II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Homeownership, Manufacturing, and Economic Growth 

6 Act’’ or the ‘‘HOME Act’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 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. 


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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


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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. 


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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. 

1 TITLE I—KEEPING TAXES LOW 

2 SEC. 100. AMENDMENT TO 1986 CODE. 

3 Except as otherwise expressly provided, whenever in 

4 this title an amendment or repeal is expressed in terms 

5 of an amendment to, or repeal of, a section or other provi6 sion, the reference shall be considered to be made to a 

7 section or other provision of the Internal Revenue Code 

8 of 1986. 

9 Subtitle A—Extension of Expiring 

10 Provisions 

11 PART I—INDIVIDUAL TAX PROVISIONS 

12 Subpart A—Provisions Expiring in 2007 

13 SEC. 101. NONBUSINESS ENERGY PROPERTY. 

14 (a) EXTENSION OF CREDIT.—Section 25C(g) (relat15 ing to termination) is amended by striking ‘‘December 31, 

16 2007’’ and inserting ‘‘December 31, 2009’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to property placed in service after 

19 December 31, 2007. 


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1 SEC. 102. ELECTION TO INCLUDE COMBAT PAY AS EARNED 

2 INCOME FOR PURPOSES OF THE EARNED IN3 COME CREDIT. 

4 (a) IN GENERAL.—Subclause (II) of section 

5 32(c)(2)(B)(vi) (defining earned income) is amended by 

6 striking ‘‘January 1, 2008’’ and inserting ‘‘January 1, 

7 2010’’. 

8 (b) CONFORMING AMENDMENT.—Paragraph (4) of 

9 section 6428, as amended by the Economic Stimulus Act 

10 of 2008, is amended to read as follows: 

11 ‘‘(4) EARNED INCOME.—The term ‘earned in12 come’ has the meaning set forth in section 32(c)(2) 

13 except that such term shall not include net earnings 

14 from self-employment which are not taken into ac15 count in computing taxable income.’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years ending after De18 cember 31, 2007. 

19 SEC. 103. DEDUCTION FOR CERTAIN EXPENSES OF ELE20 MENTARY AND SECONDARY SCHOOL TEACH21 ERS. 

22 (a) IN GENERAL.—Subparagraph (D) of section 

23 62(a)(2) (relating to certain expenses of elementary and 

24 secondary school teachers) is amended by striking ‘‘or 

25 2007’’ and inserting ‘‘2007, 2008, or 2009’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2007. 

4 SEC. 104. DISTRIBUTIONS FROM RETIREMENT PLANS TO 

5 INDIVIDUALS CALLED TO ACTIVE DUTY. 

6 (a) IN GENERAL.—Clause (iv) of section 72(t)(2)(G) 

7 is amended by striking ‘‘December 31, 2007’’ and insert8 ing ‘‘January 1, 2010’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to individuals ordered or called to 

11 active duty on or after December 31, 2007. 

12 SEC. 105. MODIFICATION OF MORTGAGE REVENUE BONDS 

13 FOR VETERANS. 

14 (a) QUALIFIED MORTGAGE BONDS USED TO FI15 NANCE RESIDENCES FOR VETERANS WITHOUT REGARD

16 TO FIRST-TIME HOMEBUYER REQUIREMENT.—Subpara17 graph (D) of section 143(d)(2) (relating to exceptions) is 

18 amended by inserting ‘‘and after the date of the enactment 

19 of the HOME Act and before January 1, 2010’’ after 

20 ‘‘January 1, 2008’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to bonds issued after the date of 

23 the enactment of this Act. 


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1 SEC. 106. DEDUCTION FOR STATE AND LOCAL SALES 

2 TAXES. 

3 (a) IN GENERAL.—Subparagraph (I) of section 

4 164(b)(5) is amended by striking ‘‘January 1, 2008’’ and 

5 inserting ‘‘January 1, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2007. 

9 SEC. 107. ARCHER MSAS. 

10 (a) IN GENERAL.—Subsection (i) of section 220 (re11 lating to limitation on number of taxpayers having Archer 

12 MSAs) is amended— 

13 (1) by striking ‘‘2007’’ each place it appears in 

14 paragraphs (2) and (3)(B) and inserting ‘‘2009’’, 

15 (2) by striking ‘‘2007’’ in the heading of para16 graph (3)(B) and inserting ‘‘2009’’. 

17 (b) CONFORMING AMENDMENTS.—Subsection (j) of 

18 section 220 is amended— 

19 (1) by striking ‘‘or 2006’’ each place it appears 

20 in paragraph (2) and inserting ‘‘2006, 2007, or 

21 2008’’, 

22 (2) by striking ‘‘OR 2006’’ in the heading for 

23 paragraph (2) and inserting ‘‘2006, 2007, OR 2008’’, 

24 and 

25 (3) by striking ‘‘and 2006’’ in paragraph (4) 

26 and inserting ‘‘2006, 2007, and 2008’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to calendar years beginning after 

3 December 31, 2007. 

4 SEC. 108. DEDUCTION OF QUALIFIED TUITION AND RE5 LATED EXPENSES. 

6 (a) IN GENERAL.—Subsection (e) of section 222 (re7 lating to termination) is amended by striking ‘‘December 

8 31, 2007’’ and inserting ‘‘December 31, 2009’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to taxable years beginning after 

11 December 31, 2007. 

12 SEC. 109. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE13 TIREMENT PLANS FOR CHARITABLE PUR14 POSES. 

15 (a) IN GENERAL.—Subparagraph (F) of section 

16 408(d)(8) (relating to termination) is amended by striking 

17 ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

18 2009’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to distributions made in taxable 

21 years beginning after December 31, 2007. 


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1 SEC. 110. STOCK IN RIC FOR PURPOSES OF DETERMINING 

2 ESTATES OF NONRESIDENTS NOT CITIZENS. 

3 (a) IN GENERAL.—Paragraph (3) of section 2105(d) 

4 (relating to stock in a RIC) is amended by striking ‘‘De5 cember 31, 2007’’ and inserting ‘‘December 31, 2009’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to decedents dying after December 

8 31, 2007. 

9 Subpart B—Provisions Expiring in 2008 

10 SEC. 111. RESIDENTIAL ENERGY EFFICIENT PROPERTY. 

11 Subsection (g) of section 25D (relating to termi12 nation) is amended by striking ‘‘December 31, 2008’’ and 

13 inserting ‘‘December 31, 2009’’. 

14 PART II—BUSINESS TAX PROVISIONS 

15 Subpart A—Provisions Expiring in 2007 

16 SEC. 121. RESEARCH ACTIVITIES. 

17 (a) IN GENERAL.—Section 41(h) (relating to termi18 nation) is amended by striking ‘‘December 31, 2007’’ and 

19 inserting ‘‘December 31, 2009’’ in paragraph (1)(B). 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to amounts paid or incurred after 

22 December 31, 2007. 

23 SEC. 122. INDIAN EMPLOYMENT CREDIT. 

24 (a) IN GENERAL.—Subsection (f) of section 45A (re25 lating to termination) is amended by striking ‘‘December 

26 31, 2007’’ and inserting ‘‘December 31, 2009’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2007. 

4 SEC. 123. RAILROAD TRACK MAINTENANCE. 

5 (a) IN GENERAL.—Subsection (f) of section 45G (re6 lating to application of section) is amended by striking 

7 ‘‘January 1, 2008’’ and inserting ‘‘January 1, 2010’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to expenditures paid or incurred 

10 during taxable years beginning after December 31, 2007. 

11 SEC. 124. PRODUCTION OF FUEL FROM A NONCONVEN12 TIONAL SOURCE AT CERTAIN FACILITIES. 

13 (a) IN GENERAL.—Subsection (f)(1)(B) of section 

14 45K (relating to extension for certain facilities) is amend15 ed by striking ‘‘January 1, 2008’’ and inserting ‘‘January 

16 1, 2010’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to fuels produced and sold after 

19 December 31, 2007. 

20 SEC. 125. ENERGY EFFICIENT APPLIANCES. 

21 (a) IN GENERAL.—Subsection (b) of section 45M (re22 lating to applicable amount) is amended by striking ‘‘cal23 endar year 2006 or 2007’’ each place it appears in para24 graphs (1)(A)(i), (1)(B)(i), (1)(C)(ii)(I), and 


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1 (1)(C)(iii)(I), and inserting ‘‘calendar year 2006, 2007, 

2 2008, or 2009’’. 

3 (b) RESTART OF CREDIT LIMITATION.—Paragraph 

4 (1) of section 45M(e) (relating to aggregate credit amount 

5 allowed) is amended by inserting ‘‘beginning after Decem6 ber 31, 2007’’ after ‘‘for all prior taxable years’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to appliances produced after De9 cember 31, 2007. 

10 SEC. 126. 15-YEAR STRAIGHT-LINE COST RECOVERY FOR 

11 QUALIFIED LEASEHOLD IMPROVEMENTS AND 

12 QUALIFIED RESTAURANT IMPROVEMENTS. 

13 (a) IN GENERAL.—Clauses (iv) and (v) of section 

14 168(e)(3)(E) (relating to 15-year property) are each 

15 amended by striking ‘‘January 1, 2008’’ and inserting 

16 ‘‘January 1, 2010’’. 

17 (b) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to property placed in service after 

19 December 31, 2007. 

20 SEC. 127. SEVEN-YEAR COST RECOVERY PERIOD FOR MO21 TORSPORTS RACING TRACK FACILITY. 

22 (a) IN GENERAL.—Subparagraph (D) of section 

23 168(i)(15) (relating to termination) is amended by strik24 ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

25 2009’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to property placed in service after 

3 December 31, 2007. 

4 SEC. 128. ACCELERATED DEPRECIATION FOR BUSINESS 

5 PROPERTY ON INDIAN RESERVATION. 

6 (a) IN GENERAL.—Paragraph (8) of section 168(j) 

7 (relating to termination) is amended by striking ‘‘Decem8 ber 31, 2007’’ and inserting ‘‘December 31, 2009’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to property placed in service after 

11 December 31, 2007. 

12 SEC. 129. QUALIFIED CONSERVATION CONTRIBUTIONS. 

13 (a) IN GENERAL.—Clause (vi) of section 

14 170(b)(1)(E) (relating to termination) is amended by 

15 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

16 31, 2009’’. 

17 (b) CONTRIBUTIONS BY CORPORATE FARMERS AND

18 RANCHERS.—Clause (iii) of section 170(b)(2)(B) (relating 

19 to termination) is amended by striking ‘‘December 31, 

20 2007’’ and inserting ‘‘December 31, 2009’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to contributions made in taxable 

23 years beginning after December 31, 2007. 


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1 SEC. 130. ENHANCED CHARITABLE DEDUCTION FOR CON2 TRIBUTIONS OF FOOD INVENTORY. 

3 (a) IN GENERAL.—Clause (iv) of section 

4 170(e)(3)(C) (relating to termination) is amended by 

5 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

6 31, 2009’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to contributions made after De9 cember 31, 2007. 

10 SEC. 131. ENHANCED CHARITABLE DEDUCTION FOR CON11 TRIBUTIONS OF BOOK INVENTORY. 

12 (a) IN GENERAL.—Clause (iv) of section 

13 170(e)(3)(D) (relating to termination) is amended by 

14 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

15 31, 2009’’. 

16 (b) CLERICAL AMENDMENT.—Clause (iii) of section 

17 170(e)(3)(D) (relating to certification by donee) is amend18 ed by inserting ‘‘of books’’ after ‘‘to any contribution’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to contributions made after De21 cember 31, 2007. 

22 SEC. 132. ENHANCED CHARITABLE DEDUCTION FOR COR23 PORATE CONTRIBUTIONS OF COMPUTER 

24 EQUIPMENT FOR EDUCATIONAL PURPOSES. 

25 (a) IN GENERAL.—Subparagraph (G) of section 

26 170(e)(6) (relating to termination) is amended by striking 


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1 ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

2 2009’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to contributions made after De5 cember 31, 2007. 

6 SEC. 133. EXPENSING OF ENVIRONMENTAL REMEDIATION 

7 COSTS. 

8 (a) IN GENERAL.—Subsection (h) of section 198 (re9 lating to termination) is amended by striking ‘‘December 

10 31, 2007’’ and inserting ‘‘December 31, 2009’’. 

11 (b) EFFECTIVE DATE.—The amendment made by 

12 this section shall apply to expenditures paid or incurred 

13 after December 31, 2007. 

14 SEC. 134. DEDUCTION ALLOWABLE WITH RESPECT TO IN15 COME ATTRIBUTABLE TO DOMESTIC PRO16 DUCTION ACTIVITIES IN PUERTO RICO. 

17 (a) IN GENERAL.—Subparagraph (C) of section 

18 199(d)(8) (relating to termination) is amended— 

19 (1) by striking ‘‘first 2 taxable years’’ and in20 serting ‘‘first 4 taxable years’’, and 

21 (2) by striking ‘‘January 1, 2008’’ and insert22 ing ‘‘January 1, 2010’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years beginning after 

25 December 31, 2007. 


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1 SEC. 135. SPECIAL RULE FOR SALES OR DISPOSITIONS TO 

2 IMPLEMENT FERC OR STATE ELECTRIC RE3 STRUCTURING POLICY. 

4 (a) IN GENERAL.—Paragraph (3) of section 451(i) 

5 (relating to qualifying electric transmission transaction) is 

6 amended by striking ‘‘January 1, 2008’’ and inserting 

7 ‘‘January 1, 2010’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to transactions occurring after De10 cember 31, 2007. 

11 SEC. 136. MODIFICATION OF TAX TREATMENT OF CERTAIN 

12 PAYMENTS TO CONTROLLING EXEMPT ORGA13 NIZATIONS. 

14 (a) IN GENERAL.—Clause (iv) of section 

15 512(b)(13)(E) (relating to termination) is amended by 

16 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

17 31, 2009’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to payments received or accrued 

20 after December 31, 2007. 

21 SEC. 137. SUSPENSION OF TAXABLE INCOME LIMIT WITH 

22 RESPECT TO MARGINAL WELLS. 

23 (a) IN GENERAL.—Subparagraph (H) of section 

24 613A(c)(6) (relating to temporary suspension of taxable 

25 income limit with respect to marginal production) is 


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1 amended by striking ‘‘January 1, 2008’’ and inserting 

2 ‘‘January 1, 2010’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2007. 

6 SEC. 138. TREATMENT OF CERTAIN DIVIDENDS OF REGU7 LATED INVESTMENT COMPANIES. 

8 (a) INTEREST-RELATED DIVIDENDS.—Subpara9 graph (C) of section 871(k)(1) (defining interest-related 

10 dividend) is amended by striking ‘‘December 31, 2007’’ 

11 and inserting ‘‘December 31, 2009’’. 

12 (b) SHORT-TERM CAPITAL GAIN DIVIDENDS.—Sub13 paragraph (C) of section 871(k)(2) (defining short-term 

14 capital gain dividend) is amended by striking ‘‘December 

15 31, 2007’’ and inserting ‘‘December 31, 2009’’. 

16 (c) DISPOSITION OF INVESTMENT IN UNITED

17 STATES REAL PROPERTY.—Clause (ii) of section 

18 897(h)(4)(A) (relating to termination) is amended by 

19 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

20 31, 2009’’. 

