H. R. 1—217 
streets, roads, and highways (not including a vehicle operated 
exclusively on a rail or rails) and which has at least 4 wheels.’’. 
(3) Section 30C(d)(2)(A) is amended by striking ‘‘, 30,’’. 
(4)(A) Section 53(d)(1)(B) is amended by striking clause 
(iii) and redesignating clause (iv) as clause (iii). 
(B) Subclause (II) of section 53(d)(1)(B)(iii), as so redesig-
nated, is amended by striking ‘‘increased in the manner pro-
vided in clause (iii)’’. 
(5) Section 55(c)(3) is amended by striking ‘‘30(b)(3),’’. 
(6) Section 1016(a)(25) is amended by striking ‘‘section 
30(d)(1)’’ and inserting ‘‘section 30(e)(1)’’. 
(7) Section 6501(m) is amended by striking ‘‘section 
30(d)(4)’’ and inserting ‘‘section 30(e)(6)’’. 
(8) The item in the table of sections for subpart B of 
part IV of subchapter A of chapter 1 is amended to read 
as follows: 
‘‘Sec. 30. Certain plug-in electric vehicles.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to vehicles acquired after the date of the enactment 
of this Act. 
(d) TRANSITIONAL RULE.—In the case of a vehicle acquired 
after the date of the enactment of this Act and before January 
1, 2010, no credit shall be allowed under section 30 of the Internal 
Revenue Code of 1986, as added by this section, if credit is allowable 
under section 30D of such Code with respect to such vehicle. 
(e) APPLICATION OF EGTRRA SUNSET.—The amendment made 
by subsection (b)(1)(A) shall be subject to title IX of the Economic 
Growth and Tax Relief Reconciliation Act of 2001 in the same 
manner as the provision of such Act to which such amendment 
relates. 
SEC. 1143. CONVERSION KITS. 
(a) IN GENERAL.—Section 30B (relating to alternative motor 
vehicle credit) is amended by redesignating subsections (i) and 
(j) as subsections (j) and (k), respectively, and by inserting after 
subsection (h) the following new subsection: 
‘‘(i) PLUG-IN CONVERSION CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of subsection (a), the plug- 
in conversion credit determined under this subsection with 
respect to any motor vehicle which is converted to a qualified 
plug-in electric drive motor vehicle is 10 percent of so much 
of the cost of the converting such vehicle as does not exceed 
$40,000. 
‘‘(2) QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE.— 
For purposes of this subsection, the term ‘qualified plug-in 
electric drive motor vehicle’ means any new qualified plug- 
in electric drive motor vehicle (as defined in section 30D, deter-
mined without regard to whether such vehicle is made by 
a manufacturer or whether the original use of such vehicle 
commences with the taxpayer). 
‘‘(3) CREDIT ALLOWED IN ADDITION TO OTHER CREDITS.— 
The credit allowed under this subsection shall be allowed with 
respect to a motor vehicle notwithstanding whether a credit 
has been allowed with respect to such motor vehicle under 
this section (other than this subsection) in any preceding tax-
able year.
H. R. 1—218 
‘‘(4) TERMINATION.—This subsection shall not apply to 
conversions made after December 31, 2011.’’. 
(b) CREDIT TREATED AS PART OF ALTERNATIVE MOTOR VEHICLE 
CREDIT.—Section 30B(a) is amended by striking ‘‘and’’ at the end 
of paragraph (3), by striking the period at the end of paragraph 
(4) and inserting ‘‘, and’’, and by adding at the end the following 
new paragraph: 
‘‘(5) the plug-in conversion credit determined under sub-
section (i).’’. 
(c) NO RECAPTURE FOR VEHICLES CONVERTED TO QUALIFIED 
PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.—Paragraph (8) of sec-
tion 30B(h) is amended by adding at the end the following: ‘‘, 
except that no benefit shall be recaptured if such property ceases 
to be eligible for such credit by reason of conversion to a qualified 
plug-in electric drive motor vehicle.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to property placed in service after the date of the 
enactment of this Act. 
SEC. 1144. TREATMENT OF ALTERNATIVE MOTOR VEHICLE CREDIT 
AS A PERSONAL CREDIT ALLOWED AGAINST AMT. 
(a) IN GENERAL.—Paragraph (2) of section 30B(g) is amended 
to read as follows: 
‘‘(2) PERSONAL CREDIT.— 
‘‘(A) IN GENERAL.—For purposes of this title, the credit 
allowed under subsection (a) for any taxable year (deter-
mined after application of paragraph (1)) shall be treated 
as a credit allowable under subpart A for such taxable 
year. 
