Heroes Earnings Assistance and Relief Tax Act of 2008
PL 110-245 (H.R.6081), enacted 06/17/2008

122 STAT. 1624 
PUBLIC LAW 110–245—JUNE 17, 2008 
Public Law 110–245 
110th Congress 
An Act 
To amend the Internal Revenue Code of 1986 to provide benefits for military 
personnel, and for other purposes. 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the ‘‘Heroes 
Earnings Assistance and Relief Tax Act of 2008’’. 
(b) REFERENCE.—Except as otherwise expressly provided, when-
ever in this Act an amendment or repeal is expressed in terms 
of an amendment to, or repeal 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. 
(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. Recovery rebate provided to military families. 
Sec. 102. Election to include combat pay as earned income for purposes of earned 
income tax credit. 
Sec. 103. Modification of mortgage revenue bonds for veterans. 
Sec. 104. Survivor and disability payments with respect to qualified military serv-
ice. 
Sec. 105. Treatment of differential military pay as wages. 
Sec. 106. Special period of limitation when uniformed services retired pay is re-
duced as a result of award of disability compensation. 
Sec. 107. Distributions from retirement plans to individuals called to active duty. 
Sec. 108. Authority to disclose return information for certain veterans programs 
made permanent. 
Sec. 109. Contributions of military death gratuities to Roth IRAs and Education 
Savings Accounts. 
Sec. 110. Suspension of 5-year period during service with the Peace Corps. 
Sec. 111. Credit for employer differential wage payments to employees who are ac-
tive duty members of the uniformed services. 
Sec. 112. State payments to service members treated as qualified military benefits. 
Sec. 113. Permanent exclusion of gain from sale of a principal residence by certain 
employees of the intelligence community. 
Sec. 114. Special disposition rules for unused benefits in health flexible spending 
arrangements of individuals called to active duty. 
Sec. 115. Technical correction related to exclusion of certain property tax rebates 
and other benefits provided to volunteer firefighters and emergency 
medical responders. 
TITLE II—IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME 
Sec. 201. Treatment of uniformed service cash remuneration as earned income. 
Sec. 202. State annuities for certain veterans to be disregarded in determining sup-
plemental security income benefits. 
Sec. 203. Exclusion of AmeriCorps benefits for purposes of determining supple-
mental security income eligibility and benefit amounts. 
26 USC 1 et seq. 
26 USC 1 note. 
Heroes Earnings 
Assistance and 
Relief Tax Act of 
2008. 
June 17, 2008 
[H.R. 6081] 
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122 STAT. 1625 
PUBLIC LAW 110–245—JUNE 17, 2008 
Sec. 204. Effective date. 
TITLE III—REVENUE PROVISIONS 
Sec. 301. Revision of tax rules on expatriation. 
Sec. 302. Certain domestically controlled foreign persons performing services under 
contract with United States Government treated as American employ-
ers. 
Sec. 303. Increase in minimum penalty on failure to file a return of tax. 
TITLE IV—PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
HEALTH BENEFITS 
Sec. 401. Parity in the application of certain limits to mental health benefits. 
TITLE I—BENEFITS FOR MILITARY 
SEC. 101. RECOVERY REBATE PROVIDED TO MILITARY FAMILIES. 
(a) IN GENERAL.—Subsection (h) of section 6428 (relating to 
identification number requirement) is amended by adding at the 
end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR MEMBERS OF THE ARMED FORCES.— 
Paragraph (1) shall not apply to a joint return where at least 
1 spouse was a member of the Armed Forces of the United 
States at any time during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in the amendments made by section 
101 of the Economic Stimulus Act of 2008. 
SEC. 102. 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 reason of section 112 
as earned income.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (4) of section 6428(e) 
is amended by striking ‘‘except that—’’ and all that follows through 
‘‘(B) such term shall’’ and inserting ‘‘except that such term shall’’. 
(c) SUNSET NOT APPLICABLE.—Section 105 of the Working Fami-
lies Tax Relief Act of 2004 (relating to application of EGTRRA 
sunset to this title) shall not apply to section 104(b) of such Act. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years ending after December 31, 2007. 
SEC. 103. MODIFICATION OF MORTGAGE REVENUE BONDS FOR VET-
ERANS. 
(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, OREGON, 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 sec-
tion 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 
26 USC 32 note. 
26 USC 32 note. 
26 USC 6428 
note. 
26 USC 6428. 
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122 STAT. 1626 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(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. 
(e) TRANSITION RULE.—In the case of any bond issued after 
December 31, 2007, and before the date of the enactment of this 
Act, subparagraph (B) of section 143(l)(4) of the Internal Revenue 
Code of 1986, as amended by this section, shall be applied by 
substituting ‘‘30 years’’ for ‘‘25 years’’. 
SEC. 104. SURVIVOR AND DISABILITY PAYMENTS WITH RESPECT TO 
QUALIFIED MILITARY SERVICE. 
(a) PLAN QUALIFICATION REQUIREMENT FOR DEATH BENEFITS 
UNDER USERRA-QUALIFIED ACTIVE MILITARY SERVICE.—Subsection 
(a) of section 401 (relating to requirements for qualification) is 
amended by inserting after paragraph (36) the following new para-
graph: 
‘‘(37) DEATH
BENEFITS
UNDER
USERRA-QUALIFIED
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 performing qualified military service (as defined 
in section 414(u)), the survivors of the participant are entitled 
to any additional benefits (other than benefit accruals relating 
to the period of qualified military service) provided under the 
plan had the participant resumed and then terminated employ-
ment on account of death.’’. 
(b) TREATMENT
IN
THE
CASE
OF
DEATH
OR
DISABILITY 
RESULTING FROM ACTIVE MILITARY SERVICE FOR BENEFIT ACCRUAL 
PURPOSES.—Subsection (u) of section 414 (relating to special rules 
relating to veterans’ reemployment rights under USERRA) is 
amended by redesignating paragraphs (9) and (10) as paragraphs 
(10) and (11), respectively, and by inserting after paragraph (8) 
the following new paragraph: 
‘‘(9) TREATMENT
IN
THE
CASE
OF
DEATH
OR
DISABILITY 
RESULTING FROM ACTIVE MILITARY SERVICE.— 
‘‘(A) IN
GENERAL.—For benefit accrual purposes, an 
employer sponsoring a retirement plan may treat an indi-
vidual who dies or becomes 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 employment in accordance 
with the individual’s reemployment rights under chapter 
43 of title 38, United States Code, on the day preceding 
death or disability (as the case may be) and terminated 
employment on the actual date of death or disability. In 
the case of any such treatment, and subject to subpara-
graphs (B) and (C), any full or partial compliance by such 
plan with respect to the benefit accrual requirements of 
paragraph (8) with respect to such individual shall be 
treated for purposes of paragraph (1) as if such compliance 
were required under such chapter 43. 
