```

[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                 H. R. 1

To amend the Internal Revenue Code of 1986 to provide for comprehensive 
                              tax reform.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           December 10, 2014

   Mr. Camp 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 provide for comprehensive 
                              tax reform.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Tax Reform Act of 
2014''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; etc.
                  TITLE I--TAX REFORM FOR INDIVIDUALS

             Subtitle A--Individual Income Tax Rate Reform

Sec. 1001. Simplification of individual income tax rates.
Sec. 1002. Deduction for adjusted net capital gain.
Sec. 1003. Conforming amendments related to simplification of 
                            individual income tax rates.
        Subtitle B--Simplification of Tax Benefits for Families

Sec. 1101. Standard deduction.
Sec. 1102. Increase and expansion of child tax credit.
Sec. 1103. Modification of earned income tax credit.
Sec. 1104. Repeal of deduction for personal exemptions.
           Subtitle C--Simplification of Education Incentives

Sec. 1201. American opportunity tax credit.
Sec. 1202. Expansion of Pell Grant exclusion from gross income.
Sec. 1203. Repeal of exclusion of income from United States savings 
                            bonds used to pay higher education tuition 
                            and fees.
Sec. 1204. Repeal of deduction for interest on education loans.
Sec. 1205. Repeal of deduction for qualified tuition and related 
                            expenses.
Sec. 1206. No new contributions to Coverdell education savings 
                            accounts.
Sec. 1207. Repeal of exclusion for discharge of student loan 
                            indebtedness.
Sec. 1208. Repeal of exclusion for qualified tuition reductions.
Sec. 1209. Repeal of exclusion for education assistance programs.
Sec. 1210. Repeal of exception to 10-percent penalty for higher 
                            education expenses.
         Subtitle D--Repeal of Certain Credits for Individuals

Sec. 1301. Repeal of dependent care credit.
Sec. 1302. Repeal of credit for adoption expenses.
Sec. 1303. Repeal of credit for nonbusiness energy property.
Sec. 1304. Repeal of credit for residential energy efficient property.
Sec. 1305. Repeal of credit for qualified electric vehicles.
Sec. 1306. Repeal of alternative motor vehicle credit.
Sec. 1307. Repeal of alternative fuel vehicle refueling property 
                            credit.
Sec. 1308. Repeal of credit for new qualified plug-in electric drive 
                            motor vehicles.
Sec. 1309. Repeal of credit for health insurance costs of eligible 
                            individuals.
Sec. 1310. Repeal of first-time homebuyer credit.
    Subtitle E--Deductions, Exclusions, and Certain Other Provisions

Sec. 1401. Exclusion of gain from sale of a principal residence.
Sec. 1402. Mortgage interest.
Sec. 1403. Charitable contributions.
Sec. 1404. Denial of deduction for expenses attributable to the trade 
                            or business of being an employee.
Sec. 1405. Repeal of deduction for taxes not paid or accrued in a trade 
                            or business.
Sec. 1406. Repeal of deduction for personal casualty losses.
Sec. 1407. Limitation on wagering losses.
Sec. 1408. Repeal of deduction for tax preparation expenses.
Sec. 1409. Repeal of deduction for medical expenses.
Sec. 1410. Repeal of disqualification of expenses for over-the-counter 
                            drugs under certain accounts and 
                            arrangements.
Sec. 1411. Repeal of deduction for alimony payments and corresponding 
                            inclusion in gross income.
Sec. 1412. Repeal of deduction for moving expenses.
Sec. 1413. Termination of deduction and exclusions for contributions to 
                            medical savings accounts.
Sec. 1414. Repeal of 2-percent floor on miscellaneous itemized 
                            deductions.
Sec. 1415. Repeal of overall limitation on itemized deductions.
Sec. 1416. Deduction for amortizable bond premium allowed in 
                            determining adjusted gross income.
Sec. 1417. Repeal of exclusion, etc., for employee achievement awards.
Sec. 1418. Clarification of special rule for certain governmental 
                            plans.
Sec. 1419. Limitation on exclusion for employer-provided housing.
Sec. 1420. Fringe benefits.
Sec. 1421. Repeal of exclusion of net unrealized appreciation in 
                            employer securities.
Sec. 1422. Consistent basis reporting between estate and person 
                            acquiring property from decedent.
                Subtitle F--Employment Tax Modifications

Sec. 1501. Modifications of deduction for Social Security taxes in 
                            computing net earnings from self-
                            employment.
Sec. 1502. Determination of net earnings from self-employment.
Sec. 1503. Repeal of exemption from FICA taxes for certain foreign 
                            workers.
Sec. 1504. Repeal of exemption from FICA taxes for certain students.
Sec. 1505. Override of Treasury guidance providing that certain 
                            employer-provided supplemental unemployment 
                            benefits are not subject to employment 
                            taxes.
Sec. 1506. Certified professional employer organizations.
                  Subtitle G--Pensions and Retirement

                  Part 1--Individual Retirement Plans

Sec. 1601. Elimination of income limits on contributions to Roth IRAs.
Sec. 1602. No new contributions to traditional IRAs.
Sec. 1603. Inflation adjustment for Roth IRA contributions.
Sec. 1604. Repeal of special rule permitting recharacterization of Roth 
                            IRA contributions as traditional IRA 
                            contributions.
Sec. 1605. Repeal of exception to 10-percent penalty for first home 
                            purchases.
                    Part 2--Employer-Provided Plans

Sec. 1611. Termination for new SEPs.
Sec. 1612. Termination for new SIMPLE 401(k)s.
Sec. 1613. Rules related to designated Roth contributions.
Sec. 1614. Modifications of required distribution rules for pension 
                            plans.
Sec. 1615. Reduction in minimum age for allowable in-service 
                            distributions.
Sec. 1616. Modification of rules governing hardship distributions.
Sec. 1617. Extended rollover period for the rollover of plan loan 
                            offset amounts in certain cases.
Sec. 1618. Coordination of contribution limitations for 403(b) plans 
                            and governmental 457(b) plans.
Sec. 1619. Application of 10-percent early distribution tax to 
                            governmental 457 plans.
Sec. 1620. Inflation adjustments for qualified plan benefit and 
                            contribution limitations.
Sec. 1621. Inflation adjustments for qualified plan elective deferral 
                            limitations.
Sec. 1622. Inflation adjustments for SIMPLE retirement accounts.
Sec. 1623. Inflation adjustments for catch-up contributions for certain 
                            employer plans.
Sec. 1624. Inflation adjustments for governmental and tax-exempt 
                            organization plans.
   Subtitle H--Certain Provisions Related to Members of Indian Tribes

Sec. 1701. Indian general welfare benefits.
Sec. 1702. Tribal Advisory Committee.
Sec. 1703. Other relief for Indian tribes.
                TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

Sec. 2001. Repeal of alternative minimum tax.
                     TITLE III--BUSINESS TAX REFORM

                         Subtitle A--Tax Rates

Sec. 3001. 25-percent corporate tax rate.
    Subtitle B--Reform of Business-Related Exclusions and Deductions

Sec. 3101. Revision of treatment of contributions to capital.
Sec. 3102. Repeal of deduction for local lobbying expenses.
Sec. 3103. Expenditures for repairs in connection with casualty losses.
Sec. 3104. Reform of accelerated cost recovery system.
Sec. 3105. Repeal of amortization of pollution control facilities.
Sec. 3106. Net operating loss deduction.
Sec. 3107. Circulation expenditures.
Sec. 3108. Amortization of research and experimental expenditures.
Sec. 3109. Repeal of deductions for soil and water conservation 
                            expenditures and endangered species 
                            recovery expenditures.
Sec. 3110. Amortization of certain advertising expenses.
Sec. 3111. Expensing certain depreciable business assets for small 
                            business.
Sec. 3112. Repeal of election to expense certain refineries.
Sec. 3113. Repeal of deduction for energy efficient commercial 
                            buildings.
Sec. 3114. Repeal of election to expense advanced mine safety 
                            equipment.
Sec. 3115. Repeal of deduction for expenditures by farmers for 
                            fertilizer, etc.
Sec. 3116. Repeal of special treatment of certain qualified film and 
                            television productions.
Sec. 3117. Repeal of special rules for recoveries of damages of 
                            antitrust violations, etc.
Sec. 3118. Treatment of reforestation expenditures.
Sec. 3119. 20-year amortization of goodwill and certain other 
                            intangibles.
Sec. 3120. Treatment of environmental remediation costs.
Sec. 3121. Repeal of expensing of qualified disaster expenses.
Sec. 3122. Phaseout and repeal of deduction for income attributable to 
                            domestic production activities.
Sec. 3123. Unification of deduction for organizational expenditures.
Sec. 3124. Prevention of arbitrage of deductible interest expense and 
                            tax-exempt interest income.
Sec. 3125. Prevention of transfer of certain losses from tax 
                            indifferent parties.
Sec. 3126. Entertainment, etc. expenses.
Sec. 3127. Repeal of limitation on corporate acquisition indebtedness.
Sec. 3128. Denial of deductions and credits for expenditures in illegal 
                            businesses.
Sec. 3129. Limitation on deduction for FDIC premiums.
Sec. 3130. Repeal of percentage depletion.
Sec. 3131. Repeal of passive activity exception for working interests 
                            in oil and gas property.
Sec. 3132. Repeal of special rules for gain or loss on timber, coal, or 
                            domestic iron ore.
Sec. 3133. Repeal of like-kind exchanges.
Sec. 3134. Restriction on trade or business property treated as similar 
                            or related in service to involuntarily 
                            converted property in disaster areas.
Sec. 3135. Repeal of rollover of publicly traded securities gain into 
                            specialized small business investment 
                            companies.
Sec. 3136. Termination of special rules for gain from certain small 
                            business stock.
Sec. 3137. Certain self-created property not treated as a capital 
                            asset.
Sec. 3138. Repeal of special rule for sale or exchange of patents.
Sec. 3139. Depreciation recapture on gain from disposition of certain 
                            depreciable realty.
Sec. 3140. Common deduction conforming amendments.
                 Subtitle C--Reform of Business Credits

Sec. 3201. Repeal of credit for alcohol, etc., used as fuel.
Sec. 3202. Repeal of credit for biodiesel and renewable diesel used as 
                            fuel.
Sec. 3203. Research credit modified and made permanent.
Sec. 3204. Low-income housing tax credit.
Sec. 3205. Repeal of enhanced oil recovery credit.
Sec. 3206. Phaseout and repeal of credit for electricity produced from 
                            certain renewable resources.
Sec. 3207. Repeal of Indian employment credit.
Sec. 3208. Repeal of credit for portion of employer Social Security 
                            taxes paid with respect to employee cash 
                            tips.
Sec. 3209. Repeal of credit for clinical testing expenses for certain 
                            drugs for rare diseases or conditions.
Sec. 3210. Repeal of credit for small employer pension plan startup 
                            costs.
Sec. 3211. Repeal of employer-provided child care credit.
Sec. 3212. Repeal of railroad track maintenance credit.
Sec. 3213. Repeal of credit for production of low sulfur diesel fuel.
Sec. 3214. Repeal of credit for producing oil and gas from marginal 
                            wells.
Sec. 3215. Repeal of credit for production from advanced nuclear power 
                            facilities.
Sec. 3216. Repeal of credit for producing fuel from a nonconventional 
                            source.
Sec. 3217. Repeal of new energy efficient home credit.
Sec. 3218. Repeal of energy efficient appliance credit.
Sec. 3219. Repeal of mine rescue team training credit.
Sec. 3220. Repeal of agricultural chemicals security credit.
Sec. 3221. Repeal of credit for carbon dioxide sequestration.
Sec. 3222. Repeal of credit for employee health insurance expenses of 
                            small employers.
Sec. 3223. Repeal of rehabilitation credit.
Sec. 3224. Repeal of energy credit.
Sec. 3225. Repeal of qualifying advanced coal project credit.
Sec. 3226. Repeal of qualifying gasification project credit.
Sec. 3227. Repeal of qualifying advanced energy project credit.
Sec. 3228. Repeal of qualifying therapeutic discovery project credit.
Sec. 3229. Repeal of work opportunity tax credit.
Sec. 3230. Repeal of deduction for certain unused business credits.
                     Subtitle D--Accounting Methods

Sec. 3301. Limitation on use of cash method of accounting.
Sec. 3302. Rules for determining whether taxpayer has adopted a method 
                            of accounting.
Sec. 3303. Certain special rules for taxable year of inclusion.
Sec. 3304. Installment sales.
Sec. 3305. Repeal of special rule for prepaid subscription income.
Sec. 3306. Repeal of special rule for prepaid dues income of certain 
                            membership organizations.
Sec. 3307. Repeal of special rule for magazines, paperbacks, and 
                            records returned after close of the taxable 
                            year.
Sec. 3308. Modification of rules for long-term contracts.
Sec. 3309. Nuclear decommissioning reserve funds.
Sec. 3310. Repeal of last-in, first-out method of inventory.
Sec. 3311. Repeal of lower of cost or market method of inventory.
Sec. 3312. Modification of rules for capitalization and inclusion in 
                            inventory costs of certain expenses.
Sec. 3313. Modification of income forecast method.
Sec. 3314. Repeal of averaging of farm income.
Sec. 3315. Treatment of patent or trademark infringement awards.
Sec. 3316. Repeal of redundant rules with respect to carrying charges.
Sec. 3317. Repeal of recurring item exception for spudding of oil or 
                            gas wells.
                   Subtitle E--Financial Instruments

                     Part 1--Derivatives and Hedges

Sec. 3401. Treatment of certain derivatives.
Sec. 3402. Modification of certain rules related to hedges.
                 Part 2--Treatment of Debt Instruments

Sec. 3411. Current inclusion in income of market discount.
Sec. 3412. Treatment of certain exchanges of debt instruments.
Sec. 3413. Coordination with rules for inclusion not later than for 
                            financial accounting purposes.
Sec. 3414. Rules regarding certain government debt.
          Part 3--Certain Rules for Determining Gain and Loss

Sec. 3421. Cost basis of specified securities determined without regard 
                            to identification.
Sec. 3422. Wash sales by related parties.
Sec. 3423. Nonrecognition for derivative transactions by a corporation 
                            with respect to its stock.
                       Part 4--Tax Favored Bonds

Sec. 3431. Termination of private activity bonds.
Sec. 3432. Termination of credit for interest on certain home 
                            mortgages.
Sec. 3433. Repeal of advance refunding bonds.
Sec. 3434. Repeal of tax credit bond rules.
                     Subtitle F--Insurance Reforms

Sec. 3501. Exception to pro rata interest expense disallowance for 
                            corporate-owned life insurance restricted 
                            to 20-percent owners.
Sec. 3502. Net operating losses of life insurance companies.
Sec. 3503. Repeal of small life insurance company deduction.
Sec. 3504. Computation of life insurance tax reserves.
Sec. 3505. Adjustment for change in computing reserves.
Sec. 3506. Modification of rules for life insurance proration for 
                            purposes of determining the dividends 
                            received deduction.
Sec. 3507. Repeal of special rule for distributions to shareholders 
                            from pre-1984 policyholders surplus 
                            account.
Sec. 3508. Modification of proration rules for property and casualty 
                            insurance companies.
Sec. 3509. Repeal of special treatment of Blue Cross and Blue Shield 
                            organizations, etc.
Sec. 3510. Modification of discounting rules for property and casualty 
                            insurance companies.
Sec. 3511. Repeal of special estimated tax payments.
Sec. 3512. Capitalization of certain policy acquisition expenses.
Sec. 3513. Tax reporting for life settlement transactions.
Sec. 3514. Clarification of tax basis of life insurance contracts.
Sec. 3515. Exception to transfer for valuable consideration rules.
            Subtitle G--Pass-Thru and Certain Other Entities

                         Part 1--S Corporations

Sec. 3601. Reduced recognition period for built-in gains made 
                            permanent.
Sec. 3602. Modifications to S corporation passive investment income 
                            rules.
Sec. 3603. Expansion of qualifying beneficiaries of an electing small 
                            business trust.
Sec. 3604. Charitable contribution deduction for electing small 
                            business trusts.
Sec. 3605. Permanent rule regarding basis adjustment to stock of S 
                            corporations making charitable 
                            contributions of property.
Sec. 3606. Extension of time for making S corporation elections.
Sec. 3607. Relocation of C corporation definition.
                          Part 2--Partnerships

Sec. 3611. Repeal of rules relating to guaranteed payments and 
                            liquidating distributions.
Sec. 3612. Mandatory adjustments to basis of partnership property in 
                            case of transfer of partnership interests.
Sec. 3613. Mandatory adjustments to basis of undistributed partnership 
                            property.
Sec. 3614. Corresponding adjustments to basis of properties held by 
                            partnership where partnership basis 
                            adjusted.
Sec. 3615. Charitable contributions and foreign taxes taken into 
                            account in determining limitation on 
                            allowance of partner's share of loss.
Sec. 3616. Revisions related to unrealized receivables and inventory 
                            items.
Sec. 3617. Repeal of time limitation on taxing precontribution gain.
Sec. 3618. Partnership interests created by gift.
Sec. 3619. Repeal of technical termination.
Sec. 3620. Publicly traded partnership exception restricted to mining 
                            and natural resources partnerships.
Sec. 3621. Ordinary income treatment in the case of partnership 
                            interests held in connection with 
                            performance of services.
Sec. 3622. Partnership audits and adjustments.
                         Part 3--REITs and RICs

Sec. 3631. Prevention of tax-free spinoffs involving REITs.
Sec. 3632. Extension of period for prevention of REIT election 
                            following revocation or termination.
Sec. 3633. Certain short-life property not treated as real property for 
                            purposes of REIT provisions.
Sec. 3634. Repeal of special rules for timber held by REITs.
Sec. 3635. Limitation on fixed percentage rent and interest exceptions 
                            for REIT income tests.
Sec. 3636. Repeal of preferential dividend rule for publicly offered 
                            REITs.
Sec. 3637. Authority for alternative remedies to address certain REIT 
                            distribution failures.
Sec. 3638. Limitations on designation of dividends by REITs.
Sec. 3639. Non-REIT earnings and profits required to be distributed by 
                            REIT in cash.
Sec. 3640. Debt instruments of publicly offered REITs and mortgages 
                            treated as real estate assets.
Sec. 3641. Asset and income test clarification regarding ancillary 
                            personal property.
Sec. 3642. Hedging provisions.
Sec. 3643. Modification of REIT earnings and profits calculation to 
                            avoid duplicate taxation.
Sec. 3644. Reduction in percentage limitation on assets of REIT which 
                            may be taxable REIT subsidiaries.
Sec. 3645. Treatment of certain services provided by taxable REIT 
                            subsidiaries.
Sec. 3646. Study relating to taxable REIT subsidiaries.
Sec. 3647. C corporation election to become, or transfer assets to, a 
                            RIC or REIT.
Sec. 3648. Interests in RICs and REITs not excluded from definition of 
                            United States real property interests.
Sec. 3649. Dividends derived from RICs and REITs ineligible for 
                            deduction for United States source portion 
                            of dividends from certain foreign 
                            corporations.
                   Part 4--Personal Holding Companies

Sec. 3661. Exclusion of dividends from controlled foreign corporations 
                            from the definition of personal holding 
                            company income for purposes of the personal 
                            holding company rules.
                Subtitle H--Taxation of Foreign Persons

Sec. 3701. Prevention of avoidance of tax through reinsurance with non-
                            taxed affiliates.
Sec. 3702. Taxation of passenger cruise gross income of foreign 
                            corporations and nonresident alien 
                            individuals.
Sec. 3703. Restriction on insurance business exception to passive 
                            foreign investment company rules.
Sec. 3704. Modification of limitation on earnings stripping.
Sec. 3705. Limitation on treaty benefits for certain deductible 
                            payments.
             Subtitle I--Provisions Related to Compensation

                     Part 1--Executive Compensation

Sec. 3801. Nonqualified deferred compensation.
Sec. 3802. Modification of limitation on excessive employee 
                            remuneration.
Sec. 3803. Excise tax on excess tax-exempt organization executive 
                            compensation.
Sec. 3804. Denial of deduction as research expenditure for stock 
                            transferred pursuant to an incentive stock 
                            option.
                     Part 2--Worker Classification

Sec. 3811. Determination of worker classification.
           Subtitle J--Zones and Short-Term Regional Benefits

Sec. 3821. Repeal of provisions relating to Empowerment Zones and 
                            Enterprise Communities.
Sec. 3822. Repeal of DC Zone provisions.
Sec. 3823. Repeal of provisions relating to renewal communities.
Sec. 3824. Repeal of various short-term regional benefits.
 TITLE IV--PARTICIPATION EXEMPTION SYSTEM FOR THE TAXATION OF FOREIGN 
                                 INCOME

             Subtitle A--Establishment of Exemption System

Sec. 4001. Deduction for dividends received by domestic corporations 
                            from certain foreign corporations.
Sec. 4002. Limitation on losses with respect to specified 10-percent 
                            owned foreign corporations.
Sec. 4003. Treatment of deferred foreign income upon transition to 
                            participation exemption system of taxation.
Sec. 4004. Look-thru rule for related controlled foreign corporations 
                            made permanent.
     Subtitle B--Modifications Related to Foreign Tax Credit System

Sec. 4101. Repeal of section 902 indirect foreign tax credits; 
                            determination of section 960 credit on 
                            current year basis.
Sec. 4102. Foreign tax credit limitation applied by allocating only 
                            directly allocable deductions to foreign 
                            source income.
Sec. 4103. Passive category income expanded to include other mobile 
                            income.
Sec. 4104. Source of income from sales of inventory determined solely 
                            on basis of production activities.
         Subtitle C--Rules Related to Passive and Mobile Income

              Part 1--Modification of Subpart F Provisions

Sec. 4201. Subpart F income to only include low-taxed foreign income.
Sec. 4202. Foreign base company sales income.
Sec. 4203. Inflation adjustment of de minimis exception for foreign 
                            base company income.
Sec. 4204. Active financing exception extended with limitation for low-
                            taxed foreign income.
Sec. 4205. Repeal of inclusion based on withdrawal of previously 
                            excluded subpart F income from qualified 
                            investment.
                   Part 2--Prevention of Base Erosion

Sec. 4211. Foreign intangible income subject to taxation at reduced 
                            rate; intangible income treated as subpart 
                            F income.
Sec. 4212. Denial of deduction for interest expense of United States 
                            shareholders which are members of worldwide 
                            affiliated groups with excess domestic 
                            indebtedness.
                      TITLE V--TAX EXEMPT ENTITIES

               Subtitle A--Unrelated Business Income Tax

Sec. 5001. Clarification of unrelated business income tax treatment of 
                            entities treated as exempt from taxation 
                            under section 501(a).
Sec. 5002. Name and logo royalties treated as unrelated business 
                            taxable income.
Sec. 5003. Unrelated business taxable income separately computed for 
                            each trade or business activity.
Sec. 5004. Exclusion of research income limited to publicly available 
                            research.
Sec. 5005. Parity of charitable contribution limitation between trusts 
                            and corporations.
Sec. 5006. Increased specific deduction.
Sec. 5007. Repeal of exclusion of gain or loss from disposition of 
                            distressed property.
Sec. 5008. Qualified sponsorship payments.
                         Subtitle B--Penalties

Sec. 5101. Increase in information return penalties.
Sec. 5102. Manager-level accuracy-related penalty on underpayment of 
                            unrelated business income tax.
                        Subtitle C--Excise Taxes

Sec. 5201. Modification of intermediate sanctions.
Sec. 5202. Modification of taxes on self-dealing.
Sec. 5203. Excise tax on failure to distribute within 5 years 
                            contribution to donor advised fund.
Sec. 5204. Simplification of excise tax on private foundation 
                            investment income.
Sec. 5205. Repeal of exception for private operating foundation failure 
                            to distribute income.
Sec. 5206. Excise tax based on investment income of private colleges 
                            and universities.
       Subtitle D--Requirements for Organizations Exempt From Tax

Sec. 5301. Repeal of tax-exempt status for professional sports leagues.
Sec. 5302. Repeal of exemption from tax for certain insurance companies 
                            and co-op health insurance issuers.
Sec. 5303. In-State requirement for workmen's compensation insurance 
                            organization.
Sec. 5304. Repeal of Type II and Type III supporting organizations.
              TITLE VI--TAX ADMINISTRATION AND COMPLIANCE

             Subtitle A--IRS Investigation-Related Reforms

Sec. 6001. Organizations required to notify Secretary of intent to 
                            operate as 501(c)(4).
Sec. 6002. Declaratory judgments for 501(c)(4) organizations.
Sec. 6003. Restriction on donation reporting for certain 501(c)(4) 
                            organizations.
Sec. 6004. Mandatory electronic filing for annual returns of exempt 
                            organizations.
Sec. 6005. Duty to ensure that IRS employees are familiar with and act 
                            in accord with certain taxpayer rights.
Sec. 6006. Termination of employment of IRS employees for taking 
                            official actions for political purposes.
Sec. 6007. Release of information regarding the status of certain 
                            investigations.
Sec. 6008. Review of IRS examination selection procedures.
Sec. 6009. IRS employees prohibited from using personal email accounts 
                            for official business.
Sec. 6010. Moratorium on IRS conferences.
Sec. 6011. Applicable standard for determinations of whether an 
                            organization is operated exclusively for 
                            the promotion of social welfare.
          Subtitle B--Taxpayer Protection and Service Reforms

Sec. 6101. Extension of IRS authority to require truncated Social 
                            Security numbers on Form W-2.
Sec. 6102. Free electronic filing.
Sec. 6103. Pre-populated returns prohibited.
Sec. 6104. Form 1040SR for seniors.
Sec. 6105. Increased refund and credit threshold for Joint Committee on 
                            Taxation review of C corporation return.
             Subtitle C--Tax Return Due Date Simplification

Sec. 6201. Due dates for returns of partnerships, S corporations, and C 
                            corporations.
Sec. 6202. Modification of due dates by regulation.
Sec. 6203. Corporations permitted statutory automatic 6-month extension 
                            of income tax returns.
                     Subtitle D--Compliance Reforms

Sec. 6301. Penalty for failure to file.
Sec. 6302. Penalty for failure to file correct information returns and 
                            provide payee statements.
Sec. 6303. Clarification of 6-year statute of limitations in case of 
                            overstatement of basis.
Sec. 6304. Reform of rules related to qualified tax collection 
                            contracts.
Sec. 6305. 100 percent continuous levy on payments to Medicare 
                            providers and suppliers.
Sec. 6306. Treatment of refundable credits for purposes of certain 
                            penalties.
                        TITLE VII--EXCISE TAXES

Sec. 7001. Repeal of medical device excise tax.
Sec. 7002. Modifications relating to oil spill liability trust fund.
Sec. 7003. Modification relating to inland waterways trust fund 
                            financing rate.
Sec. 7004. Excise tax on systemically important financial institutions.
Sec. 7005. Clarification of orphan drug exception to annual fee on 
                            branded prescription pharmaceutical 
                            manufacturers and importers.
             TITLE VIII--DEADWOOD AND TECHNICAL PROVISIONS

                     Subtitle A--Repeal of Deadwood

Sec. 8001. Repeal of Puerto Rico economic activity credit.
Sec. 8002. Repeal of making work pay credit.
Sec. 8003. General business credit.
Sec. 8004. Environmental tax.
Sec. 8005. Annuities; certain proceeds of endowment and life insurance 
                            contracts.
Sec. 8006. Unemployment compensation.
Sec. 8007. Flexible spending arrangements.
Sec. 8008. Certain combat zone compensation of members of the armed 
                            forces.
Sec. 8009. Qualified group legal services plans.
Sec. 8010. Certain reduced uniformed services retirement pay.
Sec. 8011. Great plains conservation program.
Sec. 8012. State legislators' travel expenses away from home.
Sec. 8013. Treble damage payments under the antitrust law.
Sec. 8014. Phase-in of limitation on investment interest.
Sec. 8015. Charitable, etc., contributions and gifts.
Sec. 8016. Amortizable bond premium.
Sec. 8017. Repeal of deduction for clean-fuel vehicles and certain 
                            refueling property.
Sec. 8018. Repeal of deduction for capital costs incurred in complying 
                            with environmental protection agency sulfur 
                            regulations.
Sec. 8019. Activities not engaged in for profit.
Sec. 8020. Dividends received on certain preferred stock; and dividends 
                            paid on certain preferred stock of public 
                            utilities.
Sec. 8021. Acquisitions made to evade or avoid income tax.
Sec. 8022. Distributions of property.
Sec. 8023. Effect on earnings and profits.
Sec. 8024. Basis to corporations.
Sec. 8025. Tax credit employee stock ownership plans.
Sec. 8026. Employee stock purchase plans.
Sec. 8027. Transition rules.
Sec. 8028. Limitation on deductions for certain farming.
Sec. 8029. Deductions limited to amount at risk.
Sec. 8030. Passive activity losses and credits limited.
Sec. 8031. Adjustments required by changes in method of accounting.
Sec. 8032. Exemption from tax on corporations, certain trusts, etc.
Sec. 8033. Requirements for exemption.
Sec. 8034. Repeal of special treatment for religious broadcasting 
                            company.
Sec. 8035. Repeal of exclusion of gain or loss from disposition of 
                            brownfield property.
Sec. 8036. Accumulated taxable income.
Sec. 8037. Certain provisions related to depletion.
Sec. 8038. Amounts received by surviving annuitant under joint and 
                            survivor annuity contract.
Sec. 8039. Income taxes of members of armed forces on death.
Sec. 8040. Special rules for computing reserves.
Sec. 8041. Insurance company taxable income.
Sec. 8042. Capitalization of certain policy acquisition expenses.
Sec. 8043. Repeal of provision on expatriation to avoid tax.
Sec. 8044. Repeal of certain transition rules on income from sources 
                            without United States.
Sec. 8045. Repeal of Puerto Rico and possession tax credit.
Sec. 8046. Basis of property acquired from decedent.
Sec. 8047. Property on which lessee has made improvements.
Sec. 8048. Involuntary conversion.
Sec. 8049. Property acquired during affiliation.
Sec. 8050. Repeal of special holding period rules for certain commodity 
                            futures transactions.
Sec. 8051. Holding period of property.
Sec. 8052. Property used in the trade or business and involuntary 
                            conversions.
Sec. 8053. Sale of patents.
Sec. 8054. Gain from disposition of farmland.
Sec. 8055. Transition rules related to the treatment of amounts 
                            received on retirement or sale or exchange 
                            of debt instruments.
Sec. 8056. Certain rules with respect to debt instruments issued before 
                            July 2, 1982.
Sec. 8057. Certain rules with respect to stripped bonds purchased 
                            before July 2, 1982.
Sec. 8058. Amount and method of adjustment.
Sec. 8059. Old-age, survivors, and disability insurance.
Sec. 8060. Hospital insurance.
Sec. 8061. Ministers, members of religious orders, and christian 
                            science practitioners.
Sec. 8062. Affiliated group defined.
Sec. 8063. Credit for state death taxes.
Sec. 8064. Family-owned business interest.
Sec. 8065. Property within the united states.
Sec. 8066. Repeal of deadwood provisions relating to employment taxes.
Sec. 8067. Luxury passenger automobiles.
Sec. 8068. Transportation by air.
Sec. 8069. Taxes on failure to distribute income.
Sec. 8070. Taxes on taxable expenditures.
Sec. 8071. Definitions and special rules.
Sec. 8072. Returns.
Sec. 8073. Information returns.
Sec. 8074. Abatements.
Sec. 8075. Failure by corporation to pay estimated income tax.
Sec. 8076. Repeal of 2008 recovery rebates.
Sec. 8077. Repeal of advance payment of portion of increased child 
                            credit for 2003.
Sec. 8078. Repeal of provisions related to COBRA premium assistance.
Sec. 8079. Retirement.
Sec. 8080. Annuities to surviving spouses and dependent children of 
                            judges.
Sec. 8081. Merchant marine capital construction funds.
Sec. 8082. Valuation tables.
Sec. 8083. Definition of employee.
Sec. 8084. Effective date.
     Subtitle B--Conforming Amendments Related to Multiple Sections

Sec. 8101. Conforming amendments related to multiple sections.

                  TITLE I--TAX REFORM FOR INDIVIDUALS

             Subtitle A--Individual Income Tax Rate Reform

SEC. 1001. SIMPLIFICATION OF INDIVIDUAL INCOME TAX RATES.

    (a) In General.--Section 1 is amended to read as follows:

``SEC. 1. TAX IMPOSED.

    ``(a) In General.--There is hereby imposed on the income of every 
individual a tax equal to the sum of--
            ``(1) 10 percent bracket.--10 percent of so much of the 
        taxable income as does not exceed the 25-percent bracket 
        threshold amount,
            ``(2) 25 percent bracket.--25 percent of so much of the 
        taxable income as exceeds the 25-percent bracket threshold 
        amount, plus
            ``(3) 35 percent bracket.--10 percent of so much of the 
        modified adjusted gross income (as defined in section 2) as 
        exceeds the 35-percent bracket threshold amount.
    ``(b) Bracket Threshold Amounts.--For purposes of this section--
            ``(1) 25-percent bracket threshold amount.--The term `25-
        percent bracket threshold amount' means--
                    ``(A) in the case of a joint return or surviving 
                spouse, $71,200,
                    ``(B) in the case of any other individual (other 
                than an estate or trust), one-half of the dollar amount 
                in effect under subparagraph (A), and
                    ``(C) in the case of an estate or trust, zero.
            ``(2) 35-percent bracket threshold amount.--The term `35-
        percent bracket threshold amount' means--
                    ``(A) in the case of a joint return or surviving 
                spouse, $450,000,
                    ``(B) in the case of any other individual (other 
                than an estate or trust), $400,000, and
                    ``(C) in the case of an estate or trust, $12,000.
    ``(c) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2014, each dollar amount in subsections 
        (b)(1)(A), (b)(2)(A), (b)(2)(B), (b)(2)(C), (e)(3)(A), and 
        (e)(3)(B) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under this subsection for the calendar year in which 
                the taxable year begins.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.
            ``(2) Cost-of-living adjustment.--For purposes of this 
        subsection--
                    ``(A) In general.--The cost-of-living adjustment 
                for any calendar year is the percentage (if any) by 
                which--
                            ``(i) the C-CPI-U for the preceding 
                        calendar year, exceeds
                            ``(ii) the normalized CPI for calendar year 
                        2012.
                    ``(B) Special rule for adjustments with a base year 
                after 2012.--For purposes of any provision which 
                provides for the substitution of a year after 2012 for 
                `2012' in subparagraph (A)(ii), subparagraph (A) shall 
                be applied by substituting `C-CPI-U' for `normalized 
                CPI' in clause (ii).
            ``(3) Normalized cpi.--For purposes of this subsection, the 
        normalized CPI for any calendar year is the product of--
                    ``(A) the CPI for such calendar year, multiplied by
                    ``(B) the C-CPI-U transition multiple.
            ``(4) C-CPI-U transition multiple.--For purposes of this 
        subsection, the term `C-CPI-U transition multiple' means the 
        amount obtained by dividing--
                    ``(A) the C-CPI-U for calendar year 2013, by
                    ``(B) the CPI for calendar year 2013.
            ``(5) C-CPI-U.--For purposes of this subsection--
                    ``(A) In general.--The term `C-CPI-U' means the 
                Chained Consumer Price Index for All Urban Consumers 
                (as published by the Bureau of Labor Statistics of the 
                Department of Labor). The values of the Chained 
                Consumer Price Index for All Urban Consumers taken into 
                account for purposes of determining the cost-of-living 
                adjustment for any calendar year under this subsection 
                shall be the latest values so published as of the date 
                on which such Bureau publishes the initial value of the 
                Chained Consumer Price Index for All Urban Consumers 
                for the month of August for the preceding calendar 
                year.
                    ``(B) Determination for calendar year.--The C-CPI-U 
                for any calendar year is the average of the C-CPI-U as 
                of the close of the 12-month period ending on August 31 
                of such calendar year.
            ``(6) CPI.--For purposes of this subsection--
                    ``(A) In general.--The term `Consumer Price Index' 
                means the last Consumer Price Index for All Urban 
                Consumers published by the Department of Labor. For 
                purposes of the preceding sentence, the revision of the 
                Consumer Price Index which is most consistent with the 
                Consumer Price Index for calendar year 1986 shall be 
                used.
                    ``(B) Determination for calendar year.--The CPI for 
                any calendar year is the average of the Consumer Price 
                Index as of the close of the 12-month period ending on 
                August 31 of such calendar year.
    ``(d) Special Rules for Certain Children With Unearned Income.--
            ``(1) In general.--In the case of any child to whom this 
        subsection applies for any taxable year--
                    ``(A) the 25-percent bracket threshold amount shall 
                not be more than the taxable income of such child for 
                the taxable year reduced by the net unearned income of 
                such child, and
                    ``(B) the 35-percent bracket threshold amount shall 
                not be more than the sum of--
                            ``(i) the taxable income of such child for 
                        the taxable year reduced by the net unearned 
                        income of such child, plus
                            ``(ii) the dollar amount in effect under 
                        subsection (b)(2)(C) for the taxable year.
            ``(2) Child to whom subsection applies.--This subsection 
        shall apply to any child for any taxable year if--
                    ``(A) such child--
                            ``(i) has not attained age 18 before the 
                        close of the taxable year, or
                            ``(ii) has attained age 18 before the close 
                        of the taxable year and is described in 
                        paragraph (3),
                    ``(B) either parent of such child is alive at the 
                close of the taxable year, and
                    ``(C) such child does not file a joint return for 
                the taxable year.
            ``(3) Certain children whose earned income does not exceed 
        one-half of individual's support.--A child is described in this 
        paragraph if--
                    ``(A) such child--
                            ``(i) has not attained age 19 before the 
                        close of the taxable year, or
                            ``(ii) is a student (within the meaning of 
                        section 7705(f)(2)) who has not attained age 24 
                        before the close of the taxable year, and
                    ``(B) such child's earned income (as defined in 
                section 911(d)(2)) for such taxable year does not 
                exceed one-half of the amount of the individual's 
                support (within the meaning of section 7705(c)(1)(D) 
                after the application of section 7705(f)(5) (without 
                regard to subparagraph (A) thereof)) for such taxable 
                year.
            ``(4) Net unearned income.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `net unearned income' 
                means the excess of--
                            ``(i) the portion of the adjusted gross 
                        income for the taxable year which is not 
                        attributable to earned income (as defined in 
                        section 911(d)(2)), over
                            ``(ii) the sum of--
                                    ``(I) the amount in effect for the 
                                taxable year under section 63(c)(4)(A) 
                                (relating to limitation on standard 
                                deduction in the case of certain 
                                dependents), plus
                                    ``(II) the greater of the amount 
                                described in subclause (I) or, if the 
                                child itemizes his deductions for the 
                                taxable year, the amount of the 
                                itemized deductions allowed by this 
                                chapter for the taxable year which are 
                                directly connected with the production 
                                of the portion of adjusted gross income 
                                referred to in clause (i).
                    ``(B) Limitation based on taxable income.--The 
                amount of the net unearned income for any taxable year 
                shall not exceed the individual's taxable income for 
                such taxable year.
    ``(e) Phaseout of 10-Percent Rate.--
            ``(1) In general.--The amount of tax imposed by this 
        section (determined without regard to this subsection) shall be 
        increased by 5 percent of the excess (if any) of--
                    ``(A) modified adjusted gross income, over
                    ``(B) the applicable dollar amount.
            ``(2) Limitation.--The increase determined under paragraph 
        (1) with respect to any taxpayer for any taxable year shall not 
        exceed 15 percent of the lesser of--
                    ``(A) the taxpayer's taxable income for such 
                taxable year, or
                    ``(B) the 25-percent bracket threshold amount in 
                effect with respect to the taxpayer for such taxable 
                year.
            ``(3) Applicable dollar amount.--For purposes of this 
        subsection, the term `applicable dollar amount' means--
                    ``(A) in the case of a joint return or a surviving 
                spouse, $300,000,
                    ``(B) in the case of any other individual, 
                $250,000.
            ``(4) Estates and trusts.--Paragraph (1) shall not apply in 
        the case of an estate or trust.
    ``(f) Determination of Highest Rate.--For purposes of any provision 
of law which refers to the highest rate of tax specified in this 
section (or any subsection of this section), such highest rate shall be 
treated as being 35 percent.''.
    (b) Modified Adjusted Gross Income.--Section 2 is amended by 
striking subsection (b), by redesignating subsections (c), (d), and 
(e), as subsections (d), (e), and (f), respectively, and by inserting 
after subsection (a) the following new subsections:
    ``(b) Modified Adjusted Gross Income.--For purposes of section 1--
            ``(1) In general.--The term `modified adjusted gross 
        income' means adjusted gross income--
                    ``(A) increased by--
                            ``(i) any amount excluded from gross income 
                        under sections 911, 931, and 933,
                            ``(ii) the excess (if any) of--
                                    ``(I) amounts of interest received 
                                or accrued by the taxpayer during the 
                                taxable year which are exempt from tax, 
                                over
                                    ``(II) amounts disallowed as a 
                                deduction by reason of section 
                                163(d)(1)(A) or 171(a)(2),
                            ``(iii) any exclusion from gross income 
                        with respect to the cost described in section 
                        6051(a)(14) (without regard to subparagraphs 
                        (A) and (B) thereof),
                            ``(iv) any deduction allowable under 
                        section 162(l) (relating to special rules for 
                        health insurance costs of self-employed 
                        individuals),
                            ``(v) any annual addition (as defined in 
                        section 415(c)(2)) to a defined contribution 
                        plan which is not includible in, or which is 
                        deductible from, the gross income of the 
                        individual for the taxable year,
                            ``(vi) any deduction allowable under 
                        section 223, and
                            ``(vii) the excess (if any) of--
                                    ``(I) the social security benefits 
                                of the individual for the taxable year 
                                (as defined in section 86(d)), over
                                    ``(II) the amount included in the 
                                gross income of such individual for 
                                such taxable year under section 86, and
                    ``(B) decreased by--
                            ``(i) any deduction allowed under section 
                        170 (and in the case of an estate or trust, any 
                        deduction allowed under section 642(c)), and
                            ``(ii) qualified domestic manufacturing 
                        income.
            ``(2) Determination of adjusted gross income in case of 
        estates and trusts.--For purposes of this subsection, the 
        adjusted gross income of an estate or trust shall be computed 
        in the same manner as in the case of an individual, except 
        that--
                    ``(A) the deductions for costs which are paid or 
                incurred in connection with the administration of the 
                estate or trust and which would not have been incurred 
                if the property were not held in such trust or estate, 
                and
                    ``(B) the deductions allowable under sections 
                642(b), 651, and 661,
        shall be treated as allowable in arriving at adjusted gross 
        income. Under regulations, appropriate adjustments shall be 
        made in the application of part I of subchapter J of this 
        chapter to take into account the application of this paragraph.
    ``(c) Qualified Domestic Manufacturing Income.--
            ``(1) In general.--For purposes of subsection (b), the term 
        `qualified domestic manufacturing income' for any taxable year 
        means an amount equal to the excess (if any) of--
                    ``(A) the taxpayer's domestic manufacturing gross 
                receipts for such taxable year, over
                    ``(B) the sum of--
                            ``(i) the cost of goods sold that are 
                        allocable to such receipts, and
                            ``(ii) other expenses, losses, or 
                        deductions, which are properly allocable to 
                        such receipts.
            ``(2) Allocation method.--The Secretary shall prescribe 
        rules for the proper allocation of items described in paragraph 
        (1) for purposes of determining qualified domestic 
        manufacturing income. Such rules shall provide for the proper 
        allocation of items whether or not such items are directly 
        allocable to domestic manufacturing gross receipts.
            ``(3) Special rules for determining costs.--
                    ``(A) In general.--For purposes of determining 
                costs under clause (i) of paragraph (1)(B), any item or 
                service brought into the United States shall be treated 
                as acquired by purchase, and its cost shall be treated 
                as not less than its value immediately after it entered 
                the United States. A similar rule shall apply in 
                determining the adjusted basis of leased or rented 
                property where the lease or rental gives rise to 
                domestic manufacturing gross receipts.
                    ``(B) Exports for further manufacture.--In the case 
                of any property described in subparagraph (A) that had 
                been exported by the taxpayer for further manufacture, 
                the increase in cost or adjusted basis under 
                subparagraph (A) shall not exceed the difference 
                between the value of the property when exported and the 
                value of the property when brought back into the United 
                States after the further manufacture.
            ``(4) Domestic manufacturing gross receipts.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `domestic manufacturing 
                gross receipts' means the gross receipts of the 
                taxpayer which are derived from--
                            ``(i) any lease, rental, license, sale, 
                        exchange, or other disposition of tangible 
                        personal property which was manufactured, 
                        produced, grown, or extracted by the taxpayer 
                        in whole or in significant part within the 
                        United States, or
                            ``(ii) in the case of a taxpayer engaged in 
                        the active conduct of a construction trade or 
                        business, construction of real property 
                        performed in the United States by the taxpayer 
                        in the ordinary course of such trade or 
                        business if such real property is placed in 
                        service after December 31, 2014.
                    ``(B) Exceptions.--Such term shall not include 
                gross receipts of the taxpayer which are derived from--
                            ``(i) the sale of food and beverages 
                        prepared by the taxpayer at a retail 
                        establishment,
                            ``(ii) the transmission or distribution of 
                        electricity, natural gas, or potable water, and
                            ``(iii) the lease, rental, license, sale, 
                        exchange, or other disposition of land.
                    ``(C) Special rule for certain government 
                contracts.--Gross receipts derived from the manufacture 
                or production of any property described in subparagraph 
                (A)(i) shall be treated as meeting the requirements of 
                subparagraph (A)(i) if--
                            ``(i) such property is manufactured or 
                        produced by the taxpayer pursuant to a contract 
                        with the Federal Government, and
                            ``(ii) the Federal Acquisition Regulation 
                        requires that title or risk of loss with 
                        respect to such property be transferred to the 
                        Federal Government before the manufacture or 
                        production of such property is complete.
                    ``(D) Treatment of activities in puerto rico.--In 
                the case of any taxpayer with gross receipts for any 
                taxable year from sources within the Commonwealth of 
                Puerto Rico, if all of such receipts are taxable under 
                section 1 for such taxable year, then this paragraph 
                shall be applied by treating each reference in 
                subparagraph (A) to the United States as including the 
                Commonwealth of Puerto Rico.
                    ``(E) Tangible personal property.--The term 
                `tangible personal property' shall not include computer 
                software or any property described in paragraph (3) or 
                (4) of section 168(f).
                    ``(F) Related persons.--
                            ``(i) In general.--The term `domestic 
                        manufacturing gross receipts' shall not include 
                        any gross receipts of the taxpayer derived from 
                        property leased, licensed, or rented by the 
                        taxpayer for use by any related person.
                            ``(ii) Related person.--For purposes of 
                        clause (i), a person shall be treated as 
                        related to another person if such persons are 
                        treated as a single employer under subsection 
                        (a) or (b) of section 52 or subsection (m) or 
                        (o) of section 414, except that determinations 
                        under subsections (a) and (b) of section 52 
                        shall be made without regard to section 
                        1563(b).
            ``(5) Certain income not qualified.--
                    ``(A) Net earnings from self employment.--Domestic 
                manufacturing gross receipts shall not include any 
                amount which is properly allocable to the taxpayer's 
                net earnings from self employment (determined after any 
                reduction provided under section 1402(m)).
                    ``(B) Certain accounting method adjustments.--
                Domestic manufacturing gross receipts shall not include 
                any amount attributable to--
                            ``(i) a qualified change in method of 
                        accounting (as defined in section 3301(d)(2) of 
                        the Tax Reform Act of 2014), or
                            ``(ii) any other change in method of 
                        accounting which is required by the amendments 
                        made by such Act.
            ``(6) Application of section to pass-through entities.--
                    ``(A) Partnerships and s corporations.--Except as 
                provided in subparagraph (B), in the case of a 
                partnership or S corporation, each partner or 
                shareholder shall take into account such person's 
                allocable share of each item described in subparagraph 
                (A) or (B) of paragraph (1) (determined without regard 
                to whether the items described in such subparagraph (A) 
                exceed the items described in such subparagraph (B)).
                    ``(B) Publicly traded partnerships.--In the case of 
                a publicly traded partnership described in section 
                7704(c), each partner shall not take into account any 
                allocable share of any item referred to in subparagraph 
                (A).
                    ``(C) Trusts and estates.--In the case of a trust 
                or estate, the items referred to in subparagraph (A) 
                (as determined therein) shall be apportioned between 
                the beneficiaries and the fiduciary (and among the 
                beneficiaries) under regulations prescribed by the 
                Secretary.
            ``(7) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as may be necessary or 
        appropriate to carry out the purposes of this section, 
        including regulations or other guidance--
                    ``(A) which prevent more than 1 taxpayer from 
                taking into account the same qualified domestic 
                manufacturing income, and
                    ``(B) which require or restrict the allocation of 
                items under paragraph (6) and require such reporting 
                for purposes of carrying out such paragraph as the 
                Secretary determines appropriate.
            ``(8) Phase-in of exclusion.--In the case of any taxable 
        year beginning before January 1, 2017, the term `qualified 
        domestic manufacturing income' shall be an amount equal to the 
        product of the qualified domestic manufacturing income 
        determined without regard to this paragraph, multiplied by--
                    ``(A) in the case of any taxable year beginning in 
                2015, 33 percent, and
                    ``(B) in the case of any taxable year beginning in 
                2016, 67 percent.''.
    (c) Application of Section 15.--
            (1) In general.--Subsection (a) of section 15 is amended by 
        striking ``this chapter'' and inserting ``section 11''.
            (2) Conforming amendments.--
                    (A) Section 15 is amended by striking subsections 
                (d) and (f) and by redesignating subsection (e) as 
                subsection (d).
                    (B) Section 15(d), as redesignated by subparagraph 
                (A), is amended by striking ``section 1 or 11(b)'' and 
                inserting ``section 11(b)''.
                    (C) Subchapter A of chapter 1 is amended--
                            (i) by redesignating section 12 as section 
                        13,
                            (ii) by redesignating section 15 (as 
                        amended by this subsection) as section 12 and 
                        moving such section from part III of such 
                        subchapter to after section 11 in part II of 
                        such subchapter,
                            (iii) by striking part III, and
                            (iv) by amending the table of sections for 
                        part II of such subchapter by redesignating the 
                        item relating to section 12 as an item relating 
                        to section 13 and by inserting after the item 
                        relating to section 11 the following new item:

``Sec. 12. Effect of changes.''.
                    (D) Section 6013(c) is amended by striking 
                ``sections 15, 443, and 7851(a)(1)(A)'' and inserting 
                ``sections 443 and 7851(a)(1)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1002. DEDUCTION FOR ADJUSTED NET CAPITAL GAIN.

    (a) In General.--Part VI of subchapter B of chapter 1, as amended 
by section 3105, is amended by inserting after section 168 the 
following new section:

``SEC. 169. ADJUSTED NET CAPITAL GAIN.

    ``(a) In General.--If for any taxable year a taxpayer other than a 
corporation has an adjusted net capital gain, 40 percent of the amount 
of the adjusted net capital gain shall be allowed as a deduction from 
gross income.
    ``(b) Adjusted Net Capital Gain.--For purposes of this section, the 
term `adjusted net capital gain' means the sum of--
            ``(1) net capital gain reduced (but not below zero) by the 
        net collectibles gain, plus
            ``(2) qualified dividend income.
    ``(c) Net Capital Gain Reduced by Amounts Taken Into Account as 
Investment Income.--For purposes of this section, the net capital gain 
for any taxable year shall be reduced (but not below zero) by the 
amount which the taxpayer takes into account as investment income under 
section 163(d)(4)(B)(iii).
    ``(d) Net Collectibles Gain.--For purposes of this section--
            ``(1) In general.--The term `net collectibles gain' means 
        the excess (if any) of--
                    ``(A) collectibles gain, over
                    ``(B) collectibles loss.
            ``(2) Collectibles gain and loss.--The terms `collectibles 
        gain' and `collectibles loss' mean gain or loss (respectively) 
        from the sale or exchange of a collectible (as defined in 
        section 408(m) without regard to paragraph (3) thereof) which 
        is a capital asset held for more than 1 year but only to the 
        extent such gain is taken into account in computing gross 
        income and such loss is taken into account in computing taxable 
        income.
            ``(3) Partnerships, etc.--For purposes of paragraph (2), 
        any gain from the sale of an interest in a partnership, S 
        corporation, or trust which is attributable to unrealized 
        appreciation in the value of collectibles shall be treated as 
        gain from the sale or exchange of a collectible. Rules similar 
        to the rules of section 751 shall apply for purposes of the 
        preceding sentence.
    ``(e) Qualified Dividend Income.--For purposes of this section--
            ``(1) In general.--The term `qualified dividend income' 
        means dividends received during the taxable year from--
                    ``(A) domestic corporations, and
                    ``(B) qualified foreign corporations.
            ``(2) Certain dividends excluded.--Such term shall not 
        include--
                    ``(A) any dividend from a corporation which for the 
                taxable year of the corporation in which the 
                distribution is made, or the preceding taxable year, is 
                a corporation exempt from tax under section 501 or 521,
                    ``(B) any amount allowed as a deduction under 
                section 591 (relating to deduction for dividends paid 
                by mutual savings banks, etc.), and
                    ``(C) any dividend described in section 404(k).
            ``(3) Coordination with section 246(c).--Such term shall 
        not include any dividend on any share of stock--
                    ``(A) with respect to which the holding period 
                requirements of section 246(c) are not met (determined 
                without regard to paragraph (5) of section 246(c) and 
                by substituting in section 246(c) `60 days' for `45 
                days' each place it appears and by substituting `121-
                day period' for `91-day period'), or
                    ``(B) to the extent that the taxpayer is under an 
                obligation (whether pursuant to a short sale or 
                otherwise) to make related payments with respect to 
                positions in substantially similar or related property.
            ``(4) Qualified foreign corporations.--
                    ``(A) In general.--Except as otherwise provided in 
                this subparagraph, the term `qualified foreign 
                corporation' means any foreign corporation if--
                            ``(i) such corporation is incorporated in a 
                        possession of the United States, or
                            ``(ii) such corporation is eligible as a 
                        qualified resident for all of the benefits 
                        provided under a comprehensive income tax 
                        treaty with the United States which the 
                        Secretary determines is satisfactory for 
                        purposes of this paragraph and which includes 
                        an exchange of information program.
                    ``(B) Dividends on stock readily tradable on united 
                states securities market.--A foreign corporation not 
                otherwise treated as a qualified foreign corporation 
                under subparagraph (A) shall be so treated with respect 
                to any dividend paid by such corporation if the stock 
                with respect to which such dividend is paid is readily 
                tradable on an established securities market in the 
                United States.
                    ``(C) Exclusion of dividends of certain foreign 
                corporations.--The term `qualified foreign corporation' 
                shall not include any foreign corporation which for the 
                taxable year of the corporation in which the dividend 
                was paid, or the preceding taxable year, is a passive 
                foreign investment company (as defined in section 
                1297).
            ``(5) Treatment of dividends from regulated investment 
        companies and real estate investment trusts.--A dividend 
        received from a regulated investment company or a real estate 
        investment trust shall be subject to the limitations prescribed 
        in sections 854 and 857.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes 
Deductions.--Section 62(a) is amended by inserting after paragraph (7) 
the following new paragraph:
            ``(8) Adjusted net capital gain.--The deduction allowed by 
        section 169.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1003. CONFORMING AMENDMENTS RELATED TO SIMPLIFICATION OF 
              INDIVIDUAL INCOME TAX RATES.

    (a) Amendments Related to Modification of Inflation Adjustment.--
            (1) Section 25B(b)(3)(B) is amended by striking ``section 
        1(f)(3) for the calendar year in which the taxable year begins, 
        determined by substituting `calendar year 2005' for `calendar 
        year 1992' in subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins, determined by substituting `calendar year 2005' 
        for `calendar year 2012' in clause (ii) thereof''.
            (2) Subclause (II) of section 36B(b)(3)(A)(ii) is amended 
        by striking ``consumer price index'' and inserting ``C-CPI-U 
        (as defined in section 1(c))''.
            (3) Section 41(e)(5)(C) is amended to read as follows:
                    ``(C) Cost-of-living adjustment defined.--
                            ``(i) In general.--The cost-of-living 
                        adjustment for any calendar year is the cost-
                        of-living adjustment for such calendar year 
                        determined under section 1(c)(2)(A), by 
                        substituting `calendar year 1987' for `calendar 
                        year 2012' in clause (ii) thereof.
                            ``(ii) Special rule where base period ends 
                        in a calendar year other than 1983 or 1984.--If 
                        the base period of any taxpayer does not end in 
                        1983 or 1984, clause (i) shall be applied by 
                        substituting the calendar year in which such 
                        base period ends for 1987.''.
            (4) Section 125(i)(2) is amended--
                    (A) by striking ``section 1(f)(3) for the calendar 
                year in which the taxable year begins by substituting 
                `calendar year 2012' for `calendar year 1992' in 
                subparagraph (B) thereof'' in subparagraph (B) and 
                inserting ``section 1(c)(2)(A) for the calendar year in 
                which the taxable year begins'', and
                    (B) by striking ``$50'' both places it appears in 
                the last sentence and inserting ``$100''.
            (5) Section 137(f) is amended--
                    (A) by striking ``section 1(f)(3) for the calendar 
                year in which the taxable year begins, determined by 
                substituting `calendar year 2001' for `calendar year 
                1992' in subparagraph (B) thereof'' in paragraph (2) 
                and inserting ``section 1(c)(2)(A) for the calendar 
                year in which the taxable year begins, determined by 
                substituting `calendar year 2001' for `calendar year 
                2012' in clause (ii) thereof'', and
                    (B) in the last sentence thereof--
                            (i) by striking ``$10'' the first place it 
                        appears and inserting ``$100'', and
                            (ii) by striking ``nearest multiple of 
                        $10'' and inserting ``next lowest multiple of 
                        $100''.
            (6) Section 162(o)(3) is amended by inserting ``as in 
        effect before enactment of the Tax Reform Act of 2014'' after 
        ``section 1(f)(5)''.
            (7) Section 220(g)(2) is amended by striking ``section 
        1(f)(3) for the calendar year in which the taxable year begins 
        by substituting `calendar year 1997' for `calendar year 1992' 
        in subparagraph (B) thereof'' and inserting ``section 
        1(c)(2)(A) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 1997' for 
        `calendar year 2012' in clause (ii) thereof''.
            (8) Section 223(g)(1) is amended by striking all that 
        follows subparagraph (A) and inserting the following:
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins, determined--
                            ``(i) by substituting for `calendar year 
                        2012' in clause (ii) thereof--
                                    ``(I) except as provided in clause 
                                (ii), `calendar year 1997', and
                                    ``(II) in the case of each dollar 
                                amount in subsection (c)(2)(A), 
                                `calendar year 2003', and
                            ``(ii) by substituting `March 31' for 
                        `August 31' in paragraphs (5)(B) and (6)(B) of 
                        section 1(c).
                The Secretary shall publish the dollar amounts as 
                adjusted under this subsection for taxable years 
                beginning in any calendar year no later than June 1 of 
                the preceding calendar year.''.
            (9) Section 430(c)(7)(D)(vii)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year, determined by 
        substituting `calendar year 2009' for `calendar year 1992' in 
        subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A) 
        for the calendar year, determined by substituting `calendar 
        year 2009' for `calendar year 2012' in clause (ii) thereof''.
            (10) Section 512(d)(2)(B) is amended by striking ``section 
        1(f)(3) for the calendar year in which the taxable year begins, 
        by substituting `calendar year 1994' for `calendar year 1992' 
        in subparagraph (B) thereof''and inserting ``section 1(c)(2)(A) 
        for the calendar year in which the taxable year begins, 
        determined by substituting `calendar year 1994' for `calendar 
        year 2012' in clause (ii) thereof''.
            (11) Section 513(h)(2)(C)(ii) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins by substituting `calendar year 1987' for `calendar 
        year 1992' in subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins, determined by substituting `calendar year 1987' 
        for `calendar year 2012' in clause (ii) thereof''.
            (12) Section 877A(a)(3)(B)(i)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins, by substituting `calendar year 2007' for `calendar 
        year 1992' in subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins, determined by substituting `calendar year 2007' 
        for `calendar year 2012' in clause (ii) thereof''.
            (13) Section 911(b)(2)(D)(ii)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins, determined by substituting `2004' for `1992' in 
        subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A) 
        for the calendar year in which the taxable year begins, 
        determined by substituting `calendar year 2004' for `calendar 
        year 2012' in clause (ii) thereof''.
            (14) Section 1274A(d)(2) is amended to read as follows:
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any debt 
                instrument arising out of a sale or exchange during any 
                calendar year after 2014, each adjusted dollar amount 
                shall be increased by an amount equal to--
                            ``(i) such adjusted dollar amount, 
                        multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for such 
                        calendar year, determined by substituting 
                        `calendar year 2013' for `calendar year 2012' 
                        in clause (ii) thereof.
                    ``(B) Adjusted dollar amounts.--For purposes of 
                this paragraph, the term `adjusted dollar amount' means 
                the dollar amounts in subsections (b) and (c), in each 
                case as in effect for calendar year 2014.
                    ``(C) Rounding.--Any increase under subparagraph 
                (A) shall be rounded to the nearest multiple of 
                $100.''.
            (15) Section 2010(c)(3)(B)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 2010' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year, determined by substituting `calendar year 2010' 
        for `calendar year 2012' in clause (ii) thereof''.
            (16) Section 2032A(a)(3)(B) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 1997' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year, determined by substituting `calendar year 1997' 
        for `calendar year 2012' in clause (ii) thereof''.
            (17) Section 2503(b)(2)(B) is amended by striking ``section 
        1(f)(3) for such calendar year by substituting `calendar year 
        1997' for `calendar year 1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for the calendar year, 
        determined by substituting `calendar year 1997' for `calendar 
        year 2012' in clause (ii) thereof''.
            (18) Section 4161(b)(2)(C)(i)(II) is amended by striking 
        ``section 1(f)(3) for such calendar year, determined by 
        substituting `2004' for `1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for such calendar year, 
        determined by substituting `calendar year 2004' for `calendar 
        year 2012' in clause (ii) thereof''.
            (19) Section 4261(e)(4)(A)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting the 
        year before the last nonindexed year for `calendar year 1992' 
        in subparagraph (B) thereof'' and inserting ``section 
        1(c)(2)(A) for such calendar year, determined by substituting 
        the year before the last nonindexed year for `calendar year 
        2012' in clause (ii) thereof''.
            (20) Section 4980I(b)(3)(C)(v)(II) is amended
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2012''.
            (21) Section 5000A(c)(3)(D)(ii) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2012''.
            (22) Section 6039F(d) is amended by striking ``section 
        1(f)(3), except that subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A), except that clause (ii) thereof''.
            (23) Section 6323(i)(4)(B) is amended by striking ``section 
        1(f)(3) for the calendar year, determined by substituting 
        `calendar year 1996' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for the 
        calendar year, determined by substituting `calendar year 1996' 
        for `calendar year 2012' in clause (ii) thereof''.
            (24) Section 6334(g)(1)(B) is amended by striking ``section 
        1(f)(3) for such calendar year, by substituting `calendar year 
        1998' for `calendar year 1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for such calendar year, 
        determined by substituting `calendar year 1999' for `calendar 
        year 2012' in clause (ii) thereof''.
            (25) Section 6721(f)(1) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2012''.
            (26) Section 6722(f)(1) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2012''.
            (27) Section 7430(c)(1) is amended by striking ``section 
        1(f)(3) for such calendar year, by substituting `calendar year 
        1995' for `calendar year 1992' in subparagraph (B) thereof'' in 
        the flush text at the end and inserting ``section 1(c)(2)(A) 
        for such calendar year, determined by substituting `calendar 
        year 1995' for `calendar year 2012' in clause (ii) thereof''.
            (28) Section 7872(g)(5) is amended to read as follows:
            ``(5) Inflation adjustment.--
                    ``(A) In general.--In the case of any loan made 
                during any calendar year after 2014 to which paragraph 
                (1) applies, the adjusted dollar amount shall be 
                increased by an amount equal to--
                            ``(i) such adjusted dollar amount, 
                        multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for such 
                        calendar year, determined by substituting 
                        `calendar year 2013' for `calendar year 2012' 
                        in clause (ii) thereof.
                    ``(B) Adjusted dollar amount.--For purposes of this 
                paragraph, the term `adjusted dollar amount' means the 
                dollar amount in paragraph (2) as in effect for 
                calendar year 2014.
                    ``(C) Rounding.--Any increase under subparagraph 
                (A) shall be rounded to the nearest multiple of 
                $100.''.
    (b) Amendments Related to Deduction for Adjusted Net Capital 
Gain.--
            (1) Section 163(d)(4)(B) is amended by striking ``section 
        1(h)(11)(B)'' and inserting ``section 169(e)''.
            (2) Section 172(d)(2)(B) is amended by inserting ``the 
        deduction allowable under section 169 and'' before ``the 
        exclusion''.
            (3) Section 301(f)(4) is amended by striking ``section 
        1(h)(11)'' and inserting ``section 169(e)''.
            (4) Section 306(a)(1)(D) is amended by striking ``section 
        1(h)(11)'' and inserting ``section 169(e)''.
            (5) The last sentence of section 453A(c)(3) is amended by 
        striking ``capital gain'' and all that follows and inserting 
        ``capital gain, the deduction under section 169 shall be taken 
        into account.''.
            (6) Sections 531 and 541 are each amended by striking ``20 
        percent'' and inserting ``21 percent''.
            (7) Section 584(c) is amended by striking ``and to which 
        section 1(h)(11) applies'' in the last sentence and inserting 
        ``which is qualified dividend income (as defined in section 
        169(e)) in the hands of such common trust fund''.
            (8) Section 641(c)(2)(C) (prior to redesignation by title 
        II) is amended by adding at the end the following new clause:
                            ``(v) The deduction allowed by section 
                        169.''.
            (9) The first sentence of section 642(c)(4) is amended by 
        striking ``consists of'' and all that follows and inserting 
        ``consists of long-term capital gain or gain described in 
        section 1202(a), proper adjustments shall be made for any 
        deduction allowable to the trust or estate under section 169 
        and for any exclusion allowable under section 1202.''.
            (10) The last sentence of section 643(a)(3) is amended to 
        read as follows: ``The deduction under section 169 and the 
        exclusion under section 1202 shall not be taken into 
        account.''.
            (11) Section 691(c)(4) is amended by striking ``1(h)'' and 
        inserting ``169''.
            (12) Section 702(a)(5) is amended by striking ``section 
        1(h)(11)'' and inserting ``section 169''.
            (13) Section 854 is amended--
                    (A) by striking ``section 1(h)(11) (relating to 
                maximum rate of tax on dividends)'' in subsection (a) 
                and inserting ``section 169 (relating to adjusted net 
                capital gain)'',
                    (B) by striking ``Maximum rate under section 1(h)'' 
                in the heading of subsection (b)(1)(B) and inserting 
                ``Determination of adjusted net capital gain'', and
                    (C) by striking ``section 1(h)(11)(B)'' in 
                subsection (b)(4) and inserting ``section 169(e)''.
            (14) Section 857(c)(2) is amended--
                    (A) by striking ``section 1(h)(11)(B)'' in 
                subparagraph (D) and inserting ``section 169(e)'', and
                    (B) by striking ``Section 1(h)(11)'' in the heading 
                and inserting ``Section 169(e)''.
            (15) Section 904(b) is amended--
                    (A) by amending paragraph (2) to read as follows:
            ``(2) Capital gains.--For purposes of this section, taxable 
        income from sources outside the United States shall include 
        gain from the sale or exchange of capital assets (including 
        gain so treated under section 1231) only to the extent of the 
        lesser of--
                    ``(A) capital gain net income from sources without 
                the United States, or
                    ``(B) capital gain net income.'', and
                    (B) by striking paragraph (3).
            (16) Section 1260(a) is amended by striking ``long-term 
        capital gain'' the first place such term appears and all that 
        follows and inserting ``long-term capital gain, such gain shall 
        be treated as ordinary income to the extent such gain exceeds 
        the net underlying long-term capital gain.''.
            (17) Section 1411(c)(1)(B) is amended by inserting ``(other 
        than section 169)'' after ``this subtitle''.
            (18) Section 4985(a)(1) is amended by striking ``the rate 
        of tax specified in section 1(h)(1)(C)'' and inserting ``21 
        percent''.
            (19) Section 7518(g)(6)(A) is amended by striking all that 
        follows clause (i) and inserting the following:
                            ``(ii) by increasing the tax imposed by 
                        chapter 1 by the product of the amount of such 
                        withdrawal, multiplied by--
                                    ``(I) in the case of a taxpayer 
                                other than a corporation, 60 percent of 
                                the highest rate of tax specified in 
                                section 1, and
                                    ``(II) in the case of a 
                                corporation, the highest rate of tax 
                                specified in section 11.''.
            (20) Section 53511(f) of title 46, United States Code, is 
        amended by--
                    (A) by amending paragraph (1)(B) to read as 
                follows:
                    ``(B) increasing the tax imposed by chapter 1 of 
                such Code by the product of the amount of such 
                withdrawal, multiplied by--
                            ``(i) in the case of a taxpayer other than 
                        a corporation, the highest rate of tax 
                        specified in section 1 (60 percent of such 
                        highest rate in the case of so much of such 
                        withdrawal as is made from the capital gain 
                        account), and
                            ``(ii) in the case of a corporation, the 
                        highest rate of tax specified in section 11.'', 
                        and
                    (B) by striking paragraph (2) and by redesignating 
                paragraphs (3) and (4) as paragraphs (2) and (3), 
                respectively.
            (21) The table of sections for part VI of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 168 the following new item:

``Sec. 169. Adjusted net capital gain.''.
    (c) Other Conforming Amendments.--
            (1) Section 25B(b)(2) is amended by striking ``In the case 
        of--'' and all that follows through ``any taxpayer not 
        described in paragraph (1) or subparagraph (A),'' and inserting 
        ``In the case of any taxpayer not described in paragraph 
        (1),''.
            (2) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as 
        follows:
                                            ``(aa) who is described in 
                                        section 1(b)(1)(B) and who does 
                                        not have any dependents for the 
                                        taxable year,''.
            (3) Section 486B(b)(1) is amended--
                    (A) by striking ``maximum rate in effect'' and 
                inserting ``highest rate specified'', and
                    (B) by striking ``section 1(e)'' and inserting 
                ``section 1''.
            (4) Section 511(b)(1) is amended to read as follows:
            ``(1) Imposition of tax.--There is hereby imposed for each 
        taxable year on the unrelated business taxable income of every 
        trust described in paragraph (2) a tax computed as provided in 
        section 1. In making such computation for purposes of this 
        section, the terms `taxable income' and `modified adjusted 
        gross income' as used in section 1 shall both be read as 
        `unrelated business taxable income' as defined in section 
        512.''.
            (5) Section 641(a) is amended by striking ``section 1(e) 
        shall apply to the taxable income'' and inserting ``section 1 
        shall apply to the income''.
            (6) Section 641(c)(2)(A) is amended to read as follows:
                    ``(A) The dollar amount in effect under section 
                1(b)(2)(C) shall be treated as being zero.''.
            (7) Section 646(b) is amended to read as follows:
    ``(b) Taxation of Income of Trust.--Except as provided in 
subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income 
of an electing Settlement Trust a tax at the rate specified in section 
1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed 
by this chapter on such income.''.
            (8) Section 685(c) is amended by striking ``Section 1(e)'' 
        and inserting ``Section 1''.
            (9) Section 1398(c) is amended by striking paragraphs (1) 
        and (2), by redesignating paragraph (3) as paragraph (2), and 
        by inserting before paragraph (2) as so redesignated the 
        following new paragraph:
            ``(1) Computation and payment of tax.--Except as otherwise 
        provided in this section or part I of subchapter A, the taxable 
        income and modified adjusted gross income of the estate shall 
        be computed in the same manner as for an individual. The tax 
        shall be computed under section 1 and shall be paid by the 
        trustee.''.
            (10) Section 3402(p)(1)(B) is amended by striking ``any 
        percentage applicable to any of the 3 lowest income brackets in 
        the table under section 1(c),'' and inserting ``10 percent, 25 
        percent, 35 percent,''.
            (11) Section 3402(q)(1) is amended by striking ``the third 
        lowest rate of tax applicable under section 1(c)'' and 
        inserting ``the highest rate of tax specified in section 1''.
            (12) Section 3402(r)(3) is amended by striking ``the amount 
        of tax which would be imposed by section 1(c) (determined 
        without regard to any rate of tax in excess of the fourth 
        lowest rate of tax applicable under section 1(c)) on an amount 
        of taxable income equal to'' and inserting ``an amount equal to 
        the product of the highest rate of tax specified in section 1 
        multiplied by''.
            (13) Section 3406(a)(1) is amended by striking ``the fourth 
        lowest rate of tax applicable under section 1(c)'' and 
        inserting ``the highest rate of tax specified in section 1''.
            (14) Section 6103(e)(1)(A)(iii) is amended by striking 
        ``section 1(g)'' and inserting ``section 1(d)''.
    (d) Withholding From Supplemental Wage Payments.--
            (1) In general.--If an employer elects under Treasury 
        Regulation section 31.3402(g)-1 to determine the amount to be 
        deducted and withheld from any supplemental wage payment by 
        using a flat percentage rate, the rate to be used in 
        determining such amount shall not be less than 35 percent.
            (2) Repeal of superceded provision.--The American Jobs 
        Creation Act of 2004 is amended by striking section 904.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Withholding from supplemental wage payments.--The 
        provisions of, and amendments made by, subsection (d) shall 
        apply to payments made after December 31, 2014.

        Subtitle B--Simplification of Tax Benefits for Families

SEC. 1101. STANDARD DEDUCTION.

    (a) Increase in Standard Deduction.--Subsection (c) of section 63 
is amended to read as follows:
    ``(c) Standard Deduction.--For purposes of this subtitle--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `standard deduction' means--
                    ``(A) $22,000, in the case of a joint return, and
                    ``(B) one-half of the amount in effect under 
                subparagraph (A) for the taxable year, in any other 
                case.
            ``(2) Phaseout of standard deduction.--The amount of the 
        standard deduction determined under this subsection (without 
        regard to this paragraph and after the application of paragraph 
        (4)) shall be reduced (but not below zero) by an amount equal 
        to 20 percent of the excess (if any) of--
                    ``(A) the taxpayer's modified adjusted gross income 
                (as defined in section 2(b)) for the taxable year, over
                    ``(B)(i) the joint return standard deduction 
                phaseout threshold for the taxable year, in the case of 
                a taxpayer described in paragraph (1)(A), and
                    ``(ii) the non-joint return standard deduction 
                phaseout threshold for the taxable year, in any other 
                case.
            ``(3) Standard deduction phaseout thresholds.--
                    ``(A) Joint return standard deduction phaseout 
                threshold.--The term `joint return standard deduction 
                phaseout threshold' means, with respect to any taxable 
                year--
                            ``(i) the dollar amount in effect under 
                        section 1(e)(3)(A) for such taxable year, plus
                            ``(ii) the product of--
                                    ``(I) the dollar amount in effect 
                                under section 1(b)(1)(A) for such 
                                taxable year, multiplied by
                                    ``(II) 3.
                    ``(B) Non-joint return standard deduction phaseout 
                threshold.--The term `non-joint return standard 
                deduction phaseout threshold' means, with respect to 
                any taxable year--
                            ``(i) the dollar amount in effect under 
                        section 1(e)(3)(B) for such taxable year, plus
                            ``(ii) the product of--
                                    ``(I) the dollar amount in effect 
                                under section 1(b)(1)(B) for such 
                                taxable year, multiplied by
                                    ``(II) 3.
            ``(4) Limitation on standard deduction in the case of 
        certain dependents.--In the case of an individual who is a 
        dependent of another taxpayer for a taxable year beginning in 
        the calendar year in which the individual's taxable year 
        begins, the standard deduction applicable to such individual 
        for such individual's taxable year shall not exceed the greater 
        of--
                    ``(A) $500, or
                    ``(B) the sum of $250 and such individual's earned 
                income (as defined in section 24(d)(2)).
            ``(5) Certain individuals, etc., not eligible for standard 
        deduction.--In the case of--
                    ``(A) a married individual filing a separate return 
                where such individual's spouse elects to itemize 
                deductions,
                    ``(B) a nonresident alien individual,
                    ``(C) an individual making a return under section 
                443(a)(1) for a period of less than 12 months on 
                account of a change in his annual accounting period, or
                    ``(D) an estate or trust, common trust fund, or 
                partnership,
        the standard deduction shall be zero.
            ``(6) Inflation adjustments.--In the case of any taxable 
        year beginning after 2014, each of the dollar amounts in 
        paragraphs (1)(A) and (4) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined--
                            ``(i) in the case of the dollar amount in 
                        paragraph (1)(A), under section 1(c)(2)(A) for 
                        the calendar year in which the taxable year 
                        begins,
                            ``(ii) in the case of the dollar amount in 
                        paragraph (4)(A), under section 1(c)(2)(A) for 
                        the calendar year in which the taxable year 
                        begins determined by substituting `calendar 
                        year 1987' for `calendar year 2012' in clause 
                        (ii) thereof, and
                            ``(iii) in the case of the dollar amount in 
                        paragraph (4)(B), under section 1(c)(2)(A) for 
                        the calendar year in which the taxable year 
                        begins determined by substituting `calendar 
                        year 1997' for `calendar year 2012' in clause 
                        (ii) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.''.
    (b) Additional Deduction for Unmarried Individuals With at Least 
One Qualifying Child.--
            (1) In general.--Part VII of subchapter B of chapter 1 is 
        amended by redesignating section 224 as section 225 and by 
        inserting after section 223 the following new section:

``SEC. 224. DEDUCTION FOR UNMARRIED INDIVIDUALS WITH AT LEAST ONE 
              QUALIFYING CHILD.

    ``(a) In General.--In the case of an unmarried individual with at 
least one qualifying child (within the meaning of section 7705), there 
shall be allowed as a deduction an amount equal to $5,500.
    ``(b) Phaseout of Deduction.--The amount of the deduction 
determined under subsection (a) (without regard to this subsection) 
shall be reduced (but not below zero) by an amount equal to the excess 
(if any) of--
            ``(1) the taxpayer's adjusted gross income (determined 
        without regard to this section) for the taxable year, over
            ``(2) $30,000.
    ``(c) Unmarried Individual.--For purposes of this section, the term 
`unmarried individual' means any individual who--
            ``(1) is not married as of the close of the taxable year 
        (as determined by applying section 7703),
            ``(2) is not a surviving spouse (as defined in section 
        2(a)) for the taxable year, and
            ``(3) is not a dependent of another taxpayer for a taxable 
        year beginning in the calendar year in which the individual's 
        taxable year begins.
    ``(d) Inflation Adjustments.--
            ``(1) Deduction amount.--In the case of any taxable year 
        beginning after 2014, the dollar amount in subsection (a) shall 
        be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins.
            ``(2) Phaseout threshold.--In the case of any taxable year 
        beginning after 2015, the dollar amount in subsection (b)(2) 
        shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins determined by substituting 
                `calendar year 2014' for `calendar year 2012' in clause 
                (ii) thereof.
            ``(3) Rounding.--If any increase determined under paragraph 
        (1) or (2) is not a multiple of $100, such increase shall be 
        rounded to the next lowest multiple of $100.''.
            (2) Deduction allowed whether or not taxpayer itemizes 
        deductions.--Section 62(a) is amended by adding at the end the 
        following new paragraph:
            ``(22) Deduction for unmarried individuals with at least 
        one qualifying child.--The deduction allowed by section 224.''.
    (c) Application of Standard Deduction Phaseout to Itemized 
Deductions.--Subsection (f) of section 63 is amended to read as 
follows:
    ``(f) Application of Phaseout of Standard Deduction to Itemized 
Deductions.--
            ``(1) In general.--In the case of an individual whose 
        modified adjusted gross income (as defined in section 2(b)) 
        exceeds the amount in effect under subsection (c)(2)(B) with 
        respect to the taxpayer for the taxable year, the amount of the 
        itemized deductions otherwise allowable for the taxable year 
        shall be reduced by the lesser of--
                    ``(A) 20 percent of the excess described in 
                subsection (c)(2) with respect to such taxpayer for 
                such taxable year, or
                    ``(B) the amount of the taxpayer's standard 
                deduction for such taxable year (determined without 
                regard to subsection (c)(2) and without regard to any 
                election to itemize deductions).
            ``(2) Coordination with other limitations.--This subsection 
        shall be applied after the application of any other limitation 
        on the allowance of any itemized deduction.
            ``(3) Exception for estates and trusts.--This subsection 
        shall not apply to any estate or trust.''.
    (d) Conforming Amendments.--
            (1) Sections 86(b)(2)(A) and 137(b)(3)(A) are each amended 
        by inserting ``224,'' before ``911,''.
            (2) Section 199(d)(2)(B) is amended by inserting ``section 
        224 and'' before ``this section''.
            (3) Section 469(i)(3)(F)(iii) is amended by inserting ``and 
        224'' after ``219,''.
            (4) Section 1398(c), as amended by section 1003(c), is 
        amended--
                    (A) by striking ``Basic'' in the heading thereof,
                    (B) by striking ``Basic standard'' in the heading 
                of paragraph (2) and inserting ``Standard'', and
                    (C) by striking ``basic'' in paragraph (2).
            (5) Section 3402(m)(3) is amended by striking ``(including 
        the additional standard deduction under section 63(c)(3) for 
        the aged and blind)''.
            (6) Section 6014(b)(4) is amended by striking ``section 
        63(c)(5)'' and inserting ``section 63(c)(4)''.
            (7) The table of sections for part VII of subchapter B of 
        chapter 1 is amended by redesignating the item relating to 
        section 224 as an item relating to section 225 and by inserting 
        after the item relating to section 223 the following new item:

``Sec. 224. Deduction for unmarried individuals with at least one 
                            qualifying child.''.
    (e) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 1102. INCREASE AND EXPANSION OF CHILD TAX CREDIT.

    (a) In General.--Section 24 is amended to read as follows:

``SEC. 24. CHILD AND DEPENDENT TAX CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year with 
respect to each dependent of the taxpayer an amount equal to $500 
($1,500 in the case of a qualifying child).
    ``(b) Phaseout of Credit.--
            ``(1) In general.--The credit allowed under subsection (a) 
        (determined without regard to this subsection) shall be reduced 
        (but not below zero) by 5 percent of the excess (if any) of--
                    ``(A) the taxpayer's modified adjusted gross income 
                (as defined in section 2(b)), over
                    ``(B)(i) the joint return child credit phaseout 
                threshold, in the case of a joint return or a surviving 
                spouse (as defined in section 2(a)), or
                    ``(ii) the non-joint return child credit phaseout 
                threshold, in any other case.
            ``(2) Joint return child credit phaseout threshold.--For 
        purposes of this section, the term `joint return child credit 
        phaseout threshold' means, with respect to any taxable year, 
        the sum of--
                    ``(A) the joint return standard deduction phaseout 
                threshold (as defined in section 63(c)(3)(A)), plus
                    ``(B) an amount equal to--
                            ``(i) the dollar amount in effect under 
                        section 63(c)(1)(A) for such taxable year, 
                        divided by
                            ``(ii) 0.2.
            ``(3) Non-joint return child credit phaseout threshold.--
        For purposes of this section, the term `non-joint return child 
        credit phaseout threshold' means, with respect to any taxable 
        year, the sum of--
                    ``(A) the non-joint return standard deduction 
                phaseout threshold (as defined in section 63(c)(3)(B)), 
                plus
                    ``(B) an amount equal to--
                            ``(i) the dollar amount in effect under 
                        section 63(c)(1)(B) for such taxable year, 
                        divided by
                            ``(ii) 0.2.
    ``(c) Qualifying Child.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        term `qualifying child' has the meaning given such term by 
        section 7705.
            ``(2) Exception for certain noncitizens.--The term 
        `qualifying child' shall not include any individual who would 
        not be a dependent if subparagraph (A) of section 7705(b)(3) 
        were applied without regard to all that follows `resident of 
        the United States'.
    ``(d) Portion of Credit Refundable.--
            ``(1) In general.--The aggregate credits allowed under 
        subpart C shall be increased by the lesser of--
                    ``(A) the credit which would be allowed under this 
                section without regard to this subsection and the 
                limitation under section 26(a), or
                    ``(B) the amount by which the aggregate amount of 
                credits allowed under the subpart (determined without 
                regard to this subsection) would increase if the 
                limitation under section 26(a) were increased by 25 
                percent of the taxpayer's earned income for the taxable 
                year.
        The amount of the credit allowed under this subsection shall 
        not be treated as a credit allowed under this subpart and shall 
        reduce the amount of credit otherwise allowable under 
        subsection (a) without regard to section 26(a).
            ``(2) Earned income.--For purposes of this subsection--
                    ``(A) In general.--The term `earned income' means--
                            ``(i) the taxpayer's wages, salaries, tips, 
                        and other employee compensation, but only if 
                        such amounts are includible in gross income for 
                        the taxable year, plus
                            ``(ii) the taxpayer's net earnings from 
                        self-employment for the taxable year (within 
                        the meaning of section 1402(a)) determined with 
                        regard to the deduction allowed to the taxpayer 
                        by section 164(f).
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) the earned income of an individual 
                        shall be computed without regard to any 
                        community property laws,
                            ``(ii) no amount received as a pension or 
                        annuity shall be taken into account,
                            ``(iii) no amount to which section 871(a) 
                        applies (relating to income of nonresident 
                        alien individuals not connected with United 
                        States business) shall be taken into account,
                            ``(iv) no amount received for services 
                        provided by an individual while the individual 
                        is an inmate at a penal institution shall be 
                        taken into account,
                            ``(v) no amount described in subparagraph 
                        (A) received for service performed in work 
                        activities as defined in paragraph (4) or (7) 
                        of section 407(d) of the Social Security Act to 
                        which the taxpayer is assigned under any State 
                        program under part A of title IV of such Act 
                        shall be taken into account, but only to the 
                        extent such amount is subsidized under such 
                        State program, and
                            ``(vi) amounts excluded from gross income 
                        by reason of section 112 shall be taken into 
                        account as earned income.
                    ``(C) Special rule for taxable years beginning 
                before 2018.--In the case of any taxable year beginning 
                before January 1, 2018, the earned income of the 
                taxpayer taken into account under paragraph (1) shall 
                be reduced (but not below zero) by $3,000.
            ``(3) Exception for taxpayers excluding foreign earned 
        income.--Paragraph (1) shall not apply to any taxpayer for any 
        taxable year if such taxpayer elects to exclude any amount from 
        gross income under section 911 for such taxable year.
    ``(e) Inflation Adjustment.--In the case of any taxable year 
beginning after 2014, each dollar amount in subsection (a) shall be 
increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins.
If any increase determined under the preceding sentence is not a 
multiple of $100, such increase shall be rounded to the next lowest 
multiple of $100.
    ``(f) Identification Requirements.--
            ``(1) In general.--No credit shall be allowed under this 
        section to a taxpayer with respect to any dependent unless the 
        taxpayer includes the name and taxpayer identification number 
        of such dependent on the return of tax for the taxable year.
            ``(2) Additional identification requirement with respect to 
        refundable credit.--
                    ``(A) In general.--Subsection (d) shall not apply 
                to any taxpayer for any taxable year unless the 
                taxpayer includes the taxpayer's Social Security number 
                on the return of tax for such taxable year.
                    ``(B) Joint returns.--In the case of a joint 
                return, the requirement of subparagraph (A) shall be 
                treated as met if the Social Security number of either 
                spouse is included on such return.
    ``(g) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.''.
    (b) Omission of Identification Information Treated as Mathematical 
or Clerical Error.--Subparagraph (I) of section 6213(g)(2) of such Code 
is amended to read as follows:
                    ``(I) an omission of a correct TIN under section 
                24(f)(1) (relating to the child and dependent tax 
                credit), or a correct Social Security number under 
                section 24(f)(2) (relating to the refundable portion of 
                child and dependent tax credit), to be included on a 
                return,''.
    (c) Application of Rule for Short Taxable Years.--Section 443(c) is 
amended to read as follows:
    ``(c) Adjustment in Child and Dependent Tax Credit.--If a return is 
made for a short period by reason of subsection (a)(1) and if the tax 
is not computed under subsection (b)(2), then the credit allowed under 
section 24 shall be reduced to an amount which bears the same ratio to 
the full amount of such credit as the number of months in the short 
period bears to 12.''.
    (d) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by striking the item 
relating to section 24 and inserting the following new item:

``Sec. 24. Child and dependent tax credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1103. MODIFICATION OF EARNED INCOME TAX CREDIT.

    (a) In General.--Section 32 is amended to read as follows:

``SEC. 32. EARNED INCOME.

    ``(a) In General.--In the case of an individual who is an eligible 
individual for any taxable year, there shall be allowed as a credit 
against the tax imposed by this subtitle for such taxable year an 
amount equal to the taxpayer's employment-related taxes for such 
taxable year.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The credit allowed under 
        subsection (a) shall not exceed--
                    ``(A) in the case of a taxpayer with 2 or more 
                qualifying children, $3,000 ($4,000 in the case of a 
                joint return), and
                    ``(B) in the case of a taxpayer with 1 qualifying 
                child, $2,400.
            ``(2) Phase-out of credit.--The credit allowed under 
        subsection (a) (determined after application of paragraph (1)) 
        shall be reduced (but not below zero) by the sum of--
                    ``(A) 19 percent of so much of the taxpayer's 
                adjusted gross income (reduced by the amount of any 
                excess described in subparagraph (B)) as exceeds 
                $20,000 ($27,000 in the case of a joint return), plus
                    ``(B) so much of the taxpayer's investment income 
                for the taxable year as exceeds $3,300.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means any individual who has a qualifying child for the 
                taxable year.
                    ``(B) Qualifying child ineligible.--If an 
                individual is the qualifying child of a taxpayer for 
                any taxable year of such taxpayer beginning in a 
                calendar year, such individual shall not be treated as 
                an eligible individual for any taxable year of such 
                individual beginning in such calendar year.
                    ``(C) Exception for individual claiming benefits 
                under section 911.--The term `eligible individual' does 
                not include any individual who claims the benefits of 
                section 911 (relating to citizens or residents living 
                abroad) for the taxable year.
                    ``(D) Limitation on eligibility of nonresident 
                aliens.--The term `eligible individual' shall not 
                include any individual who is a nonresident alien 
                individual for any portion of the taxable year unless 
                such individual is treated for such taxable year as a 
                resident of the United States for purposes of this 
                chapter by reason of an election under subsection (g) 
                or (h) of section 6013.
            ``(2) Employment-related taxes.--The term `employment-
        related taxes' means, with respect to any taxpayer for any 
        taxable year, the sum of--
                    ``(A) any tax imposed under sections 3101 or 3111 
                on the wages (as defined in section 3121(a)) received 
                by the taxpayer during the calendar year in which the 
                taxable year begins,
                    ``(B) any tax imposed under sections 3201(a), 
                3211(a), or 3221(a) on the compensation (as defined in 
                section 3231(e)) received by the taxpayer during the 
                calendar year in which the taxable year begins, and
                    ``(C) any tax imposed under section 1401 on the 
                self-employment income of the taxpayer for the taxable 
                year.
            ``(3) Qualifying child.--
                    ``(A) In general.--The term `qualifying child' 
                means a qualifying child of the taxpayer (within the 
                meaning of section 7705, determined without regard to 
                subsections (c)(1)(D) and (e) thereof).
                    ``(B) Place of abode.--For purposes of subparagraph 
                (A), the requirements of section 7705(c)(1)(B) shall be 
                met only if the principal place of abode is in the 
                United States.
                    ``(C) Treatment of military personnel stationed 
                outside the united states.--For purposes of 
                subparagraph (B), the principal place of abode of a 
                member of the Armed Forces of the United States shall 
                be treated as in the United States during any period 
                during which such member is stationed outside the 
                United States while serving on extended active duty 
                with the Armed Forces of the United States. For 
                purposes of the preceding sentence, the term `extended 
                active duty' means any period of active duty pursuant 
                to a call or order to such duty for a period in excess 
                of 90 days or for an indefinite period.
            ``(4) Investment income.--For purposes of paragraph (1), 
        the term `investment income' means--
                    ``(A) interest or dividends to the extent 
                includible in gross income for the taxable year,
                    ``(B) interest received or accrued during the 
                taxable year which is exempt from tax imposed by this 
                chapter,
                    ``(C) the excess (if any) of--
                            ``(i) gross income from rents or royalties 
                        not derived in the ordinary course of a trade 
                        or business, over
                            ``(ii) the sum of--
                                    ``(I) the deductions (other than 
                                interest) which are clearly and 
                                directly allocable to such gross 
                                income, plus
                                    ``(II) interest deductions properly 
                                allocable to such gross income,
                    ``(D) the capital gain net income (as defined in 
                section 1222) of the taxpayer for such taxable year, 
                and
                    ``(E) the excess (if any) of--
                            ``(i) the aggregate income from all passive 
                        activities for the taxable year (determined 
                        without regard to any amount with respect to 
                        which a tax described in subsection (c)(2) is 
                        imposed or an amount described in a preceding 
                        subparagraph), over
                            ``(ii) the aggregate losses from all 
                        passive activities for the taxable year (as so 
                        determined).
                For purposes of subparagraph (E), the term `passive 
                activity' has the meaning given such term by section 
                469.
    ``(d) Identification Requirements.--
            ``(1) In general.--No credit shall be allowed under this 
        section unless the taxpayer includes on the return of tax for 
        the taxable year--
                    ``(A) the taxpayer's Social Security number, and
                    ``(B) the name, age, and Social Security number of 
                each qualifying child taken into account under 
                subsection (b)(1).
            ``(2) Joint returns.--In the case of a joint return, the 
        requirement of paragraph (1)(A) shall be treated as met if the 
        Social Security number of either spouse is included on such 
        return.
            ``(3) Other methods of providing children's information.--
        The Secretary may prescribe other methods for providing the 
        information described in paragraph (1)(B).
    ``(e) Restrictions on Taxpayers Who Improperly Claimed Credit in 
Prior Year.--
            ``(1) Taxpayers making prior fraudulent or reckless 
        claims.--
                    ``(A) In general.--No credit shall be allowed under 
                this section for any taxable year in the disallowance 
                period.
                    ``(B) Disallowance period.--For purposes of 
                paragraph (1), the disallowance period is--
                            ``(i) the period of 10 taxable years after 
                        the most recent taxable year for which there 
                        was a final determination that the taxpayer's 
                        claim of credit under this section was due to 
                        fraud, and
                            ``(ii) the period of 2 taxable years after 
                        the most recent taxable year for which there 
                        was a final determination that the taxpayer's 
                        claim of credit under this section was due to 
                        reckless or intentional disregard of rules and 
                        regulations (but not due to fraud).
            ``(2) Taxpayers making improper prior claims.--In the case 
        of a taxpayer who is denied credit under this section for any 
        taxable year as a result of the deficiency procedures under 
        subchapter B of chapter 63, no credit shall be allowed under 
        this section for any subsequent taxable year unless the 
        taxpayer provides such information as the Secretary may require 
        to demonstrate eligibility for such credit.
    ``(f) Other Special Rules.--For purposes of this section--
            ``(1) Married individuals.--In the case of an individual 
        who is married (within the meaning of section 7703), this 
        section shall apply only if a joint return is filed for the 
        taxable year under section 6013.
            ``(2) Taxable year must be full taxable year.--Except in 
        the case of a taxable year closed by reason of the death of the 
        taxpayer, no credit shall be allowable under this section in 
        the case of a taxable year covering a period of less than 12 
        months.
            ``(3) Coordination with certain means-tested programs.--For 
        purposes of--
                    ``(A) the United States Housing Act of 1937,
                    ``(B) title V of the Housing Act of 1949,
                    ``(C) section 101 of the Housing and Urban 
                Development Act of 1965,
                    ``(D) sections 221(d)(3), 235, and 236 of the 
                National Housing Act, and
                    ``(E) the Food and Nutrition Act of 2008,
        any refund made to an individual (or the spouse of an 
        individual) by reason of this section, and any payment made to 
        such individual (or such spouse) by an employer under section 
        3507, shall not be treated as income (and shall not be taken 
        into account in determining resources for the month of its 
        receipt and the following month).
            ``(4) Coordination with payroll tax credits.--The credit 
        allowed under subsection (a) with respect to any taxpayer for 
        any taxable year shall be reduced by the sum of the credits 
        allowed under sections 3103 and 3203 with respect to such 
        taxpayer for such taxable year.
    ``(g) Application to Certain Individuals Without Qualifying 
Children.--For purposes of this section and sections 3103 and 3203--
            ``(1) In general.--In the case of an individual described 
        in paragraph (2)--
                    ``(A) such individual shall be treated as an 
                eligible individual,
                    ``(B) notwithstanding subsection (i), the dollar 
                limitation applicable to such individual under 
                subsection (b)(1) shall be $100 (twice such amount in 
                the case of a joint return),
                    ``(C) subsection (b)(2)(A) shall be applied by 
                substituting `$8,000 ($13,000' for `$20,000 ($27,000', 
                and
                    ``(D) subsection (i)(1) shall not apply and the 
                employment-related taxes with respect to such 
                individual for any taxable year shall not exceed the 
                sum of--
                            ``(i) any tax imposed under section 3101 on 
                        the wages (as defined in section 3121(a)) 
                        received by the taxpayer during the calendar 
                        year in which the taxable year begins,
                            ``(ii) any tax imposed under sections 
                        3201(a) (and so much of the tax imposed by 
                        section 3211(a) as is attributable to the rates 
                        of tax under subsections (a) and (b) of section 
                        3101) on the compensation (as defined in 
                        section 3231(e)) received by the taxpayer 
                        during the calendar year in which the taxable 
                        year begins, and
                            ``(iii) 50 percent of any tax imposed under 
                        section 1401 on the self-employment income of 
                        the taxpayer for the taxable year.
            ``(2) Individual to whom subsection applies.--An individual 
        is described in this paragraph for any taxable year if--
                    ``(A) such individual does not have a qualifying 
                child for the taxable year,
                    ``(B) such individual's principal place of abode is 
                in the United States for more than one-half of such 
                taxable year,
                    ``(C) such individual (or, if the individual is 
                married (within the meaning of section 7703), either 
                the individual or the individual's spouse) has attained 
                age 25 but not attained age 65 before the close of the 
                taxable year, and
                    ``(D) such individual is not a dependent of another 
                taxpayer for any taxable year beginning in the same 
                calendar year as such taxable year.
    ``(h) Inflation Adjustment.--In the case of any taxable year 
beginning after 2014, both dollar amounts in subsection (b)(1)(A), the 
dollar amount in subsection (b)(1)(B), both dollar amounts in 
subsection (b)(2)(A), the dollar amount in subsection (b)(2)(B), the 
$100 amount in subsection (g)(1)(B), the $8,000 and $13,000 amounts in 
subsection (g)(1)(C), the $4,000 amount in subsection (i)(2), and the 
$3,000 amount in subsection (i)(3), shall each be increased by an 
amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins.
If any increase determined under the preceding sentence is not a 
multiple of $100 ($10 in the case of the $100 amount in subsection 
(g)(1)(B)), such increase shall be rounded to the next lowest multiple 
of $100 ($10 in the case of the $100 amount in subsection (g)(1)(B)).
    ``(i) Special Rules for Taxable Years Beginning Before 2018.--In 
the case of any taxable year beginning before January 1, 2018--
            ``(1) subsection (a) shall be applied by substituting `200 
        percent of the taxpayer's employment-related taxes' for `the 
        taxpayer's employment-related taxes',
            ``(2) subsection (b)(1)(A) shall be applied by substituting 
        `$4,000' for `$3,000 ($4,000 in the case of a joint return)', 
        and
            ``(3) subsection (b)(1)(B) shall be applied by substituting 
        `$3,000' for `$2,400'.''.
    (b) Credit Allowed Against Payroll Taxes.--
            (1) FICA tax.--Subchapter A of chapter 21 is amended by 
        adding at the end the following new section:

``SEC. 3103. CREDIT AGAINST TAX.

    ``(a) In General.--In the case of an individual who is allowed a 
credit under section 32 (determined without regard to subsection (f)(4) 
thereof) for a taxable year, there shall be allowed as a credit against 
the tax imposed by section 3101 with respect to wages received by such 
individual during the calendar year ending with or within such taxable 
year the lesser of--
            ``(1) the amount of tax so imposed, or
            ``(2) the amount of the credit allowed under section 32 (as 
        so determined) for such taxable year.
    ``(b) Application of Credit.--The credit determined under 
subsection (a) shall be taken into account under this title in the same 
manner as a credit or refund to which the taxpayer is entitled under 
section 6413(c)(1). Such credit shall not be taken into account for 
purposes of determining any amount deducted and withheld under section 
3102.''.
            (2) Railroad retirement tax.--Subchapter A of chapter 22 is 
        amended by adding at the end the following new section:

``SEC. 3203. CREDIT AGAINST TAX.

    ``(a) In General.--In the case of an individual who is allowed a 
credit under section 32 (determined without regard to subsection (f)(4) 
thereof) for a taxable year, there shall be allowed as a credit against 
the tax imposed by section 3201(a) (and so much of the tax imposed by 
section 3211(a) as is attributable to the rates of tax under 
subsections (a) and (b) of section 3101) with respect to compensation 
received by such individual during the calendar year ending with or 
within such taxable year the lesser of--
            ``(1) the amount of tax so imposed, or
            ``(2) the excess of--
                    ``(A) the amount of the credit allowed under 
                section 32 (as so determined) for such taxable year, 
                over
                    ``(B) the amount of the credit allowed under 
                section 3103.
    ``(b) Application of Credit.--The credit determined under 
subsection (a) shall be taken into account under this title in the same 
manner as a credit or refund to which the taxpayer is entitled under 
section 6413(c)(1). Such credit shall not be taken into account for 
purposes of determining any amount deducted and withheld under section 
3202.''.
    (c) Conforming Amendments.--
            (1) Section 86(f)(2) is amended by striking ``section 
        32(c)(2)'' and inserting ``section 24(d)(2)''.
            (2) Section 129(e)(2) is amended by striking ``section 
        32(c)(2)'' and inserting ``section 24(d)(2)''
            (3) Section 6051(a)(10) is amended by striking ``for 
        purposes of section 32 (relating to earned income credit)'' and 
        inserting ``under section 24(d)(2)''.
            (4) Section 6211(b)(4)(A) is amended by inserting 
        ``(determined without regard to subsection (f)(4) thereof)'' 
        after ``32''.
            (5) Section 6213(g)(2)(F) is amended by striking ``taxpayer 
        identification number'' and inserting ``Social Security 
        number''.
            (6) Section 6213(g)(2)(G) is amended by striking ``with 
        respect to'' and all that follows and inserting ``with respect 
        to the tax imposed under section 1401 (relating to self-
        employment tax) to the extent such tax has not been paid,''.
            (7) Section 6213(g)(2)(K) is amended by striking ``section 
        32(k)(2)'' and inserting ``section 32(e)(2)''.
            (8) Section 7705(f)(6)(B), as redesignated by this Act, is 
        amended by striking clause (iv), by striking ``, and'' at the 
        end of clause (iii) and inserting a period, and by inserting 
        ``and'' at the end of clause (ii).
            (9) The table of sections for subchapter A of chapter 21 is 
        amended by adding at the end the following new item:

``Sec. 3103. Credit against tax.''.
            (10) The table of sections for subchapter A of chapter 22 
        is amended by adding at the end the following new item:

``Sec. 3203. Credit against tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (e) Treatment of Taxpayers Who Improperly Claimed Credit in Prior 
Years.--A claim of credit under section 32 of the Internal Revenue Code 
of 1986 (as in effect before the amendments made by this section) shall 
not fail to be taken into account under subsection (e) of such section 
(as amended by this section) merely because such claim is for a taxable 
year beginning before January 1, 2015.
    (f) Treasury Report on Making Credit Advanceable.--Not later than 
the date which is 180 days after the date of the enactment of this Act, 
the Secretary of the Treasury (or the Secretary's designee) shall 
submit a report to Congress making recommendations regarding the best 
method for providing for advance payment of the credits established by 
the amendments made by this section. The recommendations in such report 
shall seek to--
            (1) provide for the payment of such credits to taxpayers as 
        promptly as is feasible, including on a weekly, biweekly, or 
        monthly basis, and
            (2) minimize any administrative burdens on employers and 
        the Internal Revenue Service.

SEC. 1104. REPEAL OF DEDUCTION FOR PERSONAL EXEMPTIONS.

    (a) In General.--Part V of subchapter B of chapter 1 is hereby 
repealed.
    (b) Definition of Dependent Retained.--
            (1) In general.--Section 152, prior to repeal by subsection 
        (a), is hereby redesignated as section 7705 and moved to the 
        end of chapter 79.
            (2) Modification of age requirements.--Section 
        7705(c)(3)(A), as redesignated by paragraph (1), is amended by 
        striking ``as a qualifying child and--'' and all that follows 
        and inserting ``is a qualifying child and has not attained the 
        age of 18 as of the close of the calendar year in which the 
        taxable year of the taxpayer begins.''.
    (c) Application to Estates and Trusts.--Subsection (b) of section 
642 is amended--
            (1) by striking paragraph (2)(C),
            (2) by striking paragraph (3), and
            (3) by striking ``Deduction for Personal Exemption'' in the 
        heading thereof and inserting ``Basic Deduction''.
    (d) Application to Nonresident Aliens.--Section 873(b) is amended 
by striking paragraph (3).
    (e) Modification of Wage Withholding Rules.--
            (1) In general.--Section 3402(a)(2) is amended by striking 
        ``the amount of one personal exemption provided in section 
        151(b)'' and inserting ``$3,900''.
            (2) Inflation adjustment.--Section 3402(a) is amended by 
        adding at the end the following new paragraph:
            ``(3) Inflation adjustment.--In the case of any calendar 
        year beginning after 2014, the $3,900 amount in paragraph (2) 
        shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for such calendar year.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.''.
            (3) Number of exemptions.--Section 3402(f)(1) is amended--
                    (A) in subparagraph (A), by striking ``an 
                individual described in section 151(d)(2)'' and 
                inserting ``a dependent of any other taxpayer'', and
                    (B) in subparagraph (C), by striking ``with respect 
                to whom, on the basis of facts existing at the 
                beginning of such day, there may reasonably be expected 
                to be allowable an exemption under section 151(c)'' and 
                inserting ``who, on the basis of facts existing at the 
                beginning of such day, is reasonably expected to be a 
                dependent of the employee''.
    (f) Modification of Return Requirement.--
            (1) In general.--Paragraph (1) of section 6012(a) is 
        amended to read as follows:
            ``(1) Every individual who has gross income for the taxable 
        year, except that a return shall not be required of--
                    ``(A) an individual who is not married (determined 
                by applying section 7703) and who has gross income for 
                the taxable year which does not exceed the standard 
                deduction applicable to such individual for such 
                taxable year under section 63, or
                    ``(B) an individual entitled to make a joint return 
                if--
                            ``(i) the gross income of such individual, 
                        when combined with the gross income of such 
                        individual's spouse, for the taxable year does 
                        not exceed the standard deduction which would 
                        be applicable to the taxpayer for such taxable 
                        year under section 63 if such individual and 
                        such individual's spouse made a joint return,
                            ``(ii) such individual and such 
                        individual's spouse have the same household as 
                        their home at the close of the taxable year,
                            ``(iii) such individual's spouse does not 
                        make a separate return, and
                            ``(iv) neither such individual nor such 
                        individual's spouse is an individual described 
                        in section 63(c)(4) who has income (other than 
                        earned income) in excess of the amount in 
                        effect under section 63(c)(4)(A).''.
            (2) Bankruptcy estates.--Paragraph (8) of section 6012(a) 
        is amended by striking ``the sum of the exemption amount plus 
        the basic standard deduction under section 63(c)(2)(D)'' and 
        inserting ``the standard deduction in effect under section 
        63(c)(1)(B)''.
    (g) Conforming Amendments.--
            (1) Section 2(a)(1)(B) is amended by striking ``a 
        dependent'' and all that follows through ``section 151'' and 
        inserting ``a dependent who (within the meaning of section 
        7705, determined without regard to subsections (b)(1), (b)(2) 
        and (d)(1)(B) thereof) is a son, stepson, daughter, or 
        stepdaughter of the taxpayer''.
            (2) Section 36B(b)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (3) Section 36B(b)(3)(B) is amended by striking ``unless a 
        deduction is allowed under section 151 for the taxable year 
        with respect to a dependent'' in the flush matter at the end 
        and inserting ``unless the taxpayer has a dependent for the 
        taxable year''.
            (4) Section 36B(c)(1)(D) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer'' and inserting ``who is a dependent of 
        another taxpayer''.
            (5) Section 36B(d)(1) is amended by striking ``equal to the 
        number of individuals for whom the taxpayer is allowed a 
        deduction under section 151 (relating to allowance of deduction 
        for personal exemptions) for the taxable year'' and inserting 
        ``the sum of 1 (2 in the case of a joint return) plus the 
        number of the taxpayer's dependents for the taxable year''.
            (6) Section 36B(e)(1) is amended by striking ``1 or more 
        individuals for whom a taxpayer is allowed a deduction under 
        section 151 (relating to allowance of deduction for personal 
        exemptions) for the taxable year (including the taxpayer or his 
        spouse)'' and inserting ``1 or more of the taxpayer, the 
        taxpayer's spouse, or any dependent of the taxpayer''.
            (7) Section 42(i)(3)(D)(ii)(I) is amended--
                    (A) by striking ``section 152'' and inserting 
                ``section 7705'', and
                    (B) by striking the period at the end and inserting 
                a comma.
            (8) Section 63(b) is amended by striking ``minus--'' and 
        all that follows and inserting ``minus the standard 
        deduction.''.
            (9) Section 63(d) is amended by striking ``other than--'' 
        and all that follows and inserting ``other than the deductions 
        allowable in arriving at adjusted gross income.''.
            (10) Section 72(t)(2)(D)(i)(III) is amended by striking 
        ``section 152'' and inserting ``section 7705''.
            (11) Section 72(t)(7)(A)(iii) is amended by striking 
        ``section 152(f)(1)'' and inserting ``section 7705(f)(1)''.
            (12) Section 105(b) is amended--
                    (A) by striking ``as defined in section 152'' and 
                inserting ``as defined in section 7705'',
                    (B) by striking ``section 152(f)(1)'' and inserting 
                ``section 7705(f)(1)'' and
                    (C) by striking ``section 152(e)'' and inserting 
                ``section 7705(e)''.
            (13) Section 105(c)(1) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (14) Section 125(e)(1)(D) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (15) Section 129(c) is amended--
                    (A) by striking ``with respect to whom, for such 
                taxable year, a deduction is allowable under section 
                151(c) (relating to personal exemptions for dependents) 
                to'' in paragraph (1) and inserting ``who is a 
                dependent of'', and
                    (B) by striking ``section 152(f)(1)'' in paragraph 
                (2) and inserting ``section 7705(f)(1)''.
            (16) Section 132(h)(2)(B) is amended--
                    (A) by striking ``section 152(f)(1)'' and inserting 
                ``section 7705(f)(1)'', and
                    (B) by striking ``section 152(e)'' and inserting 
                ``section 7705(e)''.
            (17) Section 139D(c)(5) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (18) Section 162(l)(1)(D) is amended by striking ``section 
        152(f)(1)'' and inserting ``section 7705(f)(1)''.
            (19) Section 170(g)(1) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (20) Section 170(g)(3) is amended by striking ``section 
        152(d)(2)'' and inserting ``section 7705(d)(2)''.
            (21) Section 172(d) is amended by striking paragraph (3).
            (22) Section 220(b)(6) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to'' 
        and inserting ``who is a dependent of''.
            (23) Section 220(d)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (24) Section 223(b)(6) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to'' 
        and inserting ``who is a dependent of''.
            (25) Section 223(d)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (26) Section 401(h) is amended by striking ``section 
        152(f)(1)'' in the last sentence and inserting ``section 
        7705(f)(1)''.
            (27) Section 402(l)(4)(D) is amended by striking ``section 
        152'' and inserting ``section 7705''.
            (28) Section 409A(a)(2)(B)(ii)(I) is amended by striking 
        ``section 152(a)'' and inserting ``section 7705(a)''.
            (29) Section 501(c)(9) is amended by striking ``section 
        152(f)(1)'' and inserting ``section 7705(f)(1)''.
            (30) Section 529(e)(2)(B) is amended by striking ``section 
        152(d)(2)'' and inserting ``section 7705(d)(2)''.
            (31) Section 703(a)(2) is amended by striking subparagraph 
        (A) and by redesignating subparagraphs (B) through (F) as 
        subparagraphs (A) through (E), respectively.
            (32) Section 874 is amended by striking subsection (b) and 
        by redesignating subsection (c) as subsection (b).
            (33) Section 891 is amended by striking ``under section 151 
        and''.
            (34) Section 904(b) is amended by striking paragraph (1).
            (35) Section 931(b)(1) is amended by striking ``(other than 
        the deduction under section 151, relating to personal 
        exemptions)''.
            (36) Section 933 is amended--
                    (A) by striking ``(other than the deduction under 
                section 151, relating to personal exemptions)'' in 
                paragraph (1), and
                    (B) by striking ``(other than the deduction for 
                personal exemptions under section 151)'' in paragraph 
                (2).