‘‘(B) LIMITATION BASED ON AMOUNT OF TAX.—In the 
case of a taxable year to which section 26(a)(2) does not 
apply, the credit allowed under subsection (a) for any tax-
able year (determined after application of paragraph (1)) 
shall not exceed the excess of— 
‘‘(i) the sum of the regular tax liability (as defined 
in section 26(b)) plus the tax imposed by section 55, 
over 
‘‘(ii) the sum of the credits allowable under subpart 
A (other than this section and sections 23, 25D, 30, 
and 30D) and section 27 for the taxable year.’’. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 24(b)(3)(B), as amended by this Act, is 
amended by inserting ‘‘30B,’’ after ‘‘30,’’. 
(B) Section 25(e)(1)(C)(ii), as amended by this Act, is 
amended by inserting ‘‘30B,’’ after ‘‘30,’’. 
(C) Section 25B(g)(2), as amended by this Act, is amended 
by inserting ‘‘30B,’’ after ‘‘30,’’. 
(D) Section 26(a)(1), as amended by this Act, is amended 
by inserting ‘‘30B,’’ after ‘‘30,’’. 
(E) Section 904(i), as amended by this Act, is amended 
by inserting ‘‘30B,’’ after ‘‘30’’. 
(F) Section 1400C(d)(2), as amended by this Act, is amended 
by striking ‘‘and 30’’ and inserting ‘‘30, and 30B’’. 
(2) Section 30C(d)(2)(A), as amended by this Act, is 
amended by striking ‘‘sections 27 and 30B’’ and inserting ‘‘sec-
tion 27’’. 
(3) Section 55(c)(3) is amended by striking ‘‘30B(g)(2),’’.
H. R. 1—219 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2008. 
(d) APPLICATION OF EGTRRA SUNSET.—The amendment made 
by subsection (b)(1)(A) shall be subject to title IX of the Economic 
Growth and Tax Relief Reconciliation Act of 2001 in the same 
manner as the provision of such Act to which such amendment 
relates. 
PART VI—PARITY FOR TRANSPORTATION 
FRINGE BENEFITS 
SEC. 1151. INCREASED EXCLUSION AMOUNT FOR COMMUTER TRANSIT 
BENEFITS AND TRANSIT PASSES. 
(a) IN GENERAL.—Paragraph (2) of section 132(f) is amended 
by adding at the end the following flush sentence: 
‘‘In the case of any month beginning on or after the date 
of the enactment of this sentence and before January 1, 2011, 
subparagraph (A) shall be applied as if the dollar amount 
therein were the same as the dollar amount in effect for such 
month under subparagraph (B).’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to months beginning on or after the date of the enact-
ment of this section. 
Subtitle C—Tax Incentives for Business 
PART I—TEMPORARY INVESTMENT 
INCENTIVES 
SEC. 1201. SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED 
DURING 2009. 
(a) EXTENSION OF SPECIAL ALLOWANCE.— 
(1) IN
GENERAL.—Paragraph (2) of section 168(k) is 
amended— 
(A) by striking ‘‘January 1, 2010’’ and inserting 
‘‘January 1, 2011’’, and 
(B) by striking ‘‘January 1, 2009’’ each place it appears 
and inserting ‘‘January 1, 2010’’. 
(2) CONFORMING AMENDMENTS.— 
(A) The heading for subsection (k) of section 168 is 
amended by striking ‘‘JANUARY 1, 2009’’ and inserting 
‘‘JANUARY 1, 2010’’. 
(B) The heading for clause (ii) of section 168(k)(2)(B) 
is amended by striking ‘‘PRE-JANUARY 1, 2009’’ and inserting 
‘‘PRE-JANUARY 1, 2010’’. 
(C) Subparagraph (B) of section 168(l)(5) is amended 
by striking ‘‘January 1, 2009’’ and inserting ‘‘January 1, 
2010’’. 
(D) Subparagraph (C) of section 168(n)(2) is amended 
by striking ‘‘January 1, 2009’’ and inserting ‘‘January 1, 
2010’’. 
(E) Subparagraph (B) of section 1400N(d)(3) is 
amended by striking ‘‘January 1, 2009’’ and inserting 
‘‘January 1, 2010’’. 
(3) TECHNICAL AMENDMENTS.— 
(A) Subparagraph (D) of section 168(k)(4) is amended—
H. R. 1—220 
(i) by striking ‘‘and’’ at the end of clause (i), 
(ii) by redesignating clause (ii) as clause (iii), and 
(iii) by inserting after clause (i) the following new 
clause: 
‘‘(ii) ‘April 1, 2008’ shall be substituted for ‘January 
1, 2008’ in subparagraph (A)(iii)(I) thereof, and’’. 
(B) Subparagraph (A) of section 6211(b)(4) is amended 
by inserting ‘‘168(k)(4),’’ after ‘‘53(e),’’. 
(b) EXTENSION
OF ELECTION
TO ACCELERATE
THE AMT
AND 
RESEARCH CREDITS IN LIEU OF BONUS DEPRECIATION.— 
(1) IN GENERAL.—Section 168(k)(4) (relating to election to 
accelerate the AMT and research credits in lieu of bonus depre-
ciation) is amended— 
(A) by striking ‘‘2009’’ and inserting ‘‘2010’’in subpara-
graph (D)(iii) (as redesignated by subsection (a)(3)), and 
(B) by adding at the end the following new subpara-
graph: 
‘‘(H) SPECIAL RULES FOR EXTENSION PROPERTY.— 
‘‘(i) TAXPAYERS PREVIOUSLY ELECTING ACCELERA-
TION.—In the case of a taxpayer who made the election 
under subparagraph (A) for its first taxable year ending 
after March 31, 2008— 
‘‘(I) the taxpayer may elect not to have this 
paragraph apply to extension property, but 
‘‘(II) if the taxpayer does not make the election 
under subclause (I), in applying this paragraph 
to the taxpayer a separate bonus depreciation 
amount, 
maximum 
amount, 
and 
maximum 
increase amount shall be computed and applied 
to eligible qualified property which is extension 
property and to eligible qualified property which 
is not extension property. 
‘‘(ii) TAXPAYERS NOT PREVIOUSLY ELECTING ACCEL-
ERATION.—In the case of a taxpayer who did not make 
the election under subparagraph (A) for its first taxable 
year ending after March 31, 2008— 
‘‘(I) the taxpayer may elect to have this para-
graph apply to its first taxable year ending after 
December 31, 2008, and each subsequent taxable 
year, and 
‘‘(II) if the taxpayer makes the election under 
subclause (I), this paragraph shall only apply to 
eligible qualified property which is extension prop-
erty. 
‘‘(iii) EXTENSION PROPERTY.—For purposes of this 
subparagraph, the term ‘extension property’ means 
property which is eligible qualified property solely by 
reason of the extension of the application of the special 
allowance under paragraph (1) pursuant to the amend-
ments made by section 1201(a) of the American 
Recovery and Reinvestment Tax Act of 2009 (and the 
application of such extension to this paragraph pursu-
ant to the amendment made by section 1201(b)(1) of 
such Act).’’. 
(2) TECHNICAL
AMENDMENT.—Section 6211(b)(4)(A) is 
amended by inserting ‘‘168(k)(4),’’ after ‘‘53(e),’’. 
(c) EFFECTIVE DATES.—
H. R. 1—221 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to property placed 
in service after December 31, 2008, in taxable years ending 
after such date. 
(2) TECHNICAL AMENDMENTS.—The amendments made by 
subsections (a)(3) and (b)(2) shall apply to taxable years ending 
after March 31, 2008. 
SEC. 1202. TEMPORARY INCREASE IN LIMITATIONS ON EXPENSING 
OF CERTAIN DEPRECIABLE BUSINESS ASSETS. 
(a) IN GENERAL.—Paragraph (7) of section 179(b) is amended— 
(1) by striking ‘‘2008’’ and inserting ‘‘2008, or 2009’’, and 
(2) by striking ‘‘2008’’ in the heading thereof and inserting 
‘‘2008, AND 2009’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2008. 
PART II—SMALL BUSINESS PROVISIONS 
SEC. 1211. 5-YEAR CARRYBACK OF OPERATING LOSSES OF SMALL 
BUSINESSES. 
(a) IN GENERAL.—Subparagraph (H) of section 172(b)(1) is 
amended to read as follows: 
‘‘(H) CARRYBACK FOR 2008 NET OPERATING LOSSES OF 
SMALL BUSINESSES.— 
‘‘(i) IN
GENERAL.—If an eligible small business 
elects the application of this subparagraph with respect 
to an applicable 2008 net operating loss— 
‘‘(I) subparagraph (A)(i) shall be applied by 
substituting any whole number elected by the tax-
payer which is more than 2 and less than 6 for 
‘2’, 
‘‘(II) subparagraph (E)(ii) shall be applied by 
substituting the whole number which is one less 
than the whole number substituted under sub-
clause (I) for ‘2’, and 
‘‘(III) subparagraph (F) shall not apply. 
‘‘(ii) APPLICABLE 2008 NET OPERATING LOSS.—For 
purposes of this subparagraph, the term ‘applicable 
2008 net operating loss’ means— 
‘‘(I) the taxpayer’s net operating loss for any 
taxable year ending in 2008, or 
‘‘(II) if the taxpayer elects to have this sub-
clause apply in lieu of subclause (I), the taxpayer’s 
net operating loss for any taxable year beginning 
in 2008. 
‘‘(iii) ELECTION.—Any election under this subpara-
graph shall be made in such manner as may be pre-
scribed by the Secretary, and shall be made by the 
due date (including extension of time) for filing the 
taxpayer’s return for the taxable year of the net oper-
ating loss. Any such election, once made, shall be irrev-
ocable. Any election under this subparagraph may be 
made only with respect to 1 taxable year. 
‘‘(iv) ELIGIBLE SMALL BUSINESS.—For purposes of 
this subparagraph, the term ‘eligible small business’ 
has the meaning given such term by subparagraph
H. R. 1—222 
(F)(iii), except that in applying such subparagraph, 
section 448(c) shall be applied by substituting 
‘$15,000,000’ for ‘$5,000,000’ each place it appears.’’. 
(b) CONFORMING AMENDMENT.—Section 172 is amended by 
striking subsection (k) and by redesignating subsection (l) as sub-
section (k). 
(c) ANTI-ABUSE RULES.—The Secretary of Treasury or the Sec-
retary’s designee shall prescribe such rules as are necessary to 
prevent the abuse of the purposes of the amendments made by 
this section, including anti-stuffing rules, anti-churning rules 
(including rules relating to sale-leasebacks), and rules similar to 
the rules under section 1091 of the Internal Revenue Code of 
1986 relating to losses from wash sales. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to 
net operating losses arising in taxable years ending after 
December 31, 2007. 
(2) TRANSITIONAL RULE.—In the case of a net operating 
loss for a taxable year ending before the date of the enactment 
of this Act— 
(A) any election made under section 172(b)(3) of the 
Internal Revenue Code of 1986 with respect to such loss 
may (notwithstanding such section) be revoked before the 
applicable date, 
(B) any election made under section 172(b)(1)(H) of 
such Code with respect to such loss shall (notwithstanding 
such section) be treated as timely made if made before 
the applicable date, and 
(C) any application under section 6411(a) of such Code 
with respect to such loss shall be treated as timely filed 
if filed before the applicable date. 
For purposes of this paragraph, the term ‘‘applicable date’’ 
means the date which is 60 days after the date of the enactment 
of this Act. 
SEC. 1212. DECREASED REQUIRED ESTIMATED TAX PAYMENTS IN 2009 
FOR CERTAIN SMALL BUSINESSES. 
Paragraph (1) of section 6654(d) is amended by adding at 
the end the following new subparagraph: 
‘‘(D) SPECIAL RULE FOR 2009.— 
‘‘(i) IN GENERAL.—Notwithstanding subparagraph 
(C), in the case of any taxable year beginning in 2009, 
clause (ii) of subparagraph (B) shall be applied to any 
qualified individual by substituting ‘90 percent’ for ‘100 
percent’. 
‘‘(ii) QUALIFIED INDIVIDUAL.—For purposes of this 
subparagraph, the term ‘qualified individual’ means 
any individual if— 
‘‘(I) the adjusted gross income shown on the 
return of such individual for the preceding taxable 
year is less than $500,000, and 
‘‘(II) such individual certifies that more than 
50 percent of the gross income shown on the return 
of such individual for the preceding taxable year 
was income from a small business.
H. R. 1—223 
A certification under subclause (II) shall be in such 
form and manner and filed at such time as the Sec-
retary may by regulations prescribe. 
‘‘(iii) INCOME FROM A SMALL BUSINESS.—For pur-
poses of clause (ii), income from a small business 
means, with respect to any individual, income from 
a trade or business the average number of employees 
of which was less than 500 employees for the calendar 
year ending with or within the preceding taxable year 
of the individual. 
‘‘(iv) SEPARATE RETURNS.—In the case of a married 
individual (within the meaning of section 7703) who 
files a separate return for the taxable year for which 
the amount of the installment is being determined, 
clause (ii)(I) shall be applied by substituting ‘$250,000’ 
for ‘$500,000’. 
‘‘(v) ESTATES AND TRUSTS.—In the case of an estate 
or trust, adjusted gross income shall be determined 
as provided in section 67(e).’’. 
PART III—INCENTIVES FOR NEW JOBS 
SEC. 1221. INCENTIVES TO HIRE UNEMPLOYED VETERANS AND DIS-
CONNECTED YOUTH. 
(a) IN GENERAL.—Subsection (d) of section 51 is amended by 
adding at the end the following new paragraph: 
‘‘(14) CREDIT ALLOWED FOR UNEMPLOYED VETERANS AND 
DISCONNECTED YOUTH HIRED IN 2009 OR 2010.— 
‘‘(A) IN GENERAL.—Any unemployed veteran or discon-
nected youth who begins work for the employer during 
2009 or 2010 shall be treated as a member of a targeted 
group for purposes of this subpart. 
‘‘(B) DEFINITIONS.—For purposes of this paragraph— 
‘‘(i) 
UNEMPLOYED
VETERAN.—The 
term 
‘unemployed veteran’ means any veteran (as defined 
in paragraph (3)(B), determined without regard to 
clause (ii) thereof) who is certified by the designated 
local agency as— 
‘‘(I) having been discharged or released from 
active duty in the Armed Forces at any time during 
the 5-year period ending on the hiring date, and 
‘‘(II) being in receipt of unemployment com-
pensation under State or Federal law for not less 
than 4 weeks during the 1-year period ending on 
the hiring date. 