‘‘(B) 
NONDISCRIMINATION
REQUIREMENT.—Subpara-
graph (A) shall apply only if all individuals 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 
Applicability. 
26 USC 401. 
Applicability. 
26 USC 143 note. 
26 USC 143 note. 
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122 STAT. 1627 
PUBLIC LAW 110–245—JUNE 17, 2008 
result of performing qualified military service prior to 
reemployment by the employer are credited 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 deter-
mined on the basis of the individual’s average 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 employer.’’. 
(c) CONFORMING AMENDMENTS.— 
(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-QUALIFIED
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-QUALIFIED ACTIVE MILI-
TARY 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 AMENDMENTS.— 
(A) IN GENERAL.—If this subparagraph applies to any 
plan or contract amendment, such plan or contract shall 
be treated as being operated in accordance with the terms 
of the plan during the period described in subparagraph 
(B)(iii). 
(B) 
AMENDMENTS
TO
WHICH
SUBPARAGRAPH
(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 sub-
section (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, 2010. 
In the case of a governmental plan (as defined in 
section 414(d) of the Internal Revenue Code of 1986), 
this clause shall be applied by substituting ‘‘2012’’ for 
‘‘2010’’ in subclause (II). 
26 USC 401 note. 
26 USC 404. 
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122 STAT. 1628 
PUBLIC LAW 110–245—JUNE 17, 2008 
(ii) CONDITIONS.—This paragraph shall not apply 
to any amendment unless— 
(I) the plan or contract is operated as if such 
plan or contract amendment were in effect for 
the period described in clause (iii), and 
(II) such plan or contract amendment applies 
retroactively for such period. 
(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. 105. TREATMENT OF DIFFERENTIAL MILITARY PAY AS WAGES. 
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL WAGE PAY-
MENTS.— 
(1) IN GENERAL.—Section 3401 (relating to definitions) is 
amended by adding at the end the following new subsection: 
‘‘(h) DIFFERENTIAL WAGE PAYMENTS TO ACTIVE DUTY MEMBERS 
OF THE UNIFORMED SERVICES.— 
‘‘(1) IN GENERAL.—For purposes of subsection (a), any dif-
ferential wage payment shall be treated as a payment of wages 
by the employer to the employee. 
‘‘(2) DIFFERENTIAL WAGE PAYMENT.—For purposes of para-
graph (1), the term ‘differential wage payment’ means any 
payment which— 
‘‘(A) is made by an employer to an individual with 
respect to any period during which the individual is per-
forming service in the uniformed 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 indi-
vidual would have received from the employer if the indi-
vidual were performing service for the employer.’’. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall apply to remuneration paid after December 31, 
2008. 
(b) TREATMENT OF DIFFERENTIAL WAGE PAYMENTS FOR RETIRE-
MENT PLAN PURPOSES.— 
(1) PENSION PLANS.— 
(A) IN GENERAL.—Section 414(u) (relating to special 
rules relating to veterans’ reemployment rights under 
USERRA), as amended by section 103(b), is amended by 
adding at the end the following new paragraph: 
‘‘(12) TREATMENT OF DIFFERENTIAL WAGE PAYMENTS.— 
‘‘(A) IN GENERAL.—Except as provided in this para-
graph, for purposes of applying this title to a retirement 
plan to which this subsection applies— 
‘‘(i) an individual receiving a differential wage pay-
ment shall be treated as an employee of the employer 
making the payment, 
‘‘(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 provision described in 
26 USC 3401 
note. 
26 USC 3401. 
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122 STAT. 1629 
PUBLIC LAW 110–245—JUNE 17, 2008 
paragraph (1)(C) by reason of any contribution or ben-
efit 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 
individual shall be treated as having been severed 
from employment during any period the individual is 
performing service in the uniformed services described 
in section 3401(h)(2)(A). 
‘‘(ii) LIMITATION.—If an individual elects to receive 
a distribution by reason of clause (i), the plan shall 
provide that the individual may not make an elective 
deferral or employee contribution during the 6-month 
period beginning on the date of the distribution. 
‘‘(C) 
NONDISCRIMINATION
REQUIREMENT.—Subpara-
graph (A)(iii) shall apply only if all employees of an 
employer (as determined under subsections (b), (c), (m), 
and (o)) performing service in the uniformed services 
described in section 3401(h)(2)(A) are entitled to receive 
differential wage payments on reasonably equivalent terms 
and, if eligible to participate in a retirement plan main-
tained by the employer, to make contributions based on 
the payments on reasonably equivalent terms. For purposes 
of applying this subparagraph, the provisions of paragraphs 
(3), (4), and (5) of section 410(b) shall apply. 
‘‘(D) DIFFERENTIAL WAGE PAYMENT.—For purposes of 
this paragraph, the term ‘differential wage payment’ has 
the meaning given such term by section 3401(h)(2).’’. 
(B) CONFORMING AMENDMENT.—The heading for sec-
tion 414(u) is amended by inserting ‘‘AND TO DIFFERENTIAL 
WAGE PAYMENTS
TO MEMBERS
ON ACTIVE DUTY’’ after 
‘‘USERRA’’. 
(2) DIFFERENTIAL WAGE PAYMENTS TREATED AS COMPENSA-
TION
FOR
INDIVIDUAL
RETIREMENT
PLANS.—Section 219(f)(1) 
(defining compensation) is amended by adding at the end the 
following new sentence: ‘‘The term compensation includes any 
differential wage payment (as defined in section 3401(h)(2)).’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to years beginning after December 31, 2008. 
(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 accordance with the terms 
of the plan or contract during the period described in paragraph 
(2)(B)(i). 
(2) AMENDMENTS TO WHICH SECTION APPLIES.— 
(A) IN GENERAL.—This subsection shall apply to any 
amendment to any plan or annuity 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, 2010. 
26 USC 414 note. 
26 USC 219 note. 
26 USC 414. 
Applicability. 
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122 STAT. 1630 
PUBLIC LAW 110–245—JUNE 17, 2008 
In the case of a governmental plan (as defined in section 
414(d) of the Internal Revenue Code of 1986), this subpara-
graph shall be applied by substituting ‘‘2012’’ for ‘‘2010’’ 
in clause (ii). 
