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 
education savings account. 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF 
ROLLOVERS 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 in-
come under paragraph (1), the amount treated 
as a 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 
section shall apply with respect to deaths from inju-
ries 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 amend-
ments made by this section shall apply to any con-
tribution 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 re-
ceived under section 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 enact-
ment 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 (b)) shall apply to taxable years begin-
ning after December 31, 2007. 
SEC. 110. SUSPENSION OF 5-YEAR PERIOD DURING SERV-
ICE WITH THE PEACE CORPS. 
(a) IN GENERAL.—Subsection (d) of section 121 (re-
lating to special rules) is amended by adding at the end 
the following new paragraph: 
‘‘(12) PEACE CORPS.— 
‘‘(A) IN GENERAL.—At the election of an 
individual with respect to a property, the run-
ning of the 5-year period described in sub-
sections (a) and (c)(1)(B) and paragraph (7) of 
this subsection with respect to such property 
shall be suspended 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 
subsection (a) shall apply to taxable years beginning after 
December 31, 2007.
SEC. 111. CREDIT FOR EMPLOYER DIFFERENTIAL WAGE 
PAYMENTS TO EMPLOYEES WHO ARE ACTIVE 
DUTY MEMBERS OF THE UNIFORMED SERV-
ICES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business credits) is 
amended by adding at the end the following new section: 
‘‘SEC. 45P. EMPLOYER WAGE CREDIT FOR EMPLOYEES WHO 
ARE ACTIVE DUTY MEMBERS OF THE UNI-
FORMED SERVICES. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of an eligible small business employer, the dif-
ferential wage payment credit for any taxable year is an 
amount equal to 20 percent of the sum of the eligible dif-
ferential wage payments for each of the qualified employ-
ees of the taxpayer during such taxable year. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE
DIFFERENTIAL
WAGE
PAY-
MENTS.—The term ‘eligible differential wage pay-
ments’ means, with respect to each qualified em-
ployee, so much of the differential wage payments 
(as defined in section 3401(h)(2)) paid to such em-
ployee for the taxable year as does not exceed 
$20,000. 
‘‘(2) QUALIFIED EMPLOYEE.—The term ‘quali-
fied employee’ means a person who has been an em-
ployee of the taxpayer for the 91-day period imme-
diately preceding the period for which any differen-
tial wage payment is made. 
‘‘(3) ELIGIBLE SMALL BUSINESS EMPLOYER.— 
‘‘(A) IN
GENERAL.—The term ‘eligible 
small business employer’ means, with respect to 
any taxable year, any employer which— 
‘‘(i) employed an average of less than 
50 employees on business days during such 
taxable year, and 
‘‘(ii) under a written plan of the em-
ployer, provides eligible differential wage 
payments to every qualified employee of 
the employer. 
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of subparagraph (A), all persons treated 
as a single employer under subsection (b), (c), 
(m), or (o) of section 414 shall be treated as a 
single employer. 
‘‘(c) COORDINATION WITH OTHER CREDITS.—The 
amount of credit otherwise allowable under this chapter 
with respect to compensation paid to any employee shall 
be reduced by the credit determined under this section 
with respect to such employee.
‘‘(d) DISALLOWANCE
FOR FAILURE TO COMPLY 
WITH EMPLOYMENT
OR REEMPLOYMENT RIGHTS
OF 
MEMBERS
OF
THE RESERVE COMPONENTS
OF
THE 
ARMED FORCES OF THE UNITED STATES.—No credit 
shall be allowed under subsection (a) to a taxpayer for— 
‘‘(1) any taxable year, beginning after the date 
of the enactment of this section, in which the tax-
payer is under a final order, judgment, or other 
process issued or required by a district court of the 
United States under section 4323 of title 38 of the 
United States Code with respect to a violation of 
chapter 43 of such title, and 
‘‘(2) the 2 succeeding taxable years. 
‘‘(e) CERTAIN RULES TO APPLY.—For purposes of 
this section, rules similar to the rules of subsections (c), 
(d), and (e) of section 52 shall apply. 
‘‘(f) TERMINATION.—This section shall not apply to 
any payments made after December 31, 2009.’’. 
