(II) did not include the require-
ment under paragraph (1)(A)(ii). 
SEC. 103. PAYMENTS TO STATES HAVING AGREEMENTS FOR 
THE PAYMENT OF EMERGENCY UNEMPLOY-
MENT COMPENSATION. 
(a) GENERAL RULE.—There shall be paid to each 
State that has entered into an agreement under this title 
an amount equal to 100 percent of the emergency unem-
ployment compensation paid to individuals by the State 
pursuant to such agreement. 
(b) TREATMENT
OF REIMBURSABLE COMPENSA-
TION.—No payment shall be made to any State under this 
section in respect of any compensation to the extent the 
State is entitled to reimbursement in respect of such com-
pensation under the provisions of any Federal law other 
than this title or chapter 85 of title 5, United States Code. 
A State shall not be entitled to any reimbursement under 
such chapter 85 in respect of any compensation to the ex-
tent the State is entitled to reimbursement under this title 
in respect of such compensation. 
(c) DETERMINATION OF AMOUNT.—Sums payable to 
any State by reason of such State having an agreement 
under this title shall be payable, either in advance or by 
way of reimbursement (as may be determined by the Sec-
retary), in such amounts as the Secretary estimates the 
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State will be entitled to receive under this title for each 
calendar month, reduced or increased, as the case may be, 
by any amount by which the Secretary finds that the Sec-
retary’s estimates for any prior calendar month were 
greater or less than the amounts which should have been 
paid to the State. Such estimates may be made on the 
basis of such statistical, sampling, or other method as may 
be agreed upon by the Secretary and the State agency of 
the State involved. 
SEC. 104. FINANCING PROVISIONS. 
(a) IN GENERAL.—Funds in the extended unemploy-
ment compensation account (as established by section 
905(a) of the Social Security Act (42 U.S.C. 1105(a)) of 
the Unemployment Trust Fund (as established by section 
904(a) of such Act (42 U.S.C. 1104(a)) shall be used for 
the making of payments to States having agreements en-
tered into under this title. 
(b) CERTIFICATION.—The Secretary shall from time 
to time certify to the Secretary of the Treasury for pay-
ment to each State the sums payable to such State under 
this title. The Secretary of the Treasury, prior to audit 
or settlement by the Government Accountability Office, 
shall make payments to the State in accordance with such 
certification, by transfers from the extended unemploy-
ment compensation account (as so established) to the ac-
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count of such State in the Unemployment Trust Fund (as 
so established). 
(c) ASSISTANCE
TO STATES.—There are appro-
priated out of the employment security administration ac-
count (as established by section 901(a) of the Social Secu-
rity Act (42 U.S.C. 1101(a)) of the Unemployment Trust 
Fund, without fiscal year limitation, such funds as may 
be necessary for purposes of assisting States (as provided 
in title III of the Social Security Act (42 U.S.C. 501 et 
seq.)) in meeting the costs of administration of agree-
ments under this title. 
(d) APPROPRIATIONS
FOR CERTAIN PAYMENTS.— 
There are appropriated from the general fund of the 
Treasury, without fiscal year limitation, to the extended 
unemployment compensation account (as so established) 
of the Unemployment Trust Fund (as so established) such 
sums as the Secretary estimates to be necessary to make 
the payments under this section in respect of— 
(1) compensation payable under chapter 85 of 
title 5, United States Code; and 
(2) compensation payable on the basis of serv-
ices to which section 3309(a)(1) of the Internal Rev-
enue Code of 1986 applies. 
Amounts appropriated pursuant to the preceding sentence 
shall not be required to be repaid. 
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SEC. 105. FRAUD AND OVERPAYMENTS. 
(a) IN GENERAL.—If an individual knowingly has 
made, or caused to be made by another, a false statement 
or representation of a material fact, or knowingly has 
failed, or caused another to fail, to disclose a material fact, 
and as a result of such false statement or representation 
or of such nondisclosure such individual has received an 
amount of emergency unemployment compensation under 
this title to which he was not entitled, such individual— 
(1) shall be ineligible for further emergency un-
employment compensation under this title in accord-
ance with the provisions of the applicable State un-
employment compensation law relating to fraud in 
connection with a claim for unemployment com-
pensation; and 
(2) shall be subject to prosecution under section 
1001 of title 18, United States Code. 
(b) REPAYMENT.—In the case of individuals who 
have received amounts of emergency unemployment com-
pensation under this title to which they were not entitled, 
the State shall require such individuals to repay the 
amounts of such emergency unemployment compensation 
to the State agency, except that the State agency may 
waive such repayment if it determines that— 
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(1) the payment of such emergency unemploy-
ment compensation was without fault on the part of 
any such individual; and 
(2) such repayment would be contrary to equity 
and good conscience. 
(c) RECOVERY BY STATE AGENCY.— 
(1) IN GENERAL.—The State agency may re-
cover the amount to be repaid, or any part thereof, 
by deductions from any emergency unemployment 
compensation payable to such individual under this 
title or from any unemployment compensation pay-
able to such individual under any State or Federal 
unemployment compensation law administered by 
the State agency or under any other Federal law ad-
ministered by the State agency which provides for 
the payment of any assistance or allowance with re-
spect to any week of unemployment, during the 3- 
year period after the date such individuals received 
the payment of the emergency unemployment com-
pensation to which they were not entitled, except 
that no single deduction may exceed 50 percent of 
the weekly benefit amount from which such deduc-
tion is made. 