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

22 this section shall apply to dividends with respect to taxable 

23 years of regulated investment companies beginning after 

24 December 31, 2007. 


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1 SEC. 139. BASIS ADJUSTMENT TO STOCK OF S CORPORA2 TIONS MAKING CHARITABLE CONTRIBU3 TIONS OF PROPERTY. 

4 (a) IN GENERAL.—The last sentence of section 

5 1367(a)(2) (relating to decreases in basis) is amended by 

6 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

7 31, 2009’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to contributions made in taxable 

10 years beginning after December 31, 2007. 

11 SEC. 140. EXTENSION OF QUALIFIED ZONE ACADEMY 

12 BONDS. 

13 (a) IN GENERAL.—Paragraph (1) of section 

14 1397E(e) is amended by striking ‘‘and 2007’’ and insert15 ing ‘‘2007, 2008, and 2009’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall apply to obligations issued after the date 

18 of the enactment of this Act. 

19 SEC. 141. TAX INCENTIVES FOR INVESTMENT IN THE DIS20 TRICT OF COLUMBIA. 

21 (a) DESIGNATION OF DC ENTERPRISE ZONE.—Sub22 section (f) of section 1400 (relating to time for which des23 ignation applicable) is amended by striking ‘‘December 31, 

24 2007’’ each place it appears in paragraphs (1) and (2) 

25 and inserting ‘‘December 31, 2009’’. 


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1 (b) TAX-EXEMPT DC EMPOWERMENT ZONE

2 BONDS.—Subsection (b) of section 1400A (relating to pe3 riod of applicability) is amended by inserting ‘‘, and after 

4 the date of the enactment of the HOME Act and before 

5 December 31, 2009’’ after ‘‘December 31, 2007’’. 

6 (c) ACQUISITION DATE FOR ELIGIBILITY FOR ZERO7 PERCENT CAPITAL GAINS RATE FOR INVESTMENT IN

8 DC.—ubsection (b) of section 1400B (relating to DC zone 

9 asset) is amended by striking ‘‘January 1, 2008’’ each 

10 place it appears in paragraphs (2)(A)(i), (3)(A), (4)(A)(i), 

11 and (4)(B)(i)(I) and inserting ‘‘January 1, 2010’’. 

12 (d) TAX CREDIT FOR FIRST-TIME DC HOME13 BUYERS.—Subsection (i) of section 1400C (relating to ap14 plication of section) is amended by striking ‘‘January 1, 

15 2008’’ and inserting ‘‘January 1, 2010’’. 

16 (e) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to transactions after December 31, 

18 2007. 

19 SEC. 142. 0.2 PERCENT FUTA SURTAX. 

20 (a) IN GENERAL.—Section 3301 (relating to rate of 

21 tax) is amended— 

22 (1) by striking ‘‘through 2007’’ in paragraph 

23 (1) and inserting ‘‘through 2009’’, and 

24 (2) by striking ‘‘calendar year 2008’’ in para25 graph (2) and inserting ‘‘calendar year 2010’’. 


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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to wages paid after December 31, 

3 2007. 

4 Subpart B—Provisions Expiring in 2008 

5 SEC. 146. BIODIESEL AND RENEWABLE DIESEL USED AS 

6 FUEL. 

7 Subsection (g) of section 40A (relating to termi8 nation) is amended by striking ‘‘December 31, 2008’’ and 

9 inserting ‘‘December 31, 2009’’. 

10 SEC. 147. ELECTRICITY PRODUCED FROM CERTAIN RENEW11 ABLE RESOURCES; PRODUCTION OF REFINED 

12 COAL AND INDIAN COAL. 

13 Section 45(d) (relating to qualified facilities) is 

14 amended by striking ‘‘January 1, 2009’’ each place it ap15 pears in paragraphs (1), (2), (3), (4), (5), (6), (7), (8), 

16 (9), and (10) and inserting ‘‘January 1, 2010’’. 

17 SEC. 148. NEW MARKETS TAX CREDIT. 

18 Subparagraph (D) of section 45D(f)(1) (relating to 

19 national limitation on amount of investments designated) 

20 is amended by striking ‘‘and 2008’’ and inserting ‘‘2008, 

21 and 2009’’. 


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1 SEC. 149. EXTENSION OF NEW ENERGY EFFICIENT HOME 

2 CREDIT. 

3 Subsection (g) of section 45L (relating to termi4 nation) is amended by striking ‘‘December 31, 2008’’ and 

5 inserting ‘‘December 31, 2009’’. 

6 SEC. 150. EXTENSION OF MINE RESCUE TEAM TRAINING 

7 CREDIT. 

8 Section 45N(e) (relating to termination) is amended 

9 by striking ‘‘December 31, 2008’’ and inserting ‘‘Decem10 ber 31, 2009’’. 

11 SEC. 151. EXTENSION OF ENERGY CREDIT. 

12 (a) SOLAR ENERGY PROPERTY.—Paragraphs 

13 (2)(A)(i)(II) and (3)(A)(ii) of section 48(a) (relating to 

14 energy credit) are each amended by striking ‘‘January 1, 

15 2009’’ and inserting ‘‘January 1, 2010’’. 

16 (b) FUEL CELL PROPERTY.—Subparagraph (E) of 

17 section 48(c)(1) (relating to qualified fuel cell property) 

18 is amended by striking ‘‘December 31, 2008’’ and insert19 ing ‘‘December 31, 2009’’. 

20 (c) MICROTURBINE PROPERTY.—Subparagraph (E) 

21 of section 48(c)(2) (relating to qualified microturbine 

22 property) is amended by striking ‘‘December 31, 2008’’ 

23 and inserting ‘‘December 31, 2009’’. 


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1 SEC. 152. 5-YEAR NOL CARRYBACK FOR CERTAIN ELECTRIC 

2 UTILITY COMPANIES. 

3 Subparagraph (I)(i) of section 172(b)(1) (relating to 

4 transmission property and pollution control investment) is 

5 amended— 

6 (1) by striking ‘‘January 1, 2009’’ and insert7 ing ‘‘January 1, 2010’’, and 

8 (2) by striking ‘‘January 1, 2006’’ and insert9 ing ‘‘January 1, 2007’’. 

10 SEC. 153. EXTENSION OF ENERGY EFFICIENT COMMERCIAL 

11 BUILDINGS DEDUCTION. 

12 Section 179D(h) (relating to termination) is amended 

13 by striking ‘‘December 31, 2008’’ and inserting ‘‘Decem14 ber 31, 2009’’. 

15 SEC. 154. EXTENSION OF ELECTION TO EXPENSE AD16 VANCED MINE SAFETY EQUIPMENT. 

17 Section 179E(g) (relating to termination) is amended 

18 by striking ‘‘December 31, 2008’’ and inserting ‘‘Decem19 ber 31, 2009’’. 

20 SEC. 155. EXTENSION AND MODIFICATION OF EXPENSING 

21 RULES FOR QUALIFIED FILM AND TELE22 VISION PRODUCTIONS. 

23 Section 181(f) (relating to termination) is amended 

24 by striking ‘‘December 31, 2008’’ and inserting ‘‘Decem25 ber 31, 2009’’. 


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1 SEC. 156. SUBPART F EXCEPTION FOR ACTIVE FINANCING 

2 INCOME. 

3 (a) EXEMPT INSURANCE INCOME.—Paragraph (10) 

4 of section 953(e) (relating to application) is amended— 

5 (1) by striking ‘‘January 1, 2009’’ and insert6 ing ‘‘January 1, 2010’’, and 

7 (2) by striking ‘‘December 31, 2008’’ and in8 serting ‘‘December 31, 2009’’. 

9 (b) EXCEPTION TO TREATMENT AS FOREIGN PER10 SONAL HOLDING COMPANY INCOME.—Paragraph (9) of 

11 section 954(h) (relating to application) is amended by 

12 striking ‘‘January 1, 2009’’ and inserting ‘‘January 1, 

13 2010’’. 

14 SEC. 157. EXTENSION OF LOOK-THRU RULE FOR RELATED 

15 CONTROLLED FOREIGN CORPORATIONS. 

16 Subparagraph (B) of section 954(c)(6) (relating to 

17 application) is amended by striking ‘‘January 1, 2009’’ 

18 and inserting ‘‘January 1, 2010’’. 

19 PART III—EXCISE TAX PROVISIONS 

20 Subpart A—Provisions Expiring in 2007 

21 SEC. 161. INCREASE IN LIMIT ON COVER OVER OF RUM EX22 CISE TAX TO PUERTO RICO AND THE VIRGIN 

23 ISLANDS. 

24 (a) IN GENERAL.—Paragraph (1) of section 7652(f) 

25 is amended by inserting ‘‘, and after the date of the enactVerDate Aug 31 2005 01:22 Mar 04, 2008 Jkt 069200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S12.PCS S12

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1 ment of the HOME Act and before January 1, 2010’’ 

2 after ‘‘January 1, 2008’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to distilled spirits brought into the 

5 United States after the date of the enactment of this Act. 

6 SEC. 162. PARITY IN THE APPLICATION OF CERTAIN LIMITS 

7 TO MENTAL HEALTH BENEFITS. 

8 (a) IN GENERAL.—Subsection (f) of section 9812 (re9 lating to application of section) is amended— 

10 (1) by striking ‘‘and’’ at the end of paragraph 

11 (2), 

12 (2) by striking the period at the end of para13 graph (3) and inserting ‘‘, and before the date of the 

14 enactment of the HOME Act’’, and 

15 (3) by adding at the end the following new 

16 paragraph: 

17 ‘‘(4) after December 31, 2009.’’. 

18 (b) AMENDMENT TO THE EMPLOYEE RETIREMENT

19 INCOME SECURITY ACT OF 1974.—Section 712(f) of the 

20 Employee Retirement Income Security Act of 1974 (29 

21 U.S.C. 1185a(f)) is amended by inserting ‘‘, and before 

22 the date of the enactment of the HOME Act, and after 

23 December 31, 2009’’ after ‘‘December 31, 2007’’. 

24 (c) AMENDMENT TO THE PUBLIC HEALTH SERVICE

25 ACT.—Section 2705(f) of the Public Health Service Act 


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1 (42 U.S.C. 300gg-5(f)) is amended by inserting ‘‘, and be2 fore the date of the enactment of the HOME Act, and 

3 after December 31, 2009’’ after ‘‘December 31, 2006’’. 

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

5 this section shall apply to benefits for services furnished 

6 on or after the date of the enactment of this Act. 

7 SEC. 163. EXTENSION OF ECONOMIC DEVELOPMENT CRED8 IT FOR AMERICAN SAMOA. 

9 (a) IN GENERAL.—Subsection (d) of section 119 of 

10 division A of the Tax Relief and Health Care Act of 2006 

11 is amended— 

12 (1) by striking ‘‘first two taxable years’’ and in13 serting ‘‘first 4 taxable years’’, and 

14 (2) by striking ‘‘January 1, 2008’’ and insert15 ing ‘‘January 1, 2010’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2007. 

19 Subpart B—Provisions Expiring in 2008 

20 SEC. 166. SPECIAL RULE FOR QUALIFIED METHANOL OR 

21 ETHANOL FUEL FROM COAL. 

22 Subparagraph (D) of section 4041(b)(2) (relating to 

23 termination) is amended by striking ‘‘January 1, 2009’’ 

24 and inserting ‘‘January 1, 2010’’. 


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1 SEC. 167. BIODIESEL MIXTURE CREDIT AND CREDIT FOR 

2 FUELS USED FOR NONTAXABLE PURPOSES. 

3 (a) BIODIESEL MIXTURES.—Paragraph (6) of sec4 tion 6426(c) (relating to termination) is amended by strik5 ing ‘‘December 31, 2008’’ and inserting ‘‘December 31, 

6 2009’’. 

7 (b) BIODIESEL USED FOR NONTAXABLE PUR8 POSES.—Paragraph (5)(B) of section 6427(e) (relating to 

9 termination) is amended by striking ‘‘December 31, 2008’’ 

10 and inserting ‘‘December 31, 2009’’. 

11 PART IV—TAX ADMINISTRATION PROVISIONS 

12 Subpart A—Provisions Expiring in 2007 

13 SEC. 171. DISCLOSURES TO FACILITATE COMBINED EM14 PLOYMENT TAX REPORTING. 

15 (a) IN GENERAL.—Subparagraph (B) of section 

16 6103(d)(5) (relating to termination) is amended by strik17 ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

18 2009’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this subsection shall apply to disclosures after the date 

21 of the enactment of this Act. 

22 SEC. 172. DISCLOSURE OF RETURN INFORMATION TO AP23 PRISE APPROPRIATE OFFICIALS OF TER24 RORIST ACTIVITIES. 

25 (a) IN GENERAL.—Clause (iv) of section 

26 6103(i)(3)(C) (relating to termination) is amended by 


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1 striking ‘‘December 31, 2007’’ and inserting ‘‘December 

2 31, 2009’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to disclosures after the date of the 

5 enactment of this Act. 

6 SEC. 173. DISCLOSURE UPON REQUEST OF INFORMATION 

7 RELATING TO TERRORIST ACTIVITIES. 

8 (a) IN GENERAL.—Subparagraph (E) of section 

9 6103(i)(7) (relating to termination) is amended by strik10 ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

11 2009’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to disclosures after the date of the 

14 enactment of this Act. 

15 SEC. 174. DISCLOSURE OF RETURN INFORMATION TO 

16 CARRY OUT INCOME CONTINGENT REPAY17 MENT OF STUDENT LOANS. 

18 (a) IN GENERAL.—Subparagraph (D) of section 

19 6103(l)(13) (relating to termination) is amended by strik20 ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 

21 2009’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to disclosures after the date of the 

24 enactment of this Act. 


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1 SEC. 175. AUTHORITY FOR UNDERCOVER OPERATIONS. 

2 (a) IN GENERAL.—Paragraph (6) of section 7608(c) 

3 (relating to application of section) is amended by striking 

4 ‘‘January 1, 2008’’ each place it appears and inserting 

5 ‘‘January 1, 2010’’. 

6 (b) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to operations conducted after the 

8 date of the enactment of this Act. 

9 Subpart B—Provisions Expiring in 2008 

10 SEC. 176. EXTENSION OF REPORTING OF INTEREST OF EX11 EMPT ORGANIZATIONS IN INSURANCE CON12 TRACTS. 

13 Section 6050V(e) (relating to termination) is amend14 ed by striking ‘‘the date which is 2 years after the date 

15 of the enactment of this section’’ and inserting ‘‘December 

16 31, 2009’’. 

17 SEC. 177. DISCLOSURES RELATING TO CERTAIN PROGRAMS 

18 ADMINISTERED BY THE DEPARTMENT OF 

19 VETERANS AFFAIRS. 

20 (a) IN GENERAL.—Section 6103(l)(7)(D) (relating to 

21 programs to which rule applies) is amended by striking 

22 ‘‘September 30, 2008’’ and inserting ‘‘December 31, 

23 2009’’. 

24 (b) TECHNICAL AMENDMENT.—Section 

25 6103(l)(7)(D)(viii)(III) is amended by striking ‘‘sections 

26 1710(a)(1)(I), 1710(a)(2), 1710(b), and 1712(a)(2)(B)’’ 


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1 and inserting ‘‘sections 1710(a)(2)(G), 1710(a)(3), and 

2 1710(b)’’. 