‘‘(ii) DISCONNECTED
YOUTH.—The term ‘discon-
nected youth’ means any individual who is certified 
by the designated local agency— 
‘‘(I) as having attained age 16 but not age 
25 on the hiring date, 
‘‘(II) as not regularly attending any secondary, 
technical, or post-secondary school during the 6- 
month period preceding the hiring date, 
‘‘(III) as not regularly employed during such 
6-month period, and 
‘‘(IV) as not readily employable by reason of 
lacking a sufficient number of basic skills.’’.
H. R. 1—224 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to individuals who begin work for the employer after 
December 31, 2008. 
PART IV—RULES RELATING TO DEBT 
INSTRUMENTS 
SEC. 1231. DEFERRAL AND RATABLE INCLUSION OF INCOME ARISING 
FROM BUSINESS INDEBTEDNESS DISCHARGED BY THE 
REACQUISITION OF A DEBT INSTRUMENT. 
(a) IN GENERAL.—Section 108 (relating to income from dis-
charge of indebtedness) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(i) DEFERRAL AND RATABLE INCLUSION OF INCOME ARISING 
FROM BUSINESS INDEBTEDNESS DISCHARGED BY THE REACQUISITION 
OF A DEBT INSTRUMENT.— 
‘‘(1) IN GENERAL.—At the election of the taxpayer, income 
from the discharge of indebtedness in connection with the 
reacquisition after December 31, 2008, and before January 
1, 2011, of an applicable debt instrument shall be includible 
in gross income ratably over the 5-taxable-year period beginning 
with— 
‘‘(A) in the case of a reacquisition occurring in 2009, 
the fifth taxable year following the taxable year in which 
the reacquisition occurs, and 
‘‘(B) in the case of a reacquisition occurring in 2010, 
the fourth taxable year following the taxable year in which 
the reacquisition occurs. 
‘‘(2) DEFERRAL OF DEDUCTION FOR ORIGINAL ISSUE DISCOUNT 
IN DEBT FOR DEBT EXCHANGES.— 
‘‘(A) IN
GENERAL.—If, as part of a reacquisition to 
which paragraph (1) applies, any debt instrument is issued 
for the applicable debt instrument being reacquired (or 
is treated as so issued under subsection (e)(4) and the 
regulations thereunder) and there is any original issue 
discount determined under subpart A of part V of sub-
chapter P of this chapter with respect to the debt 
instrument so issued— 
‘‘(i) except as provided in clause (ii), no deduction 
otherwise allowable under this chapter shall be allowed 
to the issuer of such debt instrument with respect 
to the portion of such original issue discount which— 
‘‘(I) accrues before the 1st taxable year in the 
5-taxable-year period in which income from the 
discharge of indebtedness attributable to the 
reacquisition of the debt instrument is includible 
under paragraph (1), and 
‘‘(II) does not exceed the income from the dis-
charge of indebtedness with respect to the debt 
instrument being reacquired, and 
‘‘(ii) the aggregate amount of deductions disallowed 
under clause (i) shall be allowed as a deduction ratably 
over the 5-taxable-year period described in clause (i)(I). 
If the amount of the original issue discount accruing before 
such 1st taxable year exceeds the income from the dis-
charge of indebtedness with respect to the applicable debt
H. R. 1—225 
instrument being reacquired, the deductions shall be dis-
allowed in the order in which the original issue discount 
is accrued. 
‘‘(B) DEEMED DEBT FOR DEBT EXCHANGES.—For pur-
poses of subparagraph (A), if any debt instrument is issued 
by an issuer and the proceeds of such debt instrument 
are used directly or indirectly by the issuer to reacquire 
an applicable debt instrument of the issuer, the debt 
instrument so issued shall be treated as issued for the 
debt instrument being reacquired. If only a portion of the 
proceeds from a debt instrument are so used, the rules 
of subparagraph (A) shall apply to the portion of any 
original issue discount on the newly issued debt instrument 
which is equal to the portion of the proceeds from such 
instrument used to reacquire the outstanding instrument. 
‘‘(3) APPLICABLE DEBT INSTRUMENT.—For purposes of this 
subsection— 
‘‘(A) 
APPLICABLE
DEBT
INSTRUMENT.—The 
term 
‘applicable debt instrument’ means any debt instrument 
which was issued by— 
‘‘(i) a C corporation, or 
‘‘(ii) any other person in connection with the con-
duct of a trade or business by such person. 
‘‘(B) DEBT INSTRUMENT.—The term ‘debt instrument’ 
means a bond, debenture, note, certificate, or any other 
instrument or contractual arrangement constituting indebt-
edness (within the meaning of section 1275(a)(1)). 
‘‘(4) REACQUISITION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘reacquisition’ means, with 
respect to any applicable debt instrument, any acquisition 
of the debt instrument by— 
‘‘(i) the debtor which issued (or is otherwise the 
obligor under) the debt instrument, or 
‘‘(ii) a related person to such debtor. 
