An Act
To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness
on principal residences from gross income, and for other purposes.Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled
,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Mortgage Forgiveness Debt
Relief Act of 2007’’.SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE
EXCLUDED FROM GROSS INCOME.
(a) I
Revenue Code of 1986 is amended by striking ‘‘or’’ at the end
of subparagraph (C), by striking the period at the end of subparagraph
(D) and inserting ‘‘, or’’, and by inserting after subparagraph
(D) the following new subparagraph:
‘‘(E) the indebtedness discharged is qualified principal
residence indebtedness which is discharged before January
1, 2010.’’.
(b) S
N GENERAL.—Paragraph (1) of section 108(a) of the InternalPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESIDENCE
I
adding at the end the following new subsection:
‘‘(h) S
NDEBTEDNESS.—Section 108 of such Code is amended byPECIAL RULES RELATING TO QUALIFIED PRINCIPAL RESIDENCE
I
‘‘(1) B
income by reason of subsection (a)(1)(E) shall be applied to
reduce (but not below zero) the basis of the principal residence
of the taxpayer.
‘‘(2) Q
purposes of this section, the term ‘qualified principal residence
indebtedness’ means acquisition indebtedness (within the
meaning of section 163(h)(3)(B), applied by substituting
‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’ in clause (ii)
thereof) with respect to the principal residence of the taxpayer.
‘‘(3) E
TAXPAYER
not apply to the discharge of a loan if the discharge is on
account of services performed for the lender or any other factor
not directly related to a decline in the value of the residence
or to the financial condition of the taxpayer.
‘‘(4) O
or in part, and only a portion of such loan is qualified principal
residence indebtedness, subsection (a)(1)(E) shall apply only
to so much of the amount discharged as exceeds the amount
H. R. 3648—2
of the loan (as determined immediately before such discharge)
which is not qualified principal residence indebtedness.
‘‘(5) P
the term ‘principal residence’ has the same meaning as when
used in section 121.’’.
(c) C
(1) Subparagraph (A) of section 108(a)(2) of such Code
is amended by striking ‘‘and (D)’’ and inserting ‘‘(D), and (E)’’.
(2) Paragraph (2) of section 108(a) of such Code is amended
by adding at the end the following new subparagraph:
‘‘(C) P
OVER INSOLVENCY EXCLUSION UNLESS ELECTED
OTHERWISE
to which paragraph (1)(E) applies unless the taxpayer
elects to apply paragraph (1)(B) in lieu of paragraph
(1)(E).’’.
(d) E
shall apply to discharges of indebtedness on or after January 1,
2007.
NDEBTEDNESS.—ASIS REDUCTION.—The amount excluded from grossUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.—ForXCEPTION FOR CERTAIN DISCHARGES NOT RELATED TO’S FINANCIAL CONDITION.—Subsection (a)(1)(E) shallRDERING RULE.—If any loan is discharged, in wholeRINCIPAL RESIDENCE.—For purposes of this subsection,OORDINATION.—RINCIPAL RESIDENCE EXCLUSION TAKES PRECEDENCE.—Paragraph (1)(B) shall not apply to a dischargeFFECTIVE DATE.—The amendments made by this section
SEC. 3. EXTENSION OF TREATMENT OF MORTGAGE INSURANCE PREMIUMS
AS INTEREST.
(a) I
the Internal Revenue Code of 1986 (relating to termination) is
amended by striking ‘‘December 31, 2007’’ and inserting ‘‘December
31, 2010’’.
(b) E
shall apply to amounts paid or accrued after December 31, 2007.
N GENERAL.—Subclause (I) of section 163(h)(3)(E)(iv) ofFFECTIVE DATE.—The amendment made by this section
SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE
HOUSING CORPORATION.
(a) I
Internal Revenue Code of 1986 (defining cooperative housing corporation)
is amended to read as follows:
‘‘(D) meeting 1 or more of the following requirements
for the taxable year in which the taxes and interest
described in subsection (a) are paid or incurred:
‘‘(i) 80 percent or more of the corporation’s gross
income for such taxable year is derived from tenant-
stockholders.
‘‘(ii) At all times during such taxable year, 80
percent or more of the total square footage of the
corporation’s property is used or available for use by
the tenant-stockholders for residential purposes or purposes
ancillary to such residential use.
‘‘(iii) 90 percent or more of the expenditures of
the corporation paid or incurred during such taxable
year are paid or incurred for the acquisition, construction,
management, maintenance, or care of the corporation’s
property for the benefit of the tenant-stockholders.’’.
