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(2) EXPANSION OF GROSS RECEIPTS TEST.— 
(A) IN GENERAL.—Paragraph (3) of section 
448(b) (relating to entities with gross receipts of 
not more than $5,000,000) is amended to read as 
follows: 
‘‘(3) 
ENTITIES
MEETING
GROSS
RECEIPTS 
TEST.—Paragraphs (1) and (2) of subsection (a) shall 
not apply to any corporation or partnership for any 
taxable year if, for each of the prior taxable years 
ending on or after the date of the enactment of the 
Small Business and Work Opportunity Act of 2007, 
the entity (or any predecessor) met the gross receipts 
test in effect under subsection (c) for such prior tax-
able year.’’. 
(B) CONFORMING
AMENDMENTS.—Section 
448(c) of such Code is amended— 
(i) by striking ‘‘$5,000,000’’ in the 
heading thereof, 
(ii) by striking ‘‘$5,000,000’’ each 
place it appears in paragraph (1) and in-
serting ‘‘$10,000,000’’, and 
(iii) by adding at the end the following 
new paragraph: 
‘‘(4) INFLATION
ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
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2008, the dollar amount contained in paragraph (1) 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar year 
in which the taxable year begins, by substituting 
‘calendar year 2007’ for ‘calendar year 1992’ in 
subparagraph (B) thereof. 
‘‘If any amount as adjusted under this subpara-
graph is not a multiple of $100,000, such amount 
shall be rounded to the nearest multiple of $100,000.’’. 
(b) CLARIFICATION OF INVENTORY RULES FOR SMALL 
BUSINESS.— 
(1) IN GENERAL.—Section 471 (relating to gen-
eral rule for inventories) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection: 
‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED TO 
USE INVENTORIES.— 
‘‘(1) IN GENERAL.—A qualified taxpayer shall 
not be required to use inventories under this section 
for a taxable year. 
‘‘(2) TREATMENT OF TAXPAYERS NOT USING IN-
VENTORIES.—If a qualified taxpayer does not use in-
ventories with respect to any property for any taxable 
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year beginning after the date of the enactment of this 
subsection, such property shall be treated as a mate-
rial or supply which is not incidental. 
‘‘(3) QUALIFIED
TAXPAYER.—For purposes of 
this subsection, the term ‘qualified taxpayer’ means— 
‘‘(A) any eligible taxpayer (as defined in 
section 446(g)(2)), and 
‘‘(B) any taxpayer described in section 
448(b)(3).’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Subpart D of part II of subchapter E 
of chapter 1 is amended by striking section 474. 
(B) The table of sections for subpart D of 
part II of subchapter E of chapter 1 is amended 
by striking the item relating to section 474. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after the date 
of the enactment of this Act. 
SEC. 514. EXTENSION AND MODIFICATION OF COMBINED 
WORK OPPORTUNITY TAX CREDIT AND WEL-
FARE-TO-WORK CREDIT. 
(a) EXTENSION.—Section 51(c)(4)(B) (relating to ter-
mination) is amended by striking ‘‘2007’’ and inserting 
‘‘2012’’. 
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(b) INCREASE IN MAXIMUM AGE FOR DESIGNATED 
COMMUNITY RESIDENTS.— 
(1) IN
GENERAL.—Paragraph (5) of section 
51(d) is amended to read as follows: 
‘‘(5) DESIGNATED COMMUNITY RESIDENTS.— 
‘‘(A) IN
GENERAL.—The term ‘designated 
community resident’ means any individual who 
is certified by the designated local agency— 
‘‘(i) as having attained age 18 but not 
age 40 on the hiring date, and 
‘‘(ii) as having his principal place of 
abode within an empowerment zone, enter-
prise community, renewal community, or 
rural renewal county. 
‘‘(B) INDIVIDUAL MUST CONTINUE TO RE-
SIDE IN ZONE, COMMUNITY, OR COUNTY.—In the 
case of a designated community resident, the 
term ‘qualified wages’ shall not include wages 
paid or incurred for services performed while the 
individual’s principal place of abode is outside 
an empowerment zone, enterprise community, re-
newal community, or rural renewal county. 
‘‘(C) RURAL RENEWAL COUNTY.—For pur-
poses of this paragraph, the term ‘rural renewal 
county’ means any county which— 
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‘‘(i) is outside a metropolitan statis-
tical area (defined as such by the Office of 
Management and Budget), and 
‘‘(ii) during the 5-year periods 1990 
through 1994 and 1995 through 1999 had a 
net population loss.’’. 
