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(ii) 
CONDITIONS.—This 
paragraph
shall not apply to any amendment unless—
(I) the plan or contract is oper-
ated as if such plan or contract
amendment were in effect for the pe-
riod described in clause (iii), and
(II) such plan or contract amend-
ment applies retroactively for such pe-
riod.
(iii) PERIOD DESCRIBED.—The period
described in this clause is the period—
(I) beginning on the effective date
specified by the plan, and
(II) ending on the date described
in clause (i)(II) (or, if earlier, the date
the plan or contract amendment is
adopted).
SEC. 109. TREATMENT OF DIFFERENTIAL MILITARY PAY AS
WAGES.
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL
WAGE PAYMENTS.—
(1) IN GENERAL.—Section 3401 (relating to defi-
nitions) is amended by adding at the end the fol-
lowing new subsection:
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‘‘(h) DIFFERENTIAL WAGE PAYMENTS
TO ACTIVE
DUTY MEMBERS OF THE UNIFORMED SERVICES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), any differential wage payment shall be treated as
a payment of wages by the employer to the employee.
‘‘(2) DIFFERENTIAL WAGE PAYMENT.—For pur-
poses of paragraph (1), the term ‘differential wage
payment’ means any payment which—
‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which
the individual is performing service in the uni-
formed services while on active duty for a period
of more than 30 days, and
‘‘(B) represents all or a portion of the wages
the individual would have received from the em-
ployer if the individual were performing service
for the employer.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to remuneration paid after
December 31, 2007.
(b) TREATMENT OF DIFFERENTIAL WAGE PAYMENTS
FOR RETIREMENT PLAN PURPOSES.—
(1) PENSION PLANS.—
(A) IN GENERAL.—Section 414(u) (relating
to special rules relating to veterans’ reemploy-
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ment rights under USERRA), as amended by
this Act, is amended by redesignating para-
graphs (10) and (11) as paragraphs (11) and
(12), respectively, and by inserting after para-
graph (9) the following new paragraph:
‘‘(10) TREATMENT OF DIFFERENTIAL WAGE PAY-
MENTS.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, for purposes of applying this
title to a retirement plan to which this sub-
section applies—
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an
employee of the employer making the pay-
ment,
‘‘(ii) the differential wage payment
shall be treated as compensation, and
‘‘(iii) the plan shall not be treated as
failing to meet the requirements of any pro-
vision described in paragraph (1)(C) by
reason of any contribution or benefit which
is based on the differential wage payment.
‘‘(B) SPECIAL RULE FOR DISTRIBUTIONS.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A)(i), for purposes of section
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401(k)(2)(B)(i)(I), 
403(b)(7)(A)(ii),
403(b)(11)(A), or 457(d)(1)(A)(ii), an indi-
vidual shall be treated as having been sev-
ered from employment during any period
the individual is performing service in the
uniformed services described in section
3401(h)(2)(A).
‘‘(ii) LIMITATION.—If an individual
elects to receive a distribution by reason of
clause (i), the plan shall provide that the
individual may not make an elective defer-
ral or employee contribution during the 6-
month period beginning on the date of the
distribution.
‘‘(C) NONDISCRIMINATION REQUIREMENT.—
Subparagraph (A)(iii) shall apply only if all
employees of an employer (as determined under
subsections (b), (c), (m), and (o)) performing
service in the uniformed services described in sec-
tion 3401(h)(2)(A) are entitled to receive dif-
ferential wage payments on reasonably equiva-
lent terms and, if eligible to participate in a re-
tirement plan maintained by the employer, to
make contributions based on the payments on
reasonably equivalent terms. For purposes of ap-
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plying this subparagraph, the provisions of
paragraphs (3), (4), and (5) of section 410(b)
shall apply.
‘‘(D) DIFFERENTIAL WAGE PAYMENT.—For
purposes of this paragraph, the term ‘differential
wage payment’ has the meaning given such term
by section 3401(h)(2).’’.
(B) CONFORMING AMENDMENT.—The head-
ing for section 414(u) is amended by inserting
‘‘AND
TO DIFFERENTIAL WAGE PAYMENTS
TO
MEMBERS ON ACTIVE DUTY’’ after ‘‘USERRA’’.
