SEC. 801. Short title; amendment of 1986 Code.

(a) Short title.—This title may be cited as the “REIT Investment Diversification and Empowerment Act of 2008”.

(b) Amendment of 1986 Code.—Except as otherwise expressly provided, whenever in this title 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.

SEC. 811. Conforming taxable REIT subsidiary asset test.

Section 856(c)(4)(B)(ii) is amended by striking “20 percent” and inserting “25 percent”.

SEC. 821. Holding period under safe harbor.

Section 857(b)(6) (relating to income from prohibited transactions) is amended—

(1) by striking “4 years” in subparagraphs (C)(i), (C)(iv), and (D)(i) and inserting “2 years”,

(2) by striking “4-year period” in subparagraphs (C)(ii), (D)(ii), and (D)(iii) and inserting “2-year period”, and

(3) by striking “real estate asset”and all that follows through “if” in the matter preceding clause (i) of subparagraphs (C) and (D), respectively, and inserting “real estate asset (as defined in section 856(c)(5)(B)) and which is described in section 1221(a)(1) if”.

SEC. 822. Determining value of sales under safe harbor.

Section 857(b)(6) is amended—

(1) by striking the semicolon at the end of subparagraph (C)(iii) and inserting “, or (III) the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the fair market value of all of the assets of the trust as of the beginning of the taxable year;”, and

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        “(III) the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the fair market value of all of the assets of the trust as of the beginning of the taxable year,”.

(2) by adding “or” at the end of subclause (II) of subparagraph (D)(iv) and by adding at the end of such subparagraph the following new subclause:

 

 

 

SEC. 831. Conformity for health care facilities.

(a) Related party rentals.—Subparagraph (B) of section 856(d)(8) (relating to special rule for taxable REIT subsidiaries) is amended to read as follows:

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    “(i) directly or indirectly possesses a license, permit, or similar instrument enabling it to do so, or

    “(ii) employs individuals working at such property or facility located outside the United States, but only if an eligible independent contractor is responsible for the daily supervision and direction of such individuals on behalf of the taxable REIT subsidiary pursuant to a management agreement or similar service contract.”.

  “(B) Exception for certain lodging facilities and health care property.—The requirements of this subparagraph are met with respect to an interest in real property which is a qualified lodging facility (as defined in paragraph (9)(D)) or a qualified health care property (as defined in subsection (e)(6)(D)(i)) leased by the trust to a taxable REIT subsidiary of the trust if the property is operated on behalf of such subsidiary by a person who is an eligible independent contractor. For purposes of this section, a taxable REIT subsidiary is not considered to be operating or managing a qualified health care property or qualified lodging facility solely because it—

   

(b) Eligible independent contractor.—Subparagraphs (A) and (B) of section 856(d)(9) (relating to eligible independent contractor) are amended to read as follows:

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  “(A) In general.—The term ‘eligible independent contractor’ means, with respect to any qualified lodging facility or qualified health care property (as defined in subsection (e)(6)(D)(i)), any independent contractor if, at the time such contractor enters into a management agreement or other similar service contract with the taxable REIT subsidiary to operate such qualified lodging facility or qualified health care property, such contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities or qualified health care properties, respectively, for any person who is not a related person with respect to the real estate investment trust or the taxable REIT subsidiary.

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    “(i) The taxable REIT subsidiary bears the expenses for the operation of such qualified lodging facility or qualified health care property pursuant to the management agreement or other similar service contract.

    “(ii) The taxable REIT subsidiary receives the revenues from the operation of such qualified lodging facility or qualified health care property, net of expenses for such operation and fees payable to the operator pursuant to such agreement or contract.

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      “(I) January 1, 1999, or

      “(II) the earliest date that any taxable REIT subsidiary of such trust entered into a management agreement or other similar service contract with such person with respect to such qualified lodging facility or qualified health care property.”.

    “(iii) The real estate investment trust receives income from such person with respect to another property that is attributable to a lease of such other property to such person that was in effect as of the later of—

     

  “(B) Special rules.—Solely for purposes of this paragraph and paragraph (8)(B), a person shall not fail to be treated as an independent contractor with respect to any qualified lodging facility or qualified health care property (as so defined) by reason of the following:

   

(c) Taxable REIT subsidiaries.—The last sentence of section 856(l)(3) is amended—

(1) by inserting “or a health care facility” after “a lodging facility”, and

(2) by inserting “or health care facility” after “such lodging facility”.

