In the Senate of the United States,
December 19, 2007.
Resolved, That the Senate agree to the amendment of
the House of Representatives to the amendment of the Sen-
ate to the bill (H.R. 3997) entitled ‘‘An Act to amend the
Internal Revenue Code of 1986 to provide earnings assistance
and tax relief to members of the uniformed services, volunteer
firefighters, and Peace Corps volunteers, and for other pur-
poses.’’, with the following
SENATE AMENDMENT TO HOUSE AMENDMENT TO
SENATE AMENDMENT:
In lieu of the matter proposed to be inserted by the
amendment of the House to the amendment of the Sen-
ate, insert the following:
SECTION 1. SHORT TITLE, ETC.
(a) SHORT TITLE.—This Act may be cited as the ‘‘De-
fenders of Freedom Tax Relief Act of 2007’’.
(b) REFERENCE.—Except as otherwise expressly pro-
vided, whenever in this Act an amendment or repeal is ex-
pressed in terms of an amendment to, or repeal of, a section
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HR 3997 EAS2
or other provision, the reference shall be considered to be
made to a section or other provision of the Internal Revenue
Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title, etc.
TITLE I—BENEFITS FOR MILITARY
Sec. 101. Election to include combat pay as earned income for purposes of earned
income tax credit.
Sec. 102. Modification of mortgage revenue bonds for veterans.
Sec. 103. Survivor and disability payments with respect to qualified military
service.
Sec. 104. Treatment of differential military pay as wages.
Sec. 105. Special period of limitation when uniformed services retired pay is re-
duced as a result of award of disability compensation.
Sec. 106. Distributions from retirement plans to individuals called to active duty.
Sec. 107. Disclosure of return information relating to veterans programs made
permanent.
Sec. 108. Contributions of military death gratuities to Roth IRAs and Education
Savings Accounts.
Sec. 109. Suspension of 5-year period during service with the Peace Corps.
Sec. 110. Credit for employer differential wage payments to employees who are
active duty members of the uniformed services.
Sec. 111. State payments to service members treated as qualified military bene-
fits.
Sec. 112. Permanent exclusion of gain from sale of a principal residence by cer-
tain employees of the intelligence community.
Sec. 113. Special disposition rules for unused benefits in health flexible spending
arrangements of individuals called to active duty.
Sec. 114. Option to exclude military basic housing allowance for purposes of de-
termining income eligibility under low-income housing credit
and bond-financed residential rental projects.
TITLE II—REVENUE PROVISIONS
Sec. 201. Increase in penalty for failure to file partnership returns.
Sec. 202. Increase in penalty for failure to file S corporation returns.
Sec. 203. Increase in minimum penalty on failure to file a return of tax.
Sec. 204. Revision of tax rules on expatriation.
Sec. 205. Special enrollment option by employer health plans for members of uni-
form services who lose health care coverage.
TITLE III—TAX TECHNICAL CORRECTIONS
Sec. 301. Short title.
Sec. 302. Amendment related to the Tax Relief and Health Care Act of 2006.
Sec. 303. Amendments related to title XII of the Pension Protection Act of 2006.
Sec. 304. Amendments related to the Tax Increase Prevention and Reconciliation
Act of 2005.
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Sec. 305. Amendments related to the Safe, Accountable, Flexible, Efficient Trans-
portation Equity Act: A Legacy for Users.
Sec. 306. Amendments related to the Energy Policy Act of 2005.
Sec. 307. Amendments related to the American Jobs Creation Act of 2004.
Sec. 308. Amendments related to the Economic Growth and Tax Relief Reconcili-
ation Act of 2001.
Sec. 309. Amendments related to the Tax Relief Extension Act of 1999.
Sec. 310. Amendment related to the Internal Revenue Service Restructuring and
Reform Act of 1998.
Sec. 311. Clerical corrections.
TITLE IV—PARITY IN APPLICATION OF CERTAIN LIMITS TO
MENTAL HEALTH BENEFITS
Sec. 401. Parity in application of certain limits to mental health benefits.
TITLE I—BENEFITS FOR
MILITARY
SEC. 101. ELECTION TO INCLUDE COMBAT PAY AS EARNED
INCOME FOR PURPOSES OF EARNED INCOME
TAX CREDIT.
(a) IN GENERAL.—Clause (vi) of section 32(c)(2)(B)
(defining earned income) is amended to read as follows:
‘‘(vi) a taxpayer may elect to treat
amounts excluded from gross income by rea-
son of section 112 as earned income.’’.
(b) SUNSET NOT APPLICABLE.—Section 105 of the
Working Families Tax Relief Act of 2004 (relating to appli-
cation of EGTRRA sunset to this title) shall not apply to
section 104(b) of such Act.
(c) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years ending after December
31, 2007.
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SEC. 102. MODIFICATION OF MORTGAGE REVENUE BONDS
FOR VETERANS.
(a) QUALIFIED MORTGAGE BONDS USED TO FINANCE
RESIDENCES FOR VETERANS WITHOUT REGARD TO FIRST-
TIME HOMEBUYER REQUIREMENT.—Subparagraph (D) of
section 143(d)(2) (relating to exceptions) is amended by
striking ‘‘and before January 1, 2008’’.
(b) INCREASE IN BOND LIMITATION FOR ALASKA, OR-
EGON, AND WISCONSIN.—Clause (ii) of section 143(l)(3)(B)
(relating to State veterans limit) is amended by striking
‘‘$25,000,000’’ each place it appears and inserting
‘‘$100,000,000’’.
(c) DEFINITION OF QUALIFIED VETERAN.—Paragraph
(4) of section 143(l) (defining qualified veteran) is amended
to read as follows:
‘‘(4) QUALIFIED VETERAN.—For purposes of this
subsection, the term ‘qualified veteran’ means any
veteran who—
‘‘(A) served on active duty, and
‘‘(B) applied for the financing before the
date 25 years after the last date on which such
veteran left active service.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to bonds issued after December 31, 2007.
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SEC. 103. SURVIVOR AND DISABILITY PAYMENTS WITH RE-
SPECT TO QUALIFIED MILITARY SERVICE.
(a) PLAN QUALIFICATION REQUIREMENT FOR DEATH
BENEFITS UNDER USERRA-QUALIFIED ACTIVE MILITARY
SERVICE.—Subsection (a) of section 401 (relating to re-
quirements for qualification) is amended by inserting after
paragraph (36) the following new paragraph:
‘‘(37) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—A trust shall not
constitute a qualified trust unless the plan provides
that, in the case of a participant who dies while per-
forming qualified military service (as defined in sec-
tion 414(u)), the survivors of the participant are enti-
tled to any additional benefits (other than benefit ac-
cruals relating to the period of qualified military
service) provided under the plan had the participant
resumed and then terminated employment on account
of death.’’.
