In the nature of a substitute.

SA 353. Mr. ENSIGN (for himself, Mr. McConnell, and Mr. Alexander)
proposed an amendment to amendment SA 98 proposed by Mr. Inouye (for
himself and Mr. Baucus) to the bill H.R. 1, making supplemental
appropriations for job preservation and creation, infrastructure
investment, energy efficiency and science, assistance to the
unemployed, and State and local fiscal stabilization, for fiscal year
ending September 30, 2009, and for other purposes; as follows:

In lieu of the matter proposed to be inserted, insert the
following:

SECTION 1. SHORT TITLE, ETC.

(a) Short Title.--This Act may be cited as the``Fix Housing
First Act''.
(b) References.--Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other
provision, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code of
1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title, etc.

TITLE I--FIX HOUSING FIRST

Subtitle A--Homeowner Security Program

Sec. 1001. Homeowner security program.

[[Page S1602]]

Sec. 1002. Termination.
Sec. 1003. Other limitations
Sec. 1004. Study on interest rates.
Sec. 1005. Reports to Congress.
Sec. 1006. Funding.
Sec. 1007. Other mortgage purchases.

Subtitle B--Foreclosure Mitigation

Sec. 1011. Definitions.
Sec. 1012. Payments to eligible servicers authorized.
Sec. 1013. Compensation for aggrieved investors.
Sec. 1014. Authorization of appropriations.
Sec. 1015. Sunset of authority.

Subtitle C--Credit for Certain Home Purchases

Sec. 1021. Credit for certain home purchases.

TITLE II--MIDDLE CLASS TAX RELIEF

Sec. 2001. 10 percent rate bracket for individuals reduced to 5 percent
for 2009 and 2010.
Sec. 2002. 15 percent rate bracket for individuals reduced to 10
percent for 2009 and 2010.

TITLE III--BUSINESS TAX RELIEF

Subtitle A--Temporary Investment Incentives

Sec. 3001. Special allowance for certain property acquired during 2009.
Sec. 3002. Temporary increase in limitations on expensing of certain
depreciable business assets.

Subtitle B--5-Year Carryback of Operating Losses

Sec. 3101. 5-year carryback of operating losses.
Sec. 3102. Exception for TARP recipients.

Subtitle C--Incentives for New Jobs

Sec. 3201. Incentives to hire unemployed veterans.

Subtitle D--Cancellation of Indebtedness

Sec. 3301. Deferral and ratable inclusion of income arising from
indebtedness discharged by the repurchase of a debt
instrument.

Subtitle E--Qualified Small Business Stock

Sec. 3401. Modifications to exclusion for gain from certain small
business stock.

Subtitle F--S Corporations

Sec. 3501. Temporary reduction in recognition period for built-in gains
tax.

Subtitle G--Broadband Incentives

Sec. 3601. Broadband Internet access tax credit.

Subtitle H--Clarification of Regulations Related to Limitations on
Certain Built-in Losses Following an Ownership Change

Sec. 3701. Clarification of regulations related to limitations on
certain built-in losses following an ownership change.

TITLE I--FIX HOUSING FIRST

Subtitle A--Homeowner Security Program

SEC. 1001. HOMEOWNER SECURITY PROGRAM.

(a) Establishment of Program.--The Secretary of the
Treasury (in this subtitle referred to as the ``Secretary'')
shall, not later than 1 month after the date of enactment of
this Act, in consultation with the Board of Governors of the
Federal Reserve System, develop and implement a comprehensive
homeowner security program in accordance with this subtitle,
but only after making a finding that implementing such a
program shall not disrupt the ability of the Federal
Government to fund regular operations of the Government or
not adversely affect the credit rating of debt instruments
issued by the Government.
(b) Criteria.--The homeowner security program developed
under this subtitle (in this subtitle referred to as the
``program'') shall--
(1) require the Federal Government to take action to
restore mortgage interest rates for 30-year fixed mortgages
to amounts that are comparable to the return on obligations
of the Treasury having 10-year periods of maturity, based on
the average of the spreads of such rates over the 20-year
period preceding the date of enactment of this Act;
(2) include specific measures to minimize cost and risk to
the taxpayer and minimize market distortions;
(3) be limited to--
(A) providing funds to the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation
from the fund established under section 1006 for the purpose
of purchasing newly issued mortgages, bonds, or mortgage-
backed securities under this subtitle; and
(B) the payment of applicable prepayment or other fees or
penalties associated with underlying mortgage loans;
(4) limit such action to conforming loans, as determined by
the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation, using conforming loan limits
in effect for 2008;
(5) apply such action only--
(A) to creditworthy borrowers, as determined after an
evaluation of debt to income ratio, credit rating, income,
employment history, and other relevant information, who are
current in payments on outstanding mortgage obligations;
(B) subject to a new, independent appraisal of the property
securing the obligation; and
(C) with respect to mortgage loans that are--
(i) secured by the single-family, primary residence of the
borrower; and
(ii) held or backed by--

(I) the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation; or
(II) any another person, only if the loan-to-value ratio on
the property securing the loan is not more than 95 percent;

(6) ensure availability of such mortgage loans for home
purchase regardless of the type or size of financial
institution that acts as a loan originator or a portfolio
lender, taking into account the differences in the cost of
funds and other factors when executing the program;
(7) allow new purchases and refinanced loans to qualify for
such action; and
(8) result in the redemption of the vast majority of
residential mortgage backed securities that are currently
held in the marketplace.
(c) Authority to Pay Certain Fees.--Funds made available to
carry out this subtitle may be used to pay loan origination
fees, if the Secretary determines that such payments are
necessary to maximize the economic benefit of the program.
(d) Additional Considerations.--In developing the program
under this subtitle, the Secretary shall consider whether
refinancings under the program should be in the form of
recourse or nonrecourse loans.

SEC. 1002. TERMINATION.

The program developed under section 1001, and the authority
of the Secretary under this subtitle, shall terminate on
December 31, 2010, or such earlier date, if the Secretary
determines that no further economic benefit can be achieved
or can't be achieved by the private market.

SEC. 1003. OTHER LIMITATIONS.

(a) Resale.--If the Secretary, the Federal National
Mortgage Association, or the Federal Home Loan Mortgage
Corporation repackages and sells mortgages funded under the
program developed under this subtitle, such mortgages shall
be segregated from other mortgages not so funded, and shall
be identified as such.
(b) Information Available to Borrowers.--The rules of the
Secretary under this subtitle shall assure the ability of the
homeowner with respect to a mortgage loan refinanced under
the homeowner security program to ascertain the identity of
the owner or holder of the mortgage, including upon resale of
the mortgage loan.
(c) Authority of the Secretary.--The Secretary is
authorized to issue such rules to carry out this subtitle as
the Secretary determines are appropriate, including measures
designed to address problems that have contributed to the
mortgage crisis, and to prevent such future crises.

SEC. 1004. STUDY ON INTEREST RATES.

In carrying out this subtitle, the Secretary shall--
(1) conduct an economic study of reducing mortgage interest
rates, estimating the impact on the mortgage delinquencies
and foreclosures, housing prices, and credit markets; and
(2) develop clear metrics for the homeowner security
program.

SEC. 1005. REPORTS TO CONGRESS.

The Secretary shall submit a report to Congress once every
3 months on the development and implementation of the program
required by this subtitle, together with any necessary
legislative recommendations.

SEC. 1006. FUNDING.