SEC. 841 Effective dates and sunset.

(a) In general.—Except as otherwise provided in this section, the amendments made by this title shall apply to taxable years beginning after the date of the enactment of this Act.

(b) REIT income tests.—

(1) The amendment made by section 801(a) and (b) shall apply to gains and items of income recognized after the date of the enactment of this Act.

(2) The amendment made by section 801(c) shall apply to transactions entered into after the date of the enactment of this Act.

(3) The amendment made by section 801(d) shall apply after the date of the enactment of this Act.

(c) Conforming foreign currency revisions.—

(1) The amendment made by section 803(a) shall apply to gains recognized after the date of the enactment of this Act.

(2) The amendment made by section 803(b) shall apply to gains and deductions recognized after the date of the enactment of this Act.

(d) Dealer sales.—The amendments made by subtitle C shall apply to sales made after the date of the enactment of this Act.

(e) Sunset.—All amendments made by this title shall not apply to taxable years beginning after the date which is 5 years after the date of the enactment of this Act. The Internal Revenue Code of 1986 shall be applied and administered to taxable years described in the preceding sentence as if the amendments so described had never been enacted.

Tax-related provisions

SEC. 601. Election for 4-year carryback of certain net operating losses and temporary suspension of 90 percent AMT limit.

(a) In general.—

(1) 4-year carryback of certain losses.—Subparagraph (H) of section 172(b)(1) of the Internal Revenue Code of 1986 (relating to years to which loss may be carried) is amended to read as follows:

“(H) Additional carryback of certain losses.—

“(i) Taxable years ending during 2001 and 2002.—In the case of a net operating loss for any taxable year ending during 2001 or 2002, subparagraph (A)(i) shall be applied by substituting ‘5’ for ‘2’ and subparagraph (F) shall not apply.

“(ii) Taxable years ending during 2008 and 2009.—In the case of a net operating loss with respect to any eligible taxpayer (within the meaning of section 168(k)(4)) for any taxable year ending during 2008 or 2009—

“(I) subparagraph (A)(i) shall be applied by substituting ‘4’ for ‘2’,

“(II) subparagraph (E)(ii) shall be applied by substituting ‘3’ for ‘2’, and

“(III) subparagraph (F) shall not apply.”.

(2) Temporary suspension of 90 percent limit on certain NOL carrybacks and carryovers.—

(A) In general.—Section 56(d) of the Internal Revenue Code of 1986 (relating to definition of alternative tax net operating loss deduction) is amended by adding at the end the following new paragraph:

“(3) Additional adjustments.—For purposes of paragraph (1)(A), in the case of an eligible taxpayer (within the meaning of section 168(k)(4)), the amount described in subclause (I) of paragraph (1)(A)(ii) shall be increased by the amount of the net operating loss deduction allowable for the taxable year under section 172 attributable to the sum of—

“(A) carrybacks of net operating losses from taxable years ending during 2008 and 2009, and

“(B) carryovers of net operating losses to taxable years ending during 2008 or 2009.”.

(B) Conforming amendment.—Subclause (I) of section 56(d)(1)(A)(i) of such Code is amended by inserting “amount of such” before “deduction described in clause (ii)(I)”.

(3) Effective dates.—

(A) Net operating losses.—The amendments made by paragraph (1) shall apply to net operating losses arising in taxable years ending in 2008 or 2009.

(B) Suspension of AMT limitation.—The amendments made by paragraph (2) shall apply to taxable years ending after December 31, 1997.

(4) Anti-abuse rules.—The Secretary of Treasury or the Secretary's designee shall prescribe such rules as are necessary to prevent the abuse of the purposes of the amendments made by this subsection, including anti-stuffing rules, anti-churning rules (including rules relating to sale-leasebacks), and rules similar to the rules under section 1091 of the Internal Revenue Code of 1986 relating to losses from wash sales.

