To amend the Internal Revenue Code of 1986 to extend certain expiring provisions, and for other purposes.

SA 5635. Mr. BAUCUS (for himself, Mr. Grassley, and Mr. Reid)
proposed an amendment to amendment SA 5633 proposed by Mr. Baucus (for
himself, Mr. Grassley, and Mr. Reid) to the bill H.R. 6049, to amend
the Internal Revenue Code of 1986 to provide incentives for energy
production and conservation, to extend certain expiring provisions, to
provide individual income tax relief, and for other purposes; as
follows:

At the end, insert the following:

DIVISION B--TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.

(a) Short Title.--This division may be cited as the ``Tax
Extenders and Alternative Minimum Tax Relief Act of 2008''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this division 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 of this
division is as follows:

DIVISION B--TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I--ALTERNATIVE MINIMUM TAX RELIEF

Sec. 101. Extension of alternative minimum tax relief for nonrefundable
personal credits.
Sec. 102. Extension of increased alternative minimum tax exemption
amount.
Sec. 103. Increase of AMT refundable credit amount for individuals with
long-term unused credits for prior year minimum tax
liability, etc.

TITLE II--EXTENSION OF INDIVIDUAL TAX PROVISIONS

Sec. 201. Deduction for State and local sales taxes.
Sec. 202. Deduction of qualified tuition and related expenses.
Sec. 203. Deduction for certain expenses of elementary and secondary
school teachers.
Sec. 204. Additional standard deduction for real property taxes for
nonitemizers.
Sec. 205. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 206. Treatment of certain dividends of regulated investment
companies.
Sec. 207. Stock in RIC for purposes of determining estates of
nonresidents not citizens.
Sec. 208. Qualified investment entities.

TITLE III--EXTENSION OF BUSINESS TAX PROVISIONS

Sec. 301. Extension and modification of research credit.
Sec. 302. New markets tax credit.
Sec. 303. Subpart F exception for active financing income.
Sec. 304. Extension of look-thru rule for related controlled foreign
corporations.
Sec. 305. Extension of 15-year straight-line cost recovery for
qualified leasehold improvements and qualified restaurant
improvements; 15-year straight-line cost recovery for
certain improvements to retail space.
Sec. 306. Modification of tax treatment of certain payments to
controlling exempt organizations.
Sec. 307. Basis adjustment to stock of S corporations making charitable
contributions of property.
Sec. 308. Increase in limit on cover over of rum excise tax to Puerto
Rico and the Virgin Islands.
Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety
equipment.
Sec. 312. Deduction allowable with respect to income attributable to
domestic production activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian
reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track
facility.
Sec. 318. Expensing of environmental remediation costs.
Sec. 319. Extension of work opportunity tax credit for Hurricane
Katrina employees.
Sec. 320. Extension of increased rehabilitation credit for structures
in the Gulf Opportunity Zone.
Sec. 321. Enhanced deduction for qualified computer contributions.
Sec. 322. Tax incentives for investment in the District of Columbia.
Sec. 323. Enhanced charitable deductions for contributions of food
inventory.
Sec. 324. Extension of enhanced charitable deduction for contributions
of book inventory.
Sec. 325. Extension and modification of duty suspension on wool
products; wool research fund; wool duty refunds.

TITLE IV--EXTENSION OF TAX ADMINISTRATION PROVISIONS

Sec. 401. Permanent authority for undercover operations.
Sec. 402. Permanent authority for disclosure of information relating to
terrorist activities.

TITLE V--ADDITIONAL TAX RELIEF AND OTHER TAX PROVISIONS

Subtitle A--General Provisions

Sec. 501. $8,500 income threshold used to calculate refundable portion
of child tax credit.
Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed
for use by children.
Sec. 504. Income averaging for amounts received in connection with the
Exxon Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as
5-year property.
Sec. 506. Modification of penalty on understatement of taxpayer's
liability by tax return preparer.

Subtitle B--Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008

Sec. 511. Short title.
Sec. 512. Mental health parity.

TITLE VI--OTHER PROVISIONS

Sec. 601. Secure rural schools and community self-determination
program.
Sec. 602. Transfer to abandoned mine reclamation fund.

TITLE VII--DISASTER RELIEF

Subtitle A--Heartland and Hurricane Ike Disaster Relief

Sec. 701. Short title.
Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern
severe storms, tornados, and flooding.
Sec. 703. Reporting requirements relating to disaster relief
contributions.
Sec. 704. Temporary tax-exempt bond financing and low-income housing
tax relief for areas damaged by Hurricane Ike.

Subtitle B--National Disaster Relief

Sec. 706. Losses attributable to federally declared disasters.
Sec. 707. Expensing of Qualified Disaster Expenses.
Sec. 708. Net operating losses attributable to federally declared
disasters.

[[Page S9305]]

Sec. 709. Waiver of certain mortgage revenue bond requirements
following federally declared disasters.
Sec. 710. Special depreciation allowance for qualified disaster
property.
Sec. 711. Increased expensing for qualified disaster assistance
property.
Sec. 712. Coordination with Heartland disaster relief.

TITLE VIII--SPENDING REDUCTIONS AND APPROPRIATE REVENUE RAISERS FOR NEW
TAX RELIEF POLICY

Sec. 801. Nonqualified deferred compensation from certain tax
indifferent parties.

TITLE I--ALTERNATIVE MINIMUM TAX RELIEF

SEC. 101. EXTENSION OF ALTERNATIVE MINIMUM TAX RELIEF FOR
NONREFUNDABLE PERSONAL CREDITS.

(a) In General.--Paragraph (2) of section 26(a) (relating
to special rule for taxable years 2000 through 2007) is
amended--
(1) by striking ``or 2007'' and inserting ``2007, or
2008'', and
(2) by striking ``2007'' in the heading thereof and
inserting ``2008''.
(b)  Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 102. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX
EXEMPTION AMOUNT.

(a) In General.--Paragraph (1) of section 55(d) (relating
to exemption amount) is amended--
(1) by striking ``($66,250 in the case of taxable years
beginning in 2007)'' in subparagraph (A) and inserting
``($69,950 in the case of taxable years beginning in 2008)'',
and
(2) by striking ``($44,350 in the case of taxable years
beginning in 2007)'' in subparagraph (B) and inserting
``($46,200 in the case of taxable years beginning in 2008)''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 103. INCREASE OF AMT REFUNDABLE CREDIT AMOUNT FOR
INDIVIDUALS WITH LONG-TERM UNUSED CREDITS FOR
PRIOR YEAR MINIMUM TAX LIABILITY, ETC.

(a) In General.--Paragraph (2) of section 53(e) is amended
to read as follows:
``(2) AMT refundable credit amount.--For purposes of
paragraph (1), 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--
``(A) 50 percent of the long-term unused minimum tax credit
for such taxable year, or
``(B) the amount (if any) of the AMT refundable credit
amount determined under this paragraph for the taxpayer's
preceding taxable year (determined without regard to
subsection (f)(2)).''.
(b) Treatment of Certain Underpayments, Interest, and
Penalties Attributable to the Treatment of Incentive Stock
Options.--Section 53 is amended by adding at the end the
following new subsection:
``(f) Treatment of Certain Underpayments, Interest, and
Penalties Attributable to the Treatment of Incentive Stock
Options.--
``(1) Abatement.--Any underpayment of tax outstanding on
the date of the enactment of this subsection which is
attributable to the application of section 56(b)(3) for any
taxable year ending before January 1, 2008, and any interest
or penalty with respect to such underpayment which is
outstanding on such date of enactment, is hereby abated. The
amount determined under subsection (b)(1) shall not include
any tax abated under the preceding sentence.
``(2) Increase in credit for certain interest and penalties
already paid.--The AMT refundable credit amount, and the
minimum tax credit determined under subsection (b), for the
taxpayer's first 2 taxable years beginning after December 31,
2007, shall each be increased by 50 percent of the aggregate
amount of the interest and penalties which were paid by the
taxpayer before the date of the enactment of this subsection
and which would (but for such payment) have been abated under
paragraph (1).''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2007.
(2) Abatement.--Section 53(f)(1), as added by subsection
(b), shall take effect on the date of the enactment of this
Act.

TITLE II--EXTENSION OF INDIVIDUAL TAX PROVISIONS

SEC. 201. DEDUCTION FOR STATE AND LOCAL SALES TAXES.

(a) In General.--Subparagraph (I) of section 164(b)(5) is
amended by striking ``January 1, 2008'' and inserting
``January 1, 2010''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 202. DEDUCTION OF QUALIFIED TUITION AND RELATED
EXPENSES.

(a) In General.--Subsection (e) of section 222 (relating to
termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 203. DEDUCTION FOR CERTAIN EXPENSES OF ELEMENTARY AND
SECONDARY SCHOOL TEACHERS.

(a) In General.--Subparagraph (D) of section 62(a)(2)
(relating to certain expenses of elementary and secondary
school teachers) is amended by striking ``or 2007'' and
inserting ``2007, 2008, or 2009''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2007.

SEC. 204. ADDITIONAL STANDARD DEDUCTION FOR REAL PROPERTY
TAXES FOR NONITEMIZERS.

(a) In General.--Subparagraph (C) of section 63(c)(1), as
added by the Housing Assistance Tax Act of 2008, is amended
by inserting ``or 2009'' after ``2008''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2008.

SEC. 205. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
PLANS FOR CHARITABLE PURPOSES.

(a) In General.--Subparagraph (F) of section 408(d)(8)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions made in taxable years beginning
after December 31, 2007.

SEC. 206. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED
INVESTMENT COMPANIES.

(a) Interest-Related Dividends.--Subparagraph (C) of
section 871(k)(1) (defining interest-related dividend) is
amended by striking ``December 31, 2007'' and inserting
``December 31, 2009''.
(b) Short-Term Capital Gain Dividends.--Subparagraph (C) of
section 871(k)(2) (defining short-term capital gain dividend)
is amended by striking ``December 31, 2007'' and inserting
``December 31, 2009''.
(c) Effective Date.--The amendments made by this section
shall apply to dividends with respect to taxable years of
regulated investment companies beginning after December 31,
2007.

SEC. 207. STOCK IN RIC FOR PURPOSES OF DETERMINING ESTATES OF
NONRESIDENTS NOT CITIZENS.

(a) In General.--Paragraph (3) of section 2105(d) (relating
to stock in a RIC) is amended by striking ``December 31,
2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to decedents dying after December 31, 2007.

SEC. 208. QUALIFIED INVESTMENT ENTITIES.

(a) In General.--Clause (ii) of section 897(h)(4)(A)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on January 1, 2008.

TITLE III--EXTENSION OF BUSINESS TAX PROVISIONS

SEC. 301. EXTENSION AND MODIFICATION OF RESEARCH CREDIT.

(a) Extension.--
(1) In general.--Section 41(h) (relating to termination) is
amended by striking ``December 31, 2007'' and inserting
``December 31, 2009'' in paragraph (1)(B).
(2) Conforming amendment.--Subparagraph (D) of section
45C(b)(1) (relating to special rule) is amended by striking
``after December 31, 2007'' and inserting ``after December
31, 2009''.
(b) Termination of Alternative Incremental Credit.--Section
41(h) is amended by redesignating paragraph (2) as paragraph
(3), and by inserting after paragraph (1) the following new
paragraph:
``(2) Termination of alternative incremental credit.--No
election under subsection (c)(4) shall apply to taxable years
beginning after December 31, 2008.''.
(c) Modification of Alternative Simplified Credit.--
Paragraph (5)(A) of section 41(c) (relating to election of
alternative simplified credit) is amended by striking ``12
percent'' and inserting ``14 percent (12 percent in the case
of taxable years ending before January 1, 2009)''.
(d) Technical Correction.--Paragraph (3) of section 41(h)
is amended to read as follows:
``(2) Computation for taxable year in which credit
terminates.--In the case of any taxable year with respect to
which this section applies to a number of days which is less
than the total number of days in such taxable year--
``(A) the amount determined under subsection (c)(1)(B) with
respect to such taxable year shall be the amount which bears
the same ratio to such amount (determined without regard to
this paragraph) as the number of days in such taxable year to
which this section applies bears to the total number of days
in such taxable year, and
``(B) for purposes of subsection (c)(5), the average
qualified research expenses for the preceding 3 taxable years
shall be the amount which bears the same ratio to such
average qualified research expenses (determined without
regard to this paragraph) as the number of days in such
taxable year to which this section applies bears to the total
number of days in such taxable year.''.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2007.
(2) Extension.--The amendments made by subsection (a) shall
apply to amounts paid or incurred after December 31, 2007.

[[Page S9306]]

SEC. 302. NEW MARKETS TAX CREDIT.

Subparagraph (D) of section 45D(f)(1) (relating to national
limitation on amount of investments designated) is amended by
striking ``and 2008'' and inserting ``2008, and 2009''.

SEC. 303. SUBPART F EXCEPTION FOR ACTIVE FINANCING INCOME.

(a) Exempt Insurance Income.--Paragraph (10) of section
953(e) (relating to application) is amended--
(1) by striking ``January 1, 2009'' and inserting ``January
1, 2010'', and
(2) by striking ``December 31, 2008'' and inserting
``December 31, 2009''.
(b) Exception to Treatment as Foreign Personal Holding
Company Income.--Paragraph (9) of section 954(h) (relating to
application) is amended by striking ``January 1, 2009'' and
inserting ``January 1, 2010''.

SEC. 304. EXTENSION OF LOOK-THRU RULE FOR RELATED CONTROLLED
FOREIGN CORPORATIONS.

(a) In General.--Subparagraph (C) of section 954(c)(6)
(relating to application) is amended by striking ``January 1,
2009'' and inserting ``January 1, 2010''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2007, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.

SEC. 305. EXTENSION OF 15-YEAR STRAIGHT-LINE COST RECOVERY
FOR QUALIFIED LEASEHOLD IMPROVEMENTS AND
QUALIFIED RESTAURANT IMPROVEMENTS; 15-YEAR
STRAIGHT-LINE COST RECOVERY FOR CERTAIN
IMPROVEMENTS TO RETAIL SPACE.

(a) Extension of Leasehold and Restaurant Improvements.--
(1) In general.--Clauses (iv) and (v) of section
168(e)(3)(E) (relating to 15-year property) are each amended
by striking ``January 1, 2008'' and inserting ``January 1,
2010''.
(2) Effective date.--The amendments made by this subsection
shall apply to property placed in service after December 31,
2007.
(b) Treatment to Include New Construction.--
(1) In general.--Paragraph (7) of section 168(e) (relating
to classification of property) is amended to read as follows:
``(7) Qualified restaurant property.--
``(A) In general.--The term `qualified restaurant property'
means any section 1250 property which is--
``(i) a building, if such building is placed in service
after December 31, 2008, and before January 1, 2010, or
``(ii) an improvement to a building,
if more than 50 percent of the building's square footage is
devoted to preparation of, and seating for on-premises
consumption of, prepared meals.
``(B) Exclusion from bonus depreciation.--Property
described in this paragraph shall not be considered qualified
property for purposes of subsection (k).''.
(2) Effective date.--The amendment made by this subsection
shall apply to property placed in service after December 31,
2008.
(c) Recovery Period for Depreciation of Certain
Improvements to Retail Space.--
(1) 15-year recovery period.--Section 168(e)(3)(E)
(relating to 15-year property) is amended by striking ``and''
at the end of clause (vii), by striking the period at the end
of clause (viii) and inserting ``, and'', and by adding at
the end the following new clause:
``(ix) any qualified retail improvement property placed in
service after December 31, 2008, and before January 1,
2010.''.
(2) Qualified retail improvement property.--Section 168(e)
is amended by adding at the end the following new paragraph:
``(8) Qualified retail improvement property.--
``(A) In general.--The term `qualified retail improvement
property' means any improvement to an interior portion of a
building which is nonresidential real property if--
``(i) such portion is open to the general public and is
used in the retail trade or business of selling tangible
personal property to the general public, and
``(ii) such improvement is placed in service more than 3
years after the date the building was first placed in
service.
``(B) Improvements made by owner.--In the case of an
improvement made by the owner of such improvement, such
improvement shall be qualified retail improvement property
(if at all) only so long as such improvement is held by such
owner. Rules similar to the rules under paragraph (6)(B)
shall apply for purposes of the preceding sentence.
``(C) Certain improvements not included.--Such term shall
not include any improvement for which the expenditure is
attributable to--
``(i) the enlargement of the building,
``(ii) any elevator or escalator,
``(iii) any structural component benefitting a common area,
or
``(iv) the internal structural framework of the building.
``(D) Exclusion from bonus depreciation.--Property
described in this paragraph shall not be considered qualified
property for purposes of subsection (k).
``(E) Termination.--Such term shall not include any
improvement placed in service after December 31, 2009.''.
(3) Requirement to use straight line method.--Section
168(b)(3) is amended by adding at the end the following new
subparagraph:
``(I) Qualified retail improvement property described in
subsection (e)(8).''.
(4) Alternative system.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating
to subparagraph (E)(viii) the following new item:

``(E)(ix)......................................................    39''.

(5) Effective date.--The amendments made by this subsection
shall apply to property placed in service after December 31,
2008.

SEC. 306. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS
TO CONTROLLING EXEMPT ORGANIZATIONS.

(a) In General.--Clause (iv) of section 512(b)(13)(E)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to payments received or accrued after December
31, 2007.

SEC. 307. BASIS ADJUSTMENT TO STOCK OF S CORPORATIONS MAKING
CHARITABLE CONTRIBUTIONS OF PROPERTY.

(a) In General.--The last sentence of section 1367(a)(2)
(relating to decreases in basis) is amended by striking
``December 31, 2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions made in taxable years beginning
after December 31, 2007.

SEC. 308. INCREASE IN LIMIT ON COVER OVER OF RUM EXCISE TAX
TO PUERTO RICO AND THE VIRGIN ISLANDS.

(a) In General.--Paragraph (1) of section 7652(f) is
amended by striking ``January 1, 2008'' and inserting
``January 1, 2010''.
(b) Effective Date.--The amendment made by this section
shall apply to distilled spirits brought into the United
States after December 31, 2007.

SEC. 309. EXTENSION OF ECONOMIC DEVELOPMENT CREDIT FOR
AMERICAN SAMOA.

(a) In General.--Subsection (d) of section 119 of division
A of the Tax Relief and Health Care Act of 2006 is amended--
(1) by striking ``first two taxable years'' and inserting
``first 4 taxable years'', and
(2) by striking ``January 1, 2008'' and inserting ``January
1, 2010''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 310. EXTENSION OF MINE RESCUE TEAM TRAINING CREDIT.

Section 45N(e) (relating to termination) is amended by
striking ``December 31, 2008'' and inserting ``December 31,
2009''.

SEC. 311. EXTENSION OF ELECTION TO EXPENSE ADVANCED MINE
SAFETY EQUIPMENT.

Section 179E(g) (relating to termination) is amended by
striking ``December 31, 2008'' and inserting ``December 31,
2009''.

SEC. 312. DEDUCTION ALLOWABLE WITH RESPECT TO INCOME
ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES
IN PUERTO RICO.

(a) In General.--Subparagraph (C) of section 199(d)(8)
(relating to termination) is amended--
(1) by striking ``first 2 taxable years'' and inserting
``first 4 taxable years'', and
(2) by striking ``January 1, 2008'' and inserting ``January
1, 2010''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 313. QUALIFIED ZONE ACADEMY BONDS.

(a) In General.--Subpart I of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:

``SEC. 54E. QUALIFIED ZONE ACADEMY BONDS.