(b) CREDIT TREATED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (relating to general busi-
ness credit) is amended by striking ‘‘plus’’ at the end of 
paragraph (31), by striking the period at the end of para-
graph (32) and inserting ‘‘, plus’’, and by adding at the 
end of following new paragraph:
‘‘(33) the differential wage payment credit de-
termined under section 45P(a).’’. 
(c) NO DEDUCTION
FOR COMPENSATION TAKEN 
INTO ACCOUNT FOR CREDIT.—Section 280C(a) (relating 
to rule for employment credits) is amended by inserting 
‘‘45P(a),’’ after ‘‘45A(a),’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new item: 
‘‘Sec. 45P. Employer wage credit for employees who are active duty members 
of the uniformed services.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid after the date of 
the enactment of this Act. 
SEC. 112. STATE PAYMENTS TO SERVICE MEMBERS TREAT-
ED AS QUALIFIED MILITARY BENEFITS. 
(a) IN GENERAL.—Section 134(b) (defining qualified 
military benefit) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) CERTAIN
STATE
PAYMENTS.—The term 
‘qualified military benefit’ includes any bonus pay-
ment by a State or political subdivision thereof to 
any member or former member of the uniformed 
services of the United States or any dependent of 
such member only by reason of such member’s serv-
ice in an combat zone (as defined in section
112(c)(2), determined without regard to the par-
enthetical).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments made before, on, or 
after the date of the enactment of this Act. 
SEC. 113. PERMANENT EXCLUSION OF GAIN FROM SALE OF 
A PRINCIPAL RESIDENCE BY CERTAIN EM-
PLOYEES OF THE INTELLIGENCE COMMU-
NITY. 
(a) IN GENERAL.—Paragraph (9) of section 121(d) 
is amended by striking subparagraph (E). 
(b) DUTY
STATION
MAY
BE
INSIDE
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 the date 
of the enactment of this Act. 
SEC. 114. SPECIAL DISPOSITION RULES FOR UNUSED BENE-
FITS IN HEALTH FLEXIBLE SPENDING AR-
RANGEMENTS OF INDIVIDUALS CALLED TO 
ACTIVE DUTY. 
(a) IN GENERAL.—Section 125 (relating to cafeteria 
plans) is amended by redesignating subsections (h) and 
(i) as subsection (i) and (j), respectively, and by inserting 
after subsection (g) the following new subsection:
‘‘(h) SPECIAL RULE
FOR UNUSED BENEFITS
IN 
HEALTH FLEXIBLE SPENDING ARRANGEMENTS OF INDI-
VIDUALS CALLED TO ACTIVE DUTY.— 
‘‘(1) IN GENERAL.—For purposes of this title, 
a plan or other arrangement shall not fail to be 
treated as a cafeteria plan or health flexible spend-
ing arrangement merely because such arrangement 
provides for qualified reservist distributions. 
‘‘(2) QUALIFIED
RESERVIST
DISTRIBUTION.— 
For purposes of this subsection, the term ‘qualified 
reservist distribution’ means, any distribution to an 
individual of all or a portion of the balance in the 
employee’s account under such arrangement if— 
‘‘(A) such individual was (by reason of 
being a member of a reserve component (as de-
fined in section 101 of title 37, United States 
Code)) ordered or called to active duty for a pe-
riod in excess of 179 days or for an indefinite 
period, and 
‘‘(B) such distribution is made during the 
period beginning on the date of such order or 
call and ending on the last date that reimburse-
ments could otherwise be made under such ar-
rangement for the plan year which includes the 
date of such order or call.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions made after the 
date of the enactment of this Act. 
SEC. 115. TECHNICAL CORRECTION RELATED TO EXCLU-
SION OF CERTAIN PROPERTY TAX REBATES 
AND OTHER BENEFITS PROVIDED TO VOLUN-
TEER FIREFIGHTERS AND EMERGENCY MED-
ICAL RESPONDERS. 
(a) SOCIAL SECURITY TAXES.— 
(1) Section 3121(a) (relating to definition of 
wages) is amended by striking ‘‘or’’ at the end of 
paragraph (21), by striking the period at the end of 
paragraph (22) and inserting ‘‘; or’’, and by insert-
ing after paragraph (22) the following new para-
graph: 
‘‘(23) any benefit or payment which is exclud-
able from the gross income of the employee under 
section 139B(b).’’. 