(2) DIFFERENTIAL WAGE PAYMENTS TREATED AS
COMPENSATION
FOR
INDIVIDUAL
RETIREMENT
PLANS.—Section 219(f)(1) (defining compensation) is
amended by adding at the end the following new sen-
tence: ‘‘The term ‘compensation’ includes any dif-
ferential wage payment (as defined in section
3401(h)(2)).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2007.
(c) PROVISIONS RELATING TO PLAN AMENDMENTS.—
(1) IN GENERAL.—If this subsection applies to
any plan or annuity contract amendment—
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(A) such plan or contract shall be treated as
being operated in accordance with the terms of
the plan or contract during the period described
in paragraph (2)(B)(i), and
(B) except as provided by the Secretary of
the Treasury, such plan shall not fail to meet the
requirements of the Internal Revenue Code of
1986 or the Employee Retirement Income Secu-
rity Act of 1974 by reason of such amendment.
(2) AMENDMENTS
TO
WHICH
SECTION
AP-
PLIES.—
(A) IN
GENERAL.—This subsection shall
apply to any amendment to any plan or annu-
ity contract which is made—
(i) pursuant to any amendment made
by this section, and
(ii) on or before the last day of the first
plan year beginning on or after January 1,
2009.
(B) CONDITIONS.—This subsection shall not
apply to any plan or annuity contract amend-
ment unless—
(i) during the period beginning on the
date the amendment described in subpara-
graph (A)(i) takes effect and ending on the
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‘‘(i) the sum of the amounts received
during such period by such individual
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Coverdell education
savings account under section 530(d)(9).
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—Section 408(d)(3)(B)
shall not apply with respect to amounts treated
as a rollover by subparagraph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason
of subparagraph (A) shall be treated as invest-
ment in the contract.’’.
(b) PROVISION IN EFFECT AFTER PENSION PROTEC-
TION ACT.—Subsection (e) of section 408A, as in effect after
the amendments made by section 824 of the Pension Protec-
tion Act of 2006, is amended to read as follows:
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified rollover
contribution’ means a rollover contribution—
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‘‘(A) to a Roth IRA from another such ac-
count,
‘‘(B) from an eligible retirement plan, but
only if—
‘‘(i) in the case of an individual retire-
ment plan, such rollover contribution meets
the requirements of section 408(d)(3), and
‘‘(ii) in the case of any eligible retire-
ment 
plan 
(as 
defined 
in 
section
402(c)(8)(B) other than clauses (i) and (ii)
thereof), such rollover contribution meets the
requirements of section 402(c), 403(b)(8), or
457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall
be disregarded any qualified rollover contribu-
tion from an individual retirement plan (other
than a Roth IRA) to a Roth IRA.
‘‘(2) MILITARY DEATH GRATUITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
rollover contribution’ includes a contribution to
a Roth IRA maintained for the benefit of an in-
dividual made before the end of the 1-year period
beginning on the date on which such individual
receives an amount under section 1477 of title
10, United States Code, or section 1967 of title
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38 of such Code, with respect to a person, to the
extent that such contribution does not exceed—
‘‘(i) the sum of the amounts received
during such period by such individual
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Coverdell education
savings account under section 530(d)(9).
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—Section 408(d)(3)(B)
shall not apply with respect to amounts treated
as a rollover by the subparagraph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason
of subparagraph (A) shall be treated as invest-
ment in the contract.’’.
(c) EDUCATION SAVINGS ACCOUNTS.—Subsection (d)
of section 530 is amended by adding at the end the following
new paragraph:
‘‘(9) MILITARY DEATH GRATUITY.—
‘‘(A) IN
GENERAL.—For purposes of this
section, the term ‘rollover contribution’ includes
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a contribution to a Coverdell education savings
account made before the end of the 1-year period
beginning on the date on which the contributor
receives an amount under section 1477 of title
10, United States Code, or section 1967 of title
38 of such Code, with respect to a person, to the
extent that such contribution does not exceed—
‘‘(i) the sum of the amounts received
during such period by such contributor
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Roth IRA under sec-
tion 408A(e)(2) or to another Coverdell edu-
cation savings account.