(b) Election among stimulus incentives.—

(1) In general.—

(A) Bonus depreciation.—Section 168(k) of the Internal Revenue Code of 1986 (relating to special allowance for certain property acquired after December 31, 2007, and before January 1, 2009), as amended by the Economic Stimulus Act of 2008, is amended—

(i) in paragraph (1), by inserting “placed in service by an eligible taxpayer” after “any qualified property”, and

(ii) by adding at the end the following new paragraph:

“(4) Eligible taxpayer.—

“(A) In general.—At such time and in such manner as the Secretary shall prescribe, each taxpayer may elect to be an eligible taxpayer with respect to 1 (and only 1) of the following:

“(i) This subsection and section 179(b)(7).

“(ii) The application of section 56(d)(1)(A)(ii)(I) and section 172(b)(1)(H)(ii) in connection with net operating losses relating to taxable years ending during 2008 and 2009.

“(B) Eligible taxpayer.—For purposes of each of the provisions described in subparagraph (A), a taxpayer shall only be treated as an eligible taxpayer with respect to the provision with respect to which the taxpayer made the election under subparagraph (A).

“(C) Election irrevocable.—An election under subparagraph (A) may not be revoked except with the consent of the Secretary.”.

(B) Effective date.—The amendments made by this paragraph shall take effect as if included in section 103 of the Economic Stimulus Act of 2008.

(2) Election for increased expensing.—

(A) In general.—Paragraph (7) of section 179(b) of the Internal Revenue Code of 1986 (relating to limitations), as added by the Economic Stimulus Act of 2008, is amended to read as follows:

“(7) Special rule for eligible taxpayers in 2008.—In the case of any taxable year of any eligible taxpayer (within the meaning of section 168(k)(4)) beginning in 2008—

“(A) the dollar limitation under paragraph (1) shall be $250,000,

“(B) the dollar limitation under paragraph (2) shall be $800,000, and

“(C) the amounts described in subparagraphs (A) and (B) shall not be adjusted under paragraph (5).”.

(B) Effective date.—The amendment made by this paragraph shall take effect as if included in section 102 of the Economic Stimulus Act of 2008.

SEC. 602. Modifications on use of qualified mortgage bonds; temporary increased volume cap for certain housing bonds.

(a) Use of qualified mortgage bonds proceeds for subprime refinancing loans.—Section 143(k) of the Internal Revenue Code of 1986 (relating to other definitions and special rules) is amended by adding at the end the following new paragraph:

“(12) Special rules for subprime refinancings.—

“(A) In general.—Notwithstanding the requirements of subsection (i)(1), the proceeds of a qualified mortgage issue may be used to refinance a mortgage on a residence which was originally financed by the mortgagor through a qualified subprime loan.

“(B) Special rules.—In applying this paragraph to any case in which the proceeds of a qualified mortgage issue are used for any refinancing described in subparagraph (A)—

“(i) subsection (a)(2)(D)(i) (relating to proceeds must be used within 42 months of date of issuance) shall be applied by substituting ‘12-month period’ for ‘42-month period’ each place it appears,

“(ii) subsection (d) (relating to 3-year requirement) shall not apply, and

“(iii) subsection (e) (relating to purchase price requirement) shall be applied by using the market value of the residence at the time of refinancing in lieu of the acquisition cost.

“(C) Qualified subprime loan.—The term ‘qualified subprime loan’ means an adjustable rate single-family residential mortgage loan originated after December 31, 2001, and before January 1, 2008, that the bond issuer determines would be reasonably likely to cause financial hardship to the borrower if not refinanced.

“(D) Termination.—This paragraph shall not apply to any bonds issued after December 31, 2010.”.

(b) Increased volume cap for certain bonds.—

(1) In general.—Subsection (d) of section 146 of the Internal Revenue Code of 1986 (relating to State ceiling) is amended by adding at the end the following new paragraph:

“(5) Increase and set aside for housing bonds for 2008.—

“(A) Increase for 2008.—In the case of calendar year 2008, the State ceiling for each State shall be increased by an amount equal to the greater of—

“(i) $10,000,000,000 multiplied by a fraction—

“(I) the numerator of which is the population of such State, and

“(II) the denominator of which is the total population of all States, or

“(ii) the amount determined under subparagraph (B).