(2) Section 209(a) of the Social Security Act is 
amended by striking ‘‘or’’ at the end of paragraph 
(18), by striking the period at the end of paragraph 
(19) and inserting ‘‘; or’’, and by inserting after 
paragraph (19) the following new paragraph: 
‘‘(20) Any benefit or payment which is exclud-
able from the gross income of the employee under
section 139B(b) of the Internal Revenue Code of 
1986).’’. 
(b) UNEMPLOYMENT TAXES.—Section 3306(b) (re-
lating to definition of wages) is amended by striking ‘‘or’’ 
at the end of paragraph (18), by striking the period at 
the end of paragraph (19) and inserting ‘‘; or’’, and by 
inserting after paragraph (19) the following new para-
graph: 
‘‘(20) any benefit or payment which is exclud-
able from the gross income of the employee under 
section 139B(b).’’. 
(c) WAGE WITHHOLDING.—Section 3401(a) (defin-
ing wages) is amended by striking ‘‘or’’ at the end of para-
graph (21), by striking the period at the end of paragraph 
(22) and inserting ‘‘; or’’, and by inserting after para-
graph (22) the following new paragraph: 
‘‘(23) for any benefit or payment which is ex-
cludable from the gross income of the employee 
under section 139B(b).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in section 5 
of the Mortgage Forgiveness Debt Relief Act of 2007.
TITLE 
II—IMPROVEMENTS 
IN 
SUPPLEMENTAL 
SECURITY 
INCOME 
SEC. 201. TREATMENT OF UNIFORMED SERVICE CASH RE-
MUNERATION AS EARNED INCOME. 
(a) IN GENERAL.—Section 1612(a)(1)(A) of the So-
cial Security Act (42 U.S.C. 1382a(a)(1)(A)) is amended 
by inserting ‘‘(and, in the case of cash remuneration paid 
for service as a member of a uniformed service (other than 
payments described in paragraph (2)(H) of this subsection 
or subsection (b)(20)), without regard to the limitations 
contained in section 209(d))’’ before the semicolon. 
(b) CERTAIN HOUSING PAYMENTS TREATED AS IN- 
KIND SUPPORT AND MAINTENANCE.—Section 1612(a)(2) 
of such Act (42 U.S.C. 1382a(a)(2)) is amended— 
(1) by striking ‘‘and’’ at the end of subpara-
graph (F); 
(2) by striking the period at the end of sub-
paragraph (G) and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(H) payments to or on behalf of a mem-
ber of a uniformed service for housing of the 
member (and his or her dependents, if any) on 
a facility of a uniformed service, including pay-
ments provided under section 403 of title 37,
United States Code, for housing that is ac-
quired or constructed under subchapter IV of 
chapter 169 of title 10 of such Code, or any re-
lated provision of law, and any such payments 
shall be treated as support and maintenance in 
kind subject to subparagraph (A) of this para-
graph.’’. 
SEC. 202. STATE ANNUITIES FOR CERTAIN VETERANS TO 
BE DISREGARDED IN DETERMINING SUPPLE-
MENTAL SECURITY INCOME BENEFITS. 
(a) INCOME DISREGARD.—Section 1612(b) of the So-
cial Security Act (42 U.S.C. 1382a(b)) is amended— 
(1) by striking ‘‘and’’ at the end of paragraph 
(22); 
(2) by striking the period at the end of para-
graph (23) and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(24) any annuity paid by a State to the indi-
vidual (or such spouse) on the basis of the individ-
ual’s being a veteran (as defined in section 101 of 
title 38, United States Code), and blind, disabled, or 
aged.’’. 
(b) RESOURCE DISREGARD.—Section 1613(a) of 
such Act (42 U.S.C. 1382b(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph 
(14); 
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; and’’; and 
(3) by inserting after paragraph (15) the fol-
lowing: 
‘‘(16) for the month of receipt and every month 
thereafter, any annuity paid by a State to the indi-
vidual (or such spouse) on the basis of the individ-
ual’s being a veteran (as defined in section 101 of 
title 38, United States Code), and blind, disabled, or 
aged.’’. 
SEC. 203. EXCLUSION OF AMERICORPS BENEFITS FOR PUR-
POSES OF DETERMINING SUPPLEMENTAL SE-
CURITY INCOME ELIGIBILITY AND BENEFIT 
AMOUNTS. 
Section 1612(b) of the Social Security Act (42 U.S.C. 