3 Subtitle B—Alternative Minimum 

4 Tax Relief 

5 SEC. 181. 2-YEAR EXTENSION OF INCREASED ALTERNATIVE 

6 MINIMUM TAX EXEMPTION AMOUNT. 

7 (a) IN GENERAL.—Section 55(d)(1) is amended— 

8 (1) by striking ‘‘$66,250’’ and all that follows 

9 through ‘‘2007’’ in subparagraph (A) and inserting 

10 ‘‘the joint return amount in the case of taxable years 

11 beginning in 2008 and 2009’’, and 

12 (2) by striking ‘‘$44,350’’ and all that follows 

13 through ‘‘2007’’ in subparagraph (B) and inserting 

14 ‘‘the unmarried individual return amount in the case 

15 of taxable years beginning in 2008 and 2009’’. 

16 (b) JOINT RETURN AMOUNT; UNMARRIED INDI17 VIDUAL RETURN AMOUNT.—Section 55(d) is amended by 

18 adding at the end the following new paragraph: 

19 ‘‘(4) JOINT RETURN AMOUNT; UNMARRIED IN20 DIVIDUAL RETURN AMOUNT.— 

21 ‘‘(A) JOINT RETURN AMOUNT.—For pur22 poses of paragraph (1)(A), the joint return 

23 amount shall be— 

24 ‘‘(i) $69,950 for taxable years begin25 ning in 2008, and 


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1 ‘‘(ii) $73,250 for taxable year begin2 ning in 2009. 

3 ‘‘(B) UNMARRIED INDIVIDUAL RETURN

4 AMOUNT.—For purposes of paragraph (1)(B), 

5 the unmarried individual return amount shall 

6 be— 

7 ‘‘(i) $46,200 for taxable years begin8 ning in 2008, and 

9 ‘‘(ii) $47,850 for taxable year begin10 ning in 2009.’’. 

11 (c) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to taxable years beginning after 

13 December 31, 2007. 

14 SEC. 182. EXTENSION OF ALTERNATIVE MINIMUM TAX RE15 LIEF FOR NONREFUNDABLE PERSONAL 

16 CREDITS. 

17 (a) IN GENERAL.—Paragraph (2) of section 26(a) is 

18 amended— 

19 (1) by striking ‘‘or 2007’’ and inserting ‘‘2007, 

20 2008, or 2009’’, and 

21 (2) by striking ‘‘2007’’ in the heading thereof 

22 and inserting ‘‘2009’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years beginning after 

25 December 31, 2007. 


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1 Subtitle C—Additional Tax Relief 

2 SEC. 191. PERMANENT EXTENSION OF 2001 AND 2003 TAX 

3 RELIEF PROVISIONS. 

4 (a) ECONOMIC GROWTH AND TAX RELIEF REC5 ONCILIATION ACT OF 2001.—Title IX of the Economic 

6 Growth and Tax Relief Reconciliation Act of 2001 (relat7 ing to compliance with Congressional Budget Act) is re8 pealed. 

9 (b) JOBS AND GROWTH TAX RELIEF RECONCILI10 ATION ACT OF 2003.—Title III of the Jobs and Growth 

11 Tax Relief Reconciliation Act of 2003 is amended by strik12 ing section 303. 

13 SEC. 192. MAXIMUM CORPORATE INCOME TAX RATE RE14 DUCED TO 25 PERCENT. 

15 (a) IN GENERAL.—Paragraph (1) of section 11(b) 

16 (relating to amount of tax on corporations) is amended 

17 to read as follows: 

18 ‘‘(1) IN GENERAL.—The amount of the tax im19 posed by subsection (a) shall be the sum of— 

20 ‘‘(A) 15 percent of so much of the taxable 

21 income as does not exceed $50,000, and 

22 ‘‘(B) 25 percent of so much of the taxable 

23 income as exceeds $50,000.’’. 


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1 (b) PERSONAL SERVICE CORPORATIONS.—Para2 graph (2) of section 11(b) is amended by striking ‘‘35 per3 cent’’ and inserting ‘‘25 percent’’. 

4 (c) CONFORMING AMENDMENTS.—Paragraphs (1) 

5 and (2) of section 1445(e) are each amended by striking 

6 ‘‘35 percent’’ and inserting ‘‘25 percent’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2008, except that the amendments made 

10 by subsection (c) shall take effect on January 1, 2009. 

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

12 (a) GENERAL BUSINESS CREDIT.—Subsection (a) of 

13 section 39 is amended by adding at the end the following 

14 new paragraph: 

15 ‘‘(4) SPECIAL RULE FOR 2007, 2008, AND 2009.— 

16 In the case of an excess described in paragraph (1) 

17 arising in a taxable year beginning in 2007, 2008, 

18 or 2009— 

19 ‘‘(A) paragraph (1)(A) shall be applied by 

20 substituting ‘each of the 3 taxable years’ for 

21 ‘‘the taxable year’, 

22 ‘‘(B) paragraphs (2)(A) and (3)(C)(i) shall 

23 each be applied by substituting ‘23 taxable 

24 years’ for ‘21 taxable years’, and 


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1 ‘‘(C) paragraphs (2)(B) and (3)(C)(ii) 

2 shall be applied by substituting ‘23 taxable 

3 years’ for ‘20 taxable years’.’’. 

4 (b) FOREIGN TAX CREDIT.— 

5 (1) IN GENERAL.—Section 904(c) is amended 

6 by adding at the end thereof the following: ‘‘In the 

7 case of taxable years beginning in 2007, 2008, or 

8 2009, the first sentence of this subsection shall, at 

9 the election of the taxpayer, be applied by sub10 stituting ‘in the third preceding taxable year, the 

11 second preceding taxable year, the first preceding 

12 taxable year’ for ‘the first preceding taxable year’.’’. 

13 (2) APPLICATION OF SPECIAL REFUND

14 RULES.—Section 6411 (relating to tentative 

15 carryback and refund adjustments) is amended by 

16 redesignating subsection (d) as subsection (e) and by 

17 inserting after subsection (c) the following new sub18 section: 

19 ‘‘(d) APPLICATION TO FOREIGN TAX CREDIT

20 CARRYBACK.—Under rules prescribed by the Secretary, in 

21 the case of taxable years beginning in 2007, 2008, and 

22 2009, this section shall apply with respect to a foreign 

23 tax credit carryback provided in section 904(c) in the same 

24 manner as this section applies with respect to net oper25 ating loss carrybacks provided in section 172(b), business 


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1 credit carrybacks provided in section 39, and capital loss 

2 carrybacks provided in subsection (a)(1) or (c) of section 

3 1212.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to general business credits and for6 eign tax credits arising in taxable years beginning after 

7 December 31, 2006. 

8 SEC. 194. ELECTION TO ACCELERATE AMT AND R AND D 

9 CREDITS IN LIEU OF BONUS DEPRECIATION. 

10 (a) IN GENERAL.—Section 168(k) is amended by 

11 adding at the end the following new paragraph: 

12 ‘‘(4) ELECTION TO ACCELERATE AMT AND R

13 AND D CREDITS IN LIEU OF BONUS DEPRECIA14 TION.— 

15 ‘‘(A) IN GENERAL.—If a corporation elects 

16 to have this paragraph apply — 

17 ‘‘(i) no additional depreciation shall be 

18 allowed under paragraph (1) for any prop19 erty placed in service during the taxable 

20 year, and 

21 ‘‘(ii) the limitations described in sub22 paragraph (B) for such taxable year shall 

23 be increased by an aggregate amount not 

24 in excess of the bonus depreciation amount 

25 for such taxable year. 


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1 ‘‘(B) LIMITATIONS TO BE INCREASED.— 

2 The limitations described in this subparagraph 

3 are— 

4 ‘‘(i) the limitation under section 38(c), 

5 and 

6 ‘‘(ii) the limitation under section 

7 53(c). 

8 ‘‘(C) BONUS DEPRECIATION AMOUNT.— 

9 For purposes of this paragraph— 

10 ‘‘(i) IN GENERAL.—The bonus depre11 ciation amount for any taxable year is an 

12 amount equal to the product of the appli13 cable percentage and the excess (if any) 

14 of— 

15 ‘‘(I) the aggregate amount of de16 preciation which would be determined 

17 under this section for property placed 

18 in service during the taxable year if 

19 no election under this paragraph were 

20 made, over 

21 ‘‘(II) the aggregate amount of 

22 depreciation allowable under this sec23 tion for property placed in service 

24 during the taxable year. 


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1 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

2 purposes of clause (i), the applicable per3 centage shall be— 

4 ‘‘(I) 30 percent in the case of the 

5 limitation under section 38(c), and 

6 ‘‘(II) 20 percent in the case of 

7 the limitation under section 53(c). 

8 ‘‘(D) ALLOCATION OF BONUS DEPRECIA9 TION AMOUNTS.— 

10 ‘‘(i) IN GENERAL.—Subject to clauses 

11 (ii) and (iii), the taxpayer shall, at such 

12 time and in such manner as the Secretary 

13 may prescribe, specify the portion (if any) 

14 of the bonus depreciation amount which is 

15 to be allocated to each of the limitations 

16 described in subparagraph (B). 

17 ‘‘(ii) BUSINESS CREDIT LIMITA18 TION.—The portion of the bonus deprecia19 tion amount allocated to the limitation de20 scribed in subparagraph (B)(i) shall not 

21 exceed an amount equal to the portion of 

22 the credit allowable under section 38 for 

23 the taxable year which is allocable to busi24 ness credit carryforwards to such taxable 

25 year which are— 


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1 ‘‘(I) from taxable years beginning 

2 before January 1, 2006, and 

3 ‘‘(II) properly allocable (deter4 mined under the rules of section 

5 38(d)) to the research credit deter6 mined under section 41(a). 

7 ‘‘(iii) ALTERNATIVE MINIMUM TAX

8 CREDIT LIMITATION.—The portion of the 

9 bonus depreciation amount allocated to the 

10 limitation described in subparagraph 

11 (B)(ii) shall not exceed an amount equal to 

12 the portion of the minimum tax credit al13 lowable under section 53 for the taxable 

14 year which is allocable to the adjusted min15 imum tax imposed for taxable years begin16 ning before January 1, 2006. 

17 ‘‘(E) CREDIT REFUNDABLE.—Any aggre18 gate increases in the credits allowed under sec19 tion 38 or 53 by reason of this paragraph shall, 

20 for purposes of this title, be treated as a credit 

21 allowed to the taxpayer under subpart C of part 

22 IV of subchapter A. 

23 ‘‘(F) OTHER RULES.— 

24 ‘‘(i) ELECTION.—Any election under 

25 this paragraph (including any allocation 


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1 under subparagraph (D)) may be revoked 

2 only with the consent of the Secretary. 

3 ‘‘(ii) DEDUCTION ALLOWED IN COM4 PUTING MINIMUM TAX.—Notwithstanding 

5 this paragraph, paragraph (2)(G) shall 

6 apply with respect to the deduction com7 puted under this section (after application 

8 of this paragraph) with respect to property 

9 placed in service during any applicable tax10 able year.’’. 

11 (b) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to property placed in service after 

13 December 31, 2007, in taxable years ending after such 

14 date. 

15 SEC. 195. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

16 OF DETERMINING GAIN OR LOSS. 

17 (a) IN GENERAL.—Part II of subchapter O of chap18 ter 1 (relating to basis rules of general application) is 

19 amended by redesignating section 1023 as section 1024 

20 and by inserting after section 1022 the following new sec21 tion: 

22 ‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

23 OF DETERMINING GAIN OR LOSS. 

24 ‘‘(a) GENERAL RULE.— 


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1 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD2 JUSTED BASIS.—Solely for purposes of determining 

3 gain or loss on the sale or other disposition by a tax4 payer (other than a corporation) of an indexed asset 

5 which has been held for more than 3 years, the in6 dexed basis of the asset shall be substituted for its 

7 adjusted basis. 

8 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.— 

9 The deductions for depreciation, depletion, and am10 ortization shall be determined without regard to the 

11 application of paragraph (1) to the taxpayer or any 

12 other person. 

13 ‘‘(3) WRITTEN DOCUMENTATION REQUIRE14 MENT.—Paragraph (1) shall apply only with respect 

15 to indexed assets for which the taxpayer has written 

16 documentation of the original purchase price paid or 

17 incurred by the taxpayer to acquire such asset. 

18 ‘‘(b) INDEXED ASSET.— 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the term ‘indexed asset’ means— 

21 ‘‘(A) common stock in a C corporation 

22 (other than a foreign corporation), or 

23 ‘‘(B) tangible property, 

24 which is a capital asset or property used in the trade 

25 or business (as defined in section 1231(b)). 


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1 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORA2 TIONS INCLUDED.—For purposes of this section— 

3 ‘‘(A) IN GENERAL.—The term ‘indexed 

4 asset’ includes common stock in a foreign cor5 poration which is regularly traded on an estab6 lished securities market. 

7 ‘‘(B) EXCEPTION.—Subparagraph (A) 

8 shall not apply to— 

9 ‘‘(i) stock in a passive foreign invest10 ment company (as defined in section 

11 1296), and 

12 ‘‘(ii) stock in a foreign corporation 

13 held by a United States person who meets 

14 the requirements of section 1248(a)(2). 

15 ‘‘(C) TREATMENT OF AMERICAN DEPOSI16 TORY RECEIPTS.—An American depository re17 ceipt for common stock in a foreign corporation 

18 shall be treated as common stock in such cor19 poration. 

20 ‘‘(c) INDEXED BASIS.—For purposes of this sec21 tion— 

22 ‘‘(1) GENERAL RULE.—The indexed basis for 

23 any asset is— 

24 ‘‘(A) the adjusted basis of the asset, in25 creased by 


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1 ‘‘(B) the applicable inflation adjustment. 

2 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 

3 The applicable inflation adjustment for any asset is 

4 an amount equal to— 

5 ‘‘(A) the adjusted basis of the asset, multi6 plied by 

7 ‘‘(B) the percentage (if any) by which— 

8 ‘‘(i) the gross domestic product 

9 deflator for the last calendar quarter end10 ing before the asset is disposed of, exceeds 

11 ‘‘(ii) the gross domestic product 

12 deflator for the last calendar quarter end13 ing before the asset was acquired by the 

14 taxpayer. 

15 The percentage under subparagraph (B) shall be 

rounded to the nearest 1 16 ⁄10 of 1 percentage point. 

17 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 

18 The gross domestic product deflator for any cal19 endar quarter is the implicit price deflator for the 

20 gross domestic product for such quarter (as shown 

21 in the last revision thereof released by the Secretary 

22 of Commerce before the close of the following cal23 endar quarter). 


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1 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI2 MINISHED RISK OF LOSS; TREATMENT OF SHORT

3 SALES.— 

4 ‘‘(1) IN GENERAL.—If the taxpayer (or a re5 lated person) enters into any transaction which sub6 stantially reduces the risk of loss from holding any 

7 asset, such asset shall not be treated as an indexed 

8 asset for the period of such reduced risk. 

9 ‘‘(2) SHORT SALES.— 

10 ‘‘(A) IN GENERAL.—In the case of a short 

11 sale of an indexed asset with a short sale period 

12 in excess of 3 years, for purposes of this title, 

13 the amount realized shall be an amount equal 

14 to the amount realized (determined without re15 gard to this paragraph) increased by the appli16 cable inflation adjustment. In applying sub17 section (c)(2) for purposes of the preceding sen18 tence, the date on which the property is sold 

19 short shall be treated as the date of acquisition 

20 and the closing date for the sale shall be treat21 ed as the date of disposition. 

22 ‘‘(B) SHORT SALE PERIOD.—For purposes 

23 of subparagraph (A), the short sale period be24 gins on the day that the property is sold and 

25 ends on the closing date for the sale. 


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1 ‘‘(e) TREATMENT OF REGULATED INVESTMENT

2 COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 

3 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 

4 ‘‘(A) IN GENERAL.—Except as otherwise 

5 provided in this paragraph, the adjustment 

6 under subsection (a) shall be allowed to any 

7 qualified investment entity (including for pur8 poses of determining the earnings and profits of 

9 such entity). 

10 ‘‘(B) EXCEPTION FOR CORPORATE SHARE11 HOLDERS.—Under regulations— 

12 ‘‘(i) in the case of a distribution by a 

13 qualified investment entity (directly or in14 directly) to a corporation— 

15 ‘‘(I) the determination of whether 

16 such distribution is a dividend shall be 

17 made without regard to this section, 

18 and 

19 ‘‘(II) the amount treated as gain 

20 by reason of the receipt of any capital 

21 gain dividend shall be increased by the 

22 percentage by which the entity’s net 

23 capital gain for the taxable year (de24 termined without regard to this sec25 tion) exceeds the entity’s net capital 


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1 gain for such year determined with re2 gard to this section, and 

3 ‘‘(ii) there shall be other appropriate 

4 adjustments (including deemed distribu5 tions) so as to ensure that the benefits of 

6 this section are not allowed (directly or in7 directly) to corporate shareholders of quali8 fied investment entities. 

9 For purposes of the preceding sentence, any 

10 amount includible in gross income under section 

11 852(b)(3)(D) shall be treated as a capital gain 

12 dividend and an S corporation shall not be 

13 treated as a corporation. 

14 ‘‘(C) EXCEPTION FOR QUALIFICATION

15 PURPOSES.—This section shall not apply for 

16 purposes of sections 851(b) and 856(c). 

17 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM18 POSED AT ENTITY LEVEL.— 

19 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

20 ENTIRE GAIN.—If any amount is subject to 

21 tax under section 852(b)(3)(A) for any 

22 taxable year, the amount on which tax is 

23 imposed under such section shall be in24 creased by the percentage determined 

25 under subparagraph (B)(i)(II). A similar 


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1 rule shall apply in the case of any amount 

2 subject to tax under paragraph (2) or (3) 

3 of section 857(b) to the extent attributable 

4 to the excess of the net capital gain over 

5 the deduction for dividends paid deter6 mined with reference to capital gain divi7 dends only. The first sentence of this 

8 clause shall not apply to so much of the 

9 amount subject to tax under section 

10 852(b)(3)(A) as is designated by the com11 pany under section 852(b)(3)(D). 

12 ‘‘(ii) OTHER TAXES.—This section 

13 shall not apply for purposes of determining 

14 the amount of any tax imposed by para15 graph (4), (5), or (6) of section 857(b). 

16 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

17 ENTITY.— 

18 ‘‘(A) REGULATED INVESTMENT COMPA19 NIES.—Stock in a regulated investment com20 pany (within the meaning of section 851) shall 

21 be an indexed asset for any calendar quarter in 

22 the same ratio as— 

23 ‘‘(i) the average of the fair market 

24 values of the indexed assets held by such 


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1 company at the close of each month during 

2 such quarter, bears to 

3 ‘‘(ii) the average of the fair market 

4 values of all assets held by such company 

5 at the close of each such month. 

6 ‘‘(B) REAL ESTATE INVESTMENT

7 TRUSTS.—Stock in a real estate investment 

8 trust (within the meaning of section 856) shall 

9 be an indexed asset for any calendar quarter in 

10 the same ratio as— 

11 ‘‘(i) the fair market value of the in12 dexed assets held by such trust at the close 

13 of such quarter, bears to 

14 ‘‘(ii) the fair market value of all as15 sets held by such trust at the close of such 

16 quarter. 

17 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 

18 the ratio for any calendar quarter determined 

19 under subparagraph (A) or (B) would (but for 

20 this subparagraph) be 80 percent or more, such 

21 ratio for such quarter shall be 100 percent. 

22 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 

23 the ratio for any calendar quarter determined 

24 under subparagraph (A) or (B) would (but for 


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1 this subparagraph) be 20 percent or less, such 

2 ratio for such quarter shall be zero. 

3 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 

4 purposes of this paragraph, a qualified invest5 ment entity which holds a partnership interest 

6 shall be treated (in lieu of holding a partnership 

7 interest) as holding its proportionate share of 

8 the assets held by the partnership. 

9 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS10 TRIBUTIONS.—Except as otherwise provided by the 

11 Secretary, a distribution with respect to stock in a 

12 qualified investment entity which is not a dividend 

13 and which results in a reduction in the adjusted 

14 basis of such stock shall be treated as allocable to 

15 stock acquired by the taxpayer in the order in which 

16 such stock was acquired. 

17 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For 

18 purposes of this subsection, the term ‘qualified in19 vestment entity’ means— 

20 ‘‘(A) a regulated investment company 

21 (within the meaning of section 851), and 

22 ‘‘(B) a real estate investment trust (within 

23 the meaning of section 856). 

24 ‘‘(f) OTHER PASS-THRU ENTITIES.— 

25 ‘‘(1) PARTNERSHIPS.— 


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1 ‘‘(A) IN GENERAL.—In the case of a part2 nership, the adjustment made under subsection 

3 (a) at the partnership level shall be passed 

4 through to the partners. 

5 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC6 TION 754 ELECTIONS.—In the case of a transfer 

7 of an interest in a partnership with respect to 

8 which the election provided in section 754 is in 

9 effect— 

10 ‘‘(i) the adjustment under section 

11 743(b)(1) shall, with respect to the trans12 feror partner, be treated as a sale of the 

13 partnership assets for purposes of applying 

14 this section, and 

15 ‘‘(ii) with respect to the transferee 

16 partner, the partnership’s holding period 

17 for purposes of this section in such assets 

18 shall be treated as beginning on the date 

19 of such adjustment. 

20 ‘‘(2) S CORPORATIONS.—In the case of an S 

21 corporation, the adjustment made under subsection 

22 (a) at the corporate level shall be passed through to 

23 the shareholders. This section shall not apply for 

24 purposes of determining the amount of any tax im25 posed by section 1374 or 1375. 


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1 ‘‘(3) COMMON TRUST FUNDS.—In the case of a 

2 common trust fund, the adjustment made under sub3 section (a) at the trust level shall be passed through 

4 to the participants. 

5 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

6 DETERMINING LOSS ON SALE OF INTEREST IN ENTI7 TY.—Notwithstanding the preceding provisions of 

8 this subsection, for purposes of determining the 

9 amount of any loss on a sale or exchange of an in10 terest in a partnership, S corporation, or common 

11 trust fund, the adjustment made under subsection 

12 (a) shall not be taken into account in determining 

13 the adjusted basis of such interest. 

14 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 

15 ‘‘(1) IN GENERAL.—This section shall not apply 

16 to any sale or other disposition of property between 

17 related persons except to the extent that the basis 

18 of such property in the hands of the transferee is a 

19 substituted basis. 

20 ‘‘(2) RELATED PERSONS DEFINED.—For pur21 poses of this section, the term ‘related persons’ 

22 means— 

23 ‘‘(A) persons bearing a relationship set 

24 forth in section 267(b), and 


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1 ‘‘(B) persons treated as single employer 

2 under subsection (b) or (c) of section 414. 

3 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST4 MENT.—If any person transfers cash, debt, or any other 

5 property to another person and the principal purpose of 

6 such transfer is to secure or increase an adjustment under 

7 subsection (a), the Secretary may disallow part or all of 

8 such adjustment or increase. 

9 ‘‘(i) SPECIAL RULES.—For purposes of this section— 

10 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 

11 there is an addition to the adjusted basis of any tan12 gible property or of any stock in a corporation dur13 ing the taxable year by reason of an improvement to 

14 such property or a contribution to capital of such 

15 corporation— 

16 ‘‘(A) such addition shall never be taken 

17 into account under subsection (c)(1)(A) if the 

18 aggregate amount thereof during the taxable 

19 year with respect to such property or stock is 

20 less than $1,000, and 

21 ‘‘(B) such addition shall be treated as a 

22 separate asset acquired at the close of such tax23 able year if the aggregate amount thereof dur24 ing the taxable year with respect to such prop25 erty or stock is $1,000 or more. 


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1 A rule similar to the rule of the preceding sentence 

2 shall apply to any other portion of an asset to the 

3 extent that separate treatment of such portion is ap4 propriate to carry out the purposes of this section. 

5 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

6 THROUGHOUT HOLDING PERIOD.—The applicable in7 flation adjustment shall be appropriately reduced for 

8 periods during which the asset was not an indexed 

9 asset. 

10 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU11 TIONS.—A distribution with respect to stock in a 

12 corporation which is not a dividend shall be treated 

13 as a disposition. 

14 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

15 LOSS.—To the extent that (but for this paragraph) 

16 this section would create or increase a net ordinary 

17 loss to which section 1231(a)(2) applies or an ordi18 nary loss to which any other provision of this title 

19 applies, such provision shall not apply. The taxpayer 

20 shall be treated as having a long-term capital loss in 

21 an amount equal to the amount of the ordinary loss 

22 to which the preceding sentence applies. 

23 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

24 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) 

25 WITH RESPECT TO THE TAXPAYER.—If there has 


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1 been a prior application of subsection (a)(1) to an 

2 asset while such asset was held by the taxpayer, the 

3 date of acquisition of such asset by the taxpayer 

4 shall be treated as not earlier than the date of the 

5 most recent such prior application. 

6 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

7 such regulations as may be necessary or appropriate to 

8 carry out the purposes of this section.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for part II of subchapter O of chapter 1 is amended by 

11 striking the item relating to section 1023 and by inserting 

12 after the item relating to section 1022 the following new 

13 item: 

‘‘Sec. 1023. Indexing of certain assets for purposes of determining gain or loss. 

‘‘Sec. 1024. Cross references.’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to sales and other dispositions of 

16 indexed assets after the date of the enactment of this Act, 

17 in taxable years ending after such date. 

18 SEC. 196. DEFERRAL OF GAIN ON SALE OF CERTAIN PRIN19 CIPAL RESIDENCES. 

20 (a) IN GENERAL.—Part III of subchapter O of chap21 ter 1 of subtitle A (relating to common nontaxable ex22 changes) is amended by inserting after section 1033 the 

23 following new section: 


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1 ‘‘SEC. 1034. DEFERRAL OF GAIN ON SALE OF CERTAIN PRIN2 CIPAL RESIDENCES. 

3 ‘‘(a) DEFERRAL OF GAIN.— 

4 ‘‘(1) IN GENERAL.—In the case of a sale of a 

5 principal residence by a taxpayer, the taxpayer’s 

6 gain (if any) from such sale shall be recognized only 

7 to the extent that the taxpayer’s adjusted sales price 

8 exceeds the taxpayer’s cost of purchasing a qualified 

9 residence. 

10 ‘‘(2) REDUCTION OF BASIS IN QUALIFIED RESI11 DENCE.—In the case of a nonrecognition of gain on 

12 the sale of a principal residence due to the purchase 

13 of a qualified residence under paragraph (1), the 

14 taxpayer’s basis in the qualified residence shall be 

15 reduced by the amount of such gain. 

16 ‘‘(b) DEFINITIONS.— 

17 ‘‘(1) ADJUSTED SALES PRICE.— 

18 ‘‘(A) IN GENERAL.—For purposes of this 

19 section, the term ‘adjusted sales price’ means 

20 the amount realized, reduced by the aggregate 

21 of the expenses for work performed on a prin22 cipal residence in order to assist in its sale. 

23 ‘‘(B) LIMITATION.—The reduction pro24 vided in subparagraph (A) applies only to ex25 penses— 


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1 ‘‘(i) for work performed during the 

2 90-day period ending on the day on which 

3 the contract to sell the principal residence 

4 is entered into, 

5 ‘‘(ii) which are paid on or before the 

6 30th day after the date of the sale of the 

7 principal residence, and 

8 ‘‘(iii) which are— 

9 ‘‘(I) not allowable as deductions 

10 in computing taxable income under 

11 section 63, and 

12 ‘‘(II) not taken into account in 

13 computing the amount realized from 

14 the sale of the principal residence. 

15 ‘‘(2) QUALIFIED RESIDENCE.—For purposes of 

16 this section, the term ‘qualified residence’ means 

17 property that is— 

18 ‘‘(A) purchased by the taxpayer for use as 

19 a principal residence, and 

20 ‘‘(B) purchased during the period begin21 ning 2 years before the date of the sale of the 

22 taxpayer’s previous principal residence and end23 ing 2 years after the date of such sale. 

24 ‘‘(c) APPLICATION OF SECTION.—For purposes of 

25 this section: 


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1 ‘‘(1) EXCHANGE OF RESIDENCE FOR PROP2 ERTY.—An exchange by the taxpayer of a principal 

3 residence for other property shall be treated as a 

4 sale of such residence, and the acquisition of a quali5 fied residence on the exchange of property shall be 

6 treated as a purchase of such residence. 

7 ‘‘(2) CONSTRUCTION OF RESIDENCE.—A quali8 fied residence any part of which was constructed or 

9 reconstructed by the taxpayer shall be treated as 

10 purchased by the taxpayer. In determining the tax11 payer’s cost of purchasing a qualified residence, 

12 there shall be included only so much of such cost as 

13 is attributable to the acquisition, construction, re14 construction, and improvements made which are 

15 properly chargeable to capital account, during the 

16 period specified in subsection (b)(2)(B). 

17 ‘‘(3) SALE OF NEW RESIDENCE PRIOR TO SALE

18 OF PRINCIPAL RESIDENCE.—If a residence is pur19 chased by the taxpayer before the date of the sale 

20 of the taxpayer’s principal residence, such purchased 

21 residence shall not be a qualified residence under 

22 this section if such residence is sold or otherwise dis23 posed of by the taxpayer before the date of the sale 

24 of the taxpayer’s principal residence. 


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1 ‘‘(4) MULTIPLE PRINCIPAL RESIDENCES.—If 

2 the taxpayer, during the period described in sub3 section (b)(2)(B), purchases more than 1 residence 

4 which is used as the taxpayer’s principal residence 

5 at some time during the 2 years after the date of 

6 the sale of a principal residence for which gain is de7 ferred under this section, only the last of such resi8 dences so used by the taxpayer within such 2 years 

9 shall be a qualified residence under this section. If 

10 a qualified residence is sold in a sale to which sub11 section (d)(2) applies within 2 years after the sale 

12 of the taxpayer’s previous principal residence, for 

13 purposes of applying the preceding sentence with re14 spect to such principal residence, the qualified resi15 dence sold shall be treated as the last residence used 

16 during such 2-year period. 

17 ‘‘(d) LIMITATION.— 

18 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

19 apply with respect to the sale of the taxpayer’s prin20 cipal residence if within 2 years before the date of 

21 such sale the taxpayer sold at a gain other property 

22 used by him as his principal residence, and any part 

23 of such gain was deferred by reason of subsection 

24 (a). 