            (37) Section 1212(b)(2)(B)(ii) is amended to read as 
        follows:
                            ``(ii) in the case of an estate or trust, 
                        the deduction allowed for such year under 
                        section 642(b).''.
            (38) Section 1361(c)(1)(C) is amended by striking ``section 
        152(f)(1)(C)'' and inserting ``section 7705(f)(1)(C)''.
            (39) Section 1402(a) is amended by striking paragraph (7).
            (40) Section 2032A(c)(7)(D) is amended by striking 
        ``section 152(f)(2)'' and inserting ``section 7705(f)(2)''.
            (41) Section 3402(m)(1) is amended by striking ``other than 
        the deductions referred to in section 151 and''.
            (42) Section 3402(r)(2) is amended by striking ``the sum 
        of--'' and all that follows and inserting ``the standard 
        deduction in effect under section 63(c)(1)(B).''.
            (43) Section 5000A(b)(3)(A) is amended by striking 
        ``section 152'' and inserting ``section 7705''.
            (44) Section 5000A(c)(4)(A) is amended by striking ``the 
        number of individuals for whom the taxpayer is allowed a 
        deduction under section 151 (relating to allowance of deduction 
        for personal exemptions) for the taxable year'' and inserting 
        ``the sum of 1 (2 in the case of a joint return) plus the 
        number of the taxpayer's dependents for the taxable year''.
            (45) Section 6013(b)(3)(A) is amended--
                    (A) by striking ``had less than the exemption 
                amount of gross income'' in clause (ii) and inserting 
                ``had no gross income'',
                    (B) by striking ``had gross income of the exemption 
                amount or more'' in clause (iii) and inserting ``had 
                any gross income'', and
                    (C) by striking the flush language following clause 
                (iii).
            (46) Section 6103(l)(21)(A)(iii) is amended to read as 
        follows:
                            ``(iii) the number of the taxpayer's 
                        dependents,''.
            (47) Section 6213(g)(2) is amended by striking subparagraph 
        (H).
            (48) Section 6334(d)(2) is amended to read as follows:
            ``(2) Exempt amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `exempt amount' means an amount equal to--
                            ``(i) the sum of the standard deduction and 
                        the personal exemption amount, divided by
                            ``(ii) 52.
                    ``(B) Personal exemption amount.--For purposes of 
                subparagraph (A), the personal exemption amount is 
                $3,900 multiplied by the number of the taxpayer's 
                dependents for the taxable year in which the levy 
                occurs.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2014, the $3,900 amount in 
                subparagraph (B) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for the 
                        calendar year in which the taxable year begins.
                If any increase determined under the preceding sentence 
                is not a multiple of $100, such increase shall be 
                rounded to the next lowest multiple of $100.
                    ``(D) Verified statement.--Unless the taxpayer 
                submits to the Secretary a written and properly 
                verified statement specifying the facts necessary to 
                determine the proper amount under subparagraph (A), 
                subparagraph (A) shall be applied as if the taxpayer 
                were a married individual filing a separate return with 
                no dependents.''.
            (49) Section 7702B(f)(2)(C)(iii) is amended by striking 
        ``section 152(d)(2)'' and inserting ``section 7705(d)(2)''.
            (50) Section 7703(a) is amended by striking ``part V of 
        subchapter B of chapter 1 and''.
            (51) Section 7703(b)(1) is amended by striking ``section 
        152(f)(1)'' and all that follows and inserting ``section 
        7705(f)(1),''.
            (52) Section 7705(a), as redesignated by this section, is 
        amended by striking ``this subtitle'' and inserting ``subtitle 
        A''.
            (53)(A) Section 7705(d)(1)(B), as redesignated by this 
        section, is amended by striking ``the exemption amount (as 
        defined in section 151(d))'' and inserting ``$3,900''.
            (B) Section 7705(d), as redesignated by this section, is 
        amended by adding at the end the following new paragraph:
            ``(6) Inflation adjustment.--In the case of any calendar 
        year beginning after 2014, the $3,900 amount in paragraph 
        (1)(B) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for such calendar year.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.''.
            (54) The table of sections for chapter 79 is amended by 
        adding at the end the following new item:

``Sec. 7705. Dependent defined.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

           Subtitle C--Simplification of Education Incentives

SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT.

    (a) In General.--Section 25A is amended to read as follows:

``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to the sum of--
            ``(1) 100 percent of so much of the qualified tuition and 
        related expenses paid by the taxpayer during the taxable year 
        (for education furnished to any eligible student for whom an 
        election is in effect under this section for such taxable year 
        during any academic period beginning in such taxable year) as 
        does not exceed $2,000, plus
            ``(2) 25 percent of so much of such expenses so paid as 
        exceeds the dollar amount in effect under paragraph (1) but 
        does not exceed twice such dollar amount.
    ``(b) Portion of Credit Refundable.--So much of the credit 
allowable under subsection (a) (determined without regard to this 
subsection and section 26(a) and after application of all other 
provisions of this section) as does not exceed $1,500 shall be treated 
as a credit allowable under subpart C (and not under this part). The 
preceding sentence shall not apply to any taxpayer for any taxable year 
if such taxpayer is a child to whom section 1(d) applies for such 
taxable year.
    ``(c) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount allowable as a credit under 
        subsection (a) for any taxable year shall be reduced (but not 
        below zero) by an amount which bears the same ratio to the 
        amount so allowable (determined without regard to this 
        subsection and subsection (b) but after application of all 
        other provisions of this section) as--
                    ``(A) the excess of--
                            ``(i) the taxpayer's modified adjusted 
                        gross income for such taxable year, over
                            ``(ii) $43,000 (twice such amount in the 
                        case of a joint return), bears to
                    ``(B) $20,000 (twice such amount in the case of a 
                joint return).
            ``(2) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means the 
        adjusted gross income of the taxpayer for the taxable year 
        increased by any amount excluded from gross income under 
        section 911, 931, or 933.
    ``(d) Other Limitations.--
            ``(1) Credit allowed only for 4 taxable years.--An election 
        to have this section apply may not be made for any taxable year 
        if such an election (by the taxpayer or any other individual) 
        is in effect with respect to such student for any 4 prior 
        taxable years.
            ``(2) Credit allowed only for first 4 years of 
        postsecondary education.--No credit shall be allowed under 
        subsection (a) for a taxable year with respect to the qualified 
        tuition and related expenses of an eligible student if the 
        student has completed (before the beginning of such taxable 
        year) the first 4 years of postsecondary education at an 
        eligible educational institution.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Eligible student.--The term `eligible student' means, 
        with respect to any academic period, a student who--
                    ``(A) meets the requirements of section 484(a)(1) 
                of the Higher Education Act of 1965 (20 U.S.C. 
                1091(a)(1)), as in effect on August 5, 1997, and
                    ``(B) is carrying at least \1/2\ the normal full-
                time work load for the course of study the student is 
                pursuing.
            ``(2) Qualified tuition and related expenses.--
                    ``(A) In general.--The term `qualified tuition and 
                related expenses' means tuition, fees, and course 
                materials, required for enrollment or attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) any dependent of the taxpayer,
                at an eligible educational institution for courses of 
                instruction of such individual at such institution.
                    ``(B) Exception for education involving sports, 
                etc.--Such term does not include expenses with respect 
                to any course or other education involving sports, 
                games, or hobbies, unless such course or other 
                education is part of the individual's degree program.
                    ``(C) Exception for nonacademic fees.--Such term 
                does not include student activity fees, athletic fees, 
                insurance expenses, or other expenses unrelated to an 
                individual's academic course of instruction.
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' means an institution--
                    ``(A) which is described in section 481 of the 
                Higher Education Act of 1965 (20 U.S.C. 1088), as in 
                effect on August 5, 1997, and
                    ``(B) which is eligible to participate in a program 
                under title IV of such Act.
    ``(f) Special Rules.--
            ``(1) Identification requirement.--No credit shall be 
        allowed under subsection (a) to a taxpayer with respect to the 
        qualified tuition and related expenses of an individual unless 
        the taxpayer includes the name and taxpayer identification 
        number of such individual, and the employer identification 
        number of any institution to which such expenses were paid, on 
        the return of tax for the taxable year.
            ``(2) Adjustment for certain scholarships, etc.--
                    ``(A) In general.--The amount of qualified tuition 
                and related expenses otherwise taken into account under 
                subsection (a) with respect to an individual for an 
                academic period shall be reduced (before the 
                application of subsection (c)) by the sum of any 
                amounts paid for the benefit of such individual which 
                are allocable to such period as--
                            ``(i) a qualified scholarship which is 
                        excludable from gross income under section 117,
                            ``(ii) an educational assistance allowance 
                        under chapter 30, 31, 32, 34, or 35 of title 
                        38, United States Code, or under chapter 1606 
                        of title 10, United States Code, and
                            ``(iii) a payment (other than a gift, 
                        bequest, devise, or inheritance within the 
                        meaning of section 102(a)) for such 
                        individual's educational expenses, or 
                        attributable to such individual's enrollment at 
                        an eligible educational institution, which is 
                        excludable from gross income under any law of 
                        the United States.
                    ``(B) Coordination with pell grants not used for 
                qualified tuition and related expenses.--For purposes 
                of subparagraph (A), the amount of any Federal Pell 
                Grant under section 401 of the Higher Education Act of 
                1965 (20 U.S.C. 1070a) shall be reduced (but not below 
                zero) by the amount of expenses (other than qualified 
                tuition and related expenses) which are taken into 
                account in determining the cost of attendance (as 
                defined in section 472 of the Higher Education Act of 
                1965, as in effect on the date of the enactment of this 
                paragraph) of such individual at an eligible 
                educational institution for the academic period for 
                which the credit under this section is being 
                determined.
            ``(3) Treatment of expenses paid by dependent.--If an 
        individual is a dependent of another taxpayer for a taxable 
        year beginning in the calendar year in which such individuals 
        taxable year begins--
                    ``(A) no credit shall be allowed under subsection 
                (a) to such individual for such individual's taxable 
                year, and
                    ``(B) qualified tuition and related expenses paid 
                by such individual during such individual's taxable 
                year shall be treated for purposes of this section as 
                paid by such other taxpayer.
            ``(4) Treatment of certain prepayments.--If qualified 
        tuition and related expenses are paid by the taxpayer during a 
        taxable year for an academic period which begins during the 
        first 3 months following such taxable year, such academic 
        period shall be treated for purposes of this section as 
        beginning during such taxable year.
            ``(5) Denial of double benefit.--No credit shall be allowed 
        under this section for any amount for which a deduction is 
        allowed under any other provision of this chapter.
            ``(6) No credit for married individuals filing separate 
        returns.--If the taxpayer is a married individual (within the 
        meaning of section 7703), this section shall apply only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(7) Nonresident aliens.--If the taxpayer is a nonresident 
        alien individual for any portion of the taxable year, this 
        section shall apply only if such individual is treated as a 
        resident alien of the United States for purposes of this 
        chapter by reason of an election under subsection (g) or (h) of 
        section 6013.
    ``(g) Inflation Adjustment.--
            ``(1) In general.--In the case of a taxable year beginning 
        after 2018, the $2,000 amount in subsection (a)(1), the $1,500 
        amount in subsection (b), and the $43,000 amount in subsection 
        (c)(1)(A)(ii) shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2017' for `calendar year 2012' in clause 
                (ii) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $100 ($1,000 in the case of the amount 
        in subsection (c)(1)(A)(ii)), such amount shall be rounded to 
        the next lowest multiple of $100 ($1,000 in the case of the 
        amount in subsection (c)(1)(A)(ii)).
    ``(h) Regulations.--The Secretary may prescribe such regulations or 
other guidance as may be necessary or appropriate to carry out this 
section, including regulations providing for a recapture of the credit 
allowed under this section in cases where there is a refund in a 
subsequent taxable year of any amount which was taken into account in 
determining the amount of such credit.''.
    (b) Requirement To Report Tuition Paid Rather Than Tuition 
Billed.--Section 6050S(b)(2)(B)(i) is amended by striking ``or the 
aggregate amount billed''.
    (c) Conforming Amendments.--
            (1) Section 72(t)(7)(B) of such Code is amended by striking 
        ``section 25A(g)(2)'' and inserting ``section 25A(f)(2)''.
            (2) Section 529(c)(3)(B)(v)(I) of such Code is amended by 
        striking ``section 25A(g)(2)'' and inserting ``section 
        25A(f)(2)''.
            (3) Section 529(e)(3)(B)(i) of such Code is amended by 
        striking ``section 25A(b)(3)'' and inserting ``section 
        25A(d)''.
            (4) Section 530(d)(2)(C) of such Code is amended--
                    (A) by striking ``section 25A(g)(2)'' in clause 
                (i)(I) and inserting ``section 25A(f)(2)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity tax credit''.
            (5) Section 530(d)(4)(B)(iii) of such Code is amended by 
        striking ``section 25A(g)(2)'' and inserting ``section 
        25A(d)(4)(B)''.
            (6) Section 6050S(e) of such Code is amended by striking 
        ``subsection (g)(2)'' and inserting ``subsection (f)(2)''.
            (7) Section 6211(b)(4)(A) of such Code is amended by 
        striking ``subsection (i)(6)'' and inserting ``subsection 
        (b)''.
            (8) Section 6213(g)(2)(J) of such Code is amended by 
        striking ``TIN required under section 25A(g)(1)'' and inserting 
        ``TIN, and employer identification number, required under 
        section 25A(f)(1)''.
            (9) Section 1004(c) of division B of the American Recovery 
        and Reinvestment Tax Act of 2009 is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``section 25A(i)(6)'' each 
                        place it appears and inserting ``section 
                        25A(b)'', and
                            (ii) by striking ``with respect to taxable 
                        years beginning after 2008 and before 2018'' 
                        each place it appears and inserting ``with 
                        respect to each taxable year'',
                    (B) in paragraph (2), by striking ``Section 
                25A(i)(6)'' and inserting ``Section 25A(b)'', and
                    (C) in paragraph (3)(C), by striking ``subsection 
                (i)(6)'' and inserting ``subsection (b)''.
            (10) 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 striking the item relating to section 25A and 
        inserting the following new item:

``Sec. 25A. American opportunity tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1202. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME.

    (a) In General.--Paragraph (1) of section 117(b) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking the period at the end and inserting ``, 
        or'',
            (2) by striking ``received by an individual as a 
        scholarship'' and inserting the following: ``received by an 
        individual--
                    ``(A) as a scholarship'', and
            (3) by adding at the end the following new subparagraph:
                    ``(B) as a Federal Pell Grant under section 401 of 
                the Higher Education Act of 1965 (20 U.S.C. 1070a).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1203. REPEAL OF EXCLUSION OF INCOME FROM UNITED STATES SAVINGS 
              BONDS USED TO PAY HIGHER EDUCATION TUITION AND FEES.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by striking section 135 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1204. REPEAL OF DEDUCTION FOR INTEREST ON EDUCATION LOANS.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by striking section 221 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--Section 62(a) is amended by striking 
paragraph (17).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1205. REPEAL OF DEDUCTION FOR QUALIFIED TUITION AND RELATED 
              EXPENSES.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by striking section 222 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--Section 62(a) is amended by striking 
paragraph (18).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

SEC. 1206. NO NEW CONTRIBUTIONS TO COVERDELL EDUCATION SAVINGS 
              ACCOUNTS.

    (a) In General.--Section 530(b)(1)(A) is amended to read as 
follows:
                    ``(A) Except in the case of rollover contributions, 
                no contribution will be accepted after December 31, 
                2014.''.
    (b) Rollovers to Qualified Tuition Programs Permitted.--Section 
530(d)(5) is amended by inserting ``, or into (by purchase or 
contribution) a qualified tuition program (as defined in section 
529),'' after ``into another Coverdell education savings account''.
    (c) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        contributions made after December 31, 2014.
            (2) Rollovers to qualified tuition programs.--The 
        amendments made by subsection (b) shall apply to distributions 
        after December 31, 2014.

SEC. 1207. REPEAL OF EXCLUSION FOR DISCHARGE OF STUDENT LOAN 
              INDEBTEDNESS.

    (a) In General.--Section 108 is amended by striking subsection (f).
    (b) Conforming Amendments.--
            (1) Section 3121(a)(20) is amended by striking 
        ``108(f)(4),''.
            (2) Section 209(a)(17) of the Social Security Act is 
        amended by striking ``108(f)(4),''.
            (3) Section 3231(e)(5) is amended by striking 
        ``108(f)(4),''.
            (4) Section 3306(b)(16) is amended by striking 
        ``108(f)(4),''.
            (5) Section 3401(a)(19) is amended by striking 
        ``108(f)(4),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts discharged after December 31, 2014.

SEC. 1208. REPEAL OF EXCLUSION FOR QUALIFIED TUITION REDUCTIONS.

    (a) In General.--Section 117 is amended by striking subsection (d).
    (b) Conforming Amendments.--
            (1) Section 117(c)(1) is amended--
                    (A) by striking ``subsections (a) and (d)'' and 
                inserting ``subsection (a)'', and
                    (B) by striking ``or qualified tuition reduction''.
            (2) Section 414(n)(3)(C) is amended by striking 
        ``117(d),''.
            (3) Section 414(t)(2) is amended by striking ``117(d),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1209. REPEAL OF EXCLUSION FOR EDUCATION ASSISTANCE PROGRAMS.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by striking section 127 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 125(f)(1) is amended by striking ``127,''.
            (2) Section 132(j)(8) is amended by striking ``which are 
        not excludable from gross income under section 127''.
            (3) Section 137(c) is amended to read as follows:
    ``(c) Adoption Assistance Program.--
            ``(1) In general.--For purposes of this section, an 
        adoption assistance program is a separate written plan of an 
        employer for the exclusive benefit of such employer's employees 
        under which the employer provides such employees with adoption 
        assistance. Except as provided in paragraph (6), such program 
        must meet the requirements of paragraphs (2), (3), and (4).
            ``(2) Eligibility.--The program shall benefit employees who 
        qualify under a classification set up by the employer and found 
        by the Secretary not to be discriminatory in favor of employees 
        who are highly compensated employees (within the meaning of 
        section 414(q)) or their dependents. For purposes of this 
        paragraph, there shall be excluded from consideration employees 
        not included in the program who are included in a unit of 
        employees covered by an agreement which the Secretary of Labor 
        finds to be a collective bargaining agreement between employee 
        representatives and one or more employers, if there is evidence 
        that adoption assistance benefits were the subject of good 
        faith bargaining between such employee representatives and such 
        employer or employers.
            ``(3) Principal shareholders or owners.--Not more than 5 
        percent of the amounts paid or incurred by the employer for 
        adoption assistance during the year may be provided for the 
        class of individuals who are shareholders or owners (or their 
        spouses or dependents), each of whom (on any day of the year) 
        owns more than 5 percent of the stock or of the capital or 
        profits interest in the employer.
            ``(4) Notification of employees.--Reasonable notification 
        of the availability and terms of the program must be provided 
        to eligible employees.
            ``(5) No funding required.--A program referred to in 
        paragraph (1) is not required to be funded.
            ``(6) Certain federal programs.--An adoption reimbursement 
        program operated under section 1052 of title 10, United States 
        Code (relating to armed forces) or section 514 of title 14, 
        United States Code (relating to members of the Coast Guard) 
        shall be treated as an adoption assistance program for purposes 
        of this section.''.
            (4) Section 414(n)(3)(C) is amended by striking ``127,''.
            (5) Section 414(t)(2) is amended by striking ``127,''.
            (6) Section 3121(a)(18) is amended by striking ``127,''.
            (7) Section 209(a)(15) of the Social Security Act is 
        amended by striking ``127 or''.
            (8) Section 3231(e) is amended by striking paragraph (6).
            (9) Section 3306(b)(13) is amended by striking ``127,''.
            (10) Section 3401(a)(18) is amended by striking ``127,''.
            (11) Section 6039D(d)(1) is amended by striking ``127,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2014.

SEC. 1210. REPEAL OF EXCEPTION TO 10-PERCENT PENALTY FOR HIGHER 
              EDUCATION EXPENSES.

    (a) In General.--Section 72(t)(2) is amended by striking 
subparagraph (E).
    (b) Conforming Amendment.--Section 72(t) is amended by striking 
paragraph (7).
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2014.

         Subtitle D--Repeal of Certain Credits for Individuals

SEC. 1301. REPEAL OF DEPENDENT CARE CREDIT.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
is amended by striking section 21 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1)(A) Section 129(a)(2) is amended by striking 
        subparagraph (C).
            (B) Section 129(e) is amended by adding at the end the 
        following new paragraph:
            ``(10) Marital status.--Rules similar to the rules of 
        subsections (a) and (b) of section 7703 shall apply for 
        purposes of this section.''.
            (2) Section 129(e)(1) is amended to read as follows:
            ``(1) Dependent care assistance.--
                    ``(A) In general.--The term `dependent care 
                assistance' means employment-related expenses and the 
                provision of services which constitute employment-
                related expenses.
                    ``(B) Employment-related expenses.--The term 
                `employment-related expenses' means amounts paid for 
                the following expenses, but only if such expenses are 
                incurred to enable the employee to be gainfully 
                employed for any period for which there are 1 or more 
                qualifying individuals with respect to the employee:
                            ``(i) expenses for household services, and
                            ``(ii) expenses for the care of a 
                        qualifying individual.
                Such term shall not include any amount paid for 
                services outside the employee's household at a camp 
                where the qualifying individual stays overnight.
                    ``(C) Exception.--Employment-related expenses 
                described in subparagraph (A) which are incurred for 
                services outside the employee's household shall be 
                taken into account only if incurred for the care of--
                            ``(i) a qualifying individual described in 
                        subparagraph (D)(i), or
                            ``(ii) a qualifying individual (not 
                        described in subparagraph (D)(i)) who regularly 
                        spends at least 8 hours each day in the 
                        employee's household.
                    ``(D) Qualifying individual.--The term `qualifying 
                individual' means--
                            ``(i) a dependent of the taxpayer (as 
                        defined in section 7705(a)(1)) who has not 
                        attained age 13,
                            ``(ii) a dependent of the taxpayer (as 
                        defined in section 7705, determined without 
                        regard to subsections (b)(1), (b)(2), and 
                        (d)(1)(B)) who is physically or mentally 
                        incapable of caring for himself or herself and 
                        who has the same principal place of abode as 
                        the taxpayer for more than one-half of such 
                        taxable year, or
                            ``(iii) the spouse of the taxpayer, if the 
                        spouse is physically or mentally incapable of 
                        caring for himself or herself and who has the 
                        same principal place of abode as the taxpayer 
                        for more than one-half of such taxable year.
                    ``(E)  Dependent care centers.--Employment-related 
                expenses described in subparagraph (A) which are 
                incurred for services provided outside the employee's 
                household by a dependent care center shall be taken 
                into account only if--
                            ``(i) such center complies with all 
                        applicable laws and regulations of a State or 
                        unit of local government, and
                            ``(ii) the requirements of subparagraph (B) 
                        are met.
                    ``(F) Dependent care center defined.--For purposes 
                of this paragraph, the term `dependent care center' 
                means any facility which--
                            ``(i) provides care for more than six 
                        individuals (other than individuals who reside 
                        at the facility), and
                            ``(ii) receives a fee, payment, or grant 
                        for providing services for any of the 
                        individuals (regardless of whether such 
                        facility is operated for profit).
                    ``(G) Place of abode.--For purposes of this 
                paragraph, an individual shall not be treated as having 
                the same principal place of abode as the taxpayer if at 
                any time during the taxable year of the taxpayer the 
                relationship between the individual and the taxpayer is 
                in violation of local law.
                    ``(H) Special dependency test in case of divorced 
                parents, etc..--If--
                            ``(i) section 7705(e) applies to any child 
                        with respect to any calendar year, and
                            ``(ii) such child is under the age of 13 or 
                        is physically or mentally incapable of caring 
                        for himself, in the case of any taxable year 
                        beginning in such calendar year,
                such child shall be treated as a qualifying individual 
                described in clause (i) or (ii) of subparagraph (D) 
                (whichever is appropriate) with respect to the 
                custodial parent (as defined in section 7705(e)(4)(A)), 
                and shall not be treated as a qualifying individual 
                with respect to the noncustodial parent.''.
            (3) Section 6213(g)(2)(L) is amended by striking ``21,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1302. REPEAL OF CREDIT FOR ADOPTION EXPENSES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
is amended by striking section 23 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 137 is amended by striking subsections (d) and 
        (e).
            (2) Subsections (d) and (e) of section 23 (prior to being 
        stricken by subsection (a)) are each moved to section 137 
        (after amendment by paragraph (1)) and inserted after 
        subsection (c) as new subsections (d) and (e), respectively.
            (3) Section 137(d)(1)(D), as amended by paragraphs (1) and 
        (2), is amended by inserting ``(determined without regard to 
        reimbursements under this section)'' before the period at the 
        end.
            (4) Section 137(e), as amended by paragraphs (1) and (2), 
        is amended by striking ``(as defined in section 217(h)(3))'' 
        and inserting ``(or any possession of the United States)''.
            (5) Section 137 is amended by redesignating subsection (f) 
        as subsection (h), and by inserting before subsection (h) (as 
        so redesignated) the following new subsections:
    ``(f) Filing Requirements.--
            ``(1) Married couples must file joint return.--
                    ``(A) In general.--If the taxpayer is married at 
                the close of the taxable year, subsection (a) shall 
                apply to the taxpayer only if the taxpayer and the 
                taxpayer's spouse file a joint return for the taxable 
                year.
                    ``(B) Marital status.--Rules similar to the rules 
                of subsections (a) and (b) of section 7703 shall apply 
                for purposes of this section.
            ``(2) Taxpayer must include tin.--
                    ``(A) In general.--Subsection (a) shall apply with 
                respect to any child only if the taxpayer includes (if 
                known) the name, age, and TIN of such child on the 
                return of tax for the taxable year.
                    ``(B) Other methods.--The Secretary may, in lieu of 
                the information referred to in subparagraph (A), 
                require other information meeting the purposes of 
                subparagraph (A), including identification of an agent 
                assisting with the adoption.
    ``(g) Basis Adjustments.--For purposes of this subtitle, if the 
amount of any expenditure with respect to any property is excluded from 
gross income under this section, the increase in the basis of such 
property which would (but for this subsection) result from such 
expenditure shall be reduced by the amount of such expenditure which is 
so excluded.''.
            (6) Section 1016(a)(26) is amended by striking ``sections 
        23(g) and 137(e)'' and inserting ``section 137(g)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to amounts paid or incurred after December 31, 2014.
            (2) Special needs adoptions.--For purposes of paragraph 
        (1), any amount treated as paid by the taxpayer under section 
        23(a)(3) of the Internal Revenue Code of 1986 (as in effect 
        before its repeal by subsection (a)) shall be treated as paid 
        on the date that the adoption referred to in such section 
        becomes final.

SEC. 1303. REPEAL OF CREDIT FOR NONBUSINESS ENERGY PROPERTY.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
is amended by striking section 25C (and by striking the item relating 
to such section in the table of sections of such subpart).
    (b) Conforming Amendment.--Section 1016(a) is amended by striking 
paragraph (33).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2013.

SEC. 1304. REPEAL OF CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
is amended by striking section 25D (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 1016(a) is amended by striking 
paragraph (34).
    (c) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2014.

SEC. 1305. REPEAL OF CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
is amended by striking section 30 (and by striking the item relating to 
such section in the table of sections of such subpart).
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by striking paragraph (25).
            (2) Section 6501(m) is amended by striking ``section 
        30(e)(6),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to vehicles acquired after December 31, 2011.

SEC. 1306. REPEAL OF ALTERNATIVE MOTOR VEHICLE CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
is amended by striking section 30B (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (25).
            (2) Section 1016(a) is amended by striking paragraph (35).
            (3) Section 6501(m) is amended by striking ``30B(h)(9),''.
    (c) Effective Date.--The amendment made by this section shall apply 
to property purchased after December 31, 2014.

SEC. 1307. REPEAL OF ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY 
              CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
is amended by striking section 30C (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (26).
            (2) Section 1016(a) is amended by striking paragraph (36).
            (3) Section 6501(m) is amended by striking ``30C(e)(5),''.
    (c) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2014.

SEC. 1308. REPEAL OF CREDIT FOR NEW QUALIFIED PLUG-IN ELECTRIC DRIVE 
              MOTOR VEHICLES.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
is amended by striking section 30D (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (35).
            (2) Section 1016(a) is amended by striking paragraph (37).
            (3) Section 6501(m) is amended by striking ``30D(e)(4),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to vehicles acquired after December 31, 2014.

SEC. 1309. REPEAL OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE 
              INDIVIDUALS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
is amended by striking section 35 (and by striking the item relating to 
such section in the table of sections of such subpart).
    (b) Conforming Amendments.--
            (1) Chapter 77 is amended by striking section 7527 (and by 
        striking the item relating to such section in the table of 
        sections of such chapter).
            (2) Section 4980B(f)(5)(C)(iv)(II) is amended by inserting 
        ``as in effect before its repeal'' after ``section 35(c)''.
            (3) Section 6211(b)(4)(A) is amended by striking ``35,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to months beginning after December 31, 2013.

SEC. 1310. REPEAL OF FIRST-TIME HOMEBUYER CREDIT.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
is amended by striking section 36 (and by striking the item relating to 
such section in the table of sections of such subpart).
    (b) Conforming Amendments.--
            (1) Section 26(b)(2) is amended by striking subparagraph 
        (W).
            (2) Section 1400C(e) is amended by striking paragraph (4).
            (3) Section 6211(b)(4)(A) is amended by striking ``36,''.
            (4) Section 6213(g)(2) is amended by striking subparagraphs 
        (O) and (P).
    (c) Effective Date.--The amendments made by this section shall 
apply to residences purchased after June 30, 2011.

    Subtitle E--Deductions, Exclusions, and Certain Other Provisions

SEC. 1401. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.

    (a) Requirement That Residence Be Principal Residence for 5 Years 
During 8-Year Period.--Subsection (a) of section 121 is amended--
            (1) by striking ``5-year period'' and inserting ``8-year 
        period'', and
            (2) by striking ``2 years'' and inserting ``5 years''.
    (b) Application to Only 1 Sale or Exchange Every 5 Years.--
Paragraph (3) of section 121(b) is amended to read as follows:
            ``(3) Application to only 1 sale or exchange every 5 
        years.--Subsection (a) shall not apply to any sale or exchange 
        by the taxpayer if, during the 5-year period ending on the date 
        of such sale or exchange, there was any other sale or exchange 
        by the taxpayer to which subsection (a) applied.''.
    (c) Phaseout Based on Modified Adjusted Gross Income.--Section 121 
is amended by adding at the end the following new subsection:
    ``(h) Phaseout Based on Modified Adjusted Gross Income.--
            ``(1) In general.--If the modified adjusted gross income of 
        the taxpayer for the taxable year exceeds $250,000 (twice such 
        amount in the case of a joint return), the amount which would 
        (but for this subsection) be excluded from gross income under 
        subsection (a) for such taxable year shall be reduced (but not 
        below zero) by the amount of such excess.
            ``(2) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' has the 
        meaning given such term by section 2 determined after the 
        application of this section but without regard to this 
        subsection.''.
    (d) Conforming Amendments.--
            (1) The last paragraph of section 121(b) (relating to 
        exclusion of gain allocated to nonqualified use) is 
        redesignated as paragraph (5).
            (2) The following provisions of section 121 are each 
        amended by striking ``5-year period'' each place it appears 
        therein and inserting ``8-year period'':
                    (A) Subsection (b)(5)(C)(ii)(I) (as redesignated by 
                paragraph (1)).
                    (B) Subsection (c)(1)(B)(i)(I).
                    (C) Subsection (d)(7)(B).
                    (D) Subparagraphs (A) and (B) of subsection (d)(9).
                    (E) Subsection (d)(10)
                    (F) Subsection (d)(12)(A).
            (3) Section 121(c)(1)(B)(ii) is amended by striking ``2 
        years'' and inserting ``5 years'':
    (e) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after December 31, 2014.

SEC. 1402. MORTGAGE INTEREST.

    (a) Modification of Limitations.--
            (1) In general.--Paragraph (3) of section 163(h) is amended 
        to read as follows:
            ``(3) Qualified residence interest.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified residence 
                interest' means any interest which is paid or accrued 
                during the taxable year on indebtedness which--
                            ``(i) is incurred in acquiring, 
                        constructing, or substantially improving any 
                        qualified residence (determined as of the time 
                        the interest is accrued) of the taxpayer, and
                            ``(ii) is secured by such residence.
                Such term also includes interest on any indebtedness 
                secured by such residence resulting from the 
                refinancing of indebtedness meeting the requirements of 
                the preceding sentence (or this sentence); but only to 
                the extent the amount of the indebtedness resulting 
                from such refinancing does not exceed the amount of the 
                refinanced indebtedness.
                    ``(B) Limitation.--
                            ``(i) In general.--The aggregate amount of 
                        indebtedness taken into account under 
                        subparagraph (A) for any period shall not 
                        exceed $500,000 (half of such amount in the 
                        case of a married individual filing a separate 
                        return).
                            ``(ii) Phase-in of decreased limitation.--
                        For purposes of applying clause (i) with 
                        respect to any indebtedness incurred during a 
                        calendar year after 2014 and before 2018, the 
                        $500,000 amount in clause (i) shall be 
                        increased by the phase-in amount determined in 
                        accordance with the following table:

----------------------------------------------------------------------------------------------------------------
       ``In the case of indebtedness incurred during:                      The phase-in amount is:
----------------------------------------------------------------------------------------------------------------
2015.......................................................  $375,000
2016.......................................................  $250,000
2017.......................................................  $125,000
----------------------------------------------------------------------------------------------------------------

                            ``(iii) Treatment of refinancings of 
                        indebtedness incurred during phase-in period.--
                        In the case of any indebtedness which is 
                        incurred to refinance indebtedness to which 
                        clause (ii) applies (or to which this clause 
                        applies), such refinanced indebtedness shall be 
                        treated for purposes of clause (ii) as incurred 
                        on the date that the original indebtedness was 
                        incurred to the extent the amount of the 
                        indebtedness resulting from such refinancing 
                        does not exceed the amount of the refinanced 
                        indebtedness.
                    ``(C) Treatment of indebtedness incurred before 
                january 1, 2015.--
                            ``(i) In general.--In the case of any pre-
                        January 1, 2015, indebtedness, this paragraph 
                        shall apply as in effect immediately before the 
                        enactment of the Tax Reform Act of 2014.
                            ``(ii) Reduction in dollar limitation.--The 
                        limitation of subparagraph (B) (after 
                        application of clause (ii) thereof) shall be 
                        reduced (but not below zero) by the aggregate 
                        amount of outstanding pre-January 1, 2015, 
                        indebtedness of the taxpayer with respect to 
                        which interest is allowable as a deduction by 
                        reason of this subparagraph.
                            ``(iii) Pre-january 1, 2015, 
                        indebtedness.--For purposes of this 
                        subparagraph, the term `pre-January 1, 2015, 
                        indebtedness' means--
                                    ``(I) any indebtedness incurred 
                                before January 1, 2015, and
                                    ``(II) any indebtedness incurred on 
                                or after such date to refinance 
                                indebtedness described in subclause (I) 
                                (or refinanced indebtedness meeting the 
                                requirements of this subclause) to the 
                                extent the amount of the indebtedness 
                                resulting from such refinancing does 
                                not exceed the amount of the refinanced 
                                indebtedness.
                    ``(D) Limitation on period of refinancing.--
                Subparagraphs (B)(iii) and (C)(iii)(II) shall not apply 
                to any indebtedness after--
                            ``(i) the expiration of the term of the 
                        original indebtedness, or
                            ``(ii) if the principal of such original 
                        indebtedness is not amortized over its term, 
                        the expiration of the term of the 1st 
                        refinancing of such indebtedness (or if 
                        earlier, the date which is 30 years after the 
                        date of such 1st refinancing).
                    ``(E) Coordination with certain exclusions.--The 
                amount otherwise treated as qualified residence 
                interest (determined without regard to this 
                subparagraph) with respect to any residence of the 
                taxpayer for any taxable year shall be reduced by the 
                sum of the amounts excludable from the gross income of 
                such taxpayer under sections 107 and 119 with respect 
                to such residence.''.
            (2) Conforming amendments.--
                    (A) Section 108(h)(2) is amended to read as 
                follows:
            ``(2) Qualified principal residence indebtedness.--For 
        purposes of this section, the term `qualified principal 
        residence indebtedness' means indebtedness described in section 
        163(h)(3) applied without regard to clauses (ii) and (iii) of 
        subparagraph (B) thereof and by substituting `$2,000,000' for 
        `$500,000' in subparagraph (B)(i) thereof.''.
                    (B) Section 163(h) is amended--
                            (i) by striking subparagraph (E) in 
                        paragraph (3),
                            (ii) by striking subparagraphs (E) and (F) 
                        in paragraph (4), and
                            (iii) by striking paragraph (5).
                    (C) Section 265(a)(6) is amended--
                            (i) by striking ``an amount as--'' and all 
                        that follows and inserting ``an amount as a 
                        military housing allowance.'', and
                            (ii) by striking ``parsonage and'' in the 
                        heading thereof.
    (b) Modification of Reporting Requirements.--
            (1) Information return requirements.--Paragraph (2) of 
        section 6050H(b) is amended by striking ``and'' at the end of 
        subparagraph (C), by redesignating subparagraph (D) as 
        subparagraph (F) and by inserting after subparagraph (C) the 
        following new subparagraphs:
                    ``(D) the amount of outstanding principal on the 
                mortgage as of the beginning of such calendar year,
                    ``(E) the date of the origination of the mortgage, 
                and''.
            (2) Statements to individuals.--Paragraph (2) of section 
        6050H(d) is amended by striking ``subsection (b)(2)(C)'' and 
        inserting ``subparagraphs (C), (D), and (E) of subsection 
        (b)(2)''.
    (c) Effective Dates.--
            (1) Modification of limitations.--
                    (A) In general.--The amendments made by subsection 
                (a) shall apply to interest paid or accrued in taxable 
                years beginning after December 31, 2014, with respect 
                to indebtedness incurred before, on, or after such 
                date.
                    (B) Treatment of grandfathered indebtedness.--For 
                application of the amendments made by subsection (a) to 
                grandfathered indebtedness, see section 163(h)(3)(C) of 
                the Internal Revenue Code of 1986 as amended by this 
                section.
            (2) Modification of reporting requirements.--The amendments 
        made by subsection (b) shall apply to returns and statements 
        for calendar years after December 31, 2014.

SEC. 1403. CHARITABLE CONTRIBUTIONS.

    (a) 2 Percent Floor on Charitable Deduction for Individuals.--
Paragraph (3) of section 170(b) is amended to read as follows:
            ``(3) 2 percent floor on charitable deduction for 
        individuals.--The amount of charitable contributions taken into 
        account under this section as made by any individual during a 
        taxable year (determined without regard to subsection (d)) 
        shall be reduced by 2 percent of the taxpayer's contribution 
        base for such taxable year. Such reduction shall apply--
                    ``(A) first, to charitable contributions to which 
                paragraph (1)(B) applies to the extent thereof,
                    ``(B) second, to charitable contributions to which 
                paragraph (1)(C) applies to the extent thereof, and
                    ``(C) third, to charitable contributions to which 
                paragraph (1)(A) applies to the extent thereof.''.
    (b) Extension of Time for Making Charitable Contributions.--
Subsection (a) of section 170 is amended by redesignating paragraphs 
(2) and (3) as paragraphs (3) and (4), respectively, and by inserting 
after paragraph (1) the following new paragraph:
            ``(2) Treatment of charitable contributions made by 
        individuals before due date of return.--If any charitable 
        contribution is made by an individual after the close of a 
        taxable year but not later than the due date (determined 
        without regard to extensions) for the return of tax for such 
        taxable year, then the taxpayer may elect to treat such 
        charitable contribution as made in such taxable year. Such 
        election may be made only at the time of the filing of such 
        return of tax and shall be signified in such manner as the 
        Secretary may provide.''.
    (c) Deduction for Contributions of Property Generally Limited to 
Adjusted Basis.--
            (1) In general.--Subsection (e) of section 170 is amended--
                    (A) by striking paragraphs (1) and (6),
                    (B) by redesignating paragraphs (2), (3), (4), and 
                (5) as paragraphs (3), (4), (5), and (6), respectively, 
                and
                    (C) by inserting before paragraph (3) (as so 
                redesignated) the following new paragraphs:
            ``(1) In general.--Except in the case of property to which 
        paragraph (2) applies, the amount of any charitable 
        contribution of property otherwise taken into account under 
        this section shall be reduced by the amount of gain which would 
        have been realized if the property contributed had been sold by 
        the taxpayer for its fair market value (determined at the time 
        of such contribution).
            ``(2) Special rule for certain property.--
                    ``(A) In general.--In the case of property to which 
                this paragraph applies, the amount of any charitable 
                contribution of property otherwise taken into account 
                under this section shall be reduced by the amount of 
                gain which would not have been long-term capital gain 
                if the property contributed had been sold by the 
                taxpayer at its fair market value (determined at the 
                time of such contribution).
                    ``(B) Property to which this paragraph applies.--
                This paragraph shall apply to--
                            ``(i) any contribution of tangible personal 
                        property if the use of such property by the 
                        donee is related to the purpose or function 
                        constituting the basis for its exemption under 
                        section 501 (or, in the case of a governmental 
                        unit, to any purpose or function described in 
                        subsection (c)),
                            ``(ii) any qualified conservation 
                        contribution (as defined in subsection (h)(1)),
                            ``(iii) any qualified contribution (as 
                        defined in paragraph (4)(A)),
                            ``(iv) any qualified research contribution 
                        (as defined in paragraph (5)(B)), and
                            ``(v) any qualified appreciated stock (as 
                        defined in subsection (e)(6)).
                    ``(C) Special rules for determining long-term 
                capital gain.--
                            ``(i) In general.--For purposes of applying 
                        this paragraph (other than in the case of gain 
                        to which section 1245(a), 1250(a), 1252(a), or 
                        1254(a) applies), property which is property 
                        used in the trade or business (as defined in 
                        section 1231(b)) shall be treated as a capital 
                        asset.
                            ``(ii) Contributions of stock in s 
                        corporations.--For purposes of applying this 
                        paragraph in the case of a charitable 
                        contribution of stock in an S corporation, 
                        rules similar to the rules of section 751 shall 
                        apply in determining whether gain on such stock 
                        would have been long-term capital gain if such 
                        stock were sold by the taxpayer.''.
            (2) Repeal of special rules for food and book inventory.--
        Paragraph (4) of section 170(e), as redesignated by paragraph 
        (1), is amended by striking subparagraphs (C) and (D) and by 
        redesignating subparagraph (E) as subparagraph (C).
            (3) Conforming amendments.--
                    (A) Section 170(e)(3), as redesignated by paragraph 
                (1), is amended by striking ``paragraph (1)'' and 
                inserting ``paragraphs (1) and (2)''.
                    (B) Paragraphs (4) and (5) of section 170(e), as 
                redesignated by paragraph (1), are each amended by 
                striking ``paragraph (1)(A)'' each place it appears and 
                inserting ``paragraph (2)(A)''.
                    (C) Section 170(e)(6), as redesignated by paragraph 
                (1), is amended--
                            (i) by striking all that precedes ``for 
                        purposes of this paragraph'' in subparagraph 
                        (B) and inserting the following:
            ``(6) Qualified appreciated stock.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B),'',
                            (ii) by redesignating subparagraph (C) as 
                        subparagraph (B), and
                            (iii) by striking ``in a contribution to 
                        which paragraph (1)(B)(ii) applies (determined 
                        without regard to this paragraph)'' in 
                        subparagraph (B) as so redesignated.
    (d) Modification of Income Based Contribution Limitations.--
            (1) In general.--Section 170(b)(1) is amended--
                    (A) by striking ``30 percent'' in subparagraph 
                (B)(i) and inserting ``25 percent'', and
                    (B) by striking ``50 percent'' and inserting ``40 
                percent'' in--
                            (i) the flush matter at the end of 
                        subparagraph (A),
                            (ii) subparagraph (B)(ii), and
                            (iii) clauses (i), (iv)(I), and (v) of 
                        subparagraph (C) (as redesignated by paragraph 
                        (2)).
            (2) Repeal of special limitations for certain capital gain 
        property.--
                    (A) In general.--Paragraph (1) of section 170(b) is 
                amended by striking subparagraphs (C) and (D) and by 
                redesignating subparagraphs (E), (F), and (G) as 
                subparagraphs (C), (D), and (E), respectively.
                    (B) Conforming amendments.--
                            (i) Section 170(b)(1)(A)(vii) is amended by 
                        striking ``subparagraph (F)'' and inserting 
                        ``subparagraph (D)''
                            (ii) Section 170(b)(1)(B)(ii) is amended by 
                        striking ``(determined without regard to 
                        subparagraph (C))''.
                            (iii) Section 170(b)(1)(C)(iii), as 
                        redesignated by paragraph (1), is amended by 
                        striking ``subparagraph (A), (B), (C) or (D)'' 
                        and inserting ``subparagraph (A) or (B)''.
                            (iv) Section 170(b)(2)(B)(i)(I) is amended 
                        by striking ``paragraph (1)(E)(v)'' and 
                        inserting ``paragraph (1)(C)(v)''.
                            (v) Section 545(b)(2) is amended by 
                        striking ``(D), and (E)'' and inserting ``and 
                        (C)''.
    (e) Qualified Conservation Contributions.--
            (1) Rules made permanent.--
                    (A) In general.--Subparagraph (C) of section 
                170(b)(1), as redesignated by subsection (d), is 
                amended by striking clause (vi).
                    (B) Corporate farmers and ranchers.--Subparagraph 
                (B) of section 170(b)(2) is amended by striking clause 
                (iii).
            (2) Treatment of golf course easements.--Subsection (h) of 
        section 170 is amended by adding at the end the following new 
        paragraph:
            ``(7) Special rule with respect to golf courses.--An 
        interest in real property shall not be treated as a qualified 
        real property interest for purposes of this subsection if (at 
        the time of the contribution of such interest) such property 
        is, or is reasonably expected to be, used as a golf course.''.
            (3) Conforming amendments.--
                    (A) Section 170(b)(1)(C)(iv)(II), as redesignated 
                by subsection (d), is amended by striking ``made after 
                the date of the enactment of this subparagraph''.
                    (B) Section 170(b)(2)(B)(i)(II) is amended by 
                striking ``, in the case of contributions made after 
                the date of the enactment of this subparagraph,''.
    (f) Repeal of Special Rule for College Athletic Event Seating 
Rights.--Section 170 is amended by striking subsection (l).
    (g) Repeal of Special Rule Treating Donee Income From Intellectual 
Property as an Additional Charitable Contribution.--
            (1) In general.--Section 170 is amended by striking 
        subsection (m).
            (2) Conforming amendments.--Section 6050L is amended--
                    (A) by striking subsection (b) and redesignating 
                subsection (c) as subsection (b), and
                    (B) by striking ``or (b)'' in subsection (b) (as 
                redesignated by subparagraph (A)).
    (h) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        contributions made in taxable years beginning after December 
        31, 2014.
            (2) Qualified conservation contributions.--The amendments 
        made by subsection (e) shall apply to contributions made in 
        taxable years beginning after December 31, 2013.

SEC. 1404. DENIAL OF DEDUCTION FOR EXPENSES ATTRIBUTABLE TO THE TRADE 
              OR BUSINESS OF BEING AN EMPLOYEE.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
inserting after the item relating to section 262 the following new 
item:

``SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EMPLOYEE.

    ``(a) In General.--Except as otherwise provided in this section, no 
deduction shall be allowed with respect to any trade or business of the 
taxpayer which consists of the performance of services by the taxpayer 
as an employee.
    ``(b) Exception for Above-the-Line Deductions.--Subsection (a) 
shall not apply to any deduction allowable (determined without regard 
to subsection (a)) in determining adjusted gross income.''.
    (b) Repeal of Certain Above-the-Line Trade and Business Deductions 
of Employees.--
            (1) In general.--Paragraph (2) of section 62(a) is 
        amended--
                    (A) by striking subparagraphs (B), (C), and (D), 
                and
                    (B) by redesignating subparagraph (E) as 
                subparagraph (B).
            (2) Conforming amendments.--
                    (A) Section 62 is amended by striking subsections 
                (b) and (d) and by redesignating subsections (c) and 
                (e) as subsections (b) and (c), respectively.
                    (B) Section 62(a)(20) is amended by striking 
                ``subsection (e)'' and inserting ``subsection (c)''.
    (c) Continued Exclusion of Working Condition Fringe Benefits.--
Section 132(d) is amended by inserting ``(determined without regard to 
section 262A)'' after ``section 162''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1405. REPEAL OF DEDUCTION FOR TAXES NOT PAID OR ACCRUED IN A TRADE 
              OR BUSINESS.

    (a) In General.--Subsection (b) of section 164 is amended by 
striking paragraphs (5) and (6) and inserting the following new 
paragraph:
            ``(5) Limitation in case of individuals.--In the case of a 
        taxpayer other than a corporation--
                    ``(A) paragraphs (1) and (2) of subsection (a) 
                shall only apply to taxes which are paid or accrued in 
                carrying on a trade or business or an activity 
                described in section 212, and
                    ``(B) paragraph (3) of subsection (a) shall not 
                apply to State and local taxes.''.
    (b) Conforming Amendments.--
            (1) Section 164(a) is amended by striking paragraph (6).
            (2)(A) Section 216(a) is amended by striking 
        ``proportionate share of--'' and all that follows and inserting 
        ``proportionate share of the interest allowable as a deduction 
        to the corporation under section 163 which is paid or incurred 
        by the corporation on its indebtedness contracted--
            ``(1) in the acquisition, construction, alteration, 
        rehabilitation, or maintenance of the houses or apartment 
        building, or
            ``(2) in the acquisition of the land on which the houses 
        (or apartment building) are situated.''.
            (B) Section 216(b)(3)(B)(i) is amended--
                    (i) by striking ``a share of such corporation's 
                real estate taxes described in subsection (a)(1) or'' 
                in subclause (I), and
                    (ii) by striking ``of such taxes, or of such 
                interest,'' in subclause (II) and inserting ``of such 
                interest''.
            (C) Section 216(d) is amended by striking ``subsections 
        (a)(1) and (a)(2)'' and inserting ``subsection (a)''.
            (3) Section 274(f) is amended by striking ``Taxes,'' in the 
        heading thereof.
            (4) Section 280A(b) is amended by striking ``Taxes,'' in 
        the heading thereof.
            (5) Section 911(c)(3)(A)(ii) is amended--
                    (A) by striking ``and taxes'', and
                    (B) by striking ``or 164''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1406. REPEAL OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.

    (a) In General.--Subsection (c) of section 165 is amended by 
inserting ``and'' at the end of paragraph (1), by striking ``; and'' at 
the end of paragraph (2) and inserting a period, and by striking 
paragraph (3).
    (b) Conforming Amendments.--
            (1) Section 165 is amended by striking subsections (h) and 
        (k).
            (2) Subsection (i) of section 165 is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``(as defined by clause 
                        (ii) of subsection (h)(3)(C))'', and
                            (ii) by striking ``(as defined by clause 
                        (i) of such subsection)'',
                    (B) by striking ``(as defined by subsection 
                (h)(3)(C)(i)'' in paragraph (4), and
                    (C) by adding at the end the following new 
                paragraph:
            ``(5) Federally declared disaster.--For purposes of this 
        subsection--
                    ``(A) Federally declared disaster.--The term 
                `federally declared disaster' means any disaster 
                subsequently determined by the President of the United 
                States to warrant assistance by the Federal Government 
                under the Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act.
                    ``(B) Disaster area.--The term `disaster area' 
                means the area so determined to warrant such 
                assistance.''.
            (3)(A) Section 165(l)(1) is amended by striking ``a loss 
        described in subsection (c)(3)'' and inserting ``an ordinary 
        loss described in subsection (c)(2)''.
            (B) Section 165(l) is amended--
                    (i) by striking paragraph (5),
                    (ii) by redesignating paragraphs (2), (3), and (4) 
                as paragraphs (3), (4), and (5), respectively, and
                    (iii) by inserting after paragraph (1) the 
                following new paragraph:
            ``(2) Limitations.--
                    ``(A) Deposit may not be federally insured.--No 
                election may be made under paragraph (1) with respect 
                to any loss on a deposit in a qualified financial 
                institution if part or all of such deposit is insured 
                under Federal law.
                    ``(B) Dollar limitation.--With respect to each 
                financial institution, the aggregate amount of losses 
                attributable to deposits in such financial institution 
                to which an election under paragraph (1) may be made by 
                the taxpayer for any taxable year shall not exceed 
                $20,000 ($10,000 in the case of a separate return by a 
                married individual). The limitation of the preceding 
                sentence shall be reduced by the amount of any 
                insurance proceeds under any State law which can 
                reasonably be expected to be received with respect to 
                losses on deposits in such institution.''.
            (4) Section 172(b)(1)(F)(ii), prior to redesignation under 
        title III, is amended--
                    (A) by striking subclause (I) and by redesignating 
                subclauses (II) and (III) as subclauses (I) and (II), 
                respectively, and
                    (B) by striking ``subsection (h)(3)(C)(i)'' and 
                inserting ``section 165(i)(5)''.
            (5) Section 172(d)(4)(C) is amended by striking ``paragraph 
        (2) or (3) of section 165(c)'' and inserting ``section 
        165(c)(2)''.
            (6) Section 274(f) is amended by striking ``Casualty 
        Losses,'' in the heading thereof.
            (7) Section 280A(b) is amended by striking ``Casualty 
        Losses,'' in the heading thereof.
            (8) Section 873(b), as amended by the preceding provisions 
        of this Act, is amended by striking paragraph (1) and by 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1407. LIMITATION ON WAGERING LOSSES.

    (a) In General.--Section 165(d) is amended by adding at the end the 
following: ``For purposes of the preceding sentence, the term `losses 
from wagering transactions' includes any deduction otherwise allowable 
under this chapter incurred in carrying on any wagering transaction.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1408. REPEAL OF DEDUCTION FOR TAX PREPARATION EXPENSES.

    (a) In General.--Section 212 is amended by adding ``or'' at the end 
of paragraph (1), by striking ``; or'' at the end of paragraph (2) and 
inserting a period, and by striking paragraph (3).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1409. REPEAL OF DEDUCTION FOR MEDICAL EXPENSES.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by striking section 213 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1)(A) Section 223 is amended by redesignating subsections 
        (e), (f), (g), and (h) as subsections (f), (g), (h), and (i), 
        respectively, and by inserting after subsection (d) the 
        following new subsection:
    ``(e) Medical Care.--For purposes of this section--
            ``(1) In general.--The term `medical care' means amounts 
        paid--
                    ``(A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the purpose 
                of affecting any structure or function of the body,
                    ``(B) for transportation primarily for and 
                essential to medical care referred to in subparagraph 
                (A),
                    ``(C) for qualified long-term care services (as 
                defined in section 7702B(c)), or
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in subparagraphs (A) and (B) or for any qualified 
                long-term care insurance contract (as defined in 
                section 7702B(b)).
        In the case of a qualified long-term care insurance contract 
        (as defined in section 7702B(b)), only eligible long-term care 
        premiums (as defined in paragraph (7)) shall be taken into 
        account under subparagraph (D).
            ``(2) Amounts paid for certain lodging away from home 
        treated as paid for medical care.--Amounts paid for lodging 
        (not lavish or extravagant under the circumstances) while away 
        from home primarily for and essential to medical care referred 
        to in paragraph (1)(A) shall be treated as amounts paid for 
        medical care if--
                    ``(A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which is 
                related to, or the equivalent of, a licensed hospital), 
                and
                    ``(B) there is no significant element of personal 
                pleasure, recreation, or vacation in the travel away 
                from home.
        The amount taken into account under the preceding sentence 
        shall not exceed $50 for each night for each individual.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act (42 U.S.C. 1395x(r)).
            ``(4) Contracts covering other than medical care.--In the 
        case of an insurance contract under which amounts are payable 
        for other than medical care referred to in subparagraphs (A), 
        (B) and (C) of paragraph (1)--
                    ``(A) no amount shall be treated as paid for 
                insurance to which paragraph (1)(D) applies unless the 
                charge for such insurance is either separately stated 
                in the contract, or furnished to the policyholder by 
                the insurance company in a separate statement,
                    ``(B) the amount taken into account as the amount 
                paid for such insurance shall not exceed such charge, 
                and
                    ``(C) no amount shall be treated as paid for such 
                insurance if the amount specified in the contract (or 
                furnished to the policyholder by the insurance company 
                in a separate statement) as the charge for such 
                insurance is unreasonably large in relation to the 
                total charges under the contract.
            ``(5) Certain pre-paid contracts.--Subject to the 
        limitations of paragraph (4), premiums paid during the taxable 
        year by a taxpayer before he attains the age of 65 for 
        insurance covering medical care (within the meaning of 
        subparagraphs (A), (B), and (C) of paragraph (1)) for the 
        taxpayer, his spouse, or a dependent after the taxpayer attains 
        the age of 65 shall be treated as expenses paid during the 
        taxable year for insurance which constitutes medical care if 
        premiums for such insurance are payable (on a level payment 
        basis) under the contract for a period of 10 years or more or 
        until the year in which the taxpayer attains the age of 65 (but 
        in no case for a period of less than 5 years).
            ``(6) Cosmetic surgery.--
                    ``(A) In general.--The term `medical care' does not 
                include cosmetic surgery or other similar procedures, 
                unless the surgery or procedure is necessary to 
                ameliorate a deformity arising from, or directly 
                related to, a congenital abnormality, a personal injury 
                resulting from an accident or trauma, or disfiguring 
                disease.
                    ``(B) Cosmetic surgery defined .--For purposes of 
                this paragraph, the term `cosmetic surgery' means any 
                procedure which is directed at improving the patient's 
                appearance and does not meaningfully promote the proper 
                function of the body or prevent or treat illness or 
                disease.
            ``(7) Eligible long-term care premiums.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible long-term care premiums' means the 
                amount paid during a taxable year for any qualified 
                long-term care insurance contract (as defined in 
                section 7702B(b)) covering an individual, to the extent 
                such amount does not exceed the limitation determined 
                under the following table:

------------------------------------------------------------------------
``In the case of an individual with
an attained age before the close of           The limitation is:
        the taxable year of:
------------------------------------------------------------------------
40 or less                           $200
More than 40 but not more than 50    $375
More than 50 but not more than 60    $750
More than 60 but not more than 70    $2,000
More than 70                         $2,500
------------------------------------------------------------------------

                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning after 1997, each dollar 
                        amount in subparagraph (A) shall be increased 
                        by the medical care cost adjustment of such 
                        amount for such calendar year. Any increase 
                        determined under the preceding sentence shall 
                        be rounded to the nearest multiple of $10.
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        adjustment prescribed by the Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, for purposes of such clause. To 
                        the extent that CPI (as defined section 1(c)), 
                        or any component thereof, is taken into account 
                        in determining such adjustment, such adjustment 
                        shall be determined by taking into account C-
                        CPI-U (as so defined), or the corresponding 
                        component thereof, in lieu of such CPI (or 
                        component thereof), but only with respect to 
                        the portion of such adjustment which relates to 
                        periods after December 31, 2014.
            ``(8) Certain payments to relatives treated as not paid for 
        medical care.--An amount paid for a qualified long-term care 
        service (as defined in section 7702B(c)) provided to an 
        individual shall be treated as not paid for medical care if 
        such service is provided--
                    ``(A) by the spouse of the individual or by a 
                relative (directly or through a partnership, 
                corporation, or other entity) unless the service is 
                provided by a licensed professional with respect to 
                such service, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in any of subparagraphs (A) through (G) of section 
        7705(d)(2). This paragraph shall not apply for purposes of 
        section 105(b) with respect to reimbursements through 
        insurance.''.
            (B) Section 72(t)(2)(D)(i)(III) is amended by striking 
        ``section 213(d)(1)(D)'' and inserting ``section 
        223(e)(1)(D)''.
            (C) Section 104(a) is amended by striking ``section 
        213(d)(1)'' in the last sentence and inserting ``section 
        223(e)(1)''.
            (D) Section 105(b) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (E) Section 139D is amended by striking ``section 213'' and 
        inserting ``section 223''.
            (F) Section 162(l)(2) is amended by striking ``section 
        213(d)(10)'' and inserting ``section 223(e)(7)''.
            (G) Section 220(d)(2)(A) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (H) Section 223(d)(2)(A) is amended by striking ``section 
        213(d)'' and inserting ``subsection (e))''.
            (I) Section 419A(f)(2) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (J) Section 501(c)(26)(A) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (K) Section 2503(e) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (L) Section 4980B(c)(4)(B)(i)(I) is amended by striking 
        ``section 213(d)'' and inserting ``section 223(e)''.
            (M) Section 6041(f) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (N) Section 7702B(a)(2) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (O) Section 7702B(a)(4) is amended by striking ``section 
        213(d)(1)(D)'' and inserting ``section 223(e)(1)(D)''.
            (P) Section 7702B(d)(5) is amended by striking ``section 
        213(d)(10)'' and inserting ``section 223(e)(7)''.
            (Q) Section 9832(d)(3) is amended by striking ``section 
        213(d)'' and inserting ``section 223(e)''.
            (2) Section 72(t)(2)(B) is amended to read as follows:
                    ``(B) Medical expenses.--Distributions made to an 
                individual (other than distributions described in 
                subparagraph (A), (C), or (D) to the extent such 
                distributions do not exceed the excess of--
                            ``(i) the expenses paid by the taxpayer 
                        during the taxable year, not compensated for by 
                        insurance or otherwise, for medical care (as 
                        defined in 223(e)) of the taxpayer, his spouse, 
                        or a dependent (as defined in section 7705, 
                        determined without regard to subsections 
                        (b)(1), (b)(2), and (d)(1)(B) thereof), over
                            ``(ii) 10 percent of the taxpayer's 
                        adjusted gross income.''.
            (3) Section 105 is amended by striking subsection (f).
            (4) Section 162(l) is amended by striking paragraph (3).
            (5) Section 402(l) is amended by striking paragraph (7) and 
        redesignating paragraph (8) as paragraph (7).
            (6) Section 220(f) is amended by striking paragraph (6).
            (7) Section 223(f) is amended by striking paragraph (6).
            (8) Section 7702B(e) is amended by striking paragraph (2).
            (9) Section 7705(f)(7), as redesignated by this Act, is 
        amended by striking ``sections 105(b), 132(h)(2)(B), and 
        213(d)(5)'' and inserting ``sections 105(b) and 132(h)(2)(B)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1410. REPEAL OF DISQUALIFICATION OF EXPENSES FOR OVER-THE-COUNTER 
              DRUGS UNDER CERTAIN ACCOUNTS AND ARRANGEMENTS.

    (a) HSAs.--Subparagraph (A) of section 223(d)(2) is amended by 
striking the last sentence.
    (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) is amended 
by striking the last sentence.
    (c) Health Flexible Spending Arrangements and Health Reimbursement 
Arrangements.--Section 106 is amended by striking subsection (f).
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses incurred after December 31, 2014.

SEC. 1411. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS AND CORRESPONDING 
              INCLUSION IN GROSS INCOME.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by striking section 215 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Corresponding Repeal of Provisions Providing for Inclusion of 
Alimony in Gross Income.--
            (1) Subsection (a) of section 61 is amended by striking 
        paragraph (8) and by redesignating paragraphs (9) through (15) 
        as paragraphs (8) through (14), respectively.
            (2) Part II of subchapter B of chapter 1 is amended by 
        striking section 71 (and by striking the item relating to such 
        section in the table of sections for such part).
            (3) Subpart F of part I of subchapter J of chapter 1 is 
        amended by striking section 682 (and by striking the item 
        relating to such section in the table of sections for such 
        subpart).
    (c) Conforming Amendments.--
            (1) Related to repeal of section 215.--
                    (A) Section 62(a) is amended by striking paragraph 
                (10).
                    (B) Section 3402(m)(1) is amended by striking 
                ``(other than paragraph (10) thereof)''.
            (2) Related to repeal of section 71.--
                    (A) Section 121(d)(3) is amended--
                            (i) by striking ``(as defined in section 
                        71(b)(2))'' in subparagraph (B), and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(C) Divorce or separation instrument.--For 
                purposes of this paragraph, the term `divorce or 
                separation instrument' means--
                            ``(i) a decree of divorce or separate 
                        maintenance or a written instrument incident to 
                        such a decree,
                            ``(ii) a written separation agreement, or
                            ``(iii) a decree (not described in clause 
                        (i)) requiring a spouse to make payments for 
                        the support or maintenance of the other 
                        spouse.''.
                    (B) Section 220(f)(7) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
                    (C) Section 223(f)(7) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
                    (D) Section 382(l)(3)(B)(iii) is amended by 
                striking ``section 71(b)(2)'' and inserting ``section 
                121(d)(3)(C)''.
                    (E) Section 408(d)(6) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) any divorce or separation instrument (as defined in 
        section 71(b)(2) of the Internal Revenue Code of 1986 as in 
        effect before the date of the enactment of this Act) executed 
        after December 31, 2014, and
            (2) any divorce or separation instrument (as so defined) 
        executed on or before such date and modified after such date if 
        the modification expressly provides that the amendments made by 
        this section apply to such modification.

SEC. 1412. REPEAL OF DEDUCTION FOR MOVING EXPENSES.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by striking section 217 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 62(a) is amended by striking paragraph (15).
            (2)(A) Section 132(a) is amended by striking paragraph (6).
            (B) Section 82 is amended by striking ``Except as provided 
        in section 132(a)(6), there'' and inserting ``There''.
            (3)(A) Section 132 is amended by striking subsection (g).
            (B) Section 132(l) is amended by striking by striking 
        ``subsections (e) and (g)'' and inserting ``subsection (e)''.
            (4) Section 274(m)(3) is amended by striking ``(other than 
        section 217)''.
            (5) Section 3121(a) is amended by striking paragraph (11).
            (6) Section 209(a) of the Social Security Act is amended by 
        striking paragraph (9).
            (7) Section 3306(b) is amended by striking paragraph (9).
            (8) Section 3401(a) is amended by striking paragraph (15).
            (9) Section 7872(f) is amended by striking paragraph (11).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1413. TERMINATION OF DEDUCTION AND EXCLUSIONS FOR CONTRIBUTIONS TO 
              MEDICAL SAVINGS ACCOUNTS.

    (a) Termination of Income Tax Deduction.--Section 220 is amended by 
adding at the end the following new subsection:
    ``(k) Termination.--No deduction shall be allowed under subsection 
(a) with respect to any taxable year beginning after December 31, 
2014.''.
    (b) Termination of Exclusion for Employer-Provided Contributions.--
Section 106 is amended by striking subsection (b).
    (c) Conforming Amendments.--
            (1) Section 62(a) is amended by striking paragraph (16).
            (2) Section 106(d) is amended by striking paragraph (2), by 
        redesignating paragraph (3) as paragraph (6), and by inserting 
        after paragraph (1) the following new paragraphs:
            ``(2) No constructive receipt.--No amount shall be included 
        in the gross income of any employee solely because the employee 
        may choose between the contributions referred to in paragraph 
        (1) and employer contributions to another health plan of the 
        employer.
            ``(3) Special rule for deduction of employer 
        contributions.--Any employer contribution to a health savings 
        account (as so defined), if otherwise allowable as a deduction 
        under this chapter, shall be allowed only for the taxable year 
        in which paid.
            ``(4) Employer health savings account contribution required 
        to be shown on return.--Every individual required to file a 
        return under section 6012 for the taxable year shall include on 
        such return the aggregate amount contributed by employers to 
        the health savings accounts (as so defined) of such individual 
        or such individual's spouse for such taxable year.
            ``(5) Health savings account contributions not part of 
        cobra coverage.--Paragraph (1) shall not apply for purposes of 
        section 4980B.''.
            (3) Section 223(b)(4) is amended by striking subparagraph 
        (A) and by redesignating subparagraphs (B) and (C) as 
        subparagraphs (A) and (B), respectively.
            (4) Section 3231(e) is amended by striking paragraph (10) 
        and by redesignating paragraphs (11) and (12) as paragraphs 
        (10) and (11), respectively.
            (5) Section 3306(b) is amended by striking paragraph (17).
            (6) Section 3401(a) is amended by striking paragraph (21).
            (7) Chapter 43 is amended by striking section 4980E (and by 
        striking the item relating to such section in the table of 
        sections for such chapter).
            (8) Section 4980G is amended to read as follows:

``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH SAVINGS 
              ACCOUNT CONTRIBUTIONS.

    ``(a) In General.--In the case of an employer who makes a 
contribution to the health savings account of any employee during a 
calendar year, there is hereby imposed a tax on the failure of such 
employer to meet the requirements of subsection (d) for such calendar 
year.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure for any calendar year is the amount equal to 35 
percent of the aggregate amount contributed by the employer to health 
savings accounts of employees for taxable years of such employees 
ending with or within such calendar year.
    ``(c) Waiver by Secretary.--In the case of a failure which is due 
to reasonable cause and not to willful neglect, the Secretary may waive 
part or all of the tax imposed by subsection (a) to the extent that the 
payment of such tax would be excessive relative to the failure 
involved.
    ``(d) Employer Required To Make Comparable Health Savings Account 
Contributions for All Participating Employees.--
            ``(1) In general.--An employer meets the requirements of 
        this subsection for any calendar year if the employer makes 
        available comparable contributions to the health savings 
        accounts of all comparable participating employees for each 
        coverage period during such calendar year.
            ``(2) Comparable contributions.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `comparable contributions' means 
                contributions--
                            ``(i) which are the same amount, or
                            ``(ii) which are the same percentage of the 
                        annual deductible limit under the high 
                        deductible health plan covering the employees.
                    ``(B) Part-year employees.--In the case of an 
                employee who is employed by the employer for only a 
                portion of the calendar year, a contribution to the 
                health savings account of such employee shall be 
                treated as comparable if it is an amount which bears 
                the same ratio to the comparable amount (determined 
                without regard to this subparagraph) as such portion 
                bears to the entire calendar year.
            ``(3) Comparable participating employees.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `comparable participating employees' means all 
                employees--
                            ``(i) who are eligible individuals covered 
                        under any high deductible health plan of the 
                        employer, and
                            ``(ii) who have the same category of 
                        coverage.
                    ``(B) Categories of coverage.--For purposes of 
                subparagraph (B), the categories of coverage are self-
                only and family coverage.
            ``(4) Part-time employees.--
                    ``(A) In general .--Paragraph (3) shall be applied 
                separately with respect to part-time employees and 
                other employees.
                    ``(B) Part-time employee.--For purposes of 
                subparagraph (A), the term `part-time employee' means 
                any employee who is customarily employed for fewer than 
                30 hours per week.
            ``(5) Special rule for non-highly compensated employees.--
        For purposes of applying this section to a contribution to a 
        health savings account of an employee who is not a highly 
        compensated employee (as defined in section 414(q)), highly 
        compensated employees shall not be treated as comparable 
        participating employees.
    ``(e) Controlled Groups.--For purposes of this section, all persons 
treated as a single employer under subsection (b), (c), (m), or (o) of 
section 414 shall be treated as 1 employer.
    ``(f) Definitions.--Terms used in this section which are also used 
in section 223 have the respective meanings given such terms in section 
223.
    ``(g) Regulations.--The Secretary shall issue regulations to carry 
out the purposes of this section.''.
            (9) Section 6051(a) is amended by striking paragraph (11).
            (10) Section 6051(a)(14)(A) is amended by striking 
        ``paragraphs (11) and (12)'' and inserting ``paragraph (12)''.
    (d) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 1414. REPEAL OF 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED 
              DEDUCTIONS.

    (a) In General.--Part 1 of subchapter B of chapter 1 is amended by 
striking section 67 (and the item relating to such section in the table 
of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 642(b)(2)(C)(i)(II) is amended to read as 
        follows:
                                    ``(II) by determining the adjusted 
                                gross income of the trust under the 
                                rules of section 2(b)(2) (without the 
                                reference to section 642(b)).''.
            (2) Section 162(o) is amended by striking paragraph (2).
            (3) Section 302(b)(5) is amended by striking ``section 
        67(c)(2)(B)'' and inserting ``section 562(c)(2)''.
            (4) Section 562(c) is amended--
                    (A) by striking ``(as defined in section 
                67(c)(2)(B))'',
                    (B) by striking ``(as so defined)'',
                    (C) by striking ``Except in the case of'' and 
                inserting the following:
            ``(1) In general.--Except in the case of'', and
                    (D) by adding at the end the following new 
                paragraph:
            ``(2) Publicly offered regulated investment company.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `publicly offered 
                regulated investment company' means a regulated 
                investment company the shares of which are--
                            ``(i) continuously offered pursuant to a 
                        public offering (within the meaning of section 
                        4 of the Securities Act of 1933, as amended (15 
                        U.S.C. 77a to 77aa)),
                            ``(ii) regularly traded on an established 
                        securities market, or
                            ``(iii) held by or for no fewer than 500 
                        persons at all times during the taxable year.
                    ``(B) Secretary may reduce 500 person 
                requirement.--The Secretary may by regulation decrease 
                the minimum shareholder requirement of clause (i)(III) 
                in the case of regulated investment companies which 
                experience a loss of shareholders through net 
                redemptions of their shares.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1415. REPEAL OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

    (a) In General.--Part 1 of subchapter B of chapter 1 is amended by 
striking section 68 (and the item relating to such section in the table 
of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1416. DEDUCTION FOR AMORTIZABLE BOND PREMIUM ALLOWED IN 
              DETERMINING ADJUSTED GROSS INCOME.

    (a) In General.--Subsection (a) of section 62, as amended by 
section 1411, is amended by inserting after paragraph (9) the following 
new paragraph:
            ``(10) Amortizable bond premium.--The deduction allowed 
        under section 171(a)(1).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1417. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE ACHIEVEMENT AWARDS.

    (a) In General.--Section 74 is amended by striking subsection (c).
    (b) Repeal of Limitation on Deduction.--Section 274 is amended by 
striking subsection (j).
    (c) Conforming Amendments.--
            (1) Section 102(c)(2) is amended by striking the first 
        sentence.
            (2) Section 414(n)(3)(C) is amended by striking 
        ``274(j),''.
            (3) Section 414(t)(2) is amended by striking ``274(j),''.
            (4) Section 3121(a)(20) is amended by striking ``74(c),''.
            (5) Section 209(a)(17) of the Social Security Act is 
        amended by striking ``74(c),''.
            (6) Section 3231(e)(5) is amended by striking ``74(c),''.
            (7) Section 3306(b)(16) is amended by striking ``74(c),''.
            (8) Section 3401(a)(19) is amended by striking ``74(c),''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1418. CLARIFICATION OF SPECIAL RULE FOR CERTAIN GOVERNMENTAL 
              PLANS.

    (a) Treatment of Beneficiaries.--Section 105(j)(1) is amended--
            (1) by striking ``the taxpayer'' and inserting ``an 
        employee, spouse, dependent (as defined for purposes of 
        subsection (b)), or child (as so defined)'', and
            (2) by striking ``deceased plan participant's beneficiary'' 
        and inserting ``deceased employee's beneficiary who is not a 
        surviving spouse, dependent (as so defined), or child (as so 
        defined)''.
    (b) Application to Political Subdivisions of States.--Section 
105(j)(2) is amended--
            (1) by inserting ``or established by or on behalf of a 
        State or political subdivision thereof'' after ``public 
        retirement system'', and
            (2) by inserting ``or 501(c)(9)'' after ``section 115'' in 
        subparagraph (B) thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments after the date of the enactment of this Act.

SEC. 1419. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HOUSING.

    (a) In General.--Section 119 is amended by adding at the end the 
following new subsection:
    ``(e) Limitation on Exclusion of Lodging.--
            ``(1) In general.--The aggregate amount excluded from gross 
        income of the taxpayer under subsections (a) and (d) with 
        respect to lodging for any taxable year shall not exceed 
        $50,000 (half such amount in the case of a married individual 
        filing a separate return).
            ``(2) Limitation to 1 home.--Subsections (a) and (d) 
        (separately and in combination) shall not apply with respect to 
        more than 1 residence of the taxpayer at any given time. In the 
        case of a joint return, the preceding sentence shall apply 
        separately to each spouse for any period during which each 
        spouse resides separate from the other spouse in a residence 
        which is provided in connection with the employment of each 
        spouse, respectively.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 1420. FRINGE BENEFITS.

    (a) Repeal of Special Rule for Air Transportation by Parent of 
Employee.--Subsection (h) of section 132 is amended by striking 
paragraph (3).
    (b) Transportation and Parking.--
            (1) Freeze at current levels.--
                    (A) In general.--Paragraph (2) of section 132(f) is 
                amended--
                            (i) in subparagraph (A) by striking 
                        ``$100'' and inserting ``$130'', and
                            (ii) in subparagraph (B) by striking 
                        ``$175'' and inserting ``$250''.
                    (B) Inflation adjustment.--Subsection (f) of such 
                section is amended by striking paragraph (6) and 
                redesignating paragraph (7) as paragraph (6).
            (2) Repeal of bicycle benefit.--
                    (A) In general.--Paragraph (1) of section 132(f) is 
                amended by striking subparagraph (D).
                    (B) Conforming amendments.--
                            (i) Section 132(f)(2) is amended by 
                        inserting ``and'' at the end of subparagraph 
                        (A), by striking ``and'' at the end of 
                        subparagraph (B) and inserting a period, and by 
                        striking subparagraph (C).
                            (ii) Section 132(f)(4) is amended by 
                        striking ``(other than a qualified bicycle 
                        commuting reimbursement)''.
                            (iii) Section 132(f)(5) is amended by 
                        striking subparagraph (F).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1421. REPEAL OF EXCLUSION OF NET UNREALIZED APPRECIATION IN 
              EMPLOYER SECURITIES.

    (a) In General.--Section 402(e) is amended by striking paragraph 
(4).
    (b) Conforming Amendments.--
            (1) Section 401(k)(10) is amended by striking subparagraph 
        (B) and inserting the following new subparagraphs:
                    ``(B) Distributions must be lump sum 
                distributions.--A termination shall not be treated as 
                described in subparagraph (A) with respect to any 
                employee unless the employee receives a lump sum 
                distribution by reason of the termination.
                    ``(C) Lump-sum distribution defined.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term `lump sum 
                        distribution' means the distribution or payment 
                        within one taxable year of the recipient of the 
                        balance to the credit of an employee which 
                        becomes payable to the recipient from a trust 
                        which forms a part of a plan described in 
                        section 401(a) and which is exempt from tax 
                        under section 501 or from a plan described in 
                        section 403(a). Such term includes a 
                        distribution of an annuity contract from--
                                    ``(I) a trust which forms a part of 
                                a plan described in section 401(a) and 
                                which is exempt from tax under section 
                                501(a), or
                                    ``(II) an annuity plan described in 
                                section 403(a).
                        For purposes of this clause, a distribution to 
                        two or more trusts shall be treated as a 
                        distribution to one recipient.
                            ``(ii) Aggregation of certain trusts and 
                        plans.--For purposes of determining the balance 
                        to the credit of an employee under clause (i)--
                                    ``(I) all trusts which are part of 
                                a plan shall be treated as a single 
                                trust, all pension plans maintained by 
                                the employer shall be treated as a 
                                single plan, all profit-sharing plans 
                                maintained by the employer shall be 
                                treated as a single plan, and all stock 
                                bonus plans maintained by the employer 
                                shall be treated as a single plan, and
                                    ``(II) trusts which are not 
                                qualified trusts under section 401(a) 
                                and annuity contracts which do not 
                                satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.
                            ``(iii) Community property laws.--The 
                        provisions of this subparagraph shall be 
                        applied without regard to community property 
                        laws.
                            ``(iv) Balance to credit of employee not to 
                        include amounts payable under qualified 
                        domestic relations order.--The balance to the 
                        credit of an employee shall not include any 
                        amount payable to an alternate payee under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)).
                            ``(v) Transfers to cost-of-living 
                        arrangement not treated as distribution.--The 
                        balance to the credit of an employee under a 
                        defined contribution plan shall not include any 
                        amount transferred from such defined 
                        contribution plan to a qualified cost-of-living 
                        arrangement (within the meaning of section 
                        415(k)(2)) under a defined benefit plan. (vii)
                            ``(vi) Lump-sum distributions of alternate 
                        payees.--If any distribution or payment of the 
                        balance to the credit of an employee would be 
                        treated as a lump-sum distribution, then, for 
                        purposes of this paragraph, the payment under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)) of the balance to 
                        the credit of an alternate payee who is the 
                        spouse or former spouse of the employee shall 
                        be treated as a lump-sum distribution. For 
                        purposes of this clause, the balance to the 
                        credit of the alternate payee shall not include 
                        any amount payable to the employee.
                            ``(vii) Exclusion of accumulate deductible 
                        employee contributions.--For purposes of this 
                        subparagraph, the balance to the credit of the 
                        employee does not include the accumulated 
                        deductible employee contributions under the 
                        plan (within the meaning of section 
                        72(o)(5)).''.
            (2) Section 3405(e) is amended by striking paragraph (8).
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2014.

SEC. 1422. CONSISTENT BASIS REPORTING BETWEEN ESTATE AND PERSON 
              ACQUIRING PROPERTY FROM DECEDENT.

    (a) Property Acquired From a Decedent.--Section 1014 is amended by 
adding at the end the following new subsection:
    ``(f) Basis Must Be Consistent With Estate Tax Return.--For 
purposes of this section--
            ``(1) In general.--The basis of any property to which 
        subsection (a) applies shall not exceed--
                    ``(A) in the case of property the final value of 
                which has been determined for purposes of the tax 
                imposed by chapter 11 on the estate of such decedent, 
                such value, and
                    ``(B) in the case of property not described in 
                subparagraph (A) and with respect to which a statement 
                has been furnished under section 6035(a) identifying 
                the value of such property, such value.
            ``(2) Exception.--Paragraph (1) shall only apply to any 
        property whose inclusion in the decedent's estate increased the 
        liability for the tax imposed by chapter 11 (reduced by credits 
        allowable against such tax) on such estate.
            ``(3) Regulations.--The Secretary may by regulations 
        provide exceptions to the application of this subsection.''.
    (b) Information Reporting.--
            (1) In general.--Subpart A of part III of subchapter A of 
        chapter 61 is amended by inserting after section 6034A the 
        following new section:

``SEC. 6035. BASIS INFORMATION TO PERSONS ACQUIRING PROPERTY FROM 
              DECEDENT.

    ``(a) Information With Respect to Property Acquired From 
Decedents.--
            ``(1) In general.--The executor of any estate required to 
        file a return under section 6018(a) shall furnish to the 
        Secretary and to each person acquiring any interest in property 
        included in the decedent's gross estate for Federal estate tax 
        purposes a statement identifying the value of each interest in 
        such property as reported on such return and such other 
        information with respect to such interest as the Secretary may 
        prescribe.
            ``(2) Statements by beneficiaries.--Each person required to 
        file a return under section 6018(b) shall furnish to the 
        Secretary and to each other person who holds a legal or 
        beneficial interest in the property to which such return 
        relates a statement identifying the information described in 
        paragraph (1).
            ``(3) Time for furnishing statement.--
                    ``(A) In general.--Each statement required to be 
                furnished under paragraph (1) or (2) shall be furnished 
                at such time as the Secretary may prescribe, but in no 
                case at a time later than the earlier of--
                            ``(i) the date which is 30 days after the 
                        date on which the return under section 6018 was 
                        required to be filed (including extensions, if 
                        any), or
                            ``(ii) the date which is 30 days after the 
                        date such return is filed.
                    ``(B) Adjustments.--In any case in which there is 
                an adjustment to the information required to be 
                included on a statement filed under paragraph (1) or 
                (2) after such statement has been filed, a supplemental 
                statement under such paragraph shall be filed not later 
                than the date which is 30 days after such adjustment is 
                made.
    ``(b) Regulations.--The Secretary shall prescribe such regulations 
as necessary to carry out this section, including regulations relating 
to--
            ``(1) the application of this section to property with 
        regard to which no estate tax return is required to be filed, 
        and
            ``(2) situations in which the surviving joint tenant or 
        other recipient may have better information than the executor 
        regarding the basis or fair market value of the property.''.
            (2) Penalty for failure to file.--
                    (A) Return.--Section 6724(d)(1) is amended by 
                striking ``and'' at the end of subparagraph (B), by 
                striking the period at the end of subparagraph (C) and 
                inserting ``, and'', and by adding at the end the 
                following new subparagraph:
                    ``(D) any statement required to be filed with the 
                Secretary under section 6035.''.
                    (B) Statement.--Section 6724(d)(2) is amended by 
                striking ``or'' at the end of subparagraph (GG), by 
                striking the period at the end of subparagraph (HH) and 
                inserting ``, or'', and by adding at the end the 
                following new subparagraph:
                    ``(II) section 6035 (other than a statement 
                described in paragraph (1)(D)).''.
            (3) Clerical amendment.--The table of sections for subpart 
        A of part III of subchapter A of chapter 61 is amended by 
        inserting after the item relating to section 6034A the 
        following new item:

``Sec. 6035. Basis information to persons acquiring property from 
                            decedent.''.
    (c) Penalty for Inconsistent Reporting.--
            (1) In general.--Subsection (b) of section 6662 is amended 
        by inserting after paragraph (7) the following new paragraph:
            ``(8) Any inconsistent estate basis.''.
            (2) Inconsistent basis reporting.--Section 6662 is amended 
        by adding at the end the following new subsection:
    ``(k) Inconsistent Estate Basis Reporting.--For purposes of this 
section, the term `inconsistent estate basis' means the portion of the 
understatement which is attributable to in the case of property 
acquired from a decedent, a basis determination with respect to such 
property which is not consistent with the value of such property as 
determined under section 1014(f).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transfers for which an estate tax return is filed after the 
date of the enactment of this Act.

                Subtitle F--Employment Tax Modifications

SEC. 1501. MODIFICATIONS OF DEDUCTION FOR SOCIAL SECURITY TAXES IN 
              COMPUTING NET EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Paragraph (12) of section 1402(a) is amended to 
read as follows:
            ``(12) in lieu of the deduction allowable under section 
        164(f) (relating to deduction for one-half of self-employment 
        taxes), there shall be allowed as a deduction an amount equal 
        to the sum of--
                    ``(A) 7.1064 percent of so much of the individual's 
                net earnings from self-employment for the taxable year 
                (determined without regard to this paragraph) as does 
                not exceed an amount equal to the product of 1.0765 and 
                the excess (if any) of--
                            ``(i) the contribution and benefit base (as 
                        determined under section 230 of the Social 
                        Security Act) in effect for the calendar year 
                        in which the taxable year begins, over
                            ``(ii) the wages (within the meaning of 
                        subsection (b)(1)) paid to the individual 
                        during such taxable year, plus
                    ``(B) 1.4293 percent of the excess (if any) of the 
                individual's net earnings from self-employment for the 
                taxable year (determined without regard to this 
                paragraph) over the amount of such net earnings taken 
                into account under subparagraph (A);''.
    (b) Coordination With Benefits.--Paragraph (11) of section 211(a) 
of the Social Security Act is amended to read as follows:
            ``(11) in lieu of the deduction allowable under section 
        164(f) of the Internal Revenue Code of 1986 (relating to 
        deduction for one-half of self-employment taxes), there shall 
        be allowed as a deduction an amount equal to the sum of--
                    ``(A) 7.1064 percent of so much of the individual's 
                net-earnings from self-employment for the taxable year 
                (determined without regard to this paragraph) as does 
                not exceed an amount equal to the product of 1.0765 and 
                the excess (if any) of--
                            ``(i) the contribution and benefit base (as 
                        determined under section 230) in effect for the 
                        calendar year in which the taxable year begins,
                            ``(ii) the wages (within the meaning of 
                        section 1402(b)(1) of the Internal Revenue Code 
                        of 1986) paid to the individual during such 
                        taxable year, plus
                    ``(B) 1.4293 percent of the excess (if any) of such 
                net earnings over the amount of such net earnings taken 
                into account under subparagraph (A);''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1502. DETERMINATION OF NET EARNINGS FROM SELF-EMPLOYMENT.

    (a) Pro Rata Share of S Corporation Items Included as Net Earnings 
From Self-Employment.--
            (1) In general.--Section 1402(a) is amended by inserting 
        ``, plus (notwithstanding subsection (c)(2)) his pro rata share 
        of nonseparately computed income or loss (as defined in section 
        1366(a)(2)) from any trade or business carried on by an S 
        corporation in which he is a shareholder'' before ``; except 
        that'' in the matter preceding paragraph (1).
            (2) Application of adjustments.--Section 1402(a) is amended 
        by inserting ``and such pro rata share of S corporation 
        nonseparately computed income or loss'' after ``such 
        distributive share of partnership ordinary income or loss'' in 
        the matter preceding paragraph (1).
            (3) Conforming amendments.--Section 211(a) of the Social 
        Security Act is amended in the matter preceding paragraph (1)--
                    (A) by inserting ``, plus (notwithstanding 
                subsection (c)(2)) his pro rata share of nonseparately 
                computed income or loss (as defined in section 
                1366(a)(2) of the Internal Revenue Code of 1986)from 
                any trade or business carried on by an S corporation in 
                which he is a shareholder'' before ``; except that'', 
                and
                    (B) by inserting ``and such pro rata share of S 
                corporation nonseparately computed income or loss'' 
                after ``such distributive share of partnership ordinary 
                income or loss''.
    (b) Repeal of Exception for Limited Partners.--
            (1) In general.--Section 1402(a) is amended by striking 
        paragraph (13).
            (2) Conforming amendment.--Section 211(a) of the Social 
        Security Act is amended by striking paragraph (12).
    (c) Deduction for Return on Invested Capital.--
            (1) In general.--Section 1402 is amended by adding at the 
        end the following new subsection:
    ``(m) Deduction for Return on Invested Capital.--
            ``(1) In general.--An individual's net earnings from self-
        employment shall be reduced (but not below zero) by the lesser 
        of--
                    ``(A) 30 percent of the sum of--
                            ``(i) such individual's pass-through net 
                        earnings from self-employment, and
                            ``(ii) such individual's wages (as defined 
                        in section 3121) paid with respect to any trade 
                        or business carried on by an S corporation in 
                        which he is a shareholder, or
                    ``(B) such individual's pass-through net earnings 
                from self-employment.
            ``(2) Pass-through net earnings from self-employment.--For 
        purposes of this subsection, the term `pass-through net 
        earnings from self-employment' means net earnings from self-
        employment (as computed under subsection (a) without regard to 
        this subsection) determined without regard to any trade or 
        business carried on by the individual.
            ``(3) 100 percent deduction where no material 
        participation.--
                    ``(A) In general.--If an individual does not have 
                material participation with respect to an entity (as 
                determined under subparagraph (B)), in lieu of the 
                reduction provided under paragraph (1) such 
                individual's net earnings from self-employment shall be 
                reduced (but not below zero) by the sum of--
                            ``(i) the reduction determined under 
                        paragraph (1) applied--
                                    ``(I) by substituting `100 percent' 
                                for `30 percent' in subparagraph (A) 
                                thereof, and
                                    ``(II) by determining pass-through 
                                net earnings from self-employment by 
                                only taking into account distributive 
                                and pro rata shares from non-
                                participation entities, and
                                    ``(III) by only taking into account 
                                under subparagraph (A)(ii) thereof 
                                wages paid with respect to trades or 
                                businesses carried on by S corporations 
                                which are non-participation entities, 
                                plus
                            ``(ii) the reduction determined under 
                        paragraph (1) applied--
                                    ``(I) by determining pass-through 
                                net earnings from self-employment by 
                                not taking into account any 
                                distributive or pro rata share from a 
                                non-participation entity, and
                                    ``(II) by not taking into account 
                                under subparagraph (A)(ii) thereof any 
                                wages paid with respect to trades or 
                                businesses carried on by an S 
                                corporation which is a non-
                                participation entity.
                    ``(B) Material participation.--For purposes of this 
                paragraph--
                            ``(i) In general.--An individual does not 
                        have material participation with respect to an 
                        entity (hereafter referred to as the top-tier 
                        entity) if such individual demonstrates to the 
                        satisfaction of the Secretary that such 
                        individual--
                                    ``(I) does not materially 
                                participate (as determined under 
                                section 469(h) without regard to 
                                paragraph (2) thereof) in any activity 
                                carried on by such top-tier entity, and
                                    ``(II) does not materially 
                                participate (as so determined) in any 
                                activity carried on by any entity in 
                                which such top-tier entity holds 
                                (directly or indirectly) any interest.
                            ``(ii) Family attribution.--For purposes of 
                        applying clause (i), the participation of any 
                        individual in any activity shall also be 
                        treated as performed by such individual's 
                        spouse and the lineal descendants of such 
                        individual and such individual's spouse.
                    ``(C) Non-participation entity.--For purposes of 
                this paragraph, the term `non-participation entity' 
                means, with respect to any individual, any entity with 
                respect to which such individual does not have material 
                participation (as determined under subparagraph 
                (B)).''.
            (2) Conforming amendment.--Section 211 of the Social 
        Security Act is amended by adding at the end the following new 
        subsection:
    ``(l) Deduction for Return on Invested Capital.--
            ``(1) In general.--An individual's net earnings from self-
        employment shall be reduced (but not below zero) by the lesser 
        of--
                    ``(A) 30 percent of the sum of--
                            ``(i) such individual's pass-through net 
                        earnings from self-employment, and
                            ``(ii) such individual's wages (as defined 
                        in section 209) paid with respect to any trade 
                        or business carried on by an S corporation in 
                        which he is a shareholder, or
                    ``(B) such individual's pass-through net earnings 
                from self-employment.
            ``(2) Pass-through net earnings from self-employment.--For 
        purposes of this subsection, the term `pass-through net 
        earnings from self-employment' means net earnings from self-
        employment (as computed under subsection (a) without regard to 
        this subsection) determined without regard to any trade or 
        business carried on by the individual.
            ``(3) 100 percent deduction where no material 
        participation.--
                    ``(A) In general.--If an individual does not have 
                material participation with respect to an entity (as 
                determined under subparagraph (B)), in lieu of the 
                reduction provided under paragraph (1) such 
                individual's net earnings from self-employment shall be 
                reduced (but not below zero) by the sum of--
                            ``(i) the reduction determined under 
                        paragraph (1) applied--
                                    ``(I) by substituting `100 percent' 
                                for `30 percent' in subparagraph (A) 
                                thereof, and
                                    ``(II) by determining pass-through 
                                net earnings from self-employment by 
                                only taking into account distributive 
                                and pro rata shares from non-
                                participation entities, and
                                    ``(III) by only taking into account 
                                under subparagraph (A)(ii) thereof 
                                wages paid with respect to trades or 
                                businesses carried on by S corporations 
                                which are non-participation entities, 
                                plus
                            ``(ii) the reduction determined under 
                        paragraph (1) applied--
                                    ``(I) by determining pass-through 
                                net earnings from self-employment by 
                                not taking into account any 
                                distributive or pro rata share from a 
                                nonparticipation entity, and
                                    ``(II) by not taking into account 
                                under subparagraph (A)(ii) thereof any 
                                wages paid with respect to trades or 
                                businesses carried on by an S 
                                corporation which is a nonparticipation 
                                entity.
                    ``(B) Material participation.--For purposes of this 
                paragraph--
                            ``(i) In general.--An individual does not 
                        have material participation with respect to an 
                        entity (hereafter referred to as the top-tier 
                        entity) if such individual demonstrates to the 
                        satisfaction of the Secretary of the Treasury 
                        under section 1402(m) of the Internal Revenue 
                        Code of 1986 that such individual--
                                    ``(I) does not materially 
                                participate (as determined under 
                                section 469(h) of the Internal Revenue 
                                Code of 1986 without regard to 
                                paragraph (2) thereof) in any activity 
                                carried on by such top-tier entity, and
                                    ``(II) does not materially 
                                participate (as so determined) in any 
                                activity carried on by any entity in 
                                which such top-tier entity holds 
                                (directly or indirectly) any interest.
                            ``(ii) Family attribution.--For purposes of 
                        applying clause (i), the participation of any 
                        individual in any activity shall also be 
                        treated as performed by such individual's 
                        spouse and the lineal descendants of such 
                        individual and such individual's spouse.
                    ``(C) Nonparticipation entity.--For purposes of 
                this paragraph, the term `nonparticipation entity' 
                means, with respect to any individual, any entity with 
                respect to which such individual does not have material 
                participation (as determined under subparagraph 
                (B)).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1503. REPEAL OF EXEMPTION FROM FICA TAXES FOR CERTAIN FOREIGN 
              WORKERS.

    (a) In General.--Subsection (b) of section 3121 is amended by 
striking paragraphs (1) and (19).
    (b) Coordination With Benefits.--Subsection (a) of section 210 of 
the Social Security Act is amended by striking paragraphs (1) and (19).
    (c) Railroad Retirement Tax.--Paragraph (1) of section 3231(e) is 
amended by striking the third sentence.
    (d) Effective Date.--The amendments made by this section shall 
apply to remuneration received for services performed after December 
31, 2014.

SEC. 1504. REPEAL OF EXEMPTION FROM FICA TAXES FOR CERTAIN STUDENTS.

    (a) In General.--Paragraph (10) of section 3121(b) is amended--
            (1) by inserting ``during any calendar year'' after 
        ``service performed'' in the matter preceding subparagraph (A), 
        and
            (2) by inserting ``, and the remuneration paid by the 
        employer with respect to such service during such calendar year 
        is less than the dollar amount in effect under section 213(d) 
        of the Social Security Act (relating to amount required for a 
        quarter of coverage) with respect to such year'' before the 
        semicolon at the end.
    (b) College Clubs, Fraternities, and Sororities.--Paragraph (2) of 
section 3121(b) is amended--
            (1) by inserting ``during any calendar year'' after 
        ``domestic service performed'', and
            (2) by inserting ``, if the remuneration paid by the 
        employer with respect to such service during such calendar year 
        is less than the dollar amount in effect under section 213(d) 
        of the Social Security Act (relating to amount required for a 
        quarter of coverage) with respect to such year'' before the 
        semicolon at the end.
    (c) Deduction of Tax From Wages.--Subsection (a) of section 3102 is 
amended by inserting ``; and an employer who in any calendar year pays 
to an employee remuneration to which paragraph (2) or (10) of section 
3121(b) is applicable may deduct an amount equivalent to such tax from 
any such payment of remuneration, even though at the time of payment 
the total amount of such remuneration paid to the employee by the 
employer in the calendar year is less than the dollar amount in effect 
under section 213(d) of the Social Security Act with respect to such 
year'' before the period at the end.
    (d) Coordination With Benefits.--
            (1) Paragraph (10) of section 210(a) of the Social Security 
        Act is amended--
                    (A) by inserting ``during any calendar year'' after 
                ``Service performed'' in the matter preceding 
                subparagraph (A), and
                    (B) by inserting ``, and the remuneration paid by 
                the employer with respect to such service during such 
                calendar year is less than the dollar amount in effect 
                under section 213(d) (relating to amount required for a 
                quarter of coverage) with respect to such year'' before 
                the semicolon at the end.
            (2) Paragraph (2) of section 210(a) of the Social Security 
        Act is amended--
                    (A) by inserting ``during any calendar year'' after 
                ``Domestic service performed'', and
                    (B) by inserting ``, if the remuneration paid by 
                the employer with respect to such service during such 
                calendar year is less than the dollar amount in effect 
                under section 213(d) (relating to amount required for a 
                quarter of coverage) with respect to such year'' before 
                the semicolon at the end.
    (e) Effective Date.--The amendments made by this section shall 
apply to remuneration received for services performed after December 
31, 2014.

SEC. 1505. OVERRIDE OF TREASURY GUIDANCE PROVIDING THAT CERTAIN 
              EMPLOYER-PROVIDED SUPPLEMENTAL UNEMPLOYMENT BENEFITS ARE 
              NOT SUBJECT TO EMPLOYMENT TAXES.

    (a) In General.--Effective with respect to amounts paid after 
December 31, 2014--
            (1) Revenue Ruling 56-249,
            (2) Revenue Ruling 58-128,
            (3) Revenue Ruling 60-330,
            (4) so much of the holding of Revenue Ruling 77-347 as 
        relates to Plan (1) and Plan (2),
            (5) Revenue Ruling 90-72, and
            (6) any other ruling, regulation, or other guidance 
        provided by the Secretary of the Treasury, or his designee, to 
        the extent that such ruling, regulation, or guidance provides 
        that any payment made by an employer by reason of involuntary 
        termination of employment shall not be treated as wages or 
        compensation for purposes of any provision of the Internal 
        Revenue Code of 1986,
shall be null and void. The preceding sentence shall not apply to the 
extent a ruling, regulation, or other guidance implements a statutory 
exception to wages or compensation.
    (b) Repeal of Withholding Requirement.--
            (1) In general.--Section 3402(o)(1) is amended by striking 
        subparagraph (A) and by redesignating subparagraphs (B) and (C) 
        as subparagraphs (A) and (B), respectively.
            (2) Conforming amendments.--
                    (A) Section 3402(o)(2) is amended by striking 
                subparagraph (A) and by redesignating subparagraphs (B) 
                and (C) as subparagraphs (A) and (B), respectively.
                    (B) Section 3402(o)(5)(A) is amended by striking 
                ``paragraph (1)(C)'' and inserting ``paragraph 
                (1)(B)''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to amounts paid after December 
                31, 2013.
                    (B) No inference.--No amendment made by this 
                subsection shall be construed to create any inference 
                with respect to any amounts paid before January 1, 
                2014.

SEC. 1506. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.

    (a) Employment Taxes.--Chapter 25 is amended by adding at the end 
the following new section:

``SEC. 3511. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.

    ``(a) General Rules.--For purposes of the taxes and other 
obligations imposed by this subtitle--
            ``(1) a certified professional employer organization shall 
        be treated as the employer (and no other person shall be 
        treated as the employer) of any work site employee performing 
        services for any customer of such organization, but only with 
        respect to remuneration remitted by such organization to such 
        work site employee, and
            ``(2) the exemptions, exclusions, definitions, and other 
        rules which are based on type of employer and which would (but 
        for paragraph (1)) apply shall apply with respect to such taxes 
        imposed on such remuneration.
    ``(b) Successor Employer Status.--For purposes of sections 
3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)--
            ``(1) a certified professional employer organization 
        entering into a service contract with a customer with respect 
        to a work site employee shall be treated as a successor 
        employer and the customer shall be treated as a predecessor 
        employer during the term of such service contract, and
            ``(2) a customer whose service contract with a certified 
        professional employer organization is terminated with respect 
        to a work site employee shall be treated as a successor 
        employer and the certified professional employer organization 
        shall be treated as a predecessor employer.
    ``(c) Liability of Certified Professional Employer Organization.--
Solely for purposes of its liability for the taxes and other 
obligations imposed by this subtitle--
            ``(1) a certified professional employer organization shall 
        be treated as the employer of any work site employee (other 
        than a person described in subsection (e)) who is performing 
        services covered by a contract meeting the requirements of 
        section 7706(e)(2), but only with respect to remuneration 
        remitted by such organization to such individual, and
            ``(2) exemptions, exclusions, definitions, and other rules 
        which are based on type of employer and which would (but for 
        paragraph (1)) apply shall apply with respect to such taxes 
        imposed on such remuneration.
    ``(d) Special Rule for Related Party.--This section shall not apply 
in the case of a customer which bears a relationship to a certified 
professional employer organization described in section 267(b) or 
707(b). For purposes of the preceding sentence, such sections shall be 
applied by substituting `10 percent' for `50 percent'.
    ``(e) Special Rule for Certain Individuals.--For purposes of the 
taxes imposed under this subtitle, an individual with net earnings from 
self-employment derived from the customer's trade or business 
(including a partner in a partnership that is a customer), is not a 
work site employee with respect to remuneration paid by a certified 
professional employer organization.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Certified Professional Employer Organization Defined.--Chapter 
79, as amended by the preceding provisions of this Act, is amended by 
adding at the end the following new section:

``SEC. 7706. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZATIONS.

    ``(a) In General.--For purposes of this title, the term `certified 
professional employer organization' means a person who applies to be 
treated as a certified professional employer organization for purposes 
of section 3511 and who has been certified by the Secretary as meeting 
the requirements of subsection (b).
    ``(b) Certification Requirements.--A person meets the requirements 
of this subsection if such person--
            ``(1) demonstrates that such person (and any owner, 
        officer, and such other persons as may be specified in 
        regulations) meets such requirements as the Secretary shall 
        establish with respect to tax status, background, experience, 
        business location, and annual financial audits,
            ``(2) agrees that it will satisfy the bond and independent 
        financial review requirements of subsections (c) on an ongoing 
        basis,
            ``(3) agrees that it will satisfy such reporting 
        obligations as may be imposed by the Secretary,
            ``(4) computes its taxable income using an accrual method 
        of accounting unless the Secretary approves another method,
            ``(5) agrees to verify on such periodic basis as the 
        Secretary may prescribe that it continues to meet the 
        requirements of this subsection, and
            ``(6) agrees to notify the Secretary in writing, within 
        such time as the of Secretary may prescribe, of any change that 
        materially affects the continuing accuracy of any agreement or 
        information which was previously made or provided.
    ``(c) Bond and Independent Financial Review.--
            ``(1) In general.--An organization meets the requirements 
        of this paragraph if such organization--
                    ``(A) meets the bond requirements of paragraph (2), 
                and
                    ``(B) meets the independent financial review 
                requirements of paragraph (3).
            ``(2) Bond.--
                    ``(A) In general.--A certified professional 
                employer organization meets the requirements of this 
                paragraph if the organization has posted a bond for the 
                payment of taxes under subtitle C (in a form acceptable 
                to the Secretary) that is in an amount at least equal 
                to the amount specified in subparagraph (B).
                    ``(B) Amount of bond.--
                            ``(i) In general.--For the period April 1 
                        of any calendar year through March 31 of the 
                        following calendar year, the amount of the bond 
                        required is equal to the greater of--
                                    ``(I) 5 percent of the 
                                organization's liability under section 
                                3511 for taxes imposed by subtitle C 
                                during the preceding calendar year (but 
                                not to exceed $1,000,000), or
                                    ``(II) $50,000.
                            ``(ii) Special rule for newly created 
                        professional employer organizations.--During 
                        the first three full calendar years that an 
                        organization is in existence, subclause (I) of 
                        clause (i) shall not apply. For this purpose--
                                    ``(I) under rules provided by the 
                                Secretary, an organization is treated 
                                as in existence as of the date that 
                                such organization began providing 
                                services to any customer which were 
                                comparable to the services being 
                                provided with respect to work site 
                                employees, regardless of whether such 
                                date occurred before or after the 
                                organization is certified under 
                                subsection (b), and
                                    ``(II) an organization with 
                                liability under section 3511 for taxes 
                                imposed by subtitle C during the 
                                preceding calendar year in excess of 
                                $5,000,000 shall no longer be described 
                                in this clause (ii) as of April 1 of 
                                the year following such calendar year.
            ``(3) Independent financial review requirements.--A 
        certified professional employer organization meets the 
        requirements of this paragraph if such organization--
                    ``(A) has, as of the most recent audit date, caused 
                to be prepared and provided to the Secretary (in such 
                manner as the Secretary may prescribe) an opinion of an 
                independent certified public accountant as to whether 
                the certified professional employer organization's 
                financial statements are presented fairly in accordance 
                with generally accepted accounting principles, and
                    ``(B) provides to the Secretary an assertion 
                regarding Federal employment tax payments and an 
                examination level attestation on such assertion from an 
                independent certified public accountant not later than 
                the last day of the second month beginning after the 
                end of each calendar quarter. Such assertion shall 
                state that the organization has withheld and made 
                deposits of all taxes imposed by chapters 21, 22, and 
                24 of the Internal Revenue Code in accordance with 
                regulations imposed by the Secretary for such calendar 
                quarter and such examination level attestation shall 
                state that such assertion is fairly stated, in all 
                material respects.
            ``(4) Controlled group rules.--For purposes of the 
        requirements of paragraphs (2) and (3), all professional 
        employer organizations that are members of a controlled group 
        within the meaning of sections 414(b) and (c) shall be treated 
        as a single organization.
            ``(5) Failure to file assertion and attestation.--If the 
        certified professional employer organization fails to file the 
        assertion and attestation required by paragraph (3) with 
        respect to any calendar quarter, then the requirements of 
        paragraph (3) with respect to such failure shall be treated as 
        not satisfied for the period beginning on the due date for such 
        attestation.
            ``(6) Audit date.--For purposes of paragraph (3)(A), the 
        audit date shall be six months after the completion of the 
        organization's fiscal year.
    ``(d) Suspension and Revocation Authority.--The Secretary may 
suspend or revoke a certification of any person under subsection (b) 
for purposes of section 3511 if the Secretary determines that such 
person is not satisfying the agreements or requirements of subsections 
(b) or (c), or fails to satisfy applicable accounting, reporting, 
payment, or deposit requirements.
    ``(e) Work Site Employee.--For purposes of this title--
            ``(1) In general.--The term `work site employee' means, 
        with respect to a certified professional employer organization, 
        an individual who--
                    ``(A) performs services for a customer pursuant to 
                a contract which is between such customer and the 
                certified professional employer organization and which 
                meets the requirements of paragraph (2), and
                    ``(B) performs services at a work site meeting the 
                requirements of paragraph (3).
            ``(2) Service contract requirements.--A contract meets the 
        requirements of this paragraph with respect to an individual 
        performing services for a customer if such contract is in 
        writing and provides that the certified professional employer 
        organization shall--
                    ``(A) assume responsibility for payment of wages to 
                the individual, without regard to the receipt or 
                adequacy of payment from the customer for such 
                services,
                    ``(B) assume responsibility for reporting, 
                withholding, and paying any applicable taxes under 
                subtitle C, with respect to the individual's wages, 
                without regard to the receipt or adequacy of payment 
                from the customer for such services,
                    ``(C) assume responsibility for any employee 
                benefits which the service contract may require the 
                certified professional employer organization to 
                provide, without regard to the receipt or adequacy of 
                payment from the customer for such services,
                    ``(D) assume responsibility for hiring, firing and 
                for recruiting workers in addition to the customer's 
                responsibility for recruiting, hiring, and firing 
                workers,
                    ``(E) maintain employee records relating to the 
                individual, and
                    ``(F) agree to be treated as a certified 
                professional employer organization for purposes of 
                section 3511 with respect to such individual.
            ``(3) Work site coverage requirement.--The requirements of 
        this paragraph are met with respect to an individual if at 
        least 85 percent of the individuals performing services for the 
        customer at the work site where such individual performs 
        services are subject to 1 or more contracts with the certified 
        professional employer organization which meet the requirements 
        of paragraph (2) (but not taking into account those individuals 
        who are excluded employees within the meaning of section 
        414(q)(5)).
    ``(f) Determination of Employment Status.--Except to the extent 
necessary for purposes of section 3511, nothing in this section shall 
be construed to affect the determination of who is an employee or 
employer for purposes of this title.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (c) Conforming Amendments.--
            (1) Section 3302 is amended by adding at the end the 
        following new subsection:
    ``(h) Treatment of Certified Professional Employer Organizations.--
If a certified professional employer organization (as defined in 
section 7706), or a customer of such organization, makes a contribution 
to the State's unemployment fund with respect to a work site employee, 
such organization shall be eligible for the credits available under 
this section with respect to such contribution.''.
            (2) Section 3303(a) is amended--
                    (A) by striking the period at the end of paragraph 
                (3) and inserting ``; and'' and by inserting after 
                paragraph (3) the following new paragraph:
            ``(4) if the taxpayer is a certified professional employer 
        organization (as defined in section 7706) that is treated as 
        the employer under section 3511, such certified professional 
        employer organization is permitted to collect and remit, in 
        accordance with paragraphs (1), (2), and (3), contributions 
        during the taxable year to the State unemployment fund with 
        respect to a work site employee.'', and
            (B) in the last sentence--
                    (i) by striking ``paragraphs (1), (2), and (3)'' 
                and inserting ``paragraphs (1), (2), (3), and (4)'', 
                and
                    (ii) by striking ``paragraph (1), (2), or (3)'' and 
                inserting ``paragraph (1), (2), (3), or (4)''.
            (3) Section 6053(c) is amended by adding at the end the 
        following new paragraph:
            ``(8) Certified professional employer organizations.--For 
        purposes of any report required by this subsection, in the case 
        of a certified professional employer organization that is 
        treated, under section 3511, as the employer of a work site 
        employee, the customer with respect to whom a work site 
        employee performs services shall be the employer for purposes 
        of reporting under this section and the certified professional 
        employer organization shall furnish to the customer any 
        information necessary to complete such reporting no later than 
        such time as the Secretary shall prescribe.''.
    (d) Clerical Amendments.--
            (1) The table of sections for chapter 25 is amended by 
        adding at the end the following new item:

``Sec. 3511. Certified professional employer organizations.''.
            (2) The table of sections for chapter 79, as amended by the 
        preceding provisions of this Act, is amended by adding at the 
        end the following new item:

``Sec. 7706. Certified professional employer organizations.''.
    (e) Reporting Requirements and Obligations.--The Secretary of the 
Treasury shall develop such reporting and recordkeeping rules, 
regulations, and procedures as the Secretary determines necessary or 
appropriate to ensure compliance with the amendments made by this 
section with respect to entities applying for certification as 
certified professional employer organizations or entities that have 
been so certified. Such rules shall be designed in a manner which 
streamlines, to the extent possible, the application of requirements of 
such amendments, the exchange of information between a certified 
professional employer organization and its customers, and the reporting 
and recordkeeping obligations of the certified professional employer 
organization.
