SEC. 230. MODIFICATION OF TAX TREATMENT OF CERTAIN 
PAYMENTS TO CONTROLLING EXEMPT ORGA-
NIZATIONS. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
512(b)(13)(E) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments received or accrued 
after December 31, 2007. 
SEC. 231. EXTENSION AND MODIFICATION OF CREDIT TO 
HOLDERS OF QUALIFIED ZONE ACADEMY 
BONDS. 
(a) IN GENERAL.—Subsection (e) of section 1397E 
(relating to limitation on amount of bonds designated) is 
amended by striking ‘‘1998, 1999, 2000, 2001, 2002, 
2003, 2004, 2005, 2006, and 2007’’ and inserting ‘‘each 
of calendar years 1998 through 2008’’. 
(b) MODIFICATION OF ARBITRAGE RULES.— 
(1) IN
GENERAL.—Subsection (g) of section 
1397E (relating to special rules relating to arbi-
trage) is amended to read as follows: 
‘‘(g) SPECIAL RULES RELATING TO ARBITRAGE.— 
‘‘(1) IN GENERAL.—An issue shall be treated as 
meeting the requirements of this subsection if the 
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issuer satisfies the requirements of section 148 with 
respect to the proceeds of the issue. 
‘‘(2) SPECIAL RULE FOR INVESTMENTS DURING 
EXPENDITURE PERIOD.—An issue shall not be treat-
ed as failing to meet the requirements of paragraph 
(1) by reason of any investment of available project 
proceeds during the 5-year period described in sub-
section (f)(1)(A) (including any extension of such 
period under subsection (f)(2)). 
‘‘(3) SPECIAL RULE FOR RESERVE FUNDS.—An 
issue shall not be treated as failing to meet the re-
quirements of paragraph (1) by reason of any fund 
which is expected to be used to repay such issue if— 
‘‘(A) such fund is funded at a rate not 
more rapid than equal annual installments, 
‘‘(B) such fund is funded in a manner that 
such fund will not exceed the amount necessary 
to repay the issue if invested at the maximum 
rate permitted under subparagraph (C), and 
‘‘(C) the yield on such fund is not greater 
than the discount rate determined under sub-
section (d)(3) with respect to the issue.’’. 
(2) APPLICATION OF AVAILABLE PROJECT PRO-
CEEDS
TO
OTHER
REQUIREMENTS.—Subsections 
(d)(1)(A), (d)(2)(A), (f)(1)(A), (f)(1)(B), (f)(1)(C), 
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and (f)(3) of section 1397E are each amended by 
striking ‘‘proceeds’’ and inserting ‘‘available project 
proceeds’’ 
(3) 
AVAILABLE
PROJECT
PROCEEDS
DE-
FINED.—Subsection (i) of section 1397E (relating to 
definitions) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) AVAILABLE
PROJECT
PROCEEDS.—The 
term ‘available project proceeds’ means— 
‘‘(A) the excess of— 
‘‘(i) the proceeds from the sale of an 
issue, over 
‘‘(ii) the issuance costs financed by 
the issue (to the extent that such costs do 
not exceed 2 percent of such proceeds), 
and 
‘‘(B) the proceeds from any investment of 
the excess described in subparagraph (A).’’. 
(c) EFFECTIVE DATE.— 
(1) EXTENSION.—The amendment made by 
subsection (a) shall apply to obligations issued after 
December 31, 2007. 
(2) MODIFICATION
OF
ARBITRAGE
RULES.— 
The amendments made by subsection (b) shall apply 
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to obligations issued after the date of the enactment 
of this Act. 
SEC. 232. TAX INCENTIVES FOR INVESTMENT IN THE DIS-
TRICT OF COLUMBIA. 
(a) DESIGNATION OF ZONE.— 
(1) IN
GENERAL.—Subsection (f) of section 
1400 is amended by striking ‘‘2007’’ both places it 
appears and inserting ‘‘2008’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to periods beginning 
after December 31, 2007. 