``(a) Qualified Zone Academy Bonds.--For purposes of this
subchapter, the term `qualified zone academy bond' means any
bond issued as part of an issue if--
``(1) 100 percent of the available project proceeds of such
issue are to be used for a qualified purpose with respect to
a qualified zone academy established by an eligible local
education agency,
``(2) the bond is issued by a State or local government
within the jurisdiction of which such academy is located, and
``(3) the issuer--
``(A) designates such bond for purposes of this section,
``(B) certifies that it has written assurances that the
private business contribution requirement of subsection (b)
will be met with respect to such academy, and
``(C) certifies that it has the written approval of the
eligible local education agency for such bond issuance.
``(b)  Private Business Contribution Requirement.--For
purposes of subsection (a), the private business contribution
requirement of this subsection is met with respect to any
issue if the eligible local education agency that established
the qualified zone academy has written commitments from
private entities to make qualified contributions having a
present value (as of the date of issuance of the issue) of
not less than 10 percent of the proceeds of the issue.
``(c) Limitation on Amount of Bonds Designated.--
``(1) National limitation.--There is a national zone
academy bond limitation for each calendar year. Such
limitation is $400,000,000 for 2008 and 2009, and, except as
provided in paragraph (4), zero thereafter.
``(2) Allocation of limitation.--The national zone academy
bond limitation for a

[[Page S9307]]

calendar year shall be allocated by the Secretary among the
States on the basis of their respective populations of
individuals below the poverty line (as defined by the Office
of Management and Budget). The limitation amount allocated to
a State under the preceding sentence shall be allocated by
the State education agency to qualified zone academies within
such State.
``(3) Designation subject to limitation amount.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (a)
with respect to any qualified zone academy shall not exceed
the limitation amount allocated to such academy under
paragraph (2) for such calendar year.
``(4) Carryover of unused limitation.--
``(A) In general.--If for any calendar year--
``(i) the limitation amount for any State, exceeds
``(ii) the amount of bonds issued during such year which
are designated under subsection (a) with respect to qualified
zone academies within such State,
the limitation amount for such State for the following
calendar year shall be increased by the amount of such
excess.
``(B) Limitation on carryover.--Any carryforward of a
limitation amount may be carried only to the first 2 years
following the unused limitation year. For purposes of the
preceding sentence, a limitation amount shall be treated as
used on a first-in first-out basis.
``(C) Coordination with section 1397e.--Any carryover
determined under section 1397E(e)(4) (relating to carryover
of unused limitation) with respect to any State to calendar
year 2008 or 2009 shall be treated for purposes of this
section as a carryover with respect to such State for such
calendar year under subparagraph (A), and the limitation of
subparagraph (B) shall apply to such carryover taking into
account the calendar years to which such carryover relates.
``(d) Definitions.--For purposes of this section--
``(1) Qualified zone academy.--The term `qualified zone
academy' means any public school (or academic program within
a public school) which is established by and operated under
the supervision of an eligible local education agency to
provide education or training below the postsecondary level
if--
``(A) such public school or program (as the case may be) is
designed in cooperation with business to enhance the academic
curriculum, increase graduation and employment rates, and
better prepare students for the rigors of college and the
increasingly complex workforce,
``(B) students in such public school or program (as the
case may be) will be subject to the same academic standards
and assessments as other students educated by the eligible
local education agency,
``(C) the comprehensive education plan of such public
school or program is approved by the eligible local education
agency, and
``(D)(i) such public school is located in an empowerment
zone or enterprise community (including any such zone or
community designated after the date of the enactment of this
section), or
``(ii) there is a reasonable expectation (as of the date of
issuance of the bonds) that at least 35 percent of the
students attending such school or participating in such
program (as the case may be) will be eligible for free or
reduced-cost lunches under the school lunch program
established under the National School Lunch Act.
``(2) Eligible local education agency.--For purposes of
this section, the term `eligible local education agency'
means any local educational agency as defined in section 9101
of the Elementary and Secondary Education Act of 1965.
``(3) Qualified purpose.--The term `qualified purpose'
means, with respect to any qualified zone academy--
``(A) rehabilitating or repairing the public school
facility in which the academy is established,
``(B) providing equipment for use at such academy,
``(C) developing course materials for education to be
provided at such academy, and
``(D) training teachers and other school personnel in such
academy.
``(4) Qualified contributions.--The term `qualified
contribution' means any contribution (of a type and quality
acceptable to the eligible local education agency) of--
``(A) equipment for use in the qualified zone academy
(including state-of-the-art technology and vocational
equipment),
``(B) technical assistance in developing curriculum or in
training teachers in order to promote appropriate market
driven technology in the classroom,
``(C) services of employees as volunteer mentors,
``(D) internships, field trips, or other educational
opportunities outside the academy for students, or
``(E) any other property or service specified by the
eligible local education agency.''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 54A(d), as amended by this
Act, is amended by striking ``or'' at the end of subparagraph
(B), by inserting ``or'' at the end of subparagraph (C), and
by inserting after subparagraph (C) the following new
subparagraph:
``(D) a qualified zone academy bond,''.
(2) Subparagraph (C) of section 54A(d)(2), as amended by
this Act, is amended by striking ``and'' at the end of clause
(ii), by striking the period at the end of clause (iii) and
inserting ``, and'', and by adding at the end the following
new clause:
``(iv) in the case of a qualified zone academy bond, a
purpose specified in section 54E(a)(1).''.
(3) Section 1397E is amended by adding at the end the
following new subsection:
``(m) Termination.--This section shall not apply to any
obligation issued after the date of the enactment of the Tax
Extenders and Alternative Minimum Tax Relief Act of 2008.''.
(4) The table of sections for subpart I of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:

``Sec. 54E. Qualified zone academy bonds.''.
(c) Effective Date.--The amendments made by this section
shall apply to obligations issued after the date of the
enactment of this Act.

SEC. 314. INDIAN EMPLOYMENT CREDIT.

(a) In General.--Subsection (f) of section 45A (relating to
termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 315. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON
INDIAN RESERVATIONS.

(a) In General.--Paragraph (8) of section 168(j) (relating
to termination) is amended by striking ``December 31, 2007''
and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to property placed in service after December 31,
2007.

SEC. 316. RAILROAD TRACK MAINTENANCE.

(a) In General.--Subsection (f) of section 45G (relating to
application of section) is amended by striking ``January 1,
2008'' and inserting ``January 1, 2010''.
(b) Credit Allowed Against Alternative Minimum Tax.--
Subparagraph (B) of section 38(c)(4), as amended by this Act,
is amended--
(1) by redesignating clauses (v), (vi), and (vii) as
clauses (vi), (vii), and (viii), respectively, and
(2) by inserting after clause (iv) the following new
clause:
``(v) the credit determined under section 45G,''.
(c) Effective Dates.--
(1) The amendment made by subsection (a) shall apply to
expenditures paid or incurred during taxable years beginning
after December 31, 2007.
(2) The amendments made by subsection (b) shall apply to
credits determined under section 45G of the Internal Revenue
Code of 1986 in taxable years beginning after December 31,
2007, and to carrybacks of such credits.

SEC. 317. SEVEN-YEAR COST RECOVERY PERIOD FOR MOTORSPORTS
RACING TRACK FACILITY.

(a) In General.--Subparagraph (D) of section 168(i)(15)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to property placed in service after December 31,
2007.

SEC. 318. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

(a) In General.--Subsection (h) of section 198 (relating to
termination) is amended by striking ``December 31, 2007'' and
inserting ``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to expenditures paid or incurred after December
31, 2007.

SEC. 319. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR
HURRICANE KATRINA EMPLOYEES.

(a) In General.--Paragraph (1) of section 201(b) of the
Katrina Emergency Tax Relief Act of 2005 is amended by
striking ``2-year'' and inserting ``4-year''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals hired after August 27, 2007.

SEC. 320. EXTENSION OF INCREASED REHABILITATION CREDIT FOR
STRUCTURES IN THE GULF OPPORTUNITY ZONE.

(a) In General.--Subsection (h) of section 1400N is amended
by striking ``December 31, 2008'' and inserting ``December
31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to expenditures paid or incurred after the date
of the enactment of this Act.

SEC. 321. ENHANCED DEDUCTION FOR QUALIFIED COMPUTER
CONTRIBUTIONS.

(a) In General.--Subparagraph (G) of section 170(e)(6) is
amended by striking ``December 31, 2007'' and inserting
``December 31, 2009''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions made during taxable years
beginning after December 31, 2007.

SEC. 322. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF
COLUMBIA.

(a) Designation of Zone.--
(1) In general.--Subsection (f) of section 1400 is amended
by striking ``2007'' both places it appears and inserting
``2009''.
(2) Effective date.--The amendments made by this subsection
shall apply to periods beginning after December 31, 2007.
(b) Tax-Exempt Economic Development Bonds.--
(1) In general.--Subsection (b) of section 1400A is amended
by striking ``2007'' and inserting ``2009''.
(2) Effective date.--The amendment made by this subsection
shall apply to bonds issued after December 31, 2007.

[[Page S9308]]

(c) Zero Percent Capital Gains Rate.--
(1) In general.--Subsection (b) of section 1400B is amended
by striking ``2008'' each place it appears and inserting
``2010''.
(2) Conforming amendments.--
(A) Section 1400B(e)(2) is amended--
(i) by striking ``2012'' and inserting ``2014'', and
(ii) by striking ``2012'' in the heading thereof and
inserting ``2014''.
(B) Section 1400B(g)(2) is amended by striking ``2012'' and
inserting ``2014''.
(C) Section 1400F(d) is amended by striking ``2012'' and
inserting ``2014''.
(3) Effective dates.--
(A) Extension.--The amendments made by paragraph (1) shall
apply to acquisitions after December 31, 2007.
(B) Conforming amendments.--The amendments made by
paragraph (2) shall take effect on the date of the enactment
of this Act.
(d) First-Time Homebuyer Credit.--
(1) In general.--Subsection (i) of section 1400C is amended
by striking ``2008'' and inserting ``2010''.
(2) Effective date.--The amendment made by this subsection
shall apply to property purchased after December 31, 2007.

SEC. 323. ENHANCED CHARITABLE DEDUCTIONS FOR CONTRIBUTIONS OF
FOOD INVENTORY.

(a) Increased Amount of Deduction.--
(1) In general.--Clause (iv) of section 170(e)(3)(C)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(2) Effective date.--The amendment made by this subsection
shall apply to contributions made after December 31, 2007.
(b) Temporary Suspension of Limitations on Charitable
Contributions.--
(1) In general.--Section 170(b) is amended by adding at the
end the following new paragraph:
``(3) Temporary suspension of limitations on charitable
contributions.--In the case of a qualified farmer or rancher
(as defined in paragraph (1)(E)(v)), any charitable
contribution of food--
``(A) to which subsection (e)(3)(C) applies (without regard
to clause (ii) thereof), and
``(B) which is made during the period beginning on the date
of the enactment of this paragraph and before January 1,
2009,
shall be treated for purposes of paragraph (1)(E) or (2)(B),
whichever is applicable, as if it were a qualified
conservation contribution which is made by a qualified farmer
or rancher and which otherwise meets the requirements of such
paragraph.''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.

SEC. 324. EXTENSION OF ENHANCED CHARITABLE DEDUCTION FOR
CONTRIBUTIONS OF BOOK INVENTORY.

(a) Extension.--Clause (iv) of section 170(e)(3)(D)
(relating to termination) is amended by striking ``December
31, 2007'' and inserting ``December 31, 2009''.
(b) Clerical Amendment.--Clause (iii) of section
170(e)(3)(D) (relating to certification by donee) is amended
by inserting ``of books'' after ``to any contribution''.
(c) Effective Date.--The amendments made by this section
shall apply to contributions made after December 31, 2007.

SEC. 325. EXTENSION AND MODIFICATION OF DUTY SUSPENSION ON
WOOL PRODUCTS; WOOL RESEARCH FUND; WOOL DUTY
REFUNDS.

(a) Extension of Temporary Duty Reductions.--Each of the
following headings of the Harmonized Tariff Schedule of the
United States is amended by striking the date in the
effective period column and inserting ``12/31/2014'':
(1) Heading 9902.51.11 (relating to fabrics of worsted
wool).
(2) Heading 9902.51.13 (relating to yarn of combed wool).
(3) Heading 9902.51.14 (relating to wool fiber, waste,
garnetted stock, combed wool, or wool top).
(4) Heading 9902.51.15 (relating to fabrics of combed
wool).
(5) Heading 9902.51.16 (relating to fabrics of combed
wool).
(b) Extension of Duty Refunds and Wool Research Trust
Fund.--
(1) In general.--Section 4002(c) of the Wool Suit and
Textile Trade Extension Act of 2004 (Public Law 108-429; 118
Stat. 2603) is amended--
(A) in paragraph (3)(C), by striking ``2010'' and inserting
``2015''; and
(B) in paragraph (6)(A), by striking ``through 2009'' and
inserting ``through 2014''.
(2) Sunset.--Section 506(f) of the Trade and Development
Act of 2000 (Public 106-200; 114 Stat. 303 (7 U.S.C. 7101
note)) is amended by striking ``2010'' and inserting
``2015''.

TITLE IV--EXTENSION OF TAX ADMINISTRATION PROVISIONS

SEC. 401. PERMANENT AUTHORITY FOR UNDERCOVER OPERATIONS.

(a) In General.--Section 7608(c) (relating to rules
relating to undercover operations) is amended by striking
paragraph (6).
(b) Effective Date.--The amendment made by this section
shall apply to operations conducted after the date of the
enactment of this Act.

SEC. 402. PERMANENT AUTHORITY FOR DISCLOSURE OF INFORMATION
RELATING TO TERRORIST ACTIVITIES.

(a) Disclosure of Return Information to Apprise Appropriate
Officials of Terrorist Activities.--Subparagraph (C) of
section 6103(i)(3) is amended by striking clause (iv).
(b) Disclosure Upon Request of Information Relating to
Terrorist Activities.--Paragraph (7) of section 6103(i) is
amended by striking subparagraph (E).
(c) Effective Date.--The amendments made by this section
shall apply to disclosures after the date of the enactment of
this Act.

TITLE V--ADDITIONAL TAX RELIEF AND OTHER TAX PROVISIONS

Subtitle A--General Provisions

SEC. 501. $8,500 INCOME THRESHOLD USED TO CALCULATE
REFUNDABLE PORTION OF CHILD TAX CREDIT.

(a) In General.--Section 24(d) is amended by adding at the
end the following new paragraph:
``(4) Special rule for 2008.--Notwithstanding paragraph
(3), in the case of any taxable year beginning in 2008, the
dollar amount in effect for such taxable year under paragraph
(1)(B)(i) shall be $8,500.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2007.

SEC. 502. PROVISIONS RELATED TO FILM AND TELEVISION
PRODUCTIONS.

(a) Extension of Expensing Rules for Qualified Film and
Television Productions.--Section 181(f) (relating to
termination) is amended by striking ``December 31, 2008'' and
inserting ``December 31, 2009''.
(b) Modification of Limitation on Expensing.--Subparagraph
(A) of section 181(a)(2) is amended to read as follows:
``(A) In general.--Paragraph (1) shall not apply to so much
of the aggregate cost of any qualified film or television
production as exceeds $15,000,000.''.
(c) Modifications to Deduction for Domestic Activities.--
(1) Determination of w-2 wages.--Paragraph (2) of section
199(b) is amended by adding at the end the following new
subparagraph:
``(D) Special rule for qualified film.--In the case of a
qualified film, such term shall include compensation for
services performed in the United States by actors, production
personnel, directors, and producers.''.
(2) Definition of qualified film.--Paragraph (6) of section
199(c) is amended by adding at the end the following: ``A
qualified film shall include any copyrights, trademarks, or
other intangibles with respect to such film. The methods and
means of distributing a qualified film shall not affect the
availability of the deduction under this section.''.
(3) Partnerships.--Subparagraph (A) of section 199(d)(1) is
amended by striking ``and'' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting
``, and'', and by adding at the end the following new clause:
``(iv) in the case of each partner of a partnership, or
shareholder of an S corporation, who owns (directly or
indirectly) at least 20 percent of the capital interests in
such partnership or of the stock of such S corporation--

``(I) such partner or shareholder shall be treated as
having engaged directly in any film produced by such
partnership or S corporation, and
``(II) such partnership or S corporation shall be treated
as having engaged directly in any film produced by such
partner or shareholder.''.

(d) Conforming Amendment.--Section 181(d)(3)(A) is amended
by striking ``actors'' and all that follows and inserting
``actors, production personnel, directors, and producers.''.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to qualified film and television productions commencing after
December 31, 2007.
(2) Deduction.--The amendments made by subsection (c) shall
apply to taxable years beginning after December 31, 2007.

SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS
DESIGNED FOR USE BY CHILDREN.

(a) In General.--Paragraph (2) of section 4161(b) is
amended by redesignating subparagraph (B) as subparagraph (C)
and by inserting after subparagraph (A) the following new
subparagraph:
``(B) Exemption for certain wooden arrow shafts.--
Subparagraph (A) shall not apply to any shaft consisting of
all natural wood with no laminations or artificial means of
enhancing the spine of such shaft (whether sold separately or
incorporated as part of a finished or unfinished product) of
a type used in the manufacture of any arrow which after its
assembly--
``(i) measures \5/16\ of an inch or less in diameter, and
``(ii) is not suitable for use with a bow described in
paragraph (1)(A).''.
(b) Effective Date.--The amendments made by this section
shall apply to shafts first sold after the date of enactment
of this Act.

SEC. 504. INCOME AVERAGING FOR AMOUNTS RECEIVED IN CONNECTION
WITH THE EXXON VALDEZ LITIGATION.

(a) Income Averaging of Amounts Received From the Exxon
Valdez Litigation.--For purposes of section 1301 of the
Internal Revenue Code of 1986--
(1) any qualified taxpayer who receives any qualified
settlement income in any taxable year shall be treated as
engaged in a fishing business (determined without regard to
the commercial nature of the business), and

[[Page S9309]]

(2) such qualified settlement income shall be treated as
income attributable to such a fishing business for such
taxable year.
(b) Contributions of Amounts Received to Retirement
Accounts.--
(1) In general.--Any qualified taxpayer who receives
qualified settlement income during the taxable year may, at
any time before the end of the taxable year in which such
income was received, make one or more contributions to an
eligible retirement plan of which such qualified taxpayer is
a beneficiary in an aggregate amount not to exceed the lesser
of--
(A) $100,000 (reduced by the amount of qualified settlement
income contributed to an eligible retirement plan in prior
taxable years pursuant to this subsection), or
(B) the amount of qualified settlement income received by
the individual during the taxable year.
(2) Time when contributions deemed made.--For purposes of
paragraph (1), a qualified taxpayer shall be deemed to have
made a contribution to an eligible retirement plan on the
last day of the taxable year in which such income is received
if the contribution is made on account of such taxable year
and is made not later than the time prescribed by law for
filing the return for such taxable year (not including
extensions thereof).
(3) Treatment of contributions to eligible retirement
plans.--For purposes of the Internal Revenue Code of 1986, if
a contribution is made pursuant to paragraph (1) with respect
to qualified settlement income, then--
(A) except as provided in paragraph (4)--
(i) to the extent of such contribution, the qualified
settlement income shall not be included in taxable income,
and
(ii) for purposes of section 72 of such Code, such
contribution shall not be considered to be investment in the
contract,
(B) the qualified taxpayer shall, to the extent of the
amount of the contribution, be treated--
(i) as having received the qualified settlement income--

(I) in the case of a contribution to an individual
retirement plan (as defined under section 7701(a)(37) of such
Code), in a distribution described in section 408(d)(3) of
such Code, and
(II) in the case of any other eligible retirement plan, in
an eligible rollover distribution (as defined under section
402(f)(2) of such Code), and

(ii) as having transferred the amount to the eligible
retirement plan in a direct trustee to trustee transfer
within 60 days of the distribution,
(C) section 408(d)(3)(B) of the Internal Revenue Code of
1986 shall not apply with respect to amounts treated as a
rollover under this paragraph, and
(D) section 408A(c)(3)(B) of the Internal Revenue Code of
1986 shall not apply with respect to amounts contributed to a
Roth IRA (as defined under section 408A(b) of such Code) or a
designated Roth contribution to an applicable retirement plan
(within the meaning of section 402A of such Code) under this
paragraph.
(4) Special rule for roth iras and roth 401(k)s.--For
purposes of the Internal Revenue Code of 1986, if a
contribution is made pursuant to paragraph (1) with respect
to qualified settlement income to a Roth IRA (as defined
under section 408A(b) of such Code) or as a designated Roth
contribution to an applicable retirement plan (within the
meaning of section 402A of such Code), then--
(A) the qualified settlement income shall be includible in
taxable income, and
(B) for purposes of section 72 of such Code, such
contribution shall be considered to be investment in the
contract.
(5) Eligible retirement plan.--For purpose of this
subsection, the term ``eligible retirement plan'' has the
meaning given such term under section 402(c)(8)(B) of the
Internal Revenue Code of 1986.
(c) Treatment of Qualified Settlement Income Under
Employment Taxes.--
(1) SECA.--For purposes of chapter 2 of the Internal
Revenue Code of 1986 and section 211 of the Social Security
Act, no portion of qualified settlement income received by a
qualified taxpayer shall be treated as self-employment
income.
(2) FICA.--For purposes of chapter 21 of the Internal
Revenue Code of 1986 and section 209 of the Social Security
Act, no portion of qualified settlement income received by a
qualified taxpayer shall be treated as wages.
(d) Qualified Taxpayer.--For purposes of this section, the
term ``qualified taxpayer'' means--
(1) any individual who is a plaintiff in the civil action
In re Exxon Valdez, No. 89-095-CV (HRH) (Consolidated) (D.
Alaska); or
(2) any individual who is a beneficiary of the estate of
such a plaintiff who--
(A) acquired the right to receive qualified settlement
income from that plaintiff; and
(B) was the spouse or an immediate relative of that
plaintiff.
(e) Qualified Settlement Income.--For purposes of this
section, the term ``qualified settlement income'' means any
interest and punitive damage awards which are--
(1) otherwise includible in taxable income, and
(2) received (whether as lump sums or periodic payments) in
connection with the civil action In re Exxon Valdez, No. 89-
095-CV (HRH) (Consolidated) (D. Alaska) (whether pre- or
post-judgment and whether related to a settlement or
judgment).

