residence,
at any time within 36 months after the date on which the taxpayer 
purchased such residence, then the remaining portion of the credit 
allowed under subsection (a) shall be disallowed in the taxable year 
during which such disposition occurred or in which the taxpayer failed 
to occupy the residence as a principal residence, and in any subsequent 
taxable year in which the remaining portion of the credit would, but 
for this subsection, have been allowed.
    ``(f) Special Rules.--
            ``(1) Joint purchase.--
                    ``(A) Married individuals filing separately.--In 
                the case of 2 married individuals filing separately, 
                subsection (a) shall be applied to each such individual 
                by substituting `$7,500' for `$15,000' in subsection 
                (a)(1).
                    ``(B) Unmarried individuals.--If 2 or more 
                individuals who are not married purchase a qualified 
                principal residence, the amount of the credit allowed 
                under subsection (a) shall be allocated among such 
                individuals in such manner as the Secretary may 
                prescribe, except that the total amount of the credits 
                allowed to all such individuals shall not exceed 
                $15,000.
            ``(2) Purchase.--In defining the purchase of a qualified 
        principal residence, rules similar to the rules of paragraphs 
        (2) and (3) of section 1400C(e) (as in effect on the date of 
        the enactment of this section) shall apply.
            ``(3) Reporting requirement.--Rules similar to the rules of 
        section 1400C(f) (as so in effect) shall apply.
    ``(g) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section with respect to the purchase of any 
residence, the basis of such residence shall be reduced by the amount 
of the credit so allowed.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 25D the 
following new item:

``Sec. 25E. Credit for certain home purchases.''.

SEC. 304. ENHANCED MORTGAGE LOAN DISCLOSURES.

