I 

114TH CONGRESS 

2D SESSION H. R. 4377 

To amend the Internal Revenue Code of 1986 to tax business income on 

a cash flow basis, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 13, 2016 

Mr. NUNES (for himself, Mr. TIBERI, Mr. BOUSTANY, Mr. MARCHANT, Mr. 

HOLDING, Mr. PITTENGER, Mr. PALMER, Mr. RUSSELL, Mr. SIMPSON, 

Mr. FRANKS of Arizona, Mr. STEWART, Mr. CALVERT, Mr. KNIGHT, Mrs. 

MIMI WALTERS of California, Mr. VALADAO, Mr. ISSA, Mr. AMODEI, Mr. 

YOHO, Mr. HARDY, Mr. COLE, Mr. POMPEO, Mr. ROE of Tennessee, Mr. 

FLEISCHMANN, Mr. EMMER of Minnesota, Mr. LONG, Mr. BRAT, and Mr. 

ROUZER) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to tax business 

income on a cash flow basis, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘American Business Competitiveness Act of 2015’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amendVerDate Sep 11 2014 23:34 Jan 13, 2016 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4377.IH H4377

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1 ment or repeal is expressed in terms of an amendment 

2 to, or repeal of, a section or other provision, the reference 

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

5 (c) TABLE OF CONTENTS.—The table of contents is 

6 as follows: 

Sec. 1. Short title, etc. 

Sec. 2. Congressional findings. 

Sec. 3. Maximum tax rate for net business income. 

Sec. 4. Definition of net business income tax base. 

Sec. 5. Allowance of transition basis deduction. 

Sec. 6. Interest income of individuals taxed in same manner as dividend income; reduced by interest expense. 

Sec. 7. Repeal of depreciation, international, and other tax provisions. 

Sec. 8. Expanded relief for net operating losses. 

Sec. 9. Repeal of corporate AMT and individual AMT preferences and adjustments that pertain to capital cost recovery. 

Sec. 10. Repeal of business tax credits. 

Sec. 11. Disallowance of interest expense deduction, except qualified residence 

interest. 

Sec. 12. Cash method of accounting. 

7 SEC. 2. CONGRESSIONAL FINDINGS. 

8 (a) FINDINGS RELATING TO THE DEPRECIATION

9 SYSTEM OF FEDERAL BUSINESS TAXATION.—Congress 

10 finds the depreciation system— 

11 (1) is rife with outdated asset classifications, 

12 inaccurate depreciation schedules, targeted credits 

13 and deductions, and targeted expensing provisions; 

14 (2) rewards some business activities over oth15 ers; 

16 (3) reduces savings and investment in the 

17 United States by increasing the rate of return that 

18 is required for investments to be viable; and 


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1 (4) creates complexity for both the Internal 

2 Revenue Service and businesses. 

3 (b) FINDINGS RELATING TO THE DEDUCTION OF

4 BUSINESS INTEREST.—Congress finds that the business 

5 interest deduction— 

6 (1) encourages businesses to finance their oper7 ations with debt; 

8 (2) results in negative effective tax rates for 

9 some investments; and 

10 (3) heightens bankruptcy risk during periods of 

11 economic distress. 

12 (c) FINDINGS RELATING TO THE EXPENSING OF IN13 VESTMENT.—Congress finds that allowing businesses to 

14 expense their investments— 

15 (1) will make more investment opportunities 

16 profitable for businesses to undertake; 

17 (2) will promote investment in the United 

18 States; 

19 (3) will limit the Government’s ability to reward 

20 specific business activities through the tax code; and 

21 (4) will simplify business taxation. 

22 SEC. 3. MAXIMUM TAX RATE FOR NET BUSINESS INCOME. 

23 (a) INDIVIDUAL NET BUSINESS INCOME.— 

24 (1) MAXIMUM RATE OF 25 PERCENT.—Para25 graph (1) of section 1(h) is amended— 


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1 (A) in subparagraph (A)— 

2 (i) by striking ‘‘the net capital gain’’ 

3 in clause (i) and inserting ‘‘the sum of the 

4 net capital gain and the net business in5 come’’; and 

6 (ii) by striking ‘‘the adjusted net cap7 ital gain’’ in clause (ii)(II) and inserting 

8 ‘‘the sum of the adjusted net capital gain 

9 and the net business income’’; and 

10 (B) in subparagraph (E)(i) by striking 

11 ‘‘unrecaptured section 1250 gain’’ and inserting 

12 ‘‘25-percent rate gain’’. 

13 (2) 25-PERCENT RATE GAIN.—Subsection (h) of 

14 section 1 is amended by adding at the end the fol15 lowing: 

16 ‘‘(12) 25-PERCENT RATE GAIN.—For purposes 

17 of this subsection— 

18 ‘‘(A) unrecaptured section 1250 gain, plus 

19 ‘‘(B) net business income.’’. 

20 (b) CORPORATE INCOME TAX RATE REDUCTION; 

21 TAX IMPOSED ONLY ON CORPORATION’S NET BUSINESS

22 INCOME.— 

23 (1) IN GENERAL.—Section 11 is amended to 

24 read as follows: 


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1 ‘‘SEC. 11. TAX IMPOSED. 

2 ‘‘(a) CORPORATIONS IN GENERAL.—A tax is hereby 

3 imposed for each taxable year on the net business income 

4 of every corporation. 

5 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im6 posed by subsection (a) shall be the sum of— 

7 ‘‘(1) 15 percent of so much of the net business 

8 income as does not exceed $50,000, and 

9 ‘‘(2) 25 percent of so much of the net business 

10 income as exceeds $50,000. 

11 In the case of a corporation which has net business income 

12 in excess of $100,000 for any taxable year, the amount 

13 of tax determined under the preceding sentence for such 

14 taxable year shall be increased by the lesser of (i) 5 per15 cent of such excess, or (ii) $5,000.’’. 

16 (2) CONFORMING AMENDMENT.—Paragraphs 

17 (1) and (2) of section 1445(e) are each amended by 

18 striking ‘‘35 percent’’ and inserting ‘‘25 percent’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning on or 

21 after January 1, 2015. 