SEC. 505. CERTAIN FARMING BUSINESS MACHINERY AND EQUIPMENT
TREATED AS 5-YEAR PROPERTY.

(a) In General.--Section 168(e)(3)(B) (defining 5-year
property) is amended by striking ``and'' at the end of clause
(v), by striking the period at the end of clause (vi)(III)
and inserting ``, and'', and by inserting after clause (vi)
the following new clause:
``(vii) any machinery or equipment (other than any grain
bin, cotton ginning asset, fence, or other land improvement)
which is used in a farming business (as defined in section
263A(e)(4)), the original use of which commences with the
taxpayer after December 31, 2008, and which is placed in
service before January 1, 2010.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) (relating to special rule for certain property
assigned to classes) is amended by inserting after the item
relating to subparagraph (B)(iii) the following:

(B)(vii).....................................................     10''.

(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2008.

SEC. 506. MODIFICATION OF PENALTY ON UNDERSTATEMENT OF
TAXPAYER'S LIABILITY BY TAX RETURN PREPARER.

(a) In General.--Subsection (a) of section 6694 is amended
to read as follows:
``(a) Understatement Due to Unreasonable Positions.--
``(1) In general.--If a tax return preparer--
``(A) prepares any return or claim of refund with respect
to which any part of an understatement of liability is due to
a position described in paragraph (2), and
``(B) knew (or reasonably should have known) of the
position,
such tax return preparer shall pay a penalty with respect to
each such return or claim in an amount equal to the greater
of $1,000 or 50 percent of the income derived (or to be
derived) by the tax return preparer with respect to the
return or claim.
``(2) Unreasonable position.--
``(A) In general.--Except as otherwise provided in this
paragraph, a position is described in this paragraph unless
there is or was substantial authority for the position.
``(B) Disclosed positions.--If the position was disclosed
as provided in section 6662(d)(2)(B)(ii)(I) and is not a
position to which subparagraph (C) applies, the position is
described in this paragraph unless there is a reasonable
basis for the position.
``(C) Tax shelters and reportable transactions.--If the
position is with respect to a tax shelter (as defined in
section 6662(d)(2)(C)(ii)) or a reportable transaction to
which section 6662A applies, the position is described in
this paragraph unless it is reasonable to believe that the
position would more likely than not be sustained on its
merits.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection if it is shown that there is
reasonable cause for the understatement and the tax return
preparer acted in good faith.''.
(b) Effective Date.--The amendment made by this section
shall apply--
(1) in the case of a position other than a position
described in subparagraph (C) of section 6694(a)(2) of the
Internal Revenue Code of 1986 (as amended by this section),
to returns prepared after May 25, 2007, and
(2) in the case of a position described in such
subparagraph (C), to returns prepared for taxable years
ending after the date of the enactment of this Act.

Subtitle B--Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008

SEC. 511. SHORT TITLE.

This subtitle may be cited as the ``Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of
2008''.

SEC. 512. MENTAL HEALTH PARITY.

(a) Amendments to ERISA.--Section 712 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1185a) is
amended--
(1) in subsection (a), by adding at the end the following:
``(3) Financial requirements and treatment limitations.--
``(A) In general.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health or substance use disorder benefits, such plan
or coverage shall ensure that--
``(i) the financial requirements applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant financial requirements
applied to substantially all medical and surgical benefits
covered by the plan (or coverage), and there are no separate
cost sharing requirements that are applicable only with
respect to mental health or substance use disorder benefits;
and
``(ii) the treatment limitations applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant treatment limitations
applied to substantially all medical and surgical benefits
covered by the plan (or coverage) and there are no separate
treatment limitations that are applicable only with respect
to mental health or substance use disorder benefits.
``(B) Definitions.--In this paragraph:
``(i) Financial requirement.--The term `financial
requirement' includes deductibles,

[[Page S9310]]

copayments, coinsurance, and out-of-pocket expenses, but
excludes an aggregate lifetime limit and an annual limit
subject to paragraphs (1) and (2),
``(ii) Predominant.--A financial requirement or treatment
limit is considered to be predominant if it is the most
common or frequent of such type of limit or requirement.
``(iii) Treatment limitation.--The term `treatment
limitation' includes limits on the frequency of treatment,
number of visits, days of coverage, or other similar limits
on the scope or duration of treatment.
``(4) Availability of plan information.--The criteria for
medical necessity determinations made under the plan with
respect to mental health or substance use disorder benefits
(or the health insurance coverage offered in connection with
the plan with respect to such benefits) shall be made
available by the plan administrator (or the health insurance
issuer offering such coverage) in accordance with regulations
to any current or potential participant, beneficiary, or
contracting provider upon request. The reason for any denial
under the plan (or coverage) of reimbursement or payment for
services with respect to mental health or substance use
disorder benefits in the case of any participant or
beneficiary shall, on request or as otherwise required, be
made available by the plan administrator (or the health
insurance issuer offering such coverage) to the participant
or beneficiary in accordance with regulations.
``(5) Out-of-network providers.--In the case of a plan or
coverage that provides both medical and surgical benefits and
mental health or substance use disorder benefits, if the plan
or coverage provides coverage for medical or surgical
benefits provided by out-of-network providers, the plan or
coverage shall provide coverage for mental health or
substance use disorder benefits provided by out-of-network
providers in a manner that is consistent with the
requirements of this section.'';
(2) in subsection (b), by amending paragraph (2) to read as
follows:
``(2) in the case of a group health plan (or health
insurance coverage offered in connection with such a plan)
that provides mental health or substance use disorder
benefits, as affecting the terms and conditions of the plan
or coverage relating to such benefits under the plan or
coverage, except as provided in subsection (a).'';
(3) in subsection (c)--
(A) in paragraph (1)(B)--
(i) by inserting ``(or 1 in the case of an employer
residing in a State that permits small groups to include a
single individual)'' after ``at least 2'' the first place
that such appears; and
(ii) by striking ``and who employs at least 2 employees on
the first day of the plan year''; and
(B) by striking paragraph (2) and inserting the following:
``(2) Cost exemption.--
``(A) In general.--With respect to a group health plan (or
health insurance coverage offered in connection with such a
plan), if the application of this section to such plan (or
coverage) results in an increase for the plan year involved
of the actual total costs of coverage with respect to medical
and surgical benefits and mental health and substance use
disorder benefits under the plan (as determined and certified
under subparagraph (C)) by an amount that exceeds the
applicable percentage described in subparagraph (B) of the
actual total plan costs, the provisions of this section shall
not apply to such plan (or coverage) during the following
plan year, and such exemption shall apply to the plan (or
coverage) for 1 plan year. An employer may elect to continue
to apply mental health and substance use disorder parity
pursuant to this section with respect to the group health
plan (or coverage) involved regardless of any increase in
total costs.
``(B) Applicable percentage.--With respect to a plan (or
coverage), the applicable percentage described in this
subparagraph shall be--
``(i) 2 percent in the case of the first plan year in which
this section is applied; and
``(ii) 1 percent in the case of each subsequent plan year.
``(C) Determinations by actuaries.--Determinations as to
increases in actual costs under a plan (or coverage) for
purposes of this section shall be made and certified by a
qualified and licensed actuary who is a member in good
standing of the American Academy of Actuaries. All such
determinations shall be in a written report prepared by the
actuary. The report, and all underlying documentation relied
upon by the actuary, shall be maintained by the group health
plan or health insurance issuer for a period of 6 years
following the notification made under subparagraph (E).
``(D) 6-month determinations.--If a group health plan (or a
health insurance issuer offering coverage in connection with
a group health plan) seeks an exemption under this paragraph,
determinations under subparagraph (A) shall be made after
such plan (or coverage) has complied with this section for
the first 6 months of the plan year involved.
``(E) Notification.--
``(i) In general.--A group health plan (or a health
insurance issuer offering coverage in connection with a group
health plan) that, based upon a certification described under
subparagraph (C), qualifies for an exemption under this
paragraph, and elects to implement the exemption, shall
promptly notify the Secretary, the appropriate State
agencies, and participants and beneficiaries in the plan of
such election.
``(ii) Requirement.--A notification to the Secretary under
clause (i) shall include--

``(I) a description of the number of covered lives under
the plan (or coverage) involved at the time of the
notification, and as applicable, at the time of any prior
election of the cost-exemption under this paragraph by such
plan (or coverage);
``(II) for both the plan year upon which a cost exemption
is sought and the year prior, a description of the actual
total costs of coverage with respect to medical and surgical
benefits and mental health and substance use disorder
benefits under the plan; and
``(III) for both the plan year upon which a cost exemption
is sought and the year prior, the actual total costs of
coverage with respect to mental health and substance use
disorder benefits under the plan.

``(iii) Confidentiality.--A notification to the Secretary
under clause (i) shall be confidential. The Secretary shall
make available, upon request and on not more than an annual
basis, an anonymous itemization of such notifications, that
includes--

``(I) a breakdown of States by the size and type of
employers submitting such notification; and
``(II) a summary of the data received under clause (ii).

``(F) Audits by appropriate agencies.--To determine
compliance with this paragraph, the Secretary may audit the
books and records of a group health plan or health insurance
issuer relating to an exemption, including any actuarial
reports prepared pursuant to subparagraph (C), during the 6
year period following the notification of such exemption
under subparagraph (E). A State agency receiving a
notification under subparagraph (E) may also conduct such an
audit with respect to an exemption covered by such
notification.'';
(4) in subsection (e), by striking paragraph (4) and
inserting the following:
``(4) Mental health benefits.--The term `mental health
benefits' means benefits with respect to services for mental
health conditions, as defined under the terms of the plan and
in accordance with applicable Federal and State law.
``(5) Substance use disorder benefits.--The term `substance
use disorder benefits' means benefits with respect to
services for substance use disorders, as defined under the
terms of the plan and in accordance with applicable Federal
and State law.'';
(5) by striking subsection (f);
(6) by inserting after subsection (e) the following:
``(f) Secretary Report.--The Secretary shall, by January 1,
2012, and every two years thereafter, submit to the
appropriate committees of Congress a report on compliance of
group health plans (and health insurance coverage offered in
connection with such plans) with the requirements of this
section. Such report shall include the results of any surveys
or audits on compliance of group health plans (and health
insurance coverage offered in connection with such plans)
with such requirements and an analysis of the reasons for any
failures to comply.
``(g) Notice and Assistance.--The Secretary, in cooperation
with the Secretaries of Health and Human Services and
Treasury, as appropriate, shall publish and widely
disseminate guidance and information for group health plans,
participants and beneficiaries, applicable State and local
regulatory bodies, and the National Association of Insurance
Commissioners concerning the requirements of this section and
shall provide assistance concerning such requirements and the
continued operation of applicable State law. Such guidance
and information shall inform participants and beneficiaries
of how they may obtain assistance under this section,
including, where appropriate, assistance from State consumer
and insurance agencies.'';
(7) by striking ``mental health benefits'' and inserting
``mental health and substance use disorder benefits'' each
place it appears in subsections (a)(1)(B)(i), (a)(1)(C),
(a)(2)(B)(i), and (a)(2)(C); and
(8) by striking ``mental health benefits'' and inserting
``mental health or substance use disorder benefits'' each
place it appears (other than in any provision amended by the
previous paragraph).
(b) Amendments to Public Health Service Act.--Section 2705
of the Public Health Service Act (42 U.S.C. 300gg-5) is
amended--
(1) in subsection (a), by adding at the end the following:
``(3) Financial requirements and treatment limitations.--
``(A) In general.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health or substance use disorder benefits, such plan
or coverage shall ensure that--
``(i) the financial requirements applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant financial requirements
applied to substantially all medical and surgical benefits
covered by the plan (or coverage), and there are no separate
cost sharing requirements that are applicable only with
respect to mental health or substance use disorder benefits;
and
``(ii) the treatment limitations applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant treatment limitations
applied to substantially all medical and surgical benefits
covered by the plan (or coverage) and there are no separate
treatment

[[Page S9311]]

limitations that are applicable only with respect to mental
health or substance use disorder benefits.
``(B) Definitions.--In this paragraph:
``(i) Financial requirement.--The term `financial
requirement' includes deductibles, copayments, coinsurance,
and out-of-pocket expenses, but excludes an aggregate
lifetime limit and an annual limit subject to paragraphs (1)
and (2).
``(ii) Predominant.--A financial requirement or treatment
limit is considered to be predominant if it is the most
common or frequent of such type of limit or requirement.
``(iii) Treatment limitation.--The term `treatment
limitation' includes limits on the frequency of treatment,
number of visits, days of coverage, or other similar limits
on the scope or duration of treatment.
``(4) Availability of plan information.--The criteria for
medical necessity determinations made under the plan with
respect to mental health or substance use disorder benefits
(or the health insurance coverage offered in connection with
the plan with respect to such benefits) shall be made
available by the plan administrator (or the health insurance
issuer offering such coverage) in accordance with regulations
to any current or potential participant, beneficiary, or
contracting provider upon request. The reason for any denial
under the plan (or coverage) of reimbursement or payment for
services with respect to mental health or substance use
disorder benefits in the case of any participant or
beneficiary shall, on request or as otherwise required, be
made available by the plan administrator (or the health
insurance issuer offering such coverage) to the participant
or beneficiary in accordance with regulations.
``(5) Out-of-network providers.--In the case of a plan or
coverage that provides both medical and surgical benefits and
mental health or substance use disorder benefits, if the plan
or coverage provides coverage for medical or surgical
benefits provided by out-of-network providers, the plan or
coverage shall provide coverage for mental health or
substance use disorder benefits provided by out-of-network
providers in a manner that is consistent with the
requirements of this section.'';
(2) in subsection (b), by amending paragraph (2) to read as
follows:
``(2) in the case of a group health plan (or health
insurance coverage offered in connection with such a plan)
that provides mental health or substance use disorder
benefits, as affecting the terms and conditions of the plan
or coverage relating to such benefits under the plan or
coverage, except as provided in subsection (a).'';
(3) in subsection (c)--
(A) in paragraph (1), by inserting before the period the
following: ``(as defined in section 2791(e)(4), except that
for purposes of this paragraph such term shall include
employers with 1 employee in the case of an employer residing
in a State that permits small groups to include a single
individual)''; and
(B) by striking paragraph (2) and inserting the following:
``(2) Cost exemption.--
``(A) In general.--With respect to a group health plan (or
health insurance coverage offered in connection with such a
plan), if the application of this section to such plan (or
coverage) results in an increase for the plan year involved
of the actual total costs of coverage with respect to medical
and surgical benefits and mental health and substance use
disorder benefits under the plan (as determined and certified
under subparagraph (C)) by an amount that exceeds the
applicable percentage described in subparagraph (B) of the
actual total plan costs, the provisions of this section shall
not apply to such plan (or coverage) during the following
plan year, and such exemption shall apply to the plan (or
coverage) for 1 plan year. An employer may elect to continue
to apply mental health and substance use disorder parity
pursuant to this section with respect to the group health
plan (or coverage) involved regardless of any increase in
total costs.
``(B) Applicable percentage.--With respect to a plan (or
coverage), the applicable percentage described in this
subparagraph shall be--
``(i) 2 percent in the case of the first plan year in which
this section is applied; and
``(ii) 1 percent in the case of each subsequent plan year.
``(C) Determinations by actuaries.--Determinations as to
increases in actual costs under a plan (or coverage) for
purposes of this section shall be made and certified by a
qualified and licensed actuary who is a member in good
standing of the American Academy of Actuaries. All such
determinations shall be in a written report prepared by the
actuary. The report, and all underlying documentation relied
upon by the actuary, shall be maintained by the group health
plan or health insurance issuer for a period of 6 years
following the notification made under subparagraph (E).
``(D) 6-month determinations.--If a group health plan (or a
health insurance issuer offering coverage in connection with
a group health plan) seeks an exemption under this paragraph,
determinations under subparagraph (A) shall be made after
such plan (or coverage) has complied with this section for
the first 6 months of the plan year involved.
``(E) Notification.--
``(i) In general.--A group health plan (or a health
insurance issuer offering coverage in connection with a group
health plan) that, based upon a certification described under
subparagraph (C), qualifies for an exemption under this
paragraph, and elects to implement the exemption, shall
promptly notify the Secretary, the appropriate State
agencies, and participants and beneficiaries in the plan of
such election.
``(ii) Requirement.--A notification to the Secretary under
clause (i) shall include--

``(I) a description of the number of covered lives under
the plan (or coverage) involved at the time of the
notification, and as applicable, at the time of any prior
election of the cost-exemption under this paragraph by such
plan (or coverage);
``(II) for both the plan year upon which a cost exemption
is sought and the year prior, a description of the actual
total costs of coverage with respect to medical and surgical
benefits and mental health and substance use disorder
benefits under the plan; and
``(III) for both the plan year upon which a cost exemption
is sought and the year prior, the actual total costs of
coverage with respect to mental health and substance use
disorder benefits under the plan.

``(iii) Confidentiality.--A notification to the Secretary
under clause (i) shall be confidential. The Secretary shall
make available, upon request and on not more than an annual
basis, an anonymous itemization of such notifications, that
includes--

``(I) a breakdown of States by the size and type of
employers submitting such notification; and
``(II) a summary of the data received under clause (ii).

