Text: H.R.3997 — 110th Congress (2007-2008)All Information (Except Text)

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Engrossed Amendment Senate (12/20/2007)

 
[Congressional Bills 110th Congress]
[From the U.S. Government Printing Office]
[H.R. 3997 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                     December 19, 2007.
      Resolved, That the Senate agree to the amendment of the House of 
Representatives to the amendment of the Senate to the bill (H.R. 3997) 
entitled ``An Act to amend the Internal Revenue Code of 1986 to provide 
earnings assistance and tax relief to members of the uniformed 
services, volunteer firefighters, and Peace Corps volunteers, and for 
other purposes.'', with the following

        SENATE AMENDMENT TO HOUSE AMENDMENT TO SENATE AMENDMENT:

            In lieu of the matter proposed to be inserted by the 
      amendment of the House to the amendment of the Senate, insert the 
      following:

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Defenders of 
Freedom Tax Relief Act of 2007''.
    (b) Reference.--Except as otherwise expressly provided, whenever 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. Election to include combat pay as earned income for purposes 
                            of earned income tax credit.
Sec. 102. Modification of mortgage revenue bonds for veterans.
Sec. 103. Survivor and disability payments with respect to qualified 
                            military service.
Sec. 104. Treatment of differential military pay as wages.
Sec. 105. Special period of limitation when uniformed services retired 
                            pay is reduced as a result of award of 
                            disability compensation.
Sec. 106. Distributions from retirement plans to individuals called to 
                            active duty.
Sec. 107. Disclosure of return information relating to veterans 
                            programs made permanent.
Sec. 108. Contributions of military death gratuities to Roth IRAs and 
                            Education Savings Accounts.
Sec. 109. Suspension of 5-year period during service with the Peace 
                            Corps.
Sec. 110. Credit for employer differential wage payments to employees 
                            who are active duty members of the 
                            uniformed services.
Sec. 111. State payments to service members treated as qualified 
                            military benefits.
Sec. 112. Permanent exclusion of gain from sale of a principal 
                            residence by certain employees of the 
                            intelligence community.
Sec. 113. Special disposition rules for unused benefits in health 
                            flexible spending arrangements of 
                            individuals called to active duty.
Sec. 114. Option to exclude military basic housing allowance for 
                            purposes of determining income eligibility 
                            under low-income housing credit and bond-
                            financed residential rental projects.

                      TITLE II--REVENUE PROVISIONS

Sec. 201. Increase in penalty for failure to file partnership returns.
Sec. 202. Increase in penalty for failure to file S corporation 
                            returns.
Sec. 203. Increase in minimum penalty on failure to file a return of 
                            tax.
Sec. 204. Revision of tax rules on expatriation.
Sec. 205. Special enrollment option by employer health plans for 
                            members of uniform services who lose health 
                            care coverage.

                  TITLE III--TAX TECHNICAL CORRECTIONS

Sec. 301. Short title.
Sec. 302. Amendment related to the Tax Relief and Health Care Act of 
                            2006.
Sec. 303. Amendments related to title XII of the Pension Protection Act 
                            of 2006.
Sec. 304. Amendments related to the Tax Increase Prevention and 
                            Reconciliation Act of 2005.
Sec. 305. Amendments related to the Safe, Accountable, Flexible, 
                            Efficient Transportation Equity Act: A 
                            Legacy for Users.
Sec. 306. Amendments related to the Energy Policy Act of 2005.
Sec. 307. Amendments related to the American Jobs Creation Act of 2004.
Sec. 308. Amendments related to the Economic Growth and Tax Relief 
                            Reconciliation Act of 2001.
Sec. 309. Amendments related to the Tax Relief Extension Act of 1999.
Sec. 310. Amendment related to the Internal Revenue Service 
                            Restructuring and Reform Act of 1998.
Sec. 311. Clerical corrections.

  TITLE IV--PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
                                BENEFITS

Sec. 401. Parity in application of certain limits to mental health 
                            benefits.

                     TITLE I--BENEFITS FOR MILITARY

SEC. 101. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR PURPOSES 
              OF EARNED INCOME TAX CREDIT.

    (a) In General.--Clause (vi) of section 32(c)(2)(B) (defining 
earned income) is amended to read as follows:
                            ``(vi) a taxpayer may elect to treat 
                        amounts excluded from gross income by reason of 
                        section 112 as earned income.''.
    (b) Sunset Not Applicable.--Section 105 of the Working Families Tax 
Relief Act of 2004 (relating to application of EGTRRA sunset to this 
title) shall not apply to section 104(b) of such Act.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after December 31, 2007.

SEC. 102. MODIFICATION OF MORTGAGE REVENUE BONDS FOR VETERANS.

    (a) Qualified Mortgage Bonds Used To Finance Residences for 
Veterans Without Regard to First-Time Homebuyer Requirement.--
Subparagraph (D) of section 143(d)(2) (relating to exceptions) is 
amended by striking ``and before January 1, 2008''.
    (b) Increase in Bond Limitation for Alaska, 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 section 
143(l) (defining qualified veteran) is amended to read as follows:
            ``(4) Qualified veteran.--For purposes of this subsection, 
        the term `qualified veteran' means any veteran who--
                    ``(A) served on active duty, and
                    ``(B) applied for the financing before the date 25 
                years after the last date on which such veteran left 
                active service.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2007.

SEC. 103. 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 paragraph:
            ``(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 employment 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 
                individual 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 
                subparagraphs (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.--Subparagraph 
                (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 
                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 determined 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 military 
        service.--A plan described in paragraph (1) shall not be 
        treated as an eligible deferred compensation plan unless such 
        plan meets the requirements of section 401(a)(37).''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to deaths and disabilities occurring on or 
        after January 1, 2007.
            (2) Provisions relating to plan 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 subsection (a) or pursuant to any 
                                regulation issued by the Secretary of 
                                the Treasury under subsection (a), and
                                    (II) on or before the last day of 
                                the first plan year beginning on or 
                                after January 1, 2009.
                        In the case of a governmental plan (as defined 
                        in section 414(d) of the Internal Revenue Code 
                        of 1986), this clause shall be applied by 
                        substituting ``2011'' for ``2009'' in subclause 
                        (II).
                            (ii) Conditions.--This paragraph shall not 
                        apply to any amendment unless--
                                    (I) the plan or contract is 
                                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. 104. TREATMENT OF DIFFERENTIAL MILITARY PAY AS WAGES.

    (a) Income Tax Withholding on Differential Wage Payments.--
            (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 
        differential wage payment shall be treated as a payment of 
        wages by the employer to the employee.
            ``(2) Differential wage payment.--For purposes of paragraph 
        (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 
                performing 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 
                individual would have received from the employer if the 
                individual were performing service for the employer.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to remuneration paid after December 31, 2007.
    (b) Treatment of Differential Wage Payments for Retirement Plan 
Purposes.--
            (1) Pension plans.--
                    (A) In general.--Section 414(u) (relating to 
                special rules relating to veterans' 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 
                paragraph, for purposes of applying this title to a 
                retirement plan to which this subsection applies--
                            ``(i) an individual receiving a 
                        differential wage payment 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 paragraph (1)(C) by 
                        reason of any contribution or benefit which is 
                        based on the differential wage payment.
                    ``(B) Special rule for distributions.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A)(i), for purposes of section 
                        401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii), 
                        403(b)(11)(A), or 457(d)(1)(A)(ii), an 
                        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.--Subparagraph 
                (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 maintained 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 section 
                414(u) is amended by inserting ``and to Differential 
                Wage Payments to Members on Active Duty'' after 
                ``USERRA''.
            (2) Differential wage payments treated as compensation for 
        individual retirement plans.--Section 219(f)(1) (defining 
        compensation) is amended by adding at the end the following new 
        sentence: ``The term compensation includes any differential 
        wage payment (as defined in section 3401(h)(2)).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2007.
    (c) Provisions Relating to Plan Amendments.--
            (1) In general.--If this subsection applies to any plan or 
        annuity contract amendment, such plan or contract shall be 
        treated as being operated in 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, 
                        2009.
                In the case of a governmental plan (as defined in 
                section 414(d) of the Internal Revenue Code of 1986), 
                this subparagraph shall be applied by substituting 
                ``2011'' for ``2009'' in clause (ii).
                    (B) Conditions.--This subsection shall not apply to 
                any plan or annuity contract 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 subparagraph (A)(ii) (or, if earlier, the 
                        date the plan or contract amendment is 
                        adopted), the plan or contract is operated as 
                        if such plan or contract amendment were in 
                        effect, and
                            (ii) such plan or contract amendment 
                        applies retroactively for such period.

SEC. 105. SPECIAL PERIOD OF LIMITATION WHEN UNIFORMED SERVICES 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 compensation.--
                    ``(A) Period of limitation on filing claim.--If the 
                claim for credit or refund relates to an overpayment of 
                tax imposed by subtitle A on account of--
                            ``(i) the reduction of uniformed services 
                        retired pay computed under section 1406 or 1407 
                        of title 10, United States Code, or
                            ``(ii) the waiver of such pay under 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 prescribed in subsection (a) shall be 
                extended, for purposes of permitting a credit or refund 
                based upon the amount of such reduction or waiver, 
                until the end of the 1-year 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 
                determination.''.
    (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.
    (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 ``the date of the 
        enactment of the Defenders of Freedom Tax Relief Act of 2007'' 
        for ``the date of such determination'' in subparagraph (A) 
        thereof.

SEC. 106. DISTRIBUTIONS FROM RETIREMENT PLANS TO 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. 107. DISCLOSURE OF RETURN INFORMATION RELATING TO VETERANS 
              PROGRAMS MADE PERMANENT.