(B) CONDITIONS.—This subsection shall not apply to 
any plan or annuity contract amendment unless— 
(i) during the period beginning on the date the 
amendment described in subparagraph (A)(i) takes 
effect and ending on the date described in subpara-
graph (A)(ii) (or, if earlier, the date the plan or contract 
amendment is adopted), the plan or contract is oper-
ated as if such plan or contract amendment were in 
effect, and 
(ii) such plan or contract amendment applies retro-
actively for such period. 
SEC. 106. SPECIAL PERIOD OF LIMITATION WHEN UNIFORMED SERV-
ICES RETIRED PAY IS REDUCED AS A RESULT OF AWARD 
OF DISABILITY COMPENSATION. 
(a) IN GENERAL.—Subsection (d) of section 6511 (relating to 
special rules applicable to income taxes) is amended by adding 
at the end the following new paragraph: 
‘‘(8) SPECIAL RULES WHEN UNIFORMED SERVICES RETIRED 
PAY IS REDUCED AS A RESULT OF AWARD OF DISABILITY COM-
PENSATION.— 
‘‘(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 section 5305 
of title 38 of such Code, 
as a result of an award of compensation under title 38 
of such Code pursuant to a determination by the Secretary 
of Veterans Affairs, the 3-year period of limitation pre-
scribed 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 
period beginning on the date of such determination. 
‘‘(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 determina-
tion.’’. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to claims for credit or refund filed after the date of 
the enactment of this Act note. 
(c) TRANSITION
RULES.—In the case of a determination 
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 for ‘‘the date of such 
determination’’ in subparagraph (A) thereof. 
Applicability. 
26 USC 6511 
note. 
26 USC 6511 
note. 
26 USC 6511. 
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122 STAT. 1631 
PUBLIC LAW 110–245—JUNE 17, 2008 
SEC. 107. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS 
CALLED TO ACTIVE DUTY. 
(a) IN GENERAL.—Clause (iv) of section 72(t)(2)(G) is amended 
by striking ‘‘, and before December 31, 2007’’. 
(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. 108. AUTHORITY TO DISCLOSE RETURN INFORMATION FOR CER-
TAIN VETERANS PROGRAMS MADE PERMANENT. 
(a) IN GENERAL.—Paragraph (7) of section 6103(l) is amended 
by striking the last sentence thereof. 
(b) CONFORMING 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)’’. 
(c) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to requests made after September 30, 2008. 
SEC. 109. CONTRIBUTIONS OF MILITARY DEATH GRATUITIES TO ROTH 
IRAS AND EDUCATION SAVINGS ACCOUNTS. 
(a) PROVISION IN EFFECT BEFORE PENSION PROTECTION ACT.— 
Subsection (e) of section 408A (relating to qualified rollover con-
tribution), as in effect before the amendments made by section 
824 of the Pension Protection Act of 2006, is amended to read 
as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For purposes 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 individual retirement plan, but only 
if such rollover contribution 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 con-
tribution’ includes a contribution to a Roth IRA maintained 
for the benefit of an individual 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— 
‘‘(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 contrib-
uted to a Coverdell education savings account under 
section 530(d)(9). 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF
ROLLOVERS
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 
26 USC 6103 
note. 
26 USC 72 note. 
26 USC 72. 
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122 STAT. 1632 
PUBLIC LAW 110–245—JUNE 17, 2008 
is not a qualified distribution, the amount treated as a 
rollover by reason of subparagraph (A) shall be treated 
as investment in the contract.’’. 
(b) PROVISION IN EFFECT AFTER PENSION PROTECTION ACT.— 
Subsection (e) of section 408A, as in effect after the amendments 
made by section 824 of the Pension Protection Act of 2006, is 
amended to read as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘qualified rollover contribution’ 
means a rollover contribution— 
‘‘(A) to a Roth IRA from another such account, 
‘‘(B) from an eligible retirement plan, but only if— 
‘‘(i) in the case of an individual retirement plan, 
such rollover contribution meets the requirements of 
section 408(d)(3), and 
‘‘(ii) in the case of any eligible retirement plan 
(as defined in section 402(c)(8)(B) other than clauses 
(i) and (ii) thereof), such rollover contribution meets 
the requirements of section 402(c), 403(b)(8), or 
457(e)(16), as applicable. 
For purposes of section 408(d)(3)(B), there shall be dis-
regarded any qualified rollover contribution from an indi-
vidual retirement plan (other than a Roth IRA) to a Roth 
IRA. 
‘‘(2) MILITARY DEATH GRATUITY.— 
‘‘(A) IN
GENERAL.—The term ‘qualified rollover con-
tribution’ includes a contribution to a Roth IRA maintained 
for the benefit of an individual 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— 
‘‘(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 contrib-
uted to a Coverdell education savings account under 
section 530(d)(9). 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF
ROLLOVERS
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 distribution, the amount treated as a 
rollover by reason of subparagraph (A) shall be treated 
as investment 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 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 
26 USC 408. 
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122 STAT. 1633 
PUBLIC LAW 110–245—JUNE 17, 2008 
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 contrib-
uted to a Roth IRA under section 408A(e)(2) or to 
another Coverdell education savings account. 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF
ROLLOVERS
NOT 
TO APPLY.—The last sentence of paragraph (5) 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 includible in gross income under paragraph (1), the 
amount treated as a rollover by reason of subparagraph 
(A) shall be treated as investment in the contract.’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided by paragraphs (2) 
and (3), the amendments made by this section 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 ENACT-
MENT.—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 section 
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 enact-
ment 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.—Section 408A(e)(1) 
of the Internal Revenue Code of 1986 (as in effect after the 
amendments made by subsection (b)) shall apply to taxable 
years beginning after December 31, 2007. 
SEC. 110. SUSPENSION OF 5-YEAR PERIOD DURING SERVICE WITH THE 
PEACE CORPS. 
(a) IN GENERAL.—Subsection (d) of section 121 (relating 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 running of the 5-year period 
described in subsections (a) and (c)(1)(B) and paragraph 
(7) of this subsection with respect to such property shall 
be suspended 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 employee of the Peace Corps, 
or 
‘‘(ii) as an enrolled volunteer or volunteer leader 
under section 5 or 6 (as the case may be) of the Peace 
Corps Act (22 U.S.C. 2504, 2505). 
26 USC 121. 
Applicability. 
26 USC 408A 
note. 
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122 STAT. 1634 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(B) APPLICABLE
RULES.—For purposes of subpara-
graph (A), rules similar to the rules of subparagraphs (B) 
and (D) shall apply.’’. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 2007. 
