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(1) the taxpayer’s net Federal income tax re-
duction which would be attributable to such deduc-
tion for such taxable year, is less than 
(2) the credit which would be allowed to the 
taxpayer for such taxable year under section 25A of 
such Code (determined without regard to sections 
25A(e) and 26 of such Code). 
SEC. 203. TREATMENT OF CERTAIN DIVIDENDS OF REGU-
LATED INVESTMENT COMPANIES. 
(a) 
INTEREST-RELATED
DIVIDENDS.—Subpara-
graph (C) of section 871(k)(1) (defining interest-related 
dividend) is amended by striking ‘‘December 31, 2007’’ 
and inserting ‘‘December 31, 2009’’. 
(b) SHORT-TERM CAPITAL GAIN DIVIDENDS.—Sub-
paragraph (C) of section 871(k)(2) (defining short-term 
capital gain dividend) is amended by striking ‘‘December 
31, 2007’’ and inserting ‘‘December 31, 2009’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dividends with respect to taxable 
years of regulated investment companies beginning after 
December 31, 2007. 
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SEC. 204. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE-
TIREMENT PLANS FOR CHARITABLE PUR-
POSES. 
(a) IN GENERAL.—Subparagraph (F) of section 
408(d)(8) is amended by striking ‘‘December 31, 2007’’ 
and inserting ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions made in taxable 
years beginning after December 31, 2007. 
SEC. 205. DEDUCTION FOR CERTAIN EXPENSES OF ELE-
MENTARY AND SECONDARY SCHOOL TEACH-
ERS. 
(a) IN GENERAL.—Subparagraph (D) of section 
62(a)(2) is amended by striking ‘‘or 2007’’ and inserting 
‘‘2007, 2008, or 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2007. 
SEC. 206. STOCK IN RIC FOR PURPOSES OF DETERMINING 
ESTATES OF NONRESIDENTS NOT CITIZENS. 
(a) IN GENERAL.—Paragraph (3) of section 2105(d) 
is amended by striking ‘‘December 31, 2007’’ and insert-
ing ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to decedents dying after December 
31, 2007. 
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SEC. 207. QUALIFIED INVESTMENT ENTITIES. 
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section 
897(h)(4)(A) is amended by striking ‘‘December 31, 
2007’’ and inserting ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect on January 1, 2008, except 
that such amendment shall not apply to the application 
of withholding requirements with respect to any payment 
made on or before the date of the enactment of this Act. 
SEC. 208. REAL PROPERTY TAX STANDARD DEDUCTION. 
(a) IN GENERAL.—Subparagraph (C) of section 
63(c)(1) is amended by inserting ‘‘or 2009’’ after ‘‘2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
Subtitle B—Extensions Primarily 
Affecting Businesses 
SEC. 221. RESEARCH CREDIT. 
(a) IN GENERAL.—Subparagraph (B) of section 
41(h)(1) is amended by striking ‘‘December 31, 2007’’ 
and inserting ‘‘December 31, 2009’’. 
(b) COMPUTATION OF CREDIT FOR TAXABLE YEAR 
IN WHICH CREDIT TERMINATES.—Paragraph (2) of sec-
tion 41(h) is amended to read as follows: 
‘‘(2) COMPUTATION OF CREDIT FOR TAXABLE 
YEAR IN WHICH CREDIT TERMINATES.— 
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‘‘(A) IN
GENERAL.—In the case of any 
taxable year with respect to which this section 
applies to a number of days which is less than 
the total number of days in such taxable year, 
the applicable base amount with respect to such 
taxable year shall be the amount which bears 
the same ratio to such applicable amount (de-
termined without regard to this paragraph) as 
the number of days in such taxable year to 
which this section applies bears to the total 
number of days in such taxable year. 
‘‘(B) APPLICABLE
BASE
AMOUNT.—For 
purposes of subparagraph (A), the term ‘appli-
cable base amount’ means, with respect to any 
taxable year— 
‘‘(i) except as otherwise provided in 
this subparagraph, the base amount for 
the taxable year, 
‘‘(ii) in the case of a taxable year with 
respect to which an election under sub-
section (c)(4) (relating to election of alter-
native incremental credit) is in effect, the 
average described in subsection (c)(1)(B) 
for the taxable year, and 
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‘‘(iii) in the case of a taxable year 
with respect to which an election under 
subsection (c)(5) (relating to election of al-
ternative simplified credit) is in effect, the 
average qualified research expenses for the 
3 taxable years preceding the taxable 
year.’’. 