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1 ‘‘(2) SUBSEQUENT SALE CONNECTED WITH

2 NEW PRINCIPAL PLACE OF WORK.—Paragraph (1) 

3 shall not apply with respect to the sale of the tax4 payer’s principal residence if— 

5 ‘‘(A) such sale was in connection with the 

6 commencement of work by the taxpayer (or the 

7 taxpayer’s spouse, if such spouse has the same 

8 principal residence as the taxpayer) as an em9 ployee or as a self-employed individual at a new 

10 principal place of work, and 

11 ‘‘(B) the taxpayer would satisfy the condi12 tions of section 217(c) if the principal residence 

13 so sold were treated as the former residence for 

14 purposes of section 217. 

15 ‘‘(e) TENANT-STOCKHOLDER IN A COOPERATIVE

16 HOUSING CORPORATION.—For purposes of this section, 

17 references to property used by the taxpayer as a principal 

18 residence shall include stock held by a tenant-stockholder 

19 (as defined in section 216) in a cooperative housing cor20 poration (as so defined) if— 

21 ‘‘(1) in the case of stock sold, the house or 

22 apartment which the taxpayer was entitled to occupy 

23 as such stockholder was used by the taxpayer as a 

24 principal residence, and 


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1 ‘‘(2) in the case of stock purchased, the tax2 payer used as a principal residence the house or 

3 apartment which the taxpayer was entitled to occupy 

4 as such stockholder. 

5 ‘‘(f) JOINT OWNERSHIP.—In the case of a residence 

6 jointly owned and used as a principal residence by 1 or 

7 more taxpayers, or by a married couple filing separately, 

8 the gain (if any) from the sale of such principal residence 

9 which may be deferred under subsection (a) shall be allo10 cated among such taxpayers according to regulations 

11 which shall be prescribed by the Secretary. 

12 ‘‘(g) MEMBERS OF THE ARMED FORCES.— 

13 ‘‘(1) IN GENERAL.—The running of any period 

14 of time specified in subsection (b)(2)(B) or (c) 

15 (other than the 2 years referred to in subsection 

16 (c)(4)) shall be suspended during any time that the 

17 taxpayer (or the taxpayer’s spouse, if such spouse 

18 has the same principal residence as the taxpayer) 

19 serves on extended active duty with the Armed 

20 Forces of the United States after the date of the 

21 sale of the principal residence for which gain is de22 ferred under this section, except that any period of 

23 time so suspended shall not extend beyond the date 

24 that is 4 years after the date of sale of such prin25 cipal residence. 


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1 ‘‘(2) MEMBERS STATIONED OUTSIDE THE

2 UNITED STATES OR REQUIRED TO RESIDE IN GOV3 ERNMENT QUARTERS.—In the case of a taxpayer (or 

4 the taxpayer’s spouse, if such spouse has the same 

5 principal residence as the taxpayer) who, during any 

6 period of time the running of which is suspended 

7 under paragraph (1)— 

8 ‘‘(A) is stationed outside the United 

9 States, or 

10 ‘‘(B) after returning from a tour of duty 

11 outside of the United States and pursuant to a 

12 determination by the Secretary of Defense that 

13 adequate off-base housing is not available at a 

14 remote base site, is required to reside in on15 base Government quarters, 

16 any period of time so suspended shall not expire be17 fore the day that is 1 year after the last day that 

18 such taxpayer or spouse is so stationed or under 

19 such requirement, except that any period so sus20 pended shall not extend beyond the date which is 8 

21 years after the date of the sale of the principal resi22 dence. 

23 ‘‘(h) INDIVIDUAL WHOSE TAX HOME IS OUTSIDE

24 THE UNITED STATES.—The running of any period of time 

25 specified in subsection (b)(2)(B) or (c) (other than the 2 


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1 years referred to in subsection (c)(4)) shall be suspended 

2 during any time that the taxpayer (or the taxpayer’s 

3 spouse, if such spouse has the same principal residence 

4 as the taxpayer) has a tax home (as defined in section 

5 911(d)(3)) outside the United States after the date of the 

6 sale of the principal residence for which gain is deferred 

7 under this section, except that any period of time so sus8 pended shall not extend beyond the date that is 4 years 

9 after the date of sale of such principal residence. 

10 ‘‘(i) SPECIAL RULE FOR CONDEMNATION.—In the 

11 case of the seizure, requisition, or condemnation of a prin12 cipal residence, or the sale or exchange of a principal resi13 dence under threat or imminence thereof, the taxpayer 

14 may elect to have this section apply in lieu of section 1033. 

15 If such election is made, such seizure, requisition, or con16 demnation shall be treated as the sale of the principal resi17 dence. Such election shall be made at such time and in 

18 such manner as the Secretary shall prescribe. 

19 ‘‘(j) STATUTE OF LIMITATIONS.—In the case of any 

20 sale of a principal residence that results in gain— 

21 ‘‘(1) the statutory period for the assessment of 

22 any deficiency attributable to any part of such gain 

23 shall not expire before the expiration of 3 years from 

24 the date the Secretary is notified by the taxpayer (in 

25 such manner as the Secretary shall prescribe) of— 


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1 ‘‘(A) the taxpayer’s cost of purchasing any 

2 qualified residence which results in nonrecogni3 tion of such gain, 

4 ‘‘(B) the taxpayer’s intention not to pur5 chase such a qualified residence during the pe6 riod specified in subsection (b)(2)(B), or 

7 ‘‘(C) a failure to make such a purchase 

8 within such period, and 

9 ‘‘(2) such deficiency may be assessed before the 

10 expiration of such 3-year period notwithstanding the 

11 provisions of any other law or rule of law which 

12 would otherwise prevent such assessment. 

13 ‘‘(k) APPLICATION OF EXCLUSION ON THE SALE OF

14 A PRINCIPAL RESIDENCE.—In the case of a sale of a prin15 cipal residence by a taxpayer to which section 121 applies, 

16 the amount of the gain on such sale that may be deferred 

17 under subsection (a) of this section shall be reduced by 

18 the amount of gain on such sale that is excluded from 

19 gross income under section 121(a).’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) COORDINATION WITH SECTION 121.— 

22 (A) Section 121 (relating to exclusion of 

23 gain from sale of principal residence) is amend24 ed by adding at the end the following new sub25 section: 


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1 ‘‘(h) COORDINATION WITH SECTION 1034 DEFER2 RAL.—For deferral of gain from the sale of a principal 

3 residence in the case of a purchase of another qualified 

4 residence, see section 1034.’’. 

5 (B) Subsection (g) of section 121 (relating 

6 to residences acquired in rollovers under section 

7 1034) is amended by striking ‘‘(as in effect on 

8 the day before the date of the enactment of this 

9 section)’’. 

10 (2) EXTENSION OF PERIOD OF LIMITATION.— 

11 Section 6503 (relating to suspension of running of 

12 period of limitation) is amended— 

13 (A) by redesignating subsection (k) as sub14 section (l), and 

15 (B) by inserting after subsection (j) the 

16 following new subsection: 

17 ‘‘(k) EXTENSION OF TIME FOR ASSESSMENT OF TAX

18 LIABILITY ON GAIN FROM THE SALE OF CERTAIN PRIN19 CIPAL RESIDENCES.—The running of any period of limita20 tions for collection of any amount of tax liability on gain 

21 from the sale of a principal residence that is deferred 

22 under section 1034 shall be suspended for the period of 

23 any extension of time specified under section 1034(j).’’. 

24 (3) REDUCTION IN BASIS.—Subsection (a) of 

25 section 1016 (relating to general rule) is amended— 


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1 (A) by striking ‘‘and’’ at the end of para2 graph (36), 

3 (B) by striking the period at the end of 

4 paragraph (37) and inserting ‘‘, and’’, and 

5 (C) by adding at the end the following new 

6 paragraph: 

7 ‘‘(38) to the extent provided in section 

8 1034(a)(2).’’. 

9 (c) CLERICAL AMENDMENT.—The table of sections 

10 for part III of subchapter O of chapter 1 of subtitle A 

11 (relating to common nontaxable exchanges) is amended by 

12 inserting after the item relating to section 1033 the fol13 lowing new item: 

‘‘Sec. 1034. Deferral of gain on sale of certain principal residences.’’. 

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

15 this section shall apply to sales in taxable years beginning 

16 after the date of the enactment of this Act. 

17 SEC. 197. AMOUNT EXCLUDED FROM SALE OF PRINCIPAL 

18 RESIDENCE INDEXED FOR INFLATION. 

19 (a) IN GENERAL.—Section 121 is amended by adding 

20 at the end the following new subsection: 

21 ‘‘(h) INFLATION ADJUSTMENT.— 

22 ‘‘(1) IN GENERAL.—In the case of any taxable 

23 year beginning after 2008, the $250,000 amount 

24 under subsection (b)(1) shall be increased by an 

25 amount equal to— 


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1 ‘‘(A) such dollar amount, multiplied by 

2 ‘‘(B) the cost-of-living adjustment deter3 mined under section 1(f)(3) for the calendar 

4 year in which the taxable year begins, deter5 mined by substituting ‘calendar year 2007’ for 

6 ‘calendar year 1992’ in subparagraph (B) 

7 thereof. 

8 ‘‘(2) ROUNDING.—If any amount as adjusted 

9 under subparagraph (A) is not a multiple of $1,000, 

10 such amount shall be rounded to the next lowest 

11 multiple of $1,000.’’. 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Subparagraph (A) of section 121(b)(2) is 

14 amended— 

15 (A) by striking ‘‘Paragraph (1) shall be 

16 applied by substituting ‘$500,000’ for 

17 ‘$250,000’ ’’ and inserting ‘‘The dollar amount 

18 under paragraph (1) shall be twice the dollar 

19 amount otherwise in effect under such para20 graph’’, and 

21 (B) by striking ‘‘$500,000’’ in the heading 

22 and inserting ‘‘INCREASED’’. 

23 (2) Section 121(b)(4) is amended by striking 

24 ‘‘paragraph (1) shall be applied by substituting 

25 ‘$500,000’ for ‘$250,000’ ’’ and inserting ‘‘the dollar 


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1 amount under paragraph (1) shall be twice the dol2 lar amount otherwise in effect under such para3 graph’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to sales occurring after December 

6 31, 2008. 

7 SEC. 198. REPEAL OF PHASEIN FOR DOMESTIC PRODUC8 TION ACTIVITIES DEDUCTION. 

9 (a) IN GENERAL.—Subsection (a) of section 199 (re10 lating to income attributable to domestic production activi11 ties) is amended to read as follows: 

12 ‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be 

13 allowed as a deduction an amount equal to 9 percent of 

14 the lesser of— 

15 ‘‘(1) the qualified production activities income 

16 of the taxpayer for the taxable year, or 

17 ‘‘(2) taxable income (determined without regard 

18 to this section) for the taxable year.’’. 

19 (b) CONFORMING AMENDMENTS.—Section 199 is 

20 amended by striking ‘‘subsection (a)(1)(B)’’ each place it 

21 appears and inserting ‘‘subsection (a)(2)’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2007. 


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1 TITLE II—KEEPING AMERICA 

2 COMPETITIVE 

3 SEC. 201. SENSE OF CONGRESS REGARDING THE LEGISLA4 TIVE INITIATIVES REQUIRED TO STRENGTH5 EN AND PROTECT THE WELL BEING OF OUR 

6 NATION’S CAPITAL MARKETS. 

7 (a) FINDINGS.—Congress finds the following: 

8 (1) America’s capital markets are a foundation 

9 of our Nation’s economic well being and security. 

10 (2) Healthy capital markets foster investment 

11 in the United States economy, helping to sustain 

12 and create jobs. 

13 (3) The American economy is fundamentally 

14 strong, but a correction in the residential housing 

15 market, credit turmoil, and high oil prices are ham16 pering economic growth. 

17 (4) American businesses and investors face ever 

18 increasing competition from international competi19 tors and markets. 

20 (5) Economic policies that maintain low tax 

21 rates on capital gains and dividends have historically 

22 fostered sustained growth in the American economy. 

23 (b) SENSE OF CONGRESS.—It is the sense of the 

24 Congress that— 


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1 (1) Congress should not pass legislation that 

2 would create new or greater uncertainty in the fi3 nancial markets; 

4 (2) Congress should not pass legislation that 

5 would serve to further constrict liquidity in the mar6 ketplace; 

7 (3) Congress should not pass legislation that 

8 would make credit more expensive and less accessible 

9 in the United States than in other world markets; 

10 (4) Congress should not pass legislation that 

11 would inhibit or impair capital formation and long12 term investments; 

13 (5) Congress should maintain existing tax pol14 icy regarding capital formation and long-term invest15 ment, except in the case of illegitimate tax shelter 

16 activity; 

17 (6) Congress should pass legislation to extend 

18 permanently the 2001 and 2003 tax rate cuts, in19 cluding the 15 percent capital gains and dividend 

20 rates, and to simplify and lower corporate tax rates; 

21 and 

22 (7) Congress should promote the entrepreneur23 ship and economic development fostered by long24 term, private investment. 


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1 SEC. 202. DIRECTING THE SECURITIES AND EXCHANGE 

2 COMMISSION TO CONVENE A PUBLIC HEAR3 ING ON THE IMPACT OF EXCESSIVE LITIGA4 TION. 

5 (a) FINDINGS.—Congress finds that— 

6 (1) companies listed on United States securities 

7 exchanges face the potential of extraordinary litiga8 tion costs that companies listed abroad do not; 

9 (2) securities class action settlements in the 

10 United States for 2006 totaled $10,600,000,000 

11 (not counting the Enron-related settlements of ap12 proximately $7,100,000,000), reflecting an increase 

13 of— 

14 (A) 255 percent from 2004; 

15 (B) more than 500 percent from 2000 (not 

16 including the $3,100,000,000 Cendant settle17 ment); and 

18 (C) an astonishing 7,000 percent from 

19 1995; 

20 (3) while many such claims are legitimate, the 

21 sheer number of cases and the staggering settlement 

22 amounts illustrate the growing impact of the tort 

23 system on the United States economy; and 

24 (4) by contrast, such private shareholder class 

25 action suits do not exist in the United Kingdom and 

26 other European Union countries. 


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1 (b) PUBLIC HEARING.—Not later than 60 days after 

2 the date of enactment of this Act, the Chairman of the 

3 Securities and Exchange Commission (in this section re4 ferred to as the ‘‘Commission’’) shall convene a public 

5 hearing on the impact of excessive litigation on the com6 petitiveness of companies listed on United States securi7 ties exchanges. 

8 SEC. 203. DIRECTING THE COMMISSION TO ESTABLISH 

9 FORMAL PROCESSES AND PROCEDURES FOR 

10 COST-BENEFIT ANALYSES OF PROPOSED AND 

11 EXISTING RULES AND REGULATIONS. 

12 (a) STUDY.—Not later than 180 days after the date 

13 of enactment of this Act, the Commission shall submit to 

14 Congress a study of its existing processes and procedures 

15 for conducting cost-benefit analyses of proposed and exist16 ing rules and regulations, and shall report to Congress on 

17 ways in which the Commission could perform more rig18 orous and informed cost-benefit analyses of such rules and 

19 regulations. 

20 (b) PROPOSED RULE.— 

21 (1) IN GENERAL.—Not later than 180 days 

22 after the date of submission to Congress of the re23 port under subsection (a), the Commission shall 

24 issue a final rule to establish formal processes and 


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1 procedures for conducting cost-benefit analyses of 

2 proposed and existing rules and regulations. 