(b) TREATMENT IN THE CASE OF DEATH OR DIS-
ABILITY RESULTING FROM ACTIVE MILITARY SERVICE FOR
BENEFIT ACCRUAL PURPOSES.—Subsection (u) of section
414 (relating to special rules relating to veterans’ reemploy-
ment rights under USERRA) is amended by redesignating
paragraphs (9) and (10) as paragraphs (10) and (11), re-
spectively, and by inserting after paragraph (8) the fol-
lowing new paragraph:
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‘‘(9) TREATMENT IN THE CASE OF DEATH OR
DISABILITY RESULTING FROM ACTIVE MILITARY SERV-
ICE.—
‘‘(A) IN
GENERAL.—For benefit accrual
purposes, an employer sponsoring a retirement
plan may treat an individual who dies or be-
comes disabled (as defined under the terms of the
plan) while performing qualified military service
with respect to the employer maintaining the
plan as if the individual has resumed employ-
ment in accordance with the individual’s reem-
ployment rights under chapter 43 of title 38,
United States Code, on the day preceding death
or disability (as the case may be) and termi-
nated employment on the actual date of death or
disability. In the case of any such treatment,
and subject to subparagraphs (B) and (C), any
full or partial compliance by such plan with re-
spect to the benefit accrual requirements of para-
graph (8) with respect to such individual shall
be treated for purposes of paragraph (1) as if
such compliance were required under such chap-
ter 43.
‘‘(B) NONDISCRIMINATION REQUIREMENT.—
Subparagraph (A) shall apply only if all indi-
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HR 3997 EAS2
viduals performing qualified military service
with respect to the employer maintaining the
plan (as determined under subsections (b), (c),
(m), and (o)) who die or became disabled as a
result of performing qualified military service
prior to reemployment by the employer are cred-
ited with service and benefits on reasonably
equivalent terms.
‘‘(C) DETERMINATION OF BENEFITS.—The
amount of employee contributions and the
amount of elective deferrals of an individual
treated as reemployed under subparagraph (A)
for purposes of applying paragraph (8)(C) shall
be determined on the basis of the individual’s av-
erage actual employee contributions or elective
deferrals for the lesser of—
‘‘(i) the 12-month period of service
with the employer immediately prior to
qualified military service, or
‘‘(ii) if service with the employer is less
than such 12-month period, the actual
length of continuous service with the em-
ployer.’’.
(c) CONFORMING AMENDMENTS.—
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(1) Section 404(a)(2) is amended by striking
‘‘and (31)’’ and inserting ‘‘(31), and (37)’’.
(2) Section 403(b) is amended by adding at the
end the following new paragraph:
‘‘(14) DEATH BENEFITS UNDER USERRA-QUALI-
FIED
ACTIVE
MILITARY
SERVICE.—This subsection
shall not apply to an annuity contract unless such
contract 
meets 
the 
requirements 
of 
section
401(a)(37).’’.
(3) Section 457(g) is amended by adding at the
end the following new paragraph:
‘‘(4) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—A plan described
in paragraph (1) shall not be treated as an eligible
deferred compensation plan unless such plan meets
the requirements of section 401(a)(37).’’.
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply with respect to deaths and
disabilities occurring on or after January 1, 2007.
(2) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.—
(A) IN GENERAL.—If this subparagraph ap-
plies to any plan or contract amendment, such
plan or contract shall be treated as being oper-
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HR 3997 EAS2
ated in accordance with the terms of the plan
during the period described in subparagraph
(B)(iii).
(B) AMENDMENTS
TO
WHICH
SUBPARA-
GRAPH (A) APPLIES.—
(i) IN
GENERAL.—Subparagraph (A)
shall apply to any amendment to any plan
or annuity contract which is made—
(I) pursuant to the amendments
made by subsection (a) or pursuant to
any regulation issued by the Secretary
of the Treasury under subsection (a),
and
(II) on or before the last day of
the first plan year beginning on or
after January 1, 2009.
In the case of a governmental plan (as de-
fined in section 414(d) of the Internal Rev-
enue Code of 1986), this clause shall be ap-
plied by substituting ‘‘2011’’ for ‘‘2009’’ in
subclause (II).
(ii) 
CONDITIONS.—This 
paragraph
shall not apply to any amendment unless—
(I) the plan or contract is oper-
ated as if such plan or contract
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amendment were in effect for the pe-
riod described in clause (iii), and
(II) such plan or contract amend-
ment applies retroactively for such pe-
riod.
(iii) PERIOD DESCRIBED.—The period
described in this clause is the period—
(I) beginning on the effective date
specified by the plan, and
(II) ending on the date described
in clause (i)(II) (or, if earlier, the date
the plan or contract amendment is
adopted).
SEC. 104. TREATMENT OF DIFFERENTIAL MILITARY PAY AS
WAGES.
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL
WAGE PAYMENTS.—
(1) IN GENERAL.—Section 3401 (relating to defi-
nitions) is amended by adding at the end the fol-
lowing new subsection:
‘‘(h) DIFFERENTIAL WAGE PAYMENTS
TO ACTIVE
DUTY MEMBERS OF THE UNIFORMED SERVICES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), any differential wage payment shall be treated as
a payment of wages by the employer to the employee.
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‘‘(2) DIFFERENTIAL WAGE PAYMENT.—For pur-
poses of paragraph (1), the term ‘differential wage
payment’ means any payment which—
‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which
the individual is performing service in the uni-
formed services (as defined in chapter 43 of title
38, United States Code) while on active duty for
a period of more than 30 days, and
‘‘(B) represents all or a portion of the wages
the individual would have received from the em-
ployer if the individual were performing service
for the employer.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to remuneration paid after
December 31, 2007.
(b) TREATMENT OF DIFFERENTIAL WAGE PAYMENTS
FOR RETIREMENT PLAN PURPOSES.—
(1) PENSION PLANS.—
(A) IN GENERAL.—Section 414(u) (relating
to special rules relating to veterans’ reemploy-
ment rights under USERRA), as amended by
section 103(b), is amended by adding at the end
the following new paragraph:
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‘‘(12) TREATMENT OF DIFFERENTIAL WAGE PAY-
MENTS.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, for purposes of applying this
title to a retirement plan to which this sub-
section applies—
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an
employee of the employer making the pay-
ment,
‘‘(ii) the differential wage payment
shall be treated as compensation, and
‘‘(iii) the plan shall not be treated as
failing to meet the requirements of any pro-
vision described in paragraph (1)(C) by
reason of any contribution or benefit which
is based on the differential wage payment.