(2) CONFORMING
AMENDMENT.—Subparagraph 
(D) of section 51(d)(1) is amended to read as follows: 
‘‘(D) a designated community resident,’’. 
(c) CLARIFICATION OF TREATMENT OF INDIVIDUALS 
UNDER INDIVIDUAL WORK PLANS.—Subparagraph (B) of 
section 51(d)(6) (relating to vocational rehabilitation refer-
ral) is amended by striking ‘‘or’’ at the end of clause (i), 
by striking the period at the end of clause (ii) and inserting 
‘‘, or’’, and by adding at the end the following new clause: 
‘‘(iii) an individual work plan devel-
oped and implemented by an employment 
network pursuant to subsection (g) of sec-
tion 1148 of the Social Security Act with 
respect to which the requirements of such 
subsection are met.’’. 
(d) TREATMENT OF DISABLED VETERANS UNDER THE 
WORK OPPORTUNITY TAX CREDIT.— 
(1) DISABLED VETERANS TREATED AS MEMBERS 
OF TARGETED GROUP.— 
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HR 1591 PP 
(A) IN
GENERAL.—Subparagraph (A) of 
section 51(d)(3) (relating to qualified veteran) is 
amended by striking ‘‘agency as being a member 
of a family’’ and all that follows and inserting 
‘‘agency as— 
‘‘(i) being a member of a family receiv-
ing assistance under a food stamp program 
under the Food Stamp Act of 1977 for at 
least a 3-month period ending during the 
12-month period ending on the hiring date, 
or 
‘‘(ii) entitled to compensation for a 
service-connected disability incurred after 
September 10, 2001.’’. 
(B) DEFINITIONS.—Paragraph (3) of sec-
tion 51(d) is amended by adding at the end the 
following new subparagraph: 
‘‘(C) OTHER DEFINITIONS.—For purposes of 
subparagraph (A), the terms ‘compensation’ and 
‘service-connected’ have the meanings given such 
terms under section 101 of title 38, United 
States Code.’’. 
(2) INCREASE IN AMOUNT OF WAGES TAKEN INTO 
ACCOUNT FOR DISABLED VETERANS.—Paragraph (3) 
of section 51(b) is amended— 
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(A) by inserting ‘‘($12,000 per year in the 
case of any individual who is a qualified veteran 
by reason of subsection (d)(3)(A)(ii))’’ before the 
period at the end, and 
(B) by striking ‘‘ONLY FIRST $6,000 of’’ 
in the heading and inserting ‘‘LIMITATION 
ON’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to individuals who begin work for the 
employer after the date of the enactment of this Act, in tax-
able years ending after such date. 
SEC. 515. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZA-
TIONS. 
(a) EMPLOYMENT TAXES.—Chapter 25 (relating to 
general provisions relating to employment taxes) is amend-
ed by adding at the end the following new section: 
‘‘SEC. 3511. CERTIFIED PROFESSIONAL EMPLOYER ORGANI-
ZATIONS. 
‘‘(a) GENERAL RULES.—For purposes of the taxes, and 
other obligations, imposed by this subtitle— 
‘‘(1) a certified professional employer organiza-
tion shall be treated as the employer (and no other 
person shall be treated as the employer) of any work 
site employee performing services for any customer of 
such organization, but only with respect to remunera-
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tion remitted by such organization to such work site 
employee, and 
‘‘(2) exclusions, definitions, and other rules 
which are based on the type of employer and which 
would (but for paragraph (1)) apply shall apply with 
respect to such taxes imposed on such remuneration. 
‘‘(b) SUCCESSOR EMPLOYER STATUS.—For purposes 
of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)— 
‘‘(1) a certified professional employer organiza-
tion entering into a service contract with a customer 
with respect to a work site employee shall be treated 
as a successor employer and the customer shall be 
treated as a predecessor employer during the term of 
such service contract, and 
‘‘(2) a customer whose service contract with a 
certified professional employer organization is termi-
nated with respect to a work site employee shall be 
treated as a successor employer and the certified pro-
fessional employer organization shall be treated as a 
predecessor employer. 
‘‘(c) LIABILITY
OF CERTIFIED PROFESSIONAL EM-
PLOYER ORGANIZATION.—Solely for purposes of its liability 
for the taxes, and other obligations, imposed by this sub-
title— 
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