576 
referred to in paragraph (2). Paragraph (2) 
shall apply to such new principal residence dur-
ing the recapture period in the same manner as 
if such new principal residence were the con-
verted residence. 
‘‘(C) TRANSFERS BETWEEN SPOUSES OR IN-
CIDENT TO DIVORCE.—In the case of a transfer 
of a residence to which section 1041(a) applies— 
‘‘(i) paragraph (2) shall not apply to 
such transfer, and 
‘‘(ii) in the case of taxable years end-
ing after such transfer, paragraphs (1) and 
(2) shall apply to the transferee in the same 
manner as if such transferee were the trans-
feror (and shall not apply to the transferor). 
‘‘(5) JOINT RETURNS.—In the case of a credit al-
lowed under subsection (a) with respect to a joint re-
turn, half of such credit shall be treated as having 
been allowed to each individual filing such return for 
purposes of this subsection. 
‘‘(6) RECAPTURE PERIOD.—For purposes of this 
subsection, the term ‘recapture period’ means the 15 
taxable years beginning with the second taxable year 
following the taxable year in which the purchase of
577 
the principal residence for which a credit is allowed 
under subsection (a) was made. 
‘‘(g) APPLICATION OF SECTION.—This section shall 
only apply to a principal residence purchased by the tax-
payer on or after April 9, 2008, and before April 1, 2009.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 26(b)(2) is amended by striking 
‘‘and’’ at the end of subparagraph (U), by striking the 
period and inserting ‘‘, and’’ and the end of subpara-
graph (V), and by inserting after subparagraph (V) 
the following new subparagraph: 
‘‘(W) section 36(f) (relating to recapture of 
homebuyer credit).’’. 
(2) Section 6211(b)(4)(A) is amended by striking 
‘‘34,’’ and all that follows through ‘‘6428’’ and insert-
ing ‘‘34, 35, 36, 53(e), and 6428’’. 
(3) Section 1324(b)(2) of title 31, United States 
Code, is amended by inserting ‘‘, 36,’’ after ‘‘section 
35’’. 
(4) The table of sections for subpart C of part IV 
of subchapter A of chapter 1 is amended by redesig-
nating the item relating to section 36 as an item re-
lating to section 37 and by inserting before such item 
the following new item: 
‘‘Sec. 36. First-time homebuyer credit.’’.
578 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to residences purchased on or after April 
9, 2008, in taxable years ending on or after such date. 
SEC. 3012. ADDITIONAL STANDARD DEDUCTION FOR REAL 
PROPERTY TAXES FOR NONITEMIZERS. 
(a) IN GENERAL.—Section 63(c)(1) (defining standard 
deduction) is amended by striking ‘‘and’’ at the end of sub-
paragraph (A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, and’’, and by adding at the end 
the following new subparagraph: 
‘‘(C) in the case of any taxable year begin-
ning in 2008, the real property tax deduction.’’. 
(b) DEFINITION.—Section 63(c) is amended by adding 
at the end the following new paragraph: 
‘‘(8) REAL PROPERTY TAX DEDUCTION.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the real property tax deduction is the 
lesser of— 
‘‘(i) the amount allowable as a deduc-
tion under this chapter for State and local 
taxes described in section 164(a)(1), or 
‘‘(ii) $500 ($1,000 in the case of a 
joint return).
579 
Any taxes taken into account under section 62(a) 
shall not be taken into account under this para-
graph. 
‘‘(B) EXCEPTION.—The real property tax 
deduction shall not be allowed in the case of a 
taxpayer living in a jurisdiction in which the 
rate of tax for all residential real property taxes 
is increased, net of any tax rebates, through rate 
increases or the repeal or reduction of otherwise 
applicable deductions, credits, or offsets, at any 
time after the date of the enactment of this para-
graph and before December 31, 2008. This sub-
paragraph shall not apply in the case of a juris-
diction in which the rate of tax for all residen-
tial real property taxes is increased pursuant to 
an equalization policy in effect before the date of 
the enactment of this paragraph or as a result 
of any votes of the residents of such jurisdiction 
to increase funding for pre-school, primary, sec-
ondary, or higher education.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2007.
580 
Subtitle C—General Provisions 
SEC. 3021. TEMPORARY LIBERALIZATION OF TAX-EXEMPT 
HOUSING BOND RULES. 
(a) TEMPORARY INCREASE IN VOLUME CAP.— 
(1) IN GENERAL.—Subsection (d) of section 146 
is amended by adding at the end the following new 
paragraph: 
‘‘(5) INCREASE AND SET ASIDE FOR HOUSING 
BONDS FOR 2008.— 
‘‘(A) INCREASE FOR 2008.—In the case of 
calendar year 2008, the State ceiling for each 
State shall be increased by an amount equal to 
$11,000,000,000 multiplied by a fraction— 
‘‘(i) the numerator of which is the 
State ceiling applicable to the State for cal-
endar year 2008, determined without regard 
to this paragraph, and 
‘‘(ii) the denominator of which is the 
sum of the State ceilings determined under 
clause (i) for all States. 
‘‘(B) SET ASIDE.— 
‘‘(i) IN GENERAL.—Any amount of the 
State ceiling for any State which is attrib-
utable to an increase under this paragraph
581 
shall be allocated solely for one or more 
qualified housing issues. 
‘‘(ii) QUALIFIED HOUSING ISSUE.—For 
purposes of this paragraph, the term ‘quali-
fied housing issue’ means— 
‘‘(I) an issue described in section 
142(a)(7) (relating to qualified resi-
dential rental projects), or 
‘‘(II) a qualified mortgage issue 
(determined by substituting ‘12-month 
period’ for ‘42-month period’ each 
place 
it 
appears 
in 
section 
143(a)(2)(D)(i)).’’. 