(2) OPPORTUNITY FOR HEARING.—No repay-
ment shall be required, and no deduction shall be 
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made, until a determination has been made, notice 
thereof and an opportunity for a fair hearing has 
been given to the individual, and the determination 
has become final. 
(d) REVIEW.—Any determination by a State agency 
under this section shall be subject to review in the same 
manner and to the same extent as determinations under 
the State unemployment compensation law, and only in 
that manner and to that extent. 
SEC. 106. DEFINITIONS. 
In this title, the terms ‘‘compensation’’, ‘‘regular 
compensation’’, ‘‘extended compensation’’, ‘‘additional 
compensation’’, ‘‘benefit year’’, ‘‘base period’’, ‘‘State’’, 
‘‘State agency’’, ‘‘State law’’, and ‘‘week’’ have the respec-
tive meanings given such terms under section 205 of the 
Federal-State Extended Unemployment Compensation Act 
of 1970 (26 U.S.C. 3304 note). 
SEC. 107. APPLICABILITY. 
(a) IN GENERAL.—Except as provided in subsection 
(b), an agreement entered into under this title shall apply 
to weeks of unemployment— 
(1) beginning after the date on which such 
agreement is entered into; and 
(2) ending on or before February 1, 2009. 
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(b) TRANSITION FOR AMOUNT REMAINING IN AC-
COUNT.— 
(1) IN GENERAL.—Subject to paragraphs (2) 
and (3), in the case of an individual who has 
amounts remaining in an account established under 
section 102 as of the last day of the last week (as 
determined in accordance with the applicable State 
law) ending on or before February 1, 2009, emer-
gency unemployment compensation shall continue to 
be payable to such individual from such amounts for 
any week beginning after such last day for which the 
individual meets the eligibility requirements of this 
title. 
(2) LIMIT ON AUGMENTATION.—If the account 
of an individual is exhausted after the last day of 
such last week (as so determined), then section 
102(c) shall not apply and such account shall not be 
augmented under such section, regardless of whether 
such individual’s State is in an extended benefit pe-
riod (as determined under paragraph (2) of such 
section). 
(3) LIMIT ON COMPENSATION.—No compensa-
tion shall be payable by reason of paragraph (1) for 
any week beginning after April 30, 2009. 
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TITLE II—TAX PROVISIONS 
Subtitle A—Penalty-Free IRA 
Distributions 
SEC. 201. PENALTY-FREE DISTRIBUTIONS FROM IRAS TO 
AVOID FORECLOSURE ON PRINCIPAL RESI-
DENCE. 
(a) IN GENERAL.—Paragraph (2) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to subsection 
not to apply to certain distributions) is amended by adding 
at the end the following new subparagraph: 
‘‘(H) QUALIFIED FORECLOSURE DISTRIBU-
TIONS.—Distributions from an individual retire-
ment plan to an individual which are qualified 
foreclosure distributions (as defined in para-
graph (11)). Distributions shall not be taken 
into account under the preceding sentence if 
such distributions are described in subpara-
graph (A), (C), (D), (E), (F), or (G) or to the 
extent paragraph (1) does not apply to such 
distributions by reason of subparagraph (B).’’. 
(b) QUALIFIED FORECLOSURE DISTRIBUTIONS.— 
Subsection (t) of section 72 of such Code (relating to 10- 
percent additional tax on early distributions from qualified 
retirement plans) is amended by adding at the end the 
following new paragraph: 
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‘‘(11) QUALIFIED
FORECLOSURE
DISTRIBU-
TIONS.—For purposes of paragraph (2)(H)— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
foreclosure distribution’ means any payment or 
distribution received by an individual after the 
individual has received a notice of foreclosure 
relating to any mortgage on the principal resi-
dence (within the meaning of section 121) of 
the individual. 
‘‘(B) LIMITATION.—The aggregate pay-
ments or distributions which may be treated as 
qualified foreclosure distributions for a taxable 
year shall not exceed the amount paid on out-
standing indebtedness secured by the principal 
residence of the taxpayer during the taxable 
year or the preceeding taxable year.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments or distributions re-
ceived after December 31, 2006. 
SEC. 202. PENALTY-FREE DISTRIBUTIONS FROM IRAS FOR 
EXPENSES DURING EXTENDED UNEMPLOY-
MENT. 
(a) IN GENERAL.—Subclause (III) of section 72(t)(2) 
of the Internal Revenue Code of 1986 is amended to read 
as follows: 
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‘‘(III) to the extent such distribu-
tions do not exceed the expenses dur-
ing the taxable year with respect to 
the individual and the individual’s 
spouse and dependents (as defined in 
section 152, determined without re-
gard to subsections (b)(1), (b)(2), and 
(d)(1)(B) thereof).’’. 
(b) REPAYMENT.—Subparagraph (D) of section 72(t) 
of such Code is amended by adding at the end the fol-
lowing new clause: 
‘‘(iv) AMOUNT DISTRIBUTED MAY BE 
REPAID.— 
‘‘(I) IN
GENERAL.—Any indi-
vidual who receives a distribution 
under this subparagraph, at any time 
during the 5-year period beginning on 
the day after the date on which such 
distribution was received, make one or 
more contributions in an aggregate 
amount not to exceed the amount of 
such distribution to an individual re-
tirement plan of which such individual 
is a beneficiary. 
