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‘‘(i) the proceeds from the sale of an 
issue, over 
‘‘(ii) the issuance costs financed by 
the issue (to the extent that such costs do 
not exceed 2 percent of such proceeds), 
and 
‘‘(B) the proceeds from any investment of 
the excess described in subparagraph (A).’’. 
(c) EFFECTIVE DATE.— 
(1) EXTENSION.—The amendment made by 
subsection (a) shall apply to obligations issued after 
December 31, 2007. 
(2) MODIFICATION
OF
ARBITRAGE
RULES.— 
The amendments made by subsection (b) shall apply 
to obligations issued after the date of the enactment 
of this Act. 
SEC. 332. TAX INCENTIVES FOR INVESTMENT IN THE DIS-
TRICT OF COLUMBIA. 
(a) DESIGNATION OF ZONE.— 
(1) IN
GENERAL.—Subsection (f) of section 
1400 is amended by striking ‘‘2007’’ both places it 
appears and inserting ‘‘2008’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to periods beginning 
after December 31, 2007. 
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(b) 
TAX-EXEMPT
ECONOMIC
DEVELOPMENT 
BONDS.— 
(1) IN
GENERAL.—Subsection (b) of section 
1400A is amended by striking ‘‘2007’’ and inserting 
‘‘2008’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to bonds issued after 
December 31, 2007. 
(c) ZERO PERCENT CAPITAL GAINS RATE.— 
(1) IN
GENERAL.—Subsection (b) of section 
1400B is amended by striking ‘‘2008’’ each place it 
appears and inserting ‘‘2009’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 1400B(e)(2) is amended— 
(i) by striking ‘‘2012’’ and inserting 
‘‘2013’’, and 
(ii) by striking ‘‘2012’’ in the heading 
thereof and inserting ‘‘2013’’. 
(B) Section 1400B(g)(2) is amended by 
striking ‘‘2012’’ and inserting ‘‘2013’’. 
(C) Section 1400F(d) is amended by strik-
ing ‘‘2012’’ and inserting ‘‘2013’’. 
(3) EFFECTIVE DATES.— 
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(A) EXTENSION.—The amendments made 
by paragraph (1) shall apply to acquisitions 
after December 31, 2007. 
(B) 
CONFORMING
AMENDMENTS.—The 
amendments made by paragraph (2) shall take 
effect on the date of the enactment of this Act. 
(d) FIRST-TIME HOMEBUYER CREDIT.— 
(1) IN
GENERAL.—Subsection (i) of section 
1400C is amended by striking ‘‘2008’’ and inserting 
‘‘2009’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to property purchased 
after December 31, 2007. 
SEC. 333. EXTENSION OF ECONOMIC DEVELOPMENT CRED-
IT FOR AMERICAN SAMOA. 
(a) IN GENERAL.—Subsection (d) of section 119 of 
division A of the Tax Relief and Health Care Act of 2006 
is amended— 
(1) by striking ‘‘first two taxable years’’ and in-
serting ‘‘first 3 taxable years’’, and 
(2) by striking ‘‘January 1, 2008’’ and insert-
ing ‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
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SEC. 334. ENHANCED CHARITABLE DEDUCTION FOR CON-
TRIBUTIONS OF FOOD INVENTORY. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
170(e)(3)(C) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after De-
cember 31, 2007. 
SEC. 335. ENHANCED CHARITABLE DEDUCTION FOR CON-
TRIBUTIONS OF BOOK INVENTORY TO PUB-
LIC SCHOOLS. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
170(e)(3)(D) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after De-
cember 31, 2007. 
SEC. 336. ENHANCED DEDUCTION FOR QUALIFIED COM-
PUTER CONTRIBUTIONS. 
(a) IN GENERAL.—Subparagraph (G) of section 
170(e)(6) (relating to termination) is amended by striking 
‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made during tax-
able years beginning after December 31, 2007. 
