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shall be allocated to the two calendar years, portions of
which are included within such taxable year, in the same
proportion to the total of such deemed self-employment in-
come as the sum of the amounts applicable under section
213(d) for the calendar quarters ending with or within each
such calendar year bears to the lower limit for such taxable
year specified in section 211(k)(1).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2007.
SEC. 12503. INFORMATION REPORTING FOR COMMODITY
CREDIT CORPORATION TRANSACTIONS.
(a) IN GENERAL.—Subpart A of part III of subchapter
A of chapter 61 (relating to information concerning persons
subject to special provisions) is amended by inserting after
section 6039I the following new section:
‘‘SEC. 6039J. INFORMATION REPORTING WITH RESPECT TO
COMMODITY CREDIT CORPORATION TRANS-
ACTIONS.
‘‘(a) REQUIREMENT OF REPORTING.—The Commodity
Credit Corporation, through the Secretary of Agriculture,
shall make a return, according to the forms and regulations
prescribed by the Secretary of the Treasury, setting forth
any market gain realized by a taxpayer during the taxable
year in relation to the repayment of a loan issued by the
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Commodity Credit Corporation, without regard to the man-
ner in which such loan was repaid.
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—
The Secretary of Agriculture shall furnish to each person
whose name is required to be set forth in a return required
under subsection (a) a written statement showing the
amount of market gain reported in such return.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
subpart A of part III of subchapter A of chapter 61 is
amended by inserting after the item relating to section
6039I the following new item:
‘‘Sec. 6039J. Information reporting with respect to Commodity Credit Corpora-
tion transactions.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to loans repaid on or after January 1,
2007.
SEC. 12504. MODIFICATION OF SECTION 1031 TREATMENT
FOR CERTAIN REAL ESTATE.
(a) IN GENERAL.—Section 1031 (relating to exchange
of property held for productive use or investment), as
amended by this Act, is amended by adding at the end the
following new subsection:
‘‘(j) SPECIAL RULE FOR SUBSIDIZED AGRICULTURAL
REAL PROPERTY.—
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‘‘(1) IN GENERAL.—Subsidized agricultural real
property and nonagricultural real property are not
property of a like kind.
‘‘(2) SUBSIDIZED
AGRICULTURAL
REAL
PROP-
ERTY.—For purposes of this subsection, the term ‘sub-
sidized agricultural real property’ means real
property—
‘‘(A) which is used as a farm for farming
purposes 
(within 
the 
meaning 
of 
section
2032A(e)(5)); and
‘‘(B) with respect to which a taxpayer re-
ceives, in the taxable year in which an exchange
of such property is made, any payment or ben-
efit under—
‘‘(i) part I of subtitle A,
‘‘(ii) part III (other than sections 1307
and 1308) of subtitle A, or
‘‘(iii) subtitle B,
of title I of the Food and Energy Security Act
of 2007.
‘‘(3) NONAGRICULTURAL REAL PROPERTY.—For
purposes of this subsection, the term ‘nonagricultural
real property’ means real property which is not used
as a farm for farming purposes (within the meaning
of section 2032A(e)(5)).
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‘‘(4) EXCEPTION.—Paragraph (1) shall not
apply with respect to any subsidized agricultural real
property which, not later than the date of the ex-
change, is permanently retired from any program
under which any payment or benefit described in
paragraph (2)(B) is made.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to exchanges completed after the date
of the enactment of this Act.
SEC. 12505. MODIFICATION OF EFFECTIVE DATE OF LEAS-
ING PROVISIONS OF THE AMERICAN JOBS
CREATION ACT OF 2004.
(a) LEASES TO FOREIGN ENTITIES.—Section 849(b)
of the American Jobs Creation Act of 2004 is amended by
adding at the end the following new paragraph:
‘‘(5) LEASES TO FOREIGN ENTITIES.—In the case
of tax-exempt use property leased to a tax-exempt en-
tity which is a foreign person or entity, the amend-
ments made by this part shall apply to taxable years
beginning after December 31, 2006, with respect to
leases entered into on or before March 12, 2004.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the enactment of
the American Jobs Creation Act of 2004.
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SEC. 12506. TIME FOR PAYMENT OF CORPORATE ESTI-
MATED TAXES.
The percentage under subparagraph (B) of section
401(1) of the Tax Increase Prevention and Reconciliation
Act of 2005 in effect on the date of the enactment of this
Act is increased by 7.00 percentage points.
SEC. 12507. DENIAL OF DEDUCTION FOR CERTAIN FINES,
PENALTIES, AND OTHER AMOUNTS.
(a) IN GENERAL.—Subsection (f) of section 162 (relat-
ing to trade or business expenses) is amended to read as
follows:
‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), no deduction otherwise allowable shall be
allowed under this chapter for any amount paid or
incurred (whether by suit, agreement, or otherwise)
to, or at the direction of, a government or entity de-
scribed in paragraph (4) in relation to—
‘‘(A) the violation of any law, or
‘‘(B) an investigation or inquiry into the
potential violation of any law which is initiated
by such government or entity.
‘‘(2) EXCEPTION
FOR
AMOUNTS
CONSTITUTING
RESTITUTION OR PAID TO COME INTO COMPLIANCE
WITH LAW.—Paragraph (1) shall not apply to any
amount which—
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‘‘(A) the taxpayer establishes—
‘‘(i) constitutes restitution (or remedi-
ation of property) for damage or harm
caused by, or which may be caused by, the
violation of any law or the potential viola-
tion of any law, or
‘‘(ii) is paid to come into compliance
with any law which was violated or in-
volved in the investigation or inquiry, and
‘‘(B) is identified as an amount described
in clause (i) or (ii) of subparagraph (A), as the
case may be, in the court order or settlement
agreement, except that the requirement of this
subparagraph shall not apply in the case of any
settlement agreement which requires the taxpayer
to pay or incur an amount not greater than
$1,000,000.
A taxpayer shall not meet the requirements of sub-
paragraph (A) solely by reason of an identification
under subparagraph (B). This paragraph shall not
apply to any amount paid or incurred as reimburse-
ment to the government or entity for the costs of any
investigation or litigation unless such amount is paid
or incurred for a cost or fee regularly charged for any
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routine audit or other customary review performed by
the government or entity.
‘‘(3) EXCEPTION
FOR
AMOUNTS
PAID
OR
IN-
CURRED
AS
THE
RESULT
OF
CERTAIN
COURT
OR-
DERS.—Paragraph (1) shall not apply to any
amount paid or incurred by order of a court in a suit
in which no government or entity described in para-
graph (4) is a party.
‘‘(4) CERTAIN NONGOVERNMENTAL REGULATORY
ENTITIES.—An entity is described in this paragraph
if it is—
‘‘(A) a nongovernmental entity which exer-
cises self-regulatory powers (including imposing
sanctions) in connection with a qualified board
or exchange (as defined in section 1256(g)(7)), or
‘‘(B) to the extent provided in regulations,
a nongovernmental entity which exercises self-
regulatory powers (including imposing sanc-
tions) as part of performing an essential govern-
mental function.
‘‘(5) EXCEPTION FOR TAXES DUE.—Paragraph
(1) shall not apply to any amount paid or incurred
as taxes due.’’.
(b) REPORTING OF DEDUCTIBLE AMOUNTS.—
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(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by inserting after
section 6050V the following new section:
‘‘SEC. 6050W. INFORMATION WITH RESPECT TO CERTAIN
FINES, PENALTIES, AND OTHER AMOUNTS.
‘‘(a) REQUIREMENT OF REPORTING.—
‘‘(1) IN GENERAL.—The appropriate official of
any government or entity which is described in sec-
tion 162(f)(4) which is involved in a suit or agree-
ment described in paragraph (2) shall make a return
in such form as determined by the Secretary setting
forth—
‘‘(A) the amount required to be paid as a
result of the suit or agreement to which para-
graph (1) of section 162(f) applies,
‘‘(B) any amount required to be paid as a
result of the suit or agreement which constitutes
restitution or remediation of property, and
‘‘(C) any amount required to be paid as a
result of the suit or agreement for the purpose of
coming into compliance with any law which was
violated or involved in the investigation or in-
quiry.
‘‘(2) SUIT OR AGREEMENT DESCRIBED.—
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‘‘(A) IN GENERAL.—A suit or agreement is
described in this paragraph if—
‘‘(i) it is—
‘‘(I) a suit with respect to a viola-
tion of any law over which the govern-
ment or entity has authority and with
respect to which there has been a court
order, or
‘‘(II) an agreement which is en-
tered into with respect to a violation of
any law over which the government or
entity has authority, or with respect to
an investigation or inquiry by the gov-
ernment or entity into the potential
violation of any law over which such
government or entity has authority,
and
‘‘(ii) the aggregate amount involved in
all court orders and agreements with respect
to the violation, investigation, or inquiry is
$600 or more.
‘‘(B) ADJUSTMENT OF REPORTING THRESH-
OLD.—The Secretary may adjust the $600
amount in subparagraph (A)(ii) as necessary in
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order to ensure the efficient administration of the
internal revenue laws.
‘‘(3) TIME
OF
FILING.—The return required
under this subsection shall be filed not later than—
‘‘(A) 30 days after the date on which a
court order is issued with respect to the suit or
the date the agreement is entered into, as the
case may be, or
‘‘(B) the date specified by the Secretary.
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS
INVOLVED IN THE SETTLEMENT.—Every person required to
make a return under subsection (a) shall furnish to each
person who is a party to the suit or agreement a written
statement showing—
‘‘(1) the name of the government or entity, and
‘‘(2) the information supplied to the Secretary
under subsection (a)(1).
The written statement required under the preceding sen-
tence shall be furnished to the person at the same time the
government or entity provides the Secretary with the infor-
mation required under subsection (a).
‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes
of this section, the term ‘appropriate official’ means the offi-
cer or employee having control of the suit, investigation,
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or inquiry or the person appropriately designated for pur-
poses of this section.’’.