‘‘(B) SPECIAL RULE FOR DISTRIBUTIONS.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A)(i), for purposes of section
401(k)(2)(B)(i)(I), 
403(b)(7)(A)(ii),
403(b)(11)(A), or 457(d)(1)(A)(ii), an indi-
vidual shall be treated as having been sev-
ered from employment during any period
the individual is performing service in the
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wage payment’ has the meaning given such term
by section 3401(h)(2).’’.
(B) CONFORMING AMENDMENT.—The head-
ing for section 414(u) is amended by inserting
‘‘AND
TO DIFFERENTIAL WAGE PAYMENTS
TO
MEMBERS ON ACTIVE DUTY’’ after ‘‘USERRA’’.
(2) DIFFERENTIAL WAGE PAYMENTS TREATED AS
COMPENSATION
FOR
INDIVIDUAL
RETIREMENT
PLANS.—Section 219(f)(1) (defining compensation) is
amended by adding at the end the following new sen-
tence: ‘‘The term compensation includes any differen-
tial 
wage 
payment 
(as 
defined 
in 
section
3401(h)(2)).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2007.
(c) PROVISIONS RELATING TO PLAN AMENDMENTS.—
(1) IN GENERAL.—If this subsection applies to
any plan or annuity contract amendment, such plan
or contract shall be treated as being operated in ac-
cordance with the terms of the plan or contract dur-
ing the period described in paragraph (2)(B)(i).
(2) AMENDMENTS
TO
WHICH
SECTION
AP-
PLIES.—
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(A) IN
GENERAL.—This subsection shall
apply to any amendment to any plan or annu-
ity contract which is made—
(i) pursuant to any amendment made
by subsection (b)(1), and
(ii) on or before the last day of the first
plan year beginning on or after January 1,
2009.
In the case of a governmental plan (as defined
in section 414(d) of the Internal Revenue Code
of 1986), this subparagraph shall be applied by
substituting ‘‘2011’’ for ‘‘2009’’ in clause (ii).
(B) CONDITIONS.—This subsection shall not
apply to any plan or annuity contract amend-
ment unless—
(i) during the period beginning on the
date the amendment described in subpara-
graph (A)(i) takes effect and ending on the
date described in subparagraph (A)(ii) (or,
if earlier, the date the plan or contract
amendment is adopted), the plan or con-
tract is operated as if such plan or contract
amendment were in effect, and
(ii) such plan or contract amendment
applies retroactively for such period.
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HR 3997 EAS2
SEC. 105. SPECIAL PERIOD OF LIMITATION WHEN UNI-
FORMED SERVICES RETIRED PAY IS RE-
DUCED AS A RESULT OF AWARD OF DIS-
ABILITY COMPENSATION.
(a) IN GENERAL.—Subsection (d) of section 6511 (re-
lating to special rules applicable to income taxes) is amend-
ed by adding at the end the following new paragraph:
‘‘(8) SPECIAL RULES WHEN UNIFORMED SERV-
ICES RETIRED PAY IS REDUCED AS A RESULT OF
AWARD OF DISABILITY COMPENSATION.—
‘‘(A) PERIOD
OF
LIMITATION
ON
FILING
CLAIM.—If the claim for credit or refund relates
to an overpayment of tax imposed by subtitle A
on account of—
‘‘(i) the reduction of uniformed services
retired pay computed under section 1406 or
1407 of title 10, United States Code, or
‘‘(ii) the waiver of such pay under sec-
tion 5305 of title 38 of such Code,
as a result of an award of compensation under
title 38 of such Code pursuant to a determina-
tion by the Secretary of Veterans Affairs, the 3-
year period of limitation prescribed in subsection
(a) shall be extended, for purposes of permitting
a credit or refund based upon the amount of such
reduction or waiver, until the end of the 1-year
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HR 3997 EAS2
period beginning on the date of such determina-
tion.
‘‘(B) LIMITATION TO 5 TAXABLE YEARS.—
Subparagraph (A) shall not apply with respect
to any taxable year which began more than 5
years before the date of such determination.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to claims for credit or refund filed
after the date of the enactment of this Act.
(c) TRANSITION RULES.—In the case of a determina-
tion described in paragraph (8) of section 6511(d) of the
Internal Revenue Code of 1986 (as added by this section)
which is made by the Secretary of Veterans Affairs after
December 31, 2000, and before the date of the enactment
of this Act, such paragraph—
(1) shall not apply with respect to any taxable
year which began before January 1, 2001, and
(2) shall be applied by substituting ‘‘the date of
the enactment of the Defenders of Freedom Tax Relief
Act of 2007’’ for ‘‘the date of such determination’’ in
subparagraph (A) thereof.
SEC. 106. DISTRIBUTIONS FROM RETIREMENT PLANS TO IN-
DIVIDUALS CALLED TO ACTIVE DUTY.
(a) IN GENERAL.—Clause (iv) of section 72(t)(2)(G)
is amended by striking ‘‘, and before December 31, 2007’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to individuals ordered or called to active
duty on or after December 31, 2007.
SEC. 107. DISCLOSURE OF RETURN INFORMATION RELAT-
ING TO VETERANS PROGRAMS MADE PERMA-
NENT.
(a) IN
GENERAL.—Subparagraph (D) of section
6103(l)(7) (relating to disclosure of return information to
Federal, State, and local agencies administering certain
programs under the Social Security Act, the Food Stamp
Act of 1977, or title 38, United States Code or certain hous-
ing assistance programs) is amended by striking the last
sentence.
(b) 
TECHNICAL
AMENDMENT.—Section
6103(l)(7)(D)(viii)(III) is amended by striking ‘‘sections
1710(a)(1)(I), 1710(a)(2), 1710(b), and 1712(a)(2)(B)’’ and
inserting 
‘‘sections 
1710(a)(2)(G), 
1710(a)(3), 
and
1710(b)’’.
SEC. 108. CONTRIBUTIONS OF MILITARY DEATH GRATU-
ITIES TO ROTH IRAS AND EDUCATION SAV-
INGS ACCOUNTS.