SEC. 337. BASIS ADJUSTMENT TO STOCK OF S CORPORA-
TIONS 
MAKING 
CHARITABLE 
CONTRIBU-
TIONS OF PROPERTY. 
(a) IN GENERAL.—The last sentence of section 
1367(a)(2) (relating to decreases in basis) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) TECHNICAL AMENDMENT RELATED TO SECTION 
1203 OF THE PENSION PROTECTION ACT OF 2006.—Sub-
section (d) of section 1366 is amended by adding at the 
end the following new paragraph: 
‘‘(4) APPLICATION OF LIMITATION ON CHARI-
TABLE CONTRIBUTIONS.—In the case of any chari-
table contribution of property to which the second 
sentence of section 1367(a)(2) applies, paragraph 
(1) shall not apply to the extent of the excess (if 
any) of— 
‘‘(A) the shareholder’s pro rata share of 
such contribution, over 
‘‘(B) the shareholder’s pro rata share of 
the adjusted basis of such property.’’. 
(c) EFFECTIVE DATE.— 
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to contributions made in taxable years 
beginning after December 31, 2007. 
(2) TECHNICAL AMENDMENT.—The amendment 
made by subsection (b) shall take effect as if in-
cluded in the provision of the Pension Protection Act 
of 2006 to which it relates. 
SEC. 338. EXTENSION OF WORK OPPORTUNITY TAX CREDIT 
FOR HURRICANE KATRINA EMPLOYEES. 
(a) IN GENERAL.—Paragraph (1) of section 201(b) 
of the Katrina Emergency Tax Relief Act of 2005 is 
amended by striking ‘‘2-year’’ and inserting ‘‘3-year’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to individuals hired after August 
27, 2007. 
Subtitle C—Other Extenders 
SEC. 341. DISCLOSURE FOR COMBINED EMPLOYMENT TAX 
REPORTING. 
(a) IN GENERAL.—Subparagraph (B) of section 
6103(d)(5) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
SEC. 342. DISCLOSURE OF RETURN INFORMATION TO AP-
PRISE APPROPRIATE OFFICIALS OF TER-
RORIST ACTIVITIES. 
(a) 
IN
GENERAL.—Clause 
(iv) 
of 
section 
6103(i)(3)(C) (relating to termination) is amended by 
striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
SEC. 343. DISCLOSURE UPON REQUEST OF INFORMATION 
RELATING TO TERRORIST ACTIVITIES. 
(a) IN GENERAL.—Subparagraph (E) of section 
6103(i)(7) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disclosures after December 31, 
2007. 
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SEC. 344. DISCLOSURE OF RETURN INFORMATION TO 
CARRY OUT INCOME CONTINGENT REPAY-
MENT OF STUDENT LOANS. 
(a) IN GENERAL.—Subparagraph (D) of section 
6103(l)(13) (relating to termination) is amended by strik-
ing ‘‘December 31, 2007’’ and inserting ‘‘December 31, 
2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to requests made after December 
31, 2007. 
SEC. 345. AUTHORITY FOR UNDERCOVER OPERATIONS. 
(a) IN GENERAL.—Paragraph (6) of section 7608(c) 
(relating to application of section) is amended by striking 
‘‘January 1, 2008’’ each place it appears and inserting 
‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on January 1, 2008. 
SEC. 346. INCREASE IN LIMIT ON COVER OVER OF RUM EX-
CISE TAX TO PUERTO RICO AND THE VIRGIN 
ISLANDS. 
(a) IN GENERAL.—Paragraph (1) of section 7652(f) 
is amended by striking ‘‘January 1, 2008’’ and inserting 
‘‘January 1, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distilled spirits brought into the 
United States after December 31, 2007. 
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SEC. 347. DISCLOSURE OF RETURN INFORMATION FOR 
CERTAIN VETERANS PROGRAMS. 
(a) IN GENERAL.—The last sentence of paragraph 
(7) of section 6103(l) is amended by striking ‘‘September 
30, 2008’’ and inserting ‘‘December 31, 2008’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to requests made after Sep-
tember 30, 2008. 
