Mortgage Forgiveness Debt Relief Act of 2007
PL 110-142 (H.R.3648), enacted 12/20/2007

121 STAT. 1803 
PUBLIC LAW 110–142—DEC. 20, 2007 
Public Law 110–142 
110th Congress 
An Act 
To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness 
on principal residences from gross income, 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. 
This Act may be cited as the ‘‘Mortgage Forgiveness Debt 
Relief Act of 2007’’. 
SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE 
EXCLUDED FROM GROSS INCOME. 
(a) IN GENERAL.—Paragraph (1) of section 108(a) of the Internal 
Revenue Code of 1986 is amended by striking ‘‘or’’ at the end 
of subparagraph (C), by striking the period at the end of subpara-
graph (D) and inserting ‘‘, or’’, and by inserting after subparagraph 
(D) the following new subparagraph: 
‘‘(E) the indebtedness discharged is qualified principal 
residence indebtedness which is discharged before January 
1, 2010.’’. 
(b) SPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESI-
DENCE INDEBTEDNESS.—Section 108 of such Code is amended by 
adding at the end the following new subsection: 
‘‘(h) SPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESI-
DENCE INDEBTEDNESS.— 
‘‘(1) BASIS REDUCTION.—The amount excluded from gross 
income by reason of subsection (a)(1)(E) shall be applied to 
reduce (but not below zero) the basis of the principal residence 
of the taxpayer. 
‘‘(2) QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.—For 
purposes of this section, the term ‘qualified principal residence 
indebtedness’ means acquisition indebtedness (within the 
meaning of section 163(h)(3)(B), applied by substituting 
‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’ in clause (ii) 
thereof) with respect to the principal residence of the taxpayer. 
‘‘(3) EXCEPTION FOR CERTAIN DISCHARGES NOT RELATED TO 
TAXPAYER’S
FINANCIAL
CONDITION.—Subsection (a)(1)(E) shall 
not apply to the discharge of a loan if the discharge is on 
account of services performed for the lender or any other factor 
not directly related to a decline in the value of the residence 
or to the financial condition of the taxpayer. 
‘‘(4) ORDERING RULE.—If any loan is discharged, in whole 
or in part, and only a portion of such loan is qualified principal 
residence indebtedness, subsection (a)(1)(E) shall apply only 
to so much of the amount discharged as exceeds the amount 
26 USC 108. 
26 USC 1 note. 
Mortgage 
Forgiveness Debt 
Relief Act of 
2007. 
Dec. 20, 2007 
[H.R. 3648] 
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121 STAT. 1804 
PUBLIC LAW 110–142—DEC. 20, 2007 
of the loan (as determined immediately before such discharge) 
which is not qualified principal residence indebtedness. 
‘‘(5) PRINCIPAL RESIDENCE.—For purposes of this subsection, 
the term ‘principal residence’ has the same meaning as when 
used in section 121.’’. 
(c) COORDINATION.— 
(1) Subparagraph (A) of section 108(a)(2) of such Code 
is amended by striking ‘‘and (D)’’ and inserting ‘‘(D), and (E)’’. 
(2) Paragraph (2) of section 108(a) of such Code is amended 
by adding at the end the following new subparagraph: 
‘‘(C) PRINCIPAL
RESIDENCE
EXCLUSION
TAKES
PRECE-
DENCE
OVER
INSOLVENCY
EXCLUSION
UNLESS
ELECTED 
OTHERWISE.—Paragraph (1)(B) shall not apply to a dis-
charge to which paragraph (1)(E) applies unless the tax-
payer elects to apply paragraph (1)(B) in lieu of paragraph 
(1)(E).’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to discharges of indebtedness on or after January 1, 
2007. 
SEC. 3. EXTENSION OF TREATMENT OF MORTGAGE INSURANCE PRE-
MIUMS AS INTEREST. 
(a) IN GENERAL.—Subclause (I) of section 163(h)(3)(E)(iv) of 
the Internal Revenue Code of 1986 (relating to termination) is 
amended by striking ‘‘December 31, 2007’’ and inserting ‘‘December 
31, 2010’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to amounts paid or accrued after December 31, 2007. 
SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE 
HOUSING CORPORATION. 
(a) IN GENERAL.—Subparagraph (D) of section 216(b)(1) of the 
Internal Revenue Code of 1986 (defining cooperative housing cor-
poration) is amended to read as follows: 
‘‘(D) meeting 1 or more of the following requirements 
for the taxable year in which the taxes and interest 
described in subsection (a) are paid or incurred: 
‘‘(i) 80 percent or more of the corporation’s gross 
income for such taxable year is derived from tenant- 
stockholders. 
‘‘(ii) At all times during such taxable year, 80 
percent or more of the total square footage of the 
corporation’s property is used or available for use by 
the tenant-stockholders for residential purposes or pur-
poses ancillary to such residential use. 