(2) CARRYFORWARD OF UNUSED LIMITATIONS.— 
Subsection (f) of section 146 is amended by adding at 
the end the following new paragraph: 
‘‘(6) SPECIAL RULES FOR INCREASED VOLUME 
CAP UNDER SUBSECTION (d)(5).—No amount which is 
attributable to the increase under subsection (d)(5) 
may be used— 
‘‘(A) for any issue other than a qualified 
housing issue (as defined in subsection (d)(5)), 
or 
‘‘(B) to issue any bond after calendar year 
2010.’’.
590 
‘‘(ii) the transferee or qualified sub-
stitute receives a notice (as described in sub-
section (d)) from a transferor’s agent, trans-
feree’s agent, or qualified substitute that 
such affidavit or statement is false, or 
‘‘(B) if the Secretary by regulations requires 
the transferee or qualified substitute to furnish a 
copy of such affidavit or statement to the Sec-
retary and the transferee or qualified substitute 
fails to furnish a copy of such affidavit or state-
ment to the Secretary at such time and in such 
manner as required by such regulations.’’. 
(2) LIABILITY.— 
(A) NOTICE.—Paragraph (1) of section 
1445(d) (relating to notice of false affidavit; for-
eign corporations) is amended to read as follows: 
‘‘(1) NOTICE
OF
FALSE
AFFIDAVIT; FOREIGN 
CORPORATIONS.—If— 
‘‘(A) the transferor furnishes the transferee 
or qualified substitute an affidavit described in 
paragraph (2) of subsection (b) or a domestic 
corporation furnishes the transferee an affidavit 
described in paragraph (3) of subsection (b), and 
‘‘(B) in the case of— 
‘‘(i) any transferor’s agent—
591 
‘‘(I) such agent has actual knowl-
edge that such affidavit is false, or 
‘‘(II) in the case of an affidavit 
described in subsection (b)(2) furnished 
by a corporation, such corporation is a 
foreign corporation, or 
‘‘(ii) any transferee’s agent or qualified 
substitute, such agent or substitute has ac-
tual knowledge that such affidavit is false, 
such agent or qualified substitute shall so notify 
the transferee at such time and in such manner 
as the Secretary shall require by regulations.’’. 
(B) FAILURE TO FURNISH NOTICE.—Para-
graph (2) of section 1445(d) (relating to failure 
to furnish notice) is amended to read as follows: 
‘‘(2) FAILURE TO FURNISH NOTICE.— 
‘‘(A) IN
GENERAL.—If any transferor’s 
agent, transferee’s agent, or qualified substitute 
is required by paragraph (1) to furnish notice, 
but fails to furnish such notice at such time or 
times and in such manner as may be required 
by regulations, such agent or substitute shall 
have the same duty to deduct and withhold that 
the transferee would have had if such agent or 
substitute had complied with paragraph (1).
592 
‘‘(B) LIABILITY
LIMITED
TO
AMOUNT
OF 
COMPENSATION.—An agent’s or substitute’s li-
ability under subparagraph (A) shall be limited 
to the amount of compensation the agent or sub-
stitute derives from the transaction.’’. 
(C) CONFORMING AMENDMENT.—The head-
ing for section 1445(d) is amended by striking 
‘‘OR TRANSFEREE’S AGENTS’’ and inserting ‘‘, 
TRANSFEREE’S AGENTS, OR QUALIFIED SUB-
STITUTES’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to dispositions of United States real 
property interests after the date of the enactment of this 
Act. 
SEC. 3025. MODIFICATION OF DEFINITION OF TAX-EXEMPT 
USE PROPERTY FOR PURPOSES OF THE RE-
HABILITATION CREDIT. 
(a) 
IN
GENERAL.—Subclause 
(I) 
of 
section 
47(c)(2)(B)(v) is amended by striking ‘‘section 168(h)’’ and 
inserting ‘‘section 168(h), except that ‘50 percent’ shall be 
substituted for ‘35 percent’ in paragraph (1)(B)(iii) there-
of’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to expenditures properly taken into ac-
count for periods after December 31, 2007.
593 
SEC. 3026. EXTENSION OF SPECIAL RULE FOR MORTGAGE 
REVENUE BONDS FOR RESIDENCES LOCATED 
IN DISASTER AREAS. 
(a) IN GENERAL.—Paragraph (11) of section 143(k) 
is amended— 
(1) by striking ‘‘December 31, 1996’’ and insert-
ing ‘‘May 1, 2008’’, and 
(2) by striking ‘‘January 1, 1999’’ and inserting 
‘‘January 1, 2010’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to bonds issued after May 1, 2008. 
TITLE II—REFORMS RELATED TO 
REAL 
ESTATE 
INVESTMENT 
TRUSTS 
Subtitle A—Foreign Currency and 
Other Qualified Activities 
SEC. 3031. REVISIONS TO REIT INCOME TESTS. 
(a) FOREIGN CURRENCY GAINS NOT GROSS INCOME 
IN APPLYING REIT INCOME TESTS.—Section 856 (defining 
real estate investment trust) is amended by adding at the 
end the following new subsection: 
‘‘(n) RULES REGARDING FOREIGN CURRENCY TRANS-
ACTIONS.— 
‘‘(1) IN GENERAL.—For purposes of this part—
594 
‘‘(A) passive foreign exchange gain for any 
taxable year shall not constitute gross income for 
purposes of subsection (c)(2), and 
‘‘(B) real estate foreign exchange gain for 
any taxable year shall not constitute gross in-
come for purposes of subsection (c)(3). 