(a) PROVISION IN EFFECT BEFORE PENSION PROTEC-
TION ACT.—Subsection (e) of section 408A (relating to
qualified rollover contribution), as in effect before the
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amendments made by section 824 of the Pension Protection
Act of 2006, is amended to read as follows:
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified rollover
contribution’ means a rollover contribution to a Roth
IRA from another such account, or from an indi-
vidual retirement plan, but only if such rollover con-
tribution meets the requirements of section 408(d)(3).
Such term includes a rollover contribution described
in section 402A(c)(3)(A). For purposes of section
408(d)(3)(B), there shall be disregarded any qualified
rollover contribution from an individual retirement
plan (other than a Roth IRA) to a Roth IRA.
‘‘(2) MILITARY DEATH GRATUITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
rollover contribution’ includes a contribution to
a Roth IRA maintained for the benefit of an in-
dividual made before the end of the 1-year period
beginning on the date on which such individual
receives an amount under section 1477 of title
10, United States Code, or section 1967 of title
38 of such Code, with respect to a person, to the
extent that such contribution does not exceed—
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HR 3997 EAS2
‘‘(i) the sum of the amounts received
during such period by such individual
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Coverdell education
savings account under section 530(d)(9).
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—Section 408(d)(3)(B)
shall not apply with respect to amounts treated
as a rollover by subparagraph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason
of subparagraph (A) shall be treated as invest-
ment in the contract.’’.
(b) PROVISION IN EFFECT AFTER PENSION PROTEC-
TION ACT.—Subsection (e) of section 408A, as in effect after
the amendments made by section 824 of the Pension Protec-
tion Act of 2006, is amended to read as follows:
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified rollover
contribution’ means a rollover contribution—
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38 of such Code, with respect to a person, to the
extent that such contribution does not exceed—
‘‘(i) the sum of the amounts received
during such period by such individual
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Coverdell education
savings account under section 530(d)(9).
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—Section 408(d)(3)(B)
shall not apply with respect to amounts treated
as a rollover by the subparagraph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason
of subparagraph (A) shall be treated as invest-
ment in the contract.’’.
(c) EDUCATION SAVINGS ACCOUNTS.—Subsection (d)
of section 530 is amended by adding at the end the following
new paragraph:
‘‘(9) MILITARY DEATH GRATUITY.—
‘‘(A) IN
GENERAL.—For purposes of this
section, the term ‘rollover contribution’ includes
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HR 3997 EAS2
a contribution to a Coverdell education savings
account made before the end of the 1-year period
beginning on the date on which the contributor
receives an amount under section 1477 of title
10, United States Code, or section 1967 of title
38 of such Code, with respect to a person, to the
extent that such contribution does not exceed—
‘‘(i) the sum of the amounts received
during such period by such contributor
under such sections with respect to such
person, reduced by
‘‘(ii) the amounts so received which
were contributed to a Roth IRA under sec-
tion 408A(e)(2) or to another Coverdell edu-
cation savings account.
‘‘(B) ANNUAL LIMIT ON NUMBER OF ROLL-
OVERS
NOT
TO
APPLY.—The last sentence of
paragraph (5) shall not apply with respect to
amounts treated as a rollover by the subpara-
graph (A).
‘‘(C) APPLICATION
OF
SECTION
72.—For
purposes of applying section 72 in the case of a
distribution which is includible in gross income
under paragraph (1), the amount treated as a
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rollover by reason of subparagraph (A) shall be
treated as investment in the contract.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graphs (2) and (3), the amendments made by this sec-
tion shall apply with respect to deaths from injuries
occurring on or after the date of the enactment of this
Act.
(2) APPLICATION OF AMENDMENTS TO DEATHS
FROM INJURIES OCCURRING ON OR AFTER OCTOBER 7,
2001, AND
BEFORE
ENACTMENT.—The amendments
made by this section shall apply to any contribution
made pursuant to section 408A(e)(2) or 530(d)(5) of
the Internal Revenue Code of 1986, as amended by
this Act, with respect to amounts received under sec-
tion 1477 of title 10, United States Code, or under
section 1967 of title 38 of such Code, for deaths from
injuries occurring on or after October 7, 2001, and
before the date of the enactment of this Act if such
contribution is made not later than 1 year after the
date of the enactment of this Act.
(3) PENSION PROTECTION ACT CHANGES.—Sec-
tion 408A(e)(1) of the Internal Revenue Code of 1986
(as in effect after the amendments made by subsection
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(b)) shall apply to taxable years beginning after De-
cember 31, 2007.
SEC. 109. SUSPENSION OF 5-YEAR PERIOD DURING SERVICE
WITH THE PEACE CORPS.
(a) IN GENERAL.—Subsection (d) of section 121 (relat-
ing to special rules) is amended by adding at the end the
following new paragraph:
‘‘(12) PEACE CORPS.—
‘‘(A) IN GENERAL.—At the election of an
individual with respect to a property, the run-
ning of the 5-year period described in subsections
(a) and (c)(1)(B) and paragraph (7) of this sub-
section with respect to such property shall be sus-
pended during any period that such individual
or such individual’s spouse is serving outside the
United States—
‘‘(i) on qualified official extended duty
(as defined in paragraph (9)(C)) as an em-
ployee of the Peace Corps, or
‘‘(ii) as an enrolled volunteer or volun-
teer leader under section 5 or 6 (as the case
may be) of the Peace Corps Act (22 U.S.C.
2504, 2505).
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‘‘(B) APPLICABLE RULES.—For purposes of
subparagraph (A), rules similar to the rules of
subparagraphs (B) and (D) shall apply.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2007.
SEC. 110. CREDIT FOR EMPLOYER DIFFERENTIAL WAGE
PAYMENTS TO EMPLOYEES WHO ARE ACTIVE
DUTY MEMBERS OF THE UNIFORMED SERV-
ICES.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business credits) is amended by
adding at the end the following new section:
‘‘SEC. 45O. EMPLOYER WAGE CREDIT FOR EMPLOYEES WHO
ARE ACTIVE DUTY MEMBERS OF THE UNI-
FORMED SERVICES.
‘‘(a) GENERAL RULE.—For purposes of section 38, in
the case of an eligible small business employer, the differen-
tial wage payment credit for any taxable year is an amount
equal to 20 percent of the sum of the eligible differential
wage payments for each of the qualified employees of the
taxpayer during such taxable year.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) 
ELIGIBLE
DIFFERENTIAL
WAGE
PAY-
MENTS.—The term ‘eligible differential wage pay-
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ments’ means, with respect to each qualified employee,
so much of the differential wage payments (as defined
in section 3401(h)(2)) paid to such employee for the
taxable year as does not exceed $20,000.
‘‘(2) QUALIFIED EMPLOYEE.—The term ‘quali-
fied employee’ means a person who has been an em-
ployee of the taxpayer for the 91-day period imme-
diately preceding the period for which any differen-
tial wage payment is made.
‘‘(3) ELIGIBLE SMALL BUSINESS EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘eligible small
business employer’ means, with respect to any
taxable year, any employer which—
‘‘(i) employed an average of less than
50 employees on business days during such
taxable year, and
‘‘(ii) under a written plan of the em-
ployer, provides eligible differential wage
payments to every qualified employee of the
employer.
‘‘(B) CONTROLLED GROUPS.—For purposes
of subparagraph (A), all persons treated as a
single employer under subsection (b), (c), (m), or
(o) of section 414 shall be treated as a single em-
ployer.
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‘‘(c) COORDINATION WITH OTHER CREDITS.—The
amount of credit otherwise allowable under this chapter
with respect to compensation paid to any employee shall
be reduced by the credit determined under this section with
respect to such employee.
‘‘(d) DISALLOWANCE FOR FAILURE TO COMPLY WITH
EMPLOYMENT OR REEMPLOYMENT RIGHTS OF MEMBERS
OF THE RESERVE COMPONENTS OF THE ARMED FORCES
OF THE UNITED STATES.—No credit shall be allowed under
subsection (a) to a taxpayer for—
‘‘(1) any taxable year, beginning after the date
of the enactment of this section, in which the taxpayer
is under a final order, judgment, or other process
issued or required by a district court of the United
States under section 4323 of title 38 of the United
States Code with respect to a violation of chapter 43
of such title, and
‘‘(2) the 2 succeeding taxable years.
‘‘(e) CERTAIN RULES TO APPLY.—For purposes of this
section, rules similar to the rules of subsections (c), (d), and
(e) of section 52 shall apply.
‘‘(f) TERMINATION.—This section shall not apply to
any payments made after December 31, 2009.’’.
(b) CREDIT TREATED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (relating to general business
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credit) is amended by striking ‘‘plus’’ at the end of para-
graph (30), by striking the period at the end of paragraph
(31) and inserting ‘‘, plus’’, and by adding at the end of
following new paragraph:
‘‘(32) the differential wage payment credit deter-
mined under section 45O(a).’’.
(c) NO DEDUCTION FOR COMPENSATION TAKEN INTO
ACCOUNT FOR CREDIT.—Section 280C(a) (relating to rule
for employment credits) is amended by inserting ‘‘45O(a),’’
after ‘‘45A(a),’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amend-
ed by adding at the end the following new item:
‘‘Sec. 45O. Employer wage credit for employees who are active duty members of
the uniformed services.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts paid after the date of the
enactment of this Act.
SEC. 111. STATE PAYMENTS TO SERVICE MEMBERS TREAT-
ED AS QUALIFIED MILITARY BENEFITS.
(a) IN GENERAL.—Section 134(b) (defining qualified
military benefit) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6) CERTAIN
STATE
PAYMENTS.—The term
‘qualified military benefit’ includes any bonus pay-
ment by a State or political subdivision thereof to
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any member or former member of the uniformed serv-
ices of the United States or any dependent of such
member only by reason of such member’s service in an
combat zone (as defined in section 112(c)(2), deter-
mined without regard to the parenthetical).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to payments made before, on, or after
the date of the enactment of this Act.
SEC. 112. PERMANENT EXCLUSION OF GAIN FROM SALE OF
A PRINCIPAL RESIDENCE BY CERTAIN EM-
PLOYEES OF THE INTELLIGENCE COMMU-
NITY.
(a) PERMANENT EXCLUSION.—
(1) IN GENERAL.—Section 417(e) of division A
of the Tax Relief and Health Care Act of 2006 is
amended by striking ‘‘and before January 1, 2011’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to sales or exchanges after
December 31, 2010.
(b) DUTY
STATION
MAY
BE
INSIDE
UNITED
STATES.—
(1) IN GENERAL.—Section 121(d)(9)(C) (defin-
ing qualified official extended duty) is amended by
striking clause (vi).
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(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to sales or exchanges after
the date of the enactment of this Act.
SEC. 113. SPECIAL DISPOSITION RULES FOR UNUSED BENE-
FITS IN HEALTH FLEXIBLE SPENDING AR-
RANGEMENTS OF INDIVIDUALS CALLED TO
ACTIVE DUTY.
(a) IN GENERAL.—Section 125 (relating to cafeteria
plans) is amended by redesignating subsections (h) and (i)
as subsection (i) and (j), respectively, and by inserting after
subsection (g) the following new subsection:
‘‘(h) SPECIAL RULE
FOR UNUSED BENEFITS
IN
HEALTH FLEXIBLE SPENDING ARRANGEMENTS OF INDI-
VIDUALS CALLED TO ACTIVE DUTY.—
‘‘(1) IN GENERAL.—For purposes of this title, a
plan or other arrangement shall not fail to be treated
as a cafeteria plan or health flexible spending ar-
rangement merely because such arrangement provides
for qualified reservist distributions.
‘‘(2) QUALIFIED RESERVIST DISTRIBUTION.—For
purposes of this subsection, the term ‘qualified reserv-
ist distribution’ means, any distribution to an indi-
vidual of all or a portion of the balance in the em-
ployee’s account under such arrangement if—
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‘‘(A) such individual was (by reason of
being a member of a reserve component (as de-
fined in section 101 of title 37, United States
Code)) ordered or called to active duty for a pe-
riod in excess of 179 days or for an indefinite
period, and
‘‘(B) such distribution is made during the
period beginning on the date of such order or
call and ending on the last date that reimburse-
ments could otherwise be made under such ar-
rangement for the plan year which includes the
date of such order or call.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions made after the date of
the enactment of this Act.
SEC. 114. OPTION TO EXCLUDE MILITARY BASIC HOUSING
ALLOWANCE 
FOR 
PURPOSES 
OF 
DETER-
MINING INCOME ELIGIBILITY UNDER LOW-IN-
COME 
HOUSING 
CREDIT 
AND 
BOND-FI-
NANCED RESIDENTIAL RENTAL PROJECTS.
(a) IN GENERAL.—The last sentence of 142(d)(2)(B)
(relating to income of individuals; area median gross in-
come) is amended to read as follows: ‘‘For purposes of deter-
mining income under this subparagraph—
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‘‘(i) subsections (g) and (h) of section
7872 shall not apply, and
‘‘(ii) in the case of determinations
made before January 1, 2015, payments
under section 403 of title 37, United States
Code, as a basic pay allowance for housing
shall be disregarded if the project is located
in a census tract which is designated by the
Governor (of the State in which such tract
is located) as being in need of housing for
members of the Armed Forces of the United
States.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect with respect to determinations made
after the date of the enactment of this Act.
TITLE II—REVENUE PROVISIONS
SEC. 201. INCREASE IN PENALTY FOR FAILURE TO FILE
PARTNERSHIP RETURNS.
(a) INCREASE IN PENALTY AMOUNT.—Paragraph (1)
of section 6698(b) (relating to amount per month), as
amended by section 8 of the Mortgage Forgiveness Debt Re-
lief Act of 2007, is amended by striking ‘‘$85’’ and inserting
‘‘$100’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect as if included in the amendments
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‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
‘‘(a) 
GENERAL
RULES.—For 
purposes 
of 
this
subtitle—
‘‘(1) MARK TO MARKET.—All property of a cov-
ered expatriate shall be treated as sold on the day be-
fore the expatriation date for its fair market value.
‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the
case of any sale under paragraph (1)—
‘‘(A) notwithstanding any other provision of
this title, any gain arising from such sale shall
be taken into account for the taxable year of the
sale, and
‘‘(B) any loss arising from such sale shall
be taken into account for the taxable year of the
sale to the extent otherwise provided by this title,
except that section 1091 shall not apply to any
such loss.
Proper adjustment shall be made in the amount of
any gain or loss subsequently realized for gain or loss
taken into account under the preceding sentence, de-
termined without regard to paragraph (3).
‘‘(3) EXCLUSION FOR CERTAIN GAIN.—
‘‘(A) IN
GENERAL.—The amount which
would (but for this paragraph) be includible in
the gross income of any individual by reason of
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B of chapter 3 shall apply for purposes of this
subsection.
‘‘(B) APPLICATION OF TAX.—Any item sub-
ject to the withholding tax imposed under para-
graph (1) shall be subject to tax under section
871.
‘‘(C) COORDINATION
WITH
OTHER
WITH-
HOLDING REQUIREMENTS.—Any item subject to
withholding under paragraph (1) shall not be
subject to withholding under section 1441 or
chapter 24.
‘‘(e) TREATMENT OF SPECIFIED TAX DEFERRED AC-
COUNTS.—
‘‘(1) ACCOUNT TREATED AS DISTRIBUTED.—In
the case of any interest in a specified tax deferred ac-
count held by a covered expatriate on the day before
the expatriation date—
‘‘(A) the covered expatriate shall be treated
as receiving a distribution of his entire interest
in such account on the day before the expatria-
tion date,
‘‘(B) no early distribution tax shall apply
by reason of such treatment, and
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‘‘(C) appropriate adjustments shall be made
to subsequent distributions from the account to
reflect such treatment.
‘‘(2) SPECIFIED TAX DEFERRED ACCOUNT.—For
purposes of paragraph (1), the term ‘specified tax de-
ferred account’ means an individual retirement plan
(as defined in section 7701(a)(37)) other than any ar-
rangement described in subsection (k) or (p) of section
408, a qualified tuition program (as defined in sec-
tion 529), a Coverdell education savings account (as
defined in section 530), a health savings account (as
defined in section 223), and an Archer MSA (as de-
fined in section 220).
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.—
‘‘(1) IN GENERAL.—In the case of a distribution
(directly or indirectly) of any property from a non-
grantor trust to a covered expatriate—
‘‘(A) the trustee shall deduct and withhold
from such distribution an amount equal to 30
percent of the taxable portion of the distribution,
and
‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of the
trust, gain shall be recognized to the trust as if
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such property were sold to the expatriate at its
fair market value.
‘‘(2) TAXABLE PORTION.—For purposes of this
subsection, the term ‘taxable portion’ means, with re-
spect to any distribution, that portion of the distribu-
tion which would be includible in the gross income of
the covered expatriate if such expatriate continued to
be subject to tax as a citizen or resident of the United
States.
‘‘(3) NONGRANTOR TRUST.—For purposes of this
subsection, the term ‘nongrantor trust’ means the por-
tion of any trust that the individual is not considered
the owner of under subpart E of part I of subchapter
J. The determination under the preceding sentence
shall be made immediately before the expatriation
date.
‘‘(4) SPECIAL
RULES
RELATING
TO
WITH-
HOLDING.—For purposes of this subsection—
‘‘(A) rules similar to the rules of subsection
(d)(6) shall apply, and
‘‘(B) the covered expatriate shall be treated
as having waived any right to claim any reduc-
tion under any treaty with the United States in
withholding on any distribution to which para-
graph (1)(A) applies unless the covered expa-
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triate agrees to such other treatment as the Sec-
retary determines appropriate.
‘‘(5) APPLICATION.—This subsection shall apply
to a nongrantor trust only if the covered expatriate
was a beneficiary of the trust on the day before the
expatriation date.
‘‘(g) DEFINITIONS AND SPECIAL RULES RELATING TO
EXPATRIATION.—For purposes of this section—
‘‘(1) COVERED EXPATRIATE.—
‘‘(A) IN GENERAL.—The term ‘covered expa-
triate’ means an expatriate who meets the re-
quirements of subparagraph (A), (B), or (C) of
section 877(a)(2).
‘‘(B) EXCEPTIONS.—An individual shall
not be treated as meeting the requirements of
subparagraph (A) or (B) of section 877(a)(2)
if—
‘‘(i) the individual—
‘‘(I) became at birth a citizen of
the United States and a citizen of an-
other country and, as of the expatria-
tion date, continues to be a citizen of,
and is taxed as a resident of, such
other country, and
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‘‘(II) has been a resident of the
United States (as defined in section
7701(b)(1)(A)(ii)) for not more than
10 taxable years during the 15-taxable
year period ending with the taxable
year during which the expatriation
date occurs, or
‘‘(ii)(I) the individual’s relinquishment
of United States citizenship occurs before
such individual attains age 181⁄2, and
‘‘(II) the individual has been a resi-
dent of the United States (as so defined) for
not more than 10 taxable years before the
date of relinquishment.