(b) E
shall apply to taxable years ending after the date of the enactment
of this Act.
H. R. 3648—3
N GENERAL.—Subparagraph (D) of section 216(b)(1) of theFFECTIVE DATE.—The amendment made by this section
SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER
FIREFIGHTERS AND EMERGENCY MEDICAL
RESPONDERS.
(a) I
the Internal Revenue Code of 1986 (relating to items specifically
excluded from gross income) is amended by inserting after section
139A the following new section:
N GENERAL.—Part III of subchapter B of chapter 1 of
‘‘SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIREFIGHTERS AND
EMERGENCY MEDICAL RESPONDERS.
‘‘(a) I
volunteer emergency response organization, gross income shall not
include—
‘‘(1) any qualified State and local tax benefit, and
‘‘(2) any qualified payment.
‘‘(b) D
of a qualified volunteer emergency response organization—
‘‘(1) the deduction under 164 shall be determined with
regard to any qualified State and local tax benefit, and
‘‘(2) expenses paid or incurred by the taxpayer in connection
with the performance of services as such a member shall be
taken into account under section 170 only to the extent such
expenses exceed the amount of any qualified payment excluded
from gross income under subsection (a).
‘‘(c) D
‘‘(1) Q
‘qualified state and local tax benefit’ means any reduction or
rebate of a tax described in paragraph (1), (2), or (3) of section
164(a) provided by a State or political division thereof on
account of services performed as a member of a qualified volunteer
emergency response organization.
‘‘(2) Q
‘‘(A) I
any payment (whether reimbursement or otherwise) provided
by a State or political division thereof on account
of the performance of services as a member of a qualified
volunteer emergency response organization.
‘‘(B) A
determined under subparagraph (A) for any taxable year
shall not exceed $30 multiplied by the number of months
during such year that the taxpayer performs such services.
‘‘(3) Q
ORGANIZATION
response organization’ means any volunteer organization—
‘‘(A) which is organized and operated to provide firefighting
or emergency medical services for persons in the
State or political subdivision, as the case may be, and
‘‘(B) which is required (by written agreement) by the
State or political subdivision to furnish firefighting or emergency
medical services in such State or political subdivision.
‘‘(d) T
to taxable years beginning after December 31, 2010.’’.
H. R. 3648—4
(b) C
is amended by inserting after the item relating to section 139A
the following new item:
N GENERAL.—In the case of any member of a qualifiedENIAL OF DOUBLE BENEFITS.—In the case of any memberEFINITIONS.—For purposes of this section—UALIFIED STATE AND LOCAL TAX BENEFIT.—The termUALIFIED PAYMENT.—N GENERAL.—The term ‘qualified payment’ meansPPLICABLE DOLLAR LIMITATION.—The amountUALIFIED VOLUNTEER EMERGENCY RESPONSE.—The term ‘qualified volunteer emergencyERMINATION.—This section shall not apply with respectLERICAL AMENDMENT.—The table of sections for such part
‘‘Sec. 139B. Benefits provided to volunteer firefighters and emergency medical responders.’’.
(c) E
shall apply to taxable years beginning after December 31, 2007.
FFECTIVE DATE.—The amendments made by this section
SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW-
INCOME HOUSING CREDIT.
(a) I
Internal Revenue Code of 1986 (relating to certain students not
to disqualify unit) is amended to read as follows:
‘‘(I) single parents and their children and such
parents are not dependents (as defined in section
152, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof) of another individual
and such children are not dependents (as
so defined) of another individual other than a
parent of such children, or.’’.
(b) E
shall apply to—
(1) housing credit amounts allocated before, on, or after
the date of the enactment of this Act, and
(2) buildings placed in service before, on, or after such
date to the extent paragraph (1) of section 42(h) of the Internal
Revenue Code of 1986 does not apply to any building by reason
of paragraph (4) thereof.
N GENERAL.—Subclause (I) of section 42(i)(3)(D)(ii) of theFFECTIVE DATE.—The amendment made by this section
SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL
GAINS EXCLUSION TO CERTAIN POST-MARRIAGE SALES
OF PRINCIPAL RESIDENCES BY SURVIVING SPOUSES.
(a) S
of the Internal Revenue Code of 1986 (relating to limitations) is
amended by adding at the end the following new paragraph:
‘‘(4) S
SPOUSES
an unmarried individual whose spouse is deceased on the date
of such sale, paragraph (1) shall be applied by substituting
‘$500,000’ for ‘$250,000’ if such sale occurs not later than 2
years after the date of death of such spouse and the requirements
of paragraph (2)(A) were met immediately before such
date of death.’’.