TITLE IV—MORTGAGE 
FORGIVENESS DEBT RELIEF 
SEC. 401. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL 
RESIDENCE EXCLUDED FROM GROSS IN-
COME. 
(a) IN GENERAL.—Paragraph (1) of section 108(a) 
is amended by striking ‘‘or’’ at the end of subparagraph 
(C), by striking the period at the end of subparagraph (D) 
and inserting ‘‘, or’’, and by inserting after subparagraph 
(D) the following new subparagraph: 
‘‘(E) the indebtedness discharged is quali-
fied principal residence indebtedness.’’. 
(b) SPECIAL RULES RELATING TO QUALIFIED PRIN-
CIPAL
RESIDENCE
INDEBTEDNESS.—Section 108 is 
amended by adding at the end the following new sub-
section: 
‘‘(h) SPECIAL RULES RELATING
TO QUALIFIED 
PRINCIPAL RESIDENCE INDEBTEDNESS.— 
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‘‘(1) BASIS REDUCTION.—The amount excluded 
from gross income by reason of subsection (a)(1)(E) 
shall be applied to reduce (but not below zero) the 
basis of the principal residence of the taxpayer. 
‘‘(2) QUALIFIED
PRINCIPAL
RESIDENCE
IN-
DEBTEDNESS.—For purposes of this section, the 
term ‘qualified principal residence indebtedness’ 
means acquisition indebtedness (within the meaning 
of section 163(h)(3)(B), applied by substituting 
‘$2,000,000 
($1,000,000’ 
for 
‘$1,000,000 
($500,000’ in clause (ii) thereof) with respect to the 
principal residence of the taxpayer. 
‘‘(3) EXCEPTION
FOR
CERTAIN
DISCHARGES 
NOT RELATED TO TAXPAYER’S FINANCIAL CONDI-
TION.—Subsection (a)(1)(E) shall not apply to the 
discharge of a loan if the discharge is on account of 
services performed for the lender or any other factor 
not directly related to a decline in the value of the 
residence or to the financial condition of the tax-
payer. 
‘‘(4) ORDERING
RULE.—If any loan is dis-
charged, in whole or in part, and only a portion of 
such loan is qualified principal residence indebted-
ness, subsection (a)(1)(E) shall apply only to so 
much of the amount discharged as exceeds the 
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amount of the loan (as determined immediately be-
fore such discharge) which is not qualified principal 
residence indebtedness. 
‘‘(5) PRINCIPAL RESIDENCE.—For purposes of 
this subsection, the term ‘principal residence’ has 
the same meaning as when used in section 121.’’. 
(c) COORDINATION.— 
(1) Subparagraph (A) of section 108(a)(2) is 
amended by striking ‘‘and (D)’’ and inserting ‘‘(D), 
and (E)’’. 
(2) Paragraph (2) of section 108(a) is amended 
by adding at the end the following new subpara-
graph: 
‘‘(C) PRINCIPAL
RESIDENCE
EXCLUSION 
TAKES PRECEDENCE OVER INSOLVENCY EXCLU-
SION
UNLESS
ELECTED
OTHERWISE.—Para-
graph (1)(B) shall not apply to a discharge to 
which paragraph (1)(E) applies unless the tax-
payer elects to apply paragraph (1)(B) in lieu 
of paragraph (1)(E).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to discharges of indebtedness on 
or after January 1, 2007. 
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SEC. 402. LONG-TERM EXTENSION OF DEDUCTION FOR 
MORTGAGE INSURANCE PREMIUMS. 
(a) IN GENERAL.—Subparagraph (E) of section 
163(h)(3) (relating to mortgage insurance premiums 
treated as interest) is amended by striking clauses (iii) 
and (iv) and inserting the following new clause: 
‘‘(iii) APPLICATION.—Clause (i) shall 
not apply with respect to any mortgage in-
surance contract issued before January 1, 
2007, or after December 31, 2014.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contracts issued after Decem-
ber 31, 2006. 