(b) 
TAX-EXEMPT
ECONOMIC
DEVELOPMENT 
BONDS.— 
(1) IN
GENERAL.—Subsection (b) of section 
1400A is amended by striking ‘‘2007’’ and inserting 
‘‘2008’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to bonds issued after 
December 31, 2007. 
(c) ZERO PERCENT CAPITAL GAINS RATE.— 
(1) IN
GENERAL.—Subsection (b) of section 
1400B is amended by striking ‘‘2008’’ each place it 
appears and inserting ‘‘2009’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 1400B(e)(2) is amended— 
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(i) by striking ‘‘2012’’ and inserting 
‘‘2013’’, and 
(ii) by striking ‘‘2012’’ in the heading 
thereof and inserting ‘‘2013’’. 
(B) Section 1400B(g)(2) is amended by 
striking ‘‘2012’’ and inserting ‘‘2013’’. 
(C) Section 1400F(d) is amended by strik-
ing ‘‘2012’’ and inserting ‘‘2013’’. 
(3) EFFECTIVE DATES.— 
(A) EXTENSION.—The amendments made 
by paragraph (1) shall apply to acquisitions 
after December 31, 2007. 
(B) 
CONFORMING
AMENDMENTS.—The 
amendments made by paragraph (2) shall take 
effect on the date of the enactment of this Act. 
(d) FIRST-TIME HOMEBUYER CREDIT.— 
(1) IN
GENERAL.—Subsection (i) of section 
1400C is amended by striking ‘‘2008’’ and inserting 
‘‘2009’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to property purchased 
after December 31, 2007. 
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SEC. 233. EXTENSION OF ECONOMIC DEVELOPMENT CRED-
IT FOR AMERICAN SAMOA. 
(a) IN GENERAL.—Subsection (d) of section 119 of 
division A of the Tax Relief and Health Care Act of 2006 
is amended— 
(1) by striking ‘‘first two taxable years’’ and in-
serting ‘‘first 3 taxable years’’, and 
(2) by striking ‘‘January 1, 2008’’ and insert-
ing ‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
SEC. 234. ENHANCED CHARITABLE DEDUCTION FOR CON-
TRIBUTIONS OF FOOD INVENTORY. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
170(e)(3)(C) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after De-
cember 31, 2007. 
SEC. 235. ENHANCED CHARITABLE DEDUCTION FOR CON-
TRIBUTIONS OF BOOK INVENTORY TO PUB-
LIC SCHOOLS. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
170(e)(3)(D) (relating to termination) is amended by 
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‘‘(4) APPLICATION OF LIMITATION ON CHARI-
TABLE CONTRIBUTIONS.—In the case of any chari-
table contribution of property to which the second 
sentence of section 1367(a)(2) applies, paragraph 
(1) shall not apply to the extent of the excess (if 
any) of— 
‘‘(A) the shareholder’s pro rata share of 
such contribution, over 
‘‘(B) the shareholder’s pro rata share of 
the adjusted basis of such property.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to contributions made in taxable years 
beginning after December 31, 2007. 
(2) TECHNICAL AMENDMENT.—The amendment 
made by subsection (b)shall take effect as if included 
in the provision of the Pension Protection Act of 
2006 to which it relates. 
SEC. 238. EXTENSION OF WORK OPPORTUNITY TAX CREDIT 
FOR HURRICANE KATRINA EMPLOYEES. 
(a) IN GENERAL.—Paragraph (1) of section 201(b) 
of the Katrina Emergency Tax Relief Act of 2005 is 
amended by striking ‘‘2-year’’ and inserting ‘‘3-year’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to individuals hired after August 
27, 2007. 
Subtitle C—Other Extenders 
SEC. 241. DISCLOSURE FOR COMBINED EMPLOYMENT TAX 
REPORTING. 