    (f) User Fees.--Subsection (b) of section 7528 is amended by adding 
at the end thereof the following new paragraph:
            ``(4) Certified professional employer organizations.--The 
        fee charged under the program in connection with the 
        certification by the Secretary of a professional employer 
        organization under section 7706 shall be an annual fee not to 
        exceed $1,000 per year.''.
    (g) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to wages for services performed on or after 
        January 1 of the first calendar year beginning more than 12 
        months after the date of the enactment of this Act.
            (2) Certification program.--The Secretary of the Treasury 
        shall establish the certification program described in section 
        7706(b) of the Internal Revenue Code of 1986, as added by this 
        section, not later than 6 months before the effective date 
        determined under paragraph (1).
    (h) No Inference.--Nothing contained in this section or the 
amendments made by this section shall be construed to create any 
inference with respect to the determination of who is an employee or 
employer--
            (1) for Federal tax purposes (other than the purposes set 
        forth in the amendments made by this section), or
            (2) for purposes of any other provision of law.

                  Subtitle G--Pensions and Retirement

                  PART 1--INDIVIDUAL RETIREMENT PLANS

SEC. 1601. ELIMINATION OF INCOME LIMITS ON CONTRIBUTIONS TO ROTH IRAS.

    (a) In General.--Subsection (c) of section 408A is amended by 
striking paragraph (3).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1602. NO NEW CONTRIBUTIONS TO TRADITIONAL IRAS.

    (a) In General.--
            (1) Individual retirement accounts.--Paragraph (1) of 
        section 408(a) is amended by striking ``in excess of the 
        amount'' and all that follows through the end and inserting the 
        following: ``unless it is a contribution under a simplified 
        employee pension described in subsection (k) not in excess of 
        the amount of the limitation in effect for such taxable year 
        under section 415(c)(1)(A), a contribution to a simple 
        retirement account described in subsection (p) not in excess of 
        the amount described in section 408(p)(8) for such taxable 
        year, or a contribution to a Roth IRA described in section 408A 
        not in excess of the amount in effect for the taxable year with 
        respect to such individual under section 408A(c)(1)(A)(i).''.
            (2) Individual retirement annuities.--
                    (A) In general.--Subparagraph (B) of section 
                408(b)(2) is amended to read as follows:
                    ``(B) any amount paid as a premium on behalf of any 
                individual for a taxable year would meet the 
                requirements of subsection (a)(1) if it were paid as a 
                contribution to an individual retirement account, 
                and''.
                    (B) Endowment contract requirement.--The last 
                sentence of section 408(b) is amended by striking ``the 
                dollar amount in effect under section 219(b)(1)(A)'' 
                and inserting ``the amounts described in paragraph 
                (2)(B)''.
    (b) Conforming Amendments.--
            (1) Amendments relating to deductibility.--
                    (A) Section 219(a) is amended by striking ``equal 
                to the qualified retirement contributions of the 
                individual'' and inserting ``equal to the amounts 
                contributed on behalf of the individual to a plan 
                described in section 501(c)(18)''.
                    (B) Section 219(b) is amended--
                            (i) by striking ``Maximum Amount of 
                        Deduction'' and all that follows through 
                        ``Notwithstanding paragraph (1), the amount 
                        allowable as a deduction'' and inserting 
                        ``Maximum Amount of Deduction.--The amount 
                        allowable as a deduction'', and
                            (ii) by striking paragraphs (4) and (5).
                    (C) Section 219 is amended by striking subsections 
                (c), (d), (e), (g), and (h) and by redesignating 
                subsection (f) as subsection (c).
                    (D) Section 219(c), as so redesignated, is 
                amended--
                            (i) by striking ``Other Definitions and 
                        Special Rules'' and inserting ``Special 
                        Rules'',
                            (ii) by striking paragraphs (1), (3), (4), 
                        (5), (6), (7), and (8), and
                            (iii) by inserting before paragraph (2) the 
                        following new paragraph:
            ``(1) Beneficiary must be under age 70\1/2\.--No deduction 
        shall be allowed under this section with respect to any amount 
        contributed on behalf of an individual to a plan described in 
        section 501(c)(18) if such individual has attained age 70\1/2\ 
        before the close of such individual's taxable year for which 
        the contribution was made.''.
                    (E) Section 4973(b)(2)(C) is amended by striking 
                ``(determined without regard to section 219(f)(6))''.
            (2) Amendments relating to roth ira contribution limits.--
                    (A) Section 408A(c), as amended by this Act, is 
                amended--
                            (i) by striking paragraphs (1) and (2) and 
                        inserting the following new paragraphs:
            ``(1) Maximum contribution.--
                    ``(A) In general.--The aggregate amount of 
                contributions for any taxable year to all Roth IRAs 
                maintained for the benefit of an individual shall not 
                exceed the lesser of--
                            ``(i) $5,500, or
                            ``(ii) an amount equal to the compensation 
                        includible in the individual's gross income for 
                        such taxable year.
                    ``(B) Catch-up contributions for individuals 50 or 
                older.--In the case of an individual who has attained 
                the age of 50 before the close of the taxable year, the 
                amount in effect under subparagraph (A)(i) for such 
                taxable year shall be increased by $1,000.
            ``(2) Special rule for certain married individuals.--In the 
        case of an individual to whom this paragraph applies for the 
        taxable year, the limitation of paragraph (1) shall be equal to 
        the lesser of--
                    ``(A) the dollar amount in effect under paragraph 
                (1)(A)(i) for the taxable year, or
                    ``(B) the sum of--
                            ``(i) the compensation includible in such 
                        individual's gross income for the taxable year, 
                        plus
                            ``(ii) the compensation includible in the 
                        gross income of such individual's spouse for 
                        the taxable year reduced by--
                                    ``(I) the amount allowed as a 
                                deduction under section 219(a) to such 
                                spouse for such taxable year,
                                    ``(II) the amount of any 
                                contribution on behalf of such spouse 
                                to a Roth IRA for such taxable year.
            ``(3) Individuals to whom paragraph (2) applies.--Paragraph 
        (2) shall apply to any individual if--
                    ``(A) such individual files a joint return for the 
                taxable year, and
                    ``(B) the amount of compensation (if any) 
                includible in such individual's gross income for the 
                taxable year is less than the compensation includible 
                in the gross income of such individual's spouse for the 
                taxable year.''.
                            (ii) by striking ``paragraph (2)'' in 
                        paragraph (6) and inserting ``paragraph (1)'',
                            (iii) by striking ``the rule of section 
                        219(f)(3) shall apply'' in paragraph (7) and 
                        inserting the following: ``a taxpayer shall be 
                        deemed to have made a contribution to a Roth 
                        IRA on the last day of the preceding taxable 
                        year if the contribution is made on account of 
                        such taxable year and is made not later than 
                        the time prescribed by law for filing the 
                        return for such taxable year (not including 
                        extensions thereof)'', and
                            (iv) by adding at the end the following new 
                        paragraphs:
            ``(8) Compensation.--For purposes of this section, the term 
        `compensation' includes earned income (as defined in section 
        401(c)(2)). The term `compensation' does not include any amount 
        received as a pension or annuity and does not include any 
        amount received as deferred compensation. For purposes of this 
        paragraph, section 401(c)(2) shall be applied as if the term 
        trade or business for purposes of section 1402 included service 
        described in subsection (c)(6) thereof. The term compensation 
        includes any differential wage payment (as defined in section 
        3401(h)(2)).
            ``(9) Married individuals.--The limitation under this 
        subsection shall be computed separately for each individual, 
        and this section shall be applied without regard to any 
        community property laws.
            ``(10) Special rule for compensation earned by members of 
        armed forces for services in combat zone.--For purposes of 
        paragraphs (1)(A)(ii) and (2), the amount of compensation 
        includible in an individual's gross income shall be determined 
        without regard to section 112.''.
                    (B) Section 408A(d)(3)(A) is amended--
                            (i) by inserting ``and'' at the end of 
                        clause (i),
                            (ii) by striking ``, and'' at the end of 
                        clause (ii) and inserting a period,
                            (iii) by striking clause (iii), and
                            (iv) by striking the last sentence.
            (3) Amendments relating to traditional iras.--
                    (A) Section 408(d)(4) is amended--
                            (i) by striking subparagraph (B) and 
                        inserting the following:
                    ``(B) in the case of simplified employee pension, 
                such contribution is not excluded from gross income 
                under section 402(h),''.
                            (ii) by adding at the end the following: 
                        ``This paragraph shall not apply to any 
                        contribution to a simple retirement account.''.
                    (B) Section 408(d)(5)(A) is amended--
                            (i) by striking ``in effect under section 
                        219(b)(1)(A)'' and inserting ``in effect with 
                        respect to the taxpayer for the taxable year 
                        under section 408A(c)(1)(A)(i)'',
                            (ii) by striking ``the amount allowable as 
                        a deduction'' and all that follows through 
                        ``such excess contribution.'' and inserting 
                        ``the amount that may be contributed under 
                        section 408A(c)(1) for the taxable year for 
                        which the contribution was made if such 
                        distribution is received after the date 
                        described in paragraph (4).'',
                            (iii) by adding at the end of subparagraph 
                        (A) the following: ``This paragraph shall not 
                        apply to any contribution to a simple 
                        retirement account.'', and
                            (iv) by striking the last sentence.
                    (C) Section 408 is amended by striking subsection 
                (o).
            (4) Amendments relating to simple retirement accounts.--
                    (A) Section 408(p)(2)(D)(ii) is amended by striking 
                ``means a plan, contract'' and all that follows through 
                the period at the end and inserting the following: 
                ``means--
                                    ``(I) a plan described in section 
                                401(a) which includes a trust exempt 
                                from tax under section 501(a),
                                    ``(II) an annuity plan described in 
                                section 403(a),
                                    ``(III) an eligible deferred 
                                compensation plan (as defined in 
                                section 457(b)) of an eligible employer 
                                described in section 457(e)(1)(A)),
                                    ``(IV) an annuity contract 
                                described in section 403(b),
                                    ``(V) a simplified employee pension 
                                (within the meaning of section 408(k)),
                                    ``(VI) any simple retirement 
                                account (within the meaning of section 
                                408(p)), or
                                    ``(VII) a trust described in 
                                section 501(c)(18).''.
                    (B) Section 408(p)(8) is amended to read as 
                follows:
            ``(8) Coordination with maximum limitation under subsection 
        (a).--In the case of a simple retirement account, for purposes 
        of subsections (a)(1) and (b)(2), contributions may not exceed 
        the sum of--
                    ``(A) the dollar amount in effect under paragraph 
                (2)(A)(ii), and
                    ``(B) the employer contribution required under 
                subparagraph (A)(iii) or (B)(i) of paragraph (2), 
                whichever is applicable.''.
            (5) Amendments relating to seps.--Section 408 is amended by 
        striking subsection (j).
            (6) Amendments relating to excise tax on excess 
        contributions.--
                    (A) Traditional iras.--Subsection (b) of section 
                4973 is amended--
                            (i) by striking paragraph (1) and inserting 
                        the following:
            ``(1) the amounts contributed for the taxable year to the 
        accounts or for the annuities or bonds (other than any 
        contributions to a Roth IRA) which are not permitted 
        contributions under subsection (a)(1) or (b)(2) of section 408, 
        and''.
                            (ii) in paragraph (2)(C), by striking ``the 
                        maximum amount allowable'' and all that follows 
                        through ``without regard to section 
                        219(f)(6))'' and inserting ``the permitted 
                        contributions under subsection (a)(1) or (b)(2) 
                        of section 408 for the taxable year over the 
                        amount contributed'', and
                            (iii) by striking the last sentence and 
                        inserting the following: ``Paragraph (2) shall 
                        be determined separately with respect to any 
                        simplified employee pension (within the meaning 
                        of section 408(k)) and any simple retirement 
                        account (within the meaning of section 
                        408(p)).''.
                    (B) Roth iras.--Section 4973(f) is amended by 
                striking ``sections 408A(c)(2) and (c)(3)'' each place 
                it appears and inserting ``section 408A(c)(1)''.
            (7) Amendments relating to saver's credit.--Section 
        25B(d)(1)(A) is amended to read as follows:
                    ``(A) the amounts--
                            ``(i) paid in cash for the taxable year by 
                        or on behalf of an individual to all Roth IRAs 
                        maintained for such individual's benefit, and
                            ``(ii) contributed on behalf of the 
                        individual to a plan described in section 
                        501(c)(18),''.
            (8) Other conforming amendments.--
                    (A) Section 86(f)(3) is amended by striking 
                ``219(f)(1)'' and inserting ``section 408A(c)(8)''.
                    (B) Section 132(m)(3) is amended by striking 
                ``section 219(g)(5)'' and inserting ``section 
                408(p)(2)(D)(ii)''.
                    (C)(i) Section 223(d) is amended--
                            (I) by redesignating paragraph (4) as 
                        paragraph (7),
                            (II) by inserting after paragraph (3) the 
                        following new paragraphs:
            ``(4) Recontributed amounts.--No deduction shall be allowed 
        under this section with respect to a rollover contribution 
        described in subsection (f)(5).
            ``(5) Time when contributions deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to a health savings account on the last day of the 
        preceding taxable year if the contribution is made on account 
        of such taxable year and is made not later than the time 
        prescribed by law for filing the return for such taxable year 
        (not including extensions thereof).
            ``(6) Employer payments.--Except as provided in section 
        106(d), for purposes of this title, any amount paid by an 
        employer to a health savings account shall be treated as 
        payment of compensation to the employee (other than a self-
        employed individual who is an employee within the meaning of 
        section 401(c)(1)) includible in his gross income in the 
        taxable year for which the amount was contributed, whether or 
        not a deduction for such payment is allowable under this 
        section to the employee.''.
                    (ii) Section 223(d)(7), as so redesignated, is 
                amended by striking subparagraphs (A), (B), and (C), 
                and redesignating subparagraphs (D) and (E) as 
                subparagraphs (A) and (B), respectively.
                    (D) Section 409A(d)(2)(A) is amended by striking 
                ``subparagraph (A) or (B) of section 219(g)(5) (without 
                regard to subparagraph (A)(iii))'' and inserting 
                ``section 408(p)(2)(D)(ii) (without regard to subclause 
                (III) thereof)''.
                    (E) Section 501(c)(18)(D)(i) is amended by striking 
                ``section 219(b)(3)'' and inserting ``section 219(a)''.
                    (F) Section 877A(d)(4)(A) is amended by striking 
                ``section 219(g)(5)'' and inserting 
                ``408(p)(2)(D)(ii)''.
                    (G) Section 6652 is amended by striking subsection 
                (g).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1603. INFLATION ADJUSTMENT FOR ROTH IRA CONTRIBUTIONS.

    (a) In General.--Subsection (c) of section 408A, as amended by this 
Act, is amended by adding at the end the following new paragraph:
            ``(11) Cost-of-living adjustment.--In the case of any 
        taxable year beginning after 2023, the dollar amount in 
        paragraph (1)(A)(i) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2022' for `calendar year 2012' in clause 
                (ii) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $500, such increase shall be rounded to the next 
        lowest multiple of $500.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 1604. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF ROTH 
              IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.

    (a) In General.--Section 408A(d) is amended by striking paragraph 
(6) and by redesignating paragraph (7) as paragraph (6).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1605. REPEAL OF EXCEPTION TO 10-PERCENT PENALTY FOR FIRST HOME 
              PURCHASES.

    (a) In General.--Section 72(t)(2) is amended by striking 
subparagraph (F).
    (b) Roth IRAs.--Subparagraph (A) of section 408A(d)(2) is amended 
by inserting ``or'' at the end of clause (ii), and by striking ``, or'' 
at the end of clause (iii) and inserting a period, and by striking 
clause (iv).
    (c) Conforming Amendment.--
            (1) Section 72(t) is amended by striking paragraph (8).
            (2) Section 408A(d), as amended by this Act, is amended by 
        striking paragraph (5) and by redesignating paragraph (6) as 
        paragraph (5).
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2014.

                    PART 2--EMPLOYER-PROVIDED PLANS

SEC. 1611. TERMINATION FOR NEW SEPS.

    (a) In General.--
            (1) Section 408(k) is amended by redesignating paragraph 
        (9) as paragraph (10) and by inserting after paragraph (8) the 
        following new paragraph:
            ``(9) Termination.--This subsection shall not apply to 
        years beginning after December 31, 2014. The preceding sentence 
        shall not apply to any simplified employee pension of an 
        employer if such simplified employee pension, and the terms 
        thereof, meet the requirements of this subsection on and after 
        such date.''.
            (2) Section 402(h) is amended by adding at the end the 
        following new paragraph:
            ``(4) Termination.--This subsection shall not apply to any 
        simplified employee pension the arrangement for which is 
        established after December 31, 2014.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1612. TERMINATION FOR NEW SIMPLE 401(K)S.

    (a) Amendments Relating to SIMPLE 401(k)s.--Section 401(k)(11) is 
amended by adding at the end the following new subparagraph:
                    ``(E) Termination.--This paragraph shall apply to a 
                cash or deferred arrangement for any plan year 
                beginning after December 31, 2014, only if such 
                arrangement meets the requirements of this paragraph 
                for the last plan year beginning before January 1, 
                2015, and for each plan year thereafter.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2014.

SEC. 1613. RULES RELATED TO DESIGNATED ROTH CONTRIBUTIONS.

    (a) Applicable Retirement Plans Which Permit Elective Deferrals 
Required To Accept Designated Roth Contributions.--
            (1) In general.--Paragraph (30) of section 401(a) is 
        amended--
                    (A) by striking ``deferrals.--'' and all that 
                follows through ``In the case of a trust'' and 
                inserting the following: ``deferrals.--
                    ``(A) In general.--In the case of a trust'',
                    (B) by striking ``unless the plan provides that'' 
                and inserting the following: ``unless the plan--
                            ``(i) provides that'',
                    (C) by striking the period at the end and inserting 
                ``, and'', and
                    (D) by adding at the end the following:
                            ``(ii) except as provided in subparagraph 
                        (B), includes a qualified Roth contribution 
                        program (as defined in section 402A(b)).
                    ``(B) Exception for certain small plans.--
                Subparagraph (A)(ii) shall not apply to any plan of an 
                eligible employer (as defined in section 
                408(p)(2)(C)).''.
            (2) Conforming amendments.--
                    (A) Section 402A(b)(1) is amended by striking all 
                that follows ``designated Roth contributions'' and 
                inserting a period.
                    (B) The heading of section 402A (and the item 
                relating to such section in the table of sections for 
                part I of subchapter D of chapter 1) is amended by 
                striking ``optional treatment of elective deferrals as 
                roth contributions'' and inserting ``designated roth 
                contributions''.
    (b) Restriction on Portion of Elective Deferral Limitation Which 
May Apply to Traditional Elective Deferrals.--
            (1) In general.--Subparagraph (A) of section 402(g)(1) is 
        amended by striking ``the applicable dollar amount'' and 
        inserting ``50 percent (100 percent in the case of elective 
        deferrals with respect to any plan of an eligible employer (as 
        defined in section 408(p)(2)(C)) of the applicable dollar 
        amount''.
            (2) Government 457(b) plans.--
                    (A) In general.--Subsection (b) of section 457 is 
                amended by striking ``and'' at the end of paragraph 
                (5), by redesignating paragraph (6) as paragraph (7), 
                and by inserting after paragraph (5) the following new 
                paragraph:
            ``(6) which, in the case of a plan maintained by an 
        employer described in subsection (e)(1)(A), meets requirements 
        similar to the requirements of section 401(a)(30), and''.
                    (B) Conforming amendment.--Section 402(g)(1)(A) is 
                amended by inserting ``and section 457(a)(1)'' after 
                ``(h)(1)(B)''.
                    (C) Cross-reference.--For treatment of amounts 
                deferred under an eligible compensation plan of a 
                governmental employer as elective deferrals, see 
                section 1618(b)(1) of this Act.
            (3) Roth elective deferrals permitted to extent of full 
        limitation amount.--
                    (A) In general.--Section 402A(c)(2)(A) is amended 
                to read as follows:
                    ``(A) the applicable dollar amount in effect under 
                section 402(g)(1)(B) with respect to the employee for 
                the taxable year, over''.
                    (B) Conforming amendments.--
                            (i) Section 401(a)(30) is amended--
                                    (I) by inserting ``(including 
                                contributions treated as elective 
                                deferrals under section 402A(a)(1))'' 
                                after ``section 402(g)(3)'', and
                                    (II) by striking ``section 
                                402(g)(1)(A)'' and inserting ``section 
                                402(g)(1)(B), and that the amount of 
                                elective deferrals not included in 
                                gross income may not exceed the amount 
                                of the limitation in effect under 
                                section 402(g)(1)(A),''.
                            (ii) Section 402(g)(1)(C) is amended--
                                    (I) by striking ``In addition to 
                                subparagraph (A)'' and inserting ``For 
                                purposes of subparagraph (A)''.
                                    (II) by striking ``gross income 
                                shall not include'' and all that 
                                follows through ``does not exceed'' and 
                                inserting ``the applicable dollar 
                                amount in effect for the taxable year 
                                under subparagraph (B) shall be 
                                increased by''.
                            (iii)(I) So much of section 402(g)(2)(A) as 
                        precedes clause (i) is amended to read as 
                        follows:
                    ``(A) In general.--If an individual's aggregate 
                elective deferrals for a taxable year exceed the 
                applicable dollar amount under paragraph (1) 
                (hereinafter in this paragraph referred to as `excess 
                total deferrals') or if an individual's aggregate 
                elective deferrals (disregarding designated Roth 
                contributions and simple Roth contributions) exceed the 
                amount excludable under paragraph (1)(A) (hereinafter 
                in this paragraph referred to as `excess non-Roth 
                deferrals')--''.
                            (II) Section 402(g)(2)(A)(i) is amended by 
                        striking ``such excess deferrals'' and 
                        inserting ``such excess total deferrals or 
                        excess non-Roth deferrals''.
                            (III) Section 402(g)(2)(C)(ii) is amended 
                        by striking ``the excess deferral'' and 
                        inserting ``the excess total deferral or excess 
                        non-Roth deferral''.
                            (IV) Section 402A(d)(2)(C) is amended by 
                        striking ``excess deferral'' and inserting 
                        ``excess total deferral''.
                            (V) Section 402A(d)(3) is amended by 
                        striking ``excess deferral'' each place it 
                        appears and inserting ``excess total 
                        deferral''.
                            (VI) Section 402(g)(1)(A) is amended by 
                        striking the second sentence.
                            (iv) Section 402A(c)(1)(A) is amended by 
                        striking ``without regard to this section'' and 
                        inserting ``(determined without regard to this 
                        section and section 402(g))''.
            (4) Reporting by employers.--Section 6051(a)(8) is amended 
        by inserting after ``(as defined in section 402A)'' the 
        following: ``, and the type of plan under which amounts are 
        deferred or contributed''.
    (c) SIMPLE Roth Retirement Accounts Permitted.--
            (1) In general.--Subsection (p) of section 408 is amended 
        by adding at the end the following new paragraph:
            ``(11) Roth contributions.--For purposes of this section--
                    ``(A) In general.--If a qualified salary reduction 
                arrangement with respect to a simple retirement account 
                includes a simple Roth contribution program, any simple 
                Roth contribution made by an employer pursuant to such 
                program shall be treated as an elective employer 
                contribution, except that such contribution shall be 
                paid to a Roth IRA and shall not be excludable from 
                gross income.
                    ``(B) Simple roth contribution program.--The term 
                `simple Roth contribution program' means a program 
                under which an employee may elect to make simple Roth 
                contributions.
                    ``(C) Simple roth contribution.--The term `simple 
                Roth contribution' means any elective employer 
                contribution which--
                            ``(i) is excludable from gross income of an 
                        employee without regard to this paragraph, and
                            ``(ii) the employee designates (at such 
                        time and in such manner as the Secretary may 
                        prescribe) as not being so excludable.
                    ``(D) Limitation.--In the case of an eligible 
                employer which elects the application of this 
                subparagraph with respect to the simple retirement 
                accounts established pursuant to a qualified salary 
                reduction arrangement of such employer, notwithstanding 
                paragraph (2)(E), the applicable dollar amount for 
                purposes of paragraph (2)(A)(ii), shall be equal to--
                            ``(i) in the case of any such account which 
                        is not designated as a Roth IRA, 50 percent of 
                        the applicable dollar amount in effect under 
                        section 402(g)(1)(B) for the taxable year, and
                            ``(ii) in the case of any such account 
                        which is designated as a Roth IRA, the excess 
                        (if any) of--
                                    ``(I) the applicable dollar amount 
                                in effect under section 402(g)(1)(B) 
                                for the taxable year, over
                                    ``(II) the aggregate amount of 
                                elective employer contributions to any 
                                account described in clause (i).
                In the case of a simple retirement account with respect 
                to which the application of this subparagraph is 
                elected, the employer shall not be treated as an 
                eligible employer for purposes of section 402(g)(1)(A), 
                and the applicable dollar amount with respect to any 
                eligible participant (as defined in section 414(v)) 
                shall, notwithstanding section 414(v)(2)(B)(ii), be 
                determined by reference to section 402(g)(1)(C).''.
            (2) Coordination with maximum roth limitation.--Subsection 
        (c) of section 408A, as amended by this Act, is amended by 
        adding at the end the following new paragraph:
            ``(12) Increase in maximum limitation for simple roth.--In 
        the case of any simple retirement account, subparagraphs (A)(i) 
        and (B) of paragraph (1) shall be applied by disregarding any 
        contributions made to a simple retirement account and any 
        qualified rollover contributions.''.
            (3) Conforming amendments.--
                    (A) Section 408A(f)(1) is amended by striking ``or 
                a simple retirement account''.
                    (B) Section 6051(a)(8), as amended by this Act, is 
                amended by inserting after ``(as defined in section 
                402A)'' the following: ``and simple Roth contributions 
                (as defined in section 408(p)(11)(C))''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan years and 
        taxable years beginning after December 31, 2014.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall apply to calendar years beginning after December 31, 
        2014.

SEC. 1614. MODIFICATIONS OF REQUIRED DISTRIBUTION RULES FOR PENSION 
              PLANS.

    (a) In General.--Section 401(a)(9)(B) of the Internal Revenue Code 
of 1986 is amended to read as follows:
                    ``(B) Required distributions where employee dies 
                before entire interest is distributed.--
                            ``(i) 5-year general rule.--A trust shall 
                        not constitute a qualified trust under this 
                        section unless the plan provides that, if an 
                        employee dies before the distribution of the 
                        employee's interest (whether or not such 
                        distribution has begun in accordance with 
                        subparagraph (A)), the entire interest of the 
                        employee will be distributed within 5 years 
                        after the death of such employee.
                            ``(ii) Exception for eligible designated 
                        beneficiaries.--If--
                                    ``(I) any portion of the employee's 
                                interest is payable to (or for the 
                                benefit of) an eligible designated 
                                beneficiary,
                                    ``(II) such portion will be 
                                distributed (in accordance with 
                                regulations) over the life of such 
                                eligible designated beneficiary (or 
                                over a period not extending beyond the 
                                life expectancy of such beneficiary), 
                                and
                                    ``(III) such distributions begin 
                                not later than 1 year after the date of 
                                the employee's death or such later date 
                                as the Secretary may by regulations 
                                prescribe,
                        then, for purposes of clause (i) and except as 
                        provided in clause (iv) or subparagraph 
                        (E)(iii), the portion referred to in subclause 
                        (I) shall be treated as distributed on the date 
                        on which such distributions begin.
                            ``(iii) Special rule for surviving spouse 
                        of employee.--If the eligible designated 
                        beneficiary referred to in clause (ii)(I) is 
                        the surviving spouse of the employee--
                                    ``(I) the date on which the 
                                distributions are required to begin 
                                under clause (ii)(III) shall not be 
                                earlier than the date on which the 
                                employee would have attained age 70\1/
                                2\, and
                                    ``(II) if the surviving spouse dies 
                                before the distributions to such spouse 
                                begin, this subparagraph shall be 
                                applied as if the surviving spouse were 
                                the employee.
                            ``(iv) Rules upon death of eligible 
                        designated beneficiary.--If an eligible 
                        designated beneficiary dies before the portion 
                        of an employee's interest described in clause 
                        (ii) is entirely distributed, clause (ii) shall 
                        not apply to any beneficiary of such eligible 
                        designated beneficiary and the remainder of 
                        such portion shall be distributed within 5 
                        years after the death of such beneficiary.''.
    (b) Definition of Eligible Designated Beneficiary.--Section 
401(a)(9)(E) of such Code is amended to read as follows:
                    ``(E) Definitions and rules relating to designated 
                beneficiary.--For purposes of this paragraph--
                            ``(i) Designated beneficiary.--The term 
                        `designated beneficiary' means any individual 
                        designated as a beneficiary by the employee.
                            ``(ii) Eligible designated beneficiary.--
                        The term `eligible designated beneficiary' 
                        means, with respect to any employee, any 
                        designated beneficiary who, as of the date of 
                        death of the employee, is--
                                    ``(I) the surviving spouse of the 
                                employee,
                                    ``(II) subject to clause (iii), a 
                                child of the employee who has not 
                                attained age 22,
                                    ``(III) disabled (within the 
                                meaning of section 72(m)(7)),
                                    ``(IV) a chronically ill individual 
                                (within the meaning of section 
                                7702B(c)(2), except that the 
                                requirements of subparagraph (A)(i) 
                                thereof shall only be treated as met if 
                                there is a certification that, as of 
                                such date, the period of inability 
                                described in such subparagraph with 
                                respect to the individual is an 
                                indefinite one that is reasonably 
                                expected to be lengthy in nature), or
                                    ``(V) an individual not described 
                                in any of the preceding subparagraphs 
                                who is not more than 10 years younger 
                                than the employee.
                            ``(iii) Special rule for children.--Subject 
                        to subparagraph (F), an individual described in 
                        clause (ii)(II) shall cease to be an eligible 
                        designated beneficiary as of the date the 
                        individual attains age 22 and the requirement 
                        of subparagraph (B)(i) shall not be treated as 
                        met with respect to any remaining portion of an 
                        employee's interest payable to the individual 
                        unless such portion is distributed within 5 
                        years after such date.''.
    (c) Required Beginning Date.--Section 401(a)(9)(C) of such Code is 
amended by adding at the end the following new clause:
                            ``(v) Employees becoming 5-percent owners 
                        after age 70\1/2\.--If an employee becomes a 5-
                        percent owner (as defined in section 416) with 
                        respect to a plan year ending in a calendar 
                        year after the calendar year in which the 
                        employee attains age 70\1/2\, then clause 
                        (i)(II) shall be applied by substituting the 
                        calendar year in which the employee became such 
                        an owner for the calendar year in which the 
                        employee retires.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to distributions 
        with respect to employees who die after December 31, 2014.
            (2) Required beginning date.--The amendment made by 
        subsection (c) shall apply to employees becoming a 5-percent 
        owner with respect to plan years ending in calendar years 
        beginning before, on, or after the date of the enactment of 
        this Act, except that--
                    (A) if, without regard to such amendment, an 
                employee's required beginning date occurs before April 
                1, 2015, such amendment shall not result in an earlier 
                required beginning date for such employee, and
                    (B) if, solely by reason of such amendment, an 
                employee's required beginning date would occur before 
                April 1, 2015, such employee's required beginning date 
                shall occur on April 1, 2015.
            (3) Exception for certain beneficiaries.--If a designated 
        beneficiary of an employee who dies before January 1, 2015, 
        dies after December 31, 2014--
                    (A) the amendments made by this section shall apply 
                to any beneficiary of such designated beneficiary, and
                    (B) the designated beneficiary shall be treated as 
                an eligible designated beneficiary for purposes of 
                applying section 401(a)(9)(B)(iv) of such Code (as in 
                effect after the amendments made by this section).
            (4) Exception for certain existing annuity contracts.--
                    (A) In general.--The amendments made by this 
                section shall not apply to a qualified annuity which is 
                a binding annuity contract in effect on the date of the 
                enactment of this Act and at all times thereafter.
                    (B) Qualified annuity contract.--For purposes of 
                this paragraph, the term ``qualified annuity'' means, 
                with respect to an employee, an annuity--
                            (i) which is a commercial annuity (as 
                        defined in section 3405(e)(6) of such Code) or 
                        payable by a defined benefit plan,
                            (ii) under which the annuity payments are 
                        substantially equal periodic payments (not less 
                        frequently than annually) over the lives of 
                        such employee and a designated beneficiary (or 
                        over a period not extending beyond the life 
                        expectancy of such employee or the life 
                        expectancy of such employee and a designated 
                        beneficiary) in accordance with the regulations 
                        described in section 401(a)(9)(A)(ii) of such 
                        Code (as in effect before such amendments) and 
                        which meets the other requirements of this 
                        section 401(a)(9) of such Code (as so in 
                        effect) with respect to such payments, and
                            (iii) with respect to which--
                                    (I) annuity payments to the 
                                employee have begun before January 1, 
                                2015, and the employee has made an 
                                irrevocable election before such date 
                                as to the method and amount of the 
                                annuity payments to the employee or any 
                                designated beneficiaries, or
                                    (II) if subclause (I) does not 
                                apply, the employee has made an 
                                irrevocable election before the date of 
                                the enactment of this Act as to the 
                                method and amount of the annuity 
                                payments to the employee or any 
                                designated beneficiaries.

SEC. 1615. REDUCTION IN MINIMUM AGE FOR ALLOWABLE IN-SERVICE 
              DISTRIBUTIONS.

    (a) In General.--Section 401(a)(36) is amended by striking ``age 
62'' and inserting ``age 59\1/2\''.
    (b) Application to Governmental Section 457(b) Plans.--Clause (i) 
of section 457(d)(1)(A) is amended by inserting ``(in the case of a 
plan maintained by an employer described in subsection (e)(1)(A), age 
59\1/2\)'' before the comma at the end.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2014.

SEC. 1616. MODIFICATION OF RULES GOVERNING HARDSHIP DISTRIBUTIONS.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury shall modify 
Treasury Regulation section 1.401(k)-1(d)(3)(iv)(E) to--
            (1) delete the 6-month prohibition on contributions imposed 
        by paragraph (2) thereof, and
            (2) to make any other modifications necessary to carry out 
        the purposes of section 401(k)(2)(B)(i)(IV) of the Internal 
        Revenue Code of 1986.
    (b) Effective Date.--The revised regulations under this section 
shall apply to plan years beginning after December 31, 2014.

SEC. 1617. EXTENDED ROLLOVER PERIOD FOR THE ROLLOVER OF PLAN LOAN 
              OFFSET AMOUNTS IN CERTAIN CASES.

    (a) In General.--Paragraph (3) of section 402(c) is amended by 
adding at the end the following new subparagraph:
                    ``(C) Rollover of certain plan loan offset 
                amounts.--
                            ``(i) In general.--In the case of a 
                        qualified plan loan offset amount, paragraph 
                        (1) shall not apply to any transfer of such 
                        amount made after the due date (including 
                        extensions) for filing the return of tax for 
                        the taxable year in which such amount is 
                        treated as distributed from a qualified 
                        employer plan.
                            ``(ii) Qualified plan loan offset amount.--
                        For purposes of this subparagraph, the term 
                        `qualified plan loan offset amount' means a 
                        plan loan offset amount which is treated as 
                        distributed from a qualified employer plan to a 
                        participant or beneficiary solely by reason 
                        of--
                                    ``(I) the termination of the 
                                qualified employer plan, or
                                    ``(II) the failure to meet the 
                                repayment terms of the loan from such 
                                plan because of the separation from 
                                service of the participant (whether due 
                                to layoff, cessation of business, 
                                termination of employment, or 
                                otherwise).
                            ``(iii) Plan loan offset amount.--For 
                        purposes of clause (ii), the term `plan loan 
                        offset amount' means the amount by which the 
                        participant's accrued benefit under the plan is 
                        reduced in order to repay a loan from the plan.
                            ``(iv) Limitation.--This subparagraph shall 
                        not apply to any plan loan offset amount unless 
                        such plan loan offset amount relates to a loan 
                        to which section 72(p)(1) does not apply by 
                        reason of section 72(p)(2).
                            ``(v) Qualified employer plan.--For 
                        purposes of this subsection, the term 
                        `qualified employer plan' has the meaning given 
                        such term by section 72(p)(4).''.
    (b) Conforming Amendment.--Subparagraph (A) of section 402(c)(3) is 
amended by striking ``subparagraph (B)'' and inserting ``subparagraphs 
(B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1618. COORDINATION OF CONTRIBUTION LIMITATIONS FOR 403(B) PLANS 
              AND GOVERNMENTAL 457(B) PLANS.

    (a) 403(b) Plans.--
            (1) Elimination of special catch-up rule.--Subsection (g) 
        of section 402 is amended by striking paragraph (7) and by 
        redesignating paragraph (8) as paragraph (7).
            (2) Elimination of post termination non-elective 
        contributions.--Subsection (b) of section 403 is amended--
                    (A) in paragraph (3), by striking ``for the most 
                recent period'' and all that follows through ``more 
                than five years'', and
                    (B) by striking paragraph (4).
            (3) Elimination of increased contribution limit for church 
        plans.--Subsection (c) of section 415 is amended by striking 
        paragraph (7).
            (4) Elimination of separate 415(c) limits.--Paragraph (4) 
        of section 415(k) is amended by striking ``each employer with 
        respect to which the participant has the control required'' and 
        inserting ``the employer and each employer which is part of a 
        controlled group or under common control''.
    (b) 457(b) Plans.--
            (1) Elimination of separate deferral limit.--Paragraph (3) 
        of section 402(g) is amended by striking ``and'' at the end of 
        subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, and'', and by inserting 
        after subparagraph (D) the following new subparagraph:
                    ``(E) any amount deferred under an eligible 
                deferred compensation plan (as defined in section 
                457(b)) of an eligible employer described in section 
                457(e)(1)(A).''.
            (2) Taken into account under limitation for defined 
        contribution plans.--
                    (A) In general.--Paragraph (2) of section 415(a) is 
                amended by striking ``or'' at the end of subparagraph 
                (B), by inserting ``or'' at the end of subparagraph 
                (C), and by inserting after subparagraph (C) the 
                following new subparagraph:
                    ``(D) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A),''.
                    (B) Definition.--Paragraph (1) of section 415(k) 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 adding at the end 
                the following new subparagraph:
                    ``(E) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A).''.
            (3) Elimination of special catch-up rule.--Paragraph (3) of 
        section 457(b) is amended by inserting ``, in the case of an 
        eligible employer described in subsection (e)(1)(B),'' after 
        ``which''.
    (c) Conforming Amendments.--
            (1) Section 25B(d)(1)(B) is amended--
                    (A) by striking clause (ii), and
                    (B) by striking ``the amount of--'' and all that 
                follows through ``any elective deferrals'' and 
                inserting the following: ``the amount of any elective 
                deferrals''.
            (2) Section 402A(e)(2) is amended--
                    (A) by striking ``, and'' and all that follows and 
                inserting a period, and
                    (B) by striking ``means--'' and all that follows 
                through ``any elective deferral described in 
                subparagraph (A) or (C)'' and inserting the following: 
                ``means any elective deferral described in (A), (C), or 
                (E)''.
            (3) Section 457(e) is amended by striking paragraph (18).
            (4) Section 414(u)(2)(C) is amended by inserting ``by an 
        eligible employer described in section 457(e)(1)(B)'' after 
        ``(as defined in section 457(b))''.
            (5) Section 414(v)(2)(D) is amended--
                    (A) by striking ``clauses (i), (ii), and (iv) of'', 
                and
                    (B) by striking ``, and plans described in clause 
                (iii)'' and all that follows through the end and 
                inserting a period.
            (6) Section 414(v)(3)(A)(i) is amended by striking 
        ``(determined without regard to section 457(b)(3))''.
            (7) Section 414(v)(6)(B) is amended by striking 
        ``subsection (u)(2)(C)'' and inserting ``section 402(g)(3)''.
            (8) Section 414(v)(6) is amended by striking subparagraph 
        (C).
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years and taxable years beginning after December 31, 
2014.

SEC. 1619. APPLICATION OF 10-PERCENT EARLY DISTRIBUTION TAX TO 
              GOVERNMENTAL 457 PLANS.

    (a) In General.--Paragraph (1) of section 72(t) is amended by 
inserting ``or an eligible deferred compensation plan (as defined in 
section 457(b)) of an eligible employer described in section 
457(e)(1)(A),'' after ``section 4974(c)),''.
    (b) Effective Date.--The amendment made by this section shall apply 
to withdrawals on or after February 26, 2014.

SEC. 1620. INFLATION ADJUSTMENTS FOR QUALIFIED PLAN BENEFIT AND 
              CONTRIBUTION LIMITATIONS.

    (a) Defined Benefit Plans.--
            (1) Current limit.--Subparagraph (A) of section 415(b)(1) 
        is amended by striking ``$160,000'' and inserting ``$210,000''.
            (2) Inflation adjustment.--Section 415(d) is amended--
                    (A) in paragraph (1)(A)--
                            (i) by striking ``$160,000'' and inserting 
                        ``$210,000'', and
                            (ii) by inserting ``for calendar years 
                        beginning after 2023'' after ``subsection 
                        (b)(1)(A)'',
                    (B) paragraph (3)(A), by striking ``July 1, 2001'' 
                and inserting ``July 1, 2022''.
    (b) Defined Contribution Plans.--
            (1) Current limit.--Subparagraph (A) of section 415(c)(1) 
        is amended by striking ``$40,000'' and inserting ``$52,000''.
            (2) Inflation adjustment.--Subsection (d) of section 415 is 
        amended--
                    (A) in paragraph (1)(C)--
                            (i) by striking ``$40,000'' and inserting 
                        ``$52,000'',
                            (ii) by inserting ``for calendar years 
                        beginning after 2023'' after ``subsection 
                        (c)(1)(A)'',
                    (B) in paragraph (3)(D), by striking ``July 1, 
                2001'' and inserting ``July 1, 2022''.
    (c) Conforming Amendments.--
            (1) Section 415(b)(2) is amended by striking ``$160,000'' 
        each place it appears in subparagraphs (C) and (D) and 
        inserting ``$210,000''.
            (2) Section 415(b) is amended by striking ``$160,000'' in 
        the fourth sentence of paragraph (7) and inserting 
        ``$210,000''.
            (3) The headings for subparagraphs (C) and (D) of section 
        415(b)(2) are each amended by striking ``$160,000'' and 
        inserting ``$210,000''.
            (4) The heading for subparagraph (A) of section 415(d)(3) 
        is amended by striking ``$160,000'' and inserting ``$210,000''.
            (5) The heading for subparagraph (D) of section 415(d)(3) 
        is amended by striking ``$40,000'' and inserting ``$52,000''.
            (6) The heading for subparagraph (A) of section 415(d)(4) 
        is amended by striking ``$160,000'' and inserting ``$210,000''.
            (7) The heading for subparagraph (B) of section 415(d)(4) 
        is amended by striking ``$40,000'' and inserting ``$52,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to years ending with or within a calendar year beginning after 
2014.

SEC. 1621. INFLATION ADJUSTMENTS FOR QUALIFIED PLAN ELECTIVE DEFERRAL 
              LIMITATIONS.

    (a) Current Limit.--Subparagraph (B) of section 402(g)(1) is 
amended by striking ``shall be'' and all that follows and inserting 
``is $17,500.''
    (b) Inflation Adjustment.--Paragraph (4) of section 402(g) is 
amended--
            (1) by striking ``December 31, 2006'' and inserting 
        ``December 31, 2023'',
            (2) by striking ``$15,000'' and inserting ``$17,500'', and
            (3) by striking ``2005'' and inserting ``2022''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years and taxable years beginning after December 31, 
2014.

SEC. 1622. INFLATION ADJUSTMENTS FOR SIMPLE RETIREMENT ACCOUNTS.

    (a) Current Limit.--Clause (i) of section 408(p)(2)(E) is amended 
by striking ``shall be'' and all that follows and inserting ``shall be 
$12,000''.
    (b) Inflation Adjustment.--Clause (ii) of section 408(p)(2)(E) is 
amended--
            (1) by striking ``December 31, 2005'' and inserting 
        ``December 31, 2023'',
            (2) by striking ``$10,000'' and inserting ``$12,000'',
            (3) by striking ``2004'' and inserting ``2022''.
    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after 2014.

SEC. 1623. INFLATION ADJUSTMENTS FOR CATCH-UP CONTRIBUTIONS FOR CERTAIN 
              EMPLOYER PLANS.

    (a) Current Limit.--
            (1) Plans other than simple 401(k) and simple retirement 
        accounts.--Clause (i) of section 414(v)(2)(B) is amended by 
        striking ``determined in accordance with the following table'' 
        and all that follows through the period at the end and 
        inserting ``$5,500.''.
            (2) Simple 401(k) and simple retirement accounts.--Clause 
        (ii) of section 414(v)(2)(B) is amended by striking 
        ``determined in accordance with the following table'' and all 
        that follows through the period at the end and inserting 
        ``$2,500.''.
    (b) Inflation Adjustment.--Subparagraph (C) of section 414(v)(2) is 
amended--
            (1) by striking ``December 31, 2006'' and inserting 
        ``December 31, 2023'',
            (2) by striking ``$5,000'' and inserting ``$5,500'', and
            (3) by striking ``2005'' and inserting ``2022''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 1624. INFLATION ADJUSTMENTS FOR GOVERNMENTAL AND TAX-EXEMPT 
              ORGANIZATION PLANS.

    (a) Current Limit.--Subparagraph (A) of section 457(b)(2) is 
amended by striking ``the applicable dollar amount'' and inserting 
``$17,500''.
    (b) Inflation Adjustment.--Paragraph (15) of section 457(e) is 
amended--
            (1) by striking ``Applicable dollar amount.--'' and all 
        that follows through ``Cost-of-living adjustments.--In the case 
        of taxable years beginning after December 31, 2006'' and 
        inserting the following: ``Cost-of-living adjustments.--In the 
        case of taxable years beginning after December 31, 2023'',
            (2) by striking ``the $15,000 amount under subparagraph 
        (A)'' and inserting ``the $17,500 amount under subsection 
        (b)(2)(A)'', and
            (3) by striking ``2005'' and inserting ``2022''.
    (c) Conforming Amendment.--Section 457(f)(4)(A) is amended by 
striking ``twice the applicable dollar limit determined under 
subsection (e)(15)'' and inserting ``twice the amount in effect under 
subsection (b)(2)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

   Subtitle H--Certain Provisions Related to Members of Indian Tribes

SEC. 1701. INDIAN GENERAL WELFARE BENEFITS.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by inserting before section 140 the following new section:

``SEC. 139E. INDIAN GENERAL WELFARE BENEFITS.

    ``(a) In General.--Gross income does not include the value of any 
Indian general welfare benefit.
    ``(b) Indian General Welfare Benefit.--For purposes of this 
section, the term `Indian general welfare benefit' includes any payment 
made or services provided to or on behalf of a member of an Indian 
tribe (or any spouse or dependent of such a member) pursuant to an 
Indian tribal government program, but only if--
            ``(1) the program is administered under specified written 
        guidelines and does not discriminate in favor of members of the 
        governing body of the tribe, and
            ``(2) the benefits provided under such program--
                    ``(A) are available to any tribal member who meets 
                such guidelines,
                    ``(B) are for the promotion of general welfare,
                    ``(C) are not lavish or extravagant, and
                    ``(D) are not compensation for services.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Indian tribal government.--For purposes of this 
        section, the term `Indian tribal government' includes any 
        agencies or instrumentalities of an Indian tribal government 
        and any Alaska Native regional or village corporation, as 
        defined in, or established pursuant to, the Alaska Native 
        Claims Settlement Act (43 U.S.C. 1601, et seq.).
            ``(2) Dependent.--The term `dependent' has the meaning 
        given such term by section 7705, determined without regard to 
        subsections (b)(1), (b)(2), and (d)(1)(B).
            ``(3) Lavish or extravagant.--The Secretary shall, in 
        consultation with the Tribal Advisory Committee (as established 
        under section 1702 of the Tax Reform Act of 2014), establish 
        guidelines for what constitutes lavish or extravagant benefits 
        with respect to Indian tribal government programs.
            ``(4) Establishment of tribal government program.--A 
        program shall not fail to be treated as an Indian tribal 
        government program solely by reason of the program being 
        established by tribal custom or government practice.''.
    (b) Conforming Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by inserting before the item 
relating to section 140 the following new item:

``Sec. 139E. Indian general welfare benefits.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years for which the period of limitation on 
        refund or credit under section 6511 of the Internal Revenue 
        Code of 1986 has not expired.
            (2) One-year waiver of statute of limitations.--If the 
        period of limitation on a credit or refund resulting from the 
        amendments made by subsection (a) expires before the end of the 
        1-year period beginning on the date of the enactment of this 
        Act, refund or credit of such overpayment (to the extent 
        attributable to such amendments) may, nevertheless, be made or 
        allowed if claim therefor is filed before the close of such 1-
        year period.

SEC. 1702. TRIBAL ADVISORY COMMITTEE.

    (a) Establishment.--The Secretary of the Treasury shall establish a 
Tribal Advisory Committee (hereinafter in this subsection referred to 
as the ``Committee'').
    (b) Duties.--
            (1) Implementation.--The Committee shall advise the 
        Secretary on matters relating to the taxation of Indians.
            (2) Education and training.--The Secretary shall, in 
        consultation with the Committee, establish and require--
                    (A) training and education for internal revenue 
                field agents who administer and enforce internal 
                revenue laws with respect to Indian tribes on Federal 
                Indian law and the Federal Government's unique legal 
                treaty and trust relationship with Indian tribal 
                governments, and
                    (B) training of such internal revenue field agents, 
                and provision of training and technical assistance to 
                tribal financial officers, about implementation of this 
                Act and the amendments made thereby.
    (c) Membership.--
            (1) In general.--The Committee shall be composed of 7 
        members appointed as follows:
                    (A) Three members appointed by the Secretary of the 
                Treasury.
                    (B) One member appointed by the Chairman, and one 
                member appointed by the Ranking Member, of the 
                Committee on Ways and Means of the House of 
                Representatives.
                    (C) One member appointed by the Chairman, and one 
                member appointed by the Ranking Member, of the 
                Committee on Finance of the Senate.
            (2) Term.--
                    (A) In general.--Except as provided in subparagraph 
                (B), each member's term shall be 4 years.
                    (B) Initial staggering.--The first appointments 
                made by the Secretary under paragraph (1)(A) shall be 
                for a term of 2 years.

SEC. 1703. OTHER RELIEF FOR INDIAN TRIBES.

    (a) Waiver of Penalties and Interest.--The Secretary of the 
Treasury may waive any interest and penalties imposed under the 
Internal Revenue Code of 1986 on any Indian tribal government or member 
of an Indian tribe (or any spouse or dependent of such a member) to the 
extent such interest and penalties relate to excluding a payment or 
benefit from gross income under the general welfare exclusion.
    (b) Definitions.--For purposes of this section--
            (1) Indian tribal government.--The term ``Indian tribal 
        government'' shall have the meaning given such term by section 
        139E of such Code, as added by this Act.
            (2) Indian tribe.--The term ``Indian tribe'' shall have the 
        meaning given such term by section 139D(c)(1) of such Code, as 
        amended by this Act.

                TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX.

    (a) In General.--Subchapter A of chapter 1 is amended by striking 
part VI (and by striking the item relating to such part in the table of 
parts for subchapter A).
    (b) Credit for Prior Year Minimum Tax Liability.--
            (1) Limitation.--Subsection (c) of section 53 is amended to 
        read as follows:
    ``(c) Limitation.--The credit allowed under subsection (a) shall 
not exceed the regular tax liability of the taxpayer reduced by the sum 
of the credits allowed under subparts A, B, and D.''.
            (2) Credits treated as refundable.--Subsection (e) of 
        section 53 is amended to read as follows:
    ``(e) Portion of Credit Treated as Refundable.--
            ``(1) In general.--In the case of any taxable year 
        beginning in 2016, 2017, 2018, or 2019, the limitation under 
        subsection (c) shall be increased by the AMT refundable credit 
        amount for such year.
            ``(2) AMT refundable credit amount.--For purposes of 
        paragraph (1), the AMT refundable credit amount is an amount 
        equal to 50 percent (100 percent in the case of a taxable year 
        beginning in 2019) of the excess (if any) of--
                    ``(A) the minimum tax credit determined under 
                subsection (b) for the taxable year, over
                    ``(B) the minimum tax credit allowed under 
                subsection (a) for such year (before the application of 
                this subsection for such year).
            ``(3) Credit refundable.--For purposes of this title (other 
        than this section), the credit allowed by reason of this 
        subsection shall be treated as a credit allowed under subpart C 
        (and not this subpart).
            ``(4) Short taxable years.--In the case of any taxable year 
        of less than 365 days, the AMT refundable credit amount 
        determined under paragraph (2) with respect to such taxable 
        year shall be the amount which bears the same ratio to such 
        amount determined without regard to this paragraph as the 
        number of days in such taxable year bears to 365.''.
            (3) Treatment of references.--Section 53(d) is amended by 
        adding at the end the following new paragraph:
            ``(3) AMT term references.--Any references in this 
        subsection to section 55, 56, or 57 shall be treated as a 
        reference to such section as in effect before its repeal by the 
        Tax Reform Act of 2014.''.
            (4) Repeal of special rules with respect to treatment of 
        incentive stock options.--Section 53 is amended by striking 
        subsection (f).
    (c) Conforming Amendments Related to AMT Repeal.--
            (1) Section 2(e), as redesignated by section 1001, is 
        amended by striking ``sections 1 and 55'' and inserting 
        ``section 1''.
            (2) Section 5(a) is amended by striking paragraph (4).
            (3) Section 11(d) is amended by striking ``the taxes 
        imposed by subsection (a) and section 55'' and inserting ``the 
        tax imposed by subsection (a)''.
            (4) Section 13, as redesignated by title I, is amended by 
        striking paragraph (7).
            (5) Section 26(a) is amended to read as follows:
    ``(a) Limitation Based on Amount of Tax.--The aggregate amount of 
credits allowed by this subpart for the taxable year shall not exceed 
the taxpayer's regular tax liability for the taxable year.''.
            (6) Section 26(b)(2) is amended by striking subparagraph 
        (A).
            (7) Section 26 is amended by striking subsection (c).
            (8) Section 38(c) is amended--
                    (A) by striking paragraphs (1) through (5),
                    (B) by redesignating paragraph (6) as paragraph 
                (2),
                    (C) by inserting before paragraph (2) (as so 
                redesignated) the following new paragraph:
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of--
                            ``(i) so much of the regular tax liability 
                        as does not exceed $25,000, plus
                            ``(ii) 75 percent of so much of the regular 
                        tax liability as exceeds $25,000, over
                    ``(B) the sum of the credits allowable under 
                subparts A and B of this part.'', and
                    (D) by striking ``subparagraph (B) of paragraph 
                (1)'' each place it appears in paragraph (2) (as so 
                redesignated) and inserting ``clauses (i) and (ii) of 
                paragraph (1)(A)''.
            (9) Section 45D(g)(4)(B) is amended by striking ``or for 
        purposes of section 55''.
            (10) Section 54(c)(1) is amended to read as follows:
            ``(1) regular tax liability (as defined in section 26(b)), 
        over''.
            (11) Section 54A(c)(1)(A) is amended to read as follows:
                    ``(A) regular tax liability (as defined in section 
                26(b)), over''.
            (12)(A) Section 108(b)(2) is amended by striking 
        subparagraph (C) and by redesignating subparagraphs (D) through 
        (G) as subparagraphs (C) through (F), respectively.
            (B) Section 108(b)(3)(B) is amended--
                    (i) by striking ``subparagraphs (B), (C), and (G)'' 
                and inserting ``subparagraphs (B) and (F) of paragraph 
                (2)'', and
                    (ii) by striking ``subparagraph (F)'' and inserting 
                ``paragraph (2)(E)''.
            (C) Section 108(b)(4)(B) is amended by striking 
        ``subparagraph (A) or (D)'' in the heading and text thereof and 
        inserting ``subparagraph (A) or (C)''.
            (D) Section 108(b)(4)(C) is amended by striking 
        ``subparagraphs (B) and (G)'' in the heading and text thereof 
        and inserting ``subparagraphs (B) and (F)''.
            (13) Section 168(k)(2) is amended by striking subparagraph 
        (G).
            (14) Section 173 is amended by striking subsection (b).
            (15) Section 174(f) is amended to read as follows:
    ``(f) Cross Reference.--For adjustments to basis of property for 
amounts allowed as deductions as deferred expenses under subsection 
(b), see section 1016(a)(14).''.
            (16) Section 263A(c) is amended by striking paragraph (6).
            (17) Section 382(l) is amended by striking paragraph (7) 
        and by redesignating paragraph (8) as paragraph (7).
            (18) Section 443 (relating to returns for a period of less 
        than 12 months) adjustment in computing minimum tax and tax 
        preferences) is amended by striking subsection (d) and by 
        redesignating subsection (e) as subsection (d).
            (19) Section 641(c) is amended--
                    (A) in paragraph (2) by striking subparagraph (B) 
                and by redesignating subparagraphs (C) and (D) as 
                subparagraphs (B) and (C), respectively, and
                    (B) in paragraph (3), by striking ``paragraph 
                (2)(C)'' and inserting ``paragraph (2)(B)''.
            (20) Subsections (b) and (c) of section 666 are each 
        amended by striking ``(other than the tax imposed by section 
        55)''.
            (21) Section 815(c)(2) is amended by striking the last 
        sentence.
            (22) Section 847 is amended--
                    (A) by striking the last sentence of paragraph (9), 
                and
                    (B) in paragraph (10), by inserting ``and'' at the 
                end of subparagraph (A), by striking subparagraph (B), 
                and by redesignating subparagraph (C) as subparagraph 
                (B).
            (23) Section 848 is amended by striking subsection (i) and 
        by redesignating subsection (j) as subsection (i).
            (24) Section 860E(a) is amended by striking paragraph (4).
            (25) Section 871(b)(1) is amended by striking ``or 55''.
            (26) Section 882(a)(1) is amended by striking ``55,''.
            (27) Section 897(a) is amended to read as follows:
    ``(a) Treatment as Effectively Connected With United States Trade 
or Business.--For purposes of this title, gain or loss of a nonresident 
alien individual or a foreign corporation from the disposition of a 
United States real property interest shall be taken into account--
            ``(1) in the case of a nonresident alien individual, under 
        section 871(b)(1), or
            ``(2) in the case of a foreign corporation, under section 
        882(a)(1), as if the taxpayer were engaged in a trade or 
        business within the United States during the taxable year and 
        as if such gain or loss were effectively connected with such 
        trade or business.''.
            (28) Section 904(k) is amended to read as follows:
    ``(k) Cross Reference.--For increase of limitation under subsection 
(a) for taxes paid with respect to amounts received which were included 
in the gross income of the taxpayer for a prior taxable year as a 
United States shareholder with respect to a controlled foreign 
corporation, see section 960(b).''.
            (29) Section 911(f) is amended to read as follows:
    ``(f) Determination of Tax Liability.--If, for any taxable year, 
any amount is excluded from gross income of a taxpayer under subsection 
(a), then, notwithstanding section 1, if such taxpayer has taxable 
income for such taxable year, the tax imposed by section 1 for such 
taxable year shall be equal to the excess (if any) of--
            ``(1) the tax which would be imposed by section 1 for such 
        taxable year if the taxpayer's taxable income were increased by 
        the amount excluded under subsection (a) for such taxable year, 
        over
            ``(2) the tax which would be imposed by section 1 for such 
        taxable year if the taxpayer's taxable income were equal to the 
        amount excluded under subsection (a) for such taxable year.''.
            (30) Section 962(a)(1) is amended--
                    (A) by striking ``sections 1 and 55'' and inserting 
                ``section 1'', and
                    (B) by striking ``sections 11 and 55'' and 
                inserting ``section 11''.
            (31) Section 1016(a) is amended by striking paragraph (20).
            (32) Section 1202(a)(4) is amended by inserting ``and'' at 
        the end of subparagraph (A), by striking ``, and'' and 
        inserting a period at the end of subparagraph (B), and by 
        striking subparagraph (C).
            (33) Section 1374(b)(3)(B) is amended by striking the last 
        sentence thereof.
            (34) Section 1397E(c)(1) is amended to read as follows:
            ``(1) regular tax liability (as defined in section 26(b), 
        over''.
            (35) Section 1561(a) is amended--
                    (A) by inserting ``and'' at the end of paragraph 
                (1), by striking the comma at the end of paragraph (2) 
                and inserting a period, and by striking paragraphs (3) 
                and (4), and
                    (B) by striking the last sentence.
            (36) Section 6015(d)(2)(B) is amended by striking ``or 
        55''.
            (37) Section 6425(c)(1)(A) is amended--
                    (A) by adding ``plus'' at the end of clause (i), 
                and
                    (B) by striking clause (ii) and by redesignating 
                clause (iii) as clause (ii).
            (38) Section 6654(d)(2) is amended--
                    (A) in clause (i) of subparagraph (B), by striking 
                ``, alternative minimum taxable income,'', and
                    (B) in clause (i) of subparagraph (C), by striking 
                ``, alternative minimum taxable income,''.
            (39) Section 6655(e)(2)(B) is amended--
                    (A) by striking ``The taxable income, alternative 
                minimum taxable income, and modified alternative 
                taxable income shall'' and inserting ``Taxable income 
                shall'', and
                    (B) by striking clause (iii).
            (40) Section 6655(g)(1)(A) is amended--
                    (A) by striking clause (ii), and
                    (B) by redesignating clauses (iii) and (iv) as 
                clauses (ii) and (iii), respectively.
            (41) Section 6662(e)(3)(C) is amended by striking ``the 
        regular tax (as defined in section 55(c))'' and inserting ``the 
        regular tax liability (as defined in section 26(b))''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Prior elections with respect to certain tax 
        preferences.--So much of the amendment made by subsection (a) 
        as relates to the repeal of section 59(e) of the Internal 
        Revenue Code of 1986 shall apply to amounts paid or incurred 
        after December 31, 2014.
            (3) Treatment of net operating loss carrybacks.--For 
        purposes of section 56(d) of the Internal Revenue Code of 1986 
        (as in effect before its repeal), the amount of any net 
        operating loss which may be carried back from a taxable year 
        beginning after December 31, 2014, to taxable years beginning 
        before January 1, 2015, shall be determined without regard to 
        any adjustments under section 56(d)(2)(A) of such Code (as so 
        in effect).

                     TITLE III--BUSINESS TAX REFORM

                         Subtitle A--Tax Rates

SEC. 3001. 25-PERCENT CORPORATE TAX RATE.

    (a) In General.--Subsection (b) of section 11 is amended to read as 
follows:
    ``(b) Amount of Tax.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of the tax imposed by subsection (a) shall be 25 percent 
        of taxable income.
            ``(2) Phase-in for taxable years beginning before 2019.--
                    ``(A) In general.--In the case of taxable years 
                beginning before 2019, the amount of tax imposed by 
                subsection (a) shall be the sum of--
                            ``(i) 25 percent of so much of the taxable 
                        income as does not exceed $75,000, and
                            ``(ii) the applicable percentage of so much 
                        of taxable income as exceeds $75,000.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage shall be 
                determined in accordance with the following table:

``In the case of taxable years            The applicable percentage is:
        beginning during calendar 
        year
        2015...............................................        33% 
        2016...............................................        31% 
        2017...............................................        29% 
        2018...............................................      27%''.
    (b) Conforming Amendments.--
            (1) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e) are 
        each amended by striking ``section 11(b)(1)'' and inserting 
        ``section 11(b)''.
            (2)(A) Part I of subchapter P of chapter 1 is amended by 
        striking section 1201 (and by striking the item relating to 
        such section in the table of sections for such part).
            (B) Section 13, as amended and redesignated by the 
        preceding provisions of this Act, is amended by striking 
        paragraphs (4) and (6), and by redesignating paragraph (5) as 
        paragraph (4).
            (C) Section 527(b) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:
    ``(b) Tax Imposed.--A tax''.
            (D) Sections 594(a) is amended by striking ``taxes imposed 
        by section 11 or 1201(a)'' and inserting ``tax imposed by 
        section 11''.
            (E) Section 691(c)(4) is amended by striking ``1201,''.
            (F) Section 801(a) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:
    ``(a) Tax Imposed.--A tax''.
            (G) Section 831(d) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (H) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
        striking ``sec. 1201 and following,''.
            (I) Section 852(b)(3)(A) is amended by striking ``section 
        1201(a)'' and inserting ``section 11(b)''.
            (J) Section 857(b)(3) is amended--
                    (i) by striking subparagraph (A) and redesignating 
                subparagraphs (B) through (F) as subparagraphs (A) 
                through (E), respectively,
                    (ii) in subparagraph (C), as so redesignated--
                            (I) by striking ``subparagraph (A)(ii)'' in 
                        clause (i) thereof and inserting ``paragraph 
                        (1)'',
                            (II) by striking ``the tax imposed by 
                        subparagraph (A)(ii)'' in clauses (ii) and (iv) 
                        thereof and inserting ``the tax imposed by 
                        paragraph (1) on undistributed capital gain'',
                    (iii) in subparagraph (E), as so redesignated, by 
                striking ``subparagraph (B) or (D)'' and inserting 
                ``subparagraph (A) or (C)'', and
                    (iv) by adding at the end the following new 
                subparagraph:
                    ``(F) Undistributed capital gain.--For purposes of 
                this paragraph, the term `undistributed capital gain' 
                means the excess of the net capital gain over the 
                deduction for dividends paid (as defined in section 
                561) determined with reference to capital gain 
                dividends only.''.
            (K) Section 882(a)(1) is amended by striking ``, or 
        1201(a)''.
            (L) Section 1374(b) is amended by striking paragraph (4).
            (M) Section 1381(b) is amended by striking ``taxes imposed 
        by section 11 or 1201'' and inserting ``tax imposed by section 
        11''.
            (N) Sections 6425(c)(1)(A)(i) and 6655(g)(1)(A)(i) are each 
        amended by striking ``or 1201(a),''.
            (3)(A) Section 1445(e)(1) is amended--
                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year 
                under section 11(b)'', and
                    (ii) by striking ``of the gain'' and inserting 
                ``multiplied by the gain''.
            (B) Section 1445(e)(2) is amended by striking ``35 percent 
        of the amount'' and inserting ``the highest rate of tax in 
        effect for the taxable year under section 11(b) multiplied by 
        the amount''.
            (C) Section 1445(e)(6) is amended--
                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year 
                under section 11(b)'', and
                    (ii) by striking ``of the amount'' and inserting 
                ``multiplied by the amount''.
            (D) Section 1446(b)(2)(B) is amended by striking ``section 
        11(b)(1)'' and inserting ``section 11(b)''.
            (4) Section 852(b)(1) is amended by striking the last 
        sentence.
            (5)(A) Part I of subchapter B of chapter 5 is amended by 
        striking section 1551 (and by striking the item relating to 
        such section in the table of sections for such part).
            (B) Section 535(c)(5) is amended to read as follows:
            ``(5) Cross reference.--For limitation on credit provided 
        in paragraph (2) or (3) in the case of certain controlled 
        corporations, see section 1561.''.
            (6)(A) Section 1561, as amended by the preceding provisions 
        of this Act, is amended to read as follows:

``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE OF 
              CERTAIN CONTROLLED CORPORATIONS.

    ``(a) In General.--The component members of a controlled group of 
corporations on a December 31 shall, for their taxable years which 
include such December 31, be limited for purposes of this subtitle to 
one $250,000 ($150,000 if any component member is a corporation 
described in section 535(c)(2)(B)) amount for purposes of computing the 
accumulated earnings credit under section 535(c)(2) and (3). Such 
amount shall be divided equally among the component members of such 
group on such December 31 unless the Secretary prescribes regulations 
permitting an unequal allocation of such amount.
    ``(b) Certain Short Taxable Years.--If a corporation has a short 
taxable year which does not include a December 31 and is a component 
member of a controlled group of corporations with respect to such 
taxable year, then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under section 535(c)(2) 
and (3) of such corporation for such taxable year shall be the amount 
specified in subsection (a) with respect to such group, divided by the 
number of corporations which are component members of such group on the 
last day of such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were substituted 
for December 31.''.
            (B) The table of sections for part II of subchapter B of 
        chapter 5 is amended by striking the item relating to section 
        1561 and inserting the following new item:

``Sec. 1561. Limitation on accumulated earnings credit in the case of 
                            certain controlled corporations.''.
            (7) Section 7874(e)(1)(B) is amended by striking ``section 
        11(b)(1)'' and inserting ``section 11(b)''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Withholding.--The amendments made by subsection (b)(3) 
        shall apply to distributions made after December 31, 2014.
            (3) Certain transfers.--The amendments made by subsection 
        (b)(5) shall apply to transfers made after December 31, 2018.
            (4) Certain other amendments related to single rate of 
        tax.--The amendments made by paragraphs (4) and (6) of 
        subsection (b) shall apply to taxable years beginning after 
        December 31, 2018.

    Subtitle B--Reform of Business-Related Exclusions and Deductions

SEC. 3101. REVISION OF TREATMENT OF CONTRIBUTIONS TO CAPITAL.

    (a) Inclusion of Contributions to Capital.--Part II of subchapter B 
of chapter 1 is amended by inserting after section 75 the following new 
section:

``SEC. 76. CONTRIBUTIONS TO CAPITAL.

    ``(a) In General.--Gross income includes--
            ``(1) any contribution to the capital of any entity, and
            ``(2) any premium received by such entity with respect to 
        any option on any interest in such entity.
    ``(b) Treatment of Contributions in Exchange for Stock, etc.--
            ``(1) In general.--In the case of any contribution of money 
        or other property to a corporation in exchange for stock of 
        such corporation--
                    ``(A) such contribution shall not be treated for 
                purposes of subsection (a) as a contribution to the 
                capital of such corporation (and shall not be 
                includible in the gross income of such corporation), 
                and
                    ``(B) no gain or loss shall be recognized to such 
                corporation upon the issuance of such stock.
            ``(2) Treatment limited to value of stock.--For purposes of 
        this subsection, a contribution of money or other property to a 
        corporation shall be treated as being in exchange for stock of 
        such corporation only to the extent that the fair market value 
        of such money and other property does not exceed the fair 
        market value of such stock.
            ``(3) Application to entities other than corporations.--In 
        the case of any entity other than a corporation, rules similar 
        to the rules of paragraphs (1) and (2) shall apply in the case 
        of any contribution of money or other property to such entity 
        in exchange for any interest in such entity.
    ``(c) Treasury Stock Treated as Stock.--Any reference in this 
section to stock shall be treated as including a reference to treasury 
stock.''.
    (b) Basis of Corporation in Contributed Property.--
            (1) Contributions to capital.--Subsection (c) of section 
        362 is amended to read as follows:
    ``(c) Contributions to Capital.--If property other than money is 
transferred to a corporation as a contribution to the capital of such 
corporation (within the meaning of section 76) then the basis of such 
property shall be the greater of--
            ``(1) the basis determined in the hands of the transferor, 
        increased by the amount of gain recognized to the transferor on 
        such transfer, or
            ``(2) the amount included in gross income by such 
        corporation under section 76 with respect to such 
        contribution.''.
            (2) Contributions in exchange for stock.--Paragraph (2) of 
        section 362(a) is amended by striking ``contribution to 
        capital'' and inserting ``contribution in exchange for stock of 
        such corporation (determined under rules similar to the rules 
        of paragraphs (2) and (3) of section 76(b))''.
    (c) Conforming Amendments.--
            (1) Section 108(e) is amended by striking paragraph (6).
            (2) Part III of subchapter B of chapter 1 is amended by 
        striking section 118 (and by striking the item relating to such 
        section in the table of sections for such part).
            (3) The table of sections for part II of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 75 the following new item:

``Sec. 76. Contributions to capital.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made, and transactions entered into, after the 
date of the enactment of this Act.

SEC. 3102. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.

    (a) In General.--Section 162(e) is amended by striking paragraphs 
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) 
as paragraphs (2), (3), (4), (5), and (6), respectively.
    (b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by 
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section 
162(e)(4)(B)(ii)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2014.

SEC. 3103. EXPENDITURES FOR REPAIRS IN CONNECTION WITH CASUALTY LOSSES.

    (a) In General.--Section 165, as amended by the preceding 
provisions of this Act, is amended by inserting after subsection (g) 
the following new subsection:
    ``(h) Special Rule for Casualty Losses.--
            ``(1) Expenditures for repairs in connection with casualty 
        losses.--If a deduction is allowable under this section for any 
        casualty loss with respect to any property, any expenditure 
        made for any repair of damage to such property in connection 
        with such casualty loss shall be treated as a permanent 
        improvement made to increase the value of such property for 
        purposes of section 263(a)(1).
            ``(2) Election to expense repair in lieu of deducting 
        casualty loss.--If the taxpayer elects the application of this 
        paragraph with respect to any property with respect to which 
        there is a casualty loss, no deduction shall be allowable under 
        this section for the casualty loss with respect to such 
        property and paragraph (1) shall not apply to expenditures made 
        for repair of damage to such property in connection with such 
        casualty loss. Any election under this paragraph shall be made 
        not later than the due date for the return of tax (including 
        extensions) for the taxable year in which the casualty loss 
        occurs and, once made, may be revoked only with the consent of 
        the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to losses sustained after December 31, 2014.

SEC. 3104. REFORM OF ACCELERATED COST RECOVERY SYSTEM.

    (a) Applicable Depreciation Method.--Subsection (b) of section 168 
is amended to read as follows:
    ``(b) Applicable Depreciation Method.--For purposes of this 
section--
            ``(1) In general.--The applicable depreciation method is 
        the straight line method.
            ``(2) Salvage value treated as zero.--Salvage value shall 
        be treated as zero.''.
    (b) Applicable Recovery Period.--Subsection (c) of section 168 is 
amended to read as follows:
    ``(c) Applicable Recovery Period.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        applicable recovery period for any property is the class life 
        of such property.
            ``(2) Special rules for determining class life of certain 
        property.--
                    ``(A) Property with no class life.--In the case of 
                personal property with no class life, the recovery 
                period is 12 years.
                    ``(B) Certain horses.--In the case of any race 
                horse, and any horse other than a race horse which is 
                more than 12 years old at the time it is placed in 
                service, 3 years.
                    ``(C) Semi-conductor manufacturing equipment.--In 
                the case of any semi-conductor manufacturing equipment, 
                the recovery period is 5 years.
                    ``(D) Qualified technological equipment.--In the 
                case of any qualified technological equipment, the 
                recovery period is 5 years.
                    ``(E) Automobile or light general purpose truck.--
                In the case of any automobile or light general purpose 
                truck, the recovery period is 5 years.
                    ``(F) Qualified rent-to-own property.--In the case 
                of any qualified rent-to-own property, the recovery 
                period is 9 years.
                    ``(G) Certain telephone switching equipment.--In 
                the case of any computer-based telephone central office 
                switching equipment, the recovery period is 9.5 years.
                    ``(H) Railroad track.--In the case of any railroad 
                track, the recovery period is 10 years.
                    ``(I) Smart electric distribution property.--In the 
                case of qualified smart electric meters and qualified 
                smart electric grid systems, the recovery period is 10 
                years.
                    ``(J) Airplanes.--In the case of any fixed-wing 
                aircraft (including any fixed-wing airframe or engine), 
                the recovery period is 12 years.
                    ``(K) Natural gas gathering line.--In the case of 
                any natural gas gathering line, the recovery period is 
                14 years.
                    ``(L) Tree or vine bearing fruit or nuts.--In the 
                case of any tree or vine bearing fruit or nuts, the 
                recovery period is 20 years.
                    ``(M) Telephone distribution plant.--In the case of 
                any telephone distribution plant and comparable 
                equipment used for 2-way exchange of voice and data 
                communications by cable, the recovery period is 24 
                years.
                    ``(N) Real property.--In the case of nonresidential 
                real property, residential rental property, and any 
                section 1245 property (as defined in section 
                1245(a)(3)) which is real property with no class life, 
                the recovery period is 40 years.
                    ``(O) Water treatment and utility property.--In the 
                case of any municipal wastewater treatment plant or 
                water utility property, the recovery period is 50 
                years.
                    ``(P) Clearing and grading improvements; tunnel 
                bore.--In the case of any clearing and grading land 
                improvements or tunnel bore, the recovery period is 50 
                years.
                    ``(Q) Tax-exempt use property subject to lease.--In 
                the case of any tax-exempt use property subject to a 
                lease, the recovery period used for purposes of 
                paragraph (2) shall (notwithstanding any other 
                subparagraph of this paragraph) in no event be less 
                than 125 percent of the lease term.''.
    (c) Neutral Cost Recovery System.--Section 168, as amended by 
subsection (f), is amended by adding at the end the following new 
subsection:
    ``(i) Neutral Cost Recovery System.--
            ``(1) In general.--In the case of any property (to which 
        this section applies) placed in service by the taxpayer in a 
        taxable year for which such taxpayer has elected the 
        application of this subsection, the deduction determined under 
        subsection (a) with respect to such property for any taxable 
        year shall be increased by an amount equal to the product of--
                    ``(A) the modified adjusted basis of such property 
                determined as of the close of such taxable year 
                (determined without regard to this subsection but after 
                taking all other adjustments for such taxable year into 
                account), multiplied by
                    ``(B) the inflation adjustment percentage for the 
                calendar year in which such taxable year begins.
            ``(2) Modified adjusted basis.--For purposes of this 
        subsection, the term `modified adjusted basis' means, with 
        respect to any property, the adjusted basis which would be 
        determined with respect to such property if this subsection 
        never applied to such property.
            ``(3) Inflation adjustment percentage.--For purposes of 
        this subsection, the term `inflation adjustment percentage' 
        means, with respect to any calendar year, the cost-of-living 
        adjustment which would be determined under section 1(c)(2)(A) 
        for such calendar year if clause (ii) thereof were applied by 
        substituting `the C-CPI-U for the calendar year preceding the 
        calendar year referred to in clause (i)' for `the normalized 
        CPI for calendar year 2012'.
            ``(4) Increase for first taxable year reduced to take into 
        account placed in service convention.--In the case of the 
        taxable year in which any property is placed in service, the 
        increase determined under paragraph (1) with respect to such 
        property shall be equal to--
                    ``(A) in the case of any property to which 
                subsection (d)(3) applies, \1/8\ of the amount of such 
                increase determined without regard to this paragraph, 
                and
                    ``(B) in the case of any other property, \1/2\ of 
                the amount of such increase determined without regard 
                to this paragraph.
            ``(5) Overall depreciation allowance not to exceed basis.--
        The deduction determined under subsection (a) (after any 
        increase determined under this subsection) with respect to any 
        property for any taxable year shall not exceed the adjusted 
        basis of such property determined as of the beginning of such 
        taxable year.
            ``(6) Certain property excluded.--Paragraph (1) shall not 
        apply to any specified property used outside the United States 
        or to any property described in subsection (d)(2).
            ``(7) Election.--
                    ``(A) In general.--An election under paragraph (1) 
                for any taxable year shall be made not later than the 
                due date (including extensions) for the return of tax 
                for such taxable year. Such election, once made, shall 
                be irrevocable. Such election shall apply with respect 
                to all property placed in service during the taxable 
                for which made (and shall apply for subsequent taxable 
                years but only with respect to such property).
                    ``(B) Taxpayer engaged in more than one business.--
                A taxpayer engaged in more than one trade or business 
                may make separate elections under paragraph (1) with 
                respect to each such trade or business.''.
    (d) Application of Mid-Month Convention.--
            (1) In general.--Subparagraphs (A), (B) and (C) of section 
        168(d)(2) are amended to read as follows:
                    ``(A) real property,
                    ``(B) water treatment and utility property, and
                    ``(C) any clearing and grading land improvements or 
                tunnel bore,''.
            (2) Conforming amendment.--Clause (i) of section 
        168(d)(3)(B) is amended to read as follows:
                            ``(i) any property described in paragraph 
                        (2),''.
    (e) Definitions.--Subsection (e) of section 168 is amended to read 
as follows:
    ``(e) Definitions.--For purposes of this section--
            ``(1) Class life.--
                    ``(A) In general.--Except as provided in this 
                section, the term `class life' means the class life (if 
                any) which would be applicable with respect to any 
                property as of January 1, 1986, under subsection (m) of 
                section 167 (determined without regard to paragraph (4) 
                and as if the taxpayer had made an election under such 
                subsection). The reference in this paragraph to 
                subsection (m) of section 167 shall be treated as a 
                reference to such subsection as in effect on the day 
                before the date of the enactment of the Revenue 
                Reconciliation Act of 1990.
                    ``(B) Secretarial authority to modify rev. proc. 
                87-56.--
                            ``(i) In general.--The Secretary, through 
                        the Office of Tax Analysis and in consultation 
                        with the Bureau of Economic Analysis of the 
                        Department of Commerce, shall--
                                    ``(I) determine, and develop a 
                                schedule of, the economic depreciation 
                                of the major categories of depreciable 
                                property (other than property with a 
                                specified class life under subsection 
                                (c)(2)) to approximate constant 
                                straight-line depreciation, and
                                    ``(II) develop recommendations 
                                regarding the proper economic 
                                depreciation for property with a 
                                specified class life under subsection 
                                (c)(2).
                            ``(ii) Report.--Not later than December 31, 
                        2017, the Secretary shall submit to the 
                        Committee on Ways and Means of the House of 
                        Representatives and the Committee on Finance of 
                        the Senate--
                                    ``(I) the schedule developed under 
                                clause (i)(I), and
                                    ``(II) the recommendations 
                                developed under clause (i)(II).
                        The schedule developed under clause (i)(I) 
                        shall take effect with respect to property 
                        placed in service after the later of December 
                        31, 2017, or the end of the first calendar year 
                        ending after the calendar year during which 
                        such schedule is submitted.
            ``(2) Residential rental property.--
                    ``(A) In general.--The term `residential rental 
                property' means any building or structure if 80 percent 
                or more of the gross rental income from such building 
                or structure for the taxable year is rental income from 
                dwelling units.
                    ``(B) Dwelling unit.--For purposes of subparagraph 
                (A)--
                            ``(i) the term `dwelling unit' means a 
                        house or apartment used to provide living 
                        accommodations in a building or structure, but 
                        does not include a unit in a hotel, motel, or 
                        other establishment more than one-half of the 
                        units in which are used on a transient basis, 
                        and
                            ``(ii) if any portion of the building or 
                        structure is occupied by the taxpayer, the 
                        gross rental income from such building or 
                        structure shall include the rental value of the 
                        portion so occupied.
            ``(3) Nonresidential real property.--The term 
        `nonresidential real property' means section 1250 property 
        which is not--
                    ``(A) residential rental property, or
                    ``(B) property with a class life of less than 27.5 
                years.
            ``(4) Water utility property.--The term `water utility 
        property' means property--
                    ``(A) which is an integral part of the gathering, 
                treatment, or commercial distribution of water, and
                    ``(B) any municipal sewer.
            ``(5) Qualified rent-to-own property.--
                    ``(A) In general.--The term `qualified rent-to-own 
                property' means any property held by a rent-to-own 
                dealer for purposes of being subject to a rent-to-own 
                contract.
                    ``(B) Rent-to-own dealer.--The term `rent-to-own 
                dealer' means a person that, in the ordinary course of 
                business, regularly enters into rent-to-own contracts 
                with customers for the use of consumer property, if a 
                substantial portion of those contracts terminate and 
                the property is returned to such person before the 
                receipt of all payments required to transfer ownership 
                of the property from such person to the customer.
                    ``(C) Consumer property.--The term `consumer 
                property' means tangible personal property of a type 
                generally used within the home for personal use.
                    ``(D) Rent-to-own contract.--The term `rent-to-own 
                contract' means any lease for the use of consumer 
                property between a rent-to-own dealer and a customer 
                who is an individual which--
                            ``(i) is titled `Rent-to-Own Agreement' or 
                        `Lease Agreement with Ownership Option', or 
                        uses other similar language,
                            ``(ii) provides for level (or decreasing 
                        where no payment is less than 40 percent of the 
                        largest payment), regular periodic payments 
                        (for a payment period which is a week or 
                        month),
                            ``(iii) provides that legal title to such 
                        property remains with the rent-to-own dealer 
                        until the customer makes all the payments 
                        described in clause (ii) or early purchase 
                        payments required under the contract to acquire 
                        legal title to the item of property,
                            ``(iv) provides a beginning date and a 
                        maximum period of time for which the contract 
                        may be in effect that does not exceed 156 weeks 
                        or 36 months from such beginning date 
                        (including renewals or options to extend),
                            ``(v) provides for payments within the 156-
                        week or 36-month period that, in the aggregate, 
                        generally exceed the normal retail price of the 
                        consumer property plus interest,
                            ``(vi) provides for payments under the 
                        contract that, in the aggregate, do not exceed 
                        $10,000 per item of consumer property,
                            ``(vii) provides that the customer does not 
                        have any legal obligation to make all the 
                        payments referred to in clause (ii) set forth 
                        under the contract, and that at the end of each 
                        payment period the customer may either continue 
                        to use the consumer property by making the 
                        payment for the next payment period or return 
                        such property to the rent-to-own dealer in good 
                        working order, in which case the customer does 
                        not incur any further obligations under the 
                        contract and is not entitled to a return of any 
                        payments previously made under the contract, 
                        and
                            ``(viii) provides that the customer has no 
                        right to sell, sublease, mortgage, pawn, 
                        pledge, encumber, or otherwise dispose of the 
                        consumer property until all the payments stated 
                        in the contract have been made.
            ``(6) Qualified technological equipment.--
                    ``(A) In general.--The term `qualified 
                technological equipment' means--
                            ``(i) any computer or peripheral equipment,
                            ``(ii) any high technology telephone 
                        station equipment installed on the customer's 
                        premises, and
                            ``(iii) any high technology medical 
                        equipment.
                    ``(B) Computer or peripheral equipment defined.--
                For purposes of this paragraph--
                            ``(i) In general.--The term `computer or 
                        peripheral equipment' means--
                                    ``(I) any computer, and
                                    ``(II) any related peripheral 
                                equipment.
                            ``(ii) Computer.--The term `computer' means 
                        a programmable electronically activated device 
                        which--
                                    ``(I) is capable of accepting 
                                information, applying prescribed 
                                processes to the information, and 
                                supplying the results of these 
                                processes with or without human 
                                intervention, and
                                    ``(II) consists of a central 
                                processing unit containing extensive 
                                storage, logic, arithmetic, and control 
                                capabilities.
                    ``(C) High technology medical equipment.--For 
                purposes of this paragraph, the term `high technology 
                medical equipment' means any electronic, 
                electromechanical, or computer-based high technology 
                equipment used in the screening, monitoring, 
                observation, diagnosis, or treatment of patients in a 
                laboratory, medical, or hospital environment.
            ``(7) Natural gas gathering line.--The term `natural gas 
        gathering line' means--
                    ``(A) the pipe, equipment, and appurtenances 
                determined to be a gathering line by the Federal Energy 
                Regulatory Commission, and
                    ``(B) the pipe, equipment, and appurtenances used 
                to deliver natural gas from the wellhead or a 
                commonpoint to the point at which such gas first 
                reaches--
                            ``(i) a gas processing plant,
                            ``(ii) an interconnection with a 
                        transmission pipeline for which a certificate 
                        as an interstate transmission pipeline has been 
                        issued by the Federal Energy Regulatory 
                        Commission,
                            ``(iii) an interconnection with an 
                        intrastate transmission pipeline, or
                            ``(iv) a direct interconnection with a 
                        local distribution company, a gas storage 
                        facility, or an industrial consumer.
            ``(8) Qualified smart electric meters.--
                    ``(A) In general.--The term `qualified smart 
                electric meter' means any smart electric meter which--
                            ``(i) is placed in service by a taxpayer 
                        that is a supplier of electric energy or a 
                        provider of electric energy services, and
                            ``(ii) does not have a class life 
                        (determined without regard to subsection (c)) 
                        of less than 10 years.
                    ``(B) Smart electric meter.--For purposes of 
                subparagraph (A), the term `smart electric meter' means 
                any time-based meter and related communication 
                equipment which is capable of being used by the 
                taxpayer as part of a system that--
                            ``(i) measures and records electricity 
                        usage data on a time-differentiated basis in at 
                        least 24 separate time segments per day,
                            ``(ii) provides for the exchange of 
                        information between supplier or provider and 
                        the customer's electric meter in support of 
                        time-based rates or other forms of demand 
                        response,
                            ``(iii) provides data to such supplier or 
                        provider so that the supplier or provider can 
                        provide energy usage information to customers 
                        electronically, and
                            ``(iv) provides net metering.
            ``(9) Qualified smart electric grid systems.--
                    ``(A) In general.--The term `qualified smart 
                electric grid system' means any smart grid property 
                which--
                            ``(i) is used as part of a system for 
                        electric distribution grid communications, 
                        monitoring, and management placed in service by 
                        a taxpayer who is a supplier of electric energy 
                        or a provider of electric energy services, and
                            ``(ii) does not have a class life 
                        (determined without regard to subsection (c)) 
                        of less than 10 years.
                    ``(B) Smart grid property.--For the purposes of 
                subparagraph (A), the term `smart grid property' means 
                electronics and related equipment that is capable of--
                            ``(i) sensing, collecting, and monitoring 
                        data of or from all portions of a utility's 
                        electric distribution grid,
                            ``(ii) providing real-time, two-way 
                        communications to monitor or manage such grid, 
                        and
                            ``(iii) providing real time analysis of and 
                        event prediction based upon collected data that 
                        can be used to improve electric distribution 
                        system reliability, quality, and performance.
            ``(10) Specified property used outside the united states.--
                    ``(A) In general.--The term `specified property 
                used outside the United States' means--
                            ``(i) any aircraft which is registered by 
                        the Administrator of the Federal Aviation 
                        Agency and which is operated to and from the 
                        United States or is operated under contract 
                        with the United States,
                            ``(ii) rolling stock which is used within 
                        and without the United States and which is--
                                    ``(I) of a rail carrier subject to 
                                part A of subtitle IV of title 49, or
                                    ``(II) of a United States person 
                                (other than a corporation described in 
                                subclause (I)) but only if the rolling 
                                stock is not leased to one or more 
                                foreign persons for periods aggregating 
                                more than 12 months in any 24-month 
                                period,
                            ``(iii) any vessel documented under the 
                        laws of the United States which is operated in 
                        the foreign or domestic commerce of the United 
                        States,
                            ``(iv) any motor vehicle of a United States 
                        person (as defined in section 7701(a)(30)) 
                        which is operated to and from the United 
                        States,
                            ``(v) any container of a United States 
                        person which is used in the transportation of 
                        property to and from the United States,
                            ``(vi) any property (other than a vessel or 
                        an aircraft) of a United States person which is 
                        used for the purpose of exploring for, 
                        developing, removing, or transporting resources 
                        from the outer Continental Shelf (within the 
                        meaning of section 2 of the Outer Continental 
                        Shelf Lands Act, as amended and supplemented 
                        (43 U.S.C. 1331)),
                            ``(vii) any property which is owned by a 
                        domestic corporation or by a United States 
                        citizen (other than a citizen entitled to the 
                        benefits of section 931 or 933) and which is 
                        used predominantly in a possession of the 
                        United States by such a corporation, or such a 
                        citizen, or by a corporation created or 
                        organized in, or under the law of, a possession 
                        of the United States,
                            ``(viii) any communications satellite (as 
                        defined in section 103(3) of the Communications 
                        Satellite Act of 1962, 47 U.S.C. 702(3)), or 
                        any interest therein, of a United States 
                        person,
                            ``(ix) any cable, or any interest therein, 
                        of a domestic corporation engaged in furnishing 
                        telephone service to which section 
                        168(e)(10)(C) applies (or of a wholly owned 
                        domestic subsidiary of such a corporation), if 
                        such cable is part of a submarine cable system 
                        which constitutes part of a communication link 
                        exclusively between the United States and one 
                        or more foreign countries,
                            ``(x) any property (other than a vessel or 
                        an aircraft) of a United States person which is 
                        used in international or territorial waters 
                        within the northern portion of the Western 
                        Hemisphere for the purpose of exploring for, 
                        developing, removing, or transporting resources 
                        from ocean waters or deposits under such 
                        waters,
                            ``(xi) any property described in section 
                        48(l)(3)(A)(ix) (as in effect on the day before 
                        the date of the enactment of the Revenue 
                        Reconciliation Act of 1990) which is owned by a 
                        United States person and which is used in 
                        international or territorial waters to generate 
                        energy for use in the United States, and
                            ``(xii) any satellite (not described in 
                        clause (viii)) or other spacecraft (or any 
                        interest therein) held by a United States 
                        person if such satellite or other spacecraft 
                        was launched from within the United States.
                    ``(B) Northern portion of the western hemisphere.--
                For purposes of subparagraph (A)(x), the term `northern 
                portion of the Western Hemisphere' means the area lying 
                west of the 30th meridian west of Greenwich, east of 
                the international dateline, and north of the Equator, 
                but not including any foreign country which is a 
                country of South America.''.
    (f) Conforming Amendments.--
            (1) Amendments to section 168.--
                    (A) Section 168 is amended by striking subsections 
                (g), (j), (k), (l), (m), and (n), and by redesignating 
                subsections (h) and (i) as subsections (g) and (h), 
                respectively.
                    (B) Section 168(h), as redesignated by subparagraph 
                (A), is amended--
                            (i) by striking paragraphs (1), (2), (11), 
                        (12), (13), (14), (15), (16), (17), (18), and 
                        (19) and by redesignating paragraphs (3) 
                        through (10) as paragraphs (1) through (8), 
                        respectively, and
                            (ii) by striking ``Definitions and'' in the 
                        heading thereof.
                    (C) Section 168(h)(8), as redesignated by 
                subparagraphs (A) and (B), is moved to the end of 
                section 168(e) (as amended by subsection (e)) and 
                redesignated as paragraph (11).
            (2) Other conforming amendments.--
                    (A) Section 50(b)(4) is amended--
                            (i) in subparagraph (A)(ii)--
                                    (I) by striking ``section 
                                168(h)(2)(C)'' and inserting ``section 
                                168(g)(2)(C)'',
                                    (II) by striking ``section 
                                168(h)(2)(A)(iii)'' and inserting 
                                ``section 168(g)(2)(A)(iii)'', and
                                    (III) by striking ``section 
                                168(h)(2)(B)'' and inserting ``section 
                                168(g)(2)(B)'',
                            (ii) in subparagraph (B), by striking 
                        ``section 168(i)(3)'' and inserting ``section 
                        168(h)(1)'', and
                            (iii) in subparagraphs (D) and (E), by 
                        striking ``section 168(h)'' each place it 
                        appears and inserting ``section 168(g)''.
                    (B)(i) Section 50(b)(1)(B) is amended by striking 
                ``any property described in section 168(g)(4)'' and 
                inserting ``any specified property used outside the 
                United States (as defined in section 168(e)(10)''.
                    (ii) Section 865(c)(3)(B) is amended by striking 
                ``property of a kind described in section 168(g)(4)'' 
                and inserting ``specified property used outside the 
                United States (as defined in section 168(e)(10)''.
                    (C) Section 179(e)(2) is amended by inserting ``as 
                in effect before its repeal by the Tax Reform Act of 
                2014'' after ``section 168(n)(2)''.
                    (D) Section 179(f), as amended by section 3111, is 
                amended--
                            (i) by striking paragraph (2), and
                            (ii) by inserting after paragraph (1) the 
                        following new paragraphs:
            ``(2) Qualified real property.--For purposes of this 
        subsection, the term `qualified real property' means qualified 
        leasehold improvement property, qualified restaurant property, 
        and qualified retail improvement property.
            ``(3) Qualified leasehold improvement property.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified leasehold 
                improvement property' means any improvement to an 
                interior portion of a building which is nonresidential 
                real property if--
                            ``(i) such improvement is made under or 
                        pursuant to a lease (as defined in section 
                        168(g)(7))--
                                    ``(I) by the lessee (or any 
                                sublessee) of such portion, or
                                    ``(II) by the lessor of such 
                                portion,
                            ``(ii) such portion is to be occupied 
                        exclusively by the lessee (or any sublessee) of 
                        such portion, and
                            ``(iii) such improvement is placed in 
                        service more than 3 years after the date the 
                        building was first placed in service.
                    ``(B) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                            ``(i) the enlargement of the building,
                            ``(ii) any elevator or escalator,
                            ``(iii) any structural component 
                        benefitting a common area, and
                            ``(iv) the internal structural framework of 
                        the building.
                    ``(C) Definitions and special rules.--For purposes 
                of this paragraph--
                            ``(i) Commitment to lease treated as 
                        lease.--A commitment to enter into a lease 
                        shall be treated as a lease, and the parties to 
                        such commitment shall be treated as lessor and 
                        lessee, respectively.
                            ``(ii) Related persons.--A lease between 
                        related persons shall not be considered a 
                        lease. For purposes of the preceding sentence, 
                        the term `related persons' means--
                                    ``(I) members of an affiliated 
                                group (as defined in section 1504), and
                                    ``(II) persons having a 
                                relationship described in subsection 
                                (b) of section 267; except that, for 
                                purposes of this subclause, the phrase 
                                `80 percent or more' shall be 
                                substituted for the phrase `more than 
                                50 percent' each place it appears in 
                                such subsection.
                    ``(D) Improvements made by lessor.--In the case of 
                an improvement made by the person who was the lessor of 
                such improvement when such improvement was placed in 
                service, such improvement shall be qualified leasehold 
                improvement property (if at all) only so long as such 
                improvement is held by such person.
                    ``(E) Exception for changes in form of business.--
                Property shall not cease to be qualified leasehold 
                improvement property by reason of--
                            ``(i) death,
                            ``(ii) a transaction to which section 
                        381(a) applies,
                            ``(iii) a mere change in the form of 
                        conducting the trade or business so long as the 
                        property is retained in such trade or business 
                        as qualified leasehold improvement property and 
                        the taxpayer retains a substantial interest in 
                        such trade or business,
                            ``(iv) the acquisition of such property in 
                        an exchange described in section 1031 (as in 
                        effect before its repeal by the Tax Reform Act 
                        of 2014), 1033, or 1038 to the extent that the 
                        basis of such property includes an amount 
                        representing the adjusted basis of other 
                        property owned by the taxpayer or a related 
                        person, or
                            ``(v) the acquisition of such property by 
                        the taxpayer in a transaction described in 
                        section 332, 351, 361, 721, or 731 (or the 
                        acquisition of such property by the taxpayer 
                        from the transferee or acquiring corporation in 
                        a transaction described in such section), to 
                        the extent that the basis of the property in 
                        the hands of the taxpayer is determined by 
                        reference to its basis in the hands of the 
                        transferor or distributor.
            ``(4) Qualified restaurant property.--For purposes of this 
        subsection, the term `qualified restaurant property' means any 
        section 1250 property which is--
                    ``(A) a building, or
                    ``(B) an improvement to a building,
        if more than 50 percent of the building's square footage is 
        devoted to preparation of, and seating for on-premises 
        consumption of, prepared meals.
            ``(5) Qualified retail improvement property.--
                    ``(A) In general.--The term `qualified retail 
                improvement property' means any improvement to an 
                interior portion of a building which is nonresidential 
                real property if--
                            ``(i) such portion is open to the general 
                        public and is used in the retail trade or 
                        business of selling tangible personal property 
                        to the general public, and
                            ``(ii) such improvement is placed in 
                        service more than 3 years after the date the 
                        building was first placed in service.
                    ``(B) Improvements made by owner.--In the case of 
                an improvement made by the owner of such improvement, 
                such improvement shall be qualified retail improvement 
                property (if at all) only so long as such improvement 
                is held by such owner. Rules similar to the rules under 
                paragraph (3)(E) shall apply for purposes of the 
                preceding sentence.
                    ``(C) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                            ``(i) the enlargement of the building,
                            ``(ii) any elevator or escalator,
                            ``(iii) any structural component 
                        benefitting a common area, or
                            ``(iv) the internal structural framework of 
                        the building.''.
                    (E) Section 280F(b) is amended--
                            (i) by striking paragraph (1) and by 
                        redesignating paragraphs (2) and (3) as 
                        paragraphs (1) and (2), respectively, and
                            (ii) by striking ``, and the depreciation 
                        deduction'' and all that follows through 
                        ``alternative depreciation system)'' in 
                        paragraph (1) (as redesignated by clause (i)).
                    (F) Section 280F(d)(4)(A)(iv) is amended by 
                striking ``section 168(i)(2)(B)'' and inserting 
                ``section 168(e)(6)(B)''.
                    (G) Section 312(k)(3) is amended by striking 
                ``Exception for tangible property'' and all that 
                follows through ``For purposes of computing the 
                earnings and profits'' and inserting ``Exception for 
                certain tangible property.--For purposes of computing 
                the earnings and profits''.
                    (H) Section 460(c) is amended by striking paragraph 
                (6).
                    (I) Section 460(d)(2) is amended by striking 
                ``section 168(h)(2)(D)'' and inserting ``section 
                168(g)(2)(D)''.
                    (J) Section 460(e)(6) is amended by striking 
                ``section 168(e)(2)(A)(ii)'' each place it appears and 
                inserting ``section 168(e)(2)(B)''.
                    (K)(i) Subparagraphs (A) and (C) of section 
                470(c)(2) are each amended by striking ``section 
                168(h)'' and inserting ``section 168(g).''
                    (ii) Section 470(c)(2)(B) is amended by striking 
                ``section 168(h)(6)'' and inserting ``section 
                168(g)(6)''.
                    (L) Section 512(b)(17)(B)(ii)(I) is amended by 
                striking ``section 168(h)(4)(B)'' and inserting 
                ``section 168(g)(4)(B)''.
                    (M) Section 514(c)(9)(B)(vi)(II) is amended by 
                striking ``section 168(h)(6)'' and inserting ``section 
                168(g)(6)''.
                    (N) Section 527(i)(3)(D) is amended by striking 
                ``section 168(h)(4)'' and inserting ``section 
                168(g)(4)''.
                    (O) The second sentence of section 860E(e)(5) is 
                amended by striking ``section 168(h)(2)(D)'' and 
                inserting ``section 168(g)(2)(D)''.
                    (P) Section 1245(a) is amended--
                            (i) in paragraph (3)(D), by striking 
                        ``section 168(i)(13)'' and inserting 
                        ``paragraph (4)'', and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(4) Single purpose agricultural or horticultural 
        structure.--For purposes of this subsection--
                    ``(A) In general.--The term `single purpose 
                agricultural or horticultural structure' means--
                            ``(i) a single purpose livestock structure, 
                        and
                            ``(ii) a single purpose horticultural 
                        structure.
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Single purpose livestock structure.--
                        The term `single purpose livestock structure' 
                        means any enclosure or structure specifically 
                        designed, constructed, and used--
                                    ``(I) for housing, raising, and 
                                feeding a particular type of livestock 
                                and their produce, and
                                    ``(II) for housing the equipment 
                                (including any replacements) necessary 
                                for the housing, raising, and feeding 
                                referred to in subclause (I).
                            ``(ii) Single purpose horticultural 
                        structure.--The term `single purpose 
                        horticultural structure' means--
                                    ``(I) a greenhouse specifically 
                                designed, constructed, and used for the 
                                commercial production of plants, and
                                    ``(II) a structure specifically 
                                designed, constructed, and used for the 
                                commercial production of mushrooms.
                            ``(iii) Structures which include work 
                        space.--An enclosure or structure which 
                        provides work space shall be treated as a 
                        single purpose agricultural or horticultural 
                        structure only if such work space is solely 
                        for--
                                    ``(I) the stocking, caring for, or 
                                collecting of livestock or plants (as 
                                the case may be) or their produce,
                                    ``(II) the maintenance of the 
                                enclosure or structure, and
                                    ``(III) the maintenance or 
                                replacement of the equipment or stock 
                                enclosed or housed therein.
                            ``(iv) Livestock.--The term ``livestock'' 
                        includes poultry.''.
                    (Q) Section 1245(a)(3)(F) is amended to read as 
                follows:
                    ``(F) any clearing and grading land improvements or 
                tunnel bore (within the meaning of section 
                168(c)(2)(P)).''.
                    (R) Section 6050V(d)(3) is amended by striking 
                ``section 168(h)(2)(A)(iv)'' and inserting ``section 
                168(g)(2)(A)(iv)''.
                    (S) Section 6211(b)(4)(A) is amended by striking 
                ``168(k)(4),''.
                    (T) The second sentence of section 7701(e)(4)(A) is 
                amended by striking ``section 168(h)'' and inserting 
                ``section 168(g)''.
                    (U) Section 7871(f)(3) is amended--
                            (i) by striking ``(as defined in section 
                        168(j)(6))'' in subparagraph (B)(ii), and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(D) Indian reservation.--For purposes of this 
                paragraph, the term `Indian reservation' means a 
                reservation, as defined in--
                            ``(i) section 3(d) of the Indian Financing 
                        Act of 1974 (25 U.S.C. 1452(d)), or
                            ``(ii) section 4(10) of the Indian Child 
                        Welfare Act of 1978 (25 U.S.C. 1903(10)).
                For purposes of the preceding sentence, such section 
                3(d) shall be applied by treating the term `former 
                Indian reservations in Oklahoma' as including only 
                lands which are within the jurisdictional area of an 
                Oklahoma Indian tribe (as determined by the Secretary 
                of the Interior) and are recognized by such Secretary 
                as eligible for trust land status under 25 CFR Part 151 
                (as in effect on August 5, 1997).''.
    (g) Normalization Requirements.--
            (1) In general.--A normalization method of accounting shall 
        not be treated as being used with respect to any public utility 
        property for purposes of section 167 or 168 of the Internal 
        Revenue Code of 1986 if the taxpayer, in computing its cost of 
        service for ratemaking purposes and reflecting operating 
        results in its regulated books of account, reduces the excess 
        tax reserve more rapidly or to a greater extent than such 
        reserve would be reduced under the average rate assumption 
        method.
            (2) Alternative method for certain taxpayers.--If, as of 
        the first day of the taxable year that includes the date of 
        enactment of this Act--
                    (A) the taxpayer was required by a regulatory 
                agency to compute depreciation for public utility 
                property on the basis of an average life or composite 
                rate method, and
                    (B) the taxpayer's books and underlying records did 
                not contain the vintage account data necessary to apply 
                the average rate assumption method,
        the taxpayer will be treated as using a normalization method of 
        accounting if, with respect to such jurisdiction, the taxpayer 
        uses the alternative method for public utility property that is 
        subject to the regulatory authority of that jurisdiction.
            (3) Definitions.--For purposes of this subsection--
                    (A) Excess tax reserve.--The term ``excess tax 
                reserve'' means the excess of--
                            (i) the reserve for deferred taxes (as 
                        described in section 168(i)(9)(A)(ii) of the 
                        Internal Revenue Code of 1986 as in effect on 
                        the day before the date of the enactment of 
                        this Act), over
                            (ii) the amount which would be the balance 
                        in such reserve if the amount of such reserve 
                        were determined by assuming that the corporate 
                        rate reductions provided in this Act were in 
                        effect for all prior periods.
                    (B) Average rate assumption method.--The average 
                rate assumption method is the method under which the 
                excess in the reserve for deferred taxes is reduced 
                over the remaining lives of the property as used in its 
                regulated books of account which gave rise to the 
                reserve for deferred taxes. Under such method, if 
                timing differences for the property reverse, the amount 
                of the adjustment to the reserve for the deferred taxes 
                is calculated by multiplying--
                            (i) the ratio of the aggregate deferred 
                        taxes for the property to the aggregate timing 
                        differences for the property as of the 
                        beginning of the period in question, by
                            (ii) the amount of the timing differences 
                        which reverse during such period.
                    (C) Alternative method.--The ``alternative method'' 
                is the method in which the taxpayer--
                            (i) computes the excess tax reserve on all 
                        public utility property included in the plant 
                        account on the basis of the weighted average 
                        life or composite rate used to compute 
                        depreciation for regulatory purposes, and
                            (ii) reduces the excess tax reserve ratably 
                        over the remaining regulatory life of the 
                        property.
            (4) Tax increased for normalization violation.--If, for any 
        taxable year ending after the date of the enactment of this 
        Act, the taxpayer does not use a normalization method of 
        accounting, the taxpayer's tax for the taxable year shall be 
        increased by the amount by which it reduces its excess tax 
        reserve more rapidly than permitted under a normalization 
        method of accounting.
    (h) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2016.

SEC. 3105. REPEAL OF AMORTIZATION OF POLLUTION CONTROL FACILITIES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 169 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 642(f) is amended by striking ``the deductions 
        for amortization provided by sections 169 and 197'' and 
        inserting ``the deduction for amortization provided by section 
        197''.
            (2) Section 1250(b)(3) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``169''.
    (c) Effective Date.--The amendments made by this section shall 
apply to facilities placed in service after December 31, 2014.

SEC. 3106. NET OPERATING LOSS DEDUCTION.

    (a) Limitation on Net Operating Losses of Corporations.--
            (1) In general.--Section 172(a) is amended to read as 
        follows:
    ``(a) Deduction Allowed.--
            ``(1) In general.--There shall be allowed as a deduction 
        for the taxable year an amount equal to the aggregate of--
                    ``(A) the net operating loss carryovers to such 
                year, plus
                    ``(B) the net operating loss carrybacks to such 
                year.
            ``(2) Limitation in case of corporations.--In the case of a 
        corporation--
                    ``(A) the deduction allowed under paragraph (1) for 
                the taxable year shall not exceed 90 percent of the 
                taxable income for such year computed without regard to 
                the deduction allowable under this section, and
                    ``(B) appropriate adjustments in the application of 
                subsection (b)(2) shall be made to take into account 
                the limitation of subparagraph (A).
            ``(3) Net operating loss deduction defined.--For purposes 
        of this subtitle, the term `net operating loss deduction' means 
        the deduction allowed by this subsection.''.
            (2) Coordination with limitation on deduction for 
        charitable contributions.--
                    (A) In general.--Section 170(b)(2)(C) is amended by 
                redesignating clauses (iv) and (v) as clauses (v) and 
                (vi), respectively, and by inserting after clause (iii) 
                the following new clause:
                            ``(iv) the limitation imposed under section 
                        172(a)(2)(A),''.
                    (B) Life insurance companies.--Section 805(b)(2)(A) 
                is amended by redesignating clauses (ii) through (v) as 
                clauses (iii) through (vi), respectively, and by 
                inserting after clause (i) the following new clause:
                            ``(ii) the limitation imposed under section 
                        172(a)(2)(A),''.
    (b) Repeal of Special Carryback Provisions.--
            (1) In general.--Section 172(b)(1) is amended by striking 
        subparagraphs (C), (D), (E), (G), (H), (I), and (J) and by 
        redesignating subparagraph (F) as subparagraph (C).
            (2) Conforming amendments.--
                    (A) Section 172(b)(1)(C), as redesignated by 
                paragraph (1), is amended--
                            (i) in clause (ii), by striking the last 
                        sentence, and
                            (ii) in clause (iv), by striking ``in a 
                        manner similar to the manner in which a 
                        specified liability loss is treated'' and 
                        inserting ``as a separate net operating loss 
                        for such taxable year to be taken into account 
                        after the remaining portion of the net 
                        operating loss for such taxable year''.
                    (B) Section 172 is amended by striking subsections 
                (f), (g), (h), (i), and (j) and by redesignating 
                subsection (k) as subsection (f).
    (c) Effective Dates.--
            (1) Limitation on nols of corporations.--The amendments 
        made by subsection (a) shall apply to--
                    (A) taxable years beginning after December 31, 
                2014, and
                    (B) to carrybacks of losses arising in taxable 
                years beginning after December 31, 2014, to taxable 
                years beginning on or before such date.
            (2) Repeal of special carrybacks.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by subsection (b) 
                shall apply to losses arising in taxable years 
                beginning after December 31, 2014.
                    (B) Expired provisions.--So much of the amendments 
                made by subsection (b) as relate to striking 
                subparagraphs (D), (H), (I), and (J) of section 
                172(b)(1) of the Internal Revenue Code of 1986 shall 
                take effect on the date of the enactment of this Act.

SEC. 3107. CIRCULATION EXPENDITURES.

    (a) In General.--Section 173 is amended to read as follows:

``SEC. 173. CIRCULATION EXPENDITURES.

    ``(a) In General.--In the case of a taxpayer's specified 
circulation expenditures--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenditures to capital account, 
                and
                    ``(B) be allowed an amortization deduction of such 
                expenditures ratably over the 36-month period beginning 
                with the midpoint of the month in which such 
                expenditures are paid or incurred.
    ``(b) Specified Circulation Expenditures.--For purposes of this 
section, the term `specified circulation expenditures' means all 
expenditures (other than expenditures for the purchase of land or 
depreciable property or for the acquisition of circulation through the 
purchase of any part of the business of another publisher of a 
newspaper, magazine, or other periodical) to establish, maintain, or 
increase the circulation of a newspaper, magazine, or other periodical.
    ``(c) Treatment Upon Abandonment.--If any property with respect to 
which specified circulation expenditures are paid or incurred is 
disposed, retired, or abandoned during the period during which such 
expenditures are allowed as an amortization deduction under this 
section, no deduction shall be allowed with respect to such 
expenditures on account of such disposition, retirement, or abandonment 
and such amortization deduction shall continue with respect to such 
expenditures.