SEC. 403. ALTERNATIVE TESTS FOR QUALIFYING AS COOP-
ERATIVE HOUSING CORPORATION. 
(a) IN GENERAL.—Subparagraph (D) of section 
216(b)(1) (defining cooperative housing corporation) is 
amended to read as follows: 
‘‘(D) meeting 1 or more of the following 
requirements for the taxable year in which the 
taxes and interest described in subsection (a) 
are paid or incurred: 
‘‘(i) 80 percent or more of the cor-
poration’s gross income for such taxable 
year is derived from tenant-stockholders. 
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‘‘(ii) At all times during such taxable 
year, 80 percent or more of the total 
square footage of the corporation’s prop-
erty is used or available for use by the ten-
ant-stockholders for residential purposes or 
purposes ancillary to such residential use. 
‘‘(iii) 90 percent or more of the ex-
penditures of the corporation paid or in-
curred during such taxable year are paid 
or incurred for the acquisition, construc-
tion, management, maintenance, or care of 
the corporation’s property for the benefit 
of the tenant-stockholders.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 404. GAIN FROM SALE OF PRINCIPAL RESIDENCE AL-
LOCATED TO NONQUALIFIED USE NOT EX-
CLUDED FROM INCOME. 
(a) IN GENERAL.—Subsection (b) of section 121 (re-
lating to limitations) is amended by adding at the end the 
following new paragraph: 
‘‘(4) EXCLUSION OF GAIN ALLOCATED TO NON-
QUALIFIED USE.— 
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‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to so much of the gain from the sale 
or exchange of property as is allocated to peri-
ods of nonqualified use. 
‘‘(B) GAIN
ALLOCATED
TO
PERIODS
OF 
NONQUALIFIED USE.—For purposes of subpara-
graph (A), gain shall be allocated to periods of 
nonqualified use based on the ratio which— 
‘‘(i) the aggregate periods of non-
qualified use during the period such prop-
erty was owned by the taxpayer, bears to 
‘‘(ii) the period such property was 
owned by the taxpayer. 
‘‘(C) PERIOD
OF
NONQUALIFIED
USE.— 
For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘period 
of nonqualified use’ means any period 
(other than the portion of any period pre-
ceding January 1, 2008) during which the 
property is not used as the principal resi-
dence of the taxpayer or the taxpayer’s 
spouse or former spouse. 
‘‘(ii) EXCEPTIONS.—The term ‘period 
of nonqualified use’ does not include— 
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‘‘(I) any portion of the 5-year pe-
riod described in subsection (a) which 
is after the last date that such prop-
erty is used as the principal residence 
of the taxpayer or the taxpayer’s 
spouse, 
‘‘(II) any period (not to exceed 
an aggregate period of 10 years) dur-
ing which the taxpayer or the tax-
payer’s spouse is serving on qualified 
official extended duty (as defined in 
subsection (d)(9)(C)) described in 
clause (i), (ii), or (iii) of subsection 
(d)(9)(A), and 
‘‘(III) any other period of tem-
porary absence (not to exceed an ag-
gregate period of 2 years) due to 
change of employment, health condi-
tions, or such other unforeseen cir-
cumstances as may be specified by the 
Secretary. 
‘‘(D) COORDINATION
WITH
RECOGNITION 
OF GAIN ATTRIBUTABLE TO DEPRECIATION.— 
For purposes of this paragraph— 
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‘‘(i) subparagraph (A) shall be applied 
after the application of subsection (d)(6), 
and 
‘‘(ii) subparagraph (B) shall be ap-
plied without regard to any gain to which 
subsection (d)(6) applies.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to sales and exchanges after De-
cember 31, 2007. 
TITLE V—ADMINISTRATIVE 
PROVISIONS 
SEC. 501. REPEAL OF AUTHORITY TO ENTER INTO PRIVATE 
DEBT COLLECTION CONTRACTS. 