(c) CONFORMING AMENDMENT.—Subparagraph (D) 
of section 45C(b)(1) is amended by striking ‘‘December 
31, 2007’’ and inserting ‘‘December 31, 2009’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to amounts paid or incurred after De-
cember 31, 2007. 
(2) COMPUTATION
OF
CREDIT
FOR
TAXABLE 
YEAR IN WHICH CREDIT BEGINS.—The amendment 
made by subsection (b) shall apply to taxable years 
beginning after December 31, 2007. 
SEC. 222. INDIAN EMPLOYMENT CREDIT. 
(a) IN GENERAL.—Subsection (f) of section 45A is 
amended by striking ‘‘December 31, 2007’’ and inserting 
‘‘December 31, 2009’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
SEC. 223. NEW MARKETS TAX CREDIT. 
Subparagraph (D) of section 45D(f)(1) is amended 
by striking ‘‘and 2008’’ and inserting ‘‘2008, and 2009’’. 
SEC. 224. RAILROAD TRACK MAINTENANCE. 
(a) IN GENERAL.—Subsection (f) of section 45G is 
amended by striking ‘‘January 1, 2008’’ and inserting 
‘‘January 1, 2010’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to expenditures paid or incurred 
during taxable years beginning after December 31, 2007. 
SEC. 225. FIFTEEN-YEAR STRAIGHT-LINE COST RECOVERY 
FOR QUALIFIED LEASEHOLD IMPROVEMENTS 
AND QUALIFIED RESTAURANT PROPERTY. 
(a) IN GENERAL.—Clauses (iv) and (v) of section 
168(e)(3)(E) are each amended by striking ‘‘January 1, 
2008’’ and inserting ‘‘January 1, 2010’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2007. 
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SEC. 226. SEVEN-YEAR COST RECOVERY PERIOD FOR MO-
TORSPORTS RACING TRACK FACILITY. 
(a) IN GENERAL.—Subparagraph (D) of section 
168(i)(15) is amended by striking ‘‘December 31, 2007’’ 
and inserting ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to property placed in service after 
December 31, 2007. 
SEC. 227. ACCELERATED DEPRECIATION FOR BUSINESS 
PROPERTY ON INDIAN RESERVATION. 
(a) IN GENERAL.—Paragraph (8) of section 168(j) 
is amended by striking ‘‘December 31, 2007’’ and insert-
ing ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to property placed in service after 
December 31, 2007. 
SEC. 228. EXPENSING OF ENVIRONMENTAL REMEDIATION 
COSTS. 
(a) IN GENERAL.—Subsection (h) of section 198 is 
amended by striking ‘‘December 31, 2007’’ and inserting 
‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to expenditures paid or incurred 
after December 31, 2007. 
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SEC. 229. DEDUCTION ALLOWABLE WITH RESPECT TO IN-
COME ATTRIBUTABLE TO DOMESTIC PRO-
DUCTION ACTIVITIES IN PUERTO RICO. 
(a) IN GENERAL.—Subparagraph (C) of section 
199(d)(8) is amended— 
(1) by striking ‘‘first 2 taxable years’’ and in-
serting ‘‘first 4 taxable years’’, and 
(2) by striking ‘‘January 1, 2008’’ and insert-
ing ‘‘January 1, 2010’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
SEC. 230. MODIFICATION OF TAX TREATMENT OF CERTAIN 
PAYMENTS TO CONTROLLING EXEMPT ORGA-
NIZATIONS. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
512(b)(13)(E) is amended by striking ‘‘December 31, 
2007’’ and inserting ‘‘December 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments received or accrued 
after December 31, 2007. 
SEC. 231. QUALIFIED ZONE ACADEMY BONDS. 
(a) IN GENERAL.—Subpart I of part IV of sub-
chapter A of chapter 1 is amended by adding at the end 
the following new section: 
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‘‘SEC. 54C. QUALIFIED ZONE ACADEMY BONDS. 
‘‘(a) QUALIFIED ZONE ACADEMY BONDS.—For pur-
poses of this subchapter, the term ‘qualified zone academy 
bond’ means any bond issued as part of an issue if— 
‘‘(1) 100 percent of the available project pro-
ceeds of such issue are to be used for a qualified 
purpose with respect to a qualified zone academy es-
tablished by an eligible local education agency, 
‘‘(2) the bond is issued by a State or local gov-
ernment within the jurisdiction of which such acad-
emy is located, and 
‘‘(3) the issuer— 
‘‘(A) designates such bond for purposes of 
this section, 
‘‘(B) certifies that it has written assur-
ances that the private business contribution re-
quirement of subsection (b) will be met with re-
spect to such academy, and 
‘‘(C) certifies that it has the written ap-
proval of the eligible local education agency for 
such bond issuance. 
‘‘(b) PRIVATE BUSINESS CONTRIBUTION REQUIRE-
MENT.—For purposes of subsection (a), the private busi-
ness contribution requirement of this subsection is met 
with respect to any issue if the eligible local education 
agency that established the qualified zone academy has 
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written commitments from private entities to make quali-
fied contributions having a present value (as of the date 
of issuance of the issue) of not less than 10 percent of 
the proceeds of the issue. 
‘‘(c) LIMITATION
ON AMOUNT
OF BONDS DES-
IGNATED.— 
‘‘(1) NATIONAL LIMITATION.—There is a na-
tional zone academy bond limitation for each cal-
endar year. Such limitation is $400,000,000 for 
2008 and 2009, and, except as provided in para-
graph (4), zero thereafter. 
‘‘(2) ALLOCATION
OF
LIMITATION.—The na-
tional zone academy bond limitation for a calendar 
year shall be allocated by the Secretary among the 
States on the basis of their respective populations of 
individuals below the poverty line (as defined by the 
Office of Management and Budget). The limitation 
amount allocated to a State under the preceding 
sentence shall be allocated by the State education 
agency to qualified zone academies within such 
State. 
‘‘(3) DESIGNATION
SUBJECT
TO
LIMITATION 
AMOUNT.—The maximum aggregate face amount of 
bonds issued during any calendar year which may be 
designated under subsection (a) with respect to any 
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qualified zone academy shall not exceed the limita-
tion amount allocated to such academy under para-
graph (2) for such calendar year. 
‘‘(4) CARRYOVER OF UNUSED LIMITATION.— 
‘‘(A) IN
GENERAL.—If for any calendar 
year— 
‘‘(i) the limitation amount for any 
State, exceeds 
‘‘(ii) the amount of bonds issued dur-
ing such year which are designated under 
subsection (a) with respect to qualified 
zone academies within such State, 
the limitation amount for such State for the fol-
lowing calendar year shall be increased by the 
amount of such excess. 
‘‘(B) LIMITATION
ON
CARRYOVER.—Any 
carryforward of a limitation amount may be 
carried only to the first 2 years following the 
unused limitation year. For purposes of the pre-
ceding sentence, a limitation amount shall be 
treated as used on a first-in first-out basis. 
‘‘(C) 
COORDINATION
WITH
SECTION 
1397E.—Any carryover determined under sec-
tion 1397E(e)(4) (relating to carryover of un-
used limitation) with respect to any State to 
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calendar year 2008 shall be treated for pur-
poses of this section as a carryover with respect 
to such State for such calendar year under sub-
paragraph (A), and the limitation of subpara-
graph (B) shall apply to such carryover taking 
into account the calendar years to which such 
carryover relates. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED
ZONE
ACADEMY.—The term 
‘qualified zone academy’ means any public school (or 
academic program within a public school) which is 
established by and operated under the supervision of 
an eligible local education agency to provide edu-
cation or training below the postsecondary level if— 
‘‘(A) such public school or program (as the 
case may be) is designed in cooperation with 
business to enhance the academic curriculum, 
increase graduation and employment rates, and 
better prepare students for the rigors of college 
and the increasingly complex workforce, 
‘‘(B) students in such public school or pro-
gram (as the case may be) will be subject to the 
same academic standards and assessments as 
other students educated by the eligible local 
education agency, 
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‘‘(C) the comprehensive education plan of 
such public school or program is approved by 
the eligible local education agency, and 
‘‘(D)(i) such public school is located in an 
empowerment zone or enterprise community 
(including any such zone or community des-
ignated after the date of the enactment of this 
section), or 
‘‘(ii) there is a reasonable expectation (as 
of the date of issuance of the bonds) that at 
least 35 percent of the students attending such 
school or participating in such program (as the 
case may be) will be eligible for free or reduced- 
cost lunches under the school lunch program es-
tablished under the National School Lunch Act. 
‘‘(2) ELIGIBLE LOCAL EDUCATION AGENCY.— 
For purposes of this section, the term ‘eligible local 
education agency’ means any local educational agen-
cy as defined in section 9101 of the Elementary and 
Secondary Education Act of 1965. 
‘‘(3) QUALIFIED PURPOSE.—The term ‘quali-
fied purpose’ means, with respect to any qualified 
zone academy— 
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