‘‘(iii) 90 percent or more of the expenditures of 
the corporation paid or incurred during such taxable 
year are paid or incurred for the acquisition, construc-
tion, management, maintenance, or care of the corpora-
tion’s property for the benefit of the tenant-stock-
holders.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years ending after the date of the enactment 
of this Act. 
26 USC 216 note. 
26 USC 163 note. 
26 USC 108 note. 
26 USC 108. 
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121 STAT. 1805 
PUBLIC LAW 110–142—DEC. 20, 2007 
SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOL-
UNTEER FIREFIGHTERS AND EMERGENCY MEDICAL 
RESPONDERS. 
(a) IN GENERAL.—Part III of subchapter B of chapter 1 of 
the Internal Revenue Code of 1986 (relating to items specifically 
excluded from gross income) is amended by inserting after section 
139A the following new section: 
‘‘SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND 
EMERGENCY MEDICAL RESPONDERS. 
‘‘(a) IN GENERAL.—In the case of any member of a qualified 
volunteer emergency response organization, gross income shall not 
include— 
‘‘(1) any qualified State and local tax benefit, and 
‘‘(2) any qualified payment. 
‘‘(b) DENIAL OF DOUBLE BENEFITS.—In the case of any member 
of a qualified volunteer emergency response organization— 
‘‘(1) the deduction under 164 shall be determined with 
regard to any qualified State and local tax benefit, and 
‘‘(2) expenses paid or incurred by the taxpayer in connection 
with the performance of services as such a member shall be 
taken into account under section 170 only to the extent such 
expenses exceed the amount of any qualified payment excluded 
from gross income under subsection (a). 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED STATE AND LOCAL TAX BENEFIT.—The term 
‘qualified state and local tax benefit’ means any reduction or 
rebate of a tax described in paragraph (1), (2), or (3) of section 
164(a) provided by a State or political division thereof on 
account of services performed as a member of a qualified volun-
teer emergency response organization. 
‘‘(2) QUALIFIED PAYMENT.— 
‘‘(A) IN GENERAL.—The term ‘qualified payment’ means 
any payment (whether reimbursement or otherwise) pro-
vided by a State or political division thereof on account 
of the performance of services as a member of a qualified 
volunteer emergency response organization. 
‘‘(B) APPLICABLE
DOLLAR
LIMITATION.—The amount 
determined under subparagraph (A) for any taxable year 
shall not exceed $30 multiplied by the number of months 
during such year that the taxpayer performs such services. 
‘‘(3) 
QUALIFIED
VOLUNTEER
EMERGENCY
RESPONSE 
ORGANIZATION.—The term ‘qualified volunteer emergency 
response organization’ means any volunteer organization— 
‘‘(A) which is organized and operated to provide fire-
fighting or emergency medical services for persons in the 
State or political subdivision, as the case may be, and 
‘‘(B) which is required (by written agreement) by the 
State or political subdivision to furnish firefighting or emer-
gency medical services in such State or political subdivision. 
‘‘(d) TERMINATION.—This section shall not apply with respect 
to taxable years beginning after December 31, 2010.’’. 
26 USC 139B. 
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121 STAT. 1806 
PUBLIC LAW 110–142—DEC. 20, 2007 
(b) CLERICAL AMENDMENT.—The table of sections for such part 
is amended by inserting after the item relating to section 139A 
the following new item: 
‘‘Sec. 139B. Benefits provided to volunteer firefighters and emergency medical re-
sponders.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2007. 
SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW- 
INCOME HOUSING CREDIT. 
(a) IN GENERAL.—Subclause (I) of section 42(i)(3)(D)(ii) of the 
Internal Revenue Code of 1986 (relating to certain students not 
to disqualify unit) is amended to read as follows: 
‘‘(I) single parents and their children and such 
parents are not dependents (as defined in section 
152, determined without regard to subsections 
(b)(1), (b)(2), and (d)(1)(B) thereof) of another indi-
vidual and such children are not dependents (as 
so defined) of another individual other than a 
parent of such children, or.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to— 
(1) housing credit amounts allocated before, on, or after 
the date of the enactment of this Act, and 
(2) buildings placed in service before, on, or after such 
date to the extent paragraph (1) of section 42(h) of the Internal 
Revenue Code of 1986 does not apply to any building by reason 
of paragraph (4) thereof. 
SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL 
GAINS EXCLUSION TO CERTAIN POST-MARRIAGE SALES 
OF PRINCIPAL RESIDENCES BY SURVIVING SPOUSES. 
(a) SALE WITHIN 2 YEARS OF SPOUSE’S DEATH.—Section 121(b) 
of the Internal Revenue Code of 1986 (relating to limitations) is 
amended by adding at the end the following new paragraph: 
‘‘(4) SPECIAL
RULE
FOR
CERTAIN
SALES
BY
SURVIVING 
SPOUSES.—In the case of a sale or exchange of property by 
an unmarried individual whose spouse is deceased on the date 
of such sale, paragraph (1) shall be applied by substituting 
‘$500,000’ for ‘$250,000’ if such sale occurs not later than 2 
years after the date of death of such spouse and the require-
ments of paragraph (2)(A) were met immediately before such 
date of death.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to sales or exchanges after December 31, 2007. 