22 SEC. 4. DEFINITION OF NET BUSINESS INCOME TAX BASE. 

23 (a) IN GENERAL.—Subtitle A is amended by insert24 ing after chapter 2A the following new chapter: 

25 ‘‘CHAPTER 2B—BUSINESS INCOME 

‘‘SUBCHAPTER A. BASIC RULES


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‘‘SUBCHAPTER B. CAPITAL CONTRIBUTIONS, MERGERS, ACQUISITIONS, AND

DISTRIBUTIONS

‘‘SUBCHAPTER C. INTERNATIONAL PROVISIONS

‘‘SUBCHAPTER D. FINANCIAL INSTITUTIONS

‘‘SUBCHAPTER E. OTHER DEFINITIONS

1 ‘‘Subchapter A—Basic Rules 

‘‘Sec. 1421. Net business income. 

2 ‘‘SEC. 1421. NET BUSINESS INCOME. 

3 ‘‘(a) IN GENERAL.—For purposes of this title, the 

4 term ‘net business income’ means, for a taxable year with 

5 respect to a business entity, the amount by which the tax6 able receipts of the business entity for the taxable year 

7 exceed the deductible amounts for the business entity for 

8 the taxable year. 

9 ‘‘(b) TAXABLE RECEIPTS.— 

10 ‘‘(1) IN GENERAL.—The term ‘taxable receipts’ 

11 means all receipts from the sale of property, use of 

12 property, and performance of services. 

13 ‘‘(2) GAMES OF CHANCE.—Amounts received 

14 for playing games of chance by business entities en15 gaging in the activity of providing such games shall 

16 be treated as receipts from the sale of property or 

17 services. 

18 ‘‘(3) IN-KIND RECEIPTS.—The taxable receipts 

19 attributable to the receipt of property, use of prop20 erty or services in whole or partial exchange for 


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1 property, use of property or services equal the fair 

2 market value of the services or property received. 

3 ‘‘(4) TAXES.—The term ‘taxable receipts’ does 

4 not include any excise tax, sales tax, custom duty, 

5 or other separately stated levy imposed by a Federal, 

6 State, or local government received by a business en7 tity in connection with the sale of property or serv8 ices or the use of property. 

9 ‘‘(5) FINANCIAL RECEIPTS.— 

10 ‘‘(A) IN GENERAL.—The term ‘taxable re11 ceipts’ does not include financial receipts. 

12 ‘‘(B) FINANCIAL RECEIPTS.—The term ‘fi13 nancial receipts’ includes— 

14 ‘‘(i) interest, 

15 ‘‘(ii) dividends and other distributions 

16 by a business entity, 

17 ‘‘(iii) proceeds from the sale of stock, 

18 other ownership interests in business enti19 ties, or other financial instruments, 

20 ‘‘(iv) proceeds from life insurance 

21 policies, 

22 ‘‘(v) proceeds from annuities, 

23 ‘‘(vi) proceeds from currency hedging 

24 or exchanges, and 


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1 ‘‘(vii) proceeds from other financial 

2 transactions. 

3 ‘‘(C) FINANCIAL INSTRUMENT.—The term 

4 ‘financial instrument’ means any— 

5 ‘‘(i) share of stock in a corporation, 

6 ‘‘(ii) equity ownership in any widely 

7 held or publicly traded partnership, trust, 

8 or other business entity, 

9 ‘‘(iii) note, bond, debenture, or other 

10 evidence of indebtedness, 

11 ‘‘(iv) interest rate, currency, or equity 

12 notional principal contract, 

13 ‘‘(v) evidence or interest in, or a de14 rivative financial instrument in, any finan15 cial instrument described in clause (i), (ii), 

16 (iii), or (iv), or any currency, including any 

17 option, forward contract, short position, 

18 and any similar financial instrument in 

19 such a financial instrument or currency, 

20 and 

21 ‘‘(vi) a position which— 

22 ‘‘(I) is not a financial instrument 

23 described in clause (i), (ii), (iii), or 

24 (iv), 


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1 ‘‘(II) is a hedge with respect to 

2 such a financial instrument, and 

3 ‘‘(III) is clearly identified in the 

4 dealer’s records as being described in 

5 this subparagraph before the close of 

6 the day on which it was acquired or 

7 entered into. 

8 ‘‘(c) DEDUCTIBLE AMOUNTS.— 

9 ‘‘(1) IN GENERAL.—The term ‘deductible 

10 amounts’ includes for a taxable year with respect to 

11 a business entity— 

12 ‘‘(A) the cost of business purchases in the 

13 taxable year (as determined under subsection 

14 (d)), 

15 ‘‘(B) compensation expenses for an indi16 vidual (other than amounts paid to an indi17 vidual in his capacity as a business entity), or 

18 ‘‘(C) the cost of employer-provided health 

19 insurance for which the employee, members of 

20 his family, or persons designated by him or 

21 members of his family are the beneficiaries, 

22 ‘‘(D) such entity’s loss carryover deduction 

23 (determined under section 172), 

24 ‘‘(E) in the case of an entity which is a 

25 real estate investment trust, the amount of any 


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1 dividend payment made to a shareholder of 

2 such trust, and 

3 ‘‘(F) the transition basis deduction (as de4 termined under section 5 of the American Busi5 ness Competitiveness Act of 2015). 

6 ‘‘(2) COMPENSATION EXPENSES.—For purposes 

7 of subsection (a), the term ‘compensation expenses’ 

8 means— 

9 ‘‘(A) wages, salaries or other cash payable 

10 for services, 

11 ‘‘(B) any taxes imposed on the recipient 

12 that are withheld by the business entity, 

13 ‘‘(C) the cost of property purchased to pro14 vide employees with compensation (other than 

15 property incidental to the provision of fringe 

16 benefits that are excluded from income under 

17 the individual tax), and 

18 ‘‘(D) the cost of fringe benefits other than 

19 health insurance deductible under paragraph 

20 (1)(C). 

21 ‘‘(3) PASS-THRU WAGES MUST BE REASON22 ABLE.—For purposes of paragraph (2)(A), amounts 

23 payable as wages, salaries or other cash payable for 

24 services by a S corporation, partnership, or other 

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1 ries or other cash payable for services unless such 

2 amounts are reasonable for the service rendered. 

3 ‘‘(d) COST OF BUSINESS PURCHASES.— 

4 ‘‘(1) BUSINESS PURCHASES.— 

5 ‘‘(A) IN GENERAL.—The term ‘business 

6 purchases’ means the acquisition of— 

7 ‘‘(i) property, 

8 ‘‘(ii) the use of property, or 

9 ‘‘(iii) services, 

10 for use in a business activity. 

11 ‘‘(B) EXAMPLES.—Business purchases in12 clude (without limitation) the— 

13 ‘‘(i) purchase or rental of real prop14 erty, 

15 ‘‘(ii) purchase or rental of capital 

16 equipment, 

17 ‘‘(iii) purchase of supplies and inven18 tory, 

19 ‘‘(iv) purchase of services from inde20 pendent contractors, and 

21 ‘‘(v) imports for use in a business ac22 tivity. 

23 ‘‘(C) EXCLUSIONS.—Business purchases 

24 do not include— 


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1 ‘‘(i) payments for use of money or 

2 capital, such as interest or dividends (ex3 cept to the extent that a portion so paid is 

4 a fee for financial intermediation services), 

5 ‘‘(ii) premiums for life insurance, 

6 ‘‘(iii) the acquisition of savings assets 

7 or other financial instruments (as defined 

8 in subsection (b)(5)(C)), 

9 ‘‘(iv) taxes (except as provided in sub10 section (b)(2) relating to product taxes), 

11 and 

12 ‘‘(v) the cost of financial instruments 

13 (as defined in subsection (b)(5)(C)). 

14 ‘‘(2) COST OF BUSINESS PURCHASES.— 

15 ‘‘(A) IN GENERAL.—The term ‘cost of a 

16 business purchase’ is the amount paid or to be 

17 paid for the business purchase. 

18 ‘‘(B) PROPERTY AND SERVICES ACQUIRED

19 FOR PROPERTY.—If a business entity receives 

20 property or services from a business entity in 

21 whole or partial exchange for property or serv22 ices, the property or services acquired shall be 

23 treated as if they were purchased for an 

24 amount equal to the fair market value of the 

25 services or property received. For purposes of 


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1 this section, property includes stock and other 

2 equity interests in business other than stock or 

3 an equity interest in the business entity acquir4 ing the property or services. See section 1422 

5 for rules on property or services received in ex6 change for an equity interest in the recipient. 

7 ‘‘(C) GAMBLING PAYMENTS.—In the case 

8 of a business involving gambling, lotteries, or 

9 other games of chance, business purchases in10 clude amounts paid to winners. 

11 ‘‘(e) BUSINESS ENTITY AND BUSINESS ACTIVITY.— 

12 ‘‘(1) BUSINESS ENTITY.—For purposes of de13 termining business income, the term ‘business entity’ 

14 means any corporation (including any S corpora15 tion), unincorporated association, partnership, lim16 ited liability company, proprietorship, independent 

17 contractor, individual, or any other person, engaging 

18 in business activity in the United States. An indi19 vidual shall be considered a business entity only with 

20 respect to the individual’s business activities. 

21 ‘‘(2) BUSINESS ACTIVITY.—The term ‘business 

22 activity’ means the sale of property or services, the 

23 leasing of property, the development of property or 

24 services for subsequent sale or use in producing 

25 property or services for subsequent sale. The term 


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1 ‘business activity’ does not include casual or occa2 sional sales of property used by an individual (other 

3 than in a business activity), such as the sale by an 

4 individual of a vehicle used by the individual. 

5 ‘‘(3) EXCEPTION FOR CERTAIN EMPLOYEES.— 

6 ‘‘(A) IN GENERAL.—The term ‘business 

7 activity’ does not include— 

8 ‘‘(i) the performance of services by an 

9 employee for an employer that is a busi10 ness entity with respect to the activity in 

11 which the employee is engaged, or 

12 ‘‘(ii) the performance of regular do13 mestic household services (including baby14 sitting, housecleaning, and lawn cutting) 

15 by an employee of an employer that is an 

16 individual or family. 

17 ‘‘(B) EMPLOYEE DEFINED.—For purposes 

18 of this subsection, the term ‘employee’ includes 

19 an individual partner who provides services to a 

20 partnership or an individual member who pro21 vides services to a limited liability company, or 

22 a proprietor with respect to compensation for 

23 services from his proprietorship. 

24 ‘‘(f) SAVINGS ASSETS.—The term ‘savings assets’ 

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1 vestments in partnerships and limited liability companies, 

2 shares of mutual funds, life insurance policies, annuities, 

3 and other similar savings or investment assets. 

4 ‘‘Subchapter B—Capital Contributions, 

5 Mergers, Acquisitions, and Distributions 

‘‘Sec. 1422. Contributions to a business entity. 

‘‘Sec. 1422A. Distributions of property. 

‘‘Sec. 1422B. Asset acquisitions. 

‘‘Sec. 1422C. Mergers, stock acquisitions, and spin-offs, split-offs, etc. 

6 ‘‘SEC. 1422. CONTRIBUTIONS TO A BUSINESS ENTITY. 

7 ‘‘(a) BY BUSINESS ENTITY.— 

8 ‘‘(1) CASH.—If a business entity contributes 

9 cash to a business entity of which it is or becomes 

10 a partial or full owner, the amount contributed is 

11 not a deductible amount to the contributor or a tax12 able receipt to the recipient. 

13 ‘‘(2) PROPERTY OR SERVICES.—If a business 

14 entity contributes property or services to a business 

15 entity of which it is or becomes a partial or full 

16 owner, the transaction will not result in taxable re17 ceipts to the contributor or a deduction for a busi18 ness purchase for the recipient and will not con19 stitute a sale resulting in taxable receipts to the con20 tributor. 

21 ‘‘(b) BY INDIVIDUAL.— 

22 ‘‘(1) CASH.—If an individual contributes cash 

23 to a business entity, the amount contributed is not 


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1 a deductible amount to the contributor and the cash 

2 received by the business entity is not a taxable re3 ceipt. 

4 ‘‘(2) NEW PROPERTY.—If an individual contrib5 utes to a business entity property that the individual 

6 purchased for the business entity but which was not 

7 used by any person after its purchase, the property 

8 shall be considered purchased by such business enti9 ty from the person from which the individual pur10 chased the property and the transaction will not re11 sult in a deductible amount to the contributor. 

12 ‘‘(3) PERSONAL USE PROPERTY.— 

13 ‘‘(A) IN GENERAL.—If an individual con14 tributes personal use property to a business en15 tity in which the individual has an ownership 

16 interest or for which the individual receives an 

17 ownership interest, the business entity shall not 

18 be permitted to deduct the value of the property 

19 received as a business expense. The business 

20 entity will have a tax basis in the contributed 

21 property equal to the contributor’s basis. 

22 ‘‘(B) PERSONAL USE PROPERTY.—The 

23 term ‘personal use property’ means any prop24 erty used by an individual at any time other 

25 than in a business activity. 