‘‘(2) REAL ESTATE FOREIGN EXCHANGE GAIN.— 
For purposes of this subsection, the term ‘real estate 
foreign exchange gain’ means— 
‘‘(A) foreign currency gain (as defined in 
section 988(b)(1)) which is attributable to— 
‘‘(i) any item of income or gain de-
scribed in subsection (c)(3), 
‘‘(ii) the acquisition or ownership of 
obligations secured by mortgages on real 
property or on interests in real property 
(other than foreign currency gain attrib-
utable to any item of income or gain de-
scribed in clause (i)), or 
‘‘(iii) becoming or being the obligor 
under obligations secured by mortgages on 
real property or on interests in real prop-
erty (other than foreign currency gain at-
tributable to any item of income or gain de-
scribed in clause (i)),
595 
‘‘(B) section 987 gain attributable to a 
qualified business unit (as defined by section 
989) of the real estate investment trust, but only 
if such qualified business unit meets the require-
ments under— 
‘‘(i) subsection (c)(3) for the taxable 
year, and 
‘‘(ii) subsection (c)(4)(A) at the close of 
each quarter that the real estate investment 
trust has directly or indirectly held the 
qualified business unit, and 
‘‘(C) any other foreign currency gain as de-
termined by the Secretary. 
‘‘(3) PASSIVE
FOREIGN
EXCHANGE
GAIN.—For 
purposes of this subsection, the term ‘passive foreign 
exchange gain’ means— 
‘‘(A) real estate foreign exchange gain, 
‘‘(B) foreign currency gain (as defined in 
section 988(b)(1)) which is not described in sub-
paragraph (A) and which is attributable to— 
‘‘(i) any item of income or gain de-
scribed in subsection (c)(2), 
‘‘(ii) the acquisition or ownership of 
obligations (other than foreign currency
596 
gain attributable to any item of income or 
gain described in clause (i)), or 
‘‘(iii) becoming or being the obligor 
under obligations (other than foreign cur-
rency gain attributable to any item of in-
come or gain described in clause (i)), and 
‘‘(C) any other foreign currency gain as de-
termined by the Secretary. 
‘‘(4) EXCEPTION FOR INCOME FROM SUBSTAN-
TIAL AND REGULAR TRADING.—Notwithstanding this 
subsection or any other provision of this part, any 
section 988 gain derived by a corporation, trust, or 
association from engaging in substantial and regular 
trading or dealing in securities (as defined in section 
475(c)(2)) shall constitute gross income which does 
not qualify under paragraph (2) or (3) of subsection 
(c). This paragraph shall not apply to income which 
does not constitute gross income by reason of sub-
section (c)(5)(G).’’. 
(b) ADDITION TO REIT HEDGING RULE.—Subpara-
graph (G) of section 856(c)(5) is amended to read as fol-
lows: 
‘‘(G) TREATMENT OF CERTAIN HEDGING IN-
STRUMENTS.—Except to the extent as determined 
by the Secretary—
597 
‘‘(i) any income of a real estate invest-
ment trust from a hedging transaction (as 
defined in clause (ii) or (iii) of section 
1221(b)(2)(A)) which is clearly identified 
pursuant to section 1221(a)(7), including 
gain from the sale or disposition of such a 
transaction, shall not constitute gross in-
come under paragraphs (2) and (3) to the 
extent that the transaction hedges any in-
debtedness incurred or to be incurred by the 
trust to acquire or carry real estate assets, 
and 
‘‘(ii) any income of a real estate in-
vestment trust from a transaction entered 
into by the trust primarily to manage risk 
of currency fluctuations with respect to any 
item of income or gain described in para-
graph (2) or (3) (or any property which 
generates such income or gain), including 
gain from the termination of such a trans-
action, shall not constitute gross income 
under paragraphs (2) and (3), but only if 
such transaction is clearly identified as 
such before the close of the day on which it 
was acquired, originated, or entered into (or
598 
such other time as the Secretary may pre-
scribe).’’. 
(c) AUTHORITY TO EXCLUDE ITEMS OF INCOME FROM 
REIT INCOME TESTS.—Section 856(c)(5), as amended by 
the Heartland, Habitat, Harvest, and Horticulture Act of 
2008, is amended by adding at the end the following new 
subparagraph: 
‘‘(J) SECRETARIAL AUTHORITY TO EXCLUDE 
OTHER ITEMS OF INCOME.—To the extent nec-
essary to carry out the purposes of this part, the 
Secretary is authorized to determine, solely for 
purposes of this part, whether any item of in-
come or gain which— 
‘‘(i) does not otherwise qualify under 
paragraph (2) or (3) may be considered as 
not constituting gross income, or 
‘‘(ii) otherwise constitutes gross income 
not qualifying under paragraph (2) or (3) 
may be considered as gross income which 
qualifies under paragraph (2) or (3).’’. 
SEC. 3032. REVISIONS TO REIT ASSET TESTS. 
(a) CLARIFICATION OF VALUATION TEST.—The first 
sentence 
in 
the 
matter 
following 
section 
856(c)(4)(B)(iii)(III) is amended by inserting ‘‘(including 
a discrepancy caused solely by the change in the foreign
599 
currency exchange rate used to value a foreign asset)’’ after 
‘‘such requirements’’. 