(2) CONFORMING AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of
chapter 61 is amended by inserting after the item re-
lating to section 6050V the following new item:
‘‘Sec. 6050W. Information with respect to certain fines, penalties, and other
amounts’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts paid or incurred on or after
the date of the enactment of this Act, except that such
amendments shall not apply to amounts paid or incurred
under any binding order or agreement entered into before
such date. Such exception shall not apply to an order or
agreement requiring court approval unless the approval
was obtained before such date.
SEC. 12508. INCREASE IN INFORMATION RETURN PEN-
ALTIES.
(a) FAILURE TO FILE CORRECT INFORMATION RE-
TURNS.—
(1) 
IN
GENERAL.—Section 
6721(a)(1) 
is
amended—
(A) by striking ‘‘$50’’ and inserting
‘‘$250’’, and
(B) by striking ‘‘$250,000’’ and inserting
‘‘$3,000,000’’.
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(2) REDUCTION WHERE CORRECTION IN SPECI-
FIED PERIOD.—
(A) CORRECTION WITHIN 30 DAYS.—Section
6721(b)(1) is amended—
(i) by striking ‘‘$15’’ and inserting
‘‘$50’’,
(ii) by striking ‘‘$50’’ and inserting
‘‘$250’’, and
(iii) by striking ‘‘$75,000’’ and insert-
ing ‘‘$500,000’’.
(B) FAILURES CORRECTED ON OR BEFORE
AUGUST 1.—Section 6721(b)(2) is amended—
(i) by striking ‘‘$30’’ and inserting
‘‘$100’’,
(ii) by striking ‘‘$50’’ and inserting
‘‘$250’’, and
(iii) by striking ‘‘$150,000’’ and in-
serting ‘‘$1,500,000’’.
(3) LOWER
LIMITATION
FOR
PERSONS
WITH
GROSS RECEIPTS OF NOT MORE THAN $5,000,000.—Sec-
tion 6721(d)(1) is amended—
(A) in subparagraph (A)—
(i) by striking ‘‘$100,000’’ and insert-
ing ‘‘$1,000,000’’, and
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(ii) by striking ‘‘$250,000’’ and insert-
ing ‘‘$3,000,000’’,
(B) in subparagraph (B)—
(i) by striking ‘‘$25,000’’ and inserting
‘‘$175,000’’, and
(ii) by striking ‘‘$75,000’’ and insert-
ing ‘‘$500,000’’, and
(C) in subparagraph (C)—
(i) by striking ‘‘$50,000’’ and inserting
‘‘$500,000’’, and
(ii) by striking ‘‘$150,000’’ and insert-
ing ‘‘$1,500,000’’.
(4) PENALTY
IN
CASE
OF
INTENTIONAL
DIS-
REGARD.—Section 6721(e) is amended—
(A) by striking ‘‘$100’’ in paragraph (2)
and inserting ‘‘$500’’,
(B) by striking ‘‘$250,000’’ in paragraph
(3)(A) and inserting ‘‘$3,000,000’’.
(b) FAILURE TO FURNISH CORRECT PAYEE STATE-
MENTS.—
(1) IN GENERAL.—Section 6722(a) is amended—
(A) by striking ‘‘$50’’ and inserting
‘‘$250’’, and
(B) by striking ‘‘$100,000’’ and inserting
‘‘$1,000,000’’.
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(2) PENALTY
IN
CASE
OF
INTENTIONAL
DIS-
REGARD.—Section 6722(c) is amended—
(A) by striking ‘‘$100’’ in paragraph (1)
and inserting ‘‘$500’’, and
(B) by striking ‘‘$100,000’’ in paragraph
(2)(A) and inserting ‘‘$1,000,000’’.
(c) FAILURE TO COMPLY WITH OTHER INFORMATION
REPORTING REQUIREMENTS.—Section 6723 is amended—
(1) by striking ‘‘$50’’ and inserting ‘‘$250’’, and
(2) by striking ‘‘$100,000’’ and inserting
‘‘$1,000,000’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to information returns re-
quired to be filed on or after January 1, 2008.
SEC. 12509. ASSET TREATMENT OF HORSES.
(a) 3-YEAR DEPRECIATION FOR ALL RACE HORSES.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
168(e)(3)(A) of the Internal Revenue Code of 1986
(relating to 3-year property) is amended to read as
follows:
‘‘(i) any race horse,’’.
(2) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service
on or after the date of the enactment of this Act.
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(b) REDUCTION OF HOLDING PERIOD TO 12 MONTHS
FOR PURPOSES OF DETERMINING WHETHER HORSES ARE
SECTION 1231 ASSETS.—
(1) IN GENERAL.—Subparagraph (A) of section
1231(b)(3) of the Internal Revenue Code of 1986 (re-
lating to definition of livestock) is amended by strik-
ing ‘‘and horses’’.
(2) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning
after December 31, 2007.
SEC. 12510. ELIMINATION OF PRIVATE PAYMENT TEST FOR
PROFESSIONAL SPORTS FACILITY BONDS.
(a) IN GENERAL.—Section 141(a) (defining private
activity bond) is amended by adding at the end the fol-
lowing new flush sentence:
‘‘In the case of any professional sports facility bond, para-
graph (1) shall be applied without regard to subparagraph
(B) thereof.’’.
(b) PROFESSIONAL
SPORTS
FACILITY
BOND
DE-
FINED.—Section 141 is amended by adding at the end the
following new subsection:
‘‘(f) PROFESSIONAL SPORTS FACILITY BOND.—For
purposes of subsection (a)—
‘‘(1) IN GENERAL.—The term ‘professional sports
facility bond’ means any bond issued as part of an
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issue any portion of the proceeds of which are to be
used to provide a professional sports facility.
‘‘(2) PROFESSIONAL
SPORTS
FACILITY.—The
term ‘professional sports facility’ means real property
and related improvements used, in whole or in part,
for professional sports, professional sports exhibitions,
professional games, or professional training.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to bonds issued after the date of the en-
actment of this Act, other than bonds with respect to which
a resolution was issued by an issuer or conduit borrower
before January 24, 2007.
SEC. 12511. MODIFICATION OF PENALTY FOR FAILURE TO
FILE PARTNERSHIP RETURNS; LIMITATION
ON DISCLOSURE.
(a) EXTENSION
OF
TIME
LIMITATION.—Section
6698(a) (relating to failure to file partnership returns) is
amended by striking ‘‘5 months’’ and inserting ‘‘12
months’’.
(b) INCREASE IN PENALTY AMOUNT.—Paragraph (1)
of section 6698(b) is amended by striking ‘‘$50’’ and insert-
ing ‘‘$100’’.
(c) LIMITATION ON DISCLOSURE OF TAXPAYER RE-
TURNS TO PARTNERS, S CORPORATION SHAREHOLDERS,
TRUST BENEFICIARIES, AND ESTATE BENEFICIARIES.—
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(1) IN GENERAL.—Section 6103(e) (relating to
disclosure to persons having material interest) is
amended by adding at the end the following new
paragraph:
‘‘(10) LIMITATION
ON
CERTAIN
DISCLOSURES
UNDER THIS SUBSECTION.—In the case of an inspec-
tion or disclosure under this subsection relating to the
return of a partnership, S corporation, trust, or an
estate, the information inspected or disclosed shall not
include any supporting schedule, attachment, or list
which includes the taxpayer identity information of a
person other than the entity making the return or the
person conducting the inspection or to whom the dis-
closure is made.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall take effect on the date of the en-
actment of this Act.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to returns required to
be filed after the date of the enactment of this Act.
SEC. 12512. PARTICIPANTS IN GOVERNMENT SECTION 457
PLANS ALLOWED TO TREAT ELECTIVE DEFER-
RALS AS ROTH CONTRIBUTIONS.
(a) IN GENERAL.—Section 402A(e)(1) (defining appli-
cable retirement plan) is amended by striking ‘‘and’’ at the
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end of subparagraph (A), by striking the period at the end
of subparagraph (B) and inserting ‘‘, and’’, and by adding
at the end the following:
‘‘(C) an eligible deferred compensation plan
(as defined in section 457(b)) of an eligible em-
ployer described in section 457(e)(1)(A).’’.
(b) ELECTIVE DEFERRALS.—Section 402A(e)(2) (de-
fining elective deferral) is amended to read as follows:
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means—
‘‘(A) any elective deferral described in sub-
paragraph (A) or (C) of section 402(g)(3), and
‘‘(B) any elective deferral of compensation
by an individual under an eligible deferred com-
pensation plan (as defined in section 457(b)) of
an 
eligible 
employer 
described 
in 
section
457(e)(1)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2007.
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PART II—ECONOMIC SUBSTANCE DOCTRINE
SEC. 12521. CLARIFICATION OF ECONOMIC SUBSTANCE
DOCTRINE.
(a) IN GENERAL.—Section 7701 is amended by redes-
ignating subsection (p) as subsection (q) and by inserting
after subsection (o) the following new subsection:
‘‘(p) CLARIFICATION OF ECONOMIC SUBSTANCE DOC-
TRINE; ETC.—
‘‘(1) GENERAL RULES.—
‘‘(A) IN GENERAL.—In any case in which a
court determines that the economic substance
doctrine is relevant for purposes of this title to
a transaction (or series of transactions), such
transaction (or series of transactions) shall have
economic substance only if the requirements of
this paragraph are met.
‘‘(B) 
DEFINITION
OF
ECONOMIC
SUB-
STANCE.—For purposes of subparagraph (A)—
‘‘(i) IN GENERAL.—A transaction has
economic substance only if—
‘‘(I) the transaction changes in a
meaningful way (apart from Federal
tax effects) the taxpayer’s economic po-
sition, and
‘‘(II) subject to clause (iii), the
taxpayer has a substantial purpose
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(other than a Federal tax purpose) for
entering into such transaction.