(a) Establishment of Treasury Fund.--The Secretary shall
establish, within the Treasury of the United States, a fund
comprised of the proceeds to the United States from the sale
of Treasury bills having 30-year periods of maturity.
(b) Appropriation.--There is appropriated to the Secretary
from the fund created under subsection (a) to carry out this
subtitle, $300,000,000,000, to remain available until
expended.
(c) Termination of Fund.--The fund established under this
section shall remain in effect for such period as any
obligation under this subtitle remains outstanding, and shall
be terminated when all such obligations are repaid.

SEC. 1007. OTHER MORTGAGE PURCHASES.

Nothing in this subtitle shall preclude the Federal
National Mortgage Association or the Federal Home Loan
Mortgage Corporation from using funds not appropriated under
this subtitle for the purpose of purchasing mortgage loans.

Subtitle B--Foreclosure Mitigation

SEC. 1011. DEFINITIONS.

For purposes of this subtitle--
(1) the term ``securitized mortgages'' means residential
mortgages that have been pooled by a securitization vehicle;
(2) the term ``securitization vehicle'' means a trust,
corporation, partnership, limited liability entity, special
purpose entity, or other structure that--
(A) is the issuer, or is created by the issuer, of mortgage
pass-through certificates, participation certificates,
mortgage-backed securities, or other similar securities
backed by a pool of assets that includes residential mortgage
loans;
(B) holds all of the mortgage loans which are the basis for
any vehicle described in subparagraph (A); and
(C) has not issued securities that are guaranteed by the
Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or the Government National Mortgage
Association;
(3) the term ``servicer'' means a servicer of securitized
mortgages;

[[Page S1603]]

(4) the term ``eligible servicer'' means a servicer of
pooled and securitized residential mortgages, all of which
are eligible mortgages;
(5) the term ``eligible mortgage'' means a residential
mortgage, the principal amount of which did not exceed the
conforming loan size limit that was in existence at the time
of origination for a comparable dwelling, as established by
the Federal National Mortgage Association;
(6) the term ``Secretary'' means the Secretary of the
Treasury;
(7) the term ``effective term of the subtitle'' means the
period beginning on the effective date of this subtitle and
ending on December 31, 2011;
(8) the term ``incentive fee'' means the monthly payment to
eligible servicers, as determined under section 1012(a);
(9) the term ``Office'' means the Office of Aggrieved
Investor Claims established under section 1013(a); and
(10) the term ``prepayment fee'' means the payment to
eligible servicers, as determined under section 1012(b).

SEC. 1012. PAYMENTS TO ELIGIBLE SERVICERS AUTHORIZED.

(a) Authority.--The Secretary is authorized during the
effective term of the subtitle, to make payments to eligible
servicers in an amount not to exceed an aggregate of
$10,000,000,000, subject to the terms and conditions
established under this subtitle.
(b) Fees Paid to Eligible Servicers.--
(1) In general.--During the effective term of the subtitle,
eligible servicers may collect monthly fee payments,
consistent with the limitation in paragraph (2).
(2) Conditions.--For every mortgage that was--
(A) not prepaid during a month, an eligible servicer may
collect an incentive fee equal to 10 percent of mortgage
payments received during that month, not to exceed $60 per
loan; and
(B) prepaid during a month, an eligible servicer may
collect a one-time prepayment fee equal to 12 times the
amount of the incentive fee for the preceding month.
For purposes of subparagraph (A), total fees which may be
collected for any mortgage may not exceed $1,000.
(c) Safe Harbor.--Notwithstanding any other provision of
law, and notwithstanding any investment contract between a
servicer and a securitization vehicle, a servicer--
(1) owes any duty to maximize the net present value of the
pooled mortgages in the securitization vehicle to all
investors and parties having a direct or indirect interest in
such vehicle, and not to any individual party or group of
parties; and
(2) shall be deemed to act in the best interests of all
such investors and parties if the servicer agrees to or
implements a modification, workout, or other loss mitigation
plan for a residential mortgage or a class of residential
mortgages that constitutes a part or all of the pooled
mortgages in such securitization vehicle, if--
(A) default on the payment of such mortgage has occurred or
is reasonably foreseeable;
(B) the property securing such mortgage is occupied by the
mortgagor of such mortgage; and
(C) the servicer reasonably and in good faith believes that
the anticipated recovery on the principal outstanding
obligation of the mortgage under the modification or workout
plan exceeds, on a net present value basis, the anticipated
recovery on the principal outstanding obligation of the
mortgage through foreclosure;
(3) shall not be obligated to repurchase loans from, or
otherwise make payments to, the securitization vehicle on
account of a modification, workout, or other loss mitigation
plan that satisfies the conditions of paragraph (2); and
(4) if it acts in a manner consistent with the duties set
forth in paragraphs (1) and (2), shall not be liable for
entering into a modification or workout plan to any person--
(A) based on ownership by that person of a residential
mortgage loan or any interest in a pool of residential
mortgage loans, or in securities that distribute payments out
of the principal, interest, and other payments in loans in
the pool;
(B) who is obligated to make payments determined in
reference to any loan or any interest referred to in
subparagraph (A); or
(C) that insures any loan or any interest referred to in
subparagraph (A) under any provision of law or regulation of
the United States or any State or political subdivision
thereof.
(d) Legal Costs.--If an unsuccessful suit is brought by a
person described in subsection (d)(4), that person shall bear
the actual legal costs of the servicer, including reasonable
attorney fees and expert witness fees, incurred in good
faith.
(e) Reporting Requirements.--
(1) In general.--Each servicer shall report regularly, not
less frequently than monthly, to the Secretary on the extent
and scope of the loss mitigation activities of the mortgage
owner.
(2) Content.--Each report required by this subsection shall
include--
(A) the number of residential mortgage loans receiving loss
mitigation that have become performing loans;
(B) the number of residential mortgage loans receiving loss
mitigation that have proceeded to foreclosure;
(C) the total number of foreclosures initiated during the
reporting period;
(D) data on loss mitigation activities, disaggregated to
reflect whether the loss mitigation was in the form of--
(i) a waiver of any late payment charge, penalty interest,
or any other fees or charges, or any combination thereof;
(ii) the establishment of a repayment plan under which the
homeowner resumes regularly scheduled payments and pays
additional amounts at scheduled intervals to cure the
delinquency;
(iii) forbearance under the loan that provides for a
temporary reduction in or cessation of monthly payments,
followed by a reamortization of the amounts due under the
loan, including arrearage, and a new schedule of repayment
amounts;
(iv) waiver, modification, or variation of any material
term of the loan, including short-term, long-term, or life-
of-loan modifications that change the interest rate, forgive
the payment of principal or interest, or extend the final
maturity date of the loan;
(v) short refinancing of the loan consisting of acceptance
of payment from or on behalf of the homeowner of an amount
less than the amount alleged to be due and owing under the
loan, including principal, interest, and fees, in full
satisfaction of the obligation under such loan and as part of
a refinance transaction in which the property is intended to
remain the principal residence of the homeowner;
(vi) acquisition of the property by the owner or servicer
by deed in lieu of foreclosure;
(vii) short sale of the principal residence that is subject
to the lien securing the loan;
(viii) assumption of the obligation of the homeowner under
the loan by a third party;
(ix) cancellation or postponement of a foreclosure sale to
allow the homeowner additional time to sell the property; or
(x) any other loss mitigation activity not covered; and
(E) such other information as the Secretary determines to
be relevant.
(3) Public availability of reports.--After removing
information that would compromise the privacy interests of
mortgagors, the Secretary shall make public the reports
required by this subsection.

SEC. 1013. COMPENSATION FOR AGGRIEVED INVESTORS.