SEC. 111. CREDIT FOR EMPLOYER DIFFERENTIAL WAGE PAYMENTS 
TO EMPLOYEES WHO ARE ACTIVE DUTY MEMBERS OF THE 
UNIFORMED SERVICES. 
(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. 45P. EMPLOYER WAGE CREDIT FOR EMPLOYEES WHO ARE 
ACTIVE DUTY MEMBERS OF THE UNIFORMED SERVICES. 
‘‘(a) GENERAL RULE.—For purposes of section 38, in the case 
of an eligible small business employer, the differential wage pay-
ment 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 PAYMENTS.—The term 
‘eligible differential wage payments’ means, with respect to 
each qualified employee, so much of the differential wage pay-
ments (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 ‘qualified employee’ 
means a person who has been an employee of the taxpayer 
for the 91-day period immediately preceding the period for 
which any differential 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 employer, provides 
eligible differential wage payments to every qualified 
employee of the employer. 
‘‘(B) CONTROLLED GROUPS.—For purposes of subpara-
graph (A), all persons treated as a single employer under 
subsection (b), (c), (m), or (o) of section 414 shall be treated 
as a single employer. 
‘‘(c) COORDINATION WITH OTHER CREDITS.—The amount of 
credit otherwise allowable under this chapter with respect to com-
pensation 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 EMPLOY-
MENT 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 enact-
ment 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 
26 USC 121 note. 
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122 STAT. 1635 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(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 pay-
ments made after December 31, 2009.’’. 
(b) CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT.— 
Section 38(b) (relating to general business credit) is amended by 
striking ‘‘plus’’ at the end of paragraph (31), by striking the period 
at the end of paragraph (32) and inserting ‘‘, plus’’, and by adding 
at the end of following new paragraph: 
‘‘(33) the differential wage payment credit determined 
under section 45P(a).’’. 
(c) NO DEDUCTION FOR COMPENSATION TAKEN INTO ACCOUNT 
FOR CREDIT.—Section 280C(a) (relating to rule for employment 
credits) is amended by inserting ‘‘45P(a),’’ after ‘‘45A(a),’’. 
(d) CLERICAL AMENDMENT.—The table of sections for subpart 
D of part IV of subchapter A of chapter 1 is amended by adding 
at the end the following new item: 
‘‘Sec. 45P. 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. 112. STATE PAYMENTS TO SERVICE MEMBERS TREATED AS 
QUALIFIED MILITARY BENEFITS. 
(a) IN GENERAL.—Section 134(b) (defining qualified military 
benefit) is amended by adding at the end the following new para-
graph: 
‘‘(6) CERTAIN STATE PAYMENTS.—The term ‘qualified mili-
tary benefit’ includes any bonus payment by a State or political 
subdivision thereof to any member or former member of the 
uniformed services 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), determined 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. 113. PERMANENT EXCLUSION OF GAIN FROM SALE OF A PRIN-
CIPAL RESIDENCE BY CERTAIN EMPLOYEES OF THE 
INTELLIGENCE COMMUNITY. 
(a) IN GENERAL.—Paragraph (9) of section 121(d) is amended 
by striking subparagraph (E). 
(b) DUTY STATION MAY BE INSIDE UNITED STATES.—Section 
121(d)(9)(C) (defining qualified official extended duty) is amended 
by striking clause (vi). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales or exchanges after the date of the enactment 
of this Act. 
26 USC 121 note. 
26 USC 134 note. 
26 USC 38 note. 
26 USC 38. 
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122 STAT. 1636 
PUBLIC LAW 110–245—JUNE 17, 2008 
SEC. 114. SPECIAL DISPOSITION RULES FOR UNUSED BENEFITS IN 
HEALTH 
FLEXIBLE 
SPENDING 
ARRANGEMENTS 
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
INDIVIDUALS
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 arrangement merely because 
such arrangement provides for qualified reservist distributions. 
‘‘(2) QUALIFIED RESERVIST DISTRIBUTION.—For purposes of 
this subsection, the term ‘qualified reservist distribution’ 
means, any distribution to an individual of all or a portion 
of the balance in the employee’s account under such arrange-
ment if— 
‘‘(A) such individual was (by reason of being a member 
of a reserve component (as defined in section 101 of title 
37, United States Code)) ordered or called to active duty 
for a period in excess of 179 days or for an indefinite 
period, and 
‘‘(B) such distribution is made during the period begin-
ning on the date of such order or call and ending on 
the last date that reimbursements could otherwise be made 
under such arrangement 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. 115. TECHNICAL CORRECTION RELATED TO EXCLUSION OF CER-
TAIN PROPERTY TAX REBATES AND OTHER BENEFITS PRO-
VIDED TO VOLUNTEER FIREFIGHTERS AND EMERGENCY 
MEDICAL RESPONDERS. 
(a) SOCIAL SECURITY TAXES.— 
(1) Section 3121(a) (relating to definition of wages) is 
amended by striking ‘‘or’’ at the end of paragraph (21), by 
striking the period at the end of paragraph (22) and inserting 
‘‘; or’’, and by inserting after paragraph (22) the following 
new paragraph: 
‘‘(23) any benefit or payment which is excludable from 
the gross income of the employee under section 139B(b).’’. 
(2) Section 209(a) of the Social Security Act is amended 
by striking ‘‘or’’ at the end of paragraph (18), by striking the 
period at the end of paragraph (19) and inserting ‘‘; or’’, and 
by inserting after paragraph (19) the following new paragraph: 
‘‘(20) Any benefit or payment which is excludable from 
the gross income of the employee under section 139B(b) of 
the Internal Revenue Code of 1986).’’. 
(b) UNEMPLOYMENT TAXES.—Section 3306(b) (relating to defini-
tion of wages) is amended by striking ‘‘or’’ at the end of paragraph 
(18), by striking the period at the end of paragraph (19) and 
inserting ‘‘; or’’, and by inserting after paragraph (19) the following 
new paragraph: 
26 USC 3306. 
42 USC 409. 
26 USC 125 note. 
26 USC 125. 
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122 STAT. 1637 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(20) any benefit or payment which is excludable from 
the gross income of the employee under section 139B(b).’’. 
(c) WAGE WITHHOLDING.—Section 3401(a) (defining wages) is 
amended by striking ‘‘or’’ at the end of paragraph (21), by striking 
the period at the end of paragraph (22) and inserting ‘‘; or’’, and 
by inserting after paragraph (22) the following new paragraph: 
‘‘(23) for any benefit or payment which is excludable from 
the gross income of the employee under section 139B(b).’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in section 5 of the Mortgage Forgive-
ness Debt Relief Act of 2007. 