    (a) In General.--Subparagraph (D) of section 6103(l)(7) (relating 
to disclosure of return information to Federal, State, and local 
agencies administering certain programs under the Social Security Act, 
the Food Stamp Act of 1977, or title 38, United States Code or certain 
housing assistance programs) is amended by striking the last sentence.
    (b) Technical Amendment.--Section 6103(l)(7)(D)(viii)(III) is 
amended by striking ``sections 1710(a)(1)(I), 1710(a)(2), 1710(b), and 
1712(a)(2)(B)'' and inserting ``sections 1710(a)(2)(G), 1710(a)(3), and 
1710(b)''.

SEC. 108. CONTRIBUTIONS OF MILITARY DEATH 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 contribution), 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 
                contribution' 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 
                        contributed 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 
                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 
                disregarded any qualified rollover contribution from an 
                individual retirement plan (other than a Roth IRA) to a 
                Roth IRA.
            ``(2) Military death gratuity.--
                    ``(A) In general.--The term `qualified rollover 
                contribution' includes a contribution to a Roth IRA 
                maintained for the benefit of an 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 
                        contributed 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 Code, with respect to 
                a person, to the extent that such contribution does not 
                exceed--
                            ``(i) the sum of the amounts received 
                        during such period by such contributor under 
                        such sections with respect to such person, 
                        reduced by
                            ``(ii) the amounts so received which were 
                        contributed to a Roth IRA under 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 enactment.--
        The amendments made by this section shall apply to any 
        contribution made pursuant to section 408A(e)(2) or 530(d)(5) 
        of the Internal Revenue Code of 1986, as amended by this Act, 
        with respect to amounts received under 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 enactment of this 
        Act if such contribution is made not later than 1 year after 
        the date of the enactment of this Act.
            (3) Pension protection act changes.--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. 109. 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).
                    ``(B) Applicable rules.--For purposes of 
                subparagraph (A), rules similar to the rules of 
                subparagraphs (B) and (D) shall apply.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2007.

SEC. 110. 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. 45O. 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 payment credit 
for any taxable year is an amount equal to 20 percent of the sum of the 
eligible differential wage payments for each of the qualified employees 
of the taxpayer during such taxable year.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Eligible differential wage payments.--The term 
        `eligible differential wage payments' means, with respect to 
        each qualified employee, so much of the differential wage 
        payments (as defined in section 3401(h)(2)) paid to such 
        employee for the taxable year as does not exceed $20,000.
            ``(2) Qualified employee.--The term `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 
                subparagraph (A), all persons treated as a single 
                employer under subsection (b), (c), (m), or (o) of 
                section 414 shall be treated as a single employer.
    ``(c) Coordination With Other Credits.--The amount of credit 
otherwise allowable under this chapter with respect to compensation 
paid to any employee shall be reduced by the credit determined under 
this section with respect to such employee.
    ``(d) Disallowance for Failure To Comply With Employment or 
Reemployment Rights of Members of the Reserve Components of the Armed 
Forces of the United States.--No credit shall be allowed under 
subsection (a) to a taxpayer for--
            ``(1) any taxable year, beginning after the date of the 
        enactment of this section, in which the taxpayer is under a 
        final order, judgment, or other process issued or required by a 
        district court of the United States under section 4323 of title 
        38 of the United States Code with respect to a violation of 
        chapter 43 of such title, and
            ``(2) the 2 succeeding taxable years.
    ``(e) Certain Rules to Apply.--For purposes of this section, rules 
similar to the rules of subsections (c), (d), and (e) of section 52 
shall apply.
    ``(f) Termination.--This section shall not apply to any payments 
made after December 31, 2009.''.
    (b) Credit Treated as Part of General Business Credit.--Section 
38(b) (relating to general business credit) is amended by striking 
``plus'' at the end of paragraph (30), by striking the period at the 
end of paragraph (31) and inserting ``, plus'', and by adding at the 
end of following new paragraph:
            ``(32) the differential wage payment credit determined 
        under section 45O(a).''.
    (c) No Deduction for Compensation Taken Into Account for Credit.--
Section 280C(a) (relating to rule for employment credits) is amended by 
inserting ``45O(a),'' after ``45A(a),''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``Sec. 45O. Employer wage credit for employees who are active duty 
                            members of the uniformed services.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid after the date of the enactment of this Act.

SEC. 111. STATE PAYMENTS TO SERVICE MEMBERS 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 paragraph:
            ``(6) Certain state payments.--The term `qualified military 
        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. 112. PERMANENT EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL 
              RESIDENCE BY CERTAIN EMPLOYEES OF THE INTELLIGENCE 
              COMMUNITY.

    (a) Permanent Exclusion.--
            (1) In general.--Section 417(e) of division A of the Tax 
        Relief and Health Care Act of 2006 is amended by striking ``and 
        before January 1, 2011''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to sales or exchanges after December 31, 2010.
    (b) Duty Station May Be Inside United States.--
            (1) In general.--Section 121(d)(9)(C) (defining qualified 
        official extended duty) is amended by striking clause (vi).
            (2) Effective date.--The amendment made by this subsection 
        shall apply to sales or exchanges after the date of the 
        enactment of this Act.

SEC. 113. SPECIAL DISPOSITION RULES FOR UNUSED 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 arrangement 
        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 
                beginning 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. 114. OPTION TO EXCLUDE MILITARY BASIC HOUSING ALLOWANCE FOR 
              PURPOSES OF DETERMINING INCOME ELIGIBILITY UNDER LOW-
              INCOME HOUSING CREDIT AND BOND-FINANCED RESIDENTIAL 
              RENTAL PROJECTS.

    (a) In General.--The last sentence of 142(d)(2)(B) (relating to 
income of individuals; area median gross income) is amended to read as 
follows: ``For purposes of determining income under this subparagraph--
                            ``(i) subsections (g) and (h) of section 
                        7872 shall not apply, and
                            ``(ii) in the case of determinations made 
                        before January 1, 2015, payments under section 
                        403 of title 37, United States Code, as a basic 
                        pay allowance for housing shall be disregarded 
                        if the project is located in a census tract 
                        which is designated by the Governor (of the 
                        State in which such tract is located) as being 
                        in need of housing for members of the Armed 
                        Forces of the United States.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect with respect to determinations made after the date of the 
enactment of this Act.

                      TITLE II--REVENUE PROVISIONS

SEC. 201. INCREASE IN PENALTY FOR FAILURE TO FILE PARTNERSHIP RETURNS.

    (a) Increase in Penalty Amount.--Paragraph (1) of section 6698(b) 
(relating to amount per month), as amended by section 8 of the Mortgage 
Forgiveness Debt Relief Act of 2007, is amended by striking ``$85'' and 
inserting ``$100''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the amendments made by section 8 of the 
Mortgage Forgiveness Debt Relief Act of 2007.

SEC. 202. INCREASE IN PENALTY FOR FAILURE TO FILE S CORPORATION 
              RETURNS.

    (a) In General.--Paragraph (1) of section 6699(b) (relating to 
amount per month), as added to the Internal Revenue Code of 1986 by 
section 9 of the Mortgage Forgiveness Debt Relief Act of 2007, is 
amended by striking ``$85'' and inserting ``$100''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the amendments made by section 9 of the 
Mortgage Forgiveness Debt Relief Act of 2007.

SEC. 203. 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 ``$225''.
    (b) Effective Date.--The amendment made by this section shall apply 
to returns the due date for the filing of which (including extensions) 
is after December 31, 2007.

SEC. 204. 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.--
                    ``(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 
        additional 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 payment 
        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 
                subparagraph (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 requirements as the Secretary may 
                        prescribe.
            ``(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 
        subsection (d)(4)),
            ``(2) any specified tax deferred account (as defined in 
        subsection (e)(2)), and
            ``(3) any interest in a nongrantor trust (as defined in 
        subsection (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 compensation 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 forfeiture 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 
                subsequent distributions from the plan to reflect such 
                treatment.
            ``(3) Eligible deferred compensation items.--For purposes 
        of this subsection, the term `eligible deferred compensation 
        item' means any deferred compensation item with respect to 
        which--
                    ``(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 requirements 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 
                individual is entitled to receive in connection with 
                the performance 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 which is attributable to 
        services performed outside the United States while the covered 
        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 
                subject 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 
                subsequent distributions from the account to reflect 
                such treatment.
            ``(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)) 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 
        distribution, 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 purposes 
        of this subsection--
                    ``(A) rules similar to the rules of subsection 
                (d)(6) shall apply, and
                    ``(B) the covered expatriate shall be treated as 
                having waived any right to claim any reduction under 
                any treaty with the United States in withholding on any 
                distribution to which paragraph (1)(A) applies unless 
                the covered expatriate agrees to such other treatment 
                as the Secretary determines appropriate.
            ``(5) Application.--This subsection shall apply to a 
        nongrantor trust only if the covered expatriate was a 
        beneficiary of the trust on the day before the expatriation 
        date.
    ``(g) Definitions and Special Rules Relating to Expatriation.--For 
purposes of this section--
            ``(1) Covered expatriate.--
                    ``(A) In general.--The term `covered 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
                                    ``(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 18\1/2\, 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 
                expatriate who is subject to tax as a citizen or 
                resident of the United States for any period beginning 
                after the expatriation date, such individual shall not 
                be treated as a covered expatriate during such period 
                for 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 
        subsequently approved by the issuance to the individual of a 
        certificate of loss of nationality by the United States 
        Department of State.
            ``(5) Long-term resident.--The term `long-term resident' 
        has the meaning given to such term by section 877(e)(2).
            ``(6) Early distribution tax.--The term `early distribution 
        tax' means any increase in tax 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 
                recognized 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 regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Tax on Gifts and Bequests Received by United States Citizens 
and Residents From 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 subsection 
(a) on any covered gift or bequest shall be paid by the person 
receiving such gift or bequest.
    ``(c) Exception for Certain Gifts.--Subsection (a) shall apply only 
to the extent that the value of covered gifts and bequests received by 
any person during the calendar year exceeds the dollar amount in effect 
under section 2503(b) for such calendar year.
    ``(d) Tax Reduced by Foreign Gift or Estate Tax.--The tax imposed 
by subsection (a) on any covered gift or bequest shall be reduced by 
the amount of any gift or estate tax paid to a foreign country with 
respect to such covered gift or bequest.
    ``(e) Covered Gift or Bequest.--
            ``(1) In general.--For purposes of this chapter, the term 
        `covered gift or bequest' means--
                    ``(A) any property acquired by gift directly or 
                indirectly from an individual who, at the time of such 
                acquisition, is a covered expatriate, and
                    ``(B) any property acquired directly or 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 corpus) 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. 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 subtitle 
        B is amended by inserting after the item relating to chapter 14 
        the following new item:

         ``Chapter 15. Gifts and Bequests From Expatriates.''.

