‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning after December 31, 2008, each dollar 
amount in the table contained in subsection (b) in 
the columns under the heading ‘All other cases’ shall 
be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar 
year by substituting ‘calendar year 2007’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
If any increase under the preceding sentence is not 
a multiple of $1,000, such increase shall be rounded 
to the nearest multiple of $1,000. 
‘‘(2) ADJUSTMENT OF AMOUNTS RELATING TO 
JOINT RETURN AND HEAD OF HOUSEHOLD.—In the 
case of any taxable year beginning after December 
31, 2008— 
‘‘(A) there shall be substituted for each 
dollar amount in the table contained in sub-
section (b) in the columns under the heading 
‘Joint return’ a dollar amount equal to twice 
the corresponding dollar amount in such table 
in the columns under the heading ‘All other 
cases’ (as increased under paragraph (1)), and
‘‘(B) there shall be substituted for each 
dollar amount in the table contained in sub-
section (b) in the columns under the heading 
‘Head of household’ a dollar amount equal to 
11⁄2 times the corresponding dollar amount in 
such table in the columns under the heading 
‘All other cases’ (as increased under paragraph 
(1)).’’. 
(c) TESTING PERIOD.—Subparagraph (B) of section 
25B(d)(2) of such Code is amended to read as follows: 
‘‘(B) TESTING PERIOD.—For purposes of 
subparagraph (A), the testing period, with re-
spect to a taxable year, is the period which in-
cludes— 
‘‘(i) such taxable year, and 
‘‘(ii) the 3 preceding taxable years.’’. 
(d) TREATMENT AS REFUNDABLE.— 
(1) CREDIT MOVED TO SUBPART RELATING TO 
REFUNDABLE CREDIT.— 
(A) IN
GENERAL.—Section 25B of such 
Code, as amended by this Act, is hereby moved 
to subpart C of part IV of subchapter A of 
chapter 1 (relating to refundable credits) and 
inserted after section 35. 
(B) TECHNICAL AMENDMENTS.—
(i) Section 36 of such Code is redesig-
nated as section 37. 
(ii) Section 25B of such Code (as 
moved by subparagraph (A)) is redesig-
nated as section 36. 
(iii) The table of sections for subpart 
A of such part is amended by striking the 
item relating to section 25B. 
(iv) The table of sections for subpart 
C of such part is amended by redesig-
nating the item relating to section 36 as 
an item relating to section 37 and by in-
serting after section 35 the following new 
item: 
‘‘Sec. 36. Elective deferrals and IRA contributions by certain individuals.’’. 
(2) MANDATORY DEPOSIT INTO QUALIFIED AC-
COUNT.— 
(A) NO REDUCTION OF TAX.—Subsection 
(a) of section 36 of such Code, as moved and 
redesignated by paragraph (1), is amended by 
striking ‘‘credit against the tax imposed by this 
subtitle’’ and inserting ‘‘tax credit’’. 
(B) 
DEPOSIT
INTO
QUALIFIED
AC-
COUNT.—Subsection (g) of section 36 of such 
Code, as moved and redesignated by paragraph 
(1), is amended to read as follows:
‘‘(g) DEPOSIT INTO QUALIFIED ACCOUNT.— 
‘‘(1) IN GENERAL.—Any amount allowed as a 
tax credit under subsection (a) shall not be allowed 
as a credit against any tax imposed by this subtitle 
but instead shall be treated as an overpayment 
under section 6401(b) and— 
‘‘(A) shall be paid on behalf of the indi-
vidual taxpayer to an applicable retirement plan 
designated by the individual to be invested in a 
manner designated by the individual, except 
that in the case of a joint return, each spouse 
shall be entitled to designate an applicable re-
tirement plan and investments with respect to 
payments attributable to such spouse, or 
‘‘(B) in the case of taxpayer who does not 
properly designate an applicable retirement plan 
in a timely manner or who designates an appli-
cable retirement plan that does not accept such 
amount in a timely manner, shall be paid or 
credited on behalf of the individual taxpayer in 
a manner determined under rules prescribed by 
the Secretary that provide treatment com-
parable to the treatment under subparagraph 
(A).