[110th Congress Public Law 142]
[From the U.S. Government Printing Office]
[DOCID: f:publ142.110]
[[Page 121 STAT. 1803]]
Public Law 110-142
110th Congress
An Act
To amend the Internal Revenue Code of 1986 to exclude discharges of
indebtedness on principal residences from gross income, and for other
purposes. <<NOTE: Dec. 20, 2007 - [H.R. 3648]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress <<NOTE: Mortgage Forgiveness Debt
Relief Act of 2007.>> assembled,
SECTION 1. <<NOTE: 26 USC 1 note.>> SHORT TITLE.
This Act may be cited as the ``Mortgage Forgiveness Debt Relief Act
of 2007''.
SEC. 2. DISCHARGES OF INDEBTEDNESS ON PRINCIPAL RESIDENCE EXCLUDED FROM
GROSS INCOME.
(a) In General.--Paragraph (1) of section 108(a) of the Internal
Revenue Code of 1986 is <<NOTE: 26 USC 108.>> amended by striking ``or''
at the end of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting ``, or'', and by inserting after
subparagraph (D) the following new subparagraph:
``(E) the indebtedness discharged is qualified
principal residence indebtedness which is discharged
before January 1, 2010.''.
(b) Special Rules Relating to Qualified Principal Residence
Indebtedness.--Section 108 of such Code is amended by adding at the end
the following new subsection:
``(h) Special Rules Relating to Qualified Principal Residence
Indebtedness.--
``(1) Basis reduction.--The amount excluded from gross
income by reason of subsection (a)(1)(E) shall be applied to
reduce (but not below zero) the basis of the principal residence
of the taxpayer.
``(2) Qualified principal residence indebtedness.--For
purposes of this section, the term `qualified principal
residence indebtedness' means acquisition indebtedness (within
the meaning of section 163(h)(3)(B), applied by substituting
`$2,000,000 ($1,000,000' for `$1,000,000 ($500,000' in clause
(ii) thereof) with respect to the principal residence of the
taxpayer.
``(3) Exception for certain discharges not related to
taxpayer's financial condition.--Subsection (a)(1)(E) shall not
apply to the discharge of a loan if the discharge is on account
of services performed for the lender or any other factor not
directly related to a decline in the value of the residence or
to the financial condition of the taxpayer.
``(4) Ordering rule.--If any loan is discharged, in whole or
in part, and only a portion of such loan is qualified principal
residence indebtedness, subsection (a)(1)(E) shall apply only to
so much of the amount discharged as exceeds the amount
[[Page 121 STAT. 1804]]
of the loan (as determined immediately before such discharge)
which is not qualified principal residence indebtedness.
``(5) Principal residence.--For purposes of this subsection,
the term `principal residence' has the same meaning as when used
in section 121.''.
(c) Coordination.--
(1) Subparagraph (A) of section 108(a)(2) <<NOTE: 26 USC
108.>> of such Code is amended by striking ``and (D)'' and
inserting ``(D), and (E)''.
(2) Paragraph (2) of section 108(a) of such Code is amended
by adding at the end the following new subparagraph:
``(C) Principal residence exclusion takes precedence
over insolvency exclusion unless elected otherwise.--
Paragraph (1)(B) shall not apply to a discharge to which
paragraph (1)(E) applies unless the taxpayer elects to
apply paragraph (1)(B) in lieu of paragraph (1)(E).''.
(d) Effective Date.--The <<NOTE: 26 USC 108 note.>> amendments made
by this section shall apply to discharges of indebtedness on or after
January 1, 2007.
SEC. 3. EXTENSION OF TREATMENT OF MORTGAGE INSURANCE PREMIUMS AS
INTEREST.
(a) In General.--Subclause (I) of section 163(h)(3)(E)(iv) of the
Internal Revenue Code of 1986 (relating to termination) is amended by
striking ``December 31, 2007'' and inserting ``December 31, 2010''.
(b) Effective Date.--The <<NOTE: 26 USC 163 note.>> amendment made
by this section shall apply to amounts paid or accrued after December
31, 2007.
SEC. 4. ALTERNATIVE TESTS FOR QUALIFYING AS COOPERATIVE HOUSING
CORPORATION.
(a) In General.--Subparagraph (D) of section 216(b)(1) of the
Internal Revenue Code of 1986 (defining cooperative housing corporation)
is amended to read as follows:
``(D) meeting 1 or more of the following
requirements for the taxable year in which the taxes and
interest described in subsection (a) are paid or
incurred:
``(i) 80 percent or more of the corporation's
gross income for such taxable year is derived from
tenant-stockholders.