(b) E
shall apply to sales or exchanges after December 31, 2007.
ALE WITHIN 2 YEARS OF SPOUSE’S DEATH.—Section 121(b)PECIAL RULE FOR CERTAIN SALES BY SURVIVING.—In the case of a sale or exchange of property byFFECTIVE DATE.—The amendment made by this section
SEC. 8. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP
RETURNS; LIMITATION ON DISCLOSURE.
(a) E
Internal Revenue Code of 1986 (relating to failure to file partnership
returns) is amended by striking ‘‘5 months’’ and inserting ‘‘12
months’’.
(b) I
6698(b) of such Code is amended by striking ‘‘$50’’ and inserting
‘‘$85’’.
H. R. 3648—5
(c) L
S C
XTENSION OF TIME LIMITATION.—Section 6698(a) of theNCREASE IN PENALTY AMOUNT.—Paragraph (1) of sectionIMITATION ON DISCLOSURE OF TAXPAYER RETURNS TO PARTNERS,ORPORATION SHAREHOLDERS, TRUST BENEFICIARIES, AND
E
(1) I
to disclosure to persons having material interest) is amended
by adding at the end the following new paragraph:
‘‘(10) L
—In the case of an inspection or disclosure under
this subsection relating to the return of a partnership, S corporation,
trust, or an estate, the information inspected or disclosed
shall not include any supporting schedule, attachment,
or list which includes the taxpayer identity information of
a person other than the entity making the return or the person
conducting the inspection or to whom the disclosure is made.’’.
(2) E
shall take effect on the date of the enactment of this
Act.
(d) E
(a) and (b) shall apply to returns required to be filed after the
date of the enactment of this Act.
STATE BENEFICIARIES.—N GENERAL.—Section 6103(e) of such Code (relatingIMITATION ON CERTAIN DISCLOSURES UNDER THIS SUBSECTION.FFECTIVE DATE.—The amendment made by this subsectionFFECTIVE DATE.—The amendments made by subsections
SEC. 9. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS.
(a) I
the Internal Revenue Code of 1986 (relating to assessable penalties)
is amended by adding at the end the following new section:
N GENERAL.—Part I of subchapter B of chapter 68 of
‘‘SEC. 6699. FAILURE TO FILE S CORPORATION RETURN.
‘‘(a) G
section 7203 (relating to willful failure to file return, supply
information, or pay tax), if any S corporation required to file a
return under section 6037 for any taxable year—
‘‘(1) fails to file such return at the time prescribed therefor
(determined with regard to any extension of time for filing),
or
‘‘(2) files a return which fails to show the information
required under section 6037,
such S corporation shall be liable for a penalty determined under
subsection (b) for each month (or fraction thereof) during which
such failure continues (but not to exceed 12 months), unless it
is shown that such failure is due to reasonable cause.
‘‘(b) A
amount determined under this subsection for any month is the
product of—
‘‘(1) $85, multiplied by
‘‘(2) the number of persons who were shareholders in the
S corporation during any part of the taxable year.
‘‘(c) A
(a) shall be assessed against the S corporation.
‘‘(d) D
of chapter 63 (relating to deficiency procedures for income, estate,
gift, and certain excise taxes) shall not apply in respect of the
assessment or collection of any penalty imposed by subsection (a).’’.
(b) C
of subchapter B of chapter 68 of such Code is amended by adding
at the end the following new item:
ENERAL RULE.—In addition to the penalty imposed byMOUNT PER MONTH.—For purposes of subsection (a), theSSESSMENT OF PENALTY.—The penalty imposed by subsectionEFICIENCY PROCEDURES NOT TO APPLY.—Subchapter BLERICAL AMENDMENT.—The table of sections for part I
‘‘Sec. 6699. Failure to file S corporation return.’’.
H. R. 3648—6
(c) E
shall apply to returns required to be filed after the date of the
enactment of this Act.
FFECTIVE DATE.—The amendments made by this section
SEC. 10. MODIFICATION OF REQUIRED INSTALLMENT OF CORPORATE
ESTIMATED TAXES WITH RESPECT TO CERTAIN DATES.
The percentage under subparagraph (B) of section 401(1) of
the Tax Increase Prevention and Reconciliation Act of 2005 in
effect on the date of the enactment of this Act is increased by
1.50 percentage points.Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