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‘‘(II) TREATMENT
OF
REPAY-
MENTS
FOR
DISTRIBUTIONS
FROM 
IRAS.—For purposes of this title, if a 
contribution is made pursuant to sub-
clause (I) with respect to a distribu-
tion under clause (i), then, to the ex-
tent of the amount of the contribu-
tion, the distribution shall be treated 
as a distribution described in section 
408(d)(3) and as having been trans-
ferred to such plan in a direct trustee 
to trustee transfer within 60 days of 
the distribution.’’. 
(c) CLERICAL AMENDMENT.—The heading for sub-
paragraph (D) of section 72(t)(2) of such Code is amend-
ed by striking ‘‘FOR HEALTH INSURANCE PREMIUMS’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions received in taxable 
years beginning after December 31, 2006. 
Subtitle B—Homeland Investment 
SEC. 211. ALLOWANCE OF DEDUCTION FOR DIVIDENDS RE-
CEIVED FROM CONTROLLED FOREIGN COR-
PORATIONS FOR ADDITIONAL YEAR. 
(a) IN GENERAL.—Section 965 of the Internal Rev-
enue Code of 1986 (relating to temporary dividends re-
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ceived deduction) is amended by adding at the end the 
following new subsection: 
‘‘(g) ALLOWANCE FOR DEDUCTION FOR 2008.— 
‘‘(1) IN GENERAL.—In the case of the first tax-
able year beginning in 2008, subsection (f)(1) shall 
be applied by substituting ‘January 1, 2008,’ for 
‘the date of the enactment of this section’. 
‘‘(2) SPECIAL RULES.—For purposes of para-
graph (1)— 
‘‘(A) EXTRAORDINARY
DIVIDENDS.—Sub-
section (b)(2) shall be applied by substituting 
‘June 30, 2007’ for ‘June 30, 2003’. 
‘‘(B) DETERMINATIONS RELATING TO RE-
LATED
PARTY
INDEBTEDNESS.—Subsection 
(b)(3)(B) shall be applied by substituting ‘Octo-
ber 3, 2008’ for ‘October 3, 2004’. 
‘‘(C) 
APPLICABLE
FINANCIAL
STATE-
MENT.—Subsection (c)(1) shall be applied by 
substituting ‘June 30, 2007’ for ‘June 30, 
2003’ each place it occurs. 
‘‘(D) 
DETERMINATIONS
RELATING
TO 
BASE PERIOD.—Subsection (c)(2) shall be ap-
plied by substituting ‘June 30, 2007’ for ‘June 
30, 2003’.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years ending on or 
after January 1, 2008. 
Subtitle C—Suspension of Highway 
Fuels 
Taxes 
When 
Summer 
Blending in Effect 
SEC. 221. SUSPENSION OF HIGHWAY FUELS TAXES WHEN 
SUMMER BLENDING IN EFFECT. 
(a) SUSPENSION OF HIGHWAY FUEL TAXES ON GAS-
OLINE, DIESEL FUEL, AND KEROSENE.— 
(1) IN GENERAL.—Section 4081 of the Internal 
Revenue Code of 1986 (relating to imposition of tax 
on gasoline, diesel fuel, and kerosene) is amended by 
adding at the end the following new subsection: 
‘‘(f) SUSPENSION OF TAXES ON GASOLINE, DIESEL 
FUEL, AND KEROSENE.— 
‘‘(1) IN GENERAL.—During the suspension pe-
riod, each rate of tax referred to in paragraph (2) 
shall be reduced to zero cents per gallon. 
‘‘(2) RATES OF TAX.—The rates of tax referred 
to in this paragraph are the rates of tax otherwise 
applicable under— 
‘‘(A) clauses (i) and (iii) of subsection 
(a)(2)(A) (relating to gasoline, diesel fuel, and 
kerosene), determined after application of sub-
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section (a)(2)(B) and without regard to sub-
section (a)(2)(C), and 
‘‘(B) paragraph (1) of section 4041(a) (re-
lating to diesel fuel and kerosene) with respect 
to fuel sold for use or used in a diesel-powered 
highway vehicle. 
‘‘(3) SUSPENSION
PERIOD.—For purposes of 
this subsection, the term ‘suspension period’ means 
the period in 2008 beginning on the date specified 
under the section 80.27 of title 40, Code of Federal 
Regulations, in May and ending on the date speci-
fied in September under such section. 
‘‘(4) MAINTENANCE OF TRUST FUND DEPOS-
ITS.—In determining the amounts to be appro-
priated to the Highway Trust Fund under section 
9503 and to the Leaking Underground Storage 
Tank Trust Fund under 9508, an amount equal to 
the reduction in revenues to the Treasury by reason 
of this subsection shall be treated as taxes received 
in the Treasury under this section or section 4041.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall take effect on the date of the 
enactment of this Act. 
(b) FLOOR STOCK REFUNDS.— 
(1) IN GENERAL.—If— 
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(A) before the tax suspension date, tax has 
been imposed under section 4081 of the Inter-
nal Revenue Code of 1986 on any highway 
motor fuel, and 
(B) on such date such fuel is held by a 
dealer and has not been used and is intended 
for sale, 
there shall be credited or refunded (without interest) 
to the person who paid such tax (hereafter in this 
subsection referred to as the ‘‘taxpayer’’) an amount 
equal to the excess of the tax paid by the taxpayer 
over the tax which would be imposed on such fuel 
had the taxable event occurred on such date. 