(b) CLARIFICATION
OF PERMISSIBLE ASSET CAT-
EGORY.—Section 856(c)(5), as amended by section 3031(c), 
is amended by adding at the end the following new subpara-
graph: 
‘‘(K) CASH.—If the real estate investment 
trust or its qualified business unit (as defined in 
section 989) uses any foreign currency as its 
functional currency (as defined in section 
985(b)), the term ‘cash’ includes such foreign 
currency but only to the extent such foreign cur-
rency— 
‘‘(i) is held for use in the normal 
course of the activities of the trust or quali-
fied business unit which give rise to items 
of income or gain described in paragraph 
(2) or (3) of subsection (c) or are directly 
related to acquiring or holding assets de-
scribed in subsection (c)(4), and 
‘‘(ii) is not held in connection with an 
activity described in subsection (n)(4).’’.
601 
chapter which are directly connected with 
prohibited transactions;’’. 
Subtitle B—Taxable REIT 
Subsidiaries 
SEC. 3041. CONFORMING TAXABLE REIT SUBSIDIARY ASSET 
TEST. 
Section 856(c)(4)(B)(ii) is amended— 
(1) by striking ‘‘20 percent’’ and inserting ‘‘25 
percent’’, and 
(2) by striking ‘‘REIT subsidiaries’’ and all that 
follows, and inserting ‘‘REIT subsidiaries,’’. 
Subtitle C—Dealer Sales 
SEC. 3051. HOLDING PERIOD UNDER SAFE HARBOR. 
Section 857(b)(6) (relating to income from prohibited 
transactions) is amended— 
(1) by striking ‘‘4 years’’ in subparagraphs 
(C)(i), (C)(iv), and (D)(i) and inserting ‘‘2 years’’, 
(2) by striking ‘‘4-year period’’ in subpara-
graphs (C)(ii), (D)(ii), and (D)(iii) and inserting ‘‘2- 
year period’’, and 
(3) by striking ‘‘real estate asset’’and all that fol-
lows through ‘‘if’’ in the matter preceding clause (i) 
of subparagraphs (C) and (D), respectively, and in-
serting ‘‘real estate asset (as defined in section
602 
856(c)(5)(B)) and which is described in section 
1221(a)(1) if’’. 
SEC. 3052. DETERMINING VALUE OF SALES UNDER SAFE 
HARBOR. 
Section 857(b)(6) is amended— 
(1) by striking the semicolon at the end of sub-
paragraph (C)(iii) and inserting ‘‘, or (III) the fair 
market value of property (other than sales of fore-
closure property or sales to which section 1033 ap-
plies) sold during the taxable year does not exceed 10 
percent of the fair market value of all of the assets of 
the trust as of the beginning of the taxable year;’’, and 
(2) by adding ‘‘or’’ at the end of subclause (II) 
of subparagraph (D)(iv) and by adding at the end of 
such subparagraph the following new subclause: 
‘‘(III) the fair market value of prop-
erty (other than sales of foreclosure property 
or sales to which section 1033 applies) sold 
during the taxable year does not exceed 10 
percent of the fair market value of all of the 
assets of the trust as of the beginning of the 
taxable year,’’.
603 
Subtitle D—Health Care REITs 
SEC. 3061. CONFORMITY FOR HEALTH CARE FACILITIES. 
(a) RELATED PARTY RENTALS.—Subparagraph (B) of 
section 856(d)(8) (relating to special rule for taxable REIT 
subsidiaries) is amended to read as follows: 
‘‘(B) EXCEPTION FOR CERTAIN LODGING FA-
CILITIES
AND
HEALTH
CARE
PROPERTY.—The 
requirements of this subparagraph are met with 
respect to an interest in real property which is 
a qualified lodging facility (as defined in para-
graph (9)(D)) or a qualified health care property 
(as defined in subsection (e)(6)(D)(i)) leased by 
the trust to a taxable REIT subsidiary of the 
trust if the property is operated on behalf of such 
subsidiary by a person who is an eligible inde-
pendent contractor. For purposes of this section, 
a taxable REIT subsidiary is not considered to 
be operating or managing a qualified health care 
property or qualified lodging facility solely be-
cause it— 
‘‘(i) directly or indirectly possesses a 
license, permit, or similar instrument ena-
bling it to do so, or 
‘‘(ii) employs individuals working at 
such facility or property located outside the
604 
United States, but only if an eligible inde-
pendent contractor is responsible for the 
daily supervision and direction of such in-
dividuals on behalf of the taxable REIT 
subsidiary pursuant to a management 
agreement or similar service contract.’’. 
(b) ELIGIBLE INDEPENDENT CONTRACTOR.—Subpara-
graphs (A) and (B) of section 856(d)(9) (relating to eligible 
independent contractor) are amended to read as follows: 
‘‘(A) IN GENERAL.—The term ‘eligible inde-
pendent contractor’ means, with respect to any 
qualified lodging facility or qualified health care 
property (as defined in subsection (e)(6)(D)(i)), 
any independent contractor if, at the time such 
contractor enters into a management agreement 
or other similar service contract with the taxable 
REIT subsidiary to operate such qualified lodg-
ing facility or qualified health care property, 
such contractor (or any related person) is ac-
tively engaged in the trade or business of oper-
ating qualified lodging facilities or qualified 
health care properties, respectively, for any per-
son who is not a related person with respect to 
the real estate investment trust or the taxable 
REIT subsidiary.
605 
‘‘(B) SPECIAL RULES.—Solely for purposes 
of this paragraph and paragraph (8)(B), a per-
son shall not fail to be treated as an independent 
contractor with respect to any qualified lodging 
facility or qualified health care property (as so 
defined) by reason of the following: 
‘‘(i) The taxable REIT subsidiary 
bears the expenses for the operation of such 
qualified lodging facility or qualified health 
care property pursuant to the management 
agreement or other similar service contract. 