(a) In General.--
(1) Compensation.--Each injured person shall be entitled to
receive from the United States--
(A) compensation for injury suffered by the injured person
as a result of loan modifications made pursuant to this
subtitle; and
(B) damages described in subsection (d)(4), as determined
by the Secretary of the Treasury.
(2) Office of aggrieved investor claims.--
(A) In general.--There is established within the Department
of the Treasury an Office of Aggrieved Investor Claims.
(B) Purpose.--The Office shall receive, process, and pay
claims in accordance with this section.
(C) Funding.--The Office--
(i) shall be funded from funds made available to the
Secretary under this section;
(ii) may reimburse other Federal agencies for claims
processing support and assistance;
(iii) may appoint and fix the compensation of such
temporary personnel as may be necessary, without regard to
the provisions of title 5, United States Code, governing
appointments in competitive service; and
(iv) upon the request of the Secretary, the head of any
Federal department or agency may detail, on a reimbursable
basis, any of the personnel of that department or agency to
the Department of Treasury to assist it in carrying out its
duties under this section.
(3) Option to appoint independent claims manager.--The
Secretary may appoint an Independent Claims Manager--
(A) to head the Office; and
(B) to assume the duties of the Secretary under this
section.
(b) Submission of Claims.--Not later than 2 years after the
date on which regulations are first promulgated under
subsection (f), an injured person may submit to the Secretary
a written claim for one or more injuries suffered by the
injured person in accordance with such requirements as the
Secretary determines to be appropriate.
(c) Investigation of Claims.--
(1) In general.--The Secretary shall, on behalf of the
United States, investigate, consider, ascertain, adjust,
determine, grant, deny, or settle any claim for money damages
asserted under subsection (b).
(2) Extent of damages.--Any payment under this section--
(A) shall be limited to actual compensatory damages
measured by injuries suffered; and
(B) shall not include--
(i) interest before settlement or payment of a claim; or
(ii) punitive damages.
(d) Payment of Claims.--
(1) Determination and payment of amount.--
(A) In general.--Not later than 180 days after the date on
which a claim is submitted under this section, the Secretary
shall determine and fix the amount, if any, to be paid for
the claim.
(B) Parameters of determination.--In determining and
settling a claim under this section, the Secretary shall
determine only--
(i) whether the claimant is an injured person;
(ii) whether the injury that is the subject of the claim
resulted from a loan modification made pursuant to this
subtitle;

[[Page S1604]]

(iii) the amount, if any, to be allowed and paid under this
section; and
(iv) the person or persons entitled to receive the amount.
(2) Partial payment.--
(A) In general.--At the request of a claimant, the
Secretary may make one or more advance or partial payments
before the final settlement of a claim, including final
settlement on any portion or aspect of a claim that is
determined to be severable.
(B) Judicial decision.--If a claimant receives a partial
payment on a claim under this section, but further payment on
the claim is subsequently denied by the Secretary, the
claimant may--
(i) seek judicial review under subsection (i); and
(ii) keep any partial payment that the claimant received,
unless the Secretary determines that the claimant--

(I) was not eligible to receive the compensation; or
(II) fraudulently procured the compensation.

(3) Allowable damages for financial loss.--A claim that is
paid for injury under this section may include damages
resulting from a loan modification pursuant to this subtitle
for the following types of otherwise uncompensated financial
loss:
(A) Lost personal income.
(B) Any other loss that the Secretary determines to be
appropriate for inclusion as financial loss.
(e) Acceptance of Award.--The acceptance by a claimant of
any payment under this section, except an advance or partial
payment made under subsection (d)(2), shall--
(1) be final and conclusive on the claimant with respect to
all claims arising out of or relating to the same subject
matter;
(2) constitute a complete release of all claims against the
United States (including any agency or employee of the United
States) under chapter 171 of title 28, United States Code
(commonly known as the ``Federal Tort Claims Act''), or any
other Federal or State law, arising out of or relating to the
same subject matter;
(3) constitute a complete release of all claims against the
eligible servicer of the securitization in which the injured
person was an investor under any Federal or State law,
arising out of or relating to the same subject matter; and
(4) shall include a certification by the claimant, made
under penalty of perjury and subject to the provisions of
section 1001 of title 18, United States Code, that such claim
is true and correct.
(f) Regulations.--Notwithstanding any other provision of
law, not later than 45 days after the date of enactment of
this Act, the Secretary shall promulgate and publish in the
Federal Register interim final regulations for the processing
and payment of claims under this section.
(g) Consultation.--In administering this section, the
Secretary shall consult with other Federal agencies, as
determined to be necessary by the Secretary, to ensure the
efficient administration of the claims process.
(h) Election of Remedy.--
(1) In general.--An injured person may elect to seek
compensation from the United States for one or more injuries
resulting from a loan modification made pursuant to this
subtitle by--
(A) submitting a claim under this section;
(B) filing a claim or bringing a civil action under chapter
171 of title 28, United States Code; or
(C) bringing an authorized civil action under any other
provision of law.
(2) Effect of election.--An election by an injured person
to seek compensation in any manner described in paragraph (1)
shall be final and conclusive on the claimant with respect to
all injuries resulting from a loan modification made pursuant
to this subtitle that are suffered by the claimant.
(3) Arbitration.--
(A) In general.--Not later than 45 days after the date of
the enactment of this Act, the Secretary shall establish by
regulation procedures under which a dispute regarding a claim
submitted under this section may be settled by arbitration.
(B) Arbitration as remedy.--On establishment of arbitration
procedures under subparagraph (A), an injured person that
submits a disputed claim under this section may elect to
settle the claim through arbitration.
(C) Binding effect.--An election by an injured person to
settle a claim through arbitration under this paragraph
shall--
(i) be binding; and
(ii) preclude any exercise by the injured person of the
right to judicial review of a claim described in subsection
(i).
(i) Judicial Review.--
(1) In general.--Any claimant aggrieved by a final decision
of the Secretary under this section may, not later than 60
days after the date on which the decision is issued, bring a
civil action in the United States District Court for the
District of Columbia, to modify or set aside the decision, in
whole or in part.
(2) Record.--The court shall hear a civil action under
paragraph (1) on the record made before the Secretary.
(3) Standard.--The decision of the Secretary incorporating
the findings of the Secretary shall be upheld if the decision
is supported by substantial evidence on the record considered
as a whole.
(j) Attorney's and Agent's Fees.--
(1) In general.--No attorney or agent, acting alone or in
combination with any other attorney or agent, shall charge,
demand, receive, or collect, for services rendered in
connection with a claim submitted under this section, fees in
excess of 10 percent of the amount of any payment on the
claim.
(2) Violation.--An attorney or agent who violates paragraph
(1) shall be fined not more than $10,000.
(k) Applicability of Debt Collection Requirements.--Section
3716 of title 31, United States Code, shall not apply to any
payment under this section.
(l) Report.--Not later than 1 year after the date of
promulgation of regulations under subsection (f), and
annually thereafter, the Secretary shall submit to Congress a
report that describes the claims submitted under this section
during the year preceding the date of submission of the
report, including, for each claim--
(1) the amount claimed;
(2) a brief description of the nature of the claim; and
(3) the status or disposition of the claim, including the
amount of any payment under this section.
(m) GAO Audit.--The Comptroller General of the United
States shall conduct an annual audit on the payment of all
claims made under this section and shall report to the
Congress on the results of this audit beginning not later
than the expiration of the 1-year period beginning on the
date of the enactment of this Act.
(n) Authorization of Appropriations.--There are authorized
to be appropriated for the payment of claims in accordance
with this section up to $1,700,000,000, to remain available
until expended.

SEC. 1014. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated to the Secretary,
such sums as may be necessary to carry out this subtitle.

SEC. 1015. SUNSET OF AUTHORITY.

The authority of the Secretary to provide assistance under
this title shall terminate on December 31, 2011.