TITLE II—IMPROVEMENTS IN 
SUPPLEMENTAL SECURITY INCOME 
SEC. 201. TREATMENT OF UNIFORMED SERVICE CASH REMUNERATION 
AS EARNED INCOME. 
(a) IN GENERAL.—Section 1612(a)(1)(A) of the Social Security 
Act (42 U.S.C. 1382a(a)(1)(A)) is amended by inserting ‘‘(and, in 
the case of cash remuneration paid for service as a member of 
a uniformed service (other than payments described in paragraph 
(2)(H) of this subsection or subsection (b)(20)), without regard to 
the limitations contained in section 209(d))’’ before the semicolon. 
(b) CERTAIN HOUSING PAYMENTS TREATED AS IN-KIND SUPPORT 
AND MAINTENANCE.—Section 1612(a)(2) of such Act (42 U.S.C. 
1382a(a)(2)) is amended— 
(1) by striking ‘‘and’’ at the end of subparagraph (F); 
(2) by striking the period at the end of subparagraph (G) 
and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(H) payments to or on behalf of a member of a uni-
formed service for housing of the member (and his or 
her dependents, if any) on a facility of a uniformed service, 
including payments provided under section 403 of title 
37, United States Code, for housing that is acquired or 
constructed under subchapter IV of chapter 169 of title 
10 of such Code, or any related provision of law, and 
any such payments shall be treated as support and mainte-
nance in kind subject to subparagraph (A) of this para-
graph.’’. 
SEC. 202. STATE ANNUITIES FOR CERTAIN VETERANS TO BE DIS-
REGARDED IN DETERMINING SUPPLEMENTAL SECURITY 
INCOME BENEFITS. 
(a) INCOME DISREGARD.—Section 1612(b) of the Social Security 
Act (42 U.S.C. 1382a(b)) is amended— 
(1) by striking ‘‘and’’ at the end of paragraph (22); 
(2) by striking the period at the end of paragraph (23) 
and inserting ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(24) any annuity paid by a State to the individual (or 
such spouse) on the basis of the individual’s being a veteran 
(as defined in section 101 of title 38, United States Code), 
and blind, disabled, or aged.’’. 
(b) RESOURCE DISREGARD.—Section 1613(a) of such Act (42 
U.S.C. 1382b(a)) is amended— 
26 USC 3121 
note. 
26 USC 3401. 
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122 STAT. 1638 
PUBLIC LAW 110–245—JUNE 17, 2008 
(1) by striking ‘‘and’’ at the end of paragraph (14); 
(2) by striking the period at the end of paragraph (15) 
and inserting ‘‘; and’’; and 
(3) by inserting after paragraph (15) the following: 
‘‘(16) for the month of receipt and every month thereafter, 
any annuity paid by a State to the individual (or such spouse) 
on the basis of the individual’s being a veteran (as defined 
in section 101 of title 38, United States Code), and blind, 
disabled, or aged.’’. 
SEC. 203. EXCLUSION OF AMERICORPS BENEFITS FOR PURPOSES OF 
DETERMINING SUPPLEMENTAL SECURITY INCOME ELIGI-
BILITY AND BENEFIT AMOUNTS. 
Section 1612(b) of the Social Security Act (42 U.S.C. 1382a(b)), 
as amended by section 202(a) of this Act, is amended— 
(1) in paragraph (23), by striking ‘‘and’’ at the end; 
(2) in paragraph (24), by striking the period and inserting 
‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(25) any benefit (whether cash or in-kind) conferred upon 
(or paid on behalf of) a
participant in an AmeriCorps position 
approved by the Corporation for
National and Community 
Service under section 123 of the National and Community 
Service Act of 1990 (42 U.S.C. 12573).’’. 
SEC. 204. EFFECTIVE DATE. 
The amendments made by this title shall be effective with 
respect to benefits payable for months beginning after 60 days 
after the date of the enactment of this Act. 
TITLE III—REVENUE PROVISIONS 
SEC. 301. REVISION OF TAX RULES ON EXPATRIATION. 
(a) IN GENERAL.—Subpart A of part II of subchapter N of 
chapter 1 is amended by inserting after section 877 the following 
new section: 
‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION. 
‘‘(a) GENERAL RULES.—For purposes of this subtitle— 
‘‘(1) MARK TO MARKET.—All property of a covered expatriate 
shall be treated as sold on the day before 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, determined without regard to 
paragraph (3). 
‘‘(3) EXCLUSION FOR CERTAIN GAIN.— 
42 USC 1382a 
note. 
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122 STAT. 1639 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(A) IN GENERAL.—The amount which would (but for 
this paragraph) be includible in the gross income of any 
individual by reason of paragraph (1) shall be reduced 
(but not below zero) by $600,000. 
‘‘(B) ADJUSTMENT FOR INFLATION.— 
‘‘(i) IN GENERAL.—In the case of any taxable year 
beginning in a calendar year after 2008, the dollar 
amount in subparagraph (A) shall be increased by an 
amount equal to— 
‘‘(I) such dollar amount, multiplied by 
‘‘(II) the cost-of-living adjustment determined 
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. 
‘‘(ii) ROUNDING.—If any amount as adjusted under 
clause (i) is not a multiple of $1,000, such amount 
shall be rounded to the nearest multiple of $1,000. 
‘‘(b) ELECTION TO DEFER TAX.— 
‘‘(1) IN GENERAL.—If the taxpayer elects the application 
of this subsection with respect to any property treated as sold 
by reason of subsection (a), the time for payment of the addi-
tional tax attributable to such property shall be extended until 
the due date of the return for the taxable year in which such 
property is disposed of (or, in the case of property disposed 
of in a transaction in which gain is not recognized in whole 
or in part, until such other date as the Secretary may prescribe). 
‘‘(2) DETERMINATION OF TAX WITH RESPECT TO PROPERTY.— 
For purposes of paragraph (1), the additional tax attributable 
to any property is an amount which bears the same ratio 
to the additional tax imposed by this chapter for the taxable 
year solely by reason of subsection (a) as the gain taken into 
account under subsection (a) with respect to such property 
bears to the total gain taken into account under subsection 
(a) with respect to all property to which subsection (a) applies. 
‘‘(3) TERMINATION OF EXTENSION.—The due date for pay-
ment of tax may not be extended under this subsection later 
than the due date for the return of tax imposed by this chapter 
for the taxable year which includes the date of death of the 
expatriate (or, if earlier, the time that the security provided 
with respect to the property fails to meet the requirements 
of paragraph (4), unless the taxpayer corrects such failure 
within the time specified by the Secretary). 