‘‘(ii) The taxable REIT subsidiary re-
ceives the revenues from the operation of 
such qualified lodging facility or qualified 
health care property, net of expenses for 
such operation and fees payable to the oper-
ator pursuant to such agreement or con-
tract. 
‘‘(iii) The real estate investment trust 
receives income from such person with re-
spect to another property that is attrib-
utable to a lease of such other property to 
such person that was in effect as of the later 
of— 
‘‘(I) January 1, 1999, or
606 
‘‘(II) the earliest date that any 
taxable REIT subsidiary of such trust 
entered into a management agreement 
or other similar service contract with 
such person with respect to such quali-
fied lodging facility or qualified health 
care property.’’. 
(c) TAXABLE REIT SUBSIDIARIES.—The last sentence 
of section 856(l)(3) is amended— 
(1) by inserting ‘‘or a health care facility’’ after 
‘‘a lodging facility’’, and 
(2) by inserting ‘‘or health care facility’’ after 
‘‘such lodging facility’’. 
Subtitle E—Effective Dates 
SEC. 3071. EFFECTIVE DATES. 
(a) IN GENERAL.—Except as otherwise provided in 
this section, the amendments made by this title shall apply 
to taxable years beginning after the date of the enactment 
of this Act. 
(b) REIT INCOME TESTS.— 
(1) The amendments made by section 3031(a) 
and (c) shall apply to gains and items of income rec-
ognized after the date of the enactment of this Act.
607 
(2) The amendment made by section 3031(b) 
shall apply to transactions entered into after the date 
of the enactment of this Act. 
(c) CONFORMING FOREIGN CURRENCY REVISIONS.— 
(1) The amendment made by section 3033(a) 
shall apply to gains recognized after the date of the 
enactment of this Act. 
(2) The amendment made by section 3033(b) 
shall apply to gains and deductions recognized after 
the date of the enactment of this Act. 
(d) DEALER SALES.—The amendments made by sub-
title C shall apply to sales made after the date of the enact-
ment of this Act. 
TITLE III—REVENUE 
PROVISIONS 
Subtitle A—General Provisions 
SEC. 3081. ELECTION TO ACCELERATE AMT AND R AND D 
CREDITS IN LIEU OF BONUS DEPRECIATION. 
(a) IN GENERAL.—Section 168(k) is amended by add-
ing at the end the following new paragraph: 
‘‘(4) ELECTION TO ACCELERATE AMT AND R AND 
D CREDITS IN LIEU OF BONUS DEPRECIATION.— 
‘‘(A) IN GENERAL.—If a corporation elects 
to have this paragraph apply—
608 
‘‘(i) no additional depreciation shall be 
allowed under paragraph (1) for any eligi-
ble qualified property placed in service dur-
ing any taxable year to which paragraph 
(1) would otherwise apply, 
‘‘(ii) the applicable depreciation meth-
od used under this section with respect to 
such eligible qualified property shall be the 
straight line method rather than the method 
that would otherwise be used, and 
‘‘(iii) the limitations described in sub-
paragraph (B) for such taxable year shall 
be increased by an aggregate amount not in 
excess of the bonus depreciation amount for 
such taxable year. 
‘‘(B) LIMITATIONS TO BE INCREASED.—The 
limitations described in this subparagraph are— 
‘‘(i) the limitation under section 38(c), 
and 
‘‘(ii) the limitation under section 
53(c). 
‘‘(C) BONUS DEPRECIATION AMOUNT.—For 
purposes of this paragraph— 
‘‘(i) IN GENERAL.—The bonus depre-
ciation amount for any applicable taxable
609 
year is an amount equal to the product of 
20 percent and the excess (if any) of— 
‘‘(I) the aggregate amount of de-
preciation which would be determined 
under this section for property placed 
in service during the taxable year if no 
election under this paragraph were 
made, over 
‘‘(II) the aggregate amount of de-
preciation allowable under this section 
for property placed in service during 
the taxable year. 
In the case of property which is a passenger 
aircraft, the amount determined under sub-
clause (I) shall be calculated without regard 
to the written binding contract limitation 
under paragraph (2)(A)(iii)(I). 
‘‘(ii) MAXIMUM
AMOUNT.—The bonus 
depreciation amount for any applicable tax-
able year shall not exceed the applicable 
limitation under clause (iii), reduced (but 
not below zero) by the bonus depreciation 
amount for any preceding taxable year. 
‘‘(iii) APPLICABLE
LIMITATION.—For 
purposes of clause (ii), the term ‘applicable
610 
limitation’ means, with respect to any eligi-
ble taxpayer, the lesser of— 
‘‘(I) $30,000,000, or 
‘‘(II) 6 percent of the sum of the 
amounts determined with respect to the 
taxpayer under clauses (ii) and (iii) of 
subparagraph (E). 
‘‘(iv) AGGREGATION
RULE.—All cor-
porations which are treated as a single em-
ployer under section 52(a) shall be treated 
as 1 taxpayer for purposes of applying the 
limitation under this subparagraph and de-
termining the applicable limitation under 
clause (iii). 