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—The last sentence of
paragraph (5) shall not apply with respect to
amounts treated as a rollover by the subpara-
graph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is includible in gross income
under paragraph (1), the amount treated as a
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rollover by reason of subparagraph (A) shall be
treated as investment in the contract.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graphs (2) and (3), the amendments made by this sec-
tion shall apply with respect to deaths from injuries
occurring on or after the date of the enactment of this
Act.
(2) APPLICATION OF AMENDMENTS TO DEATHS
FROM INJURIES OCCURRING ON OR AFTER OCTOBER 7,
2001, AND
BEFORE
ENACTMENT.—The amendments
made by this section shall apply to any contribution
made pursuant to section 408A(e)(2) or 530(d)(5) of
the Internal Revenue Code of 1986, as amended by
this Act, with respect to amounts received under sec-
tion 1477 of title 10, United States Code, or under
section 1967 of title 38 of such Code, for deaths from
injuries occurring on or after October 7, 2001, and
before the date of the enactment of this Act if such
contribution is made not later than 1 year after the
date of the enactment of this Act.
(3) PENSION PROTECTION ACT CHANGES.—Sec-
tion 408A(e)(1) of the Internal Revenue Code of 1986
(as in effect after the amendments made by subsection
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(b)) shall apply to taxable years beginning after De-
cember 31, 2007.
TITLE 
II—CERTAIN 
HOUSING
BENEFITS 
FOR 
INTEL-
LIGENCE 
COMMUNITY 
AND
PEACE CORPS VOLUNTEERS
SEC. 201. PERMANENT EXCLUSION OF GAIN FROM SALE OF
A PRINCIPAL RESIDENCE BY CERTAIN EM-
PLOYEES OF THE INTELLIGENCE COMMU-
NITY.
(a) IN GENERAL.—Section 417(e) of division A of the
Tax Relief and Health Care Act of 2006 is amended by
striking ‘‘and before January 1, 2011’’.
(b) DUTY
STATION
MAY
BE
OUTSIDE
UNITED
STATES.—Section 121(d)(9)(C) (defining qualified official
extended duty) is amended by striking clause (vi).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to sales or exchanges after December 31,
2010.
SEC. 202. SUSPENSION OF 5-YEAR PERIOD DURING SERVICE
WITH THE PEACE CORPS.
(a) IN GENERAL.—Subsection (d) of section 121 (relat-
ing to special rules) is amended by adding at the end the
following new paragraph:
‘‘(12) PEACE CORPS.—
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‘‘(A) IN GENERAL.—At the election of an
individual with respect to a property, the run-
ning of the 5-year period described in subsections
(a) and (c)(1)(B) and paragraph (7) of this sub-
section with respect to such property shall be sus-
pended during any period that such individual
or such individual’s spouse is serving outside the
United States—
‘‘(i) on qualified official extended duty
(as defined in paragraph (9)(C)) as an em-
ployee of the Peace Corps, or
‘‘(ii) as an enrolled volunteer or volun-
teer leader under section 5 or 6 (as the case
may be) of the Peace Corps Act (22 U.S.C.
2504, 2505).
‘‘(B) APPLICABLE RULES.—For purposes of
subparagraph (A), rules similar to the rules of
subparagraphs (B) and (D) shall apply.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2007.
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TITLE III—REVENUE
PROVISIONS
SEC. 301. REVISION OF TAX RULES ON EXPATRIATION.
(a) IN GENERAL.—Subpart A of part II of subchapter
N of chapter 1 is amended by inserting after section 877
the following new section:
‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
‘‘(a) 
GENERAL
RULES.—For 
purposes 
of 
this
subtitle—
‘‘(1) MARK TO MARKET.—All property of a cov-
ered expatriate shall be treated as sold on the day be-
fore the expatriation date for its fair market value.
‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the
case of any sale under paragraph (1)—
‘‘(A) notwithstanding any other provision of
this title, any gain arising from such sale shall
be taken into account for the taxable year of the
sale, and
‘‘(B) any loss arising from such sale shall
be taken into account for the taxable year of the
sale to the extent otherwise provided by this title,
except that section 1091 shall not apply to any
such loss.
Proper adjustment shall be made in the amount of
any gain or loss subsequently realized for gain or loss
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taken into account under the preceding sentence, de-
termined without regard to paragraph (3).
‘‘(3) EXCLUSION FOR CERTAIN GAIN.—
‘‘(A) IN
GENERAL.—The amount which
would (but for this paragraph) be includible in
the gross income of any individual by reason of
paragraph (1) shall be reduced (but not below
zero) by $600,000.
‘‘(B) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 2008, the dollar amount in subpara-
graph (A) shall be increased by an amount
equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjustment
determined 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.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
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of $1,000, such amount shall be rounded to
the nearest multiple of $1,000.
‘‘(b) ELECTION TO DEFER TAX.—
‘‘(1) IN GENERAL.—If the taxpayer elects the ap-
plication of this subsection with respect to any prop-
erty treated as sold by reason of subsection (a), the
time for payment of the additional tax attributable to
such property shall be extended until the due date of
the return for the taxable year in which such property
is disposed of (or, in the case of property disposed of
in a transaction in which gain is not recognized in
whole or in part, until such other date as the Sec-
retary may prescribe).
‘‘(2) DETERMINATION OF TAX WITH RESPECT TO
PROPERTY.—For purposes of paragraph (1), the addi-
tional tax attributable to any property is an amount
which bears the same ratio to the additional tax im-
posed by this chapter for the taxable year solely by
reason of subsection (a) as the gain taken into ac-
count under subsection (a) with respect to such prop-
erty bears to the total gain taken into account under
subsection (a) with respect to all property to which
subsection (a) applies.
‘‘(3) TERMINATION
OF
EXTENSION.—The due
date for payment of tax may not be extended under
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this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year
which includes the date of death of the expatriate (or,
if earlier, the time that the security provided with re-
spect to the property fails to meet the requirements of
paragraph (4), unless the taxpayer corrects such fail-
ure within the time specified by the Secretary).
‘‘(4) SECURITY.—
‘‘(A) IN
GENERAL.—No election may be
made under paragraph (1) with respect to any
property unless adequate security is provided
with respect to such property.
‘‘(B) ADEQUATE SECURITY.—For purposes
of subparagraph (A), security with respect to
any property shall be treated as adequate secu-
rity if—
‘‘(i) it is a bond which is furnished to,
and accepted by, the Secretary, which is
conditioned on the payment of tax (and in-
terest thereon), and which meets the require-
ments of section 6325, or
‘‘(ii) it is another form of security for
such payment (including letters of credit)
that meets such requirements as the Sec-
retary may prescribe.
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‘‘(5) WAIVER OF CERTAIN RIGHTS.—No election
may be made under paragraph (1) unless the tax-
payer makes an irrevocable waiver of any right under
any treaty of the United States which would preclude
assessment or collection of any tax imposed by reason
of this section.
‘‘(6) ELECTIONS.—An election under paragraph
(1) shall only apply to property described in the elec-
tion and, once made, is irrevocable.
‘‘(7) INTEREST.—For purposes of section 6601,
the last date for the payment of tax shall be deter-
mined without regard to the election under this sub-
section.
‘‘(c) EXCEPTION
FOR
CERTAIN
PROPERTY.—Sub-
section (a) shall not apply to—
‘‘(1) any deferred compensation item (as defined
in subsection (d)(4)),
‘‘(2) any specified tax deferred account (as de-
fined in subsection (e)(2)), and
‘‘(3) any interest in a nongrantor trust (as de-
fined in subsection (f)(3)).
‘‘(d) TREATMENT
OF
DEFERRED
COMPENSATION
ITEMS.—
‘‘(1) WITHHOLDING
ON
ELIGIBLE
DEFERRED
COMPENSATION ITEMS.—
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‘‘(A) IN GENERAL.—In the case of any eligi-
ble deferred compensation item, the payor shall
deduct and withhold from any taxable payment
to a covered expatriate with respect to such item
a tax equal to 30 percent thereof.
‘‘(B) TAXABLE PAYMENT.—For purposes of
subparagraph (A), the term ‘taxable payment’
means with respect to a covered expatriate any
payment to the extent it would be includible in
the gross income of the covered expatriate if such
expatriate continued to be subject to tax as a cit-
izen or resident of the United States. A deferred
compensation item shall be taken into account as
a payment under the preceding sentence when
such item would be so includible.