(a) IN GENERAL.—Subparagraph (B) of section 
6103(d)(5) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
SEC. 242. DISCLOSURE OF RETURN INFORMATION TO AP-
PRISE APPROPRIATE OFFICIALS OF TER-
RORIST ACTIVITIES. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
6103(i)(3)(C) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
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SEC. 243. DISCLOSURE UPON REQUEST OF INFORMATION 
RELATING TO TERRORIST ACTIVITIES. 
(a) IN GENERAL.—Subparagraph (E) of section 
6103(i)(7) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
SEC. 244. DISCLOSURE OF RETURN INFORMATION TO 
CARRY OUT INCOME CONTINGENT REPAY-
MENT OF STUDENT LOANS. 
(a) IN GENERAL.—Subparagraph (D) of section 
6103(l)(13) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to requests made after December 
31, 2007. 
SEC. 245. AUTHORITY FOR UNDERCOVER OPERATIONS. 
(a) IN GENERAL.—Paragraph (6) of section 7608(c) 
(relating to application of section) is amended by striking 
‘‘January 1, 2008’’ each place it appears and inserting 
‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on January 1, 2008. 
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SEC. 246. INCREASE IN LIMIT ON COVER OVER OF RUM EX-
CISE TAX TO PUERTO RICO AND THE VIRGIN 
ISLANDS. 
(a) IN GENERAL.—Paragraph (1) of section 7652(f) 
is amended by striking ‘‘January 1, 2008’’ and inserting 
‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distilled spirits brought into the 
United States after December 31, 2007. 
SEC. 247. DISCLOSURE OF RETURN INFORMATION FOR 
CERTAIN VETERANS PROGRAMS. 
(a) IN GENERAL.—The last sentence of paragraph 
(7) of section 6103(l) is amended by striking ‘‘September 
30, 2008’’ and inserting ‘‘December 31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to requests made after Sep-
tember 30, 2008. 
TITLE III—MORTGAGE 
FORGIVENESS DEBT RELIEF 
SEC. 301. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL 
RESIDENCE EXCLUDED FROM GROSS IN-
COME. 
(a) IN GENERAL.—Paragraph (1) of section 108(a) 
is amended by striking ‘‘or’’ at the end of subparagraph 
(C), by striking the period at the end of subparagraph (D) 
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and inserting ‘‘, or’’, and by inserting after subparagraph 
(D) the following new subparagraph: 
‘‘(E) the indebtedness discharged is quali-
fied principal residence indebtedness.’’. 
(b) SPECIAL RULES RELATING TO QUALIFIED PRIN-
CIPAL
RESIDENCE
INDEBTEDNESS.—Section 108 is 
amended by adding at the end the following new sub-
section: 
‘‘(h) SPECIAL RULES RELATING
TO QUALIFIED 
PRINCIPAL RESIDENCE INDEBTEDNESS.— 
‘‘(1) BASIS REDUCTION.—The amount excluded 
from gross income by reason of subsection (a)(1)(E) 
shall be applied to reduce (but not below zero) the 
basis of the principal residence of the taxpayer. 
‘‘(2) QUALIFIED
PRINCIPAL
RESIDENCE
IN-
DEBTEDNESS.—For purposes of this section, the 
term ‘qualified principal residence indebtedness’ 
means acquisition indebtedness (within the meaning 
of section 163(h)(3)(B), applied by substituting 
‘$2,000,000 
($1,000,000’ 
for 
‘$1,000,000 
($500,000’ in clause (ii) thereof) with respect to the 
principal residence of the taxpayer. 
‘‘(3) EXCEPTION
FOR
CERTAIN
DISCHARGES 
NOT RELATED TO TAXPAYER’S FINANCIAL CONDI-
TION.—Subsection (a)(1)(E) shall not apply to the 
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discharge of a loan if the discharge is on account of 
services performed for the lender or any other factor 
not directly related to a decline in the value of the 
residence or to the financial condition of the tax-
payer. 
‘‘(4) ORDERING
RULE.—If any loan is dis-
charged, in whole or in part, and only a portion of 
such loan is qualified principal residence indebted-
ness, subsection (a)(1)(E) shall apply only to so 
much of the amount discharged as exceeds the 
amount of the loan (as determined immediately be-
fore such discharge) which is not qualified principal 
residence indebtedness. 
‘‘(5) PRINCIPAL RESIDENCE.—For purposes of 
this subsection, the term ‘principal residence’ has 
the same meaning as when used in section 121.’’. 
(c) COORDINATION.— 
(1) Subparagraph (A) of section 108(a)(2) is 
amended by striking ‘‘and (D)’’ and inserting ‘‘(D), 
and (E)’’. 
(2) Paragraph (2) of section 108(a) is amended 
by adding at the end the following new subpara-
graph: 
‘‘(C) PRINCIPAL
RESIDENCE
EXCLUSION 
TAKES PRECEDENCE OVER INSOLVENCY EXCLU-
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SION
UNLESS
ELECTED
OTHERWISE.—Para-
graph (1)(B) shall not apply to a discharge to 
which paragraph (1)(E) applies unless the tax-
payer elects to apply paragraph (1)(B) in lieu 
of paragraph (1)(E).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to discharges of indebtedness on 
or after January 1, 2007. 
SEC. 302. LONG-TERM EXTENSION OF DEDUCTION FOR 
MORTGAGE INSURANCE PREMIUMS. 
(a) IN GENERAL.—Subparagraph (E) of section 
163(h)(3) (relating to mortgage insurance premiums 
treated as interest) is amended by striking clauses (iii) 
and (iv) and inserting the following new clause: 
‘‘(iii) APPLICATION.—Clause (i) shall 
not apply with respect to any mortgage in-
surance contract issued before January 1, 
2007, or after December 31, 2014.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contracts issued after Decem-
ber 31, 2006. 
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SEC. 303. ALTERNATIVE TESTS FOR QUALIFYING AS COOP-
ERATIVE HOUSING CORPORATION. 
(a) IN GENERAL.—Subparagraph (D) of section 
216(b)(1) (defining cooperative housing corporation) is 
amended to read as follows: 
‘‘(D) meeting 1 or more of the following 
requirements for the taxable year in which the 
taxes and interest described in subsection (a) 
are paid or incurred: 
‘‘(i) 80 percent or more of the cor-
poration’s gross income for such taxable 
year is derived from tenant-stockholders. 
‘‘(ii) At all times during such taxable 
year, 80 percent or more of the total 
square footage of the corporation’s prop-
erty is used or available for use by the ten-
ant-stockholders for residential purposes or 
purposes ancillary to such residential use. 
‘‘(iii) 90 percent or more of the ex-
penditures of the corporation paid or in-
curred during such taxable year are paid 
or incurred for the acquisition, construc-
tion, management, maintenance, or care of 
the corporation’s property for the benefit 
of the tenant-stockholders.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 304. GAIN FROM SALE OF PRINCIPAL RESIDENCE AL-
LOCATED TO NONQUALIFIED USE NOT EX-
CLUDED FROM INCOME. 
(a) IN GENERAL.—Subsection (b) of section 121 (re-
lating to limitations) is amended by adding at the end the 
following new paragraph: 
‘‘(4) EXCLUSION OF GAIN ALLOCATED TO NON-
QUALIFIED USE.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to so much of the gain from the sale 
or exchange of property as is allocated to peri-
ods of nonqualified use. 
‘‘(B) GAIN
ALLOCATED
TO
PERIODS
OF 
NONQUALIFIED USE.—For purposes of subpara-
graph (A), gain shall be allocated to periods of 
nonqualified use based on the ratio which— 
‘‘(i) the aggregate periods of non-
qualified use during the period such prop-
erty was owned by the taxpayer, bears to 
‘‘(ii) the period such property was 
owned by the taxpayer. 