(2) TIME FOR FILING CLAIMS.—No credit or re-
fund shall be allowed or made under this subsection 
unless— 
(A) claim therefor is filed with the Sec-
retary of the Treasury before the date which is 
6 months after the tax suspension date based 
on a request submitted to the taxpayer before 
the date which is 3 months after the tax sus-
pension date by the dealer who held the high-
way motor fuel on such date, and 
(B) the taxpayer has repaid or agreed to 
repay the amount so claimed to such dealer or 
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has obtained the written consent of such dealer 
to the allowance of the credit or the making of 
the refund. 
(3) EXCEPTION
FOR
FUEL
HELD
IN
RETAIL 
STOCKS.—No credit or refund shall be allowed under 
this subsection with respect to any highway motor 
fuel in retail stocks held at the place where intended 
to be sold at retail. 
(4) DEFINITIONS.—For purposes of this sub-
section— 
(A) TAX
SUSPENSION
DATE.—The term 
‘‘tax suspension date’’ means the first day of 
the suspension period in effect under section 
4081(f) of the Internal Revenue Code of 1986 
(as added by subsection (a) of this section). 
(B) HIGHWAY
MOTOR
FUEL.—The term 
‘‘highway motor fuel’’ has the meaning given 
such term for purposes of subsection (c). 
(C) OTHER TERMS.—The terms ‘‘dealer’’ 
and ‘‘held by a dealer’’ have the respective 
meanings given to such terms by section 6412 
of such Code. 
(5) CERTAIN RULES TO APPLY.—Rules similar 
to the rules of subsections (b) and (c) of section 
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6412 of such Code shall apply for purposes of this 
subsection. 
(c) FLOOR STOCKS TAX.— 
(1) IMPOSITION OF TAX.—In the case of any 
highway motor fuel which is held on the tax restora-
tion date by any person, there is hereby imposed a 
floor stocks tax equal to the excess of the tax which 
would be imposed on such fuel had the taxable event 
occurred on such date over the tax (if any) pre-
viously paid (and not credited or refunded) on such 
fuel. 
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.— 
(A) LIABILITY
FOR
TAX.—The person 
holding highway motor fuel on the tax restora-
tion date to which the tax imposed by para-
graph (1) applies shall be liable for such tax. 
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such 
manner as the Secretary shall prescribe. 
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore the 45th day after the tax restoration date. 
(3) DEFINITIONS.—For purposes of this sub-
section— 
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(A) TAX RESTORATION DATE.—The term 
‘‘tax restoration date’’ means the first day after 
the suspension period (as defined in section 
4081(f) of the Internal Revenue Code of 1986). 
(B) HIGHWAY
MOTOR
FUEL.—The term 
‘‘highway motor fuel’’ means any liquid on 
which tax would have been imposed under sec-
tion 4081 of the Internal Revenue Code of 1986 
during the suspension period in effect under 
section 4081(f) of such Code but for the 
amendments made by subsection (a). 
(C) HELD
BY
A
PERSON.—A highway 
motor fuel shall be considered as held by a per-
son if title thereto has passed to such person 
(whether or not delivery to the person has been 
made). 
(D) SECRETARY.—The term ‘‘Secretary’’ 
means the Secretary of the Treasury or the 
Secretary’s delegate. 
(4) EXCEPTION FOR EXEMPT USES.—The tax 
imposed by paragraph (1) shall not apply to any 
highway motor fuel held by any person exclusively 
for any use to the extent a credit or refund of the 
tax is allowable for such use. 
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(5) EXCEPTION
FOR
CERTAIN
AMOUNTS
OF 
FUEL.— 
(A) IN
GENERAL.—No tax shall be im-
posed by paragraph (1) on any highway motor 
fuel held on the tax restoration date by any per-
son if the aggregate amount of such highway 
motor fuel held by such person on such date 
does not exceed 2,000 gallons. The preceding 
sentence shall apply only if such person submits 
to the Secretary (at the time and in the manner 
required by the Secretary) such information as 
the Secretary shall require for purposes of this 
subparagraph. 
(B) EXEMPT FUEL.—For purposes of sub-
paragraph (A), there shall not be taken into ac-
count any highway motor fuel held by any per-
son which is exempt from the tax imposed by 
paragraph (1) by reason of paragraph (4). 
(C) CONTROLLED GROUPS.—For purposes 
of this subsection— 
(i) CORPORATIONS.— 
(I) IN
GENERAL.—All persons 
treated as a controlled group shall be 
treated as 1 person. 
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(II) CONTROLLED
GROUP.—The 
term ‘‘controlled group’’ has the 
meaning given to such term by sub-
section (a) of section 1563 of such 
Code; except that for such purposes 
the phrase ‘‘more than 50 percent’’ 
shall be substituted for the phrase ‘‘at 
least 80 percent’’ each place it ap-
pears in such subsection. 
(ii) 
NONINCORPORATED
PERSONS 
UNDER COMMON CONTROL.—Under regula-
tions prescribed by the Secretary, prin-
ciples similar to the principles of subpara-
graph (A) shall apply to a group of per-
sons under common control if 1 or more of 
such persons is not a corporation. 
(6) OTHER LAWS APPLICABLE.—All provisions 
of law, including penalties, applicable with respect to 
the taxes imposed by section 4081 of such Code 
shall, insofar as applicable and not inconsistent with 
the provisions of this subsection, apply with respect 
to the floor stock taxes imposed by paragraph (1) to 
the same extent as if such taxes were imposed by 
such section. 