1382a(b)), as amended by section 202(a) of this Act, is 
amended— 
(1) in paragraph (23), by striking ‘‘and’’ at the 
end; 
(2) in paragraph (24), by striking the period 
and inserting ‘‘; and’’; and 
(3) by adding at the end the following:
‘‘(25) any benefit (whether cash or in-kind) 
conferred upon (or paid on behalf of) a
participant 
in an AmeriCorps position approved by the Corpora-
tion for
National and Community Service under 
section 123 of the National and Community Service 
Act of 1990 (42 U.S.C. 12573).’’. 
SEC. 204. EFFECTIVE DATE. 
The amendments made by this title shall be effective 
with respect to benefits payable for months beginning 
after 60 days after the date of the enactment of this Act. 
TITLE III—REVENUE 
PROVISIONS 
SEC. 301. REVISION OF TAX RULES ON EXPATRIATION. 
(a) IN GENERAL.—Subpart A of part II of sub-
chapter N of chapter 1 is amended by inserting after sec-
tion 877 the following new section: 
‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION. 
‘‘(a) GENERAL RULES.—For purposes of this sub-
title— 
‘‘(1) MARK TO MARKET.—All property of a cov-
ered expatriate shall be treated as sold on the day 
before 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 taken into account under the preceding sen-
tence, determined 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 adjust-
ment determined under section 1(f)(3) 
for the calendar year in which the tax-
able year begins, by substituting ‘cal-
endar year 2007’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(ii) ROUNDING.—If any amount as 
adjusted under clause (i) is not a multiple 
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 
application of this subsection with respect to any 
property treated as sold by reason of subsection (a), 
the time for payment of the additional tax attrib-
utable 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 prop-
erty disposed of in a transaction in which gain is not 
recognized in whole or in part, until such other date 
as the Secretary may prescribe). 
‘‘(2) DETERMINATION OF TAX WITH RESPECT 
TO PROPERTY.—For purposes of paragraph (1), the
additional tax attributable to any property is an 
amount which bears the same ratio to the additional 
tax imposed by this chapter for the taxable year 
solely by reason of subsection (a) as the gain taken 
into account under subsection (a) with respect to 
such property bears to the total gain taken into ac-
count under subsection (a) with respect to all prop-
erty to which subsection (a) applies. 
‘‘(3) TERMINATION OF EXTENSION.—The due 
date for payment of tax may not be extended under 
this subsection later than the due date for the re-
turn of tax imposed by this chapter for the taxable 
year which includes the date of death of the expa-
triate (or, if earlier, the time that the security pro-
vided with respect to the property fails to meet the 
requirements of paragraph (4), unless the taxpayer 
corrects such failure 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 re-
quirements 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. 
‘‘(5) WAIVER OF CERTAIN RIGHTS.—No elec-
tion may be made under paragraph (1) unless the 
taxpayer 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 de-
fined 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.— 
‘‘(A) IN GENERAL.—In the case of any eli-
gible 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 pay-
ment’ means with respect to a covered expa-
triate any payment to the extent it would be in-
cludible in the gross income of the covered ex-
patriate if such expatriate continued to be sub-
ject to tax as a citizen or resident of the United 
States. A deferred compensation item shall be
taken into account as a payment under the pre-
ceding sentence when such item would be so in-
cludible. 
‘‘(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-
vidual on the day before the expatriation date 
as a distribution under the plan, and 
‘‘(ii) with respect to any deferred com-
pensation item referred to in paragraph (4)(D), 
the rights of the covered expatriate to such item 
shall be treated as becoming transferable and 
not subject 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 reflect such treatment.
‘‘(3) 
ELIGIBLE
DEFERRED
COMPENSATION 
ITEMS.—For purposes of this subsection, the term 
‘eligible deferred compensation item’ means any de-
ferred 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 require-
ments as the Secretary may provide to en-
sure that the payor will meet the require-
ments of paragraph (1), and 
‘‘(B) the covered expatriate— 
‘‘(i) notifies the payor of his status as 
a covered expatriate, and 
‘‘(ii) makes an irrevocable waiver of 
any right to claim any reduction under any 
treaty with the United States in with-
holding on such item. 
