149 
apply to funds appropriated under such heading for fiscal 
year 2007. 
CHAPTER 9 
DEPARTMENT OF HOUSING AND URBAN 
DEVELOPMENT 
OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT 
SALARIES AND EXPENSES 
(INCLUDING TRANSFER OF FUNDS) 
For an additional amount to carry out the Federal 
Housing Enterprises Financial Safety and Soundness Act 
of 1992, $6,150,000, to remain available until expended, 
to be derived from the Federal Housing Enterprises Over-
sight Fund and to be subject to the same terms and condi-
tions pertaining to funds provided under this heading in 
Public Law 109–115: Provided, That not to exceed the 
total amount provided for these activities for fiscal year 
2007 shall be available from the general fund of the Treas-
ury to the extent necessary to incur obligations and make 
expenditures pending the receipt of collections to the 
Fund: Provided further, That the general fund amount 
shall be reduced as collections are received during the fis-
cal year so as to result in a final appropriation from the 
general fund estimated at not more than $0. 
GENERAL PROVISIONS—THIS CHAPTER 
SEC. 5901. Hereafter, funds limited or appropriated 
for the Department of Transportation may be obligated 
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or expended to grant authority to a Mexican motor carrier 
to operate beyond United States municipalities and com-
mercial zones on the United States-Mexico border only to 
the extent that— 
(1) granting such authority is first tested as 
part of a pilot program; 
(2) such pilot program complies with the re-
quirements of section 350 of Public Law 107–87 
and the requirements of section 31315(c) of title 49, 
United States Code, related to pilot programs; and 
(3) simultaneous and comparable authority to 
operate within Mexico is made available to motor 
carriers domiciled in the United States. 
SEC. 5902. Funds provided for the ‘‘National Trans-
portation Safety Board, Salaries and Expenses’’ in section 
21031 of the Continuing Appropriations Resolution, 2007 
(division B of Public Law 109–289, as amended by Public 
Law 110–5) include amounts necessary to make lease pay-
ments due in fiscal year 2007 only, on an obligation in-
curred in 2001 under a capital lease. 
SEC. 5903. Section 21033 of the Continuing Appro-
priations Resolution, 2007 (division B of Public Law 109– 
289, as amended by Public Law 110–5) is amended by 
adding after the second proviso: ‘‘: Provided further, That 
paragraph (2) under such heading in Public Law 109– 
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151 
115 (119 Stat. 2441) shall be funded at $149,300,000, 
but additional section 8 tenant protection rental assistance 
costs may be funded in 2007 by using unobligated bal-
ances, notwithstanding the purposes for which such 
amounts were appropriated, including recaptures and car-
ryover, remaining from funds appropriated to the Depart-
ment of Housing and Urban Development under this 
heading, the heading ‘Annual Contributions for Assisted 
Housing’, the heading ‘Housing Certificate Fund’, and the 
heading ‘Project-Based Rental Assistance’ for fiscal year 
2006 and prior fiscal years: Provided further, That para-
graph (3) under such heading in Public Law 109–115 
(119 Stat. 2441) shall be funded at $47,500,000: Pro-
vided further, That paragraph (4) under such heading in 
Public Law 109–115 (119 Stat. 2441) shall be funded at 
$5,900,000: Provided further, That paragraph (5) under 
such heading in Public Law 109–115 (119 Stat. 2441) 
shall 
be 
funded 
at 
$1,281,100,000, 
of 
which 
$1,251,100,000 shall be allocated for the calendar year 
2007 funding cycle on a pro rata basis to public housing 
agencies based on the amount public housing agencies 
were eligible to receive in calendar year 2006, and of which 
up to $30,000,000 shall be available to the Secretary to 
allocate to public housing agencies that need additional 
funds to administer their section 8 programs, with up to 
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152 
$20,000,000 to be for fees associated with section 8 tenant 
protection rental assistance’’. 
SEC. 5904. Section 232(b) of the Departments of 
Veterans Affairs and Housing and Urban Development, 
and Independent Agencies Appropriations Act, 2001 
(Public Law 106–377) is amended to read as follows: 
‘‘(b) APPLICABILITY.—In the case of any dwelling 
unit that, upon the date of the enactment of this Act, is 
assisted under a housing assistance payment contract 
under section 8(o)(13) as in effect before such enactment, 
or under section 8(d)(2) of the United States Housing Act 
of 1937 (42 U.S.C. 1437f(d)(2)) as in effect before the 
enactment of the Quality Housing and Work Responsi-
bility Act of 1998 (title V of Public Law 105–276), assist-
ance may be renewed or extended under such section 
8(o)(13), as amended by subsection (a), provided that the 
initial contract term and rent of such renewed or extended 
assistance shall be determined pursuant to subparagraphs 
(F) and (H), and subparagraphs (C) and (D) of such sec-
tion shall not apply to such extensions or renewals.’’. 
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153 
CHAPTER 10 
GENERAL PROVISIONS—THIS ACT 
AVAILABILITY OF FUNDS 
SEC. 5951. No part of any appropriation contained 
in this Act shall remain available for obligation beyond 
the current fiscal year unless expressly so provided herein. 
DESIGNATION FOR TITLES I AND II 
SEC. 5952. Amounts in titles I and II are designated 
as emergency requirements pursuant to section 402 of H. 
Con. Res. 95 (109th Congress), and as making appropria-
tions for contingency operations directly related to the 
global war on terrorism and other unanticipated defense- 
related operations pursuant to section 402 of H. Con. Res. 
376 (109th Congress) as made applicable to the House 
of Representatives by section 511(a)(4) of H. Res. 6 
(110th Congress). 
EMERGENCY DESIGNATION FOR OTHER TITLES 
SEC. 5953. Amounts in titles III, IV, and VI are des-
ignated as emergency requirements pursuant to section 
402 of H. Con. Res. 95 (109th Congress), and pursuant 
to section 501 of H. Con. Res. 376 (109th Congress) as 
made applicable to the House of Representatives by sec-
tion 511(a)(4) of H. Res. 6 (110th Congress). 
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154 
TITLE 
VI—ELIMINATION 
OF 
SCHIP 
SHORTFALL 
AND 
OTHER HEALTH MATTERS 
DEPARTMENT OF HEALTH AND HUMAN 
SERVICES 
CENTERS FOR MEDICARE AND MEDICAID SERVICES 
STATE CHILDREN’S HEALTH INSURANCE FUND 
For an additional amount to provide additional allot-
ments to remaining shortfall States under section 
2104(h)(4) of the Social Security Act, as inserted by sec-
tion 6001, such sums as may be necessary, but not to ex-
ceed $650,000,000 for fiscal year 2007, to remain avail-
able until expended. 
GENERAL PROVISIONS—THIS TITLE 
SEC. 6001. (a) ELIMINATION OF REMAINDER OF 
SCHIP FUNDING SHORTFALLS, TIERED MATCH, AND 
OTHER
LIMITATION
ON
EXPENDITURES.—Section 
2104(h) of the Social Security Act (42 U.S.C. 1397dd(h)), 
as added by section 201(a) of the National Institutes of 
Health Reform Act of 2006 (Public Law 109–482), is 
amended— 
(1) in the heading for paragraph (2), by strik-
ing ‘‘REMAINDER
OF
REDUCTION’’ and inserting 
‘‘PART’’; and 
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155 
(2) by striking paragraph (4) and inserting the 
following: 
‘‘(4) ADDITIONAL AMOUNTS TO ELIMINATE RE-
MAINDER OF FISCAL YEAR 2007 FUNDING SHORT-
FALLS.— 
‘‘(A) IN
GENERAL.—From the amounts 
provided in advance in appropriations Acts, the 
Secretary shall allot to each remaining shortfall 
State described in subparagraph (B) such 
amount as the Secretary determines will elimi-
nate the estimated shortfall described in such 
subparagraph for the State for fiscal year 2007. 
‘‘(B) REMAINING SHORTFALL STATE DE-
SCRIBED.—For purposes of subparagraph (A), 
a remaining shortfall State is a State with a 
State child health plan approved under this title 
for which the Secretary estimates, on the basis 
of the most recent data available to the Sec-
retary as of the date of the enactment of this 
paragraph, that the projected Federal expendi-
tures under such plan for the State for fiscal 
year 2007 will exceed the sum of— 
‘‘(i) the amount of the State’s allot-
ments for each of fiscal years 2005 and 
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156 
2006 that will not be expended by the end 
of fiscal year 2006; 
‘‘(ii) the amount of the State’s allot-
ment for fiscal year 2007; and 
‘‘(iii) the amounts, if any, that are to 
be redistributed to the State during fiscal 
year 2007 in accordance with paragraphs 
(1) and (2).’’. 
(b) CONFORMING AMENDMENTS.—Section 2104(h) 
of such Act (42 U.S.C. 1397dd(h)) (as so added), is 
amended— 
(1) in paragraph (1)(B), by striking ‘‘subject to 
paragraph (4)(B) and’’; 
(2) in paragraph (2)(B), by striking ‘‘subject to 
paragraph (4)(B) and’’; 
(3) in paragraph (5)(A), by striking ‘‘and (3)’’ 
and inserting ‘‘(3), and (4)’’; and 
(4) in paragraph (6)— 
(A) in the first sentence— 
(i) by inserting ‘‘or allotted’’ after 
‘‘redistributed’’; and 
(ii) by inserting ‘‘or allotments’’ after 
‘‘redistributions’’; and 
(B) by striking ‘‘and (3)’’ and inserting 
‘‘(3), and (4)’’. 