‘‘(2) 
OTHER
DEFERRED
COMPENSATION
ITEMS.—In the case of any deferred compensation
item which is not an eligible deferred compensation
item—
‘‘(A)(i) with respect to any deferred com-
pensation item to which clause (ii) does not
apply, an amount equal to the present value of
the covered expatriate’s accrued benefit shall be
treated as having been received by such indi-
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vidual on the day before the expatriation date as
a distribution under the plan, and
‘‘(ii) with respect to any deferred compensa-
tion item referred to in paragraph (4)(D), the
rights of the covered expatriate to such item shall
be treated as becoming transferable and not sub-
ject to a substantial risk of forfeiture on the day
before the expatriation date,
‘‘(B) no early distribution tax shall apply
by reason of such treatment, and
‘‘(C) appropriate adjustments shall be made
to subsequent distributions from the plan to re-
flect such treatment.
‘‘(3) 
ELIGIBLE
DEFERRED
COMPENSATION
ITEMS.—For purposes of this subsection, the term ‘eli-
gible deferred compensation item’ means any deferred
compensation item with respect to which—
‘‘(A) the payor of such item is—
‘‘(i) a United States person, or
‘‘(ii) a person who is not a United
States person but who elects to be treated as
a United States person for purposes of
paragraph (1) and meets such requirements
as the Secretary may provide to ensure that
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in such account on the day before the expatria-
tion date,
‘‘(B) no early distribution tax shall apply
by reason of such treatment, and
‘‘(C) appropriate adjustments shall be made
to subsequent distributions from the account to
reflect such treatment.
‘‘(2) SPECIFIED TAX DEFERRED ACCOUNT.—For
purposes of paragraph (1), the term ‘specified tax de-
ferred account’ means an individual retirement plan
(as defined in section 7701(a)(37)) other than any ar-
rangement described in subsection (k) or (p) of section
408, a qualified tuition program (as defined in sec-
tion 529), a Coverdell education savings account (as
defined in section 530), a health savings account (as
defined in section 223), and an Archer MSA (as de-
fined in section 220).
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.—
‘‘(1) IN GENERAL.—In the case of a distribution
(directly or indirectly) of any property from a non-
grantor trust to a covered expatriate—
‘‘(A) the trustee shall deduct and withhold
from such distribution an amount equal to 30
percent of the taxable portion of the distribution,
and
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‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of the
trust, gain shall be recognized to the trust as if
such property were sold to the expatriate at its
fair market value.
‘‘(2) TAXABLE PORTION.—For purposes of this
subsection, the term ‘taxable portion’ means, with re-
spect to any distribution, that portion of the distribu-
tion which would be includible in the gross income of
the covered expatriate if such expatriate continued to
be subject to tax as a citizen or resident of the United
States.
‘‘(3) NONGRANTOR TRUST.—For purposes of this
subsection, the term ‘nongrantor trust’ means the por-
tion of any trust that the individual is not considered
the owner of under subpart E of part I of subchapter
J. The determination under the preceding sentence
shall be made immediately before the expatriation
date.
‘‘(4) SPECIAL
RULES
RELATING
TO
WITH-
HOLDING.—For purposes of this subsection—
‘‘(A) rules similar to the rules of subsection
(d)(6) shall apply, and
‘‘(B) the covered expatriate shall be treated
as having waived any right to claim any reduc-
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tion under any treaty with the United States in
withholding on any distribution to which para-
graph (1)(A) applies.
‘‘(5) APPLICATION.—This subsection shall apply
to a nongrantor trust only if the covered expatriate
was a beneficiary of the trust on the day before the
expatriation date.
‘‘(g) DEFINITIONS AND SPECIAL RULES RELATING TO
EXPATRIATION.—For purposes of this section—
‘‘(1) COVERED EXPATRIATE.—
‘‘(A) IN GENERAL.—The term ‘covered expa-
triate’ means an expatriate who meets the re-
quirements of subparagraph (A), (B), or (C) of
section 877(a)(2).