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1 ‘‘(4) SERVICES.—If an individual contributes 

2 services to a business entity in which the individual 

3 has an ownership interest or receives an ownership 

4 interest, the business entity shall not be permitted to 

5 deduct the value of the services received (or the 

6 value of the equity interest provided to the services 

7 provider). 

8 ‘‘SEC. 1422A. DISTRIBUTIONS OF PROPERTY. 

9 ‘‘(a) DISTRIBUTIONS OTHER THAN TO CONTROL10 LING BUSINESS.—If a business entity distributes all or a 

11 portion of its assets to its owners (other than a controlling 

12 business entity), the business entity will be treated as if 

13 it sold the assets to its owners at fair market value. The 

14 fair market value will be determined by the distributing 

15 business entity and those determinations, unless unreason16 able, will be binding on the recipients. 

17 ‘‘(b) DISTRIBUTIONS TO A CONTROLLING BUSI18 NESS.—If a business entity distributes all or a portion of 

19 its assets to a controlling business entity, the controlling 

20 business entity will assume the distributing entity’s tax 

21 attributes with respect to the assets and neither entity will 

22 have taxable receipts or a deduction as a result of the 

23 transaction. 

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1 vidual who contributed the personal use property to a busi2 ness entity, the fair market value of the property for pur3 poses of subsection (a) shall equal the basis of the prop4 erty plus any enhancement in value of the property attrib5 utable to business purchases with respect to the property. 

6 ‘‘(d) CONTROLLING BUSINESS ENTITY.—A business 

7 entity is a ‘controlling business entity’ with respect to an8 other business entity if it, or any person to which it is 

9 related, owns directly or indirectly more than 50 percent 

10 of the profits or capital interest in the other business enti11 ty. For purposes of the preceding sentence, a person is 

12 related to a business entity if such person owns directly 

13 or indirectly more than 50 percent of the profits or capital 

14 interest in the business entity. 

15 ‘‘(e) APPLICATION OF THIS SECTION.—This section 

16 applies to both liquidating and nonliquidating distribu17 tions. 

18 ‘‘SEC. 1422B. ASSET ACQUISITIONS. 

19 ‘‘(a) IN GENERAL.—If a business entity transfers 

20 some or all of its assets, the consideration received for 

21 such assets shall be allocated among the assets transferred 

22 in the same manner as was required by section 1060 of 

23 the Internal Revenue Code of 1986. If the transferee and 

24 transferor agree in writing on the allocation of any consid25 eration, or as to the fair market value of any of the assets, 


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1 such agreement shall be binding on both the transferor 

2 and transferee unless the Secretary determines that such 

3 allocation (or fair market value) is not appropriate. 

4 ‘‘(b) TAX CONSEQUENCES.—The tax consequences of 

5 an asset acquisition shall be determined in accordance 

6 with the rules of this chapter and shall be dependent upon 

7 allocations made under subsection (a). In general, consid8 eration allocable to savings assets, such as stock in an9 other business entity, would not be included in taxable re10 ceipts of the transferor and would not be a business pur11 chase of the purchaser, but consideration allocable to the 

12 sale of tangible property and intangible property (other 

13 than savings assets) will constitute taxable receipts of the 

14 seller and a business purchase of the purchaser. 

15 ‘‘(c) ELECTION TO TREAT ASSET ACQUISITION AS A

16 STOCK ACQUISITION.—In the case of the sale of substan17 tially all of the assets of a business entity or substantially 

18 all of the assets of a line of business or a separately stand19 ing business of a business entity, the transferee and trans20 feror can jointly elect to treat the acquisition as if it were 

21 an acquisition of the stock of a business entity holding 

22 the assets so transferred. In such case, the rules of section 

23 1422C shall apply. 

24 ‘‘(d) AUTHORITY TO REQUIRE ALLOCATION AGREE25 MENT AND NOTICE TO THE SECRETARY.—If the SecVerDate Sep 11 2014 23:34 Jan 13, 2016 Jkt 059200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H4377.IH H4377

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1 retary determines that certain types of asset acquisitions 

2 have significant possibilities of tax avoidance, the Sec3 retary may require— 

4 ‘‘(1) parties to such types of acquisitions to 

5 enter into agreements allocating consideration, 

6 ‘‘(2) parties to acquisitions involving certain 

7 kinds of assets to enter into agreements allocating 

8 part of the consideration to those assets, or 

9 ‘‘(3) parties to certain acquisitions to report in10 formation to the Secretary. 

11 ‘‘(e) ASSET ACQUISITION RULES DO NOT APPLY IF

12 CONSIDERATION INCLUDES EQUITY IN PURCHASER.— 

13 ‘‘(1) IN GENERAL.—If a business entity issues 

14 its own equity or equity in a subsidiary or other con15 trolled entity as part of the consideration for the 

16 transfer of assets to it, the transaction shall be 

17 treated as a business purchase and not as an asset 

18 acquisition, and the taxpayer shall not be entitled to 

19 a loss carryover for any unused deduction attrib20 utable to the equity portion of such transfer. 

21 ‘‘(2) EQUITY.—For purposes of this subsection, 

22 equity means— 

23 ‘‘(A) stock, in the case of a corporation, 


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1 ‘‘(B) partnership or similar interest, in the 

2 case of a partnership or limited liability com3 pany, and 

4 ‘‘(C) an ownership interest or interest in 

5 profits in the case of any other business entity. 

6 ‘‘SEC. 1422C. MERGERS, STOCK ACQUISITIONS, AND SPIN7 OFFS, SPLIT-OFFS, ETC. 

8 ‘‘(a) MERGERS.—A merger of one business entity 

9 into another or two businesses entities into a third busi10 ness entity or any other similar transaction shall have no 

11 direct consequences under the business cash flow tax. The 

12 surviving entity shall assume the tax attributes of the 

13 merged business entities, including any loss carryovers 

14 and credit carryovers. 

15 ‘‘(b) STOCK ACQUISITION.—The acquisition of all or 

16 substantially all of the ownership interest in one business 

17 entity either for cash or in exchange for ownership in the 

18 acquiring entity or an entity controlled by the acquired 

19 entity shall have no direct consequences under the busi20 ness cash flow tax. 

21 ‘‘(c) SPIN-OFFS, SPLIT-OFFS, ETC.—A spin-off, 

22 split-off or split-up of a business entity shall have no direct 

23 tax consequences under this chapter. 

24 ‘‘Subchapter C—International Provisions 

‘‘Sec. 1423. No tax imposed on income derived from trade or business outside 

the United States. 