(a) IN GENERAL.—Subchapter A of chapter 64 is 
amended by striking section 6306. 
(b) CONFORMING AMENDMENTS.— 
(1) Subchapter B of chapter 76 is amended by 
striking section 7433A. 
(2) Section 7811 is amended by striking sub-
section (g). 
(3) Section 1203 of the Internal Revenue Serv-
ice Restructuring Act of 1998 is amended by strik-
ing subsection (e). 
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(4) The table of sections for subchapter A of 
chapter 64 is amended by striking the item relating 
to section 6306. 
(5) The table of sections for subchapter B of 
chapter 76 is amended by striking the item relating 
to section 7433A. 
(c) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall take effect on the date of the en-
actment of this Act. 
(2) EXCEPTION
FOR
EXISTING
CONTRACTS, 
ETC.—The amendments made by this section shall 
not apply to any contract which was entered into be-
fore July 18, 2007, and is not renewed or extended 
on or after such date. 
(3) UNAUTHORIZED CONTRACTS AND EXTEN-
SIONS TREATED AS VOID.—Any qualified tax collec-
tion contract (as defined in section 6306 of the In-
ternal Revenue Code of 1986, as in effect before its 
repeal) which is entered into on or after July 18, 
2007, and any extension or renewal on or after such 
date of any qualified tax collection contract (as so 
defined) shall be void. 
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SEC. 502. DELAY OF APPLICATION OF WITHHOLDING RE-
QUIREMENT ON CERTAIN GOVERNMENTAL 
PAYMENTS FOR GOODS AND SERVICES. 
(a) IN GENERAL.—Subsection (b) of section 511 of 
the Tax Increase Prevention and Reconciliation Act of 
2005 is amended by striking ‘‘December 31, 2010’’ and 
inserting ‘‘December 31, 2011’’. 
(b) REPORT
TO
CONGRESS.—Not later than 6 
months after the date of the enactment of this Act, the 
Secretary of the Treasury shall submit to the Committee 
on Ways and Means of the House of Representatives and 
the Committee on Finance of the Senate a report with 
respect to the withholding requirements of section 3402(t) 
of the Internal Revenue Code of 1986, including a detailed 
analysis of— 
(1) the problems, if any, which are anticipated 
in administering and complying with such require-
ments, 
(2) the burdens, if any, that such requirements 
will place on governments and businesses (taking 
into account such mechanisms as may be necessary 
to administer such requirements), and 
(3) the application of such requirements to 
small expenditures for services and goods by govern-
ments. 
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SEC. 503. CLARIFICATION OF ENTITLEMENT OF VIRGIN IS-
LANDS RESIDENTS TO PROTECTIONS OF LIM-
ITATIONS ON ASSESSMENT AND COLLECTION 
OF TAX. 
(a) IN GENERAL.—Subsection (c) of section 932 (re-
lating to treatment of Virgin Islands residents) is amended 
by adding at the end the following new paragraph: 
‘‘(5) TREATMENT
OF
INCOME
TAX
RETURN 
FILED WITH VIRGIN ISLANDS.—An income tax re-
turn filed with the Virgin Islands by an individual 
claiming to be described in paragraph (1) for the 
taxable year shall be treated for purposes of subtitle 
F in the same manner as if such return were an in-
come tax return filed with the United States for 
such taxable year. The preceding sentence shall not 
apply where such return is false or fraudulent with 
the intent to evade tax or otherwise is a willful at-
tempt in any manner to defeat or evade tax.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
1986. 
SEC. 504. 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: 
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‘‘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 
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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-
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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 
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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 
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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 
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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 
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‘‘(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— 
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‘‘(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 
which is attributable to services performed outside 
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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-
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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) 
of section 408, a qualified tuition program (as de-
fined in section 529), a Coverdell education savings 
account (as defined in section 530), a health savings 
account (as defined in section 223), and an Archer 
MSA (as defined in section 220). 