3 (2) CERTAIN CONTENT REQUIRED.—At a min4 imum, processes and procedures proposed by the 

5 Commission under this subsection shall include pro6 visions directing the Commission— 

7 (A) to assess all costs and benefits of avail8 able regulatory alternatives, including both 

9 quantifiable measures (to the extent that such 

10 measures can be usefully estimated) and quali11 tative measures of costs and benefits that are 

12 difficult to quantify, but nevertheless essential 

13 to consider; 

14 (B) to design its rules and regulations in 

15 the most cost-effective manner to achieve the 

16 regulatory objective, considering incentives for 

17 innovation, consistency, predictability, the costs 

18 of enforcement and compliance, and flexibility; 

19 (C) to assess both the costs and the bene20 fits of the intended rule or regulation and pro21 pose or adopt a rule or regulation only upon a 

22 reasoned determination that the benefits of the 

23 intended rule or regulation justify its costs; 

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1 tion concerning the need for, and consequences 

2 of, the intended rule or regulation; 

3 (E) to tailor its rules and regulations to 

4 impose the least possible burden on individuals, 

5 businesses of differing sizes, and other entities, 

6 consistent with obtaining the regulatory objec7 tives, taking into account, among other things, 

8 and to the extent practicable, the cumulative 

9 costs; and 

10 (F) to establish a process for reexamining 

11 existing rules and regulations, or, at a min12 imum, those rules and regulations that the 

13 Commission, industry participants, or others 

14 identify as imposing unjustifiable costs or com15 petitive burdens, that shall be designed to de16 termine whether the rules and regulations are 

17 working as intended, whether there are satisfac18 tory alternatives of a less burdensome nature, 

19 and whether changes should be made. 

20 (3) PERIODIC REVIEW.—Each rule and regula21 tion of the Commission that is subject to review pur22 suant to paragraph (2)(F) shall be reviewed not less 

23 frequently than 2 years after the date of its issuance 

24 in final form, and once every 10 years thereafter. 


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1 SEC. 204. DIRECTING THE COMMISSION TO DEFINE 

2 ‘‘SMALLER PUBLIC COMPANY’’ TO PROVIDE 

3 CERTAINTY TO ISSUERS. 

4 (a) RULE REVISION REQUIRED.—Not later than 90 

5 days after the date of enactment of this Act, the Commis6 sion, pursuant to its authority to amend rules of the Pub7 lic Company Accounting Oversight Board under section 

8 107 of the Sarbanes-Oxley Act of 2002, shall revise Audit9 ing Standard No. 5 of the Oversight Board, as in effect 

10 on the date of enactment of this Act, to include a defini11 tion of the term ‘‘smaller public company’’. 

12 (b) DEFINITION OF SMALLER PUBLIC COMPANY.— 

13 For purposes of the rule revision required under sub14 section (a), the term ‘‘smaller public company’’ shall mean 

15 an issuer for which an annual report is required by section 

16 13(a) or 15(d) of the Securities Exchange Act of 1934 

17 (15 U.S.C. 78m, 78o(d)) that— 

18 (1) has a total market capitalization at the be19 ginning of the relevant reporting period of less than 

20 $700,000,000; and 

21 (2) has total revenues for that reporting period 

22 of less than $250,000,000. 

23 SEC. 205. MUTUAL RECOGNITION. 

24 (a) FINDINGS.—Congress finds that— 

25 (1) there is an ongoing and pressing need to 

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1 ture to address the increasingly global nature of the 

2 financial marketplace; 

3 (2) existing regulations on cross-border activi4 ties are outdated, and predate the revolution in com5 munications technology and the accompanying trans6 formations in global markets; 

7 (3) existing regulations on cross-border activi8 ties are complex, inefficient, not flexible enough to 

9 meet modern market needs, and have the effect of 

10 chilling innovation and imposing significant and un11 necessary burdens on United States investors; 

12 (4) the Commission has delayed the timetable 

13 for Commission action on key elements of reexam14 ining and developing new approaches to cross-border 

15 regulation, including much needed reform to Com16 mission rule 240.15a–6 of title 17, Code of Federal 

17 Regulations, as in effect on the date of enactment of 

18 this Act, and potential recognition of foreign regu19 latory regimes; and 

20 (5) such delay postpones the regulatory changes 

21 needed to eliminate unnecessary inefficiencies from 

22 international financial transactions, and poses an in23 creasingly significant risk to the effective moderniza24 tion and competitiveness of United States capital 

25 markets. 


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1 (b) MODERNIZATION OF CROSS-BORDER RULES AP2 PLICABLE TO BROKERS AND DEALERS.— 

3 (1) IN GENERAL.—The Commission shall, by 

4 rule, exempt any foreign broker or dealer from the 

5 registration requirements of the Securities Exchange 

6 Act of 1934, and any other regulation applicable to 

7 registered or unregistered brokers or dealers, to the 

8 extent that the foreign broker or dealer effects 

9 transactions in securities with or for, or induces or 

10 attempts to induce the purchase or sale of any secu11 rity by— 

12 (A) a qualified investor, as defined in sec13 tion 3(a)(54) of the Securities Exchange Act of 

14 1934; 

15 (B) an investor that is a resident outside 

16 of the United States; and 

17 (C) any person described in Commission 

18 rule 240.15a–6(a)(4) of title 17, Code of Fed19 eral Regulations, as in effect on the date of en20 actment of this Act. 

21 (2) DEFINITION OF FOREIGN BROKER OR

22 DEALER.—As used in this section, the term ‘‘For23 eign broker or dealer’’ has the same meaning as in 

24 section 240.15a–6(b)(3) of title 17, Code of Federal 


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1 Regulations, as in effect on the date of enactment of 

2 this Act. 

3 (3) REGULATORY AUTHORITY.—The Commis4 sion may, upon a finding that such action is nec5 essary to protect United States investors and con6 sistent with this section, require a foreign broker or 

7 dealer and its associated persons— 

8 (A) to file documentation to establish that 

9 the foreign broker or dealer and its associated 

10 persons are not subject to statutory disquali11 fication; 

12 (B) to consent to service of process for any 

13 civil action brought by or proceeding before the 

14 Commission or a self-regulatory organization; 

15 and 

16 (C) to agree to provide any information or 

17 documents that the Commission reasonably re18 quests, relating to effecting transactions in se19 curities with or for, or inducing or attempting 

20 to induce the purchase or sale of any security 

21 by persons described in subparagraphs (A) 

22 through (C) of paragraph (1), subject to limita23 tions recognizing potential conflicts with appli24 cable foreign laws or regulations. 


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1 (4) LIMITATION ON STATE ACTION.—No State 

2 or political subdivision thereof, or any self-regulatory 

3 organization, may impose any registration, licensing, 

4 qualification, or other legal requirement applicable to 

5 a foreign broker or dealer or associated person 

6 thereof that is exempt from Commission registration 

7 and regulation pursuant to this subsection, except 

8 that the State or political subdivision thereof, or 

9 such self-regulatory organization, may require the 

10 foreign broker or dealer to provide copies of any doc11 uments filed with the Commission, as described in 

12 this subsection. 

13 (5) TIMING OF REGULATIONS.—Final regula14 tions to carry out this subsection shall be issued by 

15 the Commission, and such regulations shall become 

16 effective, not later than 180 days after the date of 

17 enactment of this Act. 

18 (c) MUTUAL RECOGNITION RULES.— 

19 (1) IN GENERAL.—The Commission shall issue 

20 regulations designed to provide for a framework for 

21 mutual recognition of foreign regulatory regimes, so 

22 that foreign brokers, dealers, and exchanges shall be 

23 regulated based on regulation in their home country, 

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1 sion finds necessary to protect United States inves2 tors. 

3 (2) IMPLEMENTATION.—The Commission shall 

4 adopt regulations that provide an expeditious and 

5 transparent implementation mechanism for this sec6 tion, based on objective qualification criteria and 

7 fixed timelines, that is designed to enable foreign 

8 brokers, dealers, and exchanges to operate in the 

9 United States and abroad based on regulation in 

10 their home country. 

11 (3) LIMITATION.—The regulations required by 

12 this subsection— 

13 (A) shall not require individualized review 

14 and approval process for foreign brokers, deal15 ers, and exchanges to be eligible to rely on reg16 ulation in their home country, but shall permit 

17 such brokers, dealers, and exchanges to make a 

18 supplemental showing, on an individual exemp19 tive basis, to demonstrate their qualifications to 

20 do business with relevant classes of investors; 

21 and 

22 (B) may not create regulatory distinctions 

23 that limit trading of portfolios containing both 

24 United States and non-United States securities 


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1 or impose other requirements that are incon2 sistent with the business objectives of investors. 

3 (4) TIMING.—The Commission shall issue pro4 posed regulations to carry out this subsection not 

5 later than 90 days after the date of enactment of 

6 this Act, and shall make such regulations effective 

7 reasonably promptly thereafter. 

8 (5) EXEMPTION AUTHORITY.—The Commission 

9 may, by rule, provide for such exemptions to the 

10 provisions of this subsection as the Commission de11 termines appropriate. 

12 SEC. 206. SUPPORTING THE SECURITIES AND EXCHANGE 

13 COMMISSION REFORM EFFORTS TO SPEED 

14 THE PROCESS OF RULEMAKING FOR SELF 

15 REGULATORY ORGANIZATIONS. 

16 (a) FINDINGS.—Congress finds that— 

17 (1) United States capital markets are evolving 

18 quickly, and United States equity exchanges face in19 creasing competition, both domestically and inter20 nationally; 

21 (2) the Commission has recognized this trans22 formation in the competitive landscape and an23 nounced a project to redesign the rule approval proc24 ess for exchanges to make it more efficient; 


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1 (3) rather than approving rule filings by self 

2 regulatory organizations within the 35-day period 

3 prescribed under the Securities Exchange Act of 

4 1934, the Commission has routinely requested that 

5 exchanges agree to extend deadlines while rules are 

6 weighed and considered within the agency, poten7 tially resulting in years before exchange rule filings 

8 are finally approved; 

9 (4) this antiquated and overly rigid regulatory 

10 model does not recognize the new realities of inter11 national competition among exchanges or new com12 petition from innovative products that compete with 

13 traditional asset classes; and 

14 (5) competitors to United States equity ex15 changes operate under different regulatory regimes, 

16 which can allow such competitors to adapt to rapidly 

17 changing business environments while United States 

18 exchanges are frozen in rule approval process review 

19 by the Commission for months or years. 

20 (b) RULEMAKING.—The Commission shall promul21 gate rules under section 19 of the Securities Exchange Act 

22 of 1934, to speed the process of rulemaking to enable self23 regulatory organizations to respond to competitive inequi24 ties and better meet customer needs. Such rules and other 

25 actions should be completed not later than 180 days after 


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1 the date of enactment of this Act, and should predate or 

2 be coterminous with any foreign exchange mutual recogni3 tion regime established under this Act. 

4 SEC. 207. ELIMINATE THE EXEMPTION FROM STATE REGU5 LATION FOR CERTAIN SECURITIES DES6 IGNATED BY NATIONAL SECURITIES EX7 CHANGES. 

8 Section 18(b)(1) of the Securities Act of 1933 (15 

9 U.S.C. 77r(b)(1)) is amended— 

10 (1) in subparagraph (A)— 

11 (A) by striking ‘‘or the American Stock 

12 Exchange, or listed, or authorized for listing, on 

13 the National Market System of the Nasdaq 

14 Stock Market (or any successor to such enti15 ties)’’ and inserting ‘‘, the American Stock Ex16 change, or the Nasdaq Stock Market (or any 

17 successor to such entities)’’; and 

18 (B) by inserting before the semicolon at 

19 the end the following: ‘‘, except that a security 

20 listed, or authorized for listing, on the New 

21 York Stock Exchange, the American Stock Ex22 change, or the Nasdaq Stock Market (or any 

23 successor to any such entity) shall not be a cov24 ered security if the exchange adopts listing 

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1 curities Exchange Act of 1934 (15 U.S.C. 

2 78s(b)) that designates a tier or segment of 

3 such securities as securities that are not cov4 ered securities for purposes of this section and 

5 such security is listed, or authorized for listing, 

6 on such tier or segment’’; and 

7 (2) in subparagraph (B), by inserting ‘‘covered’’ 

8 after ‘‘applicable to’’. 

9 SEC. 208. DIRECTING THE COMMISSION TO ACCELERATE 

10 FULL CONVERSION OF IFRS AND UNITED 

11 STATES GAAP. 

12 (a) FINDINGS.—Congress finds that— 

13 (1) the accounting framework applied in more 

14 than 100 countries around the world is the Inter15 national Financial Reporting Standard (in this sec16 tion referred to as ‘‘IFRS’’); 

17 (2) a number of additional important United 

18 States trading partners, including Canada, Brazil, 

19 Chile, India, and South Korea, have announced 

20 dates to shift to IFRS; and 

21 (3) the difficulty and expense of reconciling 

22 IFRS with generally accepted accounting principles 

23 employed in the United States (in this section re24 ferred to as ‘‘GAAP’’), the accounting framework 

25 within which companies whose shares are listed on 


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1 United States exchanges must report their financial 

2 information, is among the highest hurdles for for3 eign companies considering a United States listing, 

4 and one of the most compelling incentives for for5 eign-based businesses to list their shares on ex6 changes based somewhere other than the United 

7 States. 

8 (b) ACCELERATION OF EFFORT.—The Commission 

9 shall— 

10 (1) accelerate efforts to offer to both United 

11 States- and foreign-based companies the option of 

12 reporting financial information using either IFRS or 

13 GAAP; and 

14 (2) accelerate efforts with the Commission’s 

15 foreign counterparts to achieve full conversion of 

16 IFRS and GAAP. 

17 SEC. 209. PROMOTING MARKET ACCESS FOR FINANCIAL 

18 SERVICES. 

19 (a) FINDINGS.—Congress finds that— 

20 (1) there is a need to consistently monitor and 

21 increase Government advocacy for United States fi22 nancial services firms’ attempts to gain overseas fi23 nancial market access; 

24 (2) the presence of foreign financial services 

25 firms in the United States and their activities should 


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1 be documented to find which countries’ firms enjoy 

2 full market access in the United States, while their 

3 home governments deny national treatment to Amer4 ican financial services firms; and 

5 (3) an analysis of the results achieved from the 

6 U.S.-China Strategic Economic Dialogue (referred to 

7 as ‘‘SED’’) and how such results specifically apply 

8 to United States financial services firms, including 

9 benchmarks and timeframes for future improve10 ments, should be compiled to assess the efficacy of 

11 the negotiations. 

12 (b) AMENDMENTS TO FINANCIAL REPORTS ACT.— 

13 The Financial Reports Act of 1988 (22 U.S.C. 5351 et 

14 seq.) is amended— 

15 (1) in section 3602— 

16 (A) in the section heading, by striking 

17 ‘‘QUADRENNIAL’’ and inserting ‘‘ANNUAL’’; 

18 (B) by striking ‘‘Not less frequently than 

19 every 4 years, beginning December 1, 1990’’ 

20 and inserting ‘‘Beginning July 1, 2008, and an21 nually thereafter,’’; and 

22 (C) by striking ‘‘to the Congress’’ and in23 serting ‘‘to the Committee on Banking, Hous24 ing, and Urban Affairs of the Senate and the 


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1 Committee on Financial Services of the House 

2 of Representatives’’; and 

3 (2) in section 3603— 

4 (A) by redesignating subsections (b), (c), 

5 and (d) as subsections (c), (d), and (e), respec6 tively; and 

7 (B) by inserting after subsection (a) the 

8 following: 

9 ‘‘(b) REPORT ON SED.— 

10 ‘‘(1) IN GENERAL.—The Secretary shall include 

11 in the initial report required under section 3602, a 

12 summary of the results of the most recent United 

13 States-China Strategic Economic Dialogue (in this 

14 subsection referred to as ‘SED’) and the results of 

15 the SED as it relates to promoting market access 

16 for financial institutions. 