    (c) Definition of Termination of United States Citizenship.--
            (1) In general.--Section 7701(a) is amended by adding at 
        the end the following new paragraph:
            ``(50) Termination of united states 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 individual 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 
                subsections (n) and (o), respectively.
    (d) Information Returns.--Section 6039G is amended--
            (1) by inserting ``or 877A'' after ``section 877(b)'' in 
        subsection (a), and
            (2) by inserting ``or 877A'' after ``section 877(a)'' in 
        subsection (d).
    (e) Clerical Amendment.--The table of sections for subpart A of 
part II of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.
    (f) Effective Date.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to expatriates (as 
        defined in section 877A(g) of the Internal Revenue Code of 
        1986, as added by this section) whose expatriation date (as so 
        defined) is on or after the date of the enactment of this Act.
            (2) Gifts and bequests.--Chapter 15 of the Internal Revenue 
        Code of 1986 (as added by 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 whose expatriation date 
        is on or after such date of enactment.

SEC. 205. SPECIAL ENROLLMENT OPTION BY EMPLOYER HEALTH PLANS FOR 
              MEMBERS OF UNIFORM SERVICES WHO LOSE HEALTH CARE 
              COVERAGE.

    (a) In General.--Section 9801(f) (relating to special enrollment 
periods) is amended by adding at the end the following new paragraph:
            ``(3) Loss of military health coverage.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), a group health plan shall permit an employee 
                who is eligible, but not enrolled, for coverage under 
                the terms of the plan (or a dependent of such an 
                employee if the dependent is eligible, but not 
                enrolled, for coverage under such terms) to enroll for 
                coverage under the terms of the plan if each of the 
                following conditions is met:
                            ``(i) The employee or dependent, by reason 
                        of service in the uniformed services (within 
                        the meaning of section 4303 of title 38, United 
                        States Code), was covered under a Federal 
                        health care benefit program (including coverage 
                        under the TRICARE program (as that term is 
                        defined in section 1072 of title 10, United 
                        States Code) or by reason of entitlement to 
                        health care benefits under the laws 
                        administered by the Secretary of Veterans 
                        Affairs or as a member of the uniformed 
                        services on active duty), and the employee or 
                        dependent loses eligibility for such coverage.
                            ``(ii) The employee or dependent is 
                        otherwise eligible to enroll for coverage under 
                        the terms of the plan.
                            ``(iii) The employee requests such coverage 
                        not later than 90 days after the date on which 
                        the coverage described in clause (i) 
                        terminated.
                    ``(B) Effective date of coverage.--Coverage 
                requested under subparagraph (A)(iii) shall become 
                effective not later than the first day of the first 
                month after the date of such request.''.
    (b) Employee Retirement Income Security Act of 1974.--Section 
701(f) of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1181(f)) is amended by adding at the end the following:
            ``(3) Loss of military health coverage.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), a group health plan, and a health insurance 
                issuer offering group health insurance coverage in 
                connection with a group health plan, shall permit an 
                employee who is eligible, but not enrolled, for 
                coverage under the terms of the plan (or a dependent of 
                such an employee if the dependent is eligible, but not 
                enrolled, for coverage under such terms) to enroll for 
                coverage under the terms of the plan if each of the 
                following conditions is met:
                            ``(i) The employee or dependent, by reason 
                        of service in the uniformed services (within 
                        the meaning of section 4303 of title 38, United 
                        States Code), was covered under a Federal 
                        health care benefit program (including coverage 
                        under the TRICARE program (as that term is 
                        defined in section 1072 of title 10, United 
                        States Code) or by reason of entitlement to 
                        health care benefits under the laws 
                        administered by the Secretary of Veterans 
                        Affairs or as a member of the uniformed 
                        services on active duty), and the employee or 
                        dependent loses eligibility for such coverage.
                            ``(ii) The employee or dependent is 
                        otherwise eligible to enroll for coverage under 
                        the terms of the plan.
                            ``(iii) The employee requests such coverage 
                        not later than 90 days after the date on which 
                        the coverage described in clause (i) 
                        terminated.
                    ``(B) Effective date of coverage.--Coverage 
                requested under subparagraph (A)(iii) shall become 
                effective not later than the first day of the first 
                month after the date of such request.''.
    (c) Public Health Service Act.--Section 2701(f) of the Public 
Health Service Act (42 U.S.C. 300gg(f)) is amended by adding at the end 
the following:
            ``(3) Loss of military health coverage.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), a group health plan, and a health insurance 
                issuer offering group health insurance coverage in 
                connection with a group health plan, shall permit an 
                employee who is eligible, but not enrolled, for 
                coverage under the terms of the plan (or a dependent of 
                such an employee if the dependent is eligible, but not 
                enrolled, for coverage under such terms) to enroll for 
                coverage under the terms of the plan if each of the 
                following conditions is met:
                            ``(i) The employee or dependent, by reason 
                        of service in the uniformed services (within 
                        the meaning of section 4303 of title 38, United 
                        States Code), was covered under a Federal 
                        health care benefit program (including coverage 
                        under the TRICARE program (as that term is 
                        defined in section 1072 of title 10, United 
                        States Code) or by reason of entitlement to 
                        health care benefits under the laws 
                        administered by the Secretary of Veterans 
                        Affairs or as a member of the uniformed 
                        services on active duty), and the employee or 
                        dependent loses eligibility for such coverage.
                            ``(ii) The employee or dependent is 
                        otherwise eligible to enroll for coverage under 
                        the terms of the plan.
                            ``(iii) The employee requests such coverage 
                        not later than 90 days after the date on which 
                        the coverage described in clause (i) 
                        terminated.
                    ``(B) Effective date of coverage.--Coverage 
                requested under subparagraph (A)(iii) shall become 
                effective not later than the first day of the first 
                month after the date of such request.''.
    (d) Regulations.--The Secretary of the Treasury, the Secretary of 
Labor, and the Secretary of Health and Human Services, consistent with 
section 104 of the Health Insurance Portability and Accountability Act 
of 1996 (42 U.S.C. 300gg-92 note), may promulgate such regulations as 
may be necessary or appropriate to require the notification of 
individuals (or their dependents) of their rights under the amendment 
made by this Act.
    (e) Effective Date.--The amendments made by this section shall take 
effect 90 days after the date of the enactment of this Act.

                  TITLE III--TAX TECHNICAL CORRECTIONS

SEC. 301. SHORT TITLE.

    This title may be cited as the ``''.

SEC. 302. AMENDMENT RELATED TO THE TAX RELIEF AND HEALTH CARE ACT OF 
              2006.

    (a) Amendment Related to Section 402 of Division A of the Act.--
Subparagraph (A) of section 53(e)(2) is amended to read as follows:
                    ``(A) In general.--The term `AMT refundable credit 
                amount' means, with respect to any taxable year, the 
                amount (not in excess of the long-term unused minimum 
                tax credit for such taxable year) equal to the greater 
                of--
                            ``(i) $5,000,
                            ``(ii) 20 percent of the long-term unused 
                        minimum tax credit for such taxable year, or
                            ``(iii) the amount (if any) of the AMT 
                        refundable credit amount determined under this 
                        paragraph for the taxpayer's preceding taxable 
                        year (as determined before any reduction under 
                        subparagraph (B)).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the provision of the Tax Relief and Health 
Care Act of 2006 to which it relates.

SEC. 303. AMENDMENTS RELATED TO TITLE XII OF THE PENSION PROTECTION ACT 
              OF 2006.