‘‘(4) SECURITY.— 
‘‘(A) IN GENERAL.—No election may be made under 
paragraph (1) with respect to any property unless adequate 
security is provided with respect to such property. 
‘‘(B) ADEQUATE SECURITY.—For purposes of subpara-
graph (A), security with respect to any property shall be 
treated as adequate security if— 
‘‘(i) it is a bond which is furnished to, and accepted 
by, the Secretary, which is conditioned on the payment 
of tax (and interest thereon), and which meets the 
requirements of section 6325, or 
‘‘(ii) it is another form of security for such payment 
(including letters of credit) that meets such require-
ments as the Secretary may prescribe. 
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122 STAT. 1640 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(5) WAIVER OF CERTAIN RIGHTS.—No election may be made 
under paragraph (1) unless the taxpayer makes an irrevocable 
waiver of any right under any treaty of the United States 
which would preclude assessment or collection of any tax 
imposed by reason of this section. 
‘‘(6) ELECTIONS.—An election under paragraph (1) shall 
only apply to property described in the election and, once made, 
is irrevocable. 
‘‘(7) INTEREST.—For purposes of section 6601, the last date 
for the payment of tax shall be determined without regard 
to the election under this subsection. 
‘‘(c) EXCEPTION FOR CERTAIN PROPERTY.—Subsection (a) shall 
not apply to— 
‘‘(1) any deferred compensation item (as defined in sub-
section (d)(4)), 
‘‘(2) any specified tax deferred account (as defined in sub-
section (e)(2)), and 
‘‘(3) any interest in a nongrantor trust (as defined in sub-
section (f)(3)). 
‘‘(d) TREATMENT OF DEFERRED COMPENSATION ITEMS.— 
‘‘(1) WITHHOLDING ON ELIGIBLE DEFERRED COMPENSATION 
ITEMS.— 
‘‘(A) IN GENERAL.—In the case of any eligible deferred 
compensation item, the payor shall deduct and withhold 
from any taxable payment to a covered expatriate with 
respect to such item a tax equal to 30 percent thereof. 
‘‘(B) TAXABLE PAYMENT.—For purposes of subparagraph 
(A), the term ‘taxable payment’ means with respect to 
a covered expatriate any payment to the extent it 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. A deferred com-
pensation item shall be taken into account as a payment 
under the preceding sentence when such item would be 
so includible. 
‘‘(2) OTHER DEFERRED COMPENSATION ITEMS.—In the case 
of any deferred compensation item which is not an eligible 
deferred compensation item— 
‘‘(A)(i) with respect to any deferred compensation item 
to which clause (ii) does not apply, an amount equal to 
the present value of the covered expatriate’s accrued benefit 
shall be treated as having been received by such individual 
on the day before the expatriation date as a distribution 
under the plan, and 
‘‘(ii) with respect to any deferred compensation item 
referred to in paragraph (4)(D), the rights of the covered 
expatriate to such item shall be treated as becoming 
transferable and not subject to a substantial risk of for-
feiture on the day before the expatriation date, 
‘‘(B) no early distribution tax shall apply by reason 
of such treatment, and 
‘‘(C) appropriate adjustments shall be made to subse-
quent distributions from the plan to reflect such treatment. 
‘‘(3) ELIGIBLE DEFERRED COMPENSATION ITEMS.—For pur-
poses of this subsection, the term ‘eligible deferred compensa-
tion item’ means any deferred compensation item with respect 
to which— 
Applicability. 
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122 STAT. 1641 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(A) the payor of such item is— 
‘‘(i) a United States person, or 
‘‘(ii) a person who is not a United States person 
but who elects to be treated as a United States person 
for purposes of paragraph (1) and meets such require-
ments as the Secretary may provide to ensure that 
the payor will meet the requirements of paragraph 
(1), and 
‘‘(B) the covered expatriate— 
‘‘(i) notifies the payor of his status as a covered 
expatriate, and 
‘‘(ii) makes an irrevocable waiver of any right to 
claim any reduction under any treaty with the United 
States in withholding on such item. 
‘‘(4) DEFERRED COMPENSATION ITEM.—For purposes of this 
subsection, the term ‘deferred compensation item’ means— 
‘‘(A) any interest in a plan or arrangement described 
in section 219(g)(5), 
‘‘(B) any interest in a foreign pension plan or similar 
retirement arrangement or program, 
‘‘(C) any item of deferred compensation, and 
‘‘(D) any property, or right to property, which the indi-
vidual is entitled to receive in connection with the perform-
ance of services to the extent not previously taken into 
account under section 83 or in accordance with section 
83. 
‘‘(5) EXCEPTION.—Paragraphs (1) and (2) shall not apply 
to any deferred compensation item to the extent attributable 
to services performed outside the United States while the cov-
ered expatriate was not a citizen or resident of the United 
States. 
‘‘(6) SPECIAL RULES.— 
‘‘(A) APPLICATION
OF
WITHHOLDING
RULES.—Rules 
similar to the rules of subchapter B of chapter 3 shall 
apply for purposes of this subsection. 
‘‘(B) APPLICATION OF TAX.—Any item subject to the 
withholding tax imposed under paragraph (1) shall be sub-
ject to tax under section 871. 
‘‘(C) 
COORDINATION
WITH
OTHER
WITHHOLDING 
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 ACCOUNTS.— 
‘‘(1) ACCOUNT TREATED AS DISTRIBUTED.—In the case of 
any interest in a specified tax deferred account 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 expatriation date, 
‘‘(B) no early distribution tax shall apply by reason 
of such treatment, and 
‘‘(C) appropriate adjustments shall be made to subse-
quent distributions from the account to reflect such treat-
ment. 
‘‘(2) SPECIFIED TAX DEFERRED ACCOUNT.—For purposes of 
paragraph (1), the term ‘specified tax deferred account’ means 
an individual retirement plan (as defined in section 7701(a)(37)) 
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122 STAT. 1642 
PUBLIC LAW 110–245—JUNE 17, 2008 
other than any arrangement described in subsection (k) or 
(p) of section 408, a qualified tuition program (as defined in 
section 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 defined 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 nongrantor 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 property exceeds 
its adjusted basis in the hands of the trust, gain shall 
be recognized to the trust as if 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 respect to any distribu-
tion, that portion of the distribution 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 portion 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 WITHHOLDING.—For pur-
poses 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 reduction under any treaty 
with the United States in withholding on any distribution 
to which paragraph (1)(A) applies unless the covered expa-
triate agrees to such other treatment as the Secretary 
determines appropriate. 