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‘‘Sec. 1423A. No credit allowed for foreign taxes on income derived from trade 

or business outside the United States. 

‘‘Sec. 1423B. 5-percent toll charge on undistributed foreign earnings. 

1 ‘‘SEC. 1423. NO TAX IMPOSED ON INCOME DERIVED FROM 

2 TRADE OR BUSINESS OUTSIDE THE UNITED 

3 STATES. 

4 ‘‘(a) IN GENERAL.—Only taxable receipts and de5 ductible amounts which are effectively connected with the 

6 conduct of a trade or business within the United States 

7 shall be included or deducted in the computation of net 

8 business income. 

9 ‘‘(b) No tax shall be imposed under this title on in10 come effectively connected with the conduct of a trade or 

11 business that is not a trade or business within the United 

12 States. 

13 ‘‘SEC. 1423A. NO CREDIT ALLOWED FOR FOREIGN TAXES ON 

14 INCOME DERIVED FROM TRADE OR BUSI15 NESS OUTSIDE THE UNITED STATES. 

16 ‘‘(a) IN GENERAL.—No credit shall be allowed under 

17 this title for any income, war profits, or excess profits 

18 taxes paid or accrued with respect to income effectively 

19 connected with the conduct of a trade or business that 

20 is not a trade or business within the United States. 

21 ‘‘(b) UNUSED FOREIGN TAX CREDITS.—Under regu22 lations prescribed by the Secretary, any taxpayer that is 

23 a corporation may elect to treat foreign tax credit 


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1 carryovers from taxable years beginning prior to January 

2 1, 2015, as general business credit carryovers. 

3 ‘‘SEC. 1423B. 5-PERCENT TOLL CHARGE ON UNDISTRIB4 UTED FOREIGN EARNINGS. 

5 ‘‘There is hereby imposed on any domestic corpora6 tion which owns 10 percent or more of the voting stock 

7 of a foreign corporation a tax equal to 5 percent of the 

8 corporation’s post-1986 undistributed earnings for the 

9 corporation’s last taxable year beginning prior to January 

10 1, 2015. For purposes of this subsection, post-1986 undis11 tributed earnings shall be computed as provided in section 

12 902(c)(1) of the Internal Revenue Code of 1986 (as in 

13 effect prior to the enactment of the American Business 

14 Competitiveness Act of 2015), except that such undistrib15 uted earnings shall be diminished by the dividends distrib16 uted during such taxable year. Except as provided in regu17 lations prescribed by the Secretary, the tax imposed by 

18 this subsection shall be paid at the same time and in the 

19 same manner as the tax imposed by section 11 for the 

20 corporation’s first taxable year beginning on or after Jan21 uary 1, 2015. 

22 ‘‘Subchapter D—Financial Institutions 

‘‘Sec. 1424. Real-plus-financial treatment of certain transactions involving financial institutions. 


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1 ‘‘SEC. 1424. REAL-PLUS-FINANCIAL TREATMENT OF CER2 TAIN TRANSACTIONS INVOLVING FINANCIAL 

3 INSTITUTIONS. 

4 ‘‘(a) TAXATION OF TRANSACTIONS BETWEEN FINAN5 CIAL INSTITUTIONS AND BUSINESSES.— 

6 ‘‘(1) GENERAL RULE.—In the case of a tax7 payer that is a financial institution, taxable receipts 

8 shall include all amounts received in covered finan9 cial transactions and deductible amounts and shall 

10 include all amounts paid in covered financial trans11 actions. 

12 ‘‘(2) FINANCIAL INSTITUTIONS.—For purposes 

13 of this section, ‘financial institution’ shall mean, 

14 under regulations prescribed by the Secretary, any 

15 business entity that is regulated by any Federal or 

16 State agency as a financial institution. Such term 

17 includes regulated banks, insurance companies, in18 vestment banks, securities brokers, and mutual 

19 funds. Such term does not include credit unions. 

20 ‘‘(3) COVERED FINANCIAL TRANSACTIONS.— 

21 For purposes of this section, ‘covered financial 

22 transactions’ shall mean transactions between a fi23 nancial institution and a party that is not a business 

24 entity as defined in section 1421(e)(1). Under regu25 lations prescribed by the Secretary, transactions that 

26 do not involve any significant provision of financial 


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1 services (other than services for which explicit fees 

2 are charged) shall be treated as not being covered fi3 nancial transactions. 

4 ‘‘(b) TRANSITION RULE.—Under regulations pre5 scribed by the Secretary, a tax is imposed on any financial 

6 institution equal to 25 percent of the institution’s net 

7 claims against parties that are not business entities, as 

8 defined in section 1421(e)(1). Such claims shall be valued 

9 at the end of the financial institution’s last taxable year 

10 beginning before January 1, 2015, with value measured 

11 by the institution’s basis in such claims. Except as pro12 vided in regulations prescribed by the Secretary, the tax 

13 imposed by this subsection shall be paid at the same time 

14 and in the same manner as the net business income tax 

15 for the financial institution’s first taxable year beginning 

16 on or after January 1, 2015. 

17 ‘‘Subchapter E—Other Definitions 

‘‘Sec. 1425. Other definitions. 

18 ‘‘SEC. 1425. OTHER DEFINITIONS. 

19 ‘‘(a) IN GENERAL.—When used in this chapter, 

20 where not otherwise distinctly expressed or manifestly in21 compatible with the intent thereof— 

22 ‘‘(1) UNITED STATES.—The term ‘United 

23 States’ includes the States and the District of Co24 lumbia. 


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1 ‘‘(2) TREATMENT OF POSSESSIONS.— 

2 ‘‘(A) IN GENERAL.—For purposes of this 

3 chapter, the United States possessions shall not 

4 be treated as part of the United States. 

5 ‘‘(B) POSSESSION.—For purposes of para6 graph (1), ‘United States possession’ or ‘posses7 sion’ means a possession of the United States 

8 and includes the Commonwealth of Puerto Rico, 

9 the Commonwealth of the Northern Marianas 

10 Islands, Guam, American Samoa, and the 

11 United States Virgin Islands. 

12 ‘‘(3) DEFINITIONS GENERALLY.—Any definition 

13 included in this chapter shall apply for all purposes 

14 of this chapter unless— 

15 ‘‘(A) such definition is limited to the pur16 poses of a particular chapter, section, or sub17 section, or 

18 ‘‘(B) the definition clearly would not be ap19 plicable in a particular context. 