``(F) Audits by appropriate agencies.--To determine
compliance with this paragraph, the Secretary may audit the
books and records of a group health plan or health insurance
issuer relating to an exemption, including any actuarial
reports prepared pursuant to subparagraph (C), during the 6
year period following the notification of such exemption
under subparagraph (E). A State agency receiving a
notification under subparagraph (E) may also conduct such an
audit with respect to an exemption covered by such
notification.'';
(4) in subsection (e), by striking paragraph (4) and
inserting the following:
``(4) Mental health benefits.--The term `mental health
benefits' means benefits with respect to services for mental
health conditions, as defined under the terms of the plan and
in accordance with applicable Federal and State law.
``(5) Substance use disorder benefits.--The term `substance
use disorder benefits' means benefits with respect to
services for substance use disorders, as defined under the
terms of the plan and in accordance with applicable Federal
and State law.'';
(5) by striking subsection (f);
(6) by striking ``mental health benefits'' and inserting
``mental health and substance use disorder benefits'' each
place it appears in subsections (a)(1)(B)(i), (a)(1)(C),
(a)(2)(B)(i), and (a)(2)(C); and
(7) by striking ``mental health benefits'' and inserting
``mental health or substance use disorder benefits'' each
place it appears (other than in any provision amended by the
previous paragraph).
(c) Amendments to Internal Revenue Code.--Section 9812 of
the Internal Revenue Code of 1986 is amended--
(1) in subsection (a), by adding at the end the following:
``(3) Financial requirements and treatment limitations.--
``(A) In general.--In the case of a group health plan that
provides both medical and surgical benefits and mental health
or substance use disorder benefits, such plan shall ensure
that--
``(i) the financial requirements applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant financial requirements
applied to substantially all medical and surgical benefits
covered by the plan, and there are no separate cost sharing
requirements that are applicable only with respect to mental
health or substance use disorder benefits; and
``(ii) the treatment limitations applicable to such mental
health or substance use disorder benefits are no more
restrictive than the predominant treatment limitations
applied to substantially all medical and surgical benefits
covered by the plan and there are no separate treatment
limitations that are applicable only with respect to mental
health or substance use disorder benefits.
``(B) Definitions.--In this paragraph:
``(i) Financial requirement.--The term `financial
requirement' includes deductibles, copayments, coinsurance,
and out-of-pocket expenses, but excludes an aggregate
lifetime limit and an annual limit subject to paragraphs (1)
and (2),
``(ii) Predominant.--A financial requirement or treatment
limit is considered to be predominant if it is the most
common or frequent of such type of limit or requirement.
``(iii) Treatment limitation.--The term `treatment
limitation' includes limits on the frequency of treatment,
number of visits, days of coverage, or other similar limits
on the scope or duration of treatment.
``(4) Availability of plan information.--The criteria for
medical necessity determinations made under the plan with
respect to mental health or substance use disorder benefits
shall be made available by the plan administrator in
accordance with regulations to any current or potential
participant, beneficiary, or contracting provider upon
request. The reason for any denial under the plan of
reimbursement or payment for services with respect to mental
health or substance use disorder benefits in the case of

[[Page S9312]]

any participant or beneficiary shall, on request or as
otherwise required, be made available by the plan
administrator to the participant or beneficiary in accordance
with regulations.
``(5) Out-of-network providers.--In the case of a plan that
provides both medical and surgical benefits and mental health
or substance use disorder benefits, if the plan provides
coverage for medical or surgical benefits provided by out-of-
network providers, the plan shall provide coverage for mental
health or substance use disorder benefits provided by out-of-
network providers in a manner that is consistent with the
requirements of this section.'';
(2) in subsection (b), by amending paragraph (2) to read as
follows:
``(2) in the case of a group health plan that provides
mental health or substance use disorder benefits, as
affecting the terms and conditions of the plan relating to
such benefits under the plan, except as provided in
subsection (a).'';
(3) in subsection (c)--
(A) by amending paragraph (1) to read as follows:
``(1) Small employer exemption.--
``(A) In general.--This section shall not apply to any
group health plan for any plan year of a small employer.
``(B) Small employer.--For purposes of subparagraph (A),
the term `small employer' means, with respect to a calendar
year and a plan year, an employer who employed an average of
at least 2 (or 1 in the case of an employer residing in a
State that permits small groups to include a single
individual) but not more than 50 employees on business days
during the preceding calendar year. For purposes of the
preceding sentence, all persons treated as a single employer
under subsection (b), (c), (m), or (o) of section 414 shall
be treated as 1 employer and rules similar to rules of
subparagraphs (B) and (C) of section 4980D(d)(2) shall
apply.''; and
(B) by striking paragraph (2) and inserting the following:
``(2) Cost exemption.--
``(A) In general.--With respect to a group health plan, if
the application of this section to such plan results in an
increase for the plan year involved of the actual total costs
of coverage with respect to medical and surgical benefits and
mental health and substance use disorder benefits under the
plan (as determined and certified under subparagraph (C)) by
an amount that exceeds the applicable percentage described in
subparagraph (B) of the actual total plan costs, the
provisions of this section shall not apply to such plan
during the following plan year, and such exemption shall
apply to the plan for 1 plan year. An employer may elect to
continue to apply mental health and substance use disorder
parity pursuant to this section with respect to the group
health plan involved regardless of any increase in total
costs.
``(B) Applicable percentage.--With respect to a plan, the
applicable percentage described in this subparagraph shall
be--
``(i) 2 percent in the case of the first plan year in which
this section is applied; and
``(ii) 1 percent in the case of each subsequent plan year.
``(C) Determinations by actuaries.--Determinations as to
increases in actual costs under a plan for purposes of this
section shall be made and certified by a qualified and
licensed actuary who is a member in good standing of the
American Academy of Actuaries. All such determinations shall
be in a written report prepared by the actuary. The report,
and all underlying documentation relied upon by the actuary,
shall be maintained by the group health plan for a period of
6 years following the notification made under subparagraph
(E).
``(D) 6-month determinations.--If a group health plan seeks
an exemption under this paragraph, determinations under
subparagraph (A) shall be made after such plan has complied
with this section for the first 6 months of the plan year
involved.
``(E) Notification.--
``(i) In general.--A group health plan that, based upon a
certification described under subparagraph (C), qualifies for
an exemption under this paragraph, and elects to implement
the exemption, shall promptly notify the Secretary, the
appropriate State agencies, and participants and
beneficiaries in the plan of such election.
``(ii) Requirement.--A notification to the Secretary under
clause (i) shall include--

``(I) a description of the number of covered lives under
the plan involved at the time of the notification, and as
applicable, at the time of any prior election of the cost-
exemption under this paragraph by such plan;
``(II) for both the plan year upon which a cost exemption
is sought and the year prior, a description of the actual
total costs of coverage with respect to medical and surgical
benefits and mental health and substance use disorder
benefits under the plan; and
``(III) for both the plan year upon which a cost exemption
is sought and the year prior, the actual total costs of
coverage with respect to mental health and substance use
disorder benefits under the plan.

``(iii) Confidentiality.--A notification to the Secretary
under clause (i) shall be confidential. The Secretary shall
make available, upon request and on not more than an annual
basis, an anonymous itemization of such notifications, that
includes--

``(I) a breakdown of States by the size and type of
employers submitting such notification; and
``(II) a summary of the data received under clause (ii).

``(F) Audits by appropriate agencies.--To determine
compliance with this paragraph, the Secretary may audit the
books and records of a group health plan relating to an
exemption, including any actuarial reports prepared pursuant
to subparagraph (C), during the 6 year period following the
notification of such exemption under subparagraph (E). A
State agency receiving a notification under subparagraph (E)
may also conduct such an audit with respect to an exemption
covered by such notification.'';
(4) in subsection (e), by striking paragraph (4) and
inserting the following:
``(4) Mental health benefits.--The term `mental health
benefits' means benefits with respect to services for mental
health conditions, as defined under the terms of the plan and
in accordance with applicable Federal and State law.
``(5) Substance use disorder benefits.--The term `substance
use disorder benefits' means benefits with respect to
services for substance use disorders, as defined under the
terms of the plan and in accordance with applicable Federal
and State law.'';
(5) by striking subsection (f);
(6) by striking ``mental health benefits'' and inserting
``mental health and substance use disorder benefits'' each
place it appears in subsections (a)(1)(B)(i), (a)(1)(C),
(a)(2)(B)(i), and (a)(2)(C); and
(7) by striking ``mental health benefits'' and inserting
``mental health or substance use disorder benefits'' each
place it appears (other than in any provision amended by the
previous paragraph).
(d) Regulations.--Not later than 1 year after the date of
enactment of this Act, the Secretaries of Labor, Health and
Human Services, and the Treasury shall issue regulations to
carry out the amendments made by subsections (a), (b), and
(c), respectively.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to group health plans for plan years
beginning after the date that is 1 year after the date of
enactment of this Act, regardless of whether regulations have
been issued to carry out such amendments by such effective
date, except that the amendments made by subsections (a)(5),
(b)(5), and (c)(5), relating to striking of certain sunset
provisions, shall take effect on January 1, 2009.
(2) Special rule for collective bargaining agreements.--In
the case of a group health plan maintained pursuant to one or
more collective bargaining agreements between employee
representatives and one or more employers ratified before the
date of the enactment of this Act, the amendments made by
this section shall not apply to plan years beginning before
the later of--
(A) the date on which the last of the collective bargaining
agreements relating to the plan terminates (determined
without regard to any extension thereof agreed to after the
date of the enactment of this Act), or
(B) January 1, 2009.
For purposes of subparagraph (A), any plan amendment made
pursuant to a collective bargaining agreement relating to the
plan which amends the plan solely to conform to any
requirement added by this section shall not be treated as a
termination of such collective bargaining agreement.
(f) Assuring Coordination.--The Secretary of Health and
Human Services, the Secretary of Labor, and the Secretary of
the Treasury may ensure, through the execution or revision of
an interagency memorandum of understanding among such
Secretaries, that--
(1) regulations, rulings, and interpretations issued by
such Secretaries relating to the same matter over which two
or more such Secretaries have responsibility under this
section (and the amendments made by this section) are
administered so as to have the same effect at all times; and
(2) coordination of policies relating to enforcing the same
requirements through such Secretaries in order to have a
coordinated enforcement strategy that avoids duplication of
enforcement efforts and assigns priorities in enforcement.
(g) Conforming Clerical Amendments.--
(1) ERISA heading.--
(A) In general.--The heading of section 712 of the Employee
Retirement Income Security Act of 1974 is amended to read as
follows:

``SEC. 712. PARITY IN MENTAL HEALTH AND SUBSTANCE USE
DISORDER BENEFITS.''.

(B) Clerical amendment.--The table of contents in section 1
of such Act is amended by striking the item relating to
section 712 and inserting the following new item:

``Sec. 712. Parity in mental health and substance use disorder
benefits.''.
(2) PHSA heading.--The heading of section 2705 of the
Public Health Service Act is amended to read as follows:

``SEC. 2705. PARITY IN MENTAL HEALTH AND SUBSTANCE USE
DISORDER BENEFITS.''.

(3) IRC heading.--
(A) In general.--The heading of section 9812 of the
Internal Revenue Code of 1986 is amended to read as follows:

``SEC. 9812. PARITY IN MENTAL HEALTH AND SUBSTANCE USE
DISORDER BENEFITS.''.

(B) Clerical amendment.--The table of sections for
subchapter B of chapter 100 of such Code is amended by
striking the item relating to section 9812 and inserting the
following new item:

``Sec. 9812. Parity in mental health and substance use disorder
benefits.''.

[[Page S9313]]

(h) GAO Study on Coverage and Exclusion of Mental Health
and Substance Use Disorder Diagnoses.--
(1) In general.--The Comptroller General of the United
States shall conduct a study that analyzes the specific
rates, patterns, and trends in coverage and exclusion of
specific mental health and substance use disorder diagnoses
by health plans and health insurance. The study shall include
an analysis of--
(A) specific coverage rates for all mental health
conditions and substance use disorders;
(B) which diagnoses are most commonly covered or excluded;
(C) whether implementation of this Act has affected trends
in coverage or exclusion of such diagnoses; and
(D) the impact of covering or excluding specific diagnoses
on participants' and enrollees' health, their health care
coverage, and the costs of delivering health care.
(2) Reports.--Not later than 3 years after the date of the
enactment of this Act, and 2 years after the date of
submission the first report under this paragraph, the
Comptroller General shall submit to Congress a report on the
results of the study conducted under paragraph (1).

TITLE VI--OTHER PROVISIONS

SEC. 601. SECURE RURAL SCHOOLS AND COMMUNITY SELF-
DETERMINATION PROGRAM.

(a) Reauthorization of the Secure Rural Schools and
Community Self-Determination Act of 2000.--The Secure Rural
Schools and Community Self-Determination Act of 2000 (16
U.S.C. 500 note; Public Law 106-393) is amended by striking
sections 1 through 403 and inserting the following:

``SECTION 1. SHORT TITLE.

``This Act may be cited as the `Secure Rural Schools and
Community Self-Determination Act of 2000'.

``SEC. 2. PURPOSES.

``The purposes of this Act are--
``(1) to stabilize and transition payments to counties to
provide funding for schools and roads that supplements other
available funds;
``(2) to make additional investments in, and create
additional employment opportunities through, projects that--
``(A)(i) improve the maintenance of existing
infrastructure;
``(ii) implement stewardship objectives that enhance forest
ecosystems; and
``(iii) restore and improve land health and water quality;
``(B) enjoy broad-based support; and
``(C) have objectives that may include--
``(i) road, trail, and infrastructure maintenance or
obliteration;
``(ii) soil productivity improvement;
``(iii) improvements in forest ecosystem health;
``(iv) watershed restoration and maintenance;
``(v) the restoration, maintenance, and improvement of
wildlife and fish habitat;
``(vi) the control of noxious and exotic weeds; and
``(vii) the reestablishment of native species; and
``(3) to improve cooperative relationships among--
``(A) the people that use and care for Federal land; and
``(B) the agencies that manage the Federal land.

``SEC. 3. DEFINITIONS.

``In this Act:
``(1) Adjusted share.--The term `adjusted share' means the
number equal to the quotient obtained by dividing--
``(A) the number equal to the quotient obtained by
dividing--
``(i) the base share for the eligible county; by
``(ii) the income adjustment for the eligible county; by
``(B) the number equal to the sum of the quotients obtained
under subparagraph (A) and paragraph (8)(A) for all eligible
counties.
``(2) Base share.--The term `base share' means the number
equal to the average of--
``(A) the quotient obtained by dividing--
``(i) the number of acres of Federal land described in
paragraph (7)(A) in each eligible county; by
``(ii) the total number acres of Federal land in all
eligible counties in all eligible States; and
``(B) the quotient obtained by dividing--
``(i) the amount equal to the average of the 3 highest 25-
percent payments and safety net payments made to each
eligible State for each eligible county during the
eligibility period; by
``(ii) the amount equal to the sum of the amounts
calculated under clause (i) and paragraph (9)(B)(i) for all
eligible counties in all eligible States during the
eligibility period.
``(3) County payment.--The term `county payment' means the
payment for an eligible county calculated under section
101(b).
``(4) Eligible county.--The term `eligible county' means
any county that--
``(A) contains Federal land (as defined in paragraph (7));
and
``(B) elects to receive a share of the State payment or the
county payment under section 102(b).
``(5) Eligibility period.--The term `eligibility period'
means fiscal year 1986 through fiscal year 1999.
``(6) Eligible state.--The term `eligible State' means a
State or territory of the United States that received a 25-
percent payment for 1 or more fiscal years of the eligibility
period.
``(7) Federal land.--The term `Federal land' means--
``(A) land within the National Forest System, as defined in
section 11(a) of the Forest and Rangeland Renewable Resources
Planning Act of 1974 (16 U.S.C. 1609(a)) exclusive of the
National Grasslands and land utilization projects designated
as National Grasslands administered pursuant to the Act of
July 22, 1937 (7 U.S.C. 1010-1012); and
``(B) such portions of the revested Oregon and California
Railroad and reconveyed Coos Bay Wagon Road grant land as are
or may hereafter come under the jurisdiction of the
Department of the Interior, which have heretofore or may
hereafter be classified as timberlands, and power-site land
valuable for timber, that shall be managed, except as
provided in the former section 3 of the Act of August 28,
1937 (50 Stat. 875; 43 U.S.C. 1181c), for permanent forest
production.
``(8) 50-Percent adjusted share.--The term `50-percent
adjusted share' means the number equal to the quotient
obtained by dividing--
``(A) the number equal to the quotient obtained by
dividing--
``(i) the 50-percent base share for the eligible county; by
``(ii) the income adjustment for the eligible county; by
``(B) the number equal to the sum of the quotients obtained
under subparagraph (A) and paragraph (1)(A) for all eligible
counties.
``(9) 50-Percent base share.--The term `50-percent base
share' means the number equal to the average of--
``(A) the quotient obtained by dividing--
``(i) the number of acres of Federal land described in
paragraph (7)(B) in each eligible county; by
``(ii) the total number acres of Federal land in all
eligible counties in all eligible States; and
``(B) the quotient obtained by dividing--
``(i) the amount equal to the average of the 3 highest 50-
percent payments made to each eligible county during the
eligibility period; by
``(ii) the amount equal to the sum of the amounts
calculated under clause (i) and paragraph (2)(B)(i) for all
eligible counties in all eligible States during the
eligibility period.
``(10) 50-percent payment.--The term `50-percent payment'
means the payment that is the sum of the 50-percent share
otherwise paid to a county pursuant to title II of the Act of
August 28, 1937 (chapter 876; 50 Stat. 875; 43 U.S.C. 1181f),
and the payment made to a county pursuant to the Act of May
24, 1939 (chapter 144; 53 Stat. 753; 43 U.S.C. 1181f-1 et
seq.).
``(11) Full funding amount.--The term `full funding amount'
means--
``(A) $500,000,000 for fiscal year 2008; and
``(B) for fiscal year 2009 and each fiscal year thereafter,
the amount that is equal to 90 percent of the full funding
amount for the preceding fiscal year.
``(12) Income adjustment.--The term `income adjustment'
means the square of the quotient obtained by dividing--
``(A) the per capita personal income for each eligible
county; by
``(B) the median per capita personal income of all eligible
counties.
``(13) Per capita personal income.--The term `per capita
personal income' means the most recent per capita personal
income data, as determined by the Bureau of Economic
Analysis.
``(14) Safety net payments.--The term `safety net payments'
means the special payment amounts paid to States and counties
required by section 13982 or 13983 of the Omnibus Budget
Reconciliation Act of 1993 (Public Law 103-66; 16 U.S.C. 500
note; 43 U.S.C. 1181f note).
``(15) Secretary concerned.--The term `Secretary concerned'
means--
``(A) the Secretary of Agriculture or the designee of the
Secretary of Agriculture with respect to the Federal land
described in paragraph (7)(A); and
``(B) the Secretary of the Interior or the designee of the
Secretary of the Interior with respect to the Federal land
described in paragraph (7)(B).
``(16) State payment.--The term `State payment' means the
payment for an eligible State calculated under section
101(a).
``(17) 25-Percent payment.--The term `25-percent payment'
means the payment to States required by the sixth paragraph
under the heading of `FOREST SERVICE' in the Act of May 23,
1908 (35 Stat. 260; 16 U.S.C. 500), and section 13 of the Act
of March 1, 1911 (36 Stat. 963; 16 U.S.C. 500).

``TITLE I--SECURE PAYMENTS FOR STATES AND COUNTIES CONTAINING FEDERAL
LAND

``SEC. 101. SECURE PAYMENTS FOR STATES CONTAINING FEDERAL
LAND.

``(a) State Payment.--For each of fiscal years 2008 through
2011, the Secretary of Agriculture shall calculate for each
eligible State an amount equal to the sum of the products
obtained by multiplying--
``(1) the adjusted share for each eligible county within
the eligible State; by
``(2) the full funding amount for the fiscal year.
``(b) County Payment.--For each of fiscal years 2008
through 2011, the Secretary of the Interior shall calculate
for each eligible county that received a 50-percent payment
during the eligibility period an amount

[[Page S9314]]

equal to the product obtained by multiplying--
``(1) the 50-percent adjusted share for the eligible
county; by
``(2) the full funding amount for the fiscal year.

``SEC. 102. PAYMENTS TO STATES AND COUNTIES.