‘‘(5) APPLICATION.—This subsection shall apply to a non-
grantor 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 EXPATRIA-
TION.—For purposes of this section— 
‘‘(1) COVERED EXPATRIATE.— 
‘‘(A) IN GENERAL.—The term ‘covered expatriate’ means 
an expatriate who meets the requirements 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 another country and, as 
of the expatriation date, continues to be a citizen 
of, and is taxed as a resident of, such other country, 
and 
Applicability. 
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122 STAT. 1643 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(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 resident 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 expa-
triate 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 purposes of 
subsections (d)(1) and (f) and section 2801. 
‘‘(2) EXPATRIATE.—The term ‘expatriate’ means— 
‘‘(A) any United States citizen who relinquishes his 
citizenship, and 
‘‘(B) any long-term resident of the United States who 
ceases to be a lawful permanent resident of the United 
States (within the meaning of section 7701(b)(6)). 
‘‘(3) EXPATRIATION
DATE.—The term ‘expatriation 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 individual ceases to be a 
lawful permanent resident of the United States (within 
the meaning of section 7701(b)(6)). 
‘‘(4) RELINQUISHMENT OF CITIZENSHIP.—A citizen 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 Immigration 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 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 Immigration 
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 naturalization. 
Subparagraph (A) or (B) shall not apply to any individual 
unless the renunciation or voluntary relinquishment is subse-
quently approved by the issuance to the individual of a certifi-
cate of loss of nationality by the United States Department 
of State. 
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122 STAT. 1644 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(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 imposed under section 72(t), 
220(e)(4), 223(f)(4), 409A(a)(1)(B), 529(c)(6), or 530(d)(4). 
‘‘(h) OTHER RULES.— 
‘‘(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 property which 
would result in the reduction in the amount of gain recog-
nized with respect to property 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 expatriation 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 recognition of gain under 
section 684, this section shall be applied after the application 
of section 684. 
‘‘(i) REGULATIONS.—The Secretary shall prescribe such regula-
tions 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 EXPATRIATES.— 
(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 product 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. 
‘‘(b) TAX TO BE PAID BY RECIPIENT.—The tax imposed by sub-
section (a) on any covered gift or bequest shall be paid by the 
person receiving such gift or bequest. 
Applicability. 
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122 STAT. 1645 
PUBLIC LAW 110–245—JUNE 17, 2008 
‘‘(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 indirectly by 
reason of the death of an individual who, immediately 
before such death, was a covered expatriate. 
‘‘(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 estate 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 property with respect to which 
a deduction would be allowed 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 
‘‘(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 distribution attributable to such gift or 
bequest from such trust (whether from income or cor-
pus) to a United States citizen or resident in the same 
manner as if such distribution were a covered gift 
or bequest. 
‘‘(ii) DEDUCTION
FOR
TAX
PAID
BY
RECIPIENT.— 
There shall be allowed as a deduction under section 
164 the amount of tax imposed by this section which 
is paid or accrued by a United States citizen or resident 
by reason of a distribution from a foreign trust, but 
only to the extent such tax is imposed 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 treated as a domestic trust. 
Applicability. 
Applicability. 
Applicability. 
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122 STAT. 1646 
PUBLIC LAW 110–245—JUNE 17, 2008 
Such an election may be revoked with the consent 
of the Secretary. 
‘‘(f) COVERED EXPATRIATE.—For purposes of this section, the 
term ‘covered expatriate’ has the meaning given to such term by 
section 877A(g)(1).’’. 
(2) CLERICAL AMENDMENT.—The table of chapters for sub-
title 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 CITIZEN-
SHIP.— 
(1) IN GENERAL.—Section 7701(a) is amended by adding 
at the end the following new paragraph: 
‘‘(50) TERMINATION OF UNITED STATES CITIZENSHIP.— 
‘‘(A) IN
GENERAL.—An individual shall not cease to 
be treated as a United States citizen before the date on 
which the individual’s citizenship 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 indi-
vidual who became at birth a citizen of the United States 
and a citizen of another country.’’. 
(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 permanent resident of the 
United States (within the meaning 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 individual commences 
to be treated as a resident of a foreign country under the 
provisions of a tax treaty between 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 
Secretary of the commencement of such treatment.’’. 
(C) Section 7701 is amended by striking subsection 
(n) and by redesignating subsections (o) and (p) as sub-
sections (n) and (o), respectively. 
(d) TERMINATION OF SECTION 877.—Section 877 is amended 
by adding at the end the following new subsection: 
‘‘(h) TERMINATION.—This section shall not apply to any indi-
vidual whose expatriation date (as defined in section 877A(g)(3)) 
is on or after the date of the enactment of this subsection.’’. 
(e) INFORMATION RETURNS.—Section 6039G is amended— 
(1) by inserting ‘‘or 877A’’ after ‘‘section 877(b)’’ in sub-
section (a), and 
(2) by inserting ‘‘or 877A’’ after ‘‘section 877(a)’’ in sub-
section (d). 
Regulations. 
26 USC 7701. 
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122 STAT. 1647 
PUBLIC LAW 110–245—JUNE 17, 2008 
(f) CLERICAL AMENDMENT.—The table of sections for subpart 
A of part II of subchapter N of chapter 1 is amended by inserting 
after the item relating to section 877 the following new item: 
‘‘Sec. 877A. Tax responsibilities of expatriation.’’. 
(g) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in this subsection, 
the amendments made by this section shall apply to any indi-
vidual 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 Rev-
enue Code of 1986 (as added by subsection (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 Act from transferors (or from the estates 
of transferors) whose expatriation date is on or after such 
date of enactment. 
SEC. 302. CERTAIN DOMESTICALLY CONTROLLED FOREIGN PERSONS 
PERFORMING SERVICES UNDER CONTRACT WITH UNITED 
STATES 
GOVERNMENT 
TREATED 
AS 
AMERICAN 
EMPLOYERS. 
(a) FICA TAXES.—Section 3121 (relating to definitions) is 
amended by adding at the end the following new subsection: 
‘‘(z) TREATMENT OF CERTAIN FOREIGN PERSONS AS AMERICAN 
EMPLOYERS.— 
‘‘(1) IN
GENERAL.—If any employee of a foreign person 
is performing services in connection with a contract between 
the United States Government (or any instrumentality thereof) 
and any member of any domestically controlled group of entities 
which includes such foreign person, such foreign person shall 
be treated for purposes of this chapter as an American employer 
with respect to such services performed by such employee. 
‘‘(2) DOMESTICALLY CONTROLLED GROUP OF ENTITIES.—For 
purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘domestically controlled 
group of entities’ means a controlled group of entities the 
common parent of which is a domestic corporation. 
