In the Senate of the United States,
February 1, 2007.
Resolved, That the bill from the House of Representa-
tives (H.R. 2) entitled ‘‘An Act to amend the Fair Labor
Standards Act of 1938 to provide for an increase in the Fed-
eral minimum wage.’’, do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
TITLE I—FAIR MINIMUM WAGE
SEC. 100. SHORT TITLE.
This title may be cited as the ‘‘Fair Minimum Wage
Act of 2007’’.
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SEC. 101. MINIMUM WAGE.
(a) IN GENERAL.—Section 6(a)(1) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended
to read as follows:
‘‘(1) except as otherwise provided in this section,
not less than—
‘‘(A) $5.85 an hour, beginning on the 60th
day after the date of enactment of the Fair Min-
imum Wage Act of 2007;
‘‘(B) $6.55 an hour, beginning 12 months
after that 60th day; and
‘‘(C) $7.25 an hour, beginning 24 months
after that 60th day;’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect 60 days after the date of enact-
ment of this Act.
SEC. 102. APPLICABILITY OF MINIMUM WAGE TO THE COM-
MONWEALTH OF THE NORTHERN MARIANA
ISLANDS.
(a) IN GENERAL.—Section 6 of the Fair Labor Stand-
ards Act of 1938 (29 U.S.C. 206) shall apply to the Com-
monwealth of the Northern Mariana Islands.
(b) TRANSITION.—Notwithstanding subsection (a), the
minimum wage applicable to the Commonwealth of the
Northern Mariana Islands under section 6(a)(1) of the Fair
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Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)) shall
be—
(1) $3.55 an hour, beginning on the 60th day
after the date of enactment of this Act; and
(2) increased by $0.50 an hour (or such lesser
amount as may be necessary to equal the minimum
wage under section 6(a)(1) of such Act), beginning 6
months after the date of enactment of this Act and
every 6 months thereafter until the minimum wage
applicable to the Commonwealth of the Northern Mar-
iana Islands under this subsection is equal to the
minimum wage set forth in such section.
TITLE II—SMALL BUSINESS TAX
INCENTIVES
SEC. 200. SHORT TITLE; AMENDMENT OF CODE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Small Business and Work Opportunity Act of 2007’’.
(b) AMENDMENT OF 1986 CODE.—Except as otherwise
expressly provided, whenever in this title an amendment
or repeal is expressed in terms of an amendment to, or re-
peal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
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Subtitle A—Small Business Tax
Relief Provisions
PART I—GENERAL PROVISIONS
SEC. 201. EXTENSION OF INCREASED EXPENSING FOR
SMALL BUSINESSES.
Section 179 (relating to election to expense certain de-
preciable business assets) is amended by striking ‘‘2010’’
each place it appears and inserting ‘‘2011’’.
SEC. 202. EXTENSION AND MODIFICATION OF 15-YEAR
STRAIGHT-LINE COST RECOVERY FOR QUALI-
FIED 
LEASEHOLD 
IMPROVEMENTS 
AND
QUALIFIED RESTAURANT IMPROVEMENTS; 15-
YEAR STRAIGHT-LINE COST RECOVERY FOR
CERTAIN IMPROVEMENTS TO RETAIL SPACE.
(a) EXTENSION OF LEASEHOLD AND RESTAURANT IM-
PROVEMENTS.—
(1) IN GENERAL.—Clauses (iv) and (v) of section
168(e)(3)(E) (relating to 15-year property) are each
amended by striking ‘‘January 1, 2008’’ and insert-
ing ‘‘April 1, 2008’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to property placed in serv-
ice after December 31, 2007.
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(b) MODIFICATION
OF TREATMENT
OF QUALIFIED
RESTAURANT PROPERTY AS 15-YEAR PROPERTY FOR PUR-
POSES OF DEPRECIATION DEDUCTION.—
(1) TREATMENT
TO
INCLUDE
NEW
CONSTRUC-
TION.—Paragraph (7) of section 168(e) (relating to
classification of property) is amended to read as fol-
lows:
‘‘(7) QUALIFIED RESTAURANT PROPERTY.—The
term ‘qualified restaurant property’ means any sec-
tion 1250 property which is a building (or its struc-
tural components) or an improvement to such build-
ing if more than 50 percent of such building’s square
footage is devoted to preparation of, and seating for
on-premises consumption of, prepared meals.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to any property placed in
service after the date of the enactment of this Act, the
original use of which begins with the taxpayer after
such date.
(c) RECOVERY PERIOD FOR DEPRECIATION OF CER-
TAIN IMPROVEMENTS TO RETAIL SPACE.—
(1) 
15-YEAR
RECOVERY
PERIOD.—Section
168(e)(3)(E) (relating to 15-year property) is amend-
ed by striking ‘‘and’’ at the end of clause (vii), by
striking the period at the end of clause (viii) and in-
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serting ‘‘, and’’, and by adding at the end the fol-
lowing new clause:
‘‘(ix) any qualified retail improvement
property placed in service before April 1,
2008.’’.
(2) QUALIFIED
RETAIL
IMPROVEMENT
PROP-
ERTY.—Section 168(e) is amended by adding at the
end the following new paragraph:
‘‘(8) QUALIFIED
RETAIL
IMPROVEMENT
PROP-
ERTY.—
‘‘(A) IN GENERAL.—The term ‘qualified re-
tail improvement property’ means any improve-
ment to an interior portion of a building which
is nonresidential real property if—
‘‘(i) such portion is open to the general
public and is used in the retail trade or
business of selling tangible personal prop-
erty to the general public, and
‘‘(ii) such improvement is placed in
service more than 3 years after the date the
building was first placed in service.
‘‘(B) IMPROVEMENTS MADE BY OWNER.—In
the case of an improvement made by the owner
of such improvement, such improvement shall be
qualified retail improvement property (if at all)
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only so long as such improvement is held by such
owner. Rules similar to the rules under para-
graph (6)(B) shall apply for purposes of the pre-
ceding sentence.
‘‘(C) CERTAIN
IMPROVEMENTS
NOT
IN-
CLUDED.—Such term shall not include any im-
provement for which the expenditure is attrib-
utable to—
‘‘(i) the enlargement of the building,
‘‘(ii) any elevator or escalator,
‘‘(iii) any structural component bene-
fitting a common area, or
‘‘(iv) the internal structural framework
of the building.’’.
(3) REQUIREMENT
TO
USE
STRAIGHT
LINE
METHOD.—Section 168(b)(3) is amended by adding
at the end the following new subparagraph:
‘‘(I) Qualified retail improvement property
described in subsection (e)(8).’’.
(4) ALTERNATIVE SYSTEM.—The table contained
in section 168(g)(3)(B) is amended by inserting after
the item relating to subparagraph (E)(viii) the fol-
lowing new item:
‘‘(E)(ix) ...................................................................................................
39’’.
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(5) EFFECTIVE DATE.—The amendments made
by this section shall apply to property placed in serv-
ice after the date of the enactment of this Act.
SEC. 203. CLARIFICATION OF CASH ACCOUNTING RULES
FOR SMALL BUSINESS.
(a) CASH ACCOUNTING PERMITTED.—
(1) IN GENERAL.—Section 446 (relating to gen-
eral rule for methods of accounting) is amended by
adding at the end the following new subsection:
‘‘(g) CERTAIN SMALL BUSINESS TAXPAYERS PER-
MITTED TO USE CASH ACCOUNTING METHOD WITHOUT
LIMITATION.—
‘‘(1) IN GENERAL.—An eligible taxpayer shall
not be required to use an accrual method of account-
ing for any taxable year.
‘‘(2) ELIGIBLE TAXPAYER.—For purposes of this
subsection, a taxpayer is an eligible taxpayer with re-
spect to any taxable year if—
‘‘(A) for each of the prior taxable years end-
ing on or after the date of the enactment of this
subsection, the taxpayer (or any predecessor) met
the gross receipts test in effect under section
448(c) for such taxable year, and
‘‘(B) the taxpayer is not subject to section
447 or 448.’’.
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(2) EXPANSION OF GROSS RECEIPTS TEST.—
(A) IN GENERAL.—Paragraph (3) of section
448(b) (relating to entities with gross receipts of
not more than $5,000,000) is amended to read as
follows:
‘‘(3) 
ENTITIES
MEETING
GROSS
RECEIPTS
TEST.—Paragraphs (1) and (2) of subsection (a) shall
not apply to any corporation or partnership for any
taxable year if, for each of the prior taxable years
ending on or after the date of the enactment of the
Small Business and Work Opportunity Act of 2007,
the entity (or any predecessor) met the gross receipts
test in effect under subsection (c) for such prior tax-
able year.’’.