‘‘(ii) SPECIAL RULE WHERE TAXPAYER
RELIES ON PROFIT POTENTIAL.—A trans-
action shall not be treated as having eco-
nomic substance solely by reason of having
a potential for profit unless the present
value of the reasonably expected pre-Federal
tax profit from the transaction is substan-
tial in relation to the present value of the
expected net Federal tax benefits that would
be allowed if the transaction were respected.
In determining pre-Federal tax profit, there
shall be taken into account fees and other
transaction expenses and to the extent pro-
vided by the Secretary, foreign taxes.
‘‘(iii) SPECIAL
RULES
FOR
DETER-
MINING WHETHER NON-FEDERAL TAX PUR-
POSE.—For purposes of clause (i)(II)—
‘‘(I) a purpose of achieving a fi-
nancial accounting benefit shall not be
taken into account in determining
whether a transaction has a substan-
tial purpose (other than a Federal tax
purpose) if the origin of such financial
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accounting benefit is a reduction of
Federal tax, and
‘‘(II) the taxpayer shall not be
treated as having a substantial pur-
pose (other than a Federal tax pur-
pose) with respect to a transaction if
the only such purpose is the reduction
of non-Federal taxes and the trans-
action will result in a reduction of
Federal taxes substantially equal to, or
greater than, the reduction in non-Fed-
eral taxes because of similarities be-
tween the laws imposing the taxes.
‘‘(2) DEFINITIONS
AND
SPECIAL
RULES.—For
purposes of this subsection—
‘‘(A) ECONOMIC
SUBSTANCE
DOCTRINE.—
The term ‘economic substance doctrine’ means
the common law doctrine under which tax bene-
fits under subtitle A with respect to a trans-
action are not allowable if the transaction does
not have economic substance or lacks a business
purpose.
‘‘(B) EXCEPTION
FOR
PERSONAL
TRANS-
ACTIONS OF INDIVIDUALS.—In the case of an in-
dividual, this subsection shall apply only to
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transactions entered into in connection with a
trade or business or an activity engaged in for
the production of income.
‘‘(3) OTHER PROVISIONS NOT AFFECTED.—Ex-
cept as specifically provided in this subsection, the
provisions of this subsection shall not be construed as
altering or supplanting any other rule of law or pro-
vision of this title, and the requirements of this sub-
section shall be construed as being in addition to any
such other rule of law or provision of this title.
‘‘(4) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or appro-
priate to carry out the purposes of this subsection.
Such regulations may include exemptions from the
application of this subsection.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to transactions entered into after the
date of the enactment of this Act.
SEC. 12522. PENALTY FOR UNDERSTATEMENTS ATTRIB-
UTABLE TO TRANSACTIONS LACKING ECO-
NOMIC SUBSTANCE, ETC.
(a) IN GENERAL.—Subchapter A of chapter 68 is
amended by inserting after section 6662A the following new
section:
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‘‘SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIB-
UTABLE TO TRANSACTIONS LACKING ECO-
NOMIC SUBSTANCE, ETC.
‘‘(a) IMPOSITION OF PENALTY.—If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount
equal to 30 percent of the amount of such understatement.
‘‘(b) REDUCTION OF PENALTY FOR DISCLOSED TRANS-
ACTIONS.—Subsection (a) shall be applied by substituting
‘20 percent’ for ‘30 percent’ with respect to the portion of
any noneconomic substance transaction understatement
with respect to which the relevant facts affecting the tax
treatment of the item are adequately disclosed in the return
or a statement attached to the return.
‘‘(c) NONECONOMIC SUBSTANCE TRANSACTION UNDER-
STATEMENT.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘noneconomic sub-
stance 
transaction 
understatement’ 
means 
any
amount which would be an understatement under sec-
tion 6662A(b)(1) if section 6662A were applied by
taking into account items attributable to noneconomic
substance transactions rather than items to which sec-
tion 6662A would apply without regard to this para-
graph.
‘‘(2) NONECONOMIC SUBSTANCE TRANSACTION.—
The term ‘noneconomic substance transaction’ means
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any transaction if there is a lack of economic sub-
stance (within the meaning of section 7701(p)(1)(B))
for the transaction giving rise to the claimed benefit.
‘‘(d) RULES
APPLICABLE
TO
ASSERTION, COM-
PROMISE, AND COLLECTION OF PENALTY.—
‘‘(1) IN GENERAL.—Only the Chief Counsel for
the Internal Revenue Service may assert a penalty
imposed under this section or may compromise all or
any portion of such penalty. The Chief Counsel may
delegate the authority under this paragraph only to
an individual holding the position of chief of a
branch within the Office of the Chief Counsel for the
Internal Revenue Service.
‘‘(2) SPECIFIC REQUIREMENTS.—
‘‘(A) ASSERTION OF PENALTY.—The Chief
Counsel for the Internal Revenue Service (or the
Chief Counsel’s delegate under paragraph (1))
shall not assert a penalty imposed under this
section unless, before the assertion of the penalty,
the taxpayer is provided—
‘‘(i) a notice of intent to assert the
penalty, and
‘‘(ii) an opportunity to provide to the
Commissioner (or the Chief Counsel’s dele-
gate under paragraph (1)) a written re-
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sponse to the proposed penalty within a
reasonable period of time after such notice.
‘‘(B) COMPROMISE OF PENALTY.—A com-
promise shall not result in a reduction in the
penalty imposed by this section in an amount
greater than the amount which bears the same
ratio to the amount of the penalty determined
without regard to the compromise as—
‘‘(i) the reduction under the com-
promise in the noneconomic substance
transaction understatement to which the
penalty relates, bears to
‘‘(ii) the amount of the noneconomic
substance transaction understatement deter-
mined without regard to the compromise.
‘‘(3) RULES RELATING TO RELEVANCY REQUIRE-
MENT.—
‘‘(A) DETERMINATION
OF
RELEVANCE
BY
CHIEF COUNSEL.—The Chief Counsel for the In-
ternal Revenue Service (or the Chief Counsel’s
delegate under paragraph (1)) may assert, com-
promise, or collect a penalty imposed by this sec-
tion with respect to a noneconomic substance
transaction even if there has not been a court de-
termination that the economic substance doctrine
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was relevant for purposes of this title to the
transaction if the Chief Counsel (or delegate) de-
termines that either was so relevant.
‘‘(B) FINAL ORDER OF COURT.—If there is
a final order of a court that determines that the
economic substance doctrine was not relevant for
purposes of this title to a transaction (or series
of transactions), any penalty imposed under this
section with respect to the transaction (or series
of transactions) shall be rescinded.
‘‘(4) APPLICABLE
RULES.—The rules of para-
graphs (2) and (3) of section 6707A(d) shall apply to
a compromise under paragraph (1).
‘‘(e) COORDINATION WITH OTHER PENALTIES.—Ex-
cept as otherwise provided in this part, the penalty imposed
by this section shall be in addition to any other penalty
imposed by this title.
‘‘(f) CROSS REFERENCES.—
‘‘(1) For coordination of penalty with understatements
under section 6662 and other special rules, see section
6662A(e).
‘‘(2) For reporting of penalty imposed under this section to
the Securities and Exchange Commission, see section
6707A(e).’’.
(b) COORDINATION WITH OTHER UNDERSTATEMENTS
AND PENALTIES.—
(1) The second sentence of section 6662(d)(2)(A)
is amended by inserting ‘‘and without regard to items
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with respect to which a penalty is imposed by section
6662B’’ before the period at the end.
(2) Subsection (e) of section 6662A is amended—
(A) in paragraph (1), by inserting ‘‘and
noneconomic substance transaction understate-
ments’’ after ‘‘reportable transaction understate-
ments’’ both places it appears,
(B) in paragraph (2)(A)—
(i) by inserting ‘‘6662B or’’ before
‘‘6663’’ in the text, and
(ii) by striking ‘‘PENALTY’’ in the
heading and inserting ‘‘AND ECONOMIC SUB-
STANCE PENALTIES’’,
(C) in paragraph (2)(B)—
(i) by inserting ‘‘and section 6662B’’
after ‘‘This section’’, and
(ii) by striking ‘‘PENALTY’’ in the
heading and inserting ‘‘AND ECONOMIC SUB-
STANCE PENALTIES’’,
(D) in paragraph (3), by inserting ‘‘or non-
economic substance transaction understatement’’
after ‘‘reportable transaction understatement’’,
and
(E) by adding at the end the following new
paragraph:
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‘‘(4) NONECONOMIC
SUBSTANCE
TRANSACTION
UNDERSTATEMENT.—For purposes of this subsection,
the term ‘noneconomic substance transaction under-
statement’ has the meaning given such term by sec-
tion 6662B(c).’’.
(3) Subsection (e) of section 6707A is amended—
(A) by striking ‘‘or’’ at the end of subpara-
graph (B), and
(B) by striking subparagraph (C) and in-
serting the following new subparagraphs:
‘‘(C) is required to pay a penalty under sec-
tion 6662B with respect to any noneconomic
substance transaction, or
‘‘(D) is required to pay a penalty under
section 6662(h) with respect to any transaction
and would (but for section 6662A(e)(2)(B)) have
been subject to penalty under section 6662A at a
rate prescribed under section 6662A(c) or to pen-
alty under section 6662B,’’.
(c) CLERICAL AMENDMENT.—The table of sections for
part II of subchapter A of chapter 68 is amended by insert-
ing after the item relating to section 6662A the following
new item:
‘‘Sec. 6662B. Penalty for understatements attributable to transactions lacking
economic substance, etc.’’.
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(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to transactions entered into after the
date of the enactment of this Act.
SEC. 12523. DENIAL OF DEDUCTION FOR INTEREST ON UN-
DERPAYMENTS 
ATTRIBUTABLE 
TO 
NON-
ECONOMIC SUBSTANCE TRANSACTIONS.