``(ii) At all times during such taxable year,
80 percent or more of the total square footage of
the corporation's property is used or available
for use by the tenant-stockholders for residential
purposes or purposes ancillary to such residential
use.
``(iii) 90 percent or more of the expenditures
of the corporation paid or incurred during such
taxable year are paid or incurred for the
acquisition, construction, management,
maintenance, or care of the corporation's property
for the benefit of the tenant-stockholders.''.
(b) Effective Date.--The <<NOTE: 26 USC 216 note.>> amendment made
by this section shall apply to taxable years ending after the date of
the enactment of this Act.
[[Page 121 STAT. 1805]]
SEC. 5. EXCLUSION FROM INCOME FOR BENEFITS PROVIDED TO VOLUNTEER
FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to items specifically excluded
from gross income) is amended by inserting after section 139A the
following new section:
``SEC. 139B. <<NOTE: 26 USC 139B.>> BENEFITS PROVIDED TO VOLUNTEER
FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS.
``(a) In General.--In the case of any member of a qualified
volunteer emergency response organization, gross income shall not
include--
``(1) any qualified State and local tax benefit, and
``(2) any qualified payment.
``(b) Denial of Double Benefits.--In the case of any member of a
qualified volunteer emergency response organization--
``(1) the deduction under 164 shall be determined with
regard to any qualified State and local tax benefit, and
``(2) expenses paid or incurred by the taxpayer in
connection with the performance of services as such a member
shall be taken into account under section 170 only to the extent
such expenses exceed the amount of any qualified payment
excluded from gross income under subsection (a).
``(c) Definitions.--For purposes of this section--
``(1) Qualified state and local tax benefit.--The term
`qualified state and local tax benefit' means any reduction or
rebate of a tax described in paragraph (1), (2), or (3) of
section 164(a) provided by a State or political division thereof
on account of services performed as a member of a qualified
volunteer emergency response organization.
``(2) Qualified payment.--
``(A) In general.--The term `qualified payment'
means any payment (whether reimbursement or otherwise)
provided by a State or political division thereof on
account of the performance of services as a member of a
qualified volunteer emergency response organization.
``(B) Applicable dollar limitation.--The amount
determined under subparagraph (A) for any taxable year
shall not exceed $30 multiplied by the number of months
during such year that the taxpayer performs such
services.
``(3) Qualified volunteer emergency response organization.--
The term `qualified volunteer emergency response organization'
means any volunteer organization--
``(A) which is organized and operated to provide
firefighting or emergency medical services for persons
in the State or political subdivision, as the case may
be, and
``(B) which is required (by written agreement) by
the State or political subdivision to furnish
firefighting or emergency medical services in such State
or political subdivision.
``(d) Termination.--This section shall not apply with respect to
taxable years beginning after December 31, 2010.''.
[[Page 121 STAT. 1806]]
(b) Clerical Amendment.--The table of sections for such part is
amended by inserting after the item relating to section 139A the
following new item:
``Sec. 139B. Benefits provided to volunteer firefighters and emergency
medical responders.''.
(c) Effective Date.--The <<NOTE: 26 USC 139B note.>> amendments made
by this section shall apply to taxable years beginning after December
31, 2007.
SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW-INCOME HOUSING
CREDIT.
(a) In General.--Subclause (I) of section 42(i)(3)(D)(ii) of the
Internal Revenue Code of <<NOTE: 26 USC 42.>> 1986 (relating to certain
students not to disqualify unit) is amended to read as follows:
``(I) single parents and their
children and such parents are not
dependents (as defined in section 152,
determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B) thereof)
of another individual and such children
are not dependents (as so defined) of
another individual other than a parent
of such children, or.''.
(b) Effective Date.--The <<NOTE: 26 USC 42 note.>> amendment made by
this section shall apply to--
(1) housing credit amounts allocated before, on, or after
the date of the enactment of this Act, and
(2) buildings placed in service before, on, or after such
date to the extent paragraph (1) of section 42(h) of the
Internal Revenue Code of 1986 does not apply to any building by
reason of paragraph (4) thereof.
SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL GAINS
EXCLUSION TO CERTAIN POST-MARRIAGE SALES OF PRINCIPAL
RESIDENCES BY SURVIVING SPOUSES.
(a) Sale Within 2 Years of Spouse's Death.--Section 121(b) of the
Internal Revenue Code of 1986 (relating to limitations) is amended by
adding at the end the following new paragraph:
``(4) Special rule for certain sales by surviving spouses.--
In the case of a sale or exchange of property by an unmarried
individual whose spouse is deceased on the date of such sale,
paragraph (1) shall be applied by substituting `$500,000' for
`$250,000' if such sale occurs not later than 2 years after the
date of death of such spouse and the requirements of paragraph
(2)(A) were met immediately before such date of death.''.