“(B) Minimum amount.—The amount determined under this subparagraph is—

“(i) in the case of a State (other than a possession), $90,300,606, and

“(ii) in the case of a possession of the United States with a population less than the least populous State (other than a possession), the product of—

“(I) a fraction the numerator of which is $90,300,606 and the denominator of which is population of the least populous State (other than a possession), and

“(II) the population of such possession.

In the case of any possession of the United States not described in clause (ii), the amount determined under this subparagraph shall be zero.

“(C) Set aside.—

“(i) In general.—Any amount of the State ceiling for any State which is attributable to an increase under this paragraph shall be allocated solely for one or more qualified purposes.

“(ii) Qualified purpose.—For purposes of this paragraph, the term ‘qualified purpose’ means—

“(I) the issuance of exempt facility bonds used solely to provide qualified residential rental projects, or

“(II) a qualified mortgage issue (determined by substituting ‘12-month period’ for ‘42-month period’ each place it appears in section 143(a)(2)(D)(i)).”.

(2) Carryforward of unused limitations.—Subsection (f) of section 146 of such Code (relating to elective carryforward of unused limitation for specified purpose) is amended by adding at the end the following new paragraph:

“(6) Special rules for increased volume cap under subsection (d)(5).—

“(A) In general.—No amount which is attributable to the increase under subsection (d)(5) may be used—

“(i) for a carryforward purpose other than a qualified purpose (as defined in subsection (d)(5)), and

“(ii) to issue any bond after calendar year 2010.

“(B) Ordering rules.—For purposes of subparagraph (A), any carryforward of an issuing authority’s volume cap for calendar year 2008 shall be treated as attributable to such increase to the extent of such increase.”.

(c) Alternative minimum tax exemption for qualified mortgage bonds, qualified veterans' mortgage bonds, and bonds for qualified residential rental projects.—

(1) In general.—Clause (ii) of section 57(a)(5)(C) of the Internal Revenue Code of 1986 (relating to specified private activity bonds) is amended by striking “shall not include” and all that follows and inserting “

“shall not include—

“(I) any qualified 501(c)(3) bond (as defined in section 145), or

“(II) any qualified mortgage bond (as defined in section 143(a)), any qualified veterans' mortgage bond (as defined in section 143(b)), or any exempt facility bond (as defined in section 142(a)) issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide qualified residential rental projects (as defined in section 142(d)), but only if such bond is issued after the date of the enactment of this subclause and before January 1, 2011.

“Subclause (II) shall not apply to a refunding bond unless such subclause applied to the refunded bond (or in the case of a series of refundings, the original bond).”.

(2) Conforming amendment.—The heading for section 57(a)(5)(C)(ii) of such Code is amended by striking “qualified 501(c)(3) bonds” and inserting “certain bonds”.

(d) Effective date.—The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.

SEC. 603. Credit for certain home purchases.

(a) Allowance of credit.—Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:

“SEC. 25E. Credit for certain home purchases.

“(a) Allowance of credit.—

“(1) In general.—In the case of an individual who is a purchaser of a qualified principal residence during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter an amount equal to so much of the purchase price of the residence as does not exceed $7,000.

“(2) Allocation of credit amount.—The amount of the credit allowed under paragraph (1) shall be equally divided among the 2 taxable years beginning with the taxable year in which the purchase of the qualified principal residence is made.

“(b) Limitations.—

“(1) Date of purchase.—The credit allowed under subsection (a) shall be allowed only with respect to purchases made—

“(A) after the date of the enactment of this section, and

“(B) before the date that is 12 months after such date.

“(2) Limitation based on amount of tax.—In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of—

“(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

“(B) the sum of the credits allowable under this subpart (other than this section and section 23) for the taxable year.

“(3) One-time only.—

“(A) In general.—If a credit is allowed under this section in the case of any individual (and such individual's spouse, if married) with respect to the purchase of any qualified principal residence, no credit shall be allowed under this section in any taxable year with respect to the purchase of any other qualified principal residence by such individual or a spouse of such individual.

“(B) Joint purchase.—In the case of a purchase of a qualified principal residence by 2 or more unmarried individuals or by 2 married individuals filing separately, no credit shall be allowed under this section if a credit under this section has been allowed to any of such individuals in any taxable year with respect to the purchase of any other qualified principal residence.