Subtitle C--Credit for Certain Home Purchases

SEC. 1021. CREDIT FOR CERTAIN HOME PURCHASES.

(a) Allowance of Credit.--Subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after
section 25D the following new section:

``SEC. 25E. CREDIT FOR CERTAIN HOME PURCHASES.

``(a) Allowance of Credit.--
``(1) In general.--In the case of an individual who is a
purchaser of a qualified principal residence during the
taxable year, there shall be allowed as a credit against the
tax imposed by this chapter an amount equal to 10 percent of
the purchase price of the residence.
``(2) Dollar limitation.--The amount of the credit allowed
under paragraph (1) shall not exceed $15,000.
``(3) Allocation of credit amount.--At the election of the
taxpayer, the amount of the credit allowed under paragraph
(1) (after application of paragraph (2)) may be equally
divided among the 2 taxable years beginning with the taxable
year in which the purchase of the qualified principal
residence is made.
``(b) Limitations.--
``(1) Date of purchase.--The credit allowed under
subsection (a) shall be allowed only with respect to
purchases made--
``(A) after December 31, 2008, and
``(B) before January 1, 2010.
``(2) Limitation based on amount of tax.--In the case of a
taxable year to which section 26(a)(2) does not apply, the
credit allowed under subsection (a) for any taxable year
shall not exceed the excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under this subpart
(other than this section) for the taxable year.
``(3) One-time only.--
``(A) In general.--If a credit is allowed under this
section in the case of any individual (and such individual's
spouse, if married) with respect to the purchase of any
qualified principal residence, no credit shall be allowed
under this section in any taxable year with respect to the
purchase of any other qualified principal residence by such
individual or a spouse of such individual.
``(B) Joint purchase.--In the case of a purchase of a
qualified principal residence by 2 or more unmarried
individuals or by 2 married individuals filing separately, no
credit shall be allowed under this section if a credit under
this section has been allowed to any of such individuals in
any taxable year with respect to the purchase of any other
qualified principal residence.
``(c) Qualified Principal Residence.--For purposes of this
section, the term `qualified principal residence' means a
single-family residence that is purchased to be the principal
residence of the purchaser.
``(d) Denial of Double Benefit.--No credit shall be allowed
under this section for any purchase for which a credit is
allowed under section 36 or section 1400C.
``(e) Special Rules.--
``(1) Joint purchase.--
``(A) Married individuals filing separately.--In the case
of 2 married individuals filing separately, subsection (a)
shall be applied to each such individual by substituting
`$7,500' for `$15,000' in subsection (a)(1).
``(B) Unmarried individuals.--If 2 or more individuals who
are not married purchase a qualified principal residence, the
amount of

[[Page S1605]]

the credit allowed under subsection (a) shall be allocated
among such individuals in such manner as the Secretary may
prescribe, except that the total amount of the credits
allowed to all such individuals shall not exceed $15,000.
``(2) Purchase.--In defining the purchase of a qualified
principal residence, rules similar to the rules of paragraphs
(2) and (3) of section 1400C(e) (as in effect on the date of
the enactment of this section) shall apply.
``(3) Reporting requirement.--Rules similar to the rules of
section 1400C(f) (as so in effect) shall apply.
``(f) Recapture of Credit in the Case of Certain
Dispositions.--
``(1) In general.--In the event that a taxpayer--
``(A) disposes of the principal residence with respect to
which a credit was allowed under subsection (a), or
``(B) fails to occupy such residence as the taxpayer's
principal residence,
at any time within 24 months after the date on which the
taxpayer purchased such residence, then the tax imposed by
this chapter for the taxable year during which such
disposition occurred or in which the taxpayer failed to
occupy the residence as a principal residence shall be
increased by the amount of such credit.
``(2) Exceptions.--
``(A) Death of taxpayer.--Paragraph (1) shall not apply to
any taxable year ending after the date of the taxpayer's
death.
``(B) Involuntary conversion.--Paragraph (1) shall not
apply in the case of a residence which is compulsorily or
involuntarily converted (within the meaning of section
1033(a)) if the taxpayer acquires a new principal residence
within the 2-year period beginning on the date of the
disposition or cessation referred to in such paragraph.
Paragraph (1) shall apply to such new principal residence
during the remainder of the 24-month period described in such
paragraph as if such new principal residence were the
converted residence.
``(C) Transfers between spouses or incident to divorce.--In
the case of a transfer of a residence to which section
1041(a) applies--
``(i) paragraph (1) shall not apply to such transfer, and
``(ii) in the case of taxable years ending after such
transfer, paragraph (1) shall apply to the transferee in the
same manner as if such transferee were the transferor (and
shall not apply to the transferor).
``(D) Relocation of members of the armed forces.--Paragraph
(1) shall not apply in the case of a member of the Armed
Forces of the United States on active duty who moves pursuant
to a military order and incident to a permanent change of
station.
``(3) Joint returns.--In the case of a credit allowed under
subsection (a) with respect to a joint return, half of such
credit shall be treated as having been allowed to each
individual filing such return for purposes of this
subsection.
``(4) Return requirement.--If the tax imposed by this
chapter for the taxable year is increased under this
subsection, the taxpayer shall, notwithstanding section 6012,
be required to file a return with respect to the taxes
imposed under this subtitle.
``(g) Basis Adjustment.--For purposes of this subtitle, if
a credit is allowed under this section with respect to the
purchase of any residence, the basis of such residence shall
be reduced by the amount of the credit so allowed.
``(h) Election to Treat Purchase in Prior Year.--In the
case of a purchase of a principal residence during the period
described in subsection (b)(1), a taxpayer may elect to treat
such purchase as made on December 31, 2008, for purposes of
this section.''.
(b) Clerical Amendment.--The table of sections for subpart
A of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 25D the
following new item:

``Sec. 25E. Credit for certain home purchases.''.
(c) Sunset of Current First-Time Homebuyer Credit.--
(1) In general.--Subsection (h) of section 36 is amended by
striking ``July 1, 2009'' and inserting ``the date of the
enactment of the Fix Housing First Act''.
(2) Election to treat purchase in prior year.--Subsection
(g) of section 36 is amended by striking ``July 1, 2009'' and
inserting ``the date of the enactment of the Fix Housing
First Act''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2008.

TITLE II--MIDDLE CLASS TAX RELIEF

SEC. 2001. 10 PERCENT RATE BRACKET FOR INDIVIDUALS REDUCED TO
5 PERCENT FOR 2009 AND 2010.

(a) In General.--Clause (i) of section 1(i)(1)(A) is
amended by inserting ``(5 percent in the case of any taxable
year beginning in 2009 or 2010)'' after ``10 percent''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2008.

SEC. 2002. 15 PERCENT RATE BRACKET FOR INDIVIDUALS REDUCED TO
10 PERCENT FOR 2009 AND 2010.

(a) In General.--Subsection (i) of section 1 is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Reduction in 15 percent rate for 2009 and 2010.--In
the case of any taxable year beginning in 2009 or 2010, `10
percent' shall be substituted for `15 percent' in the tables
under subsections (a), (b), (c), (d), and (e). The preceding
sentence shall be applied after application of paragraph
(1).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2008.

TITLE III--BUSINESS TAX RELIEF

Subtitle A--Temporary Investment Incentives

SEC. 3001. SPECIAL ALLOWANCE FOR CERTAIN PROPERTY ACQUIRED
DURING 2009.