‘‘(D) ELIGIBLE QUALIFIED PROPERTY.—For 
purposes of this paragraph, the term ‘eligible 
qualified property’ means qualified property 
under paragraph (2), except that in applying 
paragraph (2) for purposes of this clause— 
‘‘(i) ‘March 31, 2008’ shall be sub-
stituted for ‘December 31, 2007’ each place 
it appears in subparagraph (A) and clauses 
(i) and (ii) of subparagraph (E) thereof, 
‘‘(ii) only adjusted basis attributable to 
manufacture, construction, or production
611 
after March 31, 2008, and before January 
1, 2009, shall be taken into account under 
subparagraph (B)(ii) thereof, and 
‘‘(iii) in the case of property which is 
a passenger aircraft, the written binding 
contract limitation under subparagraph 
(A)(iii)(I) thereof shall not apply. 
‘‘(E) ALLOCATION OF BONUS DEPRECIATION 
AMOUNTS.— 
‘‘(i) IN GENERAL.—Subject to clauses 
(ii) and (iii), the taxpayer shall, at such 
time and in such manner as the Secretary 
may prescribe, specify the portion (if any) 
of the bonus depreciation amount which is 
to be allocated to each of the limitations de-
scribed in subparagraph (B). 
‘‘(ii) BUSINESS CREDIT LIMITATION.— 
The portion of the bonus depreciation 
amount allocated to the limitation described 
in subparagraph (B)(i) shall not exceed an 
amount equal to the portion of the credit al-
lowable under section 38 for the taxable 
year which is allocable to business credit 
carryforwards to such taxable year which 
are—
612 
‘‘(I) from taxable years beginning 
before January 1, 2006, and 
‘‘(II) properly allocable (deter-
mined under the rules of section 38(d)) 
to the research credit determined under 
section 41(a). 
‘‘(iii) 
ALTERNATIVE
MINIMUM
TAX 
CREDIT
LIMITATION.—The portion of the 
bonus depreciation amount allocated to the 
limitation 
described 
in 
subparagraph 
(B)(ii) shall not exceed an amount equal to 
the portion of the minimum tax credit al-
lowable under section 53 for the taxable 
year which is allocable to the adjusted min-
imum tax imposed for taxable years begin-
ning before January 1, 2006. For purposes 
of the preceding sentence, credits shall be 
treated as allowed on a first-in, first-out 
basis. 
‘‘(F) CREDIT REFUNDABLE.—Any aggregate 
increases in the credits allowed under section 38 
or 53 by reason of this paragraph shall, for pur-
poses of this title, be treated as a credit allowed 
to the taxpayer under subpart C of part IV of 
subchapter A.
613 
‘‘(G) OTHER RULES.— 
‘‘(i) ELECTION.—Any election under 
this paragraph (including any allocation 
under subparagraph (E)) may be revoked 
only with the consent of the Secretary. 
‘‘(ii) DEDUCTION
ALLOWED
IN
COM-
PUTING
MINIMUM
TAX.—Notwithstanding 
this paragraph, paragraph (2)(G) shall 
apply with respect to the deduction com-
puted under this section (after application 
of this paragraph) with respect to property 
placed in service during any applicable tax-
able year.’’. 
(b) APPLICATION TO CERTAIN AUTOMOTIVE PARTNER-
SHIPS.— 
(1) IN GENERAL.—If an applicable partnership 
elects the application of this subsection— 
(A) the partnership shall be treated as hav-
ing made a payment against the tax imposed by 
chapter 1 of the Internal Revenue Code of 1986 
for any applicable taxable year of the partner-
ship in the amount determined under paragraph 
(3),
614 
(B) in the case of any eligible qualified 
property placed in service by the partnership 
during any applicable taxable year— 
(i) section 168(k) of such Code shall 
not apply in determining the amount of the 
deduction allowable to the partnership or 
any partner with respect to such property 
under section 168 of such Code, 
(ii) the applicable depreciation method 
used by the partnership or any partner 
under such section with respect to such 
property shall be the straight line method 
rather than the method that would otherwise 
be used, 
(C) no election may be made under section 
168(k)(4) of such Code with respect to the part-
nership, and 
(D) the amount of the credit determined 
under section 41 of such Code for any applicable 
taxable year with respect to the partnership shall 
be reduced by the amount of the deemed payment 
under subparagraph (A) for the taxable year. 
(2) TREATMENT OF DEEMED PAYMENT.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of the Internal Revenue Code of
615 
1986, the Secretary of the Treasury or his dele-
gate shall not use the payment of tax described 
in paragraph (1) as an offset or credit against 
any tax liability of the applicable partnership or 
any partner but shall refund such payment to 
the applicable partnership. 
(B) NO INTEREST.—The payment described 
in paragraph (1) shall not be taken into account 
in determining any amount of interest under 
such Code. 
(3) 
AMOUNT
OF
DEEMED
PAYMENT.—The 
amount determined under this paragraph for any ap-
plicable taxable year shall be the least of the fol-
lowing: 
(A) The amount which would be determined 
for the taxable year under section 168(k)(4)(C)(i) 
of the Internal Revenue Code of 1986 (as added 
by the amendments made by this section) if an 
election under such section were in effect with re-
spect to the partnership. 
(B) The amount of the credit determined 
under section 41 of such Code for the taxable 
year with respect to the partnership.
617 
(c) CONFORMING AMENDMENT.—Section 1324(b)(2) of 
title 31, United States Code, as amended by this Act, is 
amended— 
(1) by inserting ‘‘168(k)(4)(F),’’ after ‘‘36,’’, and 
(2) by inserting ‘‘, or due under section 
3081(b)(2) of the Housing Assistance Tax Act of 
2008’’ before the period at the end. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years ending after March 31, 
2008. 
SEC. 3082. CERTAIN GO ZONE INCENTIVES. 