17 ‘‘(2) PROGRESS REPORT.—The reports required 

18 under section 3602 shall include a progress report 

19 on the implementation of any agreements resulting 

20 from the SED, a description of the remaining chal21 lenges, if any, in improving market access for finan22 cial institutions, and a plan, including benchmarks 

23 and time frames, for dealing with the remaining 

24 challenges. 


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1 ‘‘(3) SPECIFIC CONTENT.—Each report de2 scribed in this subsection shall specifically address 

3 issues regarding— 

4 ‘‘(A) foreign investment rules; 

5 ‘‘(B) the problems of a dual-share stock 

6 market; 

7 ‘‘(C) the openness of the derivatives mar8 ket; 

9 ‘‘(D) restrictions on foreign bank branch10 ing; 

11 ‘‘(E) the ability to offer insurance (includ12 ing innovative products); and 

13 ‘‘(F) regulatory and procedural trans14 parency.’’. 

15 TITLE III—PROTECTING 

16 HOMEOWNERS 

17 SEC. 301. SUBPRIME REFINANCING LOANS THROUGH USE 

18 OF QUALIFIED MORTGAGE BONDS. 

19 (a) USE OF QUALIFIED MORTGAGE BONDS PRO20 CEEDS FOR SUBPRIME REFINANCING LOANS.—Section 

21 143(k) of the Internal Revenue Code of 1986 (relating to 

22 other definitions and special rules) is amended by adding 

23 at the end the following: 

24 ‘‘(12) SPECIAL RULES FOR SUBPRIME

25 REFINANCINGS.— 


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1 ‘‘(A) IN GENERAL.—Notwithstanding the 

2 requirements of subsection (i)(1), the proceeds 

3 of a qualified mortgage issue may be used to re4 finance a mortgage on a residence which was 

5 originally financed by the mortgagor through a 

6 qualified subprime loan. 

7 ‘‘(B) SPECIAL RULES.—In applying this 

8 paragraph to any case in which the proceeds of 

9 a qualified mortgage issue are used for any refi10 nancing described in subparagraph (A)— 

11 ‘‘(i) subsection (a)(2)(D)(i) shall be 

12 applied by substituting ‘12-month period’ 

13 for ‘42-month period’ each place it ap14 pears, 

15 ‘‘(ii) subsection (d) (relating to 3-year 

16 requirement) shall not apply, and 

17 ‘‘(iii) subsection (e) (relating to pur18 chase price requirement) shall be applied 

19 by using the market value of the residence 

20 at the time of refinancing in lieu of the ac21 quisition cost. 

22 ‘‘(C) QUALIFIED SUBPRIME LOAN.—The 

23 term ‘qualified subprime loan’ means an adjust24 able rate single-family residential mortgage loan 

25 originated after December 31, 2001, and before 


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1 January 1, 2008, that the bond issuer deter2 mines would be reasonably likely to cause finan3 cial hardship to the borrower if not refinanced. 

4 ‘‘(D) TERMINATION.—This paragraph 

5 shall not apply to any bonds issued after De6 cember 31, 2010.’’. 

7 (b) INCREASED VOLUME CAP FOR CERTAIN

8 BONDS.— 

9 (1) IN GENERAL.—Subsection (d) of section 

10 146 of the Internal Revenue Code of 1986 is amend11 ed by adding at the end the following: 

12 ‘‘(5) INCREASE AND SET ASIDE FOR HOUSING

13 BONDS FOR 2008.— 

14 ‘‘(A) INCREASE FOR 2008.—In the case of 

15 calendar year 2008, the State ceiling for each 

16 State shall be increased by an amount equal to 

17 $10,000,000,000 multiplied by a fraction— 

18 ‘‘(i) the numerator of which is the 

19 population of such State (as reported in 

20 the most recent decennial census), and 

21 ‘‘(ii) the denominator of which is the 

22 total population of all States (as reported 

23 in the most recent decennial census). 

24 ‘‘(B) SET ASIDE.— 


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1 ‘‘(i) IN GENERAL.—Any amount of 

2 the State ceiling for any State which is at3 tributable to an increase under this para4 graph shall be allocated solely for one or 

5 more qualified purposes. 

6 ‘‘(ii) QUALIFIED PURPOSE.—For pur7 poses of this paragraph, the term ‘qualified 

8 purpose’ means— 

9 ‘‘(I) the issuance of exempt facil10 ity bonds used solely to provide quali11 fied residential rental projects, or 

12 ‘‘(II) a qualified mortgage issue 

13 (determined by substituting ‘12-month 

14 period’ for ‘42-month period’ each 

15 place it appears in section 

16 143(a)(2)(D)(i)).’’. 

17 (2) CARRYFORWARD OF UNUSED LIMITA18 TIONS.—Subsection (f) of section 146 of such Code 

19 is amended by adding at the end the following: 

20 ‘‘(6) SPECIAL RULES FOR INCREASED VOLUME

21 CAP UNDER SUBSECTION (D)(5).— 

22 ‘‘(A) IN GENERAL.—No amount which is 

23 attributable to the increase under subsection 

24 (d)(5) may be used— 


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1 ‘‘(i) for a carryforward purpose other 

2 than a qualified purpose (as defined in 

3 subsection (d)(5)), and 

4 ‘‘(ii) to issue any bond after calendar 

5 year 2010. 

6 ‘‘(B) ORDERING RULES.—For purposes of 

7 subparagraph (A), any carryforward of an 

8 issuing authority’s volume cap for calendar year 

9 2008 shall be treated as attributable to such in10 crease to the extent of such increase.’’. 

11 (c) ALTERNATIVE MINIMUM TAX.— 

12 (1) IN GENERAL.—Clause (ii) of section 

13 57(a)(5)(C) of the Internal Revenue Code of 1986 is 

14 amended by striking ‘‘shall not include’’ and all that 

15 follows and inserting ‘‘shall not include— 

16 ‘‘(I) any qualified 501(c)(3) bond 

17 (as defined in section 145), or 

18 ‘‘(II) any qualified mortgage 

19 bond (as defined in section 143(a)) or 

20 qualified veteran’s mortgage bond (as 

21 defined in section 143(b)) issued after 

22 the date of the enactment of this sub23 clause and before January 1, 2011.’’. 

24 (2) CONFORMING AMENDMENT.—The heading 

25 for section 57(a)(5)(C)(ii) of the Internal Revenue 


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1 Code of 1986 is amended by striking ‘‘QUALIFIED

2 501(C)(3) BONDS’’ and inserting ‘‘CERTAIN BOND’’. 

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

4 this section shall apply to bonds issued after the date of 

5 the enactment of this Act. 

6 SEC. 302. EXPEDITIOUS DISTRIBUTION OF FUNDS ALREADY 

7 PROVIDED FOR MORTGAGE FORECLOSURE 

8 COUNSELING. 

9 Upon certification by the Neighborhood Reinvestment 

10 Corporation under paragraph (4) under the heading 

11 ‘‘Neighborhood Reinvestment Corporation—Payment to 

12 the Neighborhood Reinvestment Corporation’’ of Public 

13 Law 110-161 that Housing and Urban Development or 

14 Neighborhood Reinvestment Corporation-approved coun15 seling intermediaries and State Housing Finance Agencies 

16 have the need for additional portions of the $180,000,000 

17 provided therein for mortgage foreclosure mitigation ac18 tivities in States and areas with high rates of mortgage 

19 foreclosures, defaults, or related activities beyond the ini20 tial awards, and the expertise to use such funds effectively, 

21 the Neighborhood Reinvestment Corporation shall expedi22 tiously continue to award such funds as need and expertise 

23 is shown. 


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

2 FORECLOSURE. 

3 (a) ALLOWANCE OF CREDIT.—Subpart A of part IV 

4 of subchapter A of chapter 1 of the Internal Revenue Code 

5 of 1986 (relating to refundable credits) is amended by in6 serting after section 25D the following new section: 

7 ‘‘SEC. 25E. CREDIT FOR PURCHASE OF HOMES IN OR NEAR 

8 FORECLOSURE. 

9 ‘‘(a) ALLOWANCE OF CREDIT.— 

10 ‘‘(1) IN GENERAL.—In the case of an individual 

11 who is a purchaser of a qualified principal residence 

12 during the taxable year, there shall be allowed as a 

13 credit against the tax imposed by this chapter an 

14 amount equal to so much of the purchase price of 

15 the residence as does not exceed $15,000. 

16 ‘‘(2) ALLOCATION OF CREDIT AMOUNT.—The 

17 amount of the credit allowed under paragraph (1) 

18 shall be equally divided among the 3 taxable years 

19 beginning with the taxable year in which the pur20 chase of the qualified principal residence is made. 

21 ‘‘(b) LIMITATIONS.— 

22 ‘‘(1) DATE OF PURCHASE.—The credit allowed 

23 under subsection (a) shall be allowed only with re24 spect to purchases made— 

25 ‘‘(A) after February 29, 2008, and 

26 ‘‘(B) before March 1, 2009. 


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1 ‘‘(2) LIMITATION BASED ON AMOUNT OF

2 TAX.—In the case of a taxable year to which section 

3 26(a)(2) does not apply, the credit allowed under 

4 subsection (a) for any taxable year shall not exceed 

5 the excess of— 

6 ‘‘(A) the sum of the regular tax liability 

7 (as defined in section 26(b)) plus the tax im8 posed by section 55, over 

9 ‘‘(B) the sum of the credits allowable 

10 under this subpart (other than this section) for 

11 the taxable year. 

12 ‘‘(3) ONE-TIME ONLY.— 

13 ‘‘(A) IN GENERAL.—If a credit is allowed 

14 under this section in the case of any individual 

15 (and such individual’s spouse, if married) with 

16 respect to the purchase of any qualified prin17 cipal residence, no credit shall be allowed under 

18 this section in any taxable year with respect to 

19 the purchase of any other qualified principal 

20 residence by such individual or a spouse of such 

21 individual. 

22 ‘‘(B) JOINT PURCHASE.—In the case of a 

23 purchase of a qualified principal residence by 2 

24 or more unmarried individuals or by 2 married 

25 individuals filing separately, no credit shall be 


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1 allowed under this section if a credit under this 

2 section has been allowed to any of such individ3 uals in any taxable year with respect to the 

4 purchase of any other qualified principal resi5 dence. 

6 ‘‘(c) QUALIFIED PRINCIPAL RESIDENCE.— 

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, the term ‘qualified principal residence’ means 

9 an eligible single-family residence that is purchased 

10 to be the principal residence of the purchaser. 

11 ‘‘(2) ELIGIBLE SINGLE-FAMILY RESIDENCE.— 

12 ‘‘(A) IN GENERAL.—For purposes of this 

13 subsection, the term ‘eligible single-family resi14 dence’ means a single-family structure that is— 

15 ‘‘(i) a new previously unoccupied resi16 dence for which a building permit is issued 

17 and construction begins on or before Sep18 tember 1, 2007, but only if such residence 

19 is purchased by the taxpayer directly from 

20 the person to whom such building permit 

21 was issued, 

22 ‘‘(ii) an owner-occupied residence with 

23 respect to which the owner’s acquisition in24 debtedness (as defined in section 

25 163(h)(3)(B), determined without regard 


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1 to clause (ii) thereof) is in default on or 

2 before March 1, 2008, or 

3 ‘‘(iii) a residence with respect to 

4 which a foreclosure event has taken place 

5 and which is owned by the mortgagor or 

6 the mortgagor’s agent, but only if such 

7 residence was occupied as a principal resi8 dence by the mortgagee for at least 1 year 

9 prior to the foreclosure event. 

10 ‘‘(B) CERTIFICATION.—In the case of an 

11 eligible single-family residence described in sub12 paragraph (A)(i), no credit shall be allowed 

13 under this section unless the purchaser submits 

14 a certification by the seller of such residence 

15 that such residence meets the requirements of 

16 such subparagraph. 

17 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No credit shall 

18 be allowed under this section for any purchase for which 

19 a credit is allowed under section 1400C. 

20 ‘‘(e) RECAPTURE IN THE CASE OF CERTAIN DISPOSI21 TIONS.—In the event that a taxpayer— 

22 ‘‘(1) disposes of the qualified principal resi23 dence with respect to which a credit is allowed under 

24 subsection (a), or 


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1 ‘‘(2) fails to occupy such residence as the tax2 payer’s principal residence, 

3 at any time within 36 months after the date on which the 

4 taxpayer purchased such residence, then the remaining 

5 portion of the credit allowed under subsection (a) shall be 

6 disallowed in the taxable year during which such disposi7 tion occurred or in which the taxpayer failed to occupy 

8 the residence as a principal residence, and in any subse9 quent taxable year in which the remaining portion of the 

10 credit would, but for this subsection, have been allowed. 

11 ‘‘(f) SPECIAL RULES.— 

12 ‘‘(1) JOINT PURCHASE.— 

13 ‘‘(A) MARRIED INDIVIDUALS FILING SEPA14 RATELY.—In the case of 2 married individuals 

15 filing separately, subsection (a) shall be applied 

16 to each such individual by substituting ‘$7,500’ 

17 for ‘$15,000’ in subsection (a)(1). 

18 ‘‘(B) UNMARRIED INDIVIDUALS.—If 2 or 

19 more individuals who are not married purchase 

20 a qualified principal residence, the amount of 

21 the credit allowed under subsection (a) shall be 

22 allocated among such individuals in such man23 ner as the Secretary may prescribe, except that 

24 the total amount of the credits allowed to all 

25 such individuals shall not exceed $15,000. 


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1 ‘‘(2) PURCHASE.—In defining the purchase of a 

2 qualified principal residence, rules similar to the 

3 rules of paragraphs (2) and (3) of section 1400C(e) 

4 (as in effect on the date of the enactment of this 

5 section) shall apply. 

6 ‘‘(3) REPORTING REQUIREMENT.—Rules similar 

7 to the rules of section 1400C(f) (as so in effect) 

8 shall apply. 

9 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub10 title, if a credit is allowed under this section with respect 

11 to the purchase of any residence, the basis of such resi12 dence shall be reduced by the amount of the credit so al13 lowed.’’. 

14 (b) CLERICAL AMENDMENT.—The table of sections 

15 for subpart A of part IV of subchapter A of chapter 1 

16 of the Internal Revenue Code of 1986 is amended by in17 serting after the item relating to section 25D the following 

18 new item: 

‘‘Sec. 25E. Credit for certain home purchases.’’. 

19 SEC. 304. ENHANCED MORTGAGE LOAN DISCLOSURES. 

20 (a) TRUTH IN LENDING ACT DISCLOSURES.—Sec21 tion 128(b)(2) of the Truth in Lending Act (15 U.S.C. 