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157 
SEC. 6002. (a) PROHIBITION.— 
(1) LIMITATION
ON
SECRETARIAL
AUTHOR-
ITY.—Notwithstanding any other provision of law, 
the Secretary of Health and Human Services shall 
not, prior to the date that is 1 year after the date 
of enactment of this Act, take any action (through 
promulgation of regulation, issuance of regulatory 
guidance, or other administrative action) to— 
(A) finalize or otherwise implement provi-
sions contained in the proposed rule published 
on January 18, 2007, on pages 2236 through 
2248 of volume 72, Federal Register (relating 
to parts 433, 447, and 457 of title 42, Code of 
Federal Regulations); 
(B) promulgate or implement any rule or 
provisions similar to the provisions described in 
subparagraph (A) pertaining to the Medicaid 
program established under title XIX of the So-
cial Security Act or the State Children’s Health 
Insurance Program established under title XXI 
of such Act; or 
(C) promulgate or implement any rule or 
provisions restricting payments for graduate 
medical education under the Medicaid program. 
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158 
(2) CONTINUATION
OF
OTHER
SECRETARIAL 
AUTHORITY.—The Secretary of Health and Human 
Service shall not be prohibited during the period de-
scribed in paragraph (1) from taking any action 
(through promulgation of regulation, issuance of 
regulatory guidance, or other administrative action) 
to enforce a provision of law in effect as of the date 
of enactment of this Act with respect to the Med-
icaid program or the State Children’s Health Insur-
ance Program, or to promulgate or implement a new 
rule or provision during such period with respect to 
such programs, other than a rule or provision de-
scribed in paragraph (1) and subject to the prohibi-
tion set forth in that paragraph. 
(b) REQUIREMENT FOR USE OF TAMPER-RESISTANT 
PRESCRIPTION
PADS
UNDER
THE
MEDICAID
PRO-
GRAM.— 
(1) IN GENERAL.—Section 1903(i) of the Social 
Security Act (42 U.S.C. 1396b(i)) is amended— 
(A) by striking ‘‘or’’ at the end of para-
graph (21); 
(B) by striking the period at the end of 
paragraph (22) and inserting ‘‘; or’’; and 
(C) by inserting after paragraph (22) the 
following new paragraph: 
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159 
‘‘(23) with respect to amounts expended for 
medical assistance for covered outpatient drugs (as 
defined in section 1927(k)(2)) for which the pre-
scription was executed in written (and non-elec-
tronic) form unless the prescription was executed on 
a tamper-resistant pad.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to prescriptions exe-
cuted after September 30, 2007. 
(c) EXTENSION OF CERTAIN PHARMACY PLUS WAIV-
ERS.— 
(1) AUTHORITY
TO
CONTINUE
TO
OPERATE 
WAIVERS.—Notwithstanding any other provision of 
law, any State that is operating a Pharmacy Plus 
waiver described in paragraph (2) which would oth-
erwise expire on June 30, 2007, may elect to con-
tinue to operate the waiver through December 31, 
2009. 
(2) PHARMACY PLUS WAIVER DESCRIBED.—For 
purposes of paragraph (1), a Pharmacy Plus waiver 
described in this paragraph is a waiver approved by 
the Secretary of Health and Human Services under 
the authority of section 1115 of the Social Security 
Act (42 U.S.C. 1315) that provides coverage for pre-
scription drugs for individuals who have attained age 
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160 
65 and whose family income does not exceed 200 
percent of the poverty line (as defined in section 
2110(c)(5) of such Act (42 U.S.C. 1397jj(c)(5)). 
TITLE VII—FAIR MINIMUM WAGE 
AND TAX RELIEF 
Subtitle A—Fair Minimum Wage 
SEC. 7101. SHORT TITLE. 
This subtitle may be cited as the ‘‘Fair Minimum 
Wage Act of 2007’’. 
SEC. 7102. MINIMUM WAGE. 
(a) IN GENERAL.—Section 6(a)(1) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended 
to read as follows: 
‘‘(1) except as otherwise provided in this sec-
tion, not less than— 
‘‘(A) $5.85 an hour, beginning on the 60th 
day after the date of enactment of the Fair 
Minimum Wage Act of 2007; 
‘‘(B) $6.55 an hour, beginning 12 months 
after that 60th day; and 
‘‘(C) $7.25 an hour, beginning 24 months 
after that 60th day;’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect 60 days after the date of 
enactment of this Act. 