‘‘(B) EXCEPTIONS.—An individual shall
not be treated as meeting the requirements of
subparagraph (A) or (B) of section 877(a)(2)
if—
‘‘(i) the individual—
‘‘(I) became at birth a citizen of
the United States and a citizen of an-
other country and, as of the expatria-
tion date, continues to be a citizen of,
and is taxed as a resident of, such
other country, and
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‘‘(II) has been a resident of the
United States (as defined in section
7701(b)(1)(A)(ii)) for not more than
10 taxable years during the 15-taxable
year period ending with the taxable
year during which the expatriation
date occurs, or
‘‘(ii)(I) the individual’s relinquishment
of United States citizenship occurs before
such individual attains age 181⁄2, and
‘‘(II) the individual has been a resi-
dent of the United States (as so defined) for
not more than 10 taxable years before the
date of relinquishment.
‘‘(C) COVERED EXPATRIATES ALSO SUBJECT
TO
TAX
AS
CITIZENS
OR
RESIDENTS.—In the
case of any covered expatriate who is subject to
tax as a citizen or resident of the United States
for any period beginning after the expatriation
date, such individual shall not be treated as a
covered expatriate during such period for pur-
poses of subsections (d)(1) and (f) and section
2801.
‘‘(2) 
EXPATRIATE.—The 
term 
‘expatriate’
means—
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‘‘(A) any United States citizen who relin-
quishes his citizenship, and
‘‘(B) any long-term resident of the United
States who ceases to be a lawful permanent resi-
dent of the United States (within the meaning of
section 7701(b)(6)).
‘‘(3) EXPATRIATION DATE.—The term ‘expatria-
tion date’ means—
‘‘(A) the date an individual relinquishes
United States citizenship, or
‘‘(B) in the case of a long-term resident of
the United States, the date on which the indi-
vidual ceases to be a lawful permanent resident
of the United States (within the meaning of sec-
tion 7701(b)(6)).
‘‘(4) RELINQUISHMENT OF CITIZENSHIP.—A cit-
izen shall be treated as relinquishing his United
States citizenship on the earliest of—
‘‘(A) the date the individual renounces his
United States nationality before a diplomatic or
consular officer of the United States pursuant to
paragraph (5) of section 349(a) of the Immigra-
tion and Nationality Act (8 U.S.C. 1481(a)(5)),
‘‘(B) the date the individual furnishes to the
United States Department of State a signed
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statement of voluntary relinquishment of United
States nationality confirming the performance of
an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Im-
migration and Nationality Act (8 U.S.C.
1481(a)(1)–(4)),
‘‘(C) the date the United States Department
of State issues to the individual a certificate of
loss of nationality, or
‘‘(D) the date a court of the United States
cancels a naturalized citizen’s certificate of natu-
ralization.
Subparagraph (A) or (B) shall not apply to any in-
dividual unless the renunciation or voluntary relin-
quishment is subsequently approved by the issuance to
the individual of a certificate of loss of nationality by
the United States Department of State.
‘‘(5) LONG-TERM
RESIDENT.—The term ‘long-
term resident’ has the meaning given to such term by
section 877(e)(2).
‘‘(6) EARLY
DISTRIBUTION
TAX.—The term
‘early distribution tax’ means any increase in tax im-
posed under section 72(t), 220(e)(4), 223(f)(4),
409A(a)(1)(B), 529(c)(6), or 530(d)(4).
‘‘(h) OTHER RULES.—
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‘‘(1) TERMINATION OF DEFERRALS, ETC.—In the
case of any covered expatriate, notwithstanding any
other provision of this title—
‘‘(A) any time period for acquiring prop-
erty which would result in the reduction in the
amount of gain recognized with respect to prop-
erty disposed of by the taxpayer shall terminate
on the day before the expatriation date, and
‘‘(B) any extension of time for payment of
tax shall cease to apply on the day before the ex-
patriation date and the unpaid portion of such
tax shall be due and payable at the time and in
the manner prescribed by the Secretary.
‘‘(2) STEP-UP IN BASIS.—Solely for purposes of
determining any tax imposed by reason of subsection
(a), property which was held by an individual on the
date the individual first became a resident of the
United States (within the meaning of section 7701(b))
shall be treated as having a basis on such date of not
less than the fair market value of such property on
such date. The preceding sentence shall not apply if
the individual elects not to have such sentence apply.