    (a) Truth in Lending Act Disclosures.--Section 128(b)(2) of the 
Truth in Lending Act (15 U.S.C. 1638(b)(2)) is amended--
            (1) by inserting ``(A)'' before ``In the'';
            (2) by striking ``a residential mortgage transaction, as 
        defined in section 103(w)'' and inserting ``any extension of 
        credit that is secured by the dwelling of a consumer'';
            (3) by striking ``shall be made in accordance'' and all 
        that follows through ``extended, or''; and
            (4) by striking ``If the'' and all that follows through the 
        end of the paragraph and inserting the following:
                    ``(B) In the case of an extension of credit that is 
                secured by the dwelling of a consumer, in addition to 
                the other disclosures required by subsection (a), the 
                disclosures provided under this paragraph shall--
                            ``(i) state in conspicuous type size and 
                        format, the following: `You are not required to 
                        complete this agreement merely because you have 
                        received these disclosures or signed a loan 
                        application.'; and
                            ``(ii) be furnished to the borrower not 
                        later than 7 business days before the date of 
                        consummation of the transaction, and at the 
                        time of consummation of the transaction, 
                        subject to subparagraph (D).
                    ``(C) In the case of an extension of credit that is 
                secured by the dwelling of a consumer, under which the 
                annual rate of interest is variable, or with respect to 
                which the regular payments may otherwise be variable, 
                in addition to the other disclosures required by 
                subsection (a), the disclosures provided under this 
                paragraph shall--
                            ``(i) label the payment schedule as 
                        follows: `Payment Schedule: Payments Will Vary 
                        Based on Interest Rate Changes';
                            ``(ii) state the maximum amount of the 
                        regular required payments on the loan, based on 
                        the maximum interest rate allowed, introduced 
                        with the following language in conspicuous type 
                        size and format: `Your payment can go as high 
                        as $_______', the blank to be filled in with 
                        the maximum possible payment amount;
                            ``(iii) if the loan is an adjustable rate 
                        mortgage that includes an initial fixed 
                        interest rate--
                                    ``(I) state in conspicuous type 
                                size and format the following phrase: 
                                This loan is an adjustable rate 
                                mortgage with an initial fixed interest 
                                rate. Your initial fixed interest rate 
                                is AAA with a monthly payment of BBB 
                                until CCC. After that date, the 
                                interest rate on your loan will `reset' 
                                to an adjustable rate and both your 
                                interest rate and payment could go 
                                higher on that date and in the future. 
                                For example, if your initial fixed rate 
                                ended today, your new adjustable 
                                interest rate would be DDD and your new 
                                payment EEE. If interest rates are one 
                                percent higher than they are today or 
                                at some point in the future, your new 
                                payment would be FFF. There is no 
                                guarantee you will be able to refinance 
                                your loan to a lower interest rate and 
                                payment before your initial fixed 
                                interest rate ends.;
                                    ``(II) the blank AAA in 
                                subparagraph (I) to be filled in with 
                                the initial fixed interest rate;
                                    ``(III) the blank BBB in 
                                subparagraph (I) to be filled in with 
                                the payment amount under the initial 
                                fixed interest rate;
                                    ``(IV) the blank CCC in 
                                subparagraph (I) to be filled in with 
                                the loan reset date;
                                    ``(V) the blank DDD in subparagraph 
                                (I) to be filled in with the adjustable 
                                rate as if the initial rate expired on 
                                the date of disclosure under 
                                subparagraph (B);
                                    ``(VI) the blank EEE in 
                                subparagraph (I) to be filled in with 
                                the payment under the adjustable rate 
                                as if the initial rate expired on the 
                                date of disclosure under subparagraph 
                                (B); and
                                    ``(VII) the blank FFF in 
                                subparagraph (I) to be filled in with 
                                the payment under the adjustable rate 
                                as if index rate on which the 
                                adjustable rate was one percent higher 
                                than of the date of disclosure under 
                                subparagraph (B); and
                            ``(iv) if the loan contains a prepayment 
                        penalty--
                                    ``(I) state in conspicuous type and 
                                format the following phrase: This loan 
                                contains a prepayment penalty. If you 
                                desire to pay off this loan before GGG, 
                                you will pay a penalty of HHH.;
                                    ``(II) the blank GGG in 
                                subparagraph (I) to be filled in with 
                                the date the prepayment penalty 
                                expires; and
                                    ``(III) the blank HHH in 
                                subparagraph (I) to be filled in with 
                                the prepayment penalty amount.
                    ``(D) In any case in which the disclosure statement 
                provided 7 business days before the date of 
                consummation of the transaction contains an annual 
                percentage rate of interest that is no longer accurate, 
                as determined under section 107(c), the creditor shall 
                furnish an additional, corrected statement to the 
                borrower, not later than 3 business days before the 
                date of consummation of the transaction.''.
    (b) Civil Liability.--Section 130(a) of the Truth in Lending Act 
(15 U.S.C. 1640(a)) is amended--
            (1) in paragraph (2)(A)(iii), by striking ``not less than 
        $200 or greater than $2,000'' and inserting ``$5,000, such 
        amount to be adjusted annually based on the consumer price 
        index, to maintain current value''; and
            (2) in the penultimate sentence of the undesignated matter 
        following paragraph (4)--
                    (A) by striking ``only for'' and inserting ``for'';
                    (B) by striking ``section 125 or'' and inserting 
                ``section 122, section 125,'';
                    (C) by inserting ``or section 128(b),'' after 
                ``128(a),''; and
                    (D) by inserting ``or section 128(b)'' before the 
                period.

SEC. 305. CARRYBACK OF CERTAIN NET OPERATING LOSSES ALLOWED FOR 5 
              YEARS; TEMPORARY SUSPENSION OF 90 PERCENT AMT LIMIT.