(a) IN GENERAL.—Section 163(m) (relating to interest
on unpaid taxes attributable to nondisclosed reportable
transactions) is amended—
(1) by striking ‘‘attributable’’ and all that fol-
lows and inserting the following: ‘‘attributable to—
‘‘(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with
respect 
to 
which 
the 
requirement 
of 
section
6664(d)(2)(A) is not met, or
‘‘(2) any noneconomic substance transaction un-
derstatement (as defined in section 6662B(c)).’’, and
(2) by inserting ‘‘AND NONECONOMIC SUBSTANCE
TRANSACTIONS’’ in the heading thereof after ‘‘TRANS-
ACTIONS’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to transactions after the date of the en-
actment of this Act in taxable years ending after such date.
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Subtitle F—Protection of Social
Security
SEC. 12601. PROTECTION OF SOCIAL SECURITY.
To ensure that the assets of the trust funds established
under section 201 of the Social Security Act (42 U.S.C.
401) are not reduced as a result of the enactment of this
Act, the Secretary of the Treasury shall transfer annually
from the general revenues of the Federal Government to
those trust funds the following amounts:
(1) For fiscal year 2009, $86,000,000.
(2) For fiscal year 2010, $90,000,000.
(3) For fiscal year 2011, $88,000,000.
(4) For fiscal year 2012, $88,000,000.
(5) For fiscal year 2013, $5,000,000.
(6) For fiscal year 2014, $5,000,000.
(7) For fiscal year 2015, $4,000,000.
(8) For each fiscal year after fiscal year 2015,
$2,000,000.
SEC. 12602. INTEREST RATES FOR WATER AND WASTE DIS-
POSAL FACILITIES LOANS.
Section 307(a)(3) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1927(a)(3)) is amended by add-
ing at the end the following:
‘‘(E) INTEREST
RATES
FOR
WATER
AND
WASTE DISPOSAL FACILITIES LOANS.—Notwith-
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standing subparagraph (A), for loans (other than
guaranteed loans) for water and waste disposal
facilities—
‘‘(i) in the case of a loan that would be
subject to the 5 percent interest rate limita-
tion under subparagraph (A), the Secretary
shall set the interest rate equal to 60 percent
of the current market yield for outstanding
municipal obligations with remaining peri-
ods to maturity comparable to the average
maturity of such loans, adjusted to the
nearest one-eight of 1 per centum; and
‘‘(ii) in the case of a loan that would
be subject to the 7 percent limitation in sub-
paragraph (A), the Secretary shall set the
interest rate equal to 80 percent of the cur-
rent market yield for outstanding munic-
ipal obligations with remaining periods to
maturity comparable to the average matu-
rity of such loans, adjusted to the nearest
one-eight of 1 per centum.’’.
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Subtitle G—Kansas Disaster Tax
Relief Assistance
SEC. 12701. TEMPORARY TAX RELIEF FOR KIOWA COUNTY,
KANSAS AND SURROUNDING AREA.
The following provisions of or relating to the Internal
Revenue Code of 1986 shall apply, in addition to the areas
described in such provisions, to an area with respect to
which a major disaster has been declared by the President
under section 401 of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (FEMA–1699–DR, as in ef-
fect on the date of the enactment of this Act) by reason of
severe storms and tornados beginning on May 4, 2007, and
determined by the President to warrant individual or indi-
vidual and public assistance from the Federal Government
under such Act with respect to damages attributed to such
storms and tornados:
(1) SUSPENSION OF CERTAIN LIMITATIONS ON
PERSONAL CASUALTY LOSSES.—Section 1400S(b)(1)
of the Internal Revenue Code of 1986, by substituting
‘‘May 4, 2007’’ for ‘‘August 25, 2005’’.
(2) EXTENSION OF REPLACEMENT PERIOD FOR
NONRECOGNITION
OF
GAIN.—Section 405 of the
Katrina Emergency Tax Relief Act of 2005, by sub-
stituting ‘‘on or after May 4, 2007, by reason of the
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May 4, 2007, storms and tornados’’ for ‘‘on or after
August 25, 2005, by reason of Hurricane Katrina’’.
(3) EMPLOYEE RETENTION CREDIT FOR EMPLOY-
ERS AFFECTED BY MAY 4 STORMS AND TORNADOS.—
Section 1400R(a) of the Internal Revenue Code of
1986—
(A) by substituting ‘‘May 4, 2007’’ for ‘‘Au-
gust 28, 2005’’ each place it appears,
(B) by substituting ‘‘January 1, 2008’’ for
‘‘January 1, 2006’’ both places it appears, and
(C) only with respect to eligible employers
who employed an average of not more than 200
employees on business days during the taxable
year before May 4, 2007.
(4) SPECIAL
ALLOWANCE
FOR
CERTAIN
PROP-
ERTY ACQUIRED ON OR AFTER MAY 5, 2007.—Section
1400N(d) of such Code—
(A) by substituting ‘‘qualified Recovery As-
sistance property’’ for ‘‘qualified Gulf Oppor-
tunity Zone property’’ each place it appears,
(B) by substituting ‘‘May 5, 2007’’ for ‘‘Au-
gust 28, 2005’’ each place it appears,
(C) by substituting ‘‘December 31, 2008’’ for
‘‘December 31, 2007’’ in paragraph (2)(A)(v),
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(D) by substituting ‘‘December 31, 2009’’
for ‘‘December 31, 2008’’ in paragraph (2)(A)(v),
(E) by substituting ‘‘May 4, 2007’’ for ‘‘Au-
gust 27, 2005’’ in paragraph (3)(A),
(F) by substituting ‘‘January 1, 2009’’ for
‘‘January 1, 2008’’ in paragraph (3)(B), and
(G) determined without regard to para-
graph (6) thereof.
(5) INCREASE
IN
EXPENSING
UNDER
SECTION
179.—Section 1400N(e) of such Code, by substituting
‘‘qualified section 179 Recovery Assistance property’’
for ‘‘qualified section 179 Gulf Opportunity Zone
property’’ each place it appears.
(6) EXPENSING FOR CERTAIN DEMOLITION AND
CLEAN-UP COSTS.—Section 1400N(f) of such Code—
(A) by substituting ‘‘qualified Recovery As-
sistance clean-up cost’’ for ‘‘qualified Gulf Op-
portunity Zone clean-up cost’’ each place it ap-
pears, and
(B) by substituting ‘‘beginning on May 4,
2007, and ending on December 31, 2009’’ for
‘‘beginning on August 28, 2005, and ending on
December 31, 2007’’ in paragraph (2) thereof.
(7) TREATMENT OF PUBLIC UTILITY PROPERTY
DISASTER LOSSES.—Section 1400N(o) of such Code.
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(8) TREATMENT OF NET OPERATING LOSSES AT-
TRIBUTABLE TO STORM LOSSES.—Section 1400N(k) of
such Code—
(A) by substituting ‘‘qualified Recovery As-
sistance loss’’ for ‘‘qualified Gulf Opportunity
Zone loss’’ each place it appears,
(B) by substituting ‘‘after May 3, 2007, and
before on January 1, 2010’’ for ‘‘after August 27,
2005, and before January 1, 2008’’ each place it
appears,
(C) by substituting ‘‘May 4, 2007’’ for ‘‘Au-
gust 28, 2005’’ in paragraph (2)(B)(ii)(I) there-
of,
(D) by substituting ‘‘qualified Recovery As-
sistance property’’ for ‘‘qualified Gulf Oppor-
tunity Zone property’’ in paragraph (2)(B)(iv)
thereof, and
(E) by substituting ‘‘qualified Recovery As-
sistance casualty loss’’ for ‘‘qualified Gulf Op-
portunity Zone casualty loss’’ each place it ap-
pears.
(9) TREATMENT OF REPRESENTATIONS REGARD-
ING INCOME ELIGIBILITY FOR PURPOSES OF QUALI-
FIED
RENTAL
PROJECT
REQUIREMENTS.—Section
1400N(n) of such Code.
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(10) SPECIAL RULES FOR USE OF RETIREMENT
FUNDS.—Section 1400Q of such Code—
(A) by substituting ‘‘qualified Recovery As-
sistance distribution’’ for ‘‘qualified hurricane
distribution’’ each place it appears,
(B) by substituting ‘‘on or after May 4,
2007, and before January 1, 2009’’ for ‘‘on or
after August 25, 2005, and before January 1,
2007’’ in subsection (a)(4)(A)(i),
(C) by substituting ‘‘qualified storm dis-
tribution’’ for ‘‘qualified Katrina distribution’’
each place it appears,
(D) by substituting ‘‘after November 4,
2006, and before May 5, 2007’’ for ‘‘after Feb-
ruary 28, 2005, and before August 29, 2005’’ in
subsection (b)(2)(B)(ii),
(E) by substituting ‘‘beginning on May 4,
2007, and ending on November 5, 2007’’ for ‘‘be-
ginning on August 25, 2005, and ending on Feb-
ruary 28, 2006’’ in subsection (b)(3)(A),
(F) by substituting ‘‘qualified storm indi-
vidual’’ for ‘‘qualified Hurricane Katrina indi-
vidual’’ each place it appears,
(G) by substituting ‘‘December 31, 2007’’
for ‘‘December 31, 2006’’ in subsection (c)(2)(A),
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(H) by substituting ‘‘beginning on June 4,
2007, and ending on December 31, 2007’’ for
‘‘beginning on September 24, 2005, and ending
on 
December 
31, 
2006’’ 
in 
subsection
(c)(4)(A)(i),
(I) by substituting ‘‘May 4, 2007’’ for ‘‘Au-
gust 25, 2005’’ in subsection (c)(4)(A)(ii), and
(J) by substituting ‘‘January 1, 2008’’ for
‘‘January 1, 2007’’ in subsection (d)(2)(A)(ii).