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Subtitle D—Indexing for Capital 
Gains 
SEC. 231. INDEXING OF CERTAIN ASSETS FOR PURPOSES 
OF DETERMINING GAIN OR LOSS. 
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
basis rules of general application) is amended by redesig-
nating section 1023 as section 1024 and by inserting after 
section 1022 the following new section: 
‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 
OF DETERMINING GAIN OR LOSS. 
‘‘(a) GENERAL RULE.— 
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining 
gain or loss on the sale or other disposition by a tax-
payer (other than a corporation) of an indexed asset 
which has been held for more than 3 years, the in-
dexed basis of the asset shall be substituted for its 
adjusted basis. 
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.— 
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the 
application of paragraph (1) to the taxpayer or any 
other person. 
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‘‘(3) WRITTEN
DOCUMENTATION
REQUIRE-
MENT.—Paragraph (1) shall apply only with respect 
to indexed assets for which the taxpayer has written 
documentation of the original purchase price paid or 
incurred by the taxpayer to acquire such asset. 
‘‘(b) INDEXED ASSET.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means— 
‘‘(A) common stock in a C corporation 
(other than a foreign corporation), or 
‘‘(B) tangible property, 
which is a capital asset or property used in the trade 
or business (as defined in section 1231(b)). 
‘‘(2) STOCK
IN
CERTAIN
FOREIGN
CORPORA-
TIONS INCLUDED.—For purposes of this section— 
‘‘(A) IN
GENERAL.—The term ‘indexed 
asset’ includes common stock in a foreign cor-
poration which is regularly traded on an estab-
lished securities market. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to— 
‘‘(i) stock of a foreign investment 
company, 
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‘‘(ii) stock in a passive foreign invest-
ment company (as defined in section 
1296), 
‘‘(iii) stock in a foreign corporation 
held by a United States person who meets 
the requirements of section 1248(a)(2), 
and 
‘‘(iv) stock in a foreign personal hold-
ing company. 
‘‘(C) TREATMENT OF AMERICAN DEPOSI-
TORY RECEIPTS.—An American depository re-
ceipt for common stock in a foreign corporation 
shall be treated as common stock in such cor-
poration. 
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion— 
‘‘(1) GENERAL RULE.—The indexed basis for 
any asset is— 
‘‘(A) the adjusted basis of the asset, in-
creased by 
‘‘(B) the applicable inflation adjustment. 
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 
The applicable inflation adjustment for any asset is 
an amount equal to— 
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‘‘(A) the adjusted basis of the asset, multi-
plied by 
‘‘(B) the percentage (if any) by which— 
‘‘(i) 
the 
gross 
domestic 
product 
deflator for the last calendar quarter end-
ing before the asset is disposed of, exceeds 
‘‘(ii) the gross domestic product 
deflator for the last calendar quarter end-
ing before the asset was acquired by the 
taxpayer. 
The percentage under subparagraph (B) shall be 
rounded to the nearest 1⁄10 of 1 percentage point. 
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 
The gross domestic product deflator for any cal-
endar quarter is the implicit price deflator for the 
gross domestic product for such quarter (as shown 
in the last revision thereof released by the Secretary 
of Commerce before the close of the following cal-
endar quarter). 
‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI-
MINISHED
RISK
OF
LOSS; TREATMENT
OF
SHORT 
SALES.— 
‘‘(1) IN GENERAL.—If the taxpayer (or a re-
lated person) enters into any transaction which sub-
stantially reduces the risk of loss from holding any 
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asset, such asset shall not be treated as an indexed 
asset for the period of such reduced risk. 
‘‘(2) SHORT SALES.— 
‘‘(A) IN GENERAL.—In the case of a short 
sale of an indexed asset with a short sale period 
in excess of 3 years, for purposes of this title, 
the amount realized shall be an amount equal 
to the amount realized (determined without re-
gard to this paragraph) increased by the appli-
cable inflation adjustment. In applying sub-
section (c)(2) for purposes of the preceding sen-
tence, the date on which the property is sold 
short shall be treated as the date of acquisition 
and the closing date for the sale shall be treat-
ed as the date of disposition. 
‘‘(B) SHORT SALE PERIOD.—For purposes 
of subparagraph (A), the short sale period be-
gins on the day that the property is sold and 
ends on the closing date for the sale. 
‘‘(e) TREATMENT
OF
REGULATED
INVESTMENT 
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 
‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, the adjustment 
under subsection (a) shall be allowed to any 
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qualified investment entity (including for pur-
poses of determining the earnings and profits of 
such entity). 
‘‘(B) EXCEPTION FOR CORPORATE SHARE-
HOLDERS.—Under regulations— 
‘‘(i) in the case of a distribution by a 
qualified investment entity (directly or in-
directly) to a corporation— 
‘‘(I) the determination of whether 
such distribution is a dividend shall be 
made without regard to this section, 
and 
‘‘(II) the amount treated as gain 
by reason of the receipt of any capital 
gain dividend shall be increased by the 
percentage by which the entity’s net 
capital gain for the taxable year (de-
termined without regard to this sec-
tion) exceeds the entity’s net capital 
gain for such year determined with re-
gard to this section, and 
‘‘(ii) there shall be other appropriate 
adjustments (including deemed distribu-
tions) so as to ensure that the benefits of 
this section are not allowed (directly or in-
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directly) to corporate shareholders of quali-
fied investment entities. 
For purposes of the preceding sentence, any 
amount includible in gross income under section 
852(b)(3)(D) shall be treated as a capital gain 
dividend and an S corporation shall not be 
treated as a corporation. 