20 ‘‘(b) INTERPRETATIONS CONSISTENT WITH REST OF

21 INTERNAL REVENUE CODE OF 1986.—Terms not defined 

22 in this chapter, but defined elsewhere in this title, shall 

23 be interpreted in a manner consistent with this title, ex24 cept to the extent such interpretation would be incon25 sistent with the principles and purposes of this chapter.’’. 


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1 (b) EXEMPT ORGANIZATIONS AND UNRELATED

2 BUSINESS INCOME.—Sections 512 and 514 are both 

3 amended by striking ‘‘gross income’’ each place it appears 

4 and inserting ‘‘net business income’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning on or 

7 after January 1, 2015, except to the extent otherwise spe8 cifically provided in the text of such amendments. 

9 SEC. 5. ALLOWANCE OF TRANSITION BASIS DEDUCTION. 

10 In the case of any property held by the taxpayer on 

11 December 31, 2014, and used in a trade or business of 

12 the taxpayer on such date, the following rules shall apply: 

13 (1) BASIS.—The basis of such property shall be 

14 zero. 

15 (2) DEDUCTION.— 

16 (A) IN GENERAL.—There shall be allowed 

17 to the taxpayer a deduction with respect to such 

18 property, other than land. 

19 (B) AMOUNT OF DEDUCTION.—Except as 

20 provided in subparagraph (D), such deduction 

21 shall be determined for a taxable year by amor22 tizing the basis of such property on the same 

23 schedule and method that applied to such prop24 erty before the enactment of this Act. 


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1 (C) DISPOSAL OF PROPERTY.—Subpara2 graph (A) shall apply with respect to property 

3 held by the taxpayer on December 31, 2014, 

4 whether or not the taxpayer disposes of such 

5 property after December 31, 2014. 

6 (D) INVENTORY.—In the case of inventory, 

7 the deduction allowed by subparagraph (A) 

8 shall be allowed in the taxable year of the tax9 payer which includes January 1, 2015. 

10 SEC. 6. INTEREST INCOME OF INDIVIDUALS TAXED IN 

11 SAME MANNER AS DIVIDEND INCOME; RE12 DUCED BY INTEREST EXPENSE. 

13 (a) IN GENERAL.—Subparagraph (A) of section 

14 1(h)(11) is amended by striking ‘‘qualified dividend in15 come’’ and inserting ‘‘the sum of qualified dividend income 

16 and qualified interest income and reduced by interest ex17 pense’’. 

18 (b) QUALIFIED INTEREST INCOME.—Paragraph (11) 

19 of section 1(h) is amended by adding at the end the fol20 lowing: 

21 ‘‘(E) QUALIFIED INTEREST INCOME.—For 

22 purposes of this paragraph, the term ‘qualified 

23 interest income’ means— 

24 ‘‘(i) interest on deposits with a bank 

25 (as defined in section 581), 


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1 ‘‘(ii) amounts (whether or not des2 ignated as interest) paid, in respect of de3 posits, investment certificates, or 

4 withdrawable or repurchasable shares, 

5 by— 

6 ‘‘(I) a mutual savings bank, co7 operative bank, domestic building and 

8 loan association, industrial loan asso9 ciation or bank, or credit union, or 

10 ‘‘(II) any other savings or thrift 

11 institution which is chartered and su12 pervised under Federal or State law, 

13 the deposits or accounts in which are 

14 insured under Federal or State law or 

15 which are protected and guaranteed 

16 under State law, 

17 ‘‘(iii) interest on— 

18 ‘‘(I) evidences of indebtedness 

19 (including bonds, debentures, notes, 

20 and certificates) issued by a domestic 

21 corporation in registered form, and 

22 ‘‘(II) to the extent provided in 

23 regulations prescribed by the Sec24 retary, other evidences of indebtedness 

25 issued by a domestic corporation of a 


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1 type offered by corporations to the 

2 public, 

3 ‘‘(iv) interest on obligations of the 

4 United States, a State, or a political sub5 division of a State (not excluded from 

6 gross income of the taxpayer under any 

7 other provision of law), and 

8 ‘‘(v) interest attributable to participa9 tion shares in a trust established and 

10 maintained by a corporation established 

11 pursuant to Federal law.’’. 

12 (c) INTEREST EXPENSE.—Paragraph (11) of section 

13 1(h), as amended by subsection (b), is amended by insert14 ing at the end the following: 

15 ‘‘(F) INTEREST EXPENSE.—The term ‘in16 terest expense’ means interest paid by the tax17 payer other than qualified residence interest.’’. 

18 (d) CONFORMING AMENDMENT.—The heading for 

19 section 1(h)(11) is amended by inserting ‘‘AND INTEREST’’ 

20 after ‘‘DIVIDENDS’’. 

21 (e) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 December 31, 2014. 


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1 SEC. 7. REPEAL OF DEPRECIATION, INTERNATIONAL, AND 

2 OTHER TAX PROVISIONS. 

3 (a) DEPRECIATION AND COST RECOVERY PROVI4 SIONS.—The following sections of the Internal Revenue 

5 Code of 1986 are hereby repealed: 

6 (1) Section 167 (relating to depreciation). 

7 (2) Section 168 (relating to accelerated cost re8 covery system). 

9 (3) Section 169 (relating to amortization of pol10 lution control facilities). 

11 (4) Section 173 (relating to circulation expendi12 tures). 

13 (5) Section 174 (relating to research and exper14 imental expenditures). 

15 (6) Section 175 (relating to soil and water con16 servation expenditures; endangered species recovery 

17 expenditures). 

18 (7) Section 176 (relating to payments with re19 spect to employees of certain foreign corporations). 

20 (8) Section 178 (relating to amortization of cost 

21 of acquiring a lease). 

22 (9) Section 179 (relating to election to expense 

23 certain depreciable business assets). 

24 (10) Section 179A (relating to deduction for 

25 clean-fuel vehicles and certain refueling property). 


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1 (11) Section 179B (relating to deduction for 

2 capital costs incurred in complying with Environ3 mental Protection Agency sulfur regulations). 

4 (12) Section 179C (relating to election to ex5 pense certain refineries). 

6 (13) Section 179D (relating to energy efficient 

7 commercial buildings deduction). 

8 (14) Section 179E (relating to election to ex9 pense advanced mine safety equipment). 

10 (15) Section 180 (relating to expenditures by 

11 farmers for fertilizer, etc.). 