    (a) Amendment Related to Section 1201 of the Act.--Subparagraph (D) 
of section 408(d)(8) is amended by striking ``all amounts distributed 
from all individual retirement plans were treated as 1 contract under 
paragraph (2)(A) for purposes of determining the inclusion of such 
distribution under section 72'' and inserting ``all amounts in all 
individual retirement plans of the individual were distributed during 
such taxable year and all such plans were treated as 1 contract for 
purposes of determining under section 72 the aggregate amount which 
would have been so includible''.
    (b) Amendment Related to Section 1203 of the Act.--Subsection (d) 
of section 1366 is amended by adding at the end the following new 
paragraph:
            ``(4) Application of limitation on charitable 
        contributions.--In the case of any charitable contribution of 
        property to which the second sentence of section 1367(a)(2) 
        applies, paragraph (1) shall not apply to the extent of the 
        excess (if any) of--
                    ``(A) the shareholder's pro rata share of such 
                contribution, over
                    ``(B) the shareholder's pro rata share of the 
                adjusted basis of such property.''.
    (c) Amendment Related to Section 1215 of the Act.--Subclause (I) of 
section 170(e)(7)(D)(i) is amended by striking ``related'' and 
inserting ``substantial and related''.
    (d) Amendments Related to Section 1218 of the Act.--
            (1) Section 2055 is amended by striking subsection (g) and 
        by redesignating subsection (h) as subsection (g).
            (2) Subsection (e) of section 2522 is amended--
                    (A) by striking paragraphs (2) and (4),
                    (B) by redesignating paragraph (3) as paragraph 
                (2), and
                    (C) by adding at the end of paragraph (2), as so 
                redesignated, the following new subparagraph:
                    ``(C) Initial fractional contribution.--For 
                purposes of this paragraph, the term `initial 
                fractional contribution' means, with respect to any 
                donor, the first gift of an undivided portion of the 
                donor's entire interest in any tangible personal 
                property for which a deduction is allowed under 
                subsection (a) or (b).''.
    (e) Amendments Related to Section 1219 of the Act.--
            (1) Paragraph (2) of section 6695A(a) is amended by 
        inserting ``a substantial estate or gift tax valuation 
        understatement (within the meaning of section 6662(g)),'' 
        before ``or a gross valuation misstatement''.
            (2) Paragraph (1) of section 6696(d) is amended by striking 
        ``or under section 6695'' and inserting ``, section 6695, or 
        6695A''.
    (f) Amendment Related to Section 1221 of the Act.--Subparagraph (A) 
of section 4940(c)(4) is amended to read as follows:
                    ``(A) There shall not be taken into account any 
                gain or loss from the sale or other disposition of 
                property to the extent that such gain or loss is taken 
                into account for purposes of computing the tax imposed 
                by section 511.''.
    (g) Amendment Related to Section 1225 of the Act.--
            (1) Subsection (b) of section 6104 is amended--
                    (A) by striking ``Information'' in the heading, and
                    (B) by adding at the end the following: ``Any 
                annual return which is filed under section 6011 by an 
                organization described in section 501(c)(3) and which 
                relates to any tax imposed by section 511 (relating to 
                imposition of tax on unrelated business income of 
                charitable, etc., organizations) shall be treated for 
                purposes of this subsection in the same manner as if 
                furnished under section 6033.''.
            (2) Clause (ii) of section 6104(d)(1)(A) is amended to read 
        as follows:
                            ``(ii) any annual return which is filed 
                        under section 6011 by an organization described 
                        in section 501(c)(3) and which relates to any 
                        tax imposed by section 511 (relating to 
                        imposition of tax on unrelated business income 
                        of charitable, etc., organizations),''.
            (3) Paragraph (2) of section 6104(d) is amended by striking 
        ``section 6033'' and inserting ``section 6011 or 6033''.
    (h) Amendment Related to Section 1231 of the Act.--Subsection (b) 
of section 4962 is amended by striking ``or D'' and inserting ``D, or 
G''.
    (i) Amendment Related to Section 1242 of the Act.--
            (1) Subclause (II) of section 4958(c)(3)(A)(i) is amended 
        by striking ``paragraph (1), (2), or (4) of section 509(a)'' 
        and inserting ``subparagraph (C)(ii)''.
            (2) Clause (ii) of section 4958(c)(3)(C) is amended to read 
        as follows:
                            ``(ii) Exception.--Such term shall not 
                        include--
                                    ``(I) any organization described in 
                                paragraph (1), (2), or (4) of section 
                                509(a), and
                                    ``(II) any organization which is 
                                treated as described in such paragraph 
                                (2) by reason of the last sentence of 
                                section 509(a) and which is a supported 
                                organization (as defined in section 
                                509(f)(3)) of the organization to which 
                                subparagraph (A) applies.''.
    (j) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Pension Protection Act 
of 2006 to which they relate.

SEC. 304. AMENDMENTS RELATED TO THE TAX INCREASE PREVENTION AND 
              RECONCILIATION ACT OF 2005.

    (a) Amendments Related to Section 103 of the Act.--Paragraph (6) of 
section 954(c) is amended by redesignating subparagraph (B) as 
subparagraph (C) and inserting after subparagraph (A) the following new 
subparagraph:
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                in the case of any interest, rent, or royalty to the 
                extent such interest, rent, or royalty creates (or 
                increases) a deficit which under section 952(c) may 
                reduce the subpart F income of the payor or another 
                controlled foreign corporation.''.
    (b) Amendments Related to Section 202 of the Act.--
            (1) Subparagraph (A) of section 355(b)(2) is amended to 
        read as follows:
                    ``(A) it is engaged in the active conduct of a 
                trade or business,''.
            (2) Paragraph (3) of section 355(b) is amended to read as 
        follows:
            ``(3) Special rules for determining active conduct in the 
        case of affiliated groups.--
                    ``(A) In general.--For purposes of determining 
                whether a corporation meets the requirements of 
                paragraph (2)(A), all members of such corporation's 
                separate affiliated group shall be treated as one 
                corporation.
                    ``(B) Separate affiliated group.--For purposes of 
                this paragraph, the term `separate affiliated group' 
                means, with respect to any corporation, the affiliated 
                group which would be determined under section 1504(a) 
                if such corporation were the common parent and section 
                1504(b) did not apply.
                    ``(C) Treatment of trade or business conducted by 
                acquired member.--If a corporation became a member of a 
                separate affiliated group as a result of one or more 
                transactions in which gain or loss was recognized in 
                whole or in part, any trade or business conducted by 
                such corporation (at the time that such corporation 
                became such a member) shall be treated for purposes of 
                paragraph (2) as acquired in a transaction in which 
                gain or loss was recognized in whole or in part.
                    ``(D) Regulations.--The Secretary shall prescribe 
                such regulations as are necessary or appropriate to 
                carry out the purposes of this paragraph, including 
                regulations which provide for the proper application of 
                subparagraphs (B), (C), and (D) of paragraph (2), and 
                modify the application of subsection (a)(3)(B), in 
                connection with the application of this paragraph.''.
            (3) The Internal Revenue Code of 1986 shall be applied and 
        administered as if the amendments made by section 202 of the 
        Tax Increase Prevention and Reconciliation Act of 2005 and by 
        section 410 of division A of the Tax Relief and Health Care Act 
        of 2006 had never been enacted.
    (c) Amendment Related to Section 515 of the Act.--Subsection (f) of 
section 911 is amended to read as follows:
    ``(f) Determination of Tax Liability.--
            ``(1) In general.--If, for any taxable year, any amount is 
        excluded from gross income of a taxpayer under subsection (a), 
        then, notwithstanding sections 1 and 55--
                    ``(A) if such taxpayer has taxable income for such 
                taxable year, the tax imposed by section 1 for such 
                taxable year shall be equal to the excess (if any) of--
                            ``(i) the tax which would be imposed by 
                        section 1 for such taxable year if the 
                        taxpayer's taxable income were increased by the 
                        amount excluded under subsection (a) for such 
                        taxable year, over
                            ``(ii) the tax which would be imposed by 
                        section 1 for such taxable year if the 
                        taxpayer's taxable income were equal to the 
                        amount excluded under subsection (a) for such 
                        taxable year, and
                    ``(B) if such taxpayer has a taxable excess (as 
                defined in section 55(b)(1)(A)(ii)) for such taxable 
                year, the amount determined under the first sentence of 
                section 55(b)(1)(A)(i) for such taxable year shall be 
                equal to the excess (if any) of--
                            ``(i) the amount which would be determined 
                        under such sentence for such taxable year 
                        (subject to the limitation of section 55(b)(3)) 
                        if the taxpayer's taxable excess (as so 
                        defined) were increased by the amount excluded 
                        under subsection (a) for such taxable year, 
                        over
                            ``(ii) the amount which would be determined 
                        under such sentence for such taxable year if 
                        the taxpayer's taxable excess (as so defined) 
                        were equal to the amount excluded under 
                        subsection (a) for such taxable year.
            ``(2) Special rules.--
                    ``(A) Regular tax.--In applying section 1(h) for 
                purposes of determining the tax under paragraph 
                (1)(A)(i) for any taxable year in which, without regard 
                to this subsection, the taxpayer's net capital gain 
                exceeds taxable income (hereafter in this subparagraph 
                referred to as the capital gain excess)--
                            ``(i) the taxpayer's net capital gain 
                        (determined without regard to section 1(h)(11)) 
                        shall be reduced (but not below zero) by such 
                        capital gain excess,
                            ``(ii) the taxpayer's qualified dividend 
                        income shall be reduced by so much of such 
                        capital gain excess as exceeds the taxpayer's 
                        net capital gain (determined without regard to 
                        section 1(h)(11) and the reduction under clause 
                        (i)), and
                            ``(iii) adjusted net capital gain, 
                        unrecaptured section 1250 gain, and 28-percent 
                        rate gain shall each be determined after 
                        increasing the amount described in section 
                        1(h)(4)(B) by such capital gain excess.
                    ``(B) Alternative minimum tax.--In applying section 
                55(b)(3) for purposes of determining the tax under 
                paragraph (1)(B)(i) for any taxable year in which, 
                without regard to this subsection, the taxpayer's net 
                capital gain exceeds the taxable excess (as defined in 
                section 55(b)(1)(A)(ii))--
                            ``(i) the rules of subparagraph (A) shall 
                        apply, except that such subparagraph shall be 
                        applied by substituting `the taxable excess (as 
                        defined in section 55(b)(1)(A)(ii))' for 
                        `taxable income', and
                            ``(ii) the reference in section 55(b)(3)(B) 
                        to the excess described in section 1(h)(1)(B) 
                        shall be treated as a reference to such excess 
                        as determined under the rules of subparagraph 
                        (A) for purposes of determining the tax under 
                        paragraph (1)(A)(i).
                    ``(C) Definitions.--Terms used in this paragraph 
                which are also used in section 1(h) shall have the 
                respective meanings given such terms by section 1(h), 
                except that in applying subparagraph (B) the 
                adjustments under part VI of subchapter A shall be 
                taken into account.''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect as if included in the provisions of the Tax Increase 
        Prevention and Reconciliation Act of 2005 to which they relate.
            (2) Modification of active business definition under 
        section 355.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by subsection (b) 
                shall apply to distributions made after May 17, 2006.
                    (B) Transition rule.--The amendments made by 
                subsection (b) shall not apply to any distribution 
                pursuant to a transaction which is--
                            (i) made pursuant to an agreement which was 
                        binding on May 17, 2006, and at all times 
                        thereafter,
                            (ii) described in a ruling request 
                        submitted to the Internal Revenue Service on or 
                        before such date, or
                            (iii) described on or before such date in a 
                        public announcement or in a filing with the 
                        Securities and Exchange Commission.
                    (C) Election out of transition rule.--Subparagraph 
                (B) shall not apply if the distributing corporation 
                elects not to have such subparagraph apply to 
                distributions of such corporation. Any such election, 
                once made, shall be irrevocable.
                    (D) Special rule for certain pre-enactment 
                distributions.--For purposes of determining the 
                continued qualification under section 355(b)(2)(A) of 
                the Internal Revenue Code of 1986 of distributions made 
                on or before May 17, 2006, as a result of an 
                acquisition, disposition, or other restructuring after 
                such date, such distribution shall be treated as made 
                on the date of such acquisition, disposition, or 
                restructuring for purposes of applying subparagraphs 
                (A) through (C) of this paragraph. The preceding 
                sentence shall only apply with respect to the 
                corporation that undertakes such acquisition, 
                disposition, or other restructuring, and only if such 
                application results in continued qualification under 
                section 355(b)(2)(A) of such Code.
            (3) Amendment related to section 515 of the act.--The 
        amendment made by subsection (c) shall apply to taxable years 
        beginning after December 31, 2006.