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‘‘(C) PERIOD
OF
NONQUALIFIED
USE.— 
For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘period 
of nonqualified use’ means any period 
(other than the portion of any period pre-
ceding January 1, 2008) during which the 
property is not used as the principal resi-
dence of the taxpayer or the taxpayer’s 
spouse or former spouse. 
‘‘(ii) EXCEPTIONS.—The term ‘period 
of nonqualified use’ does not include— 
‘‘(I) any portion of the 5-year pe-
riod described in subsection (a) which 
is after the last date that such prop-
erty is used as the principal residence 
of the taxpayer or the taxpayer’s 
spouse, 
‘‘(II) any period (not to exceed 
an aggregate period of 10 years) dur-
ing which the taxpayer or the tax-
payer’s spouse is serving on qualified 
official extended duty (as defined in 
subsection (d)(9)(C)) described in 
clause (i), (ii), or (iii) of subsection 
(d)(9)(A), and 
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‘‘(III) any other period of tem-
porary absence (not to exceed an ag-
gregate period of 2 years) due to 
change of employment, health condi-
tions, or such other unforeseen cir-
cumstances as may be specified by the 
Secretary. 
‘‘(D) COORDINATION
WITH
RECOGNITION 
OF GAIN ATTRIBUTABLE TO DEPRECIATION.— 
For purposes of this paragraph— 
‘‘(i) subparagraph (A) shall be applied 
after the application of subsection (d)(6), 
and 
‘‘(ii) subparagraph (B) shall be ap-
plied without regard to any gain to which 
subsection (d)(6) applies.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to sales and exchanges after De-
cember 31, 2007. 
TITLE IV—ADMINISTRATIVE 
PROVISIONS 
SEC. 401. REPEAL OF AUTHORITY TO ENTER INTO PRIVATE 
DEBT COLLECTION CONTRACTS. 
(a) IN GENERAL.—Subchapter A of chapter 64 is 
amended by striking section 6306. 
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(b) CONFORMING AMENDMENTS.— 
(1) Subchapter B of chapter 76 is amended by 
striking section 7433A. 
(2) Section 7811 is amended by striking sub-
section (g). 
(3) Section 1203 of the Internal Revenue Serv-
ice Restructuring Act of 1998 is amended by strik-
ing subsection (e). 
(4) The table of sections for subchapter A of 
chapter 64 is amended by striking the item relating 
to section 6306. 
(5) The table of sections for subchapter B of 
chapter 76 is amended by striking the item relating 
to section 7433A. 
(c) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall take effect on the date of the en-
actment of this Act. 
(2) EXCEPTION
FOR
EXISTING
CONTRACTS, 
ETC.—The amendments made by this section shall 
not apply to any contract which was entered into be-
fore July 18, 2007, and is not renewed or extended 
on or after such date. 
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(3) UNAUTHORIZED CONTRACTS AND EXTEN-
SIONS TREATED AS VOID.—Any qualified tax collec-
tion contract (as defined in section 6306 of the In-
ternal Revenue Code of 1986, as in effect before its 
repeal) which is entered into on or after July 18, 
2007, and any extension or renewal on or after such 
date of any qualified tax collection contract (as so 
defined) shall be void. 
SEC. 402. DELAY OF APPLICATION OF WITHHOLDING RE-
QUIREMENT ON CERTAIN GOVERNMENTAL 
PAYMENTS FOR GOODS AND SERVICES. 
(a) IN GENERAL.—Subsection (b) of section 511 of 
the Tax Increase Prevention and Reconciliation Act of 
2005 is amended by striking ‘‘December 31, 2010’’ and 
inserting ‘‘December 31, 2011’’. 
(b) REPORT
TO
CONGRESS.—Not later than 6 
months after the date of the enactment of this Act, the 
Secretary of the Treasury shall submit to the Committee 
on Ways and Means of the House of Representatives and 
the Committee on Finance of the Senate a report with 
respect to the withholding requirements of section 3402(t) 
of the Internal Revenue Code of 1986, including a detailed 
analysis of— 
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