(b) Effective Date.--The <<NOTE: 26 USC 121 note.>> amendment made
by this section shall apply to sales or exchanges after December 31,
2007.
SEC. 8. MODIFICATION OF PENALTY FOR FAILURE TO FILE PARTNERSHIP RETURNS;
LIMITATION ON DISCLOSURE.
(a) Extension of Time Limitation.--Section 6698(a) of the Internal
Revenue Code of 1986 (relating to failure to file partnership returns)
is amended by striking ``5 months'' and inserting ``12 months''.
(b) Increase in Penalty Amount.--Paragraph (1) of section 6698(b) of
such Code is amended by striking ``$50'' and inserting ``$85''.
[[Page 121 STAT. 1807]]
(c) Limitation on Disclosure of Taxpayer Returns to Partners, S
Corporation Shareholders, Trust Beneficiaries, and Estate
Beneficiaries.--
(1) In general.--Section 6103(e) of such <<NOTE: 26 USC
6103.>> Code (relating to disclosure to persons having material
interest) is amended by adding at the end the following new
paragraph:
``(10) Limitation on certain disclosures under this
subsection.--In the case of an inspection or disclosure under
this subsection relating to the return of a partnership, S
corporation, trust, or an estate, the information inspected or
disclosed shall not include any supporting schedule, attachment,
or list which includes the taxpayer identity information of a
person other than the entity making the return or the person
conducting the inspection or to whom the disclosure is made.''.
(2) Effective date.--The amendment made by this subsection
shall take effect on the date of the enactment of this Act.
(d) Effective Date.--The <<NOTE: 26 USC 6103 note.>> amendments made
by subsections (a) and (b) shall apply to returns required to be filed
after the date of the enactment of this Act.
SEC. 9. PENALTY FOR FAILURE TO FILE S CORPORATION RETURNS.
(a) In General.--Part I of subchapter B of chapter 68 of the
Internal Revenue Code of 1986 (relating to assessable penalties) is
amended by adding at the end the following new section:
``SEC. 6699. <<NOTE: Penalties. 26 USC 6699.>> FAILURE TO FILE S
CORPORATION RETURN.
``(a) General Rule.--In addition to the penalty imposed by section
7203 (relating to willful failure to file return, supply information, or
pay tax), if any S corporation required to file a return under section
6037 for any taxable year--
``(1) fails to file such return at the time prescribed
therefor (determined with regard to any extension of time for
filing), or
``(2) files a return which fails to show the information
required under section 6037,
such S corporation shall be liable for a penalty determined under
subsection (b) for each month (or fraction thereof) during which such
failure continues (but not to exceed 12 months), unless it is shown that
such failure is due to reasonable cause.
``(b) Amount Per Month.--For purposes of subsection (a), the amount
determined under this subsection for any month is the product of--
``(1) $85, multiplied by
``(2) the number of persons who were shareholders in the S
corporation during any part of the taxable year.
``(c) Assessment of Penalty.--The penalty imposed by subsection (a)
shall be assessed against the S corporation.
``(d) Deficiency Procedures Not To Apply.--Subchapter B of chapter
63 (relating to deficiency procedures for income, estate, gift, and
certain excise taxes) shall not apply in respect of the assessment or
collection of any penalty imposed by subsection (a).''.
(b) Clerical Amendment.--The table of sections for part I of
subchapter B of chapter 68 of such Code is amended by adding at the end
the following new item:
``Sec. 6699. Failure to file S corporation return.''.
[[Page 121 STAT. 1808]]
(c) Effective Date.--The <<NOTE: 26 USC 6699 note.>> amendments made
by this section shall apply to returns required to be filed after the
date of the enactment of this Act.
SEC. 10. <<NOTE: 26 USC 6655 note.>> MODIFICATION OF REQUIRED
INSTALLMENT OF CORPORATE ESTIMATED TAXES WITH RESPECT TO
CERTAIN DATES.
The percentage under subparagraph (B) of section 401(1) of the Tax
Increase Prevention and Reconciliation Act of 2005 in effect on the date
of the enactment of this Act is increased by 1.50 percentage points.
Approved December 20, 2007.
LEGISLATIVE HISTORY--H.R. 3648:
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HOUSE REPORTS: No. 110-356 (Comm. on Ways and Means).
CONGRESSIONAL RECORD, Vol. 153 (2007):
Oct. 4, considered and passed House.
Dec. 14, considered and passed Senate, amended.
Dec. 18, House concurred in Senate amendment.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 43 (2007):
Dec. 20, Presidential remarks.
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