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H.R. 3648 (110th): Mortgage Forgiveness Debt Relief Act of 2007


The text of the bill below is as of Oct 1, 2007 (Reported by House Committee).


IB

Union Calendar No. 220

110th CONGRESS

1st Session

H. R. 3648

[Report No. 110–356]

IN THE HOUSE OF REPRESENTATIVES

September 25, 2007

(for himself, Mr. Stark, Mr. Levin, Mr. McDermott, Mr. Pomeroy, Mr. Larson of Connecticut, Mr. Emanuel, Mr. Blumenauer, Mr. Pascrell, Ms. Berkley, Mr. Crowley, Mr. Van Hollen, Mr. Meek of Florida, Ms. Schwartz, Mr. Ramstad, Mr. English of Pennsylvania, Mr. Andrews, Mr. Nadler, Mrs. Maloney of New York, Mr. Space, and Mr. Neal of Massachusetts) introduced the following bill; which was referred to the Committee on Ways and Means

October 1, 2007

Additional sponsors: Mr. Gordon of Tennessee, Ms. Ginny Brown-Waite of Florida, Mr. Fattah, Mr. Holt, and Ms. Giffords

October 1, 2007

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Strike out all after the enacting clause and insert the part printed in italic

For text of introduced bill, see copy of bill as introduced on September 25, 2007

A BILL

To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes.

1.

Short title

This Act may be cited as the Mortgage Forgiveness Debt Relief Act of 2007.

2.

Discharges of indebtedness on principal residence excluded from gross income

(a)

In general

Paragraph (1) of section 108(a) of the Internal Revenue Code of 1986 is amended by striking or at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting , or, and by inserting after subparagraph (D) the following new subparagraph:

(E)

the indebtedness discharged is qualified principal residence indebtedness.

.

(b)

Special rules relating to qualified principal residence indebtedness

Section 108 of such Code is amended by adding at the end the following new subsection:

(h)

Special rules relating to qualified principal residence indebtedness

(1)

Basis reduction

The amount excluded from gross income by reason of subsection (a)(1)(E) shall be applied to reduce (but not below zero) the basis of the principal residence of the taxpayer.

(2)

Qualified principal residence indebtedness

For purposes of this section, the term qualified principal residence indebtedness means acquisition indebtedness (within the meaning of section 163(h)(3)(B), without regard to clause (ii) thereof) with respect to the principal residence of the taxpayer.

(3)

Exception for discharges on account of services performed for the lender

Subsection (a)(1)(E) shall not apply to the discharge of a loan if the discharge is on account of services performed for the lender.

(4)

Ordering rule

If any loan is discharged, in whole or in part, and only a portion of such loan is qualified principal residence indebtedness, subsection (a)(1)(E) shall apply only to so much of the amount discharged as exceeds the amount of the loan (as determined immediately before such discharge) which is not qualified principal residence indebtedness.

(5)

Principal residence

For purposes of this subsection, the term principal residence has the same meaning as when used in section 121.

.

(c)

Coordination

(1)

Subparagraph (A) of section 108(a)(2) of such Code is amended by striking and (D) and inserting (D), and (E).

(2)

Paragraph (2) of section 108(a) of such Code is amended by adding at the end the following new subparagraph:

(C)

Principal residence exclusion takes precedence over insolvency exclusion unless elected otherwise

Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(E) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph (1)(E).

.

(d)

Effective date

The amendments made by this section shall apply to discharges of indebtedness on or after January 1, 2007.

3.

Long-term extension of deduction for mortgage insurance premiums

(a)

In general

Subparagraph (E) of section 163(h)(3) of the Internal Revenue Code of 1986 (relating to mortgage insurance premiums treated as interest) is amended by striking clauses (iii) and (iv) and inserting the following new clause:

(iii)

Application

Clause (i) shall not apply with respect to any mortgage insurance contract issued before January 1, 2007, or after December 31, 2014.

.

(b)

Effective date

The amendment made by subsection (a) shall apply to contracts issued after December 31, 2006.

4.

Alternative tests for qualifying as cooperative housing corporation

(a)

In general

Subparagraph (D) of section 216(b)(1) of the Internal Revenue Code of 1986 (defining cooperative housing corporation) is amended to read as follows:

(D)

meeting 1 or more of the following requirements for the taxable year in which the taxes and interest described in subsection (a) are paid or incurred:

(i)

80 percent or more of the corporation’s gross income for such taxable year is derived from tenant-stockholders.

(ii)

At all times during such taxable year, 80 percent or more of the total square footage of the corporation’s property is used or available for use by the tenant-stockholders for residential purposes or purposes ancillary to such residential use.

(iii)

90 percent or more of the expenditures of the corporation paid or incurred during such taxable year are paid or incurred for the acquisition, construction, management, maintenance, or care of the corporation’s property for the benefit of the tenant-stockholders.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act.

5.

Gain from sale of principal residence allocated to nonqualified use not excluded from income

(a)

In general

Subsection (b) of section 121 of the Internal Revenue Code of 1986 (relating to limitations) is amended by adding at the end the following new paragraph:

(4)

Exclusion of gain allocated to nonqualified use

(A)

In general

Subsection (a) shall not apply to so much of the gain from the sale or exchange of property as is allocated to periods of nonqualified use.

(B)

Gain allocated to periods of nonqualified use

For purposes of subparagraph (A), gain shall be allocated to periods of nonqualified use based on the ratio which—

(i)

the aggregate periods of nonqualified use during the period such property was owned by the taxpayer, bears to

(ii)

the period such property was owned by the taxpayer.

(C)

Period of nonqualified use

For purposes of this paragraph—

(i)

In general

The term period of nonqualified use means any period (other than the portion of any period preceding January 1, 2008) during which the property is not used as the principal residence of the taxpayer or the taxpayer’s spouse or former spouse.

(ii)

Exceptions

The term period of nonqualified use does not include—

(I)

any portion of the 5-year period described in subsection (a) which is after the last date that such property is used as the principal residence of the taxpayer or the taxpayer’s spouse,

(II)

any period (not to exceed an aggregate period of 10 years) during which the taxpayer or the taxpayer’s spouse is serving on qualified official extended duty (as defined in subsection (d)(9)(C)) described in clause (i), (ii), or (iii) of subsection (d)(9)(A), and

(III)

any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the Secretary.

(D)

Coordination with recognition of gain attributable to depreciation

For purposes of this paragraph—

(i)

subparagraph (A) shall be applied after the application of subsection (d)(6), and

(ii)

subparagraph (B) shall be applied without regard to any gain to which subsection (d)(6) applies.

.

(b)

Effective date

The amendment made by this section shall apply to sales and exchanges after December 31, 2007.

6.

Time for payment of corporate estimated taxes

Subparagraph (B) of section 401(1) of the Tax Increase Prevention and Reconciliation Act of 2005 is amended by striking the percentage contained therein and inserting 116.75 percent.

October 1, 2007

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed