141 
in taxable years beginning after the date of the enactment 
of this Act. 
SEC. 312. PROVISIONS RELATED TO FILM AND TELEVISION 
PRODUCTIONS. 
(a) MODIFICATION OF LIMITATION ON EXPENSING.— 
Subparagraph (A) of section 181(a)(2) is amended to read 
as follows: 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to so much of the aggregate cost of any 
qualified film or television production as exceeds 
$15,000,000.’’. 
(b) MODIFICATIONS TO DEDUCTION FOR DOMESTIC 
ACTIVITIES.— 
(1) DETERMINATION OF W-2 WAGES.—Paragraph 
(2) of section 199(b) is amended by adding at the end 
the following new subparagraph: 
‘‘(D) 
SPECIAL
RULE
FOR
QUALIFIED 
FILM.—In the case of a qualified film, such term 
shall include compensation for services performed 
in the United States by actors, production per-
sonnel, directors, and producers.’’. 
(2) DEFINITION
OF
QUALIFIED
FILM.—Para-
graph (6) of section 199(c) is amended by adding at 
the end the following: ‘‘A qualified film shall include 
any copyrights, trademarks, or other intangibles with 
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142 
respect to such film. The methods and means of dis-
tributing a qualified film shall not affect the avail-
ability of the deduction under this section.’’. 
(3) PARTNERSHIPS.—Subparagraph (A) of sec-
tion 199(d)(1) is amended by striking ‘‘and’’ at the 
end of clause (ii), by striking the period at the end 
of clause (iii) and inserting ‘‘, and’’, and by adding 
at the end the following new clause: 
‘‘(iv) in the case of each partner of a 
partnership, or shareholder of an S corpora-
tion, who owns (directly or indirectly) at 
least 20 percent of the capital interests in 
such partnership or of the stock of such S 
corporation— 
‘‘(I) such partner or shareholder 
shall be treated as having engaged di-
rectly in any film produced by such 
partnership or S corporation, and 
‘‘(II) such partnership or S cor-
poration shall be treated as having en-
gaged directly in any film produced by 
such partner or shareholder.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
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143 
tion shall apply to taxable years beginning after De-
cember 31, 2007. 
(2) EXPENSING.—The amendments made by sub-
section (a) shall apply to qualified film and television 
productions commencing after December 31, 2007. 
Subtitle C—Modification of Penalty 
on Understatement of Taxpayer’s 
Liability by Tax Return Pre-
parer 
SEC. 321. MODIFICATION OF PENALTY ON UNDERSTATE-
MENT OF TAXPAYER’S LIABILITY BY TAX RE-
TURN PREPARER. 
(a) IN GENERAL.—Subsection (a) of section 6694 (re-
lating to understatement due to unreasonable positions) is 
amended to read as follows: 
‘‘(a) UNDERSTATEMENT DUE TO UNREASONABLE PO-
SITIONS.— 
‘‘(1) IN GENERAL.—If a tax return preparer— 
‘‘(A) prepares any return or claim of refund 
with respect to which any part of an understate-
ment of liability is due to a position described 
in paragraph (2), and 
‘‘(B) knew (or reasonably should have 
known) of the position, 
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144 
such tax return preparer shall pay a penalty with re-
spect to each such return or claim in an amount 
equal to the greater of $1,000 or 50 percent of the in-
come derived (or to be derived) by the tax return pre-
parer with respect to the return or claim. 
‘‘(2) UNREASONABLE POSITION.— 
‘‘(A) IN
GENERAL.—Except as otherwise 
provided in this paragraph, a position is de-
scribed in this paragraph unless there is or was 
substantial authority for the position. 
‘‘(B) DISCLOSED POSITIONS.—If the posi-
tion was disclosed as provided in section 
6662(d)(2)(B)(ii)(I) and is not a position to 
which subparagraph (C) applies, the position is 
described in this paragraph unless there is a rea-
sonable basis for the position. 
‘‘(C) TAX
SHELTERS
AND
REPORTABLE 
TRANSACTIONS.—If the position is with respect 
to 
a 
tax 
shelter 
(as 
defined 
in 
section 
6662(d)(2)(C)(ii)) or a reportable transaction to 
which section 6662A applies, the position is de-
scribed in this paragraph unless it is reasonable 
to believe that the position would more likely 
than not be sustained on its merits. 
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145 
‘‘(3) REASONABLE CAUSE EXCEPTION.—No pen-
alty shall be imposed under this subsection if it is 
shown that there is reasonable cause for the under-
statement and the tax return preparer acted in good 
faith.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply— 
(1) in the case of a position other than a posi-
tion described in subparagraph (C) of section 
6694(a)(2) of the Internal Revenue Code of 1986 (as 
amended by this section), to returns prepared after 
May 25, 2007, and 
(2) in the case of a position described in such 
subparagraph (C), to returns prepared for taxable 
years ending after the date of the enactment of this 
Act. 
Subtitle D—Extension and Expan-
sion of Certain GO Zone Incen-
tives 
SEC. 331. CERTAIN GO ZONE INCENTIVES. 
(a) USE OF AMENDED INCOME TAX RETURNS TO 
TAKE INTO ACCOUNT RECEIPT OF CERTAIN HURRICANE- 
RELATED CASUALTY LOSS GRANTS BY DISALLOWING PRE-
VIOUSLY TAKEN CASUALTY LOSS DEDUCTIONS.— 
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146 
(1) IN
GENERAL.—Notwithstanding any other 
provision of the Internal Revenue Code of 1986, if a 
taxpayer claims a deduction for any taxable year 
with respect to a casualty loss to a principal resi-
dence (within the meaning of section 121 of such 
Code) resulting from Hurricane Katrina, Hurricane 
Rita, or Hurricane Wilma and in a subsequent tax-
able year receives a grant under Public Law 109–148, 
109–234, or 110–116 as reimbursement for such loss, 
such taxpayer may elect to file an amended income 
tax return for the taxable year in which such deduc-
tion was allowed (and for any taxable year to which 
such deduction is carried) and reduce (but not below 
zero) the amount of such deduction by the amount of 
such reimbursement. 
(2) TIME OF FILING AMENDED RETURN.—Para-
graph (1) shall apply with respect to any grant only 
if any amended income tax returns with respect to 
such grant are filed not later than the later of— 
(A) the due date for filing the tax return for 
the taxable year in which the taxpayer receives 
such grant, or 
(B) the date which is 1 year after the date 
of the enactment of this Act. 
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147 
(3) WAIVER OF PENALTIES AND INTEREST.—Any 
underpayment of tax resulting from the reduction 
under paragraph (1) of the amount otherwise allow-
able as a deduction shall not be subject to any penalty 
or interest under such Code if such tax is paid not 
later than 1 year after the filing of the amended re-
turn to which such reduction relates. 
(b) WAIVER OF DEADLINE ON CONSTRUCTION OF GO 
ZONE PROPERTY ELIGIBLE FOR BONUS DEPRECIATION.— 
(1) IN GENERAL.—Subparagraph (B) of section 
1400N(d)(3) is amended to read as follows: 
‘‘(B) without regard to ‘and before January 
1, 2009’ in clause (i) thereof, and’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall apply to property placed in serv-
ice after December 31, 2007. 
(c) INCLUSION OF CERTAIN COUNTIES IN GULF OP-
PORTUNITY ZONE FOR PURPOSES OF TAX-EXEMPT BOND 
FINANCING.— 
(1) IN
GENERAL.—Subsection (a) of section 
1400N is amended by adding at the end the following 
new paragraph: 
‘‘(8) INCLUSION
OF
CERTAIN
COUNTIES.—For 
purposes of this subsection, the Gulf Opportunity 
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148 
Zone includes Colbert County, Alabama and Dallas 
County, Alabama.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall take effect as if included in the 
provisions of the Gulf Opportunity Zone Act of 2005 
to which it relates. 
TITLE IV—REVENUE 
PROVISIONS 
SEC. 401. NONQUALIFIED DEFERRED COMPENSATION FROM 
CERTAIN TAX INDIFFERENT PARTIES. 
(a) IN GENERAL.—Subpart B of part II of subchapter 
E of chapter 1 is amended by inserting after section 457 
the following new section: 
‘‘SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION 
FROM CERTAIN TAX INDIFFERENT PARTIES. 
‘‘(a) IN GENERAL.—Any compensation which is de-
ferred under a nonqualified deferred compensation plan of 
a nonqualified entity shall be includible in gross income 
when there is no substantial risk of forfeiture of the rights 
to such compensation. 
‘‘(b) NONQUALIFIED ENTITY.—For purposes of this 
section, the term ‘nonqualified entity’ means— 
‘‘(1) any foreign corporation unless substantially 
all of its income is— 
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149 
‘‘(A) effectively connected with the conduct 
of a trade or business in the United States, or 
‘‘(B) subject to a comprehensive foreign in-
come tax, and 
‘‘(2) any partnership unless substantially all of 
its income is allocated to persons other than— 
‘‘(A) foreign persons with respect to whom 
such income is not subject to a comprehensive 
foreign income tax, and 
‘‘(B) organizations which are exempt from 
tax under this title. 
‘‘(c) DETERMINABILITY OF AMOUNTS OF COMPENSA-
TION.— 
‘‘(1) IN GENERAL.—If the amount of any com-
pensation is not determinable at the time that such 
compensation is otherwise includible in gross income 
under subsection (a)— 
‘‘(A) such amount shall be so includible in 
gross income when determinable, and 
‘‘(B) the tax imposed under this chapter for 
the taxable year in which such compensation is 
includible in gross income shall be increased by 
the sum of— 
‘‘(i) the amount of interest determined 
under paragraph (2), and 
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150 
‘‘(ii) an amount equal to 20 percent of 
the amount of such compensation. 
‘‘(2) INTEREST.—For purposes of paragraph 
(1)(B)(i), the interest determined under this para-
graph for any taxable year is the amount of interest 
at the underpayment rate under section 6621 plus 1 
percentage point on the underpayments that would 
have occurred had the deferred compensation been in-
cludible in gross income for the taxable year in which 
first deferred or, if later, the first taxable year in 
which such deferred compensation is not subject to a 
substantial risk of forfeiture. 
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—For 
purposes of this section— 
‘‘(1) SUBSTANTIAL RISK OF FORFEITURE.— 
‘‘(A) IN GENERAL.—The rights of a person 
to compensation shall be treated as subject to a 
substantial risk of forfeiture only if such person’s 
rights to such compensation are conditioned 
upon the future performance of substantial serv-
ices by any individual. 
‘‘(B) 
EXCEPTION
FOR
COMPENSATION 
BASED ON GAIN RECOGNIZED ON AN INVESTMENT 
ASSET.— 
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151 
‘‘(i) IN GENERAL.—To the extent pro-
vided in regulations prescribed by the Sec-
retary, if compensation is determined solely 
by reference to the amount of gain recog-
nized on the disposition of an investment 
asset, such compensation shall be treated as 
subject to a substantial risk of forfeiture 
until the date of such disposition. 
‘‘(ii) INVESTMENT
ASSET.—For pur-
poses of clause (i), the term ‘investment 
asset’ means any single asset (other than an 
investment fund or similar entity)— 
‘‘(I) acquired directly by an in-
vestment fund or similar entity, 
‘‘(II) with respect to which such 
entity does not (nor does any person 
related to such entity) participate in 
the active management of such asset 
(or if such asset is an interest in an 
entity, in the active management of the 
activities of such entity), and 
‘‘(III) substantially all of any 
gain on the disposition of which (other 
than such deferred compensation) is al-
located to investors in such entity. 
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152 
‘‘(iii) COORDINATION
WITH
SPECIAL 
RULE.—Paragraph (3)(B) shall not apply 
to any compensation to which clause (i) ap-
plies. 
‘‘(2) COMPREHENSIVE FOREIGN INCOME TAX.— 
The term ‘comprehensive foreign income tax’ means, 
with respect to any foreign person, the income tax of 
a foreign country if— 
‘‘(A) such person is eligible for the benefits 
of a comprehensive income tax treaty between 
such foreign country and the United States, or 
‘‘(B) such person demonstrates to the satis-
faction of the Secretary that such foreign country 
has a comprehensive income tax. 
‘‘(3) NONQUALIFIED DEFERRED COMPENSATION 
PLAN.— 
‘‘(A) IN GENERAL.—The term ‘nonqualified 
deferred compensation plan’ has the meaning 
given such term under section 409A(d), except 
that such term shall include any plan that pro-
vides a right to compensation based on the ap-
preciation in value of a specified number of eq-
uity units of the service recipient. 
‘‘(B) EXCEPTION.—Compensation shall not 
be treated as deferred for purposes of this section 
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153 
if the service provider receives payment of such 
compensation not later than 12 months after the 
end of the taxable year of the service recipient 
during which the right to the payment of such 
compensation is no longer subject to a substan-
tial risk of forfeiture. 
‘‘(4) EXCEPTION
FOR
CERTAIN
COMPENSATION 
WITH
RESPECT
TO
EFFECTIVELY
CONNECTED
IN-
COME.—In the case a foreign corporation with income 
which is taxable under section 882, this section shall 
not apply to compensation which, had such com-
pensation had been paid in cash on the date that such 
compensation ceased to be subject to a substantial risk 
of forfeiture, would have been deductible by such for-
eign corporation against such income. 
‘‘(5) APPLICATION OF RULES.—Rules similar to 
the rules of paragraphs (5) and (6) of section 409A(d) 
shall apply. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section, including regulations 
disregarding a substantial risk of forfeiture in cases where 
necessary to carry out the purposes of this section.’’. 