12 (16) Section 181 (relating to treatment of cer13 tain qualified film and television productions). 

14 (17) Section 190 (relating to expenditures to 

15 remove architectural and transportation barriers to 

16 the handicapped and elderly). 

17 (18) Section 192 (relating to contributions to 

18 black lung benefit trust). 

19 (19) Section 193 (relating to tertiary 

20 injectants). 

21 (20) Section 194 (relating to treatment of re22 forestation expenditures). 

23 (21) Section 195 (relating to start-up expendi24 tures). 


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1 (22) Section 196 (relating to deduction for cer2 tain unused business credits). 

3 (23) Section 197 (relating to amortization of 

4 goodwill and certain other intangibles). 

5 (24) Section 198 (relating to expensing of envi6 ronmental remediation costs). 

7 (25) Section 198A (relating to expensing of 

8 qualified disaster expenses). 

9 (26) Section 199 (relating to income attrib10 utable to domestic production activities). 

11 (27) Section 263 (relating to capital expendi12 tures). 

13 (28) Section 263A (relating to capitalization 

14 and inclusion in inventory costs of certain expenses). 

15 (29) Section 471 (relating to general rule for 

16 inventories). 

17 (30) Section 472 (relating to last-in, first-out 

18 inventories). 

19 (31) Section 473 (relating to qualified liquida20 tions of LIFO inventories). 

21 (32) Section 474 (relating to simplified dollar22 value LIFO method for certain small businesses). 

23 (33) Section 611 (relating to allowance of de24 duction for depletion). 


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1 (34) Section 612 (relating to basis for cost de2 pletion). 

3 (35) Section 613 (relating to percentage deple4 tion). 

5 (36) Section 613A (relating to limitations on 

6 percentage depletion in case of oil and gas wells). 

7 (37) Section 614 (relating to definition of prop8 erty). 

9 (38) Section 616 (relating to development ex10 penditures). 

11 (39) Section 617 (relating to deduction and re12 capture of certain mining exploration expenditures). 

13 (b) SPECIAL DEDUCTIONS FOR CORPORATIONS.— 

14 The following sections of the Internal Revenue Code of 

15 1986 are hereby repealed: 

16 (1) Section 241 (relating to allowance of special 

17 deductions). 

18 (2) Section 243 (relating to dividends received 

19 by corporations). 

20 (3) Section 244 (relating to dividends received 

21 on certain preferred stock). 

22 (4) Section 245 (relating to dividends received 

23 from certain foreign corporations). 

24 (5) Section 246 (relating to rules applying to 

25 deductions for dividends received). 


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1 (6) Section 246A (relating to dividends received 

2 deduction reduced where portfolio stock is debt fi3 nanced). 

4 (7) Section 247 (relating to dividends paid on 

5 certain preferred stock of public utilities). 

6 (8) Section 248 (relating to organizational ex7 penditures). 

8 (9) Section 249 (relating to limitation on de9 duction of bond premium on repurchase). 

10 (c) RECOGNITION OF REVENUE AND TIMING OF DE11 DUCTION PROVISIONS.—The following provisions of the 

12 Internal Revenue Code of 1986 are hereby repealed: 

13 (1) Part X of subchapter B of chapter 1 of the 

14 Internal Revenue Code of 1986 (relating to terminal 

15 railroad corporations and their shareholders). 

16 (2) Section 456 (relating to prepaid dues in17 come of certain membership organizations). 

18 (3) Section 458 (relating to magazines, paper19 backs, and records returned after the close of the 

20 taxable year). 

21 (4) Section 460 (relating to special rules for 

22 long-term contracts). 

23 (5) Section 467 (relating to certain payments 

24 for the use of property or services). 


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1 (6) Section 468 (relating to special rules for 

2 mining and solid waste reclamation and closing 

3 costs). 

4 (d) INTERNATIONAL PROVISIONS.—The following 

5 provisions of the Internal Revenue Code of 1986 are here6 by repealed: 

7 (1) Section 902 (relating to deemed paid credit 

8 where domestic corporation owns 10 percent or more 

9 of voting stock of foreign corporation). 

10 (2) Section 907 (relating to special rules in case 

11 of foreign oil and gas income). 

12 (3) Subpart F of part III of subchapter N of 

13 chapter 1 (relating to controlled foreign corpora14 tions) other than section 965. 

15 (4) Subpart G of part III of subchapter N of 

16 chapter 1 (relating to export trade corporations). 

17 (5) Part IV of part III of subchapter N of 

18 chapter 1 (relating to domestic international sales 

19 corporations). 

20 (e) EFFECTIVE DATE.— 

21 (1) SUBSECTION (a).—The amendments made 

22 by subsection (a) shall apply to property placed in 

23 service after December 31, 2014, in taxable years 

24 ending after that date. 


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1 (2) SUBSECTION (b).—The amendments made 

2 by subsection (b) shall apply with respect to divi3 dends received or accrued after December 31, 2014, 

4 in taxable years ending after such date. 

5 (3) SUBSECTIONS (c) AND (d).—The amend6 ments made by subsections (c) and (d) shall apply 

7 to taxable years beginning on or after January 1, 

8 2015. 

9 SEC. 8. EXPANDED RELIEF FOR NET OPERATING LOSSES. 

10 (a) EXTENDED CARRYBACK; UNLIMITED

11 CARRYFORWARD WITH INTEREST.—Paragraph (1) of sec12 tion 172(b) is amended to read as follows: 

13 ‘‘(1) YEARS TO WHICH LOSS MAY BE CAR14 RIED.— 

15 ‘‘(A) IN GENERAL.—A net operating loss 

16 for any taxable year— 

17 ‘‘(i) shall be a net operating loss 

18 carryback to each of the 5 taxable years 

19 preceding the taxable year of such loss, 

20 and 

21 ‘‘(ii) shall be a net operating loss car22 ryover to the succeeding taxable year and 

23 added to the deduction allowable under 

24 subsection (a) for such taxable year. 


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1 ‘‘(B) LIMITATION.—A net operating loss 

2 may not be carried back to any taxable year 

3 ending before January 1, 2015, except that a 

4 loss arising in a taxable year beginning in cal5 endar year 2015 or calendar year 2016 may be 

6 carried back to the two preceding taxable 

7 years.’’. 