“(c) Qualified principal residence.—For purposes of this section—

“(1) In general.—The term ‘qualified principal residence’ means an eligible single-family residence that is purchased to be the principal residence of the purchaser.

“(2) Eligible single-family residence.—

“(A) In general.—The term ‘eligible single-family residence’ means a single-family structure that is a residence—

“(i) upon which foreclosure has been filed pursuant to the laws of the State in which the residence is located, and

“(ii) which—

“(I) is a new previously unoccupied residence for which a building permit was issued and construction began on or before September 1, 2007, or

“(II) was occupied as a principal residence by the mortgagor for at least 1 year prior to the foreclosure filing.

“(B) Certification.—In the case of an eligible single-family residence described in subparagraph (A)(ii)(I), no credit shall be allowed under this section unless the purchaser submits a certification by the seller of such residence that such residence meets the requirements of such subparagraph.

“(3) Principal residence.—The term ‘principal residence’ has the same meaning as when used in section 121.

“(d) Denial of double benefit.—No credit shall be allowed under this section for any purchase for which a credit is allowed under section 1400C.

“(e) Recapture in the case of certain dispositions.—In the event that a taxpayer—

“(1) disposes of the qualified principal residence with respect to which a credit is allowed under subsection (a), or

“(2) fails to occupy such residence as the taxpayer's principal residence,

at any time within 24 months after the date on which the taxpayer purchased such residence, then the remaining portion of the credit allowed under subsection (a) shall be disallowed in the taxable year during which such disposition occurred or in which the taxpayer failed to occupy the residence as a principal residence, and in any subsequent taxable year in which the remaining portion of the credit would, but for this subsection, have been allowed.

“(f) Special rules.—

“(1) Joint purchase.—

“(A) Married individuals filing separately.—In the case of 2 married individuals filing separately, subsection (a) shall be applied to each such individual by substituting ‘$3,500’ for ‘$7,000’ in paragraph (1) thereof.

“(B) Unmarried individuals.—If 2 or more individuals who are not married purchase a qualified principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $7,000.

“(2) Purchase; purchase price.—Rules similar to the rules of paragraphs (2) and (3) of section 1400C(e) (as in effect on the date of the enactment of this section) shall apply for purposes of this section.

“(3) Reporting requirement.—Rules similar to the rules of section 1400C(f) (as so in effect) shall apply for purposes of this section.

“(g) Basis adjustment.—For purposes of this subtitle, if a credit is allowed under this section with respect to the purchase of any residence, the basis of such residence shall be reduced by the amount of the credit so allowed.”.

(b) Conforming amendments.—

(1) Section 24(b)(3)(B) of the Internal Revenue Code of 1986 is amended by striking “and 25B” and inserting “, 25B, and 25E”.

(2) Section 25(e)(1)(C)(ii) of such Code is amended by inserting “25E,” after “25D,”.

(3) Section 25B(g)(2) of such Code is amended by striking “section 23” and inserting “sections 23 and 25E”.

(4) Section 25D(c)(2) of such Code is amended by striking “and 25B” and inserting “25B, and 25E”.

(5) Section 26(a)(1) of such Code is amended by striking “and 25B” and inserting “25B, and 25E”.

(6) Section 904(i) of such Code is amended by striking “and 25B” and inserting “25B, and 25E”.

(7) Subsection (a) of section 1016 of such Code is amended by striking “and” at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting “, and”, and by adding at the end the following new paragraph:

“(38) to the extent provided in section 25E(g).”.

(8) Section 1400C(d)(2) of such Code is amended by striking “and 25D” and inserting “25D, and 25E”.

(c) Clerical amendment.—The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 25D the following new item:

“Sec. 25E. Credit for certain home purchases.”.

(d) Effective date.—The amendments made by this section shall apply to purchases in taxable years ending after the date of the enactment of this Act.

(e) Application of EGTRRA sunset.—The amendment made by subsection (b)(1) shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the same manner as the provisions of such Act to which such amendment relates.

SEC. 604. Additional standard deduction for real property taxes for nonitemizers.

(a) In general.—Section 63(c)(1) of the Internal Revenue Code of 1986 (defining standard deduction) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, and”, and by adding at the end the following new subparagraph:

“(C) in the case of any taxable year beginning in 2008, the real property tax deduction.”.

(b) Definition.—Section 63(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

“(8) Real property tax deduction.—

“(A) In general.—For purposes of paragraph (1), the real property tax deduction is so much of the amount of the eligible State and local real property taxes paid or accrued by the taxpayer during the taxable year which do not exceed $500 ($1,000 in the case of a joint return).

“(B) Eligible State and local real property taxes.—For purposes of subparagraph (A), the term ‘eligible State and local real property taxes’ means State and local real property taxes (within the meaning of section 164), but only if the rate of tax for all residential real property taxes in the jurisdiction has not been increased at any time after April 2, 2008, and before January 1, 2009.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2007.

SEC. 605. Election to accelerate AMT and R and D credits in lieu of bonus depreciation.

(a) In general.—Section 168(k), as amended by this Act, is amended by adding at the end the following new paragraph:

“(5) Election to accelerate AMT and R and D credits in lieu of bonus depreciation.—

“(A) In general.—If a corporation which is an eligible taxpayer (within the meaning of paragraph (4)) for purposes of this subsection elects to have this paragraph apply—

“(i) no additional depreciation shall be allowed under paragraph (1) for any qualified property placed in service during any taxable year to which paragraph (1) would otherwise apply, and

“(ii) the limitations described in subparagraph (B) for such taxable year shall be increased by an aggregate amount not in excess of the bonus depreciation amount for such taxable year.

“(B) Limitations to be increased.—The limitations described in this subparagraph are—

“(i) the limitation under section 38(c), and

“(ii) the limitation under section 53(c).

“(C) Bonus depreciation amount.—For purposes of this paragraph—

“(i) In general.—The bonus depreciation amount for any applicable taxable year is an amount equal to the product of 20 percent and the excess (if any) of—

“(I) the aggregate amount of depreciation which would be determined under this section for property placed in service during the taxable year if no election under this paragraph were made, over

“(II) the aggregate amount of depreciation allowable under this section for property placed in service during the taxable year.

In the case of property which is a passenger aircraft, the amount determined under subclause (I) shall be calculated without regard to the written binding contract limitation under paragraph (2)(A)(iii)(I).

“(ii) Eligible qualified property.—For purposes of clause (i), the term ‘eligible qualified property’ means qualified property under paragraph (2), except that in applying paragraph (2) for purposes of this clause—

“(I) ‘March 31, 2008’ shall be substituted for ‘December 31, 2007’ each place it appears in subparagraph (A) and clauses (i) and (ii) of subparagraph (E) thereof,

“(II) only adjusted basis attributable to manufacture, construction, or production after March 31, 2008, and before January 1, 2009, shall be taken into account under subparagraph (B)(ii) thereof, and

“(III) in the case of property which is a passenger aircraft, the written binding contract limitation under subparagraph (A)(iii)(I) thereof shall not apply.

“(iii) Maximum amount.—The bonus depreciation amount for any applicable taxable year shall not exceed the applicable limitation under clause (iv), reduced (but not below zero) by the bonus depreciation amount for any preceding taxable year.

“(iv) Applicable limitation.—For purposes of clause (iii), the term ‘applicable limitation’ means, with respect to any eligible taxpayer, the lesser of—

“(I) $40,000,000, or

“(II) 10 percent of the sum of the amounts determined with respect to the eligible taxpayer under clauses (ii) and (iii) of subparagraph (D).

“(v) Aggregation rule.—All corporations which are treated as a single employer under section 52(a) shall be treated as 1 taxpayer for purposes of applying the limitation under this subparagraph and determining the applicable limitation under clause (iv).

“(D) Allocation of bonus depreciation amounts.—

“(i) In general.—Subject to clauses (ii) and (iii), the taxpayer shall, at such time and in such manner as the Secretary may prescribe, specify the portion (if any) of the bonus depreciation amount which is to be allocated to each of the limitations described in subparagraph (B).

“(ii) Business credit limitation.—The portion of the bonus depreciation amount allocated to the limitation described in subparagraph (B)(i) shall not exceed an amount equal to the portion of the credit allowable under section 38 for the taxable year which is allocable to business credit carryforwards to such taxable year which are—

“(I) from taxable years beginning before January 1, 2006, and

“(II) properly allocable (determined under the rules of section 38(d)) to the research credit determined under section 41(a).