‘‘(B) CONTROLLED GROUP OF ENTITIES.—The term ‘con-
trolled group of entities’ means a controlled group of cor-
porations as defined in section 1563(a)(1), except that— 
‘‘(i) ‘more than 50 percent’ shall be substituted 
for ‘at least 80 percent’ each place it appears therein, 
and 
‘‘(ii) the determination shall be made without 
regard to subsections (a)(4) and (b)(2) of section 1563. 
A partnership or any other entity (other than a corporation) 
shall be treated as a member of a controlled group of 
entities if such entity is controlled (within the meaning 
of section 954(d)(3)) by members of such group (including 
any entity treated as a member of such group by reason 
of this sentence). 
‘‘(3) LIABILITY OF COMMON PARENT.—In the case of a foreign 
person who is a member of any domestically controlled group 
of entities, the common parent of such group shall be jointly 
and severally liable for any tax under this chapter for which 
such foreign person is liable by reason of this subsection, and 
26 USC 3121. 
Applicability. 
26 USC 2801 
note. 
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122 STAT. 1648 
PUBLIC LAW 110–245—JUNE 17, 2008 
for any penalty imposed on such person by this title with 
respect to any failure to pay such tax or to file any return 
or statement with respect to such tax or wages subject to 
such tax. No deduction shall be allowed under this title for 
any liability imposed by the preceding sentence. 
‘‘(4) PROVISIONS PREVENTING DOUBLE TAXATION.— 
‘‘(A) AGREEMENTS.—Paragraph (1) shall not apply to 
any services which are covered by an agreement under 
subsection (l). 
‘‘(B) EQUIVALENT FOREIGN TAXATION.—Paragraph (1) 
shall not apply to any services if the employer establishes 
to the satisfaction of the Secretary that the remuneration 
paid by such employer for such services is subject to a 
tax imposed by a foreign country which is substantially 
equivalent to the taxes imposed by this chapter. 
‘‘(5) CROSS REFERENCE.—For relief from taxes in cases cov-
ered by certain international agreements, see sections 3101(c) 
and 3111(c).’’. 
(b) SOCIAL SECURITY BENEFITS.—Subsection (e) of section 210 
of the Social Security Act (42 U.S.C. 410(e)) is amended— 
(1) by striking ‘‘(e) The term’’ and inserting ‘‘(e)(1) The 
term’’, 
(2) by redesignating clauses (1) through (6) as clauses 
(A) through (F), respectively, and 
(3) by adding at the end the following new paragraph: 
‘‘(2)(A) If any employee of a foreign person is performing serv-
ices in connection with a contract between the United States 
Government (or any instrumentality thereof) and any member of 
any domestically controlled group of entities which includes such 
foreign person, such foreign person shall be treated as an American 
employer with respect to such services performed by such employee. 
‘‘(B) For purposes of this paragraph— 
‘‘(i) The term ‘domestically controlled group of entities’ 
means a controlled group of entities the common parent of 
which is a domestic corporation. 
‘‘(ii) The term ‘controlled group of entities’ means a con-
trolled group of corporations as defined in section 1563(a)(1) 
of the Internal Revenue Code of 1986, except that— 
‘‘(I) ‘more than 50 percent’ shall be substituted for 
‘at least 80 percent’ each place it appears therein, and 
‘‘(II) the determination shall be made without regard 
to subsections (a)(4) and (b)(2) of section 1563 of such 
Code. 
A partnership or any other entity (other than a corporation) 
shall be treated as a member of a controlled group of entities 
if such entity is controlled (within the meaning of section 
954(d)(3) of such Code) by members of such group (including 
any entity treated as a member of such group by reason of 
this sentence). 
‘‘(C) Subparagraph (A) shall not apply to any services to which 
paragraph (1) of section 3121(z) of the Internal Revenue Code 
of 1986 does not apply by reason of paragraph (4) of such section.’’. 
(c) EFFECTIVE DATE.—The amendment made by this section 
shall apply to services performed in calendar months beginning 
more than 30 days after the date of the enactment of this Act. 
26 USC 3121 
note. 
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122 STAT. 1649 
PUBLIC LAW 110–245—JUNE 17, 2008 
SEC. 303. INCREASE IN MINIMUM PENALTY ON FAILURE TO FILE A 
RETURN OF TAX. 
(a) IN GENERAL.—Subsection (a) of section 6651 is amended 
by striking ‘‘$100’’ in the last sentence and inserting ‘‘$135’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to returns required to be filed after December 31, 
2008. 
TITLE IV—PARITY IN THE APPLICATION 
OF 
CERTAIN 
LIMITS 
TO 
MENTAL 
HEALTH BENEFITS 
SEC. 401. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
MENTAL HEALTH BENEFITS. 
(a) INTERNAL REVENUE CODE OF 1986.—Subsection (f) of section 
9812 is amended— 
(1) by striking ‘‘and’’ at the end of paragraph (2), and 
(2) by striking paragraph (3) and inserting the following 
new paragraphs: 
‘‘(3) on or after January 1, 2008, and before the date 
of the enactment of the Heroes Earnings Assistance and Relief 
Tax Act of 2008, and 
‘‘(4) after December 31, 2008.’’. 
(b) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.— 
Subsection (f) of section 712 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1185a(f)) is amended by striking 
‘‘services furnished after December 31, 2007’’ and inserting ‘‘services 
furnished— 
‘‘(1) on or after January 1, 2008, and before the date 
of the enactment of the Heroes Earnings Assistance and Relief 
Tax Act of 2008, and 
‘‘(2) after December 31, 2008.’’. 
26 USC 6651 
note. 
26 USC 6651. 
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122 STAT. 1650 
PUBLIC LAW 110–245—JUNE 17, 2008 
LEGISLATIVE HISTORY—H.R. 6081: 
CONGRESSIONAL RECORD, Vol. 154 (2008): 
May 20, considered and passed House. 
May 22, considered and passed Senate. 
(c) PUBLIC HEALTH SERVICE ACT.—Subsection (f) of section 
2705 of the Public Health Service Act (42 U.S.C. 300gg-5(f)) is 
amended by striking ‘‘services furnished after December 31, 2007’’ 
and inserting ‘‘services furnished— 
‘‘(1) on or after January 1, 2008, and before the date 
of the enactment of the Heroes Earnings Assistance and Relief 
Tax Act of 2008, and 
‘‘(2) after December 31, 2008.’’. 
Approved June 17, 2008. 
VerDate Aug 31 2005 
13:21 Dec 07, 2009
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