    (a) In General.--Subparagraph (H) of section 172(b)(1) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                    ``(H) 5-year carryback of certain losses.--
                            ``(i) Taxable years ending during 2001 and 
                        2002.--In the case of a net operating loss for 
                        any taxable year ending during 2001 or 2002, 
                        subparagraph (A)(i) shall be applied by 
                        substituting `5' for `2' and subparagraph (F) 
                        shall not apply.
                            ``(ii) Taxable years ending during 2006, 
                        2007, 2008, and 2009.--In the case of a net 
                        operating loss for any taxable year ending 
                        during 2006, 2007, 2008, or 2009--
                                    ``(I) subparagraph (A)(i) shall be 
                                applied by substituting `5' for `2',
                                    ``(II) subparagraph (E)(ii) shall 
                                be applied by substituting `4' for `2', 
                                and
                                    ``(III) subparagraph (F) shall not 
                                apply.''.
    (b) Temporary Suspension of 90 Percent Limit on Certain NOL 
Carrybacks and Carryovers.--
            (1) In general.--Section 56(d) of the of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new paragraph:
            ``(3) Additional adjustments.--For purposes of paragraph 
        (1)(A), the amount described in clause (I) of paragraph 
        (1)(A)(ii) shall be increased by the amount of the net 
        operating loss deduction allowable for the taxable year under 
        section 172 attributable to the sum of--
                    ``(A) carrybacks of net operating losses from 
                taxable years ending during 2006, 2007, 2008, and 2009, 
                and
                    ``(B) carryovers of net operating losses to taxable 
                years ending during 2006, 2007, 2008, or 2009.''.
            (2) Conforming amendment.--Subclause (I) of section 
        56(d)(1)(A)(i) of such Code is amended by inserting ``amount of 
        such'' before ``deduction described in clause (ii)(I)''.
    (c) Anti-Abuse Rules.--The Secretary of Treasury or the Secretary's 
designee shall prescribes such rules as are necessary to prevent the 
abuse of the purposes of the amendments made by this section, including 
anti-stuffing rules, anti-churning rules (including rules relating to 
sale-leasebacks), and rules similar to the rules under section 1091 of 
the Internal Revenue Code of 1986 relating to losses from wash sales.
    (d) Effective Dates.--
            (1) Subsection (a).--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by subsection (a) shall apply 
                to net operating losses arising in taxable years ending 
                in 2006, 2007, 2008, or 2009.
                    (B) Election.--In the case of a net operating loss 
                for a taxable year ending during 2006 or 2007--
                            (i) any election made under section 
                        172(b)(3) of the Internal Revenue Code of 1986 
                        may (notwithstanding such section) be revoked 
                        before November 1, 2008, and
                            (ii) any election made under section 172(j) 
                        of such Code shall (notwithstanding such 
                        section) be treated as timely made if made 
                        before November 1, 2008.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years ending after December 31, 1995.

                 TITLE IV--REDUCING THE LITIGATION TAX

SEC. 401 LIMITATION ON PUNITIVE DAMAGES FOR SMALL BUSINESSES.

    (a) Definition of Covered Small Business.--In this section, the 
term ``covered small business'' means any unincorporated business, or 
any partnership, corporation, association, unit of local government, or 
organization--
            (1) that has fewer than 25 full-time employees as of the 
        date that the relevant civil action is filed; and
            (2) the principal place of business of which is in a State 
        other than the State where the relevant civil action is filed.
    (b) General Rule.--Except as provided in subsection (c), in any 
civil action filed in a Federal or State court against a covered small 
business, punitive damages--
            (1) may be awarded against that covered small business only 
        if the court finds by clear and convincing evidence that 
        conduct of that covered small business was--
                    (A) carried out with a conscious, flagrant 
                indifference to the rights or safety of others; and
                    (B) the proximate cause of the harm that is the 
                subject of the civil action; and
            (2) shall not be awarded against that covered small 
        business in an amount greater than $250,000.
    (c) Exceptions.--This section shall not apply to a civil action if 
the court finds by clear and convincing evidence that--
            (1) the covered small business acted with specific intent 
        to cause the type of harm that is the subject of the civil 
        action;
            (2) the conduct of the covered small business constitute a 
        criminal offense; or
            (3) the conduct of the covered small business resulted in 
        serious environmental degradation.
    (d) Application by the Court.--The limitation on punitive damages 
under this section shall be carried out by the court and shall not be 
disclosed to the jury, if any.