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.— 
‘‘(1) IN GENERAL.—In the case of a distribu-
tion (directly or indirectly) of any property from a 
nongrantor trust to a covered expatriate— 
‘‘(A) the trustee shall deduct and withhold 
from such distribution an amount equal to 30 
percent of the taxable portion of the distribu-
tion, and 
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‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of 
the trust, gain shall be recognized to the trust 
as if such property were sold to the expatriate 
at its fair market value. 
‘‘(2) TAXABLE PORTION.—For purposes of this 
subsection, the term ‘taxable portion’ means, with 
respect to any distribution, that portion of the dis-
tribution which would be includible in the gross in-
come of the covered expatriate if such expatriate 
continued to be subject to tax as a citizen or resi-
dent of the United States. 
‘‘(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-
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duction under any treaty with the United 
States in withholding on any distribution to 
which paragraph (1)(A) applies. 
‘‘(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 
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‘‘(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— 
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‘‘(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)), 
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‘‘(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-
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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 
‘‘(B) any extension of time for payment of 
tax shall cease to apply on the day before the 
expatriation date and the unpaid portion of 
such tax shall be due and payable at the time 
and in the manner prescribed by the Secretary. 
‘‘(2) STEP-UP IN BASIS.—Solely for purposes of 
determining any tax imposed by reason of subsection 
(a), property which was held by an individual on the 
date the individual first became a resident of the 
United States (within the meaning of section 
7701(b)) shall be treated as having a basis on such 
date of not less than the fair market value of such 
property on such date. The preceding sentence shall 
not apply if the individual elects not to have such 
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sentence apply. Such an election, once made, shall 
be irrevocable. 
‘‘(3) COORDINATION WITH SECTION 684.—If the 
expatriation of any individual would result in the 
recognition of gain under section 684, this section 
shall be applied after the application of section 684. 
‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
(b) TAX ON GIFTS AND BEQUESTS RECEIVED BY 
UNITED STATES CITIZENS AND RESIDENTS FROM EXPA-
TRIATES.— 
(1) IN GENERAL.—Subtitle B (relating to estate 
and gift taxes) is amended by inserting after chapter 
14 the following new chapter: 
‘‘CHAPTER 15—GIFTS AND BEQUESTS 
FROM EXPATRIATES 
‘‘Sec. 2801. Imposition of tax. 
‘‘SEC. 2801. IMPOSITION OF TAX. 
‘‘(a) IN GENERAL.—If, during any calendar year, any 
United States citizen or resident receives any covered gift 
or bequest, there is hereby imposed a tax equal to the 
product of— 
‘‘(1) the highest rate of tax specified in the 
table contained in section 2001(c) as in effect on the 
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date of such receipt (or, if greater, the highest rate 
of tax specified in the table applicable under section 
2502(a) as in effect on the date), and 
‘‘(2) the value of such covered gift or bequest. 
‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax im-
posed by subsection (a) on any covered gift or bequest 
shall be paid by the person receiving such gift or bequest. 
‘‘(c) EXCEPTION FOR CERTAIN GIFTS.—Subsection 
(a) shall apply only to the extent that the value of covered 
gifts and bequests received by any person during the cal-
endar year exceeds $10,000. 
‘‘(d) TAX REDUCED BY FOREIGN GIFT OR ESTATE 
TAX.—The tax imposed by subsection (a) on any covered 
gift or bequest shall be reduced by the amount of any gift 
or estate tax paid to a foreign country with respect to such 
covered gift or bequest. 
‘‘(e) COVERED GIFT OR BEQUEST.— 
‘‘(1) IN GENERAL.—For purposes of this chap-
ter, the term ‘covered gift or bequest’ means— 
‘‘(A) any property acquired by gift directly 
or indirectly from an individual who, at the 
time of such acquisition, is a covered expatriate, 
and 
‘‘(B) any property acquired directly or in-
directly by reason of the death of an individual 
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