‘‘(4) DEFERRED
COMPENSATION
ITEM.—For 
purposes of this subsection, the term ‘deferred com-
pensation item’ means— 
‘‘(A) any interest in a plan or arrangement 
described in section 219(g)(5),
‘‘(B) any interest in a foreign pension plan 
or similar retirement arrangement or program, 
‘‘(C) any item of deferred compensation, 
and 
‘‘(D) any property, or right to property, 
which the individual is entitled to receive in 
connection with the performance of services to 
the extent not previously taken into account 
under section 83 or in accordance with section 
83. 
‘‘(5) EXCEPTION.—Paragraphs (1) and (2) 
shall not apply to any deferred compensation item to 
the extent attributable to services performed outside 
the United States while the covered expatriate was 
not a citizen or resident of the United States. 
‘‘(6) SPECIAL RULES.— 
‘‘(A) 
APPLICATION
OF
WITHHOLDING 
RULES.—Rules similar to the rules of sub-
chapter B of chapter 3 shall apply for purposes 
of this subsection. 
‘‘(B) APPLICATION
OF
TAX.—Any item 
subject to the withholding tax imposed under 
paragraph (1) shall be subject to tax under sec-
tion 871.
‘‘(C) COORDINATION WITH OTHER WITH-
HOLDING REQUIREMENTS.—Any item subject to 
withholding under paragraph (1) shall not be 
subject to withholding under section 1441 or 
chapter 24. 
‘‘(e) TREATMENT OF SPECIFIED TAX DEFERRED AC-
COUNTS.— 
‘‘(1) ACCOUNT TREATED AS DISTRIBUTED.—In 
the case of any interest in a specified tax deferred 
account held by a covered expatriate on the day be-
fore the expatriation date— 
‘‘(A) the covered expatriate shall be treat-
ed as receiving a distribution of his entire inter-
est in such account on the day before the expa-
triation 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 ac-
count to reflect such treatment. 
‘‘(2) SPECIFIED
TAX
DEFERRED
ACCOUNT.— 
For purposes of paragraph (1), the term ‘specified 
tax deferred account’ means an individual retirement 
plan (as defined in section 7701(a)(37)) other than 
any arrangement described in subsection (k) or (p)
‘‘(3) NONGRANTOR
TRUST.—For purposes of 
this subsection, the term ‘nongrantor trust’ means 
the portion 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 pre-
ceding 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 sub-
section (d)(6) shall apply, and 
‘‘(B) the covered expatriate shall be treat-
ed as having waived any right to claim any re-
duction under any treaty with the United 
States in withholding on any distribution to 
which paragraph (1)(A) applies unless the cov-
ered expatriate agrees to such other treatment 
as the Secretary determines appropriate. 
‘‘(5) 
APPLICATION.—This 
subsection 
shall 
apply to a nongrantor trust only if the covered expa-
triate was a beneficiary of the trust on the day be-
fore 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 ex-
patriate’ 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 
‘‘(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-tax-
able year period ending with the tax-
able year during which the expatria-
tion 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
SUB-
JECT TO TAX AS CITIZENS OR RESIDENTS.—In 
the case of any covered expatriate who is sub-
ject to tax as a citizen or resident of the United 
States for any period beginning after the expa-
triation date, such individual shall not be treat-
ed as a covered expatriate during such period 
for purposes of subsections (d)(1) and (f) and 
section 2801. 
‘‘(2) 
EXPATRIATE.—The 
term 
‘expatriate’ 
means— 
‘‘(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 
resident of the United States (within the mean-
ing of section 7701(b)(6)). 
‘‘(3) EXPATRIATION
DATE.—The term ‘expa-
triation 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 
section 7701(b)(6)). 
‘‘(4) RELINQUISHMENT
OF
CITIZENSHIP.—A 
citizen 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 Immi-
gration 
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 
statement 
of 
voluntary 
relinquishment 
of 
United States nationality confirming the per-
formance of an act of expatriation specified in 
paragraph (1), (2), (3), or (4) of section 349(a) 
of the Immigration and Nationality Act (8 
U.S.C. 1481(a)(1)–(4)), 
‘‘(C) the date the United States Depart-
ment of State issues to the individual a certifi-
cate of loss of nationality, or
‘‘(D) the date a court of the United States 
cancels a naturalized citizen’s certificate of nat-
uralization. 
Subparagraph (A) or (B) shall not apply to any indi-
vidual 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.— 
‘‘(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