    ``(d) Phase-In for Taxable Years Beginning Before 2019.--
            ``(1) In general.--In the case of specified circulation 
        expenditures paid or incurred in taxable years beginning before 
        2019--
                    ``(A) notwithstanding subsection (a), the 
                applicable percentage of such expenditures shall be 
                allowed as a deduction for the taxable year in which 
                paid or incurred, and
                    ``(B) subsection (a) shall apply to the remainder 
                of such expenditures.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage shall be determined in 
        accordance with the following table:

``In the case of taxable years            The applicable percentage is:
        beginning in:
        2016...............................................         75%
        2017...............................................         50%
        2018...............................................         25%
            ``(3) Election out of phase-in.--The taxpayer may elect, at 
        such time and in such form and manner as the Secretary shall 
        prescribe, for paragraph (1) not to apply for all taxable years 
        beginning before 2019. Such election, once made, shall be 
        irrevocable.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2015.

SEC. 3108. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

    (a) In General.--Section 174 is amended to read as follows:

``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

    ``(a) In General.--In the case of a taxpayer's specified research 
or experimental expenditures for any taxable year--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenditures to capital account, 
                and
                    ``(B) be allowed an amortization deduction of such 
                expenditures ratably over the 5-year period (15-year 
                period in the case of any specified research or 
                experimental expenditures which are attributable to 
                foreign research (within the meaning of section 
                41(d)(4)(F))) beginning with the midpoint of the 
                taxable year in which such expenditures are paid or 
                incurred.
    ``(b) Specified Research or Experimental Expenditures.--For 
purposes of this section, the term `specified research or experimental 
expenditures' means, with respect to any taxable year, research or 
experimental expenditures which are paid or incurred by the taxpayer 
during such taxable year in connection with the taxpayer's trade or 
business.
    ``(c) Special Rules.--
            ``(1) Land and other property.--This section shall not 
        apply to any expenditure for the acquisition or improvement of 
        land, or for the acquisition or improvement of property to be 
        used in connection with the research or experimentation and of 
        a character which is subject to the allowance under section 167 
        (relating to allowance for depreciation, etc.) or section 611 
        (relating to allowance for depletion); but for purposes of this 
        section allowances under section 167, and allowances under 
        section 611, shall be considered as expenditures.
            ``(2) Exploration expenditures.--This section shall not 
        apply to any expenditure paid or incurred for the purpose of 
        ascertaining the existence, location, extent, or quality of any 
        deposit of ore or other mineral (including oil and gas).
            ``(3) Software development.--For purposes of this section, 
        any amount paid or incurred in connection with the development 
        of any software shall be treated as a research or experimental 
        expenditure.
    ``(d) Treatment Upon Disposition, Retirement, or Abandonment.--If 
any property with respect to which specified research or experimental 
expenditures are paid or incurred is disposed, retired, or abandoned 
during the period during which such expenditures are allowed as an 
amortization deduction under this section, no deduction shall be 
allowed with respect to such expenditures on account of such 
disposition, retirement, or abandonment and such amortization deduction 
shall continue with respect to such expenditures.
    ``(e) Special Rules for Expenditures for Domestic Research During 
Taxable Years Beginning Before 2021.--
            ``(1) In general.--In the case of domestic research or 
        experimental expenditures paid or incurred during any taxable 
        year beginning before 2021--
                    ``(A) notwithstanding subsection (a), the 
                applicable percentage of such expenditures shall be 
                allowed as a deduction in the taxable year in which 
                paid or incurred, and
                    ``(B) subsection (a) shall apply to the remainder 
                of such expenditures by substituting the applicable 
                period for `the 5-year period'.
            ``(2) Domestic research or experimental expenditures.--For 
        purposes of this subsection, the term `domestic research or 
        experimental expenditures' means any expenditures--
                    ``(A) to which subsection (a) applies (determined 
                without regard to this subsection), and
                    ``(B) which are not attributable to foreign 
                research (within the meaning of section 41(d)(4)(F)).
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the applicable percentage shall be determined in 
        accordance with the following table:

``In the case of taxable years            The applicable percentage is:
        beginning in:
        2015...............................................         60%
        2016 or 2017.......................................         40%
        2018, 2019, or 2020................................         20%
            ``(4) Applicable period.--For purposes of this subsection, 
        the applicable period shall be determined in accordance with 
        the following table:

``In the case of taxable years            The applicable period is the:
        beginning in:
        2015..............................................2-year period
        2016 or 2017......................................3-year period
        2018, 2019, or 2020...............................4-year period
            ``(5) Election out of phase-in.--The taxpayer may elect, at 
        such time and in such form and manner as the Secretary shall 
        prescribe, for paragraph (1) not to apply to all domestic 
        research or experimental expenditures of the taxpayer for any 
        taxable years beginning before 2021. Such election, once made, 
        shall be irrevocable.''.
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 174 and inserting the following new item:

``Sec. 174. Amortization of research and experimental expenditures.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3109. REPEAL OF DEDUCTIONS FOR SOIL AND WATER CONSERVATION 
              EXPENDITURES AND ENDANGERED SPECIES RECOVERY 
              EXPENDITURES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 175 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--Paragraphs (1)(A) and (2) of section 
1252(a) are each amended by striking ``relating to soil and water 
conservation expenditures'' and inserting ``as in effect before its 
repeal by the Tax Reform Act of 2014''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to amounts paid or incurred after December 31, 2014.
            (2) Assessments treated as paid or incurred.--In the case 
        of any amount paid or incurred before December 31, 2014, and 
        treated as paid or incurred in any succeeding taxable year by 
        reason of section 175(f) of the Internal Revenue Code of 1986 
        (as in effect on the day before the date of the enactment of 
        this Act), paragraph (1) shall not apply.

SEC. 3110. AMORTIZATION OF CERTAIN ADVERTISING EXPENSES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
inserting after section 176 the following new section:

``SEC. 177. AMORTIZATION OF CERTAIN ADVERTISING EXPENSES.

    ``(a) In General.--In the case of a taxpayer's amortizable 
advertising expenses for any taxable year--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenses, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenses to capital account, and
                    ``(B) be allowed an amortization deduction of such 
                expenses ratably over the 10-year period beginning with 
                the midpoint of the taxable year in which such expenses 
                are paid or incurred.
    ``(b) Exemption.--
            ``(1) In general.--So much of the taxpayer's otherwise 
        deductible advertising expenses for any taxable year as do not 
        exceed $1,000,000 shall not be taken into account in 
        determining such taxpayer's amortizable advertising expenses 
        for such taxable year.
            ``(2) Phaseout of exemption.--In the case of a taxpayer 
        whose otherwise deductible advertising expenses for any taxable 
        year exceed $1,500,000, the dollar amount in effect under 
        paragraph (1) with respect to such taxpayer for such taxable 
        year shall be reduced (but not below zero) by twice such 
        excess.
            ``(3) Aggregation; short taxable years.--For purposes of 
        this subsection, rules similar to the rules of paragraphs (2) 
        and (3)(B) of section 448(b) shall apply.
    ``(c) Amortizable Advertising Expenses.--
            ``(1) In general.--For purposes of this section, the term 
        `amortizable advertising expenses' means, with respect to any 
        taxpayer for any taxable year, the applicable percentage of the 
        taxpayer's otherwise deductible advertising expenses for such 
        taxable year.
            ``(2) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means (with 
        respect to the taxpayer's otherwise deductible advertising 
        expenses for any taxable year) the percentage determined in 
        accordance with the following table:

----------------------------------------------------------------------------------------------------------------
      ``For taxable years beginning in:                          The applicable percentage is:
----------------------------------------------------------------------------------------------------------------
2015.........................................  20 percent
2016.........................................  30 percent
2017.........................................  40 percent
2018 or thereafter...........................  50 percent.
----------------------------------------------------------------------------------------------------------------

            ``(3) Election out of phase-in.--The taxpayer may elect, at 
        such time and in such form and manner as the Secretary shall 
        prescribe, to treat the applicable percentage as being equal to 
        50 percent for all taxable years beginning before 2018. Such 
        election, once made, shall be irrevocable.
    ``(d) Otherwise Deductible Advertising Expenses.--For purposes of 
this section--
            ``(1) In general.--The term `otherwise deductible 
        advertising expenses' means, with respect to any taxpayer for 
        any taxable year, the deductions which would (but for this 
        section) be allowable to the taxpayer for such taxable year 
        with respect to specified advertising expenses.
            ``(2) Specified advertising expenses.--The term `specified 
        advertising expenses' means any amount paid or incurred for the 
        development, production, or placement (including any form of 
        transmission, broadcast, publication, display, or distribution) 
        of any communication to the general public (or portions 
        thereof) which is intended to promote the taxpayer or a trade 
        or business of the taxpayer (or any service, facility, or 
        product provided pursuant to such trade or business).
            ``(3) Exceptions.--The term `specified advertising 
        expenses' shall not include--
                    ``(A) Certain wages.--Wages paid or incurred to any 
                employee unless the services rendered by such employee 
                are primarily related to--
                            ``(i) an activity described in paragraph 
                        (2) (other than the direct sale of goods or 
                        services to customers of the taxpayer), or
                            ``(ii) the direct supervision of employees 
                        rendering services primarily related to such an 
                        activity.
                    ``(B) Depreciation of tangible property.--In the 
                case of any tangible property, any amount for which a 
                deduction is allowed for depreciation under section 
                167.
                    ``(C) Amortizable section 197 intangibles.--Any 
                amount for which a deduction is allowed for 
                amortization under section 197.
                    ``(D) Discounts, etc.--Any discount, coupon, 
                rebate, slotting allowance, sample, prize, loyalty 
                reward point, or any item determined by the Secretary 
                to be similar to any of the foregoing (other than any 
                amount paid or incurred to promote any of the 
                foregoing).
                    ``(E) Certain communications on taxpayer's 
                property.--Any amount paid or incurred with respect to 
                any communication appearing on tangible property of the 
                taxpayer which--
                            ``(i) is of a character subject to the 
                        allowance for depreciation, or
                            ``(ii) is properly treated as inventory for 
                        purposes of section 471.
                    ``(F) Creation of logos, trade names, etc.--Any 
                amount paid or incurred for the creation of any logo, 
                trademark, or trade name.
                    ``(G) Package design.--Any amount to which section 
                263A(i) applies.
                    ``(H) Marketing research.--Any amount paid or 
                incurred for marketing research.
                    ``(I) Business meals.--Any amount paid or incurred 
                for meals.
                    ``(J) Qualified sponsorship payments.--Any amount 
                paid or incurred as a qualified sponsorship payment (as 
                defined in section 513(i)(2)) with respect to an 
                organization subject to the tax imposed by section 511.
    ``(e) Treatment Upon Abandonment.--If any property with respect to 
which specified advertising expenses are paid or incurred is disposed, 
retired, or abandoned during the period during which such expenses are 
allowed as an amortization deduction under this section, no deduction 
shall be allowed with respect such expenses on account of such 
disposition, retirement, or abandonment and such amortization deduction 
shall continue with respect to such expenses.
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2015, each of the dollar amounts in subsection 
        (b) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for such calendar year, 
                determined by substituting `calendar year 2014' for 
                `calendar year 2012' in clause (ii) thereof.
            ``(2) Rounding.--The amount of any increase under paragraph 
        (1) shall be rounded to the nearest multiple of $10,000.''.
    (b) Capitalization of Package Design Expenses.--Section 263A is 
amended by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new subsection:
    ``(i) Capitalization of Package Design Expenses.--For purposes of 
this section, in the case of any amount paid or incurred for package 
design, such amounts shall be treated as an indirect cost described in 
subsection (a)(2)(B) with respect to packages which utilize such 
design.''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 176 the following new item:

``Sec. 177. Amortization of certain advertising expenses.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3111. EXPENSING CERTAIN DEPRECIABLE BUSINESS ASSETS FOR SMALL 
              BUSINESS.

    (a) In General.--
            (1) Dollar limitation.--Paragraph (1) of section 179(b) is 
        amended by striking ``shall not exceed--'' and all that follows 
        and inserting ``shall not exceed $250,000.''.
            (2) Reduction in limitation.--Paragraph (2) of section 
        179(b) is amended by striking ``exceeds--'' and all that 
        follows and inserting ``exceeds $800,000.''.
    (b) Computer Software.--Clause (ii) of section 179(d)(1)(A) is 
amended by striking ``to which section 167 applies, and which is placed 
in service in a taxable year beginning after 2002 and before 2014'' and 
inserting ``and to which section 167 applies''.
    (c) Election.--Paragraph (2) of section 179(c) is amended--
            (1) by striking ``may not be revoked'' and all that follows 
        through ``and before 2014'', and
            (2) by striking ``irrevocable'' in the heading thereof.
    (d) Air Conditioning and Heating Units.--Paragraph (1) of section 
179(d) is amended by striking ``and shall not include air conditioning 
or heating units''.
    (e) Qualified Real Property.--Section 179(f) is amended--
            (1) by striking ``beginning in 2010, 2011, 2012, or 2013'' 
        in paragraph (1), and
            (2) by striking paragraphs (3) and (4).
    (f) Inflation Adjustment.--Subsection (b) of section 179 is amended 
by adding at the end the following new paragraph:
            ``(6) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after 2014, the dollar amounts in paragraphs 
                (1) and (2) shall each be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for such 
                        calendar year, determined by substituting 
                        `calendar year 2013' for `calendar year 2012' 
                        in clause (ii) thereof.
                    ``(B) Rounding.--The amount of any increase under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $10,000.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

SEC. 3112. REPEAL OF ELECTION TO EXPENSE CERTAIN REFINERIES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 179C (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--Section 312(k)(3), as amended by the 
preceding provisions of this Act, is amended by striking ``, 179C'' 
each place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2013.

SEC. 3113. REPEAL OF DEDUCTION FOR ENERGY EFFICIENT COMMERCIAL 
              BUILDINGS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 179D (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--
            (1) Section 1016(a) is amended by striking paragraph (31).
            (2) Section 312(k)(3), as amended by the preceding 
        provisions of this Act, is amended by striking ``, 179D'' each 
        place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2013.

SEC. 3114. REPEAL OF ELECTION TO EXPENSE ADVANCED MINE SAFETY 
              EQUIPMENT.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 179E (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--Section 312(k)(3), as amended by the 
preceding provisions of this Act, is amended--
            (1) by striking ``, or 179E, as the case may be'', and
            (2) by striking ``, or 179E'' each place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2013.

SEC. 3115. REPEAL OF DEDUCTION FOR EXPENDITURES BY FARMERS FOR 
              FERTILIZER, ETC.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 180 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3116. REPEAL OF SPECIAL TREATMENT OF CERTAIN QUALIFIED FILM AND 
              TELEVISION PRODUCTIONS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 181 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to productions commencing after December 31, 2013.

SEC. 3117. REPEAL OF SPECIAL RULES FOR RECOVERIES OF DAMAGES OF 
              ANTITRUST VIOLATIONS, ETC.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 186 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3118. TREATMENT OF REFORESTATION EXPENDITURES.

    (a) Elimination of Expensing Election.--Section 194 is amended by 
striking subsections (a) and (b), by redesignating subsection (c) and 
(d) as subsections (b) and (c), respectively, and by inserting before 
subsection (b) (as so redesignated) the following new subsection:
    ``(a) In General.--In the case of a taxpayer's qualified 
reforestation expenditures for any taxable year--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenditures to capital account, 
                and
                    ``(B) be allowed an amortization deduction of such 
                expenditures ratably over the 7-year period beginning 
                with the midpoint of the taxable year in which such 
                expenditures are paid or incurred.''.
    (b) Qualified Reforestation Expenditures.--Section 194(b), as 
redesignated by subsection (a), is amended by striking paragraph (2), 
by redesignating paragraph (1) as paragraph (2), and by inserting 
before paragraph (2) (as so redesignated the following new paragraph:
            ``(1) Qualified reforestation expenditures.--The term 
        `qualified reforestation expenditures' means, with respect to 
        any taxable year, the reforestation expenditures paid or 
        incurred by the taxpayer during such taxable year with respect 
        to qualified timber property.''.
    (c) Qualified Timber Property Limited to Ornamental Trees.--Section 
194(b)(2), as redesignated by subsections (a) and (b), is amended to 
read as follows:
            ``(2) Qualified timber property.--The term `qualified 
        timber property' means a woodlot or other site located in the 
        United States which--
                    ``(A) will contain evergreen trees in significant 
                commercial quantities which are reasonably expected to 
                be more than 6 years old at the time severed from the 
                roots, and
                    ``(B) is held by the taxpayer for the planting, 
                cultivating, caring for, and cutting of such trees for 
                sale for ornamental purposes.''.
    (d) Determination of Recomputed Basis.--Section 1245(b) is amended 
by striking paragraph (7).
    (e) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3119. 20-YEAR AMORTIZATION OF GOODWILL AND CERTAIN OTHER 
              INTANGIBLES.

    (a) In General.--Subsection (a) of section 197 is amended by 
striking ``15-year period'' and inserting ``20-year period''.
    (b) Mortgage Servicing Rights.--Subsection (e) of section 197 is 
amended by striking paragraph (6) and by redesignating paragraph (7) as 
paragraph (6).
    (c) Conforming Amendments.--
            (1) Clause (i) of section 197(e)(4)(D) is amended by 
        striking ``15 years'' and inserting ``20 years''.
            (2) Section 167(f) is amended by striking paragraph (3).
    (d) Effective Date.--The amendments made by this section shall 
apply to property acquired after December 31, 2014.

SEC. 3120. TREATMENT OF ENVIRONMENTAL REMEDIATION COSTS.

    (a) In General.--Subsection (a) of section 198 is amended to read 
as follows:
    ``(a) In General.--In the case of a taxpayer's qualified 
environmental remediation expenditures for any taxable year--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenditures to capital account, 
                and
                    ``(B) be allowed an amortization deduction of such 
                expenditures ratably over the 40-year period beginning 
                with the midpoint of the taxable year in which such 
                expenditures are paid or incurred.''.
    (b) Made Permanent.--Section 198 is amended by striking subsection 
(h).
    (c) Conforming Amendments.--
            (1) Section 198, as amended by subsection (b), is amended 
        by striking subsection (f) and by redesignating subsection (g) 
        as subsection (f).
            (2) Section 198 (and the item relating to such section in 
        the table of sections for part VI of subchapter B of chapter 1) 
        is amended by striking ``expensing'' in the heading thereof and 
        inserting ``amortization''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred after December 31, 2014.

SEC. 3121. REPEAL OF EXPENSING OF QUALIFIED DISASTER EXPENSES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 198A (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2014.

SEC. 3122. PHASEOUT AND REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
              DOMESTIC PRODUCTION ACTIVITIES.

    (a) Phaseout.--
            (1) In general.--Subsection (a) of section 199 is amended 
        by adding at the end the following new paragraph:
            ``(3) Phaseout.--In the case of any taxable year beginning 
        after 2014, paragraph (1) shall be applied by substituting for 
        the percentage contained therein the phaseout percentage 
        determined under the following table:

``For taxable years beginning in:           The phaseout percentage is:
        2015...............................................         6% 
        2016...............................................       3%''.
            (2) Coordination with oil related qualified production 
        activities income.--Section 199(d) is amended by striking 
        paragraph (9).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2014.
    (b) Repeal.--
            (1) In general.--Part VI of subchapter B of chapter 1 is 
        amended by striking section 199 (and by striking the item 
        relating to such section in the table of sections for such 
        part).
            (2) Conforming amendments.--
                    (A) Sections 86(b)(2)(A), 137(b)(3)(A), 246(b)(1), 
                and 469(i)(3)(F)(iii) are each amended by striking 
                ``199,''.
                    (B) Section 163(j)(6)(A)(i), as amended by the 
                preceding provisions of this Act, is amended by 
                striking subclause (III) and by redesignating 
                subclauses (IV) and (V) as subclauses (III) and (IV), 
                respectively.
                    (C) Section 170(b)(2)(C), as amended by the 
                preceding provisions of this Act, is amended by 
                striking clause (v), by redesignating clause (vi) as 
                clause (v), and by inserting ``and'' at the end of 
                clause (iv).
                    (D) Section 172(d) is amended by striking paragraph 
                (7).
                    (E) Section 1402(a) is amended by adding ``and'' at 
                the end of paragraph (15) and by striking paragraph 
                (16).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2016.

SEC. 3123. UNIFICATION OF DEDUCTION FOR ORGANIZATIONAL EXPENDITURES.

    (a) In General.--Subsections (a) and (b) of section 195 is amended 
by inserting ``and organizational'' after ``start-up'' each place it 
appears.
    (b) Organizational Expenditures.--Subsection (c) of section 195 is 
amended by adding at the end the following new paragraph:
            ``(3) Organizational expenditures.--The term 
        `organizational expenditures' means any expenditure which--
                    ``(A) is incident to the creation of a corporation 
                or a partnership,
                    ``(B) is chargeable to capital account, and
                    ``(C) is of a character which, if expended incident 
                to the creation of a corporation or a partnership 
                having a limited life, would be amortizable over such 
                life.''.
    (c) Dollar Amounts.--Clause (ii) of section 195(b)(1)(A) is 
amended--
            (1) by striking ``$5,000'' and inserting ``$10,000'', and
            (2) by striking ``$50,000'' and inserting ``$60,000''.
    (d) Mid-Year Convention.--Subparagraph (B) of section 195(b)(1), as 
amended by subsection (a), is amended to read as follows:
                    ``(B) the remainder of such start-up and 
                organizational expenditures shall be charged to capital 
                account and allowed as an amortization deduction 
                determined by amortizing such expenditures ratably over 
                the 15-year period beginning with the midpoint of the 
                taxable year in which the active trade or business 
                begins.''.
    (e) Conforming Amendments.--
            (1) Section 195(b)(1) is amended--
                    (A) by inserting ``(or, in the case of a 
                partnership, the partnership elects)'' after ``If a 
                taxpayer elects'', and
                    (B) by inserting ``(or the partnership, as the case 
                may be)'' after ``the taxpayer'' in subparagraph (A).
            (2) Section 195(b)(2) is amended--
                    (A) by striking ``amortization period.--In any 
                case'' and inserting the following: ``amortization 
                period.--
                    ``(A) In general.--In any case'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) Special partnership rule.--In the case of a 
                partnership, subparagraph (A) shall be applied at the 
                partnership level.''.
            (3) Section 195(b) is amended by striking paragraph (3).
            (4)(A) Part VIII of subchapter B of chapter 1 is amended by 
        striking section 248 (and by striking the item relating to such 
        section in the table of sections for such part).
            (B) Section 170(b)(2)(C)(ii) is amended by striking 
        ``(except section 248)''.
            (C) Section 312(n)(3) is amended by striking ``Sections 173 
        and 248'' and inserting ``Section 173''.
            (D) Section 535(b)(3) is amended by striking ``(except 
        section 248)''.
            (E) Section 545(b)(3) is amended by striking ``(except 
        section 248)''.
            (F) Section 834(c)(7) is amended by striking ``(except 
        section 248)''.
            (G) Section 852(b)(2)(C) is amended by striking ``(except 
        section 248)''.
            (H) Section 857(b)(2)(A) is amended by striking ``(except 
        section 248)''.
            (I) Section 1363(b) is amended by inserting ``and'' at the 
        end of paragraph (2), by striking paragraph (3), and by 
        redesignating paragraph (4) as paragraph (3).
            (J) Section 1375(b)(1)(B)(i) is amended by striking 
        ``(other than the deduction allowed by section 248, relating to 
        organization expenditures)''.
            (5) Part I of subchapter K of chapter 1 is amended by 
        striking section 709 (and by striking the item relating to such 
        section in the table of sections for such part).
            (6) The heading of section 195 (and the item relating to 
        such section in the table of sections for part VI of subchapter 
        B of chapter 1) are each amended by inserting ``and 
        organizational'' after ``Start-up''.
    (f) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3124. PREVENTION OF ARBITRAGE OF DEDUCTIBLE INTEREST EXPENSE AND 
              TAX-EXEMPT INTEREST INCOME.

    (a) Pro Rata Allocation Rules Applicable to Financial Institutions 
Modified and Made Applicable to All C Corporations.--
            (1) Application to corporations.--So much of section 265(b) 
        as precedes paragraph (3) is amended to read as follows:
    ``(b) Pro Rata Allocation of Interest Expense of Corporations and 
Financial Institutions to Tax-Exempt Interest.--
            ``(1) In general.--In the case of a C corporation or a 
        financial institution, no deduction shall be allowed for that 
        portion of the taxpayer's interest expense which is allocable 
        to tax-exempt interest.
            ``(2) Allocation.--For purposes of paragraph (1), the 
        portion of the taxpayer's interest expense which is allocable 
        to tax-exempt interest is an amount which bears the same ratio 
        to such interest expense as--
                    ``(A) the taxpayer's average adjusted bases (within 
                the meaning of section 1016) of tax-exempt obligations 
                acquired on or after February 26, 2014 (August 7, 1986, 
                in the case of a financial institution), bears to
                    ``(B) such average adjusted bases for all assets of 
                the taxpayer.''.
            (2) Repeal of exceptions.--Section 265(b) is amended by 
        striking paragraphs (3) and (7).
    (b) Limitation on Investment Interest.--
            (1) In general.--Section 163(d)(1) is amended to read as 
        follows:
            ``(1) In general.--In the case of a taxpayer other than a 
        corporation, the amount allowed as a deduction under this 
        chapter for investment interest for any taxable year--
                    ``(A) shall be reduced by the amount of tax-exempt 
                interest received by the taxpayer during such taxable 
                year, and
                    ``(B) shall not (after any reduction under 
                subparagraph (A)) exceed the net investment income of 
                the taxpayer for such taxable year.''.
            (2) Reductions for tax-exempt interest not carried 
        forward.--Section 163(d)(2) is amended by striking ``paragraph 
        (1)'' and inserting ``paragraph (1)(B)''.
            (3) Clarification that property held for investment 
        includes property producing tax-exempt interest.--Section 
        163(d)(5)(A) is amended by striking ``and'' at the end of 
        clause (i), by striking the period at the end of clause 
        (ii)(II) and inserting ``, and'', and by adding at the end the 
        following new clause:
                            ``(iii) any property held for the 
                        production of tax-exempt interest (including 
                        any shares of stock of a regulated investment 
                        company which during the taxable year of the 
                        holder thereof distributes exempt-interest 
                        dividends).''.
            (4) Coordination with section 265.--
                    (A) In general.--Section 265(a) is amended by--
                            (i) striking paragraph (2) and inserting 
                        the following new paragraph:
            ``(2) Interest.--
                    ``(A) Corporations and financial institutions.--For 
                pro rata allocation rules in the case of corporations 
                and financial institutions, see subsection (b).
                    ``(B) Other taxpayers.--For limitation on 
                investment interest in the case of other taxpayers, see 
                section 163(d).'', and
                            (ii) by striking paragraphs (4) and (5) and 
                        by redesignating paragraph (6) as paragraph 
                        (4).
                    (B) Conforming amendments.--
                            (i) Section 265(b), as amended by 
                        subsection (a), is amended by inserting after 
                        paragraph (2) the following new paragraph:
            ``(3) Special rules for short sales.--
                    ``(A) In general.--For purposes of this subsection, 
                interest includes any amount paid or incurred--
                            ``(i) by any person making a short sale in 
                        connection with personal property used in such 
                        short sale, or
                            ``(ii) by any other person for the use of 
                        any collateral with respect to such short sale.
                    ``(B) Exception where no return on cash collateral 
                .--If--
                            ``(i) the taxpayer provides cash as 
                        collateral for any short sale, and
                            ``(ii) the taxpayer receives no material 
                        earnings on such cash during the period of the 
                        sale,
                subparagraph (A)(i) shall not apply to such short 
                sale.''.
                            (ii) Section 265(b)(6) is amended to read 
                        as follows:
            ``(6) Coordination with section 263a.--This section shall 
        be applied before the application of section 263A (relating to 
        capitalization of certain expenses where taxpayer produces 
        property).''.
                            (iii) Section 163(n)(2) is amended to read 
                        as follows:
            ``(2) For disallowance of deduction for interest relating 
        to tax-exempt income, see sections 163(d) and 265(b)''.
    (c) Effective Dates.--
            (1) Application of pro rata allocation rules.--
                    (A) Application to c corporations.--The amendments 
                made by subsection (a)(1) shall apply to taxable years 
                ending on or after February 26, 2014.
                    (B) Repeal of exceptions.--The amendments made by 
                subsection (a)(2) shall apply to obligations issued on 
                or after February 26, 2014.
            (2) Limitation on investment interest.--The amendments made 
        by subsection (b) shall apply to taxable years beginning after 
        December 31, 2014.

SEC. 3125. PREVENTION OF TRANSFER OF CERTAIN LOSSES FROM TAX 
              INDIFFERENT PARTIES.

    (a) In General.--Section 267(d) is amended to read as follows:
    ``(d) Amount of Gain Where Loss Previously Disallowed.--
            ``(1) In general.--If--
                    ``(A) in the case of a sale or exchange of property 
                to the taxpayer a loss sustained by the transferor is 
                not allowable to the transferor as a deduction by 
                reason of subsection (a)(1), and
                    ``(B) the taxpayer sells or otherwise disposes of 
                such property (or of other property the basis of which 
                in the taxpayer's hands is determined directly or 
                indirectly by reference to such property) at a gain,
        then such gain shall be recognized only to the extent that it 
        exceeds so much of such loss as is properly allocable to the 
        property sold or otherwise disposed of by the taxpayer.
            ``(2) Exception for wash sales.--Paragraph (1) shall not 
        apply if the loss sustained by the transferor is not allowable 
        to the transferor as a deduction by reason of section 1091 
        (relating to wash sales).
            ``(3) Exception for transfers from tax indifferent 
        parties.--Paragraph (1) shall not apply to the extent any loss 
        sustained by the transferor (if allowed) would not be taken 
        into account in determining a tax imposed under section 1 or 11 
        or a tax computed as provided by either of such sections.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales and exchanges after December 31, 2014.

SEC. 3126. ENTERTAINMENT, ETC. EXPENSES.

    (a) Denial of Deduction.--Subsection (a) of section 274 is amended 
to read as follows:
    ``(a) Entertainment, Amusement, or Recreation.--
            ``(1) In general.--No deduction otherwise allowable under 
        this chapter shall be allowed for amounts paid or incurred for 
        any of the following items:
                    ``(A) Activity.--With respect to an activity which 
                is of a type generally considered to constitute 
                entertainment, amusement, or recreation.
                    ``(B) Membership dues.--With respect to membership 
                in any club organized for business, pleasure, 
                recreation or other social purposes.
                    ``(C) Amenity.--With respect to a de minimis fringe 
                (as defined in section 132(e)(1)) that is primarily 
                personal in nature and involving property or services 
                that are not directly related to the taxpayer's trade 
                or business.
                    ``(D) Facility.--With respect to a facility or 
                portion thereof used in connection with an activity 
                referred to in subparagraph (A), membership dues or 
                similar amounts referred to in subparagraph (B), or an 
                amenity referred to in subparagraph (C).
                    ``(E) Qualified transportation fringe and parking 
                facility.--Which is a qualified transportation fringe 
                (as defined in section 132(f)) or which is a parking 
                facility used in connection with qualified parking (as 
                defined in section 132(f)(5)(C)).
            ``(2) Special rules.--For purposes of applying paragraph 
        (1), an activity described in section 212 shall be treated as a 
        trade or business.
            ``(3) Regulations.--Under the regulations prescribed to 
        carry out this section, the Secretary shall include 
        regulations--
                    ``(A) defining entertainment, amenities, 
                recreation, amusement, and facilities for purposes of 
                this subsection,
                    ``(B) providing for the appropriate allocation of 
                depreciation and other costs with respect to facilities 
                used for parking, and
                    ``(C) specifying arrangements a primary purpose of 
                which is the avoidance of this subsection.''.
    (b) Exception for Certain Expenses Includible in Income of 
Recipient.--
            (1) Expenses treated as compensation.--Paragraph (2) of 
        section 274(e) is amended to read as follows:
            ``(2) Expenses treated as compensation.--Expenses for 
        goods, services, and facilities, to the extent that the 
        expenses do not exceed the amount of the expenses which are 
        treated by the taxpayer, with respect to the recipient of the 
        entertainment, amusement, or recreation, as compensation to an 
        employee on the taxpayer's return of tax under this chapter and 
        as wages to such employee for purposes of chapter 24 (relating 
        to withholding of income tax at source on wages).''.
            (2) Expenses includible in income of persons who are not 
        employees.--Paragraph (9) of section 274(e) is amended by 
        striking ``to the extent that the expenses'' and inserting ``to 
        the extent that the expenses do not exceed the amount of the 
        expenses that''.
    (c) Exceptions for Reimbursed Expenses.--Paragraph (3) of section 
274(e) is amended to read as follows:
            ``(3) Reimbursed expenses.--
                    ``(A) In general.--Expenses paid or incurred by the 
                taxpayer, in connection with the performance by him of 
                services for another person (whether or not such other 
                person is the taxpayer's employer), under a 
                reimbursement or other expense allowance arrangement 
                with such other person, but this paragraph shall 
                apply--
                            ``(i) where the services are performed for 
                        an employer, only if the employer has not 
                        treated such expenses in the manner provided in 
                        paragraph (2), or
                            ``(ii) where the services are performed for 
                        a person other than an employer, only if the 
                        taxpayer accounts (to the extent provided by 
                        subsection (d)) to such person.
                    ``(B) Exception.--Except as provided by the 
                Secretary, subparagraph (A) shall not apply--
                            ``(i) in the case of an arrangement in 
                        which the person other than the employer is an 
                        entity described in section 168(g)(2)(A), or
                            ``(ii) to any other arrangement designated 
                        by the Secretary as having the effect of 
                        avoiding the limitation under subparagraph 
                        (A).''.
    (d) 50-Percent Limitation on Meals and Entertainment Expenses.--
Subsection (n) of section 274 is amended to read as follows:
    ``(n) Limitation on Certain Expenses.--
            ``(1) In general.--The amount allowable as a deduction 
        under this chapter for any expense for food or beverages 
        (pursuant to subsection (e)(1)) or business meals (pursuant to 
        subsection (k)(1)) shall not exceed 50 percent of the amount of 
        such expense or item which would (but for this paragraph) be 
        allowable as a deduction under this chapter.
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        expense if--
                    ``(A) such expense is described in paragraph (2), 
                (3), (6), (7), or (8) of subsection (e),
                    ``(B) in the case of an expense for food or 
                beverages, such expense is excludable from the gross 
                income of the recipient under section 132 by reason of 
                subsection (e) thereof (relating to de minimis fringes) 
                or under section 119 (relating to meals and lodging 
                furnished for convenience of employer), or
                    ``(C) in the case of an employer who pays or 
                reimburses moving expenses of an employee, such 
                expenses are includible in the income of the employee 
                under section 82.
            ``(3) Special rule for individuals subject to federal hours 
        of service.--In the case of any expenses for food or beverages 
        consumed while away from home (within the meaning of section 
        162(a)(2)) by an individual during, or incident to, the period 
        of duty subject to the hours of service limitations of the 
        Department of Transportation, paragraph (1) shall be applied by 
        substituting `80 percent' for `50 percent'.''.
    (e) Conforming Amendments.--
            (1) Section 274(d) is amended--
                    (A) by striking paragraph (2) and redesignating 
                paragraphs (3) and (4) as paragraphs (2) and (3), 
                respectively, and
                    (B) in the flush material following paragraph (3) 
                (as so redesignated)--
                            (i) by striking ``, entertainment, 
                        amusement, recreation, or'' in item (B), and
                            (ii) by striking ``(D) the business 
                        relationship to the taxpayer of persons 
                        entertained, using the facility or property, or 
                        receiving the gift'' and inserting ``(D) the 
                        business relationship to the taxpayer of the 
                        person receiving the benefit''.
            (2) Section 274(e) is amended by striking paragraph (4) and 
        redesignating paragraphs (5), (6), (7), (8), and (9) as 
        paragraphs (4), (5), (6), (7), and (8), respectively.
            (3) Section 274(k)(2)(A) is amended by striking ``(4), (7), 
        (8), or (9)'' and inserting ``(6), (7), or (8)''.
            (4) Section 274 is amended by striking subsection (l).
            (5) Section 274(m)(1)(B)(ii) is amended by striking ``(4), 
        (7), (8), or (9)'' and inserting ``(6), (7), or (8)''.
    (f) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2014.

SEC. 3127. REPEAL OF LIMITATION ON CORPORATE ACQUISITION INDEBTEDNESS.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
striking section 279 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to interest paid or incurred with respect to indebtedness 
incurred after December 31, 2014.

SEC. 3128. DENIAL OF DEDUCTIONS AND CREDITS FOR EXPENDITURES IN ILLEGAL 
              BUSINESSES.

    (a) In General.--Section 280E is amended to read as follows:

``SEC. 280E. EXPENDITURES IN CONNECTION WITH ILLEGAL BUSINESSES.

    ``No deduction or credit shall be allowed for any amount paid or 
incurred during the taxable year in carrying on any trade or business 
if--
            ``(1) such trade or business (or the activities which 
        comprise such trade or business) consists of trafficking in 
        controlled substances (within the meaning of schedule I and II 
        of the Controlled Substances Act) which is prohibited by 
        Federal law or the law of any State in which such trade or 
        business is conducted, or
            ``(2) the carrying out of such trade or business is a 
        felony under Federal law or the law of any State in which such 
        trade or business is conducted.''.
    (b) Clerical Amendment.--The table of sections for part IX of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 280E and inserting the following new item:

``Sec. 280E. Expenditures in connection with illegal businesses.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act in taxable years ending after the date of the enactment of 
this Act.

SEC. 3129. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.

    (a) In General.--Section 162 is amended by redesignating subsection 
(q) as subsection (r) and by inserting after subsection (p) the 
following new subsection:
    ``(q) Disallowance of FDIC Premiums Paid by Certain Large Financial 
Institutions.--
            ``(1) In general.--No deduction shall be allowed for the 
        applicable percentage of any FDIC premium paid or incurred by 
        the taxpayer.
            ``(2) Exception for small institutions.--Paragraph (1) 
        shall not apply to any taxpayer for any taxable year if the 
        total consolidated assets of such taxpayer (determined as of 
        the close of such taxable year) do not exceed $10,000,000,000.
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, with 
        respect to any taxpayer for any taxable year, the ratio 
        (expressed as a percentage but not greater than 100 percent) 
        which--
                    ``(A) the excess of--
                            ``(i) the total consolidated assets of such 
                        taxpayer (determined as of the close of such 
                        taxable year), over
                            ``(ii) $10,000,000,000, bears to
                    ``(B) $40,000,000,000.
            ``(4) FDIC premiums.--For purposes of this subsection, the 
        term `FDIC premium' means any assessment imposed under section 
        7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
            ``(5) Total consolidated assets.--For purposes of this 
        subsection, the term `total consolidated assets' has the 
        meaning given such term under section 165 of the Dodd-Frank 
        Wall Street Reform and Consumer Protection Act (12 U.S.C. 
        5365).
            ``(6) Aggregation rule.--
                    ``(A) In general.--Members of an expanded 
                affiliated group shall be treated as a single taxpayer 
                for purposes of applying this subsection.
                    ``(B) Expanded affiliated group.--For purposes of 
                this paragraph, the term `expanded affiliated group' 
                means an affiliated group as defined in section 
                1504(a), determined--
                            ``(i) by substituting `more than 50 
                        percent' for `at least 80 percent' each place 
                        it appears, and
                            ``(ii) without regard to paragraphs (2) and 
                        (3) of section 1504(b).
                A partnership or any other entity (other than a 
                corporation) shall be treated as a member of an 
                expanded affiliated group if such entity is controlled 
                (within the meaning of section 954(d)(3)) by members of 
                such group (including any entity treated as a member of 
                such group by reason of this sentence).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3130. REPEAL OF PERCENTAGE DEPLETION.

    (a) In General.--Part I of subchapter I of chapter 1 is amended by 
striking sections 613 and 613A (and by striking the items relating to 
such sections in the table of sections for such part).
    (b) Conforming Amendments.--
            (1)(A) Such part is amended by redesignating section 614 as 
        section 613 (and, in the table of sections for such part, by 
        redesignating the item relating to section 614 as an item 
        relating to section 613).
            (B) Clauses (iv) and (v) of section 465(c)(2)(A) are each 
        amended by striking ``section 614'' and inserting ``section 
        613''.
            (C) Section 1016(e) is amended by striking ``section 614'' 
        and inserting ``section 613''.
            (D) Section 1254(a)(3) is amended by striking ``section 
        614'' and inserting ``section 613''.
            (2) Section 45(c)(4) is amended to read as follows:
            ``(4) Geothermal energy.--
                    ``(A) In general.--The term `geothermal energy' 
                means energy derived from a geothermal deposit.
                    ``(B) Geothermal deposit.--The term `geothermal 
                deposit' means a geothermal reservoir consisting of 
                natural heat which is stored in rocks or in an aqueous 
                liquid or vapor (whether or not under pressure).''.
            (3) Section 48(a)(3)(A)(iii) is amended by striking 
        ``section 613(e)(2)'' and inserting ``section 45(c)(4)(B)''
            (4) Section 381(c) is amended by striking paragraph (18).
            (5) Section 465(c)(1)(E) is amended by striking ``section 
        613(e)(2)'' and inserting ``section 45(c)(4)(B)''.
            (6) Section 468(d)(3) is amended by striking ``section 
        614'' and inserting ``section 613''.
            (7) Section 611(a) is amended by striking the second 
        sentence.
            (8) Section 613(d), as redesignated by paragraph (1), is 
        amended by striking ``includes only'' and all that follows and 
        inserting ``includes only an interest burdened by the costs of 
        production.''.
            (9) Section 636(a) is amended by striking ``(for purposes 
        of section 613)''.
            (10) Section 636(d) is amended by striking ``section 
        614(a)'' and inserting ``section 613(a)''.
            (11) Section 705(a) is amended--
                    (A) in paragraph (1), by adding ``and'' at the end 
                of subparagraph (A), by striking ``; and'' at the end 
                of subparagraph (B) and inserting a period, and by 
                striking subparagraph (C),
                    (B) in paragraph (2), by striking ``; and'' at the 
                end of subparagraph (B) and inserting a period, and
                    (C) by striking paragraph (3).
            (12) Section 901(e)(1)(A) is amended by striking ``(or, if 
        smaller'' and all that follows through ``under section 613)''.
            (13) Section 993(c)(2)(C) is amended by inserting ``(as 
        each such section was in effect before its repeal by the Tax 
        Reform Act of 2014)'' after ``section 613 or 613A''.
            (14) Section 1202(e)(3)(D) is amended by inserting ``(as 
        each such section was in effect before its repeal by the Tax 
        Reform Act of 2014)'' after ``section 613 or 613A''.
            (15) Section 1367(a) is amended--
                    (A) in paragraph (1), by adding ``and'' at the end 
                of subparagraph (A), by striking ``, and'' at the end 
                of subparagraph (B) and inserting a period, and by 
                striking subparagraph (C), and
                    (B) in paragraph (2), by adding ``and'' at the end 
                of subparagraph (C), by striking ``, and'' at the end 
                of subparagraph (D) and inserting a period, and by 
                striking subparagraph (E).
            (16) Section 1446(c) is amended by striking paragraph (2) 
        and by redesignating paragraph (3) as paragraph (2).
            (17) Section 4612(a)(7) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 613''.
            (18) Section 4940(c)(3)(B) is amended--
                    (A) by striking clause (ii), and
                    (B) by striking all that precedes ``The deduction 
                provided'' and inserting the following:
                    ``(B) Modifications.--For purposes of subparagraph 
                (A), the deduction provided''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3131. REPEAL OF PASSIVE ACTIVITY EXCEPTION FOR WORKING INTERESTS 
              IN OIL AND GAS PROPERTY.

    (a) In General.--Subsection (c) of section 469 is amended by 
striking paragraph (3).
    (b) Conforming Amendments.--Section 469 is amended--
            (1) by striking paragraph (4) and by redesignating 
        paragraphs (5), (6), and (7) as paragraphs (3), (4), and (5), 
        respectively, and
            (2) in paragraph (2)--
                    (A) by striking ``paragraph (7)'' and inserting 
                ``paragraph (5)'', and
                    (B) by inserting ``, without regard to whether or 
                not the taxpayer materially participates in the 
                activity'' before the period at the end.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3132. REPEAL OF SPECIAL RULES FOR GAIN OR LOSS ON TIMBER, COAL, OR 
              DOMESTIC IRON ORE.

    (a) In General.--Subchapter I of chapter 1 is amended by striking 
part III (and by striking the item relating to such part in the table 
of parts for such subchapter).
    (b) Conforming Amendments.--
            (1) Section 512(b)(5) is amended by striking the last 
        sentence.
            (2) Section 871(a)(1)(B) is amended by striking ``gains 
        described in section 631(b) or (c), and''.
            (3) Section 871(d)(1)(A) is amended--
                    (A) by striking ``, (ii) rents'' and inserting 
                ``and (ii) rents'', and
                    (B) by striking ``, and (iii) gains described in 
                section 631(b) or (c)''.
            (4)(A) Section 881(a) is amended by striking paragraph (2) 
        and by redesignating paragraphs (3) and (4) as paragraphs (2) 
        and (3), respectively.
            (B) Section 1442(a) is amended--
                    (i) by striking ``881(a)(3) and (4)'' and inserting 
                ``881(a)(2) and (3)'',
                    (ii) by striking ``881(a)(3),'' and inserting 
                ``881(a)(2),'', and
                    (iii) by striking ``881(a)(4)'' and inserting 
                ``881(a)(3)''.
            (5) Section 882(d)(1)(A) is amended--
                    (A) by striking ``, (ii) rents'' and inserting 
                ``and (ii) rents'', and
                    (B) by striking ``, and (iii) gains described in 
                section 631(b) or (c)''.
            (6) Section 1231(b) is amended by striking paragraph (2).
            (7) Section 1402(a)(3) is amended by inserting ``or'' at 
        the end of subparagraph (A) and by striking subparagraph (B) 
        and redesignating subparagraph (C) as subparagraph (B).
            (8) Section 1441 is amended--
                    (A) in subsection (b), by striking ``, gains 
                described in section 631(b) or (c)'', and
                    (B) in subsection (c)(5), by striking ``gains 
                described in section 631(b) or (c), gains subject to 
                tax under section 871(a)(1)(D),'' and inserting ``gains 
                subject to tax under section 871(a)(1)(D)''.
            (9)(A) Part IX of subchapter B of chapter 1 is amended by 
        striking section 272 (and by striking the item relating to such 
        section in the table of sections for such subpart).
            (B) Section 1016(a) is amended by striking paragraph (15).
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Basis adjustments.--The amendment made by subsection 
        (b)(9)(B) shall apply to deductions determined for taxable 
        years beginning after December 31, 2014.

SEC. 3133. REPEAL OF LIKE-KIND EXCHANGES.

    (a) In General.--Part III of subchapter O of chapter 1 is amended 
by striking section 1031 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 121(d)(10) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 1031''.
            (2) Section 197(f)(2)(B)(i) is amended by inserting ``(as 
        in effect before its repeal by the Tax Reform Act of 2014)'' 
        after ``1031''.
            (3) Section 453(f) is amended by striking paragraph (6).
            (4) Section 470(e)(4) is amended--
                    (A) by striking ``Sections 1031(a) and'' in 
                subparagraph (A) and inserting ``Section'',
                    (i) by striking ``1031 or'' in subparagraph (B), 
                and
                    (ii) by striking ``sections 1031 and'' in the 
                heading thereof and inserting ``section''.
            (5)(A) Section 501(c)(12)(C)(v) is amended by striking 
        ``asset exchange or conversion transaction'' and inserting 
        ``specified involuntary conversion''.
            (B) Section 501(c)(12)(G) is amended--
                    (i) by striking ``asset exchange or conversion 
                transaction'' and inserting ``specified involuntary 
                conversion'',
                    (ii) by striking ``voluntary exchange or'', and
                    (iii) by striking ``1031 or''.
            (6)(A) Section 704(c) is amended by striking paragraph (2) 
        and by redesignating paragraph (3) as paragraph (2).
            (B) Section 704(c)(2), as so redesignated, is amended by 
        striking ``or (2)''.
            (7) Section 857(e)(2) is amended by striking subparagraph 
        (B) and by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively.
            (8)(A) Section 1035 is amended by striking subsection (d) 
        and inserting the following new subsections:
    ``(d) Gain From Exchanges Not Solely in Kind.--If an exchange would 
be within the provisions of subsection (a), of section 1036(a), or of 
section 1037(a), if it were not for the fact that the property received 
in exchange consists not only of property permitted by such provisions 
to be received without the recognition of gain, but also of other 
property or money, then the gain, if any, to the recipient shall be 
recognized, but in an amount not in excess of the sum of such money and 
the fair market value of such other property.
    ``(e) Loss From Exchanges Not Solely in Kind.--If an exchange would 
be within the provisions of subsection (a), of section 1036(a), or of 
section 1037(a), if it were not for the fact that the property received 
in exchange consists not only of property permitted by such provisions 
to be received without the recognition of gain or loss, but also of 
other property or money, then no loss from the exchange shall be 
recognized.
    ``(f) Basis.--If property was acquired on an exchange described in 
this section, section 1036(a), or section 1037(a), then the basis shall 
be the same as that of the property exchanged, decreased in the amount 
of any money received by the taxpayer and increased in the amount of 
gain or decreased in the amount of loss to the taxpayer that was 
recognized on such exchange. If the property so acquired consisted in 
part of the type of property permitted by this section, section 
1036(a), or section 1037(a), to be received without the recognition of 
gain or loss, and in part of other property, the basis provided in this 
subsection shall be allocated between the properties (other than money) 
received, and for the purpose of the allocation there shall be assigned 
to such other property an amount equivalent to its fair market value at 
the date of the exchange. For purposes of this section and section 
1036(a), where as part of the consideration to the taxpayer another 
party to the exchange assumed (as determined under section 357(d)) a 
liability of the taxpayer, such assumption shall be considered as money 
received by the taxpayer on the exchange.''.
            (B) Section 1036(c) is amended--
                    (i) in paragraph (1), by striking ``subsections (b) 
                and (c) of section 1031'' and inserting ``subsections 
                (d) and (e) of section 1035'', and
                    (ii) in paragraph (2), by striking ``subsection (d) 
                of section 1031'' and inserting ``subsection (f) of 
                section 1035''.
            (C) Section 1037(c) is amended--
                    (i) in paragraph (1), by striking ``subsections (b) 
                and (c) of section 1031'' and inserting ``subsections 
                (d) and (e) of section 1035'', and
                    (ii) in paragraph (2), by striking ``subsection (d) 
                of section 1031'' and inserting ``subsection (f) of 
                section 1035''.
            (D) Section 83(g) is amended by striking ``section 1031'' 
        and inserting ``section 1035''.
            (E) Section 424(b) is amended by striking ``section 1031'' 
        and inserting ``section 1035''.
            (F) Section 424(c)(1)(B) is amended by striking ``section 
        1031'' and inserting ``section 1035''.
            (9) Section 1060(c) is amended by striking the second 
        sentence thereof.
            (10) Section 1245(b)(4) is amended--
                    (A) by striking ``Like kind exchanges; 
                involuntary'' and inserting ``Involuntary'', and
                    (B) by striking ``1031 or''.
            (11) Section 1250(d)(4) is amended--
                    (A) by striking ``Like kind exchanges; 
                involuntary'' and inserting ``Involuntary'',
                    (B) by striking ``1031 or'' in subparagraph (A), 
                and
                    (C) by striking ``1031 or'' in subparagraph (E).
            (12) Section 2032A(e)(14)(C) is amended--
                    (A) in clause (i)(I), by inserting ``(as in effect 
                before its repeal by the Tax Reform Act of 2014)'' 
                after ``section 1031'', and
                    (B) in clause (ii)(I), by inserting ``(as so in 
                effect)'' after ``section 1031''.
            (13) Section 4940(c)(4) is amended by striking subparagraph 
        (D).
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transfers after December 31, 2014.
            (2) Exception for transfers pursuant to binding 
        contracts.--Notwithstanding paragraph (1), the amendments made 
        by this section shall not apply to any transfer if--
                    (A) such transfer is pursuant to a written binding 
                contract entered into before January 1, 2015, and
                    (B) the exchange of which such transfer is a part 
                is completed before January 1, 2017.

SEC. 3134. RESTRICTION ON TRADE OR BUSINESS PROPERTY TREATED AS SIMILAR 
              OR RELATED IN SERVICE TO INVOLUNTARILY CONVERTED PROPERTY 
              IN DISASTER AREAS.

    (a) Class Life of Replacement Property Not To Exceed Converted 
Property.--Section 1033(h)(2) is amended by inserting ``if the class 
life of such tangible property does not exceed the class life of the 
property so converted'' before the period at the end.
    (b) Effective Date.--The amendment made by this section shall apply 
to disasters declared after December 31, 2014.

SEC. 3135. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN INTO 
              SPECIALIZED SMALL BUSINESS INVESTMENT COMPANIES.

    (a) In General.--Part III of subchapter O of chapter 1 is amended 
by striking section 1044 (and by striking the item relating to such 
section in the table of sections of such part).
    (b) Conforming Amendments.--
            (1) Section 45D(c)(2)(A) is amended to read as follows:
                    ``(A) any partnership or corporation which is 
                licensed by the Small Business Administration under 
                section 301(d) of the Small Business Investment Act of 
                1958 (as in effect on May 13, 1993), and''.
            (2) Section 1016(a)(23) is amended--
                    (A) by striking ``1044,'', and
                    (B) by striking ``1044(d),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after December 31, 2014.

SEC. 3136. TERMINATION OF SPECIAL RULES FOR GAIN FROM CERTAIN SMALL 
              BUSINESS STOCK.

    (a) Termination of Partial Exclusion.--Section 1202 is amended--
            (1) by inserting ``and before the date of the enactment of 
        the Tax Reform Act of 2014'' after ``Revenue Reconciliation Act 
        of 1993'' in subsection (c)(1), and
            (2) by adding at the end the following new subsection:
    ``(l) Termination.--For termination with respect to qualified small 
business stock issued after the date of the enactment of the Tax Reform 
Act of 2014, see subsection (c)(1).''.
    (b) Repeal of Rollover Rules.--
            (1) In general.--Part III of subchapter O of chapter 1 is 
        amended by striking section 1045 (and by striking the item 
        relating to such section in the table of sections of such 
        part).
            (2) Conforming amendments.--
                    (A) Section 1016(a)(23) is amended--
                            (i) by striking ``1045,'', and
                            (ii) by striking ``1045(b)(3),''.
                    (B) Section 1223 is amended by striking paragraph 
                (13).
    (c) Effective Dates.--
            (1) Termination of partial exclusion.--The amendments made 
        by subsection (a) shall apply to sales and exchanges after the 
        date of the enactment of this Act.
            (2) Repeal of rollover rules.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by subsection (b) shall apply 
                to sales after the date of the enactment of this Act.
                    (B) Savings provision.--The amendments made by 
                subsection (b)(2) shall not apply with respect to 
                property the acquisition of which was before the date 
                of the enactment of this Act.

SEC. 3137. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL 
              ASSET.

    (a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a 
patent, invention, model or design (whether or not patented), a secret 
formula or process,'' before ``a copyright''.
    (b) Self-Created Musical Works.--Section 1221(b) is amended by 
striking paragraph (3).
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2014.

SEC. 3138. REPEAL OF SPECIAL RULE FOR SALE OR EXCHANGE OF PATENTS.

    (a) In General.--Part IV of subchapter P of chapter 1 is amended by 
striking section 1235 (and by striking the item relating to such 
section in the table of sections of such part).
    (b) Conforming Amendments.--
            (1) Section 483(d) is amended by striking paragraph (4).
            (2)(A) Section 871(a)(1), as amended by the preceding 
        provisions of this Act, is amended by striking subparagraph (B) 
        and by redesignating subparagraphs (C) and (D) as subparagraphs 
        (B) and (C), respectively.
            (B) Section 871(g)(3) is amended by striking ``(a)(1)(C)'' 
        and inserting ``(a)(1)(B)''.
            (C) Subsections (h)(1) and (i)(1) of section 871 are each 
        amended by striking ``(1)(C)'' and inserting ``(1)(B)''.
            (D) Section 1441, as amended by the preceding provisions of 
        this Act, is amended--
                    (i) in subsections (b) and (c)(8), by striking 
                ``871(a)(1)(C)'' and inserting ``871(a)(1)(B)'', and
                    (ii) in subsections (b) and (c)(5), by striking 
                ``871(a)(1)(D)'' and inserting ``871(a)(1)(C)''.
            (E) Section 1442(a), as amended by the preceding provisions 
        of this Act, is amended--
                    (i) by striking ``871(a)(1)(C) and (D)'' and 
                inserting ``871(a)(1)(B) and (C)'', and
                    (ii) by striking ``871(a)(1)(D)'' and inserting 
                ``871(a)(1)(C)''.
            (3) Section 901(l)(5) is amended by striking ``without 
        regard to section 1235 or any similar rule'' and inserting 
        ``without regard to any provision which treats a disposition as 
        a sale or exchange of a capital asset held for more than 1 year 
        or any similar provision''.
            (4) Section 1274(c)(3) is amended by striking subparagraph 
        (E) and redesignating subparagraph (F) as subparagraph (E).
            (5) Subsections (b) and (c)(5) of section 1441, as amended 
        by the preceding provisions of this Act, are each amended by 
        striking ``gains subject to tax under section 871(a)(1)(C), and 
        gains on transfers described in section 1235 made on or before 
        October 4, 1966'' and inserting ``and gains subject to tax 
        under section 871(a)(1)(C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2014.

SEC. 3139. DEPRECIATION RECAPTURE ON GAIN FROM DISPOSITION OF CERTAIN 
              DEPRECIABLE REALTY.

    (a) In General.--Subsection (a) of section 1250 is amended to read 
as follows:
    ``(a) In General.--Except as otherwise provided in this section, if 
section 1250 property is disposed of after December 31, 2014, the 
amount of gain with respect to such property which is treated as 
ordinary income shall be an amount equal to the lesser of--
            ``(1) the sum of--
                    ``(A) the amount of additional depreciation 
                attributable to periods before January 1, 2015, in 
                respect of such property, and
                    ``(B) the amount of depreciation adjustments 
                attributable to periods after December 31, 2014, in 
                respect of such property, or
            ``(2) the excess of the amount realized (or, in the case of 
        a disposition other than a sale, exchange, or involuntary 
        conversion, the fair market value of such property), over the 
        adjusted basis of such property.''.
    (b) Conforming Amendments.--
            (1) Section 267(e)(5)(D)(i) is amended to read as follows:
                            ``(i) any interest in--
                                    ``(I) any section 1250 property 
                                with respect to which a mortgage is 
                                insured under section 221(d)(3) or 236 
                                of the National Housing Act, or housing 
                                financed or assisted by direct loan or 
                                tax abatement under similar provisions 
                                of State or local laws and with respect 
                                to which the owner is subject to the 
                                restrictions described in section 
                                1039(b)(1)(B) (as in effect on the day 
                                before the date of the enactment of the 
                                Revenue Reconciliation Act of 1990),
                                    ``(II) dwelling units which, on the 
                                average, were held for occupancy by 
                                families or individuals eligible to 
                                receive subsidies under section 8 of 
                                the United States Housing Act of 1937, 
                                as amended, or under the provisions of 
                                State or local law authorizing similar 
                                levels of subsidy for lower-income 
                                families,
                                    ``(III) any section 1250 property 
                                with respect to which a depreciation 
                                deduction for rehabilitation 
                                expenditures was allowed under section 
                                167(k), or
                                    ``(IV) any section 1250 property 
                                with respect to which a loan is made or 
                                insured under title V of the Housing 
                                Act of 1949, and''.
            (2) Section 1250(b) is amended by striking paragraph (4) 
        and by redesignating paragraph (5) as paragraph (4).
            (3) Section 1250(c) is amended by striking ``For purposes 
        of this section'' and inserting ``For purposes of this title''
            (4)(A) Section 1250(d)(5)(B)(i) is amended by striking 
        ``and the applicable percentage for the property had been 100 
        percent''.
            (B) Section 1250(d)(5)(B)(ii) is amended to read as 
        follows:
                            ``(ii) the amount of such gain (if any) to 
                        which section 751(b) applied.''.
            (5) Section 1250(d) is amended by striking paragraph (7).
            (6) Section 1250 is amended by striking subsections (e) and 
        (f) and by redesignating subsections (g) and (h) as subsections 
        (e) and (f), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2014.

SEC. 3140. COMMON DEDUCTION CONFORMING AMENDMENTS.

    (a) In General.--
            (1) Section 1245(a)(2)(C) is amended by striking ``section 
        179,'' and all that follows through ``or 194'' and inserting 
        ``section 179 or (as in effect before repeal by the Tax Reform 
        Act of 2014) section 179A, 179B, 179C, 179D, 179E, 181, 190, 
        193, or 194,''
            (2) Section 1245(a)(3)(C) is amended by striking ``section 
        169'' and all that follows through ``or 194'' and inserting 
        ``section 179, 185, 188 (as in effect before its repeal by the 
        Revenue Reconciliation Act of 1990), or (as in effect before 
        repeal by the Tax Reform Act of 2014) section 169, 179A, 179B, 
        179C, 179D, 179E, 190, 193, or 194''.
            (3) Section 263(a)(1) is amended by striking subparagraphs 
        (C), (D), (F), (H), (I), (J), (K), and (L) and by redesignating 
        subparagraphs (E) and (G) as subparagraphs (C) and (D), 
        respectively.
            (4) Section 280C, as amended by the preceding provisions of 
        this Act, is amended by redesignating subsections (c) and (g) 
        as subsections (b) and (c), respectively.
    (b) Effective Date.--Each portion of each amendment made by this 
section shall take effect as if included in the provision of this 
subtitle to which such portion relates.

                 Subtitle C--Reform of Business Credits

SEC. 3201. REPEAL OF CREDIT FOR ALCOHOL, ETC., USED AS FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 40 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Repeal of Corresponding Excise Tax Credits.--
            (1) Credit.--Subchapter B of chapter 65 is amended by 
        striking section 6426 (and by striking the item relating to 
        such section in the table of sections for such subchapter).
            (2) Payment.--Section 6427 is amended by striking 
        subsection (e).
    (c) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (3).
            (2) Section 6416(a)(4)(C) is amended--
                    (A) by striking ``section 6427(i)(4)'' and 
                inserting ``section 6427(i)(3)'', and
                    (B) by striking ``section 6427(i)(3)(B)'' and 
                inserting ``subparagraph (B) thereof''.
            (3) Section 6427(i) is amended by striking paragraph (3) 
        and by redesignating paragraph (4) as paragraph (3).
            (4) Section 6427(i)(3), as redesignated by paragraph (2), 
        is amended--
                    (A) by striking the sentence at the end of 
                subparagraph (A),
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C), and
                    (C) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) Payment of claim.--Notwithstanding subsection 
                (l)(1), if the Secretary has not paid pursuant to a 
                claim filed under subsection (b)(4), (l)(4)(C)(ii), or 
                (l)(5) within 45 days of the date of the filing of such 
                claim (20 days in the case of an electronic claim), the 
                claim shall be paid with interest from such date 
                determined by using the overpayment rate and method 
                under section 6621.''.
            (5) Subpart B of part III of subchapter A of chapter 32 is 
        amended by striking section 4104 (and by striking the item 
        relating to such section in the table of sections for such 
        subpart).
            (6) Section 6501(m) is amended by striking ``40(f),''.
            (7) Section 9503(b)(1) is amended by striking the second 
        sentence.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuels sold or used after December 31, 2013.

SEC. 3202. REPEAL OF CREDIT FOR BIODIESEL AND RENEWABLE DIESEL USED AS 
              FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 40A (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (17).
            (2) Part II of subchapter B of chapter 1 is amended by 
        striking section 87 (and by striking the item relating to such 
        section in the table of sections for such subpart).
            (3) Section 4101(a)(1) is amended by striking ``, every 
        person producing'' and all that follows through ``section 
        40(b)(6)(E))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fuels sold or used after December 31, 2013.

SEC. 3203. RESEARCH CREDIT MODIFIED AND MADE PERMANENT.

    (a) Permanent Simplification of Incremental Research Credit and 
Elimination of Credit for Energy Research Consortium Payments.--
            (1) In general.--Subsection (a) of section 41 is amended to 
        read as follows:
    ``(a) In General.--For purposes of section 38, the research credit 
determined under this section for the taxable year shall be an amount 
equal to the sum of--
            ``(1) 15 percent of so much of the qualified research 
        expenses for the taxable year as exceeds 50 percent of the 
        average qualified research expenses for the 3 taxable years 
        preceding the taxable year for which the credit is being 
        determined, plus
            ``(2) 15 percent of so much of the basic research payments 
        for the taxable year as exceeds 50 percent of the average basic 
        research payments for the 3 taxable years preceding the taxable 
        year for which the credit is being determined.''.
            (2) Repeal of termination.--Section 41 is amended by 
        striking subsection (h).
            (3) Conforming amendments.--
                    (A) Subsection (c) of section 41 is amended to read 
                as follows:
    ``(c) Determination of Average Research Expenses for Prior Years.--
            ``(1) Special rule in case of no qualified research 
        expenditures in any of 3 preceding taxable years.--In any case 
        in which the taxpayer has no qualified research expenses in any 
        one of the 3 taxable years preceding the taxable year for which 
        the credit is being determined, the amount determined under 
        subsection (a)(1) for such taxable year shall be equal to 10 
        percent of the qualified research expenses for the taxable 
        year.
            ``(2) Consistent treatment of expenses.--
                    ``(A) In general.--Notwithstanding whether the 
                period for filing a claim for credit or refund has 
                expired for any taxable year taken into account in 
                determining the average qualified research expenses, or 
                average basic research payments, taken into account 
                under subsection (a), the qualified research expenses 
                and basic research payments taken into account in 
                determining such averages shall be determined on a 
                basis consistent with the determination of qualified 
                research expenses and basic research payments, 
                respectively, for the credit year.
                    ``(B) Prevention of distortions.--The Secretary may 
                prescribe regulations to prevent distortions in 
                calculating a taxpayer's qualified research expenses or 
                basic research payments caused by a change in 
                accounting methods used by such taxpayer between the 
                current year and a year taken into account in 
                determining the average qualified research expenses or 
                average basic research payments taken into account 
                under subsection (a).''.
                    (B) Section 41(e) is amended--
                            (i) by striking all that precedes paragraph 
                        (6) and inserting the following:
    ``(e) Basic Research Payments.--For purposes of this section--
            ``(1) In general.--The term `basic research payment' means, 
        with respect to any taxable year, any amount paid in cash 
        during such taxable year by a corporation to any qualified 
        organization for basic research but only if--
                    ``(A) such payment is pursuant to a written 
                agreement between such corporation and such qualified 
                organization, and
                    ``(B) such basic research is to be performed by 
                such qualified organization.
            ``(2) Exception to requirement that research be performed 
        by the organization.--In the case of a qualified organization 
        described in subparagraph (C) or (D) of paragraph (3), 
        subparagraph (B) of paragraph (1) shall not apply.'',
                            (ii) by redesignating paragraphs (6) and 
                        (7) as paragraphs (3) and (4), respectively, 
                        and
                            (iii) in paragraph (4) as so redesignated, 
                        by striking subparagraphs (B) and (C) and by 
                        redesignating subparagraphs (D) and (E) as 
                        subparagraphs (B) and (C), respectively.
                    (C)(i) Section 41(f)(1) is amended by striking ``, 
                basic research payments, and amounts paid or incurred 
                to energy research consortiums,'' in subparagraphs 
                (A)(ii) and (B)(ii) and inserting ``and basic research 
                payments''.
                    (ii) Section 41(f) is amended by striking paragraph 
                (6).
            (4) Effective date.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by this subsection shall apply 
                to taxable years beginning after December 31, 2013.
                    (B) Paragraph (2).--The amendment made by paragraph 
                (2) shall apply to amounts paid or incurred after 
                December 31, 2013.
    (b) Other Reforms.--
            (1) Elimination of credit for computer software.--
        Subparagraph (E) of section 41(d)(4) is amended--
                    (A) by striking ``Except to the extent provided in 
                regulations, any research'' and inserting ``Any 
                research'', and
                    (B) by striking ``which is developed by'' and all 
                that follows through the end and inserting a period.
            (2) Elimination of increased credit for amounts paid to 
        certain entities.--Paragraph (3) of section 41(b) is amended by 
        striking subparagraphs (C) and (D).
            (3) Elimination of credit for supplies.--Subparagraph (A) 
        of section 41(b)(2) is amended by inserting ``and'' at the end 
        of clause (i), by striking clause (ii), and by redesignating 
        clause (iii) as clause (ii).
            (4) Elimination of election of reduced credit.--Section 
        280C(c) is amended by striking paragraphs (3) and (4).
            (5) Conforming amendments.--
                    (A) The second sentence of section 41(b)(2)(A) is 
                amended by striking ``Clause (iii)'' and inserting 
                ``Clause (ii)''.
                    (B) Section 41(b)(2) is amended by striking 
                subparagraph (C) and by redesignating subparagraph (D) 
                as subparagraph (C).
                    (C) Section 41(d)(2)(B) is amended by striking ``, 
                computer software''.
            (6) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2013.

SEC. 3204. LOW-INCOME HOUSING TAX CREDIT.

    (a) Reform of Limitation and Allocation Rules.--
            (1) Allocations of eligible basis amounts rather than 
        credit amounts; elimination of national reallocations.--
        Subsection (h) of section 42 is amended to read as follows:
    ``(h) Limitation on Qualified Basis With Respect to Projects 
Located in a State.--
            ``(1) Qualified basis may not exceed limitation amount 
        allocated to building.--
                    ``(A) In general.--The qualified basis of any 
                building which is taken into account under subsection 
                (a) for any taxable year shall not exceed the 
                limitation amount allocated to such building under this 
                subsection.
                    ``(B) Time for making allocation.--Except in the 
                case of an allocation which meets the requirements of 
                subparagraph (C), (D), (E), or (F), an allocation shall 
                be taken into account under subparagraph (A) only if it 
                is made not later than the close of the calendar year 
                in which the building is placed in service.
                    ``(C) Exception where binding commitment.--An 
                allocation meets the requirements of this subparagraph 
                if there is a binding commitment (not later than the 
                close of the calendar year in which the building is 
                placed in service) by the housing credit agency to 
                allocate a specified limitation amount to such building 
                beginning in a specified later taxable year.
                    ``(D) Exception where increase in qualified 
                basis.--
                            ``(i) In general.--An allocation meets the 
                        requirements of this subparagraph if such 
                        allocation is made not later than the close of 
                        the calendar year in which ends the taxable 
                        year to which it will 1st apply but only to the 
                        extent the amount of such allocation does not 
                        exceed the limitation under clause (ii).
                            ``(ii) Limitation.--The limitation under 
                        this clause is the excess of--
                                    ``(I) the qualified basis of such 
                                building as of the close of the 1st 
                                taxable year to which such allocation 
                                will apply, over
                                    ``(II) the qualified basis of such 
                                building as of the close of the 1st 
                                taxable year to which the most recent 
                                prior allocation with respect to such 
                                building applied.
                            ``(iii) Housing credit basis limitation 
                        reduced by full allocation.--Notwithstanding 
                        clause (i), the full amount of the allocation 
                        shall be taken into account under paragraph 
                        (2).
                    ``(E) Exception where 10 percent of cost 
                incurred.--
                            ``(i) In general.--An allocation meets the 
                        requirements of this subparagraph if such 
                        allocation is made with respect to a qualified 
                        building which is placed in service not later 
                        than the close of the second calendar year 
                        following the calendar year in which the 
                        allocation is made.
                            ``(ii) Qualified building.--For purposes of 
                        clause (i), the term `qualified building' means 
                        any building which is part of a project if the 
                        taxpayer's basis in such project (as of the 
                        date which is 1 year after the date that the 
                        allocation was made) is more than 10 percent of 
                        the taxpayer's reasonably expected basis in 
                        such project (as of the close of the second 
                        calendar year referred to in clause (i)). Such 
                        term does not include any existing building 
                        unless a credit is allowable under subsection 
                        (e) for rehabilitation expenditures paid or 
                        incurred by the taxpayer with respect to such 
                        building for a taxable year ending during the 
                        second calendar year referred to in clause (i) 
                        or the prior taxable year.
                    ``(F) Allocation of credit on a project basis.--
                            ``(i) In general.--In the case of a project 
                        which includes (or will include) more than 1 
                        building, an allocation meets the requirements 
                        of this subparagraph if--
                                    ``(I) the allocation is made to the 
                                project for a calendar year during the 
                                project period,
                                    ``(II) the allocation only applies 
                                to buildings placed in service during 
                                or after the calendar year for which 
                                the allocation is made, and
                                    ``(III) the portion of such 
                                allocation which is allocated to any 
                                building in such project is specified 
                                not later than the close of the 
                                calendar year in which the building is 
                                placed in service.
                            ``(ii) Project period.--For purposes of 
                        clause (i), the term `project period' means the 
                        period--
                                    ``(I) beginning with the 1st 
                                calendar year for which an allocation 
                                may be made for the 1st building placed 
                                in service as part of such project, and
                                    ``(II) ending with the calendar 
                                year the last building is placed in 
                                service as part of such project.
            ``(2) Allocated limitation amount to apply to all taxable 
        years ending during or after allocation year.--Any limitation 
        amount allocated to any building for any calendar year--
                    ``(A) shall apply to such building for all taxable 
                years in the compliance period ending during or after 
                such calendar year, and
                    ``(B) shall reduce the aggregate limitation amount 
                of the allocating agency only for such calendar year.
            ``(3) Limitation amount for agencies.--
                    ``(A) In general.--The limitation amount which a 
                housing credit agency may allocate for any calendar 
                year is the portion of the State limitation allocated 
                under this paragraph for such calendar year to such 
                agency.
                    ``(B) State limitation initially allocated to state 
                housing credit agencies.--Except as provided in 
                subparagraph (F), the State limitation for each 
                calendar year shall be allocated to the housing credit 
                agency of such State. If there is more than 1 housing 
                credit agency of a State, all such agencies shall be 
                treated as a single agency.
                    ``(C) State limitation.--The State limitation 
                applicable to any State for any calendar year shall be 
                an amount equal to the sum of--
                            ``(i) the unused State limitation (if any) 
                        of such State for the preceding calendar year,
                            ``(ii) the greater of--
                                    ``(I) $31.20 multiplied by the 
                                State population, or
                                    ``(II) $36,300,000, plus
                            ``(iii) the amount of State limitation 
                        returned in the calendar year.
                    ``(D) Unused state limitation.--For purposes of 
                subparagraph (C)(i), the unused State limitation for 
                any calendar year is the excess (if any) of the sum of 
                the amounts described in clauses (ii) and (iii) of 
                subparagraph (C) over the aggregate limitation amount 
                allocated for such year.
                    ``(E) State limitation returned in the calendar 
                year.--For purposes of subparagraph (C)(iii), the 
                amount of State limitation returned in the calendar 
                year equals the limitation amount previously allocated 
                within the State to any project--
                            ``(i) which fails to meet the 10 percent 
                        test under paragraph (1)(E)(ii) on a date after 
                        the close of the calendar year in which the 
                        allocation was made,
                            ``(ii) which does not become a qualified 
                        low-income housing project within the period 
                        required by this section or the terms of the 
                        allocation, or
                            ``(iii) with respect to which an allocation 
                        is cancelled by mutual consent of the housing 
                        credit agency and the allocation recipient.
                    ``(F) State may provide for different allocation.--
                For purposes of this paragraph, a State may by law 
                provide (or a Governor of a State may proclaim) a 
                different formula for allocating the State limitation 
                among the State housing credit agencies in such State.
                    ``(G) Population.--For purposes of this paragraph, 
                determinations of the population of any State shall be 
                made with respect to any calendar year on the basis of 
                the most recent census estimate of the resident 
                population of such State released by the Bureau of 
                Census before the beginning of such calendar year.
                    ``(H) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2015, the dollar amounts in 
                        subparagraph (C)(ii) shall each be increased by 
                        an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(c)(2)(A) for such calendar year, 
                                determined by substituting `calendar 
                                year 2014' for `calendar year 2012' in 
                                clause (ii) thereof.
                            ``(ii) Rounding.--
                                    ``(I) In the case of the dollar 
                                amount in subparagraph (C)(ii)(I), any 
                                increase under clause (i) which is not 
                                a multiple of 20 cents shall be rounded 
                                to the next lowest multiple of 20 
                                cents.
                                    ``(II) In the case of the dollar 
                                amount in subparagraph (C)(ii)(II), any 
                                increase under clause (i) which is not 
                                a multiple of $100,000 shall be rounded 
                                to the next lowest multiple of 
                                $100,000.
            ``(4) Portion of state limitation set-aside for certain 
        projects involving qualified nonprofit organizations.--
                    ``(A) In general.--Not more than 90 percent of the 
                State limitation for any State for any calendar year 
                shall be allocated to projects other than qualified 
                low-income housing projects described in subparagraph 
                (B).
                    ``(B) Projects involving qualified nonprofit 
                organizations.--For purposes of subparagraph (A), a 
                qualified low-income housing project is described in 
                this subparagraph if a qualified nonprofit organization 
                is to own an interest in the project (directly or 
                through a partnership) and materially participate 
                (within the meaning of section 469(h)) in the 
                development and operation of the project throughout the 
                credit period.
                    ``(C) Qualified nonprofit organization.--For 
                purposes of this paragraph, the term `qualified 
                nonprofit organization' means any organization if--
                            ``(i) such organization is described in 
                        paragraph (3) or (4) of section 501(c) and is 
                        exempt from tax under section 501(a),
                            ``(ii) such organization is determined by 
                        the State housing credit agency not to be 
                        affiliated with or controlled by a for-profit 
                        organization; and
                            ``(iii) 1 of the exempt purposes of such 
                        organization includes the fostering of low-
                        income housing.
                    ``(D) Treatment of certain subsidiaries.--
                            ``(i) In general.--For purposes of this 
                        paragraph, a qualified nonprofit organization 
                        shall be treated as satisfying the ownership 
                        and material participation test of subparagraph 
                        (B) if any qualified corporation in which such 
                        organization holds stock satisfies such test.
                            ``(ii) Qualified corporation.--For purposes 
                        of clause (i), the term `qualified corporation' 
                        means any corporation if 100 percent of the 
                        stock of such corporation is held by 1 or more 
                        qualified nonprofit organizations at all times 
                        during the period such corporation is in 
                        existence.
                    ``(E) State may not override set-aside.--Nothing in 
                subparagraph (F) of paragraph (3) shall be construed to 
                permit a State not to comply with subparagraph (A) of 
                this paragraph.
            ``(5) Buildings eligible for credit only if minimum long-
        term commitment to low-income housing.--
                    ``(A) In general.--No credit shall be allowed by 
                reason of this section with respect to any building for 
                the taxable year unless an extended low-income housing 
                commitment is in effect as of the end of such taxable 
                year.
                    ``(B) Extended low-income housing commitment.--For 
                purposes of this paragraph, the term `extended low-
                income housing commitment' means any agreement between 
                the taxpayer and the housing credit agency--
                            ``(i) which requires that the applicable 
                        fraction (as defined in subsection (c)(1)) for 
                        the building for each taxable year in the 
                        extended use period will not be less than the 
                        applicable fraction specified in such agreement 
                        and which prohibits the actions described in 
                        subclauses (I) and (II) of subparagraph 
                        (E)(ii),
                            ``(ii) which allows individuals who meet 
                        the income limitation applicable to the 
                        building under subsection (g) (whether 
                        prospective, present, or former occupants of 
                        the building) the right to enforce in any State 
                        court the requirement and prohibitions of 
                        clause (i),
                            ``(iii) which prohibits the disposition to 
                        any person of any portion of the building to 
                        which such agreement applies unless all of the 
                        building to which such agreement applies is 
                        disposed of to such person,
                            ``(iv) which prohibits the refusal to lease 
                        to a holder of a voucher or certificate of 
                        eligibility under section 8 of the United 
                        States Housing Act of 1937 because of the 
                        status of the prospective tenant as such a 
                        holder,
                            ``(v) which is binding on all successors of 
                        the taxpayer, and
                            ``(vi) which, with respect to the property, 
                        is recorded pursuant to State law as a 
                        restrictive covenant.
                    ``(C) Allocation of limitation amount may not 
                exceed amount necessary to support commitment.--The 
                limitation amount allocated to any building may not 
                exceed the amount necessary to support the applicable 
                fraction specified in the extended low-income housing 
                commitment for such building.
                    ``(D) Extended use period.--For purposes of this 
                paragraph, the term `extended use period' means the 
                period--
                            ``(i) beginning on the 1st day in the 
                        credit period on which such building is part of 
                        a qualified low-income housing project, and
                            ``(ii) ending on the later of--
                                    ``(I) the date specified by such 
                                agency in such agreement, or
                                    ``(II) the date which is 15 years 
                                after the close of the credit period.
                    ``(E) Exceptions if foreclosure or if no buyer 
                willing to maintain low-income status.--
                            ``(i) In general.--The extended use period 
                        for any building shall terminate--
                                    ``(I) on the date the building is 
                                acquired by foreclosure (or instrument 
                                in lieu of foreclosure) unless the 
                                Secretary determines that such 
                                acquisition is part of an arrangement 
                                with the taxpayer a purpose of which is 
                                to terminate such period, or
                                    ``(II) on the last day of the 
                                period specified in subparagraph (I) if 
                                the housing credit agency is unable to 
                                present during such period a qualified 
                                contract for the acquisition of the 
                                low-income portion of the building by 
                                any person who will continue to operate 
                                such portion as a qualified low-income 
                                building.
                        Subclause (II) shall not apply to the extent 
                        more stringent requirements are provided in the 
                        agreement or in State law.
                            ``(ii) Eviction, etc., of existing low-
                        income tenants not permitted.--The termination 
                        of an extended use period under clause (i) 
                        shall not be construed to permit before the 
                        close of the 3-year period following such 
                        termination--
                                    ``(I) the eviction or the 
                                termination of tenancy (other than for 
                                good cause) of an existing tenant of 
                                any low-income unit, or
                                    ``(II) any increase in the gross 
                                rent with respect to such unit not 
                                otherwise permitted under this section.
                    ``(F) Qualified contract.--For purposes of 
                subparagraph (E), the term `qualified contract' means a 
                bona fide contract to acquire (within a reasonable 
                period after the contract is entered into) the nonlow-
                income portion of the building for fair market value 
                and the low-income portion of the building for an 
                amount not less than the applicable fraction (specified 
                in the extended low-income housing commitment) of--
                            ``(i) the sum of--
                                    ``(I) the outstanding indebtedness 
                                secured by, or with respect to, the 
                                building,
                                    ``(II) the adjusted investor equity 
                                in the building, plus
                                    ``(III) other capital contributions 
                                not reflected in the amounts described 
                                in subclause (I) or (II), reduced by
                            ``(ii) cash distributions from (or 
                        available for distribution from) the project.
                The Secretary shall prescribe such regulations as may 
                be necessary or appropriate to carry out this 
                paragraph, including regulations to prevent the 
                manipulation of the amount determined under the 
                preceding sentence.
                    ``(G) Adjusted investor equity.--
                            ``(i) In general.--For purposes of 
                        subparagraph (F), the term `adjusted investor 
                        equity' means, with respect to any calendar 
                        year, the aggregate amount of cash taxpayers 
                        invested with respect to the project increased 
                        by the amount equal to--
                                    ``(I) such amount, multiplied by
                                    ``(II) the cost-of-living 
                                adjustment for such calendar year, 
                                determined under section 1(c)(2)(A) by 
                                substituting the base calendar year for 
                                `calendar year 2012' in clause (ii) 
                                thereof.
                        An amount shall be taken into account as an 
                        investment in the project only to the extent 
                        there was an obligation to invest such amount 
                        as of the beginning of the credit period and to 
                        the extent such amount is reflected in the 
                        adjusted basis of the project.
                            ``(ii) Cost-of-living increases in excess 
                        of 5 percent not taken into account.--Under 
                        regulations prescribed by the Secretary, if the 
                        C-CPI-U for any calendar year (within the 
                        meaning of section 1(c)) exceeds the C-CPI-U 
                        for the preceding calendar year by more than 5 
                        percent, the C-CPI-U for the base calendar year 
                        shall be increased such that such excess shall 
                        never be taken into account under clause (i).
                            ``(iii) Base calendar year.--For purposes 
                        of this subparagraph, the term `base calendar 
                        year' means the calendar year with or within 
                        which the 1st taxable year of the credit period 
                        ends.
                    ``(H) Low-income portion.--For purposes of this 
                paragraph, the low-income portion of a building is the 
                portion of such building equal to the applicable 
                fraction specified in the extended low-income housing 
                commitment for the building.
                    ``(I) Period for finding buyer.--The period 
                referred to in this subparagraph is the 1-year period 
                beginning on the date (after the 14th year of the 
                credit period) the taxpayer submits a written request 
                to the housing credit agency to find a person to 
                acquire the taxpayer's interest in the low-income 
                portion of the building.
                    ``(J) Effect of noncompliance.--If, during a 
                taxable year, there is a determination that an extended 
                low-income housing agreement was not in effect as of 
                the beginning of such year, such determination shall 
                not apply to any period before such year and 
                subparagraph (A) shall be applied without regard to 
                such determination if the failure is corrected within 1 
                year from the date of the determination.
                    ``(K) Projects which consist of more than 1 
                building.--The application of this paragraph to 
                projects which consist of more than 1 building shall be 
                made under regulations prescribed by the Secretary.
            ``(6) Special rules.--
                    ``(A) Building must be located within jurisdiction 
                of credit agency.--A housing credit agency may allocate 
                its limitation amount only to buildings located in the 
                jurisdiction of the governmental unit of which such 
                agency is a part.
                    ``(B) Agency allocations in excess of limit.--If 
                the limitation amounts allocated by a housing credit 
                agency for any calendar year exceed the portion of the 
                State limitation allocated to such agency for such 
                calendar year, the limitation amounts so allocated 
                shall be reduced (to the extent of such excess) for 
                buildings in the reverse of the order in which the 
                allocations of such amounts were made.
                    ``(C) Credit reduced if credit is less than credit 
                which would be allowable without regard to placed in 
                service convention, etc.--
                            ``(i) In general.--The amount of the credit 
                        determined under this section with respect to 
                        any building shall not exceed the clause (ii) 
                        percentage of the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to such 
                        building.
                            ``(ii) Determination of percentage.--For 
                        purposes of clause (i), the clause (ii) 
                        percentage with respect to any building is the 
                        percentage which--
                                    ``(I) the credit amount which would 
                                be determined under this section with 
                                respect to the building if the 
                                limitation amount allocated to such 
                                building were equal to the qualified 
                                basis of such building, bears to
                                    ``(II) the credit amount determined 
                                in accordance with clause (iii).
                            ``(iii) Determination of credit amount.--
                        The credit amount determined in accordance with 
                        this clause is the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to the building 
                        if this section were applied without regard to 
                        subsection (f)(2)(A).
            ``(7) Other definitions.--For purposes of this subsection--
                    ``(A) Housing credit agency.--The term `housing 
                credit agency' means any agency authorized to carry out 
                this subsection.
                    ``(B) Possessions treated as states.--The term 
                `State' includes a possession of the United States.''.
            (2) Conforming amendments.--
                    (A) Section 42(f) is amended by striking paragraph 
                (3).
                    (B) Section 42(i)(3)(B)(iii)(II) is amended by 
                striking ``subsection (h)(5)'' and inserting 
                ``subsection (h)(4)''.
                    (C) Section 42(i)(7)(A) is amended by striking 
                ``subsection (h)(5)(C)'' and inserting ``subsection 
                (h)(4)(C)''.
                    (D) Section 42(i)(8) is amended by striking the 
                last sentence.
                    (E) Section 42(i) is amended by striking paragraph 
                (9).
                    (F) Section 42(k)(2)(A) is amended by striking 
                ``subsection (h)(5)'' and inserting ``subsection 
                (h)(4)''.
                    (G) Section 42(l)(3) is amended by striking 
                ``housing credit amount'' both places it appears and 
                inserting ``limitation amount''.
                    (H) Section 42(m)(1)(A) is amended by striking 
                ``housing credit dollar amount'' both places it appears 
                and inserting ``limitation amount''.
                    (I) Section 42(m)(1)(B)(ii) is amended by striking 
                ``housing credit dollar amounts'' and inserting 
                ``limitation amounts''.
                    (J) Section 42(m)(1) is amended by striking 
                subparagraph (D).
                    (K) Subparagraphs (A), (B)(iii), (C)(i)(I), and 
                (C)(i)(II) of section 42(m)(2) are each amended by 
                striking ``housing credit dollar amount'' and inserting 
                ``limitation amount''.
                    (L) Section 42(m)(2) is amended by striking 
                subparagraph (D).
    (b) 15-Year Credit Period.--
            (1) In general.--Section 42(f)(1) is amended by striking 
        ``10 taxable years'' and inserting ``15 taxable years''.
            (2) Repeal of recapture.--Section 42 is amended by striking 
        subsection (j).
            (3) Conforming amendments.--
                    (A) Section 42(d)(7) is amended--
                            (i) by striking ``compliance period'' in 
                        the heading thereof and inserting ``credit 
                        period'', and
                            (ii) by striking ``compliance period'' in 
                        subparagraph (B)(ii) and inserting ``credit 
                        period''.
                    (B) Section 42(f)(4) is amended by striking the 
                last sentence thereof.
                    (C) Section 42(i) is amended by striking paragraph 
                (1).
                    (D) Section 42(i)(6) is amended by striking ``and 
                any increase in tax under subsection (j)''.
                    (E) Section 42(k)(4)(C) is amended to read as 
                follows:
                    ``(C) Special rules.--
                            ``(i) Tax benefit rule.--The tax for the 
                        taxable year shall be increased under 
                        subparagraph (A) only with respect to credits 
                        allowed by reason of this section which were 
                        used to reduce tax liability. In the case of 
                        credits not so used to reduce tax liability, 
                        the carryforwards and carrybacks under section 
                        39 shall be appropriately adjusted.
                            ``(ii) No credits against tax.--Any 
                        increase in tax under this paragraph shall not 
                        be treated as a tax imposed by this chapter for 
                        purposes of determining the amount of any 
                        credit under this chapter.''.
    (c) Determination of Applicable Percentage.--
            (1) Elimination of 30 percent credit; modification of 
        discount rate.--Subsection (b) of section 42 is amended to read 
        as follows:
    ``(b) Applicable Percentage.--
            ``(1) In general.--For purposes of this section, the term 
        `applicable percentage' means with respect to any building, the 
        appropriate percentage prescribed by the Secretary for the 
        earlier of--
                    ``(A) the month in which such building is placed in 
                service, or
                    ``(B) at the election of the taxpayer, the month in 
                which the taxpayer and the housing credit agency enter 
                into an agreement with respect to such building (which 
                is binding on such agency, the taxpayer, and all 
                successors in interest) as to the limitation amount to 
                be allocated to such building.
        A month may be elected under subparagraph (B) only if the 
        election is made not later than the 5th day after the close of 
        such month. Such an election, once made, shall be irrevocable.
            ``(2) Method of prescribing percentages.--The percentages 
        prescribed by the Secretary for any month shall be percentages 
        which will yield over a 15-year period amounts of credit under 
        subsection (a) which have a present value equal to 70 percent 
        of the qualified basis of the building.
            ``(3) Method of discounting.--
                    ``(A) In general.--The present value under 
                paragraph (2) shall be determined--
                            ``(i) as of the last day of the 1st year of 
                        the 15-year period referred to in paragraph 
                        (2),
                            ``(ii) by using a discount rate equal to 
                        the applicable discount percentage of the 
                        average of the annual Federal mid-term rate and 
                        the annual Federal long-term rate applicable 
                        under section 1274(d)(1) to the month 
                        applicable under subparagraph (A) or (B) of 
                        paragraph (1) and compounded annually, and
                            ``(iii) by assuming that the credit 
                        allowable under this section for any year is 
                        received on the last day of such year.
                    ``(B) Applicable discount percentage.--For purposes 
                of this paragraph, the term `applicable discount 
                percentage' means, with respect to any month referred 
                to in subparagraph (A)(ii) the number of percentage 
                points by which 100 percent exceeds the highest rate of 
                tax in effect under section 11 for a taxable year which 
                begins in such month.
            ``(4) Cross reference.--For treatment of certain 
        rehabilitation expenditures as separate new buildings, see 
        subsection (e).''.
            (2) Existing and federally subsidized buildings ineligible 
        for credit.--Section 42(d) is amended--
                    (A) by striking paragraphs (1), (2), and (6), and 
                redesignating paragraphs (3), (4), (5), and (7) as 
                paragraphs (2), (3), (4), and (5), respectively, and
                    (B) by inserting before paragraph (2) (as so 
                redesignated) the following new paragraph:
            ``(1) In general.--The eligible basis of any building is--
                    ``(A) in the case a new building which is not 
                Federally subsidized for the taxable year, its adjusted 
                basis as of the close of the 1st taxable year of the 
                credit period, and
                    ``(B) zero in any other case.''.
            (3) Conforming amendments.--
                    (A) Section 42(e) is amended--
                            (i) in paragraph (2)(B), by striking 
                        ``paragraph (3) or (4)'' and inserting 
                        ``paragraph (2) or (3)''.
                            (ii) in paragraph (3), by striking 
                        subparagraph (B) and redesignating 
                        subparagraphs (C) and (D) as subparagraphs (B) 
                        and (C), respectively,
                            (iii) in paragraph (4), by striking the 
                        last sentence thereof, and
                            (iv) by striking paragraph (5) and 
                        redesignating paragraph (6) as paragraph (5).
                    (B) Section 42(f) is amended by striking paragraph 
                (5).
                    (C) Section 42(i)(2)(A) is amended by striking 
                ``for purposes of subsection (b)(1),''.
                    (D) Section 42(i)(3) is amended--
                            (i) by striking ``(as defined in subsection 
                        (d)(2)(D)(iii))'' in subparagraph (C)(ii) and 
                        inserting ``(within the meaning of subparagraph 
                        (F))'', and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(F) Related person.--For purposes of subparagraph 
                (C), a person (hereinafter in this subparagraph 
                referred to as the `related person') is related to any 
                person if the related person bears a relationship to 
                such person specified in section 267(b) or 707(b)(1), 
                or the related person and such person are engaged in 
                trades or businesses under common control (within the 
                meaning of subsections (a) and (b) of section 52).''.
                    (E) Section 42(i) is amended by striking paragraph 
                (5).
                    (F) Section 42(k)(2)(B) is amended by striking ``, 
                except that'' and all that follows and inserting a 
                period.
    (d) Repeal of Special Rules for Buildings in High Cost and 
Difficult Development Areas.--
            (1) In general.--Paragraph (4) of section 42(d), as 
        redesignated by subsection (c)(2), is amended to read as 
        follows:
            ``(4) Federal grants not taken into account in determining 
        eligible basis.--The eligible basis of a building shall not 
        include any costs financed with the proceeds of a federally 
        funded grant.''.
            (2) Conforming amendments.--
                    (A) Paragraph (3) of section 42(d), as redesignated 
                by subsection (c)(2), is amended--
                            (i) by striking ``(as defined in paragraph 
                        (5)(C))'' in subparagraph (C)(i), and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(E) Qualified census tract.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `qualified 
                        census tract' means any census tract which is 
                        designated by the Secretary of Housing and 
                        Urban Development and, for the most recent year 
                        for which census data are available on 
                        household income in such tract, either in which 
                        50 percent or more of the households have an 
                        income which is less than 60 percent of the 
                        area median gross income for such year or which 
                        has a poverty rate of at least 25 percent. If 
                        the Secretary of Housing and Urban Development 
                        determines that sufficient data for any period 
                        are not available to apply this subparagraph on 
                        the basis of census tracts, such Secretary 
                        shall apply this subparagraph for such period 
                        on the basis of enumeration districts.
                            ``(ii) Limit on msa's designated.--The 
                        portion of a metropolitan statistical area 
                        which may be designated for purposes of this 
                        subparagraph shall not exceed an area having 20 
                        percent of the population of such metropolitan 
                        statistical area.
                            ``(iii) Determination of areas.--For 
                        purposes of this subparagraph, each 
                        metropolitan statistical area shall be treated 
                        as a separate area and all nonmetropolitan 
                        areas in a State shall be treated as 1 area.''.
                    (B) Clause (i) of section 42(d)(5)(A), as 
                redesignated by subsection (c)(2), is amended to read 
                as follows:
                            ``(i) such building shall be treated as a 
                        new building, but''.
    (e) Repeal of Certain Exceptions to Rules Against Preferential 
Treatment.--Section 42(g)(9) is amended--
            (1) by adding ``or'' at the end of subparagraph (A), and
            (2) by striking subparagraphs (B) and (C) and inserting the 
        following new subparagraph:
                    ``(B) who are veterans (as defined in section 101 
                of title 38, United States Code).''.
    (f) Modification of Selection Criteria.--Section 42(m)(1)(C) is 
amended--
            (1) by adding ``and'' at the end of clause (vii),
            (2) by striking the comma at the end of clause (viii) and 
        inserting a period, and
            (3) by striking clauses (ix) and (x).
    (g) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to State limitation amounts determined for 
        calendar years after 2014 (and to determinations with respect 
        to allocations of such limitation amounts).
            (2) Transition rule.--For purposes of determining the State 
        limitation amount for calendar year 2015 under section 
        42(h)(3)(C) of the Internal Revenue Code of 1986, as amended by 
        this section, the amount described in clause (i) of such 
        section shall be treated as being equal to the quotient of--
                    (A) the amount which would be described in section 
                42(h)(3)(C)(i) of such Code (determined without regard 
                to the amendments made by this section), divided by
                    (B) the applicable percentage determined under 
                section 42(b)(1)(B)(i) for December 2014 (determined 
                without regard to the amendments made by this section).

SEC. 3205. REPEAL OF ENHANCED OIL RECOVERY CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 43 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (6).
            (2) Section 6501(m) is amended by striking ``43,''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 3206. PHASEOUT AND REPEAL OF CREDIT FOR ELECTRICITY PRODUCED FROM 
              CERTAIN RENEWABLE RESOURCES.

    (a) Reduction of Credit and Phaseout Amounts.--
            (1) In general.--Section 45(b) is amended by striking 
        paragraph (2).
            (2) Conforming amendments.--Section 45(e)(2) is amended--
                    (A) by striking ``the inflation adjustment factor 
                and'' in subparagraph (A), and
                    (B) by striking subparagraph (B) and redesignating 
                subparagraph (C) as subparagraph (B).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to electricity, and refined coal, produced and sold 
        after December 31, 2014.
    (b) Special Rule for Determining Beginning of Construction.--
            (1) In general.--Section 45(e) is amended by adding at the 
        end the following new paragraph:
            ``(12) Special rule for determining beginning of 
        construction.--For purposes of subsection (d) and section 
        48(a)(5), the construction of any facility, modification, 
        improvement, addition, or other property shall not be treated 
        as beginning before any date unless there is a continuous 
        program of construction which begins before such date and ends 
        on the date that such property is placed in service.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning before, on, or after the 
        date of the enactment of this Act.
    (c) Repeal of Credit.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 is amended by striking section 45 (and by striking 
        the item relating to such section in the table of sections for 
        such subpart).
            (2) Conforming amendment.--Section 38(b) is amended by 
        striking paragraph (8).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to electricity, and refined coal, produced and sold 
        after December 31, 2024.

SEC. 3207. REPEAL OF INDIAN EMPLOYMENT CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45A (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--
            (1) Section 38(b) is amended by striking paragraph (10).
            (2) Section 139D(c)(1) is amended to read as follows:
            ``(1) Indian tribe.--The term `Indian tribe' means any 
        Indian tribe, band, nation, pueblo, or other organized group or 
        community, including any Alaska Native village or regional or 
        village corporation, as defined in, or established pursuant to, 
        the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
        seq.) which is recognized as eligible for the special programs 
        and services provided by the United States to Indians because 
        of their status as Indians.''.
            (3) Section 280C(a) is amended by striking ``45A,''.
            (4) Section 5000A(e)(3) is amended by striking ``section 
        45A(c)(6)'' and inserting ``section 139D(c)(1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

SEC. 3208. REPEAL OF CREDIT FOR PORTION OF EMPLOYER SOCIAL SECURITY 
              TAXES PAID WITH RESPECT TO EMPLOYEE CASH TIPS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45B (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (11).
            (2) Section 6501(m) is amended by striking ``45B,''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to tips received for services performed after 
December 31, 2014.

SEC. 3209. REPEAL OF CREDIT FOR CLINICAL TESTING EXPENSES FOR CERTAIN 
              DRUGS FOR RARE DISEASES OR CONDITIONS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45C (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (12).
            (2) Section 280C is amended by striking subsection (b).
            (3) Section 6501(m) is amended by striking ``45C(d)(4),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3210. REPEAL OF CREDIT FOR SMALL EMPLOYER PENSION PLAN STARTUP 
              COSTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45E (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--Section 38(b) is amended by striking 
paragraph (14).
    (c) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred after December 31, 2014, with respect 
to qualified employer plans first effective after such date.

SEC. 3211. REPEAL OF EMPLOYER-PROVIDED CHILD CARE CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45F (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (15).
            (2) Section 1016(a) is amended by striking paragraph (28).
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Basis adjustments.--The amendment made by subsection 
        (b)(2) shall apply to credits determined for taxable years 
        beginning after December 31, 2014.

SEC. 3212. REPEAL OF RAILROAD TRACK MAINTENANCE CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45G (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (16).
            (2) Section 1016(a) is amended by striking paragraph (29).
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2013.
            (2) Basis adjustments.--The amendment made by subsection 
        (b)(2) shall apply to credits determined for taxable years 
        beginning after December 31, 2013.

SEC. 3213. REPEAL OF CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45H (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (18).
            (2) Section 280C is amended by striking subsection (d).
            (3) Section 6501(m) is amended by striking ``45H(g),''.
            (4) Section 6720A is amended--
                    (A) by striking ``(as defined in section 
                45H(c)(3))'' in subsection (a), and
                    (B) by adding at the end the following new 
                subsection:
    ``(c) Applicable EPA Regulations.--The term `applicable EPA 
regulations' means the Highway Diesel Fuel Sulfur Control Requirements 
of the Environmental Protection Agency.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 2014.

SEC. 3214. REPEAL OF CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
              WELLS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45I (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (19).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3215. REPEAL OF CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER 
              FACILITIES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45J (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (21).
    (c) Effective Date.--The amendments made by this section shall 
apply to electricity produced and sold after December 31, 2014.

SEC. 3216. REPEAL OF CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL 
              SOURCE.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45K (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (22).
            (2) Section 45(e)(9) is amended--
                    (A) in subparagraph (A)--
                            (i) by inserting ``, as in effect before 
                        its repeal'' after ``within the meaning of 
                        section 45K'', and
                            (ii) by inserting ``(as in effect before 
                        its repeal)'' after ``under section 45K'', and
                    (B) in subparagraph (B), by inserting ``(as in 
                effect before its repeal)'' after ``section 45K''.
            (3) Section 4041(a)(2) is amended--
                    (A) by striking ``(as defined in section 
                45K(c)(3))'' in subparagraph (B)(ii), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Biomass.--The term ``biomass'' means any 
                organic material other than--
                            ``(i) oil and natural gas (or any product 
                        thereof), and
                            ``(ii) coal (including lignite) or any 
                        product thereof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fuel produced and sold after December 31, 2013.

SEC. 3217. REPEAL OF NEW ENERGY EFFICIENT HOME CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45L (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (23).
            (2) Section 1016(a) is amended by striking paragraph (32).
    (c) Effective Date.--The amendments made by this section shall 
apply to homes acquired after December 31, 2013.

SEC. 3218. REPEAL OF ENERGY EFFICIENT APPLIANCE CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45M (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (24).
    (c) Effective Date.--The amendments made by this section shall 
apply to appliances produced after December 31, 2013.

SEC. 3219. REPEAL OF MINE RESCUE TEAM TRAINING CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45N (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (31).
            (2) Section 280C is amended by striking subsection (e).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

SEC. 3220. REPEAL OF AGRICULTURAL CHEMICALS SECURITY CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45O (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (32).
            (2) Section 280C is amended by striking subsection (f).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2012.

SEC. 3221. REPEAL OF CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45Q (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (34).
    (c) Effective Date.--The amendments made by this section shall 
apply to credits determined for taxable years beginning after December 
31, 2014.

SEC. 3222. REPEAL OF CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES OF 
              SMALL EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45R (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (36).
            (2) Section 280C is amended by striking subsection (h).
            (3) Section 6055(b)(2) is amended by inserting ``and'' at 
        the end of subparagraph (A), by striking ``, and'' at the end 
        of subparagraph (B) and inserting a period, and by striking 
        subparagraph (C).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred for taxable years beginning after 
December 31, 2014.

SEC. 3223. REPEAL OF REHABILITATION CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 47 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 170(f)(14)(A) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 47''.
            (2) Section 170(h)(4) is amended--
                    (A) by striking ``(as defined in section 
                47(c)(3)(B))'' in subparagraph (C)(ii), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(D) Registered historic district.--The term 
                `registered historic district' means--
                            ``(i) any district listed in the National 
                        Register, and
                            ``(ii) any district--
                                    ``(I) which is designated under a 
                                statute of the appropriate State or 
                                local government, if such statute is 
                                certified by the Secretary of the 
                                Interior to the Secretary as containing 
                                criteria which will substantially 
                                achieve the purpose of preserving and 
                                rehabilitating buildings of historic 
                                significance to the district, and
                                    ``(II) which is certified by the 
                                Secretary of the Interior to the 
                                Secretary as meeting substantially all 
                                of the requirements for the listing of 
                                districts in the National Register.''.
            (3) Section 469(i)(3) is amended by striking subparagraph 
        (B).
            (4) Section 469(i)(6)(B) is amended--
                    (A) by striking ``in the case of--'' and all that 
                follows and inserting ``in the case of any credit 
                determined under section 42 for any taxable year.'', 
                and
                    (B) by striking ``, rehabilitation credit,'' in the 
                heading thereof.
            (5) Section 469(k)(1) is amended by striking ``, or any 
        rehabilitation credit determined under section 47,''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts paid 
        after December 31, 2014.
            (2) Transition rule.--In the case of qualified 
        rehabilitation expenditures (within the meaning of section 47 
        of the Internal Revenue Code of 1986 as in effect before its 
        repeal) with respect to any building--
                    (A) acquired by the taxpayer before January 1, 
                2015, and
                    (B) with respect to which the 24-month period 
                selected by the taxpayer under section 47(c)(1)(C) of 
                such Code begins not later than January 1, 2015,
        the amendments made by this section shall apply to amounts paid 
        after December 31, 2016.

SEC. 3224. REPEAL OF ENERGY CREDIT.

    (a) Termination.--Section 48 is amended by adding at the end the 
following new subsection:
    ``(e) Application of Section.--This section shall not apply to any 
energy property placed in service after December 31, 2016.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2)(A)(i)(II), and clauses (ii) and (vii) of 
        paragraph (3)(A), of section 48(a) are each amended by striking 
        ``but only with respect to periods ending before January 1, 
        2017''.
            (2) Paragraph (1) of section 48(c) is amended by striking 
        subparagraph (D).
            (3) Paragraph (2) of section 48(c) is amended by striking 
        subparagraph (D).
            (4) Subparagraph (A) of section 48(c)(3) is amended by 
        inserting ``and'' at the end of clause (ii), by striking ``, 
        and'' at the end of clause (iii) and inserting a period, and by 
        striking clause (iv).
            (5) Paragraph (4) of section 48(c) is amended by striking 
        subparagraph (C).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2016.

SEC. 3225. REPEAL OF QUALIFYING ADVANCED COAL PROJECT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 48A (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Effective Date.--The amendments made by this section shall 
apply to allocations and reallocations after December 31, 2014.

SEC. 3226. REPEAL OF QUALIFYING GASIFICATION PROJECT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 48B (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Effective Date.--The amendments made by this section shall 
apply to allocations and reallocations after December 31, 2014.

SEC. 3227. REPEAL OF QUALIFYING ADVANCED ENERGY PROJECT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 48C (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Effective Date.--The amendments made by this section shall 
apply to allocations and reallocations after December 31, 2014.

SEC. 3228. REPEAL OF QUALIFYING THERAPEUTIC DISCOVERY PROJECT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 48D (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--Section 280C is amended by striking the 
second subsection (g) (as added by the Patient Protection and 
Affordable Care Act).
    (c) Effective Date.--The amendments made by this section shall 
apply to allocations and reallocations after December 31, 2014.

SEC. 3229. REPEAL OF WORK OPPORTUNITY TAX CREDIT.

    (a) In General.--Subpart F of part IV of subchapter A of chapter 1 
is amended by striking section 51 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Clerical Amendment.--The heading of such subpart F (and the 
item relating to such subpart in the table of subparts for part IV of 
subchapter A of chapter 1) are each amended by striking ``Rules for 
Computing Work Opportunity Credit'' and inserting ``Special Rules''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred to individuals who begin work for the 
employer after December 31, 2013.

SEC. 3230. REPEAL OF DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 196 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

                     Subtitle D--Accounting Methods

SEC. 3301. LIMITATION ON USE OF CASH METHOD OF ACCOUNTING.

    (a) In General.--Section 448 is amended to read as follows:

``SEC. 448. LIMITATION ON USE OF CASH METHOD OF ACCOUNTING.

    ``(a) In General.--The cash receipts and disbursements method of 
accounting may only be used by--
            ``(1) a natural person,
            ``(2) a farming business, and
            ``(3) any other entity which meets the gross receipts test 
        of subsection (b) for the taxable year.
Such method may not be used by a tax shelter (as defined in subsection 
(d)).
    ``(b) Gross Receipts Test.--For purposes of this section--
            ``(1) In general.--An entity meets the gross receipts test 
        of this subsection for any taxable year if the average annual 
        gross receipts of such entity for the 3-taxable-year period 
        ending with the taxable year which precedes such taxable year 
        does not exceed $10,000,000.
            ``(2) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414 shall be treated as one 
        entity for purposes of paragraph (1).
            ``(3) Special rules.--For purposes of this subsection--
                    ``(A) Not in existence for entire 3-year period.--
                If the entity was not in existence for the entire 3-
                year period referred to in paragraph (1), such 
                paragraph shall be applied on the basis of the period 
                during which such entity (or trade or business) was in 
                existence.
                    ``(B) Short taxable years.--Gross receipts for any 
                taxable year of less than 12 months shall be annualized 
                by multiplying the gross receipts for the short period 
                by 12 and dividing the result by the number of months 
                in the short period.
                    ``(C) Gross receipts.--Gross receipts for any 
                taxable year shall be reduced by returns and allowances 
                made during such year.
                    ``(D) Treatment of predecessors.--Any reference in 
                this subsection to an entity shall include a reference 
                to any predecessor of such entity.
    ``(c) Farming Business.--For purposes of this section--
            ``(1) In general.--The term `farming business' means the 
        trade or business of farming.
            ``(2) Certain trades and businesses included.--
                    ``(A) In general.--The term `farming business' 
                shall include the trade or business of--
                            ``(i) operating a nursery or sod farm, or
                            ``(ii) the raising or harvesting of trees 
                        bearing fruit, nuts, or other crops, or 
                        ornamental trees.
                    ``(B) Certain evergreen trees not treated as 
                ornamental.--For purposes of subparagraph (A)(ii), an 
                evergreen tree which is more than 6 years old at the 
                time severed from the roots shall not be treated as an 
                ornamental tree.
    ``(d) Tax Shelter Defined.--For purposes of this section, the term 
`tax shelter' has the meaning given such term by section 461(i)(2) 
(determined after application of paragraph (3) thereof). An S 
corporation shall not be treated as a tax shelter for purposes of this 
section merely by reason of being required to file a notice of 
exemption from registration with a State agency described in section 
461(i)(2)(A), but only if there is a requirement applicable to all 
corporations offering securities for sale in the State that to be 
exempt from such registration the corporation must file such a notice.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Coordination with section 481.--In the case of any 
        person required by this section to change its method of 
        accounting for any taxable year--
                    ``(A) such change shall be treated as initiated by 
                such person, and
                    ``(B) such change shall be treated as made with the 
                consent of the Secretary.
            ``(2) Use of related parties, etc.--The Secretary shall 
        prescribe such regulations as may be necessary to prevent the 
        use of related parties, pass-thru entities, or intermediaries 
        to avoid the application of this section.''.
    (b) Conforming Amendments.--
            (1) Section 446(c)(1) is amended by inserting ``to the 
        extent provided in section 448,'' before ``the cash receipts''.
            (2) Section 451 is amended by adding at the end the 
        following new subsection:
    ``(j) Special Rule for Losses of Certain Service Providers on 
Accrual Method of Accounting.--
            ``(1) In general.--In the case of any person using an 
        accrual method of accounting with respect to amounts to be 
        received for the performance of services by such person, such 
        person shall not be required to accrue any portion of such 
        amounts which (on the basis of such person's experience) will 
        not be collected if such services are in the fields of health, 
        law, engineering, architecture, accounting, actuarial science, 
        performing arts, consulting, or any other field identified by 
        the Secretary for purposes of this subsection.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        amount if interest is required to be paid on such amount or 
        there is any penalty for failure to timely pay such amount.
            ``(3) Regulations.--The Secretary shall prescribe 
        regulations to permit taxpayers to determine amounts referred 
        to in paragraph (1) using computations or formulas which, based 
        on experience, accurately reflect the amount of income that 
        will not be collected by such person. A taxpayer may adopt, or 
        request consent of the Secretary to change to, a computation or 
        formula that clearly reflects the taxpayer's experience. A 
        request under the preceding sentence shall be approved if such 
        computation or formula clearly reflects the taxpayer's 
        experience.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (d) Change in Method of Accounting.--
            (1) In general.--In the case of any qualified change in 
        method of accounting for the taxpayer's first taxable year 
        beginning after December 31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) if the net amount of the adjustments required 
                to be taken into account by the taxpayer under section 
                481 of the Internal Revenue Code of 1986 by reason of 
                such change is positive--
                            (i) such amount shall be taken into account 
                        during the 4-taxable year period beginning with 
                        the earlier of the taxpayer's elected taxable 
                        year or the taxpayer's first taxable year 
                        beginning after December 31, 2018, as follows:
                                    (I) 10 percent of such amount in 
                                the first taxable year in such period,
                                    (II) 15 percent of such amount in 
                                the second taxable year in such period,
                                    (III) 25 percent of such amount in 
                                the third taxable year in such period, 
                                and
                                    (IV) 50 percent of such amount in 
                                the fourth taxable year in such period, 
                                and
                            (ii) for purposes of applying the 
                        regulations and other guidance issued under 
                        such section (including any provisions which 
                        require accelerated inclusion), the period 
                        beginning with the taxpayer's first taxable 
                        year beginning after December 31 2014, and 
                        ending with the taxable year before the first 
                        taxable year referred to in clause (i) shall 
                        not fail to be taken into account as part of 
                        the period of the adjustment merely because 
                        such amount is not otherwise taken into account 
                        under clause (i) during such period.
            (2) Qualified change in method of accounting.--For purposes 
        of this subsection, the term ``qualified change in method of 
        accounting'' means any change in method of accounting which--
                    (A) is required by the amendments made by this 
                section, or
                    (B) was prohibited under the Internal Revenue Code 
                of 1986 prior to such amendments and is permitted under 
                such Code after such amendments.
            (3) Elected taxable year.--For purposes of this subsection, 
        the term ``elected taxable year'' means such taxable year as 
        the taxpayer may elect (at such time and in such form and 
        manner as the Secretary may provide) which begins after 
        December 31, 2014, and is before the taxpayer's second taxable 
        year beginning after December 31, 2018.

SEC. 3302. RULES FOR DETERMINING WHETHER TAXPAYER HAS ADOPTED A METHOD 
              OF ACCOUNTING.

    (a) In General.--Section 446 is amended by adding at the end the 
following new subsection:
    ``(g) Rules for Treating Accounting Method as Adopted by 
Taxpayer.--If the taxpayer uses a method of accounting with respect to 
any item on any return of tax--
            ``(1) in the case of any method of accounting which the 
        taxpayer is permitted to use with respect to such item, such 
        method shall be treated as having been adopted by the taxpayer 
        with respect to such item, and
            ``(2) in the case of any method of accounting which the 
        taxpayer is not permitted to use with respect to such item, 
        such method shall be treated as having been adopted by the 
        taxpayer with respect to such item if the taxpayer used the 
        same method with respect to such item on the return of tax for 
        the preceding taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3303. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.

    (a) Inclusion Not Later Than for Financial Accounting Purposes.--
Section 451 is amended by redesignating subsections (b) through (j) as 
subsection (c) through (k), respectively, and by inserting after 
subsection (a) the following new subsection:
    ``(b) Inclusion Not Later Than for Financial Accounting Purposes.--
            ``(1) In general.--In the case of a taxpayer the taxable 
        income of which is computed under the accrual method of 
        accounting, the amount of any portion of any item of income 
        shall be included in gross income not later than the taxable 
        year with respect to which such amount is taken into account as 
        income in--
                    ``(A) an audited financial statement of the 
                taxpayer described in section 1221(b)(3)(B), or
                    ``(B) such other financial statement as the 
                Secretary may specify for purposes of this subsection.
            ``(2) Coordination with special rules for long-term 
        contracts.--Paragraph (1) shall not apply with respect to any 
        item of income to which section 460 applies.''.
    (b) Treatment of Advance Payments.--Section 451, as amended by 
subsection (a), is amended by redesignating subsections (c) through (k) 
as subsections (d) through (l), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Treatment of Advance Payments.--
            ``(1) In general.--A taxpayer which computes taxable income 
        under the accrual method of accounting, and receives any 
        advance payment during the taxable year, shall--
                    ``(A) except as provided in subparagraph (B), 
                include such advance payment in gross income for such 
                taxable year, or
                    ``(B) if the taxpayer elects the application of 
                this subparagraph with respect to the category of 
                advance payments to which such advance payment belongs, 
                the taxpayer shall--
                            ``(i) to the extent that any portion of 
                        such advance payment is required under 
                        subsection (b) to be included in gross income 
                        in the taxable year in which such payment is 
                        received, so include such portion, and
                            ``(ii) include the remaining portion of 
                        such advance payment in gross income in the 
                        taxable year following the taxable year in 
                        which such payment is received.
            ``(2) Election.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the election under paragraph (1)(B) 
                shall be made at such time, in such form and manner, 
                and with respect to such categories of advance 
                payments, as the Secretary may provide.
                    ``(B) Period to which election applies.--An 
                election under paragraph (1)(B) shall be effective for 
                the taxable year with respect to which it is first made 
                and for all subsequent taxable years, unless the 
                taxpayer secures the consent of the Secretary to revoke 
                such election. For purposes of this title, the 
                computation of taxable income under an election made 
                under paragraph (1)(B) shall be treated as a method of 
                accounting.
            ``(3) Advance payment.--For purposes of this subsection--
                    ``(A) In general.--The term `advance payment' means 
                any payment--
                            ``(i) the full inclusion of which in the 
                        gross income of the taxpayer for the taxable 
                        year of receipt is a permissible method of 
                        accounting under this section (determined 
                        without regard to this subsection), and
                            ``(ii) which is for goods, services, or 
                        such other items as may be identified by the 
                        Secretary for purposes of this clause.
                    ``(B) Exclusions.--Except as otherwise provided by 
                the Secretary, such term shall not include--
                            ``(i) rent,
                            ``(ii) insurance premiums,
                            ``(iii) payments with respect to financial 
                        instruments,
                            ``(iv) payments with respect to warranty or 
                        guarantee contracts under which a third party 
                        is the primary obligor,
                            ``(v) payments subject to section 871(a), 
                        881, 1441, or 1442,
                            ``(vi) payments in property to which 
                        section 83 applies, and
                            ``(vii) any other payment identified by the 
                        Secretary for purposes of this subparagraph.''.
    (c) Crop Insurance Proceeds and Disaster Payments.--Section 451, as 
amended by subsections (a) and (b), is amended by striking subsection 
(f).
    (d) Livestock Sold on Account of Drought, Flood, and Other Weather-
Related Conditions.--Section 451, as amended by subsections (a) and 
(b), is amended by striking subsection (g).
    (e) Sales or Dispositions To Implement Federal Energy Regulatory 
Commission or State Electric Restructuring Policy.--Section 451, as 
amended by subsections (a) and (b), is amended by striking subsection 
(k).
    (f) Conforming Amendments.--Section 451, as amended by subsections 
(a), (b), (c), (d), and (e), is amended by redesignating subsections 
(h), (i), (j), and (l) as subsections (f), (g), (h), and (i), 
respectively.
    (g) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2014.
            (2) Crop insurance proceeds and disaster payments.----
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by subsection (c) shall apply 
                to destruction and damage of crops occurring after 
                December 31, 2014.
                    (B) Inability to plant.--In the case of inability 
                to plant crops because of a natural disaster, the 
                amendments made by subsection (c) shall apply to 
                natural disasters occurring after December 31, 2014.
            (3) Livestock.--The amendments made by subsection (d) shall 
        apply to sales and exchanges after December 31, 2014.
            (4) Sales or dispositions to implement electric 
        restructuring policy.--The amendments made by subsection (e) 
        shall apply to sales and dispositions after December 31, 2013.
            (5) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by subsections (a) and 
        (b) to change its method of accounting for its first taxable 
        year beginning after December 31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.

SEC. 3304. INSTALLMENT SALES.

    (a) Repeal of Exceptions to Treatment as Dealer Dispositions.--
Section 453(l) is amended to read as follows:
    ``(l) Dealer Dispositions.--For purposes of subsection (b)(2)(A), 
the term `dealer disposition' means any of the following dispositions:
            ``(1) Personal property.--Any disposition of personal 
        property by a person who regularly sells or otherwise disposes 
        of personal property of the same type on the installment plan.
            ``(2) Real property.--Any disposition of real property 
        which is held by the taxpayer for sale to customers in the 
        ordinary course of the taxpayer's trade or business.''.
    (b) Modification of Rules for Nondealers.--
            (1) Repeal of special rule for interest payments.--Section 
        453A(b)(2) is amended to read as follows:
            ``(2) Interest payment exception for obligations not 
        outstanding at close of taxable year.--Subsection (a)(1) shall 
        apply to an obligation described in paragraph (1) arising 
        during any taxable year only if such obligation is outstanding 
        as of the close of such taxable year.''.
            (2) Repeal of exception for farm property.--Section 
        453A(b)(3) is amended--
                    (A) by striking ``from the disposition--'' and all 
                that follows and inserting ``from the disposition by an 
                individual of personal use property (within the meaning 
                of section 1275(b)(3)).'', and
                    (B) by striking ``and farm'' in the heading.
            (3) Repeal of special rule for timeshares and residential 
        lots.--Section 453A(b) is amended by striking paragraph (4) and 
        by redesignating paragraph (5) as paragraph (4).
            (4) Conforming amendment.--Section 453A(c) is amended--
                    (A) by striking ``the applicable percentage of'' in 
                paragraph (2)(A), and
                    (B) by striking paragraph (4) and by redesignating 
                paragraphs (5) and (6) as paragraphs (4) and (5), 
                respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and other dispositions after December 31, 2014.

SEC. 3305. REPEAL OF SPECIAL RULE FOR PREPAID SUBSCRIPTION INCOME.

    (a) In General.--Subpart B of part II of subchapter E of chapter 1 
is amended by striking section 455 (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Effective Date.--The amendments made by this section shall 
apply to payments received after December 31, 2014.

SEC. 3306. REPEAL OF SPECIAL RULE FOR PREPAID DUES INCOME OF CERTAIN 
              MEMBERSHIP ORGANIZATIONS.

    (a) In General.--Subpart B of part II of subchapter E of chapter 1 
is amended by striking section 456 (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 277(b)(2) is amended by 
inserting ``(as in effect before its repeal)'' after ``section 
456(c)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments received after December 31, 2014.

SEC. 3307. REPEAL OF SPECIAL RULE FOR MAGAZINES, PAPERBACKS, AND 
              RECORDS RETURNED AFTER CLOSE OF THE TAXABLE YEAR.

    (a) In General.--Subpart B of part II of subchapter E of chapter 1 
is amended by striking section 458 (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2014.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        beginning after December 31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.

SEC. 3308. MODIFICATION OF RULES FOR LONG-TERM CONTRACTS.

    (a) Repeal of Exception for Home Construction Contracts.--Paragraph 
(1) of section 460(e) is amended to read as follows:
            ``(1) Exception for certain construction contracts.--
        Subsections (a), (b), and (c)(1) and (2) shall not apply to any 
        construction contract entered into by a taxpayer--
                    ``(A) who estimates (at the time such contract is 
                entered into) that such contract will be completed 
                within the 2-year period beginning on the contract 
                commencement date of such contract, and
                    ``(B) whose average annual gross receipts for the 3 
                taxable years preceding the taxable year in which such 
                contract is entered into do not exceed $10,000,000.
        For purposes of this paragraph, rules similar to the rules of 
        paragraphs (2) and (3) of section 448(b) shall apply.''.
    (b) Repeal of Special Rule for Other Residential Construction 
Contracts.--Section 460(e) is amended by striking paragraphs (5) and 
(6).
    (c) Repeal of Special Rules for Qualified Ship Contracts.--
            (1) In general.--Section 10203(b) of the Revenue Act of 
        1987 is amended by striking paragraph (2).
            (2) Qualified naval ship contracts.--The American Jobs 
        Creation Act of 2004 is amended by striking section 708.
    (d) Conforming Amendments.--Section 460(e) is amended by striking 
paragraphs (2) and (3) and by redesignating paragraph (4) as paragraph 
(2).
    (e) Effective Date.--The amendments made by this section shall 
apply to contracts entered into after December 31, 2014.

SEC. 3309. NUCLEAR DECOMMISSIONING RESERVE FUNDS.

    (a) Gross Income on Nuclear Decommissioning Reserve Funds Taxed at 
Corporate Rate.--Section 468A(e)(2) is amended by striking ``at the 
rate of 20 percent'' and inserting ``at a rate equal to the maximum 
rate in effect for such taxable year under section 11''.
    (b) Income Inclusion Upon Disqualified Distribution.--Section 
468A(c)(1) 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) if any distribution is made from the Fund 
                during such taxable year which is not used as provided 
                in subsection (e)(4), the balance of the Fund 
                determined immediately before such distribution.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3310. REPEAL OF LAST-IN, FIRST-OUT METHOD OF INVENTORY.

    (a) In General.--Section 471 is amended by redesignating subsection 
(c) as subsection (d) and by inserting after subsection (b) the 
following new subsection:
    ``(c) Last-In, First-Out Method Not Permissible.--The last-in, 
first-out method of determining inventories shall in no event be 
treated as clearly reflecting income.''.
    (b) Conforming Amendments.--
            (1) Subpart D of part II of subchapter E of chapter 1 is 
        amended by striking sections 472, 473, and 474 (and by striking 
        the items relating to such sections in the table of sections 
        for such subpart).
            (2)(A) Section 312(n), as amended by the preceding 
        provisions of this Act, is amended by striking paragraph (3) 
        and by redesignating paragraphs (4) through (7) as paragraphs 
        (3) through (6), respectively.
            (B) Section 312(n)(6), as amended by the preceding 
        provisions of this Act, is amended--
                    (i) by striking ``paragraphs (4) and (6)'' in 
                subparagraph (A) and inserting ``paragraph (4)'', and
                    (ii) by striking ``paragraph (5)'' in subparagraph 
                (B) and inserting ``paragraph (3)''.
            (C) Section 301(e)(3), as amended by the preceding 
        provisions of this Act, is amended--
                    (i) by striking ``paragraph (6)'' and inserting 
                ``paragraph (5)'', and
                    (ii) by striking ``section 312(n)(6)'' in the 
                heading and inserting ``section 312(n)(5)''.
            (D) Section 952(c)(3), as amended by the preceding 
        provisions of this Act, is amended by striking ``paragraphs 
        (3), (4), and (5)'' and inserting ``paragraphs (2), (3), and 
        (4)''.
            (E) Section 1293(e)(3), as amended by the preceding 
        provisions of this Act, is amended by striking ``paragraphs 
        (3), (4), and (5)'' and inserting ``paragraphs (2), (3), and 
        (4)''.
            (F) Section 1503(e)(2)(C), as amended by the preceding 
        provisions of this Act, is amended--
                    (i) by striking ``paragraph (6)'' and inserting 
                ``paragraph (5)'', and
                    (ii) by striking ``section 312(n)(6)'' in the 
                heading and inserting ``section 312(n)(5)''.
            (3) Section 1363 is amended by striking subsection (d).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (d) Change in Method of Accounting.--
            (1) In general.--In the case of any taxpayer required by 
        the amendments made by this section to change its method of 
        accounting for its first taxable year beginning after December 
        31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) if the net amount of the adjustments required 
                to be taken into account by the taxpayer under section 
                481 of the Internal Revenue Code of 1986 by reason of 
                such change is positive--
                            (i) such amount shall be taken into account 
                        during the 4-taxable year period beginning with 
                        the earlier of the taxpayer's elected taxable 
                        year or the taxpayer's first taxable year 
                        beginning after December 31, 2018, as follows:
                                    (I) 10 percent of such amount in 
                                the first taxable year in such period,
                                    (II) 15 percent of such amount in 
                                the second taxable year in such period,
                                    (III) 25 percent of such amount in 
                                the third taxable year in such period, 
                                and
                                    (IV) 50 percent of such amount in 
                                the fourth taxable year in such period, 
                                and
                            (ii) for purposes of applying the 
                        regulations and other guidance issued under 
                        such section (including any provisions which 
                        require accelerated inclusion), the period 
                        beginning with the taxpayer's first taxable 
                        year beginning after December 31 2014, and 
                        ending with the taxable year before the first 
                        taxable year referred to in clause (i) shall 
                        not fail to be taken into account as part of 
                        the period of the adjustment merely because 
                        such amount is not otherwise taken into account 
                        under clause (i) during such period.
            (2) Elected taxable year.--For purposes of this subsection, 
        the term ``elected taxable year'' means such taxable year as 
        the taxpayer may elect (at such time and in such form and 
        manner as the Secretary may provide) which begins after 
        December 31, 2014, and is before the taxpayer's second taxable 
        year beginning after December 31, 2018.
            (3) Reduction in amount of adjustment for closely-held 
        entities.--
                    (A) In general.--In the case of any closely-held 
                entity, paragraph (1)(C) shall be applied by treating 
                any reference to ``such amount'' as a reference to 20 
                percent (28 percent in the case of a C corporation) of 
                such amount.
                    (B) Closely-held entity.--For purposes of this 
                paragraph--
                            (i) In general.--The term ``closely-held 
                        entity'' means any domestic corporation or 
                        domestic partnership which--
                                    (I) is not an ineligible entity,
                                    (II) does not have more than 100 
                                shareholders or partners (as the case 
                                may be), and
                                    (III) does not have as a 
                                shareholder or partner a person (other 
                                than an estate, a trust described in 
                                section 1361(c)(2) of the Internal 
                                Revenue Code of 1986, or an 
                                organization described section 
                                1361(c)(6) of such Code) who is not an 
                                individual.
                            (ii) Certain subsidiaries.--An entity shall 
                        not fail to be treated as a closely-held entity 
                        by reason of clause (i)(III) if all of the 
                        interests in such entity are held by a single 
                        closely-held entity (determined without regard 
                        to this clause) and individuals taken into 
                        account under clause (i)(II) with respect to 
                        such entity. In the case of tiered entities 
                        (other than the top tier entity), the preceding 
                        sentence shall be applied--
                                    (I) by substituting ``(determined 
                                after application of this clause)'' for 
                                ``(determined without regard to this 
                                clause)'', and
                                    (II) by substituting ``with respect 
                                to the top tier entity'' for ``with 
                                respect to such entity''.
                            (iii) Ineligible entity.--The term 
                        ``ineligible entity'' means any entity 
                        described in section 1361(b)(2) of the Internal 
                        Revenue Code of 1986 applied by substituting 
                        ``corporation or partnership'' for 
                        ``corporation'' each place it appears.
                            (iv) Date of determination.--The status of 
                        any entity as a closely-held entity shall be 
                        determined as of February 26, 2014.
                            (v) Sole proprietors.--An individual 
                        operating a trade or business shall be treated 
                        as a closely-held entity.
                    (C) Certain transfers disregarded.--
                            (i) In general.--In the case of any 
                        specified inventory transfer, the adjustments 
                        referred to in paragraph (1)(C) shall be 
                        determined--
                                    (I) with respect to the transferor, 
                                as though the property transferred 
                                continued to be held at all times by 
                                such transferor, and
                                    (II) with respect to the 
                                transferee, as though such property was 
                                never transferred to such transferee.
                            (ii) Specified inventory transfer.--The 
                        term ``specified inventory transfer'' means any 
                        transfer of property described in section 
                        1221(a)(1) if--
                                    (I) such transfer is to a closely-
                                held entity from any person who is not 
                                a closely-held entity,
                                    (II) such transfer is on or after 
                                February 26, 2014, and before the 
                                beginning of the transferor's first 
                                taxable year beginning after December 
                                31, 2014, and
                                    (III) the basis of such property in 
                                the hands of the transferee immediately 
                                after such transfer is either 
                                determined by reference to the basis of 
                                such property in the hands of the 
                                transferor or is less than the fair 
                                market value of such property at the 
                                time of such transfer.

SEC. 3311. REPEAL OF LOWER OF COST OR MARKET METHOD OF INVENTORY.

    (a) In General.--Section 471, as amended by the preceding 
provisions of this Act, is amended by redesignating subsection (d) as 
subsection (e) and by inserting after subsection (c) the following new 
subsection:
    ``(d) Lower of Cost or Market Method Not Permissible.--The lower of 
cost or market method of determining inventories shall in no event be 
treated as clearly reflecting income. For purposes of the preceding 
sentence, the lower of cost or market shall include the lower of cost 
or bona fide net selling price.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (c) Change in Method of Accounting.--
            (1) In general.--In the case of any taxpayer required by 
        the amendments made by this section to change its method of 
        accounting for its first taxable year beginning after December 
        31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) if the net amount of the adjustments required 
                to be taken into account by the taxpayer under section 
                481 of the Internal Revenue Code of 1986 by reason of 
                such change is positive--
                            (i) such amount shall be taken into account 
                        during the 4-taxable year period beginning with 
                        the earlier of the taxpayer's elected taxable 
                        year or the taxpayer's first taxable year 
                        beginning after December 31, 2018, as follows:
                                    (I) 10 percent of such amount in 
                                the first taxable year in such period,
                                    (II) 15 percent of such amount in 
                                the second taxable year in such period,
                                    (III) 25 percent of such amount in 
                                the third taxable year in such period, 
                                and
                                    (IV) 50 percent of such amount in 
                                the fourth taxable year in such period, 
                                and
                            (ii) for purposes of applying the 
                        regulations and other guidance issued under 
                        such section (including any provisions which 
                        require accelerated inclusion), the period 
                        beginning with the taxpayer's first taxable 
                        year beginning after December 31 2014, and 
                        ending with the taxable year before the first 
                        taxable year referred to in clause (i) shall 
                        not fail to be taken into account as part of 
                        the period of the adjustment merely because 
                        such amount is not otherwise taken into account 
                        under clause (i) during such period.
            (2) Elected taxable year.--For purposes of this subsection, 
        the term ``elected taxable year'' means such taxable year as 
        the taxpayer may elect (at such time and in such form and 
        manner as the Secretary may provide) which begins after 
        December 31, 2014, and is before the taxpayer's second taxable 
        year beginning after December 31, 2018.

SEC. 3312. MODIFICATION OF RULES FOR CAPITALIZATION AND INCLUSION IN 
              INVENTORY COSTS OF CERTAIN EXPENSES.

    (a) $10,000,000 Gross Receipts Exception To Apply to Property 
Produced by the Taxpayer.--Section 263A(b) is amended by striking all 
that follows paragraph (1) and inserting the following new paragraphs:
            ``(2) Property acquired for resale.--Real or personal 
        property described in section 1221(a)(1) which is acquired by 
        the taxpayer for resale.
            ``(3) Exception for taxpayer with gross receipts of 
        $10,000,000 or less.--This section shall not apply to any 
        property produced or acquired by the taxpayer during any 
        taxable year if the average annual gross receipts of the 
        taxpayer (or any predecessor) for the 3-taxable year period 
        ending with the taxable year preceding such taxable year do not 
        exceed $10,000,000. For purposes of this paragraph, rules 
        similar to the rules of paragraphs (2) and (3) of section 
        448(b) shall apply.
            ``(4) Films, sound recordings, books, etc.--For purposes of 
        this subsection, the term `tangible personal property' shall 
        include a film, sound recording, video tape, book, or similar 
        property.''.
    (b) Repeal of Exceptions for Timber and Certain Ornamental Trees.--
Section 263A(c) is amended by striking paragraph (5).
    (c) Repeal of Exception for Qualified Creative Expenses.--Section 
263A is amended by striking subsection (h).
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2014.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        beginning after December 31, 2014--
                    (A) such change shall be treated as initiated by 
                the taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.

SEC. 3313. MODIFICATION OF INCOME FORECAST METHOD.

    (a) Extension of Forecast Period.--
            (1) In general.--Paragraph (1) of section 167(g) is amended 
        by striking ``10th'' each place it appears and inserting 
        ``20th''.
            (2) Modification of recomputation years.--Paragraph (4) of 
        section 167(g) is amended by striking ``the 3d and the 10th'' 
        and inserting ``the 5th, 10th, 15th, and 20th''.
    (b) Modification of Rules for Treatment of Participations and 
Residuals.--Paragraph (7) of section 167(g) is amended to read as 
follows:
            ``(7) Treatment of participations and residuals.--
                    ``(A) In general.--In the case of any participation 
                or residual with respect to any property to which this 
                subsection applies (including any property to which 
                section 168 applies by reason of paragraph (8)), the 
                taxpayer--
                            ``(i) shall exclude such participation or 
                        residual from the adjusted basis of such 
                        property, and
                            ``(ii) shall be allowed a deduction for 
                        such participation or residual in the taxable 
                        year in which such participation or residual is 
                        paid.
                    ``(B) Participations and residuals.--For purposes 
                of this paragraph, the term `participation or residual' 
                means, with respect to any property, any cost the 
                amount of which by contract varies with the amount of 
                income earned in connection with such property.''.
    (c) Election To Utilize 20-Year Straight Line Recovery.--Subsection 
(g) of section 167 is amended by redesignating (8) as paragraph (9) and 
by inserting after paragraph (7) the following new paragraph:
            ``(8) Election to utilize 20-year straight line recovery.--
        If the taxpayer elects the application of this paragraph for 
        any taxable year, the depreciation deduction allowable with 
        respect to any property placed in service by the taxpayer 
        during such taxable year which would otherwise be determined 
        under paragraph (1) shall be determined under section 168--
                    ``(A) by treating the straight line method as the 
                applicable depreciation method, and
                    ``(B) by treating 20 years as the applicable 
                recovery period.''.
    (d) Repeal of Special Rules for Certain Musical Works and 
Copyrights.--Subsection (g) of section 167, as amended by subsection 
(c), is amended by striking paragraph (9).
    (e) Safe Harbor Amortization of Certain Intangible Assets.--
Effective for property placed in service after December 31, 2014, the 
Secretary of the Treasury, or the Secretary's designee, shall revise 
Treasury Regulation section 1.167(a)-3(b) (and such regulation shall be 
applied) such that the safe harbor amortization for certain intangible 
assets to which such regulation applies shall allow the taxpayer to 
treat such asset as having a useful life equal to 20 years (and not 15 
years).
    (f) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2014.

SEC. 3314. REPEAL OF AVERAGING OF FARM INCOME.

    (a) In General.--Subchapter Q of chapter 1 is amended by striking 
part I (and by striking the item relating to such part in the table of 
parts for such subchapter).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3315. TREATMENT OF PATENT OR TRADEMARK INFRINGEMENT AWARDS.

    (a) In General.--Part II of subchapter B of chapter 1 is amended by 
adding at the end the following new section:

``SEC. 91. PATENT OR TRADEMARK INFRINGEMENT AWARDS.

    ``(a) In General.--Except as provided in subsection (b), any 
payment received for infringement of any patent or trademark (whether 
by reason of judgment or settlement) shall be included in gross income 
as ordinary income.
    ``(b) Impairment of Capital.--If the taxpayer demonstrates to the 
satisfaction of the Secretary that a payment described in subsection 
(a) constitutes damages received by reason of the reduction in value of 
property of the taxpayer caused by the infringement referred to in 
subsection (a)--
            ``(1) the taxpayer's basis in such property shall be 
        reduced (but not below zero) by the amount of such payment, and
            ``(2) subsection (a) shall apply to so much of such payment 
        as exceeds the amount of the reduction under paragraph (1).''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) is amended by adding at the end the 
        following new paragraph:
            ``(38) to the extent provided in section 91(b)(1),''.
            (2) The table of sections for part II of subchapter B of 
        chapter 1 is amended by adding at the end the following new 
        item:

``Sec. 91. Patent or trademark infringement awards.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments received pursuant to judgments and settlements after 
December 31, 2014.

SEC. 3316. REPEAL OF REDUNDANT RULES WITH RESPECT TO CARRYING CHARGES.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
striking section 266 (and by striking the item relating to such section 
in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 163(n) is amended by striking paragraph (3) and 
        by redesignating paragraphs (4) and (5) as paragraphs (3) and 
        (4), respectively.
            (2) Section 1016(a)(1)(A)(i), as amended by section 3514, 
        is amended by striking ``described in section 266''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2014.

SEC. 3317. REPEAL OF RECURRING ITEM EXCEPTION FOR SPUDDING OF OIL OR 
              GAS WELLS.

    (a) In General.--Section 461(i) is amended by striking paragraph 
(2) and by redesignating paragraphs (3), (4), and (5) as paragraphs 
(2), (3), and (4), respectively.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

                   Subtitle E--Financial Instruments

                     PART 1--DERIVATIVES AND HEDGES

SEC. 3401. TREATMENT OF CERTAIN DERIVATIVES.

    (a) In General.--Subchapter E of chapter 1 is amended by adding at 
the end the following new part:

                         ``PART IV--DERIVATIVES

``Sec. 485. Treatment of certain derivatives.
``Sec. 486. Derivative defined.

``SEC. 485. TREATMENT OF CERTAIN DERIVATIVES.

    ``(a) In General.--For purposes of this subtitle--
            ``(1) any derivative held by a taxpayer at the close of the 
        taxable year shall be treated as sold for its fair market value 
        on the last business day of such taxable year (and any gain or 
        loss shall be taken into account for the taxable year), and
            ``(2) proper adjustment shall be made in the amount of any 
        gain or loss subsequently realized for gain or loss taken into 
        account by reason of paragraph (1).
    ``(b) Treatment as Ordinary Income or Loss; Allowance as Net 
Operating Loss.--All items of income, gain, loss, and deduction with 
respect to any derivative--
            ``(1) shall be treated as ordinary income or loss, and
            ``(2) shall be treated for purposes of section 172(d)(4) as 
        attributable to a trade or business of the taxpayer.
    ``(c) Mark to Market of Certain Offsetting Positions.--
            ``(1) In general.--In the case of any straddle which 
        includes any derivative, subsections (a) and (b) shall apply to 
        all positions comprising such straddle in the same manner as 
        such subsections apply to such derivative.
            ``(2) Application to built-in gain positions.--
                    ``(A) In general.--In the case of any built-in gain 
                position to which subsection (a) applies by reason of 
                paragraph (1)--
                            ``(i) in addition to any other time at 
                        which such position is treated as sold under 
                        subsection (a)(1), such position shall be 
                        treated as sold for its fair market value at 
                        the time that the straddle is established with 
                        respect to such position,
                            ``(ii) proper adjustment shall be made in 
                        the amount of any gain or loss subsequently 
                        realized for gain taken into account by reason 
                        of clause (i), and
                            ``(iii) subsection (b) shall not apply to 
                        any gain taken into account by reason of clause 
                        (i).
                    ``(B) Built-in gain position.--For purposes of this 
                subsection, the term `built-in gain position' means any 
                position (other than a derivative to which subsection 
                (a) applies) with respect to which a gain would be 
                realized if such position were sold for its fair market 
                value at the time that the straddle is established with 
                respect to such position.
                    ``(C) Exception for straight debt.--Subparagraph 
                (A) shall not apply to any position with respect to 
                debt if--
                            ``(i) the interest payments (or other 
                        similar amounts) with respect to such position 
                        meet the requirements of section 
                        860G(a)(1)(B)(i), and
                            ``(ii) such position is not convertible 
                        (directly or indirectly) into stock of the 
                        issuer or any related person.
                    ``(D) Exception for straddles consisting of 
                qualified covered call options and the optioned 
                stock.--Subparagraph (A) shall not apply to any 
                position which is part of a straddle if--
                            ``(i) all the offsetting positions which 
                        are part of such straddle consist of 1 or more 
                        qualified covered call options (as defined in 
                        paragraph (6)) and the stock to be purchased 
                        from the taxpayer under such options, and
                            ``(ii) such straddle is not part of a 
                        larger straddle.
            ``(3) Application to built-in loss positions.--
                    ``(A) In general.--In the case of any built-in loss 
                position to which subsection (a) applies by reason of 
                paragraph (1), any gain or loss realized under 
                subsection (a)(1) shall be properly adjusted so as not 
                to take into account the loss referred to in 
                subparagraph (B) with respect to such position.
                    ``(B) Built-in loss position.--For purposes of 
                subparagraph (A), the term `built-in loss position' 
                means any position (other than a derivative to which 
                subsection (a) applies) with respect to which a loss 
                would be realized if such position were sold for its 
                fair market value at the time that the straddle is 
                established with respect to such position.
            ``(4) Holding period of non-derivatives.--For purposes of 
        section 1222, in the case of any position to which subsection 
        (a) applies by reason of paragraph (1), the holding period of 
        such position shall not include--
                    ``(A) the period during which subsection (a) 
                applies to such position, and
                    ``(B) in the case of a built-in gain position, the 
                period before such position is treated as sold under 
                paragraph (2)(A).
            ``(5) Straddle.--For purposes of this section--
                    ``(A) the term `straddle' has the meaning given 
                such term by section 1092(c) applied by treating all 
                offsetting positions as being with respect to personal 
                property, and
                    ``(B) the term `position' includes any derivative.
            ``(6) Qualified covered call options.--
                    ``(A) In general.--For purposes of paragraph 
                (2)(D), the term `qualified covered call option' means 
                any option granted by the taxpayer to purchase stock 
                held by the taxpayer (or stock acquired by the taxpayer 
                in connection with the granting of the option) but only 
                if--
                            ``(i) such option is traded on a national 
                        securities exchange which is registered with 
                        the Securities and Exchange Commission or other 
                        market which the Secretary determines has rules 
                        adequate to carry out the purposes of this 
                        paragraph,
                            ``(ii) such option is granted--
                                    ``(I) more than 30 days before the 
                                day on which the option expires, and
                                    ``(II) not more than 90 days before 
                                the day on which the option expires,
                            ``(iii) such option is not granted by an 
                        options dealer (as defined in subparagraph (B)) 
                        in connection with such dealer's activity of 
                        dealing in options, and
                            ``(iv) gain or loss with respect to such 
                        option would not be ordinary income or loss if 
                        determined without regard to this section.
                    ``(B) Options dealer.--For purposes of subparagraph 
                (A), the term `options dealer' means--
                            ``(i) any person registered with an 
                        appropriate national securities exchange as a 
                        market maker or specialist in listed options, 
                        and
                            ``(ii) to the extent provided by the 
                        Secretary consistent with the purposes of this 
                        paragraph, any person whom the Secretary 
                        determines performs functions similar to the 
                        persons described in clause (i).
                    ``(C) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary or appropriate to 
                carry out the purposes of this paragraph and paragraph 
                (2)(D). Such regulations may include modifications to 
                the provisions of this paragraph and paragraph (2)(D) 
                which are appropriate to take account of changes in the 
                practices of option exchanges or to prevent the use of 
                options for tax avoidance purposes.
    ``(d) Terminations, etc.--
            ``(1) In general.--The rules of subsections (a) and (b) 
        shall also apply to the termination (or transfer) during the 
        taxable year of the taxpayer's obligation (or rights) with 
        respect to a derivative by offsetting, by taking or making 
        delivery, by exercise or being exercised, by assignment or 
        being assigned, by lapse, by expiration, by settlement, or 
        otherwise.
            ``(2) Mark to market of all positions in straddle if any 
        position terminated or transferred.--If paragraph (1) applies 
        with respect to any position which is part of a straddle, the 
        rules of subsections (a) and (b) shall apply to every position 
        which is part of such straddle.
    ``(e) Determination of Fair Market Value.--For purposes of this 
section--
            ``(1) Terminations, etc.--For purposes of subsection (d), 
        fair market value shall be determined at the time of the 
        termination (or transfer).
            ``(2) Blockage factor not taken into account.--To the 
        extent provided in regulations prescribed by the Secretary, 
        fair market value shall be determined without regard to any 
        premium or discount based on the proportion of the total 
        available trading units which are held.
    ``(f) Coordination With Certain Rules.--The rules of sections 
263(g) and 263A shall not apply to any derivative or other position to 
which subsection (a) applies, and section 1091 shall not apply (and 
section 1092 shall apply) to any loss recognized under subsection (a).

``SEC. 486. DERIVATIVE DEFINED.

    ``(a) In General.--For purposes of this part, except as otherwise 
provided in this section, the term `derivative' means any contract 
(including any option, forward contract, futures contract, short 
position, swap, or similar contract) the value of which, or any payment 
or other transfer with respect to which, is (directly or indirectly) 
determined by reference to one or more of the following:
            ``(1) Any share of stock in a corporation.
            ``(2) Any partnership or beneficial ownership interest in a 
        partnership or trust.
            ``(3) Any evidence of indebtedness.
            ``(4) Except as provided in subsection (d), any real 
        property.
            ``(5) Any commodity which is actively traded (within the 
        meaning of section 1092(d)(1)).
            ``(6) Any currency.
            ``(7) Any rate, price, amount, index, formula, or 
        algorithm.
            ``(8) Any other item as the Secretary may prescribe.
Such term shall not include any item described in paragraphs (1) 
through (8).
    ``(b) Exceptions.--
            ``(1) Certain real property.--
                    ``(A) In general.--For purposes of subsection 
                (a)(4), the term `real property' shall not include--
                            ``(i) a tract of real property (as defined 
                        in section 1237(c)), or
                            ``(ii) any real property which would be 
                        property described in section 1221(a)(1) with 
                        respect to the taxpayer if held directly by the 
                        taxpayer.
                    ``(B) Regulations.--The Secretary shall prescribe 
                regulations or other guidance under which multiple 
                tracts of real property may be treated as a single 
                tract of real property for purposes of subparagraph 
                (A)(i) if the contract referred to in subsection (a) is 
                of a type which is designed to facilitate the 
                acquisition or disposition of such real property.
            ``(2) Hedging transactions.--
                    ``(A) In general.--For purposes of this part, the 
                term `derivative' shall not include any contract which 
                is part of a hedging transaction (as defined in section 
                1221(b)).
                    ``(B) Section 988 hedging transactions.--For 
                exception for section 988 hedging transactions, see 
                section 988(d)(1).
            ``(3) Securities lending, sale-repurchase, and similar 
        financing transactions.--To the extent provided by the 
        Secretary, for purposes of this part, the term `derivative' 
        shall not include the right to the return of the same or 
        substantially identical securities transferred in a securities 
        lending transaction, sale-repurchase transaction, or similar 
        financing transaction.
            ``(4) Options received in connection with the performance 
        of services.--For purposes of this part, the term `derivative' 
        shall not include any option described in section 83(e)(3) 
        received in connection with the performance of services.
            ``(5) Insurance contracts, annuities, and endowments.--For 
        purposes of this part, the term `derivative' shall not include 
        any insurance, annuity, or endowment contract issued by an 
        insurance company to which subchapter L applies (or issued by 
        any foreign corporation to which such subchapter would apply if 
        such foreign corporation were a domestic corporation).
            ``(6) Derivatives with respect to stock of members of same 
        worldwide affiliated group.--For purposes of this part, the 
        term `derivative' shall not include, and subsections (c) and 
        (d)(2) of section 485 shall not apply to, any derivative 
        (determined without regard to this subsection) with respect to 
        stock issued by any member of the same worldwide affiliated 
        group (as defined in section 864(f)) in which the taxpayer is a 
        member.
            ``(7) Commodities used in normal course of trade or 
        business.--For purposes of this part, the term `derivative' 
        shall not include any contract with respect to any commodity 
        if--
                    ``(A) such contract requires physical delivery with 
                the option of cash settlement only in unusual and 
                exceptional circumstances, and
                    ``(B) such commodity is used (and is used in 
                quantities with respect to which such derivative 
                relates) in the normal course of the taxpayer's trade 
                or business (or, in the case of an individual, for 
                personal consumption).
    ``(c) Contracts With Embedded Derivative Components.--
            ``(1) In general.--If a contract has derivative and 
        nonderivative components, then each derivative component shall 
        be treated as a derivative for purposes of this part. If the 
        derivative component cannot be separately valued, then the 
        entire contract shall be treated as a derivative for purposes 
        of this part.
            ``(2) Exception for certain embedded derivative components 
        of debt instruments.--A debt instrument shall not be treated as 
        having a derivative component merely because--
                    ``(A) such debt instrument is denominated in a 
                nonfunctional currency (as defined in section 
                988(c)(1)(C)(ii)),
                    ``(B) payments with respect to such debt instrument 
                are determined by reference to the value of a 
                nonfunctional currency (as so defined), or
                    ``(C) such debt instrument is a convertible debt 
                instrument, contingent payment debt instrument, a 
                variable rate debt instrument, an integrated debt 
                instrument, an investment unit, a debt instrument with 
                alternative payment schedules, or other debt instrument 
                with respect to which the regulations under section 
                1275(d) apply.
    ``(d) Treatment of American Depository Receipts and Similar 
Instruments.--Except as otherwise provided by the Secretary, for 
purposes of this part, American depository receipts (and similar 
instruments) with respect to shares of stock in foreign corporations 
shall be treated as shares of stock in such foreign corporations.''.
    (b) Coordination With Rules for Dealers and Traders.--
            (1) Derivatives not treated as securities.--Section 
        475(c)(2) is amended--
                    (A) by adding ``and'' at the end of subparagraph 
                (C),
                    (B) by striking subparagraphs (D) and (E) and by 
                redesignating subparagraph (F) as subparagraph (D),
                    (C) by striking ``subparagraph (A), (B), (C), (D), 
                or (E)'' in subparagraph (D)(i), as so redesignated, 
                and inserting ``subparagraph (A), (B), or (C)'', and
                    (D) by amending the last sentence to read as 
                follows: ``Such term shall not include any position to 
                which section 485(a) applies.''
            (2) Derivatives not treated as commodities.--Section 
        475(e)(2) is amended--
                    (A) by adding ``and'' at the end of subparagraph 
                (A),
                    (B) by striking subparagraphs (B) and (C) and by 
                redesignating subparagraph (D) as subparagraph (B), and
                    (C) by striking ``subparagraph (A), (B) or (C)'' in 
                subparagraph (B)(i), as so redesignated, and inserting 
                ``subparagraph (A)''.
            (3) Conforming amendments.--
                    (A) Section 475(b) is amended by striking paragraph 
                (4).
                    (B) Section 475(d)(2)(B) is amended--
                            (i) by striking ``subsection 
                        (c)(2)(F)(iii)'' and inserting ``subsection 
                        (c)(2)(D)(iii)'', and
                            (ii) by striking ``subsection (c)(2)(F)'' 
                        and inserting ``subsection (c)(2)(D)''.
                    (C) Section 475(f)(1)(D) is amended by striking 
                ``subsections (b)(4) and (d)'' and inserting 
                ``subsection (d)''.
    (c) Coordination With Straddle Rules.--
            (1) In general.--Section 1092(e) is amended to read as 
        follows:
    ``(e) Exception for Hedging Transactions and Straddles With 
Derivatives.--This section shall not apply in the case of--
            ``(1) any hedging transaction (as defined in section 
        1221(b)), and
            ``(2) any straddle (as defined in section 485) which 
        includes any derivative (as defined in section 486).''.
            (2) Conforming amendments.--
                    (A) Section 263(g)(3) is amended to read as 
                follows:
            ``(3) Exception for hedging transactions and straddles with 
        derivatives.--This subsection shall not apply in the case of--
                    ``(A) any hedging transaction (as defined in 
                section 1221(b)), and
                    ``(B) any straddle (as defined in section 485) 
                which includes any derivative (as defined in section 
                486).''.
                    (B) Section 1092(b) is amended--
                            (i) by striking paragraph (2), and
                            (ii) by striking all that precedes ``The 
                        Secretary shall'' and inserting the following:
    ``(b) Regulations.--The Secretary shall''.
                    (C) Section 1092(c) is amended by striking 
                paragraph (4).
                    (D) Section 1092 is amended by striking subsection 
                (f) and by redesignating subsection (g) as subsection 
                (f).
    (d) Treatment of Convertible Debt Instruments.--The Secretary of 
the Treasury, or the Secretary's designee, shall modify the regulations 
issued under section 1275(d) of the Internal Revenue Code of 1986 to 
provide that convertible debt instruments are treated in a manner 
similar to contingent payment debt instruments.
    (e) Repeal of Certain Other Superceded Rules for Determining 
Capital Gains and Losses.--
            (1) In general.--Part IV of subchapter P of chapter 1 is 
        amended by striking sections 1233, 1234, 1234A, 1234B, 1236, 
        1256, 1258, 1259, and 1260 (and by striking the items relating 
        to such sections in the table of sections for such part).
            (2) Conforming amendments related to repeal of section 
        1233.--Section 1092(b) is amended by inserting ``(as in effect 
        before their repeal)'' after ``section 1233''.
            (3) Conforming amendments related to repeal of section 
        1234.--Section 6045(h)(2) is amended--
                    (A) by striking ``(as defined in section 
                1234(b)(2)(A)'', and
                    (B) by adding at the end the following: ``For 
                purposes of the preceding sentence, the term `closing 
                transaction' means any termination of the taxpayer's 
                obligation under an option in property other than 
                through the exercise or lapse of the option.''.
            (4) Conforming amendments related to repeal of section 
        1236.--
                    (A) Section 475(d)(3)(A) is amended by striking 
                ``or section 1236(b)''.
                    (B) Section 512(b)(5) is amended by striking 
                ``section 1236(c)'' and inserting ``section 1058(c)''.
                    (C) Section 1058 is amended--
                            (i) by striking ``(as defined in section 
                        1236(c))'' in subsection (a), and
                            (ii) by redesignating subsection (c) as 
                        subsection (d) and by inserting after 
                        subsection (b) the following new subsection:
    ``(c) Securities.--For purposes of this section, the term 
`security' means any share of stock in any corporation, certificate of 
stock or interest in any corporation, note, bond, debenture, or 
evidence of indebtedness, or any evidence of an interest in or right to 
subscribe to or purchase any of the foregoing.''.
            (5) Conforming amendments related to repeal of section 
        1256.--
                    (A) Section 461(i)(2)(B), as amended by the 
                preceding provisions of this Act, is amended to read as 
                follows:
                    ``(B) any partnership or other entity (other than a 
                corporation which is not an S corporation) if more than 
                35 percent of the losses of such entity during the 
                taxable year are allocable to limited partners or 
                limited entrepreneurs (within the meaning of section 
                461(j)(4)), and''.
                    (B) Section 475(d)(1) is amended by striking 
                ``sections 263(g), 263A, and 1256(a)'' and inserting 
                ``sections 263(g) and 263A''.
                    (C) Section 988(c)(1) is amended by striking 
                subparagraphs (D) and (E).
                    (D) Section 1092(a)(3)(C)(ii)(II) is amended by 
                striking ``section 1256(e)'' and inserting ``section 
                1221(b)''.
                    (E) Section 1092(d) is amended by striking 
                paragraphs (5) and (6) and by redesignating paragraphs 
                (7) and (8) as paragraphs (5) and (6), respectively.
                    (F) Section 1212 is amended by striking subsection 
                (c).
                    (G) Section 1223 is amended by striking paragraphs 
                (7) and (14).
                    (H) Section 1281(b)(1)(E) is amended to read as 
                follows:
                    ``(E) is a hedging transaction (as defined in 
                section 1221(b)), or''.
                    (I) Section 1402 is amended by striking subsection 
                (i).
                    (J) Section 4982(e)(6)(B) is amended by striking 
                ``sections 1256 and 1296'' and inserting ``sections 485 
                and 1296''.
            (6) Conforming amendments related to repeal of section 
        1259.--Section 475(f)(1) is amended by striking subparagraph 
        (C) and by redesignating subparagraph (D) as subparagraph (C).
    (f) Other Conforming Amendments.--
            (1) Section 355(g)(2)(B)(i)(V) is amended to read as 
        follows:
                                    ``(V) any derivative (as defined in 
                                section 486),''.
            (2) Section 856(n)(4) is amended by inserting ``or 
        derivatives (as defined in section 486)'' after ``securities 
        (as defined in section 475(c)(2))''.
            (3) Section 857(e)(2)(B)(i), as amended by the preceding 
        provisions of this Act, is amended by striking ``section 860E 
        or 1272'' and inserting ``section 485, 860E, or 1272''.
            (4) Section 988(d)(1) is amended--
                    (A) by striking ``or 1256'' and inserting ``or 
                485'', and
                    (B) by striking ``1092, and 1256'' and inserting 
                ``485, and 1092''.
            (5) Section 1091(e) is amended to read as follows:
    ``(e) Coordination With Mark to Market of Derivatives.--
Notwithstanding any other provision of this section, a derivative (as 
defined in section 486) shall not be treated as a security for purposes 
of this section.''.
            (6)(A) Section 1221(a)(6) is amended to read as follows:
            ``(6) any derivative (as defined in section 486),''.
            (B) Section 1221(b) is amended by striking paragraph (1).
            (7) Section 4975(f)(11)(D) is amended by striking clauses 
        (i) and (ii) and inserting the following:
                            ``(i) Security.--The term `security' means 
                        any security described in section 475(c)(2) 
                        (without regard to subparagraph (D)(iii) 
                        thereof) and any derivative with respect to 
                        such a security (within the meaning of section 
                        486).
                            ``(ii) Commodity.--The term `commodity' 
                        means any commodity described in section 
                        475(e)(2) (without regard to subparagraph 
                        (B)(iii) thereof) and any derivative with 
                        respect to such a commodity (within the meaning 
                        of section 486).''.
            (8) The table of parts for subchapter E of chapter 1 is 
        amended by adding at the end the following new item:

                       ``Part IV. Derivatives''.

    (g) Effective Dates.--The amendments made by this section shall 
apply to--
            (1) taxable years ending after December 31, 2014, in the 
        case of property acquired and positions established after 
        December 31, 2014, and
            (2) taxable years ending after December 31, 2019, in the 
        case of any other property or position.
For purposes of this subsection, any property acquired on or before 
December 31, 2014, which becomes part of a straddle (as defined in 
section 485, as added by this section) after such date shall be treated 
as a position established after such date.

SEC. 3402. MODIFICATION OF CERTAIN RULES RELATED TO HEDGES.

    (a) Treatment of Hedges Identified for Financial Accounting 
Purposes.--
            (1) In general.--Section 1221(b), as amended by the 
        preceding provisions of this Act, is amended to read as 
        follows:
    ``(b) Hedging Transaction.--For purposes of this section--
            ``(1) In general.--The term `hedging transaction' means any 
        transaction described in paragraph (2) and identified under 
        paragraph (3).
            ``(2) Transaction described.--A transaction is described in 
        this paragraph if such transaction is entered into by the 
        taxpayer in the normal course of the taxpayer's trade or 
        business primarily--
                    ``(A) to manage risk of price changes or currency 
                fluctuations with respect to ordinary property which is 
                held or to be held by the taxpayer,
                    ``(B) to manage risk of interest rate or price 
                changes or currency fluctuations with respect to 
                borrowings made or to be made, or ordinary obligations 
                incurred or to be incurred, by the taxpayer, or
                    ``(C) to manage such other risks as the Secretary 
                may prescribe in regulations.
            ``(3) Identification.--A transaction is identified under 
        this paragraph if--
                    ``(A) such transaction is clearly identified as a 
                hedging transaction for purposes of this paragraph 
                before the close of the day on which it was acquired, 
                originated, or entered into (or such other time as the 
                Secretary may by regulations prescribe), or
                    ``(B) such transaction is treated as a hedging 
                transaction (within the meaning of generally accepted 
                accounting principles) for purposes of an audited 
                financial statement of the taxpayer which--
                            ``(i) is certified as being prepared in 
                        accordance with generally accepted accounting 
                        principles, and
                            ``(ii) is used for the purposes of a 
                        statement or report--
                                    ``(I) to shareholders, partners, or 
                                other proprietors, or to beneficiaries, 
                                or
                                    ``(II) for credit purposes.
            ``(4) Treatment of nonidentification or improper 
        identification of hedging transactions.--The Secretary shall 
        prescribe regulations to properly characterize any income, 
        gain, expense, or loss arising from a transaction--
                    ``(A) which would be a hedging transaction if 
                identified under paragraph (3), or
                    ``(B) which is identified under paragraph (3) but 
                is not a transaction described in paragraph (2).
        In the case of a transaction identified under paragraph (3) 
        solely by reason of paragraph (3)(B), subparagraph (B) of this 
        paragraph shall not apply with respect to such transaction 
        unless the taxpayer treats such transaction as a hedging 
        transaction for purposes of any provision of this title.
            ``(5) Bonds held by an insurance company.--For purposes of 
        paragraph (2)(A), in the case of an insurance company to which 
        subchapter L applies, any bond, debenture, note, certificate, 
        or other evidence of indebtedness held by the taxpayer shall be 
        treated as ordinary property.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as are appropriate to carryout the purposes of this 
        subsection and subsection (a)(7) in the case of transactions 
        involving related parties.''.
            (2) Conforming amendments.--
                    (A) Section 856(c)(5)(G)(i) is amended by striking 
                ``(as defined in clause (ii) or (iii) of section 
                1221(b)(2)(A)) which is clearly identified pursuant to 
                section 1221(a)(7)'' and inserting ``(as defined in 
                section 1221(b) (determined without regard to paragraph 
                (2)(A) thereof)''.
                    (B) Section 954(c)(5)(A) is amended to read as 
                follows:
                    ``(A) Commodity hedging transactions.--
                            ``(i) In general.--For purposes of 
                        paragraph (1)(C)(i), the term `commodity 
                        hedging transaction' means any transaction with 
                        respect to a commodity if such transaction 
                        would be a hedging transaction under section 
                        1221(b) if--
                                    ``(I) the only transactions 
                                described in paragraph (2) thereof were 
                                transactions described in clause (ii), 
                                and
                                    ``(II) paragraphs (3) and (4) 
                                thereof were applied by substituting 
                                `controlled foreign corporation' for 
                                `taxpayer' each place it appears.
                            ``(ii) Transaction described.--A 
                        transaction is described in this clause if such 
                        transaction is entered into by the controlled 
                        foreign corporation in the normal course of the 
                        controlled foreign corporation's trade or 
                        business primarily--
                                    ``(I) to manage risk of price 
                                changes or currency fluctuations with 
                                respect to ordinary property or 
                                property described in section 1231(b) 
                                which is held or to be held by the 
                                controlled foreign corporation, or
                                    ``(II) to manage such other risks 
                                as the Secretary may prescribe in 
                                regulations.''.
                    (C) Section 1221(a)(7) is amended by striking 
                ``which is clearly'' and all that follows through 
                ``regulations prescribe)''.
    (b) Special Rule for Commodity Hedging Transactions Involving 
Related Controlled Foreign Corporations.--Section 954(c)(5)(A), as 
amended by subsection (a), is amended by adding at the end the 
following new clause:
                            ``(iii) Application to related controlled 
                        foreign corporations.--
                                    ``(I) In general.--In the case of 
                                qualified property, clause (ii)(I) 
                                shall be applied by substituting `the 
                                controlled foreign corporation or 
                                another controlled foreign corporation 
                                which is a related person (within the 
                                meaning of subsection (d)(3))' for `the 
                                controlled foreign corporation'.
                                    ``(II) Qualified property.--For 
                                purposes of this clause, the term 
                                `qualified property' means ordinary 
                                property or property described in 
                                section 1231(b) (if disposed of at a 
                                gain) the income from the disposition 
                                of which would be neither subpart F 
                                income nor income treated as 
                                effectively connected with the conduct 
                                of a trade or business in the United 
                                States.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after December 31, 2014.

                 PART 2--TREATMENT OF DEBT INSTRUMENTS

SEC. 3411. CURRENT INCLUSION IN INCOME OF MARKET DISCOUNT.

    (a) In General.--Subpart B of part V of subchapter P of chapter 1 
is amended by redesignating section 1278 as section 1279 and by 
inserting after section 1277 the following new section:

``SEC. 1278. CURRENT INCLUSION IN INCOME OF MARKET DISCOUNT ON BONDS 
              ACQUIRED AFTER 2014.

    ``(a) In General.--There shall be included in the gross income of 
the holder of any market discount bond acquired after December 31, 
2014, an amount equal to the sum of the daily portions of the market 
discount for each day during the taxable year on which such holder held 
such bond.
    ``(b) Determination of Daily Portions.--
            ``(1) In general.--For purposes of subsection (a), the 
        daily portion of the market discount on any market discount 
        bond shall be an amount equal to the daily portion of original 
        issue discount which would be includible in gross income under 
        section 1272(a) (determined without regard to paragraph (2) 
        thereof) if such bond had been--
                    ``(A) originally issued on the date on which such 
                bond was acquired by the taxpayer,
                    ``(B) for an issue price equal to the basis of such 
                bond immediately after such acquisition.
            ``(2) Coordination where bond has original issue 
        discount.--In the case of any bond having original issue 
        discount, the daily portion determined under paragraph (1) 
        shall be reduced by the daily portion of original issue 
        discount includible in gross income under section 1272(a) 
        (determined without regard to paragraph (2) thereof) with 
        respect to such bond.
            ``(3) Special rule where partial principal payments.--In 
        the case of a bond the principal of which may be paid in 2 or 
        more payments, the daily portions of market discount shall be 
        determined under regulations prescribed by the Secretary.
    ``(c) Limitation.--
            ``(1) In general.--The amount of market discount allocable 
        to any accrual period for purposes of determining the sum of 
        the daily portions under subsection (a) shall not exceed the 
        excess (if any) of--
                    ``(A) the product of--
                            ``(i) the maximum accrual rate determined 
                        under paragraph (2), properly adjusted for the 
                        length of the accrual period, multiplied by
                            ``(ii) the adjusted basis of such bond at 
                        the beginning of such accrual period, over
                    ``(B) the sum of the qualified stated interest and 
                original issue discount allocable to such accrual 
                period.
            ``(2) Maximum accrual rate.--The maximum accrual rate 
        determined under this paragraph with respect to any bond is the 
        greater of--
                    ``(A) such bonds's yield to maturity (determined as 
                of the date of the issuance of such bond) plus 5 
                percentage points, or
                    ``(B) the applicable Federal rate for such bond 
                (determined under section 1274(d) as of the date of the 
                acquisition of such bond and on the basis of the 
                remaining term of such bond as of such date) plus 10 
                percentage points.
            ``(3) Application to pools.--In the case of debt 
        instruments to which section 1272(a)(6) applies, rules similar 
        to the rules of such section shall apply for purposes of 
        determining the daily portions of market discount.
            ``(4) Accrual period.--For purposes of this subsection, the 
        term `accrual period' has the meaning given such term in 
        section 1272(a)(5).
    ``(d) Special Rules.--
            ``(1) Accruals treated as interest.--Except for purposes of 
        sections 103, 871(a), 881, 1441, 1442, and 6049 (and such other 
        provisions as may be specified in regulations), any amount 
        included in gross income under this section shall be treated as 
        interest for purposes of this title.
            ``(2) Basis adjustment.--The basis of any market discount 
        bond in the hands of the taxpayer shall be increased by the 
        amount included in gross income pursuant to this section.
            ``(3) Treatment of loss on disposition.--So much of any 
        loss recognized by the taxpayer on the disposition of a market 
        discount bond as does not exceed the aggregate amounts included 
        in the taxpayer's gross income under subsection (a) with 
        respect to such bond shall be treated for purposes of this 
        title as an ordinary loss.''.
    (b) Treatment of Market Discount on Short-Term Nongovernmental 
Bonds.--
            (1) Accrual basis taxpayers, etc.--Section 1283 is amended 
        by striking subsection (c) and redesignating subsection (d) as 
        subsection (c).
            (2) Other taxpayers.--
                    (A) Section 1271(a)(3) is amended--
                            (i) by striking all that precedes 
                        subparagraph (C) and inserting the following:
            ``(3) Certain short-term obligations.--
                    ``(A) In general.--On the sale or exchange of any 
                short-term obligation (as defined in section 
                1283(a)(1)), any gain realized which does not exceed an 
                amount equal to the ratable share of the acquisition 
                discount shall be treated as ordinary income.'', and
                            (ii) by redesignating subparagraphs (C), 
                        (D), and (E) as subparagraphs (B), (C), and 
                        (D), respectively.
                    (B) Section 1271(a) is amended by striking 
                paragraph (4).
                    (C) Section 1283(c)(3), as redesignated by 
                paragraph (1), is amended by striking ``paragraphs (3) 
                and (4) of section 1271(a)'' and inserting ``section 
                1271(a)(3)''.
    (c) Coordination With Rules Related To Treating Market Discount as 
Ordinary Income Upon Disposition.--
            (1) In general.--Section 1276 is amended by adding at the 
        end the following new subsection:
    ``(e) Coordination With Rules for Current Inclusion of Market 
Discount.--This section shall not apply to any market discount bond to 
which section 1278 applies.''.
            (2) Coordination with deferral of interest deduction.--
        Section 1277 is amended by adding at the end the following new 
        subsection:
    ``(d) Coordination With Rules for Current Inclusion of Market 
Discount.--This section shall not apply to any market discount bond to 
which section 1278 applies.''.
            (3) Coordination with election to include market discount 
        currently.--Section 1279(b), as redesignated by subsection (a), 
        is amended by adding at the end the following new paragraph:
            ``(5) Coordination with rules for current inclusion of 
        market discount.--This subsection shall not apply to any market 
        discount bond to which section 1278 applies.''.
    (d) Treatment of Certain Bonds Held by Partnerships.--
            (1) Transfers of partnership interests.--Section 1279(a), 
        as redesignated by subsection (a), is amended by adding at the 
        end the following new paragraph:
            ``(6) Transfers of partnership interests.--In the case of a 
        transfer described in section 743 of an interest in a 
        partnership holding a bond, the partnership shall be treated as 
        acquiring the transferee partner's proportionate share of such 
        bond at the time of such transfer.''.
            (2) Distribution of bonds by partnerships.--Section 
        1279(a)(2), as redesignated by subsection (a), is amended by 
        adding at the end the following new subparagraph:
                    ``(D) Distribution by partnership.--If the basis of 
                the taxpayer in a bond is determined under section 
                734(a)(2) or (b), for purposes of subparagraph (A)(ii), 
                the basis of such bond shall not be less than its fair 
                market value immediately after its acquisition by the 
                taxpayer.''.
    (e) Modernization of Certain Definitions.--
            (1) Repeal of superceded exception for market discount 
        bonds acquired at issue.--Section 1279(a)(1), as redesignated 
        by subsection (a), is amended by striking subparagraph (D)
            (2) Revised issue price.--Section 1279(a)(4), as 
        redesignated by subsection (a), is amended--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii) and by indenting such clauses 
                appropriately,
                    (B) by striking ``means the sum of--'' and 
                inserting ``means the excess of--
                    ``(A) the sum of--'',
                    (C) by striking the period at the end and inserting 
                ``, over'', and
                    (D) by adding at the end the following new 
                subparagraph:
                    ``(B) the sum of--
                            ``(i) any payments other than qualified 
                        stated interest made under the bond during 
                        periods before the acquisition of the bond by 
                        the taxpayer, and
                            ``(ii) any premium which has accrued during 
                        such periods (determined as if owned at all 
                        times by the original holder).''.
            (3) Redemption price .--
                    (A) In general.--Section 1273(a)(2) is amended to 
                read as follows:
            ``(2) Redemption price.--
                    ``(A) In general.--The term `redemption price' 
                means the sum of all payments provided by the debt 
                instrument other than qualified stated interest.
                    ``(B) Qualified stated interest.--The term 
                `qualified stated interest' means stated interest that 
                is unconditionally payable in money and other property 
                (other than a debt instrument of the issuer) at least 
                annually at a fixed rate (or to the extent provided by 
                regulations, at a variable rate).
                    ``(C) Basis adjustment.--The basis of any debt 
                instrument shall be reduced by the amount of any 
                payment received other than qualified stated 
                interest.''.
                    (B) Conforming amendments.--
                            (i) Each of the following provisions is 
                        amended by striking ``stated redemption price 
                        at maturity'' and inserting ``redemption 
                        price'':
                                    (I) Section 1271(a)(3)(B) (as 
                                redesignated by subsection (b)).
                                    (II) Section 1273(a)(1)(A).
                                    (III) Section 1273(a)(3).
                                    (IV) Section 1273(b)(4).
                                    (V) Section 1274(c)(1)(A).
                                    (VI) Section 1279(a)(5) (as 
                                redesignated by subsection (a)).
                                    (VII) Section 1283(a)(2)(A).
                                    (VIII) Section 1286(a)(1).
                                    (IX) The heading and text of 
                                section 1286(e)(4).
                            (ii) Section 108(e)(10)(B) is amended by 
                        striking ``stated'' both places it appears.
                            (iii) Section 1272(a)(6)(A)(i) is amended 
                        by striking ``stated''.
                            (iv) Subparagraphs (A)(i) and (C) of 
                        section 1279(a)(2) (as redesignated by 
                        subsection (a)) are each amended by striking 
                        ``the stated redemption price of the bond at 
                        maturity'' and inserting ``the redemption price 
                        of the bond''.
                            (v) Section 1279(a)(2)(B) (as redesignated 
                        by subsection (a)) is amended by striking ``the 
                        stated redemption price of such bond at 
                        maturity'' and inserting ``the redemption price 
                        of such bond''.
            (4) Adjusted issue price.--Section 1275(a) is amended by 
        adding at the end the following new paragraph:
            ``(5) Adjusted issue price.--
                    ``(A) In general.--For purposes of this part, the 
                adjusted issue price of any debt instrument is its 
                issue price--
                            ``(i) increased by the aggregate of the 
                        original issue discount includible in the gross 
                        income of all holders for prior periods 
                        (determined without regard to paragraph (7) of 
                        section 1272(a)), or, in the case of a tax-
                        exempt obligation, the aggregate amount which 
                        accrued in the manner provided by this 
                        subsection (determined without regard to such 
                        paragraph (7)) for all prior periods, and
                            ``(ii) reduced by the sum of--
                                    ``(I) any payments other than 
                                qualified stated interest previously 
                                made on the debt instrument, and
                                    ``(II) in the case of a debt 
                                instrument which was issued with 
                                amortizable bond premium (as defined in 
                                section 171(b)), the aggregate amount 
                                by which the basis of such instrument 
                                would have been reduced under section 
                                1016(a)(5) for prior periods if the 
                                instrument had been held by the 
                                original holder at all times.
                    ``(B) De minimis rule.--The adjusted issue price of 
                the issuer shall be properly adjusted to take into 
                account that section 1273(a)(3) does not apply to the 
                deduction under section 163 for original issue 
                discount.''.
            (5) Certain other terms.--Paragraphs (3), (4), and (5) of 
        section 1272(a) are amended to read as follows:
            ``(3) Determination of daily portions.--For purposes of 
        paragraph (1), the daily portion of the original issue discount 
        on any debt instrument shall be determined by allocating to 
        each day in any accrual period its ratable share of the 
        original issue discount allocable to such accrual period. For 
        purposes of the preceding sentence, the original issue discount 
        allocable to any accrual period is the excess (if any) of--
                    ``(A) the product of--
                            ``(i) the adjusted issue price of the debt 
                        instrument at the beginning of such accrual 
                        period, multiplied by
                            ``(ii) the yield to maturity of the debt 
                        instrument properly adjusted for the length of 
                        the accrual period, over
                    ``(B) the amount of any qualified stated interest 
                allocable to such accrual period.
            ``(4) Yield to maturity.--For purposes of this subsection, 
        the term `yield to maturity' means the discount rate that, when 
        used in computing the present value of all principal and 
        interest payments to be made under the debt instrument produces 
        an amount equal to the issue price of the debt instrument.
            ``(5) Accrual period.--For purposes of this subsection, the 
        term `accrual period' shall be determined under regulations 
        prescribed by the Secretary, provided that an accrual period 
        shall in no event be longer than one year.''.
    (f) Broker Reporting of Includible Discount on Bonds.--
            (1) In general.--Section 6045 is amended by adding at the 
        end the following new subsection:
    ``(i) Discount on Bonds.--
            ``(1) In general.--If any customer of a broker holds a 
        covered bond in an account with such broker at any time during 
        a calendar year--
                    ``(A) such broker shall file a return under 
                subsection (a) for such calendar year, and
                    ``(B) such return shall include with respect to 
                each such covered bond--
                            ``(i) the amount (if any) includible in the 
                        gross income of such customer as original issue 
                        discount with respect to such bond under 
                        section 1272 for periods during such calendar 
                        year, and.
                            ``(ii) the amount (if any) includible in 
                        the gross income of such customer as market 
                        discount with respect to such bond under 
                        section 1278(a) for periods during such 
                        calendar year.
            ``(2) Covered bond.--For purposes of this subsection, the 
        term `covered bond' means any obligation to which section 1272 
        or 1278(a) applies if such obligation--
                    ``(A) was acquired after December 31, 2014, through 
                a transaction in the account in which such obligation 
                is held, or
                    ``(B) was transferred to such account from an 
                account in which such obligation was a covered bond, 
                but only if the broker received a statement under 
                section 6045A with respect to the transfer.
            ``(3) Statements to customers.--The requirements of 
        subsections (b) shall apply with respect to any return filed 
        under subsection (a) by reason of this subsection.''.
            (2) Information required in connection with transfers of 
        covered bonds to brokers.--Subsection (a) of section 6045A is 
        amended--
                    (A) by inserting ``or a covered bond (as defined in 
                section 6045(i)(2))'' after ``covered security (as 
                defined in section 6045(g)(3))'', and
                    (B) by striking ``section 6045(g)'' and inserting 
                ``subsections (g) and (i) of section 6045''.
            (3) Coordination with reporting by issuer of original issue 
        discount.--Paragraph (6) of section 6049(d) is amended by 
        adding at the end the following new subparagraph:
                    ``(C) Prevention of double reporting.--Except as 
                otherwise provided by the Secretary, original issue 
                discount with respect to any obligation shall not be 
                required to be reported under this section if such 
                original issue discount is required to be reported with 
                respect to such obligation under section 6045(i).''.
    (g) Conforming Amendments.--
            (1) Section 857(e)(2)(B)(i), as amended by the preceding 
        provisions of this Act, is amended by striking ``or 1272'' and 
        inserting ``1272, or 1278''.
            (2) Section 1042(d) is amended by striking ``section 
        1278(a)(2)(A)(ii)'' in the matter following paragraph (2) and 
        inserting ``section 1279(a)(2)(A)(ii)''.
            (3) Section 1016(a), as amended by the preceding provisions 
        of this Act, is amended by adding at the end the following new 
        paragraph:
            ``(39) in the case of any debt instrument, to extend 
        provided in sections 1272(d)(1), 1273(a)(2)(C), and 
        1278(d)(2).''.
            (4) Section 1276 is amended by inserting ``on bonds not 
        subject to current inclusion'' after ``accrued market 
        discount'' in the heading thereof.
            (5) Section 1277 is amended by inserting ``on bonds not 
        subject to current inclusion'' after ``accrued market 
        discount'' in the heading thereof.
            (6) Section 1281 is amended by striking subsection (c).
            (7) Section 1282 is amended by striking subsection (d).
            (8) The table of sections for subpart B of part V of 
        subchapter P of chapter 1 is amended to read as follows:

``Sec. 1276. Disposition gain representing accrued market discount on 
                            bonds not subject to current inclusion 
                            treated as ordinary income.
``Sec. 1277. Deferral of interest deduction allocable to accrued market 
                            discount on bonds not subject to current 
                            inclusion.
``Sec. 1278. Current inclusion in income of market discount on bonds 
                            acquired after 2014.
``Sec. 1279. Definitions and special rules.''.
    (h) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to obligations 
        acquired after December 31, 2014.
            (2) Modernization of terms.--The amendments made by 
        subsection (e) shall take effect on January 1, 2015.

SEC. 3412. TREATMENT OF CERTAIN EXCHANGES OF DEBT INSTRUMENTS.

    (a) Determination of Issue Price.--
            (1) In general.--Subpart A of part V of subchapter P is 
        amended by inserting after section 1274A the following new 
        section:

``SEC. 1274B. DETERMINATION OF ISSUE PRICE IN THE CASE OF AN EXCHANGE 
              OF DEBT INSTRUMENTS.

    ``(a) In General.--In the case of an exchange (including by 
significant modification) by an issuer of a new debt instrument for an 
existing debt instrument issued by the same issuer, the issue price of 
the new debt instrument shall be the least of--
            ``(1) the adjusted issue price of the existing debt 
        instrument,
            ``(2) the stated principal amount of the new debt 
        instrument, or
            ``(3) the imputed principal amount of the new debt 
        instrument.
    ``(b) Applicable Rate.--The discount rate used to determine the 
imputed principal amount of the new debt instrument under subsection 
(a)(3) shall be the lesser of--
            ``(1) the applicable Federal rate determined under section 
        1274(d) with respect to the new debt instrument, or
            ``(2) the greater of--
                    ``(A) the rate of qualified stated interest with 
                respect to the existing debt instrument, or
                    ``(B) the applicable Federal rate determined under 
                section 1274(d) with respect to the existing debt 
                instrument.
    ``(c) Treatment of Investment Units.--Rules similar to the rules of 
section 1273(c)(2) shall apply for purposes of this section.''.
            (2) Conforming amendments.--
                    (A) Section 108(e)(10)(B) is amended by striking 
                ``and 1274'' and inserting ``, 1274, and 1274B''.
                    (B) Section 1274(c)(3), as amended by the preceding 
                provisions of this Act, is amended by adding at the end 
                the following new subparagraph:
                    ``(F) Certain modified debt.--Any debt instrument 
                the issue price of which is determined under section 
                1274B.''.
                    (C) The table of sections for subpart A of part V 
                of subchapter P is amended by inserting after the item 
                relating to section 1274A the following new item:

``Sec. 1274B. Determination of issue price in the case of an exchange 
                            of debt instruments.''.
    (b) Nonrecognition of Gain or Loss by Holder.--
            (1) In general.--Section 1037 is amended to read as 
        follows:

``SEC. 1037. CERTAIN EXCHANGES OF DEBT INSTRUMENTS.

    ``(a) Nonrecognition of Gain or Loss.--No gain or loss shall be 
recognized to the holder of a debt instrument if such existing debt 
instrument is exchanged solely for a new debt instrument (whether by 
exchange or significant modification) issued by the same issuer.
    ``(b) Property Attributable to Accrued Interest.--Subsection (a) 
shall not apply to the extent that any property received is 
attributable to interest which accrued on the existing debt instrument 
on or after the beginning of the holder's holding period of such 
instrument.
    ``(c) Limitation on Gain Recognition in Case of Exchange Not Solely 
for a New Debt Instrument.--In the case of an exchange of a debt 
instrument to which section 1035(d) applies, the amount of gain 
recognized shall not exceed the amount of gain which would have been 
recognized if section 1274B did not apply.
    ``(d) Cross References.--
            ``(1) For rules relating to securities exchanged or 
        distributed in a reorganization, etc., see sections 354, 355, 
        and 356.
            ``(2) For rules relating to recognition of gain or loss 
        where exchange was not made solely for another debt instrument 
        of the issuer, see subsections (d) and (e) of section 1035.
            ``(3) For rules relating to basis of obligations acquired 
        in an exchange described in subsection (a), see subsection (f) 
        of section 1035.''.
            (2) Clerical amendment.--The table of sections for part III 
        of subchapter O of chapter 1 is amended by striking the item 
        relating to section 1037 and inserting the following new item:

``Sec. 1037. Certain exchanges of debt instruments.''.
    (c) Application to Excess Principal Rules for Corporate 
Reorganizations.--
            (1) Exchanges of securities in reorganizations.--
                    (A) In general.--Section 354(a)(2)(A)(i) is amended 
                to read as follows:
                            ``(i) the issue price of any such 
                        securities received exceeds the adjusted issue 
                        price of any such securities surrendered, or''.
                    (B) Definitions.--Section 354(a)(2) is amended by 
                inserting after subparagraph (C) the following new 
                subparagraph:
                    ``(D) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Issue price.--The issue price of any 
                        security shall be determined under sections 
                        1273, 1274, and 1274B.
                            ``(ii) Adjusted issue price.--The adjusted 
                        issue price of any security shall be determined 
                        under section 1275(a)(5).''.
            (2) Section 355 transactions.--Section 355(a)(3)(A)(i) is 
        amended to read as follows:
                            ``(i) the issue price (as defined in 
                        section 354(a)(2)(D)) of the securities in the 
                        controlled corporation which are received 
                        exceeds the adjusted issue price (as so 
                        defined) of the securities which are 
                        surrendered in connection with such 
                        distribution, or''.
            (3) Section 356 transactions.--
                    (A) In general.--Section 356(d)(2)(B)(ii) is 
                amended to read as follows:
                            ``(ii) the issue price (as defined in 
                        section 354(a)(2)(D)) of such securities 
                        received exceeds the adjusted issue price (as 
                        so defined) of such securities surrendered,''.
                    (B) Conforming amendments.--
                            (i) Section 356(d)(2)(B) is amended in the 
                        matter following clause (ii)--
                                    (I) by striking ``the fair market 
                                value of such excess'' and inserting 
                                ``the amount of such excess'', and
                                    (II) by striking ``the entire 
                                principal amount'' and inserting ``the 
                                entire issue price (as so defined)''.
                            (ii) Section 356(d)(2)(C) is amended to 
                        read as follows:
                    ``(C) Greater principal amount in section 355 
                transaction.--If, in an exchange or distribution 
                described in section 355, the issue price (as defined 
                in section 354(a)(2)(D)) of the securities in the 
                controlled corporation which are received exceeds the 
                adjusted issue price (as so defined) of the securities 
                in the distributing corporation which are surrendered, 
                then, with respect to such securities received, the 
                term `other property' means only the amount of such 
                excess.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2014.

SEC. 3413. COORDINATION WITH RULES FOR INCLUSION NOT LATER THAN FOR 
              FINANCIAL ACCOUNTING PURPOSES.

    (a) In General.--Section 451(b), as amended by the preceding 
provisions of this Act, is amended by inserting immediately after the 
heading thereof (and before paragraph (1) thereof) the following: 
``Notwithstanding any other provision of law (including part V of 
subchapter P)--''.
    (b) Effective Date; Change in Method of Accounting.--The amendment 
made by subsection (a) shall be treated for purposes of section 3303(g) 
as though such amendment were made by section 3303(a).

SEC. 3414. RULES REGARDING CERTAIN GOVERNMENT DEBT.

    (a) Repeal of Certain Superceded Rules.--Subpart B of part II of 
subchapter E of chapter 1 is amended by striking section 454 (and by 
striking the item relating to such section in the table of sections for 
such subpart).
    (b) Preservation of Rules Related to United States Savings Bonds.--
Subpart A of part V of subchapter P of chapter 1 is amended by 
inserting after section 1272 the following new section:

``SEC. 1272A. UNITED STATES SAVINGS BONDS.

    ``(a) Election To Include Increase in Redemption Price in Income.--
A taxpayer holding a United States savings bond may elect (on the 
taxpayer's return for the taxable year) to treat any increase in the 
redemption price as income received in the taxable year. If any such 
election is made with respect to any such obligation, it shall apply 
also to all such obligations owned by the taxpayer at the beginning of 
the first taxable year to which it applies and to all such obligations 
thereafter acquired by the taxpayer and shall be binding for all 
subsequent taxable years, unless revoked with the consent of the 
Secretary. In the case of any such obligations owned by the taxpayer at 
the beginning of the first taxable year to which the taxpayer's 
election applies, the increase in the redemption price of such 
obligations occurring between the date of acquisition and the first day 
of such taxable year shall also be treated as income received in such 
taxable year.
    ``(b) Treatment Upon Redemption or Final Maturity.--The increase in 
redemption value of a United States savings bond (to the extent not 
previously included in gross income) in excess of the adjusted basis of 
such bond shall be included in gross income in the earlier of the 
taxable year in which the bond is redeemed or in the taxable year of 
final maturity.
    ``(c) Cross References.--
            ``(1) For exception from current inclusion of original 
        issue discount, see section 1272(a)(2)(B).
            ``(2) For exception from market discount rules, see section 
        1279(a)(1)(B)(iii).''.
    (c) Conforming Amendments.--
            (1) Section 852(b)(2), as amended by the preceding 
        provisions of this Act, is amended by striking subparagraph (E) 
        and redesignating subparagraphs (F) and (G) as subparagraphs 
        (E) and (F), respectively.
            (2) Section 1283(c)(3), as amended by the preceding 
        provisions of this Act, is amended by striking all that 
        precedes ``shall not apply'' and inserting the following:
            ``(3) Coordination with section 1271.--Section 
        1271(a)(3)''.
            (3) Section 7871(a)(6) is amended by adding ``and'' at the 
        end of subparagraph (A) and by striking subparagraph (C).
            (4) The table of sections for subpart A of part V of 
        subchapter P of chapter 1 is amended by inserting after the 
        item relating to section 1272 the following new item:

``Sec. 1272A. United States savings bonds.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

          PART 3--CERTAIN RULES FOR DETERMINING GAIN AND LOSS

SEC. 3421. COST BASIS OF SPECIFIED SECURITIES DETERMINED WITHOUT REGARD 
              TO IDENTIFICATION.

    (a) In General.--Section 1012 is amended by adding at the end the 
following new subsection:
    ``(e) Cost Basis of Specified Securities Determined Without Regard 
to Identification.--Except to the extent otherwise provided in this 
section or in regulations thereunder permitting the use of an average 
basis method for determining cost, in the case of the sale, exchange, 
or other disposition of a specified security (within the meaning of 
section 6045(g)(3)(B)), the basis (and holding period) of such security 
shall be determined on a first-in first-out basis.''.
    (b) Conforming Amendments.--
            (1) Section 1012(c)(1) is amended by striking ``the 
        conventions prescribed by regulations under this section'' and 
        inserting ``the method applicable for determining the cost of 
        such security''.
            (2) Section 1012(c)(2)(A) is amended by striking ``section 
        1012'' and inserting ``this section (as in effect prior to the 
        enactment of the Tax Reform Act of 2014)''.
            (3) Section 6045(g)(2)(B)(i)(I) is amended by striking 
        ``unless the customer notifies the broker by means of making an 
        adequate identification of the stock sold or transferred''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales, exchanges, and other dispositions after December 31, 
2014.

SEC. 3422. WASH SALES BY RELATED PARTIES.

    (a) Application of Wash Sale Rules to Related Parties.--Subsection 
(a) of section 1091 is amended by striking ``the taxpayer has 
acquired'' and inserting ``the taxpayer (or a related party) has 
acquired''.
    (b) Modification of Basis Adjustment Rule To Prevent Transfer of 
Losses to Related Parties.--Subsection (d) of section 1091 is amended 
to read as follows:
    ``(d) Adjustment to Basis in Case of Wash Sale.--If the taxpayer 
(or the taxpayer's spouse) acquires substantially identical stock or 
securities during the period which--
            ``(1) begins 30 days before the disposition with respect to 
        which a deduction was disallowed under subsection (a), and
            ``(2) ends with the close of the taxpayer's first taxable 
        year which begins after such disposition,
the basis of such stock or securities shall be increased by the amount 
of the deduction so disallowed (reduced by any amount of such deduction 
taken into account under this subsection to increase the basis of stock 
or securities previously acquired).''.
    (c) Related Party.--Section 1091 is amended by adding at the end 
the following new subsection:
    ``(g) Related Party.--For purposes of this section--
            ``(1) In general.--The term `related party' means--
                    ``(A) the taxpayer's spouse,
                    ``(B) any dependent of the taxpayer and any other 
                taxpayer with respect to whom the taxpayer is a 
                dependent,
                    ``(C) any individual, corporation, partnership, 
                trust, or estate which controls, or is controlled by, 
                (within the meaning of section 954(d)(3)) the taxpayer 
                or any individual described in subparagraph (A) or (B) 
                with respect to the taxpayer (or any combination 
                thereof),
                    ``(D) any individual retirement plan, Archer MSA 
                (as defined in section 220(d)), or health savings 
                account (as defined in section 223(d)), of the taxpayer 
                or of any individual described in subparagraph (A) or 
                (B) with respect to the taxpayer,
                    ``(E) any account under a qualified tuition program 
                described in section 529 or a Coverdell education 
                savings account (as defined in section 530(b)) if the 
                taxpayer, or any individual described in subparagraph 
                (A) or (B) with respect to the taxpayer, is the 
                designated beneficiary of such account or has the right 
                to make any decision with respect to the investment of 
                any amount in such account, and
                    ``(F) any account under--
                            ``(i) a plan described in section 401(a),
                            ``(ii) an annuity plan described in section 
                        403(a),
                            ``(iii) an annuity contract described in 
                        section 403(b), or
                            ``(iv) an eligible deferred compensation 
                        plan described in section 457(b) and maintained 
                        by an employer described in section 
                        457(e)(1)(A),
                if the taxpayer or any individual described in 
                subparagraph (A) or (B) with respect to the taxpayer 
                has the right to make any decision with respect to the 
                investment of any amount in such account.
            ``(2) Rules for determining status.--
                    ``(A) Relationships determined at time of 
                acquisition.--Determinations under paragraph (1) shall 
                be made as of the time of the purchase or exchange 
                referred to in subsection (a) except that 
                determinations under subparagraphs (A) and (B) of 
                paragraph (1) shall be made for the taxable year which 
                includes such purchase or exchange.
                    ``(B) Determination of marital status.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), marital status shall be determined 
                        under section 7703.
                            ``(ii) Special rule for married individuals 
                        filing separately and living apart.--A husband 
                        and wife who--
                                    ``(I) file separate returns for any 
                                taxable year, and
                                    ``(II) live apart at all times 
                                during such taxable year,
                        shall not be treated as married individuals.
            ``(3) Regulations.--The Secretary shall issue such 
        regulations or other guidance as may be necessary to prevent 
        the avoidance of the purposes of this subsection, including 
        regulations which treat persons as related parties if such 
        persons are formed or availed of to avoid the purposes of this 
        subsection.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to sales and other dispositions after December 31, 2014.

SEC. 3423. NONRECOGNITION FOR DERIVATIVE TRANSACTIONS BY A CORPORATION 
              WITH RESPECT TO ITS STOCK.

    (a) In General.--Section 1032 is amended to read as follows:

``SEC. 1032. DERIVATIVE TRANSACTIONS BY A CORPORATION WITH RESPECT TO 
              ITS STOCK.

    ``(a) In General.--Except as otherwise provided in this section or 
section 76, section 1032 derivative items of a corporation shall not be 
taken into account in determining such corporation's liability for tax 
under this subtitle.
    ``(b) Income Recognition on Certain Forward Contracts.--
            ``(1) In general.--If--
                    ``(A) a corporation acquires its stock, and
                    ``(B) such acquisition is part of a plan (or series 
                of related transactions) pursuant to which the 
                corporation enters into a forward contract with respect 
                to its stock,
        such corporation shall include amounts in income as if the 
        excess of the amount to be received under the forward contract 
        over the fair market value of the stock as of the date the 
        corporation entered into the forward contract were original 
        issue discount on a debt instrument acquired on such date. The 
        preceding sentence shall apply only to the extent that the 
        amount of stock involved in the forward contract does not 
        exceed the amount acquired as described in subparagraph (A).
            ``(2) Plan presumed to exist.--If a corporation enters into 
        a forward contract with respect to its stock within the 60-day 
        period beginning on the date which is 30 days before the date 
        that the corporation acquires its stock, such acquisition shall 
        be treated as pursuant to a plan described in paragraph (1)(B) 
        unless it is established that entering into such contract and 
        such acquisition are not pursuant to a plan or series of 
        related transactions.
    ``(c) Section 1032 Derivative Items.--For purposes of this section, 
the term `section 1032 derivative item' means any item of income, gain, 
loss, or deduction if--
            ``(1) such item arises out of the rights or obligations 
        under any derivative (as defined in section 486) to the extent 
        such derivative relates to the corporation's stock (or is 
        attributable to any transfer or extinguishment of any such 
        right or obligation), or
            ``(2) such item arises under any other contract or position 
        but only to the extent that such item reflects (or is 
        determined by reference to) changes in the value of such stock 
        or distributions thereon.
Such term shall not include any deduction with respect to which section 
83(h) applies and shall not include any deduction for any item which is 
in the nature of compensation for services rendered. For purposes of 
this subparagraph, de minimis relationships, as determined by the 
Secretary, shall be disregarded.
    ``(d) Treasury Stock Treated as Stock.--Any reference in this 
section to stock shall be treated as including a reference to treasury 
stock.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be appropriate to carry out the purposes of 
this section, including regulations or other guidance which--
            ``(1) treat the portion of an instrument which is described 
        in subsection (c)(1) separately from the portion of such 
        instrument which is not so described, and
            ``(2) treat section 1032 derivative items as contributions 
        to the capital of the corporation to the extent that the 
        application of this section would be inconsistent with the 
        purposes of section 76(b).''.
    (b) Clerical Amendment.--The item relating to section 1032 in the 
table of sections for part III of subchapter O of chapter 1 is amended 
to read as follows:

``Sec. 1032. Derivative transactions by a corporation with respect to 
                            its stock.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after the date of the enactment of 
this Act.

                       PART 4--TAX FAVORED BONDS

SEC. 3431. TERMINATION OF PRIVATE ACTIVITY BONDS.

    (a) In General.--Paragraph (1) of section 103(b) is amended--
            (1) by striking ``which is not a qualified bond (within the 
        meaning of section 141)'', and
            (2) by striking ``which is not a qualified bond'' in the 
        heading thereof.
    (b) Conforming Amendments.--
            (1) Section 141 is amended by striking subsection (e).
            (2) Subpart A of part IV of subchapter B of chapter 1 is 
        amended by striking sections 142, 143, 144, 145, 146, and 147 
        (and by striking each of the items relating to such sections in 
        the table of sections for such subpart).
            (3) Section 25 is amended by adding at the end the 
        following new subsection:
    ``(j) Coordination With Repeal of Private Activity Bonds.--Any 
reference to section 143, 144, or 146 shall be treated as a reference 
to such section as in effect before its repeal by the Tax Reform Act of 
2014.''.
            (4) Section 26(b)(2) is amended by striking subparagraph 
        (D).
            (5) Section 141(b) is amended by striking paragraphs (5) 
        and (9) and by redesignating paragraphs (6), (7), and (8) as 
        paragraphs (5), (6), and (7), respectively.
            (6) Section 141(d) is amended by striking paragraph (5) and 
        by redesignating paragraphs (6) and (7) as paragraphs (5) and 
        (6).
            (7) Section 148(b)(2)(E) is amended by striking ``in the 
        case of a bond other than a private activity bond,''.
            (8) Section 148(b)(3) is amended to read as follows:
            ``(3) Tax-exempt bonds not treated as investment 
        property.--The term `investment property' does not include any 
        tax-exempt bond.''.
            (9) Section 148(f)(3) is amended by striking ``or is a 
        private activity bond'' in the fourth sentence.
            (10) Section 148(f)(4) is amended--
                    (A) by striking ``(determined in accordance with 
                section 147(b)(2)(A))'' in the flush matter following 
                subparagraph (A)(ii),
                    (B) by striking the last sentence of subparagraph 
                (D)(v), and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(E) Average maturity.--For purposes of this 
                paragraph, the average maturity of any issue shall be 
                determined by taking into account the respective issue 
                prices of the bonds issued as part of such issue.''.
            (11) Section 148(f)(4)(A) is amended in the flush matter 
        after clause (ii) by striking ``In the case of an issue no bond 
        of which is a private activity bond, clause'' and inserting 
        ``Clause''.
            (12) Section 148(f)(4)(B)(ii) is amended--
                    (A) by striking subclause (II), and
                    (B) by striking ``certain bonds.--'' and all that 
                follows through ``issue described in subclause (II)'' 
                and inserting ``certain bonds.--In the case of an issue 
                no bond of which is a tax or revenue anticipation 
                bond''.
            (13)(A) Section 148(f)(4)(C)(iv) is amended to read as 
        follows:
                            ``(iv) Construction issue.--For purposes of 
                        this subparagraph, the term `construction 
                        issue' means any issue if at least 75 percent 
                        of the available construction proceeds of such 
                        issue are to be used for construction 
                        expenditures with respect to property which is 
                        to be owned by a governmental unit.''.
                    (B) Section 148(f)(4)(C) is amended by 
                redesignating clauses (v) through (xvii) as clauses 
                (viii) through (xx), respectively, and by inserting 
                after clause (iv) the following new clauses:
                            ``(v) Construction.--For purposes of this 
                        subparagraph, the term `construction' includes 
                        reconstruction and rehabilitation.
                            ``(vi) Safe harbor for leases and 
                        management contracts.--For purposes of this 
                        subparagraph, property leased by a governmental 
                        unit shall be treated as owned by such 
                        governmental unit if--
                                    ``(I) the lessee makes an 
                                irrevocable election (binding on the 
                                lessee and all successors in interest 
                                under the lease) not to claim 
                                depreciation or an investment credit 
                                with respect to such property,
                                    ``(II) the lease term (as defined 
                                in section 168(h)(1)) is not more than 
                                80 percent of the reasonably expected 
                                economic life of the property, and
                                    ``(III) the lessee has no option to 
                                purchase the property other than at 
                                fair market value (as of the time such 
                                option is exercised).
                            ``(vii) Determination of economic life.--
                        For purposes of clause (vi), the reasonably 
                        expected economic life of any facility shall be 
                        determined as of the later of--
                                    ``(I) the date on which the bonds 
                                are issued, or
                                    ``(II) the date on which the 
                                facility is placed in service (or 
                                expected to be placed in service).''.
                    (C) Section 148(f)(4)(D) is amended by striking 
                ``subparagraph (C)(iv)'' each place it appears and 
                inserting ``subparagraph (C)(v)''.
            (14) Section 148(f)(4)(D)(i) is amended--
                    (A) by striking subclause (II),
                    (B) by striking ``(other than private activity 
                bonds)'' in subclause (IV), and
                    (C) by redesignating subclauses (III) and (IV) (as 
                amended by subparagraph (B)) as subclauses (II) and 
                (III).
            (15) Section 148(f)(4)(D)(ii) is amended by striking 
        ``subclause (IV)'' both places it appears and inserting 
        ``subclause (III)''.
            (16) Section 148(f)(4)(D)(iii) is amended by striking 
        ``subclause (IV)'' and inserting ``subclause (III)''.
            (17) Section 148(f)(4)(D)(iv)(II) is amended by striking 
        ``clause (i)(IV)'' and inserting ``clause (i)(III)''.
            (18) Section 148(f)(4)(D)(vi) is amended by striking the 
        last sentence.
            (19) Section 148(f)(7) is amended by striking subparagraph 
        (A) and by redesignating subparagraphs (B) and (C) as 
        subparagraphs (A) and (B).
            (20) Section 149(b)(3) is amended--
                    (A) by striking subparagraph (C) and by 
                redesignating subparagraphs (D) and (E) as 
                subparagraphs (C) and (D), and
                    (B) by striking ``subparagraph (E)'' in 
                subparagraph (A)(iv) and inserting ``subparagraph 
                (D)''.
            (21) Section 149(e)(2) is amended--
                    (A) by striking subparagraphs (C), (D), and (F) and 
                by redesignating subparagraphs (E) and (G) as 
                subparagraphs (C) and (D), respectively, and
                    (B) by striking the second sentence.
            (22) Section 149(f)(6) is amended--
                    (A) by striking subparagraph (B), and
                    (B) by striking ``For purposes of this subsection'' 
                and all that follows through ``The term'' and inserting 
                the following: ``For purposes of this subsection, the 
                term''.
            (23) Section 150 is amended by striking subsections (b) and 
        (c) and by redesignating subsections (d) and (e) as subsections 
        (b) and (c), respectively.
            (24) Section 150(e)(3) is amended to read as follows:
            ``(3) Public approval requirement.--A bond shall not be 
        treated as part of an issue which meets the requirements of 
        paragraph (1) unless such bond satisfies the requirements of 
        section 147(f)(2) (as in effect before its repeal by the Tax 
        Reform Act of 2014).''.
            (25) Section 269A(b)(3) is amended by striking 
        ``144(a)(3)'' and inserting ``414(n)(6)(A)''.
            (26) Section 414(m)(5) is amended by striking ``section 
        144(a)(3)'' and inserting ``subsection (n)(6)(A)''.
            (27) Section 414(n)(6)(A) is amended to read as follows:
                    ``(A) Related persons.--A person is a related 
                person to another person if--
                            ``(i) the relationship between such persons 
                        would result in a disallowance of losses under 
                        section 267 or 707(b), or
                            ``(ii) such persons are members of the same 
                        controlled group of corporations (as defined in 
                        section 1563(a), except that `more than 50 
                        percent' shall be substituted for `at least 80 
                        percent' each place it appears therein).''.
            (28) Section 6045(e)(4)(B) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 143(m)(3)''.
            (29) Section 6654(f)(1) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 143(m)''.
            (30) Section 7871(c) is amended--
                    (A) by striking paragraphs (2) and (3), and
                    (B) by striking ``Tax-exempt Bonds.--'' and all 
                that follows through ``Subsection (a) of section 103'' 
                and inserting the following: ``Tax-exempt Bonds.--
                Subsection (a) of section 103''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2014.

SEC. 3432. TERMINATION OF CREDIT FOR INTEREST ON CERTAIN HOME 
              MORTGAGES.

    (a) In General.--Section 25, as amended by the preceding provisions 
of this Act, is amended by adding at the end the following new 
subsection:
    ``(k) Termination.--No credit shall be allowed under this section 
with respect to any mortgage credit certificate issued after December 
31, 2014.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2014.

SEC. 3433. REPEAL OF ADVANCE REFUNDING BONDS.

    (a) In General.--Paragraph (1) of section 149(d) is amended by 
striking ``as part of an issue described in paragraph (2), (3), or 
(4).'' and inserting ``to advance refund a bond.''.
    (b) Conforming Amendments.--
            (1) Section 149(d) is amended by striking paragraphs (2), 
        (3), (4), and (6) and by redesignating paragraphs (5) and (7) 
        as paragraphs (2) and (3).
            (2) Section 148(f)(4)(C), as amended by the preceding 
        provisions of this Act, is amended by striking clause (xvii) 
        and by redesignating clauses (xviii), (xix), and (xx) as 
        clauses (xvii), (xviii), and (xix), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to advance refunding bonds issued after December 31, 2014.

SEC. 3434. REPEAL OF TAX CREDIT BOND RULES.

    (a) In General.--Part IV of subchapter A of chapter 1 is amended by 
striking subparts H, I, and J (and by striking the items relating to 
such subparts in the table of subparts for such part).
    (b) Payments to Issuers.--Subchapter B of chapter 65 is amended by 
striking section 6431 (and by striking the item relating to such 
section in the table of sections for such subchapter).
    (c) Conforming Amendments.--
            (1) Section 6211(b)(4)(A) is amended by striking ``and 
        6431''.
            (2) Section 6401(b)(1) is amended by striking ``G, H, I, 
        and J'' and inserting ``and G''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

                     Subtitle F--Insurance Reforms

SEC. 3501. EXCEPTION TO PRO RATA INTEREST EXPENSE DISALLOWANCE FOR 
              CORPORATE-OWNED LIFE INSURANCE RESTRICTED TO 20-PERCENT 
              OWNERS.

    (a) In General.--Subparagraph (A) of section 264(f)(4) is amended--
            (1) by striking ``policy or contract)--'' and all that 
        follows through ``A policy or contract'' and inserting ``policy 
        or contract) a 20-percent owner of such entity. A policy or 
        contract'', and
            (2) by striking ``, officers, directors, and employees'' in 
        the heading.
    (b) Conforming Amendment.--Section 264(f)(4) is amended by striking 
subparagraph (E).
    (c) Effective Date.--The amendment made by this section shall apply 
to contracts issued after December 31, 2014. For purposes of the 
preceding sentence, any material increase in the death benefit or other 
material change in the contract shall be treated as a new contract.

SEC. 3502. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.

    (a) In General.--Paragraph (5) of section 805(a) is amended to read 
as follows:
            ``(5) Net operating loss deduction.--The deduction allowed 
        under section 172, determined--
                    ``(A) by treating the net operating loss for any 
                taxable year as equal to the excess (if any) of--
                            ``(i) the life insurance deductions for 
                        such taxable year, over
                            ``(ii) the life insurance gross income for 
                        such taxable year, and
                    ``(B) by applying subsection (d)(5) thereof with 
                the modifications described in paragraph (4) of this 
                subsection.''.
    (b) Conforming Amendments.--
            (1) Part I of subchapter L of chapter 1 is amended by 
        striking section 810 (and by striking the item relating to such 
        section in the table of sections for such part).
            (2) Part III of subchapter L of chapter 1 is amended by 
        striking section 844 (and by striking the item relating to such 
        section in the table of sections for such part).
            (3) Section 381 is amended by striking subsection (d).
            (4) Section 805(a)(4)(B)(i), as redesignated by the 
        preceding provisions of this Act, is amended to read as 
        follows:
                            ``(ii) the net operating loss deduction 
                        provided by paragraph (5),''.
            (5) Section 805(b)(2)(A)(iii), as redesignated by the 
        preceding provisions of this Act, is amended to read as 
        follows:
                            ``(iv) any net operating loss carryback to 
                        the taxable year under section 172 (as applied 
                        pursuant to subsection (a)(5)), and''.
            (6) Section 805(b) is amended by striking paragraph (4) and 
        redesignating paragraph (5) as paragraph (4).
            (7) Section 953(b)(1)(A), as redesignated by the preceding 
        provisions of this Act, is amended by striking ``operations'' 
        and inserting ``net operating''.
            (8) Section 1351(i)(3) is amended by striking ``or the 
        operations loss deduction under section 810,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2014.

SEC. 3503. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.

    (a) In General.--Part I of subchapter L of chapter 1 is amended by 
striking section 806 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 453B(e) is amended--
                    (A) by striking ``(as defined in section 
                806(b)(3))'' in paragraph (2)(B), and
                    (B) by adding at the end the following new 
                paragraph:
            ``(3) Noninsurance business.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `noninsurance business' means any activity 
                which is not an insurance business.
                    ``(B) Certain activities treated as insurance 
                businesses.--For purposes of subparagraph (A), any 
                activity which is not an insurance business shall be 
                treated as an insurance business if--
                            ``(i) it is of a type traditionally carried 
                        on by life insurance companies for investment 
                        purposes, but only if the carrying on of such 
                        activity (other than in the case of real 
                        estate) does not constitute the active conduct 
                        of a trade or business, or
                            ``(ii) it involves the performance of 
                        administrative services in connection with 
                        plans providing life insurance, pension, or 
                        accident and health benefits.''.
            (2) Section 465(c)(7)(D)(v)(II) is amended by striking 
        ``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
            (3) Section 801(a)(2) is amended by striking subparagraph 
        (C).
            (4) Section 804 is amended by striking ``means--'' and all 
        that follows and inserting ``means the general deductions 
        provided in section 805.''.
            (5) Section 805(a)(4)(B) is amended by striking clause (i) 
        and by redesignating clauses (ii), (iii), and (iv) as clauses 
        (i), (ii), and (iii), respectively.
            (6) Section 805(b)(2)(A) is amended by striking clause 
        (iii) and by redesignating clauses (iv) and (v) as clauses 
        (iii) and (iv), respectively.
            (7) Section 815(c)(2)(A) is amended by inserting ``and'' at 
        the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (8) Section 842(c) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (9) Section 953(b)(1) is amended by striking subparagraph 
        (A) and by redesignating subparagraphs (B) and (C) as 
        subparagraphs (A) and (B), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3504. COMPUTATION OF LIFE INSURANCE TAX RESERVES.

    (a) In General.--Subparagraph (B) of section 807(d)(2) is amended 
to read as follows:
                    ``(B) an interest rate equal to the sum of--
                            ``(i) the applicable Federal interest rate, 
                        plus
                            ``(ii) 3.5 percentage points, and''.
    (b) Conforming Amendments.--
            (1) Paragraph (4) of section 807(d) is amended to read as 
        follows:
            ``(4) Applicable federal interest rate.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `applicable Federal interest 
                rate' means the annual rate determined by the Secretary 
                under subparagraph (C) for the calendar year in which 
                the contract was issued.
                    ``(B) Election to recompute federal interest rate 
                every 5 years.--For purposes of this subsection--
                            ``(i) In general.--In computing the amount 
                        of the reserve with respect to any contract to 
                        which an election under this subparagraph 
                        applies for periods during any recomputation 
                        period, the applicable Federal interest rate 
                        shall be the annual rate determined by the 
                        Secretary under subparagraph (C) for the 1st 
                        year of such period. No change in the 
                        applicable Federal interest rate shall be made 
                        under the preceding sentence unless such change 
                        would equal or exceed \1/2\ of 1 percentage 
                        point.
                            ``(ii) Recomputation period.--For purposes 
                        of clause (i), the term `recomputation period' 
                        means, with respect to any contract, the 5 
                        calendar year period beginning with the 5th 
                        calendar year beginning after the calendar year 
                        in which the contract was issued (and each 
                        subsequent 5 calendar year period).
                            ``(iii) Election.--An election under this 
                        subparagraph shall apply to all contracts 
                        issued during the calendar year for which the 
                        election was made or during any subsequent 
                        calendar year unless such election is revoked 
                        with the consent of the Secretary.
                            ``(iv) Spread not available.--Subsection 
                        (f) shall not apply to any adjustment required 
                        under this paragraph.
                    ``(C) Rate of interest.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the rate of interest determined 
                        under this subparagraph shall be the annual 
                        rate determined by the Secretary under clause 
                        (ii).
                            ``(ii) Determination of annual rate.--
                                    ``(I) In general.--The annual rate 
                                determined by the Secretary under this 
                                clause for any calendar year shall be a 
                                rate equal to the average of the 
                                applicable Federal mid-term rates (as 
                                defined in section 1274(d) but based on 
                                annual compounding) effective as of the 
                                beginning of each of the calendar 
                                months in the test period.
                                    ``(II) Test period.--For purposes 
                                of subclause (I), the test period is 
                                the most recent 60-calendar-month 
                                period ending before the beginning of 
                                the calendar year for which the 
                                determination is made.''.
            (2) The first sentence following paragraph (6) in section 
        807(c) is amended by striking ``the applicable Federal interest 
        rate under subsection (d)(2)(B)(i), the prevailing State 
        assumed interest rate under subsection (d)(2)(B)(ii),'' and 
        inserting ``the interest rate determined under subsection 
        (d)(2)(B)''.
            (3) Section 808 is amended by adding at the end the 
        following new subsection:
    ``(g) Prevailing State Assumed Interest Rate.--For purposes of this 
subchapter--
            ``(1) In general.--The term `prevailing State assumed 
        interest rate' means, with respect to any contract, the highest 
        assumed interest rate permitted to be used in computing life 
        insurance reserves for insurance contracts or annuity contracts 
        (as the case may be) under the insurance laws of at least 26 
        States. For purposes of the preceding sentence, the effect of 
        nonforfeiture laws of a State on interest rates for reserves 
        shall not be taken into account.
            ``(2) When rate determined.--The prevailing State assumed 
        interest rate with respect to any contract shall be determined 
        as of the beginning of the calendar year in which the contract 
        was issued.''.
            (4) Paragraph (1) of section 811(d) is amended by striking 
        ``the greater of the prevailing State assumed interest rate or 
        applicable Federal interest rate in effect under section 807'' 
        and inserting ``the interest rate in effect under section 
        807(d)(2)(B)''.
            (5) Subparagraph (A) of section 846(f)(6) is amended by 
        striking ``except that'' and all that follows and inserting 
        ``except that the limitation of subsection (a)(3) shall apply 
        in lieu of the limitation of the last sentence of section 
        807(d)(1), and''.
            (6) Subparagraph (B) of section 954(i)(5) is amended by 
        striking ``shall be substituted for the prevailing State 
        assumed interest rate'' and inserting ``shall, if higher, be 
        substituted for the interest rate in effect under section 
        807(d)(2)(B)''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2014.
            (2) Transition rule.--For the first taxable year beginning 
        after December 31, 2014, the reserve with respect to any 
        contract (as determined under section 807(d)(2) of the Internal 
        Revenue Code of 1986) at the end of the preceding taxable year 
        shall be determined as if the amendments made by this section 
        had applied to such reserve in such preceding taxable year and 
        by using the interest rate applicable to such reserves under 
        section 807(d)(2) of the Internal Revenue Code of 1986 for 
        calendar year 2015. For subsequent taxable years, such 
        amendments shall be applied with respect to such reserve by 
        using the interest rate applicable under such section for 
        calendar year 2015.
            (3) Transition relief.--
                    (A) In general.--If--
                            (i) the reserve determined under section 
                        807(d)(2) of the Internal Revenue Code of 1986 
                        with respect to any contract as of the close of 
                        the year preceding the first taxable year 
                        beginning after December 31, 2014, differs from
                            (ii) the reserve which would have been 
                        determined with respect to such contract as of 
                        the close of such taxable year under such 
                        section determined without regard to paragraph 
                        (2),
                then the difference between the amount of the reserve 
                described in clause (i) and the amount of the reserve 
                described in clause (ii) shall be taken into account 
                under the method provided in subparagraph (B).
                    (B) Method.--The method provided in this 
                subparagraph is as follows:
                            (i) if the amount determined under 
                        subparagraph (A)(i) exceeds the amount 
                        determined under subparagraph (A)(ii), \1/8\ of 
                        such excess shall be taken into account, for 
                        each of the 8 succeeding taxable years, as a 
                        deduction under section 805(a)(2) of such Code, 
                        or
                            (ii) if the amount determined under 
                        subparagraph (A)(ii) exceeds the amount 
                        determined under subparagraph (A)(i), \1/8\ of 
                        such excess shall be included in gross income, 
                        for each of the 8 succeeding taxable years, 
                        under section 803(a)(2) of such Code.

SEC. 3505. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.

    (a) In General.--Paragraph (1) of section 807(f) is amended to read 
as follows:
            ``(1) Treatment as change in method of accounting.--If the 
        basis for determining any item referred to in subsection (c) as 
        of the close of any taxable year differs from the basis for 
        such determination as of the close of the preceding taxable 
        year, then so much of the difference between--
                    ``(A) the amount of the item at the close of the 
                taxable year, computed on the new basis, and
                    ``(B) the amount of the item at the close of the 
                taxable year, computed on the old basis,
        as is attributable to contracts issued before the taxable year 
        shall be taken into account under section 481 as adjustments 
        attributable to a change in method of accounting initiated by 
        the taxpayer and made with the consent of the Secretary.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3506. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR 
              PURPOSES OF DETERMINING THE DIVIDENDS RECEIVED DEDUCTION.

    (a) In General.--Section 812 is amended to read as follows:

``SEC. 812. DETERMINATION OF COMPANY'S AND POLICYHOLDER'S SHARE ON 
              ACCOUNT BY ACCOUNT BASIS.

    ``(a) Determination on Account by Account Basis.--Sections 
805(a)(4) and 807 shall be applied on an account by account basis.
    ``(b) Company's Share.--For purposes of section 805(a)(4), the term 
`company's share' means, with respect to any account for any taxable 
year, the ratio (expressed as a percentage) of--
            ``(1) the excess of--
                    ``(A) the mean assets of such account for such 
                taxable year, over
                    ``(B) the mean reserves with respect to such 
                account for such taxable year, divided by
            ``(2) the mean assets of such account for such taxable 
        year.
    ``(c) Policyholder's Share.--For purposes of section 807, the term 
`policyholder's share' means, with respect to any account for any 
taxable year, the excess of 100 percent over the percentage determined 
under paragraph (2).
    ``(d) Mean Assets and Mean Reserves Defined.--For purposes of this 
subsection--
            ``(1) Mean assets.--The term `mean assets' means, with 
        respect to any account for any taxable year, 50 percent of the 
        sum of--
                    ``(A) the fair market value of the assets of such 
                account determined as of the beginning of such taxable 
                year, and
                    ``(B) the fair market value of the assets of such 
                account determined as of the close of such taxable 
                year.
            ``(2) Mean reserves.--The term `mean reserves' means, with 
        respect to any account for any taxable year, 50 percent of the 
        sum of--
                    ``(A) the reserves with respect to such account as 
                determined under section 807 as of the beginning of 
                such taxable year, and
                    ``(B) the reserves with respect to such account as 
                determined under section 807 as of the close of such 
                taxable year.
            ``(3) Certain dividends not taken into account.--Dividends 
        described in section 246(c) shall not be taken into account for 
        purposes of determining mean assets or mean reserves.
            ``(4) Fees and expenses not taken into account.--Fees and 
        expenses shall not be taken into account for purposes of 
        determining mean assets or mean reserves.''.
    (b) Conforming Amendment.--Section 817A(e)(2) is amended by 
striking ``, 807(d)(2)(B), and 812'' and inserting ``and 807(d)(2)(B)''
    (c) Clerical Amendment.--The table of sections for subpart D of 
part I of subchapter L of chapter 1 is amended by striking the item 
relating to section 812 and inserting the following:

``Sec. 812. Determination of company's and policyholder's share on 
                            account by account basis.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3507. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS 
              FROM PRE-1984 POLICYHOLDERS SURPLUS ACCOUNT.

    (a) In General.--Subpart D of part I of subchapter L is amended by 
striking section 815 (and by striking the item relating to such section 
in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 801 is amended by striking 
subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (d) Phased Inclusion of Remaining Balance of Policyholders Surplus 
Accounts.--In the case of any stock life insurance company which has a 
balance (determined as of the close of such company's last taxable year 
beginning before January 1, 2015) in an existing policyholders surplus 
account (as defined in section 815 of the Internal Revenue Code of 
1986, as in effect before its repeal), the tax imposed by section 801 
of such Code for the first 8 taxable years beginning after December 31, 
2014, shall be the amount which would be imposed by such section for 
such year on the sum of--
            (1) life insurance company taxable income for such year 
        (within the meaning of such section 801 but not less than 
        zero), plus
            (2) \1/8\ of such balance.

SEC. 3508. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY 
              INSURANCE COMPANIES.

    (a) In General.--Section 832(b)(5)(B) is amended by striking ``15 
percent'' and inserting ``the percentage determined under subparagraph 
(F))''.
    (b) Determination of Percentage.--Section 832(b)(5) is amended by 
adding at the end the following new subparagraph:
                    ``(F) Determination of percentage.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), the percentage determined 
                        under this subparagraph is the ratio (expressed 
                        as a percentage) of--
                                    ``(I) the average adjusted bases 
                                (within the meaning of section 1016) of 
                                tax-exempt assets of the company, to
                                    ``(II) such average adjusted bases 
                                of all assets of the company.
                            ``(ii) Tax-exempt assets.--For purposes of 
                        clause (i)(I), the term `tax-exempt assets' 
                        means assets of the type which give rise to 
                        income described in subparagraph (B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3509. REPEAL OF SPECIAL TREATMENT OF BLUE CROSS AND BLUE SHIELD 
              ORGANIZATIONS, ETC.

    (a) Transitional Repeal of Special Rules.--
            (1) In general.--Section 833 is amended by striking 
        subsection (b), by redesignating subsection (c) as subsection 
        (b), and by amending subsection (a) to read as follows:
    ``(a) In General.--An organization to which this section applies 
shall be taxable under this part in the same manner as if it were a 
stock insurance company.''.
            (2) Tax status not dependent on medical loss ratio.--
        Subsection (b) of section 833, as redesignated by subsection 
        (a), is amended by striking paragraph (5).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2014.
    (b) Repeal of Statutory Treatment as a Stock Insurance Company.--
            (1) In general.--Part II of subchapter L of chapter is 
        amended by striking section 833 (and by striking the item 
        relating to such section in the table of sections for such 
        part).
            (2) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2016.

SEC. 3510. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND CASUALTY 
              INSURANCE COMPANIES.

    (a) Modification of Rate of Interest Used To Discount Unpaid 
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
            ``(2) Determination of annual rate.--The annual rate 
        determined by the Secretary under this paragraph for any 
        calendar year shall be a rate determined on the basis of the 
        corporate bond yield curve (as defined in section 
        430(h)(2)(D)(i)).''.
    (b) Modification of Computational Rules for Loss Payment 
Patterns.--Section 846(d)(3) is amended by striking subparagraphs (B) 
through (G) and inserting the following new subparagraphs:
                    ``(B) Treatment of certain losses.--Losses which 
                would have been treated as paid in the last year of the 
                period applicable under subparagraph (A)(i) or (A)(ii) 
                shall be treated as paid in the following manner:
                            ``(i) 3-year loss payment pattern.--
                                    ``(I) In general.--The period taken 
                                into account under subparagraph (A)(i) 
                                shall be extended to the extent 
                                required under subclause (II).
                                    ``(II) Computation of extension.--
                                The amount of losses which would have 
                                been treated as paid in the 3d year 
                                after the accident year shall be 
                                treated as paid in such 3d year and 
                                each subsequent year in an amount equal 
                                to the amount of the losses treated as 
                                paid in the 2d year after the accident 
                                year (or, if lesser, the portion of the 
                                unpaid losses not theretofore taken 
                                into account).
                            ``(ii) 10-year loss payment pattern.--
                                    ``(I) In general.--The period taken 
                                into account under subparagraph (A)(ii) 
                                shall be extended to the extent 
                                required under subclause (II).
                                    ``(II) Computation of extension.--
                                The amount of losses which would have 
                                been treated as paid in the 10th year 
                                after the accident year shall be 
                                treated as paid in such 10th year and 
                                each subsequent year in an amount equal 
                                to the amount of the losses treated as 
                                paid in the 9th year after the accident 
                                year (or, if lesser, the portion of the 
                                unpaid losses not theretofore taken 
                                into account).
                    ``(C) Special rule for international and 
                reinsurance lines of business.--Except as otherwise 
                provided by regulations, any determination made under 
                subsection (a) with respect to unpaid losses relating 
                to the international or reinsurance lines of business 
                shall be made using, in lieu of the loss payment 
                pattern applicable to the respective lines of business, 
                a pattern determined by the Secretary under paragraphs 
                (1) and (2) based on the combined losses for all lines 
                of business described in subparagraph (A)(ii).
                    ``(D) Special rule for 2d or 9th year if negative 
                or zero.--
                            ``(i) 3-year loss payment pattern.--If the 
                        amount of the losses treated as paid in the 2d 
                        year after the accident year is zero or a 
                        negative amount, subparagraph (B)(i)(II) shall 
                        be applied by substituting the average of the 
                        losses treated as paid in the 1st and 2d years 
                        after the accident year for the losses treated 
                        as paid in the 2d year after the accident year.
                            ``(ii) 10-year loss payment pattern.--If 
                        the amount of the losses treated as paid in the 
                        9th year after the accident year is zero or a 
                        negative amount, subparagraph (B)(ii)(II) shall 
                        be applied by substituting the average of the 
                        losses treated as paid in the 7th, 8th, and 9th 
                        years after the accident year for the losses 
                        treated as paid in the 9th year after the 
                        accident year.''.
    (c) Repeal of Historical Payment Pattern Election.--Section 846 is 
amended by striking subsection (e) and by redesignating subsections (f) 
and (g) as subsections (e) and (f), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (e) Transitional Rule.--For the first taxable year beginning after 
December 31, 2014--
            (1) the unpaid losses and the expenses unpaid (as defined 
        in paragraphs (5)(B) and (6) of section 832(b) of the Internal 
        Revenue Code of 1986) at the end of the preceding taxable year, 
        and
            (2) the unpaid losses as defined in sections 807(c)(2) and 
        805(a)(1) of such Code at the end of the preceding taxable 
        year,
shall be determined as if the amendments made by this section had 
applied to such unpaid losses and expenses unpaid in the preceding 
taxable year and by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2015, and any 
adjustment shall be taken into account ratably in such first taxable 
year and the 7 succeeding taxable years. For subsequent taxable years, 
such amendments shall be applied with respect to such unpaid losses and 
expenses unpaid by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2015.

SEC. 3511. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

    (a) In General.--Part III of subchapter L of chapter 1 is amended 
by striking section 847 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3512. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    (a) In General.--Paragraph (1) of section 848(c) is amended by 
striking subparagraphs (A), (B), and (C) and inserting the following 
new subparagraphs:
                    ``(A) 5 percent of the net premiums for such 
                taxable year on specified insurance contracts which are 
                group contracts, and
                    ``(B) 12 percent of the net premiums for such 
                taxable year on specified insurance contracts not 
                described in subparagraph (A).''.
    (b) Group Contracts.--So much of paragraph (2) of section 848(e) as 
precedes subparagraph (A) thereof is amended to read as follows:
            ``(2) Group contract.--The term `group contract' means any 
        specified insurance contract--''.
    (c) Conforming Amendments.--Section 848(e) is amended by striking 
paragraphs (3) and (6) and by redesignating paragraphs (4) and (5) as 
paragraphs (3) and (4), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3513. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 is amended by adding at the end the following new section:

``SEC. 6050X. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT 
              TRANSACTIONS.

    ``(a) Requirement of Reporting of Certain Payments.--
            ``(1) In general.--Every person who acquires a life 
        insurance contract or any interest in a life insurance contract 
        in a reportable policy sale during any taxable year shall make 
        a return for such taxable year (at such time and in such manner 
        as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of such person,
                    ``(B) the name, address, and TIN of each recipient 
                of payment in the reportable policy sale,
                    ``(C) the date of such sale,
                    ``(D) the name of the issuer of the life insurance 
                contract sold and the policy number of such contract, 
                and
                    ``(E) the amount of each payment.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to such person, except that in the 
                case of an issuer of a life insurance contract, such 
                statement is not required to include the information 
                specified in paragraph (1)(E).
    ``(b) Requirement of Reporting of Seller's Basis in Life Insurance 
Contracts.--
            ``(1) In general.--Upon receipt of the statement required 
        under subsection (a)(2) or upon notice of a transfer of a life 
        insurance contract to a foreign person, each issuer of a life 
        insurance contract shall make a return (at such time and in 
        such manner as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of the seller who 
                transfers any interest in such contract in such sale,
                    ``(B) the investment in the contract (as defined in 
                section 72(e)(6)) with respect to such seller, and
                    ``(C) the policy number of such contract.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each seller whose name is 
                required to be set forth in such return.
    ``(c) Requirement of Reporting With Respect to Reportable Death 
Benefits.--
            ``(1) In general.--Every person who makes a payment of 
        reportable death benefits during any taxable year shall make a 
        return for such taxable year (at such time and in such manner 
        as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of the person 
                making such payment,
                    ``(B) the name, address, and TIN of each recipient 
                of such payment,
                    ``(C) the date of each such payment, and
                    ``(D) the amount of each such payment.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each recipient of payment whose 
                name is required to be set forth in such return.
    ``(d) Definitions.--For purposes of this section:
            ``(1) Payment.--The term `payment' means the amount of cash 
        and the fair market value of any consideration transferred in a 
        reportable policy sale.
            ``(2) Reportable policy sale.--The term `reportable policy 
        sale' has the meaning given such term in section 101(a)(3)(B).
            ``(3) Issuer.--The term `issuer' means any life insurance 
        company that bears the risk with respect to a life insurance 
        contract on the date any return or statement is required to be 
        made under this section.
            ``(4) Reportable death benefits.--The term `reportable 
        death benefits' means amounts paid by reason of the death of 
        the insured under a life insurance contract that has been 
        transferred in a reportable policy sale.''.
    (b) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 is amended by inserting after 
the item relating to section 6050W the following new item:

``Sec. 6050X. Returns relating to certain life insurance contract 
                            transactions.''.
    (c) Conforming Amendments.--
            (1) Subsection (d) of section 6724 is amended--
                    (A) by striking ``or'' at the end of clause (xxiv) 
                of paragraph (1)(B), by striking ``and'' at the end of 
                clause (xxv) of such paragraph and inserting ``or'', 
                and by inserting after such clause (xxv) the following 
                new clause:
                            ``(xxvi) section 6050X (relating to returns 
                        relating to certain life insurance contract 
                        transactions), and'', and
                    (B) by striking ``or'' at the end of subparagraph 
                (GG) of paragraph (2), by striking the period at the 
                end of subparagraph (HH) of such paragraph and 
                inserting ``, or'', and by inserting after such 
                subparagraph (HH) the following new subparagraph:
                    ``(II) subsection (a)(2), (b)(2), or (c)(2) of 
                section 6050X (relating to returns relating to certain 
                life insurance contract transactions).''.
            (2) Section 6047 is amended--
                    (A) by redesignating subsection (g) as subsection 
                (h),
                    (B) by inserting after subsection (f) the following 
                new subsection:
    ``(g) Information Relating to Life Insurance Contract 
Transactions.--This section shall not apply to any information which is 
required to be reported under section 6050X.'', and
                    (C) by adding at the end of subsection (h), as so 
                redesignated, the following new paragraph:
            ``(4) For provisions requiring reporting of information 
        relating to certain life insurance contract transactions, see 
        section 6050X.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) reportable policy sales (as defined in section 
        6050X(d)(2) of the Internal Revenue Code of 1986 (as added by 
        subsection (a)) after December 31, 2014, and
            (2) reportable death benefits (as defined in section 
        6050X(d)(4) of such Code (as added by subsection (a)) paid 
        after December 31, 2014.

SEC. 3514. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.

    (a) Clarification With Respect to Adjustments.--Paragraph (1) of 
section 1016(a) is amended by striking subparagraph (A) and all that 
follows and inserting the following:
                    ``(A) for--
                            ``(i) taxes or other carrying charges 
                        described in section 266; or
                            ``(ii) expenditures described in section 
                        173 (relating to circulation expenditures),
                for which deductions have been taken by the taxpayer in 
                determining taxable income for the taxable year or 
                prior taxable years; or
                    ``(B) for mortality, expense, or other reasonable 
                charges incurred under an annuity or life insurance 
                contract;''.
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions entered into after August 25, 2009.

SEC. 3515. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.

    (a) In General.--Subsection (a) of section 101 is amended by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Exception to valuable consideration rules for 
        commercial transfers.--
                    ``(A) In general.--The second sentence of paragraph 
                (2) shall not apply in the case of a transfer of a life 
                insurance contract, or any interest therein, which is a 
                reportable policy sale.
                    ``(B) Reportable policy sale.--For purposes of this 
                paragraph, the term `reportable policy sale' means the 
                acquisition of an interest in a life insurance 
                contract, directly or indirectly, if the acquirer has 
                no substantial family, business, or financial 
                relationship with the insured apart from the acquirer's 
                interest in such life insurance contract. For purposes 
                of the preceding sentence, the term `indirectly' 
                applies to the acquisition of an interest in a 
                partnership, trust, or other entity that holds an 
                interest in the life insurance contract.''.
    (b) Conforming Amendment.--Paragraph (1) of section 101(a) is 
amended by striking ``paragraph (2)'' and inserting ``paragraphs (2) 
and (3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 2014.

            Subtitle G--Pass-Thru and Certain Other Entities

                         PART 1--S CORPORATIONS

SEC. 3601. REDUCED RECOGNITION PERIOD FOR BUILT-IN GAINS MADE 
              PERMANENT.

    (a) In General.--Paragraph (7) of section 1374(d) (relating to 
definitions and special rules) is amended to read as follows:
            ``(7) Recognition period.--
                    ``(A) In general.--The term `recognition period' 
                means the 5-year period beginning with the 1st day of 
                the 1st taxable year for which the corporation was an S 
                corporation. For purposes of applying this section to 
                any amount includible in income by reason of 
                distributions to shareholders pursuant to section 
                593(e), the preceding sentence shall be applied without 
                regard to the phrase `5-year'.
                    ``(B) Installment sales.--If an S corporation sells 
                an asset and reports the income from the sale using the 
                installment method under section 453, the treatment of 
                all payments received shall be governed by the 
                provisions of this paragraph applicable to the taxable 
                year in which such sale was made.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2013.

SEC. 3602. MODIFICATIONS TO S CORPORATION PASSIVE INVESTMENT INCOME 
              RULES.

    (a) Increased Percentage Limit.--Paragraph (2) of section 1375(a) 
is amended by striking ``25 percent'' and inserting ``60 percent''.
    (b) Repeal of Excessive Passive Income as a Termination Event.--
Section 1362(d) is amended by striking paragraph (3).
    (c) Conforming Amendments.--
            (1) Subsection (b) of section 1375 is amended by striking 
        paragraphs (3) and (4) and inserting the following new 
        paragraph:
            ``(3) Passive investment income defined.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `passive investment income' 
                means gross receipts derived from royalties, rents, 
                dividends, interest, and annuities.
                    ``(B) Exception for interest on notes from sales of 
                inventory.--The term `passive investment income' shall 
                not include interest on any obligation acquired in the 
                ordinary course of the corporation's trade or business 
                from its sale of property described in section 
                1221(a)(1).
                    ``(C) Treatment of certain lending or finance 
                companies.--If the S corporation meets the requirements 
                of section 542(c)(6) for the taxable year, the term 
                `passive investment income' shall not include gross 
                receipts for the taxable year which are derived 
                directly from the active and regular conduct of a 
                lending or finance business (as defined in section 
                542(d)(1)).
                    ``(D) Treatment of certain dividends.--If an S 
                corporation holds stock in a C corporation meeting the 
                requirements of section 1504(a)(2), the term `passive 
                investment income' shall not include dividends from 
                such C corporation to the extent such dividends are 
                attributable to the earnings and profits of such C 
                corporation derived from the active conduct of a trade 
                or business.
                    ``(E) Exception for banks, etc.--In the case of a 
                bank (as defined in section 581) or a depository 
                institution holding company (as defined in section 
                3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
                1813(w)(1)), the term `passive investment income' shall 
                not include--
                            ``(i) interest income earned by such bank 
                        or company, or
                            ``(ii) dividends on assets required to be 
                        held by such bank or company, including stock 
                        in the Federal Reserve Bank, the Federal Home 
                        Loan Bank, or the Federal Agricultural Mortgage 
                        Bank or participation certificates issued by a 
                        Federal Intermediate Credit Bank.
                    ``(F) Gross receipts from the sales of certain 
                assets.--For purposes of this paragraph--
                            ``(i) Capital assets other than stock and 
                        securities.--In the case of dispositions of 
                        capital assets (other than stock and 
                        securities), gross receipts from such 
                        dispositions shall be taken into account only 
                        to the extent of capital gain net income 
                        therefrom.
                            ``(ii) Stock and securities.--In the case 
                        of sales or exchanges of stock or securities, 
                        gross receipts shall be taken into account only 
                        to the extent of the gain therefrom.
                    ``(G) Coordination with section 1374.--The amount 
                of passive investment income shall be determined by not 
                taking into account any recognized built-in gain or 
                loss of the S corporation for any taxable year in the 
                recognition period. Terms used in the preceding 
                sentence shall have the same respective meanings as 
                when used in section 1374.''.
            (2)(A) Subparagraph (J) of section 26(b)(2) is amended by 
        striking ``25 percent'' and inserting ``60 percent''.
            (B) Clause (i) of section 1375(b)(1)(A) is amended by 
        striking ``25 percent'' and inserting ``60 percent''.
            (C) The heading for section 1375 is amended by striking 
        ``25 percent'' and inserting ``60 percent''.
            (D) The item relating to section 1375 in the table of 
        sections for part III of subchapter S of chapter 1 is amended 
        by striking ``25 percent'' and inserting ``60 percent''.
            (3) Subparagraph (B) of section 1362(f)(1) is amended by 
        striking ``paragraph (2) or (3) of subsection (d)'' and 
        inserting ``subsection (d)(2)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3603. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL 
              BUSINESS TRUST.

    (a) No Look-Through for Eligibility Purposes.--Subparagraph (C) of 
section 1361(b)(1) is amended by inserting ``(determined without regard 
to subsection (c)(2)(B)(v))'' after ``shareholder''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2015.

SEC. 3604. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL 
              BUSINESS TRUSTS.

    (a) In General.--Paragraph (2) of section 641(c), as amended by the 
preceding provisions of this Act, is amended by inserting after 
subparagraph (C) the following new subparagraph:
                    ``(D)(i) Section 642(c) shall not apply.
                    ``(ii) For purposes of section 170(b)(1)(E), 
                adjusted gross income shall be computed in the same 
                manner as in the case of an individual, except that the 
                deductions for costs which are paid or incurred in 
                connection with the administration of the trust and 
                which would not have been incurred if the property were 
                not held in such trust shall be treated as allowable in 
                arriving at adjusted gross income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3605. PERMANENT RULE REGARDING BASIS ADJUSTMENT TO STOCK OF S 
              CORPORATIONS MAKING CHARITABLE CONTRIBUTIONS OF PROPERTY.

    (a) In General.--Section 1367(a)(2) (relating to decreases in 
basis) is amended by striking the last sentence.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made in taxable years beginning after December 31, 
2013.

SEC. 3606. EXTENSION OF TIME FOR MAKING S CORPORATION ELECTIONS.

    (a) In General.--Subsection (b) of section 1362 is amended to read 
as follows:
    ``(b) When Made.--
            ``(1) In general.--An election under subsection (a) may be 
        made by a small business corporation for any taxable year not 
        later than the due date for filing the return of the S 
        corporation for such taxable year (including extensions).
            ``(2) Certain elections treated as made for next taxable 
        year.--If--
                    ``(A) an election under subsection (a) is made for 
                any taxable year within the period described in 
                paragraph (1), but
                    ``(B) either--
                            ``(i) on 1 or more days in such taxable 
                        year and before the day on which the election 
                        was made the corporation did not meet the 
                        requirements of subsection (b) of section 1361, 
                        or
                            ``(ii) 1 or more of the persons who held 
                        stock in the corporation during such taxable 
                        year and before the election was made did not 
                        consent to the election,
                then such election shall be treated as made for the 
                following taxable year.
            ``(3) Authority to treat late elections, etc., as timely.--
        If--
                    ``(A) an election under subsection (a) is made for 
                any taxable year after the date prescribed by this 
                subsection for making such election for such taxable 
                year or no such election is made for any taxable year, 
                and
                    ``(B) the Secretary determines that there was 
                reasonable cause for the failure to timely make such 
                election,
        the Secretary may treat such an election as timely made for 
        such taxable year.
            ``(4) Election on timely filed returns.--Except as 
        otherwise provided by the Secretary, an election under 
        subsection (a) for any taxable year may be made on a timely 
        filed return of the S corporation for such taxable year.
            ``(5) Secretarial authority.--The Secretary may prescribe 
        such regulations, rules, or other guidance as may be necessary 
        or appropriate for purposes of applying this subsection.''.
    (b) Coordination With Certain Other Provisions.--
            (1) Qualified subchapter s subsidiaries.--Section 
        1361(b)(3)(B) is amended by adding at the end the following 
        flush sentence:
                ``Rules similar to the rules of section 1362(b) shall 
                apply with respect to any election under clause 
                (ii).''.
            (2) Qualified subchapter s trusts.--Section 1361(d)(2) is 
        amended by striking subparagraph (D).
    (c) Revocations.--Paragraph (1) of section 1362(d) is amended--
            (1) by striking ``subparagraph (D)'' in subparagraph (C) 
        and inserting ``subparagraphs (D) and (E)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Authority to treat late revocations as 
                timely.--If--
                            ``(i) a revocation under subparagraph (A) 
                        is made for any taxable year after the date 
                        prescribed by this paragraph for making such 
                        revocation for such taxable year or no such 
                        revocation is made for any taxable year, and
                            ``(ii) the Secretary determines that there 
                        was reasonable cause for the failure to timely 
                        make such revocation,
                the Secretary may treat such a revocation as timely 
                made for such taxable year.''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        elections for taxable years beginning after December 31, 2014.
            (2) Revocations.--The amendments made by subsection (c) 
        shall apply to revocations after December 31, 2014.

SEC. 3607. RELOCATION OF C CORPORATION DEFINITION.

    (a) In General.--Subsection (a) of section 1361 is amended--
            (1) by striking paragraph (2), and
            (2) by striking ``S Corporation Defined.--'' and all that 
        follows through ``For purposes of this title, the term `S 
        corporation' means'' and inserting the following: ``In 
        General.--For purposes of this title, the term `S corporation' 
        means''.
    (b) Conforming Amendment.--Section 7701(a)(3) is amended--
            (1) by striking ``Corporation.--The term `corporation' 
        means'' and inserting the following: ``Corporations.--
                    ``(1) In general.--The term `corporation' means'', 
                and
            (2) by adding at the end the following new paragraph:
            ``(2) C corporations.--The term `C corporation' means, with 
        respect to any taxable year, a corporation which is not an S 
        corporation for such year.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                          PART 2--PARTNERSHIPS

SEC. 3611. REPEAL OF RULES RELATING TO GUARANTEED PAYMENTS AND 
              LIQUIDATING DISTRIBUTIONS.

    (a) Payment to Partner for Services or Use of Capital.--
            (1) In general.--Section 707 is amended by striking 
        subsection (c).
            (2) Conforming amendments.--
                    (A) Section 267(e) is amended by striking paragraph 
                (4).
                    (B) Section 706(a) is amended by striking ``and 
                707(c)''.
                    (C) Section 1402(a) is amended, in the matter 
                following paragraph (17)--
                            (i) by striking ``(after such gross income 
                        has been reduced by the sum of all payments to 
                        which section 707(c) applies)'' in clauses 
                        (iii) and (iv), and
                            (ii) by striking ``(after such gross income 
                        has been so reduced)'' in clause (iv).
                    (D) Section 2701(c)(1)(B) is amended by inserting 
                ``or'' at the end of clause (i), by striking ``, or'' 
                at the end of clause (ii) and inserting a period, and 
                by striking clause (iii).
                    (E) Section 7519(d) is amended by striking 
                paragraph (5).
            (3) Effective dates.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by this subsection 
                shall apply to partnership taxable years beginning 
                after December 31, 2014.
                    (B) Transfers.--The amendment made by paragraph 
                (2)(E) shall apply to transfers after December 31, 
                2014.
    (b) Payments Made in Liquidation of Retiring or Deceased Partner.--
            (1) In general.--Subpart B of part II of subchapter K of 
        chapter 1 is amended by striking section 736 (and by striking 
        the item relating to such section in the table of sections for 
        such subpart).
            (2) Retired partners and successors in interest of deceased 
        partners treated as partners until liquidation.--Section 761(d) 
        is amended by adding at the end the following: ``For purposes 
        of this subchapter, any retired partner or a deceased partner's 
        successor in interest shall be treated as a partner until the 
        complete liquidation of such interest.''
            (3) Conforming amendment.--
                    (A) Section 357(c)(3)(A) is amended by striking 
                ``payment of which either--'' and all that follows 
                through ``then, for purposes of'' and inserting 
                ``payment of which would give rise to a deduction, 
                then, for purposes of''.
                    (B) Section 731(d) is amended--
                            (i) by striking ``section 736 (relating to 
                        payments to a retiring partner or a deceased 
                        partner's successor in interest),'', and
                            (ii) by striking ``items), and'' and 
                        inserting ``items) and''.
                    (C) Section 751(b)(2) is amended--
                            (i) by striking subparagraph (B), and
                            (ii) by striking ``shall not apply to--'' 
                        and all that follows through ``a distribution 
                        of property'' and inserting the following: 
                        ``shall not apply to a distribution of 
                        property''.
                    (D)(i) Section 753 is amended by striking ``The 
                amount includible'' and all that follows and inserting 
                ``For treatment of income in respect of a decedent, see 
                section 691.''
                    (ii) Section 691 is amended by striking subsection 
                (e).
            (4) Effective date.--The amendments made by this subsection 
        shall apply to partners retiring or dying after December 31, 
        2014.

SEC. 3612. MANDATORY ADJUSTMENTS TO BASIS OF PARTNERSHIP PROPERTY IN 
              CASE OF TRANSFER OF PARTNERSHIP INTERESTS.

    (a) In General.--Section 743 is amended--
            (1) by striking subsections (a), (c), (d), (e), and (f) and 
        by redesignating subsection (b) as subsection (a),
            (2) in subsection (a) (as so redesignated) by striking 
        ``with respect to which the election provided in section 754 is 
        in effect or which has a substantial built-in loss immediately 
        after such transfer'', and
            (3) by adding at the end the following new subsection:
    ``(b) Allocation of Basis.--
            ``(1) General rule.--Any increase or decrease in the 
        adjusted basis of partnership property under subsection (a) 
        shall, except as provided in paragraph (2), be allocated--
                    ``(A) in a manner which has the effect of reducing 
                the difference between the fair market value and the 
                adjusted basis of partnership properties, or
                    ``(B) in any other manner permitted by regulations 
                prescribed by the Secretary.
            ``(2) Special rule.--In applying the allocation rules 
        provided in paragraph (1), increases or decreases in the 
        adjusted basis of partnership property arising from a transfer 
        of an interest attributable to property consisting of--
                    ``(A) capital assets and property described in 
                section 1231(b), or
                    ``(B) any other property of the partnership,
        shall be allocated to partnership property of a like character 
        except that the basis of any such partnership property shall 
        not be reduced below zero.''.
    (b) Conforming Amendments.--
            (1) Section 704(c)(1) is amended--
                    (A) by adding ``and'' at the end of subparagraph 
                (A),
                    (B) by striking ``, and'' at the end of 
                subparagraph (B) and inserting a period, and
                    (C) by striking all that follows subparagraph (B).
            (2) Section 732 is amended by striking subsection (d) and 
        by redesignating subsections (e) and (f) as subsections (d) and 
        (e), respectively.
            (3) Section 761(e)(2) is amended by striking ``optional''.
            (4) Section 6031 is amended by striking subsection (f).
            (5) The heading for section 743 is amended to read as 
        follows: ``adjustment to basis of partnership property.''
            (6) The heading for subsection (a) (as redesignated by the 
        preceding provisions of this Act) of section 743 is amended by 
        striking ``Adjustment to Basis of Partnership Property'' and 
        inserting ``In General''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 2014.

SEC. 3613. MANDATORY ADJUSTMENTS TO BASIS OF UNDISTRIBUTED PARTNERSHIP 
              PROPERTY.

    (a) In General.--Section 734 is amended to read as follows:

``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP PROPERTY.

    ``(a) In General.--In the case of any distribution to a partner, 
the partnership shall adjust the basis of partnership property such 
that each remaining partner's net liquidation amount immediately after 
such distribution is equal to such partner's net liquidation amount 
immediately before such distribution.
    ``(b) Distributions Other Than in Liquidation of a Partner's 
Interest.--In the case of any distribution to a partner other than in 
liquidation of such partner's interest, proper adjustment shall be made 
under subsection (a) with respect to such partner to take into 
account--
            ``(1) the amount of any gain recognized by such partner 
        with respect to such distribution under section 731(a), and
            ``(2) the amount of any gain or loss which would be 
        recognized by such partner if such partner sold the property 
        distributed at fair market value immediately after such 
        distribution.
    ``(c) Net Liquidation Amount.--For purposes of this section, the 
term `net liquidation amount' means, with respect to any partner, the 
net amount of gain or loss (if any) which would be taken into account 
by the partner under section 702 if the partnership sold all of its 
assets at fair market value (and no other amounts were taken into 
account under such section).
    ``(d) Allocation of Basis.--
            ``(1) Decreases in basis.--Any decrease in the adjusted 
        basis of partnership property which is required under this 
        section--
                    ``(A) shall be made in accordance with paragraph 
                (3) of section 732(c), and
                    ``(B) shall be made first with respect to property 
                other than unrealized receivables (as defined in 
                section 751(c)) and inventory (as defined in section 
                751(d)) to the extent thereof.
        If any such decrease is prevented by the absence of sufficient 
        adjusted basis of partnership property, each partner shall 
        recognize gain in the amount of such partner's distributive 
        share of such prevented decrease. Such gain shall be treated as 
        gain from the sale of the partner's partnership interest.
            ``(2) Increases in basis.--Any increase in the adjusted 
        basis of partnership property which is required under this 
        section--
                    ``(A) shall be made in accordance with paragraph 
                (2) of section 732(c), and
                    ``(B) shall be made only with respect to property 
                other than unrealized receivables (as defined in 
                section 751(c)) and inventory (as defined in section 
                751(d)).
        If any such increase is prevented by the absence of property 
        described in subparagraph (B), each partners shall recognize a 
        loss in the amount of such partner's distributive share of such 
        prevented increase. Such loss shall be treated as a loss from 
        the sale of the partner's partnership interest.
    ``(e) No Allocation of Basis Decrease to Stock of Corporate 
Partner.--In making an allocation under subsection (d) of any decrease 
in the adjusted basis of partnership property required under subsection 
(a)--
            ``(1) no allocation may be made to stock in a corporation 
        (or any person related (within the meaning of section 267(b) or 
        707(b)(1)) to such corporation) which is a partner in the 
        partnership, and
            ``(2) any amount not allocable to stock by reason of 
        paragraph (1) shall be allocated under subsection (d) to other 
        partnership property.
Gain shall be recognized by the partnership to the extent that the 
amount required to be allocated to other partnership property under 
subsection (e)(2) exceeds the aggregate adjusted basis of such other 
property immediately before the allocation required by subsection 
(a).''.
    (b) Conforming Amendments.--
            (1)(A) Subpart D of part II of subchapter K of chapter 1 is 
        amended by striking sections 754 and 755 (and by striking items 
        relating to such sections in the table of sections of such 
        subpart).
            (B) Clause (ii) of section 706(d)(2)(D) is amended by 
        striking ``section 755'' and inserting ``section 743(b)''.
            (2) Subsection (d) of section 1060 is amended--
                    (A) by striking ``section 755'' in paragraph (1) 
                and inserting ``sections 734 and 743'', and
                    (B) by striking ``section 755'' in paragraph (2) 
                and inserting ``section 734 or 743''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2014.

SEC. 3614. CORRESPONDING ADJUSTMENTS TO BASIS OF PROPERTIES HELD BY 
              PARTNERSHIP WHERE PARTNERSHIP BASIS ADJUSTED.

    (a) In General.--Subpart B of part II of subchapter K of chapter 1, 
as amended by the preceding provisions of this Act, is amended by 
inserting after section 735 the following new section:

``SEC. 736. CORRESPONDING ADJUSTMENT TO BASIS OF PROPERTIES HELD BY 
              LOWER-TIER PARTNERSHIP IN CASE OF UPPER-TIER PARTNERSHIP 
              BASIS ADJUSTMENTS.

    ``(a) Distributions by Upper-Tier Partnership.--In the case of any 
distribution of property to a partner by an upper-tier partnership, if 
such distribution results in an adjustment in the upper-tier 
partnership's adjusted basis in an interest in a lower-tier partnership 
under section 734, then such lower-tier partnership shall make a 
corresponding adjustment to the adjusted basis of its partnership 
property.
    ``(b) Distributions of Interests in Lower-Tier Partnership.--In the 
case of any distribution of an interest in a lower-tier partnership by 
an upper-tier partnership--
            ``(1) if the adjusted basis of such interest in the hands 
        of the upper-tier partnership (determined immediately before 
        such distribution) exceeds the adjusted basis of such interest 
        in the hands of the distributee partner (determined immediately 
        after such distribution), then such lower-tier partnership 
        shall decrease the adjusted basis of its partnership property 
        by the amount of such excess, or
            ``(2) if the adjusted basis of such interest in the hands 
        of the distributee partner (determined immediately after such 
        distribution) exceeds the adjusted basis of such interest in 
        the hands of the upper-tier partnership (determined immediately 
        before such distribution), then such lower-tier partnership 
        shall increase the adjusted basis of its partnership property 
        by the amount of such excess.
    ``(c) Dispositions of Interests in Upper-Tier Partnership.--In the 
case of a disposition of an interest in an upper-tier partnership which 
holds an interest in a lower-tier partnership, if there is an 
adjustment to the adjusted basis of the lower-tier partnership under 
section 743, then such lower-tier partnership shall make a 
corresponding adjustment to the adjusted basis of its partnership 
property.
    ``(d) Multi-Tiered Partnerships.--In the case of any adjustment 
under subsection (a), (b), or (c) in the adjusted basis of an interest 
in another partnership, such other partnership shall make a 
corresponding adjustment in the adjusted basis of its partnership 
property.
    ``(e) Allocation of Basis; Recognition of Gain.--In the case of any 
adjustment in the adjusted basis of partnership property--
            ``(1) under subsection (a), (b), (c), or (d), such 
        adjustment shall be made only with respect to the upper-tier 
        partnership's proportionate share (as determined under section 
        743(a)) of the adjusted basis of the lower-tier partnership's 
        property,
            ``(2) under subsection (a) or (b) (or so much of subsection 
        (d) as relates to either such subsection), rules similar to the 
        rules of section 734(d) shall apply, and
            ``(3) under subsection (c) (or so much of subsection (d) as 
        relates to such subsection), rules similar to the rules of 
        section 743(b) shall apply.
    ``(f) Reporting.--In the case of any adjustment in the adjusted 
basis of partnership property by a lower-tier partnership under this 
section by reason of a distribution by, or a disposition of an interest 
in, an upper-tier partnership, such upper-tier partnership shall 
furnish (in such manner as the Secretary shall prescribe) to such 
lower-tier partnership such information as is necessary to enable such 
lower-tier partnership to make such adjustment.
    ``(g) Upper- and Lower-Tier Partnerships.--For purposes of this 
section--
            ``(1) Upper-tier partnership.--The term `upper-tier 
        partnership' means a partnership owning an interest in another 
        partnership.
            ``(2) Lower-tier partnership.--The term `lower-tier 
        partnership' means the partnership referred to in paragraph (1) 
        an interest in which is owned by the upper-tier partnership.''.
    (b) Effective Dates.--The amendments made by this section shall 
apply to distributions and transfers after December 31, 2014.

SEC. 3615. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO 
              ACCOUNT IN DETERMINING LIMITATION ON ALLOWANCE OF 
              PARTNER'S SHARE OF LOSS.

    (a) In General.--Subsection (d) of section 704 is amended--
            (1) by striking ``A partner's distributive share'' and 
        inserting the following:
            ``(1) In general.--A partner's distributive share'',
            (2) by striking ``Any excess of such loss'' and inserting 
        the following:
            ``(2) Carryover.--Any excess of such loss'', and
            (3) by adding at the end the following new paragraph:
            ``(3) Special rules.--In determining the amount of any loss 
        under paragraph (1), there shall be taken into account as a 
        deduction the partner's distributive share of--
                    ``(A) the adjusted basis of charitable 
                contributions described in paragraph (4) of section 
                702(a), and
                    ``(B) the amount of taxes described in paragraph 
                (6) of such section.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2014.

SEC. 3616. REVISIONS RELATED TO UNREALIZED RECEIVABLES AND INVENTORY 
              ITEMS.

    (a) Repeal of Requirement That Inventory Be Substantially 
Appreciated in Certain Partnership Distributions Treated as Sale or 
Exchange.--
            (1) In general.--Clause (ii) of section 751(b)(1)(A) is 
        amended by striking ``which have appreciated substantially in 
        value''.
            (2) Conforming amendment.--Section 751(b) is amended by 
        striking paragraph (3).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to distributions after December 31, 2014.
    (b) Revision of Regulations Relating to Treatment of Unrealized 
Receivables and Inventory Items.--The Secretary of the Treasury shall 
revise regulations issued under section 751(b) of the Internal Revenue 
Code of 1986 to take into account the partner's share of income and 
gain rather than the partner's share of partnership assets.
    (c) Simplification of Definition of Unrealized Receivables.--
            (1) In general.--Section 751(c) is amended by striking all 
        that follows paragraph (2) and inserting the following:
``For purposes of this section and sections 731, 732, 734, and 741, 
such term also includes any property other than inventory items, but 
only to the extent of the amount which would be treated as ordinary 
income if (at the time of the transaction described in the applicable 
section) such property had been sold by the partnership for its fair 
market value.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to partnership taxable years beginning after 
        December 31, 2014.

SEC. 3617. REPEAL OF TIME LIMITATION ON TAXING PRECONTRIBUTION GAIN.

    (a) In General.--Subparagraph (B) of section 704(c)(1) is amended 
by striking ``within 7 years of being contributed''.
    (b) Conforming Amendment.--Paragraph (1) of section 737(b) is 
amended by striking ``within 7 years of the distribution''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property contributed to a partnership after December 31, 2014.

SEC. 3618. PARTNERSHIP INTERESTS CREATED BY GIFT.

    (a) In General.--Section 761(b) is amended by adding at the end the 
following: ``In the case of a capital interest in a partnership in 
which capital is a material income-producing factor, whether a person 
is a partner with respect to such interest shall be determined without 
regard to whether such interest was derived by gift from any other 
person.''.
    (b) Conforming Amendments.--Section 704(e) is amended--
            (1) by striking paragraph (1) and by redesignating 
        paragraphs (2) and (3) as paragraphs (1) and (2), respectively,
            (2) by striking ``this section'' in paragraph (2) (as so 
        redesignated) and inserting ``this subsection'', and
            (3) by striking ``Family Partnerships'' in the heading and 
        inserting ``Partnership Interests Created by Gift''.
    (c) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2014.

SEC. 3619. REPEAL OF TECHNICAL TERMINATION.

    (a) In General.--Paragraph (1) of section 708(b) is amended--
            (1) by striking ``, or'' and all that follows and inserting 
        a period, and
            (2) by striking ``only if--'' and all that follows through 
        ``no part of any business'' and inserting the following: ``only 
        if no part of any business''.
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2014.

SEC. 3620. PUBLICLY TRADED PARTNERSHIP EXCEPTION RESTRICTED TO MINING 
              AND NATURAL RESOURCES PARTNERSHIPS.

    (a) In General.--Subsection (d) of section 7704 is amended to read 
as follows:
    ``(d) Qualifying Income.--For purposes of this section, the term 
`qualifying income' means--
            ``(1) income and gains derived from the exploration, 
        development, mining or production, processing, refining, 
        transportation (including pipelines transporting gas, oil, or 
        products thereof), or the marketing of any mineral or natural 
        resource (including geothermal energy and excluding fertilizer 
        and timber) or industrial source carbon dioxide, and
            ``(2) any gain from the sale or disposition of a capital 
        asset (or property described in section 1231(b)) held for the 
        production of income described in paragraph (1).
For purposes of this subsection, the term `mineral or natural resource' 
means any product of a character with respect to which a deduction for 
depletion is allowable under section 611 (other than minerals from sea 
water or the air (or similar inexhaustible sources), soil, sod, dirt, 
turf, water, or mosses).''.
    (b) Conforming Amendments.--Section 988(c)(1)(E) is amended--
            (1) by striking ``income or gains described in subparagraph 
        (A), (B), or (G) of section 7704(d)(1)'' in clause (iii)(III) 
        and inserting ``qualifying income or gains'',
            (2) by striking subclause (III) of clause (vi) and by 
        redesignating subclause (IV) as subclause (III),
            (3) by redesignating clause (vi) (as amended by this 
        subparagraph) as clause (viii), and
            (4) by inserting after clause (v) the following new 
        clauses:
                            ``(vi) Qualifying income or gains.--The 
                        term `qualifying income or gains' means--
                                    ``(I) interest,
                                    ``(II) dividends, and
                                    ``(III) in the case of a 
                                partnership described in the second 
                                sentence of section 7704(c)(3), income 
                                and gains from commodities (not 
                                described in section 1221(a)(1)) or 
                                futures, forwards, and options with 
                                respect to commodities.
                            ``(vii) Inadvertent terminations.--If--
                                    ``(I) A partnership fails to meet 
                                the gross income requirements of this 
                                subparagraph,
                                    ``(II) the Secretary determines 
                                that such failure was inadvertent,
                                    ``(III) no later than a reasonable 
                                time after the discovery of such 
                                failure, steps are taken so that such 
                                partnership once more meets such gross 
                                income requirements, and
                                    ``(IV) such partnership agrees to 
                                make such adjustments (including 
                                adjustments with respect to the 
                                partners) or to pay such amounts as may 
                                be required by the Secretary with 
                                respect to such period,
                        then, notwithstanding such failure, such entity 
                        shall be treated as continuing to meet such 
                        gross income requirements for such period.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2016.

SEC. 3621. ORDINARY INCOME TREATMENT IN THE CASE OF PARTNERSHIP 
              INTERESTS HELD IN CONNECTION WITH PERFORMANCE OF 
              SERVICES.

    (a) In General.--Part IV of subchapter O of chapter 1 is amended--
            (1) by redesignating section 1061 as section 1062, and
            (2) by inserting after section 1060 the following new 
        section:

``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH PERFORMANCE 
              OF SERVICES.

    ``(a) In General.--If one or more applicable partnership interests 
are held by a taxpayer at any time during the taxable year, so much 
of--
            ``(1) the taxpayer's net capital gain with respect to such 
        interests for such taxable year, as does not exceed
            ``(2) the taxpayer's recharacterization account balance for 
        such taxable year,
shall be treated as ordinary income.
    ``(b) Net Capital Gain.--
            ``(1) In general.--For purposes of subsection (a)(1), net 
        capital gain shall be determined under section 1222, except 
        that such section shall be applied--
                    ``(A) without regard to the recharacterization of 
                any item as ordinary income under this section,
                    ``(B) by only taking into account items of gain and 
                loss--
                            ``(i) taken into account by the taxpayer 
                        under section 702 with respect to any 
                        applicable partnership interest,
                            ``(ii) recognized by the taxpayer on the 
                        disposition of any such interest, or
                            ``(iii) recognized by the taxpayer under 
                        paragraph (4) on a distribution of property 
                        with respect to such interest, and
                    ``(C) in the case of a taxable year for which 
                section 1231 gains (as defined in section 
                1231(a)(3)(A)) exceed section 1231 losses (as defined 
                in section 1231(a)(3)(B)), by treating property which 
                is taken into account in determining such gains and 
                losses as capital assets held for more than 1 year.
            ``(2) Allocation to items of gain.--The amount treated as 
        ordinary income under subsection (a) shall be allocated ratably 
        among the items of long-term capital gain taken into account in 
        determining net capital gain under paragraph (1).
            ``(3) Recognition of gain on disposition of applicable 
        partnership interests.--Any gain on the disposition of any 
        applicable partnership interest shall be recognized 
        notwithstanding any other provision of this title.
            ``(4) Recognition of gain on distributions of partnership 
        property.--
                    ``(A) In general.--In the case of any distribution 
                of property by a partnership with respect to any 
                applicable partnership interest, the partner receiving 
                such property shall recognize gain equal to the excess 
                (if any) of--
                            ``(i) the fair market value of such 
                        property at the time of such distribution, over
                            ``(ii) the adjusted basis of such property 
                        in the hands of such partner (determined 
                        without regard to subparagraph (B)).
                    ``(B) Adjustment of basis.--In the case of a 
                distribution to which subparagraph (A) applies, the 
                basis of the distributed property in the hands of the 
                distributee partner shall be the amount determined 
                under subparagraph (A)(i).
    ``(c) Recharacterization Account Balance.--
            ``(1) In general.--For purposes of this section, the term 
        `recharacterization account balance' means, with respect to any 
        taxpayer for any taxable year, the excess (if any) of--
                    ``(A) the sum of--
                            ``(i) the taxpayer's aggregate annual 
                        recharacterization amounts with respect to 
                        applicable partnership interests for such 
                        taxable year, plus
                            ``(ii) the taxpayer's recharacterization 
                        account balance for the taxable year preceding 
                        such taxable year, over
                    ``(B) the sum of--
                            ``(i) the taxpayer's net ordinary income 
                        with respect to applicable partnership 
                        interests for such taxable year (determined 
                        without regard to this section), plus
                            ``(ii) the amount treated as ordinary 
                        income of the taxpayer under this section for 
                        the taxable year preceding such taxable year.
            ``(2) Annual recharacterization amount.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `annual 
                recharacterization amount' means, with respect to any 
                applicable partnership interest for any partnership 
                taxable year, an amount equal to the product of--
                            ``(i) the specified rate determined under 
                        subparagraph (B) for the calendar year in which 
                        such taxable year begins, multiplied by
                            ``(ii) the excess (if any) of--
                                    ``(I) an amount equal to the 
                                applicable percentage of the 
                                partnership's aggregate invested 
                                capital for such taxable year, over
                                    ``(II) the specified capital 
                                contribution of the partner with 
                                respect to the applicable partnership 
                                interest for such taxable year.
                If a taxpayer holds an applicable partnership interest 
                for less than the entire taxable year, the amount 
                determined under the preceding sentence shall be 
                ratably reduced.
                    ``(B) Specified rate.--For purposes of subparagraph 
                (A), the term `specified rate' means, with respect to 
                any calendar year, a percentage equal to--
                            ``(i) the Federal long-term rate determined 
                        under section 1274(d)(1) for the last month of 
                        the calendar year, plus
                            ``(ii) 10 percentage points.
                    ``(C) Applicable percentage.--
                            ``(i) In general.--The term `applicable 
                        percentage' means, with respect to any 
                        applicable partnership interest, the highest 
                        percentage of profits of the partnership that 
                        could be allocated with respect to such 
                        interest for the taxable year (consistent with 
                        the partnership agreement and assuming such 
                        facts and circumstances with respect to such 
                        taxable year as would result in such highest 
                        percentage).
                            ``(ii) Secretarial authority.--The 
                        Secretary shall prescribe rules for the 
                        determination of the applicable percentage in 
                        cases in which the percentage of profits of a 
                        partnership that are to be allocated with 
                        respect to an applicable partnership interest 
                        varies on the basis of the aggregate amount of 
                        such profits. Such rules may provide a 
                        percentage which may be used in lieu of the 
                        highest percentage determined under clause (i) 
                        in cases where such other percentage is 
                        consistent with the purposes of this section.
                    ``(D) Aggregate invested capital.--
                            ``(i) In general.--The term `aggregate 
                        invested capital' means, with respect to any 
                        taxable year, the average daily amount of 
                        invested capital of the partnership for such 
                        taxable year.
                            ``(ii) Invested capital.--The term 
                        `invested capital' means, with respect to any 
                        partnership as of any day, the total cumulative 
                        value, determined at the time of contribution, 
                        of all money or other property contributed to 
                        the partnership on or before such day.
                            ``(iii) Reduction for liquidation of 
                        partnership interests.--The invested capital of 
                        a partnership shall be reduced by the aggregate 
                        amount distributed in liquidation of interests 
                        in the partnership.
                            ``(iv) Treatment of certain indebtedness as 
                        invested capital.--The following amounts shall 
                        be treated as invested capital:
                                    ``(I) Partner loans.--The aggregate 
                                value (determined as of the time of the 
                                loan) of money or other property which 
                                a partner loans to the partnership.
                                    ``(II) Indebtedness eligible to 
                                share in equity of the partnership.--
                                The face amount of any convertible debt 
                                of the partnership or any debt 
                                obligation providing equity 
                                participation in the partnership.
                    ``(E) Specified capital contribution.--
                            ``(i) In general.--The term `specified 
                        capital contribution' means, with respect to 
                        any applicable partnership interest for any 
                        taxable year, the average daily amount of 
                        contributed capital with respect to such 
                        interest for such year.
                            ``(ii) Contributed capital.--The term 
                        `contributed capital' means, with respect to 
                        applicable partnership interest as of any day, 
                        the excess (if any) of--
                                    ``(I) the total cumulative value, 
                                determined at the time of contribution, 
                                of all money or other property 
                                contributed by the partner to the 
                                partnership with respect to such 
                                interest as of such day, over
                                    ``(II) the total cumulative value, 
                                determined at the time of distribution, 
                                of all money or other property 
                                distributed by the partnership to the 
                                partner with respect to such interest 
                                as of such day.
                            ``(iii) Treatment of related party 
                        borrowings.--Any amount borrowed directly or 
                        indirectly from the partnership or any other 
                        partner of the partnership or any person 
                        related to such other partner or such 
                        partnership shall not be taken into account 
                        under this subparagraph. For purposes of the 
                        preceding sentence, a person shall be treated 
                        as related to another person if the 
                        relationship between such persons would be 
                        described in section 267(b) or 707(b) if such 
                        sections and section 267(f) were applied by 
                        substituting `10 percent' for `50 percent' each 
                        place it appears.
                    ``(F) Multiple interests.--If at any time during a 
                taxable year a taxpayer holds directly or indirectly 
                more than 1 applicable partnership interest in a single 
                partnership, such interests shall be treated as 1 
                applicable partnership interest for purposes of 
                applying this paragraph.
            ``(3) Net ordinary income.--For purposes of this 
        subsection, the net ordinary income with respect to applicable 
        partnership interests for any taxable year is the excess (if 
        any) of--
                    ``(A) the taxpayer's distributive share of items of 
                income and gain under section 702 with respect to 
                applicable partnership interests for such taxable year 
                (determined without regard to any items of gain taken 
                into account in determining net capital gain under 
                subsection (b)(1)), over
                    ``(B) the taxpayer's distributive share of items of 
                deduction and loss under section 702 with respect to 
                such interests for such taxable year (determined 
                without regard to any items of loss taken into account 
                in determining net capital gain under subsection 
                (b)(1)).
    ``(d) Applicable Partnership Interest.--For purposes of this 
section--
            ``(1) In general.--The term `applicable partnership 
        interest' means any interest in a partnership which, directly 
        or indirectly, is transferred to (or is held by) the taxpayer 
        in connection with the performance of services by the taxpayer, 
        or any other person, in any applicable trade or business.
            ``(2) Applicable trade or business.--
                    ``(A) In general.--The term `applicable trade or 
                business' means any trade or business conducted on a 
                regular, continuous, and substantial basis which, 
                regardless of whether the activities are conducted in 
                one or more entities, consists, in whole or in part, 
                of--
                            ``(i) raising or returning capital,
                            ``(ii) investing in (or disposing of) 
                        trades or businesses (or identifying trades or 
                        businesses for such investing or disposition), 
                        and
                            ``(iii) developing such trades or 
                        businesses.
                    ``(B) Treatment of research and experimentation 
                activities.--Any activity involving research or 
                experimentation (within the meaning of section 
                469(c)(4)) shall be treated as a trade or business for 
                purposes of clauses (ii) and (iii) of subparagraph (A).
    ``(e) Transfer of Applicable Partnership Interest to Related 
Person.--
            ``(1) In general.--If a taxpayer transfers any applicable 
        partnership interest, directly or indirectly, to a person 
        related to the taxpayer, the taxpayer shall include in gross 
        income (as ordinary income) so much of the taxpayer's 
        recharacterization account balance for such taxable year as is 
        allocable to such interest (determined in such manner as the 
        Secretary may provide and reduced by any amount treated as 
        ordinary income under subsection (a) with respect to the 
        transfer of such interest).
            ``(2) Related person.--For purposes of this paragraph, a 
        person is related to the taxpayer if--
                    ``(A) the person is a member of the taxpayer's 
                family within the meaning of section 318(a)(1), or
                    ``(B) the person performed a service within the 
                current calendar year or the preceding three calendar 
                years in any applicable trade or business in which or 
                for which the taxpayer performed a service.
    ``(f) Reporting by Entity of Taxpayer's Annual Recharacterization 
Amount.--A partnership shall report to the Secretary, and include with 
the information required to be furnished under section 6031(b) to each 
partner, the amount of the partner's annual recharacterization amount 
for the taxable year, if any. A similar rule applies to any entity that 
receives a report of an annual recharacterization amount for the 
taxable year.
    ``(g) Regulations.--The Secretary shall issue such regulations or 
other guidance as necessary to carry out this section, including 
regulations--
            ``(1) to prevent the abuse of the purposes of this section, 
        including through--
                    ``(A) the allocation of income to tax indifferent 
                parties, or
                    ``(B) a reduction in the invested capital of the 
                partnership (including attempts to undervalue 
                contributed or loaned property),
            ``(2) which provide that partnership interests shall not 
        fail to be treated as transferred or held in connection with 
        the performance of services merely because the taxpayer also 
        made contributions to the partnership,
            ``(3) which provide for the application of this section in 
        cases where the taxpayer has more than 1 applicable interest in 
        a partnership, and
            ``(4) which provide for the application of this section in 
        cases of tiered structures of entities.''.
    (b) Coordination With Section 83.--Subsection (e) of section 83 is 
amended by striking ``or'' at the end of paragraph (4), by striking the 
period at the end of paragraph (5) and inserting ``, or'', and by 
adding at the end the following new paragraph:
            ``(6) a transfer of a partnership interest to which section 
        1061 applies.''.
    (c) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 is amended by striking the item relating to 
1061 and inserting the following new items:

``Sec. 1061. Partnership interests held in connection with performance 
                            of services.
``Sec. 1062. Cross references.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3622. PARTNERSHIP AUDITS AND ADJUSTMENTS.

    (a) Repeal of TEFRA Partnership Audit Rules.--Chapter 63 is amended 
by striking subchapter C (and by striking the item relating to such 
subchapter in the table of subchapters for such chapter).
    (b) Repeal of Electing Large Partnership Rules.--
            (1) In general.--Subchapter K of chapter 1 is amended by 
        striking part IV (and by striking the item relating to such 
        part in the table of parts for such subchapter).
            (2) Assessment rules relating to electing large 
        partnerships.--Chapter 63 is amended by striking subchapter D 
        (and by striking the item relating to such subchapter in the 
        table of subchapters for such chapter).
            (3) Effective date.--The amendments made by this section 
        shall apply to returns filed after December 31, 2014.
    (c) Partnership Audit Reform.--
            (1) In general.--Chapter 63, as amended by the preceding 
        provisions of this Act, is amended by inserting after 
        subchapter B the following new subchapter:

               ``Subchapter C--Treatment of Partnerships

                          ``Part I--In General

                   ``Part II--Partnership Adjustments

                         ``Part III--Procedure

                ``Part IV--Definitions and Special Rules

                          ``PART I--IN GENERAL

``Sec. 6221. Determination at partnership level.
``Sec. 6222. Partner's return must be consistent with partnership 
                            return.
``Sec. 6223. Designation of partnership representative.

``SEC. 6221. DETERMINATION AT PARTNERSHIP LEVEL.

    ``(a) In General.--Items of income, gain, loss, deduction, or 
credit of a partnership for a partnership taxable year (and any 
partner's distributive share thereof) shall be audited, any tax 
attributable thereto shall be assessed and collected, and the 
applicability of any penalty, addition to tax, or additional amount 
which relates to an adjustment to any such item or share shall be 
determined, at the partnership level pursuant to this subchapter.
    ``(b) Election Out for Certain Partnerships With 100 or Fewer 
Partners.--This subchapter shall not apply with respect to any 
partnership for any taxable year if--
            ``(1) the partnership elects the application of this 
        subsection for such taxable year,
            ``(2) the partnership has 100 or fewer partners on the last 
        day of such taxable year,
            ``(3) each of the partners of such partnership is an 
        individual, a C corporation (other than a real estate 
        investment trust or a regulated investment company), any 
        foreign entity that would be treated as a C corporation were it 
        domestic, or an estate of a deceased partner,
            ``(4) the election--
                    ``(A) is made with a timely filed return for such 
                taxable year, and
                    ``(B) includes (in the manner prescribed by the 
                Secretary) a disclosure of the name and taxpayer 
                identification number of each partner of such 
                partnership, and
            ``(5) the partnership notifies each such partner of such 
        election in the manner prescribed by the Secretary.
For purposes of paragraph (4)(B), the Secretary may provide for 
alternative identification of any foreign partners.

``SEC. 6222. PARTNER'S RETURN MUST BE CONSISTENT WITH PARTNERSHIP 
              RETURN.

    ``(a) In General.--A partner of any partnership shall, on the 
partner's return, treat each item of income, gain, loss, deduction, or 
credit attributable to such partnership in a manner which is consistent 
with the treatment of such income, gain, loss, deduction, or credit on 
the partnership return.
    ``(b) Underpayment Due to Inconsistent Treatment Assessed as Math 
Error.--Any underpayment of tax by a partner by reason of failing to 
comply with the requirements of subsection (a) shall be assessed and 
collected in the same manner as if such underpayment were on account of 
a mathematical or clerical error appearing on the partner's return. 
Paragraph (2) of section 6213(b) shall not apply to any assessment of 
an underpayment referred to in the preceding sentence.
    ``(c) Addition to Tax for Failure To Comply With Section.--For 
addition to tax in the case of partner's disregard of the requirements 
of this section, see part II of subchapter A of chapter 68.

``SEC. 6223. PARTNERS BOUND BY ACTIONS OF PARTNERSHIP.

    ``(a) Designation of Partner.--Each partnership shall designate (in 
the manner prescribed by the Secretary) a partner (or other person) as 
the partnership representative who shall have the sole authority to act 
on behalf of the partnership under this subchapter. In any case in 
which such a designation is not in effect, the Secretary may select any 
partner as the partnership representative.
    ``(b) Binding Effect.--A partnership and all partners of such 
partnership shall be bound--
            ``(1) by actions taken under this subchapter by the 
        partnership, and
            ``(2) by any decision in a proceeding brought under this 
        subchapter.

                   ``PART II--PARTNERSHIP ADJUSTMENTS

``Sec. 6225. Partnership adjustment by Secretary.
``Sec. 6226. Administrative adjustment request by partnership.

``SEC. 6225. PARTNERSHIP ADJUSTMENT BY SECRETARY.

    ``(a) In General.--In the case of any adjustment by the Secretary 
in the amount of any item of income, gain, loss, deduction, or credit 
of a partnership, or any partner's distributive share thereof--
            ``(1) the partnership shall pay any imputed underpayment 
        with respect to such adjustment in the adjustment year as 
        provided in section 6232, and
            ``(2) any imputed overpayment shall be taken into account 
        by the partnership in the adjustment year as a reduction in 
        non-separately stated income or an increase in non-separately 
        stated loss (whichever is appropriate) under section 702(a)(8).
    ``(b) Determination of Imputed Underpayments and Overpayments.--For 
purposes of this subchapter--
            ``(1) In general.--Except as provided in subsection (c), 
        any imputed underpayment or imputed overpayment with respect to 
        any partnership adjustment for any reviewed year shall be 
        determined--
                    ``(A) by netting all adjustments of items of 
                income, gain, loss, or deduction and multiplying such 
                net amount by the highest rate of tax in effect for the 
                reviewed year under section 1 or 11,
                    ``(B) by treating any net increase or decrease in 
                loss under subparagraph (A) as a decrease or increase, 
                respectively, in income, and
                    ``(C) by taking into account any adjustments to 
                items of credit as an increase or decrease, as the case 
                may be, in the amount determined under subparagraph 
                (A).
            ``(2) Adjustments to distributive shares of partners not 
        netted.--In the case of any adjustment which reallocates the 
        distributive share of any item from one partner to another, 
        such adjustment shall be taken into account under paragraph (1) 
        by disregarding--
                    ``(A) any decrease in any item of income or gain, 
                and
                    ``(B) any increase in any item of deduction, loss, 
                or credit.
    ``(c) Modification of Imputed Underpayments.--
            ``(1) Method in general.--The Secretary shall establish 
        procedures under which the imputed underpayment amount may be 
        modified consistent with the requirements of this subsection.
            ``(2) Amended returns of partners.--Such procedures shall 
        provide that if--
                    ``(A) one or more partners file returns for the 
                taxable year of the partners which includes the end of 
                the reviewed year of the partnership,
                    ``(B) such returns take into account all 
                adjustments under subsection (a) properly allocable to 
                such partners (and for any other taxable year with 
                respect to which any tax attribute is affected by 
                reason of such adjustments), and
                    ``(C) payment of any tax due is included with such 
                return,
        then the imputed underpayment amount shall be determined 
        without regard to the portion of the adjustments so taken into 
        account.
            ``(3) Reallocation of distributive share.--In the case of 
        any adjustment which reallocates the distributive share of any 
        item from one partner to another, paragraph (2) shall apply 
        only if returns are filed by all partners affected by such 
        adjustment.
            ``(4) Year and day for submission to secretary.--Anything 
        required to be submitted pursuant to paragraph (1) shall be 
        submitted to the Secretary not later than the close the 180-day 
        period beginning on the date on which the notice of a proposed 
        partnership adjustment is mailed under section 6231 unless such 
        period is extended with the consent of the Secretary.
            ``(5) Decision of secretary.--Any modification of the 
        imputed underpayment amount under this subsection shall be made 
        only upon approval of such modification by the Secretary.
    ``(d) Definitions and Special Rule.--For purposes of this 
subchapter--
            ``(1) Reviewed year.--The term `reviewed year' means the 
        partnership taxable year to which the item being adjusted 
        relates.
            ``(2) Adjustment year.--The term `adjustment year' means 
        the partnership taxable year in which--
                    ``(A) in the case of an adjustment pursuant to the 
                decision of a court in a proceeding brought under 
                section 6234, such decision becomes final,
                    ``(B) in the case of an administrative adjustment 
                request under section 6226, such administrative 
                adjustment request is made, or
                    ``(C) in any other case, notice of the final 
                partnership adjustment is mailed under section 6231.

``SEC. 6226. ADMINISTRATIVE ADJUSTMENT REQUEST BY PARTNERSHIP.

    ``(a) In General.--A partnership may file a request for an 
administrative adjustment in the amount of any item of income, gain, 
loss, deduction, or credit of the partnership for any partnership 
taxable year, but only to the extent such adjustment results in an 
imputed underpayment.
    ``(b) Adjustment.--Any adjustment under subsection (a) shall be 
determined and taken into account by the partnership under rules 
similar to the rules of section 6225 (other than subsection (c) 
thereof) for the partnership taxable year in which the administrative 
adjustment request is made.
    ``(c) Period of Limitations.--A partnership may not file such a 
request--
            ``(1) more than 3 years after the later of--
                    ``(A) the date on which the partnership return for 
                such year is filed, or
                    ``(B) the last day for filing the partnership 
                return for such year (determined without regard to 
                extensions), and
            ``(2) after any notice of an administrative proceeding with 
        respect to the taxable year is mailed under section 6231.

                         ``PART III--PROCEDURE

``Sec. 6231. Notice of proceedings and adjustment.
``Sec. 6232. Assessment, collection, and payment.
``Sec. 6233. Penalties and interest.
``Sec. 6234. Judicial review of partnership adjustment.
``Sec. 6235. Period of limitations on making adjustments.

``SEC. 6231. NOTICE OF PROCEEDINGS AND ADJUSTMENT.

    ``(a) In General.--The Secretary shall mail to the partnership and 
the partnership representative--
            ``(1) notice of any administrative proceeding initiated at 
        the partnership level with respect to an adjustment of any item 
        of income, gain, loss, deduction, or credit of a partnership 
        for a partnership taxable year, or any partner's distributive 
        share thereof,
            ``(2) notice of any proposed partnership adjustment 
        resulting from such proceeding, and
            ``(3) notice of any final partnership adjustment resulting 
        from such proceeding.
Any notice of a final partnership adjustment shall not be mailed 
earlier than 180 days after the date on which the notice of the 
proposed partnership adjustment is mailed. Such notices shall be 
sufficient if mailed to the last known address of the partnership 
representative or the partnership (even if the partnership has 
terminated its existence). The first sentence shall apply to any 
proceeding with respect to an administrative adjustment request filed 
by a partnership under section 6226.
    ``(b) Further Notices Restricted.--If the Secretary mails a notice 
of a final partnership adjustment to any partnership for any 
partnership taxable year and the partnership files a petition under 
section 6234 with respect to such notice, in the absence of a showing 
of fraud, malfeasance, or misrepresentation of a material fact, the 
Secretary shall not mail another such notice to such partnership with 
respect to such taxable year.
    ``(c) Authority To Rescind Notice With Partnership Consent.--The 
Secretary may, with the consent of the partnership, rescind any notice 
of a partnership adjustment mailed to such partnership. Any notice so 
rescinded shall not be treated as a notice of a partnership adjustment 
for purposes of this subchapter, and the taxpayer shall have no right 
to bring a proceeding under section 6234 with respect to such notice.

``SEC. 6232. ASSESSMENT, COLLECTION, AND PAYMENT.

    ``(a) In General.--Any imputed underpayment--
            ``(1) shall be assessed and collected in the same manner as 
        if it were a tax imposed for the adjustment year by subtitle A, 
        and
            ``(2) shall be paid on or before the return due date for 
        the adjustment year.
    ``(b) Limitation on Assessment.--Except as otherwise provided in 
this chapter, no assessment of a deficiency may be made (and no levy or 
proceeding in any court for the collection of any amount resulting from 
such adjustment may be made, begun or prosecuted) before--
            ``(1) the close of the 90th day after the day on which a 
        notice of a final partnership adjustment was mailed, and
            ``(2) if a petition is filed under section 6234 with 
        respect to such notice, the decision of the court has become 
        final.
    ``(c) Premature Action May Be Enjoined.--Notwithstanding section 
7421(a), any action which violates subsection (b) may be enjoined in 
the proper court, including the Tax Court. The Tax Court shall have no 
jurisdiction to enjoin any action under this subsection unless a timely 
petition has been filed under section 6234 and then only in respect of 
the adjustments that are the subject of such petition.
    ``(d) Exceptions to Restrictions on Adjustments.--
            ``(1) Adjustments arising out of math or clerical errors.--
                    ``(A) In general.--If the partnership is notified 
                that, on account of a mathematical or clerical error 
                appearing on the partnership return, an adjustment to a 
                partnership item is required, rules similar to the 
                rules of paragraphs (1) and (2) of section 6213(b) 
                shall apply to such adjustment.
                    ``(B) Special rule.--If a partnership is a partner 
                in another partnership, any adjustment on account of 
                such partnership's failure to comply with the 
                requirements of section 6222(a) with respect to its 
                interest in such other partnership shall be treated as 
                an adjustment referred to in subparagraph (A), except 
                that paragraph (2) of section 6213(b) shall not apply 
                to such adjustment.
            ``(2) Partnership may waive restrictions.--The partnership 
        may at any time (whether or not any notice of partnership 
        adjustment has been issued), by a signed notice in writing 
        filed with the Secretary, waive the restrictions provided in 
        subsection (b) on the making of any partnership adjustment.
    ``(e) Limit Where No Proceeding Begun.--If no proceeding under 
section 6234 is begun with respect to any notice of a final partnership 
adjustment during the 90-day period described in subsection (b) 
thereof, the amount for which the partnership is liable under section 
6225 shall not exceed the amount determined in accordance with such 
notice.

``SEC. 6233. PENALTIES AND INTEREST.

    ``(a) Penalties and Interest Determined From Reviewed Year.--
            ``(1) In general.--In the case of an imputed underpayment 
        with respect to a partnership adjustment for a reviewed year, 
        the partnership--
                    ``(A) shall pay to the Secretary interest computed 
                under paragraph (2), and
                    ``(B) shall be liable for any penalty, addition to 
                tax, or additional amount as provided in paragraph (3).
            ``(2) Determination of amount of interest.--The interest 
        computed under this paragraph with respect to any partnership 
        adjustment is the interest which would be determined under 
        chapter 67--
                    ``(A) on the imputed underpayment determined with 
                respect to such adjustment,
                    ``(B) for the period beginning on the day after the 
                return due date for the reviewed year and ending on the 
                return due date for the adjustment year (or, if 
                earlier, the date payment of the imputed underpayment 
                is made).
        Proper adjustments in the amount determined under the preceding 
        sentence shall be made for adjustments required for partnership 
        taxable years after the reviewed year and before the adjustment 
        year by reason of such partnership adjustment.
            ``(3) Penalties.--A partnership shall be liable for any 
        penalty, addition to tax, or additional amount for which it 
        would have been liable if such partnership had been an 
        individual subject to tax under chapter 1 for the reviewed year 
        and the imputed underpayment were an actual underpayment (or 
        understatement) for such year.
    ``(b) Interest and Penalties With Respect to Adjustment Year 
Return.--
            ``(1) In general.--In the case of any failure to pay an 
        imputed underpayment on the date prescribed therefor, the 
        partnership shall be liable--
                    ``(A) for interest as determined under paragraph 
                (2), and
                    ``(B) for any penalty, addition to tax, or 
                additional amount as determined under paragraph (3).
            ``(2) Interest.--Interest determined under this paragraph 
        is the interest that would be determined by treating the 
        imputed underpayment as an underpayment of tax imposed in the 
        adjustment year.
            ``(3) Penalties.--Penalties, additions to tax, or 
        additional amounts determined under this paragraph are the 
        penalties, additions to tax, or additional amounts that would 
        be determined--
                    ``(A) by applying section 6651(a)(2) to such 
                failure to pay.
                    ``(B) by treating the imputed underpayment as an 
                underpayment of tax for purposes of part II of 
                subchapter A of chapter 68.

``SEC. 6234. JUDICIAL REVIEW OF PARTNERSHIP ADJUSTMENT.

    ``(a) In General.--Within 90 days after the date on which a notice 
of a final partnership adjustment is mailed under section 6231 with 
respect to any partnership taxable year, the partnership may file a 
petition for a readjustment for such taxable year with--
            ``(1) the Tax Court,
            ``(2) the district court of the United States for the 
        district in which the partnership's principal place of business 
        is located, or
            ``(3) the Claims Court.
    ``(b) Jurisdictional Requirement for Bringing Action in District 
Court or Claims Court.--
            ``(1) In general.--A readjustment petition under this 
        section may be filed in a district court of the United States 
        or the Claims Court only if the partnership filing the petition 
        deposits with the Secretary, on or before the date the petition 
        is filed, the amount of the imputed underpayment (as of the 
        date of the filing of the petition) if the partnership 
        adjustment was made as provided by the notice of final 
        partnership adjustment. The court may by order provide that the 
        jurisdictional requirements of this paragraph are satisfied 
        where there has been a good faith attempt to satisfy such 
        requirement and any shortfall of the amount required to be 
        deposited is timely corrected.
            ``(2) Interest payable.--Any amount deposited under 
        paragraph (1), while deposited, shall not be treated as a 
        payment of tax for purposes of this title (other than chapter 
        67).
    ``(c) Scope of Judicial Review.--A court with which a petition is 
filed in accordance with this section shall have jurisdiction to 
determine all items of income, gain, loss, deduction, or credit of the 
partnership for the partnership taxable year to which the notice of 
final partnership adjustment relates, the proper allocation of such 
items among the partners, and the applicability of any penalty, 
addition to tax, or additional amount for which the partnership may be 
liable under this subchapter.
    ``(d) Determination of Court Reviewable.--Any determination by a 
court under this section shall have the force and effect of a decision 
of the Tax Court or a final judgment or decree of the district court or 
the Claims Court, as the case may be, and shall be reviewable as such. 
The date of any such determination shall be treated as being the date 
of the court's order entering the decision.
    ``(e) Effect of Decision Dismissing Action.--If an action brought 
under this section is dismissed other than by reason of a rescission 
under section 6231(c), the decision of the court dismissing the action 
shall be considered as its decision that the notice of final 
partnership adjustment is correct, and an appropriate order shall be 
entered in the records of the court.

``SEC. 6235. PERIOD OF LIMITATIONS ON MAKING ADJUSTMENTS.

    ``(a) In General.--Except as otherwise provided in this section, no 
adjustment under this subpart for any partnership taxable year may be 
made after the date which is 3 years after the latest of--
            ``(1) the date on which the partnership return for such 
        taxable year was filed,
            ``(2) the return due date for the taxable year, or
            ``(3) the date on which the partnership filed an 
        administrative adjustment request with respect to such year 
        under section 6226.
    ``(b) Extension by Agreement.--The period described in subsection 
(a) (including an extension period under this subsection) may be 
extended by an agreement entered into by the Secretary and the 
partnership before the expiration of such period.
    ``(c) Special Rule in Case of Fraud, etc.--
            ``(1) False return.--In the case of a false or fraudulent 
        partnership return with intent to evade tax, the adjustment may 
        be made at any time.
            ``(2) Substantial omission of income.--If any partnership 
        omits from gross income an amount properly includible therein 
        and such amount is described in section 6501(e)(1)(A), 
        subsection (a) shall be applied by substituting `6 years' for 
        `3 years'.
            ``(3) No return.--In the case of a failure by a partnership 
        to file a return for any taxable year, the adjustment may be 
        made at any time.
            ``(4) Return filed by secretary.--For purposes of this 
        section, a return executed by the Secretary under subsection 
        (b) of section 6020 on behalf of the partnership shall not be 
        treated as a return of the partnership.
    ``(d) Suspension When Secretary Mails Notice of Adjustment.--If 
notice of a final partnership adjustment with respect to any taxable 
year is mailed under section 6231, the running of the period specified 
in subsection (a) (as modified by the other provisions of this section) 
shall be suspended--
            ``(1) for the period during which an action may be brought 
        under section 6234 (and, if a petition is filed under such 
        section with respect to such notice, until the decision of the 
        court becomes final), and
            ``(2) for 1 year thereafter.

                ``PART IV--DEFINITIONS AND SPECIAL RULES

``Sec. 6241. Definitions and special rules.

``SEC. 6241. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions and Special Rules.--For purposes of this 
subchapter--
            ``(1) Partnership.--The term `partnership' means any 
        partnership required to file a return under section 6031(a).
            ``(2) Partner.--The term `partner' means--
                    ``(A) a partner in the partnership, and
                    ``(B) any other person whose income tax liability 
                under subtitle A is determined in whole or in part by 
                taking into account directly or indirectly income, 
                gain, deduction, or loss of the partnership.
    ``(b) Partnership Adjustment.--The term `partnership adjustment' 
means any adjustment in the amount of any item of income, gain, loss, 
deduction, or credit of a partnership, or any partner's distributive 
share thereof.
    ``(c) Return Due Date.--The term `return due date' means, with 
respect to the taxable year, the date prescribed for filing the 
partnership return for such taxable year (determined without regard to 
extensions).
    ``(d) Joint and Several Liability.--
            ``(1) In general.--The partnership and any partner of the 
        partnership shall be jointly and severally liable for any 
        imputed underpayment and any penalty, addition to tax, or 
        additional amount attributable thereto.
            ``(2) Period for assessment of partners.--The period for 
        assessment of an imputed underpayment with respect to a partner 
        of a partnership shall not expire earlier than 3 years after 
        the date on which an assessment of such imputed underpayment 
        was made with respect to the partnership.
            ``(3) Determining partners.--A person shall be treated as 
        partner of the partnership if such person is a partner of such 
        partnership at any time during the reviewed or adjustment year.
    ``(e) Payments Nondeductible.--No deduction shall be allowed under 
subtitle A for any payment required to be made by a partnership under 
this subchapter.
    ``(f) Special Rule for Deductions, Losses, and Credits of Foreign 
Partnerships.--Except to the extent otherwise provided in regulations, 
in the case of any partnership the partnership representative of which 
resides outside the United States or the books of which are maintained 
outside the United States, no deduction, loss, or credit shall be 
allowable to any partner unless section 6031 is complied with for the 
partnership's taxable year in which such deduction, loss, or credit 
arose at such time as the Secretary prescribes by regulations.
    ``(g) Partnerships Having Principal Place of Business Outside 
United States.--For purposes of sections 6234, a principal place of 
business located outside the United States shall be treated as located 
in the District of Columbia.
    ``(h) Partnerships in Cases Under Title 11 of United States Code.--
            ``(1) Suspension of period of limitations on making 
        adjustment, assessment, or collection.--The running of any 
        period of limitations provided in this subchapter on making a 
        partnership adjustment (or provided by section 6501 or 6502 on 
        the assessment or collection of any imputed underpayment 
        determined under this subchapter) shall, in a case under title 
        11 of the United States Code, be suspended during the period 
        during which the Secretary is prohibited by reason of such case 
        from making the adjustment (or assessment or collection) and--
                    ``(A) for adjustment or assessment, 60 days 
                thereafter, and
                    ``(B) for collection, 6 months thereafter.
        A rule similar to the rule of section 6213(f)(2) shall apply 
        for purposes of section 6232(b).
            ``(2) Suspension of period of limitation for filing for 
        judicial review.--The running of the period specified in 
        section 6234 shall, in a case under title 11 of the United 
        States Code, be suspended during the period during which the 
        partnership is prohibited by reason of such case from filing a 
        petition under section 6234 and for 60 days thereafter.''.
            (2) Clerical amendment.--The table of subchapters for 
        chapter 63 is amended by inserting after the item relating to 
        subchapter B the following new items:

             ``subchapter c. treatment of partnerships.''.

    (d) Conforming Amendments.--
            (1) Section 6422 is amended by striking paragraph (12).
            (2) Section 6501(n) is amended by striking paragraphs (2) 
        and (3) and by striking ``Cross References'' and all that 
        follows through ``For period of limitations'' and inserting 
        ``Cross Reference.--For period of limitations''.
            (3) Section 6503(a)(1) is amended by striking ``(or section 
        6229'' and all that follows through ``of section 6230(a))''.
            (4) Section 6504 is amended by striking paragraph (11).
            (5) Section 6511 is amended by striking subsection (g).
            (6) Section 6512(b)(3) is amended by striking the second 
        sentence.
            (7) Section 6515 is amended by striking paragraph (6).
            (8) Section 6601(c) is amended by striking the last 
        sentence.
            (9) Section 7421(a) is amended by striking ``6225(b), 
        6246(b)'' and inserting ``6232(c)''.
            (10) Section 7422 is amended by striking subsection (h).
            (11) Section 7459(c) is amended by striking ``section 
        6226'' and all that follows through ``or 6252'' and inserting 
        ``section 6234''.
            (12) Section 7482(b)(1) is amended--
                    (A) in subparagraph (E), by striking ``section 
                6226, 6228, 6247, or 6252'' and inserting ``section 
                6234'',
                    (B) by striking subparagraph (F), by striking 
                ``or'' at the end of subparagraph (E) and inserting a 
                period, and by inserting ``or'' at the end of 
                subparagraph (D), and
                    (C) in the last sentence, by striking ``section 
                6226, 6228(a), or 6234(c)'' and inserting ``section 
                6234''.
            (13) Section 7485(b) is amended by striking ``section 6226, 
        6228(a), 6247, or 6252'' and inserting ``section 6234''.
    (e) Effective Date.--The amendments made by this section shall 
apply to returns filed for partnership taxable years ending after 
December 31, 2014, except that a partnership may elect (at such time 
and in such form and manner as the Secretary of the Treasury may 
prescribe) for such amendments to apply to any return of the 
partnership filed for partnership taxable years ending after the date 
of the enactment of this Act and before January 1, 2015.

                         PART 3--REITS AND RICS

SEC. 3631. PREVENTION OF TAX-FREE SPINOFFS INVOLVING REITS.

    (a) In General.--Section 355 is amended by adding at the end the 
following new subsection:
    ``(h) Section Not To Apply to Distributions Involving Real Estate 
Investment Trusts.--This section (and so much of section 356 as relates 
to this section) shall not apply to any distribution if either the 
distributing corporation or controlled corporation is a real estate 
investment trust.''.
    (b) Prevention of REIT Election Following Tax-Free Spin Off.--
Section 856(c) is amended by redesignating paragraph (8) as paragraph 
(9) and by inserting after paragraph (7) the following new paragraph:
            ``(8) Election after tax-free reorganization.--If a 
        corporation was a distributing corporation or a controlled 
        corporation with respect to any distribution to which section 
        355 applied, such corporation (and any successor corporation) 
        shall not be eligible to make any election under subsection 
        (c)(1) for any taxable year prior to the 10th taxable year 
        which begins after the taxable year in which such distribution 
        was made.''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        distributions on or after February 26, 2014.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any distribution made pursuant to an 
        agreement which was binding on February 26, 2014, and at all 
        times thereafter.

SEC. 3632. EXTENSION OF PERIOD FOR PREVENTION OF REIT ELECTION 
              FOLLOWING REVOCATION OR TERMINATION.

    (a) In General.--Section 856(g)(3) is amended by striking ``fifth'' 
and inserting ``10th''.
    (b) Effective Date.--The amendments made by this section shall 
apply to terminations and revocations after December 31, 2014.

SEC. 3633. CERTAIN SHORT-LIFE PROPERTY NOT TREATED AS REAL PROPERTY FOR 
              PURPOSES OF REIT PROVISIONS.

    (a) In General.--Section 856(c)(5) is amended by adding at the end 
the following new subparagraph:
                    ``(L) Real property.--The term `real property' 
                shall not include any tangible property with a class 
                life of less than 27.5 years. For purposes of the 
                preceding sentence, class life of tangible property for 
                any taxable year shall be the greater of--
                            ``(i) the class life of such property in 
                        the hands of the real estate investment trust, 
                        or
                            ``(ii) the class life which would be 
                        applicable to such property if such property 
                        was placed in service in the taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2016.

SEC. 3634. REPEAL OF SPECIAL RULES FOR TIMBER HELD BY REITS.

    (a) In General.--Section 856(c)(5)(L), as added by this Act, is 
amended by inserting ``timber or'' after ``shall not include''.
    (b) Conforming Amendments.--
            (1) Section 856(c)(2) is amended by inserting ``and'' at 
        the end of subparagraph (G), by striking ``and'' at the end of 
        subparagraph (H), and by striking subparagraph (I).
            (2) Section 856(c)(5), as amended by the preceding 
        provisions of this Act, is amended by striking subparagraphs 
        (H) and (I) and by redesignating subparagraphs (J), (K), and 
        (L) as subparagraphs (H), (I) and (J), respectively.
            (3) Section 856(c), as amended by the preceding provisions 
        of this Act, is amended by striking paragraph (9).
            (4) Section 857(b)(6) is amended by striking subparagraphs 
        (D), (G), and (H), and by redesignating subparagraphs (E) and 
        (F) as subparagraphs (D) and (E), respectively.
            (5) Section 857(b)(6)(D), as redesignated by paragraph (4), 
        is amended by striking ``subparagraphs (C) and (D)'' and 
        inserting ``subparagraph (C)''.
            (6) Section 857(b)(6)(E), as redesignated by paragraph (4), 
        is amended--
                    (A) by striking ``subparagraph (C) or (D)'' and 
                inserting ``subparagraph (C)'', and
                    (B) by striking ``subparagraphs (C), (D), and (E)'' 
                and inserting ``subparagraphs (C) and (D)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2016.

SEC. 3635. LIMITATION ON FIXED PERCENTAGE RENT AND INTEREST EXCEPTIONS 
              FOR REIT INCOME TESTS.

    (a) In General.--Section 856 is amended by adding at the end the 
following new subsection:
    ``(o) Limitation on Fixed Percentage Rent and Interest 
Exceptions.--
            ``(1) In general.--If the fixed percentage rent and 
        interest income received or accrued by a real estate investment 
        trust from a single C corporation (other than a taxable REIT 
        subsidiary of such real estate investment trust) for any 
        taxable year exceeds either--
                    ``(A) 25 percent of the fixed percentage rent 
                income received or accrued by such real estate 
                investment trust for such taxable year, or
                    ``(B) 25 percent of the fixed percentage interest 
                income received or accrued by such real estate 
                investment trust for such taxable year,
        then, notwithstanding subsection (d)(2), none of the fixed 
        percentage rent income received or accrued from such 
        corporation which is attributable to leases entered into after 
        December 31, 2014, shall be treated as rents from real property 
        and, notwithstanding subsection (f), none of the fixed 
        percentage interest income received or accrued from such 
        corporation which is attributable to debt instruments acquired 
        after December 31, 2014, shall be treated as interest.
            ``(2) Fixed percentage rent and interest income.--For 
        purposes of this subsection--
                    ``(A) Fixed percentage rent and interest income.--
                The term `fixed percentage rent and interest income' 
                means the sum of the fixed percentage rent income plus 
                the fixed percentage interest income.
                    ``(B) Fixed percentage rent income.--The term 
                `fixed percentage rent income' means amounts described 
                in subsection (d)(2)(A) which are based on a fixed 
                percentage or percentages of receipts or sales.
                    ``(C) Fixed percentage interest income.--The term 
                `fixed percentage interest income' means amounts 
                described in subsection (f)(1) which are based on a 
                fixed percentage or percentages of receipts or sales.
            ``(3) Aggregation rule.--Members of the same affiliated 
        group (as defined in section 1504, applied by substituting `50 
        percent' for `80 percent' each place it appears therein) shall 
        be treated as 1 corporation for purposes of paragraph (1).
            ``(4) Treatment of modifications.--For purposes of 
        paragraph (1), any material modification (including any 
        extension of the term) of a lease or debt instrument shall be 
        treated as a new lease or debt instrument, as the case may be, 
        entered into on the date of such modification.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after December 31, 2014.

SEC. 3636. REPEAL OF PREFERENTIAL DIVIDEND RULE FOR PUBLICLY OFFERED 
              REITS.

    (a) In General.--Paragraph (1) of section 562(c), as amended by the 
preceding provisions of this Act, is amended by inserting ``or a 
publicly offered REIT'' after ``a publicly offered regulated investment 
company''.
    (b) Publicly Offered REIT.--Subsection (c) of section 562, as so 
amended, is amended by adding at the end the following new paragraph:
            ``(3) Publicly offered reit.--For purposes of this 
        subsection, the term `publicly offered REIT' means a real 
        estate investment trust which is required to file annual and 
        periodic reports with the Securities and Exchange Commission 
        under the Securities Exchange Act of 1934.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to distributions in taxable years beginning after December 31, 2014.

SEC. 3637. AUTHORITY FOR ALTERNATIVE REMEDIES TO ADDRESS CERTAIN REIT 
              DISTRIBUTION FAILURES.

    (a) In General.--Subsection (e) of section 562 is amended--
            (1) by striking ``In the case of a real estate investment 
        trust'' and inserting the following:
            ``(1) Determination of earnings and profits for purposes of 
        dividends paid deduction.--In the case of a real estate 
        investment trust'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Authority to provide alternative remedies for certain 
        failures.--In the case of a failure of a distribution by a real 
        estate investment trust to comply with the requirements of 
        subsection (c), the Secretary may provide an appropriate remedy 
        to cure such failure in lieu of not considering the 
        distribution to be a dividend for purposes of computing the 
        dividends paid deduction if--
                    ``(A) the Secretary determines that such failure is 
                inadvertent or is due to reasonable cause and not due 
                to willful neglect, or
                    ``(B) such failure is of a type of failure which 
                the Secretary has identified for purposes of this 
                paragraph as being described in subparagraph (A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions in taxable years beginning after December 31, 
2014.

SEC. 3638. LIMITATIONS ON DESIGNATION OF DIVIDENDS BY REITS.

    (a) In General.--Section 857 is amended by redesignating subsection 
(g) as subsection (h) and by inserting after subsection (f) the 
following new subsection:
    ``(g) Limitations on Designation of Dividends.--
            ``(1) Overall limitation.--The aggregate amount of 
        dividends designated by a real estate investment trust under 
        subsections (b)(3)(C) and (c)(2)(A) with respect to any taxable 
        year may not exceed the dividends paid by such trust with 
        respect to such year. For purposes of the preceding sentence, 
        dividends paid after the close of the taxable year described in 
        section 858 shall be treated as paid with respect to such year.
            ``(2) Proportionality.--The Secretary may prescribe 
        regulations or other guidance requiring the proportionality of 
        the designation of particular types of dividends among shares 
        or beneficial interests of a real estate investment trust.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions in taxable years beginning after December 31, 
2014.

SEC. 3639. NON-REIT EARNINGS AND PROFITS REQUIRED TO BE DISTRIBUTED BY 
              REIT IN CASH.

    (a) In General.--Section 857, as amended by the preceding 
provisions of this Act, is amended by redesignating subsection (h) as 
subsection (i) and by inserting after subsection (g) the following new 
subsection:
    ``(h) Determination of Earnings and Profits Accumulated in Non-REIT 
Years.--
            ``(1) In general.--For purposes of subsection (a)(2)(B), 
        distributions during the transition period shall be taken into 
        account in determining accumulated earning and profits only if 
        such distributions are made in cash.
            ``(2) Transition period.--For purposes of this subsection, 
        the term `transition period' means the period of taxable years 
        beginning with the last taxable year (other than a short 
        taxable year) which was a non-REIT year (as defined in 
        subsection (a)) and ending with the first taxable year to which 
        the provisions of this part apply.''.
    (b) Conforming Amendment.--Section 857(a)(2)(B) is amended by 
inserting ``(determined as provided in subsection (h))'' before the 
period at the end.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made on or after February 26, 2014.

SEC. 3640. DEBT INSTRUMENTS OF PUBLICLY OFFERED REITS AND MORTGAGES 
              TREATED AS REAL ESTATE ASSETS.

    (a) Debt Instruments of Publicly Offered REITs Treated as Real 
Estate Assets.--
            (1) In general.--Subparagraph (B) of section 856(c)(5) is 
        amended--
                    (A) by striking ``and shares'' and inserting ``, 
                shares'', and
                    (B) by inserting ``, and debt instruments issued by 
                publicly offered REITs'' before the period at the end 
                of the first sentence.
            (2) Income from nonqualified debt instruments of publicly 
        offered reits not qualified for purposes of satisfying the 75 
        percent gross income test.--Subparagraph (H) of section 
        856(c)(3) is amended by inserting ``(other than a nonqualified 
        publicly offered REIT debt instrument)'' after ``real estate 
        asset''.
            (3) 25 percent asset limitation on holding of nonqualified 
        debt instruments of publicly offered reits.--Subparagraph (B) 
        of section 856(c)(4) is amended by redesignating clause (iii) 
        as clause (iv) and by inserting after clause (ii) the following 
        new clause:
                            ``(iii) not more than 25 percent of the 
                        value of its total assets is represented by 
                        nonqualified publicly offered REIT debt 
                        instruments, and''.
            (4) Definitions related to debt instruments of publicly 
        offered reits.--Paragraph (5) of section 856(c), as amended by 
        the preceding provisions of this Act, is amended by adding at 
        the end the following new subparagraph:
                    ``(K) Definitions related to debt instruments of 
                publicly offered reits.--
                            ``(i) Publicly offered reit.--The term 
                        `publicly offered REIT' has the meaning given 
                        such term by section 562(c)(3).
                            ``(ii) Nonqualified publicly offered reit 
                        debt instrument.--The term `nonqualified 
                        publicly offered REIT debt instrument' means 
                        any real estate asset which would cease to be a 
                        real estate asset if subparagraph (B) were 
                        applied without regard to the reference to 
                        `debt instruments issued by publicly offered 
                        REITs'.''.
    (b) Interests in Mortgages on Interests in Real Property Treated as 
Real Estate Assets.--Subparagraph (B) of section 856(c)(5) is amended 
by inserting ``or on interests in real property'' after ``interests in 
mortgages on real property''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3641. ASSET AND INCOME TEST CLARIFICATION REGARDING ANCILLARY 
              PERSONAL PROPERTY.

    (a) In General.--Subsection (c) of section 856 is amended by adding 
at the end the following new paragraph:
            ``(9) Special rules for certain personal property which is 
        ancillary to real property.--
                    ``(A) Certain personal property leased in 
                connection with real property.--Personal property shall 
                be treated as a real estate asset for purposes of 
                paragraph (4)(A) to the extent that rents attributable 
                to such personal property are treated as rents from 
                real property under subsection (d)(1)(C).
                    ``(B) Certain personal property mortgaged in 
                connection with real property.--In the case of an 
                obligation secured by a mortgage on both real property 
                and personal property, if the fair market value of such 
                personal property does not exceed 15 percent of the 
                total fair market value of all such property, such 
                personal property shall be treated as real property for 
                purposes of applying paragraphs (3)(B) and (4)(A). For 
                purposes of the preceding sentence, the fair market 
                value of all such property shall be determined in the 
                same manner as the fair market value of real property 
                is determined for purposes of apportioning interest 
                income between real property and personal property 
                under paragraph (3)(B).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3642. HEDGING PROVISIONS.

    (a) Modification To Permit the Termination of a Hedging Transaction 
Using an Additional Hedging Instrument.--Subparagraph (G) of section 
856(c)(5) is amended by striking ``and'' at the end of clause (i), by 
striking the period at the end of clause (ii) and inserting ``, and'', 
and by adding at the end the following new clause:
                            ``(iii) if--
                                    ``(I) a real estate investment 
                                trust enters into one or more positions 
                                described in clause (i) with respect to 
                                indebtedness described in clause (i) or 
                                one or more positions described in 
                                clause (ii) with respect to property 
                                which generates income or gain 
                                described in paragraph (2) or (3),
                                    ``(II) any portion of such 
                                indebtedness is extinguished or any 
                                portion of such property is disposed 
                                of, and
                                    ``(III) in connection with such 
                                extinguishment or disposition, such 
                                trust enters into one or more 
                                transactions which would be hedging 
                                transactions described in subparagraph 
                                (B) or (C) of section 1221(b)(2) with 
                                respect to any position referred to in 
                                subclause (I) if such position were 
                                ordinary property,
                        any income of such trust from any position 
                        referred to in subclause (I) and from any 
                        transaction referred to in subclause (III) 
                        (including gain from the termination of any 
                        such position or transaction) shall not 
                        constitute gross income under paragraphs (2) 
                        and (3) to the extent that such transaction 
                        hedges such position.''.
    (b) Identification Requirements.--
            (1) In general.--Subparagraph (G) of section 856(c)(5), as 
        amended by subsection (a), is amended by striking ``and'' at 
        the end of clause (ii), by striking the period at the end of 
        clause (iii) and inserting ``, and'', and by adding at the end 
        the following new clause:
                            ``(iv) clauses (i), (ii), and (iii) shall 
                        not apply with respect to any transaction 
                        unless such transaction satisfies the 
                        identification requirement described in section 
                        1221(b)(3)(A) (determined after taking into 
                        account any curative provisions provided under 
                        the regulations referred to therein).''.
            (2) Conforming amendments.--Subparagraph (G) of section 
        856(c)(5) is amended--
                    (A) by striking ``which is clearly identified 
                pursuant to section 1221(a)(7)'' in clause (i), and
                    (B) by striking ``, but only if such transaction is 
                clearly identified as such before the close of the day 
                on which it was acquired, originated, or entered into 
                (or such other time as the Secretary may prescribe)'' 
                in clause (ii).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3643. MODIFICATION OF REIT EARNINGS AND PROFITS CALCULATION TO 
              AVOID DUPLICATE TAXATION.

    (a) Earnings and Profits Not Increased by Amounts Allowed in 
Computing Taxable Income in Prior Years.--
            (1) In general.--Paragraph (1) of section 857(d) is amended 
        to read as follows:
            ``(1) In general.--The earnings and profits of a real 
        estate investment trust for any taxable year (but not its 
        accumulated earnings) shall not be reduced by any amount 
        which--
                    ``(A) is not allowable in computing its taxable 
                income for such taxable year, and
                    ``(B) was not allowable in computing its taxable 
                income for any prior taxable year.''.
            (2) Exception for purposes of determining dividends paid 
        deduction.--Paragraph (1) of section 562(e), as amended by the 
        preceding provisions of this Act, is amended--
                    (A) by striking ``deduction, the earnings'' and 
                inserting the following: ``deduction--
                    ``(A) the earnings'',
                    (B) by striking the period at the end and inserting 
                ``, and'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(B) section 857(d)(1) shall be applied without 
                regard to subparagraph (B) thereof.''.
            (3) Conforming amendments.--Subsection (d) of section 857 
        is amended by adding at the end the following new paragraphs:
            ``(4) Real estate investment trust.--For purposes of this 
        subsection, the term `real estate investment trust' includes a 
        domestic corporation, trust, or association which is a real 
        estate investment trust determined without regard to the 
        requirements of subsection (a).
            ``(5) Special rules for determining earnings and profits 
        for purposes of the deduction for dividends paid.--For special 
        rules for determining the earnings and profits of a real estate 
        investment trust for purposes of the deduction for dividends 
        paid, see section 562(e)(1).''.
    (b) Treatment of Gain on Sales of Real Property.--Subparagraph (A) 
of section 562(e)(1), as amended by the preceding provisions of this 
Act, is amended to read as follows:
                    ``(A) the earnings and profits of such trust for 
                any taxable year (but not its accumulated earnings) 
                shall be increased by the amount of gain (if any) on 
                the sale or exchange of real property which is taken 
                into account in determining the taxable income of such 
                trust for such taxable year (and not otherwise taken 
                into account in determining such earnings and profits), 
                and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3644. REDUCTION IN PERCENTAGE LIMITATION ON ASSETS OF REIT WHICH 
              MAY BE TAXABLE REIT SUBSIDIARIES.

    (a) In General.--Section 856(c)(4)(B)(ii) is amended by striking 
``25 percent'' and inserting ``20 percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2016.

SEC. 3645. TREATMENT OF CERTAIN SERVICES PROVIDED BY TAXABLE REIT 
              SUBSIDIARIES.

    (a) Taxable REIT Subsidiaries Treated in Same Manner as Independent 
Contractors for Certain Purposes.--
            (1) Marketing and development expenses under rental 
        property safe harbor.--Clause (v) of section 857(b)(6)(C) is 
        amended by inserting ``or by a taxable REIT subsidiary'' before 
        the period at the end.
            (2) Foreclosure property grace period.--Subparagraph (C) of 
        section 856(e)(4) is amended by inserting ``or through a 
        taxable REIT subsidiary'' after ``receive any income''.
    (b) Tax on Redetermined TRS Service Income.--
            (1) In general.--Subparagraph (A) of section 857(b)(7) is 
        amended by striking ``and excess interest'' and inserting 
        ``excess interest, and redetermined TRS service income''.
            (2) Redetermined trs service income.--Paragraph (7) of 
        section 857(b) is amended by redesignating subparagraphs (E) 
        and (F) as subparagraphs (F) and (G), respectively, and 
        inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) Redetermined trs service income.--
                            ``(i) In general.--The term `redetermined 
                        TRS service income' means gross income of a 
                        taxable REIT subsidiary of a real estate 
                        investment trust attributable to services 
                        provided to, or on behalf of, such trust (less 
                        deductions properly allocable thereto) to the 
                        extent the amount of such income (less such 
                        deductions) would (but for subparagraph (F)) be 
                        increased on distribution, apportionment, or 
                        allocation under section 482.
                            ``(ii) Coordination with redetermined 
                        rents.--Clause (i) shall not apply with respect 
                        to gross income attributable to services 
                        furnished or rendered to a tenant of the real 
                        estate investment trust (or to deductions 
                        properly allocable thereto).''.
            (3) Conforming amendments.--Subparagraphs (B)(i) and (C) of 
        section 857(b)(7) are each amended by striking ``subparagraph 
        (E)'' and inserting ``subparagraph (F)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3646. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

    The Secretary of the Treasury (or the Secretary's designee) shall, 
biannually--
            (1) conduct a study to determine--
                    (A) how many taxable REIT subsidiaries are in 
                existence and the aggregate amount of taxes paid by 
                such subsidiaries, and
                    (B) the amount by which transactions between a REIT 
                and a taxable REIT subsidiary reduce taxable income of 
                the taxable REIT subsidiary (whether or not such 
                transactions are conducted at arms length), and
            (2) submit a report to the Committee on Ways and Means of 
        the House of Representatives and the Committee on Finance of 
        the Senate describing the results of such study.

SEC. 3647. C CORPORATION ELECTION TO BECOME, OR TRANSFER ASSETS TO, A 
              RIC OR REIT.

    (a) In General.--Part IV of subchapter O of chapter 1, as amended 
by the preceding provisions of this Act, is amended by redesignating 
section 1062 as section 1063 and by inserting after section 1061 the 
following new section:

``SEC. 1062. RECOGNITION OF GAIN OR LOSS UPON C CORPORATION ELECTION TO 
              BECOME, OR TRANSFER ASSETS TO, A REGULATED INVESTMENT 
              COMPANY OR A REAL ESTATE INVESTMENT TRUST.

    ``(a) In General.--If a C corporation elects to become a regulated 
investment company or a real estate investment trust for a taxable 
year, such corporation shall recognize gain or loss as if all its 
assets were sold by such corporation at their fair market value 
immediately before the close of the last taxable year before such 
corporation becomes a regulated investment company or real estate 
investment trust (as the case may be).
    ``(b) Application to Transfers of Assets.--In the case of a C 
corporation which transfers to a regulated investment company or a real 
estate investment trust one or more assets the basis of which is 
determined (in whole or in part) by reference to the basis of such 
asset or assets in the hands of the C corporation, such corporation 
shall recognize gain or loss as if such assets were sold by such 
corporation at their fair market value as of the end of the day before 
the day of the transfer.
    ``(c) Nonapplication to Net Loss.--Subsections (a) and (b) shall 
not apply if their application would result in the recognition of a net 
loss. For purposes of the preceding sentence, the term `net loss' means 
the excess of aggregate losses over aggregate gains (including items of 
income) without regard to character.
    ``(d) Basis Adjustment.--If any asset is treated as sold under 
subsection (a) or (b), the basis of such asset immediately after such 
deemed sale shall be equal to the fair market value of such asset as 
determined under such subsection.
    ``(e) C Corporation.--For purposes of this section, the term `C 
corporation' does not include a regulated investment company or a real 
estate investment trust.''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 is amended by redesignating the item relating 
to section 1062 as an item relating to section 1063 and by inserting 
after the item relating to section 1061 the following new item:

``Sec. 1062. Recognition of gain or loss upon C corporation election to 
                            become, or transfer assets to, a regulated 
                            investment company or a real estate 
                            investment trust.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to elections and transfers on or after February 26, 2014.

SEC. 3648. INTERESTS IN RICS AND REITS NOT EXCLUDED FROM DEFINITION OF 
              UNITED STATES REAL PROPERTY INTERESTS.

    (a) In General.--Section 897(c)(1)(B) is amended by striking 
``and'' at the end of clause (i), by striking the period at the end of 
clause (ii)(II) and inserting ``, and'', and by adding at the end the 
following new clause:
                            ``(iii) neither such corporation nor any 
                        predecessor of such corporation was a regulated 
                        investment company or a real estate investment 
                        company at any time during the period described 
                        in subparagraph (A)(ii).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dispositions after December 31, 2014.

SEC. 3649. DIVIDENDS DERIVED FROM RICS AND REITS INELIGIBLE FOR 
              DEDUCTION FOR UNITED STATES SOURCE PORTION OF DIVIDENDS 
              FROM CERTAIN FOREIGN CORPORATIONS.

    (a) In General.--Section 245(a) is amended by adding at the end the 
following new paragraph:
            ``(12) Dividends derived from rics and reits ineligible for 
        deduction.--Regulated investment companies and real estate 
        investment trusts shall not be treated as domestic corporations 
        for purposes of paragraph (5)(B).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dividends received from regulated investment companies and real 
estate investment trusts on or after February 26, 2014.

                   PART 4--PERSONAL HOLDING COMPANIES

SEC. 3661. EXCLUSION OF DIVIDENDS FROM CONTROLLED FOREIGN CORPORATIONS 
              FROM THE DEFINITION OF PERSONAL HOLDING COMPANY INCOME 
              FOR PURPOSES OF THE PERSONAL HOLDING COMPANY RULES.

    (a) In General.--Paragraph (1) of section 543(a) is amended--
            (1) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (D) and (E), respectively, and
            (2) by inserting after subparagraph (B) the following:
                    ``(C) dividends received by a United States 
                shareholder (as defined in section 951(b)) from a 
                controlled foreign corporation (as defined in section 
                957(a)),''.
    (b) Effective Date.--The amendments made by this Act shall apply to 
taxable years beginning after December 31, 2014.

                Subtitle H--Taxation of Foreign Persons

SEC. 3701. PREVENTION OF AVOIDANCE OF TAX THROUGH REINSURANCE WITH NON-
              TAXED AFFILIATES.

    (a) In General.--Part III of subchapter L of chapter 1 is amended 
by adding at the end the following new section:

``SEC. 849. SPECIAL RULES FOR REINSURANCE OF NON-LIFE CONTRACTS WITH 
              NON-TAXED AFFILIATES.

    ``(a) In General.--The taxable income under section 831(a) or the 
life insurance company taxable income under section 801(b) (as the case 
may be) of an insurance company shall be determined by not taking into 
account--
            ``(1) any non-taxed reinsurance premium,
            ``(2) any additional amount paid by such insurance company 
        with respect to the reinsurance for which such non-taxed 
        reinsurance premium is paid, to the extent such additional 
        amount is properly allocable to such non-taxed reinsurance 
        premium, and
            ``(3) any return premium, ceding commission, reinsurance 
        recovered, or other amount received by such insurance company 
        with respect to the reinsurance for which such non-taxed 
        reinsurance premium is paid, to the extent such return premium, 
        ceding commission, reinsurance recovered, or other amount is 
        properly allocable to such non-taxed reinsurance premium.
    ``(b) Non-Taxed Reinsurance Premiums.--For purposes of this 
section--
            ``(1) In general.--The term `non-taxed reinsurance premium' 
        means any reinsurance premium paid directly or indirectly to an 
        affiliated corporation with respect to reinsurance of risks 
        (other than excepted risks), to the extent that the income 
        attributable to the premium is not subject to tax under this 
        subtitle (either as the income of the affiliated corporation or 
        as amounts included in gross income by a United States 
        shareholder under section 951).
            ``(2) Excepted risks.--The term `excepted risks' means any 
        risk with respect to which reserves described in section 
        816(b)(1) are established.
    ``(c) Affiliated Corporations.--For purposes of this section, a 
corporation shall be treated as affiliated with an insurance company if 
both corporations would be members of the same controlled group of 
corporations (as defined in section 1563(a)) if section 1563 were 
applied--
            ``(1) by substituting `at least 50 percent' for `at least 
        80 percent' each place it appears in subsection (a)(1), and
            ``(2) without regard to subsections (a)(4), (b)(2)(C), 
        (b)(2)(D), and (e)(3)(C).
    ``(d) Election To Treat Reinsurance Income as Effectively 
Connected.--
            ``(1) In general.--A specified affiliated corporation may 
        elect for any taxable year to treat specified reinsurance 
        income as--
                    ``(A) income effectively connected with the conduct 
                of a trade or business in the United States, and
                    ``(B) for purposes of any treaty between the United 
                States and any foreign country, income attributable to 
                a permanent establishment in the United States.
            ``(2) Effect of election.--In the case of any specified 
        reinsurance income with respect to which the election under 
        this subsection applies--
                    ``(A) Deduction allowed for reinsurance premiums.--
                For exemption from subsection (a), see definition of 
                non-taxed reinsurance premiums in subsection (b).
                    ``(B) Exception from excise tax.--The tax imposed 
                by section 4371 shall not apply with respect to any 
                income treated as effectively connected with the 
                conduct of a trade or business in the United States 
                under paragraph (1).
                    ``(C) Taxation under this subchapter.--Such income 
                shall be subject to tax under this subchapter to the 
                same extent and in the same manner as if such income 
                were the income of a domestic insurance company.
                    ``(D) Coordination with foreign tax credit 
                provisions.--For purposes of subpart A of part III of 
                subchapter N and sections 78 and 960--
                            ``(i) such specified reinsurance income 
                        shall be treated as derived from sources 
                        without the United States, and
                            ``(ii) subsections (a), (b), and (c) of 
                        section 904, and section 960, shall be applied 
                        separately with respect to each item of such 
                        income.
                The Secretary may issue regulations or other guidance 
                which provide that related items of specified 
                reinsurance income may be aggregated for purposes of 
                applying clause (ii).
            ``(3) Specified affiliated corporation.--For purposes of 
        this subsection, the term `specified affiliated corporation' 
        means any affiliated corporation which is a foreign corporation 
        and which meets such requirements as the Secretary shall 
        prescribe to ensure that tax on the specified reinsurance 
        income of such corporation is properly determined and paid.
            ``(4) Specified reinsurance income.--For purposes of this 
        paragraph, the term `specified reinsurance income' means all 
        income of a specified affiliated corporation which is 
        attributable to reinsurance with respect to which subsection 
        (a) would (but for the election under this subsection) apply.
            ``(5) Rules related to election.--Any election under 
        paragraph (1) shall--
                    ``(A) be made at such time and in such form and 
                manner as the Secretary may provide, and
                    ``(B) apply for the taxable year for which made and 
                all subsequent taxable years unless revoked with the 
                consent of the Secretary.
    ``(e) Exception for Amounts Subject to Foreign Tax.--An amount 
shall not be treated as described in paragraph (1), (2), or (3) of 
subsection (a) if the taxpayer demonstrates to the satisfaction of the 
Secretary that such amount was subject to an effective rate of income 
tax imposed by a foreign country which is not less than 100 percent of 
the maximum rate of tax specified in section 11.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be appropriate to carry out, or to prevent the 
avoidance of the purposes of, this section, including regulations or 
other guidance which provide for the application of this section to 
alternative reinsurance transactions, fronting transactions, conduit 
and reciprocal transactions, and any economically equivalent 
transactions.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter L of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 849. Special rules for reinsurance of non-life contracts with 
                            non-taxed affiliates.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3702. TAXATION OF PASSENGER CRUISE GROSS INCOME OF FOREIGN 
              CORPORATIONS AND NONRESIDENT ALIEN INDIVIDUALS.

    (a) In General.--Section 882 is amended by redesignating subsection 
(f) as subsection (g) and by inserting after subsection (e) the 
following new subsection:
    ``(f) Treatment of Passenger Cruise Gross Income.--
            ``(1) In general.--For purposes of this title, the 
        effectively connected passenger cruise gross income of a 
        foreign corporation shall be treated as gross income which is 
        effectively connected with the conduct of a trade or business 
        in the United States.
            ``(2) Effectively connected passenger cruise gross 
        income.--For purposes of this subsection, the term `effectively 
        connected passenger cruise gross income' means, with respect to 
        the operation of any ship in a covered voyage, the United 
        States territorial waters percentage of the gross income 
        (determined without regard to section 883(a)(1)) derived from 
        such operation, including any amount received with respect to 
        the provision of any on- or off-board activities, services, or 
        sales, with respect to passengers incidental to such operation 
        (or with respect to any agreement with any person with respect 
        to the provision of any such activities, services, or sales).
            ``(3) United states territorial waters percentage.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `United States 
                territorial waters percentage' means, with respect to 
                the operation of any ship in any covered voyage, the 
                ratio (expressed as a percentage) of--
                            ``(i) the number of days during such voyage 
                        such ship was operated in the territorial 
                        waters of the United States, divided by
                            ``(ii) the total number of days of such 
                        voyage.
                    ``(B) Calendar day rule.--If a ship--
                            ``(i) is operated in a covered voyage, or
                            ``(ii) is operated in the territorial 
                        waters of the United States during a covered 
                        voyage,
                for any portion of a calendar day, such ship shall be 
                treated as having operated in a covered voyage, or as 
                having operated in such territorial waters, 
                respectively, for the entirety of such day.
                    ``(C) Territorial waters.--The territorial waters 
                of the United States shall be treated as consisting of 
                those waters which are--
                            ``(i) within the international boundary 
                        line between the United States and any 
                        contiguous foreign country, or
                            ``(ii) within 12 nautical miles from low 
                        tide on the coastline of the United States.
            ``(4) Covered voyage.--For purposes of this subsection--
                    ``(A) In general.--The term `covered voyage' has 
                the meaning given such term by section 4472(1).
                    ``(B) Anti-abuse rule.--Except as otherwise 
                provided by the Secretary, if passengers embark a ship 
                in the United States and more than 10 percent of such 
                passengers disembark in the United States, the 
                operation of such ship at all times between such events 
                shall be treated as a covered voyage. Nothing in the 
                preceding sentence shall preclude any operation of a 
                ship (including any operation of a ship before or after 
                such events) which would otherwise be treated as part 
                of a covered voyage from being so treated.