Subtitle H—Other Provisions
SEC. 12801. INCOME AVERAGING FOR AMOUNTS RECEIVED
IN CONNECTION WITH THE EXXON VALDEZ
LITIGATION.
(a) INCOME AVERAGING OF AMOUNTS RECEIVED FROM
THE EXXON VALDEZ LITIGATION.—For purposes of section
1301 of the Internal Revenue Code of 1986—
(1) any qualified taxpayer who receives any
qualified settlement income in any taxable year shall
be treated as engaged in a fishing business (deter-
mined without regard to the commercial nature of the
business), and
(2) such qualified settlement income shall be
treated as income attributable to such a fishing busi-
ness for such taxable year.
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(b) CONTRIBUTIONS OF AMOUNTS RECEIVED TO RE-
TIREMENT ACCOUNTS.—
(1) IN GENERAL.—Any qualified taxpayer who
receives qualified settlement income during the tax-
able year may, at any time before the end of the tax-
able year in which such income was received, make
one or more contributions to an eligible retirement
plan of which such qualified taxpayer is a beneficiary
in an aggregate amount not to exceed the lesser of—
(A) $100,000 (reduced by the amount of
qualified settlement income contributed to an eli-
gible retirement plan in prior taxable years pur-
suant to this subsection), or
(B) the amount of qualified settlement in-
come received by the individual during the tax-
able year.
(2) 
TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of paragraph (1), a qualified
taxpayer shall be deemed to have made a contribution
to an eligible retirement plan on the last day of the
taxable year in which such income is received if the
contribution is made on account of such taxable year
and is made not later than the time prescribed by law
for filing the return for such taxable year (not includ-
ing extensions thereof).
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(3) TREATMENT OF CONTRIBUTIONS TO ELIGIBLE
RETIREMENT PLANS.—For purposes of the Internal
Revenue Code of 1986, if a contribution is made pur-
suant to paragraph (1) with respect to qualified set-
tlement income, then—
(A) except as provided in paragraph (4)—
(i) to the extent of such contribution,
the qualified settlement income shall not be
included in gross income, and
(ii) for purposes of section 72 of such
Code, such contribution shall not be consid-
ered to be investment in the contract,
(B) the qualified taxpayer shall, to the ex-
tent of the amount of the contribution, be
treated—
(i) as having received the qualified set-
tlement income—
(I) in the case of a contribution to
an individual retirement plan (as de-
fined under section 7701(a)(37) of such
Code), in a distribution described in
section 408(d)(3) of such Code, and
(II) in the case of any other eligi-
ble retirement plan, in an eligible roll-
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over distribution (as defined under sec-
tion 402(f)(2) of such Code), and
(ii) as having transferred the amount
to the eligible retirement plan in a direct
trustee to trustee transfer within 60 days of
the distribution,
(C) section 408(d)(3)(B) of the Internal
Revenue Code of 1986 shall not apply with re-
spect to amounts treated as a rollover under this
paragraph, and
(D) section 408A(c)(3)(B) of the Internal
Revenue Code of 1986 shall not apply with re-
spect to amounts contributed to a Roth IRA (as
defined under section 408A(b) of such Code) or
a designated Roth contribution to an applicable
retirement plan (within the meaning of section
402A of such Code) under this paragraph.
(4) SPECIAL RULE FOR ROTH IRAS AND ROTH
401(k)S.—For purposes of the Internal Revenue Code
of 1986, if a contribution is made pursuant to para-
graph (1) with respect to qualified settlement income
to a Roth IRA (as defined under section 408A(b) of
such Code) or as a designated Roth contribution to an
applicable retirement plan (within the meaning of
section 402A of such Code), then—
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(A) the qualified settlement income shall be
includible in gross income, and
(B) for purposes of section 72 of such Code,
such contribution shall be considered to be in-
vestment in the contract.
(5) ELIGIBLE RETIREMENT PLAN.—For purpose
of this subsection, the term ‘‘eligible retirement plan’’
has the meaning given such term under section
402(c)(8)(B) of the Internal Revenue Code of 1986.
(c) TREATMENT OF QUALIFIED SETTLEMENT INCOME
UNDER EMPLOYMENT TAXES.—
(1) SECA.—For purposes of chapter 2 of the In-
ternal Revenue Code of 1986 and section 211 of the
Social Security Act, no portion of qualified settlement
income received by a qualified taxpayer shall be treat-
ed as self-employment income.
(2) FICA.—For purposes of chapter 21 of the In-
ternal Revenue Code of 1986 and section 209 of the
Social Security Act, no portion of qualified settlement
income received by a qualified taxpayer shall be treat-
ed as wages.
(d) QUALIFIED TAXPAYER.—For purposes of this sec-
tion, the term ‘‘qualified taxpayer’’ means—
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(1) any individual who is a plaintiff in the civil
action In re Exxon Valdez, No. 89–095–CV (HRH)
(Consolidated) (D. Alaska); or
(2) any individual who is a beneficiary of the es-
tate of such a plaintiff who—
(A) acquired the right to receive qualified
settlement income from that plaintiff; and
(B) was the spouse or an immediate relative
of that plaintiff.
(e) QUALIFIED SETTLEMENT INCOME.—For purposes
of this section, the term ‘‘qualified settlement income’’
means any interest and punitive damage awards which
are—
(1) otherwise includible in gross income (deter-
mined without regard to subsection (b)), and
(2) received (whether as lump sums or periodic
payments) in connection with the civil action In re
Exxon Valdez, No. 89–095–CV (HRH) (Consolidated)
(D. Alaska) (whether pre- or post-judgment and
whether related to a settlement or judgment).
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SEC. 12802. 2-YEAR EXTENSION AND EXPANSION OF CHARI-
TABLE DEDUCTION FOR CONTRIBUTIONS OF
FOOD INVENTORY.
(a) IN GENERAL.—Section 170(e)(3)(C) (relating to
special rule for certain contributions of inventory and other
property) is amended—
(1) by striking ‘‘December 31, 2007’’ in clause
(iv) and inserting ‘‘December 31, 2009’’, and
(2) by redesignating clauses (iii) and (iv) as
clauses (iv) and (v), respectively, and by inserting
after clause (ii) the following new clause:
‘‘(iii) DETERMINATION OF BASIS.—If a
taxpayer—
‘‘(I) does not account for inven-
tories under section 471, and
‘‘(II) is not required to capitalize
indirect costs under section 263A,
the taxpayer may elect, solely for purposes
of subparagraph (B), to treat the basis of
any apparently wholesome food as being
equal to 25 percent of the fair market value
of such food.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to contributions made after December
31, 2007.
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SEC. 12803. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS EXCLUDED FROM GROSS IN-
COME.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 is amended by inserting after section 139A the following
new section:
‘‘SEC. 139B. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS.
‘‘(a) IN GENERAL.—Gross income of an individual
does not include amounts received, from an organization
described in section 170(c), as reimbursement of operating
expenses with respect to use of a passenger automobile for
the benefit of such organization. The preceding sentence
shall apply only to the extent that such reimbursement
would be deductible under this chapter if section 274(d)
were applied—
‘‘(1) by using the standard business mileage rate
in effect under section 162(a) at the time of such use,
and
‘‘(2) as if the individual were an employee of an
organization not described in section 170(c).
‘‘(b) APPLICATION TO VOLUNTEER SERVICES ONLY.—
Subsection (a) shall not apply with respect to any expenses
relating to the performance of services for compensation.
‘‘(c) NO DOUBLE BENEFIT.—No deduction or credit
shall be allowed under any other provision of this title with
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respect to the expenses excludable from gross income under
subsection (a).’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter B of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after the item
relating to section 139A and inserting the following new
item:
‘‘Sec. 139B. Reimbursement for use of passenger automobile for charity.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 12804. BASIS ADJUSTMENT TO STOCK OF S CORPORA-
TIONS MAKING CHARITABLE CONTRIBUTIONS
OF PROPERTY.
(a) 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
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‘‘(B) the shareholder’s pro rata share of the
adjusted basis of such property.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the provision of
the Pension Protection Act of 2006 to which it relates.
SEC. 12805. PRIVATE PAYMENT TEST FOR PROFESSIONAL
SPORTS FACILITY BONDS.
Section 141, as amended by this Act, is amended—
(1) by striking the last sentence of subsection (a),
and
(2) by striking subsection (f).
SEC. 12806. APPLICATION OF REHABILITATION CREDIT AND
DEPRECIATION 
SCHEDULES 
TO 
CERTAIN
LOW-INCOME HOUSING FOR THE ELDERLY.
(a) IN GENERAL.—Section 251(d)(4)(X) of the Tax
Reform Act of 1986 is repealed.
(b) EFFECTIVE DATE.—The repeal made by this sec-
tion shall apply to property placed in service after the date
of the enactment of this Act.
SEC. 12807. COMPETITIVE CERTIFICATION AWARDS MODI-
FICATION AUTHORITY.
(a) IN GENERAL.—Section 48A (relating to qualifying
advanced coal project credit) is amended by adding at the
end the following new subsection:
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‘‘(h) COMPETITIVE CERTIFICATION AWARDS MODI-
FICATION AUTHORITY.—In implementing this section or
section 48B, the Secretary is directed to modify the terms
of any competitive certification award and any associated
closing agreement where such modification—
‘‘(1) is consistent with the objectives of such sec-
tion,
‘‘(2) is requested by the recipient of the competi-
tive certification award, and
‘‘(3) involves moving the project site to improve
the potential to capture and sequester carbon dioxide
emissions, reduce costs of transporting feedstock, and
serve a broader customer base,
unless the Secretary determines that the dollar amount of
tax credits available to the taxpayer under such section
would increase as a result of the modification or such modi-
fication would result in such project not being originally
certified. In considering any such modification, the Sec-
retary shall consult with other relevant Federal agencies,
including the Department of Energy.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act and is applicable to all competitive certification awards
entered into under section 48A or 48B of the Internal Rev-
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enue Code of 1986, whether such awards were issued before,
on, or after such date of enactment.