‘‘(B) ACQUISITION.—The term ‘acquisition’ shall, with 
respect to any applicable debt instrument, include an 
acquisition of the debt instrument for cash, the exchange 
of the debt instrument for another debt instrument 
(including an exchange resulting from a modification of 
the debt instrument), the exchange of the debt instrument 
for corporate stock or a partnership interest, and the con-
tribution of the debt instrument to capital. Such term 
shall also include the complete forgiveness of the indebted-
ness by the holder of the debt instrument. 
‘‘(5) OTHER DEFINITIONS AND RULES.—For purposes of this 
subsection— 
‘‘(A) RELATED PERSON.—The determination of whether 
a person is related to another person shall be made in 
the same manner as under subsection (e)(4). 
‘‘(B) ELECTION.— 
‘‘(i) IN GENERAL.—An election under this subsection 
with respect to any applicable debt instrument shall 
be made by including with the return of tax imposed 
by chapter 1 for the taxable year in which the 
reacquisition of the debt instrument occurs a statement 
which— 
‘‘(I) clearly identifies such instrument, and
H. R. 1—226 
‘‘(II) includes the amount of income to which 
paragraph (1) applies and such other information 
as the Secretary may prescribe. 
‘‘(ii) ELECTION IRREVOCABLE.—Such election, once 
made, is irrevocable. 
‘‘(iii) PASS-THRU ENTITIES.—In the case of a part-
nership, S corporation, or other pass-thru entity, the 
election under this subsection shall be made by the 
partnership, the S corporation, or other entity involved. 
‘‘(C) COORDINATION WITH OTHER EXCLUSIONS.—If a tax-
payer elects to have this subsection apply to an applicable 
debt instrument, subparagraphs (A), (B), (C), and (D) of 
subsection (a)(1) shall not apply to the income from the 
discharge of such indebtedness for the taxable year of the 
election or any subsequent taxable year. 
‘‘(D) ACCELERATION OF DEFERRED ITEMS.— 
‘‘(i) IN GENERAL.—In the case of the death of the 
taxpayer, the liquidation or sale of substantially all 
the assets of the taxpayer (including in a title 11 
or similar case), the cessation of business by the tax-
payer, or similar circumstances, any item of income 
or deduction which is deferred under this subsection 
(and has not previously been taken into account) shall 
be taken into account in the taxable year in which 
such event occurs (or in the case of a title 11 or 
similar case, the day before the petition is filed). 
‘‘(ii) SPECIAL RULE FOR PASS-THRU ENTITIES.—The 
rule of clause (i) shall also apply in the case of the 
sale or exchange or redemption of an interest in a 
partnership, S corporation, or other pass- thru entity 
by a partner, shareholder, or other person holding 
an ownership interest in such entity. 
‘‘(6) SPECIAL RULE FOR PARTNERSHIPS.—In the case of a 
partnership, any income deferred under this subsection shall 
be allocated to the partners in the partnership immediately 
before the discharge in the manner such amounts would have 
been included in the distributive shares of such partners under 
section 704 if such income were recognized at such time. Any 
decrease in a partner’s share of partnership liabilities as a 
result of such discharge shall not be taken into account for 
purposes of section 752 at the time of the discharge to the 
extent it would cause the partner to recognize gain under 
section 731. Any decrease in partnership liabilities deferred 
under the preceding sentence shall be taken into account by 
such partner at the same time, and to the extent remaining 
in the same amount, as income deferred under this subsection 
is recognized. 
‘‘(7) SECRETARIAL
AUTHORITY.—The Secretary may pre-
scribe such regulations, rules, or other guidance as may be 
necessary or appropriate for purposes of applying this sub-
section, including— 
‘‘(A) extending the application of the rules of paragraph 
(5)(D) to other circumstances where appropriate, 
‘‘(B) requiring reporting of the election (and such other 
information as the Secretary may require) on returns of 
tax for subsequent taxable years, and
H. R. 1—227 
‘‘(C) rules for the application of this subsection to part-
nerships, S corporations, and other pass-thru entities, 
including for the allocation of deferred deductions.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to discharges in taxable years ending after December 
31, 2008. 
SEC. 1232. MODIFICATIONS OF RULES FOR ORIGINAL ISSUE DISCOUNT 
ON CERTAIN HIGH YIELD OBLIGATIONS. 
(a) SUSPENSION OF SPECIAL RULES.—Section 163(e)(5) (relating 
to special rules for original issue discount on certain high yield 
obligations) is amended by redesignating subparagraph (F) as 
subparagraph (G) and by inserting after subparagraph (E) the 
following new subparagraph: 
‘‘(F) SUSPENSION OF APPLICATION OF PARAGRAPH.— 
‘‘(i) 
TEMPORARY
SUSPENSION.—This 
paragraph 
shall not apply to any applicable high yield discount 
obligation issued during the period beginning on Sep-
tember 1, 2008, and ending on December 31, 2009, 
in exchange (including an exchange resulting from a 
modification of the debt instrument) for an obligation 
which is not an applicable high yield discount obliga-
tion and the issuer (or obligor) of which is the same 
as the issuer (or obligor) of such applicable high yield 
discount obligation. The preceding sentence shall not 
apply to any obligation the interest on which is interest 
described in section 871(h)(4) (without regard to 
subparagraph (D) thereof) or to any obligation issued 
to a related person (within the meaning of section 
108(e)(4)). 