``(a) Payment Amounts.--Except as provided in section 103,
the Secretary of the Treasury shall pay to--
``(1) a State or territory of the United States an amount
equal to the sum of the amounts elected under subsection (b)
by each county within the State or territory for--
``(A) if the county is eligible for the 25-percent payment,
the share of the 25-percent payment; or
``(B) the share of the State payment of the eligible
county; and
``(2) a county an amount equal to the amount elected under
subsection (b) by each county for--
``(A) if the county is eligible for the 50-percent payment,
the 50-percent payment; or
``(B) the county payment for the eligible county.
``(b) Election To Receive Payment Amount.--
``(1) Election; submission of results.--
``(A) In general.--The election to receive a share of the
State payment, the county payment, a share of the State
payment and the county payment, a share of the 25-percent
payment, the 50-percent payment, or a share of the 25-percent
payment and the 50-percent payment, as applicable, shall be
made at the discretion of each affected county by August 1,
2008 (or as soon thereafter as the Secretary concerned
determines is practicable), and August 1 of each second
fiscal year thereafter, in accordance with paragraph (2), and
transmitted to the Secretary concerned by the Governor of
each eligible State.
``(B) Failure to transmit.--If an election for an affected
county is not transmitted to the Secretary concerned by the
date specified under subparagraph (A), the affected county
shall be considered to have elected to receive a share of the
State payment, the county payment, or a share of the State
payment and the county payment, as applicable.
``(2) Duration of election.--
``(A) In general.--A county election to receive a share of
the 25-percent payment or 50-percent payment, as applicable,
shall be effective for 2 fiscal years.
``(B) Full funding amount.--If a county elects to receive a
share of the State payment or the county payment, the
election shall be effective for all subsequent fiscal years
through fiscal year 2011.
``(3) Source of payment amounts.--The payment to an
eligible State or eligible county under this section for a
fiscal year shall be derived from--
``(A) any amounts that are appropriated to carry out this
Act;
``(B) any revenues, fees, penalties, or miscellaneous
receipts, exclusive of deposits to any relevant trust fund,
special account, or permanent operating funds, received by
the Federal Government from activities by the Bureau of Land
Management or the Forest Service on the applicable Federal
land; and
``(C) to the extent of any shortfall, out of any amounts in
the Treasury of the United States not otherwise appropriated.
``(c) Distribution and Expenditure of Payments.--
``(1) Distribution method.--A State that receives a payment
under subsection (a) for Federal land described in section
3(7)(A) shall distribute the appropriate payment amount among
the appropriate counties in the State in accordance with--
``(A) the Act of May 23, 1908 (16 U.S.C. 500); and
``(B) section 13 of the Act of March 1, 1911 (36 Stat. 963;
16 U.S.C. 500).
``(2) Expenditure purposes.--Subject to subsection (d),
payments received by a State under subsection (a) and
distributed to counties in accordance with paragraph (1)
shall be expended as required by the laws referred to in
paragraph (1).
``(d) Expenditure Rules for Eligible Counties.--
``(1) Allocations.--
``(A) Use of portion in same manner as 25-percent payment
or 50-percent payment, as applicable.--Except as provided in
paragraph (3)(B), if an eligible county elects to receive its
share of the State payment or the county payment, not less
than 80 percent, but not more than 85 percent, of the funds
shall be expended in the same manner in which the 25-percent
payments or 50-percent payment, as applicable, are required
to be expended.
``(B) Election as to use of balance.--Except as provided in
subparagraph (C), an eligible county shall elect to do 1 or
more of the following with the balance of any funds not
expended pursuant to subparagraph (A):
``(i) Reserve any portion of the balance for projects in
accordance with title II.
``(ii) Reserve not more than 7 percent of the total share
for the eligible county of the State payment or the county
payment for projects in accordance with title III.
``(iii) Return the portion of the balance not reserved
under clauses (i) and (ii) to the Treasury of the United
States.
``(C) Counties with modest distributions.--In the case of
each eligible county to which more than $100,000, but less
than $350,000, is distributed for any fiscal year pursuant to
either or both of paragraphs (1)(B) and (2)(B) of subsection
(a), the eligible county, with respect to the balance of any
funds not expended pursuant to subparagraph (A) for that
fiscal year, shall--
``(i) reserve any portion of the balance for--

``(I) carrying out projects under title II;
``(II) carrying out projects under title III; or
``(III) a combination of the purposes described in
subclauses (I) and (II); or

``(ii) return the portion of the balance not reserved under
clause (i) to the Treasury of the United States.
``(2) Distribution of funds.--
``(A) In general.--Funds reserved by an eligible county
under subparagraph (B)(i) or (C)(i) of paragraph (1) for
carrying out projects under title II shall be deposited in a
special account in the Treasury of the United States.
``(B) Availability.--Amounts deposited under subparagraph
(A) shall--
``(i) be available for expenditure by the Secretary
concerned, without further appropriation; and
``(ii) remain available until expended in accordance with
title II.
``(3) Election.--
``(A) Notification.--
``(i) In general.--An eligible county shall notify the
Secretary concerned of an election by the eligible county
under this subsection not later than September 30, 2008 (or
as soon thereafter as the Secretary concerned determines is
practicable), and each September 30 thereafter for each
succeeding fiscal year.
``(ii) Failure to elect.--Except as provided in
subparagraph (B), if the eligible county fails to make an
election by the date specified in clause (i), the eligible
county shall--

``(I) be considered to have elected to expend 85 percent of
the funds in accordance with paragraph (1)(A); and
``(II) return the balance to the Treasury of the United
States.

``(B) Counties with minor distributions.--In the case of
each eligible county to which less than $100,000 is
distributed for any fiscal year pursuant to either or both of
paragraphs (1)(B) and (2)(B) of subsection (a), the eligible
county may elect to expend all the funds in the same manner
in which the 25-percent payments or 50-percent payments, as
applicable, are required to be expended.
``(e) Time for Payment.--The payments required under this
section for a fiscal year shall be made as soon as
practicable after the end of that fiscal year.

``SEC. 103. TRANSITION PAYMENTS TO STATES.

``(a) Definitions.--In this section:
``(1) Adjusted amount.--The term `adjusted amount' means,
with respect to a covered State--
``(A) for fiscal year 2008, 90 percent of--
``(i) the sum of the amounts paid for fiscal year 2006
under section 102(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the covered State that have
elected under section 102(b) to receive a share of the State
payment for fiscal year 2008; and
``(ii) the sum of the amounts paid for fiscal year 2006
under section 103(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the State of Oregon that have
elected under section 102(b) to receive the county payment
for fiscal year 2008;
``(B) for fiscal year 2009, 81 percent of--
``(i) the sum of the amounts paid for fiscal year 2006
under section 102(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the covered State that have
elected under section 102(b) to receive a share of the State
payment for fiscal year 2009; and
``(ii) the sum of the amounts paid for fiscal year 2006
under section 103(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the State of Oregon that have
elected under section 102(b) to receive the county payment
for fiscal year 2009; and
``(C) for fiscal year 2010, 73 percent of--
``(i) the sum of the amounts paid for fiscal year 2006
under section 102(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the covered State that have
elected under section 102(b) to receive a share of the State
payment for fiscal year 2010; and
``(ii) the sum of the amounts paid for fiscal year 2006
under section 103(a)(2) (as in effect on September 29, 2006)
for the eligible counties in the State of Oregon that have
elected under section 102(b) to receive the county payment
for fiscal year 2010.
``(2) Covered state.--The term `covered State' means each
of the States of California, Louisiana, Oregon, Pennsylvania,
South Carolina, South Dakota, Texas, and Washington.
``(b) Transition Payments.--For each of fiscal years 2008
through 2010, in lieu of the payment amounts that otherwise
would have been made under paragraphs (1)(B) and (2)(B) of
section 102(a), the Secretary of the Treasury shall pay the
adjusted amount to each covered State and the eligible
counties within the covered State, as applicable.
``(c) Distribution of Adjusted Amount.--Except as provided
in subsection (d), it is the intent of Congress that the
method of distributing the payments under subsection (b)
among the counties in the covered States for each of fiscal
years 2008 through 2010 be in the same proportion that the
payments were distributed to the eligible counties in fiscal
year 2006.
``(d) Distribution of Payments in California.--The
following payments shall be distributed among the eligible
counties in the State of California in the same proportion
that payments under section 102(a)(2)

[[Page S9315]]

(as in effect on September 29, 2006) were distributed to the
eligible counties for fiscal year 2006:
``(1) Payments to the State of California under subsection
(b).
``(2) The shares of the eligible counties of the State
payment for California under section 102 for fiscal year
2011.
``(e) Treatment of Payments.--For purposes of this Act, any
payment made under subsection (b) shall be considered to be a
payment made under section 102(a).

``TITLE II--SPECIAL PROJECTS ON FEDERAL LAND

``SEC. 201. DEFINITIONS.

``In this title:
``(1) Participating county.--The term `participating
county' means an eligible county that elects under section
102(d) to expend a portion of the Federal funds received
under section 102 in accordance with this title.
``(2) Project funds.--The term `project funds' means all
funds an eligible county elects under section 102(d) to
reserve for expenditure in accordance with this title.
``(3) Resource advisory committee.--The term `resource
advisory committee' means--
``(A) an advisory committee established by the Secretary
concerned under section 205; or
``(B) an advisory committee determined by the Secretary
concerned to meet the requirements of section 205.
``(4) Resource management plan.--The term `resource
management plan' means--
``(A) a land use plan prepared by the Bureau of Land
Management for units of the Federal land described in section
3(7)(B) pursuant to section 202 of the Federal Land Policy
and Management Act of 1976 (43 U.S.C. 1712); or
``(B) a land and resource management plan prepared by the
Forest Service for units of the National Forest System
pursuant to section 6 of the Forest and Rangeland Renewable
Resources Planning Act of 1974 (16 U.S.C. 1604).

``SEC. 202. GENERAL LIMITATION ON USE OF PROJECT FUNDS.

``(a) Limitation.--Project funds shall be expended solely
on projects that meet the requirements of this title.
``(b) Authorized Uses.--Project funds may be used by the
Secretary concerned for the purpose of entering into and
implementing cooperative agreements with willing Federal
agencies, State and local governments, private and nonprofit
entities, and landowners for protection, restoration, and
enhancement of fish and wildlife habitat, and other resource
objectives consistent with the purposes of this Act on
Federal land and on non-Federal land where projects would
benefit the resources on Federal land.

``SEC. 203. SUBMISSION OF PROJECT PROPOSALS.

``(a) Submission of Project Proposals to Secretary
Concerned.--
``(1) Projects funded using project funds.--Not later than
September 30 for fiscal year 2008 (or as soon thereafter as
the Secretary concerned determines is practicable), and each
September 30 thereafter for each succeeding fiscal year
through fiscal year 2011, each resource advisory committee
shall submit to the Secretary concerned a description of any
projects that the resource advisory committee proposes the
Secretary undertake using any project funds reserved by
eligible counties in the area in which the resource advisory
committee has geographic jurisdiction.
``(2) Projects funded using other funds.--A resource
advisory committee may submit to the Secretary concerned a
description of any projects that the committee proposes the
Secretary undertake using funds from State or local
governments, or from the private sector, other than project
funds and funds appropriated and otherwise available to do
similar work.
``(3) Joint projects.--Participating counties or other
persons may propose to pool project funds or other funds,
described in paragraph (2), and jointly propose a project or
group of projects to a resource advisory committee
established under section 205.
``(b) Required Description of Projects.--In submitting
proposed projects to the Secretary concerned under subsection
(a), a resource advisory committee shall include in the
description of each proposed project the following
information:
``(1) The purpose of the project and a description of how
the project will meet the purposes of this title.
``(2) The anticipated duration of the project.
``(3) The anticipated cost of the project.
``(4) The proposed source of funding for the project,
whether project funds or other funds.
``(5)(A) Expected outcomes, including how the project will
meet or exceed desired ecological conditions, maintenance
objectives, or stewardship objectives.
``(B) An estimate of the amount of any timber, forage, and
other commodities and other economic activity, including jobs
generated, if any, anticipated as part of the project.
``(6) A detailed monitoring plan, including funding needs
and sources, that--
``(A) tracks and identifies the positive or negative
impacts of the project, implementation, and provides for
validation monitoring; and
``(B) includes an assessment of the following:
``(i) Whether or not the project met or exceeded desired
ecological conditions; created local employment or training
opportunities, including summer youth jobs programs such as
the Youth Conservation Corps where appropriate.
``(ii) Whether the project improved the use of, or added
value to, any products removed from land consistent with the
purposes of this title.
``(7) An assessment that the project is to be in the public
interest.
``(c) Authorized Projects.--Projects proposed under
subsection (a) shall be consistent with section 2.

``SEC. 204. EVALUATION AND APPROVAL OF PROJECTS BY SECRETARY
CONCERNED.

``(a) Conditions for Approval of Proposed Project.--The
Secretary concerned may make a decision to approve a project
submitted by a resource advisory committee under section 203
only if the proposed project satisfies each of the following
conditions:
``(1) The project complies with all applicable Federal laws
(including regulations).
``(2) The project is consistent with the applicable
resource management plan and with any watershed or subsequent
plan developed pursuant to the resource management plan and
approved by the Secretary concerned.
``(3) The project has been approved by the resource
advisory committee in accordance with section 205, including
the procedures issued under subsection (e) of that section.
``(4) A project description has been submitted by the
resource advisory committee to the Secretary concerned in
accordance with section 203.
``(5) The project will improve the maintenance of existing
infrastructure, implement stewardship objectives that enhance
forest ecosystems, and restore and improve land health and
water quality.
``(b) Environmental Reviews.--
``(1) Request for payment by county.--The Secretary
concerned may request the resource advisory committee
submitting a proposed project to agree to the use of project
funds to pay for any environmental review, consultation, or
compliance with applicable environmental laws required in
connection with the project.
``(2) Conduct of environmental review.--If a payment is
requested under paragraph (1) and the resource advisory
committee agrees to the expenditure of funds for this
purpose, the Secretary concerned shall conduct environmental
review, consultation, or other compliance responsibilities in
accordance with Federal laws (including regulations).
``(3) Effect of refusal to pay.--
``(A) In general.--If a resource advisory committee does
not agree to the expenditure of funds under paragraph (1),
the project shall be deemed withdrawn from further
consideration by the Secretary concerned pursuant to this
title.
``(B) Effect of withdrawal.--A withdrawal under
subparagraph (A) shall be deemed to be a rejection of the
project for purposes of section 207(c).
``(c) Decisions of Secretary Concerned.--
``(1) Rejection of projects.--
``(A) In general.--A decision by the Secretary concerned to
reject a proposed project shall be at the sole discretion of
the Secretary concerned.
``(B) No administrative appeal or judicial review.--
Notwithstanding any other provision of law, a decision by the
Secretary concerned to reject a proposed project shall not be
subject to administrative appeal or judicial review.
``(C) Notice of rejection.--Not later than 30 days after
the date on which the Secretary concerned makes the rejection
decision, the Secretary concerned shall notify in writing the
resource advisory committee that submitted the proposed
project of the rejection and the reasons for rejection.
``(2) Notice of project approval.--The Secretary concerned
shall publish in the Federal Register notice of each project
approved under subsection (a) if the notice would be required
had the project originated with the Secretary.
``(d) Source and Conduct of Project.--Once the Secretary
concerned accepts a project for review under section 203, the
acceptance shall be deemed a Federal action for all purposes.
``(e) Implementation of Approved Projects.--
``(1) Cooperation.--Notwithstanding chapter 63 of title 31,
United States Code, using project funds the Secretary
concerned may enter into contracts, grants, and cooperative
agreements with States and local governments, private and
nonprofit entities, and landowners and other persons to
assist the Secretary in carrying out an approved project.
``(2) Best value contracting.--
``(A) In general.--For any project involving a contract
authorized by paragraph (1) the Secretary concerned may elect
a source for performance of the contract on a best value
basis.
``(B) Factors.--The Secretary concerned shall determine
best value based on such factors as--
``(i) the technical demands and complexity of the work to
be done;
``(ii)(I) the ecological objectives of the project; and
``(II) the sensitivity of the resources being treated;
``(iii) the past experience by the contractor with the type
of work being done, using the type of equipment proposed for
the project, and meeting or exceeding desired ecological
conditions; and

[[Page S9316]]

``(iv) the commitment of the contractor to hiring highly
qualified workers and local residents.
``(3) Merchantable timber contracting pilot program.--
``(A) Establishment.--The Secretary concerned shall
establish a pilot program to implement a certain percentage
of approved projects involving the sale of merchantable
timber using separate contracts for--
``(i) the harvesting or collection of merchantable timber;
and
``(ii) the sale of the timber.
``(B) Annual percentages.--Under the pilot program, the
Secretary concerned shall ensure that, on a nationwide basis,
not less than the following percentage of all approved
projects involving the sale of merchantable timber are
implemented using separate contracts:
``(i) For fiscal year 2008, 35 percent.
``(ii) For fiscal year 2009, 45 percent.
``(iii) For each of fiscal years 2010 and 2011, 50 percent.
``(C) Inclusion in pilot program.--The decision whether to
use separate contracts to implement a project involving the
sale of merchantable timber shall be made by the Secretary
concerned after the approval of the project under this title.
``(D) Assistance.--
``(i) In general.--The Secretary concerned may use funds
from any appropriated account available to the Secretary for
the Federal land to assist in the administration of projects
conducted under the pilot program.
``(ii) Maximum amount of assistance.--The total amount
obligated under this subparagraph may not exceed $1,000,000
for any fiscal year during which the pilot program is in
effect.
``(E) Review and report.--
``(i) Initial report.--Not later than September 30, 2010,
the Comptroller General shall submit to the Committees on
Agriculture, Nutrition, and Forestry and Energy and Natural
Resources of the Senate and the Committees on Agriculture and
Natural Resources of the House of Representatives a report
assessing the pilot program.
``(ii) Annual report.--The Secretary concerned shall submit
to the Committees on Agriculture, Nutrition, and Forestry and
Energy and Natural Resources of the Senate and the Committees
on Agriculture and Natural Resources of the House of
Representatives an annual report describing the results of
the pilot program.
``(f) Requirements for Project Funds.--The Secretary shall
ensure that at least 50 percent of all project funds be used
for projects that are primarily dedicated--
``(1) to road maintenance, decommissioning, or
obliteration; or
``(2) to restoration of streams and watersheds.

``SEC. 205. RESOURCE ADVISORY COMMITTEES.

``(a) Establishment and Purpose of Resource Advisory
Committees.--
``(1) Establishment.--The Secretary concerned shall
establish and maintain resource advisory committees to
perform the duties in subsection (b), except as provided in
paragraph (4).
``(2) Purpose.--The purpose of a resource advisory
committee shall be--
``(A) to improve collaborative relationships; and
``(B) to provide advice and recommendations to the land
management agencies consistent with the purposes of this
title.
``(3) Access to resource advisory committees.--To ensure
that each unit of Federal land has access to a resource
advisory committee, and that there is sufficient interest in
participation on a committee to ensure that membership can be
balanced in terms of the points of view represented and the
functions to be performed, the Secretary concerned may,
establish resource advisory committees for part of, or 1 or
more, units of Federal land.
``(4) Existing advisory committees.--
``(A) In general.--An advisory committee that meets the
requirements of this section, a resource advisory committee
established before September 29, 2006, or an advisory
committee determined by the Secretary concerned before
September 29, 2006, to meet the requirements of this section
may be deemed by the Secretary concerned to be a resource
advisory committee for the purposes of this title.
``(B) Charter.--A charter for a committee described in
subparagraph (A) that was filed on or before September 29,
2006, shall be considered to be filed for purposes of this
Act.
``(C) Bureau of land management advisory committees.--The
Secretary of the Interior may deem a resource advisory
committee meeting the requirements of subpart 1784 of part
1780 of title 43, Code of Federal Regulations, as a resource
advisory committee for the purposes of this title.
``(b) Duties.--A resource advisory committee shall--
``(1) review projects proposed under this title by
participating counties and other persons;
``(2) propose projects and funding to the Secretary
concerned under section 203;
``(3) provide early and continuous coordination with
appropriate land management agency officials in recommending
projects consistent with purposes of this Act under this
title;
``(4) provide frequent opportunities for citizens,
organizations, tribes, land management agencies, and other
interested parties to participate openly and meaningfully,
beginning at the early stages of the project development
process under this title;
``(5)(A) monitor projects that have been approved under
section 204; and
``(B) advise the designated Federal official on the
progress of the monitoring efforts under subparagraph (A);
and
``(6) make recommendations to the Secretary concerned for
any appropriate changes or adjustments to the projects being
monitored by the resource advisory committee.
``(c) Appointment by the Secretary.--
``(1) Appointment and term.--
``(A) In general.--The Secretary concerned, shall appoint
the members of resource advisory committees for a term of 4
years beginning on the date of appointment.
``(B) Reappointment.--The Secretary concerned may reappoint
members to subsequent 4-year terms.
``(2) Basic requirements.--The Secretary concerned shall
ensure that each resource advisory committee established
meets the requirements of subsection (d).
``(3) Initial appointment.--Not later than 180 days after
the date of the enactment of this Act, the Secretary
concerned shall make initial appointments to the resource
advisory committees.
``(4) Vacancies.--The Secretary concerned shall make
appointments to fill vacancies on any resource advisory
committee as soon as practicable after the vacancy has
occurred.
``(5) Compensation.--Members of the resource advisory
committees shall not receive any compensation.
``(d) Composition of Advisory Committee.--
``(1) Number.--Each resource advisory committee shall be
comprised of 15 members.
``(2) Community interests represented.--Committee members
shall be representative of the interests of the following 3
categories:
``(A) 5 persons that--
``(i) represent organized labor or non-timber forest
product harvester groups;
``(ii) represent developed outdoor recreation, off highway
vehicle users, or commercial recreation activities;
``(iii) represent--

``(I) energy and mineral development interests; or
``(II) commercial or recreational fishing interests;

``(iv) represent the commercial timber industry; or
``(v) hold Federal grazing or other land use permits, or
represent nonindustrial private forest land owners, within
the area for which the committee is organized.
``(B) 5 persons that represent--
``(i) nationally recognized environmental organizations;
``(ii) regionally or locally recognized environmental
organizations;
``(iii) dispersed recreational activities;
``(iv) archaeological and historical interests; or
``(v) nationally or regionally recognized wild horse and
burro interest groups, wildlife or hunting organizations, or
watershed associations.
``(C) 5 persons that--
``(i) hold State elected office (or a designee);
``(ii) hold county or local elected office;
``(iii) represent American Indian tribes within or adjacent
to the area for which the committee is organized;
``(iv) are school officials or teachers; or
``(v) represent the affected public at large.
``(3) Balanced representation.--In appointing committee
members from the 3 categories in paragraph (2), the Secretary
concerned shall provide for balanced and broad representation
from within each category.
``(4) Geographic distribution.--The members of a resource
advisory committee shall reside within the State in which the
committee has jurisdiction and, to extent practicable, the
Secretary concerned shall ensure local representation in each
category in paragraph (2).
``(5) Chairperson.--A majority on each resource advisory
committee shall select the chairperson of the committee.
``(e) Approval Procedures.--
``(1) In general.--Subject to paragraph (3), each resource
advisory committee shall establish procedures for proposing
projects to the Secretary concerned under this title.
``(2) Quorum.--A quorum must be present to constitute an
official meeting of the committee.
``(3) Approval by majority of members.--A project may be
proposed by a resource advisory committee to the Secretary
concerned under section 203(a), if the project has been
approved by a majority of members of the committee from each
of the 3 categories in subsection (d)(2).
``(f) Other Committee Authorities and Requirements.--
``(1) Staff assistance.--A resource advisory committee may
submit to the Secretary concerned a request for periodic
staff assistance from Federal employees under the
jurisdiction of the Secretary.
``(2) Meetings.--All meetings of a resource advisory
committee shall be announced at least 1 week in advance in a
local newspaper of record and shall be open to the public.
``(3) Records.--A resource advisory committee shall
maintain records of the meetings of the committee and make
the records available for public inspection.