SEC. 12808. QUALIFIED FORESTRY CONSERVATION BONDS.
(a) IN GENERAL.—Part IV of subchapter A of chapter
1 (relating to credits against tax) is amended by adding
at the end the following new subpart:
‘‘Subpart I—Qualified Tax Credit Bonds
‘‘Sec. 54A. Credit to holders of qualified tax credit bonds.
‘‘Sec. 54B. Qualified forestry conservation bonds.
‘‘SEC. 54A. CREDIT TO HOLDERS OF QUALIFIED TAX CREDIT
BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—If a taxpayer holds a
qualified tax credit bond on one or more credit allowance
dates of the bond during any taxable year, there shall be
allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of the cred-
its determined under subsection (b) with respect to such
dates.
‘‘(b) AMOUNT OF CREDIT.—
‘‘(1) IN GENERAL.—The amount of the credit de-
termined under this subsection with respect to any
credit allowance date for a qualified tax credit bond
is 25 percent of the annual credit determined with re-
spect to such bond.
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‘‘(2) ANNUAL CREDIT.—The annual credit deter-
mined with respect to any qualified tax credit bond
is the product of—
‘‘(A) the applicable credit rate, multiplied
by
‘‘(B) the outstanding face amount of the
bond.
‘‘(3) APPLICABLE CREDIT RATE.—For purposes
of paragraph (2), the applicable credit rate is 70 per-
cent of the rate which the Secretary estimates will
permit the issuance of qualified tax credit bonds with
a specified maturity or redemption date without dis-
count and without interest cost to the qualified issuer.
The applicable credit rate with respect to any quali-
fied tax credit bond shall be determined as of the first
day on which there is a binding, written contract for
the sale or exchange of the bond.
‘‘(4) SPECIAL RULE FOR ISSUANCE AND REDEMP-
TION.—In the case of a bond which is issued during
the 3-month period ending on a credit allowance date,
the amount of the credit determined under this sub-
section with respect to such credit allowance date
shall be a ratable portion of the credit otherwise deter-
mined based on the portion of the 3-month period
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during which the bond is outstanding. A similar rule
shall apply when the bond is redeemed or matures.
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) IN
GENERAL.—The credit allowed under
subsection (a) for any taxable year shall not exceed
the excess of—
‘‘(A) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
‘‘(B) the sum of the credits allowable under
this part (other than subpart C and this sub-
part).
‘‘(2) CARRYOVER
OF
UNUSED
CREDIT.—If the
credit allowable under subsection (a) exceeds the limi-
tation imposed by paragraph (1) for such taxable
year, such excess shall be carried to the succeeding
taxable year and added to the credit allowable under
subsection (a) for such taxable year (determined be-
fore the application of paragraph (1) for such suc-
ceeding taxable year).
‘‘(d) QUALIFIED TAX CREDIT BOND.—For purposes of
this section—
‘‘(1) QUALIFIED TAX CREDIT BOND.—The term
‘qualified tax credit bond’ means a qualified forestry
conservation bond which is part of an issue that
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meets the requirements of paragraphs (2), (3), (4),
(5), and (6).
‘‘(2) SPECIAL
RULES
RELATING
TO
EXPENDI-
TURES.—
‘‘(A) IN GENERAL.—An issue shall be treat-
ed as meeting the requirements of this paragraph
if, as of the date of issuance, the issuer reason-
ably expects—
‘‘(i) 100 percent or more of the avail-
able project proceeds to be spent for 1 or
more qualified purposes within the 3-year
period beginning on such date of issuance,
and
‘‘(ii) a binding commitment with a
third party to spend at least 10 percent of
such available project proceeds will be in-
curred within the 6-month period beginning
on such date of issuance.
‘‘(B) 
FAILURE
TO
SPEND
REQUIRED
AMOUNT OF BOND PROCEEDS WITHIN 3 YEARS.—
‘‘(i) IN GENERAL.—To the extent that
less than 100 percent of the available project
proceeds of the issue are expended by the
close of the expenditure period for 1 or more
qualified purposes, the issuer shall redeem
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all of the nonqualified bonds within 90 days
after the end of such period. For purposes of
this paragraph, the amount of the non-
qualified bonds required to be redeemed
shall be determined in the same manner as
under section 142.
‘‘(ii) 
EXPENDITURE
PERIOD.—For
purposes of this subpart, the term ‘expendi-
ture period’ means, with respect to any
issue, the 3-year period beginning on the
date of issuance. Such term shall include
any extension of such period under clause
(iii).
‘‘(iii) EXTENSION OF PERIOD.—Upon
submission of a request prior to the expira-
tion of the expenditure period (determined
without regard to any extension under this
clause), the Secretary may extend such pe-
riod if the issuer establishes that the failure
to expend the proceeds within the original
expenditure period is due to reasonable
cause and the expenditures for qualified
purposes will continue to proceed with due
diligence.
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‘‘(C) QUALIFIED
PURPOSE.—For purposes
of this paragraph, the term ‘qualified purpose’
means a purpose specified in section 54B(e).
‘‘(D) REIMBURSEMENT.—For purposes of
this subtitle, available project proceeds of an
issue shall be treated as spent for a qualified
purpose if such proceeds are used to reimburse
the issuer for amounts paid for a qualified pur-
pose after the date that the Secretary makes an
allocation of bond limitation with respect to such
issue, but only if—
‘‘(i) prior to the payment of the origi-
nal expenditure, the issuer declared its in-
tent to reimburse such expenditure with the
proceeds of a qualified tax credit bond,
‘‘(ii) not later than 60 days after pay-
ment of the original expenditure, the issuer
adopts an official intent to reimburse the
original expenditure with such proceeds,
and
‘‘(iii) the reimbursement is made not
later than 18 months after the date the
original expenditure is paid.
‘‘(3) REPORTING.—An issue shall be treated as
meeting the requirements of this paragraph if the
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issuer of qualified tax credit bonds submits reports
similar to the reports required under section 149(e).
‘‘(4) SPECIAL
RULES
RELATING
TO
ARBI-
TRAGE.—
‘‘(A) IN GENERAL.—An issue shall be treat-
ed as meeting the requirements of this paragraph
if the issuer satisfies the requirements of section
148 with respect to the proceeds of the issue.
‘‘(B) SPECIAL
RULE
FOR
INVESTMENTS
DURING
EXPENDITURE
PERIOD.—Available
project proceeds invested during the expenditure
period shall not be subject to the requirements of
subparagraph (A).
‘‘(C) 
SPECIAL
RULE
FOR
RESERVE
FUNDS.—An issue shall not be treated as failing
to meet the requirements of subparagraph (A) by
reason of any fund which is expected to be used
to repay such issue if—
‘‘(i) such fund is funded in a manner
reasonably expected to result in an amount
not greater than an amount necessary to
repay the issue, and
‘‘(ii) the yield on such fund is not
greater than the discount rate determined
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under paragraph (5)(B) with respect to the
issue.
‘‘(5) MATURITY LIMITATION.—
‘‘(A) IN GENERAL.—An issue shall be treat-
ed as meeting the requirements of this paragraph
if the maturity of any bond which is part of
such issue does not exceed the maximum term de-
termined by the Secretary under subparagraph
(B).
‘‘(B) MAXIMUM
TERM.—During each cal-
endar month, the Secretary shall determine the
maximum term permitted under this paragraph
for bonds issued during the following calendar
month. Such maximum term shall be the term
which the Secretary estimates will result in the
present value of the obligation to repay the prin-
cipal on the bond being equal to 50 percent of the
face amount of such bond. Such present value
shall be determined using as a discount rate the
average annual interest rate of tax-exempt obli-
gations having a term of 10 years or more which
are issued during the month. If the term as so
determined is not a multiple of a whole year,
such term shall be rounded to the next highest
whole year.
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‘‘(6) PROHIBITION ON FINANCIAL CONFLICTS OF
INTEREST.—An issue shall be treated as meeting the
requirements of this paragraph if the issuer certifies
that—
‘‘(A) applicable State and local law require-
ments governing conflicts of interest are satisfied
with respect to such issue, and
‘‘(B) if the Secretary prescribes additional
conflicts of interest rules governing the appro-
priate Members of Congress, Federal, State, and
local officials, and their spouses, such additional
rules are satisfied with respect to such issue.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
subchapter—
‘‘(1) CREDIT
ALLOWANCE
DATE.—The term
‘credit allowance date’ means—
‘‘(A) March 15,
‘‘(B) June 15,
‘‘(C) September 15, and
‘‘(D) December 15.
Such term includes the last day on which the bond is
outstanding.
‘‘(2) BOND.—The term ‘bond’ includes any obli-
gation.
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‘‘(3) STATE.—The term ‘State’ includes the Dis-
trict of Columbia and any possession of the United
States.
‘‘(4) AVAILABLE PROJECT PROCEEDS.—The term
‘available project proceeds’ means—
‘‘(A) the excess of—
‘‘(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).
‘‘(f) CREDIT TREATED AS INTEREST.—For purposes of
this subtitle, the credit determined under subsection (a)
shall be treated as interest which is includible in gross in-
come.
‘‘(g) S CORPORATIONS AND PARTNERSHIPS.—In the
case of a tax credit bond held by an S corporation or part-
nership, the allocation of the credit allowed by this section
to the shareholders of such corporation or partners of such
partnership shall be treated as a distribution.
‘‘(h) BONDS HELD BY REGULATED INVESTMENT COM-
PANIES AND REAL ESTATE INVESTMENT TRUSTS.—If any
qualified tax credit bond is held by a regulated investment
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company or a real estate investment trust, the credit deter-
mined under subsection (a) shall be allowed to shareholders
of such company or beneficiaries of such trust (and any
gross income included under subsection (f) with respect to
such credit shall be treated as distributed to such share-
holders or beneficiaries) under procedures prescribed by the
Secretary.