‘‘(C) 
EXCEPTION
FOR
QUALIFICATION 
PURPOSES.—This section shall not apply for 
purposes of sections 851(b) and 856(c). 
‘‘(D) EXCEPTION FOR CERTAIN TAXES IM-
POSED AT ENTITY LEVEL.— 
‘‘(i) TAX ON FAILURE TO DISTRIBUTE 
ENTIRE GAIN.—If any amount is subject to 
tax under section 852(b)(3)(A) for any 
taxable year, the amount on which tax is 
imposed under such section shall be in-
creased by the percentage determined 
under subparagraph (B)(i)(II). A similar 
rule shall apply in the case of any amount 
subject to tax under paragraph (2) or (3) 
of section 857(b) to the extent attributable 
to the excess of the net capital gain over 
the deduction for dividends paid deter-
mined with reference to capital gain divi-
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dends only. The first sentence of this 
clause shall not apply to so much of the 
amount subject to tax under section 
852(b)(3)(A) as is designated by the com-
pany under section 852(b)(3)(D). 
‘‘(ii) OTHER
TAXES.—This section 
shall not apply for purposes of determining 
the amount of any tax imposed by para-
graph (4), (5), or (6) of section 857(b). 
‘‘(2) ADJUSTMENTS
TO
INTERESTS
HELD
IN 
ENTITY.— 
‘‘(A) REGULATED
INVESTMENT
COMPA-
NIES.—Stock in a regulated investment com-
pany (within the meaning of section 851) shall 
be an indexed asset for any calendar quarter in 
the same ratio as— 
‘‘(i) the average of the fair market 
values of the indexed assets held by such 
company at the close of each month during 
such quarter, bears to 
‘‘(ii) the average of the fair market 
values of all assets held by such company 
at the close of each such month. 
‘‘(B) 
REAL
ESTATE
INVESTMENT 
TRUSTS.—Stock in a real estate investment 
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trust (within the meaning of section 856) shall 
be an indexed asset for any calendar quarter in 
the same ratio as— 
‘‘(i) the fair market value of the in-
dexed assets held by such trust at the close 
of such quarter, bears to 
‘‘(ii) the fair market value of all as-
sets held by such trust at the close of such 
quarter. 
‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 
the ratio for any calendar quarter determined 
under subparagraph (A) or (B) would (but for 
this subparagraph) be 80 percent or more, such 
ratio for such quarter shall be 100 percent. 
‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 
the ratio for any calendar quarter determined 
under subparagraph (A) or (B) would (but for 
this subparagraph) be 20 percent or less, such 
ratio for such quarter shall be zero. 
‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 
purposes of this paragraph, a qualified invest-
ment entity which holds a partnership interest 
shall be treated (in lieu of holding a partnership 
interest) as holding its proportionate share of 
the assets held by the partnership. 
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‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS-
TRIBUTIONS.—Except as otherwise provided by the 
Secretary, a distribution with respect to stock in a 
qualified investment entity which is not a dividend 
and which results in a reduction in the adjusted 
basis of such stock shall be treated as allocable to 
stock acquired by the taxpayer in the order in which 
such stock was acquired. 
‘‘(4) QUALIFIED
INVESTMENT
ENTITY.—For 
purposes of this subsection, the term ‘qualified in-
vestment entity’ means— 
‘‘(A) a regulated investment company 
(within the meaning of section 851), and 
‘‘(B) a real estate investment trust (within 
the meaning of section 856). 
‘‘(f) OTHER PASS-THRU ENTITIES.— 
‘‘(1) PARTNERSHIPS.— 
‘‘(A) IN GENERAL.—In the case of a part-
nership, the adjustment made under subsection 
(a) at the partnership level shall be passed 
through to the partners. 
‘‘(B) SPECIAL RULE IN THE CASE OF SEC-
TION 754 ELECTIONS.—In the case of a transfer 
of an interest in a partnership with respect to 
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which the election provided in section 754 is in 
effect— 
‘‘(i) the adjustment under section 
743(b)(1) shall, with respect to the trans-
feror partner, be treated as a sale of the 
partnership assets for purposes of applying 
this section, and 
‘‘(ii) with respect to the transferee 
partner, the partnership’s holding period 
for purposes of this section in such assets 
shall be treated as beginning on the date 
of such adjustment. 
‘‘(2) S CORPORATIONS.—In the case of an S 
corporation, the adjustment made under subsection 
(a) at the corporate level shall be passed through to 
the shareholders. This section shall not apply for 
purposes of determining the amount of any tax im-
posed by section 1374 or 1375. 
‘‘(3) COMMON TRUST FUNDS.—In the case of a 
common trust fund, the adjustment made under sub-
section (a) at the trust level shall be passed through 
to the participants. 
‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN 
DETERMINING LOSS ON SALE OF INTEREST IN ENTI-
TY.—Notwithstanding the preceding provisions of 
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this subsection, for purposes of determining the 
amount of any loss on a sale or exchange of an in-
terest in a partnership, S corporation, or common 
trust fund, the adjustment made under subsection 
(a) shall not be taken into account in determining 
the adjusted basis of such interest. 
‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 
‘‘(1) IN GENERAL.—This section shall not apply 
to any sale or other disposition of property between 
related persons except to the extent that the basis 
of such property in the hands of the transferee is a 
substituted basis. 
‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’ 
means— 
‘‘(A) persons bearing a relationship set 
forth in section 267(b), and 
‘‘(B) persons treated as single employer 
under subsection (b) or (c) of section 414. 
‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT.—If any person transfers cash, debt, or any other 
property to another person and the principal purpose of 
such transfer is to secure or increase an adjustment under 
subsection (a), the Secretary may disallow part or all of 
such adjustment or increase. 
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‘‘(i) SPECIAL RULES.—For purposes of this section— 
‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 
there is an addition to the adjusted basis of any tan-
gible property or of any stock in a corporation dur-
ing the taxable year by reason of an improvement to 
such property or a contribution to capital of such 
corporation— 
‘‘(A) such addition shall never be taken 
into account under subsection (c)(1)(A) if the 
aggregate amount thereof during the taxable 
year with respect to such property or stock is 
less than $1,000, and 
‘‘(B) such addition shall be treated as a 
separate asset acquired at the close of such tax-
able year if the aggregate amount thereof dur-
ing the taxable year with respect to such prop-
erty or stock is $1,000 or more. 
A rule similar to the rule of the preceding sentence 
shall apply to any other portion of an asset to the 
extent that separate treatment of such portion is ap-
propriate to carry out the purposes of this section. 
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS 
THROUGHOUT HOLDING PERIOD.—The applicable in-
flation adjustment shall be appropriately reduced for 
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periods during which the asset was not an indexed 
asset. 
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a 
corporation which is not a dividend shall be treated 
as a disposition. 
‘‘(4) SECTION
CANNOT
INCREASE
ORDINARY 
LOSS.—To the extent that (but for this paragraph) 
this section would create or increase a net ordinary 
loss to which section 1231(a)(2) applies or an ordi-
nary loss to which any other provision of this title 
applies, such provision shall not apply. The taxpayer 
shall be treated as having a long-term capital loss in 
an amount equal to the amount of the ordinary loss 
to which the preceding sentence applies. 
‘‘(5) ACQUISITION
DATE
WHERE
THERE
HAS 
BEEN
PRIOR
APPLICATION
OF
SUBSECTION (a)(1) 
WITH RESPECT TO THE TAXPAYER.—If there has 
been a prior application of subsection (a)(1) to an 
asset while such asset was held by the taxpayer, the 
date of acquisition of such asset by the taxpayer 
shall be treated as not earlier than the date of the 
most recent such prior application. 
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‘‘(j) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part II of subchapter O of chapter 1 of such Code 
is amended by striking the item relating to section 1023 
and by inserting after the item relating to section 1022 
the following new item: 
‘‘Sec. 1023. Indexing of certain assets for purposes of determining gain or loss. 
‘‘Sec. 1024. Cross references.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to indexed assets acquired by the 
taxpayer after December 31, 2007, in taxable years ending 
after such date. 
TITLE III—EMERGENCY ASSIST-
ANCE FOR REDEVELOPMENT 
OF ABANDONED AND FORE-
CLOSED 
HOMES 
AND 
FOR 
WEATHERIZATION OF HOMES 
OF LOW-INCOME FAMILIES 
SEC. 301. DIRECT APPROPRIATIONS. 
There are appropriated out of any money in the 
Treasury not otherwise appropriated for the fiscal year 
2008, $4,000,000,000, to remain available until expended, 
for assistance to States and units of general local govern-
ment (as such terms are defined in section 102 of the 
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Housing and Community Development Act of 1974 (42 
U.S.C. 5302)) for the redevelopment of abandoned and 
foreclosed upon homes and residential properties and for 
the weatherization of homes of low-income families. 
SEC. 302. ALLOCATION OF APPROPRIATED AMOUNTS. 
(a) IN GENERAL.—The amounts appropriated or oth-
erwise made available to States and units of general local 
government under this title shall be allocated based on a 
funding formula established by the Secretary of Housing 
and Urban Development (in this title referred to as the 
‘‘Secretary’’). 
(b) FORMULA TO BE DEVISED SWIFTLY.—The fund-
ing formula required under subsection (a)) shall be estab-
lished not later than 60 days after the date of the enact-
ment of this Act. 
(c) CRITERIA.—The funding formula required under 
subsection (a) shall ensure that any amounts appropriated 
or otherwise made available under this title are allocated 
to States and units of general local government with the 
greatest need, as such need is determined in the discretion 
of the Secretary based on— 
(1) the number and percentage of home fore-
closures in each State or unit of general local gov-
ernment; 
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(2) the number and percentage of homes fi-
nanced by a subprime mortgage related loan in each 
State or unit of general local government; 
(3) the number and percentage of homes in de-
fault or delinquency in each State or unit of general 
local government; 
(4) the rate of unemployment in each State or 
unit of general local government; and 
(5) the amount of assistance used within the 
State or unit of general local government under the 
Low-Income Home Energy Assistance Program 
under title XXVI of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8621 et seq.). 
(d) DISTRIBUTION.—Amounts appropriated or other-
wise made available under this title shall be distributed 
according to the funding formula established by the Sec-
retary under subsection (a) not later than 30 days after 
the establishment of such formula. 
SEC. 303. USE OF FUNDS. 