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161 
SEC. 7103. APPLICABILITY OF MINIMUM WAGE TO AMER-
ICAN SAMOA AND THE COMMONWEALTH OF 
THE NORTHERN MARIANA ISLANDS. 
(a) IN GENERAL.—Section 6 of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 206) shall apply to 
American Samoa and the Commonwealth of the Northern 
Mariana Islands. 
(b) TRANSITION.—Notwithstanding subsection (a)— 
(1) the minimum wage applicable to the Com-
monwealth of the Northern Mariana Islands under 
section 6(a)(1) of the Fair Labor Standards Act of 
1938 (29 U.S.C. 206(a)(1)) shall be— 
(A) $3.55 an hour, beginning on the 60th 
day after the date of enactment of this Act; and 
(B) increased by $0.50 an hour (or such 
lesser amount as may be necessary to equal the 
minimum wage under section 6(a)(1) of such 
Act), beginning 1 year after the date of enact-
ment of this Act and each year thereafter until 
the minimum wage applicable to the Common-
wealth of the Northern Mariana Islands under 
this paragraph is equal to the minimum wage 
set forth in such section; and 
(2) the minimum wage applicable to American 
Samoa under section 6(a)(1) of the Fair Labor 
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162 
Standards Act of 1938 (29 U.S.C. 206(a)(1)) shall 
be— 
(A) the applicable wage rate in effect for 
each industry and classification under section 
697 of title 29, Code of Federal Regulations, on 
the date of enactment of this Act; 
(B) increased by $0.50 an hour, beginning 
on the 60th day after the date of enactment of 
this Act; and 
(C) increased by $0.50 an hour (or such 
lesser amount as may be necessary to equal the 
minimum wage under section 6(a)(1) of such 
Act), beginning 1 year after the date of enact-
ment of this Act and each year thereafter until 
the minimum wage applicable to American 
Samoa under this paragraph is equal to the 
minimum wage set forth in such section. 
(c) CONFORMING AMENDMENTS.— 
(1) IN GENERAL.—The Fair Labor Standards 
Act of 1938 is amended— 
(A) by striking sections 5 and 8; and 
(B) in section 6(a), by striking paragraph 
(3) and redesignating paragraphs (4) and (5) 
as paragraphs (3) and (4), respectively. 
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163 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect 60 days after the 
date of enactment of this Act. 
SEC. 7104. STUDY ON PROJECTED IMPACT. 
(a) STUDY.—Beginning on the date that is 26 
months after the date of enactment of this Act, the Sec-
retary of Labor shall, through the Bureau of Labor Statis-
tics, conduct a study to— 
(1) assess the assess the impact of the wage in-
creases required by this Act through such date; and 
(2) to project the impact of any further wage 
increase, 
on living standards and rates of employment in American 
Samoa and the Commonwealth of the Northern Mariana 
Islands. 
(b) REPORT.—Not later than the date that is 32 
months after the date of enactment of this Act, the Sec-
retary of Labor shall transmit to Congress a report on 
the findings of the study required by subsection (a). 
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164 
Subtitle B—Small Business Tax 
Incentives 
SEC. 7201. SHORT TITLE; AMENDMENT OF CODE; TABLE OF 
CONTENTS. 
(a) SHORT TITLE.—This subtitle may be cited as the 
‘‘Small Business and Work Opportunity Tax Act of 
2007’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this subtitle an 
amendment or repeal is expressed in terms of an amend-
ment to, or repeal of, a section or other provision, the ref-
erence shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents of 
this subtitle is as follows: 
Sec. 7201. Short title; amendment of Code; table of contents. 
PART 1—SMALL BUSINESS TAX RELIEF PROVISIONS 
SUBPART A—GENERAL PROVISIONS 
Sec. 7211. Extension and modification of work opportunity tax credit. 
Sec. 7212. Extension and increase of expensing for small business. 
Sec. 7213. Determination of credit for certain taxes paid with respect to em-
ployee cash tips. 
Sec. 7214. Waiver of individual and corporate alternative minimum tax limits 
on work opportunity credit and credit for taxes paid with re-
spect to employee cash tips. 
Sec. 7215. Family business tax simplification. 
SUBPART B—GULF OPPORTUNITY ZONE TAX INCENTIVES 
Sec. 7221. Extension of increased expensing for qualified section 179 Gulf Op-
portunity Zone property. 
Sec. 7222. Extension and expansion of low-income housing credit rules for 
buildings in the GO Zones. 
Sec. 7223. Special tax-exempt bond financing rule for repairs and reconstruc-
tions of residences in the GO Zones. 