(a) Extension of Special Allowance.--
(1) In general.--Paragraph (2) of section 168(k) is
amended--
(A) by striking ``January 1, 2010'' and inserting ``January
1, 2011'', and
(B) by striking ``January 1, 2009'' each place it appears
and inserting ``January 1, 2010''.
(2) Conforming amendments.--
(A) The heading for subsection (k) of section 168 is
amended by striking ``January 1, 2009'' and inserting
``January 1, 2010''.
(B) The heading for clause (ii) of section 168(k)(2)(B) is
amended by striking ``pre-january 1, 2009'' and inserting
``pre-january 1, 2010''.
(C) Subparagraph (B) of section 168(l)(5) is amended by
striking ``January 1, 2009'' and inserting ``January 1,
2010''.
(D) Subparagraph (C) of section 168(n)(2) is amended by
striking ``January 1, 2009'' and inserting ``January 1,
2010''.
(E) Subparagraph (B) of section 1400N(d)(3) is amended by
striking ``January 1, 2009'' and inserting ``January 1,
2010''.
(3) Technical amendment.--Subparagraph (D) of section
168(k)(4) is amended--
(A) by striking ``and'' at the end of clause (i),
(B) by redesignating clause (ii) as clause (iii), and
(C) by inserting after clause (i) the following new clause:
``(ii) `April 1, 2008' shall be substituted for `January 1,
2008' in subparagraph (A)(iii)(I) thereof, and''.
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to property
placed in service after December 31, 2008, in taxable years
ending after such date.
(2) Technical amendment.--The amendments made by subsection
(a)(3) shall apply to taxable years ending after March 31,
2008.

SEC. 3002. TEMPORARY INCREASE IN LIMITATIONS ON EXPENSING OF
CERTAIN DEPRECIABLE BUSINESS ASSETS.

(a) In General.--Paragraph (7) of section 179(b) is
amended--
(1) by striking ``2008'' and inserting ``2008, or 2009'',
and
(2) by striking ``2008'' in the heading thereof and
inserting ``2008, and 2009''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2008.

Subtitle B--5-Year Carryback of Operating Losses

SEC. 3101. 5-YEAR CARRYBACK OF OPERATING LOSSES.

(a) In General.--Subparagraph (H) of section 172(b)(1) is
amended to read as follows:
``(H) Carryback for 2008 and 2009 net operating losses.--
``(i) In general.--In the case of an applicable 2008 or
2009 net operating loss with respect to which the taxpayer
has elected the application of this subparagraph--

``(I) subparagraph (A)(i) shall be applied by substituting
any whole number elected by the taxpayer which is more than 2
and less than 6 for `2',
``(II) subparagraph (E)(ii) shall be applied by
substituting the whole number which is one less than the
whole number substituted under subclause (II) for `2', and
``(III) subparagraph (F) shall not apply.

``(ii) Applicable 2008 or 2009 net operating loss.--For
purposes of this subparagraph, the term `applicable 2008 or
2009 net operating loss' means--

``(I) the taxpayer's net operating loss for any taxable
year ending in 2008 or 2009, or
``(II) if the taxpayer elects to have this subclause apply
in lieu of subclause (I), the taxpayer's net operating loss
for any taxable year beginning in 2008 or 2009.

``(iii) Election.--Any election under this subparagraph
shall be made in such manner as may be prescribed by the
Secretary, and shall be made by the due date (including
extension of time) for filing the taxpayer's return for the
taxable year of the net operating loss. Any such election,
once made, shall be irrevocable.
``(iv) Coordination with alternative tax net operating loss
deduction.--In the case of a taxpayer who elects to have
clause (ii)(II) apply, section 56(d)(1)(A)(ii) shall be
applied by substituting `ending during 2001 or 2002 or
beginning during 2008 or 2009' for `ending during 2001, 2002,
2008, or 2009'.''.
(b) Alternative Tax Net Operating Loss Deduction.--
Subclause (I) of section 56(d)(1)(A)(ii) is amended to read
as follows:

``(I) the amount of such deduction attributable to the sum
of carrybacks of net operating losses from taxable years
ending during 2001, 2002, 2008, or 2009 and carryovers of net
operating losses to such taxable years, or''.

(c) Loss From Operations of Life Insurance Companies.--
Subsection (b) of section 810 is amended by adding at the end
the following new paragraph:
``(4) Carryback for 2008 and 2009 losses.--
``(A) In general.--In the case of an applicable 2008 or
2009 loss from operations with respect to which the taxpayer
has elected

[[Page S1606]]

the application of this paragraph, paragraph (1)(A) shall be
applied, at the election of the taxpayer, by substituting `5'
or `4' for `3'.
``(B) Applicable 2008 or 2009 loss from operations.--For
purposes of this paragraph, the term `applicable 2008 or 2009
loss from operations' means--
``(i) the taxpayer's loss from operations for any taxable
year ending in 2008 or 2009, or
``(ii) if the taxpayer elects to have this clause apply in
lieu of clause (i), the taxpayer's loss from operations for
any taxable year beginning in 2008 or 2009.
``(C) Election.--Any election under this paragraph shall be
made in such manner as may be prescribed by the Secretary,
and shall be made by the due date (including extension of
time) for filing the taxpayer's return for the taxable year
of the loss from operations. Any such election, once made,
shall be irrevocable.
``(D) Coordination with alternative tax net operating loss
deduction.--In the case of a taxpayer who elects to have
subparagraph (B)(ii) apply, section 56(d)(1)(A)(ii) shall be
applied by substituting `ending during 2001 or 2002 or
beginning during 2008 or 2009' for `ending during 2001, 2002,
2008, or 2009'.''.
(d) Conforming Amendment.--Section 172 is amended by
striking subsection (k) and by redesignating subsection (l)
as subsection (k).
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to net operating losses arising in taxable years ending after
December 31, 2007.
(2) Alternative tax net operating loss deduction.--The
amendment made by subsection (b) shall apply to taxable years
ending after 1997.
(3) Loss from operations of life insurance companies.--The
amendment made by subsection (d) shall apply to losses from
operations arising in taxable years ending after December 31,
2007.
(4) Transitional rule.--In the case of a net operating loss
(or, in the case of a life insurance company, a loss from
operations) for a taxable year ending before the date of the
enactment of this Act--
(A) any election made under section 172(b)(3) or 810(b)(3)
of the Internal Revenue Code of 1986 with respect to such
loss may (notwithstanding such section) be revoked before the
applicable date,
(B) any election made under section 172(k) or 810(b)(4) of
such Code with respect to such loss shall (notwithstanding
such section) be treated as timely made if made before the
applicable date, and
(C) any application under section 6411(a) of such Code with
respect to such loss shall be treated as timely filed if
filed before the applicable date.
For purposes of this paragraph, the term ``applicable date''
means the date which is 60 days after the date of the
enactment of this Act.

SEC. 3102. EXCEPTION FOR TARP RECIPIENTS.

The amendments made by this part shall not apply to--
(1) any taxpayer if--
(A) the Federal Government acquires, at any time, an equity
interest in the taxpayer pursuant to the Emergency Economic
Stabilization Act of 2008, or
(B) the Federal Government acquires, at any time, any
warrant (or other right) to acquire any equity interest with
respect to the taxpayer pursuant to such Act,
(2) the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, and
(3) any taxpayer which at any time in 2008 or 2009 is a
member of the same affiliated group (as defined in section
1504 of the Internal Revenue Code of 1986, determined without
regard to subsection (b) thereof) as a taxpayer described in
paragraph (1) or (2).

Subtitle C--Incentives for New Jobs

SEC. 3201. INCENTIVES TO HIRE UNEMPLOYED VETERANS.