Such an election, once made, shall be irrevocable.
‘‘(3) COORDINATION WITH SECTION 684.—If the
expatriation of any individual would result in the
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recognition of gain under section 684, this section
shall be applied after the application of section 684.
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’.
(b) TAX
ON GIFTS
AND BEQUESTS RECEIVED
BY
UNITED STATES CITIZENS AND RESIDENTS FROM EXPA-
TRIATES.—
(1) IN GENERAL.—Subtitle B (relating to estate
and gift taxes) is amended by inserting after chapter
14 the following new chapter:
‘‘CHAPTER 15—GIFTS AND BEQUESTS
FROM EXPATRIATES
‘‘Sec. 2801. Imposition of tax.
‘‘SEC. 2801. IMPOSITION OF TAX.
‘‘(a) IN GENERAL.—If, during any calendar year, any
United States citizen or resident receives any covered gift
or bequest, there is hereby imposed a tax equal to the prod-
uct of—
‘‘(1) the highest rate of tax specified in the table
contained in section 2001(c) as in effect on the date
of such receipt (or, if greater, the highest rate of tax
specified in the table applicable under section 2502(a)
as in effect on the date), and
‘‘(2) the value of such covered gift or bequest.
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‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax im-
posed by subsection (a) on any covered gift or bequest shall
be paid by the person receiving such gift or bequest.
‘‘(c) EXCEPTION FOR CERTAIN GIFTS.—Subsection (a)
shall apply only to the extent that the value of covered gifts
and bequests received by any person during the calendar
year exceeds $10,000.
‘‘(d) TAX REDUCED BY FOREIGN GIFT OR ESTATE
TAX.—The tax imposed by subsection (a) on any covered
gift or bequest shall be reduced by the amount of any gift
or estate tax paid to a foreign country with respect to such
covered gift or bequest.
‘‘(e) COVERED GIFT OR BEQUEST.—
‘‘(1) IN GENERAL.—For purposes of this chapter,
the term ‘covered gift or bequest’ means—
‘‘(A) any property acquired by gift directly
or indirectly from an individual who, at the
time of such acquisition, is a covered expatriate,
and
‘‘(B) any property acquired directly or in-
directly by reason of the death of an individual
who, immediately before such death, was a cov-
ered expatriate.
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‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE
SUBJECT TO ESTATE OR GIFT TAX.—Such term shall
not include—
‘‘(A) any property shown on a timely filed
return of tax imposed by chapter 12 which is a
taxable gift by the covered expatriate, and
‘‘(B) any property included in the gross es-
tate of the covered expatriate for purposes of
chapter 11 and shown on a timely filed return
of tax imposed by chapter 11 of the estate of the
covered expatriate.
‘‘(3) TRANSFERS IN TRUST.—
‘‘(A) DOMESTIC TRUSTS.—In the case of a
covered gift or bequest made to a domestic
trust—
‘‘(i) subsection (a) shall apply in the
same manner as if such trust were a United
States citizen, and
‘‘(ii) the tax imposed by subsection (a)
on such gift or bequest shall be paid by such
trust.
‘‘(B) FOREIGN TRUSTS.—
‘‘(i) IN GENERAL.—In the case of a
covered gift or bequest made to a foreign
trust, subsection (a) shall apply to any dis-
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(2) CLERICAL AMENDMENT.—The table of chap-
ters for subtitle B is amended by inserting after the
item relating to chapter 14 the following new item:
‘‘CHAPTER 15. GIFTS AND BEQUESTS FROM EXPATRIATES.’’.
(c) DEFINITION OF TERMINATION OF UNITED STATES
CITIZENSHIP.—
(1) IN GENERAL.—Section 7701(a) is amended
by adding at the end the following new paragraph:
‘‘(50) TERMINATION OF UNITED STATES CITIZEN-
SHIP.—
‘‘(A) IN GENERAL.—An individual shall not
cease to be treated as a United States citizen be-
fore the date on which the individual’s citizen-
ship is treated as relinquished under section
877A(g)(4).