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Sec. 7224. GAO study of practices employed by State and local governments 
in allocating and utilizing tax incentives provided pursuant to 
the Gulf Opportunity Zone Act of 2005. 
SUBPART C—SUBCHAPTER S PROVISIONS 
Sec. 7231. Capital gain of S corporation not treated as passive investment in-
come. 
Sec. 7232. Treatment of bank director shares. 
Sec. 7233. Special rule for bank required to change from the reserve method 
of accounting on becoming S corporation. 
Sec. 7234. Treatment of the sale of interest in a qualified subchapter S sub-
sidiary. 
Sec. 7235. Elimination of all earnings and profits attributable to pre-1983 
years for certain corporations. 
Sec. 7236. Deductibility of interest expense on indebtedness incurred by an 
electing small business trust to acquire S corporation stock. 
PART 2—REVENUE PROVISIONS 
Sec. 7241. Increase in age of children whose unearned income is taxed as if 
parent’s income. 
Sec. 7242. Suspension of certain penalties and interest. 
Sec. 7243. Modification of collection due process procedures for employment 
tax liabilities. 
Sec. 7244. Permanent extension of IRS user fees. 
Sec. 7245. Increase in penalty for bad checks and money orders. 
Sec. 7246. Understatement of taxpayer liability by return preparers. 
Sec. 7247. Penalty for filing erroneous refund claims. 
Sec. 7248. Time for payment of corporate estimated taxes. 
PART 1—SMALL BUSINESS TAX RELIEF 
PROVISIONS 
Subpart A—General Provisions 
SEC. 7211. EXTENSION AND MODIFICATION OF WORK OP-
PORTUNITY TAX CREDIT. 
(a) EXTENSION.—Section 51(c)(4)(B) (relating to 
termination) is amended by striking ‘‘December 31, 2007’’ 
and inserting ‘‘August 31, 2011’’. 
(b) INCREASE IN MAXIMUM AGE FOR DESIGNATED 
COMMUNITY RESIDENTS.— 
(1) IN
GENERAL.—Paragraph (5) of section 
51(d) is amended to read as follows: 
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166 
‘‘(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 com-
munity, renewal community, or rural renewal 
county. 
‘‘(C) RURAL RENEWAL COUNTY.—For pur-
poses of this paragraph, the term ‘rural renewal 
county’ means any county which— 
‘‘(i) is outside a metropolitan statis-
tical area (defined as such by the Office of 
Management and Budget), and 
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167 
‘‘(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 fol-
lows: 
‘‘(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 
referral) 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
MEM-
BERS OF TARGETED GROUP.— 
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168 
(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 re-
ceiving assistance under a food stamp pro-
gram under the Food Stamp Act of 1977 
for at least a 3-month period ending dur-
ing the 12-month period ending on the hir-
ing date, or 
‘‘(ii) entitled to compensation for a 
service-connected disability, and— 
‘‘(I) having a hiring date which is 
not more that 1 year after having 
been discharged or released from ac-
tive duty in the Armed Forces of the 
United States, or 
‘‘(II) having aggregate periods of 
unemployment during the 1-year pe-
riod ending on the hiring date which 
equal or exceed 6 months.’’. 
(B) DEFINITIONS.—Paragraph (3) of sec-
tion 51(d) is amended by adding at the end the 
following new subparagraph: 
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‘‘(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.—Para-
graph (3) of section 51(b) is amended— 
(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. 
SEC. 7212. EXTENSION AND INCREASE OF EXPENSING FOR 
SMALL BUSINESS. 
(a) EXTENSION.—Subsections (b)(1), (b)(2), (b)(5), 
(c)(2), and (d)(1)(A)(ii) of section 179 (relating to election 
to expense certain depreciable business assets) are each 
amended by striking ‘‘2010’’ and inserting ‘‘2011’’. 
(b) INCREASE IN LIMITATIONS.—Subsection (b) of 
section 179 is amended— 
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(1) by striking ‘‘$100,000 in the case of taxable 
years beginning after 2002’’ in paragraph (1) and 
inserting ‘‘$125,000 in the case of taxable years be-
ginning after 2006’’, and 
(2) by striking ‘‘$400,000 in the case of taxable 
years beginning after 2002’’ in paragraph (2) and 
inserting ‘‘$500,000 in the case of taxable years be-
ginning after 2006’’. 
(c) INFLATION ADJUSTMENT.—Subparagraph (A) of 
section 179(b)(5) is amended— 
(1) by striking ‘‘2003’’ and inserting ‘‘2007’’, 
(2) by striking ‘‘$100,000 and $400,000’’ and 
inserting ‘‘$125,000 and $500,000’’, and 
(3) by striking ‘‘2002’’ in clause (ii) and insert-
ing ‘‘2006’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 7213. DETERMINATION OF CREDIT FOR CERTAIN 
TAXES PAID WITH RESPECT TO EMPLOYEE 
CASH TIPS. 