8 (b) INTEREST ON CARRYFORWARD.—Section 172(b) 

9 is amended by adding at the end the following new para10 graph: 

11 ‘‘(4) INTEREST ON CARRYFORWARD.—The 

12 amount of any net operating loss carryover shall, 

13 prior to being carried to a succeeding taxable year, 

14 be increased by an amount equal to such carryover 

15 multiplied by the Federal short-term rate (as defined 

16 in section 1274(d)) for the month in which or with 

17 which the taxable year ends.’’. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) Section 172(d)(1) is amended by inserting 

20 ‘‘(other than by reason of subsection (b)(1)(B))’’ 

21 after ‘‘deduction’’. 

22 (2) Section 172 is amended by striking sub23 sections (f), (i), and (j) and redesignating sub24 sections (g), (h), and (k) as subsections (f), (g), and 

25 (h), respectively. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to net operating losses arising in 

3 taxable years beginning after December 31, 2014. 

4 SEC. 9. REPEAL OF CORPORATE AMT AND INDIVIDUAL AMT 

5 PREFERENCES AND ADJUSTMENTS THAT 

6 PERTAIN TO CAPITAL COST RECOVERY. 

7 (a) CORPORATE AMT.—Section 55(a)(1)(B) is 

8 amended by adding at the end the following flush sen9 tence: 

10 ‘‘For purposes of this title, the tentative min11 imum tax of any corporation for any taxable 

12 year ending after December 31, 2014, shall be 

13 zero.’’. 

14 (b) INDIVIDUAL AMT.— 

15 (1) Section 56 is amended— 

16 (A) by striking paragraphs (1), (2), (3), 

17 (5), and (6) of subsection (a); and 

18 (B) by striking subsection (b)(2). 

19 (2) Section 57 is amended— 

20 (A) by striking paragraphs (1), (2), (6), 

21 and (7) of subsection (a); and 

22 (B) by striking subsection (b). 

23 (c) EFFECTIVE DATE.— 


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1 (1) CORPORATE AMT.—The amendments made 

2 by subsection (a) shall apply to taxable years ending 

3 after December 31, 2014. 

4 (2) INDIVIDUAL AMT.—The amendments made 

5 by subsection (b) shall apply to amounts paid or in6 curred after December 31, 2014. 

7 SEC. 10. REPEAL OF BUSINESS TAX CREDITS. 

8 (a) IN GENERAL.—Subparts D and E of part IV of 

9 subchapter A of chapter 1 are hereby repealed. 

10 (b) SPECIAL RULE FOR CARRYBACK AND

11 CARRYFORWARD OF UNUSED CREDITS.—Any carryback 

12 or carryforward that arose under section 39 of the Inter13 nal Revenue Code of 1986 (as in effect before the repeal 

14 of such section by subsection (a)) shall be allowed under 

15 section 38 of such Code (as in effect before the repeal of 

16 such section by subsection (a)), in accordance with the 

17 terms of such sections (as so in effect). 

18 (c) EFFECTIVE DATE.—The repeals made by this 

19 section shall apply with respect to amounts paid or in20 curred, and property placed in service, in taxable years 

21 beginning after December 31, 2014. 


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1 SEC. 11. DISALLOWANCE OF INTEREST EXPENSE DEDUC2 TION, EXCEPT QUALIFIED RESIDENCE INTER3 EST. 

4 (a) IN GENERAL.—Section 163 is amended by adding 

5 at the end the following: 

6 (1) in subsection (a) by striking ‘‘There’’ and 

7 inserting ‘‘Except as provided by subsection (n), 

8 there’’, 

9 (2) by redesignating subsection (n) as sub10 section (o), and 

11 (3) by inserting after subsection (m) the fol12 lowing new subsection: 

13 ‘‘(n) TERMINATION.— 

14 ‘‘(1) IN GENERAL.—Except as provided by sub15 section (h)(2)(D) and paragraph (2), this section 

16 shall not apply to interest paid or accrued after De17 cember 31, 2014. 

18 ‘‘(2) TRANSITION INTEREST DEDUCTION.— 

19 ‘‘(A) IN GENERAL.—In the case of a tax20 payer who is a corporation, there shall be al21 lowed as a deduction for a taxable year the sum 

22 of the monthly transition interest deductions for 

23 the taxable year. 

24 ‘‘(B) MONTHLY TRANSITION INTEREST DE25 DUCTION.—For purposes of subparagraph 

26 (A)— 


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1 ‘‘(i) IN GENERAL.—The monthly tran2 sition interest deduction for any month is 

3 the transition interest amount multiplied 

4 by the applicable percentage for such 

5 month. 

6 ‘‘(ii) APPLICABLE PERCENTAGE DE7 FINED.—The term ‘applicable percentage’ 

8 means, with respect to a month, 100 per9 cent reduced (but not below zero) by .833 

10 for each month of the transition period oc11 curring before the month for which such 

12 percentage is determined. 

13 ‘‘(iii) TRANSITION INTEREST

14 AMOUNT.—The transition interest amount 

15 is the deduction allowed to the taxpayer 

16 under this section for the last full taxable 

17 year ending before January 1, 2015. 

18 ‘‘(iv) TRANSITION PERIOD.—The term 

19 ‘transition period’ means the 120-month 

20 period beginning with January 2015.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 subsection (a) shall apply to interest paid or accrued on 

23 or after January 1, 2015. 


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1 SEC. 12. CASH METHOD OF ACCOUNTING. 

2 (a) IN GENERAL.—Subsection (a) of section 446 is 

3 amended to read as follows: 

4 ‘‘(a) GENERAL RULE.—Taxable income shall be com5 puted under the cash receipts and disbursements method 

6 of accounting.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 446 is amended by striking sub9 sections (b), (c), and (e). 

10 (2) The following sections of the Internal Rev11 enue Code of 1986 are repealed: 

12 (A) Section 447 (relating to method of ac13 counting for corporations engaged in farming). 

14 (B) Section 448 (relating to limitation on 

15 use of cash method of accounting). 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to taxable years beginning 

19 after December 31, 2014. 

20 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

21 the case of any taxpayer required by an amendment 

22 made by this section to change its method of ac23 counting for its first taxable year beginning after the 

24 date of the enactment of this Act— 

25 (A) such change shall be treated as initi26 ated by the taxpayer; 


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1 (B) such change shall be treated as made 

2 with the consent of the Secretary of the Treas3 ury; and 

4 (C) the net amount of the adjustments re5 quired to be taken into account by the taxpayer 

6 under section 481 of the Internal Revenue Code 

7 of 1986 shall be taken into account ratably over 

8 a period (not greater than 8 taxable years) be9 ginning with such first taxable year. 

Æ 


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