‘‘(C) COVERED EXPATRIATES ALSO SUBJECT
TO
TAX
AS
CITIZENS
OR
RESIDENTS.—In the
case of any covered expatriate who is subject to
tax as a citizen or resident of the United States
for any period beginning after the expatriation
date, such individual shall not be treated as a
covered expatriate during such period for pur-
poses of subsections (d)(1) and (f) and section
2801.
‘‘(2) 
EXPATRIATE.—The 
term 
‘expatriate’
means—
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‘‘(A) any United States citizen who relin-
quishes his citizenship, and
‘‘(B) any long-term resident of the United
States who ceases to be a lawful permanent resi-
dent of the United States (within the meaning of
section 7701(b)(6)).
‘‘(3) EXPATRIATION DATE.—The term ‘expatria-
tion date’ means—
‘‘(A) the date an individual relinquishes
United States citizenship, or
‘‘(B) in the case of a long-term resident of
the United States, the date on which the indi-
vidual ceases to be a lawful permanent resident
of the United States (within the meaning of sec-
tion 7701(b)(6)).
‘‘(4) RELINQUISHMENT OF CITIZENSHIP.—A cit-
izen shall be treated as relinquishing his United
States citizenship on the earliest of—
‘‘(A) the date the individual renounces his
United States nationality before a diplomatic or
consular officer of the United States pursuant to
paragraph (5) of section 349(a) of the Immigra-
tion and Nationality Act (8 U.S.C. 1481(a)(5)),
‘‘(B) the date the individual furnishes to the
United States Department of State a signed
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statement of voluntary relinquishment of United
States nationality confirming the performance of
an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Im-
migration and Nationality Act (8 U.S.C.
1481(a)(1)–(4)),
‘‘(C) the date the United States Department
of State issues to the individual a certificate of
loss of nationality, or
‘‘(D) the date a court of the United States
cancels a naturalized citizen’s certificate of natu-
ralization.
Subparagraph (A) or (B) shall not apply to any in-
dividual unless the renunciation or voluntary relin-
quishment is subsequently approved by the issuance to
the individual of a certificate of loss of nationality by
the United States Department of State.
‘‘(5) LONG-TERM
RESIDENT.—The term ‘long-
term resident’ has the meaning given to such term by
section 877(e)(2).
‘‘(6) EARLY
DISTRIBUTION
TAX.—The term
‘early distribution tax’ means any increase in tax im-
posed under section 72(t), 220(e)(4), 223(f)(4),
409A(a)(1)(B), 529(c)(6), or 530(d)(4).
‘‘(h) OTHER RULES.—
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‘‘(1) TERMINATION OF DEFERRALS, ETC.—In the
case of any covered expatriate, notwithstanding any
other provision of this title—
‘‘(A) any time period for acquiring prop-
erty which would result in the reduction in the
amount of gain recognized with respect to prop-
erty disposed of by the taxpayer shall terminate
on the day before the expatriation date, and
‘‘(B) any extension of time for payment of
tax shall cease to apply on the day before the ex-
patriation date and the unpaid portion of such
tax shall be due and payable at the time and in
the manner prescribed by the Secretary.
‘‘(2) STEP-UP IN BASIS.—Solely for purposes of
determining any tax imposed by reason of subsection
(a), property which was held by an individual on the
date the individual first became a resident of the
United States (within the meaning of section 7701(b))
shall be treated as having a basis on such date of not
less than the fair market value of such property on
such date. The preceding sentence shall not apply if
the individual elects not to have such sentence apply.
Such an election, once made, shall be irrevocable.
‘‘(3) COORDINATION WITH SECTION 684.—If the
expatriation of any individual would result in the
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recognition of gain under section 684, this section
shall be applied after the application of section 684.
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’.
(b) TAX
ON GIFTS
AND BEQUESTS RECEIVED
BY
UNITED STATES CITIZENS AND RESIDENTS FROM EXPA-
TRIATES.—
(1) IN GENERAL.—Subtitle B (relating to estate
and gift taxes) is amended by inserting after chapter
14 the following new chapter:
‘‘CHAPTER 15—GIFTS AND BEQUESTS
FROM EXPATRIATES
‘‘Sec. 2801. Imposition of tax.
‘‘SEC. 2801. IMPOSITION OF TAX.
‘‘(a) IN GENERAL.—If, during any calendar year, any
United States citizen or resident receives any covered gift
or bequest, there is hereby imposed a tax equal to the prod-
uct of—
‘‘(1) the highest rate of tax specified in the table
contained in section 2001(c) as in effect on the date
of such receipt (or, if greater, the highest rate of tax
specified in the table applicable under section 2502(a)
as in effect on the date), and
‘‘(2) the value of such covered gift or bequest.
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‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax im-
posed by subsection (a) on any covered gift or bequest shall
be paid by the person receiving such gift or bequest.
‘‘(c) EXCEPTION FOR CERTAIN GIFTS.—Subsection (a)
shall apply only to the extent that the value of covered gifts
and bequests received by any person during the calendar
year exceeds the dollar amount in effect under section
2503(b) for such calendar year.
‘‘(d) TAX REDUCED BY FOREIGN GIFT OR ESTATE
TAX.—The tax imposed by subsection (a) on any covered
gift or bequest shall be reduced by the amount of any gift
or estate tax paid to a foreign country with respect to such
covered gift or bequest.
‘‘(e) COVERED GIFT OR BEQUEST.—
‘‘(1) IN GENERAL.—For purposes of this chapter,
the term ‘covered gift or bequest’ means—
‘‘(A) any property acquired by gift directly
or indirectly from an individual who, at the
time of such acquisition, is a covered expatriate,
and
‘‘(B) any property acquired directly or in-
directly by reason of the death of an individual
who, immediately before such death, was a cov-
ered expatriate.
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‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE
SUBJECT TO ESTATE OR GIFT TAX.—Such term shall
not include—
‘‘(A) any property shown on a timely filed
return of tax imposed by chapter 12 which is a
taxable gift by the covered expatriate, and
‘‘(B) any property included in the gross es-
tate of the covered expatriate for purposes of
chapter 11 and shown on a timely filed return
of tax imposed by chapter 11 of the estate of the
covered expatriate.
‘‘(3) EXCEPTIONS FOR TRANSFERS TO SPOUSE
OR CHARITY.—Such term shall not include any prop-
erty with respect to which a deduction would be al-
lowed under section 2055, 2056, 2522, or 2523,
whichever is appropriate, if the decedent or donor
were a United States person.