SEC. 402. REASONABLENESS REVIEW OF ATTORNEY'S FEES.

    (a) In General.--In any civil action in a Federal or State court in 
which the damages awarded to a party exceed $5,000,000, the court shall 
review the fees paid to any attorney for the prevailing party and 
ensure that those fees are reasonable in light of the hours of work 
actually performed by that attorney and the risk of nonpayment of fees 
assumed by that attorney when that attorney agreed to represent the 
party.
    (b) Unreasonable Fees.--If a Federal or State court determines 
under subsection (a) that the fees paid to an attorney for a prevailing 
party are not reasonable, the court shall reduce the amount of that 
attorney's fees.
    (c) Assistance.--A Federal or State court may, as appropriate, 
retain the services of an independent accounting firm to assist the 
court in conducting a review under this section.

SEC. 403. PARTIAL AWARD OF ATTORNEY'S FEES FOR UNREASONABLE LAWSUITS.

    (a) In General.--In any civil action described in subsection (b), a 
court shall award to a prevailing party 30 percent of the reasonable 
attorney's fees that were incurred by that prevailing party in 
connection with a claim described in subsection (b)(2) after the date 
on which the party asserting that claim knew or should have known of 
the facts that would require that claim to be dismissed because there 
was no genuine issue of material fact.
    (b) Civil Actions.--A civil action described in this subsection is 
a civil action--
            (1) filed in a Federal court or against a party whose 
        principal residence or place of business is in a State other 
        than the State where the civil action is filed; and
            (2) in which the court finds that no genuine issue of 
        material fact exists with regard to a claim that would allow a 
        reasonable juror to find in favor of the party presenting that 
        claim.

SEC. 404. MANDATORY SANCTIONS FOR FRIVOLOUS LAWSUITS.

    (a) In General.--If a court of the United States (as that term is 
defined in section 451 of title 28, United States Code) determines, 
whether on a motion of a party or on its own motion, that there has 
been a violation of rule 11 of the Federal Rules of Civil Procedure in 
any civil action, the court shall impose upon the attorney, law firm, 
or pro se litigant that violated rule 11, or is responsible for such 
violation, an appropriate sanction.
    (b) Sanctions.--A sanction imposed under this section--
            (1) shall include an order to pay any other party to the 
        relevant civil action the reasonable expenses incurred by that 
        party as a direct result of the filing of the pleading, motion, 
        or other paper that is the subject of the violation of rule 11 
        of the Federal Rules of Civil Procedure, including reasonable 
        attorney's fees; and
            (2) shall be sufficient to--
                    (A) deter the repetition of such conduct or 
                comparable conduct by other similarly situated persons; 
                and
                    (B) compensate any party injured by such conduct.

SEC. 405. BAR ON JUNK SCIENCE IN THE COURTROOM.

    (a) In General.--In any civil action filed in a Federal court or 
against a party whose principal residence or place of business is in a 
State other than the State where the civil action is filed, if 
scientific, technical, or other specialized knowledge will assist the 
fact finder to understand the evidence or to determine a fact in issue, 
a witness qualified as an expert by knowledge, skill, experience, 
training, or education, may give testimony relating to that evidence or 
fact, in the form of an opinion or otherwise, if--
            (1) the witness has disclosed, upon the request of the 
        opposing party, those facts or data upon which the testimony of 
        the witness is based or that are material to the testimony of 
        the witness;
            (2) the testimony is based upon sufficient facts or data;
            (3) the testimony is the product of reliable principles and 
        methods; and
            (4) the witness has applied the principles and methods 
        reliably to the facts.
    (b) Review.--A trial court's application of subsection (a) shall be 
subject to de novo review.
                                                       Calendar No. 587

110th CONGRESS

  2d Session

                                 S. 12

_______________________________________________________________________

                                 A BILL

     To promote home ownership, manufacturing, and economic growth.

_______________________________________________________________________

                             March 3, 2008

            Read the second time and placed on the calendar
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