Tax Extenders and Alternative Minimum Tax Relief Act of 2008

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Public Law 110-343
United States Congress
Division C: Tax Extenders and Alternative Minimum Tax Relief Act of 2008
Pub.L. 110−343, 122 Stat. 3765

==DIVISION C — TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF==

Sec. 1. Short Title; Amendment Of 1986 Code; Table Of Contents.[edit]

(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:

Contents

TITLE I—ALTERNATIVE MINIMUM TAX RELIEF[edit]

Sec. 101. Extension Of Alternative Minimum Tax Relief For Nonrefundable Personal Credits.[edit]

(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.[edit]

(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.[edit]

(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[edit]

Sec. 201. Deduction For State And Local Sales Taxes.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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[edit]

Sec. 301. Extension And Modification Of Research Credit.[edit]

(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.

Sec. 302. New Markets Tax Credit.[edit]

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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

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.[edit]

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.[edit]

(a) In General.—
Subparagraph (C) of section 199(d)(8) (relating to termination) is amended—

L:: (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.[edit]

(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 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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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.
(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.[edit]

(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.[edit]

(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.[edit]

(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[edit]

Sec. 401. Permanent Authority For Undercover Operations.[edit]

(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.[edit]

(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[edit]

Subtitle A—General Provisions[edit]

Sec. 501. $8,500 Income Threshold Used To Calculate Refundable Portion Of Child Tax Credit.[edit]

(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.[edit]

(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.[edit]

(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.[edit]

(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
(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.[edit]

(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.[edit]

(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[edit]

Sec. 511. Short Title.[edit]

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.[edit]

(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, 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 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 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.'.
(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[edit]

Sec. 601. Secure Rural Schools And Community Self-determination Program.[edit]

(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:
`SEC. 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 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) (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
`(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 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 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.[edit]

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[edit]

Subtitle A—Heartland and Hurricane Ike Disaster Relief[edit]

Sec. 701. Short Title.[edit]

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.[edit]

(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
(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'.

Sec. 703. Reporting Requirements Relating To Disaster Relief Contributions.[edit]

(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.[edit]

(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.
(c) 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[edit]

Sec. 706. Losses Attributable To Federally Declared Disasters.[edit]

(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 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.[edit]

(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.[edit]

(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.
(1) 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.[edit]

(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.
`(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.[edit]

(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.[edit]

(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.[edit]

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[edit]

Sec. 801. Nonqualified Deferred Compensation From Certain Tax Indifferent Parties.[edit]

(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 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.