SEC. 8. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNER-
SHIP RETURNS; LIMITATION ON DISCLOSURE. 
(a) EXTENSION OF TIME LIMITATION.—Section 6698(a) of the 
Internal Revenue Code of 1986 (relating to failure to file partnership 
returns) is amended by striking ‘‘5 months’’ and inserting ‘‘12 
months’’. 
(b) INCREASE IN PENALTY AMOUNT.—Paragraph (1) of section 
6698(b) of such Code is amended by striking ‘‘$50’’ and inserting 
‘‘$85’’. 
26 USC 121 note. 
26 USC 42 note. 
26 USC 42. 
26 USC 139B 
note. 
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121 STAT. 1807 
PUBLIC LAW 110–142—DEC. 20, 2007 
(c) LIMITATION ON DISCLOSURE OF TAXPAYER RETURNS TO PART-
NERS, S CORPORATION SHAREHOLDERS, TRUST BENEFICIARIES, AND 
ESTATE BENEFICIARIES.— 
(1) IN GENERAL.—Section 6103(e) of such Code (relating 
to disclosure to persons having material interest) is amended 
by adding at the end the following new paragraph: 
‘‘(10) LIMITATION ON CERTAIN DISCLOSURES UNDER THIS SUB-
SECTION.—In the case of an inspection or disclosure under 
this subsection relating to the return of a partnership, S cor-
poration, trust, or an estate, the information inspected or dis-
closed shall not include any supporting schedule, attachment, 
or list which includes the taxpayer identity information of 
a person other than the entity making the return or the person 
conducting the inspection or to whom the disclosure is made.’’. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall take effect on the date of the enactment of this 
Act. 
(d) EFFECTIVE DATE.—The amendments made by subsections 
(a) and (b) shall apply to returns required to be filed after the 
date of the enactment of this Act. 
SEC. 9. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS. 
(a) IN GENERAL.—Part I of subchapter B of chapter 68 of 
the Internal Revenue Code of 1986 (relating to assessable penalties) 
is amended by adding at the end the following new section: 
‘‘SEC. 6699. FAILURE TO FILE S CORPORATION RETURN. 
‘‘(a) GENERAL RULE.—In addition to the penalty imposed by 
section 7203 (relating to willful failure to file return, supply 
information, or pay tax), if any S corporation required to file a 
return under section 6037 for any taxable year— 
‘‘(1) fails to file such return at the time prescribed therefor 
(determined with regard to any extension of time for filing), 
or 
‘‘(2) files a return which fails to show the information 
required under section 6037, 
such S corporation shall be liable for a penalty determined under 
subsection (b) for each month (or fraction thereof) during which 
such failure continues (but not to exceed 12 months), unless it 
is shown that such failure is due to reasonable cause. 
‘‘(b) AMOUNT PER MONTH.—For purposes of subsection (a), the 
amount determined under this subsection for any month is the 
product of— 
‘‘(1) $85, multiplied by 
‘‘(2) the number of persons who were shareholders in the 
S corporation during any part of the taxable year. 
‘‘(c) ASSESSMENT OF PENALTY.—The penalty imposed by sub-
section (a) shall be assessed against the S corporation. 
‘‘(d) DEFICIENCY PROCEDURES NOT TO APPLY.—Subchapter B 
of chapter 63 (relating to deficiency procedures for income, estate, 
gift, and certain excise taxes) shall not apply in respect of the 
assessment or collection of any penalty imposed by subsection (a).’’. 
(b) CLERICAL AMENDMENT.—The table of sections for part I 
of subchapter B of chapter 68 of such Code is amended by adding 
at the end the following new item: 
‘‘Sec. 6699. Failure to file S corporation return.’’. 
Penalties. 
26 USC 6699. 
26 USC 6103 
note. 
26 USC 6103. 
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121 STAT. 1808 
PUBLIC LAW 110–142—DEC. 20, 2007 
LEGISLATIVE HISTORY—H.R. 3648: 
HOUSE REPORTS: No. 110–356 (Comm. on Ways and Means). 
CONGRESSIONAL RECORD, Vol. 153 (2007): 
Oct. 4, considered and passed House. 
Dec. 14, considered and passed Senate, amended. 
Dec. 18, House concurred in Senate amendment. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 43 (2007): 
Dec. 20, Presidential remarks. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to returns required to be filed after the date of the 
enactment of this Act. 
SEC. 10. MODIFICATION OF REQUIRED INSTALLMENT OF CORPORATE 
ESTIMATED TAXES WITH RESPECT TO CERTAIN DATES. 
The percentage under subparagraph (B) of section 401(1) of 
the Tax Increase Prevention and Reconciliation Act of 2005 in 
effect on the date of the enactment of this Act is increased by 
1.50 percentage points. 
Approved December 20, 2007. 
26 USC 6655 
note. 
26 USC 6699 
note. 
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