``SEC. 206. USE OF PROJECT FUNDS.

``(a) Agreement Regarding Schedule and Cost of Project.--
``(1) Agreement between parties.--The Secretary concerned
may carry out a project

[[Page S9317]]

submitted by a resource advisory committee under section
203(a) using project funds or other funds described in
section 203(a)(2), if, as soon as practicable after the
issuance of a decision document for the project and the
exhaustion of all administrative appeals and judicial review
of the project decision, the Secretary concerned and the
resource advisory committee enter into an agreement
addressing, at a minimum, the following:
``(A) The schedule for completing the project.
``(B) The total cost of the project, including the level of
agency overhead to be assessed against the project.
``(C) For a multiyear project, the estimated cost of the
project for each of the fiscal years in which it will be
carried out.
``(D) The remedies for failure of the Secretary concerned
to comply with the terms of the agreement consistent with
current Federal law.
``(2) Limited use of federal funds.--The Secretary
concerned may decide, at the sole discretion of the Secretary
concerned, to cover the costs of a portion of an approved
project using Federal funds appropriated or otherwise
available to the Secretary for the same purposes as the
project.
``(b) Transfer of Project Funds.--
``(1) Initial transfer required.--As soon as practicable
after the agreement is reached under subsection (a) with
regard to a project to be funded in whole or in part using
project funds, or other funds described in section 203(a)(2),
the Secretary concerned shall transfer to the applicable unit
of National Forest System land or Bureau of Land Management
District an amount of project funds equal to--
``(A) in the case of a project to be completed in a single
fiscal year, the total amount specified in the agreement to
be paid using project funds, or other funds described in
section 203(a)(2); or
``(B) in the case of a multiyear project, the amount
specified in the agreement to be paid using project funds, or
other funds described in section 203(a)(2) for the first
fiscal year.
``(2) Condition on project commencement.--The unit of
National Forest System land or Bureau of Land Management
District concerned, shall not commence a project until the
project funds, or other funds described in section 203(a)(2)
required to be transferred under paragraph (1) for the
project, have been made available by the Secretary concerned.
``(3) Subsequent transfers for multiyear projects.--
``(A) In general.--For the second and subsequent fiscal
years of a multiyear project to be funded in whole or in part
using project funds, the unit of National Forest System land
or Bureau of Land Management District concerned shall use the
amount of project funds required to continue the project in
that fiscal year according to the agreement entered into
under subsection (a).
``(B) Suspension of work.--The Secretary concerned shall
suspend work on the project if the project funds required by
the agreement in the second and subsequent fiscal years are
not available.

``SEC. 207. AVAILABILITY OF PROJECT FUNDS.

``(a) Submission of Proposed Projects To Obligate Funds.--
By September 30, 2008 (or as soon thereafter as the Secretary
concerned determines is practicable), and each September 30
thereafter for each succeeding fiscal year through fiscal
year 2011, a resource advisory committee shall submit to the
Secretary concerned pursuant to section 203(a)(1) a
sufficient number of project proposals that, if approved,
would result in the obligation of at least the full amount of
the project funds reserved by the participating county in the
preceding fiscal year.
``(b) Use or Transfer of Unobligated Funds.--Subject to
section 208, if a resource advisory committee fails to comply
with subsection (a) for a fiscal year, any project funds
reserved by the participating county in the preceding fiscal
year and remaining unobligated shall be available for use as
part of the project submissions in the next fiscal year.
``(c) Effect of Rejection of Projects.--Subject to section
208, any project funds reserved by a participating county in
the preceding fiscal year that are unobligated at the end of
a fiscal year because the Secretary concerned has rejected
one or more proposed projects shall be available for use as
part of the project submissions in the next fiscal year.
``(d) Effect of Court Orders.--
``(1) In general.--If an approved project under this Act is
enjoined or prohibited by a Federal court, the Secretary
concerned shall return the unobligated project funds related
to the project to the participating county or counties that
reserved the funds.
``(2) Expenditure of funds.--The returned funds shall be
available for the county to expend in the same manner as the
funds reserved by the county under subparagraph (B) or (C)(i)
of section 102(d)(1).

``SEC. 208. TERMINATION OF AUTHORITY.

``(a) In General.--The authority to initiate projects under
this title shall terminate on September 30, 2011.
``(b) Deposits in Treasury.--Any project funds not
obligated by September 30, 2012, shall be deposited in the
Treasury of the United States.

``TITLE III--COUNTY FUNDS

``SEC. 301. DEFINITIONS.

``In this title:
``(1) County funds.--The term `county funds' means all
funds an eligible county elects under section 102(d) to
reserve for expenditure in accordance with this title.
``(2) Participating county.--The term `participating
county' means an eligible county that elects under section
102(d) to expend a portion of the Federal funds received
under section 102 in accordance with this title.

``SEC. 302. USE.

``(a) Authorized Uses.--A participating county, including
any applicable agencies of the participating county, shall
use county funds, in accordance with this title, only--
``(1) to carry out activities under the Firewise
Communities program to provide to homeowners in fire-
sensitive ecosystems education on, and assistance with
implementing, techniques in home siting, home construction,
and home landscaping that can increase the protection of
people and property from wildfires;
``(2) to reimburse the participating county for search and
rescue and other emergency services, including firefighting,
that are--
``(A) performed on Federal land after the date on which the
use was approved under subsection (b);
``(B) paid for by the participating county; and
``(3) to develop community wildfire protection plans in
coordination with the appropriate Secretary concerned.
``(b) Proposals.--A participating county shall use county
funds for a use described in subsection (a) only after a 45-
day public comment period, at the beginning of which the
participating county shall--
``(1) publish in any publications of local record a
proposal that describes the proposed use of the county funds;
and
``(2) submit the proposal to any resource advisory
committee established under section 205 for the participating
county.

``SEC. 303. CERTIFICATION.

``(a) In General.--Not later than February 1 of the year
after the year in which any county funds were expended by a
participating county, the appropriate official of the
participating county shall submit to the Secretary concerned
a certification that the county funds expended in the
applicable year have been used for the uses authorized under
section 302(a), including a description of the amounts
expended and the uses for which the amounts were expended.
``(b) Review.--The Secretary concerned shall review the
certifications submitted under subsection (a) as the
Secretary concerned determines to be appropriate.

``SEC. 304. TERMINATION OF AUTHORITY.

``(a) In General.--The authority to initiate projects under
this title terminates on September 30, 2011.
``(b) Availability.--Any county funds not obligated by
September 30, 2012, shall be returned to the Treasury of the
United States.

``TITLE IV--MISCELLANEOUS PROVISIONS

``SEC. 401. REGULATIONS.

``The Secretary of Agriculture and the Secretary of the
Interior shall issue regulations to carry out the purposes of
this Act.

``SEC. 402. AUTHORIZATION OF APPROPRIATIONS.

``There are authorized to be appropriated such sums as are
necessary to carry out this Act for each of fiscal years 2008
through 2011.

``SEC. 403. TREATMENT OF FUNDS AND REVENUES.

``(a) Relation to Other Appropriations.--Funds made
available under section 402 and funds made available to a
Secretary concerned under section 206 shall be in addition to
any other annual appropriations for the Forest Service and
the Bureau of Land Management.
``(b) Deposit of Revenues and Other Funds.--All revenues
generated from projects pursuant to title II, including any
interest accrued from the revenues, shall be deposited in the
Treasury of the United States.''.
(b) Forest Receipt Payments to Eligible States and
Counties.--
(1) Act of may 23, 1908.--The sixth paragraph under the
heading ``FOREST SERVICE'' in the Act of May 23, 1908 (16
U.S.C. 500) is amended in the first sentence by striking
``twenty-five percentum'' and all that follows through
``shall be paid'' and inserting the following: ``an amount
equal to the annual average of 25 percent of all amounts
received for the applicable fiscal year and each of the
preceding 6 fiscal years from each national forest shall be
paid''.
(2) Weeks law.--Section 13 of the Act of March 1, 1911
(commonly known as the ``Weeks Law'') (16 U.S.C. 500) is
amended in the first sentence by striking ``twenty-five
percentum'' and all that follows through ``shall be paid''
and inserting the following: ``an amount equal to the annual
average of 25 percent of all amounts received for the
applicable fiscal year and each of the preceding 6 fiscal
years from each national forest shall be paid''.
(c) Payments in Lieu of Taxes.--
(1) In general.--Section 6906 of title 31, United States
Code, is amended to read as follows:

``Sec. 6906. Funding

``For each of fiscal years 2008 through 2012--
``(1) each county or other eligible unit of local
government shall be entitled to payment under this chapter;
and
``(2) sums shall be made available to the Secretary of the
Interior for obligation or expenditure in accordance with
this chapter.''.
(2) Conforming amendment.--The table of sections for
chapter 69 of title 31, United

[[Page S9318]]

States Code, is amended by striking the item relating to
section 6906 and inserting the following:

``6906. Funding.''.
(3) Budget scorekeeping.--
(A) In general.--Notwithstanding the Budget Scorekeeping
Guidelines and the accompanying list of programs and accounts
set forth in the joint explanatory statement of the committee
of conference accompanying Conference Report 105-217, the
section in this title regarding Payments in Lieu of Taxes
shall be treated in the baseline for purposes of section 257
of the Balanced Budget and Emergency Deficit Control Act of
1985 (as in effect prior to September 30, 2002), and by the
Chairmen of the House and Senate Budget Committees, as
appropriate, for purposes of budget enforcement in the House
and Senate, and under the Congressional Budget Act of 1974 as
if Payment in Lieu of Taxes (14-1114-0-1-806) were an account
designated as Appropriated Entitlements and Mandatories for
Fiscal Year 1997 in the joint explanatory statement of the
committee of conference accompanying Conference Report 105-
217.
(B) Effective date.--This paragraph shall remain in effect
for the fiscal years to which the entitlement in section 6906
of title 31, United States Code (as amended by paragraph
(1)), applies.

SEC. 602. TRANSFER TO ABANDONED MINE RECLAMATION FUND.

Subparagraph (C) of section 402(i)(1) of the Surface Mining
Control and Reclamation Act of 1977 (30 U.S.C. 1232(i)(1)) is
amended by striking ``and $9,000,000 on October 1, 2009'' and
inserting ``$9,000,000 on October 1, 2009, and $9,000,000 on
October 1, 2010''.

TITLE VII--DISASTER RELIEF

Subtitle A--Heartland and Hurricane Ike Disaster Relief

SEC. 701. SHORT TITLE.

This subtitle may be cited as the ``Heartland Disaster Tax
Relief Act of 2008''.

SEC. 702. TEMPORARY TAX RELIEF FOR AREAS DAMAGED BY 2008
MIDWESTERN SEVERE STORMS, TORNADOS, AND
FLOODING.

(a) In General.--Subject to the modifications described in
this section, the following provisions of or relating to the
Internal Revenue Code of 1986 shall apply to any Midwestern
disaster area in addition to the areas to which such
provisions otherwise apply:
(1) Go zone benefits.--
(A) Section 1400N (relating to tax benefits) other than
subsections (b), (d), (e), (i), (j), (m), and (o) thereof.
(B) Section 1400O (relating to education tax benefits).
(C) Section 1400P (relating to housing tax benefits).
(D) Section 1400Q (relating to special rules for use of
retirement funds).
(E) Section 1400R(a) (relating to employee retention credit
for employers).
(F) Section 1400S (relating to additional tax relief) other
than subsection (d) thereof.
(G) Section 1400T (relating to special rules for mortgage
revenue bonds).
(2) Other benefits included in katrina emergency tax relief
act of 2005.--Sections 302, 303, 304, 401, and 405 of the
Katrina Emergency Tax Relief Act of 2005.
(b) Midwestern Disaster Area.--
(1) In general.--For purposes of this section and for
applying the substitutions described in subsections (d) and
(e), the term ``Midwestern disaster area'' means an area--
(A) with respect to which a major disaster has been
declared by the President on or after May 20, 2008, and
before August 1, 2008, under section 401 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act by
reason of severe storms, tornados, or flooding occurring in
any of the States of Arkansas, Illinois, Indiana, Iowa,
Kansas, Michigan, Minnesota, Missouri, Nebraska, and
Wisconsin, and
(B) determined by the President to warrant individual or
individual and public assistance from the Federal Government
under such Act with respect to damages attributable to such
severe storms, tornados, or flooding.
(2) Certain benefits available to areas eligible only for
public assistance.--For purposes of applying this section to
benefits under the following provisions, paragraph (1) shall
be applied without regard to subparagraph (B):
(A) Sections 1400Q, 1400S(b), and 1400S(d) of the Internal
Revenue Code of 1986.
(B) Sections 302, 401, and 405 of the Katrina Emergency Tax
Relief Act of 2005.
(c) References.--
(1) Area.--Any reference in such provisions to the
Hurricane Katrina disaster area or the Gulf Opportunity Zone
shall be treated as a reference to any Midwestern disaster
area and any reference to the Hurricane Katrina disaster area
or the Gulf Opportunity Zone within a State shall be treated
as a reference to all Midwestern disaster areas within the
State.
(2) Items attributable to disaster.--Any reference in such
provisions to any loss, damage, or other item attributable to
Hurricane Katrina shall be treated as a reference to any
loss, damage, or other item attributable to the severe
storms, tornados, or flooding giving rise to any Presidential
declaration described in subsection (b)(1)(A).
(3) Applicable disaster date.--For purposes of applying the
substitutions described in subsections (d) and (e), the term
``applicable disaster date'' means, with respect to any
Midwestern disaster area, the date on which the severe
storms, tornados, or flooding giving rise to the Presidential
declaration described in subsection (b)(1)(A) occurred.
(d) Modifications to 1986 Code.--The following provisions
of the Internal Revenue Code of 1986 shall be applied with
the following modifications:
(1) Tax-exempt bond financing.--Section 1400N(a)--
(A) by substituting ``qualified Midwestern disaster area
bond'' for ``qualified Gulf Opportunity Zone Bond'' each
place it appears, except that in determining whether a bond
is a qualified Midwestern disaster area bond--
(i) paragraph (2)(A)(i) shall be applied by only treating
costs as qualified project costs if--

(I) in the case of a project involving a private business
use (as defined in section 141(b)(6)), either the person
using the property suffered a loss in a trade or business
attributable to the severe storms, tornados, or flooding
giving rise to any Presidential declaration described in
subsection (b)(1)(A) or is a person designated for purposes
of this section by the Governor of the State in which the
project is located as a person carrying on a trade or
business replacing a trade or business with respect to which
another person suffered such a loss, and
(II) in the case of a project relating to public utility
property, the project involves repair or reconstruction of
public utility property damaged by such severe storms,
tornados, or flooding, and

(ii) paragraph (2)(A)(ii) shall be applied by treating an
issue as a qualified mortgage issue only if 95 percent or
more of the net proceeds (as defined in section 150(a)(3)) of
the issue are to be used to provide financing for mortgagors
who suffered damages to their principal residences
attributable to such severe storms, tornados, or flooding.
(B) by substituting ``any State in which a Midwestern
disaster area is located'' for ``the State of Alabama,
Louisiana, or Mississippi'' in paragraph (2)(B),
(C) by substituting ``designated for purposes of this
section (on the basis of providing assistance to areas in the
order in which such assistance is most needed)'' for
``designated for purposes of this section'' in paragraph
(2)(C),
(D) by substituting ``January 1, 2013'' for ``January 1,
2011'' in paragraph (2)(D),
(E) in paragraph (3)(A)--
(i) by substituting ``$1,000'' for ``$2,500'', and
(ii) by substituting ``before the earliest applicable
disaster date for Midwestern disaster areas within the
State'' for ``before August 28, 2005'',
(F) by substituting ``qualified Midwestern disaster area
repair or construction'' for ``qualified GO Zone repair or
construction'' each place it appears,
(G) by substituting ``after the date of the enactment of
the Heartland Disaster Tax Relief Act of 2008 and before
January 1, 2013'' for ``after the date of the enactment of
this paragraph and before January 1, 2011'' in paragraph
(7)(C), and
(H) by disregarding paragraph (8) thereof.
(2) Low-income housing credit.--Section 1400N(c)--
(A) only with respect to calendar years 2008, 2009, and
2010,
(B) by substituting ``Disaster Recovery Assistance housing
amount'' for ``Gulf Opportunity housing amount'' each place
it appears,
(C) in paragraph (1)(B)--
(i) by substituting ``$8.00'' for ``$18.00'', and
(ii) by substituting ``before the earliest applicable
disaster date for Midwestern disaster areas within the
State'' for ``before August 28, 2005'' , and
(D) determined without regard to paragraphs (2), (3), (4),
(5), and (6) thereof.
(3) Expensing for certain demolition and clean-up costs.--
Section 1400N(f)--
(A) by substituting ``qualified Disaster Recovery
Assistance clean-up cost'' for ``qualified Gulf Opportunity
Zone clean-up cost'' each place it appears,
(B) by substituting ``beginning on the applicable disaster
date and ending on December 31, 2010'' for ``beginning on
August 28, 2005, and ending on December 31, 2007'' in
paragraph (2), and
(C) by treating costs as qualified Disaster Recovery
Assistance clean-up costs only if the removal of debris or
demolition of any structure was necessary due to damage
attributable to the severe storms, tornados, or flooding
giving rise to any Presidential declaration described in
subsection (b)(1)(A).
(4) Extension of expensing for environmental remediation
costs.--Section 1400N(g)--
(A) by substituting ``the applicable disaster date'' for
``August 28, 2005'' each place it appears,
(B) by substituting ``January 1, 2011'' for ``January 1,
2008'' in paragraph (1),
(C) by substituting ``December 31, 2010'' for ``December
31, 2007'' in paragraph (1), and
(D) by treating a site as a qualified contaminated site
only if the release (or threat of release) or disposal of a
hazardous substance at the site was attributable to the
severe storms, tornados, or flooding giving rise to any
Presidential declaration described in subsection (b)(1)(A).
(5) Increase in rehabilitation credit.--Section 1400N(h),
as amended by this Act--
(A) by substituting ``the applicable disaster date'' for
``August 28, 2005'',
(B) by substituting ``December 31, 2011'' for ``December
31, 2009'' in paragraph (1), and

[[Page S9319]]