(B) CONFORMING
AMENDMENTS.—Section
448(c) of such Code is amended—
(i) by striking ‘‘$5,000,000’’ in the
heading thereof,
(ii) by striking ‘‘$5,000,000’’ each
place it appears in paragraph (1) and in-
serting ‘‘$10,000,000’’, and
(iii) by adding at the end the following
new paragraph:
‘‘(4) INFLATION
ADJUSTMENT.—In the case of
any taxable year beginning in a calendar year after
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2008, the dollar amount contained in paragraph (1)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar year
in which the taxable year begins, by substituting
‘calendar year 2007’ for ‘calendar year 1992’ in
subparagraph (B) thereof.
If any amount as adjusted under this subparagraph
is not a multiple of $100,000, such amount shall be
rounded to the nearest multiple of $100,000.’’.
(b) CLARIFICATION OF INVENTORY RULES FOR SMALL
BUSINESS.—
(1) IN GENERAL.—Section 471 (relating to gen-
eral rule for inventories) is amended by redesignating
subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED TO
USE INVENTORIES.—
‘‘(1) IN GENERAL.—A qualified taxpayer shall
not be required to use inventories under this section
for a taxable year.
‘‘(2) TREATMENT OF TAXPAYERS NOT USING IN-
VENTORIES.—If a qualified taxpayer does not use in-
ventories with respect to any property for any taxable
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year beginning after the date of the enactment of this
subsection, such property shall be treated as a mate-
rial or supply which is not incidental.
‘‘(3) QUALIFIED
TAXPAYER.—For purposes of
this subsection, the term ‘qualified taxpayer’ means—
‘‘(A) any eligible taxpayer (as defined in
section 446(g)(2)), and
‘‘(B) any taxpayer described in section
448(b)(3).’’.
(2) CONFORMING AMENDMENTS.—
(A) Subpart D of part II of subchapter E
of chapter 1 is amended by striking section 474.
(B) The table of sections for subpart D of
part II of subchapter E of chapter 1 is amended
by striking the item relating to section 474.
(c) EFFECTIVE DATE AND SPECIAL RULES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after the date of the enactment of this Act.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer changing the taxpayer’s
method of accounting for any taxable year under the
amendments made by this section—
(A) such change shall be treated as initiated
by the taxpayer;
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(B) such change shall be treated as made
with the consent of the Secretary of the Treasury;
and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481 of the Internal Revenue Code
of 1986 shall be taken into account over a period
(not greater than 4 taxable years) beginning
with such taxable year.
SEC. 204. EXTENSION AND MODIFICATION OF COMBINED
WORK OPPORTUNITY TAX CREDIT AND WEL-
FARE-TO-WORK CREDIT.
(a) EXTENSION.—Section 51(c)(4)(B) (relating to ter-
mination) is amended by striking ‘‘2007’’ and inserting
‘‘2012’’.
(b) INCREASE IN MAXIMUM AGE FOR DESIGNATED
COMMUNITY RESIDENTS.—
(1) IN
GENERAL.—Paragraph (5) of section
51(d) is amended to read as follows:
‘‘(5) DESIGNATED COMMUNITY RESIDENTS.—
‘‘(A) IN
GENERAL.—The term ‘designated
community resident’ means any individual who
is certified by the designated local agency—
‘‘(i) as having attained age 18 but not
age 40 on the hiring date, and
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‘‘(ii) as having his principal place of
abode within an empowerment zone, enter-
prise community, or renewal community.
‘‘(B) INDIVIDUAL MUST CONTINUE TO RE-
SIDE IN ZONE OR COMMUNITY.—In the case of a
designated community resident, the term ‘quali-
fied wages’ shall not include wages paid or in-
curred for services performed while the individ-
ual’s principal place of abode is outside an em-
powerment zone, enterprise community, or re-
newal community.’’.
(2) CONFORMING
AMENDMENT.—Subparagraph
(D) of section 51(d)(1) is amended to read as follows:
‘‘(D) a designated community resident,’’.
(c) CLARIFICATION OF TREATMENT OF INDIVIDUALS
UNDER INDIVIDUAL WORK PLANS.—Subparagraph (B) of
section 51(d)(6) (relating to vocational rehabilitation refer-
ral) is amended by striking ‘‘or’’ at the end of clause (i),
by striking the period at the end of clause (ii) and inserting
‘‘, or’’, and by adding at the end the following new clause:
‘‘(iii) an individual work plan devel-
oped and implemented by an employment
network pursuant to subsection (g) of sec-
tion 1148 of the Social Security Act with
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respect to which the requirements of such
subsection are met.’’.