(a) IN GENERAL.—Subparagraph (B) of section 
45B(b)(1) is amended by inserting ‘‘as in effect on Janu-
ary 1, 2007, and’’ before ‘‘determined without regard to’’. 
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171 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to tips received for services per-
formed after December 31, 2006. 
SEC. 7214. WAIVER OF INDIVIDUAL AND CORPORATE AL-
TERNATIVE MINIMUM TAX LIMITS ON WORK 
OPPORTUNITY CREDIT AND CREDIT FOR 
TAXES PAID WITH RESPECT TO EMPLOYEE 
CASH TIPS. 
(a) ALLOWANCE AGAINST ALTERNATIVE MINIMUM 
TAX.—Subparagraph (B) of section 38(c)(4) is amended 
by striking ‘‘and’’ at the end of clause (i), by inserting 
a comma at the end of clause (ii), and by adding at the 
end the following new clauses: 
‘‘(iii) the credit determined under sec-
tion 45B, and 
‘‘(iv) the credit determined under sec-
tion 51.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to credits determined under sec-
tions 45B and 51 of the Internal Revenue Code of 1986 
in taxable years beginning after December 31, 2006, and 
to carrybacks of such credits. 
SEC. 7215. FAMILY BUSINESS TAX SIMPLIFICATION. 
(a) IN GENERAL.—Section 761 (defining terms for 
purposes of partnerships) is amended by redesignating 
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172 
subsection (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection: 
‘‘(f) QUALIFIED JOINT VENTURE.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
joint venture conducted by a husband and wife who 
file a joint return for the taxable year, for purposes 
of this title— 
‘‘(A) such joint venture shall not be treat-
ed as a partnership, 
‘‘(B) all items of income, gain, loss, deduc-
tion, and credit shall be divided between the 
spouses in accordance with their respective in-
terests in the venture, and 
‘‘(C) each spouse shall take into account 
such spouse’s respective share of such items as 
if they were attributable to a trade or business 
conducted by such spouse as a sole proprietor. 
‘‘(2) QUALIFIED
JOINT
VENTURE.—For pur-
poses of paragraph (1), the term ‘qualified joint ven-
ture’ means any joint venture involving the conduct 
of a trade or business if— 
‘‘(A) the only members of such joint ven-
ture are a husband and wife, 
‘‘(B) both spouses materially participate 
(within the meaning of section 469(h) without 
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173 
regard to paragraph (5) thereof) in such trade 
or business, and 
‘‘(C) both spouses elect the application of 
this subsection.’’. 
(b) NET EARNINGS FROM SELF-EMPLOYMENT.— 
(1) Subsection (a) of section 1402 (defining net 
earnings from self-employment) is amended by strik-
ing ‘‘, and’’ at the end of paragraph (15) and insert-
ing a semicolon, by striking the period at the end of 
paragraph (16) and inserting ‘‘; and’’, and by insert-
ing after paragraph (16) the following new para-
graph: 
‘‘(17) notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) in deter-
mining net earnings from self-employment of such 
spouse.’’. 
(2) Subsection (a) of section 211 of the Social 
Security Act (defining net earnings from self-em-
ployment) is amended by striking ‘‘and’’ at the end 
of paragraph (14), by striking the period at the end 
of paragraph (15) and inserting ‘‘; and’’, and by in-
serting after paragraph (15) the following new para-
graph: 
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174 
‘‘(16) Notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint venture shall be taken 
into account as provided in section 761(f) of the In-
ternal Revenue Code of 1986 in determining net 
earnings from self-employment of such spouse.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
Subpart B—Gulf Opportunity Zone Tax Incentives 
SEC. 7221. EXTENSION OF INCREASED EXPENSING FOR 
QUALIFIED SECTION 179 GULF OPPORTUNITY 
ZONE PROPERTY. 
Paragraph (2) of section 1400N(e) (relating to quali-
fied section 179 Gulf Opportunity Zone property) is 
amended— 
(1) by striking ‘‘this subsection, the term’’ and 
inserting 
‘‘this subsection— 
‘‘(A) IN GENERAL.—The term’’, and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) EXTENSION
FOR
CERTAIN
PROP-
ERTY.—In the case of property substantially all 
of the use of which is in one or more specified 
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175 
portions of the GO Zone (as defined by sub-
section (d)(6)), such term shall include section 
179 property (as so defined) which is described 
in subsection (d)(2), determined— 
‘‘(i) without regard to subsection 
(d)(6), and 
‘‘(ii) by substituting ‘2008’ for ‘2007’ 
in subparagraph (A)(v) thereof.’’. 