(C) by only applying such subsection to qualified
rehabilitation expenditures with respect to any building or
structure which was damaged or destroyed as a result of the
severe storms, tornados, or flooding giving rise to any
Presidential declaration described in subsection (b)(1)(A).
(6) Treatment of net operating losses attributable to
disaster losses.--Section 1400N(k)--
(A) by substituting ``qualified Disaster Recovery
Assistance loss'' for ``qualified Gulf Opportunity Zone
loss'' each place it appears,
(B) by substituting ``after the day before the applicable
disaster date, and before January 1, 2011'' for ``after
August 27, 2005, and before January 1, 2008'' each place it
appears,
(C) by substituting ``the applicable disaster date'' for
``August 28, 2005'' in paragraph (2)(B)(ii)(I),
(D) by substituting ``qualified Disaster Recovery
Assistance property'' for ``qualified Gulf Opportunity Zone
property'' in paragraph (2)(B)(iv), and
(E) by substituting ``qualified Disaster Recovery
Assistance casualty loss'' for ``qualified Gulf Opportunity
Zone casualty loss'' each place it appears.
(7) Credit to holders of tax credit bonds.--Section
1400N(l)--
(A) by substituting ``Midwestern tax credit bond'' for
``Gulf tax credit bond'' each place it appears,
(B) by substituting ``any State in which a Midwestern
disaster area is located or any instrumentality of the
State'' for ``the State of Alabama, Louisiana, or
Mississippi'' in paragraph (4)(A)(i),
(C) by substituting ``after December 31, 2008 and before
January 1, 2010'' for ``after December 31, 2005, and before
January 1, 2007'',
(D) by substituting ``shall not exceed $100,000,000 for any
State with an aggregate population located in all Midwestern
disaster areas within the State of at least 2,000,000,
$50,000,000 for any State with an aggregate population
located in all Midwestern disaster areas within the State of
at least 1,000,000 but less than 2,000,000, and zero for any
other State. The population of a State within any area shall
be determined on the basis of the most recent census estimate
of resident population released by the Bureau of Census
before the earliest applicable disaster date for Midwestern
disaster areas within the State.'' for ``shall not exceed''
and all that follows in paragraph (4)(C), and
(E) by substituting ``the earliest applicable disaster date
for Midwestern disaster areas within the State'' for ``August
28, 2005'' in paragraph (5)(A).
(8) Education tax benefits.--Section 1400O, by substituting
``2008 or 2009'' for ``2005 or 2006''.
(9) Housing tax benefits.--Section 1400P, by substituting
``the applicable disaster date'' for ``August 28, 2005'' in
subsection (c)(1).
(10) Special rules for use of retirement funds.--Section
1400Q--
(A) by substituting ``qualified Disaster Recovery
Assistance distribution'' for ``qualified hurricane
distribution'' each place it appears,
(B) by substituting ``on or after the applicable disaster
date and before January 1, 2010'' for ``on or after August
25, 2005, and before January 1, 2007'' in subsection
(a)(4)(A)(i),
(C) by substituting ``the applicable disaster date'' for
``August 28, 2005'' in subsections (a)(4)(A)(i) and
(c)(3)(B),
(D) by disregarding clauses (ii) and (iii) of subsection
(a)(4)(A) thereof,
(E) by substituting ``qualified storm damage distribution''
for ``qualified Katrina distribution'' each place it appears,
(F) by substituting ``after the date which is 6 months
before the applicable disaster date and before the date which
is the day after the applicable disaster date'' for ``after
February 28, 2005, and before August 29, 2005'' in subsection
(b)(2)(B)(ii),
(G) by substituting ``the Midwestern disaster area, but not
so purchased or constructed on account of severe storms,
tornados, or flooding giving rise to the designation of the
area as a disaster area'' for ``the Hurricane Katrina
disaster area, but not so purchased or constructed on account
of Hurricane Katrina'' in subsection (b)(2)(B)(iii),
(H) by substituting ``beginning on the applicable disaster
date and ending on the date which is 5 months after the date
of the enactment of the Heartland Disaster Tax Relief Act of
2008'' for ``beginning on August 25, 2005, and ending on
February 28, 2006'' in subsection (b)(3)(A),
(I) by substituting ``qualified storm damage individual''
for ``qualified Hurricane Katrina individual'' each place it
appears,
(J) by substituting ``December 31, 2009'' for ``December
31, 2006'' in subsection (c)(2)(A),
(K) by disregarding subparagraphs (C) and (D) of subsection
(c)(3) thereof,
(L) by substituting ``beginning on the date of the
enactment of the Heartland Disaster Tax Relief Act of 2008
and ending on December 31, 2009'' for ``beginning on
September 24, 2005, and ending on December 31, 2006'' in
subsection (c)(4)(A)(i),
(M) by substituting ``the applicable disaster date'' for
``August 25, 2005'' in subsection (c)(4)(A)(ii), and
(N) by substituting ``January 1, 2010'' for ``January 1,
2007'' in subsection (d)(2)(A)(ii).
(11) Employee retention credit for employers affected by
severe storms, tornados, and flooding.--Section 1400R(a)--
(A) by substituting ``the applicable disaster date'' for
``August 28, 2005'' each place it appears,
(B) by substituting ``January 1, 2009'' for ``January 1,
2006'' both places it appears, and
(C) only with respect to eligible employers who employed an
average of not more than 200 employees on business days
during the taxable year before the applicable disaster date.
(12) Temporary suspension of limitations on charitable
contributions.--Section 1400S(a), by substituting the
following paragraph for paragraph (4) thereof:
``(4) Qualified contributions.--
``(A) In general.--For purposes of this subsection, the
term `qualified contribution' means any charitable
contribution (as defined in section 170(c)) if--
``(i) such contribution--

``(I) is paid during the period beginning on the earliest
applicable disaster date for all States and ending on
December 31, 2008, in cash to an organization described in
section 170(b)(1)(A), and
``(II) is made for relief efforts in 1 or more Midwestern
disaster areas,

``(ii) the taxpayer obtains from such organization
contemporaneous written acknowledgment (within the meaning of
section 170(f)(8)) that such contribution was used (or is to
be used) for relief efforts in 1 or more Midwestern disaster
areas, and
``(iii) the taxpayer has elected the application of this
subsection with respect to such contribution.
``(B) Exception.--Such term shall not include a
contribution by a donor if the contribution is--
``(i) to an organization described in section 509(a)(3), or
``(ii) for establishment of a new, or maintenance of an
existing, donor advised fund (as defined in section
4966(d)(2)).
``(C) Application of election to partnerships and s
corporations.--In the case of a partnership or S corporation,
the election under subparagraph (A)(iii) shall be made
separately by each partner or shareholder.''.
(13) Suspension of certain limitations on personal casualty
losses.--Section 1400S(b)(1), by substituting ``the
applicable disaster date'' for ``August 25, 2005''.
(14) Special rule for determining earned income.--Section
1400S(d)--
(A) by treating an individual as a qualified individual if
such individual's principal place of abode on the applicable
disaster date was located in a Midwestern disaster area,
(B) by treating the applicable disaster date with respect
to any such individual as the applicable date for purposes of
such subsection, and
(C) by treating an area as described in paragraph
(2)(B)(ii) thereof if the area is a Midwestern disaster area
only by reason of subsection (b)(2) of this section (relating
to areas eligible only for public assistance).
(15) Adjustments regarding taxpayer and dependency
status.--Section 1400S(e), by substituting ``2008 or 2009''
for ``2005 or 2006''.
(e) Modifications to Katrina Emergency Tax Relief Act of
2005.--The following provisions of the Katrina Emergency Tax
Relief Act of 2005 shall be applied with the following
modifications:
(1) Additional exemption for housing displaced
individual.--Section 302--
(A) by substituting ``2008 or 2009'' for ``2005 or 2006''
in subsection (a) thereof,
(B) by substituting ``Midwestern displaced individual'' for
``Hurricane Katrina displaced individual'' each place it
appears, and
(C) by treating an area as a core disaster area for
purposes of applying subsection (c) thereof if the area is a
Midwestern disaster area without regard to subsection (b)(2)
of this section (relating to areas eligible only for public
assistance).
(2) Increase in standard mileage rate.--Section 303, by
substituting ``beginning on the applicable disaster date and
ending on December 31, 2008'' for ``beginning on August 25,
2005, and ending on December 31, 2006''.
(3) Mileage reimbursements for charitable volunteers.--
Section 304--
(A) by substituting ``beginning on the applicable disaster
date and ending on December 31, 2008'' for ``beginning on
August 25, 2005, and ending on December 31, 2006'' in
subsection (a), and
(B) by substituting ``the applicable disaster date'' for
``August 25, 2005'' in subsection (a).
(4) Exclusion of certain cancellation of indebtedness
income.--Section 401--
(A) by treating an individual whose principal place of
abode on the applicable disaster date was in a Midwestern
disaster area (determined without regard to subsection (b)(2)
of this section) as an individual described in subsection
(b)(1) thereof, and by treating an individual whose principal
place of abode on the applicable disaster date was in a
Midwestern disaster area solely by reason of subsection
(b)(2) of this section as an individual described in
subsection (b)(2) thereof,
(B) by substituting ``the applicable disaster date'' for
``August 28, 2005'' both places it appears, and
(C) by substituting ``January 1, 2010'' for ``January 1,
2007'' in subsection (e).
(5) Extension of replacement period for nonrecognition of
gain.--Section 405, by substituting ``on or after the
applicable disaster date'' for ``on or after August 25,
2005''.

[[Page S9320]]

SEC. 703. REPORTING REQUIREMENTS RELATING TO DISASTER RELIEF
CONTRIBUTIONS.

(a) In General.--Section 6033(b) (relating to returns of
certain organizations described in section 501(c)(3)) is
amended by striking ``and'' at the end of paragraph (13), by
redesignating paragraph (14) as paragraph (15), and by adding
after paragraph (13) the following new paragraph:
``(14) such information as the Secretary may require with
respect to disaster relief activities, including the amount
and use of qualified contributions to which section 1400S(a)
applies, and''.
(b) Effective Date.--The amendments made by this section
shall apply to returns the due date for which (determined
without regard to any extension) occurs after December 31,
2008.

SEC. 704. TEMPORARY TAX-EXEMPT BOND FINANCING AND LOW-INCOME
HOUSING TAX RELIEF FOR AREAS DAMAGED BY
HURRICANE IKE.

(a) Tax-Exempt Bond Financing.--Section 1400N(a) of the
Internal Revenue Code of 1986 shall apply to any Hurricane
Ike disaster area in addition to any other area referenced in
such section, but with the following modifications:
(1) By substituting ``qualified Hurricane Ike disaster area
bond'' for ``qualified Gulf Opportunity Zone Bond'' each
place it appears, except that in determining whether a bond
is a qualified Hurricane Ike disaster area bond--
(A) paragraph (2)(A)(i) shall be applied by only treating
costs as qualified project costs if--
(i) in the case of a project involving a private business
use (as defined in section 141(b)(6)), either the person
using the property suffered a loss in a trade or business
attributable to Hurricane Ike or is a person designated for
purposes of this section by the Governor of the State in
which the project is located as a person carrying on a trade
or business replacing a trade or business with respect to
which another person suffered such a loss, and
(ii) in the case of a project relating to public utility
property, the project involves repair or reconstruction of
public utility property damaged by Hurricane Ike, and
(B) paragraph (2)(A)(ii) shall be applied by treating an
issue as a qualified mortgage issue only if 95 percent or
more of the net proceeds (as defined in section 150(a)(3)) of
the issue are to be used to provide financing for mortgagors
who suffered damages to their principal residences
attributable to Hurricane Ike.
(2) By substituting ``any State in which any Hurricane Ike
disaster area is located'' for ``the State of Alabama,
Louisiana, or Mississippi'' in paragraph (2)(B).
(3) By substituting ``designated for purposes of this
section (on the basis of providing assistance to areas in the
order in which such assistance is most needed)'' for
``designated for purposes of this section'' in paragraph
(2)(C).
(4) By substituting ``January 1, 2013'' for ``January 1,
2011'' in paragraph (2)(D).
(5) By substituting the following for subparagraph (A) of
paragraph (3):
``(A) Aggregate amount designated.--The maximum aggregate
face amount of bonds which may be designated under this
subsection with respect to any State shall not exceed the
product of $2,000 multiplied by the portion of the State
population which is in--
``(i) in the case of Texas, the counties of Brazoria,
Chambers, Galveston, Jefferson, and Orange, and
``(ii) in the case of Louisiana, the parishes of Calcasieu
and Cameron,
(as determined on the basis of the most recent census
estimate of resident population released by the Bureau of
Census before September 13, 2008).''.
(6) By substituting ``qualified Hurricane Ike disaster area
repair or construction'' for ``qualified GO Zone repair or
construction'' each place it appears.
(7) By substituting ``after the date of the enactment of
the Heartland Disaster Tax Relief Act of 2008 and before
January 1, 2013'' for ``after the date of the enactment of
this paragraph and before January 1, 2011'' in paragraph
(7)(C).
(8) By disregarding paragraph (8) thereof.
(9) By substituting ``any Hurricane Ike disaster area'' for
``the Gulf Opportunity Zone'' each place it appears.
(b) Low-Income Housing Credit.--Section 1400N(c) of the
Internal Revenue Code of 1986 shall apply to any Hurricane
Ike disaster area in addition to any other area referenced in
such section, but with the following modifications:
(1) Only with respect to calendar years 2008, 2009, and
2010.
(2) By substituting ``any Hurricane Ike disaster area'' for
``the Gulf Opportunity Zone'' each place it appears.
(3) By substituting ``Hurricane Ike Recovery Assistance
housing amount'' for ``Gulf Opportunity housing amount'' each
place it appears.
(4) By substituting the following for subparagraph (B) of
paragraph (1):
``(B) Hurricane ike housing amount.--For purposes of
subparagraph (A), the term `Hurricane Ike housing amount'
means, for any calendar year, the amount equal to the product
of $16.00 multiplied by the portion of the State population
which is in--
``(i) in the case of Texas, the counties of Brazoria,
Chambers, Galveston, Jefferson, and Orange, and
``(ii) in the case of Louisiana, the parishes of Calcasieu
and Cameron,
(as determined on the basis of the most recent census
estimate of resident population released by the Bureau of
Census before September 13, 2008).''.
(5) Determined without regard to paragraphs (2), (3), (4),
(5), and (6) thereof.
(c) Hurricane Ike Disaster Area.--For purposes of this
section and for applying the substitutions described in
subsections (a) and (b), the term ``Hurricane Ike disaster
area'' means an area in the State of Texas or Louisiana--
(1) with respect to which a major disaster has been
declared by the President on September 13, 2008, under
section 401 of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act by reason of Hurricane Ike, and
(2) determined by the President to warrant individual or
individual and public assistance from the Federal Government
under such Act with respect to damages attributable to
Hurricane Ike.

Subtitle B--National Disaster Relief

SEC. 706. LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED
DISASTERS.

(a) Waiver of Adjusted Gross Income Limitation.--
(1) In general.--Subsection (h) of section 165 is amended
by redesignating paragraphs (3) and (4) as paragraphs (4) and
(5), respectively, and by inserting after paragraph (2) the
following new paragraph:
``(3) Special rule for losses in federally declared
disasters.--
``(A) In general.--If an individual has a net disaster loss
for any taxable year, the amount determined under paragraph
(2)(A)(ii) shall be the sum of--
``(i) such net disaster loss, and
``(ii) so much of the excess referred to in the matter
preceding clause (i) of paragraph (2)(A) (reduced by the
amount in clause (i) of this subparagraph) as exceeds 10
percent of the adjusted gross income of the individual.
``(B) Net disaster loss.--For purposes of subparagraph (A),
the term `net disaster loss' means the excess of--
``(i) the personal casualty losses--

``(I) attributable to a federally declared disaster
occurring before January 1, 2010, and
``(II) occurring in a disaster area, over

``(ii) personal casualty gains.
``(C) Federally declared disaster.--For purposes of this
paragraph--
``(i) Federally declared disaster.--The term `federally
declared disaster' means any disaster subsequently determined
by the President of the United States to warrant assistance
by the Federal Government under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act.
``(ii) Disaster area.--The term `disaster area' means the
area so determined to warrant such assistance.''.
(2) Conforming amendments.--
(A) Section 165(h)(4)(B) (as so redesignated) is amended by
striking ``paragraph (2)'' and inserting ``paragraphs (2) and
(3)''.
(B) Section 165(i)(1) is amended by striking ``loss'' and
all that follows through ``Act'' and inserting ``loss
occurring in a disaster area (as defined by clause (ii) of
subsection (h)(3)(C)) and attributable to a federally
declared disaster (as defined by clause (i) of such
subsection)''.
(C) Section 165(i)(4) is amended by striking
``Presidentially declared disaster (as defined by section
1033(h)(3))'' and inserting ``federally declared disaster (as
defined by subsection (h)(3)(C)(i)''.
(D)(i) So much of subsection (h) of section 1033 as
precedes subparagraph (A) of paragraph (1) thereof is amended
to read as follows:
``(h) Special Rules for Property Damaged by Federally
Declared Disasters.--
``(1) Principal residences.--If the taxpayer's principal
residence or any of its contents is located in a disaster
area and is compulsorily or involuntarily converted as a
result of a federally declared disaster--''.
(ii) Paragraph (2) of section 1033(h) is amended by
striking ``investment'' and all that follows through
``disaster'' and inserting ``investment located in a disaster
area and compulsorily or involuntarily converted as a result
of a federally declared disaster''.
(iii) Paragraph (3) of section 1033(h) is amended to read
as follows:
``(3) Federally declared disaster; disaster area.--The
terms ``federally declared disaster'' and ``disaster area''
shall have the respective meaning given such terms by section
165(h)(3)(C).''.
(iv) Section 139(c)(2) is amended to read as follows:
``(2) federally declared disaster (as defined by section
165(h)(3)(C)(i)),''.
(v) Subclause (II) of section 172(b)(1)(F)(ii) is amended
by striking ``Presidentially declared disasters (as defined
in section 1033(h)(3))'' and inserting ``federally declared
disasters (as defined by subsection (h)(3)(C)(i))''.
(vi) Subclause (III) of section 172(b)(1)(F)(ii) is amended
by striking ``Presidentially declared disasters'' and
inserting ``federally declared disasters''.
(vii) Subsection (a) of section 7508A is amended by
striking ``Presidentially declared disaster (as defined in
section 1033(h)(3))'' and inserting ``federally declared
disaster (as defined by section 165(h)(3)(C)(i))''.
(b) Increase in Standard Deduction by Disaster Casualty
Loss.--
(1) In general.--Paragraph (1) of section 63(c), as amended
by the Housing Assistance Tax Act of 2008, is amended by
striking ``and'' at the end of subparagraph (B), by

[[Page S9321]]

striking the period at the end of subparagraph (C) and
inserting ``, and'', and by adding at the end the following
new subparagraph:
``(D) the disaster loss deduction.''.
(2) Disaster loss deduction.--Subsection (c) of section 63,
as amended by the Housing Assistance Tax Act of 2008, is
amended by adding at the end the following new paragraph:
``(8) Disaster loss deduction.--For the purposes of
paragraph (1), the term `disaster loss deduction' means the
net disaster loss (as defined in section 165(h)(3)(B)).''.
(3) Allowance in computing alternative minimum taxable
income.--Subparagraph (E) of section 56(b)(1) is amended by
adding at the end the following new sentence: ``The preceding
sentence shall not apply to so much of the standard deduction
as is determined under section 63(c)(1)(D).''.
(c) Increase in Limitation on Individual Loss Per
Casualty.--Paragraph (1) of section 165(h) is amended by
striking ``$100'' and inserting ``$500 ($100 for taxable
years beginning after December 31, 2009)''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to disasters
declared in taxable years beginning after December 31, 2007.
(2) Increase in limitation on individual loss per
casualty.--The amendment made by subsection (c) shall apply
to taxable years beginning after December 31, 2008.

SEC. 707. EXPENSING OF QUALIFIED DISASTER EXPENSES.

(a) In General.--Part VI of subchapter B of chapter 1 is
amended by inserting after section 198 the following new
section:

``SEC. 198A. EXPENSING OF QUALIFIED DISASTER EXPENSES.