(a) IN GENERAL.—Any State or unit of general local 
government that receives amounts pursuant to this title 
shall, not later than 18 months after the receipt of such 
amounts, use such amounts only as provided in subsection 
(c) to purchase and redevelop abandoned and foreclosed 
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(c) ELIGIBLE USES.—Amounts made available under 
this title may be used to— 
(1) establish financing mechanisms for pur-
chase and redevelopment of foreclosed upon homes 
and residential properties, including such mecha-
nisms as soft-seconds, loan loss reserves, and 
shared-equity loans for low- and moderate-income 
homebuyers; 
(2) purchase and rehabilitate homes and resi-
dential properties that have been abandoned or fore-
closed upon, in order to sell, rent, or redevelop such 
homes and properties; 
(3) establish land banks for homes that have 
been foreclosed upon; 
(4) demolish blighted structures; and 
(5) conduct activities to rehabilitate and make 
improvements to homes of low-income families 
that— 
(A) make such homes secure against cold, 
heat, wind, precipitation, or other inclement 
weather; and 
(B) would be eligible for funding provided 
under the HOME Investment Partnerships Act 
(42 U.S.C. 12721 et seq.); 
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except that such activities may only be conducted 
with respect to homes of families who, at any time 
during the 36-month period ending upon the date of 
the enactment of this Act, have received assistance 
under the Low-Income Home Energy Assistance 
Program under title XXVI of the Low-Income Home 
Energy Assistance Act of 1981. 
SEC. 304. LIMITATIONS. 
(a) ON PURCHASES.—Any purchase of a foreclosed 
upon home or residential property under this title shall 
be at a discount from the current market appraised value 
of the home or property, taking into account its current 
condition, and such discount shall ensure that purchasers 
are paying below-market value for the home or property. 
(b) SALE OF HOMES.—If an abandoned or foreclosed 
upon home or residential property is purchased, redevel-
oped, or otherwise sold to an individual as a primary resi-
dence, then such sale shall be in an amount equal to or 
less than the cost to acquire and redevelop or rehabilitate 
such home or property up to a decent, safe, and habitable 
condition. 
(c) REINVESTMENT OF PROFITS.— 
(1) REVENUES GENERATED FROM SALES.—Any 
revenue generated from the sale, rental, redevelop-
ment, rehabilitation, or any other eligible use that is 
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in excess of the cost to acquire and redevelop (in-
cluding reasonable development fees) or rehabilitate 
an abandoned or foreclosed upon home or residential 
property shall be provided to and used by the State 
or unit of general local government in accordance 
with, and in furtherance of, the intent and provi-
sions of this title. 
(2) OTHER REVENUES.—Any revenue generated 
under paragraphs (1), (3) or (4) of section 303(c) 
shall be provided to and used by the State or unit 
of general local government in accordance with, and 
in furtherance of, the intent and provisions of this 
title. 
SEC. 305. RULES OF CONSTRUCTION. 
(a) IN GENERAL.—Except as otherwise provided by 
this title, amounts appropriated, revenues generated, or 
amounts otherwise made available to States and units of 
general local government under this title shall be treated 
as though such funds were community development block 
grant funds under title I of the Housing and Community 
Development Act of 1974 (42 U.S.C. 5301 et seq.). 
(b) NO MATCH.—No matching funds shall be re-
quired in order for a State or unit of general local govern-
ment to receive any amounts under this title. 
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SEC. 306. AUTHORITY TO SPECIFY ALTERNATIVE REQUIRE-
MENTS. 
(a) IN GENERAL.—In administering any amounts ap-
propriated or otherwise made available under this title, the 
Secretary may specify alternative requirements to any pro-
vision under title I of the Housing and Community Devel-
opment Act of 1974 (except for those related to fair hous-
ing, nondiscrimination, labor standards, and the environ-
ment) in accordance with the terms of this title and for 
the sole purpose of expediting the use of such funds. 
(b) NOTICE.—The Secretary shall provide written no-
tice of the Secretary’s intent to exercise the authority to 
specify alternative requirements under subsection (a) to 
the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services 
of the House of Representatives not later than 10 business 
days before such exercise of authority is to occur. 
(c) LOW- AND MODERATE-INCOME REQUIREMENT.— 
(1) IN GENERAL.—Notwithstanding the author-
ity of the Secretary under paragraph (1)— 
(A) all of the funds appropriated or other-
wise made available under this title shall be 
used with respect to individuals and families 
whose income does not exceed 120 percent of 
area median income; and 
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(B) not less than 25 percent of the funds 
appropriated or otherwise made available under 
this title shall be used for— 
(i) the purchase and redevelopment of 
abandoned or foreclosed upon homes or 
residential properties that will be used to 
house individuals or families whose in-
comes do not exceed 50 percent of area 
median income; or 
(ii) weatherization activities for homes 
of individuals or families whose incomes do 
not exceed 50 percent of area median in-
come. 
(2) RECURRENT
REQUIREMENT.—The Sec-
retary shall, by rule or order, ensure, to the max-
imum extent practicable and for the longest feasible 
term, that the sale, rental, or redevelopment of 
abandoned and foreclosed upon homes and residen-
tial properties under this title remain affordable to 
individuals or families described in paragraph (1). 
SEC. 307. PERIODIC AUDITS. 
In consultation with the Secretary of Housing and 
Urban Development, the Comptroller General of the 
United States shall conduct periodic audits to ensure that 
funds appropriated, made available, or otherwise distrib-
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sroberts on PROD1PC70 with BILLS
uted under this title are being used in a manner consistent 
with the criteria provided in this title. 
Æ 
VerDate Aug 31 2005 
23:26 May 24, 2008
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E:\BILLS\H6152.IH
H6152
sroberts on PROD1PC70 with BILLS