(d) TREATMENT OF DISABLED VETERANS UNDER THE
WORK OPPORTUNITY TAX CREDIT.—
(1) DISABLED VETERANS TREATED AS MEMBERS
OF TARGETED GROUP.—
(A) IN
GENERAL.—Subparagraph (A) of
section 51(d)(3) (relating to qualified veteran) is
amended by striking ‘‘agency as being a member
of a family’’ and all that follows and inserting
‘‘agency as—
‘‘(i) being a member of a family receiv-
ing assistance under a food stamp program
under the Food Stamp Act of 1977 for at
least a 3-month period ending during the
12-month period ending on the hiring date,
or
‘‘(ii) entitled to compensation for a
service-connected disability incurred after
September 10, 2001.’’.
(B) DEFINITIONS.—Paragraph (3) of sec-
tion 51(d) is amended by adding at the end the
following new subparagraph:
‘‘(C) OTHER DEFINITIONS.—For purposes of
subparagraph (A), the terms ‘compensation’ and
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‘service-connected’ have the meanings given such
terms under section 101 of title 38, United
States Code.’’.
(2) INCREASE IN AMOUNT OF WAGES TAKEN INTO
ACCOUNT FOR DISABLED VETERANS.—Paragraph (3)
of section 51(b) is amended—
(A) by inserting ‘‘($12,000 per year in the
case of any individual who is a qualified veteran
by reason of subsection (d)(3)(A)(ii))’’ before the
period at the end, and
(B) by striking ‘‘ONLY FIRST $6,000 OF’’ in
the heading and inserting ‘‘LIMITATION ON’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to individuals who begin work for the
employer after the date of the enactment of this Act, in tax-
able years ending after such date.
SEC. 205. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZA-
TIONS.
(a) EMPLOYMENT TAXES.—Chapter 25 (relating to
general provisions relating to employment taxes) is amend-
ed by adding at the end the following new section:
‘‘SEC. 3511. CERTIFIED PROFESSIONAL EMPLOYER ORGANI-
ZATIONS.
‘‘(a) GENERAL RULES.—For purposes of the taxes, and
other obligations, imposed by this subtitle—
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‘‘(1) a certified professional employer organiza-
tion shall be treated as the employer (and no other
person shall be treated as the employer) of any work
site employee performing services for any customer of
such organization, but only with respect to remunera-
tion remitted by such organization to such work site
employee, and
‘‘(2) exclusions, definitions, and other rules
which are based on the type of employer and which
would (but for paragraph (1)) apply shall apply with
respect to such taxes imposed on such remuneration.
‘‘(b) SUCCESSOR EMPLOYER STATUS.—For purposes
of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)—
‘‘(1) a certified professional employer organiza-
tion entering into a service contract with a customer
with respect to a work site employee shall be treated
as a successor employer and the customer shall be
treated as a predecessor employer during the term of
such service contract, and
‘‘(2) a customer whose service contract with a
certified professional employer organization is termi-
nated with respect to a work site employee shall be
treated as a successor employer and the certified pro-
fessional employer organization shall be treated as a
predecessor employer.
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‘‘(c) LIABILITY
OF CERTIFIED PROFESSIONAL EM-
PLOYER ORGANIZATION.—Solely for purposes of its liability
for the taxes, and other obligations, imposed by this
subtitle—
‘‘(1) a certified professional employer organiza-
tion shall be treated as the employer of any indi-
vidual (other than a work site employee or a person
described in subsection (f)) who is performing services
covered by a contract meeting the requirements of sec-
tion 7705(e)(2), but only with respect to remunera-
tion remitted by such organization to such individual,
and
‘‘(2) exclusions, definitions, and other rules
which are based on the type of employer and which
would (but for paragraph (1)) apply shall apply with
respect to such taxes imposed on such remuneration.
‘‘(d) TREATMENT OF CREDITS.—
‘‘(1) IN GENERAL.—For purposes of any credit
specified in paragraph (2)—
‘‘(A) such credit with respect to a work site
employee performing services for the customer
applies to the customer, not the certified profes-
sional employer organization,