``(a) In General.--A taxpayer may elect to treat any
qualified disaster expenses which are paid or incurred by the
taxpayer as an expense which is not chargeable to capital
account. Any expense which is so treated shall be allowed as
a deduction for the taxable year in which it is paid or
incurred.
``(b) Qualified Disaster Expense.--For purposes of this
section, the term `qualified disaster expense' means any
expenditure--
``(1) which is paid or incurred in connection with a trade
or business or with business-related property,
``(2) which is--
``(A) for the abatement or control of hazardous substances
that were released on account of a federally declared
disaster occurring before January 1, 2010,
``(B) for the removal of debris from, or the demolition of
structures on, real property which is business-related
property damaged or destroyed as a result of a federally
declared disaster occurring before such date, or
``(C) for the repair of business-related property damaged
as a result of a federally declared disaster occurring before
such date, and
``(3) which is otherwise chargeable to capital account.
``(c) Other Definitions.--For purposes of this section--
``(1) Business-related property.--The term `business-
related property' means property--
``(A) held by the taxpayer for use in a trade or business
or for the production of income, or
``(B) described in section 1221(a)(1) in the hands of the
taxpayer.
``(2) Federally declared disaster.--The term `federally
declared disaster' has the meaning given such term by section
165(h)(3)(C)(i).
``(d) Deduction Recaptured as Ordinary Income on Sale,
etc.--Solely for purposes of section 1245, in the case of
property to which a qualified disaster expense would have
been capitalized but for this section--
``(1) the deduction allowed by this section for such
expense shall be treated as a deduction for depreciation, and
``(2) such property (if not otherwise section 1245
property) shall be treated as section 1245 property solely
for purposes of applying section 1245 to such deduction.
``(e) Coordination With Other Provisions.--Sections 198,
280B, and 468 shall not apply to amounts which are treated as
expenses under this section.
``(f) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by inserting after
the item relating to section 198 the following new item:

``Sec. 198A. Expensing of Qualified Disaster Expenses.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2007 in connection with disaster declared after such date.

SEC. 708. NET OPERATING LOSSES ATTRIBUTABLE TO FEDERALLY
DECLARED DISASTERS.

(a) In General.--Paragraph (1) of section 172(b) is amended
by adding at the end the following new subparagraph:
``(J) Certain losses attributable federally declared
disasters.--In the case of a taxpayer who has a qualified
disaster loss (as defined in subsection (j)), such loss shall
be a net operating loss carryback to each of the 5 taxable
years preceding the taxable year of such loss.''.
(b) Qualified Disaster Loss.--Section 172 is amended by
redesignating subsections (j) and (k) as subsections (k) and
(l), respectively, and by inserting after subsection (i) the
following new subsection:
``(j) Rules Relating to Qualified Disaster Losses.--For
purposes of this section--
``(1) In general.--The term `qualified disaster loss' means
the lesser of--
``(A) the sum of--
``(i) the losses allowable under section 165 for the
taxable year--

``(I) attributable to a federally declared disaster (as
defined in section 165(h)(3)(C)(i)) occurring before January
1, 2010, and
``(II) occurring in a disaster area (as defined in section
165(h)(3)(C)(ii)), and

``(ii) the deduction for the taxable year for qualified
disaster expenses which is allowable under section 198A(a) or
which would be so allowable if not otherwise treated as an
expense, or
``(B) the net operating loss for such taxable year.
``(2) Coordination with subsection (b)(2).--For purposes of
applying subsection (b)(2), a qualified disaster loss for any
taxable year shall be treated in a manner similar to the
manner in which a specified liability loss is treated.
``(3) Election.--Any taxpayer entitled to a 5-year
carryback under subsection (b)(1)(J) from any loss year may
elect to have the carryback period with respect to such loss
year determined without regard to subsection (b)(1)(J). Such
election shall be made in such manner as may be prescribed by
the Secretary and shall be made by the due date (including
extensions of time) for filing the taxpayer's return for the
taxable year of the net operating loss. Such election, once
made for any taxable year, shall be irrevocable for such
taxable year.
``(4) Exclusion.--The term `qualified disaster loss' shall
not include any loss with respect to any property described
in section 1400N(p)(3).''.
(c) Loss Deduction Allowed in Computing Alternative Minimum
Taxable Income.--Subsection (d) of section 56 is amended by
adding at the end the following new paragraph:
``(3) Net operating loss attributable to federally declared
disasters.--In the case of a taxpayer which has a qualified
disaster loss (as defined by section 172(b)(1)(J)) for the
taxable year, paragraph (1) shall be applied by increasing
the amount determined under subparagraph (A)(ii)(I) thereof
by the sum of the carrybacks and carryovers of such loss.''.
(d) Conforming Amendments.--
(1) Clause (ii) of section 172(b)(1)(F) is amended by
inserting ``or qualified disaster loss (as defined in
subsection (j))'' before the period at the end of the last
sentence.
(2) Paragraph (1) of section 172(i) is amended by adding at
the end the following new flush sentence:
``Such term shall not include any qualified disaster loss (as
defined in subsection (j)).''.
(e) Effective Date.--The amendments made by this section
shall apply to losses arising in taxable years beginning
after December 31, 2007, in connection with disasters
declared after such date.

SEC. 709. WAIVER OF CERTAIN MORTGAGE REVENUE BOND
REQUIREMENTS FOLLOWING FEDERALLY DECLARED
DISASTERS.

(a) In General.--Subsection (k) of section 143 is amended
by adding at the end the following new paragraph:
``(12) Special rules for residences destroyed in federally
declared disasters.--
``(A) Principal residence destroyed.--At the election of
the taxpayer, if the principal residence (within the meaning
of section 121) of such taxpayer is--
``(i) rendered unsafe for use as a residence by reason of a
federally declared disaster occurring before January 1, 2010,
or
``(ii) demolished or relocated by reason of an order of the
government of a State or political subdivision thereof on
account of a federally declared disaster occurring before
such date,
then, for the 2-year period beginning on the date of the
disaster declaration, subsection (d)(1) shall not apply with
respect to such taxpayer and subsection (e) shall be applied
by substituting `110' for `90' in paragraph (1) thereof.
``(B) Principal residence damaged.--
``(i) In general.--At the election of the taxpayer, if the
principal residence (within the meaning of section 121) of
such taxpayer was damaged as the result of a federally
declared disaster occurring before January 1, 2010, any
owner-financing provided in connection with the repair or
reconstruction of such residence shall be treated as a
qualified rehabilitation loan.
``(ii) Limitation.--The aggregate owner-financing to which
clause (i) applies shall not exceed the lesser of--

``(I) the cost of such repair or reconstruction, or
``(II) $150,000.

``(C) Federally declared disaster.--For purposes of this
paragraph, the term `federally declared disaster' has the
meaning given such term by section 165(h)(3)(C)(i).
``(D) Election; denial of double benefit.--
``(i) Election.--An election under this paragraph may not
be revoked except with the consent of the Secretary.

[[Page S9322]]

``(ii) Denial of double benefit.--If a taxpayer elects the
application of this paragraph, paragraph (11) shall not apply
with respect to the purchase or financing of any residence by
such taxpayer.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to disasters occurring after December 31, 2007.

SEC. 710. SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED
DISASTER PROPERTY.

(a) In General.--Section 168, as amended by this Act, is
amended by adding at the end the following new subsection:
``(n) Special Allowance for Qualified Disaster Assistance
Property.--
``(1) In general.--In the case of any qualified disaster
assistance property--
``(A) the depreciation deduction provided by section 167(a)
for the taxable year in which such property is placed in
service shall include an allowance equal to 50 percent of the
adjusted basis of the qualified disaster assistance property,
and
``(B) the adjusted basis of the qualified disaster
assistance property shall be reduced by the amount of such
deduction before computing the amount otherwise allowable as
a depreciation deduction under this chapter for such taxable
year and any subsequent taxable year.
``(2) Qualified disaster assistance property.--For purposes
of this subsection--
``(A) In general.--The term `qualified disaster assistance
property' means any property--
``(i)(I) which is described in subsection (k)(2)(A)(i), or
``(II) which is nonresidential real property or residential
rental property,
``(ii) substantially all of the use of which is--

``(I) in a disaster area with respect to a federally
declared disaster occurring before January 1, 2010, and
``(II) in the active conduct of a trade or business by the
taxpayer in such disaster area,

``(iii) which--

``(I) rehabilitates property damaged, or replaces property
destroyed or condemned, as a result of such federally
declared disaster, except that, for purposes of this clause,
property shall be treated as replacing property destroyed or
condemned if, as part of an integrated plan, such property
replaces property which is included in a continuous area
which includes real property destroyed or condemned, and
``(II) is similar in nature to, and located in the same
county as, the property being rehabilitated or replaced,

``(iv) the original use of which in such disaster area
commences with an eligible taxpayer on or after the
applicable disaster date,
``(v) which is acquired by such eligible taxpayer by
purchase (as defined in section 179(d)) on or after the
applicable disaster date, but only if no written binding
contract for the acquisition was in effect before such date,
and
``(vi) which is placed in service by such eligible taxpayer
on or before the date which is the last day of the third
calendar year following the applicable disaster date (the
fourth calendar year in the case of nonresidential real
property and residential rental property).
``(B) Exceptions.--
``(i) Other bonus depreciation property.--The term
`qualified disaster assistance property' shall not include--

``(I) any property to which subsection (k) (determined
without regard to paragraph (4)), (l), or (m) applies,
``(II) any property to which section 1400N(d) applies, and
``(III) any property described in section 1400N(p)(3).

``(ii) Alternative depreciation property.--The term
`qualified disaster assistance property' shall not include
any property to which the alternative depreciation system
under subsection (g) applies, determined without regard to
paragraph (7) of subsection (g) (relating to election to have
system apply).
``(iii) Tax-exempt bond financed property.--Such term shall
not include any property any portion of which is financed
with the proceeds of any obligation the interest on which is
exempt from tax under section 103.
``(iv) Qualified revitalization buildings.--Such term shall
not include any qualified revitalization building with
respect to which the taxpayer has elected the application of
paragraph (1) or (2) of section 1400I(a).
``(v) Election out.--If a taxpayer makes an election under
this clause with respect to any class of property for any
taxable year, this subsection shall not apply to all property
in such class placed in service during such taxable year.
``(C) Special rules.--For purposes of this subsection,
rules similar to the rules of subparagraph (E) of subsection
(k)(2) shall apply, except that such subparagraph shall be
applied--
``(i) by substituting `the applicable disaster date' for
`December 31, 2007' each place it appears therein,
``(ii) without regard to `and before January 1, 2009' in
clause (i) thereof, and
``(iii) by substituting `qualified disaster assistance
property' for `qualified property' in clause (iv) thereof.
``(D) Allowance against alternative minimum tax.--For
purposes of this subsection, rules similar to the rules of
subsection (k)(2)(G) shall apply.
``(3) Other definitions.--For purposes of this subsection--
``(A) Applicable disaster date.--The term `applicable
disaster date' means, with respect to any federally declared
disaster, the date on which such federally declared disaster
occurs.
``(B) Federally declared disaster.--The term `federally
declared disaster' has the meaning given such term under
section 165(h)(3)(C)(i).
``(C) Disaster area.--The term `disaster area' has the
meaning given such term under section 165(h)(3)(C)(ii).
``(D) Eligible taxpayer.--The term `eligible taxpayer'
means a taxpayer who has suffered an economic loss
attributable to a federally declared disaster.
``(4) Recapture.--For purposes of this subsection, rules
similar to the rules under section 179(d)(10) shall apply
with respect to any qualified disaster assistance property
which ceases to be qualified disaster assistance property.''.
(b) Effective Date.--The amendment made by this section
shall apply to property placed in service after December 31,
2007, with respect disasters declared after such date.

SEC. 711. INCREASED EXPENSING FOR QUALIFIED DISASTER
ASSISTANCE PROPERTY.

(a) In General.--Section 179 is amended by adding at the
end the following new subsection:
``(e) Special Rules for Qualified Disaster Assistance
Property.--
``(1) In general.--For purposes of this section--
``(A) the dollar amount in effect under subsection (b)(1)
for the taxable year shall be increased by the lesser of--
``(i) $100,000, or
``(ii) the cost of qualified section 179 disaster
assistance property placed in service during the taxable
year, and
``(B) the dollar amount in effect under subsection (b)(2)
for the taxable year shall be increased by the lesser of--
``(i) $600,000, or
``(ii) the cost of qualified section 179 disaster
assistance property placed in service during the taxable
year.
``(2) Qualified section 179 disaster assistance property.--
For purposes of this subsection, the term `qualified section
179 disaster assistance property' means section 179 property
(as defined in subsection (d)) which is qualified disaster
assistance property (as defined in section 168(n)(2)).
``(3) Coordination with empowerment zones and renewal
communities.--For purposes of sections 1397A and 1400J,
qualified section 179 disaster assistance property shall not
be treated as qualified zone property or qualified renewal
property, unless the taxpayer elects not to take such
qualified section 179 disaster assistance property into
account for purposes of this subsection.
``(4) Recapture.--For purposes of this subsection, rules
similar to the rules under subsection (d)(10) shall apply
with respect to any qualified section 179 disaster assistance
property which ceases to be qualified section 179 disaster
assistance property.''.
(b) Effective Date.--The amendment made by this section
shall apply to property placed in service after December 31,
2007, with respect disasters declared after such date.

SEC. 712. COORDINATION WITH HEARTLAND DISASTER RELIEF.

The amendments made by this subtitle, other than the
amendments made by sections 706(a)(2), 710, and 711, shall
not apply to any disaster described in section 702(c)(1)(A),
or to any expenditure or loss resulting from such disaster.

TITLE VIII--SPENDING REDUCTIONS AND APPROPRIATE REVENUE RAISERS FOR NEW
TAX RELIEF POLICY

SEC. 801. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX
INDIFFERENT PARTIES.

(a) In General.--Subpart B of part II of subchapter E of
chapter 1 is amended by inserting after section 457 the
following new section:

``SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN
TAX INDIFFERENT PARTIES.

``(a) In General.--Any compensation which is deferred under
a nonqualified deferred compensation plan of a nonqualified
entity shall be includible in gross income when there is no
substantial risk of forfeiture of the rights to such
compensation.
``(b) Nonqualified Entity.--For purposes of this section,
the term `nonqualified entity' means--
``(1) any foreign corporation unless substantially all of
its income is--
``(A) effectively connected with the conduct of a trade or
business in the United States, or
``(B) subject to a comprehensive foreign income tax, and
``(2) any partnership unless substantially all of its
income is allocated to persons other than--
``(A) foreign persons with respect to whom such income is
not subject to a comprehensive foreign income tax, and
``(B) organizations which are exempt from tax under this
title.
``(c) Determinability of Amounts of Compensation.--
``(1) In general.--If the amount of any compensation is not
determinable at the

[[Page S9323]]

time that such compensation is otherwise includible in gross
income under subsection (a)--
``(A) such amount shall be so includible in gross income
when determinable, and
``(B) the tax imposed under this chapter for the taxable
year in which such compensation is includible in gross income
shall be increased by the sum of--
``(i) the amount of interest determined under paragraph
(2), and
``(ii) an amount equal to 20 percent of the amount of such
compensation.
``(2) Interest.--For purposes of paragraph (1)(B)(i), the
interest determined under this paragraph for any taxable year
is the amount of interest at the underpayment rate under
section 6621 plus 1 percentage point on the underpayments
that would have occurred had the deferred compensation been
includible in gross income for the taxable year in which
first deferred or, if later, the first taxable year in which
such deferred compensation is not subject to a substantial
risk of forfeiture.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Substantial risk of forfeiture.--
``(A) In general.--The rights of a person to compensation
shall be treated as subject to a substantial risk of
forfeiture only if such person's rights to such compensation
are conditioned upon the future performance of substantial
services by any individual.
``(B) Exception for compensation based on gain recognized
on an investment asset.--
``(i) In general.--To the extent provided in regulations
prescribed by the Secretary, if compensation is determined
solely by reference to the amount of gain recognized on the
disposition of an investment asset, such compensation shall
be treated as subject to a substantial risk of forfeiture
until the date of such disposition.
``(ii) Investment asset.--For purposes of clause (i), the
term `investment asset' means any single asset (other than an
investment fund or similar entity)--

``(I) acquired directly by an investment fund or similar
entity,
``(II) with respect to which such entity does not (nor does
any person related to such entity) participate in the active
management of such asset (or if such asset is an interest in
an entity, in the active management of the activities of such
entity), and
``(III) substantially all of any gain on the disposition of
which (other than such deferred compensation) is allocated to
investors in such entity.

``(iii) Coordination with special rule.--Paragraph (3)(B)
shall not apply to any compensation to which clause (i)
applies.
``(2) Comprehensive foreign income tax.--The term
`comprehensive foreign income tax' means, with respect to any
foreign person, the income tax of a foreign country if--
``(A) such person is eligible for the benefits of a
comprehensive income tax treaty between such foreign country
and the United States, or
``(B) such person demonstrates to the satisfaction of the
Secretary that such foreign country has a comprehensive
income tax.
``(3) Nonqualified deferred compensation plan.--
``(A) In general.--The term `nonqualified deferred
compensation plan' has the meaning given such term under
section 409A(d), except that such term shall include any plan
that provides a right to compensation based on the
appreciation in value of a specified number of equity units
of the service recipient.
``(B) Exception.--Compensation shall not be treated as
deferred for purposes of this section if the service provider
receives payment of such compensation not later than 12
months after the end of the taxable year of the service
recipient during which the right to the payment of such
compensation is no longer subject to a substantial risk of
forfeiture.
``(4) Exception for certain compensation with respect to
effectively connected income.--In the case a foreign
corporation with income which is taxable under section 882,
this section shall not apply to compensation which, had such
compensation had been paid in cash on the date that such
compensation ceased to be subject to a substantial risk of
forfeiture, would have been deductible by such foreign
corporation against such income.
``(5) Application of rules.--Rules similar to the rules of
paragraphs (5) and (6) of section 409A(d) shall apply.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including regulations
disregarding a substantial risk of forfeiture in cases where
necessary to carry out the purposes of this section.''.
(b) Conforming Amendment.--Section 26(b)(2), as amended by
the Housing Assistance Tax Act of 2008, is amended by
striking ``and'' at the end of subparagraph (V), by striking
the period at the end of subparagraph (W) and inserting ``,
and'', and by adding at the end the following new
subparagraph:
``(X) section 457A(c)(1)(B) (relating to determinability of
amounts of compensation).''.
(c) Clerical Amendment.--The table of sections of subpart B
of part II of subchapter E of chapter 1 is amended by
inserting after the item relating to section 457 the
following new item:

``Sec. 457A. Nonqualified deferred compensation from certain tax
indifferent parties.''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to amounts deferred which are attributable to services
performed after December 31, 2008.
(2) Application to existing deferrals.--In the case of any
amount deferred to which the amendments made by this section
do not apply solely by reason of the fact that the amount is
attributable to services performed before January 1, 2009, to
the extent such amount is not includible in gross income in a
taxable year beginning before 2018, such amounts shall be
includible in gross income in the later of--
(A) the last taxable year beginning before 2018, or
(B) the taxable year in which there is no substantial risk
of forfeiture of the rights to such compensation (determined
in the same manner as determined for purposes of section 457A
of the Internal Revenue Code of 1986, as added by this
section).
(3) Accelerated payments.--No later than 120 days after the
date of the enactment of this Act, the Secretary shall issue
guidance providing a limited period of time during which a
nonqualified deferred compensation arrangement attributable
to services performed on or before December 31, 2008, may,
without violating the requirements of section 409A(a) of the
Internal Revenue Code of 1986, be amended to conform the date
of distribution to the date the amounts are required to be
included in income.
(4) Certain back-to-back arrangements.--If the taxpayer is
also a service recipient and maintains one or more
nonqualified deferred compensation arrangements for its
service providers under which any amount is attributable to
services performed on or before December 31, 2008, the
guidance issued under paragraph (4) shall permit such
arrangements to be amended to conform the dates of
distribution under such arrangement to the date amounts are
required to be included in the income of such taxpayer under
this subsection.
(5) Accelerated payment not treated as material
modification.--Any amendment to a nonqualified deferred
compensation arrangement made pursuant to paragraph (4) or
(5) shall not be treated as a material modification of the
arrangement for purposes of section 409A of the Internal
Revenue Code of 1986.
______