SEC. 7222. EXTENSION AND EXPANSION OF LOW-INCOME 
HOUSING CREDIT RULES FOR BUILDINGS IN 
THE GO ZONES. 
(a) TIME
FOR
MAKING
LOW-INCOME
HOUSING 
CREDIT ALLOCATIONS.—Subsection (c) of section 1400N 
(relating to low-income housing credit) is amended by re-
designating paragraph (5) as paragraph (6) and by insert-
ing after paragraph (4) the following new paragraph: 
‘‘(5) TIME FOR MAKING LOW-INCOME HOUSING 
CREDIT
ALLOCATIONS.—Section 42(h)(1)(B) shall 
not apply to an allocation of housing credit dollar 
amount to a building located in the Gulf Oppor-
tunity Zone, the Rita GO Zone, or the Wilma GO 
Zone, if such allocation is made in 2006, 2007, or 
2008, and such building is placed in service before 
January 1, 2011.’’. 
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176 
(b) EXTENSION
OF PERIOD
FOR TREATING GO 
ZONES AS DIFFICULT DEVELOPMENT AREAS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
1400N(c)(3) is amended by striking ‘‘2006, 2007, or 
2008’’ and inserting ‘‘the period beginning on Janu-
ary 1, 2006, and ending on December 31, 2010’’. 
(2) CONFORMING AMENDMENT.—Clause (ii) of 
section 1400N(c)(3)(B) is amended by striking 
‘‘such period’’ and inserting ‘‘the period described in 
subparagraph (A)’’. 
(c) COMMUNITY DEVELOPMENT BLOCK GRANTS NOT 
TAKEN INTO ACCOUNT IN DETERMINING IF BUILDINGS 
ARE FEDERALLY SUBSIDIZED.—Subsection (c) of section 
1400N (relating to low-income housing credit), as amend-
ed by this Act, is amended by redesignating paragraph (6) 
as paragraph (7) and by inserting after paragraph (5) the 
following new paragraph: 
‘‘(6) 
COMMUNITY
DEVELOPMENT
BLOCK 
GRANTS
NOT
TAKEN
INTO
ACCOUNT
IN
DETER-
MINING
IF
BUILDINGS
ARE
FEDERALLY
SUB-
SIDIZED.—For 
purpose 
of 
applying 
section 
42(i)(2)(D) to any building which is placed in serv-
ice in the Gulf Opportunity Zone, the Rita GO Zone, 
or the Wilma GO Zone during the period beginning 
on January 1, 2006, and ending on December 31, 
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2010, a loan shall not be treated as a below market 
Federal loan solely by reason of any assistance pro-
vided under section 106, 107, or 108 of the Housing 
and Community Development Act of 1974 by reason 
of section 122 of such Act or any provision of the 
Department of Defense Appropriations Act, 2006, or 
the Emergency Supplemental Appropriations Act for 
Defense, the Global War on Terror, and Hurricane 
Recovery, 2006.’’. 
SEC. 7223. SPECIAL TAX-EXEMPT BOND FINANCING RULE 
FOR REPAIRS AND RECONSTRUCTIONS OF 
RESIDENCES IN THE GO ZONES. 
Subsection (a) of section 1400N (relating to tax-ex-
empt bond financing) is amended by adding at the end 
the following new paragraph: 
‘‘(7) SPECIAL RULE FOR REPAIRS AND RECON-
STRUCTIONS.— 
‘‘(A) IN GENERAL.—For purposes of sec-
tion 143 and this subsection, any qualified GO 
Zone repair or reconstruction shall be treated 
as a qualified rehabilitation. 
‘‘(B) QUALIFIED GO ZONE REPAIR OR RE-
CONSTRUCTION.—For purposes of subpara-
graph (A), the term ‘qualified GO Zone repair 
or reconstruction’ means any repair of damage 
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178 
caused by Hurricane Katrina, Hurricane Rita, 
or Hurricane Wilma to a building located in the 
Gulf Opportunity Zone, the Rita GO Zone, or 
the Wilma GO Zone (or reconstruction of such 
building in the case of damage constituting de-
struction) if the expenditures for such repair or 
reconstruction are 25 percent or more of the 
mortgagor’s adjusted basis in the residence. 
For purposes of the preceding sentence, the 
mortgagor’s adjusted basis shall be determined 
as of the completion of the repair or reconstruc-
tion or, if later, the date on which the mort-
gagor acquires the residence. 
‘‘(C) TERMINATION.—This paragraph shall 
apply only to owner-financing provided after the 
date of the enactment of this paragraph and be-
fore January 1, 2011.’’. 