(a) In General.--Subsection (d) of section 51 is amended by
adding at the end the following new paragraph:
``(14) Credit allowed for unemployed veterans hired in 2009
or 2010.--
``(A) In general.--Any unemployed veteran who begins work
for the employer during 2009 or 2010 shall be treated as a
member of a targeted group for purposes of this subpart.
``(B) Unemployed veteran.--For purposes of this paragraph,
the term `unemployed veteran' means any veteran (as defined
in paragraph (3)(B), determined without regard to clause (ii)
thereof) who is certified by the designated local agency as--
``(i) having been discharged or released from active duty
in the Armed Forces during 2008, 2009, or 2010, and
``(ii) being in receipt of unemployment compensation under
State or Federal law for not less than 4 weeks during the 1-
year period ending on the hiring date.''.
(b) Effective Date.--The amendment made by this section
shall apply to individuals who begin work for the employer
after December 31, 2008.

Subtitle D--Cancellation of Indebtedness

SEC. 3301. DEFERRAL AND RATABLE INCLUSION OF INCOME ARISING
FROM INDEBTEDNESS DISCHARGED BY THE REPURCHASE
OF A DEBT INSTRUMENT.

(a) In General.--Section 108 (relating to income from
discharge of indebtedness) is amended by adding at the end
the following new subsection:
``(i) Deferral and Ratable Inclusion of Income Arising From
Indebtedness Discharged by the Repurchase of a Debt
Instrument.--
``(1) In general.--At the election of the taxpayer, income
from the discharge of indebtedness in connection with the
repurchase of a debt instrument after December 31, 2008, and
before January 1, 2011, shall be includible in gross income
ratably over the 5-taxable-year period beginning with--
``(A) in the case of a repurchase occurring in 2009, the
fifth taxable year following the taxable year in which the
repurchase occurs, and
``(B) in the case of a repurchase occurring in 2010, the
fourth taxable year following the taxable year in which the
repurchase occurs.
``(2) Deferral of deduction for original issue discount in
debt for debt exchanges.--
``(A) In general.--If, as part of a repurchase to which
paragraph (1) applies, any debt instrument is issued for the
debt instrument being repurchased and there is any original
issue discount determined under subpart A of part V of
subchapter P of this chapter with respect to the debt
instrument so issued--
``(i) except as provided in clause (ii), no deduction
otherwise allowable under this chapter shall be allowed to
the issuer of such debt instrument with respect to the
portion of such original issue discount which--

``(I) accrues before the 1st taxable year in the 5-taxable-
year period in which income from the discharge of
indebtedness attributable to the repurchase of the debt
instrument is includible under paragraph (1), and
``(II) does not exceed the income from the discharge of
indebtedness with respect to the debt instrument being
repurchased, and

``(ii) the aggregate amount of deductions disallowed under
clause (i) shall be allowed as a deduction ratably over the
5-taxable-year period described in clause (i)(I).
If the amount of the original issue discount accruing before
such 1st taxable year exceeds the income from the discharge
of indebtedness with respect to the debt instrument being
repurchased, the deductions shall be disallowed in the order
in which the original issue discount is accrued.
``(B) Deemed debt for debt exchanges.--For purposes of
subparagraph (A), if any debt instrument is issued by an
issuer and the proceeds of such debt instrument are used
directly or indirectly by the issuer to repurchase a debt
instrument of the issuer, the debt instrument so issued shall
be treated as issued for the debt instrument being
repurchased. If only a portion of the proceeds from a debt
instrument are so used, the rules of subparagraph (A) shall
apply to the portion of any original issue discount on the
newly issued debt instrument which is equal to the portion of
the proceeds from such instrument used to repurchase the
outstanding instrument.
``(3) Debt instrument.--For purposes of this subsection,
the term `debt instrument' means a bond, debenture, note,
certificate, or any other instrument or contractual
arrangement constituting indebtedness (within the meaning of
section 1275(a)(1)).
``(4) Repurchase.--For purposes of this subsection, the
term `repurchase' means, with respect to any debt instrument,
any acquisition of the debt instrument by--
``(A) the debtor which issued (or is otherwise the obligor
under) the debt instrument, or
``(B) any person related to such debtor.
Such term shall also include the complete forgiveness of the
indebtedness by the holder of the debt instrument. For
purposes of subparagraph (B), the determination of whether a
person is related to another person shall be made in the same
manner as under subsection (e)(4). For purposes of this
paragraph, the term `acquisition' shall include any
acquisition for cash, the exchange of a debt instrument for a
debt instrument, the exchange of a debt instrument for
corporate stock or partnership interest, as a contribution of
the debt instrument to capital, and any significant
modification of the debt instrument within the meaning of
section 1001.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Related person.--The determination of whether a
person is related to another person shall be made in the same
manner as under subsection (e)(4).
``(B) Election.--
``(i) In general.--An issuer of a debt instrument shall
make the election under this subsection with respect to any
debt instrument by clearly identifying such debt instrument
on the issuer's records as an instrument to which the
election applies before the close of the day on which the
repurchase of the debt instrument occurs (or such other time
as the Secretary may prescribe). Such election, once made, is
irrevocable.
``(ii) Pass through entities.--In the case of a
partnership, S corporation, or other pass through entity, the
election under this subsection shall be made by the
partnership, the S corporation, or other entity involved.
``(C) Coordination with exclusions for title 11 or
insolvency.--If a taxpayer elects to have this subsection
apply to a debt instrument, subparagraph (A) or (B) of
subsection (a)(1) shall not apply to the income from the
discharge of such indebtedness for the taxable year of the
election or any subsequent taxable year.
``(D) Acceleration of deferred items.--In the case of the
death of the taxpayer, the liquidation or sale of
substantially all the assets of the taxpayer (including in a
title 11 or

[[Page S1607]]

similar case), the cessation of business by the taxpayer, or
similar circumstances, any item of income or deduction which
is deferred under this subsection (and has not previously
been taken into account) shall be taken into account in the
taxable year in which such event occurs (or in the case of a
title 11 case, the day before the petition is filed).
``(6) Authority to prescribe regulations.--The Secretary
may prescribe such rules and regulations as may be necessary
or appropriate for purposes of applying this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to discharges in taxable years ending after
December 31, 2008.

Subtitle E--Qualified Small Business Stock

SEC. 3401. MODIFICATIONS TO EXCLUSION FOR GAIN FROM CERTAIN
SMALL BUSINESS STOCK.

(a) Temporary Increase in Exclusion.--Section 1202(a)
(relating to exclusion) is amended by adding at the end the
following new paragraph:
``(3) Special rule for stock acquired before 2011.--In the
case of qualified small business stock acquired after the
date of the enactment of this paragraph and before January 1,
2011--
``(A) paragraph (1) shall be applied by substituting `100
percent' for `50 percent', and
``(B) paragraph (2) shall not apply.''.
(b) Increase in Limitation.--
(1) In general.--Subparagraph (A) of section 1202(b)(1) is
amended by striking ``$10,000,000'' and inserting
``$15,000,000''.
(2) Married individuals.--Subparagraph (A) of section
1202(b)(3) is amended by striking ``paragraph (1)(A) shall be
applied by substituting `$5,000,000' for `$10,000,000' '' and
inserting ``the amount under paragraph (1)(A) shall be half
of the amount otherwise in effect''.
(c) Modification of Definition of Qualified Small
Business.--Section 1202(d)(1) is amended by striking
``$50,000,000'' each place it appears and inserting
``$75,000,000''.
(d) Inflation Adjustments.--Section 1202 is amended by
redesignating subsection (k) as subsection (l) and by
inserting after subsection (j) the following new subsection:
``(k) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2009, the $15,000,000 amount in subsection
(b)(1)(A), the $75,000,000 amount in subsection (d)(1)(A),
and the $75,000,000 amount in subsection (d)(1)(B) shall each
be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost of living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2008'
for `calendar year 1992' in subparagraph (B) thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $1,000,000 such amount shall be
rounded to the next lowest multiple of $1,000,000.''.
(e) Nonapplication of Minimum Tax.--Section 57(a)(7) is
amended by inserting ``(other than by reason of subsection
(a)(3) thereof)'' after ``section 1202''.
(f) Effective Dates.--
(1) Exclusion; qualified small business; minimum tax.--The
amendments made by subsections (a), (c), and (d) shall apply
to stock acquired after the date of the enactment of this
Act.
(2) Limitation; inflation adjustment.--The amendments made
by subsections (b) and (d) shall apply to taxable years
ending after the date of the enactment of this Act.