‘‘(B) DUAL
CITIZENS.—Under regulations
prescribed by the Secretary, subparagraph (A)
shall not apply to an individual who became at
birth a citizen of the United States and a citizen
of another country.’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 877(e) is
amended to read as follows:
‘‘(1) IN GENERAL.—Any long-term resident of
the United States who ceases to be a lawful perma-
nent resident of the United States (within the mean-
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ing of section 7701(b)(6)) shall be treated for purposes
of this section and sections 2107, 2501, and 6039G in
the same manner as if such resident were a citizen of
the United States who lost United States citizenship
on the date of such cessation or commencement.’’.
(B) Paragraph (6) of section 7701(b) is
amended by adding at the end the following flush
sentence:
‘‘An individual shall cease to be treated as a lawful
permanent resident of the United States if such indi-
vidual commences to be treated as a resident of a for-
eign country under the provisions of a tax treaty be-
tween the United States and the foreign country, does
not waive the benefits of such treaty applicable to
residents of the foreign country, and notifies the Sec-
retary of the commencement of such treatment.’’.
(C) Section 7701 is amended by striking
subsection (n) and by redesignating subsections
(o) and (p) as subsections (n) and (o), respec-
tively.
(d) INFORMATION
RETURNS.—Section 6039G is
amended—
(1) by inserting ‘‘or 877A’’ after ‘‘section 877(b)’’
in subsection (a), and
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(2) by inserting ‘‘or 877A’’ after ‘‘section
877(a)’’ in subsection (d).
(e) CLERICAL AMENDMENT.—The table of sections for
subpart A of part II of subchapter N of chapter 1 is amend-
ed by inserting after the item relating to section 877 the
following new item:
‘‘Sec. 877A. Tax responsibilities of expatriation.’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendments made by this section shall
apply to expatriates (as defined in section 877A(g) of
the Internal Revenue Code of 1986, as added by this
section) whose expatriation date (as so defined) is on
or after the date of the enactment of this Act.
(2) GIFTS AND BEQUESTS.—Chapter 15 of the
Internal Revenue Code of 1986 (as added by sub-
section (b)) shall apply to covered gifts and bequests
(as defined in section 2801 of such Code, as so added)
received on or after the date of the enactment of this
Act from transferors whose expatriation date is on or
after such date of enactment.
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SEC. 302. SPECIAL ENROLLMENT OPTION BY EMPLOYER
HEALTH PLANS FOR MEMBERS OF UNIFORM
SERVICES WHO LOSE HEALTH CARE COV-
ERAGE.
(a) IN GENERAL.—Section 9801(f) (relating to special
enrollment periods) is amended by adding at the end the
following new paragraph:
‘‘(3) LOSS OF MILITARY HEALTH COVERAGE.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graphs (1) and (2), a group health plan shall
permit an employee who is eligible, but not en-
rolled, for coverage under the terms of the plan
(or a dependent of such an employee if the de-
pendent is eligible, but not enrolled, for coverage
under such terms) to enroll for coverage under
the terms of the plan if each of the following con-
ditions is met:
‘‘(i) The employee or dependent, by
reason of service in the uniformed services
(within the meaning of section 4303 of title
38, United States Code), was covered under
a Federal health care benefit program (in-
cluding coverage under the TRICARE pro-
gram (as that term is defined in section
1072 of title 10, United States Code) or by
reason of entitlement to health care benefits
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under the laws administered by the Sec-
retary of Veterans Affairs or as a member
of the uniformed services on active duty),
and the employee or dependent loses eligi-
bility for such coverage.
‘‘(ii) The employee or dependent is oth-
erwise eligible to enroll for coverage under
the terms of the plan.
‘‘(iii) The employee requests such cov-
erage not later than 90 days after the date
on which the coverage described in clause (i)
terminated.
‘‘(B) EFFECTIVE
DATE
OF
COVERAGE.—
Coverage requested under subparagraph (A)(iii)
shall become effective not later than the first day
of the first month after the date of such request.’’.
(b) EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974.—Section 701(f) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1181(f)) is amended
by adding at the end the following:
‘‘(3) LOSS OF MILITARY HEALTH COVERAGE.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graphs (1) and (2), a group health plan, and a
health insurance issuer offering group health in-
surance coverage in connection with a group