“(iii) Alternative minimum tax credit limitation.—The portion of the bonus depreciation amount allocated to the limitation described in subparagraph (B)(ii) shall not exceed an amount equal to the portion of the minimum tax credit allowable under section 53 for the taxable year which is allocable to the adjusted minimum tax imposed for taxable years beginning before January 1, 2006.

“(E) Credit refundable.—Any aggregate increases in the credits allowed under section 38 or 53 by reason of this paragraph shall, for purposes of this title, be treated as a credit allowed to the taxpayer under subpart C of part IV of subchapter A.

“(F) Other rules.—

“(i) Election.—Any election under this paragraph (including any allocation under subparagraph (D)) may be revoked only with the consent of the Secretary.

“(ii) Deduction allowed in computing minimum tax.—Notwithstanding this paragraph, paragraph (2)(G) shall apply with respect to the deduction computed under this section (after application of this paragraph) with respect to property placed in service during any applicable taxable year.”.

(b) Effective date.—The amendments made by this section shall apply to property placed in service after December 31, 2007, in taxable years ending after such date.

SEC. 606. Use of amended income tax returns to take into account receipt of certain hurricane-related casualty loss grants by disallowing previously taken casualty loss deductions.

(a) In general.—Notwithstanding any other provision of the Internal Revenue Code of 1986, if a taxpayer claims a deduction for any taxable year with respect to a casualty loss to a personal residence (within the meaning of section 121 of such Code) resulting from Hurricane Katrina, Hurricane Rita, or Hurricane Wilma and in a subsequent taxable year receives a grant under Public Law 109–148, 109–234, or 110–116 as reimbursement for such loss, such taxpayer may elect to file an amended income tax return for the taxable year in which such deduction was allowed and disallow such deduction. If elected, such amended return must be filed not later than the due date for filing the tax return for the taxable year in which the taxpayer receives such reimbursement or the date that is 4 months after the date of the enactment of this Act, whichever is later. Any increase in Federal income tax resulting from such disallowance if such amended return is filed—

(1) shall be subject to interest on the underpaid tax for one year at the underpayment rate determined under section 6621(a)(2) of such Code; and

(2) shall not be subject to any penalty under such Code.

(b) Emergency designation.—For purposes of Senate enforcement, all provisions of this section are designated as emergency requirements and necessary to meet emergency needs pursuant to section 204 of S. Con. Res. 21 (110th Congress), the concurrent resolution on the budget for fiscal year 2008.

SEC. 607. Waiver of deadline on construction of GO Zone property eligible for bonus depreciation.

(a) In general.—Subparagraph (B) of section 1400N(d)(3) of the Internal Revenue Code of 1986 is amended to read as follows:

“(B) without regard to ‘and before January 1, 2009’ in clause (i) thereof,”.

(b) Effective date.—The amendment made by this section shall apply to property placed in service after December 31, 2007.

(c) Emergency designation.—For purposes of Senate enforcement, all provisions of this section are designated as emergency requirements and necessary to meet emergency needs pursuant to section 204 of S. Con. Res. 21 (110th Congress), the concurrent resolution on the budget for fiscal year 2008.

SEC. 608. Temporary tax relief for Kiowa County, Kansas and surrounding area.

(a) In general.—The following provisions of or relating to the Internal Revenue Code of 1986 shall apply, in addition to the areas described in such provisions, to an area with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (FEMA–1699–DR, as in effect on the date of the enactment of this Act) by reason of severe storms and tornados beginning on May 4, 2007, and determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act with respect to damages attributed to such storms and tornados:

(1) Suspension of certain limitations on personal casualty losses.—Section 1400S(b)(1) of the Internal Revenue Code of 1986, by substituting “May 4, 2007” for “August 25, 2005”.

(2) Extension of replacement period for nonrecognition of gain.—Section 405 of the Katrina Emergency Tax Relief Act of 2005, by substituting “on or after May 4, 2007, by reason of the May 4, 2007, storms and tornados” for “on or after August 25, 2005, by reason of Hurricane Katrina”.