‘‘(ii) SUCCESSIVE APPLICATION.—Any obligation to 
which clause (i) applies shall not be treated as an 
applicable high yield discount obligation for purposes 
of applying this subparagraph to any other obligation 
issued in exchange for such obligation. 
‘‘(iii) SECRETARIAL AUTHORITY TO SUSPEND APPLICA-
TION.—The Secretary may apply this paragraph with 
respect to debt instruments issued in periods following 
the period described in clause (i) if the Secretary deter-
mines that such application is appropriate in light 
of distressed conditions in the debt capital markets.’’. 
(b) INTEREST RATE USED IN DETERMINING HIGH YIELD OBLIGA-
TIONS.—The last sentence of section 163(i)(1) is amended— 
(1) by inserting ‘‘(i)’’ after ‘‘regulation’’, and 
(2) by inserting ‘‘, or (ii) permit, on a temporary basis, 
a rate to be used with respect to any debt instrument which 
is higher than the applicable Federal rate if the Secretary 
determines that such rate is appropriate in light of distressed 
conditions in the debt capital markets’’ before the period at 
the end. 
(c) EFFECTIVE DATE.— 
(1) SUSPENSION.—The amendments made by subsection (a) 
shall apply to obligations issued after August 31, 2008, in 
taxable years ending after such date. 
(2) INTEREST RATE AUTHORITY.—The amendments made by 
subsection (b) shall apply to obligations issued after December 
31, 2009, in taxable years ending after such date.
H. R. 1—228 
PART V—QUALIFIED SMALL BUSINESS STOCK 
SEC. 1241. SPECIAL RULES APPLICABLE TO QUALIFIED SMALL BUSI-
NESS STOCK FOR 2009 AND 2010. 
(a) IN GENERAL.—Section 1202(a) is amended by adding at 
the end the following new paragraph: 
‘‘(3) SPECIAL
RULES
FOR
2009
AND
2010.—In the case of 
qualified small business stock acquired after the date of the 
enactment of this paragraph and before January 1, 2011— 
‘‘(A) paragraph (1) shall be applied by substituting 
‘75 percent’ for ‘50 percent’, and 
‘‘(B) paragraph (2) shall not apply.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to stock acquired after the date of the enactment of 
this Act. 
PART VI—S CORPORATIONS 
SEC. 1251. TEMPORARY REDUCTION IN RECOGNITION PERIOD FOR 
BUILT-IN GAINS TAX. 
(a) IN GENERAL.—Paragraph (7) of section 1374(d) (relating 
to definitions and special rules) is amended to read as follows: 
‘‘(7) RECOGNITION PERIOD.— 
‘‘(A) IN GENERAL.—The term ‘recognition period’ means 
the 10-year period beginning with the 1st day of the 1st 
taxable year for which the corporation was an S corpora-
tion. 
‘‘(B) SPECIAL RULE FOR 2009 AND 2010.—In the case 
of any taxable year beginning in 2009 or 2010, no tax 
shall be imposed on the net recognized built-in gain of 
an S corporation if the 7th taxable year in the recognition 
period preceded such taxable year. The preceding sentence 
shall be applied separately with respect to any asset to 
which paragraph (8) applies. 
‘‘(C) SPECIAL
RULE
FOR
DISTRIBUTIONS
TO
SHARE-
HOLDERS.—For purposes of applying this section to any 
amount includible in income by reason of distributions 
to shareholders pursuant to section 593(e)— 
‘‘(i) subparagraph (A) shall be applied without 
regard to the phrase ‘10-year’, and 
‘‘(ii) subparagraph (B) shall not apply.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2008. 
PART VII—RULES RELATING TO OWNERSHIP 
CHANGES 
SEC. 1261. CLARIFICATION OF REGULATIONS RELATED TO LIMITA-
TIONS ON CERTAIN BUILT-IN LOSSES FOLLOWING AN 
OWNERSHIP CHANGE. 
(a) FINDINGS.—Congress finds as follows: 
(1) The delegation of authority to the Secretary of the 
Treasury under section 382(m) of the Internal Revenue Code 
of 1986 does not authorize the Secretary to provide exemptions 
or special rules that are restricted to particular industries 
or classes of taxpayers.
H. R. 1—229 
(2) Internal Revenue Service Notice 2008–83 is inconsistent 
with the congressional intent in enacting such section 382(m). 
(3) The legal authority to prescribe Internal Revenue 
Service Notice 2008–83 is doubtful. 
(4) However, as taxpayers should generally be able to rely 
on guidance issued by the Secretary of the Treasury legislation 
is necessary to clarify the force and effect of Internal Revenue 
Service Notice 2008–83 and restore the proper application 
under the Internal Revenue Code of 1986 of the limitation 
on built-in losses following an ownership change of a bank. 