(a) USE OF AMENDED INCOME TAX RETURNS TO 
TAKE INTO ACCOUNT RECEIPT OF CERTAIN HURRICANE- 
RELATED CASUALTY LOSS GRANTS BY DISALLOWING PRE-
VIOUSLY TAKEN CASUALTY LOSS DEDUCTIONS.— 
(1) IN
GENERAL.—Notwithstanding any other 
provision of the Internal Revenue Code of 1986, if a 
taxpayer claims a deduction for any taxable year 
with respect to a casualty loss to a principal resi-
dence (within the meaning of section 121 of such 
Code) resulting from Hurricane Katrina, Hurricane 
Rita, or Hurricane Wilma and in a subsequent tax-
able year receives a grant under Public Law 109–148, 
109–234, or 110–116 as reimbursement for such loss, 
such taxpayer may elect to file an amended income
619 
‘‘(B) without regard to ‘and before January 
1, 2009’ in clause (i) thereof, and’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall apply to property placed in serv-
ice after December 31, 2007. 
(c) INCLUSION OF CERTAIN COUNTIES IN GULF OP-
PORTUNITY ZONE FOR PURPOSES OF TAX-EXEMPT BOND 
FINANCING.— 
(1) IN
GENERAL.—Subsection (a) of section 
1400N is amended by adding at the end the following 
new paragraph: 
‘‘(8) INCLUSION
OF
CERTAIN
COUNTIES.—For 
purposes of this subsection, the Gulf Opportunity 
Zone includes Colbert County, Alabama and Dallas 
County, Alabama.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall take effect as if included in the 
provisions of the Gulf Opportunity Zone Act of 2005 
to which it relates.
620 
Subtitle B—Revenue Offsets 
SEC. 3091. RETURNS RELATING TO PAYMENTS MADE IN 
SETTLEMENT OF PAYMENT CARD AND THIRD 
PARTY NETWORK TRANSACTIONS. 
(a) IN GENERAL.—Subpart B of part III of subchapter 
A of chapter 61 is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 6050W. RETURNS RELATING TO PAYMENTS MADE IN 
SETTLEMENT OF PAYMENT CARD AND THIRD 
PARTY NETWORK TRANSACTIONS. 
‘‘(a) IN GENERAL.—Each payment settlement entity 
shall make a return for each calendar year setting forth— 
‘‘(1) the name, address, and TIN of each partici-
pating payee to whom one or more payments in set-
tlement of reportable transactions are made, and 
‘‘(2) the gross amount of the reportable trans-
actions with respect to each such participating payee. 
Such return shall be made at such time and in such form 
and manner as the Secretary may require by regulations. 
‘‘(b) PAYMENT SETTLEMENT ENTITY.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘payment settle-
ment entity’ means— 
‘‘(A) in the case of a payment card trans-
action, the merchant acquiring bank, and
621 
‘‘(B) in the case of a third party network 
transaction, the third party settlement organiza-
tion. 
‘‘(2) MERCHANT
ACQUIRING
BANK.—The term 
‘merchant acquiring bank’ means the bank or other 
organization which has the contractual obligation to 
make payment to participating payees in settlement 
of payment card transactions. 
‘‘(3) THIRD
PARTY
SETTLEMENT
ORGANIZA-
TION.—The term ‘third party settlement organization’ 
means the central organization which has the contrac-
tual obligation to make payment to participating 
payees of third party network transactions. 
‘‘(4) SPECIAL
RULES
RELATED
TO
INTER-
MEDIARIES.—For purposes of this section— 
‘‘(A) AGGREGATED PAYEES.—In any case 
where reportable transactions of more than one 
participating payee are settled through an inter-
mediary— 
‘‘(i) such intermediary shall be treated 
as the participating payee for purposes of 
determining the reporting obligations of the 
payment settlement entity with respect to 
such transactions, and
622 
‘‘(ii) such intermediary shall be treated 
as the payment settlement entity with re-
spect to the settlement of such transactions 
with the participating payees. 
‘‘(B) 
ELECTRONIC
PAYMENT 
FACILITATORS.—In any case where an electronic 
payment facilitator or other third party makes 
payments in settlement of reportable transactions 
on behalf of the payment settlement entity, the 
return under subsection (a) shall be made by 
such electronic payment facilitator or other third 
party in lieu of the payment settlement entity. 
‘‘(c) REPORTABLE TRANSACTION.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘reportable trans-
action’ means any payment card transaction and any 
third party network transaction. 
‘‘(2) PAYMENT CARD TRANSACTION.—The term 
‘payment card transaction’ means any transaction in 
which a payment card is accepted as payment. 
‘‘(3) THIRD
PARTY
NETWORK
TRANSACTION.— 
The term ‘third party network transaction’ means 
any transaction which is settled through a third 
party payment network.
623 
‘‘(d) OTHER DEFINITIONS.—For purposes of this sec-
tion— 
‘‘(1) PARTICIPATING PAYEE.— 
‘‘(A) IN GENERAL.—The term ‘participating 
payee’ means— 
‘‘(i) in the case of a payment card 
transaction, any person who accepts a pay-
ment card as payment, and 
‘‘(ii) in the case of a third party net-
work transaction, any person who accepts 
payment from a third party settlement or-
ganization in settlement of such trans-
action. 
‘‘(B) EXCLUSION OF FOREIGN PERSONS.— 
To the extent provided by the Secretary in regu-
lations or other guidance, such term shall not in-
clude any foreign person. 
‘‘(C) 
INCLUSION
OF
GOVERNMENTAL 
UNITS.—The term ‘person’ includes any govern-
mental unit (and any agency or instrumentality 
thereof). 
‘‘(2) PAYMENT CARD.—The term ‘payment card’ 
means any card which is issued pursuant to an 
agreement or arrangement which provides for— 
‘‘(A) one or more issuers of such cards,
624 
‘‘(B) a network of persons unrelated to each 
other, and to the issuer, who agree to accept such 
cards as payment, and 
‘‘(C) standards and mechanisms for settling 
the transactions between the merchant acquiring 
banks and the persons who agree to accept such 
cards as payment. 
The acceptance as payment of any account number or 
other indicia associated with a payment card shall be 
treated for purposes of this section in the same man-
ner as accepting such payment card as payment. 
‘‘(3) THIRD
PARTY
PAYMENT
NETWORK.—The 
term ‘third party payment network’ means any agree-
ment or arrangement— 
‘‘(A) which involves the establishment of ac-
counts with a central organization for the pur-
pose of settling transactions between persons who 
establish such accounts, 
‘‘(B) which provides for standards and 
mechanisms for settling such transactions, 
‘‘(C) which involves a substantial number of 
persons unrelated to such central organization 
who provide goods or services and who have 
agreed to settle transactions for the provision of
625 
such goods or services pursuant to such agree-
ment or arrangement, and 
‘‘(D) which guarantees persons providing 
goods or services pursuant to such agreement or 
arrangement that such persons will be paid for 
providing such goods or services. 
Such term shall not include any agreement or ar-
rangement which provides for the issuance of pay-
ment cards. 
‘‘(e) EXCEPTION
FOR DE MINIMIS PAYMENTS
BY 
THIRD PARTY SETTLEMENT ORGANIZATIONS.—A third 
party settlement organization shall not be required to report 
any information under subsection (a) with respect to third 
party network transactions of any participating payee if 
the amount which would otherwise be reported under sub-
section (a)(2) with respect to such transactions does not ex-
ceed $10,000 and the aggregate number of such transactions 
does not exceed 200. 
‘‘(f) STATEMENTS TO BE FURNISHED TO PERSONS 
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 
Every person required to make a return under subsection 
(a) shall furnish to each person with respect to whom such 
a return is required a written statement showing—
626 
‘‘(1) the name, address, and phone number of the 
information contact of the person required to make 
such return, and 
‘‘(2) the gross amount of payments made to the 
person required to be shown on the return. 
The written statement required under the preceding sen-
tence shall be furnished to the person on or before January 
31 of the year following the calendar year for which the 
return under subsection (a) was required to be made. 
‘‘(g) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary or 
appropriate to carry out this section, including rules to pre-
vent the reporting of the same transaction more than once.’’. 
(b) PENALTY FOR FAILURE TO FILE.— 
(1) RETURN.—Subparagraph (B) of section 
6724(d)(1) is amended— 
(A) by striking ‘‘or’’ at the end of clause 
(xx), 
(B) by redesignating the clause (xix) that 
follows clause (xx) as clause (xxi), 
(C) by striking ‘‘and’’ at the end of clause 
(xxi), as redesignated by subparagraph (B) and 
inserting ‘‘or’’, and 
(D) by adding at the end the following:
627 
‘‘(xxii) section 6050W (relating to re-
turns to payments made in settlement of 
payment card transactions), and’’. 
(2) STATEMENT.—Paragraph (2) of section 
6724(d) is amended by striking ‘‘or’’ at the end of 
subparagraph (BB), by striking the period at the end 
of the subparagraph (CC) and inserting ‘‘, or’’, and 
by inserting after subparagraph (CC) the following: 
‘‘(DD) section 6050W(c) (relating to returns 
relating to payments made in settlement of pay-
ment card transactions).’’. 
(c) APPLICATION OF BACKUP WITHHOLDING.—Para-
graph (3) of section 3406(b) is amended by striking ‘‘or’’ 
at the end of subparagraph (D), by striking the period at 
the end of subparagraph (E) and inserting ‘‘, or’’, and by 
adding at the end the following new subparagraph: 
‘‘(F) section 6050W (relating to returns re-
lating to payments made in settlement of pay-
ment card transactions).’’. 
(d) CLERICAL AMENDMENT.—The table of sections for 
subpart B of part III of subchapter A of chapter 61 is 
amended by inserting after the item relating to section 
6050V the following: 
‘‘Sec. 6050W. Returns relating to payments made in settlement of payment card 
transactions.’’. 
(e) EFFECTIVE DATE.—
628 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to returns for calendar years begin-
ning after December 31, 2010. 
(2) APPLICATION OF BACKUP WITHHOLDING.— 
The amendment made by subsection (c) shall apply to 
amounts paid after December 31, 2011. 
SEC. 3092. GAIN FROM SALE OF PRINCIPAL RESIDENCE AL-
LOCATED TO NONQUALIFIED USE NOT EX-
CLUDED FROM INCOME. 
(a) IN GENERAL.—Subsection (b) of section 121 of the 
Internal Revenue Code of 1986 (relating to limitations) is 
amended by adding at the end the following new paragraph: 
‘‘(4) EXCLUSION OF GAIN ALLOCATED TO NON-
QUALIFIED USE.— 
‘‘(A) IN GENERAL.—Subsection (a) shall not 
apply to so much of the gain from the sale or ex-
change of property as is allocated to periods of 
nonqualified use. 
‘‘(B) GAIN ALLOCATED TO PERIODS OF NON-
QUALIFIED USE.—For purposes of subparagraph 
(A), gain shall be allocated to periods of non-
qualified use based on the ratio which—