SEC. 305. AMENDMENTS RELATED TO THE SAFE, ACCOUNTABLE, FLEXIBLE, 
              EFFICIENT TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS.

    (a) Amendments Related to Section 11113 of the Act.--
            (1) Paragraph (3) of section 6427(i) is amended--
                    (A) by inserting ``or under subsection (e)(2) by 
                any person with respect to an alternative fuel (as 
                defined in section 6426(d)(2))'' after ``section 6426'' 
                in subparagraph (A),
                    (B) by inserting ``or (e)(2)'' after ``subsection 
                (e)(1)'' in subparagraphs (A)(i) and (B), and
                    (C) by striking ``alcohol fuel and biodiesel 
                mixture credit'' and inserting ``mixture credits and 
                the alternative fuel credit'' in the heading thereof.
            (2) Subparagraph (F) of section 6426(d)(2) is amended by 
        striking ``hydrocarbons'' and inserting ``fuel''.
            (3) Section 6426 is amended by adding at the end the 
        following new subsection:
    ``(h) Denial of Double Benefit.--No credit shall be determined 
under subsection (d) or (e) with respect to any fuel with respect to 
which credit may be determined under subsection (b) or (c) or under 
section 40 or 40A.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the SAFETEA-LU to which they 
relate.

SEC. 306. AMENDMENTS RELATED TO THE ENERGY POLICY ACT OF 2005.

    (a) Amendment Related to Section 1306 of the Act.--Paragraph (2) of 
section 45J(b) is amended to read as follows:
            ``(2) Amount of national limitation.--The aggregate amount 
        of national megawatt capacity limitation allocated by the 
        Secretary under paragraph (3) shall not exceed 6,000 
        megawatts.''.
    (b) Amendments Related to Section 1342 of the Act.--
            (1) So much of subsection (b) of section 30C as precedes 
        paragraph (1) thereof is amended to read as follows:
    ``(b) Limitation.--The credit allowed under subsection (a) with 
respect to all qualified alternative fuel vehicle refueling property 
placed in service by the taxpayer during the taxable year at a location 
shall not
exceed--''.
            (2) Subsection (c) of section 30C is amended to read as 
        follows:
    ``(c) Qualified Alternative Fuel Vehicle Refueling Property.--For 
purposes of this section, the term `qualified alternative fuel vehicle 
refueling property' has the same meaning as the term `qualified clean-
fuel vehicle refueling property' would have under section 179A if--
            ``(1) paragraph (1) of section 179A(d) did not apply to 
        property installed on property which is used as the principal 
        residence (within the meaning of section 121) of the taxpayer, 
        and
            ``(2) only the following were treated as clean-burning 
        fuels for purposes of section 179A(d):
                    ``(A) Any fuel at least 85 percent of the volume of 
                which consists of one or more of the following: 
                ethanol, natural gas, compressed natural gas, liquified 
                natural gas, liquefied petroleum gas, or hydrogen.
                    ``(B) Any mixture--
                            ``(i) which consists of two or more of the 
                        following: biodiesel (as defined in section 
                        40A(d)(1)), diesel fuel (as defined in section 
                        4083(a)(3)), or kerosene, and
                            ``(ii) at least 20 percent of the volume of 
                        which consists of biodiesel (as so defined) 
                        determined without regard to any kerosene in 
                        such mixture.''.
    (c) Amendments Related to Section 1351 of the Act.--
            (1) Paragraph (3) of section 41(a) is amended by inserting 
        ``for energy research'' before the period at the end.
            (2) Paragraph (6) of section 41(f) is amended by adding at 
        the end the following new subparagraph:
                    ``(E) Energy research.--The term `energy research' 
                does not include any research which is not qualified 
                research.''.
    (d) Amendments Related to Section 1362 of the Act.--
            (1)(A) Paragraph (1) of section 4041(d) is amended by 
        adding at the end the following new sentence: ``No tax shall be 
        imposed under the preceding sentence on the sale or use of any 
        liquid if tax was imposed with respect to such liquid under 
        section 4081 at the Leaking Underground Storage Tank Trust Fund 
        financing rate.''.
            (B) Paragraph (3) of section 4042(b) is amended to read as 
        follows:
            ``(3) Exception for fuel on which leaking underground 
        storage tank trust fund financing rate separately imposed.--The 
        Leaking Underground Storage Tank Trust Fund financing rate 
        under paragraph (2)(B) shall not apply to the use of any fuel 
        if tax was imposed with respect to such fuel under section 
        4041(d) or 4081 at the Leaking Underground Storage Tank Trust 
        Fund financing rate.''.
            (C) Notwithstanding section 6430 of the Internal Revenue 
        Code of 1986, a refund, credit, or payment may be made under 
        subchapter B of chapter 65 of such Code for taxes imposed with 
        respect to any liquid after September 30, 2005, and before the 
        date of the enactment of this Act under section 4041(d)(1) or 
        4042 of such Code at the Leaking Underground Storage Tank Trust 
        Fund financing rate to the extent that tax was imposed with 
        respect to such liquid under section 4081 at the Leaking 
        Underground Storage Tank Trust Fund financing rate.
            (2)(A) Paragraph (5) of section 4041(d) is amended--
                    (i) by striking ``(other than with respect to any 
                sale for export under paragraph (3) thereof)'', and
                    (ii) by adding at the end the following new 
                sentence: ``The preceding sentence shall not apply with 
                respect to subsection (g)(3) and so much of subsection 
                (g)(1) as relates to vessels (within the meaning of 
                section 4221(d)(3)) employed in foreign trade or trade 
                between the United States and any of its 
                possessions.''.
            (B) Section 4082 is amended--
                    (i) by striking ``(other than such tax at the 
                Leaking Underground Storage Tank Trust Fund financing 
                rate imposed in all cases other than for export)'' in 
                subsection (a), and
                    (ii) by redesignating subsections (f) and (g) as 
                subsections (g) and (h), respectively, and by inserting 
                after subsection (e) the following new subsection:
    ``(f) Exception for Leaking Underground Storage Tank Trust Fund 
Financing Rate.--
            ``(1) In general.--Subsection (a) shall not apply to the 
        tax imposed under section 4081 at the Leaking Underground 
        Storage Tank Trust Fund financing rate.
            ``(2) Exception for export, etc.--Paragraph (1) shall not 
        apply with respect to any fuel if the Secretary determines that 
        such fuel is destined for export or for use by the purchaser as 
        supplies for vessels (within the meaning of section 4221(d)(3)) 
        employed in foreign trade or trade between the United States 
        and any of its possessions.''.
            (C) Subsection (e) of section 4082 is amended--
                    (i) by striking ``an aircraft, the rate of tax 
                under section 4081(a)(2)(A)(iii) shall be zero.'' and 
                inserting ``an aircraft--
            ``(1) the rate of tax under section 4081(a)(2)(A)(iii) 
        shall be zero, and
            ``(2) if such aircraft is employed in foreign trade or 
        trade between the United States and any of its possessions, the 
        increase in such rate under section 4081(a)(2)(B) shall be 
        zero.''; and
                    (ii) by moving the last sentence flush with the 
                margin of such subsection (following the paragraph (2) 
                added by clause (i)).
            (D) Section 6430 is amended to read as follows:

``SEC. 6430. TREATMENT OF TAX IMPOSED AT LEAKING UNDERGROUND STORAGE 
              TANK TRUST FUND FINANCING RATE.

    ``No refunds, credits, or payments shall be made under this 
subchapter for any tax imposed at the Leaking Underground Storage Tank 
Trust Fund financing rate, except in the case of fuels--
            ``(1) which are exempt from tax under section 4081(a) by 
        reason of section 4082(f)(2),
            ``(2) which are exempt from tax under section 4041(d) by 
        reason of the last sentence of paragraph (5) thereof, or
            ``(3) with respect to which the rate increase under section 
        4081(a)(2)(B) is zero by reason of section 4082(e)(2).''.
            (3) Paragraph (5) of section 4041(d) is amended by 
        inserting ``(b)(1)(A),'' after ``subsections''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect as if included in the provisions of the Energy Policy 
        Act of 2005 to which they relate.
            (2) Nonapplication of exemption for off-highway business 
        use.--The amendment made by subsection (d)(3) shall apply to 
        fuel sold for use or used after the date of the enactment of 
        this Act.
            (3) Amendment made by the safetea-lu.--The amendment made 
        by subsection (d)(2)(C)(ii) shall take effect as if included in 
        section 11161 of the SAFETEA-LU.

SEC. 307. AMENDMENTS RELATED TO THE AMERICAN JOBS CREATION ACT OF 2004.