(b) DETERMINATION OF FORCE AND EFFECT OF INTERNAL REV-
ENUE SERVICE NOTICE 2008–83 EXEMPTING BANKS FROM LIMITA-
TION
ON
CERTAIN
BUILT–IN
LOSSES
FOLLOWING
OWNERSHIP 
CHANGE.— 
(1) IN GENERAL.—Internal Revenue Service Notice 2008– 
83— 
(A) shall be deemed to have the force and effect of 
law with respect to any ownership change (as defined in 
section 382(g) of the Internal Revenue Code of 1986) occur-
ring on or before January 16, 2009, and 
(B) shall have no force or effect with respect to any 
ownership change after such date. 
(2) BINDING CONTRACTS.—Notwithstanding paragraph (1), 
Internal Revenue Service Notice 2008–83 shall have the force 
and effect of law with respect to any ownership change (as 
so defined) which occurs after January 16, 2009, if such 
change— 
(A) is pursuant to a written binding contract entered 
into on or before such date, or 
(B) is pursuant to a written agreement entered into 
on or before such date and such agreement was described 
on or before such date in a public announcement or in 
a filing with the Securities and Exchange Commission 
required by reason of such ownership change. 
SEC. 1262. TREATMENT OF CERTAIN OWNERSHIP CHANGES FOR PUR-
POSES OF LIMITATIONS ON NET OPERATING LOSS 
CARRYFORWARDS AND CERTAIN BUILT-IN LOSSES. 
(a) IN GENERAL.—Section 382 is amended by adding at the 
end the following new subsection: 
‘‘(n) SPECIAL RULE FOR CERTAIN OWNERSHIP CHANGES.— 
‘‘(1) IN GENERAL.—The limitation contained in subsection 
(a) shall not apply in the case of an ownership change which 
is pursuant to a restructuring plan of a taxpayer which— 
‘‘(A) is required under a loan agreement or a commit-
ment for a line of credit entered into with the Department 
of the Treasury under the Emergency Economic Stabiliza-
tion Act of 2008, and 
‘‘(B) is intended to result in a rationalization of the 
costs, capitalization, and capacity with respect to the manu-
facturing workforce of, and suppliers to, the taxpayer and 
its subsidiaries. 
‘‘(2) SUBSEQUENT ACQUISITIONS.—Paragraph (1) shall not 
apply in the case of any subsequent ownership change unless 
such ownership change is described in such paragraph. 
‘‘(3) LIMITATION BASED ON CONTROL IN CORPORATION.—
H. R. 1—230 
‘‘(A) IN GENERAL.—Paragraph (1) shall not apply in 
the case of any ownership change if, immediately after 
such ownership change, any person (other than a voluntary 
employees’ beneficiary association under section 501(c)(9)) 
owns stock of the new loss corporation possessing 50 per-
cent or more of the total combined voting power of all 
classes of stock entitled to vote, or of the total value of 
the stock of such corporation. 
‘‘(B) TREATMENT OF RELATED PERSONS.— 
‘‘(i) IN GENERAL.—Related persons shall be treated 
as a single person for purposes of this paragraph. 
‘‘(ii) RELATED
PERSONS.—For purposes of clause 
(i), a person shall be treated as related to another 
person if— 
‘‘(I) such person bears a relationship to such 
other person described in section 267(b) or 707(b), 
or 
‘‘(II) such persons are members of a group 
of persons acting in concert.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to ownership changes after the date of the enactment 
of this Act. 
Subtitle D—Manufacturing Recovery 
Provisions 
SEC. 1301. TEMPORARY EXPANSION OF AVAILABILITY OF INDUSTRIAL 
DEVELOPMENT BONDS TO FACILITIES MANUFACTURING 
INTANGIBLE PROPERTY. 
(a) IN GENERAL.—Subparagraph (C) of section 144(a)(12) is 
amended— 
(1) by striking ‘‘For purposes of this paragraph, the term’’ 
and inserting ‘‘For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term’’, and 
(2) by striking the last sentence and inserting the following 
new clauses: 
‘‘(ii) CERTAIN
FACILITIES
INCLUDED.—Such term 
includes facilities which are directly related and 
ancillary to a manufacturing facility (determined with-
out regard to this clause) if— 
‘‘(I) such facilities are located on the same 
site as the manufacturing facility, and 
‘‘(II) not more than 25 percent of the net pro-
ceeds of the issue are used to provide such facili-
ties. 
‘‘(iii) SPECIAL
RULES
FOR
BONDS
ISSUED
IN
2009 
AND 2010.—In the case of any issue made after the 
date of enactment of this clause and before January 
1, 2011, clause (ii) shall not apply and the net proceeds 
from a bond shall be considered to be used to provide 
a manufacturing facility if such proceeds are used to 
provide— 
‘‘(I) a facility which is used in the creation 
or production of intangible property which is 
described in section 197(d)(1)(C)(iii), or