            ``(5) Treatment of otherwise effectively connected 
        income.--Gross income which would, without regard to this 
        subsection, be gross income which is effectively connected with 
        the conduct of a trade or business in the United States--
                    ``(A) shall be so treated, and
                    ``(B) shall not be taken into account as gross 
                income under paragraph (2).''.
    (b) Application to Nonresident Alien Individuals.--Section 871 is 
amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Treatment of Passenger Cruise Gross Income.--
            ``(1) In general.--For purposes of this title, the 
        effectively connected passenger cruise gross income of a 
        nonresident alien individual shall be treated as gross income 
        which is effectively connected with the conduct of a trade or 
        business in the United States.
            ``(2) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Definitions.--Terms used in this subsection 
                which are also used in section 882(f) shall have the 
                same meaning as when used in such section, except that 
                section 882(f)(2) shall be applied by substituting 
                `section 872(b)(1)' for `section 883(a)(1)'.
                    ``(B) Treatment of otherwise effectively connected 
                income.--Rules similar to the rules of section 
                882(f)(5) shall apply for purposes of this 
                subsection.''.
    (c) Coordination With Reciprocal Exemptions for Shipping Income.--
            (1) In general.--Section 883(a)(1) is amended by striking 
        ``Gross income'' and inserting ``Except as provided in section 
        882(f), gross income''.
            (2) Nonresident alien individuals.--Section 872(b)(1) is 
        amended by striking ``Gross income'' and inserting ``Except as 
        provided in section 871(n), gross income''.
    (d) Coordination With Tax on Gross Transportation Income.--Section 
887(b)(4) is amended by adding at the end the following new flush text:
        ``The preceding sentence shall not apply to any United States 
        source gross transportation income which is effectively 
        connected passenger cruise gross income (within the meaning of 
        section 871(n) or 882(f)).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3703. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE 
              FOREIGN INVESTMENT COMPANY RULES.

    (a) In General.--Section 1297(b)(2)(B) is amended to read as 
follows:
                    ``(B) derived in the active conduct of an insurance 
                business by a corporation if--
                            ``(i) such corporation would be subject to 
                        tax under subchapter L if such corporation were 
                        a domestic corporation,
                            ``(ii) more than 50 percent of such 
                        corporation's gross receipts for the taxable 
                        year consist of premiums, and
                            ``(iii) the applicable insurance 
                        liabilities of such corporation constitute more 
                        than 35 percent of its total assets as reported 
                        on the corporation's applicable financial 
                        statement for the year with which or in which 
                        the taxable year ends,''.
    (b) Applicable Insurance Liabilities; Applicable Financial 
Statement.--
            (1) In general.--Section 1297(b) is amended by adding at 
        the end the following new paragraph:
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Applicable insurance liabilities.--The term 
                `applicable insurance liabilities' means, with respect 
                to any life or property and casualty insurance 
                business--
                            ``(i) loss and loss adjustment expenses,
                            ``(ii) unearned premiums, and
                            ``(iii) reserves (other than deficiency or 
                        contingency reserves) for life and health 
                        insurance risks and life and health insurance 
                        claims with respect to contracts providing 
                        coverage for mortality or morbidity risks (not 
                        to exceed the amount of such reserve that is 
                        required to be reported to the home country 
                        insurance regulatory body).
                    ``(B) Applicable financial statement.--The term 
                `applicable financial statement' means a statement for 
                financial reporting purposes which--
                            ``(i) is made on the basis of generally 
                        accepted accounting principles,
                            ``(ii) is made on the basis of 
                        international financial reporting standards, 
                        but only if there is no statement that meets 
                        the requirement of clause (i), or
                            ``(iii) except as otherwise provided by the 
                        Secretary in regulations, is the annual 
                        statement which is required to be filed with 
                        the home country insurance regulatory body, but 
                        only if there is no statement which meets the 
                        requirements of clause (i) or (ii).''.
            (2) Conforming amendment.--Section 1297(b) is amended--
                    (A) by striking the last sentence in paragraph (2) 
                thereof, and
                    (B) by adding at the end of paragraph (3) thereof 
                (as added by paragraph (1)), the following new 
                subparagraph:
                    ``(C) Related person.--The term `related person' 
                has the meaning given such term by section 954(d)(3) 
                determined by substituting `foreign corporation' for 
                `controlled foreign corporation' each place it appears 
                therein.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3704. MODIFICATION OF LIMITATION ON EARNINGS STRIPPING.

    (a) In General.--Section 163(j)(2)(B)(i)(II) is amended by striking 
``50 percent'' and inserting ``40 percent''.
    (b) No New Excess Limitation Carryforwards.--Section 
163(j)(2)(B)(ii) is amended by striking ``for any taxable year'' and 
inserting ``for any taxable year beginning before January 1, 2015''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3705. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE 
              PAYMENTS.

    (a) In General.--Section 894 of the Internal Revenue Code of 1986 
(relating to income affected by treaty) is amended by adding at the end 
the following new subsection:
    ``(d) Limitation on Treaty Benefits for Certain Deductible 
Payments.--
            ``(1) In general.--In the case of any deductible related-
        party payment, any withholding tax imposed under chapter 3 (and 
        any tax imposed under subpart A or B of this part) with respect 
        to such payment may not be reduced under any treaty of the 
        United States unless any such withholding tax would be reduced 
        under a treaty of the United States if such payment were made 
        directly to the foreign parent corporation.
            ``(2) Deductible related-party payment.--For purposes of 
        this subsection, the term `deductible related-party payment' 
        means any payment made, directly or indirectly, by any person 
        to any other person if the payment is allowable as a deduction 
        under this chapter and both persons are members of the same 
        foreign controlled group of entities.
            ``(3) Foreign controlled group of entities.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `foreign controlled 
                group of entities' means a controlled group of entities 
                the common parent of which is a foreign corporation.
                    ``(B) Controlled group of entities.--The term 
                `controlled group of entities' means a controlled group 
                of corporations as defined in section 1563(a)(1), 
                except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears therein, and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and (b)(2) 
                        of section 1563.
                A partnership or any other entity (other than a 
                corporation) shall be treated as a member of a 
                controlled group of entities if such entity is 
                controlled (within the meaning of section 954(d)(3)) by 
                members of such group (including any entity treated as 
                a member of such group by reason of this sentence).
            ``(4) Foreign parent corporation.--For purposes of this 
        subsection, the term `foreign parent corporation' means, with 
        respect to any deductible related-party payment, the common 
        parent of the foreign controlled group of entities referred to 
        in paragraph (3)(A).
            ``(5) Regulations.--The Secretary may prescribe such 
        regulations or other guidance as are necessary or appropriate 
        to carry out the purposes of this subsection, including 
        regulations or other guidance which provide for--
                    ``(A) the treatment of two or more persons as 
                members of a foreign controlled group of entities if 
                such persons would be the common parent of such group 
                if treated as one corporation, and
                    ``(B) the treatment of any member of a foreign 
                controlled group of entities as the common parent of 
                such group if such treatment is appropriate taking into 
                account the economic relationships among such 
                entities.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments made after the date of the enactment of this Act.

             Subtitle I--Provisions Related to Compensation

                     PART 1--EXECUTIVE COMPENSATION

SEC. 3801. NONQUALIFIED DEFERRED COMPENSATION.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
is amended by adding at the end the following new section:

``SEC. 409B. NONQUALIFIED DEFERRED COMPENSATION.

    ``(a) In General.--Any compensation which is deferred under a 
nonqualified deferred compensation plan shall be includible in gross 
income when there is no substantial risk of forfeiture of the rights to 
such compensation.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Substantial risk of forfeiture.--The rights of a 
        person to compensation shall be treated as subject to a 
        substantial risk of forfeiture only if such person's rights to 
        such compensation are conditioned upon the future performance 
        of substantial services by any individual.
            ``(2) Nonqualified deferred compensation plan.--For 
        purposes of this section:
                    ``(A) Nonqualified deferred compensation plan.--The 
                term `nonqualified deferred compensation plan' means 
                any plan that provides for the deferral of 
                compensation, other than--
                            ``(i) a qualified employer plan,
                            ``(ii) any bona fide vacation leave, sick 
                        leave, compensatory time, disability pay, or 
                        death benefit plan, and
                            ``(iii) any other plan or arrangement 
                        designated by the Secretary consistent with the 
                        purposes of this section.
                    ``(B) Equity-based compensation.--The term 
                `nonqualified deferred compensation plan' shall include 
                any plan that provides a right to compensation based on 
                the appreciation in value of a specified number of 
                equity units of the service recipient or stock options.
            ``(3) Qualified employer plan.--The term `qualified 
        employer plan' means any plan, contract, pension, account, or 
        trust described in 408(p)(2)(D)(ii).
            ``(4) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement, including an agreement 
        or arrangement that includes one person.
            ``(5) Exception.--Compensation shall not be treated as 
        deferred for purposes of this section if the service provider 
        receives payment of such compensation not later than 6 months 
        after the end of the taxable year of the service recipient 
        during which the right to the payment of such compensation is 
        no longer subject to a substantial risk of forfeiture.
            ``(6) Treatment of earnings.--References to deferred 
        compensation shall be treated as including references to income 
        (whether actual or notional) attributable to such compensation 
        or such income.
            ``(7) Aggregation rules.--Except as provided by the 
        Secretary, rules similar to the rules of subsections (b) and 
        (c) of section 414 shall apply.
    ``(c) No Inference on Earlier Income Inclusion or Requirement of 
Later Inclusion.--Nothing in this section shall be construed to prevent 
the inclusion of amounts in gross income under any other provision of 
this chapter or any other rule of law earlier than the time provided in 
this section. Any amount included in gross income under this section 
shall not be required to be included in gross income under any other 
provision of this chapter or any other rule of law later than the time 
provided in this section.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations disregarding a substantial risk of 
forfeiture in cases where necessary to carry out the purposes of this 
section.''.
    (b) Termination of Certain Other Nonqualified Deferred Compensation 
Rules.--
            (1) Nonqualified deferred compensation.--
                    (A) In general.--Subpart A of part I of subchapter 
                D of chapter 1 is amended by striking section 409A (and 
                by striking the item relating to such section in the 
                table of sections for such subpart).
                    (B) Conforming amendments.--
                            (i) Section 26(b)(2) is amended by striking 
                        subparagraph (V).
                            (ii) Section 3401(a) is amended by striking 
                        the flush sentence at the end.
                            (iii) Section 6041 is amended by striking 
                        subsection (g).
                            (iv) Section 6051(a), as amended by the 
                        preceding provisions of this Act, is amended by 
                        striking paragraph (12), by inserting ``and'' 
                        at the end of paragraph (11), and by 
                        redesignating paragraph (13) as paragraph (12).
            (2) 457(b) plans of tax exempt organizations.--Section 457 
        is amended by adding at the end the following new subsection:
    ``(h) Termination of Certain Plans.--
            ``(1) Tax-exempt organization plans.--This section shall 
        not apply to amounts deferred which are attributable to 
        services performed after December 31, 2014, under a plan 
        maintained by an employer described in subsection (e)(1)(B).
            ``(2) Ineligible deferred compensation plans.--Subsection 
        (f) shall not apply to amounts deferred which are attributable 
        to services performed after December 31, 2014.''.
            (3) Nonqualified deferred compensation from certain tax 
        indifferent parties.--
                    (A) In general.--Subpart B of part II of subchapter 
                E of chapter 1 is amended by striking section 457A (and 
                by striking the item relating to such section in the 
                table of sections for such subpart).
                    (B) Conforming amendment.--Section 26(b)(2) is 
                amended by striking subparagraph (X).
    (c) Clerical Amendment.--The table of sections for part I of 
subchapter D of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 409B. Nonqualified deferred compensation.''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        amounts which are attributable to services performed after 
        December 31, 2014.
            (2) Application to existing deferrals.--In the case of any 
        amount deferred to which the amendments made by this section do 
        no apply solely by reason of the fact that the amount is 
        attributable to services performed before January 1, 2015, to 
        the extent such amount is not includible in gross income in a 
        taxable year beginning before 2023, such amounts shall be 
        includible in gross income in the later of--
                    (A) the last taxable year beginning before 2023, or
                    (B) the taxable year in which there is no 
                substantial risk of forfeiture of the rights to such 
                compensation (determined in the same manner as 
                determined for purposes of section 409B of the Internal 
                Revenue Code of 1986, as added by this section).
            (3) Accelerated payments.--No later than 120 days after the 
        date of the enactment of this Act, the Secretary shall issue 
        guidance providing a limited period of time during which a 
        nonqualified deferred compensation arrangement attributable to 
        services performed on or before December 31, 2014, may, without 
        violating the requirements of section 409A of the Internal 
        Revenue Code of 1986, be amended to conform the date of 
        distribution to the date the amounts are required to be 
        included in income.
            (4) Certain back-to-back arrangements.--If the taxpayer is 
        also a service recipient and maintains one or more nonqualified 
        deferred compensation arrangements for its service providers 
        under which any amount is attributable to services performed on 
        or before December 31, 2014, the guidance issued under 
        paragraph (3) shall permit such arrangements to be amended to 
        conform the dates of distribution under such arrangement to the 
        date amounts are required to be included in the income of such 
        taxpayer under this subsection.
            (5) Accelerated payment not treated as material 
        modification.--Any amendment to a nonqualified deferred 
        compensation arrangement made pursuant to paragraph (3) or (4) 
        shall not be treated as a material modification of the 
        arrangement for purposes of section 409A of the Internal 
        Revenue Code of 1986.

SEC. 3802. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE 
              REMUNERATION.

    (a) Repeal of Performance-Based Compensation and Commission 
Exceptions for Limitation on Excessive Employee Remuneration.--
            (1) In general.--Paragraph (4) of section 162(m) is amended 
        by striking subparagraphs (B) and (C) and by redesignating 
        subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), 
        (D), and (E), respectively.
            (2) Conforming amendments.--
                    (A) Paragraphs (5)(E) and (6)(D) of section 162(m) 
                are each amended by striking ``subparagraphs (B), (C), 
                and (D)'' and inserting ``subparagraph (B)''.
                    (B) Paragraphs (5)(G) and (6)(G) of section 162(m) 
                are each amended by striking ``(F) and (G)'' and 
                inserting ``(D) and (E)''.
    (b) Modification of Definition of Covered Employees.--Paragraph (3) 
of section 162(m) is amended--
            (1) in subparagraph (A), by striking ``as of the close of 
        the taxable year, such employee is the chief executive officer 
        of the taxpayer or is'' and inserting ``such employee is the 
        chief executive officer or the chief financial officer of the 
        taxpayer at any time during the taxable year, or was'',
            (2) in subparagraph (B)--
                    (A) by striking ``4'' and inserting ``3'', and
                    (B) by striking ``(other than the chief executive 
                officer)'' and inserting ``(other than any individual 
                described in subparagraph (A))'', and
            (3) by striking ``or'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and 
        inserting ``, or'', and by adding at the end the following:
                    ``(C) was a covered employee of the taxpayer (or 
                any predecessor) for any preceding taxable year 
                beginning after December 31, 2013.''.
    (c) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m), as amended by subsection (a), is 
amended by adding at the end the following new subparagraph:
                    ``(F) Special rule for remuneration paid to 
                beneficiaries, etc.--Remuneration shall not fail to be 
                applicable employee remuneration merely because it is 
                includible in the income of, or paid to, a person other 
                than the covered employee, including after the death of 
                the covered employee.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3803. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
              COMPENSATION.

    (a) In General.--Subchapter D of chapter 42 is amended by adding at 
the end the following new section:

``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
              COMPENSATION.

    ``(a) Tax Imposed.--There is hereby imposed a tax equal to 25 
percent of the sum of--
            ``(1) so much of the remuneration paid (other than any 
        excess parachute payment) by an applicable tax-exempt 
        organization for the taxable year with respect to employment of 
        any covered employee in excess of $1,000,000, plus
            ``(2) any excess parachute payment paid by such an 
        organization to any covered employee.
    ``(b) Liability for Tax.--The employer shall be liable for the tax 
imposed under subsection (a).
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable tax-exempt organization.--The term 
        `applicable tax-exempt organization' means any organization 
        that for the taxable year--
                    ``(A) is exempt from taxation under section 501(a),
                    ``(B) is a farmers' cooperative organization 
                described in section 521(b)(1), or
                    ``(C) has income excluded from taxation under 
                section 115(1).
            ``(2) Covered employee.--For purposes of this section, the 
        term `covered employee' means any employee (including any 
        former employee) of an applicable tax-exempt organization if 
        the employee--
                    ``(A) is one of the 5 highest compensated employees 
                of the organization for the taxable year, or
                    ``(B) was a covered employee of the organization 
                (or any predecessor) for any preceding taxable year 
                beginning after December 31, 2013.
            ``(3) Remuneration.--For purposes of this section, the term 
        `remuneration' means wages (as defined in section 3401(a)), 
        except that such term shall not include any designated Roth 
        contribution (as defined in section 402A(c)).
            ``(4) Remuneration from related organizations.--
                    ``(A) In general.--Remuneration of a covered 
                employee by an applicable tax-exempt organization shall 
                include any remuneration paid with respect to 
                employment of such employee by any related person or 
                governmental entity.
                    ``(B) Related organizations.--A person or 
                governmental entity shall be treated as related to an 
                applicable tax-exempt organization if such person or 
                governmental entity--
                            ``(i) controls, or is controlled by, the 
                        organization,
                            ``(ii) is controlled by one or more persons 
                        that control the organization,
                            ``(iii) is a supported organization (as 
                        defined in section 509(f)(2)) during the 
                        taxable year with respect to the organization,
                            ``(iv) is a supporting organization 
                        described in section 509(a)(3) during the 
                        taxable year with respect to the organization, 
                        or
                            ``(v) in the case of an organization that 
                        is a voluntary employees' beneficiary 
                        association described in section 501(a)(9), 
                        establishes, maintains, or makes contributions 
                        to such voluntary employees' beneficiary 
                        association.
                    ``(C) Liability for tax.--In any case in which 
                remuneration from more than one employer is taken into 
                account under this paragraph in determining the tax 
                imposed by subsection (a), each such employer shall be 
                liable for such tax in an amount which bears the same 
                ratio to the total tax determined under subsection (a) 
                with respect to such remuneration as--
                            ``(i) the amount of remuneration paid by 
                        such employer with respect to such employee, 
                        bears to
                            ``(ii) the amount of remuneration paid by 
                        all such employers to such employee.
            ``(5) Excess parachute payment.--For purposes determining 
        the tax imposed by subsection (a)(2)--
                    ``(A) In general.--The term `excess parachute 
                payment' means an amount equal to the excess of any 
                parachute payment over the portion of the base amount 
                allocated to such payment.
                    ``(B) Parachute payment.--The term `parachute 
                payment' means any payment in the nature of 
                compensation to (or for the benefit of) a covered 
                employee if--
                            ``(i) such payment is contingent on such 
                        employee's separation from employment with the 
                        employer, and
                            ``(ii) the aggregate present value of the 
                        payments in the nature of compensation to (or 
                        for the benefit of) such individual which are 
                        contingent on such separation equals or exceeds 
                        an amount equal to 3 times the base amount.
                Such term does not include any payment described in 
                section 280G(b)(6) (relating to exemption for payments 
                under qualified plans) or any payment made under or to 
                an annuity contract described in section 403(b) or a 
                plan described in section 457(b).
                    ``(C) Base amount.--Rules similar to the rules of 
                280G(b)(3) shall apply for purposes of determining the 
                base amount.
                    ``(D) Property transfers; present value.--Rules 
                similar to the rules of paragraphs (3) and (4) of 
                section 280G(d) shall apply.
            ``(6) Coordination with deduction limitation.--Remuneration 
        the deduction for which is not allowed by reason of section 
        162(m) shall not be taken into account for purposes of this 
        section.''.
    (b) Clerical Amendment.--The table of sections for subchapter D of 
chapter 42 is amended by adding at the end the following new item:

``Sec. 4960. Tax on excess exempt organization executive 
                            compensation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 3804. DENIAL OF DEDUCTION AS RESEARCH EXPENDITURE FOR STOCK 
              TRANSFERRED PURSUANT TO AN INCENTIVE STOCK OPTION.

    (a) In General.--Paragraph (2) of section 421(a) is amended by 
striking ``under section 162 (relating to trade or business 
expenses)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to stock transferred on or after February 26, 2014.

                     PART 2--WORKER CLASSIFICATION

SEC. 3811. DETERMINATION OF WORKER CLASSIFICATION.

    (a) In General.--Chapter 79, as amended by the preceding provisions 
of this Act, is amended by adding at the end the following new section:

``SEC. 7707. DETERMINATION OF WORKER CLASSIFICATION.

    ``(a) In General.--For purposes of this title (and notwithstanding 
any provision of this title not contained in this section to the 
contrary), if the requirements of subsections (b), (c), and (d) are met 
with respect to any service performed by a service provider, then with 
respect to such service--
            ``(1) the service provider shall not be treated as an 
        employee,
            ``(2) the service recipient shall not be treated as an 
        employer,
            ``(3) any payor shall not be treated as an employer, and
            ``(4) the compensation paid or received for such service 
        shall not be treated as paid or received with respect to 
        employment.
    ``(b) General Service Provider Requirements.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any service if the service provider 
        either--
                    ``(A) meets the requirements of paragraph (2) with 
                respect to such service, or
                    ``(B) in the case a service provider engaged in the 
                trade or business of selling (or soliciting the sale 
                of) goods or services, meets the requirements of 
                paragraph (3) with respect to such service.
            ``(2) General requirements.--The requirements of this 
        paragraph are met with respect to any service if the service 
        provider, in connection with performing the service--
                    ``(A) incurs significant unreimbursed expenses,
                    ``(B) agrees to perform the service for a 
                particular amount of time, to achieve a specific 
                result, or to complete a specific task,
                    ``(C) is primarily compensated on a basis not tied 
                to the number of hours worked, and
                    ``(D) at least one of the following:
                            ``(i) has a significant investment in 
                        assets or training,
                            ``(ii) is not required to perform services 
                        exclusively for the service recipient, or
                            ``(iii) has not performed services for the 
                        service recipient as an employee during the 1-
                        year period ending with the date of the 
                        commencement of services under the contract 
                        described in subsection (d).
            ``(3) Alternative requirements with respect to sales 
        persons.--In the case of a service provider engaged in the 
        trade or business of selling (or soliciting the sale of) goods 
        or services, the requirements of this paragraph are met with 
        respect to any service provided in the ordinary course of such 
        trade or business if--
                    ``(A) the service provider is compensated primarily 
                on a commission basis, and
                    ``(B) substantially all the compensation for such 
                service is directly related to sales of goods or 
                services rather than to the number of hours worked.
    ``(c) Place of Business or Own Equipment Requirement.--The 
requirement of this subsection is met with respect to any service if 
the service provider--
            ``(1) has a principal place of business,
            ``(2) does not primarily provide the service in the service 
        recipient's place of business,
            ``(3) pays a fair market rent for use of the service 
        recipient's place of business, or
            ``(4) provides the service primarily using equipment 
        supplied by the service provider.
    ``(d) Written Contract Requirement.--The requirements of this 
subsection are met with respect to any service if such service is 
performed pursuant to a written contract between the service provider 
and the service recipient (or payor) which meets the following 
requirements:
            ``(1) The contract includes each of the following:
                    ``(A) The service provider's name, taxpayer 
                identification number, and address.
                    ``(B) A statement that the service provider will 
                not be treated as an employee with respect to the 
                services provided pursuant to the contract for purposes 
                of this title.
                    ``(C) A statement that the service recipient (or 
                the payor) will withhold upon and report to the 
                Internal Revenue Service the compensation payable 
                pursuant to the contract consistent with the 
                requirements of this title.
                    ``(D) A statement that the service provider is 
                responsible for payment of Federal, State, and local 
                taxes, including self-employment taxes, on compensation 
                payable pursuant to the contract.
                    ``(E) A statement that the contract is intended to 
                be considered a contract described in this subsection.
            ``(2) The term of the contract does not exceed 1 year. The 
        preceding sentence shall not prevent one or more subsequent 
        written renewals of the contract from satisfying the 
        requirements of this subsection if the term of each such 
        renewal does not exceed 1 year and if the information required 
        under paragraph (1)(A) is updated in connection with each such 
        renewal.
            ``(3) The contract (or renewal) is signed by both the 
        service recipient (or payor) and the service provider not later 
        than the date on which the aggregate payments made by the 
        service recipient to the service provider exceeds $600 for the 
        year covered by the contract (or renewal).
    ``(e) Reporting Requirements.--If any service recipient or payor 
fails to meet the applicable reporting requirements of section 6041(a) 
or 6041A(a) for any taxable year with respect to any service provider, 
this section shall not apply for purposes of making any determination 
with respect to the liability of such service recipient or payor for 
any tax with respect to such service provider for such period. For 
purposes of the preceding sentence, such reporting requirements shall 
be treated as met if the failure to satisfy such requirements is due to 
reasonable cause and not willful neglect.
    ``(f) Exception for Services Provided by Owner.--This section shall 
not apply with respect to any service provided by a service provider to 
a service recipient if the service provider owns any interest in the 
service recipient or any payor with respect to the service provided. 
The preceding sentence shall not apply in the case of a service 
recipient the stock of which is regularly traded on an established 
securities market.
    ``(g) Exception for Services Not Received in Course of a Trade or 
Business.--This section shall not apply with respect to any service 
unless such service is performed in the ordinary course of a trade or 
business of the service recipient.
    ``(h) Limitation on Reclassification by Secretary.--For purposes of 
this title--
            ``(1) Effect of reclassification on recipients and 
        payors.--A determination by the Secretary that a service 
        recipient or a payor should have treated a service provider as 
        an employee shall be effective with respect to the service 
        recipient or payor no earlier than the notice date if--
                    ``(A) the service recipient or the payor entered 
                into a written contract with the service provider which 
                meets the requirements of subsection (d),
                    ``(B) the service recipient or the payor satisfied 
                the applicable reporting requirements of section 
                6041(a) or 6041A(a) for all relevant taxable years with 
                respect to the service provider,
                    ``(C) the service recipient or the payor collected 
                and paid over all applicable taxes imposed under 
                subtitle C for all relevant taxable years with respect 
                to the service provider,
                    ``(D) the service recipient or the payor 
                demonstrates a reasonable basis for having determined 
                that the service provider should not be treated as an 
                employee under this section and that such determination 
                was made in good faith.
            ``(2) Effect of reclassification on service providers.--A 
        determination by the Secretary that a service provider should 
        have been treated as an employee shall be effective with 
        respect to the service provider no earlier than the notice date 
        if--
                    ``(A) the service provider entered into a written 
                contract with the service recipient or payor which 
                meets the requirements of subsection (d),
                    ``(B) the service provider satisfied the applicable 
                reporting requirements of sections 6012(a) and 6017 for 
                all relevant taxable years with respect to the service 
                recipient or payor, and
                    ``(C) the service provider demonstrates a 
                reasonable basis for determining that the service 
                provider is not an employee under this section and that 
                such determination was made in good faith.
            ``(3) Notice date.--For purposes of this subsection, the 
        term `notice date' means the 30th day after the earliest of--
                    ``(A) the date on which the first letter of 
                proposed deficiency which allows the service provider, 
                the service recipient, or the payor an opportunity for 
                administrative review in the Internal Revenue Service 
                Office of Appeals is sent,
                    ``(B) the date on which a deficiency notice under 
                section 6212 is sent, or
                    ``(C) the date on which a notice of determination 
                under section 7436(b)(2) is sent.
            ``(4) Reasonable cause exception.--The requirements of 
        paragraphs (1)(B) and (2)(B) shall be treated as met if the 
        failure to satisfy such requirements is due to reasonable cause 
        and not willful neglect.
            ``(5) No restriction on administrative or judicial 
        review.--Nothing in this subsection shall be construed as 
        limiting any provision of law which provides an opportunity for 
        administrative or judicial review of a determination by the 
        Secretary.
    ``(i) Definitions.--For purposes of this section--
            ``(1) Service provider.--
                    ``(A) In general.--The term `service provider' 
                means any qualified person who performs service for 
                another person.
                    ``(B) Qualified person.--The term `qualified 
                person' means--
                            ``(i) any natural person, and
                            ``(ii) any entity if any of the services 
                        referred to in subparagraph (A) are performed 
                        by one or more natural persons who directly own 
                        interests in such entity.
            ``(2) Service recipient.--The term `service recipient' 
        means the person for whom the service provider performs such 
        service.
            ``(3) Payor.--The term `payor' means any person who pays 
        the service provider for performing such service.
    ``(j) Regulations.--Notwithstanding section 530(d) of the Revenue 
Act of 1978, the Secretary shall issue such regulations as the 
Secretary determines are necessary to carry out the purposes of this 
section.''.
    (b) Withholding by Payor in Case of Certain Persons Classified as 
Not Employees.--Section 3402 is amended by redesignating subsection (s) 
as subsection (t) and inserting after subsection (r) the following new 
subsection:
    ``(s) Extension of Withholding to Payments to Certain Persons 
Classified as Not Employees.--
            ``(1) In general.--For purposes of this chapter and so much 
        of subtitle F as relates to this chapter, compensation paid 
        pursuant to a contract described in section 7707(d) shall be 
        treated as if it were a payment of wages by an employer to an 
        employee.
            ``(2) Amount withheld.--Except as otherwise provided under 
        subsection (i), the amount to be deducted and withheld pursuant 
        to paragraph (1) with respect to compensation paid pursuant to 
        any such contract during any calendar year shall be an amount 
        equal to 5 percent of so much of the amount of such 
        compensation as does not exceed $10,000.''.
    (c) Reporting.--Section 6041A is amended by adding at the end the 
following new subsection:
    ``(g) Special Rules for Certain Persons Classified as Not 
Employees.--In the case of any service recipient required to make a 
return under subsection (a) with respect to compensation to which 
section 7707(a) applies--
            ``(1) such return shall include--
                    ``(A) the aggregate amount of such compensation 
                paid to each person whose name is required to be 
                included on such return,
                    ``(B) the aggregate amount deducted and withheld 
                under section 3402(s) with respect to such 
                compensation, and
                    ``(C) an indication of whether a copy of the 
                contract described in section 7707(d) is on file with 
                the service recipient or payor, and
            ``(2) the statement required to be furnished under 
        subsection (e) shall include the information described in 
        paragraph (1) with respect to the service provider to whom such 
        statement is furnished.
Terms used in this subsection which are also used in section 7707 shall 
have the same meaning as when used in such section.''.
    (d) Clerical Amendment.--The table of sections for chapter 79, as 
amended by the preceding provisions of this Act, is amended by adding 
at the end the following new item:

``Sec. 7707. Determination of worker classification.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to services performed after December 31, 2014 (and to payments 
made for such services after such date).

           Subtitle J--Zones and Short-Term Regional Benefits

SEC. 3821. REPEAL OF PROVISIONS RELATING TO EMPOWERMENT ZONES AND 
              ENTERPRISE COMMUNITIES.

    (a) In General.--Chapter 1 is amended by striking subchapter U (and 
by striking the item relating to such subchapter in the table of 
subchapters for such chapter).
    (b) Conforming Amendments.--
            (1)(A) Section 38(b) is amended by striking paragraph (9).
            (B) Section 280C(a) is amended by striking ``1396(a),''.
            (2) Section 179(e) is amended by striking paragraph (3) and 
        by redesignating paragraph (4) as paragraph (3).
            (3) Section 1202(a)(2)(A) is amended by inserting ``(as in 
        effect before its repeal by the Tax Reform Act of 2014)'' after 
        ``section 1397C(b)''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendment made by this section shall take 
        effect on the date of the enactment of this Act.
            (2) Rollovers.--So much of subsection (a) as relates to the 
        repeal of section 1397B of the Internal Revenue Code of 1986 
        shall apply to sales after the date of the enactment of this 
        Act.
            (3) Savings provision.--The amendments made by this section 
        shall not apply to obligations described in section 1394 of the 
        Internal Revenue Code of 1986 (as in effect before its repeal) 
        which were issued before January 1, 2014.

SEC. 3822. REPEAL OF DC ZONE PROVISIONS.

    (a) In General.--Chapter 1 is amended by striking subchapter W (and 
by striking the item relating to such subchapter in the table of 
subchapters for such chapter).
    (b) Conforming Amendments.--
            (1)(A) Section 1202(a)(2)(B) is amended by inserting ``(as 
        in effect before its repeal by the Tax Reform Act of 2014)'' 
        after ``1400B(b)''.
            (2) Section 25(e)(1)(C) is amended by striking ``sections 
        23, 25D, and 1400C'' and inserting ``section 23''.
            (3) Section 1016(a) is amended by striking paragraph (27).
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in paragraph 
        (2), the amendments made by this section shall take effect on 
        the date of the enactment of this Act.
            (2) Savings provision.--The amendments made by this section 
        shall not apply to--
                    (A) in the case of the repeal of section 1400A of 
                the Internal Revenue Code of 1986, obligations 
                described in section 1394 of such Code (as in effect 
                before its repeal) which were issued before January 1, 
                2012,
                    (B) in the case of the repeal of section 1400B of 
                such Code, DC Zone assets (as defined in such section, 
                as in effect before its repeal) which were acquired by 
                the taxpayer before January 1, 2012, and
                    (C) in the case of the repeal of section 1400C of 
                such Code, principal residences acquired before January 
                1, 2012.

SEC. 3823. REPEAL OF PROVISIONS RELATING TO RENEWAL COMMUNITIES.

    (a) In General.--Chapter 1 is amended by striking subchapter X (and 
by striking the item relating to such subchapter in the table of 
subchapters for such chapter).
    (b) Conforming Amendments.--
            (1)(A) Section 469(i)(3), as amended by the preceding 
        provisions of this Act, is amended by striking subparagraph (C) 
        and by redesignating subparagraphs (D), (E), and (F) as 
        subparagraphs (B), (C), and (D).
            (B) Section 469(i)(3)(C), as so redesignated, is amended to 
        read as follows:
                    ``(C) Ordering rule.--If subparagraph (B) applies 
                for a taxable year, paragraph (1) shall be applied--
                            ``(i) first to the portion of the passive 
                        activity loss to which such subparagraph does 
                        not apply, and
                            ``(ii) then to the portion of such loss to 
                        which such subparagraph does apply.''.
            (C) Section 469(i)(6)(B), as amended by the preceding 
        provisions of this Act, is amended--
                    (i) by striking ``commercial revitalization 
                deduction'' in the heading,
                    (ii) by striking ``in the case of--'' and all that 
                follows through ``any credit'' in clause (i),
                    (iii) by striking ``year, or'' in clause (i) and 
                inserting ``year.'', and
                    (iv) by striking clause (iii).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Savings provision.--The amendments made by this section 
        shall not apply to--
                    (A) in the case of the repeal of section 1400F of 
                the Internal Revenue Code of 1986, qualified community 
                assets (as defined in such section, as in effect before 
                its repeal) which were acquired by the taxpayer before 
                January 1, 2010,
                    (B) in the case of the repeal section 1400H of such 
                Code, wages paid or incurred before January 1, 2010,
                    (C) in the case of the repeal of section 1400I of 
                such Code, qualified revitalization buildings (as 
                defined in such section, as in effect before its 
                repeal) which were placed in service before January 1, 
                2010, and
                    (D) in the case of the repeal of section 1400J of 
                such Code, property acquired before January 1, 2010.

SEC. 3824. REPEAL OF VARIOUS SHORT-TERM REGIONAL BENEFITS.

    (a) In General.--Chapter 1 is amended by striking subchapter Y (and 
by striking the item relating to such subchapter in the table of 
subchapters for such chapter).
    (b) Conforming Amendments.--Section 38(b) is amended by striking 
paragraphs (27), (28), (29) and (30).
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Savings provision.--The amendments made by this section 
        shall not apply to--
                    (A) in the case of the repeal of section 1400L(a) 
                of the Internal Revenue Code of 1986, qualified wages 
                (as defined in such section, as in effect before its 
                repeal) which were paid or incurred before January 1, 
                2004,
                    (B) in the case of the repeal of subsections (b) 
                and (f) of section 1400L of such Code, qualified New 
                York Liberty Zone property (as defined in section 
                1400L(b) of such Code, as in effect before its repeal) 
                placed in service before January 1, 2010,
                    (C) in the case of the repeal of section 1400L(c) 
                of such Code, qualified New York Liberty Zone leasehold 
                improvement property (as defined in such section, as in 
                effect before its repeal) placed in service before 
                January 1, 2007,
                    (D) in the case of the repeal of section 1400L(d) 
                of such Code, qualified New York Liberty bonds (as 
                defined in such section, as in effect before its 
                repeal) issued before January 1, 2014,
                    (E) in the case of the repeal of section 1400L(e) 
                of such Code, advanced refundings before January 1, 
                2006,
                    (F) in the case of the repeal of section 1400L(g) 
                of such Code, property which is compulsorily or 
                involuntarily converted as a result of the terrorist 
                attacks on September 11, 2001,
                    (G) in the case of the repeal of section 1400N(a) 
                of such Code, obligations issued before January 1, 
                2012,
                    (H) in the case of the repeal of section 1400N(b) 
                of such Code, advanced refundings before January 1, 
                2011,
                    (I) in the case of the repeal of section 1400N(d) 
                of such Code, property placed in service before January 
                1, 2012,
                    (J) in the case of the repeal of section 1400N(e) 
                of such Code, property placed in service before January 
                1, 2009,
                    (K) in the case of the repeal of subsections (f) 
                and (g) of section 1400N of such Code, amounts paid or 
                incurred before January 1, 2008,
                    (L) in the case of the repeal of section 1400N(h) 
                of such Code, amounts paid or incurred before January 
                1, 2012,
                    (M) in the case of the repeal of section 1400N(l) 
                of such Code, bonds issued before January 1, 2007,
                    (N) in the case of the repeal of section 1400Q(a) 
                of such Code, distributions before January 1, 2007,
                    (O) in the case of the repeal of section 1400Q(b) 
                of such Code, contributions before March 1, 2006,
                    (P) in the case of the repeal of section 1400Q(c) 
                of such Code, loans made before January 1, 2007,
                    (Q) in the case of the repeal of section 1400R of 
                such Code, wages paid or incurred before January 1, 
                2006,
                    (R) in the case of the repeal of section 1400S(a) 
                of such Code, contributions paid before January 1, 
                2006,
                    (S) in the case of the repeal of section 1400T of 
                such Code, financing provided before January 1, 2011, 
                and
                    (T) in the case of the repeal of part III of 
                subchapter Y of chapter 1 of such Code, obligations 
                issued before January 1, 2011.

 TITLE IV--PARTICIPATION EXEMPTION SYSTEM FOR THE TAXATION OF FOREIGN 
                                 INCOME

             Subtitle A--Establishment of Exemption System

SEC. 4001. DEDUCTION FOR DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS 
              FROM CERTAIN FOREIGN CORPORATIONS.

    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by inserting after section 245 the following new section:

``SEC. 245A. DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM CERTAIN 
              FOREIGN CORPORATIONS.

    ``(a) In General.--In the case of any dividend received from a 
specified 10-percent owned foreign corporation by a domestic 
corporation which is a United States shareholder with respect to such 
foreign corporation, there shall be allowed as a deduction an amount 
equal to 95 percent of the foreign-source portion of such dividend.
    ``(b) Specified 10-Percent Owned Foreign Corporation.--For purposes 
of this section, the term `specified 10-percent owned foreign 
corporation' means any foreign corporation if any domestic corporation 
owns directly, or indirectly through a chain of ownership described 
under section 958(a), 10 percent or more of the voting stock of such 
foreign corporation.
    ``(c) Foreign-Source Portion.--For purposes of this section--
            ``(1) In general.--The foreign-source portion of any 
        dividend is an amount which bears the same ratio to such 
        dividends as--
                    ``(A) the post-1986 undistributed foreign earnings, 
                bears to
                    ``(B) the total post-1986 undistributed earnings.
            ``(2) Post-1986 undistributed earnings.--The term `post-
        1986 undistributed earnings' means the amount of the earnings 
        and profits of the specified 10-percent owned foreign 
        corporation (computed in accordance with sections 964(a) and 
        986) accumulated in taxable years beginning after December 31, 
        1986--
                    ``(A) as of the close of the taxable year of the 
                specified 10-percent owned foreign corporation in which 
                the dividend is distributed, and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.
            ``(3) Post-1986 undistributed foreign earnings.--The term 
        `post-1986 undistributed foreign earnings' means the portion of 
        the post-1986 undistributed earnings which is attributable to 
        neither--
                    ``(A) income described in subparagraph (A) of 
                section 245(a)(5), nor
                    ``(B) dividends described in subparagraph (B) of 
                such section (determined without regard to section 
                245(a)(12)).
            ``(4) Treatment of distributions from earnings before 
        1987.--
                    ``(A) In general.--In the case of any dividend paid 
                out of earnings and profits of the specified 10-percent 
                owned foreign corporation (computed in accordance with 
                sections 964(a) and 986) accumulated in taxable years 
                beginning before January 1, 1987--
                            ``(i) paragraphs (1), (2), and (3) shall be 
                        applied without regard to the phrase `post-
                        1986' each place it appears, and
                            ``(ii) paragraph (2) shall be applied 
                        without regard to the phrase `in taxable years 
                        beginning after December 31, 1986'.
                    ``(B) Dividends paid first out of post-1986 
                earnings.--Dividends shall be treated as paid out of 
                post-1986 undistributed earnings to the extent thereof.
    ``(d) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for any taxes paid or accrued (or treated as paid or 
        accrued) with respect to any dividend for which a deduction is 
        allowed under this section.
            ``(2) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not 
        allowable under section 901 by reason of paragraph (1) 
        (determined by treating the taxpayer as having elected the 
        benefits of subpart A of part III of subchapter N).
    ``(e) Regulations.--The Secretary may prescribe such regulations or 
other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (b) Application of Holding Period Requirement.--Subsection (c) of 
section 246 is amended--
            (1) by striking ``or 245'' in paragraph (1) and inserting 
        ``245, or 245A'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Special rules for foreign source portion of dividends 
        received from specified 10-percent owned foreign 
        corporations.--
                    ``(A) 6-month holding period requirement.--For 
                purposes of section 245A--
                            ``(i) paragraph (1)(A) shall be applied--
                                    ``(I) by substituting `180 days' 
                                for `45 days'each place it appears, and
                                    ``(II) by substituting `361-day 
                                period' for `91-day period', and
                            ``(ii) paragraph (2) shall not apply.
                    ``(B) Status must be maintained during holding 
                period.--For purposes of section 245A, the holding 
                period requirement of this subsection shall be treated 
                as met only if--
                            ``(i) the specified 10-percent owned 
                        corporation referred to in section 245A(a) is a 
                        specified 10-percent owned corporation at all 
                        times during such period, and
                            ``(ii) the taxpayer is a United States 
                        shareholder with respect to such specified 10-
                        percent owned corporation at all times during 
                        such period.''.
    (c) Application of Rules Generally Applicable to Deductions for 
Dividends Received.--
            (1) Treatment of dividends from certain corporations.--
        Paragraph (1) of section 246(a) is amended by striking ``and 
        245'' and inserting ``245, and 245A''.
            (2) Assets generating tax-exempt portion of dividend not 
        taken into account in allocating and apportioning deductible 
        expenses.--Paragraph (3) of section 864(e) is amended by 
        striking ``or 245(a)'' and inserting ``, 245(a), or 245A''.
            (3) Coordination with section 1059.--Subparagraph (B) of 
        section 1059(b)(2) is amended by striking ``or 245'' and 
        inserting ``245, or 245A''.
    (d) Coordination With Foreign Tax Credit Limitation.--Subsection 
(b) of section 904, as amended by the preceding provisions of this Act, 
is amended by redesignating paragraph (2) as paragraph (1) and by 
adding at the end the following new paragraph:
            ``(2) Treatment of dividends for which deduction is allowed 
        under section 245a.--For purposes of subsection (a), in the 
        case of a domestic corporation which is a United States 
        shareholder with respect to a specified 10-percent owned 
        foreign corporation, such domestic corporation's taxable income 
        from sources without the United States shall be determined 
        without regard to--
                    ``(A) the foreign-source portion of any dividend 
                received from such foreign corporation, and
                    ``(B) any deductions properly allocable to such 
                portion.
        Any term which is used in section 245A and in this paragraph 
        shall have the same meaning for purposes of this paragraph as 
        when used in such section.''.
    (e) Conforming Amendments.--
            (1) Paragraph (4) of section 245(a) is amended by striking 
        ``section 902(c)(1)'' and inserting ``section 245A(c)(2)''.
            (2) Subsection (b) of section 951 is amended by striking 
        ``subpart'' and inserting ``title''.
            (3) Subsection (a) of section 957 is amended by striking 
        ``subpart'' in the matter preceding paragraph (1) and inserting 
        ``title''.
            (4) The table of sections for part VIII of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 245 the following new item:

``Sec. 245A. Dividends received by domestic corporations from certain 
                            foreign corporations.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4002. LIMITATION ON LOSSES WITH RESPECT TO SPECIFIED 10-PERCENT 
              OWNED FOREIGN CORPORATIONS.

    (a) Basis in Specified 10-Percent Owned Foreign Corporation Reduced 
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
            (1) In general.--Section 961 is amended by adding at the 
        end the following new subsection:
    ``(d) Basis in Specified 10-Percent Owned Foreign Corporation 
Reduced by Nontaxed Portion of Dividend for Purposes of Determining 
Loss.--If a domestic corporation received a dividend from a specified 
10-percent owned foreign corporation (as defined in section 245A) in 
any taxable year, solely for purposes of determining loss on any 
disposition in such taxable year or any subsequent taxable year, the 
basis of such domestic corporation in the stock of such foreign 
corporation shall be reduced by the amount of any deduction allowable 
to such domestic corporation under section 245A with respect to such 
stock.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to dividends received in taxable years beginning 
        after December 31, 2014.
    (b) Treatment of Foreign Branch Losses Transferred to Specified 10-
Percent Owned Foreign Corporations.--
            (1) In general.--Part II of subchapter B of chapter 1, as 
        amended by the preceding provisions of this Act, is amended by 
        adding at the end the following new section:

``SEC. 92. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO SPECIFIED 10-
              PERCENT OWNED FOREIGN CORPORATIONS.

    ``(a) In General.--If a domestic corporation transfers 
substantially all of the assets of a foreign branch (within the meaning 
of section 367(a)(3)(C)) to a specified 10-percent owned foreign 
corporation (as defined in section 245A) with respect to which it is a 
United States shareholder after such transfer, such domestic 
corporation shall include in gross income for the taxable year which 
includes such transfer an amount equal to the transferred loss amount 
with respect to such transfer.
    ``(b) Limitation and Carryforward Based on Foreign-Source Dividends 
Received.--
            ``(1) In general.--The amount included in the gross income 
        of the taxpayer under subsection (a) for any taxable year shall 
        not exceed the amount allowed as a deduction under section 245A 
        for such taxable year (taking into account dividends received 
        from all specified 10-percent owned foreign corporations with 
        respect to which the taxpayer is a United States shareholder).
            ``(2) Amounts not included carried forward.--Any amount not 
        included in gross income for any taxable year by reason of 
        paragraph (1) shall, subject to the application of paragraph 
        (1) to the succeeding taxable year, be included in gross income 
        for the succeeding taxable year.
    ``(c) Transferred Loss Amount.--For purposes of this section, the 
term `transferred loss amount' means, with respect to any transfer of 
substantially all of the assets of a foreign branch, the excess (if 
any) of--
            ``(1) the sum of losses--
                    ``(A) which were incurred by the foreign branch 
                after December 31, 2014, and before the transfer, and
                    ``(B) with respect to which a deduction was allowed 
                to the taxpayer, over
            ``(2) the sum of--
                    ``(A) any taxable income of such branch for a 
                taxable year after the taxable year in which the loss 
                was incurred and through the close of the taxable year 
                of the transfer, and
                    ``(B) any amount which is recognized under section 
                904(f)(3) on account of the transfer.
    ``(d) Reduction for Recognized Gains.--
            ``(1) In general.--In the case of a transfer not described 
        in section 367(a)(3)(C), the transferred loss amount shall be 
        reduced (but not below zero) by the amount of gain recognized 
        by the taxpayer on account of the transfer (other than amounts 
        taken into account under subsection (c)(2)(B)).
            ``(2) Coordination with recognition under section 367.--In 
        the case of a transfer described in section 367(a)(3)(C), the 
        transferred loss amount shall not exceed the excess (if any) 
        of--
                    ``(A) the excess of the amount described in section 
                367(a)(3)(C)(i) over the amount described in section 
                367(a)(3)(C)(ii) with respect to such transfer, over
                    ``(B) the amount of gain recognized under section 
                367(a)(3)(C) with respect to such transfer.
    ``(e) Source of Income.--Amounts included in gross income under 
this section shall be treated as derived from sources within the United 
States.
    ``(f) Basis Adjustments.--Consistent with such regulations or other 
guidance as the Secretary may prescribe, proper adjustments shall be 
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in 
the transferee's adjusted basis in the property transferred, to reflect 
amounts included in gross income under this section.''.
            (2) Amounts recognized under section 367 on transfer of 
        foreign branch with previously deducted losses treated as 
        united states source.--Subparagraph (C) of section 367(a)(3) is 
        amended by striking ``outside'' in the last sentence and 
        inserting ``within''.
            (3) Clerical amendment.--The table of subparts for such 
        part, as amended by the preceding provisions of this Act, is 
        amended by adding at the end the following new item:

``Sec. 92. Certain foreign branch losses transferred to specified 10-
                            percent owned foreign corporations.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to transfers after December 31, 2014.

SEC. 4003. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
              PARTICIPATION EXEMPTION SYSTEM OF TAXATION.

    (a) In General.--Section 965 is amended to read as follows:

``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
              PARTICIPATION EXEMPTION SYSTEM OF TAXATION.

    ``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In 
the case of the last taxable year of a deferred foreign income 
corporation which begins before January 1, 2015, the subpart F income 
of such foreign corporation (as otherwise determined for such taxable 
year under section 952) shall be increased by the accumulated post-1986 
deferred foreign income of such corporation determined as of the close 
of such taxable year.
    ``(b) Reduction in Amounts Included in Gross Income of United 
States Shareholders of Specified Foreign Corporations With Deficits in 
Earnings and Profits.--
            ``(1) In general.--In the case of a taxpayer which is a 
        United States shareholder with respect to at least one deferred 
        foreign income corporation and at least one E&P deficit foreign 
        corporation, the amount which would (but for this subsection) 
        be taken into account under section 951(a)(1) by reason of 
        subsection (a) as such United States shareholder's pro rata 
        share of the subpart F income of each deferred foreign income 
        corporation shall be reduced (but not below zero) by the amount 
        of such United States shareholder's aggregate foreign E&P 
        deficit which is allocated under paragraph (2) to such deferred 
        foreign income corporation.
            ``(2) Allocation of aggregate foreign e&p deficit.--The 
        aggregate foreign E&P deficit of any United States shareholder 
        shall be allocated among the deferred foreign income 
        corporations of such United States shareholder in an amount 
        which bears the same proportion to such aggregate as--
                    ``(A) such United States shareholder's pro rata 
                share of the accumulated post-1986 deferred foreign 
                income of each such deferred foreign income 
                corporation, bears to
                    ``(B) the aggregate of such United States 
                shareholder's pro rata share of the accumulated post-
                1986 deferred foreign income of all deferred foreign 
                income corporations of such United States shareholder.
            ``(3) Definitions related to e&p deficits.--For purposes of 
        this subsection--
                    ``(A) Aggregate foreign e&p deficit.--The term 
                `aggregate foreign E&P deficit' means, with respect to 
                any United States shareholder, the aggregate of such 
                shareholder's pro rata shares of the specified E&P 
                deficits of the E&P deficit foreign corporations of 
                such shareholder.
                    ``(B) E&P deficit foreign corporation.--The term 
                `E&P deficit foreign corporation' means, with respect 
                to any taxpayer, any specified foreign corporation with 
                respect to which such taxpayer is a United States 
                shareholder, if--
                            ``(i) such specified foreign corporation 
                        has a deficit in post-1986 earnings and 
                        profits, and
                            ``(ii) as of February 26, 2014--
                                    ``(I) such corporation was a 
                                specified foreign corporation, and
                                    ``(II) such taxpayer was a United 
                                States shareholder of such corporation.
                    ``(C) Specified e&p deficit.--The term `specified 
                E&P deficit' means, with respect to any E&P deficit 
                foreign corporation, the amount of the deficit referred 
                to in subparagraph (B).
    ``(c) Application of Participation Exemption to Included Income.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, there 
        shall be allowed as a deduction for the taxable year in which 
        an amount is included in the gross income of such United States 
        shareholder under section 951(a)(1) by reason of this section 
        an amount equal to the sum of--
                    ``(A) 90 percent of the excess (if any) of--
                            ``(i) the amount so included as gross 
                        income, over
                            ``(ii) the amount of such United States 
                        shareholder's aggregate foreign cash position, 
                        plus
                    ``(B) 75 percent of so much of the amount described 
                in subparagraph (A)(ii) as does not exceed the amount 
                described in subparagraph (A)(i).
            ``(2) Aggregate foreign cash position.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `aggregate foreign cash 
                position' means, with respect to any United States 
                shareholder, the greater of--
                            ``(i) the aggregate of such United States 
                        shareholder's pro rata share of the cash 
                        position of each specified foreign corporation 
                        of such United States shareholder determined as 
                        of the close of the last taxable year of such 
                        specified foreign corporation which begins 
                        before January 1, 2015, or
                            ``(ii) one half of the sum of--
                                    ``(I) the aggregate described in 
                                clause (i) determined as of the close 
                                of the last taxable year of each such 
                                specified foreign corporation which 
                                ends before February 26, 2014, plus
                                    ``(II) the aggregate described in 
                                clause (i) determined as of the close 
                                of the taxable year of each such 
                                specified foreign corporation which 
                                precedes the taxable year referred to 
                                in subclause (I).
                    ``(B) Cash position.--For purposes of this 
                paragraph, the cash position of any specified foreign 
                corporation is the sum of--
                            ``(i) cash and foreign currency held by 
                        such foreign corporation,
                            ``(ii) the net accounts receivable of such 
                        foreign corporation, plus
                            ``(iii) the fair market value of the 
                        following assets held by such corporation:
                                    ``(I) Actively traded personal 
                                property for which there is an 
                                established financial market.
                                    ``(II) Commercial paper, 
                                certificates of deposit, the securities 
                                of the Federal government and of any 
                                State or foreign government
                                    ``(III) Any obligation with a term 
                                of less than one year.
                                    ``(IV) Any asset which the 
                                Secretary identifies as being 
                                economically equivalent to any asset 
                                described in this subparagraph.
                    ``(C) Net accounts receivable.--For purposes of 
                this paragraph, the term `net accounts receivable' 
                means, with respect to any specified foreign 
                corporation, the excess (if any) of--
                            ``(i) such corporation's accounts 
                        receivable, over
                            ``(ii) such corporation's accounts payable 
                        (determined consistent with the rules of 
                        section 461).
                    ``(D) Prevention of double counting.--Cash 
                positions of a specified foreign corporation described 
                in clause (ii) or (iii)(III) of subparagraph (B) shall 
                not be taken into account by a United States 
                shareholder under subparagraph (A) to the extent that 
                such United States shareholder demonstrates to the 
                satisfaction of the Secretary that such amount is so 
                taken into account by such United States shareholder 
                with respect to another specified foreign corporation.
                    ``(E) Cash positions of foreign pass-thru entities 
                taken into account.--Any foreign entity which would be 
                a specified foreign corporation of a United States 
                shareholder if such entity were a corporation shall be 
                treated as a specified foreign corporation of such 
                United States shareholder for purposes of determining 
                such United States shareholder's aggregate foreign cash 
                position.
                    ``(F) Anti-abuse.--If the Secretary determines that 
                the principal purpose of any transaction was to reduce 
                the aggregate foreign cash position taken into account 
                under this subsection, such transaction shall be 
                disregarded for purposes of this subsection.
    ``(d) Deferred Foreign Income Corporation; Accumulated Post-1986 
Deferred Foreign Income.--For purposes of this section--
            ``(1) Deferred foreign income corporation.--The term 
        `deferred foreign income corporation' means, with respect to 
        any United States shareholder, any specified foreign 
        corporation of such United States shareholder which has 
        accumulated post-1986 deferred foreign income (as of the close 
        of the taxable year referred to in subsection (a)) greater than 
        zero.
            ``(2) Accumulated post-1986 deferred foreign income.--The 
        term `accumulated post-1986 deferred foreign income' means the 
        post-1986 earnings and profits except to the extent such 
        earnings--
                    ``(A) are attributable to income of the specified 
                foreign corporation which is effectively connected with 
                the conduct of a trade or business within the United 
                States and subject to tax under this chapter,
                    ``(B) if distributed, would--
                            ``(i) in the case of a controlled foreign 
                        corporation, be excluded from the gross income 
                        of a United States shareholder under section 
                        959, or
                            ``(ii) in the case of any passive foreign 
                        investment company (as defined in section 1297) 
                        other than a controlled foreign corporation, be 
                        treated as a distribution which is not a 
                        dividend, or
                    ``(C) in the case of any passive foreign investment 
                company (as so defined), is properly attributable to an 
                unreversed inclusion of a United States person under 
                section 1296.
        To the extent provided in regulations or other guidance 
        prescribed by the Secretary, in the case of any controlled 
        foreign corporation which has shareholders which are not United 
        States shareholders, accumulated post-1986 deferred foreign 
        income shall be appropriately reduced by amounts which would be 
        described in subparagraph (B)(i) is such shareholders were 
        United States shareholders. Such regulations or other guidance 
        may provide a similar rule for purposes of subparagraph (B)(ii) 
        and (C).
            ``(3) Post-1986 earnings and profits.--The term `post-1986 
        earnings and profits' means the earnings and profits of the 
        foreign corporation (computed in accordance with sections 
        964(a) and 986) accumulated in taxable years beginning after 
        December 31, 1986, and determined--
                    ``(A) as of the close the taxable year referred to 
                in subsection (a), and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.
    ``(e) Specified Foreign Corporation.--
            ``(1) In general.--For purposes of this section, the term 
        `specified foreign corporation' means--
                    ``(A) any controlled foreign corporation, and
                    ``(B) any section 902 corporation (as defined in 
                section 909(d)(5) as in effect before the date of the 
                enactment of the Tax Reform Act of 2014).
            ``(2) Application to section 902 corporations.--For 
        purposes of section 951, a section 902 corporation (as so 
        defined) shall be treated as a controlled foreign corporation 
        solely for purposes of taking into account the subpart F income 
        of such corporation under subsection (a) (and for purposes of 
        applying subsection (f)).
    ``(f) Determinations of Pro Rata Share.--For purposes of this 
section, the determination of any United States shareholder's pro rata 
share of any amount with respect to any specified foreign corporation 
shall be determined under rules similar to the rules of section 
951(a)(2) by treating such amount in the same manner as subpart F 
income (and by treating such specified foreign corporation as a 
controlled foreign corporation).
    ``(g) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for the applicable percentage of any taxes paid or accrued 
        (or treated as paid or accrued) with respect to any amount for 
        which a deduction is allowed under this section.
            ``(2) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means the amount 
        (expressed as a percentage) equal to the sum of--
                    ``(A) 0.9 multiplied by the ratio of--
                            ``(i) the excess to which subsection 
                        (c)(1)(A) applies, divided by
                            ``(ii) the sum of such excess plus the 
                        amount to which subsection (c)(1)(B) applies, 
                        plus
                    ``(B) 0.75 multiplied by the ratio of--
                            ``(i) the amount to which subsection 
                        (c)(1)(B) applies, divided by
                            ``(ii) the sum described in subparagraph 
                        (A)(ii).
            ``(3) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not 
        allowable under section 901 by reason of paragraph (1) 
        (determined by treating the taxpayer as having elected the 
        benefits of subpart A of part III of subchapter N).
            ``(4) Coordination with section 78.--Section 78 shall not 
        apply to any tax for which credit is not allowable under 
        section 901 by reason of paragraph (1).
    ``(h) Election To Pay Liability in Installments.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, such 
        United States shareholder may elect to pay the net tax 
        liability under this section in 8 installments of the following 
        amounts:
                    ``(A) 8 percent of the net tax liability in the 
                case of each of the first 5 of such installments,
                    ``(B) 15 percent of the net tax liability in the 
                case of the 6th such installment,
                    ``(C) 20 percent of the net tax liability in the 
                case of the 7th such installment, and
                    ``(D) 25 percent of the net tax liability in the 
                case of the 8th such installment.
            ``(2) Date for payment of installments.--If an election is 
        made under paragraph (1), the first installment shall be paid 
        on the due date (determined without regard to any extension of 
        time for filing the return) for the return of tax for the 
        taxable year described in subsection (b) and each succeeding 
        installment shall be paid on the due date (as so determined) 
        for the return of tax for the taxable year following the 
        taxable year with respect to which the preceding installment 
        was made.
            ``(3) Acceleration of payment.--If there is an addition to 
        tax for failure to pay timely assessed with respect to any 
        installment required under this subsection, a liquidation or 
        sale of substantially all the assets of the taxpayer (including 
        in a title 11 or similar case), a cessation of business by the 
        taxpayer, or any similar circumstance, then the unpaid portion 
        of all remaining installments shall be due on the date of such 
        event (or in the case of a title 11 or similar case, the day 
        before the petition is filed). The preceding sentence shall not 
        apply to the sale of substantially all the assets of a taxpayer 
        to a buyer if such buyer enters into an agreement with the 
        Secretary under which such buyer is liable for the remaining 
        installments due under this subsection in the same manner as if 
        such buyer were the taxpayer.
            ``(4) Proration of deficiency to installments.--If an 
        election is made under paragraph (1) to pay the net tax 
        liability under this section in installments and a deficiency 
        has been assessed with respect to such net tax liability, the 
        deficiency shall be prorated to the installments payable under 
        paragraph (1). The part of the deficiency so prorated to any 
        installment the date for payment of which has not arrived shall 
        be collected at the same time as, and as a part of, such 
        installment. The part of the deficiency so prorated to any 
        installment the date for payment of which has arrived shall be 
        paid upon notice and demand from the Secretary. This subsection 
        shall not apply if the deficiency is due to negligence, to 
        intentional disregard of rules and regulations, or to fraud 
        with intent to evade tax.
            ``(5) Election.--Any election under paragraph (1) shall be 
        made not later than the due date for the return of tax for the 
        taxable year described in subsection (a) and shall be made in 
        such manner as the Secretary may provide.
            ``(6) Net tax liability under this section.--For purposes 
        of this subsection--
                    ``(A) In general.--The net tax liability under this 
                section with respect to any United States shareholder 
                is the excess (if any) of--
                            ``(i) such taxpayer's net income tax for 
                        the taxable year described in subsection (a), 
                        over
                            ``(ii) such taxpayer's net income tax for 
                        such taxable year determined without regard to 
                        this section.
                    ``(B) Net income tax.--The term `net income tax' 
                means the regular tax liability reduced by the credits 
                allowed under subparts A, B, and D of part IV of 
                subchapter A.
    ``(i) Special Rules for S Corporation Shareholders.--
            ``(1) In general.--In the case of any S corporation which 
        is a United States shareholder of a deferred foreign income 
        corporation, each shareholder of such S corporation may elect 
        to defer payment of such shareholder's net tax liability under 
        this section with respect to such S corporation until the 
        shareholder's taxable year which includes the triggering event 
        with respect to such liability.
            ``(2) Triggering event.--
                    ``(A) In general.--In the case of any shareholder's 
                net tax liability under this section with respect to 
                any S corporation, the triggering event with respect to 
                such liability is whichever of the following occurs 
                first:
                            ``(i) Such corporation ceases to be an S 
                        corporation (determined as of the first day of 
                        the first taxable year that such corporation is 
                        not an S corporation).
                            ``(ii) A liquidation or sale of 
                        substantially all the assets of such S 
                        corporation (including in a title 11 or similar 
                        case), a cessation of business by such S 
                        corporation, such S corporation ceases to 
                        exist, or any similar circumstance.
                            ``(iii) A transfer of any share of stock in 
                        such S corporation by the taxpayer (including 
                        by reason of death, or otherwise).
                    ``(B) Partial transfers of stock.--In the case of a 
                transfer of less than all of the taxpayer's shares of 
                stock in the S corporation, such transfer shall only be 
                a triggering event with respect to so much of the 
                taxpayer's net tax liability under this section with 
                respect to such S corporation as is properly allocable 
                to such stock.
                    ``(C) Transfer of liability.--A transfer described 
                in clause (iii) shall not be treated as a triggering 
                event if the transferee enters into an agreement with 
                the Secretary under which such transferee is liable for 
                net tax liability with respect to such stock in the 
                same manner as if such transferee were the taxpayer.
            ``(3) Net tax liability.--A shareholder's net tax liability 
        under this section with respect to any S corporation is the net 
        tax liability under this section which would be determined 
        under subsection (h)(6) if the only subpart F income taken into 
        account by such shareholder by reason of this section were 
        allocations from such S corporation.
            ``(4) Election to pay deferred liability in installments.--
        In the case of a taxpayer which elects to defer payment under 
        paragraph (1), subsection (h) shall be applied--
                    ``(A) separately with respect to the liability to 
                which such election applies,
                    ``(B) an election under subsection (h) with respect 
                to such liability shall be treated as timely made if 
                made not later than the due date for the return of tax 
                for the taxable year in which the triggering event with 
                respect to such liability occurs,
                    ``(C) the first installment under subsection (h) 
                with respect to such liability shall be paid not later 
                than such due date (but determined without regard to 
                any extension of time for filing the return), and
                    ``(D) if the triggering event with respect to any 
                net tax liability is described in paragraph (2)(A)(ii), 
                an election under subsection (h) with respect to such 
                liability may be made only with the consent of the 
                Secretary.
            ``(5) Joint and several liability of s corporation.--If any 
        shareholder of an S corporation elects to defer payment under 
        paragraph (1), such S corporation shall be jointly and 
        severally liable for such payment and any penalty, addition to 
        tax, or additional amount attributable thereto.
            ``(6) Extension of limitation on collection.--
        Notwithstanding any other provision of law, any limitation on 
        the time period for the collection of a liability deferred 
        under this subsection shall not be treated as beginning before 
        the date of the triggering event with respect to such 
        liability.
            ``(7) Election.--Any election under paragraph (1) shall be 
        made not later than the due date for the return of tax for the 
        taxable year described in subsection (a) and shall be made in 
        such manner as the Secretary may provide.
    ``(j) Inclusion of Deferred Foreign Income Under This Section Not 
To Trigger Recapture of Overall Foreign Loss.--For purposes of section 
904(f)(1), in the case of a United States shareholder of a deferred 
foreign income corporation, such United States shareholder's taxable 
income from sources without the United States shall be determined 
without regard to this section.
    ``(k) Regulations.--The Secretary may prescribe such regulations or 
other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (b) Dedication of Revenues to Highway Trust Fund.--
            (1) In general.--Section 9503(f) is amended by 
        redesignating paragraph (5) as paragraph (6) and by inserting 
        after paragraph (4) the following new paragraph:
            ``(5) Appropriation to trust fund of net tax liabilities 
        received under section 965.--
                    ``(A) In general.--Out of money in the Treasury not 
                otherwise appropriated, there are hereby appropriated 
                to the Highway Trust Fund amounts equivalent to the 
                aggregate net tax liabilities under section 965 (as 
                defined in such section) received in the Treasury.
                    ``(B) Monthly transfers based on estimates.--For 
                rule providing for the monthly transfer of amounts 
                appropriated under subparagraph (A) based on estimates 
                of the Secretary, see section 9601.''.
            (2) Transfers to mass transit account.--Section 9503(e)(2) 
        is amended by striking ``the mass transit portion'' and 
        inserting ``, 20 percent of the amounts appropriated to the 
        Highway Trust Fund under subsection (f)(5), and the mass 
        transit portion''.
    (c) Clerical Amendment.--The table of section for subpart F of part 
III of subchapter N of chapter 1 is amended by striking the item 
relating to section 965 and inserting the following:

``Sec. 965. Treatment of deferred foreign income upon transition to 
                            participation exemption system of 
                            taxation.''.

SEC. 4004. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN CORPORATIONS 
              MADE PERMANENT.

    (a) In General.--Paragraph (6) of section 954(c) is amended by 
striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2013, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

     Subtitle B--Modifications Related to Foreign Tax Credit System

SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS; 
              DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR 
              BASIS.

    (a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A 
of part III of subchapter N of chapter 1 is amended by striking section 
902.
    (b) Determination of Section 960 Credit on Current Year Basis.--
Section 960 is amended--
            (1) by striking subsection (c), by redesignating subsection 
        (b) as subsection (c), by striking all that precedes subsection 
        (c) (as so redesignated) and inserting the following:

``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.

    ``(a) In General.--For purposes of this subpart, if there is 
included in the gross income of a domestic corporation any item of 
income under section 951(a)(1) with respect to any controlled foreign 
corporation with respect to which such domestic corporation is a United 
States shareholder, such domestic corporation shall be deemed to have 
paid so much of such foreign corporation's foreign income taxes as are 
properly attributable to the item of income so included.
    ``(b) Special Rules for Distributions From Previously Taxed 
Earnings and Profits.--For purposes of this subpart--
            ``(1) In general.--If any portion of a distribution from a 
        controlled foreign corporation to a domestic corporation which 
        is a United States shareholder with respect to such controlled 
        foreign corporation is excluded from gross income under section 
        959(a), such domestic corporation shall be deemed to have paid 
        so much of such foreign corporation's foreign income taxes as--
                    ``(A) are properly attributable to such portion, 
                and
                    ``(B) have not been deemed to have to been paid by 
                such domestic corporation under this section for any 
                prior taxable year.
            ``(2) Tiered controlled foreign corporations.--If section 
        959(b) applies to any portion of a distribution from a 
        controlled foreign corporation to another controlled foreign 
        corporation, such controlled foreign corporation shall be 
        deemed to have paid so much of such other controlled foreign 
        corporation's foreign income taxes as--
                    ``(A) are properly attributable to such portion, 
                and
                    ``(B) have not been deemed to have been paid by a 
                domestic corporation under this section for any prior 
                taxable year.'',
            (2) and by adding after subsection (c) (as so redesignated) 
        the following new subsections:
    ``(d) Foreign Income Taxes.--The term `foreign income taxes' means 
any income, war profits, or excess profits taxes paid or accrued to any 
foreign country or possession of the United States.
    ``(e) Regulations.--The Secretary shall provide such regulations as 
may be necessary or appropriate to carry out the provisions of this 
section.''.
    (c) Conforming Amendments.--
            (1) Section 78 is amended to read as follows:

``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.

    ``If a domestic corporation chooses to have the benefits of subpart 
A of part III of subchapter N (relating to foreign tax credit) for any 
taxable year, an amount equal to the taxes deemed to be paid by such 
corporation under section 960 (relating to deemed paid credit for 
subpart F inclusions) for such taxable year shall be treated for 
purposes of this title (other than section 960) as an item of income 
required to be included in the gross income of such domestic 
corporation under section 951(a).''.
            (2) Section 245(a)(10) is amended by striking ``902,''.
            (3) Sections 535(b)(1) and 545(b)(1) are each amended by 
        striking ``section 902(a) or 960(a)(1)'' and inserting 
        ``section 960''.
            (4) Paragraph (1) of section 814(f) is amended--
                    (A) by striking subparagraph (B), and
                    (B) by striking all that precedes ``No income'' and 
                inserting the following:
            ``(1) Treatment of foreign taxes.--''.
            (5) Subparagraph (B) of section 864(h)(1) is amended by 
        striking ``902,''.
            (6) Subsection (a) of section 901 is amended by striking 
        ``sections 902 and 960'' and inserting ``section 960''.
            (7) Paragraph (2) of section 901(e) is amended by striking 
        ``but is not limited to--'' and all that follows through ``that 
        portion'' and inserting ``but is not limited to that portion''.
            (8) Subsection (f) of section 901 is amended by striking 
        ``sections 902 and 960'' and inserting ``section 960''.
            (9) Subparagraph (A) of section 901(j)(1) is amended by 
        striking ``902 or''.
            (10) Subparagraph (B) of section 901(j)(1) is amended by 
        striking ``sections 902 and 960'' and inserting ``section 
        960''.
            (11) Paragraph (2) of section 901(k) is amended by striking 
        ``902,''.
            (12) Paragraph (6) of section 901(k) is amended by striking 
        ``902 or''.
            (13) Subparagraph (A) of section 904(h)(10) is amended by 
        striking ``sections 902, 907, and 960'' and inserting 
        ``sections 907 and 960''.
            (14) Section 904 is amended by striking subsection (k).
            (15) Paragraph (1) of section 905(c) is amended by striking 
        the last sentence.
            (16) Subclause (I) of section 905(c)(2)(B)(i) is amended by 
        striking ``section 902 or''.
            (17) Subsection (a) of section 906 is amended by striking 
        ``(or deemed, under section 902, paid or accrued during the 
        taxable year)''.
            (18) Subsection (b) of section 906 is amended by striking 
        paragraphs (4) and (5).
            (19) Subparagraph (B) of section 907(b)(2) is amended by 
        striking ``902 or''.
            (20) Paragraph (3) of section 907(c) is amended--
                    (A) by striking subparagraph (A) and redesignating 
                subparagraphs (B) and (C) as subparagraphs (A) and (B), 
                respectively, and
                    (B) by striking ``section 960(a)'' in subparagraph 
                (A) (as so redesignated) and inserting ``section 960''.
            (21) Paragraph (5) of section 907(c) is amended by striking 
        ``902 or''.
            (22) Clause (i) of section 907(f)(2)(B) is amended by 
        striking ``902 or''.
            (23) Subsection (a) of section 908 is amended by striking 
        ``902 or''.
            (24) Subsection (b) of section 909 is amended--
                    (A) by striking ``section 902 corporation'' in the 
                matter preceding paragraph (1) and inserting 
                ``specified 10-percent owned foreign corporation'',
                    (B) by striking ``902 or'' in paragraph (1),
                    (C) by striking ``by such section 902 corporation'' 
                and all that follows in the matter following paragraph 
                (2) and inserting ``by such specified 10-percent owned 
                foreign corporation or a domestic corporation which is 
                a United States shareholder with respect to such 
                specified 10-percent owned foreign corporation.'', and
                    (D) by striking ``Section 902 Corporations'' in the 
                heading thereof and inserting ``Specified 10-percent 
                Owned Foreign Corporations''.
            (25) Subsection (d) of section 909 is amended by striking 
        paragraph (5).
            (26) Paragraph (1) of section 958(a) is amended by striking 
        ``960(a)(1)'' and inserting ``960''.
            (27) Subsection (d) of section 959 is amended by striking 
        ``Except as provided in section 960(a)(3), any'' and inserting 
        ``Any''.
            (28) Subsection (e) of section 959 is amended by striking 
        ``and section 960(b)''.
            (29) Subparagraph (A) of section 1291(g)(2) is amended by 
        striking ``any distribution--'' and all that follows through 
        ``but only if'' and inserting ``any distribution, any 
        withholding tax imposed with respect to such distribution, but 
        only if''.
            (30) Section 1293 is amended by striking subsection (f).
            (31) Subparagraph (B) of section 6038(c)(1) is amended by 
        striking ``sections 902 (relating to foreign tax credit for 
        corporate stockholder in foreign corporation) and 960 (relating 
        to special rules for foreign tax credit)'' and inserting 
        ``section 960''.
            (32) Paragraph (4) of section 6038(c) is amended by 
        striking subparagraph (C).
            (33) The table of sections for subpart A of part III of 
        subchapter N of chapter 1 is amended by striking the item 
        relating to section 902.
            (34) The table of sections for subpart F of part III of 
        subchapter N of chapter 1 is amended by striking the item 
        relating to section 960 and inserting the following:

``Sec. 960. Deemed paid credit for subpart F inclusions.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4102. FOREIGN TAX CREDIT LIMITATION APPLIED BY ALLOCATING ONLY 
              DIRECTLY ALLOCABLE DEDUCTIONS TO FOREIGN SOURCE INCOME.

    (a) In General.--Subsection (b) of section 904, as amended by the 
preceding provisions of this Act, is amended by adding at the end the 
following new paragraph:
            ``(3) Deductions allocable to foreign source income only if 
        directly allocable.--For purposes of subsection (a), the 
        taxpayer's taxable income from sources without the United 
        States shall be determined by allocating deductions to such 
        income only if such deductions are directly allocable to such 
        income.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4103. PASSIVE CATEGORY INCOME EXPANDED TO INCLUDE OTHER MOBILE 
              INCOME.

    (a) Treatment of Foreign Base Company Intangible Income and Foreign 
Base Company Sales Income as Mobile Category Income.--Clause (i) of 
section 904(d)(2)(A) is amended by striking ``and specified passive 
category income'' and inserting ``specified passive category income, 
foreign base company sales income (as defined in section 954(d)), and 
foreign base company intangible income (as defined in section 
954(f))''.
    (b) Repeal of Special Rules Treating Financial Services Income as 
General Category Income.--Paragraph (2) of section 904(d) is amended by 
striking subparagraphs (C) and (D) and by redesignating subparagraphs 
(E) through (K) as subparagraphs (C) through (I), respectively.
    (c) Conforming Amendments.--
            (1) Relating to references to passive income.--
                    (A) Section 904(d)(1)(A) is amended by striking 
                ``passive category income'' and inserting ``mobile 
                category income''.
                    (B) Section 904(d)(2)(A)(i), as amended by 
                subsection (a), is amended--
                            (i) by striking ``Passive category income'' 
                        in the heading thereof and inserting ``Mobile 
                        category income'',
                            (ii) by striking ``passive category 
                        income'' and inserting ``mobile category 
                        income'',
                            (iii) by striking ``passive income'' and 
                        inserting ``mobile income'', and
                            (iv) by striking ``specified passive 
                        category income'' and inserting ``specified 
                        mobile category income''.
                    (C) Section 904(d)(2)(A)(ii) is amended by striking 
                ``passive category income'' and inserting ``mobile 
                category income''.
                    (D) Section 904(d)(2)(B) is amended--
                            (i) by striking ``Passive income'' in the 
                        heading thereof and inserting ``Mobile 
                        income'',
                            (ii) by striking ``passive income'' in 
                        clauses (i), (ii), and (iii) and inserting 
                        ``mobile income'',
                            (iii) by striking ``Specified passive 
                        category income'' in the heading of clause (iv) 
                        and inserting ``Specified mobile category 
                        income'', and
                            (iv) by striking ``specified passive 
                        category income'' in clause (iv) and inserting 
                        ``specified mobile category income''.
                    (E) Section 904(d)(2)(D), as redesignated by 
                subsection (b), is amended by striking ``passive 
                income'' and inserting ``mobile income''.
                    (F) Section 904(d)(3)(A) is amended by striking 
                ``passive category income'' and inserting ``mobile 
                category income''.
                    (G) Section 904(d)(3)(B) is amended by striking 
                ``passive category income'' both places it appears and 
                inserting ``mobile category income''.
                    (H) Section 904(d)(3)(C) is amended by striking 
                ``passive category income'' both places it appears and 
                inserting ``mobile category income''.
                    (I) Section 904(d)(3)(D) is amended by striking 
                ``passive category income'' both places it appears and 
                inserting ``mobile category income''.
                    (J) Section 904(d)(3)(E) is amended--
                            (i) by striking ``passive category income'' 
                        both places it appears and inserting ``mobile 
                        category income'', and
                            (ii) by striking ``passive income'' and 
                        inserting ``mobile income''.
                    (K) Section 904(d)(3)(F) is amended by striking 
                ``passive category income'' both places it appears and 
                inserting ``mobile category income''.
            (2) Other conforming amendments.--
                    (A) Subparagraph (B) of section 864(f)(5) is 
                amended by inserting ``(as in effect before its 
                repeal)'' after ``section 904(d)(2)(D)(ii)''.
                    (B) Subparagraph (B) of section 954(c)(2) is 
                amended by striking ``section 904(d)(2)(G)'' and 
                inserting ``section 904(d)(2)(E)''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years of foreign corporations beginning after 
        December 31, 2014, and to taxable years of United States 
        shareholders in which or with which such taxable years of 
        foreign corporations end.
            (2) Treatment of carryforwards and carrybacks.--For 
        purposes of section 904 of the Internal Revenue Code of 1986--
                    (A) the amendments made by this section shall apply 
                to any taxes carried from any taxable year beginning 
                before January 1, 2015, to any taxable year beginning 
                on or after such date, and
                    (B) the Secretary of the Treasury, or his designee, 
                may by regulations provide for the allocation of any 
                carryback of taxes with respect to income from a 
                taxable year beginning on or after January 1, 2015, to 
                a taxable year beginning before such date for purposes 
                of allocating such income among the separate categories 
                in effect under section 904(d) for the taxable year to 
                which carried.

SEC. 4104. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY 
              ON BASIS OF PRODUCTION ACTIVITIES.

    (a) In General.--Subsection (b) of section 863 is amended by adding 
at the end the following: ``Gains, profits, and income from the sale or 
exchange of inventory property described in paragraph (2) shall be 
allocated and apportioned between sources within and without the United 
States solely on the basis of the production activities with respect to 
the property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

         Subtitle C--Rules Related to Passive and Mobile Income

              PART 1--MODIFICATION OF SUBPART F PROVISIONS

SEC. 4201. SUBPART F INCOME TO ONLY INCLUDE LOW-TAXED FOREIGN INCOME.

    (a) In General.--Subsection (a) of section 954 is amended--
            (1) by redesignating paragraphs (1), (2), (3), and (5) as 
        subparagraphs (A) through (D), respectively,
            (2) by striking ``For purposes of'' and inserting the 
        following:
            ``(1) In general.--For purposes of'', and
            (3) by adding at the end the following new paragraph:
            ``(2) Application only to foreign base company income 
        subject to a low foreign effective rate of tax.--
                    ``(A) In general.--Foreign base company income 
                shall only include items of income received by a 
                controlled foreign corporation which are subject to an 
                effective rate of income tax imposed by a foreign 
                country which is less than 100 percent of the maximum 
                rate of tax specified in section 11.
                    ``(B) Application to foreign base company income 
                subject to reduced domestic rate of tax.--
                            ``(i) Foreign base company sales income.--
                        In the case of foreign base company sales 
                        income, subparagraph (A) shall be applied by 
                        substituting `50 percent' for `100 percent'.
                            ``(ii) Foreign base company intangible 
                        income.--In the case of foreign base company 
                        intangible income, subparagraph (A) shall be 
                        applied--
                                    ``(I) by substituting `the 
                                applicable percentage of the foreign 
                                percentage (determined under section 
                                250(c) with respect to the controlled 
                                foreign corporation)' for `100 
                                percent', and
                                    ``(II) by treating the foreign base 
                                company intangible income as a single 
                                item of income.
                            ``(iii) Applicable percentage.--For 
                        purposes of clause (ii)(I), the term 
                        `applicable percentage' means, with respect to 
                        any taxable year of a controlled foreign 
                        corporation, the percentage determined in 
                        accordance with the following table:

----------------------------------------------------------------------------------------------------------------
      ``In the case of any taxable year beginning in:                   The applicable percentage is:
----------------------------------------------------------------------------------------------------------------
2015.......................................................  45 percent
2016.......................................................  48 percent
2017.......................................................  52 percent
2018.......................................................  56 percent
2019 or thereafter.........................................  60 percent.''.
----------------------------------------------------------------------------------------------------------------

    (b) Insurance Income.--Subsection (a) of section 953 is amended by 
redesignating paragraph (2) as paragraph (3) and by inserting after 
paragraph (1) the following new paragraph:
            ``(2) Application only to insurance income subject to a low 
        foreign effective rate of tax.--Insurance income shall only 
        include items of income received by a controlled foreign 
        corporation which are subject to an effective rate of income 
        tax imposed by a foreign country which is less than the maximum 
        rate of tax specified in section 11.''.
    (c) Conforming Amendments.--
            (1) Section 954(b)(3)(B) is amended by striking 
        ``paragraphs (4) and (5)'' and inserting ``subsection (a)(2), 
        section 953(a)(2), and paragraph (5)''
            (2) Section 954(b) is amended by striking paragraph (4).
            (3) Section 954(c)(1) is amended by striking ``subsection 
        (a)(1)'' and inserting ``this section''.
            (4) Section 954(d)(1) is amended by striking ``subsection 
        (a)(2)'' and inserting ``this section''.
            (5) Section 954(e)(1) is amended by striking ``subsection 
        (a)(3)'' and inserting ``this section''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4202. FOREIGN BASE COMPANY SALES INCOME.

    (a) 50-Percent Exclusion for Low-Taxed Foreign Base Company Sales 
Income.--
            (1) In general.--Subparagraph (B) of section 954(a)(1), as 
        amended by the preceding provisions of this Act, is amended by 
        inserting ``50 percent of'' before ``the foreign base company 
        sales income''.
            (2) Preservation of deemed paid foreign tax credit on low-
        taxed foreign base company income.--Section 960, as amended by 
        this Act, is amended by redesignating subsection (c) as 
        subsection (d) and by inserting after subsection (b) the 
        following new subsection:
    ``(c) Deemed Paid Credit Determined Without Regard to Certain 
Exclusions From Subpart F Income.--Solely for purposes of subsection 
(a), section 954(a)(1)(B) shall be applied by substituting `100 
percent' for `50 percent' in determining amounts included under section 
951(a)(1).''.
    (b) Exception From Foreign Base Company Sales Income for Foreign 
Corporations Eligible for Benefits Under Comprehensive Income Tax 
Treaties.--Section 954(d) is amended by adding at the end the following 
new paragraph:
            ``(5) Exception for foreign corporations eligible for 
        benefits under comprehensive income tax treaties.--No portion 
        of the gross income of a controlled foreign corporation shall 
        be treated as foreign base company sales income if such 
        controlled foreign corporation is eligible as a qualified 
        resident for all of the benefits provided under a comprehensive 
        income tax treaty with the United States.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEPTION FOR FOREIGN 
              BASE COMPANY INCOME.

    (a) In General.--Paragraph (3) of section 954(b) is amended by 
adding at the end the following new subparagraph:
                    ``(D) Inflation adjustment.--In the case of any 
                taxable year beginning after 2015, the dollar amount in 
                subparagraph (A)(ii) shall be increased by an amount 
                equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2014' 
                        for `calendar year 2012' in clause (ii) 
                        thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $50,000.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4204. ACTIVE FINANCING EXCEPTION EXTENDED WITH LIMITATION FOR LOW-
              TAXED FOREIGN INCOME.

    (a) Extension of Active Financing Exception.--
            (1) In general.--Paragraph (9) of section 954(h) is amended 
        by striking ``January 1, 2014'' and inserting ``January 1, 
        2019''.
            (2) Exempt insurance income.--Paragraph (10) of section 
        953(e) is amended--
                    (A) by striking ``January 1, 2014'' and inserting 
                ``January 1, 2019'', and
                    (B) by striking ``December 31, 2013'' and inserting 
                ``December 31, 2018''.
    (b) Limitation for Low-Taxed Foreign Income.--
            (1) In general.--Paragraph (1) of section 954(h) is amended 
        to read as follows:
            ``(1) In general.--For purposes of subsection (c)(1), in 
        the case of an eligible controlled foreign corporation, foreign 
        personal holding company income shall not include--
                    ``(A) qualified banking or financing income which 
                is subject to an effective rate of income tax imposed 
                by a foreign country which is at least 50 percent of 
                the maximum rate of tax specified in section 11, and
                    ``(B) 50 percent of any other qualified banking or 
                financing income of such eligible controlled foreign 
                corporation.''.
            (2) Insurance business income.--Paragraph (1) of section 
        954(i) is amended to read as follows:
            ``(1) In general.--For purposes of subsection (c)(1), in 
        the case of a qualifying insurance company, foreign personal 
        holding company income shall not include--
                    ``(A) any qualified insurance income which is 
                subject to an effective rate of income tax imposed by a 
                foreign country which is at least 50 percent of the 
                maximum rate of tax specified in section 11, and
                    ``(B) 50 percent of any other qualified insurance 
                income of such qualifying insurance company.''.
            (3) Preservation of deemed paid foreign tax credit on high-
        taxed foreign income.--Subsection (c) of section 960, as 
        amended by the preceding provisions of this Act, is amended by 
        striking ``Solely for purposes of subsection (a)'' and all that 
        following and inserting the following: ``Solely for purposes of 
        subsection (a)--
            ``(1) section 954(a)(1)(B) shall be applied by substituting 
        `100 percent' for `50 percent', and
            ``(2) the exclusions under subsections (h)(1)(B) and 
        (i)(1)(B) of section 954 shall not apply,
in determining amounts included under section 951(a)(1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2013, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 4205. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY 
              EXCLUDED SUBPART F INCOME FROM QUALIFIED INVESTMENT.

    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by striking section 955.
    (b) Conforming Amendments.--
            (1)(A) Subparagraph (A) of section 951(a)(1), as amended by 
        this Act, is amended to read as follows:
                    ``(A) his pro rata share (determined under 
                paragraph (2)) of the corporation's subpart F income 
                for such year, and''.
            (B) Paragraph (3) of section 851(b) is amended by striking 
        ``section 951(a)(1)(A)(i)'' in the flush language at the end 
        and inserting ``section 951(a)(1)(A)''.
            (C) Clause (i) of section 952(c)(1)(B) is amended by 
        striking ``section 951(a)(1)(A)(i)'' and inserting ``section 
        951(a)(1)(A)''.
            (D) Subparagraph (C) of section 953(c)(1) is amended by 
        striking ``section 951(a)(1)(A)(i)'' and inserting ``section 
        951(a)(1)(A)''.
            (2) Subsection (a) of section 951 is amended by striking 
        paragraph (3).
            (3) Subclause (II) of section 953(d)(4)(B)(iv) is amended 
        by striking ``or amounts referred to in clause (ii) or (iii) of 
        section 951(a)(1)(A)''.
            (4) Subsection (b) of section 964 is amended by striking 
        ``, 955,''.
            (5) Section 970 is amended by striking subsection (b).
            (6) The table of sections for subpart F of part III of 
        subchapter N of chapter 1 is amended by striking the item 
        relating to section 955.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2014, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

                   PART 2--PREVENTION OF BASE EROSION

SEC. 4211. FOREIGN INTANGIBLE INCOME SUBJECT TO TAXATION AT REDUCED 
              RATE; INTANGIBLE INCOME TREATED AS SUBPART F INCOME.

    (a) Foreign Base Company Intangible Income Treated as Subpart F 
Income.--
            (1) Treatment as subpart f income.--Paragraph (1) of 
        section 954(a), as amended by the preceding provisions of this 
        Act, is amended by redesignating subparagraph (D) as 
        subparagraph (E) and by inserting after subparagraph (C) the 
        following new subparagraph:
                    ``(D) the foreign base company intangible income 
                for the taxable year (determined under subsection (f) 
                and reduced as provided in subsection (b)(5)), and''.
            (2) Foreign base company intangible income defined.--
        Section 954 of such Code is amended by inserting after 
        subsection (e) the following new subsection:
    ``(f) Foreign Base Company Intangible Income.--For purposes of this 
section--
            ``(1) In general.--The term `foreign base company 
        intangible income' means, with respect to any corporation for 
        any taxable year, the excess of--
                    ``(A) so much of the adjusted gross income of the 
                corporation as exceeds 10 percent of the corporation's 
                qualified business asset investment, over
                    ``(B) the applicable percentage of such 
                corporation's foreign personal holding company income, 
                foreign base company sales income, foreign base company 
                services income, and foreign base company oil related 
                income.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means, with respect to 
        any corporation for any taxable year, the ratio (expressed as a 
        percentage) of--
                    ``(A) the excess described in paragraph (1)(A), 
                divided by
                    ``(B) the adjusted gross income of the corporation.
            ``(3) Qualified business asset investment.--
                    ``(A) In general.--The term `qualified business 
                asset investment' means, with respect to any 
                corporation for any taxable year, the aggregate of the 
                corporation's adjusted bases (determined as of the 
                close of such taxable year and after any adjustments 
                with respect to such taxable year) in specified 
                tangible property--
                            ``(i) used in a trade or business of the 
                        corporation, and
                            ``(ii) of a type with respect to which a 
                        deduction is allowable under section 168.
                    ``(B) Determination of adjusted basis.--For 
                purposes of subparagraph (A), the adjusted basis in any 
                property shall be determined without regard to any 
                provision of this title (or any other provision of law) 
                which is enacted after the date of the enactment of 
                this section.
                    ``(C) Regulations.--The Secretary shall issue such 
                regulations or other guidance as the Secretary 
                determines appropriate to prevent the avoidance of the 
                purposes of this paragraph, including regulations or 
                other guidance which provide for the treatment of 
                property if--
                            ``(i) such property is transferred, or 
                        held, temporarily, or
                            ``(ii) the avoidance of the purposes of 
                        this paragraph is a factor in the transfer or 
                        holding of such property.
            ``(4) Adjusted gross income; specified tangible property.--
        For purposes of this subsection--
                    ``(A) Adjusted gross income.--
                            ``(i) In general.--The term `adjusted gross 
                        income' means, with respect to any corporation, 
                        the gross income of such corporation reduced by 
                        such corporation's commodities gross income.
                            ``(ii) Commodities gross income.--The term 
                        `commodities gross income' means, with respect 
                        to any corporation, the gross income of such 
                        corporation which is derived from commodities 
                        which are produced or extracted by such 
                        corporation.
                    ``(B) Specified tangible property.--The term 
                `specified tangible property' means any tangible 
                property unless such property is used in the production 
                of commodities gross income. In the case of property 
                which is used in the production of commodities gross 
                income and other gross income, such property shall be 
                treated as specified tangible property in the same 
                proportion that the adjusted gross income produced with 
                respect to such property bears to the total gross 
                income produced with respect to such property.
                    ``(C) Commodity.--The term `commodity' means any 
                commodity described in section 475(e)(2).''.
            (3) Application only to foreign base company intangible 
        income subject to a low foreign effective rate of tax.--
        Paragraph (2) of section 954(a), as amended by preceding 
        provisions of this Act, is amended by inserting ``or foreign 
        base company intangible income'' after ``foreign base company 
        sales income''.
            (4) Conforming amendment.--Paragraph (5) of section 954(b) 
        is amended by inserting ``the foreign base company intangible 
        income,'' before ``and the foreign base company oil related 
        income''.
    (b) Deduction for Foreign Intangible Income.--
            (1) In general.--Part VIII of subchapter B of chapter 1 is 
        amended by adding at the end the following new section:

``SEC. 250. FOREIGN INTANGIBLE INCOME.

    ``(a) In General.--In the case of a domestic corporation for any 
taxable year, there shall be allowed as a deduction an amount equal to 
the applicable percentage of the lesser of--
            ``(1) the sum of--
                    ``(A) the foreign percentage multiplied by the net 
                imputed intangible income of such domestic corporation 
                for such taxable year, plus
                    ``(B) in the case of a domestic corporation which 
                is a United States shareholder with respect to any 
                controlled foreign corporation, the foreign percentage 
                (determined with respect to such controlled foreign 
                corporation) multiplied by any foreign base company 
                intangible income (as defined in section 954(f)) of 
                such controlled foreign corporation which is included 
                in the gross income of such domestic corporation under 
                section 951 for such taxable year, or
            ``(2) taxable income of such domestic corporation 
        (determined without regard to this section) for the taxable 
        year.
    ``(b) Net Imputed Intangible Income.--For purposes of this 
subsection, the term `net imputed intangible income' means the excess 
of--
            ``(1) the excess described in section 954(f)(1)(A), over
            ``(2) the deductions properly allocable to the amount 
        described in paragraph (1).
    ``(c) Foreign Percentage.--For purposes of this section--
            ``(1) In general.--The term `foreign percentage' means, 
        with respect to any corporation for any taxable year, the ratio 
        (expressed as a percentage) of--
                    ``(A) the foreign-derived adjusted gross income of 
                such corporation for such taxable year, over
                    ``(B) the adjusted gross income of such corporation 
                for such taxable year.
            ``(2) Foreign-derived adjusted gross income.--
                    ``(A) In general.--The term `foreign-derived 
                adjusted gross income' means, with respect to any 
                corporation for any taxable year, any adjusted gross 
                income of such corporation which is derived in 
                connection with--
                            ``(i) property which is sold for use, 
                        consumption, or disposition outside the United 
                        States, or
                            ``(ii) services provided with respect to 
                        persons or property located outside the United 
                        States.
                    ``(B) Special rules.--
                            ``(i) Ultimate disposition.--Property shall 
                        not be treated as sold for use, consumption, or 
                        disposition outside the United States if the 
                        taxpayer knew, or had reason to know, that such 
                        property would be ultimately sold for use, 
                        consumption, or disposition in the United 
                        States.
                            ``(ii) Sales to related parties.--If 
                        property is sold to a related party, such sale 
                        shall not be treated as for use, consumption or 
                        disposition outside the United States unless--
                                    ``(I) such property is ultimately 
                                sold for use, consumption or 
                                disposition outside the United States, 
                                or
                                    ``(II) such property is resold to 
                                an unrelated party outside the United 
                                States and no related party knew or had 
                                reason to know that such property would 
                                be ultimately sold for use, 
                                consumption, or disposition in the 
                                United States.
                            ``(iii) Application to services.--Rules 
                        similar to the rules of clauses (i) and (ii) 
                        shall apply with respect to services described 
                        in subparagraph (A)(ii).
                    ``(C) Related party.--For purposes of this 
                paragraph, the term `related party' means any member of 
                an affiliated group as defined in section 1504(a), 
                determined--
                            ``(i) by substituting `more than 50 
                        percent' for `at least 80 percent' each place 
                        it appears, and
                            ``(ii) without regard to paragraphs (2) and 
                        (3) of section 1504(b).
                Any person (other than a corporation) shall be treated 
                as a member of such group if such person is controlled 
                by members of such group (including any entity treated 
                as a member of such group by reason of this sentence) 
                or controls any such member. For purposes of the 
                preceding sentence, control shall be determined under 
                the rules of section 954(d)(3).
            ``(3) Adjusted gross income.--The term `adjusted gross 
        income' has the meaning given such term by section 954(f)(4).
    ``(d) Applicable Percentage.--For purposes of this section, the 
term `applicable percentage' means, with respect to any taxable year of 
the domestic corporation referred to in subsection (a), the percentage 
determined in accordance with the following table:

----------------------------------------------------------------------------------------------------------------
      ``In the case of any taxable year beginning in:                   The applicable percentage is:
----------------------------------------------------------------------------------------------------------------
2015.......................................................  55 percent
2016.......................................................  52 percent
2017.......................................................  48 percent
2018.......................................................  44 percent
2019 or thereafter.........................................  40 percent.
----------------------------------------------------------------------------------------------------------------

    ``(e) Regulations.--The Secretary may prescribe such regulations or 
other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
            (2) Conforming amendments.--
                    (A) Clause (i) of section 163(j)(6)(A), as amended 
                by the preceding provisions of this Act, is amended by 
                striking ``and'' at the end of subclause (II) and by 
                adding at the end the following new subclause:
                                    ``(IV) any deduction allowable 
                                under section 250, and''.
                    (B) Subparagraph (C) of section 170(b)(2) is 
                amended by striking ``and'' at the end of clause (iv), 
                by redesignating clause (v) as clause (vi), and by 
                inserting after clause (iv) the following new clause:
                            ``(v) section 250, and''.
                    (C) Subsection (d) of section 172, as amended by 
                the preceding provisions of this Act, is amended by 
                adding at the end the following new paragraph:
            ``(7) Deduction for foreign intangible income.--The 
        deduction under section 250 shall not be allowed.''.
                    (D) Paragraph (1) of section 246(b) is amended by 
                striking ``and 247'' and inserting ``247, and 250''.
                    (E) Clause (iii) of section 469(i)(3)(D), as 
                amended by the preceding provisions of this Act, is 
                amended by striking ``and 222'' and inserting ``222, 
                and 250''.
    (c) Effective Date.--
            (1) Treatment as subpart f income.--The amendments made by 
        subsection (a) shall apply to taxable years of foreign 
        corporations beginning after December 31, 2014, and to taxable 
        years of United States shareholders in which or with which such 
        taxable years of foreign corporations end.
            (2) Deduction for foreign intangible income.--The 
        amendments made by subsection (b) shall apply to taxable years 
        beginning after December 31, 2014.

SEC. 4212. DENIAL OF DEDUCTION FOR INTEREST EXPENSE OF UNITED STATES 
              SHAREHOLDERS WHICH ARE MEMBERS OF WORLDWIDE AFFILIATED 
              GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.

    (a) In General.--Section 163 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) the 
following new subsection:
    ``(n) Disallowance of Deduction for Interest Expense of United 
States Shareholders Which Are Members of Worldwide Affiliated Groups 
With Excess Domestic Indebtedness.--
            ``(1) In general.--In the case of any domestic corporation 
        which is a United States shareholder (as defined in section 
        951(b)) with respect to any foreign corporation both of which 
        are members of the same worldwide affiliated group, the 
        deduction allowed under this chapter for interest paid or 
        accrued by such domestic corporation during the taxable year 
        shall be reduced by the lesser of--
                    ``(A) the product of--
                            ``(i) the net interest expense of such 
                        domestic corporation, multiplied by
                            ``(ii) the debt-to-equity differential 
                        percentage of such worldwide affiliated group, 
                        or
                    ``(B) the excess (if any) of--
                            ``(i) such net interest expense, over
                            ``(ii) 40 percent of the adjusted taxable 
                        income (as defined in subsection (j)(6)(A)) of 
                        such domestic corporation.
            ``(2) Carryforward.--Any amount disallowed under paragraph 
        (1) for any taxable year shall be treated as interest paid or 
        accrued in the succeeding taxable year (and shall not be 
        treated as disqualified interest for purposes of applying 
        subsection (j)).
            ``(3) Debt-to-equity differential percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `debt-to-equity differential percentage' 
                means, with respect to any worldwide affiliated group, 
                the percentage which the excess domestic indebtedness 
                of such group bears to the total indebtedness of the 
                domestic corporations which are members of such group.
                    ``(B) Excess domestic indebtedness.--For purposes 
                of subparagraph (A), the term `excess domestic 
                indebtedness' means, with respect to any worldwide 
                affiliated group, the excess (if any) of--
                            ``(i) the total indebtedness of the 
                        domestic corporations which are members of such 
                        group, over
                            ``(ii) 110 percent of the amount which the 
                        total indebtedness of such domestic 
                        corporations would be if the ratio of such 
                        indebtedness to the total equity of such 
                        domestic corporations equaled the ratio which--
                                    ``(I) the total indebtedness of 
                                such group, bears to
                                    ``(II) the total equity of such 
                                group.
                    ``(C) Total equity.--For purposes of subparagraph 
                (B), the term `total equity' means, with respect to one 
                or more corporations, the excess (if any) of--
                            ``(i) the money and all other assets of 
                        such corporations, over
                            ``(ii) the total indebtedness of such 
                        corporations.
                    ``(D) Special rules for determining debt and 
                equity.--For purposes of this paragraph--
                            ``(i) Application of certain general 
                        rules.--Rules similar to the rules of clauses 
                        (i), (ii), and (iii) of subsection (j)(2)(C) 
                        shall apply.
                            ``(ii) Intragroup debt and equity interests 
                        disregarded.--The total indebtedness, and the 
                        assets, of any group of corporations shall be 
                        determined by treating all members of such 
                        group as one corporation.
                            ``(iii) Determination of assets of domestic 
                        group.--The assets of the domestic corporations 
                        which are members of any worldwide affiliated 
                        group shall be determined by disregarding any 
                        interest held by any such domestic corporation 
                        in any foreign corporation which is a member of 
                        such group.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Worldwide affiliated group.--The term 
                `worldwide affiliated group' has the meaning which 
                would be given such term by section 864(f)(1)(C) if 
                section 1504(a) were applied by substituting `more than 
                50 percent' for `at least 80 percent' each place it 
                appears.
                    ``(B) Net interest expense.--The term `net interest 
                expense' has the meaning given such term by subsection 
                (j)(6)(B).
            ``(5) Treatment of affiliated group.--For purposes of this 
        subsection, all members of the same affiliated group (within 
        the meaning of section 1504(a) applied by substituting `more 
        than 50 percent' for `at least 80 percent' each place it 
        appears) shall be treated as 1 taxpayer.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as may be appropriate to carry 
        out the purposes of this subsection, including regulations or 
        other guidance--
                    ``(A) to prevent the avoidance of the purposes of 
                this subsection,
                    ``(B) providing such adjustments in the case of 
                corporations which are members of an affiliated group 
                as may be appropriate to carry out the purposes of this 
                subsection,
                    ``(C) providing for the coordination of this 
                subsection with section 884, and
                    ``(D) providing for the reallocation of shares of 
                partnership indebtedness, or distributive shares of the 
                partnership's interest income or interest expense.''.
    (b) Coordination With Limitation on Related Party Indebtedness.--
Paragraph (1) of section 163(j) is amended by adding at the end the 
following new subparagraph:
                    ``(C) Coordination with limitation on excess 
                domestic indebtedness.--The amount disallowed under 
                subparagraph (A) with respect to any corporation for 
                any taxable year shall be reduced by any amount 
                disallowed under subsection (n)(1) with respect to such 
                corporation for such taxable year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

                      TITLE V--TAX EXEMPT ENTITIES

               Subtitle A--Unrelated Business Income Tax

SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS INCOME TAX TREATMENT OF 
              ENTITIES TREATED AS EXEMPT FROM TAXATION UNDER SECTION 
              501(A).

    (a) In General.--Subparagraph (A) of section 511(a)(2) is amended 
by adding at the end the following: ``For purposes of the preceding 
sentence, an organization shall not fail to be treated as exempt from 
taxation under this subtitle by reason of section 501(a) solely because 
such organization is also so exempt, or excludes amounts from gross 
income, by reason of any other provision of this title.''.
    (b) Clerical Amendment.--The heading for subparagraph (A) of 
section 511(a)(2) is amended to read as follows: ``Organizations exempt 
from taxation by reason of section 501(a).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5002. NAME AND LOGO ROYALTIES TREATED AS UNRELATED BUSINESS 
              TAXABLE INCOME.

    (a) In General.--Section 513 is amended by adding at the end the 
following new subsection:
    ``(k) Name and Logo Royalties.--Any sale or licensing by an 
organization of any name or logo of the organization (including any 
trademark or copyright relating to such name or logo) shall be treated 
as an unrelated trade or business regularly carried on by such 
organization.''.
    (b) Calculation of Unrelated Business Taxable Income.--Subsection 
(b) of section 512 is amended by adding at the end the following new 
paragraph:
            ``(20) Special rule for name and logo royalties.--
        Notwithstanding paragraph (1), (2), (3), or (5), any income 
        derived from any sale or licensing described in section 513(k) 
        shall be included as an item of gross income derived from an 
        unrelated trade or business.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5003. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED FOR 
              EACH TRADE OR BUSINESS ACTIVITY.

    (a) In General.--Subsection (a) of section 512 is amended by adding 
at the end the following new paragraph:
            ``(6) Special rule for organization with more than 1 
        unrelated trade or business.--In the case of any organization 
        with more than 1 unrelated trade or business--
                    ``(A) unrelated business taxable income shall be 
                computed separately with respect to each such trade or 
                business and without regard to subsection (b)(12),
                    ``(B) the unrelated business taxable income of such 
                organization shall be the sum of the unrelated business 
                taxable income so computed with respect to each such 
                trade or business, less a specific deduction under 
                subsection (b)(12), and
                    ``(C) for purposes of subparagraph (B), unrelated 
                business taxable income with respect to any such trade 
                or business shall not be less than zero, and
                    ``(D) the net operating loss deduction shall only 
                be allowed with respect to the trade or business from 
                which the net operating loss arose.''.
    (b) Effective Date.--
            (1) In general.--Except to the extent provided in paragraph 
        (2), the amendment made by this section shall apply to taxable 
        years beginning after December 31, 2014.
            (2) Net operating losses.--
                    (A) Certain carryovers.--In the case of any net 
                operating loss arising in a taxable year beginning 
                before January 1, 2015, that is carried over to a 
                taxable year beginning on or after such date, section 
                512(a)(6)(D) of the Internal Revenue Code of 1986, as 
                added by this Act, shall not apply.
                    (B) Certain carrybacks.--In the case of any net 
                operating loss arising in a taxable year beginning 
                after December 31, 2014, and carried back to any 
                taxable year beginning on or before such date, in 
                computing unrelated business taxable income of an 
                organization under section 512(a) of such Code for the 
                taxable year, the net operating loss deduction shall be 
                allowed only with respect to the trade or business from 
                which the net operating loss arose.

SEC. 5004. EXCLUSION OF RESEARCH INCOME LIMITED TO PUBLICLY AVAILABLE 
              RESEARCH.

    (a) In General.--Paragraph (9) of section 512(b) is amended by 
striking ``from research'' and inserting ``from such research''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5005. PARITY OF CHARITABLE CONTRIBUTION LIMITATION BETWEEN TRUSTS 
              AND CORPORATIONS.

    (a) In General.--Paragraph (11) of section 512(b) is amended by 
striking the second sentence and inserting the following: ``The 
deduction allowed by this paragraph shall not exceed 10 percent of the 
unrelated business taxable income computed without the benefit of this 
paragraph.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 5006. INCREASED SPECIFIC DEDUCTION.

    (a) In General.--Paragraph (12) of section 512(b) is amended by 
striking ``$1,000'' each place it appears and inserting ``$10,000''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5007. REPEAL OF EXCLUSION OF GAIN OR LOSS FROM DISPOSITION OF 
              DISTRESSED PROPERTY.

    (a) In General.--Subsection (b) of section 512 is amended by 
striking paragraph (16).
    (b) Effective Date.--The amendment made by this section shall apply 
to property acquired after December 31, 2014.

SEC. 5008. QUALIFIED SPONSORSHIP PAYMENTS.

    (a) Repeal of Use or Acknowledgment of Product Lines for Qualified 
Sponsorship Payments.--Subparagraphs (A) and (B)(ii)(I) of section 
513(i)(2) are each amended by striking ``(or product lines)''.
    (b) Use or Acknowledgment Limited in Case of Certain Events.--
Subparagraph (B) of section 513(i)(2) is amended by adding at the end 
the following new clause:
                            ``(iii) Use or acknowledgment limited in 
                        case of certain events.--In the case of an 
                        event with respect to which an organization 
                        receives an aggregate amount of qualified 
                        sponsorship payments greater than $25,000, a 
                        payment shall not be treated as a qualified 
                        sponsorship payment for purposes of paragraph 
                        (1) unless the use or acknowledgment of the 
                        sponsor's name or logo appears with, and in 
                        substantially the same manner as, the names of 
                        a significant portion of other donors to the 
                        organization. For purposes of the preceding 
                        sentence, whether a number of donors is a 
                        significant portion shall be determined based 
                        on the total number of donors and the total 
                        contributed with respect to the event, but in 
                        no event shall fewer than 2 other donors be 
                        treated as a significant portion of other 
                        donors.''.
    (c) Clerical Amendment.--The heading for clause (ii) of section 
513(i)(2)(B) is amended to read as follows: ``Periodicals and qualified 
convention and trade show activities.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

                         Subtitle B--Penalties

SEC. 5101. INCREASE IN INFORMATION RETURN PENALTIES.

    (a) Failure To File Return.--
            (1) Organization.--Subparagraph (A) of section 6652(c)(1) 
        is amended--
                    (A) by striking ``$20'' each place it appears and 
                inserting ``$40'', and
                    (B) by striking ``$100'' and inserting ``$200''.
            (2) Managers.--Clause (ii) of section 6652(c)(1)(B) is 
        amended by striking ``$10'' and inserting ``$20''.
    (b) Failure To Make Returns, Reports, and Applications Available 
for Public Inspection.--Subparagraphs (C) and (D) of section 6652(c)(1) 
are each amended by striking ``$20'' and inserting ``$40''.
    (c) Failure To File Returns Under Section 6034 or 6043.--Paragraph 
(2) of section 6652(c) is amended--
            (1) by striking ``$10'' each place it appears in 
        subparagraphs (A) and (B) and inserting ``$20'', and
            (2) by striking ``substituting `$100' for `$20','' in 
        subparagraph (C)(ii) and inserting ``substituting `$200' for 
        `$40',''.
    (d) Failure To File Disclosure Under Section 6033(a)(2).--
            (1) Organization.--Subparagraph (A) of section 6652(c)(3) 
        is amended by striking ``$100'' and inserting ``$200''.
            (2) Managers.--Subparagraph (B) of section 6652(c)(3) is 
        amended by striking ``$100'' and inserting ``$200''.
    (e) Effective Date.--The amendments made by this section shall 
apply with respect to information returns required to be filed on or 
after January 1, 2015.

SEC. 5102. MANAGER-LEVEL ACCURACY-RELATED PENALTY ON UNDERPAYMENT OF 
              UNRELATED BUSINESS INCOME TAX.

    (a) In General.--Section 6662 is amended by adding at the end the 
following new subsection:
    ``(k) Manager-Level Penalty for Substantial Underpayment of 
Unrelated Business Income Tax.--
            ``(1) In general.--In the case of any substantial 
        underpayment of income tax which is attributable to the tax 
        imposed by section 511 on the unrelated business taxable income 
        of an organization for the taxable year, there is hereby 
        imposed a tax with respect to such organization an amount equal 
        to 5 percent of such underpayment to which the underpayment 
        relates. Such tax shall be paid by any manager of the 
        organization.
            ``(2) Manager.--For purposes of this subsection, the term 
        `manager' means any officer, director, trustee, employee, or 
        other individual who is under a duty to perform an act in 
        respect of which the underpayment relates.