    (a) Amendments Related to Section 339 of the Act.--
            (1)(A) Section 45H is amended by striking subsection (d) 
        and by redesignating subsections (e), (f), and (g) as 
        subsections (d), (e), and (f), respectively.
            (B) Subsection (d) of section 280C is amended to read as 
        follows:
    ``(d) Credit for Low Sulfur Diesel Fuel Production.--The deductions 
otherwise allowed under this chapter for the taxable year shall be 
reduced by the amount of the credit determined for the taxable year 
under section 45H(a).''.
            (C) Subsection (a) of section 1016 is amended by striking 
        paragraph (31) and by redesignating paragraphs (32) through 
        (37) as paragraphs (31) through (36), respectively.
            (2)(A) Section 45H, as amended by paragraph (1), is amended 
        by adding at the end the following new subsection:
    ``(g) Election to Not Take Credit.--No credit shall be determined 
under subsection (a) for the taxable year if the taxpayer elects not to 
have subsection (a) apply to such taxable year.''.
            (B) Subsection (m) of section 6501 is amended by inserting 
        ``45H(g),'' after ``45C(d)(4),''.
            (3)(A) Subsections (b)(1)(A), (c)(2), (e)(1), and (e)(2) of 
        section 45H (as amended by paragraph (1)) and section 179B(a) 
        are each amended by striking ``qualified capital costs'' and 
        inserting ``qualified costs''.
            (B) The heading of paragraph (2) of section 45H(c) is 
        amended by striking ``capital''.
            (C) Subsection (a) of section 179B is amended by inserting 
        ``and which are properly chargeable to capital account'' before 
        the period at the end.
    (b) Amendments Related to Section 710 of the Act.--
            (1) Clause (ii) of section 45(c)(3)(A) is amended by 
        striking ``which is segregated from other waste materials 
        and''.
            (2) Subparagraph (B) of section 45(d)(2) is amended by 
        inserting ``and'' at the end of clause (i), by striking clause 
        (ii), and by redesignating clause (iii) as clause (ii).
    (c) Amendments Related to Section 848 of the Act.--
            (1) Paragraph (2) of section 470(c) is amended to read as 
        follows:
            ``(2) Tax-exempt use property.--
                    ``(A) In general.--The term `tax-exempt use 
                property' has the meaning given to such term by section 
                168(h), except that such section shall be applied--
                            ``(i) without regard to paragraphs (1)(C) 
                        and (3) thereof, and
                            ``(ii) as if section 197 intangible 
                        property (as defined in section 197), and 
                        property described in paragraph (1)(B) or (2) 
                        of section 167(f), were tangible property.
                    ``(B) Exception for partnerships.--Such term shall 
                not include any property which would (but for this 
                subparagraph) be tax-exempt use property solely by 
                reason of section 168(h)(6).
                    ``(C) Cross reference.--For treatment of 
                partnerships as leases to which section 168(h) applies, 
                see section 7701(e).''.
            (2) Subparagraph (A) of section 470(d)(1) is amended by 
        striking ``(at any time during the lease term)'' and inserting 
        ``(at all times during the lease term)''.
    (d) Amendments Related to Section 888 of the Act.--
            (1) Subparagraph (A) of section 1092(a)(2) is amended by 
        striking ``and'' at the end of clause (ii), by redesignating 
        clause (iii) as clause (iv), and by inserting after clause (ii) 
        the following new clause:
                            ``(iii) if the application of clause (ii) 
                        does not result in an increase in the basis of 
                        any offsetting position in the identified 
                        straddle, the basis of each of the offsetting 
                        positions in the identified straddle shall be 
                        increased in a manner which--
                                    ``(I) is reasonable, consistent 
                                with the purposes of this paragraph, 
                                and consistently applied by the 
                                taxpayer, and
                                    ``(II) results in an aggregate 
                                increase in the basis of such 
                                offsetting positions which is equal to 
                                the loss described in clause (ii), 
                                and''.
            (2)(A) Subparagraph (B) of section 1092(a)(2) is amended by 
        adding at the end the following flush sentence:
                ``A straddle shall be treated as clearly identified for 
                purposes of clause (i) only if such identification 
                includes an identification of the positions in the 
                straddle which are offsetting with respect other 
                positions in the straddle.''.
            (B) Subparagraph (A) of section 1092(a)(2) is amended--
                    (i) by striking ``identified positions'' in clause 
                (i) and inserting ``positions'',
                    (ii) by striking ``identified position'' in clause 
                (ii) and inserting ``position'', and
                    (iii) by striking ``identified offsetting 
                positions'' in clause (ii) and inserting ``offsetting 
                positions''.
            (C) Subparagraph (B) of section 1092(a)(3) is amended by 
        striking ``identified offsetting position'' and inserting 
        ``offsetting position''.
            (3) Paragraph (2) of section 1092(a) is amended by 
        redesignating subparagraph (C) as subparagraph (D) and 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Application to liabilities and obligations.--
                Except as otherwise provided by the Secretary, rules 
                similar to the rules of clauses (ii) and (iii) of 
                subparagraph (A) shall apply for purposes of this 
                paragraph with respect to any position which is, or has 
                been, a liability or obligation.''.
            (4) Subparagraph (D) of section 1092(a)(2), as redesignated 
        by paragraph (3), is amended by inserting ``the rules for the 
        application of this section to a position which is or has been 
        a liability or obligation, methods of loss allocation which 
        satisfy the requirements of subparagraph (A)(iii),'' before 
        ``and the ordering rules''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect as if included in the provisions of the American Jobs 
        Creation Act of 2004 to which they relate.
            (2) Identification requirement of amendment related to 
        section 888 of the american jobs creation act of 2004.--The 
        amendment made by subsection (d)(2)(A) shall apply to straddles 
        acquired after the date of the enactment of this Act.

SEC. 308. AMENDMENTS RELATED TO THE ECONOMIC GROWTH AND TAX RELIEF 
              RECONCILIATION ACT OF 2001.

    (a) Amendments Related to Section 617 of the Act.--
            (1) Subclause (II) of section 402(g)(7)(A)(ii) is amended 
        by striking ``for prior taxable years'' and inserting 
        ``permitted for prior taxable years by reason of this 
        paragraph''.
            (2) Subparagraph (A) of section 3121(v)(1) is amended by 
        inserting ``or consisting of designated Roth contributions (as 
        defined in section 402A(c))'' before the comma at the end.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 to which they relate.

SEC. 309. AMENDMENTS RELATED TO THE TAX RELIEF EXTENSION ACT OF 1999.

    (a) Amendment Related to Section 507 of the Act.--Clause (i) of 
section 45(e)(7)(A) is amended by striking ``placed in service by the 
taxpayer'' and inserting ``originally placed in service''.
    (b) Amendment Related to Section 542 of the Act.--Clause (ii) of 
section 856(d)(9)(D) is amended to read as follows:
                            ``(ii) Lodging facility.--The term `lodging 
                        facility' means a--
                                    ``(I) hotel,
                                    ``(II) motel, or
                                    ``(III) other establishment more 
                                than one-half of the dwelling units in 
                                which are used on a transient basis.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Tax Relief Extension Act 
of 1999 to which they relate.

SEC. 310. AMENDMENT RELATED TO THE INTERNAL REVENUE SERVICE 
              RESTRUCTURING AND REFORM ACT OF 1998.

    (a) Amendment Related to Section 3509 of the Act.--Paragraph (3) of 
section 6110(i) is amended by inserting ``and related background file 
documents'' after ``Chief Counsel advice'' in the matter preceding 
subparagraph (A).
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the provision of the Internal Revenue Service 
Restructuring and Reform Act of 1998 to which it relates.

SEC. 311. CLERICAL CORRECTIONS.