(3) Employee retention credit for employers affected by May 4 storms and tornados.—Section 1400R(a) of the Internal Revenue Code of 1986—

(A) by substituting “May 4, 2007” for “August 28, 2005” each place it appears,

(B) by substituting “January 1, 2008” 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 May 4, 2007.

(4) Special allowance for certain property acquired on or after May 5, 2007.—Section 1400N(d) of such Code—

(A) by substituting “qualified Recovery Assistance property” for “qualified Gulf Opportunity Zone property” each place it appears,

(B) by substituting “May 5, 2007” for “August 28, 2005” each place it appears,

(C) by substituting “December 31, 2008” for “December 31, 2007” in paragraph (2)(A)(v),

(D) by substituting “December 31, 2009” for “December 31, 2008” in paragraph (2)(A)(v),

(E) by substituting “May 4, 2007” for “August 27, 2005” in paragraph (3)(A),

(F) by substituting “January 1, 2009” for “January 1, 2008” in paragraph (3)(B), and

(G) determined without regard to paragraph (6) thereof.

(5) Increase in expensing under section 179.—Section 1400N(e) of such Code, by substituting “qualified section 179 Recovery Assistance property” for “qualified section 179 Gulf Opportunity Zone property” each place it appears.

(6) Expensing for certain demolition and clean-up costs.—Section 1400N(f) of such Code—

(A) by substituting “qualified Recovery Assistance clean-up cost” for “qualified Gulf Opportunity Zone clean-up cost” each place it appears, and

(B) by substituting “beginning on May 4, 2007, and ending on December 31, 2009” for “beginning on August 28, 2005, and ending on December 31, 2007” in paragraph (2) thereof.

(7) Treatment of public utility property disaster losses.—Section 1400N(o) of such Code.

(8) Treatment of net operating losses attributable to storm losses.—Section 1400N(k) of such Code—

(A) by substituting “qualified Recovery Assistance loss” for “qualified Gulf Opportunity Zone loss” each place it appears,

(B) by substituting “after May 3, 2007, and before on January 1, 2010” for “after August 27, 2005, and before January 1, 2008” each place it appears,

(C) by substituting “May 4, 2007” for “August 28, 2005” in paragraph (2)(B)(ii)(I) thereof,

(D) by substituting “qualified Recovery Assistance property” for “qualified Gulf Opportunity Zone property” in paragraph (2)(B)(iv) thereof, and

(E) by substituting “qualified Recovery Assistance casualty loss” for “qualified Gulf Opportunity Zone casualty loss” each place it appears.

(9) Treatment of representations regarding income eligibility for purposes of qualified rental project requirements.—Section 1400N(n) of such Code.

(10) Special rules for use of retirement funds.—Section 1400Q of such Code—

(A) by substituting “qualified Recovery Assistance distribution” for “qualified hurricane distribution” each place it appears,

(B) by substituting “on or after May 4, 2007, and before January 1, 2009” for “on or after August 25, 2005, and before January 1, 2007” in subsection (a)(4)(A)(i),

(C) by substituting “qualified storm distribution” for “qualified Katrina distribution” each place it appears,

(D) by substituting “after November 4, 2006, and before May 5, 2007” for “after February 28, 2005, and before August 29, 2005” in subsection (b)(2)(B)(ii),

(E) by substituting “beginning on May 4, 2007, and ending on November 5, 2007” for “beginning on August 25, 2005, and ending on February 28, 2006” in subsection (b)(3)(A),

(F) by substituting “qualified storm individual” for “qualified Hurricane Katrina individual” each place it appears,

(G) by substituting “December 31, 2007” for “December 31, 2006” in subsection (c)(2)(A),

(H) by substituting “beginning on June 4, 2007, and ending on December 31, 2007” for “beginning on September 24, 2005, and ending on December 31, 2006” in subsection (c)(4)(A)(i),

(I) by substituting “May 4, 2007” for “August 25, 2005” in subsection (c)(4)(A)(ii), and

(J) by substituting “January 1, 2008” for “January 1, 2007” in subsection (d)(2)(A)(ii).

(b) Emergency designation.—For purposes of Senate enforcement, all provisions of this section are designated as emergency requirements and necessary to meet emergency needs pursuant to section 204 of S. Con. Res. 21 (110th Congress), the