Subtitle F--S Corporations

SEC. 3501. TEMPORARY REDUCTION IN RECOGNITION PERIOD FOR
BUILT-IN GAINS TAX.

(a) In General.--Paragraph (7) of section 1374(d) (relating
to definitions and special rules) is amended to read as
follows:
``(7) Recognition period.--
``(A) In general.--The term `recognition period' means the
10-year period beginning with the 1st day of the 1st taxable
year for which the corporation was an S corporation.
``(B) Special rule for 2009 and 2010.--In the case of any
taxable year beginning in 2009 or 2010, no tax shall be
imposed on the net unrecognized built-in gain of an S
corporation if the 7th taxable year in the recognition period
preceded such taxable year. The preceding sentence shall be
applied separately with respect to any asset to which
paragraph (8) applies.
``(C) Special rule for distributions to shareholders.--For
purposes of applying this section to any amount includible in
income by reason of distributions to shareholders pursuant to
section 593(e)--
``(i) subparagraph (A) shall be applied without regard to
the phrase `10-year', and
``(ii) subparagraph (B) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2008.

Subtitle G--Broadband Incentives

SEC. 3601. BROADBAND INTERNET ACCESS TAX CREDIT.

(a) In General.--Subpart E of part IV of chapter 1
(relating to rules for computing investment credit) is
amended by inserting after section 48C the following new
section:

``SEC. 48C. BROADBAND INTERNET ACCESS CREDIT.

``(a) General Rule.--For purposes of section 46, the
broadband credit for any taxable year is the sum of--
``(1) the current generation broadband credit, plus
``(2) the next generation broadband credit.
``(b) Current Generation Broadband Credit; Next Generation
Broadband Credit.--For purposes of this section--
``(1) Current generation broadband credit.--The current
generation broadband credit for any taxable year is equal to
10 percent (20 percent in the case of qualified subscribers
which are unserved subscribers) of the qualified broadband
expenditures incurred with respect to qualified equipment
providing current generation broadband services to qualified
subscribers and taken into account with respect to such
taxable year.
``(2) Next generation broadband credit.--The next
generation broadband credit for any taxable year is equal to
20 percent of the qualified broadband expenditures incurred
with respect to qualified equipment providing next generation
broadband services to qualified subscribers and taken into
account with respect to such taxable year.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified broadband expenditures with
respect to qualified equipment shall be taken into account
with respect to the first taxable year in which--
``(A) current generation broadband services are provided
through such equipment to qualified subscribers, or
``(B) next generation broadband services are provided
through such equipment to qualified subscribers.
``(2) Limitation.--
``(A) In general.--Qualified broadband expenditures shall
be taken into account under paragraph (1) only with respect
to qualified equipment--
``(i) the original use of which commences with the
taxpayer, and
``(ii) which is placed in service, after December 31, 2008,
and before January 1, 2011.
``(B) Sale-leasebacks.--For purposes of subparagraph (A),
if property--
``(i) is originally placed in service after December 31,
2008, by any person, and
``(ii) sold and leased back by such person within 3 months
after the date such property was originally placed in
service,
such property shall be treated as originally placed in
service not earlier than the date on which such property is
used under the leaseback referred to in clause (ii).
``(d) Special Allocation Rules for Current Generation
Broadband Services.--For purposes of determining the current
generation broadband credit under subsection (a)(1) with
respect to qualified equipment through which current
generation broadband services are provided, if the qualified
equipment is capable of serving both qualified subscribers
and other subscribers, the qualified broadband expenditures
shall be multiplied by a fraction--
``(1) the numerator of which is the sum of the number of
potential qualified subscribers within the rural areas and
the underserved areas and the unserved areas which the
equipment is capable of serving with current generation
broadband services, and
``(2) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with current generation broadband
services.
``(e) Definitions.--For purposes of this section--
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 5,000,000 bits per second to
the subscriber and at least 1,000,000 bits per second from
the subscriber (at least 3,000,000 bits per second to the
subscriber and at least 768,000 bits per second from the
subscriber in the case of service through radio transmission
of energy).
``(5) Multiplexing or demultiplexing.--The term
`multiplexing' means the transmission of 2 or more signals
over a single channel, and the term `demultiplexing' means
the separation of 2 or more signals previously combined by
compatible multiplexing equipment.
``(6) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 100,000,000 bits per second to
the subscriber (or its equivalent when the data rate is
measured before being compressed for transmission) and at
least 20,000,000 bits per second from the subscriber (or its
equivalent as so measured).
``(7) Nonresidential subscriber.--The term `nonresidential
subscriber' means any person who purchases broadband services
which are delivered to the permanent place of business of
such person.
``(8) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(9) Other wireless carrier.--The term `other wireless
carrier' means any person

[[Page S1608]]

(other than a telecommunications carrier, commercial mobile
service carrier, cable operator, open video system operator,
or satellite carrier) providing current generation broadband
services or next generation broadband service to subscribers
through the radio transmission of energy.
``(10) Packet switching.--The term `packet switching' means
controlling or routing the path of a digitized transmission
signal which is assembled into packets or cells.
``(11) Provider.--The term `provider' means, with respect
to any qualified equipment any--
``(A) cable operator,
``(B) commercial mobile service carrier,
``(C) open video system operator,
``(D) satellite carrier,
``(E) telecommunications carrier, or
``(F) other wireless carrier,
providing current generation broadband services or next
generation broadband services to subscribers through such
qualified equipment.
``(12) Provision of services.--A provider shall be treated
as providing services to 1 or more subscribers if--
``(A) such a subscriber has been passed by the provider's
equipment and can be connected to such equipment for a
standard connection fee,
``(B) the provider is physically able to deliver current
generation broadband services or next generation broadband
services, as applicable, to such a subscriber without making
more than an insignificant investment with respect to such
subscriber,
``(C) the provider has made reasonable efforts to make such
subscribers aware of the availability of such services,
``(D) such services have been purchased by 1 or more such
subscribers, and
``(E) such services are made available to such subscribers
at average prices comparable to those at which the provider
makes available similar services in any areas in which the
provider makes available such services.
``(13) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
property with respect to which depreciation (or amortization
in lieu of depreciation) is allowable and which provides
current generation broadband services or next generation
broadband services--
``(i) at least a majority of the time during periods of
maximum demand to each subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no credit is allowed under subsection
(a)(1).
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C) or (D), equipment shall be
taken into account under subparagraph (A) only to the extent
it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier or broadband-over-powerline operator,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) owned or leased by a subscriber in
the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from multiple subscribers, to a transmission/receive
antenna (including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(D) Multiplexing and demultiplexing equipment.--
Multiplexing and demultiplexing equipment shall be taken into
account under subparagraph (A) only to the extent it is
deployed in connection with equipment described in
subparagraph (B) and is uniquely designed to perform the
function of multiplexing and demultiplexing packets or cells
of data and making associated application adaptions, but only
if such multiplexing or demultiplexing equipment is located
between packet switching equipment described in subparagraph
(C) and the subscriber's premises.
``(14) Qualified broadband expenditure.--
``(A) In general.--The term `qualified broadband
expenditure' means any amount--
``(i) chargeable to capital account with respect to the
purchase and installation of qualified equipment (including
any upgrades thereto) for which depreciation is allowable
under section 168, and
``(ii) incurred after December 31, 2008, and before January
1, 2011.
``(B) Certain satellite expenditures excluded.--Such term
shall not include any expenditure with respect to the
launching of any satellite equipment.
``(C) Leased equipment.--Such term shall include so much of
the purchase price paid by the lessor of equipment subject to
a lease described in subsection (c)(2)(B) as is attributable
to expenditures incurred by the lessee which would otherwise
be described in subparagraph (A).
``(15) Qualified subscriber.--The term `qualified
subscriber' means--
``(A) with respect to the provision of current generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area, an underserved area, or an
unserved area, or
``(ii) any residential subscriber residing in a dwelling
located in a rural area, an underserved area, or an unserved
area which is not a saturated market, and
``(B) with respect to the provision of next generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area, an underserved area, or an
unserved area , or
``(ii) any residential subscriber.
``(16) Residential subscriber.--The term `residential
subscriber' means any individual who purchases broadband
services which are delivered to such individual's dwelling.
``(17) Rural area.--The term `rural area' means any census
tract which--
``(A) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(B) is not within a county or county equivalent which has
an overall population density of more than 500 people per
square mile of land.
``(18) Rural subscriber.--The term `rural subscriber' means
any residential subscriber residing in a dwelling located in
a rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(19) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for distribution of signals, and owning or
leasing a capacity or service on a satellite in order to
provide such point-to-multipoint distribution.
``(20) Saturated market.--The term `saturated market' means
any census tract in which, as of the date of the enactment of
this section--
``(A) current generation broadband services have been
provided by a single provider to 85 percent or more of the
total number of potential residential subscribers residing in
dwellings located within such census tract, and
``(B) such services can be utilized--
``(i) at least a majority of the time during periods of
maximum demand by each such subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no credit is allowed under subsection
(a)(1).
``(21) Subscriber.--The term `subscriber' means any person
who purchases current generation broadband services or next
generation broadband services.
``(22) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153(44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include any commercial mobile service
carrier.
``(23) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(24) Underserved area.--The term `underserved area' means
any census tract which is located in--
``(A) an empowerment zone or enterprise community
designated under section 1391,
``(B) the District of Columbia Enterprise Zone established
under section 1400,
``(C) a renewal community designated under section 1400E,
or
``(D) a low-income community designated under section 45D.
``(25) Underserved subscriber.--The term `underserved
subscriber' means any residential subscriber residing in a
dwelling located in an underserved area or nonresidential
subscriber maintaining a permanent place of business located
in an underserved area.
``(26) Unserved area.--The term `unserved area' means any
census tract in which no current generation broadband
services are provided, as certified by the State in which
such tract is located not later than September 30, 2009.
``(27) Unserved subscriber.--The term `unserved subscriber'
means any residential subscriber residing in a dwelling
located in

[[Page S1609]]

an unserved area or nonresidential subscriber maintaining a
permanent place of business located in an unserved area.''.
(b) Credit to Be Part of Investment Credit.--Section 46
(relating to the amount of investment credit) is amended by
striking ``and'' at the end of paragraph (3), by striking the
period at the end of paragraph (4) and inserting ``, and'',
and by adding at the end the following:
``(5) the broadband Internet access credit.''
(c) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) (relating to list of exempt
organizations) is amended by striking ``or'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, or'', and by adding at the end the
following new clause:
``(v) from the sale of property subject to a lease
described in section 48C(c)(2)(B), but only to the extent
such income does not in any year exceed an amount equal to
the credit for qualified broadband expenditures which would
be determined under section 48C for such year if the mutual
or cooperative telephone company was not exempt from taxation
and was treated as the owner of the property subject to such
lease.''.
(d) Conforming Amendments.--
(1) Section 49(a)(1)(C) is amended by striking ``and'' at
the end of clause (iii), by striking the period at the end of
clause (iv) and inserting ``, and'', and by adding after
clause (iv) the following new clause:
``(v) the portion of the basis of any qualified equipment
attributable to qualified broadband expenditures under
section 48C.''.
(2) The table of sections for subpart E of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 48B the following:

``Sec. 48C. Broadband internet access credit''.
(e) Designation of Census Tracts.--
(1) In general.--The Secretary of the Treasury shall, not
later than 90 days after the date of the enactment of this
Act, designate and publish those census tracts meeting the
criteria described in paragraphs (17), (23), (24), and (26)
of section 48C(e) of the Internal Revenue Code of 1986 (as
added by this section). In making such designations, the
Secretary of the Treasury shall consult with such other
departments and agencies as the Secretary determines
appropriate.
(2) Saturated market.--
(A) In general.--For purposes of designating and publishing
those census tracts meeting the criteria described in
subsection (e)(20) of such section 48C--
(i) the Secretary of the Treasury shall prescribe not later
than 30 days after the date of the enactment of this Act the
form upon which any provider which takes the position that it
meets such criteria with respect to any census tract shall
submit a list of such census tracts (and any other
information required by the Secretary) not later than 60 days
after the date of the publication of such form, and
(ii) the Secretary of the Treasury shall publish an
aggregate list of such census tracts submitted and the
applicable providers not later than 30 days after the last
date such submissions are allowed under clause (i).
(B) No subsequent lists required.--The Secretary of the
Treasury shall not be required to publish any list of census
tracts meeting such criteria subsequent to the list described
in subparagraph (A)(ii).
(C) Authority to disregard false submissions.--In addition
to imposing any other applicable penalties, the Secretary of
the Treasury shall have the discretion to disregard any form
described in subparagraph (A)(i) on which a provider
knowingly submitted false information.
(f) Other Regulatory Matters.--
(1) Prohibition.--No Federal or State agency or
instrumentality shall adopt regulations or ratemaking
procedures that would have the effect of eliminating or
reducing any credit or portion thereof allowed under section
48C of the Internal Revenue Code of 1986 (as added by this
section) or otherwise subverting the purpose of this section.
(2) Treasury regulatory authority.--It is the intent of
Congress in providing the broadband Internet access credit
under section 48C of the Internal Revenue Code of 1986 (as
added by this section) to provide incentives for the
purchase, installation, and connection of equipment and
facilities offering expanded broadband access to the Internet
for users in certain low income and rural areas of the United
States, as well as to residential users nationwide, in a
manner that maintains competitive neutrality among the
various classes of providers of broadband services.
Accordingly, the Secretary of the Treasury shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of section 48C of such Code, including--
(A) regulations to determine how and when a taxpayer that
incurs qualified broadband expenditures satisfies the
requirements of section 48C of such Code to provide broadband
services, and
(B) regulations describing the information, records, and
data taxpayers are required to provide the Secretary to
substantiate compliance with the requirements of section 48C
of such Code.
(g) Effective Date.--The amendments made by this section
shall apply to expenditures incurred after December 31, 2008.

Subtitle H--Clarification of Regulations Related to Limitations on
Certain Built-in Losses Following an Ownership Change

SEC. 3701. CLARIFICATION OF REGULATIONS RELATED TO
LIMITATIONS ON CERTAIN BUILT-IN LOSSES
FOLLOWING AN OWNERSHIP CHANGE.

(a) Findings.--Congress finds as follows:
(1) The delegation of authority to the Secretary of the
Treasury under section 382(m) of the Internal Revenue Code of
1986 does not authorize the Secretary to provide exemptions
or special rules that are restricted to particular industries
or classes of taxpayers.
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