    (a) In General.--
            (1) Paragraph (5) of section 21(e) is amended by striking 
        ``section 152(e)(3)(A)'' in the flush matter after subparagraph 
        (B) and inserting ``section 152(e)(4)(A)''.
            (2) Paragraph (3) of section 25C(c) is amended by striking 
        ``section 3280'' and inserting ``part 3280''.
            (3) Paragraph (2) of section 26(b) is amended by 
        redesignating subparagraphs (S) and (T) as subparagraphs (U) 
        and (V), respectively, and by inserting after subparagraph (R) 
        the following new subparagraphs:
                    ``(S) sections 106(e)(3)(A)(ii), 
                223(b)(8)(B)(i)(II), and 408(d)(9)(D)(i)(II) (relating 
                to certain failures to maintain high deductible health 
                plan coverage),
                    ``(T) section 170(o)(3)(B) (relating to recapture 
                of certain deductions for fractional gifts),''.
            (4) Subsection (a) of section 34 is amended--
                    (A) in paragraph (1), by striking ``with respect to 
                gasoline used during the taxable year on a farm for 
                farming purposes'',
                    (B) in paragraph (2), by striking ``with respect to 
                gasoline used during the taxable year (A) otherwise 
                than as a fuel in a highway vehicle or (B) in vehicles 
                while engaged in furnishing certain public passenger 
                land transportation service'', and
                    (C) in paragraph (3), by striking ``with respect to 
                fuels used for nontaxable purposes or resold during the 
                taxable year''.
            (5) Paragraph (2) of section 35(d) is amended--
                    (A) by striking ``paragraph (2) or (4) of'', and
                    (B) by striking ``(within the meaning of section 
                152(e)(1))'' and inserting ``(as defined in section 
                152(e)(4)(A))''.
            (6) Subsection (b) of section 38 is amended--
                    (A) by striking ``and'' each place it appears at 
                the end of any paragraph,
                    (B) by striking ``plus'' each place it appears at 
                the end of any paragraph, and
                    (C) by inserting ``plus'' at the end of paragraph 
                (30).
            (7) Paragraphs (2) and (3) of section 45L(c) are each 
        amended by striking ``section 3280'' and inserting ``part 
        3280''.
            (8) Subsection (c) of section 48 is amended by striking 
        ``subsection'' in the text preceding paragraph (1) and 
        inserting ``section''.
            (9) Paragraphs (1)(B) and (2)(B) of section 48(c) are each 
        amended by striking ``paragraph (1)'' and inserting 
        ``subsection (a)''.
            (10) Clause (ii) of section 48A(d)(4)(B) is amended by 
        striking ``subsection'' both places it appears.
            (11) The last sentence of section 125(b)(2) is amended by 
        striking ``last sentence'' and inserting ``second sentence''.
            (12) Subclause (II) of section 167(g)(8)(C)(ii) is amended 
        by striking ``section 263A(j)(2)'' and inserting ``section 
        263A(i)(2)''.
            (13)(A) Clause (vii) of section 170(b)(1)(A) is amended by 
        striking ``subparagraph (E)'' and inserting ``subparagraph 
        (F)''.
            (B) Clause (ii) of section 170(e)(1)(B) is amended by 
        striking ``subsection (b)(1)(E)'' and inserting ``subsection 
        (b)(1)(F)''.
            (C) Clause (i) of section 1400S(a)(2)(A) is amended by 
        striking ``subparagraph (F)'' and inserting ``subparagraph 
        (G)''.
            (D) Subparagraph (A) of section 4942(i)(1) is amended by 
        striking ``section 170(b)(1)(E)(ii)'' and inserting ``section 
        170(b)(1)(F)(ii)''.
            (14) Subclause (II) of section 170(e)(1)(B)(i) is amended 
        by inserting ``, but without regard to clause (ii) thereof'' 
        after ``paragraph (7)(C)''.
            (15)(A) Subparagraph (A) of section 170(o)(1) and 
        subparagraph (A) of section 2522(e)(1) are each amended by 
        striking ``all interest in the property is'' and inserting 
        ``all interests in the property are''.
            (B) Section 170(o)(3)(A)(i), and section 2522(e)(2)(A)(i) 
        (as redesignated by section 403(d)(2)), are each amended--
                    (i) by striking ``interest'' and inserting 
                ``interests'', and
                    (ii) by striking ``before'' and inserting ``on or 
                before''.
            (16)(A) Subparagraph (C) of section 852(b)(4) is amended to 
        read as follows:
                    ``(C) Determination of holding periods.--For 
                purposes of this paragraph, in determining the period 
                for which the taxpayer has held any share of stock--
                            ``(i) the rules of paragraphs (3) and (4) 
                        of section 246(c) shall apply, and
                            ``(ii) there shall not be taken into 
                        account any day which is more than 6 months 
                        after the date on which such share becomes ex-
                        dividend.''.
            (B) Subparagraph (B) of section 857(b)(8) is amended to 
        read as follows:
                    ``(B) Determination of holding periods.--For 
                purposes of this paragraph, in determining the period 
                for which the taxpayer has held any share of stock or 
                beneficial interest--
                            ``(i) the rules of paragraphs (3) and (4) 
                        of section 246(c) shall apply, and
                            ``(ii) there shall not be taken into 
                        account any day which is more than 6 months 
                        after the date on which such share or interest 
                        becomes ex-dividend.''.
            (17) Paragraph (2) of section 856(l) is amended by striking 
        the last sentence and inserting the following: ``For purposes 
        of subparagraph (B), securities described in subsection 
        (m)(2)(A) shall not be taken into account.''.
            (18) Subparagraph (F) of section 954(c)(1) is amended to 
        read as follows:
                    ``(F) Income from notional principal contracts.--
                            ``(i) In general.--Net income from notional 
                        principal contracts.
                            ``(ii) Coordination with other categories 
                        of foreign personal holding company income.--
                        Any item of income, gain, deduction, or loss 
                        from a notional principal contract entered into 
                        for purposes of hedging any item described in 
                        any preceding subparagraph shall not be taken 
                        into account for purposes of this subparagraph 
                        but shall be taken into account under such 
                        other subparagraph.''.
            (19) Paragraph (1) of section 954(c) is amended by 
        redesignating subparagraph (I) as subparagraph (H).
            (20) Paragraph (33) of section 1016(a), as redesignated by 
        section 407(a)(1)(C), is amended by striking ``section 25C(e)'' 
        and inserting ``section 25C(f)''.
            (21) Paragraph (36) of section 1016(a), as redesignated by 
        section 407(a)(1)(C), is amended by striking ``section 30C(f)'' 
        and inserting ``section 30C(e)(1)''.
            (22) Subparagraph (G) of section 1260(c)(2) is amended by 
        adding ``and'' at the end.
            (23)(A) Section 1297 is amended by striking subsection (d) 
        and by redesignating subsections (e) and (f) as subsections (d) 
        and (e), respectively.
            (B) Subparagraph (G) of section 1260(c)(2) is amended by 
        striking ``subsection (e)'' and inserting ``subsection (d)''.
            (C) Subparagraph (B) of section 1298(a)(2) is amended by 
        striking ``Section 1297(e)'' and inserting ``Section 1297(d)''.
            (24) Paragraph (1) of section 1362(f) is amended--
                    (A) by striking ``, section 1361(b)(3)(B)(ii), or 
                section 1361(c)(1)(A)(ii)'' and inserting ``or section 
                1361(b)(3)(B)(ii)'', and
                    (B) by striking ``, section 1361(b)(3)(C), or 
                section 1361(c)(1)(D)(iii)'' in subparagraph (B) and 
                inserting ``or section 1361(b)(3)(C)''.
            (25) Paragraph (2) of section 1400O is amended by striking 
        ``under of'' and inserting ``under''.
            (26) The table of sections for part II of subchapter Y of 
        chapter 1 is amended by adding at the end the following new 
        item:

``Sec. 1400T. Special rules for mortgage revenue bonds.''.
            (27) Subsection (b) of section 4082 is amended to read as 
        follows:
    ``(b) Nontaxable Use.--For purposes of this section, the term 
`nontaxable use' means--
            ``(1) any use which is exempt from the tax imposed by 
        section 4041(a)(1) other than by reason of a prior imposition 
        of tax,
            ``(2) any use in a train, and
            ``(3) any use described in section 4041(a)(1)(C)(iii)(II).
The term `nontaxable use' does not include the use of kerosene in an 
aircraft and such term shall not include any use described in section 
6421(e)(2)(C).''.
            (28) Paragraph (4) of section 4101(a) (relating to 
        registration in event of change of ownership) is redesignated 
        as paragraph (5).
            (29) Paragraph (6) of section 4965(c) is amended by 
        striking ``section 4457(e)(1)(A)'' and inserting ``section 
        457(e)(1)(A)''.
            (30) Subpart C of part II of subchapter A of chapter 51 is 
        amended by redesignating section 5432 (relating to 
        recordkeeping by wholesale dealers) as section 5121.
            (31) Paragraph (2) of section 5732(c), as redesignated by 
        section 11125(b)(20)(A) of the SAFETEA-LU, is amended by 
        striking ``this subpart'' and inserting ``this subchapter''.
            (32) Subsection (b) of section 6046 is amended--
                    (A) by striking ``subsection (a)(1)'' and inserting 
                ``subsection (a)(1)(A)'', and
                    (B) by striking ``paragraph (2) or (3) of 
                subsection (a)'' and inserting ``subparagraph (B) or 
                (C) of subsection (a)(1)''.
            (33)(A) Subparagraph (A) of section 6103(b)(5) is amended 
        by striking ``the Canal Zone,''.
            (B) Section 7651 is amended by striking paragraph (4) and 
        by redesignating paragraph (5) as paragraph (4).
            (34) Subparagraph (A) of section 6211(b)(4) is amended by 
        striking ``and 34'' and inserting ``34, and 35''.
            (35) Subparagraphs (A) and (B) of section 6230(a)(3) are 
        each amended by striking ``section 6013(e)'' and inserting 
        ``section 6015''.
            (36) Paragraph (3) of section 6427(e) (relating to 
        termination), as added by section 11113 of the SAFETEA-LU, is 
        redesignated as paragraph (5) and moved after paragraph (4).
            (37) Clause (ii) of section 6427(l)(4)(A) is amended by 
        striking ``section 4081(a)(2)(iii)'' and inserting ``section 
        4081(a)(2)(A)(iii)''.
            (38)(A) Section 6427, as amended by section 1343(b)(1) of 
        the Energy Policy Act of 2005, is amended by striking 
        subsection (p) (relating to gasohol used in noncommercial 
        aviation) and redesignating subsection (q) as subsection (p).
            (B) The Internal Revenue Code of 1986 shall be applied and 
        administered as if the amendments made by paragraph (2) of 
        section 11151(a) of the SAFETEA-LU had never been enacted.
            (39) Subsection (a) of section 6695A is amended by striking 
        ``then such person'' in paragraph (2) and inserting the 
        following:
``then such person''.
            (40) Subparagraph (C) of section 6707A(e)(2) is amended by 
        striking ``section 6662A(e)(2)(C)'' and inserting ``section 
        6662A(e)(2)(B)''.
            (41)(A) Paragraph (3) of section 9002 is amended by 
        striking ``section 309(a)(1)'' and inserting ``section 
        306(a)(1)''.
            (B) Paragraph (1) of section 9004(a) is amended by striking 
        ``section 320(b)(1)(B)'' and inserting ``section 
        315(b)(1)(B)''.
            (C) Paragraph (3) of section 9032 is amended by striking 
        ``section 309(a)(1)'' and inserting ``section 306(a)(1)''.
            (D) Subsection (b) of section 9034 is amended by striking 
        ``section 320(b)(1)(A)'' and inserting ``section 
        315(b)(1)(A)''.
            (42) Section 9006 is amended by striking ``Comptroller 
        General'' each place it appears and inserting ``Commission''.
            (43) Subsection (c) of section 9503 is amended by 
        redesignating paragraph (7) (relating to transfers from the 
        trust fund for certain aviation fuels taxes) as paragraph (6).
            (44) Paragraph (1) of section 1301(g) of the Energy Policy 
        Act of 2005 is amended by striking ``shall take effect of the 
        date of the enactment'' and inserting ``shall take effect on 
        the date of the enactment''.
            (45) The Internal Revenue Code of 1986 shall be applied and 
        administered as if the amendments made by section 1(a) of 
        Public Law 109-433 had never been enacted.
    (b) Clerical Amendments Related to the Tax Relief and Health Care 
Act of 2006.--
            (1) Amendment related to section 209 of division a of the 
        act.--Paragraph (3) of section 168(l) is amended by striking 
        ``enzymatic''.
            (2) Amendments related to section 419 of division a of the 
        act.--
                    (A) Clause (iv) of section 6724(d)(1)(B) is amended 
                by inserting ``or (h)(1)'' after ``section 6050H(a)''.
                    (B) Subparagraph (K) of section 6724(d)(2) is 
                amended by inserting ``or (h)(2)'' after ``section 
                6050H(d)''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provision of the Tax 
        Relief and Health Care Act of 2006 to which they relate.
    (c) Clerical Amendments Related to the Gulf Opportunity Zone Act of 
2005.--
            (1) Amendments related to section 402 of the act.--
        Subparagraph (B) of section 24(d)(1) is amended--
                    (A) by striking ``the excess (if any) of'' in the 
                matter preceding clause (i) and inserting ``the greater 
                of'', and
                    (B) by striking ``section'' in clause (ii)(II) and 
                inserting ``section 32''.
            (2) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provisions of the Gulf 
        Opportunity Zone Act of 2005 to which they relate.
    (d) Clerical Amendments Related to the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users.--
            (1) Amendments related to section 11163 of the act.--
        Subparagraph (C) of section 6416(a)(4) is amended--
                    (A) by striking ``ultimate vendor'' and all that 
                follows through ``has certified'' and inserting 
                ``ultimate vendor or credit card issuer has 
                certified'', and
                    (B) by striking ``all ultimate purchasers of the 
                vendor'' and all that follows through ``are certified'' 
                and inserting ``all ultimate purchasers of the vendor 
                or credit card issuer are certified''.
            (2) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provisions of the Safe, 
        Accountable, Flexible, Efficient Transportation Equity Act: A 
        Legacy for Users to which they relate.
    (e) Clerical Amendments Related to the Energy Policy Act of 2005.--
            (1) Amendment related to section 1344 of the act.--
        Subparagraph (B) of section 6427(e)(5), as redesignated by 
        subsection (a)(36), is amended by striking ``2006'' and 
        inserting ``2008''.
            (2) Amendments related to section 1351 of the act.--
        Subparagraphs (A)(ii) and (B)(ii) of section 41(f)(1) are each 
        amended by striking ``qualified research expenses and basic 
        research payments'' and inserting ``qualified research 
        expenses, basic research payments, and amounts paid or incurred 
        to energy research consortiums,''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provisions of the 
        Energy Policy Act of 2005 to which they relate.
    (f) Clerical Amendments Related to the American Jobs Creation Act 
of 2004.--
            (1) Amendment related to section 301 of the act.--Section 
        9502 is amended by striking subsection (e) and redesignating 
        subsection (f) as subsection (e).
            (2) Amendment related to section 413 of the act.--
        Subsection (b) of section 1298 is amended by striking paragraph 
        (7) and by redesignating paragraphs (8) and (9) as paragraphs 
        (7) and (8), respectively.
            (3) Amendment related to section 895 of the act.--Clause 
        (iv) of section 904(f)(3)(D) is amended by striking ``a 
        controlled group'' and inserting ``an affiliated group''.
            (4) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the provisions of the 
        American Jobs Creation Act of 2004 to which they relate.
    (g) Clerical Amendments Related to the FSC Repeal and 
Extraterritorial Income Exclusion Act of 2000.--
            (1) Subclause (I) of section 56(g)(4)(C)(ii) is amended by 
        striking ``921'' and inserting ``921 (as in effect before its 
        repeal by the FSC Repeal and Extraterritorial Income Exclusion 
        Act of 2000)''.
            (2) Clause (iv) of section 54(g)(4)(C) is amended by 
        striking ``a cooperative described in section 927(a)(4)'' and 
        inserting ``an organization to which part I of subchapter T 
        (relating to tax treatment of cooperatives) applies which is 
        engaged in the marketing of agricultural or horticultural 
        products''.
            (3) Paragraph (4) of section 245(c) is amended by adding at 
        the end the following new subparagraph:
                    ``(C) FSC.--The term `FSC' has the meaning given 
                such term by section 922.''.
            (4) Subsection (c) of section 245 is amended by inserting 
        at the end the following new paragraph:
            ``(5) References to prior law.--Any reference in this 
        subsection to section 922, 923, or 927 shall be treated as a 
        reference to such section as in effect before its repeal by the 
        FSC Repeal and Extraterritorial Income Exclusion Act of 
        2000.''.
            (5) Paragraph (4) of section 275(a) is amended by striking 
        ``if'' and all that follows and inserting ``if the taxpayer 
        chooses to take to any extent the benefits of section 901.''.
            (6)(A) Subsection (a) of section 291 is amended by striking 
        paragraph (4) and by redesignating paragraph (5) as paragraph 
        (4).
            (B) Paragraph (1) of section 291(c) is amended by striking 
        ``subsection (a)(5)'' and inserting ``subsection (a)(4)''.
            (7)(A) Paragraph (4) of section 441(b) is amended by 
        striking ``FSC or''.
            (B) Subsection (h) of section 441 is amended--
                    (i) by striking ``FSC or'' each place it appears, 
                and
                    (ii) by striking ``FSC's and'' in the heading 
                thereof.
            (8) Subparagraph (B) of section 884(d)(2) is amended by 
        inserting before the comma ``(as in effect before their repeal 
        by the FSC Repeal and Extraterritorial Income Exclusion Act of 
        2000)''.
            (9) Section 901 is amended by striking subsection (h).
            (10) Clause (v) of section 904(d)(2)(B) is amended--
                    (A) by inserting ``and'' at the end of subclause 
                (I), by striking subclause (II), and by redesignating 
                subclause (III) as subclause (II),
                    (B) by striking ``a FSC (or a former FSC)'' in 
                subclause (II) (as so redesignated) and inserting ``a 
                former FSC (as defined in section 922)'', and
                    (C) by adding at the end the following:
                        ``Any reference in subclause (II) to section 
                        922, 923, or 927 shall be treated as a 
                        reference to such section as in effect before 
                        its repeal by the FSC Repeal and 
                        Extraterritorial Income Exclusion Act of 
                        2000.''.
            (11) Subsection (b) of section 906 is amended by striking 
        paragraph (5) and redesignating paragraphs (6) and (7) as 
        paragraphs (5) and (6), respectively.
            (12) Subparagraph (B) of section 936(f)(2) is amended by 
        striking ``FSC or''.
            (13) Section 951 is amended by striking subsection (c) and 
        by redesignating subsection (d) as subsection (c).
            (14) Subsection (b) of section 952 is amended by striking 
        the second sentence.
            (15)(A) Paragraph (2) of section 956(c) is amended--
                    (i) by striking subparagraph (I) and by 
                redesignating subparagraphs (J) through (M) as 
                subparagraphs (I) through (L), respectively, and
                    (ii) by striking ``subparagraphs (J), (K), and 
                (L)'' in the flush sentence at the end and inserting 
                ``subparagraphs (I), (J), and (K)''.
            (B) Clause (ii) of section 954(c)(2)(C) is amended by 
        striking ``section 956(c)(2)(J)'' and inserting ``section 
        956(c)(2)(I)''.
            (16) Paragraph (1) of section 992(a) is amended by striking 
        subparagraph (E), by inserting ``and'' at the end of 
        subparagraph (C), and by striking ``, and'' at the end of 
        subparagraph (D) and inserting a period.
            (17) Paragraph (5) of section 1248(d) is amended--
                    (A) by inserting ``(as defined in section 922)'' 
                after ``a FSC'', and
                    (B) by adding at the end the following new 
                sentence: ``Any reference in this paragraph to section 
                922, 923, or 927 shall be treated as a reference to 
                such section as in effect before its repeal by the FSC 
                Repeal and Extraterritorial Income Exclusion Act of 
                2000.''.
            (18) Subparagraph (D) of section 1297(b)(2) is amended by 
        striking ``foreign trade income of a FSC or''.
            (19)(A) Paragraph (1) of section 6011(c) is amended by 
        striking ``or former DISC or a FSC or former FSC'' and 
        inserting ``, former DISC, or former FSC (as defined in section 
        922 as in effect before its repeal by the FSC Repeal and 
        Extraterritorial Income Exclusion Act of 2000)''.
            (B) Subsection (c) of section 6011 is amended by striking 
        ``and FSC's'' in the heading thereof.
            (20) Subsection (c) of section 6072 is amended by striking 
        ``a FSC or former FSC'' and inserting ``a former FSC (as 
        defined in section 922 as in effect before its repeal by the 
        FSC Repeal and Extraterritorial Income Exclusion Act of 
        2000)''.
            (21) Section 6686 is amended by inserting ``FORMER'' before 
        ``FSC'' in the heading thereof.

  TITLE IV--PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
                                BENEFITS

SEC. 401. PARITY IN APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
              BENEFITS.

    (a) Amendment to the Internal Revenue Code of 1986.--Section 
9812(f)(3) of the Internal Revenue Code of 1986 is amended by striking 
``2007'' and inserting ``2008''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Section 712(f) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1185a(f)) is amended by striking ``2007'' and inserting 
``2008''.
    (c) Amendment to the Public Health Service Act.--Section 2705(f) of 
the Public Health Service Act (42 U.S.C. 300gg-5(f)) is amended by 
striking ``2007'' and inserting ``2008''.
    (d) Effective Date.--The amendments made by this section shall 
apply to benefits for services furnished after December 31, 2007.

            Attest:

                                                             Secretary.
110th CONGRESS

  1st Session

                               H. R. 3997

_______________________________________________________________________

        SENATE AMENDMENT TO HOUSE AMENDMENT TO SENATE AMENDMENT