‘‘(i) CREDITS MAY BE STRIPPED.—Under regulations
prescribed by the Secretary—
‘‘(1) IN GENERAL.—There may be a separation
(including at issuance) of the ownership of a qualified
tax credit bond and the entitlement to the credit
under this section with respect to such bond. In case
of any such separation, the credit under this section
shall be allowed to the person who on the credit allow-
ance date holds the instrument evidencing the entitle-
ment to the credit and not to the holder of the bond.
‘‘(2) CERTAIN RULES TO APPLY.—In the case of
a separation described in paragraph (1), the rules of
section 1286 shall apply to the qualified tax credit
bond as if it were a stripped bond and to the credit
under this section as if it were a stripped coupon.
‘‘SEC. 54B. QUALIFIED FORESTRY CONSERVATION BONDS.
‘‘(a) QUALIFIED FORESTRY CONSERVATION BOND.—
For purposes of this subchapter, the term ‘qualified forestry
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conservation bond’ means any bond issued as part of an
issue if—
‘‘(1) 100 percent of the available proceeds of such
issue are to be used for one or more qualified forestry
conservation purposes,
‘‘(2) the bond is issued by a qualified issuer, and
‘‘(3) the issuer designates such bond for purposes
of this section.
‘‘(b) LIMITATION
ON
AMOUNT
OF
BONDS
DES-
IGNATED.—The maximum aggregate face amount of bonds
which may be designated under subsection (a) by any issuer
shall not exceed the limitation amount allocated to such
issuer under subsection (d).
‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS
DESIGNATED.—There is a national qualified forestry con-
servation bond limitation of $500,000,000.
‘‘(d) ALLOCATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall make al-
locations of the amount of the national qualified for-
estry conservation bond limitation described in sub-
section (c) among qualified forestry conservation pur-
poses in such manner as the Secretary determines ap-
propriate so as to ensure that all of such limitation
is allocated before the date which is 24 months after
the date of the enactment of this section.
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‘‘(2) SOLICITATION OF APPLICATIONS.—The Sec-
retary shall solicit applications for allocations of the
national qualified forestry conservation bond limita-
tion described in subsection (c) not later than 90 days
after the date of the enactment of this section.
‘‘(e) QUALIFIED
FORESTRY
CONSERVATION
PUR-
POSE.—For purposes of this section, the term ‘qualified for-
estry conservation purpose’ means the acquisition by a
State or 501(c)(3) organization (as defined in section
150(a)(4)) from an unrelated person of forest and forest
land that meets the following qualifications:
‘‘(1) Some portion of the land acquired must be
adjacent to United States Forest Service Land.
‘‘(2) At least half of the land acquired must be
transferred to the United States Forest Service at no
net cost to the United States and not more than half
of the land acquired may either remain with or be do-
nated to a State.
‘‘(3) All of the land must be subject to a native
fish habitat conservation plan approved by the United
States Fish and Wildlife Service.
‘‘(4) The amount of acreage acquired must be at
least 40,000 acres.
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‘‘(f) QUALIFIED ISSUER.—For purposes of this section,
the term ‘qualified issuer’ means a State or 501(c)(3) orga-
nization (as defined in section 150(a)(4)).’’.
(b) REPORTING.—Subsection (d) of section 6049 (relat-
ing to returns regarding payments of interest) is amended
by adding at the end the following new paragraph:
‘‘(9) REPORTING OF CREDIT ON QUALIFIED TAX
CREDIT BONDS.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts
includible in gross income under section 54A
and such amounts shall be treated as paid on the
credit allowance date (as defined in section
54A(e)(1)).
‘‘(B) REPORTING TO CORPORATIONS, ETC.—
Except as otherwise provided in regulations, in
the case of any interest described in subpara-
graph (A) of this paragraph, subsection (b)(4) of
this section shall be applied without regard to
subparagraphs (A), (H), (I), (J), (K), and
(L)(i).
‘‘(C) REGULATORY
AUTHORITY.—The Sec-
retary may prescribe such regulations as are nec-
essary or appropriate to carry out the purposes
of this paragraph, including regulations which
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require more frequent or more detailed report-
ing.’’.
(c) CONFORMING AMENDMENTS.—
(1) Sections 54(c)(2) and 1400N(l)(3)(B) are
each amended by striking ‘‘subpart C’’ and inserting
‘‘subparts C and I’’.
(2) Section 1397E(c)(2) is amended by striking
‘‘subpart H’’ and inserting ‘‘subparts H and I’’.
(3) Section 6401(b)(1) is amended by striking
‘‘and H’’ and inserting ‘‘H, and I’’.
(4) The heading of subpart H of part IV of sub-
chapter A of chapter 1 is amended by striking ‘‘Cer-
tain Bonds’’ and inserting ‘‘Clean Renewable
Energy Bonds’’.
(5) The table of subparts for part IV of sub-
chapter A of chapter 1 is amended by striking the
item relating to subpart H and inserting the fol-
lowing new items:
‘‘SUBPART H. NONREFUNDABLE CREDIT TO HOLDERS OF CLEAN RENEWABLE
ENERGY BONDS.
‘‘SUBPART I. QUALIFIED TAX CREDIT BONDS.’’.
(d) EFFECTIVE DATES.—The amendments made by
this section shall apply to obligations issued after the date
of the enactment of this Act.
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TITLE XIII—AMENDMENTS TO
COMMODITY EXCHANGE ACT
SEC. 13001. SHORT TITLE.
This title may be cited as the ‘‘CFTC Reauthorization
Act of 2007’’.
Subtitle A—General Provisions
SEC. 13101. CFTC AUTHORITY OVER OFF-EXCHANGE RETAIL
FOREIGN CURRENCY TRANSACTIONS.
(a) IN GENERAL.—Section 2(c)(2) of the Commodity
Exchange Act (7 U.S.C. 2(c)(2)) is amended by striking
subparagraphs (B) and (C) and inserting the following:
‘‘(B) 
AGREEMENTS, 
CONTRACTS, 
AND
TRANSACTIONS IN RETAIL FOREIGN CURRENCY.—
‘‘(i) This Act applies to, and the Com-
mission shall have jurisdiction over, an
agreement, contract, or transaction in for-
eign currency that—
‘‘(I) is a contract of sale of a com-
modity for future delivery (or an op-
tion on such a contract) or an option
(other than an option executed or trad-
ed on a national securities exchange
registered pursuant to section 6(a) of
the Securities Exchange Act of 1934
(15 U.S.C. 78f(a))); and
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‘‘(II) is offered to, or entered into
with, a person that is not an eligible
contract 
participant, 
unless 
the
counterparty, or the person offering to
be the counterparty, of the person is—
‘‘(aa) a financial institution;
‘‘(bb)(AA) a broker or dealer
registered under section 15(b) (ex-
cept paragraph (11) thereof) or
15C of the Securities Exchange
Act of 1934 (15 U.S.C. 78o(b),
78o–5); or
‘‘(BB) an associated person
of a broker or dealer registered
under section 15(b) (except para-
graph (11) thereof) or 15C of the
Securities Exchange Act of 1934
(15 U.S.C. 78o(b), 78o–5) con-
cerning the financial or securities
activities of which the broker or
dealer makes and keeps records
under section 15C(b) or 17(h) of
the Securities Exchange Act of
1934 
(15 
U.S.C. 
78o–5(b),
78q(h));
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‘‘(cc) a futures commission
merchant registered under this
Act (that is not also a person de-
scribed in item (bb)), or an affili-
ated person of such a futures com-
mission merchant (that is not also
a person described in item (bb)) if
such futures commission merchant
makes and keeps records under
section 4f(c)(2)(B) of this Act con-
cerning the futures and other fi-
nancial activities of such affili-
ated person;
‘‘(dd) an insurance company
described in section 1a(12)(A)(ii)
of this Act, or a regulated sub-
sidiary or affiliate of such an in-
surance company;
‘‘(ee) a financial holding
company (as defined in section 2
of the Bank Holding Company
Act of 1956); or
‘‘(ff) an investment bank
holding company (as defined in
section 17(i) of the Securities Ex-
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change Act of 1934 (15 U.S.C.
78q(i))).
‘‘(ii) Notwithstanding item (cc) of
clause (i)(II) of this subparagraph, agree-
ments, contracts, or transactions described
in clause (i) of this subparagraph shall be
subject to subsection (a)(1)(B) of this section
and sections 4(b), 4b, 4c(b), 4o, 6(c) and
6(d) (except to the extent that sections 6(c)
and 6(d) prohibit manipulation of the mar-
ket price of any commodity in interstate
commerce, or for future delivery on or sub-
ject to the rules of any market), 6c, 6d, 8(a),
13(a), and 13(b) if the agreements, con-
tracts, or transactions are offered, or en-
tered into, by a person that is registered as
a futures commission merchant or an affili-
ated person of a futures commission mer-
chant registered under this Act that is not
also a person described in any of items
(aa), (bb), (dd), (ee), or (ff) of clause (i) of
this subparagraph.
‘‘(iii)(I) Notwithstanding item (cc) of
clause (i)(II), a person shall not participate
in the solicitation or recommendation of
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any agreement, contract, or transaction de-
scribed in clause (i) entered into with or to
be entered into with a person described in
such item, unless the person—
‘‘(aa) is registered in such capac-
ity as the Commission by rule, regula-
tion, or order shall determine; and
‘‘(bb) is a member of a futures as-
sociation registered under section 17.
‘‘(II) Subclause (I) shall not
apply to—
‘‘(aa) any person described
in any of items (aa), (bb), (dd),
(ee), or (ff) of subparagraph
(B)(i)(II); or
‘‘(bb) any such person’s asso-
ciated persons.