SEC. 7224. GAO STUDY OF PRACTICES EMPLOYED BY STATE 
AND LOCAL GOVERNMENTS IN ALLOCATING 
AND UTILIZING TAX INCENTIVES PROVIDED 
PURSUANT 
TO 
THE 
GULF 
OPPORTUNITY 
ZONE ACT OF 2005. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study of the practices em-
ployed by State and local governments, and subdivisions 
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179 
thereof, in allocating and utilizing tax incentives provided 
pursuant to the Gulf Opportunity Zone Act of 2005 and 
this Act. 
(b) SUBMISSION OF REPORT.—Not later than one 
year after the date of the enactment of this Act, the Comp-
troller General shall submit a report on the findings of 
the study conducted under subsection (a) and shall include 
therein recommendations (if any) relating to such find-
ings. The report shall be submitted to the Committee on 
Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate. 
(c) CONGRESSIONAL HEARINGS.—In the case that 
the report submitted under this section includes findings 
of significant fraud, waste or abuse, each Committee spec-
ified in subsection (b) shall, within 60 days after the date 
the report is submitted under subsection (b), hold a public 
hearing to review such findings. 
Subpart C—Subchapter S Provisions 
SEC. 7231. CAPITAL GAIN OF S CORPORATION NOT TREAT-
ED AS PASSIVE INVESTMENT INCOME. 
(a) IN GENERAL.—Section 1362(d)(3) is amended by 
striking subparagraphs (B), (C), (D), (E), and (F) and 
inserting the following new subparagraphs: 
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180 
‘‘(B) GROSS RECEIPTS FROM THE SALES 
OF
CERTAIN
ASSETS.—For purposes of this 
paragraph— 
‘‘(i) in the case of dispositions of cap-
ital assets (other than stock and securi-
ties), gross receipts from such dispositions 
shall be taken into account only to the ex-
tent of the capital gain net income there-
from, and 
‘‘(ii) in the case of sales or exchanges 
of stock or securities, gross receipts shall 
be taken into account only to the extent of 
the gains therefrom. 
‘‘(C) PASSIVE
INVESTMENT
INCOME
DE-
FINED.— 
‘‘(i) IN GENERAL.—Except as other-
wise provided in this subparagraph, the 
term ‘passive investment income’ means 
gross receipts derived from royalties, rents, 
dividends, interest, and annuities. 
‘‘(ii) EXCEPTION
FOR
INTEREST
ON 
NOTES FROM SALES OF INVENTORY.—The 
term ‘passive investment income’ shall not 
include interest on any obligation acquired 
in the ordinary course of the corporation’s 
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181 
trade or business from its sale of property 
described in section 1221(a)(1). 
‘‘(iii) TREATMENT OF CERTAIN LEND-
ING
OR
FINANCE
COMPANIES.—If the S 
corporation meets the requirements of sec-
tion 542(c)(6) for the taxable year, the 
term ‘passive investment income’ shall not 
include gross receipts for the taxable year 
which are derived directly from the active 
and regular conduct of a lending or finance 
business (as defined in section 542(d)(1)). 
‘‘(iv) TREATMENT OF CERTAIN DIVI-
DENDS.—If an S corporation holds stock 
in a C corporation meeting the require-
ments of section 1504(a)(2), the term ‘pas-
sive investment income’ shall not include 
dividends from such C corporation to the 
extent such dividends are attributable to 
the earnings and profits of such C corpora-
tion derived from the active conduct of a 
trade or business. 
‘‘(v) EXCEPTION FOR BANKS, ETC.— 
In the case of a bank (as defined in section 
581) or a depository institution holding 
company (as defined in section 3(w)(1) of 
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182 
the Federal Deposit Insurance Act (12 
U.S.C. 1813(w)(1)), the term ‘passive in-
vestment income’ shall not include— 
‘‘(I) interest income earned by 
such bank or company, or 
‘‘(II) dividends on assets required 
to be held by such bank or company, 
including stock in the Federal Reserve 
Bank, the Federal Home Loan Bank, 
or the Federal Agricultural Mortgage 
Bank 
or 
participation 
certificates 
issued by a Federal Intermediate 
Credit Bank.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 7232. TREATMENT OF BANK DIRECTOR SHARES. 
(a) IN GENERAL.—Section 1361 (defining S corpora-
tion) is amended by adding at the end the following new 
subsection: 
‘‘(f) RESTRICTED BANK DIRECTOR STOCK.— 
‘‘(1) IN
GENERAL.—Restricted bank director 
stock shall not be taken into account as outstanding 
stock of the S corporation in applying this sub-
chapter (other than section 1368(f)). 
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