(b) CONFORMING AMENDMENT.—Section 26(b)(2) is 
amended by striking ‘‘and’’ at the end of subparagraph (U), 
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154 
by striking the period at the end of subparagraph (V) and 
inserting ‘‘, and’’, and by adding at the end the following 
new subparagraph: 
‘‘(W) section 457A(c)(1)(B) (relating to de-
terminability of amounts of compensation).’’. 
(c) CLERICAL AMENDMENT.—The table of sections of 
subpart B of part II of subchapter E of chapter 1 is amend-
ed by inserting after the item relating to section 457 the 
following new item: 
‘‘Sec. 457A. Nonqualified deferred compensation from certain tax indifferent par-
ties.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to amounts deferred which are attrib-
utable to services performed after December 31, 2008. 
(2) APPLICATION TO EXISTING DEFERRALS.—In 
the case of any amount deferred to which the amend-
ments made by this section do not apply solely by 
reason of the fact that the amount is attributable to 
services performed before January 1, 2009, to the ex-
tent such amount is not includible in gross income in 
a taxable year beginning before 2018, such amounts 
shall be includible in gross income in the later of— 
(A) the last taxable year beginning before 
2018, or 
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155 
(B) the taxable year in which there is no 
substantial risk of forfeiture of the rights to such 
compensation (determined in the same manner 
as determined for purposes of section 457A of the 
Internal Revenue Code of 1986, as added by this 
section). 
(3) CHARITABLE CONTRIBUTIONS OF EXISTING 
DEFERRALS PERMITTED.— 
(A) IN GENERAL.—Subsection (b) of section 
170 of the Internal Revenue Code of 1986 shall 
not apply to (and subsections (b) and (d) of such 
section shall be applied without regard to) so 
much of the taxpayer’s qualified contributions 
made during the taxpayer’s last taxable year be-
ginning before 2018 as does not exceed the tax-
payer’s qualified inclusion amount. For purposes 
of subsection (b) of section 170 of such Code, the 
taxpayer’s contribution base for such last taxable 
year shall be reduced by the amount of the tax-
payer’s qualified contributions to which such 
subsection does not apply by reason the pre-
ceding sentence. 
(B) QUALIFIED CONTRIBUTIONS.—For pur-
poses of this paragraph, the term ‘‘qualified con-
tributions’’ means the aggregate charitable con-
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tributions (as defined in section 170(c) of such 
Code) paid in cash by the taxpayer to organiza-
tions described in section 170(b)(1)(A) of such 
Code (other than any organization described in 
section 509(a)(3) of such Code or any fund or 
account described in section 4966(d)(2) of such 
Code). 
(C) QUALIFIED
INCLUSION
AMOUNT.—For 
purposes of this paragraph, the term ‘‘qualified 
inclusion amount’’ means the amount includible 
in the taxpayer’s gross income for the last tax-
able year beginning before 2018 by reason of 
paragraph (2). 
(4) ACCELERATED
PAYMENTS.—No later than 
120 days after the date of the enactment of this Act, 
the Secretary shall issue guidance providing a limited 
period of time during which a nonqualified deferred 
compensation arrangement attributable to services 
performed on or before December 31, 2008, may, with-
out violating the requirements of section 409A(a) of 
the Internal Revenue Code of 1986, be amended to 
conform the date of distribution to the date the 
amounts are required to be included in income. 
(5) CERTAIN BACK-TO-BACK ARRANGEMENTS.—If 
the taxpayer is also a service recipient and maintains 
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157 
one or more nonqualified deferred compensation ar-
rangements for its service providers under which any 
amount is attributable to services performed on or be-
fore December 31, 2008, the guidance issued under 
paragraph (4) shall permit such arrangements to be 
amended to conform the dates of distribution under 
such arrangement to the date amounts are required to 
be included in the income of such taxpayer under this 
subsection. 
(6) ACCELERATED PAYMENT NOT TREATED AS 
MATERIAL
MODIFICATION.—Any amendment to a 
nonqualified 
deferred 
compensation 
arrangement 
made pursuant to paragraph (4) or (5) shall not be 
treated as a material modification of the arrangement 
for purposes of section 409A of the Internal Revenue 
Code of 1986. 
SEC. 402. DELAY IN APPLICATION OF WORLDWIDE ALLOCA-
TION OF INTEREST. 
(a) IN GENERAL.—Paragraphs (5)(D) and (6) of sec-
tion 864(f) are each amended by striking ‘‘December 31, 
2008’’ and inserting ‘‘December 31, 2018’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2008. 
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