‘‘(C)(i)(I) This subparagraph shall apply to
any agreement, contract, or transaction in for-
eign currency that is—
‘‘(aa) offered to, or entered into with,
a person that is not an eligible contract
participant (except that this subparagraph
shall not apply if the counterparty, or the
person offering to be the counterparty, of the
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HR 2419 EAS
person that is not an eligible contract par-
ticipant is a person described in any of
items (aa), (bb), (dd), (ee), or (ff) of sub-
paragraph (B)(i)(II)); and
‘‘(bb) offered, or entered into, on a le-
veraged or margined basis, or financed by
the offeror, the counterparty, or a person
acting in concert with the offeror or
counterparty on a similar basis.
‘‘(II) Subclause (I) shall not apply to—
‘‘(aa) a security that is not a security
futures product; or
‘‘(bb) a contract of sale that—
‘‘(AA) results in actual delivery
within 2 days; or
‘‘(BB) creates an enforceable obli-
gation to deliver between a seller and
buyer that have the ability to deliver
and accept delivery, respectively, in
connection with their line of business.
‘‘(ii)(I) Agreements, contracts, or transactions
described in clause (i) of this subparagraph shall be
subject to subsection (a)(1)(B) of this section and sec-
tions 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) (except to the
extent that sections 6(c) and 6(d) prohibit manipula-
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tion of the market price of any commodity in inter-
state commerce, or for future delivery on or subject to
the rules of any market), 6c, 6d, 8(a), 13(a), and
13(b).
‘‘(II) Subclause (I) of this clause shall not apply
to—
‘‘(aa) any person described in any of items
(aa), (bb), (dd), (ee), or (ff) of subparagraph
(B)(i)(II); or
‘‘(bb) any such person’s associated persons.
‘‘(iii)(I) A person shall not participate in the solicita-
tion or recommendation of any agreement, contract, or
transaction described in clause (i) of this subparagraph un-
less the person is registered in such capacity as the Commis-
sion by rule, regulation, or order shall determine, and is
a member of a futures association registered under section
17.
‘‘(II) Subclause (I) shall not apply to—
‘‘(aa) any person described in any of items (aa),
(bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II); or
‘‘(bb) any such person’s associated persons.
‘‘(iv)(I) Sections 4(b) and 4b shall
apply to any agreement, contract, or trans-
action described in clause (i) of this sub-
paragraph as if the agreement, contract, or
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transaction were a contract of sale of a
commodity for future delivery.
‘‘(II) The Commission may, after
issuing notice and soliciting comment, issue
rules proscribing fraud in connection with
any agreement, contract, or transaction de-
scribed in clause (i) in an exempt com-
modity or an agricultural commodity.
Nothing in this provision shall affect the de-
termination of whether such agreement, con-
tract, or transaction is a contract for the
purchase or sale of a commodity for future
delivery for purposes of section 4(a).
‘‘(v) This subparagraph shall not be
construed to limit any jurisdiction that the
Commission may otherwise have under any
other provision of this Act over an agree-
ment, contract, or transaction that is a con-
tract of sale of a commodity for future de-
livery.
‘‘(vi) This subparagraph shall not be
construed to limit any jurisdiction that the
Commission or the Securities and Exchange
Commission may otherwise have under any
other provision of this Act with respect to
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HR 2419 EAS
security futures products and persons effect-
ing transactions in security futures prod-
ucts.’’.
(b) EFFECTIVE
DATE.—Clause (iii) of section
2(c)(2)(B) and clause (iii) of section 2(c)(2)(C) of the Com-
modity Exchange Act, as amended by subsection (a) of this
section, shall be effective 120 days after the date of the en-
actment of this Act or such other time as the Commodity
Futures Trading Commission shall determine.
SEC. 13102. LIAISON WITH DEPARTMENT OF JUSTICE.
Section 2(a)(9) of the Commodity Exchange Act (7
U.S.C. 2(a)(9)) is amended by adding at the end the fol-
lowing:
‘‘(C) LIAISON WITH DEPARTMENT OF JUS-
TICE.—
‘‘(i) IN
GENERAL.—The Commission
shall, in cooperation with the Attorney Gen-
eral, maintain a liaison between the Com-
mission and the Department of Justice to
coordinate civil and criminal investigations
and prosecutions of violations of this Act as
appropriate.
‘‘(ii) 
DESIGNATION.—The 
Attorney
General shall designate a person as liaison
and take such steps as are necessary to fa-
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cilitate communications described in clause
(i).’’.
SEC. 13103. ANTI-FRAUD AUTHORITY OVER PRINCIPAL-TO-
PRINCIPAL TRANSACTIONS.
Section 4b of the Commodity Exchange Act (7 U.S.C.
Section 6b) is amended—
(1) by redesignating subsections (b) and (c) as
subsections (c) and (d), respectively; and
(2) by striking ‘‘SEC.4b.’’ and all that follows
through the end of subsection (a) and inserting the
following:
‘‘SEC. 4b. CONTRACTS DESIGNED TO DEFRAUD OR MIS-
LEAD.
‘‘(a) UNLAWFUL ACTIONS.—It shall be unlawful—
‘‘(1) for any person, in or in connection with
any order to make, or the making of, any contract of
sale of any commodity in interstate commerce or for
future delivery that is made, or to be made, on or sub-
ject to the rules of a designated contract market, for
or on behalf of any other person; or
‘‘(2) for any person, in or in connection with
any order to make, or the making of, any contract of
sale of any commodity for future delivery, or other
agreement, contract, or transaction subject to para-
graphs (1) and (2) of section 5a(g), that is made, or
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to be made, for or on behalf of, or with, any other per-
son, other than on or subject to the rules of a des-
ignated contract market—
‘‘(A) to cheat or defraud or attempt to cheat
or defraud the other person;
‘‘(B) willfully to make or cause to be made
to the other person any false report or statement
or willfully to enter or cause to be entered for the
other person any false record;
‘‘(C) willfully to deceive or attempt to de-
ceive the other person by any means whatsoever
in regard to any order or contract or the disposi-
tion or execution of any order or contract, or in
regard to any act of agency performed, with re-
spect to any order or contract for or, in the case
of paragraph (2), with the other person; or
‘‘(D)(i) to bucket an order if the order is ei-
ther represented by the person as an order to be
executed, or is required to be executed, on or sub-
ject to the rules of a designated contract market;
or
‘‘(ii) to fill an order by offset against the
order or orders of any other person, or willfully
and knowingly and without the prior consent of
the other person to become the buyer in respect
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HR 2419 EAS
to any selling order of the other person, or be-
come the seller in respect to any buying order of
the other person, if the order is either represented
by the person as an order to be executed, or is
required to be executed, on or subject to the rules
of a designated contract market unless the order
is executed in accordance with the rules of the
designated contract market.
‘‘(b) CLARIFICATION.—Subsection (a)(2) of this section
shall not obligate any person, in or in connection with a
transaction in a contract of sale of a commodity for future
delivery, or other agreement, contract or transaction subject
to paragraphs (1) and (2) of section 5a(g), with another
person, to disclose to the other person nonpublic informa-
tion that may be material to the market price, rate, or level
of the commodity or transaction, except as necessary to
make any statement made to the other person in or in con-
nection with the transaction not misleading in any mate-
rial respect.’’.
SEC. 13104. CRIMINAL AND CIVIL PENALTIES.
(a) ENFORCEMENT POWERS OF THE COMMISSION.—
Section 6(c) of the Commodity Exchange Act (7 U.S.C. 9,
15) is amended in paragraph (3) of the 10th sentence—
(1) by inserting ‘‘(A)’’ after ‘‘assess such person’’;
and
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(2) by inserting after ‘‘each such violation’’ the
following: ‘‘, or (B) in any case of manipulation or
attempted manipulation in violation of this sub-
section, subsection (d), or section 9(a)(2), a civil pen-
alty of not more than the greater of $1,000,000 or tri-
ple the monetary gain to such person for each such
violation,’’.
(b) NONENFORCEMENT OF RULES OF GOVERNMENT OR
OTHER VIOLATIONS.—Section 6b of the Commodity Ex-
change Act (7 U.S.C. 13a) is amended—
(1) in the first sentence, by inserting before the
period at the end the following: ‘‘, or, in any case of
manipulation or attempted manipulation in violation
of sections 6(c), 6(d), or 9(a)(2), a civil penalty of not
more than $1,000,000 for each such violation’’; and
(2) in the second sentence, by inserting before the
period at the end the following: ‘‘, except that if the
failure or refusal to obey or comply with the order in-
volved any offense under section 9(a)(2), the registered
entity, director, officer, agent, or employee shall be
guilty of a felony and, on conviction, shall be subject
to penalties under section 9(a)(2)’’.
(c) ACTION TO ENJOIN OR RESTRAIN VIOLATIONS.—
Section 6c(d) of the Commodity Exchange Act (7 U.S.C.
13a–1(d)) is amended by striking ‘‘(d)’’ and all that follows
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through the end of paragraph (1) and inserting the fol-
lowing:
‘‘(d) CIVIL PENALTIES.—
‘‘(1) IN GENERAL.—In any action brought under
this section, the Commission may seek and the court
shall have jurisdiction to impose, on a proper show-
ing, on any person found in the action to have com-
mitted any violation—
‘‘(A) a civil penalty in the amount of not
more than the greater of $100,000 or triple the
monetary gain to the person for each violation;
or
‘‘(B) in any case of manipulation or at-
tempted manipulation in violation of sections
6(c), 6(d), or 9(a)(2), a civil penalty in the
amount of not more than the greater of
$1,000,000 or triple the monetary gain to the
person for each violation.’’.
(d) VIOLATIONS GENERALLY.—Section 9 of the Com-
modity Exchange Act (7 U.S.C. 13) is amended—
(1) in subsection (a), in the matter preceding
paragraph (1)—
(A) by striking ‘‘(or $500,000 in the case of
a person who is an individual)’’; and