22 1638(b)(2)) is amended— 

23 (1) by inserting ‘‘(A)’’ before ‘‘In the’’; 

24 (2) by striking ‘‘a residential mortgage trans25 action, as defined in section 103(w)’’ and inserting 


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1 ‘‘any extension of credit that is secured by the dwell2 ing of a consumer’’; 

3 (3) by striking ‘‘shall be made in accordance’’ 

4 and all that follows through ‘‘extended, or’’; and 

5 (4) by striking ‘‘If the’’ and all that follows 

6 through the end of the paragraph and inserting the 

7 following: 

8 ‘‘(B) In the case of an extension of credit 

9 that is secured by the dwelling of a consumer, 

10 in addition to the other disclosures required by 

11 subsection (a), the disclosures provided under 

12 this paragraph shall— 

13 ‘‘(i) state in conspicuous type size and 

14 format, the following: ‘You are not re15 quired to complete this agreement merely 

16 because you have received these disclosures 

17 or signed a loan application.’; and 

18 ‘‘(ii) be furnished to the borrower not 

19 later than 7 business days before the date 

20 of consummation of the transaction, and at 

21 the time of consummation of the trans22 action, subject to subparagraph (D). 

23 ‘‘(C) In the case of an extension of credit 

24 that is secured by the dwelling of a consumer, 

25 under which the annual rate of interest is variVerDate Aug 31 2005 01:22 Mar 04, 2008 Jkt 069200 PO 00000 Frm 00097 Fmt 6652 Sfmt 6201 E:\BILLS\S12.PCS S12

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1 able, or with respect to which the regular pay2 ments may otherwise be variable, in addition to 

3 the other disclosures required by subsection (a), 

4 the disclosures provided under this paragraph 

5 shall— 

6 ‘‘(i) label the payment schedule as fol7 lows: ‘Payment Schedule: Payments Will 

8 Vary Based on Interest Rate Changes’; 

9 ‘‘(ii) state the maximum amount of 

10 the regular required payments on the loan, 

11 based on the maximum interest rate al12 lowed, introduced with the following lan13 guage in conspicuous type size and format: 

14 ‘Your payment can go as high as 

15 $lllllll’, the blank to be filled 

16 in with the maximum possible payment 

17 amount; 

18 ‘‘(iii) if the loan is an adjustable rate 

19 mortgage that includes an initial fixed in20 terest rate— 

21 ‘‘(I) state in conspicuous type 

22 size and format the following phrase: 

23 This loan is an adjustable rate mort24 gage with an initial fixed interest rate. 

25 Your initial fixed interest rate is AAA 


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1 with a monthly payment of BBB until 

2 CCC. After that date, the interest 

3 rate on your loan will ‘reset’ to an ad4 justable rate and both your interest 

5 rate and payment could go higher on 

6 that date and in the future. For ex7 ample, if your initial fixed rate ended 

8 today, your new adjustable interest 

9 rate would be DDD and your new 

10 payment EEE. If interest rates are 

11 one percent higher than they are 

12 today or at some point in the future, 

13 your new payment would be FFF. 

14 There is no guarantee you will be able 

15 to refinance your loan to a lower in16 terest rate and payment before your 

17 initial fixed interest rate ends.; 

18 ‘‘(II) the blank AAA in subpara19 graph (I) to be filled in with the ini20 tial fixed interest rate; 

21 ‘‘(III) the blank BBB in sub22 paragraph (I) to be filled in with the 

23 payment amount under the initial 

24 fixed interest rate; 


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1 ‘‘(IV) the blank CCC in subpara2 graph (I) to be filled in with the loan 

3 reset date; 

4 ‘‘(V) the blank DDD in subpara5 graph (I) to be filled in with the ad6 justable rate as if the initial rate ex7 pired on the date of disclosure under 

8 subparagraph (B); 

9 ‘‘(VI) the blank EEE in subpara10 graph (I) to be filled in with the pay11 ment under the adjustable rate as if 

12 the initial rate expired on the date of 

13 disclosure under subparagraph (B); 

14 and 

15 ‘‘(VII) the blank FFF in sub16 paragraph (I) to be filled in with the 

17 payment under the adjustable rate as 

18 if index rate on which the adjustable 

19 rate was one percent higher than of 

20 the date of disclosure under subpara21 graph (B); and 

22 ‘‘(iv) if the loan contains a prepay23 ment penalty— 

24 ‘‘(I) state in conspicuous type 

25 and format the following phrase: This 


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1 loan contains a prepayment penalty. 

2 If you desire to pay off this loan be3 fore GGG, you will pay a penalty of 

4 HHH.; 

5 ‘‘(II) the blank GGG in subpara6 graph (I) to be filled in with the date 

7 the prepayment penalty expires; and 

8 ‘‘(III) the blank HHH in sub9 paragraph (I) to be filled in with the 

10 prepayment penalty amount. 

11 ‘‘(D) In any case in which the disclosure 

12 statement provided 7 business days before the 

13 date of consummation of the transaction con14 tains an annual percentage rate of interest that 

15 is no longer accurate, as determined under sec16 tion 107(c), the creditor shall furnish an addi17 tional, corrected statement to the borrower, not 

18 later than 3 business days before the date of 

19 consummation of the transaction.’’. 

20 (b) CIVIL LIABILITY.—Section 130(a) of the Truth 

21 in Lending Act (15 U.S.C. 1640(a)) is amended— 

22 (1) in paragraph (2)(A)(iii), by striking ‘‘not 

23 less than $200 or greater than $2,000’’ and insert24 ing ‘‘$5,000, such amount to be adjusted annually 


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1 based on the consumer price index, to maintain cur2 rent value’’; and 

3 (2) in the penultimate sentence of the undesig4 nated matter following paragraph (4)— 

5 (A) by striking ‘‘only for’’ and inserting 

6 ‘‘for’’; 

7 (B) by striking ‘‘section 125 or’’ and in8 serting ‘‘section 122, section 125,’’; 

9 (C) by inserting ‘‘or section 128(b),’’ after 

10 ‘‘128(a),’’; and 

11 (D) by inserting ‘‘or section 128(b)’’ before 

12 the period. 

13 SEC. 305. CARRYBACK OF CERTAIN NET OPERATING 

14 LOSSES ALLOWED FOR 5 YEARS; TEMPORARY 

15 SUSPENSION OF 90 PERCENT AMT LIMIT. 

16 (a) IN GENERAL.—Subparagraph (H) of section 

17 172(b)(1) of the Internal Revenue Code of 1986 is amend18 ed to read as follows: 

19 ‘‘(H) 5-YEAR CARRYBACK OF CERTAIN

20 LOSSES.— 

21 ‘‘(i) TAXABLE YEARS ENDING DURING

22 2001 AND 2002.—In the case of a net oper23 ating loss for any taxable year ending dur24 ing 2001 or 2002, subparagraph (A)(i) 


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1 shall be applied by substituting ‘5’ for ‘2’ 

2 and subparagraph (F) shall not apply. 

3 ‘‘(ii) TAXABLE YEARS ENDING DUR4 ING 2006, 2007, 2008, AND 2009.—In the 

5 case of a net operating loss for any taxable 

6 year ending during 2006, 2007, 2008, or 

7 2009— 

8 ‘‘(I) subparagraph (A)(i) shall be 

9 applied by substituting ‘5’ for ‘2’, 

10 ‘‘(II) subparagraph (E)(ii) shall 

11 be applied by substituting ‘4’ for ‘2’, 

12 and 

13 ‘‘(III) subparagraph (F) shall not 

14 apply.’’. 

15 (b) TEMPORARY SUSPENSION OF 90 PERCENT LIMIT

16 ON CERTAIN NOL CARRYBACKS AND CARRYOVERS.— 

17 (1) IN GENERAL.—Section 56(d) of the of the 

18 Internal Revenue Code of 1986 is amended by add19 ing at the end the following new paragraph: 

20 ‘‘(3) ADDITIONAL ADJUSTMENTS.—For pur21 poses of paragraph (1)(A), the amount described in 

22 clause (I) of paragraph (1)(A)(ii) shall be increased 

23 by the amount of the net operating loss deduction 

24 allowable for the taxable year under section 172 at25 tributable to the sum of— 


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1 ‘‘(A) carrybacks of net operating losses 

2 from taxable years ending during 2006, 2007, 

3 2008, and 2009, and 

4 ‘‘(B) carryovers of net operating losses to 

5 taxable years ending during 2006, 2007, 2008, 

6 or 2009.’’. 

7 (2) CONFORMING AMENDMENT.—Subclause (I) 

8 of section 56(d)(1)(A)(i) of such Code is amended by 

9 inserting ‘‘amount of such’’ before ‘‘deduction de10 scribed in clause (ii)(I)’’. 

11 (c) ANTI-ABUSE RULES.—The Secretary of Treasury 

12 or the Secretary’s designee shall prescribes such rules as 

13 are necessary to prevent the abuse of the purposes of the 

14 amendments made by this section, including anti-stuffing 

15 rules, anti-churning rules (including rules relating to sale16 leasebacks), and rules similar to the rules under section 

17 1091 of the Internal Revenue Code of 1986 relating to 

18 losses from wash sales. 

19 (d) EFFECTIVE DATES.— 

20 (1) SUBSECTION (a).— 

21 (A) IN GENERAL.—Except as provided in 

22 subparagraph (B), the amendments made by 

23 subsection (a) shall apply to net operating 

24 losses arising in taxable years ending in 2006, 

25 2007, 2008, or 2009. 


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1 (B) ELECTION.—In the case of a net oper2 ating loss for a taxable year ending during 

3 2006 or 2007— 

4 (i) any election made under section 

5 172(b)(3) of the Internal Revenue Code of 

6 1986 may (notwithstanding such section) 

7 be revoked before November 1, 2008, and 

8 (ii) any election made under section 

9 172(j) of such Code shall (notwithstanding 

10 such section) be treated as timely made if 

11 made before November 1, 2008. 

12 (2) SUBSECTION (b).—The amendments made 

13 by subsection (b) shall apply to taxable years ending 

14 after December 31, 1995. 

15 TITLE IV—REDUCING THE 

16 LITIGATION TAX 

17 SEC. 401 LIMITATION ON PUNITIVE DAMAGES FOR SMALL 

18 BUSINESSES. 

19 (a) DEFINITION OF COVERED SMALL BUSINESS.— 

20 In this section, the term ‘‘covered small business’’ means 

21 any unincorporated business, or any partnership, corpora22 tion, association, unit of local government, or organiza23 tion— 


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1 (1) that has fewer than 25 full-time employees 

2 as of the date that the relevant civil action is filed; 

3 and 

4 (2) the principal place of business of which is 

5 in a State other than the State where the relevant 

6 civil action is filed. 

7 (b) GENERAL RULE.—Except as provided in sub8 section (c), in any civil action filed in a Federal or State 

9 court against a covered small business, punitive dam10 ages— 

11 (1) may be awarded against that covered small 

12 business only if the court finds by clear and con13 vincing evidence that conduct of that covered small 

14 business was— 

15 (A) carried out with a conscious, flagrant 

16 indifference to the rights or safety of others; 

17 and 

18 (B) the proximate cause of the harm that 

19 is the subject of the civil action; and 

20 (2) shall not be awarded against that covered 

21 small business in an amount greater than $250,000. 

22 (c) EXCEPTIONS.—This section shall not apply to a 

23 civil action if the court finds by clear and convincing evi24 dence that— 


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1 (1) the covered small business acted with spe2 cific intent to cause the type of harm that is the 

3 subject of the civil action; 

4 (2) the conduct of the covered small business 

5 constitute a criminal offense; or 

6 (3) the conduct of the covered small business 

7 resulted in serious environmental degradation. 

8 (d) APPLICATION BY THE COURT.—The limitation on 

9 punitive damages under this section shall be carried out 

10 by the court and shall not be disclosed to the jury, if any. 

11 SEC. 402. REASONABLENESS REVIEW OF ATTORNEY’S FEES. 

12 (a) IN GENERAL.—In any civil action in a Federal 

13 or State court in which the damages awarded to a party 

14 exceed $5,000,000, the court shall review the fees paid to 

15 any attorney for the prevailing party and ensure that 

16 those fees are reasonable in light of the hours of work 

17 actually performed by that attorney and the risk of non18 payment of fees assumed by that attorney when that attor19 ney agreed to represent the party. 

20 (b) UNREASONABLE FEES.—If a Federal or State 

21 court determines under subsection (a) that the fees paid 

22 to an attorney for a prevailing party are not reasonable, 

23 the court shall reduce the amount of that attorney’s fees. 

24 (c) ASSISTANCE.—A Federal or State court may, as 

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1 ing firm to assist the court in conducting a review under 

2 this section. 

3 SEC. 403. PARTIAL AWARD OF ATTORNEY’S FEES FOR UN4 REASONABLE LAWSUITS. 

5 (a) IN GENERAL.—In any civil action described in 

6 subsection (b), a court shall award to a prevailing party 

7 30 percent of the reasonable attorney’s fees that were in8 curred by that prevailing party in connection with a claim 

9 described in subsection (b)(2) after the date on which the 

10 party asserting that claim knew or should have known of 

11 the facts that would require that claim to be dismissed 

12 because there was no genuine issue of material fact. 

13 (b) CIVIL ACTIONS.—A civil action described in this 

14 subsection is a civil action— 

15 (1) filed in a Federal court or against a party 

16 whose principal residence or place of business is in 

17 a State other than the State where the civil action 

18 is filed; and 

19 (2) in which the court finds that no genuine 

20 issue of material fact exists with regard to a claim 

21 that would allow a reasonable juror to find in favor 

22 of the party presenting that claim. 


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1 SEC. 404. MANDATORY SANCTIONS FOR FRIVOLOUS LAW2 SUITS. 

3 (a) IN GENERAL.—If a court of the United States 

4 (as that term is defined in section 451 of title 28, United 

5 States Code) determines, whether on a motion of a party 

6 or on its own motion, that there has been a violation of 

7 rule 11 of the Federal Rules of Civil Procedure in any 

8 civil action, the court shall impose upon the attorney, law 

9 firm, or pro se litigant that violated rule 11, or is respon10 sible for such violation, an appropriate sanction. 

11 (b) SANCTIONS.—A sanction imposed under this sec12 tion— 

13 (1) shall include an order to pay any other 

14 party to the relevant civil action the reasonable ex15 penses incurred by that party as a direct result of 

16 the filing of the pleading, motion, or other paper 

17 that is the subject of the violation of rule 11 of the 

18 Federal Rules of Civil Procedure, including reason19 able attorney’s fees; and 

20 (2) shall be sufficient to— 

21 (A) deter the repetition of such conduct or 

22 comparable conduct by other similarly situated 

23 persons; and 

24 (B) compensate any party injured by such 

25 conduct. 


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

2 (a) IN GENERAL.—In any civil action filed in a Fed3 eral court or against a party whose principal residence or 

4 place of business is in a State other than the State where 

5 the civil action is filed, if scientific, technical, or other spe6 cialized knowledge will assist the fact finder to understand 

7 the evidence or to determine a fact in issue, a witness 

8 qualified as an expert by knowledge, skill, experience, 

9 training, or education, may give testimony relating to that 

10 evidence or fact, in the form of an opinion or otherwise, 

11 if— 

12 (1) the witness has disclosed, upon the request 

13 of the opposing party, those facts or data upon 

14 which the testimony of the witness is based or that 

15 are material to the testimony of the witness; 

16 (2) the testimony is based upon sufficient facts 

17 or data; 

18 (3) the testimony is the product of reliable prin19 ciples and methods; and 

20 (4) the witness has applied the principles and 

21 methods reliably to the facts. 

22 (b) REVIEW.—A trial court’s application of sub23 section (a) shall be subject to de novo review. 


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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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