            ``(3) Joint and several liability.--If more than one person 
        is liable under paragraph (1) with respect to an underpayment, 
        all such persons shall be jointly and severally liable under 
        such paragraph with respect to such underpayment
            ``(4) Limit.--With respect to any substantial underpayment 
        of income tax for a taxable year, the maximum amount of the tax 
        added by paragraph (1) shall not exceed $20,000.''.
    (b) Reportable Transactions.--Section 6662A is amended by adding at 
the end the following new subsection:
    ``(f) Manager-Level Penalty in Case of Unrelated Business Income 
Tax.--
            ``(1) In general.--In the case of any portion of a 
        reportable transaction understatement of the tax imposed by 
        section 511 to which this section applies, there is hereby 
        imposed a tax in an amount equal to 10 percent of such portion 
        of the underpayment to which the reportable transaction 
        understatement occurs. Such tax shall be paid by any manager of 
        the organization.
            ``(2) Manager.--For purposes of this subsection, the term 
        `manager' means any officer, director, trustee, employee, or 
        other individual who is under a duty to perform an act in 
        respect of which such understatement occurs.
            ``(3) Joint and several liability.--If more than one person 
        is liable under paragraph (1) with respect to an 
        understatement, all such persons shall be jointly and severally 
        liable under such paragraph with respect to such 
        understatement.
            ``(4) Limit.--With respect to any understatement of tax to 
        which this section applies, the maximum amount of the tax added 
        by paragraph (1) shall not exceed $40,000''.
    (c) Coordination.--Section 6662 is amended--
            (1) by striking the flush matter at the end of subsection 
        (b), and
            (2) by adding at the end the following new subsection:
    ``(l) Coordination With Other Penalties.--This section shall not 
apply to any portion of an underpayment on which a penalty is imposed 
under section 6663. Except as provided in paragraph (1) or (2)(B) of 
section 6662A(e), this section shall not apply to the portion of any 
underpayment which is attributable to a reportable transaction 
understatement on which a penalty is imposed under section 6662A.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

                        Subtitle C--Excise Taxes

SEC. 5201. MODIFICATION OF INTERMEDIATE SANCTIONS.

    (a) Organization Level Tax.--Subsection (a) of section 4958 is 
amended by adding at the end the following new paragraph:
            ``(3) On the organization.--In any case in which a tax is 
        imposed by paragraph (1), there is hereby imposed on the 
        organization a tax equal to 10 percent of the excess 
        benefit.''.
    (b) Minimum Standards of Organization Due Diligence.--Subsection 
(d) of section 4958 is amended by adding at the end the following new 
paragraph:
            ``(3) Minimum standards of organization due diligence.--
                    ``(A) In general.--Subsection (a)(3) shall not 
                apply to a transaction, if--
                            ``(i) the organization establishes that the 
                        minimum standards of due diligence described in 
                        subparagraph (B) were met with respect to the 
                        transaction, or
                            ``(ii) the organization establishes to the 
                        satisfaction of the Secretary that such other 
                        reasonable procedures were used to ensure that 
                        no excess benefit was provided.
                    ``(B) Minimum standards.--An organization shall be 
                treated as satisfying the minimum standards of due 
                diligence described in this subparagraph with respect 
                to any transaction, if--
                            ``(i) the transaction was approved in 
                        advance by an authorized body of the 
                        organization composed entirely of individuals 
                        who did not have a conflict of interest with 
                        respect to the transaction,
                            ``(ii) the authorized body obtained and 
                        relied upon appropriate data as to 
                        comparability prior to approval of the 
                        transaction, and
                            ``(iii) the authorizing body adequately and 
                        concurrently documented the basis for approving 
                        the transaction.
                    ``(C) No presumption as to reasonableness.--Meeting 
                the requirements of clause (i) or (ii) of subparagraph 
                (A) with respect to a transaction shall not give rise 
                to a presumption of reasonableness for purposes of the 
                taxes imposed by paragraphs (1) or (2) of subsection 
                (a) and shall not, by itself, support a conclusion that 
                a manager did not act knowingly for purposes of 
                subsection (a)(2).''.
    (c) Repeal of Exception for Manager Reliance on Professional 
Advice.--Section 4958 is amended by adding at the end the following new 
subsection:
    ``(g) No Safe Harbor for Reliance on Professional Advice.--An 
organization manager's reliance on a written opinion of a professional 
with respect to elements of a transaction within the professional's 
expertise shall not, by itself, preclude the manager from being treated 
as participating in the transaction knowingly.''.
    (d) Athletic Coaches and Investment Managers Treated as 
Disqualified Persons.--
            (1) Athletic coaches.--
                    (A) In general.--Paragraph (1) of section 4958(f) 
                is amended by striking ``and'' at the end of 
                subparagraph (E), by striking the period at the end of 
                subparagraph (F) and inserting ``, and'', and by adding 
                at the end the following new subparagraph:
                    ``(G) any person who performs services as an 
                athletic coach for the organization.''.
                    (B) Family members.--Subparagraph (B) of section 
                4958(f)(1) is amended by inserting ``or (G)'' after 
                ``subparagraph (A)''.
            (2) Investment advisors.--
                    (A) In general.--Subparagraph (F) of section 
                4958(f)(1) is amended--
                            (i) by striking ``which involves a 
                        sponsoring organization (as defined in section 
                        4966(d)(1)),'', and
                            (ii) by striking ``such sponsoring 
                        organization (as so defined)'' and inserting 
                        ``the organization''.
                    (B) Investment advisor definition.--Subparagraph 
                (B) of section 4958(f)(8) is amended to read as 
                follows:
                    ``(B) Investment advisor defined.--For purposes of 
                subparagraph (A), the term `investment advisor' means--
                            ``(i) with respect to any organization, any 
                        person who is compensated by such organization 
                        and is primarily responsible for managing the 
                        investment of, or providing investment advice 
                        with respect to, assets of such organization, 
                        and
                            ``(ii) with respect to any sponsoring 
                        organization (as defined in section 
                        4966(d)(1)), any person (other than an employee 
                        of such organization) compensated by such 
                        organization for managing the investment of, or 
                        providing investment advice with respect to, 
                        assets maintained in donor advised funds (as 
                        defined in section 4966(d)(2)) owned by such 
                        organization.''.
    (e) Application to Unions and Trade Associations.--Paragraph (1) of 
section 4958(e) is amended by inserting ``(5), (6),'' after ``(4),''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5202. MODIFICATION OF TAXES ON SELF-DEALING.

    (a) Organization Level Tax.--Subsection (a) of section 4941 is 
amended by adding at the end the following new paragraph:
            ``(3) On the foundation.--In any case in which a tax is 
        imposed by paragraph (1), there is hereby imposed on the 
        foundation a tax equal to 2.5 percent (10 percent in the case 
        payment of compensation) of the amount involved with respect to 
        the act of self-dealing for each year (or part thereof) in the 
        taxable period.''.
    (b) Repeal of Exception for Manager Reliance on Advice From 
Counsel.--Section 4941 is amended by adding at the end the following 
new subsection:
    ``(f) No Safe Harbor for Reliance on Advice of Counsel.--A 
foundation manager's reliance on a written legal opinion by legal 
counsel that an act is not an act of self-dealing shall not, by itself, 
preclude the manager from being treated as participating in the act 
knowingly.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5203. EXCISE TAX ON FAILURE TO DISTRIBUTE WITHIN 5 YEARS 
              CONTRIBUTION TO DONOR ADVISED FUND.

    (a) In General.--Subchapter G of chapter 42 is amended by adding at 
the end the following new section:

``SEC. 4968. FAILURE TO DISTRIBUTE CONTRIBUTIONS WITHIN 5 YEARS.

    ``(a) In General.--In the case of a contribution which is held in a 
donor advised fund, there is hereby imposed a tax equal to 20 percent 
of so much of the portion of such contribution as has not been 
distributed by the sponsoring organization in an eligible distribution 
before the beginning of the 6th (or succeeding) taxable year beginning 
after the taxable year during which such contribution was made. The tax 
imposed by this subsection shall be paid by such sponsoring 
organization.
    ``(b) Treatment of Distributions.--For purposes of this section--
            ``(1) Eligible distribution.--The term `eligible 
        distribution' means any distribution to an organization 
        described in section 170(b)(1)(A) (other than an organization 
        described in section 509(a)(3) or any fund or account described 
        in section 4966(d)(2).
            ``(2) Accounting.--Distributions shall be treated as made 
        from contributions (and any earnings attributable thereto) on a 
        first-in, first-out basis.''.
    (b) Conforming Amendment.--The table of sections for subchapter G 
of chapter 42 is amended by adding at the end the following new item:

``Sec. 4968. Failure to distribute contributions within 5 years.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        made after December 31, 2014.
            (2) Transition rule.--In the case of any contribution--
                    (A) which was made before January 1, 2015, and
                    (B) any portion of which (including any earnings 
                attributable thereto) is held in a donor advised fund 
                on such date,
        such portion shall be treated as contributed on such date.

SEC. 5204. SIMPLIFICATION OF EXCISE TAX ON PRIVATE FOUNDATION 
              INVESTMENT INCOME.

    (a) Rate Reduction.--Subsection (a) of section 4940 is amended by 
striking ``2 percent'' and inserting ``1 percent''.
    (b) Repeal of Special Rules for Certain Private Foundations.--
Section 4940 is amended by striking subsections (d) and (e).
    (c) Conforming Amendment.--Section 4945(d)(4)(A) is amended by 
striking clause (iii) and by inserting ``or'' at the end of clause (i).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5205. REPEAL OF EXCEPTION FOR PRIVATE OPERATING FOUNDATION FAILURE 
              TO DISTRIBUTE INCOME.

    (a) In General.--Subsection (a) of section 4942 is amended--
            (1) by striking ``a private foundation--'' and all that 
        follows through ``(2) to the extent'' and inserting ``a private 
        foundation to the extent'', and
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as paragraphs (1), (2), (3), and (4), respectively, and by 
        moving such paragraphs, as so redesignated, two ems to the 
        left.
    (b) Conforming Amendments.--
            (1) Section 4942(j) is amended by striking paragraphs (3), 
        (4), and (5).
            (2) Section 170(b)(1)(F)(i) is amended by striking ``(as 
        defined in section 4942(j)(3))'',
            (3) Section 170(b)(1) is amended by adding at the end the 
        following new subparagraphs:
                    ``(H) Private operating foundation.--For purposes 
                of this paragraph, the term `private operating 
                foundation' means any organization--
                            ``(i) which makes qualifying distributions 
                        (within the meaning of paragraph (1) or (2) of 
                        section 4942(g)) directly for the active 
                        conduct of the activities constituting the 
                        purpose or function for which it is organized 
                        and operated equal to substantially all of the 
                        lesser of--
                                    ``(I) its adjusted net income (as 
                                defined in subsection section 4942(f)), 
                                or
                                    ``(II) its minimum investment 
                                return, and
                            ``(ii)(I) substantially more than half of 
                        the assets of which are devoted directly to 
                        such activities or to functionally related 
                        businesses, or to both, or are stock of a 
                        corporation which is controlled by the 
                        foundation and substantially all of the assets 
                        of which are so devoted,
                            ``(II) which normally makes qualifying 
                        distributions (within the meaning of paragraph 
                        (1) or (2) of section 4942(g)) directly for the 
                        active conduct of the activities constituting 
                        the purpose or function for which it is 
                        organized and operated in an amount not less 
                        than two-thirds of its minimum investment 
                        return (as defined in section 4942(e)), or
                            ``(III) substantially all of the support 
                        (other than gross investment income as defined 
                        in section 509(e)) of which is normally 
                        received from the general public and from 5 or 
                        more exempt organizations which are not 
                        described in section 4946(a)(1)(H) with respect 
                        to each other or the recipient foundation; not 
                        more than 25 percent of the support (other than 
                        gross investment income) of which is normally 
                        received from any one such exempt organization; 
                        and not more than half of the support of which 
                        is normally received from gross investment 
                        income.
                Notwithstanding the provisions of clause (i), if the 
                qualifying distributions (within the meaning of 
                paragraph (1) or (2) of section 4942(g)) of an 
                organization for the taxable year exceed the minimum 
                investment return for the taxable year, subclause (II) 
                of clause (i) shall not apply unless substantially all 
                of such qualifying distributions are made directly for 
                the active conduct of the activities constituting the 
                purpose or function for which it is organized and 
                operated.
                    ``(I) Functionally related business.--For purposes 
                of subparagraph (H), the term `functionally related 
                business' means--
                            ``(i) a trade or business which is not an 
                        unrelated trade or business (as defined in 
                        section 513), or
                            ``(ii) an activity which is carried on 
                        within a larger aggregate of similar activities 
                        or within a larger complex of other endeavors 
                        which is related (aside from the need of the 
                        organization for income or funds or the use it 
                        makes of the profits derived) to the exempt 
                        purposes of the organization.''.
            (4) Section 170(e)(3)(A) is amended by striking ``as 
        defined in section 4942(j)(3)'' and inserting ``as defined in 
        subsection (b)(1)(H)''.
            (5) Section 150(b)(3)(F), as redesignated by this Act, is 
        amended--
                    (A) by striking ``4942 (relating to the excise tax 
                on a failure to distribute income) and'',
                    (B) by striking ``section 4942(j)(4)'' and 
                inserting ``section 170(b)(1)(I)''.
            (6) Section 2055(e)(4)(D) is amended by striking ``section 
        4942(j)(3)'' and inserting ``section 170(b)(1)(H)''.
            (7) Section 2503(g)(2)(B) is amended by striking ``section 
        4942(j)(3)'' and inserting ``section 170(b)(1)(H)''.
            (8) Section 4942(g)(1)(A) is amended by striking ``which is 
        not an operating foundation (as defined in subsection 
        (j)(3))''.
            (9) Section 4942(g)(3)(A) is amended by striking ``which is 
        not an operating foundation''.
            (10) Section 4942(g)(4)(A) is amended by striking ``which 
        is not an operating foundation''.
            (11) Section 4943(d)(3)(A) is amended by striking ``section 
        4942(j)(4)'' and inserting ``section 170(b)(1)(I)''.
            (12) Section 6110(l)(2)(A) is amended by striking ``section 
        4942(j)(3)'' and inserting ``section 170(b)(1)(H)''.
            (13) Section 7428(a)(1)(C) is amended by striking ``section 
        4942(j)(3)'' and inserting ``section 170(b)(1)(H)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5206. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES 
              AND UNIVERSITIES.

    (a) In General.--Chapter 42 is amended by adding at the end the 
following new subchapter:

   ``Subchapter H--Excise Tax Based on Investment Income of Private 
                       Colleges and Universities

``Sec. 4969. Excise tax based on investment income of private colleges 
                            and universities.

``SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES 
              AND UNIVERSITIES.

    ``(a) Tax Imposed.--There is hereby imposed on each applicable 
educational institution for the taxable year a tax equal to 1 percent 
of the net investment income of such institution for the taxable year.
    ``(b) Applicable Educational Institution.--For purposes of this 
subchapter--
            ``(1) In general.--The term `applicable educational 
        institution' means an eligible educational institution (as 
        defined in section 25A(e)(3))--
                    ``(A) which is not described in the first sentence 
                of section 511(a)(2)(B) (relating to State colleges and 
                universities), and
                    ``(B) the aggregate fair market value of the assets 
                of which at the end of the preceding taxable year 
                (other than those assets which are used (or held for 
                use) directly in carrying out the institution's exempt 
                purpose) is at least $100,000 per student of the 
                institution.
            ``(2) Students.--For purposes of paragraph (1)(B), the 
        number of students of an institution shall be based on the 
        daily average number of full-time students attending such 
        institution (with part-time students taken into account on a 
        full-time student equivalent basis).
    ``(c) Net Investment Income.--For purposes of this section, net 
investment income shall be determined under rules similar to the rules 
of section 4940(c).''.
    (b) Clerical Amendment.--The table of subchapters for chapter 42 is 
amended by adding at the end the following new item:

   ``subchapter h--excise tax based on investment income of private 
                      colleges and universities''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

       Subtitle D--Requirements for Organizations Exempt From Tax

SEC. 5301. REPEAL OF TAX-EXEMPT STATUS FOR PROFESSIONAL SPORTS LEAGUES.

    (a) In General.--Paragraph (6) of section 501(c) is amended--
            (1) by striking ``, boards of trade, or professional'' and 
        all that follows through ``players)'' and inserting ``, or 
        boards of trade'', and
            (2) by adding at the end the following: ``This paragraph 
        shall not apply to any professional sports league (whether or 
        not administering a pension fund for players).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.

SEC. 5302. REPEAL OF EXEMPTION FROM TAX FOR CERTAIN INSURANCE COMPANIES 
              AND CO-OP HEALTH INSURANCE ISSUERS.

    (a) In General.--Section 501(c) is amended by striking paragraphs 
(15) and (29).
    (b) Conforming Amendments.--
            (1) Section 831(d), as amended by the preceding provisions 
        of this Act, is amended to read as follows:
    ``(d) Cross Reference.--For taxation of foreign corporations 
carrying on an insurance business within the United States, see section 
842.''.
            (2) Section 4958(e)(1) is amended by striking ``(4), or 
        (29)'' and inserting ``or (4)''.
            (3) Section 6033 is amended by striking subsection (m) and 
        redesignating subsection (n) as subsection (m).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.
    (d) Transition Rules.--In the case of any organization described in 
paragraph (15) or (29) of section 501(c) of the Internal Revenue Code 
of 1986 (as in effect immediately before the enactment of this Act)--
            (1) no adjustment shall be made under section 481 (or any 
        other provision) of the Internal Revenue Code of 1986 on 
        account of a change in its method of accounting for its 1st 
        taxable year beginning after December 31, 2014, and
            (2) for purposes of determining gain or loss, the adjusted 
        basis of any asset held on the 1st day of such taxable year 
        shall be treated as equal to its fair market value as of such 
        day.

SEC. 5303. IN-STATE REQUIREMENT FOR WORKMEN'S COMPENSATION INSURANCE 
              ORGANIZATION.

    (a) In General.--Clause (ii) of section 501(c)(27)(B) is amended by 
inserting before the comma at the end the following: ``, and must not 
offer any other insurance''.
    (b) Effective Date.--The amendment made by this section shall apply 
to insurance policies issued, and renewals, after December 31, 2014.

SEC. 5304. REPEAL OF TYPE II AND TYPE III SUPPORTING ORGANIZATIONS.

    (a) In General.--Subparagraph (B) of section 509(a)(3) is amended--
            (1) by inserting ``and'' at the end of clause (i),
            (2) by striking clauses (ii) and (iii), and
            (3) by striking ``is--'' and all that follows through 
        ``operated, supervised, or controlled'' and inserting ``is 
        operated, supervised, or controlled''.
    (b) Conforming Amendments.--
            (1) Section 170(f)(18)(A) is amended by striking ``is not--
        '' and all that follows through ``, and'' and inserting the 
        following: ``is not described in paragraph (3), (4), or (5) of 
        subsection (c), and''.
            (2)(A)(i) Section 509(f) is amended by striking paragraph 
        (1) and by redesignating paragraphs (2) and (3) as paragraphs 
        (1) and (2), respectively.
            (ii) Section 4942(g)(4)(A)(ii)(I) is amended by striking 
        ``section 509(f)(3)'' and inserting ``section 509(f)(2)''.
            (iii) Section 4958(c)(3)(C)(ii)(II) is amended by striking 
        ``section 509(f)(3)'' and inserting ``section 509(f)(2)''.
            (iv) Section 4966(d)(4)(A)(ii)(I) is amended by striking 
        ``section 509(f)(3)'' and inserting ``section 509(f)(2)''.
            (B) Section 509(f)(1)(A), as so redesignated, is amended by 
        striking ``shall not be considered to be--'' and all that 
        follows through ``if such organization'' and inserting the 
        following: ``shall not be considered to be operated, 
        supervised, or controlled by any organization described in 
        paragraph (1) or (2) of subsection (a), if such organization''.
            (3) Section 2055(e)(5)(A) is amended by striking ``is not--
        '' and all that follows through ``, and'' and inserting the 
        following: ``is not described in paragraph (3) or (4) of 
        subsection (a), and''.
            (4) Section 2522(c)(5)(A) is amended by striking ``is not--
        '' and all that follows through ``, and'' and inserting the 
        following: ``is not described in paragraph (3) or (4) of 
        subsection (a), and''.
            (5)(A) Section 4942(g)(4)(A), as amended by the preceding 
        provision of this Act, is amended--
                            (i) by redesignating subclauses (I) and 
                        (II) of clause (ii) as clauses (i) and (ii), 
                        respectively, and moving such redesignated 
                        clauses 2 ems to the left,
                            (ii) by striking ``paid by a private 
                        foundation to--'' and all that follows through 
                        ``any organization which'' and inserting the 
                        following: ``paid by a private foundation to 
                        any organization which'', and
                            (iii) by striking ``subparagraph (B) or 
                        (C)'' and inserting ``subparagraph (B)''.
            (B) Section 4942(g)(4)(B) is amended--
                    (i) by striking clause (ii),
                    (ii) by striking ``section 509(a), or'' and 
                inserting ``section 509(a).'',
                    (iii) by striking ``and is--'' and all that follows 
                through ``operated, supervised, or controlled by'' and 
                inserting the following: ``and is operated, supervised, 
                or controlled by'', and
                    (iv) by striking ``Type i and type ii'' in the 
                heading thereof.
            (C) Section 4942(g)(4) is amended by striking subparagraph 
        (C).
            (D) Section 4945(d)(4)(A)(ii) is amended by striking 
        ``clause (i) or (ii) of section 4942(g)(4)(A)'' and inserting 
        ``section 4942(g)(4)(A)''.
            (6) Section 4943 is amended by striking subsection (f).
            (7)(A) Section 4966(d)(4)(A), as amended by this Act, is 
        amended--
                            (i) by redesignating subclauses (I) and 
                        (II) of clause (ii) as clauses (i) and (ii), 
                        respectively, and moving such redesignated 
                        clauses 2 ems to the left,
                            (ii) by striking ``with respect to any 
                        distribution--'' and all that follows through 
                        ``any organization which'' and inserting the 
                        following: ``with respect to any distribution, 
                        any organization which'', and
                            (iii) by striking ``subparagraph (B) or 
                        (C)'' and inserting ``subparagraph (B)''.
            (B) Section 4966(d)(4)(B) is amended--
                    (i) by striking clause (ii),
                    (ii) by striking ``section 509(a), or'' and 
                inserting ``section 509(a).'',
                    (iii) by striking ``and is--'' and all that follows 
                through ``operated, supervised, or controlled by'' and 
                inserting the following: ``and is operated, supervised, 
                or controlled by'', and
                    (iv) by striking ``Type i and type ii'' in the 
                heading thereof.
            (C) Section 4966(d)(4) is amended by striking subparagraph 
        (C).
            (8) Section 6033(l) is amended by inserting ``and'' at the 
        end of paragraph (1), by striking paragraph (2), and by 
        redesignating paragraph (3) as paragraph (2).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Delay for current supporting organizations.--In the 
        case of an organization which, as of the date of the enactment 
        of this Act, meets the requirements of subparagraphs (A) and 
        (C) of section 509(a)(3) of the Internal Revenue Code of 1986 
        and is--
                    (A) supervised or controlled in connection with one 
                or more organizations described in paragraph (1) or (2) 
                of section 509(a) of such Code, or
                    (B) is operated in connection with one or more such 
                organizations,
        the amendments made by this section shall apply to taxable 
        years beginning after December 31, 2015.

              TITLE VI--TAX ADMINISTRATION AND COMPLIANCE

             Subtitle A--IRS Investigation-Related Reforms

SEC. 6001. ORGANIZATIONS REQUIRED TO NOTIFY SECRETARY OF INTENT TO 
              OPERATE AS 501(C)(4).

    (a) In General.--Part I of subchapter F of chapter 1 is amended by 
adding at the end the following new section:

``SEC. 506. ORGANIZATIONS REQUIRED TO NOTIFY SECRETARY OF INTENT TO 
              OPERATE AS 501(C)(4).

    ``(a) In General.--An organization described in section 501(c)(4) 
shall, not later than 60 days after the organization is established, 
notify the Secretary (in such manner as the Secretary shall by 
regulation prescribe) that it is operating as such.
    ``(b) Contents of Notice.--The notice required under subsection (a) 
shall include the following information:
            ``(1) The name, address, and taxpayer identification number 
        of the organization.
            ``(2) The date on which, and the State under the laws of 
        which, the organization was organized.
            ``(3) A statement of the purpose of the organization.
    ``(c) Acknowledgment of Receipt.--Not later than 60 days after 
receipt of such a notice, the Secretary shall send to the organization 
an acknowledgment of such receipt.
    ``(d) Extension for Reasonable Cause.--The Secretary may, for 
reasonable cause, extend the 60-day period described in subsection (a).
    ``(e) User Fee.--The Secretary shall impose a reasonable user fee 
for submission of the notice under subsection (a).
    ``(f) Request for Determination.--Upon request by an organization 
to be treated as an organization described in section 501(c)(4), the 
Secretary may issue a determination with respect to such treatment. 
Such request shall be treated for purposes of section 6104 as an 
application for exemption from taxation under section 501(a).''.
    (b) Supporting Information With First Return.--Paragraph (1) of 
section 6033(f) is amended--
            (1) by striking the period at the end and inserting ``, 
        and'',
            (2) by striking ``include on the return required under 
        subsection (a) the information'' and inserting the following: 
        ``include on the return required under subsection (a)--
            ``(1) the information'', and
            (3) by adding at the end the following new paragraph:
            ``(2) in the case of the first such return filed by such an 
        organization after submitting a notice to the Secretary under 
        section 506(a), such information as the Secretary shall by 
        regulation require in support of the organization's treatment 
        as an organization described in section 501(c)(4).''.
    (c) Failure To File Initial Notification.--Subsection (c) of 
section 6652 is amended by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively, and by inserting after paragraph 
(3) the following new paragraph:
            ``(4) Notices under section 506.--
                    ``(A) Penalty on organization.--In the case of a 
                failure to submit a notice required under section 
                506(a) (relating to organizations required to notify 
                Secretary of intent to operate as 501(c)(4)) on the 
                date and in the manner prescribed therefor, there shall 
                be paid by the organization failing to so submit $20 
                for each day during which such failure continues, but 
                the total amount imposed under this subparagraph on any 
                organization for failure to submit any one notice shall 
                not exceed $5,000.
                    ``(B) Managers.--The Secretary may make written 
                demand on an organization subject to penalty under 
                subparagraph (A) specifying in such demand a reasonable 
                future date by which the notice shall be submitted for 
                purposes of this subparagraph. If such notice is not 
                submitted on or before such date, there shall be paid 
                by the person failing to so submit $20 for each day 
                after the expiration of the time specified in the 
                written demand during which such failure continues, but 
                the total amount imposed under this subparagraph on all 
                persons for failure to submit any one notice shall not 
                exceed $5,000.''.
    (d) Clerical Amendment.--The table of sections for part I of 
subchapter F of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 506. Organizations required to notify Secretary of intent to 
                            operate as 501(c)(4).''.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to organizations which are described in section 501(c)(4) 
        of the Internal Revenue Code of 1986 and organized after 
        December 31, 2014.
            (2) Certain existing organizations.--In the case of any 
        other organization described in section 501(c)(4) of such Code, 
        the amendments made by this section shall apply to such 
        organization only if, on or before the date of the enactment of 
        this Act--
                    (A) such organization has not applied for a written 
                determination of recognition as an organization 
                described in section 501(c)(4) of such Code, and
                    (B) such organization has not filed at least one 
                annual return or notice required under subsection 
                (a)(1) or (i) (as the case may be) of section 6033 of 
                such Code.
        In the case of any organization to which the amendments made by 
        this section apply by reason of the preceding sentence, such 
        organization shall submit the notice required by section 506(a) 
        of such Code, as added by this Act, not later than 180 days 
        after the date of the enactment of this Act.

SEC. 6002. DECLARATORY JUDGMENTS FOR 501(C)(4) ORGANIZATIONS.

    (a) In General.--Paragraph (1) of section 7428(a) is amended by 
striking ``or'' at the end of subparagraph (C) and by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E) with respect to the initial classification or 
                continuing classification of an organization described 
                in section 501(c)(4) which is exempt from tax under 
                section 501(a), or''.
    (b) Effective Date.--The amendments made by this section shall 
apply to pleadings filed after the date of the enactment of this Act.

SEC. 6003. RESTRICTION ON DONATION REPORTING FOR CERTAIN 501(C)(4) 
              ORGANIZATIONS.

    (a) In General.--Subsection (f) of section 6033, as amended by this 
Act, is amended--
            (1) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively, and by moving such 
        subparagraphs 2 ems to the right,
            (2) by striking ``in Section 501(c)(4).--Every 
        organization'' and inserting the following: ``in Section 
        501(c)(4).--
            ``(1) In general.--Every organization'', and
            (3) by adding at the end the following new paragraph:
            ``(2) Restriction on donation reporting.--In the case of 
        any such organization, information relating to contributions 
        and gifts may only be required to be included on a return 
        required under subsection (a) if the contribution or gift is 
        made by an officer or director of the organization (or an 
        individual having powers or responsibilities similar to those 
        of officers or directors) or any covered employee (as defined 
        in section 4960(c)(2)) of the organization.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years beginning after December 31, 2013.

SEC. 6004. MANDATORY ELECTRONIC FILING FOR ANNUAL RETURNS OF EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Section 6033, as amended by the preceding 
provisions of this Act, is amended by redesignating subsection (m) as 
subsection (n) and by inserting after subsection (l) the following new 
subsection:
    ``(m) Mandatory Electronic Filing.--Any organization required to 
file a return under this section shall file such return in electronic 
form.''.
    (b) Inspection of Electronically Filed Annual Returns.--Subsection 
(b) of section 6104 is amended by adding at the end the following: 
``Any annual return required to be filed electronically under section 
6033(m) shall be made available by the Secretary to the public in 
machine readable format as soon as practicable.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after the date of the enactment of this Act.
            (2) Transitional relief.--
                    (A) Small organizations.--
                            (i) In general.--In the case of any small 
                        organizations, or any other organizations for 
                        which the Secretary determines the application 
                        of the amendments made by subsection (a) would 
                        cause undue burden without a delay, the 
                        Secretary may delay the application of such 
                        amendments, but not later than taxable years 
                        beginning 2 years after the date of the 
                        enactment of this Act.
                            (ii) Small organization.--For purposes of 
                        clause (i), the term ``small organization'' 
                        means any organization--
                                    (I) the gross receipts of which for 
                                the taxable year are less than 
                                $200,000, and
                                    (II) the aggregate gross assets of 
                                which at the end of the taxable year 
                                are less than $500,000.
                    (B) Organizations filing form 990-t.--In the case 
                of any organization described in section 511(a)(2) of 
                the Internal Revenue Code of 1986 which is subject to 
                the tax imposed by section 511(a)(1) of such Code on 
                its unrelated business taxable income, or any 
                organization required to file a return under section 
                6033 of such Code and include information under 
                subsection (e) thereof, the Secretary may delay the 
                application of the amendments made by this section, but 
                not later than taxable years beginning 2 years after 
                the date of the enactment of this Act.

SEC. 6005. DUTY TO ENSURE THAT IRS EMPLOYEES ARE FAMILIAR WITH AND ACT 
              IN ACCORD WITH CERTAIN TAXPAYER RIGHTS.

    Section 7803(a) is amended by redesignating paragraph (3) as 
paragraph (4) and by inserting after paragraph (2) the following new 
paragraph:
            ``(3) Execution of duties in accord with taxpayer rights.--
        In discharging his duties, the Commissioner shall ensure that 
        employees of the Internal Revenue Service are familiar with and 
        act in accord with taxpayer rights as afforded by other 
        provisions of this title, including--
                    ``(A) the right to be informed,
                    ``(B) the right to be assisted,
                    ``(C) the right to be heard,
                    ``(D) the right to pay no more than the correct 
                amount of tax,
                    ``(E) the right of appeal,
                    ``(F) the right to certainty,
                    ``(G) the right to privacy,
                    ``(H) the right to confidentiality,
                    ``(I) the right to representation, and
                    ``(J) the right to a fair and just tax system.''.

SEC. 6006. TERMINATION OF EMPLOYMENT OF IRS EMPLOYEES FOR TAKING 
              OFFICIAL ACTIONS FOR POLITICAL PURPOSES.

    Paragraph (10) of section 1203(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 is amended to read as follows:
            ``(10) performing, delaying, or failing to perform (or 
        threatening to perform, delay, or fail to perform) any official 
        action (including any audit) with respect to a taxpayer for 
        purpose of extracting personal gain or benefit or for a 
        political purpose.''.

SEC. 6007. RELEASE OF INFORMATION REGARDING THE STATUS OF CERTAIN 
              INVESTIGATIONS.

    (a) In General.--Subsection (e) of section 6103 is amended by 
adding at the end the following new paragraph:
            ``(11) Disclosure of information regarding status of 
        investigation of violation of this section.--In the case of a 
        person who provides to the Secretary information indicating a 
        violation of section 7213, 7213A, or 7214 with respect to any 
        return or return information of such person, the Secretary may 
        disclose to such person (or such person's designee)--
                    ``(A) whether an investigation based on the 
                person's provision of such information has been 
                initiated and whether it is open or closed,
                    ``(B) whether any such investigation substantiated 
                such a violation by any individual, and
                    ``(C) whether any action has been taken with 
                respect to such individual (including whether a 
                referral has been made for prosecution of such 
                individual).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 6008. REVIEW OF IRS EXAMINATION SELECTION PROCEDURES.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study of each Internal Revenue Service operating division to 
assess the process used for determining how enforcement cases are 
selected and processed. Such study shall include a review of the 
following:
            (1) The standards each such operating division has 
        established for enforcement case selection (including any 
        automated or discretionary selection processes) and case work, 
        and whether such standards meet the objectives of impartiality, 
        objectivity, compliance, and minimizing taxpayer burden.
            (2) The extent to which any cases are initiated by 
        referrals or complaints from inside or outside of the operating 
        division (including from outside of the Internal Revenue 
        Service).
            (3) The Internal Revenue Service controls (including 
        management reviews and regular updates) for assuring that its 
        standards for enforcement cases (and handling of referrals and 
        complaints) in each operating division are sufficient for 
        achieving the objectives described in paragraph (1).
            (4) The Internal Revenue Service controls (including 
        training, monitoring, and quality assessments) for assuring 
        that its standards are adhered to by all division personnel and 
        the effectiveness of such controls.
            (5) Whether the existing standards and controls provide 
        reasonable assurance that each division's enforcement processes 
        meet the Internal Revenue Service objectives of impartiality, 
        objectivity, compliance, and minimizing taxpayer burden.
    (b) Initial Report.--Not later than 1 year after the date of the 
enactment of this section, the Comptroller General shall submit to the 
Committee on Ways and Means of the House of Representatives, the 
Committee on Finance of the Senate, and the Secretary of the Treasury a 
report on the results of such study. Such report shall include such 
recommendations as the Comptroller General may deem advisable.
    (c) Follow-Up on Recommendations.--Not later than 180 days after a 
report is submitted with respect to an operating division under 
subsection (b), the Comptroller General shall conduct a follow-up 
study, and submit to the Committee on Ways and Means of the House of 
Representatives, the Committee on Finance of the Senate, and the 
Secretary of the Treasury a report, on whether any recommendations to 
improve case selection and case work processes have been implemented 
and are working as intended.
    (d) Continuing Case Management Studies and Reports.--
            (1) In general.--After a report is submitted under 
        subsection (b), the Comptroller General shall conduct follow-up 
        studies and reports in the same manner as provided in 
        subsections (a) and (b) with respect to each operating division 
        of the Internal Revenue Service and shall include in such study 
        and report a review of whether any previous recommendations to 
        improve case selection and case work processes have been 
        implemented and are working as intended.
            (2) Frequency.--Each such report with respect to an 
        operating division shall be submitted not later than 4 years 
        after the date the most recent report was submitted with 
        respect to such operating division under subsection (b) or this 
        subsection. The Comptroller General shall submit no fewer than 
        1 such report each year.

SEC. 6009. IRS EMPLOYEES PROHIBITED FROM USING PERSONAL EMAIL ACCOUNTS 
              FOR OFFICIAL BUSINESS.

    No officer or employee of the Internal Revenue Service may use a 
personal email account to conduct any official business of the 
Government.

SEC. 6010. MORATORIUM ON IRS CONFERENCES.

    The Internal Revenue Service shall not hold any conference until 
the Treasury Inspector General for Tax Administration submits a report 
to Congress--
            (1) certifying that the Internal Revenue Service has 
        implemented all of the recommendations set out in such 
        Inspector General's report titled ``Review of the August 2010 
        Small Business/Self-Employed Division's Conference in Anaheim, 
        California'', and
            (2) describing such implementation.

SEC. 6011. APPLICABLE STANDARD FOR DETERMINATIONS OF WHETHER AN 
              ORGANIZATION IS OPERATED EXCLUSIVELY FOR THE PROMOTION OF 
              SOCIAL WELFARE.

    (a) In General.--The standard and definitions as in effect on 
January 1, 2010, which are used to determine whether an organization is 
operated exclusively for the promotion of social welfare for purposes 
of section 501(c)(4) of the Internal Revenue Code of 1986 shall apply 
for purposes of determining the status of organizations under section 
501(c)(4) of the Internal Revenue Code of 1986 after the date of the 
enactment of this Act.
    (b) Prohibition on Modification of Standard.--The Secretary of the 
Treasury may not (nor may any delegate of such Secretary) issue, 
revise, or finalize any regulation (including the proposed regulations 
published at 78 Fed. Reg. 71535 (November 29, 2013)), revenue ruling, 
or other guidance not limited to a particular taxpayer relating to the 
standard and definitions specified in subsection (a).
    (c) Application to Organizations.--Except as provided in subsection 
(d), this section shall apply with respect to any organization claiming 
tax exempt status under section 501(c)(4) of the Internal Revenue Code 
of 1986 which was created on, before, or after the date of the 
enactment of this Act.
    (d) Sunset.--This section shall not apply after the one-year period 
beginning on the date of the enactment of this Act.

          Subtitle B--Taxpayer Protection and Service Reforms

SEC. 6101. EXTENSION OF IRS AUTHORITY TO REQUIRE TRUNCATED SOCIAL 
              SECURITY NUMBERS ON FORM W-2.

    (a) In General.--Paragraph (2) of section 6051(a) is amended by 
striking ``his social security number'' and inserting ``an identifying 
number for the employee''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 6102. FREE ELECTRONIC FILING.

    (a) In General.--The Secretary of the Treasury shall, in 
cooperation with the private sector technology industry, maintain a 
program that provides free individual income tax preparation and 
electronic filing services to low-income taxpayers and elderly 
taxpayers.
    (b) Requirements of Program.--The Secretary shall by regulation or 
other guidance prescribe with respect to the program--
            (1) the qualifications, selection process, and contract 
        term for businesses participating in the program,
            (2) a process for periodic review of businesses 
        participating in the program,
            (3) procedures for terminating business participation in 
        the program for failure to comply with any program 
        requirements, and
            (4) such other procedures as the Secretary determines are 
        necessary or appropriate to carry out the purposes of the 
        program.
    (c) Free File Program.--The Internal Revenue Service Free File 
program, as set forth in the notice published in the Federal Register 
on November 4, 2002 (67 Fed. Reg. 67247), shall be treated as meeting 
the requirements of subsection (a).

SEC. 6103. PRE-POPULATED RETURNS PROHIBITED.

    Except to the extent provided in section 6014, 6020, or 6201(d) of 
the Internal Revenue Code of 1986, the Secretary of the Treasury shall 
not provide to any person a proposed final return or statement for use 
by such person to satisfy a filing or reporting requirement under such 
Code.

SEC. 6104. FORM 1040SR FOR SENIORS.

    (a) In General.--The Secretary of the Treasury (or the Secretary's 
delegate) shall make available a form, to be known as ``Form 1040SR'', 
for use by individuals to file the return of tax imposed by chapter 1 
of the Internal Revenue Code of 1986. Such form shall be as similar as 
practicable to Form 1040EZ, except that--
            (1) the form shall be available to individuals who have 
        attained age 65 as of the close of the taxable year,
            (2) the form may be used even if income for the taxable 
        year includes--
                    (A) social security benefits (as defined in section 
                86(d) of the Internal Revenue Code of 1986),
                    (B) distributions from qualified retirement plans 
                (as defined in section 4974(c) of such Code), annuities 
                or other such deferred payment arrangements,
                    (C) interest and dividends, or
                    (D) capital gains and losses taken into account in 
                determining the deduction for adjusted net capital gain 
                under section 169 of such Code, and
            (3) the form shall be available without regard to the 
        amount of any item of taxable income or the total amount of 
        taxable income for the taxable year.
    (b) Effective Date.--The form required by subsection (a) shall be 
made available for taxable years beginning after December 31, 2014.

SEC. 6105. INCREASED REFUND AND CREDIT THRESHOLD FOR JOINT COMMITTEE ON 
              TAXATION REVIEW OF C CORPORATION RETURN.

    (a) In General.--Subsections (a) and (b) of section 6405 are each 
amended by inserting ``($5,000,000 in the case of a C corporation)'' 
after ``$2,000,000''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act, except that such 
amendment shall not apply with respect to any refund or credit with 
respect to a report that has been made before such date under section 
6405 of the Internal Revenue Code of 1986.

             Subtitle C--Tax Return Due Date Simplification

SEC. 6201. DUE DATES FOR RETURNS OF PARTNERSHIPS, S CORPORATIONS, AND C 
              CORPORATIONS.

    (a) Partnerships and S Corporations.--
            (1) In general.--So much of subsection (b) of 6072 as 
        precedes the second sentence thereof is amended to read as 
        follows:
    ``(b) Returns of Partnerships and S Corporations.--Returns of 
partnerships under section 6031 and returns of S corporations under 
sections 6012 and 6037 made on the basis of the calendar year shall be 
filed on or before the 15th day of March following the close of the 
calendar year, and such returns made on the basis of a fiscal year 
shall be filed on or before the 15th day of the third month following 
the close of the fiscal year.''.
            (2) Conforming amendment.--Section 6072(a) is amended by 
        striking ``6017, or 6031'' and inserting ``or 6017''.
    (b) Conforming Amendments Relating to C Corporation Due Date of 
15th Day of Fourth Month Following Taxable Year.--
            (1) Section 170(a)(3)(B), as redesignated by the preceding 
        provisions of this Act, is amended by striking ``third month'' 
        and inserting ``fourth month''.
            (2) Section 563 is amended by striking ``third month'' each 
        place it appears and inserting ``fourth month''.
            (3) Section 1354(d)(1)(B)(i) is amended by striking ``3d 
        month'' and inserting ``4th month''.
            (4) Subsection (a) and (c) of section 6167 are each amended 
        by striking ``third month'' and inserting ``fourth month''.
            (5) Section 6425(a)(1) is amended by striking ``third 
        month'' and inserting ``fourth month''.
            (6) Subsections (b)(2)(A), (g)(3), and (h)(1) of section 
        6655 are each amended by striking ``3rd month'' and inserting 
        ``4th month''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to returns for 
        taxable years beginning after December 31, 2014.
            (2) Special rule for c corporations with fiscal years 
        ending on june 30.--In the case of any C corporation with a 
        fiscal year ending on June 30, the amendments made by this 
        section shall not apply to any taxable year beginning in 2022.

SEC. 6202. MODIFICATION OF DUE DATES BY REGULATION.

    In the case of returns for taxable years beginning after December 
31, 2014, the Secretary of the Treasury, or the Secretary's designee, 
shall modify appropriate regulations to provide as follows:
            (1) The maximum extension for the returns of partnerships 
        filing Form 1065 shall be a 6-month period ending on September 
        15 for calendar year taxpayers.
            (2) The maximum extension for the returns of trusts filing 
        Form 1041 shall be a 5\1/2\-month period ending on September 30 
        for calendar year taxpayers.
            (3) The maximum extension for the returns of employee 
        benefit plans filing Form 5500 shall be an automatic 3\1/2\-
        month period ending on November 15 for calendar year plans.
            (4) The maximum extension for the returns of organizations 
        exempt from income tax filing Form 990 shall be an automatic 6-
        month period ending on November 15 for calendar year filers.
            (5) The due date of Form 3520-A (relating to the Annual 
        Information Return of Foreign Trust with a United States Owner) 
        for calendar year filers shall be April 15 with a maximum 
        extension for a 6-month period ending on October 15.
            (6) The due date of Form TD F 90-22.1 (relating to Report 
        of Foreign Bank and Financial Accounts) shall be April 15 with 
        a maximum extension for a 6-month period ending on October 15 
        and with provision for an extension under rules similar to the 
        rules in Treas. Reg. section 1.6081-5. For any taxpayer 
        required to file such Form for the first time, any penalty for 
        failure to timely request for, or file, an extension, may be 
        waived by the Secretary.

SEC. 6203. CORPORATIONS PERMITTED STATUTORY AUTOMATIC 6-MONTH EXTENSION 
              OF INCOME TAX RETURNS.

    (a) In General.--Section 6081(b) is amended by striking ``3 
months'' and inserting ``6 months''.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years beginning after December 31, 2014.

                     Subtitle D--Compliance Reforms

SEC. 6301. PENALTY FOR FAILURE TO FILE.

    (a) In General.--Section 6651(a) is amended by striking ``$135'' in 
the flush material at the end and inserting ``$400''.
    (b) Effective Date.--The amendments made by this section shall 
apply to returns the due date for the filing of which (including 
extension) is after December 31, 2014.

SEC. 6302. PENALTY FOR FAILURE TO FILE CORRECT INFORMATION RETURNS AND 
              PROVIDE PAYEE STATEMENTS.

    (a) In General.--Section 6721(a)(1) is amended--
            (1) by striking ``$100'' and inserting ``$250'', and
            (2) by striking ``$1,500,000'' and inserting 
        ``$3,000,000''.
    (b) Reduction Where Correction in Specified Period.--
            (1) Correction within 30 days.--Section 6721(b)(1) is 
        amended--
                    (A) by striking ``$30'' and inserting ``$50'',
                    (B) by striking ``$100'' and inserting ``$250'', 
                and
                    (C) by striking ``$250,000'' and inserting 
                ``$500,000''.
            (2) Failures corrected on or before august 1.--Section 
        6721(b)(2) is amended--
                    (A) by striking ``$60'' and inserting ``$100'',
                    (B) by striking ``$100'' (prior to amendment by 
                subparagraph (A)) and inserting ``$250'', and
                    (C) by striking ``$500,000'' and inserting 
                ``$1,500,000''.
    (c) Lower Limitation for Persons With Gross Receipts of Not More 
Than $5,000,000.--Section 6721(d)(1) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``$500,000'' and inserting 
                ``$1,000,000'', and
                    (B) by striking ``$1,500,000'' and inserting 
                ``$3,000,000'',
            (2) in subparagraph (B)--
                    (A) by striking ``$75,000'' and inserting 
                ``$175,000'', and
                    (B) by striking ``$250,000'' and inserting 
                ``$500,000'', and
            (3) in subparagraph (C)--
                    (A) by striking ``$200,000'' and inserting 
                ``$500,000'', and
                    (B) by striking ``$500,000'' (prior to amendment by 
                subparagraph (A)) and inserting ``$1,500,000''.
    (d) Penalty in Case of Intentional Disregard.--Section 6721(e) is 
amended--
            (1) by striking ``$250'' in paragraph (2) and inserting 
        ``$500'', and
            (2) by striking ``$1,500,000'' in paragraph (3)(A) and 
        inserting ``$3,000,000''.
    (e) Failure To Furnish Correct Payee Statements.--
            (1) In general.--Section 6722(a)(1) is amended--
                    (A) by striking ``$100'' and inserting ``$250'', 
                and
                    (B) by striking ``$1,500,000'' and inserting 
                ``$3,000,000''.
            (2) Reduction where correction in specified period.--
                    (A) Correction within 30 days.--Section 6722(b)(1) 
                is amended--
                            (i) by striking ``$30'' and inserting 
                        ``$50'',
                            (ii) by striking ``$100'' and inserting 
                        ``$250'', and
                            (iii) by striking ``$250,000'' and 
                        inserting ``$500,000''.
                    (B) Failures corrected on or before august 1.--
                Section 6722(b)(2) is amended--
                            (i) by striking ``$60'' and inserting 
                        ``$100'',
                            (ii) by striking ``$100'' (prior to 
                        amendment by clause (i)) and inserting 
                        ``$250'', and
                            (iii) by striking ``$500,000'' and 
                        inserting ``$1,500,000''.
            (3) Lower limitation for persons with gross receipts of not 
        more than $5,000,000.--Section 6722(d)(1) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$500,000'' and inserting 
                        ``$1,000,000'', and
                            (ii) by striking ``$1,500,000'' and 
                        inserting ``$3,000,000'',
                    (B) in subparagraph (B)--
                            (i) by striking ``$75,000'' and inserting 
                        ``$175,000'', and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000'', and
                    (C) in subparagraph (C)--
                            (i) by striking ``$200,000'' and inserting 
                        ``$500,000'', and
                            (ii) by striking ``$500,000'' (prior to 
                        amendment by subparagraph (A)) and inserting 
                        ``$1,500,000''.
            (4) Penalty in case of intentional disregard.--Section 
        6722(e) is amended--
                    (A) by striking ``$250'' in paragraph (2) and 
                inserting ``$500'', and
                    (B) by striking ``$1,500,000'' in paragraph (3)(A) 
                and inserting ``$3,000,000''.
    (f) Effective Date.--The amendments made by this section shall 
apply with respect to returns and statements required to be filed after 
December 31, 2014.

SEC. 6303. CLARIFICATION OF 6-YEAR STATUTE OF LIMITATIONS IN CASE OF 
              OVERSTATEMENT OF BASIS.

    (a) In General.--Subparagraph (B) of section 6501(e)(1) is 
amended--
            (1) by striking ``and'' at the end of clause (i), by 
        redesignating clause (ii) as clause (iii), and by inserting 
        after clause (i) the following new clause:
                            ``(ii) An understatement of gross income by 
                        reason of an overstatement of unrecovered cost 
                        or other basis is an omission from gross 
                        income; and'', and
            (2) by inserting ``(other than in the case of an 
        overstatement of unrecovered cost or other basis)'' in clause 
        (iii) (as so redesignated) after ``In determining the amount 
        omitted from gross income''.
    (b) Effective Date.--The amendments made by this section shall 
apply to--
            (1) returns filed after the date of the enactment of this 
        Act, and
            (2) returns filed on or before such date if the period 
        specified in section 6501 of the Internal Revenue Code of 1986 
        (determined without regard to such amendments) for assessment 
        of the taxes with respect to which such return relates has not 
        expired as of such date.

SEC. 6304. REFORM OF RULES RELATED TO QUALIFIED TAX COLLECTION 
              CONTRACTS.

    (a) Requirement To Collect Certain Inactive Tax Receivables Under 
Qualified Tax Collection Contracts.--Section 6306 is amended by 
redesignating subsections (c) through (f) as subsections (d) through 
(g), respectively, and by inserting after subsection (b) the following 
new subsection:
    ``(c) Collection of Inactive Tax Receivables.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, the Secretary shall enter into one or more qualified tax 
        collection contracts for the collection of all outstanding 
        inactive tax receivables.
            ``(2) Inactive tax receivables.--For purposes of this 
        section--
                    ``(A) In general.--The term `inactive tax 
                receivable' means any tax receivable if--
                            ``(i) at any time after assessment, the 
                        Internal Revenue Service removes such 
                        receivable from the active inventory for lack 
                        of resources or inability to locate the 
                        taxpayer,
                            ``(ii) more than \1/3\ of the period of the 
                        applicable statute of limitation has lapsed and 
                        no employee of the Internal Revenue Service has 
                        been assigned such receivable for collection, 
                        or
                            ``(iii) in the case of a receivable which 
                        has been assigned for collection, more than 365 
                        days have passed without interaction with the 
                        taxpayer or a third party for purposes of 
                        furthering the collection of such receivable.
                    ``(B) Tax receivable.--The term `tax receivable' 
                means any outstanding assessment which the Internal 
                Revenue Service includes in potentially collectible 
                inventory.''.
    (b) Certain Tax Receivables Not Eligible for Collection Under 
Qualified Tax Collection Contracts.--Section 6306, as amended by 
subsection (a), is amended by redesignating subsections (d) through (g) 
as subsections (e) through (h), respectively, and by inserting after 
subsection (c) the following new subsection:
    ``(d) Certain Tax Receivables Not Eligible for Collection Under 
Qualified Tax Collections Contracts.--A tax receivable shall not be 
eligible for collection pursuant to a qualified tax collection contract 
if such receivable--
            ``(1) is subject to a pending or active offer-in-compromise 
        or installment agreement,
            ``(2) is classified as an innocent spouse case,
            ``(3) involves a taxpayer identified by the Secretary as 
        being--
                    ``(A) deceased,
                    ``(B) under the age of 18,
                    ``(C) in a designated combat zone, or
                    ``(D) a victim of identity theft,
            ``(4) is currently under examination, litigation, criminal 
        investigation, or levy, or
            ``(5) is currently subject to a proper exercise of a right 
        of appeal under this title.''.
    (c) Contracting Priority.--Section 6306, as amended by the 
preceding provisions of this section, is amended by redesignating 
subsection (h) as subsection (i) and by inserting after subsection (g) 
the following new subsection:
    ``(h) Contracting Priority.--In contracting for the services of any 
person under this section, the Secretary shall give priority to private 
collection contractors and debt collection centers on the schedule 
required under section 3711(g) of title 31, United States Code, to the 
extent such private collection contractors and debt collection centers 
are appropriate to carry out the purposes of this section.''.
    (d) Disclosure of Return Information.--Section 6103(k) is amended 
by adding at the end the following new paragraph:
            ``(11) Qualified tax collection contractors.--Persons 
        providing services pursuant to a qualified tax collection 
        contract under section 6306 may, if speaking to a person who 
        has identified himself or herself as having the name of the 
        taxpayer to which a tax receivable (within the meaning of such 
        section) relates, identify themselves as contractors of the 
        Internal Revenue Service and disclose the business name of the 
        contractor, and the nature, subject, and reason for the 
        contact. Disclosures under this paragraph shall be made only in 
        such situations and under such conditions as have been approved 
        by the Secretary.''.
    (e) Taxpayers Affected by Federally Declared Disasters.--Section 
6306, as amended by the preceding provisions of this section, is 
amended by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new subsection:
    ``(i) Taxpayers in Presidentially Declared Disaster Areas.--The 
Secretary may prescribe procedures under which a taxpayer determined to 
be affected by a federally declared disaster (as defined by section 
165(i)(5)) may request--
            ``(1) relief from immediate collection measures by 
        contractors under this section, and
            ``(2) a return of the inactive tax receivable to the 
        Internal Revenue Service for collection.''.
    (f) Report to Congress.--
            (1) In general.--Section 6306, as amended by the preceding 
        provisions of this section, is amended by redesignating 
        subsection (j) as subsection (k) and by inserting after 
        subsection (i) the following new subsection:
    ``(j) Report to Congress.--Not later than 90 days after each fiscal 
year ending on September 30, the Secretary shall submit to the 
Committee on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate a report with respect to qualified 
tax collection contracts under this section which shall include--
            ``(1) annually (with respect to each such fiscal year 
        beginning with the first such fiscal year ending after the date 
        of the enactment of this subsection)--
                    ``(A) the total number and amount of tax 
                receivables provided to each contractor for collection 
                under this section,
                    ``(B) the total amounts collected (and amounts of 
                installment agreements entered into under subsection 
                (b)(1)(B)) with respect to each contractor and the 
                collection costs incurred (directly and indirectly) by 
                the Internal Revenue Service with respect to such 
                amounts,
                    ``(C) the impact of such contracts on the total 
                number and amount of unpaid assessments, and on the 
                number and amount of assessments collected by Internal 
                Revenue Service personnel after initial contact by a 
                contractor,
                    ``(D) the amount of fees retained by the Secretary 
                under subsection (e) and a description of the use of 
                such funds, and
                    ``(E) a disclosure safeguard report in a form 
                similar to that required under section 6103(p)(5), and
            ``(2) biannually (beginning with the second report 
        submitted under this subsection)--
                    ``(A) an independent evaluation of contractor 
                performance; and
                    ``(B) a measurement plan that includes a comparison 
                of the best practices used by the private collectors to 
                the collection techniques used by the Internal Revenue 
                Service and mechanisms to identify and capture 
                information on successful collection techniques used by 
                the contractors that could be adopted by the Internal 
                Revenue Service.''.
            (2) Repeal of existing reporting requirements with respect 
        to qualified tax collection contracts.--Section 881 of the 
        American Jobs Creation Act of 2004 is amended by striking 
        subsection (e).
    (g) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (b) shall apply to tax receivables identified by the Secretary 
        after the date of the enactment of this Act.
            (2) Contracting priority.--The amendments made by 
        subsection (c) shall apply to contracts and agreements entered 
        into after the date of the enactment of this Act.
            (3) Disclosures.--The amendments made by subsection (d) 
        shall apply to disclosures made after the date of the enactment 
        of this Act.
            (4) Procedures; report to congress.--The amendments made by 
        subsections (e) and (f) shall take effect on the date of the 
        enactment of this Act.

SEC. 6305. 100 PERCENT CONTINUOUS LEVY ON PAYMENTS TO MEDICARE 
              PROVIDERS AND SUPPLIERS.

    (a) In General.--Paragraph (3) of section 6331(h) is amended by 
striking the period at the end and inserting ``, or to a Medicare 
provider or supplier under title XVIII of the Social Security Act.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to levies issued after the date of the enactment of this Act.

SEC. 6306. TREATMENT OF REFUNDABLE CREDITS FOR PURPOSES OF CERTAIN 
              PENALTIES.

    (a) Application of Underpayment Penalties.--Section 6664(a) is 
amended by adding at the end the following: ``A rule similar to the 
rule of section 6211(b)(4) shall apply for purposes of this 
subsection.''.
    (b) Penalty for Erroneous Claim of Credit Made Applicable to Earned 
Income Credit.--Section 6676(a) is amended by striking ``(other than a 
claim for a refund or credit relating to the earned income credit under 
section 32)''.
    (c) Effective Dates.--
            (1) Underpayment penalties.--The amendment made by 
        subsection (a) shall apply to--
                    (A) returns filed after February 26, 2014, and
                    (B) returns filed on or before such date if the 
                period specified in section 6501 of the Internal 
                Revenue Code of 1986 for assessment of the taxes with 
                respect to which such return relates has not expired as 
                of such date.
            (2) Penalty for erroneous claim of credit.--The amendment 
        made by subsection (b) shall apply to claims filed after 
        February 26, 2014.

                        TITLE VII--EXCISE TAXES

SEC. 7001. REPEAL OF MEDICAL DEVICE EXCISE TAX.

    (a) In General.--Chapter 32 is amended by striking subchapter E.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 4221 is amended by striking 
        the last sentence.
            (2) Paragraph (2) of section 6416(b) is amended by striking 
        the last sentence.
    (c) Clerical Amendment.--The table of subchapters for chapter 32 is 
amended by striking the item relating to subchapter E.
    (d) Effective Date.--The amendments made by this section shall 
apply to sales after the date of the enactment of this Act.

SEC. 7002. MODIFICATIONS RELATING TO OIL SPILL LIABILITY TRUST FUND.

    (a) Extension of Oil Spill Liability Trust Fund Financing Rate.--
Paragraph (2) of section 4611(f) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2023''.
    (b) Application With Respect to Bitumen and Bituminous Mixtures and 
Shale Oil.--Paragraph (1) of section 4612(a) is amended to read as 
follows:
            ``(1) Crude oil.--The term `crude oil' includes crude oil 
        condensates, natural gasoline, any bitumen or bituminous 
        mixture, any oil derived from a bitumen or bituminous mixture, 
        shale oil, and any oil derived from kerogen-bearing sources.''.
    (c) Conforming Amendment.--Paragraph (2) of section 4612(a) is 
amended by striking ``from a well located''.
    (d) Effective Date.--The amendments made by this section shall 
apply to oil and petroleum products received or entered during calendar 
quarters beginning more than 60 days after the date of the enactment of 
this Act.

SEC. 7003. MODIFICATION RELATING TO INLAND WATERWAYS TRUST FUND 
              FINANCING RATE.

    (a) In General.--Section 4042(b)(2)(A) is amended to read as 
follows:
                    ``(A) The Inland Waterways Trust Fund financing 
                rate is 26 cents per gallon.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuel used after December 31, 2014.

SEC. 7004. EXCISE TAX ON SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTIONS.

    (a) In General.--Chapter 36 is amended by adding at the end the 
following new subchapter:

  ``Subchapter E--Tax on Systemically Important Financial Institutions

``Sec. 4491. Tax on systemically important financial institutions.

``SEC. 4491. TAX ON SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTIONS.

    ``(a) In General.--There is hereby imposed a tax on the excess 
total consolidated assets of any systemically important financial 
institution on the close of each calendar quarter.
    ``(b) Amount of Tax.--The rate of tax imposed by subsection (a) is 
0.035 percent of such excess total consolidated assets.
    ``(c) By Whom Paid.--The tax imposed by subsection (a) shall be 
paid by the systemically important financial institution.
    ``(d) Due Date.--The tax imposed by subsection (a) for a calendar 
quarter shall be due on the first day of the third month beginning 
after the close of such quarter.
    ``(e) Systemically Important Financial Institution.--For purposes 
of this section, the term `systemically important financial 
institution' means any person subject to section 165 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act.
    ``(f) Excess Total Consolidated Assets.--For purposes of this 
section, the term `excess total consolidated assets' means the excess 
of--
            ``(1) total consolidated assets (within the meaning of 
        section 165 of the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act), over
            ``(2) $500,000,000,000.
    ``(g) Adjustment of Dollar Amount.--
            ``(1) In general.--In the case of any calendar year 
        beginning after 2015, there shall be substituted for the dollar 
        amount in subsection (f)(2) a dollar amount which bears the 
        same ratio to such amount (determined without regard to this 
        subsection) as--
                    ``(A) the GDP for the preceding calendar year, 
                bears to
                    ``(B) the GDP for 2014.
        Any dollar amount determined under this paragraph for 
        substitution in subsection (f)(2) which is not a multiple of 
        $1,000,000,000 shall be rounded to the nearest multiple of 
        $1,000,000,000.
            ``(2) GDP.--For purposes of this subsection, the GDP for 
        any calendar year means the latest estimate of the gross 
        domestic product published by the Department of Commerce for 
        the preceding calendar year.
    ``(h) Treatment of Certain References.--Any reference in this 
section to any provision of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act shall be treated as a reference to such 
provision as in effect on the date of the enactment of this section.''.
    (b) Clerical Amendment.--The table of subchapters for chapter 36 is 
amended by adding at the end the following new item:

        ``subchapter e. tax on systemically important financial 
                            institutions.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to calendar quarters beginning after December 31, 2014.

SEC. 7005. CLARIFICATION OF ORPHAN DRUG EXCEPTION TO ANNUAL FEE ON 
              BRANDED PRESCRIPTION PHARMACEUTICAL MANUFACTURERS AND 
              IMPORTERS.

    (a) In General.--Paragraph (3) of section 9008(e) of the Patient 
Protection and Affordable Care Act (Public Law 111-148) is amended to 
read as follows:
            ``(3) Exclusion of orphan drug sales.--
                    ``(A) In general.--The term `branded prescription 
                drug sales' shall not include sales of any drug or 
                biological product--
                            ``(i) with respect to which a credit was 
                        allowed for any taxable year under section 45C 
                        of the Internal Revenue Code of 1986 (as in 
                        effect before its repeal by the Tax Reform Act 
                        of 2014); or
                            ``(ii) which is approved or licensed by the 
                        Food and Drug Administration for marketing 
                        solely for one or more rare diseases or 
                        conditions.
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                with respect to any drug or biological product after 
                the date on which the drug or biological product is 
                approved or licensed by the Food and Drug 
                Administration for marketing for any indication other 
                than the treatment of a rare disease or condition.
                    ``(C) Rare disease or condition.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `rare disease or condition' 
                        means any disease or condition which--
                                    ``(I) affects less than 200,000 
                                persons in the United States, or
                                    ``(II) affects more than 200,000 
                                persons in the United States but for 
                                which there is no reasonable 
                                expectation that the cost of developing 
                                and making available in the United 
                                States a drug or biological product for 
                                such disease or condition will be 
                                recovered from sales in the United 
                                States of such drug or biological 
                                product.
                            ``(ii) Time of determination.--
                        Determinations under the preceding sentence 
                        with respect to any drug or biological product 
                        shall be made on the basis of the facts and 
                        circumstances as of--
                                    ``(I) in the case a drug or 
                                biological product that has been 
                                designated under section 526 of the 
                                Federal Food, Drug, and Cosmetic Act 
                                for a particular indication, the date 
                                of such designation, and
                                    ``(II) in any other case, the date 
                                such drug or biological product is 
                                approved or licensed by the Food and 
                                Drug Administration for marketing for 
                                the treatment of the disease or 
                                condition referred to in clause (i).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fees imposed under section 9008(a)(1) of the Patient Protection and 
Affordable Care Act with annual payment dates after 2013.

             TITLE VIII--DEADWOOD AND TECHNICAL PROVISIONS

                     Subtitle A--Repeal of Deadwood

SEC. 8001. REPEAL OF PUERTO RICO ECONOMIC ACTIVITY CREDIT.

    Subpart B of part IV of subchapter A of chapter 1 is amended by 
striking section 30A (and by striking the item relating to such section 
in the table of sections of such subpart).

SEC. 8002. REPEAL OF MAKING WORK PAY CREDIT.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
is amended by striking section 36A (and by striking the item relating 
to such section in the table of sections of such subpart).
    (b) Conforming Amendments.--
            (1) Section 6211(b)(4)(A) is amended by striking ``36A,''.
            (2) Section 6213(g)(2) is amended by striking subparagraph 
        (N).

SEC. 8003. GENERAL BUSINESS CREDIT.

    Subsection (d) of section 38 is amended by striking paragraph (3).

SEC. 8004. ENVIRONMENTAL TAX.

    (a) In General.--Subchapter A of chapter 1 is amended by striking 
part VII (and the table of parts for such chapter is amended by 
striking the item relating to part VII).
    (b) Conforming Amendments.--
            (1) Section 26(b)(2) is amended by striking subparagraph 
        (B).
            (2) Section 164(a) is amended by striking paragraph (5).
            (3) Section 275(a) is amended by striking the last 
        sentence.
            (4) Section 882(a)(1) is amended by striking ``59A,''.
            (5) Section 6425(c)(1)(A), as amended by the preceding 
        provisions of this Act, is amended to read as follows:
                    ``(A) the tax imposed by section 11 or 1201(a), or 
                subchapter L of chapter 1, whichever is applicable, 
                over''.
            (6) Section 6655(g)(1)(A), as amended by the preceding 
        provisions of this Act, is amended by adding ``plus'' at the 
        end of clause (i) and by striking clause (ii).

SEC. 8005. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE 
              CONTRACTS.

    Section 72 is amended--
            (1) in subsection (c)(4) by striking ``; except that if 
        such date was before January 1, 1954, then the annuity starting 
        date is January 1, 1954'', and
            (2) in subsection (g)(3) by striking ``January 1, 1954, 
        or'' and ``, whichever is later''.

SEC. 8006. UNEMPLOYMENT COMPENSATION.

    Section 85 is amended by striking subsection (c).

SEC. 8007. FLEXIBLE SPENDING ARRANGEMENTS.

    Section 106(c)(1) is amended by striking ``Effective on and after 
January 1, 1997, gross'' and inserting ``Gross''.

SEC. 8008. CERTAIN COMBAT ZONE COMPENSATION OF MEMBERS OF THE ARMED 
              FORCES.

    Subsection (c) of section 112 is amended--
            (1) by striking ``(after June 24, 1950)'' in paragraph (2), 
        and
            (2) striking ``such zone;'' and all that follows in 
        paragraph (3) and inserting ``such zone.''.

SEC. 8009. QUALIFIED GROUP LEGAL SERVICES PLANS.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by striking section 120 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Tax-Exemption of Group Legal Services Plans.--Section 501(c) is 
amended by striking paragraph (20).
    (c) Conforming Amendments.--
            (1) Section 414(n)(3)(C) is amended by striking ``120,''.
            (2) Section 414(t)(2) is amended by striking ``120,''.
            (3) Section 3121(a) is amended by striking paragraph (17).
            (4) Section 3231(e) is amended by striking paragraph (7).
            (5) Section 3306(b) is amended by striking paragraph (12).
            (6) Section 6039D(d)(1) is amended by striking ``120,''.
            (7) Section 209(a)(14) of the Social Security Act is 
        amended--
                    (A) by striking subparagraph (B), and
                    (B) by striking ``(14)(A)'' and inserting ``(14)''.

SEC. 8010. CERTAIN REDUCED UNIFORMED SERVICES RETIREMENT PAY.

    Section 122(b)(1) is amended by striking ``after December 31, 
1965,''.

SEC. 8011. GREAT PLAINS CONSERVATION PROGRAM.

    Section 126(a) is amended by striking paragraph (6) and by 
redesignating paragraphs (7),(8), (9), and (10) as paragraphs (6), (7), 
(8), and (9), respectively.

SEC. 8012. STATE LEGISLATORS' TRAVEL EXPENSES AWAY FROM HOME.

    Paragraph (4) of section 162(h) is amended by striking ``For 
taxable years beginning after December 31, 1980, this'' and inserting 
``This''.

SEC. 8013. TREBLE DAMAGE PAYMENTS UNDER THE ANTITRUST LAW.

    Section 162(g) is amended by striking the last sentence.

SEC. 8014. PHASE-IN OF LIMITATION ON INVESTMENT INTEREST.

    Section 163(d) is amended by striking paragraph (6).

SEC. 8015. CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS.

    Section 170 is amended by striking subsection (k).

SEC. 8016. AMORTIZABLE BOND PREMIUM.

    (a) In General.--Subparagraph (B) of section 171(b)(1) is amended 
to read as follows:
                    ``(B)(i) with reference to the amount payable on 
                maturity (or if it results in a smaller amortizable 
                bond premium attributable to the period before the call 
                date, with reference to the amount payable on the 
                earlier call date), in the case of a bond described in 
                subsection (a)(1), and
                    ``(ii) with reference to the amount payable on 
                maturity or on an earlier call date, in the case of a 
                bond described in subsection (a)(2).''.
    (b) Conforming Amendments.--Paragraphs (2)(B) and (3)(B) of section 
171(b) are each amended by striking ``paragraph (1)(B)(ii)'' and 
inserting ``paragraph (1)(B)(i)''.

SEC. 8017. REPEAL OF DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN 
              REFUELING PROPERTY.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 179A (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendment.--
            (1) Section 62(a) is amended by striking paragraph (14).
            (2) Section 280F(a)(1) is amended by striking subparagraph 
        (C).
            (3) Section 312(k)(3), as amended by this Act, is amended 
        by striking ``, 179A'' each place it appears.
            (4) Section 1016(a) is amended by striking paragraph (24).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005.

SEC. 8018. REPEAL OF DEDUCTION FOR CAPITAL COSTS INCURRED IN COMPLYING 
              WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 179B (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 312(k)(3), as amended by this Act, is amended 
        by striking ``, 179B'' each place it appears.
            (2) Section 1016(a) is amended by striking paragraph (30).
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2009.

SEC. 8019. ACTIVITIES NOT ENGAGED IN FOR PROFIT.

    Section 183(e)(1) is amended by striking the last sentence.

SEC. 8020. DIVIDENDS RECEIVED ON CERTAIN PREFERRED STOCK; AND DIVIDENDS 
              PAID ON CERTAIN PREFERRED STOCK OF PUBLIC UTILITIES.

    (a) In General.--Sections 244 and 247 are hereby repealed, and the 
table of sections for part VIII of subchapter B of chapter 1 is amended 
by striking the items relating to sections 244 and 247.
    (b) Conforming Amendments.--
            (1) Paragraph (5) of section 172(d) is amended to read as 
        follows:
            ``(5) Computation of deduction for dividends received.--The 
        deductions allowed by section 243 (relating to dividends 
        received by corporations) and 245 (relating to dividends 
        received from certain foreign corporations) shall be computed 
        without regard to section 246(b) (relating to limitation on 
        aggregate amount of deductions).''.
            (2) Paragraph (1) of section 243(c) is amended to read as 
        follows:
            ``(1) In general.--In the case of any dividend received 
        from a 20-percent owned corporation, subsection (a)(1) shall be 
        applied by substituting `80 percent' for `70 percent'''.''.
            (3) Section 243(d) is amended by striking paragraph (4).
            (4) Section 246 is amended--
                    (A) by striking ``, 244,'' in subsection (a)(1),
                    (B) in subsection (b)(1)--
                            (i) by striking ``sections 243(a)(1), 
                        244(a),'' the first place it appears and 
                        inserting ``section 243(a)(1)'',
                            (ii) by striking ``244(a),'' the second 
                        place it appears, and
                            (iii) by striking ``subsection (a) or (b) 
                        of section 245, and 247,'' and inserting ``and 
                        subsection (a) or (b) of section 245,'', and
                    (C) by striking ``, 244,'' in subsection (c)(1).
            (5) Section 246A is amended by striking ``, 244,'' both 
        places it appears in subsections (a) and (e).
            (6) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
        469(e)(4), 512(a)(3)(A), 805(a)(4)(A), (C), and (D), 805(b)(4) 
        (as redesignated by this Act), 832(b)(5)(B)(ii), (D)(i), and 
        (D)(ii)(I), 833(b)(3)(E), and 1059(b)(2)(B) are each amended by 
        striking ``, 244,'' each place it appears.
            (7) Section 805(a)(4)(B) is amended by striking ``, 
        244(a),'' each place it appears.
            (8) Section 810(c)(2)(B) is amended by striking ``244 
        (relating to dividends on certain preferred stock of public 
        utilities),''.
            (9) Section 1244(c)(2)(C) is amended by striking ``244,''.

SEC. 8021. ACQUISITIONS MADE TO EVADE OR AVOID INCOME TAX.

    Paragraphs (1) and (2) of section 269(a) are each amended by 
striking ``or acquired on or after October 8, 1940,''.

SEC. 8022. DISTRIBUTIONS OF PROPERTY.

    Paragraph (3) of section 301(c) is amended to read as follows:
            ``(3) Amounts in excess of basis.--That portion of the 
        distribution which is not a dividend, to the extent that it 
        exceeds the adjusted basis of the stock, shall be treated as 
        gain from the sale or exchange of property.''.

SEC. 8023. EFFECT ON EARNINGS AND PROFITS.

    Subsection (d) of section 312 is amended by striking paragraph (2) 
and redesignating paragraph (3) as paragraph (2).

SEC. 8024. BASIS TO CORPORATIONS.

    Section 362(a) is amended by striking ``on or after June 22, 
1954,''.

SEC. 8025. TAX CREDIT EMPLOYEE STOCK OWNERSHIP PLANS.

    Section 409 is amended by striking subsection (q).

SEC. 8026. EMPLOYEE STOCK PURCHASE PLANS.

    Section 423(a) is amended by striking ``after December 31, 1963''.

SEC. 8027. TRANSITION RULES.

    (a) Paragraph (5) of section 430(c) is amended by striking 
subparagraph (B) and by striking ``(A) in general.--''.
    (b) Paragraph (2) of section 430(h) is amended by striking 
subparagraph (G).
    (c) Paragraph (3) of section 436(j) is amended by striking 
subparagraphs (B) and (C) and by striking ``(A) in general.--''
    (d) Section 436 is amended by striking subsection (m).

SEC. 8028. LIMITATION ON DEDUCTIONS FOR CERTAIN FARMING.

    (a) In General.--Section 464 is amended by striking ``any farming 
syndicate (as defined in subsection (c))'' both places it appears in 
subsections (a) and (b) and inserting ``any taxpayer to whom subsection 
(d) applies''.
    (b) Farming Syndicate.--
            (1) Subsection (c) of section 464 is hereby moved to the 
        end of section 461 and redesignated as subsection (j).
            (2) Such subsection (j) is amended--
                    (A) by striking ``For purposes of this section'' in 
                paragraph (1) and inserting ``For purposes of 
                subsection (i)(4)'', and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(3) Farming.--For purposes of this subsection, the term 
        `farming' has the meaning given to such term by section 464(e).
            ``(4) Limited entrepreneur.--For purposes of this 
        subsection, the term `limited entrepreneur' means a person 
        who--
                    ``(A) has an interest in an enterprise other than 
                as a limited partner, and
                    ``(B) does not actively participate in the 
                management of such enterprise.''.
                    (C) Paragraph (4) of section 461(i) is amended by 
                striking ``section 464(c)'' and inserting ``subsection 
                (j)''.
    (c) Section 464 is amended--
            (1) by striking subsections (e) and (g) and redesignating 
        subsections (d) and (f) as subsections (c) and (d), 
        respectively, and
            (2) by inserting after subsection (d) the following new 
        subsection:
    ``(e) Farming.--For purposes of this section, the term `farming' 
means the cultivation of land or the raising or harvesting of any 
agricultural or horticultural commodity including the raising, 
shearing, feeding, caring for, training, and management of animals. For 
purposes of the preceding sentence, trees (other than trees bearing 
fruit or nuts) shall not be treated as an agricultural or horticultural 
commodity.''.
    (d) Subsection (d) of section 464 of such Code, as redesignated by 
subsection (c), is amended--
            (1) by striking paragraph (1) and redesignating paragraphs 
        (2), (3), and (4) as paragraphs (1), (2), and (3), 
        respectively, and
            (2) by striking ``SUBSECTIONS (a) AND (b) TO APPLY TO'' in 
        the subsection heading.
    (e) Subparagraph (A) of section 58(a)(2) is amended by striking 
``section 464(c)'' and inserting ``section 461(j)''.

SEC. 8029. DEDUCTIONS LIMITED TO AMOUNT AT RISK.

    Paragraph (3) of section 465(c) is amended by striking ``In the 
case of taxable years beginning after December 31, 1978, this'' and 
inserting ``This''.

SEC. 8030. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED.

    Section 469 is amended by striking subsection (m).

SEC. 8031. ADJUSTMENTS REQUIRED BY CHANGES IN METHOD OF ACCOUNTING.

    Section 481(b)(3) is amended by striking subparagraph (C).

SEC. 8032. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.

    Section 501 is amended by striking subsection (s).

SEC. 8033. REQUIREMENTS FOR EXEMPTION.

    (a) Section 503(a)(1) is amended to read as follows:
            ``(1) General rule.--An organization described in paragraph 
        (17) or (18) of section 501(c) or described in section 401(a) 
        and referred to in section 4975(g)(2) or (3) shall not be 
        exempt from taxation under section 501(a) if it has engaged in 
        a prohibited transaction.''.
    (b) Paragraph (2) of section 503(a) is amended by striking 
``described in section 501(c)(17) or (18) or paragraph (a)(1)(B)'' and 
inserting ``described in paragraph (1)''.
    (c) Subsection (c) of section 503 is amended by striking 
``described in section 501(c)(17) or (18) or subsection (a)(1)(B)'' and 
inserting ``described in subsection (a)(1)''.

SEC. 8034. REPEAL OF SPECIAL TREATMENT FOR RELIGIOUS BROADCASTING 
              COMPANY.

    (a) In General.--Subsection (b) of section 512 is amended by 
striking paragraph (15).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 8035. REPEAL OF EXCLUSION OF GAIN OR LOSS FROM DISPOSITION OF 
              BROWNFIELD PROPERTY.

    (a) In General.--Subsection (b) of section 512 is amended by 
striking paragraph (19).
    (b) Effective Date.--The amendment made by this section shall apply 
to property acquired after December 31, 2009.

SEC. 8036. ACCUMULATED TAXABLE INCOME.

    Paragraph (1) of section 535(b) and paragraph (1) of section 545(b) 
are each amended by striking ``section 531'' and all that follows and 
inserting ``section 531 or the personal holding company tax imposed by 
section 541.''.

SEC. 8037. CERTAIN PROVISIONS RELATED TO DEPLETION.

    (a) Section 614(b)(3) (before being redesignated by title III) is 
amended by striking subparagraph (C).
    (b) Section 614(b)(4) (before being redesignated by title III) is 
amended by striking ``whichever of the following taxable years is the 
later: The first taxable year beginning after December 31, 1963, or''.
    (c) Section 614(b) (before being redesignated by title III) is 
amended by striking paragraph (5).

SEC. 8038. AMOUNTS RECEIVED BY SURVIVING ANNUITANT UNDER JOINT AND 
              SURVIVOR ANNUITY CONTRACT.

    Subparagraph (A) of section 691(d)(1) is amended by striking 
``after December 31, 1953, and''.

SEC. 8039. INCOME TAXES OF MEMBERS OF ARMED FORCES ON DEATH.

    Section 692(a)(1) is amended by striking ``after June 24, 1950''.

SEC. 8040. SPECIAL RULES FOR COMPUTING RESERVES.

    Paragraph (7) of section 807(e) is amended by striking subparagraph 
(B) and redesignating subparagraph (C) as subparagraph (B).

SEC. 8041. INSURANCE COMPANY TAXABLE INCOME.

    (a) Section 832(e) is amended by striking ``of taxable years 
beginning after December 31, 1966,''.
    (b) Section 832(e)(6) is amended by striking ``In the case of any 
taxable year beginning after December 31, 1970, the'' and inserting 
``The''.

SEC. 8042. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    Section 848 (as amended by title II) is amended by striking 
subsection (i).

SEC. 8043. REPEAL OF PROVISION ON EXPATRIATION TO AVOID TAX.

    (a) In General.--Subpart A of part II of subchapter N of chapter 1 
is amended by striking section 877 (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 2(d) is amended by striking ``or 877''.
            (2) Section 121 is amended by striking subsection (e).
            (3) Section 865(j)(3) is amended by inserting ``as in 
        effect before its repeal'' after ``section 877''.
            (4) Paragraph (2) of section 871(o) (as amended by this 
        Act) is amended to read as follows:
            ``(2) For taxation of covered expatriates, see section 
        877A.''.
            (5)(A) Section 877A(g)(1)(A) is amended to read as follows:
                    ``(A) In general.--The term `covered expatriate' 
                means any expatriate if--
                            ``(i) the average annual net income tax of 
                        such individual for the period of 5 taxable 
                        years ending before the date of the loss of 
                        United States citizenship is greater than 
                        $124,000,
                            ``(ii) the net worth of the individual as 
                        of such date is $2,000,000 or more, or
                            ``(iii) such individual fails to certify 
                        under penalty of perjury that he has met the 
                        requirements of this title for the 5 preceding 
                        taxable years or fails to submit such evidence 
                        of such compliance as the Secretary may 
                        require.''.
            (B) Section 877A(g)(1)(B) is amended by striking ``shall 
        not be treated as meeting the requirements of subparagraph (A) 
        or (B) of section 877(a)(2)'' and inserting ``shall not be 
        treated as described in clause (i) or (ii) of subparagraph 
        (A)''.
            (C) Section 877A(g)(1) is amended by redesignating 
        subparagraph (C) as subparagraph (D) and inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) Net income tax.--For purposes of subparagraph 
                (A), the term `net income tax' means the regular tax 
                liability reduced by the credits allowed under subparts 
                A, B, and D of part IV of subchapter A.''.
            (D) Section 877A(g)(1), as amended by subparagraph (C), is 
        amended by adding at the end the following new subparagraph:
                    ``(E) Inflation adjustment.--In the case of the 
                loss of United States citizenship in any calendar year 
                after 2007, the dollar amount in subparagraph (A)(i) 
                shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for the 
                        calendar year in which such loss of United 
                        States citizenship occurs determined by 
                        substituting `calendar year 2003' for `calendar 
                        year 2012' in clause (ii) thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $1,000.''.
            (E) Section 877A(g)(5) is amended to read as follows:
            ``(5) Long-term resident.--The term `long-term resident' 
        means any individual (other than a citizen of the United 
        States) who is a lawful permanent resident of the United States 
        in at least 8 taxable years during the period of 15 taxable 
        years ending with the taxable year during which the event 
        described in subparagraph (A) or (B) of paragraph (2) occurs. 
        For purposes of the preceding sentence, an individual shall not 
        be treated as a lawful permanent resident for any taxable year 
        if such individual is treated as a resident of a foreign 
        country for the taxable year under the provisions of a tax 
        treaty between the United States and the foreign country and 
        does not waive the benefits of such treaty applicable to 
        residents of the foreign country.''.
            (6) Section 894(b) is amended by striking the last 
        sentence.
            (7) Section 2107 is amended by striking subsection (e).
            (8) Section 2501(a) is amended by striking paragraphs (3) 
        and (5) and by redesignating paragraph (4) as paragraph (3).
            (9) Section 3405(e)(13)(B) is amended by striking ``that 
        such person is not--'' and all that follows and inserting 
        ``that such person is not a United States citizen or a resident 
        alien of the United States.''.
            (10) Section 6039G(a) is amended by striking ``section 
        877(b) or 877A'' and inserting ``section 877A''.
            (11) Section 6039G(d) is amended by striking ``section 
        877(a) or 877A'' and inserting ``section 877A''.
            (12) Section 7701(b) is amended by striking paragraph (10) 
        and by redesignating paragraph (11) as paragraph (10).
    (c) Effective Date.--The amendments made by this subsection shall 
apply to individuals whose expatriation date (as defined in section 
877A(g)(3) of the Internal Revenue Code of 1986) is on or after June 
17, 2008.

SEC. 8044. REPEAL OF CERTAIN TRANSITION RULES ON INCOME FROM SOURCES 
              WITHOUT UNITED STATES.

    (a) Limitation on Credit.--Paragraph (2) of section 904(d) is 
amended by striking subparagraph (J).
    (b) Foreign Earned Income.--Clause (i) of section 911(b)(2)(D) is 
amended to read as follows:
                            ``(i) In general.--The exclusion amount for 
                        any calendar year is $80,000.''.

SEC. 8045. REPEAL OF PUERTO RICO AND POSSESSION TAX CREDIT.

    (a) In General.--Subpart D of part III of subchapter N of chapter 1 
is amended by striking section 936 (and by striking the item relating 
to such section in the table of sections of such subpart).
    (b) Conforming Amendments.--
            (1)(A) Section 27 is amended to read as follows:

``SEC. 27. TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF THE UNITED 
              STATES.

    ``The amount of taxes imposed by foreign countries and possessions 
of the United States shall be allowed as a credit against the tax 
imposed by this chapter to the extent provided in section 901.''.
            (B) The item relating to section 27 in the table of 
        sections for subpart B of part IV of subchapter A of chapter 1 
        is amended to read as follows:

``Sec. 27. Taxes of foreign countries and possessions of the United 
                            States.''.
            (2) Section 243(b)(1)(B) is amended to read as follows:
                    ``(B) if such dividend is distributed out of the 
                earnings and profits of a taxable year of the 
                distributing corporation which ends after December 31, 
                1963, and on each day of which the distributing 
                corporation and the corporation receiving the dividend 
                were members of such affiliated group.''.
            (3) Section 246 is amended by striking subsection (e).
            (4) Section 338(h)(6)(B)(i) is amended by striking ``, a 
        DISC, or a corporation to which an election under section 936 
        applies'' and inserting ``or a DISC''.
            (5) Section 861(a)(2) is amended--
                    (A) by striking subparagraph (A) and by 
                redesignating subparagraphs (B), (C), and (D) as 
                subparagraphs (A), (B), and (C), respectively, and
                    (B) by striking ``subparagraph (B)'' each place it 
                appears and inserting ``subparagraph (A)''.
            (6) Section 864(d)(5) is amended to read as follows:
            ``(5) Certain provisions not to apply.--The following 
        provisions shall not apply to any amount treated as interest 
        under paragraph (1) or (6):
                    ``(A) Section 904(d)(2)(B)(iii)(I) (relating to 
                exceptions for export financing interest).
                    ``(B) Subparagraph (A) of section 954(b)(3) 
                (relating to exception where foreign base company 
                income is less than 5 percent or $1,000,000).
                    ``(C) Subparagraph (B) of section 954(c)(2) 
                (relating to certain export financing).
                    ``(D) Clause (i) of section 954(c)(3)(A) (relating 
                to certain income received from related persons).''.
            (7) Section 865(j)(3) is amended by striking ``, 933, and 
        936'' and inserting ``and 933''.
            (8) Section 901(g)(2) is amended by inserting ``(as in 
        effect before its repeal)'' after ``936''.
            (9) Section 904(b) is amended by striking paragraph (4).
            (10) Section 1202(e)(4) is amended by striking subparagraph 
        (B) and by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively.
            (11) Section 1361(b)(2) is amended by adding ``or'' at the 
        end of subparagraph (B), by striking subparagraph (C), and by 
        redesignating subparagraph (D) as subparagraph (C).
            (12) Section 1504(b) is amended by striking paragraph (4).
            (13) Section 6091(b)(2)(B) is amended by striking clause 
        (ii) and by redesignating clauses (iii) and (iv) as clauses 
        (ii) and (iii), respectively.
            (14) Section 6654(d)(2)(D) is amended--
                    (A) by striking ``936(h) or'' in clause (i), and
                    (B) by striking ``and section 936'' in the heading.
            (15) Section 6655(e)(4) is amended--
                    (A) by striking ``936(h) or'' in subparagraph (A), 
                and
                    (B) by striking ``and section 936'' in the heading.
            (16)(A) Section 367(d) is amended by adding at the end the 
        following new paragraph:
            ``(4) Intangible property.--For purposes of this 
        subsection, the term `intangible property' means any--
                    ``(A) patent, invention, formula, process, design, 
                pattern, or know-how,
                    ``(B) copyright, literary, musical, or artistic 
                composition,
                    ``(C) trademark, trade name, or brand name,
                    ``(D) franchise, license, or contract,
                    ``(E) method, program, system, procedure, campaign, 
                survey, study, forecast, estimate, customer list, or 
                technical data, or
                    ``(F) any similar item,
        which has substantial value independent of the services of any 
        individual.''.
            (B) Section 367(a)(3)(B)(iv) is amended by striking 
        ``section 936(h)(3)(B)'' and inserting ``subsection (d)(4)''.
            (C) Sections 482 and 1298(e)(2)(A) are each amended by 
        striking ``section 936(h)(4)(B)'' and inserting ``section 
        367(d)(4)''.

SEC. 8046. BASIS OF PROPERTY ACQUIRED FROM DECEDENT.

    Section 1014 is amended--
            (1) by striking ``either'' and by striking ``or section 
        811(j) of the Internal Revenue Code of 1939 where the decedent 
        died after October 21, 1942'' in subsection (a)(2), and
            (2) by striking paragraphs (7) and (8) of subsection (b).

SEC. 8047. PROPERTY ON WHICH LESSEE HAS MADE IMPROVEMENTS.

    Section 1019 is amended by striking the last sentence.

SEC. 8048. INVOLUNTARY CONVERSION.

    Section 1033 is amended by striking subsection (j) and by 
redesignating subsection (k) as subsection (j).

SEC. 8049. PROPERTY ACQUIRED DURING AFFILIATION.

    Section 1051 is hereby repealed, and the table of sections for part 
IV of subchapter O of chapter 1 is amended by striking the item 
relating to section 1051.

SEC. 8050. REPEAL OF SPECIAL HOLDING PERIOD RULES FOR CERTAIN COMMODITY 
              FUTURES TRANSACTIONS.

    Section 1222 is amended by striking the last sentence.

SEC. 8051. HOLDING PERIOD OF PROPERTY.

    (a) Paragraph (1) of section 1223 is amended by striking ``, in the 
case of such exchanges after March 1, 1954,''.
    (b) Paragraph (4) of section 1223 is amended by striking ``(or 
under so much of section 1052(c) as refers to section 113(a)(23) of the 
Internal Revenue Code of 1939)''.
    (c) Paragraph (6) of section 1223 is repealed.
    (d) Paragraph (8) of section 1223 is repealed.

SEC. 8052. PROPERTY USED IN THE TRADE OR BUSINESS AND INVOLUNTARY 
              CONVERSIONS.

    Subparagraph (A) of section 1231(c)(2) is amended by striking 
``beginning after December 31, 1981''.

SEC. 8053. SALE OF PATENTS.

    Subsection (a) of section 1249 is amended by striking ``after 
December 31, 1962,''.

SEC. 8054. GAIN FROM DISPOSITION OF FARMLAND.

    (a) Paragraph (1) of section 1252(a), as amended by the preceding 
provisions of this Act, is amended--
            (1) by striking ``beginning after December 31, 1969'' in 
        the matter preceding subparagraph (A), and
            (2) by amending subparagraph (A) to read as follows:
                    ``(A) the applicable percentage of the aggregate 
                deductions allowed under section 175 (as in effect 
                before its repeal by the Tax Reform Act of 2014) with 
                respect to the farmland, or''.
    (b) Paragraph (2) of section 1252(a) is amended by striking 
``sections 175'' and all that follows and inserting ``section 175 (as 
in effect before its repeal by the Tax Reform Act of 2014).''.

SEC. 8055. TRANSITION RULES RELATED TO THE TREATMENT OF AMOUNTS 
              RECEIVED ON RETIREMENT OR SALE OR EXCHANGE OF DEBT 
              INSTRUMENTS.

    (a) Section 1271 is amended by striking subsection (c).
    (b) Section 1271(a)(2)(B) is amended by striking ``(and paragraph 
(2) of subsection (c))''.

SEC. 8056. CERTAIN RULES WITH RESPECT TO DEBT INSTRUMENTS ISSUED BEFORE 
              JULY 2, 1982.

    (a) Section 1272 is amended by striking subsection (b).
    (b) Section 163(j)(2)(C)(ii) is amended by striking ``or (b)(4)''.
    (c) Section 1271(a)(2)(A)(ii) is amended by striking ``subsection 
(a)(7) or (b)(4) of section 1272'' and inserting ``section 
1272(a)(7)''.
    (d) Section 1271(b)(1) is amended to read as follows:
            ``(1) In general.--This section shall not apply to any 
        obligation issued by a natural person before June 9, 1997.''.
    (e) Section 1279(a)(4)(A)(ii), as amended by the preceding 
provisions of this Act, is amended by striking ``or (b)(4)''.
    (f) The amendments made by this section shall apply to debt 
instruments issued after July 1, 1982.

SEC. 8057. CERTAIN RULES WITH RESPECT TO STRIPPED BONDS PURCHASED 
              BEFORE JULY 2, 1982.

    (a) Section 1286 is amended by striking subsection (c).
    (b) Section 1286(e)(5) is amended by striking the last sentence.
    (c) Subsections (a) and (b) of section 1286 are each amended by 
striking ``after July 1, 1982,''.
    (d) The amendments made by this section shall apply to bonds and 
coupons purchased after July 1, 1982.

SEC. 8058. AMOUNT AND METHOD OF ADJUSTMENT.

    Section 1314 is amended by striking subsection (d) and by 
redesignating subsection (e) as subsection (d).

SEC. 8059. OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.

    Subsection (a) of section 1401 is amended by striking ``the 
following percent'' and all that follows and inserting ``12.4 percent 
of the amount of the self-employment income for such taxable year.''.

SEC. 8060. HOSPITAL INSURANCE.

    Paragraph (1) of section 1401(b) is amended by striking ``the 
following percent''and all that follows and inserting ``2.9 percent of 
the amount of the self-employment income for such taxable year.''.

SEC. 8061. MINISTERS, MEMBERS OF RELIGIOUS ORDERS, AND CHRISTIAN 
              SCIENCE PRACTITIONERS.

    Paragraph (3) of section 1402(e) is amended by striking ``whichever 
of the following dates is later: (A)'' and by striking ``; or (B)'' and 
all that follows and inserting a period.

SEC. 8062. AFFILIATED GROUP DEFINED.

    Subparagraph (A) of section 1504(a)(3) is amended by striking ``for 
a taxable year which includes any period after December 31, 1984'' in 
clause (i) and by striking ``in a taxable year beginning after December 
31, 1984'' in clause (ii).

SEC. 8063. CREDIT FOR STATE DEATH TAXES.

    (a) Part II of subchapter A of chapter 11 is amended by striking 
section 2011 (and by striking the item relating to such section in the 
table of sections for such subpart).
    (b) Subchapter A of chapter 13 is amended by striking section 2604 
(and by striking the item relating to such section in the table of 
sections for such subpart).

SEC. 8064. FAMILY-OWNED BUSINESS INTEREST.

    Part IV of subchapter A of chapter 11 is amended by striking 
section 2057 (and by striking the item relating to such section in the 
table of sections for such part).

SEC. 8065. PROPERTY WITHIN THE UNITED STATES.

    Subsection (c) of section 2104 is amended by striking ``With 
respect to estates of decedents dying after December 31, 1969, 
deposits'' and inserting ``Deposits''.

SEC. 8066. REPEAL OF DEADWOOD PROVISIONS RELATING TO EMPLOYMENT TAXES.

    (a) Tax on Employees.--Subsection (a) of section 3101 is amended by 
striking ``the following percentages'' and all that follows and 
inserting ``6.2 percent of the wages (as defined in section 3121(a)) 
received by him with respect to employment (as defined in section 
3121(b)).''.
    (b) Tax on Employers.--
            (1) Subsection (a) of section 3111 is amended by striking 
        ``the following percentages'' and all that follows and 
        inserting ``6.2 percent of the wages (as defined in section 
        3121(a)) paid by him with respect to employment (as defined in 
        section 3121(b)).''
            (2) Subsection (b) of section 3111 is amended by striking 
        ``the following percentages'' and all that follows and 
        inserting ``1.45 percent of the wages (as defined in section 
        3121(a)) paid by him with respect to employment (as defined in 
        section 3121(b)).''
            (3) Section 3111 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
    (c) Tier 2 Tax on Employees.--Subsection (b) of section 3201 is 
amended to read as follows:
    ``(b) Tier 2 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee a tax equal to the percentage 
determined under section 3241 for any calendar year of the compensation 
received during such calendar year by such employee for services 
rendered by such employee.''.
    (d) Rate of Tier 2 Tax on Employee Representatives.--Subsection (b) 
of section 3211 is amended to read as follows:
    ``(b) Tier 2 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employee representative a tax equal to 
the percentage determined under section 3241 for any calendar year of 
the compensation received during such calendar year by such employee 
representative for services rendered by such employee 
representative.''.
    (e) Tier 2 Tax on Employers.--
            (1) Subsection (b) of section 3221 is amended to read as 
        follows:
    ``(b) Tier 2 Tax.--In addition to other taxes, there is hereby 
imposed on the income of each employer a tax equal to the percentage 
determined under section 3241 for any calendar year of the compensation 
paid during such calendar year by such employer for services rendered 
for such employer.''.
            (2) Section 3221 is amended by striking subsection (d) and 
        redesignating subsection (e) as subsection (d).
    (f) Employee Under Railroad Retirement System.--Subsection (b) of 
section 3231 is amended by is amended by striking ``; except'' and all 
that follows and inserting a period.
    (g) Definition of Wages.--
            (1) Section 3121(b) is amended by striking paragraph (17).
            (2) Section 210(a) of the Social Security Act is amended by 
        striking paragraph (17).
    (h) Credits Against Unemployment Tax.--
            (1) Paragraph (4) of section 3302(f) is amended--
                    (A) by striking ``subsection--'' and all that 
                follows through `` (A) in general--The'' and inserting 
                ``subsection, the'',
                    (B) by striking subparagraph (B),
                    (C) by redesignating clauses (i) and(ii) as 
                subparagraphs (A) and (B), respectively, and
                    (D) by moving the text of such subparagraphs (as so 
                redesignated) 2 ems to the left.
            (2) Paragraph (5) of section 3302(f) is amended by striking 
        subparagraph (D) and by redesignating subparagraph (E) as 
        subparagraph (D).
    (i) Domestic Service Employment Taxes.--Section 3510(b) is amended 
by striking paragraph (4).

SEC. 8067. LUXURY PASSENGER AUTOMOBILES.

    (a) In General.--Chapter 31 is amended by striking subchapter A 
(and by striking the item relating to such subchapter in the table of 
sections for such chapter).
    (b) Conforming Amendments.--
            (1) Section 4293 is amended by striking ``subchapter A of 
        chapter 31,''.
            (2) Section 4221 is amended--
                    (A) in subsections (a) and (d)(1), by striking 
                ``subchapter A or'' and inserting ``subchapter'',
                    (B) in subsection (a), by striking ``In the case of 
                taxes imposed by subchapter A of chapter 31, paragraphs 
                (1), (3), (4), and (5) shall not apply.'', and
                    (C) in subsection (c), by striking ``4001(c), 
                4001(d)''.
            (3) Section 4222 is amended by striking ``4001(c), 
        4001(d),''.

SEC. 8068. TRANSPORTATION BY AIR.

    Section 4261(e) is amended--
            (1) in paragraph (1) by striking subparagraph (C), and
            (2) by striking paragraph (5).

SEC. 8069. TAXES ON FAILURE TO DISTRIBUTE INCOME.

    (a) Paragraph (2) of section 4942(f) is amended by striking the 
semicolon at the end of subparagraph (B) and inserting ``, and'', by 
striking ``; and'' at the end of subparagraph (C) and inserting a 
period, and by striking subparagraph (D).
    (b) Subsection (g) of section 4942 (as amended by this Act) is 
amended--
            (1) by striking ``For all taxable years beginning on or 
        after January 1, 1975, subject'' in paragraph (2)(A) and 
        inserting ``Subject'', and
            (2) by striking paragraph (4).
    (c) Section 4942(i)(2) is amended by striking ``beginning after 
December 31, 1969, and''.

SEC. 8070. TAXES ON TAXABLE EXPENDITURES.

    Section 4945(f) is amended by striking ``(excluding therefrom any 
preceding taxable year which begins before January 1, 1970)''.

SEC. 8071. DEFINITIONS AND SPECIAL RULES.

    Section 4682 is amended by striking subsection (h).

SEC. 8072. RETURNS.

    Subsection (a) of section 6039D is amended by striking ``beginning 
after December 31, 1984,''.

SEC. 8073. INFORMATION RETURNS.

    Subsection (c) of section 6060 is amended by striking ``year'' and 
all that follows and inserting ``year.''.

SEC. 8074. ABATEMENTS.

    Section 6404(f) is amended by striking paragraph (3).

SEC. 8075. FAILURE BY CORPORATION TO PAY ESTIMATED INCOME TAX.

    Clause (i) of section 6655(g)(4)(A) is amended by striking ``(or 
the corresponding provisions of prior law)''.

SEC. 8076. REPEAL OF 2008 RECOVERY REBATES.

    (a) In General.--Subchapter B of chapter 65 is amended by striking 
section 6428 (and by striking the item relating to such section in the 
table of sections for such subchapter).
    (b) Conforming Amendments.--
            (1) Section 6211(b)(4)(A) is amended by striking ``6428,''.
            (2) Section 6213(g)(2)(L) is amended by striking ``32, or 
        6428'' and inserting ``or 32''.
            (3) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by striking ``or 6428''.

SEC. 8077. REPEAL OF ADVANCE PAYMENT OF PORTION OF INCREASED CHILD 
              CREDIT FOR 2003.

    Subchapter B of chapter 65 is amended by striking section 6429 (and 
by striking the item relating to such section in the table of sections 
for such subchapter).

SEC. 8078. REPEAL OF PROVISIONS RELATED TO COBRA PREMIUM ASSISTANCE.

    (a) In General.--Subchapter B of chapter 65 is amended by striking 
section 6432 (and by striking the item relating to such section in the 
table of sections for such subchapter).
    (b) Notification Requirement.--Part I of subchapter B of chapter 68 
is amended by striking section 6720C (and by striking the item relating 
to such section in the table of sections for such part).
    (c) Exclusion From Gross Income.--Part III of subchapter B of 
chapter 1 is amended by striking section 139C (and by striking the item 
relating to such section in the table of sections for such part).

SEC. 8079. RETIREMENT.

    Section 7447(i)(3)(B)(ii) is amended by striking ``at 4 percent per 
annum to December 31, 1947, and at 3 percent per annum thereafter'', 
and inserting ``at 3 percent per annum''.

SEC. 8080. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF 
              JUDGES.

    (a) Paragraph (2) of section 7448(a) is amended by striking ``or 
under section 1106 of the Internal Revenue Code of 1939'' and by 
striking ``or pursuant to section 1106(d) of the Internal Revenue Code 
of 1939''.
    (b) Subsection (g) of section 7448 is amended by striking ``or 
other than pursuant to section 1106 of the Internal Revenue Code of 
1939''.
    (c) Subsections (g), (j)(1), and (j)(2) of section 7448 are each 
amended by striking ``at 4 percent per annum to December 31, 1947, and 
at 3 percent per annum thereafter'' and inserting ``at 3 percent per 
annum''.

SEC. 8081. MERCHANT MARINE CAPITAL CONSTRUCTION FUNDS.

    Paragraph (4) of section 7518(g) is amended by striking ``any 
nonqualified withdrawal'' and all that follows through ``shall be 
determined'' and inserting ``any nonqualified withdrawal shall be 
determined''.

SEC. 8082. VALUATION TABLES.

    (a) Subsection (c) of section 7520 is amended by striking paragraph 
(2) and by redesignating paragraph (3) as paragraph (2).
    (b) Paragraph (2) of section 7520(c) of such Code, as so 
redesignated, is amended--
            (1) by striking ``Not later than December 31, 1989, the'' 
        and inserting ``The'', and
            (2) by striking ``thereafter'' in the last sentence 
        thereof.

SEC. 8083. DEFINITION OF EMPLOYEE.

    Section 7701(a)(20) is amended by striking ``chapter 21'' and all 
that follows and inserting ``chapter 21.''.

SEC. 8084. EFFECTIVE DATE.

    (a) General Rule.--Except as otherwise provided in subsection (b) 
of this section and the preceding sections of this subtitle, the 
amendments made by this subtitle shall take effect on the date of 
enactment of this Act.
    (b) Savings Provision.--If--
            (1) any provision amended or repealed by the amendments 
        made by this subtitle applied to--
                    (A) any transaction occurring before the date of 
                the enactment of this Act,
                    (B) any property acquired before such date of 
                enactment, or
                    (C) any item of income, loss, deduction, or credit 
                taken into account before such date of enactment, and
            (2) the treatment of such transaction, property, or item 
        under such provision would (without regard to the amendments or 
        repeals made by this subtitle) affect the liability for tax for 
        periods ending after such date of enactment,
nothing in the amendments or repeals made by this subtitle shall be 
construed to affect the treatment of such transaction, property, or 
item for purposes of determining liability for tax for periods ending 
after such date of enactment.

     Subtitle B--Conforming Amendments Related to Multiple Sections

SEC. 8101. CONFORMING AMENDMENTS RELATED TO MULTIPLE SECTIONS.

    (a) General Business Credit.--Section 38(b), as amended by the 
preceding provisions of this Act, is amended--
            (1) by redesignating paragraphs (4), (5), (7), (8), (13), 
        (20), and (33) as paragraphs (3), (4), (5), (6), (7), (8), and 
        (9), respectively,
            (2) by adding ``plus'' at the end of paragraph (8) (as so 
        redesignated), and
            (3) by striking the comma at the end of paragraph (9) (as 
        so redesignated) and inserting a period.
    (b) Adjustments to Basis.--Section 1016(a), as amended by the 
preceding provisions of this Act, is amended--
            (1) by striking the last two sentences of paragraph (2),
            (2) in paragraph (4) by striking ``(not including'' and all 
        that follows through ``1921)'',
            (3) by striking paragraph (12),
            (4) by redesignating paragraphs (11), (14), (16), (17), 
        (18), (21), (23), (26), (38), and (39) as paragraphs (9), (10), 
        (11), (12), (13), (14), (15), (16), (17), and (18), 
        respectively, and
            (5) by adding ``and'' at the end of paragraph (17) (as so 
        redesignated).
    (c) Holding Period of Property.--Section 1223, as amended by the 
preceding provisions of this Act, is amended by redesignating 
paragraphs (9), (10), (11), (12), and (15) as paragraphs (6), (7), (8), 
(9) and (10), respectively.
    (d) Corporate Preference Items.--
            (1) In general.--Subchapter B of chapter 1, as amended by 
        this Act, is amended by striking part XI (and by striking the 
        item relating to such part from the table of parts for such 
        subchapter).
            (2) Preservation of special rule for treatment of 
        intangible drilling costs.--Section 263(c) is amended--
                    (A) by striking all that precedes ``and except as 
                provided in subsection (i)'' and inserting the 
                following:
    ``(c) Intangible Drilling and Development Costs in the Case of Oil 
and Gas Wells and Geothermal Wells.--
            ``(1) In general.--Notwithstanding subsection (a),'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(2) Reduction for integrated oil companies.--
                    ``(A) In general.--In the case of a corporation 
                which is an integrated oil company, the amount 
                allowable as a deduction for any taxable year 
                (determined without regard to this paragraph) under 
                paragraph (1) shall be reduced by 30 percent.
                    ``(B) Amortization of disallowed amounts.--The 
                amount not allowable as a deduction under paragraph (1) 
                for any taxable year by reason of subparagraph (A) 
                shall be allowable as a deduction ratably over the 60-
                month period beginning with the month in which the 
                costs are paid or incurred.
                    ``(C)  Dispositions.--For purposes of section 1254, 
                any deduction under subparagraph (B) shall be treated 
                as a deduction allowable under paragraph (1).
                    ``(D) Integrated oil company.--For purposes of this 
                paragraph, the term `integrated oil company' means, 
                with respect to any taxable year, any producer of crude 
                oil to whom subsection (c) of section 613A does not 
                apply by reason of paragraph (2) or (4) of section 
                613A(d) (as such provisions were in effect before their 
                repeal by the Tax Reform Act of 2014).
                    ``(E) Coordination with cost depletion.--The 
                portion of the adjusted basis of any property which is 
                attributable to amounts to which subparagraph (A) 
                applied shall not be taken into account for purposes of 
                determining depletion under section 611.''.
            (3) Preservation of limitation on certain interest on 
        indebtedness of financial institutions.--
                    (A) In general.--Section 163 is amended by 
                redesignating subsection (n) as subsection (o) and by 
                inserting after subsection (m) the following new 
                subsection:
    ``(n) Limitation on Certain Interest on Indebtedness of Financial 
Institutions.--
            ``(1) In general.--For purposes of this subtitle, in the 
        case of a corporation, the amount allowable as a deduction 
        under this chapter (determined without regard to this 
        subsection) with respect to the amount described in paragraph 
        (2) shall be reduced by 20 percent.
            ``(2) Interest on debt to carry tax-exempt obligations 
        acquired after december 31, 1982, and before august 8, 1986.--
                    ``(A) In general.--In the case of a financial 
                institution which is a bank (as defined in section 
                585(a)(2)), the amount described in this paragraph is 
                the amount of interest on indebtedness incurred or 
                continued to purchase or carry obligations acquired 
                after December 31, 1982, and before August 8, 1986, the 
                interest on which is exempt from taxes for the taxable 
                year, to the extent that a deduction would (but for 
                this paragraph or section 265(b)) be allowable with 
                respect to such interest for such taxable year.
                    ``(B) Determination of interest allocable to 
                indebtedness on tax-exempt obligations.--Unless the 
                taxpayer (under regulations prescribed by the 
                Secretary) establishes otherwise, the amount determined 
                under subparagraph (A) shall be an amount which bears 
                the same ratio to the aggregate amount allowable 
                (determined without regard to this section and section 
                265(b)) to the taxpayer as a deduction for interest for 
                the taxable year as--
                            ``(i) the taxpayer's average adjusted basis 
                        (within the meaning of section 1016) of 
                        obligations described in subparagraph (A), 
                        bears to
                            ``(ii) such average adjusted basis for all 
                        assets of the taxpayer.
                    ``(C) Interest.--For purposes of this paragraph, 
                the term `interest' includes amounts (whether or not 
                designated as interest) paid in respect of deposits, 
                investment certificates, or withdrawable or 
                repurchasable shares.
                    ``(D) Application of subparagraph to certain 
                obligations issued after august 7, 1986.--For 
                application of this subparagraph to certain obligations 
                issued after August 7, 1986, see section 265(b)(3) (as 
                in effect before the enactment of the Tax Reform Act of 
                2014). That portion of any obligation not taken into 
                account under paragraph (2)(A) of section 265(b) (as so 
                in effect) by reason of paragraph (7) of such section 
                shall be treated for purposes of this section as having 
                been acquired on August 7, 1986.''.
                    (B) Conforming amendments.--
                            (i) Section 1277(c) is amended by striking 
                        ``section 291(e)(1)(B)(ii)'' and inserting 
                        ``section 163(n)(2)(B)''.
                            (ii) Section 1363(b)(3), as amended by the 
                        preceding provisions of this Act, is amended by 
                        striking ``section 291'' and inserting 
                        ``section 163(n)''.
            (4) Effective date.--Except as otherwise provided in this 
        Act with respect to amendments made to section 291 of the 
        Internal Revenue Code of 1986, the amendments made this 
        subsection shall apply to taxable years beginning after 
        December 31, 2014.
                                 <all>
```