‘‘(4) TRANSFERS IN TRUST.—
‘‘(A) DOMESTIC TRUSTS.—In the case of a
covered gift or bequest made to a domestic
trust—
‘‘(i) subsection (a) shall apply in the
same manner as if such trust were a United
States citizen, and
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‘‘(ii) the tax imposed by subsection (a)
on such gift or bequest shall be paid by such
trust.
‘‘(B) FOREIGN TRUSTS.—
‘‘(i) IN GENERAL.—In the case of a
covered gift or bequest made to a foreign
trust, subsection (a) shall apply to any dis-
tribution attributable to such gift or bequest
from such trust (whether from income or
corpus) to a United States citizen or resi-
dent in the same manner as if such dis-
tribution were a covered gift or bequest.
‘‘(ii) DEDUCTION FOR TAX PAID BY RE-
CIPIENT.—There shall be allowed as a de-
duction under section 164 the amount of tax
imposed by this section which is paid or ac-
crued by a United States citizen or resident
by reason of a distribution from a foreign
trust, but only to the extent such tax is im-
posed on the portion of such distribution
which is included in the gross income of
such citizen or resident.
‘‘(iii) ELECTION TO BE TREATED AS
DOMESTIC TRUST.—Solely for purposes of
this section, a foreign trust may elect to be
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treated as a domestic trust. Such an election
may be revoked with the consent of the Sec-
retary.
‘‘(f) COVERED EXPATRIATE.—For purposes of this sec-
tion, the term ‘covered expatriate’ has the meaning given
to such term by section 877A(g)(1).’’.
(2) CLERICAL AMENDMENT.—The table of chap-
ters for subtitle B is amended by inserting after the
item relating to chapter 14 the following new item:
‘‘CHAPTER 15. GIFTS AND BEQUESTS FROM EXPATRIATES.’’.
(c) DEFINITION OF TERMINATION OF UNITED STATES
CITIZENSHIP.—
(1) IN GENERAL.—Section 7701(a) is amended
by adding at the end the following new paragraph:
‘‘(50) TERMINATION OF UNITED STATES CITIZEN-
SHIP.—
‘‘(A) IN GENERAL.—An individual shall not
cease to be treated as a United States citizen be-
fore the date on which the individual’s citizen-
ship is treated as relinquished under section
877A(g)(4).
‘‘(B) DUAL
CITIZENS.—Under regulations
prescribed by the Secretary, subparagraph (A)
shall not apply to an individual who became at
birth a citizen of the United States and a citizen
of another country.’’.
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(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 877(e) is
amended to read as follows:
‘‘(1) IN GENERAL.—Any long-term resident of
the United States who ceases to be a lawful perma-
nent resident of the United States (within the mean-
ing of section 7701(b)(6)) shall be treated for purposes
of this section and sections 2107, 2501, and 6039G in
the same manner as if such resident were a citizen of
the United States who lost United States citizenship
on the date of such cessation or commencement.’’.
(B) Paragraph (6) of section 7701(b) is
amended by adding at the end the following flush
sentence:
‘‘An individual shall cease to be treated as a lawful
permanent resident of the United States if such indi-
vidual commences to be treated as a resident of a for-
eign country under the provisions of a tax treaty be-
tween the United States and the foreign country, does
not waive the benefits of such treaty applicable to
residents of the foreign country, and notifies the Sec-
retary of the commencement of such treatment.’’.
(C) Section 7701 is amended by striking
subsection (n) and by redesignating subsections
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(o) and (p) as subsections (n) and (o), respec-
tively.
(d) INFORMATION
RETURNS.—Section 6039G is
amended—
(1) by inserting ‘‘or 877A’’ after ‘‘section 877(b)’’
in subsection (a), and
(2) by inserting ‘‘or 877A’’ after ‘‘section
877(a)’’ in subsection (d).
(e) CLERICAL AMENDMENT.—The table of sections for
subpart A of part II of subchapter N of chapter 1 is amend-
ed by inserting after the item relating to section 877 the
following new item:
‘‘Sec. 877A. Tax responsibilities of expatriation.’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendments made by this section shall
apply to expatriates (as defined in section 877A(g) of
the Internal Revenue Code of 1986, as added by this
section) whose expatriation date (as so defined) is on
or after the date of the enactment of this Act.
(2) GIFTS AND BEQUESTS.—Chapter 15 of the
Internal Revenue Code of 1986 (as added by sub-
section (b)) shall apply to covered gifts and bequests
(as defined in section 2801 of such Code, as so added)
received on or after the date of the enactment of this
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Act from transferors whose expatriation date is on or
after such date of enactment.
SEC. 205. SPECIAL ENROLLMENT OPTION BY EMPLOYER
HEALTH PLANS FOR MEMBERS OF UNIFORM
SERVICES WHO LOSE HEALTH CARE COV-
ERAGE.
(a) IN GENERAL.—Section 9801(f) (relating to special
enrollment periods) is amended by adding at the end the
following new paragraph:
‘‘(3) LOSS OF MILITARY HEALTH COVERAGE.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graphs (1) and (2), a group health plan shall
permit an employee who is eligible, but not en-
rolled, for coverage under the terms of the plan
(or a dependent of such an employee if the de-
pendent is eligible, but not enrolled, for coverage
under such terms) to enroll for coverage under
the terms of the plan if each of the following con-
ditions is met:
‘‘(i) The employee or dependent, by
reason of service in the uniformed services
(within the meaning of section 4303 of title
38, United States Code), was covered under
a Federal health care benefit program (in-
cluding coverage under the TRICARE pro-
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certified’’ and inserting ‘‘all ultimate purchasers
of the vendor or credit card issuer are certified’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect as if included in
the provisions of the Safe, Accountable, Flexible, Effi-
cient Transportation Equity Act: A Legacy for Users
to which they relate.
(e) CLERICAL AMENDMENTS RELATED TO THE EN-
ERGY POLICY ACT OF 2005.—
(1) AMENDMENT RELATED TO SECTION 1344 OF
THE ACT.—Subparagraph (B) of section 6427(e)(5),
as redesignated by subsection (a)(36), is amended by
striking ‘‘2006’’ and inserting ‘‘2008’’.
(2) AMENDMENTS RELATED TO SECTION 1351 OF
THE ACT.—Subparagraphs (A)(ii) and (B)(ii) of sec-
tion 41(f)(1) are each amended by striking ‘‘qualified
research expenses and basic research payments’’ and
inserting ‘‘qualified research expenses, basic research
payments, and amounts paid or incurred to energy
research consortiums,’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect as if included in
the provisions of the Energy Policy Act of 2005 to
which they relate.